What exactly is leadership?

What do Bill Gates, Christine Lagarde, and Winston Churchill have in common? That’s right: all three are or were well-known leaders. That does not mean they are uncontroversial. But it does mean that they inspired people around the world with their vision. We show what leadership means in today’s context, why leadership and management are not the same thing, and how managers can develop their leadership skills.

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What is leadership?

When we talk about “leadership” today, we mean something completely different than we did ten years ago. In fact, ten years ago, we didn’t call it leadership, but simply “management”. Even today, the two terms are often used synonymously – yet we now associate much more with the term “leadership” than “just” the pure management task:

Leadership is the art of motivating, inspiring, and inspiring others. Successful leaders do this as CEOs in top management, as department or division managers in middle management, and as managers of individual employees.

While management sets the course for people in a company or organization, leadership empowers them to contribute to the company’s success in their own way. In this context, we also refer to modern leadership.

Leadership in transition: Modern leadership

Our modern (working) world is volatile (V), uncertain (U), complex (C), and ambiguous (A). Technical innovations come thick and fast, and companies and organizations are working with ever less time and resources to remain competitive in a globalized market. Experts have coined the term “VUCA” to describe this phenomenon. At the same time, internal expectations of “leadership” are changing.

While leadership in the days of the baby boomers and Generation X was still very much thought of as “from the top down”, millennials demand flat hierarchies and personal appreciation. This rethinking culminates in the idealistic values of Gen Z: those born between 1995 and 2010 want their work to make a difference and bring about change. They need a “purpose.”

The tension between modern competitive dynamics, rapidly advancing digitalization, and a new “type” of employee requires a radical rethink of leadership.

Leadership and management

Managers can be leaders, and leaders can be managers. However, this does not mean that leadership and management are the same thing. Modern leadership paints a positive vision of the future for a company or organization without prescribing the path to get there. Modern leaders are therefore visionaries: they embody the values and principles of the company and lead by example.

Management, on the other hand, is about guiding the organization based on these values and principles. While leaders inspire change through creativity and innovation, management is the entity that gives shape to change:

Managers organize processes and resources. They manage and optimize what is, while leaders see what could be.

What makes a good leader?

On a personal level, leaders are often people who attract others. They are able to inspire through engagement and lead through inspiration. What a leader can never lack is authenticity:

Leaders like Yvon Chouinard, founder of the outdoor clothing brand Patagonia, and Finnish Prime Minister Sanna Marin believe in what they do. They don’t just proclaim their vision, they embody it. In doing so, they inspire others to follow them and achieve a common goal.

From a business perspective, a good leader builds a bridge between day-to-day operations and important future issues. Topics that concern leaders in this context include, for example

Adaptability (agility): How quickly can we respond to change? How well is my company/team equipped for the future (future thinking)?
Digital transformation: How do we as a company/organization/team meet the challenges of advancing digitalization?
Skill set and mindset: What skills and mindset do I need to develop in my company/organization/team so that we are optimally equipped for the new world of work (New Work)?
Innovative spirit: How do we as a company/organization/team manage to develop new ideas and bring them to market in a timely manner (innovation management)?
Entrepreneurial spirit: How can I strengthen the innovative power and entrepreneurial spirit within my company (intrapreneurship)?
Customer centricity: How can we better adapt our processes and structures to customer needs?
Toolset: What tools do I need to provide so that my employees can work independently and on their own responsibility?

Modern leadership also plays an important role in the context of agile transformation. As agile breaks down hierarchies, dismantles rigid structures, and encourages people to take ownership, it requires a leadership style that not only supports, but actively drives this change process.

Leadership styles: Leading, but how?

Leadership is not just leadership. The leadership style a leader adopts depends on the requirements and conditions of the company or organization, but also on his or her natural disposition. For example, a manager who puts the needs of his or her employees first will not lead through charisma, but will see himself or herself in a supportive mentoring role.

Transactional leadership

Transactional leadership is rooted in the classic top-down principle: transactional leaders lead by issuing instructions on the one hand and motivating their employees on the other. Employees work toward specific goals, and their motivation to achieve these goals usually comes from a reward system. This can, but does not have to, involve external incentives such as paychecks. Transactional leadership also aims to intrinsically motivate employees to act and to foster a strong connection to the company.

Charismatic leadership

A charismatic leader is less concerned with the sensitivities of individuals and more with inspiring the crowd from the stage: they score points with their charisma and their role model function within the company/organization. Charismatic leaders such as Martin Luther King Jr. or Barack Obama have a natural appeal: other people like to be around them and listen to what they have to say.

Transformational Leadership

Transformational leaders lead through vision and trust in their employees. They do not micromanage, but rather let their team feel that they are part of the success: small individual goals are replaced by the overarching corporate goal. Transformational leadership thrives on continuous change and innovation: potential is developed, processes are optimized, and principles are lived.

Transformational leaders are not afraid of big and/or unpopular decisions and, above all, they are not afraid to break new ground: Amazon CEO Jeff Bezos came from the world of finance and revolutionized online retail. Netflix founder Reed Hastings became a pioneer of streaming portals without any previous experience in the television industry.

Servant Leadership

Servant leadership relies on flat hierarchies and communication at eye level. The leader takes a step back from their team and views leadership as a service: their goal is to create the right conditions for their employees to excel and reach their full potential.

An important feature of this leadership style is an open culture of communication: regular employee appraisals enable servant leaders to respond quickly to difficulties and adapt work processes if necessary.

