By Dr. Larry W. Stout, Associate Professor of Psychology
Stockholm School of Economics in Riga

Change management is one of the hottest topics in training today, as organizations struggle to adapt to the rapid transitions taking place throughout society. But no organization has faced the challenge that the tiny Baltic countries of Latvia, Lithuania and Estonia faced when they became independent of the Soviet Union in 1991. From reforms necessary in government, education, commerce, medicine, technology and even religion, they literally had to change everything.

As an American educator living and working in Riga, Latvia with my family since January of 1991, I had the rare opportunity to witness these changes first hand. At the time of our arrival, Latvia was still part of the Soviet Union, but was strongly pushing to become an indepedent nation. This was outwardly evident in the political arena as the Latvian parliament reinstituted Latvian as the official language and reintroduced the national flag. But the real changes that needed to made were much, much deeper in the national psyche.

I was one of the very first foreign visitors to the formerly closed coastal city of Liepaja (a Soviet naval port) in September of 1991 and was invited to lecture at the local university. In a discussion with the rector, Dr. Karlis Doebelis, I asked what he perceived was the greatest need in his institution. He quickly responded, "A new way of thinking." I was intrigued by the answer, as I was expecting him to say something about increased funding or staff development or the acquiring of new curriculum materials. But Dr. Doebelis explained, "Larry, for fifty years we have been fed an ideology that we now know is false. But we don't know what to replace it with. We need a new way of thinking."

Strangely enough, I visited a university at the opposite end of the country two weeks later and asked the rector there the same question - and I got the same answer! I inquired, "Did you speak with Dr. Doebelis recently and he told you I was going to come and ask this question?" He replied, "No, Larry, but it should not surprise you. We all realize we need a new way of thinking."

With so many open to change, the country of Latvia under went astounding development in a little more than a decade. Many foreign visitors are pleasantly surprised when they visit the capital city Riga because of its wonderful blend of heritage, culture, and amiable hotels and eating establishments. It is rapidly gaining a reputation as a bright and attractive tourist spot and a worthwhile investment area. But just beneath the surface, the vestiges of the Soviet mindset are evident everywhere, with the most visible in the area of management styles in business.

I work as associate professor of psychology at the Stockholm School of Economics in Riga, which was established in 1994 in a cooperative effort between the Swedish and Latvian governments. It was designed to provide a new generation of young people in the three Baltic nations with the necessary business skills to manage in the free-market economy. My task is to teach in the 'soft skills' areas; organizational behavior and human resource management. The undergraduate students, many of whom now barely even remember the old Soviet days, are quick to embrace the concepts that are presented to them. They will be a solid resource for these developing nations in coming years.

But they are not in charge now. The present management of firms and organizations (as well as government) is largely controlled by individuals whose formative years were under a heavy state-controlled Socialistic framework of society. One study found that virtually all of the CEOs of the one hundred largest firms in Latvia were run by autocratic managers. It is not a surprise. It is the only style of management that they have ever known. They have no models from which to redirect their thinking.

THE CONDITIONS OF LEADERSHIP

This was the impetus for the development of the Ideal Leadership Model. The Western models of leadership presuppose a certain rationale that simply could not be postulated with leaders in the Baltic countries. Quite frankly, as we considered the enormity of the task at hand, we realized that we would have to approach the subject of leadership from a totally fresh perspective.

There is a precedence for this in psychology. One of the breakthroughs in the field of cognitive psychology came as a result of Project Zero at Harvard University. They started with the premise that they would start from scratch and see what they could discover about human intelligence. The result was the theory of Multiple Intelligences, popularized by Professor Howard Gardner. We felt that perhaps this same idea could be applied to leadership.

We began with distinguishing between the measure of control that was largely exhibited among those in management and those who truly led their organizations. A policeman can stop cars on the highway, exerting control, but he could never be said to be 'leading' the traffic. A director who is simply bossing his employees around, ruling through intimidation and fear, cannot in any true sense be said to be leading his employees. Leaders, by definition, must have followers.

So how did certain individuals find themselves in decision-making positions? Sometimes it was merit, true, but more often it was nepotism or favoritism and sometimes it was simply luck. We narrowed down the four factors that determined whether an individual would find themselves in an authority capacity and called them leadership conditions. These four factors were all necessary for an individual to exert some control over their organization.

