Leadership for Long-Term Success
Jan 24, 2019
Steve Jobs was extraordinarily successful as the leader of Apple, which this year became the country’s most valuable company based on its market capitalization. Often described as a visionary and genius, Jobs had an uncanny ability to capture the essence and value of other people’s creations. His recent death became a worldwide occasion of mourning for those who admired the man and Apple products. It also caused me to reflect on the nature of leadership.
Jobs fit squarely in the category of the heroic leader—the chief executive who seems larger than life and whose will and personality dominate a company. He took power and commanded people to follow him.
His leadership style, however, makes me pessimistic about Apple’s longer-term future. Organizations that rely on a heroic leader, as Apple did with Jobs, usually can’t sustain themselves much beyond that person’s leadership cycle. They struggle to remain high performers once the leader is gone, as Apple did when Jobs was forced out of the company in 1985.
The heroic leader is the antithesis of what is needed today. In fact, I believe a broken leadership model across the public and private sectors is a root cause of our current economic troubles. A desire for great heroes has created a leadership vacuum, and companies—or more accurately their CEOs—have come to believe that only shareholder wealth matters.
Far too many organizational leaders are failing to listen and lack the foresight and stewardship that are essential to effective leadership and long-term success.
Instead of looking for heroic leaders, these organizations should seek servant leaders.
Choosing a Better Leadership Model
There is empirical evidence that servant leadership outperforms heroic leadership. Consider some companies that have put servant leadership into practice: Southwest Airlines, TDIndustries, Herman Miller, Starbucks, Johnson & Johnson, Walmart, and Google, to name a few. These companies have been able to respond to the significant economic challenges of the past several years and few have CEOs who are household names that receive media adulation, but all have produced exceptional results within their industries.
This is typical of servant leaders, who follow the philosophy and practices first espoused in 1970 by the management researcher, educator, writer, and consultant Robert K. Greenleaf. In this leadership model, which is consistent with what author Jim Collins later termed “Level 5 leadership” in his bestselling book, Good to Great: Why Some Companies Make the Leap … and Others Don’t, CEOs are as committed as their heroic peers to making money for their companies, but that’s not all that drives them.
Servant leaders see themselves as their organization’s stewards and are disciplined advocates of long-term goals. They view their company as an ecosystem and understand its values. They are passionate, strong leaders who are fiercely protective of their organization, not their personal interests. Their behavior is humble and empathetic, focused on developing the people who work with them rather than gaining accolades for themselves.
These leaders exhibit strong situational awareness as well as foresight. They listen, even when the facts are difficult. They recognize that drawing on the talents and abilities of others helps organizations adapt to change and achieve optimal performance.
As a result, servant leaders benefit from the brainpower of teams. They get the best from people and are better able to retain top employees. In contrast, the big egos of many heroic leaders can eventually drive away high-performers, weakening an organization in the long term.
Companies that embrace a servant leadership model have effective teams throughout their organization and decentralized authority. Team members interact both vertically and horizontally within the company hierarchy and are able to challenge decisions made at the top. They can and must challenge power—with facts, evidence, passion, and respect.
Focusing on the Long Term
Servant leaders recognize that optimizing performance requires patience and adaptability. I see an analogy between organizations and gardening: If you repeatedly try to maximize output in a single growth cycle and take whatever you can from a garden—or a business—it will quickly die. Yet most publicly traded companies continue to emphasize short-term profits as a primary goal. The price of such myopia is an inability to seriously consider alternative future states and scenarios and prepare for them.
Most companies won’t change or adopt a new leadership model unless they are forced to do so. The beauty of effective, sustainable leadership, however, is that ultimately it’s given by individuals to others. It exists at all levels of organizations, and it isn’t reserved only for CEOs. Active shareholders, citizens, followers, and servant leaders can make a difference in organizations, communities, the nation, and the world.
In practical terms, this requires recognition that making money is a means to advance a greater purpose, not a value in itself. As a nation, we have to get back to the values of meaning and creating actual wealth, rather than just trading paper money. As Philip Selznick wrote in his classic 1957 book Leadership in Administration, effective leadership allows organizations to be institutions of meaning. Therefore, shareholders and CEOs need to take the long view rather than stressing quarterly returns. Build on values, including meaning, and the profits will come.
Shareholders should also insist that organizations be open in their leadership selection and compensation practices. Publicly held companies and boards should submit all information about executive compensation, benefits, and perks to an open shareholder referendum and vote during their annual meetings.
This kind of transparency will reveal the need to change how we determine pay and perks for leaders of publicly traded companies. CEOs must be given the incentive to hire the right people, nurture their abilities, and develop a culture that truly optimizes performance over time.
Recalculating CEO Compensation
Today, CEO compensation can reach 300-plus times the average employee’s earnings. Instead, corporate leaders should receive more equitable base pay of perhaps 20 to 30 times the average employee salary, plus an additional percentage for investment in human capital and research and development. Perks should be capped and executives made responsible for expenditures beyond the limit. Overall, “bonus” incentives should be back-loaded so that CEOs receive them at least a decade after they leave an organization—providing incentive to build a sustainable organization.
Our current model of CEO compensation is rooted in a closed-market, oligopolistic, interconnected board environment that is inconsistent with market-based capitalistic principles. We, the people, need to insist that CEO compensation changes—and one way to do that is to build new servant-led companies and out-compete the hero-led ones—driving them to extinction.
In the servant leadership model, an organization’s success—not an individual’s gain—is the priority. As a result, executive bonuses should be tied to company performance. Moreover, back-loading the greatest financial incentives promotes servant leadership, a long-term perspective, and succession planning.
Leaders behave as they are measured. If rewards come from investment in people and a constancy of purpose, more servant leaders and solutions that support ongoing success will emerge. I believe this will equip companies to optimize performance and compete effectively in today’s global marketplace.
The time is ripe to embrace a more effective, more humane, more meaningful perspective on organizational life and leadership—through the promotion of more servant-led businesses and government. In doing so, we can prepare our nation to truly compete on the global stage and to better enjoy being part of something significant.