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Slobodan Adzic











Economics Institute • Belgrade









ISBN 86-7329-054-6




Publisher:                    Economics Institute, Belgrade, 2004




Reviewers:                  Prof. dr Janko M. Cvijanovic

                                      Prof dr Milivoj M. Klarin



Editor:                          Jelena Lazic




Translation:                 Snjezana Mijatovic














Abstract 5



1. Definition of Leadership 9

2. Leaders vs. Managers 11

3. Human Society and Leadership 14

4. Leadership styles 16

4.1. Classic leadership styles 17

4.2. Modern leadership styles 20

4.3. Behaviorist theories, shared leadership and virtual leadership 25

5. Types of Leaders 28

6. Jobs and characteristics of leaders 33

7. Democracy and Leadership 44


1. Emotional Intelligence and Leadership 48

2. Types of Personality and the Leadership 60

3. Creativity and Leadership 68

4. Leadership and New Sciences 72


1. Kotler’s Model of Main Actors and Powers in Marketing Environment  77

2. Trends in Modern Environment 82

3. Challenges to the 21st Century Management 85

4. Ecological Environment Impact on Competitiveness 89


1. “Business Nature” Evolution 93

2. Diagnosis of Organizations and Getting Familiar with the HPO Model  98

3. Spheres of work in an HPO_ 103

4. From Visions to Performances 107

5. Leading Changes 113

6. Examples of Successful HPO Model Implementation 120

6.1. Johnsonville Sausage 120

6.2. Charleston Naval Shipyard 123

6.3. Local Government HPO_ 126


1. Philosophy of Leadership 130

2. Leadership Functions 137

3. Leadership Forms 140

4. HPO Leaders 145

5. Good is enemy of great 149

6. Personal Leadership 156

7. Elasticity 161

8. How to become a great leader? 162


1. Model Contributions and Limitations 169

2. Impact of National Cultures on the HPO Model Application 173











The necessity of leader management lies in the dynamical development of the present-day society. Leadership and changes are synonymous. Management is connected with efficiency, and leadership with effectiveness and changes. According to the quality of interpersonal relations between leaders and their followers we recognize resonant and dissonant leaders. The job of the leader primarily encompasses the jobs that are important, however not urgent. The leader necessary for the creation of high performance organization is a democrat. Democracy, being the only system that can effectively combat the requirements of the changes in the modern civilisation, is the basis of HPO. An effective leader has developed emotional intelligence and emphatic abilities, and as for the differences between people, he views them as constants and draws advantages out of them. Dynamical changes of the micro and macro setting of the marketingenvironment of enterprises contain more and more the effects upon business that are the more dramatic. The organization that survives is HPO, the organization that changes the strategy, structures and systems of organization on the basis of philosophy, the function and forms of leadership, as well as vision and values. The success of HPO is achieving high performances, namely simultaneous production of quality products and services, additional values for the consumer and enviable financial performances. Each of the HPO employees develops their leader, management, technical and team work skills. An HPO leader builds effectiveness through paradoxal mixture of personal modesty and professional strength, he knows that it is good to be an enemy of the excellent and uses that knowledge in leading enterprises. An excellent leader develops those qualities that make him above average to perfection, his philosophy of effectiveness is: reinforce the qualities that make you strong. The study of HPO models can contribute to the easier surmounting of oppositions in our national culture in accepting and implementing the leader concept of management. Leaders of the 21st century meet with the tasks that will be successfully accomplished on condition that they realise that it is the unceasing learning that enables high standards, ambitious goals and a true feeling of a mission in life.


Key words: leadership, management, organisation, effectiveness, democracy, performances, environment, multidisciplinarity, changes, vision.






Leadership is a relatively new phenomenon. However, this concept has quickly been acknowledged in the world, with over two thousand titles on leadership published only in the U.S.A. In Serbia, to my knowledge, no book could be found in Serbian language dealing only with business leadership. This is the main reason why I have chosen this subject. I believe that my modest contribution to the development of leadership thought will produce effects so that those interested in this matter would be able to get familiar with the idea of this brilliant concept.


However, the prime objective of this paper is not only theoretical aspect of leadership, but first of all a model of HIGH PERFORMANCE ORGANIZATION (HPO) representing a model of an organization completely based on leadership approach. At the very beginning, there is a doubt in how many economic organizations in Serbia today are ready to accept both the leadership approach and the HPO model based on it. Their number is probably negligible. Nevertheless, this should not be a barrier to our intention to discuss the latest concept of the world theory and practice. On the contrary, by learning from the best examples it is possible to make big steps forward, and that is actually what we need in our economy today.


To understand author’s approach, it is necessary to make several remarks:

·        The author is holding a leader’s position in a non-profit sector.

·        The author has become familiar with the HPO concept at the Senior Executive Institute, University of Virginia, one of the leading courses on leadership designed for city managers in the U.S.A.

·        The literature used has almost exclusively dealt with a profit sector.


It is important to emphasize because of the author’s vision. Although the leadership concept is completely the same in both the profit and the non-profit sector, there are still some distinctions:

·        Coming to a leader’s position in the profit sector involves a longer process; in the non-profit sector, and particularly in the state administration, it is easier to jump over some of the “steps”.

·        The non-profit organizations “put up with” greater number of leaders easier than the profit ones, as well as with empowerment and alignment concepts which, in their essence, aim at reducing the number of the hierarchy levels to almost none.


Still, these very specific qualities of the non-profit sector have aroused greater interest of the science in leadership because, as a rule, it is much easier to test the concepts within them. Thus, John P.Kotter, leading expert in leadership, has based his doctoral thesis on leadership of American mayors in big cities, while Peter F.Drucker, leading expert in management, has founded the Leader to Leader Institute the objectives of which are in dealing with developing leadership in non-profit sector. The author wants to highlight his own vision of consideration because this paper is, after all, rather focused on economic organizations and business leadership.


To begin with, the phenomenon of leadership will be highlighted. We shall define it, explain difference between a leader and a manager, show the necessity of division into leaders and followers conditioned by biological and psychological distinctions of individuals. Furthermore, main types of leaders and leadership styles will be shown, as well as what are the tasks and qualities of leaders. This Chapter will be concluded by linking democracy and leadership because the democracy is the basis for the type of leaders required for an HPO.


In the next Chapter the main trends conditioning dynamic changes of marketing environment will be revealed, and the turbulent environment “is guilty” for the need of leadership approach in the modern world.


Since leadership is an economic phenomenon, the multidisciplinary aspect of leadership, particularly its psychological dimension, will be discussed in the Chapter to follow. Emotional intelligence and types of personalities are of critical importance for leadership. The concept of creativity necessary for new way of leader’s thinking will also be discussed. Finally, the development of new sciences will be discussed and they will be linked with leadership. We shall also see how the concept of quantum physics is particularly appropriate for a leadership approach in leading organizations.


The subsequent three Chapters will be dedicated to the main concept – the high performance organization. In the first one we will explain the basic model, which will be supplemented with the “prescription” for leading changes and will close it by giving examples of successful HPO model implementing. In the next one, we will explain in more detail leadership in then HPO model: philosophy, functions and forms. Then, we will show that a type of leader for the HPO does exist, and that is the HPO leader or level V leader. We will then proceed with concepts from good to great and built to last. Furthermore, we will explain a personal leadership approach, as well as a concept of elasticity. Finally, we will show how to become a great leader.  In the closing Chapter dealing with the HPO model we will try to highlight its advantages and limitations.


At the very end, of course, conclusive considerations and references used in this paper will be given. I would like to express my gratitude to the team leaders from the University of Virginia who have recommended me excellent choice of literature based on the subject of this paper. The material from the course has also been used in the researches, while without using Internet I would not have all elements contained in the final version.






1. Definition of Leadership


While preparing this paper I have on several occasions discussed with my friends some of the topics form this paper, which have drawn my attention. As a rule, the same thing has happened all the time – until I have not defined the leadership, each of my observations has been followed by the question: “Quite interesting, but what has it to do with leadership?” For the science, the leadership is a new matter, although as a phenomenon, it is very old. Therefore, it is necessary to define precisely and in detail what is understood under leadership.


It should be emphasized that leadership as a phenomenon has first appeared in non-economic social theories. According to these theories a leader is “a person who, by his words and/or personal example, distinctively affects the behavior, thinking and/or emotions of a considerable number of human individuals (followers or general population)”[1]. Obviously, these theories do not limit leadership only to political leadership. Actually, the main division does not lay on political and business leadership, as might be thought, but on relation towards the audience: direct leaders address audience “face to face”, while indirect leaders exert their influence through their work or deeds they create. This also implies that influence of a leader may be significant long after his biologically departure (the “New York Times” editorial staff have chosen Albert Einstein for the leader of the 20th century).


Six leadership constants, according to Gardner, are[2]:

1.    STORY: A leader must have a central story or message. It must be effective for a big and heterogeneous group. In crisis, the story must be told quickly, this resulting in simplifying central message.

2.    AUDIENCE: Each, even the most eloquently told story, has no effect in the absence of audience.

3.    ORGANIZATION: At the beginning a leader directly addresses the audience and achieves his initial success. For a continual leadership it is necessary to have an institution based on organizational basis.

4.    PERSONIFICATION: The author of the story must in certain sense be a personification of his story. However, this does not mean that he should be a saint but that he should not be in contradiction with his main message.

5.    ADDRESSING: Most of creative leaders address indirectly, through a symbolic product which they creates, while most of the political leaders address the audience with their stories directly. Direct addressing bears more risks, however, and particularly for a short time, it can be more efficient and effective.

6.    SKILL: Only persons achieving a high level of expert knowledge in their work or credibility in their life have a chance to succeed as leaders. Direct leaders, in principle, lack technical knowledge while the strength of an indirect leader is actually based on his knowledge of concrete things.


This paper will primarily deal with leadership in business organizations and not with political leadership. And this very type of leadership is in the focus of new science. There is no strictly adopted definition of this kind of leadership but the emphasis is laid more on the fact that it is needed in business organizations today, and even more in the future. The necessity of leader management primarily lies on a dynamic development of the modern human society. Today, the overall human knowledge doubled in the period of 2.5 years. A leader is a person able to lead an organization in the turbulent environment of today, because he is the one who can successfully cope with changes. Therefore, leadership and changes are synonyms when business leadership is concerned.  This is a primary thing. No need to be a superman in order to be a leader, because one becomes leader by birth but by acquiring knowledge in addition to his natural predispositions. This is the next axiom. And finally: the key of good leader is in his relation towards people, the emotional role of a leader being a primary thing. To simplify, the task of a leader is in the following[3]:

·        Considering situation, and

·        Taking action.


May be Max Depree, great personality of American business world, has best described a leader: “The first duty of a leader is to define a situation. The last one is to say thanks.”[4]


In order to reveal what is between the first and the last duty of a leader, other aspects of leadership should be highlighted as well.



2. Leaders vs. Managers


In American literature the following definition of distinction between a leader and a manager, which is actually a play of words, is very popular: leaders make the right things while managers make things right. Although popular, this definition is neither sufficient nor complete because it presumes that the positions of leaders and those of managers are on opposite ends. However, this is certainly not the case in organizations considering that in every business environment the work of both a leader and a manager is required. They are not competitive but complementary. Both are necessary in an organization for its prosperity. Powerful leadership and weak management, and vice versa, may easily put the organization in danger.


The consequences of powerful leadership and weak management in a complex organization are[5]:

1.    Powerful long-running visions without short-term planning and budgeting.

2.    Almost a cult culture in an organization without much specialization, structure and rules.

3.    Inspired people who use control systems and problem solving disciplines very little or not at all.


The situation in such organizations often slips out of control. When business schedule, approved budget and promises given to the consumers are not obeyed the risks for organization are growing.


The consequences of powerful management and weak leadership in a complex organization are:

1.    Insisting on short terms, details, eliminating risks and ordinary rationality, with placing little focus on long terms, great images, strategies including risks, as well as on human values.

2.    Powerful focus on specialization; a job is above the people while they become slaves of rules, and with minimal insisting on integration, alignment and personal engagement of people.

3.    Control and anticipating are in the first plan, while growth, empowering and inspiration are not.


The situation in such organizations is rigid, non-innovative, and therefore, organizations are not able to cope with changes on markets or in technology. If an enterprise has a strong market position, the performances worsen slowly, while, otherwise, the performances worsen fast.


Many people even today have stereotypes about positions of leaders and managers in organizations. The stereotype is in belief that a leader is a lonely person on the very top level of an organizational pyramid while the managers managing organizations are below him, and that on the very bottom, separated with a clear line, are other collaborators. The reality, as shown in Figure 1, is quite different. In a complex organization there may be thousands of complex and linked jobs. They condition different bonds between people so that great leaders may be found in teams at the lowest level as well. The same process contributes to diminishing of manager’s role and position in an organization. People are more often mutually linked not only because of interdependence of teams within the organization but are also directly linked with buyers and other actors from their environment. In such situations a good leadership is of critical importance for an organization to be successful on market.



Figure 1: Reality and stereotype about positions in an organization

(Source: Kotter John P., POWER AND INFLUENCE,

The Free Press, USA, 1985, pg. 171)


Management is connected with efficient functioning of organization, while leadership with changes[6]. The companies manage the complexity by planning, while leading an organization begins with developing visions. While the management realizes its plans by organizing, the equivalent in leadership is communication amongst those who are on the road towards the realization of their visions. Finally, while in managing the plan is realized by control, in leadership reaching visions is achieved by inspiration.


In the 20th century Rockefeller III wrote: “Organization is a system having its own logic based on tradition and inertia. It is in good direction if the things are done in a proven and tested manner, and not by risking and searching for new business roads.”[7] Rockefeller would hardly become a rich man with such attitude in the 21st century.


To highlight the roles of leaders and managers, their different positions and roles in an organization will be highlighted:[8]

Manager is an administrator while a leader is an innovator.

Manager is a copy while a leader is an original.

Manager maintains while a leader develops.

Manager is focused on a system while a leader is focused on people.

Manager develops control while a leader develops confidence.

Managers focuses on short-term and a leader on long-term prospective.

Manager asks how and when while a leader asks what and why.

Manager keeps an eye on final results while a leader on horizon.

Manager is an imitator while manager is an innovator.

Manager accepts status quo while a leader denies it.

Manager is a classical obedient soldier while a leader only his own.

Manager is trained while a leader is educated.

Manager takes care of where you are while a leader leads you to a new place.

Manager deals with today while a leader deals with the future.

Manager works with the security while leader with probability.

Manager struggles with complexity while a leader struggles with uncertainty.

Manager is focused on facts while a leader on decisions.

Manager finds answers and solutions while a leader formulates questions and problems.

Manager looks for similarity while a leader looks for difference.

Manager considers that a right solution may be used again in the future, while a leader asks himself whether a new solution for the future is required.

Manager is responsible for efficiency while leader is responsible for effectiveness.


The semantics of verbs to manage and to lead in Serbian language is quite interesting to be mentioned. While managing means determining direction, the leading means movement towards the goal. Determining direction - managing, may be a static quality because after the direction has been determined the one who has determined the direction doesn’t necessarily have to move towards the goal. Moving towards the goal - leading, has necessarily a dynamic form because the one who leads towards the goal has be at the head of such change.


The standard situation in current organizations is that they are led too little and managed too much.  Everyday turbulent changes in environment are a synonym of the need for greater influence of leadership in management.


Today, it is necessary to have ideas in order to survive on market. Leaders are those who sell ideas while managers are those who try to buy ideas at the lowest possible price in practice. Managers are always worried about the price while leaders are not interested in prices at all. New concepts are needed today to bring an organization closer and link it more firmly to consumers. The manager’s task is to preserve the given concept and within its framework to “push out” maximum efficiency, while a leader breaks valid concepts and offers new, even not proven, concepts and ideas.  An organizational model able to cope with all these changes is needed today. And that is a high performance organization with leaders in its entire structure who have mind of winners and turn attacks from their environment into chances and long-term growth and development on market.



3. Human Society and Leadership


In this Chapter the attention will be drawn to the roots of leadership and followership in human society.[9]


The mankind originates from primates. The primates are hierarchically organized with clear differences in domination within the species. The researches have shown that dominant males in relation to the non-dominant ones have greater production of serotonin hormone in their bodies and lower level of stress. Another ability we have inherited from the primates is the ability to imitate. With primates the imitation is almost always one-way: lower status primates imitate actions of the higher status primates. As with people, the preschool children have the behavior similar to the primates: dominant children control toys, choose games and decide who will join the group. Less dominant children subordinate themselves to the dominant children, imitate them and accept their behavioral forms. 


The next recognizable factor is early socialization of a child, namely importance of establishing firm relation of an infant with his guardians in order to survive. A child of 18 months has a strong awareness of his own existence as an individual. It is when he starts to look for the similarities with other people from his environment. Freud called this process the identification. The child identifies himself with the parent of the same gender as well as with elder child of the same gender. It is rather rare for a child to identify himself with another child of the same age. By identifying himself the child becomes a devoted “follower” because he anticipates actions and acts abased on the example of his “leader” also in situations when he is out of his control.


A five-year old child already completely understands the position of a leader, follower and place in the hierarchy. With clearly expressed wishes and aspirations and low developed empathy, in this period the child develops his emotional forms that will mark his behavior until the end of its life. Luckily, latest researches refute Freud’s allegation that the forms remain unchanged during lifetime.


Education is the last factor essential for studying leaders. Namely, the expertise may be achieved by acquiring knowledge in certain activities and, based on this knowledge, an influential position may be achieved and leader’s potential realized as well. Influences in the previous age affect the choice of expertise area of an individual.


According to the studies[10], over 60% of the top British leaders have lost one of their parents back in their childhood, mainly the father. Also, the most influential world leaders (e.g. Hitler, Lenin, Stalin, and Gandhi) have been on good terms with one, and bad terms with other parent. Churchill himself has emphasized in his biography that famous people have mainly been a product of unhappy childhood.


The followers are made of “species” different from those of leaders. They are constantly searching for a fascinating personality while many of the followers are often migrating, searching not for a perfect leader but for a perfect organization, association or society to which they would like to belong. Nevertheless, there are examples showing that even chronic followers may become leaders. There are followers who are attracted by the power or strength of an idea, and those attracted by charisma of leaders.  The charisma may be physical, intellectual and spiritual.


It is of great importance to consider biological and psychological conditions for the existence of both the leaders and the followers in human society because of the future education of leaders. An illiterate of the 21st century will nor the one who does not know how to read or write but the one who does not improve his knowledge. Such should be particularly the future leaders always at the edge of new knowledge. However, the procedure for building a leader out of the one who is not made off this “fabric” would be a waste just like trying to make a pianist out of a typist. I believe in the future that developing science on leadership will be ever more focused on the phenomenon of early discovering of leaders so that they could be built as leaders starting from earlier stage. The current principle of building leaders is based on the principle of empowering already proven top-level managers.  Only such target groups justify investing in development and only such small classes of people have the opportunity to reinforce their leader’s qualities through education.



4. Leadership styles


The leadership style is a manner in which relationships between leaders and collaborators as well as other employees in the company are established. Namely, it is the manner in which leaders direct the behavior of subordinates as well as the means they use to win over or obtain consent for the desired behavior[11]. Basic criteria according to which we distinguish the styles are the following:  

·        Leader approach to motivation of subordinates – coercion or motive,

·        Leader’s decision making manner,

·        Sources of power the leaders use to exert their influence on subordinates,

·        Leader’s competencies to adjust his behavior to various situations.


Based on these criteria the following styles are distinguished:

·        Classic leadership styles, and

·        Modern leadership styles.[12]


4.1. Classic leadership styles


The pioneer studies on leadership are the Hothorn’s and Iowa’s studies. These studies have investigated the influence of three leadership styles on behavior and performance as follows:


The characteristic of autocratic leadership style is in that a leader makes own decisions. He has no confidence in his collaborators. He uses coercion while his influence derives from a formal power of authority. There are two sub-types of autocratic style: charismatic and paternalistic leadership.  The charismatic leaders rely on those personal qualities which distinguish them from others, while the paternalistic leaders build their power on a vision of a company as of their own family, they are fathers taking care of well-being of employees. The autocratic leadership is applied in small-size enterprises; as the enterprise grows and develops this style has to be transformed into the leadership style more appropriate to the situation.


The democratic leadership style is characterized by greater inclusion of subordinates into decision making process, greater confidence in subordinates and faith in readiness and willingness of subordinates to undertake responsibility in the decision making process. The decision making is decentralized, authority is delegated, and this style ensures the participation of employees, flexibility of organization and better performances. The democratic leadership is typical for medium-sized and big enterprises.


The liberal leadership style is characterized by full inclusion of all employees, in whom a leader is fully confident, while they feel completely free to discuss all issues. The liberal leadership is implemented in all enterprises, regardless of their size, structured according to their type and working groups, in which complex jobs are performed requiring sophisticated knowledge and highly educated people who do not tolerate restraints and cliches.


The Ohio studies are the first inter-disciplinary studies on leadership based on team work of psychologists, sociologists and economists. The concept of “management network” is actually based on the conclusions of these studies. The network has two dimensions: care for people and care for production. By advancing along horizontal axis, where the care for production is shown, the leaders show that they are task orientated, while by advancing along the vertical axis, where care for people is shown, the leaders show that they have higher degree of care for people.



Figure 2: Management network

(Source: Petkovic M, Janicijevic N, Bogicevic B., ORGANIZATION: THEORIES,

DESIGN, BEHAVIOR, CHANGES, School of Economy, Belgrade, 2020, pg.305)


In management network three leadership styles are defined:

1.    STYLE 1.1. IMPOVERISHED MANAGEMENT is characterized by extremely low interest of leaders in people and production. This style indicates a low level of entrepreneurial spirit and low competencies of a leader.

2.    STYLE 1.9. CLUB MANAGEMENT is typical for leaders who are hardly interested in production but who devote their attention to employees. This style is not recommended to leaders because it is considered as a specific manipulation with people in an organization.

3.    STYLE 9.1. TASK MANAGEMENT is typical for leaders who are interested in everything pertinent to the production process but who are very little or not at all interested in motives and needs of employees. This style has all characteristics of autocratic leadership.

4.    STYLE 5.5. HALF-WAY MANAGEMENT is typical for leaders who have a balanced sense for both the people and the production. Such leaders, who are majority in real life, do not set ambitious goals and have benevolent autocratic attitude towards the subordinates.

5.    STYLE 9.9. TEAM MANAGERS are the most effective ones, because they are leaders equally greatly interested in both the people and the business. This is a position to be aimed to, and only chosen great leaders may achieve it.

The management network has been proven in practice as a good way of testing leaders because it shows them that the satisfaction of employees is as important as the achieved productivity.


The Michigan studies represent the most comprehensive researches of the classical school of this problem and Likert used their results to develop the “System 4” of management leadership. The first system represents the autocratic leadership on which all power is concentrated on an organizational top level. The second system is still autocratic because management and control have remained on the top level, however some decisions are delegated. There is certain, but not sufficient, confidence between leaders and employees. The third system comprises consulting employees in the decision making process, cherishing the team work in an organization. Nevertheless, the goals are set on the organizational top level.  The fourth system represents a system of decentralized decision making favoring ideas of all employees who enjoy great confidence. The teams make organizational structure. These systems will be discussed in more detail in leadership philosophy of the HPO model.


The group dynamic approach is a modern school approach starting from the attitude according to which an organization is composed of organized and led groups. This approach distinguishes two styles: transactional and transformational leadership.


Transactional leadership means that leaders determine what the subordinates should do in order to realize organization’s objectives, define tasks and assign jobs to subordinates and then stimulate and motivate them to accomplish the set goals. This leadership is successfully realized by authoritarian leaders.


Transformational leadership appeared in 80ties of the last century along with a big wave of organizational transformations of the well-known companies. It has been shown that only a special kind of leaders may make such changes, actually the leaders who have a vision and energy to inspire their followers. They redefine reality, move boundaries of impossible and with the power of their personality move forward the followers to accept and even to create innovations. These are transformational leaders and their qualities are:

1.    They are recognized as advocates of changes.

2.    They are brave.

3.    They have confidence in people.

4.    They are governed by values.

5.    They learn as long as they live.

6.    They are able to cope with complexity, ambiguity and uncertainty.

7.    They are visionaries.


4.2. Modern leadership styles


The contingent approach to leadership is the attitude according to which different leadership styles are variously efficient in various situations. According to this approach no style may be efficient in all situations. The factors affecting the leader’s efficiency are:

1.    The task characteristics and requirements.

2.    The employees’ qualities, expectations and behavior.

3.    Organizational culture and organizational policies.


Further, the four leadership models based on contingent approach, dealt with in the literature the most, will be explained.


Fiddler is considered a founder of an efficient leadership contingent model.  The Fiddler’s model is built on the basis of a relation between leadership styles and appropriateness of the situation, namely the degree to which a leader can control, influence or anticipate the consequences of certain behavior. The combination of a leadership style and concrete situation determines the group performances. Fiddler is of opinion that leaders can implement two different styles in leading their collaborators. One style is characterized by benevolence and tolerant relation towards collaborators, while the other is characterized by unfavorable relation towards the collaborators, namely the ordering relation. The technique he has developed is based on rating opinions of a group leaders on the group members with whom they have worked and collaborated worst, the so-called LPC (the least preferred collaborator) scale.


A leader with low LPC rating is a task-oriented leader, and it is thereby quite logical that he describes negatively those employees who do not contribute to good results.  A leader with high LPC rating is the one devoted to building ever better interpersonal relations. Fiddler shows that the both leadership styles have good performances under favorable conditions while under unfavorable conditions they don’t. Accordingly, we cannot speak of a “good “ or a “bad” leader but of a situation in which a leader may have good performances or a situation in which he may have bad performances. Some leaders may achieve better results with less rather than with more power.  The performances may be improved either by changing some leader’s qualities and his motivation system or by changing situation in order to make it more favorable for a leader.


The advantages of this model are in successful linking of three factors of critical importance for leadership success:

1.    The relation leader/member may be categorized as a good one when there is mutual confidence, or as a bad one when high level of control, threat and fear is present.

2.    The task structure may be categorized as highly structured, when a task is defined by known and clear procedures and instructions for members of an organization, or as badly structured, when organization’s members face a dilemma on what they have to do, when and how.

3.    The position of leader’s power may be strong, when he has great influence, or weak, when he has little influence in an organization.


The basic criticism is directed towards the procedure and statistical analysis applied in the model. In practice, it is not simple to precisely define the level of task structuring, as well as the quality of the leader/subordinates relation. Also, the model does not include in the analysis the characteristics of subordinates and the degree of competency of both the leaders and the subordinates.


The Harsy – Blanshar model, in addition to the tasks/leader–follower relation also introduces in the analysis the third situational variable, maturity of followers. The maturity of followers is defined as competencies and readiness of the employees to assume responsibility when directing their own behavior related to the given task. The maturity level is determined on the basis of three criteria:

1.    Degree of motivation for achievements.

2.    Readiness to assume responsibility.

3.    Degree of education and/or experience.


Based on this three-dimensioned situational model the four leadership styles are defined:

1.    TALKING LEADERSHIP STYLE is the best one for the low maturity level followers not ready to assume responsibility so that their role in performing tasks is ensured by orders and guidelines.

2.    SELLING LEDERSHIP STYLE is best to be applied in case of the low to moderate maturity level followers. This style at the same time ensures both the orientation towards the tasks and the support to people not able but ready to assume responsibility.

3.    PARTICIPATIVE LEADERSHIP STYLE is applied in a situation when the followers show maturity and competency but not readiness to assume responsibility because of which they need support to raise their motivation.

4.    DELEGATING LEADERSHIP STYLE is the best for high maturity level followers. This leadership style allows the followers high degree of freedom and possibility to assume full responsibility.


The House’s model, the “road-goal” model, places focus on expectations and motivation of employees. Initial attitude is that employees expect to achieve high results, and based on this, high rewards while the leader’s task is to assist them and explain which road towards the goal to take. This model distinguishes leadership styles according to leader’s competency to notice distinctions between employees and to build, on these distinctions, various systems of remuneration according to individual contributions. Based on these criteria, four forms of manager’s behavior are distinguished in the model as well as two categories of contingent variables. The motivation and satisfaction of subordinates is the result of a sum of forms of leader’s behavior and contingent variables.


The contingent variables creating leader’S behavioral forms and attitudes and behavioral forms of subordinates are:

1.    Qualities of subordinates (rigidity, external – internal orientation, and competency)

2.    Environmental characteristics ( nature of jobs, formal system of authority, and characteristics of a group)


Four leader’s behavioral forms are:

1.    Directive behavior, resulting in positive influence on subordinates when a task is complex, and negative influence in the situation when a task is clear.

2.    Imitating behavior, contributing to greater satisfaction of employees working on jobs which cause monotony, frustration and stress.

3.    Achievements-oriented behavior aiming at inspiring employees for greater dedication and acceptance of challenges. A leader will, in addition to high assessment of results, create possibility for development and promotion of subordinates.

4.    Participating behavior, meaning a high level of including subordinates into the decision making process, developed communication, getting information, and confidence.


Just like other model based on contingent approach, this model as well suggests to leaders that leadership style should always change and adjust itself to the given situation.


The Vrum-Jeton’s model or normative leadership model tries to explain how leaders should respond or what decisions they should make in a given situation. They have created “decision making tree”. The model contains 5 leadership styles, 7 situational dimensions, 14 problem types, and 7 decision-making rules.


