Flawed from the “Get-Go”: Lee Iacocca and the origins of transformational leadership

Abstract

Transformational leadership has undergone a critical reassessment. Rather than examining the state of the science or the conceptual confusion and contradictions inherent in the ongoing stream of transformational leadership research, this article adopts an historical perspective, looking back on the founding era of this influential concept. In particular, the article evaluates the use of Lee Iacocca, who became the personification of the transformational leadership ideal. While placing Iacocca's appeal into a particular socio-historical context, the article offers a critical weighing of that devise. This use of Iacocca as a personification and embodiment of the transformational leadership construct was, at best, a highly romanticized take on an individual. At worse, the use of Iacocca was misleading and disingenuous. The article concludes that two core flaws of transformational leadership—over-attribution and romanticizing traditional leadership behaviors—were present from the inception.

Keywords

Transformational leadership American history Lee Iacocca intellectual history Chrysler Corporation

Introduction

Transformational leadership (TL), defined as a leader with the capacity to “help the organization develop a vision of what it can be, to mobilize the organization to accept and work toward achieving the new vision, and to institutionalize the changes that must last over time” (Tichy and Ulrich, 1984: 59), was first introduced into management discourse in 1984. Inspired by the appearance six years earlier of James McGregor Burns' Pulitzer Prize winning book, Leadership, Noel Tichy and David Ulrich extolled the capacity of TL to rescue the industrial base of the U.S. economy from the decline it had been experiencing for much of the decade. “Unless the creation of this breed of leaders becomes a national agenda,” Tichy and Ulrich insisted, “we are not very optimistic about the revitalization of the U.S. economy” (Tichy and Ulrich, 1984: 59).

At first, a cadre of scholars—notably Tichy and Ulrich joined by Bernard Bass and Warren Bennis—offered a small number of articles and books on the topic. By the end of the decade, that trickle had turned into what Burns called “an international tidal wave of researchers and scholars” focused on TL (quoted in Bass and Riggio, 2005). In a 1999 survey of research, James Hunt noted that the study of transformational and charismatic leadership had revitalized the field of leadership studies.¹

In the three decades following the Tichy and Ulrich piece, TL grew to become the most popular approach to and source of leadership research (Antonakis, 2012; Northouse, 2013). Articles examining TL outnumbered all leadership articles using other theories—trait theory, path-goal theory, and leader–member exchange theory among them—combined (Bass and Riggio, 2005; Judge and Piccolo, 2004; Lowe and Gardner, 2001). In addition, TL came to dominate the pedagogy offered in leading U.S. and U.K. MBA programs, helping to set the agenda for educating future corporate executives (Kellerman, 2012; Tourish, 2013).

TL scholars have occasionally sought to distance themselves from the potential abuses of claimants to the label. Pseudo and inauthentic transformational leaders are said to use many of the tools of the concept—charisma and inspiration most notably—to stray from the “moral foundation of legitimate values” on which TL is said to rest (Christie et al., 2011; Conger and Kamungo, 1998; the quote is from Bass and Steidlmeier, 1999: 184). These authors defended the core concept of TL against potential abuses in the real world in order to protect its integrity. But another response is equally feasible. That is, that the flaws of the TL lie not in the abuses by particular practitioners but in the conceptualization of TL by the theorists. Flawed execution or damaged conceptualization? While no single work is likely to offer a satisfactory, conclusive answer, this article weighs in on the side of the “damaged conceptualization” thesis by adopting an historical approach.

To evaluate the founding premises of TL, I adopt intellectual history as a broad framework for analysis. That framework is broad because “intellectual history” is a far-from specified field of inquiry (Gordon, 2007). I take as my point of reference Higham's classic definition of intellectual history as the history of thought (Higham, 1961). Specifically, intellectual historians ask who and why ideas occur when they do. It is the “state of mind” of the idea generators—in this case, the generators of the application of Burns' TL construct to management dialog—that rests at the center of this inquiry. The context in which a focal idea arises should also be appreciated by the intellectual historian (Gordon, 2007). That appreciation requires an understanding of the appeal of the idea, which I do by contextualizing the appearance of TL within broad socio-economic forces as well as with significant intellectual trends within academic discourse. At the same time, Higham (1961) requires the historian to offer a critical weighing of the focal idea's tenability, which I will do as well.

The “crisis of the American spirit”

The decade of the 1970s “was the only decade other than the 1930s wherein Americans ended up poorer than they began” (Stein, 2010: xi). The “age of compression” opened with the 1973 embargo by the Organization of Petroleum Exporting Counties (OPEC). That unprecedented action initiated a rest-of-the-decade decline in American economic fortunes. In the following year, the resignation of President Richard Nixon in the wake of the Watergate scandal left in place an unelected President, Gerald Ford, who had never stood for election as vice-president. Rather, he was appointed in 1973 when the elected vice-president, Spiro Agnew, was forced to resign due to his own scandal. Ford, Stein argues, lacked the political platform to respond effectively to this challenge to western capitalism.

