‘What Makes a Successful Leader?’ Sandra Watson, Rachel Chandler and Janice McMillan Business School Edinburgh Napier University Craiglockhart Campus Edinburgh E14 1DJ Corresponding author: Sandra Watson s.watson@napier.ac.uk 0131 455 4309 Leadership and Management Development: Working Paper Key Words: Leadership; Success; Meaning; Measurements; Rewards ‘What Makes a Successful Leader?’ Key Words: Leadership; Success; Meaning; Measurements; Rewards Abstract This research offers an insight into the meaning of leadership success in different organisational contexts, through examining how organisations identify those who have the potential to lead, and how success is measured, valued and rewarded. It investigates the influence that measures and rewards have on leadership practices and behaviours. Finally, the research highlights key leadership challenges faced by organisations in Scotland. Research Background Leadership is crucial to the supporting of sustained productivity growth, competitiveness and prosperity (www.skillsactive.com 05/05/08). At senior levels in an organisation, the ability to adapt, to make decisions quickly in situations of high uncertainty, and to steer through change is critical, but understanding on the characteristics of and influences on successful leaders is limited. What value is given to leadership success and how is this measured in different organisations? This research endeavours to answer this question, to aid understanding of leadership in different contexts. This work builds on research in the areas of leadership and management development carried out in the public and private sectors (Alimo-Metcalfe, 1998; Alimo-Metcalfe and Lawler, 2001). Public sector organisations have been subject to changes that are transforming them from traditional administered bureaucracies to outward-facing, managed, service organisations (Ashburner et al., 2005). Central to this shift has been the embodiment of concepts associated with the private sector, like Best Value, internal customer service and quality management, leading to greater managerialism and privatisation within the public sector (Pollitt, 1993; Wettenhall, 2001). The extent to which these have influenced leadership approaches and practices is less clear. This research explores notions of leadership success in the sector in which leaders operate. Literature Review What makes a leader successful? It has been suggested that leaders need certain leadership competencies, such as resilience, intuition and honesty, in order to be successful (O’Brien and Robertson, 2008; Tourish et al., 2008). However, it has also been questioned whether simply having key competencies is enough to guarantee success (Kirkpatrick and Locke, 1991; Hollenbeck et al., 2006). Other factors may also influence success, such as the style of leadership adopted (Browning, 2007) and the context in which they lead (Alimo-Metcalfe et al., 2007). There are also differences in perceptions of what constitutes leadership success, especially between the public and private sectors (Hooijberg and Choi, 2001). Early identification of potential leaders is important so that organisations can develop and nurture a larger pool of leaders for the future (Bernthal and Wellins, 2006). Effective succession planning can be the first step towards building such a pool of strong leaders, followed by an assessment of leader strength and development needs (ibid). Bernthal and Wellins (2006) argue that a cycle of assessment, development and talent deployment will ensure long-term business success. However, it has been argued that some methods of identification, such as appraisal, can be biased, unreliable and subjective (Alimo-Metcalfe and Lawler, 2001). Alternative methods include the identification of key competencies, self-selection and the use of leadership development programmes and personal development plans (Effron et al., 2005; Hill, 2008; Bernthal and Wellins, 2006). Since a link between leadership strength and organisational performance has been documented frequently, organisations should have measures in place to track the progress of their leaders (Bernthal and Wellins, 2006). In order to assess a leader’s success, it may be more appropriate to measure an organisation’s success, rather than an individual’s (Edmonstone and Western, 2002), especially as leaders do not live in isolation of their organisational setting (Hooijberg and Choi 2000). Suggested outcomes of effective leadership include organisational growth, innovation (Balkundi and Kilduff, 2006), superior financial results, increased productivity (Effron et al., 2005; Alimo-Metcalfe and Bradley, 2008) and a more motivated and committed workforce (Alimo-Metcalfe and Bradley, 2008). Research suggests that it is important for an organisation to value all its employees, as those who are respected and listened to will have greater job satisfaction and commitment to the organisation, resulting in greater productivity (CIPD, 2002). This will be reinforced if a high level of trust exists, if communication is good, and if realistic expectations are formed, highlighting the importance of people management skills (ibid). However, the literature reveals that organisations often value quantifiable behaviour, such as the ability to make a profit, more than interpersonal skills (Bernthal & Wellins, 2006; CIPD, 2002). Consequently, rewards for successful leadership tend to be based on behaviours that are easy to quantify (CIPD, 2002). Successful leaders are often given financial rewards, such as bonus pay (Kulich et al., 2007) or promotion to a position with a higher salary, with the aim of attracting and retaining high potential employees (Piansoongnern et al., 2008). However, it has been argued that how you pay a leader is more important for success than