Why Theories and Maxims?

We’ve already mentioned why the distinction between theories and maxims is important, but it's worth elaborating upon.

Leadership is tough to make generalizations about because relevant sample sizes are small. Therefore, it can be hard to create reliable statistics in order to, through empirical support, move a theory from one way of knowing (logic) to two (combination of logic and observation). To a certain extent, maxims are unavoidable—and many current and former leaders are willing to share their experiences. That said, the lessons they impart might have issues, since certain things can never be verified via maxim. Let’s look at an example.

Everyone looks to Jeff Bezos, the founder and CEO of Amazon, as a great leader. And, indeed, he's led one of the largest and most profitable corporations in history. But is it because he's inherently a great leader? Or did he happen to start a company at the right time, when the public was waiting for an online retailer? Was it that the workforce he hired was, for the first time in history, technologically savvy enough for a company like Amazon to actually work? Was it the dot-com boom boosting the U.S. economy enough for it to support a company that lost $719 million in its first seven years (Hendricks, 2014)? 

All of these questions can help us explain Amazon’s success, but we often attribute that success to Jeff Bezos himself because the personal leadership maxim he endorses is attractive to a public audience. It's also easier for us, as witnesses to the success, to focus on a single person rather than various situational details. We are trusting Bezos's expertise as a single individual (authority), but it is lacking full empirical support (observation), because not all of its elements can be measured in a scientific way. (Please note that we aren't knocking Jeff Bezos—by all accounts, he is a good leader. This example is only intended to show why maxims are not great for understanding the full extent of leadership, especially compared to theories, which get at all of the details.)

What happens when personal maxims are applied to organizations? Very occasionally, they actually improve the organization, but that can be attributed to chance. Typically, they have no effect. In some cases, though, they have a distinct negative effect, harming the organization with ideas that don't fit. There can be all sorts of reasons for the mismatch:

• organizational culture,
• current societal pressures,
• customer perceptions, and
• many more.

Let’s take a look at a popular example from the 1980s. Jack Welch headed General Electric, a highly profitable country that was one of the biggest in the world. Welch's personal leadership maxim was to cut the bottom 10% of employees every year. This helped drive investments into the company, as the 1980s were known for cutthroat business tactics that were popular among the general public. Later, though, the company struggled when other parts of the economy excelled (as in, for example the dot-com boom). Welch's maxim fell out of favor as GE's success decreased. There are all sorts of reasons for this, but none can ever truly be measured. It could be that good people stopped applying to the company, knowing that they might not have a job in a year. It could be the dot-com industry hiring all the talent. The list goes on and on.

Theory is a stronger way to explain leadership. Using logic and observation, theories methodically and quantifiably build solid explanations of leadership that work in nearly any situation. Theories, unlike maxims, can have a large impact on organizational leadership and performance. The theories that you have studied and will study in the OLEAD program, for example, have collected evidence from thousands of leaders using a variety of methods over an extended period of time. A large amount of observed evidence paints a more holistic picture of leadership than any maxim (a single opinion) ever can.

Think of it this way: If you were going to guess your odds for winning the lottery, which would you do?

• Base your guess on the fact that one person won the lottery last year.
• Calculate the odds based on the number of tickets sold.

A person guessing based on theory would calculate their odds based on the fact that there is a very slim chance of winning—literally one in a million. Someone acting on a maxim might base their guess on knowing someone who won, assuming success is easy.