Both the 1974 resignation of President Nixon and the fall of Saigon the following year were harbingers of what Bailey and Farber (2004) labeled the “cultural crisis” of the period. A 1979 accident at the Three Mile Island nuclear power plant seemed to undercut the desirability of turning to nuclear energy as a way of loosening the country's dependence on OPEC oil. America's “Rust Belt”—the upper Midwestern states that hosted much of the country's industrial operations—staggered under the economic weight. “One by one,” wrote historian Paul Boyer, “plagued by foreign competition, aging equipment, rising labor costs, and shifting consumer tastes, the factories that made America the world's industrial leader from the 1880s through World War II closed their gates” (Boyer, 1999: 379).

Schulman (2001) located the roots of a national malaise specifically in “the unchecked, out-of-control rage of inflation” (p. 131). Runaway inflation—in 1979 and 1980 the U.S. experienced two consecutive years of double-digit inflation for the first time since World War I—led President Jimmy Carter to institute voluntary wage and price freezes with little positive effect. A public opinion poll taken in February 1979 found only 26% of respondents claimed to be “highly satisfied” with “life in the nation today”; five months later, that figure plummeted to 12% (Gallup, 1980).

A lack of leadership lay behind this malaise. That, at least, was an argument being made with some frequency and prominence. The Culture of Narcissism, a surprise 1979 best-seller by cultural historian Christopher Lasch, reflected the view that America's leaders had lost their capacity to confront the difficulties faced by society (Lasch, 1979). An Independence Day editorial in the New York Post repeated the theme: “The United States is now a victim of a loss of nerve and will, wracked by indecision and groping for a glimpse of inspirational and innovative leadership” (New York Post, 2 July 1979: 25).

In July 1979, President Carter delivered a nationally televised speech to address what he called the “crisis of the American spirit.” (The text to the speech is reprinted in Mattson, 2009: 207–217.) That “malaise speech” directly confronted the national longing for leadership:²

The symptoms of this crisis of the American spirit are all around us. For the first time in the history of our country, a majority of our people believe that the next five years will be worse than the past five years. Two-thirds of our people do not even vote. The productivity of American workers is actually dropping, and the willingness of Americans to save for the future has fallen below that of all other people in the Western world.

“I will do my best,” the President vowed, “but I will not do it alone . . . it is time for us to join hands . . . [and] commit ourselves together to a rebirth of the American spirit.”

In a comment little noted at the time, Carter suggested that the American people expected far more than competent management from public officials. They valued leadership. This notion that “leadership” provided the needed antidote to malaise fit perfectly with a moment of reckoning that was simultaneously occurring among management scholars.

Intellectual antecedents to TL

Leadership research had been part of the academy for most of the 20th century. Stodgill's 1974 Handbook of Leadership offered over 6000 citations of academic work (Stodgill, 1974). By the time that book appeared, however, leadership research had become mired in minutia, contributing little—or at least contradictory conclusions—to an understanding of organizational performance. Even though the leadership literature was vast, the focus was almost entirely on influence and authority in small groups and the face-to-face interactions between first-line supervisors and workers (Hunt, 1991). The majority of Stodgill's 6000-plus citations—by my count, approximately 80%—focused on activities and concepts that were related only indirectly to what Burns understood to be leadership.³ Furthermore, the insights offered by scholars who were explicitly focused on leadership had reduced the topic to a set of highly technical interactions. “Leadership,” wrote Tannenbaum and Massarik in an influential 1957 Management Science piece, “always involves attempts on the part of a leader (influencer) to affect (influence) the behavior of a follower (influencee) or followers in a situation” (Tannenbaum and Masarik, 1957: 3). This was a field in search of a grand theory, and the ground for that theory was laid in 1977.

Separating leaders from managers

The search for leadership in academic circles received an important boost from a hypothesis that came to the fore in 1977: the idea that management and leadership were separate, even perhaps contradictory impulses. Prior to this time, the terms “leader,” “manager,” and “executive” were typically employed interchangeably (see, for example, Bridgeman, 1930; Cleeton and Mason, 1934; Gowin, 1915, 1918; O'Connor, 1934; Starch, 1943; Taussig and Joslyn, 1932). In a seminal (thus labeled by Khurana, 2007: 355) 1977 Harvard Business Review article, Abraham Zaleznik proposed that not only were management and leadership different, they were contradictory.

Managers seek to create and reinforce order, Zaleznik wrote, while leaders generate “relative disorder.” Writing from a perspective situated within Freudian psychology, Zaleznik argued that managers and leaders were fundamentally different types of people. They “differ in motivation, personal history, and in how they think and act” (Zaleznik, 1977: 68). To provide examples from the world of industry, Zaleznik offered General Motors' Alfred Sloan as the prototypical manager.⁴ For a leader, Zaleznik proposed Edwin H. Land, co-founder of Polaroid and driver of the company's instant film development innovation. (He also suggested, from the world of politics, John F. Kennedy.) Leaders such as Land are “active instead of reactive, shaping ideas rather than responding to them” (Zaleznik, 1977: 70–71).

