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Best Business Books 2003: Leadership

The Needs of the Followers

(originally published by Booz & Company)

This year’s harvest of leadership books reflects the performance of the current crop of leaders in the public and private sectors: mostly mediocre. We had trouble finding even six out of the dozen of new titles that we could recommend without qualification — and the best that can be said for most of them is that they faithfully repeat unobjectionable advice found in volumes already on our shelves. However, we note one positive thematic trend running through the books we’ve examined: The marketplace of ideas is continuing to define leadership not by vision or charisma, but by execution. And increasingly, execution is seen not as a bloodless operational skill, but as a collection of human traits. Most encouraging, authors seem to be focusing more on the legitimate needs of followers and less on the ego requirements of leaders.

Fortunately, there are a few good leaders, and a few good new leadership books.

Louis V. Gerstner Jr. gets the nod on both counts. His Who Says Elephants Can’t Dance? Inside IBM’s Historic Turnaround (HarperBusiness, 2002) is, to our minds, one of the best books written by a practitioner of the leadership art. Writing in plain English, and apparently without the help of a professional writer, Gerstner logically and analytically relates what he learned about leadership during his successful career as a top executive at American Express, RJR Nabisco, and IBM. He translates those lessons into a set of guiding principles, and shows how he applied them in the complex process of turning around IBM. Combining his principles with those offered in Larry Bossidy and Ram Charan’s Execution: The Discipline of Getting Things Done (which we reviewed last year in “Leadership Theory and Practice: So Happy Together,” s+b, Fourth Quarter 2002) would constitute a useful playbook on how to transform almost any business.

Gerstner is not on an executive ego trip designed to convince readers how great a leader he was. Instead, he wants to educate us. Devoting minimal space to his own life, Gerstner quickly gets down to work telling us how he planned the unexpected (and, for a time, controversial) initial steps in the IBM makeover. Dismissing the “vision thing,” Gerstner explains how he decided on the following strategic priorities: keeping IBM together, changing its fundamental economic model (expenses needed to be reduced faster than its gross profits were declining), selling underperforming assets to raise cash, and reengineering.

Reengineering’s Pain and Payoff
Although IBM saved billions by reengineering, Gerstner frankly admits the process was painful, quoting a colleague’s statement that “reengineering is like starting a fire on your head and putting it out with a hammer.” He describes key elements of the reengineering process in practical detail: eliminating bureaucracy as quickly as possible; decentralizing decision making while allowing for central strategic direction setting; creating a common focus on the customer; and right-sizing quickly after cutting costs. In carrying out these changes, Gerstner says he was guided by the following leadership precepts:

  • Manage by principle, not process.
  • The marketplace is the driving force behind everything IBM does.
  • Look for people who work to solve problems, help colleagues, and don’t hide behind staff; sack the “politicians.”
  • Stay heavily involved in the company’s strategic direction; let others implement.
  • Reduce hierarchy and committees; create new leadership teams.
  • Lead change from the top.
  • Think and act with a sense of urgency.
  • Accountability must replace looking good.
  • Set priorities, with sooner being better than perfect.

These would be truisms and platitudes if it weren’t for Gerstner’s willingness to spell out what they mean in practice. For example, he says a corporation is nothing more than the collective capacity of its people to create value, a capacity that is a byproduct of company culture — how people work, how they interact, and what motivates them. Although it is easy to identify key indicators of culture — does it focus on risk taking or consensus? is it driven by teamwork or the cult of an individual star? — Gerstner says a leader can neither mandate changes in culture from the top, nor reengineer them through change management processes. Instead, the leader must create conditions that enable people to adapt to changes in the operating environment. Keys to doing that include creating strategies with analytical underpinnings (“competitive and market intelligence wins wars”) and insisting on disciplined reporting and accountability (“people respect what you inspect”).

Finally, Gerstner describes four kinds of people: those who make things happen; those to whom things happen; those who watch things happen; and those who don’t even know that things are happening. The book offers useful advice to would-be leaders on how to be in the first category.

