The Critical Role of Leadership Impact in Creating Organizational Purpose

Leadership plays a crucial role in shaping the decision-making process within an organization.

Transformational leadership has been shown to have a significant impact on both individual and collective decision-making and employee and company performance. This leadership style empowers followers by providing guidance, support, and opportunities for growth and development, promoting independent thinking, creativity, and initiative.

However, leadership can also have negative effects, such as weakening followers and increasing their dependence on their leader. Research has shown a positive correlation between the leader’s personal and social identification with their followers. Dependence and empowerment can result in different company performances depending on the leader’s personality.

The Negative Aspects of Leadership

Leadership style can significantly impact the outcome of decision-making processes within an organization. Charisma, social influence, and data-driven approaches used by leaders can be used to further personal or organizational goals, but there is also a darker side to leadership that can lead to organizational failures, including poor decision-making, ineffective processes, and wasted resources.

When followers become passive, they are more likely to blindly follow their leaders, leading to a lack of critical thinking, risk aversion, and reduced accountability. A negative leadership style, passive followers, and a surplus of questionable data can make sustainable growth and maximizing shareholder value increasingly difficult to achieve.

According to Terri Williams in The Economist, excessive charisma in leadership can be detrimental to a leader’s effectiveness. Charisma has a powerful effect on followers, but too much can backfire and cause leaders to become ineffective. Studies have highlighted the tempting nature of charisma and the way it maximizes leaders’ influence over followers.

The study “The Double-Edged Sword of Leader Charisma” by Vergauwe et al. (2017), found that while increased charisma correlated with increased perceived effectiveness in leaders, there was a point at which this relationship would plateau and decline. The researchers discovered that leaders with moderate charisma were considered most effective, as they had a balance of strategic and operational leadership skills. Leaders with low charisma were seen as lacking strategic acumen, while those with high charisma were criticized for their operational behavior.

In their book “Fear Your Strengths,” Kaiser and Kaplan argue that being too charismatic or overconfident as a leader can lead to negative behaviors such as narcissism, manipulative behavior, attention-seeking behavior, and hubris, which can harm the organization. The authors caution against being too enamored by charisma, as it can be tempting but a slippery slope towards problematic behavior.

The findings on charisma as a leadership trait can be paralleled with big data in today’s landscape. The obsession with data and the drive to be data-savvy have replaced charisma as the new source of power for leaders. However, it is important to use data wisely, as overreliance and protectionism towards it can lead to flawed decision-making and blindly trusting in the accuracy of data without questioning it.

Your Company’s Leaders Determine Its Fate

Transformational leadership has the potential to positively impact a company’s performance through employee empowerment, growth, and independent decision-making. However, leaders who prioritize their personal agendas can use data to justify unethical decisions, referred to as the “dark side” of leadership. It is crucial to have measures in place to ensure that data is used in an ethical and responsible manner. Striving for balance between utilizing data and promoting transparency, accountability, and ethics is crucial for organizations.

Stanton Chase has been placing exceptional executives in C-suite roles for over three decades. Our expertise in company growth and deep understanding of the ideal leader gives us a unique advantage in sourcing the perfect talent for your business.  We also provide assessment tools and techniques to understand how a leader performs within their cross-functional organization.

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About the Author

As a Partner at Stanton Chase Istanbul, Can Arcasoy brings a wealth of experience in consumer goods, brand marketing, strategy, and general management. He is particularly passionate about working closely with leadership teams in organizations to help them navigate uncertain and volatile competitive environments through organizational restructuring and the establishment of an agile culture. Can is also an advocate for digital transformation, recognizing the importance of data-informed decision-making in these environments.

Click here to learn more about Can.