chapter 2 leadership trait approach.pdf

1Alain Gomez is the former chairman and CEO of Thomson S. A.

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C H A P T E R

5C H A P T E R

2Leadership Trait ApproachLeadership Trait Approach

I usually look first for character. Do they have stamina and dedication? Do theyhave the physical andmental balance to be leaders? Not everybody makes the samechoice in weighing work and personal life, and that is legitimate. But for leadersyou need people who are willing to work hard and get results. . . . Leadership alsodemands an openmind and the willingness to engage with different points of view.

—Alain Gomez1

Leadership trait research was developed to ascertain why certain people were greatleaders. This research led to the development of the “great person” theory as itfocused on the inherent characteristics and qualities of leaders who were considered

to be great. This research also led to the nature argument, which said that only certainpeople were born with these traits and, consequently, only those certain people becamegreat leaders. The research focused on finding those traits that discriminated betweenfollowers and leaders (Bass, 1990; Dubrin, 2007; Jago, 1982).

Eventually, researchers questioned the universality of leadership traits. It was arguedthat no one set of traits was appropriate in all situations. This led to the reconceptualiza-tion of leadership as relationships among individuals in social situations. Recently,researchers have returned to the trait approach. The nature of this research is different inthat it now emphasizes the importance of traits in effective leadership.

Traits are attributes that include aspects such as values, needs, motives, and personality(Yukl, 2006). One very prominent leadership researcher (Stogdill, 1948, 1974) demonstratedthat average leaders were different from average group members in several ways. In hisfirst study (Stogdill, 1948), he identified the following traits: (1) intelligence, (2) alertness,

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(3) insight, (4) responsibility, (5) initiative, (6) persistence, (7) self-confidence, and (8) socia-bility. This study also identified that traits and situations intersected in the sense that sometraits were more important in some situations if an individual was to be an effective leader(Yukl, 2006). Stogdill’s (1974) second study reported on 10 traits associated with leadershipin a positive way. These were (1) drive for responsibility and task completion, (2) vigor andpersistence in pursuit of goals, (3) venturesomeness and originality in problem solving,(4) drive to exercise initiative in social situations, (5) self-confidence and sense of personalidentity, (6) willingness to accept consequences of decisions and actions, (7) readiness toabsorb personal stress, (8) willingness to tolerate frustration and delay, (9) ability to influ-ence other people’s behavior, and (10) the capacity to structure social interaction systems tothe goal to be achieved (Northouse, 2010).

Mann (1959) determined that leaders were strong in traits such as (1) intelligence,(2) masculinity, (3) adjustment, (4) dominance, (5) extroversion, and (6) conservatism.He agreed that traits could help differentiate leaders from nonleaders. Lord, DeVader, andAlliger (1986) reviewed Mann’s work and concluded that (1) intelligence, (2) masculin-ity, and (3) dominance are very important traits that people use to distinguish leaders.Kirkpatrick and Locke (1991) argued that leaders and nonleaders differ on six traits:(1) drive, (2) desire to lead, (3) honesty and integrity, (4) self-confidence, (5) cognitiveability, and (6) knowledge of the business. These writers argued for a nurture and natureperspective in that they believed that people can learn these traits, be born with them, orboth. Summarizing the traits identified above suggests five that are mentioned most fre-quently: These are (1) intelligence, (2) self-confidence, (3) determination, (4) integrity,and (5) sociability. It is these five that we will focus on (Northouse, 2010).

Intelligence

Zaccaro, Kemp, and Bader (2004) found that leaders and nonleaders differ in their intel-lectual ability in that leaders have higher levels of intelligence than nonleaders. Theirresearch suggests that having certain abilities helps one be a better leader—these arestrong verbal, perceptual, and reasoning abilities. Conversely, their research also indicatesthat it may be counterproductive if a leader’s intelligence is a lot higher than his or herfollowers’ intelligence (Dubrin, 2007). This situation could lead to an inability to effec-tively communicate with followers as leaders may be too advanced in their thinking to beaccepted and understood by their followers. Intelligence does allow leaders to more effec-tively develop social judgment and complex problem-solving skills. It also appears to bepositively associated with effective leadership (Dubrin, 2007; Northouse, 2010).

Self-Confidence

Self-confidence means that you have a positive perspective on your ability to make judg-ments, to make decisions, and to develop ideas (Daft, 2005). Self-confidence aids peopleto develop as leaders (Yukl, 2006). It helps individuals to be assured of their skills, knowl-edge, abilities, and competencies. It encourages leaders to consider that influencing oth-ers is right and appropriate. It allows individuals to believe that their decisions will makea difference. In addition to being self-confident, it is important for a leader to be able toexpress that confidence to followers; one example of exhibiting self-confidence is beingcalm, cool, and collected in a crisis situation (Dubrin, 2007).

44 CASES IN LEADERSHIP


Determination

Determination is a trait that we like to call “stick-to-it-ive-ness.” Others would describe itas having a task orientation—a desire to get the job done. Dubrin (2007) calls it tenacity.Daft (2005) calls it drive and says that it is related to having high energy. Many leadershave this sense of “stick-to-it-ive-ness”—this desire to finish the job and to do it well.Initiative, persistence, dominance, and drive go along with determination. Leaders withdetermination are willing to be assertive, to be proactive, and to persevere when the goinggets tough. Determined leaders will demonstrate a sense of dominance, especially whenfollowers need explicit direction and when there is little or no time to explain the reasonfor the direction being given.

Integrity

We like to think of integrity as consistency between what you believe, what you think,what you say, and what you do. Integrity is being trustworthy and honest. It is takingresponsibility for one’s actions and holding fast to strong principles. Followers trust andhave confidence in leaders with integrity because these leaders do what they say they willdo (Daft, 2005; Yukl, 2006). In the 1990s and 2000s, many political and business leadersabused the trust of their followers; consequently, trust of followers toward their leaders isabsent in many organizations (Daft, 2005). This led to cynicism on the part of followerstoward leaders in these arenas because many were disappointed in what was believed tobe hypocritical behavior on the part of leaders. As those of you reading this casebookbecome leaders, you can be sure that your followers will demand that you demonstrateintegrity in your beliefs, thoughts, words, and actions.

Sociability

Sociability is an important trait for leaders. Leaders who are sociable are more inclined topursue enjoyable social relationships. They are empathetic to the concerns and needs ofothers and want the best for them. They exhibit friendliness, courtesy, tactfulness, diplo-macy, and an outgoing personality. Their interpersonal skills are above average, and theydevelop a higher level of cooperation with, and among, their followers (Northouse, 2010).

These five traits are substantive contributors to effective leadership. However, the othertraits listed earlier also contribute to effective leadership. Collins (2004) argues that twotraits exemplify those with the highest level of leadership—a sense of humility and a steelyresolve to get the job done. Their sense of humility means that they accept and take theblame when things go wrong but give others the credit when things go right. Their steelyresolve means that they will find a way to go through, over, under, or around obstacles.

The Five-Factor Personality Model

Since the early 1980s, researchers have come to generally agree on five factors that determinean individual’s personality. These factors are known as the Big Five and include neuroticism,extraversion, openness or intellect, agreeableness, and conscientiousness or dependability(Judge, Bono, Ilies, & Gerhardt, 2002; Yukl, 2006). Judge et al. (2002) found empirical sup-port for personality traits being associated with effective leadership. In particular, extrover-sion, conscientiousness, and openness are positively associated with effective leadership, in

Chapter 2: Leadership Trait Approach 45


46 CASES IN LEADERSHIP

that order of importance. Neuroticism is ranked third with openness but is negatively asso-ciated with effective leadership—in other words, less is better. Finally, agreeableness wasonly weakly, albeit positively, associated with effective leadership (Northouse, 2010).

Emotional Intelligence

Emotional intelligence combines our affective domain (emotions) with our cognitivedomain (thinking) (Yukl, 2006). It is concerned with our understanding of emotions andapplying this understanding to the tasks we engage in throughout our lives. Mayer,Salovey, and Caruso (2000) used four components to define emotional intelligence: beingaware of one’s ability to perceive and express emotions, having the ability to control ourown emotions while behaving with integrity and honesty, being empathetic toward oth-ers and sensing organizational concerns, and effectively managing our own emotions andthose involved in our relationships with other people (Dubrin, 2007). Another researcher(Goleman, 1995, 1998) suggests that emotional intelligence encompasses social and per-sonal competencies, with social competence consisting of empathy, communication, andconflict management, while personal competence involves motivation, conscientiousness,self-regulation, confidence, and self-awareness (Northouse, 2010).

Emotional intelligence is a relatively new concept in leadership trait research. There isdebate on how important it is in people’s lives, with some arguing that it is very importantin success at home, school, and work and others saying that it is somewhat important. It isreasonable to suggest that emotional intelligence is important to effective leadership asleaders with more sensitivity to their own emotions and the effect of their emotions onother individuals should be more effective (Yukl, 2006). Dubrin (2007) says that emotionalintelligence is a supplement to cognitive ability and that leader effectiveness needs morethan only emotional intelligence. More research is needed to give us a better understand-ing of the relationship between emotional intelligence and effective leadership.

How Does the Trait Approach Work?

The trait approach to leadership is not relational. It concentrates on leaders with no focuson followers or situations. The trait approach emphasizes that effective leadership isabout having leaders with specific traits. Inherent in the trait approach is the suggestionthat organizations will have better performance if they put people with specific leadershiptraits into particular leadership positions. In other words, selecting the right people willimprove organizational performance (Northouse, 2010).

yy ReferencesBass, B. M. (1990). Bass and Stogdill’s handbook of leadership: A survey of theory and research. New York:

Free Press.Collins, J. (2004). Level 5 leadership: The triumph of humility and fierce resolve. In Collection of

articles—Best of HBR on leadership: Stealth leadership (pp. 15–30). Boston: Harvard Business SchoolPress.

Daft, R. L. (2005). The leadership experience (3rd ed.). Mason, OH: Thomson, South-Western.Dubrin, A. (2007). Leadership: Research findings, practice, and skills. New York: Houghton Mifflin.Goleman, D. (1995). Emotional intelligence. New York: Bantam.


Chapter 2: Leadership Trait Approach 47

Goleman, D. (1998). Working with emotional intelligence. New York: Bantam.Jago, A. G. (1982). Leadership: Perspectives in theory and research. Management Science, 28(3), 315–336.Judge, T. A., Bono, J. E., Ilies, R., & Gerhardt, M. V. (2002). Personality and leadership: A qualitative and

quantitative review. Journal of Applied Psychology, 87, 765–780.Kirkpatrick, S. A., & Locke, E. A. (1991). Leadership: Do traits matter? The Executive, 5, 48–60.Lord, R. G., DeVader, C. L., & Alliger, G. M. (1986). A meta-analysis of the relation between personality

traits and leadership perceptions: An application of validity generalization procedures. Journal ofApplied Psychology, 71, 402–420.

Mann, R. D. (1959). A review of the relationship between personality and performance in small groups.Psychological Bulletin, 56, 241–270.

Mayer, J. D., Salovey, P., & Caruso, D. R. (2000). Models of emotional intelligence. In R. J. Sternberg (Ed.),Handbook of intelligence (pp. 396–420). Cambridge, UK: Cambridge University Press.

McCormick, J. & Stone, N. (1992). From national champion to global competitor: An interview withThomson’s Alain Gomez. In W. Bennis (Ed.) Leaders on leadership: Interviews with top executives(pp. 119–136). Boston, MA: Harvard Business Review.

Northouse, P. G. (2010). Leadership: Theory and practice (5th ed.). Thousand Oaks, CA: Sage.Stogdill, R. M. (1948). Personal factors associated with leadership: A survey of the literature. Journal of

Psychology, 25, 35–71.Stogdill, R. M. (1974). Handbook of leadership: A survey of theory and research. New York: Free Press.Yukl, G. (2006). Leadership in organizations (6th ed.). Upper Saddle River, NJ: Pearson-Prentice Hall.Zaccaro, S. J., Kemp, C., & Bader, P. (2004). Leader traits and attributes. In J. Antonakis, A. T. Cianciolo,

& R. J. Sternberg (Eds.), The nature of leadership (pp. 101–124). Thousand Oaks, CA: Sage.

yy The Cases

LG Group: Developing Tomorrow’s Global Leaders

The firm’s chairman has announced a corporate goal of increasing revenues from $38 billionto $380 billion between 1995 and 2005. Most of this increase is expected to come from newinternational sales. As a consequence, the firm must add an estimated 1,400 new global lead-ers to its management ranks. The chairman and his team must determine what these newglobal leaders should look like and how to develop them.

Vista-Sci Health Care, Inc.

