It may be overly simplistic to say that a company’s success depends on the quality of its communication and internal dialogue. But look at the top and you’ll see that a leader who is authentic is a leader who has inspired clear and honest communication.

It is critical that leaders understand who they are and how their identity affects their capacity to communicate (and to collaborate). Leaders need to model the kind of communication that they view as critical to the success of their organization. Once a leader has addressed his or her own communication challenges and shortcomings, he or she can begin to systematically address the barriers to effective, highly collaborative communication within the organization. Ultimately, it is the quality of the company’s dialogue that will determine how it receives the incoming flow of rapidly changing information. Whether the information confuses and overwhelms, or informs and inspires will have a direct impact on the decision-making process, and by extension, on the performance of the company.

The new leadership challenge

The dictum “Adapt or die” has never been more true. The complexity of globalization and technology are putting demands on leaders that render old models of leadership woefully inadequate. Leaders today must be highly flexible, comfortable with fast-changing environments and capable of utilizing multiple leadership styles.

These far-reaching developments have created unique challenges for leaders. The rapidity of change and subsequent increase in complexity have exceeded the ability of leaders to adapt. Today, perhaps the most critical factors for effective leadership are the capacity to embrace paradox, tolerate ambiguity, and/act flexibly. These factors determine a leader’s ability to master ongoing change and create sustainable, good performance. Significantly, this ability to adapt largely represents an emotional challenge rather than an intellectual one. Our work suggests that the only effective way to meet this emotional challenge is to attack and remove the critical emotional barriers that restrain effective leadership. This article will describe how an organization can remove such barriers.

We founded the Center for Advanced Emotional Intelligence (AEI) in 1995 based on advancements in the field of neuroscience. These advancements identified powerful new knowledge about the interaction between emotions, the intellect, and values, and the subsequent impact of this interaction on leadership. We found that we could help leaders increase their internal flexibility by addressing the emotional barriers inhibiting their ability to change. We saw this as the single most important issue for leaders to address to create a more effective corporate culture. But as the pace of change has continued to escalate, adapting has become exponentially more difficult – and even more essential to a company’s success.

The critical component of effective leadership today is the ability to see reality as clearly and as objectively as possible. This is a far more complex process than most leaders realize. Only those who have a stable and authentic sense of self, who know their blind spots, fears, and shortcomings, can view the unfolding of the world around them with equanimity and objectivity, and thus enable themselves to see the opportunities – and challenges – that arise. Without this self knowledge, and even if their business strategies and initiatives are right, leaders will be ineffective because their organizations will execute sub-optimally.

In the past five years, thinking and writing on leadership have converged on the reality that the key to adapting to change is a strong capacity for relationship-building and collaboration. As Thomas Friedman writes in The World Is Flat, “In the flat world, more and more business will be done through collaboration within and between companies, for a very simple reason: the next layers of value creation – whether in technology, marketing, biomedicine, or manufacturing – are becoming so complex that no single firm or department is going to be able to master them alone.”

It is our observation and strong belief that there is a direct relationship between a leader’s authentic sense of self and the effectiveness of collaboration in his/her organization. More than any other variable, the quality of dialogue within a company shapes its culture and affects its performance. Based on a decade of research and real world experience, we know that companies that achieve sustainable results have cultures that tolerate truth-telling and embrace dissent. And we know that the largest barriers to the creation of this kind of culture are directly linked to the emotional barriers of the leaders who run the company.

In 2001, Jim Collins published the results of a five-year study of over 1400 companies. In this study, described in his book, Good to Great, Collins strove to understand why certain companies were able to achieve extraordinary results over time. The “great” companies in his study averaged cumulative stock returns that were 6.9 times those of the general market over at least a fifteen year period: One key finding was that companies defined as “great” had, at their helm, leaders who were paradoxical in nature. He called them “Level 5 Leaders,” and defined them as having both fierce resolve and true humility.

Collins’ research concluded that there was a direct relationship between the quality of the dialogue within a company, the authenticity of the leader, and the sustainability of high performance. He writes:

“All good-to-great companies began the process of finding a path to greatness by confronting the brutal facts of their current reality… Your leadership personality can deter people from bringing you the brutal facts.”

