4 Traits of Successful Transformational Leaders

Digital transformation, regulatory constraints, requests for disclosure of the relationship of CEO pay to total shareholder return (TSR), increased M&A activity, Foreign Corrupt Practices Act (FCPA) issues, and new SEC clawback rules for accounting mistakes have significantly altered standard operating procedures at the top of many companies. In this tumultuous environment, transformational leaders are being sought out as never before.

These leaders bring about change that defies linear understanding—by embodying a diverse array of thinking styles and adjusting their actions in real time as complex business challenges require.

Though most organizations are aware that these qualities are desirable, they often shrink from selecting people who possess them for leadership roles, opting instead for someone in the traditional, risk-averse mold—which, ironically, may well be the choice that should give us pause.

While there is no magic formula for identifying a transformational leader, they do tend to have 4 key things in common.

1. They “fail well.” Think Steve Jobs being forced out of Apple only to lead it again years later. Home Depot founders Arthur Blank and Bernard Marcus started that company after being fired from Handy Dan under pressure from a corporate raider; similarly, Michael Bloomberg’s seed capital for his multibillion-dollar empire was his severance check from Salomon Brothers—he was forced out after the firm was acquired. In all of these cases, the CEOs in question took on phenomenal challenges after suffering what would be career-ending setbacks for most. This ability to embrace risk is central to the transformational profile. It is interesting to see what happens when interviewers probe for failure stories instead of success stories; much interesting information about the ability to transform can be gleaned.

2. They lean toward the strategist side of the strategy/operations dichotomy. This can put companies in something of a bind, as they may feel that they are facing operational challenges and need to hire a strong operator. Often, however, a business transformation is needed, and a strategist is crucial to this shift. One well-wrought compromise is often to hire terrific operators to work for a keen strategist—certainly better than deploying strategists below a leader whose vision does not extend beyond operations. Perhaps as a result of this thinking, fewer companies are putting COOs into the CEO seat: recent Russell Reynolds research showed a drop in this particular move over the last three years.

3. They are willing to take the long view and may even seem wrong for the present. Intriguingly, transformative leaders may seem wrong for the company’s current situation and may ultimately be better suited to how the business will function some years down the road (which is highly relevant, given a typical five-year succession time frame). Think of Larry Merlo at CVS, who pushed past significant initial resistance to transform that company into a successful full-spectrum healthcare provider four years after his appointment. Companies can utilize scenario planning to identify possible future situations and can then ask leader candidates how they would deal with those possibilities.

4. Perhaps most challenging for companies, the right transformational leader for their business may be an outsider. Under the current conditions of rapid and intense business model disruption, knowledge of the business can in fact interfere with understanding the sharp changes in direction an organization may need to take. Transformative outsiders are often willing and able to mobilize nimbly to make change in situations where insiders hesitate and, as a result, fail. Interestingly, outsiders do not have to be literal outsiders—“intrapreneurs” who have used transformative skills to build new businesses within an established company also excel at looking at problems from a fresh and often heretical perspective.

Choosing leaders with these 4 characteristics cannot guarantee success in selecting CEOs, board directors, or other top leaders. But taking these factors into account can help the odds, and with ever larger amounts of money on the line, opting for transformational leadership is a bet companies should be happy to take. In the end, it may be that the path to leadership has fundamentally changed, and we are all challenged to constantly revisit our mental picture of what a real leader looks like.