Transformational Leadership: Models, Factors, and Outcomes Explained

This report provides a comprehensive overview of transformational leadership, a complex process that binds leaders and followers in transformative change. It explores the core concepts, distinguishing between transformational and transactional leadership, and highlighting the role of charismatic leadership. The report delves into the transformational leadership model, outlining its eight key factors, including idealized influence, inspirational motivation, intellectual stimulation, and individualized consideration, as well as transactional and non-leadership factors. It also discusses other perspectives of transformational leadership, including models developed by Bennis and Nanus, and Kouzes and Posner. The report emphasizes the positive outcomes of transformational leadership, which inspires followers to work for the good of the organization, and subordinate their own self-interests to those of the organization.

258
TransformationalTransformational
LeadershipLeadership
Leaders who can spark our imaginations with a compelling vision of a worth-
while end that stretches us beyond what is known today and who can show us a
clear path to our objectives are the ones we follow. In the future, the leadership
role will focus more on the development of an effective strategy, the creation of the
vision, and an understanding of their impact, and will empower others to carry
out the implementation of the plan.
—Goldsmith, Greenberg, Robertson, & Hu-Chan (2003, p. 118)
Transformational leadership is an involved, complex process that binds leaders and
followers together in the transformation or changing of followers, organizations, or
even whole nations.It involves leaders interacting with followers with respect to
their “emotions,values,ethics,standards,and long-term goals,and includes assessing
followers’motives,satisfying theirneeds,and treating them asfull human beings”
(Northouse,2010). While alltheories of leadership involve influence,transformational
leadership is aboutan extraordinary ability to influence thatencourages followers to
achieve something well above what was expected by themselves or their leaders.
Early researchersin the areaof transformationalleadership coined theterm
(Downton,1973) and tried to integrate the responsibilities ofleaders and followers
(Burns, 1978). In particular, Burns (1978) described leaders as people who could under-
stand the motives of followers and, therefore, be able to achieve the goals of followers and
leaders.As we discussed in Chapter 1,he considered leadership different from power
because leadership is a concept that cannot be separated from the needs of followers.
C H A P T E R
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C H A P T E R
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Chapter 9: TransformationalLeadership 259
Burns (1978) differentiated between transactional and transformational leadership.
He described transactional leadership as that which emphasizes exchanges between fol-
lowers and leaders. This idea of exchange is easily seen at most levels in many different
types of organizations.
He described transformationalleadership as thatprocess through which leaders
engage with followers and develop a connection (one that did not previously exist) that
increases the morals and motivation ofthe follower and the leader.Because ofthis
process, leaders assist followers in achieving their potential to the fullest (Yukl, 2006).
Bass and colleagues (Bass, 1998; Bass & Riggio, 2006; Bass & Steidlmeier, 1999) dif-
ferentiated between leadership that raised the morals of followers and that which trans-
formed people,organizations,and nationsin a negative manner.They called this
pseudotransformational leadership, to describe leaders who are power hungry, have per-
verted moral values, and are exploitative. In particular, this form of leadership empha-
sizes the leader’s self-interest in a manner that is self-aggrandizing and contrary to the
interests of his or her followers (Northouse, 2010). Kenneth Lay and Jeff Skilling might
be examples of this form of leadership in their roles as chair and CEO of Enron, respec-
tively. Authentic transformational leaders put the interests of followers above their own
interestsand,in so doing,emphasize the collective good for leadersand followers
(Howell & Avolio, 1992).
Charismatic Leadership
“Charisma is a specialquality ofleaders whose purposes,powers,and extraordinary
determination differentiate them from others” (Dubrin,2007,p. 68).Weber (1947)
emphasized the extraordinary nature of this personality trait but also argued that follow-
ers were important in that they confirmed that their leaders had charisma (Bryman, 1992
House, 1976). The influence exercised by charismatic leaders comes from their personal
power,not their position power.Their personalqualities help their personalpower to
transcend the influence they have from position power (Daft, 2005).
House (1976) provided a theory of charismatic leadership that linked personality char
acteristics to leader behaviors and,through leader behaviors,effects on followers. Weber
(1947) and House (1976) both argued that these effects would be more likely to happen
when followers were in stressful situations because this is when followers want deliveran
from their problems. A major revision to House’s conceptualization has been offered by
Shamir, House, and Arthur (1993). They argue that charismatic leadership transforms ho
followers view themselves and strives to tie each follower’s identity to the organization’s
lective identity (Northouse, 2010). In other words, charismatic leadership is effective bec
each follower’s sense of identity is linked to the identity of his or her organization.
A Transformational Leadership Model
Bass and his colleagues (Avolio, 1999; Bass, 1985, 1990; Bass & Avolio, 1993, 1994) refin
and expanded the models suggested by Burns (1978) and House (1976). Bass (1985) add
to Burns’s model by focusing more on the needs of followers than on the needs of leader
focusing on situations where the outcomes could be negative, and by placing transforma
tional and transactional leadership on a single continuum as opposed to considering them
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260 CASES IN LEADERSHIP
independent continua. He extended House’s model by emphasizing the emotional compo-
nents of charisma and by arguing that while charisma may be a necessary condition for
transformational leadership, it is not a sufficient condition—more than charisma is needed.
Transformationalleadership inspires subordinates to achieve more than expected
because (a) itincreases individuals’awareness regarding the significance oftask out-
comes, (b) it encourages subordinates to go beyond their own self-interest to the interests
of others in their team and organization, and (c) it motivates subordinates to take care of
needs that operate at a higher level (Bass, 1985; Yukl, 2006).
There are eight factors in the transformational and transactional leadership model.
These are separated into three types of factors: (1) transformational factors consisting of
idealized influence, individualized consideration, inspirational motivation, and intellec-
tual stimulation; (2) transactional factors consisting of contingent reward, management by
exception (active), and management by exception (passive); and (3) one nontransformatio
nontransactional factor, that being laissez-faire (Yukl, 2006).
Transformational Leadership Factors
This form of leadership is about improving each follower’s performance and helping fol-
lowers develop to their highest potential (Avolio, 1999; Bass & Avolio, 1990). In addition,
transformational leaders move subordinates to work for the interests of others over and
above their own interests and, in so doing, cause significant, positive changes to happen
for the good of the team and organization (Dubrin, 2007; Kuhnert, 1994).
Idealized Influence or Charisma. Leaders with this factor are strong role models followers
want to emulate and with whom they want to identify. They generally exhibit very high
moral and ethical standards of conduct and usually do the right thing when confronted
with ethicaland moralchoices. Followers develop a deep respect for these leaders and
generally have a high level of trust in them. These leaders give followers a shared vision
and a strong sense of mission with which followers identify (Northouse, 2010).
InspirationalMotivation.Leaders with this factor share high expectations with followers
and motivate them to share in the organization’s vision with a high degree of commitment
These leaders encourage followers to achieve more in the interests of the group than they
would if they tried to achieve their own self-interests. These leaders increase team spirit
through coaching, encouraging, and supporting followers (Yukl, 2006).
Intellectual Stimulation. Leaders with this factor encourage subordinates to be innovative
and creative. These leaders support followers as they challenge the deeply held beliefs and
values of their leaders, their organizations, and themselves. This encourages followers to
innovatively handle organizational problems (Yukl, 2006).
Individualized Consideration. Leaders with this factor are very supportive and take great ca
to listen to and understand their followers’ needs. They appropriately coach and give advic
to their followers and help them to achieve self-actualization. These leaders delegate to as
followers in developing through work-related challenges and care for employees in a way
appropriate for each employee. If employees need nurturance, the leader will nurture;if
employees need task structure, the leader will provide structure (Northouse, 2010).
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Chapter 9: TransformationalLeadership 261
Transformationalleadership achieves differentand more positive outcomes than
transactionalleadership. The latter achieves expected results while the former achieves
much more than expected. The reason is that under transformational leaders, followers
are inspired to work for the good of the organization and subordinate their own self-
interests to those of the organization.
Transactional Leadership Factors
As suggested above, transactional leadership is different from transformational leadershi
in expected outcomes. The reason is that under transactional leaders, there is no individ-
ualization offollowers’needs and no emphasis on followers’personaldevelopment—
these leaders treat their followers as members of a homogeneous group.These leaders
develop a relationship with their followers based on the exchange of something valuable
to followers for the achievement of the leader’s goals and the goals of the followers. Thes
leaders are influential because their subordinates’ interests are connected to the interest
of each leader (Kuhnert, 1994; Kuhnert & Lewis, 1987).
