We discussed in the preceding sections the concepts and definitions of purpose and its power and impact on organizational performance. This section will offer some principles for leaders who want to cultivate and activate their purpose. I am assuming if purpose and values provide the compass, principles give leaders a set of directions. We understand that to be a purposeful leader or purposeful company is not easy, even companies and leaders who recognize power of purpose have a hard time getting on board with purpose. They may not have the right mindset or the necessary resources at their disposable. There are many reasons why companies fail to truly close the purpose gap or activate purpose. For example, many leaders make the mistake of treating purpose just like any other plan to win talent and customers, or like making money or marketing program, etc. (Izzo & Vanderwielen, 2018) have come up with the best practices for avoiding purpose pitfalls:
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Purpose must be authentic and cannot be viewed as another short-term business strategy or way to garner customer attention;
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Shift the dialogue from profit to purpose;
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Align your brand’s core competencies with your social platform by making a clear, authentic purpose statement;
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Be willing to update your purpose and vision with the changing times, keeping in mind the expectations of tomorrow’s generation as well as today’s.
Now the most difficult part might be the application of the best practices in reality if leaders do not change their ideology and mentality, transform fixed mind-set to growth mindset. Laozi ascribed failure in cultivating the Tao or purpose to different mindsets. He describes them in TTC, Chapter 41:
Those who have high wisdom hear of the Tao, they diligently practice it;
Those who have low wisdom hear of the Tao, they doubt it and
Those who have no wisdom hear of the Tao, they laugh loudly at it.
If we interpret the passage in our modern business language, it is easy to understand. Laozi described three types of people or leaders with three different mindsets: growth mindset, mixed mindset and fixed mindset. Those who have growth mindset believe that abilities can be developed. They have high wisdom and perseverance, and never give up even in the face of struggle. They take negative feedback and apply it to their own work the next time they do a task. Therefore, they are positive to activate and practice purpose in organization; those who have mixed mindset have low wisdom and low perseverance, and try hard until they face a struggle. They need a strategy before they can overcome the obstacle on perseverance. They are inspired to do better by feedback, but they need to consider the source in order to take it seriously. Therefore, they are in hesitation and unable to bring purpose statement to life. Those who have fixed mindset have no wisdom, and believe that abilities are fixed. They do not persevere and give up after the littlest inconvenience and they feel intimidated by negative feedback and do not apply the corrections. Therefore, they are negative and unwilling to develop purpose in organization.
Developing a purposeful organization and purpose-driven leadership requires transformation in mindset from fixed, mixed to growth mindset. Wisdom of Laozi offers us principles, which can guide and transform leaders’ mindset. In this section, I will walk you through that the text of Tao Te Ching to identify the five principles of Taoism for effective leadership. The principles of Taoism have been tested in the fires of real life, with real people. These essential leadership principles encourage true growth and real change. I start with self-awareness (mindful leadership); self-cultivation (authentic leadership), leading with humility and willpower (level-5 leadership); transcending ego (servant leadership), and doing the right thing right (effective leadership). The five principles are logically integrated and interacted with each other. Self-awareness is at the center of a purpose-driven leader’s compass, and the foundation of authenticity. To develop your self-awareness, you must cultivate yourself with virtue, the power of Tao. Self-cultivation is a path to be authentic and achieve the ultimate purpose of life. Humility is the heart of a leader, and is a quality of certain types of leaders. A sense of humility is essential because it authenticates a person’s humanity. John Buchan, a Scottish novelist, historian says, “Without humility there can be no humanity”. Mahatma Gandhi says that attempting to sustain truth without humility is doomed to become a “arrogant caricature” of truth. Humility is a trait that can enhance leadership effectiveness. Humility is one of the core virtues of Taoism for a wise leader to cultivate. When you cultivate your humility and transcend your ego, you have the power to serve others. However, to be an effective and sustainable leader requires the principle of “doing the right things right”. This is the pathway for purpose-driven leaders to achieve a sustainable business.
Self-awareness: Mindful leadership
The history reveals that nearly all individuals who achieve high levels of personal and professional success have a keen sense of self-awareness. A purpose-driven leader must start with self-awareness. Leading others begins by first leading yourself, and measuring yourself before you measure others. Peter Drucker agrees that we cannot manage others unless we learn to manage ourselves (P. F. Drucker & Wartzman, 2010). Once you discover the purpose of your leadership, you will find the true leader inside you. Self-awareness is the foundation of authenticity, and thus it is at the center of a purpose-driven leader’s compass. You develop it by exploring your life story and then understanding the meaning of your crucibles. As you do this, you need to understand who you are at a deeper level. This is hard work but an essential step in your development as a leader. A foundation of self-awareness leads to self-acceptance and ultimately self-actualization so that you can fulfill your greatest potential (George, 2015).
In our modern society, much attention is devoted to promoting self-awareness: “finding ourselves”, “knowing who we truly are”. Many traditions, including certain schools of Western psychology, regard this discovery and acceptance of self as central to personal well-being, an important step on the path of individual transformation. It is also the belief of certain social thinkers and activists that, without a high degree of individual self-awareness and responsibility, it will remain impossible to resolve the many social and environmental problems currently facing mankind.
What guidelines does Taoism offer in this area? How can we manifest our virtue, know our true selves in a manner that connects us with the rest of our world? Laozi demands Taoist leaders to not only know themselves, but also transcend themselves. Because he claims in TTC, Chapter 33 that:
Those who know others are smart,
Those who know themselves are wise.
Those who transcend others have strength,
Those who transcend themselves have inner power.
Laozi advises a wise leader to take the time to get to know yourself and find your passion. Look inside, to find your power, your purpose. If you find and go with this flow, you will make a difference in our world and you will find joy in the journey. Laozi’s wisdom on self-awareness reflects the ancient Greek aphorism “Know Thyself”: understanding your inner world, bright and dark sides, personal strengths and weaknesses. Sayings based on great wisdom, such as this one, all have one thing in common, regardless of the time and place in which they occur: they are encouragements to engage in conduct that is demanding and out of the ordinary but nevertheless offers prospects of great reward. Laozi’s teaching is a classic illustration of this point. Why did the ancient sages attach a great importance to “Know thyself”? “Know thyself” is always an immensely difficult task. There are four impediments to “Knowing thyself”, which include everyday distractions that encourage a superficial and non-analytical existence; psychological obstructions that shade our eyes from the glare of troublesome truths; hedonism, the lack of courage to face and address painful and inconvenient realities; and the distorted imagery of mass media presentation (Soupios & Mourdoukoutas 2014). Those who are courageous to know thyself must be able to:
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explore the dark side of their inner being, the frauds and deceits that nurture a counterfeit reality;
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reveal psychological deficiencies and troublesome truths;
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cast a harsh and unforgiving light at self - exonerating falsehoods, and
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commit to an agenda of spirited self-indictment - an honest self-discovery process designed to dispel self-induced frauds.
