Leadership Notes

Topic 1 INTRODUCTION TO LEADERSHIP Topic introduction video Key concepts This topic includes: • an introduction to our key concept of leadership, including the variety of defnitions and approaches to this topic • an evaluation of what effectiveness means in the leadership arena and the barriers to this in contemporary organisations • a comparison between leadership and management • some self-reflection on your strengths and which areas you could develop with regard to a defnition of leadership. Topic objectives After completing the study of this topic you should be able to: 1. defne leadership and leadership effectiveness 2. discuss effective leadership and identify its major obstacles 3. compare and contrast leadership and management 4. summarise the debate over the role and impact of leadership in organisations. EKREM INCE ekremince@gmail.com University of London 2 Topic 1 INTRODUCTION TO LEADERSHIP MINI LECTURE undefned EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 3 ESSENTIAL READING The Essential reading for this topic is: • Nahavandi, A. The art and science of leadership. (Harlow: Pearson, 2015) 7th, global edition. Chapter 1 Defnition and signifcance of leadership. • Yukl, G. Leadership in organizations. (Harlow: Pearson, 2013) 8th edition. Chapter 1 Introduction and overview. When you are reading through these chapters, pay particular attention to the following key points: • The variety of defnitions of leadership and how these are characterised as well as the qualities that are assumed to be required of a leader according to particular theories. • How the effectiveness of a leader is articulated and evaluated. Compare this to a notion of successful leadership and how these two differ. • Note the discussion of gender differences in leadership in Nahavandi’s text and think about how this changes the landscape of what we might call a good leader. • Consider how Yukl’s approach to the question of leadership is concerned with academic research and, therefore, what the research question is key question to how to answer what leadership is. This will help you - as a student of leadership - as you need to be aware of your approach to the question of what leadership which will help you understand why you prefer one defnition over another. • The focus on leadership as a specialism reflects the importance of the role of leaders in organisations. Remember that all the essential reading for this programme is provided for you. Click the link (which may take you to the Online Library where you can search for a journal article) or click ‘next’ to go to the next page and start reading. EKREM INCE ekremince@gmail.com University of London 4 Topic 1 INTRODUCTION TO LEADERSHIP CHAPTER 1 DEFINITION AND SIGNIFICANCE OF LEADERSHIP The art and science of leadership 7th edition, Afsaneh Nahavandi. Original materials from The art and science of leadership © copyright 2015 Pearson. All rights reserved. After studying this chapter, you will be able to: 1. Define leadership and leadership effectiveness. 2. Discuss the major obstacles to effective leadership. 3. Compare and contrast leadership and management. 4. List the roles and functions of leaders and managers. 5. Explain the changes in organizations and how they affect leaders. 6. Summarize the debate over the role and impact of leadership in organizations. THE LEADERSHIP QUESTION Some leaders are focused on getting things done while others put taking care of their followers frst. Some look at the big picture, and others hone in on the details. Is one approach better than the other? Which one do you prefer? Who is a leader? When are leaders effective? These age-old questions appear simple, but their answers have kept philosophers, social scientists, scholars from many disciplines, and business practitioners busy for many years. We recognize bad leadership. Bad leaders are dishonest, self-centered, arrogant, disorganized, and uncommunicative. However, being honest, selfless, organized and communicative are necessary, but not sufcient to be a good leader. This chapter defnes leadership and its many aspects, roles, and functions. EFFECTIVE LEADERSHIP We recognize effective leaders when we work with them or observe them. However, leadership is a complex process, and there are many different defnitions of leadership and leadership effectiveness. Who Is a Leader? Dictionaries defne leading as “guiding and directing on a course” and as “serving as a channel.” A leader is someone with commanding authority or influence. Researchers have developed many working defnitions of leadership. Although these defnitions share several elements, they each consider different aspects of leadership. Some defne leadership as an integral part of the group process (Green, 2002; Krech and Crutchfeld, 1948). Others defne it primarily as an influence process (Bass, 1960; Cartwright, 1965; Katz and Kahn, 1966). Still others see leadership as the initiation of structure (Homans, 1950) and the instrument of goal achievement. Several even EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 5 consider leaders to be servants of their followers (Greenleaf, 1998). Despite the differences, the various defnitions of leadership share four common elements: • First, leadership is a group and social phenomenon; there can be no leaders without followers. Leadership is about others. • Second, leadership necessarily involves interpersonal influence or persuasion. Leaders move others toward goals and actions. • Third, leadership is goal directed and action oriented; leaders play an active role in groups and organizations. They use influence to guide others through a certain course of action or toward the achievement of certain goals. • Fourth, the presence of leaders assumes some form of hierarchy within a group. In some cases, the hierarchy is formal and well defned, with the leader at the top; in other cases, it is informal and flexible. Combining these four elements, we can defne a leader as any person who influences individuals and groups within an organization, helps them establish goals, and guides them toward achievement of those goals, thereby allowing them to be effective. Being a leader is about getting things done for, through, and with others. Notice that the defnition does not include a formal title and does not defne leadership in terms of certain traits or personal characteristics. Neither is necessary to leadership. This broad and general defnition includes those who have formal leadership titles and many who do not. For Jonas Falk, CEO of OrganicLife, a start-up company that provide nutritious school lunches, leadership is taking “an average team of individuals and transform(ing) them into superstars” (Mielach, 2012). For consultant Kendra Coleman, leadership is about taking a stand (Mielach, 2012). Bill Gates, founder of Microsoft, considers empowerment to be an essential part of leadership (Kruse, 2013). For the CEO of the Container Store, “leadership and communication are the same thing. Communication is leadership” (Bryant, 2010). In all these examples, the leader moves followers to action and helps them achieve goals, but each focuses on a different element that constitutes leadership. When Is a Leader Effective? What does it mean to be an effective leader? As is the case with the defnition of leadership, effectiveness can be defned in various ways. Some researchers, such as Fred Fiedler, whose Contingency Model is discussed in Chapter 3, defne leadership effectiveness in terms of group performance. According to this view, leaders are effective when their group performs well. Other models - for example, Robert House’s Path-Goal Theory presented in Chapter 3 - consider follower satisfaction as a primary factor in determining leadership effectiveness; leaders are effective when their followers are satisfed. Still others, namely researchers working on the transformational and visionary leadership models described in Chapters 6 and 9, defne effectiveness as the successful implementation of change in an organization. The defnitions of leadership effectiveness are as diverse as the defnitions of organizational effectiveness. The choice of a certain defnition depends mostly on the point of view of the person trying to determine effectiveness and on the constituents who are being considered. For cardiologist Stephen Oesterle, senior vice president for medicine and technology at Medtronic, one of the world’s biggest manufacturers of medical devices and pacemakers, restoring lives is both a personal and an organizational goal (Tuggle, 2007). Barbara Waugh, a 1960s civil rights and antidiscrimination activist and once personnel director and worldwide change manager of Hewlett-Packard Laboratories (often known as the “World’s Best Industrial Research Laboratory” - WBIRL), defnes effectiveness as fnding a story EKREM INCE ekremince@gmail.com University of London 6 Topic 1 INTRODUCTION TO LEADERSHIP that is worth living: “You decide what you want your life to be about and go after it” (Marshall, 2009: 3). John Hickenlooper, Colorado governor and former mayor of Denver, focuses on an inclusive style, cooperation, aligning people’s self-interest, and getting buy-in from the people who are affected by his decisions (Goldsmith, 2008). Effectiveness versus Success Clearly, no one way best defnes what it means to be an effective leader. Fred Luthans (1989) proposes an interesting twist on the concept of leadership effectiveness by distinguishing between effective and successful managers. According to Luthans, effective managers are those with satisfed and productive employees, whereas successful managers are those who are promoted quickly. After studying a group of managers, Luthans suggests that successful managers and effective managers engage in different types of activities. Whereas effective managers spend their time communicating with subordinates, managing conflict, and training, developing, and motivating employees, the primary focus of successful managers is not on employees. Instead, they concentrate on networking activities such as interacting with outsiders, socializing, and politicking. The internal and external activities that effective and successful managers undertake are important to allowing leaders to achieve their goals. Luthans, however, fnds that only 10 percent of the managers in his study are effective and successful. The results of his study present some grave implications for how we might measure our leaders’ effectiveness and reward them. To encourage and reward performance, organizations need to reward the leadership activities that will lead to effectiveness rather than those that lead to quick promotion. If an organization cannot achieve balance, it quickly might fnd itself with flashy but incompetent leaders who reached the top primarily through networking rather than through taking care of their employees and achieving goals. Barbara Waugh, mentioned earlier, considers the focus on what she calls the “vocal visionary” at the expense of the “quiet implementer” one of the reasons many organizations do not achieve their full potential (Marshall, 2009). Joe Torre, the famed Los Angeles Dodgers baseball coach, believes that solid, quiet, and steady managers who do not brag are the ones who get things done (Hollon, 2009). Ideally, any defnition of leadership effectiveness should consider all the different roles and functions that a leader performs. Few organizations, however, perform such a thorough analysis, and they often fall back on simplistic measures. For example, stockholders and fnancial analysts consider the CEO of a company to be effective if company stock prices keep increasing, regardless of how satisfed the company’s employees are. Politicians are effective if the polls indicate their popularity is high and if they are reelected. A football coach is effective when his team is winning. Students’ scores on standardized tests determine a school principal’s effectiveness. In all cases, the factors that make the leader effective are highly complex and multifaceted. Consider the challenge faced by the executives of the New York Times, one of the world’s most respected newspapers. In 2002, the paper won a record seven Pulitzer prizes, a clear measure of success. A year later, however, the same executive editor team that had led the company in that success was forced to step down because of plagiarism scandals (Bennis, 2003). The executive team’s hierarchical structure, autocratic leadership style, and an organizational culture that focused on winning and hustling were partly blamed for the scandals (McGregor, 2005). By one measure, the Times was highly effective; by another, it failed a basic tenet of the journalistic profession. Politics further provide examples of the complexity of defning leadership effectiveness. Consider former U.S. president Clinton, who, despite being impeached in the U.S. Senate, maintained his popularity at the polls in 1998 and 1999; many EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 7 voters continued to consider him effective. Hugo Chavez, the late president of Venezuela, was adored by his supporters for his advocacy for the poor and despised by his opponents for his dictatorial style. Whether any of these leaders is considered effective or not depends on one’s perspective. General Motors’ recent troubles further illustrate the need for a broad defnition of effectiveness. An Integrative Defnition The common thread in all these examples of effectiveness is the focus on outcome. To judge their effectiveness, we look at the results of what leaders accomplish. Process issues, such as employee satisfaction, are important but are rarely the primary indicator of effectiveness. Nancy McKintry, CEO of Wolters Kluwer, an information services company, states, “At the end of the day, no matter how much somebody respects your intellect or your capabilities or how much they like you, in the end it is all about results in the business context” (Bryant, 2009a). The executive editorial team at the New York Times delivered the awards despite creating a difcult and sometimes hostile culture. Voters in the United States liked President Clinton because the economy flourished under his administration. Hugo Chavez survived many challenges because he pointed to specifc accomplishments. One way to take a broad view of effectiveness is to consider leaders effective when their group is successful in maintaining internal stability and external adaptability while achieving goals. Overall, leaders are effective when their followers achieve their goals, can function well together, and can adapt to changing demands from external forces. The defnition of leadership effectiveness, therefore, contains three elements: 1. Goal achievement, which includes meeting fnancial goals, producing quality products or services, addressing the needs of customers, and so forth 2. Smooth internal processes, including group cohesion, follower satisfaction, and efcient operations 3. External adaptability, which refers to a group’s ability to change and evolve successfully THE LEADERSHIP QUESTION - REVISITED So focusing on the task, on people, on the big picture, on the details, and so forth can all be part of leadership. What works depends on the leader, the followers, and the situation. While some things generally don’t work, for example using fear and threats in all situations, there are many different styles and approaches to leading that can be effective. Understanding the situation is key. Why Do We Need Leaders? Leadership is a universal phenomenon across cultures. Why is leadership necessary? What needs does it fulfll? Do we really need leaders? In the business world, new leaders can influence a frm’s credit rating by affecting the confdence of the fnancial community. For example, while Xerox weathered considerable fnancial and leadership problems in 2000 and 2001, the selection of Anne Mulcahy, a company veteran, as CEO helped ease stakeholders’ concerns. In other sectors, a city or nation might feel a sense of revival and optimism or considerable concern when a new leader comes to power, as was the case in the 2008 U.S. presidential elections with the win of Barack Obama. We believe that leadership matters. The reasons why we need leaders closely fall in line with the functions and roles that leaders play and are EKREM INCE ekremince@gmail.com University of London 8 Topic 1 INTRODUCTION TO LEADERSHIP related to the need or desire to be in collectives. Overall, we need leaders for following reasons: • To keep groups orderly and focused. Human beings have formed groups and societies for close to 50,000 years. Whether the formation of groups itself is an instinct or whether it is based on the need to accomplish complex tasks too difcult for individuals to undertake, the existence of groups requires some form of organization and hierarchy. Whereas individual group members may have common goals, they also have individual needs and aspirations. Leaders are needed to pull the individuals together, organize, and coordinate their efforts. • To accomplish tasks. Groups allow us to accomplish tasks that individuals alone could not undertake or complete. Leaders are needed to facilitate that accomplishment, and to provide goals and directions and coordinate activities. • To make sense of the world. Groups and their leaders provide individuals with a perceptual check. Leaders help us make sense of the world, establish social reality, and assign meaning to events and situations that may be ambiguous. • To be romantic ideals. Finally, as some researchers have suggested (e.g., Meindl and Ehrlick, 1987), leadership is needed to fulfll our desire for mythical or romantic fgures who represent us and symbolize our own and our culture’s ideals and accomplishments. Research on Signifcance of Leadership Despite the common belief that leaders matter, considerable debate among leadership scholars addresses whether leadership actually affects organizations. Some researchers suggest that environmental, social, industrial, and economic conditions determine organizational direction and performance to a much higher degree than does leadership (Brown, 1982; Cyert and March, 1963; Hannan and Freeman, 1977; Salancik and Pfeffer, 1977a). External factors, along with organizational elements such as structure and strategy, are assumed to limit the leader’s decision-making options, reducing the leader’s discretion. For example, Salancik and Pfeffer (1977a), in a study of the performance of mayors, found that leadership accounted for only 7 to 15 percent of changes in city budgets. Similarly, Lieberson and O’Connor (1972) found that whereas leadership has minimal effects on the performance of large corporations (accounting for only 7 to 14 percent of the performance), company size and economic factors show considerable links to frm performance. Additionally research about managerial discretion indicates that managers have less influence on organizations than environmental and internal organizational factors (Finkelstein and Hambrick, 1996; Hambrick and Finkelstein, 1987). Other research fndings suggest that leadership does indeed have an impact. For example, in reevaluating Lieberson and O’Connor’s 1972 study, Weiner and Mahoney (1981) fnd that a change in leadership accounts for 44 percent of the proftability of the frms studied. Other researchers (Day and Lord, 1988; Thomas, 1988) indicate that the early results were not as strong as originally believed, and recent studies suggest that leadership can have an impact by looking at the disruption that can come from changes in leadership (Ballinger and Schoorman, 2007) and fnd a strong effect of CEOs on company performance (Mackey, 2008). Additionally, research continues to indicate that leadership has a positive impact on a variety of organizational effectiveness factors including climate and work group performance (McMurray et al., 2012) in both business and public organizations (e.g., Vashdi, Vigoda-Gadot, and Shlomi, 2013). EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 9 In trying to reconcile the different arguments regarding the need for and impact of leadership, it is important to recognize that leadership is one of many factors that influence the performance of a group or an organization (see Table 1.1 for a summary). Additionally, the leader’s contribution, although not always tangible, is signifcant in providing a vision and direction for followers and in integrating their activities. The key is to identify situations in which the leader’s power and discretion over the group and the organization are limited. These situations are discussed as part of the concept of leadership substitutes in Chapter 3 and in presentations of the role of upper-echelon leaders in Chapter 7. Finally, the potential lack of impact of leaders in some situations further emphasizes the importance of followers in the success of leadership and the need to understand organizations as broad systems. LEADING CHANGE The Container Store “You can build a much more wonderful company on love than you can on fear,” says Kip Tindell, the CEO of the highly successful Container Store chain (Klein, 2013). He has put that principle to work in all aspects of his business. Chances are that if you have engaged in a home or ofce organization project, you have heard of the Container Store. The privately held company offers creative, practical, and innovative solutions to a multitude of storage problems and has established an enviable track record of success and growth of 26 percent growth per year (Container Store’s secret growth story, 2013). The company has been consistently ranked as one of the best places to work in, and it considers its employees its greatest asset. Its unique culture and treating its employees well are other areas in which it claims leadership (Container Store Web site, 2013). One of the principles that the company espouses is that “one great person equals three good people” (Bliss, 2011). Kip Tindell says, “We talk about getting the customer to dance . . . every time she goes into the closet . . . because the product has been designed and sold to her so carefully” (Birchall, 2006). Achieving this level of service takes a dedicated and, the company believes, happy employees that the company carefully recruits (often mostly through its existing employees) and trains. Whereas in comparable companies, the average salesperson gets about eight hours of training during the frst year on the job, it is not unusual for Container Store salespeople to get over 200 hours of training before a new store opens (Birchall, 2006). In addition to a family-friendly work environment, the company covers close to 70 percent of its employees’ health-care insurance costs, pays 50 to 100 percent higher wages than its competitors’ pay, and provides flexible shifts to accommodate its employees’ work-life balance. The investment in employees has paid off. The Container Store has an annual turnover of about 10 percent, compared with 90 percent for most retail stores. Its founders, Kip Tindell and Garrett Boone, believe that the unique culture and the success of the company are inseparable. Sources: Birchall, J. 2006. “Training improves shelf life,” Financial Times, March 8. http://search.ft.com/ft Article?queryText=Kip+Tindell&y=0&aje=true&x=0&id=060307009431 (accessed July 8, 2007); Bliss, J. 2011. “Container store - Flames of trust,” SatMetrix. http://www.netpromoter.com/netpromoter_ community/blogs/jeanne_bliss/2011/10/24/the-container-store - flames-of-trust (accessed May 30, 2013); Container Store’s secret growth story, 2013. http://www.youtube.com/watch?v=uDmfbrcGxSk(accessed May 30, 2013); EKREM INCE ekremince@gmail.com University of London 10 Topic 1 INTRODUCTION TO LEADERSHIP Container store website, 2013. http://standfor.containerstore.com/putting-our-employees-frst/ (accessed October 6, 2013); Containing Culture, 2007. Chain Store Age (April): 23-24; Klein, J. 2013. “Put people frst,” Under 30 CEOs. http://under30ceo.com/put-people-frst-reflections-from-kip-tindell-ceo-the-container-store/ (accessed May 30, 2013). Table 1.1 Signifcance of Leadership • Leadership is one of many factors that affect the performance of organizations. • Leadership can indirectly impact other performance factors. • Leadership is essential in providing vision and direction. • Identifying the situations in which leadership matters is essential. • The combination of leaders with followers and other organizational factors makes an impact. OBSTACLES TO EFFECTIVE LEADERSHIP In any setting, being an effective leader is a challenging task. Even with a clear defnition of leadership and what makes a leader effective, being effective is not easy. Meanwhile, organizations pay a heavy price for ineffective, incompetent, or unethical leadership (Bedeian and Armenakis, 1998; Kellerman, 2004). The keys to becoming an effective leader are knowledge, experience, practice, and learning from one’s mistakes. Unfortunately, many organizations do not provide an environment in which leaders can practice new skills, try out new behaviors, and observe their impact. In most cases, the price for making mistakes is so high that new leaders and managers opt for routine actions. Without such practice and without failure, it is difcult for leaders to learn how to be effective. The experience of failure, in some cases, may be a defning moment in the development of a leader (George, 2009). The question is, therefore, what are the obstacles to becoming an effective leader? Aside from different levels of skills and aptitudes that might prevent a leader from being effective, several other obstacles to effective leadership exist: • First, organizations face considerable uncertainty that creates pressure for quick responses and solutions. External forces, such as voters and investors, demand immediate attention. In an atmosphere of crisis, there is no time or patience for learning. Ironically, implementing new methods of leadership, if they are allowed, would make dealing with complexity and uncertainty easier in the long run. Therefore, a vicious cycle that allows no time for the learning that would help current crises continues. The lack of learning and experimentation in turn causes the continuation of the crises, which makes the time needed to learn and practice innovative behaviors unavailable. • Second, organizations are often rigid and unforgiving. In their push for short-term and immediate performance, they do not allow any room for mistakes and experimentation. A few organizations, such as Virgin Group Ltd., 3M, and Apple Computers that encourage taking risks and making mistakes, are the exception. The rigidity and rewards systems of many institutions discourage such endeavors. • Third, organizations fall back on old ideas about what effective leadership is and, therefore, rely on simplistic solutions that do not ft new and complex problems. EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 11 The use of simple ideas, such as those proposed in many popular books, provides only temporary solutions. • Fourth, over time, all organizations develop a particular culture that strongly influences how things are done and what is considered acceptable behavior. As leaders try to implement new ideas and experiment with new methods, they may face resistance generated by the established culture. • Finally, another factor that can pose an obstacle to effective leadership is the difculty involved in understanding and applying the fndings of academic research. In the laudable search for precision and scientifc rigor, academic researchers sometimes do not clarify the application of their research, making the research inaccessible to practitioners. The complex and never-ending learning process of becoming an effective leader requires experimentation and organizational support. The inaccessibility of academic research to many practitioners and the short-term orientation of the organizations in which most managers operate provide challenging obstacles to effective leadership. Except for the few individuals who are talented and learn quickly and easily or those rare leaders who have the luxury of time, these obstacles are not easily surmounted. Organizations that allow their leaders at all levels to make mistakes, learn, and develop new skills are training effective leaders. LEADERSHIP AND MANAGEMENT What is the difference between a leader and a manager? Are the two basically the same, or are there sharp distinctions between them? These questions have been at the forefront of the discussion of leadership for many years. Kevin Kruse, bestselling author and entrepreneur, believes that organizations need good management to plan, measure, hire, fre, coordinate activities, and so forth. However, he states that leadership is about people (Kruse, 2013). Table 1.2 presents the major distinctions between managers and leaders. Whereas leaders have long-term and future-oriented perspectives and provide a vision for their followers to look beyond their immediate surroundings, managers take short-term perspectives and focus on routine issues within their own immediate departments or groups. Zaleznik (1990) further suggests that leaders, but not managers, are charismatic and can create a sense of excitement and purpose in their followers. Kotter (1990; 1996) takes a historical perspective in the debate and proposes that leadership is an age-old concept, but the concept of management developed in the past 100 years as a result of the complex organizations created after the Industrial Revolution. A manager’s role is to bring order and consistency through planning, budgeting, and controlling. Leadership, on the other hand, is aimed at producing movement and change. Table 1.2 Managers and Leaders Managers Leaders Focus on the present Focus on the future Maintain status quo and stability Create change Implement policies and procedures Initiate goals and strategies Maintain existing structure Create a culture based on shared values Remain aloof to maintain objectivity Establish an emotional link with followers EKREM INCE ekremince@gmail.com University of London 12 Topic 1 INTRODUCTION TO LEADERSHIP Use position power Use personal power The debates suggest that for those who draw a distinction between leaders and managers, leaders demonstrate attributes that allow them to energize their followers, whereas managers simply take care of the mundane and routine details. Both are necessary for organizations to function, and one cannot replace the other. By considering the issue of effectiveness, many of the arguments regarding the differences between leadership and management can be clarifed. For example are managers who motivate their followers and whose departments achieve all their goals simply effective managers, or are they leaders as well? Being an effective manager often involves performing many of the functions that are attributed to leaders with or without some degree of charisma. The distinctions drawn between leadership and management may be more related to effectiveness than to the difference between the two concepts. An effective manager of people provides a mission and sense of purpose with future-oriented goals, initiates goals and actions, and builds a sense of shared values that allows followers to be focused and motivated, all actions that are attributed to leaders. Therefore, effective managers can often be considered leaders. Management professor Henry Mintzberg further suggests that good leaders must manage their team and organizations as well. By focusing too much on leadership, at the expense of management, much of the hard work needed to make organizations effective may be left unattended. He states: “Being an engaged leader means you must be reflective while staying in the fray-the hectic, fragmented, never-ending world of managing” (Mintzberg, 2009). Thus, any manager who guides a group toward goal accomplishment can be considered a leader, and any good leader must perform many management functions. Much of the distinction between management and leadership comes from the fact that the title leader assumes competence. Consequently, an effective and successful manager can be considered a leader, but a less-competent manager is not a leader. Overall, the debate over the difference between the two concepts does not add much to our understanding of what constitutes good leadership or good management and how to achieve these goals. It does, however, point to the need felt by many people and organizations for effective, competent, and visionary leadership/management. This book does not dwell on the distinction between the two concepts and uses the terms interchangeably. ROLES AND FUNCTIONS OF LEADERS Although leaders in different organizations and different cultures perform dissimilar functions and play unique roles, researchers have identifed a number of managerial roles and functions that cut across most settings. Managerial Roles To be effective, leaders perform a number of roles. The roles are sets of expected behaviors ascribed to them by virtue of their leadership position. Along with the basic managerial functions of planning, organizing, stafng, directing, and controlling, leaders are ascribed a number of strategic and external roles, as well, which are discussed in detail in Chapter 7. Furthermore, one of the major functions of leaders is to provide their group or organization with a sense of vision and mission. For example, department managers need to plan and organize their department’s activities and assign various people to perform tasks. They also monitor their employees’ performance and correct employees’ actions when needed. Aside from these internal functions, managers negotiate with their boss and other department managers for resources and coordinate decisions and activities with them. Additionally, many department managers must participate in strategic planning and EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 13 the development of their organization’s mission beyond the immediate focus on their own department or team. One of the most cited taxonomies of managerial activities is proposed by Henry Mintzberg (1973), who added the 10 executive roles of fgurehead, leader, liaison, monitor, disseminator, spokesperson, entrepreneur, disturbance handler, resource allocator, and negotiator to an already long list of what leaders do. Mintzberg’s research further suggests that few, if any, managers perform these roles in an organized, compartmentalized, and coherent fashion. Instead, a typical manager’s days are characterized by a wide variety of tasks, frequent interruptions, and little time to think or to connect with their subordinates. Mintzberg’s fndings are an integral part of many defnitions of leadership and management. The roles he defnes are typically considered the major roles and functions of leaders. Interestingly, research suggests that male and female managers may perform their roles differently. In her book, The Female Advantage: Women’s Way of Leadership, Sally Helgesen (1995) questions many myths about the universality of management behaviors. Through case studies of fve female executives, Helgesen faithfully replicated the methodology used 20 years earlier by Mintzberg in his study of seven male managers. Mintzberg had found that his managers often worked at an unrelenting pace, with many interruptions and few nonwork-related activities. The men felt that their identity was tied directly to their job and often reported feeling isolated, with no time to reflect, plan, and share information with others. They also reported having a complex network of colleagues outside work and preferring face-to-face interaction to all other means of communication. Helgesen’s fndings of female managers matched Mintzberg’s only in the last two categories. Her female managers also were part of a complex network and preferred face-to-face communication. The other fndings, however, were surprisingly different. The women reported working at a calm, steady pace with frequent breaks. They did not consider unscheduled events to be interruptions; they instead viewed them as a normal part of their work. All of them reported working at a number of nonwork-related activities. They each cultivated multifaceted identities and, therefore, did not feel isolated. They found themselves with time to read and reflect on the big picture. Additionally, the female executives scheduled time to share information with their colleagues and subordinates. The gender differences found between the two studies can be attributed partly to the 20-year time difference. However, Helgesen’s suggestions about a different female leadership style, which she calls “the web,” are supported by a number of other research and anecdotal studies. Helgesen’s web is compared to a circle with the manager in the center and interconnected to all other parts of the department or organization. This view differs sharply from the traditional pyramid structure common in many organizations. Chapter 2 further explores the gender differences in leadership. Functions of the Leader: Creation and Maintenance of an Organizational Culture One of the major functions of leaders is the creation and development of a culture and climate for their group or organization (Nahavandi and Malekzadeh, 1993a; Schein, 2010). Leaders, particularly founders, leave an almost-indelible mark on the assumptions that are passed down from one generation to the next. In fact, organizations often come to mirror their founders’ personalities. Consider, for example, how Starbucks, the worldwide provider of gourmet coffee, reflects the dreams and fears of its founder, Howard Schultz (see Leading Change case in Chapter 10). The company is known for its generous beneft package and its focus on taking care of its employees. Schultz often repeats the story of his father losing his job after EKREM INCE ekremince@gmail.com University of London 14 Topic 1 INTRODUCTION TO LEADERSHIP breaking his leg and the devastating and long-lasting effect this event had on him and his family (George, 2007). As is the case in many other organizations, the founder’s style, or in the case of Starbucks, the founder’s family history, has an impact on the culture of an organization. If the founder is workaholic and control oriented, the organization is likely to push for fast-paced decision making and be centralized. If the founder is participative and team oriented, the organization will be decentralized and open. Norm Brodsky, a veteran entrepreneur who created several businesses, realized how much his hard-driving personality affected the culture of his company. He also realized that his wife and partner’s more caring style was having a positive impact on employees, so he worked on softening his own style and supporting her initiatives (Brodsky, 2006). The leader’s passion often translates into the mission or one of the primary goals of the organization, as is the case of Howard Schultz for Starbucks. Similarly, David Neeleman’s passion for customers and high-quality service (see Section “Leadership in Action” at the end of this chapter) has shaped the management of all the companies Neeleman has founded. The leaders set the vision and direction and make most, if not all, of the decisions regarding the various factors that will shape the culture (Figure 1.1). Figure 1.1 Leader’s Functions in Shaping Organizational Culture Leaders are role models for other organizational members. They establish and grant the status symbols that are the main artifacts of organizational culture. Followers take their cues from the leaders on what behaviors are and are not acceptable. For example, Stephen Oesterle, senior vice president at Medtronics leads by example in two ways. As the leader in charge of medicine, one of his key roles is to look for new technology that can advance the company’s mission. He is considered an international technology scout who scours the globe in search of technological innovation to assure his company’s future success (Walsh, 2012). As a marathon runner, he promotes a healthy lifestyle and its role in restoring lives, which is the mission of his company (Tuggle, 2007). Another example is Tyler Winkler, the senior vice president of sales and business development for Secure Works, who is obsessed with improving sales numbers. One of his frst statements to his employees was, “Make your numbers in three months or you’re out” (Cummings, 2004). He measures everything, observes employees closely, and provides detailed feedback and training, all to improve sales. His methods became the norm in the organization and created a legion of loyal employees. Research about the importance of empathy in leadership suggests another function for leaders, related to cultural factors. Researchers argue that a key function of leaders is to manage the emotions of group members (Humphrey, 2002). Even though attention to internal process issues, such as the emotional state of followers, has always been considered a factor in leadership, it is increasingly seen not as a peripheral task, but rather as one of the main functions. This function is particularly EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 15 critical to maintaining followers’ positive outlook in uncertain and ambiguous situations. Followers observe their leaders’ emotional reactions and take their cue from them to determine appropriate reactions (Pescosolido, 2002). An unlikely example of the emotion management role of leaders is Bob Ladouceur, the legendary La Salle, California, high school football coach and the man behind a great dynasty of 20 undefeated seasons and 399 wins (Sankin, 2013). Ladouceur, who retired as head coach after 34 years in 2013, focuses on shaping the lives of his students, rather than simply winning. His players are not generally considered to be the most talented or the strongest. Ladouceur, however, gets extraordinary performance from them through hard training and character building. He states, “If a team has no soul, you’re just wasting your time” (Wallace, 2003: 100-104). He wants his players to get in touch with their emotions and develop “love” for their teammates. For Ladouceur, managing these emotions is the key to his teams’ winning streaks. He considers his relationships with his followers and coworkers, rather than his winning record, to be the highlight of his career (Hammon, 2013). Other means through which the leader shapes culture are by decisions regarding the reward system (Kerr and Slocum, 1987) and by controlling decision standards. In one organization, rewards (fnancial and nonfnancial) go to only the highest contributors to the bottom line. In another, accomplishments such as contribution to cultural diversity or the degree of social responsibility are also valued and rewarded. Additionally, leaders are in charge of selecting other leaders and managers for the organization. Those selected are likely to ft the existing leader’s ideal model and, therefore, ft the culture. Other influential members of the organization provide leaders with yet another opportunity to shape the culture. Many frms, for example, establish a nominating committee of the board of directors. In such committees, top managers nominate and select their successors. Therefore, they not only control the current culture but also exert a strong influence on the future of their organization. To select his successor before he left in 2001, General Electric’s (GE) Jack Welch carefully observed, interacted with, and interviewed many of the company’s executives. He sought feedback from top company leaders, and after selecting Jeff Immelt, Welch orchestrated the transition of power. This carefully orchestrated succession ensured that the new leader, although bringing about some new ideas, ft the existing culture of the organization (Useem, 2001). A similar careful process took place at Procter & Gamble in 2009 and again in 2013 (see Section “Leadership in Action” case in Chapter 7). APPLYING WHAT YOU LEARN Leadership Basics Leadership is a complex process that is a journey rather than a destination. All effective leaders continue to grow and improve, learning from each situation they face and from their mistakes. Here are some basic points that we will revisit throughout the book: • Find your passion: We can be at our best when we lead others into something for which we have passion. • Learn about yourself: Self-awareness of your values, strengths, and weaknesses is an essential starting point for leaders. • Experiment with new behaviors and situations: Learning and growth occur when we are exposed to new situations that challenge us; seek them out. EKREM INCE ekremince@gmail.com University of London 16 Topic 1 INTRODUCTION TO LEADERSHIP • Get comfortable with failure: All leaders fail; good leaders learn from their mistakes and consider them learning opportunities. Mistakes are more likely to happen when you are placed in new challenging situations that provide you with opportunities to learn. • Pay attention to your environment: Understanding all the elements of a leadership situation, and particularly followers, is essential to effectiveness. Ask questions, listen carefully, and observe intently so that you can understand the people and the situations around you. • Remember that it’s about others:Leadership is not about you and your personal agenda. It’s about getting things done for, through and with others. • Don’t take yourself too seriously: A good sense of humor and keeping a perspective on priorities will help you. You are not as good as your most fervent supporters believe and not as flawed as your reticent detractors think, so lighten up! The power of the leader to make decisions for the organization about its structure and strategy is another effective means of shaping culture. By determining the hierarchy, span of control, reporting relationship, and degree of formalization and specialization, the leader molds culture. A highly decentralized and organic structure is likely to be the result of an open and participative culture, whereas a highly centralized structure will go hand in hand with a mechanistic/bureaucratic culture. The structure of an organization limits or encourages interaction and by doing so affects, as well as is affected by, the assumptions shared by members of the organization. Similarly, the strategy selected by the leader or the top management team will be determined by, as well as help shape, the culture of the organization. Therefore, a leader who adopts a proactive growth strategy that requires innovation and risk taking will have to create a culture different from a leader who selects a strategy of retrenchment. CHANGES IN ORGANIZATIONS AND IN EXPECTATIONS OF LEADERS To some, a leader is someone who takes charge and jumps in to make decisions whenever the situation requires. This view is particularly dominant in traditional organizations with a clear hierarchy in which employees and managers carry out narrowly defned responsibilities. To others, a leader is a facilitator who simply channels the group’s desires. The extent to which a leader is attributed power and knowledge varies by culture and will be discussed in Chapter 2. Even though the U.S. mainstream culture is not as authority oriented as some other cultures, a large number of our leadership theories are implicitly or explicitly based on the assumptions that leaders have to take charge and provide others with instructions. For example, the initiation-of-structure concept provides that effective leadership involves giving direction, assigning tasks to followers, and setting deadlines. These activities are considered an inherent part of an effective leader’s behaviors. Similarly, the widely used concept of motivation to manage (Miner and Smith, 1982) includes desire for power and control over others as an essential component. WHAT DO YOU DO? You have started on a new job, and based on the interview and discussion with people prior to accepting the job you were led to believe that the company strongly believes in employee participation, engagement, and flexibility. A EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 17 couple of months of working with your new boss, however, all you see is command and control, with little opportunity for you to provide any input. What do you do? New Roles for Leaders With the constant need for innovation, intense global competition, economic pressures, and changing demographics, organizations are changing drastically. As a result, many of the traditional leadership functions and roles are changing as well. Figure 1.2 presents the traditional control-oriented model and the new result-oriented model for leaders in organizations. The changing environment for organizations has forced us to reconsider our expectations and requirements for leadership. Effective leaders of diverse and global teams are not necessarily in control of the group. They might need facilitation and participation skills much more than initiation-of-structure skills. For example, employees in traditional organizations are responsible only for production; the planning, leading, and controlling functions, as well as the responsibility for results, fall on the manager (see Figure 1.2). An increasing number of organizations, however, are shifting the activities and responsibilities typically associated with managers to employees. Managers are expected to provide the vision, get the needed resources to employees, act as support persons, and get out of employees’ way. The employees, in turn, learn about the strategic and fnancial issues related to their job, plan their own activities, set production goals, and take responsibility for their results. Figure 1.2 Control Versus Results-Oriented Leadership Many executives have adopted new management techniques to help them with the challenges inherent in the new roles for leaders. Harnessing employees’ ideas and engaging them in the goals of the organization is increasingly a key role for leaders. When Rick Sapio was the CEO of the 37-employee New York City Mutual.com, a mutual fund advisory company, he knew that his business was high pressure with little time to stay in touch with his employees (Buchanan, 2001). Recognizing the importance of involving employees, however, Sapio created “Hassles,” an electronic mailbox through which employees could express their concerns and ideas with a guarantee from the CEO that they will be addressed within a week. For those who preferred to see the boss in person, Sapio scheduled one hour each week in a conference room (rather than his ofce, which seemed inaccessible) where anyone could drop in to give him input. Jeffrey Immelt, CEO of General Electric, has made learning and getting to hear everybody’s ideas one EKREM INCE ekremince@gmail.com University of London 18 Topic 1 INTRODUCTION TO LEADERSHIP of his priorities. His predecessor, Jack Welch, notes that a great leader needs to “get under the skin of every person who works for the company” (Hammonds, 2004: 32). Leaders at large companies such as Procter & Gamble, Whole Foods, and Toyota, as well as small start-ups such as Evernote, practice being egalitarian and cooperative. Their priorities are fast decision making, training, and innovation. The new leadership styles are not limited to business organizations; they can also be seen in government and other not-for-proft organizations. Harry Baxter, chairman and CEO of Baxter Healthcare in Deerfeld, Illinois, likes to focus on doing the right thing instead of being right. He suggests, “I have very few defnitive answers, but I have a lot of opinions” (Kraemer, 2003: 16). Philip Diehl, former director of the U.S. Mint, and his leadership team transformed the stodgy government bureaucracy into an efcient and customer-centered organization by asking questions, listening to stakeholders, creating a sense of urgency in employees, and involving them in the change (Muio, 1999). These changes also occur in local, state, and federal government agencies. For example, Ron Sims, who was recognized in 2006 as one of the most innovative public ofcials, is known for always looking for common ground while operating from a clear set of principles (Walters, 2006). Ron Sims is also known for leading by example. When he talked about county employees adopting a healthier lifestyle, he started eating better and biking and lost 40 pounds (Walters, 2006). These leaders leave their top-floor ofces to keep in touch with the members of their organizations. Given the rapid pace of change and complexity of the environment in which many organizations operate, cultivating extensive sources of information and involving many people in the decision-making process are essential. Factors Fueling Changes A number of external and internal organizational factors are driving the changes in our organizations and in the role of leaders and managers (Figure 1.3). First, political changes worldwide are leading to more openness and democracy. These political changes shape and are shaped by images of what is considered to be appropriate leadership. With the fall of the Soviet Union at the end of the twentieth century, the world has seen a spread in democratic principles aimed at power sharing. Uprising in North Africa and the Middle East and the Arab Spring movement demonstrated the desire of many for more openness and democracy. In the United States, the public continues to expect transparency in both the private and the public sectors. Politicians are forced to share details of their past and their personal life and justify to the public many, if not all, of their decisions. Communities increasingly demand participation in the decisions regarding their schools, health-care systems, and environment. EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 19 Figure 1.3 Factors Fueling Changes in Organizations and Their Leadership Second, with the worldwide economic downturn, increasing global and local competition, and complex and fast-changing technologies, numerous organizations struggle for survival and to justify their existence. Many are forced to reconsider how they provide goods and services to their customers and to the public and to reevaluate the assumptions they held as basic truths. For example, while Unions in the United States are struggling for both membership and a new identity, in some cases, their leadership has succeeded by focusing on cooperation with management, something that would have been unimaginable a few years back. Monty Newcomb, a shop steward at a chemical plant in Calvert City Kentucky, worked with his union and with management to integrate trust and team building between union and management with the traditional collective bargaining process (Davidson, 2013). This new collaboration took a while to take hold but eventually resulted in both groups accomplishing their goals, increasing efciency and quality, and preventing the company from shipping jobs overseas. Another key factor fueling changes in leadership is the diversity in the United States and many other countries (Figure 1.4). Demographic changes that lead to increased diversity in the various groups and organizations push leaders to consider this diversity when making decisions. Many countries include similar or even greater cultural diversity. For example, Malaysia’s population is highly diverse and consists of Malays, Chinese, Indians, Arabs, Sinhalese, Eurasians, and Europeans, with the Muslim, Buddhist, Daoist, Hindu, Christian, Sikh, and Shamanistic religions all practiced (World Fact Book: Malaysia, 2013). Although the majority of Singapore’s population of more than 4 million is Chinese, it also includes Malays, Indians, and Eurasians. As a result, the country has four ofcial languages: English, Malay, Mandarin, and Tamil (World Fact Book: Singapore, 2013). Table 1.3 highlights some of the ethnic and demographic changes and trends in the United States. EKREM INCE ekremince@gmail.com University of London 20 Topic 1 INTRODUCTION TO LEADERSHIP Figure 1.4 Diversity in the U.S. Population Source: United States Census Bureau, 2013. http://quickfacts.census.gov/qfd/states/00000.html (accessed May 30, 2013). Table 1.3 U.S. Demographic Highlights and Trends • In 2007, 20.3 percent of the U.S population spoke a language other than English at home compared to 13 percent in 2000. • More than half of the U.S. workforce consists of women and minorities. • By 2016, minorities will make up one-third of the U.S. population. • By 2025, the percentage of European Americans in the population will drop from 72 percent in 2000 to 62 percent. • By 2025, Hispanics are estimated to be 21 percent of the population, outnumbering African Americans, who will make up 13 percent of the population. • By 2050, the Hispanic population of the United States will grow to 30.25 percent. • By 2025, the average age will be close to 40, as opposed to under 35 in 2000. • By 2025, more than 50 percent of the population of Hawaii, California, New Mexico, and Texas will be from a minority group. • By 2050, the average U.S. resident will be from a non-European background. • By 2050, only about 62 percent of the entrants into the labor force will be white, with half that number being women. Source: U.S. Census Bureau, Census, 2010. http://www.census.gov/population; and Bureau of Labor Statistics, 2013. http://www.bls.gov/emp/ep_table_303.htm. Some of the diversity that leaders must manage is related to age. Roxann Hewertson, CEO of the Highland Consulting Group, an organization that focuses on leadership issues and a faculty at Cornell University, says the younger workers do not respond to traditional hierarchies easily. As a result she believes,“There’s a real hunger out there for fnding a better way. The old way is broken. It doesn’t serve us” (5 influential CEOs, 2013). Nick Petrie, senior faculty member of the Center for Creative Leadership, an influential leadership organization, strongly believes, “There is a transition occurring from the old paradigm in which leadership resided in a person or role, to a new one in which leadership is a collective process that is spread throughout networks of people” (5 influential CEOs, 2013). Other demographic trends in the United States include the largest percentage of the population being older baby boomers (born between the late 1940s and the 1960s) at the top, and the millennial generation (born after the mid-1980s) at the bottom, with the generation Xers (born between the 1970s and 1980s) pinched in the middle. This suggests that many organizational leaders are managing employees from generations other than their own and EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 21 therefore must take cultural and generational factors into account. We will discuss the impact of generational differences on individuals in Chapters 2 and 4. The increasing number of women in the workforce is another factor that has an impact on leadership. Although women currently hold only 10 percent of the executive positions in the United States, they make up over 47 percent of the general workforce with a clear majority of women being part of the labor force (Women in the Labor Force, 2010). Similar trends exist all over the world. For example, women make up almost 47 percent of the labor force in Canada, close to 45 percent in China, over 50 percent in Russia (Labor force, 2009). Scandinavian countries are leading the way with the number of women in top management and leadership positions in the executive ofces and boardrooms. In Sweden, women hold 23 percent of the board seats (Amble, 2006). As a result, the old ways that were designed for a gender and ethnically homogeneous population do not always work with employees and customers from varied backgrounds and cultures. Much of the burden for devising and implementing the needed changes falls on the leadership of our organizations. The demand to listen to and address the needs of nonhomogeneous groups requires skills that go beyond controlling and monitoring. Because of the pressures for change, many organizations fnd themselves rewriting their policies to address the needs of a diverse community and consumer base. Consultant Ted Childs, who used to be IBM’s president of global workforce diversity states, “Business is at its core about relationships. I think diversity work takes away barriers that interfere with relationship building” (Child, 2013). He adds: “You’re going to have to sell to people who are different from you, and buy from people who are different from you, and manage people who are different from you . . . . This is how we do business. If it’s not your destination, you should get off the plane now” (Swan, 2000: 260). He views getting people to respect those who are different from them as the biggest challenge in managing diversity. Barriers to Change Despite the factors that fuel the need for change, few organizations and individuals have adopted new models for leadership painlessly. In part because of perceived fnancial pressures and attempts to fnd a quick way out of them, organizations turn to tough autocratic leaders whose goals are clearly not employee motivation and loyalty. For example, John Grundhofer, nicknamed “Jack the Ripper,” specialized in implementing massive layoffs and found his skills in high demand. Similarly, Al Dunlap, with nicknames such as “Ming the Merciless” and “Chainsaw Al,” for a long time moved successfully from the top position of one organization to another before being fred from Sunbeam Corporation in 1998. For many years, the fnancial community applauded him for his drastic cost-cutting strategies that involved widespread layoffs. Bill George, the highly respected former CEO of Medtronic, states that this focus on short-term and quick results cannot create the motivation necessary for the innovation and superior service that are essential to leadership and organizational effectiveness (George, 2003). Another obstacle to implementing new models of leadership is that even though teams are fairly common in lower and middle levels of organizations, top management still remains a one-person