ContingentReward.This factordescribesa processwhereby leadersand followers
exchange effort by followers for specific rewards from leaders. This process implies agree
ment between leaders and followers on what needs to be accomplished and what each
person in the process will receive. This agreement is usually done prior to the exchange o
effort and reward.
Management by Exception (MBE). This factor has two forms—active and passive. The for-
mer involves corrective criticism, while the latter involves negative feedback and negativ
reinforcement. Leaders who use MBE (active) closely monitor their subordinates to see if
they are violating the rules or making mistakes. When rules are violated and/or mistakes
made, these leaders take corrective action by discussing with their subordinates what the
did wrong and how to do things right. Contrary to the MBE (active) way of leading, lead-
ers who use MBE (passive) do not closely monitor subordinates but wait untilproblems
occur and/or standards are violated. Based on their poor performance, these leaders give
subordinates low evaluations without discussing their performance and how to improve.
Both forms of MBE use a reinforcement pattern that is more negative than the more pos-
itive pattern used by leaders using contingent reward.
The Nonleadership Factor
As leaders move further from transformational leadership through transactional leader-
ship, they come to laissez-faire leadership. Individuals in leadership positions who exer-
cise this type ofleadership actually abdicate their leadership responsibilities.This is
absentee leadership (Northouse,2010).These leaders try to not make decisions or to
delay making decisions longer than they should, provide subordinates with little or no
performance feedback, and ignore the needs of subordinates. These leaders have a “wha
will be will be” or “hands-off, let-things-ride” approach with no effort to even exchange
rewards for effort by subordinates. Leaders who do not communicate with their subordi-
nates or have any plans for their organization exemplify this type of leadership.
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Other Perspectives of Transformational Leadership
Two other streams ofresearch contribute to our comprehension oftransformational
leadership:These streamsare research conducted by Bennisand Nanus(1985) and
Kouzes and Posner (1987,2002).Bennis and Nanus interviewed 90 leaders and,from
these leaders’ answers to several questions, developed strategies that enable organization
to be transformed. Kouzes and Posner interviewed 1,300 middle- to senior-level leaders
in private and public organizations. They asked each leader to tell about his or her “per-
sonalbest” leader experiences.From the answers these leaders provided,Kouzes and
Posner developed their version of a transformational leadership model.
The Bennis and Nanus (1985) Transformational Leadership Model
Bennis and Nanus (1985) asked questions such as the following: “What are your strengths
and weaknesses? What past events most influenced your leadership approach? What were
the critical points in your career?” (Northouse, 2010). The answers to these questions pro-
vided four strategies that transcend leaders or organizations in their usefulness for trans-
forming organizations.
First, leaders need to have a clear, compelling, believable, and attractive vision of their
organization’s future. Second, they need to be social architects who shape the shared mea
ings maintained by individuals in organizations. These leaders set a direction that allows
subordinates to follow new organizational values and share a new organizational identity.
Third, leaders need to develop within followers a trust based on setting and consistently
implementing a direction,even though there may be a high degree ofuncertainty sur-
rounding the vision. Fourth, leaders need to use creative deployment of self through positi
self-regard. This means that leaders know their strengths and weaknesses and focus on th
strengths, not their weaknesses. This creates feelings of confidence and positive expectati
in their followers and builds a learning philosophy throughout their organizations.
The Kouzes and Posner (1987, 2002) Transformational Leadership Model
On the basis of their interviews with middle- to senior-level managers, Kouzes and Posner
(1987, 2002) found five strategies through content analyzing the answers to their “per-
sonal best” leadership experiences questions.
First, leaders need to model the way by knowing their own voice and expressing it to
their followers, peers, and superiors through verbal communication and their own behav-
iors. Second, leaders need to develop and inspire a shared vision that compels individuals
to act or behave in accordance with the vision. These inspired and shared visions chal-
lenge followers, peers, and others to achieve something that goes beyond the status quo.
Third, leaders need to challenge the process. This means having a willingness to step out
into unfamiliar areas, to experiment, to innovate, and to take risks to improve their orga-
nizations. These leaders take risks one step at a time and learn as they make mistakes.
Fourth, leaders need to enable others to act. They collaborate and develop trust with ot
ers; they treat others with respect and dignity; they willingly listen to others’ viewpoints, e
if they are different from the norm; they support others in their decisions; they emphasize
teamwork and cooperation;and,finally,they enable others to give to their organizations
because these others feel good about their leaders, their job, their organizations, and them
Fifth, leaders need to encourage the heart.This suggests that leaders should rec-
ognize the need inherent in people for support and recognition. This means praising
262 CASES IN LEADERSHIP
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Chapter 9: TransformationalLeadership 263
people for work done well and celebrating to demonstrate appreciation when others
do good work.
This model focuses on leader behaviors and is prescriptive. It describes what needs to
done to effectively lead others to embrace and willingly support organizational transform
The model is not about people with special abilities. Kouzes and Posner (1987, 2002) arg
these five principles are available to all who willingly practice them as they lead others.
How Does the Transformational Leadership Approach Work?
This approach to leadership is a broad-based perspective that describes what leaders nee
to do to formulate and implement major organizational change (Daft, 2005). These trans-
formational leaders pursue some or most of the following steps.
First, they develop an organizational culture open to change by empowering subordin
to change, encouraging transparency in conversations related to change, and supporting
in trying innovative and different ways of achieving organizational goals. Second, they pr
a strong example of moral values and ethical behavior that followers want to imitate bec
they have developed a trust and belief in these leaders and what they stand for.
Third, they help a vision to emerge that sets a direction for the organization. This visio
transcends the various interests of individuals and different groups within the organizatio
while clearly determining the organization’s identity. Fourth, they become social architec
clarify the beliefs, values, and norms that are required to accomplish organizational chan
Finally, they encourage people to work together, to build trust in their leaders and each o
and to rejoice when others accomplish goals related to the vision for change (Northouse,
yy References
Avolio, B. J. (1999). Leadership in organizations (6th ed.). Upper Saddle River, NJ: Pearson/Prentice Hall
Bass, B. M. (1985). Leadership and performance beyond expectations. New York: Free Press.
Bass, B. M. (1990). From transactional to transformational leadership: Learning to share the vis
Organizational Dynamics, 18, 19–31.
Bass, B. M. (1998). The ethics of transformational leadership. In J. Ciulla (Ed.), Ethics: The heart of lead-
ership (pp. 169–192). Westport, CT: Praeger.
Bass, B. M., & Avolio, B. J. (1990). The implications of transactional and transformational leadership for
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Bass, B. M., & Avolio, B. J. (1993). Transformational leadership: A response to critiques. In M.
Chemers & R. Ayman (Eds.), Leadership theory and research: Perspectives and directions (pp. 49–80
San Diego: Academic Press.
Bass, B. M., & Avolio, B. J. (1994). Improving organizational effectiveness through transformational lead
ship. Thousand Oaks, CA: Sage.
Bass, B. M., & Riggio, R. E. (2006). Transformational leadership (2nd ed.). Mahwah, NJ: Lawrence Erlbau
Bass, B. M., & Steidlmeier, P. (1999). Ethics, character, and authentic transformational leadersh
Leadership Quarterly, 10, 81–227.
Bennis, W. G., & Nanus, B. (1985). Leaders: The strategies for taking charge. New York: Harper & Row.
Burns, J. M. (1978). Leadership. New York: Harper & Row.
Bryman, A. (1992). Charisma and leadership in organizations. London: Sage.
Daft, R. L. (2005). The leadership experience (3rd ed.). Mason, OH: Thomson, South-Western.
Downton, J. V. (1973). Rebel leadership: Commitment and charisma in a revolutionary process. New Yo
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Dubrin, A. (2007). Leadership: Research findings, practice, and skills. New York: Houghton Mifflin.
Goldsmith, M., Greenberg, C. L., Robertson, A., & Hu-Chan, M. (2003). Global leadership: The next gen-
eration. Upper Saddle River, NJ: Financial Times Prentice Hall.
