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Third Generation Leadership: the role of the CEO

Written by: Douglas Long

Article Overview: As we move more and more into a knowledge economy the greatest point of leverage in organisational success is to increase the capability of each employee. And that requires a new culture – a Third Generation Leadership culture. And facilitating that should be the central role of a CEO.

Third Generation Leadership: the role of the CEO

The most critical part of the leadership role in any organisation belongs to the CEO. As I frequently say to clients, "what the boss touches is deemed to be important". In other words, the CEO places his or her stamp upon the entire leadership process of the organisation. Overt and covert indications of the CEO's preferences and desires are collected (both consciously and unconsciously) and used by everyone else in order to determine the most appropriate way to behave.

On the SBS (Australian TV) program "Dateline" Sunday April 11, there was an interview with Ken Feinberg of Washington DC. Feinberg has been appointed to enforce a law passed by Congress to curb the financial excesses of 7 US corporations. In this interview Feinberg says: " ... I have discovered on this job the tremendous gap in perception between the way Wall Street thinks and the way Main Street thinks in America. There is real, justifiable anger and frustration over these excessive Wall Street bonuses, guaranteed salaries, guaranteed commissions - regardless of performance - it is these principles, or these characteristics of Wall Street, that we are trying to influence and change. ..." ... " ... From my perspective, we have learnt that guaranteed compensation - unrelated to performance - guaranteed retention payments, automatic commissions, short-term ability to cash in stock, all of these practices have promoted a culture on Wall Street that promotes excessive risk-taking. And everybody pays the price for that globally. So, what you are seeing now, at least what I am doing in my limited way - low-base cash salaries, no guaranteed compensation, compensation tied to long-term performance. Your company thrives, you will thrive. If the company falters, your compensation will be diminished. These are the principles that I am trying to effectuate. ..."

The truth is that we live in a "red zone" world and, in that world, ultimately the golden rule ("he who has the gold makes the rules") is king. As Feinberg made clear, the problem is that the people who control these corporations (and most other major corporations in most parts of the world) are people with First Generation Leadership behaviours operating in a First Generation Leadership or a Second Generation Leadership manner with people who want a Third Generation Leadership world.

In this world it is the CEO's demands, wants, views etc that must be met no matter what. Under such circumstances, the Board can become nothing more than a "rubber stamp" which endorses the CEO's desires. When this happens, all other employees - no matter where in the hierarchy - are virtual serfs who are subservient to the CEO. One cannot help but wonder if recent highly publicised Australian Company collapses and/or serious problems at Board-CEO-Executive level have arisen because of this confusion.

I believe that the prevalent culture of any organisation is determined by the CEO.

Almost by definition a CEO is a person with a strong sense of self-identity and a high need to be successful. In all my research on organisational culture I find a high positive correlation between the profile of the CEO and the way by which success is measured in an organisation. As I said earlier, "what the CEO touches is deemed to be important".

The "leader" - the CEO - sets the entire tone or culture for "leadership" in the organisation. If that tone or culture is too restricted (as in the case where "greed is good") then no matter what leadership development intervention is provided, it has a very low likelihood of success. I believe we are seeing this today with many organisations, having been bailed out by their respective governments, now returning to their old habits and acting as though nothing ever happened. As Feinberg pointed out, some of the companies he was supposed to have influenced have now repaid the money the government advanced so that they are free from the restrictions he sought to place on them. He commented: "They just don't get it!"

It is widely accepted that we now live in a knowledge economy and that requires capable people optimistically, collaboratively and creatively working to create value for others and for themselves. Such people will, by definition, create outcomes that are not predictable in advance and therefore their performance cannot always be measured against budgeted outcomes. Yet we "know" when a produced outcome is of exceptional value and therefore the performance that produced it has been outstanding. For the foreseeable future, the majority of such people will operate within formal organisations. Yet, such capable people do not arrive ready formed in an organisation and so part of the value of an organisation is to develop employees at the optimum rate until they are performing at the highest levels. We need to provide environments that are:

• Safe for the employee (mentally and physically)
• Allows the employee to have their current performance understood by their manager
• Allows the employee to get a clear view of, and build commitment to, actions to improve performance
• Allows the manager to ensure that personal growth and organisational performance are both optimised

The more capable such people are, then the more value that can be created for the organisation. The limiting resource becomes the speed of growth, this is limited by the capability of managers to do performance development well.

As we move more and more into a knowledge economy the greatest point of leverage in organisational success is to increase the capability of each employee. And that requires a new culture - a Third Generation Leadership culture.

And facilitating that should be the central role of a CEO.

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Article Tags: global financial crisis, role of a ceo, role of the ceo, third generation leadership



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