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The Entrepreneur as Business Leader: Cognitive Leadership in the Firm
Article Type: Suggested reading From: Strategic Direction, Volume 27, Issue 6
Silke ScheerEdward Elgar, Cheltenham, 2009, ISBN: 978 1 84844 333 4, £59.95 Hardback, 144 pp.
In this wonderful little book Silke Scheer serves several purposes by bringing together and reconciling various pieces of scientific literature in a practical, meaningful, and altogether useful way.
To begin with, she presents what may be the next great stage or level of our understanding of leadership in a clear and practical way. While leadership trainers, academicians, and orators have been focusing on the wonderful ideas of charismatic and transformational leadership, and a spin-off notion of transcendental leadership, Ms Scheer has advanced our understanding of leadership in organizations with a relatively new, and vastly different, idea that has been developed by her and her colleagues at the Max Planck Institute of Economics.
The new idea (it is roughly 12 years old) is called cognitive leadership, and Ms Scheer does a very good job of explaining the concept in plain, simple, and practical language. The prevalent idea about leadership, charismatic leadership, as described by several authors in the past, requires leaders to be visionary and inspirational. They influence employees by appealing to their basic values, beliefs and attitudes and by appealing to their higher order needs. Transformational leadership, another take on the same idea, suggests that change occurs through every leadership act, and that both leader and follower are changed as a result of each leadership interaction.
These are tall orders for mere mortal leaders. Thankfully, cognitive leadership is less formidable and far more real world and practical. The cognitive leader does not need to be a superhero to exercise leadership influence. Cognitive leadership has more to do with the creation and sharing of “mental models” or ideas or, on a more general level, the creation of an organizational culture. This leadership model requires only that the leader influences followers by communicating and by creating a learning process. These influencing processes are based on the frequency of interaction between leaders and their followers.
This latter point is critical to the understanding of how leadership works in an entrepreneurial organization and how such organizations grow successfully or meet a different fate.
This brings us to the second purpose of this book which is to describe how entrepreneurial organizations grow through cognitive leadership.
Cognitive leadership is based on the premise that leadership occurs via the development of shared business concepts or “mental models.” At the start up of an organization the entrepreneur – the founder – has a business concept. As the entrepreneur builds the organization with new employees, she and those employees have intense communications about this business concept and develop a socially shared interpretation of this concept or model. Through these discussions cognitive coherence around the business concept occurs allowing for independent decision making and action on the part of followers.
A primary assumption of the theory of cognitive leadership is that individuals are limited in their ability to communicate and interact – that is, they have limited cognitive capacities. As a result, as the organization grows and the number of employees increases, it becomes less and less possible for the leader to interact and communicate directly with the organization members. Consequently, the direct impact of the leader on employees diminishes and the potential for rival business concepts or mental models to take over rises significantly.
In this case Scheer suggests that there are three kinds of things that may happen. First, the founder may not react appropriately and continue to lose predominance over the employees. This will be accompanied by a decline in coordination and monitoring of the firm.
The second possibility is that the founder will set up a “monitoring regime” – a hierarchy of managers and coordinators with specific instructions for dealing with various situations. She points out the well known detrimental effects of this bureaucratic approach.
The third possibility is to establish sub-divisions supervised by entrepreneurs who clearly share the business concept and mental model of the founder. This she calls the “divided entrepreneurship” regime. The founder’s aim in this approach is to implement an overarching business concept that is generally applicable to all divisions. To insure the ongoing influence of this business concept the founder must ensure that there exists frequent interaction between her or him self and the sub-group of divisional entrepreneurs around the mental model.
The value of this book to leaders of organizations is her conceptualization of cognitive leadership and how it influences individuals and groups. She does a wonderful job of describing the process of leadership through a hierarchy – that is, how a leader can extend his or her influence through levels of bureaucracy via mental models. To be sure there is much scientific information provided in support of her arguments which the individual leader may or may not want to wade through. For the practical leader to gain value from the book it is not necessary to understand the science behind it. The academic/scholar on the other hand will find the scientific review useful and instructive.
This brings us to the third purpose of this book which is to provide extensive scientific support for this theory of cognitive leadership. This Ms Scheer does amply and ably. Her review and use of the scientific literature is extensive, efficient, and cogent. To be sure, this book is designed primarily for scholars and academics. However, the average business leader will take away tremendous new insight into how leadership works and what alternative methods might exist for them to lead their organizations whether those organizations be entrepreneurial or not.
Reviewed by Tom Kent, Department of Management and Entrepreneurship, College of Charleston, Charleston, South Carolina, USA.
This review was originally published in Leadership & Organization Development Journal, Volume 31, Issue 5, 2010, pp. 473-4