With all the news of our Presidential candidates during primary season, it’s always interesting to view the potential leadership styles of those in the race. One of the candidates, Donald Trump, exhibits many of the leadership traits we often see in entrepreneurs that we discuss in our entrepreneurial management classes at the University of Wisconsin – Madison School of Business. That style, the Promoter leadership style, is one so often associated with entrepreneurs like Trump.
The Promoter leadership style was identified by the late Emeritus Professor Alan Filley at the University of Wisconsin – Madison School of Business as part of his work on characteristics associated with certain types of small businesses (i.e., organizational typologies). Specifically, Filley identified one category of businesses, as the Market/Innovation type firm. According to Filley’s framework, the Market/Innovation type form is based on exploitation of an innovative, success is based on the ability of the entrepreneur and employees to adapt to an uncertain, ever changing environment. Typically, such a firm experiences an S-shaped pattern in its sales growth as the new innovation is introduced to the market place. Initially, the company experiences rapid sales growth upon in a market that has few competitors.
In a Market/Innovation type organization, the leadership role is typically filled by a charismatic entrepreneurial leader where, in the initial stages of the firm, the entrepreneur is viewed as a ‘hero’ by many of the employees. They believe that the entrepreneur can perform in an exceptional manner to obtain the exciting goals established for such a firm. The entrepreneur is usually characterized by having a high need for achievement, as having difficulty dealing with authority, and as having the ability to make decisions under conditions of uncertainty. Also, many times the entrepreneur appears to have a difficult time differentiating the person from the organization, it is one and the same (i.e., the firm is the entrepreneur and the entrepreneur is the firm). Filley appropriately classified this type of entrepreneur as the ‘promoter-style’ of leadership.
The personal influence of the promoter/entrepreneur on the firm influences the organization structure that evolves in the Market/Innovation Centered firm. Usually there is minimal hierarchy with the entrepreneur having contact, visibility, and direct influence with everyone in the organization. She functions as the central communications center and a major source of decision-making in the organization. As a result, the structure tends to be quite flat, insofar as possible, everyone reporting to the entrepreneur.
The objectives and goals of the firm reflect the promoter with exaggerated and appealing objectives of what the firm wants to achieve. For instance, you may hear founders/managers/employees make claims such as “we’ll all be rich some day,” “our stock options will make us millionaires,” “we’ll be a billion dollar company some day,” or “we’ll all be driving Porsches some day.” The firm, especially in the early stages of development, establishes high expectations and enthusiasm for its members creating an excitement level that is rarely seen in other organizations. This passion and excitement is intoxicating and provides the early motivation for “the cause” of the firm.
As the organization gets larger, the promoter deals with the growth by working more hours, even weekends and holidays. Ultimately, the greater hours causes the promoter/owner to procrastinate with duties that don’t need to be completed on an immediate basis, only dealing with issues that are extremely urgent. Planning, never a strong suit of a promoter, becomes even less of an objective when, in fact, it should.
Finally, to deal with the time demands, the promoter/entrepreneur hires staff to serve as her ‘arms and legs’. Many times, these individuals are identified as an assistant, executive secretary, or a right-hand person. One day, the assistant is asked to make a phone call, the next day to open mail, the third day to find out the status of an order being built by the company. These individuals are not given any authority or responsibility, only to do the action that the promoter would normally have done based explicitly on the owner’s directions.
The formal mechanisms found in many firms such as policies, planning and procedures are minimal, if not non-existent, in Promoter-led firms. The tactics and day-to-day actions are improvised and subject to the whims of the leadership within the organization. Organizational charts and strategic plans may exist only on paper as the leaders in this type firm create the rules ‘by the seat of the pants’. Because the firm is typically smaller in size at the onset, the leader has personal contact with many of the employees so such tactics are not totally inappropriate as the team can communicate informally on a relatively easy basis.
This type of organization is designed, either explicitly or tacitly, to be able to change quickly to take advantage of the unique innovation as bureaucracy and cumbersome decision-making process impedes the need to move fast.
As the Promoter-led firm grows, issues emerge. First, because the firm is set up to exploit some kind of innovation, a major problem usually develops on supplying the product or service to the customer. The unique structure of the firm where the promoter/leader is at the center of every decision makes it difficult to handle growth as the complexity and number of decisions needed to be made grow exponentially with higher sales. When small in size, the complexity can be handled by the owner and the few employees. However, when growth sales rapidly increase, employees hired, the promoter/entrepreneur is unable to make every decision for production, marketing and other functions in the company. Thus, employees constantly consult with the owner as to what he/she wants done which becomes untenable as the size of the firm increases.
Second, the firm typically experiences fast sales growth and high margins as their unique innovation protects against competitive pressures. As a result, the promoter/entrepreneur fails to see the need for budgets and other cost control measures as the company’s growth in sales and profits allows sufficient funds to pay for an extravagant lifestyle. However, once sales growth declines due to competition, the company has built an expensive, inflexible infrastructure comprised of mostly fixed costs. As a result, the financial losses are exaggerated as company experiences out-of-control expenditures continue to occur despite the lower revenue base.
Finally, as operations become out-of-control too much growth or a decline in business (combined with financial losses), morale of the employees is dramatically affected. In the initial stages of the company, the promoter/entrepreneur is able to attract a team and employees based on the excitement of the opportunity, the joy of a startup, and the charisma of the leader.
As time progresses, management and employees who seek responsibility for decision-making leave due to the control nature of the founder. Usually, those who remain are ‘followers’ who are attracted to a ‘hero-type’ leader that they can put on a pedestal for adoration. As long as success continues for the firm, morale of the remaining team remains high. It’s when the downtimes occur that major morale problems emerge. Also at this point, the effectiveness of the founder/entrepreneur as prime motivator and the center of decision making may decline through loss of charisma, loss of energy, or some other reason.
At this stage, the entrepreneur goes from hero to anti-hero based on a number of factors. One, the exaggerated promises made early can seldom be realized, creating disenfranchisement and disappointment. Further, as the company suffers, management systems are installed to control the problems usually increasing accountability through tighter authority. Many times, this occurs with outsiders brought in to turn things around. With the inclusion of outsiders, the emotional bond that developed between employees and the founding entrepreneur is strained with the advent of greater authority.
Finally, charismatic leaders seem to attract people who want to be changed, save, or enriched in some way and the followers of this sort will continue to attach themselves to presumed charismatic leaders, only to move on in disappointment when the leader turns out to be fallible. In summary, the high to low morale patter is common, creating loss of long service personnel, bad feelings, and attempts to subterfuge or unionize when it happens.