Similarly, Peter Drucker recognized how critical high-quality communication and truth-telling were to the success of an organization. But Drucker also recognized the enormous challenge of developing leaders capable of leading in this kind of truth-telling environment. Drucker wrote, “At its most powerful, communication brings about ‘conversion,’ that is a change of personality involving values, beliefs, aspirations. But this is a rare existential event and one against which the basic psychological forces of every human being are strongly organized.” Drucker recognized how unlikely it is that most organizations will be able to make a “conversion,” a transformation of culture, which will produce sustainable high performance. The reasons for this are complex and deeply psychological. The complexity inherent in creating organizational transformation is one of the aspects of leadership least understood by executives.

What follows is an exploration of AEI’s model of leadership, one which we believe can remove the emotional barriers to success in a flat world. This model connects the five critical elements required for a company’s sustainable high performance: personality, leadership, collaboration, culture, and commitment. It explains how removing leaders’ emotional limitations enhances a company’s culture, particularly its capacity for collaboration, decision-making, and ultimately its performance. Removing the emotional barriers to performance ultimately creates an environment in which you can have unity without consensus.

Understanding our model requires some familiarity with the complexity of its theoretical base. Therefore, we will first discuss this theoretical base, using Jim Collins’ important findings as a starting point. We hope that this discussion will give you an appreciation of the complexity behind both leadership development and the ability to capitalize on the human side of organizations. We hope to provide you with a new way to think about leadership and corporate culture that is practical and applicable to your organization.

The limitations of the Good to Great model: Creating a Level 5 environment

Good to Great has added invaluable new knowledge to the field of leadership and culture. But as invaluable as this work is, it has practical limitations. Collins’ conclusion, that the path to greatness begins with the identification of “Level 5 Leaders” (leaders with the paradoxical qualities of both humility and fierce resolve), does not address the reality that few companies have Level 5 leaders at the helm. Based on AEI’s decade of experience, we believe that a Level 5 leader is an extremely rare phenomenon and that it is best thought of as an ideal to which companies should strive.

Therefore, instead of searching for those rare Level 5 leaders or becoming discouraged by their scarcity, we asked ourselves, “What kind of culture does the Level 5 Leader naturally create? How can leaders create a Level 5 environment – an environment where people are able to talk openly and candidly about the right issues within the company, and thus get to brutal reality – without a Level 5 leader at the helm?” We believe that the first step towards creating a Level 5 environment is the development of leaders who can comfortably operate in such an environment.

AEI’s model of effective leadership is designed to develop such leaders, so that they can be successful in a “flat world.” Our model recognizes that in the flat world the ability to adapt is more an emotional challenge than an intellectual one. Therefore, emotional intelligence is required for leadership success. The basis for high emotional intelligence is authenticity, which comes from deep self-knowledge. With high emotional intelligence, leaders can build effective relationships in a collaborative culture that can “confront the brutal facts” and achieve unity without necessarily having consensus. This type of unity allows an organization, even without a Level 5 leader at the helm, to achieve sustainable good performance.

AEI’s model of effective leadership is summarized as follows:

Step 1: Overcoming the Personality: Removing barriers to self-knowledge and authenticity
Step 2: Authentic Leadership: Developing an authentic leadership style and applying it for effective decision-making
Step 3: Collaboration: Communicating to create unity without consensus
Step 4: Culture: Helping the leader create an environment that enhances openness, candor and dissent as essential characteristics of communication
Step 5: Commitment: Committing to a Level 5 environment for sustainably good results

We will now discuss each step of this model and then draw conclusions for practical action.

1. Overcoming the personality: Removing the barriers to self-knowledge and authenticity

The key goal of this step is to overcome the identity or the essential personality of the leader, which inherently inhibits getting to the brutal reality of a company’s situation.

The central finding of Good to Great was that companies defined as “great” were led by leaders who had an uncanny capacity to get to the brutal reality of their business situation by getting their people to perceive and speak the truth. Collins deduced that this capacity was related to the leaders’ paradoxical qualities – their genuine humility and their fierce determination to succeed. This finding sounds like a deceptively simple one, and represents the first stumbling block to understanding the subtlety and brilliance of Collins’ findings.

The problem is this: Which of us does not think that we can perceive brutal reality? At best, we may admit that we benefit from others’ perspectives to round out our point of view. But what Collins’ research suggests and what most readers miss is that the problem is more subtle than this. Reality is continually distorted through the lens of our identity (for this discussion, the relevant aspects of identity are our beliefs, values, emotions, memories, and experiences). Each one of us approaches an issue with a perspective shaped by our identity. This is why collaboration that encourages and protects divergent points of view within companies is critical to high quality decision-making.

