Change, strategic response and a confusion in governance
Leadership archetypes and cultural resistance in the mature stage organisation
Dr Jillian de Araugo
and
Dr Neil Béchervaise
Key Words: Leadership, governance, change management, strategic planning, organisational culture, reputational capital
The principal author: At the time of writing, Dr Jillian de Araugo was the immediate past Principal of Mentone Girls' Grammar School in Australia, a not for profit organisation providing education for young women. Her doctoral study of trait-based archetypal leadership styles provides a guide to improved CEO selection, the maintenance of reputation capital during effective change and the demands on organisational culture and governance in maintaining strategic direction to support leadership change.
Abstract
In an aggressively competitive marketplace, media response to dramatic changes with a potential to impact on the reputational capital of the organisation often generate erratic governance response with consequent strategic planning implications. Responsibility for these knee-jerk reactions is invariably carried by the CEO.
Recognising the role of the CEO as a key contributor to the reputational capital of a not-for profit organisation, particularly, this paper observes that governing boards select leaders on the basis of immediately perceived needs for change but are seldom prepared for the successful implementation of that change. More importantly, it argues, the success of leaders initiating and then consolidating change depends more on their ability to change leadership style as needs demand to protect shareholder value and support Board perceptions of organisational reputation than on their ability to maintain effective strategic direction.
This paper presents recent research by the authors on leadership selection and the role of governance in maintaining strategic direction in support of the CEO when organisational reputation is challenged.
Introduction
A recent foray into international hedge fund investment in a major Australian bank led to a multi-million dollar loss, media speculation of impropriety, challenges to the risk management capacity of the bank and a dramatic drop in share value.
Moving rapidly to manage the media, the current CEO, a life-long employee of the same bank, nominated a dollar value below $200m for the loss, announced an internal inquiry and assured the media that the issue was not significant. Sensing blood, however, the press quickly recalled a $4bn write-down in 2000-1 linked with an interest rate 'miscalculation' involving HomeSide in the US. To this they added a $110m exposure to a failed bus company and a bungled attempt to buy 15 per cent of an insurance company. The media suddenly found itself with a wealth of journalistic opportunity as the Australian Prudential regulators, the Securities and Investment Commission and the Federal Police entered into separate investigations.
Within days, the admitted forex loss had been doubled and the CEO resigned with an estimated $3.25 termination payment - having earned $15.2 m in the previous 3 years. Two weeks later, the chairman of the board was forced to quit, amid suggestions that he may not be the only Board casualty.
The new CEO, a retail banker recently appointed from the UK branch offices of the bank, found himself teamed with an internal board appointment as the new Chairman. The new chair immediately identified a crisis in reputation, poor staff morale and control breakdowns as major contributors to the sad chain of events. Within weeks the new chairman had been forced to resign from several other board positions he held, to focus on managing the bank's reputation.
Whether an organisation is small or large, private or public, profit driven or not-for-profit motivated, the announcement of a new Chief Executive is almost inevitably a major pointer towards imminent organisational change. The identity and proven past leadership achievements of the newly appointed CEO frequently indicate the desired direction of the change and even the broader strategies being pursued by the governing board. In a transition period of essential instability, succession planning can be thrown into disarray while the market valuation of the organisation fluctuates wildly, usually adjusting to meet public perceptions of the match between the incoming leader, the organisation's ability to meet the challenges of proposed changes and the value of these changes to the principal stakeholders. When these initiatives are being mediated by a not-necessarily-disinterested press, the strategic wisdom of the change-over implementation, its impact on the organisational culture and the governance capacity of the Board may be severely tested.
In this context, it should be expected that the selection criteria adopted to engage the new leader will include both the capacity to facilitate immediate change and the ability to lead into a presently undefined, yet preferred, operating state. More frequently, however, leaders are selected according to their past performance, psychological profile, demonstrated traits, and perceived capacity to establish a short term, often reactive, response to some immediately identified demand.
This paper presents the change process through a compound lens of four archetypal leadership styles. The impact of change on the value of the organisation is examined as it is perceived by the governing board and principal stakeholders in several small to medium sized not-for-profit organisations in Australia. It observes that the careers of CEO's as change agents within an organisation is often no longer than the time it takes them to implement the change they were appointed to make. Applying a specific example where organisational culture is seen to be contrary to social expectation, the role of the CEO may be irreparably compromised as organisational reputation is downgraded.