show. The hierarchical structure of many organizations makes change difcult. Old cultures resist change. Few organizations truly reward enterprising employees and managers for crossing the traditional hierarchical barriers. Instead, most organizations continue to reward their leaders for tried-and-true approaches or sometimes for nonperformance- and nonproductivity-related behaviors, despite the lack of success (Luthans, 1989). Marcus Buckingham, a researcher at the Gallup Organization, has studied global leadership practice for 15 years. According to Buckingham, “The corporate world is EKREM INCE ekremince@gmail.com University of London 22 Topic 1 INTRODUCTION TO LEADERSHIP appallingly bad at capitalizing on the strengths of its people” (LaBarre, 2001: 90). Gallup’s extensive surveys show that employee engagement can have a considerable positive impact on an organization’s performance. Recent surveys of employees in the United States by the Conference Board indicate the low level of overall satisfaction with jobs, at 47 percent (Conference Board, 2012). Other research indicates that job satisfaction is lower in larger companies with more bureaucracy, lower autonomy, and low responsibility (Wall Street Journal, 2006). Few organizations take full advantage of their employees’ input. Tom Peters, the well-known management consultant, suggests that while business leaders focus on strategy, they often “skip over the incredibly boring part called people,” thereby failing to take advantage of one of the most important aspects of their organization (Reingold, 2003: 94). In addition, changing the established behaviors of managers is very difcult. John Kotter, Harvard Business School professor and noted authority on change, suggests, “The central issue is never strategy, structure, culture, or systems. The core of the matter is always about changing the behavior of people” (Deutschman, 2005). In addition, although they might spend a great deal of time working in teams, employees are still rewarded for individual performance. In other words, our reward structures fail to keep up with our attempts to increase cooperation among employees and managers. Furthermore, many employees are not willing or able to accept their new roles as partners and decision makers, even when such roles are offered to them. Their training and previous experiences make them balk at taking on what they might consider to be their leader’s job. Even when organizations encourage change, many leaders fnd giving up control difcult. Many receive training in the benefts of empowerment, teams, and softer images of leadership, but they simply continue to repeat what seemingly worked in the past, engaging in what researcher Pfeffer calls substituting memory for thinking (1998). With all that training on how to be in charge and in control, allowing employees to do more might appear to be a personal failure. Either because of years of traditional training or because of personality characteristics that make them more comfortable with control and hierarchy, managers’ styles often create an obstacle to implementing necessary changes. Research about children’s images of leadership indicates that the belief that leaders need to be in control develops early in life. Children, particularly boys, continue to perceive a sex-typed schema of leaders: Leaders are supposed to have male characteristics, including dominance and aggression (Ayman-Nolley, Ayman, and Becker, 1993). Summary and Conclusions A leader is any person who influences individuals and groups within an organization, helps them in the establishment of goals, and guides them toward achievement of those goals, thereby allowing them to be effective. Leaders are needed because they create order and organization in groups, allowing them to achieve their goals; they help people make sense of the world and can serve as ideal and romantic symbols for their followers. To be effective, leaders must help the organization maintain internal health and external adaptability. Despite the apparent simplicity of the defnitions of leadership and effectiveness, both are difcult concepts to implement. Various studies propose separate defnitions for leadership and management. The activities performed by leaders, however, are similar to those typically considered the domain of effective managers. Although some view the roles of leaders and managers as being different, effective, and competent, managers are often also leaders within their groups and organizations. In addition to performing the traditional managerial roles and duties, leaders also play a special role in the creation of a culture for their organizations. They can affect culture by setting the vision and direction, making direct decisions regarding reward systems, hiring other managers EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 23 and employees, and being role models for others in the organization. The role of leaders is changing with our shifting expectations and global and organizational pressures. Leaders fnd themselves providing more vision and direction and focusing on results rather than command and control. While new roles take hold slowly, political, economic, demographic, and social changes drive the need for change. However, leaders fnd use of traditional models, lack of involvement of followers, and falling back on old practices hard obstacles to overcome. Nahavandi. Original materials from The art and science of leadership © copyright 2015 Pearson. All rights reserved. EKREM INCE ekremince@gmail.com University of London 24 Topic 1 INTRODUCTION TO LEADERSHIP ESSENTIAL READING Now do the second reading, bearing in mind the points we have emphasised in the introductory video to this topic and in the mini lecture. Remember that all the essential reading for this programme is provided for you. Click ‘next’ to go to the next page and start reading. After this there will be a short quiz based on both readings to help you test how much information you have retained, then a series of more thought-provoking self-assessment exercises to allow you to stretch yourself and develop your ideas further. EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 25 CHAPTER 1 INTRODUCTION AND OVERVIEW Leadership in organizations 8th global edition, G. A. Yukl. Original materials from Leadership in organizations © copyright 2013 Pearson. All rights reserved. After studying this chapter, you will be able to: • Understand the different ways leadership has been defined. • Understand the controversy about differences between leadership and management. • Understand why it is so difcult to assess leadership effectiveness. • Understand the different indicators used to assess leadership effectiveness. • Understand what aspects of leadership have been studied the most during the past 50 years. • Understand the organization of this book. Leadership is a subject that has long excited interest among people. The term connotes images of powerful, dynamic individuals who command victorious armies, direct corporate empires from atop gleaming skyscrapers, or shape the course of nations. The exploits of brave and clever leaders are the essence of many legends and myths. Much of our description of history is the story of military, political, religious, and social leaders who are credited or blamed for important historical events, even though we do not understand very well how the events were caused or how much influence the leader really had. The widespread fascination with leadership may be because it is such a mysterious process, as well as one that touches everyone’s life. Why did certain leaders (e.g., Gandhi, Mohammed, Mao Tse-tung) inspire such intense fervor and dedication? How did certain leaders (e.g., Julius Caesar, Alexander the Great) build great empires? Why did some rather undistinguished people (e.g., Adolf Hitler, Claudius Caesar) rise to positions of great power? Why were certain leaders (e.g., Winston Churchill, Indira Gandhi) suddenly deposed, despite their apparent power and record of successful accomplishments? Why do some leaders have loyal followers who are willing to sacrifce their lives, whereas other leaders are so despised that subordinates conspire to murder them? Questions about leadership have long been a subject of speculation, but scientifc research on leadership did not begin until the twentieth century. The focus of much of the research has been on the determinants of leadership effectiveness. Social scientists have attempted to discover what traits, abilities, behaviors, sources of power, or aspects of the situation determine how well a leader is able to influence followers and accomplish task objectives. There is also a growing interest in understanding leadership as a shared process in a team or organization and the reasons why this process is effective or ineffective. Other important questions include the reasons why some people emerge as leaders, and the determinants of a leader’s actions, but the predominant concern has been leadership effectiveness. Some progress has been made in probing the mysteries surrounding leadership, but many questions remain unanswered. In this book, major theories and research fndings on leadership effectiveness will be reviewed, with particular emphasis on EKREM INCE ekremince@gmail.com University of London 26 Topic 1 INTRODUCTION TO LEADERSHIP managerial leadership in formal organizations such as business corporations, government agencies, hospitals, and universities. This chapter introduces the subject by considering different conceptions of leadership, different ways of evaluating its effectiveness, and different approaches for studying leadership. The chapter also provides an overview of the book and explains how subjects are organized. Definitions of Leadership The term leadership is a word taken from the common vocabulary and incorporated into the technical vocabulary of a scientifc discipline without being precisely redefned. As a consequence, it carries extraneous connotations that create ambiguity of meaning (Janda, 1960). Additional confusion is caused by the use of other imprecise terms such as power, authority, management, administration, control, and supervision to describe similar phenomena. An observation by Bennis (1959, p. 259) is as true today as when he made it many years ago: Always, it seems, the concept of leadership eludes us or turns up in another form to taunt us again with its slipperiness and complexity. So we have invented an endless proliferation of terms to deal with it . . . and still the concept is not sufciently defned. Researchers usually defne leadership according to their individual perspectives and the aspects of the phenomenon of most interest to them. After a comprehensive review of the leadership literature, Stogdill (1974, p. 259) concluded that “there are almost as many defnitions of leadership as there are persons who have attempted to defne the concept.” The stream of new defnitions has continued unabated since Stogdill made his observation. Leadership has been defned in terms of traits, behaviors, influence, interaction patterns, role relationships, and occupation of an administrative position. Table 1-1 shows some representative defnitions presented over the past 50 years. • Leadership is “the behavior of an individual . . . directing the activities of a group toward a shared goal” (Hemphill & Coons, 1957, p. 7). • Leadership is “the influential increment over and above mechanical compliance with the routine directives of the organization” (Katz & Kahn, 1978, p. 528). • Leadership is “the process of influencing the activities of an organized group toward goal achievement” (Rauch & Behling, 1984, p. 46). • “Leadership is about articulating visions, embodying values, and creating the environment within which things can be accomplished” (Richards & Engle, 1986, p. 206). • “Leadership is a process of giving purpose (meaningful direction) to collective effort, and causing willing effort to be expended to achieve purpose” (Jacobs & Jaques, 1990, p. 281). • Leadership “is the ability to step outside the culture . . . to start evolutionary change processes that are more adaptive” (Schein, 1992, p. 2). • “Leadership is the process of making sense of what people are doing together so that people will understand and be committed” (Drath & Palus, 1994, p. 4). • Leadership is “the ability of an individual to influence, motivate, and enable others to contribute toward the effectiveness and success of the organization . . .” (House et al., 1999, p. 184). Table 1.1 Defnitions of Leadership Most defnitions of leadership reflect the assumption that it involves a process whereby intentional influence is exerted over other people to guide, structure, and facilitate activities and relationships in a group or organization. The numerous EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 27 defnitions of leadership appear to have little else in common. They differ in many respects, including who exerts influence, the intended purpose of the influence, the manner in which influence is exerted, and the outcome of the influence attempt. The differences are not just a case of scholarly nit-picking; they reflect deep disagreement about identifcation of leaders and leadership processes. Researchers who differ in their conception of leadership select different phenomena to investigate and interpret the results in different ways. Researchers who have a very narrow defnition of leadership are less likely to discover things that are unrelated to or inconsistent with their initial assumptions about effective leadership. Because leadership has so many different meanings to people, some theorists question whether it is even useful as a scientifc construct (e.g., Alvesson & Sveningsson, 2003; Miner, 1975). Nevertheless, most behavioral scientists and practitioners seem to believe leadership is a real phenomenon that is important for the effectiveness of organizations. Interest in the subject continues to increase, and the deluge of articles and books about leadership shows no sign of abating. Specialized Role or Shared Influence Process? A major controversy involves the issue of whether leadership should be viewed as a specialized role or as a shared influence process. One view is that all groups have role specialization, and the leadership role has responsibilities and functions that cannot be shared too widely without jeopardizing the effectiveness of the group. The person with primary responsibility to perform the specialized leadership role is designated as the “leader.” Other members are called “followers” even though some of them may assist the primary leader in carrying out leadership functions. The distinction between leader and follower roles does not mean that a person cannot perform both roles at the same time. For example, a department manager who is the leader of department employees is also a follower of higher-level managers in the organization. Researchers who view leadership as a specialized role are likely to pay more attention to the attributes that determine selection of designated leaders, the typical behavior of designated leaders, and the effects of this behavior on other members of the group or organization. Another way to view leadership is in terms of an influence process that occurs naturally within a social system and is diffused among the members. Writers with this perspective believe it is more useful to study “leadership” as a social process or pattern of relationships rather than as a specialized role. According to this view, various leadership functions may be carried out by different people who influence what the group does, how it is done, and the way people in the group relate to each other. Leadership may be exhibited both by formally selected leaders and by informal leaders. Important decisions about what to do and how to do it are made through the use of an interactive process involving many different people who influence each other. Researchers who view leadership as a shared, diffuse process, are likely to pay more attention to the complex influence processes that occur among members, the context and conditions that determine when and how they occur, the processes involved in the emergence of informal leaders, and the consequences for the group or organization. Type of Influence Process Controversy about the defnition of leadership involves not only who exercises influence, but also what type of influence is exercised and the outcome. Some theorists would limit the defnition of leadership to the exercise of influence resulting in enthusiastic commitment by followers, as opposed to indifferent compliance or reluctant obedience. These theorists argue that the use of control over rewards and EKREM INCE ekremince@gmail.com University of London 28 Topic 1 INTRODUCTION TO LEADERSHIP punishments to manipulate or coerce followers is not really “leading” and may involve the unethical use of power. An opposing view is that this defnition is too restrictive because it excludes some influence processes that are important for understanding why a leader is effective or ineffective in a given situation. How leadership is defned should not predetermine the answer to the research question of what makes a leader effective. The same outcome can be accomplished with different influence methods, and the same type of influence attempt can result in different outcomes, depending on the nature of the situation. Even people who are forced or manipulated into doing something may become committed to it if they subsequently discover that it really is the best option for them and the organization. The ethical use of power is a legitimate concern for leadership scholars, but it should not limit the defnition of leadership or the type of influence processes that are studied. Purpose of Influence Attempts Another controversy about which influence attempts are part of leadership involves their purpose and outcome. One viewpoint is that leadership occurs only when people are influenced to do what is ethical and benefcial for the organization and themselves. This defnition of leadership does not include influence attempts that are irrelevant or detrimental to followers, such as a leader’s attempts to gain personal benefts at the follower’s expense. An opposing view would include all attempts to influence the attitudes and behavior of followers in an organizational context, regardless of the intended purpose or actual benefciary. Acts of leadership often have multiple motives, and it is seldom possible to determine the extent to which they are selfless rather than selfsh. The outcomes of leader actions usually include a mix of costs and benefts, some of which are unintended, making it difcult to infer purpose. Despite good intentions, the actions of a leader are sometimes more detrimental than benefcial for followers. Conversely, actions motivated solely by a leader’s personal needs sometimes result in unintended benefts for followers and the organization. Thus, the domain of leadership processes to study should not be limited by the leader’s intended purpose. Influence Based on Reason or Emotions Most of the leadership defnitions listed earlier emphasize rational, cognitive processes. For many years, it was common to view leadership as a process wherein leaders influence followers to believe it is in their best interest to cooperate in achieving a shared task objective. Until the 1980s, few conceptions of leadership recognized the importance of emotions as a basis for influence. In contrast, some recent conceptions of leadership emphasize the emotional aspects of influence much more than reason. According to this view, only the emotional, value-based aspects of leadership influence can account for the exceptional achievements of groups and organizations. Leaders inspire followers to willingly sacrifce their selfsh interests for a higher cause. For example, leaders can motivate soldiers to risk their lives for an important mission or to protect their comrades. The relative importance of rational and emotional processes and how they interact are issues to be resolved by empirical research, and the conceptualization of leadership should not exclude either type of process. EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 29 Direct and Indirect Leadership Most theories about effective leadership focus on behaviors used to directly influence immediate subordinates, but a leader can also influence other people inside the organization, including peers, bosses, and people at lower levels who do not report to the leader. Some theorists make a distinction between direct and indirect forms of leadership to help explain how a leader can influence people when there is no direct interaction with them (Hunt, 1991; Lord & Maher, 1991; Yammarino, 1994). A chief executive ofcer (CEO) has many ways to influence people at lower levels in the organization. Direct forms of leadership involve attempts to influence followers when interacting with them or using communication media to send messages to them. Examples include sending memos or reports to employees, sending e-mail messages, presenting speeches on television, holding meetings with small groups of employees, and participating in activities involving employees (e.g., attending orientation or training sessions, company picnics). Most of these forms of influence can be classifed as direct leadership. Indirect leadership has been used to describe how a chief executive can influence people at lower levels in the organization who do not interact directly with the leader (Bass, Waldman, Avolio, & Bebb, 1987; Waldman & Yammarino, 1999; Yammarino, 1994). One form of indirect leadership by a CEO is called “cascading.” It occurs when the direct influence of the CEO is transmitted down the authority hierarchy of an organization from the CEO to middle managers, to lower-level managers, to regular employees. The influence can involve changes in employee attitudes, beliefs, values, or behaviors. For example, a CEO who sets a good example of ethical and supportive behavior may influence similar behavior by employees at lower levels in the organization. Another form of indirect leadership involves influence over formal programs, management systems, and structural forms (Hunt, 1991; Lord & Maher, 1991; Yukl & Lepsinger, 2004). Many large organizations have programs or management systems intended to influence the attitudes, skills, behavior, and performance of employees. Examples include programs for recruitment, selection, and promotion of employees. Structural forms and various types of programs can be used to increase control, coordination, efciency, and innovation. Examples include formal rules and procedures, specialized subunits, decentralized product divisions, standardized facilities, and self-managed teams. In most organizations only top executives have sufcient authority to implement new programs or change the structural forms (see Chapter 11). A third form of indirect leadership involves leader influence over the organization culture, which is defned as the shared beliefs and values of members (Schein, 1992; Trice & Beyer, 1991). Leaders may attempt either to strengthen existing cultural beliefs and values or to change them. There are many ways for leaders to influence an organization’s culture. Some ways involve direct influence (e.g., communicating a compelling vision or leading by example), and some involve forms of indirect influence, such as changing the organizational structure, reward systems, and management programs (see Chapter 11). For example, a CEO can implement programs to recruit, select, and promote people who share the same values (Giberson, Resick, & Dickson, 2005). The interest in indirect leadership is useful to remind scholars that leadership influence is not limited to the types of observable behavior emphasized in many leadership theories. However, it is important to remember that a simple dichotomy does not capture the complexity involved in these influence processes. Some forms of influence are not easily classifed as either direct or indirect leadership. Moreover, EKREM INCE ekremince@gmail.com University of London 30 Topic 1 INTRODUCTION TO LEADERSHIP direct and indirect forms of influence are not mutually exclusive, and when used together in a consistent way, it is possible to magnify their effects (see Chapter 11). Leadership or Management There is a continuing controversy about the difference between leadership and management. It is obvious that a person can be a leader without being a manager (e.g., an informal leader), and a person can be a manager without leading. Indeed, some people with the job title “manager” do not have any subordinates (e.g., a manager of fnancial accounts). Nobody has proposed that managing and leading are equivalent, but the degree of overlap is a point of sharp disagreement. Some writers contend that leadership and management are qualitatively different and mutually exclusive (e.g., Bennis & Nanus, 1985; Zaleznik, 1977). The most extreme distinction assumes that management and leadership cannot occur in the same person. For these writers, leaders and managers differ with regard to their values and personalities. Managers value stability, order, and efciency, and they are impersonal, risk-averse, and focused on short-term results. Leaders value flexibility, innovation, and adaptation; they care about people as well as economic outcomes, and they have a longer-term perspective with regard to objectives and strategies. Managers are concerned about how things get done, and they try to get people to perform better. Leaders are concerned with what things mean to people, and they try to get people to agree about the most important things to be done. Bennis and Nanus (1985, p. 21) proposed that “managers are people who do things right, and leaders are people who do the right thing.” However, the empirical research does not support the assumption that people can be sorted neatly into these two extreme stereotypes. Moreover, the stereotypes imply that managers are generally ineffective. The term manager is an occupational title for a large number of people, and it is insensitive to denigrate them with a negative stereotype. Other scholars view leading and managing as distinct processes or roles, but they do not assume that leaders and managers are different types of people (Bass, 1990; Hickman, 1990; Kotter, 1988; Mintzberg, 1973; Rost, 1991). How the two processes are defned varies somewhat, depending on the scholar. For example, Mintzberg (1973) described leadership as one of the 10 managerial roles. Leadership includes motivating subordinates and creating favorable conditions for doing the work. The other nine roles (e.g., resource allocator, negotiator) involve distinct managing responsibilities, but leadership is viewed as an essential managerial role that pervades the other roles. Kotter (1990) proposed that managing seeks to produce predictability and order, whereas leading seeks to produce organizational change. Both roles are necessary, but problems can occur if an appropriate balance is not maintained. Too much emphasis on the managing role can discourage risk taking and create a bureaucracy without a clear purpose. Too much emphasis on the leadership role can disrupt order and create change that is impractical. According to Kotter, the importance of leading and managing depends in part on the situation. As an organization becomes larger and more complex, managing becomes more important. As the external environment becomes more dynamic and uncertain, leadership becomes more important. Both roles are important for executives in large organizations with a dynamic environment. When Kotter surveyed major large companies in a dynamic environment, he found very few had executives who were able to carry out both roles effectively. Rost (1991) defned management as an authority relationship that exists between a manager and subordinates to produce and sell goods and services. He defned leadership as a multidirectional influence relationship between a leader and EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 31 followers with the mutual purpose of accomplishing real change. Leaders and followers influence each other as they interact in noncoercive ways to decide what changes they want to make. Managers may be leaders, but only if they have this type of influence relationship. Rost proposed that leading was not necessary for a manager to be effective in producing and selling goods and services. However, leading is essential when major changes must be implemented in an organization, because authority is seldom a sufcient basis for gaining commitment from subordinates or for influencing other people whose cooperation is necessary, such as peers and outsiders. Defning managing and leading as distinct roles, processes, or relationships may obscure more than it reveals if it encourages simplistic theories about effective leadership. Most scholars seem to agree that success as a manager or administrator in modern organizations also involves leading. How to integrate the two processes has emerged as a complex and important issue in organizational literature (Yukl & Lepsinger, 2005). The answer will not come from debates about ideal defnitions. Questions about what to include in the domain of essential leadership processes should be explored with empirical research, not predetermined by subjective judgments. A Working Defnition of Key Terms It is neither feasible nor desirable at this point in the development of the discipline to attempt to resolve the controversies over the appropriate defnition of leadership. Like all constructs in social science, the defnition of leadership is arbitrary and subjective. Some defnitions are more useful than others, but there is no single “correct” defnition that captures the essence of leadership. For the time being, it is better to use the various conceptions of leadership as a source of different perspectives on a complex, multifaceted phenomenon. In research, the operational defnition of leadership depends to a great extent on the purpose of the researcher (Campbell, 1977). The purpose may be to identify leaders, to determine how they are selected, to discover what they do, to discover why they are effective, or to determine whether they are necessary. As Karmel (1978, p. 476) notes, “It is consequently very difcult to settle on a single defnition of leadership that is general enough to accommodate these many meanings and specifc enough to serve as an operationalization of the variable.” Whenever feasible, leadership research should be designed to provide information relevant to a wide range of defnitions, so that over time it will be possible to compare the utility of different conceptions and arrive at some consensus on the matter. In this book, leadership is defned broadly in a way that takes into account several things that determine the success of a collective effort by members of a group or organization to accomplish meaningful tasks. The following defnition is used: Leadership is the process of influencing others to understand and agree about what needs to be done and how to do it, and the process of facilitating individual and collective efforts to accomplish shared objectives. The defnition includes efforts not only to influence and facilitate the current work of the group or organization, but also to ensure that it is prepared to meet future challenges. Both direct and indirect forms of influence are included. The influence process may involve only a single leader or it may involve many leaders. Table shows the wide variety of ways leaders can influence the effectiveness of a group or organization. EKREM INCE ekremince@gmail.com University of London 32 Topic 1 INTRODUCTION TO LEADERSHIP • The choice of objectives and strategies to pursue. • The motivation of members to achieve the objectives. • The mutual trust and cooperation of members. • The organization and coordination of work activities. • The allocation of resources to activities and objectives. • The development of member skills and confdence. • The learning and sharing of new knowledge by members. • The enlistment of support and cooperation from outsiders. • The design of formal structure, programs, and systems. • The shared beliefs and values of members. Table 1.1 What Leaders Can Influence In this book, leadership is treated as both a specialized role and a social influence process. More than one individual can perform the role (i.e., leadership can be shared or distributed), but some role differentiation is assumed to occur in any group or organization. Both rational and emotional processes are viewed as essential aspects of leadership. No assumptions are made about the actual outcome of the influence processes, because the evaluation of outcomes is difcult and subjective. Thus, the defnition of leadership is not limited to processes that necessarily result in “successful” outcomes. How leadership processes affect outcomes is a central research question that should not be biased by the defnition of leadership. The focus is clearly on the process, not the person, and they are not assumed to be equivalent. Thus, the terms leader, manager, and boss are used interchangeably in this book to indicate people who occupy positions in which they are expected to perform the leadership role, but without any assumptions about their actual behavior or success. The terms subordinate and direct report are used interchangeably to denote someone whose primary work activities are directed and evaluated by the focal leader. Some writers use the term staff as a substitute for subordinate, but this practice creates unnecessary confusion. The term connotes a special type of advisory position, and most subordinates are not staff advisors. Moreover, the term staff is used both as a singular and plural noun, which creates a lot of unnecessary confusion. The term associate has become popular in business organizations as another substitute for subordinate, because it conveys a relationship in which employees are valued and supposedly empowered. However, this vague term fails to differentiate between a direct authority relationship and other types of formal relationships (e.g., peers, partners). To clarify communication, this text continues to use the term subordinate to denote the existence of a formal authority relationship. The term follower is used to describe a person who acknowledges the focal leader as the primary source of guidance about the work, regardless of how much formal authority the leader actually has over the person. Unlike the term subordinate, the term follower does not preclude leadership processes that can occur even in the absence of a formal authority relationship. Followers may include people who are not direct reports (e.g., coworkers, team members, partners, outsiders). However, the term follower is not used to describe members of an organization who completely reject the formal leader and seek to remove the person from ofce; such people are more appropriately called “rebels” or “insurgents.” Indicators of Leadership Effectiveness Like defnitions of leadership, conceptions of leader effectiveness differ from one writer to another. The criteria selected to evaluate leadership effectiveness reflect a researcher’s explicit or implicit conception of leadership. Most researchers evaluate EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 33 leadership effectiveness in terms of the consequences of influence on a single individual, a team or group, or an organization. One very relevant indicator of leadership effectiveness is the extent to which the performance of the team or organization is enhanced and the attainment of goals is facilitated (Bass, 2008; Kaiser, Hogan & Craig, 2008). Examples of objective measures of performance include sales, net profts, proft margin, market share, return on investment, return on assets, productivity, cost per unit of output, costs in relation to budgeted expenditures, and change in the value of corporate stock. Subjective measures of effectiveness include ratings obtained from the leader’s superiors, peers, or subordinates. Follower attitudes and perceptions of the leader are another common indicator of leader effectiveness, and they are usually measured with questionnaires or interviews. How well does the leader satisfy the needs and expectations of followers? Do they like, respect, and admire the leader? Do they trust the leader and perceive him or her to have high integrity? Are they strongly committed to carrying out the leader’s requests, or will they resist, ignore, or subvert them? Does the leader improve the quality of work life, build the self-confdence of followers, increase their skills, and contribute to their psychological growth and development? Follower attitudes, perceptions, and beliefs also provide an indirect indicator of dissatisfaction and hostility toward the leader. Examples of such indicators include absenteeism, voluntary turnover, grievances, complaints to higher management, requests for transfer, work slowdowns, and deliberate sabotage of equipment and facilities. Leader effectiveness is occasionally measured in terms of the leader’s contribution to the quality of group processes, as perceived by followers or by outside observers. Does the leader enhance group cohesiveness, member cooperation, member commitment, and member confdence that the group can achieve its objectives? Does the leader enhance problem solving and decision making by the group, and help to resolve disagreements and conflicts in a constructive way? Does the leader contribute to the efciency of role specialization, the organization of activities, the accumulation of resources, and the readiness of the group to deal with change and crises? A fnal type of criterion for leadership effectiveness is the extent to which a person has a successful career as a leader. Is the person promoted rapidly to positions of higher authority? Does the person serve a full term in a leadership position, or is he or she removed or forced to resign? For elected positions in organizations, is a leader who seeks reelection successful? It is difcult to evaluate the effectiveness of a leader when there are so many alternative measures of effectiveness, and it is not clear which measure is most relevant. Some researchers attempt to combine several measures into a single, composite criterion, but this approach requires subjective judgments about how to assign a weight to each measure. Multiple criteria are especially troublesome when they are negatively correlated. A negative correlation means that trade-offs occur among criteria, such that as one increases, others decrease. For example, increasing sales and market share (e.g., by reducing price and increasing advertising) may result in lower profts. Likewise, an increase in production output (e.g., by inducing people to work faster) may reduce product quality or employee satisfaction. Immediate and Delayed Outcomes Some outcomes are more immediate than others. For example, the immediate result of an influence attempt is whether followers are willing to do what the leader asks, but a delayed effect is how well followers actually perform the assignment. The EKREM INCE ekremince@gmail.com University of London 34 Topic 1 INTRODUCTION TO LEADERSHIP effects of a leader can be viewed as a causal chain of variables, with each “mediating variable” explaining the effects of the preceding one on the next one. An example is provided in Figure 2.1. The farther along in the causal chain, the longer it takes for the effect to occur. For criteria at the end of the causal chain, there is a considerable delay (months or years) before the effects of the leader’s actions are evident. Moreover, these end-result criteria are more likely to be influenced by extraneous events (e.g., the economy, market conditions). When the delay is long and there is considerable “contamination” of end-result criteria by extraneous events, then these criteria may be less useful for assessing leadership effectiveness than more immediate outcomes. Figure 2.1 Figure 1.1 Causal Chain of Effects from Two Types of Leader Behavior In many cases, a leader has both immediate and delayed effects on the same criterion. The two types of effects may be consistent or inconsistent. When they are inconsistent, the immediate outcome may be very different from the delayed outcomes. For example, profts may be increased in the short run by eliminating costly activities that have a delayed effect on profts, such as equipment maintenance, research and development, investments in new technology, and employee skill training. In the long run, the net effect of cutting these essential activities is likely to be lower profts because the negative consequences slowly increase and eventually outweigh any benefts. The converse is also true: increased investment in these activities is likely to reduce immediate profts but increase long-term profts. What Criteria to Use? There is no simple answer to the question of how to evaluate leadership effectiveness. The selection of appropriate criteria depends on the objectives and values of the person making the evaluation, and people have different values. For example, top management may prefer different criteria than other employees, customers, or shareholders. To cope with the problems of incompatible criteria, delayed effects, and the preferences of different stakeholders, it is usually best to include a variety of criteria in research on leadership effectiveness and to examine the impact of the leader on each criterion over an extended period of time. Multiple conceptions of effectiveness, like multiple conceptions of leadership, serve to broaden our perspective and enlarge the scope of inquiry. Major Perspectives in Leadership Theory and Research The attraction of leadership as a subject of research and the many different conceptions of leadership have created a vast and bewildering literature. Attempts to organize the literature according to major approaches or perspectives show only partial success. One of the more useful ways to classify leadership theory and research is according to the type of variable that is emphasized the most. Three types of variables that are relevant for understanding leadership effectiveness include (1) EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 35 characteristics of leaders, (2) characteristics of followers, and (3) characteristics of the situation. Examples of key variables within each category are shown in Table. Figure 2.2 depicts likely causal relationships among the variables. Characteristics of the Leader • Traits (motives, personality) • Values, integrity, and moral development • Confdence and optimism • Skills and expertise • Leadership behavior • Influence tactics • Attributions about followers • Mental models (beliefs and assumptions) Characteristics of the Followers • Traits (needs, values, self-concepts) • Confdence and optimism • Skills and expertise • Attributions about the leader • Identifcation with the leader • Task commitment and effort • Satisfaction with job and leader • Cooperation and mutual trust Characteristics of the Situation • Type of organizational unit • Size of organizational unit • Position power and authority of leader • Task structure and complexity • Organizational culture • Environmental uncertainty and change • External dependencies and constraints • National cultural values Table 1.2 Key Variables in Leadership Theories Figure 2.2 Figure 1.2 Causal Relationships Among the Primary Types of Leadership Variables Most leadership theories emphasize one category more than the others as the primary basis for explaining effective leadership, and leader characteristics have been emphasized most often over the past half-century. Another common practice is to limit the focus to one type of leader characteristic, namely traits, behavior, or power. To be consistent with most of the leadership literature, the theories and empirical research reviewed in this book are classifed into the following fve approaches: (1) EKREM INCE ekremince@gmail.com University of London 36 Topic 1 INTRODUCTION TO LEADERSHIP the trait approach, (2) the behavior approach, (3) the power-influence approach, (4) the situational approach, and (5) the integrative approach. Each approach is described briefly in the following sections. Trait Approach One of the earliest approaches for studying leadership was the trait approach. This approach emphasizes attributes of leaders such as personality, motives, values, and skills. Underlying this approach was the assumption that some people are natural leaders, endowed with certain traits not possessed by other people. Early leadership theories attributed managerial success to extraordinary abilities such as tireless energy, penetrating intuition, uncanny foresight, and irresistible persuasive powers. Hundreds of trait studies conducted during the 1930s and 1940s sought to discover these elusive qualities, but this massive research effort failed to fnd any traits that would guarantee leadership success. One reason for the failure was a lack of attention to mediating variables in the causal chain that could explain how traits could affect a delayed outcome such as group performance or leader advancement. The predominant research method was to look for a signifcant correlation between individual leader attributes and a criterion of leader success, without examining any explanatory processes. However, as evidence from better designed research slowly accumulated over the years, researchers made progress in discovering how leader attributes are related to leadership behavior and effectiveness. A more recent trait approach examines leader values that are relevant for explaining ethical leadership. Behavior Approach The behavior approach began in the early 1950s after many researchers became discouraged with the trait approach and began to pay closer attention to what managers actually do on the job. One line of research examines how managers spend their time and the typical pattern of activities, responsibilities, and functions for managerial jobs. Some of the research also investigates how managers cope with demands, constraints, and role conflicts in their jobs. Most research on managerial work uses descriptive methods of data collection such as direct observation, diaries, job description questionnaires, and anecdotes obtained from interviews. Although this research was not designed to directly assess effective leadership, it provides useful insights into this subject. Leadership effectiveness depends in part on how well a manager resolves role conflicts, copes with demands, recognizes opportunities, and overcomes constraints. Another subcategory of the behavior approach focuses on identifying leader actions or decisions with observable aspects and relating them to indicators of effective leadership. The preferred research method involves a survey feld study with a behavior description questionnaire. In the past 50 years, hundreds of survey studies examined the correlation between leadership behavior and various indicators of leadership effectiveness. A much smaller number of studies used laboratory experiments, feld experiments, or critical incidents to determine how effective leaders differ in behavior from ineffective leaders. Power-Influence Approach Power-influence research examines influence processes between leaders and other people. Like most research on traits and behavior, some of the power-influence research takes a leader-centered perspective with an implicit assumption that causality is unidirectional (leaders act and followers react). This research seeks to explain leadership effectiveness in terms of the amount and type of power possessed by a leader and how power is exercised. Power is viewed as important not only for EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 37 influencing subordinates, but also for influencing peers, superiors, and people outside the organization, such as clients and suppliers. The favorite methodology has been the use of survey questionnaires to relate leader power to various measures of leadership effectiveness. Other power-influence research used questionnaires and descriptive incidents to determine how leaders influence the attitudes and behavior of followers. The study of influence tactics can be viewed as a bridge linking the power-influence approach and the behavior approach. The use of different influence tactics is compared in terms of their relative effectiveness for getting people to do what the leader wants. Participative leadership is concerned with power sharing and empowerment of followers, but it is frmly rooted in the tradition of behavior research as well. Many studies used questionnaires to correlate subordinate perceptions of participative leadership with the criteria of leadership effectiveness such as subordinate satisfaction, effort, and performance. Laboratory and feld experiments compared autocratic and participative leadership styles. Finally, descriptive case studies of effective managers examined how they use consultation and delegation to give people a sense of ownership for decisions. Situational Approach The situational approach emphasizes the importance of contextual factors that influence leadership processes. Major situational variables include the characteristics of followers, the nature of the work performed by the leader’s unit, the type of organization, and the nature of the external environment. This approach has two major subcategories. One line of research is an attempt to discover the extent to which leadership processes are the same or unique across different types of organizations, levels of management, and cultures. The primary research method is a comparative study of two or more situations. The dependent variables may be managerial perceptions and attitudes, managerial activities and behavior patterns, or influence processes. The other subcategory of situational research attempts to identify aspects of the situation that “moderate” the relationship of leader attributes (e.g., traits, skills, behavior) to leadership effectiveness. The assumption is that different attributes will be effective in different situations, and that the same attribute is not optimal in all situations. Theories describing this relationship are sometimes called “contingency theories” of leadership. A more extreme form of situational theory (“leadership substitutes”) identifes the conditions that can make hierarchical leadership redundant and unnecessary. Integrative Approach An integrative approach involves more than one type of leadership variable. In recent years, it has become more common for researchers to include two or more types of leadership variables in the same study, but it is still rare to fnd a theory that includes all of them (i.e., traits, behavior, influence processes, situational variables, and outcomes). An example of the integrative approach is the self-concept theory of charismatic leadership, which attempts to explain why the followers of some leaders are willing to exert exceptional effort and make personal sacrifces to accomplish the group objective or mission. Level of Conceptualization for Leadership Theories Another way to classify leadership theories is in terms of the “level of conceptualization” or type of constructs used to describe leaders and their influence EKREM INCE ekremince@gmail.com University of London 38 Topic 1 INTRODUCTION TO LEADERSHIP on others. Leadership can be described as (1) an intra-individual process, (2) a dyadic process, (3) a group process, or (4) an organizational process. The levels can be viewed as a hierarchy, as depicted in Figure 2.3. What level is emphasized will depend on the primary research question, the type of criterion variables used to evaluate leadership effectiveness, and the type of mediating processes used to explain leadership influence. Typical research questions for each level are listed in Table. The four levels of conceptualization, and their relative advantages and disadvantages, are described next. Figure 2.3 Figure 1.3 Levels of Conceptualization for Leadership Processes Intra-Individual Processes Because most defnitions of leadership involve influence processes between individuals, leadership theories that describe only leader attributes are rare. Nevertheless, a number of researchers used psychological theories of personality traits, values, skills, motivation, and cognition to explain the decisions and behavior of an individual leader. Roles, behaviors, or decision styles are also used for describing and comparing leaders. Examples can be found in theories about the nature of managerial work and the requirements for different types of leadership positions. Individual traits and skills are also used to explain a person’s motivation to seek power and positions of authority (see Chapter 6), and individual values are used to explain ethical leadership and the altruistic use of power (see Chapter 13). Knowledge of intra-individual processes and taxonomies of leadership roles, behaviors, and traits provide insights that are helpful for developing better theories of effective leadership. However, the potential contribution of the intra-individual approach to leadership is limited, because it does not explicitly include what most theorists consider to be the essential process of leadership, namely influencing others such as subordinates, peers, bosses, and outsiders. Dyadic Processes The dyadic approach focuses on the relationship between a leader and another individual who is usually a subordinate or another type of follower. The need to influence direct reports is shared by leaders at all levels of authority from chief executives to department managers and work crew supervisors. The explanation of leader influence is usually in terms of how the leader causes the subordinate to be more motivated and more capable of accomplishing task assignments. These theories usually focus on leadership behavior as the source of influence, and on changes in the attitudes, motivation, and behavior of an individual subordinate as the influence process. Reciprocal influence between the leader and follower may be EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 39 Intra-Individual Theories • How leader traits and values influence leadership behavior • How leader skills are related to leader behavior • How leaders make decisions • How leaders manage their time • How leaders are influenced by role expectations and constraints • How leaders react to feedback and learn from experience • How leaders can use self-development techniques Dyadic Theories • How a leader influences subordinate motivation and task commitment • How a leader facilitates the work of a subordinate • How a leader interprets information about a subordinate • How a leader develops a subordinate’s skills and confdence • How a leader influences subordinate loyalty and trust • How a leader uses influence tactics with a subordinate, peer, or boss • How a leader and a subordinate influence each other • How a leader develops a cooperative exchange relationship with a subordinate Group-Level Theories • How different leader-member relations affect each other and team performance • How leadership is shared in the group or team • How leaders organize and coordinate the activities of team members • How leaders influence cooperation and resolve disagreements in the team or unit • How leaders influence collective efcacy and optimism for the team or unit • How leaders influence collective learning and innovation in the team or unit • How leaders influence collective identifcation of members with the team or unit • How unit leaders obtain resources and support from the organization and other units Organizational-Level Theories • How top executives influence members at other levels • How leaders are selected at each level (and implications of the process for the frm) • How leaders influence organizational culture • How leaders influence the efciency and the cost of internal operations • How leaders influence human relations and human capital in the organization • How leaders make decisions about competitive strategy and external initiatives • How conflicts among leaders are resolved in an organization • How leaders influence innovation and major change in an organization Table 1.3 Research Questions at Different Levels of Conceptualization included in the theory, but it is usually less important than the explanation of leader influence over the follower. Since real leaders seldom have only a single subordinate, some assumptions are necessary to make dyadic explanations relevant for explaining a leader’s influence on the performance of a group or work unit. One assumption is that subordinates have work roles that are similar and independent. Subordinates may not be homogeneous EKREM INCE ekremince@gmail.com University of London 40 Topic 1 INTRODUCTION TO LEADERSHIP with regard to skills and motives, but they have similar jobs. There is little potential for subordinates to affect each other’s job performance, and group performance is the sum of the performances by individuals. An example of minimum interdependence is a district sales unit in which sales representatives work separately and independently of each other and sell the same product in different locations or to different customers. However, when there is high interdependence among group members, a high need for collective learning, and strong external dependencies, a group-level theory is needed to explain how leadership can influence group performance. The dyadic theories do not include some leadership behaviors that are necessary to facilitate collective performance by a team or organization. Moreover, some of the dyadic behaviors that are effective in terms of dyadic influence will be ineffective with regard to team performance or organizational performance. For example, attempts to develop a closer relationship with one subordinate (e.g., by providing more benefts) may be dysfunctional if they create perceptions of inequity by other subordinates. Efforts to empower individual subordinates may create problems when it is necessary to have a high degree of coordination among all of the subordinates. The extra time needed by a leader to maximize performance by an individual subordinate (e.g., providing intensive coaching) may be more effectively used to deal with problems that involve the team or work group (e.g., obtaining necessary resources, facilitating cooperation and coordination). Another limitation of most dyadic theories is inadequate attention to the context. In most dyadic theories of effective leadership, aspects of the situation are likely to be treated as moderator variables that constrain or enhance leader influence on individual subordinates. The dyadic theories underestimate the importance of the context for determining what type of leadership is necessary to enhance collective performance by multiple subordinates. Group Processes When effective leadership is viewed from a group-level perspective, the focus is on the influence of leaders on collective processes that determine team performance. The explanatory influence processes include determinants of group effectiveness that can be influenced by leaders, and they usually involve all members of a group or team, not only a single subordinate. Examples of these collective explanatory processes include how well the work is organized to utilize personnel and resources, how committed members are to perform their work roles effectively, how confdent members are that the task can be accomplished successfully (“potency”), and the extent to which members trust each other and cooperate in accomplishing task objectives. The leadership behaviors identifed in dyadic theories are still relevant for leadership in teams, but other behaviors are also important. Behavioral theories describing leadership processes in various types of groups and teams are discussed in Chapter 10, and leadership in executive teams is discussed in Chapter 11. Much of a manager’s time is spent in formal and informal meetings, and the leadership processes that make group meetings more effective are also described in Chapter 10. Another key research question in the group approach is to explain why some members are more influential than others, and how leaders are selected. An example of a theory dealing with these questions is the “social exchange theory” discussed in Chapter 8. As compared to the dyadic theories, most group-level theories provide a much better explanation of effective leadership in teams with interactive members, but these theories also have limitations. The need to describe leader influence on member motivation is usually recognized, but the theory may not include psychological EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 41 processes that are useful for explaining this influence. The need to influence people and processes outside of the team is usually recognized, but external relationships are usually viewed from the perspective of the team. The focus is on the efforts of leaders to improve team performance (e.g., by getting more resources), but the implications of leader actions for other subunits or the larger organization are seldom explicitly considered. Shared leadership is more likely to be included in a group-level theory than in a dyadic theory, but distributed leadership by multiple formal leaders is seldom explicitly included, even though it is common in some types of teams (e.g., military combat units with a commander and an executive ofcer). Organizational Processes The group approach provides a better understanding of leadership effectiveness than dyadic or intra-individual approaches, but it has some important limitations. A group usually exists in a larger social system, and its effectiveness cannot be understood if the focus of the research is limited to the group’s internal processes. The organizational level of analysis describes leadership as a process that occurs in a larger “open system” in which groups are