Spend Your Finite Supply of Leadership Capital

You have a finite amount of leadership capital. It’s a combination of your positional authority, your credibility with specific individuals earned over time, your reputation as conveyed by others, and your skills to influence and persuade.

Sidebar: the word “credibility” comes to English from Latin word “credibilis,” the word for “believe.”  It’s really a term of economic exchange – I believe this coin or paper currency is worth X. 

When you start in a new org role, you begin with positional power. Everything you do and say (or don’t do and don’t say) adds/subtracts to your credibility account. Individual experiences contribute to your reputation. Your reputation is effectively a 2^nd-hand way of conveying your credibility to people who haven’t worked with you individually. Clear thinking, smart decisions, and clear communication add to your credibility accounts – all leaders need to work on these skills as part of leadership craft.

You do not have an infinite, renewable supply of credibility. It fluctuates over time and as you work with new people. It’s a hazardous state when your leadership credibility is derived exclusively from positional power.

Bold leaders must spend their leadership capital. Hoarding in case someone will be unhappy will not move your organization forward. [My mother used to tell my sister and me, “If Jesus couldn’t make everyone happy, you’re not going to make everyone happy.”]

Wisdom and judgment are required on how to spend your capital.

Sometimes there are little items that are worthwhile expenditures. Meeting behaviors. Attire. Getting details right on admin reports submitted on time. In this area, leaders need to remember that you get what you tolerate.

At other times, you want to save your finite leadership capital for strategic issues. Which person is hired for a role. Decision about a JV or vendor selection. When to take a principled stand against a consensus practice. When and how to handle a toxic employee in a linchpin role.

If I had a formula I’d share it. There’s no simple formula because people are messy and situations vary. A similar situation may call for different responses at different points in time. It will be a long time before AI helps this leadership challenge.

The opportunity is for you to be conscious about your leadership capital – build it, spend it, and do so wisely.