The Changing Business Model of Leadership

Leadership is used in all sorts of contexts. I find it hard to unpack. For years I ignored it because it was too ambiguous and confusing to apply — certainly to myself.

In organizations, we typically conflate leadership with executive roles. The irony of that is that many executives are quite constrained in their ability to lead because of the governance structure in which they operate. They are legally and financially responsible for organizational assets and are punished for major disruptions to those assets. The implication? While executives certainly have the ability to change how the assets they are given control over are allocated, they have very little ability to change the system around them. Where executives sit in the hierarchy determines what they can change. As complexity increases, things become more interdependent within organizations the less control they have. It’s a frustrating time to be an executive because while you have explicitly defined expectations, your control over outcomes and impact is diminishing.

So What Is leadership?

It seems we get leadership confused with a few different characteristics; power, management, vision, influence, and impact. Those are all different things that can co-occur in one person but typically do not. The ability to manage effectively in the traditional sense and be good at vision and influence are very different competencies. Here is how I think about each:

CONTROL: simply put this is ownership of assets and wealth. In public companies, shareholders are the owners, some of who are also employees. In private organizations, ownership can be divided up a number of different ways from sole ownership to more distributed employee ownership. The more of the ownership a person has, the more control they have.

MANAGEMENT: management is the application and control of assets on behalf of owners. Executives, more than anything else, are managers. They are tasked with the responsibility of using assets effectively on behalf of owners and reporting regularly on progress.

VISION: vision is the ability to see how something could be different and better. It is driven by creativity, experience, and perspective. Individuals can be great at vision with have little ability to realize it. Vision is not enough to be a leader and vision often gets in the way of management because it invariably creates friction between the way things are and the way they could be.

INFLUENCE: influence is the ability to change someone else’s beliefs or behavior without force, manipulation, or explicit rewards. Influence, from my perspective, is the core of great leadership but it too requires other factors to be realized. If a person has great influence but a very small network, their ability to lead is limited.

IMPACT: impact is created by having a large network of people who influence you and are influenced by you — a community of relationships. The bigger the community, the more potential impact a leader has. As communities have come online, they allow individuals to participate in more communities, more regularly dramatically increasing their impact.

Leadership and Control are very different things. Leadership uses intrinsic motivations and relational power to influence behaviors and outcomes. Control uses structural power and extrinsic outcomes to influence behaviors and outcomes. We confuse the two because we tend to measure outcomes rather than processes and behaviors — so the two can look the same if we are only looking at outcomes.

Leadership is the anthesis of control.

Using control to ensure outcomes is a predictable way to plan and models of the future; we know relatively precisely how much we have to invest in order to get results — and if we want more, how much more we need to invest because the ratio between investment and results is fairly stable. It’s a linear economic model. It’s easy to manage… which is important because it’s easier to find managers who can manage predictable things. The problem is that predictable is… well… predictable. It is like Dr. Doolittle’s famous Pushmi-pullyu and will always bend toward equilibrium. We will get exactly what we pay for — nothing more and nothing less. It hedges our risks but it also hedges our opportunities. The only way to get more than that is to manipulate the system around it — by controlling access with government subsidies, tariffs, or regulations, or collusion among organizations. In a system designed for growth, this becomes inevitable, and as more control and collusion are applied the system becomes top-heavy, rigid, and self-destructive.

The currency of leadership is intrinsic motivations — things like meaning, mastery, novelty, and connection. Things that cannot be owned and are not finite resources. Because of that, the ability to use leadership to generate impact is limitless. But there is a catch: influence cannot be mandated, it cannot be forecasted, and it cannot be controlled. Intrinsic motivation is diminished by traditional management. It is only animated and generated with leadership.

What Successful Leadership Requires

Leadership does not need either control or management to be successful. While extrinsic motivators work very well to ensure production work gets done they are horrible at inspiring anything that is extraordinary, different, or innovative. Creativity and its associated risks require individuals to be self-motivated, curious, and courageous.

Leadership requires a vision of what might be possible, the influence and passion to inspire others to adopt that vision, and impact, which requires a community of influential relationships. Leadership is a social and relational power. Those leaders may also have control and management responsibilities but it is not their primary means of achieving success — it is the last resort to address issues rather than the mechanism by which they achieve success — a success which has far greater potential than if they used coercive methods.