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Howell, J. M., & Avolio, B. J. (1992). The ethics of charismatic leadership: Submission or liberation
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Kouzes, J. M., & Posner, B. Z. (1987). The leadership challenge: How to get extraordinary things done in
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Kuhnert, K. W. (1994). Transforming leadership: Developing people through delegation. In B. M. Bass &
B. J. Avolio (Eds.), Improving organizational effectiveness through transformational leadership (pp. 10–
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Shamir, B., House, R. J., & Arthur, M. B. (1993). The motivational effects of charismatic leadership: A
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Yukl, G. (2006). Leadership in organizations (6th ed.). Upper Saddle River, NJ: Pearson/Prentice Hall.
yy The Cases
Mayor Rudolph Giuliani, Knight of the British Empire
Rudolph Giuliani was the mayor of New York City during the events of September 11,
2001, and became world renowned for his leadership. Outlined is a description of h
background, his first few years in office, the troubles he faced in his last year in office, and
the sudden shift in his popularity post–September 11, 2001.
Spar Applied Systems: Anna’s Challenge
The director of human resources must contend with internal and external pressures to
make changes quickly and smoothly for the new year. She has been with the company for
6 months. In her capacity as director of human resources, she has spent her time estab-
lishing a baseline for the division so that she can then create a departmental vision and
strategy for 2000. It will be one of the most interesting challenges of her career. Since join
ing, she has gained an understanding of the division’s future direction from its leadership
team. The team is under the direction of the division’s new general manager.
yy The Reading
Drucker’s Challenge: Communication
and the Emotional Glass Ceiling
The supreme challenge for a leader is to change human behavior, a formidable, if not impo
sible, task. But the leader who is emotionally intelligent (who is aware of and comfortable w
264 CASES IN LEADERSHIP
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Mayor Rudolph Giuliani, Knight of the British Empire265
his or her own self) will have a far greater chance of changing the behavior of others than
leader who is not aware of himself or herself. Using theories from esteemed managemen
thinker Peter Drucker, the author points out that leaders who inspire are those who have
resolved their own identity crisis. But that is much easier said than done, and the dauntin
nature of the task is encapsulated in Drucker’s Challenge, which states that every human
being has an emotional glass ceiling, a natural “resistance to changing” identity. This cei
is broken only when communication is so compelling that it overcomes that resistance. H
leaders can accomplish this goal is the subject of this article.
Mayor Rudolph Giuliani,
Knight of the British Empire
Prepared by Ken Mark under the supervision
of Christina A. Cavanagh
yy Introduction
Rudolph Giuliani, the mayor of New York City,
was going to receive a honorary knighthood
from Britain, announced the National Post on
October 15, 2001. The award, reported in the
British press on Saturday and confirmed by
official sources on October 14, 2001, followed
Giuliani’swidelypraisedleadershipin the
wake of the September 11 terrorist attacks on
New York that killed thousands of people and
destroyed the twin towers of the World Trade
Center.The award, “Knightof the British
Empire,” was the highest honor the Queen
could bestow on a foreign citizen.
Britain’s SundayTelegraphnewspaper
quoted a Buckingham Palace official saying:
The Queen believesthat Rudolph
Giuliani was an inspiration to political
leaders around the world, as well as to his
city. She was grateful for his support for
Britons bereaved by the tragedy and feels
that this will also be a gesture of solidar-
ity between America and Britain. Her
regard for Mayor Giuliani is reflected in
her desire to present the honour in per-
son at Buckingham Palace.
yy Rudy Giuliani,
Mayor of New York City
Giuliani had spent his adult life searching for
missions impossible enough to suit his extrav-
agant sense of self. A child of Brooklyn who
was raised in a family of fire fighters, cops and
criminals, he chose the path of righteousness
and turned his life into a war against evil as he
defined it. As a U.S. attorney in New York dur-
ing the 1980s, Giuliani was perhaps the most
effective prosecutor in the country, locking up
Mafia bosses,crookedpoliticiansand Wall
Street inside traders.
When Giuliani was electedmayor of
New York City in 1993, more than a million
AUTHOR’S NOTE: This case has been written on the basis of published sources only. Consequently, the interpretatio
spectives presented in this case are not necessarily those of Rudolph Giuliani or any of his employees.
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266 CHAPTER 9: TRANSFORMATIONAL LEADERSHIP
New Yorkers were on welfare, violent crime
and crack cocaine had ravaged whole neigh-
borhoods, and taxes and unemployment were
sky-high.It was fashionableto dismissthe
place as ungovernable. Mayor Giuliani made
good on his promise, doing away with New
York’s traditional politics of soft and ineffec-
tual symbolism. The public was shocked and
delighted to find that the streets were safer and
cleaner. And the public did not care how he did
it. If Giuliani picked fights big and small, if he
purged government of those he deemed insuf-
ficiently loyal, so be it, “People didn’t elect me
to be a conciliator,” Giuliani said.
He governed by hammering everyone else
into submission, but in areas where that strat-
egy was ineffective, such as the reform of the
city schools, he failed to make improvements.
Although by 1997 he had cut crime by two-
thirds, his job-approval rating had declined to
32 per cent. New York City was getting better,
but the mayor seemed to be getting worse.
Black minority leaders complained that his
aggressive cops were practising racial profil-
ing, stopping and frisking people because of
their race. Giuliani launchedcampaigns
against jaywalkers, street vendors, noisy car
alarms, and a crusade against publicly funded
art that offended his moral sensibilities. But
the pose seemed hypocritical at best when
Giuliani, whose wife had not been seen at
City Hall in years, began courting another
woman, Judi Nathan.
In typicalNew Yorkfashion,he was a
dichotomous mix of public sentiment and dis-
dain. Time magazinereported,on May 28,
2001, that Giuliani was poised to leave his office
on a wave of goodwill, with opportunities for
future office. Despite announcing the end of
his marriage to the press corps before he told
his wife, he had garnered a level of public sym-
pathy not usually availableto adulterers,
thought to be due to his unfortunate bout of
prostatecanceroverridingthe simultaneous
appearance of his new girlfriend.
As a public figure, his life was more than
just an open book. It was a constant and daily
analysis of every aspect of his colorful life.
Perhaps not since the Princess of Wales had a
public figure become so newsworthy even if
only on a local scale. There were hundreds of
stories written about him and just as many
colorful headlines announcing the firing of
his estranged wife’s staff and rumors of him
leaving the New York City mayor’s mansion
due to the ongoing divorce drama.
yy The Transformation Begins
Through circumstances both inexplicable and
extraordinary, a controversial mayor who was
set to leave office in 2002 took the reigns of a
crisis on what became known as the twenty-
first century’s “Day of Infamy”—September
11, 2001. Countless newspapers published sto-
ries of Giuliani mobilizing the city’s emer-
gency services, running through smoke-filled
basements wearing a gas mask and urging sur-
vivors to head north. As Newsweek reported,
September 24, 2001:
Giuliani, wearing a gas mask, was led
running through a smoke-filled base-
ment maze and out the other side of
the Merrill Lynch building on Barclay
Street, where the soot they’re now call-
ing “graysnow”was a foot deep.
Stripping off the gas mask, Giuliani
and a small group set off on foot for a
mile hike up Church Street, urging the
ghostly,ash-cakedsurvivorsto “Go
north! Go north!” A distraught African
Americanwomanapproached,and
the mayor touched her face, telling her
“It’s going to be OK.” Farther up, a
young rowdy got the mayoral
“Shhhhhh!” he deserved. That set the
tone. He was sensitive and tough and
totally on top of everything. Even his
press criticism was, for once, on target.
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Mayor Rudolph Giuliani, Knight of the British Empire267
And even his harshest critics offered noth-
ing but sincere praise.
In recent years, Rudy Giuliani has been
a crankyand not terriblyeffective
mayor, too distracted by marital and
health problems to work on the city’s
surging murder rate. But in this cata-
clysm, which he rightly called “the most
difficult week in the history of New
York,” the city and the country have
found that the most elusive of all demo-
cratic treasures—real leadership.1
A Barron’s report, on September 24, 2001,
was even more on point:
It is no secret that disaster has yielded a
remarkable change in the public per-
sona of Rudy Giuliani. Vanished is the
meanmayorwho badgeredhot-dog
vendors, threatened museums, sought
to bludgeon dissent and indulged in an
open and nasty row with his estranged
wife. And in his place is, well, the essen-
tial Rudy: generous,sympathetic,
indefatigable,levelheaded,unfailingly
reassuring, a man for all crises.
The real Rudy, in other words. We say
that becausewe’veknownRudy for
something close to a quarter of a cen-
tury; indeed, for a spell between govern-
ment jobs he represented Dow Jones, the
parent company of Barron’s, and, we can
personally attest, was one hell of a lawyer.
