10 Major Leadership Theories Every Manager Should Master in 2023

Theories of leadership explain how and why specific individuals become leaders. They emphasize the character characteristics and actions that people might adopt to improve their leadership skills. Top qualities cited by leaders as essential to effective leadership involve:

These qualities are thought to be the most crucial by leaders all across the world, according to research. And leadership theories aid in illuminating how leaders use and cultivate these qualities.Leadership theories have recently been more codified, which makes them simpler to comprehend, discuss, and evaluate in practice.

10 Major Leadership Theories You Need to Know About

1. The Transactional Theory or Management Theory

Well during Industrial Revolution, this transactional theory was developed to boost company productivity. It is a leadership approach that emphasizes the value of hierarchy for enhancing organizational effectiveness. These managers place high importance on structure and utilize their authority to enforce rules to inspire staff to perform at their best. In accordance with this philosophy, workers are rewarded for achieving their given objectives. The concept also presupposes that workers must comply with managerial directives.

Managers whopractice transactional leadership keep an eye on their staff, making sure they are rewarded for reaching milestones and disciplined when they fall short. These executives, however, do not serve as a trigger for a company's expansion. Instead, they concentrate on upholding the organization's policies and standards to ensure that everything goes as planned.

Leaders Who Practice Transactional Leadership:

Target immediate objectives.

Favor standardized processes and regulations

Recent changes

Discourage original thought

Emphasis on one's own interests

Encourage performance

When there are challenges that are clearly stated and the main goal is to finish a work, transactional leadership works well.

Master's Program: Digital Project Manager Learn Core Digital Project Management Skills Enroll Now

2. Theory of Transformation

The relationship between leaders and staff can help the organization, according to the transformational theory of management. This leadership theory contends that effective leaders inspire workers to go above and beyond what they are capable of. Leaders develop a vision for their team members and motivate them to realize it.

Employee morale is raised and inspired by transformational leaders, which helps them perform better at work. These managers encourage staff members by their deeds rather than their words because they specialize in setting an example.

Leaders Who Practice Transformational Leadership:

Self-manage

Set an example

Give interaction a high priority

Be proactive in your work

Promote the development of employees

Receptive to fresh concepts

Take chances and make difficult choices

Transformational leaders, as opposed to transactional leaders, prioritize failed processes and gather personnel who get along well to accomplish shared corporate objectives. Additionally, effective executives prioritize the requirements of the organization and its employees over their own.

3. The Theory of Contingencies

According to the contingency hypothesis, there is no one right way to run an organization. Determining the optimal strategy for leading an organization to achieve depends on both internal and external considerations. The right candidate should fit the correct scenario, according to the contingency theory.

The following elements influence the leadership style, based on contingency theory:

Management approach

Work speed

Organizational policies and culture

Employee spirit

Employees' level of maturity

Relationship between coworkers or members of a team

Organizational objectives

Environment and routine at work

The management strategy that will help the organization achieve its objectives in a particular situation is decided by the leader.

According to this view, situations determine whether or not leaders are effective. No matter how successful a leader is, the idea explains, difficult situations will always arise. It emphasizes that the leaders are aware that the conditions in combination with their abilities have a role in their achievement.

Free Webinar: Creating Mindset for Career Success Wednesday, 21 December, 9 PM IST Register Now

4. The Theory of Situations

Similar to the contingency theory, this idea emphasizes the significance of context and holds that a leader should adjust to the shifting context to achieve objectives and make judgments. The level of competence and dedication of the team members can influence how these leaders choose to lead.

Situational leadership, as per situational theory:

Develop a connection with the workforce

Encourage employees

Recognize when alternative leadership philosophies are required in a given situation

Develop teams and organizational units

The idea also distinguishes four main leadership styles:

Telling: Managers instruct staff members on what needs to be done and how to go about it. Selling: Team members are persuaded to adopt a leader's concepts or ideas. Participating: Effective leaders encourage their team members to take an active part in problem-solving and decision-making processes. Delegating: Limiting their involvement, leaders hand off the majority of the work to the team. Such leaders defer to the group for decision-making but they are always ready for advice.

The theory lists a few essential traits of a situational leader, such as problem-solving abilities, trust, adaptability, insight, and coaching.

5. The Great Man Theory

One of the first theories on leadership makes the assumption that these qualities are inherent, which indicates that leaders are born, not created, and cannot be learned. This hypothesis asserts that a leader has certain innate human characteristics, such as:

Glamour

Decisive

Wisdom

Daring

Assertiveness

Appeal

This viewpoint emphasizes the fact that individuals cannot be taught to be effective leaders. It's a quality that either you have or you don't. These abilities come naturally, thus you cannot learn them or receive training in them.

In addition, the idea holds that these leadership qualities are constant over time and apply to all organizations, regardless of the setting in which these leaders are employed. The idea that exceptional leaders emerge when they are required is another tenet of this leadership ideology.