The new senior vice president of marketing at Vista-Sci Health Care, Inc. must decidewhich of two very good candidates he should promote to the position from which he hasjust been promoted. Both of the candidates have demonstrated strengths and weaknessesin their current jobs; the question is whether these competencies and other personal char-acteristics will make them a good fit for their new roles.

yy The Reading

The Character of Leadership

Scratch the surface of a true leader, or look beneath his or her personality, and you’ll findcharacter. The traits and values that make up the character of a good business leader are,for the most part, similar to those that make up the character of an outstanding citizen.These authors describe the traits and values that make up the character of leadership.


Copyright 1998, Ivey Management Services Version: (A) 1999-01-22

On February 22, 1995, Bon Moo Koo, 51, tookover the helm of the LG Group, one of thethree largest Korean chaebols. Like a newlyrecommissioned ship, LG had recently under-gone significant renovation and appeared to bein great sailing shape. The renovation andrefurbishing had been directed by the formerchairman, Mr. Cha-Kyung Koo, Mr. Bon MooKoo’s father. After steering through somestormy seas from 1985 to 1991, the clouds hadcleared and LG’s future looked sunny andbright. Group revenues had increased eachyear from 1991 through 1994, when they stoodat a record US$38 billion.

Firmly established as the new captain,Chairman Koo was determined to build uponthe legacy of his father and set a brave newcourse by transforming LG Group from a greatKorean company into a world-class enterprise.To do this, he would need to lead the groupinto the uncharted waters of global competi-tion. In 1995, Chairman Koo announced“LEAP 2005,” his vision of the future. Of all thedifferent elements of this vision, the goal ofincreasing revenue to US$380 billion by 2005with fifty per cent coming from internationalsales was the most challenging. The emotionbehind LEAP 2005 is conveyed in the followingstatement by Chairman Koo:

If we do not compete on the worldstage, we will have difficulty surviving.I announced this lofty target to pre-vent us from becoming complacentwith our past successes.

In late 1997, nearly three years afterChairman Koo took office and just over sevenyears away from the magical date of 2005,Mr. Y. K. Kim faced a significant challenge intranslating the Chairman’s vision into reality.Mr. Kim was the head of the LG HumanResource (HR) team that was charged with thetask of identifying and developing “HIPOs”(high potential individuals) and the globalleaders that LG would need in the future.Mr. Kim, representing the Office of theChairman, worked closely with Dr. MichaelLee, Managing Director of LG Academy(LGA). LGA was the central training centerfor the entire LG Group with an annual bud-get of US$28 million and a professional staffof nearly 70 people.

Together Mr. Kim and Dr. Lee recognizedthat if LG achieved its revenue targets, itwould likely be the largest private enterpriseon earth. As such, the HR team estimated thatLG would need approximately 1,400 newglobal leaders by 2005. About half would beKorean and half would be non-Korean. Thecentral challenge for the HR team was to iden-tify, hire, retain, and develop these neededglobal leaders.

yy BackgroundTo understand what a quantum leap ChairmanKoo’s aspirations represented, it is necessary tounderstand some background on the countryand businesses of Korea.

48 CHAPTER 2: LEADERSHIP TRAIT APPROACH

LG Group

Developing Tomorrow’s Global Leaders

Prepared by J. Stewart Black and Allen J. Morrison in collaboration with Young Chul Chang


Korea’s Economic Development

Korea’s economic development over the last 50years was nothing short of phenomenal. Priorto World War II, Korea’s economy was primar-ily that of a third world, agrarian country. Inthe mid-1930s, about two-thirds of the work-ing population were engaged in agriculture.Like many agrarian societies, the literacy ratein 1935 was only about 20 per cent.

Although the country began to make someprogress after the end of World War II, theKorean civil war reversed those gains and tooka heavy toll on the country. Economically, thecivil war devastated the country’s industrialbase. After the end of the war in 1953, virtuallythe entire industrial base of what is now SouthKorea had to be rebuilt. This base was rebuiltand thereafter developed with amazing success.

A few key statistics could provide a clearpicture of the dramatic transformation of thiscountry and its economy. In 1953, per capitaGNP was just US$67. By 1963, it had risen toUS$91. By 1973, it stood at US$302. In 1983,per capita GNP had skyrocketed to US$2,014.By 1993, it had more than tripled to US$7,513.Nominal per capita GNP was projected toexceed US$30,000 by 2005, and by 2020 wasexpected to top US$77,000.

The transformation of the people was inmany respects just as dramatic. From 1945 to1995, the percentage of the working populationin agriculture dropped from 67 per cent to justunder seven per cent. As people moved fromfarms to factories, from villages to cities, literacyrates increased to 72 per cent by 1962, and to 98per cent by 1996.

Korea’s economic transformation took itfrom a third world country to a position on apar with many developed countries such asItaly and Spain in terms of per capita GNP.Many observers gave a significant portion ofthe credit to the various government officialsand bureaucrats who guided Korea’s industrialpolicy and to Korean business leaders who,during this period, built up some of the largestcompanies in the world.

Korean Chaebols

The primary economic engines for Korea’s eco-nomic growth were the chaebols. AlthoughKorean chaebols were often referred to as con-glomerates, the term captured only part of thenature of chaebols. Like conglomerates, mostKorean chaebols had a variety of companiesoperating in various industries. However,Korean chaebols were not legal entities becauseholding companies were not legally allowed inKorea. Consequently, the companies affiliatedwith each chaebol were a confederation heldtogether by controlling families. Typically, thefounding family controlled a majority of thestock in the related companies. The center ofthis web of companies was usually the “Officeof the Chairman.” In most cases, the chairmanwas a senior member of the controlling family.Nearly all of the large Korean chaebols started assmall companies established by entrepreneurs.

Chaebols received their real boost in the1960s. Devastated by the ravages of war, thegovernment of South Korea was determined torebuild the country. To ensure that the coun-try’s limited resources were used effectivelyand efficiently, the government targeted spe-cific companies as engines of economicgrowth. The government used financial incen-tives in terms of taxes and protection from for-eign competition to nurture and support theseselected companies. Chaebols were given pref-erential access to loans and foreign exchange aswell as subsidized interest rates. Governmentofficials also used indirect influence to guidechaebols into new industries such as shipbuild-ing, automobiles, and steel.

Chaebols were the main drivers behindKorea’s economic growth between 1960 and1990. In 1996, the top 30 chaebols accountedfor over 50 per cent of Korea’s GDP. The topfour chaebols employed only three per cent ofthe population, yet accounted for 60 per centof all exports and nearly a third of all companyrevenues within Korea.

Ironically, the phenomenal success of thecountry and the chaebols created new challenges

LG Group 49



and problems. As the country’s wealth increasedand the society became more democratized,organized labor movements proliferated.During the late 1980s, workers staged a numberof strikes to demonstrate the sincerity of theirdemands for higher wages and better workingconditions. Subsequently, wage rates increaseddramatically. From 1985 to 1990, wages jumped143 per cent, not including the cost of new ben-efits that were also part of these new wage pack-ages. By contrast, wages in Japan during thissame period rose only 18 per cent overall.People also began to worry about so much eco-nomic power in the hands of so few individualsand families. While chaebols contributed to therapid industrialization and economic growth ofthe country, many Koreans became increasinglyconcerned about their economic power andresource misallocation.

In response to mounting public concernsand growing international pressure, the gov-ernment began a series of reforms. Thereforms were designed to “level the playingfield” and provide medium and small-sizedcompanies with greater opportunities to grow.The chaebols did not openly embrace everyreform, and consequently, these reforms oftenmoved slowly. Still the government was deter-mined, and in some cases unilaterally changeda number of policies, such as removing thesubsidized loans and restricted access to for-eign exchange that the chaebols enjoyed.

LG Group History

LG began in 1947 as a small chemical com-pany, called the Rakhee Chemical Works. Thecompany was established by Mr. Bon MooKoo’s grandfather, Mr. In-Hwoi Koo, and ini-tially manufactured household items such ashair combs, toothpaste, and soaps. From thisbase, the company expanded into more com-plex plastic products. As it expanded, LG cre-ated a tradition of pushing into newtechnological frontiers. For example, LG pro-duced the first radio in Korea in 1958, as well

as the country’s first refrigerator. LG also ledSouth Korea’s push into greater energy self-sufficiency with the building of the Homan OilRefinery in 1967.

Low Cost Strategy (1947–1987)

From its foundation and through most of itsearly history, LG focused on competingthrough low cost manufacturing. LG competedwith other multinational corporations by lever-aging Korea’s low cost labor and government-subsidized cost of capital. LG also stronglyemphasized high production volumes. As LGexpanded into a variety of plastic products andconsumer electronics, it continued its strategyof under-pricing competitors with products ofacceptable, although not superior, quality. Inthe context of this strategy, it established theLucky-GoldStar brand as a low-cost andacceptable quality products manufacturer.

As LG moved forward on its low cost strat-egy, it developed significant manufacturing capa-bilities. Some managers were concerned that thiswas achieved at the cost of under-emphasizingmarketing competencies. Managers focused onproducing high volumes and getting per unitcosts as low as possible rather than on finding outwhat customers wanted, developing high qualityproducts, or expanding marketing capabilities.

This general strategic orientation held formost of the businesses and industries intowhich LG expanded. By 1987, LG had busi-nesses in chemicals, communications, energy,electronics, finance, insurance, machinery,metals, sports, and trade. While LG was strongin Korea, it was not an international technol-ogy or quality leader in any of its business seg-ments, especially relative to world class foreigncompetitors.

Value Strategy (1987–1995)

By the mid-1980s, it was clear that the strategicthrust of LG needed to change. Several factorscontributed to this recognition.


First, by the mid-1980s Korean consumerswere more sophisticated than they had beenduring the 1960s and 1970s, and were increas-ingly aware of and demanding higher qualityproducts. Also, the rising standard of livingincreased the ability of Koreans to affordhigher quality products and services. MostKorean consumers were no longer happy withlow quality, even if it did come at a low price.

Second, under international pressure, theKorean government began to relax trade barri-ers that made it easier for foreign companies tocompete with LG in Korea. In many cases, theseforeign companies had significantly higherproduct quality and features and, because oflower trade barriers, were increasingly pricecompetitive with domestic Korean companies.This was extremely important given that a vastmajority of LG revenues came from domesticsales (approximately 70 per cent in 1980).

Third, the cost competitiveness of Koreancompanies began to slip. As wage rates increasedin Korea, low cost labor began to erode as asource of comparative advantage. In addition,other countries, such as China, had significantlylower labor costs and were also coming up thetechnology curve. Consequently, competitors indeveloping Asian countries were quickly push-ing LG out of its traditional low cost position.For example, Chinese companies were increas-ingly able to produce consumer electronics(such as fans) that, while not technically sophis-ticated, were reasonably reliable and signifi-cantly cheaper, allowing them to under-priceand out-position Korean competitors.

By the mid-to-late 1980s, these externalchanges started showing up in LG’s financialperformance. Between 1986 and 1987, salesdropped by US$1 billion (about a seven percent decline) and profits fell by 18 per cent.

Refurbishing the Ship

Although the ship was not in any real dangerof sinking, LG was listing badly and taking onwater. It needed some serious refurbishing and

restructuring. It was unthinkable for the agingChairman, Cha-Kyung Koo, to hand over thehelm until the ship was righted. To assist inturning LG around, Chairman Koo retainedMcKinsey & Co. as an advisor and undertookan extensive internal audit.

Given the environmental shifts, it was clearthat LG had to become a value rather than a lowcost player. This meant that customers, ratherthan low cost, had to become the dominantforce in company decisions. But, what did cus-tomers really want? How did they use LG’s prod-ucts? What did they expect in terms of productreliability or service? These types of questionsbegan to dominate LG and put customers at thecenter of its new strategic philosophy.

It was also clear that LG had to change itsdecision-making style. Like many Korean orga-nizations, LG had a history of relatively central-ized decision making and a top-downmanagement process. This worked fine as longas the organization was small enough for topmanagement to know everything that wasgoing on and as long as the marketplace wasfairly homogeneous. However, by the late-1980s LG had become a huge organization withrevenues approaching US$20 billion and over80,000 employees. Furthermore, whereas earlyin its history LG had been primarily focused onthe domestic Korean market, increasingly itfocused more on international markets. Thesemarkets and their customers often differed, notonly from Korean markets and customers, butfrom each other as well. Consequently, it wasimpossible for top managers to know every-thing that was going on in such a large organi-zation and across such diverse markets andcustomers. LG’s management approach had tobecome more decentralized and more partici-pative in nature. Decisions needed to be pusheddown to where the action was.

