Monday, October 10, 2011

Four-Ring Leadership

Four-Ring Leadership
by Jac Fitz-enz | Talent Management
 
Three-ring circuses have three acts going on simultaneously under the big top. Separate and outside the rings, clowns run around acting silly. Leadership is like that, only more so.
 
Leadership is a four-ring circus, complete with occasional clowns inside the rings. This is why it is the most studied process. There is no end to the models, hypotheses and theories. Still, we struggle to find a simple means to understand and explain how to lead, and even more difficult, how to develop tomorrow's leaders. The following is one way I find that works to reduce this enigma to something basic, understandable and teachable.
 
I see the essence of leadership as four interlocking rings of activity: knowledge, development, management and measurement. They are not linear. They are all in action concurrently, which is why the topic is so exquisitely mysterious. Consider these rings and how they are connected, or disconnected, in your organization.
 
1. Knowledge:
An effective leader needs three types of knowledge: the market, the organization and the self.
 
To lead, a person must have a thorough knowledge of the current and near-term future marketplace and how it is likely to affect the organization's human, structural and relational capital. Second, a leader has to look across the three and ask, "What are we doing that is helping or hindering us?" Last, and most important, a leader has to know himself or herself in two ways. Internally: What is my value system? What is my preferred style? What are my goals in life and with this organization? Externally: How do I value people? Are they interchangeable expense elements or true value generators?
 
2. Development:
This is a prime responsibility for every leader, along with generating shareholder value. Leaders need to develop the competencies necessary to accomplish current goals. Additionally, they must build capabilities to deal with future challenges.
 
To meet tomorrow's capability challenges, the best leaders support a succession planning system that reaches far down into management ranks. The leader also has to be accountable for management growth and succession. HR might administer the system, but the leader is accountable.
 
3. Management:
Management is divided into effectiveness and efficiency. Effectiveness is doing the things that are essential for the growth and success of the enterprise. It is a matter of allocating resources in ways that ensure long-term, sustained success. Effectiveness is evaluated in terms of new product and employee development, market share and revenue growth, among others. Efficiency is managing processes in ways that incur the lowest costs while leaving sufficient muscle for future growth, and it is measured in terms of process costs and gross margins.
 
4. Measurement:
At the end of the day, leadership quality is a function of value adding performance. Performance is expressed in both objective and subjective terms. The metrics come in three forms: strategic, operational and leading indicators.
 
Strategic metrics are organization-wide macro-measures of profitability, customer retention and growth in revenue and human capability. Operational metrics deal with process costs and time cycles, quality and quantities. Leading indicators look at issues that predict future outcomes, such as leadership quality, management readiness and employee engagement. These metrics are combined into a single report system, and algorithms are created to show the interdependencies across the system.
 
In the end, leadership is the most popular management topic because it is a multifaceted, mysterious set of behaviors. Yet leaders are found at all levels, from homemakers to heads of state. Claiming that specific leadership behaviors are consistent across all situations is a stretch. Separating leadership from operational management is impossible because it raises the question: Leadership for what purpose?
 
Because leadership is situational, for practical purposes it can be better understood and applied as four interconnected concepts. So what can you do to develop leadership within your organization? Tell me what you think.
 
 
[About the Author: Jac Fitz-enz is founder and CEO of the Human Capital Source and Workforce Intelligence Institute.]
 

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