There are broadly two kinds of leadership: transactional leadership and transformational leadership. Transactional leaders give clear goals to be achieved. The job holder has to accomplish them. Many companies all over the world follow this model by giving goals, identifying key performance indicators and giving a target date by which an individual employee has to accomplish the goals. The performance appraisal systems are designed to measure the achievements of goals in a specified time frame. The person is rewarded/punished based on accomplishment of the goal. Providing incentives to achieve greater targets is a part of design to motivate people to achieve their goals. This system has worked well in most cases.
However, in bad times, many top performers desert organisations when the company is not in a position to reward handsomely or give huge incentives. The employees have no intrinsic loyalty or love towards the organisation. Researchers globally are looking for a more holistic leadership style that can intrinsically motivate employees to be loyal, dedicated, committed and altruistic. The Armed Forces in many countries have done substantial research to motivate the soldier based on patriotism, honour, valour, service before self—more than just money. They have succeeded.
James MacGregor Burns espoused the theory of transformational leadership. He said the transformational leader, as against a transactional leader, primarily wants to serve as against being paid. The transformational leader creates a vision and transmits his/her vision to the team and involves them to accomplish the chosen objective. The transformational leader is committed to enabling the team members grow in maturity, wisdom, knowledge and competence. The leader creates an effective leadership pipeline for sustainability. Transformational leaders have been found in the industry, NGO sector and the government.
For example, the Society of Jesus, a Christian missionary organisation, has been growing transformational leaders who have led great institutions like St Xavier’s schools and colleges for a few hundred years. Similarly, the Ramakrishna Mission has more than 150 centres all over the world manned by transformational leaders who serve the poor. Jim Collins, in his book Good To Great, spoke about a type of transformational leader whom he called a ‘Level 5 leader’. He proved with his research that many companies like Abbott, Gillette, Circuit City, Philip Morris, etc., made the leap to greatness over their nearest competitor, primarily due to having a ‘Level 5 leader’. He measured greatness on the basis of financial performance—several multiples better than the market average over a sustained period of 15 years.
The Level 5 leader, as per Collins, has a paradoxical blend of being ruthlessly driven for results while being humble and humane at the same time. He said such leaders first identify the right persons within the company and recruit the best people based on character and competence, and then decide the vision. He also found that celebrity leaders are negatively correlated in his research. John Maxwell, another great scholar on leadership, spoke about the five levels of leadership. He strongly advocates creating leaders with character and competence whom people can see as a role model and follow out of great respect. We have seen examples like J R D Tata, Martin Luther King, Steve Jobs, Verghese Kurien, etc.
Another aspect of transformational leadership is the ability to confront the brutal truth of the situation, yet at the same time never giving up hope. A Level 5 leader understands the overall situation of the company in depth and has a great capacity to listen to the truth, no matter how unpleasant it is. The transformational leader creates a culture where truth can be heard. As research has pointed out, no company can become a great company where the truth cannot be heard.
An interesting case in point is the rise of Japanese cars in the US market share. In 1962, Japanese cars held only 2% market share. However, in the next 20 years, they increased their market share to 43% of the US car market. Some large American car industries like Chrysler got sold. Does anyone believe that frontline sales people or executives in the lower or middle management did not know why US cars were not selling? They knew for sure, but there was no one to hear it. This brings us to the next dimension of transformational leadership, the need to create a “learning organisation”.
Professor Peter Senge of MIT found in his research that most leaderships have a near perfect system to communicate the policies and strategies from the top management to the junior levels with great clarity and precision. However, what they lacked was a system or channel to take information up from the junior level to the top management. The organisation structure had two main compartments, one of thinkers and one of doers.
The thinkers at the top management just thought and the doers just implemented executive orders. Not many companies asked the people who actually implemented what their experiences and findings were. Many crises could have been averted if they did. The subject of transformational leadership is indeed vast and I have just presented a few nuggets in this article.
Ashoke K Maitra
HR and Strategy Adviser to Industries
(ashoke.maitra@gmail.com)