subsystems (Fleishman et al., 1991; Katz & Kahn, 1978; Mumford, 1986). The survival and prosperity of an organization depends on adaptation to the environment and the acquisition of necessary resources. A business organization must be able to market its products and services successfully. Adaptation is improved by anticipating consumer needs and desires, assessing the actions and plans of competitors, evaluating likely constraints and threats (e.g., government regulation, input scarcity, hostile actions by enemies), and identifying marketable products and services that the organization has unique capabilities to provide. Some examples of activities relevant for adaptation include gathering and interpreting information about the environment, identifying threats and opportunities, developing an effective strategy for adapting to the environment, negotiating agreements that are favorable to the organization, influencing outsiders to have a favorable impression of the organization and its products, and gaining cooperation and support from outsiders upon whom the organization is dependent. These activities are aspects of “strategic leadership.” Survival and prosperity also depend on the efciency of the transformation process used by the organization to produce its products and services. Efciency is increased by fnding more rational ways to organize and perform the work, and by deciding how to make the best use of available technology, resources, and personnel. Some examples of leadership responsibilities include designing an appropriate organizational structure, determining authority relationships, and coordinating operations across specialized subunits of the organization. Strategic leadership in organizations is described in Chapter 11. As compared to dyadic or group-level theories of leadership, organization-level theories usually provide a better explanation of fnancial performance. Distributed leadership is less likely to be ignored in an organization-level theory, because it is obvious that an organization has many designated leaders whose actions must be coordinated. Management practices and systems (e.g., human resource management, operations management, strategic management) are also ignored or downplayed in dyadic and team leadership theories, but in theories of organizational leadership the need to integrate leading and managing is more obvious (Yukl & Lepsinger, 2004). More attention is likely for subjects such as organizational structure and culture, organizational change, executive succession, and influence processes between the CEO and the top management team or board of directors. A limitation of most theories of organizational leadership is that they do not explain influence EKREM INCE ekremince@gmail.com University of London 42 Topic 1 INTRODUCTION TO LEADERSHIP processes for individual leaders (except sometimes for the chief executive), or influence processes within teams (except in some cases the top-management team). Multi-level Theories Multi-level theories include constructs from more than one level of explanation (Klein, Dansereau, & Hall, 1994; Rousseau, 1985). For example, the independent and dependent variables are at the same level of conceptualization, but moderator variables are at a different level. An even more complex type of multi-level theory may include leader influence on explanatory processes at more than one level and reciprocal causality among some of the variables. Multi-level theories of effective leadership provide a way to overcome the limitations of single-level theories, but it is very difcult to develop a multi-level theory that is parsimonious and easy to apply. The level of conceptualization has implications for the measures and methods of analysis used to test a theory, and multi-level theories are usually more difcult to test than single-level theories (Yammarino, Dionne, Chun, & Dansereau, 2005). Despite the difculties, there is growing interest in developing and testing multi-level theories of leadership. Other Bases for Comparing Leadership Theories Key variables and level of conceptualization are not the only ways to compare leadership theories. This section briefly describes three other types of distinctions commonly used in the leadership literature: (1) leader-centered versus follower-centered theory, (2) universal versus contingency theory, and (3) descriptive versus prescriptive theory. Each type of distinction is better viewed as a continuum along which a theory can be located, rather than as a sharp dichotomy. For example, it is possible for a theory to have some descriptive elements as well as some prescriptive elements, some universal elements as well as some contingency elements, and an equal focus on leaders and followers. Leader-Centered or Follower-Centered Theory The extent to which a theory is focused on either the leader or followers is another useful way to classify leadership theories. Most leadership theories emphasize the characteristics and actions of the leader without much concern for follower characteristics. The leader-focus is strongest in theory and research that identifes traits, skills, or behaviors that contribute to leader effectiveness. Most of the contingency theories (in Chapter 7) also emphasize leader characteristics more than follower characteristics. Only a small amount of research and theory emphasizes characteristics of the followers. Empowerment theory describes how followers view their ability to influence important events (see Chapter 5). Attribution theory describes how followers view a leader’s influence on events and outcomes, and other theories in the same chapter explain how followers can actively influence their work role and relationship with the leader, rather than being passive recipients of leader influence. The leader substitutes theory (see Chapter 7) describes aspects of the situation and follower attributes that make a hierarchical leader less important. The emotional contagion theory of charisma (see Chapter 12) describes how followers influence each other. Finally, theories of self-managed groups emphasize sharing of leadership functions among the members of a group; in this approach, the followers are also the leaders (see Chapter 10). Theories that focus almost exclusively on either the leader or the follower are less useful than theories that offer a more balanced explanation, such as some of the EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 43 theories in Chapters 7, 10, 11, and 12. Most theories of leader power (Chapter 8) emphasize that influence over followers depends on follower perceptions of the leader as well as on objective conditions and the leader’s influence behavior. Descriptive or Prescriptive Theory Another important distinction among leadership theories is the extent to which they are descriptive or prescriptive. Descriptive theories explain leadership processes, describe the typical activities of leaders, and explain why certain behaviors occur in particular situations. Prescriptive theories specify what leaders must do to become effective, and they identify any necessary conditions for using a particular type of behavior effectively. The two perspectives are not mutually exclusive, and a theory can have both types of elements. For example, a theory that explains why a particular pattern of behavior is typical for leaders (descriptive) may also explain which aspects of behavior are most effective (prescriptive). However, the two perspectives are not always consistent. For example, the typical pattern of behavior for leaders is not always the optimal one. A prescriptive theory is especially useful when a wide discrepancy exists between what leaders typically do and what they should do to be most effective. Universal or Contingency Theory A universal theory describes some aspect of leadership that applies to all types of situations, and the theory can be either descriptive or prescriptive. A descriptive universal theory may describe typical functions performed to some extent by all types of leaders, whereas a prescriptive universal theory may specify functions all leaders must perform to be effective. A contingency theory describes some aspect of leadership that applies to some situations but not to others, and these theories can also be either descriptive or prescriptive. A descriptive contingency theory may explain how leader behavior varies from one situation to another, whereas a prescriptive contingency theory describes effective behavior in a specifc situation. The distinction between universal and contingency theories is a matter of degree, not a sharp dichotomy. Some theories include both universal and situational aspects. For example, a prescriptive theory may specify that a particular type of leadership is always effective but is more effective in some situations than in others. Even when a leadership theory is initially proposed as a universal theory, limiting and facilitating conditions are usually found in later research on the theory. Summary Leadership has been defned in many different ways, but most defnitions share the assumption that it involves an influence process for facilitating the performance of a collective task. Otherwise, the defnitions differ in many respects, such as who exerts the influence, the intended benefciary of the influence, the manner in which the influence is exerted, and the outcome of the influence attempt. Some theorists advocate treating leading and managing as separate roles or processes, but the proposed defnitions do not resolve important questions about the scope of each process and how they are interrelated. No single, “correct” defnition of leadership covers all situations. What matters most is how useful the defnition is for increasing our understanding of effective leadership. Most researchers evaluate leadership effectiveness in terms of the consequences for followers and other organization stakeholders, but the choice of outcome variables EKREM INCE ekremince@gmail.com University of London 44 Topic 1 INTRODUCTION TO LEADERSHIP has differed considerably from researcher to researcher. Criteria differ in many important respects, including how immediate they are, and whether they have subjective or objective measures. When evaluating leadership effectiveness, multiple criteria should be considered to deal with these complexities and the different preferences of various stakeholders. Leadership has been studied in different ways, depending on the researcher’s methodological preferences and defnition of leadership. Most researchers deal only with a narrow aspect of leadership, and most empirical studies fall into distinct lines of research such as the trait, behavior, power, and situational approaches. In recent years, there has been an increased effort to cut across and integrate these approaches. Level of analysis is another basis for classifying leadership theory and research. The levels include intra-individual, dyadic, group, and organizational. Each level provides some unique insights, but more research is needed on group and organizational processes, and more integration across levels is needed. Another basis for differentiating theories is the relative focus on leader or follower. For many years, the research focused on leader characteristics and followers were studied only as the object of leader influence. A more balanced approach is needed, and some progress is being made in that direction. Leadership theories can be classifed as prescriptive versus descriptive, according to the emphasis on “what should be” rather than on “what occurs now.” A fnal basis for differentiation (universal versus contingency) is the extent to which a theory describes leadership processes and relationships that are similar in all situations or that vary in specifed ways across situations. Key Terms behavior approach dyadic processes power-influence approach contingency theories follower-centered theory prescriptive theory criteria of leadership effectiveness integrative approach shared influence process delayed effects leader-centered theory situational approach descriptive theory level of conceptualization specialized leadership role mediating variable trait approach Yukl. Original materials from Leadership in organizations © copyright 2013 Pearson. All rights reserved. EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 45 QUICK QUIZ If you feel ready, please attempt the following quiz. Don’t worry if there are some questions you can’t answer - you can always try again later. EKREM INCE ekremince@gmail.com University of London 46 Topic 1 INTRODUCTION TO LEADERSHIP SELF-ASSESSMENT EXERCISES Attempt the following exercises. If you have understood the reading you should be able to answer these questions competently. A model answer is available for each question, but try to answer on your own frst. Your responses won’t match the model answers exactly, but you should compare your performance with the model and consider whether you took into account all the relevant factors. Rate your performance honestly. If you haven’t performed as well as you hoped, you may need to go over parts of the chapter again. The self-assessment exercises should help you to clarify your own understanding of the different ways in which leadership has been defned and why these differences exist. You should be able identify leadership defnitions and point to the types of research question to which these defnitions give rise. EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 47 REFLECTIVE EXERCISE Building your self-awareness as a leader We have explored the concept of leadership and seen the complexities involved in both defning it and judging its effectiveness. It is clear that there is no agreement in the literature about which of the many traits/behaviours associated with leadership are essential. Very few people possess all the traits and it follows that having all of them is not a requirement of good leadership. Traits alone do not make a leader: the situation is important. Each person must consider their own strengths and capabilities, and the situation in which they are operating. Reflection Compare the characteristics that you know you possess to the fnal list developed within your discussion group exercise. Which traits/characteristics do you possess; which do you not? Reasons Now consider what you might do to change the list of leadership traits/characteristics. Alternatives With the traits/characteristics that you have, in which situations will you fnd a better ’ft’ as a leader? EKREM INCE ekremince@gmail.com University of London 48 Topic 1 INTRODUCTION TO LEADERSHIP DISCUSSION ACTIVITY EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 49 Spend no longer than fve minutes making a shortlist of as many traits, behaviours and characteristics that you think good leaders must have. (A useful way to begin is by completing the phrase: ‘A good leader must/should/do/be . . .’.) Share your thoughts in the discussion forumand review what others have on their lists. In your group, consolidate a fnal list of 7-10 characteristics that your group feels are essential (those that ‘make or break’ a leader). Discuss in your group: • Which leaders that you’ve seen or encountered (either personally or through media accounts) have characteristics that match those on the list? • Do you know of any effective leader who lacks one or more of the characteristics? Do you think these characteristics are essential to that person’s effectiveness? (Adapted from Nahavandi, Chapter 1) EKREM INCE ekremince@gmail.com University of London 50 Topic 1 INTRODUCTION TO LEADERSHIP PORTFOLIO ACTIVITY Portfolio activity instructions One of the goals of the Successful leadership module - indeed, all the modules in the Leadership specialism - is to help you with your own leadership development. The work you do in developing yourself as a leader will help you to transition careers, advance within your sector or industry and/or rise to the top of your current organisation. A key component to your development as a leader is the work you will do for the summative assessment you submit for this module. In addition to a research paper in the feld, which will be the coursework for this module, you will compile a Portfolio to which you will contribute throughout this module. This will take the place of an examination at the end of the module. Each topic of the module contains work that is required for your Portfolio and, as it is all cumulative, it is imperative that you approach this work in stages. Format Use a Word processor to create your portfolio. Please note that you should submit your Portfolio as one document in PDF format. You can either save your completed portfolio in PDF format in your Word processor or you can use one of many free online converters to accomplish this. Please check the ‘Introduction to your assessment’ tutorial in the ‘Getting started’ section on the VLE to learn how to submit your Portfolio. Your Portfolio should include a section for each of the items you include in the table of contents. Each section should be clearly labelled, either with a title page or with a distinct header. Page breaks should be used to clearly mark the beginning and end of each section. The table of contents of the portfolio should be: 1. Identifcation (your name and student number) 2. Topic 1: Introduction to Leadership Because your portfolio should be an ongoing exercise that you work on as you progress through your module, the task for each section of the portfolio is provided within each topic of the module. Portfolio activity Topic 1 In this section of the portfolio you should be beginning to work with the defnitions of leadership that you have studied and using these as base to reflect upon yourself as a leader. First, begin with some work on your own self-awareness. Using online resources, complete a personality-type analysis of yourself (e.g. MBTI, there are a variety of these available - choose one). Put the results of this into your portfolio along with a description of what this result means, as you understand it. Second, take your personality test result and create an analysis of your strengths and the areas where you feel you need to develop for leadership. You should be referencing which aspects of a good leader you have identifed as important in your discussion group exercise and buttressing this with reference from your readings/resources. EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 51 Note: before you undertake this analysis, you may fnd it useful to read more about personality assessments generally (http://theconversation.com/why-workplaces-must-resist-the-cult-of-personality-testing-5540), as well as the MBTI particularly (http://www.bbc.com/news/magazine-18723950 or http://www.myersbriggs.org/my-mbti-personality-type/mbti-basics/ or https://www.ft.com/content/8790ef0a-d040-11e5-831d-09f7778e7377). The goal of this exercise is not to adjudge better or worse tendencies or preferences but rather to explore the use of one commonly-employed tool to identify personal type preferences. You should be aware that this identifcation is not absolute nor static - much can and does change over the course of our lives, so too do our inclinations and preferences. In the context of leadership studies, your understanding of some of your inclinations and preferences should help you in your own development as a leader. Personality tests, by their very nature, are restrictive in their validity and use. They attempt to distinguish the robust variety of people into, as in the MBTI, 16 personal types - they are subject to criticisms of reliability and falsifability (among others). One of the assumptions of these tests is that we all have clear preferences between two (or more) alternatives, whereas we all understand that we can waver in our responses (both in the instance and over the course of time, long or short). They do not assess our skills or competencies, but rather our personal preferences and tendencies, so we are warned away from using them as selection tools. EKREM INCE ekremince@gmail.com University of London 52 Topic 1 INTRODUCTION TO LEADERSHIP TOPIC SUMMARY Topic summary video EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 53 FURTHER READING AND RESOURCES Further readings for this topic are: Alvesson, M. and S. Sveningsson ‘The great disappearing act: difculties in doing “leadership”’, Leadership Quarterly 14 2003, pp. 359-81. Bennis, W.G. and J. O’Toole, ‘How business schools lost their way’, Harvard Business Review May 2005, pp. 96-104. Kaiser, R. B., R. Hogan and S. B. Craig ‘Leadership and the fate of organizations’, American Psychologist 63 2008, pp. 93-110. Labarre, P. ‘Marcus Buckingham thinks your boss has an attitude problem’, Fast Company August 2001, pp. 88-98. Luthans, F. ‘Successful vs. effective real managers’, Academy of Management Executive 2(2) 1989, pp. 127-32. Mintzberg, H. ‘The best leadership is good management’, Business Week 6 August 2009. Watkins, M.D. ‘How managers become leaders’, Harvard Business Review June 2012. Yukl, G. Leadership in organizations. (Harlow: Pearson, 2013) 8th edition. Chapter 2 ‘Managerial roles and decisions’, pp. 39-51. • TED talks: Fields Wicker-Miurin: Learning from leadership’s missing manual: www.ted.com/talks/felds_wicker_miurin_learning_from_leadership_s_missing_manual • TED talks: Patrick Awuah: How to educate leaders? Liberal arts: www.ted.com/talks/patrick_awuah_on_educating_leaders Further reading will deepen your understanding in some areas but it is not required in order to pass the module. You may wish to consult the reading suggested here or others that you fnd, but please note that we cannot guarantee that further reading will be accessible to you and we do not undertake to supply it via the Online Library. EKREM INCE ekremince@gmail.com University of London 54 Topic 1 INTRODUCTION TO LEADERSHIP PROGRESS LOG We recommend that you now complete your topic progress log. This should allow you to monitor and assess your progress and your understanding of the topic before you move on. EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 55 Topic Topic Objectives How confdent are you? Completely confdent Partially confdent Unsure Topic 1: Introduction to Leadership Date 1.1 Defne leadership and leadership effectiveness. 1.2 Discuss effective leadership and identify its major obstacles. 1.3 Compare and contrast leadership and management. 1.4 Summarise the debate over the role and impact of leadership in organisations. EKREM INCE ekremince@gmail.com University of London  Topic 1 INTRODUCTION TO LEADERSHIP Topic introduction video Key concepts This topic includes: • an introduction to our key concept of leadership, including the variety of defnitions and approaches to this topic • an evaluation of what effectiveness means in the leadership arena and the barriers to this in contemporary organisations • a comparison between leadership and management • some self-reflection on your strengths and which areas you could develop with regard to a defnition of leadership. Topic objectives After completing the study of this topic you should be able to: 1. defne leadership and leadership effectiveness 2. discuss effective leadership and identify its major obstacles 3. compare and contrast leadership and management 4. summarise the debate over the role and impact of leadership in organisations. EKREM INCE ekremince@gmail.com University of London 2 Topic 1 INTRODUCTION TO LEADERSHIP MINI LECTURE undefned EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 3 ESSENTIAL READING The Essential reading for this topic is: • Nahavandi, A. The art and science of leadership. (Harlow: Pearson, 2015) 7th, global edition. Chapter 1 Defnition and signifcance of leadership. • Yukl, G. Leadership in organizations. (Harlow: Pearson, 2013) 8th edition. Chapter 1 Introduction and overview. When you are reading through these chapters, pay particular attention to the following key points: • The variety of defnitions of leadership and how these are characterised as well as the qualities that are assumed to be required of a leader according to particular theories. • How the effectiveness of a leader is articulated and evaluated. Compare this to a notion of successful leadership and how these two differ. • Note the discussion of gender differences in leadership in Nahavandi’s text and think about how this changes the landscape of what we might call a good leader. • Consider how Yukl’s approach to the question of leadership is concerned with academic research and, therefore, what the research question is key question to how to answer what leadership is. This will help you - as a student of leadership - as you need to be aware of your approach to the question of what leadership which will help you understand why you prefer one defnition over another. • The focus on leadership as a specialism reflects the importance of the role of leaders in organisations. Remember that all the essential reading for this programme is provided for you. Click the link (which may take you to the Online Library where you can search for a journal article) or click ‘next’ to go to the next page and start reading. EKREM INCE ekremince@gmail.com University of London 4 Topic 1 INTRODUCTION TO LEADERSHIP CHAPTER 1 DEFINITION AND SIGNIFICANCE OF LEADERSHIP The art and science of leadership 7th edition, Afsaneh Nahavandi. Original materials from The art and science of leadership © copyright 2015 Pearson. All rights reserved. After studying this chapter, you will be able to: 1. Define leadership and leadership effectiveness. 2. Discuss the major obstacles to effective leadership. 3. Compare and contrast leadership and management. 4. List the roles and functions of leaders and managers. 5. Explain the changes in organizations and how they affect leaders. 6. Summarize the debate over the role and impact of leadership in organizations. THE LEADERSHIP QUESTION Some leaders are focused on getting things done while others put taking care of their followers frst. Some look at the big picture, and others hone in on the details. Is one approach better than the other? Which one do you prefer? Who is a leader? When are leaders effective? These age-old questions appear simple, but their answers have kept philosophers, social scientists, scholars from many disciplines, and business practitioners busy for many years. We recognize bad leadership. Bad leaders are dishonest, self-centered, arrogant, disorganized, and uncommunicative. However, being honest, selfless, organized and communicative are necessary, but not sufcient to be a good leader. This chapter defnes leadership and its many aspects, roles, and functions. EFFECTIVE LEADERSHIP We recognize effective leaders when we work with them or observe them. However, leadership is a complex process, and there are many different defnitions of leadership and leadership effectiveness. Who Is a Leader? Dictionaries defne leading as “guiding and directing on a course” and as “serving as a channel.” A leader is someone with commanding authority or influence. Researchers have developed many working defnitions of leadership. Although these defnitions share several elements, they each consider different aspects of leadership. Some defne leadership as an integral part of the group process (Green, 2002; Krech and Crutchfeld, 1948). Others defne it primarily as an influence process (Bass, 1960; Cartwright, 1965; Katz and Kahn, 1966). Still others see leadership as the initiation of structure (Homans, 1950) and the instrument of goal achievement. Several even EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 5 consider leaders to be servants of their followers (Greenleaf, 1998). Despite the differences, the various defnitions of leadership share four common elements: • First, leadership is a group and social phenomenon; there can be no leaders without followers. Leadership is about others. • Second, leadership necessarily involves interpersonal influence or persuasion. Leaders move others toward goals and actions. • Third, leadership is goal directed and action oriented; leaders play an active role in groups and organizations. They use influence to guide others through a certain course of action or toward the achievement of certain goals. • Fourth, the presence of leaders assumes some form of hierarchy within a group. In some cases, the hierarchy is formal and well defned, with the leader at the top; in other cases, it is informal and flexible. Combining these four elements, we can defne a leader as any person who influences individuals and groups within an organization, helps them establish goals, and guides them toward achievement of those goals, thereby allowing them to be effective. Being a leader is about getting things done for, through, and with others. Notice that the defnition does not include a formal title and does not defne leadership in terms of certain traits or personal characteristics. Neither is necessary to leadership. This broad and general defnition includes those who have formal leadership titles and many who do not. For Jonas Falk, CEO of OrganicLife, a start-up company that provide nutritious school lunches, leadership is taking “an average team of individuals and transform(ing) them into superstars” (Mielach, 2012). For consultant Kendra Coleman, leadership is about taking a stand (Mielach, 2012). Bill Gates, founder of Microsoft, considers empowerment to be an essential part of leadership (Kruse, 2013). For the CEO of the Container Store, “leadership and communication are the same thing. Communication is leadership” (Bryant, 2010). In all these examples, the leader moves followers to action and helps them achieve goals, but each focuses on a different element that constitutes leadership. When Is a Leader Effective? What does it mean to be an effective leader? As is the case with the defnition of leadership, effectiveness can be defned in various ways. Some researchers, such as Fred Fiedler, whose Contingency Model is discussed in Chapter 3, defne leadership effectiveness in terms of group performance. According to this view, leaders are effective when their group performs well. Other models - for example, Robert House’s Path-Goal Theory presented in Chapter 3 - consider follower satisfaction as a primary factor in determining leadership effectiveness; leaders are effective when their followers are satisfed. Still others, namely researchers working on the transformational and visionary leadership models described in Chapters 6 and 9, defne effectiveness as the successful implementation of change in an organization. The defnitions of leadership effectiveness are as diverse as the defnitions of organizational effectiveness. The choice of a certain defnition depends mostly on the point of view of the person trying to determine effectiveness and on the constituents who are being considered. For cardiologist Stephen Oesterle, senior vice president for medicine and technology at Medtronic, one of the world’s biggest manufacturers of medical devices and pacemakers, restoring lives is both a personal and an organizational goal (Tuggle, 2007). Barbara Waugh, a 1960s civil rights and antidiscrimination activist and once personnel director and worldwide change manager of Hewlett-Packard Laboratories (often known as the “World’s Best Industrial Research Laboratory” - WBIRL), defnes effectiveness as fnding a story EKREM INCE ekremince@gmail.com University of London 6 Topic 1 INTRODUCTION TO LEADERSHIP that is worth living: “You decide what you want your life to be about and go after it” (Marshall, 2009: 3). John Hickenlooper, Colorado governor and former mayor of Denver, focuses on an inclusive style, cooperation, aligning people’s self-interest, and getting buy-in from the people who are affected by his decisions (Goldsmith, 2008). Effectiveness versus Success Clearly, no one way best defnes what it means to be an effective leader. Fred Luthans (1989) proposes an interesting twist on the concept of leadership effectiveness by distinguishing between effective and successful managers. According to Luthans, effective managers are those with satisfed and productive employees, whereas successful managers are those who are promoted quickly. After studying a group of managers, Luthans suggests that successful managers and effective managers engage in different types of activities. Whereas effective managers spend their time communicating with subordinates, managing conflict, and training, developing, and motivating employees, the primary focus of successful managers is not on employees. Instead, they concentrate on networking activities such as interacting with outsiders, socializing, and politicking. The internal and external activities that effective and successful managers undertake are important to allowing leaders to achieve their goals. Luthans, however, fnds that only 10 percent of the managers in his study are effective and successful. The results of his study present some grave implications for how we might measure our leaders’ effectiveness and reward them. To encourage and reward performance, organizations need to reward the leadership activities that will lead to effectiveness rather than those that lead to quick promotion. If an organization cannot achieve balance, it quickly might fnd itself with flashy but incompetent leaders who reached the top primarily through networking rather than through taking care of their employees and achieving goals. Barbara Waugh, mentioned earlier, considers the focus on what she calls the “vocal visionary” at the expense of the “quiet implementer” one of the reasons many organizations do not achieve their full potential (Marshall, 2009). Joe Torre, the famed Los Angeles Dodgers baseball coach, believes that solid, quiet, and steady managers who do not brag are the ones who get things done (Hollon, 2009). Ideally, any defnition of leadership effectiveness should consider all the different roles and functions that a leader performs. Few organizations, however, perform such a thorough analysis, and they often fall back on simplistic measures. For example, stockholders and fnancial analysts consider the CEO of a company to be effective if company stock prices keep increasing, regardless of how satisfed the company’s employees are. Politicians are effective if the polls indicate their popularity is high and if they are reelected. A football coach is effective when his team is winning. Students’ scores on standardized tests determine a school principal’s effectiveness. In all cases, the factors that make the leader effective are highly complex and multifaceted. Consider the challenge faced by the executives of the New York Times, one of the world’s most respected newspapers. In 2002, the paper won a record seven Pulitzer prizes, a clear measure of success. A year later, however, the same executive editor team that had led the company in that success was forced to step down because of plagiarism scandals (Bennis, 2003). The executive team’s hierarchical structure, autocratic leadership style, and an organizational culture that focused on winning and hustling were partly blamed for the scandals (McGregor, 2005). By one measure, the Times was highly effective; by another, it failed a basic tenet of the journalistic profession. Politics further provide examples of the complexity of defning leadership effectiveness. Consider former U.S. president Clinton, who, despite being impeached in the U.S. Senate, maintained his popularity at the polls in 1998 and 1999; many EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 7 voters continued to consider him effective. Hugo Chavez, the late president of Venezuela, was adored by his supporters for his advocacy for the poor and despised by his opponents for his dictatorial style. Whether any of these leaders is considered effective or not depends on one’s perspective. General Motors’ recent troubles further illustrate the need for a broad defnition of effectiveness. An Integrative Defnition The common thread in all these examples of effectiveness is the focus on outcome. To judge their effectiveness, we look at the results of what leaders accomplish. Process issues, such as employee satisfaction, are important but are rarely the primary indicator of effectiveness. Nancy McKintry, CEO of Wolters Kluwer, an information services company, states, “At the end of the day, no matter how much somebody respects your intellect or your capabilities or how much they like you, in the end it is all about results in the business context” (Bryant, 2009a). The executive editorial team at the New York Times delivered the awards despite creating a difcult and sometimes hostile culture. Voters in the United States liked President Clinton because the economy flourished under his administration. Hugo Chavez survived many challenges because he pointed to specifc accomplishments. One way to take a broad view of effectiveness is to consider leaders effective when their group is successful in maintaining internal stability and external adaptability while achieving goals. Overall, leaders are effective when their followers achieve their goals, can function well together, and can adapt to changing demands from external forces. The defnition of leadership effectiveness, therefore, contains three elements: 1. Goal achievement, which includes meeting fnancial goals, producing quality products or services, addressing the needs of customers, and so forth 2. Smooth internal processes, including group cohesion, follower satisfaction, and efcient operations 3. External adaptability, which refers to a group’s ability to change and evolve successfully THE LEADERSHIP QUESTION - REVISITED So focusing on the task, on people, on the big picture, on the details, and so forth can all be part of leadership. What works depends on the leader, the followers, and the situation. While some things generally don’t work, for example using fear and threats in all situations, there are many different styles and approaches to leading that can be effective. Understanding the situation is key. Why Do We Need Leaders? Leadership is a universal phenomenon across cultures. Why is leadership necessary? What needs does it fulfll? Do we really need leaders? In the business world, new leaders can influence a frm’s credit rating by affecting the confdence of the fnancial community. For example, while Xerox weathered considerable fnancial and leadership problems in 2000 and 2001, the selection of Anne Mulcahy, a company veteran, as CEO helped ease stakeholders’ concerns. In other sectors, a city or nation might feel a sense of revival and optimism or considerable concern when a new leader comes to power, as was the case in the 2008 U.S. presidential elections with the win of Barack Obama. We believe that leadership matters. The reasons why we need leaders closely fall in line with the functions and roles that leaders play and are EKREM INCE ekremince@gmail.com University of London 8 Topic 1 INTRODUCTION TO LEADERSHIP related to the need or desire to be in collectives. Overall, we need leaders for following reasons: • To keep groups orderly and focused. Human beings have formed groups and societies for close to 50,000 years. Whether the formation of groups itself is an instinct or whether it is based on the need to accomplish complex tasks too difcult for individuals to undertake, the existence of groups requires some form of organization and hierarchy. Whereas individual group members may have common goals, they also have individual needs and aspirations. Leaders are needed to pull the individuals together, organize, and coordinate their efforts. • To accomplish tasks. Groups allow us to accomplish tasks that individuals alone could not undertake or complete. Leaders are needed to facilitate that accomplishment, and to provide goals and directions and coordinate activities. • To make sense of the world. Groups and their leaders provide individuals with a perceptual check. Leaders help us make sense of the world, establish social reality, and assign meaning to events and situations that may be ambiguous. • To be romantic ideals. Finally, as some researchers have suggested (e.g., Meindl and Ehrlick, 1987), leadership is needed to fulfll our desire for mythical or romantic fgures who represent us and symbolize our own and our culture’s ideals and accomplishments. Research on Signifcance of Leadership Despite the common belief that leaders matter, considerable debate among leadership scholars addresses whether leadership actually affects organizations. Some researchers suggest that environmental, social, industrial, and economic conditions determine organizational direction and performance to a much higher degree than does leadership (Brown, 1982; Cyert and March, 1963; Hannan and Freeman, 1977; Salancik and Pfeffer, 1977a). External factors, along with organizational elements such as structure and strategy, are assumed to limit the leader’s decision-making options, reducing the leader’s discretion. For example, Salancik and Pfeffer (1977a), in a study of the performance of mayors, found that leadership accounted for only 7 to 15 percent of changes in city budgets. Similarly, Lieberson and O’Connor (1972) found that whereas leadership has minimal effects on the performance of large corporations (accounting for only 7 to 14 percent of the performance), company size and economic factors show considerable links to frm performance. Additionally research about managerial discretion indicates that managers have less influence on organizations than environmental and internal organizational factors (Finkelstein and Hambrick, 1996; Hambrick and Finkelstein, 1987). Other research fndings suggest that leadership does indeed have an impact. For example, in reevaluating Lieberson and O’Connor’s 1972 study, Weiner and Mahoney (1981) fnd that a change in leadership accounts for 44 percent of the proftability of the frms studied. Other researchers (Day and Lord, 1988; Thomas, 1988) indicate that the early results were not as strong as originally believed, and recent studies suggest that leadership can have an impact by looking at the disruption that can come from changes in leadership (Ballinger and Schoorman, 2007) and fnd a strong effect of CEOs on company performance (Mackey, 2008). Additionally, research continues to indicate that leadership has a positive impact on a variety of organizational effectiveness factors including climate and work group performance (McMurray et al., 2012) in both business and public organizations (e.g., Vashdi, Vigoda-Gadot, and Shlomi, 2013). EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 9 In trying to reconcile the different arguments regarding the need for and impact of leadership, it is important to recognize that leadership is one of many factors that influence the performance of a group or an organization (see Table 1.1 for a summary). Additionally, the leader’s contribution, although not always tangible, is signifcant in providing a vision and direction for followers and in integrating their activities. The key is to identify situations in which the leader’s power and discretion over the group and the organization are limited. These situations are discussed as part of the concept of leadership substitutes in Chapter 3 and in presentations of the role of upper-echelon leaders in Chapter 7. Finally, the potential lack of impact of leaders in some situations further emphasizes the importance of followers in the success of leadership and the need to understand organizations as broad systems. LEADING CHANGE The Container Store “You can build a much more wonderful company on love than you can on fear,” says Kip Tindell, the CEO of the highly successful Container Store chain (Klein, 2013). He has put that principle to work in all aspects of his business. Chances are that if you have engaged in a home or ofce organization project, you have heard of the Container Store. The privately held company offers creative, practical, and innovative solutions to a multitude of storage problems and has established an enviable track record of success and growth of 26 percent growth per year (Container Store’s secret growth story, 2013). The company has been consistently ranked as one of the best places to work in, and it considers its employees its greatest asset. Its unique culture and treating its employees well are other areas in which it claims leadership (Container Store Web site, 2013). One of the principles that the company espouses is that “one great person equals three good people” (Bliss, 2011). Kip Tindell says, “We talk about getting the customer to dance . . . every time she goes into the closet . . . because the product has been designed and sold to her so carefully” (Birchall, 2006). Achieving this level of service takes a dedicated and, the company believes, happy employees that the company carefully recruits (often mostly through its existing employees) and trains. Whereas in comparable companies, the average salesperson gets about eight hours of training during the frst year on the job, it is not unusual for Container Store salespeople to get over 200 hours of training before a new store opens (Birchall, 2006). In addition to a family-friendly work environment, the company covers close to 70 percent of its employees’ health-care insurance costs, pays 50 to 100 percent higher wages than its competitors’ pay, and provides flexible shifts to accommodate its employees’ work-life balance. The investment in employees has paid off. The Container Store has an annual turnover of about 10 percent, compared with 90 percent for most retail stores. Its founders, Kip Tindell and Garrett Boone, believe that the unique culture and the success of the company are inseparable. Sources: Birchall, J. 2006. “Training improves shelf life,” Financial Times, March 8. http://search.ft.com/ft Article?queryText=Kip+Tindell&y=0&aje=true&x=0&id=060307009431 (accessed July 8, 2007); Bliss, J. 2011. “Container store - Flames of trust,” SatMetrix. http://www.netpromoter.com/netpromoter_ community/blogs/jeanne_bliss/2011/10/24/the-container-store - flames-of-trust (accessed May 30, 2013); Container Store’s secret growth story, 2013. http://www.youtube.com/watch?v=uDmfbrcGxSk(accessed May 30, 2013); EKREM INCE ekremince@gmail.com University of London 10 Topic 1 INTRODUCTION TO LEADERSHIP Container store website, 2013. http://standfor.containerstore.com/putting-our-employees-frst/ (accessed October 6, 2013); Containing Culture, 2007. Chain Store Age (April): 23-24; Klein, J. 2013. “Put people frst,” Under 30 CEOs. http://under30ceo.com/put-people-frst-reflections-from-kip-tindell-ceo-the-container-store/ (accessed May 30, 2013). Table 1.1 Signifcance of Leadership • Leadership is one of many factors that affect the performance of organizations. • Leadership can indirectly impact other performance factors. • Leadership is essential in providing vision and direction. • Identifying the situations in which leadership matters is essential. • The combination of leaders with followers and other organizational factors makes an impact. OBSTACLES TO EFFECTIVE LEADERSHIP In any setting, being an effective leader is a challenging task. Even with a clear defnition of leadership and what makes a leader effective, being effective is not easy. Meanwhile, organizations pay a heavy price for ineffective, incompetent, or unethical leadership (Bedeian and Armenakis, 1998; Kellerman, 2004). The keys to becoming an effective leader are knowledge, experience, practice, and learning from one’s mistakes. Unfortunately, many organizations do not provide an environment in which leaders can practice new skills, try out new behaviors, and observe their impact. In most cases, the price for making mistakes is so high that new leaders and managers opt for routine actions. Without such practice and without failure, it is difcult for leaders to learn how to be effective. The experience of failure, in some cases, may be a defning moment in the development of a leader (George, 2009). The question is, therefore, what are the obstacles to becoming an effective leader? Aside from different levels of skills and aptitudes that might prevent a leader from being effective, several other obstacles to effective leadership exist: • First, organizations face considerable uncertainty that creates pressure for quick responses and solutions. External forces, such as voters and investors, demand immediate attention. In an atmosphere of crisis, there is no time or patience for learning. Ironically, implementing new methods of leadership, if they are allowed, would make dealing with complexity and uncertainty easier in the long run. Therefore, a vicious cycle that allows no time for the learning that would help current crises continues. The lack of learning and experimentation in turn causes the continuation of the crises, which makes the time needed to learn and practice innovative behaviors unavailable. • Second, organizations are often rigid and unforgiving. In their push for short-term and immediate performance, they do not allow any room for mistakes and experimentation. A few organizations, such as Virgin Group Ltd., 3M, and Apple Computers that encourage taking risks and making mistakes, are the exception. The rigidity and rewards systems of many institutions discourage such endeavors. • Third, organizations fall back on old ideas about what effective leadership is and, therefore, rely on simplistic solutions that do not ft new and complex problems. EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 11 The use of simple ideas, such as those proposed in many popular books, provides only temporary solutions. • Fourth, over time, all organizations develop a particular culture that strongly influences how things are done and what is considered acceptable behavior. As leaders try to implement new ideas and experiment with new methods, they may face resistance generated by the established culture. • Finally, another factor that can pose an obstacle to effective leadership is the difculty involved in understanding and applying the fndings of academic research. In the laudable search for precision and scientifc rigor, academic researchers sometimes do not clarify the application of their research, making the research inaccessible to practitioners. The complex and never-ending learning process of becoming an effective leader requires experimentation and organizational support. The inaccessibility of academic research to many practitioners and the short-term orientation of the organizations in which most managers operate provide challenging obstacles to effective leadership. Except for the few individuals who are talented and learn quickly and easily or those rare leaders who have the luxury of time, these obstacles are not easily surmounted. Organizations that allow their leaders at all levels to make mistakes, learn, and develop new skills are training effective leaders. LEADERSHIP AND MANAGEMENT What is the difference between a leader and a manager? Are the two basically the same, or are there sharp distinctions between them? These questions have been at the forefront of the discussion of leadership for many years. Kevin Kruse, bestselling author and entrepreneur, believes that organizations need good management to plan, measure, hire, fre, coordinate activities, and so forth. However, he states that leadership is about people (Kruse, 2013). Table 1.2 presents the major distinctions between managers and leaders. Whereas leaders have long-term and future-oriented perspectives and provide a vision for their followers to look beyond their immediate surroundings, managers take short-term perspectives and focus on routine issues within their own immediate departments or groups. Zaleznik (1990) further suggests that leaders, but not managers, are charismatic and can create a sense of excitement and purpose in their followers. Kotter (1990; 1996) takes a historical perspective in the debate and proposes that leadership is an age-old concept, but the concept of management developed in the past 100 years as a result of the complex organizations created after the Industrial Revolution. A manager’s role is to bring order and consistency through planning, budgeting, and controlling. Leadership, on the other hand, is aimed at producing movement and change. Table 1.2 Managers and Leaders Managers Leaders Focus on the present Focus on the future Maintain status quo and stability Create change Implement policies and procedures Initiate goals and strategies Maintain existing structure Create a culture based on shared values Remain aloof to maintain objectivity Establish an emotional link with followers EKREM INCE ekremince@gmail.com University of London 12 Topic 1 INTRODUCTION TO LEADERSHIP Use position power Use personal power The debates suggest that for those who draw a distinction between leaders and managers, leaders demonstrate attributes that allow them to energize their followers, whereas managers simply take care of the mundane and routine details. Both are necessary for organizations to function, and one cannot replace the other. By considering the issue of effectiveness, many of the arguments regarding the differences between leadership and management can be clarifed. For example are managers who motivate their followers and whose departments achieve all their goals simply effective managers, or are they leaders as well? Being an effective manager often involves performing many of the functions that are attributed to leaders with or without some degree of charisma. The distinctions drawn between leadership and management may be more related to effectiveness than to the difference between the two concepts. An effective manager of people provides a mission and sense of purpose with future-oriented goals, initiates goals and actions, and builds a sense of shared values that allows followers to be focused and motivated, all actions that are attributed to leaders. Therefore, effective managers can often be considered leaders. Management professor Henry Mintzberg further suggests that good leaders must manage their team and organizations as well. By focusing too much on leadership, at the expense of management, much of the hard work needed to make organizations effective may be left unattended. He states: “Being an engaged leader means you must be reflective while staying in the fray-the hectic, fragmented, never-ending world of managing” (Mintzberg, 2009). Thus, any manager who guides a group toward goal accomplishment can be considered a leader, and any good leader must perform many management functions. Much of the distinction between management and leadership comes from the fact that the title leader assumes competence. Consequently, an effective and successful manager can be considered a leader, but a less-competent manager is not a leader. Overall, the debate over the difference between the two concepts does not add much to our understanding of what constitutes good leadership or good management and how to achieve these goals. It does, however, point to the need felt by many people and organizations for effective, competent, and visionary leadership/management. This book does not dwell on the distinction between the two concepts and uses the terms interchangeably. ROLES AND FUNCTIONS OF LEADERS Although leaders in different organizations and different cultures perform dissimilar functions and play unique roles, researchers have identifed a number of managerial roles and functions that cut across most settings. Managerial Roles To be effective, leaders perform a number of roles. The roles are sets of expected behaviors ascribed to them by virtue of their leadership position. Along with the basic managerial functions of planning, organizing, stafng, directing, and controlling, leaders are ascribed a number of strategic and external roles, as well, which are discussed in detail in Chapter 7. Furthermore, one of the major functions of leaders is to provide their group or organization with a sense of vision and mission. For example, department managers need to plan and organize their department’s activities and assign various people to perform tasks. They also monitor their employees’ performance and correct employees’ actions when needed. Aside from these internal functions, managers negotiate with their boss and other department managers for resources and coordinate decisions and activities with them. Additionally, many department managers must participate in strategic planning and EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 13 the development of their organization’s mission beyond the immediate focus on their own department or team. One of the most cited taxonomies of managerial activities is proposed by Henry Mintzberg (1973), who added the 10 executive roles of fgurehead, leader, liaison, monitor, disseminator, spokesperson, entrepreneur, disturbance handler, resource allocator, and negotiator to an already long list of what leaders do. Mintzberg’s research further suggests that few, if any, managers perform these roles in an organized, compartmentalized, and coherent fashion. Instead, a typical manager’s days are characterized by a wide variety of tasks, frequent interruptions, and little time to think or to connect with their subordinates. Mintzberg’s fndings are an integral part of many defnitions of leadership and management. The roles he defnes are typically considered the major roles and functions of leaders. Interestingly, research suggests that male and female managers may perform their roles differently. In her book, The Female Advantage: Women’s Way of Leadership, Sally Helgesen (1995) questions many myths about the universality of management behaviors. Through case studies of fve female executives, Helgesen faithfully replicated the methodology used 20 years earlier by Mintzberg in his study of seven male managers. Mintzberg had found that his managers often worked at an unrelenting pace, with many interruptions and few nonwork-related activities. The men felt that their identity was tied directly to their job and often reported feeling isolated, with no time to reflect, plan, and share information with others. They also reported having a complex network of colleagues outside work and preferring face-to-face interaction to all other means of communication. Helgesen’s fndings of female managers matched Mintzberg’s only in the last two categories. Her female managers also were part of a complex network and preferred face-to-face communication. The other fndings, however, were surprisingly different. The women reported working at a calm, steady pace with frequent breaks. They did not consider unscheduled events to be interruptions; they instead viewed them as a normal part of their work. All of them reported working at a number of nonwork-related activities. They each cultivated multifaceted identities and, therefore, did not feel isolated. They found themselves with time to read and reflect on the big picture. Additionally, the female executives scheduled time to share information with their colleagues and subordinates. The gender differences found between the two studies can be attributed partly to the 20-year time difference. However, Helgesen’s suggestions about a different female leadership style, which she calls “the web,” are supported by a number of other research and anecdotal studies. Helgesen’s web is compared to a circle with the manager in the center and interconnected to all other parts of the department or organization. This view differs sharply from the traditional pyramid structure common in many organizations. Chapter 2 further explores the gender differences in leadership. Functions of the Leader: Creation and Maintenance of an Organizational Culture One of the major functions of leaders is the creation and development of a culture and climate for their group or organization (Nahavandi and Malekzadeh, 1993a; Schein, 2010). Leaders, particularly founders, leave an almost-indelible mark on the assumptions that are passed down from one generation to the next. In fact, organizations often come to mirror their founders’ personalities. Consider, for example, how Starbucks, the worldwide provider of gourmet coffee, reflects the dreams and fears of its founder, Howard Schultz (see Leading Change case in Chapter 10). The company is known for its generous beneft package and its focus on taking care of its employees. Schultz often repeats the story of his father losing his job after EKREM INCE ekremince@gmail.com University of London 14 Topic 1 INTRODUCTION TO LEADERSHIP breaking his leg and the devastating and long-lasting effect this event had on him and his family (George, 2007). As is the case in many other organizations, the founder’s style, or in the case of Starbucks, the founder’s family history, has an impact on the culture of an organization. If the founder is workaholic and control oriented, the organization is likely to push for fast-paced decision making and be centralized. If the founder is participative and team oriented, the organization will be decentralized and open. Norm Brodsky, a veteran entrepreneur who created several businesses, realized how much his hard-driving personality affected the culture of his company. He also realized that his wife and partner’s more caring style was having a positive impact on employees, so he worked on softening his own style and supporting her initiatives (Brodsky, 2006). The leader’s passion often translates into the mission or one of the primary goals of the organization, as is the case of Howard Schultz for Starbucks. Similarly, David Neeleman’s passion for customers and high-quality service (see Section “Leadership in Action” at the end of this chapter) has shaped the management of all the companies Neeleman has founded. The leaders set the vision and direction and make most, if not all, of the decisions regarding the various factors that will shape the culture (Figure 1.1). Figure 1.1 Leader’s Functions in Shaping Organizational Culture Leaders are role models for other organizational members. They establish and grant the status symbols that are the main artifacts of organizational culture. Followers take their cues