Charismatic Leadership Theory

T

he Charismatic Leadership Theory (CRL) is a theory about leadership developed by Michael E. Porter and Joseph E. Slater in a series of books beginning with Managing the New Dynamics of Competition: Strategies for Success (Porter and Slater, 1984).

Their original inspiration was a discussion between Porter and Marcel Bénabou about the leadership styles of Richard Nixon, John F. Kennedy, and Nikita Khrushchev.

They made the mistake of using the word “chaos” to refer to these different leadership styles.

The book “Managing the New Dynamics of Competition: Strategies for Success” by Porter and Slater was first published in 1984, and in it, Porter and Slater introduced the original term “charismatic leadership”, in the context of four facets of leadership.

There is a fundamental tension in the theory between the two ways of taking a long view of competition: e.g., by putting together a series of competitive advantages, and by developing a strategy to achieve world domination, according to the latter.

More recent works by Porter have tended to place greater emphasis on the former strategy.

One of Porter and Slater’s major ideas is that successful companies must create a distinctive product or service to capture a meaningful market share in a new industry.

The “core competencies” of the “pioneers” (leaders) of a new industry are important for understanding the competitive dynamics of an industry.

Champions (or early pioneers) act as “ideal entrepreneurs”, building and managing the initial stages of the industry.

There are two primary forces that propel the initial competitive dynamics of a new industry:

According to Porter and Slater, since the initial stages of a new industry are difficult, entrepreneurship requires qualities beyond traditional business success.

The concept of competitive advantage is central to the book.

According to the authors, the concept of competitive advantage is closely related to the concept of life cycle management.

CFOs (Chief Financial Officers) in large corporations must be able to establish the appropriate business model and rationalize cash allocation at all levels of the organization.

In order to do this effectively, they need to understand how to create a competitive advantage for the corporation in terms of cash flow.

Porter and Slater differentiate between:

The “circuit model” of competition was developed by Michael Porter and Joseph Slater and developed further by others, including Gerald B. Cutler, in the latter part of the 1980s.

Each competitor has a “circuit”, which connects to the “crossover points” of that competitor’s “circuit”.

Closest to the “crossover points” are the “criteria for success”.

An organization that satisfies the criteria for success is identified as “having an essential competitive advantage”, which may be improved by exploiting a product, service, or geographic position.

A competitor that successfully exploits the criterion for success through innovation is referred to as a “competitor”, not a “victim” or “suspect”.

The main concept of strategy in Porter and Slater’s model is “delegating authority” or “reciprocity”.

In this model, the successful organization is able to foster cooperation and give, give and give authority to its key “pioneers”, without any limit on how much authority is given to the pioneers.

As a result of this, the innovators grow their authority and capture more market share.

The introduction of innovation and competition further the “power base” that defines the fundamental competitive advantage of the organization.

This power base defines the value of the organization and how others perceive it.

At each moment of competitive advantage, the “strength” of the power base increases.

This power base is accumulated during the competitive advantage phase, or during the monopoly phase, but is generally spread thin across the organization.

Porter and Slater maintain that the key to success is to be able to “delegate authority to early, strong pioneers”, which is when they achieve the greatest authority.

The pioneers are those key innovators that have the ability to create the most value for the organization and must be able to quickly assess the situation and act with sufficient authority.

The model is used in a number of “pioneer” firms, most famously Amazon.

The governing principle in this model is reciprocity, which Porter and Slater call “the exchange of resources”.

When a pioneer has an “intellectual asset”, which may be a new idea or a new technique, it must share the asset with someone else.

Someone must receive the idea in return for his/her use of the idea.

Porter and Slater define this as “delegating authority” or “reciprocity”.

Delegating authority to early, strong pioneers improves the organization’s power base because it enables the organization to grow quickly, seizing market share.

As a result, the organization can achieve the highest returns for its capital.

Also, the more pioneers are effective, the more the organization has to invest in each of them, making it increasingly likely that someone will break through and become a powerful pioneer, further increasing the advantage for the organization.

However, reciprocity is not absolute.

The organization has the ability to withhold authority and to “clawback” it when it believes that the pioneer has misused its authority.

To do this, the organization must have clearly defined authority.

They will need to define the authority of each individual pioneer, including the degree of authority that the pioneer has over those below him/her, and define a quantifiable measure of quality.

The innovation of these pioneers and their subsequent innovativeness is therefore important for the “legitimation” of their authority.

When trying to optimize innovation, the organization must be very clear about who has the power and how that power is distributed among individuals.

Also, the organization needs to have a mechanism to mitigate challenges from other organizations, including:

In the strategy of several prominent organizations, reciprocity is “shared”: it is shared between all individuals and groups within the organization, as well as between the organization and external organizations.

The main organization that is described as a “competitor” in the late 1970s Bell System, where the “experts” who made the key decisions were senior executives who had built the “old organization”, and the managers of the new organization were “insiders”.

Cultural companies are seen as having an equal power base, with power only divided by competence.

This is distinct from the “autarchic” model of innovation, in which the power base is shared among a few key innovators who are experts.

The differentiation is based on the “non-expert” group’s ability to fulfill the social and personal goals of the “expert” group.

The most famous organization that is differentiated from the autarchic model of innovation is McDonald’s, where power is shared between many non-expert managers who interact in a “commonsense” manner.

Diversity is also important in this model.

Venture capitalists (VCs) invest in diversity.

They tend to invest in firms that show high levels of performance and demonstrate a willingness to look outside the organization to attract and recruit innovators.

Other organizations have tried to solve the problem of reciprocity by formalizing the process.

At first blush, this looks like a good idea.

But innovation theorists such as Porter and Slater argued that the institution of a “reciprocal authority” system is inherently ambiguous, and this ambiguity leads to poor performance.

A better solution is to devise a unique system for the entire organization to follow.

The genius of Amazon is that it has formalized an organization-wide innovation system.

The key innovation of the organization is based on process, which is then optimized through the use of formal processes.

Since innovation is done in teams, the organization has a unique process for coordinating all the processes that are needed for a given innovation.

Then it relies on general-purpose (rather than restricted) roles for individuals, to take the place of functional roles.

What is Charisma in Leadership?

“Charisma is the ability to get others to do what you want them to do or become as you desire them to be.”

Charm and presence go hand-in-hand. Charisma is a powerful tool in making other people feel comfortable and at ease around you. By putting on a person’s aura, you are able to understand their emotional state and therefore be able to interact with them.

Your presence can make people feel accepted and heard. Your presence, your presence of yourself as a person, makes people happy. The more comfortable and outgoing you are, the more confident they will feel around you. If you’re shy, most people won’t take the time to interact with you.

There are other things you can do that increase your ability to read people’s moods. Hugs are very calming and get others’ energy up. The opposite of that is strong body language that sends a message that you are angry or have something to say, which shuts down the person you’re with.