how much you pay them (Jensen and Murphy, 1990). There are also vast differences in the ways in which leaders from the public and private sectors are rewarded financially (ibid). Furthermore, it has been suggested that leaders should be rewarded with development opportunities and should be nurtured if organisations are to retain their leaders and overcome challenges (CIPD, 2002; Silva and Sheppard, 2001). According to Melymuka (2007, cited in Piansoongnern et al. 2008), career planning and development are the most effective factors in motivating talent. Moreover, leaders should be rewarded for carrying out mentoring and coaching activities as this would encourage the transference of knowledge and skills, and promote commitment (Piansoongnern et al. 2008). It is also important that organisations find ways of creating a culture that values leadership, as devalued leadership can prevent individuals and organisations from reaching their full potential, deter others from taking up leadership positions, and perpetuate a culture of blame and conflict (Bolton, 2004). A major leadership challenge identified in the literature is dealing with and adapting to change, such as globalisation and technological innovation (Friedman, 2005). Roles within organisations are also changing and leaders need to adapt their leadership style accordingly (Bickerstaffe, 2008). Some have argued that neither leaders nor organisations are prepared for such changes (O’Brien and Robertson, 2008; Edmonstone and Western, 2002; Bernthal and Wellins, 2006). Some organisations risk having a shortage of leadership skills (Alimo-Metcalfe and Lawler, 2001) and losing competitive advantage (O’Brien and Robertson, 2008) as a result of using old models of leadership. There are also barriers to effective leadership development, including a lack of time and difficulties in applying learning (Tourish et al., 2008), and barriers to effective organisational performance, such as a lack of innovation (Christensen et al., 2008) and purpose (Montgomery, 2008). This literature review has brought to light a number of research questions: What are the perceptions of successful leadership and how do they vary between the public and private sectors? How do such organisations identify leadership potential and measure success, and how can such methods be improved? What values do organisations place on leadership and how do they reward it? What are the impacts of such value and reward? What challenges do leaders face and how can such challenges be overcome? Research Methods An interpretive research approach was used to gain a greater understanding of lived experiences. A convenience-based purposive sample of organisational leaders was adopted to select leaders within organisations from both public and private sectors of the Scottish economy. Semi-structured qualitative interviews with leaders from 30 organisations across 10 sectors * in Scotland were undertaken to explore how success in leadership is perceived, valued and measured. The content of the questions in the interviews was informed by the literature review and a pilot study with three leaders. A thematic analysis of the recorded interviews was conducted with the intention to develop categorises of leadership approaches. Discussion centres on similarities and differences across sectors to expose a greater understanding of the meanings of leadership success, derived from the data. Preliminary Findings A preliminary analysis of the interviews conducted so far shows that the following key competencies were most commonly considered to be important in the definition of leadership: listening skills, having vision, honesty, and gaining respect. Almost half of the respondents felt that ability to achieve goals was a key leadership trait, while just less than a third thought that the desire to develop others was another key trait. A few organisations used competency models or frameworks to define leadership. Nearly half of the organisations stated that leadership was distributed throughout the organisation, while just under a third indicated that leadership was situational. A few organisations, most of which were from the public sector, did not have a clear definition of leadership. * Public – Central Government, Local Government, education, health, voluntary Private – Manufacturing, finance, hospitality, professional services, retail More than half of the organisations defined successful leadership as the ability to meet business objectives and make a profit. Most of these organisations were from the private sector. However, several organisations from both sectors felt that softer skills, such as emotional intelligence, the ability to drive a team and valuing others, were necessary for leadership success. The following traits were also thought to be particularly important: trustworthy, confidence, and self-motivation. Almost a third argued that leadership success was dependent on the context or situation that the leader is in. A few thought that successful leadership is not purely confined to those at the top of the organisation. Development programmes and assessment centre were commonly used to identify potential leaders, while appraisal and performance management were also considered effective methods. However, almost two-thirds of organisations in the public sector and one private sector organisation had no formal methods in place. Nearly half of the organisations felt that their methods of identification could be improved, as methods such as interviews and psychometric testing were thought to be subjective and unreliable. While measures of leadership success varied, performance indicators, staff retention, appraisal, and profits/results were used most frequently, and more predominantly, in the private sector. Over a third of the public