The new management approach was imple-mented and was typically referred to in LG as“management by self-control.” It allowed formuch greater autonomy than had ever existedin the Group. Although most managers

LG Group 51



welcomed the opportunity for greater deci-sion-making autonomy, many lacked experi-ence with it. These managers had to changetheir mind set from flawlessly executing ordersto determining strategic direction.

To facilitate and reinforce this newapproach, LG was restructured. In 1987, LG’svarious affiliated companies were divided into21 “Cultural Units.” The cultural units con-sisted of multiple Strategic Business Units(SBUs) grouped together by common ‘cultural’characteristics. SBU heads were given fullprofit and loss responsibility for their units,were expected to formulate specific competi-tive strategies, and were held accountable forresults. Cultural Unit presidents focused onintegration and coordination across SBUs.

Within SBUs, middle managers werecharged with reviewing and reengineeringbusiness processes to ensure that they wereefficient and effective. This reengineering wasguided by the central strategic theme of pro-viding value to the customer. This requiredmanagers to have a clear idea of customerneeds, values, and preferences. In general, LG’stop management wanted businesses structuredand operated so that for a given amount ofmoney spent, customers would get more ofwhat they wanted in a product or service, andmore than what they would get from a com-petitor’s product or service.

Although managers kept a vigilant eye oncosts, greater attention was also paid to qualitythan ever before. New and intense initiativesaround ‘zero-defects’ were undertaken andsupported from the highest levels. Customersatisfaction became a key measure and impor-tant input into quality improvement programs.

By 1994, the results of all these efforts werebeginning to show. Sales had increased eachyear from 1991 through 1994. The rate ofreturn for the entire Group rose from a low in1991 of just under one per cent to nearly fourper cent in 1994. Net income was up nearly 800per cent, rising from US$128 million in 1991to US$965 million in 1994.

New Face and Image

With the ship righted and ready to sail on abrighter course, it was time for a public recom-missioning. This recommissioning occurred onJanuary 1, 1995. On that date, Lucky-GoldStarGroup officially changed its name to the LGGroup. A new corporate identity program waslaunched, the center of which was a new Grouplogo—‘The Face of the Future.’ The logo wasdesigned to symbolize five key concepts which(translated directly from Korean) were:

The World

The Future

Youth

Humans

Technology

These concepts were believed to be thekeys to LG’s future growth and prosperity.

yy Leap 2005When Mr. Bon Moo Koo took over asChairman in 1995 (about one month after thepublic recommissioning), growth was the cen-ter of his new vision for the Group. He charteda course in his Leap 2005 initiative that wouldtake LG on a journey from being a leadingcompany in Korea to being a leading companyin the world. In the process, LG would becomeone of the largest and most admired enterprisesin the world.

Basic Philosophy

To achieve the general objectives of Leap 2005,Chairman Koo articulated a basic philosophy.This philosophy was set forth with four keypoints:

1. Compete from a global perspective

• Compete with world-class compa-nies in the global market


LG Group 53

• Secure global management systemsto be competitive on a world andregional basis

• Secure and utilize people, finance,and technology from a global per-spective to create world class busi-ness systems

2. Create maximum value for customers,employees, and shareholders

3. Conduct business with integrity

4. Contribute to social development as acorporate citizen

This basic philosophy reaffirmed elementsthat had a long tradition in LG as well as addingnew emphasis to other elements. The focus onvaluing employees had been in LG from thebeginning, as had the philosophy of contribut-ing to social development through good corpo-rate citizenship. The focus on creating customervalue was relatively new, having been intro-duced with the restructuring efforts thatstarted in 1987. However, the emphases on theglobal market and world class competitors weretotally new, as was the greater emphasis on cre-ating value for shareholders. Executives hopedthat combining traditional philosophies withcompatible new ones would provide employeeswith needed anchors so that they did not feelcompletely adrift while at the same time direct-ing their attention toward new horizons.

Transitioning From the Old LG Culture

The new global orientation of LG required anew culture to support it. Although parts ofthe old culture did not fit the new environ-ment, it did have valuable components.Consequently, the objective was to reaffirmwhat was still valid and add new cultural ele-ments that were necessary for future success.The old culture was most often described bythree words: stability, harmony, and respect.

Stability

In general, LG had a history of being a rela-tively stable company and culture. The com-pany did not make radical shifts in strategy orpractice. If LG entered a country, it tended tostay there. If it entered a new product or busi-ness segment, it tended to stick with it. Neitherpoor performing businesses nor managerswere easily dropped from the Group.

Harmony

From its beginning, LG placed considerableemphasis on harmony. Some of that emphasismay have stemmed from its history. Mr. In-Hwoi Koo, the founding Chairman, believedstrongly that harmony rather than conflictshould dominate the atmosphere at work.

Respect

The emphasis on respect was reinforced bothat the company and national level. Respect forauthority and hierarchy have had a long cul-tural tradition in Korea. Much of this tradi-tion tied back to Confusion philosophy thatheld: “Let the king be king. Let the subject besubject. Let the father be father. Let the son beson. In this there is order.” As a consequence,respect for management authority and theroles of individual workers were strong valuesin LG.

The Chairman wanted the new culture tokeep the tradition of harmony as well asrespect for the individual. Stability, in contrast,could not be sustained. Technological innova-tions, mergers, acquisitions, divestitures,alliances, and so on, happened at such a rapidpace in the global environment that to accom-plish the ambitions of Leap 2005, LG had nochoice but to become more agile. Furthermore,unlike the past, Korea would no longer be aprotected market, but instead would becomeincreasingly open to foreign competitors.Consequently, even stability at home could notbe sustained. For LG to be a world leader, it



would need to be as quick and nimble as thebest global competitors.

The cultural value of respect would alsoneed to play out differently in the future thanit had in the past. In the past, respect hadtranslated into a top down management style.However, beginning with the reorganization in1987, it had become increasingly clear thatwhile respect for others would always beimportant, top down management and strongemphasis on hierarchy would not allow LG torespond to the market as quickly as needed tostay competitive.

Establishing the New LG Culture

While retaining certain elements of the pastculture, LG’s top management tried to estab-lish and reinforce four new cultural elements:challenge, speed, simplicity, boundarylessness.

Challenge

In many ways this new element was in direct con-trast to the old value of stability. Going forward,LG needed to develop a culture that thrived onchallenge rather than one that relied on stability.According to Chairman Koo, a business objectivewas challenging if the way to accomplish it wasunknown. In other words, if you knew exactlyhow to accomplish an objective, then it was notchallenging. On the other hand, an objective thatyou did not know how to reach would challengeyou to think differently and to come up with“break-through” innovations.

Speed

The second new cultural element—speed—was critical to success in the fast-changingglobal environment. Managers had to develop anew perspective on time-based competition.Most managers were used to thinking about ayear in terms of 365 days. But in fast-pacedindustries such as the Internet, “web years”lasted perhaps 90 days. In other words, as muchchanged on “the web” in 90 days as changed in

traditional industries in a year. Consequently,as LG pushed into new markets and highertechnology industries, speed had to be a centralvalue that permeated the Group’s culture.

Simplicity

In a world as complex as the one LG was enter-ing, keeping things as simple as possible wasabsolutely essential. For greater product reliabil-ity, fewer parts and simpler designs were neces-sary. Greater product simplicity would also helpkeep costs down. Quicker service time wouldrequire simpler products and business processes.Each additional step in a business process repre-sented both increased costs and time delays, nei-ther of which added value for the customer. IfLG did not instill a cultural value around sim-plicity, the natural complexity of the global envi-ronment could cause the Group to respond withcomplex products and business processes thatcould turn into a tangled mess.

Boundarylessness

The rapid pace and sophisticated nature of theglobal environment made the past structureand practice of separated departments andsequentially “handing off ” projects—fromproduct research to product design to engi-neering to manufacturing to marketing tosales—unworkable. Functional, geographic,and even business boundaries of the pastneeded to become less like fortress walls andmore like fuzzy lines. People from differentdisciplines and geographies increasinglyneeded to work together to analyze problemsand figure out solutions.

yy Strategic Orientation of LGThe growth objectives articulated by theChairman in Leap 2005 were highly ambitious.LG was to grow from around US$38 billion in1994 to US$380 billion by 2005. This objectiverepresented a true challenge because no oneknew exactly how to get there, even though by


year-end 1996 Group revenues had increasedto US$73 billion. But growing revenues at anycost, such as profitability, was not acceptable.The Chairman made it clear that to be consid-ered one of the best companies in the world,LG’s financial performance also had to beamong the best in the world.

Focus

New financial objectives meant that LG couldno longer carry marginal businesses with poorperformance. Either the managers headingthose businesses had to fix them so that theywere growing and making money or theywould need to prepare them for divestiture.Although divestiture would need to happen ina way that honored LG’s commitment toemployees and retained remaining employees’loyalty to the Group, if a business could not befixed to be a leader in its industry, it would besold or shut down.

Focus would also be essential in terms ofLG’s geographic strategy. Although LG wouldcompete across the globe, it would focus onstrategic markets. Strategic markets wereselected according to two primary criteria. Thefirst was the expected economic growth and sizeof the market. The second was the extent ofbusiness opportunity in that market. Businessopportunity was a function of how open themarket would be to foreign firms, how intensethe competition would be in that market, andwhat LG’s capabilities were for competing there.

Based on expected economic growth andbusiness opportunities, China and SoutheastAsia were identified as strategic markets. Thesemarkets were expected to grow by eight to tenper cent a year in real terms through 2005. Inaddition, these markets were increasingly opento foreign trade and investment, and LG hadgood capabilities for competing there.

Eastern Europe, Central and SouthAmerica, the Middle East and Africa were allregions with potential economic growth, butwere expected to grow more slowly than China

and Southeast Asia. Furthermore, governmentrestrictions and LG’s relatively weak competi-tive positions made them less attractive. Still,LG did not intend to ignore these regions. Infact, LG had plans to establish regional head-quarters in Europe, South America, Africa andthe Middle East in the near future because ofthe market potential in these regions.

The developed markets of the UnitedStates, Japan, and Western Europe wereexpected to grow at much slower rates (one tothree per cent). Although these markets wererelatively open, competition was quite intense,and LG generally had no particular competitiveadvantage in these markets. Thus, LG wouldcontinue to compete there because of the sizeof these markets, but would focus on Chinaand Southeast Asia as areas of strategic growth.

Avenues of Growth

Simplified, LG could grow through existingand new products, and through existing andnew geographies. The specific avenues ofgrowth in each quadrant of this matrix arecaptured in Exhibit 1. Of the four cells in thematrix, managers anticipated that growth inthe “existing products, existing markets” wouldbe the most difficult. Significant revenuegrowth in this cell would require a productrevolution in terms of new technologies orbusiness models.

Technological revolution typically comesin two forms. The first is product technologyinnovation. This type of innovation providesproducts that do things that they never didbefore. As a consequence, customers of theprevious product generation replace their oldproducts with the new ones, and new cus-tomers are so enticed by the features and capa-bilities that they enter the market in significantnumbers for the first time. The second tech-nology revolution happens through processinnovation. This type of innovation allows theproduct to be produced faster or more costefficiently.

LG Group 55


ExistingMarkets

NewMarkets

Existing Products New Products

• Product Revolution – New Technology – New Business Model

• Product Extensions

• Product Startups

• Product Acquisitions

• Alliances with New Line of Business (NLOB) Partners

• Market Extensions

• Local Competitor Acquisitions

• Alliances with Local Enterprises

• Product/Market Extensions

• Product/Market Startups

• NLOB Acquisitions

• Alliances with NLOB Enterprises

Exhibit 1 Avenues of Growth for LG


A business model revolution producessignificant growth with existing products inexisting markets because business processinnovations provide significantly better valueto customers. The significantly better valuecauses customers to purchase from the new“system” in significant numbers. Wal-Martdid this in discount retailing and Microsoftdid this with pre-installed operating systemsoftware.

Growth in the other three quadrantscomes from extensions, start ups, acquisi-tions, and various forms of alliances. Whileeach of these activities shares some commonmanagerial capabilities, each requires its ownunique set of managerial capabilities for suc-cess. Each avenue of growth is difficult tomanage successfully. Even if specific man-agers focused on just one of these avenues ofgrowth, in order to grow ten-fold in ten years,LG would need hundreds of world-class man-agers in each of these cells and for each ofthese growth strategies.

Investment Decisions and Cash Flow

To reach growth objectives, top LG managersrecognized that financial resources would needto be invested wisely for the greatest possiblereturn. No longer would simple pay-backassessments be adequate. In the future,approved investments would not only need topay back the original investment but wouldneed to provide an attractive return on thatinvestment based on a future cash flow analy-sis. With these heightened investment require-ments, LG would need a cadre of managerswith more sophisticated knowledge of finance.

