The responses of the administration and governors of the many states to the COVID crisis has put the subject of leadership under a microscope. What might family businesses learn from the lessons playing out during this crisis?

Many patriarchs and matriarchs of first-generation family businesses struggle over the issue of who in the next generation will receive the nod to lead. A common folly on the part of founding entrepreneurs is to allow family issues and personal prejudices to dictate business decisions.

For instance, the founder may pick a second-generation successor based upon rank in age, gender, issues of sibling rivalry, or longevity in service to the family business. Rarely is a more fundamental assessment made focusing on the core elements of what makes for excellent leadership.

Entrepreneurs are special. The magical ability of founders to create something from nothing, however, often comes wrapped in a “force of nature” personality with leadership stemming from the founder’s essential and omnipotent role in the new organization created.

For second generation successors, however, the process of “founding” having occurred long ago, the same is usually not true. Additionally, that “entrepreneurial magic” is rarely genetic, and, the “force of nature” personality often spawns more sober, studied souls.

There are two brands of leadership. One is centered on power and relies on force; the other, though also centered on power, relies on persuasion.

Leadership by force is blunt, sometimes crude, and easier to assert. Most are first introduced to this type of leadership as children by the schoolyard bully.

Persuasive leadership, on the other hand, requires great skill, emotional intelligence, and diplomacy, and is harder to achieve. Dwight Eisenhower famously described leadership as: “the art of getting someone else to do something you want done because he wants to do it.”

History has taught that persuasive leadership is far superior to its lesser cousin in rallying the minds and hearts of those being led.

What, then, are the core qualities called for to create a culture based upon persuasive leadership, and what characteristics might the patriarch or matriarch look for in identifying who in the next generation best fits the bill? There are three elements which are the bedrock of excellent leadership.

1. Integrity.
Communication is the currency of organized action. A leader must be believed and trusted. When a leader’s honesty and motives are questioned, effective persuasive leadership is not possible and organizational culture and mission suffer.

In a Harvard Business Review article, the publication reported on a survey it conducted of the CEOs of Berkshire Hathaway operating subsidiaries — almost all of whom reported directly to Buffett. The article reported that the subsidiary CEOs uniformly agreed that the culture of the company “promotes honesty, integrity, a long-term orientation, and an emphasis on the customer. They strongly believed that this culture is influenced by the tone at the top. According to one respondent, the main messages conveyed by Buffett are: 1) Never lose reputation; 2) Run your business as if it is your family’s only asset for the next 50 years; and 3) Integrity comes first.”

2. Humility.
Many a new leader suffers from the expectation that she needs to know everything and be prepared to respond to any issue. This is especially true of second-generation leaders in family businesses who had leadership modeled for them by the founding entrepreneur (who, for the most part, did know everything then needed to be known).

Excellent leaders have the courage and confidence to understand and accept the boundaries of their knowledge and capability. They possess a degree of self-knowledge that allows them to understand how their strengths, weaknesses and natural tendencies might advance or hinder a particular agenda or transaction. They are not afraid to seek help through augmenting the team, delegating, or deferring where appropriate. In short, an excellent leader does not think of herself as the smartest person in the room.

In his book, At Ease: Stories I Tell My Friends, Eisenhower advises, “Always try to associate yourself with and learn as much as you can from those who know more than you do, who do better than you, who see more clearly than you.”

3. Acceptance of responsibility.
The idea that leaders bear ultimate responsibility is an old one. The maritime tradition that the captain must go down with the ship exists, not because the captain in all cases is necessarily personally culpable for every bad thing that may happen to the vessel; rather, the principal is rooted in morality.

Justice dictates that the captain who, more than any other individual, has the power to create and control the environment in which the bad event occurred, should bear the ultimate consequence of that event. She, after all, had the power to choose her team, establish operating policies, and shape organizational culture.

It is no coincidence that the three core elements of leadership described all have to do with personal virtue. Though excellent leadership requires additional skills and attributes, the absence of these three core elements will corrupt the culture, deface the organization, and burden the mission.

For, as Aristotle taught: Character is destiny.

Until next time…
The Owl

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