In conclusion, the paper identifies the roles of cultural resistance, shareholder dynamics and proposed strategic direction as a complex management integration which requires a supportive and visionary Board with a shared understanding of their role in preserving the reputational capital of the company through their active support of the CEO.
Not for profit organisations
Not for profit organisations (NFP) have an extensive history in social reform, business innovation, social support and education. From coordinating extended campaigns for the closure of phosphorus match factories and the abolition of slavery, to the pursuit of universal education and famine relief through world aid agencies like UNESCO, not for profit SMEs operate both as off-shoots from existing business and political interests and as independent organisations representing specific interest groups, such as Greenpeace or the movement against nuclear power proliferation.
As essentially philanthropic social reform movements, many not for profit SMEs rely, at least in their start-up stage and often well beyond, on the charismatic value of their leader and their public image. The support of a Rockefeller or an Attaturk, the distinctive uniform of the Salvation Army, the universal logos of the Red Crescent and red Cross or even the name of group like Médecin sans Frontieres adds brand recognition to the reputational capital established by the organisation in the marketplace.
The ongoing success of the not for profit SME, as with any viable business, however, relies on its capacity to gain and maintain market share, whether defined as donations, volunteer numbers or students, and to grow with changing market demands. Opportunity cost may be defined differently but, at operational levels, capitalisation against effectiveness remains the ultimate determinant of success.
Intellectual capital
Not for profit organisations are generally service, rather than production, oriented. Their business models tend to presume significant elements of voluntarism, accession of philanthropic and government support, and a necessary level of good-will at both the supplier and client ends of the not for profit SME supply chain. These various levels and types of support, often used to define the success (or market share) of a not for profit SME, directly and fundamentally impact the reputational capital that the not for profit organisation enjoys. Not for profit organisations with a high stock of reputational capital frequently attract higher government funding, more volunteers, or more students, than a similar organisation with lower levels. Similarly, profit-oriented service enterprises such as professional sporting clubs are dependent on both team performance and the perceived behaviour of team members for both ongoing reputation and for the revenue support of their team fans.
Representations of the leader of a service-oriented organisation in the marketplace through media, publicity and client-client communication directly affect the company's reputational capital, and play a key role in encouraging and developing the ongoing innovation and learning that adds to the organisation's overall reputational and intellectual capital stock. In this context, the identification of intellectual capital (Roos & Roos, 1997) provides a particularly useful perspective from which to assess the effectiveness and ongoing viability of a service-oriented SME. In particular, because measurements of intellectual capital formation and deployment tend to be lead indicators towards strategic management performance (Roos, Bainbridge and Jacobsen, 2001), the approach provides a useful means of assessing the role of leadership in the service-oriented SME. How this measurement should be undertaken and how it can be applied to predictive rather than historical performance, however, remains an essential mystery.
Leadership
Ultimately, according to Smith (1991), leadership relates to the effective use of power within defined social structures. The development of leadership style in a new administrator, therefore, is a demonstration of the ability of the administrator to resolve personal leadership paradigms and ambitions within the framework which has appointed them to the role of leader (Peters & Waterman, 1982).
While much has been written of the power relationships which exist between employers and workers (eg Lorber and Farrell, 1991) and even between males and females (eg Sampson, 1987; West & Zimmerman,1991), little substantial attention has been paid to the manner in which leaders are constructed by the necessities of their social context (Ogilvie, 1993). Even less has been said about the need for style changes in leadership as an organisation evolves (Tushman & Romanelli, 1985).
Leadership paradigms
Traditional images of leadership involve control and domination. Nevertheless, in handling the ambiguities of a small to medium sized enterprise (SME) in a profit driven environment, effective leadership is fundamental to success. SME's have become increasingly complex organisational structures as the leaders increasingly negotiate with and lead the loose coalitions of individuals, as employees and as clients, that bind the organisation together, ensuring that the targets of the SME's are achieved and in handling the information that sustains the overall system (Weick, 1979). In a context where both internal cultural demands and external, market-driven opportunities require constant responsiveness, the potential risk for strategic direction to be subverted to specific and not necessarily coordinated pressures becomes substantial. The capacity of the leader to maintain effective direction in a turbulent competitive environment depends on both the capacity of the leader and the support of the board of directors.