sector organisations had no formal measures in place. Leadership was very highly valued by several private sector organisations because they felt that successful leadership was essential for business success. A few public sector organisations said that leadership was not valued, while a few felt that certain types of leadership were more highly valued than others. It was thought that valuing leadership encouraged role modelling and increased individuals’ confidence in their ability to lead. Conversely, it was felt that not valuing leadership resulted in individuals feeling devalued, isolated and detached from the organisation. Many organisations considered a combination of public/private recognition and financial rewards to be the best approach to rewarding successful leaders, as such rewards were believed to help motivate and retain good leaders. Other rewards included providing development opportunities, giving additional responsibilities and offering promotions. A developmental reward focus on leadership was seen to attract and retain the best leaders, allow leaders to become more energetic and confident, and ultimately make the organisation more successful. A career-based approach was also seen to have beneficial influences on leadership retention. A few organisations from the private sector felt that sharing financial rewards between the whole team encouraged team working and co-operation. Some also felt that individualised rewards were more appropriate to meet individual needs. Almost half of the public sector organisations were unable to give financial rewards, either due to a lack of funding or because of criticism about public spending. A lack of rewards was thought to have a negative impact on morale and discourage successful leaders from joining/ and/ or staying with such organisations. The majority of organisations, mostly from the private sector, used internal leadership development programmes to develop their leaders, while just under a third from both sectors used external programmes. A third of organisations, mostly from the public sector, did not use formal programmes at all. Several organisations supported their staff to gain professional qualifications and a few from the private sector included coaching or mentoring in their leadership development programmes. Most organisations said that leadership development had had positive impacts on both leadership and organisational success. Such impacts include early promotion, reduced labour turnover and increased profitability. However it was also pointed out that it is difficult to attribute success solely to leadership development, as external factors also play a part. Leadership development was met with initial scepticism and a lack of understanding in a couple of organisations. It was also considered that it could be difficult to apply learning to the workplace. Finally, the most common key leadership challenges, both for individual leaders and organisations, were adapting to changes, such as the economic climate, and keeping motivation high. Other challenges included balancing leadership roles, dealing with conflicts and succession planning. A few organisations did not have clear definitions of successful leadership, and consequently struggled to recruit and develop the right leaders and measure and reward success appropriately. Conclusions In redressing the research question What value is given to leadership success and how is this measured in different organisations? the findings are summarised in relation to the literature review. Although competencies were thought to play a part in determining the success of a leader, other factors such as the situation were also important (Alimo-Metcalfe et al., 2007). While there were differences in perceptions of successful leadership between the public and private sectors, there were also similarities initially suggesting that there is not such a clear distinction between the two sectors (Hooijberg and Choi, 2001). The findings also show that although methods for identifying potential leaders were generally thought to be effective, some were thought to be unreliable and subjective, as supported by the literature (AlimoMetcalfe and Lawler, 2001). Furthermore, organisations that did not have a clear definition of successful leadership struggled to identify, and consequently develop, potential leaders, leaving leaders with less incentive to stay at the organisation. Such organisations also struggled to measure and therefore reward leadership success, leading to the same retention problems (Hooijberg and Choi, 2001). Leadership definitions tended to be less clear in the public sector. Although financial rewards were common in the private sector, many argued that other rewards such as recognition and development were also important in terms of long-term motivation and retention. More than a third of the public sector organisations did not reward their leaders financially at all, supporting the argument that rewards vary between the sectors (Jensen and Murphy, 1990). Finally, the findings support the assertion that one of the biggest leadership challenges that leaders face is dealing with and adapting to change. For the private sector the main challenge was dealing with the changes brought about by the economic recession, whereas the public sector organisations were faced with challenges inherent in growing and evolving organisations (Bickerstaffe, 2008). This initial analysis reveals that there are distinct differences between public and private sector understanding of and approaches to leadership success. The findings have implications for theory, practice and future research. These include a lack of understanding around leadership success factors and influences in theory. 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