Burnison (2016) claim that anyone can have the right hands-on skills, but true leadership finesse lies in the much tougher realm of developing self-awareness to lead yourself first; navigating by a fixed point of personal and organizational purpose; journeying with others who want to follow you; and plotting a course that is beyond the line of sight of what everyone sees. To lead others, you must continually measure yourself - not overestimating your strengths, and not underestimating your weaknesses. To do so, you must be able to look humbly in the mirror. After all, self-awareness and honesty go hand in hand. Let others illuminate your blind spots as you improve yourself and, by extension, the organization.
According to Laozi, a great leader not only know himself, understand inner mind, but also should know others, understand outer world. Because self-awareness and awareness of others are the keys to happiness, to personal satisfaction, and to successful relationships. If we want to be successful and happy, we must take responsibility for our feelings, thoughts and behaviors. We must not blame others for our choices. Paradoxically, as we become more self-aware, we become less self-conscious – less worried about how we look to others and about what others think of us. This allows us to be more self-less and better able to work with, support and give to others. Self-awareness also provides us with a richer inner life and the ability to identify and focus on what really matters to us – the people we love. Only do those who know their inner mind and outer world have power and strength to transcend themselves and fulfil themselves, and become a mindful leader.
A mindful leader is simply a leader who uses mindfulness to gain deeper knowledge of himself and makes a conscious effort to use this knowledge to manage himself better, taking personal responsibility for his actions and striving to be the best leader he can be. Mindful leaders provide calm, clarity and a clear sense of direction, carefully balancing the needs of the organization with the needs and aspirations of the workforce. Mindful leaders monitor themselves to maintain a focus on present- moment reality, their impact on other people, and their reactions to stressful situations. Mindful leaders experience the reality and vividness of what is going on in any given moment, without knee-jerk reactions based on negative mind states (such as anxiety, fear or anger) responding with a calm awareness and care for themselves and others (Adams, 2016).
Hougaard et al. (2016) have created a framework for mindful leadership, which can help to explain the challenges many leaders face and how they can be overcome. The framework looks at what the cultivation of mindfulness—that is, high focus and awareness - enables for self and others and, subsequently, what that enables in terms of leadership. Impactful leadership begins with mindfulness as defined in quadrant 2 of Fig. 3. This is where they have strong focus and open awareness directed toward their own self. It enables them as individuals to be calm and clear-minded in how they think and behave. In this state, they mindfully monitor our thoughts and emotions and use our values and goals to guide our actions. This mind state is a prerequisite for everything else.
As they are developing greater self-awareness, they are simultaneously cultivating the ability to have greater empathy for others. Once they can see and understand their own struggles and challenges, we have a greater ability to recognize those in people around us. Therefore, moving from a high degree of mindfulness of self toward mindfulness of others is a natural transition. Once we have developed a high level of self-awareness, it is also very easy to move down in the framework toward effective self-leadership. This is where we have the discipline to focus on the right things and take the time to know what those right things are. Specifically, the “right things” come from tuning in with your authentic self and having a high degree of integrity in everything you do. Once we have the foundations of mindfulness of self and others as well as leadership of self, leadership of others becomes much easier. In particular, if you take these skills as the foundation and introduce strategic and tactical management tools and techniques such as defining vision and strategy and applying situational leadership you have a pretty robust framework for success. And the more you cultivate these skills in your leadership of others the greater your capacity for compassion and wisdom. All these together, in a dynamic, ongoing, ever-changing development road map, define mindful leadership.
Self-cultivation: Authentic leadership
Bill George, the former Chairman and CEO of Medtronic, the author of Authentic Leadership has done many studies on authenticity and impact on leadership over the past years. His study shows that those leaders who gained self-awareness was central to becoming authentic leaders. When you know yourself, you can find the passion that motivates you and the purpose of your leadership (George, 2015). Bill George’s approach to leadership, based on self-awareness and authenticity, is widely considered the gold standard in the field. Thus, self-awareness and authenticity are two important traits of every proven leader. That is why most of the business leaders have seen the importance of authenticity as one of core ingredients of purpose-driven leaders. Just as John Replogle, CEO of Seventh Generation claims that authenticity is everything you cannot fake purpose.
As I discussed in the preceding section, leadership purpose is rooted in your values and your authentic self. You must be true to who you really are and to the ethics, principles, and causes that are most meaningful to you. When purpose becomes personal, it becomes real and powerful. From this place, you will be able to establish a clear mission in life, focus attention on what is most important, find courage to do what is right, and, as a leader, activate purpose in others. In considering your personal purpose, you need to be honest about your deepest values and know how to leverage your unique, distinctive qualities, skills, and position to make a difference, to your people, your customers, and the world.
Most academic scholars agree that the CEO must define, and almost personify, a company’s purpose. In particular, the literature often characterizes purpose as being inextricably linked to the perceived authenticity of the CEO. Success is ascribed partly to this authenticity, along with clarity and consistency of the CEO’s communication. Many articles also flag the potential vulnerability of leaders if they are perceived as not living up to their avowed purpose (EY Beacon Institute 2016).
Our Chinese sage, Laozi always emphasizes the role of authenticity and integrity in life and leadership. He encourages wise leaders to embody integrity, and keep away from hypocrisy; embrace authenticity, and keep away from vanity.Footnote 4 Purpose-driven leaders are authentic leaders, who are the people with the highest integrity, and committed to building sustainable organizations. They are the leaders who have a deep sense of purpose and are true to their core values. They are also the leaders who have the courage to build their companies to meet the needs of all their stakeholders, and who recognize the importance of their service to society. Authentic leaders genuinely desire to serve others through their leadership. They are more interested in empowering the people they lead to make a difference than they are in power, money, or prestige for themselves. Authentic leaders are dedicated to developing themselves because they know that becoming a leader takes a lifetime of personal growth.