Two of these factors could be considered extrinsic to the particular leader, meaning that these are factors that are largely outside their capacity to determine. The first of these is People. The followers either support or resist the leader's efforts, largely for psychological reasons outside the leader's control. The obvious of these is age. Younger people aspiring to be leaders have difficulty being accepted by those older than them. The second extrinsic factor is Period, meaning the particular time period that the leader serves. The socio/economic climate works either for or against the particular individual's situation. This was especially true with those who were able to take advantage of the void in the market after the collapse of the Soviet Union. Being at the right place in the right time gave birth to a number of banks, shops, and other businesses.

Two of the leadership conditions could also be said to be intrinsic to the particular leader, in that they do have some measure of determination over them. These include Place, the domain that the leader serves, and their Position within that domain. My favorite example to illustrate this is Isaac Newton, probably the most brilliant scientist who ever lived. Within his domain of science, he had no peers. But in his later years, Newton entered Parliament and contributed absolutely nothing of significance. His one and only comment of record was, "Could someone please open a window, it is a little hot in here." While being one of the recognized leaders in the world in the scientific community, he could not be leader in the Place or domain of public service.

A person must also have the clout or impact in their position to make a difference in the direction of the organization. Vice presidents might have a nice title and pretty office, but no real decision-making capacity. They do not have the leadership conditions in their favor to cause them to be a leader. So we recognized overall that a person had to be in the right place, at the right time, doing the right thing for the right people - to be able to lead.

LEADERSHIP CAPITAL

But what causes this individual to be a good leader, one who truly is causing his or her organization to move forward in a positive direction, and not one who is simply trying to increase his or her own power, prestige, and pocketbook? Could the particular qualities that distinguish those who are leading in the best sense of the term be identified?

Of course, this has been the quest for the Rosetta Stone among leadership researchers for almost as long as the subject has been studied. Even Napolean drew up a list of essential traits he felt necessary for those who were called to lead. Endless books are offered today with twenty-one essential traits, twelve necessary qualities, seven secrets of leadership success and so forth and so on. We knew this presented a daunting challenge, but endeavored to analysize the process step-by-step.

Thomas Kuhn provided the best framework for constructing any scientific model with his concept of paradigm. Though the term is overworked in management literature (reduced to simply meaning 'a change in thinking'), Kuhn brilliant thesis Structure of Scientific Revolutions demonstrated that all science begins with a certain mental framework from which all subsequent research and conclusions are drawn.

Given this premise, we endeavored to look at leaders in the Baltics and determine how their particular paradigm was constructed. We found that this could be determined from their leadership philosophy, the Vision that the leader projects and the Values they embrace to accomplish their vision. We determined that vision represents the future focus of the leader and the values are largely determined from their past. This left us with discovering what forms a leader's present orientation.

Fortunately, cognitive psychology has made great strides in the past decade in showing the integration between emotions and intellect. No longer are these seen as separate but rather intertwined components - which we broadly identify as the leader's Wisdom. How this wisdom is used is largely determined by a leader's Courage. These two elements essentially form the basis for a leader's intrapersonal perspective.

Interpersonally, the two factors that we boiled down the leader's interactions to their followers were Trust (the 'glue' or bond between the leader and their followers) and Voice (a very broad term to describe the overall message that the leader projects). These four qualities, then, (1) wisdom, (2) courage, (3) trust, and (4) voice form what could be termed the presence of the leader. Combined with the two philosophical qualities, vision and values, these form the basis for what we termed Leadership Capital.

Taken together, the Leadership Capital and the Leadership Conditions, formed a model by which a basis for understanding could be researched. Called the Interdisciplinary Leadership Model, or Ideal Model, it provided a framework for explaining the dynamic interaction of all the elements of leadership. Finding this synthesis has helped correct the 'blind men' syndrome so common in other models. The blind men may study the elephant and make observations, but unless they have some frame of reference, their conclusions will be totally wrong. By describing the overall elephant, so to speak, we have been able to better examine the particular aspects.

So we found that an individual may find themselves fulfilling the conditions of leadership and hence be serving in that capacity, but how well they perform will be determined by their leadership capital. A person may aspire to leadership and even practice good self-development skills to prepare themselves - but unless the sociological components are in place, they will not lead.

Now we asked ourselves some basic questions. Are any of these six characteristics gender sensitive? Are they innate or can they be acquired and developed? What happens when a leader is strong in some areas and not others? We realized that having formed a model through intuitive investigation, we now had to conduct empirical studies to verify it.