Customer Satisfaction

Chairman Koo believed that sustained revenuegrowth would only come through satisfyingcustomers’ needs. This orientation had alreadybegun to be instilled throughout the Group bythe restructuring his father had directed.


Chairman Koo wanted to build on that.Customer satisfaction was established as a keymeasure of success in going forward. However,the Chairman did not want the organization tosimply react to customer satisfaction and “fixthings when customers were dissatisfied,” buthe wanted proactive management that wouldanticipate customer needs and satisfy thembefore the customer ever had a chance to voicedissatisfaction.

Quality

Increasingly sophisticated customers in Koreaand around the world wanted products thatwere reliable and of high quality. To have themost satisfied customers, LG would need worldclass quality in their products and services.Consequently, Leap 2005 continued the empha-sis on high quality and zero defect initiatives.

Product Technology

Customers also wanted products with “the lat-est and greatest” features. Consequently, Leap2005 stressed the role of technology and itsacquisition. To have the most satisfied cus-tomers, LG would need leading-edge producttechnology and innovations to ensure that,compared to competitors, LG products hadsuperior features and capabilities. In particu-lar, Chairman Koo stressed the importance ofacquiring differentiating technology.

Process Technology

Customers also wanted the greatest possiblevalue, which meant that they wanted the bestpossible features in products and services forthe lowest price. Therefore, acquisition ofprocess technology was also important. Keymanagers believed that innovations enablingproducts to be made more cheaply, more reli-ably, or more quickly would enhance not onlythe value proposition made to customers, butLG’s internal profit margins. Therefore, acqui-sition of process technology also became animportant part of Leap 2005.

yy Leader DevelopmentChallenge

Top management and the HR team were con-vinced that LG could not achieve the objectivesof Leap 2005 without substantially moreglobal leaders. Because LG had a domestic ori-entation in the past and because of the speedwith which Leap 2005 required LG to changecourse to a global setting, leadership develop-ment emerged as one of the biggest challengeswithin the Group.

Working Environment

To be a leading global company, senior execu-tives felt that LG would need to create a globalworking environment that included bothKorean and non-Korean leaders. TheChairman articulated several aspirations thatwould demonstrate that LG was well on its wayto creating a global working environment:

• Fill three to four business presidentpositions with non-Koreans out of thenearly 50 positions (see Exhibits 2 and3 for an overall review of LG’s currentsize and structure).

• Fill 20 per cent of executive positionsat the office of the Chairman in Seoulwith non-Koreans.

• Fill most top executive positions offoreign affiliates (approximately 129)with local national managers.

These were ambitious goals, but some exec-utives were worried that if LG did not achievethese aspirations, it would encounter the sameproblem that Japanese multinational corpora-tions had experienced. Several studies foundthat Japanese companies had significant diffi-culty attracting and then hanging on to toplocal executive talent in countries such as theU.S. This was primarily because local managersgot frustrated by the “Bamboo Ceiling.” Thebamboo ceiling was the barrier non-Japanese

LG Group 57


LG in the Korean Economy

• 10% of GNP

• 15% of total export sales

• 5% of capital expenditures

• 4% of corporate tax payment

• 1% of total workforceR and D Labs

Korea - 67Foreign - 15

RevenuesUS$73 billion

Invested CapitalUS$8.9 billion

ManufacturingPlants

Korea - 48Foreign - 76

Global Network

ForeignSubsidiaries - 132

and Branches - 204

Employees

Korea 110,000Foreign 20,000

Exhibit 2 LG Group Overall Status, 1996

Exhibit 3 LG Businesses, 1996

Trade and Services and Others (31.3% of Total Revenue)

• LG International Corp• LG Construction Co. Ltd.• LG Engineering Co. Ltd.• LG Energy Co. Ltd.• LG Mart Co. Ltd.• LG Department Store Co. Ltd.• LG Ad Inc.• LG EDS System• LG Investment Inc.

• Han Moo Development Co. Ltd.• LG Homeshopping Inc.• LG Sports Ltd.• LG Leisure Co. Ltd.• LG Economic Research Institute

Chemicals and Energy (25% of Total Revenue)

• LG Chemical Co. Ltd.• LG Petrochemical Co. Ltd.• LG MMA Corp.



• LG Owens Corning Corp.• LG Siltron, Inc.• LG AlliedSignal Corp• LG Caltex Oil Corp.• LG Caltex Gas Corp• LG Oil Products Sales Co. Ltd.• Hoyu Tanker Co. Ltd. • Wonjeon Energy Co. Ltd.

Electric and Electronics (23.7% of TotalRevenue)

• LG Electronics Inc.• LG Electro-Components Ltd.• LG Semicon Co. Ltd.• LG Honeywell Co. Ltd.• LG Industrial System Co. Ltd.

• LG Soft Ltd.• LG Information & Communication Ltd.• LG Telecom Ltd.

Finance (15% of Total Revenue)

• LG Securities Co. Ltd.• LG Investment Trust Management Co.• LG Insurance Co. Ltd.• LG Credit Card Co. Ltd.• LG Finance Co. Ltd.• LG Futures Co. Ltd.• LG Merchant Banking Corp.

Machinery and Metals (5% of Total Revenue)

• LG Cable & Machinery Ltd.• LG Metal Corp.

executives ran into at a certain point in the hier-archy of the Japanese subsidiary. In the U.S.,many American executives felt that they couldrise only to a certain level within the Japaneseforeign affiliates and no higher. Americanexecutives often felt that above that level only“Japanese expatriate managers need apply.”Consequently, smart and capable managerswould simply use their experience in a Japanesecompany as a springboard to better positions inother companies. This turnover of top local tal-ent hurt the financial performance of Japanesecompanies throughout the world.

Some managers thought Korean compa-nies, if they were not careful, would run intothe same problem. Many felt that if LG couldnot attract and retain the best managementand executive talent wherever in the world thattalent existed, it would not be competitive withmore culturally open-minded companies. Buthow could the Chairman’s aspirations beachieved? What would need to take place forthis to be accomplished? How could numerousnon-Koreans be effectively integrated into thehead offices in Seoul? Where would they findthree or four non-Koreans capable of beingcompany presidents and effectively interacting

with other Korean company presidents withinthe Group? These and other questions plaguedthe HR team.

Needed Competencies

Beyond these specific aspirations, LG had amuch broader set of leadership needs. Mr. Kimestimated that LG needed 1,400 new capableglobal leaders to achieve the growth objectivesof Leap 2005. What competencies would theseindividuals need? Mr. Kim could generate a listof 20 or 30 needed competencies off the top ofhis head, but which ones were the truly impor-tant ones? With limited time and resources, LGcould not afford to take a “shot gun” approachto global leader development. The HR teamneeded to identify a limited set of competen-cies on which they could focus assessment anddevelopment activities.

Development of Non-Korean Global Leaders

Since it was expected that 50 per cent of rev-enues in 2005 would come from international

LG Group 59


Korean Nationals Non-Korean Nationals

Man

agem

ent

Cla

ss

CEO

Senior Executive

Junior Executive

New Executive

Middle Manager

New Manager

Global

OrientationGlobal

Orientation

Domestic

Orientation Domestic

Orientation

Exhibit 4 The Composition and Orientation of Future Global Leaders at LG


sales, Mr. Kim expected that 50 per cent of the1,400 new global leaders would need to benon-Korean. This meant that 700 non-Koreanmanagers would need to be identified andbrought up to world-class standards in shortorder (see Exhibit 4). Most senior LG execu-tives believed that all company CEOs in LGwould need to have a global orientation andglobal leadership capabilities. In general, thefeeling was that as one went down the ranks of

managers, the percentage of managers needingto be global leaders declined. This view wasmore or less true for both Korean and non-Korean future leaders.

But the 700 non-Korean global leadersonly scratched the surface of the non-Koreanleadership development challenge. Given thathalf of the targeted US$380 billion in rev-enues by 2005 was expected to come frominternational sales, it was estimated that LG


would need approximately 340,000 foreignemployees. (In 1996, LG had 110,000 Koreanemployees, 20,000 non-Korean employees).With a typical manager-to-employee ratio of1-to-100, LG would need approximately3,400 non-Korean managers, compared to the200 it had in 1996.

LG’s non-Korean leadership developmentneeds were further complicated by the fact thatLG’s regional focus for growth was China andSoutheast Asia. These were areas in which world-class managerial talent was in relatively shortsupply. Furthermore, LG was not the only com-pany that had targeted this region. Companieslike General Motors, Coca-Cola, Exxon, Philips,Ericsson, Sony and other multinationals wereequally committed to the region and had beenaggressively acquiring and retaining the best localmanagerial talent.

How should LG identify high potentialmanagerial talent in the region? What compar-ative advantage did LG have in acquiring andretaining this talent compared to global com-petitors such as General Motors or Philips?Furthermore, how should LG develop thesehigh potential individuals once they werehired? Also, was it even possible for a Korea-based team to effectively create and effectivelyimplement a development plan for non-Korean managers? In other words, given that700 future top LG leaders would be non-Korean, could a group composed of Koreanseffectively hire, train, and retain this group?Would culture or other filters cause the HRteam to look at information, interpret behav-ior, structure problems and solutions in waysthat would be culturally bound and perhapsnot be effective in meeting management devel-opment objectives?

Programs

Although Mr. Kim and Dr. Lee did not havethe answers to all these questions, several pro-grams were in place at the LG Academy to try

to address these leadership development chal-lenges. (See Exhibit 5 for a brief description ofeach program.) These programs spanned theentire range of employees, from non-managerialemployees through company presidents.

The HR team recognized that youngeremployees and managers needed to be culti-vated and developed early if LG were to havestrong global leaders 20 years in the future, butthese young managers would not be ready toassume significant global responsibilities by2005. Even if they could be ready, would LG’sculture allow a 35-year-old to run a significantbusiness with international operations? Mr. Kimand Dr. Lee wondered if they should concen-trate their energy on developing managerswho were currently in their 40s.

Prioritization and Decision Time

In September 1997, the HR team met to decidehow to proceed. Some members thought theissues needed more study. For example, clearlyidentifying the critical capabilities of futureglobal leaders was a major challenge. Someargued that to make sure that the right capa-bilities were identified, more thought and datawere needed. Other members of the team feltthey knew enough to proceed without moreresearch.

In addition to identifying leadership com-petencies, the HR team needed to determinehow an agreed-upon set of leadership compe-tencies should be developed. The team hadidentified a variety of approaches to assess thecompetencies of current LG managers—penciland paper tests, supervisor evaluations, assess-ment centers, job performance, expert assess-ments, and so on. Would each of these berelevant for every career stage? While newmanagers would basically do whatever theywere asked, Mr. Kim and Dr. Lee, in particular,wondered if senior managers would ever agreeto participate in a pencil and paper test. Theyalso wondered if current job performance

LG Group 61


Exhibit 5 Global Leadership Programs


Non-Manager ManagerGeneralManager

Director VP President

Global Business Communication

Host Manager

Global Mindset

Global MBA

Global Business Leader

Global Business Consortium

Global CEO Conference

Global Business Communication: Short seminar designed to teach fundamental principles of cross-cultural communication.

Host Manager: Program designed to help host country managers understand the strategy and structure of LG.

Global Mind-set: Program intended to raise understanding of business globalization and the forces behind it.

Global MBA: Two-Year MBA program. First half completed in Korea and the second half completed in the U.S.

Global Business Leader: Six-Week program with modules in Korea, the U.S., and countries in Southeast Asia.

Global Business Consortium: Focuses on strategic benchmarking among six member countries (ABB, BT, Lufthansa, SKF, SCB, and LG).

Global CEO Conference: Designed to help senior executives address critical issues relative to LG competitive position.


Vista-Sci Health Care Inc.

Prepared by Jeffrey Gandz

For Allun Jones, this had been a good day.Senior vice-president, marketing and sales ofVista-Sci Health Care Inc.’s (Vista-Sci’s) phar-maceutical division at 35—not bad for a uni-versity general arts graduate who had startedat Vista-Sci as a medical representative, detail-ing its products to doctors and pharmacists,some 13 years ago. Now he would be responsi-ble for the domestic marketing and sales func-tions of the pharmaceutical division of amultinational company that had some leadingprescription and non-prescription brandsranging from antibiotics to skin creams.

Reporting to him, was a vice-president,product management who supervised a staffof eight product managers and assistant prod-uct managers, a vice-president, marketingresearch and her staff, a vice-president, mar-keting services and his staff, and a sales force of

some 155 medical representatives, districtmanagers and internal sales and sales trainingstaff who reported to the vice-president, sales.

This promotion was a big one that wouldplace him firmly on the next step in his careerpath, one that he believed could lead to thechief executive officer’s (CEO’s) job in sevento 10 years. But he knew that it was an oppor-tunity that required continued and indeedaccelerated performance on his part; nothingcame easily at Vista-Sci and performance waseverything!