6. The Trait Theory

The great man theory is expanded upon by the trait theory of leadership, which is predicated on the idea that effective leaders have particular personality qualities and features of behavior. They can become effective leaders in a number of circumstances thanks to these qualities. It also promotes the idea that certain people are more naturally gifted as leaders than others. Effective people have hobbies and personality traits that are very different from those of non-leaders.

The main characteristics of a successful leader are:

Emotional equilibrium

Acknowledging one's duty

Competence

Recognising obstacles

Thinking with action

Motivational abilities

Talents in communication

Tenacity and flexibility

Making decisions with assurance

You can learn more about your limitations and strengths with the help of this leadership idea. Then, you can try to strengthen your areas of weakness.The ideal person for a leadership position is chosen by many organizations using the trait approach.

PMP Certification Training Course For your next role as a Project Manager View Course

7. Behaviorist Theory

According to this view, a person's leadership abilities are a product of their environment. Different learning talents contribute to effective management. The behavioral idea holds that leaders are formed and trained, not born, in contrast to the model of leadership. In other words, a leader's performance is not influenced by their inherent traits because leadership qualities are driven by behavior. Anyone is capable of becoming a leader with the right training and instruction.

According to the theory, in order to boost the output and morale of their team, managers should be mindful of their own behavior. This theory classifies managers into the following categories depending on the leadership styles it acknowledges:

Task-focused managers

Leaders who put people first

Apathetic leaders

Effective leaders

Dictatorial authorities

Current authorities

Reliable leaders

Shrewd businesspeople

Daddy-like bosses

Heads of Country Clubs

It is simple to assess the style of leadership of construction professionals, team leaders, or indeed any skilled leader using the behavioral theory.

8. Behavioral Theory

Behavioral leadership theory focuses on the actions of leaders and holds that other leaders are able to imitate similar actions. Because it is sometimes known, the design theory contends that successful leaders could also be developed through teachable conduct rather than being born with it. The behaviors of a pacesetter are extensively emphasized in behavioral theories of leadership; this theory contends that observing a leader's behavior is the best indicator of how successful their leadership will be. The behavioral learning hypothesis emphasizes behavior instead of traits. Consistent with this idea, observable patterns of conduct are classified as "styles of leadership." Task-oriented leaders, club leaders, people-oriented leaders, dictatorial leaders, status-quo leaders, and more are some samples of leadership styles.

9. Functional Theory

The functional theory of leadership emphasizes how employment or organization is being led rather than who has been formally designated as the leader. Within the functional leadership approach, the power to get things done is supported by a collection of people's behaviors rather than one individual.

10. Integrated Psychological Theory

Integrative leadership may be a new style of leadership that encourages cooperation across a variety of barriers in order to advance the common good. It combines leadership theories and techniques that have their roots in five important societal spheres: industry, government, nonprofits, the media, and the community.

Top 5 Leadership Skills for the Workplace of Tomorrow

Fifty-eight percent of all U.S. companies say their number one strategic priority is closing their current leadership skill gaps. In 2017, these companies spent $31 billion on leadership programs to achieve just that. What’s more, many companies plan to increase their total spending on leadership development initiatives in the next few years—now treating professional development as an important component of their business strategy.

With strong leadership in such high demand, improving your leadership skills can give you a competitive advantage, because, contrary to popular belief, you don’t need to be in a C-level role to be considered a leader. Strong leaders exist—and are highly valued—at every level of business to inspire, engage, and influence their colleagues and stakeholders.

Why are Leadership Skills So Important?

Recent studies have found leadership quality to be a significant determinant of an organization’s success, which explains companies’ large investments in leadership-focused initiatives. Organizations with strong leaders experience better overall organizational performance, including high levels of customer satisfaction, organizational productivity, financial gains, and product quality. Effective leadership also has a positive impact on employee retention, performance, engagement, and morale.

Despite the criticality of quality leadership, 84 percent of organizations predict that they will experience a shortage of skilled leaders in the next five years. This is due, in part, to the nearly 10,000 baby boomers that reach retirement age every day, which means more leadership roles are ready to be filled by new—and sometimes inexperienced—talent. This significant gap in upcoming leadership means it is more important than ever for job seekers to demonstrate strong leadership skills in addition to job- and industry-specific skills.

Brian Bullock, lecturer at Northeastern University, explains why:

“In many organizations today, leaders and managers are promoted because they’re good at a skill. When they enter the leadership position, though, they struggle because they haven’t studied management approaches or skills. Leadership is a skill that needs to be continuously developed and worked on.”

In short, the leaders of today and tomorrow require a different set of skills than the leaders of yesterday. Rather than being experts in their specific field of work, they must also have strong leadership skills in order to effectively manage their teams. Here’s a look at the competencies they need and why they’re important, plus ways to strengthen them.

Download Our Free Guide to Effective Leadership in the 21st Century

Learn how to develop the skills required to lead effectively in today’s digital, global world.