More to the point, he was also that rare
combination of tough when he had to
be and tender when he should have
been, funny, bright and argumentative
(natch), a great guy to knock off a bottle
or two of vino with. Rudy has done a lot
of silly things as mayor, but it doesn’t
surpriseus one whit that whenthe
unimaginable happened, he did every-
thing right and with incomparable style.2
As his popularity soared, Giuliani played
with thoughts of returning to serve a third
term. Time magazine reported on October 8,
2001 that Giuliani had received 15 per cent of
the primary vote, all from write-in ballots. This
result underlinedGiuliani’s undiminished
popularity in the eyes of the public:
On a typical day last week, he found sim-
ple words to console the two children of
Inspector Anthony Infante at St. Theresa’s
in the morning, then managed the ego of
the Rev. Jesse Jackson as he took advan-
tage of Giuliani’s media entourage to
nominate himself negotiator-in-chief. In
the evening, Giuliani called on a stricken
crowd at Temple Emanu-El to stand and
applaud Neil Levin, the head of the Port
Authority, who died helping his employ-
ees escape. Reverting to tireless cheer-
leader,he endedhis day at Yankee
Stadium watching Roger Clemens pitch
against Tampa Bay.3
Bolstered by this show of support from the
public, Giuliani summoned the three leading
mayoral candidates to his office at Pier 92 and
demanded to be allowed to stay in office for
another three months—or else he would enter
the mayoral race against them and win. Al
Sharpton, a supporter for Fernando Ferrer in
the 2002 New York mayoralelectionwas
unimpressedwith this move.Unmovedby
Giuliani’s achievements, he referred to reports
of Giuliani’s heroics on September 11, 2001,
arguing that on that day, “We would have come
together (as a city) if Bozo was the mayor.”
1Jonathan Alter, “Grit, Guts and Rudy Giuliani”, Newsweek, September 24, 2001.
2Alan Abelson, “Up & Down Wall Street: Weighing Consequences”, Barron’s, September 24, 2001.
3Margaret Carlson, “Patriotic Splurging”, Time, October 15, 2001.
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It was September 1993 and Anna Solari had
been with Spar Applied Systems for six months.
In her capacity as director of human resources,
she had spent her time establishing a baseline
for the division so that she could then create a
departmental vision and strategy for 2000. It
would be one of the most interesting challenges
of her career. Since joining, Anna had gained an
understanding of the division’s future direction
from its leadership team. The team was under
the direction of Stephen Miller, the division’s
new general manager. Since there was internal
and externalpressureto makethe changes
quickly and smoothly, Anna knew the vision
for human resources had to be in place well
before the new year.
yy Spar Aerospace Limited
Spar Aerospace Limited was Canada’s premier
space company and was a recognized leader in
the space-basedcommunications,robotics,
informatics, aviation and defense industries.
The company began in 1968 as a spin-off from
de Havilland Aircraft, and was re-organized
into four decentralized business segments over
a period of two decades: space, communica-
tions,aviationand defenseand informatics
(see Exhibit 1).
The companyemployedapproximately
2,500peopleworldwideand approximately
60 per cent of Spar’s sales originated outside
Canada. Spar’s expertise enabled Canada to
become the third country in outer space and
the companycontinuedto innovatewith
achievements such as communications satel-
lites, the Canadarm, and the compression of
digital communication signals.
yy Spar Applied Systems
Spar’s Aviation and Defense area featured two
distinct businesses, one of which was Applied
Systems Group (ASG). ASG was born through a
merger between Spar Defense Systems and the
newly acquired, but bankrupt, Leigh Instruments
Limited in 1990. ASG designed and supplied
communication, flight safety, surveillance and
navigationequipmentto space,military,and
aerospace organizations around the world. It also
offeredadvancedmanufacturingservicesfor
complexelectronicassembliesand systems.
These government contracts represented close to
100 per cent of ASG’s business.
The flight safety systems products included
deployable emergency locator beacons, and flight
data and cockpit voice recorders that collected,
monitored, and analyzed aircraft flight informa-
tion to assess equipment condition and improve
flight safety procedures. Communications and
intelligence products included integrated ship-
board naval communications systems, ground-
based aircraft navigation beacons, and infrared
surveillance systems. Advanced manufacturing
incorporated the assembly of high quality, low
volume, highly complex electronic assemblies
and systems to meet stringent military and space
specifications.
ASG operated out of two facilities in the
OttawaValley(Kanataand CarletonPlace),
268 CHAPTER 9: TRANSFORMATIONAL LEADERSHIP
Copyright 1997, Ivey Management Services Version: (A) 2001-08-10
Spar Applied Systems
Anna’s Challenge
Prepared by Laura Erksine under the supervision of Jane M. Howell
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Spar Applied Systems269
employed 340 people (43 per cent manufacturing,
20 per cent engineering and technical, 17 per cent
sales and professional, and 20 per cent other),
and was the only non-unionized area of Spar.
Historically, ASG’s customers were primarily
government-basedand included Canada’s
Department of National Defense, the U.S. Navy
and Coast Guard, as well as organizations in other
internationalgovernments.For government
customers, ASG had cost-plus contracts which
guaranteed a minimum profit for the company,
even if there were delays or occasions when the
project went over budget. Customers were often
told by ASG what they needed rather than deliv-
ering requirements or specifications to ASG.
Due to shrinking defense budgets, the
aviation and defense industry was becoming
increasingly competitive. As government contracts
diminished, ASG soughtmorecommercially
orientedaviationcustomerswho required
fixed-price contracts. This meant ASG would
have to finish on time and on, or under, budget
in order to guarantee a profit. Time to market
was becoming a critical factor in winning bids.
Competitionwas comingfrom larger-scale,
highly flexible, and vertically integrated compa-
nies such as Hughes Aircraft and McDonnell
Douglas who were global in both strength and
influence.Their capabilities,competencies,
and capacities, especially related to technology
and products, overshadowed those at ASG.
Applied Systems had other reasons to be
concerned. More than 70 per cent of its revenues
came from heritage programs that were nearing
completion; it operated in too many fragmented
lines of business; and a significant portion of the
lines of business in their portfolio were nearing
an ‘end-of-life’ status.The AppliedSystems
ComStream
Corporation
HQ - San
Diego, California
Spar Aviation Services
Mississauga,
Ontario Astro,
Ontario
Spar Applied Systems
Kanata, Ontario
Carleton Place,
Ontario
Aviation and
Defence
Spar Space
Systems
Ste-Anne-de-
Bellevue, Quebec
Brampton, Ontario
Prior Data Sciences
HQ - Kanata, Ontario
Mississauga, Ontario;
Richmond, B.C.
Halifax, Nova Scotia;
Pointe Clarie, Quebec
Spar Corporate
Offices Toronto,
Ontario
SOURCE: Company files.
Exhibit 1Organizational Chart
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270 CHAPTER 9: TRANSFORMATIONAL LEADERSHIP
division of Spar had just started to become prof-
itable two years after the acquisition of the Leigh
Instruments assets. In the fall of 1993, ASG
made up 9.1 per cent of the revenues and 33.3
per cent of the profitsof Spar Aerospace.
Members of ASG’s leadership were wondering
how to sustain this newfound profitability.
Althoughthe employeesat ASG were
among the most skilled in their fields, the com-
pany did not know how to best direct their
energy. They were very comfortable working in
their current environment. In the era of cost-
plus contracts, they had lots of time to work on
a project becausedeadlineswere often
extended.Engineerspossessedthe abilityto
dedicate themselves to designing and creating
superior (sometimes over-engineered) technol-
ogy, even at the expense of manufacturability.
Most importantly, employees could focus on
their design and manufacturing tasks because
they were being directed and led by a program
manager.The programmanagerhad the
responsibility of customer contact, maintaining
a schedule, and looking after the “business”
details. The work was very independent and
narrow as specific people were asked to con-
tribute to different phases based on their skill
setsand their experience.Overall,company
strategy was unimportant to ASG’s engineers.
Phases moved sequentially through design and
manufacturing with little interaction.
