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Leadership in Organizations

Robert Hogan, Gordon Curphy, Robert B. Kaiser, and Tomas Chamorro-Premuzic

To appear in:

Anderson, N., Ones, D. S., Sinangil, H. K., & Viswesvaran, C. (Eds.) (in press), The Sage Handbook of Industrial, Work, and Organizational Psychology: Volume 2 Organizational Psychology, London: Sage.

The success of schools, sports teams, businesses, armies, governments, and nations depends on the performance of their leaders. Thus, leadership is one of the most consequential subjects in human affairs. However, despite the immense literature on the topic, there is no consensus regarding how to define, identify, or develop leadership. This chapter provides a theoretical framework for organizing the vast body of interdisciplinary research on leadership, and is aimed primarily at scientist-practitioners; for a review of mainstream academic thinking on leadership, see Barling, Christie, and Hoption (2011).

Defining Leadership

Our discussion of leadership rests on two assumptions: (1) All significant human achievement, from the building of the Egyptian pyramids to the NASA space program, depends on coordinated group effort; (2) Inter-group differences in the success of coordinated group effort can be explained in terms of five generic precepts from evolutionary psychology. These themes, all human universals, are as follows.

First, people evolved as group living animals; as a result, they have deep needs for attention and approval, and find criticism and rejection stressful. Accordingly, people devote a great deal of effort to gaining social approval and avoiding disapproval. People in leadership positions receive more positive attention than their subordinates—such are the rewards of high status.

Second, every human group, from pre-school toddlers to prison inmates, has a status hierarchy. People seem innately motivated to seek power and status; conversely, they find the loss of power and status stressful. Much everyday behavior concerns gaining, or avoiding losing, status. People in leadership positions enjoy more power and status than those lower in the ir hierarchies.

Third, religion has been a cultural universal from the beginning of human history. This suggests that people have deep needs for meaning, structure, and order – all needs that religion serves. Conversely, people find inexplicable and unpredictable circumstances highly stressful. High status people, like leaders, have more structure and meaning (and less stress) than low status people (Marmot, 2004), and one of the critical functions of leadership is to provide a sense of meaning and purpose to others, much as religion does.

Fourth, the powerful human needs for acceptance and status are inherently in conflict (Campbell, 1965). Being accepted depends on ingratiating ourselves with others—who enjoy it; acquiring status,

however, depends on outperforming other people—who resent it. As Oscar Wilde noted, “If you are

successful, you will win false friends and true enemies“. To the degree that people seek acceptance, they risk losing status (being downgraded); to the degree that people seek status, they risk losing

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acceptance (being resented). Good leaders are able to balance the tension between these conflicting demands.

Fifth, people within groups constantly compete for attention and status, something most employed adults understand. However, there is also constant competition between groups for resources and even survival, something most anthropologists understand (Chagnon, 1988; Wrangham, 1999). Evolution within groups is driven by sexual selection (Miller, 2000); evolution between groups is driven by warfare. The fact that warfare is a major force in human evolution has been recognized for a long time (cf. LeVine & Campbell, 1972, Chapter 6), and the inevitability of warfare has implications for understanding leadership. Specifically, people are inherently self-centered, but when their groups come under attack, the members must organize themselves for defense. Leadership evolved as a mechanism for organizing group effort, and it is most indispensable when groups face crises.

The distinction between within- and between-group competition parallels the distinction between leadership emergence and leadership effectiveness (Kaiser, Hogan, & Craig, 2008). Leadership emergence involves standing out in a group, and modern organizations tend to reward the winners of the within-group competition with “high potential” nominations and promotions (e.g., salary raises, more senior titles, and bonuses). In contrast, leadership effectiveness concerns forming and managing a winning team, unit, or organization. Effective leaders are able to organize collections of people to outperform other groups, and most organizations are surprisingly inept at recognizing effectiveness. What is good for a group is always good for its members, but what is good for individuals may or may not be good for their fellow group members. Kaiser, et al. (2008) point out that most leadership research concerns identifying the characteristics of individuals who are perceived as being leader-like (i.e., people who stand out). But, as Lord, DeVader, and Alliger (1986) note, leadership research typically operates under the misconception that the attributes associated with standing out are the same as those that help organizations prosper: “Understanding the characteristics associated with how leaders are perceived…is primarily relevant to the careers of individual managers” (Kaiser, et al., 2008, p. 99).

Organizations confuse leadership emergence and effectiveness; moreover, the leadership literature contains a critical methodological confound that adds to this confusion. Most published research defines leader emergence and leader effectiveness using observer ratings. However, factor analytic studies consistently find only one dimension underlying ratings for both emergence and effectiveness (Russell, 2001; Scullen, Mount, & Goff, 2000). That single underlying dimension concerns the degree to which raters approve of the person being rated (Brown & Keeping, 2005). We think rated effectiveness is a poor index of true effectiveness; we prefer to define effectiveness exclusively in terms of the impact a leader has on employee motivation, team dynamics, and tangible results, notably team performance. It is important to note that the majority of the published literature defines leadership in terms of emergence (Kaiser, et al. 2008)

Following the above, we define leadership as “a solution to the problem of collective effort—the problem of bringing people together and combining their efforts to promote success and survival” (Kaiser, Hogan, & Craig, 2008, p. 96). Simply put, leadership concerns building teams that win, either by surviving or outperforming rival teams – which, in the long run, leads to success. Two aspects of this definition are unique. First, leadership is essential for organizational effectiveness, and we think effectiveness should be the bottom line in all organizational research. Nonetheless, the organizational behavior literature largely ignores organizational effectiveness. Second, academic researchers typically define leadership in terms of the people who are in charge. But the behavioral characteristics associated with being promoted to top positions are often uncorrelated with the behavioral characteristics

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associated with building and maintaining high performing teams. For example, in a large-scale investigation of the determinants of executive career success in Europe and the US, Boudreau, Boswell, and Judge (2001) found that disagreeable behaviors (e.g., being selfish, self-centered, and arrogant) are positively linked to managers’ promotion and compensation – yet the opposite characteristics are necessary to inspire high performing teams (Collins, 2001).

We want to emphasize the fact that being promoted – managing one’s career – is different from being a leader – managing a team effectively. As Luthans, Hodgetts, and Rosenkrantz (1988) note, “One of the dominant myths surrounding the field of management is that ‘successful managers’ are equated with ‘effective managers’” (p. xv); their research debunks this myth. They studied 457 managers, 44 by “free observation” on the job, 248 systematically on the job, and 165 using interviews, and they collected standardized questionnaire data from the managers’ subordinates. They defined two groups: (1) successful managers—people who had been rapidly promoted in their organizations; (2) effective managers—people whose subordinates expressed satisfaction and commitment and whose organizational units were judged to be effective. They then catalogued the behavior of the two groups. Based on hard data, their three key findings are: (1) successful managers spend most of their time “networking”, defined as “interacting with outsiders” and “socializing and politicking” (p. 38); (2) effective managers spend most of their time “communicating“, defined as “keeping people informed”, and “human resource management”, defined as “managing conflict” and “persuading people to cooperate” (p. 70); and (3) 10% of their sample were both successful and effective. This research shows those wanting to stand out and get promoted act differently from those wanting to beat the competition by boosting their team’s performance, yet most leadership competency models fail to distinguish between leader success and effectiveness. This has profound implications for employee engagement, leader assessment and development, and organizational culture.