DOWNLOAD NOW

5 Essential Leadership Skills and Practices

1. Self-development

Because businesses today operate at breakneck speed, leaders should prioritize a half-hour a week to focus on themselves, whether that means learning something new or taking time to plan for the week ahead, Bullock says.

“This could be seeking out quick learning experiences, whether they’re through online videos or short, online trainings,” he says. “Maybe it’s learning about how to work with difficult people, how to have a difficult conversation, or how to motivate someone who’s difficult to motivate. Learning isn’t something that should ever end; it should be continual.”

Self-development might also mean setting aside time each week to prioritize what you want to achieve in the week ahead. This helps you become more intentional, Bullock says.

“When you step into your workspace, you’re immediately flooded with communications and fires to put out. This whirlwind hinders your intentionality because you’re only reacting,” he says. “Think about what’s most important for you and your team in the upcoming week, and set strategic actions to accomplish them.”

2. Team development

Equally as important as your own development is the development of your team members, Bullock says. Some of the most successful managers today are adopting a leadership approach that embraces developing partnerships with employees, he adds. In this paradigm, superiors embrace developing partnerships with employees, working together with them to develop and achieve goals, and allowing employees to take a more independent approach in completing their work.

“Leaders today might check in once a week for 10 to 15 minutes with the people on their team to review priorities, what they’re working on, and how they’re feeling—whether they’re overwhelmed or engaged, for example,” Bullock says. “It’s more about collecting real-time data on their team to make sure they’re focused on the right things at the right time.”

Moreover, as job-hopping trends continue to increase, retaining talent is more important than ever. Leaders should meet with their team members quarterly to discuss the employee’s interests, ambitions, and goals and then work together to develop a path with resources to get there.

“Many times leaders aren’t aware of all the resources that are available to them,” he says. “When people think about development, their mind goes to sitting in a classroom—but that’s not necessarily the only option. There are videos, e-learning opportunities, on-the-job trainings, and even networking events that can be useful. The leader’s job is to facilitate this process.”

3. Strategic thinking and acting

Companies today must remain nimble and responsive to change, which is why strategic thinking are among the most highly effective leaders, according to Harvard Business Review. In the report, HBR found that a strategic approach to leadership was 10 times more important to the perception of effectiveness than other behaviors it studied, including communication and hands-on tactical behaviors. Strategic thinkers take a broad, long-range approach to problem-solving and decision making that involves objective analysis, thinking ahead, and planning.

“Leaders need to think about the best route to get to the outcomes that exceed the expectations for the people they serve,” Bullock says. “There are many ways to go about that, including setting a vision and being clear about what that means, along with everyone’s role in achieving that vision.”

4. Ethical practice and civic-mindedness

Leaders set the standard for teams based on their values, Bullock says. “The things you talk about, do, and allow all become part of your team’s culture,” he says. “If you’re talking about ethics and doing the right thing, your team will pick up on that,” he says. “What you value gets valued by your team.”

Ethics and civic mindedness are often dictated by the organization through written policies and procedures that leaders should learn and periodically reference. Many leaders are aware that these policies exist, but only seek them out in times of crisis, Bullock says. Instead, leaders should familiarize themselves with the policies and procedures so they’re prepared when an ethics situation arises.

“Most leaders don’t take ethics as seriously as they should,” he says. “Mishaps happen when something drastic happens and they get caught up in the whirlwind. Leaders should have ethics front-of-mind so when a problem happens they can handle it quickly and effectively.”

5. Innovation

For businesses to keep pace in today’s competitive marketplace, innovation needs to be an organizational priority—and this type of culture starts at the top. It’s easy for leaders to get stuck in a rut performing their everyday responsibilities because people are creatures of habit, Bullock says. Innovation is a good way for leaders to change things up and try something new—which sometimes leads to great ideas and better methods.

“Leaders need to create an environment in which people feel psychologically safe to try something new, see how it goes, and even fail,” he says. “In today’s fast-paced world, people are reluctant to try new things.”

Once again, this starts by setting the example yourself. Bullock recommends that leaders make time every week to try something new, whether it’s a new process or idea.

“Leadership is synonymous with learning,” Bullock says. “The best leaders are the ones who are constantly learning and figuring out how to fill the gaps and develop skills that are the most meaningful to them.”

Acquiring Leadership Skills

If you’re feeling less than confident in your current abilities in these areas, don’t fret. Fortunately, these skills can be learned and refined over time. According to a study by Harvard University, 85 percent of executives who participated in leadership development programs—including classroom learning, online training, one-on-one mentoring, and job shadowing—were able to improve their leadership effectiveness dramatically in just three years.

There are many ways to acquire and develop these skills to advance your career and stay in demand in the marketplace. A graduate education is one reliable way to improve your leadership skills to help you confidently face the rigors of working in challenging business environments.

