Why You Need Transformational Leaders In Your Circle

To be inspired and to inspire others to succeed during inevitable times of change 

Human resources professionals today are faced with information on dozens of major workplace trends and expected to prioritize them appropriately, develop an HR strategy to respond, and then execute it for the benefit of the organization. This is no easy task - and it is not getting any easier. The next decade will undoubtedly bring major change to how businesses are structured, how they are led, and how these changes affect employees and shape their experiences. The most pressing concerns will vary from company to company. However, three trends - women in the workplace, increased focus on employee empowerment, and the importance of internal branding - are sweeping trends for all organizations to consider. These trends will affect the performance evaluation and leadership development areas of HR in the next ten years. A sharp focus on transformational leadership and corresponding balanced performance evaluation systems will be needed to respond effectively.

Women now make up over half of the current workforce and are increasingly becoming the major breadwinners or co-breadwinners of their families.[i] Yet there is stagnant growth of women in some positions and the demographic makeup of top leadership remains largely unchanged. It is hard for women to enter the upper echelons of the workplace, as evidenced by the fact that just 3% of Fortune500 CEOs and less than 15% of corporate executives at top companies worldwide are female.[ii] Just over 5% of executive management positions in Fortune 500 companies are held by women.[iii] A full 75% of Fortune 500 companies report no women as top earners.[iv] Organizations will have a unique opportunity in the next ten years to reconcile this discrepancy between women's apparent advancement and the reality of an entrenched "glass ceiling."

As companies become increasingly global they are transitioning to a "transnational" operating structure.[v] This movement "beyond the matrix" is characterized by flexibility, interdependencies through all levels, bottom-up innovation, and learning. It is less of a specific organization structure than "a concept and direction of development."[vi] One important effect of transnational operating structures is an increased focus on employee empowerment. This is characterized by employee freedom, employee power to fully participate in organizational life, and employee knowledge of information needed to make more decisions. 74% of CEOs report being more "participatory, more consensus-oriented, and rely more on communication than on command in today's global environment." [vii]

In a recent study, well over half of companies surveyed were focusing their employer brand management (i.e. how the company positions itself to candidates) as much internally as externally.[viii] Employer branding has become a more popular topic due to an increase in the power of brands, an increase in focus on employee engagement, a tight labor market and "war for talent," and HR seeking to be seen as a more credible business partner. Studies suggest that deliberate and careful management of employee value propositions can bring as much as a fourfold increase in employee commitment. [ix] Internal branding also influences how employees view the company brand;[x] as employees' values increasingly align with those of the company, internal branding can shape external branding and customers' perceptions in powerful ways.

The factors that go into an internal brand are far-reaching but some specific attributes of companies deemed "best places to work" through various surveys include: a supportive, communicative, and visible leadership team that promotes honesty, integrity, respect, collaboration, and trust; a culture of high performance with an effective rewards system; and "Best Employer HR practices" such as effective performance management, corporate citizenship promotion, effective training and development, and inspired leadership.[xii]

One viable option to address the above trends is to craft a leadership paradigm that focuses on transformational leadership attributes. As opposed to transactional leadership, a style characterized by offering rewards for productivity and denying rewards for a lack of productivity, transformational leadership aims to stimulate and inspire followers to reach beyond what they thought possible and elicit extraordinary results. It looks to achieve true commitment and involvement from the follower by involving his or her self-worth in the work. Four I's characterize transformational leadership, the most studied style of leadership:[xiii]

1. Idealized Influence, in which the leader communicates the values, purpose, and organizational mission in a way that motivates respect and pride
2. Inspirational Motivation, where the leader shows visible optimism and excitement about the future
3. Intellectual Stimulation, where a leader encourages examining new ways of solving problems
4. Individualized Consideration, demonstrated by a focus on mentoring followers and attending to their development and needs