Leadership (Miramax, 2002), by former New York City Mayor Rudolph W. Giuliani and Ken Kurson, attempts to describe leadership techniques and principles useful to executives in both government and industry. Some of Giuliani’s principles sound like Gerstner’s: He says leaders should surround themselves with great people, see things for themselves rather than relying on others, and organize around a purpose. Like Gerstner, he stresses accountability, stating that leaders need relevant data, performance indicators, and regular meetings to probe results. Both authors stress the importance of understanding enough of the fundamentals and details of a business to distinguish between authentic and make-believe experts, between those who are truly competent and those who talk a good game: “You can’t fake expertise.”

In a chilling chapter on the events of September 11, 2001, Giuliani discusses how relentless preparation, a tradition of working across departmental boundaries, and scenario planning helped his team react positively to the almost unimaginable. “You must prepare for everything you can think of, because no one, no matter how gifted, can perform without careful preparation,” he writes.

Giuliani’s advice tends to be sound, if not original. His advice to leaders is raise the bar, underpromise and overdeliver, “don’t assume a damn thing,” always sweat the small stuff, stand up to bullies, and control your emotions when under pressure. Leadership is an important book for leaders in government, and it offers a few useful lessons to those in business. Unfortunately, all Giuliani’s experiences and examples are from government, and not all translate to the private sector.

Academic Perspectives
Compared with the memoirs of CEOs and mayors, leadership books by scholars tend to be derivative and deadly dull. Yet, because their authors bring impressive credentials to the subject, four books among this year’s crop promised to be different. Harvard professor Rakesh Khurana is a new voice in the field; he offers data to support unconventional and controversial conclusions. Pulitzer Prize–winning historian James MacGregor Burns is the most distinguished scholar of our era to address the subject of leadership. Mihaly Csikszentmihalyi’s notion of “flow” is one of the hottest ideas in psychology today. And organizational theorist Edward E. Lawler III, recipient of the Michael Losey Award — the closest thing there is to a Nobel Prize for management — brings 40 years of quality research to his subject.

Khurana’s Searching for a Corporate Savior: The Irrational Quest for Charismatic CEOs (Princeton University Press, 2002) takes the unorthodox position that the CEO labor market is inefficient because it has too few buyers and sellers. He argues that most CEO search processes have lost legitimacy and are not transparent to outsiders and investors. Khurana claims that boards and executive search firms look for outsiders as saviors, valuing charismatic attributes more highly than relevant skills and experience. Using data on CEO turnover at 850 U.S. firms, the author concludes that top executives have no significant impact on performance. That being so, searches for outside CEOs are a waste of money.

Khurana lumps people who study executive performance into three categories: those who believe CEOs are important, those who feel CEOs are so constrained in what they can do that they have little impact, and those who say it all depends. Citing the national fixation on Alan Greenspan’s supposed impact on the economy, he argues Americans have a cultural bias toward the first category and thus overestimate the contribution of individual business leaders.

Khurana questions the conventional wisdom that the job of leaders is to be Giuliani-like, helping organizations face up to crises and guiding them to the future by way of motivating visions. Because boards believe that, he says CEO job descriptions end up as calls for change agents with charisma, chemistry, and executive presence. However, although Khurana amasses data to support his arguments, somehow they don’t ring entirely true in light of experience. Many outside CEO hires — Lou Gerstner, for one — are far more analytical than charismatic. Clearly, Khurana is correct that Americans overrate charisma and err in portraying leadership as a solo act. However, few boards actually seem to focus on charisma in CEO searches, looking instead for related experience and the demonstrated ability to execute and implement. And while he is probably correct that many qualified insiders are overlooked in CEO successions, there are often good reasons to look outside. When disruptive technology, regulatory change, or new competitors alter the fundamentals of a business, an outsider is often required to lead a successful transformation, as the IBM board’s appointment of Gerstner illustrates.

