The weakness of the “leader-based organization”

While business and non-profit organizations like other sectors of society have their stars and leaders who having followings and gain great praise, too often in my observation the force of the boss's personality can be an impediment in getting the organization to the right place for the best results. 

What a strong leader can bring to an organization is undisputable.  Strategic clarity and consistency; focusing management and workers on what's important; establishing and maintaining an effective culture; providing the drive and incentives to achieve implementation; visibility in key markets and with stakeholders, investors and the media - these and more are what a strong leader can provide the organization.  Certainly Bill Gates or earlier Jack Welch have been strong leaders who drove Microsoft and General Electric to great success by these measures.

But a "leader-based organization" has two inherent weaknesses, in my view.

First, a "leader-based organization" depends much on the leader being right.  The organization is oriented to "follow the leader."  This means the organization can be led to Steve Jobs/Apple-like success, or it can be led to Eddie Lampert/Sears-like disappointing results and possible failure.

Ultimately, these kinds of leaders are shown to be wrong and are shown the door - with recognition that it does not always work this way in our perverse CEO culture where the CEO's job is not always at risk when the organization goes into a tailspin.

The second weakness of the "leader-based organization" is more pernicious and much harder to see.  It is the curse, as we used to say at the University of Chicago Graduate School of Business way back when I attended, of "sub-maximization."  Simply, might an organization that taps more of the knowledge, expertise and vision of its management and workforce in a dynamic process perform better over time than an organization dominated by a single leader? 

Research confirms that committees make better decisions than individuals.  Who’s to say that even a Microsoft might be delivering better results today had it had a little less Bill Gates and a little more "team" and process along the way.  I certainly can’t say...but we can speculate.  That's why the real success of leader-based organizations is so hard to sort out.  You get what you get from leader.  You know when it's good...but is it the best that could be had?

Here's a real life example from my consulting career.  I was called in to help a family-owned publishing company whose results had been slipping for years and finally the lack of dividends to the family members moved the board to ask for help.  What became clear was that the prime publication had been declining in profitability and share for years, but this had been partly masked by a new information service that had been growing and delivering some results.  OK, fix or drop the publication and grow the service, right?  Not that easy.  Turns out the same leaders had been at the helm of the company for decades, as had the same person been in charge of the publication.  What seemed like addressable product problems instead became a long, expensive struggle to convince the leader and the lieutenant they were wrong, and then failing that, to displace the leaders and the increasingly dysfunctional culture they had created. 

What was once a great company was run into the ground, because the leader was always right...even when he was wrong.  For years, the sub-maximization of the company's operations and results could be overlooked, until it was too late!