Literature Review

We now turn to a review of the empirical literature based on our definition of leadership. The review reveals several interesting themes.

Implicit Leadership Theory

Because intra-group warfare is and has been a constant theme in human affairs, leadership was important in our evolutionary history (Van Vugt, Hogan, & Kaiser, 2008). It may be the case, then, that people are pre-programmed to: (a) need leadership; and (b) have certain innate expectations regarding the characteristics of leaders. Freud (1960) argued that most people need external direction (he thought this was the reason for religion, art, and philosophical inquiry), a need that is potentiated during crises; certain other people opportunistically co-opt these needs and assume leadership roles. Freud described these people as narcissistic, psychopathic, egoistic, and demanding, and the followers who need direction, “fall in love” with them. As Nicholson (2013, p. 20) notes: “When leaders evoke such visceral feelings in followers, we are in the territory of pure animal instinct. The leaders know what they are doing—they get a deep animal satisfaction from their dominance—Hitler, Pol Pot, Gaddafi, Idi Amin, Saddam Hussein, Stalin, and many more….It is a model of leadership that has its roots in the deepest areas of animal response—where the most basic emotions of fear and need reside.” This leadership style is also held in high regard in modern business, as in the case of Steve Jobs and Jack Welch (cf. Isaacson, 2013).

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The idea that, at an unconscious level, most people need direction appears in the modern literature as “the romance of leadership” (Meindl, 1995). This model interprets followers’ ratings of leaders’ performance as a kind of wish fulfillment or “sense making” rather than as veridical accounts of actual leader performance. This line of analysis is important because it focuses on followers’ reactions to leader performance, rather than on the characteristics of high ranking people. If leadership concerns effectively mobilizing group effort to outperform other groups, then it is crucial to understand the psychology of those who are led, and particularly how they respond to the characteristics of would be leaders. This leads directly to implicit leadership theory (Schyns & Meindl, 2005)—how followers define effective leadership.

Kouzes and Posner (2010) devised a disarmingly simple paradigm for studying leadership from the followers’ perspective: ask people to describe the best and the worst bosses they have ever had using a standardized format. This research reveals that followers evaluate leaders in terms of four broad categories of behavior (Hogan & Kaiser, 2005). The first concerns integrity (Kaiser & Hogan, 2010). Followers need to be able to trust their leaders, to know that they are honest, even handed, keep their word, and avoid self-dealing; followers’ ratings of the degree to which they trust their leaders are the best single predictor of engagement and team performance (Dirks & Ferrin, 2002). The second thing followers hope to see in potential leaders is evidence of good judgment; Lyndon Johnson’s decision to attack North Vietnam and George Bush’s decision to invade Iraq were the two worst foreign policy decisions in modern American history and permanently damaged their reputations for leadership. Third, followers expect their leaders to be competent, to know something about the business they are in and have recognized expertise in that area. Terry Semel, the failed CEO of Yahoo, was a Hollywood producer and the only chief executive in Silicon Valley without a background in technology. Leo Apothecker, the failed CEO of the computer hardware manufacturer, Hewlett-Packard, came to the company from SAP with a background in software development and lasted 11 months. The fourth thing that followers want to see in potential leaders is “vision”—the ability to explain why a team is doing what it is doing, where it is going, and why it matters. Vision provides teams with a meaningful mission and a sense of purpose, inspiring them to work hard to achieve their goal. This speaks to people’s needs for meaning and purpose in their lives. These four themes emerge in descending order—integrity is the most important perceived leader attribute and vision is the least important—but all four are crucial components of leaders’ reputations (Lord, Foti, & DeVader, 1984). Followers hope to see integrity, good judgment, competence, and vision in their leaders; conversely, leaders who lack integrity, good judgment, competence, and vision will surely lead their followers to failure.

Personality and Leadership

Freud (1960) believed that: (1) leadership powerfully shapes the course of human affairs; (2) leaders have distinctive personalities; and (3) followers’ personalities shape the way they respond to leaders. Thus Freud thought that leadership and personality are inextricably intertwined, a view that has not been popular among academic researchers. From the late 1940s until fairly recently, behaviorism and situationism dominated American psychology; these views maintain that people’s (including leaders’) behavior depends more on situational contexts than stable personal characteristics. In the early 1990s, researchers finally agreed that personality does have significant real-life consequences (Barrick & Mount, 1991); ten years later researchers agreed that personality is related to leadership emergence (Judge, Bono, Illies, & Gerhardt, 2002). Across organizations, industry sectors, hierarchical levels, and thousands of managers, the personality dimensions of Emotional Stability, Conscientiousness, Extraversion, and Openness predict leader emergence—managers who seem confident, socially appropriate, outgoing, dutiful, and bright stand out from the crowd.

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Collins’ (2001) seminal book is another milestone in leadership research. As noted above, most of academic research involves comparing individuals who make it to the top with those who don’t, which is a within-groups approach to leadership—i.e., why some individuals outperform others inside a group. In contrast, Collins compared successful versus mediocre companies, a between-groups approach that is unique in this field and enables us to understand the determinants of organizational effectiveness – i.e., why some groups outperform others. Collins’ research team studied the 1,435 companies listed on the Fortune 500 list between 1965 and 1995. They then identified 126 companies that had a period of below average returns followed by a period of above average returns or vice versa. Then they focused on 11 companies that showed 15 years of above average performance, followed by a transition year, and then 15 years of performance substantially above their industry average. Finally, they identified the factors that separated the 11 winning companies from all the others.

We want to emphasize four findings from Collins’ research. First, the transition event that turned good companies into great companies was the arrival of a new CEO, a finding that the researchers did not seem to expect. Second, the 11 highly effective CEOs had the same personalities; they were: “Self-effacing, quiet, reserved, even shy” (p. 12); at the same time they were “…incredibly ambitious—but their ambition [was] first and foremost for the institution, not themselves” (p.21). Thus, they were a blend of extreme personal humility and “intense professional will”—a fierce and relentless drive to win. Third, the new CEOs all did the same thing: in Collins’ terms, they got the right people on the bus, the wrong people off the bus, and the right people in the right seats—i.e., they built high performing teams starting with proper employee selection. Finally, Collins’ data demonstrate that effectiveness always trumps emergence. Time and again he contrasts his humble, self-effacing, but highly effective CEOs with their high-profile, publicity-seeking (emergent) counterparts in poorer performing companies. We can summarize this final (counter-intuitive but highly significant) finding as, “Say good-bye to the myth of the ego-driven and charismatic CEO.” Consistent with the preceding section of this chapter, we also believe that these 11 highly effective CEOs were perceived as having integrity, competence, good judgment, and vision, but this is not part of Collins’ message.