Zaleznik did not suggest that leadership represented an undiluted benefit to organizations. Managers' sense of self-worth arose from working with others and perpetuating and strengthening their employing organizations. Leaders, on the other hand, preferred to separate themselves from their environment. “They may work in organizations but they never belong to them” (Zaleznik, 1977: 72, 74–75). Zaleznik's caveat was largely ignored in the immediate aftermath of his article.⁵

With the Zaleznik article, a new hypothesis had emerged: American industry was suffering from an overabundance of managers and a paucity of leaders. A seminal 1980 Harvard Business Review article made that point explicitly.⁶ In “Managing our way to economic decline,” authors Robert Hayes and William Abernathy chastised management and managers for undermining America's economic strength. “During the past several years,” the authors wrote, “American business has experienced a marked deterioration of competitive vigor and a growing unease about its overall economic well-being” (Hayes and Abernathy, 1980: 67). That failure, Hayes and Abernathy insisted, involved the loss of leadership, which in turn “has eroded both the inclination and the capacity of U.S. companies to innovate” (Hayes and Abernathy, 1980: 69). The mandate to develop more leaders and fewer managers was picked up and popularized in the influential writing of John Kotter (1988, 1990).

The Burns hypothesis

Neither Zaleznik, Hayes, and Abernathy nor Kotter used “transformational leadership” to define their ideal type. That term entered the dialog through the work of political scientist James McGregor Burns. The 1978 publication of Leadership was pivotal in the evolution of leadership theory. Bernard Bass proclaimed Burns' book to be “seminal.” Leadership theory prior to Burns tended to focus on behaviors of individuals within groups and actions taken by those individuals to influence the behavior of others. What Burns did, noted Bass, was turn attention to “the statesmen who moved and shook the world” (Bass, 1993: 375–376). Thus did Burns' work marry leadership with those who resided at the top.

Burns postulated two dichotomous types of leadership: transactional and transforming. Transactional leadership involved an exchange between leader and follower: jobs for votes and subsidies for campaign contributions were examples offered from the political realm. Transforming leadership was both more complex and more potent than transactional—or what Burns sometimes referred to as “traditional”—leadership, given its aim of “mutual stimulation and elevation that converts followers into leaders and may convert leaders into moral agents.” To Burns, the moral aspect of transforming leadership was paramount. It allowed a separation between leadership and power, which he sometimes referred to as “naked power.” Transforming leaders used power, to be sure. However, they did so in a manner that raised “the level of human conduct and ethical aspiration of both leader and led, and thus has a transforming effect on both” (Burns, 1978: 20).

Expanding on Burns

Burns' book, noted the founding editor of Leadership Quarterly, Bernard Bass, turned attention to the top of the organization as “an important, if not the most important, component of management” (Bass, 1993: 376). Bass argued that transactional leadership, which he explicitly equated with Zaleznik's management, “abdicates responsibilities [and] avoids making decisions.” Transformational leaders, conversely, relied on charisma and inspiration, communicated high expectations, promoted “intelligence, rationality, and careful problem solving,” and provided personal attention and encouragement to “each employee.” Just to make sure readers did not miss his point that TL represented not just an alternative type of leadership but a preferable type, Bass explicitly equated “superior leadership performance” with TL and noted that “transformational leaders make the difference between success and failure” (Bass, 1990: 21–23). If that were the case, then no other form of leadership would even be possible.

The Iacocca personification

The explicit connection between “superior leadership performance” and Lee Iacocca was a founding tenant in the initial TL writing. The 1984 Tichy and Ulrich article referred to Iacocca as “one of the most dramatic examples of transformational management and organizational revitalization in the early 1980s.” Iacocca had “provided the leadership to transform the company from the brink of bankruptcy to profitability” (Tichy and Ulrich, 1984: 59). Their claim for transformation rested on assertion rather than evidence. “As a result of Iacocca's leadership,” they insisted, “by 1984 Chrysler had earned record profits, had obtained high levels of employee morale, and had helped employees generate a sense of meaning in their work.” Iacocca had altered the culture of the corporation to a “lean and hungry team looking for victory.”

Certainly, the turnaround argument for Chrysler appeared valid at the time of the article. Placing that result on the shoulders of the CEO was, at the very least, a shortcut for explaining the multiple forces at play both inside Chrysler and in the larger external environment. Furthermore, claims that Iacocca had transformed the culture, lifted employee morale, and generated a “sense of meaning” for those employees were offered without evidence of substantiation. The authors, in fact, made no attempt to suggest that these conclusions were based on data collected either by them or others. That lack of substantiation did not prevent them from insisting that Iacocca's leadership style presented a prescription for American industry: “Lee Iacocca's high visibility and notoriety may be the important missing element in management today; there seems to be a paucity of transformational leader role models at all levels of the organization” (Tichy and Ulrich, 1984: 60). The drab leaders of other industrial giants—sluggish, colorless, and noncharismatic—became foils for the exciting and apparently effective style of Iacocca.

Neither did the lack of substantiation deter others from endorsing the claim. In their 1985 book, Bennis and Nanus simply imported Tichy and Ulrich: “Almost exclusively because of Iacocca's leadership, by 1983 Chrysler made a profit, boosted employee morale, and helped employees generate a sense of meaning in their work.” To demonstrate Iacocca's right to the mantle of TL, they repeated Tichy and Ulrich's insistence that Iacocca had overseen a culture change at Chrysler. “Over a period of a year or two, the internal culture was transformed to that of a lean and hungry team looking for victory—and competent enough to achieve it” (Bennis and Nanus, 1985: 17, 145). The authors were even more emphatic than were Tichy and Ulrich. “Our concept of power and leadership, then, is molded on the Iacocca phenomenon.” Once again, no claim of research was offered or supporting evidence presented. Unlike Tichy and Ulrich, however, Bennis and Nanus could include one citation: Tichy and Ulrich.