Transformational leadership is not simply an obscure form of leadership with little empirical support. Instead, it has been shown to be the most effective form of leadership.[xiv] A growing number of studies, including meta-analysis, are finding transformational leadership induces better performance than other styles.[xv] It leads to more committed, loyal, and satisfied followers. The current results show that transformational leadership's 4 I's are the most effective characteristics of a leader, followed by contingent reward (transactional leadership), then active management-by-exception, then passive management-by-exception, and then laissez-faire leadership.[xvi]

Transformational leadership effectively addresses the women in the workplace trend. Transformational leadership, encompassing stereotypically feminine characteristics, is an avenue to start a change in the perception of the content of leadership roles - to start an "opening up" of what it means to be a leader. Transformational leadership has been shown to be more aligned with communal qualities than with agentic qualities.[xvii] Women, in general, view job and people orientation (the masculine and feminine sides of management, respectively) as more interdependent than men.[xviii] Transformational leadership, likewise, focuses on how these two facets are interdependent. One avenue for getting more women into leadership roles is defining leader roles in less masculine terms.[xix] Thus, widespread acceptance of transformational leadership as a schema for recognizing leadership may mean more women are recognized as top leaders.

Transformational leadership, with its unique emphasis on "Intellectual Stimulation" and "Individualized Attention," can also effectively help address the second major trend of empowering employees. Transformational leaders show consideration for each individual they are leading and motivate them to find part of their identity in the work they are doing.[xx] These leadership behaviors will help employees become more knowledgeable, more confident in making their own decisions, and more integrated into organizational activity. Employees rely on their manager or leader to model the behaviors expected of them and give them the space to grow and develop. The transformational leadership style allows for exactly this.

Lastly, transformational leadership is needed to set the right internal brand-the third major trend discussed above. Transformational leaders inspire and motivate followers to develop and grow, feel connected to the larger vision or mission of the organization, and work with others to attain common goals. Organizations rely on their leaders to set the tone for other employees and show that the company is acting in line with their employee value propositions. The "Idealized Influence" and "Inspirational Motivation" attributes of transformational leaders will help ensure employees feel they are working under a visible and inspired leadership team that promotes honesty, integrity, respect, collaboration, and trust. This, in turn, contributes to a well-perceived internal brand and increases the likelihood of being named to prominent "Best Places to Work" lists.

To bring about this emphasis on transformational leadership in the next ten years I argue for, and predict changes in, performance management. Specifically, organizations will need to increase focus on balanced performance evaluation techniques such as 360-degree feedback[xxi] and the Balanced Scorecard.[xxii] These evaluation systems encompass transformational leadership competencies and results as well as financial profit/stock price. They take into consideration bosses, peers, direct reports, customers, and many different aspects of business. They could better identify women's leadership potential and facilitate their development and promotion. They could better assess how well a leader is empowering his or her employees and promoting an appropriate internal brand.

A second area of change needed is in the leadership development space. Though current leadership development models and trainings within organizations encompass some elements of transformational leadership, there can be more robust education and development of transformational leadership attributes. Greater knowledge and awareness of transformational leadership among all levels of employees may be one way to effectively encourage transformational leadership in the workplace. Companies will need to get more creative with their approach to developing transformational leaders, possibly implementing systems with more varied job experiences (e.g. externships), better access to learn from more experienced organization members, and formal training where goals and results are measured and tracked over time.

Jim Collins, author of bestselling book Good to Great, says, "Those who build great companies understand that the ultimate throttle on growth for any great company is not markets, or technology, or competition, or products. It is one thing above all others: the ability to get and keep enough of the right people."[xxiii] HR executives that care about the effectiveness of their managers and also care about empowering female leaders should put in place, or increase their dependence on, the balanced scorecard, 360-degree feedback, and revamped leadership development models. The challenge managers and executives face in adopting balanced performance evaluation systems and stressing the importance of transformational leadership is that it represents a change from the past. Many managers and executives who want the standard status quo to remain may try to keep the old systems in place. Though the coming ten years will entail difficult transitions out of old paradigms for how work gets done and who leads such work, the decade also holds tremendous potential for women in leadership, empowering employees, and creating a powerful internal brand. ℵ

McGraw Hill, 2005. Print.