One rather urgent issue was his replacementas vice-president, product management. Therole was a challenging one—he had been doingit for almost seven years, and those years hadbeen difficult but exciting times. He had twocandidates, both of whom had stellar recordsof performance as product managers but, as

Copyright 2006, Ivey Management Services Version: (A) 2006-03-31

would be a good indicator of potential inyoung managers. Also, would supervisor eval-uations be valid for young managers whomight very well have bosses that were not veryhigh potential global leaders themselves?

Once high potential managers were identi-fied and the gaps between existing versus desiredleadership competencies were determined, theapproach to develop these competencies had yetto be worked out. What role should job rotationand experience play in developing future leaders?What about international assignments? Shouldthe nature of the assignment differ for youngmanagers versus older managers? What aboutformal training and education programs? Whatsorts of programs would really be effective?

As members of the HR team grappledwith these issues, the task ahead seemeddaunting. In an effort to better structure thediscussion, Mr. Kim and Dr. Lee agreed tofocus the team on three key questions: (1) Whatwere the key needed capabilities of futureglobal leaders? (2) How should these capabili-ties be developed? (3) Could the team take thesame approach to both these issues withKorean and non-Korean managers? With justover seven years remaining under Leap 2005,the HR team was under increasing pressure tonot only find answers to these questions, but toput in place the infrastructure required toquickly develop the next generation of leadersat LG.

Vista-Sci Health Care Inc. 63



personalities and in their previous career paths,they were as different as any two people could be.Which one should he recommend? Or should hedo the unexpected and look outside the domes-tic operation or even outside the company? Thislatter option would be an unusual one to take;Vista-Sci had an outstanding reputation as adeveloper of talent in the industry and tended topromote from within its own ranks.

yy The Vice-President-ProductManagement Role

Vista-Sci was a company that had embracedthe marketing philosophy earlier and morecompletely than most pharmaceutical firms.Everything was focused on the customer,defined as the user of the company’s productsrather than the channels through which theywere sold, prescribed or recommended. Thefirm spent millions of dollars on marketresearch, believed that it was knowledgeableabout customers’ wants, needs and buyingbehaviors, and its research and development,marketing and sales efforts were driven by anintense commitment to customer satisfaction.

This marketing orientation pervaded thecompany. Packaging engineers were focused onmaking the products appealing and accessible tocustomers, researchers were searching for moreappealing dosage regimens, leading to manyproducts being reformulated into one-a-day,time-released formats; even accounts receivablestaff were seeking ways in which the trades couldspread their payments for seasonal productsover a full year so that they would not run out ofstock during “slow” periods, thereby inconve-niencing customers.

But while this marketing orientation wasintensely customer-focused, it also had astrong bottom-line orientation. Shareholderswere to be delighted because the company wassuccessful in satisfying customer needs. Soevery initiative, every new product, package,flavor, distribution drive was expected to payoff in bottom-line results.

Product managers were key players in exe-cuting this marketing orientation. Each ofthese men and women was expected to be amarketing professional. Many had formalbusiness education—most had MBAs fromwell-recognized schools; some had startedwith the company as medical representatives(prescription products) or sales representa-tives (non-prescription products); many hadscience undergraduate degrees in disciplinessuch as pharmacy, pharmacology or biochem-istry. Each was responsible for the performanceof one or more products; its marketing, adver-tising, packaging, forecasting, line-extensiondevelopment and the many other activities thatwent into product management.

These product managers shared manyresources. When they wanted some marketresearch, they would make the request of thevice-president, market research; their requestmight be competing with 10, 20 or morerequests from other product managers. Salesforce time was allocated to products, andproduct managers had to make their cases whytheir product, as opposed to some other prod-uct, should be allocated time by the sales forcein, for example, the first quarter of next year.

There were formal mechanisms for plan-ning priorities; for example, there was a “salescalendar” established annually, and productmanagers pitched for their allocation of salestime. There were systems development sched-ules and priorities, market research efforts wereallocated to various products in a planned andbudgeted way. But it was well known that themost “effective” product managers got thefavored treatment from all those staffs that sup-ported the marketing programs. It was onething for product managers to get their prod-ucts allocated for sales force attention . . . andquite another to get the sales force motivatedand excited about actually detailing or sellingthat product to doctors and pharmacists.

Product managers who made effectivepresentations, who related well to the salesforce and who listened to the sales representa-tives’ ideas about how to sell the products


seemed to get more attention than others.Market researchers, packaging engineers, evencredit analysts had their favorites among thecompany’s eight product managers—usuallythe ones who took time to give them the “bigpicture,” thanked them for their work, gavecredit where credit was due and emphasizedthe team’s efforts. There were other productmanagers who seemed to have more troublegetting the kind of involvement, participationand commitment from the marketing services,sales and other support functions. They wereeither too demanding or not demandingenough; too academic in their approach tomarketing or not thoughtful enough, con-stantly promoting hare-brained schemes tosupport their products.

The product managers also maintained anumber of external relationships. The com-pany used three different advertising agenciesamong which it distributed its brands. Here,again, it was clear that some product managersseemed to get much better performance fromagency personnel than others. Top copywritersand creative directors could make a huge dif-ference in marketing a product and some ofthe product managers seemed to attract thevery best agency personnel to work on theirassignments. Others attracted lesser talent.

The vice-president product managementwas really the director of this marketing thrust,even though many of the key players did notreport to this position. Packaging reportedthrough production, accounting personnelthrough the controller, sales staff through thevice-president, sales. It was the responsibilityof the vice-president product management torecruit, train and develop the product manage-ment staff and to ensure that while each wasdriving and promoting the interests of theassigned products, the whole unit worked as ateam. It was the closest thing to corporate lion-taming that Allun Jones had ever experienced!Now he was moving onwards and upwards,and he needed to find a replacement. Two can-didates were apparent—both had strengths,and both had weaknesses.

yy Jamie HernandezWhen she joined Vista-Sci six years previously,Hernandez had just been terminated from herjob with Ashridge Pharmaceuticals in England.She explained why to anyone who asked:

One day the president was musingaloud about why sales were belowplan. I told him: I’d just spent threedays out with different members ofthe field sales force and we’d spentmore time in coffee shops than indoctors’ offices. I just thought that weweren’t pushing hard enough. Tenminutes later, my boss, the vice-presidentmarketing, was in my office telling methat I was being let go. No matter thatI was absolutely right—he agreedwith me . . . it was lack of sales effort.But I had managed to embarrass thevice-president of sales and he hadinsisted that my boss fire me, virtuallyas a condition for continued supportby the sales department. So, despitebeing right, I was sacked—fired! Justshows, you can be right and wrong atthe same time!

When he had interviewed Hernandez inthe United Kingdom, Jones had been immedi-ately attracted to her openness, her apparentwillingness to learn from this incident, andher obvious enthusiasm for the industry andfor the marketing role. Hernandez had been apre-med student at a prestigious medicalschool in the United Kingdom but had notcompleted her program. “I was probably tooyoung, had a great time at university, but mygrades weren’t that great! I just felt that beinga doctor wasn’t what I really wanted.” So,without a degree but with some knowledge ofpharmacology, physiology and anatomy, shehad applied to a pharmaceutical company as amedical representative, calling on doctors inher assigned territory in London. She’d donethat for three years:




But there’s just so many Readers Digestsyou can read while waiting for doctorsto see you. After a while, I was justbored stiff. The problem was, youcouldn’t get ahead in that companyunless you have a university degree . . .I was stuck! It didn’t matter how good Iwas at my job. In fact, I was workingonly three days a week—I could get allmy assigned calls done in that time, myarea manager didn’t want me to do anymore because it would show up otherrepresentatives and make it hard forhim to explain why they weren’t doingmore. So I took up golf!

One day, coming back on a train from ameeting at head office, she’d started talking toa man who was the president of an engineeringfirm selling to the petro-chemical industry inEurope. He was drinking pretty heavily on thetrain and, by the time they reached London, hewas semi-conscious. She helped him into a taxiand sent him on his way, not, however, beforehe’d given her a business card and said, “Ifyou’re ever looking for a job, give me a call.”

The next day, she did. He couldn’t remem-ber the event at all! But, despite that—ormaybe because of it—she ended up as theRedders Instrumentation and Valve sales man-ager for Europe.

Great title, reasonable salary, a Jaguaras a company car, and lots of incentivepay for building the business. It was agreat two years . . . but it came to anend when Redders was acquired by alarger company and my job wasreduced in scope and opportunity.They wanted to keep me, but I justdidn’t see my future selling safety reliefvalves and instruments to petrochem-ical plants in Northeastern England.

While working as a medical representativeat the pharmaceutical firm, Hernandez had

enrolled in a continuing education program ata local polytechnic (community college) lead-ing to a diploma in marketing. Armed withthis accreditation, she applied for a job as aproduct manager at a very large U.S.-basedmulti-national pharmaceutical firm. She wassuccessful in a series of full-day interviews,parted on good terms from Redders and joinedAshridge Pharmaceutical where she’d beencompletely happy until the day she was fired.This entire story had come out during herinterview with Allun Jones:

It was one of the most refreshing andcandid job interviews I think that I’veever conducted. That’s the great thingwith Jamie . . . what you see is what youget! She speaks her mind, tells it the wayit is. Totally transparent. Passionateabout what she wants to do, totallycommitted. And she’s that way witheveryone, from the CEO of the com-pany to an accounts receivable clerk.And they all seem to respond well toher. They like working with her or forher; she never has any difficulty gettingthe best talent to work on her projects,new assistant product supervisors(freshly minted graduates, straight outof business school who are assigned towork for product managers) seem towant to work with her, despite the factthat she does not have the MBA-typeeducation that others have.True, her outspokenness does

cause some ripples. Jamie does notsuffer fools wisely and she sometimesis fast to judge people as fools. Herexcitability is both an asset and a lia-bility. There are few weeks that go bywhen I don’t have someone in myoffice raising questions or complaintsabout how she’s handled something.What I notice, however, is that theyare not people who are directlyinvolved in her projects. Rather, they


2She completed her MBA in three years of evening and weekend study.

are “observers” and they usually pointout that Jamie is different from others,maybe just doesn’t fit the usual Vista-Sci model. As far as I’ve been con-cerned, at least in the past, that’s beena good thing. We need some morediversity around here . . . and Jamie’sdifferent. The outspokenness? Wellshe usually says “What do you expect,with a Scottish mother and a Mexicanfather . . . bland?”

There was one incident that showed whata driving personality Hernandez was. One ofher products was a specialized, bactericidalmouthwash that was positioned at dentistsand dental hygienists to be recommended totheir patients. It was very successful in thisniche, with very high gross margins, limitedadvertising expenditures, but only seven percent share of the total mouthwash market.Hernandez wanted to reposition this brandinto the broader consumer market. She feltthat with the professional endorsements, thehighly appealing characteristics of the prod-uct and with the right kind of approach shecould drive market share up to the 20 per centto 25 per cent range.

The issue was that Vista-Sci already had amouthwash brand with 35 per cent share ofmarket, positioned against this broader mar-ket. “No problem,” said Hernandez; “Sure we’llcannibalize some of that market share but,overall, we’ll boost our corporate market shareby 10 or so share points.” And she’d commis-sioned the research to support her point. Incomparison tests and conjoint analysis studies,she had built the case for doing it. It convincedpretty well everyone . . . except the productmanager of the other, consumer-orientedmouthwash brand. He was not, and neverwould be, convinced. Discussions had gottenpretty heated before Hernandez had been toldto back off. Still, every chance she got, she

made the point that they could be doing betterin the mouthwash category if the company hadaccepted her approach.

There were other sources of friction. Thecompany used a “full-costing” approach tomaking product “go/no-go” launch decisions;Hernandez—who, at that time had beenstudying for her MBA at a local university inthe evenings2—had become convinced thatthey were making bad decisions by followingthis approach, that what they should really dowas use a marginal-contribution approach. So,when making her proposal, that’s how she didit. Routinely, the finance department sent backher analysis and told her to do it “the rightway.” She did . . . and it was “her” way! Ofcourse, in the end, she did it their way becauseshe wanted to get her projects approved. Butshe also wanted to make her point.“Eventually,” she said, “they’ll change. Sure Imake a few waves, but if you don’t, then peoplewill keep on doing the same old things in thesame old ways. I think I know how hard I canpush and when to back off.”