Dueling theories

Placing the onus for America's industrial decline on management, as Hayes and Abernathy so emphatically did, raised a particular challenge for the educational institutions that trained professional managers and provided an intellectual home to management scholars. If analytic detachment and methodological elegance were behind the decline, then the schools—Harvard Business School included, the home of Hayes and Abernathy as well as Zaleznik and Kotter– that taught these approaches bore a share of the blame.

TL, with its explicit intention to distance itself from management offered one path forward. It was not, however, the only, or even the most influential academic theory to address the question of how to move forward from the supposed managerial abyss. In a 1976 article, Michael Jensen and William Meckling placed “agency theory” at the center of their solution (Jensen and Meckling, 1976). The challenge of aligning the interest of shareholders with those of corporate managers had been highlighted decades earlier by Berle and Means (1933). In the modern corporation, owners no longer ran the firm's activities. The agency challenge—the challenge of aligning the actions of management with the interests of the investor owners—led economists Jensen and Meckling to focus on the so-called principle-agent problem, in which shareholders were the principles and executives the agents. Misalignment could be addressed through a meticulous alignment of executive rewards (mainly bonuses and stock options) with share performance. (For a comprehensive review of agency theory research, see Eisenhardt, 1989.)

Agency theory immediately attracted spirited rebuke. Perrow (1986), for example, labeled it “dangerous” because of its focus on a single stakeholder, a single metric, and reliance on purely financial controls. Nonetheless, agency theory became the centerpiece of much of the teaching in business schools focused on corporate governance, and helped fuel the widespread embrace of stock options as the incentive of choice for top executives.⁷ (For a discussion of its influence on business school pedagogy, see Khurana, 2002.)

Tourish et al. (2010) noted that TL and agency theory posed two contradictory views of corporate executives. Agency theory posited executives as motivated solely to maximize their own rewards. Tethering executives to share price through incentives had the effect of reducing the autonomy of those executives. Their leeway to act was defined solely by the best interests of shareholders. TL, conversely, offered a view of executives who operated virtually untethered by external constraints. Their very genius, if that's what it was, lie in their capacity and willingness to act boldly in the face of expectations and conventional wisdom. These leaders were able to transform other organizational members into agents of their vision. Shareholders might benefit in the long run from such bold intervention, although in truth TL scholars barely mentioned shareholders. To draw a metaphorical contrast, agency theory depicted executives as puppets controlled by shareholders, while TL theorists depicted executives as (potentially, at least) puppet masters. To bolster the point that executives could and should be bold and untethered, they turned to Lee Iacocca.

The Iacocca narrative

Lee Iacocca's launch as a nationally recognized figure can be traced to his first (of three) appearances on the cover of Time Magazine in April 1964.⁸ At the time, Iacocca headed the Ford Division, which accounted for 80% of the corporation's sales. Iacocca and his staff were credited with “launching most of the major themes that dominate the U.S. auto industry today: the return to car racing, the intensified appeal to the youth market, and the trend to the low-priced sports car [the Mustang]” (Time, 17 April 1964). Buried deeply within the story was a slightly ominous note. Arjay Miller, Ford president, acknowledged Iacocca's contribution but urged the Time reporter not to forget the commanding presence of Henry Ford II, the real boss. “Make no mistake, there's one boss and that's Henry Ford.” The mistake may have been Iacocca's rather than the reporter's. In July 1978, after years of acrimony, Henry Ford fired Lee Iacocca.

Arrival at Chrysler

For Iacocca, ascendency to “folk hero” status was just beginning. In November 1978, less than five months after his dismissal from Ford, Iacocca became the Chairman and President of Chrysler. The company that had once been the number two auto maker in the U.S.—with a 25% domestic market share in 1940—had fallen to the brink of bankruptcy (background on Chrysler from Anastakis, 2007 Ingrassia and White, 1994 Levin 1995 Moritz and Seaman, 1984 Nohria and Green, 1993). In 1978, Chrysler lost over $200 million, then over $1 billion the following year. The poor reputation of Chrysler products (Chrysler, Dodge, and Plymouth were its brands) in terms of both styling and quality eroded the company's market share. When Iacocca arrived at Chrysler, the company had 80,000 unsold vehicles worth nearly one-quarter of a billion dollars sitting in lots, and owed $4 billion.⁹

Like the rest of the automotive industry—indeed, like American basic industry generally—Chrysler increasingly found itself on the losing end of competition with Japanese companies, especially Toyota and Nissan (marketed in the U.S. under the brand name “Datsun”). Japanese auto manufacturers, which had produced a total of 32,000 vehicles in 1950, now manufactured over 11 million, allowing Japan to surpass the U.S. as the largest auto producing nation (Chang, 1981; Cusumano, 1985; Shimokawa, 2010). At the core of the import challenge was the increasing productivity of Japanese factories compared with their U.S. counterparts. In particular, Toyota's revolutionary production system, which included quality circles, voluntary improvement programs, kanban, and kaizen, eliminated waste and idle time, allowing Japanese makers to improve quality and reduce costs simultaneously. Automobiles were not alone in falling behind Japanese competition—the U.S. steel, appliances, and electronics industries were also deeply challenged—but there was something emblematic about the role of automobiles in U.S. culture (Foster, 2002; Lewis and Goldstein, 1983).

