THE BLOG
05/10/2016 6:27 PM IST | Updated 06/10/2017 2:42 PM IST

When Leadership Fails to Scale: 3 Keys for Leaders

5,300 Wells Fargo employees fired over 2 million phony accountsCNN 9/9/16
Wells Fargo CEO Grilling by Congress: Round 2CNN 9/29/16

AA Pilots Blast Return of Toxic Culture Bloomberg 3/6/16
AA Reverses Course on Employee Profit-sharingWSJ 3/28/16

Inside Amazon: Wrestling Big Ideas in a Bruising Workplace NYT 8/15/15 Amazon Vastly Improves Parental-Leave Benefits, HuffPost 11/2/15

Amazon, American Airlines, Wells Fargo: just three of the organizations whose troubled employee relationships have made front page headlines in the past year. While leaders can often point to progress in building scalable information technology, business processes, marketing and financial systems, developing the human side of organizations - culture, talent, leadership - that scales to today's rate of growth and change has been slow and treacherous. Today's leaders are challenged by an emerging accountability for a more scalable, productive human enterprise. The pressure for organizational performance continues to grow but acceptable ways for getting there have narrowed.

John Stumpf at Wells Fargo, Doug Parker at American Airlines and Jeff Bezos at Amazon are highly regarded CEOs who have recently faced an angry public increasingly focused on income inequality, CEO pay, so-called toxic work cultures, stagnant wages and short-termism. Shareholders are clawing back pay, employees are threatening strikes and class action suits and activist regulators are imposing large fines. Politicians are threatening executives. Dorothy nailed it: "We're not in Kansas anymore."

Generational change is adding to the pressure. Most Millennials are looking for leadership that creates a different work environment - more purposeful, transparent, participative and with more employee development and coaching. Sixty-four percent of employers nationally report having adjusted their management styles in the last five years to adapt to a younger workforce.

Yet in this new reality leaders are losing ground. Leadership is being 'de-authorized' at the very time it is most needed. CEO trust has fallen nine percentage points to 43 percent since 2011 and leadership capability gap widened in all 53 regions around the world. Deloitte's 2016 Human Capital Trends study reports: "After three years struggling to drive employee engagement and retention, improve leadership, and build a meaningful culture, executives see a need to redesign the organization itself...92% rating this a critical priority." Have leaders turned stupid overnight or has something shifted that requires leadership re-design?

Leadership Scalability - More Than Just Size


The tough question for today's leaders - whether CEOs, C-suite executives, or front line managers is: Is my leadership "scalable" - is it designed to handle today's rapidly changing employee and customer relationships, products, technology, and organizational requirements? Scalability can be defined: the ability to continue to function well when an entity (or its context) is changed (usually increased) in size or volume.

However, in today's world this definition is too narrow. Scalability means dealing with three requirements:
• Size: grow larger - more employees, customers, products, locations, channels - or perform the same work with fewer resources
• Speed: increase the speed of execution - straight ahead speed
• Agility: ability to change directions in response to conditions - zig-zag fluidly

A more scalable human organization means people performing today's work while preparing the organization for tomorrow's changing demands. One of my clients described his company's efforts to scale up "like re-wiring the house with the electricity turned on."

Relational Leadership - Scaling Up

This more robust form of scalability requires stronger, more engaged stakeholder relationships. And, it confronts leaders with a defining question: Are your relationships big enough to get the job done? Stronger relationships must come from a more intentional, 'by-design' form of leadership - I have termed Relational Leadership. Relational Leadership places a premium on attracting, developing and retaining talented, committed relationships - great people in highly productive relationships. Relational Leadership is what leaders themselves do to make their organizations scale. Let's look at three keys:

Relationships as a Strategic Priority: Many organizations talk about relationships as their most precious and strategic resource - yet practice often contradicts the words. Wells Fargo historically had a strong reputation with employees and customers alike, yet the world changed. Aggressive cross-selling - applauded ten years ago - morphed into oppressive and unethical behaviors. The underlying issue was goals and rewards that pushed company priorities ahead of customer relationships. A colleague recently shared that when shopping her key question to a salesperson: "Are you paid on commission?" Today consumers have a new relational sensitivity and even distrust - particularly after the 2008 Wall Street meltdown (which Wells Fargo, to its credit, actually avoided). Likewise, at American Airlines, the old adversarial culture between labor and management, as Doug Parker realized, devolved from merely unfortunate to unsustainable. Relational leaders are vigilant in looking for goals, metrics and rewards that undermine relationships as a strategic priority.

Commitment-worthy Purpose - that elicits employee commitment: Purpose is higher than strategy and a more powerful motivational currency for most workers than profits - especially Millennials. The challenge is, few of our jobs entail save-the-planet kinds of purpose. "Commitment-worthy" leaders help us find aspirational purpose implicit in the mundane things we do - banking, retail, air travel - that drive aspirational performance. Finding "commitment-worthy" purpose that informs our vision can be, according to Burt Nanaus: "so energizing that it in effect jump-starts the future by calling forth the skills, talents, and resources to make it happen." Relational leaders constantly assess "how we manage" to avoid a culture of 'toxic' or 'bruising' relationships that undermines purpose and shrinks the energy supply.

Power Distributed via Empowerment: Growing the energy supply only matters if that energy is distributed and shared. As organizations scale, the need for distributed power grows. Micro-management drains power. Lynne Olson provides a pointed example from WWII: While Churchill involved himself less and less with the day-to-day military conduct of the war, Hitler became more and more the micro-manager... it made effective military leadership all but impossible as D-Day was to show. Hitler's hoarding of power de-scaled his organization and dispirited his leaders.

Empowerment is risky, disempowerment is riskier - especially with Millennials seeking more empowerment and more coaching/development as Baby Boomers retire in droves. Relational leaders use empowerment and enablement to manage today's relational risk.

Rand Stagen says: "Leadership presupposes movement from one place (actual or metaphorical) to another." The bottom line for moving forward is this: the scalability of tomorrow's organizations hinges on the scalability of today's leaders and their relationships.