7 Ways Graduate Studies Can Improve Your Leadership Skills

Twenty-seven percent of companies report that they now target advanced degree holders for roles that used to require four-year degrees, in part due to the often superior leadership abilities among those with an advanced education. Here are some of the ways that earning a master’s degree can improve your leadership skills to help you grow in your career:

1. You’ll Develop Business Acumen

Graduate coursework is designed to sharpen critical thinking and analytical skills. You’ll be required to craft compelling arguments, defend them against criticism, and justify your decisions with data. You’ll address complex, multi-faceted case studies with solutions that require a thorough situational analysis and strategic thinking. In the real world, leaders are faced with similar challenges that require the ability to consider the needs of many diverse stakeholders in their decision making.

2. You’ll Improve Your Goal-Setting Capabilities

Achieving an advanced degree is no easy feat. Completing graduate studies exhibits your ability to set goals and see them through to execution. Balancing graduate coursework with your professional and personal life requires initiative, time management, and superior organizational ability. Given the self-directed nature of graduate work, you’ll learn to set goals, organize, learn, and complete objectives with little direction—which, according to global leaders, is the second most important competency for leaders.

3. You’ll Become a More Effective Communicator

In an age of constant and rapid change, effective communication skills are critical. According to a survey by Harvard Business Review, clear communication of expectations is among the top three skills required for quality leadership. In graduate school, you’ll have the chance to improve your communication abilities by constructing written arguments and participating in classroom discussion. As a leader, you’ll use these skills to deliver compelling communication to motivate teams, respond to problems, engage employees, and effectively relay your strategic vision.

4. You’ll Gain a Global Perspective

In graduate school, you’ll meet and work with people from a variety of cultures and backgrounds. Surrounding yourself with diverse minds and opinions will give you a broader perspective and increase your cross-cultural competency and awareness. This exposure will give you the ability to learn from others more efficiently, improve intercultural communication, and enable you to better lead across countries and cultures—currently one of the leadership skills companies say they struggle with most.

5. Your Views Will Be Challenged

Graduate courses are designed to push you out of your comfort zone, encourage flexibility, and teach you how to respond favorably and strategically to change. By learning to step aside from preconceived beliefs, consider the perspectives of others, and challenge their current problem-solving methods, graduate students learn to lead more inclusively. Successful leaders are comfortable challenging their own views in order to make the best and most objective decisions.

6. You’ll Solve Real-World Problems with Industry Leaders

In grad school, you’ll learn from key players in your industry, who utilize real-world experience to help you combine cutting-edge research with practice. These individuals teach core industry competencies while also imparting advice on how to be a more effective leader in real-world environments. Through hands-on, experiential learning opportunities offered at some graduate programs, you’ll develop problem-solving skills and gain exposure to new business models and state-of-the-art innovations to help you lead creatively.

7. You’ll Become a Teamwork Expert

In graduate school, you’ll participate in many collaborative projects and breakout sessions during classes that encourage cooperation to solve complex problems. These environments help embody the collective nature of leadership and illustrate the importance of failing and succeeding together. These collaborative projects can teach you lasting lessons about how to build and manage teams, by noting strengths, weaknesses, and personality dynamics. You’ll learn to listen to the views of others, experience different work ethics, and delegate effectively. As a leader in the real world, you’ll be able to utilize these skills to inspire a shared vision and enable others to act.

Developing Yourself as a Leader

Leadership skills are in high demand, and a graduate education can help you get there. To improve your skills, it helps to have sustained practice in a real-world environment. As a busy professional, balancing learning and work can be a challenge. But through rigorous curricula and hands-on experience, graduate school enables you to gain and improve your leadership skills without taking a break from your current workload, maintaining a real-world focus while learning new theory in tandem.

Northeastern’s Master of Science in Leadership is one such graduate program that is designed to cultivate strong leadership skills in learners. The program combines real-world lessons and an action-learning approach to prepare students to become the leaders of tomorrow.

Interested in further improving your leadership skills and advancing your career? Download our free guide below.

How Managers Become Leaders

To make the transition, managers have to acquire new capabilities quickly. And though what got them to the top may no longer be enough, there are steps that they and their organizations can take to prepare them to succeed.

What he found was that at this turning point, executives must navigate a tricky set of changes in their leadership focus and skills. Watkins calls these the seven seismic shifts. New enterprise leaders must move from being a specialist to a generalist; from analyzing data to integrating knowledge from multiple sources; and from implementing tactics to developing strategies. They also need to transform themselves from bricklayers into organizational architects; from problem solvers into agenda setters; and from warriors intent on beating the competition into diplomats who engage with a full range of stakeholders. Finally, leaders must move out from the wings and get used to living on center stage in the full spotlight.

Few managerial transitions are more difficult than making the move from leading a function to leading an entire enterprise for the first time. The scope and complexity of the job increase dramatically, in ways that can leave executives feeling overwhelmed and uncertain. It truly is different at the top. But how, exactly? Career transition expert Michael Watkins set out to explore that question in an extensive series of interviews with leadership mentors, HR professionals, and newly minted unit heads.