Iacocca commenced turnaround efforts at Chrysler with cost cutting, starting with his own salary. He accepted only $1 of his contracted $360,000, seeing this as a symbolic gesture of shared sacrifice. In a move considered radical by much of the business community and highly controversial within the labor movement, Iacocca convinced United Auto Workers' president Douglas Fraser to accept a seat on the Chrysler board. That gesture allowed Chrysler to win wage concessions from the union three years ahead of those granted to GM and Ford, accounting for a three-year $1 billion labor cost advantage Ford and GM (Moritz and Seaman, 1984). Assembly was largely off-shored to Chrysler plants in Canada, thus lowering labor costs.

When financial restructuring, which removed $400 million in debt and added $300 million in loans, proved insufficient to fuel recovery, Iacocca, Fraser, and Detroit mayor Coleman Young traveled to Washington, DC. They won approval of a $1.5 billion federal loan guarantee, signed by President Carter just after his malaise speech.¹⁰ That guarantee further aided Chrysler by allowing the corporation to roll forward its recent losses and pay no taxes through 1985.

Product innovation at Chrysler helped as well. The erosion of Chrysler's market share had been severe throughout the 1970s. Volkswagen had gained a foothold in the U.S. market, but it was mainly Japanese brands that ate away at Chrysler and the other U.S.-based auto makers. Under Iacocca, Chrysler responded by reducing the number of platforms and emphasizing front-wheel-drive cars with smaller four-cylinder engines. Drastic cost cutting allowed Chrysler to slash its break-even point on domestically produced autos, thus keeping prices low while generating a profit.

The most significant new car development of the 1980s emerged from Iacocca's Chrysler: the minivan. Built on Chrysler's K-platform, the Dodge Caravan and twin Plymouth Voyager combined a station wagon and a van. Ford and GM had small vans at the time, but both were built on truck platforms, resulting in limited appeal to suburban consumers. The minivan concept had been developed at Ford during the Iacocca years by product design master Hal Sperlich. Ford did not pursue the idea and fired Sperlich in the mid-1970s. Sperlich joined Chrysler where he was soon reunited with his old boss. Iacocca gave Sperlich the go-ahead and the minivan revolutionized the car market (Levin, 1995 ).

Growing celebrity

In their study of business celebrity, Guthey, Clark, and Jackson trace the self-conscious efforts of business executives dating back to the 19th century Robber Barons to cultivate a favorable public image (Guthey et al., 2009). Iacocca had a platform for promotion—television and the accompanying potential for mass marketing—that was unavailable to earlier generations of executives, and he took full advantage. He proved to be a remarkably effective pitchman for Chrysler cars, packaging “straight talk” with the trappings of American patriotism. His blunt-talking television ads addressed the public directly. Of the 1981 La Baron, Iacocca said, “If you can find a better car, buy it.” In another TV spot, he suggested that Chrysler products would compete with the best of Europe: BMW, Audi, and “even Mercedes.” As for Japanese cars with their reputation for high quality, Iacocca promised: “We are determined to beat the Japanese at their own game” (yourememberthat.com/media/9309/1984_Lee_Iacocca_Chrysler_commercial).

By the early 1980s, the U.S. auto industry as a whole was experiencing a recovery. The end of 1970s stagflation—the combination of slow growth and inflation—and a dramatic decline in interest rates, released pent up demand for all cars.¹¹ Eventually, the UAW made wage concessions to Ford and GM. Political pressure led to a “voluntary” limit on the number of Japanese imports, affording U.S. auto makers a temporary cushion (temporary because, by the mid-1980s, Japanese makers began manufacturing their cars in the United States to circumvent import limitations) against foreign competition.

However, while the entire industry recovered, Chrysler outpaced its domestic competitors, achieving larger percentage increases in U.S. sales than either GM or Ford. In 1982, Chrysler posted its first profitable quarter in five years. Overall, 1982 ended in a $68 million loss. 1983 was a different story. With profits of nearly $1 billion dollars, Chrysler repaid its government debt seven years early; a “miracle,” observed the Saturday Evening Post (Stuller, 1984: 7).

The identification of Iacocca as an essentially American hero—“the American underdog winning the battle of preserving the American dream” (Thorpe, 1988: 44)—was carefully and consciously cultivated by Iacocca himself. Chrysler's ad campaign frequently used the word “American.” The K-car, for instance, was roomy enough to hold not six passengers but “six Americans.” The ads typically employed a red, white, and blue color scheme for their backdrop (Iacocca and Novak, 1984: 265). With the launch of various K-car models, Iacocca proclaimed, “This is the beginning of the reindustrialization of the American automobile industry” (quoted in Moritz and Seaman, 1984: 323). Even beyond the automobile industry, Iacocca offered himself and Chrysler as a tonic for America's loss of confidence. Iacocca opened a 1984 TV ad, for instance, by saying, “A lot of people think America can't cut the mustard any more, that quality counts for nothing and hard work for even less. And commitment? That went out with the hula hoop.” To combat that pessimism, Iacocca offered hope, promising—from Chrysler at least—“quality, hard work, and commitment, the stuff America was made of” (yourememberthat.com/media/9309/1984_Lee_Iacocca_Chrysler_commercial).

