Ram Charan What Every Company Should Know

How often have you known a leader who takes command of the room the minute he walks in, gets all eyes focused on him, delivers a fantastic PowerPoint presentation, and has everyone eating out of the palm of his hand?

When that happens, people think to themselves, "Now that's a leader!"

But as time goes on, the same leader makes terrible decisions or none at all. The people who report to him lose focus, the organization loses direction, and the business begins to flounder.

The so-called leader, it turns out, has no real ability to lead a business.

Style Before Substance

The issue comes down to style versus substance. Far too often, the people who identify, develop, and appoint leaders focus on the appearance of leadership. They miss the most important aspect of it: knowing how to run a business.

In his book Blink, Malcolm Gladwell notes that CEOs are on average three inches taller than the average male, and he attributes this fact to an unconscious bias. An imposing physical stature, he surmises, sends unconscious signals about who is or isn't a leader, and thus influences who gets picked.

It may be hard to believe that people are swayed by such superficial qualities, and height is clearly an extreme example. But there are many other traps that cause us to put the wrong people in leadership positions, with terrible consequences for the person and the business.

Are They Really Leaders?

There are certain types of leaders who aren't necessarily business leader. Don't assume you've found a leader when you find one of the following:

• The Pedigree

  When you hear leaders making frequent references to their alma mater ("When I was at Harvard...") or the big successful company they used to work for ("When I was at Toyota..."), be skeptical. Such people may be trying to impress by virtue of where they've been, rather than what they've done as a leader.
  

  I'm not against education or valuable work experience. (In the spirit of full disclosure, I'm a proud Harvard grad myself.) The point is that some people are taken in and choose such "leaders" either because they assume something good must have rubbed off, or because they think it's safe.
  

  It isn't. You have to look at the person's skills and record of actual accomplishment to have any sense of the person's capability as a business leader.

• The Spiritual Leader

  Some people have a way of stirring up energy and excitement in other people. They conjure a vision of something great and appealing and have extraordinary communication skills that fire up emotion. People believe them, and want to go where they're going.
  

  The ability to inspire others is indeed a wonderful trait in leaders, but not every person who can arouse emotion can link her vision to the practicalities of business, and emotion alone cannot get an organization where it needs to be.
  

  When a spiritual leader, rather than a business leader, runs the show, the initial burst of excitement can be uplifting. But it inevitably fades when results fail to materialize.

• The Brain

  One way people gauge a leader is by how smart she is. We can't help but be impressed by the person who reacts quickly, gets to the answer fastest, can speak knowledgably on a breadth of topics, and has instant recall of names, quotations, and numbers.
  

  Sometimes such people let you know how well-read they are. But being quick on your feet is not the same as intelligence, and intelligence is not the same as being a leader. Do we want intelligent leaders? Absolutely. Just don't choose leaders based on raw intelligence alone.
  

• The Savior

  A leader is running a troubled division. Margins are shrinking, quality is deteriorating, and customers are defecting. But he is undaunted by every piece of bad news. In every review, he assures his superiors that change is right around the corner.
  

  He has a plan, meticulously detailed in charts and graphs. He wants you to trust him, and because he seems so confident and sincere, you do.
  

  Optimism and confidence are appealing, but make poor substitutes for the know-how of addressing problems. And we all know that problems neglected have a way of growing. The person who promises the answer but never delivers on it is not a business leader.

Focus on Substance

There are lots of personal traits we want in our leaders -- things like confidence, intelligence, and communication skills. But if we want our organizations to be in good hands, we have to focus primarily on the substance of leadership -- whether the person really knows what he or she is doing.

If you're an aspiring leader, don't assume you were born to be a leader. Leaders are largely made, not born. You have to build your leadership capabilities. The time you spend polishing your PowerPoint presentations or building your reputation may get you ahead temporarily, but in this age of transparency, the inability to deliver results will eventually catch up with you.

You have to put at least as much effort into developing the skills, or know-how, that leadership requires. That's the subject of my upcoming book, and my next Yahoo! Finance column.