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When asked to define the ideal leader, many would emphasize traits such as intelligence, toughness, determination, and vision-the qualities traditionally associated with leadership. Such skills and smarts are necessary but insufficient qualities for the leader. Often left off the list are softer, more personal qualities-but they are also essential. Although a certain degree of analytical and technical skill is a minimum requirement for success, studies indicate that emotional intelligence may be the key attribute that distinguishes outstanding performers from those who are merely adequate. Psychologist and author Daniel Goleman first brought the term "emotional intelligence" to a wide audience with his 1995 book of the same name, and Goleman first applied the concept to business with this 1998 classic HBR article. In his research at nearly 200 large, global companies, Goleman found that truly effective leaders are distinguished by a high degree of emotional intelligence. Without it, a person can have first-class training, an incisive mind, and an endless supply of good ideas, but he still won't be a great leader. The chief components of emotional intelligence-self-awareness, self-regulation, motivation, empathy, and social skill-can sound unbusinesslike, but Goleman, cochair of the Consortium for Research on Emotional Intelligence in Organizations, based at Rutgers University, found direct ties between emotional intelligence and measurable business results. The notion of emotional intelligence and its relevance to business has continued to spark debate over the past six years, but Goleman's article remains the definitive reference on the subject, with a detailed discussion of each component of emotional intelligence, how to recognize it in potential leaders, how and why it connects to performance, and how it can be learned.

In the winter of 2000, at the height of the dot-com boom, business leaders posed for the covers of Time, BusinessWeek, and the Economist with the aplomb and confidence of rock stars. These were a different breed from their counterparts of just 10 or 20 years before, who shunned the press and whose comments were carefully crafted by corporate PR departments. Such love of the limelight often stems from what Freud called a narcissistic personality, says psychoanalyst and anthropologist Michael Maccoby in this HBR classic, first published in the January-February 2000 issue. Narcissists are good for companies in extraordinary times--those that need people with the passion and daring to take them in new directions. But narcissists can also lead companies into disaster by refusing to listen to the advice and warnings of their managers. It's not always true, as Andy Grove famously put it, that only the paranoid survive. Most business advice is focused on the more analytic personality that Freud labeled obsessive. But recommendations about creating teamwork and being more receptive to subordinates will not resonate with narcissists. Narcissists who want to overcome the limits of their personalities must work as hard at that as they do at business success. One solution is to find a trusted sidekick who can point out the operational requirements of the narcissistic leader's often overly grandiose vision and keep him or her rooted in reality. Another is to take a leap of faith and go into psychoanalysis, which can give these leaders the tools to overcome their sometimes fatal character flaws.

The would-be analyst of leadership usually studies popularity, power, showmanship, or wisdom in long-range planning. But none of these qualities is the essence of leadership. Leadership is the accomplishment of a goal through the direction of human assistants-a human and social achievement that stems from the leader's understanding of his or her fellow workers and the relationship of their individual goals to the group's aim. To be successful, leaders must learn two basic lessons: People are complex, and people are different. Human beings respond not only to the traditional carrot and stick but also to ambition, patriotism, love of the good and the beautiful, boredom, self-doubt, and many other desires and emotions. One person may find satisfaction in solving intellectual problems but may never be given the opportunity to explore how that satisfaction can be applied to business. Another may need a friendly, admiring relationship and may be constantly frustrated by the failure of his superior to recognize and take advantage of that need. In this article, first published in HBR's September-October 1961 issue, W.C.H. Prentice argues that by responding to such individual patterns, the leader will be able to create genuinely intrinsic interest in the work. Ideally, Prentice says, managerial dominions should be small enough that every supervisor can know those who report to him or her as human beings. Prentice calls for democratic leadership that, without creating anarchy, gives employees opportunities to learn and grow. This concept, along with his rejection of the notion that leadership is the exercise of power or the possession of extraordinary analytical skill, foreshadows the work of more recent authors such as Abraham Zaleznik and Daniel Goleman, who have fundamentally changed the way we look at leadership.

Businesspeople tend to be extroverts, taking a lively interest in others and preferring action to introspection. But to be fully effective as leaders, they must learn to navigate the twists and turns of their emotions and those of the people around them.

The past three decades have been a time of increasing informality in the American workplace. It's easy to characterize this growing comfort with the casual as a positive step for workplace culture, an outgrowth of the American democratic belief in workers' equality. Informal environments are said to be more trusting and open, and workers who are free to express their personalities are more comfortable and, thus, more creative--right? According to etiquette guru Judith Martin--known far and wide as Miss Manners--informality in the workplace may do more harm than good. Without some formality in social intercourse, Miss Manners argues, human interactions end up being governed by laws, which are too heavy-handed to serve as a guide through the nuances of personal--or professional--behavior. On the whole, Miss Manners argues, informality in the workplace leads to a host of problems, from making employees feel pressured to "socialize" with coworkers during weekends and evenings to sexual harassment. Despite the shortcomings of informality in the American workplace, though, Miss Manners believes that we have the best code of manners the world has ever seen--in theory. In practice, American etiquette is undoubtedly still a work in progress.