from the leaders on what behaviors are and are not acceptable. For example, Stephen Oesterle, senior vice president at Medtronics leads by example in two ways. As the leader in charge of medicine, one of his key roles is to look for new technology that can advance the company’s mission. He is considered an international technology scout who scours the globe in search of technological innovation to assure his company’s future success (Walsh, 2012). As a marathon runner, he promotes a healthy lifestyle and its role in restoring lives, which is the mission of his company (Tuggle, 2007). Another example is Tyler Winkler, the senior vice president of sales and business development for Secure Works, who is obsessed with improving sales numbers. One of his frst statements to his employees was, “Make your numbers in three months or you’re out” (Cummings, 2004). He measures everything, observes employees closely, and provides detailed feedback and training, all to improve sales. His methods became the norm in the organization and created a legion of loyal employees. Research about the importance of empathy in leadership suggests another function for leaders, related to cultural factors. Researchers argue that a key function of leaders is to manage the emotions of group members (Humphrey, 2002). Even though attention to internal process issues, such as the emotional state of followers, has always been considered a factor in leadership, it is increasingly seen not as a peripheral task, but rather as one of the main functions. This function is particularly EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 15 critical to maintaining followers’ positive outlook in uncertain and ambiguous situations. Followers observe their leaders’ emotional reactions and take their cue from them to determine appropriate reactions (Pescosolido, 2002). An unlikely example of the emotion management role of leaders is Bob Ladouceur, the legendary La Salle, California, high school football coach and the man behind a great dynasty of 20 undefeated seasons and 399 wins (Sankin, 2013). Ladouceur, who retired as head coach after 34 years in 2013, focuses on shaping the lives of his students, rather than simply winning. His players are not generally considered to be the most talented or the strongest. Ladouceur, however, gets extraordinary performance from them through hard training and character building. He states, “If a team has no soul, you’re just wasting your time” (Wallace, 2003: 100-104). He wants his players to get in touch with their emotions and develop “love” for their teammates. For Ladouceur, managing these emotions is the key to his teams’ winning streaks. He considers his relationships with his followers and coworkers, rather than his winning record, to be the highlight of his career (Hammon, 2013). Other means through which the leader shapes culture are by decisions regarding the reward system (Kerr and Slocum, 1987) and by controlling decision standards. In one organization, rewards (fnancial and nonfnancial) go to only the highest contributors to the bottom line. In another, accomplishments such as contribution to cultural diversity or the degree of social responsibility are also valued and rewarded. Additionally, leaders are in charge of selecting other leaders and managers for the organization. Those selected are likely to ft the existing leader’s ideal model and, therefore, ft the culture. Other influential members of the organization provide leaders with yet another opportunity to shape the culture. Many frms, for example, establish a nominating committee of the board of directors. In such committees, top managers nominate and select their successors. Therefore, they not only control the current culture but also exert a strong influence on the future of their organization. To select his successor before he left in 2001, General Electric’s (GE) Jack Welch carefully observed, interacted with, and interviewed many of the company’s executives. He sought feedback from top company leaders, and after selecting Jeff Immelt, Welch orchestrated the transition of power. This carefully orchestrated succession ensured that the new leader, although bringing about some new ideas, ft the existing culture of the organization (Useem, 2001). A similar careful process took place at Procter & Gamble in 2009 and again in 2013 (see Section “Leadership in Action” case in Chapter 7). APPLYING WHAT YOU LEARN Leadership Basics Leadership is a complex process that is a journey rather than a destination. All effective leaders continue to grow and improve, learning from each situation they face and from their mistakes. Here are some basic points that we will revisit throughout the book: • Find your passion: We can be at our best when we lead others into something for which we have passion. • Learn about yourself: Self-awareness of your values, strengths, and weaknesses is an essential starting point for leaders. • Experiment with new behaviors and situations: Learning and growth occur when we are exposed to new situations that challenge us; seek them out. EKREM INCE ekremince@gmail.com University of London 16 Topic 1 INTRODUCTION TO LEADERSHIP • Get comfortable with failure: All leaders fail; good leaders learn from their mistakes and consider them learning opportunities. Mistakes are more likely to happen when you are placed in new challenging situations that provide you with opportunities to learn. • Pay attention to your environment: Understanding all the elements of a leadership situation, and particularly followers, is essential to effectiveness. Ask questions, listen carefully, and observe intently so that you can understand the people and the situations around you. • Remember that it’s about others:Leadership is not about you and your personal agenda. It’s about getting things done for, through and with others. • Don’t take yourself too seriously: A good sense of humor and keeping a perspective on priorities will help you. You are not as good as your most fervent supporters believe and not as flawed as your reticent detractors think, so lighten up! The power of the leader to make decisions for the organization about its structure and strategy is another effective means of shaping culture. By determining the hierarchy, span of control, reporting relationship, and degree of formalization and specialization, the leader molds culture. A highly decentralized and organic structure is likely to be the result of an open and participative culture, whereas a highly centralized structure will go hand in hand with a mechanistic/bureaucratic culture. The structure of an organization limits or encourages interaction and by doing so affects, as well as is affected by, the assumptions shared by members of the organization. Similarly, the strategy selected by the leader or the top management team will be determined by, as well as help shape, the culture of the organization. Therefore, a leader who adopts a proactive growth strategy that requires innovation and risk taking will have to create a culture different from a leader who selects a strategy of retrenchment. CHANGES IN ORGANIZATIONS AND IN EXPECTATIONS OF LEADERS To some, a leader is someone who takes charge and jumps in to make decisions whenever the situation requires. This view is particularly dominant in traditional organizations with a clear hierarchy in which employees and managers carry out narrowly defned responsibilities. To others, a leader is a facilitator who simply channels the group’s desires. The extent to which a leader is attributed power and knowledge varies by culture and will be discussed in Chapter 2. Even though the U.S. mainstream culture is not as authority oriented as some other cultures, a large number of our leadership theories are implicitly or explicitly based on the assumptions that leaders have to take charge and provide others with instructions. For example, the initiation-of-structure concept provides that effective leadership involves giving direction, assigning tasks to followers, and setting deadlines. These activities are considered an inherent part of an effective leader’s behaviors. Similarly, the widely used concept of motivation to manage (Miner and Smith, 1982) includes desire for power and control over others as an essential component. WHAT DO YOU DO? You have started on a new job, and based on the interview and discussion with people prior to accepting the job you were led to believe that the company strongly believes in employee participation, engagement, and flexibility. A EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 17 couple of months of working with your new boss, however, all you see is command and control, with little opportunity for you to provide any input. What do you do? New Roles for Leaders With the constant need for innovation, intense global competition, economic pressures, and changing demographics, organizations are changing drastically. As a result, many of the traditional leadership functions and roles are changing as well. Figure 1.2 presents the traditional control-oriented model and the new result-oriented model for leaders in organizations. The changing environment for organizations has forced us to reconsider our expectations and requirements for leadership. Effective leaders of diverse and global teams are not necessarily in control of the group. They might need facilitation and participation skills much more than initiation-of-structure skills. For example, employees in traditional organizations are responsible only for production; the planning, leading, and controlling functions, as well as the responsibility for results, fall on the manager (see Figure 1.2). An increasing number of organizations, however, are shifting the activities and responsibilities typically associated with managers to employees. Managers are expected to provide the vision, get the needed resources to employees, act as support persons, and get out of employees’ way. The employees, in turn, learn about the strategic and fnancial issues related to their job, plan their own activities, set production goals, and take responsibility for their results. Figure 1.2 Control Versus Results-Oriented Leadership Many executives have adopted new management techniques to help them with the challenges inherent in the new roles for leaders. Harnessing employees’ ideas and engaging them in the goals of the organization is increasingly a key role for leaders. When Rick Sapio was the CEO of the 37-employee New York City Mutual.com, a mutual fund advisory company, he knew that his business was high pressure with little time to stay in touch with his employees (Buchanan, 2001). Recognizing the importance of involving employees, however, Sapio created “Hassles,” an electronic mailbox through which employees could express their concerns and ideas with a guarantee from the CEO that they will be addressed within a week. For those who preferred to see the boss in person, Sapio scheduled one hour each week in a conference room (rather than his ofce, which seemed inaccessible) where anyone could drop in to give him input. Jeffrey Immelt, CEO of General Electric, has made learning and getting to hear everybody’s ideas one EKREM INCE ekremince@gmail.com University of London 18 Topic 1 INTRODUCTION TO LEADERSHIP of his priorities. His predecessor, Jack Welch, notes that a great leader needs to “get under the skin of every person who works for the company” (Hammonds, 2004: 32). Leaders at large companies such as Procter & Gamble, Whole Foods, and Toyota, as well as small start-ups such as Evernote, practice being egalitarian and cooperative. Their priorities are fast decision making, training, and innovation. The new leadership styles are not limited to business organizations; they can also be seen in government and other not-for-proft organizations. Harry Baxter, chairman and CEO of Baxter Healthcare in Deerfeld, Illinois, likes to focus on doing the right thing instead of being right. He suggests, “I have very few defnitive answers, but I have a lot of opinions” (Kraemer, 2003: 16). Philip Diehl, former director of the U.S. Mint, and his leadership team transformed the stodgy government bureaucracy into an efcient and customer-centered organization by asking questions, listening to stakeholders, creating a sense of urgency in employees, and involving them in the change (Muio, 1999). These changes also occur in local, state, and federal government agencies. For example, Ron Sims, who was recognized in 2006 as one of the most innovative public ofcials, is known for always looking for common ground while operating from a clear set of principles (Walters, 2006). Ron Sims is also known for leading by example. When he talked about county employees adopting a healthier lifestyle, he started eating better and biking and lost 40 pounds (Walters, 2006). These leaders leave their top-floor ofces to keep in touch with the members of their organizations. Given the rapid pace of change and complexity of the environment in which many organizations operate, cultivating extensive sources of information and involving many people in the decision-making process are essential. Factors Fueling Changes A number of external and internal organizational factors are driving the changes in our organizations and in the role of leaders and managers (Figure 1.3). First, political changes worldwide are leading to more openness and democracy. These political changes shape and are shaped by images of what is considered to be appropriate leadership. With the fall of the Soviet Union at the end of the twentieth century, the world has seen a spread in democratic principles aimed at power sharing. Uprising in North Africa and the Middle East and the Arab Spring movement demonstrated the desire of many for more openness and democracy. In the United States, the public continues to expect transparency in both the private and the public sectors. Politicians are forced to share details of their past and their personal life and justify to the public many, if not all, of their decisions. Communities increasingly demand participation in the decisions regarding their schools, health-care systems, and environment. EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 19 Figure 1.3 Factors Fueling Changes in Organizations and Their Leadership Second, with the worldwide economic downturn, increasing global and local competition, and complex and fast-changing technologies, numerous organizations struggle for survival and to justify their existence. Many are forced to reconsider how they provide goods and services to their customers and to the public and to reevaluate the assumptions they held as basic truths. For example, while Unions in the United States are struggling for both membership and a new identity, in some cases, their leadership has succeeded by focusing on cooperation with management, something that would have been unimaginable a few years back. Monty Newcomb, a shop steward at a chemical plant in Calvert City Kentucky, worked with his union and with management to integrate trust and team building between union and management with the traditional collective bargaining process (Davidson, 2013). This new collaboration took a while to take hold but eventually resulted in both groups accomplishing their goals, increasing efciency and quality, and preventing the company from shipping jobs overseas. Another key factor fueling changes in leadership is the diversity in the United States and many other countries (Figure 1.4). Demographic changes that lead to increased diversity in the various groups and organizations push leaders to consider this diversity when making decisions. Many countries include similar or even greater cultural diversity. For example, Malaysia’s population is highly diverse and consists of Malays, Chinese, Indians, Arabs, Sinhalese, Eurasians, and Europeans, with the Muslim, Buddhist, Daoist, Hindu, Christian, Sikh, and Shamanistic religions all practiced (World Fact Book: Malaysia, 2013). Although the majority of Singapore’s population of more than 4 million is Chinese, it also includes Malays, Indians, and Eurasians. As a result, the country has four ofcial languages: English, Malay, Mandarin, and Tamil (World Fact Book: Singapore, 2013). Table 1.3 highlights some of the ethnic and demographic changes and trends in the United States. EKREM INCE ekremince@gmail.com University of London 20 Topic 1 INTRODUCTION TO LEADERSHIP Figure 1.4 Diversity in the U.S. Population Source: United States Census Bureau, 2013. http://quickfacts.census.gov/qfd/states/00000.html (accessed May 30, 2013). Table 1.3 U.S. Demographic Highlights and Trends • In 2007, 20.3 percent of the U.S population spoke a language other than English at home compared to 13 percent in 2000. • More than half of the U.S. workforce consists of women and minorities. • By 2016, minorities will make up one-third of the U.S. population. • By 2025, the percentage of European Americans in the population will drop from 72 percent in 2000 to 62 percent. • By 2025, Hispanics are estimated to be 21 percent of the population, outnumbering African Americans, who will make up 13 percent of the population. • By 2050, the Hispanic population of the United States will grow to 30.25 percent. • By 2025, the average age will be close to 40, as opposed to under 35 in 2000. • By 2025, more than 50 percent of the population of Hawaii, California, New Mexico, and Texas will be from a minority group. • By 2050, the average U.S. resident will be from a non-European background. • By 2050, only about 62 percent of the entrants into the labor force will be white, with half that number being women. Source: U.S. Census Bureau, Census, 2010. http://www.census.gov/population; and Bureau of Labor Statistics, 2013. http://www.bls.gov/emp/ep_table_303.htm. Some of the diversity that leaders must manage is related to age. Roxann Hewertson, CEO of the Highland Consulting Group, an organization that focuses on leadership issues and a faculty at Cornell University, says the younger workers do not respond to traditional hierarchies easily. As a result she believes,“There’s a real hunger out there for fnding a better way. The old way is broken. It doesn’t serve us” (5 influential CEOs, 2013). Nick Petrie, senior faculty member of the Center for Creative Leadership, an influential leadership organization, strongly believes, “There is a transition occurring from the old paradigm in which leadership resided in a person or role, to a new one in which leadership is a collective process that is spread throughout networks of people” (5 influential CEOs, 2013). Other demographic trends in the United States include the largest percentage of the population being older baby boomers (born between the late 1940s and the 1960s) at the top, and the millennial generation (born after the mid-1980s) at the bottom, with the generation Xers (born between the 1970s and 1980s) pinched in the middle. This suggests that many organizational leaders are managing employees from generations other than their own and EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 21 therefore must take cultural and generational factors into account. We will discuss the impact of generational differences on individuals in Chapters 2 and 4. The increasing number of women in the workforce is another factor that has an impact on leadership. Although women currently hold only 10 percent of the executive positions in the United States, they make up over 47 percent of the general workforce with a clear majority of women being part of the labor force (Women in the Labor Force, 2010). Similar trends exist all over the world. For example, women make up almost 47 percent of the labor force in Canada, close to 45 percent in China, over 50 percent in Russia (Labor force, 2009). Scandinavian countries are leading the way with the number of women in top management and leadership positions in the executive ofces and boardrooms. In Sweden, women hold 23 percent of the board seats (Amble, 2006). As a result, the old ways that were designed for a gender and ethnically homogeneous population do not always work with employees and customers from varied backgrounds and cultures. Much of the burden for devising and implementing the needed changes falls on the leadership of our organizations. The demand to listen to and address the needs of nonhomogeneous groups requires skills that go beyond controlling and monitoring. Because of the pressures for change, many organizations fnd themselves rewriting their policies to address the needs of a diverse community and consumer base. Consultant Ted Childs, who used to be IBM’s president of global workforce diversity states, “Business is at its core about relationships. I think diversity work takes away barriers that interfere with relationship building” (Child, 2013). He adds: “You’re going to have to sell to people who are different from you, and buy from people who are different from you, and manage people who are different from you . . . . This is how we do business. If it’s not your destination, you should get off the plane now” (Swan, 2000: 260). He views getting people to respect those who are different from them as the biggest challenge in managing diversity. Barriers to Change Despite the factors that fuel the need for change, few organizations and individuals have adopted new models for leadership painlessly. In part because of perceived fnancial pressures and attempts to fnd a quick way out of them, organizations turn to tough autocratic leaders whose goals are clearly not employee motivation and loyalty. For example, John Grundhofer, nicknamed “Jack the Ripper,” specialized in implementing massive layoffs and found his skills in high demand. Similarly, Al Dunlap, with nicknames such as “Ming the Merciless” and “Chainsaw Al,” for a long time moved successfully from the top position of one organization to another before being fred from Sunbeam Corporation in 1998. For many years, the fnancial community applauded him for his drastic cost-cutting strategies that involved widespread layoffs. Bill George, the highly respected former CEO of Medtronic, states that this focus on short-term and quick results cannot create the motivation necessary for the innovation and superior service that are essential to leadership and organizational effectiveness (George, 2003). Another obstacle to implementing new models of leadership is that even though teams are fairly common in lower and middle levels of organizations, top management still remains a one-person show. The hierarchical structure of many organizations makes change difcult. Old cultures resist change. Few organizations truly reward enterprising employees and managers for crossing the traditional hierarchical barriers. Instead, most organizations continue to reward their leaders for tried-and-true approaches or sometimes for nonperformance- and nonproductivity-related behaviors, despite the lack of success (Luthans, 1989). Marcus Buckingham, a researcher at the Gallup Organization, has studied global leadership practice for 15 years. According to Buckingham, “The corporate world is EKREM INCE ekremince@gmail.com University of London 22 Topic 1 INTRODUCTION TO LEADERSHIP appallingly bad at capitalizing on the strengths of its people” (LaBarre, 2001: 90). Gallup’s extensive surveys show that employee engagement can have a considerable positive impact on an organization’s performance. Recent surveys of employees in the United States by the Conference Board indicate the low level of overall satisfaction with jobs, at 47 percent (Conference Board, 2012). Other research indicates that job satisfaction is lower in larger companies with more bureaucracy, lower autonomy, and low responsibility (Wall Street Journal, 2006). Few organizations take full advantage of their employees’ input. Tom Peters, the well-known management consultant, suggests that while business leaders focus on strategy, they often “skip over the incredibly boring part called people,” thereby failing to take advantage of one of the most important aspects of their organization (Reingold, 2003: 94). In addition, changing the established behaviors of managers is very difcult. John Kotter, Harvard Business School professor and noted authority on change, suggests, “The central issue is never strategy, structure, culture, or systems. The core of the matter is always about changing the behavior of people” (Deutschman, 2005). In addition, although they might spend a great deal of time working in teams, employees are still rewarded for individual performance. In other words, our reward structures fail to keep up with our attempts to increase cooperation among employees and managers. Furthermore, many employees are not willing or able to accept their new roles as partners and decision makers, even when such roles are offered to them. Their training and previous experiences make them balk at taking on what they might consider to be their leader’s job. Even when organizations encourage change, many leaders fnd giving up control difcult. Many receive training in the benefts of empowerment, teams, and softer images of leadership, but they simply continue to repeat what seemingly worked in the past, engaging in what researcher Pfeffer calls substituting memory for thinking (1998). With all that training on how to be in charge and in control, allowing employees to do more might appear to be a personal failure. Either because of years of traditional training or because of personality characteristics that make them more comfortable with control and hierarchy, managers’ styles often create an obstacle to implementing necessary changes. Research about children’s images of leadership indicates that the belief that leaders need to be in control develops early in life. Children, particularly boys, continue to perceive a sex-typed schema of leaders: Leaders are supposed to have male characteristics, including dominance and aggression (Ayman-Nolley, Ayman, and Becker, 1993). Summary and Conclusions A leader is any person who influences individuals and groups within an organization, helps them in the establishment of goals, and guides them toward achievement of those goals, thereby allowing them to be effective. Leaders are needed because they create order and organization in groups, allowing them to achieve their goals; they help people make sense of the world and can serve as ideal and romantic symbols for their followers. To be effective, leaders must help the organization maintain internal health and external adaptability. Despite the apparent simplicity of the defnitions of leadership and effectiveness, both are difcult concepts to implement. Various studies propose separate defnitions for leadership and management. The activities performed by leaders, however, are similar to those typically considered the domain of effective managers. Although some view the roles of leaders and managers as being different, effective, and competent, managers are often also leaders within their groups and organizations. In addition to performing the traditional managerial roles and duties, leaders also play a special role in the creation of a culture for their organizations. They can affect culture by setting the vision and direction, making direct decisions regarding reward systems, hiring other managers EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 23 and employees, and being role models for others in the organization. The role of leaders is changing with our shifting expectations and global and organizational pressures. Leaders fnd themselves providing more vision and direction and focusing on results rather than command and control. While new roles take hold slowly, political, economic, demographic, and social changes drive the need for change. However, leaders fnd use of traditional models, lack of involvement of followers, and falling back on old practices hard obstacles to overcome. Nahavandi. Original materials from The art and science of leadership © copyright 2015 Pearson. All rights reserved. EKREM INCE ekremince@gmail.com University of London 24 Topic 1 INTRODUCTION TO LEADERSHIP ESSENTIAL READING Now do the second reading, bearing in mind the points we have emphasised in the introductory video to this topic and in the mini lecture. Remember that all the essential reading for this programme is provided for you. Click ‘next’ to go to the next page and start reading. After this there will be a short quiz based on both readings to help you test how much information you have retained, then a series of more thought-provoking self-assessment exercises to allow you to stretch yourself and develop your ideas further. EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 25 CHAPTER 1 INTRODUCTION AND OVERVIEW Leadership in organizations 8th global edition, G. A. Yukl. Original materials from Leadership in organizations © copyright 2013 Pearson. All rights reserved. After studying this chapter, you will be able to: • Understand the different ways leadership has been defined. • Understand the controversy about differences between leadership and management. • Understand why it is so difcult to assess leadership effectiveness. • Understand the different indicators used to assess leadership effectiveness. • Understand what aspects of leadership have been studied the most during the past 50 years. • Understand the organization of this book. Leadership is a subject that has long excited interest among people. The term connotes images of powerful, dynamic individuals who command victorious armies, direct corporate empires from atop gleaming skyscrapers, or shape the course of nations. The exploits of brave and clever leaders are the essence of many legends and myths. Much of our description of history is the story of military, political, religious, and social leaders who are credited or blamed for important historical events, even though we do not understand very well how the events were caused or how much influence the leader really had. The widespread fascination with leadership may be because it is such a mysterious process, as well as one that touches everyone’s life. Why did certain leaders (e.g., Gandhi, Mohammed, Mao Tse-tung) inspire such intense fervor and dedication? How did certain leaders (e.g., Julius Caesar, Alexander the Great) build great empires? Why did some rather undistinguished people (e.g., Adolf Hitler, Claudius Caesar) rise to positions of great power? Why were certain leaders (e.g., Winston Churchill, Indira Gandhi) suddenly deposed, despite their apparent power and record of successful accomplishments? Why do some leaders have loyal followers who are willing to sacrifce their lives, whereas other leaders are so despised that subordinates conspire to murder them? Questions about leadership have long been a subject of speculation, but scientifc research on leadership did not begin until the twentieth century. The focus of much of the research has been on the determinants of leadership effectiveness. Social scientists have attempted to discover what traits, abilities, behaviors, sources of power, or aspects of the situation determine how well a leader is able to influence followers and accomplish task objectives. There is also a growing interest in understanding leadership as a shared process in a team or organization and the reasons why this process is effective or ineffective. Other important questions include the reasons why some people emerge as leaders, and the determinants of a leader’s actions, but the predominant concern has been leadership effectiveness. Some progress has been made in probing the mysteries surrounding leadership, but many questions remain unanswered. In this book, major theories and research fndings on leadership effectiveness will be reviewed, with particular emphasis on EKREM INCE ekremince@gmail.com University of London 26 Topic 1 INTRODUCTION TO LEADERSHIP managerial leadership in formal organizations such as business corporations, government agencies, hospitals, and universities. This chapter introduces the subject by considering different conceptions of leadership, different ways of evaluating its effectiveness, and different approaches for studying leadership. The chapter also provides an overview of the book and explains how subjects are organized. Definitions of Leadership The term leadership is a word taken from the common vocabulary and incorporated into the technical vocabulary of a scientifc discipline without being precisely redefned. As a consequence, it carries extraneous connotations that create ambiguity of meaning (Janda, 1960). Additional confusion is caused by the use of other imprecise terms such as power, authority, management, administration, control, and supervision to describe similar phenomena. An observation by Bennis (1959, p. 259) is as true today as when he made it many years ago: Always, it seems, the concept of leadership eludes us or turns up in another form to taunt us again with its slipperiness and complexity. So we have invented an endless proliferation of terms to deal with it . . . and still the concept is not sufciently defned. Researchers usually defne leadership according to their individual perspectives and the aspects of the phenomenon of most interest to them. After a comprehensive review of the leadership literature, Stogdill (1974, p. 259) concluded that “there are almost as many defnitions of leadership as there are persons who have attempted to defne the concept.” The stream of new defnitions has continued unabated since Stogdill made his observation. Leadership has been defned in terms of traits, behaviors, influence, interaction patterns, role relationships, and occupation of an administrative position. Table 1-1 shows some representative defnitions presented over the past 50 years. • Leadership is “the behavior of an individual . . . directing the activities of a group toward a shared goal” (Hemphill & Coons, 1957, p. 7). • Leadership is “the influential increment over and above mechanical compliance with the routine directives of the organization” (Katz & Kahn, 1978, p. 528). • Leadership is “the process of influencing the activities of an organized group toward goal achievement” (Rauch & Behling, 1984, p. 46). • “Leadership is about articulating visions, embodying values, and creating the environment within which things can be accomplished” (Richards & Engle, 1986, p. 206). • “Leadership is a process of giving purpose (meaningful direction) to collective effort, and causing willing effort to be expended to achieve purpose” (Jacobs & Jaques, 1990, p. 281). • Leadership “is the ability to step outside the culture . . . to start evolutionary change processes that are more adaptive” (Schein, 1992, p. 2). • “Leadership is the process of making sense of what people are doing together so that people will understand and be committed” (Drath & Palus, 1994, p. 4). • Leadership is “the ability of an individual to influence, motivate, and enable others to contribute toward the effectiveness and success of the organization . . .” (House et al., 1999, p. 184). Table 1.1 Defnitions of Leadership Most defnitions of leadership reflect the assumption that it involves a process whereby intentional influence is exerted over other people to guide, structure, and facilitate activities and relationships in a group or organization. The numerous EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 27 defnitions of leadership appear to have little else in common. They differ in many respects, including who exerts influence, the intended purpose of the influence, the manner in which influence is exerted, and the outcome of the influence attempt. The differences are not just a case of scholarly nit-picking; they reflect deep disagreement about identifcation of leaders and leadership processes. Researchers who differ in their conception of leadership select different phenomena to investigate and interpret the results in different ways. Researchers who have a very narrow defnition of leadership are less likely to discover things that are unrelated to or inconsistent with their initial assumptions about effective leadership. Because leadership has so many different meanings to people, some theorists question whether it is even useful as a scientifc construct (e.g., Alvesson & Sveningsson, 2003; Miner, 1975). Nevertheless, most behavioral scientists and practitioners seem to believe leadership is a real phenomenon that is important for the effectiveness of organizations. Interest in the subject continues to increase, and the deluge of articles and books about leadership shows no sign of abating. Specialized Role or Shared Influence Process? A major controversy involves the issue of whether leadership should be viewed as a specialized role or as a shared influence process. One view is that all groups have role specialization, and the leadership role has responsibilities and functions that cannot be shared too widely without jeopardizing the effectiveness of the group. The person with primary responsibility to perform the specialized leadership role is designated as the “leader.” Other members are called “followers” even though some of them may assist the primary leader in carrying out leadership functions. The distinction between leader and follower roles does not mean that a person cannot perform both roles at the same time. For example, a department manager who is the leader of department employees is also a follower of higher-level managers in the organization. Researchers who view leadership as a specialized role are likely to pay more attention to the attributes that determine selection of designated leaders, the typical behavior of designated leaders, and the effects of this behavior on other members of the group or organization. Another way to view leadership is in terms of an influence process that occurs naturally within a social system and is diffused among the members. Writers with this perspective believe it is more useful to study “leadership” as a social process or pattern of relationships rather than as a specialized role. According to this view, various leadership functions may be carried out by different people who influence what the group does, how it is done, and the way people in the group relate to each other. Leadership may be exhibited both by formally selected leaders and by informal leaders. Important decisions about what to do and how to do it are made through the use of an interactive process involving many different people who influence each other. Researchers who view leadership as a shared, diffuse process, are likely to pay more attention to the complex influence processes that occur among members, the context and conditions that determine when and how they occur, the processes involved in the emergence of informal leaders, and the consequences for the group or organization. Type of Influence Process Controversy about the defnition of leadership involves not only who exercises influence, but also what type of influence is exercised and the outcome. Some theorists would limit the defnition of leadership to the exercise of influence resulting in enthusiastic commitment by followers, as opposed to indifferent compliance or reluctant obedience. These theorists argue that the use of control over rewards and EKREM INCE ekremince@gmail.com University of London 28 Topic 1 INTRODUCTION TO LEADERSHIP punishments to manipulate or coerce followers is not really “leading” and may involve the unethical use of power. An opposing view is that this defnition is too restrictive because it excludes some influence processes that are important for understanding why a leader is effective or ineffective in a given situation. How leadership is defned should not predetermine the answer to the research question of what makes a leader effective. The same outcome can be accomplished with different influence methods, and the same type of influence attempt can result in different outcomes, depending on the nature of the situation. Even people who are forced or manipulated into doing something may become committed to it if they subsequently discover that it really is the best option for them and the organization. The ethical use of power is a legitimate concern for leadership scholars, but it should not limit the defnition of leadership or the type of influence processes that are studied. Purpose of Influence Attempts Another controversy about which influence attempts are part of leadership involves their purpose and outcome. One viewpoint is that leadership occurs only when people are influenced to do what is ethical and benefcial for the organization and themselves. This defnition of leadership does not include influence attempts that are irrelevant or detrimental to followers, such as a leader’s attempts to gain personal benefts at the follower’s expense. An opposing view would include all attempts to influence the attitudes and behavior of followers in an organizational context, regardless of the intended purpose or actual benefciary. Acts of leadership often have multiple motives, and it is seldom possible to determine the extent to which they are selfless rather than selfsh. The outcomes of leader actions usually include a mix of costs and benefts, some of which are unintended, making it difcult to infer purpose. Despite good intentions, the actions of a leader are sometimes more detrimental than benefcial for followers. Conversely, actions motivated solely by a leader’s personal needs sometimes result in unintended benefts for followers and the organization. Thus, the domain of leadership processes to study should not be limited by the leader’s intended purpose. Influence Based on Reason or Emotions Most of the leadership defnitions listed earlier emphasize rational, cognitive processes. For many years, it was common to view leadership as a process wherein leaders influence followers to believe it is in their best interest to cooperate in achieving a shared task objective. Until the 1980s, few conceptions of leadership recognized the importance of emotions as a basis for influence. In contrast, some recent conceptions of leadership emphasize the emotional aspects of influence much more than reason. According to this view, only the emotional, value-based aspects of leadership influence can account for the exceptional achievements of groups and organizations. Leaders inspire followers to willingly sacrifce their selfsh interests for a higher cause. For example, leaders can motivate soldiers to risk their lives for an important mission or to protect their comrades. The relative importance of rational and emotional processes and how they interact are issues to be resolved by empirical research, and the conceptualization of leadership should not exclude either type of process. EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 29 Direct and Indirect Leadership Most theories about effective leadership focus on behaviors used to directly influence immediate subordinates, but a leader can also influence other people inside the organization, including peers, bosses, and people at lower levels who do not report to the leader. Some theorists make a distinction between direct and indirect forms of leadership to help explain how a leader can influence people when there is no direct interaction with them (Hunt, 1991; Lord & Maher, 1991; Yammarino, 1994). A chief executive ofcer (CEO) has many ways to influence people at lower levels in the organization. Direct forms of leadership involve attempts to influence followers when interacting with them or using communication media to send messages to them. Examples include sending memos or reports to employees, sending e-mail messages, presenting speeches on television, holding meetings with small groups of employees, and participating in activities involving employees (e.g., attending orientation or training sessions, company picnics). Most of these forms of influence can be classifed as direct leadership. Indirect leadership has been used to describe how a chief executive can influence people at lower levels in the organization who do not interact directly with the leader (Bass, Waldman, Avolio, & Bebb, 1987; Waldman & Yammarino, 1999; Yammarino, 1994). One form of indirect leadership by a CEO is called “cascading.” It occurs when the direct influence of the CEO is transmitted down the authority hierarchy of an organization from the CEO to middle managers, to lower-level managers, to regular employees. The influence can involve changes in employee attitudes, beliefs, values, or behaviors. For example, a CEO who sets a good example of ethical and supportive behavior may influence similar behavior by employees at lower levels in the organization. Another form of indirect leadership involves influence over formal programs, management systems, and structural forms (Hunt, 1991; Lord & Maher, 1991; Yukl & Lepsinger, 2004). Many large organizations have programs or management systems intended to influence the attitudes, skills, behavior, and performance of employees. Examples include programs for recruitment, selection, and promotion of employees. Structural forms and various types of programs can be used to increase control, coordination, efciency, and innovation. Examples include formal rules and procedures, specialized subunits, decentralized product divisions, standardized facilities, and self-managed teams. In most organizations only top executives have sufcient authority to implement new programs or change the structural forms (see Chapter 11). A third form of indirect leadership involves leader influence over the organization culture, which is defned as the shared beliefs and values of members (Schein, 1992; Trice & Beyer, 1991). Leaders may attempt either to strengthen existing cultural beliefs and values or to change them. There are many ways for leaders to influence an organization’s culture. Some ways involve direct influence (e.g., communicating a compelling vision or leading by example), and some involve forms of indirect influence, such as changing the organizational structure, reward systems, and management programs (see Chapter 11). For example, a CEO can implement programs to recruit, select, and promote people who share the same values (Giberson, Resick, & Dickson, 2005). The interest in indirect leadership is useful to remind scholars that leadership influence is not limited to the types of observable behavior emphasized in many leadership theories. However, it is important to remember that a simple dichotomy does not capture the complexity involved in these influence processes. Some forms of influence are not easily classifed as either direct or indirect leadership. Moreover, EKREM INCE ekremince@gmail.com University of London 30 Topic 1 INTRODUCTION TO LEADERSHIP direct and indirect forms of influence are not mutually exclusive, and when used together in a consistent way, it is possible to magnify their effects (see Chapter 11). Leadership or Management There is a continuing controversy about the difference between leadership and management. It is obvious that a person can be a leader without being a manager (e.g., an informal leader), and a person can be a manager without leading. Indeed, some people with the job title “manager” do not have any subordinates (e.g., a manager of fnancial accounts). Nobody has proposed that managing and leading are equivalent, but the degree of overlap is a point of sharp disagreement. Some writers contend that leadership and management are qualitatively different and mutually exclusive (e.g., Bennis & Nanus, 1985; Zaleznik, 1977). The most extreme distinction assumes that management and leadership cannot occur in the same person. For these writers, leaders and managers differ with regard to their values and personalities. Managers value stability, order, and efciency, and they are impersonal, risk-averse, and focused on short-term results. Leaders value flexibility, innovation, and adaptation; they care about people as well as economic outcomes, and they have a longer-term perspective with regard to objectives and strategies. Managers are concerned about how things get done, and they try to get people to perform better. Leaders are concerned with what things mean to people, and they try to get people to agree about the most important things to be done. Bennis and Nanus (1985, p. 21) proposed that “managers are people who do things right, and leaders are people who do the right thing.” However, the empirical research does not support the assumption that people can be sorted neatly into these two extreme stereotypes. Moreover, the stereotypes imply that managers are generally ineffective. The term manager is an occupational title for a large number of people, and it is insensitive to denigrate them with a negative stereotype. Other scholars view leading and managing as distinct processes or roles, but they do not assume that leaders and managers are different types of people (Bass, 1990; Hickman, 1990; Kotter, 1988; Mintzberg, 1973; Rost, 1991). How the two processes are defned varies somewhat, depending on the scholar. For example, Mintzberg (1973) described leadership as one of the 10 managerial roles. Leadership includes motivating subordinates and creating favorable conditions for doing the work. The other nine roles (e.g., resource allocator, negotiator) involve distinct managing responsibilities, but leadership is viewed as an essential managerial role that pervades the other roles. Kotter (1990) proposed that managing seeks to produce predictability and order, whereas leading seeks to produce organizational change. Both roles are necessary, but problems can occur if an appropriate balance is not maintained. Too much emphasis on the managing role can discourage risk taking and create a bureaucracy without a clear purpose. Too much emphasis on the leadership role can disrupt order and create change that is impractical. According to Kotter, the importance of leading and managing depends in part on the situation. As an organization becomes larger and more complex, managing becomes more important. As the external environment becomes more dynamic and uncertain, leadership becomes more important. Both roles are important for executives in large organizations with a dynamic environment. When Kotter surveyed major large companies in a dynamic environment, he found very few had executives who were able to carry out both roles effectively. Rost (1991) defned management as an authority relationship that exists between a manager and subordinates to produce and sell goods and services. He defned leadership as a multidirectional influence relationship between a leader and EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 31 followers with the mutual purpose of accomplishing real change. Leaders and followers influence each other as they interact in noncoercive ways to decide what changes they want to make. Managers may be leaders, but only if they have this type of influence relationship. Rost proposed that leading was not necessary for a manager to be effective in producing and selling goods and services. However, leading is essential when major changes must be implemented in an organization, because authority is seldom a sufcient basis for gaining commitment from subordinates or for influencing other people whose cooperation is necessary, such as peers and outsiders. Defning managing and leading as distinct roles, processes, or relationships may obscure more than it reveals if it encourages simplistic theories about effective leadership. Most scholars seem to agree that success as a manager or administrator in modern organizations also involves leading. How to integrate the two processes has emerged as a complex and important issue in organizational literature (Yukl & Lepsinger, 2005). The answer will not come from debates about ideal defnitions. Questions about what to include in the domain of essential leadership processes should be explored with empirical research, not predetermined by subjective judgments. A Working Defnition of Key Terms It is neither feasible nor desirable at this point in the development of the discipline to attempt to resolve the controversies over the appropriate defnition of leadership. Like all constructs in social science, the defnition of leadership is arbitrary and subjective. Some defnitions are more useful than others, but there is no single “correct” defnition that captures the essence of leadership. For the time being, it is better to use the various conceptions of leadership as a source of different perspectives on a complex, multifaceted phenomenon. In research, the operational defnition of leadership depends to a great extent on the purpose of the researcher (Campbell, 1977). The purpose may be to identify leaders, to determine how they are selected, to discover what they do, to discover why they are effective, or to determine whether they are necessary. As Karmel (1978, p. 476) notes, “It is consequently very difcult to settle on a single defnition of leadership that is general enough to accommodate these many meanings and specifc enough to serve as an operationalization of the variable.” Whenever feasible, leadership research should be designed to provide information relevant to a wide range of defnitions, so that over time it will be possible to compare the utility of different conceptions and arrive at some consensus on the matter. In this book, leadership is defned broadly in a way that takes into account several things that determine the success of a collective effort by members of a group or organization to accomplish meaningful tasks. The following defnition is used: Leadership is the process of influencing others to understand and agree about what needs to be done and how to do it, and the process of facilitating individual and collective efforts to accomplish shared objectives. The defnition includes efforts not only to influence and facilitate the current work of the group or organization, but also to ensure that it is prepared to meet future challenges. Both direct and indirect forms of influence are included. The influence process may involve only a single leader or it may involve many leaders. Table shows the wide variety of ways leaders can influence the effectiveness of a group or organization. EKREM INCE ekremince@gmail.com University of London 32 Topic 1 INTRODUCTION TO LEADERSHIP • The choice of objectives and strategies to pursue. • The motivation of members to achieve the objectives. • The mutual trust and cooperation of members. • The organization and coordination of work activities. • The allocation of resources to activities and objectives. • The development of member skills and confdence. • The learning and sharing of new knowledge by members. • The enlistment of support and cooperation from outsiders. • The design of formal structure, programs, and systems. • The shared beliefs and values of members. Table 1.1 What Leaders Can Influence In this book, leadership is treated as both a specialized role and a social influence process. More than one individual can perform the role (i.e., leadership can be shared or distributed), but some role differentiation is assumed to occur in any group or organization. Both rational and emotional processes are viewed as essential aspects of leadership. No assumptions are made about the actual outcome of the influence processes, because the evaluation of outcomes is difcult and subjective. Thus, the defnition of leadership is not limited to processes that necessarily result in “successful” outcomes. How leadership processes affect outcomes is a central research question that should not be biased by the defnition of leadership. The focus is clearly on the process, not the person, and they are not assumed to be equivalent. Thus, the terms leader, manager, and boss are used interchangeably in this book to indicate people who occupy positions in which they are expected to perform the leadership role, but without any assumptions about their actual behavior or success. The terms subordinate and direct report are used interchangeably to denote someone whose primary work activities are directed and evaluated by the focal leader. Some writers use the term staff as a substitute for subordinate, but this practice creates unnecessary confusion. The term connotes a special type of advisory position, and most subordinates are not staff advisors. Moreover, the term staff is used both as a singular and plural noun, which creates a lot of unnecessary confusion. The term associate has become popular in business organizations as another substitute for subordinate, because it conveys a relationship in which employees are valued and supposedly empowered. However, this vague term fails to differentiate between a direct authority relationship and other types of formal relationships (e.g., peers, partners). To clarify communication, this text continues to use the term subordinate to denote the existence of a formal authority relationship. The term follower is used to describe a person who acknowledges the focal leader as the primary source of guidance about the work, regardless of how much formal authority the leader actually has over the person. Unlike the term subordinate, the term follower does not preclude leadership processes that can occur even in the absence of a formal authority relationship. Followers may include people who are not direct reports (e.g., coworkers, team members, partners, outsiders). However, the term follower is not used to describe members of an organization who completely reject the formal leader and seek to remove the person from ofce; such people are more appropriately called “rebels” or “insurgents.” Indicators of Leadership Effectiveness Like defnitions of leadership, conceptions of leader effectiveness differ from one writer to another. The criteria selected to evaluate leadership effectiveness reflect a researcher’s explicit or implicit conception of leadership. Most researchers evaluate EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 33 leadership effectiveness in terms of the consequences of influence on a single individual, a team or group, or an organization. One very relevant indicator of leadership effectiveness is the extent to which the performance of the team or organization is enhanced and the attainment of goals is facilitated (Bass, 2008; Kaiser, Hogan & Craig, 2008). Examples of objective measures of performance include sales, net profts, proft margin, market share, return on investment, return on assets, productivity, cost per unit of output, costs in relation to budgeted expenditures, and change in the value of corporate stock. Subjective measures of effectiveness include ratings obtained from the leader’s superiors, peers, or subordinates. Follower attitudes and perceptions of the leader are another common indicator of leader effectiveness, and they are usually measured with questionnaires or interviews. How well does the leader satisfy the needs and expectations of followers? Do they like, respect, and admire the leader? Do they trust the leader and perceive him or her to have high integrity? Are they strongly committed to carrying out the leader’s requests, or will they resist, ignore, or subvert them? Does the leader improve the quality of work life, build the self-confdence of followers, increase their skills, and contribute to their psychological growth and development? Follower attitudes, perceptions, and beliefs also provide an indirect indicator of dissatisfaction and hostility toward the leader. Examples of such indicators include absenteeism, voluntary turnover, grievances, complaints to higher management, requests for transfer, work slowdowns, and deliberate sabotage of equipment and facilities. Leader effectiveness is occasionally measured in terms of the leader’s contribution to the quality of group processes, as perceived by followers or by outside observers. Does the leader enhance group cohesiveness, member cooperation, member commitment, and member confdence that the group can achieve its objectives? Does the leader enhance problem solving and decision making by the group, and help to resolve disagreements and conflicts in a constructive way? Does the leader contribute to the efciency of role specialization, the organization of activities, the accumulation of resources, and the readiness of the group to deal with change and crises? A fnal type of criterion for leadership effectiveness is the extent to which a person has a successful career as a leader. Is the person promoted rapidly to positions of higher authority? Does the person serve a full term in a leadership position, or is he or she removed or forced to resign? For elected positions in organizations, is a leader who seeks reelection successful? It is difcult to evaluate the effectiveness of a leader when there are so many alternative measures of effectiveness, and it is not clear which measure is most relevant. Some researchers attempt to combine several measures into a single, composite criterion, but this approach requires subjective judgments about how to assign a weight to each measure. Multiple criteria are especially troublesome when they are negatively correlated. A negative correlation means that trade-offs occur among criteria, such that as one increases, others decrease. For example, increasing sales and market share (e.g., by reducing price and increasing advertising) may result in lower profts. Likewise, an increase in production output (e.g., by inducing people to work faster) may reduce product quality or employee satisfaction. Immediate and Delayed Outcomes Some outcomes are more immediate than others. For example, the immediate result of an influence attempt is whether followers are willing to do what the leader asks, but a delayed effect is how well followers actually perform the assignment. The EKREM INCE ekremince@gmail.com University of London 34 Topic 1 INTRODUCTION TO LEADERSHIP effects of a leader can be viewed as a causal chain of variables, with each “mediating variable” explaining the effects of the preceding one on the next one. An example is provided in Figure 2.1. The farther along in the causal chain, the longer it takes for the effect to