EQ and the Soft Skills of Leadership

Modern leadership research provides compelling evidence for the importance of “soft skills” – e.g., intrapersonal, interpersonal, management, or people skills – in leaders. Hard skills (technical expertise) primarily predict task performance, but soft skills are critical for managing people and building winning teams. Emotional intelligence (EQ), usually defined as the ability to identify and manage one’s and other people’s emotions (Chamorro-Premuzic & Furnham, 2010; Mayer, Caruso & Salovey, 2000), is an important component of the soft skills discussion. Research shows those who are better able to read others’, and control their own, emotions are better at engaging and empowering employees. Sivanathan and Fekken (2002) found that EQ predicted subordinates’ ratings of transformational leadership; Palmer and Gignac (2012) showed that managers’ EQ explained a substantial amount variance in subordinates’ engagement levels; Leary, et al. (2013) reported that employees whose bosses score lower on EQ are significantly more disengaged. In addition, a meta-analytic study synthesizing the results of 62 independent studies reported a strong correlation (.59) between ratings of transformational leadership and EQ scores (Harms & Crede, 2010).

EQ not only predicts employee engagement, it also plays an important role in leadership emergence. A recent model of employability and career success (Hogan, Chamorro-Premuzic, & Kaiser, 2013) proposes that the ability to gain and maintain desirable jobs and to climb the organizational hierarchy is largely a function of the degree to which people are rewarding to deal with; people with

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higher EQ scores are more rewarding to deal with. In line, meta-analytic research shows that EQ is positively related to supervisory ratings of job performance, even after holding constant IQ and the Big Five personality dimensions (O’Boyle, et al., 2010). Because supervisory ratings of performance are more indicators of approval versus effectiveness, EQ is important for those wanting to appear on high potential lists (i.e., leadership success). The relationship between EQ and leadership effectiveness is less clear, as there has been little research in this area.

Despite the positive correlations between EQ, employee engagement, and leadership success, it should be noted that there are positive and negative characteristics associated with both high and low EQ scores. For example, studies suggest that EQ and narcissism are related, even at the genotypic level (Petrides, et al., 2011), and that being able to recognize emotions in others and empathize with them is positively related to narcissistic exploitativeness (Konrath, et al, 2014). It is also clear that too much positive self-belief leads to self-enhancing delusions; thus under-confidence is less harmful than over-confidence (Colvin, et al., 1995). Concerning the benefits of low EQ, research suggests that people who worry about their performance tend to outperform those who don’t (Huy, et al., 2011), and lower EQ scores predict people’s receptiveness to negative feedback (Baumgardner, et al., 1989), which should result in greater coachability.

Unfortunately, the EQ concept has been hijacked by the (pseudo-scientific) positive psychology movement, which means that most popular articles concerning EQ are colored by the self-indulgent spirit of the self-help industry. High EQ scores, like any other aspect of personality, are adaptive in some environments but counterproductive in others. A good example of the ambivalent nature of EQ would be U.S. President Barack Obama, who would surely score highly on any EQ test. Thus, he is steady, calm, and a good communicator, but he also resists negative feedback, and is somewhat aloof, smug and self-satisfied. Thus, it is probably more useful to think of EQ in terms of emotional sensitivity and reactivity than an actual “intelligence”.

Intelligence and Leadership

Evolutionary psychology also suggests that intelligence plays an important role in between-groups competition. Ancestral groups that could predict weather patterns, anticipate attacks, develop superior weapons, and exploit their competitors’ weaknesses had an adaptive advantage. Intelligence can be defined as the ability to think clearly, which entails reviewing assumptions, reflecting on performance, and making changes as needed (Hogan, Barrett, & Hogan, 2009). Successful entrepreneurs constantly review assumptions and change their business models based on feedback from customers

and competitors; those who do not adapt to business realities usually fail.

Intelligence may also be defined as the ability to detect and exploit relevant covariations in external events. Intelligent people can identify reliable sequences of events (e.g., falling customer satisfaction ratings are followed by declining revenues) and recognize when these sequences are reoccurring. Less intelligent leaders fail to note how events are interconnected and cannot accurately predict outcomes. Thus intelligence can be seen as a two-step process, where the first step is problem detection. Do leaders recognize problems or identify the causes underlying a variety of challenges? The second part of the process is problem resolution. Once leaders have identified problems, can they fix them? Leaders who can recognize and correctly prioritize issues and develop sound solutions will seem to have good judgment. They are also more likely to develop visions of the future that make sense to followers. Those who misdiagnose issues or develop sub-optimal solutions will be perceived as having

bad judgment and lacking vision.

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Leaders are constantly required to recognize conflicts, resolve resource constraints, make trade-offs, and manage talent; thus problem detection and resolution are important for organizational performance. It could be that the success of organization depends on their leaders’ day-to-day problem solving and decision making competence (Hogan, Barrett, & Hogan, 2009). It is interesting to note that this definition of intelligence resembles Spearman’s (1927) concept of g, which he defined as the ability to solve a wide variety of problems correctly. Most standardized tests of intelligence are designed to predict academic performance, but they have been used to select leaders since World War I. Research reviews (cf. Stogdill, 1948, 1974; Bray & Howard, 1983; Lord, DeVader & Allinger, 1986; Bass, 1990; Fiedler, 1992; Judge, et al., 2004) report correlations between standardized intelligence tests and leadership in the r= .3 to .5 range. Most of this research used rated leadership performance as criteria, which means that doing well on standardized tests helps individuals gain approval, stand out, and win the within-groups competition (i.e., be successful leaders). How standardized intelligence test scores relate to building winning teams is not clear. Assessments that measure problem detection and resolution may be better predictors of leadership effectiveness than the standardized intelligence tests

currently in use.

It is interesting to speculate how successful versus effective leaders approach problem identification and resolution. Successful leaders are concerned with winning the within-group competition and may focus their problem detection to the challenges posed by their peers. Problem resolution may be directed toward developing programs that gain them recognition rather than resolving the issues affecting team performance. Effective leaders are more concerned with winning the between-groups competition and identifying challenges posed by market and customer trends, competitive threats, and internal capabilities. They develop and implement solutions that leverage team

strengths and exploit competitors’ weaknesses in order to win customers.

Experience and Leadership

Experience also affects leader competence. Managers who seem to lack the relevant experience (e.g., newly commissioned military officers) are not perceived as competent. Experience is related to problem detection and resolution—the more exposure people have to organizational challenges, the more likely they are to learn the associated covariations. This is why organizations rotate high potential candidates through various functions and geographic locations. However, exposure does not entail learning; some people learn much faster on the job than others (Hughes, Ginnett & Curphy, 2014). The speed of learning, the talent to apply that learning to novel situations, and the ability to unlearn false covariations are important qualifiers of experience (DeRue, Ashford, & Myers, 2012; Kuncel, 2013). Personality also predicts the ability to learn from experience versus learning to perform (Dweck, 1986). Eichinger and De Meuse have developed measures of the ability to learn and apply the lessons from experience and their measures correlate in the r=.3 to .4 region with supervisors’ ratings of leadership competence, performance, and potential (De Meuse, Dai, & Hallenbeck, 2010; De Meuse et. al, 2012; Eichinger & Lombardo, 2004). However, the evidence indicates that “learning agility” predicts leadership success not effectiveness. It may be that those individuals who seem better able to learn from experience are also adept at managing upwards and attracting attention to themselves.

