American policymakers have come to view principals as linchpins in plans for educational change. Findings of a study that examined how the principal's role changes in a school that is engaged in fundamental restructuring are presented in this paper. Data for the longitudinal case study of a suburban-urban school district in the northeastern United States were collected from 1988 to 1993. This paper focuses on the implementation processes of school-based management and shared decision making in two elementary schools. Methodology involved document analysis and interviews with central office administrators, members of the school leadership councils, and the two principals. Findings indicate that structural changes in the school increase the potential for conflict because principals must negotiate higher stakes decisions with parents and staff, yet remain accountable to the central office. For the most part, the principals were unable to successfully adapt to the demands of the district context. Successful leadership in a participative decision-making context requires congruence of personal values with organizational goals, preparation in group process skills, instructional leadership abilities, and clear lines of authority and domains of responsibility. (Contains 31 references.) (LMI)