Vrum and Jeton have identified seven possible situations, namely problem characteristics, setting certain requirements before the leaders who face these problems more or less every day. In this model, the requirements are formulated as questions with offered answers YES and NO, and are listed from A to G:

A)   Does the problem require quality solution?

B)   Do I have enough information to make a decision?

C)   Is the problem structured?

D)   Is the acceptance of the decision by subordinates critical for its successful implementation?

E)    If I make a decision all by myself, is it certain that it will be accepted by my subordinates?

F)    Do the subordinates accept (share) organization’s objectives which would be realized by solving this problem?

G)   Is the conflict among subordinates likely to occur in the preferred solution(s)?



Figure 3 : Vrum – Jeton normative leadership model

(Source: Ibid., pg. 317)


This relation between questions and answers should make possible to make a diagnosis of the situation a leader is in, and then enable choice amongst one of the five leadership styles, out of which the two are autocratic decision making (AI, AII), two have characteristics of a consultative decision making (CI, CII), and one has characteristics of a group decision making (GII):

1.    AI

The situation when a leader alone solves problems and makes decisions relaying on information available in the given moment.

2.    AII

A leader obtains the required information from his subordinates and then alone solves problems and makes decisions. The role of subordinates is exclusively in collecting information.

3.    CI

Including subordinates through consulting. A leader consults the subordinates but makes his own decisions which may, but do not necessarily have to, reflect the viewpoints and opinions of the subordinates.

4.    CII

A leader gathers subordinates into groups in which the problems are discussed and opinions of the group conceptualized and presented to leaders. After having consultations, the leaders make decisions.

5.    GII      

Manner of decision making in which leaders and groups discuss problems and make decisions together. They together create and evaluate alternatives and apply consensus in choosing solutions.


The Vrum-Jeton decision making model, by its appearance at the beginning of 70-ties of the 20th century, greatly contributed to the development of theory, and, as analytical means, proved to be very useful in practice. However, the authors themselves pointed at certain model deficiencies.


Vrum and Jago have made significant modification of the normative model. Compared to the normative model offering two options for an answer: YES and NO, the Vrum-Jago model offers several options, such as for example: NO, PROBABLY NO, MAYBE, PROBABLY YES, and YES. They have also introduced in the model some additional aspects of a situation, such as:

·        Time limitations,

·        Quantity of information,

·        Geographical dispersion of subordinates included in the decision making process.


The care for the development of subordinates and the time required for decision-making are also additional elements in the new model. Besides, the rules defined as a support to the normative model have been replaced with mathematical functions. In this way, the already complex model has become ever more complex, so that it is possible to apply it only by using a computer.


4.3. Behaviorist theories, shared leadership and virtual leadership


The behaviorist approach has further improved the theory of leadership styles. Modern authors do not deal with answers to the question who the successful leaders are, but they deal with the question what the successful leaders do, how they behave in organization, how they organize their enterprises, how they make decisions, how they communicate, and how they motivate employees. The leaders are suggested to learn how to behave.


E.Shane concludes that new forms of leadership should be learnt and not through one-time learning, but through changes and unceasing learning. He links effective leadership with the behavior of leaders and defines the following leader’s roles:

1.    Leader as an animator.

2.    Leader as a culture creator.

3.    Leader as a culture preserver.

4.    Leader as an agent of changes.


A leader as an animator is a creator of organization. He is important in the first, entrepreneurial phase, when organization of a young enterprise is being created. The entrepreneurs having visions often lack energy to motivate them to persist, on one hand, and, on the other, to inspire confidence, loyalty and readiness of employees to face failures. The entrepreneurs who successfully overcome this crisis may be said to be leaders-animators. They create organization and give initial impulse for further growth and development.


A leader as a culture creator is an architect of organizational culture of an enterprise. When the organization is created, the leader is, in the second phase of organizational development, expected to convey to employees the assumptions, believes and values, so that they accept and adopt them, in order to build a desirable model of employee’s behavior, and he:

·        Employs and keeps only those employees who accept the system of organization’s values, by changing his mental model.

·        Indoctrinates and socializes employees in accordance with his cultural formula.

·        Imposes his own behavior as a model of roles by which he encourages employees to identify themselves with the organization.


A leader as a culture preserver maintains the accepted model of organizational culture that is realized in the third phase of organizational development called institutionalization. In this phase the successful elements of organizational culture are recognized and leader’s task is to find the way to stabilize and preserve them. Simultaneously, leaders should monitor the organizational development, in order to be able to recognize a new situation, adjust leadership style and allow the appearance of other leadership forms. The leader’s task is to develop competitiveness both of the individuals and the groups. They should develop together with their organization as well as develop a new generation of leaders, for a different future of the organization.


A leader as an agent of changes also changes organizational culture. The role of the agent of changes requires leadership skill in recognizing disharmony between the size and age of organization, newly created conditions and cultural forms of organization. The change in organizational culture understands the activities of leaders aiming at destroying elements of old culture and promoting new elements that will create a basis for new behavior.


The Benis’s researches show that basic dimensions of an effective leader’s behavior are:

1.    Effective leaders focus their attention on visions. Their own convictions direct behavior of others.  By defining an image of a desired future, they direct actions by visions thus transforming the existing opinions of the followers. The more the vision accepted the stronger the emotional and spiritual foundation of organization.

2.    Effective leaders provide meaning through communication. Leaders define what has been unsaid or presumed before. The leaders explore why and not how, always and constantly discovering new problems. Leaders are those creating organizational culture.

3.    Effective leaders win and maintain confidence through positioning that is considered an active side of vision. A task of positioning is to make the positions, values and models known and clear. Leaders are trusted if their positions are consistent, if their beliefs are persistent. This has a return effect on further strengthening of visions as well.

4.    Effective leaders develop their personality through respect. Recognizing advantages and eliminating weaknesses, sharpening competencies and talents, distinguishing appropriate competencies through job requirements; ability of recognizing mistakes as a way of learning and not as a failure, are requirements which leaders must respect. The leaders accept people for what they are, avoid the past in relations with them, are full of attention and kindness, have confidence in people and self-confidence as well.


For a continual success of an organization it is necessary to provide a generation scheme. Solution to this problem is in Handy’s concept of shared leadership the essence of which is in distributing power throughout entire organization.


There are two basic concepts on which the shared leadership is based:

1.    SUBSUDIARY quality, a notion taken from the political theory, introduced in practice of modern organizations aiming at achieving balance of power. The essence of the principle is in that the higher body should not take over the duties which could be performed by lower bodies. The subsidiary relations understand confidence, while the task of leaders is to develop competencies of employees and make them become independent in order to assume the leadership role.

2.    EARNED AUTHORITY, the notion taken from political theory, in leading modern organizations which is less and less like a machine and more and more a group of political processes, which should explain to leaders that power does not spring out from somebody’s position. According to this principle, the power should spring out from the competencies and merits of the organization’s employees.


Leadership and leaders are becoming changeable categories. The leaders realize their influence on behavior of other members by their respect earned by contributing to the organization’s success. When others achieve better results and merit authority, they will assume the leader role.


Replaceability of leaders means that in modern organizations there is not only one leader. The reality shows that there should be more leaders in an organization and that leadership functions must be divided throughout the organization. The subsidiary and earned authority principle presupposes two things:

1.    Structuring organization per teams and working groups; and

2.    Making people independent for leadership.


Traditional organizations have been created on the concept of place, namely space where business activities are performed. Today, in the era of high technologies, information, learning and changes, the traditional organizations are undergoing metamorphosis and are being transformed into virtual organizations based on the concept of activities and not on the place at which the activities are performed.  This phenomenon brings us to the need of studying the leadership required for such type of organization. Such leadership is defined as a virtual leadership.  The virtual leadership affirms a new doctrine trying to find an answer to a key question of virtual organization: how to manage the people we don’t see? The answer seems to be an easy one: by having confidence in them. The confidence is a basis of virtual organization and a phenomenon opening new chapter of leadership. This is a leadership model which should develop the feeling of belonging and loyalty in the people who work on certain jobs, regardless of place and time in which a job is performed. In order to accomplish the goal of belonging, the basic principles on which the confidence is built are suggested:

·        Confidence is not blind.

·        Confidence requires boundaries.

·        Confidence requires learning.

·        Confidence requires strength.

·        Confidence requires unity.

·        Confidence requires contact.

·        Confidence requires shared leadership.


The motivation and participation of employees in virtual leadership become more and more important. For virtual leadership the key issue is how to keep people with good qualities. The answer is in changing relation towards the employees.  The employees must be evaluated as assets and not as costs of an enterprise. And indeed, the market value of two hundred leading companies on the London Stock Exchange in average is equal to three times greater value of visible fixed assets. This means that markets evaluate the invisible assets of an enterprise, namely knowledge, experience and quality of employees, more than visible assets shown in balances of enterprise.



5. Types of Leaders


The main division of leaders would be the following: transformational and transactional leaders.[13] A transformational leader is the one at the top position in an organization and his role is in changing reality of certain environment to bring the organization in conformity with values and ideals. A transactional leader is in position below the top one and his task is to efficiently get in interaction with the changed reality. Although an organization needs both leaders, only the transformational leader is a principle-centered leader.


Covey recognizes 2 basic principles at 4 levels. A principle-centered leader should incorporate the following principles, from own level to organizational level:



Figure 4: Levels of the Principle centered  leaders

and key principles


Simon &Schuster, USA, 1992, pg. 286)


Related to the central massage of a leader[14], the following types of leaders are distinguished:

1.    ORDINARY type, who has found out the way to effectively communicate the traditional story among followers, ever less desirable type in the world;

2.    INNOVATIVE type, who adds to the story latently present in population a fresh component or highlights it in different way, this being a good quality of transactional leader; and

3.    VISIONARY type, the rarest type, who creates new stories, unknown to the audience, by which he achieves efficiency at higher level, this being the very quality of transformational leader.


A leader spends a lot of his time working with people. According to the quality of interpersonal relations between a leader and his followers, the resonant and dissonant leaders are recognized, namely the leaders whose actions are in harmony with follower’s feelings so that they are all in positive emotional climate, and leaders whose actions are in disharmony with wishes and feelings of the followers so that the emotional climate is not simulative.[15]


Based on Goleman’s researches carried out on 3,871 leaders, the following types of leaders are recognized:

1.    VISIONARY, resonant. When changes require a new vision, or when a new and original direction is needed, this type of leader, creating positive climate in organization, moves people towards the common dream.

2.    TRAINER, resonant. He assists employees in improving their performances on long-term basis, creating very positive climate in organization, linking wishes of each employee with organization’s objectives.

3.    GUARDIAN, resonant. When it is necessary to strengthen connections, provide motivation in stress situations and “fill in holes” in organization, in a positive climate, this type of leader creates harmony by linking people.

4.    DEMOCRATE, resonant. When it is necessary to build consensus or stimulate employees to improve their outputs, this type of leader, in a positive climate, appraises outputs of employees and creates the participating culture.

5.    REGULATOR, dissonant. When high-quality results are to be obtained from a motivated and competent team, this type of leader regulates steps how to bring the realized results close to the expected ones. Considering that this is usually poorly done in practice, this type of leader often creates negative climate.

6.    COMMANDER, dissonant. In crises, radical changes or critical situations between the leaders and employees, this type of leader diminishes uncertainties issuing clear directives. Often misused model, so that this type of leader creates a negative climate in organization.


Although Goleman and collaborators consider the first 4 types of management as positive, and the last 2 as negative ones, still his general advise is: manage with style, the right style in the right time.


A study on management[16] manners shows that management is not dependent on emotional nature of leaders but that business environment and branch activities determine the manners of management. Farkas and Wetlaufer have studied the manners in which 160 world business leaders manage and they have expected to discover another 160 manners of management. However, they have discovered only 5, oriented to:

1.    STRATEGY, less than 18% of respondents;

2.    PEOPLE, about 22% of respondents;

3.    EXPERTISE, about 15% of respondents;

4.    CONTROL, 30% of respondents;

5.    CHANGES, less than 15% of respondents, the smallest share in a sample.


The Strategic leaders, e.g. in the CEO Coca-Cola or Dell Computers, consider that their main job is to create, test and implement a long-run strategy of the company. They spend most of their time on jobs pertaining to strategy and contacts with external factors. The people-oriented leaders, e.g. in the CEO Gillete or PepsiCo, spend most of their time travelling, in business units and in contacts with people. Their special sphere of interest is recruiting and employing new workers. For the expertise-oriented leaders, e.g. in the CEO Motorola or Ogilvy & Mothers, the primary sphere is the one in which expert knowledge produces competitive advantage on the company’s market. They spend most of their time in creating programs, systems and procedures. The control-oriented leaders, e.g. in the CEO Bank America or British Airways, are oriented on creating a set of control elements which may ensure uniform or anticipated behavior of the company towards consumers and employees. These leaders very much appraise confidence and long employment of collaborators in the firm. The job of leader of changes, e.g. in the CEO Goldman Sach or Tenneco, is in continual innovations in business running. Compared to a strategic leader, this leader does not set a specific goal to be achieved or determine a place to be reached, but a desired direction. They spend most of their time communicating: speeches, meetings, and alike. And these leaders are the most effective ones.


Based on these researches it was concluded that the management manners is not dependent primarily on personal leadership style but that leaders should accept the way of managing needed by the organization with relation to the environmental conditions. It was also concluded that leadership style should and must change with changes in environment.



Figure 5: COP model

(Source: Zenger John H. et al., THE EXTRAODRINARY LEADER:


McGraw-Hill Trade, USA, 2002, pg.117)


Figure 5 shows the COP model[17] revealing where the “right combination” for leaders is, namely the center of their acting. This is a good model, which may clarify how leaders behave with relation to their environment.


Obviously, the COP is actually an abbreviation composed of the main model element initials in English language: competency (C), organization(s) (O), and passion (P). The right leadership combination is in the cross section of competency, organizational needs and passions.


Competency is a skills, behaviors and competencies that a person possesses or performs more than well. A sphere of knowledge or expertise may also be a competency. In order the leaders may successfully find their “right combination”, the competent people possessing passion for performing their jobs must be appraised by the organization. Typically, organizations will appraise competencies and passion of an individual having direct influence on business success of organization. However, the fact that somebody has a competency does not necessarily mean that he has passion, namely enthusiasm and irresistible need to use his knowledge and skills for the benefit of his organization. It is actually impossible to develop passion for things we dislike or don’t appreciate in our life outside business.


The leaders who are in the model average:

·        produce output greater then their colleagues.

·        are ranked as persons of higher performance.

·        generally spend more time at work than their colleagues do.

·        don’t search new jobs.

·        are more motivated and to them their organization’s problems are clearer.

·        permanently receive education and develop new skills.

·        job is amusing for them… and they are pleasant to work with.



6. Jobs and characteristics of leaders







·        Crises

·        Problems

·        Projects that have become due

·        Urgent meetings

·        Urgent preparations


·        Most of preparations

·        Clarification of goals

·        Planning

·        Training

·        Alignment



·        Interruptions in job

·        Some telephone calls

·        Some meetings

·        Some mail

·        Out-of- business activities


·        Trivial jobs

·        Some telephone calls

·        Unimportant mail

·        Non-business software

·        Out-of-business activities


Figure 6: The time management matrix

(Source: Covey Stephen R. et al.: FIRST THINGS FIRST: TO LIVE, TO LOVE, TO LEARN, TO LEAVE A LEGACY, Free Press, USA, 1996, pg.37)


As shown in the matrix, various activities take place at work:[18] some things are urgent, some are not, some are important, and some are not. In practice the jobs are performed in the following sequence: urgent jobs listed in square I are performed first. Then the work is continued by performing urgent jobs listed in square III. Then a person wants to have a coffee break playing solitaire on his PC. Then he spends time in square IV, so that least time is dedicated to the jobs in square II, actually the jobs of utmost importance because only in climate of these activities a vision of business operation and strategy for future is developed. The matrix shows that the managers are needed in organizations considering great numbers of activities are the very jobs of a manager.


In a HIGH PERFORMANCE ORGANIZATION (hereinafter referred to as the HPO) the time management matrix looks different. Namely, by training people, authorizing them to get fully involved in business activities, as well as by aligning people in an organization by drastically reducing hierarchy levels, a lot of so far urgent jobs, overburdening the top management, are today performed at lower levels of organization. Thus, the “time crunch” problem is gradually fading away. The leader in square II is thereby gets free from stress and short focus and may dedicate most of his time to developing vision, finding out new possibilities and improving communication between people. This matrix, where bolded numbers represent the HPO while italic numbers represent the typical organization, is presented as follows:[19]








20 – 25%

25 – 30%



65 – 80%






50 – 60%



Less than 1%

2 - 3%


Figure 7: Time management matrix in the HPO and typical organization

(Source: Ibid., pg. 218)


In the period of rapid structural changes, the only one who survives is the leader of changes.[20] The changes cannot be managed; one can only be ahead of them. The leader of changes is expected to:

1.    Penetrate deeply into the future.

2.    Find out and anticipate changes.

3.    Incorporate changes.

4.    Balance chances and continuity.


The strategy of a leader of changes is denying the past. What has been good yesterday may not be, and usually is not, good for today and tomorrow. It certainly does not mean that everything is to be denied. Drucker suggests that in such situation we should ask ourselves the following question: “If then I had had the wisdom of today, would have I done the same thing?” The next policy pursued by a leader of changes is “exposing problem to starvation” and  “feeding” chances, all this in the spirit of continual and organized improvement and progress. The third systematic policy is insisting on innovations because in this way the changes are stimulated. The only strategic orientation having chance is creating future.


The effectiveness is a habit of guru management, claims Drunker in his well-known and supplemented paper[21] reprinted and translated a number of times in the past 40 years. A habit is a complex of skills. Skills may be improved by learning, meaning that effectiveness may be learnt.


Effective executives have a set of 5 skills:[22]


Firstly, effective executives know where their time runs. Drucker suggests three steps in mastering these skills:

1.    Recording the time used,

2.    Time managing, and

3.    Consolidating time.


Secondly, effective executives have a clear result in their focus. Namely, they focus their work on results and not on mere job performing. The key of efficiency is in the focus on results while in its basis are: communication, team work, self-training and training of collaborators.


Thirdly, effective executives lean on their own strength, the strength of their superiors, colleagues, and the subordinates as well as on the strength that may be created by a certain situation in the environment.  This is a fundamental behavior of the executives. It is primarily manifested at the employment of new workers. They make decision on employing new workers, however, not to minimize weaknesses but to strengthen advantages. The tasks assigned to the collaborators are demanding and intensive, and the executives see, not what the requirements of the job or work place are, but how a person may contribute to the organization.


Fourthly, effective executives do not concentrate on everything but on several major activities where their superior performances may produce supreme results. One of the secrets of effectiveness is that effective executives work on the most important things first and one by one. Many of them are aware that things having no priority are not worth to be considered and are to be rejected.


Fifthly, the effective executives make effective decisions. They are aware that this is a matter of the system – the first step in the right time. Effective executives don’t make many decisions, they concentrate on the most important ones.  They rather think strategically and generically than they “solve the problems”. They also know when the decision is to be based on principles and when the case calls for pragmatism. The decision is like a surgical operation, a court judgement. The choice between the good and bad is rarely made, while the choice between several alternatives is more often the case. The golden rule in the decision making process is that the decision is not to be made until the disharmony is made. There are three reasons why: this is a safe way for a decision-maker not to be a prisoner of his own delusions or misconceptions of his organization; the disharmony produces alternatives, and without alternatives the decision may be unproved and deficient; the disharmony is needed in order to stimulate imagination.


An effective leader is, according to Drucker, our greatest hope for the modern society to be economically productive and socially vital.


A leader will find out that idle moments are greatly under their control. One research work[23] shows in a plastic way what executives actually do. While according to the conventional opinion according to which the executives, as defined by Feyol back in 1916, deal with planning, organization, coordination and control, Mintzberg shows that the job of executives comprise: interpersonal activities, information activities and activities pertinent to the decision making. Thus, the myths to be demystified are:

·        The managers are reflexive and systematic planners.  In reality, the manager’s job is full of discontinued activities, and managers are, thereby, action oriented and not reflective-activity oriented.  A study comprising 56 American executives showed that they had 583 activities in 8 hours or one activity per 48 seconds on average. The studies comprising 160 British executives showed that they could work on one activity continuously only half an hour in two days. Thus, managers can only in such way respond to the pressure created by their work.

·        Managers are not in charge of regular duties.  In practice, manager’s job is full of formal duties, including both rituals and ceremonies vital for relation between organization and its environment. According to the researches the managers spend almost 50% of their time on these very activities.

·        Managers need information in a summarized form, in the form of report. Three studies show that managers spend 66%, 78% and 80% of their time respectively in oral communication. As for non-oral communication, the managers spend most of their time on reading – various mail.

·        Management is, or will soon become, a science. Mintzberg’s observations show that the work of managers in practice and the description of managers in books differ to great extent. The job of a manager – how he organizes his time, makes decisions, etc., is something that happens deeply in his mind. The effectiveness of executives, according to him, primarily lies deeply in the executives themselves, in their own relation towards the job.


Mintzberg has developed, based on explained myths, major roles of a manager. A manager is a person responsible for the welfare of his organization. He has formal authority and status. His job may be described through roles he has, namely organizational set of behaviors identified with the position. Based on authority and status, the roles of a manager are:


1.1           frontman -  every head of organization has certain ceremonial duties such as for example opening of company’s tournament or taking a guest out for lunch.

1.2.        leader – he is responsible for leading people in an organization or organizational unit, as well as for accomplished success or failure on the basis of such leadership;

1.3.        link – the researches show that contacts outside a vertical  chain of commanding with colleagues from environment are extremely important, as well as the fact that managers dedicate much of their time to this; 44% of contacts, according to Mintzberg’s study, are the contacts of such kind;


2.1.             monitor – a manager constantly screens environment searching for information, and the result is information as much good as the network of his contacts is good.

2.2.             disseminator – a manager has a power to control the scope and quality of information he conveys to others.

2.3.             speaker – as a speaker the manager conveys direct information to people, especially to those outside the organizational unit;


3.1.             entrepreneur – the duties of a manager are improving organization performances and adapting to the changes in the environment, and in this role a manager is herald of changes.

3.2.             handler of disturbances – in previous role the changes are under the influence of a manager, in this role they are out of his control; a manager must respond immediately to all dangers coming from environment;

3.3.             resource allocator – a manager is responsible to decide who will do what. The essential resource is also the use of manager’s own time. According to Mintzberg the managers make lot of decisions on ad-hoc basis;

3.4.             negotiator – a manager spends a part of his time negotiating, this being an essential element in integral job of a manager.


Instead of giving answers, the leaders should ask questions. Instead of orienting people towards their jobs, the leaders should disorient them in order to obtain new ranges. Instead of diminishing conflicts, the leaders should stimulate them. Instead of maintaining stable behavioral norms the leaders should change them.

Leaders whose task is adapting to changes should adhere to the following 6 principles:[24]

1.    Leaders should have a strong sense for reality and should watch the situation as if standing “on the balcony”.

2.    When the business cannot be quickly adapted to changes, then he is most liking facing its disappearance. Leaders should rapidly identify changes to which the business should adapt.

3.    Leaders should regulate stress situations in the sense to lessen the stress. They should create the so-called sustainable situation using pressure cooker analogy – to keep the pressure constant, neither to too high nor too low. Leaders are responsible for directing, orienting, establishing norms and managing conflicts.  And finally, the leaders must have a sense of equilibrium.

4.    Leaders should maintain discipline. Nobody is able to be a leader unless he is not open for different attitudes. When in stead of sterility a leader introduces as a practice a conflict of thoughts, then the leader must withdraw to enable the team to come to acceptable solution and then he has to show up again to quickly establish equilibrium.

5.    Leaders should bring the work back to people. The people having sense for early changes are often at the periphery of events. The changes require special knowledge. Unless all team members are not included in the process, the organization might deprive itself from visions of those who see early changes, as well as of those who have expert knowledge, and thus lead itself to self-destruction.

6.    Granting rights to people is a basis of an organization wishing to experiment, learn and adapt itself to changes. The leader’s task is to support voices “from bellow” but also to suppress or root out the voices of those deviant ones not fitting in the values and norms of organization and thereby generating negative imbalance in the organization.


The model[25] that follows introduces basis of a leader and leadership, namely explains what makes the foundation of a successful leader:



Leading organizational changes



 Interpersonal skills



 Personal capacity



Focus on results













Figure 8: Model of a leader basis

(Source:Zenger John H. et al., THE EXTRAORDINARY LEADER:


McGraw-Hill Trade, USA, pg.55)


The character is the central part and main column of a leader. Everything lies on him and derives from him, and a leader should:

·        make decisions thinking to the benefit of an organization, and use his  own attitudes in order to influence decisions,

·        fulfill obligations and given promises,

·        always work on himself, learn and be trained,

·        be open for feedback

·        be available to everyone

·        treat every collaborator in the same way,

·        make no difference among people at different levels in the organization,

·        trust people and expect good intentions from them,

·        work in a team,

·        not be arrogant,

·        be steadfast towards barriers and

·        be elastic towards the changes.


Knowledge and skills a leader should posses represent his personal capacities:

·        technical knowledge,

·        knowledge on products/services,

·        personal skills,

·        innovative knowledge,

·        initiative, and

·        effective application of information.


Very important link in the model is the manner in which leaders focus on results:

·        determine stretched goals for their people,

·        assume personal responsibility for team results,

·        provide constant feedback and behave as coaches while working with their people,

·        attach the halo of sublimity to the goals assigned to the team,

·        act as sponsors of each initiative or action,

·        initiate new programs, projects, processes, technologies, new relations with consumers,

·        focus on organization’s objectives and ensure that they are turned into individual actions,

·        operate quickly and intensively and give rhythm to the team,

·        they are champions in relations with consumers, and

·        balance long-term and short-term results.


Interpersonal skills, interpersonal relations are what gives great advantage to leaders in their work with people. They:

·        communicate intensively and fruitfully,

·        inspire others to achieve high performances,

·        build positive relations with others,

·        develop skills and talent of their collaborators,

·        work in the atmosphere of togetherness with others,

·        are effective team members,

·        recognize and reward contributions of others,

·        are open towards new ideas,

·        receive and respond to feedback positively,

·        effectively resolve conflicts in the organization,

·        have positive influence on both the superiors and the colleagues and on the subordinates as well,

·        build self-respect of others, and

·        teach others.


Leaders, in leading organizational changes, have the following competencies:

·        competency to be a champion of changes in the organization,

·        lead programs and projects  with the support  and cooperation of others,

·        are effective promoters of programs of changes,

·        have strategic prospective,

·        know how to fit their work in the business strategy,

·        turn organization’s vision into challenging goals and tasks for others,

·        have long-term visions, but still find out balance between the visions and short-term goals,

·        link outer world with stakeholders in the organization,

·        represent the work of his team in and out of the organization, and

·        help people understand that meeting customer’s needs is the mission and objective of the organization.


Such qualities have been found in practice, based on the most comprehensive researches to which I have had access: basis of 25,000 leaders assessed by 200,000 of their collaborators. Further, Zenger and associates have brought into relation 5 basic leader’s qualities and have come to conclusion that leaders assessed as being strong in focusing on results and in focusing on interpersonal qualities are the best combination. Out of 10% of the best leaders even 66% of them have been assessed as strong in these two qualities.  We shall go back to this research later.


Leaders come in all forms and sizes, but they are all composed of the following components:[26]

·        The first basic leadership component is a visionary guideline. A leader must have crystal clear idea where he leads.

·        Second basic leadership component is a passion - passion for life, passion for profession, passion for actions, passion for vision. A leader communicating with passion gives hope and inspires collaborators.

·        Third basic leadership component is integrity. There are three essential components of integrity: self-awareness, openness and maturity. “Get to know yourself” has been inscribed long time ago on oracle in Delphi, in ancient Greece.

·        The fourth basic component is confidence. The confidence emerges as a quality product of his cooperation with collaborators. Expressing confidence by followers is like a “cream” without which a “leadership cake” is not finished, not sweet, not perfect.

·        Fifth basic leadership component is curiosity, inquisitiveness. A leader always asks questions and wants to learn everything that he may know.

·        Sixth basic leadership component is boldness. A leader likes to experiment and does not fear a failure. On the contrary, he learns from failures and turns his mistakes into advantages.


We may already emphasize that we slowly come to understanding that two critical leader’s characteristics are his personality and interpersonal relations. The HPO leader, as we shall see, is a leader building his strength on the following advantages: emotional intelligence and democracy.


The art of leadership lies in freeing people to do what they are asked in an efficient and the most humane possible way. Three key elements[27] of this art:

1.    mastering changes.

2.    diminishing conflicts, and

3.    reaching maximum potential.


It would be interesting to see the specific characteristics of a political leader. David Gergen, as a member of the White House team, was a counselor to six American presidents, from Nixon to Clinton, and wrote a book on that.  The suggested principles and characteristics appropriate for an American president from this paper may be presented as a model of good characteristic of a political leader.