Historically, four major paradigms have been developed to describe how leadership evolves:
1. The congenital or charismatic leadership model Ñ 'leaders are born not made, all we have to do is find them' (Knipe & Maclay, 1973),
2. The behaviourist leadership model (Halpin & Winer, 1957) - appropriate leadership behaviours are learned 'on the job',
3. The corporate management leadership model -leadership depends on appointment to the position' (Paisey, 1981), and
4. The situational leadership model Ñ 'circumstances create leaders' (Bion, 1961).
While the 'born to lead' paradigm meets increasing opposition in a 'free society', each of its above-mentioned alternatives is contextualised by the organisation itself, the environment in which it operates, and the ongoing challenges it accepts in aligning these to evolving demands. More evidently, perhaps, leaders who cannot meet rapidly changing circumstances, whether they are born or selected, will be required to respond to novel situations as they emerge. In this context, there is little lattitude within Paisey's (1981) corporate management model for learning on the job. Rapid executive turnover, on a global scale, has become an increasingly identifiable board response to shareholder dissatisfaction (Booz Allen, 2002). As it appears, "the longevity of CEO's has less to do with the returns they generate than it has to do with their ability to sustain their own performance." (Bartholemeuz 2002)
Leadership in context
Although definitions of leadership abound, there is increasingly widespread consensus that leadership is about change (Bass, 1990). Leadership produces innovation, allows an organisation to adapt to a changed and changing environment, and carries the organisation's members along (Cohen, 1993; Hodgkinson, 1983). Within this agreed framework, the role of the leader is to create culture, envision the future, communicate that vision, clarify the values of the organisation, and articulate those ideas, goals and values which will provide guidance and direction for organisational change (Senge, 1990, Sergiovanni, 1996). However, "the lifespan of companies and chief executives is shorter in Australia than anywhere else in the world [whereas] killing the old while they were still successful, embracing the new before it has taken off (Gettler) remains an international reality. The only survivor from the original Dow Jones Industrial Average published in 1896 is General Electric. Less than 15 per cent of those currently listed on the S&P Index are more than 40 years old, and the attrition rate is climbing.
Alternative views of leadership and power (eg Greenfield, 1983), suggest that power is the dynamic of relationships withinin organisations which manifests itself in action. In support of this view, Ogawa and Bossert (1995) submit that leadership lies in the system of relations between incumbents of roles within which, Bourke (2004) has argued, the effectiveness of these relations is dependent on effective communications. Gronn & Ribbins (1996) support Ricoeur's (1981) direction towards leadership as a relational activity defined by context which: relates to the achievement of group goals (Hersey & Blanchard, 1977), is a function of group processes (Bolman & Deal, 1994; Senge, 1990) and becomes a characteristic of the system or organisation over time (Ogawa & Bossert, 1995).
Pragmatically, Bass (1990) has noted that the identification of leadership as an entity distinct from management dates only from the 1970s. While successful leadership and good management go hand in hand (Taylor & Rosenbach, 1989), the two terms are not synonymous. Hough (1992) notes the Scandanavian origins of the L¿der as standing at the front of the ship and pointing the way because he carried the lodestone Ñ or magnet stone Ñ which allowed him to identify direction. In contrast, Hough recognises the French origins of the manager as stablemaster or keeper of the manger, caring for horses and maintaining supply lines while the troops do battle at the front.
In this context, leadership is provided by mission-directed individuals who envision, create and shape change as they create the future (Bolman & Deal, 1994; Stacey, 1992). Management, by contrast, is about the maintenance of the status quo, consistency and order, responding to change and to problems (Ellyard, 1999; Kotter, 1990). This apparent tension between change and stability represents a significant challenge for the newly appointed leader striving to meet selection criteria whilst sustaining a dynamic equilibrium between the management team's traditional maintenance paradigm and a constantly changing focus.