Companies spend lots of time and money on complex tools to assess customer satisfaction. But they're measuring the wrong thing. The best predictor of top-line growth can usually be captured in a single survey question: Would you recommend this company to a friend? This finding is based on two years of research in which a variety of survey questions were tested by linking the responses with actual customer behavior--purchasing patterns and referrals--and ultimately with company growth. Surprisingly, the most effective question wasn't about customer satisfaction or even loyalty per se. In most of the industries studied, the percentage of customers enthusiastic enough about a company to refer it to a friend or colleague directly correlated with growth rates among competitors. Willingness to talk up a company or product to friends, family, and colleagues is one of the best indicators of loyalty because of the customer's sacrifice in making the recommendation. When customers act as references, they do more than indicate they've received good economic value from a company; they put their own reputations on the line. The findings point to a new, simpler approach to customer research, one directly linked to a company's results.

Answer true or false: "I am an ethical manager." If you answered "true," here's an uncomfortable fact: You're probably wrong. Most of us believe we can objectively size up a job candidate or a venture deal and reach a fair and rational conclusion that's in our, and our organization's, best interests. But more than two decades of psychological research indicates that most of us harbor unconscious biases that are often at odds with our consciously held beliefs. The flawed judgments arising from these biases are ethically problematic and undermine managers' fundamental work--to recruit and retain superior talent, boost individual and team performance, and collaborate effectively with partners. This article explores four related sources of unintentional unethical decision making: implicit bias--judging according to unconscious stereotypes rather than merit; in-group bias--favoring people in their own circles; a tendency to overclaim credit; and conflicts of interest. To counter these unconscious biases, traditional ethics training is not enough. You should gather better data, rid the work environment of stereotypical cues, and broaden your mind-set when making decisions.

Growth in an adjacent market is tougher than it looks; three-quarters of the time, the effort fails. But companies can change those odds dramatically. Results from a five-year study of corporate growth conducted by Bain & Co. reveal that adjacency expansion succeeds only when built around strong core businesses that have the potential to become market leaders. And the best place to look for adjacency opportunities is inside a company's strongest customers. The study also found that the most successful companies were able to outgrow their rivals consistently and profitably by developing a formula for pushing out the boundaries of their core businesses in predictable, repeatable ways. Companies use their repeatability formulas to expand into any number of adjacencies. Some companies make repeated geographic moves, whereas others apply a superior business model to new segments. In other cases, companies develop hybrid approaches. The successful repeaters in the study had two common characteristics: they were extraordinarily disciplined, applying rigorous screens before they made an adjacency move, and in almost all cases, they developed their repeatable formulas by carefully studying their customers and their customers' economics.

Why do so many newly minted leaders fail so spectacularly? Part of the problem is that in many companies, succession planning is little more than creating a list of high-potential employees and the slots they might fill. It's a mechanical process that's too narrow and hidebound to uncover and correct skill gaps that can derail promising young executives. And it's completely divorced from organizational efforts to transform managers into leaders. Some companies, however, do succeed in building a steady, reliable pipeline of leadership talent by marrying succession planning with leadership development. Eli Lilly, Dow Chemical, Bank of America, and Sonoco Products have created long-term processes for managing the talent roster throughout their organizations--a process Conger and Fulmer call succession management. Drawing on the experiences of these best-practice organizations, the authors outline five rules for establishing a healthy succession management system: Focus on opportunities for development, identify linchpin positions, make the system transparent, measure progress regularly, and be flexible.

Most brands don't make much money. Year after year, businesses generate 80% to 90% of their profits from less than 20% of their brands. Yet most companies tend to ignore loss-making brands, unaware of the hidden costs they incur. That's because executives believe it's easy to erase a brand; they have only to stop investing in it, they assume, and it will die a natural death. But they're wrong. When companies drop brands clumsily, they antagonize loyal customers: Research shows that seven times out of eight, when firms merge two brands, the market share of the new brand never reaches the combined share of the two original ones. It doesn't have to be that way. Smart companies use a four-step process to kill brands methodically. First, CEOs make the case for rationalization by getting groups of senior executives to conduct joint audits of the brand portfolio. Next, executives need to decide how many brands will be retained, which they do either by setting broad parameters that all brands must meet or by identifying the brands they need to cater to all the customer segments in their markets. Third, executives must dispose of the brands they've decided to drop, deciding in each case whether it is appropriate to merge, sell, milk, or just eliminate the brand outright. Finally, it's critical that executives invest the resources they've freed to grow the brands they've retained.