Artwork: Adam Ekbergs Country Roads 2005, ink-jet print

Harald (not his real name) is a high-potential leader with 15 years of experience at a leading European chemical company. He started as an assistant product manager in the plastics unit and was quickly transferred to Hong Kong to help set up the unit’s new Asian business center. As sales there soared, he soon won a promotion to sales manager. Three years later he returned to Europe as the marketing and sales director for Europe, the Middle East, and Africa, overseeing a group of 80 professionals. Continuing his string of successes, he was promoted to vice president of marketing and sales for the polyethylene division, responsible for several lines of products, related services, and a staff of nearly 200.

All of Harald’s hard work culminated in his appointment as the head of the company’s plastic resins unit, a business with more than 3,000 employees worldwide. Quite intentionally, the company had assigned him to run a small but thriving business with a strong team. The idea was to give him the opportunity to move beyond managing sales and marketing, get his arms around an entire business, learn what it meant to head up a unit with the help of his more-experienced team, and take his leadership skills to the next level in a situation free from complicating problems or crises. The setup seemed perfect, but a few months into the new position, Harald was struggling mightily.

Like Harald, many rising stars trip when they shift from leading a function to leading an enterprise and for the first time taking responsibility for a P&L and oversight of executives across corporate functions. It truly is different at the top. To find out how, I took an in-depth look at this critical turning point, conducting an extensive series of interviews with more than 40 executives, including managers who had developed high-potential talent, senior HR professionals, and individuals who had recently made the move to enterprise leadership for the first time.

What I found is that to make the transition successfully, executives must navigate a tricky set of changes in their leadership focus and skills, which I call the seven seismic shifts. They must learn to move from specialist to generalist, analyst to integrator, tactician to strategist, bricklayer to architect, problem solver to agenda setter, warrior to diplomat, and supporting cast member to lead role. Like so many of his peers, Harald had trouble negotiating most of these shifts. To see what makes them so difficult, let’s follow him through each of them, as he confronts unnerving surprises, makes unwarranted assumptions, encounters entirely new demands on his time and imagination, makes decisions in ignorance, and learns from his mistakes.

The Seven Seismic Shifts All the shifts a function head must make when first becoming an enterprise leader involve learning new skills and cultivating new mind-sets. Here are the shifts and what each requires executives to do: Specialist to Generalist Understand the mental models, tools, and terms used in key business functions and develop templates for evaluating the leaders of those functions. Analyst to Integrator Integrate the collective knowledge of cross-functional teams and make appropriate trade-offs to solve complex organizational problems. Tactician to Strategist Shift fluidly between the details and the larger picture, perceive important patterns in complex environments, and anticipate and influence the reactions of key external players. Bricklayer to Architect Understand how to analyze and design organizational systems so that strategy, structure, operating models, and skill bases fit together effectively and efficiently, and harness this understanding to make needed organizational changes. Problem Solver to Agenda Setter Define the problems the organization should focus on, and spot issues that don’t fall neatly into any one function but are still important. Warrior to Diplomat Proactively shape the environment in which the business operates by influencing key external constituencies, including the government, NGOs, the media, and investors. Supporting Cast Member to Lead Role Exhibit the right behaviors as a role model for the organization and learn to communicate with and inspire large groups of people both directly and, increasingly, indirectly.

Specialist to Generalist

Harald’s immediate challenge was shifting from leading a single function to overseeing the full set of business functions. In his first couple of months, this shift left him feeling disoriented and less confident in his ability to make good judgments. And so he fell into a classic trap—overmanaging the function he knew well and undermanaging the others. Fortunately for Harald, this became crystal clear when his vice president of HR gave him some blunt feedback about his relationship with his sales and marketing VP: “You are driving Claire crazy. You need to give her some space.”

Harald’s tendency to stay in his functional comfort zone is an understandable reaction to the stresses of moving up to a much broader role. It would be wonderful if newly appointed enterprise leaders were world-class experts in all business functions, but of course they never are. In some instances they have gained experience by rotating through various functions or working on cross-functional projects, which certainly helps. (See the sidebar “How to Develop Strong Enterprise Leaders.”) But the reality is that the move to enterprise leadership always requires executives who’ve been specialists to quickly turn into generalists who know enough about all the functions to run their businesses.

