leadership and change

4
Leadership Effective Leadership in a Changing World Glenn Boseman, DBA, CLU, CLF In recent years, practitioners as well as scholarly journals have been singing the praises of leadership. There seems to be a conrinuous parade of new books on the best seller list that address lead- ership issues. Most of the practitioner books are written by retired managers who want to pass their leadership secrets and wisdom on to subsequent generations. In-deprh articles in schol- arly journals typically address otily one aspect of leadership. This leadership column will attempt to bridge the prac- titioner/scholarly worlds by introducing a particular theoretical leadership con- cept, explaining the underlying theory, discussing how practitioners apply the concept, and asking the readers to eval- uate tliemselves in relation to how other successful practitioners achieve results through the use of the concepts. As such, this column will address two issues—defining the real job of a leader and evaluating two types of leaders: transactional and rransformational. The term "leadership" is used in such a common fashion today that we take for granted that we all have about the same defmition for it. This is not the case. So that we are all on the same page, lets define leadership with a couple commonly used definitions. First, Win- ston Churchill defined leadership con- cisely as the ability to influence people to set aside their personal concerns and sup- This issue of fhe Journal went to press in Aprii 2008. Copyright © 2008. Society of Financial Service Professionals. port a larger agenda—at leastfora while. Churchill made it clear that effective leaders motivate people to perform above and beyond the call of dut)- in order to enhance group success. To him, leadership effectiveness was not who exerts the most influence or who emerges to control the group; rather, the leader is the one who can achieve high group performance over time. In today's language, we would say that Churchill su^ested that effective leadership is per- haps the best source of organizational competitive advantage. A second com- monly used definition of leadership is that it is the act of stimulating, engaging, and satisfying the motives of followers that result in the followers taking a course of action toward a mutually shared vision. Clearly, both of these def- initions embrace three important com- ponents: the leader, the follower(s), and the context or situation in which the leader and followers fmd themselves. This column will address only the leader. Over the past decades, researchers focused on defining the personal traits of effective leaders but ultimately con- cluded that it is not so much the traits as it is how individuals utilize these traits. Traits were found to be excellent predic- tors of leadership emergence rather than leadership effectiveness. This means that individuals who possess the defined traits are more likely to be perceived as leaders by others, but not that they are necessar- ily more effective leaders. Nevertheless, people with these traits are generally linked to leadership roles. The major defined traits are intelligence, domi- nance, sociability, self-monitoríng, high energy and drive, self-confidence, and a tolerance for ambiguity. If an individual lacks these traits, he or she is unlikely to be given the opportunity to lead. Leaders are afforded the opportu- nity to lead not because they are appointed by senior miuiagers; they lead because they are perceived and accepted by followers as leaders. Two researchers, Jim Kouzes and Barry Posner, conducted a research project to determine the top four characteristics that followers seek in leaders. They learned that followers want leaders who are honest, forward- looking, inspiring, and competent.' Of the defmed leadership traits and four characteristics above, how many do you possess? You are now the leader. What is your real job? Clearly, from the two definitions of leadership, it is your responsibiliry to achieve performance through the efforts of others. But what does it take to do that? Most practitioners have heard of Jack Welch's "4E" framework: "positive energy the ability to energize others, edge to summon the courage to make difficult decisions, and the ability to exe- cute." Although it is not considered part of the 4E framework, Welch explains how important it is that the leader also has passion that serves as the thread that runs throughout the 4E framework and ties it together.- Nikos Mourkogiannis has identi- fied four major aaions that every effec- tive leader must master: think, inspire, mobilize, empower.' Mourkogiannis defines thinking as the part of leader- ship that leads to innovation, developing a purpose, creating a vision, and deter- mining strategic position, all of which mtist be the essential focus of a leader. Inspiring—the most visible part of lead- ership—is selling the vision through telling stories, confronting reality, ask- JOURNAL OF FiNANOAL SERVICE PROFESSiONALS / MAY 2008 36

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Page 1: Leadership and Change

Leadership

Effective Leadershipin a Changing World

Glenn Boseman, DBA, CLU, CLF

In recent years, practitioners as well

as scholarly journals have been singing

the praises of leadership. There seems to

be a conrinuous parade of new books

on the best seller list that address lead-

ership issues. Most of the practitioner

books are written by retired managers

who want to pass their leadership

secrets and wisdom on to subsequent

generations. In-deprh articles in schol-

arly journals typically address otily one

aspect of leadership. This leadership

column will attempt to bridge the prac-

titioner/scholarly worlds by introducing

a particular theoretical leadership con-

cept, explaining the underlying theory,

discussing how practitioners apply the

concept, and asking the readers to eval-

uate tliemselves in relation to how other

successful practitioners achieve results

through the use of the concepts. As

such, this column will address two

issues—defining the real job of a leader

and evaluating two types of leaders:

transactional and rransformational.