Shifting from Managing of People to Managing Communities

In the industrial era, most of the innovation was in the production of goods. Growth and profitability came from the ability to standardize that production thereby generating more goods in less time at lower costs. People were primarily parts of that mechanical system — filling in where technology was not yet advanced enough. The production economy is now largely commoditized and serviced with machines, robots, and algorithms. People make sure the systems run and innovate in marketing and sales but are a smaller and smaller part of those companies.

People are now being looked to for their unique mental abilities — not their physical contributions. Empathy, emotions, and creativity are all things that people do exceptionally well — only not in most jobs. These unique abilities are things that thrive and grow when people are inspired, cared for, supported, challenged, and excited. They cannot be optimized with extrinsic rewards or punishments. They are what drive innovation, collaboration, relationships, and trust. That should be a sobering realization for organizations as they look to adapt and transform — because our organizational governance is structured for extrinsic coercion, not intrinsic joy.

Management then needs to move from managing individuals by controlling their daily work and production to managing the communities in which they work so that it is generating the attention, care, support, curiosity, inspiration, and excitement that individuals need to do their best work.

Who Leads?

When leadership is reserved only for those with structural power, we diminish and limit the potential of both individuals and the organization. While everyone does not have the interest, capacity, skill, or relationships to lead in every context most people do have the ability to lead in some contexts. Giving everyone access to leadership opportunities invests in their growth, confidence, and trust in the organization. The organization benefits by seizing opportunities it could not foresee, developing relationships otherwise unavailable to them, identifying risks early, and generating new business opportunities.

In strong communities, leadership is distributed and available to everyone, based on context. Individuals self-determine leadership by how they engage.

The ROI of Leadership

The impact of leadership is indirect — because done well, it is not about the production capacity of the leader themselves but about how they empower and inspire others to create and engage. Influence takes time both to build relationships and to build a network of people that are also intrinsically motivated by similar things, which is what communities are.

Online, building communities is much easier because of the speed and reach of technology. By focusing on building communities — not the work of individuals — leaders can vastly increase the impact of their leadership. However, it still requires time — time to build a network, create relationships of influence, and articulate a vision that is compelling. Others need time to be influenced, change their behaviors, and realize the value of the new vision.

At The Community Roundtable, we have built a community ROI model that allows us to project this based on the size of a network and the change we are hoping to influence.

This morning, I saw this tweet that said ‘This is what leadership looks like’ — and displayed a chart with the rate of COVID infections in New York and acknowledging Gov. Cuomo’s leadership. I realized it looked very similar to a good community ROI curve, albeit in reverse.

While the impact was much faster than typical, it makes sense. Gov. Cuomo already has access to a huge network and the credibility of his citizens. He also had structural control. By adding a strong vision he was able to influence behavior changes that dramatically changed the course of the COVID pandemic in New York — in this case using leadership to reduce a shared risk rather than inspire something new.

Leadership, Communities, and the Future of Work

Now that communications and connections are networked worldwide, organizations have little control over who has access to information and other people, which is what allowed them to maintain control without leadership. Now anyone with a vision, influence, and a network can lead irrespective of their ability to control. Greta Thunberg, an impassioned teenager from Sweden, started a worldwide conversation and movement to address climate change. She needed no permission. She didn’t need control. She inspired enormous change and value generation.

Organizations that do not adapt and invest in transforming the way they build and distribute value will lose traction because control is ultimately unwelcome and constraining. Control is also expensive, requiring layers of management, policies, infrastructure, and accounting mechanisms that shear investment resources away from value creation. Take for example WordPress — the most widely used CMS in the world that was built on open-source code. It has devoured a market that was once owned by expensive enterprise software vendors. Not only is it a cheaper product, but it is also continuously improved by a large network that builds plug-ins making it quite a bit easier to use and customizable.

Communities are showing us what the future of work can look like — and it is compelling.

Want to hear more?

Join me for the Digital Workplace Disruption conference — online — on August 26th. A fantastic set of speakers including Luiz Suarez, Celine Schillinger, Dion Hinchcliffe, Ana Neves, and more will share their work and thoughts on how work is changing.

Connector of ideas & people. Fascinated by social dynamics & false truths. Co-Founder of The Community Roundtable. Mother to The Puzzle Master.

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