Management as a Liberal Art Research Institute

What is Effective Leadership?

Byron Ramirez, Ph.D.

PUBLISHED:

November 3, 2023

In a recent conference for economists someone from the audience asked the panel of presenters: “What is the role of a leader in shaping policy?” The panel reflected in silence, and after a couple of minutes offered: “Leaders inspire others. They set the direction and people follow.” This interaction drove me to think about the meaning of effective leadership, and about the actions and behaviors that help set a direction and inspire others to follow.     


In my interactions with people across different organizations, I have found that those individuals who others perceive as ‘leaders’ are motivated by the notion of serving a higher purpose and advancing a mission that makes a difference in the lives of others. These ‘leaders’ are committed to the pursuit of goals that ultimately will improve the lives of their customers, employees, investors, suppliers, and other stakeholders.  


Over the years, I have found that it is the human touch that ignites, fuels, and facilitates growth and creativity.  To foster an innovative, creative, and high-performance environment, the effective leader has that human touch and provides people with opportunities to acquire knowledge, use divergent thinking, and contribute ideas.  The leader motivates and inspires other to think creatively, contribute to the enterprise, and develop their full potential by caring about them and allowing them to be their authentic selves.


An effective leader builds people and motivates them to contribute to a worthwhile higher purpose by granting them freedom to express their views and remain genuine.  Before a leader can inspire others to commit to an organizational mission, people must feel like they matter and that the organization appreciates them for who they are.  James MacGregor Burns speaks of a transforming leadership style, which converts followers into leaders and leaders into moral agents who have the ability to produce social change.  But it is important to indicate that people will not follow unless they feel like their opinions and actions matter, and that they are treated with respect and dignity.


A few managers I have encountered throughout my career have utilized a transactional approach to leadership. This type of relationship can yield conformity and often reduces productivity because individuals are discouraged from exerting greater effort. Consequently, under these circumstances, employees feel motivated to only give enough to meet baseline expectations, but never to give more. Recognizing this, effective leaders make attempts to encourage people to contribute and not be simply satisfied with an exchange of work for pay. Effective leaders seek to foster an environment that encourages freedom of thought and that allows the individual to express their views openly, which ultimately is more valuable to the organization and beneficial to the individual whose voice is heard. 


Effective leaders seek to transform the organization into a high-performance enterprise that pursues a mission while providing meaning to those involved with the organization. Leaders realize the importance of leveraging employees’ hearts and minds and, as such, enable their people to build on their skills and use divergent thinking in decision-making. Leaders support the ongoing development of people so that they can strive toward continuous growth. Creating this environment requires commitment, trust, fairness, compassion, and respect for the individual. To foster this environment that cultivates engagement, participation and creativity, leaders encourage people to develop their skills and take on greater responsibilities. Effective leaders use transformational leadership as a tool for building people into outstanding leaders. And building leaders can yield great opportunities for future innovation. 


People must be encouraged and allowed to contribute ideas that will enrich discussion and enhance the decision-making process.  Leaders also understand the importance of motivating people to take intelligent risks.  Hence, it is important that the organization consider approaches to better inform and train its people so that when people take risks and make decisions, they will be better informed about the issue and able to leverage different tools and skills.


Leaders understand the significance of fostering an environment that inspires and excites people with the notion that they can accomplish great things. Effective leaders encourage others to speak up and empower them to enhance ‘the existing’ for the betterment of the organization. Leaders invite people to share their perspective which are discussed and challenged with the intent of building more robust and comprehensive initiatives for improving the organization. This is consistent with Jim Collins’ findings pertaining the value of engaging in dialogue and debate, not coercion, as good-to-great companies use discussion not only to get ‘buy-in’, but to find the best decision.


Effective leaders realize that in order to find creative solutions to organizational challenges we must create a safe space for suggestions while welcoming divergent opinions. Effective leaders see the value of not discouraging people from challenging the status quo. After all, maintaining the status quo for the sake of not disrupting the way we have always done things, is inconsistent with the notion of balancing change and continuity. Organizations must evolve and move through a process of creative destruction, and if they do not, they will ultimately perish. Hence, why it is so important to leverage people and allow them to contribute ideas and opinions. Doing so can help motivate people and advance the organization’s mission of making a difference in society.


References

Burns, James MacGregor. Leadership. Harper & Row, 1978.

Collins, Jim. Good to Great. Random House Business Books, 2001.