The collaborative, equal partnership makes this leadership style particularly appealing to the youngest generation currently entering the job market (Gen Z). Well-known companies that focus on leadership as a service include FedEx, Marriott, and Starbucks.

When people are placed first they will provide the highest possible service, and profits will follow.
Fred Smith, Gründer von FedEx

Agile leadership

Agile leadership describes leadership in an agile environment. It turns traditional top-down leadership on its head: Top-down management with rigid goals and inflexible processes is replaced by a flexible, bottom-up perspective that ensures everyone in the company/organization is pulling in the same direction. Agile leaders are less required to lead their people and more required to empower them:

Agile leadership means creating the right conditions for a culture of agility (agile mindset) to develop and take hold in the company/organization. You can find more detailed information on the topic of agility here.

Agile leaders lead on equal terms

Agile leaders lead by example: they actively work to develop and sustain an agile culture, which means they are transformational. And they take the members of the organization/company with them on this journey. For agile leaders to delegate responsibility and step back from operational tasks in favor of leaner processes and faster development, they must empower their people to work independently.

Digital leadership or leadership 4.0

Digital Leadership, also known as Leadership 4.0 in reference to Industry 4.0, is not a specific leadership style, but rather a concept. It is based on the recognition that hierarchical leadership is making companies and organizations less and less agile in our modern working world: To compete in the marketplace, a model is needed that enables leaders to not only anticipate change, but to respond to it with agility.

We know this premise from modern and agile leadership. What makes the digital leadership model different is its focus on digital processes and tools:

The concept of digital leadership sees digital transformation not only as a defining characteristic of our complex modern working world, but also as the key to success in this new environment.

Female leadership

Female leadership is another important concept in the leadership discourse – NOT because leadership is male or female. Although attempts are made to associate “female” leadership with empathy, prudence, or level-headedness (as opposed to “male” leadership, which is associated with analytical and problem-solving skills), these differences have not been scientifically proven. Instead, the concept of female leadership is about raising awareness of the need for change:

According to Statista.com, only 8.9 percent of management positions in Austria’s 200 top-grossing companies are currently held by women (as of November 2022). In Germany, the proportion of women on the boards of the 200 largest companies was 11.5 percent in 2020.

What we see is a significant inequality in the distribution of power – even though women like Sanna Marin and Theresa May have long since proven that their leadership skills are no less than those of their male counterparts. The concept of female leadership focuses on this imbalance. At the heart of the concept is the belief that a just (economic) world requires a balance between male and female leadership.

From manager to leader

The concepts of modern, agile, and digital leadership stem from the need to adapt management in companies and organizations to the ever-changing conditions of our modern workplace. Leadership is all about big-picture thinking and constant strategic adaptation.

The transition from manager or executive to leader requires a radical change process: the technical manager becomes a process facilitator, change moderator, and innovation architect. The manager evolves from administrator to visionary.

True leadership is when people follow you only when they have the opportunity not to.
James McGregor Burns, political scientist

What are leadership skills?

The legend of the “born” leader is just that: a legend. Of course, there are people who are blessed with natural charisma and who consciously use it to lead others. However, this does not mean that they automatically possess all the other skills necessary for effective leadership.

The challenge for future leaders is to lead by example, to provide guidance, to embody the vision of the company/organization, and at the same time to step back.

Successful leaders empower their employees to achieve results on their own responsibility. They build bridges between organizational goals, market demands, and employee needs. To do this, today’s leaders need not only technical expertise, but also extensive knowledge of management and process methods (e.g., change management). Other key leadership skills include

Self-awareness: Before you can lead others, you must first lead yourself. Only those who know their own values, needs, strengths, and weaknesses can lead authentically and treat others as equals.
Empathy: If you want to lead people, you must be able to understand how they think and act.
Intercultural competence: In the face of globalization and outsourcing, it is important that managers are able to move confidently in an intercultural environment and respond empathetically to different ways of thinking and acting.
Communication skills: Modern managers must not only be able to communicate well face to face, but leadership must also work at a distance (keywords: New Work and remote leadership).
Tolerance of ambiguity: Leaders must be able to endure uncertainty and ambiguous situations without becoming paralyzed or allowing their transformational energy to be influenced.

Rethinking leadership with Wonderwerk

Modern leadership combines entrepreneurial thinking with employee focus and radical customer orientation. Such a leadership model does not develop overnight, nor is it a “by-product” of a digital or agile transformation:

Rethinking leadership against the backdrop of complex economic, socio-political, and economic challenges requires not only technical expertise, but above all extensive experience in managing change and transformation processes.

Customized leadership model

Wonderwerk Consulting has been advising companies and organizations of all sizes for many years on the implementation of new management models.

We analyze where your organizational and leadership challenges lie and work with you to design an innovative leadership model that fits your company or organization and enables you to develop untapped potential and achieve higher value creation. You can find more information about our services here.

Targeted leadership development

Leadership is an important issue in companies and organizations at all levels, and the demands placed on leaders are correspondingly diverse. To meet these needs, we offer customized development programs for different audiences:

From junior managers to middle managers to top managers who have to make important decisions every minute. Our goal is to create clear structures and standards for personal and professional growth in your company/organization.

Why Wonderwerk?

We not only know how leadership works in theory, we can put it into practice – and do it exceptionally well!

We have successfully implemented large-scale leadership programs with numerous clients (e.g. Austrian Ministry of Finance, Wiener Netze, Premiquamed and many more).

We would be happy to accompany you on your way to a modern, competitive leadership model!