By 1984, the U.S. economy was far healthier than it had been when Iacocca assumed control of Chrysler. Although some smokestack industries including steel continued to shed jobs, the American economy overall was expanding. Unemployment had fallen to just over 7%, inflation had dropped to under 4%, and corporate earnings were healthy (Cacy and Miller, 1984). It was in that environment that Iacocca's self-titled memoir appeared. Released in 1984, at the peak of Chrysler's recovery, it took exactly three weeks for Iacocca to reach number one on the New York Times' best-seller list. The book “seems well on its way to becoming one of the fastest-selling hard-cover books of recent times,” noted the Times (McDowell, 1984). In 1984, Iacocca was the best-selling nonfiction book of the entire year. And for 1985, the same. “It is,” said a buyer for book chain B. Dalton, “one of the biggest books of our lifetime” (quoted in New York Times, 17 July, 1985). Iacocca was now, unquestionably, a CEO superstar.

What came next

What came next for Iacocca and Chrysler proved both disheartening and diminishing. The legend did not hold up well. Iacocca found himself in frequent and increasingly bitter conflict with Chrysler's board, seemingly conforming to Zaleznik's (1977) understanding of a leader as someone who might work within an organization but never belongs to one. Chrysler fell further behind the Japanese as the decade wore on, a slippage that was “disproportionate” compared with other U.S. makers (Levin, 1995 ). As a result, Chrysler faced another financial crisis in 1991. Failure to name a successor on Iacocca's part led the board to force Iacocca to retire (Levin, 1995 ). In 1995, a bitter Iacocca joined forces with Chrysler stockholder Kirk Kerkorian to launch a hostile, and ultimately unsuccessful, take-over bid.12

A critical weighing

At the crux of the labeling of Iacocca as the ideal transformational leader reside two critical questions:

Was Chrysler, in fact, transformed under Iacocca?

Did Iacocca's leadership style conform to the transformational model?

Writing in 1984, Tichy and Ulrich conceded that the final judgment about Iacocca would need to take the passage of time into account. Although the passage of three decades has offered ample opportunity for just such a reappraisal, neither these authors nor any of the others who proclaimed Iacocca as their model has revisited either the claim or the subsequent performance of the company.

Was Chrysler transformed?

To start with an evaluation of possible organizational transformation, there can be no question that Iacocca was part of the team that saw Chrysler pull back from the brink of economic catastrophe. In an assessment of Iacocca's early years at Chrysler, Anastakis noted a number of key strategic decisions that could be credited for underpinning that turnaround, including extensive cost cutting, the decision to seek government funding, the decision to place a union representative on the Chrysler board, and the off-shoring of assembly to Canada. However, Iacocca neither created operational innovations nor borrowed Japanese innovations such as kaizen. If anything, Anastakis wrote, Chrysler “focused on playing ‘catch-up’ with the industry” (Anastakis, 2007: 13). Anastakis did not use a transformation lens to evaluate Iacocca, so it would be useful to consider the specifics of just what the TL scholars meant by “transformation.”

Transformation, of course, was meant to be something so much more than cost cutting. Al Dunlop, who earned the nickname “Chainsaw Al” for his serial slashing of costs at multiple corporations (including Scott Paper and Sunbeam) with the goal of enhancing shareholder wealth, was never labeled as a transformational leader. At the heart of TL as it was articulated by the founders was that the leader would transform a company's culture. Indeed, Tichy and Ulrich insisted that Iacocca did just that, transforming Chrysler's culture while enhancing motivation and lifting the self-esteem of employees. What, however, was the evidence? As noted earlier, the authors provided none. There were data available; however, those were ignored.

Improved quality, which can be used as an outcome proxy for transformed internal processes and which sat at the crux of the Japanese alternative approach to manufacturing, did not happen at Chrysler under Iacocca. Iacocca's promise, made in television ads, that Chrysler quality would rival imports and “beat the Japanese at their own game,” was demonstrably unmet. An examination of the quality of Chrysler models between 1982 and 1991as reported by Consumer Reports and publically available at the time shows consistent ratings of “much worse than average” quality performance for the Plymouth minivan, the Chrysler La Baron (“if you can find a better car, buy it”), and consistent “average” performance by the Dodge minivan. In contrast, the Honda Accord was annually rated as “much better than average” (Consumer Reports, 1989, 1994).

Likewise, the product innovation that Chrysler undertook in Iacocca's early years—reliance on smaller, gas efficient cars and the minivan—disappeared by mid-decade. In 1985, Iacocca began using the cash generated from auto sales to diversify the corporate portfolio: bidding unsuccessfully for Hughes Aerospace, purchasing Gulfstream Aerospace. Corporate diversification is a legitimate strategy to pursue, but in this case, Iacocca was following General Motors (the corporation that outbid Chrysler for Hughes) rather than innovating. These findings are consistent with the evaluation offered by Anastakis that Iacocca brought nothing new to the management of Chrysler or the auto industry generally.

