Why Businesses Need To Embrace New Leadership

Why Businesses Need To Embrace New Leadership

By Mark Wager

Every business has leadership but very few businesses have effective leadership. The leadership model that is most common in businesses today is an outdated model that is creating workplaces that are preventing employees from realising their full potential and as a result these businesses are quickly falling behind other businesses that have decided to lead in a new modern way.

What is traditional leadership?

Leadership is essential in every business. To succeed there needs to be a mechanism to tell employees what to do and when to do it by and the standard they need to perform to. Currently leadership in most businesses are based on an authoritative hierarchical model. Leaders are given positions of authority, usually called Managers or Supervisors and these positions are given the power to reward or punish their employees based on their performance.

Let me be clear, this traditional authoritative hierarchal model does work up to a point and can produce good results but there are very clear limitations. People will follow instructions and do their job but it's highly unlikely that they will go above and beyond what it required. Employees will follow instruction from someone in a position of authority as long as the instruction doesn't conflict with their own personal values but they won't do more than what's required. These Managers then have the ability to reward or punish people. Rewards, especially monetary ones work very well to motivate people but the impact is only short term as when you receive the reward it soon becomes the norm so the next time you get a reward it only feels motivating if the reward is of a greater value because if it's of the same value or less it doesn't feel as special so the impact diminishes with each subsequent reward. When a Manager decides to punish people the results are even worse, yes threats can achieve immediate results but with each threat the relationship between employee and employer breaks down a little bit more and with it their performance. There has never been an employee who was inspired to work their best because they were afraid of their boss.

This type of model has worked in the past but not in today's economy. There are numerous studies worldwide that show that less than a third of employees are highly motivated and the majority of employees that are at best just feel ok at work. Imagine a time when you were highly motivated and ask yourself how productive you were during this time. I guarantee your output would have been significantly greater than it was when you were not motivated. Now multiply this difference across the majority of your workforce and you will get an idea of just how much lost potential your business is missing out on. Studies have estimated that a motivated workforce can produce up to five times more output than a demotivated team.

What is new leadership?

The biggest factor determining just how motivated employees are is the standard and type of leadership that exists in the business. The companies who are achieving amazing results have adopted a new leadership model one which discards the traditional authoritative hierarchal model and instead embraces a value based leadership model. This is when businesses stop focussing on motivating employees direct and instead focus on creating an environment in which employees motivate themselves. This is done in many ways but in simple terms the business places it's values at the heart of their decision making process. If you think that because your business has organisational values you are already doing this then you are mistaken.

Your organisational values do not exist on a plaque in your lobby but they exist in the decisions of who gets rewarded, promoted and who leaves. As a leader it's not what you say but it's your actions that influence people. Your values have to be an integral part of your recruitment process and any decision that impacts your people and if handled right you can achieve remarkable results.

Value based leadership in action

Netflix, the on-line streaming entertainment platform has grown since its inception in 1997 into an annual revenue of over US$6.78 billion. In 2009 the company decided to turn their values from a vague slogan and into real action. Founder Reed Hastings published a 124 page document called "Netflix Culture: Freedom and responsibility" and this formed the basis of all future decisions and led to some very innovative initiatives including replacing the very detailed code of conduct with a simple phrase "act in the best interests of Netflix." They also introduced an unlimited amount of annual leave days. They decided that they weren't tracking the number of hours people were working every day or week so why should they track the number of vacation days. This changed the focus on what people got done rather than how many heads they worked. Netflix is not just any business during the past six years they have tripled their revenue and their value-based approach has been a vital part of that success.

This change in leadership style can't be achieved overnight, in fact if you attempted this shift too quickly you could easily end up in a disastrous situation yet you need to appreciate that this is where businesses are heading with companies like Netflix leading the way. It's the future and businesses will need to embrace it. The only question is when.

Image courtesy of Stuart Miles at FreeDigitalPhotos.net