Level 5 Leadership – Leading Organizations

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Level 4 – Creating Leaders

Being an organizational leader requires having certain attributes

  • In many ways, a Level 5 Leader is the convergence of marketing, financial principles personally and in business, and all levels of leadership
  • A great organizational leader can turn a devastated culture into a productive and engaging environment
  • A vision can only be carried out by a charismatic, intelligent and socially intelligent leader
    • Builds great relationships and teams that naturally fosters trust and encourages groups to be more connected
  • Visionaries have to creatively look beyond conventional models and previous experience
    • Operates within the boundaries and limitations to build something from the ground upwards
    • Believes that the most effective things are often the simplest
  • Focused on the final results that the project is aiming towards
    • Looks ahead at obstacles to success and removes them as fast as possible
    • Never feels fully satisfied with the current status of success and always wants a little more
    • Realistic about costs compared to the budget, and regularly looks at the organization’s financial state

Organizations only succeed if its vision is properly communicated

  • It needs to bring a passion to serve a purpose greater than itself
    • The procedures and tasks will change with culture and situation, but the vision won’t move
    • This purpose must form into something that can help someone in a specific way
  • Effective leaders convey this vision correctly
    • The simpler and more focused the message is, the farther and quicker it will travel
    • There is more than enough training to equip everyone to succeed at working toward the vision
  • Everyone in the organization must be devoted wholly to the vision of the organization
    • The culture should highly value the principles of the organization where they have to adapt or leave
    • They need to feel their input is contributing to the collective vision
    • If done correctly, the vision will carry itself far beyond the individual and into future generations
    • Ask all of the workers what they think, not just top-level ones
    • Add budget items to allow for new methods of communication
      • Choose your communication channels carefully
        Use visuals to communicate more clearly
      • Make a young social media advisory board to promote the company
        • Younger people obviously understand what young people like more
    • Rolling out products and services needs to be its own cultural experience
      • Advertise the new with a fanfare, and make it a ceremonious occasion
      • Old and discontinued products or services should be publicly put to rest, a bit like a eulogy of a great idea that ran its course
      • Dysfunctional products and services need to be invalidated publicly, but learned from to ensure that the situation isn’t repeated
  • Great communication isn’t necessarily great leadership
    • A strong leader is what people follow, not just great ideas
    • Assess yourself to ensure you’re someone people want to follow
    • Assess the senior management team to find if there are any failings in sub-leadership
  • Social engineering is simply setting rules that support or discourage certain large-scale behaviors
    • There are 2 major ways that most organizations will correct their course
      1. Providing lots of rules that must be followed to avoid mistakes
        • People often find ways to honor the lettering of the rules while still doing as bad a job as possible
      2. Providing incentives that make people want to attain good results or good things
        • In creating a measurement for success, it invalidates the ability to measure it well, since people find ways to game the system
    • The only successful cure for bad performance is a virtue-based culture
      • Practical wisdom is the moral will to do the right thing and the moral skill to figure out what the right thing is
      • Wise people know when and how to bend the rules when it calls for it
    • Not everyone will like working in a good organization
      • They must like being demanded to seek accomplishment
      • They have to adapt to the established work culture
      • They should feel proud to be a part of the organization
      • They’ll be open and interested in change in everything related to their work
      • They’ll value clear and honest communication
    • If a system becomes dysfunctional, good members are forced to do one of a few things
      1. Work twice as hard on the required bureaucracy to get to the important part of the work
      2. Ignore completely arbitrary rules that they know for certain that nobody checks and nobody cares if it’s broken
      3. Compromise their values and become part of the problem
      4. Leave the system and find a better environment

Each organization is different, but grows in the same way

  • There is a life cycle of 4 periods that every organization goes through
    1. Formation period – a new organization is started, there is a founding vision but no formal definitions
    2. Rapid growth period – the organization adds direction and coordination to keep growing and guaranteeing success
    3. Mature period – the rate of growth levels off to the overall pace of the economy
    4. Declining period – often means laying off workers and reorganizing, success in this creates a new Formation period
  • The Greiner Curve tracks how organizations grow based on their leadership, though their rate varies and the crises aren’t always in order
    1. Growth through creativity
      • The founders of the organization are busy making products and opening markets
      • Not many staff, so informal communication is perfectly acceptable
      • The rewards for long hours and hard work are often sharing in profits or in company stock
      • Growing ends with a leadership crisis where professional management is needed
        • This requires the leader to more effectively organize their resources
    2. Growth through direction
      • Often to make up for a lack of leadership, someone new is brought in
      • More formal communications
      • More budgeting and focus on separate activities like marketing, production or sales
      • Incentive benefits largely replace stock or profit as a financial reward
      • Growing ends with an autonomy crisis once the products or processes are so numerous one person can’t manage or remember all of them
        • This requires the leader to start handing off responsibilities to others
    3. Growth through delegation
      • Mid-level managers are freed up to react quickly to new market or product opportunities
      • Top management simply monitors and deals with bigger issues like mergers and acquisition opportunities
      • Most organizations fail at this stage, since the primary manager often doesn’t want to let go of control
      • Growing ends with a control crisis, where a more complex head office function is needed to manage the separate parts of the organization
        • This often happens at about 150 people, for some strange reason
        • The leader and other heads of the organization need to start developing more established roles for everyone
    4. Growth through coordination and monitoring
      • The previously isolated business units are reorganized into product groups or service practices
      • Investing is turned into a central management and focuses on ROI (return on investment) and not just profits
      • Benefits will include organization-wide profit sharing arrangements lined up with the organization’s goals
      • Growing ends with a red-tape crisis, where bureaucracy stops growth from advancing any further
        • The leader and the organization as a whole need to adapt to change
    5. Growth through collaboration
      • A new culture and structure is introduced where professional sensibility replaces a fixed hierarchy structure
      • Teams are tasked to deliver projects and regrouped as needed instead of complex systems that give financial rewards to rigid team setups
      • Growing ends with an internal growth crisis, where the organization can only grow more from partnerships with organizations that complement it
        • This requires the leader and everyone else thinking beyond the scope of the organization
    6. Growth through extra-organizational answers
      • Growth continues through merger, outsourcing, networks and other answers that involve other companies
  • Changes are always definite and clear in larger organizations
    • The situation is “unfrozen” from its static format by reducing the need to fulfill certain requirements
    • There is a movement marked with some confusion and inefficiency as everyone adjusts to a new way of doing things
      • These changes have to come from an open system that combines internal feedback and external signals
    • The new standards are “frozen” as everyone agrees to the new changes
  • As an organization expands its influence, it will expand across cultural boundaries
    • Because of globalization, organizations become well-known extremely fast compared to anything in past history
    • The vision should be formed with this global effect in mind
    • Often, developed parts of the world will forget the many opportunities and risks that come from the developing world