As Apple (1982) and Hodgkinson (1983) observed, leaders are agents who are critical of existing arrangements and able to formulate and communicate an analysis and vision of alternative possibilities towards which the community moves together. Power is vested in them by the community rather than as an application of coercion. Necessarily, the CEOs of not for profit organisations and a range of similarly service-oriented SME's are charged with the leadership of a defined community that operates both independently of, and simultaneously within, the wider society.
In this context, CEO performance, and even suitability, is measured by both tacit and publicly acknowledged criteria. Appointment to the CEO'ship of a service organisation, in particular, in these circumstances, demands both a clear understanding of contextual factors influencing the company's position in the wider social context (Seddon 1993); and, a vision which can be maintained with sufficient flexibility to permit its survival in the face of changing demands and circumstances (Dennis, 1997; Starratt, 1993). Neither the understanding nor the strategies required for that maintenance of vision, however, has been established (Kefford, 1999; Loader, 1997).
To gain employment as CEO's of service related companies, applicants must structure a perception of themselves which correlates closely with the expectation of the employing body. Boards tend to appoint new CEOs as finished products at the expense of any potential for the conception of value-adding through experience (Riem-Tan, 2000). In consequence, definitions of cost, and hence time/plant/cost efficiency, must be diffused without discernible loss to the potential corporate public image represented by the successful applicant. Equally, the capacity of the incoming CEO to assuage internal fears of damage to the existing company culture and external fears of incapacity to effect rapid change represent a challenging conundrum for the new leader.
In essence, the intellectual capital engendered in the reputation, experience, wisdom and capacity of a new CEO is discounted against the expedience of 'fit' with Board perceptions of the company's reputation and business health. The extent to which any leadership 'construction' can remain stable in the face of necessary organisational change, internal cultural resistance, changes in Board composition or response to external pressure may be problematic.
Models of leadership
Hersey & Blanchard (1977, 1986) assert that leaders choose the leadership style required for the situation, as demanded by the maturity of their followers. Their positional authority provides them with discretionary power to assess the impact of external forces on the organisational management and to determine the nature of work to be prioritised by individual followers with due respect for the environmental context within which the work is to be completed. Maturity in this model is assessed on two dimensions: professional and psychological. Situational leaders adopt one of several styles: directing; coaching; supporting or delegating (alternately designated as telling, selling, participating and delegating) - depending on the level of maturity (professional and psychological), and the skills and the attitudes of their followers. To a degree, the range of leadership styles within this model of leadership reflects the evolutionary nature of Adizes (1999) organisational life cycles, with direction focused leadership necessary in young companies and delegation to experienced employees becoming feasible in a mature organisation. In view of Wreme's (2004) convincing warning that boundary management generates an excessive failure rate among CEO's , it is timely to investigate the characteristics that suit some leaders to change while destroying others.
The Sample
This paper is informed by a study that focused on the career perceptions of CEOs in not-for-profit organisations across three states in Australia (de Araugo, 2001). The study sample of 15 CEOs from a population of 60 identified as small to medium sized enterprises (SMEs), employing between 100 and 330 with annual identifiable turnover between $5m and $15m represents early, middle and late career CEOs and is supported with specific second phase information from key informants associated with not for profit support networks who are not themselves CEOs.
The Methodology
The study was undertaken in two stages. In stage one, the CEOs responded to an open-ended interview protocol based on Sarros and Butchasky's (1996) study of factors influencing CEO's perceptions of their work.
Data from the interviews was then subjected to content analysis to identify factors impacting on leadership development according to criteria identified by Bass (1985) and extended by Sarros, et al (1999).
Content analysis of stage one interview data provided a loose framework for grouping CEOs according to leadership styles concordant with those identified by Goldrick (1999) and reported by de Araugo (2000).
Discourse analysis of stage one interview data supported the content analysis in general terms but suggested that a large volume of data discarded as a consequence of adhering to previously established criteria could inform a number of previously unidentified dimensions to leadership.
These dimensions formed the basis for stage two interviews and for the expansion of the study to involve key informants from outside of the CEO sample.
As the stage one findings focused on confirmation of previous studies in leadership, this paper focuses on the Stage two development of a trait-directed model which appears to restrain responsiveness to demands for change in leadership style.