James MacGregor Burns’s seminal work, Leadership (Harper & Row, 1978), introduced the concept of “transforming leadership,” which he distinguishes from “transactional leadership” primarily because it has a moral dimension: “Transforming leaders define public values that embrace the supreme and enduring principles of a people.” Such leaders address the wants of the most wanting, and their ranks include such notables as Gandhi, Jefferson, Lincoln, FDR, and Mandela. The book was an attempt to deal with the tough philosophical question of whether Hitler, Stalin, and Mao should be thought of as great leaders, even if they were bad men. Most critics concluded that Burns’s effort to resolve that question was a useful and brilliant failure.

Collective Activity
It is fascinating to watch as Burns again attempts to come to grips with the complexities of leadership. In Transforming Leadership: The New Pursuit of Happiness (Atlantic Monthly Press, 2003), he tries to wrestle it down once and for all with a grand theory. The premise of the current book is that leadership is the “X factor” in historic causation, the key to understanding why things happen. Although most historians focus on the contributions of individual leaders, Burns is wary of the traditional approach. He cites Erik Erickson’s concern that fearful people become “charisma hungry” in times of crisis, and notes that in most instances the net result is simply gratification of the leader’s “own psychological hunger.” But wary as Burns is of charisma, and as much as he claims leadership is a collective activity, he still seems to equate leadership with individual actions. His central point is that those actions must be undertaken for the good of the followers, not for the benefit of the leader.

Burns doesn’t shrink from the complexity and paradoxes of leadership — but his fascinating historical examples don’t necessarily illuminate the subject’s dark corners. The more he describes the categories into which he divides leadership, the murkier his distinctions become. Were LBJ and Queen Elizabeth I transformational or transactional leaders? Unhelpfully, Burns makes the case that they were both.

Burns still is capable of the elegant prose that brought tears to the eyes of those who read his masterful Vineyard of Liberty: The American Experiment (Alfred A. Knopf, 1982), and he offers numerous apposite citations, for example, Lao Tzu on the characteristics of the moral leader:

Bearing, yet not possessing
Working, yet not taking credit
Leading, yet not dominating
This is the Primal Virtue

Sadly, Burns studiously avoids the subject of business leadership. It would be instructive to see him explore the business implications of his central thesis, the question raised by Khurana in a different context: Is leadership the “X factor” in the success of a corporation? And Burns’s view that the role of leadership “is to create and expand the opportunities that empower people to pursue happiness for themselves” would have been a perfect segue into an exploration of business leadership.

In fact, providing happiness for followers is Mihaly Csikszentmihalyi’s starting point in Good Business: Leadership, Flow, and the Making of Meaning (Viking Penguin, 2003). Csikszentmihalyi (pronounced “CHICK-sent-me-high-ee”) argues that happiness equates with “flow,” that feeling enjoyed by artists, writers, and others who do creative work when they are so absorbed in what they do that they lose track of time and place. In this blissful condition, all one’s worries and concerns are set aside. Skilled athletes call this feeling “being in the zone.” We feel confident predicting Csikszentmihalyi’s name will never become a household word, but his concept of “flow” is gaining currency.

Csikszentmihalyi has a creative take on the world, and, in his previous books, he helped remove psychology from its narrow analytical and experimental boxes and apply it to the big issues facing individuals and society. Here his argument is simple and on target: Life is about the development of individual potential, and for all practical purposes, the place where that potential can be realized is inside business organizations. Thus, if leaders have a social responsibility, it is to provide employees with the opportunity and conditions under which they can fulfill their potential.

For all that, the author has written a book that feels 20 years out of date. Arguing that corporate leaders have responsibilities to employees, customers, and society, he approvingly cites business heroes of decades past. Although the people he mentions were all farsighted, brave, and virtuous leaders, and they deserved their hero status at the time, the question to be asked today about them is why they failed. They failed to convert other executives to their noble causes and, in most cases, even failed to leave lasting legacies in their own organizations. It would be useful if Csikszentmihalyi had investigated why: Were they ineffective communicators? Did they fail to practice what they preached? Was society not yet ready for their messages? Or were their ideas flawed? Indeed, Csikszentmihalyi seems unaware of their track records, and unaware of the gallons of ink expended on the subject of business’s social responsibility in the 1970 to 1990 time frame.