The action-observation-reflection model provides a framework for understanding how leaders learn from experience (Hughes, Ginnett, and Curphy, 2014; Curphy, 2014c). For learning to occur, leaders need to observe the impact of their actions on staff, team, and organizational performance. If they fail to act or to note the consequences of their actions, then they will be unable to learn from experience. Reflection helps leaders codify lessons learned, adapt insights to new situations, and

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unlearn lessons that are no longer valid. Leaders who fail to reflect are apt to continue repeating mistakes (Argyris, 1991). The irony is that reflection is least likely to occur when leaders deal with crises, complex challenges, high stakes/visibility projects, and demanding workloads-- the situations offering

the greatest potential for learning (Bennis & Thomas, 2002).

Derailment

In another milestone paper in the history of leadership research, Bentz (1967; 1985) reported on a 30 year study of managerial performance at Sears. During the study, Sears used a well -developed assessment battery to hire all new managers, thereby assuring that they were bright, well adjusted, and socially skilled; nonetheless, half of them were fired. Bentz’ research is important for three reasons. First, he broke the mold—his research shows that the failure rate for managers in American business is substantially higher than anyone expected. Second, he showed that managers fail for personality-based reasons. And third, his results, which consistently replicate (see Hogan, Hogan, Kaiser, 2011), launched the modern study of managerial derailment. This derailment research answers three questions: (1) what percentage of managers can be expected to fail; (2) what are the consequences of bad management; and (3) what causes managers to fail?

Regarding the relative frequency of bad managers in everyday organizational life, Hogan, et al., (2011) identified 12 published estimates of the base rate of management failure. The percentages ranged from 30% to 67%, with an average of about 50%. On the one hand, the estimates come from a variety of sources and are somewhat consistent; on the other hand, these estimates concern the number of managers who are fired. We suspect that the number of managers who alienate their subordinates but are not fired is substantial. For instance, according to Gallup (2013), the bulk of employees worldwide (70%) are disengaged at work, and the data come from organizations that ask their employees how they feel. We believe that about two-thirds of existing managers are ineffective, but because many are good at internal politics, fewer than half will be caught.

There are substantial costs to organizations and employees when managers fail. DeVries and Kaiser (2003) report that a poll of senior HR executives estimated the cost of derailment to be between $750,000.00 and $1.5 million per executive—a number that must be adjusted up over time. But there are also hidden costs associated with managerial failure, including lost intellectual and social capital, damaged reputations, missed business opportunities, and the low productivity associated with alienated employees. Then there are the moral consequences that accompany the misery that bad managers create for their staff. Climate surveys routinely report that 75% of working adults say the most stressful aspect of their jobs is their immediate boss (Hogan, 2007, p. 106). The National Institutes for Occupational Safety and Health (NIOSH) reports (NIOSH, 1999) that: (1) 40% of American workers think their jobs are very or extremely stressful, and (2) stress at work is the major cause of health complaints in American life, more than finances or family problems. Skogstad, Einarsen, Torsheim, Aasland and Hetland (2007) identify the empirical links between bad managers and employee stress. Kelloway, Sivanthan, Francis, and Barling (2005) provide a good review of the literature on the effects of bad management on employee health. Bad managers are a mental health menace that imposes huge medical costs on society and ruins the quality of life of many working people.

Finally, bad managerial behavior primarily originates in “the dark side” of personality (Hogan & Hogan, 2001). As Bentz (1967) noted, managers fail for a surprisingly consistent set of reasons: emotional immaturity, arrogance, micro-management, dishonesty, indecisiveness, poor communications, etc.. Hogan and Hogan (2001) proposed a taxonomy containing the most common

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counter-productive managerial behaviors. Although the behavior patterns differ, they have the same effect on employees—they erode trust and increase stress in their subordinates. Emergent leaders—those who stand out—are less concerned about their relations with their subordinates and, at the same time, certain dark side personality traits actually help them stand out.

Financial Consequences of Leadership

There are well-established financial consequences associated with individual differences in leadershiperformance. Although Collins doesn’t emphasize the point, his research clearly demonstrates that well-led companies are more profitable than those with average leadership. Research on managerial succession over the past 25 years consistently shows a relationship between leadership and organizational performance (Barney, 1991; Barrick, Day, Lord, & Alexander, 1991; Bertrand & Schoar, 2003). Although the estimates vary—from Joyce, Nohria, and Roberson’s (2003) estimate of 14% to Mackey’s (2008) 29% to Day and Lord’ s (1989) 40%--several studies conclude that CEOs account for a sizable proportion of variance in the financial performance of large organizations. In comparison, McGahan and Porter (1997) estimate that the industry in which a firm competes accounts for about 19% of the variation in financial performance.

Again using organizations as units of analysis, Huselid (1995) and Van Reenen and Bloom (2007) provide strong evidence for the links between leadership and organizational performance. In a study of 700 manufacturing firms in the US, the UK, France, and Germany, Van Reenen and Bloom evaluated each firm in terms of management practices (internal communications, transparency of goal setting, monitoring individual performance, links between pay and performance) and company performance (profitability, sales growth). Country and industry effects explained about half the variance in firm performance; the remaining explainable variance (after accounting for measurement error) was attributed to the quality of the management within the organization rather than the top executives themselves (see Collins, 2001). They subsequently replicated these results with 4,000 Asian manufacturing firms (Bloom, Sadun, & Van Reenen, 2012).

How Leaders Impact Organizational Effectiveness

Much of the psychological study of leadership has focused on how leaders influence individual followers (Bass, 1990). Although building relationships with followers is important, leaders impact organizational effectiveness in other ways that are important. Figure 1 suggests that leaders influence organizational performance through four channels and at three different levels of analysis: (1) at the individual level, they motivate and engage employees; (2) at the group level, they foster constructive team dynamics among the employees; and (3) at the organizational level they shape culture and formulate strategy (Hogan & Kaiser, 2005).

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Insert figure 1 about here

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Leadership and Employee Engagement

Over the past ten years, employee engagement has become an important topic in I/O psychology and much of this interest is based on the strong empirical links between employee engagement and important organizational outcomes. In two landmark studies, Huselid (1995) and Harter, Schmidt, and Hayes (2002) show that: (a) managers’ behavioral style predicts employee engagement at the business-unit level; and (b) employee engagement predicts business-unit performance (absenteeism, turnover, productivity, client satisfaction, and financial results). Engagement is a function of how people are treated by management; when engagement is low, productivity, client satisfaction and unit financial performance are low, and vice versa.