In sympathy with Ansoff's (1984) identification of the paralysis by analysis effect of research data presentation, direct references to the study underpinning this paper are minimised by the presentation of the archetypal leadership styles that have arisen from analysis of the study data and the inclusion of more widely reported examples from current business practice.
Model for leadership
The study informing this paper confirmed the range of commonly identified factors influencing CEO perceptions of their roles as leaders and established that they saw themselves as subject to a complex array of constraints (eg Handy, 1995; Hanna, 1997; Senge, 1990).
Goldrick (1999) speaks of "high involvement organisations" in which employees at all levels are partners in achieving agreed goals. This model evokes Gibb's 1947 formulation of distributed leadership. In such post-modern organisations, Goldrick argues that there are necessary additional leadership roles or styles. Positioning themselves specifically as CEOs of service oriented SMEs, the CEOs involved in this study identified a further range of factors that suggested a point of difference from commonly accepted leadership paradigms. These led to the categorisation of the informants by one of four world views:
1. establishing stability through process;
2. establishing a sense of mission;
3. determining direction; and
4. winning authority to generate growth.
Consideration of leadership in relation to world-view led to the proposal of four archetypal CEOs who, for ease of identification, have been termed: the Curator; the Missionary; the General and the Philosopher.
The Curator establishes stability through process
The Curator presents an air of gentility, reliant on tradition and stability and fights for the right to conserve and preserve. For the Curator, the purpose of leadership is to work through the staff to nurture appropriate understanding and recognition of the values and achievements of previous generations while building on these foundations to confirm the importance of tradition.
The Curator enfolds the service oriented SME to protect it against the forces of societal change and declining standards as she preserves, conserves and displays. As a result, the Curator presents herself as the public face of the organisation she leads, and staff responsibilities are allocated to extend her conception of the service oriented SME. Curators appointed to organisations which have survival turbulent change, rapid down-sizing and substantial reorientation tend to offer a sense of stability that, in the short term, stabilises staff in issues, reduces union discord and legitimises change by removing the immediate threat of further change.
Service oriented SMEs led by curators tend to be promoted into the public arena as holding and promoting stable values and traditional social ideals. The grounds, the buildings, the stationery, and even accepted styles of dress, become extensions of the CEOs vision that the organisation be clearly recognised by, and familiar to, past generations of clients and their associates. Stability becomes their hallmark and, in this sense, the company's community can be seen as enfolded within the life of the service oriented SME, informed by the staff and protected against reforming/corrupting external changes by the strength of leadership of the CEO.
The Missionary establishes a sense of mission
Just as the curator evokes stability, the missionary heads into the jungle of leadership with clear vision and faith - in something. The purpose of leadership for the missionary is to bring about a conversion of staff, clients and community to a real and true understanding of, and belief in, appropriate ways of achieving performance targets.
The Missionary works in multi-linear fashion, controlling and directing the organisation along paths that she 'knows' are right. In an organisation that has suffered through rapid change or whose survival is threatened, the conversion of the staff usually precedes the conversion of shareholders, clients and the wider community to the shared vision (see figure 2: Leader as Missionary). Where organisational culture is entrenched and the company has lost competitiveness or strategic direction, the missionary may energise shareholders and clients before introducing radical change and cultural revision that forces staff to follow enthusiastically or risk being cast out as heretics. One large Australian banking corporation appears, currently, to have engaged this process over the past several years with remarkable success. Despite radical re-engineering, wholesale staff cut-backs and significant business re-orientation, staff morale has skyrocketed, share prices have soared and the company's reputation as a dynamic player in the market place has led to its re-entry into the international financial field.
Service oriented SMEs led by missionaries tend to be promoted into the public arena as offering clear value propositions based on strong economic and social values. These propositions may be radical or reactionary but they are proclaimed as key elements in a born-again learning organisation and their acceptance is non-negotiable.
It is tempting to see similarities between Curatorial and Missionary leadership because the claims to a coherent and knowable set of values appear to emanate from similar philosophical approaches. The fundamental difference is that the Curator claims inheritance of a set of ideals to be upheld and even protected from immediate economic or societal demands for change while the Missionary claims to possess a set of ideals revealed through the considered higher understanding of the leader, and therefore representing her mandate to lead the company, and all who comprise the company's community, towards her revelation. As a downside, the charismatic missionary leader faced with resistance may leave abruptly, never to be heard of again, or leave amid acrimony to retain her faith in a vision that the company could never understand.