The Future of Knowledge Work: What Drucker can teach us

By Karen Linkletter Ph.D. • November 19, 2024
Interview with Karen Linkletter at the 16th Global Peter Drucker Forum 2024  Video Interview

The Specifics of Management of the Knowledge Worker

By Ryan Lee • November 7, 2024
Nowhere is management theory demanded more than in managing the knowledge worker, and yet nowhere is management theory more inadequate in addressing a field’s issues than in knowledge work. This is the point Peter Drucker posited in his work Management Challenges for the 21st Century (1991), and to resolve it he came up with six factors that determine the productivity of the management worker. Among these, his final point that management workers “must be treated as an ‘asset’ rather than a ‘cost’” by any given organization is an important concept1. While it only gradually emerged within management theory over the century, it is crucial for any employer and any government to understand and apply if they are to retain a competitive advantage going into the future. Historically, management theory has been about improving the output of the worker through banal efficiency: how to increase the production of steel per head, how to increase the production of cars per hour, how to minimize deficient products, etc. In all these considerations, the worker is a disposable resource. When he is hired, he is set to a particular task that is typically repetitive and thus easily taught, and when he is not needed because of shortcomings in his work, company difficulties, or automation, he is laid off. Referred to as “dumb oxen”, workers were seen in management theory as machines to have productivity squeezed out of. The shift from a majority manufacturing to service-based economy during the first half of the twentieth century changed this dynamic to some extent. The American postwar economic boom introduced the office worker as a common source of employment. This trend continued throughout the conglomerate era of the 1960s and was helped by the decline of the American manufacturing industry in the 1970s. Now in a stage dominated by service and knowledge work, the American economy must approach management differently. The aforementioned cost-asset shift is a demonstration of why this is so, as Drucker’s emphasis on the knowledge worker’s autonomy means that they wield control, not only within their job but over who they should work for as well. This in addition to the high-capital nature of knowledge workers means that the old management theory approach to labor as disposable will backfire catastrophically for any company that tries it with their knowledge workers. It is also important to remember the demographic trends of the United States, and more so the world, in considering why the cost-asset shift is vital. For all of human history until some fifty years ago, population was considered to be in tandem with economic power, given larger populations yielded larger labor forces and consumer markets. Economic growth was thus also correlated with population growth, demonstrated by the historic development of Europe and the United States and the more recent examples of the developing world. Consequently, the worldwide decline in fertility rates, and the decline in population numbers in some developed countries, signals economic decline for the future. In the labor market, smaller populations mean fewer jobs that produce for and service fewer people. Although the knowledge worker has grown in proportion to the total labor market, these demographic declines will affect knowledge workers as well, meaning employers will have a vested interest in retaining their high-capital labor. To enforce this, the cost-asset shift will have to come into play. The wants and needs of the knowledge worker pose a unique challenge in the field of management. Autonomy, for the first time, can be regarded as a significant factor affecting all other aspects of this labor base. What good does a large salary provide a knowledge worker if they don’t feel that they are welcome at an institution? How would they perceive that their work is not being directed towards productive pursuits at their corporation, especially given the brain work and dedication given to it? Of course, the fruits of one’s labor has been a contentious issue in management ever since compensation and workers’ rights became a universal constant with the Industrial Revolution, but this is augmented by the knowledge worker’s particular method of generating value. Given that Drucker poses their largest asset and source of value as their own mind, they will intrinsically have a special attachment to their work almost as their brainchild. Incentivizing the knowledge worker is also only one part of this picture. Per Drucker, the knowledge worker’s labor does not follow the linear relationship between quantity invested and returned. The elaborate nature of knowledge work makes it heavily dependent upon synergy: the right combination of talent can grow an organization by leaps and bounds, while virtually incompatible teams or partnerships can render all potential talent useless. And the human capital cost of the knowledge worker, both in their parents and the state educating them and in cost to their employers, is astronomical compared to all previous kinds of labor. In conclusion, the needs and wants of the knowledge worker must be met adequately, especially in the field of management. Management must almost undergo a revolution to adapt to this novel challenge, for the knowledge worker is the future of economic productivity in the developed world. Those employers that successfully accommodate the demands of this class of talent will eventually reign over those that do not accept that this is the direction economic productivity is headed.  References Drucker, P. F. (1991) Management Challenges for the 21st Century. Harper Business.

