Leadership Economics

I was never a math person. Half the reason I was a music major in college was that I didn't have to take any math classes. Unfortunately, Kari isn't much of a math person either, so when we distributed roles right after we got married we decided I would keep the finances managed, and she would do the laundry, cook dinner, do the dishes, and clean the house. Both of us felt like that was a fair trade - that's how bad it is. 

Recently, I'm realizing that leadership is all about math. There's an economics side to leadership that has everything to do with budgeting, but nothing to do with money. 

I think leadership is exactly like managing a bank account. Most leaders, often by virtue of his/her position, are given a starter sum of credibility capital when they assume a leadership role. With every decision the leader makes, he/she has to decide how to invest that capital. 

Regular investments in the people and organization you lead allows you to make bigger withdrawals, most often coming in the form of change.  You can withdraw as much as you wantor as little as you want, but when it's gone, you're done as a leader. 

I'm convinced that many young leaders don't understand the economics of leadership, which is why they so often fail. A young guy takes a leadership role, where he is given quite a bit of credibility capital up front, and spends it like a 5-year-old spends a weeks-worth of allowance. A few of those expenditures actually give the young leader more credibility capital, but also more confidence to spend more. And before he knows it, he's bouncing checks and the organization is looking for someone else. 

Good leaders have to keep a close eye on their credibility accounts to make sure they're investing wisely. 


Jason said...

Excellent post, Chris. Managing that 'account' is one of the critical success factors for any leader.