The phrase "servant leadership" may not be familiar to a large number of individuals or corporations, but it's a belief system that is already widely embraced by some of the most successful organizations in the world. Its essence is a focus on individuals and a decentralized organizational structure. It also emphasizes other core values that encourage innovation and the development of leaders that must first focus on serving all stakeholders in an organization. Below is a discussion of servant leadership and why it can be an important driver for entities and individuals that embrace its core concepts.
Servant Leadership According to its Founder
The term servant leadership is attributed to an essay written by Robert Greenleaf (1904-1990) in 1970. Greenleaf's essay was entitled "The Servant as Leader" and stemmed from concerns over the merits of a centralized organizational structure as a management style to successfully run companies. This belief was undoubtedly formed in part while working at AT&T and evolved once he founded the Greenleaf Center for Servant Leadership in 1964. Greenleaf served as a consultant to promote his work after taking what has been referred to as an early retirement from the corporate world. Since Greenleaf's death, his center has continued his mission of promoting awareness of servant leadership and how it can improve corporate cultures.

First, it is important to present the concept of servant leadership from Greenleaf's perspective. He was suspicious of those focused on leading first, "perhaps because of the need to assuage an unusual power drive or to acquire material possessions," he said in his essay. Instead, he recommended making serving a priority, with the intent of "mak[ing] sure that other people's highest priority needs are being served."

His focus was from an individual perspective. As he put it, "caring for persons, the more able and the less able serving each other, is the rock upon which a good society is built." He believed that this responsibility had shifted over time to institutions, which were "often large, complex, powerful, impersonal; not always competent; sometimes corrupt."

Servant Leadership Further Defined
Boiling servant leadership down to its basic terms and how it can be used to improve business performance, in essence it can represent a decentralized structure that focuses on employee empowerment and encourages innovation. This mean having upper management share key decision making powers with employees that work directly with customers that are arguably better aware of what is needed to serve clients and remain competitive because of their knowledge of what is occurring on the "front lines" of the business.

The Greenleaf Center explains that when companies are close to the customer, they make better decisions that help retain clients as well as win new ones. Overall, this system is "more efficient and effective in allocating resources." It can also encourage innovation, which firms need to survive. Corporate cultures that centralize power in the wrong hands can end up stifling innovation.

Perhaps most importantly, servant leadership is focused on serving all stakeholders in the corporation. This includes employees, customers and the community in general. It is seen as an evolution of a traditional corporate measure that emphasizes growing shareholder returns over time. A criticism of this measure is that it can be at the expense of the other stakeholders, especially if profit is the only driver of corporate success and leads to the trampling of other stakeholders that are vital to long-term survival of an organization.

The Primary Characteristic
Larry Spears listed a number of essential characteristics that he saw as defining servant leadership. For firms to remain competitive, listening is crucial. Employees must stay connected to customers and industry developments and they need to listen and remain receptive to clients. This is because those external parties frequently have significant insight into product successes and changes that could grow into challenges or ruin a firm if not addressed. Awareness and paying attention to important issues are also seen as paramount. Additionally, persuasion is suggested through consensus building and stands in direct contrast to tactics that are considered more command and control. Coercive tactics that are pushed through from more centralized organizations can be especially destructive.

From an employee development perspective, empathy means takes the point of view that customers and colleagues have good intentions. It emphasizes open-mindedness in hearing decisions. Healing might seem too soft for many corporate cultures, but at its core it emphasizes the development of individuals from both personal and professional perspectives. For instance, encouraging learning, development and constructive feedback along with the completion of job tasks is the focus of this characteristic. Foresight is similar to awareness but stresses the ability to use past lessons for success going forward. A commitment to the growth of people is also warranted, as is an emphasis on developing talent.

Empirical Support for Servant Leadership
At its best, servant leadership can help a firm run more effectively. Healthcare bellwether Johnson & Johnson (NYSE:JNJ) is among the most renowned firms that embraces a decentralized style of management. It is immediately apparent that its corporate credo to serve customers, employees, communities and shareholders embraces an important aspect of servant leadership. Such companies typically strive to develop managerial talent and create leaders that rise from lower ranks and are therefore focused on serving customers and others within the firm.

Upper management spends a significant amount of time developing future leaders. A major focus of its human resources department is to find the appropriate mix of centralized and decentralized functions. Companies who practice servant leadership generally should leave acquired companies to operate independently so as not to negatively impact the entrepreneurial spirit that made them a viable buyout candidate in the first place.

Servant leadership for corporations to take the stance that what is good for customers is good for business. Such a culture encourages employees to create products of high quality and value in terms of price and utility to consumers.

Firms that qualify as going against the concepts of servant leadership include those that fell by the wayside during the 2008 credit crisis. Lehman Brothers and Bear Stearns are derided for placing greed and growth over customers that were sold supposedly sophisticated financial products for which they had little understanding or need. Employees, especially those in upper management, were unduly focused on profits and personal gain over a sustainable goal of treating all stakeholders with respect.

The Bottom Line
Servant leadership has many useful concepts that can be applied to businesses to help them run more effectively and efficiently. For investors, it can be used to identify firms that have the best chances for success while operating in intensely competitive industries.

Perhaps the best advice is for organizations to strike the right balance between centralized and decentralized activities. Servant leadership is obviously wary of a centralized, command-and-control style, but there are still going to be many instances where it is the most effective way to manage certain business operations. Overall though, servant leadership is important for its holistic views of corporations, individuals and communities, and how to protect and encourage their well-being.

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