5 Key Leadership Principles for the Success of Any Organization

Article originally published in the American City Business Journals on January 9, 2017

Over the past two and a half years, I have written articles about the universal principles of effective leadership. These principles come from my own experience as a leader rising through the ranks of PQ Corporation to the position of CEO, and by observing the leaders of other organizations while serving as a board member on public, private, private equity and nonprofit boards.

I have also written about leaders and organizations that have appeared in the news when their actions provide teachable moments.

As we start 2017, I would like to share five key leadership principles for the success of any organization, drawn from previous articles and insights developed over the past year.

1. Become the preferred provider to your markets

There is one universal principle that determines the success of all businesses: Become the preferred provider to your markets.

What is a “preferred provider?” It’s a provider that a customer or client favors in the purchase of a product or service versus its competition. A preferred provider has a significant competitive advantage over all other providers. It is the “go-to” provider in the marketplace.

How does a company become the preferred provider? In addition to offering high-quality, reliable products and services, it must provide a great customer experience. These companies create a competitive advantage by servicing their customers better than their competition.

2. Establish the right tone at the top and institutional culture

Tone at the top encompasses the ethics, honesty and integrity with which the company operates. One might ask, “Aren’t these a given?” In most companies, they are, in others they are not.

Most of us are now familiar with the toxic sales culture at Wells Fargo in which bank branch employees were pressured to open more than 2 million bogus customer accounts, driven by a financial incentive system run amok.

In a Sept. 21, 2016 CNN Money article headlined, “I called the Wells Fargo ethics line and was fired,” reporter Matt Egan wrote that a number of Wells Fargo employees were fired for reporting unethical practices to the ethics hotline and the bank’s human resources department.

After five years of these unethical practices and adverse media exposure, on Oct. 12, 2016 John Stumpf finally stepped down as CEO of Wells Fargo. Stumpf failed to ensure that the Wells Fargo Consumer Banking division operated with an ethical tone and culture. The legal and civil liability as well as reputational fallout is still unfolding. Wells Fargo has lost significant business due to these issues. What occurred is a teachable moment for all CEOs and boards.

3. Embrace a culture of continuous improvement

Share with your employees that your expectation is for them to continuously improve their part of the business. Ensure they have the needed resources to do their jobs and don’t micromanage them. Nurture an environment in which they develop a sense of ownership in what they do.

Instinctively, most employees realize that continuous improvement is needed to grow the company and build competitive advantage. If your company doesn’t continually improve, it will fall behind its competition.

Even though continuous improvement is led by the CEO and other senior leaders, it is driven by employees at every level within the company. This organizational culture puts power and responsibility into the hands of employees to initiate improvement projects on their own, without getting upper management’s approval. If an improvement project is beyond their authority level, they feel empowered to present the idea to the individual who has the authority to approve it.

4. Hire people with good critical judgment

Early in my career, while serving as the division marketing manager for my company, I ordered a recall of a contaminated product without the authority to do so. My boss, the VP and general manager of the division, and his boss, the CEO, were traveling in Europe and were unreachable.

Every day that went by, the cost of the recall went up significantly, so I made the decision on my own to order the recall knowing I would be either celebrated or terminated. I was celebrated, which taught me the value of employees who possess good critical judgment and are willing to violate policy when it is in the best interest of the company to do so. Had I been terminated, the company would have been deprived of its future CEO.

5. Face the brutal facts of reality

One of the most important imperatives for all leaders is the need to surround themselves with independent thinkers who will point out the brutal facts of reality. Leaders need to create an environment and institutional culture that welcomes and encourages individuals to share their opinions. It’s equally important for leaders to consider them, especially if those offering these opinions have more experience or expertise than the leader.

The Challenger space shuttle was launched on Jan. 28, 1986 in cold weather, which caused the O-ring seal in the right solid rocket booster to fail 73 seconds after launch. The engineers at Morton Thiokol, the contractor responsible for the design of the solid rocket boosters, were concerned about the cold temperature on launch day and recommended that the launch be postponed.

NASA however, objected to Thiokol’s recommendation to delay the launch. One NASA manager is quoted as saying, “I am appalled by your recommendation.” Another NASA manager is quoted as saying, “My God, Thiokol, when do you want me to launch – next April?”

Thiokol management, facing pressure from NASA, eventually acquiesced and agreed that the launch could proceed. The rest is history. The United States lost the Challenger and its crew due to the catastrophic failure of an O-ring.

In the words of renowned Brazilian novelist, Paulo Coelho, “If you want to be successful, you must respect one rule: Never lie to yourself.” Leaders, remember this when one of the independent thinkers on your staff reminds you to face the brutal facts of your reality.

The leaders who follow these five leadership principles will enjoy business success and be effective role models for emerging leaders within their organizations.

Stan Silverman is the former president and CEO of PQ Corp. He also is founder and CEO of Silverman Leadership and is vice chairman of the board of trustees of Drexel University. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School.