Unlike some of the product managers,Hernandez seemed to be liked and respected byall her peers. When there was hard work to bedone and they needed help, she pitched in.When it was time to relax and party . . .Hernandez usually got the party organized, wasthe first to arrive and the last to leave. Whenothers had ideas, she gave credit to them andshe was reluctant to claim credit for her owninitiatives. Had there been a vote for the “mostpopular product manager in the company”among both the product managers and salesforce, she’d have won hands-down. To someextent, there was such a vote. Each year, all theproduct and assistant product managers in thecompany (not just the pharmaceutical divi-sion) held a “copy competition” where theypresented their advertising strategies and cre-ative work. Hernandez had won this competi-tion in three of the last four years, partly due




to the quality of the advertising she and heradvertising agencies developed and partlybecause of the overall respect with which shewas held by her peers.

Her official performance record was out-standing. Vista-Sci had a disciplined multi-factorscorecard approach to assessing performanceand, on every measure, Hernandez had receivedtop scores and maximum bonus. Sales of herproducts were booming, profit margins were onor above stretch targets, she got great scores fromsales force reports on her effectiveness in workingwith them, her advertising agencies put their bestcreative people on her product assignments andthe corporate marketing research managerreported that she framed her research issues bet-ter than anyone else in the company. It was, over-all, a very positive picture.

Managers at Hernandez’s level received alot of unofficial feedback but also underwentan annual performance appraisal. Based on thecompetencies associated with the role, eachproduct manager was given an overall ratingthat ranged from Unsatisfactory (1) throughNeeds Improvement (2), Satisfactory (3), Good(4), to Outstanding (5). These ratings deter-mined the personal component of theannual bonus with Unsatisfactory receivingzero bonus and Outstanding receiving abonus that was 50 per cent of base salary.The difference between Good and Outstandingwas 15 per cent, a significant amount. Moreimportant, getting an Outstanding ratingwas really considered the key to being con-sidered for promotion at the next availableopportunity.

Allun Jones could only remember onetime during Hernandez’s career at Vista-Sciwhen her performance had been an issue.About three years ago, Hernandez had come tosee him one day, visibly distressed. Her motherhad been diagnosed with Alzheimer’s diseaseabout a year ago—she had not mentioned thisto Jones—and now appeared to be deteriorat-ing fairly quickly.

Allun—I’m going to have to spendmore time with her, especially until wecan figure out what to do. You know,some of the weekend work and latenights will just have to be spent withmy family—the other one, not theVista-Sci one! And I think that I’ll defi-nitely use up my accumulated vacationthis year and, maybe, even apply for aleave of absence for a couple of months.

They had discussed her workload andagreed that she could assign a couple of herminor brands to others and also put moreresponsibility on her product supervisors—she had two people whom she had trainedreally well and Jones felt that they could pickup any slack caused by Jamie backing off a lit-tle and even coping with a leave of absence fora couple of months.

There was one additional assignment thatJones needed completed during that year. Forsome time, he had been thinking of re-shufflingthe brand allocations among the various productmanagers since he felt that some were relativelylightly loaded while others seemed overloaded.He also thought that they might be able to reducethe product management staff by at least one ortwo product managers (of the total of seven) and,perhaps, four or five of assistant product man-agers. There was some considerable pressure forhim to do so; corporate was asking for a steadyfive per cent annual increase in “people produc-tivity” and the marketing department had beenlagging this for several years.

Following several meetings, Jones had sug-gested to Hernandez that she interview thecurrent product managers and their assistants,as well as others inside and outside the com-pany with whom they worked, and then makeher recommendations. After a month, he hadmet with her to review progress; she had notyet started the interviews but promised to doso “within the next few weeks.” After anothercouple of months had gone by, Jones raised it


in a regular monthly meeting. Hernandezreported that she had started interviews buthad not yet formed any opinions about reor-ganization. Soon afterwards, Hernandez’mother’s condition had deteriorated furtherand she took six weeks accumulated vacationtime followed by a three-month leave ofabsence. At least that’s what she was supposedto do. Actually, she called in fairly frequentlyand stayed in touch with her product supervi-sors on a pretty regular basis. Toward the endof this period she had made the difficult deci-sion to place her mother in a nursing home.

On her return to work, full-time, Jones hadspoken to her about the reorganization project:

Jamie, the reorganization project is way,way behind schedule. And it forms 30per cent of your official goals for thisyear. . . . It could affect your bonus cal-culation this year. What’s the problem?

Hernandez responded

Well, I’ve spoken to several of thepeople—just informal discussionsreally—but I can’t honestly say that Ican see any areas where peopleseemed underworked or there seemsto be any slack. We’re doing real wellin sales and I think that our advertis-ing and research are better than ever.But I’ll get some more focus on it andget back to you next month.

She didn’t and, what’s more, her annualperformance rating had been due within thenext couple of weeks. “What rating should I giveher?” Jones had wondered. “If I downgrade herfrom Outstanding to Good, it would costher quite a lot in bonus and might affect herprospects for promotion.” Jones also knew thatit would be hard to justify the downgrade tohis boss, the CEO, who thought very highly of Hernandez. He had talked it over with the

vice-president, human resources. “Be careful,”he’d said. “Jamie is pretty valuable to us andwe’d hate to get her upset over this—after all, itwas a different type of assignment . . . not herusual work. And there was her family prob-lems . . . you’d expect some things to be doneless than perfectly.”

In the end, Jones had decided to ignore theunfinished project and had given Hernandezan “Outstanding” rating. He also decided,based in his own analysis, to downsize theproduct management department by five peo-ple. It was not a popular choice and certainlydisrupted the “team” environment for a whilebut he felt that it needed to be done.

With Hernandez’ mother settled into agood nursing home, things returned to normalin the Vista-Sci product management group.Hernandez was back to her normal self, doingher usual, outstanding job.

yy Michael Upshaw“When it comes to personality,” Jones observed,“You couldn’t have a greater difference thanbetween Jamie Hernandez and Michael Upshaw.Nor, for that matter, could you have people withmore different backgrounds.”

Michael Upshaw had been brought up inthe Midwestern United States, the son of asmall-town college professor and a home-maker. He had been educated at a local highschool where he’d been active in militarycadets through the Reserve Officers TrainingCorps (ROTC), in both high school and col-lege and, with the support of his local con-gressman, had won a place at West Point, theU.S. Army College. He’d ranked in the topthird of his class, graduated as an army engi-neer, and then served three years in the army,two of them in Vietnam attached to a front-line infantry regiment where he had beenslightly wounded and had eventually beenhonorably discharged.




Upshaw spoke little about his militaryservice. In fact, he spoke little about him-self at all. After the military, he had won ascholarship to a prestigious business school,graduating—again in the top third of hisclass—with an MBA and not a great deal ofsense about what he wanted to do with therest of his life.

He had been recruited by Vista-Sci whilehe was at business school and moved into thecompany in an assistant product manager role.Over the next three years Upshaw had workedfor three different product managers as well asserving on a couple of special task forces, oneworking on a department-wide forecastingsystem and the other on a project for the chair-man of Vista-Sci International, scoping outpossibilities for site location of the interna-tional division’s world headquarters. He hadreceived good or outstanding appraisals afterall of these assignments. Invariably thesereviews singled out his thoughtful, disciplinedapproach to all the tasks he undertook. Hetook direction extremely well but, when he wasleft on his own, demonstrated reasonable ini-tiative and resourcefulness. He blended in wellwith any team on which he was placed, pulledhis weight on the team and was thought of as agood colleague by those who worked with him.

Promoted to product manager about fiveyears ago, Upshaw had managed his productswith disciplined thoroughness. Never an “ideasman” himself, he nevertheless was open toideas from others, listened carefully to themand usually made good choices. His documen-tation of everything—from marketing plans tominutes of packaging meetings—was exten-sive and accurate.

Allun Jones made a point of discussing theperformance and development needs of all ofhis staff with people with whom they fre-quently interacted. In reviewing his productmanagers’ performance with John Middlestadt,the account supervisor at one of his advertisingagencies, John had said:

I’m always impressed with how well-prepared Mike (Upshaw) is. His cre-ative briefs are first rate and, largelybecause of that, his projects run verysmoothly. Come to think of it, Idon’t think that I can recall a singlecase where the budget ran over theforecasted amount or even when aproject was delayed. No—Michaeloperates with military precision!The other thing that helps him is his

choice of people to work with. Some ofyour people attract the more way-out,unorthodox members of our creativestaff. Jamie, for instance—now she’salways pushing for unusual, break-through creative ideas for print andtelevision advertising and even somecreative media buy packages . . . shewas one of the first into cable bun-dles . . . turned out to be a great buy.Michael, on the other hand . . . well, heassembles a good team and then getsreally good performance from them.It’s a more “controlled” creative prod-uct . . . but it’s good.

Allun had pushed the account supervisor:“I hear you. But tell me, honestly, if you had toassemble an absolutely first class creative teamheaded by a strong marketing person, wouldyou go for Mike?” There was a long pausebefore John answered:

I’m not sure. I know that I’d sleep wellat night if I had Mike running theteam. There would be no surprisesand a pretty good product in the end.But I suspect that someone like Jamiewould walk away with the awards forthe best advertising campaign moreoften than Mike. Of course, you’d puta lot more work into the project aswell. . . . I mean, she’d need moresupervision than Michael.


Jones had met several times with MichaelUpshaw over the last two years to discuss hiscareer aspirations. Unlike most other mem-bers of his Marketing staff, Michael had sel-dom asked about promotion or what it tookto get ahead. He’d asked him about this once,suggesting almost that maybe Michael lackedsome ambition. His response had been, char-acteristically cool:

I suppose that I get that from havingbeen in the military. You get used tohaving to put time in working onlower level jobs, some of which aren’tall that exciting. I guess that you getused to just doing a good job andhoping and expecting that someonewill notice and give you an opportu-nity to take on bigger challenges andresponsibilities. I think that the samething happens in business—notmuch point in putting myself for-ward if the job performance is notthere. . . . I just let the performancespeak for itself.

Allun Jones had also noticed thatMichael did not seem to attract high poten-tial junior staff the same way that others,including Jamie, did. While the people thathe managed always spoke well of him, andbelieved that they had benefited from histeaching and coaching, he didn’t seem tohave the same magnetism as Jamie. Whenshe went on campus recruiting trips andmade presentations, there were crowds ofstudents who came up to her asking ques-tions and trying to impress her; whenMichael did recruiting trips the responseswere less enthusiastic—people listenedpolitely but did not seem as eager to engagehim in discussion.

People who worked for Michael foundhim to be a good boss—considerate, caring,willing to spend time with them. Sometimes

Allun wondered if they had it a little toogood—he remembered always feeling stretchedand on the edge of having too much to do intoo short a time when he had been a juniorproduct manager or supervisor. MaybeMichael’s superior organizing skills meantthat his people had an easier time of it ormaybe he just didn’t stretch his people farenough.

Jones summarized:

He’s good. Sometimes he’s very good.But he’s not, you know, exciting! Hewould be a good, safe appointment asvice-president, product manage-ment. He’d make the routine deci-sions himself and probably come tome to talk through the tough ones.But I’m not convinced that we’d getany breakthroughs with Michael. Atbest, he’d do as good a job as I’vebeen doing after he got some moreexperience.

yy The DecisionThere were many thoughts on Allun Jones’smind as he drove home that night, not all ofthem making him feel comfortable.

Michael or Jamie? Which one would bebest for the job; how would each react ifthe other got it . . . and did that reallymatter? How would the decision beviewed by the other product managersand assistant product managers atVista-Sci, both in the pharmaceuticaland other divisions?

He was also conscious of the fact that thiswas the first major “people” decision that hewould be making in his new role. How thisworked out may well determine his own futurewith Vista-Sci.



AUTHORS’ NOTE: The study on which this article is based was made possible through the generous support of the AustralianInstitute of Management (Queensland division). We appreciate the contributions of Dr. Anne Hartican, research assistant,Monash University, to this study.

Copyright 2007, Ivey Management Services

Scratch the surface of a true leader, orlook beneath his or her personality, andyou’ll find character. The traits and val-ues that make up the character of a goodbusiness leader are, for the most part,similar to those that make up the char-acter of an outstanding citizen. Theseauthors describe the traits and valuesthat make up the character of leadership.

Character has come in from the cold. Once thepoor cousin of clinical psychology and behav-ioural studies, character is once again recognizedas a critically important component of personal-ity and therefore, of what makes people tick. Itsimportance to leadership is considerable.

yy Character in LeadershipNot surprisingly, the importance of the charac-ter of leadership is making inroads in the busi-ness world. Johnson & Johnson (J&J), the majormanufacturer of health care products in theUnited States, views character as a leadershipessential. Former Chairman Ralph Larsenbelieves that people with character can give acompany a significant competitive advantage.