Following the formation of ASG in 1990,
the executivemanagementgroup of Spar
Aerospace Limited wanted to see the company
become more firmly established in the com-
mercial aerospace and defense industry. They
felt that by adapting their military products to
suit commercial aviation customers, ASG could
be successful. Stephen Miller, vice-president of
marketing and government relations in Spar’s
corporate office, was selected as general man-
ager and joined ASG in September 1992.
yy Stephen Miller
Stephen Miller, in his early 40s, had more than
20 years of experience in government and the
aerospaceindustry.He quicklydetermined
from his initial size-upthat ASG was ill-
prepared to compete in an increasingly com-
mercial marketplace. ASG had products designed
for military and government clients, had a
technology rather than a customer focus, and
lacked the internal attitude to move as quickly
and efficiently as these new customers would
require. Stephen saw an urgent need to change
and established three personal objectives. First,
he wanted to change the culture at ASG so dra-
matically that any of his successors would be
unable to revert to the way things were in the
fall of 1992. Stephen wanted to change the cul-
ture from being technology-driven, reactive,
internally focused, and controlling to one that
would be market-driven, strategic, externally
focused, and liberating. Second, he wanted the
division to make money for more than six
months in a row. Finally, he wanted to develop
a long-term strategy that would make sense in
a global context and eliminate the short-term
planning with which the companywas
familiar. If successful, these objectives would
increase both the flexibility and resiliency of
the organization.
Stephen also wanted to create a culture
that fosteredteamwork,open communica-
tion, accountability, and recognition of per-
formance in a skilled, challenged workforce.
He strongly believed that the organization
was capable of greater achievements if prop-
erly managed and motivated. He knew that
the functions had to be more integrated to
eliminatethe functionalsilos currentlyin
place. He also realized that too many changes
too quickly might upset the current work-
force and, although committed to his goals,
Stephenwas worried.ASG attractedvery
highly skilled employees who would be val-
ued by competitors. Stephen was well aware
that he neededthe intellectualcapitalof
ASG’s employees in order to move into the
commercial marketplace.
One of Stephen’s first moves was to take
his management team (see Exhibit 2) off-site
to hammerout a mission statementand
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Spar Applied Systems271
develop a strategic plan. The group achieved
consensus on the following:
Building on our heritage, we will become
the marketleaderin informatics-
based integrated digital communica-
tions and flight safetysystemsand
services, with a particular focus on
satisfying the changing needs of the
global defense market. We will grow
to be a fast-paced, high performance,
$250 million a year enterprise, with
returns in the top 25 per cent of our
industry by the year 2000.
The management team also reached con-
sensus about a vision, later introduced and
discussed with ASG employees in a series of
meetings (see Exhibit 3). They also developed
a three-part strategy that was intended to link
organizational activities to the strategic plan.
First, through business development, ASG had
to capture significantly higher dollar volumes
of profitable business. Second, programs had
to be executedeffectively(on budget,on
schedule, and satisfying the customer). Third,
ASG’s employees needed to provide value to
customers by being responsive and by deliver-
ing top quality products.
By the first quarter of 1993, Stephen was
feeling confident about ASG’s future ability to
make progress with the initiatives, except for
human resources. Unlike the present ASG and
many other organizations, he wanted human
resourcesto play a crucialrole in Applied
Systems’ strategic plan by implementing the
vision at a structural and organizational level.
In order to find a leader for the new human
resources role, Stephen went outside the organi-
zation to recruit Anna Solari from a high tech-
nology firm that did not compete with ASG.
Anna was selected because of her strengths
integrated human resources systems, organiza-
tional development and change leadership.
Director
Product
Assurance
Director
Communication
and Navigation
Systems
Director
Engineering
Services
Director
Aerospace and
Electro-Optic
Systems
Director
Finance and
Business
Systems
Director
Contracts and
Business
Development
Director Human
Resources,
Administration
and Facilities
Director
Avionics
Business Unit
General Manager
Stephen Miller
Exhibit 2Management Team Off-Site, November 1992
SOURCE: Company files.
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272 CHAPTER 9: TRANSFORMATIONAL LEADERSHIP
Exhibit 3Applied Systems Group
Vision
• We will grow to be a $250 million/year enterprise by the year 2000.
• We will attain a prominent and respected position in the new world order, climbing the
systems chain, entering new markets that build on our heritage and growing those
products and services that are relevant to our future.
• We will be recognized as being the best at what we do, on a global scale, winning
consistently in excess of 70 per cent of the markets and opportunities we pursue.
• We will achieve total customer satisfaction by understanding their needs and through
100 per cent performance of our industry.
• We are mastering the concepts of teamwork and organizational growth; we will exploit its
strengths to create an exciting and vibrant entity, attractive to both our customers and
employees.
yy Anna Solari
After receiving a Bachelor of Social Sciences in
Psychology from the University of Ottawa in
1986, Anna Solari became a consultant with a
large firm specializing in Human Resources con-
sulting. From there, her 10-year career took her to
two different commercial high technology firms,
where she had a wide range of human resources
responsibilities. Anna moved to Applied Systems
in March 1993, six months after Stephen Miller
had taken the role of general manager. Having
recently managed the rapid growth and merger of
a smaller company, she was interested in the chal-
lenges presented by a mature, relatively successful
company that had to change in order to survive.
When she met with Stephen, his energy and
enthusiasm for radical change helped to finalize
her decision to take the new job.
Just as Anna joined Applied Systems, there
were a number of labor relations issues that
needed to be addressed. All of Spar’s divisions,
with the exception of ASG, were unionized.
There was regular pressure to change that situa-
tion and ASG had always maintained a labor
relations componentwithin its human
resources staff to attempt to prevent a union
from taking hold. The last attempt ended just as
Anna arrived and was the most successful yet,
where the union came close to getting the nec-
essary 50 per cent plus one vote for certification.
Reasons behind the drive were thought to be the
ASG employees comparing their representation
to the other Spar divisions and the difficulty
that arose from attempting to mix the Leigh and
Defense cultures following the acquisition. Due
to closed communication paths and a lack of
employee involvement, there was a feeling of “us
versus them”. Although the company was still
not represented, the drive was so close to being
successful that it was enough to give Spar man-
agement a wake-up call. Unsure of the reasons
behind the drive, management breathed a sigh
of relief and hoped something, anything, would
end the union threat. Since then, Anna had tried
to gather an understanding of the current state
of affairs, a baseline, in order to create a human
resources vision that would be compatible with
the company’s strategic direction and proactive
in preventing a union drive from recurring.
yy The Baseline Audit
By September 1993, Anna felt she had gathered
and digested a wide range of data and opinions
regardingthe currentstateof the human
resources function at ASG. Given the continuing
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Spar Applied Systems273
internal and external pressures to make changes,
Anna reviewedthe informationshe had
amassed in order to develop a plan for imple-
menting needed changes quickly that could be
smoothlyalignedwith a vision for human
resources and consistent with ASG’s mission.
Anna gathered the following observations
during the “baseline audit” that she later shared
with the case writer:
Organizational Structure
The company’s leadership team had already dis-
cussed possible structures to eliminate the top-
heavypyramidin placewhen Annajoined.
Instead of an organization revolving around
program management with functional depart-
ments operating in isolation, upper manage-
ment wanted a structure organized by process
(winning new business, supporting the com-
pany, and delivering product) that functioned
in integrated teams created for specific con-
tracts. Their idea was that people would have a
“home” based on the skills they possessed but
would join one or more project teams for the
length of the business contracts. Although this
was a radical departure from the current struc-
ture, Stephen, Anna, and the others felt it was an
important way to decrease their time to market
and become more responsive to their increasing
commercial customer base.
Spans of Control/
Management Responsibility
Anna recalled: “What I walked into was a very
traditional, hierarchical organization with four
or five layers of management. It started with the
general manager/VP. Under him were director
levels and those director levels may or may not
have fallen within the senior management cate-
gories. If not, directors might have had senior
management who then had middle level man-
agement. Middle level management might have
also had entry level management or supervi-
sors below it.” (See Exhibit 4 for a departmental
organization chart.) The organization was very
top-heavy which forced large spans of control at
the lower levels in the company. For example
people at the very top may have only had four or
five people reporting to them while entry-level
supervisors were responsible for 25 or 30 people.
In addition, the accountability rested with those
who possessed the ‘manager’ title whereas th
real profit and loss impact resided with the gen-
eral workforce.
Culture
DespiteStephen’sinitiativesand relationships
with his management team, Anna found the cul-
ture at ASG was quite formal, hierarchical, an
traditional. To a certain degree it was bureaucrati
and also lived under the threat of third-party inter
vention. The descriptors used were: technology-
driven;resource-led;tactical;reactive; ‘thing’
(rather than people) sensitive; closed; controlling;
introspective; divided; and marginal performer
Anna had conducted many focus groups of 20 to
25 employees during her baselining and these
employees identified issues such as the color
the paint on the walls, poor ventilation, and ques-
tions about health and safety standards, amon
others. Anna started to worry:
Because [I] wanted to make real changes
in areas that impacted the bottom line
and had a return on investment such as
equity, behavior shifts, overtime policies
and sick leave. If [the employees] were
upset about paint, what would happen
when we introduced things that affected
their pocketbooks?
