1. Lee Iacocca The Benefits and Costs of Charismatic Leadership
Andras Török
Syamak Bahmanyar

2. „We are continually faced by great opportunities brilliantly disguised as insoluble problems“ Lee Iacocca

3. Outline Short biography Charismatic leadership Power
Personal
Position
The dark side of Charisma
Conclusion and recommendations

4. Short Biography I Born in 1924 Parents were immigrants from Italy
Excelled already in school
Received a master‘s degree in mechanical engineering from Princeton
Joined Ford in 1946
Became President of Ford in 1970

5. Short Biography II Was dismissed by Henry Ford II
Joined Chrysler immediately afterwards
Company was in trouble
Iacocca managed to save Chrysler
Secured government backed loans
Appeared in advertisements
Left Chrysler in the early 90‘s

6. Charismatic Leadership
Building a vision
Communicating the vision
Instilling trust in the vision
Unconventional ways to achieve the vision
Empowerment

7. Iacocca: Building a vision
Arrived at Chrysler when the company was in big trouble and close to bankruptcy
Created the vision of turning the company around, making it profitable and elevating it to the top players in the automobile business

8. Iacocca: Communicating the vision
Linked the vision to the most basic values of followers
Iacocca possessed outstanding rhetorical abilities
Used metaphors frequently for communication
I didn’t take the one dollar a year to be a martyr. I took it because I had to go into the pits.” Lee Iacocca on the question why he cut his salary to 1$.

9. Iacocca: Instilling trust in the vision
Trust through self-sacrifice
Cut salary to one dollar („equality of sacrifice“)
Trust through expertise
Very good reputation in the industry
Expert Power
“Although my reduced salary didn’t mean I had to skip any meals, it still made a big statement in Detroit. It showed that we were all in this together. It showed that we could survive only if each of us tightened his belt.” Lee Iacocca

10. Iacocca: Unconventional Ways
Brought union representation to the board
Chrysler was the first company to do so
Appeared in advertisements
Introduced money-back guarantees on cars
Secured government-backed loans

11. Iacocca: Empowerment Introduced quarterly review system
Managers could set their own goals for the next three months
Were responsible for these goals
“First, it allows man to be his own boss and to set his own goals. Second, it makes him more productive and gets him motivated on his own.”
Lee Iacocca, when asked why he introduced the quarterly review system

12. Power and Charisma Power connected to charismatic leadership
Idolized Leaders
Decisions not questioned
More autocratic decision-making
Referent power
Expert power

13. Iacocca: Personal Power
Strong referent power
Great skill in verbal persuasion
Many employees followed him from Ford
Expert Power
Very good reputation
Invented the Ford Mustang

14. Iacocca: Positional Power
Took the most important decisions by himself
Very autocratic
Too autocratic???
“Despite what the textbooks say, most important decisions in corporate life are made by individuals, not by committees. My policy has always been to be democratic all the way to the point of decision. Then I become the ruthless commander.”
Lee Iacocca on decision-making

15. Dark side of Charisma Charisma does not only have positive effects
Negative charismatics have a personalized power orientation
Harms the followers
Does not benefit the vision

16. Iacocca: Negative Charisma
Vision
Failed to recognize fundamental change in customers‘ needs in the 80‘s
Dysfunctional management practices
Failure to manage details effectively
Creation of in-group/out-group conflict
Too autocratic management
Succession
Did want to leave the company
Wanted to hold on to his position

17. Conclusion & Recommendations
Charismatic Leadership can be beneficial
More likely in crisis situation
If conducted to excessively it rather harms than it does any good
Charismatic leader should install measure to prevent this from taking place

18. Measures Create feedback mechanism Encourage feedback Listen to advice
Increases awareness of „bad“ behaviors
Encourage feedback
No penalty for feedback
Reward feedback
Listen to advice
Do not consider yourself flawless
Retrospective thinking
Ensures decision quality
Learn to accept the status quo
Sometimes status quo might be beneficial
In this case learn to accept it

19. Thank you for the attention
Good luck with the final exam!!!!

20. Before we end, one final quote by Lee Iacocca
„In times of great stress or adversity, it's always best to keep busy, to plow your anger and your energy into something positive.“