There are four fundamental areas of responsibility for leaders in every organisation. Three are essential, and one is the difference between good and great organisations.
All organisations I’ve worked with or studied, of all types, can be boiled down to four fundamental areas of responsibility for leaders.
In order of importance: Purpose, Leadership, Strategy and Culture.
- The first three areas are essential to succeed, but aren’t guarantees.
- The fourth, culture, is the difference between good and great.
- Each area is interconnected, and each influences the other areas.
- Each area must be considered in the context of the external environment.
- Each area has many different internal functions and activities that are different for each team or organisation.
- It’s a job of leaders to focus on each area to help the organisation succeed.
- Each can amplify performance and outcomes, both good and bad.
These areas and their attributes are common to every organisation, from the smallest team to the largest institution. They apply to profit and not-for-profit (NFP) organisations, alike. They apply to anyone trying to achieve something important together – a family, sporting teams, community groups, and every project team.
How leaders work on each area
There are two important distinctions:
- Leaders directly control and set the Purpose, Leadership and Strategy areas.
These areas are within our Circle of Control. - Leaders indirectly influence the Culture through the activities in the other three areas.
Leaders create the conditions for Culture to manifest. Culture is a “second order effect” (ie, a consequence) of what leaders do re Purpose, Leadership and Strategy.
Purpose
Purpose is the raison d’être – a reason for existence. It is fundamental to an organisation, providing focus and meaning.
Purpose is about creating value for a set of beneficiaries.
This is the most essential of the four fundamental areas. Purpose is the “why”. The first responsibility of leaders is to ensure there is a clear reason for the organisation to exist, whether temporarily or in the long term. It is the first and most basic part of an organisation being fit for the environment (in the Darwinian sense).
Purpose always has a value imperative. The only reason for an organisation to exist is to create value for someone. There may be one or many beneficiaries of value from an organisation. And each beneficiary may benefit in different ways. Some people may not even realise that an organisation exists to give them benefit: a research organisation, for example.
Without value or beneficiaries, there is no valid purpose or raison d’être. Leaders must ensure that the purpose remains valid. They must track, adapt and evolve the organisation to fit the environment. Leaders must understand what beneficiaries value and align the organisation to deliver. They must also ensure a shared purpose for the people who are inside the organisation.
Failure of leaders to do any of these things will mean the organisation will soon cease to exist.
An organisation will continue to exist as long as someone benefits from it. The oldest businesses in the world have been delivering value for centuries. They sell products people want, and make money for owners. Some organisations may have done business in the past, but only continue to exist because they have valuable tax losses. They’re still around because their purpose, value and beneficiaries have changed.
Leadership
Leadership is a dynamic system that enables people to progress. The purpose of leadership is to help people achieve things that matter to them. It has four elements of people, purpose, value and trust.
- People – there are leaders, followers and externals.
- Purpose – the leaders confirm and define this with the group.
- Trust – builds, reinforces and enables the system.
- Value – the benefits delivered by the system for the people.
Leaders provide leadership to followers. And the first thing leaders must do is confirm a valid purpose (see above).
Leadership is not a guarantee of success, but it’s absence almost guarantees failure. An organisation will decline and fail without effective leadership.
Without leadership an organisation will become unmoored from a defining purpose. It will lose relevance. The value it delivers will shrink and lose importance. And the people it serves will move on without being replaced.
Counterpoint: leaders will sometimes find that the there is no benefit continuing an organisation.
Good leadership accepts reality and sometimes that means being the one to provide a coup de grâce.
Strategy
Leaders must ensure progress. Strategy is a method to achieve desired outcomes. It is “a mixture of thought and action with a basic underlying structure… It includes 1) a diagnosis, 2) a guiding policy, and 3) coherent actions.” (Richard Rumelt).
Strategy can be simplified into three coherent elements
- What we see.
Leaders must correctly observe and understand the environment. And within this, critically, leaders must correctly decide what matters. This is strategic insight which provides focus for the organisation. Leaders must constantly calibrate their understanding of the constantly changing environment. - What we think.
Leaders must orient around the strategic insight. Effective leaders craft a strategic narrative which is a decision about what matters, why it matters, and how the organisation must behave in order to succeed. This should include a definition of success and a theory of victory. A theory of victory defines what must be done to make success possible, if not guaranteed. And this must be updated as new information is received. - What we do.
Leaders must build plans and direct the organisation to act. Plans focus effort, resources and activity on achieving goals. Goals are the things that matter to people in the organisation. Effective leaders monitor outcomes and adjust plans to help the organisation progress. That means watching outcomes, stopping some things, doubling down, or adding new things to the to-do list.
Luck is what happens when preparation meets opportunity.
Seneca
Without deliberate strategy, hope is the default strategy. Any progress will be a result of luck. Luck is an essential part of strategy – maybe even the first and most important part. But it’s not enough on it’s own.
Strategy is preparation. It helps an organisation make the most of whatever luck it enjoys, and pivot to embrace the reality it finds. Great strategy expands an organisation’s luck surface area. It makes an organisation look lucky.
Great strategy doesn’t guarantee success. But the absence of a coherent strategy greatly reduces the ability to survive and thrive on one’s own terms. In a competitive environment, it’s a contest of strategy. Winners have the better strategy.
Culture
Culture is what people do when no one is looking.
Herb Kelleher, founder of Southwest Airlines
Culture is the force multiplier.
Culture includes the beliefs, norms and behaviours of the people in the organisation.
An organisation may have a wonderful, valid and enduring purpose. It may have excellent leaders providing leadership for the group. And the organisation may develop and execute strategy very well.
But it may still fail. There is no guarantee of success.
Culture can be a quality that brings something special and unique to performance and outcomes.
It’s je ne sais quoi. And that can be good or bad.
And it’s not always easy to see on the surface or at first glance. It’s in the unconscious thinking patterns and behaviours of a group. But once you see it you won’t be able to miss it. You can hear some of it in what people say, but will know what’s real by what they do.
There are two places where culture is both transparent and important: relationships and adversity.
Relationships
There is a good analogy for the quality of relationships: a three legged stool. Each leg of the stool is one of the “three Cs” of relationships: communication, commitment and care. When one of those legs is wobbly – or missing – then it all falls over.
Culture is in the little things of relationships. The care that people take in whatever they do. The consideration and compassion shown to people in the group, and to those outside. A smile when passing and a kind word. It’s in the details.
It can be seen in the commitment to each other and to the organisation’s purpose. Showing up for the activity, positive and ready to contribute, eager to support the team.
Culture is what people care about in relationships and how they show care to each other. This is where values are on show: trust, teamwork, accountability, positivity and others. It’s not just the words or hollow statements – it’s the behaviours.
Adversity
What matters isn’t what happens when things are going well. Anyone can put on a smile and play nice when life is easy and comfortable.
It’s when things are going bad that you get to see true culture. When people are under stress, the true underlying thinking patterns come out in behaviours for all to see.
Culture can a massive amplifier of performance or a poisonous detractor. In the positive it’s a differentiator that enhances productivity and provides competitive advantage. But in the negative, it undermines effort, steals energy, destroys trust and motivates people to leave the group.
Leaders can – and must – set the conditions for the desired culture to grow. But most organisations aren’t cults and secure leaders aren’t in the business of thought control. What leaders do to set purpose, provide leadership, and design and implement strategy all influence how others think and behave.
And because of the leader’s role throughout these four areas, the leader’s own behaviour is the most important and powerful of influences.
Which is why leadership matters so much.