Employee engagement can be assessed easily and reliably using any of a number of commercially available surveys. Engagement can be defined as a relatively persistent psychological state associated with attitudes and behaviors that are beneficial to the organization (Macey & Schneider, 2008). Engagement is evaluated at the aggregate level (e.g., teams, units, organization), but it is created at the individual level; engagement ultimately is about the relationships between managers and subordinates, and that is the subject of leadership-member exchange (LMX) theory and Transformational Leadership. LMX theory (Dansereau, Graen, & Haga, 1975; Gerstner & Day, 1997) argues that the quality of the relationship between leaders and followers significantly determines organizational outcomes. Good relationships are characterized by trust and loyalty (Schreisheim, et al., 1999) and create engagement; Gerstner and Day (1997) summarize the positive consequences of such relationships for organizational performance and Christian, Garza, and Slaughter (2011) show that relationships are the aspect of leadership most correlated with engagement. Conversely, Townsend, Phillips, and Elkins (2000) show that low quality relationships not only degrade performance but lead subordinates to retaliate against bad leadership.

The transformational leadership model (Bass & Riggio, 2006) also maintains that effective leadership depends on the relationships between leaders and followers. The model identifies four kinds of relationship-building behaviors as follows. Leaders should: (1) Work for the good of the organization as opposed to self-dealing; this is called Idealized Influence and it promotes follower trust; (2) Inspire subordinates to adopt high standards of performance, which is called Inspirational Motivation and promotes effort; (3) Encourage subordinates to think for themselves, which is called Intellectual Stimulation and promotes empowerment; and (4) Consider subordinates’ personal needs, which is called Individualized Consideration and promotes commitment. The Christian, et al. (2011) meta-analysis shows a direct relationship between transformational leadership and employee engagement; Barling, et al. (2011) review data showing how transformational leadership creates trust in the leader, commitment to the organization, responsiveness to change initiatives, identification with the leader and organization, organizational citizenship behavior, and follower creativity, and reduces turnover and cynicism.

Leadership and Team Functioning

Sometimes individual motivation is not enough to impact organizational performance. The political unrest in Thailand, Egypt, and Ukraine shows that well organized teams made up of moderately engaged members can overwhelm disorganized but highly motivated teams. Teams are composed of individuals, but effective team performance is an aggregate phenomenon. At the aggregate level of analysis, leaders must also persuade individuals to work together and then promote constructive team dynamics among the different interests and conflicting egos. Building on the work of Luthans, et al., (1988), Katzenbach and Smith (1994), Collins (2001), and Hackman (2002), Curphy and Hogan (2012)

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state that effective leaders: (a) insure team members share the same assumptions about the job; (b) create a set of measurable team goals; (c) select and develop the talent needed to do the work; (d) clarify team member responsibilities; (e) gain team member buy-in, (f) acquire adequate resources, (g) manage conflict, (h) monitor progress, and (i) teach teams how to win. This framework can be used to launch new teams as well as improve the performance of existing teams.

As stated earlier, most leadership research concerns the impact of leaders on individual followers. Research concerning how leadership affects team dynamics focuses on narrow aspects of team functioning, such as intragroup conflict (Chun & Choi, 2014), optimal structures (Hoch & Kozlowski, 2014), or de briefing strategies (Eddy, Tannenbaum & Mathieu, 2013). This literature is fragmented, making it difficult to discern patterns; in turn, this has produced two unintended consequences. First, many leaders don’t know how to create or maintain high performing teams—because the research-based answers are not readily accessible. Second, marketers have exploited this knowledge gap by promoting simple but unproven models of team performance (e.g., Lencioni, 2002). Curphy and Hogan’s (2012) Rocket Model attempts to build an integrative model based on team research. Effective leaders build strong relationships with direct reports and get them working as cohesive units; successful leaders

spend little time attending to employee engagement and team dynamics.

Leadership and Organizational Culture

All leaders need to engage employees and build teams, but senior leaders can also use organizational culture and strategy to drive performance. Organizational culture can be defined as the collection of beliefs, norms, values, rituals, and stories shared by members of an organization (Schein, 1985). The Catholic Church, the United States Army, and the Mayo Clinic have cultures that specify what tasks need or don’t need attention, and which behaviors are rewarded and which are punished. Culture affects how leaders exercise power, make decisions, treat staff, or get into trouble, and the local jargon and behavioral norms tell members how to behave (Kilmann & Saxton, 1983). In many ways organizational culture satisfies peoples’ needs for meaning and structure by explaining why, what, and

how things get done in organizations.

The rise of multinational corporations and the increasing globalization of business raises the question of whether values and cultural identity impact leader effectiveness—e.g., can Americans lead French work groups; is leadership talent similar in the West and the East (Hofstede, 2001; House et. al., 2004; Trompenaars & Hampden-Turner, 2012)? Social identity theory (Tajfel & Turner, 1986; Hogg, 2001) provides some answers to these questions. As noted above, group membership is a human universal. Social identity theory explains why individuals identify with their social groups and how that affects their perceptions and behavior. The model argues that identifying with their groups gives people a sense of identity and self-esteem. Social identity theory also argues that emergent leaders must embody their group’s values and norms in order to be accepted. Leaders who understand and endorse a group’s values are likely to support that group’s collective interests (can be trusted), and that in turn will reinforce the group’s collective identity. Although social identity theory has been evaluated primarily with laboratory studies, it has intuitive appeal and some interesting support (e.g., leaders who embody the group’s values receive higher ratings for effectiveness—cf. Hains, Hogg, & Duck, 1997).

Barling, et al. (2013, p. 215) note that there are no data showing that a match between leaders’ values and the groups’ values enhances group effectiveness—which for us is the bottom line in leadership research. Nonetheless, the idea that leaders should share the values of their followers is intuitively appealing. We close this discussion with four observations. First, similarity of values is the most powerful predictor of interpersonal attraction yet discovered (Hogan, Hall, & Greif, 1972); to the

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degree that leaders and followers share values, they will necessarily interact more productively. Second, we believe that a leader’s perceived integrity, competence, good judgment, vision, and relationship skill will predict effective team performance more powerfully than value match. Third, it would be easy to test social identity theory in the context of the Holland (1985) model. The Holland types are constellations of values; thus, for example if managers promise to treat Realistic/Conventional groups (combat unit, athletic team, police department) with compassion and understanding, they would lose credibility—because Realistic/Conventional groups are concerned with competence and effectivenes. Finally, for managers to be successful working in cultures other than their own, they need to understand and appreciate the values of that culture, but they don’t necessarily need personally to endorse those values.

