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  The New Emerging Economy Calls for a New Leadership Model
  Robert Guarino

Abstract

          The US recession is approaching the two-year mark, with little sign of significant abatement. The best and the brightest did not see it coming, and once it hit, they were unprepared to effectively combat it. Industry leaders, market watchers, and government agencies are doing their best to make sense of it all and to predict when it will hit bottom and begin to recover. But this recession is not behaving like past recessions. Its breadth, width, and depth are unprecedented; it is often referred to as the worst economic down period since the Great Depression.

          There are of course many explanations from many “experts” as to the nature and causes of the recession; the only thing that seems to garner unanimous agreement is that it is like no other in recent memory, and that the right approach to lessen its impact remains elusive.

          This article will make the assertion that the economy has experienced a fundamental shift, which has rendered existing business and economic prediction models suspect, and possibly even obsolete. And that the fundamental shift calls for a fundamentally different set of models. This article will also assert that one of the major contributors to the economic malaise is the decades-long persistent inability of US industry—especially the manufacturing sector, and specifically the US auto industry—to stem the tide of market share loss to foreign competitors. Finally, this article will suggest that one of the new models needed for the new emerging economy is one for leadership, and it will suggest that the servant-leader model is best suited for the task at hand.

Introduction

          The US economy is in the midst of a deep and prolonged recession. Beginning sometime in late 2007, it is now approaching its two-year anniversary. This is not a happy anniversary, it is a somber reminder that something is fundamentally wrong with the economy, and worse, nobody seems to know quite what to do about it. The scope of the economic woe is gargantuan; everything and everyone has been affected by it. And unlike previous recessions that eventually responded to fiscal and/or monetary policy intervention, this one has thus far proven impervious to such tried and true methods.

          Nobel economist Paul Krugman states, “There was nothing in the prevailing models suggesting the possibility of [this] kind of collapse…an economy that went off the rails despite the Fed’s best efforts” (2009, p. 1). Krugman goes on to suggest that some of the most fundamental assumptions that underlie modern economic prediction models are now suspect, perhaps none more pertinent than the notion that free markets self-correct, i.e. can operate free from oversight via principled leadership. President Obama seized upon the need for a new and more effective model for the new emerging economy in an address at Georgetown University in Washington, “We cannot rebuild this economy on the same pile of sand; we must build our house upon a rock” (2009). Krugman and Obama are simply stating what many have come to realize: that the US economy has fundamentally changed, old models no longer work, and new models are needed. This article will focus on a new leadership model for the new emerging economy—that of the servant-leader model.

          The servant-leader model is predicated on the paradoxical notion that leaders must first aspire to serve, and then only through a testing period and by conscious choice, aspire to lead. Said differently, a leader must have the love and humility of a servant’s heart. Servant leadership is based on 10 essential characteristics: active listening, empathy, healing, awareness, persuasion, conceptualization, foresight, stewardship, commitment to growth, and community-building. It calls for leaders to have a high standard for integrity, a deep regard for humility, and a solid connection to the spiritual self. In short, it calls them to be more like Jesus, “For even the Son of Man did not come to be served, but to serve, and to give His life as a ransom for many” (Mark 10:45 NIV). In The Servant as Leader, Robert Greenleaf wrote:

The servant-leader is servant first…It begins with the natural feeling that one wants to serve, to serve first. Then conscious choice brings one to aspire to lead…The difference manifests itself in the care taken by the servant—first to make sure that other people’s highest-priority needs are being served. The best test and the most difficult to administer, is: Do those served grow as persons? Do they, while being served, become healthier, wiser, freer, more autonomous, more likely themselves to become servants? And, what is the effect on the least privileged in society; will they benefit or, at least, not be further deprived? (Frick and Spears, 1996, p.1).

          Contrast that lofty and aspiring description with a rather scathing assessment of US auto CEOs from noted British business management author Robert Heller, “Colossally overpaid, professionally incompetent, hugely conceited; it simply isn’t the way to run a car company—or the world’s economy” (2009). Heller hits hard; but strikes a nerve. These very same words are spoken in coffee shops and water coolers in cities and towns across the nation. If the US auto-industry can be viewed as a microcosm for the US any-industry (and for this article it will be), then it is clear that US industry leaders are part of the problem—and more importantly—part of the solution. John Maxwell states this point rather succinctly: “Change the leader, change the organization. Everything rises and falls on leadership!” (1993, p. 49).

How Did We Get Here?  The Old Leadership Model

          The current deep and resilient recession did not signal the beginning of US economic troubles, it merely reinforced the fact that the troubles continue. This article will not speculate as to the precise beginning of these economic troubles, or on its definitive root causes. However, it will make the assertion that the advent of intense foreign competition—especially in the jobs-critical manufacturing sector—and the subsequent steady loss of domestic market share and resulting erosion of the value-add manufacturing economy base, are major contributing factors. Furthermore, for purposes of succinctness and brevity, this article will view the US auto industry as a representative microcosm of the greater US manufacturing economic base, and a significant tangential influence on US industry proper. Earl Eldridge, of USA Today, offers stark figures concerning US auto, “Market share for domestic automakers is below 60%...an all-time low. General Motors, Ford Motor and Chrysler Group, which have been losing US market share for 10 years, had a combined 58.8% share…” (2004).