How to Develop Strong Enterprise Leaders Early in their careers, give potential leaders… Experience on cross-functional projects and then responsibility for them An international assignment (if it’s a global business) Exposure to a broad range of business situations: start-up, accelerated growth, sustaining success, realignment, turnaround, and shutdown When their leadership promise becomes evident, give high potentials… A position on a senior management team Experience with external stakeholders (investors, the media, key customers) An assignment as chief of staff for an experienced enterprise leader An appointment to lead an acquisition integration or a substantial restructuring Sometime just before their first enterprise promotion, send rising stars… To a substantial executive program that addresses such capabilities as organizational design, business process improvement, and transition management, and allows them to build external networks At the time of their first enterprise-level promotion, place new enterprise leaders in units that are… Small, distinct, and thriving Staffed with an experienced and assertive team that they can learn from

What is “enough”? Enterprise leaders must be able to (1) make decisions that are good for the business as a whole and (2) evaluate the talent on their teams. To do both they need to recognize that business functions are distinct managerial subcultures, each with its own mental models and language. Effective leaders understand the different ways that professionals in finance, marketing, operations, HR, and R&D approach business problems, and the various tools (discounted cash flow, customer segmentation, process flow, succession planning, stage gates, and the like) that each discipline applies. Leaders must be able to speak the language of all the functions and translate for them when necessary. And critically, leaders must know the right questions to ask and the right metrics for evaluating and recruiting people to manage areas in which they themselves are not experts.

The good news for Harald was that, in addition to assigning him to a high-performing unit, his company had strong systems in place for evaluating and developing talent in key functions. These included well-crafted systems for performance reviews and 360-degree feedback, and for collecting input from corporate functions. His heads of finance and HR, for instance, while reporting directly to him, also had dotted-line reporting relationships with their respective corporate departments, which assisted Harald with their evaluation and development. So he had plenty of resources to help him understand what “excellence” meant for each function.

By investing directly in creating standardized evaluation schemes for each function, companies can ensure that new enterprise leaders get the lay of the land faster. But even if their firms don’t have such systems, aspiring enterprise leaders can prepare themselves by building relationships with colleagues in other functions, seeking to learn from them (perhaps in exchange for insight into their own functions) so that they can develop their own templates.

Analyst to Integrator

The primary responsibility of functional leaders is to recruit, develop, and manage people who focus in analytical depth on specific business activities. An enterprise leader’s job is to manage and integrate the collective knowledge of those functional teams to solve important organizational problems.

Harald found himself struggling with this shift early on as he sought to address the many competing demands of the business. His sales and marketing VP, for example, wanted to aggressively go to market with a new product, while his head of operations worried that production couldn’t be ramped up quickly enough to meet the sales staff’s demand scenarios. Harald’s team expected him to balance the needs of the supply side of the business (operations) with those of its demand side (sales and marketing), to know when to focus on the quarterly business results (finance) and when to invest in the future (R&D), to decide how much attention to devote to execution and how much to innovation, and to make many other such calls.

Once again, executives need general knowledge of the various functions to resolve such competing issues, but that isn’t enough. The skills required have less to do with analysis and more to do with understanding how to make trade-offs and explain the rationale for those decisions. Here, too, previous experience with cross-functional or new-product development teams would stand newly minted enterprise leaders in good stead, as would a previous apprenticeship as a chief of staff to a senior executive. But ultimately, as Harald found, there is no substitute for actually making the calls and learning from their outcome.

There is no substitute for actually making the calls and learning from their outcome.

Tactician to Strategist

In his early months, Harald threw himself into the myriad details of the business. Being tactical was seductive—the activities were so concrete and the results so immediate. Consequently, he lost himself in the day-to-day flow of attending meetings, making decisions, and pushing projects forward.

The problem with this, of course, was that a core part of Harald’s new role was to be strategist-in-chief for the unit he now led. To do that, he had to let go of many of the details and free his mind and his time to focus on higher-level matters. More generally, he needed to adopt a strategic mind-set.

How do tactically strong leaders learn to develop such a mind-set? By cultivating three skills: level shifting, pattern recognition, and mental simulation. Level shifting is the ability to move fluidly among levels of analysis—to know when to focus on the details, when to focus on the big picture, and how the two relate. Pattern recognition is the ability to discern important causal relationships and other significant patterns in a complex business and its environment—that is, to separate the signal from the noise. Mental simulation is the ability to anticipate how outside parties (competitors, regulators, the media, key members of the public) will respond to what you do, to predict their actions and reactions in order to define the best course to take. In Harald’s first year, for instance, an Asian competitor introduced a lower-cost substitute for a key resin product his unit made. Harald needed not only to consider the immediate threat but also to think expansively about what the competitor’s future intentions might be. Was the Asian company going to use this low-end product to forge strong customer relationships and progressively offer a broader range of products? If so, what options should Harald’s unit pursue? How would the competitor respond to what Harald chose to do? Those were not questions he had been responsible for as head of marketing and sales. In the end, after analyzing various courses of action with his senior team, he chose to lower prices, forgoing some current profits in an effort to slow the loss of market share—a move he did not live to regret.

Are strategic thinkers born or made? The answer is both. There’s no doubt that strategic thinking, like any other skill, can be improved with training. But the ability to shift through different levels of analysis, recognize patterns, and construct mental models requires some natural propensity. One of the paradoxes of leadership development is that people earn promotions to senior functional levels predominantly by being good at blocking and tackling, but employees with strategic talent may struggle at lower levels because they focus less on the details. Darwinian forces can winnow strategic thinkers out of the developmental pipeline too soon if companies don’t adopt explicit policies to identify and to some degree protect them in their early careers.