Self-cultivation is a path to develop authenticity and achieve the ultimate purpose of life, and thus occupies a central position in the philosophical Taoism. Self-cultivation empowers leaders to emanate from their deepest values and culminate in their contribution to the common good. Laozi stresses the importance of self-cultivation and its influence on team, community, organization and beyond. He says in TTC, Chapter 54:
He who cultivates himself with virtue becomes authentic.
He who influences his family with virtue harmonizes family;
He who influences his community with virtue sustains community;
He who influences his country with virtue prospers country;
He who influences the world with virtue pacifies the world.
The leaders who hold on to the great Tao can cultivate themselves and become authentic. Those who are authentic have the power to influence others, and those who are influential have the capacity of leading others. Leadership is about influence and enabling the right things to happen rather than lining up a shot and making it happen. Real power of leaders derives from influence through authentic leadership, rather than the perception of authority. Everything we do and think affects the people in our lives and their reactions in turn affect others, because we are all connected and interdependent on each other in the universe. These connections and interdependence stretch like an incredibly interwoven and complicated tapestry. Each of us exists within this tapestry. Our thoughts and actions are like a stone dropped in a pond and can create ripples that travel outward. The choices we make have far-reaching consequences. Each of us carries within us the capacity to change the world in small ways for better or worse. We can use the principles of the ripple effect to magnify our actions and their effects.
This passage also implies that if you want to be a positive and influential leader in the world, first you must get your own life in order. Ground yourself in the universal principle so that your behaviour is wholesome and effective. If you do that, you will earn trust and respect, and be a powerful influence. Your behaviour influences others through a ripple effect. Everyone influences everyone else, powerful people are powerful influences. For perspective of Laozi’s wisdom, we understand if your life works, you influence your organization; if your organization works, your organization influences the community; if your community works, your community influences the nation; if your nation works, your nation influences the world, and if your world works, the ripple effect spreads through the cosmos. Your influence begins with you and ripples outward. So be sure that your influence is both potent and wholesome.
I created the 5 waves of virtue or purpose based on Laozi’s wisdom to describe how to develop leader’s influence by applying the ripple effect, particularly combining the business practices, which were provided by other studies (Hutchinson, 2015). Figure 4 shows that the five waves of virtue. The leader’s purpose is to cultivate authenticity with virtue. The authentic leaders have the charismatic power, because the virtue is radiance that others can detect. Virtue (efficacy) will spread wherever things are arranged according to ideal structure of the Tao. This begins with the individual (self), and it extends to the family (teams in organization), the community (organization), nation (society), until it reaches the whole cosmos. Leading with influence requires a clear purpose and the ability to develop authentic connection with others. When you lead based on a genuine desire to serve, and your decisions are shaped by your core values and true respect for others, it is easy to develop authentic relationships. When relationships are grounded in mutual respect, they thrive. And when relationships thrive, so do the organizations that they serve. This mutual synergy fosters greater organizational cohesiveness and more prolific collaborations, and helps leaders to establish more robust platforms steeped in influence.
I want to further elaborate the waves of virtue and leadership influence. The first wave of virtue and influence is to lead yourself and to be authentic leader. As a leader, your actions, starting with your own state of being, affect other people and your organization. When the leader shows up with his or her strengths, values, and actions all aligned, you can feel it. Leaders who understand how to master leading themselves are more powerful and influential than those who do not. As a leader, your state of being and doing influences many different layers of your organization: personal, interpersonal, and organizational. Proactive attention to how you as a leader are showing up and taking action can enable you to make bigger, more positive impacts with others.
Second, lead others - influence each person in a genuinely positive way. As a leader, your actions, starting with your own state of being, affect how other people work on an individual level and your organization. This is not about you the leader versus a sea of followers. When the leader, already powerfully aligned with himself or herself, respects and builds an enabling relationship with each follower on an individual basis, the entire group of followers is enabled to build strong relationships with each other. As a leader, how you manage and present yourself dramatically impacts your followers, and the way you connect with each of them dramatically impacts every person in the organization. For example, imagine getting passionate about a new direction you believe your organization needs to pursue. To some people, your passion will come across as exciting and empowering. To others, it may seem dictatorial and oppressive, or even distracting and needless. While you cannot control how your passion is received, understanding how each person might react or respond to how you are showing up will enable you to build stronger relationships with each person in your business, thereby helping you achieve better results together. And this web of relationships is surrounded by resources, policies, and processes—the organization.
Third, lead the organization (in Fig. 4 it refers to family and community) - influence your systems positively. Organizations function not only through relationships but also through structural components like habits, practices, resources, measurements, rules, and processes. These structures are designed in harmony for both effectiveness (getting the right things done) and efficiency (get things done right) to get the best results possible in both the short and long term. While the influence you exert on people will cause them to do things differently within the structure, the influence you exert directly on the organizational layer changes the support structure itself and thereby affects everyone in the organization. Therefore, leaders’ actions, starting with their own state of being, affect how other people work on an individual level, and the systems in which they operate. Everyone benefits from improved results as well as from a more able and resilient organization. Your initial action starts a chain reaction that causes positive impacts to others and the organization. The benefits of this chain reaction trigger ripples through the entire organization. They add energy and enthusiasm to the people and processes that make the organization successful. This is the ripple effect in action. And with enough momentum, people outside the organization benefit as well.
The last wave - create ripples beyond your organization (including nation and the world). As a transformational leader, the ultimate outcome of your work is to create an organization that can have a lasting, positive impact on clients and customers. In turn, those people will work to make a lasting, positive impact on their clients and customers. And the stone keeps skipping…For example, imagine that you lead a non-profit like Heifer International. They raise and donate pregnant animals to people in need around the world. The recipient of a gift is then charged to pass the next offspring to another family in need, or imagine you lead a for-profit company that refines material used by other companies to make cancer-fighting drugs. Your company’s output is critical to saving people’s lives. In these pay-it-forward examples, it is easy to see how each action you take as leader - your skipping stone - goes from you to others in your organization, to the organization itself, to others creating their own product or service, and to the people who benefit from that product or service. This ripple effect continues indefinitely so long as well-intentioned leaders continue to skip stones for positive impact. While you cannot predict the future, you can influence it. With the right stones and right leadership mindset, you can create amazing ripples that travel quite far indeed.
