The Democratization of Leadership
I have rarely been as excited as I am this very moment about all the changes taking place in corporations and enterprises of all sizes around the world. By that I mean the “ Democratization of Leadership”.
What inspired me to write ProVoke was to provoke my readers globally about the fact that disruption is the key to innovation, and that the Ecosystem of Disruption™ includes many different players. The constituents of the Ecosystem of Disruption, can not only instigate disruption, but also determine the path of disruption. Democratization is a key outcome.
Why?
When we open up the ecosystem to all the players, we are effectively making every element transparent. These include the leadership, the board of directors, the investors, the entrepreneur and the academic, the phenomenal role/impact of the employees (which make up the company), AND, the unprecedented impact of the market on the success of failure of the enterprise. I call this transparency of the ecosystem = democratization.
As I discuss in detail in ProVoke, markets today can make or break a company’s plans. When Netflix wanted to change its business model the market was outraged, within a day the company changed it’s plans. BofA announced its plans to charge about $5 per ATM transactions, and retracted that insane plan within hours based on market outrage. RIM is struggling because it simply DID NOT listen to the market. In addition to the market, employees today have a phenomenal impact regarding the success or failure of a company. These are just a few examples to highlight what I mean by democratization of leadership.
Gone are the days (or will be gone soon I hope) that a few made decisions for an entire company in an ivory tower. That style of leadership which was neither inspiring nor visionary, is becoming outdated and only the very few insecure ones still clinging on to that pointless old style of leadership.. Today, decisions of leaders are analyzed, sliced up, dissected globally within minutes of any decision being announced. Leaders are ousted based on self serving decisions and transparency is king! Transparency means democratization.
More on this soon dear fellow bloggers, but those leaders who see the light, have already realized that the key to their future success is openness and inclusion of ideas and guidance from all constituents of the ecosystem and see democratization as something to embrace. Those who don’t are sitting tight, guarding the golden handcuffs that the non-democratized board of directors granted them (blindly) when they were recruited. The outcome of democratization of leadership is that moving forward we will compensate leaders based on their vision and execution vs a package guaranteed to them independent of their performance! All of this will be changing dramatically as leadership becomes democratized… It is only a matter of time!
Can you think of anything more inspiring to the rank and file of a company? The tens of millions of talented individuals working in companies who now have a huge impact on the quality and transparency of leadership….That is the power of democratized leadership.
[…] and the ensuing democratization of what I call ‘everything’… Democratization of IT, Democratization of leadership and the fantastic Global Democratization of […]
Not only is the increase in consumer voice causing the democratization of leadership in corporate business, it is forcing companies to truly consider the perspective of the consumer in tandem with eh perspective of the shareholder & boardroom. Netflix’s disastrous plan to segment their market and increase customer costs was not only rejected by the market, but caused a consumer backlash so strong that Netflix advised their return to profitability may not occur in 2012. (They have since revised this to Q4, and the outlook continues to improve). GoDaddy’s support for SOPA resulted in the loss of over 25,000 domains, including all of wikipedia.org. The Susan J. Komen foundation’s decision to specifically target Planned Parenthood for defunding and the lie about it has resulted in the majority of its core sponsors withdrawing support as well.
What will be the final outcome of examples like these? Hopefully, companies will think through the decisions they make carefully — and then make decisions they can stand by, They will understand that they can’t just throw out a 5$ fee where no fee was before to see if it would “stick.” As twitter and internet’s many other word-of-mouth tools improve and grow, companies will be more stringently bound to operating in a manner consumers believe is ethical.
I appreciate the point here about transparency and accountability. This is generally a positive thing – but there are some risks as well worth pointing out.
Yes, it’s true that the market will react instantaneously to the actions of a CEO, rewarding or punishing them in an instant. But there is a risk here of driving counterproductive short-term behavior. It’s not realistic that every element of a firm’s strategic plan will be visible to either the market or the rank-and-file. In the Netflix example, splitting the DVD and streaming businesses does make sense; DVD rentals is a dying business and this would allow Netflix to track costs and allocate resources in finer-grained manner. (What was baffling was the consumer-unfriendly manner in which this was rolled out and then rolled back, though it did provide great comedic fodder to the late night shows) The point is that getting punished for decisions based on a strategy which is not obvious to the market can drive the wrong behaviors.
