Business has undergone a sea of change in the past several decades. Competition, supply-chains, technology, and business models have shifted. Yet, many major corporations still rely on leadership theories from the 1950’s, causing leadership effectiveness to suffer.  Certainly the tried and true frameworks remain valuable, but they are insufficient given the new challenges leaders confront today.  Leaders need to know more than just about their leadership style.

 They also have to know their business and use sound judgment.  We need a new and more complete leadership lens. 

Who, How and What

Personality insights, group interaction, and listening skills were notable advances after World War II.  This focus on the “who of leadership” encourages self-awareness and interpersonal mastery. After all, personal mastery is foundational.

In the 1980’s, proficiency, competence, and skill development highlighted personal talents and knowledge.  Leadership development was expanded by targeting a new aspect: job skills.  Knowing how to do the job became a critical component not only in appraising a leader’s performance but also for career development and succession planning.

Now we need to focus on the “what must be achieved.”  Business savvy, judgment, and prioritization must be added.  Achieving goals and balancing short- and long-term results are essential to leadership effectiveness.

Helping leaders determine the “what of leadership” is key. Deciding what resources to allocate to a project, adjusting to new trends, reading the culture, validating assumptions about customers, and setting priorities that align energies requires business insights into the competing demands and multiple time horizons. Short-term goals might be rewarded on Wall Street but long-term consequences also play a crucial role.

The Business Acumen Gap

While businesses, governments and non-profit leaders struggle with achieving goals, our leadership models avoid the matter, except for the term business acumen. Which only seems to be recognized in hindsight, rather than preparing leaders with decision-making wisdom, business judgment, or action planning. Ronald Heifetz suggests that leadership is “what you do” and many leaders’ careers are judged using this formula.

HP, Home Depot, J.C. Penney, and Bank of America all have lost CEOs due to miscalculations. HP’s Carly Fiorina , Home Depot’s Robert Nardelli, and J.C. Penney’s Ron Johnson were successful in prior executive roles, and, yet, failed in a new and different leadership context. However, poor decision-making resides at all leadership levels, not just the top. IBM’s, “The Future of Enterprise,” study in 2008, surveyed 1,100 global CEOs and found that the pace of change is expanding and there is a need for agile leaders who can read their environment and select the right path forward. The path not only diverges in the woods, it also shifts in organizations.

Setting a Wise Course Towards Leadership Effectiveness

The personal approach to leadership cannot provide the flexibility, assessment of complex interactions, or ability to build a business case for change that organizations need. Leaders require a new dynamic framework that they can use to balance competing demands and juggle multiple stakeholder interests.

John Dewey in his 1910 book, How We Think, identified six perspectives that when analyzed would produce effective decisions. In business terms these are:

1. Creating new products or internal synergies
2. Customer focus, market share, and competitive position
3. Organizational systems, policies and governance
4. Quality, maximum return, and process improvement
5. High performing culture and talent development
6. Scanning for new opportunities and testing assumptions

Let’s just examine the last: checking assumptions. In the 1990s, mortgage bankers operated on the assumption that home prices would never fall more than 5%. Therefore, a 95% mortgage was viewed as a reasonable risk. While we all recognize the flaw now, identifying it earlier would certainly have benefited many financial institutions.

Unlike the personal approach to leadership, the outcome or WHAT focus can be mastered quickly. Much like the quality check sheets, having a list of questions addressing internal and external realities boosts a leader’s ability to make wise choices. Reviewing key questions in each of the six mindsets permits effective data collection and effective analysis of the trade-offs. Identifying alternatives and weighing them must precede selecting a decision, goal, or action.

In a world of change, a reality or contingency framework must be constantly tested to stay on track and ensure success. Wise decisions can run into detours. Like a GPS system challenging us when we veer off course, these six mindset questions can also be used to “recalculate” our decisions and ensure we get to our intended destination.

And just like our GPS, the navigation models must be updated to reflect current reality. It is time to update our leadership models and increase leadership effectiveness.