occur. For criteria at the end of the causal chain, there is a considerable delay (months or years) before the effects of the leader’s actions are evident. Moreover, these end-result criteria are more likely to be influenced by extraneous events (e.g., the economy, market conditions). When the delay is long and there is considerable “contamination” of end-result criteria by extraneous events, then these criteria may be less useful for assessing leadership effectiveness than more immediate outcomes. Figure 2.1 Figure 1.1 Causal Chain of Effects from Two Types of Leader Behavior In many cases, a leader has both immediate and delayed effects on the same criterion. The two types of effects may be consistent or inconsistent. When they are inconsistent, the immediate outcome may be very different from the delayed outcomes. For example, profts may be increased in the short run by eliminating costly activities that have a delayed effect on profts, such as equipment maintenance, research and development, investments in new technology, and employee skill training. In the long run, the net effect of cutting these essential activities is likely to be lower profts because the negative consequences slowly increase and eventually outweigh any benefts. The converse is also true: increased investment in these activities is likely to reduce immediate profts but increase long-term profts. What Criteria to Use? There is no simple answer to the question of how to evaluate leadership effectiveness. The selection of appropriate criteria depends on the objectives and values of the person making the evaluation, and people have different values. For example, top management may prefer different criteria than other employees, customers, or shareholders. To cope with the problems of incompatible criteria, delayed effects, and the preferences of different stakeholders, it is usually best to include a variety of criteria in research on leadership effectiveness and to examine the impact of the leader on each criterion over an extended period of time. Multiple conceptions of effectiveness, like multiple conceptions of leadership, serve to broaden our perspective and enlarge the scope of inquiry. Major Perspectives in Leadership Theory and Research The attraction of leadership as a subject of research and the many different conceptions of leadership have created a vast and bewildering literature. Attempts to organize the literature according to major approaches or perspectives show only partial success. One of the more useful ways to classify leadership theory and research is according to the type of variable that is emphasized the most. Three types of variables that are relevant for understanding leadership effectiveness include (1) EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 35 characteristics of leaders, (2) characteristics of followers, and (3) characteristics of the situation. Examples of key variables within each category are shown in Table. Figure 2.2 depicts likely causal relationships among the variables. Characteristics of the Leader • Traits (motives, personality) • Values, integrity, and moral development • Confdence and optimism • Skills and expertise • Leadership behavior • Influence tactics • Attributions about followers • Mental models (beliefs and assumptions) Characteristics of the Followers • Traits (needs, values, self-concepts) • Confdence and optimism • Skills and expertise • Attributions about the leader • Identifcation with the leader • Task commitment and effort • Satisfaction with job and leader • Cooperation and mutual trust Characteristics of the Situation • Type of organizational unit • Size of organizational unit • Position power and authority of leader • Task structure and complexity • Organizational culture • Environmental uncertainty and change • External dependencies and constraints • National cultural values Table 1.2 Key Variables in Leadership Theories Figure 2.2 Figure 1.2 Causal Relationships Among the Primary Types of Leadership Variables Most leadership theories emphasize one category more than the others as the primary basis for explaining effective leadership, and leader characteristics have been emphasized most often over the past half-century. Another common practice is to limit the focus to one type of leader characteristic, namely traits, behavior, or power. To be consistent with most of the leadership literature, the theories and empirical research reviewed in this book are classifed into the following fve approaches: (1) EKREM INCE ekremince@gmail.com University of London 36 Topic 1 INTRODUCTION TO LEADERSHIP the trait approach, (2) the behavior approach, (3) the power-influence approach, (4) the situational approach, and (5) the integrative approach. Each approach is described briefly in the following sections. Trait Approach One of the earliest approaches for studying leadership was the trait approach. This approach emphasizes attributes of leaders such as personality, motives, values, and skills. Underlying this approach was the assumption that some people are natural leaders, endowed with certain traits not possessed by other people. Early leadership theories attributed managerial success to extraordinary abilities such as tireless energy, penetrating intuition, uncanny foresight, and irresistible persuasive powers. Hundreds of trait studies conducted during the 1930s and 1940s sought to discover these elusive qualities, but this massive research effort failed to fnd any traits that would guarantee leadership success. One reason for the failure was a lack of attention to mediating variables in the causal chain that could explain how traits could affect a delayed outcome such as group performance or leader advancement. The predominant research method was to look for a signifcant correlation between individual leader attributes and a criterion of leader success, without examining any explanatory processes. However, as evidence from better designed research slowly accumulated over the years, researchers made progress in discovering how leader attributes are related to leadership behavior and effectiveness. A more recent trait approach examines leader values that are relevant for explaining ethical leadership. Behavior Approach The behavior approach began in the early 1950s after many researchers became discouraged with the trait approach and began to pay closer attention to what managers actually do on the job. One line of research examines how managers spend their time and the typical pattern of activities, responsibilities, and functions for managerial jobs. Some of the research also investigates how managers cope with demands, constraints, and role conflicts in their jobs. Most research on managerial work uses descriptive methods of data collection such as direct observation, diaries, job description questionnaires, and anecdotes obtained from interviews. Although this research was not designed to directly assess effective leadership, it provides useful insights into this subject. Leadership effectiveness depends in part on how well a manager resolves role conflicts, copes with demands, recognizes opportunities, and overcomes constraints. Another subcategory of the behavior approach focuses on identifying leader actions or decisions with observable aspects and relating them to indicators of effective leadership. The preferred research method involves a survey feld study with a behavior description questionnaire. In the past 50 years, hundreds of survey studies examined the correlation between leadership behavior and various indicators of leadership effectiveness. A much smaller number of studies used laboratory experiments, feld experiments, or critical incidents to determine how effective leaders differ in behavior from ineffective leaders. Power-Influence Approach Power-influence research examines influence processes between leaders and other people. Like most research on traits and behavior, some of the power-influence research takes a leader-centered perspective with an implicit assumption that causality is unidirectional (leaders act and followers react). This research seeks to explain leadership effectiveness in terms of the amount and type of power possessed by a leader and how power is exercised. Power is viewed as important not only for EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 37 influencing subordinates, but also for influencing peers, superiors, and people outside the organization, such as clients and suppliers. The favorite methodology has been the use of survey questionnaires to relate leader power to various measures of leadership effectiveness. Other power-influence research used questionnaires and descriptive incidents to determine how leaders influence the attitudes and behavior of followers. The study of influence tactics can be viewed as a bridge linking the power-influence approach and the behavior approach. The use of different influence tactics is compared in terms of their relative effectiveness for getting people to do what the leader wants. Participative leadership is concerned with power sharing and empowerment of followers, but it is frmly rooted in the tradition of behavior research as well. Many studies used questionnaires to correlate subordinate perceptions of participative leadership with the criteria of leadership effectiveness such as subordinate satisfaction, effort, and performance. Laboratory and feld experiments compared autocratic and participative leadership styles. Finally, descriptive case studies of effective managers examined how they use consultation and delegation to give people a sense of ownership for decisions. Situational Approach The situational approach emphasizes the importance of contextual factors that influence leadership processes. Major situational variables include the characteristics of followers, the nature of the work performed by the leader’s unit, the type of organization, and the nature of the external environment. This approach has two major subcategories. One line of research is an attempt to discover the extent to which leadership processes are the same or unique across different types of organizations, levels of management, and cultures. The primary research method is a comparative study of two or more situations. The dependent variables may be managerial perceptions and attitudes, managerial activities and behavior patterns, or influence processes. The other subcategory of situational research attempts to identify aspects of the situation that “moderate” the relationship of leader attributes (e.g., traits, skills, behavior) to leadership effectiveness. The assumption is that different attributes will be effective in different situations, and that the same attribute is not optimal in all situations. Theories describing this relationship are sometimes called “contingency theories” of leadership. A more extreme form of situational theory (“leadership substitutes”) identifes the conditions that can make hierarchical leadership redundant and unnecessary. Integrative Approach An integrative approach involves more than one type of leadership variable. In recent years, it has become more common for researchers to include two or more types of leadership variables in the same study, but it is still rare to fnd a theory that includes all of them (i.e., traits, behavior, influence processes, situational variables, and outcomes). An example of the integrative approach is the self-concept theory of charismatic leadership, which attempts to explain why the followers of some leaders are willing to exert exceptional effort and make personal sacrifces to accomplish the group objective or mission. Level of Conceptualization for Leadership Theories Another way to classify leadership theories is in terms of the “level of conceptualization” or type of constructs used to describe leaders and their influence EKREM INCE ekremince@gmail.com University of London 38 Topic 1 INTRODUCTION TO LEADERSHIP on others. Leadership can be described as (1) an intra-individual process, (2) a dyadic process, (3) a group process, or (4) an organizational process. The levels can be viewed as a hierarchy, as depicted in Figure 2.3. What level is emphasized will depend on the primary research question, the type of criterion variables used to evaluate leadership effectiveness, and the type of mediating processes used to explain leadership influence. Typical research questions for each level are listed in Table. The four levels of conceptualization, and their relative advantages and disadvantages, are described next. Figure 2.3 Figure 1.3 Levels of Conceptualization for Leadership Processes Intra-Individual Processes Because most defnitions of leadership involve influence processes between individuals, leadership theories that describe only leader attributes are rare. Nevertheless, a number of researchers used psychological theories of personality traits, values, skills, motivation, and cognition to explain the decisions and behavior of an individual leader. Roles, behaviors, or decision styles are also used for describing and comparing leaders. Examples can be found in theories about the nature of managerial work and the requirements for different types of leadership positions. Individual traits and skills are also used to explain a person’s motivation to seek power and positions of authority (see Chapter 6), and individual values are used to explain ethical leadership and the altruistic use of power (see Chapter 13). Knowledge of intra-individual processes and taxonomies of leadership roles, behaviors, and traits provide insights that are helpful for developing better theories of effective leadership. However, the potential contribution of the intra-individual approach to leadership is limited, because it does not explicitly include what most theorists consider to be the essential process of leadership, namely influencing others such as subordinates, peers, bosses, and outsiders. Dyadic Processes The dyadic approach focuses on the relationship between a leader and another individual who is usually a subordinate or another type of follower. The need to influence direct reports is shared by leaders at all levels of authority from chief executives to department managers and work crew supervisors. The explanation of leader influence is usually in terms of how the leader causes the subordinate to be more motivated and more capable of accomplishing task assignments. These theories usually focus on leadership behavior as the source of influence, and on changes in the attitudes, motivation, and behavior of an individual subordinate as the influence process. Reciprocal influence between the leader and follower may be EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 39 Intra-Individual Theories • How leader traits and values influence leadership behavior • How leader skills are related to leader behavior • How leaders make decisions • How leaders manage their time • How leaders are influenced by role expectations and constraints • How leaders react to feedback and learn from experience • How leaders can use self-development techniques Dyadic Theories • How a leader influences subordinate motivation and task commitment • How a leader facilitates the work of a subordinate • How a leader interprets information about a subordinate • How a leader develops a subordinate’s skills and confdence • How a leader influences subordinate loyalty and trust • How a leader uses influence tactics with a subordinate, peer, or boss • How a leader and a subordinate influence each other • How a leader develops a cooperative exchange relationship with a subordinate Group-Level Theories • How different leader-member relations affect each other and team performance • How leadership is shared in the group or team • How leaders organize and coordinate the activities of team members • How leaders influence cooperation and resolve disagreements in the team or unit • How leaders influence collective efcacy and optimism for the team or unit • How leaders influence collective learning and innovation in the team or unit • How leaders influence collective identifcation of members with the team or unit • How unit leaders obtain resources and support from the organization and other units Organizational-Level Theories • How top executives influence members at other levels • How leaders are selected at each level (and implications of the process for the frm) • How leaders influence organizational culture • How leaders influence the efciency and the cost of internal operations • How leaders influence human relations and human capital in the organization • How leaders make decisions about competitive strategy and external initiatives • How conflicts among leaders are resolved in an organization • How leaders influence innovation and major change in an organization Table 1.3 Research Questions at Different Levels of Conceptualization included in the theory, but it is usually less important than the explanation of leader influence over the follower. Since real leaders seldom have only a single subordinate, some assumptions are necessary to make dyadic explanations relevant for explaining a leader’s influence on the performance of a group or work unit. One assumption is that subordinates have work roles that are similar and independent. Subordinates may not be homogeneous EKREM INCE ekremince@gmail.com University of London 40 Topic 1 INTRODUCTION TO LEADERSHIP with regard to skills and motives, but they have similar jobs. There is little potential for subordinates to affect each other’s job performance, and group performance is the sum of the performances by individuals. An example of minimum interdependence is a district sales unit in which sales representatives work separately and independently of each other and sell the same product in different locations or to different customers. However, when there is high interdependence among group members, a high need for collective learning, and strong external dependencies, a group-level theory is needed to explain how leadership can influence group performance. The dyadic theories do not include some leadership behaviors that are necessary to facilitate collective performance by a team or organization. Moreover, some of the dyadic behaviors that are effective in terms of dyadic influence will be ineffective with regard to team performance or organizational performance. For example, attempts to develop a closer relationship with one subordinate (e.g., by providing more benefts) may be dysfunctional if they create perceptions of inequity by other subordinates. Efforts to empower individual subordinates may create problems when it is necessary to have a high degree of coordination among all of the subordinates. The extra time needed by a leader to maximize performance by an individual subordinate (e.g., providing intensive coaching) may be more effectively used to deal with problems that involve the team or work group (e.g., obtaining necessary resources, facilitating cooperation and coordination). Another limitation of most dyadic theories is inadequate attention to the context. In most dyadic theories of effective leadership, aspects of the situation are likely to be treated as moderator variables that constrain or enhance leader influence on individual subordinates. The dyadic theories underestimate the importance of the context for determining what type of leadership is necessary to enhance collective performance by multiple subordinates. Group Processes When effective leadership is viewed from a group-level perspective, the focus is on the influence of leaders on collective processes that determine team performance. The explanatory influence processes include determinants of group effectiveness that can be influenced by leaders, and they usually involve all members of a group or team, not only a single subordinate. Examples of these collective explanatory processes include how well the work is organized to utilize personnel and resources, how committed members are to perform their work roles effectively, how confdent members are that the task can be accomplished successfully (“potency”), and the extent to which members trust each other and cooperate in accomplishing task objectives. The leadership behaviors identifed in dyadic theories are still relevant for leadership in teams, but other behaviors are also important. Behavioral theories describing leadership processes in various types of groups and teams are discussed in Chapter 10, and leadership in executive teams is discussed in Chapter 11. Much of a manager’s time is spent in formal and informal meetings, and the leadership processes that make group meetings more effective are also described in Chapter 10. Another key research question in the group approach is to explain why some members are more influential than others, and how leaders are selected. An example of a theory dealing with these questions is the “social exchange theory” discussed in Chapter 8. As compared to the dyadic theories, most group-level theories provide a much better explanation of effective leadership in teams with interactive members, but these theories also have limitations. The need to describe leader influence on member motivation is usually recognized, but the theory may not include psychological EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 41 processes that are useful for explaining this influence. The need to influence people and processes outside of the team is usually recognized, but external relationships are usually viewed from the perspective of the team. The focus is on the efforts of leaders to improve team performance (e.g., by getting more resources), but the implications of leader actions for other subunits or the larger organization are seldom explicitly considered. Shared leadership is more likely to be included in a group-level theory than in a dyadic theory, but distributed leadership by multiple formal leaders is seldom explicitly included, even though it is common in some types of teams (e.g., military combat units with a commander and an executive ofcer). Organizational Processes The group approach provides a better understanding of leadership effectiveness than dyadic or intra-individual approaches, but it has some important limitations. A group usually exists in a larger social system, and its effectiveness cannot be understood if the focus of the research is limited to the group’s internal processes. The organizational level of analysis describes leadership as a process that occurs in a larger “open system” in which groups are subsystems (Fleishman et al., 1991; Katz & Kahn, 1978; Mumford, 1986). The survival and prosperity of an organization depends on adaptation to the environment and the acquisition of necessary resources. A business organization must be able to market its products and services successfully. Adaptation is improved by anticipating consumer needs and desires, assessing the actions and plans of competitors, evaluating likely constraints and threats (e.g., government regulation, input scarcity, hostile actions by enemies), and identifying marketable products and services that the organization has unique capabilities to provide. Some examples of activities relevant for adaptation include gathering and interpreting information about the environment, identifying threats and opportunities, developing an effective strategy for adapting to the environment, negotiating agreements that are favorable to the organization, influencing outsiders to have a favorable impression of the organization and its products, and gaining cooperation and support from outsiders upon whom the organization is dependent. These activities are aspects of “strategic leadership.” Survival and prosperity also depend on the efciency of the transformation process used by the organization to produce its products and services. Efciency is increased by fnding more rational ways to organize and perform the work, and by deciding how to make the best use of available technology, resources, and personnel. Some examples of leadership responsibilities include designing an appropriate organizational structure, determining authority relationships, and coordinating operations across specialized subunits of the organization. Strategic leadership in organizations is described in Chapter 11. As compared to dyadic or group-level theories of leadership, organization-level theories usually provide a better explanation of fnancial performance. Distributed leadership is less likely to be ignored in an organization-level theory, because it is obvious that an organization has many designated leaders whose actions must be coordinated. Management practices and systems (e.g., human resource management, operations management, strategic management) are also ignored or downplayed in dyadic and team leadership theories, but in theories of organizational leadership the need to integrate leading and managing is more obvious (Yukl & Lepsinger, 2004). More attention is likely for subjects such as organizational structure and culture, organizational change, executive succession, and influence processes between the CEO and the top management team or board of directors. A limitation of most theories of organizational leadership is that they do not explain influence EKREM INCE ekremince@gmail.com University of London 42 Topic 1 INTRODUCTION TO LEADERSHIP processes for individual leaders (except sometimes for the chief executive), or influence processes within teams (except in some cases the top-management team). Multi-level Theories Multi-level theories include constructs from more than one level of explanation (Klein, Dansereau, & Hall, 1994; Rousseau, 1985). For example, the independent and dependent variables are at the same level of conceptualization, but moderator variables are at a different level. An even more complex type of multi-level theory may include leader influence on explanatory processes at more than one level and reciprocal causality among some of the variables. Multi-level theories of effective leadership provide a way to overcome the limitations of single-level theories, but it is very difcult to develop a multi-level theory that is parsimonious and easy to apply. The level of conceptualization has implications for the measures and methods of analysis used to test a theory, and multi-level theories are usually more difcult to test than single-level theories (Yammarino, Dionne, Chun, & Dansereau, 2005). Despite the difculties, there is growing interest in developing and testing multi-level theories of leadership. Other Bases for Comparing Leadership Theories Key variables and level of conceptualization are not the only ways to compare leadership theories. This section briefly describes three other types of distinctions commonly used in the leadership literature: (1) leader-centered versus follower-centered theory, (2) universal versus contingency theory, and (3) descriptive versus prescriptive theory. Each type of distinction is better viewed as a continuum along which a theory can be located, rather than as a sharp dichotomy. For example, it is possible for a theory to have some descriptive elements as well as some prescriptive elements, some universal elements as well as some contingency elements, and an equal focus on leaders and followers. Leader-Centered or Follower-Centered Theory The extent to which a theory is focused on either the leader or followers is another useful way to classify leadership theories. Most leadership theories emphasize the characteristics and actions of the leader without much concern for follower characteristics. The leader-focus is strongest in theory and research that identifes traits, skills, or behaviors that contribute to leader effectiveness. Most of the contingency theories (in Chapter 7) also emphasize leader characteristics more than follower characteristics. Only a small amount of research and theory emphasizes characteristics of the followers. Empowerment theory describes how followers view their ability to influence important events (see Chapter 5). Attribution theory describes how followers view a leader’s influence on events and outcomes, and other theories in the same chapter explain how followers can actively influence their work role and relationship with the leader, rather than being passive recipients of leader influence. The leader substitutes theory (see Chapter 7) describes aspects of the situation and follower attributes that make a hierarchical leader less important. The emotional contagion theory of charisma (see Chapter 12) describes how followers influence each other. Finally, theories of self-managed groups emphasize sharing of leadership functions among the members of a group; in this approach, the followers are also the leaders (see Chapter 10). Theories that focus almost exclusively on either the leader or the follower are less useful than theories that offer a more balanced explanation, such as some of the EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 43 theories in Chapters 7, 10, 11, and 12. Most theories of leader power (Chapter 8) emphasize that influence over followers depends on follower perceptions of the leader as well as on objective conditions and the leader’s influence behavior. Descriptive or Prescriptive Theory Another important distinction among leadership theories is the extent to which they are descriptive or prescriptive. Descriptive theories explain leadership processes, describe the typical activities of leaders, and explain why certain behaviors occur in particular situations. Prescriptive theories specify what leaders must do to become effective, and they identify any necessary conditions for using a particular type of behavior effectively. The two perspectives are not mutually exclusive, and a theory can have both types of elements. For example, a theory that explains why a particular pattern of behavior is typical for leaders (descriptive) may also explain which aspects of behavior are most effective (prescriptive). However, the two perspectives are not always consistent. For example, the typical pattern of behavior for leaders is not always the optimal one. A prescriptive theory is especially useful when a wide discrepancy exists between what leaders typically do and what they should do to be most effective. Universal or Contingency Theory A universal theory describes some aspect of leadership that applies to all types of situations, and the theory can be either descriptive or prescriptive. A descriptive universal theory may describe typical functions performed to some extent by all types of leaders, whereas a prescriptive universal theory may specify functions all leaders must perform to be effective. A contingency theory describes some aspect of leadership that applies to some situations but not to others, and these theories can also be either descriptive or prescriptive. A descriptive contingency theory may explain how leader behavior varies from one situation to another, whereas a prescriptive contingency theory describes effective behavior in a specifc situation. The distinction between universal and contingency theories is a matter of degree, not a sharp dichotomy. Some theories include both universal and situational aspects. For example, a prescriptive theory may specify that a particular type of leadership is always effective but is more effective in some situations than in others. Even when a leadership theory is initially proposed as a universal theory, limiting and facilitating conditions are usually found in later research on the theory. Summary Leadership has been defned in many different ways, but most defnitions share the assumption that it involves an influence process for facilitating the performance of a collective task. Otherwise, the defnitions differ in many respects, such as who exerts the influence, the intended benefciary of the influence, the manner in which the influence is exerted, and the outcome of the influence attempt. Some theorists advocate treating leading and managing as separate roles or processes, but the proposed defnitions do not resolve important questions about the scope of each process and how they are interrelated. No single, “correct” defnition of leadership covers all situations. What matters most is how useful the defnition is for increasing our understanding of effective leadership. Most researchers evaluate leadership effectiveness in terms of the consequences for followers and other organization stakeholders, but the choice of outcome variables EKREM INCE ekremince@gmail.com University of London 44 Topic 1 INTRODUCTION TO LEADERSHIP has differed considerably from researcher to researcher. Criteria differ in many important respects, including how immediate they are, and whether they have subjective or objective measures. When evaluating leadership effectiveness, multiple criteria should be considered to deal with these complexities and the different preferences of various stakeholders. Leadership has been studied in different ways, depending on the researcher’s methodological preferences and defnition of leadership. Most researchers deal only with a narrow aspect of leadership, and most empirical studies fall into distinct lines of research such as the trait, behavior, power, and situational approaches. In recent years, there has been an increased effort to cut across and integrate these approaches. Level of analysis is another basis for classifying leadership theory and research. The levels include intra-individual, dyadic, group, and organizational. Each level provides some unique insights, but more research is needed on group and organizational processes, and more integration across levels is needed. Another basis for differentiating theories is the relative focus on leader or follower. For many years, the research focused on leader characteristics and followers were studied only as the object of leader influence. A more balanced approach is needed, and some progress is being made in that direction. Leadership theories can be classifed as prescriptive versus descriptive, according to the emphasis on “what should be” rather than on “what occurs now.” A fnal basis for differentiation (universal versus contingency) is the extent to which a theory describes leadership processes and relationships that are similar in all situations or that vary in specifed ways across situations. Key Terms behavior approach dyadic processes power-influence approach contingency theories follower-centered theory prescriptive theory criteria of leadership effectiveness integrative approach shared influence process delayed effects leader-centered theory situational approach descriptive theory level of conceptualization specialized leadership role mediating variable trait approach Yukl. Original materials from Leadership in organizations © copyright 2013 Pearson. All rights reserved. EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 45 QUICK QUIZ If you feel ready, please attempt the following quiz. Don’t worry if there are some questions you can’t answer - you can always try again later. EKREM INCE ekremince@gmail.com University of London 46 Topic 1 INTRODUCTION TO LEADERSHIP SELF-ASSESSMENT EXERCISES Attempt the following exercises. If you have understood the reading you should be able to answer these questions competently. A model answer is available for each question, but try to answer on your own frst. Your responses won’t match the model answers exactly, but you should compare your performance with the model and consider whether you took into account all the relevant factors. Rate your performance honestly. If you haven’t performed as well as you hoped, you may need to go over parts of the chapter again. The self-assessment exercises should help you to clarify your own understanding of the different ways in which leadership has been defned and why these differences exist. You should be able identify leadership defnitions and point to the types of research question to which these defnitions give rise. EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 47 REFLECTIVE EXERCISE Building your self-awareness as a leader We have explored the concept of leadership and seen the complexities involved in both defning it and judging its effectiveness. It is clear that there is no agreement in the literature about which of the many traits/behaviours associated with leadership are essential. Very few people possess all the traits and it follows that having all of them is not a requirement of good leadership. Traits alone do not make a leader: the situation is important. Each person must consider their own strengths and capabilities, and the situation in which they are operating. Reflection Compare the characteristics that you know you possess to the fnal list developed within your discussion group exercise. Which traits/characteristics do you possess; which do you not? Reasons Now consider what you might do to change the list of leadership traits/characteristics. Alternatives With the traits/characteristics that you have, in which situations will you fnd a better ’ft’ as a leader? EKREM INCE ekremince@gmail.com University of London 48 Topic 1 INTRODUCTION TO LEADERSHIP DISCUSSION ACTIVITY EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 49 Spend no longer than fve minutes making a shortlist of as many traits, behaviours and characteristics that you think good leaders must have. (A useful way to begin is by completing the phrase: ‘A good leader must/should/do/be . . .’.) Share your thoughts in the discussion forumand review what others have on their lists. In your group, consolidate a fnal list of 7-10 characteristics that your group feels are essential (those that ‘make or break’ a leader). Discuss in your group: • Which leaders that you’ve seen or encountered (either personally or through media accounts) have characteristics that match those on the list? • Do you know of any effective leader who lacks one or more of the characteristics? Do you think these characteristics are essential to that person’s effectiveness? (Adapted from Nahavandi, Chapter 1) EKREM INCE ekremince@gmail.com University of London 50 Topic 1 INTRODUCTION TO LEADERSHIP PORTFOLIO ACTIVITY Portfolio activity instructions One of the goals of the Successful leadership module - indeed, all the modules in the Leadership specialism - is to help you with your own leadership development. The work you do in developing yourself as a leader will help you to transition careers, advance within your sector or industry and/or rise to the top of your current organisation. A key component to your development as a leader is the work you will do for the summative assessment you submit for this module. In addition to a research paper in the feld, which will be the coursework for this module, you will compile a Portfolio to which you will contribute throughout this module. This will take the place of an examination at the end of the module. Each topic of the module contains work that is required for your Portfolio and, as it is all cumulative, it is imperative that you approach this work in stages. Format Use a Word processor to create your portfolio. Please note that you should submit your Portfolio as one document in PDF format. You can either save your completed portfolio in PDF format in your Word processor or you can use one of many free online converters to accomplish this. Please check the ‘Introduction to your assessment’ tutorial in the ‘Getting started’ section on the VLE to learn how to submit your Portfolio. Your Portfolio should include a section for each of the items you include in the table of contents. Each section should be clearly labelled, either with a title page or with a distinct header. Page breaks should be used to clearly mark the beginning and end of each section. The table of contents of the portfolio should be: 1. Identifcation (your name and student number) 2. Topic 1: Introduction to Leadership Because your portfolio should be an ongoing exercise that you work on as you progress through your module, the task for each section of the portfolio is provided within each topic of the module. Portfolio activity Topic 1 In this section of the portfolio you should be beginning to work with the defnitions of leadership that you have studied and using these as base to reflect upon yourself as a leader. First, begin with some work on your own self-awareness. Using online resources, complete a personality-type analysis of yourself (e.g. MBTI, there are a variety of these available - choose one). Put the results of this into your portfolio along with a description of what this result means, as you understand it. Second, take your personality test result and create an analysis of your strengths and the areas where you feel you need to develop for leadership. You should be referencing which aspects of a good leader you have identifed as important in your discussion group exercise and buttressing this with reference from your readings/resources. EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 51 Note: before you undertake this analysis, you may fnd it useful to read more about personality assessments generally (http://theconversation.com/why-workplaces-must-resist-the-cult-of-personality-testing-5540), as well as the MBTI particularly (http://www.bbc.com/news/magazine-18723950 or http://www.myersbriggs.org/my-mbti-personality-type/mbti-basics/ or https://www.ft.com/content/8790ef0a-d040-11e5-831d-09f7778e7377). The goal of this exercise is not to adjudge better or worse tendencies or preferences but rather to explore the use of one commonly-employed tool to identify personal type preferences. You should be aware that this identifcation is not absolute nor static - much can and does change over the course of our lives, so too do our inclinations and preferences. In the context of leadership studies, your understanding of some of your inclinations and preferences should help you in your own development as a leader. Personality tests, by their very nature, are restrictive in their validity and use. They attempt to distinguish the robust variety of people into, as in the MBTI, 16 personal types - they are subject to criticisms of reliability and falsifability (among others). One of the assumptions of these tests is that we all have clear preferences between two (or more) alternatives, whereas we all understand that we can waver in our responses (both in the instance and over the course of time, long or short). They do not assess our skills or competencies, but rather our personal preferences and tendencies, so we are warned away from using them as selection tools. EKREM INCE ekremince@gmail.com University of London 52 Topic 1 INTRODUCTION TO LEADERSHIP TOPIC SUMMARY Topic summary video EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 53 FURTHER READING AND RESOURCES Further readings for this topic are: Alvesson, M. and S. Sveningsson ‘The great disappearing act: difculties in doing “leadership”’, Leadership Quarterly 14 2003, pp. 359-81. Bennis, W.G. and J. O’Toole, ‘How business schools lost their way’, Harvard Business Review May 2005, pp. 96-104. Kaiser, R. B., R. Hogan and S. B. Craig ‘Leadership and the fate of organizations’, American Psychologist 63 2008, pp. 93-110. Labarre, P. ‘Marcus Buckingham thinks your boss has an attitude problem’, Fast Company August 2001, pp. 88-98. Luthans, F. ‘Successful vs. effective real managers’, Academy of Management Executive 2(2) 1989, pp. 127-32. Mintzberg, H. ‘The best leadership is good management’, Business Week 6 August 2009. Watkins, M.D. ‘How managers become leaders’, Harvard Business Review June 2012. Yukl, G. Leadership in organizations. (Harlow: Pearson, 2013) 8th edition. Chapter 2 ‘Managerial roles and decisions’, pp. 39-51. • TED talks: Fields Wicker-Miurin: Learning from leadership’s missing manual: www.ted.com/talks/felds_wicker_miurin_learning_from_leadership_s_missing_manual • TED talks: Patrick Awuah: How to educate leaders? Liberal arts: www.ted.com/talks/patrick_awuah_on_educating_leaders Further reading will deepen your understanding in some areas but it is not required in order to pass the module. You may wish to consult the reading suggested here or others that you fnd, but please note that we cannot guarantee that further reading will be accessible to you and we do not undertake to supply it via the Online Library. EKREM INCE ekremince@gmail.com University of London 54 Topic 1 INTRODUCTION TO LEADERSHIP PROGRESS LOG We recommend that you now complete your topic progress log. This should allow you to monitor and assess your progress and your understanding of the topic before you move on. EKREM INCE ekremince@gmail.com University of London Topic 1 INTRODUCTION TO LEADERSHIP 55 Topic Topic Objectives How confdent are you? Completely confdent Partially confdent Unsure Topic 1: Introduction to Leadership Date 1.1 Defne leadership and leadership effectiveness. 1.2 Discuss effective leadership and identify its major obstacles. 1.3 Compare and contrast leadership and management. 1.4 Summarise the debate over the role and impact of leadership in organisations. EKREM INCE ekremince@gmail.com University of London  Topic 3 LEADERSHIP ENVIRONMENTS Topic introduction video Key concepts This topic includes: • discussion of upper-echelon leadership versus the micro-level (or small group level) where the emphasis is on organisational strategic leadership • review of individual characteristics of strategic leadership and an analysis of these leaders along two axes: the need for control and challenge-seeking behaviour • analysis of culture and gender in strategic leadership and its associated issues • juxtaposition of power/influence and accountability that is present (or not) in upper-echelon management • specifc attention to the particular case of non-proft organisations and the challenges that these raise for leaders • review of the different skills and strengths required across a spectrum of organisational settings. Topic objectives After completing the study of this topic you should be able to: 1. differentiate between micro and upper-echelon leadership and describe the domain and roles of strategic leaders 2. list the individual characteristics of strategic leaders and consider the role of culture in a critical analysis of strategic leadership 3. explain how top-level managers affect their organisation 4. analyse the unique challenges of leadership in non-proft organisations EKREM INCE ekremince@gmail.com University of London 158 Topic 3 LEADERSHIP ENVIRONMENTS MINI LECTURE undefned EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 159 ESSENTIAL READING The Essential reading for this topic is: • Nahavandi, A. The art and science of leadership. (Harlow: Pearson, 2015) 7th, global edition. Chapter 7 Other leadership perspectives. • Yukl, G. Leadership in organizations. (Harlow: Pearson, 2013) 8th edition. Chapter 11 Strategic leadership. When you are reading through these chapters, pay particular attention to the following key points: • The complexity of the issues with which strategic leaders are confronted as opposed to those at micro-levels. • The distinction between the four different types of strategic leader and the preferences they demonstrate for the direction and management of their organisation. • How strategic leaders exert their influence. • The thorny issues of accountability which are ever-present in media reports today. • The different emphases required of strategic leaders in non-proft organisations. • How the study of strategic leadership brings different and novel research questions to the study of leadership generally. Remember that all the essential reading for this programme is provided for you. Click the link (which may take you to the Online Library where you can search for a journal article) or click ‘next’ to go to the next page and start reading. Upper Echelon and Leadership of Nonprofts EKREM INCE ekremince@gmail.com University of London 160 Topic 3 LEADERSHIP ENVIRONMENTS CHAPTER 7 OTHER LEADERSHIP PERSPECTIVES The art and science of leadership 7th edition, Afsaneh Nahavandi. Original materials from The art and science of leadership © copyright 2015 Pearson. All rights reserved. Upper Echelon and Leadership of Nonprofts After studying this chapter, you will be able to: 1. Differentiate between micro and upper-echelon leadership and describe the domain and roles of strategic leaders. 2. List the individual characteristics of strategic leaders and consider the role of culture. 3. Explain how top-level managers affect their organization. 4. Analyze the unique challenges of leadership in nonprofit organizations. THE LEADERSHIP QUESTION Do you think there is a difference between leaders at different levels of the organization and in different organizations? Besides size and number of people who report to you, is leadership fundamentally different at top and lower levels or in different organizations? When we talk about leadership, we are likely to refer to people who are at the top of their organizations; CEOs, city mayors, school principals, community leaders, and so forth. Based on the amount of attention given to top executives, one can deduce that we clearly believe the top leader of an organization is important. However, the academic research about top leaders’ impact on organizational elements such as performance, culture, strategy, and structure is relatively new. With the exception of some of the leadership models discussed in Chapter 6, none of the leadership theories presented so far directly addresses the role and impact of upper-echelon leaders; most apply to supervisors, team leaders, and mid-level managers who lead smaller groups and departments. This chapter will explore the differences between mid-level (micro) and upper-echelon (macro) strategic leadership and consider the individual characteristics of strategic leaders and the processes through which they affect their organization. We will also address the special characteristics of nonproft organizations and some of the challenges their leaders face. DEFINITION AND ROLE OF UPPER-ECHELON LEADERS Leadership in many organizations has become highly centralized with considerable power concentrated in the hands of top-level or upper-echelon (UP) leaders (Pearce and Manz, 2011). It is therefore important to gain an understanding of the particular characteristics and impact that UP leaders can have. We call UP leaders strategic leaders because they shape the whole organization. Strategic leadership involves a leader’s ability to consider and anticipate external and internal events and maintain flexibility and a long-term perspective in order to guide the organization. Research shows that CEOs impact the direction an organization takes, its strategy, and its performance (see Finkelstein and Hambrick, 1996; Hambrick, 2007; and EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 161 Hambrick and Mason, 1984). For example, CEO’s style can impact frm performance directly (Carmeli, Schaubroeck, and Tishler, 2011; Mackey, 2008) or indirectly through employee attitude (Wang et al., 2011), or affect the adoption of diversity strategies (Ng and Sears, 2012). CEOs can also play a key role in corruption and power abuse (Ashford and Anand, 2003), and the link between CEO narcissism and frm strategy and performance has also been explored (Chatterjee and Hambrick, 2007). Many of the leadership concepts and processes presented in previous chapters operate regardless of the level of the leader. For example, the basic defnition of leadership and leadership effectiveness can be transferred from small groups to upper echelons with only minor adjustments. UP leaders are still the people who guide others in goal achievement, and their effectiveness depends on maintaining internal health and external adaptability. Therefore, the major differences between micro and macro leadership are not in the nature of the process, but rather in the level and scope of leadership (see Table 7.1 for a summary). Table 7.1 Differences Between Micro and Strategic Leadership Micro (Group) Upper-Echelon - Strategic Who is the leader? One person heading a group, team, or department A person heading a whole organization with a variety of titles (president, CEO, COO); top management team (TMT); governance body such as board of directors What is the scope? Small group, team, or department Entire organization Where is the primary focus? Internal Internal and external What are the effectiveness criteria? Productivity; quality; employee satisfaction and motivation; turnover; absenteeism Stock prices and other fnancial measures; overall performance; stakeholder satisfaction One of the frst differences between micro and strategic leadership involves identifying who the leader is. In the case of micro leadership, the person leading the group, team, or department is clearly the leader. In the case of UP leadership the issue is not that simple (O’Reilly et al., 2010). The leader of a business organization might be the president, chief executive ofcer (CEO), or chief operating ofcer (COO), or a top management team (TMT) made up of division heads and vice presidents. In some cases, such as nonprofts, the relevant strategic leadership may be a governance body such as the board of directors, board of regents, or supervisors. Any of these individuals or groups might be the senior executives who make strategic choices for the organization. A second difference in leadership at the two levels is the scope of the leader’s impact. Whereas most micro leaders are concerned with small groups, departments, or teams, upper-echelon leaders have jurisdiction over entire organizations that include many smaller groups and departments. Because of this broader scope, UP leaders have discretion and power over many decisions. Alan Mulally, president and CEO of Ford Motor, describes his job as a top-level leader as one where he has to connect talented people to the bigger purpose of the organization and encourage them to achieve their goals (Bryant, 2009f). James E. Rogers, CEO of Duke Energy, similarly EKREM INCE ekremince@gmail.com University of London 162 Topic 3 LEADERSHIP ENVIRONMENTS believes that top leaders should have awareness of what all employees are going through so that they can tell the story regarding what the organization is doing (Bryant, 2009h). A third difference between the two groups is their focus. The micro leaders’ focus is typically internal to the organization and includes factors that affect their teams or departments. Part of their job may involve dealing with external constituents, as may be the case with a customer representative or a sales manager, or they might be under pressure to take on a more strategic view, even in their small department. They, however, generally do not need an external view to perform their job. In comparison, the job of the upper-echelon leader requires almost equal attention to internal and external factors. Dealing with outside constituents, whether they are stockholders, governmental agencies and ofcials, or customers and clients, is central to the function of executives. Alan Mulally of Ford says, “The more senior your management position is, the more important it is to connect the organization or the project to the outside world” (Bryant, 2009f). The effectiveness criteria are also different for the two groups. Although, in a general sense, they are both effective when they achieve their goals, micro leaders focus on department productivity, quality of products and services, and employee morale. Effectiveness for the upper-echelon leader is measured by overall organizational performance, stock prices, and satisfaction of outside constituents. The hospital administrator has to integrate internal productivity issues with overall performance. The CEO of a major corporation does not focus on turnover of employees as a measure of effectiveness. Instead, the criteria are likely to be return on investment and the corporation’s growth. Strategic Forces The six strategic forces depicted in Figure 7.1 are the primary domain of strategic leadership (Malekzadeh, 1995). Culture is defned as a common set of beliefs and assumptions shared by members of an organization (Schein, 2010). Structure comprises the basic design dimensions (centralization, formalization, integration, and span of control) that organize the human resources of an organization (Pugh et al., 1968). Strategy addresses how the organization will get where it wants to go - how it will achieve its goals. The environment includes all the outside forces that may potentially shape the organization. Technology is the process by which inputs are transformed into outputs, and leadership includes managers and supervisors at all levels. EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 163 Figure 7.1 The Domain of Strategic Leaders: The Six Strategic Forces Any strategic effort requires the UP leaders to understand each of forces and how they are interrelated and to create a balance and ft among them. They must know their external environment and understand culture at all levels; they must know the leadership of their organization and its structure and technology and devise or implement strategies that accomplish their goals. When leaders understand the forces and create a good ft, the organization has a greater potential to be effective (Nahavandi and Malekzadeh, 1999). Consider the example of Jagged Edge Mountain Gear (JEMG), a Colorado-based company that specializes in fashionable mountaineering clothing and has become a fxture in the small mountain community of Telluride (Jagged Edge Story, 2013). Twin sisters Margaret and Paula Quenemoen founded the company in 1993 based on the Asian philosophy that focused on the journey and process (Nahavandi and Malekzadeh, 1999: 108-109). JEMG’s goal was to become a nationally recognized competitor in their industry. As the Quenemoens state, however, “We are our own competition. We do what we think is right” (Nahavandi and Malekzadeh, 1999: 108). To achieve their goal, the sisters attracted a group of passionate mountain enthusiasts who perform the many business functions while remaining dedicated to cold-weather, extreme sports. The JEMG owners, managers, and employees worked together and played together. The culture of the organization was informal and exuded the members’ passion for their sports. The structure, although formally stated, remained informal, with a heavy reliance on participation and empowerment. In addition, because of the company’s relative isolation in Telluride, everybody depended on information technology to stay in touch with the marketing division located in Salt Lake City and their suppliers in Massachusetts, Tennessee, and China. The Quenemoens ran JEMG successfully by creating a ft among the six strategic forces. The simultaneous management of the six forces is the essence of strategic management (Malekzadeh, 1995). The UP leader’s role is to balance these various factors and set the direction for the organization. Once a direction is selected, internal forces (e.g., culture, structure, and leadership) come into play once more to move the organization toward its selected path. Role of Strategic Leaders Strategic leaders (CEO or the TMT) are the ones in charge of setting and changing the environment, culture, strategy, structure, leadership, and technology of an organization and motivating employees to implement the decisions. Their role is to EKREM INCE ekremince@gmail.com University of London 164 Topic 3 LEADERSHIP ENVIRONMENTS devise or formulate the vision and strategy for their organization and to implement those strategies; they play the dual role of strategy formulator and implementer (Nahavandi and Malekzadeh, 1993a). If an organization has not drafted a strategy or is looking for major changes and strategic redirection, the UP leaders formulate the direction of the organization based on their reading of the environment. If the organization has a well-established, successful strategy already in place, the leaders’ role is to implement that strategy. The dual role of strategic leaders is depicted in Figure 7.2. Figure 7.2 Dual Role of Strategic Leaders Although UP leaders play a central role in creating and maintaining major organizational elements, their influence often is moderated by a number of organizational and environmental factors. The next section considers these factors. Factors That Moderate the Power of Leaders Upper-echelon leaders do not have unlimited power to impact their organization. The research about the limits of their power comes under the label of managerial or executive discretion and is the subject of considerable research in strategic management (Finkelstein and Hambrick, 1996). Table 7.2 presents the factors that moderate a leader’s discretion. They are divided into external environmental and internal organizational factors. Both sets operate to limit the direct or indirect impact of senior executives on their organization. Table 7.2 Moderators of Executive Discretion External environmental factors Environment uncertainty Type of industry Market growth Legal constraints Internal organizational factors Stability Size and structure Culture Stage of organizational development Presence, power, and makeup of TMT EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 165 External environmental factors Several researchers suggest that the leader’s role becomes more prominent when organizations face an uncertain environment (Gupta, 1988; Hall, 1977; and Hambrick and Finkelstein, 1987). For example, in highly dynamic industries such as high tech or airlines, top managers must scan and interpret their environment actively and make strategic decisions based on their interpretations. The interpretation and the leaders’ actions are essential. Bill George, former CEO of Medtronics and professor of management at Harvard, believes that leadership failure was key to the 2008-2010 economic crisis and that without effective leadership no action can be effective (George, 2009a). External forces include market growth and legal constraints. In fast-growing markets, strategic leaders have considerable discretion to set and change the course of their organization (Haleblian and