Seven lessons on political leadership are:[28]

1.        The leadership starts from the inside. The inner soul of a president affects all decisions made even more than generally known or thought of. Integrity is the most important component of a president. There is a disagreement in how the president’s life affects his rule, especially as regards Clinton, but there is no disagreement that a president should be a virtuoso in public life. In order to be able to govern the president should inspire confidence in the public as well as amongst the people in his team. Also, an important component of a good president is courage. The issue of “presidential intelligence” is also disputable. The most intelligent of the observed presidents were Nixon, Carter and Clinton, however, Reagan achieved the greatest success with his combination of competencies and emotional intelligence.

2.        Central bearing message. Out of the observed ones, Reagan was the only one who had a clear goal to which he was going. Just as he must have a strong character, he must have a clear intention. A President must base his/her message in the same way as the founders of American State did in the Declaration on Independence. It does not deal with who the Americans are (at that time a new nation with only 3 million inhabitants), but what the vision of the nation is – to be great and free, and this road and this direction will never end. A President should not deal only with the present and with general places, however should not conceive a new Declaration either. He should add to the existing one the fresh elements leaving his own mark.

3.        The capacity of convincing. Television has changed the existing political world. Kennedy has beaten Nixon on TV. In previous history it was not important whether a president could mobilize the public. Today, the media and the public are always hungry for new information. In 1997 Clinton delivered 545 public speeches.

4.        Capability to work within the system. Presidents are surrounded by institutions of a system and they have to understand that they are one of these institutions. The institutions critical for presidents are: the public, Congress, and journalists. The institutions important but not critical are: foreign powers, domestic stakeholders, and domestic elite. In the past century the only American president who controlled all institutions was Roosevelt.

5.        Fast and safe start. In most of the institutions the influence of leaders rises with time. As for presidents the situation is opposite, their influence is falling. A successful start is the most important wisdom of a president, because the above observed presidents have defined the basis of their policy and what they should do until the end of their mandate not in the first hundred but the fist thirty days. A President has to both define his policy and choose his team already during the campaign in order to start working as a “locomotive” from the first moment in their cabinet. Out of the observed presidents, Clinton has had the worst start.

6.        Strong and vigilant advisers. Since the first American president, it has been obvious that the best presidents have been those surrounded by the best men. George Washington, whose advisers were future American presidents, to mention only Thomas Jefferson, has been aware of this message.

7.        To inspire others to continue their mission. The point is that effective presidents have left a living heritage, a legacy that inspired others to continue their mission long after them.  Gergen refers to other researchers who have singled out five presidents: Jefferson, Jackson, Lincoln, Roosevelt, and Reagan as presidents who have abandoned the “old orthodoxy” and built “new paradigms”. Out of the observed ones, Reagan has moved the balance between the political centralism and entrepreneurial culture in favor of the latter and ensured powerful economic development of the States as his own legacy long after his rule.




7. Democracy and Leadership


The democracy, the greatest of all social experiments, has not yet been rounded up nor finalized either. The democracy is being transformed. And it supports transformation. The democracy is related to people and the rule:[29] how we live our lives, how we behave at work, what principles and values we adhere to, what kind of authorities we have on local and higher levels, and what are our hopes for the future. The democracy inspires the freedom, equality, individual values, justice, and openness. The democracy is open and sensitive to changes. A democratic organization is based on people who are free, intelligent and competent. The democracy is not one man – one voice, everyone-does-what-he-pleases, chaos and anarchy. It is highly organized, purposeful, accountable and disciplined. A democratic organization is based on team work. The starting point of an effective team work is based on the following emotions of team members:[30]

1.        Belief that each of us is responsible for the success of each of us, our team, as well as organization as a whole.

2.        Belief that none of us is as effective as all of us together.

3.        Belief that the success of organization is a success of all of us.

4.        Belief that every team member is a friend and not consumer or competitor.


The democracy is inevitable because it is the only system able to cope with the requirements of the modern civilization changes, both in business and in political sense.[31] In the past the business leaders were of opinion that the democracy was beautiful but not efficient in the business world. Their attitude was the “democracy is a good thing for good people, but they do not work for me”. The history has shown that nations with democratic systems have had relatively richer and more stable development than those with authoritative regimes that have been suffocating either in blood or in poverty. The democracy has been the only one that has coped with the requirements of the modern civilization changes, and it may be said that it is the only one capable of adapting itself to changes in the future as well.  The practice also shows that growing number of business organizations in the USA are aware of efficiency of the democracy, not only the newly founded ones but also those with a long tradition, and they implement it successfully.


The democracy in organizations does not rely on the “laissez-fair” principle but on certain set of values:[32]

1.        Full and free communication.

2.        Relying on consensus in solving conflicts and not on coercion or compromise.

3.        Power is based on professional competency and not on position in an organization. 

4.        Atmosphere allowing and stimulating emotional relations and behavior.

5.        Conflict between a man and an organization is solved on rational basis.


The MIT has carried out researches related to the issue: Which organization is the best for a particular type of environment? The conclusions are that:

1.        For simple tasks under static conditions the appropriate system is autocratic, centralized system, such as was in many industries in the first half of the past century, which is faster, clearer and more effective.

2.        For adaptability in changeable conditions, for fast acceptance of new ideas, for flexibility and greater moral attachment of workers, the best system is a decentralized democratic system.


It is well known that most of the scientific institutions have always had a democratic system of organization. In the atmosphere of equality, liberalism and pluralism the forms stimulating new and more advanced ideas have been built. This is necessary to be done in the industry as well – particularly when a change is omnipresent and when new creativity is needed. For these organizations the democracy is not an idealistic concept but an everyday reality based on effectiveness.


In the past, the entrepreneurship was based on a great man with one idea. Today, this is “altmodisch” because innovations are taking place everyday and are diverse. And they come from all sides, not only from direct competition but also from other industries and other branches, materials, products or services. Today, a “democratic” man is in fashion.


The democracy is becoming a necessity whenever a social system strives for survival under the conditions of chaotic changes. For the organization to subsist and survive, it has to be prepared to everything and to be future-oriented, it has to develop products, services and technologies irrelevant for the present, if they may be relevant for the future.


The changes will not take place in organizations if top leaders do not focus on effectiveness. For the top leaders to be effective the required leadership system should be the one stimulating their subordinates and collaborators to work together as one team. The democratic organization is this new leadership system. A change will not take place if the top leaders would not be suspicious towards the paradigm that the democracy, empowering and aligning are the necessity in the present dynamic marketing environment. By adopting this paradigm they will be able to encourage their collaborators to change their own paradigms as well and to adopt a simple fact that all of them together are responsible for effectiveness, that this should be everybody’s role, everybody’s belief and general bequest.


The ideal of an organization of the future is a model preparing an enterprise to successfully face many complex problems and to respond to them in a manner which would be of utmost benefit for it[33].  In such an organization the power is not on the top but in leader's working teams. The power lies in the position, but the root of power is in expert knowledge of the team members. Such teams and organizations may not be managed in an authocratic manner.


A new leader is certainly not an autocrat but a democrat.  A democrat will succeed to stimulate and motivate. A democrat will know how to use all potentials. A democrat will allow the leader’s jobs to descend from the top level to the team level. A democrat will strengthen teams and team work. Such approach is the right approach that will contribute creating high performance organizations because such organizations are a set of strengths of all teams and team members in them. It may not be designed by a wish of any brilliant individual in the top position; it may be designed only if a vision of all people in the organization is a common one. Thus, the democracy lies in the core of high performance organization and a democratic leader - the leader eliminating the worn-out hierarchical systems in management, is the right type of leader for a high performance organization.







The employed in 1979 possessed knowledge comprising 75% of the knowledge required for performing their jobs. This percentage rapidly fell and in 2000 the employed possessed 15% of the knowledge required for performance of their jobs.  We have seen that the success of both leaders and an organization depends to a great deal on leader’s personality. The psychological aspect of leadership is crucial while the emotional role of a leader is a primary role.  In this Chapter other disciplines related to the phenomenon of leadership will be discussed.



1. Emotional Intelligence and Leadership


Every man has at least two kinds of intelligence, one rational and the other emotional[34]. They in fundamentally different way affect our mental life. After returning from a party, a girl wanted to frighten her parents by hiding in a cupboard in her room. Her father heard some noises in the room, took out his gun and entered the room. The girl jumped out of the cupboard and the father fired…And killed her on the spot. Although a sever punishment for this man did not exist, the court released him. Why?  Because of the structure of our brain. The evolution has conditioned that our survival instinct is fast and active. The emotional brain responds several times faster than the rational brain. And what is even more important, the emotional brain may “kidnap” the rational brain. The psychologists call it amygdala kidnapping. Visual information is gathered in a part of brain called thalamus and then sent to two places, in amygdala, the center of emotional mind, and cortex, the center of rational mind. The distance between the thalamus and amygdala is shorter than between thalamus and cortex. What is happening to a man when amygdala kidnapping takes place? The blood pressure rises and the heart pulsates faster. The muscles contract and prepare for action. This has already happened to all of us, hasn’t it? It should be mentioned that the cortex after processing information sends it to the amygdala. The infantile nature of emotions is also important to be mentioned because the emotional brain is the first to develop and these early emotions may significantly affect our later life. The basic emotions are: rage, sorrow, fear, satisfaction, love, surprise, disgust, and shame.


Each of the emotions play a unique role, which is revealed also by their characteristic biological properties:

·        In a fit of rage the blood pours into the hands, enabling them to reach a weapon or attack adversary easily; heart starts to beat faster, and the rise in hormone level, such as adrenaline, produces sufficiently powerful energetic impulse for violent action.

·        In fear the blood flows up to the big skeleton muscles, such as for example legs, making escape easier – the face turns pale since the blood runs down from it (causing the feeling as if the blood has “frozen in our veins”). At the same time, the body becomes stiff, even for a second, perhaps giving it time to assess whether hiding would be the right response.  The processes in cerebral emotional centers release a flood of hormones which place the body in the state of total alert, making it stiff and ready for action, while the attention is directed to immediate danger in order to make the best assessment of the move to follow.

·        Basic biological changes in the state of happiness include more intensive cerebral centers activity inhibiting negative feelings and stimulating available energy increase, while calming down those arousing anxious thoughts. However, in psychology there is no particular change discontinuing the state of inactivity thus  allowing faster recovery of a body than biologically aroused disturbing emotions. Such state allows total relaxation of a body as well as readiness and desire for any forthcoming task, but also an aspiration towards realization of a whole series of goals.

·        Love, tender feelings and sexual satisfaction arouse parasympathic stimulation – physiological opposite to the state of “fight or escape” movement caused by fear or rage. The parasympathic formula of “relaxation reaction” represents a series of reactions along the whole body producing general state of calmness and satisfaction, eased cooperation.

·        Rising brows in surprise allows the field of vision become wider and also more light reach the retina. In this way we get more information on an unexpected event, it is easier to understand what will happen and think out how to act.

·        All over the world the expression of disgust is equal both by appearance and by message it conveys: something is unpleasant by smell or taste, or alike. The expression of disgust – the upper lip bends at ends while nostrils pucker up a little – indicates, as Darwin observed, primordial attempt to close nostrils because of smell or to spit out poisoned food.

·        The basic action of sorrow is to help us to grow accustomed to a great loss, such as death of the closest person or essential disappointment. The sorrow causes loss of energy and lack of good mood for dealing with everyday commitments, loss of desire for entertainment and satisfaction, and if it becomes serious disturbance leading to depression, then it slows down the body metabolism. This essential isolating enables us to survive the loss or betrayed hope, to realize the significance of life, and when the energy recovers, to plan a new start.       


The strength of emotions is not the same with all people. Imagine that you are flying in an airplane on a pleasant flight. However, a pilot announces: “Ladies and Gentlemen, we’re approaching turbulence, please be seated and fasten seat belts”. Soon, the plane gets into an air storm, the worst you have ever experienced.


The question is what will you do? Are you a person who will be absorbed with reading a book or watching a film, not thinking about turbulence, or maybe you are a person who will take out flight instructions in case of emergency, listening all in ears how the engines work and looking around to see signs of panic amongst the crew indicating catastrophe?


The airplane scenario is a part of a standard psychological test[35], while the above two types of behavior in case of emergency point to the difference in experiencing emotional reactions. Those who identify themselves with the situation may unconsciously attach too much importance to own reactions, especially when by identifying themselves they loose self-conscience. Their feelings are much more intensive.  Those who do not identify themselves with the situation, who are at the distance, pay less attention to own reactions, diminish tension and intensity of the very reaction.


In extreme cases, the awareness of emotions completely paralyzes some people, while others hardly notice it. With the first group of people, the increased emotional sensibility, given even the slightest cause, provokes an emotional storm, happiness or terror, while other kind of the extreme hardly experiences such feelings, even in crucial moments.


There is probably no more important psychological ability than instinct control. This is an embryo of emotional self-control, because by their nature all emotions affect expressing of impulses.  To what extent this skill to resists instincts is important is shown in the so-called munchmellow experiment[36]. A group of four-year old children was proposed the following: they were in a room with a researcher who told them that he had to out and gave a munchmellow to each of them. But he also told them that those who would wait until he returned and would not eat the sweets would be given another two pieces. Some of the four-year children could wait for endless twenty minutes until the researcher returned. They covered their eyes, talked to themselves, sang, played, and even tried to sleep. They got their reward – two sweets. However, those more impulsive ones, seized the munchmellow just few seconds after the researcher had left the room. The children were monitored until they left the school. The difference between the children who seized the munchmellow and those who resisted was obvious.


Those who in their age of four resisted the temptation, as adolescents became socially more resourceful: successful, self-confident and more prepared to deal with life problems. It was almost unlikely that they would “fall apart”, loose strength or regress during a stress or become disorganized and disarmed under the pressure. They accepted challenges and tended to combat them not surrendering in spite of difficulties. They were reliable and self-confident, trustworthy; they were self-initiative and struggled for projects. Also, when the tested children were analyzed at the end of high-schooling, those who patiently waited at the age of four were better students than those who surrendered themselves to caprice. And after all these years they have still been able to postpone awarding for the purpose of accomplishing goal.


More than a third of the children who seized the sweet had less expressed the above mentioned qualities and had more problematic psychological profile. As adolescents they were shy and avoided social contacts. They were stubborn and indecisive. Failures discouraged them easily. They saw themselves as being “bad” and worthless. When under the stress they regressed and became inactive, distrustful, suspicious and exasperated. They were jealous and envious, excessively irritable and violent and thus provoked disputes and fights. And after so many years they have not still been able to postpone rewarding.


What is hardly evident in childhood, becomes a wide spectrum of social and emotional skills during lifetime. The ability to influence postponement of instincts represents lot of efforts, from sticking to diet to meriting academic title. What Walter Mischel, who has been doing researches, has described in a complicated expression that “self-set postponement of award for the purpose of accomplishing goal” probably represents the essence of self-regulation: ability to deny instinct in order to accomplish a goal, regardless of whether it is opening of a new business, solving equation or winning prizes. His discovery has emphasized the role of emotional intelligence as a target - ability defining how well or how bad the people will succeed in using their mental capacities.


When we speak about leaders then we speak about their ideas, their strategies and visions. In reality, leaders lead us to emotions. Several research works and practice have shown that the fashion from the beginning of the past century, researches and rational intelligence measuring – IQ, ever more withdraw before the researches and emotional intelligence measuring – EI. The IQ has shown little correlation with how the job is performed and with advancing in carrier during lifetime. However, emotional advantages, such as possibility to manage frustrations, control own emotions or emotions of others, which is something learnt since childhood, have undoubtedly shown greater correlation with a success in future life. Many people having IQ 160 work for people having IQ 100 (which is an average) because the first have a good emotional intelligence while the latter have not.  In everyday work the intelligence used in relations with people is the most important one.  In case of a bad emotional intelligence, you will be bad at work, you will be in trouble deciding which job to accept, who to marry…


A person having high IQ and low EI is almost a caricature of an intellectual, resourceful in the world of knowledge but unskillful in the world of intimacy. The profiles differ in some characteristics in men and in women.


A type of man with high IQ is directed towards a wide sphere of intellectual knowledge and competencies. He is ambitious and productive, predictable and persistent and not troubled with personal problems.  He may also be critical and humble, refined and shy, lacking self-confidence in intimate and sensual experiences, insensible and indifferent, and emotionally cold and tepid.


Compared to this type, men with high emotional intelligence are balanced, cheerful, sociable and open, and are not prone to fear and worry. They are extremely faithful to people and ideas, responsible and ethical, and in their relationships full of understanding and attention. Their emotional life is rich and diverse, they are in agreement with their selves, with others as well as society in they live.


Women of basic type with high IQ have intellectual self-confidence, very skillfully express their thoughts, discuss about intellectual issues and are interested in a number of intellectual and aesthetic spheres. They may also be introspective, prone to anxiety, worry and may have a feeling of guilt; they hesitate to openly express their anger, although they do it an indirect way.


Compared to them, emotionally intelligent women are talkative and directly and openly express their feelings. They have good opinion about themselves: the life is for them everything. As men of the same type, they are joyful, open and express their feelings in the right manner (they do not have bursts of feelings because of they later will feel sorry); they can take a stress well. Their social inventiveness allows them to easily meet new people; they are sufficiently in agreement with their own selves so that they are spontaneous, playful and open for all intimate experiences. Contrary to women with high IQ, they are rarely upset, have no feeling of guilt and rarely fall in despair.


Indeed, these portraits are only extremes, in each of us the IQ and EI intermingle to a different extent.  People with high IQ and low EI, in spite of stereotypes, are relatively rarely found, but these types represent useful insight in distinguish human qualities. Nevertheless, IQ and EI are not opposed but separate competencies. The emotional intelligence attaches to a living being qualities that make it more human.


The emotional intelligence is a capacity for recognizing own emotions and emotions of the others, for self-motivation and for controlling emotions in ourselves and of others.[37] The five domains for expressing emotional intelligence talent are the following:

1.    AWARENESS OF OWN EMOTIONS. Self-awareness – recognizing an emotion as it actually is in the moment when manifested represents a key of emotional intelligence.  The ability to control emotions in every moment is of essential importance for psychological self-awareness and self-understanding. The self-awareness represents awareness of one’s own mood coupled with own consideration of this mood. Impossibility to understand our real emotions makes us dependent upon them. People more confident in own emotions lead their lives more skillfully and are more self-confident in making decisions.

2.    CONTROLLING EMOTIONS. Overcoming and controlling emotions in an appropriate manner is a talent built on the basis of self-awareness. People who are bad in controlling their emotions are constantly overwhelmed with emotions and under stress. The people who improve the control of their emotions recover much faster from life disturbances and falls.

3.    SELF-INITIATIVE. Controlling emotions that leads to a particular goal is a basis for the feeling of caution, for self-initiative, mastering certain skills, as well as for creativity.  Emotional self-control – postponing satisfaction and suppressing impulses is the basis of every achievement. Reaching the state of “calmness” will enable exceptional achievements in every sphere.

4.    RECOGNIZING EMOTIONS OF OTHER PEOPLE. Empathy is a fundamental human skill. It is based on self-awareness – the more we are open to own emotions the more success we will have in reading other people’s emotions. The empathic people are more successful in understanding subtext of social signals of needs and wishes of people they emit through communication. The empathy enables a success in professions such as: care about others, teaching, trade, and leadership.

5.    ART OF BEHAVING IN INTERPERSONAL REALTIONS. This gift represents an art of understanding other people’s emotions. This ability is a foundation for popularity, leadership and interpersonal effectiveness. The people having this gift are able to perform the jobs and assignments based on interpersonal relations more successfully than other people; they are “stars in the society”.


One of the skills to which leaders should pay particular attention is empathic listening. The empathic listening understands that a listener from the conversation recognizes and feels emotions of a person he is talking to. There are 5 phases of listening. The only empathic listening is the one within the reference system of others, while all others are listening within ones own reference system:














Figure 9: Continuum of Listening

(Source: Senior Executive Institute, University of Virginia, 2003,

Materials of attendants)


Managers are inclined to criticism, and the employees feel that their superiors address them only when they make a mistake. Tendency to criticism is expressed more with managers who do not support employees for a longer period of time. A leader has no right to such approach, he must be competent in criticism, and the art of criticism lies in empathy and emotional intelligence. 


The feedback in a system theory is in getting to know the data on how a part of a system functions, where it is understood that one part influences all other parts in the system, and that every part “deviating” from the main course may be replaced with a better one. In an organization everyone is a part of a system, while the feedback is main artery of an organization. The way in which people receive the feedback is of vital importance for continuity of their work. Without feedback the people are in darkness, they do not know what their superiors want, what their collaborators think about them, nor what is expected from them, while problems accumulate in the course of time. A competent transmission of feedback may be the massage of the greatest help which a leader delivers to his followers. The competent criticism is directed towards the good what a man has done and is of more help than criticizing a person because of badly performed job. By attacking the personality the goal is missed.


For leader to be good in the above said, he should take the following advises:

1.    BE DETERMINED. Choose a conflict of importance, an event representing main problem needed to be solved, or any kind of deficiency preventing certain parts of jobs to be successfully accomplished. People are discouraged if they only hear that they have done “something” wrong at the same time unaware of details that may help them to correct their mistake. Concentrate on details, say to a person what he has done well and where he has been wrong, and in which way this may be corrected. Don’t hesitate and don’t be dishonest or ambiguous, because in this way you will bypass the right message.

2.    OFFER A SOLUTION. The criticism, as all useful feedback, has to be directed towards solving problem. Otherwise, a man will be dissatisfied, discouraged and unmotivated. The criticism may open a road to possibilities and alternatives of which a person was not aware, or to point at shortcomings to which he has to pay attention – but it should also include suggestions for solving problem.

3.    BE PRESENT. Criticism is, just like a praise, the most efficient when communicated personally, face to face. The people who feel unpleasant in criticizing or praising will certainly make things easier for themselves if they do it in writing. But, then the communication is getting more distant and prevents the criticized or praised person to have a chance to respond or clarify things.

4.    BE COMPASSIONATE. This is a call for empathy. Keep in mind the effects of what you say, and the manner in which you say this to the hurt person. The executives who are not empathic say their opinion in a rude way, which is an inappropriate humiliation.  The results of such criticism are destructive: in stead of making possible the mistakes to be corrected, he provokes emotional response or exasperation, bitterness, retreat and keeping distance.


Contrary to the IQ, which is given, the EI may be raised.  Leaders have to go through four phases while improving themselves:






In more details, the competencies of an emotionally balanced leader are:[38]

1.    PERSONAL COMPETENCIES: These competencies determine how we control ourselves.

1.1.        SELF-AWARENESS

1.1.1.Emotional self-awareness: Reading own emotions and recognizing their impacts, using inside feelings in making decisions.

1.1.2.Exact evaluation of own self: Knowing own advantages and limitations.

1.1.3.Self-confidence: Clear feeling of own values and competencies.


1.2.1.Emotional self-control: Keeping disturbing emotions and impulses under control.

1.2.2.Transparency: Showing honesty and integrity, credibility.

1.2.3. Adaptability: Flexibility in adapting to changeable situation or in overcoming difficulties.

1.2.4.Achievement: A desire to improve performances in order to achieve utmost internal standards.

1.2.5.Initiative: Readiness for action and utilization of good opportunities.

1.2.6.Optimism: To see only the best in the events.

2.    SOCIAL COMPETENCIES: These competencies determine how we control interpersonal relations.


2.1.1.Empathy: Feeling emotions of others, understanding their prospective.

2.1.2.Organizational awareness: Understanding what is going on, decision making network and policy on organizational level.

2.1.3.Services: Recognizing and reaching agreeing for the needs of followers, clients or consumers.


2.2.1.Inspirational leadership: Directing and motivating with a vision.

2.2.2.Influence: Having a great number of tactics for convincing.

2.2.3.Training others: Support capcompetencies of others through directing and feedback.

2.2.4.Catalyst of changes: Move, direct and lead towards the new directions.

2.2.5.Controlling conflicts: Solving conflicts.

2.2.6.Building bonds: Cultivating and maintaining interpersonal relations network.

2.2.7.Team work and cooperation: Cooperating and building teams.

Great leaders should also possess all of the four singled out competencies which are components of interpersonal or social intelligence:

1.    ORGANIZING GROUPS is a basic leader’s competency and it means initiative and coordination in organizing groups of people.

2.    NEGOTIATING SOLUTIONS is a talent of an intermediary preventing or solving already existing conflicts. Leaders having this competency are successful in negotiating jobs or solving disputes.

3.    PRSONAL RELATIONS are a gift for feeling empathy and making friends. Such competency makes establishing relations easier, as well as recognizing other people’s feelings and troubles and appropriate responses to them – this is the art of maintaining interpersonal relations. Such leaders are good “team players”.

4.    SOCIAL ANALYSIS represents a competency of discovering and interpreting other people’s feelings and worries.  Knowing other people’s feelings makes establishing relations with collaborators easier to leaders and allows the feeling of intimacy.


Considered together these competencies are inevitable “components” of a charm, social success and charisma. Those having some form of social intelligence, may easily put in touch other people, wisely read their reactions and feelings, lead and organize, and solve misunderstandings occurring in any life domain. The leaders are born, the people who are able to express collective feelings and articulate them in a manner that will enable the group to accomplish its goal. These are people with whom others like to be in a company as they inspire them emotionally. These interpersonal competencies develop on the basis of emotional intelligence.


A survey carried out in 12 organizations, comprising 2,000 managers, showed that 81% of difference between exceptional and other managers is in emotional intelligence. Another survey carried out by the MBA University students showed the manner in which the EI raises – lasting learning. Comparing the students who for two years had a lasting emotional intelligence program with university students who did not have any program at all, the following results of EI improvement were obtained:[39]




















Figure 10: Results of EI improvement with the MBA students

(Source: Goleman Daniel, Emotional intelligence,

Bantam Books, USA, 1997, pg. 107)


These results brought about another surprise. Seven years after the survey it was found out that in the other, more successful group, the EI raised in time. They continued to train themselves in the skills they have not built at the University, and they have achieved better results. Another words, they have learnt how to raise their emotional intelligence.


Finally, it has to be pointed out that inevitable task of a state in future will be a wider study of this concept in all schools. Alarmed by the statistical data on emotional state of young people in the USA in the past two decades, namely:

·        record rate of apprehended young people,

·        four times higher rate of murders of young people,

·        three times higher rate of young people suicides,

·        three times higher rate of crimes of young people under 14 years of age,

·        three times higher rate of  juvenile pregnancies,

·        three times more drugs consummation, with the young black people the increase is even thirteen times

·        one third of the young people face problems with depression,

·        according to the trend, two thirds of their future marriages will be dissolved;


The school authorities have already started an emotional intelligence research pilot project in standard schools and schools specialized in EI, and the current results of changes in behavior and life of these young people are very satisfactory.


It was shown that the price of emotional illiteracy is very high. The Grant’s Association[40] dealing with improvement of emotions, reveal the main elements of effective preventive programs:

1.    Emotional competencies:

a.    recognizing and naming emotions,

b.    expressing emotions,

c.     assessing intensity of emotions,

d.    controlling emotions,

e.    postponing satisfaction,

f.      controlling instincts,

g.    diminishing stress,

h.    becoming aware of difference between emotions and acting.

2.    Awareness of competency:

a.    talking to oneself – controlling “inside talk” as a way of facing problem, challenge or support to human behavior,

b.    understanding and interpreting social characteristics – for example, recognizing social influence on behavior and self-perception within wider community,

c.     using measures for problem solving and decision making – for example, controlling instincts, accomplishing goals, recognizing possible response, forecasting consequences,

d.    understanding other people’s opinions,

e.    understanding acceptable and unacceptable behavioral standards,

f.      positive approach to life,

g.    self-consciousness – for example, developing  real expectations

3.    Behavioral competency:

a.           non-verbal – understanding by glances, face expression, voice tone, movements, etc.

b.           verbal – establishing clear demands, avoiding negative influences, competent reply to the criticism, listening others, helping others.


The T. Dobson’s[41] story, one of the first Americans who in Japan learnt martial art of aikido, represents a good example of the applied emotional intelligence.


One day Dobson was going back home by the Tokyo subway when a huge, very drunk and enraged man in a belligerent mood got in a car. The man started, cursing and roaring, to molest passengers. Dobson felt that he should intervene to prevent someone to be hurt. And, while all others were sitting, he slowly stood up and turned to the aggressive man.  Noticing him, the drunkard roared: “Aha! Foreigner! You should get a beating in a Japanese way!” and started to prepare himself for the first blow.


But, someone shouted in an unusually cheerful way: “ Hey!” The shout had a tone of a joyful person. Surprised, the drunkard turned around and saw a short Japanese of about seventy years of age in kimono. The old man smiled to the drunkard in an enthusiastic way and asked him to come close to him. The drunkard said belligerently: “Why the hell would I talk to you?” The old man asked him in return:   ” What’ve you drunk?” The drunkard said he drank sake and that it was not his concern.  “Eh, that’s wonderful”, responded the old Japanese mildly, “you see, I also like sake! Every night me and my wife, you know she’s got 76 years, used to heat a bottle of sake, take it in the garden and sit on a wooden bench…” Then he continued his story talking about date-palm tree in the garden, about beauties of his garden and enjoying the warm rice brandy every-evening.