The company actively seeks to recruit and berepresented by people of exceptional character.Johnson & Johnson’s stance is supported byresearch which suggests that in leadership,good character counts. According to FrancesHesselbein, the author and chairman of theDrucker Foundation, leadership that achievesresults goes beyond how to be, and becomes howto do; this type of leadership is all about charac-ter. So in other words, in order to get things donepersonally and organizationally, one first needsto get in touch with his or her character.

Leaders with character achieve results thattranscend everyday organizational imperativesand outcomes. A study of world leaders overthe past 150 years asserts that managers whopossess strong character will create a betterworld for everyone, while leadership generallyis vital to the social, moral, economic, andpolitical fabrics of society.

For example, Theresa Gattung is the CEOof Telecom NZ, a New Zealand telecommunica-tions company. Her candour about her vulner-abilities, as well as her philosophy on leadership,has won her the admiration of her male col-leagues. She recognizes that good leadershipconsists more of character than personality:


The Character of Leadership

James C. Sarros, Brian K. Cooper, and Joseph C. Santora

I have a dream today . . . I have a dream that my four little children will one day live ina nation where they will not be judged by the color of their skin but by the content of theircharacter. I have a dream today.

Martin Luther King, Jr.

Speech on steps of Lincoln Memorial, Civil Rights March, 28 August 1963


When I went to management school20 years ago, I thought it was aboutpersonality, desire, determination,and a little bit of technique. I didn’tactually realise it was about character,and that struck me more as I havegone along. . . . The leaders whompeople respect and will follow havethe characteristics of being them-selves, of being passionate about whatthey are doing, communicating thatin a heartfelt way that touches hearts.

However, we often take the character ofleadership for granted. We expect good leadersto be strong in character, that is, to have amoral imperative underwrite their actions.These leaders with character have been identi-fied as authentic leaders: They are what theybelieve in; show consistency between their val-ues, ethical reasoning and actions; developpositive psychological states such as confi-dence, optimism, hope, and resilience in them-selves and their associates; and are widelyknown and respected for their integrity.

Nonetheless, the key attributes of authen-tic leaders, or leaders with character, remainproblematic. To identify these attributes andbetter understand them, we undertook a study.This paper is based on that study and in it weidentify the three underlying dimensions ofleadership character—universalism, transfor-mation, and benevolence.

We also suggest ways of further enhanc-ing these dimensions and their constituentattributes.

Universalism represents an understand-ing, appreciation, and tolerance for the welfareof people generally, and is a macro perspectiveapproach to work and life. The characterattributes of respectfulness, fairness, coopera-tiveness, and compassion in particular fit bestwith this definition of universalism.

Transformation is consistent with the con-cept of transformational leadership as anactivity that inspires others in the achievementof long-term, visionary goals. The character

attributes of courage and passion best repre-sent this factor. Transformation is a situation-specific process that relies on the competenceand self-reliance of the incumbent in theirdelivery of inspired and values-driven strategicdirection for the enterprise.

Benevolence is a micro approach to work,and focuses on concern for the welfare of othersthrough one’s daily interactions. Selflessness,integrity, and organization loyalty best repre-sent the characteristics of benevolence.

yy 1. UniversalismUniversalism is the outward expression of leader-ship character and is made manifest by respect-fulness for others, fairness, cooperativeness,compassion, spiritual respect, and humility.

Respectfulness

Juliana Chugg, the former Managing Director ofGeneral Mills Australasia, illustrated respect forher workers by dramatically altering the timeemployees needed to spend at the workplace byclosing the doors at 1pm every Friday. Againstthe board’s advice, this decision allowed the com-pany’s executives and factory workers to starttheir weekends earlier. More importantly, thisaction resulted in no job losses or salary reduc-tions, no drop in productivity, and no increase inworking hours on other days during the week.Chugg, who now heads up General Mills’ headoffice in Minneapolis, Minnesota, is the new faceof home baking giant Betty Crocker, a $1 billionbusiness in the US alone. As a relatively youngmother in charge of a diverse international com-pany, Chugg understands the need to balance herpersonal and work demands: “The role of a man-aging director is not to make all the decisions. Itis to get the people who have access to the rightinformation together so that, collectively, theyare able to make better decisions than they wouldon their own.” Chugg received the VictorianBusinesswoman of the Year award in 2000 for hervisionary and caring approach to business.

The Character of Leadership 73



Fairness

Fairness is treating people equitably and in ajust manner. Max De Pree, the former CEO offurniture maker Herman Miller, is guided by adeep concern for others. His approach to lifemanifests itself in his approach to work andthe way in which Herman Miller conducts itsbusiness affairs. De Pree believes a corporationis a community of people, all of whom are val-ued. His main contention is that when youlook after your people with care and consider-ation, they in turn look after you.

Former Chrysler CEO Lee Iacocca wasknown to say that if you talk to people in theirown language and you do it well, they’ll say,“God, he said exactly what I was thinking.”And when your people begin to respect you,Iacocca claimed “they’ll follow you to thedeath,” metaphorically speaking.

Cooperation

The ability to work as a team has been praisedas a strategic advantage. Unfortunately, manycorporations prevent good teamwork throughantiquated organizational structures and pro-tocols. However, creating new office towerswith transparent offices, mezzanine floors, andatrium-style meeting places may not necessar-ily promote a more cooperative workplace.Attitudes need to change also. One way ofinfluencing attitudinal change is by linkingindividuals’ sense of identity with the organiza-tion’s destiny. The more a leader assists workersin defining their work identities, the greater thechance of encouraging worker commitmentand building a cooperative workplace.

Merck, a leading pharmaceutical productsand services company in the U.S., lists itsrecognition of its employees’ diversity andteamwork capacities as one its core values. Itpromotes teamwork by providing employeeswith work that is meaningful in a safe anddynamic workplace. Therefore, building coop-eration as an attribute of character requirescommitment, possible corporate redesign,

and consciousness of client needs, both inter-nal and external.

Compassion

Compassion has deep religious connotations,for it refers to showing concern for the sufferingor welfare of others, and shows mercy to others.In a company sense, compassion manifests itselfwhen leaders make an effort to understand theneeds of their employees and take steps toaddress those needs and concerns. A compas-sionate leader takes the Atticus Finch approach(the attorney in Harper Lee’s 1962 novel To Killa Mockingbird), which means walking aroundin another person’s shoes, and climbing aroundunder their skin, to understand what it lookslike from their side of the ledger: “You neverunderstand a person until you consider thingsfrom his point of view . . . until you climb intohis skin and walk around in it.”

Linda Nicholls, chairperson of AustraliaPost, argues that recent terrorist activities andthe spate of corporate collapses around theglobe have given rise to widespread social con-cerns for safety, security, and certainty.Nicholls argues that leaders need to show com-passion because of the fears such events havegenerated, and to balance the drive for innova-tion, risk and growth with the human need forsafety and security.

Peter Sommers, managing director ofMerck’s Australian division, provides an anec-dote that exhibits how compassion for employ-ees takes precedence to work demands:

We’ve got stock-take this Thursday.The mother of one of the women whoworks in our factory died a few daysago, and the funeral is going to be onstock-take day. We only do stock-takeonce a year; it’s a very, very big day.The employee’s manager and I haveboth said, “Well, if the funeral is onstock-take day, then stock-take willhave to stop for an hour.” It’s a very


important day, it’s a full day, I work a12-hour day and I’m usually exhausted.But we will go to our employee’smother’s funeral to give support,because we care for our people. They’renot just numbers here. Each person istreated as an individual, we knowtheir needs, and we try to cater tosome of their wants.

Spiritual Respect

Today’s organizations are multidimensional;they provide services and products at an ever-increasing rate and superior quality, andachieve these outcomes through a multicul-tural and diverse workforce. Leaders whorespect these differences in workers’ back-grounds, cultures, and beliefs help buildvibrant and relevant workplaces.

Respect for individual beliefs and customshas a long history. In Athenian society, Platoviewed leadership as “an activity with utility forthe polis, the activity of giving direction to thecommunity of citizens in the management oftheir common affairs, especially with a view to thetraining and improvement of their souls.” Thereference to soul suggests that leaders engage thefull person and help make him or her a produc-tive and morally strong member of societythrough their contributions in the workplace.

In recent years, the Track-Type TractorsDivision of Caterpillar Inc. has experiencedunprecedented improvement across the boardby establishing workplace values and makingemployees feel important in the organization.Jim Despain, vice president of this division,acknowledges that leadership is “about othersand not about self. It is about trust and notabout power. It is about producing results bycreating cultures where people know it’s okayto be unique and different, so they willinglytake off their masks, express themselves, anddo great things.” This approach confirms theview that workers can achieve great things withthe right type of encouragement and respect.

Humility

Fifth Century BC Chinese Taoist philosopherLao-Tzu described humility as the capacityto keep yourself from putting the self beforeothers and argued that in doing so, one canbecome a leader among men.

Despite broad acknowledgement of itsimportance, being humble does not sit comfort-ably with the healthy egos of many executives.Some CEOs operate under the mistaken beliefsthat they are infallible, and that to admit error orconcede a superior point of argument is a weak-ness. Sometimes a leader becomes a boss to getthe job done, and there’s not much room forhumility when the job demands action.

A recent study of over 2,000 Australianexecutives revealed that often executives weredemocratic and collegial at the beginning ofthe working week, but often resorted toauthoritarian direction giving at week’s end inorder to meet deadlines. There was no roomfor humility in those situations. Humility maybe an anachronism in a world recognized bythe combat of commerce rather than by coop-erative and collegial workplaces. For instance,when managers are asked to apply BenjaminFranklin’s (1784) “Moral Virtues” to contem-porary society, there is a predictable resistanceto Franklin’s virtue of humility, which is to“imitate Jesus and Socrates.” Today’s executivessee themselves as more worldly and upbeatthan that, regardless of the valuable lessonsimplicit in the statement.

When we examine humility across cul-tures, there are compelling differences. Forexample, Japanese CEOs have been known toresign when their projected company profitsfell short of the mark. These businessmenblamed themselves for their company’s poorperformance. When the world’s largest bank,Mizuho Holdings, experienced severe com-puter breakdowns that delayed business trans-actions, CEO Terunobu Maeda took swiftaction. He cut the pay of the employeesdirectly involved in the computer system inte-gration, as well as taking a personal pay cut of




50% for six months. Leaders who shift respon-sibility back to themselves in good times aswell as bad have strength of character that goesbeyond standard leadership constructs. Theseleaders possess the attributes commonlyreferred to as servant leadership. One of thekey elements of this leadership philosophy ishumility, or the capacity to commit to yourworkers as much as you do to the bottom line.The guiding principle of servant leadership isto serve rather than to lead. Serving yourworkers, being a steward of their efforts, takesa considerable dose of humility and rests on astrong sense of self-identity.

Many western business leaders may rejecthumility as a desirable or useful attribute intoday’s fast moving, competitive world.Nonetheless, the common characteristics ofcompany leaders who have achieved outstand-ing and sustainable financial performance inthis dynamic environment include modesty,humility, quietness, and self-effacing behavior.These attributes are indicators of leaders qui-etly aware of their roles in the overall schemeof things. Humility therefore appears to beabout a realistic sense of perspective, an accep-tance of one’s strengths and weaknesses.

yy 2. TransformationTransformation is how leaders achieve univer-sal and benevolent outcomes, and is the second main factor of leadership character.Transformational leaders with character havecourage, passion, wisdom, competency, andself-discipline in their leadership repertoire.

Courage

From a business perspective, courage is havingstrong convictions about the strategic objec-tives of the company and being prepared toharness the minds of workers and companyresources to achieve those objectives. There areno second-place getters in this approach tobusiness. Courage is not constrained by fear of

the unknown and thrives in the problems andpromises of dynamic environments.

Managerial courage includes the willing-ness to do what is right in the face of risk. With“risk” there is a possibility of failure or loss andno guarantee that everything will turn out fine.Acting with courage may result in unpleasantexperiences, yet it is a fundamental ingredientof leadership.

Corporate courage manifests itself inmany ways. General Electric (GE) requireslaw firms on its panels to compete for pro-jects through online, eBay-style auctionswhich force competing bids to a financialbottom line that allows for comparabilityacross all contenders who are promotingtheir wares. This innovative and courageousapproach coaxes the best out of competitors.From this perspective, courage is immediateand localized.

Michelle Peluso, the chief executive ofTravelocity, a US travel company, exemplifiescourage. She knows that being innovativerequires risk and facing the possibility of fail-ure. Peluso proposed an innovative businessmodel which she believed would assistTravelocity regain ground lost to the com-pany’s key competitors. Peluso’s businessmodel, “seamless connectivity”, focuses on cus-tomer and supplier satisfaction. Implementingthe model required an investment in technol-ogy and training. Investors expressed concernabout the time it would take to implementPeluso’s strategy and questioned whether itwas the right approach. Peluso was unwaveringin the face of mounting ambivalence. Shebelieved that her business model was compat-ible with the company’s philosophy of doingthings differently and having a long-term view.

