Friday, 31 July 2009

Bring on the Iron Cage

Technical competency is all very well, but what any best in class organisation really needs is leadership. Sort of, actually no it doesn’t, not really.

Leadership is both a catch-all phrase and a cult. Typically, it's that amorphous mess of charisma, vision and ability to inspire others you occasionally stumble upon, but more often watch strutting about on a podium or sitting the other side of a desk. And by definition it’s both a vague and rare quality; we can’t all be chiefs after all, leaving it something you simply know when you encounter.

This vagueness makes it's supposed importance a belief more than anything else, yet one powerful enough to underpin an entire industry of head hunters, business schools, publishers and training companies, all engaged in selling the stuff YOU need to recruit or even better become a new and improved leader. Unfortunately, reality gets in the way because the belief in leadership is one that can actually destroy shareholder value, the only real measure of a thing's worth in business.

One reality is that “leadership” informs a self-serving political rhetoric that helps legitimise structured inequality. Like when you ask why has that bloke got loads of cash and I don’t, it’s because he’s a leader.

Another reality is that people have vested interests that influence their judgement, decisions and behaviour. To give an obvious example, people buy themselves food because they have a vested interest in not being hungry. To give a more complex business related example, people support projects led by people more senior than they are because it might make their getting a promotion more likely regardless of whether the project is silly. And that’s it really, vested interests routinely drive decisions that may or may not destroy shareholder value, but are perfectly rational for whoever makes them due to the material rewards they generate for the individuals involved.

You could of course challenge this by claiming various organisational structures are in place to put a check on stupidity. Except, the point about the cult of leadership is it emphasises the individual over the committee and, as already mentioned, legitimises as well as encourages the unequal distribution of resources, including organisational authority and power. So you can have as many project approval committees as you like; if one leader is in a position to influence the size of every committee members’ bonus, then what he wants is typically what happens and if he’s an utter nutter, you’re stuffed (and thats not even taking socialization into account or the pressure to conform with organisational values, etc., etc., yadda yadda).

The typical response here is to try and make sure you don't appoint a silly leader by conducting oodles and oodles of interviews. Except, these are typically just more of the same thing, which transforms the process of recruiting a new leader into a pointless endurance race.

A practical alternative that’s both more cost effective and efficient is to move away from the cult of leadership and focus instead on a candidate’s technical competency. To put this in sociological terms it’s to ditch the rediscovery of what Max Weber called “charismatic authority” and instead re-emphasise the importance of “rational-legal authority”.

I’ll explain why; first off, technical competency is easier to assess and measure. So rather than asking some bloke to tell you about a time when he inspired people to exceed expectations and what the outcome was, you simply ask him to change the plug on a kettle then plug it in. If he gets his wires mixed up, bingo, that’s one less travel expenses claim.

More seriously, leadership is such a half arsed, subjective thing to assess shifting the emphasis towards more technical criteria reduces the scope for inconsistent and basically bad outcomes. Most importantly of all, as someone kindly pointed out to me earlier today, it minimises costs/losses and avoids destroying shareholder value.

This is easy to illustrate using a wee model that sees 4 candidates being interviewed for the role of leader.

- Candidate A is a good leader with good ideas
- Candidate B is a good leader with bad ideas
- Candidate C is a bad leader with good ideas
- Candidate D is a bad leader with bad ideas

Candidate “A” is who you’re looking to find, not only has he got good ideas, he’s also got the leadership skills needed to implement them. Appoint him and bingo, you’ll going to improve your company’s bottom line.

Except, if you could spot an “A” straight away you wouldn’t be working thru a protracted interview process in the first place. Alongside this if your organisational focus is on leadership, the difference between a candidate A and a candidate B i.e. someone who can talk a good game, but doesn’t have a fucking clue, runs the real risk of being obscured.

Even worse, the vested interests noted above mean the fact a newly appointed leader might not know what he’s talking about will be swept under the carpet by everyone involved in appointing him because they don't want their lack of judgement shown up. Similarly, all those hoping that by keeping the new leader sweet they’ll get a bigger bonus aren't going to say diddly either.

So installing a B type candidate will see money wasted on external consultants, strategy weekends, bad acquisitions and so on, because they have the personal ability to convince people to buy-in to all that kinda shite. At the same time no one will challenge them because of their vested interest in preserving the status quo

Candidate C on the other hand has loads of good ideas and is highly technical, its just he’s a boring fecker everyone tends to ignore. But, that’s OK. If he was candidate B, he’d be pissing money against a wall inspiring people to build a shareholder value destroying machine. C on the other hand has this wonderful idea for making oodles of cash, it’s just everyone always ignored him whenever he mentioned it, so it never got implemented. At least not initially except now "C" is a leader, he will be listened to.

Similarly, no one cares what “D” thinks, because he also doesn’t have the personal chutzpah needed to introduce any changes of any significance whatsoever regardless of whether they’re good or bad. But, "D" doesn't matter anyway because the use of technical criteria meant he didn't make it past the first interview.

Pulling this together, focusing on good ideas (i.e. technical competency) has two possible outcomes. (1) increased profits or (2) no additional costs. By contrast focusing on leadership will either (1) increase profits or (2) generate losses/increase costs.

So focussing on leadership is only just as likely to deliver the same gains as ignoring it altogether, but poses higher risks. And thats that really.

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