While he was listening to the old man, the drunkard’s face became good-humored; he released his fists. “I like dates too…” said he, in a drawn-out voice. “Too”, responded vividly the little old man, “and I’m sure you’ve got a nice wife.” The drunkards said: ”No, I haven’t. My wife’s dead…” And he continued, crying, the sad story about loosing his wife, house, job, and about being shamed of himself. When the subway stopped in the Dobson’s station and while Dobson was leaving, he turned around and saw the drunkard stretching himself on the seat, his head in the old man’s lap. This was emotional perfection.



2. Types of Personality and the Leadership


Two million MBTI (Mayers – Brigs indicator type) tests are carried out yearly worldwide in 24 languages. The MBTI is a very suitable tool for implementing leadership approach lying on democracy and team work. Why? Because people differ from each other, and their type of personality and character should be calculated as a constant. For leaders there is no reason for wanting to change people. On the contrary, these differences are for them advantages and not short comings. A leader using the MBTI builds a climate in a team on advantages, and not on people’s weaknesses. In this way he will fully use human talents, particularly those he is lacking himself. The golden leadership rule is that a leader should treat people in the way they would like to be treated and by this concept the rule is fully respected.


People differ in a fundamental sense:[42]

they want different things, because they have different motives, values, wishes, needs, goals, and impulses;

they think differently, because their opinions, knowledge, ideas, comprehension, understanding, notions, and plans are different;

they behave differently, because they are lead by their manners, emotions, wishes, and comprehension.


The first classification of personality characters was established by Hypocrate back in antic times. However, the basis of today rounded up knowledge was established by Carl Gustav Jung with his functional, i.e. psychological types. He claimed that people were different in fundamental sense although in the sum of impulses (archetypes) they were the same. This is typical, so that we may be classified in types based on the desired preferences. In 1950 mother and her daughter (Mayers – Brigs) developed the MBTI, a tool for classifying Jung’s main preferences in 16 different behavioral forms.  Before we explain them, some bases of the Jung’s thinking are to be highlighted:

·        Jung did not claim that a person belonged exclusively to one or the other type but only to some extent.

·        Jung did not claim that the preferences were unchangeable in time, they may become weaker or stronger in time.

·        Jung was of opinion that a character was given by birth and not molded in childhood.


The main pairs of preferences are:

1.    EXTROVERSION vs. INTROVERSION. With relation to the orientation towards the people from the environment. A person who chooses other people for their source of energy and who is full of energy when in a company of others is an extrovert person and is marked as E. There are 75% of them in the population. A person preferring solitude for renewing his energy is an introvert person and marked as I. There are 25% of them in the population.

2.    SENSITIVITY vs. INTUITIVENESS. With relation to the method of collecting information from the environment. A sensitive person sees himself as a practical and realistic person, with a sense for values, tradition, past and future, and is marked as S. There are 75% of them in the population.  An intuitive person defines himself as innovative one, insists on imagination and future, and is marked as N. There are 25% of them in the population.

3.    FEELING vs. THINKING. With relation to the manner of decision making and reasoning. Persons using personal, subjective way of thinking, preferring to make decisions based on people and values are very sensitive F types. Persons using non-personal, objective way of thinking, preferring to make decisions based on logics and objectivity are thinking T types. Generally, there are 50:50% of them in the population, however, 65% of men are T type while 65% of women are F type.

4.    PERCEIVE vs. JUDGE. With relation to the need for controlling and completing jobs. Here, it should be pointed out that the type names given by Jung were very unfortunately chosen, so they will be marked as P for perceive and J for judge. The P types lead an easy life, keep options open and fluid. They are “take it easy” type. The J types are a complete opposite, because they are organized, structured and prone to planning. They like to make list of jobs and “cross out” the completed ones. There is 50% of each type in the population.


Based on the above stated, there are 16 Mayers – Brigs types, presented below by typical name and by representation in general population:[43]

















































Field marshal


Figure 11: MBTI types

(Source: Senior Executive Institute, University of Virginia, 2003,

Materials of attendants)


The basic characteristics of the MBTI types are highlighted:

1.    ENFJ

They are great leaders in a group. They have charming character and want the people to follow them, and people do follow them if they ask them to. This is a type of unbelievable charisma. For the ENFJ the people are of utmost importance and priority. They constantly feel responsible for other people’s feelings. They are tolerant, trustworthy and rarely critics. The ENFJ intuition is rather developed, on the basis of which they make decisions. They like their jobs to be organized and completed. In a team they may be very talkative.

2.    INFJ

This type is focused on opportunities. They base their opinions on values and make decisions easily. They have a strong desire to contribute to other people’s happiness and it is their pleasure to help others. They are strong and very complex personalities and thus they understand and may cope with complex problems. The INFJ have the strongest vision of interpersonal relations in the past, present and future. They take their work seriously and enjoy in academic achievements. Generally, they will not be visible leaders but exert their influence behind the scene. It is difficult to get to know them. They are reserved towards everyone in whom they do not have complete confidence. They easily get offended. They have vivid imagination and often find their orientation in arts. In a team they may often be “lost in space”.

3.    ENFP

For this type everything that is happening in his life is of great importance, life is a drama, full of good and bad opportunities. They have great influence on others because they are masters of non-verbal communication.  Emotional experience is of utmost importance for them. The ENFP constantly screen outer environment and nothing may skip their attention. Although they have brilliant perception, on the other hand, they make great mistakes in drawing conclusions based on it. They are enthusiasts, enjoy in creating something new, while they feel as much bored in usual activities. The ENFP are optimists by their character. They have envious and rich career because they are successful in many spheres. Working with people is essential for them. They constantly look for feedback from their interaction with others.  They are non-conformists. In a team they often alter team opinions and orientation.

4.    INFP

They are calm and pleasant persons. Although they appear as cold person, they are not such inside. They have a capacity for caring for other people not found in other types. They are idealists, ready to make extremely great sacrifices for those whom they trust. The INFP searches for the unity of body, emotions and intellect. They respond to impressions more than to logics. They like to look at  “black-white”. They are adaptable at work, welcome new ideas and new information. They may have problems when idealized concept of their life meets the reality of everyday life. In the team they may easily feel hurt.

5.    ENTJ

In one word, a commander. The ENTJ basic need is to be a leader. He may very much develop the thinking based on empiria and goals.  He insists rather on policy and goals then on regulations and procedures. He may break all procedures if they are not in harmony with his goals. He shudders at non-efficiency. The ENTJ must always have reason for doing something, and human emotions are usually not a sufficient reason for him. He has the greatest ability out of all types to visualize the road that the organization takes and are the best in communicating visions to others. As designers of the organization they cannot be leaders. 

6.    INTJ

This type has the strongest self-confidence out of all types. He lives in introspective reality and focuses himself to opportunities. The decisions are natural for the INTJ. Once he has made a decision he feels calm. He rather looks into the future then into the past. In one word, he is like an architect – system architect and one who implements theoretical models. The authority based on position, rank or title has absolutely no on the INTJ. In case he comes to like an idea or position he will accept it and in such case he will break all rules if he thinks it right, or otherwise, he will not lift a finger. Those on the top are pragmatic. Out of all types he is the greatest theoretician, always open to new concepts and ideas. The INTJ uses his intuition rather than deductive logics, searching for strategies and tactics rejecting the greatest performances. He is stimulated by barriers and likes to be a solo player. He usually keeps distance from his friends, while they see him as being cold and insensitive. The INTJ is the most independent of all types. In a team they may be stubborn.

7.    ENTP

This type is a good analyst. He is tolerant towards the others and enjoys in complexity. He is enthusiasts and often a source of inspiration for others. He always searches for a way to find out a new road, new activity or procedure. The ENTP often ignores standards, traditional actions and authorities. As a result, he often brings about a new approach to work. However, he is an improviser, not a creator. The entrepreneurs often belong to this type.  They are rarely conformists. In a team they excessively generate new actions.

8.    INTP

He shows the greatest precision in thinking. He is a real architect, the architect of ideas and architect of system.  He will always find contradictions in a system regardless of how far in space or time they are. Authority does not leave any impression on the INTP type. Wishing to understand the universe he constantly searches for answers in laws of nature. The INTP may be obsessed with analysis. He may easily become intellectual snob and express intolerance towards the less intellectually gifted people. The reality is for him trivial.  The INTP is a system architect, but he goes away when the system is to be applied.  In a team he may be too theoretical.

9.    ESTJ

This type is closely linked with exterior environment. The best attribute to describe this type is responsible. The ESTJ excellently organizes daily procedures and detailed rules. He likes to see that the things are concretely done and is not patient with those who do not implement procedures in all details. He is a realistic person and estimates others on the basis of whether they observe the standards and procedures or not. He is very loyal to his organization. He is often occupying positions requiring great responsibility.  He tends to make decisions too quickly. For him the harmony is in respecting tradition and rituals. In a team, he may be more energetic than necessary.

10. ISTJ

This type may be best described with attribute reliable. Given word is for the ISTJ a sacred thing - when he has given his word he has given his honor. This type is usually taciturn and serious. He performs his duties very dedicatedly.  He is interested in the details in the reports and procedures and is coping well with hard tasks. The duty is a word he very well understands. He may be a great banker, tax or accounting officer. In a team he may work more than he is expected to.

11. ESFJ

This type socializes more than other types. He draws energy from interactions with people. He honors the harmony the most. He may be great host – he addresses people by heir first name immediately as he meets them. The ESFJ seeks his career in services. The best salesmen belong to this type. He is loyal to his superiors. Analyzing complex things and notions does not attract him at all. The ESFJ is excellent in emotional relations. In a team he tends to keep company quite a lot.

12. ISFJ

This type wants to be in the service of someone other’s individual needs. The tradition and conservation are resources he highly estimates. He is the least hedonist out of all types. He believes he is good and that a rest should be earned. He may work very, very hard. The directed procedures are for him the must. This type may be often found in hospitals, libraries, secretarial work and at lower managerial levels. The greatest satisfaction for him is to take care of someone else. The ISFJ has an exquisite sense of responsibility as well as great gift for performing routine work. The theory does not intrigue the ISFJ type. He is loyal and dedicated to his superior. He is awe-struck by titles and positions. He is often underestimated and not understood. In a team he expresses a lot of care for everyone.

13. ESTP

These are men and women of action. When they are present the things always happen. They are great entrepreneurs, diplomats and negotiators. Life is never boring to them. They always know locations of the best restaurants and night clubs. This type is an urban and socially sophisticated type. The ESTP always looks right into the eyes. He possesses enormous amount of empathy. He is the only type who likes to work “at the edge of catastrophe”. For him the deadline is matter of seconds. He is pragmatic. He dislikes dealing with details. He always lives in the moment. He is not faithful. In a team he may be arrogant.

14. ESFP

This type radiates warmth and optimism. Soft, charming and open are attributes best describing this type. He is very amusing and most generous of all types. The ESFP avoids solitude and seek a company of others whenever possible. He likes excitements and creates them. The ESFP is sophisticated, often dressed very in the latest fashion. He is impulsive and psychologically vulnerable. He ignores dark side of a situation as long as possible. The ESFP prefers active jobs and is excellent in public relations. He avoids science and engineering. In a team he is more involved in playing than working.

15. ISTP

This type is impulsive and attracted by impulsive actions. An impulse is for him more important than a purpose. He controls himself and does not subject himself to the prescribed procedures and laws. The ISTP has to do what he likes. Each step must be free. He is often brave and, compared to other types, he takes a risk the most. He needs everyday excitements. He longs for action. The ISTP is as a rule a master of tools, any kind of tools. When we see someone working very precisely with tools then we are most likely looking at the ISTP. He does it virtuously. He has passion for weapons. He is impulsive. For him action is important and he has a little interest to develop verbal skills. He may be great leader but only when “storming with a sword in his hand”. He is a leader on a battlefield but not on an intellectual field. He does not use strategy (like the NT) but rather everything what is within his reach to win a victory. Patton was such leader, chosen by the NT Marshal, Sheridan was such person, chosen by the NT Grant, Romel was such person as well, chosen by Hitler (ENFJ). In a team he may be a nuisance because of his great precision.

16. ISFP

This type is an artist of fine arts. Many composers and painters were of such type. His temperament is very hard for observing and they are most likely the most non-understood of all types, this resulting from his tendency not to express himself directly but finding a medium for expression, mostly some artistic form. If he does not find it he remains closed and has no way to express himself. He is a hedonist and impulsive. The ISFP does not prepare and does not plan. He just does what he feels that he must do. He climbs up a mountain only because the mountain is there. When he finds a way to express himself he becomes a virtuous. He is the most kind of all the types. This type has unbelievably good relationship with animals, including wild animals as well. In a team they he is too much worried.


The real advantage of this concept is not in memorizing all 16 types but in being able to understand on the basis of types the four Jung’s basic characters. This paper will not deal with general explanations of the characters, but will be based on defining characters of leaders and their followers:


SJ, 38%


This leader could be called a traditionalist, stabilizer and consolidator. This is a responsible worker respecting loyalty, dedication and hard work.  He prefers the system and stability of the organization. The SJ leader has strongly expressed sense of social responsibility. He is a great organizer. Sometimes, this type of leader resists the changes. The representatives of this group are: Colin Powel and Mother Theresa.

Cautiousness and accuracy are the characteristics of the SJ followers. He is focused on products and the measure of success for him is an opinion on how and whether the product is in compliance with standards. He wants to be thought of as being a loyal, responsible and diligent person.


SP, 38%


This leader could be called a pragmatic leader of open mind and flexible. He takes the risks; he is a negotiator and sorts out the problems. He has entrepreneurship spirit and out of all types he has the highest sense of a moment of a situation. He is excellent for critical situations. Since he lives in the present moment, he is sometimes had no patience for theories and abstract meditation. The representatives of this group are: Ronald Reagan and Clint Eastwood.


The SP follower is oriented on the processes and not on products. He likes hazardous and dynamic tasks. He likes to be thought of as being a punctual, adaptable, wise and brave person.


NT, 12%


This leader could be called a visionary, catalyst and strategic leader. He is focused on systemic principles. He must design. He looks for and enjoys in complexity. He expects a lot from himself and little from the others. He is a great architect of changes. Considering that he is intellectually oriented, he sometimes experiences problems in communicating with other. The representatives of this group are: Albert Einstein and Margaret Thatcher.


The NT follower wants to be estimated on the basis of a success of his ideas. He may be an intelligent listener but has difficulties in working with routine tasks.


NF, 12%


This leader may be called an idealist, catalyst and optimist. He is focused on people and their potentials and has ability to get out the best from the people.  He has a communicating gift. He is excellent for democratic management. He sometimes makes decisions based only on his opinion on collaborators and not on facts. The representatives of this group are: Mahatma Gandhi and Martin Luther King.


The NF follower more then other types wants to be primarily treated as a unique human being. He may feel particularly defeated by a negative criticism, but highly esteems a constant feedback.


Leaders essentially lead in a dual manner: they want certain actions and they want certain results. The degree to which one gets want one wants, to which actions turns to results, is the degree of leader’s successfulness. For this degree to be higher it is important to consider people’s characters. The Mayers – Brigs test of personality types is therefore very useful and is recommended.



3. Creativity and Leadership


We have concluded that the job of a leader and a manager differs. We have also seen that a leader and a manager even think in different ways. Leaders deal with long-running problems and visions while managers deal with efficiency of everyday work. What is important is the fact that science has concluded that two opposite halves of a brain work this process. Managers use one half, while leaders use the other half. However, the most important is not to be exclusive in this approach, but for an effective leader it is essential to use both halves of the brain. The “process” stimulating a “complete” work of brain is called creativity and it will be further elaborated in this paper.


It may often be found in books: manage from the left, lead from the right. This is not the question of any ideology but of the human brain structure. The left brain half thinks in details, verbally, logically and in sequences. The right brain half thinks in big images, it is non-verbal, emotional and intuitive. Typical action of the left brain side is current account balancing. Typical action of the right brain half is driving a car. Given that the leadership relies on a vision how to survive and win in changes, it is clear why it is necessary to lead from the right, using the right brain half. This is the first stage. The next is to use both brain halves together. This is already the question of creativity. Like all other leadership skill, this creativity may be learnt.


The creativity is ability to see the same things the other people see in a different way.[44]

The main phases of creative process are:

·        FREEING,

·        EXPRESSION,

·        CREATION, and

·        ACTION.


The essence of the first phase is coming to a great amount of ideas. The process is structured in the following way: ATTENTION - SHOOT – SIGHT ON. Here the importance of using both brain sides is noticed, because the process sequence is the following: LEFT SIDE – RIGHT SIDE – LEFT SIDE. In this phase it is important to first find out what are the places and time appropriate for a leader to come to generating new ideas. According to researches, most of ideas are generated while sitting on a toilet bowl[45], and then while taking shower, going to office, falling asleep or while awaking, at boring meetings, while reading light literature, exercising, taking a night walk, during the church service or physical work, respectively.  A man spends 3 years in the bathroom during his life. 99% of the ideas do not happen at a study. The next thing to be ready to are the co called killing sentences. These are the sentences usually starting with: “Yes, but…” and they may quickly and at the very beginning defeat an idea, if they are not anticipated.


The essence of the second phase is in exposing the problem. Various techniques are suggested, such as for example mapping, nonlinear technique of generating ideas, simplified describing of a  problem by using the following technique ”Dear Mrs. Advice, my problem is …”,  using simple questions such as  and why is this, and why is that… at least 7 times. In the final phase the universal questions are always to be asked: who, what, where, when, how, and why, and adhere to the Einstein’s rule: find out the next correct answer – do not think like in school that only one answer is correct, but take an attitude that there are always several correct answers.


The essence of the third phase is in creating ideas, the very process of creating. A creative person, in order to be successful, should run from reality, avoid it, in order to come to the right idea. There are useful techniques:

·        Returning from the future – imagine solving problem in imagined future and then return to the present.

·        Jin/Jang – thinking in opposites.

·        Finding faults in assumptions – define a problem, imagine and note down all assumptions related to it and find what is negative in each assumption.

·        Changing prospective –considering problem from “somebody else’s shoes”.

·        Thinking in metaphors – my problem is like for example in music…

·        Borrowing from others – one should adhere to old rules according to which the idea should be 15 minutes ahead of its time, and not two centuries, so that adapting already good and proven ideas may be a good option.


The essence of the fourth phase is encountering of innovations with an organization. The ideas should be managed, the ideas should be filed, and the ideas should be considered through a team work and estimated correctly, from the point of view of: future, success, failure, organization’s visions, time implementation and purely own affinities.  However, the most important for an organization and a leader is openness of the organization towards ideas. The formula explaining this is:


Openness =   #Idea x (# accepted ideas + # Rapid rejections) + Common vision

Penalties for failure


Figure 12: Equation of organization openness towards the ideas

(Source: Thompson Charles “Chic”, WHAT A GREAT IDEA!,

Harper Perennial, USA, pg. 153)


As shown in the above equation the number of new ides first and foremost increases if the lower part of the formula is decreased, i.e. if the penalties for failures in generating or implementing bad ideas are reduced. Then, the number of new ideas increases if the number of new ideas are stimulated, particularly if they are implemented, or if they are assessed as a complete failure and quickly set aside. And finally, an organization becomes more open towards the ideas if the ideas are based on common values and organization’s vision. The conclusion is that this is indisputable task and leader’s responsibility in an organization.



4. Leadership and New Sciences


Let us imagine a black box in which we will put two dishes, one with food and the other with poison. Let’s now imagine a cat which we put in the box and which has two alternatives – to survive, eat food, or to die, eat poison. After a while, we ask ourselves: is the cat alive or dead? This is classical Schredinger’s test, the so called Schredinger’s cat, which gives us the possibility to understand the manner of thinking in quantum physics.


Let’s image an expert for organization and imagine how she has to travel often because of the nature of her business. Imagine her being constantly on a plane, how she reads all books she could and then remembers that natural sciences are her first love.  Let’s imagine further how this same person reads a pile of latest books dealing with new trends in science and imagine that impressed by them she writes a book herself. All this has actually happened, the book has become a bestseller, and while you read it you feel as if having fever. Very soon the book has become mandatory text in all business schools. Considering that the book gives us an idea of how the organization and leadership will look like in this century, this paper is based on it.[46] And what happened with the cat?


New sciences – new discoveries of quantum physics, chemistry, biology and theory of chaos give us orientations how a leader should lead in a new world full of changes and how he functions. Each of us lives and works in organizations established on the basis of Newton’s comprehension of the world and universe. We manage in details by focusing on certain organizational parts in an organization. We believe that a reaction is a direct result of stimulus in human relations. We believe that by complex planning we may anticipate everything and always search for new, objective methods of measuring and understanding environment. And what happened with the cat?


However, the world has changed since Newton and the science is aware of this. One of the first distinctions between the Newton’s and new science is a holistic approach, the focus on system as a hole rather than on its part. The intention is a system as a whole and relations within the system. In a quantum-world, everything is in correlation and the correlation is a determinant of everything. Sub-atomic elements exist only in relation to something; they do not exist as a separate “thing”. In biology the body is observed holistically, as one whole. In 1977 the Nobel Prize for chemistry was awarded to the paper which proved that chemical systems reorganized themselves in higher degree when confronted with changes in environment. In old mechanistic model the change has signalized danger, in the new one it has become a critical factor of a system self-organizing in a new form of existence. The theory of chaos showed that the chaos is an order in alternative dimension, that there are limits and anticipation of chaos in this dimension, as well as that the chaos is necessary in order to establish a new creative order. And what happened with the cat?


The Newton’s statistical laws on universe are incorporated in organizations in our society. Responsibilities are organized in functions, the people have their assignments. The organized schemes and assignments look like being made for machines. Since recently we have believed that is possible to study a part without knowing the whole, as well as that based on knowledge of all parts we can have a picture of the whole. However, by discovering subatomic world of quantum physics, another world unknown to the Newton’s laws has been discovered. In quantum world everything lies on relations, everything is correlated, while a relation is basis of everything. Nobody and nothing exists unless in relation with other. The objective reality does not exist. An environment affecting business organization is created by the organization. Given that there is no objective reality, an environment is a set of relations which we choose and estimate as important. However, we certainly may not take into consideration the set of all relations and correlations so that we may never thoroughly comprehend our environment and its possibilities and sources of changes. Many leaders no longer use the phrase strategic planning, but rather strategic reasoning. In order to discover the possibilities in changes, we have to get into stronger interaction with the world surrounding us. The relations are strength, and strength is energy. The whole of our organization should be permeated with this energy. The more we will be sensitive to the system dynamics the more we will be effective. One has to be focused on processes. And what happened with the cat?


The emptiness is a basic component of the universe. In an atom as well 99.99% of the space is empty. And we, as human beings, are mostly composed of emptiness. In the Newton’s theory, the emptiness is solitude.  In the new science, the emptiness is filled with fields, non-material impacts of emptiness on the universe. We cannot see it, but we can feel it: gravitational, electrical-magnetic… In one of the researches no correlation could be found between selling points where consumers have felt “well” and those others and the behavior of shop assistants or appearance of the shop. Wheatley deems that the influence of a leader is a component which has filled empty space in good shops, so that there people have felt better and purchased more. An organization’s vision is excellent as a candidate for the field theory. And what happened with the cat?


In the quantum world the reality does not exist. The reality exists only if noticed. In an organization we alone decide what we shall and what we shall not observe in interpersonal relations, and that creates the quality of relations in an organization. Participation, interdependence and democracy are therefore the best system for leading an organization. In the traditional model, the managers have interpreted information and by definition they could not have greater possibility to react then in the new HPO model, where information is interpreted by everybody so that the possibility of discovering new and unknown relationships is greater. Hierarchy and power are no longer important. New type of relationships in an organization and type of energy created by these relationships are critical. And what happened with the cat?


The equilibrium is a state in physics when the resultant of all activities equals zero. This is the result of the second Newton’s Law, as a result of the closed system evolution. And let’s imagine an organization having relations with the environment equal to zero. Let’s image the life without interaction. For an organization it is good to be outside the balance so that the system could grow and change itself. The structure is not important, but the system dynamics. The new sciences have discovered the self-organizing systems. They are rather adaptive and elastic than rigid and stable. The openness towards environment creates even stronger system. Paradoxically, based on stronger bonds and partnership with environment, a system develops stronger autonomy than the impact of the same environment. Another quality of self-organizing systems is their ability to change in order to preserve themselves whenever the environment changes. The system notices this and changes itself in the sense of remaining consistent. Stability and vitality is also a characteristic of these systems. General paradox is – the more freedom the more order.  And indeed, the democratic form and gathering around a vision represent freedom; the procedure and control of the old organization exclude it, still the first one is today more successful then the second. And what happened with the cat?


Information is not a thin. It is a dynamic and changeable element. Human skin changes every month, liver in every six weeks, even our brain renews itself. Body is only a place called a home by our memory. The challenges of the new sciences are continual processes of organizing information. The information demolishing a system and disturbing peace is what we need in order to find out new forms. We do not need the control but information genesis. Information has to be free. The American Army is the best example of understanding new role of information. It possesses and develops the technology enabling each individual to have full information on what is going in battlefield, which has earlier been an exclusive privilege of a commanding staff. The researches have proved that on the basis of such information and regular drill a soldier on battlefield uses the provided information in the best possible way because he is aware of the Command’s intentions. This approach is in the Army and Marine Forces called the network commanding approach and it is further intensively developed because its proven efficiency is matchless. And what happened with the cat?


The computer multidimensional models have revealed the order in the chaos. In a multidimensional space the chaos does not look like the chaos but an order of a higher dimension. This means that the disequilibrium, instability leads us to equilibrium, the stability of the new order. In the non-linear world, small and apparently hardly visible vibrations may lead to enormous and far-reaching changes. There is an equation proving that a quiver of butterfly wing in Tokyo may produce a tornado in Texas. And what happened with the cat?


About 75% of projects initiating changes are not successful in organizations. The new sciences give us instructions how to introduce the changes. First of all, we have to consider a system as a whole and we have to understand that we have impact on the overall system even when we affect only a small or isolated part of the system. The changes require the whole team to be included, all people in an organization. Then, the efficiency will be achieved if an organization is observed in its real light, and that is an endless game of numberless interdependent relations. We have to understand that we work with a network of relations, and not with machines. For a system to be changed, it must get to know more about itself. The people must be linked on the new, democratic relations within and outside an organization. The changes should be understood as a manner of preserving system and organization. A body will accept changes only of what is significant for its preservation. In an organization, this is a vision. If everything is linked with everything, the size is no longer important. We do not have to wait for a critical mass in order to initiate changes which should occur. And what happened with the cat?


Wheatley claims that the new leaders will be perhaps called with other metaphors: gardeners, midwives, servants, attendants, missionaries, assistants or convokers, because nobody could any longer lead an organization by ignoring network of relationships among collaborators. They must be leaders in the ever more unknown and bizarre world, only by a faint glittering of a vision. Each moment on this path requires from us to be comfortable with uncertainty and changes. And above all, a leader should ask us to be one, to use all our courage, wisdom and knowledge. And to thank God for having created this world which gives us unimagined opportunities.


And what happened with the cat?


And here is what happened with the cat:

1.    REALITY: The cat, her life and death exist as reality only in the box. From the point of view of our momentary comprehension of this unknown reality, the cat is both alive and dead.

2.    RELATION: By opening the box, namely only after making relation between our reality and the reality of the black box, we can solve the cat’s enigma. If we do not choose this reality, we will not have the answer.  Meaning that our curiosity has killed the cat. Or has set her free alive.







In this Chapter the dynamic changes in environment will be shown. Given that the USA are both an economic giant and currently the only world power left in the world, the stress will be laid upon the trends in America, however only to those indicating global conditioning. What happens in America in any case dramatically affects other phenomena and trends in the world, the overall world environment.



1. Kotler’s Model of Main Actors and Powers in Marketing Environment










Suppliers                Company            Distributors                  Buyers

                                                     in marketing










Kotler’s model[47] is a good basis to start studying the dynamic marketing environment of a company.

















Figure 13: Main actors and powers in marketing

environment of a company

(Resource: Kotler Philip, Managing Marketing,

Informator, Croatia, 1944, pg. 160)


The marketing environment comprises “uncontrolled” facts and powers affecting markets and marketing of a certain company. The micro-setting consists of actors in immediate environment of a company and they affect its marketability, and they are: company, suppliers, marketing agents, buyers, competitors, and the public. The micro-setting comprises wider social powers affecting all actors in a micro-environment of a company, and they are the following: demographic, economic, natural, technological, political, and cultural powers.[48]


Primary task of each company is to supply and satisfy certain needs of the selected target markets for the sake of its own profit. In order to fulfil this task a company links itself with a group of suppliers and a group of intermediaries in marketing to attract its target buyers. The chain a supplier – company – intermediaries in marketing – buyers comprises the essence of a company’s marketing. The success of the company will also be under the influence of two other groups: competitors and the public. The micro-environment of a company may be structured in such way that a company not having a leadership approach may have market position worse than its competitors. Namely, a company could be placed in worse position in the described chain by its suppliers and intermediaries in marketing – companies assisting the company in promotion, selling and distribution of its goods or services, because it has not accepted the leadership approach.


Nevertheless, the main influence on adopting leadership approach in managing company lies in a dynamic micro-environment of the company. The powers and mega-trends which shape the possibilities and pose threats to both the company and its suppliers, intermediaries, competitors, buyers and the public, are from the company’s point of view uncontrolled and the company must observe them and actively respond to them. The current marketing environment has characteristics of a very dynamic development and its main feature is in continual changes. Six powers of micro-environment shall be discussed, each of them separately.


