How to build and spend leadership capital

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Think of the amount of influence you have on the people around you as a bank account. Leadership capital represents the funds available in that account. In every interaction with others, you are either depositing funds and acquiring more leadership capital, or you are debiting the account and spending your leadership capital. This applies to every interaction with anyone: both up and down the chain of command, peer to peer, and those outside of your immediate organization. It also applies in your personal life, with family members and friends. Every interaction with others either earns you leadership capital or expends it.

How Do You Earn Leadership Capital?

Leadership capital is earned through performance. Every time you accomplish a key task to support your team, or take care of something for others who depend on you, you acquire leadership capital. Leadership capital is earned by supporting others, by putting the team and the mission before yourself. When there is an opportunity to share your resources with others, look out for others, give credit to others, and dedicate your time and energy to supporting others, you acquire leadership capital. Leadership capital accrues when you demonstrate that you can remain calm and prioritize and execute under pressure. It is also earned by listening, empowering others and giving trust. When you demonstrate that your mind is open, that you aren’t driven by your ego and self-interest, you acquire leadership capital.

How Do You Expend Leadership Capital?

You spend leadership capital when you do the opposite of everything just described above when you put yourself before the team and the mission, put your interests above others, or you demand that people do things your way simply because it feeds your ego. You also expend leadership capital when you ask people to work harder than they anticipated and when you give explicit direction to them without giving them any ownership. Even when this is critical to the success of the team, it is an expenditure of leadership capital.

Assume You Have Less Than You Think

Like any real bank account, the small transactions over time add up and can often catch us by surprise as we review expenses. Leadership capital is the same way. You should always assume you have less than you think you do.

Work to Acquire More

In every action, you should look to capitalize on opportunities to acquire more leadership capital. Put others first, put the team first, put the mission first. Where can you contribute your time, efforts and resources to helping others be successful so the greater team can be successful? Where can you cover and move to support your spouse or your family members?

Don’t Spend Leadership Capital Unwisely

Just like real money, leadership capital is hard to earn. Do not spend it unwisely. Examples of unwise expenditures of leadership capital include: demanding that something be done a certain way in order to feed your own ego; dictating the plan and giving explicit direction instead of giving people ownership; not seeking input from others; unwillingness to listen or take direction from your chain of command; taking credit for something instead of giving the credit to others; trying to undermine a peer, the boss, or anyone in your chain of command.

Think Strategically About Leadership Capital in Every Interaction

This should make you think strategically about your interactions with everyone with whom you work: your boss, your peers, the members of your team, your customers, and others you depend on to accomplish your mission. It should also make you think even more so about interactions at home with your spouse, your kids, your parents, your family, your friends, and members of your community.

Real-World example:

At Echelon Front, we were working with a senior leader, a Vice President (VP) of a division within her company, who told us she needed her boss to broker a truce between her and one of her peers, who led a different division.

“I’ve tried, and we just can’t see eye to eye,” said the VP. She and her peer could not align on a major strategic initiative for the company, in which they both played critical roles and whose teams would be required to mutually support one another to be successful.

“When you can’t get along with one of your peers—when you can’t build a good relationship with someone you depend on to accomplish your mission,” I asked, “what does that look like to your boss? What does that look like to everyone else?”
We explained the concept of leadership capital.

“In taking this issue to the boss for resolution,” I continued, “is that really how you want to spend your leadership capital? That seems like a huge expenditure when it’s likely a problem that you can resolve.”

After helping the VP see things from the boss’s perspective, and the perspective of others on the team, she reconsidered. She reached out to her peer in the other division, figured out where she could better support his team, and got the two divisions aligned. When she updated the boss on the alignment, instead of unwisely expending her leadership capital,

she acquired more leadership capital and increased her ability to influence the boss and the entire company going forward.

For Action:

Choose three interactions this week where you will focus your efforts to build leadership capital. This could be with your boss, your spouse, your peers or subordinates on your team. It could be your kids. Role play, in your mind or with someone else, how you will prevent from wasting leadership capital in your interactions this week, and determine ways that you can acquire more leadership capital by listening, seeking input from others, and allowing yourself to be influenced by them. Then, go and EXECUTE.