Our natural identity is a lens that narrows our field of perception and distorts, at least in part, the information that comes in. There is both an emotional and an intellectual component to this. The emotional component can be illustrated using a fictitious example: John and Judi have been peers as well as competitors for years, and are both in the running for the position of Senior Vice President of their division. Judi ends up winning the position and John now reports into her. John is a critical player, important to the success of the division. Believing that he should have gotten the position, John continually finds fault with Judi’s leadership, disagreeing with her point of view. His view of the issues being discussed is colored by his disappointment that he did not win the position, and by his belief that he could be doing a better job. This is an emotional barrier, affecting John’s ability to engage in an objective dialogue with Judi. But he is unaware of this; he believes that his perspective is “objective.” His lack of self-awareness affects the division’s ability to get to brutal reality quickly and thus has a negative impact on performance.

The intellectual component of the lens of identity can be referred to as a “worldview.” Our worldview is the way we take in information and the way that information is internally processed. It is our beliefs, our education, and most significantly, our experience. It is a cognitive mapping and it is quite helpful because it simplifies complex data. But it also can be limiting and distorting. There are times when the nature of our experience clouds our ability to see the present in a way that is fresh and distinct from the past. This is precisely why effective dialogue with others with diverse, unique viewpoints is an essential component of a Level 5 environment.

Thus, we look through the filter of both the emotional and intellectual components of our identity to interpret reality. The more clearly we can understand the biases, limitations, and blind spots of that filter, the more we will be able to compensate for them, and the better we will be at effective dialogue. Emotional intelligence, acknowledged as the underpinning of effective leadership, can be understood as the capacity to perceive the present moment with clarity. Self-knowledge, a critical component of emotional intelligence, involves gaining clarity about the filters through which we see reality.

Understanding the limits of our identity is the first challenge on the road to facing brutal reality. There is a “survival instinct” that is part of our identity. We resist having to change how we see ourselves and how we see the world. This is what Drucker is referring to when he notes how difficult it is to change someone’s beliefs, aspirations, or values. It is equally difficult to change one’s worldview.

We are dealing here with what we call the “Leader in a Box” syndrome. It comes in two varieties. In one, the Leader creates the box because he does not have the requisite self-awareness. In the other, the people around him create the box because people by human nature are afraid to bring “bad news” to higher ups.

Thus, in addition to understanding the limitations of our own identity, we must get others to tell the truth as they see it. Jim Collins makes the critical point that the personality of the leader can deter people from speaking the brutal truth or from bringing the leader the brutal facts. Additionally, the higher your position, the less likely it is that people will tell you the brutal truth. Leaders who are aware of this reality will often try to compensate for it. During World War II, Winston Churchill set up an office outside of the chain of command; its main purpose was to tell him the unvarnished truth. Some leaders make sure to keep informal truth tellers nearby.

In Good to Great, Collins says:

I would love to be able to give you a list of steps for becoming Level 5 (leaders), but we have no solid data that would support a credible list. Our research…(shows) level 5 as a key component inside the black box of what it takes to shift a company from good to great. Yet inside that black box is yet another black box – namely, the inner development of a person to Level 5.

Our experience indicates that the “black box within the black box” that Collins refers to represents the development of emotional intelligence in the form of self-knowledge (knowing the limitations of the lens of your identity) and social knowledge (knowing how your personality may limit other people’s ability to communicate openly and honestly with you). As a leader develops such knowledge, he or she begins to remove the emotional barriers that hinder honest dialogue.

In Managing on the Edge, Richard Pascale writes, “we simply don’t understand (all) the forces that sustain organizational success…however an important truth about organizations [is that] their transformation is tied to the growth of those who manage them.” Not every leader must reach Level 5 in order to create a Level 5 environment. But each key leader must transform him or herself to the degree that he or she can help create and operate within a Level 5 environment. And an organization must then encourage all its key leaders to do this. This is a practical although still difficult solution for countering the rarity of the Level 5 leader. It also is a realistic solution to the problem of how to get to brutal reality, the foundation of sustainable high performance.

2. Authentic leadership: Developing an authentic leadership style and applying it to decision-making.

The key goal of this step is to help the leader recognize and reveal his or her uniquely authentic self, so that the quality of his or her dialogue is “truth-laden” and can lead to effective decisions that are embraced by the organization.

For close to 50 years after World War II, the most effective style of leadership was a “command and control,” or authoritarian, style. A strong leader at the top of an organization could see the entire picture, develop a vision for what was needed to move forward, and then direct people to do what was necessary. But with increasing complexity – the speed of change, the amount of information available at all times, the twenty-four/seven work environment, leadership needs have drastically changed. Leaders need multiple ears and eyes to keep up with the pace of change and the level of specialization. They need to be able to use multiple leadership styles instead of mastering one, primarily authoritarian style. Authenticity is the bedrock of effective leadership in a complex world because it accommodates the paradox of extreme complexity and extreme simplicity.