Whatever the pros and cons, this is the new reality in which companies operate nowadays. Organizations must adapt to this or face the music – witness the recent Susan G. Komen/Planned Parenthood PR fiasco. There’s no doubt consumers have more power than they have ever had before – and in general that leaves them better off.
The ‘group’ is the future. I think that’s becoming more and more true as time goes on and reaction times from the masses shrinks. We now have to make amazing decisions in a short amount of time and monitor reactions almost continuously to succeed. The challenge with this approach is to be able to guide the process without constricting free though.
I think there is some danger in the assumption that all failed plans by a company are the result of an ivory tower decision. As with any discussion, there is far more information that needs to be understood before bold statements are made about the decisions that were made. Hindsight can be 20/20. I think of a quote from the TV series Mad Men when this type of conversation occurs “…come on Betty, you know we don’t really know what’s going on…” This in reference to the fear of the Cuban Missile Crisis. To some extent, this is entirely true. While many bold (and failed) company plans are made by a select group of people, there are abundant examples of those that were made as a “democratized” company as well. To use another overused analogy, Apple was essentially the vision of one man who demanded that everyone follow HIS vision…or so it’s been told.
In some companies, the top dog in the ivory tower thinks they’re running the business but they’re really not. I’ve witnessed a situation where the top leader is nothing bet an insecure ego-monger, and the executive team reporting to him actually runs the show. As long as drama is kept to a minimum, things are OK, but as soon as the top leader feels threatened, he demotes or fires the “insubordinate” and harvests the next sucker to fill in the gap. Even worse, they don’t fill the gap at all and justify the job as “not needed in the first place.” I am baffled by the mediocrity of certain “leaders,” and how the actual success of the business is due entirely to the employees who keep it afloat.
“The outcome of democratization of leadership is that moving forward we will compensate leaders based on their vision and execution vs a package guaranteed to them independent of their performance!” I couldn’t agree more with this statement, but how do you envision this coming into play? How does one encourage your leaders to make choices that are good for the company in the long term, but not necessarily right now? Many execs receive bonuses based on short term performance. How do you convince them to grow at a sustainable rate instead of growing beyond what is sustainable when the times are good because they want a bigger bonus?
While I agree with the performance based changes you suggest, I work in an organization that is very vertical in it’s structure and I struggle to see how this could change. In reality, even some of the brightest employees have no interest in bettering the company beyond their immediate goals (no different than some of the ivory tower executives that run companies into the ground) and wouldn’t provide a ton of value in a strategic position. Working this idea into an organization that has levels such as unions or hourly employees focused on repetitive but necessary tasks is something I would love to see developed further. I don’t see how democritization in those environments would create value.
+1 for the virtue of openness. Many preciptating factors are currently influencing corporations–as well as academic institutions and governments–to be more open, and social media is first among them. The common thread uniting Netflix business model changes, BofA’s fees,and RIM’s decline is the ability for customers to discuss and react to changes in an open, discoverable,and unifiable environment. That can be inspiring, or de-motivating, to employees of the organization, but when leaders are able to visibily respond with strategy & directional changes (as with Netflix’s recapitulation) it’s a win all around.
Noah — I’ve been in environments like this in past as well. In some cases I’ve seen effective leaders come through and successfully convert these “nonbelievers,” and in other cases I’ve seen motivated leaders come through and fail to have any impact on the enthusiasm of the folks around them. Some of this seems to be due to the inertia present in the company culture, but some of it seems to be based on some kind of leadership trait or attitude beyond mere enthusiasm that allows a leader to pull employees around him into orbit.
The point of this long, rambly post is really this: the CEOs that are brought in and are successful seem to be the kind that have that extra trait and are able to quickly and effectively affect the course of the “ship” so to speak, and I think it is these leaders that companies are trying — and failing — to recuit when they need a turnaround.
The real issue here is poor corporate leadership, structure,and incentive systems. Leaders in manylarge organizations are not measured in the same way that business-linemanagers might be measured. And theircompensation packages are structured in such a way that almost any level offailure will lead to some sort of outrageous payout. Common stockholders have no voice. Other stakeholders are either ill-advised ordis-empowered. Ultimately, theseorganizations will reap what they have sowed. It’s up to common investors to keep a sharp eye on companies they deemunworthy & steer their dollars elsewhere. I would suggest starting a fund that shorts the stock of these poorly-ledcompanies.