Anastakis finds much to praise in Iacocca's tenure at Chrysler, insisting he was “the last great automotive entrepreneur [emphasis added]” (Anastakis, 2007: 15). Although academics have debated the degree to which “entrepreneurship” and “leadership” represent overlapping constructs (for a review of the debate, see Vecchio, 2003), the assessment of Iacocca as an entrepreneur does not contribute to an analysis of him as a transformational leader. The claims of organizational transformational—cultural renewal, employee involvement, and the promotion of rational, intelligent, and participatory problem solving—are unmet by the evidence.

Was Iacocca's behavior transformational?

The second question asks: what was the evidence that Iacocca's executive behavior conformed to the transformational leader prototype presented by Bass, Bennis, Tichy, and the other pioneers of the concept? To examine that question, we can turn to Iacocca's own description of his management approach, both in his days at Ford and at Chrysler. This is material that was readily available to but ignored by the TL authors at the time they were assessing Iacocca and his style.

In the 1964 Time Magazine cover story—he was head of the Ford Division at the time—Iacocca admitted to secretly tape-recording dealership sales people and threatening them with losing their jobs if their performance was deemed unsatisfactory. Demanding superior performance, although hardly unique to TL, is well within the realm of executive responsibility. Secret tape-recording suggests at the very least questionable ethics. It is his rationale for that action that is particularly informative to this assessment: “It worked,” he insisted, “because all of a sudden a guy [an auto salesman] is face to face with the reality of his mortgage payments” (Time, April 17, 1964).¹³ There is nothing especially transformational or paradigm-bending in either the behavior or the rationale that Iacocca offered.

There is much in his autobiography to rebuke the conclusion that Iacocca's style was transformational. Of particular interest is his description of negotiations with the United Auto Workers to convince them to accept wage cuts: “I had to lay it on the line. I talked tough to them. ‘Hey, boys,’ I said, ‘I’ve got a shotgun at your head. I've got thousands of jobs available at seventeen bucks an hour. I've got none at twenty. So you'd better come to your senses.'” At a second meeting, he described himself saying, “You've got until morning to make a decision. If you don't help me out, I'm going to blow your brains out. I'll declare bankruptcy in the morning and you'll all be out of work” (Iacocca and Novak, 1984: 245). The “shotgun to your head” and “blow your brains out” metaphors describe an approach that is wholly and dramatically at odds with the transformational model.

Other descriptions in his autobiography might be used as evidence of TL: his clichéd insistence that “people come first” and the need for “a good team” at the top, for example. Perhaps the most significant overlap with the notion of charismatic leadership involved his belief in “equality of sacrifice.” He reduced his salary, he explained, to help set an example:

… when I went to Doug Fraser, the union president, I could look him in the eye and say: ‘Here’s what I want from you guys as your share,' and he wouldn't come back to me and ask, ‘You SOB, what sacrifice have you made?’ That's why I did it, for good, cold, pragmatic reasons. I wanted our employees and our suppliers to be thinking: ‘I can follow a guy who sets that kind of example’ (Iacocca and Novak, 1984: 241–242).

The notion of shared sacrifice is central to the concept of charismatic leadership. Erikson's analysis of Gandhi quoted the charismatic leader of India's independence movement telling his followers: “If a time comes when you have to starve, have confidence that we [your leaders] shall eat only after feeding you” (Erikson, 1970: 342). Self-sacrifice, in this view, enhances attribution of charisma by followers, thus aiding in the leader's quest for transformation. It is clear, however, that Iacocca saw self-sacrifice as an instrumental tool for winning concessions from the union, suggesting that, for Iacocca, self-sacrifice had a strong transactional rather than transformational component.

In short, with the hindsight of over 30 years, it is possible to make a strong case for Iacocca as a turnaround leader in his initial years. He made key decisions and participated in a remarkable recovery for a nearly bankrupt industrial giant. He was, during this period, an effective CEO and perhaps, indeed, a “hero.” It is, however, less possible to accept uncritically the argument that he oversaw the transformation of Chrysler or that his behavioral style fit a transformational prototype. And the fact that Chrysler quickly fell behind its competitors as the decade continued and faced a second near-bankruptcy crisis in 1991 undermines the claim of substantive transformation.

Consideration

Two core questions regarding TL's validity as a concept have been raised. Knippenberg and Sitkin (2013) identified what they considered to be a “fatal flaw” in the literature: the confounding of TL with its effects. Instances of extraordinary performance are examined to find leadership behaviors that can be identified as transformational. The lack of specificity and consensus on the dimensions of leadership to be included or excluded from the transformational construct compounds the likelihood of attributional over-simplification. Tourish's (2013) assessment of the “dark side” of TL proposed a second core critique. He noted a tendency on the part of theorists to extol the virtues, indeed the moral superiority (see above quote by Bass and Steidlmeier), of heroic individuals who could, in a more critical light, be seen as macho bullies intent on cajoling others to fall into line.

