Leadership in Context

Leadership in Context

Jul 25, 2017: Weekly Curated Thought-Sharing on Digital Disruption, Applied Neuroscience and Other Interesting Related Matters.

By Michael Bazigos, Chris Gagnon, and Bill Schaninger

Curated by Helena M. Herrero Lamuedra

In the corporate context, effectiveness depends less on the traits of any one executive (or of that person’s direct reports) and more on a company’s competitive challenges, legacies, and other shifting forces. If only we had a clear set of keys to effective organizational leadership—a “decoder ring” to understand which practices produce the best outcomes. McKinsey’s research, however, does point to one major element of the equation: organizational health. For people seeking to lead companies effectively and for organizations seeking to develop managers who can deploy different kinds of leadership behavior when appropriate, recognizing and responding to a company’s health is far more important than following scripts written by or about great leaders. And that’s true even of great leaders whose circumstances might, on the surface, seem relevant under a given set of conditions.

To be sure, certain normative qualities, such as demonstrating a concern for people and offering a critical perspective, will always be part of what it takes to be a leader. But the importance of other elements, such as keeping groups on task and bringing out the best in others, vary in importance depending upon an organization’s circumstances. Organizational health changes over time. Effective situational leadership adapts to these changes by identifying and marshaling the kinds of behavior needed to transition a company from its present state to a stronger, healthier one.

‘How healthy are we?’

All this presupposes, of course, that leaders have an accurate sense of how healthy their organizations are. Developing such a view is easier said than done: it’s only natural for leaders to overestimate the health of their organizations and the effectiveness of their leadership, given the way many of them identify with their companies and roles. Too many executives default to describing their companies as good and striving to be great. But this can’t be true; by definition, more companies can’t be above the median line of organizational health than below it. When survey data is examined through the lens of the different levels of an organization, we find that leading executives typically have more favorable views of its health than do its line workers—who are, after all, much closer to the true center of gravity.

What’s more, surveys, interviews, and a significant amount of honest self-reflection all go into more robust assessments of organizational health. In ailing organizations, for example, the leadership tends to rely on very detailed instructions and monitoring—a symptom of excessively tight control. A healthier organization’s leadership, by contrast, shows greater support for colleagues and subordinates, and sensitivity to their needs. And the leaders at elite organizations challenge employees to aspire higher still by setting stretch goals that inspire them to reach their full potential.

The situational-leadership staircase

The analysis performed by McKinsey yielded what they call a leadership staircase—a pyramid of behavior analogous to Maslow’s hierarchy of needs. In this hierarchy, like similar ones, some kinds of behavior are always essential. As organizational health improves, quartile to quartile, additional behaviors become apparent. More tellingly, some appear to be differentiators: emphasizing them in different situations can lift the organizational health of a fourth-quartile company to the third quartile, a third-quartile company to the second quartile, and so on.

Baseline behavior

For companies at every level above the truly dysfunctional, a set of threshold forms of behavior appears to be essential -“baseline behavior.” Others may also be called for, depending upon an organization’s state of health, but the following practices are appropriate no matter what a company’s health may be: effectiveness at facilitating group collaboration, demonstrating concern for people, championing desired change, and offering critical perspectives. The absence of such fundamentals of healthy interpersonal interaction invites disorder; shoring up these behaviors, on the other hand, serves to keep organizations from sliding backward into organizational trouble. But in themselves, they don’t spell the difference between mediocre and top-tier organizational health. Companies need additional practices to climb the staircase.

Digging out

Companies in the lowest (fourth) health quartile confront stark—even existential—challenges, such as low levels of innovation, declining customer loyalty, wilting employee morale, the loss of major talent, and critical cash constraints. Typically, these companies lack some or even all of the baseline forms of behavior. Implementing the full complement is essential. But under trying conditions, the most effective forms of leadership behavior are making fact-based decisions, solving problems effectively, and focusing positively on recovery. Ironically, these additional behaviors are often the opposite of what distressed organizations actually do. Leaders at too many fourth-quartile companies, in their urgency to act, seek quick top-down fixes (such as replacing senior executives one or more times) but forego granular, fact-based analyses or well-rooted strategies. Those missteps often mark a company in its death spiral.

Moving on up

A major differentiating leadership characteristic of companies on the upswing seems to be the ability to take practices that are already used at some levels of the organization and use them more systematically, more reliably, and more quickly. This shift calls for behavior that places a special emphasis on keeping groups on task and orienting them toward well-defined results. Such situations also favor leaders who embrace agility and seek different perspectives to help ensure that their companies don’t overlook possibly better ways of doing things. But under these circumstances, qualities (such as the ability to motivate and bring out the best in others and to model company values) found at the top tier of organizational health typically have a less pronounced effect.

Why not start at the top?

If identifiable forms of leadership behavior are associated with companies in the higher quartiles, can an organization in the lower ones apply them immediately and leap to the top? McKinsey research and experience suggest that attempts to do so typically end poorly. Emphasizing kinds of behavior that are not attuned to an organization’s specific situation can waste time and resources and reinforce bad behavior. Worse, it can make an upgrade to a higher health quartile even more difficult. This makes intuitive sense: the leaders of a company in deep trouble should not prioritize, for example, modeling organizational values, a first-quartile behavior.

Even the best scripts can ring hollow in the wrong settings. McKinsey’s research suggests that the most effective leadership behavior reflects the state of a company’s organizational health. Top-management teams that are serious about developing vibrant businesses and effective leaders must be prepared to look inward, assess the organization’s health objectively, and ask themselves frankly whether their leadership behavior is strong enough in the ways that matter most at the time. This question has implications not just for developing but also for assessing a company’s leaders. However much an executive may seem to have a leadership “it” factor, the organization’s health, not the claims of individuals, should come first when companies determine which kinds of behavior will be most effective for them. In short, they should spotlight different sets of actions in different situations. Fortunately for aspiring leaders, they don’t have to do everything at once

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