The demographic environment for a company is of vital importance because – people make market. Leaders are vitally interested in the size of world population, its geographic distribution and density, trends of movements, age division, rate of birth, marriage and mortality, as well as racial, ethnic and religious structure. Major demographic trends are the following:

·        POPULATION GROWTH WORLDWIDE. The implications of this are in that with the current growth rate of 1.7% yearly the degree of utilization of the Earth’s resources for maintaining life in water, food, energy, ores and minerals is closer to their limits, so that in future the shortage of basic resources and finding out alternative ones may be expected.

·        THE SLOWED DOWN BIRTH RATE IN THE DEVELOPED COUNTRIES. In the underdeveloped world the annual growth rate is 2.0% while in the developed 0.6%. The declining birth rate is a long-term trend in the developed economies. This phenomenon represents a threat to some branches of economy while for other branches this may be an advantage.

·        AGEING OF POPULATION IN THE DEVELOPED CUNTRIES. The development of medicine has conditioned the limits of human life to be moved. Given that the life is longer and longer, while the birth rate is falling, this phenomenon must be incorporated in marketing strategy of a company.

·        CHANGES IN A FAMILTY. The people get married later in life than earlier. The number of children per family is decreasing. The number of employed women is growing. The number of single households is also growing.

·        BETTER EDUCATED EMPLOYEES AND POPULATION. 72% of Americans has graduated from high schools while 20% from faculties. The labor force is more and more composed of office workers and they now make 54% of the employed in America while in the past 35 years the number of workers fell from 47% to 33%.

·        ETNIC AND RACIAL CHANGES IN POPULATION. In America and in European industrial countries as well, the ethnic communities and racial groups who are not indigenous and white-colored have the greatest growth rate.

·        TURN OF MASS MARKETS TOWARDS MICROMARKETS. The companies depart from earlier approach based on the “average” consumer and create their products and services more and more according to the concrete specific micro-market demands.


The elements affecting purchasing power of consumers and their consumption structure represent the economic environment. The total purchasing power is dependent on the current income, prizes, savings and loans:

·        CHANGES IN INCOME. During seventies and at the beginning of eighties the real income on American market was decreasing while since mid eighties until today it has been increasing. Leaders must pay attention not only to the average income of inhabitants but on income distribution towards the socially vulnerable classes. The practice shows that, for example, those selling luxurious goods and low cost goods survive on market while those offering goods at average price are losers.

·        CHANGES IN STRUCTURES CONSUMER’S EXPENSES. More than a century ago the German statistician Engel established a well-known “Engel’s laws”. The essence of these laws is in the fact that as the income increases the percentage of expenses for food decreases, the percentage for expenses for housing and household needs remains the same, while the percentage of expenses for other categories (clothing, transportation, recreation, health, and education) rises as well as the percentage of income separated for savings. These laws have been generally proven in practice and are valid even today in the USA.

·        LOW RATE OF SAVINGS AND HIGH DEBTS. The consumers may increase their purchasing power by taking loans and consumer credits are meritorious for faster growth of American economy. In 1984, each American was at average indebted 11,000 dollars. On the other hand, the savings amounted to 6.1% of average personal income. This percentage in Japan is three times greater.


The natural environment, which is more and more devastated by each generation, is today considered to be rather polluted. This is also one of the major problems the business world and wider community is facing in modern time. Four major trends are:

·        SHORTAGE OF RAW MATERIALS. The earth consists of unlimited, limited renewable and limited non-renewable matters. The unlimited resources, such as water, are not a direct problem, but in a long-run they may become a problem. The limited renewable resources, such as woods and food, must be reasonably consumed. The limited non-renewable resources, such as crude oil, coal and metals, are serious problem because of the time when they will be depleted.

·        INCREASE IN ENERGY COSTS. Since the crude oil crises in seventies of the past century, the crude oil prices have been increased by 15 times. Since then, governments, companies and scientific institutes of many countries search for alternative energy sources.

·        HIGHER DEGREE OF POLLUTION. Some industrial activities inevitably pollute natural environment. Finding out alternative ways of producing and packing goods is a trend which will mark near future.

·        CHANGEABLE ROLE OF A STATE. In sixties and seventies of the past century various governments had active role in environmental protection. In eighties this was weakened while today states again undertake active regulation of environmental protection. The picture of legislation pertaining to environmental protection is different in the whole developed world because some countries, for example, the Scandinavian ones, have a long tradition in active role of normative protection of environment. Even greater diversity and disharmony of laws is present amongst the developed and underdeveloped countries.


The technology, technological environment, is the most distinctive power developing activities of population. In this environment we may observe the following trends:

·        ACCELERATED RATE OF TECHNOLOGICAL CHANGES. Ninety percent of all scientists ever lived – are still alive. The accelerated stride of new inventions, application and spreading of new technologies is obvious. The time distance between the new idea and its implementation is rapidly getting smaller and the product lifetime is getting considerably shorter.

·        UNLIMITED POSSIBILITIES OF INNOVATIONS. Today, the scientists work in almost unlimited space of new technologies that will revolutionize our products and production processes.

·        HIGH BUDGETS FOR RESEARCH AND DEVELOPMENT. In 1987 the expenses for RD in the USA amounted to more than 123 billion dollars. The Government provided more than a half of the resources. 87% of the resources are earmarked for applied researches while the remainder is spent for fundamental researches, out of which more than two thirds at colleges and universities.

·        CONCENTRATING TO MINOR IMPROVEMENTS. As a result of high expenses for RD, many companies rather get involved in minor improvements of products than taking a risk with great innovations. There are more defensive than offensive researches. 

·        GROWING NUMBER OF REGULATIONS ON TECHNOLOGICAL CHANGES. Given that the products are becoming more complex the public must be sure in its safety. This is a job of a state which is lately more and more active in this sphere. Technological changes encounter both copying and stealing of ideas and products. Protecting intellectual property is today a sphere in which a role of state in very distinctive.


The situation in political environment strongly affects the decision making of a company. The major features in this environment are:

·        CONSIDERABLE NUMBER OF LEGAL REGULATIONS GOVERNING BUSINESS OPERATIONS. The legislation affecting business operations is for years consistently growing. The purpose of these regulations is protecting consumers, competition and wider social interests.

·        GROWNG NUMBER OF AGENCIES FOR IMPLEMENTING LAWS. There is a growing number of Government agencies having certain competence in implementing laws. The lawyers and economists, often lacking practical sense for business and marketing, prevail in these agencies.

·        GROWING NUMBER OF PUBLIC INTEREST GROUPS. Just like the number of government agencies grows, the number of non-government agencies for the purpose of protecting interests of certain groups or public interests is also growing.


Cultural environment is the environment emerging as a product of conviction, values and evaluation of people in society.  Major features of cultural trends are:

·        FUNDAMENTAL CULTURAL VALUES ARE VERY STABLE. People in modern society have many essential convictions and values, which they want to keep. Changing these convictions and values by companies will certainly be a waste. Secondary human convictions and values are much easier subject to changes.

·        EVERY CULTURE CONSISTS OF SUB-CULTURES. Every society has different groups of people with common comprehension, stemming out from their common life experiences or circumstances. The sub-cultures are a good marketing strategy of a company if it chooses them to be their target markets.

·        SECUNDARY CULTURAL VALUES SUBJECT TO CHANGES IN TIME. Many agencies for public opinion polling deal with discovering such changes. People’s opinions on themselves, on others, on organizations, on society, on nature, and on the world are those viewpoints that change in time. Companies must count on these changes and must anticipate them.



2. Trends in Modern Environment


It is interesting to quote which trends are taken as crucial in the books dealing with leadership.


According to Bennis, who concludes that everything is moving and changing, and that a leader should not understand this as a danger but as opportunity for personal growth and salvage of organization, the following five basic powers affecting current world may be recognized:[49]

1.     TECHNOLOGY. 40 people today produce something for the production of which 1,200 people were necessary 50 years ago. Someone said as a joke that in future factory only a man and a dog would be employed. The role of the man would be to feed the dog. The role of the dog would be to prevent the man to touch machines.

2.     GLOBAL LINKEAGE. Half of the Los Angeles central part is in the ownership of Japanese. Europe is being united, the European Union accepts new members. The Chinese economy is strengthening. The USA has a stable development. The world is ever more linked; the countries are ever more dependent on each other.

3.     MANAGERS AND ACQUISITIONS. In twenties in the century behind us the number of taken over companies increased from 1,529 at the beginning of the period to 4,500 at the end. The value of taken over companies in 1989 amounted to 600 billion dollars, in 1998 increased to 2,000 billion dollars. The number of managers and acquisitions, for the purpose of increasing economies of scale, diversification and better approach to global markets, have tendency of further growth.

4.     DEREGULATION AND REGULATION. Airline industry is under the conditions of new regulation, this being a product of terrorist attacks to America. Deregulation of electric power market in California has resulted in electricity shortage. Enron and brokers without scrupulous have provoked a big scandal. These cases are the reason for new regulations.

5.     DEMOGRAPHY. The American population is aging. 21% of Americans is older than 50 years and this age group is the group with greatest growth rate in America. In 2030 one out of five Americans will be older than 65 years. At the beginning of this century 15% of those starting a new business have been the white-colored men and 25% white-colored women, others belong to minorities who will some time in future become a majority in the USA.


According to Kouzes and Posner, the context of leadership is rapidly changing from high uncertainty through intensive search for essence up to linking of both the people and the people and leaders. Basic trends are:[50]

1.     HIGH UNCERTAINTY. Horror followed by the events after 11th September conditioned the whole world to feel less peaceful and less safe than before this terrible terrorist attack.

2.     PEOPLE IN THE FIRST PLACE. Terrorist actions, new literature and business courses, as well as practice of many companies conditioned a new reality – that people are most important, that people are in first place.

3.     EVEN GREATER LINKEAGE. Technology has linked the whole world in an electronic global place. Internet and mobile telephone industry covered even the most distant places on the Globe.

4.     SOCIAL CAPITAL. Knowledge has replaced land and financial capital as a new economic resource. This is a social capital – collective values of people in an organization who know each other and what they will do for each other.  And amongst them there is always an effective leader.

5.     GLOBAL ECONOMY. The social lineage and social capital go beyond national limits. This lineage is global.  This is a characteristic of new economy – and a chance for leadership. Global leadership means global understanding.

6.     SPEED. The speed is a direct consequence of technology uniting us. It improved our lives and reduced the cost of production.

7.     CHANGED LABOR FORCE. Growing number of people is self-employed, growing number of people work at home. The labor force is more and more diversified. Leaders, based on this trend, find answers to a new question: how can an organization be loyal to each employee?

8.     EVEN MORE INTENSIVE SEARCH FOR ESSENCE. However we call it: spirituality, religion, faith or soul, the trend in business organizations towards always greater openness to spiritual, emotional side, is clear. Books dealing with spirituality are regularly on the top of the bestseller lists. In the magazine FORTUNE in 2001 there was a headline on religion and business. The task of a leader is to create climate at work in order the people would bring to work their souls and not only their hands and brain. 


Social and political phenomena which are according to Drucker[51] essential for determining company’s strategy in our century are:

1.    DECREASING BIRTH RATE IN THE DEVELOPED WORLD. The final implication of this is in that all developed countries should rapidly increase productivity of their workers.

2.    CHANGE IN DISTRIBUTION OF CITIZEN’S INCOME. Four sectors have had the greatest growth in the share of citizen’s income: state, medical protection, education and entertainment. And none of these four sectors are on “free market”, they do not act strictly according to the supply and demand laws and they do not correspond to the model of desirable economic behavior according to the old economic theory. In any country, even in the most capitalist one, for example in the USA, these expenses exceed half of the average costs per man. This will be a great challenge for new economic science. On the other hand, many believe that informatics is the most prosperous branch in the world at the moment. The truth is that it is not, but that these are financial services, actually a new portfolio of new financial services which had not existed before – directed to the retired persons. There is another industry that has had greater growth than informatics, the book publishing. In western countries more books than computer equipment have been sold.

3.    DEFINING ENTERPRISE’S PERFORMANCIES. In the USA the pension funds, namely future retired persons, are owners of 40% of shares of all companies in high demand in stock exchange, while 60% of shares of those big ones. The situation is similar in Great Britain. It should be expected that these owners will focus on performances other than those recognized by economic theory, based on greed and selfishness of private owners. To these owners the non-financial values are of even greater importance, and this is a long life of a company, in order the company’s income would be continued when they will be very old. And today, an average life of companies in the USA is 30 years!

4.    GLOBAL COMPETITION. All organization must have as their prime goal the global competition. One of the implications is that no country may base its economic development on low cost labor. Labor costs amount to one eighth of total costs, and competitive and development advantages obviously lay somewhere else. Every business today depends on global competition. This represents a danger even for political decisions of the countries which have caused damages to the country’s economy, or which may cause it. Good examples for this are Japan (the Government restricting import) and Mexico (the Government restricting export).

5.    GROWING NON-UNIFORMITY BETWEEN THE ECONOMIC GLOBALIZATION AND POLITICAL DEVISIONS. The golden rule in business in overcoming this problem should read: if the non-uniformity between political and economic reality exists, than nothing that will not completely satisfy economic reality it to be done.



3. Challenges to the 21st Century Management


In his latest book Peter Drucker[52] also elaborated the challenges od the 21st century management. First of all new management paradigms were elaborated showing us how the management would develop in 21st century. Since 1930 the management lies on two sets of assumptions related to the management reality, assumptions related to the management discipline (the first three assumptions) and assumptions related to the management practice (the remaining four assumptions).


The first assumption is that management is business management. The development of all social organizations until today has shown that management is a specific and different body in each of them  individually, but in all organization of the society as well.


The second assumption is that there is – or has to be – only one right organizational structure. We are witnesses that there are a number of different organizational structures at various hierarchical level of organization having effective results. For a right organization the management must search for and develop an organization complying with its objectives.


The third assumption is that there is – or has to be – only one way to manage people. However, in this century the people will not be managed. The task is in that people are led by leaders and with the purpose that an organization builds up its productivity on specific skills and knowledge of each man. 


The fourth assumption is that technology, market and consumers are given and unchangeable. In this century the management must be more and more based on the fact that technology and market may not be basis for the management policy. The impact of management on the business and constant changes of environment have contributed to the fact that basis for management strategy and policy should be the values, viewpoints and decisions of consumers on their available income distribution.


The fifth assumption is that the area of management is legally defined. This assumption lies on the assumption of controlling and commanding in management. The trend is in that the management, as a discipline and practice, should be more and more based on the assumption that its area is not legally defined. The management should be operational. It should comprise entire process. It should be focused on the results and performances in the entire economic chain.


The sixth assumption is that the management is focused on inside, on organization. But the results of each organization, either enterprise, church, university or hospital, exist only in outer environment. The management exists because of benefit the organization receives based on these results. It should place its focus on assumed results and organize the realization of the anticipated results. The management should be a body producing results outside itself.


The seventh assumption is that the economy is defined within national borders and that the management area is politically defined. Today, national borders have become a restraint for business. The management practice, and not only in business, should be more and more based on operations, and not on policy. And finally, new management paradigm is that the area and responsibility of management are all that affects performances of an organization and its results – either inside our outside, either under the control of organization or completely out of its control.


What is the answer to these management realities? That is a leader of changes, the only one who will survive in the period of rapid structural changes. A leader of changes is expected to:

1.    Penetrate deeply into the future.

2.    Find and anticipate changes.

3.    Incorporate changes.

4.    Balance changes and continuity.


The favorite Drucker’s topic for the 21st century is the so-called skilled worker, one of his central concepts. Thus, in the 20th century the greatest contribution to management was the fifty times increased productivity of common workers in the production.  The greatest contribution of leaders in the 21st century should be the skilled worker’s productivity and a skilled worker. The most important value for company in the past century was production equipment, in this one it is a skilled worker. The difference between a common worker and a worker who is skilled in his job is obvious, and the following factors determine the skilled man productivity:

1.    The question for the common worker was: “How should the work be done?”, while for a skilled worker the question should be: “What is the assignment?”

2.    The productivity of a skilled worker should be imposed on by himself. A skilled worker should manage himself. He should have autonomy.

3.    The continuous innovation should be a part of work, assignment and responsibility of a skilled worker.

4.    A skilled work requires unceasing learning, in both directions.

5.    The skilled worker’s productivity is not primarily expressed by quantity but by quality.

6.    The skilled worker’s productivity requires that he is not considered as a cost but as a value for a company. It is necessary for a skilled worker to want to work for a company with relation to all other potential opportunities.


A big group of skilled workers performs both the skilled jobs and the manual jobs.  They are technologists. They are the greatest and most rapidly growing group of skilled workers. In future, the competitive advantage of a state will be determined on the basis on the success of skilled workers’ organizations. This primarily calls for redefining purpose of organization from the root, it must no longer serve the purpose of satisfying legal owner but also of satisfying human capital owner, namely each individual skilled worker. This is an implicit demand for a democratic organization and leadership orientation of companies. A state’s task in future will be building an educational system in the service of skilled worker’s productivity improvement. The skilled workers, technologists, encounter drastically new requirements:

1.    They should ask themselves: Who am I? What are my advantages? How shall I work? People think that they are aware in which things they are good. Actually, researches show that the people are generally aware in what things they are not good, while they are not aware of opposite. A man must become aware in what things he is good, he must concentrate on his advantages and improve them. Advantages and weaknesses are given, however, the question is how the assignments are performed, particularly those in which a man is good, because the people have results based on how they perform them. This is not given and there is a way how this may be improved. The improvement is based on learning. A man should be aware of which learning methods are most suitable for him, whether he learns best alone, with the assistance of mentor or in team. By learning, the conflict between the man’s advantages and ways in which he performs them may cease to exist. However, the conflict may occur between the man’s advantages and the things in which he is good. Undoubtedly, values should have priority.

2.    They should ask themselves: Where do I belong? This is a decision which one should make soonest, if possible at the very beginning of one’s career. If the choice is based on maximizing above mentioned three questions, then an average man as well may become a great performer in the organization towards which he has affinity.

3.    They should ask themselves: What have I contributed to? This is a new question in human history, because the traditional tasks were assigned. Skilled workers should learn to ask themselves: What should be my contribution? An effective action is based on three elements structured in three questions: What does the situation require? How can I most contribute to my advantages, my way of working and my values? What results should I achieve to reach difference?

4.    They should undertake responsibility for interpersonal relation. Few people work independently – great artists and scientists, while other people work in organization. The work of most of the people is effective through the work of other people. For one to manage himself he has to undertake responsibility for interpersonal relations. First of all he has to accept the fact that all people are not the same, but that they are human beings and that one has to behave towards them as to own self.  Don’t do to others what you wouldn’t like the others to do to you. Evident, but hardly applied in practice. Then, an effective communication has to be achieved. Organizations are interwoven and linked through jobs of various individuals. How to give own contribution if the work is based on assumptions, if people know very little about each other, if they do not know a basic thing: who is in what and to what extent good, how one likes to work, what are their individual values and how much one wants to contribute to the results?

5.    They should have plans for the Second part of life. The pension system has been established in some other times with different assumptions. If it was done today on the then assumption, one would be retired with 79 years of age. Without going into economic topics, the then system was created for common workers who really worn themselves out during the course of years and were biologically mature for retirement in their sixties. However, the skilled workers place a new paradigm – they do not wear themselves out during their working life, but on the contrary. They permanently get trained for their jobs so that over the years they become more and more productive. The inevitability of moving retirement age limits will be soon understood by the law makers. The skilled workers should make their careers for the second part of their lives because it is likely that they will survive their organizations during their working life. One should be prepared for this career long before the time these changes occur. The possibilities are:

·           starting new, different career;

·           developing parallel career – another assignment in the same organization;

·           social entrepreneurship – same assignment in another organization usually of non-profit sector (for the people who were unusually successful in the first career).



4. Ecological Environment Impact on Competitiveness


Porter, the greatest expert for competition, showed in one of his works how leadership effectively responds to dynamic changes of marketing environment.[53] Many people have fixed opinion that economy and ecology are on opposite poles. On one hand, here is a social advantage of a clean environment and, on the other, the costs of private capital for preventing pollution and improving environment. This statistical approach neglects the fact that companies constantly find innovative ways how to adapt themselves to changes under pressures of competition, consumers and legislation. These innovations lead to more productive use of inputs – from raw materials to energy and labor force and the increased productivity makes companies more competitive, not less competitive. These improvements in productivity reject greater yield for companies than additional costs based on new regulations. The Holland flower industry was under great pressure of the public and State because of land pollution caused by artificial fertilizers. The producers, under the pressure, ceased growing flowers on the land and started to grow flowers on water and stones - and improved their productivity, competitiveness and share in world market. The pollution, releasing toxic and waste maters into environment, should be considered as uneconomical and ineffective use of resources. In this is a key of the story why the Holland flower industry today is not an exception in the world economy but ever more a rule. Also, the blame for uneconomical use of resources has been shifted to direct consumers through prices. For many leaders this concept has opened new roads towards the increase in productivity both through closed production technologies and through substitution of materials. As leaders have made a deviation from the costs of ecology, because of legal regulations, towards opportunity costs of ecology – the loss of resources, loss in profitability, diminished value of products for consumers, the ecology and economy have found themselves at the same level.  In researches of 29 leading chemical plants, 181 new technologies for pollutant reduction have been discovered. Only one of them has caused increase of costs. Out of 70 activities on products, 68 has shown rise of productivity, 7% of them at annual level. 48 activities have been carried out without capital, two thirds of the remaining activities paid off within 6 months or in shorter time. In the mass of these activities, 1 dollar of expenditure for preventing pollution has brought 3.49 dollars of increased revenue. In 1990, the prohibition of the CFC because of ozone bought about disturbing titles in newspapers on disappearance of refrigerator, but luckily the companies dealt with innovations and not with reading black forecasts. The modern industry is based on propane-isobutane. The results are: 10% greater power efficiency and 5% lower final prices for consumers. What stand should the leaders and business organization take in these industries? The Porter’s and Van Der Linde’s message is the following:

·        Direct and indirect impacts on environment are to be compared.

·        It should be learnt how to recognize opportunity costs of insufficiently used resources.

·        Atmosphere in an organization stimulating innovative solutions increasing production should be created.

·        They should be proactive in defining new type of relationships with regulation makers and ecologists.


I would like to add another one, the primary one:

·        They should, with the assistance of leaders of changes, on democratic basis, create a high performance organization.







The HIGH PERFORMANCE ORGANIZATION model (HPO)[54] was created as a two-decade experience of authors of the model (John W. Pickering and Gerald S.Brokaw) in their work in Government agency the Federal Executive Institute (FEI) on educating high officials and their knowledge related to organization performance improvement[55]. The essence of the program is a synthesis of theory and practice of organizational changes of great scope. The Program, focused on individual officials of private and public sector, rarely had results in significant changes towards the HPO in organizations. The greatest move forward is achieved when the Program is focused on entire organization and leadership in the organization. The development and educational goals should move from individual education towards the education of teams in an organization starting from the management team, best from the entire team.  The best approach is in leading development of a team through organizational model of changes. The model is appropriate and has been implemented in a great number of various organizations: New York Stock Exchange, US Navy, GE – Fanuc, City of Norfolk, Virginia…


For the model to be implemented the teams of people are needed who are experts in their organizations and willing to be holders of changes and who need framework model of changes and analytic approach how to achieve an HPO, based on the so far progress of theory. The experience has shown that in case the organization does not have “good” leadership, there is no any possibility to apply the model “well”. To build such leadership it is necessary to reach consensus in the organization about clear and comprehensive common vision of all employees in an organization.


The feedback lies in the basis of the HIGH PERFORMANCE ORGANIZATION model. The model shows how strategy, structures and organization systems are is changed on the basis of leadership, vision and values. The leadership is based on philosophy, function and form, the vision is based on direction and alignment, while values are based on culture and behavior.  In the model the success is reaching high performances, and they are in:

·        quality of products and services,

·        additional values for consumers, and

·        financial performances.


The environment responds to the change in performances and sends signals in the organization for additionally necessary changes in it. The first to be affected by changes from the environment are the very leadership and leadership basis on which the model is based.



(Source: Pickering John W., Matson Robert E., WHY EXECUTIVE DEVELOPMENT PROGRAMS (ALONE) DON’T CHANGE ORGANIZATIONS, “ASTD’s Training & Development Journal, USA, 1992, p.1-8



1. “Business Nature” Evolution


The “business nature” evolution is a staring basis for the HPO. It clarifies types of organizations through history and offers explanations of how will organizations in the 21st century look like. These will be organizations based on democratic values.


At the beginning of the human era a man was a collector or hunter. He did not possess any knowledge and played a passive role with relation to the Nature. As agriculture and handicraft trades developed, men undertook more active role.



Figure 15: Division of labor in the handicraft trades phase

(Source: Pickering John W., Brokaw S., BUILDING HIGH-PERFORMANCE

ORGANIZATIONS FOR THE TWENTY-FIRST CENTURY, Charlottesville, VA, USA:Commonwealth Center For High Performance Organizations Inc.

(Unpublished Participant Text), 2003, I-3)


In this phase of work the entire organization lies on one man so that the work is holistic, namely united in one personality, so a man performs it independently without dividing work further. Every man thus possesses all competencies required for performing a job, and these are: leadership, managerial and technical competencies, knowledge and skills.


At the beginning of the past century the industrial phase commenced. Basic division of labor appeared, primarily the vertical one, because the owners and workers became members of two classes. In time the owners, having leadership function, left the sphere of management to a new class of people, managers. The managers managed on the basis of new sciences and disciplines on production and management based on industrial engineering in production and based on “scientific management” in managing an organization. The most competent ones came before the working class but they did not have possibility to access the managerial class.  The horizontal division also appeared in this phase of economic development. At each level the individuals were required to perform the entrusted role well – to be only a leader, only a manager or only a common performer. There was no mixing between classes and levels in an organization.



Figure 16: Division of labor in the industrial phase

(Source: Ibid., I-4)


The changes in environment and the marketing orientation of an enterprise contributed to the fact that enterprises should be oriented in a different manner. In the industrial phase only a leader could communicate with environment and he was in charge of both the products and the services satisfying consumers’ needs and wishes. Soon it was proven to be insufficient. Growing competition conditioned a new approach to consumers – marketing development phase commenced. Marketing philosophy required the entire enterprise to be oriented to the consumers’ needs and wishes so that the so-far pyramid of managing enterprises was changed. Now the first line has the assignment to respond to the consumers’ needs and wishes, and it is mainly sales operative unit or services operative unit in an enterprise.  They should have technical support by technical operative unit, which will provide them products and services which the consumers demand, and on the basis of recognized needs and explanations of the first line. Here, there is also general management support. A leader is the last. He is responsible for a vision and values of an enterprise. In this structure it is already obvious that for special or potential wishes of consumers the enterprise responds in the manner to form special teams within the enterprise which will deal with this niche as with their own micro-business.


The dynamic changes in environment, as already explained, inevitably demand from the organization to turn to democratic values and enterprise organizing, because this is the only way to survive by applying leadership approach in the years to follow. Given that in democratic model all are equally important in an organization, all have the same tasks as well.


The model appropriate to the democratic organization is called network talent model because each individual is expected to use its talent and competencies for the benefit of progress and wellbeing of its organization. Along with leadership, managerial and technical competencies, a man in a democratic organization must have team skills as well.



Figure 17: Division of labor in the 21st century HPO model

(Source: Ibid., I-6)


In this model, man’s work and his role again becomes holistic, namely all organizational roles are summarized in each individual. A man is in the role of using all of his competencies, all the best he can offer, and that is:

1.    Leadership competencies, skills and behavior,

2.    Managerial competencies, skills and behavior,

3.    Technical competencies, skills and behavior,

4.    Team competencies, skills and behavior.


The team roles and significance of teams in an organization, which established on the basis of the theory of niche, represent the very qualitative difference in competencies, skills and behavior between the workers in the 21st century and workers in the phase of handcraft trades. Team competencies, skills and behavior may be divided as follows:

1.    PROCEDURAL; types of meetings, chairing meetings, procedural rules at meetings, procedural roles, presentation skills.

2.    PROBLEM SOLVING: understanding, techniques, values, and models.

3.    BEHAVIORAL (BEHAVIOR): at personal, interpersonal and team levels.


Industrial model is:

·        stable,

·        studied,

·        based on activities,

·        people support technology,

·        based on numbers,

·        focused on products,

·        standardized, and

·        rigid.


Network talent model is:

·        flexible,

·        in learning,

·        based on performances,

·        technology supports people,

·        based on communication,

·        focused on consumers,

·        non-standardized, and

·        virtual.


However, does the talent model presume that all of them have the same function in an organization? No, because a function and role depend on the level in the organization. All of them should have leadership, managerial and technical knowledge, competencies and skills, but which knowledge should be given priority depends on the level of contacts with consumers. The first line should lay stress upon his technical competencies, while other knowledge and skills should not be set aside. By developing organizational structure a greater role is given to the managerial competencies, skills and behavior while on the top position the greatest stress is to be laid on leadership competencies.


The eminent organizations of today were established in the past century, in the industrial phase, and therefore the system and working processes which then produced results today does not produce them any longer, because the worn out organization is not able to lead us to future. The solution is in an organization based on the network talent model, the organization based on leadership and democracy. Such is the HPO organization.



