managemnet company strategy managemanet How New CEOs Establish Legitimacy

How New CEOs Establish Legitimacy

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Corporate governance delegates a lot of authority to the chief executive. But only authority gives limited license to lead. We listen to those in authority because we are required to do so; Authority operates through a rule-following mechanism that never encourages a person to go beyond the call of duty.

Higher levels of executive influence come from the new leader’s competence — that is, the credibility that comes from demonstrating wisdom, integrity, or performance that helps followers understand why the leader was chosen for in the task. Although a leader who demonstrates competence inspires some belief, even competence-based leadership is ultimately weak. If performance weakens, even temporarily, the leader’s credibility may be questioned, which will reduce people’s willingness to follow.

Legitimacy is a higher-order quality that gives a CEO a continued license to lead in good times and bad. A legitimate leader generates goodwill and a sense of personal connection with followers. CEOs who enjoy legitimacy inspire loyalty and inspire trust. They can motivate others to go beyond the minimum job requirements and give it to everyone. Legitimacy creates trust, which is a valuable currency in any organization. Enhanced trust increases people’s willingness to expend effort or give their all because they feel confident that others will do the same, that they will be recognized, and that they will be treated fairly. When people trust the CEO, they become more open to making longer-term investments in the organization with uncertain personal payoffs, feeling confident that they will not be taken advantage of. CEOs with legitimacy can perform better because people give them the moral support that increases their influence.

Authority, competence, and legitimacy are words that are often used during Harvard Business School New CEO Workshop, a semi-annual, invitation-only gathering of many faculty colleagues and I have been leading for the past 25 years. We host several hundred newly appointed chief executives of companies with $10 billion in median revenue in these workshops. Many of them stayed in touch with us for years afterward through one-on-one conversations and reconvening as a group during annual workshop alum gatherings. Since the CEOs who attended the workshop were new, many were rightfully worried about what they would say and do in their first months in the role. They have achieved the role of CEO, so they have authority – now they want to go beyond competence and establish their own legitimacy.

What, then, allows CEOs to gain and maintain legitimacy? Here are seven behaviors that corporate leaders should aim to demonstrate in the role:

Clear communication

Employees are drawn to leaders who can tell a compelling story – a narrative that helps them understand where the organization has come from and where it is going. It is even more helpful if the leader clearly explains how the organization must adapt to critical external changes in order to win and the role of each employee in contributing to the success of the organization. It is easier to follow someone with all your heart if you know where you are going, if the path chosen is reasonable, and if the role you play in the journey is clear.

In our workshops, we use the example of Jan Carlson, the CEO of SAS Group (formerly known as Scandinavian Airline Systems), from 1981 to 1994. In public statements during his early days in the role, he described the main economic drivers of the business on the plane with preternatural clarity, connecting the dots between the details that each employee can influence to great results in a way that even people unfamiliar with the company will find understandable. (You might think that every CEO has this ability, but this ability can vary greatly.) SAS stakeholders were relieved to see someone who clearly understood business management — and Carlson quickly stepped up. his leadership legitimacy.

Show fairness

Because CEOs have so much power over others, they should be treated as an even hand. “That’s not fair” are the words that undermine the legitimacy of a CEO. As the person who sets the tone for the rest of the organization, the CEO must be prudent and fair. If the CEO is seen to be partial to some, to be unfair in judging the merits of proposals or people, or to show favoritism in giving praise and rewards, the CEO loses legitimacy. When this happens, people do not give maximum effort and engage in self-defense and political behavior.

Conduct with integrity

Integrity is a measure of consistency between what the CEO stands for and how they behave. The closer the match, the greater the legitimacy of the CEO. People may not listen to every word the CEO says, but they pay close attention to the CEO’s every behavior. They often judge whether the CEO walks the talk, which is very important to the legitimacy of the CEO.

A CEO’s legitimacy is enhanced if they commit to the espoused values, especially if doing so is costly. The CEO who has no hesitation in recalling an unsafe product, regardless of the cost; who continued to fund important R&D projects even when the company was losing money; or who will take responsibility for a failed investment even if the decision is not entirely theirs will improve their legitimacy. CEOs who are seen to be abandoning their values ​​when progress is made are more likely to reduce their legitimacy and reduce commitment to themselves and the organization. Having the courage to do the right thing when challenged is a powerful way to gain legitimacy.

Show authenticity

Real CEOs are open about their successes and failures, strengths and weaknesses. They actively seek input and feedback from others. They avoid creativity and reveal a sense of “This is me.” When people meet a real leader, they say: “I see a real man here.” This openness about who they are as individuals beyond their role as CEO makes real CEOs more relatable and approachable as they connect with people personally, inspiring others to follow their lead.

Get ahead of the company

Being CEO may be a reward for years of contributions to the company, but it is also an honor. CEOs gain legitimacy to the extent that their behavior demonstrates that they put the company’s interests above their own. One CEO said: “People need to know that this is not about you, that you are committed to serving the company.” Although people may raise an eyebrow at a CEO’s salary or privileges, it really hurts them when someone puts their interests above the company’s. CEOs who use every opportunity to recognize their privilege to lead the company, are generous in giving others credit for success and are quick to take responsibility for failures, and who share in the sacrifice of themselves before they ask others to do so are more likely to enjoy legitimacy.

Staying grounded

Leaders must remain human, humble, and approachable to maintain their legitimacy. The CEO’s job changes people, like experts Rakesh Khurana which describes the dangers of the job as structurally induced narcissism. The demands of the job are many and praise is often difficult for CEOs who do not begin to believe in their own importance and superiority over others.

Take the example of former General Electric chairman Jeff Immelt. His reputation has not fully recovered from the revelation sent by GE a spare plane to accompany him as a backup whenever he flies a corporate jet in case the first jet becomes inoperable. Although Immelt later insisted he was unaware of the arrangement, the fact that his staff felt his time was so important that he needed a backup jet shows the structural self-importance that can be role of the CEO. Beyond the self-importance that some CEOs begin to display, others suffer from a related disease: they begin to think that the opinions of others are not important, which leads to arrogance.

Staying grounded can include making sure to have enough time with family or with activities outside of work. In our research about how CEOs manage their time, we found that CEOs often sacrifice time for their family or themselves. Losing their job can remove a CEO from their family and self anchors. The growing distance from their family sometimes attracts CEOs to other relationships that cross the rules and boundaries of the organization. Losing the anchors of the relationships that ground them can cause damage to their personal lives, but also risks the legitimacy of a CEO.

Maintaining a sense of purpose

CEOs who can give others a greater sense of purpose and meaning enjoy greater legitimacy. Because CEOs are judged for the underlying motivations that guide their behavior, those whose work is seen as serving a greater purpose, such as serving society or creating real value for customers, enjoy the more legitimacy than those whose actions are seen as motivated. through more mundane goals such as increasing shareholder wealth. Infusing the organization with purpose is one of the hallmarks of great leaders. Furthermore, people do not only look to leaders to improve the performance of an organization; they also look to them to give a greater sense of meaning from their work.

In short, while authority-based leadership is based on formal power and decision-making rights, and competence-based leadership focuses on performance, legitimacy-based leadership is based on behaviors and actions that inspire trust, respect, and commitment to others. While all three forms of leadership can be effective in some situations, legitimacy-based leadership is more sustainable and effective in the long run.

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