Finkelstein, 1993). Legal constraints, such as environmental laws, health and safety regulations, and international trade barriers, however, limit the discretion of leaders. In such environments, many of their decisions already are made for them, leaving less room for action. Internal organizational factors When organizations face internal uncertainty, organizational members question existing practices and decisions and rely more heavily on the leader to provide direction and guidance. In routine situations, organizational rules and regulations and a well-established culture in effect become substitutes for leadership (Kerr and Jermier, 1978). One example of a situation in which leaders are heavily relied on would be during a threatened or actual merger. The employees are likely to seek direction from their CEO, whose every word and action will be interpreted as a signal and whose attitude toward the merger will be a role model for the employees. Professor Mike Useem, director of the Center for Leadership and Change at the University of Pennsylvania’s Wharton School of Business, suggests that a leader’s calm and confdence is a key factor in managing during times of crisis (Maruca, 2001). The sense of crisis provides the stage for leaders to increase their impact or to demonstrate charismatic leadership behaviors (see Chapter 6), which influence followers to a high degree. Size and structure are the second set of internal moderators of discretion. The larger an organization is, the more likely it is that decision making is decentralized. As an organization grows, the impact of the top managers on day-to-day operations declines. In small organizations, the desires of a top manager for a certain type of culture and strategy are likely to be reflected in the actual operations of an organization. In large organizations, however, the distance between the leader and other organizational levels and departments leads to a decline in the immediate effect of the leaders. For example, the U.S. Postal Service is one of the largest employers in the United States, with more than 650,000 employees. The postmaster’s influence is diffused through numerous layers of bureaucracy and probably is not felt by local post ofce employees. This fltering also could be one reason it is difcult to change large organizations. Even the most charismatic, visionary leader might have trouble reaching all employees to establish a personal bond and energize them to seek and accept change. One of the causes of internal and external uncertainty is the organization’s life cycle or stage of development (Miller, 1987; Nahavandi and Malekzadeh, 1993a). When an organization is young and in its early stages of development, the impact of a leader’s personality and decisions is pervasive. The personality and style of the leader/entrepreneur are reflected in all aspects of the organization. The younger an organization is, the more likely it is that its culture, strategies, and structure are a reflection of its leader’s preferences. As the organization matures and grows, the EKREM INCE ekremince@gmail.com University of London 166 Topic 3 LEADERSHIP ENVIRONMENTS leader’s influence decreases and is replaced by the presence of a strong culture and a variety of well-established, successful routines. It is often at this stage that the founders of an organization leave and move on to new ventures. The leader’s influence, however, becomes strong once again when the organization faces decline. The lack of success and the perceived need to revitalize the organization increase the reliance on the top managers. They once again have the opportunity to shape the organization. Ford CEO Alan Mulally’s optimism and energy have had considerable impact on a very large organization that was facing decline. Mulally considers inspiring employees at all levels to be one of his top responsibilities. Bill Ford, the previous CEO of Ford who recruited Mulally, understood the power of a leader in times of crisis. He states: “We have good people. They just need a leader who can guide them and inspire them” (Gallo, 2012). Mickey Drexler, current CEO at J. Crew and former chief executive of Gap, Inc., was credited with Gap’s success in the late 1990s. Some even claim that he invented casual chic by providing fashionable clothes at a reasonable cost (Gordon, 2004). He is known for having considerable power. One former Gap employee states, “Mickey is omnipotent. There is nobody who is his equal. There is nobody who is near his equal” (Munk, 1998). Both at Gap and J. Crew, Drexler exercises considerable control over his organization. He believes in paying attention to every detail of the clothing his company sells and says: “I’m very proud to be a micro manager” (Sacks, 2013). Because the Gap was relatively new at the time and was experiencing a revival, Drexler’s influence was pervasive. Another example of the leader’s impact in the early stages of an organization’s life is Oprah Winfrey - the frst African American and the third woman to own a television and flm production studio with more than $300 million in annual revenue; she runs an organization that reflects her high-energy, supportive style. She states: “It’s all about attracting good people. I’ve always tried to surround myself not only with people who are smart but with people who are smarter in ways I am not” (Howard, 2006). The last moderator of power and influence of top managers of an organization is the presence, power, and composition of a TMT and the board of directors (for a review, see Carpenter, Geletkanycz, and Sanders, 2004). As noted at the beginning of the chapter, upper-echelon leadership often involves working within a team; the presence of the team and how it interacts with the CEO has a strong impact on an organization. If an organization does not have a TMT or if it is weak, the impact of its CEO is likely to be more direct. If, on the other hand, the organization is managed by a powerful TMT, such a team will moderate the power and discretion of the individual leader (see the Section “Leadership in Action” case at the end of the chapter for an interesting example). An example of a functioning partnership that increases a leader’s power is the case of Oracle. Part of the success of the company is due to a strong relationship and match between its CEO, Larry Ellison, president, Safra Catz (one of the highest paid business women in 2013), and newly appointed copresident, Mark Hurd. Ellison is techy, extraverted, easily distracted, and a media celebrity. Catz and Hurd are both fnancial people with considerable knowledge of how to run a company (Lashinsky, 2010). Hurd is also a board member. Describing their relationship, one executive says that Safra seldom checks with Ellision on decisions and still follows him to impact the company (Lashinsky, 2009). An interesting twist on the role and power of the TMT is the degree to which the members are similar to the leader and the diversity of the board. In many organizations, the UP leader both selects the members of the boards and often chairs the board (Pearce and Manz, 2011), a factor that makes it unlikely that the board members will either have approaches that are different than that of the CEO or challenge the CEO. Diversity in the board can have both good and bad consequences EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 167 and has an impact on how the company makes decisions (e.g., Jansen and Kristof-Brown, 2006). Many organizations take into account the importance of heterogeneity in the makeup of the TMT or board of directors. Bill Kling, founder and president emeritus of the American Public Media Group, says: “I think every C.E.O. needs an executive team to be balanced to ft their strengths. The key elements, such as strategy, innovation, management, fnance, don’t need to be in any single position - but they need to be there in the executive team. It’s terrifc if you can walk through the halls and say hello by name to every employee. I can’t. It’s terrifc if you can stand up at a staff meeting and do it in a way that people feel really good about your company. I can do that. But you never have all the pieces” (Bryant, 2012a). These external and internal moderating factors limit the power and discretion of strategic leaders and can prevent the leader from making a direct impact on the organization. The next section considers the key relevant, individual characteristics of upper-echelon leaders. APPLYING WHAT YOU LEARN Managing in Times of Crisis Leaders at all organizational levels have to manage difcult or crisis situations. No book knowledge replaces experience, but knowing what to do and having some guidelines makes handling crises a bit easier. The frst step is to take a hard look and gain as good an understanding of the situation as possible. Here are some additional guidelines for handling crisis situations: • Be realistic about how serious the situation is. Some people tend to sugarcoat too much and avoid problems; others tend to see everything as a crisis. Do a reality check. • Face the situation; do not postpone or avoid dealing with the crisis. • Do your research and gather facts and information; it is easier to make a hard decision when you have solid facts to back you up. • Seek help and support from your supervisor if you can, or mentors and colleagues around the organization. • Be a role model; make sure that you do what you are asking others to do; walk the talk. • Tell the truth; communicate honestly and behave with integrity. If you have information you cannot share, simply say so; do not lie or make up what you don’t know. • Remain calm and professional; followers will react to your emotions and behaviors; be very deliberate about the tone of your verbal and nonverbal messages and how you behave. • Practice kindness and give people the beneft of the doubt and support when you can. • Listen to concerns and have empathy; put yourself in other people’s shoes. You do not have to agree with or address everything you followers need, but you can listen to them. • Act! As a leader you must decide and do something. It does not have to be spectacular and solve everything, but you cannot sit idle and avoid dealing with the crisis. EKREM INCE ekremince@gmail.com University of London 168 Topic 3 LEADERSHIP ENVIRONMENTS CHARACTERISTICS OF UPPER-ECHELON LEADERS What impact do executives’ personality and other individual characteristics have on their style and the way they run the organization? Are some characteristics or combinations of characteristics more relevant for upper-echelon leadership? Information about upper-echelon leadership characteristics is somewhat disjointed. Research about micro leadership presented throughout this book identifed several important dimensions in predicting and understanding small-group leadership; the task and relationship dimensions, in particular, have dominated much of leadership theory for the past 40 to 50 years. These dimensions do not necessarily have predictive value when dealing with upper-echelon leadership (Day and Lord, 1988). Demographic and Personality Traits Older CEOs are generally more risk averse (Alluto and Hrebeniak, 1975), and insider CEOs (as opposed to those who are brought in from outside) attempt to maintain the status quo and are, therefore, less likely to change the organization (Kotin and Sharaf, 1976; Pfeffer, 1983). Researchers also considered the impact of an upper manager’s functional background on an organization’s strategic choices (Song, 1982), and a body of research explored the various personality characteristics with a recent focus on the impact of charismatic and transformational leadership (e.g., Hemsworth, Muterera, and Baragheh, 2013; Leithwood and Sun, 2012), emotions (e.g., Kisfalvi and Pitcher, 2003), emotional intelligence (e.g., Scott-Ladd and Chan, 2004), and the impact of negative traits such as those in the Dark Triad (e.g., Chatterjee and Hambrick, 2007). Most of the leader’s personal characteristics studied have some impact on organizational decision making, although the effect is not always strong. Two common themes run through the research about individual characteristics of strategic leaders. They are the degree to which they seek challenge and their need for control (Nahavandi and Malekzadeh, 1993a). Challenge seeking A number of researchers considered the upper-echelon leader’s openness to change to be an important factor of strategic leadership. Upper-echelon management’s entrepreneurship (Simsek, Heavy, and Veiga, 2010), openness to change and innovation, futuricity (Miller and Freisen, 1982), risk taking (Khandwalla, 1976), transformational and charismatic leadership, and even narcissism are all part of this theme. The common thread among these constructs is the degree to which leaders seek challenge. How much is the leader willing to take risks? How much will the leader be willing to swim in uncharted waters? How much does the leader lean toward tried-and-true strategies and procedures? A more challenge-seeking person is likely to engage in risky strategies and undertake new and original endeavors (Nahavandi and Malekzadeh, 1993a). A leader who does not seek challenges will be risk averse and stick with well-established and previously proven methods. The challenge-seeking dimension is most relevant in the way a leader formulates strategy. For example, one leader might pursue a highly risky product and a design strategy that will help produce and market such a product by accepting a high level of failure risk. Challenge-seeking executives are celebrated in the current climate of crisis in many institutions. Richard Branson’s willingness to take risks (see Leading Change in Chapter 6) has been key to his success and his fame. David Rockwell, the visionary EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 169 behind many of New York’s trendiest restaurants, is in high demand because of his creativity and his ability to harness the energy of 90 designers who work for him (Breen, 2002). Monica Luechtefeld, who now serves as a consultant to Ofce Depot and was the company’s e-commerce vice president, is one of the “fearless mavericks” of e-commerce (Tischler, 2002: 124). She attributes her willingness to take on tasks that others shun to her parents’ constant messages of “You can do anything” and “Figure it out,” an approach she passed on to her son, who was raised hearing “Why not?” from her (Tischler, 2002). Need for control The second theme in research about CEO characteristics is the leader’s need for control, which refers to how willing the leader is to give up control. The degree of need for control is reflected in the extent of delegation and follower participation in decision making and implementation of strategy. Other indicators are the degree of centralization and formalization or encouragement and the degree of tolerance for diversity of opinion and procedures. Issues such as the degree of focus on process and interpersonal orientation (Gupta, 1984), tolerance for and encouragement of participation and openness, and what one researcher has called “organicity,” which generally refers to openness and flexibility (Khandwalla, 1976), are all part of this theme. The leader with a high need for control is likely to create an organization that is centralized, with low delegation and low focus on process (Nahavandi and Malekzadeh, 1993a, b). The culture will be tight, and focus will be on uniformity and conformity. The leader with a low need for control decentralizes the organization and delegates decision-making responsibilities. Such a leader encourages an open and adaptable culture, with a focus on the integration of diverse ideas rather than conformity to a common idea. The culture will encourage employee involvement and tolerance for diversity of thought and styles (Nahavandi and Malekzadeh, 1993a). No apparent pattern emerges regarding how controlling the upper echelons of successful organizations are, despite the empowerment trends. In some cases, such as the CEO and TMT of Johnson & Johnson, decentralization and autonomy of various units are built into the credo of the organization and are central to the success of the company (Barrett, 2003). In other cases, such as Mickey Drexler, the CEO controls most of the decisions (Sacks, 2013). Strategic Leadership Types The two themes of challenge seeking and need for control affect leaders’ decision-making and managerial styles and the way they manage the various strategic forces (Nahavandi and Malekzadeh, 1993a, b). First, the upper-echelon leader must understand and interpret the environment of the organization. Second, as the primary decision maker, the leader selects the strategy for the organization. Third, the leader plays a crucial role in the implementation of the chosen strategy through the creation and encouragement of a certain culture and structure and the selection of leaders and managers throughout the organization. Challenge seeking and need for control combine to yield four strategic leadership types (Figure 7.3). Each type represents an extreme case of strategic management style, and each handles the strategic forces in a manner consistent with his or her basic tendencies and preferences. Given the pressure toward empowerment, employee participation, and the perceived need by many to be unconventional and innovative in all aspects of an organization, it might appear that some types of leaders are more desirable than others. The participative innovator (PI), in particular, could be perceived as ideal. Such an assumption, however, is inaccurate; different leadership styles ft different organizations based on their long-term strategic needs. EKREM INCE ekremince@gmail.com University of London 170 Topic 3 LEADERSHIP ENVIRONMENTS Figure 7.3 Four Strategic Leadership Types Strategic leadership types and their impact on organizations The frst strategic type is the high-control innovator (HCI). The HCI leader is a challenge seeker who likes to maintain tight control over organizational functioning. This type of leader sees opportunities in the environment and is willing to use technological advancements to achieve goals. HCIs look for risky and innovative strategies at the corporate and business levels that involve navigating uncharted territories and entering new markets or new industries. (See Table 7.3 for a summary of leaders’ impact on an organization and how they perceive and manage the six strategic forces.) Table 7.3 The Impact of Strategic Leadership Types on the Six Strategic Forces Leader Perception of Environment TechnologyStrategy Culture Structure Leadership HCI Presence of many opportunities for growth and threats from others Innovation and use of high technology High risk; product innovation; stick to core Strong dominant culture with few subcultures Centralized decision making by a few people Leaders and managers with similar styles and views SQG Many threats; desire to protect organization from outsiders Little focus on innovation unless it helps control Low risk; few innovations; focus on efciency Strong dominant culture; low tolerance for diversity Centralized decision making by a few people Leaders and managers with similar styles and views EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 171 PI Many opportunities; tendency to open organization to outside Encouragement of experimentation; wide use of technology High risk; product innovation; open to new areas Fluid main culture; many subcultures; high tolerance for diversity Decentralized decision making to lowest levels: empowerment and participation Leaders and managers with many diverse styles and views PM Threats and tendency to protect organization from outside Moderate use of technological innovation Low risk; few innovations; focus on efciency Fluid culture with focus on “no change”; tolerance for diversity Decentralized decision making; participation Leaders and managers with many diverse styles and views Source: Partially based on information in Nahavandi, A., and A. R. Malekzadeh. 1993a. Leader style in strategy and organizational performance: An integrative framework. Journal of Management Studies 30 (3): 405-425; Nahavandi, A., and A. R. Malekzadeh. 1993b. Organizational Culture in the Management of Mergers. New York: Quorum Books. As opposed to the need for innovation when concerned with external factors, HCIs tend to be conservative in the management of their organization. The HCI leader has a high need for control that leads to the creation of a highly controlled culture in which adherence to common goals and procedures is encouraged and rewarded. Decision making is likely to be centralized, with the leader delegating few, if any, of the major decisions. The ideal organization for an HCI leader is one that is innovative and focused. The employees share a strong common bond and believe in “their way” of managing. Mickey Drexler, discussed previously, provides an example of an HCI. He has been described as a “visionary and a control freak” (Gordon, 2004). Although innovative and a risk taker in his strategies and marketing, he keeps a tight control over his organization. Drexler is a relentless “store walker,” who picks on every detail (Kiviat, 2007). A Gap manager noted, “Nothing gets by Mickey. His attention to detail is extraordinary. He looks at threads, buttons, everything. He’s difcult and very demanding. He can attack” (Munk, 1998: 71). He is also well known for his creativity, which he considers to be at heart of his success: “Most people underestimate the importance of creativity. Too many people overlook the importance of a beautiful product. Creativity drives growth in any business” (Sherman, 2013). Both at the Gap and in his new leadership role at J. Crew, Drexler is known for his knowledge and control of every detail. He admits, “I spot details quickly” (Gordon, 2004). Another example of a HCI is Jeffrey Katzenberg, CEO of DreamWorks Animation SKG, discussed in Chapter 4. Unlike the HCI, the status quo guardian (SQG) does not seek challenge; however, like the HCI, SQGs want to maintain control (see Figure 7.3). This type of leader needs control over the internal functioning of the organization and is risk averse. SQGs perceive their environment as threatening and tend to want to protect their organization from its impact. They do not seek new and innovative strategies, but rather stick to tried and well-tested strategies (Nahavandi and Malekzadeh, 1993b). The organization run by an SQG leader is not likely to be an industry leader in new-product development and innovation. It, however, might be known for efciency and low cost. EKREM INCE ekremince@gmail.com University of London 172 Topic 3 LEADERSHIP ENVIRONMENTS The ideal organization for an SQG leader is highly focused and conservative with a tight, well-defned culture that expects employees and managers to conform to existing practices and procedures. Decision making is highly centralized, with the SQG leader keeping informed and involved in the majority of decisions. Janie and Victor Tsao, Inc., magazine’s 2004 entrepreneurs of the year, built their $500 million, 300-person company, Linksys, on frugality, hard work, and tight control of every operation and decision (Mount, 2004). Although they develop networking products and allow employees to run their own projects, the husband-and-wife team believes that their product is neither spectacular nor involves any particular genius - just a good business plan and tight execution. One of their employees described their style: “Victor and Janie really like to see people execute” (Mount, 2004: 68). Tootsie Roll Industries, Inc., is another company run by SQG leaders: Ellen Gordon, president, and her husband Melvin, chair of the board, along with four other executives, fully control all operations. Tootsie Roll is named repeatedly as one of the best-run small companies in the United States. Much of the credit for its success goes to the Gordons for their single-minded focus on their business and their benevolent, authority-oriented styles. Ellen states, “We encourage a lot of new ideas, we create teams and we invite challenges, but we always have to make sure we stay on our overall goals” (Murrill, 2007). The company has managed to focus on the candy-making business for 100 years and through a number of defensive moves, warded off acquisition attempts. With a narrow strategy and tight controls, the Gordons encourage openness and feedback from employees and continue to build a strong, conservative culture. The participative innovator is diametrically opposed to the SQG. Whereas the SQG values control and low-risk strategies, the PI seeks challenge and innovation on the outside and creates a loose, open, and participative culture and structure inside the organization. PIs view the environment as offering many opportunities and are open to outside influences that could bring change in all areas, including technology. Similar to the HCI, the PI is a challenge seeker and is likely to select strategies that are high risk. An organization run by a PI is often known for being at the cutting edge of technology, management innovation, and creativity. The ideal organization for a PI leader is open and decentralized, with many of the decisions made at the lowest possible level, because the leader’s low need for control allows for delegation of many of the decisions. The culture is loose, with much tolerance for diversity of thought and practice. The only common defning element might be tolerance of diversity - a “vive la difference” mentality. Employees are encouraged to create their own procedures and are given much autonomy to implement their decisions. The key to PI leadership is allowing employees and managers to develop their own structure and come up with ideas that lead to innovative products, services, and processes. Ricardo Semler (see Leading Change in Chapter 5) is celebrated for his willingness to give up control and empower his employees while implementing innovative management strategies. Not only is Roy Wetterstrom, an entrepreneur who created several businesses, a high-risk taker, but he also believes that “to make a big strategic shift, you’ll need to take a breather from day-to-day stuff (Hofman, 2000: 58) and push responsibility down the chain of command.” John Chambers, CEO of Cisco Systems since 1995, often introduces himself as the “corporate overhead,” serves ice cream to his employees, is open to ideas, is willing to adapt, and relies heavily on others to make decisions. He does not believe that leading means controlling people and budgets; instead leaders at all levels must be able to make decisions without asking for permission (McKinsey conversation, 2009). One Cisco employee described the culture: “John has instilled a culture in which it’s not a sign of weakness but a sign of strength to say, ‘I can’t do everything myself’” (Kupfer, 1998: 86). EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 173 The last type of strategic leader, the process manager (PM), has the internal elements of PI leadership and the external elements of SQG leadership. The PM leader prefers conservative strategies that stick to the tried and tested. PMs are likely to shy away from risky innovation. The PM’s low need for control, however, is likely to engender diversity and openness within the organization. Employees are not required to adhere to common goals and culture. As such, they have autonomy, and day-to-day operations are not highly standardized; the basic condition for decision making is not to create undue risk for the organization. Jon Brock, who was the CEO of the world’s No. 1 beer maker until 2005, is a process manager. His company, InBev, is part Brazilian and part Belgian with headquarters in Louvain, Belgium. It produces the famous Belgian beer Stella Artois and the Brazilian beers Skol and Brahma. Brock is informal, easygoing, and relaxed and makes it clear that he does not want to be the world’s biggest brewer, just the best. His strategy focuses on efciency and increasing profts by cutting costs. He wants to avoid hornets: “We’re not going head-to-head with Budweiser, Miller, and Coors. That would be suicidal” (Tomlinson, 2004: 240). As the former president of American Express and RJR Nabisco and CEO of IBM from 1993 to 2002, Lou Gerstner has a well-established and enviable track record as a strategic leader. He joined IBM at a time when the company was facing one of the most serious crises of its history. Gerstner is a cautious leader. While at RJR Nabisco, he opened the way for reconsideration of many internal processes. He is intelligent and has exceptional analytical skills, but he is careful about change. He strongly believes that change cannot happen unless it is balanced with stabilization (Rogers, 1994), and he is particularly skilled at letting his expectations be known. His approach is to improve existing processes slowly. He changed some elements of IBM and is proud of the company’s slow and steady progress. Some call him an incrementalist rather than a revolutionary who avoids big mistakes but is moving too slowly. All types of successful and effective leaders can be found in organizations. The need to revitalize our organizations is likely to be the reason we are celebrating innovators. The health care industry’s award to best administrators regularly goes to innovators. The most-admired business executives are those who push their businesses through change. Many uncelebrated SQG and PM leaders, however, are managing highly effective and efcient organizations. For example, the leaders of the much-publicized Lincoln Electric Company are consistently SQGs for PMs. Their organization is a model for using fnancial incentives in successfully managing performance. Our current tendency to appreciate only change could make us overlook some highly effective managers and leaders. WHAT DO YOU DO? You are fully aware that change is not your thing. You are highly successful at creating systems and putting effective structures in place. You like order and predictability and have a track record to show how good you are at your job. You join the leadership team of a small company that is also highly successful, but that operates very loosely. Everything is decentralized and the focus is on change and innovation. How can you contribute? What do you do to succeed? Culture and Gender Given the cross-cultural differences in micro-leadership style and the importance and impact of culture on leadership behaviors, one would expect that strategic EKREM INCE ekremince@gmail.com University of London 174 Topic 3 LEADERSHIP ENVIRONMENTS leadership also differs across cultures to some extent. Cultural values, in particular, can be expected to influence a top manager’s decisions and style. With little empirical research conducted about the direct effect of culture on executive style, considerable anecdotal evidence suggests both similarities and differences across cultures. As organizations become more global, their strategic leaders are also increasingly global, a factor that can attenuate cross-cultural differences. Consider that Lindsay Owen-Jones, who is Welsh, was the CEO of French cosmetics company L’Oréal until 2011. Nissan, which is owned by French carmaker Renault, is run by Carlos Ghosn, who was born in Brazil of Lebanese and French parents and was educated in France. Austrian Peter Brabeck-Lethmathe was CEO of Swiss Nestle and continues as its Chairman. Other companies actively seek to build diverse and multicultural TMTs. For example, half of the senior managers at Citibank and P&G are not from the United States. Models of cultures, such as those proposed by the GLOBE research (House et al., 2004) and Trompenaars and Hampden-Turner (2012), suggest that patterns of leadership differ from one country or region to another. Particularly, the GLOBE’s culturally endorsed leadership theories (CLTs) show that although most cultures value leaders who have a vision and are inspirational, Anglos, Latin Americans, Southern Asians, and Germanic and Nordic Europeans do so to a greater extent than Middle Easterners. Similarly, participation is seen as part of leadership by Anglos and Nordic Europeans, but not as much by Eastern Europeans, Southern Asians, and Middle Easterners (Dorfman et al., 2012). Columbians want leaders who are proactive and recognize accomplishment without being too proactive in terms of change (Matviuk, 2007). Middle Easterners, more than other cultural clusters, consider self-protection (including self-centeredness, status consciousness, and face-saving) to be part of leadership (Dorfman et al., 2004). Based on cross-cultural research and case studies, it is reasonable to suggest that upper-echelon leaders from different cultures will demonstrate different styles and approaches. For example, being part of the “cadre” (French word for management) in France means having fairly distinct characteristics (Barsoux and Lawrence, 1997). In the United States, upper-echelon managers are from different social classes with many different skills and backgrounds, but the French upper-echelon leaders are much more homogeneous. In a high-power-distance culture, in which leaders are ascribed much authority and many powers, the cadre comes almost exclusively from the upper social classes. Nearly all have graduated from a few top technical universities (Grandes Écoles), where entry depends as much on social standing as it does on intellectual superiority. These schools have a strong military influence and continue to be male dominated. Their goal is to train highly intellectual, highly disciplined students who develop close ties and support with one another well beyond their years in school. The French cadre is, therefore, characterized by intellectual brilliance, ability to analyze and synthesize problems, and excellent communication skills. Contrary to U.S. leaders, the cadre’s focus is not on practical issues or the development of interpersonal skills. Cultures with high-power distance show little need to convince subordinates of the leadership’s ideas (Laurent, 1983). The cadre is expected to be highly intelligent, and its decisions are not questioned. Many of the members of French upper management have considerable experience in public and governmental sectors. This experience allows them to forge government-business relationships that do not exist in countries such as the United States. Interestingly, graduates of the Grandes Écoles would not consider working for those who received regular university education. This factor perpetuates the homogeneity of the cadre, which in turn creates a group of like-minded executives who agree on many industrial and political issues. By the same token, this like-mindedness can lead to lack of innovation and the focus on intellect at the expense of action can cause poor implementation. EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 175 Another area of interest is potential gender differences. Unfortunately, research is lacking on the topic of gender differences in strategic leadership. It is evident that many of the top-level female executives in traditional organizations succeed because their style mirrors that of their male counterparts. Eileen Collins, commander of the space shuttle Discovery, believes that women often try to do too much and that men are more willing to delegate (Juarez, Childress, and Hoffman, 2005), a sentiment echoed by Judith Rodin, former president of the University of Pennsylvania and president of the Rockefeller Foundation. She suggests that women should fnd their own voice rather than try to emulate men and be aggressive (Juarez et al., 2005). We reviewed these differences in Chapter 2 with much of the recent research and many accounts of female executives and business owners and their focus on openness, participation, and interactive leadership provide some basis to make deductions about gender differences. It appears that the feminine style of leadership is generally low control. Meg Whitman, former CEO of Hewlett Packard, who is consistently ranked among the most powerful women in business (#15 in Forbes 2012 list) states, “I don’t actually think of myself as powerful”; instead she relies on relationship building, developing expertise and credibility, and enabling - one of her favorite words - her employees (Sellers, 2004: 161). Similarly, Parmount’s Sherry Lansing, cofounder of Stand Up to Cancer foundation, is famous for her nurturing style, charm, and ability to show empathy (Sellers, 1998). Gail McGovern, former president of Fidelity Investments and president and CEO of the Red Cross since 2008, observes that “real power is influence. My observation is that women tend to be better in positions where they can be influential” (Sellers, 2000a: 148). Many female leaders, however, play down the gender differences. Judith Shapiro, former president of Barnard College, suggests, “You need to be supportive of your people because leading is about serving. That’s not a girly thing; it’s what I believe a strong leader does” (Juarez et al., 2005). She attributes any gender differences to women’s social experiences. Chairman of the advertising company Ogilvy & Mather from 1997 to 2011, and now chairman emeritus, Shelly Lazarus asserts that everybody has to fnd their own way (Lazarus, 2010). She states: “I don’t really believe that men and women manage differently. There are as many different styles and approaches among women as there are among men” (Juarez et al., 2005). Whether they are challenge seekers or risk averse, many upper-echelon women leaders, such as those described in the research by Sally Helgesen (1995), encourage diversity of thought and employee empowerment. Their open and supportive style allows employees to contribute to decision making. In addition, the web structure that some women leaders are reputed to use is flat, with well-informed leaders at the center and without centralized decision making. As is the case with micro leadership, the type of strategic leadership that is needed depends on the type of environment the organization faces, the industry to which it belongs, and the internal culture and structure that it currently has. Therefore, leaders defne and influence strategic forces, and their style also needs to match existing ones. If an organization is in a highly stable industry with few competitors, the need for innovation and openness might not be as great. The appropriate focus in such circumstances would be on efciency. For such an organization, a highly participative and innovative strategic leadership style might not be appropriate. HOW DO EXECUTIVES AFFECT THEIR ORGANIZATION? Regardless of the type of leadership at the top of an organization, the processes through which strategic leaders affect and influence the organization are similar. As the chief decision makers and the people in charge of providing general guidelines for implementation of the strategies, top executives influence their organizations in a variety of ways (Figure 7.4). EKREM INCE ekremince@gmail.com University of London 176 Topic 3 LEADERSHIP ENVIRONMENTS Figure 7.4 Processes Leaders Use to Impact their Organizations Direct Decisions Leaders’ decisions regarding various aspects of the organization shape the course of their organization. The choices regarding the vision and mission for an organization influence all aspects of an organization’s functioning. The vision and mission influence the culture of an organization by determining the basic assumptions, what is important, what needs to be attended to frst, and what is considered less valuable. Similarly, the choice of strategy is considered to be the almost-exclusive domain of top management. In addition to the vision, mission, culture, and strategy, the decisions to adopt a new structure, adjust an existing one, or make any changes in the formal interrelationship among employees of an organization rest primarily with top management (Miller and Droge, 1986; Nahavandi, 1993; and Yasai-Ardekani, 1986, 1989). The leader can determine the structure of the organization through direct decisions on the type of structure or indirectly through the way employees share and use information. Mickey Drexler of the Gap and J. Crew uses a public-address system to communicate with people in the ofce, leaves voice messages, and communicates face-to-face (Frieidman, 2011). A leader who consistently communicates only through formal reporting channels sets up a different structure than one who crosses hierarchical lines and encourages others to do so, as well. Allocation of Resources and Control over the Reward System In addition to direct decisions, one of the most powerful effects of top managers on their organization is through the allocation of resources and the control they have over the reward system. (Kerr and Slocum, 1987; Schein, 2010). A top executive is the fnal decision maker on allocation of resources to departments or individuals. If leaders want to encourage continued innovation and creativity, they might decide that the R&D and training departments of the organization will get the lion’s share of the resources. Such allocations reinforce certain goals and actions, support a particular organizational culture and strategy, and create structures that facilitate desired outcomes and discourage undesirable ones (Kets de Vries and Miller, 1986; Miller, 1987). Consider that Jeff Bezos, CEO of Amazon.com, believes in focusing on customer satisfaction and not just the bottom line. He says: “We don’t celebrate a 10% increase in the stock price like we celebrate excellent customer experience” EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 177 (Yglesias, 2013). Given this approach, it is no surprise that Amazon ranks highly in customer satisfaction. The formal and informal reward systems also can have a powerful impact on the culture of an organization and on the behavior of its members (Schein, 2010). For example, top managers can shape the culture of their organization by rewarding conformity to unique norms and standards of behavior at the expense of diversity of behaviors and opinions (Nahavandi and Malekzadeh, 1988). This process could take place not only through encouragement of certain behaviors but also through the selection of other top managers and the promotion of those who adhere to the leader’s culture. Such a process is likely to take place regardless of the leader’s style of strategic leadership. For instance, an HCI will be most comfortable with other HCIs, whereas a PI will prefer other managers with a similar style in key positions. A comparable process is likely to take place on an individual employee level. Employees whose actions ft the vision, mission, and culture of the organization are more likely to be rewarded. These processes create domino effects that further lead an organization to reflect the style and preferences of its leader. Setting the Norms and Modeling Rewarding certain types of behaviors and decisions is an overt action on the part of the leader; modeling behaviors and setting certain decision standards and norms, however, provide more indirect ways of affecting organizations. Alan Mulally of Ford Motor says, “I really focus on the values and standards of the organization. What are expected behaviors? How do we want to treat each other?” (Bryant, 2009g). In addition to making decisions, the top managers can set the parameters by which others make decisions. CEOs might tell their vice presidents that they will go along with their choice of a new product while also providing them with clear guidelines on which types of products are appropriate and which types of markets the organization should enter. By setting such standards, even without making a direct decision, the CEO still can be assured that the vice presidents will make the right decision. Another subtle way in which leaders shape their organization is by the types of behavior they model (Nahavandi and Malekzadeh, 1993a; Schein, 2010). Mulally of Ford is the company’s biggest cheerleader. Bryce Hoffman, who wrote a book about the Ford CEO, says: “Alan is all about evangelizing Ford through personal relationships” (Gallo, 2012). Irishman Feargal Quinn, founder and president of Superquinn, a chain of supermarkets, gained a reputation as the “pope of customer service.” He focuses obsessively on making sure his customers come back - an obsession that he transfers to his employees (Customer service, 2007). James E. Rogers of Duke Energy, who was recently appointed to be on the presidential panel on energy policy, emphasizes walking the talk, “ . . . as I’ve been CEO for over 20 years, it’s really important to be on the front lines and to remember kind of the sound of the bullets whizzing by, to be on the ground” (Bryant, 2009h). Another area in which role modeling can have a powerful impact is in ethics. A. G. Lafley, CEO of P&G considers self-sacrifce and integrity to be essential traits of leadership (Jones, 2007). Similarly Gordon Bethune of Continental Airlines emphasizes the importance of integrity (Bryant, 2010a). Direct decisions, allocation of resources and rewards, setting of decision norms, and modeling are some of the ways through which a leader affects the organization. Through these various processes, leaders can make an organization the reflection of their style and preferences. They also provide strategic leaders with considerable power and influence. Such power requires some accountability, which is considered in the next section. EKREM INCE ekremince@gmail.com University of London 178 Topic 3 LEADERSHIP ENVIRONMENTS Strategic Leaders’ Accountability Chief executive ofcers and TMTs around the world have considerable power and influence over people’s lives. Their actions affect the economic health of countries and citizens. For this burden, CEOs are well rewarded fnancially and achieve considerable status. The topic of executive compensation, another governance mechanism, continues to attract considerable attention and criticism. According to the AFLCIO, the U.S. CEO to worker pay ratio was 42:1 in 1982, 281:1 in 2002, and 354:1 in 2012, the highest in the world (Executive paywatch, 2013). In one case, for Ron Johnson of J.C. Penney, the ratio was 1,795:1 (Smith and Kuntz, 2013). The average salary of CEOs in Standard and Poor’s top 500 companies in 2012 was $1.10 million, with perks averaging $273.154 (Executive pay watch, 2013). Such disparity has led many to call for mandatory disclosure of compensation packages and pay ratios, an action that stalled in the U.S. congress (Main, 2013). Even ousted CEOs fare well. In 2011, ousting CEOs cost shareholders of Hewlett-Packard, Bank of New York Mellon, Burger King, and Yahoo $60 million (Flannery, 2011). Some estimate that CEO severance packages alone were over $1 billion in the United States in 2006 (Dash, 2007a). The list includes fred AOL CEO Randy Falco, who was paid $1 million in salary and $7.5 million in bonuses through 2010 (Carlson, 2009). Others include David Edmonston, who resigned from Radio Shack in 2006 after admitting lying on his resume ($1 million severance pay); Home Depot’s Robert Nardelli, who is reputed to have refused to have his pay tied to the company performance and received an exit package of more than $200 million in 2007, despite poor stock performance and considerable controversy and criticism (Grow, 2007); Jay Sidhum, who resigned from Sovereign Bancorp amid criticism ($73.56 million that includes cash and stock options, fve-year free health care, and consulting contract); and Douglas Pertz, who resigned from Harman International Industries after the stocks dropped during his four-month tenure and still earned $3.8 million in severance pay (Dash, 2007b). While the public outcry and political pressure have led to some changes such as more executive compensation packages being tied to company performance (Thurm, 2013), the income inequity in the United States continues compared to other nations. For example, in 2013, the pay ratio for CEO to worker was 206:1 in Canada, 104:1 in France, 93:1 in Australia, 84:1 in the United Kingdom, 89:1 in Sweden, and 48:1 in Denmark (Executive paywatch around the world, 2013). The issue of executive compensation is highly complex. Theoretically, boards of directors determine CEO compensation relative to company performance; the better the fnancial performance of the company, the higher the CEO’s compensation. Therefore, CEO’s compensation can be an effective tool for motivating and controlling managers. In many cases, company leaders get fair compensation packages and perform well. The instances of lack of performance and high compensation, however, are hard to ignore. Many executives get pay raises that are considerably higher than their company’s performance. For example, in 2008, proft at Archer Daniels Midland fell by 17 percent; CEO Patricia Woertz’ salary was increased by close to 400 percent (The pay at the top, 2010). Similarly, while Boeing’s proft dropped by 35 percent in 2008, CEO James McNemey got a 14 percent increase in his compensation (The pay at the top, 2010). After pulling Vioxx off the market, shares of Merck slumped 30 percent, but the company board gave the CEO, Ray Gilmartin, a $1.4 million bonus and stock options valued at $19.2 million (Strauss and Hansen, 2005). Based on these examples and the extensive research about CEO compensation (see O’Reilly and Main, 2007), company performance is not the only determinant of CEO compensation. So what determines an executive’s worth? Table 7.4 gives a summary of factors that determine executive compensation. One factor that seems to explain EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 179 the size of executive pay in the United States is the size of the organization (see Geiger and Cashen, 2007): The larger the organization, the larger the CEO’s compensation package will be, regardless of performance. Another factor seems to be the competition for hiring CEOs: As organizations outbid one another, salaries continue to increase. Table 7.4 Determinants of Executive Compensation Firm size The larger the frm, the higher is the compensation. Industry competition Companies often outbid one another to hire top executives. CEO power and discretion The higher the power of the CEO, the higher is the compensation package. Internationalization Increased internationalization is related to higher executive pay. High stress and instability CEO jobs are considered high stress, requiring high compensation. Organizations in which top managers have more discretion also tend to have higher pay (Cho and Shen, 2007). In addition, research shows that top management pay and company performance are more aligned when the company’s board of directors is dominated by members from outside the organization (Conyon and Peck, 1998). Other research that considers the impact of internationalization found that increased internationalization is related to higher CEO pay (Sanders and Carpenter, 1998). The thought is that the high demands put on CEOs and the instability of their positions must be balanced with high salaries. These high salaries, now standard in U.S. industry, show no end in their upward trend, even during a time of economic crisis. The result is the creation of a new, powerful U.S. managerial class and a widening of the gap between high and low levels of organizations. The highly paid top executives have become popular heroes whose names are part of our everyday life. Based on economic and organizational theory, environmental forces will push a nonperforming leader to be replaced. Ideally, elected federal, state, and city ofcials who do not perform are not reelected. Similarly, the board of directors replaces a CEO who does not manage well. The principal of a school with poor student academic performance and a high dropout rate would be fred by the school board. These ideal situations do not seem to be common, however. Many powerful leaders are not being held accountable for their actions. They continue to hold positions of power and influence regardless of their organization’s poor performance, ethical abuses, and social irresponsibility. It is not common in the United States for a company CEO or public ofcials to resign when they fail to live up to the promises they made. When their organizations cause major disasters or commit illegal acts, the CEOs escape unscathed. The CEO of Exxon accepted none of the responsibility for the Valdez fasco. After the Bhopal disaster, with several thousand dead and hundreds of thousands injured, the CEO of Union Carbide was not replaced. The public fring of the CEO of General Motors by the U.S. government in 2009 and the replacement of BP’s CEO Tony Hayward in 2010 are the exception rather than the rule. For the beneft of organizational and social functioning and well-being, it is essential that the tremendous power, influence, and status of CEOs be accompanied by accountability and responsibility to their various constituents. Such accountability exists on paper but is hardly ever executed. The power and impact of upper-echelon EKREM INCE ekremince@gmail.com University of London 180 Topic 3 LEADERSHIP ENVIRONMENTS leaders are undeniable. Their credibility and ability to further affect their organizations, however, can increase only with more accountability. UNIQUE CASE OF NONPROFIT ORGANIZATIONS Nonproft organizations are private organizations that cannot make a proft for its owners or members but can charge fees for services or membership. Other terms used to describe such agencies that are private, with a public purpose include voluntary, not-for-proft, philanthropic, and NGOs or nongovernmental organizations (Weiss and Gantt, 2004). Technically nonprofts are defned by their tax-exempt status, but they ft somewhere in between the public and private (business) organizations and the distinction among the various sectors is not always clear (Robichau, 2013). Their purpose is to create value by serving society and their clients (Drucker, 1990, Pynes, 2011). Although many of the leadership and organizational principles that apply to business and other organizations are also relevant in nonproft organizations, some of their distinguishing characteristics present them with unique leadership challenges, and nonproft organizations have their own unique character (Ott and Dicke, 2012). The case of Public Allies in Leading Change in this chapter provides an example of a nonproft organization whose primary purpose is public good, and its source of funding is donations through grants, foundations, and individuals. Characteristics of Nonproft Organizations Many of the characteristics that identify nonproft organizations are related to tax status. Other characteristics include the following: • Operate without proft. Although nonproft organizations charge for services or membership and many generate and use considerable sums of money, all the funds are reinvested to support the operations of the organization. Many nonprofts are highly “proftable”; however, all excess funds are reinvested to achieve their mission. • Public service mission. The primary mission of a nonproft organization is to serve the public good, whether it is health care (hospitals), education (schools and universities), churches, community improvement, or foundations with a broad purpose. • Governed by voluntary board of directors. As opposed to business organizations that have paid board of directors, the governing boards of nonprofts are staffed by volunteers with a stake or interest in the mission of the organization. • Funded through contributions. Whereas charging fees is a source of revenue for many nonproft organizations, their primary sources of funding are contributions, grants, and donations from individuals, government agencies, and other foundations. There are many organizations around the world that ft into the nonproft category. Examples in the United States include the American Cancer Society, National Geographic Society, the Metropolitan Museum of Art, Stanford University, Planned Parenthood, the Ford and Rockefeller Foundations, the National Association for the Advancement of Colored People (NAACP), and the YMCA and YWCA. Around the world, NGOs make considerable contributions to improving social, human, political, economic, and ecological conditions. Organizations such as Doctors without Border (Médecins sans Frontières); OXFAM, an international relief agency; the International Red Cross; and the World Wildlife Fund are just a few that encourage development EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 181 and support communities in crisis around the world. These organizations survive and achieve their goals by using funds they obtain through various means. For example, physicians volunteer their time through Doctors without Borders and provide health care in remote areas of the world; OXFAM provides funds and resources to combat global poverty and social injustice. LEADING CHANGE Public Allies: Building Leadership in the Community “Leadership is an action-not a position,” “Leadership is about taking responsibility,” and “Leadership is about the practice of values” are the principles behind a unique and dynamic community organization called Public Allies (Schmitz, 2012). The organization is grounded in the belief that young members of a community have the capacity to lead others when given opportunity, support, and training, and that they can have a positive impact in their own backyard. Through a variety of programs, Public Allies aims at developing the next generation of leaders who will continue to change the world (Public Allies-Our Mission, 2013). The organization was founded in 1992 in Washington D.C. by two young community activists, Vanessa Kirsch and Katrina Browne, who brought together 14 passionate members using grants from several organizations such as the MacArthur and Surdna Foundations. Public Allies quickly became one of the frst organizations funded by the new Commission on National and Community Service created by President G.H. Bush and one of the frst funded by the newly formed Americorps under President Clinton. By 1993, the organization had 500 graduates; in 2013, 4,000 Allies served in over 20 cities where they partnered with universities and nonproft organizations to serve their communities. Making the right connections is at the heart of the organization’s success. Kirsch followed the recommendation of several people and happened to connect with a community organizer in Chicago in the early 1990s named Barack Obama, convinced him to join her board, and listened to his recommendation to interview his wife Michelle, 28 at the time and working for Chicago mayor Richard Daley, to run the Chicago ofce in 1993 (Perry, 2008). Kirsch and Browne also connected with the frst lady of Arkansas, Hilary Clinton, who promised to host an event in the White House, if her husband won his race to the presidency (Schmitz, 2012). Passion, hard work, strategic thinking, proven results, and luck have all contributed to the rise of Public Allies. Aside from serving various communities, the organization provides an opportunity for young people, 18 to 30, to lead. Its CEO, Paul Schmitz, says: “There are so many talented people who just don’t have knowledge of a path or access to a path to take their passions and skills and turn them into a viable career.” He says, “That’s what we’re about, trying to build the pipeline” (Perry, 2008: 2). The pipeline of leaders is built through the Public Allies program, which places members to work in a local charity four days a week and in intensive leadership training on the ffth day. The training provides cutting edge leadership development curriculum, coaching, reflection, feedback, and team-based projects that connect the work of members in the community with the training. One of the graduates, Paul Grifn, who founded City at Peace, an organization that now operates in several U.S. cities as well as in Israel and South Africa, and that brings together youth to write and perform musicals about their lives, says that he learned how to lead from Public Allies. He believes they answered his basic questions: “How do you do it effectively? Who are your EKREM INCE ekremince@gmail.com University of London 182 Topic 3 LEADERSHIP ENVIRONMENTS stakeholders? How do you develop a group of people to achieve these goals? (Perry, 2008: 3). CEO Paul Schmitz says he often gets the question of how can everyone lead and what does it mean if no one follows. His response is that Public Allies is “reframing the idea of leadership, moving from an emphasis on the noun leader to an emphasis on the verb to lead” (Schmitz, 2012: xv). By redefning leadership and building community capacity through engagement of citizens, providing services, and collaboration with many other organizations, Public Allies has been able to show striking results. While the large majority of nonproft organizations serve diverse communities and many of their volunteers and members are women, they are primarily led by white males. Public Allies are 67 percent people of color and 60 percent women with the majority of members having a college education (Schmitz, 2012). The groups that host the Allies are highly satisfed with them; the organization is able to recruit large number of volunteers to support projects, over 20,000 in 2010 alone; and it creates thousands of connections among various organizations to support local communities. The graduates have been able to accomplish goals such as funding schools in a Chicago neighborhood (program headed by Public Ally Jose Rico), creating a youth academy in Washington D.C. (headed by Nigel Okumbi), supporting a youth program called Urban Underground in Milwaukee (headed by Reggie Moore and Sharlen Bowen Moore), among many others (Schmitz, 2012). All of the projects are based on a strict code of ethics that emphasizes collaboration, diversity and inclusion, community-based asset development, continuous learning, and integrity (Public Allies-Code of Ethics, 2010). Sources: Perry, S. 2008. “Fired up and ready to go,”http://www.publicallies.org/atf/cf/{FBE0137A-2CA6-4E0D-B229-54D5A098332C}/Chronicle%20Arti (accessed July 20, 2013); Public Allies-Code of Ethics. 