Transcending Ego: Servant leadership
At the beginning of this section, I analyzed Laozi’s three types of leaders who embody three different mindsets. One of them is one with fixed mindset. The fixed mindset leaders preen their egos and look for the next self-image boost. They start with the belief that some people are superior. They all have the need to prove and display their superiority. They use their subordinates to feed this need, rather than fostering the development of their people. They all end by sacrificing their organizations to its need. The fixed mindset helps us to understand where gargantuan egos come from, how they operate, and why they become self-defeating (Dweck 2006). Of course, we have many leaders of growth mindset who serve a larger purpose beyond their careers and themselves. However, serving others and a noble purpose demand leaders to transcend their ego.
To be humble to serve people is one of the most core virtues that Laozi requires leaders to cultivate in their leadership. Laozi depicts in TTC, Chapter 7 and 66, the qualities of leaders who transcend ego to serve others by using the metaphor of natural phenomenon – Heaven and earth, river and sea.
Heaven is eternal and Earth everlasting.
Why Heaven and Earth exist is that they do not live for themselves, and
Thus, they can sustain themselves forever.
The sages (purpose-driven leaders)
Place themselves behind, and yet find themselves ahead;
Think nothing of themselves, and yet find themselves thrive.
Is it not because they are unselfish? Thus they achieve their purpose.
Footnote 5
Why the river and the sea become leaders of a hundred valleys
Is that they lie below them.
Thus, they are able to be leaders of a hundred valleys.
If the sages want to lead from above,
They must speak to them from below.
If they want to lead from front,
They must place themselves behind.
When the sages
Lead from above, people do not feel oppressed;
Lead from front, people do not feel obstructed.
Thus, all people are never tired of exalting them.
Because the sages contend with nobody, and
Nobody can defeat them in the world.
Footnote 6
Laozi describes two styles of ideal or purpose-driven leadership. TTC Chapter 7 is profile of altruistic leadership. It is defined as guiding others with the ultimate purpose of improving their wellness. In Laoizi’s heart, the altruistic leaders who model themselves on Heaven and Earth do not exist for themselves, they make no conscious effort for their own sake, always place their people’s interests above their own. They think of nothing but others. They free themselves from being egocentric, and are always concerned over other people’s rights and interests. As the result of their altruism, they are respected and followed by people; they end up fulfilling themselves and achieving their purpose.
Laozi in TTC Chapter 66 reveals the quality that the humble leadership shall develop. Humility is the heart of a leader. Servant-leaders have the humility, courage, and insight to admit that they can benefit from the expertise of others who have less power than them. They actively seek the ideas and unique contributions of their followers that they serve. This is how servant leaders create a culture of learning, and an atmosphere that encourages followers to become the very best they can.
Laozi offers one of the core principles for those who want to be great leaders, is that great leaders should lead from behind, not from the front. However, it does not mean that Laozi is against the way that leaders lead from the above or the front. It seems paradox, but it is wisdom of leadership. Laozi advises that those who lead from the front must be humble to what they do and say; and place people’s interests before their own. The leaders who embrace the qualities of humility and selflessness never contend with others, and claim any credits from others, but they are willing to take any risks and accountability whenever something goes wrong or in crisis. Therefore, when they lead from the above and the front, people never feel oppressed and harmful. As a result, people exalt and follow them voluntarily and cheerfully.
Nelson Mandela is a typical Taoist leader. He has aligned himself with the principles of Taoism. He said, “It is better to lead from behind and to put others in front, especially when you celebrate victory when nice things occur. You take the front line when there is danger. Then people will appreciate your leadership”. This is the exact wisdom of Laozi. In his autobiography, Mandela (1995) equated a great leader with a shepherd: “He stays behind the flock, letting the most nimble go out ahead, whereupon the others follow, not realizing that all along they are being directed from behind” (Mandela, 1995). Leading from behind does not mean abrogating your leadership responsibilities. After all, the shepherd makes sure that the flock stays together. He uses his staff to nudge and prod if the flock strays too far off course or into danger. For leaders, it is a matter of harnessing people’s collective genius. Doing so entails two primary responsibilities - and they are not easy to get right. First, leaders must ensure their organizations are willing to innovate. This is fundamentally about building community. Some leaders refer to this function as “creating a world to which people want to belong.” In these communities, people are valued for who they are and have the opportunity to contribute to something larger than themselves. These communities have a common purpose, values and rules of engagement about how people should interact and problem-solve together. A shared purpose brings the people together and makes them willing to do the hard work of innovation. Second, leaders must build the organizational capabilities necessary for engaging in the innovation process. The three essential organizational capabilities are: creative abrasion (the ability to generate ideas through intellectual discourse and debate); creative agility (the ability to test and refine ideas through quick pursuit); and creative resolution (the ability to make decisions in an integrative manner). Those who are exceptional at leading from behind are likely to be different than those who excelled at leading from the front (Hill, 2010).
Those who follow wisdom of leading from behind are servant-leaders. In the heart of Laozi, servant-leaders should be like the ones he states in TTC, Chapter 49:
Great leaders have no self-interest, but concern for other interests.
They are good to those who are good,
They are also good to those who are not good,
Then, it leads to genuine goodness.
They trust those who are trustworthy,
They also trust those who are untrustworthy,
Then, it leads to genuine trust.
Great leaders lead people by letting go of their egotism,
Care and serve people with heart and soul;
Are concerned about what they see and hear people do,
And regard people as their babies.
Laozi stresses two qualities or virtues for servant-leaders: goodness and trust or integrity. Virtue is the power, and is the power to do good; trust is a principle of power. Servant-leaders must have the power to activate goodness, build a high-trust organization, and transform the world through doing good.
Those who embrace the virtues of goodness and trust can forgo ego and self-interest, but place their mind and heart on what people think and need. They always cultivate these two important virtues in their lives. Servant-leaders are completely different from the average persons. They treat everyone equally, whoever is good or bad, trustworthy or untrustworthy. They are the magnanimous persons with the greatness of soul. When faced with choices in lives, servant-leaders tend to pursue what is most noble, and what form them in excellence and benefit others most. They strive for greatness at the heart. This is the virtue by which servant-leaders pursue what is great and honorable in their lives, even if it is difficult.