There are many worker benefits that will improve an organization’s culture

  • To increase focus on results
    • Give cash rewards based on performance
      • Avoid surprises by communicating well in advance
        Start simple with merit raises before going into incentive bonuses, which are more complex to calculate
        Set extremes by making the system really reward high performers
        Tie a portion of the bonus pool to overall profitability to make it a team effort
        Review fairly by not comparing between employees
    • Provide a company car or a car program with insurance, maintenance and repair
    • Give extra time off for reaching certain periods of time or certain goals
    • Celebrate high achievers with a very lavish ceremony
    • Provide nap rooms or lodging to allow working on heavy projects
    • Discounts or free productivity and management software that can also be used for personal purposes
  • To enable openness to change
    • Pay them for personal philanthropic time
    • Provide educational reimbursement or professional development services
    • Create opportunities for workers to have a different role to learn about its position
    • Provide an on-site gym or give incentives for their weight loss
    • Provide programs for alcohol or tobacco recovery
  • To give a feeling of freedom and priority
    • Give unlimited vacation days or flexible hours
      • For complete independence, give them complete freedom of their hours by not tracking them
    • Mandatory holidays off or mandatory half-day Fridays
    • Allow pets into an office space
    • Give a few hours up to 20% of their time to explore their own projects
    • Allow them to be part of an exclusive organization even after they leave the organization
    • Pay for their commuting costs or allow them to work from home
    • Give them paid time off to improve their professional skills
  • To foster a feeling of safety and community
    • Provide surviving spouse support and extended parental leave
      • Give family and bereavement leaves
    • Have a generous retirement plan package
    • Make an ambitious healthcare plan
      • Provide an on-campus health center for minor medical problems
      • Create a wellness program that helps with counseling and substance abuse
    • Allow business travel expenses to be used for personal needs
    • Give gifts when they reach certain life landmarks such as marriage or a new baby
    • Give them discounted or free insurance
      • Give a defensive driving day for employees with auto insurance
    • Give free or discounted services
      • Free financial consultations to inspire investing
      • Legal assistance
      • Identity theft protection
    • Provide childcare
      • Provide an adoption assistance program
      • Furnishing a family room with books and games
      • Provide breastfeeding/pumping materials
  • To make them feel like their workplace is more fun to be at
    • Give massive discounts to the company’s product or free merchandise to them
    • Free food, juice bars or unlimited snacks
    • Free services such as massages
    • Give them fun distractions at the workplace like video games, pool tables, fields or courts
    • Sponsor events for them like concerts, parties or amusement parks
    • Partner with affiliates to share discounts across organizations

Many cultural risks will damage an organization on every level

  • Try to avoid favoritism towards family members
    • Hire family members with the right mentality
    • Don’t hire your children right out of college
      • They need more experience, so let them work in the world for a few years
  • An organization can become dysfunctional if it connects bonuses to a measurement not directly connected to success
    • People will find ways to “game” the system to their advantage and the organization’s loss
    • Over time, the focus can become distorted into a completely arbitrary set of rules that don’t produce results
    • If you decide to not have bonuses, make sure the workers know exactly why
  • One of the greatest risks of an organization are automatically connecting an increase in revenue to financial success
    • It completely overlooks profitability, inventory management and cash flow by looking at revenue alone
    • It also doesn’t talk about the marketability of the product or how likely money owed to the organization will be paid
  • Bringing together multiple unrelated groups always has risks, and there are ways to protect from the worst of it
    • Be bold in the negotiations and discussions, uncertainty will easily cripple morale and inspire fear
      • When negotiating don’t pay too much additional for the workers, 5% is fine but 20-30% loses the value
    • Avoid any merging of perceived equals
      • Though it sounds good, it implies that nobody has to adopt the group culture of the other
      • Decide who’s really in charge to decide on differences that can’t be reconciled
    • Make sure the cultures of the groups matches naturally
      • To simply combine based on products, technologies or numbers will lead to huge conflicts
    • If it’s an acquisition, don’t let the acquired group be the one ultimately in charge after all of the concessions and clarifications
    • On the other hand, don’t install your own group all over the new acquisition without any respect to their talent or work environment

Someday you’ll want to retire, so make an exit plan

  • Consider stepping aside and retiring or going part-time
    • Don’t wait until it’s too late to spend time with your family
  • Don’t let boredom force your hand
  • Hire a replacement with the right qualifications in mind
    • Have specific goals in mind you want them to do
    • Don’t make the decision alone
    • Evaluate their personalities as thoroughly as you would with resumes
    • Take time to adjust things, since the entire organization will be uneasy
  • Ease employee fears during selling the company by being transparent and taking it slowly
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