As top leadership has become more and more dependent on those below them, the need for high quality communication, or dialogue, becomes critical. As Charles Munger, Vice Chairman of Berkshire Hathaway has noted, most companies focus on developing “best practices.” Instead, Munger focuses on the one or two factors that, if neglected, would guarantee failure. The quality of a company’s dialogue is one of these factors. This quality is too often invisible, and yet it affects every decision because it has a direct impact on a company’s access to brutal reality. And it is a critical component of success.

So the question emerges: “What are the characteristics of leaders who can operate in and help shape an environment based on truth-telling and effective dialogue? We believe that the strongest and most effective leaders have, at their core, an identity best described as authentic. Authenticity is difficult to define, but we know it when we meet it and we know when it is absent. Most noticeably, authenticity creates a foundation of trust. Authentic leaders demonstrate:

  • The absence of defensiveness and arrogance
  • The presence of humility
  • The presence of accurate empathy
  • The presence of social values
  • Appropriate transparency
  • The presence of emotional courage
  • A tolerance for ambiguity

The process of developing leaders who can operate within a Level 5 environment thus begins with helping them become more authentic. True authenticity, like the Level 5 leader, is an ideal. Increasing the quality of the dialogue within a company requires the recognition that we all speak more loudly based on who we are than on what we say. High-quality dialogue begins with trust. Trust is multi-faceted, reaching far beyond the words we say. The level of trust in a leader is directly related to the level of authenticity of the leader.

3. Collaboration: Communicating to create unity without consensus.

The key goal of this step is to help the leader bridge from revealing his or her authentic self to using this increased authenticity to create unity without necessarily having consensus.

As authenticity increases, leaders gain the internal flexibility that allows them to use multiple leadership styles, and gives them a much stronger foundation from which to cope with the rapidly changing world. Colin Powell, in his autobiography, My American Journey, summarizes two critical leadership styles:

“When we are debating an issue, loyalty means giving me your honest opinion, whether you think I’ll like it or not. But once a decision has been made, the debate ends. From that point on loyalty means executing the decision as if it were your own. This particular emperor expected to be told when he was naked. He did not care to freeze to death in his own ignorance. ‘If you think something is wrong, speak up,’ I told them. ‘Bad news isn’t bad wine. It doesn’t improve with age.”

We call this “Powell’s Challenge.” Embedded in this simple quote is tremendous complexity. The first part of Powell’s Challenge describes the Level 5 environment at its best. Powell recognizes the absolute importance of truth-telling, and he does not make the assumption that he will automatically get it. He describes a collaborative style of leadership, the aspect of good decision-making that involves open and candid input from others. He implicitly recognizes that there can be emotional barriers which impede people’s capacity to tell or hear the truth.

The second part of Powell’s Challenge, however, illustrates the limitations of focusing exclusively on collaboration. Powell notes that once a decision has been made he expects people to execute it as if it were their own. This represents the “authoritarian” style of leadership, namely “here’s what we are going to do. Follow me.” Paradoxically, the effectiveness of the authoritarian style depends, in part, on how well the leader implements the participative style of leadership. If people do not feel that they have truly been heard, as illustrated in the first part of Powell’s Challenge, then it becomes very difficult for them to implement that decision down the road “as if it were their own.”

If a leader meets both sides of Powell’s Challenge – creates an atmosphere of trust and safety where people tell the truth, and then makes a decision and rallies people behind that decision regardless of whether or not they agree – then he or she has created unity without consensus. Only an authentic leader, capable of generating an atmosphere of trust and safety, can pull off this two-part challenge. This ability is a key component of a high-performing or Level 5 corporate culture.

4. Culture: Helping the leader create an environment that enhances openness, candor and dissent as essential characteristics of communication.

The key goal of this step is to help the leader understand how to create the essential elements of a high performance culture by using his or her unique authenticity. These elements are openness, candor and dissent.

The reader can see from our discussion that it is critical for companies to pay attention to the quality of truth-telling in their communications. We have illustrated how a leader’s personality can deter people from communicating brutal reality. We have shown that increasing a leader’s level of authenticity increases trust, and allows him or her to hear and speak the truth. Leadership consultant and author Ram Charan speaks most eloquently to the link between truth-telling, the quality of the dialogue and the quality of the corporate culture. He writes, “Dialogue…is the single-most important factor underlying the productivity and growth of the knowledge worker…dialogue shapes…the corporate culture…faster and more permanently than any reward system, structural change, or vision statement.”