Leading with humility: Level 5 leadership
Purpose with humility is the best way that we humans can pursue a noble cause passionately without risking the perils of seeing our efforts do more harm than good. This is also the most important quality for purpose-driven leadership. When passion for a noble purpose turns into self-righteousness, we lose our capacity to learn from our mistakes or even to notice when we are making mistakes. We must always be on guard to make sure that the justifiable satisfaction that we earn with a life of purpose does not become pridefulness, which has been long been recognized, for good reason, as a deadly sin (some would say the most deadly sin). Pride harms us, harms those we are trying to help, and ultimately harms the purpose that we are trying to accomplish. The only way to avoid this constant danger is to keep a healthy perspective on ourselves (Damon, 2003).
Humility is always one of the core virtues that Taoist nurtures and cultivates in life, and most essential to sustainable leadership. Humility, in Taoism, is defined as a refusal to assert authority or a refusal to be first in anything and that the act of daring, in itself, is a refusal of wisdom and a rush to enjoin circumstances before you are ready. Along with compassion and frugality, humility is one of the three treasures (virtues) in the possession of those who follow the Tao. Laozi describes in TTC, Chapter 39 the qualities that a wise leader should embrace:
The humble is the basis of the noble
The low is the basis of the high
The ancient leaders called themselves the orphaned,
the lonely and the unworthy to show their humility.
Is this not taking the humble as the basis of the noble? Is it not so? Therefore,
The ultimate honour is no honour,
Do not seek to be shiny and glorious like jade,
But be plain and firm like stone.
Laozi offers advice to a wise leader who does not to seek to be shiny like jade, but to be plain like a stone. In other words, living a simple and humble life, like a plain and firm stone. Laozi understood humility as being in harmony with nature and the wisdom of the universe. In wisdom of Taoism, simplicity and humility were the basis of greatness.
It is clear that the qualities of a stone are ones of modern Level 5 Leadership, a new concept that was coined by Collins. The style of leadership is seen as the highest level of management development and thinking. Collins (2005) argues that the key ingredient that allows a company to become great is having a Level 5 leader: an executive in whom genuine personal humility blends with intense professional will. He describes “Level 5 Leadership” as the starting point in the process to becoming great. Level 5 leaders channel their ego needs away from themselves and into the larger goal of building a great company. It is not that Level 5 leaders who have no ego or self-interest. Indeed they are incredibly ambitious – but their ambition is first and foremost for the institution, not themselves. Level 5 leaders are fanatically driven, infected with an incurable need to produce sustained results. They are resolved to do whatever it takes to make a company great, no matter how big or hard the decisions are.
To justify his arguments, Collins explains the traits of Level 5 leadership by drawing on the theory of Yin and Yang of Taoism. Personal humility represents Yin, which demonstrates the qualities of a compelling modesty, shunning public adulation; never boastful. It acts with quiet, calm determination; relies principally on inspired standard, not inspiring charisma, to motivate. It channels ambition into the company, not the self; sets up successors for even more greatness in the next generation. It looks in the mirror, not out the window, to apportion responsibility for poor results, never blaming other people, external factors, or bad luck. Professional will is concerned with Yang. It creates superb results, a clear catalyst in the transition from good to great. It demonstrates an unwavering resolve to do whatever must be done to produce the best long-term results, no matter how difficult it is. It sets the standard of building an enduring great company; will settle for nothing else. It looks out the window, not in the mirror, to apportion credit for the success of the company – to other people, external factors, and good luck.
In addition to metaphor of stone, Laozi also used another favorite natural symbol – water - to depict humility and willpower of great leaders. The qualities of water are also the traits of Level 5 Leadership. Laozi described the qualities of humility and altruism water embodies in TTC, Chapter 8:
The highest goodness is like water
Water benefits all things without contention.
It flows and stays in places where people dislike,
Thus, water is almost like the Tao.
It identifies the right place to stay
It keeps heart and mind clear and profound
It gives with care and love
It communicates with integrity
It leads with justice
It manages well with great capability
It takes the ride at the flood
Laozi also illustrated the quality of an unwavering resolve water embraces:
Nothing in the universe is more soft and weak than water
But nothing triumphs over water in overcoming the hard and strong
Nothing substitutes for water in dissolving the hard and strong.
Footnote 7
The metaphor of water reminds us what really drives success is not “genius” but a unique combination of passion and long-term perseverance. Those who nurture and embrace the qualities of stone and water are courageous to take responsibility in a time of organizational crisis and are able to become a great leader. Those are the leaders whom Laozi wish to embrace the qualities of water:
Those who are able to bear disgrace that people suffer,
Become a leader in the country;
Those who are able to take up challenge in times of crisis that country suffers,
Become a leader in the world.
Footnote 8
Those who embrace qualities of water such as yielding but persistent humble and courageous to serve people in times of crisis, become Level 5 leaders. When people and country are facing challenges and crisis, they can stand up to protect them, and are able to be entrusted to lead them. There is nothing quite like a crisis to test our leadership. It will make or break us as a leader. Crises have brought down many leaders and their organizations with them, while other leaders have risen to the challenges to prove their mettle. What makes leading our organization through difficult situations so hard? Like being in a war, crises test us to our limits because the outcome is rarely predictable. We not only have to use all our wisdom to guide our organization through it, we must dig deep inside ourselves to find the courage to keep going forward (George, 2009). Leaders aligned with the wisdom of Taoism can be prepared to guide their organizations through severe situations because they know who they are. They have the self-awareness, self-confidence, and resilience to take responsibility for their failings and lead others through the rapidly unfolding - and often unpredictable - sequence of events. They rise to the occasion, find leadership abilities they never knew they had, and come through with shining colors. Lou Gerstner, IBM CEO, and Anne Mulcahy, CEO of Xerox are two great Taoist leaders who took up themselves in times of organizational crisis. Lou Gerstner saved IBM in the mid-1990s and Anne Mulcahy took the helm at Xerox. Inheriting companies facing bankruptcy, they showed great leadership, not just in saving their companies but restoring them to leadership in their respective fields. Darwin E. Smith, CEO of Kimberly-Clark is the typical Level 5 Leader. Smith was named as CEO when the old paper company was in great trouble in 1971, and turned it into the leading consumer paper products company in the world. Smith’s turnaround of Kimberly-Clark is one of the best examples in the twentieth century of a leader taking a company from merely good to truly great. Smith is a classic example of a Level 5 leader-an individual who blends extreme personal humility with intense professional will.