2. Diagnosis of Organizations and Getting Familiar with the HPO Model


The HPO model is not:

reducing the number of employees,

how to work longer or shorter every day,

techniques, or



The HPO model is focused on performances, actually on high performances. The generic definition of high performances is: simultaneous production of quality products and services, of exquisite values for consumers and envious financial performances. Under quality we understand purposeful “design and characteristics” of quality and excellent quality of “performance”. In this Chapter we will discuss questions asked at the beginning, and then we will move through diagnosis of organizations and introduction of the model of changes towards higher performances. In the focus of the HPO material is not only an individual, as already emphasized, but also the team and micro-business, which has emerged on the basis of the philosophy of niche, as well as the entire organization. A leader in the HPO model has a circle of control over him, circle of influences on the team and micro-business, and finally, a circle of interests spreading over the entire organization:



Figure 18: Diagram of the HPO model focuses and circles

(Source: Ibid., II-5)


There are seven basic diagnostic questions in the model for organizations and they are the following:









The most important thing with the model is that it is a model which should be implemented in each organization individually, so the answer to the first question, what the high performances are for us, should be specific for each organization. The answer must be firmly linked with the mission and desired position of the organization in the future, in the selected market niche.


How could we know that we have achieved the high performances when high performances do not include compromise? It is a well know fact that many industries in the past did not behave simultaneously in a unique manner towards the speed and price of manufacturing, so that more rapid manufacturing was often possible only at higher prices. The high performances require the work to be done well, rapidly and at low cost, namely to work better, faster and at lower cost than earlier. This is a 3+ approach explaining that it is necessary to increase all outputs with relation to the preceding state. Until 1900 there was only one approach “choose 1” – price, quality or speed. In the 20th century until around 1975, the year taken as the end of industrial society, the approach was “choose 2” – the price depended on either quality (higher) or speed of production (lower). Faster production meant lower product quality. Until the end of the past century the approach was “choose 3” – the standard quality was delivered along with standard production and prevailing price. The 21st century and dynamic marketing environment require each economic entity to adopt approach “choose 3+” –namely better, faster and lower-cost products and services are offered to consumers in every further iteration.


The third question is environment-oriented, actually micro-environment-oriented, as Kotler defined. Let’s us recall that the actors are in the direct environment of a company and it is composed of: a company, suppliers, market intermediaries, competitors and the public.  The answer to the third question is a test of adopting marketing orientation of a company. Organizations are requested to improve their relationship with all actors in their environment. The two-way communication is essential for establishing effective relation with the environment.


The fourth question is also environment-oriented but compared to the previous one the stress is here laid upon the macro-environment, and according to Kotler these are: demographic, economic, natural, technological, political and cultural powers. An organization should expand its focus from the narrow profit to broader interests, such as:

·        higher moral interests,

·        pride, and

·        existence.


The fifth question, whether we are doing the right thing, is focused on consumers. The answer to this question should provide information on whether the quality of a design and product characteristic conform to wishes and needs of consumers. The answer to this question should also show whether we use right materials for the desired product, as well as whether the labor force is appropriate in number and level of training to the output quality and price. The quality of designs and characteristics may range on the scale from complex to modest, and the right one is the one requested, wanted and expected by our consumers.


The sixth question, how much we are good in producing right things, is focused on the process of production. The answer to this question should furnish us information on whether the quality of performance conforms to consumers’ wishes and needs. The process should be the “right one”, namely the costs of the designed technological process should be minimized, and it should also be carried out well, by which the costs of non-performing operation (machine idling, standstill in production, and alike) are minimized. The quality of performance on the scale may range from excellent to poor, and the right is the one expected by our consumers.



Figure 19: Quality in the HPO model

(Source: Ibid., II-12)


The fifth and sixth question is best explained by way of a plastic example. Hence, a design and characteristics should be directed towards a determined target group and should be of high performance for that target group. Let’s take the YUGO and Mercedes cars; of course, everybody would like to drive Mercedes, but cannot afford it. The observed organization should find its appropriate place on the scale, and it is often somewhere in the middle, or upper half. Let’s say that this cross section is Skoda and that we have positioned there our designed quality in the design and characteristics of vehicles. Quality of performance represents the process performances because Skoda may be manufactured in Czech Republic or Germany for some ten thousand EUR, and it may be manufactured in Kragujevac for some twenty thousand EUR. The HPO will produce the right thing in the right way, namely with the lowest process costs. As it may be concluded the first axis, the one defining quality of design and characteristics is an axis of effectiveness, while the other one, the axis defining the performance quality is an axis of efficiency.


This model, as may be concluded from the above example, requires the work of both a leader and a manager in an organization, so that the organization may be both effective and efficient simultaneously. The mechanism of changes must be built at each organization level in order to reach high performance organization, that much necessary in the dynamic environment of the 21st century.


The first six questions were the questions to which answers were based on a vision. It was highlighted that in the past a vision was often a vision of only one man – owner. The dynamic environment of today makes this almost impossible, but the possibility still exists. However, as the changes require the use of knowledge, competencies and skills of all in an organization, the last 7th question is thus related to the values of organization, and it may also be put in the following way: is the organization’s business culture based on democratic values? Only democracy and democratic values ensure the work to be based on maximum utilization of each individual’s potential for the purpose of successful adjusting to changes in the environment and long-running effectiveness of an organization.


Finally, all seven questions will be incorporated in a model:



Figure 20: HPO  model and diagnostic questions in the model

(Source: Ibid., II-19)


We notice that the diagram of a vision and values is spiral. It represents the relation from general to particular. The vision and values should be general in their essence, however, they should lead to particular and for an organization unique implementation, which will ensure competitive recognizability, marketing positioning, short-running efficiency and long-running effectiveness.



3. Spheres of work in an HPO


The focus will be further put on an organization as a whole and what sphere of work is required for achieving changes at each level in an organization will be shown:

·        The first one, a line level must be exposed to fast learning of the basis of business and management, in order to adapt “culture of leadership”.

·        Middle level – network of working units and department must work on improvement of work process of the entire organization and improvement of system of support to work process.

·        At the top level the leader’s and manager’s team should be built which will ensure the process of changes to be implemented at all levels of work in an organization.


The model is based on an presumption that an organization may change itself from industrial into the talent model network, into a democratic organization composed of high talented individuals at all work levels, who, as leaders in their micro-business teams, effectively perform their assignments providing to the consumers the quality products and services, delivering superior values for consumers and realizing envious financial performances.


A line unit is closest to consumers. This is actually a result of an organization based on marketing logics according to which those in direct contact with the consumers are interested most in effectiveness and efficiency of micro-business, which is each individually positioned in a separate market niche. The technical support provides to the line unit the necessary technical and specialized products and services. The general support provides to all parts of organization the resources and information, such as: new labor force, financial services and budgeting, and alike. The top level is responsible for creating organizational architecture and running processes supporting such structure.



Figure 21: Reverse pyramid of the HPO model

(Source: Ibid., VI-3)


The primary need of each organization is to create efficient and effective first line, which is in the first contact with consumers. To succeed in this, it is necessary to be based on two work spheres at this level. The first work sphere J1 is a change of behavioral culture model from the industrial into network model, establishing a culture based on team work and participative approach. Individuals should understand that their work is holistic, that the organization demands from them a contribution from their other competencies and not only from technical skills they posses: leadership, manager’s and team competencies. This is achieved by training and learning. The first level should also crystallize its vision and value.  Then, it should make a long-term strategic plan, which will be transposed in specific tactics and operational plans, all together making a plan and budget of this level of organization. It is suggested to establish a team in the following:

·        HPO,

·        Covey’s[56] 7 habits of highly effective people:

·        Team building,

·        Strategic planning,

·        Trainer’s approach.


The second work sphere 2 at this level is ensuring that the line team members have knowledge on business and management bases, and that they should be trained in:

·        Basic financing,

·        Project management,

·        Managing work and processes,

·        Performances and their measuring

·        Benchmarking tests,

·        Forecasting standards for labor force.


The first work sphere - J1, behavioral culture model change, derives from organization’s leadership, vision and values, while second sphere – J2, business and management bases, from organization’s strategy, structure and system.


The next sphere of the demanded work P1 is in an organization includes key work processes. These are processes taken over by the first line work in order to satisfy consumers’ needs and desires. In many organizations the key jobs are not controlled by organizational level of a business unit, but it is rather partnership network of various units and departments. In this case, leaders and management of all organizations in a partnership network must ensure that mechanism of changes are created, leading to work process improvement. It should be taken into consideration that such approach is fundamentally opposite to hierarchic approach, not focused on the level and participation in the power, but on processes.

Here, it is necessary to be based on experiences based on knowledge on:

·        engineering,

·        designing processes,

·        costs control and management bookkeeping,

·        continual process improvement, etc.


The fourth work sphere P2 are key support processes, such as technical support (engineering, laboratory, garage…) and general support (finance, information, employment, law…) The key process may not also be an obligation of one unit or department, so the leaders and managers have to ensure that mechanism of changes is created leading to support process improvement. Here, it is necessary to be based on experiences based on knowledge on:

·        engineering,

·        process analysis,

·        costs control and cost/benefit analysis,

·        designing, and alike.


The last two work spheres T1 and T2 are related to building leader’s and manager’s team in an organization and are located at the very top level. As may be presumed, building effective leadership team, trained to lead on the basis of vision, form and values of an organization, depends on philosophy, form and leadership function, while an effective manager’s team, trained for daily assignments, works in the right way, depends on strategies, structures and systems, based on values and on vision of an organization.


The leader’s teams are suggested to be trained in the following fields:

·        HPO,

·        Covey’s 7 habits of highly effective people, 

·        Team building,

·        Team skills,

·        Strategic planning,

·        Trainer’s approach,

·        Getting familiar with 360º feedback.


 The manager’s teams are suggested to be trained in the following fields:

·        Basic financing

·        Project management

·        Managing work and processes,

·        Performances and their measuring

·        Benchmarking tests,

·        Forecasting standards for labor force

·        Managing and measuring direct and indirect activities and functions.


It is critical for the top team to be initiator of changes in an organization. It is of great importance come to awareness of changes at this level, in order to convey this awareness to other levels in an organization, up to departments and further to work units in the first line.  The top team should also be a support in overcoming resistance to changes and getting into changes as well as a support to collaborators in their work and high performances building, again at all levels, upside down. The trainer’s approach is an approach suggested as a successful one in leaders’ work with their collaborators in an organization. Similar development in leadership and management should be achieved at all levels. An open and frequent communication in organization is necessary. A consensus between the workers and organizational levels related to vision and organization’s values is also necessary.


In some organizations this high performance building process, which sometimes requires more than a year of work, appears to be unachievable, just like an “elephant eating” process. Although the elephant analogy is good related to the problem complexity, the real question should not be “whether we should eat an elephant?” but “which bite would be the first?” in these complex problems.



Figure 22: Achieving changes at every level in an HPO

(Source: Ibid., VI-22)



4. From Visions to Performances


A vision and values offer an answer to the question what kind of strategy, structure and business culture in the HPO model is needed.


The adopted values represent a business culture pattern. Based on:

·        leadership philosophy,

·        individual values of a person, and

·        system values, community values,

the behavioral pattern in an organization is defined.  Behavior may be positive and negative, and a leader’s job is to stimulate the first one. Based on decisiveness to of all in an organization to go towards the HPO, as well on feedback research, the potential positive behavior will contribute to the business culture development which is critical for creating the HPO.


We will further discuss the road from vision to performance. Based on vision and strategic reasoning, the following is developed:

1.    Strategic plans,

2.    Tactical/operational/project plans

3.    Monitoring and corrective actions.



Figure 23: Visions and values in the HPO model

(Sources: Ibid., VII-4)


To understand “common vision” in the model, answers to the following questions are to be defined:

1.    What is higher moral purpose, ultimate value – final performances, desired situation in the future?

2.    Why do we need the HPO, who will miss us if we become the HPO?

3.    What are high performances for us and how shall we know that we have them?

4.    Why should we have high performances and why now?


We have to be convinced that a common vision is the right vision, that it is appropriate in terms of place and in terms of time. In order to know that our performances are high in each sphere, the following process is recommended:

1.    Return always to a common vision.

2.    Decompose a vision into “elements”.

3.    Develop measuring of performances of:

a.    results ,

b.    effects.


Measuring performances of results demonstrates to us, after some time, whether our cause/effect model is satisfactory or not in rejecting anticipated results. Measuring performance of effects shows to us whether we have or have not reached higher moral purpose we have aspired to.


Second key element of this spiral represents a strategic reasoning. That is a product of business theory and mission / niche.


The business theory is the basis for us to establish strategy, structure and system. It represents employees’ viewpoints on market position of organization, as well as belief on a position where the future should be. It comprises beliefs on environment, mission and competitive advantage. The business theory is oriented on the “performance quality” and in its focus is efficiency:



Figure 24: Business theory in strategic reasoning

(Source: Ibid., VII-36)


The business theory is a basis for answers to the following question:

1.      What do we have to do (which strategies, structures and systems to use) to realize our vision?

2.      Are we doing things in the right way (right process and well performed)?

3.      Are we efficient?

4.      High performance indicators:

a.    performance quality

b.    financial performances

5.      Strategy – do we have a right business cause/effect model? 

a.    redesigning /reinventing  business process

b.    reengineering of costs based on activities

6.      Structure – are we correctly structured?

a.    reductionist approach (business centers, and alike)

b.    integralist approach (matrix structure, project management, and alike)

7.      System – do we have system, which is uniform and supportive?

a.    right business process (total quality management)

b.    right management and monitoring process

c.     right systems of support (information, technological, financial, legal, and technical ones)


Compared to the business theory, which in its focus has efficiency, the mission and niche analysis has effectiveness in its focus.  It is based on the following analyses:


·        SWOT,

·        GAP.


The mission and niche analysis is based on “quality of design and characteristics “, while its basis lies in interaction of the following answers:

·        Do we have necessary products and services required by the final consumers?

·        Do we know what is the strategic value for consumers?



Figure 25: Mission/niche analysis in the strategic reasoning

(Source: Ibid., VII-16)


The mission and niche analysis is the basis for answers to the following question:

1.    What is our niche?

2.    What for we (our organization unit) undertake responsibility and what other units are our partners?

3.    Are we doing right things for right consumers?

4.    Are we effective?

5.    The high performance indicators:

a.    quality of design and characteristics

b.    consumer’s “values”

6.    Analysis of key services and products:

a.    have we correctly identified the products and services to be delivered

7.    Strategic values for consumers:

a.    have we correctly identified who are our consumers now and who should be our consumers both now and in the future

b.    are we in partnership relations with our consumers in order to determine their desires and needs now and in the future

8.    Environmental protection

9.    Market analysis

10.           Feasibility studies of trends.


By synthesizing business theory and mission/niche analysis we synthesize all elements necessary for good strategic reasoning, thus we may synthesize fundamental elements necessary in this process:

·        Buyers,

·        Products and services,

·        Business strategies,

·        Organizational structures,

·        Work processes,

·        Processes of support

·        Equipment and plants,

·        Technology,

·        Information,

·        People,

·        competent enough,

·        in development process

·        feedback/training  (360º)

·        process of decisiveness (change of performances).


Based on leadership values in a dynamic marketing environment, the HPO must repeatedly return to determining values and visions, and base efficiency and effectiveness on results of strategic reasoning. If the obtained result of strategic reasoning is an effective strategic plan, out of which we get efficient operative plans, then our business planes, which are the result of previous ones, and the results emerging from the business plans will be outputs of the highest possible performances.


To ensure long running of the concept, the feedback concept in the HPO model should be shown. The feedback in the HPO model is longer that classic feedback in an organization:


Figure 26: Feedback in the HPO model

(Source: Ibid., II-21)


In most of common organizations the feedback is shorter than in high performance organizations. Namely, the HPO feedback includes also the impact on the change of leadership, visions and values, and not only operative and strategic plans. This is the feedback that may ensure fundamental changes. It should be mentioned that the feedback including the change of only tactic plans is even shorter and may be even less favorable for an organization because it contains changes in strategy, structure and system, as well as changes in mission niche in which it is present. 


The common characteristics of high performance organizations markedly successful on the market for a long time are:[57]

·        structure with less organizational levels and less hierarchic levels,

·        larger unit autonomy,

·        orientation on products and services with higher added value,

·        quality control,

·        services control,

·        reliability,

·        speed of innovation,

·        flexibility,

·        highly trained workers using both the brain and the hands

·        leaders at all levels rather than managers.



5. Leading Changes


For the changes to be successful, leading changes should have a leadership approach. Given that the HPO model does not provide enough information on the very change-leading process, it is necessary to clarify this sphere as well and give one change-leading model to have a rounded action plan. The book on leading changes[58] by John P. Cotter, guru of leadership, was written on the basis of articles published in the HBR. It was sold in 1,500,000 copies and was the first book, as professor Kotter stated in the preface, written without any footnote, because it is based only on his knowledge and experience. It is an excellent guidepost for action plan of leading changes.


According to all objective measuring, the important, often traumatic changes in organizations have lately tremendously increased. Unfortunately, in many cases, the changes have failed due to mistakes, and the most often ones are[59]:

1.    A LOT OF SELF-SATISFACTION: the greatest mistake is the attempt to change organization without a high level of need for changes with collaborators.

2.    FAILURE IN CREATING ENOUGH POWERFUL LEADING COALITION: great changes are impossible if a top leader of an organization does not accept them.  However, if he accepts them, an individual alone, regardless of his competencies or charisma, has never enough power to overcome tradition and inertia, except in very small organizations.

3.    UNDERMINING THE SIGNIFICANCE OF THE VISION: a vision is crucial in realizing necessary changes, in the manner that it helps in inspiring people and directs their actions.

4.    POENTIAL COMMUNICATION WITH FACTORS 10, 100 OR EVEN 1000: a great change is impossible unless majority of employees does not want to assist, often along with short-running self-denial.  Without credible communication the visions of a leading coalition will not capture hearts and souls of employees.

5.    ALOWING BARRIERS WHICH BLOCK NEW VISION: sometimes this is organizational structure, sometimes influential and well positioned person who may block all efforts of changes.

6.    FAILURE IN CREATING SHORT-RUNNING VICTORIES: the true transformations are complex and require a lot of time. Many people will not be a part of changes unless they see or celebrate long-running victories.

7.    ANNOUNCING VICTORY PREMATURLY: while the celebration of the short-term goals is good, any suggestion that the work is almost completed is an awful mistake. Until the changes do not get deep in the company, which usually lasts 3 to 10 years, new approaches are sensitive and breakable as glass.

8.    FAILURE OF THE CHANGES TO BECOME A PART OF CORPORATIVE CULTURE: changes bring about great moves forward only if they become “this is our way of working”. Until new behavior does not become rooted in common values and social standards of an organization, they may always be a subject to degradation. These mistakes are not inevitable. With due attention and skill they may be avoided. The key lies in understanding why an organization resists changes and what kind of leadership is required to achieve a success in the process of changes.


Implementing successful changes is a process having 8 phases. It is very important that all 8 phases are carried out in the following sequence.  The first 4 phases are in unfreezing status quo. The phases 5 to 7 introduce a new practice while the last phase is in rooting changes in corporative practice. A common mistake is in jumping over the first 4 phases. Sequential running of phases is of crucial importance, each phase must be 100% completed in order to move on to the next one. The second mistake is in that many manage changes while changes are not the job of a manager or a leader. The successful transformations are 70-90% leadership, and only 10-30% management.


Establishing sense of urgency is the first phase of the process and is crucial for establishing necessary cooperativeness. With a dose of satisfaction with the present state the transformation leads to nowhere, because people are not interested in changing problems. A success in this phase is when the majority of employees, at least 75% of them as well as the whole managers’ team believe that a change is absolutely necessary. To raise the urgency level it is necessary to:

·        Create crisis in such way to allow financial loss.

·        Eliminate obvious elements of previous success (luxurious cars and restaurants, etc.)

·        Set aims too high so that they could not be realized in a usual manner of performing job. 

·        Separate as much people as possible from functional performances and include them in business performances.

·        Send as many as possible data on financial performances and (dis)satisfaction of consumers with employees, particularly those showing weaknesses in an organization.

·        Insist on people speaking regularly with dissatisfied customers, partners and shareholders.

·        Engage consultants who will provide even more relevant data and conduct  discussions honestly at meetings of executives.

·        Publish as many honest discussions on company’s problems as possible in company’s newsletters as well as speeches delivered by the executives.

·        Bombard people with information on future chances and on miraculous awards for capitalizing these chances.


Creating leading coalitions is the second phase. The CEO alone, even if having royal prerogatives, will not succeed in carrying out a change. A weak committee, of low credibility, will be even worse. The first coalition must have:

·        POWER OF THE POSITION: sufficient number of key executives.

·        EXPERTISE: the people of necessary professions.

·        CREDIBILITY: people with good reputation in the firm.

·        LEDERSHIP: sufficient proven leaders to lead the process.

The coalition must be based on effective team work, must have enough confidence and common goals. Confidence will be built through many talks and activities as well as through carefully planned events not related directly to the job. The goal must be pleasant for ear and fascinating for soul.


Developing visions and strategies is the third phase. Often, even incredibly often, in the opinion of John P. Kotter, people try to transform organizations by authoritative decree and micro-management methods. Let’s imagine three groups of people sitting in a park on the grass. In the first group one of them got up and said: ”Get up and follow me.” Since not all of them followed him he turned back and said: “I said immediately!” In the second group one of them said: “We should move aside, we will get up one by one and move left. At bench we will count ourselves to see whether we’re all here. Don’t leave anything on the grass. Therefore, take all of your things and go to the bench…” In the third group one of them said: “It seems it’s going to rain. We’d better take shelter in a little tavern over there, and it’d be lovely to have a cup of coffee”. Isn’t it obvious that the third approach is the best one. This approach is based on a vision, an essential component of great leadership. Leaders create effective visions, attractive images of future and strategy, logical roads of realizing visions. Managers based on leader’s creations create plans, specific steps aiming at implementing strategy and budget, plans converted in financial expressions, and aims. A good vision has three purposes:

·        Enlightening roads of changes.

·        Motivating people to take action in a desired direction.

·        Helping in coordinating action of various people, sometimes thousand and thousand of them, very quickly and efficiently.


Communicating vision of changes is the fourth phase. Failure in the first three phases of changes often creates problems in this phase. When urgency is not high the people will not listen about a new vision. When a leading coalition is not the right group of people they will have problem in creation and sending certain messages. If the very vision is not initiating, if it is too detailed or too general, in short, if a vision is bad, it will not be “sold” easily. However, if the first three phases have been greatly done, the leaders often “fall” in this phase. Communicating vision of changes is incredibly demanding job. The key elements of effective vision communicating are:

·        Simplicity of speech.

·        Using metaphors, analogies and examples.

·        Abundance of forms: big gatherings and small meetings, formal and informal encounters, newspapers and speeches of executives.

·        Repeating, repeating, repeating.

·        Leadership by example: behavior of top people must be consistent with new vision.

·        Explaining visible deficiencies (new mahogany furniture is not necessary).

·        Two-way communication.


Training collaborators for extensive actions is the fifth phase of this process. The barriers in training workers, the process in which they get chance and possibility to free their work, are:

·        STRUCTURES: formal structures of organization make them unable to act.

·        SKILLS: a lack of necessary skills mines actions.

·        SYSTEMS: information systems and systems of labor relations make the process of changes impossible.

·        SUPERVISION: the executives discourage actions directed towards their implementation.


In the above cases the employees understand visions and want to make them real, but they are in a “closed box”. To avoid this, leaders should:

·        Communicate sensible vision with employees.

·        Make structures compatible with a vision.

·        Enable training necessary for the employees.

·        Adjust information and personal system with visions.

·        Confront with executives undermining necessary changes.


Generating short-running victories is the sixth phase. The impact of short-running goals, and victory based on them, on business transformation is great, which many examples taken from the practice show. The transformation is not a process exclusively relaying on leadership but a good management is also crucial. It is necessary to balance of these activities, while the realization of short-running goals is a measurement of a good management success. The short-running goals give the necessary feeling of security to people that the results of changes come, that they are planned in a long-term process of changes. The role of short-running goals would be:

·        Providing proofs that sacrificing is useful.

·        Awarding agents of changes with intensified credibility.

·        Fine adjusting of visions and strategies.

·        Undercutting cynics and those resisting changes.

·        Uniting leader’s teams because there are evidences that the transformation is on a good road.

·        Creating momentum: the neutral ones become supporters, while the supporters become active bearers of changes.


Consolidating gains and producing further changes is the seventh phase. Irrational and political resistance to changes never completely ceases. Whenever the job is given up before completely done, the critical momentum is lost and followed by the regression. This is directly linked with increased interdependence of all parts of an organization creating dynamic environment changes. This interdependence makes it difficult to change anything if all is not changed. And this is a crucial truth: the changes of interdependent systems are extremely difficult, because they require almost all to be changed. The effect in practice means that more changes will take place than it could be imagined at the beginning. This phase will be successful and the great changes will take place along with the following moves:

·        More changes and not less changes: the leading coalition, based on the achieved credibility on the basis of short-running victories, will take over additional and greater projects of changes.

·        More assistance: promote active bearers of changes, bring additional people if you need their expert knowledge.

·        Top level leadership: a top level is focused on visions; it communicates visions and explains them. It maintains the level of urgency constantly high.

·        Project management and lower level leadership: a lower level in hierarchy ensures leadership for specific projects and manages these projects.

·        Reducing necessary interdependence: makes changes easier, the managers discover the unnecessary interdependence and eliminate it.


Anchoring new approach in the culture is eighth and the last phase of this process. The culture comprises behavioral standards and common values of a group of people. The behavioral standards are the usual manner of acting adopted by a group and they are resistant because the members of the group try to behave in a way they are used to and try to teach new members of the group these standards, awarding those adopting them and punishing those who don’t. The common values are important interests and goals of most of the people in the group and they tend to be constant in time even when the group members change. The cultural changes come last, while anchoring changes in the culture has a powerful effect, because the culture is powerful out of the following reasons:

·        Because the individuals are chosen and indoctrinated so easily, and effectively,

·        Because the culture runs through actions of hundreds and thousands of people.

·        Because all this happens without much awareness on what is going on and therefore it is difficult to resist this, sometimes even to discuss.


The changes will be a part of culture if they:

·        COME THE LAST NOT THE FIRST: this is the end of transformational process.

·        DEPEND ON RESULTS: new approach will be a part of culture only if it is crystal clear that they are superior with relation to old methods.

·        REQUIRE A LOT OF TALKING: without verbal instruction and support, people often refuse to accept new practice.

·        MAY REQUIRE A TURNAROUND: sometimes the only way of changing culture is in changing the key people.

·        NEW DECISIONS ARE MADE CONSECUTIVELY: if the process of promotion within the organization is not changed in order to be compatible with new culture, the old culture will survive.


A research[60] analyzed 377 of the Fortune 500 companies that underwent dynamic fall of activities because of external factors such as recession and instability of economic branches.


The author of this research, Darell Rigby, explains that every cycle has three phases but also, which is more important, two approaches, the conventional approach and the new one, the so-called counter approach, the approach appropriate to the leadership philosophy and high performance organization behavior in network talent model:











False conviction that a company/industry is safe from changes.


Diversifying in hope that the gains in other activities will cover major activities.

Building culture which is ready for all surprises.




By focusing on major activity, we play on victory, there where we’re the strongest.





Reducing expenses as if tomorrow does not exists.




In the budge for acquisition written is 0$.

Treating partners as a friendly army stuck in the same trench together with us.



“Loose a valet” if that helps major activity.




Quickly forget that the times have been bad and urgently return to the old way of living

Don’t start all engines: start slowly and prepare yourself for higher growth rate


Figure 27: Two approaches to changes in an environment

(Source: Rigby Darell, Moving Upward in a Downturn,


 Harvard Business School Press, USA, 2002, pg. 5)


The picture of the organization of the future is[61]:

1.    Consistent sense of urgency.

2.    Team work on the top-level.

3.    People creating and communicating visions.

4.    Broad training.

5.    Delegating management for short-term performances.

6.    Without unnecessary interdependencies.

7.    Adaptable corporate cultures.


The best for all of us is to start to learn how to cope with changes, develop all leader’s potential we have and assist our organization to start the transformation process. The sooner we do that the better it will be. The leaders who want to develop themselves, learn, be bearers of changes – these people are led by the sense that what they do is good for themselves, their family and their organization. The people who make changes to “catch” the future are much happier than the people caught by shadow of the past. We need as much as possible the people of changes. They are leaders of the 21st century.



6. Examples of Successful HPO Model Implementation


6.1. Johnsonville Sausage


In 1980 the long-standing successful family firm JOHNSONVILLE SAUSAGE made a turnaround towards an HPO[62]. Till then the firm grew 20% yearly, the profit was above average for the industry, sales were excellent, and quality was high. They were a respected firm and they made a lot of money. However the owner felt nausea, because of competition and environment. The firm was too big to be a local manufacturer, and too small to be a national one. The most important was that the owner Ralph Stayer  felt gap between the potential and performances. Until then he had opinion that the workers could not be dedicated to the firm as he was, given that he was the owner. And indeed they weren’t.


