The Invisible Hand of Leadership


“Setting oneself on a predetermined course in unknown waters is the perfect way to sail straight into an iceberg.” Henry Mintzberg

Adam Smith, often cited as the father of modern capitalism, introduced the idea of an economic “invisible hand” that helps demand and supply in a free market to reach equilibrium.  Smith argued that market forces naturally do the necessary work to keep economies in balance.  One of the great debates among economists is how much economic intervention is healthy and necessary.  At what point do government policies bolster and at what point do they diminish economic growth? Organizational leaders should ask the same question of their policies, structures, and leadership styles in considering how to grow their organizations.

Like national economies, organizational life has influencing forces that largely reflect human nature and help people find their equilibrium point of motivation and ability.  The most obvious example is incentives. If you offer more financial rewards, praise, and opportunity for certain behaviors you direct people’s investment of time and talents.  If your organization lacks clarity and structural support, you largely leave it up to individual forces to determine how people will invest their working hours.  Just like economist, leaders debate on how much intervening policies are needed to find the optimal performance point.  The debate can range from the necessity of thick operating manuals detailing each situation with close management oversight to self organizing teams that control everything from what to do, to how to do it, to how much reward to distribute.

Leaders today make these decisions in the context of an increasingly complex operating environment.  This was certainly true for General Stanley McChrystal who was tasked with neutralizing Al Qaeda in Iraq starting in 2004. McChrystal quickly discovered that his opponent was fighting a much different type of warfare than his military forces had prepared to fight.  Although McChrystal commanded a much superior force in terms of personnel and materials, he was constantly failing to prevent terrorist attacks and capture the perpetuators. In his book Team of Teams, he describes the situation, “In the course of this fight, we had to unlearn a great deal of what we thought we knew about how war – and the world – worked.”

McChrystal identified the following challenges to creating the kind of organizational approach needed.

  • The current systems depended more on being able to predict the enemy’s actions and respond accordingly but the enemy was unpredictable.
  • The needed organizational teamwork was very difficult to scale and created silos.
  • Speeding up the individual elements of the system did nothing to eliminate the interface gaps between them.
  • People had trouble seeing the operating system in its entirety.

The solution “Team of Teams” focused on two practices: “shared consciousness” and “empowered execution.” Shared consciousness starts with a desire to fuse generalized awareness with specialized expertise. Basically, McChrystal argues that often what makes a high performance team (shared vision, strong sense of belonging, high trust level) create barriers to sharing information and true teaming across the organization.   McChrystal’s goal was for the entire organization to share a holistic understanding of the environment and the organization while also preserving each team’s distinctive skill set.

His approaches to creating shared consciousness are all quite practical. He started with designing an open workspace and putting different rungs of management in the same place.  Secondly, he established a daily briefing that shared information with all task force members and partners. Equally important, he made the daily briefings very interactive so that deep learning was taking place across the organization.  McChrystal sought to maximize idea flow by having a high level of engagement within teams and encouraging frequent contact among teams.

Empowered Execution derived from some insightful and humbling revelations from McChrystal. As the senior officer, he had to be consulted on most decisions. While this made him feel important and needed, he began to question his value to the process. Unless he had personally been tracking a target, he would usually only know what the officer was telling him. He rarely had some novel insight. Technology had made it possible for him to be in the communication loop, but providing a  “rubber stamp” only slowed the process.   While he could access all the information, he could not process it fast enough and accurately enough given the quantity and speed of decision making needed.  Empowering others to make decisions became the only way to make the best decisions in the relevant time frame.   McChrystal observed, “Paradoxically, at exactly the time when I had the capability to make more decisions, my intuition told me I had to make fewer.”

Unfortunately, McChrystal’s revelation is not all that common.  According to the Harvard Business Review only 20% of workers feel empowered and act resourcefully.  Despite having life and death responsibility, McChrystal chose to err on the side of greater delegation.  He discovered the sweet spot of empowerment to be the point at which he felt uncomfortable.  McChrystal redefined his role as a “humble gardener” rather than the “heroic leader.  He discovered that “Without my constantly pruning and shaping our network, the delicate balance of information, and empowerment that sustained our operation would atrophy.” 

It turns out the invisible hand of leadership requires a lot of intentionality and design.  And more importantly, requires leaders to lose their ego and redefine their role.  But the result is an organization that finds the optimal point between leadership supply and demand.