I recently attended the LOHAS Forum in Boulder, Colorado. [Background: LOHAS stands for Lifestyles of Health and Sustainability.] In addition to giving attendees a glimpse into the clean, green living for which Boulder is so well-known (see picture), the Forum has been a gathering spot for companies in the natural lifestyles, green building and alternative energy/transportation sectors since the time when the mention of granola caused more grimaces than grins.

My personal mission for attending was to understand more deeply where these LOHAS markets intersected or overlapped with what I call the 'Transformational Consumer' segment that is driving more than $300 Billion in annual spending power. I wrote about that, here: The Transformational Consumer: The $300 Billion-plus Opportunity Most Entrepreneurs Have Never Heard Of.

But something else happened during my LOHAS Forum experience: I had several conversations with CEOs and business leaders who helped deepen my understanding of the corporations and brands with which Transformational Consumers crave to connect: the businesses that these non-conformist, lifestyle design addicts and wellness/wealth hackers will buy and evangelize with rabid loyalty.

Let's call these companies and brands - these lovemarks of today's transformation-craving consumers - Transformational Businesses.

I left the Forum on a newly expanded mission to formulate profiles of both the Transformational Consumer and the Transformational Business.

In the coming weeks, I will share the insights I gathered on both these issues. On the business side, I'll be sharing what I learned about what it takes to build and scale a Transformational Business - maximizing both the company's business objectives and its customers' life design aspirations - from such entrepreneurs and leaders as:

• Kevin Rutherford - The CEO of Mrs. Meyer's Clean Day and Caldrea home cleaning lines, on how companies can engage in a mutual love affair with their customers.
• Chip Conley - The Founder of the Joie de Vivre hotel chain, and the bestselling author of PEAK: How Great Companies Get Their Mojo from Maslow and Emotional Equations: Simple Truths for Creating Happiness + Success, who talked with me about how being a 'Vulnerable Visionary' helped him turn the business around, post-recession.
• Jonathan Ellerby - The chaplain-turned-corporate consultant who advised organizations like PespiCo, Nissan and the US Navy before developing TAO Inspired Living, a wellness-based residential community in Mexico's Riviera Maya. We spoke about the conscious leadership and progressive business practices that drive business outcomes like resilience, innovation, productivity and profitability.
• Alexis Maybank - The Co-Founder of Gilt Groupe - which generated revenues over a half a billion dollars in 2011 - who talked with me about how she and her co-founders hacked the retail industry with flash sales.

We'll do a deep dive into each of these interviews over the next few posts, but I won't hold you in suspense about this Transformational Business profile I came away from these conversations with, as I think it provides useful context for precisely why these leaders' input is so important. Beyond these founders' and CEOs' obvious successes and model-worthy profits, beyond the definitional truth that Transformational Businesses are those that will have long-term, profit-driving emotional connections with the Transformational Consumers, understanding what makes a Transformational Business is a prerequisite to deciding whether or not this is the kind of company you want yours to be.

Elements of a Transformational Business. As I see it, Transformational Businesses are highly-functioning, for-profit companies with some or all of the following elements:

1. A higher purpose. These companies were often started out of a deep love for their subject matter and the consumers they serve. They place an internal value on some higher purpose than profits, which is often around innovating and sharing solutions that help users do the things they crave to do or reach their aspirations. This is why many of these companies win users' loyalty and love via extensive investments in engaging and serving users beyond the product or offering.

This higher purpose doesn't necessarily have to be a so-called 'social good,' though it often is related to one; it could be a commitment to driving users' fitness or personal finance goals or their happiness, for example. This higher purpose is held with passionate, desperate enthusiasm and excitement at all levels of the company.

2. A priority on organizational wellness. These companies see their businesses as a ministry of sorts. Accordingly, driving their higher purpose relies on the organization's growth, scale and survival in the face of market shifts, as well as the ongoing, delighted devotion of their employees. And all of these things, in turn, increasingly require a commitment to the wellness of the corporate culture and the companies' internal citizenry, physically, emotionally and otherwise.