The General determines direction
For the General, every action is a battle won or lost. Her emphasis is on forward motion but, like Raglan at the Charge of the Light Brigade, she may reach the enemy lines too far ahead of her following troops.
In operational terms there are strong similarities between the Missionary and the General. Each sees herself as a leader in the traditional style identified by Knipe & Maclay (1973), empowered to command transformational change and directed to establish the changed state regardless of the immediate beliefs, and even wishes, of her supporting staff, her clients or the wider shareholding community. Like the Missionary, the General controls and directs. Unlike the missionary, the general does not necessarily accept the right of the governing board to a role in the strategic direction of the company.
Unlike the Missionary, the purpose of leadership for the General is to break through to clearly identified performance targets by applying an appropriate marshalling of staff and resources. Whether her troops embrace the change is immaterial, as long as they implement it.
Examples of the successful CEO general tend to abound in business literature because they tend to confirm the mechanistic managerial models emergent from the industrial revolution. Taylor's efficiency, Lewin's three-stage change strategy and more recent re-engineering solutions tend to form the rational basis for a general's leadership. Success tends to be measured in terms of ROI and minimal attention is paid to the mushrooming cloud of evolving consumer demand ballooning from the horizon of global competition. Few generals are carried by military police, still seated in their chairs and refusing to move Ñ as Sewell Avery was - from Montgomery Ward and Company when he defied Roosevelt's demand for union contracts in 1944 (Champy and Nohria (2000) but their impact makes some companies and breaks others as Al Dunlap might attest. The general may initiate rapid change, increase profits by decreasing costs and leave the organisation as a meaner, leaner machine with no remaining sense of its own identity, its place in the marketplace or the strategic direction in which it might head to recover from lost development, out-dated plant and an increasingly marginalised product offering.
The Philosopher wins authority to generate growth
The Philosopher taps into the potential of her staff and the wider community as human resources and seeks to harness these towards a common pursuit of personal achievement as she leads. Successful leadership for the Philosopher is exemplified in the success of her clients and staff, whose achievement is even more remarkable if it extends beyond her own. For the Philosopher, the purpose of leadership is to work with the staff and the company's community, its clients and its shareholders, to educate them to the economic and societal changes that she herself is subject to, and to empower each individual to maximise her own potential in a dynamic social context. The intention immediately appears impractical and altruistic - perhaps suited to a not-for-profit organisation but lacking the edge of the market-reponsive and competitive sector leader.
As George Hatsopoulos of Thermo Cardio, Bill Gates of Microsoft, and Sam Walton of Wal-Mart have established, supportive leaders developing collaborative teams tend to initiate substantial loyalties, both internally and externally, to satisfy immediate production targets and to spearhead innovative strategic development out of all proportion to their apparent effort and formal capacity.
The immediate leadership focus of the Philosopher is people centred, as Roos, et al (2001) have identified, though performance focused. The process orientation acknowledges that organisational relationships are initiated and confirmed through personal reputation (McKenzie & Bechervaise, 2002) rather than independently from it and that command and control strategies are unsuited to the development of independence within learning organisations.
The leadership development model
While there has been strong acceptance and personal recognition of the archetypical leadership styles among CEOs informing this study and responding to workshops on leadership preparation, it is recognised that each of the four CEO archetypes is equally important at differing points in an organisational lifecycle. Factors determining a CEO's particular leadership style may be specific to the social and economic context of the company's governance, however, rather than to wider, more publicly-owned, perceptions of leadership. In Australia, the Australian National Soccer League was formed as an association of ethnically-focused football clubs which, despite its frequent turnover of CEOs has been unable to resolve the conflicting demands of representative, team-appointed directors. In an organisation where multicultural development might be expected, the organisational culture has harnessed itself to ongoing ethnic division. Demands for ever-increasing shares in declining gate-receipts have led to bitter in-fighting and the league has effectively destroyed its own reputation.
