Transformational Leaders Will Rule the 21st Century

BOSTON—Effective leadership is the most critical factor for organizational success in the 21st century, and the old pyramid structure won’t suffice, according to Sheri Nasim, president and CEO of the San Diego-based Center for Executive Excellence. Companies that want to continue to grow need to embrace transformational leadership, she said during a presentation at the recent The Future of Work conference.

The pyramid structure worked in the 20th century, when manufacturing companies employed most of the workers, and the employment contract was strictly transactional, she said. In this system, employees came to work, did their jobs, collected wages and went home. There was a physical and emotional distance between leaders and employees. Leaders sat in offices removed from the manufacturing floor and viewed employees simply as a cost of labor, not as individuals with lives outside of work.

In the 1970s, leaders began to actively engage employees, turning the old pyramid structure on its head. This new servant leadership model worked especially well in service-based companies, which were growing in number.

However, neither of these models is effective today, Nasim said.

“Under the pyramid system, communication stagnates and silos grow,” she explained. Leaders have a vested interest in building bureaucracy and protecting the status quo in order to keep their jobs, even though this isn’t necessarily in the best interests of the company.

Servant leadership worked when the economy was stable, she noted, but it isn’t well-suited to a volatile economy such as the one we’ve experienced in the most recent decades. Enter transformational leadership.

Leaders of the future “must be willing to be transformed—to learn and grow from those they lead,” Nasim said.

“In a service-based economy, you don’t just want employees to bring their hands” to work, she noted. “You want them to bring their hearts and minds.” The good news is, that’s what employees want, too—to roll up their sleeves and figure out ways to help the organization grow, she said.

What Transformational Leaders Do Differently

Nasim described the seven characteristics of transformational leaders:

They are committed to a new way of living. “It’s become a badge of honor to be busy,” Nasim said, but rather than pack every minute with activity, leaders need to create “margins and white space” in their lives. They can then catch up with information and turn it into insights.

They model, mentor and help develop a new society. “In a transformational leadership model, we get to do things with people,” Nasim said, as opposed to doing things for people. Leaders need to model this idea. When employees no longer have to fight for respect, they can focus that energy on helping the company grow. “You cannot fake transformational leadership,” Nasim stressed. Leaders must instead model it.

They embrace new standards of success. In the world of “big data,” companies can measure just about everything, Nasim said, but they tend not to measure culture because “it’s fuzzy and they can’t hold it in their hands.” That’s a mistake. Culture trumps everything in the organization and has a huge impact on the bottom line, she said. Transformational leaders should incorporate culture into the performance management system, she told attendees.

They arouse intellectual curiosity. Not many people like change, but it’s necessary for growth. “Transformational leaders have to be able to create an organization that can pivot with change” and bring new services, Nasim said. They need to constantly look at what else the company can do to benefit all stakeholders, and they need to inspire others to do the same.

They develop new relationships of unlikely friends. If a leader listens only to like-minded people, “that’s a dangerous situation,” Nasim said. Transformational leaders surround themselves with people who have different perspectives—or better yet, contrary perspectives—in order to see the whole picture.

They value humility. Leaders need to have a certain amount of confidence, but arrogance can get the organization in trouble, Nasim said. She cited the recent Volkswagen emissions scandal as an example. Nasim said transformational leaders regularly ask themselves three questions:

• What good can I do with my power?
• What harm can I do with my power?
• What can I do to stay humble?

They understand the requirements for lasting change. Transactional leaders focus on short-term goals, while transformational leaders make decisions that benefit the organization in the long run, Nasim explained. Rather than spending time determining how to acquire and maintain power, they focus on doing what’s good for the organization and even the community.

Erin Binney is a staff writer for SHRM.