She wondered how to cope with another
possibleattemptat unionizationwithout
allowing that threat to overshadow any decisions
that needed to be made.
Communication
There was very little face-to-face communica-
tion in ASG and the basis for information flow
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Secretary, Clerk
Receptionist
13 Direct
Reports
1 Direct
Report
Project
Engineering
5 Direct
Reports
Systems
Engineering
Advanced
Systems
8 Direct
Reports
Electronics
Engineering
6 Direct
Reports
Mechanical
Design
3 Direct
Reports
Design
Drafting
Engineering
Services
Director of
Engineering
Software
Engineering
4 Direct
Reports
Technical
Publications
Integrated
Logistics
Support
2 Assistants
Exhibit 4Engineering Department Organization Chart, February 1992
SOURCE: Company files.
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Spar Applied Systems275
Recruiting and Training
Recruitment was a reactive process designed to
fill gaps. People leaving the organization were
replaced using a position description developed
many years ago and faithfully adhered to ove
time. The human resources department solicited
was formal, one-way, top-down, and written.
Approval processes went up through the levels
of the company, across the top, and back down
again. As a result, decision making was delayed.
Occasionally, the general manager would give a
formal “stateof the union” addressto all
employees that might allow for questions at the
end. If you wanted to speak to someone, an
appointment was made through managers’ sec-
retaries in advance. Communication seemed to
Anna to be too formal and too inefficient. She
vividly recalled an exchange with a member of
the management team that occurred in her first
weeks at ASG (see Exhibit 5).
Exhibit 5An Early Communications Example—Setting Up a Meeting
Anna’s Secretary: Anna, Mr. Smith would like to set up a meeting with you. Why don’t
you give me your calendar so I can organize the meeting with
Mr. Smith’s secretary? I can also set up any other meetings you need
to have without bothering you for your availability.
Anna: Thanks for the offer but I like to keep my own schedule. Do you know
where Mr. Smith’s office is? I’ll just walk over and talk to him right now.
Anna’s Secretary: Oh, I don’t think that is a very good idea. We don’t really do things
like that around here.
Anna: That’s OK. If Mr. Smith needs to see me, I am free right now and I’ll
just walk over to see him.
Anna’s Secretary: [Gives directions to a secretary’s office with a closed outer door that
leads into Mr. Smith’s inner office (also with a closed door).]
Anna: Good morning, I am here to see Mr. Smith. He wanted to speak with me
Mr. Smith’s Secretary:Do you have an appointment?
Anna: No, but is Mr. Smith in his office?
Mr. Smith’s Secretary:Yes, but. . . .
Anna: Is he with somebody or on the phone?
Mr. Smith’s Secretary:No, but. . . [as Anna knocked on Mr. Smith’s door]. You really
shouldn’t be doing that.
Anna: Mr. Smith, I understand you wanted to see me.
Mr. Smith: Yes, but I am not really prepared for a meeting right now.
Anna: How long will it take? I can meet you in the cafeteria in 15 minutes.
Mr. Smith: Well, 15 minutes should be enough time but I would prefer to have
the meeting here in my office.
Anna: That’s fine. I’ll be back in 15 minutes.
When Anna returned 15 minutes later, Mr. Smith’s secretary was very surprised whe
greeted her but didn’t ask permission to see Mr. Smith. Anna knocked on Mr. Smith’s door,
entered, and the meeting began.
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resumes based on the information from a given
department that an employee would be leaving
or that growth required additional personnel.
The target audience for filling gaps was industry.
The organization had always targeted
[the high technology defense] indus-
try and, in fact, they broke out of the
mold a little bit when they hired me.
We did not focus a lot on the new
[college and university] grads because
experience was very important to us.
Traditional roles were defined: “a technician
is a technician, a technologist is a technologist
and at no point in time do those two roles meet.”
The humanresourcesdepartmenthad
limited involvement in the new employee ori-
entation. New employees filled out tax and
registration paperwork and received a policy
manual that explained the company “rules”
(absenteeism, benefits, company hours, bath-
room and cigarette breaks, etc.). One striking
example that stood out to Anna was the rule
that employees were not permitted to sleep at
their workstations during working hours. New
employees then reported directly to their man-
ager who immediately integrated them into
their roles. Information about ASG and their
role in the organization was picked up from
their manager and their peers.
Trainingwas also an informalprocess.
Members of the human resources department
arranged for a given employee to receive certain
coursesin responseto a requestfrom that
employee’smanager.ASG employeesalready
possessing the necessary skills provided the spe-
cific technicalcourses(usuallylastinga few
hours)and managerscould requestspecific
“trainers”.If the necessarycourseswerenot
available on site, Applied Systems reimbursed
employees’ tuition at a local community college.
This procedure was unusual because ASG pro-
vided most courses. Training was conducted on
company time and increased technical skills led
to jumps in job grades and corresponding pay
increases. There were 54 pay grades within ASG.
Managers and employees did not need to show
an immediate business need or an opportunity
to use the new technical knowledge to participate
in training, just a desire to learn the new skills.
Performance Appraisal and Review
Employee performance appraisals, which were
conducted annually, determined merit increases
for each employee. Each person’s appraisal was
conducted by his or her immediate manager
and was based on a rating system that ranged
from excellent to poor. Technical elements like
quality and quantity of work were evaluated, as
were factors like adherence to health and safety
standards, and punctuality. Some employees
indicated to Anna that they did not interact
with their managers enough to be evaluated by
them, while some managers complained of the
time it took to complete the reviews. Merit
increases were at the discretion of each man-
ager and came from a pool of funds distributed
from higher levels of the organization. As a
result, Anna learned that pay equity and equal-
ity were not being maintained throughout ASG
because a connection was not directly made
betweenthe performanceappraisaland the
amount of the merit pay.
Compensation and Benefits
Anna felt that the benefits program at Spar was
one of the best that she had seen, “not only in
the industry but extending into the high tech
area, including software.” The benefit package
included everything from dental coverage to
disability programs. In addition, employees at
ASG were very well paid. Based on information
collected by ASG from its industry hires and
marketplace research, Anna found the com-
pany’s compensation policy was 30 per cent
above market rate. Although employee satisfac-
tion was not a problem, Anna realized that
excessivelyhigh salarylevelsreflectedpoor
276 CHAPTER 9: TRANSFORMATIONAL LEADERSHIP
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Drucker’s Challenge277
business practices and were inconsistent with
actual divisional financial performance.
Salary administration was based on 54 job
grades (secretary: 1 to 6, technician: 1 to 6,
etc.) and each grade had very specific tasks that
those people within it could complete. Anna
described the mentality by saying:
People knew their box and they did
not want anybody stepping into their
box, and, by the same token, did not
want to step out of their box.
This is where the inequity was manifested.
Some people with the same roles could be
making salaries that differed by up to $10,000
annually because of seniority and performance
appraisals.
yy Vision 2000
Anna, with the assistance of members of the
management group and employees of ASG,
wanted to design an organization that would be
more competitive, more flexible, and ready to
grow through mergers and acquisitions. The
employees were highly skilled and very innova-
tive in nature; however, they were demograph-
ically diverse and tended to operate within the
silos fostered by the hierarchical organization.
Given that ASG had created a strategy and a
vision for 2000, Anna’s task was to develop a
vision for human resources that was compati-
ble with Stephen Miller’s strategy of capturing
higher volumes of profitable business, execut-
ing effectively, and providing value to the cus-
tomers.How could employeedevelopment,
succession planning, and the new organiza-
tional structure be introduced and what were
the best recruiting and training practices, per-
formance evaluation process, and compensa-
tion plan?She also wonderedif the labor
relations component needed to change in order
to prevent a successful union drive. After estab-
lishing the vision, how would the transition
occur to get them there?
Building social capital is imperative for
a leader today. But to meet that chal-
lenge, a leader must do nothing less
than change human behaviour, a for-
midable, if not impossible, task.
During the past two decades, no psychological
concept has had a greater influence on leadership
development than emotional intelligence. On the
other hand, no other concept in the past 20 years
is so tied to ancient wisdom: 2,000 years ago
Socrates declared that the attainment of self-
knowledgeis humanity’sgreatestchallenge;
Aristotle added that this challenge was about
managing our emotional life with intelligence.
This is at the heart of leadership development in
today’s complex, dynamic business environment.
This article will describe the relationship
betweenpsychologicalcomplexity,human
potential and communications, and how they
relate to emotional intelligence and, ultimately,
build social capital.
