Is holistic transformation leadership another jawbreaker of mumbo-jumbo? No, in the context of this article. It is akin to holistic life.
With the deep impact of technology on productivity and ways of working, executives rely on rationality in change management, maybe to a fault. As machine learning and artificial intelligence emerge, this trend of left-braininess could gather pace. It is great for operational managers for whom efficiency and delivery of results are key. MBA students, in fact, are educated on transactional change, and during the first half of their careers, are rewarded for their rationality.
Then their career meets a crossroad. One straight path continues to demand dominantly rational management, while the other appears like a steep, winding gradient. This second path demands empathetic leadership in addition to rational decision-making.
The difference between transactional management and transformational leadership is about how change is managed. In transactional, the manager is reacting with a near-term horizon, persuading people to follow action plans. Transformational leadership, on the other hand, requires adaptive responses, concerning individuals and social systems. In this mode, followers feel empowered and engaged, they feel a sense of self-identity, and take ownership for their results. This is the big difference.
The two approaches overlap. They deploy rationality and empathy in different proportions: transactional management requires dominantly rational skills, while transformational leadership requires dominantly empathy skills. Both skill sets are relevant.
A holistic leadership approach is akin to a systems-approach—the impact of one decision on every other part of the moving system is contemplated in advance. Rather than describe the differences, I illustrate through the exceptional and noteworthy example of rationalisation in TISCO in the early 1990s when Dr Jamshed Irani led Tata Steel. In this short article, I do not intend to analyse or comment on every aspect of the rather massive transformation, but to merely narrate what a ‘holistic’ approach looks like.
TISCO has had a long history of harmonious and trusting industrial relations. In the late 1980s, Dr Irani recalled a conversation with Mr J R D Tata outside the Jamshedpur steelworks. J R D bemoaned the fact that chief engineer, Mr Firoze Tarapore, had “submitted as many modernisations for the company as the years in his life”. But where was TISCO to get the funds? Irani doggedly responded that unless TISCO was modernised urgently, leaders would soon be standing at the factory gate, selling tickets to visit a steel museum. It was a grim, but forthright assessment of the future.
Then the environment changed. Liberalisation was announced by the government. It was an “aha” moment for Dr Jamshed Irani and his leadership team.
Very quickly, TISCO’s efficiency was benchmarked by comparing it with top global companies. A system of Total Business Excellence was adopted to rapidly improve wherever TISCO was lagging. The old plans were updated with contemporary ideas of technology and productivity, thus producing a fresh modernisation plan. Huge funds were required, so funding ideas too were developed. In a sense, these were all in the realm of the rational—technology, funding, productivity, sustainability, and so on.
Taking a systems-approach, the leadership realised that their grandiose plans required rationalising the manpower from 80,000 to 40,000; simultaneously, the employee profile had to transform to younger, differently skilled manpower. In contemporary times, this same challenge is faced by the defence forces for which they devised the Agnipath scheme.
The fact is that an intimate cause-and-effect exists between technically sound ideas on the one hand and individuals and social systems on the other. TISCO would have to adapt to unprecedented manpower reduction in Jamshedpur, perhaps even unparalleled anywhere in any Indian company at that time—halving the manpower in what was essentially a company township!
A deeply thought-out set of schemes were devised by operational and human resources leaders to implement this manpower rationalisation. The CEO, leadership team, and the board chairman spent hours on discussion. The leadership did not regard it as a headcount reduction, but rather as an unavoidable and delicate surgery on the delicate body of the company. This triggered thinking about the employees with great empathy. How could the company achieve the result with the least pain—though pain and bloodletting could not be avoided? Employees were met in small groups and large groups, in the factory and in their community setting. Questions were answered with empathy, but also with firmness. For example, at one town-hall meeting, a senior employee questioned Dr Irani, “This company has a commitment to employ one son of each family. What happens to that?”
Irani responded, “I understand your anguish; please appreciate that the issue at hand is not about employment for your son, it is about your own employment!”
A scheme was devised whereby employees above certain criteria of age and service received the full basic salary right up to their retirement age. Younger employees were given a lump sum and guided towards entrepreneurship. Counsellors were engaged to speak to distressed families, sparing no effort to do the surgery with the finest bedside manners of a doctor-patient relationship.
Finally, TISCO did modernise technologically and its productivity rivalled the best in the world within a few years. In addition, the company rationalised manpower from 80,000 to 40,000. No leader felt good about this surgery, but the patient, viz the company, was saved.
The example illustrates the distinction between transformational leadership and transactional management.
R Gopalakrishnan
Author and business commentator
‘Transforming organizations’: a series in New Indian Express
(The author was Director, Tata Sons and Vice Chairman, Hindustan Unilever)
(www.themindworks.me)
(rgopal@themindworks.me)