leadership and change
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Leadership
Effective Leadershipin a Changing World
Glenn Boseman, DBA, CLU, CLF
In recent years, practitioners as well
as scholarly journals have been singing
the praises of leadership. There seems to
be a conrinuous parade of new books
on the best seller list that address lead-
ership issues. Most of the practitioner
books are written by retired managers
who want to pass their leadership
secrets and wisdom on to subsequent
generations. In-deprh articles in schol-
arly journals typically address otily one
aspect of leadership. This leadership
column will attempt to bridge the prac-
titioner/scholarly worlds by introducing
a particular theoretical leadership con-
cept, explaining the underlying theory,
discussing how practitioners apply the
concept, and asking the readers to eval-
uate tliemselves in relation to how other
successful practitioners achieve results
through the use of the concepts. As
such, this column will address two
issues—defining the real job of a leader
and evaluating two types of leaders:
transactional and rransformational.
The term "leadership" is used in
such a common fashion today that we
take for granted that we all have about
the same defmition for it. This is not
the case. So that we are all on the same
page, lets define leadership with a couple
commonly used definitions. First, Win-
ston Churchill defined leadership con-
cisely as the ability to influence people to
set aside their personal concerns and sup-
This issue of fhe Journal went to pressin Aprii 2008. Copyright © 2008.
Society of Financial Service Professionals.
port a larger agenda—at least for a while.
Churchill made it clear that effective
leaders motivate people to perform
above and beyond the call of dut)- in
order to enhance group success. To him,
leadership effectiveness was not who
exerts the most influence or who
emerges to control the group; rather, the
leader is the one who can achieve high
group performance over time. In today's
language, we would say that Churchill
su^ested that effective leadership is per-
haps the best source of organizational
competitive advantage. A second com-
monly used definition of leadership is
that it is the act of stimulating, engaging,
and satisfying the motives of followers
that result in the followers taking a
course of action toward a mutually
shared vision. Clearly, both of these def-
initions embrace three important com-
ponents: the leader, the follower(s), and
the context or situation in which the
leader and followers fmd themselves.
This column will address only the leader.
Over the past decades, researchers
focused on defining the personal traits of
effective leaders but ultimately con-
cluded that it is not so much the traits as
it is how individuals utilize these traits.
Traits were found to be excellent predic-
tors of leadership emergence rather than
leadership effectiveness. This means that
individuals who possess the defined traits
are more likely to be perceived as leaders
by others, but not that they are necessar-
ily more effective leaders. Nevertheless,
people with these traits are generally
linked to leadership roles. The major
defined traits are intelligence, domi-
nance, sociability, self-monitoríng, high
energy and drive, self-confidence, and a
tolerance for ambiguity. If an individual
lacks these traits, he or she is unlikely to
be given the opportunity to lead.
Leaders are afforded the opportu-
nity to lead not because they are
appointed by senior miuiagers; they lead
because they are perceived and accepted
by followers as leaders. Two researchers,
Jim Kouzes and Barry Posner, conducted
a research project to determine the top
four characteristics that followers seek
in leaders. They learned that followers
want leaders who are honest, forward-
looking, inspiring, and competent.'
Of the defmed leadership traits
and four characteristics above, how
many do you possess?
You are now the leader. What is
your real job? Clearly, from the two
definitions of leadership, it is your
responsibiliry to achieve performance
through the efforts of others. But what
does it take to do that?
Most practitioners have heard of
Jack Welch's "4E" framework: "positive
energy the ability to energize others,
edge to summon the courage to make
difficult decisions, and the ability to exe-
cute." Although it is not considered part
of the 4E framework, Welch explains
how important it is that the leader also
has passion that serves as the thread that
runs throughout the 4E framework and
ties it together.-
Nikos Mourkogiannis has identi-
fied four major aaions that every effec-
tive leader must master: think, inspire,
mobilize, empower.' Mourkogiannis
defines thinking as the part of leader-
ship that leads to innovation, developing
a purpose, creating a vision, and deter-
mining strategic position, all of which
mtist be the essential focus of a leader.
Inspiring—the most visible part of lead-
ership—is selling the vision through
telling stories, confronting reality, ask-
JOURNAL OF FiNANOAL SERVICE PROFESSiONALS / MAY 2008
36
LEADERSHIP
ing the right questions, teassuting, and
ptoviding hope fot a bright future (this is
similat to Welch's energizing others).