Then the changes began to take place, starting from the Owner. He asked himself what the objectives of the company actually were and understood that he alone could not give an answer to than question. When he imagined a company selling the most expensive sausages in the industry and having the greatest share on market, he did not see the company in which where he alone made decisions, but an organization where all workers undertook the responsibility for their work, products and for the company as a whole. He saw the organization as a flying flock of geese.


Firstly, a survey on workers’ viewpoints towards related to their jobs and the company.  The results were average. The Owner began to look for excuses, but he soon realized that the methodology was not to be blamed for the fact that the workers did not feel anything towards the company. He understood that the organization is like a herd of buffaloes following blindly their leader, namely Owner. He summoned the manager’s team and said: “As of today you will make decisions by yourselves.” After two years of such work the Owner understood that his managers could not meet new requirements. He sacked them all. Afterwards he understood that he himself did not want them to make decisions by themselves but the decisions he would like them to make. Also, in these two years while making a new organization they started from a detailed plans and procedures, which should show in detail who was responsible for what. The plans were logical, but simply did not give any effects. Briefly, a catastrophe.


The Owner understood that he had to be an instructor[63], to learn the art of training, which essentially means communicating visions and training people to understand own behavior, own frustrations and own problems. He asked the workers:” What is your greatest problem?” and got an answer: “We don’t like to work on weekends!” Then he told them: “Let’s make a chance out of the problem, it is not important when but how much you work.” And they did it, they alone. The machine idling of 40% was by better organization of workers reduced to 10%. They did not work on weekends by the results were better. The people began to self-manage, but the Owner still managed the system and structure. This would be the next to change.


Firstly, the quality control system was introduced, the key system of business success and competitive advantage. The people were not encouraged to produce high performance sausages, because the quality was the responsibility of a separate division and high executives. The owner learned the following: the first strategic decision he had to make was who should make decisions. The first line of workers was told: “Since now you are responsible for sausage quality and you alone are to make the quality system control you want to have.” They did it and the results were surprisingly good. The team collected information, identified problems, worked with suppliers and other line workers on developing and implementing solutions, even visited retail facilities to learn what problems or remarks the salesmen and consumers had. The percentage of sausages of unsatisfactory quality in the process of production fell from 5% to 0.5%. The workers’ teams began every morning to carry out product organoleptic testing and search for solutions for possible improvement. They asked for information on expenditures and on opinions of consumers, so the information system was redesigned to allow such data. In time, the people asked for more and more obligations. They asked information on labor costs, efficiency and income. They were furnished with the information and were solving them. Every morning they made ever greater progress and found deeper and more complex problems. Soon they undertook obligation to manage all performances, including also managing of performances of each individual worker separately. The results were a dramatic change for better. They said that selecting and training workers caused bad performances. They took over selecting – employing and dismissing – and training for themselves. The next change was in the system of wages. The old system rewarded continuity in the company, the new rewarded performances. The fixed profit percentage was additionally established and called “share based on performances”, which was divided amongst the workers by themselves every six months. The Owner stopped eating sausages at morning meetings and visually they all knew that they alone were responsible for all related to them.



Figure 28: Company’s Mission

(Source: Pickering John W., Brokaw Gerald S., BUILDING HIGH-PERFORMANCE ORGANIZATIONS FOR THE TWENTY-FIRST CENTURY, Charlottesville, VA, USA:Commonwealth Center For High Performance Organization Inc.(Unpublished Participant Text) 2003, SM-47)


The change in structure was almost automatic. The teams undertook the jobs of the right-line managers and then of top-level managers. The teams made decisions on budget, capital investments, sequence of obligations, standards, tasks, performances… The traditional Personnel Department was replaced with a Training and Personnel Development Team. Today, 65% of people in Johnsonville are included in some kind of formal education. Everything is learnt – from accounting, engineering and marketing to Italian cooking and kite gliding. Learning is a change, should be unceasing, the continuity in learning is necessary. The life is an inspiration. Helping people to free all their potentials is morally a very good thing, and great for business. The Owner said to leaders’ team; “Talk to me as to consultant and call me whenever you need me”. One morning the Owner found a message by a leaders’ team on his table:”I need you at 8:15 hrs”. At first he was angry… and then he was aware that he succeeded.


The “pay off”[64] came in five years, when Johnsonville was offered a big contract for which the Owner did not believe the company could fulfill. In the old system he would refuse it immediately, but in the new system he presented it to all workers. All teams started to communicate mutually and in two-week time the workers decided – the contract was accepted. They decided to employ and train new workers, raise efficiency and effectiveness and work seven days a week.


The sale, quality and profit were far greater that one could expect in 1980. The people were aware that their greatest enemy was the success in the past and learned that a change is the right deal of any effective business because the change related to today and the future was not related to the past. No end for changes.


6.2. Charleston Naval Shipyard


The American Naval Shipyard in Charleston[65] existed already 100 years when in March 1991 Captain Tom Porter (now Admiral) took over command. In the work until that moment the orientation towards the Shipyard’s buyers was choose two. Choose two meant that the Shipyard could deliver a quality product by either faster delivery or lower costs, but not all three simultaneously. In 1991 the Navy decided to implement in all three shipyards the business strategy more oriented to buyers: project management (PM), and simultaneously the advanced industrial management (AIM). Porter was assigned to do the following:

1.    Reduce number of workers from 8,000 to 6,500.

2.    Implement PM/AIM.


Porter restructured his assignment through three processes of changes by:

1.    Creating high performance organization.

2.    Implementing the PM/AIM.

3.    Improving relationship between workers and managers.



Figure 29: Company’s vision



In January 1992 a three-day HPO seminar and fife-day workshop for improving team skills commenced. The first training commenced with the top team of the organization. Leader’s teams were also formed at all levels and the training commenced. In April the education and leadership development began. Also, the new PM/AIM approach was implemented. The core of this approach was that the team members building vessels were responsible for all aspects: quality, delivery speed, relations with buyers, and budget. The first two PM/AIM teams, which created the HPO, were responsible for building two nuclear submarines. The first one that was built was completed with 35% lower costs than standard of other shipyards and they saved 9 million dollars to Navy.  The total of 22 other vessels/projects were built when the Shipyard was awarded the price of the Ministry for their exceptional contribution to the growth of national defence at high money savings of taxpayers. Immediately after his arrival, Porter, first alone and then along with the assistance of other managers, initiated intensive talks with trade unions. In May 1992, the tension that appeared at the beginning of the process because of redundancy totally disappeared, and all groups agreed that they had built consensus on future relationship and actions.


Figure 30: Company’s values



The HPO model applied in the Shipyard, explained in preceding Chapter, emerged on the basic postulate of the author of the model according to which the most important for managers is a clear and concise concept of the model synthesizing comprehensive theoretical knowledge on building high performance organization, with diagnostic tools which may have a practical application in understanding their own organizations. The HPO model has contributed to the shipyard to realize 3+ approach:

·        Superior products and/or services,

·        Focus on delivering high values for consumers, and

·        Good financial performances.


In April 1996 the Shipyard was closed. The reason for closing was the change in national navy strategy – reducing building of new vessels from 600 to 340 vessels yearly. Which of the shipyards were going to be closed was not decided on the basis of their performances and results but on the basis of territorial distribution defined according to the changed global strategy.


The lessons to be learnt from this case are:

1.    The first and most important lesson is that establishing an HPO does not grant automatic survival.

2.    The second lesson is that training is only a tool in the process of changes, it neither causes them nor may be their substitute.

3.    The third lesson is that a mechanism of changes is in leaders’ teams created on the basis of the job nature. The team success in achieving an HPO was in the ability of a leader to base his work in, for us already known, K2 leadership square. The contribution of external consultants was also important.

4.    The fourth lesson is that improvement of relationships between workers and managers is of crucial importance.

5.    The fifth lesson is the importance of awarding system change.

6.    The sixth and final lesson: experience from Charleston confirmed that the program of changes focused on organizational strategies, structures and system, and without previously defined high performances, leadership approach and articulation vision and values, have marginal value.


6.3. Local Government HPO


The results of researches show that some leaders, because of the situation in an economic branch and because of environment, while leading their firms incline to the non-democratic styles of rule. In their case this may be justified because it is temporary due to momentary situation in the branch, and latest until the company becomes endangered due to the changes in the environment. However, in the policy of a democratic country, although some researches would show that all leaders do not have democratic type of rule, particularly in traditional societies, it could be said that this might never be justified. The democracy is the best existing type of rule and it must be practiced at all levels of power, at the local level as well. Its effectiveness has been proven so far.


Just like the HPO model of an economic organization, the HPO of a government is also based on values and visions, but in this case the values are given beforehand – and these are democratic values. The local community political and administrative logic must be taken into consideration in the HPO of local authorities. All actors of public services based on democratic principle of power should choose the set of their jobs on the following political values:

1.    REPRESENTATION. The elected body is a chosen representative of citizens. Therefore, the citizens’ will must be represented through the actions of the body.

2.    EFFECTIVENESS. The citizens expect to be governed wisely and reasonably.  Such relation must be felt through the results of public services and companies’ work – their work and outputs must be highly effective.

3.    INDIVIDUAL RIGHTS. A citizen must strongly feel that the authorities in communication with him, or through decision-making, are not violating his constitutional rights and freedoms.

4.    SOCIAL EQUALITY. The citizens are often addressed to as a certain social group, and not as an individual. All groups of citizens must have equal treatment by local authorities.


A vision of local authorities of high performance must be tightly linked with the communal strategies. If the leadership philosophy is adopted at all levels in an organization, as well as at the level of teams and each individual separately, we come to the model of the local authorities or local government HPO. I would like to emphasize that it is crucial for the model to be funded on democratic values.



Figure 31: Local government High performance organization

(Source: Roberts Deborah D., DELIVERING ON DEMOCRACY: HIGH PERFORMANCE GOVERNMENT FOR VIRGINIA, “University of Virginia NEWS LETTER”, Vol 71, No.6, USA, 1995, pg.9)


The duality of power at local levels is usual in all democratic countries: legislative (or political) and executive power. It is also the case in our system, along with all changes in legislation. More stable and effective democracies strengthen the executive power and leave it to professionals. The art of dealing with public services at this level has been since long ago studied as profession at foreign universities. However, it this case there is a gap in knowledge and, most likely, in skills between the professional and political power, namely appointed and elected power in our political system of local self-governance, shown in figure 32:



Figure 32: Appointed and elected persons in the local authorities HPO (Source: Senior  Executive Institute, University of Virginia, 2003, participants materials)


For the elected body to be a high performance body it should necessarily move from its political convictions (politics) towards the guidelines of acting (policy). The elected body needs assistance from professionals to be able to accept long-running visions. Without that, this form of rule is vulnerable. When the final picture of desired state is shaped, by maintaining constant creative tension between the momentary reality and desired goal, all will be on the road of accomplishing high performance.  This leadership concept “all hands together” is realized in three phases:

1.                Forming strong working linkage.

2.                Building collective image of the community future.

3.                Developing principles moving visions.

4.                Choosing effective operative guidelines.

5.                Including citizens in the process.


The work process is to commence as soon as the “dust settles” after the elections. The focus should be on a vision, on the desired future status. The democratic values are the base.  The difference in motives should be understood, the politicians are interested in being elected again, and the professionals in keeping their jobs. “Building” politicians along with unselfish participation of all the appointed persons and professionals, the full participation in work will be achieved because all of them will work in the same goal, fully sustaining their motives. Firstly, a link between the work and assignments is to be established, respecting the fact that the development strategy framework is a job of politicians, and after that the citizens have to be included. It is important to make visions acceptable by the citizens. Obviously, the well-known thesis on necessity of both leader’s and the manager’s work is repeated here. The leadership concept “all hands together” allows stable and positive development of the community in the future.


The local authorities and every power have since long ago been called public services. Unless the holders of power do not accept their role in the power only as a common job, but make use of it to serve high ideals of democracy, freedom and equality in the same way as they would serve interests of their co-citizens, acquaintances and friends, their mission will be remembered as a good and successful one.







1. Philosophy of Leadership


Firs of all, it is necessary to underline the necessary change of paradigm in the philosophy of leadership. The new philosophy is required because of the new convictions of individuals and organizations related to the nature of people and their relation towards the jobs, primary source of motivation, distribution of knowledge and creativity in an organization based on decision making and related to designing and assigning tasks. An organization has to change its culture from an “industrial model” with typical autocratic leadership towards a “network talent model” with participative, democratic leadership. Thus, the questions to be answered are:

1.      What does an organization, a system within the organization, believe (with relation to people) THE NATURE OF PEOPLE AND THEIR RELATION TOWARDS THE JOB is?

2.      What do we believe the PRIMARY SOURCE OF MOTIVATION of most people is?

3.      What is the relation towards the DISTRIBUTION OF KNOWLEDGE AND CREATIVITY and, therefore, HOW THE DECISIONS ARE MADE?

4.      What do we believe the JOB NATURE is?


As for the nature of people and their relation towards the job, the autocrat leadership philosophy is based on a presumption that people like to work, that they are not ambitious and they do not want to be responsible. The coercion and control are necessary in order to perform a job. The new philosophy is based on an presumption that the work is primeval man’s need, that people want to be a part of something important and on equal footing. Self-control is more effective than external control.


As for primary source of motivation, the old philosophy is based on Maslow’s lower levels of needs and Hertzberg’s hygienic factors respectively. The democratic leadership philosophy sees the motivation sources in Maslow’s high levels of needs and in Hertzberg’s motivators respectively.


The distribution of knowledge and creativity, namely decision making, in industrial model are based on the philosophy that knowledge and creativity are concentrated mainly on the top of organization, that the top-level managers are experts and they know the best which decisions are to be made, without consulting  lower levels in the organization. In the network talent model the knowledge and creativity are widely distributed through the organization, those closest to people holding functions know the best how they see them and how they improve them, while consulting is necessary to reach the best decisions.


Related to the job nature, the old philosophy is based on presumption that the job is best done if divided into simplified tasks, where management is obliged to unite them. The work is what an individual does by alone, the award is based on competition between the workers. The new philosophy is based on presumption that the job has surpassed the individual and the network of educated and stimulated collaborators is required for the task to be performed. The award is based on cooperative team performances.


The research of motivation in the HPO model is based on works of Maslow[66], Hertzberg[67] and Emery[68]. These authors have recognized two kinds of employee’s motivation factors:

·           MOTIVATORS: factors related to business satisfaction and motivations, and

·          HYGIENIC FACTORS: appropriate level of these factors may prevent dissatisfaction, but they alone are not “motivators”.


Maslow is known by studying motives and needs they satisfy.

The motivators for Maslow are:

·          Development (self-actualization)

·          Respect (Ego-status)

while hygienic factor for Maslow are:

·          Belonging,

·          Security,

·          Basic survival.


Hertzberg has studied goals and goal stimulation. The motivators for Hertzberg are:

·          Interesting and demanding jobs,

·          Responsibility,

·          Achievement,

·          Recognizing,

·          Professional growth,

·          Promotion  to higher levels,

while hygienic factors for him are:

·          Wages and allowances,

·          Feeling of security,

·          Interpersonal relations,

·          Status,

·          Working conditions,

·          Quality of control,

·          Organizational policy and fair administration.


The Emery’s field of study is a job design. The job motivators according Emery are the following:

·          Diversity and challenges,

·          Decision making,

·          Feedback and learning,

·          Mutual support and respect,

·          Feeling of comprehensiveness,

·          Possibility of growth,

while hygienic factors are:

·          Honest and adequate salary,

·          Job security,

·          Allowances,

·          Security,

·          Health,

·          Process of recognizing.

The most important authors whose works are the basis for designing HPO model in the leadership philosophy are McGregor[69] , Block[70], and Likert[71].


The theory X and theory Y by McGregor have been the basis for the development of behavioral science. He alone has believed that the Y model is appropriate for most of the people.


According to the X theory:

·          Work is for most people mostly unpleasant.

·          Many people are not ambitious, have little desire for responsibility and want to be directed.

·          Many people have little competencies for solving organizational problems.

·          The motivation is based on physical needs and need for security (according Maslov).

·          Many people must be directly controlled and must often be under coercion in order to accomplish organization’s objectives.


According to the Y theory:

·          Work is a natural game, if the conditions are favorable.

·          Self-control is often necessary in achieving organizational objectives.

·          Competency for solving organizational problems is widely represented in population.

·          Motivation is based on social needs, self-respect and self-actualization just like it is based on physical needs and need for security.

·          The people are not to be managed. They may be creative if adequately motivated.


It is obvious that the HPO model and democratic network talent organization are based on the Y theory.


Block dealt with the so-called cycles and his studies has brought about bureaucratic and entrepreneurial cycle. They are in opposite poles. The Block’s entrepreneurial cycle has coincided with the democratic leadership philosophy:


à           each person has authority; individuals are responsible for their actions and for organization’s success; the management is focused on the purpose of organization and helps in creating culture,

à           self-expressing is necessary to free human energy, passion and motivation,

à           vision and values are the basis for responsible actions of individuals,

à           people are loyal to the organization because they want, and not because they have to.


à           success is defined as giving contribution, working something important, being helpful to the colleagues and customers, integrity is of primary, while awards are of secondary importance.


à           communication is direct and honest; information and control are divided; people have feeling of belonging.

·          AUTONOMY:

à           we feel that our existence is in our hands; we undertake responsibility for our situation and for the future.


The block’s bureaucratic cycle is related to the authoritative organization, formally and strictly worn out and inflexible in terms of hierarchy:


à           subordination to higher authority; the top-level knows better; the management is autocratic, control is centralized; hierarchy

à           impossibility of self-expressing; be careful,

à           sacrificing for the benefit of unknown award in the future,

à           anticipated disloyalty towards the contract.


à        success is defined as gaining personal benefit – advancement, authority, benefit and “corporate jewellery”.


à        autocratic cultures and personal ambition support selfish, careful and indirect behavior; manipulative; based on control of people.

·        DEPENCENCE:

à        we feel that our existence is in hands of others; our situation depends on decisions of others and their relation towards us.


However, the best theoretical and practical value is found in Likert’s organizational system having four basic and one “gemischt” systems which may even not be called a system:








Figure 33: Table of Likert’s organizational systems

(Source: Pickering John W. Brokaw Gerald S., BUILDING HIGH-PERFORMANCE ORGANIZATIONS FOR THE TWENTY-FIRST CENTURY, Charlottesville, VA, USA: Commonwealth Center for High Performance Organizations Inc. (Unpublished Participants Text), 2003, III-9)


The zero system is called a system because it contains mixture of everything: one element operates at the level of consultative organization (say communicates), while the other is based on authoritative organization system (say the team work). In such cases we have the “sickest” organization.


In the first, exploitative system, the philosophy is based on the following: people are seen as being lazy and selfish, while the policy of the organization is exploiting. The people are motivated with fear to loose a job or salary. Knowledge, competencies and creativity are concentrated in hands of top-level managers. The work is strictly controlled, every 6-8 workers have supervisor, every 6 – 8 supervisors have a manager, hierarchy is highly explicit. The relation between the manager and workers is similar to the one of slaveholder and slave, a worker is not important for existence of the organization.


In the other, voluntary autocratic system, the philosophy is based on the following: the people are seen similarly as in the first system, however, the policy is not exploiting. The people are motivated, besides the fear and salary, also by their status in the organization. This organization usually has a lot of advancing levels and a lot of high-sounding titles. The knowledge, competency and creativity are still concentrated on the top-level, however, confidence in knowledge of some technical collaborators is shown. The work is broken into a number of assignments, with a manager being obliged to ignore them. The relation between a manager and a worker is similar to the boss and servant relation, namely is based on distrust.[72]


In the third, consultative system, the philosophy is based on the following: people are desirable, even needed for good jobs to run. Well dressed, they will accomplish their assignments well and without external control. When the “hygiene” factors are met the motivation derives from the job – high demands, growth, acknowledgement and contribution. The knowledge, competencies and creativity are widely represented in the organization, the management has no answer to all questions, so that consultation is a standard for decision making. The work is considered as a complex process, and the management is responsible for creating organization’s culture. The relation between managers and workers is the relation of an adult towards another adult.[73]


In the fourth, participative system, the philosophy is based on the following: people have status as in the third system. When “hygiene” factors are met the motivation derives from jobs – demand, growth, acknowledgement and contribution. The people are considered as being broadly trained and creative, so the job of a manager is transferred into assignments of a team, which naturally has the leader’s and manager’s role. The work is considered as being complex, the teams are responsible for technical, manager’s and leader’s performances. The relation between manager and worker is the relation between an adult towards another adult, while the job of leader is training and equalizing.


The practical value of this model is in that the upper systems are the basis for examining organization - in which system it actually is. The less consultative organization should represent a benchmark for the HPO organization, and it is desirable for it to gradually get changed in order to adopt philosophy and standards of a participative organization. Based on leader’s assessment it is estimated to which system the organization belongs, or, if the answers are dispersed in various systems, then such organization belongs to the zero system, which could not be called an organized system but a mixture of everything. The zero system is convincingly the system with lowest performances. Also, leaders answer to the question in which organization they would like to work, by which their competency to lead participative or consultative system is tested. It should be mentioned that the fourth system is still rare in the very United States. Besides assessment by leaders, the assessment by collaborators is also carried out – assessment of the existing and desired system.


The leadership philosophy is a guidepost for the nature of people, their motivation, distribution of knowledge, creativity, and responsibility. It should be a guideline in leading an organization. In the philosophy of HPO leadership the new thing is that it is based on full empowerment and alignment of all in an organization. It contributes to wipe out the hierarchic levels in an organization and to new motivation of employees.  By considering an organization as something common to all in it, the full potential of its team members is released and leadership adopted by all collaborators in the organization.



2. Leadership Functions


The leadership functions are focused on “leadership job”, NAMELY ON WHAT A LEADER ACTUALLY DOES. The leadership necessary for the HPO model is the leadership represented at all levels in an organization, each worker must contribute to leadership functions for an organization to be successful. The function of a leader is to find in each job the right answers per the following items:







Strategic consumer’s value analysis should give answer to the following question:

1.    Who are and who should be our buyers and consumers?

2.    What do they appraise (want/need/expect) now and what will they appraise in future?

3.    Who are our competitors and how do they affect us?

4.    What is happening in the environment and how this can affect us?


The linkage of vision and values with the strategy, structure and system should enable awareness of the following answers:

1.    What are the high performances for us, which are the higher moral values we serve and what is for us the desired future of the organization’s higher levels?

2.    Are visions and common values for a business unit defined and applied, are they harmonized with visions and values of organization’s higher levels?

3.    Strategic thinking: does the interaction between the mission/niche analysis and “business theory” result in strategic plan and are the operational plans based on it which result in increase of performances elaborated?

4.    Do the values of business unit/organization allow the values (leadership philosophy, individual values, operative system values) to be action values (focused on the necessary and forbidden behavior) in order to be incorporated in the business culture?


Integrating Super-systems and stewardship relation understand the following:

1.      Tighter linking of organizational parts into togetherness to allow the realization of a vision.

2.      Stewardship role is required from an individual, to serve togetherness. One should act as a “host of a whole” and not as an “owner of a part”.


Knowledge, opinion, change and renewal represent:

1.    Personal learning, renewal, growth and change; demanding and using personal feedback.

2.    Be on the “edge” of new knowledge both personally and organizationally, build up the organization of learning.

3.    Using the best experiences from the practice, continual improvement.


Empowering and aligning are rather crucial words in philosophy but also in leadership functioning. But one should be careful and know that if an incompetent person is empowered, then bad decisions will be made faster.


There are four levels of knowledge and a leader should reach the last one for his knowledge to become distinctive. Although according to our system (and according the adopted Chinese system respectively) the highest degree of learning is I know that I know, such relation is not applied in this model. A leader is a “spoiler”, always throwing system out of its axes and setting new direction and discovering new possibilities. To succeed in this, he must be a complete person, however in such way that his knowledge and experience determine the direction:




Figure 34: Four knowledge levels

(Source: Ibid., IV-22)


Leader’s functions – enable, empower, encourage – for a leader means to:

1.    Be a teacher and mentor, the bureaucratic behavior has to be cut off in its root.

2.    Ensure necessary knowledge, skills and information for making good decisions.

3.    Be provocative.

4.    Remove barriers for empowering collaborators.


To answer why the leader’s functions in many organizations are not performed, we will use the well-known time control matrix:



Figure 35: KII – HPO leader’s job square

(Source: Ibid., IV-32)


Therefore, an HPO leader should “spend” most of his time working in the KII square, the square in which important jobs but less urgent ones are performed such as defining vision and values draft, so important for a high performance organization.



3. Leadership Forms


Transiting form the organization of problem solving of autocratic style, led by a group of several individuals, to the organization of participative style, leading by a team, takes place at each level of organizational mechanism. In the HPO model this is defined as a leadership form.


The activities include building collective leadership mentality, presupposing responsibility for merging organizational units in a whole, as well as creating “parallel organizational structures” where the strategic reasoning and leader’s job may be performed rather than in hierarchically founded organization.

For leadership form we ask ourselves the following question:

·        Does a unit/organization have an organizational “mechanism of changes” to ensure that the Knowledge/Opinion/Change/Renewal appear at all levels (parallel organization)?

·        Does a unit/organization have a good balance between the “reasoning” and “behavior” at all of its levels?


The goal is to change a form, to move towards building parallel organization, which will be more appropriate to the present-day conditions of changes in an environment. We have already been acquainted with the desired form of parallel organization, and that is a network talent model. 


In designing an HPO we first deal with a procedure of how we can, out of initial system of organization according to Likert, come to the effective last participative system S4. Organizations in the initial authoritative systems S1 and S2 have strong and stratified organizational pyramid. The relation between the superiors and subordinates is identical to the relation between parents and children. Personal interests prevail over collective ones. The executives deal mostly with urgent jobs (squares KI and KIII in the time control matrix). The HPO tends to be in the system S4, to be an organization with leader’s teams at all levels.


A leader’s team is defined as a team of collaborators gathered together because of a permanent or temporary job within an organization, and all team members have equal rights and responsibilities. Each team member is as valuable as any other member. Equal importance of all in the team and their “being” in leader square KII still does not exclude a hierarchy. The hierarchy is the first and only then empowering and alignment. The leader team has an assignment to use potential of all team members to the maximum.


Forming HPO may be a long-lasting procedure. It is important to know that systems may not be jumped over and then to proceed to the last one immediately. In order to reach system S4 it is important to be (and probably for a long time) in the system S3. It should be always kept in mind that S4 is the final aim, and when we have such approach we can say that we are in the system S3+.



Figure 36: Hierarchic and Parallel Organization

(Source: Ibid., V-7)


Therefore, teams are gradually formed, which are indoctrinated with leadership and which, still insisting on the management philosophy, become S3 – the consulting teams. Visions and adopted values, along with new effectiveness, which a team accomplishes, condition the transition of the team from S3 into S3+ form. This form is excellent, because it is necessary for all teams to reach this form so that afterwards the whole organization would come into S4 – the organizing form and participative phase.


The indoctrination with leadership should start from the top level, because the first leader’s team required for creating HPO is a managing leader’s team:



Figure 37: Management Leader’s Team 

(Source: Ibid., V-8)


After establishing an effective leader’s team on top level, it is necessary to form teams for particular projects, out of workers at various levels in the organization who have special expert knowledge, by taking into consideration psychological type of a person. The project management based on mission niche is a suggested approach.


Instructions as how to behave within the parallel organization are:

·        The “normal” hierarchic organization rules are abolished, all team members are equal in a parallel organization, the decisions rare made by consensus.

·        The focus is on achieving the best solution for the team as a whole, the team members have to be dedicated to the organizational visions and values.

·        All get “promotion”, each team member has to “promote” himself for two levels, in order to have a sense of entirety, the sense of associate owner of the organization.

·        The regenerating culture is critical: relationships based on confidence, honesty and respect.

·        Confidentiality – is often necessary, because of an open atmosphere, a rule should be established according to which out of team only decisions will be made public, and not what someone said.

·        There is no retaliation because of decisions made, but because of non-observance of rules of the team itself.

·        Mandatory observance of these rules is obligation of each team member, just as performing working process is.


Therefore, we observe the project team form. In an HPO, it emerges out of the employees from various hierarchical levels of the old organization.



Figure 38: Project leader’s team

(Source: Ibid., V-9)


In a team of parallel organization the decisions are made by consensus. It proved to be the best manner of decision making in a democratic organization. The consensus is reached when all team members:

·        feel that they have been listened to;

·        believe that the discussion has been open and honest;

·        are convinced that they have faced with and discussed all important options and information;

·        personally feel that they are “in possession” of the decision, as if they alone have made it and then they will actively support it.


Finally, we come to the final form S3+, which will in certain time “slide” into the final form of leader’s organization S4.



Figure 39: Leader’ teams at all levels on the HPO

(Source: Ibid, V–10)



4. HPO Leaders


The best way to obtain an answer about an HPO leader would be by doing researches on leaders of effective companies. One of such five-year researches has been published.[74]  But, let’s first give data on a sample: out of 1,435 companies from the Fortune 500 in the period 1965-1995, by using the process of selection, it was found that there were companies which had index of growth at least three times greater than the New York Stock Exchange average, and they maintained it for at least 15 years. Such companies are called great companies. They had to be good companies that had rate of growth of shares at least 1.25 times greater than the Stock Exchange rate. They had to be the companies already existing and not the newly established ones, while their success should have not stemmed out of the economic branch success. The final number of such companies was 11, with an average growth of 6.9 times greater than the average growth of American economy. A dollar invested in these companies in 1965 after 30 years was worth 471 dollars, while investing in general markets would have rejected 56 dollars. In the paper they were compared with good companies of similar size and age, in the same branch and with similar products and services.  Also, a group of unstable companies was introduced having some similarities but which had a distinctive peak in growth and fell fast, with the cycle that lasted less than 10 years. It is important to notice that with great companies the criterion was to further maintain the growth of shares at the time of researches.