2010.http://www.publicallies.org/site/c.liKUL3PNLvF/b.4167361/k.B6B3/NEWS/apps/s/link.asp(accessed July 21, 2013); Public Allies-Our Mission. 2013.http://www.publicallies.org/site/c.liKUL3PNLvF/b.2775807/k.C8B5/About_Us.htm(accessed July 20, 2013); Schmitz, P. Everyone leads: Building leadership from the community up (San Francisco: Wiley, 2012). Leadership Challenges of Nonprofts The leadership of nonproft organizations involves the same principles as other organizations. Their leaders must help individuals and groups set goals and guide them in the achievement of those goals. The public-good mission of nonprofts, along with the voluntary participation of many of their employees, contributors, and other stakeholders, creates a particular burden on leaders of such organizations to lead through a collaborative and trust-based style (Thomson and Perry, 2010). In most cases, individual donors, except for tax benefts when applicable, do not get tangible benefts from their donation, and the resources they contribute do not always stay in their community. The nonproft is based to a great extent on the principles of altruism and selfless contribution. As much as integrity, trustworthiness, and self-sacrifce are elements for all leadership situations, they are even more so in the nonproft organizations. Without the proft motive, which legitimately guides business organizations and the rewarding of its leaders (e.g., top leaders being compensated with company shares), nonproft organizations are likely to attract leaders with a stronger focus on civic contribution. The role of leaders in nonproft organizations is that of an intermediary (Butler and Wilson, 1990). The leader guides the organization to allocate the resources, such as EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 183 donations or grants, to various receivers turning the resources that are trusted to the organization into social good (Figure 7.5). In his commencement address at the University of Maryland, Brian Gallagher - president and CEO of the United Way, the $5billion umbrella organization for large number of charities - emphasized the importance of service to the community and stated that his organization “improves lives by mobilizing the caring power of communities” (Gallagher, 2006: 6). Luis A Ubiñas, president of the Ford Foundation, the second largest philanthropy in the United States that defnes itself as a resource for innovative people and institutions worldwide, leads an organization that has as its mission to support visionary leaders and organizations on the frontlines of social change worldwide with the goals to strengthen democratic values, reduce poverty, promote international cooperation, and advance human achievement (Ford Foundation Mission, 2013). The organization aims to achieve these goals by providing grants to qualifed groups and organizations. Figure 7.5 Role of Leaders in Nonprofit Organizations One of the major challenges that leaders of nonproft organizations face is how to recruit, retain, and motivate employees, many of whom are volunteers, without having access to substantial monetary rewards (Cryer, 2004). Even in the case of paid employees, salaries are often lower than comparable positions in business organizations. The leaders of nonprofts, therefore, require considerable skills in motivating and inspiring their followers. In many cases, followers have joined the organization because they are passionate about its mission; however, passion alone does not always lead to effectiveness. An additional factor is that the structure of many nonprofts is relatively flat, with few employees and few layers of management. Effective leadership requires empowerment; use of all available resources, often by harnessing the power of teams; and participation to creatively solve problems without many resources. According to recent studies, nonproft organizations are facing a leadership crisis because of a signifcant shortfall of qualifed leaders (Tierney, 2006). As more nonproft organizations are created and step in to address growing social challenges not addressed by government or business organizations, the need for effective leadership increases. The Bridgespan Group’s study indicates that the total number of nonproft organization has tripled over the past 20 years, with a 30 percent increase from 1999 to 2009 (National Center for Charitable Statistics, 2010). However, because of demographic shifts, retirement, and lack of active recruitment and development, the supply of potential leaders has not kept up (Tierney, 2006). One of the challenges leaders of nonprofts, therefore, face is the recruitment, retention, and development of future leaders. Such a task is much simpler in a business EKREM INCE ekremince@gmail.com University of London 184 Topic 3 LEADERSHIP ENVIRONMENTS organization, where considerable resources are dedicated to recruitment and development and access to a pool of leaders from competitors is much greater. Although many of the processes involved in leading nonproft organizations are similar to those used in a business organization, leaders of nonprofts need a particular emphasis on building relationships and trust and on the development of future leaders. THE LEADERSHIP QUESTION - REVISITED At some level, leading is leading; whether you lead a team or a large organization, you need to take care of the task and take care of people. However, leading at higher levels requires different skills, a heavier reliance on cognitive and interpersonal skills, and the ability to juggle many complex factors at a strategic level. Nonprofts face another challenge of both working with volunteers and having little access to typical rewards for their employees. Regardless of the organization and the level, connecting with followers is at the heart of leadership; competence and knowledge of the task or the business matter - there is no compromise on these issues at any level. But each leadership situation is also unique and being effective requires preparation, knowledge, experience, and styles and behaviors that ft the situation. Summary and Conclusions Upper-echelon or strategic leadership has many commonalities with leadership at lower levels of organizations. UP leadership, however, adds a new level of complexity to the process by focusing the leader on a whole organization rather than a small group or department and by giving the leader discretion with far-reaching influence over decisions. In addition, upper-echelon leaders focus on external constituencies as well as the internal environment and in so doing are required to lead with a team of other executives. An integrated approach to upper-echelon leadership considers the leader to be a formulator and implementer of strategy. Therefore, in addition to considering the need to match the leader to existing strategy and other organizational elements, the integrated approach also considers the role of the leader’s individual characteristics and style in the selection of various organizational elements and the implementation of decisions. The matching concept, which views the CEO primarily as an implementer of existing strategy, is also useful when selecting a leader to implement a newly charted course. Two major themes run through the diverse research about top management characteristics. The frst theme is the leader’s degree of challenge seeking and preference for risk and innovation. The second is the leader’s need for control over the organization. The combination of these two themes yields four types of strategic leaders: HCI, SQG, PI, and PM. These four types each exhibit different preferences for the direction and management of their organization. They exert their influence through direct decisions, allocation of resources and rewards, and the setting of norms and the modeling of desired behaviors. Through these processes, strategic leaders gain considerable power and influence. Such power is accompanied by generous compensation packages. Accountability for the actions of top executives, however, is still limited. Although many of the processes involved in leading nonproft organizations are similar to those used in business organization, leaders of nonprofts need a particular emphasis on building relationships and trust and on the development of future EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 185 leaders. Overall, the area of strategic leadership, whether in business or nonproft organizations, provides a different and important perspective to the study of leadership. Strategic leaders face many challenges that micro leaders do not. The study of strategic leaders is also a fertile area for integrative research linking micro and macro factors. Nahavandi. Original materials from The art and science of leadership © copyright 2015 Pearson. All rights reserved. EKREM INCE ekremince@gmail.com University of London 186 Topic 3 LEADERSHIP ENVIRONMENTS ESSENTIAL READING Now do the second reading, bearing in mind the points we have emphasised in the introductory video to this topic and in the mini lecture. Remember that all the essential reading for this programme is provided for you. Click ‘next’ to go to the next page and start reading. After this there will be a short quiz based on both readings to help you test how much information you have retained, then a series of more thought-provoking self-assessment exercises to allow you to stretch yourself and develop your ideas further. EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 187 CHAPTER 11: STRATEGIC LEADERSHIP Leadership in organizations 8th global edition, G. A. Yukl. Original materials from Leadership in organizations © copyright 2013 Pearson. All rights reserved. After studying this chapter, you will be able to: • Understand what organizational processes determine a company’s performance. • Understand how top executives can influence organizational processes and performance. • Understand constraints on strategic leadership and conditions that make it more important. • Understand the potential advantages of executive teams and how to use them effectively. • Understand why it is important to monitor the external environment and how to do it. • Understand the procedures that can be used to formulate a good competitive strategy. Much of the early leadership literature was concerned with supervisors or middle managers in organizations, but in recent years there has been increased interest in “strategic leadership” by top executives (Cannella & Monroe, 1997). The shift in focus reflects an increased interest in understanding how executives can transform their companies to cope with globalization, increasing international competition, and rapid technological and social change. This chapter examines what has been learned about effective leadership by top executives in organizations. The chapter begins with a description of the performance determinants that determine the prosperity and survival of an organization. Next is a review of ways leaders can influence these performance determinants. Then the chapter reviews conditions that determine need for strategic change and the amount of influence top executives are likely to have on the organization. Results are reviewed and evaluated for different types of studies that examine the influence of a chief executive ofcer (CEO) on organizational performance. The chapter explains why executive teams are relevant for understanding strategic leadership in organizations, and the effective use of executive teams is discussed. Alternative conceptions of organizational leadership are reviewed, including shared and distributed leadership, relational leadership, and complexity theory. Two important responsibilities for top executives are monitoring the external environment to identify threats and opportunities, and formulating strategy for the future survival and prosperity of the organization. These responsibilities are explained and guidelines for them are provided. Determinants of Organizational Performance Organizational effectiveness is the long-term prosperity and survival of the organization. To be successful organizations must adapt to their environment, EKREM INCE ekremince@gmail.com University of London 188 Topic 3 LEADERSHIP ENVIRONMENTS acquire necessary resources, and conduct operations in efcient ways (Katz & Kahn, 1978). Leaders can influence organizational performance in several ways, including decisions about the competitive strategy, human resources, and the management programs, systems, and organization structure. The determinants of organizational performance are closely inter-related, and when deciding how to improve performance leaders should understand the inherent trade-offs and potential synergies (Gupta, Smith, & Shalley, 2006; He & Wong, 2004; Yukl, 2008). Adaptation to the Environment The effectiveness of an organization depends on responding in appropriate ways to external threats and opportunities. Adaptation is more important when the external environment is volatile and uncertain, which is likely in situations of rapid technological change, political and economic turmoil, or new threats from competitors or external enemies. A company is more likely to adapt successfully to its environment if it has a relevant competitive strategy specifying the types of products or services to offer and ways to influence potential customers or clients. Successful adaptation sometimes requires major changes in the organization’s products and services, or the procedures for marketing and supplying them. A rapid response to changing conditions and the actions of competitors is especially important for an organization with a strategy that emphasizes unique, leading-edge products or services designed to satisfy the changing needs of customers and clients. Adaptation is enhanced by accurate interpretation of information about the environment; collective learning by members, and accurate mental model about the determinants of performance; effective knowledge management (retention and diffusion of new knowledge within the organization); flexibility of work processes (capacity to change them quickly as needed); innovations in products, services, or processes; and availability of discretionary resources (to support new initiatives and crisis management). Efciency and Process Reliability Efciency is the use of people and resources to carry out essential operations in a way that minimizes costs and avoids wasted effort and resources. Efciency is especially important when the competitive strategy of the organization is to offer its products and services at a lower price than competitors, or when a fnancial crisis occurs and there are insufcient funds to support essential operations. This performance determinant is less important when an organization is able to pass along cost increases to customers, or the organization is highly subsidized by the government or private investors. Efciency can be increased by redesigning work processes, using new technology, and coordinating unit activities to avoid unnecessary activities and wasted resources. However, efforts to improve efciency by using new technology may fail if the cost of purchasing and operating the new technology exceeds any savings from a smaller workforce. Process reliability means avoiding unnecessary delays, errors, quality defects, or accidents. It is an important component of efciency when defective products or unreliable processes increase costs. Examples include theft or misuse of resources, expenses for correcting or replacing defective products or inadequate services, expenses for repairing or replacing damaged equipment, and lawsuits by customers or employees who are injured by errors, accidents, or exposure to harmful substances. Process reliability is conceptualized primarily as a component of efciency because it usually increases costs, but sometimes it can also affect adaptation (e.g., if sales are reduced by defective products or poor service) or human resources (e.g., employees are seriously injured or killed by avoidable accidents and hazards). EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 189 Process reliability can be improved by using extra resources to ensure that quality and safety standards are maintained, products or services are delivered on time, and accidents are avoided. However, efciency will not be improved unless the savings from improved process reliability exceeds the cost of the extra resources. Sometimes it is possible to redesign products and simplify work processes in ways that will reduce errors and delays as well as the direct cost of operations (e.g., with re-engineering or Six Sigma programs). Human Resources and Relations The term human capital is sometimes used to describe the quality of an organization’s human resources, which include the relevant skills and experience of members (Hitt & Ireland, 2002). Performance also depends on member motivation and the quality of their social relationships and networks (sometimes called social capital ). Collective work is performed more effectively by people who have strong skills, strong commitment to task objectives, confdence in their ability to achieve challenging objectives, a high level of mutual trust, and strong identifcation with the organization and its mission (Crook, Todd, Combs, Woehr, & Ketchen, 2011; Harter, Schmidt, & Hayes, 2002; Pfeffer, 1994, 2005). Talented, dedicated employees are often instrumental for the achievement of both efciency and innovative adaptation (Huselid, 1995; Mahsud, Yukl, & Prussia, 2011). At the organizational level, human capital is more important when the organization is heavily dependent on people who have unique talents, require extensive training, and would be difcult to replace if they left (e.g., hospitals, consulting frms, legal frms, advertising agencies, research universities). Human capital is less important for an organization with highly automated processes and few employees, for a “virtual organization” that has outsourced most activities, or for an organization with mostly unskilled jobs and an ample supply of people willing to work for low wages. Human capital depends in part on organizational policies about human resource acquisition, development, and compensation. Human capital can be improved with the use of relevant human resource programs and systems, such as recruiting, training, compensation, stafng and succession planning (e.g., Becker & Huselid, 1998; Bowen & Ostroff, 2004). Competitive Strategy Competitive strategy includes decisions about the types of products or services to offer, the basis for appealing to potential customers (e.g., price, quality, customer service, uniqueness, patriotism), and the methods used to influence potential customers or clients (e.g., advertising, discounts, promotions). The strategy may also involve ways to obtain necessary fnancial resources (e.g., stocks, bonds, loans, donations), and ways to grow the organization and expand into new markets (e.g., acquisitions, mergers, joint ventures, strategic alliances, franchises). Competitive strategy is an important determinant of the fnancial performance and survival of organizations (Adner & Helfat, 2003; Carmeli, Gelbard, & Gefen, 2010; Hambrick, 2007; Narayanan et al., 2011; O Reilly, Caldwell, Chatman, Lapiz, & Self, 2010; Porter, 1980). Leaders formulate competitive strategy with the use of change-oriented behaviors such as monitoring the external environment, assessing threats and opportunities, identifying core competencies, proposing innovative strategies, and evaluating alternative strategies. Some types of programs and systems for monitoring the external environment can be used to help detect threats and opportunities and identify an appropriate strategy for the organization. EKREM INCE ekremince@gmail.com University of London 190 Topic 3 LEADERSHIP ENVIRONMENTS Decisions about competitive strategy have the greatest potential influence on adaptation, but they also affect the relative importance of other performance determinants and their optimal level. For example, the decision to offer lower prices as the primary basis for increasing sales and profts may require a reduction in the cost of operations (e.g., by using improved technology, by using less expensive materials, by reducing the pay and benefts of current or newly hired employees, or by outsourcing high paying jobs to low-wage countries). The decision to provide more unique products or improve customer service may make it necessary to recruit more skilled employees or change the way current employees are trained and rewarded. Implementing a new strategy usually requires some modifcation of management programs, systems, and structures in the organization, and it may also involve negotiation of new agreements with other organizations (e.g., clients, distributors, suppliers, strategic partners). Management Programs, Systems, and Structures Many different types of improvement programs, management systems, and structural forms can be used to influence organizational effectiveness (Yukl & Lepsinger, 2004). Most programs have as the primary objective the improvement of adaptation, efciency, or human capital (see Table 11.1). Table 11.1 Management Programs, Systems, and Structures for Improving Performance Efciency and Process Reliability • Performance management and goal setting programs (e.g., MBO, zero defects) • Process and quality improvement programs (quality circles, TQM, Six Sigma) • Cost reduction programs (downsizing, outsourcing, just-in-time inventory) • Structural forms (functional specialization, formalization, standardization) • Appraisal, recognition, and reward systems focused on efciency and process reliability Human Resources and Relations • Quality of worklife programs (flextime, job sharing, child care, ftness center) • Employee beneft programs (health care, vacations, retirement, sabbaticals) • Socialization and teambuilding (orientation programs; ceremonies and rituals; social events and celebrations) • Employee development programs (training, mentoring, 360 feedback, education subsidies) • Human resource planning (succession planning, assessment centers, recruiting programs) • Empowerment programs (self-managed teams, employee ownership, industrial democracy) • Recognition and reward programs focused on loyalty, service, or skill acquisition Innovation and Adaptation EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 191 • Competitor and market analysis programs (market surveys, focus groups, consumer panels, comparative product testing, benchmarking of competitor products and processes) • Innovation programs (entrepreneurship programs, quality circles, innovation goals) • Knowledge acquisition (consultants, joint ventures, importing best practices from others) • Organizational learning (knowledge management systems, after-activity reviews, joint ventures) • Temporary structural forms for implementing change (steering committee, task forces) • Growth and diversifcation programs (mergers and acquisitions, franchises, joint ventures) • Structural forms (research departments, small product divisions, product managers, crossfunctional product development teams) • Appraisal, recognition, and reward systems focused on innovation and customer satisfaction Several types of management programs or initiatives have been used to improve efciency and process reliability (e.g., Benner & Tushman, 2003; Ho, Chan, & Kedwell, 1999; Lawler, Mohrman, & Benson, 2001; Powell, 1995; Waterson et al., 1999). Examples include cost reduction programs (downsizing, outsourcing, just-in-time inventory), process and quality improvement programs (total quality management, Six Sigma, business process re-engineering); performance management and goal setting programs (e.g., management by objectives, zero defects); and appraisal, recognition, and reward systems that emphasize efciency and reliability. Some programs involve the implementation of standardized procedures that provide a way to ensure that common activities are carried out in an efcient and uniform way across subunits. Another type of improvement program involves the use of new technology to automate work processes and reduce labor costs. Efciency is also affected by aspects of an organization’s formal structure such as formalization, standardization, and the use of functionally specialized subunits (Mintzberg, 1979). Several types of programs have been used to improve innovation and adaptation (e.g., Damanpour, 1991; Dougherty & Hardy, 1996; Gibson & Birkinshaw, 2004; Teece, 1996; Van de Ven et al., 1999; Vermeulen, Jong, & O Shaughnessy, 2005). Examples include programs that improve understanding of customer preferences and competitor actions (e.g., market surveys, focus groups, customer panels, comparative product testing, and benchmarking of competitor products and processes). Structural forms that can increase innovation and adaptation include research and development departments, cross-functional product development teams, product managers, and semi-autonomous divisions based on products, market segments or different types of customers (Galbraith, 1973; Mintzberg, 1979). Many types of management programs and systems are used to improve human capital (e.g., Becker & Gerhardt, 1996; Guzzo, Jette, & Katzell, 1985; Huselid, 1995; Huselid, Jackson, & Schuler, 1997; Ichniowski & Shaw, 1999; Kirkman & Rosen, 1997; Lawler et al., 2001; Molina & Ortega, 2003; Singh, 2003). Employee skills can be improved with recruiting and selection programs, talent management and succession planning programs, and employee development programs (e.g., training, mentoring program, 360 feedback, education subsidies, corporate university). Identifcation with the organization can be improved with quality of work life programs (flextime, job sharing, child care, ftness center), employee beneft programs (compensation, health care, retirement, sabbaticals), socialization programs (orientation sessions; celebrations, rituals, and ceremonies), employee EKREM INCE ekremince@gmail.com University of London 192 Topic 3 LEADERSHIP ENVIRONMENTS empowerment programs (employee stock ownership, industrial democracy), and recognition and reward programs based on loyalty, service, and skill acquisition. Despite some dramatic successes, many improvement programs and management systems fail because they are irrelevant, poorly implemented, or incompatible with the organization’s culture and competitive strategy (Abrahamson, 1996; Abrahamson & Fairchild, 1999; Beer, 1988; Benner & Tushman, 2003; Carson, Lanier, Carson, & Guidry, 2000; Powell, 1995; Staw & Epstein, 2000). Management programs and systems intended to improve one performance determinant often have unintended side effects on other performance determinants, and the side effects may be positive or negative. Even if a program is able to achieve its primary objective, adverse side effects may cause it to be abandoned. How Leaders Influence Organizational Performance Leaders can do many things to influence the things that determine organizational performance, and two general approaches are described by Flexible Leadership Theory (Yukl, 2008; Yukl & Lepsinger, 2004). One approach is to use leadership behaviors to directly influence individuals and groups. The task-oriented behaviors described in earlier chapters are used primarily to improve efciency and process reliability. The relations-oriented behaviors are used primarily to improve human relations and human resources. The change-oriented behaviors are used primarily to improve innovation and adaptation to the external environment. A second general approach is to make decisions about competitive strategy, organization structure, and management programs. Top executives usually have primary responsibility and authority for decisions about competitive strategy and the creation or modifcation of formal programs, systems, and structures (Hambrick, Nadler, & Tushman, 1998; Hunt, 1991). However, a coordinated effort by leaders at all levels in the organization is necessary to ensure that a strategy, improvement program, or management system is effectively implemented. Most leadership theories describe the direct influence of leader behavior on subordinate attitudes and motivation, but not the indirect influence on members derived from changing programs and systems. Over a longer period of time, top executives and other leaders in an organization can also influence cultural values with a combination of behaviors, programs, and reward systems. Direct behaviors and decisions about strategy and programs are complementary forms of leader influence (Yukl, 2008). The direct behaviors can be used to facilitate the implementation of a new strategy or program and their successful use. For example, a new training program is more likely to be successful when leaders encourage subordinates to attend the program and provide them with opportunities to use newly learned skills on the job. A new knowledge management system is more likely to be successful when employees are encouraged to input relevant information and use the system in appropriate ways. A major change in strategy is more likely to be accepted when leaders explain why it is needed and how it will beneft the organization. Management programs and systems can enhance the effects of direct leadership behaviors (Yukl, 2008). For example, encouraging innovative thinking is much more likely to increase the development of new products and processes when an organization has a well-designed program to facilitate and reward innovation. Without such a program, employees may doubt that their creative ideas will be supported and eventually used by the organization. However, programs and structures can also limit the use of leadership behaviors or nullify the effects of this behavior. For example, it is difcult to empower subordinates when there are elaborate rules and standard procedures for doing the work. It is difcult for a leader EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 193 to influence subordinates to improve customer service if there is an incentive system with rewards based entirely on the number of customers served, and faster service is achieved by reducing service quality. Management programs and systems can also serve as substitutes for some types of direct behaviors (Yukl, 2008). For example, company-wide training programs can reduce the amount of training that managers need to provide to their immediate subordinates. Management programs and systems provide a way to ensure that common activities are carried out in an efcient and uniform way across subunits. A company-wide bonus system with clear guidelines is likely to be more equitable than having each subunit manager determine the size and frequency of bonuses and the criteria for awarding them. Training of generic skills that are relevant for all employees is likely to be more efcient and consistent if provided by expert trainers as part of a company training program rather than by many individual managers in the company. Trade-offs and Synergies Complex interdependencies and trade-offs among the performance determinants create difcult challenges for leaders (Beer, 2001; Quinn, 1988; Yukl & Lepsinger, 2004). Decisions and actions that are intended to improve one performance determinant can affect the others in a positive or negative way, and unintended consequences are common. A leader who puts too much emphasis on influencing one performance determinant may have an adverse effect on another performance determinant, resulting in lower organizational performance. The following example from Home Depot shows how attempts to improve efciency can adversely affect both human relations and adaptation (Foust, 2003). The company had always encouraged its store managers to view their stores as their own and to manage them as they saw ft. This approach motivated employees to be entrepreneurial and customer-focused, but it increased the cost of operations. When Bob Nardelli became the CEO, he decided to cut costs by centralizing purchasing decisions, reducing inventory, and establishing clear performance standards. Many store managers were upset by the changes and chose to leave Home Depot rather than surrender their autonomy to headquarters. Customers satisfaction was also affected. Inventory reductions meant that customers could no longer be sure of fnding what they needed. Using more part-time people (up to half of the workforce) as a cost-cutting measure led to more complaints by customers that they could no longer get advice from knowledgeable, experienced salespeople. Sales declined and there was a sharp drop in the stock price. When there are difcult trade-offs, it is essential to fnd an appropriate balance that reflects the relative priorities of the performance determinants and the potential for improving each one (Beer, 2001; Ebben & Johnson, 2005; Gibson & Birkinshaw, 2004; Quinn, 1988; Uotila, Markku, Keil, & Shaker, 2009; Yukl & Lepsinger, 2004). In some cases it is not possible to improve a performance determinant without consistent changes in the others. For example, it is difcult to improve efciency or innovation if the necessary changes depend on employees who lack the motivation and skills necessary to achieve these objectives. Whenever possible, leaders should look for ways to enhance more than one performance determinant at the same time. The performance of a team or organization is likely to be better when leaders are able to enhance innovative adaptation and efciency simultaneously, which is sometimes called “organizational ambidexterity” (Gibson & Birkinshaw, 2004; He & Wong, 2004; O Reilly & Tushman, 2004; Tushman & O Reilly, 1996). For example, one study (Gilson, Mathieu, Shalley, & Ruddy, 2005) found that equipment repair teams EKREM INCE ekremince@gmail.com University of London 194 Topic 3 LEADERSHIP ENVIRONMENTS with highly skilled members (human capital) were able to achieve low costs (efciency) as well as good customer service (adaptation) with a combination of standardized best practices and creativity in using new approaches. Success in achieving potential synergies requires a good understanding of the complex relationships among performance determinants and the consequences of decisions made to influence them. The following example vividly shows what can go wrong when top executives fail to understand these complexities (Finkelstein, 2003). In the 1980s two major problems for General Motors were contentious relations with the auto workers union and increasing competition from low-cost, high quality cars made by Toyota and other Japanese companies. Roger Smith, the CEO of GM, believed that the solution for improving both efciency and quality was to replace most production workers with robots. He had a vision of GM factories operating at high speed day and night with no worker errors, no strikes, and lower labor costs. The GM executives failed to anticipate the difculties and high cost of automating production processes, and they did not understand that a much better solution was to use the same lean manufacturing practices that were so effective for Toyota (including supply-chain management, just-in-time inventory, and quality management practices). The cost for capital investment in new equipment and the high costs for skilled technicians to operate and maintain the equipment far exceeded any savings from downsizing the work force. The automated factories failed to provide the expected improvement in quality, and productivity actually declined during the period from 1984 to 1991. GM invested more than 45 billion dollars in automation, and this amount would have been sufcient to purchase both Toyota and Nissan. The task of balancing trade-offs among the performance determinants is further complicated by changes in conditions affecting the relative importance of the performance determinants (Yukl, 2008). Examples include changes in economic and political conditions, new competition from other organizations, changes in customer preferences, and changes in technology that affect the processes or products of the company. A leader may achieve a good balance only to fnd that changing conditions have upset it again. Leaders should frequently assess the situation and determine what types of behavior, programs, management systems, and structural forms are relevant and mutually compatible. Using a particular type of behavior, program, or strategy because it proved successful in the past or for other leaders may not yield the desired results. Considerable skill is required to monitor and diagnose the situation accurately and integrate diverse leadership activities in a way that is relevant for changing conditions (Boal & Hooijberg, 2001; Hooijberg, Hunt, & Dodge, 1997; Yukl & Lepsinger, 2005). Coordinating Leadership Across Levels and Subunits Leadership in organizations is a process that involves many formal and informal leaders at all levels and in different subunits of the organization. The fates of different leaders are closely intertwined in complex ways, and the overall performance of the organization is likely to suffer if decisions made by different leaders are not compatible with each other (Yukl, 2008). Even though top executives have primary responsibility for strategic decisions, they are unlikely to be implemented successfully without the support and commitment of middle- and lower-level leaders in the organization (Beer et al., 1990; Huy, 2002; O Reilly et al., 2010; Wai-Kwong, Priem, & Cycyota, 2001). Even in organizations with a powerful CEO, the implementation of a new strategy or major change can be delayed by prolonged conflicts among top executives, or by resistance to change from managers at middle and lower levels. Leaders may EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 195 disagree about the nature of external threats and opportunities, the reasons for past success or failure, the priorities for different objectives, the feasibility of alternative strategies, and the need for major changes. A good understanding of reasons for potential resistance is needed to identify a vision or competitive strategy that will elicit sufcient cooperation and commitment (Connor, 1995; Edmondson, Roberto, & Watkins, 2003; Kotter, 2002; Robbins & Duncan, 1988; Smith & Tushman, 2005). It is important to understand the complex interdependencies that determine the consequences of strategic decisions for other executives and the overall organization. The primary responsibility for resolving disagreements and achieving integration usually falls on the CEO, and it can be facilitated with the use of appropriate decision processes. However, an alternative approach is to make the entire executive team responsible for integration. The facilitating conditions and essential processes for a “leader centric” or “team centric” approach are described by Smith and Tushman (2005). It is difcult to achieve cooperation and coordination across levels and subunits in an organization unless the managers have shared ideals and values to guide their decisions. Companies with a “core ideology” that is strong and relevant are more likely to survive and be successful over a long period of time (Collins & Porras, 1997). Top management has primary responsibility for ensuring that the organization has a relevant core ideology, but leaders at all levels must help to build support for it and ensure that it is understood. Top executives do not have a monopoly on relevant information or new ideas, and innovative changes in organizations often originate from lower levels (Marion & Uhl-Bien, 2001; Yukl & Lepsinger, 2004). There are several ways top management can increase the involvement of middle- and lower-level managers in making strategic decisions (Denis, Lamothe, & Langley, 2001; Sundaramurthy & Lewis, 2003). Managers at different levels can be invited to participate in face-to-face or virtual meetings about strategic decisions. Task forces with representatives from different subunits and levels can be formed to develop a new initiative or determine what types of changes are necessary. Relevant programs and systems can be used to encourage and support proposals from lower-level managers for improving efciency, adaptation, and human relations. Situations Affecting Strategic Leadership The opportunity of top executives to exert strong influence on the performance of an organization is greater for some situations than for others. It depends in part on the success of the organization’s current strategies in achieving a high level of fnancial performance, on external conditions that determine if the strategies are effective, on the power of the CEO to make major changes, and on internal and external constraints that limit the decisions of the CEO (Lord & Maher, 1991; Miller & Friesen, 1984; Tushman & Romanelli, 1985; Tushman, Newman, & Romanelli, 1986). Each of these situational influences will be described briefly. Constraints on Top Executives In Chapter 2 we saw that managers face many constraints that limit their discretion. How much influence top executives can have on the performance of their organization is determined in part by internal and external constraints on their decisions and actions (Hambrick & Finkelstein, 1987). One type of internal constraint involves powerful inside forces or coalitions in the organization. Power and discretion are greater when the CEO is a major owner or shareholder of the frm or when the board of directors is easily influenced to support EKREM INCE ekremince@gmail.com University of London 196 Topic 3 LEADERSHIP ENVIRONMENTS the CEO. Discretion is also increased when surplus fnancial reserves are available to fund new ventures, or the frm’s prosperity makes it easy to fnance innovations by borrowing funds. There is less discretion when the CEO must operate in the shadow of the company founder, satisfy a dominant owner (e.g., the organization is a family-owned frm or the subsidiary of another frm), or answer to a strong board of directors with rigid ideas about the appropriate way to do things. Discretion is also limited when internal factions and coalitions have sufcient power to block changes a leader wants to make (e.g., labor unions, other executives with a strong power base), or there is a strong organization culture that is resistant to change. Large organizations with a strong bureaucracy and standardized ways of doing things have an inertia that is difcult to overcome. People resist change that threatens their status and power, contradicts their values and beliefs, or requires learning new ways of doing things. External constraints on the discretion of a CEO include the nature of the organization’s primary products and services and the type of markets in which the organization operates. Managerial discretion is greater if the organization is in a growth industry that has rapidly increasing demand rather than flat or declining demand, if the organization’s products or services can be differentiated from those of competitors (not a standardized “commodity” such as gasoline or cement), and if the organization dominates its markets and faces little or no direct competition (e.g., it is a monopoly or has a dominant share of the market). Discretion is constrained by powerful external stakeholders who can dictate conditions, as when a few major clients account for most of the company’s sales, or when the company is dependent on a single source of key materials. The decisions and actions of top executives are limited by environmental regulations, labor laws, safety standards, and legal obligations. Even when the organization is a monopoly, discretion in key areas such as pricing, technology, and product changes may be severely limited by government regulation. Environmental Uncertainty and Crises The discretion of an executive to make major changes depends in part on how internal and external stakeholders perceive the current performance of the organization. Major innovative changes are less likely to occur in periods of relative stability and prosperity for the organization. When people do not perceive any crisis, attempts by the leader to make major changes are likely to be viewed as inappropriate, disruptive, and irresponsible. However, in a crisis situation leaders are expected to take more decisive, innovative actions. The potential influence of a CEO on the organization’s performance is much larger when major changes in the environment threaten to undermine the effectiveness of the existing strategy or provide unusual opportunities to pursue a new strategy. A CEO who foresees the need for change and takes bold steps to deal with threats and capitalize on opportunities can have a dramatic effect on the long-term survival and effectiveness of the organization. However, in the absence of an obvious crisis and declining performance, major changes are risky. In a relatively stable environment, changing a traditional strategy that has been effective can reduce fnancial performance rather than improving it (McClelland, Liang, & Barker, 2009). It is often costly to implement a new strategy, and a temporary decline in fnancial performance is likely as added costs are incurred and people learn new ways of doing things (Lord & Maher, 1991). Considerable time is usually required to verify the success of a major change (three to fve years), and constituents may become impatient about the lack of faster progress. EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 197 When faced with gradual changes in the external environment such as new competition, new technology, or shifts in customer preferences, many executives persist too long in the belief that a previously successful strategy is still relevant (Audia, Locke, & Smith, 2000; Lant, Milliken, & Batra, 1992; Miller & Chen, 1994). When executives identify with the current strategy because they developed it, or their implicit assumptions about it are incorrect, then they are likely to make only incremental changes rather than major changes. Efforts to strengthen the current strategy by cutting costs and tightening controls often results in a temporary improvement in performance, making top management appear to be successful (Johnson, 1992). An entrenched CEO may continue to invest more resources in the current strategy rather than admit that it is failing (Staw & Ross, 1987). When organizational performance is declining and the survival of the organization is in doubt, it is common to bring in a new CEO from outside the organization with a mandate to make major changes. A new CEO usually makes some initial changes to seek immediate relief, buy time for longer-term solutions, and gain more discretion for future changes. However, if the initial changes are costly to implement and disruptive to operations, the net effect may be a further decline in organizational performance until the benefts of the change fnally begin to materialize (Gabarro, 1987; Haveman, 1992). A study of NFL coaches found that major changes were more likely to be successful if the new leader had visible success in a prior position, but the study also found that leaders with a good reputation were usually more cautious about making major changes (Ndofor, Priem, Rathburn, & Dhir, 2009). Internal and external constraints interact with each other and with the leader’s personality and skills to influence the leader’s behavior. Over time pressures arise that favor a match between the type of leadership situation and the type of person flling it. The most restrictive situation is one in which internal and external constraints are so severe that the CEO is merely a fgurehead who cannot implement any signifcant strategy changes or innovations. This type of position is unlikely to attract an ambitious, innovative leader, and the organization selection process will favor a conservative, risk-averse, compliant person. The opposite extreme is the situation with few internal and external constraints and ample discretion. Ambitious, dynamic leaders will be attracted to this type of position. Ample discretion provides opportunities for innovative leadership but does not guarantee it. Even in a situation with few constraints, some leaders lack the cognitive skill to perceive innovative options or the motivation to pursue them. Organizational Culture The culture of an organization consists of shared assumptions, beliefs, and values for the members (Schein, 1992, 2004; Trice & Beyer, 1991, 1993). The underlying beliefs and values help members deal with problems of survival in the external environment and problems of internal integration. The culture may be strong or weak, and there may be one dominant culture for the organization or several different cultures within subunits. An organization’s culture is a situational influence on leaders, but over time leaders can also influence culture. This section of the chapter explains the functions of culture, the relationship of culture to organizational performance, the influence of leaders on culture, and the difculty of changing it. Functions of Culture A major function of culture is to help people understand the environment and determine how to respond to it, thereby reducing anxiety, uncertainty, and confusion. External issues include the core mission of the organization, concrete objectives based on this mission, strategies for attaining these objectives, ways to EKREM INCE ekremince@gmail.com University of London 198 Topic 3 LEADERSHIP ENVIRONMENTS measure success in attaining objectives, and the reasons for unexpected events affecting the organization. Objectives and strategies cannot be achieved effectively without cooperative effort, and internal integration involves issues such as the criteria for membership in the organization, the basis for determining status and power, criteria and procedures for allocating rewards and punishments, rules or customs about how to handle aggression and intimacy, and a shared consensus about the meaning of words and symbols. The beliefs that develop about these issues serve as the basis for role expectations to guide behavior, let people know what is proper and improper, and help people maintain comfortable relationships with each other. The internal and external problems are closely interconnected, and organizations must deal with them simultaneously. As solutions are developed through experience, they become shared assumptions that are passed on to new members. Over time, the assumptions may become so familiar that members are no longer consciously aware of them. Shared beliefs and established traditions are an important cultural mechanism for ensuring stability and continuity in an organization or society, and culture can facilitate or limit efforts to make major changes in the organization (see Chapter 4). Culture and Organizational Performance Cultural values can enhance the performance of an organization if they are consistent with the types of processes needed to accomplish the mission and adapt to internal and external challenges (Gordon & DiTomaso, 1992; Kotter & Heskett, 1992). For example, shared values such as flexibility, creativity, and entrepreneurial initiative can facilitate innovation and organizational learning (Baer & Frese, 2003). Shared values about reliability, meeting deadlines, error-free performance, controlling costs, and responsible use of resources, and adherence to best practices and standard procedures can enhance efciency (Miron et al., 2004). The organization’s culture may also include values that are important in the national culture (e.g., performance orientation, uncertainty tolerance), and these values can also have implications for the organization’s performance. A strong corporate culture can be a weakness rather than an advantage if shared beliefs and values are not consistent with the strategies necessary for the organization to prosper and survive. Leader Influence on Culture The CEO of an organization usually has more influence than other individual managers, but the corporate culture reflects the influence of many different leaders over a considerable period of time (Pfeffer, 1992; Schein, 1992; Trice & Beyer, 1993; Tsui, Zhang, Wang, Xin, & Wu, 2006). The influence of an individual CEO can be substantial for the entrepreneurial founder of a successful company who has led it for many years, or for a turnaround CEO who saves a dying organization by making major changes in strategy and operating practices. The potential influence of leaders on corporate culture increases in a crisis that requires major changes, but the CEO is not the only source of this influence. When one subunit is clearly more important than the others for the continued success of the organization, key elements of its subculture may emerge and become central in the corporate culture. Leaders can influence the culture of an organization in a variety of ways, and the effects are stronger when the different approaches are consistent with each other. One form of leader influence on the organizational culture is the use of ideological appeals and repeated articulation of an inspiring vision for the organization or subunit. Leaders communicate their values when they make statements about values and objectives that are important and formulate long-term strategies and plans for attaining them. Written value statements, charters, and philosophies can be useful, but they have little credibility unless supported by leader actions and decisions. EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 199 Leaders communicate values and expectations by highly visible symbolic actions relevant for cultural values, such as showing loyalty, self-sacrifce, and service beyond the call of duty. Even when the symbolic actions or decisions of a leader are not directly observed by most members of the organization, they can become the subject of stories and myths and be propagated widely. Leaders also communicate their priorities and concerns in their daily activity by their choice of things to ask about, measure, comment on, praise, and criticize. By not paying attention to something, a leader sends the message that it is not important. The importance of keeping decisions and actions consistent with espoused values is shown in the following example (Newstrom & Davis, 1993). The CEO and top executives of a small computer company in the Silicon Valley wanted to create an appropriate culture for the new company. They produced a two-page values statement describing the importance of employee involvement, open communication, high-quality products, and good customer service. The values document was posted in prominent places and distributed to company employees. However, there was a wide discrepancy between the values statement and executive behavior, and most employees knew that secrecy and expediency were the real values. Instead of open communication, meetings were used to announce decisions already made by top management, and employees were not encouraged to suggest ideas or express concerns. Getting the product out the door to customers had top priority, regardless of possible defects. As quality problems increased, many customers became dissatisfed with the company’s computers. Sales begin to decline, and two years later the company fled for bankruptcy. Another approach for influencing culture involves the use of cultural forms such as symbols, slogans, rituals, and ceremonies (Trice & Beyer, 1993). Rituals, ceremonies, and rites of passage can be used to emphasize core values and strengthen identifcation with the organization. In many organizations new members are required to make a public oath of allegiance, demonstrate knowledge of the ideology, or undergo an ordeal that demonstrates loyalty. Also common are ceremonies to celebrate a member’s advancement in rank, to inaugurate a new leader, and to acknowledge the retirement of a member. Rituals and ceremonies may also involve the communication of stories about important events and heroic actions by individuals. However, stories and myths are more a reflection of culture than a determinant of it. To be useful the story must describe a real event and convey a clear message about values. A third way for leaders to influence culture is creation or modifcation of formal programs, systems, organization structure, and facilities. Formal budgets, planning sessions, reports, performance review procedures, and management development programs can be used to emphasize some values and beliefs about proper behavior. Orientation programs can be used to socialize new employees and teach them about the culture of an organization. Training programs designed to increase job skills can also be used to teach participants about the ideology of the organization. Values are also communicated by the criteria emphasized in recruiting, selecting, rewarding, promoting, and dismissing people. The effect on culture is stronger if the organization provides realistic information about the criteria and requirements for success, and the personnel decisions are consistent with these criteria. Difculty of Culture Change How difcult it is to change culture depends in part on the developmental stage of the organization (Schein, 1992; Trice & Beyer, 1993). The founder of a new organization has a strong influence on its culture. The founder typically has a vision of a new enterprise and proposes ways of doing things that, if successful in EKREM INCE ekremince@gmail.com University of London 200 Topic 3 LEADERSHIP ENVIRONMENTS accomplishing objectives and reducing anxiety, will gradually become embedded in the culture. The culture in young, successful organizations is likely to be strong when it is instrumental to the success of the organization, the assumptions are internalized by current members and transmitted to new members, and the founder is still present to symbolize and reinforce the culture. The culture will evolve slowly over the years as experience reveals that some assumptions need to be modifed. Eventually, as the organization matures and people other than the founder or family members occupy key leadership positions, the culture will become less uniform, and subcultures may develop in different subunits. In general, it is much more difcult for leaders to change culture in a mature organization than to create it in a new organization. One reason is that many of the underlying beliefs and assumptions shared by people in an organization are implicit and unconscious. Cultural assumptions are also difcult to change when they justify the past and are a matter of pride. Moreover, cultural values influence the selection of leaders and the role expectations for them. In a mature, relatively prosperous organization, culture influences leaders more than leaders influence culture. Drastic changes are unlikely unless a major crisis threatens the welfare and survival of the organization. Even with a crisis, it takes considerable insight and skill for a leader to understand the current culture in an organization and implement changes successfully. Research on Effects of Strategic Leadership The effects of CEO leadership on company performance have been examined in research with different methods. Results will be reviewed for succession studies, intensive case studies, and survey studies of CEO behavior. Studies of CEO Succession Research on the consequences of changing the chief executive of an organization is relevant for understanding importance of strategic leadership. The research method in most succession studies is an archival feld study on CEOs for a sample of business corporations, but a few succession studies have used coaches of professional sports teams. All data is from archival records, and characteristics of the successors (e.g., internal vs. external) are related to changes in objective measures of organizational performance in the years before and after succession occurs (e.g., Grinyer, Mayes, & McKiernan, 1990). Progress has been made in understanding the reasons for succession, how successors are selected, and the consequences of succession for the organization (Giambatista, Rowe, & Riaz, 2005; Shen & Cannella, 2002; Sobel, Harkins, & Conley, 2007; Zhang & Rajagopalan, 2004). Reviews of the succession research provide evidence that changes in the chief executive have important effects on the long-term performance of an organization (Giambatista et al., 2005; Kesner & Sebora, 1994). However, many limitations in the research complicate interpretation of the results, including differences in performance criteria, failure to consider effects of internal and external constraints, and failure to consider CEO skills. Most succession studies do not measure the executive’s actions, the organizational processes that would explain how a chief executive influences performance, or the conditions that determine how much potential influence the leaders can have (Day & Lord, 1988; Giambatista et al., 2005; House & Singh, 1987). Descriptive Studies of CEO Decisions and Actions Several types of descriptive studies have been used to investigate the influence of CEOs on their organizations. Many different sources of information can be used, EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 201 including interviews, questionnaires, company records, annual reports, and fnancial databases. Some researchers also use information from secondary sources such as biographies, autobiographies, and magazine articles about organizations and their leaders. Descriptive studies of chief executives usually examine the types of decisions and actions that account for the success or failure of an organization over a period of several years. A comparative study of several organizations has been used to see if successful CEOs have a similar pattern of strategic decisions and behavior (e.g., Bennis & Nanus, 1985; Nadler et al., 1995), or if CEO actions and communications can explain why some companies have better fnancial performance than other companies in the same industry (e.g., Makri & Scandura, 2010; McClelland, Liang, & Barker, 2009). An intensive case study of a single organization has been used to examine how a new chief