Bricklayer to Architect

Too often, senior executives dabble in the profession of organizational design without a license—and end up committing malpractice. They come into their first enterprise-level role itching to make their mark and then target elements of the organization that seem relatively easy to change, like strategy or structure, without completely understanding the effect their moves will have on the organization as a whole.

About four months into his new role, for example, Harald concluded that he needed to restructure the business to focus more on customers and less on product lines. It was natural for him, as a former head of sales and marketing, to think this way. In his eyes it was obvious that the business was too rooted in product development and operations and that its structure was an outdated legacy of the way the unit had been founded and grown. So he was surprised when his restructuring proposal was met first with stunned silence from his team and then with vociferous opposition. It rapidly became clear that the existing structure in this successful division was linked in intricate and nonobvious ways to its key processes and talent bases. To sell the company’s chemicals, for instance, the salespeople needed to have deep product knowledge and the ability to consult with customers on applications. A shift to a customer-focused approach would have required them to sell a broader range of complex products and acquire huge amounts of new expertise. So while a move to a customer-focused structure had potential benefits, certain trade-offs needed to be evaluated. Implementation would, for instance, require significant adjustments to processes and substantial investments in employee retraining. These changes demanded a great deal of thought and analysis.

As leaders move up to the enterprise level, they become responsible for designing and altering the architecture of their organization—its strategy, structure, processes, and skill bases. To be effective organizational architects, they need to think in terms of systems. They must understand how the key elements of the organization fit together and not naively believe, as Harald once did, that they can alter one element without thinking through the implications for all the others. Harald learned this the hard way because nothing in his experience as a functional leader had afforded him the opportunity to think about an organization as a system. Nor did he have enough experience with large-scale organizational change to develop those insights from observation.

In this Harald was typical: Enterprise leaders need to know the principles of organizational change and change management, including the mechanics of organizational design, business process improvement, and transition management. Yet few rising executives get any formal training in these domains, leaving most of them ill equipped to be the architects of their organizations—or even to be educated consumers of the work of organizational development professionals. Here Harald was once again fortunate in having—and having the sense to rely on—an experienced staff that offered him cogent advice about the many interdependencies he had not originally considered. Not all new enterprise leaders are that lucky, of course. But if their companies have invested in sending them to executive education programs that teach organizational change, they’ll be better prepared for this shift.

How Do I Evaluate a Sales Executive? Enterprise leaders need to evaluate the work of all their functional executives, not just those in the same area they came from. A simple template that systematically lists the most important metrics to track for a particular function, as well as which ones indicate trouble is brewing, will help new leaders get up to speed. Here is an example of a template for sales: Core Performance Metrics Sales of key products versus competitors’ key products Market share growth in key products Execution against business plan commitments People Management Metrics Vacancy rate by region or district Rate of internal promotions and strength of internal succession pipeline Number of regrettable employee losses and the reasons for them Success in recruiting and selection Customer Metrics Customer satisfaction and retention rates Evidence of understanding purchasing patterns Average amount of salesperson interaction with customers Warning Signs Regrettable losses of sales personnel Flattening or declining sales Lack of internal development for future sales leaders Internal promotions with poor results Inability to communicate product advantages and disadvantages Poor assessment of the organization’s strengths and weaknesses Lack of time in the field or interactions with customers Lack of partnering skills with marketing and other key functions

Problem Solver to Agenda Setter

Many managers are promoted to senior levels on the strength of their ability to fix problems. When they become enterprise leaders, however, they must focus less on solving problems and more on defining which problems the organization should be tackling.

To do that, Harald had to perceive the full range of opportunities and threats facing his business, and focus the attention of his team on only the most important ones. He also had to identify the “white spaces”—issues that don’t fall neatly into any one function but are still important to the business, such as diversity.

The number of concerns Harald now had to consider was head-spinning. When he had run sales and marketing, he had gained some appreciation for how difficult it was for business heads to prioritize all the issues thrown at them in any given day, week, or month. Still, he was surprised by the scope and complexity of some of the problems at this level. He wasn’t sure how to allocate his time and immediately felt overloaded. He knew he needed to delegate more, but he wasn’t clear yet about which tasks and assignments he could safely leave to others.

You may be surprised by the intensity of the attention at center stage and the almost constant need to keep up your guard.

The skills he had honed as a functional leader—mastery of sales and marketing tools and techniques, organizational know-how, and even the ability to mobilize talent and promote teamwork—were not enough. To work out which problems his team should focus on—that is, to set the agenda—he had to learn to navigate a far more uncertain and ambiguous environment than he was used to. He also needed to learn to communicate priorities in ways his organization could respond to. Given his sales and marketing background, Harald struggled less with how to communicate his agenda. The challenge was figuring out what that agenda was. To some degree he just had to learn from experience, but here again he was aided by the members of his team, who pressed him for guidance on issues they knew he needed to consider. He also could rely on the company’s annual planning process, which provided a structure for defining key goals for his unit.

