First Law of Leadership

Law of the Lid:

Many factors that contribute to the success of an organisation include:

  • Product quality
  • Price
  • Market size
  • Market demand
  • Competition
  • People
  • Organisation
  • Team
  • Skills
  • Manufacturing
  • Marketing
  • Knowledge
  • Experience
  • Networks
  • Distribution
  • Service
  • Infrastructure

These factors make a difference to the level of success achieved. However, the number 1 factor that determines the success of an organisation is leadership ability. On a scale of 1 to 10 if the person in charge has a leadership ability with a score of 5 then the organisation performance will never rise above 5. When lid is raised to 8 then the performance level of the organisation will increase to 7. The higher the individual’s ability to lead then the higher the lid on his potential. Conversely, the lower the ability to lead the lid on an individual’s potential will be lower. Your leadership ability will always determine your effectiveness and the impact you will have on the organisation.

If any of the factors above are improved, then the success ability will also increase. However, the biggest factor that changes the fortunes of a company is leadership ability. The limit of performance of an organisation is dependent on the leadership qualities of its leader. When leadership ability is low then the performance of an organisation will also be low. In contrast, if leadership level of the leader is high then the organisation performance will also be high. There is thus a direct relationship between leadership ability and organisational performance.


Leadership ability determines a person’s level of effectiveness


Dick and Maurice moved to California in 1930 in search of the American dream. They found jobs with a movie studio and then eventually opened a theatre about 5 miles from Hollywood. Despite their ambition and hard work, they failed miserably. They could hardly afford to pay the rent. As entrepreneurs with a strong drive for success they kept searching for opportunities and eventually opened a drive thorough restaurant. People in the 30s started owning cars and drive through restaurants became popular. Their idea was a massive success and so they moved and opened a much bigger place and expanded the menu. Annual sales reached $200,000. They were rich. In 1948 they made more changes and streamlined their operations and started serving walk-in customers increasing the speed and lowering the prices. Their operations were so slick that their target was to serve customers within 30 seconds. By the 1950s their sales rocketed to $350k. Dick and Maurice McDonald made their restaurant a huge success. Now they could enjoy luxuries with their wealth. However, they reached their limit. They could expand their operations further. Their genius was in customer service and kitchen organisation. Their fame spread widely.  They got hundreds of letters per week from people wanting to learn from them and open similar restaurants. So, they decided to market their McDonald’s concept and got into franchising so that could make money without having to open new restaurants themselves. What seemed like a great idea was a complete disaster. They understood how to run a business, make it efficient, cut costs and become profitable. They could not transfer their knowledge to others and duplicate the restaurants in other territories. The McDonald brothers were excellent managers but not great leaders. The success was limited by the Law of the Lid. Their leadership ability was low.


In three years, Dick and Maurice sold their concept to 15 buyers with only 10 actually opening restaurants. Their leadership ability had a low lid. They met Ray Kroc in 1954. He sold milk shake machine and McDonald’s was one his best customers. His vision for McDonalds was big. He wanted to open in hundreds of markets throughout the country. He bought the rights to a franchise using it as a prototype to sell other franchises. He hired the best talent and built an organisation and trained leaders. He sacrificed a lot.  For 8 years he did not take a salary. He even got a loan to pay the salaries of his key people. In 1961 he bought exclusive rights to McDonalds for $2.7M. Kroc’s leadership lid was sky high and between 1955 and 1959 he opened 100 McDonalds and four years later her reached 500.


Today, there are 8,695 restaurants with a revenue of 21.076 billion primary due to the vison and leadership ability of Ray Kroc and the genius concept developed by the McDonald brothers.


Everyone can be successful. However, your level of success will be limited by your leadership ability. Without leadership ability your impact will be tiny. With good leadership sky is the limit. If you are ambitious and want to achieve great things, then you will need to develop great leadership skills and then you will have great impact.


By increasing your leadership ability, you can increase your effectiveness. If you increase your leadership ability from a scale of 1 to 7 then improve your effectives by 600% without changing your dedication to success from 8. You multiply your success by increasing your leadership skills. Leadership is always the lid on an organisational effectiveness. If you want to change the direction of an organisation, then you have to change the leader. When companies get into trouble, they sack the managing director or CEO first. A football team will sack the manager first before change can happen. A new prime minister or president is elected when a country is in trouble.


Personal and organisational effectiveness is proportional to the strength of its leadership (John C Maxwell)


Manchester United is one of the world’s most famous and greatest football club. After winning the European Cup in 1968, Manchester United, despite having talented players, could not replicate the success that they had under Sir Matt Busby. They could not win the league for 28 years. Manager after manager failed to deliver the title even though they won the FA Cup or League Cup occasionally by beating teams higher up in the league. None of the managers appointed has the leadership ability of Sir Matt Busby. The leadership lid of the managers was low compared to the ambition of the club and its fans.

In 1986, Manchester United appointed Alex Ferguson. A manager with a very high leadership lid. His achievements have become legendary winning 38 trophies including 13 Premier League titles, 5 FA Cups and 2 Champions Leagues titles. He was knighted in 1999 for his services to football. He overtook Sir Matt Busby’s record in 2010 as the longest serving and the most successful manager in history of the Premier league and winning also in his final season in 2012/13. Ferguson man management and leadership skills are legendary. His leadership lid so high that he built several great teams during his period at Manchester United. His leadership skills are taught in the top Business Schools in the world.

The good news is that leadership ability can be learned and developed. Here is an exercise for you to try.

  • List your major goals. Focus on the most significant one. List 5 to 10 goals. Which ones require the participation and corporation of other people. For these, your leadership ability will determine your effectiveness.
  • Assess your leadership ability and ask others to rate you as well. Ask your boss, two colleagues and 3 subordinates who report to you to rate your leadership ability in these areas:
  • People skills
  • Planning and strategic thinking
  • Vision
  • Results
  • Average the scores and compare them with your ratings. Are there differences? What could be the reasons for the differences? Analyse and reflect.
  • What specific actions are you going to take to grow your leadership? Make a list and schedule your leadership development in your calendar.


The 21 Irrefutable Laws of Leadership. John C. Maxwell. Thomas Nelson Publisher (2007)

 (Note: the information in this article came from this book)

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