WHERE THE RESEARCH LEADS

We constructed two self-assessment tools. The first was a simple 60-question test with ten questions for each of the leadership capital areas. The exam was carefully designed with bi-polar questions so the examinee would not be able to detect what would be the 'best' answer. For example, an individual must rate themselves as 'very true' to 'somewhat true' on the statement, "I sometimes know something but can't explain how I know it" as opposed to the statement being 'very true' or 'somewhat true,' "I am very rational, I know what I know." The examinee is also allowed to rate themselves as 50/50 between these two poles.

The simple tool gives a series of six scores; one for each of the leadership capital areas on a 100% scale. The overall scores from hundreds of examinations done on leaders in the Baltics shows that most leaders fall in the 60-70 percentile range in all areas with the exception of the Values competency. Values, which implies having as Stephen Covey termed it, "a moral compass through the wilderness of changing times," is relatively rare among most managers and directors in the Baltic countries. The average score in this competency is in the mid 50s.

The second assessment tool is an extension of the first one. For selected leaders who participate in the Leadership Academy of the Exectutive Education Department of Stockholm School of Economics in Riga, an additional 90 questions are asked relating to the leader's personality, motivation, temperament, and habits. These provide the psychological clues to understand why the leader scored as he or she did in the six areas of leaders competence. These extended assessments have provided invaluable insights into the development of leadership among Baltic managers and directors.

One of the first discoveries was that courage in the Baltics is much more difficult than in most Western nations. Particularly in the United States, failure is almost seen as a badge of honor. To fail means that something bold was at least attempted. But in the Baltics, failure carries a strong social stigma. Not quite as intensive as the Japanese fixation on 'saving face,' Baltic leaders believe that a failure translates as weakness and this defuses their power base. Most directors would prefer to play it safe than risk a threat to their authority.

Another important discovery was found in the development of competencies dependent upon the size of the organization. In the smallest of companies such as start-up entreprenurial enterprises, the primary need of a leader's presence is in the area of Trust. Everything in a small company is based on trust of the leader. The employees are trusting that the leader's vision for the company will be successful, hence their willingness to join in the effort. And the customers are also trusting as they must risk buying from an unproven source.

As the organization begins to grow to the next level, the director realizes that they are unable to manage everything alone. Here the competency of Wisdom comes to the fore, as the leader must figure out the best strategy for organization and growth. Many leaders who are successful at the smallest level fail as the company grows simply because they are unable to develop the skills and knowledge necessary to manage a larger organization.

The company that becomes an established company, particularly in Latvia where most of our studies have been conducted, experiences struggles with the competency of Voice. The established company generally has a number of different departments and has operations in various locations, so the task of keeping 'all the noses in the same direction' becomes an important task. Finally, at the largest size domain, the compentency of Courage is paramount, as each decision of the leader has wide ramifications.

One of the most promising results of the research was the evidence that all six of the leadership competencies can be developed within the leader. The model is armed with strong intuitive study of what constitutes the embryonic elements of each competency. By examining these elements, the assessments were able to pinpoint what specifically the leader should seek to improve.

It was also evident that leadership competencies in the Baltics are not in any way gender specific. In fact, in areas of Wisdom and Values, women consistently scored higher than the men. We also found that within the three Baltic nations, no one nation seemed to perform exceptionally better than the others. Though these countries are distinct in culture, language, and history - their common experience of fifty years of Soviet domination has drawn them together in more ways than they would perhaps prefer.

WHERE TO NEXT?

The Baltic countries will be in a state of transition for some time to come. The future is very promising. Stockholm School of Economics in Riga, for example, has nearly 2000 applicants annually for the 115 placements for its three-year undergraduate program. The program is extremely demanding; all studies are in the English language, they are required to do two summer internships and make reports based on these internships, and they also must write a major thesis in their last year. They will be an indispensible resource for the banks, businesses, social organizations, and government agencies in which they will work in coming years. The quality of these young people gives hope that the Baltic nations have the capacity to become valuable members of the European and world community.

The present generation of leaders are growing and developing as well. A promising sign is that the new Executive MBA program at Stockholm School of Economics in Riga has attracted a number of the first participants of the Leadership Academy. Through executive education, a number of leaders are discovering how they can become more sensitive to their followers and at the same time, develop the necessary skills to lead their organizations forward in the turbulent, competitive market of today. And who knows? Maybe the model of leadership being developed here may someday make Riga the Leadership Capital of the World.

Reprinted from Personalführung, no. 5, 2003, pp. 48 - 52.