Mobilizing is moving people to action,
defining c:impiiigns, setting goals, and
encouraging networks. Mobilizing con-
centrates on influencing key players to
obtain their support. Empowering is
accomplishing work throtigh others.
Hence, execution requires the leader to
manage authority and delegate appro-
priately. Execution involves allocating
resources and managing the deployment
of these (sometimes scarce) resources.
As you reflect on Welch's "4E"
framework and Mourkogiannis's four
essential actions, how do you evaluate
yourself on each? In what areas do you
excel and in what areas are you chal-
lenged? What plan do you have to
develop in those areas in which you
are challenged?
Research has demonstrated that
great leadership is more about what one
does than about who one is. Research
has also shown that the "doing" part of
effective leadership has two primary
behavior dimensions: task, or behaviors
that focus primarily on the task; and
behaviors that focus on the relationships
between the leader and follower(s).
Therefore, leaders' behavior may either
have a primary focus on influencing
people to attain goals by directives {task
behavior) or by supporting an employee
(relationship behavior). The foundation
oi elective leadership is built on these
two behaviors. A leader who displays
task behavior engages in one-way com-
munication; clearly spells out the fol-
lower's role; and tells the follower what
do where, when, and how; and then
closely supervises. A leader who displays
relationship behavior engages in two-
way communication, listens, provides
support and encouragement, facilitates
interaction, and involves the follower
in decision making. Words associated
with task behavior are structure, con-
trol, and supervise; words associated
with relationship behavior are praise,
listen, and facilitate.
Leaders aui be classified as transac-
tional or transformational. Transactional
leadership builds important influence
components between the leader and fol-
lower. The transactional leader's behavior
represents an exchange (a transaction)
between the leader and follower. The
exchange pursues an economic exchange
strategy, whereby the leader exchanges
rewards for performance, effort, and par-
ticipation from che toilower. The transac-
tional leadership behaviors are imporumt
because they provide the foundation for
the relationship between the leader and
the follower. Effective leaders understand
the benefits of having great relationships
with tbe followers: high employee per-
formance, high employee satisfaction,
reduced empioyee turnover, and numer-
otis other benefits. The father of the
transactional leadei'ship concept, Bernard
Bass, suggests that there are two very
effective transactional leader behaviors—
contingent reward behavior (rewarding
for doing a good job) and management
by exception (putting out fires and taking
necessary corrective action). His research
has found that leaders who demonstrate
these two behaviors consistently estab-
lish positive employee attitudes and
behaviors. This flnding is important
because it recognizes that contingent
reward behavior serves as feedback to the
employee and the organization. The fol-
lowers learn to see the relationship
between what they are doing correctly
and the rewards they receive. Because
rewards are a powerflil tool to demon-
strate to the follower what the leader
wants, the contingent reward behavior
connection works. Thus, the transac-
tional leader behaviors build a solid foun-
dation for trust between the leader and
follower. But theßllower wiil deliver only
performance tbat is expected and rewarded
by the leader and no more.
By contrast, the transfortnational
leader attempts to stimulate and satisfy
the follower's higher-level needs by
engaging the whole person. Basically, fol-
lowers are asked to transcend their own
self-interest for the sake of the organiza-
tion, which is accomplished by raising
follower awareness of the importance
and value of goals. Although there have
been many studies to identify the charac-
teristics of a transformational leader, they
all reach essentially the same conclusions.
A transformational leader is one who
• creates and articulates a vision—
identifies new opportunities for the
group and talks positively about
what it means to all concerned
• provides a role model—sets an
example for followers to imitate
that is consistent with the values
that the leader espouses
• ptovides individualized support̂ —
demonstrates that the leader is con-
cerned about the personal needs
and feelings of the individual
• communicates high performance
expectations—shows that the
leader expects high performance,
quality, and excellence
• encourages the acceptance of
group goals—promotes cooper-
ation among followers so that
they work together to accomplish
stated goals
JOURNAL OF FINANCIAL SERVICE PROFESSIONALS / MAY 2008
37
LEADERSHIP
• provides intellectual stimulation—
challenges followers to examine
their assumptions about their deci-
sion making and work and asks
them to rethink alternative deci-
sion solutions and how work can
be achieved at a higher level
Research has found that when lead-
ers engage in transformational leader-
ship, followers are more satisfied, more
optimistic, less likely to quit, more likely
to trust their leader, and more likely to
prodtice at a high level than followers
who work tor leaders who do not display
the leader behaviors associated with
transformational leadership.