The term "leadership" is used in

such a common fashion today that we

take for granted that we all have about

the same defmition for it. This is not

the case. So that we are all on the same

page, lets define leadership with a couple

commonly used definitions. First, Win-

ston Churchill defined leadership con-

cisely as the ability to influence people to

set aside their personal concerns and sup-

This issue of fhe Journal went to pressin Aprii 2008. Copyright © 2008.

Society of Financial Service Professionals.

port a larger agenda—at least for a while.

Churchill made it clear that effective

leaders motivate people to perform

above and beyond the call of dut)- in

order to enhance group success. To him,

leadership effectiveness was not who

exerts the most influence or who

emerges to control the group; rather, the

leader is the one who can achieve high

group performance over time. In today's

language, we would say that Churchill

su^ested that effective leadership is per-

haps the best source of organizational

competitive advantage. A second com-

monly used definition of leadership is

that it is the act of stimulating, engaging,

and satisfying the motives of followers

that result in the followers taking a

course of action toward a mutually

shared vision. Clearly, both of these def-

initions embrace three important com-

ponents: the leader, the follower(s), and

the context or situation in which the

leader and followers fmd themselves.

This column will address only the leader.

Over the past decades, researchers

focused on defining the personal traits of

effective leaders but ultimately con-

cluded that it is not so much the traits as

it is how individuals utilize these traits.

Traits were found to be excellent predic-

tors of leadership emergence rather than

leadership effectiveness. This means that

individuals who possess the defined traits

are more likely to be perceived as leaders

by others, but not that they are necessar-

ily more effective leaders. Nevertheless,

people with these traits are generally

linked to leadership roles. The major

defined traits are intelligence, domi-

nance, sociability, self-monitoríng, high

energy and drive, self-confidence, and a

tolerance for ambiguity. If an individual

lacks these traits, he or she is unlikely to

be given the opportunity to lead.

Leaders are afforded the opportu-

nity to lead not because they are

appointed by senior miuiagers; they lead

because they are perceived and accepted

by followers as leaders. Two researchers,

Jim Kouzes and Barry Posner, conducted

a research project to determine the top

four characteristics that followers seek

in leaders. They learned that followers

want leaders who are honest, forward-

looking, inspiring, and competent.'

Of the defmed leadership traits

and four characteristics above, how

many do you possess?

You are now the leader. What is

your real job? Clearly, from the two

definitions of leadership, it is your

responsibiliry to achieve performance

through the efforts of others. But what

does it take to do that?

Most practitioners have heard of

Jack Welch's "4E" framework: "positive

energy the ability to energize others,

edge to summon the courage to make

difficult decisions, and the ability to exe-

cute." Although it is not considered part

of the 4E framework, Welch explains

how important it is that the leader also

has passion that serves as the thread that

runs throughout the 4E framework and

ties it together.-

Nikos Mourkogiannis has identi-

fied four major aaions that every effec-

tive leader must master: think, inspire,

mobilize, empower.' Mourkogiannis

defines thinking as the part of leader-

ship that leads to innovation, developing

a purpose, creating a vision, and deter-

mining strategic position, all of which

mtist be the essential focus of a leader.

Inspiring—the most visible part of lead-

ership—is selling the vision through

telling stories, confronting reality, ask-

JOURNAL OF FiNANOAL SERVICE PROFESSiONALS / MAY 2008

36

Page 2: Leadership and Change

LEADERSHIP

ing the right questions, teassuting, and

ptoviding hope fot a bright future (this is

similat to Welch's energizing others).