executive leads a dramatic turnaround by a company in decline (e.g., Ghosen & Ries, 2002; Wyden, 1987). A few studies have examined CEOs who were initially successful but later experienced failure in order to determine the reasons for a different outcome (e.g., Finkelstein, 2003; Probst & Raisch, 2005). Descriptive studies of top executives are not limited to corporations, and some are conducted with military leaders, political leaders, or leaders of nonproft organizations (e.g., Bennis & Nanus, 1985; Burns, 1978; Van Fleet & Yukl, 1986b). One limitation of most descriptive studies is the difculty in getting accurate information about the behavior of chief executives and their influence on organizational performance. Information provided by a current or former CEO may be biased by a desire to present a favorable image. Celebrity CEOs may decline to reveal weaknesses and claim more credit than is deserved for successes. Information from other sources may also be unreliable. Few members of the organization have an opportunity to directly observe most of a chief executive’s actions. The people who are close to the CEO may be unwilling to discuss controversial decisions or events in which they were involved, out of loyalty, fear for their own reputation, or because of non-disclosure agreements. Even when accurate information can be obtained, it may be difcult to assess the influence of a single CEO. Many of a chief executive’s strategic decisions and actions only indirectly affect the fnancial performance of a large company, and the effects may not be clear until several years later. Financial performance is affected by many different events and by the actions of many parties (e.g., the board of directors, other top executives, competitors, strategic partners, regulatory agencies). Despite all the difculties in conducting this type of research, it has provided additional evidence that CEOs can exert signifcant influence on the performance of their organizations. The descriptive studies also provide insights into the reasons why some chief executives are more effective than others. Successful chief executives identify important threats and opportunities for their organization, take decisive action to resolve serious problems, identify a good competitive strategy, and implement the strategy in a timely way. These CEOs also foster a strong core ideology that is consistent with the mission and strategy. Survey Studies on CEO Leadership Several survey studies have examined how leadership by a chief executive is related to a frm’s fnancial performance or rated effectiveness (Angle, Nagarajan, Sonnenfeld, & Srinivasan, 2006; Ensley, Hmieleski, & Pearce, 2006; Jung, Wu, & Chow, 2008; Ling, Simsek, Lubatkin, & Veiga, 2008a, 2008b; Makri & Scandura, 2010; Peterson, Walumbwa, Byron, & Myrowitz, 2009; Tosi, Misangyi, Fanelli, Waldman, & Yammarino, 2004; Waldman, Javidan, & Varella, 2004; Waldman, Ramirez, House, & Puranam, 2001; Wang, Tsui, & Xin, 2011; Zhu, Chew, & Spangler, 2005). Most of these studies were narrowly focused on the effects of charismatic or transformational EKREM INCE ekremince@gmail.com University of London 202 Topic 3 LEADERSHIP ENVIRONMENTS leadership by a CEO. Leadership behavior was measured with a questionnaire flled out by one or more subordinates, and behavior was correlated with measures of the company’s fnancial performance. The fndings were not consistent across the studies, which may be due in part to large differences in the samples, the measure of leadership behavior, and the measure of organizational effectiveness. Charismatic or transformational leadership was correlated with a measure of organizational effectiveness in some studies but not others. A few studies found that the results were dependent on situational variables such as the size and type of organization and environmental dynamism or uncertainty. None of the studies included adequate measures of performance determinants that explain how a CEO influences fnancial performance for a large company. Knowledge about frm performance may have biased the ratings of leader behavior (see Chapters 3 and 9). This attribution bias occurs when the CEO of a company known to have strong fnancial performance is rated more charismatic or transformational than CEOs for companies with weaker performance, despite no actual difference in their behavior. In one study that attempted to control for this bias by including a measure of past performance, a signifcant effect for CEO charismatic leadership was not found (Angle et al., 2006). Evaluation of Research on Strategic Leadership The research on leadership by chief executives of organizations shows that they can influence organizational processes and outcomes, but this influence varies greatly depending on the situation and the traits and skills of the leaders. The succession studies, descriptive studies, and survey studies all have limitations, and more comprehensive research is needed to accurately determine how chief executives can influence the fnancial performance of their frms. The research should examine a much broader range of actions and decisions by chief executives, including how they influence strategy, structure, programs, systems, and culture. The research should include measures of other relevant mediating processes and performance determinants in addition to member motivation, commitment, and cooperation. Finally, it is essential to gather information about the influence of other top executives and leaders at middle and lower levels in the organization. Executive Teams All organizations have a top management group that includes the CEO and other top executives, but organizations differ greatly in the way this group operates. The traditional approach is to have a clear hierarchy of authority with a CEO (usually the chairman of the board, but sometimes the president of the organization), a chief operating ofcer (usually the president of the organization), and several subordinate executives (e.g., vice presidents) who head various subunits of the organization. This structure is still prominent, but an increasingly popular alternative is to share power within the top management team (Ancona & Nadler, 1989). Executives in the team collectively assume the responsibilities of the chief operating ofcer in managing the internal operations of the organization, and they assist the CEO in formulating strategy. Another, less common variation is the “ofce of the chairperson” structure in which the responsibilities of the CEO are shared, even though one executive (the chairperson) usually has more power than the others (the vice chairpersons). Regardless of the formal structure of an organization, differences will occur in the extent to which strategic leadership is actually shared among the top executives. An organization with an executive team may have an autocratic CEO who allows other executives little influence over strategic decisions, whereas an organization with a traditional hierarchy may have a CEO who empowers other top executives to share responsibility for making strategic decisions. EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 203 Executive teams are becoming more acceptable due to their effective use in other countries (such as Japan) and a growing awareness that shared leadership can be benefcial for complex organizations in a turbulent environment. An example of an executive team with an unusual amount of shared leadership comes from Nordstrom Inc., a department store chain (Yang, 1992). During the 1980s the executive team consisted of three of the founder’s grandsons, Bruce, John, and James. The title of President rotated among the three executives. Later in the 1990s, when the company encountered sluggish sales and lower profts, the executive team was modifed. The three co-presidents and one other relative were elevated to co-chairmen. They focus on strategy issues, such as expansion plans and selection of store sites. Four non-family members were promoted to the positions of co-president. They are jointly responsible for making operating decisions on how to conduct the day-to-day affairs of the company. Each co-president is responsible for a different type of merchandise. Although they have considerable autonomy in their own domain of responsibility, they operate as a unifed team. They hold weekly meetings and communicate frequently with each other. Despite lively debates, they cooperate in fnding solutions that will be best for the customer, their common goal. Potential Advantages Executive teams offer a number of potential advantages for an organization (Ancona & Nadler, 1989; Bradford & Cohen, 1984; Eisenstat & Cohen, 1990; Hambrick, 1987; Nadler, 1998). The members often have relevant skills and knowledge that the CEO lacks and can compensate for weaknesses in the skills of the CEO. Important tasks are less likely to be neglected if several people are available to share the burden of leadership. When executives from different subunits meet regularly as a team, communication and cooperation are likely to be improved. The decisions made by a team are more likely to represent the diverse interests of organization members, and involvement in making these decisions will improve member commitment to implement them effectively. A recent study found that when the CEO allowed other members of a top executive team to influence a strategic decision, the decision quality was better, the decision was perceived as more fair, team members were more committed to implement the decision, their trust in the leader increased, and they identifed more with the team (Korsgaard, Schweiger, & Sapienze, 1995). A study of top management teams from 116 Israeli frms found that a high level of mutual understanding and collaboration among members (called “behavioral integration”) was related to better quality of strategic decisions and more favorable ratings of organizational performance (Carmeli & Schaubroeck, 2006). The team approach is also a way to facilitate leadership succession in large, diverse organizations. Experience in dealing with the major issues and decisions facing the organization provides opportunities for executives to develop more relevant leadership skills. Moreover, when several executives share responsibility for strategic leadership of the organization, it is easier for the current CEO and the board of directors to determine which executive in the team is most qualifed to become the next CEO. Facilitating Conditions The potential advantages of having an executive team depend in part on the situation, and they are especially important in a complex, rapidly changing environment that places many external demands on the CEO (Ancona & Nadler, 1989; EKREM INCE ekremince@gmail.com University of London 204 Topic 3 LEADERSHIP ENVIRONMENTS Edmondson et al., 2003). Growing turbulence in the environment due to rapid technological changes and increased global competition has made the responsibility for developing successful strategy more difcult for many organizations. Teams are also more important when the organization has diverse but highly interdependent business units that require close coordination across units. In an organization with several diverse business units, a single leader is unlikely to have the broad expertise necessary to direct and coordinate the activities of these units. The quality of the strategic decisions made by a team is likely to be better if members have a diverse backgrounds and perspectives and their knowledge and skills are relevant for understanding how the organization can adapt in a dynamic, uncertain environment (Bantel & Jackson, 1989; Cannella, Park, & Lee, 2008; Murray, 1989). However, as found in the research on decision groups (see Chapter 10), the potential benefts of diversity will not be achieved unless the team can process information and make decisions in a way that utilizes the knowledge and ideas of members. Highly divergent interests and differences in preferences and priorities regarding company objectives also make it more difcult to achieve mutual understanding (Colbert, Kristof-Brown, Bradley, & Barrick, 2008; Simsek, Veiga, Lubatkin, & Dino, 2005). It is more difcult to develop mutual trust and cooperation when team members represent subunits with different objectives or members are competing to become the successor to the current CEO. Making strategic decisions jointly is more likely to yield high quality decisions if the executives have an accurate, shared “mental model” about the determinants of organizational performance, their relative importance, and how they can be influenced to improve performance (Cannon-Bowers et al., 1993; Klimoski & Mohammed, 1994; Senge, 1990). More accurate models can be developed by explicit discussion of differences in how the executives view the world, by improving measures and information systems (to ensure accurate, timely information about key variables), and by conducting experiments on the effects of different types of changes and improvement programs. Relevant training in development of accurate mental models about the causes of important outcomes in complex systems is another way to improve strategic decisions by individual executives and teams (Marcy & Mumford, 2010). Leadership of Executive Teams Whether the potential advantages of executive teams are realized depends on the leadership provided by the CEO (Eisenstat & Cohen, 1990). Effective leadership is more likely if the CEO has relevant values, traits, and skills. For example, a comparative case study of 17 CEOs (e.g., Peterson, Smith, Martorana, & Owens, 2003) found that CEO personality was related to the top management team characteristics (optimism, cohesiveness, flexibility, and moderate risk taking), which were related in turn to a measure of fnancial performance. Executive teams are more likely to be successful when the CEO selects team members with relevant skills and experience, clearly defnes objectives consistent with shared values, gives the team considerable discretion but clearly specifes the limits of team authority in relation to CEO authority, helps the team establish norms that will facilitate group processes, facilitates learning of skills in working together effectively, and encourages openness and mutual trust among team members. The CEO should avoid actions that encourage competition or distrust, such as overtly making comparative evaluations among team members and meeting with individual executives to deal with issues that should be addressed by the entire team. It is also essential for the CEO to help the team avoid process problems that can prevent them from making good decisions. If the CEO dominates decisions, the EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 205 potential benefts of diverse members with relevant knowledge may not be realized. The quality of a strategic decision is likely to be better if individuals with the most expertise for that type of decision have ample influence over it. It is also important to make decisions in a timely way. The CEO should seek consensus among the executives who would be the most affected by a decision, rather than prolonging discussion in an effort to achieve consensus among everyone. Here is an example of how a new CEO implemented an effective executive team (George, 2003, pp. 96-97): To mold top executives into a well-oiled team and build agreement on major goals and objectives, we formed an executive committee that included the leaders of major company businesses and corporate staff units. Each meeting began with an executive session to discuss issues any member considered important. Then we reviewed and approved all strategies, investments, and fnancial plans for each business and the company as a whole. I encouraged committee members to make their positions known even on areas of the business for which they were not responsible. This open approach brought us closer together and built a strong sense of commitment to our mutual agenda. The executive committee actually voted on all major decisions of the corporation, including the release of new products before they went to market, which increased commitment to our decisions and emphasized the vital importance of product quality. Example of a Study on Executive Teams Eisenhardt (1989) conducted a study of eight minicomputer frms to investigate how the speed and quality of strategic decisions were affected by the decision processes in these frms. Interviews were conducted with members of the executive team in each company to learn about the process used for important decisions, including when and how they were made. Questionnaires, company documents, and industry reports were used to obtain additional information about decision processes and company performance. The study found that strategic decisions were both faster and better when the executive team conducted a simultaneous evaluation of several alternatives rather than using the common “satisfcing” procedure of examining alternatives sequentially until a satisfactory one is found. An intensive decision process helped the team evaluate the strengths and weaknesses of each alternative, avoid premature commitment to a particular alternative, and identify a fallback position to use if attempts to implement the chosen alternative encountered unexpected obstacles. The executive team was more effective when it considered how a decision was related to other strategic decisions, and when it considered tactical plans (e.g., action steps, budgets, schedules) for implementing a strategic decision as part of the process for evaluating feasibility. This integrative approach appears to provide a better understanding of the alternatives and their implications, and it tends to reduce anxiety about possible adverse consequences, thereby increasing confdence in the team’s evaluation and willingness to move forward with a decision. Emerging Conceptions of Organizational Leadership Some different ways of conceptualizing leadership have emerged in recent years, and they are eliciting interest among scholars who believe that the currently popular theories are too limited. Examples include shared and distributed leadership, relational leadership and social networks, and emergent processes in complexity theory. These approaches are still evolving, and as yet there is little conclusive research on them. Each approach will be described briefly. EKREM INCE ekremince@gmail.com University of London 206 Topic 3 LEADERSHIP ENVIRONMENTS Shared and Distributed Leadership The theory and research on leadership has long recognized that effective leaders empower others to participate in the process of interpreting events, solving problems, and making decisions (Argyris, 1964; Likert, 1967). In most of these approaches, the focus is on the process by which focal leaders encourage and enable others to share responsibility for leadership functions. The emphasis in the traditional approaches is on using empowerment to make an individual leader more effective. An alternative view of organizations is that distributed leadership, power sharing, and political activities are inevitable in organizations, and they cannot be understood by focusing on the decisions and actions of individual leaders. Proponents of this perspective recognize that the actions of any individual leader are less important than the collective leadership provided by many members of the organization, including both formal and informal leaders (Day, Gronn, & Salas, 2004). Viewing leadership in terms of reciprocal, recursive influence processes among multiple leaders is different from studying unidirectional effects of a single leader on subordinates. Distributed leadership involves multiple leaders with distinct but inter-related responsibilities. If the various leaders are unable to agree about what to do and how to do it, performance of the team or organization is likely to suffer (e.g., Mehra, Smith, Dixon, & Robertson, 2006). There are many different ways to share and distribute power and authority in organizations, and some are more successful than others (e.g., Cox, Pearce, & Perry, 2003; Ensley et al., 2006; Gronn, 2002; Locke, 2003; O Toole, Galbraith, & Lawler, 2003; Pearce & Conger, 2003). A few initial attempts to develop theories of shared leadership are promising (e.g., Ilgen, Hollenbeck, Johnson, & Jundt, 2005; Pearce & Sims, 2000; Mayo, Meindl, & Pastor, 2003; Seers et al., 2003). In addition to the leadership literature, insights about shared and distributed leadership in organizations are provided by several other literatures (e.g., organization theory, public administration, strategic management, and social networks theory). Several scholars have considered how shared, collective, or distributive leadership is related to team or organizational effectiveness (e.g., Brown & Gioia, 2002; Brown & Hosking, 1986; Carson et al., 2007; Denis, Lamothe, & Langley, 2001; Friedrich, Vessey, Schuelke, Ruark, & Mumford, 2009; Hunt & Ropo, 1995; Lawler, 1986; Pearce & Sims, 2002; Semler, 1989). Despite these efforts, much more research is needed on the distribution of leadership responsibilities among the members of a team or organization. The extent to which different types of leadership roles and decisions can be shared or distributed effectively, the conditions facilitating the emergence and success of shared leadership, and the implications for organizational design are all important questions that require more attention. More intensive, descriptive, and longitudinal research is needed to understand the complex processes involved in shared and distributed leadership. Relational Leadership Most theory and research on leadership views it as an influence process and focuses on the actions of people designated as leaders. Relationships are acknowledged to be important in much of the leadership literature, but in “traditional” approaches the focus is on how an individual leader can develop and maintain cooperative relationships. An alternative view of leadership is to describe it as part of the evolving social order that results from interactions, exchanges, and influence processes among many people in an organization. According to this perspective, leadership cannot be understood apart from the dynamics of the social system in which it occurs (Dachler, 1984, 1992; DeRue & EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 207 Ashford, 2010; Drath, 2001; Uhl-Bien, 2006). Instead of the traditional focus on a single leader, scholars examine the social processes and patterned relationships that explain how collective activity can accomplish shared objectives. Organizations and other social entities (e.g., teams, coalitions, common interest groups) are defned more by the web of interpersonal relationships than by formal charters, structures, policies, and rules. The relationships are continually being modifed as changes occur in the people who are involved in the collective activity, and as changing conditions elicit adaptive responses. Leaders are defned as the people who consistently influence relationships and collective activities and are expected by others to have this influence (Hogg, 2001; Hosking, 1988; Uhl-Bien, 2006). Their influence is accomplished by interpreting events and explaining cause-effect relationships in a meaningful way, and by influencing people to modify their attitudes, behavior, and goals. Many different people participate in this leadership process, and their diverse and sometimes conflicting interests make it a political process involving the use of social power as well as rational and emotional appeals. Individuals develop and use social networks to gather information and build coalitions to increase their influence over decisions (e.g., Balkundi & Kilduff, 2005). The methods most appropriate for studying relational leadership are seldom used in leadership research (Uhl-Bien, 2006). It is impossible to understand evolving relationships and reciprocal influence processes among multiple parties by analyzing data from survey studies in which most information is obtained with fxed-response questionnaires at one point in time. Instead, it is necessary to use intensive longitudinal studies and qualitative methods that allow researchers to explore different explanations of unfolding events. An example is the study conducted by Reicher et al. (2005) of leadership in the BBC prison simulation. Complexity Theory of Leadership To accurately describe effective leadership in organizations requires theories that are more complex than most of the earlier ones. Distributed leadership, relational dynamics, and emergent processes are not adequately described in the hierarchical leadership theories that focus on the influence of a chief executive or the top management team. Complexity theory involves interacting units that are dynamic (changing) and adaptive, and the complex pattern of behaviors and structures that emerge are usually unique and difcult to predict from a description of the involved units (Marion & Uhl-Bien, 2001). Complex adaptive systems are used to explain how emergent processes can facilitate adaptation by organizations to turbulent environments. The emergent processes provide an alternative explanation for organizational learning, innovation, and adaptation. However, rather than replacing hierarchical theories, it is likely that the two perspectives can be integrated to provide a more complete explanation of effective leadership in large organizations (Hunt, Osborn, & Boal, 2009; Lichtenstein & Plowman, 2009; Uhl-Bien & Marion, 2009; Uhl-Bien, Marion, & McKelvey, 2007; Osborn & Hunt, 2007). One recent version of the theory identifes three types of leadership processes (Uhl-Bien & Marion, 2009; Uhl-Bien et al., 2007). Administrative leadership involves actions and decisions by formal leaders who are responsible for planning and coordinating activities for the organization. Adaptive leadership is an emergent process that occurs when people with different knowledge, beliefs, and preferences interact in an attempt to solve problems and resolve conflicts. The result of this process is the production of creative ideas and new conceptions that can facilitate the resolution of conflict and an adaptive response to a threat or opportunity. Enabling leadership facilitates the process of emergent solutions by fostering interaction among people who need to be involved, increasing the interdependence EKREM INCE ekremince@gmail.com University of London 208 Topic 3 LEADERSHIP ENVIRONMENTS among these people, supporting the value of dissent and debate, increasing access to necessary information and resources, and helping to get innovative ideas implemented in the organization. Enabling leadership also involves efforts to keep the administrative and adaptive processes consistent and mutually compatible. For example, it is essential to prevent administrative leaders from dominating or suppressing the interaction and exploration needed to produce creative solutions, but it is also important to prevent adaptive processes from creating destructive conflicts or undermining the essential mission of the organization. Complexity theory involves emergent processes and adaptive outcomes that are often unpredictable in advance. Research is needed to learn how interactions and relationships change over time, how the historical and contextual factors affect these processes, and how the three forms of leadership interact to create adaptive outcomes for an organization. Instead of relying on survey studies conducted at one point in time, it will be necessary to conduct intensive, studies that include qualitative descriptions of the relevant processes and relationships (e.g., Lichtenstein & Plowman, 2009; Plowman et al., 2007; Schneider & Somers, 2006). Computer simulation is useful tool for testing models based on the descriptive studies (Hazy, 2007). Examples of methods relevant for studying complexity theories of leadership are described in recent publications (e.g., Hazy, 2008; Schreiber & Carley, 2008). Two Key Responsibilities for Top Executives Two key functions for top executives in business organizations are to monitor the external environment and formulate a competitive strategy. External monitoring is needed to detect threats and opportunities for the organization, and competitive strategy guides the organization’s response to threats and opportunities. External Monitoring Top executives need to be sensitive to a wide range of events and trends that are likely to affect their organization (Ginter & Duncan, 1990). Some representative questions likely to be important for a business organization are shown in Table 11.2. It is essential to learn about the concerns of customers and clients, the availability of suppliers and vendors, the actions of competitors, market trends, economic conditions, government policies, and technological developments. The information may be gathered in a variety of ways (e.g., reading government reports and industry publications, attending professional and trade meetings, talking to customers and suppliers, examining the products and reports of competitors, conducting market research). Table 11.2 Questions for External Monitoring EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 209 1. What do clients and customers need and want? 2. What is the reaction of clients and customers to the organization’s current products and services? 3. Who are the primary competitors? 4. What strategies are they pursuing (e.g., pricing, advertising and promotions, new products, customer service, etc.)? 5. How do competitors’ products and services compare to those of the manager’s organization? 6. What events affect the acquisition of materials, energy, information, and other inputs used by the organization to conduct its operations? 7. How will the organization be affected by new legislation and by government agencies that regulate its activities (e.g., labor laws, environmental regulations, safety standards, tax policies, etc.)? 8. How will new technologies affect the organization’s products, services, and operations? 9. How will the organization be affected by changes in the economy (employment level, interest rates, growth rates)? 10. How will the organization be affected by changing population demographics (e.g., aging, diversity)? 11. How will the organization be affected by international events (e.g., trade agreements, import restrictions, currency changes, wars and revolutions)? External monitoring (also called “environmental scanning”) provides the information needed for strategic planning and crisis management. Grinyer et al. (1990) studied 28 British companies that experienced a sharp improvement in performance and a matched sample of frms with only average performance; the top management of the high-performing companies did more external monitoring (e.g., environmental scanning, consultation with key customers) and were quicker to recognize and exploit opportunities. The amount of change and turbulence in the environment will determine how much external monitoring is necessary. More external monitoring is needed when the organization is highly dependent on outsiders (e.g., clients, customers, suppliers, subcontractors, joint venture partners), when the environment is rapidly changing, and when the organization faces severe competition or serious threats from outside enemies (Ginter & Duncan, 1990; Narayanan et al., 2011). Monitoring of the external environment is usually considered more important for upper-level managers than for lower-level managers (Kraut, Pedigo, McKenna, & Dunnette, 1989; Pavett & Lau, 1983). However, the difculties involved in scanning and interpreting information about environmental changes make this responsibility one that should be shared by managers in an organization. Guidelines for external monitoring are listed in Table 11.3. Table 11.3 Guidelines for External Monitoring • Identify relevant information to gather. • Use multiple sources of relevant information. • Learn what clients and customers need and want. • Learn about the products and activities of competitors. • Relate environmental information to strategic plans. Developing Competitive Strategy For business organizations, a major part of the strategy is how to compete effectively in the marketplace and remain proftable (Porter, 1980). Some examples of possible EKREM INCE ekremince@gmail.com University of London 210 Topic 3 LEADERSHIP ENVIRONMENTS competitive strategies include the following: selling a product or service at the lowest price; having superior quality, customer service, or the most innovative products and services; providing a unique product or service in a segment of the market ignored by competing organizations (“niche” strategies); and being the most flexible about customizing products or services to meet each client’s needs. Sometimes it is feasible to pursue a mix of strategies at the same time (e.g., have the least expensive “standard” product or service as well as the best customized versions of the product or service). Strategy may also involve the way the product or service is produced, delivered, marketed, fnanced, and guaranteed. Reviews of research on strategy formulation and strategic planning by top executives show that it can improve an organization’s performance, and that it is more important in a complex and dynamic environment with many threats and opportunities (Miller & Cardinal, 1994; Narayanan et al., 2011). However, a limitation of many studies on effects of strategic planning is the lack of attention to strategy content and implementation. Strategy formulation will not improve organizational performance unless the strategies are relevant and feasible, they are communicated to middle- and lower-level managers, and these managers become committed to implement the strategies. A relevant strategy takes into account changes in the external environment, and it is realistic in terms of the organization’s strengths and weaknesses. The strategy should reflect the core mission and high-priority objectives of the organization. Although strategy may include changing structure or management processes, such changes should be clearly relevant to strategic objectives. For example, it is not enough to propose downsizing, elimination of management layers, or reorganization into separate product divisions without providing a clear purpose for such changes. Unfortunately, many executives who need to improve weak short-term performance will succumb to the appeal of faddish remedies. Guidelines for Strategic Leadership One of the most difcult responsibilities for executives is to develop a competitive strategy for the organization, and there are no simple answers on how to do it effectively. The following guidelines (see Table 11.4) are based on relevant theory, research, and practitioner insights (Bennis & Nanus, 1985; Kotter, 1996; Nanus, 1992; Narayanan et al., 2011; Nohria, Joyce, & Roberson, 2004; Wall & Wall, 1995; Worley, Hitchin, & Ross, 1996). The guidelines do not depict a rigid sequence of steps, but rather a set of overlapping, cyclical activities that must be interwoven in a meaningful way. Table 11.4 Guidelines for Formulating Strategy • Determine long-term objectives and priorities. • Learn what clients and customers need and want. • Learn about the products and activities of competitors. • Assess current strengths and weaknesses. • Identify core competencies. • Evaluate the need for a major change in strategy. • Identify promising strategies. • Evaluate the likely outcomes of a strategy. • Involve other executives in selecting a strategy. • Determine long-term objectives and priorities. EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 211 It is difcult to make strategic plans without knowing the objectives to be attained and their relative priority. Long-term objectives and priorities should be based on the stated mission and vision for the organization. Strategic objectives for a business organization may involve such things as maintaining a specifed proft margin or return on investment, improving market share, and providing the best products or service in the industry. Strategic objectives for an organization with a humanitarian mission may include such things as fnding a way to cure or prevent a disease, eliminating illiteracy in a specifed population, and ending deaths from drunk driving. Strategic objectives for an educational institution may include improving the learning of essential skills, preparing students for specifc careers, and increasing the number of students who graduate. • Learn what clients and customers need and want. It is essential to learn as much as possible about the specifc needs and requirements of customers and what they think about the organization’s products and services. It is useful to discover what they like, what they dislike, and how the products or services could be improved. Market surveys are one common source of information about clients and customers, but more personal contacts are also desirable. Some manufacturing organizations have teams of production, engineering, and sales employees from different levels of the organization visit with major clients to learn more about their needs and get ideas for product improvements (Peters & Austin, 1985). Clients and suppliers are also invited to visit the organization’s facilities, meet with production and engineering personnel, and attend meetings on how to improve quality, product design, or customer service. • Learn about the products and activities of competitors. Knowledge about the products and services of competitors provides a basis for evaluating your own products and processes (a process called benchmarking), and it provides a source of good ideas on how to improve them. Detailed information about the products and services of competitors is sometimes difcult to obtain but worth the effort. Learning about competitors’ products can be accomplished in a variety of ways: use them yourself, conduct comparative product testing, read evaluations conducted by product testing companies or governmental agencies, have customers directly compare the organization’s products and services to those of competitors, visit the facilities of competitors, read competitors’ advertising literature, and attend trade shows where competitors display and demonstrate their wares. • Assess current strengths and weaknesses. Strategic planning is facilitated by a comprehensive, objective evaluation of current performance in relation to strategic objectives and compared to the performance of competitors. Much of the information needed for this evaluation is provided by internal and external monitoring. Several types of analysis are useful. Review indicators of organizational performance for the past several years and progress toward achieving strategic objectives. Examine performance (e.g., sales, market share, costs, profts) for each product, service, and market. Identify products or services that are successful and those that are not meeting expectations. Compare the organization’s products or services to those of competitors to identify strengths and weaknesses. Compare the efciency of the organization’s processes to that for similar organizations. Identify tangible resources that currently provide an advantage over competitors, such as fnancial assets, unique equipment and facilities, and patents on products or technology used to do the work. Identify conditions that provide an advantage, such as low operating costs, employees with relevant skills, a special relationship with suppliers, and an outstanding reputation for quality or EKREM INCE ekremince@gmail.com University of London 212 Topic 3 LEADERSHIP ENVIRONMENTS customer service. Identify weaknesses as well as strengths, and estimate how long current strengths and weaknesses are likely to continue. The competitive advantage to be gained from current strengths depends on how long they will last and how difcult they are for competitors to overcome or duplicate. For example, a pharmaceutical company with a patented new drug that is better and cheaper than any alternatives has a strong competitive advantage that will likely continue for several years. In contrast, a service company that devises a new and attractive promotion (e.g., special discounts) may enjoy its competitive advantage only for a few weeks or months (as long as it takes competitors to imitate it). An organization that is frst into a new market has an advantage, but only if it is difcult for competitors to follow quickly. A product or service that is costly to develop but easy and cheap to duplicate offers little advantage. Capabilities should be evaluated together, not in isolation. A unique resource (e.g., an improved product or process) may offer no competitive advantage if organizational weaknesses or external constraints prevent it from being used effectively. A weakness may not be so serious if it can be corrected quickly or offset by other strengths. • Identify core competencies. A core competency is the knowledge and capability to carry out a particular type of activity (Barney, 1991). Unlike tangible resources, which are depleted when used, core competencies increase as they are used (Prahalad & Hamel, 1990). A core competency usually involves a combination of technical expertise and application skills. For example, a core competency for W. L. Gore is their expertise about a special type of material (GORE-TEX) and their capability to discover and exploit new uses for this material. Core competencies provide a potential source of continuing competitive advantage if they are used to provide innovative, high-quality products and services that cannot easily be copied or duplicated by competitors. Core competencies can help an organization remain competitive in its current businesses and diversify into new businesses. Canon’s core competencies in optics, acquired as a producer of quality cameras, enabled the company to become a successful producer of copiers, fax machines, semiconductor lithographic equipment, and specialized video systems, while continuing to be a successful producer of cameras and the frst to develop a microprocessorcontrolled camera. Competence in display systems, which involves knowledge of microprocessor design, ultra-thin precision casing, material science, and miniaturization enabled Casio to be successful in such diverse businesses as calculators, miniature television sets, digital watches, monitors for laptop computers, and automotive dashboards (Prahalad & Hamel, 1990). • Evaluate the need for a major change in strategy. One of the most important responsibilities of executives is to help interpret events and determine whether the organization needs a different strategy or just incremental improvements in the existing strategy. A new strategy may be needed when there is a performance crisis for the organization and established practices are not sufcient to deal with it. When a serious crisis is imminent, it is appropriate to be pragmatic and flexible rather than defensive and tradition bound in deciding how to respond. In this situation, a leader who attempts to defend the old, obsolete strategy rather than proposing necessary changes is likely to be replaced. However, proposing a different strategy when the current strategy can be easily fxed is also risky, both for the organization and the leader. A new strategy may not be needed if weak performance is caused by temporary conditions or problems in implementing the current strategy. • Identify promising strategies. EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 213 If a major change in strategy is necessary, it is better to begin by exploring a range of possible strategies. Focusing attention too quickly on one strategy will preclude fnding better ones that are less obvious. Success in fnding a new strategy will be greater if the quest is guided by a clear, meaningful conception of the organization’s mission, long-term strategic objectives, core competencies, and current performance. Sometimes it is necessary to redefne the mission of the organization to include new activities that are relevant for the environment and the organization’s core competencies. For example, Williams Company was making pipelines for transporting oil and gas, but it was losing business to larger competitors with lower costs. Recognizing that it was unlikely to fnd a way to compete successfully in the pipeline business, top management looked around for other opportunities to use the company’s core competencies. They discovered that their piping was perfect for housing fber optic cable, a newly emerging market, and they could market it to cable television and telecommunications companies at a lower price than other suppliers in that industry (Worley et al., 1996). • Evaluate the likely outcomes of a strategy. A strategy should be evaluated in terms of the likely consequences for the attainment of key objectives. Relevant consequences include benefts and costs for the various stakeholders in the organization. The costs include the extra resources and lost productivity associated with any organizational changes necessary to support the strategy. It is difcult to forecast the consequences of a strategic change, especially when competitors can adjust their own strategies to cope with your changes. A number of procedures have been developed to assess likely customer response to a new product or service (market surveys, focus groups, product trials in selected locations or markets). Scenarios provide another way to improve the evaluation of likely consequences for a proposed change (Van der Heijden, 1996). A scenario is a detailed description of what the future will be like if a proposed change or strategy is pursued. Scenarios can be developed to describe what would happen under the most and least favorable conditions, as well as under the most likely conditions. The process of developing the scenarios often provides insights about unexpected consequences of a strategy and implicit assumptions that were not realistic (Sosik, Jung, Berson, Dionne, & Jaussi, 2005). • Involve other executives in selecting a strategy. A key responsibility of executives is to make strategic decisions that will improve the organization. However, few leaders are so brilliant that they can make such decisions alone, and a competitive strategy developed with participation by the top management team is more likely to be successful than strategy developed alone by an autocratic CEO (Finkelstein, 2003; Probst & Raisch, 2005). In the event of considerable uncertainty and disagreement about the best strategy, it is wise to select one that is flexible enough to permit later modifcation after more knowledge about its effectiveness can be obtained. Moderate risk taking is usually benefcial, but it is not wise to take extreme risks with irreversible decisions. Systematic procedures have been developed by scholars and consultants to facilitate the process of strategy formulation by a group of executives. One example is the scenario development procedure called “Quest” (Bennis & Nanus, 1985), which is a two-day exercise held with executives and relevant outsiders to discuss long-range opportunities and risks, and possible reactions by the organization. EKREM INCE ekremince@gmail.com University of London 214 Topic 3 LEADERSHIP ENVIRONMENTS Summary The prosperity and survival of the organization depend on timely adaptation to threats and opportunities, maintaining a high level of efciency and process reliability, ensuring favorable human relations and resources, and an organizational culture with shared values that are consistent with the mission and competitive strategy. The relative importance of these performance determinants for organizations, and the potential trade-offs among them, are determined by aspects of the situation such as the type of organization and the amount of change in the external environment. When changes in the external environment affect the capacity of the organization to carry out its mission, successful adaptation requires recognition of threats and opportunities, and the willingness to make changes in the processes, products, services, or the competitive strategy of the organization. Flexible, adaptive leadership is essential to deal successfully with the trade-offs, competing objectives, and changing situations. The organizational culture can facilitate or hinder efforts to make major change. A chief executive has more potential influence on the performance of an organization when there is a crisis and the competitive strategy is no longer aligned with its environment. A major change is more likely to be successful if it is initiated before a crisis becomes serious and the organization no longer has any slack resources, but it is more difcult to initiate a major change when there is no obvious need for it. Major strategic change is most likely to be initiated by a CEO who is an external successor than by a CEO who has been in ofce for a long time. The different types of research described in this chapter show that despite all the constraints on top executives, they can still have a moderately strong influence on the effectiveness of an organization. The outcome of a major change depends on what type of leadership is provided by mid-level and lower-level managers as well as by top executives, and the leadership decisions at different levels and in different subunits of the organization must be consistent and coordinated. An executive team is more important in a complex, rapidly changing environment that places many external demands on the CEO. Teams are also more important in an organization with diverse but highly interdependent business units, because a single leader is unlikely to have the broad expertise necessary to direct and integrate the activities of these units. The member characteristics necessary for team effectiveness depend on the organizational context, the external environment, and the leadership provided by the CEO. External monitoring provides information needed for strategic planning and crisis management. To detect threats and discover opportunities in a timely way, top management must actively monitor relevant sectors of the environment, sources of dependency for the organization, and current performance. Developing a strategy for adapting to the environment is an important responsibility for top executives, and the strategy is more likely to be effective if it builds on core competencies, is relevant to long-term objectives, and is feasible in terms of current capabilities. Key Terms adaptation core competencies performance determinants chief executive ofcer (CEO) distributed leadership relational leadership CEO succession internal and external constraints strategic leadership competitive strategy external monitoring strategic planning EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 215 complexity theory flexible leadership theory top management team convergence organizational culture Yukl. Original materials from Leadership in organizations © copyright 2013 Pearson. All rights reserved. EKREM INCE ekremince@gmail.com University of London 216 Topic 3 LEADERSHIP ENVIRONMENTS QUICK QUIZ If you feel ready, please attempt the following quiz. Don’t worry if there are some questions you can’t answer - you can always try again later. EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 217 SELF-ASSESSMENT EXERCISES Attempt the following exercises. If you have understood the reading you should be able to answer these questions competently. A model answer citing key extracts from the Essential reading is available for each question, but try to answer on your own frst. Your responses won’t match the model answers exactly, but you should compare your performance with the model and consider whether you took all the relevant factors into account. Rate your performance honestly. If you haven’t performed as well as you hoped, you may need to go over parts of the chapter again. The self-assessment exercises should help you clarify your own understanding of the different environments in which leaders act and the different calls upon leadership that these make. EKREM INCE ekremince@gmail.com University of London 218 Topic 3 LEADERSHIP ENVIRONMENTS REFLECTIVE EXERCISE CEO accountability The issue of corporate governance is one that you are likely to have encountered - or will do - when you study strategic management. The focus is on CEO accountability. Many current businesses (e.g. Enron and Xerox) can be used to illustrate the complexity of these concepts. The relationship between a board of directors and the chief executive ofcer of an organisation is complex and interesting. Bearing in mind your work on this topic, think about the role of the CEO as a strategic leader of an organisation and all that this implies. Reflection What do you think are the potential ethical and conflict-of-interest issues arising from the involvement of a CEO in the selection of board members? Reasons What are some of the pitfalls that we must be wary of? Alternatives How can these issues be addressed? EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 219 DISCUSSION ACTIVITY EKREM INCE ekremince@gmail.com University of London 220 Topic 3 LEADERSHIP ENVIRONMENTS Understanding Strategic Forces This exercise is designed to help you understand the role of leaders in managing the six strategic forces of environment, strategy, culture, structure, technology, and leadership presented in the chapter. The Scenario You are a member of a school board for a medium-sized middle (junior high) school in a major western city. The city has experienced tremendous growth in the past fve years, and as a result, the student body increased by 20 percent without much change in facilities and relatively limited increases in funding. The classrooms are overcrowded, much of the equipment is old, teachers have limited resources to enrich the curriculum, and the sense of direction is unclear. During the same time period, the school slowly developed one of the poorest records for student academic performance and dropout rate. Earlier to the past few years, however, the school held a well-established reputation as one of the most creative and academically sound schools in the city. Traditionally, parent involvement and interest in the school varied greatly. Similarly, the faculty are diverse in their approach, tenure, and backgrounds, but the majority demonstrate dedication to their students and are committed to the improvement of the school. Because of a number of recent threats of lawsuits from parents over equal opportunity issues, several violent incidents among the students, and the poor academic performance, the principal was asked to resign. Many parents, teachers, and board members blame her for a laissez-faire attitude and what appears to be a total lack of direction and focus. Problems and complaints were simply not addressed, and no plan was articulated for dealing with the changes that the school was experiencing. After a two-month multistate regional search and interviews with a number of fnalists, the school board narrowed its search for the new principal to two candidates. The Candidates J. B. Davison is 55 years old, with a doctorate in education administration and BA and MA degrees in education. He previously served as principal at two other schools, where he was successful in focusing on basic academic skills, traditional approaches, discipline, and encouragement of success. Before moving to school administration, he was a history and social studies teacher. The board is impressed with his clear-headedness and no-nonsense approach to education. He readily admits that he is conservative and traditional and considers himself to be a father fgure to the students. He runs a tight ship and is involved in every aspect of his school. Jerry Popovich is 40 years old. She holds MA and PhD degrees in education administration with an undergraduate degree in computer science. She worked in the computer industry several years before teaching science and math. She worked as assistant principal in one other school and is currently the principal of an urban middle school on the West Coast. She successfully involved many business and community members in her current school. The board is impressed with her creativity and her ability to fnd novel approaches. She considers one of EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 221 her major strengths to be the ability to involve many constituents in decision making. She describes herself as a facilitator in the education process. Remember that the choices made by upper-echelon leaders regarding which of the six strategic forces to emphasise - and how to manage each - depend to a great extent on the leader’s personality and background. The leader’s choices, on the other hand, have a profound impact on organisations. Consider the following questions, then share your thoughts about what you have read in the discussion forum. 1. How do the two candidates differ? 2. What explains these differences? 3. Who you would recommend for the job? Why? Nahavandi. Original materials from The art and science of leadership © copyright 2015 Pearson. All rights reserved. EKREM INCE ekremince@gmail.com University of London 222 Topic 3 LEADERSHIP ENVIRONMENTS PORTFOLIO ACTIVITY In this section of the portfolio you should be working with the various models of leadership that you have studied in this topic and use these to further your reflections upon yourself as a strategic leader. Select two top-level organisational leaders, either from your own organisation (or one that you have worked for in the past) or who you have found out about through research you have undertaken on public companies. (There are many public profles of top managers available on the internet, and these will provide you with enough detail to complete this task.) Now complete the exercise below from Nahavandi, Chapter 7. What Is Your Strategic Leadership Type? This exercise is a self-rating based on the four strategic leadership types presented in the chapter. You can also use the scale to rate your organizational leaders. For each of the items listed, please rate yourself using the following scale. (You can also use the items to rate a leader in your organization.) Nahavandi. Original materials from The art and science of leadership © copyright 2015 Pearson. All rights reserved. 0 = Never; 1 = Sometimes; 2 = Often; 3 = Always 1. I enjoy working on routine tasks 2. I am always looking for new ways of doing things 3. I have trouble delegating tasks to my subordinates 4. I like my subordinates to share the same values and beliefs. 5. Change makes me uncomfortable 6. I encourage my subordinates to participate in decision making. 7. It is difcult for me to get things done in situations with many contrasting opinions. 8. I enjoy working on new tasks. 9. I feel comfortable giving power away to my subordinates. 10. I consider myself to be a risk taker. Scoring: Reverse scores for items 1, 5, 6, 7, and 9 (0 = 3, 1 = 2, 2 = 1, 3 = 0). Challenge-seeking score: Add items 1, 2, 5, 8, and 10. Your score will be between 0 and 15. Transfer the score to challenge-seeking line (vertical line) on the following grid. Total: Need-for-control score: Add items 3, 4, 6, 7, and 9. Your score will be between 0 and 15. Transfer the score to control line (horizontal line) on the following grid. Total: What Is Your Strategic Leadership Type? Where do your two scores intersect? For example, if you have a score of 5 on control and 10 on challenge seeking, your scores indicate that you are a participative innovator. EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 223 name: dummy file: pearson-nahavandi_grid state: unknown 1. Think of what you have discovered about your chosen leaders as well as yourself and plot them on the challenge-control matrix grid. 2. Discuss how your chosen leaders have used their challenge-control position to affect their organisations. Reflect upon what your effect as a strategic leader may be. EKREM INCE ekremince@gmail.com University of London 224 Topic 3 LEADERSHIP ENVIRONMENTS TOPIC SUMMARY Topic summary video EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 225 FURTHER READING AND RESOURCES The Further readings for this topic are: • Goleman, D. ‘Leadership that gets results’, Harvard Business Review March-April 2000. • Rafferty, A. E. and M. A. Grifn ‘Dimensions of transformational leadership: conceptual and empirical extensions’, The Leadership Quarterly 15 2004, pp. 329-54. Further reading will deepen your understanding in some areas but it is not required in order to pass the module. You may wish to consult the reading suggested here or others that you fnd, but please note that we cannot guarantee that further reading will be accessible to you and we do not undertake to supply it via the Online Library. EKREM INCE ekremince@gmail.com University of London 226 Topic 3 LEADERSHIP ENVIRONMENTS REFERENCES • Ireland, R. D. and M. A. Hitt ‘Achieving and maintaining strategic competitiveness in the 21st century: the role of strategic leadership’, Academy of Management Executive 19(4) 2005, pp. 63-77. EKREM INCE ekremince@gmail.com University of London Topic 3 LEADERSHIP ENVIRONMENTS 227 PROGRESS LOG We recommend that you now complete your topic progress log. This should allow you to monitor and assess your progress and your understanding of the topic before you move on. EKREM INCE ekremince@gmail.com University of London 228 Topic 3 LEADERSHIP ENVIRONMENTS Topic Topic Objectives How confdent are you? Completely confdent Partially confdent Unsure Topic 3: Leadership environments Date 3.1 Differentiate between micro and upper-echelon leadership and describe the domain and roles of strategic leaders. 3,2 List the individual characteristic of strategic leaders and consider the role of culture in a critical analysis of strategic leadership. s 3.3 Explain how top-level managers affect their organisation. 3.4 Analyse the unique challenges of leadership in non-proft organisations. 3.5 Reflect upon your own strategic leadership style. EKREM INCE ekremince@gmail.com University of London