Collins’s research also found other unique qualities of Level 5 Leaders besides humility and professional will. He created the window and the mirror concept. It is a simple yet powerful concept exemplified by leaders of companies that made the Good to Great transition: Level 5 leaders, inherently humble, look out the window to apportion credit-even undue credit-to factors outside themselves. If they cannot find a specific person or event to give credit to, they credit good luck. At the same time, they look in the mirror to assign responsibility, never citing bad luck or external factors when things go poorly. Conversely, the comparison executives frequently looked out the window for factors to blame but preened in the mirror to credit themselves when things went well. The funny thing about the window-and-mirror concept is that it does not reflect reality (Collins, 2001). The “window and the mirror” model, which focuses on look out the window and give credit to those responsible for positive outcomes, and look in the mirror and take ownership of negative outcome exactly reflects the wisdom of Taoism. Laozi emphasizes it again and again in TTC. This is one of examples that Laozi describes in TTC, Chapter 34:
The Great Tao flows everywhere like water,
All things depend on it to exist, yet it does not demand for obedience.
All things depend on it to fulfil their purpose, yet it does not claim credit.
All things depend on it to nurture and grow, yet it does not possess them.
This is because it has no desire, always stays inferior.
All things submit to it, yet it does not rule over them (but serve them.), although it is superior.
The sage does not strive to be great, thus, it ends up greatness
The Taoist leader that Laozi depicts are those who are willing to help and serve others, but never take credits, and do not t dominate and control them, and therefore, they have the power of influencing others. A recent Catalyst study backs Laozi’s thought up, showing that humility is one of the critical leadership factors for creating an environment where employees from different demographic backgrounds feel included. In a survey of more than 1500 workers from Australia, China, Germany, India, Mexico, and the U.S., they found that when employees observed altruistic or selfless behaviour in their managers - a style characterized by
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acts of humility, such as learning from criticism and admitting mistakes;
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empowering followers to learn and develop;
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acts of courage, such as taking personal risks for the greater good; and
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holding employees responsible for results.
Employees who perceived altruistic behaviour from their managers also reported being more innovative, suggesting new product ideas and ways of doing work better. Moreover, they were more likely to report engaging in team citizenship behavior, going beyond the call of duty, picking up the slack for an absent colleague - all indirect effects of feeling more included in their workgroups (Prime & Salib, 2014).
Doing the right thing right: Sustainable leadership
We understand from the preceding analysis that purpose is a reason something exists or why something is done or created. To understand if something has a purpose it is beneficial to develop awareness of the correlation between the resource exchange and the perceived or expected value to be gained. Effectiveness results from the purposeful utilization of our resources. For example, the one resource that we all have available to exchange is time. However, as we all know, time is limited. We cannot get more of it. For this reason, time is our most valuable resource. From an external perspective, this may not appear to be the case. Many of us spend a great deal of our time thinking and doing things that do not have much purpose. Becoming aware of what we value and what matters in life is a great way to start thinking and acting with greater purpose. Having a clear understanding of the “why” behind our existence - our purpose - as a business or organization is an important factor of effectiveness. Laozi was aware of the close relationship between effectiveness, efficiency, impact of purpose on organizational effectiveness and resource efficiency, and the role of effective leadership in realizing the purpose over thousands of years ago. He identified three keys for effective leaders in TTC, Chapter 27: knowing your purpose (WHY), maximizing resource potential (WHAT), and investing in people’s strengths (HOW). He says:
A good passenger never leaves any tracks,
A good speaker never misspeaks,
A good accountant never resorts to devices
A good locker never needs bolts, and yet no doors are unlocked,
A good knotter never needs ropes, and yet no knots are untied.
The Laozi’s idea is whatever we do must have a purpose in our job, purpose allows us to fulfil ourselves effectively and efficiently. Laozi uses the metaphor of people who occupy different jobs to illustrate impact of purpose on performance. A good passenger’s purpose is to leave no tracks and footprint wherever he travels; a good speaker’s purpose is to make no slips whenever he speaks; a good accountant’s purpose is to make no miscalculation even when he does not use calculator; a good locker’s purpose is to keep doors unlocked even if he does not use bolts; and a good knotter’s purpose is to keep knots untied even when he does not use ropes. Laozi’s idea in this passage is more concerned with job purpose instead of job function. In our modern business philosophy, job purpose is different from job function. Job function is the set of tasks a person performs in their role, whereas job purpose is the intended outcome of the job in terms of its impact on organization, community, customers, society or environment (Izzo & Vanderwielen, 2018). Those who have high purpose in their jobs and lives work effectively and efficiently are less prone to waste of resources. As a result, whatever they do have a positive impact on environment and society. The purpose-driven or effective leaders must understand the distinction between job function and job purpose, and instill a sense of purpose in their job and act on it.
The wisdom of Taoism teaches us that being an effective leader, he must have a noble purpose, and be effective in what he does (doing the right things), and then executes efficiently what he wants to achieve (doing things right). From the perspective of Taoism, effectiveness is about efficacy of the Tao. Tao has its particular efficacy. This efficacy is named in the title of that Laozi was later given TTC or “The Classical Book of Tao (Way) and Te (Virtue)”. Te (Virtue) can also be translated as “Efficacy.” Te is the efficacy or “power” of the Tao. Te is defined as morality (to do what is right) from a social perspective, and as inner power, efficacy and integrity from an individual perspective. Efficacy is the power or capacity to produce a desired effect. The word efficacy has to do with the ability or capacity to do something, but not about how something is done. Efficacy equals effectiveness but different from efficiency. Effectiveness refers to successfully producing the expected or desired result; it is the degree to which you achieve your objectives, solve problems, and realize profits. In business, effectiveness is doing the things that get you closer to your purpose. Efficiency is performing a given task (whether important or not) in the most economical manner possible. Effectiveness is summed up by “doing the right things.” Efficiency is the accomplishment of a job with the minimum expenditure of time, effort, and cost - the shortest distance between a goal and a checkmark. In business, efficiency is summed up by “doing things right”. Being effective means being adequate to accomplish a purpose; producing the intended or expected result. Being efficient means performing or functioning in the best possible manner with the least waste of time and effort. Laozi uses the metaphor of people who achieve intended results in various jobs to illustrate how important it is for an effective leader to use effectiveness and efficiency to do the right things right, and to yield the most profitable and quickest route a leader can take to execute purpose. Laozi also claims that great leaders must have the purpose, i.e. to do good and be good. No matter whether you are a traveller, a speaker, an accountant, a blocker, and a knotter, you must have the purpose of doing the right things. You must have the strategy and efficient instruments to achieve their purposes. The efficient way for effective job in this passage are traveling without being on feet or vehicle, speaking without using any words, calculating without device, locking without bolts, and knotting without ropes. In so doing, the great positive impact can be exerted on environment and performance: no footprint and tracks left on environment, no spoken slips, no calculating mistakes, unlocked doors, and untied knots.