Mobilizing is moving people to action,

defining c:impiiigns, setting goals, and

encouraging networks. Mobilizing con-

centrates on influencing key players to

obtain their support. Empowering is

accomplishing work throtigh others.

Hence, execution requires the leader to

manage authority and delegate appro-

priately. Execution involves allocating

resources and managing the deployment

of these (sometimes scarce) resources.

As you reflect on Welch's "4E"

framework and Mourkogiannis's four

essential actions, how do you evaluate

yourself on each? In what areas do you

excel and in what areas are you chal-

lenged? What plan do you have to

develop in those areas in which you

are challenged?

Research has demonstrated that

great leadership is more about what one

does than about who one is. Research

has also shown that the "doing" part of

effective leadership has two primary

behavior dimensions: task, or behaviors

that focus primarily on the task; and

behaviors that focus on the relationships

between the leader and follower(s).

Therefore, leaders' behavior may either

have a primary focus on influencing

people to attain goals by directives {task

behavior) or by supporting an employee

(relationship behavior). The foundation

oi elective leadership is built on these

two behaviors. A leader who displays

task behavior engages in one-way com-

munication; clearly spells out the fol-

lower's role; and tells the follower what

do where, when, and how; and then

closely supervises. A leader who displays

relationship behavior engages in two-

way communication, listens, provides

support and encouragement, facilitates

interaction, and involves the follower

in decision making. Words associated

with task behavior are structure, con-

trol, and supervise; words associated

with relationship behavior are praise,

listen, and facilitate.

Leaders aui be classified as transac-

tional or transformational. Transactional

leadership builds important influence

components between the leader and fol-

lower. The transactional leader's behavior

represents an exchange (a transaction)

between the leader and follower. The

exchange pursues an economic exchange

strategy, whereby the leader exchanges

rewards for performance, effort, and par-

ticipation from che toilower. The transac-

tional leadership behaviors are imporumt

because they provide the foundation for

the relationship between the leader and

the follower. Effective leaders understand

the benefits of having great relationships

with tbe followers: high employee per-

formance, high employee satisfaction,

reduced empioyee turnover, and numer-

otis other benefits. The father of the

transactional leadei'ship concept, Bernard

Bass, suggests that there are two very

effective transactional leader behaviors—

contingent reward behavior (rewarding

for doing a good job) and management

by exception (putting out fires and taking

necessary corrective action). His research

has found that leaders who demonstrate

these two behaviors consistently estab-

lish positive employee attitudes and

behaviors. This flnding is important

because it recognizes that contingent

reward behavior serves as feedback to the

employee and the organization. The fol-

lowers learn to see the relationship

between what they are doing correctly

and the rewards they receive. Because

rewards are a powerflil tool to demon-

strate to the follower what the leader

wants, the contingent reward behavior

connection works. Thus, the transac-

tional leader behaviors build a solid foun-

dation for trust between the leader and

follower. But theßllower wiil deliver only

performance tbat is expected and rewarded

by the leader and no more.

By contrast, the transfortnational

leader attempts to stimulate and satisfy

the follower's higher-level needs by

engaging the whole person. Basically, fol-

lowers are asked to transcend their own

self-interest for the sake of the organiza-

tion, which is accomplished by raising

follower awareness of the importance

and value of goals. Although there have

been many studies to identify the charac-

teristics of a transformational leader, they

all reach essentially the same conclusions.

A transformational leader is one who

• creates and articulates a vision—

identifies new opportunities for the

group and talks positively about

what it means to all concerned

• provides a role model—sets an

example for followers to imitate

that is consistent with the values

that the leader espouses

• ptovides individualized support̂ —

demonstrates that the leader is con-

cerned about the personal needs

and feelings of the individual

• communicates high performance

expectations—shows that the

leader expects high performance,

quality, and excellence

• encourages the acceptance of

group goals—promotes cooper-

ation among followers so that

they work together to accomplish

stated goals

JOURNAL OF FINANCIAL SERVICE PROFESSIONALS / MAY 2008

37

Page 3: Leadership and Change

LEADERSHIP

• provides intellectual stimulation—

challenges followers to examine

their assumptions about their deci-

sion making and work and asks

them to rethink alternative deci-

sion solutions and how work can

be achieved at a higher level

Research has found that when lead-

ers engage in transformational leader-

ship, followers are more satisfied, more

optimistic, less likely to quit, more likely

to trust their leader, and more likely to

prodtice at a high level than followers

who work tor leaders who do not display

the leader behaviors associated with

transformational leadership.