Senior leaders should be able to answer three questions: (a) what is their organization’s culture; (b) does the culture promote organizational performance; and (c) if not, can it be changed? Concerning the first question, incumbents often have difficulty describing their organization’s culture; what is obvious to outsiders can be invisible to insiders, particularly if they came up through the ranks (Tichy & Devanna, 1986; Hughes, Ginnett, & Curphy, 2014). Concerning the second question, leaders who don’t understand their organizational culture will be unable to evaluate its impact on performance. Concerning the third question, leaders who want to change a culture must assess the current culture, specify the new culture, and develop and implement plans to close the culture gaps (Kotter & Heskett, 1982; Work Effects, 2014). These plans might include new organization structures, operating rhythms, policies, procedures, reward systems, dress codes, and titles. Implementing these changes takes time and effort. Many organizations are unable to make this happen, which explains why many mergers and organizational change initiatives fail (Kotter & Heskett, 1992; Hughes, Ginnett, & Curphy, 2014; Work

Effects, 2014).

Leadership and Organizational Strategy

Peter Drucker argued that culture trumps strategy; nonetheless, flawed strategies will doom organizations more quickly than dysfunctional cultures. Culture describes how things are done in organizations, whereas strategy describes what organizations need to do to succeed. Strategy can be defined as a set of coordinated actions needed to overcome a critical organizational challenge (Rumelt, 2011). Two aspects of strategy parallel our discussion of intelligence. The first concerns problem detection. Organizations are constantly bombarded with customer, competitor, regulatory, supply chain, technology, financial, and labor challenges. Effective leaders accurately identify the top problems facing their organizations. Problem detection itself depends on curiosity and a sober view of the facts

(Collins, 2001, 2009; Kim & Mauborgne, 2005; Hogan, Barrett, & Hogan, 2009).

The second parallel to intelligence concerns problem solving. Effective leaders develop solutions for properly identified challenges. Making choices is a critical component of strategy (Collins, 2009; Rumelt, 2011; Wickman, 2007). Effective leaders make tough calls, which means there are winners and losers in their strategic plans. Departments, initiatives, products, and people that can solve the organization’s key challenges get supported; those having little impact do not.

Two other aspects of organizational strategy are worth noting. First, the process of strategy development is rarely an individual effort. Sometimes strategy consulting firms make strategy recommendations; other times CEOs and their staff review customer feedback, market trends, and competitive threats in order to create strategic plans. Second, strategy formulation is fairly easy; strategy execution is difficult (Marcus & Weiler, 2012; Wickman, 2007). Middle managers are often responsible for translating strategic plans into actions which themselves may run counter to

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organizational culture. Successful strategy execution is a problem in many organizations (Bossidy &

Charan, 2002; Wickman, 2007).

Organizational Effectiveness and the Apple Paradox

The data clearly show that personality and intelligence influence leadership behavior; certain leader behaviors affect employee engagement, team dynamics, and organizational culture and strategy; and all of these factors impact organizational effectiveness. The data are also clear that some CEOs (e.g., Jack Welsh, Steve Jobs) treat their subordinates badly and yet preside over high-performing organizations. These people violate basic psychological principles about leadership and by doing so challenge the view that there is a right way, and many wrong ways, to treat subordinates. We call this the Apple Paradox because of the incongruity between the excellent performance of Apple Inc. and CEO Steve Jobs’ abusive behavior (Kaiser, McGinnis, & Overfield, 2012; Reichman, et. al, 2013; Curphy & Kimball, 2013). Our explanation for the Apple Paradox concerns how the tasks of leadership tend to vary with hierarchical level.

It is generally understood that managerial tasks differ across hierarchical level (Charan, Drotter, & Noel, 200; Katz & Kahn, 1978). First-line supervisors work directly with employees to implement decisions from senior management; a key task for first line supervisors is building employee engagement. Middle managers are mediators whose job involves interpreting decisions from senior management and passing them on to first line supervisors; middle managers specialize in building the consensus needed to drive decisions, conflict resolution, and coping with role related stress. Senior managers make and communicate decisions—about strategy, structure, staffing, and culture—and deal with the fallout from bad decisions. In this chain of tasks and responsibilities, relationship maintenance is most important for first line supervisors and least important for senior managers. If first line supervisors work their way up to senior management, their relationship and team building skills are often reasonably well developed. But if people are promoted primarily based on results, if they parachute into senior management from a consulting firm, or if they assume leadership roles by buying or starting companies, then their relationship and team building skills may be undeveloped. In these cases, it is their vision, strategy, decision-making, and selling abilities that matter. Steve Jobs had a compelling vision, formulated productive strategies, and made good decisions about products that created considerable wealth for shareholders, and this created the credibility and latitude to behave badly. Conversely, the equally abusive Carlton Fiorina, failed CEO of Hewlett-Packard, made bad decisions about strategy, culture, and products and suffered the consequences. So one explanation of the Apple paradox concerns the degree to which senior managers gain credibility and respect by making good decisions and projecting a positive vision, even if they treat their staff badly. In our view, there are lots of Apple Paradoxes in modern business.

The Role of Industrial & Organizational Psychology in Leadership

Leadership Competency Models

Job analysis, the traditional cornerstone of industrial-organizational psychology, is used to identify the knowledge, skills, and aptitudes needed to perform a job. If a leadership competency model is based on a job analysis, then it will describe the performance capabilities that an organization expects from its managers. Every organization has a competency model but the models are all interchangeable. In fact, the various well-known leadership competency models differ only in their level of specificity. Yukl, Gordon, and Taber (2002) propose three categories of competencies: Task-, Interpersonal-, and Change-oriented behaviors. Hogan and Warrenfeltz (2003) suggest four categories: Self-management;

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Relationship management; Business skills; and Leadership skills. Bartram (2005) identifies “the great eight” competencies which expand on Hogan and Warrenfeltz. Lombardo and Eichinger (2001) propose a list of sixty-seven competencies. Many organizations define leadership competency models for different geographic regions, functions, and hierarchical levels (Hollenbeck, McCall, & Silzer, 2006; Hughes, Ginnett, & Curphy, 2014). Most global companies use competency models to guide their leadership selection, development, performance appraisal, and succession planning processes.

Despite the widespread use of these models, most suffer from two critical flaws. First, many organizations lack explicit definitions of leadership; consequently, the personal views of their senior leaders, human resources, or marketing departments, drive their competency models, and these often specify idiosyncratic leadership behaviors. Second, competency models are often developed by asking incumbents for their opinion on what it takes to be a good leader. But research shows that these opinions often have little to do with winning the between-groups competition. Table 1 shows that many leadership competency models concern getting promoted rather than building effective teams (Curphy & Kaiser, 2014; Kaiser & Curphy, 2013). These competency models often cause organizations to select the wrong people for leadership positions and teach the wrong content in leadership development programs. Thus, competency models based on local job analysis may inadvertently contribute to the high levels of managerial incompetence discussed earlier.

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Insert Table 1 about here

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Leadership Assessment

Leadership assessment serves two purposes: (1) selecting individuals for leadership roles; or (2) evaluating individual performance in leadership roles. For selection, the problem usually concerns forecasting performance in a new context—in a new company or in a higher-level job with increased responsibility—for which past performance data are either unavailable or unhelpful. In such cases, personality assessment can provide a basis for comparing candidates because the empirical literature shows strong links between personality and leader emergence, effectiveness, and failure across the board. Judge, et al. (2002) summarize the research on personality and leader emergence. People who seem articulate, self-confident, socially appropriate, and visionary (e.g., Bill Clinton) stand out and seem to have leadership potential. Personality characteristics that contribute to a reputation for integrity, decisiveness, competence, vision, and interpersonal skill signal the kinds of qualities that employees prefer in their leaders. Similarly, Collins’ research shows that humility and a competitive drive distinguish effective senior leaders. Finally, personality assessment should also consider the dark-side factors associated with troubled relationships and corrupted judgment that are discussed in the literature on derailment (J. Hogan, et al., 2010).