So now the question emerges: “What are the specific features of the dialogue that are present in high-performing cultures?” There are three essential characteristics of effective dialogue. All three must work in concert; any one or two alone is not sufficient.

  • Openness: Openness means that the outcome of a decision-making process has not been predetermined. Can the leader walk into a room in which an important decision is being debated and leave his or her opinion at the door when listening to others? Can the leader be truly receptive to the point of views of others, despite his or her wealth of experience and knowledge? If the leader is meeting with subordinates, can he or she withhold sharing his/her opinion with those below, in order to allow them to respond honestly?

  • Candor: Candor refers to the ability to “speak the unspeakable.” It refers to the level of dialogue that sits underneath the surface of the group process because something about what needs to be said is difficult. Candor can be measured by the question, “How close are our public conversations to our private ones? How well do the water cooler conversations line up with the conversations we have in public meetings?”

  • Dissent: Peter Drucker sums up the importance of dissent in the decision-making processes when he says, “Decisions are made well only if based on a clash of conflicting views. The first rule of decision-making is that one does not make a decision unless there is disagreement. It safeguards the decision-maker against becoming a prisoner of the organization (or culture).” We ask the question, “Can the leader not only tolerate but actually encourage dissent in decision-making?” This ability is particularly important in matrix-structured organizations, which derive their value from encouraging diverse points of view from both strong line and strong functional leaders.

Once these three characteristics are understood, a leader must use his or her unique authenticity to address each in order to transform the culture in to a Level 5 environment.

5. Commitment: Committing to a Level 5 environment for sustainable good results.

The key challenge in this step is truly for those at the top of a company. The CEO and the executive team must commit to investing in their own development so they can help create and operate in a high-performance culture.

Behind every decision made within an organization lies one or more relationships. When a company increases the openness and candor of its dialogue, it affects the quality of virtually every decision that is made. When a company invests in the development of leaders who can operate in a Level 5 environment, it is, in essence, investing in the quality of the entire decision-making process. Jim Collins writes, “a primary task in taking a company from good to great is to create a culture wherein people have a tremendous opportunity to be heard, and ultimately, for the truth to be heard.” Collins sums up the impact that this has on the performance of the company when he says, “When you start with an honest and diligent effort to determine the truth of the situation, the right decisions often become self-evident.” This is at the heart of a refined decision-making process that emphasizes openness, candor and dissent.

When the right conversations are being held and the truth is being spoken, some people will thrive and others will not. Over time, there is a natural selection process of people who have the courage to withstand the heat of facing the truth about both themselves and the business situation. In the long term, this builds a sustainable corporate culture on a solid foundation of honesty and truth.

It is critical that leaders understand who they are and how their identity affects their capacity to communicate (and to collaborate). Leaders need to model the kind of communication that they view as critical to the success of their organization. Once a leader has addressed his or her own communication challenges and shortcomings, he or she can begin to systematically address the barriers to effective, highly collaborative communication within the organization. Ultimately, it is the quality of the company’s dialogue that will determine how it receives the incoming flow of rapidly changing information. Whether the information confuses and overwhelms, or informs and inspires, will have a direct impact on the decision-making process, and by extension, on the performance of the company.

At the core of an authentic leader we find self-knowledge – a realistic assessment of both strengths and shortcomings, and a lack of defensiveness that allows people to offer ongoing candid and constructive feedback. This, in turn, builds humility, and paradoxically, self-confidence. At AEI, we are gratified that our approach, using the 5-step model outlined above, has been effective in helping leaders make step-changes in their self-knowledge and as a result, positively impact their careers and their companies’ performance. So that we and our clients never forget the basis for leadership success, we have framed on the wall of AEI’s headquarters the following quote by the philosopher Montaigne, summarizing our core belief that a good leader is an authentic person – and an authentic leader.

The art of conducting one’s life requires not only deep knowledge of what one as a person really is, but also acceptance of it. Humble acceptance of the fact of our real limitations and our real abilities is the beginning of all wisdom.

Accordingly, we would encourage CEOs and their executive staffs to embrace the 5-step model we describe above and commit to achieving a highly collaborative culture founded on authenticity. With this achievement, we believe that organizations will raise their success odds for delivering sustainably good performance.