A major result of transformational
leadership is that followers tend to put in
extra effort or perform at higher levels
than stated or expected. The extra effort
comes in the form of organizational citi-
zenship behaviors that benefit the organ-
ization but are not formally recognized
by the organizational reward system. Typ-
ical components of organizational citi-
zenship behaviors are sportsmanship
(willingness to tolerate less-than-ideal sit-
uations), courtesy (in dealing with all
others), conscientiousness (going well
beyond the organization's role require-
ments), civic virtue (responsible partici-
pation in the politiail life ofthe organiza-
tion), and altruism (willingness to help
another individual perform a specific task
or overcome a specific problem).
One interesting point: Histori-
cally, it was thought that a transforma-
tional leader needed to have extraordi-
nary ability and means. Many years of
research have concluded, however, that
anyone who wishes to can become an
effective transformational leader, and
it is not restricted to a particular orga-
nizational function, management level.
or type of organization. Transforma-
tional leadership can be learned.
Take a moment to reflect. How do
you rate yourself on each ofthe six char-
acteristics of a transformational leader?
When you think about the followers in
your organization, what is the state of
their organizational citizenship behav-
iors? If you believe that your followers
show low organizational citizenship
behavior, you should examine if you are
operating on a high level in each ofthe
characteristics of transformational lead-
ership. In essence, there should be con-
sistency between the organizational cit-
izenship behavior of followers and the
manner in which the leader executes
transformational leadership.
Evaluate yourself Give yourself a
rating of 1 to 10 in each of the dimen-
sions of transformational leadership.
Be honest. Add the individual dimen-
sions and take an average. How did
you score on the total concept of trans-
formational leadership? Are you above
average? Average? Below average?
Now rate your followers' organiza-
tional citizenship behavior. How would
you score them? If you are not satisfied
with your evaluation, perhaps you
should reexamine the six dimensions
that make up transformational leader-
ship. When you evaluated yourself in
each of the dimensions, were there
.some in which you rated yourself very
poorly? If so, have you developed a
plan to improve on those dimensions
on which you arc challenged?
In summary, there is no one best
type of leadership; that is, what is effective
for one person may not be effective for
another. We mtist, however, fully under-
stand the results ofthe two different types
of leadership in choosing which one to
adopt. The outcome of transactional lead-
ership is that x}cit follower will deliver only
performance that is expected and rewarded
by the leader and no more. Many leaders
are satisfied with this performance. The
outcome of transformational leadership is
that tUe follower will perform beyond the
stated level of expectation.
A leader can make a case for using
cither style. It is up to the individual
leader to decide which style to follow
and, when change is needed, to have the
courage to develop'and implement a
plan to change. •
Glenn Boseman, DBA, CLU, CLF, received a
BS from Campbell Universitv, an MBA
from East Carolina University, and a DBA in
organization and administration from Kent
State University. In 1985, he received his
CLU from The American College, and
recently obtained the CLF designation as
well. Priortojoining the College in 1981, Dr.
Boseman taught management at Temple
University, with a one-year interruption to
serve as Visiting Scholar of Management at
the University of Western Australia.
Dr. Boseman has over 20 years' expe-
rience in the financial services industry and
has been a member of The American Col-
lege faculty since 1981, He is the director
of the Chartered Leadership Fellow (CLF)
designation program, and he also teaches
in the Master of Science in Financial Ser-
vices (MSFS) and the Master of Science in
Management {MSM L) degree programs.
He may be reached at glenn.boseman@
theamericancollege.edu.
(1) HrTp://www.leadershipchallenge.com/Wiley
CDA/Section/id-131034.html.
(2) Nikos Mourkogiaunts, "A Leader's Real Job
Description: Nikos Mourkogiannis describes
the four actions you need to master to stay on
track and focus on what matters," Business-
Week online, htrp://www.businessweek.coni/
managing/content/dec2007/ca20071225_84]l
62.htm?chan=,search.
(3) Ibid.
JOURNAL OF FINANCIAL SERVICE PROFESSIONALS / MAY 2008
38
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