Among all the companies that were touched by scandal in 2002, Tyco was uniquely positioned to serve as a laboratory for governance reform. It had solid manufacturing businesses and, unlike Enron or WorldCom, it was not the victim of massive, systemic accounting fraud. Yes, there was serious malfeasance at the top, but undergirding the company was a foundation of profitable basic businesses. In this article, Tyco's first-ever senior vice-president for corporate governance describes the steps the company is taking to wipe the slate clean and restore shareholders' and employees' trust in its operations. The company began by bringing in a new CEO, Ed Breen; hiring some 60 new senior executives; swapping out the entire board of directors with individuals who boast strong backgrounds in operations as well as in finance; and meticulously, systematically scrubbing all the books. Tyco's new board is clear about who has authority over which transactions and, with three executives within the company reporting directly to it, has a window into day-to-day affairs. Most important, Tyco is creating the conditions for good governance below the senior executive level, including a stronger boundary between finance and operations management.

Now that companies such as General Electric and Citigroup have accepted the premise that employee stock options are an expense, the debate is shifting from whether to report options on income statements to how to report them. The authors present a new accounting mechanism that maintains the rationale underlying stock option expensing while addressing critics' concerns about measurement error and the lack of reconciliation to actual experience. A procedure they call fair-value expensing adjusts and eventually reconciles cost estimates made at grant date with subsequent changes in the value of the options, and it does so in a way that eliminates forecasting and measurement errors over time. The method captures the chief characteristic of stock option compensation--that employees receive part of their compensation in the form of a contingent claim on the value they are helping to produce. The mechanism involves creating entries on both the asset and equity sides of the balance sheet. On the asset side, companies create a prepaid-compensation account equal to the estimated cost of the options granted; on the owners'-equity side, they create a paid-in capital stock-option account for the same amount. The prepaid-compensation account is then expensed through the income statement, and the stock option account is adjusted on the balance sheet to reflect changes in the estimated fair value of the granted options. The amortization of prepaid compensation is added to the change in the option grant's value to provide the total reported expense of the options grant for the year. At the end of the vesting period, the company uses the fair value of the vested option to make a final adjustment on the income statement to reconcile any difference between that fair value and the total of the amounts already reported.

Two hundred of today's leading management thinkers were asked to identify their gurus. The result is an illuminating list, notable for some of the less obvious names it contains.

Two academics challenge U.S. multinational companies to match their increasing international sales with commensurate philanthropic giving outside the United States.

When Shirley Franklin took over as mayor of Atlanta in 2001, city hall was flat broke, employee morale was in the basement, and the public had lost faith. In her own words, Franklin describes how she's managing the city's recovery.

The new WorldCom (to be known as MCI) will come out of Chapter 11 as a formidable competitor. That's left some experts questioning U.S. bankruptcy laws.

This is an MIT Sloan Management Review article. Many international business leaders consider a global mind-set desirable, but few know how to embed it companywide. A corporate global mind-set differs from having a few managers think globally. That comes first. But global thinking must be incorporated into an organization's processes so that everyone knows how to handle the tug-of-war between local responsiveness and corporate efficiency. Two Northeastern University professors studied global companies and found that inculcating a corporate global mind-set lagged behind the will to do so. IBM made the most progress. Having originally overemphasized global consistency, it learned to embrace a more flexible approach, adopting global policy development teams, worldwide knowledge networks, and appropriate performance measures. Unfortunately, many American executives regard globalization as pursuing standardized products through centralized decision making. In favoring global consistency, they often fail to secure local cooperation. Through a global mind-set, corporate decision-making processes become more permeable to influences from beyond the home country. The authors show how managers can determine when an issue calls for a locally adaptive response, when it calls for a globally consistent response, and when both elements are needed. The corporate global mind-set is a requirement for motivating a diverse and sprawling work force and giving it a common purpose.

This is an MIT Sloan Management Review article. Most companies invest a significant amount of time and effort in a formal, annual strategic planning process--but many executives see little benefit from the investment. In the course of the authors' research, one manager compared his company's process with a "primitive tribal ritual," and another likened it to the Soviet system: "We pretend to make strategy and they pretend to follow it." The authors found that, although few truly strategic decisions are made in the context of a formal process, formal planning can be a real source of competitive advantage when it is approached with the right goal in mind: as a learning tool to help companies create within their management teams "prepared minds" (to borrow from Louis Pasteur). The key is getting right a host of seemingly mundane but actually critical details concerning the annual meetings that are at the heart of all formal processes--including who should attend the meetings, where they should be held, and what kind of preparation is necessary to make them effective. Following an analysis of those details, the authors offer several examples showing prepared minds in action, in which formal planning helped managers make solidly grounded, real-time strategic decisions in a world of turbulence and uncertainty.

New e-technologies such as mobile Internet phones and interactive television are widely predicted to generate a wealth of opportunities through the creation of new e-business models. At the same time, numerous high-profile Internet ventures have gone belly-up, and millions of investors around the world have been caught out. A focus on the successes can give the impression that an ingenious business model is all that is needed to create a thriving e-firm. But do these models really matter? What can we learn by examining the Internet failures or the problems inherent in each model? What are the real key factors determining the survival or failure of e-firms?

The battle plan for Operation Iraqi Freedom called for a rapid, responsive force capable of identifying and removing threats immediately. Commercial supply chains may draw some lessons from the government's groundbreaking efforts to accommodate its soldiers in the field.