Copyright 2002, Ivey Management Services
Drucker’s Challenge
Communication and the Emotional Glass Ceiling
By Paul Wieand
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yy The Importance
of Peter Drucker
The current popularity of emotional intelligence
can be seen as a discontinuous extension of the
psychological revolution during the ’60s and
early ’70s, when the human potential move-
ment, popularized by Abraham Maslow, domi-
nated business literature.
In the history of business, Peter Drucker
stands alone as a bridge between that earlier
era and today. Drucker is both an intellectual
and a pragmatist, and at 92, he has observed the
major changes in both epochs and been a force
of change himself. In his work he consistently
points out that while the context of organiza-
tions and leadershiphas changed,human
nature has not.
Druckeralso understandsthe needfor
complexity. He says, “We can’t learn anything
by simplifying difficult issues. We have got to
complexify them.” Ultimately, Drucker values
simplicity, but he realizes that “getting there”
means making connections to the past and to
related fields. His work is a tool for making
these connections. Before discussing Drucker
further, it is necessary to identify what is, and
what is not, truly new about the concept of
emotional intelligence.
yy Emotional Intelligence
By themselves,the discoveriesin emotional
intelligence are not new. What is new is that for
the first time we can scientificallyvalidate,
through brain scanning technology, the fact that
our emotions play a central role in moulding
thinking and logic. New discoveries in neuro-
physiology have also advanced our understand-
ing of the critical relationship between emotions
and values.
With respect to human development, two
significant issues have emerged which have an
immediate impact on, and practical applica-
tion for, leadership development. One is that
the emotional component of the brain, the
limbic system, is capable of hijacking both our
intellect and our values. What is not new is
that this hijacking occurs without our aware-
ness. This is simply not good, for when the
thinking and the processing of values are con-
trolled by emotionsoutsideof awareness,
humans have a strong tendency to develop
attitudes and behaviours that destroy trust and
relationships. Values can be determined on an
ad hoc basis, leading to inconsistency in rela-
tionships and decision making.
A second significant fact is that the emo-
tional system is changed neither easily nor
quickly. Making significant changes to the lim-
bic system usually requires approximately one
year; making those changes enduring ones is
highly dependent on social interaction. This
scientific discovery sounded the death knell for
the idea that significant, enduring change can
take place quickly, by insight alone, or in isola-
tion, outside of a relationship. Reading about
or studying emotional intelligence is as likely
to have an impact on its development as read-
ing a book on playing golf. Emotional intelli-
genceis acquiredthrough experience,in
relationships.
yy Identity and the
Emotional Glass Ceiling
Thirty years before the discovery of emotional
intelligence, Drucker noted that deep and fun-
damental human change takes place at the
level of identity. He observed that such change
is most likely to occur as a result of communi-
cation in the form of social interaction around
sharedvalues.To paraphraseDrucker,the
most effective communication requires alter-
ing the emotions of others. The most powerful
communicationmay be nothingmore,but
nothing less than, shared experience, without
any logic whatever.
If Drucker is right, emotionalintelli-
gence becomes a powerful tool for moving an
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Drucker’s Challenge279
individual toward realizing his or her potential
only when the change is grounded in his or her
identity. In other words, increasing emotional
intelligence requires altering identity. At the
same time, science has shown us that identity’s
emotional component is the most difficult and
complex to alter. Drucker observed that alter-
ing emotions is, for the most part, a communi-
cations challenge that succeeds only when it
breaksthrougha person’s “emotionalglass
ceiling.” Psychologists often refer to this event
as a boundary experience.
yy Drucker’s Challenge
In 1969, Drucker wrote one of his few theoret-
ical and psychological papers and presented it
to the Fellows of the International Academy
of Management, in Tokyo. One of the most
insightfulstatementsin this paper brings
togetherpsychologicalcomplexity,human
potential and communication in a way that
can shed light on the practical application of
emotional intelligence. We call this statement
“Drucker’s Challenge,” and it states: “At its
most powerful, communication brings about
conversion, that is, a change of personality,
values, beliefs, aspirations. But this is a rare
existential event, and one against which the
basicpsychologicalforcesof everyhuman
being are strongly organized.”
Drucker’s Challenge recognizes that every
human being has an emotional glass ceiling,
a natural resistanceto changingidentity.
Moreover, this ceiling is broken only when com-
munication is so compelling that it overcomes
that resistance.
While this is not a revelation for a psy-
chologist, it presents a unique and profound
challenge for most executive coaches, the indi-
viduals who are usually responsible for signifi-
cantly increasing another person’s emotional
intelligence. It is a challenge because the basic
psychological forces of “every” human being
are strongly organized against achieving higher
emotional intelligence.
There is a myth about the difficulty and
complexity of human development, and to
understand it we must first understand the
relationship between identity and emotional
intelligence.
yy The Identity System:
Reconceptualizing
Emotional Intelligence
Emotional intelligence is an evolving concept,
one that lacks even a standard definition. More
important, it is not grounded in an integrated
existential context. Understanding the existen-
tial component of Drucker’s Challenge is a nec-
essary first step in effectively using emotiona
intelligence as a vehicle for human develop-
ment. An appreciation of the identity system
can greatly facilitate that understanding.
The foundation of identity rests on three
major, interrelated psychological and existen-
tial factors.
1. The relationship between emotional intel
gence and identity: Much of the current litera-
ture would lead you to believe that emotional
intelligence is an independent system that sub-
sumesidentity.In fact,it is the otherway
around. Identity is the whole system and emo-
tional intelligence is just one component of
that identity. When Drucker refers to a “rare
existential event,” he refers to what is required
to alter the identitysystem.Any perceived
change in emotional intelligence will be short
lived if it is not accompanied by a change in
identity. Moreover, this is not only a rare event.
It is an existential one that alters personality,
values, beliefs and aspirations.
2. The core components of the identity syste
Here, again, psychology and neuroscience have
come together and, in a way, reached a consen-
sus. Identity is composed of three primary com-
ponents that can be viewed as the brain’s co
subsystems—emotions,valuesand intellect.
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Neuroscience has revealed that all three subsys-
tems are processed in different parts of the brain.
What makes emotional intelligence such a pow-
erful concept is that the emotions play a unique
and powerful role in altering identity. Leaders
function at their best—when they are consistent
in their values, actions and words, and therefore,
trust is high—when they are aware of their emo-
tions and maintain a balance between emotions,
values and the intellect, and when values are the
leading subsystem in identity. When emotions
remain outside of awareness, they—along with
intellect—tendto drivethe identitysystem.
Behaviours that are inconsistent because they
are emotionally driven are often rationalized,
and it becomesdifficultto havevaluesthat
remain consistent. The result is that words and
action tend to be inconsistent and serve only the
individual, who has little empathy or regard for
others. The primary by-product is a decrease in
open, honest communication, which over time,
tends to lead to distrust.
When valuesare the driver—overriding
both emotionalreactivityand intellectual
rationalization—wordsand actionsbecome
consistent,creatingattitudesand behaviours
that foster open, honest communication. This
consistent communication in turn creates trust-
ing relationships.
3. The dynamics of identity.If it is to adapt
and survive, every system, including human
identity, needs an “organizing principle.” The
task of the organizing principle is to help the
system reach its potential. One way to isolate
the most powerfulorganizingprinciplein
human identity is to examine the characteris-
tics of people who survive and adapt at the
extreme boundaries of human existence. In
other words, what are the personality traits that
actually grow under the most adverse circum-
stances? The question is all the more interesting
since Drucker’s Challenge states that the basic
psychological forces of every human being are
strongly organized against change.
yy The Survivor Personality
Extensiveresearchhas beendone on two
groupsof peoplewho meetthesecriteria,
wartime paratrooper survivors and concentra-
tion camp survivors. The research reveals that
these “survivor personalities” have two charac-
teristics in common, both of which involve
very adaptive emotional capabilities.
First, values are the driver of the survivor
personality. While the intellect can change at the
speed of thought and emotions can change at
the speed of impulse, values are relatively con-
stant and tend to change at the speed of trust.
Values, because they transcend the individual,
can infuse an individual with the need for con-
tinuity and stability, both of which are necessary
to surviveunderextremeconditions. Victor
Frankl, the Viennese psychiatrist and concen-
tration camp survivor, and author of Man’s
Search for Meaning, observed that extreme, tor-
tuous conditions actually strengthened certain
identities because the conditions forced people
to clarify their values.
