In order to innovate, contemporary leaders are encouraged to be visionaries, to engage and nurture their teams at much higher levels, and to transform organizational cultures. The command-and-control micromanagement of the industrial age is a relic of the past - certainly no way to bring about the innovation required for modern organizations. According to a recent study by Ann Kowal Smith (DM 2010), however, leaders should not entirely jettison their top-down managerial repertoire - because in certain circumstances this approach can actually increase organizational innovation. According to Ann, leaders should actively seek to balance different styles of leadership to encourage increased innovation and better organizational performance.
Management scholars often think about organizational innovation as a dichotomy between exploration and exploitation. Exploration refers to activity that fosters more radical, longer-horizon innovations that depart from an organization's traditional business activity, whereas exploitation refers to more incremental, shorter-horizon innovations that are extensions of that organization's current business. Recent work has found that visionary, "transformational" leadership encourages exploration whereas top-down, "transactional" leadership drives exploitative innovation.
In analyzing data from 111 companies across 42 countries, Ann found that the dynamics between leadership and innovation are not quite so simple. She found that the combination of both transactional and transformational leadership drove the more exploratory forms of innovation that lead to sustained earnings growth, whereas a sole focus on transformational leadership may indirectly inhibit earnings growth over time. According to Ann, "These findings, in fact, seriously question the transformational/transactional leadership dichotomy represented in the academic literature and confirm that good leaders, in practice, must balance multiple, even at times counterintuitive, behavioral styles and approaches to drive innovation and performance. The right "cocktail" of these behaviors is highly dependent on the context and desired outcomes."
Ann is currently working with Kalle Lyytinen and Nick Berente to prepare this work for journal submission. She will be presenting her research at the 2010 Academy of Management's Annual Meeting based on an early version of the paper entitled "The ‘Where' and ‘How' of Exploration and Exploitation: Balancing Leadership Styles to Drive Innovation and Performance."
Ann Kowal Smith is an independent consultant, counseling individuals and organizations on strategy and leadership issues, coaching, communications, and project/initiative management. She is currently actively involved in issues at the intersection of education and economic development. Previously, Ann held senior-level positions with Heidrick & Struggles, McKinsey & Company, Squire, Sanders & Dempsey, LLP, Benesch, Friedlander, Coplan & Aronoff LLP, and KeyCorp. She has taught and been actively involved in the development of curriculum in a Montessori environment, and serves as Chair of the Board of The Montessori High School at University Circle, a new high school that opened to students in Fall 2008. Ann holds a B.A. in History of Art from Bryn Mawr College, an M.A. in History of Art from the University of Michigan, and a J.D. from Case Western Reserve University.