In Taoism’s wisdom, effectiveness (Efficacy of the Tao) is like a river, efficiency (strategy or tactics) like a boat. Effectiveness is like a rudder, and efficiency like a paddle. Boat is useless without river. There is no way to cross a river without a boat. There is no way to navigate without a rudder, and there is no way to start voyage without a paddle (to generate power). Kenichi Ohmae, the Japanese organizational theorist and management consultant says, “Rowing harder doesn’t help if the boat is headed in the wrong direction.” Peter Drucker agrees on the point and says, “There is nothing more wasteful than becoming highly efficient at doing the wrong thing.” Those who are effective but inefficient, are the victim of a frame-up, their strengths cannot be made full advantage of. Those who are efficient, but ineffective, cannot thrive. For example, if we are “efficiently ineffective”, keeping our costs down but ultimately not really providing the service our customers need. Or “inefficiently effective”, where we provide the first-class service but at champagne prices that our company cannot pay. All the thoughts and wisdom imply that it is not good enough to be efficient; you must be effective, and you must be effective first.
What does it matter to leadership? Misguided efficiency - being efficient at the expense of being effective, or being efficient at doing the wrong thing - is a common mistake among leaders. With a focus on efficiency, a leader often disregards the outside environment, and the primary concern becomes the operation of the firm itself. Conversely, when a leader focuses on effectiveness, he views his organization as a part of a greater whole, as a single piece of the puzzle. Recognizing the impact of effectiveness (purpose) and efficiency on leadership effectiveness requires leaders to embrace the second key principle of Taoism to maximize resource potential. Laozi says,
The effective leaders
Make the best of anyone, and nobody is left behind,
Make the most of anything, and nothing is left wasted,
This is called the invisible wisdom.
Footnote 9
When the effective leader cares for all creatures, they must develop efficient strategy and tools to fulfil their purpose. Efficiency has to do with minimizing waste. Something that has a perfect of efficiency will have no waste. That is the way Laozi requires leader to serve as the conscientious leader who focuses on maximizing human potential and resources efficiency. Building and maintaining an effective, productive human and natural resources is the first step toward responsible and sustainable business. Human resources are the most important source for business success. Maximizing human potential is central to a purposeful organization and is pivotal to our success as a leader and a business. In modern business, “human potential” means bringing out the best in our people, and enabling them to reach their potential as human beings - to be as creative, knowledgeable, and productive as possible. This means that they are reaching heights they may not have thought possible in terms of projects they undertake, skills they develop, inspiration they feel. Work is not a deadening place or one that is stressful to the point of being debilitating. It is a place where people come alive, where they get in “the flow.” Where, in the framework of psychologist Abraham Maslow, they can “self-actualize”. If you are not maximizing the human potential in your organization - getting the most from everyone - you cannot realize the full potential of your business. And that spells trouble over time, as competitors are working to realize the full potential of their businesses (Bush, 2018).
The new study undertaken by Korn Ferry Institute shows that by 2030, there will be a global human talent shortage of more than 85 million people. Talent shortage could result in about $8.5 trillion in unrealized annual revenues (Korn Ferry Institute, 2018). Acute global talent shortages are clearly a looming threat, and they are driven by a shortage of skills rather than a shortage of people. Mitigating the talent crunch requires a fundamental redefinition of the social contract between individuals, organizations, and governments. The future of work does not just require different skill sets, but entirely new ways of working, therefore, leaders at different levels must be mindful of their citizens’ employability in the context of a global talent market. It is essential that governments and companies focus on building and maintaining skilled talent pipelines and provide continuous access to both formal and on-the-job learning opportunities. In the new networked economy, organizations will increasingly rely on an extended ecosystem of workers rather than a large permanent workforce, using people, technology, and partners to execute their strategies in different ways.
The second factor that is influential to business success is natural resources efficiency. Eco-effectiveness is one of the central principles of Taoism for environmental sustainability: “making the most of anything, and nothing is left wasted.” The essence of eco-effectiveness is “waste equals food”, or “waste is something that is placed in the wrong place”. The concept was developed in response to some of the perceived limitations of eco-efficiency which critics claim only slow down the rate of environmental depletion and do not reverse the production of unused or non-recycled waste. Waste should be seen as a resource instead of just waste.
We are all aware that environmental degradation is one of the largest threats that are being looked at in the world today. The United Nations International Strategy for Disaster Reduction characterizes environmental degradation as the lessening of the limit of the earth to meet social and environmental destinations and needs. Environmental degradation is the deterioration of the environment through depletion of resources such as air, water and soil; the destruction of ecosystems; habitat destruction; the extinction of wildlife; and pollution. Environmental degradation is of many types. When natural habitats are destroyed or when natural resources are depleted, the environment is degraded. Therefore, waste and inefficiency has become the biggest threat to planet. Modern economies are now consuming resources at a rate to many more times the planet’s actual capacity. This leads to the fact that waste overtakes pollution as the major environmental threat in the twenty-first century.