By returning to the founders—Tichy, Ulrich, Bass, and Bennis—I suggest that their originating work fell into the very traps identified by Knippenberg and Sitkin and Tourish: confounding cause and effect while cloaking traditional leadership behaviors in a transformational mantle. The individual selected to personify the transformational ideal, Lee Iacocca, behaved in ways that can rightfully be classified as macho bullying in order to impose his will. Plus, behind his short-term although unquestionably dramatic turnaround, his tenure at Chrysler was far less than a rousing success.

Iacocca captured public imagination and gained hero status as no other CEO in the post-Robber Baron generation had. And for Robber Barons—Carnegie, Rockefeller, and Vanderbilt among them—public response was more negative than positive (Guthey et al., 2009). For Iacocca, the acclaim was virtually unanimously positive. He was a folk hero who had help lead the United States out of the economic abyss of the 1970s stagflation. Chrysler's short-term turnaround offered hope. The public responded by turning his eponymous memoir into a best-selling phenomenon.

What of the academic response, that of the pioneers of TL theory? How do we explain their eagerness to offer data-free assertions as to Iacocca's impact on Chrysler, data-ignoring attributions concerning his own behaviors, and quick judgments that precluded any real appreciation of potential long-term impact? To take on the last point first, I can make the simple but important argument that management scholars make terrible historians. No historian would, I believe (hope), have fallen into the trap of declaring Iacocca a savior without some larger and broader perspective. And the unwillingness of these particular management scholars to revisit their claims with an historical perspective can be explained, if not excused, by the fact that taking an historical view is simply not what they do.

And how do we understand the enthusiasm of their professions concerning Iacocca? None of us in the academy are isolated from the prevailing swings of public mood and national culture. Why not explain the enthusiasm of Tichy, Bennis, and Bass, then, as simply a reflection of the more generalized hero worship that attended to Iacocca for at least a short period of time? If that explanation is accepted—that is, that academic theory building is profoundly influenced by the social milieu in which those theories are advanced—then traditional approaches to the theory-building process are called into question. Theory building is typically depicted as a detached science, albeit one that calls for imaginative insight into the relationship between two or more properties (Homas, 1964; Weick, 1989). Special issues of the Academy of Management Review have analyzed how theories get formed, noticed, and published but paid no attention of the broader social milieu that underlies—and potentially influences—the construction process. Bacharach (1989), for example, noted the impact of personal values in the shaping of theories but not the broader social context in which personal values themselves are rooted.

Recent inquiries into the roots of modern management theory have highlighted the socio-historical context in which theories emerge. Those articles have noted the interaction between academic approaches to management and corporate strategy on the one hand, and the pervasive national ideology and culture on the other hand (for example, Cook, et al., 2005; Kelley, et al., 2006). My own work (for example, Spector, 2008; Spector and Spital, 2011) has been part of this movement to contextualize the process of theory formulation. This article provides evidence of the interaction between the pervasive “crisis of confidence” that permeated American society in the late 1970s–early 1980s and the rise to dominance of TL.

Putting aside the trappings of the transformational construct, we can see why Iacocca appealed so strongly to the early theorists. He appeared fully capable of imposing his will on an ailing American industrial giant with startlingly positive bottom-line results. All else was simply verbiage: a declaration made absent of or despite evidence. The notion that Iacocca operated alone to turn around Chrysler—“Almost exclusively because of Iacocca's leadership, by 1983 Chrysler made a profit, boosted employee morale, and helped employees generate a sense of meaning in their work [emphasis added]” (Bennis and Nanus, 1985: 17)—was nonsense. He never made the claim himself, although one has only to compare the title of his memoir, Iacocca, to that produced by Alfred Sloan over a decade earlier, My Years with General Motors, to catch the drift toward self-promotion. The tendency of transformational theory to place an undue burden on the shoulders of a single leader was, thus, there from birth.

This use of Iacocca as a personification and embodiment of the TL construct was, at best, a highly romanticized take on an individual, even a colorful, highly popular individual. Meindl et al. (1985) have labeled as “the romance of leadership” the tendency on the part of observers, both academic and otherwise, to focus on leadership as a sense-making process when confronted with complex, unclear dynamics. TL theorists certainly followed that tendency. At worse, we might suggest that the use of Iacocca was misleading and disingenuous. Based on evidence provided by Iacocca himself (he never claimed to be a transformational leader; that claim was made about him by others) and easily available at the time, Iacocca's behavior was far from transformational. Thus, we see the two core flaws of TL—over-attribution and romanticizing traditional leadership behaviors—present from the inception.

Footnotes

Acknowledgments

I would like to acknowledge and thank the anonymous reviewers and especially the journal's editor, Dennis Tourish. I would also like to acknowledge two colleagues who helped me in conceptualizing this material: Harry W Lane of Northeastern University's D'Amore-McKim School of Business and José Santos of the MIT Sloan School of Management and INSEAD.

Notes

Author biography

Bert Spector is an Associate Professor in Strategy at Northeastern University's D'Amore-McKim School of Business. His research interests include organizational transformation, leadership, business model change, and management history. His current project is a book, Reconsidering Leadership: A Critical Appraisal, scheduled to be published by Cambridge University Press.

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