When evaluating performance in current roles, behavioral samples and personality assessment can be combined with coworker feedback about observed performance. This raises questions about what behavior to sample and how to evaluate it. Leadership behavior assessments can come from research–based questionnaires—such as the Multifactor Leadership Questionnaire (Bass & Avolio, 1997)—or from ad hoc competency models. Unlike personality, there is no consensus regarding an adequate taxonomy of leader competencies. We propose that a proper assessment will consider three general domains: (a) interpersonal style, representing the themes in the literature on implicit leadership

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theory and leader-member exchange; (b) judgment, representing the themes in the literature on leader problem solving and strategic decision making (Fleishman, et al., 1991); and (c) team building and facilitation, representing the leadership tasks outlined by Curphy and Hogan (2012). Assessments should also be tailored to the appropriate hierarchical level, because the behaviors associated with effectiveness differ for front-line supervisors, middle managers, and executives (Kaiser & Craig, 2011). Assessments for front-line supervisors should emphasize technical skills and building employee engagement whereas assessments for senior executives should emphasize strategic thinking and business judgment.

Concerning measurement method, multisource or 360-degree feedback provide a well-rounded view of performance by supplementing the conventional, and incomplete, boss perspective with subordinate and peer perspectives. The ratings provide useful quantitative behavioral feedback, but evidence suggests that qualitative feedback (interview transcripts or written responses to open-ended questions) provide rich and compelling information, especially about behaviors that need to change (Smither & Walker, 2004). Further, research indicates that ratings made with the common five-point rating scale often yield a single underlying dimension defined by how well the rater likes the person being rated (Brown & Keeping, 2005; Varma, DeNisi, & Peters, 1996). This underscores the importance of qualitative feedback and alternative rating formats (e.g., Kaiser & Kaplan, 2005). For instance, a key theme in derailment research is that “strengths can become weaknesses” when overused, and evidence suggests that ratings made with response scales that range from “too little” to “too much” capture this phenomenon and discriminate among different dimensions of performance (Kaiser, LeBreton, & Hogan, 2013).

Researchers have introduced few new leadership assessment methods over the past ten years; the methods currently in use (e.g., personality, EQ, and work values inventories; structured interviews; standardized intelligence tests; business simulations; 360-degree feedback) account for 25-45% of the variance in leadership performance (Scott & Reynolds, 2010). However, most of this research concerns predicting leader emergence rather than effectiveness. Distinguishing between leader emergence and effectiveness might lead to better predictors, but objective indices of effectiveness are often hard to define. The movement towards big data – the growing trend for organizations to quantify performance and make evidence-based management decisions – might improve the prediction of leadership effectiveness (Chamorro-Premuzic, 2014). The adoption of assessments that measure the ability to detect and resolve problems across a variety of organizational situations might also result in some predictive improvement (Hogan, Barnett, & Hogan, 2009). Although I-O Psychology may have reached the upper limit on predicting performance with its current battery of assessment tools, adopting better measures of leader effectiveness may increase the predictive power of existing assessment tools.

Leadership Development

The ability to build winning teams seems to be a learned skill, and few new managers know how to do it (Curphy & Hogan, 2012; Curphy, 2014a). Even if they know how to perform at one organizational level they can be uncertain about what to do when moving into a new role. Well-validated assessment methods can improve the odds of selecting/promoting effective leaders, yet the most valid techniques for identifying leadership talent are often the least frequently used (Hughes, Ginnett, & Curphy, 2006). Between faulty competency models and bad selection and promotion practices, relatively few people in positions of authority know what it takes to be an effective leader—but almost everyone has an opinion.

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Some senior leaders recognize this problem. Since 1996, annual spending on leadership development by U.S. corporations has grown from $7B to $14B (see Figure 2). Consider the thousands of executive coaching, executive education, in-house classroom training, action learning, experiential learning, and e-learning programs that have been delivered over the past 20 years. The content of these programs is typically based on leadership competency models that vary by organizational level and function. Training programs for front-line supervisors focus on the knowledge and skills needed to set goals, delegate tasks, monitor performance, and provide feedback to direct reports. Executive level programs focus on strategic thinking, marketing, decision-making, and organizational change skills. Some e-learning modules can be completed in an hour whereas executive-MBA programs are multi-year undertakings. Some programs use assessment to provide developmental feedback to participants. In the battle for business, leadership consulting firms provide training on topics such as authenticity, mindfulness, synchronicity, and horse whispering.

Despite this increased emphasis on leadership training, public confidence in corporate leadership has declined by 30% (see Figure 2) and a recent Harvard Center for Public Leadership poll showed that 70% of Americans think we have a leadership crisis that is leading to national decline (Rosenthal, 2012). A 2013 Brandon Hall Group survey of 329 organizations reported that 75% of the respondents thought the leadership training programs in their organizations were ineffective. What might account for this gap between the money spent on leadership training and the sense that leadership in most organizations is inadequate?

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Insert Figure 2 about here

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As recently noted by Kaiser and Curphy, there are six reasons why organizations get poor returns on their leadership development investments (Kaiser & Curphy, 2013; Curphy & Kaiser, 2014; Curphy, 2014b). First, many organizations define leadership using idiosyncratic competency models, and when organizations don’t know what they are looking for, they rarely find something meaningful. Second, organizations often send the wrong people to leadership development programs—including people who are primarily interested in being promoted and unwilling to listen to feedback. Third, most programs teach the wrong content; training in public speaking, building relationships, and influencing others is about learning to stand out and not about building a team. Fourth, most leadership development programs are targeted at individuals; if organizations want higher performing teams, they also need programs targeted at intact teams. Fifth, many organizations offer leadership development programs for the wrong reasons; senior leaders read trendy business books and decide to send key staff through related programs to save their organizations. Finally, training participants are not required to apply what they learn and the training programs are rarely evaluated. None of this is likely to change soon because many people are powerfully invested in maintaining the leadership development status quo.

Summary and Conclusions

The arguments in this chapter can be summarized rather quickly (see Table 1). Our most important point is that the academic literature defines leadership in terms of the persons in charge, and the popular leadership literature advises individuals on how to get ahead. In contrast, we define leadership in terms of creating team, unit, or organizational effectiveness, and our practical advice concerns team building not career advancement. We also argue that most academic leadership research

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confuses emergence with effectiveness. We believe the leadership literature doesn’t converge because of these two conceptual confusions: (1) defining leadership in terms of who is in charge, and (2) conflating emergence and effectiveness. Finally, we believe that defining leadership in terms of effective group or team performance leads to the following six conclusions:

1. The data clearly show that leadership impacts the success and well-being of teams and organizations. As Collins (2001) and Bloom, et al. (2012) demonstrate, well led and well managed companies are significantly more profitable than poorly led and managed companies. Good leadership is better for everyone associated with an organization. Identifying and developing good leaders should be the number one priority of organizations that want to succeed. This is true for business organizations, schools and universities, hospitals, athletic teams, police and fire departments, military organizations, and city, county, state, and federal governments.