A second characteristic these survivors have
in common is that they are able to use a broader
range of emotions than other personality types.
This makes them better able to adapt to com-
plex socialsituationsand enablesthem to
develop social support systems. Al Seibert, a
psychologist, former paratrooper and the origi-
nator of the “survivor personality,” found that
the survivor personality is predominantly para-
doxical; it is made up of combinations of oppo-
sites. Survivor personalities have an ability to be
humble and fierce, strong and vulnerable, logi-
cal and intuitive, self-confident and self-critical,
serious and playful. They use their emotions in
a way that makes them both strong and flexible,
and they use them to get the best out of others.
But to have core values that are consistent yet
flexiblerequiresthat an individualhavean
extremely adaptive emotional capacity.
Researchers often describe individuals with these
capabilities as genuine and authentic.
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Drucker’s Challenge281
yy Authenticity and
Exceptional Leadership
The connectionbetweenauthenticityand
exceptionalleadershipis very significant.
Authenticitycan be viewedas the most
advanced form of identity and the ideal condi-
tion for increasing the effectiveness of emo-
tional intelligence.It is characterizedby an
emotional capacity that continuously strives to
reach its potential in a way that maximizes
trustingrelationships.Increasingemotional
intelligence is a complex challenge, one that
involves breaking through one’s own emotional
glass ceiling as a necessary first step, and then
using this capacity to help others do the same in
a way that transcends individual differences.
The authentic person communicates trust
by being genuine and non-defensive, and by
allowing consistent access to his or her value
system.Values,particularlyempathy,are
clearly developed and communicated, so that
authentic people are true to both themselves
and others.Being true to humanitygives
authenticity a transcendent quality by elevat-
ing dignity and respecting differences in peo-
ple and cultures.
Increasing authenticity requires courage—
the courage to be oneself—without sacrificing
the values that bond leaders with others. When
authenticity is viewed in this way, empathy
becomes an act of courage and trust becomes
the foundation of communication. Words are
the least powerful form of communication, an
artifact of the failed theory that logic and ratio-
nal thought alone are the supreme elements of
effectivecommunication.Druckeris correct
when he says that, “the whole person comes
with the words.” Identity, who you are, speaks
louder than words.
Human potential,especiallyfor leaders,
cannot be a derivative of IQ alone. In an age in
which IQ, in the form of intellectual capital, has
become a commodity, EQ has become the driver
of competitive advantage. Most organizations
will continue to fail to build high-performance
cultures if they do not require leaders at every
level of the organization to have a high degree of
emotional intelligence.
Authenticity and
the Post-Modern Leader
Estimates suggest that 70-80 per cent of major
reorganizations and re-engineering efforts fail
over the long term. The primary reason for
failure is the destruction of social capital. From
the beginningof the IndustrialRevolution
until the last few decades, physical capital was
the most valued form of capital. As the tech-
nological revolution evolved and then
exploded during the ’80s and ’90s, a premium
was placed on intellectual capital. We did not
realizethat this shift occurred,to a great
extent, at the expense of social capital, and
until its demise came to be seen as a crisis.
Very few companies have historically fac-
tored in, in any meaningful way, the social and
relationalconsequenceof major organiza-
tional change.Most reorganizations,even
today, emphasize changes in strategy, structure
and cost reductions; they do not give equal
weight to the human issues and the reorgani-
zation’snegativeimpacton social capital.
When most organizations make major changes,
they fail to manage the emotional component
intelligently, something that requires “authen-
tic” leadership. In our experience, however,
senior management in general, and CEOs in
particular, too often resist breaking through
their own emotional glass ceiling. They are not
authentic leaders.
Many executives that were trained as leaders,
especially during the ‘60s, have failed to reali
that the demands of building social capital, the
“people” component in the business world, have
changed.Maximizinghumanpotentialhas
become one of the most important and enduring
competitive advantages, primarily in its ability to
retain and attract talent. Without doubt, today’s
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post-technological revolution has changed the
requirements for leadership.
MargaretMead was perhapsthe first
anthropologist to see the new challenges facing
organizations in the industrialized world. In
her 1970 book Culture and Commitment, she
writes, “We are the first generation to develop
our identity during a time when the forces of
change are greater than the forces of non-
change.” Winston Churchill, a contemporary
of Mead, wrote, “We are shaping the world
faster than we can change ourselves, and we are
applying to the present the habits of the past.”
The existential psychologist E. Van Deurzen-
Smith states that, “The cultural component of
identity has never before been so unstable, and
this instability is anxiety-producing.”
In today’s world, leaders must not only be
able to help people in the organization realize
their human potential. They must also be able
to lead during a time of instability, uncertainty
and continuous change. To do so, leaders must
be emotionallyflexible,paradoxical,non-
defensive,empathicand values-driven.In
short, leaders must model authenticity.
Executive coach Peter Koestenbaum claims
that leaderstodaymust address “existential
quandaries” similar to those found in Drucker’s
Challenge. He writes, “Nothing is more practi-
cal [today] than for people to deepen them-
selves. The more you understand the human
condition, the more effective you are as a busi-
nessperson.Human depth makesbusiness
sense.” His primary solution is to help execu-
tives become more authentic and to deepen
their understanding of human nature.
Technicalcompetenceis still a necessity
today, but leaders who can role model authentic-
ity at every level of the organization are equally
important. This new reality is reflected in the
current emphasis by some of the world’s most
admired companies on developing the emotional
intelligence of leaders. Leaders who are both
technically competent and authentic have the
greatest ability to attract and retain talent and
build social capital. Building social capital begins
with deepening the capacity of leaders to model
authenticity. This requires changes at the level of
identity. An authentic leader then has the emo-
tional flexibility and strength to deal with the dis-
continuity of change, and to create a reasonable
sense of stability during tremendous upheaval.
Once an organizationunderstandsthat
who a leader is as a person speaks more pow-
erfully than what he or she says, the connec-
tion betweenidentityand communications
becomes clear. Authenticity and effective com-
munications are mutually inclusive, and no
organization in today’s world runs well in the
long run without effective communications.
Authentic leaders are able to manage their
own emotional lives with intelligence and lever-
age, by evoking higher levels of emotional intel-
ligence in others in the organization. Howard
Gardner, a Harvard psychologist and author of
LeadingMinds: An Anatomyof Leadership,
offersvaluableinsightinto the humanand
emotional process that takes place when leaders
can leverage their own development to help
others develop those same qualities. At the risk
of oversimplifyinghis work, Gardnerviews
authentic leaders as those who have the ability
to create a sense of group identity. They serve as
role models with whom the group identifies
and which it can emulate. With a sense of trust
at the core of these relationships, open, honest,
candid and empathic communication leads to
strong relationships that create stability amidst
uncertainty and change. The leader’s stability is
experienced as a part of the group’s stability.
Gardner adds a powerful insight into the emo-
tional process that enables this to take place: “It
is the particular burden of the leader to help
other individualsdeterminetheir personal,
social and moral identities; more often than not,
leaders inspire, in part, because of how they
have resolved their own identity issues.”
Breaking Through
When leaders find the courage and humility to
identify and break through their own emotional
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Drucker’s Challenge283
glass ceiling, they can begin to do the same for
others. As leaders develop a better understand-
ing of the nature of human change and its
connection to effective communication, they
become more realistic about the time frame and
the knowledge required for successful leader-
ship development and cultural change. They
recognize that the short-term cost of building
social capital far outweighs its long-term bene-
fits, both financial and human.
Drucker’s Challenge reflects the magni-
tude of the effort required to increase emo-
tional intelligence in leaders. There are no
quick or easy ways to accomplishthese
changes in identity. Change begins with a real-
istic appraisal of the self, a process of reflec-
tion that increases self-knowledge and leads to
a humble acceptance of one’s real limitations
and recognitionof one’sstrengths.When
leaders develop a more accurate self-concept,
they can utilize those around them to com-
pensate for their natural limitations and lever-
age their strengths. Clarification of values is
paramount so that leadership, work life, and
values are more closely aligned, over time, cre-
ating stability and a passion and commitment
to work. However, one must realize that a
deeper awareness of the complexity of emo-
tions and how they influence decision making
and reacting to others is critical.
Theseare the difficult and rewarding
challengesof leadershipdevelopmentin
today’s complex and rapidly changing world.
Leadership development, at its best, is human
development. You simply cannot be a world-
class leader if you are first of all, not a world-
class person, and you cannot be a world-class
person if you are not authentic. This is why
authenticityis the most advancedform of
emotional intelligence.
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