3. A track record of industry innovations. One manifestation of what I call the 'two-way love affair' between Transformational Businesses and their customers is the companies' willingness and track record of hacking their industry, their product, their vertical - they tend to be willing to put every industry assumption or sacred cow on the chopping block, and to sacrifice any and everything about the way things have always been done on the altar of the higher purpose of helping their users execute their desired wellness, financial, lifestyle or career dreams and aspirations.

4. A history of surviving and thriving through internal transformations. Transformational Businesses often have a history of internal transformations, some of which create a repository of organizational wisdom and knowledge that powers (a) their understanding of the transformations their customers desire and possibly even (b) consumer-facing stories of modern-day business heroism (think: Steve Jobs at Apple or Marissa Mayer at Yahoo! five years from now, fingers crossed).

Posted on Harvard Business Review: May 6, 2010 3:58 PM

In 2000, Cox Communications' Arizona branch hadn't met a budget for three years, their P&L was in shambles and morale was in the cellar. Today, the branch models organizational effectiveness, and is the U.S.-based company's largest and most successful region. A $1.6 billion operation blanketing the state, it is envy of cable systems industry-wide. What caused this dramatic change in success? All it took was a reevaluation of leadership style, and the profits followed.

Steve Rizley took over Cox Arizona at this pivotal time. A caring but tough, naturally gifted leader, Steve immediately went to work focusing on the people in his organization. In wise hands, this transformational style of leadership yielded staggering growth-like growing from $700 million to $1.3 billion, in little more than two years. So what's at the heart of their version of leadership?

The traditional or transactional leader says "I'm the leader-you're the follower; I have something you need (money) and you have something I need (labor). So let's make an exchange." Transformational leaders like Steve understand that there is something bigger at stake. He not only challenged his people to grow professionally, but also personally-emotionally and intellectually.

Within this new paradigm, there are four non-negotiable human needs that the transformational leader recognizes must be satisfied if he and his people are to succeed:

First, and arguably most important, is the need to love and be loved. It sounds touchy-feely, but people who are not both receiving and giving love-and by love I mean focused concern and action directed at another exclusively for that person's good-cannot be fully healthy, biologically and psychologically. We usually think of love as beyond the pale in the work-a-day world, but the transformational leader vividly understands that tough-minded caring is essential to leading and developing a powerful, fully expressed workforce.

Second is the need to grow. The only alternative to growth is death and decay. The transformational leader recognizes that stasis, or maintenance, is a myth that only exists in the human imagination. Nowhere in nature do we find such a thing as stability. Even in a balanced ecosystem, there is either expansive, unfolding growth, or degeneration, decay and ultimately death. By creating a culture that allows our people (and ourselves) to grow, we are expanding our capacities as leaders, as employees, and as human beings.

Third is the need to contribute. Like a battery, this need is best understood when we think of it as having two distinct poles. The negative pole reminds us that that which does not contribute is eliminated. We see it in nature all the time, and at a primal, pre-conscious level we all seem to know this fundamental fact. Failing to contribute in a significant way yields a gnawing, just-beneath-the-surface anxiety of which we are usually only vaguely aware. The other pole, the positive one, answers this anxiety. When we are contributing in a significant way we have an inexplicable peace of mind. We know we belong. The simple principle at work here goes something like this: life works when we forget about ourselves and contribute to others. To feel fulfilled and empowered, employees must know they are contributing to the whole.

The fourth and final need to be met for full leadership, effectiveness and happiness, is the need for meaning. We are meaning-seeking creatures. If our lives lack a clear sense of meaning, if we are not engaged in some larger purpose, we will not be fully satisfied, regardless of whatever else we may have.

The transformational leader understands that satisfying all four of these needs may not be easy, but when they are being met in the day-to-day affairs of his or her people, something magnificent begins to emerge: people instinctively play a bigger game, and show up in a more passionate, creative, engaged and effective way. The consequences are difficult to argue with-hard, measurable, and in many instances, astonishing results.

Have you ever worked for or known a leader who addressed any of these human needs? Did his or her leadership style improve the performance of the organization?

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