          In the mid 1980s, Japanese and European firms began making inroads into the US auto market, and by the mid 1990s they started to capture significant portions of domestic market share. The initial response by US auto leaders was to deny or ignore the threat, presumably in hopes that it was a false signal, or that it would simply dissipate on its own. However, as is now painfully known, it was real, it was sustainable, and it continues to wreak havoc to this day. Clearly, a response was in order.

          Unfortunately the response has been tepid and misguided, and for the most part unsuccessful. Heller recounts an earlier missed opportunity by the auto industry—the pattern is unmistakable, the relevance undeniable:

The [Big 3] ruled the domestic market after World War II, and faced no competition whatsoever until Volkswagen’s Beetle achieved big success in the US. However, despite sales of 400,000 or so a year, Detroit’s moguls dismissed the Beetle as a fad. They signaled no intention of adapting and sacrificing the profit margins made by the so called ‘gas-guzzlers’. It’s a familiar syndrome. The most rational way to react to a new and unwelcome threat would be to analyze the competition’s strengths, reappraise the entire market, and form a plan to safeguard existing sales while extending coverage in order to exploit new trends. Too often though, companies act irrationally in such situations and instinctively favor denial (2009).

          The Big 3 eventually recognized the seriousness of the situation, and circa late 1980s, mounted spirited TQM-like campaigns to regain lost ground. However, as hindsight has clearly shown, these efforts were too little and too late.

Where Do We Go From Here?  The New Leadership Model

          The sustained threat of foreign competition has fundamentally changed the business landscape for US automakers—decidedly for the worse—and fundamental change will be required to successfully combat it. Practically speaking, fundamental change can only happen through the purposeful actions, words, and deeds of organizationally recognized leaders. However, the old model where leaders simply acquiesced to the situation at hand and committed resources to the problem will no longer do. Once again, Heller hits the nail on the head—hard— with respect to the futility and ineffectiveness of the old model, “[Auto industry] CEOs have shown a disregard towards the future and instead put all their faith in an old approach that has proved to be a conspicuous failure.”

          A new model is needed, one where leaders do much more than perform the perfunctorily task of “leading”. The new model leader will be a servant-leader; one not only of leader, but also of worker, manager, and problem-solver. In the opinion of this author, the servant-leader model is the right model, at the right time, and for the right reasons. It smartly combines age-old wisdom with modern-day pragmaticism. It gives due deference to the multidimensional aspects of leadership, and it challenges them to be more than just figureheads, more than just “leaders”. It calls them to be more complete persons and to humbly commit to adding greater value directly to the business.

          The servant-leader model is not yet prevalent in industry today, but the prospects for its eventual emergence and acceptance are encouraging. There are two reasons for this optimism. First, extraordinary times call for extraordinary measures, and the servant-leader model certainly fits that bill; it is definitely not your father’s leadership model. Second, a recent study has shown that the servant-leader model is highly correlated to leadership effectiveness. Concluded in a 2008 study conducted by Michael McCuddy and Matthew Cavin, “The significant positive correlations for nine of the ten individual servant-leadership variables [active listening, empathy, healing, awareness, persuasion, conceptualization, foresight, stewardship, commitment to growth, and community-building]…persuasively show that people who embrace servant-leadership behaviors are more effective leaders than those who do not embrace them” (p. 10).

          It is also the fervent hope of this author that the servant-leader model comes to the fore as a viable and essential element to the resurgence of the US economy. Leaders have a critical role to play, and there is little doubt that they desire to be successful in that endeavor. The recent past has shown that leaders have not performed at a level commensurate with the enormous responsibility placed in their care, but fortunately the past does not necessarily foretell the future. Adoption of the servant-leader model can help usher in a new era in leadership, one characterized by a greater depth of character that will compel leaders to reach deeper into the organization and to add more value more directly to the business. It is what the economy requires of its leaders, it is what they would require of themselves if asked, and is what Jesus would require of them as well, for it is what He meant when He said, “The greatest among you will be your servant” (Matthew 23:11, NIV).

Conclusion

          The deep and prolonged US recession has thus far proven to be relatively impervious to tried and true methods of government/quasi-government stimulus intervention. This recession appears unlike previous recessions, in fact it is often compared to the Great Depression. This suggests that something has fundamentally changed in the US economy. Indeed, this article has asserted that the US economy, as represented by the US auto manufacturing sector, has been systemically underperforming for several decades, as evidenced by the continued erosion of domestic market share to foreign competitors. If it is true that the US economy has undergone a fundamental shift for the worse, underpinned by a fundamental weakened competitive spirit, then fundamental change will be required to effectively address the shift and return the economy to a sustained pattern of growth. The old business and economic models have been rendered suspect; a new set of models is needed to usher in and shepherd the new emerging economy. This article has suggested that one of those new models is of leadership variety, and that the model that appears best suited for the job is the servant-leader model.

 

References 

Bob Guarino is a senior supply chain manager with 27 years of manufacturing industry experience with large Fortune 500 companies. Bob has expertise across a broad range of skill sets, including quality engineering, materials management, supply chain management, and subcontract management. Bob was recently published at the Deming Research Institute at Fordham University; his white paper entitled, "Hey, Who Moved My Quality Revolution?" chronicles his 16-year tenure at the Eastman Kodak Company. Bob received his bachelors degree from the Rochester Institute of Technology in Manufacturing and Materials Management; he is currently pursuing a Master of Science degree in Strategic Leadership from Roberts Wesleyan College. Bob can be reached at guarino_robert@roberts.edu.