Circuit City



Fannie Mae

Great Western






Scott Paper






Betlehem Steel


Philip Moris



Pitney Bowes






Wels Fargo




Figure 40: The companies taken from “GOOD TO GREAT” research

(Source: Collins Jim, GOOD TO GREAT, Harper Business, USA 2001, pg.8)


The greatest shock for researchers was that all 11 great companies had CEO leaders which were of the “same kind”[75]. The leaders leading great companies are called the level 5 leader.






Figure 41: Level 5 leader and other levels

(Source: Ibid, pg.20)


Level 1 includes individual competency, level 2 the team work skills, level 3 a competent manager, level 4 a traditional leader. Level 5 contains all from the preceding levels along with an “extra dimension”: paradoxical mixture of personal modesty and professional will. A level 5 leader directs his ego further from himself setting as his higher goal the creation of a great company. This does not mean that he is not ambitious, he is actually very ambitious, however, his ambitions are directed towards the institutions and not towards his own self.  An interesting dual character of personality is reflected with them: modest, but willful, humble, but fearless. They as a rule do not speak about themselves but about the organization. The researches show that they as a rule come “out of home” contrary to the leaders of the compared and vanished companies. The compared companies have engaged six times more outsiders for the CEO than HPO have done. Also, compared to them a level 5 leader appoints his successor at quite early stage and trains him for a successor. They will stoically and uncompromisingly do all that is necessary for the existence and growth of their organization. They are fanatically infected with producing results. When they speak about their success they say that they have been lucky. When they speak about failures they blame only themselves. Level 4 leaders do the very opposite, for their failures they blame bad luck, while they ascribe a success to their credit. I would like to notice once again that level 5 leader is not an ideological guideline, but an empirical fact.


After publishing the book, Collins has gathered a great base of level 5 leaders from all spheres of society. He has concluded[76] that in human population there are much more of such leaders than of egocentric ones who are more represented in media. Our culture and media like leaders who are greater-than-life, and those quiet, modest and effective ones.  The problem is not in shortage of the level five leaders. They are actually everywhere around us. The dynamic changes expected in this century will condition our attention towards them so that economy and society could successfully cope with changes, because they are the key to overcoming them effectively. The task of society will be to identify, cultivate and develop them.


Effectiveness of a level five leader in the 21st century will be founded on the following assumptions:[77]

1.    Leaders should define the inside and outside of an organization according to firm organizational values and visions and not according to traditional limits and restrains. They must keep values in order to stimulate progress.

2.    Leaders should build mechanisms of bonds and obligations based on freedom of choice, and not rely on systems of coercion and control.  Democratic values and democratic system of an organization appear as inevitability of making choice.

3.    Leaders should accept the fact that the right leadership is in reverse proportion with leadership based on power. The right leaders of the 21st century are only those whom people follow when they are free to do that.

4.    Leaders should encompass the reality in the whole of its complexity. All barriers that have existed so far must no longer exist for leaders of the 21st century; all barriers should become archaic.


Effective leaders:[78]

·        Define mission of an organization as a framework for performing activities.

·        Create flexible environment in which people are not only esteemed but also encouraged to achieve their full potential, where everyone is treated equally.

·        Shape corporate culture in order to replace conformity, obedience and mechanical behavior with creativity, autonomous and continual learning.

·        Transform organizational forms from a rigid pyramid towards the fluid circle, towards the developed network of autonomous units.

·        Encourage innovating, experimenting and risk taking.

·        Anticipate the future by reading the present.

·        Make new bonds within organizations and new connections within collaborating teams.

·        Establish new alliances outside their organizations.

·        Constantly study organizational forms of both their own organizations and those in the environment.

·        Identify weak links and replace them.

·        Think globally rather than nationally or locally.

·        Identify and respond to new and unforeseeable needs of collaborators.

·        They are proactive, not reactive, and comfortable towards ambiguity and uncertainty.


The present-day leaders are a basis for democratic development of today, in which the power is distributed and not concentrated. The first leader, a level 5 leader, will succeed in responding to changes of this century.  It is crucial that he accepts the human nature as such and to respond to it. The emotional intelligence has for the first time been developed in this direction.



5. Good is enemy of great


We will proceed in explaining the “Good to great company”[79] concept. We have already shown that a particular type of leadership and leaders is required for a company to become great.  This is a LEVEL 5 LEADER. A level 5 leader is major but not the only component of a great company. Other components are in what a level 5 leader does, and this will be shown hereinafter.


FIRST WHO … THEN WHAT. Also, the (non-)importance of plans in great companies has unexpectedly been discovered. Researchers have expected that the first step towards the road to a great company is in establishing new directions and strategies for the company, and only then, based on them, the people would be lead. However, they have discovered a completely different thing. Great companies first start by engaging the right people and then by making plans. If one starts with “who” rather than with “what”, then adapting to changes will be easier. If the right people are employed, the problem of motivation and management becomes easier. There is no great company with wrong people. The old syntagm that the people are the most important value of a company is not valid in great companies. The right people are the greatest value. On the road leading to changes, if the company is imagined as a bus, it will take the right people on the bus, and throw out the wrong ones and then place the right people into the right seats. Great companies will assign to the best people the jobs with greatest chances, and the jobs burdened with greatest problems. Leaders of great companies are rigorous, but not merciless. The compared companies had much more dismissals then the common ones. The manner of work in the compared companies is a “genius with thousands assistants”. In them only a head man is of crucial importance while all the others are consumer goods.


Figure 42: “Good to great” concept

(Source: Ibid, pg.12)


FACING BRUTAL FACTS. For great companies the data are more important than desires.  Great companies constantly compare their high performances with brutal facts form the environment. The level 4 charismatic leaders often cannot stand the picture from the environment not coinciding with their view on own successfulness. And indeed, the charisma is rather a shortcoming than necessary component of successful leadership. The climate in great companies is such that the truth is always heard. Faced with brutal facts, the great companies never loose faith. This is a so-called Stockdale paradox. Stockdale is an admiral in the American Army and was the top rank officer captured by Vietnamese in the Vietnam War. He was confined for 8 years under very severe conditions.  His behavior was brave and inspired other captives. After being released he was one of the most decorated American officers. His story is well known saying that the first to give up hopes in prison were optimists – those who expected that they would be released soon or during some of the holidays.  On the other hand, the pessimists were none better either. Based on this, an effective model of survival is made: keep faith that you will withstand until the end whatever the difficulties are, AND AT THE SAME TIME face all brutal facts of reality, whichever they are. This is the Stockdale paradox. In great companies the leaders say that the most effective collaborators are those who have been war prisoners.


THE HEDGEHOG CONCEPT. It is a well-know fable in which a cunning fox tries in many ways to eat a hedgehog. The hedgehog defends himself always in the same manner – he has his spines and the fox can’t do him any harm. 


Figure 43: The Hedgehog  Concept

(Source: Ibid., pg.96)


The concept of a hedgehog is a simple concepts deriving from crystal clear understanding of the following three circles:

1.    In what matters can you be the best in the world (and, equally important, in what you can’t)? The aim is not to be the best or a strategy how to be the best, it is awareness in what matters one could be the best. The great companies will change their major activities uncompromisingly if they understand that in some other activity they can be better than in those they are in.

2.    What starts your economic engines? The great companies have spectacular results in very non-spectacular industries. The central point is that every great company understands what is crucial in its economic development and builds a system based on this understanding.  As a rule, this is only one denominator, because it better illustrates the essence than a group of dominators. With great companies this may be: profit per employee, profit per buyer, profit per visit of a buyer, profit per local population, profit per level of risk, profit per brand, and profit per geographical region.

3.    What is your deepest passion? The great companies, contrary to the compared ones, are not in business only to make money. This is for them in second place. For them it is much more important to like their business, to feel tremendous passion towards it.


This process of uniting three circles into one is not fast. It has to run for a long time. In the researched companies it has ran for 4 years. The compared companies are rather like foxes. They commence many deals and they do them by storm.


CULTURE OF DISCIPLINE.  Great companies have discipline culture. This is not a tyranny. This is an organization with high level of discipline and high level of entrepreneurship simultaneously. The discipline culture is not stemming out of a system but people. The culture in great companies is based on freedom and democracy, while insisting on the right people and crystallizing hedgehog concept will enable the people to be managers to themselves. With disciplined people the hierarchy is not required, the “red tape” is not required, extensive control is not required. With unstable companies the success has also been based on discipline. Actually, on the discipline of a tyrant the growth would be spectacular, and after the tyrant would leave, the discipline would quickly be lost and the fall would be dramatic. Great companies make a list of jobs they will not perform, make budget items they will by no means finance. All this based on the hedgehop concept, however attractive it may appear, will neither be done nor financed.


TECHNOLOGICAL ACCELERATOR. Great companies think in a different way about the role of technology. They never take technology as a prime motive of transformation. On the other hand, they are pioneers in applying carefully chosen new technologies. If new technology could be used according to hedgehog concept it will be used immediately, and if not, it will not be even noticed.  Great companies use technology as an accelerator of development, they are not a creator of development. Effectiveness and high performances of great companies are merit of a level 5 leader. Average results of the compared companies have derived from failures of their managers, and because of errors of technologies. An effective approach of great companies is “crawl, walk, run”, even in times of rapid and radical technological changes. 80% of the interviewed level 5 leaders have not placed technology among the first 5 factors of success. However, great companies are, when compared to other companies, in many ways pioneers of new technologies.


FLYWHEEL. Although outsiders often think that a change of a company from good to great is a miraculous moment, this does not coincide with the reality. For those inside reaching high performances represents a conditioned development process. They are often not even aware of how good their results are. By building and rounding a concept the circle closes and this circle starts to revolve. Once, twice … five hundred times. The compared companies actually like revolutions and dramatic programs of changes. Such approach does not provide results and as a rule fails. Great companies have no names for their transformations. Many of the level 5 leaders have claimed that they have not been aware of great transformations until they have turned back. For great companies there is a simple truth: great power lies in the possibility of continual improving and realizing results.  The difference in managers and acquisitions may be noticed between the compared and great companies as well. The compared companies often want to make a great move forward by purchasing other enterprise or merging with it. This usually does not work. Great companies first make a move forward, and then enter in purchasing or merging with others. They use managers and acquisition as a flywheel.


General conclusions by Collins and Porras are that good is the greatest enemy of great. This is a major reason why so little of good becomes great. We should not be satisfied with good, we should strive towards great.


Another Collins’s[80] research is dedicated to the visionary companies, namely companies which are:

·        institutions in their industries,

·        widely known and recognized by respectful businessmen,

·        have left a visible mark in the world we live in,

·        have had several generations of leaders,

·        have gone trough several production life cycles (or cycle of services),

·        have been established before 1950.


They are compared with the companies of similar character, similar period of establishment, but of somewhat worse performances. The visionary companies may be said to be golden medal holders, while the compared companies the silver medallists. The choice of visionary companies is the result of a poll carried out amongst the 700 most important business leaders in the USA. The elaborated concept is called “built to last”:






American Express

Wells Fargo


McDonell Douglas


Chase Manhattan



General Electric



Texas Instruments




Bristol-Mayers Squibb


Howard Johnson







Philip Morris

RJR Nabisco

Procter & Gamble






Walt Disney



Figure 44: Companies from the “BUILT TO LAST’ research

(Source: Collins Porras Jerry I., BUILT TO LAST: HABITS OF VISIONARY COMPANIES, Harper Business, USA, 2002, pg.3)


The first to be noticed is a negative correlation between a charismatic leader and building visionary company. The greatest creation of a visionary company is the company itself. Visionary companies have freed themselves from the “tyranny of OR and work according to the principle “ingenious AND”. They are able to encompass differences in many dimensions simultaneously. They do not choose between changes OR stability, they have changes AND stability. Profitability is a condition for long-lasting existence of a company but it is not a key to its existence. The key to existence is keeping higher values of reasons because of which a company exists during the course of time. A basic ideology of a visionary company is composed of basic values and visions or purposes of existence. The ideology of the Disney Company is, for instance: BRINGING HAPPINESS TO MILLIONS OF CHILDREN. One of the leaders of a visionary company has emphasized that an organization has to accept changes of ever changing environment, has to be ready to change all except for its major convictions moving it forward, that the only organization’s “sacred cow” is a basic philosophy of business running. That’s how visionary companies operate: keep essence / stimulate progress.  There are five categories of specific methods for preserving essence and stimulating progress:

1.      BIG HAIRY AUDACIOUS GOAL (abbreviated: BHAG). This is actually surrendering to challenging, audacious and often risky goals and projects through which visionary companies direct their efforts and stimulate progress. The BHAG has to be a goal, has to be outside comfortable zone, has to be isolated for employees, has to be consistent with the ideology of a company and must not be lonely, but has to be continued with other BHAG as well.

2.      CULTURE OF CULT: Visionary companies are great places to work in for those employees fitting in the major ideology. Those who do not fit in it are rejected as a virus, in order to preserve values. Visionary companies are not soft, on the contrary, they have standards, they are elitist, and they often have their own language, which may sound unfamiliar to those outside the elite. Workers fitting in the ideology are the workers who may be entrusted with a high operative autonomy.

3.      TRY MANY THINGS AND KEEP THOSE GOOD ONES: As a rule, in visionary companies the best moves forward are not the fruit of the detailed strategic planning, but rather of experimenting, trials and errors and sometimes even of an accidental case. High level of actions and experiments produces new unexpected progress roads. This is evolutionary progress stimulator, while the BHAG is revolutionary one. 

4.      INSIDE MANAGEMENT: Visionary companies promote from the inside; only people who have spent considerable amount of time in a company climb to top level positions. In such way a company maintains is values.  In 700 years of a combined history of visionary companies there have been only four cases where general directors have come outside the company. In the compared companies, 22.1% of general directors have been outsiders. 

5.      GOOD IS NOT ENOUGH: Visionary companies are in a continual self-improvement process aiming to be better and better both today and in the future. They stimulate the process by setting top standards to themselves. The right question the visionary companies ask is whether this is appropriate for us, and not whether this is good for us.


The essence of visionary companies is not in the existence of written visions and values, because the compared companies also have this, but in transforming essential ideology, along with eagerness for progress, into concrete assignments in an organization: goals, strategies, tactics, behavior, payment system, bookkeeping – in everything a company does. All that company does is to be aligned with basic values.


Figure 45: Concept “built to last”

(Source: Ibid., pg. 88)


The researches on the long-lasting have been carried out prior to the researches on greatness. However, Collins is of opinion that the good to great concept precedes the built to last concept. The first concept produces the high performance results, while the second concept shows how the high performance results become long lasting. For a great company to become long-lasting one it should take over the built to last concept and strive towards great, towards the best. It is not more difficult to build something great than to build something good.



6. Personal Leadership


Seven habits of highly effective people[81] is a standard for training potential leaders in the USA. The first one is also a basic training because it is focused on building leader’s personality.



Figure 46: Seven habits of highly effective people


Simon & Shuster, USA, pg.53)


Our character is basically composed of habits. A habit is defined as a set of knowledge, skills and wishes. Out of 7 habits those first ones are directed towards building effective personality while the rest towards building effective social relations.


Habit No.1: BE PROACTIVE. This is a personal vision principle.  The only vision we have about ourselves is coming from the so-called social mirror, namely from the people around us, and our image may often be deformed. Often, our response to some stimuli may be such that we cannot comprehend it later. There is a well-known story about Victor Frankl, a prisoner of the Nazi death camp. Frankl was a psychoanalyst belonging to the Freud’s school and was suffering in the camp just like all others. One day, standing in front of a gas chamber, he was thinking how his lectures to students would be after the War. Soon, he alone could decide how things that affected him would really affect him. Frankl projected himself into other circumstances and suddenly he had much more freedom than even his jailers did who, like others, admired him. Frankl survived and his future works were based on a postulate, not at all close to Freud’s one, according to which a man had freedom to choose between a stimulus and response. This is a proactive model. The freedom of choice should be based on our conscience, free will, imagination and self-confidence. A proactive man takes initiative. The proactive approach may even be felt in everyday speech of such man. What a proactive man does is spreading his proactive focus based on positive energy. A man’s circle of influence is generally smaller than the circle of anxieties. Proactive people expand their circle of independence, namely what they actively control, thus reducing the circle of anxieties, namely activities over which they don’t have direct control.


Habit No.2: BEGIN WITH THE END IN MIND. This is a personal leadership principle. The exercise explaining this habit is the following: imagine that several decades have passed from the present moment and imagine being amongst known people, but in an unknown place. Now imagine that you are at your own funeral. Four people describe what kind of person you have been, one of them representing family, the second friends, the third colleagues and the fourth representing neighbours. Could you say what would each of them say? Could you say what would you like them to say? The point is in that you always have in mind the very goal and vision that you would like to realize regardless of difficulties you come across. This principle is based on a presumption that all things are created twice: first creation is mental - in head, and the other one is physical - in life. Covey suggests that everyone should write his own Constitution which will be his own vision, his mission and guiding principle. In order to achieve this, one should look deeply into himself, into a center of his circle of influence and find basic principles there. Principles are like a compass showing your present direction. The one who in the center finds: himself, his spouse, family, money, work, property, satisfaction, friendship, hostility, or church, he is wrong, he is not a man based on principles. For such visualization to be possible, a man must be able to use the whole brain, especially its right side.


Habit number 3: PUT FIRST THINGS FIRST. This is personal management principle. The first habit says you are a creator, you are responsible for yourself. The second habit is a mental response of our proactivity, based on imagination and consciences. Third habit is physical creation, personal fruit, practical fulfillment of the first habit. In this habit the know time matrix is learnt and K2 quadrant is explained, already explained. In order to become K2 self-manager, Covey suggests the following activities:

1.      The first assignment is to define key roles, such as for example: personal role, role of parent, as of spouse, of a member of some society or association.

2.      The next step is to set goals for each of these roles, namely important results we wish to accomplish.

3.      Third step is making schedule of obligations to be fulfilled to unite these roles and goals.

4.      Daily adapting of obligations: daily planning on weekly base is suggested. While planning one should see which of the obligations may be delegated as well.


To proceed with habits which will bring us public victory, the interdependence paradigm is to be explained first.  From the first three habits a man has moved from the state of dependence into the state of independence. However, a man is not a wolf, he is not a lonely individual. He is in society and he must, out of these relation and dependence, also realize a progress. Emotional intelligence and emotional approach are the key of such relations.


Habit number 4: THINK WIN-WIN. This is interpersonal leadership principle. The author of this book has been asked by a manager to help him in his work with people. He has told him that they are selfish and not willing to work in a team. Covey has gone to the meeting. The manager has opened the meeting and asked: “why don’t you work in a team, if we work in a team we will have much more money”. He has told Covey that the present consultant would show him how he has stimulated team work. Then he has taken out a poster showing racing horses on a start line. Photographs of each collaborator separately have been attached to horse’s heads and on the goal a photograph of Bermudas glued. The manager has actually not understood that he has not awarded the team work but a success of one and the failure of other collaborators. The habit of an effective interpersonal leadership is to think victory/victory. This is not a technique, but philosophy. In fact, this is a philosophy victory/victory or otherwise there is no contract. This is a belief that there is an alternative, which is neither my way nor your way. This is better way, more effective way. Other paradigms are: victory/defeat, defeat/victory, defeat/defeat, and only victory. When it is not possible to reach an agreement from which all benefit, then it is better to withdraw with honor and proceed to the option that there is no contract. A high degree of deference and courage is required to come to the level victory/victory and, if it is based on principles, it is fundamentally important for a success in life.


Habit number 5: SEEK FIRST TO UNDERSTAND, THEN TO BE UNDERSTOOD. This is empathic communication principle.  Empathic listening is the essence of understanding feelings of another being. When we listen to the others it is not important only to listen but it is important also to feel. Even a physician does not give a prescription before he makes a diagnosis. People often link their feelings to objects, and while speaking, they speak about objects and not feelings. In order to understand this, there are 4 development phases of “drawing” feeling out of the real context of an interlocutor’s works:

1.    Repeating context.

2.    Paraphrasing context.

3.    Reflecting feelings.

4.    Paraphrasing context and reflecting feelings.


When you understand the interlocutor … then he has to understand you. This is critical for the victory/victory solution. It is suggested that in the business world you should always have an effective presentation. Its preparation must always precede its performance. The more time you spend in preparing your exposition or presentation, the better chances you have in being understood. My experience as a leader tells me that many problems are soluble only and exclusively by improving communication.


Habit number 6: SYNERGIZE. This is a creative cooperation principle. When Winston Churchill promised to the British the blood, sweat and tears in the war with Nazis, many thought that these words came into his mind in that moment. Churchill said later that he felt as if he prepared himself for that moment the whole of his life. Practicing all the above mentioned habits prepares us for such habit. Synergy is the highest activity in life – a real test and manifestation of all other habits taken together. By a complete joining of habits together new alternatives are created – results may be miraculous, something that has never existed before can be created. Synergy is vital in communication. The synergic communication is a real communication based on the victory/victory postulate. It is the result of high level of confidence and cooperation. The medium level of communication is respected communication, based on compromise, and the lowest level is defensive communication, based on defeat/victory or victory/defeat communication.  Synergy is 1+1=3, and maybe even 500. The result of a compromise is ½, the defensive result approaches to 0 or is pure 0. Synergic communication awakes creativity and points at new alternatives. Let’s imagine two colleagues in an office, one wants to open a window while the other objects. Synergic communication would be the knowledge that one wants to open the window because he lacks fresh air, while the other objects claiming the wind would take his papers from his study. The possible results are to open the door, open the window in a side room and put something heavy on papers, or anything else. The essence of synergy is evaluating risk, actually evaluating mental, emotional and psychological differences between people.


Habit number 7: SHARPEN THE SAW. This is balanced self-renewal. If we sharpen the saw we shall cut woods easier. If we renew ourselves the life will be easier. There are 4 renewal phases:

1.    PHYSICAL, based on exercising, nutrition, and managing stress.

2.    SPIRITUAL, based on searching for deeper inner goals, meditation, bonds with nature.

3.    MENTAL, based on reading, writing, planning and thinking.

4.    SOCIAL/EMOTIONAL, based on serving, empathy, synergy, and inner security.


Practicing Covey’s 7 habits is a basis of each effective leader and each effective man. When combined, they enable us to feel great power in our own selves.



7. Elasticity


We have seen that the two esteemed scientists, Collins and Covey, have mostly found their inspiration for leadership in survived war prisoners such as professor Frankl and Admiral Stockdale. An article from the HBR[82] gives the right picture of what is the essence of these two men and what should effective leaders have. And that is elasticity.


The characteristics of elasticity are:

1.    Capacity of facing and accepting reality.

2.    Ability of discovering the essence in certain aspects of life.

3.    Possibility of improvising.


The elasticity is necessary both to leaders and high performance organizations. When we are aware of reality we get ready to respond in such way as to survive. Searching for the essence means discovering values that are basis of our existence. Improvising is an art of solving problems. The elasticity is one of the most important topics in business circles today. More than education, more than experience, more than training, the elasticity level is a determinant of who succeeds and who doesn’t. This is true in a fight with a cancer, this is true on Olympic Games, and this is true in an office.  Elastic people have ability to construct their future out of their today activities.


The Morgan Stanley is a well-known investment bank. It was the greatest premises lease-holder in the New York World Trade Center, demolished in the terrorist attack on 11th September 2001. The Company had 2,700 workers in the southern tower on 22 floors, between 43rd and 74th floor. The first airplane hit the northern tower in 8:46 hrs, and in 8:47 hrs, the Morgan Stanley commenced evacuation. 15 minutes later, when the second airplane hit their tower, their premises were completely empty. The airplane hit directly in the Bank premises…


In 1993 there was the first terrorist attack on the WTC and the Bank management, which showed such elasticity 8 years later, were aware that they work in a symbolic center of American power and that it is vulnerable to terrorist attacks. They started to develop a program of readiness to terrorist attacks, for which the elastic vice-president Rick Reskorla, highly decorated Vietnamese veteran, was responsible. By exercising military discipline, he ensured that people would be trained to cope with a catastrophe. He managed to make the Morgan Stanley ready for the gravest reality. And not only the employees but technology and data as well. The data saving system was made on several locations and all data were saved.


On 11th September the Bank lost only 7 men out of 2,700 workers. Rick Reskorla was one of them.



8. How to become a great leader?


We have got familiar with the leader’s basis model[83], derived from the researches of 25,000 leaders. Zinger and Folkman found that the following makes a basis, foundation of a leader:







The main conclusion of the researches is that the leadership paradigm is wrongly presented. We don’t need a wide range of programs and mass teaching of leaders, but what we need are great leaders. We don’t need to develop leadership, but to produce great leaders. Great leaders make great difference.



Figure 47: Leaders effectiveness and consumer’s satisfaction 

(Source: Zenger John H. et al., THE EXTRAORDINARY LEADER:


McGraw-Hill Trade, USA, 2002, pg. 36)


It is interesting to notice that the results of researches show that only great leaders make great difference. The following graph shows that upper 30% of leaders according to their successfulness have great deviation in results of researches on their successfulness. The first big jump is noticeable in the first third of the researched population. The second third of the researched “good leaders” shows that a good leader, wherever on the scale from 30 to 60% of successfulness, is estimated to have medium results. Only the last third of leaders is estimated as great leaders.



Figure 48: Leader’s effectiveness and satisfaction of collaborators

(Source: Ibid., pg.30)


One becomes a great leader when what is already powerful and strong in him is improved. There lies the essential difference between a good and a great leader: a good leader develops the competencies in which he is weak to an average level, while a great leader develops the competencies in which he is above average and brings them to perfection. The philosophy of effectiveness is in intensify competencies in which you are strong.


Figure 49: Classic approach: improving weak competencies

(Source: Ibid, pg. 30)


Classic approach in work on weaknesses is based on mediocrity and produces mediocrity. The essence of this approach is in improving competencies in which a leader is below average.


Figure 50: Modern approach: improving strong competencies

(Source: Ibid, pg. 138)


Modern approach is based on superiority and it is essentially oriented to building effective leaders.


Another data obtained from researches provide us interesting information on relation between the strong competencies and effectiveness of leaders, based on assessment of their collaborators.



Figure 51: Dramatic rising of effectiveness

by increasing strong competencies

(Source: Ibid., pg.147)


As evident, already one competency in which we are strong increases our effectiveness to even 64%. Only 3 competencies in which we are strong give us assessment of effectiveness of over 80%. There are 4 explanations why the competencies are linked:

1.    Strength in one competency creates powerful “halo effect”.

2.    In the development process of any competency an individual develops also other, linked skills.

3.    Self-confidence of an individual is raised when any competency or skill produces success. The success in the development of one competency raises confidence in trying to develop others as well.

4.    The level of aspiration grows when people succeed in one dimension. This encourages them to set new goals at higher level and new ever more demanding assignments.


It’s interesting to mention that the combination of interpersonal skill and focusing on results is the best one considering that 66% of great leaders possess these competencies taken together.


It should be mentioned that the approach of improving superior competencies is not valid in case when a leader possesses a fatal shortcoming. Extremely low score in one competency represents a fatal shortcoming and if people who have it improve their results in this competency, and their collaborators will assess that the total score of the assessed individual has dramatically increased.



Figure 52: Fatal flaws

(Source: Ibid., pg. 159)


There are five fatal flaws granting failure in leadership:

1.    Lack of ability to learn from mistakes.

2.    Lack of interpersonal skills and competencies.

2.1.        Cold, rude, arrogant, and egocentric executive

2.2.        Lack of basic social values and good manners

3.    Lack of openness to new and different ideas.

4.    Lack of responsibility for (un)achieved results.

5.    Lack of initiative.


By observing these five behavioral frameworks the following facts have been crystallized:

1.    All fatal shortcomings are extremely evident, everyone near leaders feels impact of such behavior.

2.    Every fatal shortcoming is primarily an inability to do something. These are not ineffective actions but ineffectiveness deriving from non-acting. 

3.    All fatal shortcomings are rooted not only in not having intellectual but not having emotional intelligence.


Eliminating these shortcomings in their core provides increasing emotional intelligence of an individual. Technically, a correct and comprehensive feedback should be organized and its results used.


A great leader emerges from someone who, having natural gifts, and on the basis of practice, learning and experience, develops his gifts to perfection. Other knowledge deriving from this research is[84]:

1.                When compared with good leaders, the great leaders make great difference.

2.                An organization may have many good leaders.

3.                Goal is too low in development of leadership competencies.

4.                The relation between the improved leadership and raised performances does exist, and is stronger than the linear one.

5.                A great leader has several “basic blocks” of leader foundation.

6.                Leadership is crucial and critical element in success in changes.

7.                Not all components are equal. Some distinguish good leaders from great leaders, while others don’t.

8.                Leader’s competencies are tightly linked.

9.                Effective leaders have different personal styles; there is no one right leadership manner.

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