Contingency Theory and Level 5 Leadership

Good to Great by Jim Collins describes Level 5 leaders as those who “channel their ego needs away from themselves and into the larger goal of building a great company. It’s not that Level 5 leaders have no ego or self-interest. Indeed, they are incredibly ambitious- but their ambition is first and foremost for the institution, not themselves”. Collins uses examples of leaders who turned companies around, not just while they were there, but also set the company up for success after they left. We are going to look at one example used in the book, Darwin Smith, who was the CEO of Kimberly-Clark paper company for 20 years. When Smith became CEO, the company’s stock had fallen “36 percent behind the general market over the previous twenty years”. In the twenty years of Smith’s leadership, the company was transformed and generated stock returns 4.1 times the general market. Smith was determined to turn the company around and he put everything he had into making that a reality. His boldest, most dramatic decision was made shortly after he became CEO. This was to sell the paper mills. All of them. Smith and his team found that coated paper was becoming irrelevant, but had the idea to work their way into consumer paper-products instead. It was an incredibly risky move, one that would force the company to achieve greatness or perish. Ultimately, it worked out and the company turned around.

But how does this relate to Contingency Theory or Situational Leadership? Well, it would have been near-impossible for Smith to be as successful as he was without him taking into account his followers. Looking specifically at Smith’s idea to sell the mills, he had to convince his followers that it was the right thing to do. He had to appeal to each of them in different ways and inspire them to work together to make his ideas a reality. When it comes to the followers, leaders must adapt their leadership style depending on the types of followers they have, otherwise the team will not be as successful. One must be delegating, supporting, coaching, or directive with followers depending on the level of competence and commitment that the employees have. If Smith had used an approach that did not fit the employees, Kimberly-Clark would have had a much harder time turning their company around.

Level 5 leaders are not focused on themselves and how to enhance their career. They instead put everything they have into the company. Level 5 leadership is similar to situational leadership because these leaders are focused the situation the company is in and the employees. It doesn’t matter if they are more task or people-oriented, because they will do whatever it takes and adapt their leadership style to best suit the needs of the company. These leaders take into account their followers and the situation, as well as themselves, to create an atmosphere and system that best benefits the needs of the company.