Warrior to Diplomat

In his previous roles, Harald had focused primarily on marshaling the troops to defeat the competition. Now he found himself devoting a surprising amount of time to influencing a host of external constituencies, including regulators, the media, investors, and NGOs. His support staff was bombarded with requests for his time: Could he participate in industry or government forums sponsored by the government affairs department? Would he be willing to sit for an interview with an editor from a leading business publication? Could he meet with a key group of institutional investors? Some of these groups he was familiar with; others not at all. But what was entirely new to him was his responsibility not just to interact with various stakeholders but also to proactively address their concerns in ways that meshed with the firm’s interests. Little of Harald’s previous experience prepared him for the challenges of being a corporate diplomat.

What do effective corporate diplomats do? They use the tools of diplomacy—negotiation, persuasion, conflict management, and alliance building—to shape the external business environment to support their strategic objectives. In the process they often find themselves collaborating with people with whom they compete aggressively in the market every day.

To do this well, enterprise leaders need to embrace a new mind-set—to look for ways that interests can or do align, understand how decisions are made in different kinds of organizations, and develop effective strategies for influencing others. They must also understand how to recruit and manage employees of a kind that they have probably never supervised before: professionals in key supporting functions such as government relations and corporate communications. And they must recognize that these employees’ initiatives have longer horizons than the ongoing business, with its focus on quarterly or even annual results, does. Initiatives like a campaign to shape the development of government regulation can take years to unfold. It took Harald a while to understand this, as his staffers educated him about how painstakingly they managed issues over protracted periods of time and how they periodically bemoaned the results when someone took his eye off the ball.

Supporting Cast Member to Lead Role

Finally, becoming an enterprise leader means moving to center stage under the bright lights. The intensity of the attention and the almost constant need to keep up his guard caught Harald by surprise. He was somewhat shocked to discover how much stock people placed in what he said and did. Not long after he first took the job, for example, he met with his vice president of R&D and mused about a new way of packaging an existing product. Two weeks later a preliminary feasibility report for it appeared on his desk.

In part, this shift is about having a much greater impact as a role model. Managers at all levels are role models to some degree. But at the enterprise level, their influence is magnified, as everyone looks to them for vision, inspiration, and cues about the “right” behaviors and attitudes. For good or ill, the personal styles and quirks of senior leaders are infectious, whether they are observed directly by employees or indirectly transmitted from their reports to the level below and on down through the organization. This effect can’t really be avoided, but enterprise leaders can make it less inadvertent by cultivating more self-awareness and taking the time to develop empathy with subordinates’ viewpoints. After all, it wasn’t so long ago that they were the subordinates, drawing these kinds of inferences from their own bosses’ behavior.

Then there is the question of what it means, practically speaking, to lead large groups of people—how to define a compelling vision and share it in an inspiring way. Harald, already a strong communicator who was used to selling ideas along with products, still needed to adjust his thinking in this regard (though perhaps less so than some of his counterparts). In his previous job he had maintained a reasonable degree of personal, albeit sometimes sporadic, contact with most of his employees. Now that he was overseeing 3,000-plus people scattered around the globe, that was simply impossible.

The implications of this became clear as he worked with his team to craft the annual strategy. When the time came to communicate it to the organization, he realized that he couldn’t simply go out and sell it himself; he had to work more through his direct reports and find other channels, such as video, for spreading the word. And after touring most of the unit’s facilities, Harald likewise worried that he’d never really be able to figure out what was happening on the front lines. So rather than meet just with leaders when he made site visits, he instituted brown-bag lunches with small groups of frontline employees and tuned in to online discussion groups in which employees could comment on the company.For the most part, the seven shifts involve switching from left-brain, analytical thinking to right-brain conceptual mind-sets. But that doesn’t mean enterprise leaders never spend time on tactics or on functional concerns. It’s just that they spend far, far less time on those responsibilities than they used to in their previous roles. In fact, it’s often helpful for enterprise leaders to engage someone else—a chief of staff, a chief operating officer, or a project manager—to focus on execution, as a way to free up time for their new role.

As for Harald, his story ended well. He was fortunate to be working for a company that believed in leadership development and to have an experienced team that was able—and willing—to give him effective counsel. So despite the many bumps in the road, the business continued to thrive, and Harald eventually found his stride as an enterprise leader. Three years later, armed with all this experience, he was asked to take over a much larger, struggling unit of the company and initiated a successful turnaround. Reflecting back, he says, “The skills that got you where you are may not be the requisite skills to get you to where you need to go. This doesn’t discount the accomplishments of your past, but they will not be everything you need for the next leg of the journey.”