Equally damaging to both sporting leadership and reputational capital in Australia has been a recent spate of reports of footballers criminally abusing women. Revealed pay-offs and cover-ups protecting the young men have led to the termination of team managers and the resignation of CEOs held responsible for the players actions. The players themselves have faced no legal process and apparently the behavior has been condoned by the clubs. Similar behavior in more conventional businesses would result in immediate contract termination and criminal charges. To this point, it remains problematic whether football clubs see the roles of their players in the same light as the CEOs of product-oriented business must do. Cultural change appears unlikely until the tide of consumer demand for a changed organisational culture becomes a commercial imperative.
As the leader implements change, the demand on her leadership changes. Consequently, appropriate leadership style becomes an evolutionary demand on the individual CEO. The appointed missionary may generate a shared sense of mission but she may have to apply the tactics of the general to move the organisational culture to accept that mission as a strategic priority. She may then be required to adopt a curatorial approach to its maintenance in the face of changes on the governing board. The task of the CEO and her ability to adjust her approach to an ever-changing context remains immediately relevant to her continuity as an effective leader.
As a precursor to appointing the new CEO, the appointing body (the board of directors or directors) has, usually accurately, identified the organisation's needs, desired future directions and implications for change. As a consequence, it usually appoints an individual whose approach closely matches the needs of the business at that time. The reality, however, is that organisational demands change, the service oriented company's community of staff and clients evolves and the board composition itself alters. In the face of increasingly edgy board responses to perceived change imperatives, the CEOs position becomes increasingly reactive. Many of the football clubs in Australia are in damage control to protect their reputations, and their consequent membership and spectator bases, at the time of writing.
The leader with a fixed understanding of leadership and a static approach faces an unstable raft of tensions which increasingly, in Australia as elswhere, are leading to apparently untimely termination.
The CEOs approach to her task may be internally contextualised by her view of the way business in general should be developed and led; however internal contextualisation may limit responsiveness, flexibility and, ultimately, the ability to respond to economic, senior staffing or governance changes.
The need for a dynamic approach - resolution of tensions
A leader is shaped by the realities of her context. In the face of rapidly changing consume sentiment, governance and regulation, as previously exemplified, the leader can:
* do battle;
* be rendered ineffective or lose her initial vision and preferred style;
* retire to another context in anticipation of recording her reflection and revelations;
* adapt to the current context, changing approach and perhaps lose her vision; or
* adapt within and to a learning context in which she must mould and change both her own approach and that of the organisation without compromising her original vision.
In this study, resolution of the tension between being the CEO of an organisation whose business is social service, and being the leader of a business organisation called a not-for-profit organisation, was resolved only by the Philosophers, who were able to develop a positive working relationship with their board. The Philosophers invariably defined themselves in terms of a process-oriented but people-centred vision rather than in terms of their role or the mission statement of the company. Adopting one or other of the archetypes as the changing context dictates, they stepped back and away from the immediacy and hurlyburly of context. In the quiet of withdrawal, the Philosophers maintained a sense of perspective and balanced the tensions associated with the duality of their roles.
With the clarity of role definition afforded by reflective practice (Schön 1983), by maintaining a professional distance from the task and its key stakeholders, the Philosophers worked pro-actively to nurture a healthy relationship with their board of directors. The Missionaries struggled with disillusionment and retired or moved to another island. The Curators either retired or were terminated as their boards changed chair and/or identified new opportunities. The Generals battled on, fighting their boards and staff as those inevitably changed, clearly focused on performance targets and accepting termination, not necessarily graciously, when their immediate battles were won.
Leadership in context
The relationship between the leader and her context is crucial to effective leadership. In maintaining competitive advantage, changed context demands a changed approach. While every individual has a preferred approach to leading, leaders who are not conscious of their behaviour, interactions, language and style, and who are not monitoring their effect on context while actively seeking opportunity in collaboration with their executive team, are unlikely to recognise the need for change.
The increasingly demonstrable lack of longevity in CEOships (Booz Allen 2002) may be a demonstration of the increased pressure to perform in a specific context in a specific leadership mode, rather than to provide vision and display leadership as the climate and contextual needs of the company evolve under that leadership. The relative frequency of termination of CEOs in the past decade (McKinsey, 2003) may be seen, in this context, as a reflection of the inability of CEOs to respond to changing organisational contexts that they, themselves, have introduced, and that they were appointed to introduce.