Moralizing and Mush
It also would have been useful had Csikszentmihalyi addressed the issue of why, given the lip service paid by CEOs to the importance of “their people,” so few of them do much to create work environments in which employees can truly grow. One wonders why he cites as authorities half a dozen hard-nosed CEOs whose policies were the antithesis of the idealistic ones he advocates. Alas, the problem seems to be that he — like his equally innovative co-researcher, Harvard’s Howard Gardner — knows too little about business to offer useful advice to corporate leaders. What we get here is a disappointing mixture of moralizing and mush. This is unfortunate because, when all the detritus has been washed through his sluice, a true golden nugget remains. If executives were to assume responsibility for creating conditions under which employees could develop and find meaning, it is highly probable that corporations would become more effective and productive. Although Csikszentmihalyi tries to show how to apply the concept of flow to the design of organizations and work tasks, he fails to make his argument convincingly and seems unaware of the numerous and well-documented workplace experiments undertaken in the last third of the 20th century that addressed the very problems he identifies.

Doing just that has been the lifelong contribution of Edward Lawler, although the title of his 34th book may give a wrong impression about its contents. Treat People Right! How Organizations and Individuals Can Propel Each Other into a Virtuous Spiral of Success (Jossey-Bass, 2003) is not a manual for leaders bent on buying employee loyalty with hot tubs, beer busts, and casual Fridays. Instead, it is a hardheaded compendium of what has been learned about organizational effectiveness over the last 40 years, during which Lawler has arguably been the leading researcher in the field. Lawler describes what leaders need in order to attract, retain, develop, motivate, and reward employees. In so doing, he never mentions the usual suspects: charisma, communication, or control. Instead, he says the goal of a leader is to create an effective organization, one in which strategy, structure, and systems are aligned in such a way that it is in employees’ self-interest to work productively.

There is no gee-whiz or wham in the book; if it were any less sexy, its jacket would be a plain brown wrapper. Instead, there are pages of research-based advice on the routine — and real — work of leadership. Lawler explains in specific terms why leaders need to devise and implement reward systems that reinforce corporate strategy, design, and core values. Then he shows how that is done, documenting how bonuses are more effective than merit pay, explaining why it is better to determine pay increases by skills acquired than by individual performance, and warning that forced distributions — rating systems requiring supervisors to divide people into “walking on water,” “swimming,” and “drowning” categories — are counterproductive, even if currently fashionable. No arm waving or exhortations are involved in the exposition: Lawler simply presents the facts about what works and what does not.

This book is a useful reminder that leadership isn’t all glory and games; there is nothing here about headline-making acquisitions or dramatic bet-the-company investments. He acknowledges that many leadership tasks are not only dull but difficult. Lawler deals with the hated task of performance appraisal, both unpleasant and almost impossible to do fairly and effectively, in the most practical manner: He reviews best practices and presents the research data about the pros and cons of each. For leaders looking for a ton of useful advice, this is the book.

It is hard to imagine how these six authors could have written books on the same subject that are so different, yet their perspectives converge on one important point: The role of leaders is to create environments in which their followers can realize their own potential. In different ways, each author reminds us that leadership is about addressing the needs of followers. That point bears repeating because, apparently, it needs to be personally rediscovered by every would-be leader.

Author profiles:

Bruce A. Pasternack ( is a senior vice president with Booz Allen Hamilton in San Francisco. He is the coauthor, with Albert J. Viscio, of The Centerless Corporation: A New Model for Transforming Your Organization for Growth and Prosperity (Simon & Schuster, 1998).
James O’Toole ( is Research Professor in the Center for Effective Organizations at the University of Southern California and has written extensively about political philosophy, corporate culture, and leadership. He has written 13 books, including Leadership A to Z: A Guide for the Appropriately Ambitious (Jossey-Bass, 1999).


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