Peluso did not yield to these pressures.Instead, she worked hard to influence investorsby developing a strong rapport with employeesand encouraging them to be innovative andpassionate about their work. She introduced aweekly prize for outstanding and innovativework by staff. She also mentors twenty-five“exceptional” Travelocity employees.


Peluso’s courage and conviction appear tohave paid off handsomely. Travelocity hasrecently been certified as an official third-partydistributor for the Intercontinental HotelsGroup because of its supplier-friendly policies.

Passion

Passion is about energy and deeply committedenthusiasm to producing the best one can. Inbusiness, passion is an indicator of a company’sguiding principles, its raison d’etre, and helpsothers identify the underlying culture of theorganization. Unilever is a top ranking FortuneGlobal 500 company, with over US$46 billion inrevenues, US$7 billion in operating profit, andover 240,000 employees globally. The companyis a world leader in ice cream, frozen foods, teas,and the second-largest manufacturer of laun-dry, skin cleansing and hair-care products. Itscorporate slogan, “Your passion. Our strength,”represents “total commitment to exceptionalstandards of performance and productivity, toworking together effectively and to a willingnessto embrace new ideas and to learn continu-ously” (Unilever, 2004).

John McFarlane (2003), the CEO of theANZ bank in Australia, believes that leadershipis about choosing to make a difference and thatwhen you reflect on making a difference it mustbe in areas about which one is passionate. Aleader’s passion can make a significant differencein the degree to which she inspires others or pro-vides focus and motivation for the organisation.

Leadership guru Warren Bennis thinkspassion is inherent in effective leadership: “Weare productive when we do what we love to do”.For example, toward the end of his seventh yearas president of the University of Cincinnati,Bennis was giving a talk at the Harvard Schoolof Education. During question time the deanasked Bennis not if he “enjoyed”, but whether ifhe “loved” being president of the University ofCincinnati. Bennis acknowledged that he didn’tknow, but on reflection realized that he did notlove the job of president. For Bennis, this real-ization was a major turning point in his life, as

it made him realize that his passion lay inteaching and writing. If passion or love of yourwork or vocation is missing, then chooseanother vocation.

Wisdom

Wisdom is the ability to draw on one’s knowl-edge and experience to make well-formedjudgments. It also involves the use of one’spower and personal authority to implement aneffective course of action.

Wisdom underpins major decisions. FormerBP CEO John Browne was the first CEO in theoil industry to openly acknowledge the impactthe industry was having on the environment,and to highlight the ways of reducing green-house gas emissions. Browne advocated aresponsible approach to limiting the energyindustry’s impact on the environment throughBP’s “Beyond Petroleum” campaign. Thisapproach could have impacted on the com-pany’s bottom line, but the wisdom of the deci-sion was that it tapped into the moral conscienceof society at the time.

Compare Browne to Lee Raymond, hiscounterpart at Exxon Mobil. Raymond ini-tially was skeptical about global warming.Consequently, Raymond is said to have becomethe “energy executive everyone loves to blamefor the industry’s PR problems”. Exxon becamethe target of a boycott in Europe, whichencouraged Raymond to change his stance.Recognizing the positive impact Browne’sapproach had on BP’s corporate image, ExxonMobil subsequently launched its own green adcampaign.

Competence

Those actively pursuing a career as a leaderneed to be competent in order to maintain theconfidence of others. They need to be expertin something to the extent that their expertisecommands the respect of peers and followers.According to the former Australian Governor-General, Sir Ninian Stephens (1997):




The first and most important ingredi-ent of leadership seems to me to be topossess a rounded and comprehensiveknowledge of the subject matter withwhich you are dealing and aboutwhich you want others to act in a par-ticular way.

FedEx’s founder and CEO, Fred Smith,exemplifies the power of competence. AwardedChief Executive Magazine’s 2004 CEO of theYear prize, Smith was recognised for his abilityto take FedEx from being “just an idea to beinga great company”.

Smith says that his vision for creatingFedEx was the result of studying a mathemati-cal discipline called topology. Through thisstudy he realized that if you connected allpoints on a network through a central hub, theresulting efficiencies could be huge.

For Smith, competence does matter. Whenasked what it takes to be a leader who creates acompany and then builds it up to a $25 billion-a-year business, employing 240,000 employeesand contractors, Smith advocates “continuallearning and education and the discipline toapply those lessons to your operation.” He alsoadvises others to make the time and effort tobenchmark and learn the lessons of history.

Self-Discipline

Leaders with self-discipline exercise appropri-ate personal control over their thoughts andactions and are able to manage and expressemotions in constructive ways. They are wellorganised and able to persist in the face ofdifficulties. Through self-discipline, leadersengender confidence in their followers thatthey can be relied upon to make rational andlogical decisions. As a consequence, theircapacity to influence others often increases.Lao Tzu proposed that through mastering our-selves we find true power.

Author and former CEO of internationalmedical technology company, Medtronics, BillGeorge (2004) argues that self-discipline is the

attribute that converts values into consistentaction. George describes his successor atMedtronics, CEO Art Collins, as a highly self-disciplined leader as his ego and emotionsdon’t get in the way of taking appropriateaction. Collin’s consistency in his disposition,behaviours and decisions lets employees knowwhere he stands on important issues.

Self-discipline requires the maturity to dowhat is needed, not always what is desired inthe present moment. Amy Brinkley, Chief RiskOfficer, Bank of America, exhibits such matu-rity. Brinkley (2003) includes self-discipline asa key component of her personal equation forsuccess and in order to maintain the right bal-ance between her roles as bank executive, wife,mother and as a member of her church andcommunity: “I try very hard to be fully in thezone I am in at the moment. I give everything Ihave at that moment to what I am focusing on.I also abide by my own operating principles likestaying away from voice mails and e-mailswhen I am with my kids and my husband.”

As a means of maintaining a balancebetween professional and personal roles, self-discipline is an important component of effec-tive leadership.

yy 3. BenevolenceThe third major dimension of leadership char-acter is benevolence, and is associated withloyalty, selflessness, integrity, and honesty.

Loyalty

Leaders who demonstrate organisational loyaltyshow a deep commitment to building organisa-tional sustainability. Such leaders have beendescribed as having the resolve to do whatever ittakes to make a company great irrespective howhard the decisions or how difficult the task.

Take Anne Mulcahy, the CEO of Xerox, asa case in point. Mulcahy has exhibited a deeployalty to her organisation. When she wasasked by the board to take on the role of CEO,


Xerox was in financial crises, with a $17.1 bil-lion debt and $154 million in cash. In 2000 thestock fell from $63.69 a share to $4.43.

While Mulcahy had an excellent reputa-tion within Xerox, she had no prior CEO expe-rience. Despite the dire financial position ofthe company, the board recognized Mulcahywas straightforward, hard-working, disci-plined, and fiercely loyal to the company.Mulcahy accepted the CEO role based on asense of duty and loyalty.

When Xerox’s external financial advisorssuggested Mulcahy consider filing for bank-ruptcy, the easier way out, she refused to do so.According to Joe Mancini, Xerox’s Director ofCorporate Financial Analysis, the company’sfinancial advisors didn’t think Mulcahy hadthe courage to make the painful but necessarychanges to save Xerox. But Mulcahy indeed didhave what it takes.

In her efforts to achieve what can only bedescribed as an extraordinary corporate turn-around, it is claimed that Mulcahy did not take asingle weekend off in two years. Timothy R.Coleman, a senior managing director at theprivate equity firm, Blackstone, said of Mulcahyat the time: “She was leading by example.Everybody at Xerox knew she was working hard,and that she was working hard for them.”

Organizational loyalty, as a component ofcharacter, means commitment to the idea andideals of the company as much as it does to thenature of its business.

Selflessness

The character attribute of selflessness requiresleaders to put others’ interests ahead of theirown.

Ping Fu, a founding member of RaindropGeomagic, a North Carolina-based innovativesoftware company, is a leader who demon-strates a capacity for selflessness. Fu took on therole of CEO in 2001 when the company’s via-bility was threatened. The company was run-ning out of money and the venture capitalmarkets were drying up.

Under Fu’s leadership, several cost-cut-ting initiatives were implemented, whichincluded laying off almost half the company’semployees. Those who remained took paycuts. In her efforts to save the business, Fuloaned the company money in order to payits workers. She also declined to take a paycheck until the company straightened out itsfinancial situation.

Raindrop Geomagic board member PeterFuss acknowledges Fu’s personal sacrifices. Hesays she invested considerable time and wastenacious in her efforts to rebuild the company.

Integrity

The word integrity comes from the Latin word‘integritas’, meaning wholeness, coherence,rightness, or purity. Integrity has been definedas consistency between word and deed or “theperceived degree of congruence between thevalues expressed by words and those expressedthrough action.”

Integrity is the most often cited element ofcorporate mission statements. In most cases,integrity refers to honest representation of acompany’s values and operating protocols.Texas Instruments (TI) refers to “representingourselves and our intentions truthfully” as evi-dence of their integrity. General Electric (GE)identifies integrity as a “worldwide reputationfor honest and reliable business conduct.” TheGillette Company highlights “mutual respectand ethical behavior” as hallmarks of integrity.

Roger Corbett (2004), the CEO andManaging Director of Woolworths, Australia’slargest supermarket chain, consisting of morethan 150,000 employees and 1,500 stores,believes integrity is the glue that holds his val-ues and the organization’s success together:“The closer you can get the business towardsintegrity and the further away from cynicism,then that really is a good measure of the effec-tiveness of your business . . . integrity of pur-pose and example, of lifestyle and attitude, areprobably the most important cultural contri-butions a leader can make to the business.”




Honesty

Honesty is absolutely essential to leadershipand character. People value working for leadersthey can trust. Lindsay Cane is the ChiefExecutive Officer of an Australian nationalsporting body, Netball Australia. Her views onhonesty and integrity testify to their importantrole in building leadership character.

Netball Australia receives public funds andis involved with over a million people nation-ally. Cane (2004) believes her ability to win theconfidence of others is critical to the success ofthe organization, and relies on her capacity tobe honest and direct:

I think it’s really important I be seen asa very sound, honest person with highintegrity and I need people to want todo business with me. The capacityto build relationships which relates totrust and listening and respect andempathy, those are very importantthings because they absolutely affectsponsorship outcomes, business finan-cial outcomes, what money we getfrom the government, from corporateAustralia, what money we might get inthe future from our members.

Successful leaders are open and honest withothers, but they also understand that maintain-ing trust requires them to exercise discretion inhow they use and disclose information. Theytake care to avoid violating confidences anddo not carelessly divulge potentially harmfulinformation.

Greg Dooley, the Australian General Managerof international financial services and technologycompany Computershare, rates honesty as themost important character attribute of leadership:“If you’re dishonest as a leader then you’ve got nochance. As soon as you lose trust you may as wellgive up the ghost.” Dooley differentiates betweenwithholding information and deceiving someone.He acknowledges that being open and honest withpeople may at times be difficult when you havecommercially sensitive information that you can’t

disclose. However, Dooley argues that appropri-ately withholding information is critical toComputershare’s business: “Clients need to knowthat they can trust us, that we’ll be able to handlethat information and deal with it on a needs-to-know basis.”

A leader’s capacity for honesty can help fol-lowers work constructively on solving issues andproblems. American leadership developmentconsultant Joan Lloyd (2001) says: “I think mostemployees today are hungry for some good old-fashioned honesty.” Employees prefer to work forleaders who they trust can be honest with themabout the reality of their circumstances. Lloydargues that the best leaders are respected, in part,because they level with people and tell it like it is.

Future of Leadership With Character

Our study identified three underlying dimen-sions or factors of leadership character.Universalism represents an understanding,appreciation, and tolerance for the welfare ofpeople generally, and is a macro perspectiveapproach to work. Transformation is consistentwith the concept of transformational leadershipas an activity that inspires others in the achieve-ment of long-term, visionary goals. Transfor -mation is a situation-specific process that relieson the competence and self-reliance of the incum-bent in their delivery of inspired and values-driven strategic direction for the enterprise.The third dimension, Benevolence, is a microapproach to work, and focuses on concern forthe welfare of others through one’s daily inter-actions. As a process, Transformation can beseen as the link between Universalism as theexternally-focused manifestation of leadershipcharacter and internally-focused Benevolentintentions. We propose that leaders who mani-fest courage (setting a long-term direction andtaking people along without fear) with passion(energy and enthusiasm) are more often associ-ated with outcomes that have external as well asinternal benefits, and are typical of character-ledorganizations.


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