Who Needs Leaders?
Q: This issue raises the question, “Who needs leaders?” Where are leaders needed now?
Sharon M. Oster: I’d like to frame the question a little. It’s important to distinguish between two kinds of leaders: transformational leaders and transactional leaders. If you ask, “Where do we need leaders?” these leader-types bring very different kinds of leadership skills to an organization, and we need one or the other, and sometimes both, in very different areas. I think about transactional leadership a lot—how leaders hire people, motivate people, set up systems, set up organizations, and make resource-allocation decisions. Transformational leadership is associated with charismatic, follow-me-up-the-hill kinds of leaders. The question about leadership is, for me, not about whether you need leaders but whether the moment or the place calls for a transactional leader or a transformational leader.
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Richard C. Levin: I think Sharon’s distinction is a good one, and to tie it back to the original question, I think there are clearly areas where we need some transformational leadership. That seems to be perpetually true in the political arena, but I think even in the business sector there are areas where a reshaping of the tone and the direction of some institutions will be important for the future. For instance, one thinks of financial institutions in the wake of the crisis. I think some of the criticism of Wall Street that’s been lodged by journalists and by politicians is overblown. Nonetheless, a deeper sense of social responsibility in the work of these great financial institutions could be invaluable for society. You don’t just peddle any old derivative product because you could make money off of it. You have to think about the systemic consequences. We need leaders who can look a little bit beyond the near term and think about what the long-term implications of their actions are.
Edward A. Snyder: We’ve had a lot of people at the top of the pyramid who have taken money out of the organization—they’ve taken value out. And I think now we need leaders who are going to focus on creating durable value for the organization. And that takes a longer-term perspective and a sense of integrity that I know Yale SOM has focused on for a long time.
Oster: The question of how we can teach the skills and values that people will need to create this kind of value-added leadership is a very difficult one. It’s one that all management schools really struggle with. Another framing that we think about comes from Aristotle: A leader needs logos, pathos, and ethos. You can layer that onto the issues we’re discussing. We all as educators think about the logos part, because we’re in the business of training people in skills like analytics. I think we do some with ethos—ethics and values. But we actually do very little with pathos…
Levin: The passion.
Oster: How do you get people to not only follow their own passion but to create passion in others and lead them in that way?
Levin: This leads me back to another place in the business world that needs leadership. I think this is a moment where some of the historically great corporations in the manufacturing sector also could use a vision. Obviously the motor vehicle industry, if it is going to reinvent itself and survive, is going to need outstanding leadership. The plight of General Motors and Chrysler certainly stems from an inability to think as long term as some of our international competitors have. There was an article in the Economist recently about how, in the markets in which there is direct competition, Siemens is beating the pants off GE. GE is still larger, since they are in segments that are not occupied by Siemens. Perhaps GE has been distracted by its large exposure to the financial sector.
These companies are really important to the future of the American economy. So, who needs leadership? Maybe the great manufacturing companies need inspired leadership that can think longer term. If you ask, who are the success stories? The companies that come from nowhere and succeed—and stay—are the ones that are thinking two and three moves ahead and thinking longer term.
Snyder: Competition and being successful has to be part of what makes a leader in the private sector—and I would argue in other sectors as well.
The story about Siemens and GE is a good one to stay focused on. Organizations have to compete to thrive. And right now we have a situation where, I believe, a leader also has to communicate about the nature of competition. Why is it important to compete and to succeed? There is a lot of concern among the public that competition is not a good thing. And there is, I think, legitimate concern that, in some cases, the outcomes of the competitive process don’t appear to be fair. And in some cases they’re not. But I think, for the most part, competition yields outcomes that can be defended, should be defended, and should be explained. So an important attribute of leaders going forward is to understand competition, be good at making sure that their enterprises are competitive, and then also explain it to the world.
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