Alternatively, decreasing tenure among CEOs may be seen as the inability of directorial boards to identify the necessary evolution of the company in a changing socio-political context. The parallels in high turnover among chief executive officers in major profit-driven organisations in response to apparently unacceptable returns in the sharemarket, and even of national league football and baseball coaches, establishes that the phenomenon is not restricted to service oriented CEOs as organisational leaders within SMEs.
Implications
This study strongly suggests that company directors are highly capable when assessing immediate organisational needs and strategic priorities as they identify and appoint a new CEO but less able to realise on the success of their selection. This study and subsequent events in a range of companies globally suggest that it is crucial for directors to recognise and capitalise on the range of leadership demands that evolve as a CEO achieves the task for which she was initially appointed (McKenzie and Béchervaise 2004).
Recognising the probability that it will appoint a predictably archetypal leader as CEO, the pro-active board of directors needs to establish a collaborative index of incumbent, potential and aspiring CEOs from whom it might appoint its next leader. More importantly, however, they need to establish whether rapid turnover is in the longer-term strategic interest of the organisation. Simultaneously with identifying potential future leaders, boards of directors need to undertake and maintain training in monitoring the changing context of their company. Reliant on her board's preparedness, at any given point in her incumbency, a CEO could stop looking over her shoulder for the long knives and rely on board support in prioritising the leadership skills she must nurture to achieve her vision, the strategic executive team skills that need to be foregrounded to maintain that vision, and the strategic re-directions that need to be taken as the winds of market, technology and political change are revealed.
Leadership as intellectual capital
Through their impact on organisational culture, leaders directly impact the reputational and relationship capital of organisations. In this context, effective leadership within a given situational context becomes an essential vehicle for increasing market value. This is particularly pertinent in service-directed industries where profit margins may become meaningless while reputations and relationships are built or destroyed. In this context, it is argued, the intellectual capital of the organisation is largely contained within the operational capacity of the organisation and represented, in summary, in the leadership capacity of the CEO.
The paper has identified four archetypal leadership styles (The Curator, The Missionary, The General, The Philosopher) and confirmed the importance of personal leadership styles, prior reputations and relationship management skills in the selection, and perceived ongoing performance of CEOs for service oriented SMEs as a specific example of organisational leadership. In making this connection, however, the paper has identified a leadership dilemma associated with the management of change. In meeting the challenge to change the organisation, the appointment context of the successful CEO will quickly change. That is the measure of success.
The paper has argued that boards of directors select their CEOs (usually very accurately) on the basis of fit between identified change imperatives within their organisation and the potential for a new CEO to achieve that change as a result of one of these preferred styles. Crystallising their perceptions of the challenge currently facing their organisation, governing boards increasingly tend to appoint a leader with a proven track record and a reputation for past achievement in crystallising their identified future.
A leadership dilemma, then, lies in the established mis-match between the natural leadership preference for which the CEO was initially appointed and the needs of the organisation since the change has been achieved. The leader now needs to adapt to a leadership style that addresses the changed context. Inability to make this metamorphosis silently and efficiently, having already led the supporting management team to its new state of change responsiveness, now has the ability to destroy the reputational and relationship capital that the company has generated over the period of change implementation.
In an increasingly shareholder value-driven model of corporate governance, CEO tenure is becoming shorter as company life becomes shorter. In this highly competitive market-driven environment, the success of leaders initiating and then consolidating transformational change depends more on their ability to change leadership style as demands emerge to protect shareholder value and support Board perceptions of organisational reputation than on their ability to maintain effective strategic direction. This conundrum has yet to be effectively addressed in operational terms.
In addressing the leadership dilemma, this paper proposes that, when undertaking CEO selection to preserve and enhance the reputational capital of the organisation, governing boards need to consider not only the current issues facing the organisation, but also the future requirements of the leader when these issues have been resolved.
Through maintaining a long term relationship with a competent and respected leader, and recognising the need to support her to adapt or establish a multi-tasking management team, governing boards can optimise the leadership capacity of the CEO, minimise executive turnover and maximise the achievement of both performance and governance targets.
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