Our sage Laozi might not see the environmental crisis we are facing today, but we learnt from his wisdom that he had foreseen the nature and resource challenges in our modern time. In recent years, governments, businesses and scientists have realized that the waste of resources has become the biggest threat to our planet, and taken concerted efforts to counteract this problem including environmental protection and environmental resources management. Scottish governments have urged businesses, farmers and manufacturers in Scotland to adopt a “one planet prosperity” policy designed to cut their energy use, greenhouse gas emissions, waste and resource use. Scottish leaders have regarded sustainable growth as the core objective of its regulatory strategy, and defined their statutory purpose as delivering environmental protection and improvement in ways which also create health and wellbeing benefits and sustainable economic growth. In the business world, UPM is one of the responsible companies which lead in sustainable solutions to the biggest threat to planet. UPM is a Finnish forest industry company. The production of UPM is based on renewable raw-materials which are biodegradable and recyclable. Recently, UPM has created the term “Biofore” to describe new forest industry. “Bio” stands for sustainable solutions and environmental performance. “Fore” stands for forest and the company’s position at the forefront of the development. UPM provides sustainable and safe solutions to the growing global consumption demand, and offers alternatives to replace non-renewable fossil-based materials. We understand from its vision, purpose and strategy the efforts that UPM has made in creating a sustainable society. The vision of UPM is to lead the forest-based bioindustry into a sustainable, innovation-driven, and exciting future by holding on to the competence and integrity and drive of their people. The purpose of UPM is to create value by seizing the limitless potential of bioeconomy. The Biofore strategy is to use renewable and recyclable raw materials in a sustainable way, which means consuming resources such as raw materials, water and energy, in a prudent and responsible way while achieving energy, production and cost efficiency. By recognizing its great achievement in sustainability, UPM is the only paper company which is listed in the Dow Jones Sustainability Indices and the only forest industry company invited to the United Nations Global Compact LEAD sustainability leadership platform.
One of the other innovative ideas which embraced the principles of Taoism is the concept of cradle to cradle. The concept is seen as the next industrial revolution. It was developed by the German chemist, Michael Braungart, and the American designer-architect William McDonough. They fundamentally changed the way we produce and build. The principles of cradle to cradle demand industries for designing every product in such a way that at the end of its lifecycle the component materials become a new resource; designing buildings in such a way that they produce energy and become a friend to the environment. In this sense, waster equals food, meaning that waste would become food for the biosphere or the techno-sphere (all the technical products we make), production and consumption could become beneficial for the planet. The model has been implemented by a number of companies, organizations and governments around the world, predominantly in the European Union, China and the United States.
Maximizing human and resource potential must start with effective leadership. Effective leaders not only understand their own strengths, but are able to invest in other strengths. This comes to the third key of Laozi for effective leaders: understanding and investing people’s strengths. Laozi requires effective leaders to apply the principles of maximizing human potential in their organization. As we pointed out the effectiveness focuses on value and purpose. When focusing on effectiveness first, leaders can care for all creatures whether they are good or bad. Laozi says,
The good is the mentor for the bad to follow,
The bad is the lesson for the good to learn.
He who neither models himself on the good
Nor learns from the bad is bewildered, however smart he is.
This is called the essence of wisdom.
Footnote 10
The rationale behind this idea is that systems intelligence and philosophy of oneness tell us that in the interconnected world, all creatures are interdependent and interacted with each other. There is nothing so useless as doing efficiently that which should not be done at all (P. Drucker, 1963). Whether they are good or bad, they are all valuable resources for organizational growth, and each of them can play a different role in life. The Tao is oneness. As a consciousness of oneness sees and values the patterns and needs of an entire system, it also recognizes the intrinsic values of each individual part. Nothing is excluded. John Muir said: “When we try to pick out anything by itself, we find it hitched to everything in the universe”. Juan Manuel Carrion, a biologist and ornithologist stressed this point with his study:
“There is a great lesson I’ve learned from nature, from the birds, the insects, from the ecosystems: The awareness that everything has its reason to exist in nature, nothing is redundant; nothing is insignificant. A spider is as important as a dragonfly, an insect, a bird, a mammal or a huge tree. Perhaps a tiny plant has a specific and important function that makes it as important as a giant tree. This is the awareness that everything has its purpose and nothing is insignificant because everything has its own nature.” (Global Oneness Project, 2013).
Nothing is separate from us or from anything else. People and creatures are not objects or instruments for our goals. They are just like us, real beings with their own hopes, joys and pains. No one’s suffering is worse than another’s, and no one’s life is more valuable. By aligning ourselves with oneness (Tao), we find ourselves in a very different world – a world in which our contributions matter, where we are given what we need in order to make a difference, and where we see outer life as more flexible, more accessible, more part of us than we thought. In these ways, oneness is essentially empowering, helping us build communities that facilitate the flow of all resources – including the deepest resources of love and meaning – throughout the interconnected web of life. As we become more conscious of oneness, we see there is no hiding from our impacts on each other. There is no backyard that is not our backyard. There is even no such thing as “waste”. Everything in life is re-usable.
Effective leaders have the power of connecting with employees and teams on a strategic and personal level, unlocking the full potential of people and organization. When organizations maximize human potential through effective leadership, meaningful values, and a foundation of trust, good things happen. The effective leaders are able to connect on a human, emotional level with employees, no matter who they are or what they do in the organization. They forge meaningful, respectful, caring relationships at work and do so in a fundamentally fair way. Fairness in relationships is particularly vital. It means being aware of implicit biases we all have as human beings (Bush, 2018).
The new way of thinking about effective leadership is embodied in three simple but powerful principles: (1) Each is valuable; (2) No one is sufficient; and (3) All are required for the enduring success of the organization (McCloskey, 2014). These three principles explicitly elaborate the principle of Taoism: “The good is the mentor for the bad to follow, the bad is the lesson for the good to learn.” First, effective leaders embrace, embody, and extend the conviction that “each is valuable.” As McNamee (2004) observes, “In the New Normal, enterprises will increasingly recognize the value of individuals at all levels of the organization”. This makes good sense, as sustainable effectiveness depends on the efforts of many motivated and talented members-leaders who are ready and willing to contribute to the welfare and progress of the organization. Second, effective leaders embrace, embody, and extend the conviction that “no one is sufficient.” Recognizing their assets and liabilities, New Normal Leaders know they cannot do it all. They appreciate the impossibility of staying abreast of a rapidly changing external environment. They know the limits of their interpretive capacity in processing the vast amount of data and experience each day brings their way. Third, effective leaders embrace, embody, and extend the conviction that “all are required for the enduring success of the organization.” If each is valuable and no one is sufficient, it follows that no qualified member is excluded from the leadership work. Collaborative engagement calls for the wide distribution of leadership opportunity up, down, and across the organization, with the maximum participation of members a part of everyday organizational life.