A major result of transformational

leadership is that followers tend to put in

extra effort or perform at higher levels

than stated or expected. The extra effort

comes in the form of organizational citi-

zenship behaviors that benefit the organ-

ization but are not formally recognized

by the organizational reward system. Typ-

ical components of organizational citi-

zenship behaviors are sportsmanship

(willingness to tolerate less-than-ideal sit-

uations), courtesy (in dealing with all

others), conscientiousness (going well

beyond the organization's role require-

ments), civic virtue (responsible partici-

pation in the politiail life ofthe organiza-

tion), and altruism (willingness to help

another individual perform a specific task

or overcome a specific problem).

One interesting point: Histori-

cally, it was thought that a transforma-

tional leader needed to have extraordi-

nary ability and means. Many years of

research have concluded, however, that

anyone who wishes to can become an

effective transformational leader, and

it is not restricted to a particular orga-

nizational function, management level.

or type of organization. Transforma-

tional leadership can be learned.

Take a moment to reflect. How do

you rate yourself on each ofthe six char-

acteristics of a transformational leader?

When you think about the followers in

your organization, what is the state of

their organizational citizenship behav-

iors? If you believe that your followers

show low organizational citizenship

behavior, you should examine if you are

operating on a high level in each ofthe

characteristics of transformational lead-

ership. In essence, there should be con-

sistency between the organizational cit-

izenship behavior of followers and the

manner in which the leader executes

transformational leadership.

Evaluate yourself Give yourself a

rating of 1 to 10 in each of the dimen-

sions of transformational leadership.

Be honest. Add the individual dimen-

sions and take an average. How did

you score on the total concept of trans-

formational leadership? Are you above

average? Average? Below average?

Now rate your followers' organiza-

tional citizenship behavior. How would

you score them? If you are not satisfied

with your evaluation, perhaps you

should reexamine the six dimensions

that make up transformational leader-

ship. When you evaluated yourself in

each of the dimensions, were there

.some in which you rated yourself very

poorly? If so, have you developed a

plan to improve on those dimensions

on which you arc challenged?

In summary, there is no one best

type of leadership; that is, what is effective

for one person may not be effective for

another. We mtist, however, fully under-

stand the results ofthe two different types

of leadership in choosing which one to

adopt. The outcome of transactional lead-

ership is that x}cit follower will deliver only

performance that is expected and rewarded

by the leader and no more. Many leaders

are satisfied with this performance. The

outcome of transformational leadership is

that tUe follower will perform beyond the

stated level of expectation.

A leader can make a case for using

cither style. It is up to the individual

leader to decide which style to follow

and, when change is needed, to have the

courage to develop'and implement a

plan to change. •

Glenn Boseman, DBA, CLU, CLF, received a

BS from Campbell Universitv, an MBA

from East Carolina University, and a DBA in

organization and administration from Kent

State University. In 1985, he received his

CLU from The American College, and

recently obtained the CLF designation as

well. Priortojoining the College in 1981, Dr.

Boseman taught management at Temple

University, with a one-year interruption to

serve as Visiting Scholar of Management at

the University of Western Australia.

Dr. Boseman has over 20 years' expe-

rience in the financial services industry and

has been a member of The American Col-

lege faculty since 1981, He is the director

of the Chartered Leadership Fellow (CLF)

designation program, and he also teaches

in the Master of Science in Financial Ser-

vices (MSFS) and the Master of Science in

Management {MSM L) degree programs.

He may be reached at glenn.boseman@

theamericancollege.edu.

(1) HrTp://www.leadershipchallenge.com/Wiley

CDA/Section/id-131034.html.

(2) Nikos Mourkogiaunts, "A Leader's Real Job

Description: Nikos Mourkogiannis describes

the four actions you need to master to stay on

track and focus on what matters," Business-

Week online, htrp://www.businessweek.coni/

managing/content/dec2007/ca20071225_84]l

62.htm?chan=,search.

(3) Ibid.

JOURNAL OF FINANCIAL SERVICE PROFESSIONALS / MAY 2008

38

Page 4: Leadership and Change