2. How should organizations identify and evaluate leadership? Collins and his research team (2001) show that effective CEOs are not charismatic; they are humble, self-effacing, amazingly persistent, and fiercely ambitious for the success of their organizations. They also pay attention to talent and team dynamics. Implicit leadership theory (Schyns & Meindl, 2005) supports this view; it shows that subordinates prefer bosses who display integrity, good judgment, competence, and vision. These aspects of leader performance should be part of any competency model or evaluation process.

3. The manner in which employees react to their bosses is an index of employee engagement. Harter, Schmidt, and Hayes (2002) show that managers’ behavior creates or destroys employee engagement, and engagement predicts business unit performance. Engagement is the “g” factor in organizational performance; it correlates with every index of effectiveness, positive or negative: productivity, customer service ratings, absenteeism, turnover, and safety violations. It is important to note that the “C-suite” is largely clueless about engagement. Senior managers typically think they are responsible for engagement; in fact, it is long serving first line supervisors who create or destroy employee engagement, independent of the actions of senior leaders. Because leadership training focuses on the C-Suite and largely ignores first line supervisors, we suspect the problems will persist.

4. Judge, et al. (2002) show that personality predicts leadership emergence better than any other individual difference variable including IQ. Luthans, et al. (1988) demonstrate that leader emergence is not the same as leader effectiveness. Emergent leaders (high potentials) specialize in politics; effective leaders specialize in building high performing teams. Thus, different patterns of behavior underlie leader emergence and leader effectiveness; emergence is largely a political outcome; effectiveness is the result of team building.

5. Bentz (1985) shows that at least 50% of newly hired managers fail. We believe this underestimates the base rate of managerial incompetence in the corporate world, but the true base rate is an empirical question. In our view, good management and leadership are statistically rare, and bad management is the norm. Bad management creates unnecessary costs due to employee turnover, absenteeism, sabotage, and reduced productivity and customer service ratings. The behaviors associated with managerial incompetence well understood and can be identified with well-validated assessment tools. To the degree that organizations ignore the arguments in this chapter, they act contrary to their own financial best interests. But there is also the moral problem of allowing bad managers to abuse, exploit, harass, intimidate, and bully their subordinates.

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We also think it is important to appreciate the fact that there is no news in good news—organizations must acknowledge their shortcomings, failures, and mistakes in order to improve their performance. From the beginning, management consultants have specialized in telling clients how great their organizations are, but to ignore the data regarding the base rate of managerial incompetence in corporate life does everyone a disservice.

6. We propose a three phase model of leadership and organizational performance. In the first phase, personality, EQ, intelligence, and experience affect leadership behavior. In the second phase, leadership behavior affects employee engagement, team dynamics, and organizational culture and strategy. In the third phase, engagement, team dynamics, culture, and strategy affect organizational performance. This model has important implications for leadership recruitment, selection, development, promotion, and research.

Finally, we would like to comment on the overall state of leadership research in the modern world. First, it is important to note that most of the points made in this paper were (or still are) contrary to received academic opinion. From about 1968 until the publication of the Barrick and Mount (1991) meta-analysis, academic psychology maintained that personality was either irrelevant or unable to predict occupational performance; in essence personality didn’t exist before 1991. In addition, it was only with the publication of the Judge, et al. (2002) meta-analysis that academic psychologists began to believe that personality impacts leadership performance. And then the publication of the Harter, et al. (2002) meta-analysis made the case that there are financial consequences associated with managerial behavior. The academic community seems still to resist the notion that over half of all existing managers are alienating their subordinates. And finally, there is virtually no attention to the subject of organizational effectiveness in the modern literature. This means that most of the claims in this chapter would have been rejected out of hand 20 years ago and some are still controversial.

We would also like to point out that most of our discussion was prefigured in Freud’s (1923) book Group Psychology and the Analysis of the Ego. Freud argued that personality and leadership are related. He also stated clearly that leaders and subordinates have different personalities, that followers respond most powerfully to a circumscribed set of leader personality characteristics, and that demonic leaders understand this very well. Finally, Freud characterized the psychodynamics of both leaders and followers in unattractive terms, but terms that seem pretty valid today. All of which is to say that little in the chapter would have surprised Freud, which speaks volumes about the overall state of leadership research in the modern world.

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Figure 1. Three Phase Model of Leadership and Organizational Performance

Adapted from Robert Hogan and Robert B. Kaiser (2005), What we know about Leadership, Review of

General Psychology, 9, 169-180. (Figure 1. How Leader Personality Affects Organizational Performance.)

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Figure 2. Increasing Spending on Leadership Development, Decreasing Confidence in Leaders

Reproduced from Robert B. Kaiser and Gordy Curphy (2013) Leadership development: The failure of an

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Training and Development in the U.S.)

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Table 1. Two Views of Leadership

Topic Standard View Our View

Definition Persons who are in charge Persons who build teams Goal Get to the top Build a winning organization Role of Subordinates Serve the leader Help the leader Attributes Charisma Humility Legitimacy Conferred (title or status) Earned (subordinate approval) Desired Behavior Structure and consideration Effectiveness Role of Training Optional Essential Focus on Team Rarely Always Role of Ambition Getting ahead Beating the competition Role of Personality Irrelevant Central focus Good Leadership Normative Exception Client CEO / Manager Organization

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Table 2. Common Leadership Competency Models

Profilor Benchmarks Multifactor Leadership Questionnaire Leadership Mirror (PDI) (CCL) (Bass & Avolio) (DDI)

Think Strategically Strategic Perspective Idealized Influence Coaching Analyze Issues Being a Quick Study Inspirational Motivation Decision-Making

Use Sound Judgment Decisiveness Intellectual Stimulation Delegating Apply Technical/Functional Expertise Change Management Individualized Consideration Gaining Commitment Use Financial Acumen Leading Employees Contingent Reward Driving for Results Establish Plans Confronting Problem Employees Management-by-Exception Change Leadership

Drive Execution Participative Management Laissez-faire Establishing Strategic Direction Manage Change Building Collaborative Relationships Executive Disposition Drive for Results Compassion and Sensitivity Selling the Vision

Lead Courageously Putting People at Ease Influence Others Respect for Differences Coach and Develop Taking Initiative Engage and Inspire Composure

Foster Collaboration Balance between Personal and Work Life Build Relationships Self-Awareness Manage Conflict Career Management Foster Open Communication

Listen to Others Inspire Trust Demonstrate Adaptability

Note: None of these models include specific competencies for building a high performing team.