The Wisdom and Continuing Relevance of Peter Drucker

By Michael Cortrite Ph.D. • November 7, 2024
What is wisdom? The dictionary says it is knowledge of what is true and right coupled with just judgment as to action. Jennifer Rowley reports that it is the “ability to act critically or practically in a given situation. It is based on ethical judgment related to an individual's belief system.” (Rowley 2006 p. 255). So, wisdom seems to be about deciding on or doing an action based on moral or ethical belief in helping other people. This clearly describes Peter Drucker and his often prescient ideas For the 100 th anniversary of Peter Drucker’s birth, Harvard Business Review dedicated its November 2009 magazine to Drucker. In one of the articles about Drucker by Rosabeth Moss Kanter (2009 p. 1), What Would Peter Say? Kanter posits that, Heeding Peter Drucker's wisdom might have helped us avoid—and will help us solve numerous challenges, from restoring trust in business to tackling climate change. He issued early warnings about excessive executive pay, the auto industry’s failure to adapt and innovate, competitive threats from emerging markets, and the perils of neglecting nonprofit organizations and other agents of societal reform. Meynhardt (2010) calls Drucker a towering figure in Twentieth Century management. He says no other writer has had such an impact. He is well-known to practitioners and scholars for his practical wisdom and common sense approach to management as a liberal art. Drucker believed that there is no how-to solution for management practice and education. Doing more of “this” and less of “that” and vice versa is not how Drucker suggests managers do their work. Rather, Drucker relies more on morality and the virtue of practical wisdom to solve problems related to organizations. The virtue that Drucker talks about cannot be taught. It must be experienced and self-developed over time. A good example of this is Drucker’s Management by Objectives (MBO). Drucker does not give technical advice on how to initiate MBO. Rather he wisdomizes his moral convictions that integrating personal needs for autonomy with the quest of submitting one’s efforts to a higher principle (helping people) ensures performance by converting objective needs into personal goals. (Meynhardt, 2010). Peter Drucker published thirty-eight articles in the Harvard Business Review (HBR) and seven times won the McKinsey Award presented annually to the author of the best article published during the previous year in HBR. No other person has won as many McKinsey awards as Drucker The former editor-in-chief of Harvard Business Review, Thomas A. Stewart, quotes Peter Drucker; “The few of us who talked of management forty years ago were considered more or less deranged.” Stewart says that this was essentially correct. Harvard Business Review's very mission is to improve management practice. Stewart says this mission is inconceivable without Drucker’s work. Drucker’s work in management planted ideas that are as fruitful today as they ever were. Stewart posits that each year, managers discover extraordinary and immediate relevance in articles and books that were written before they were born or even before their parents were born. Stewart (2016) tries to answer the questions: Why does Drucker’s work endure? and Why is Drucker still relevant? First, was Drucker’s talent for asking the right questions. He had an instinct for being able to not let the urgent drive out the important, for seeing the trees, not just the forest. This allowed him to calmly ask pertinent questions that encouraged clients to find the proper course to take. Secondly, Drucker was able to see whole organizations. Instead of focusing on small particular problems. Ducker had the ability to find the overarching problem as well. Stewart uses Drucker’s 1994 HBR article, The Theory of the Business to make this point. Many people were trying to analyze the problems of IBM and General Motors by looking for root causes and trying to fix the blame. Drucker, on the other hand, argued correctly that the theories and assumptions on which they had managed successfully for many years were outdated. This article is as relevant today as it was in 1994 because Drucker took the “big picture view.” And no one else has ever been so skillful at describing it. Thirdly, starting in 1934, Drucker spent two years at General Motors with the legendary Alfred P. Sloan, immersed in the workings of the automaker and learning the business from within. This allowed him to talk with authority, but he has always stayed “street smart and wise.” This mentoring helped give Drucker the gift of being able to reason inductively and deductively. He could infer a new principle or a theory from a set of data or being confronted with a particular problem; he could find the right principle to apply to solve it. Drucker’s first article published in HBR, Management Must Manage, challenged managers to learn their profession not in terms of prerogatives but in terms of their responsibilities, to assume the burden of leadership rather than the mantle of privilege. Many in the management/leadership field probably found Drucker to be “deranged,” but in 2024, this is important advice for leader (Stewart 2006). Just a few more of Drucker’s ideas that seemed well outside the mainstream when he proposed them but are standard practice today include: Managing Oneself, Privatization, Decentralization, Knowledge Workers, Management by Objectives, Charismatic Leadership Being Overrated, CEO Outsize Pay Packages, and Enthusiasm of the Work of the Salvation Army (Rees, 2014). Clearly, Drucker remains relevant! References: Kanter, R. 2009. What would Peter say? Harvard Business Review. November, 2009. Meynhardt, T. 2010. The practical wisdom of Peter Drucker: Roots in the Christian tradition. Journal of Management Development Vol. 29. No. 7/8. Rees, M. 2014 The wisdom of Peter Drucker. Wall Street Journal. Dec. 12, 2014. Rowley, J. 2006. Where is the knowledge that we have lost in knowledge? Journal of Documentation. Vol. 62, Iss. 2. 251-270. Stewart, T. 2006. Classic Drucker. Editor Thomas A. Stewart. Harvard Business School Publishing Corporation.
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