The Leadership Factor
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Business leaders are captains of organizational ships. A predominant leader determines the course, guides the crew, and makes sure that everyone comes out safely through the storm. Capable leadership is a powerful arm of organizations, which directs them through unprecedented changes. Nevertheless, in recent researches, there is enough evidence that even some of the leading and most esteemed organizations are unable to adjust to change, prepare for a more unpredictable future or implement their strategic plans successfully. Organizations are currently undergoing turmoil that undoubtedly concerns leadership. If organizations do not change their current approach to leadership development, in the future, conditions will become harsher for them to operate their business.
In the past, a lot of well-known companies disappeared for example Lehman Brothers, Chrysler, Lucent, Merrill Lynch, and Northern Rock. On the other hand, new emerging economies, for instance in India and China are continuing to grow. A survey of CEOs confirms that one of the key factors responsible for the present deteriorating conditions is the quality of leadership, which will determine organizations’ fate in the near future. Many CEOs bemoan the inadequacy of leadership strength in their organizations and wonder what the scenario will be once the next generation of leaders finally enters the corporate world (Shaw 2008)
Can we really depend on the next generation of leaders once they are in a position? Are we witnessing talent deficit that cannot be filled and will lead to failure of even larger numbers of high profiles? What precautionary measures can organizations take to prevent the risks connected with unsatisfactory leadership and prepare its current and future leadership for changes that are still unforeseen? These issues are still prime concerns for large organizations.
Every leader realizes the significance of a well-formulated business strategy. However, few of them give importance to leadership that is necessary for implementing strategies that necessitate changes or reveal capabilities of organizations. Without appropriate leadership, even the boldest and best strategies will not work, and their potential will never be achieved. This paper examines the current need for an effective leadership strategy for strong, efficient leadership to prevent organizations from failure and how to develop successful leaders in organizations and create new leadership capabilities (Robbins 2003).
1. The Leadership Factor for Grooming New Leadership
As an organization expands and grows, it faces numerous challenges in its business environment. The growing need for strategic direction is crucial, so is the significance of grooming new leadership and creating a place for the implementation of a new strategy. Given the continuously increasing pace of the changing environment, changes in technologies, changes in markets, competition, and customers, each change demanding a new environment, never have leaders been more needed and more relevant. Leadership is a priority for all successful organizations. Leadership is more significant than management or culture tools. It is leaders who establish methods and culture. It is the leader who is a decision-maker and sets a course of action. Some idealists must draw a picture of an organization’s future and then inspire followers on that path. Successful companies put emphasis on building alignment between technical, political, and cultural elements with leadership within an organization (Kotter 1998).
It is not easy for even small organizations to function smoothly. In order to make the optimum use of material resources and human capital, they need sound policies and efficient systems. In principle, it is essential not only to manage them, but more importantly lead them.
Today, organizations are continuously evolving and changing. They need to interact with external and internal changes in their environment. According to Zaleznik (2004), all companies are moving in the process, but the healthier of them will remain in the process consistently. The more dynamic and vigorous they are, the more rapidly they will be changing and approaching perfection. In such crucial times, if they wish to survive and succeed, companies need powerful and competent leadership to lead the way.
Handy (1995) suggests that leadership needs to be indigenous in companies in any sphere. How many leaders will an organization need? Handy recommends many and at each level of an organization.
Kotter (1988) argues that the increasing competitive intensity and the growing complexity of organizations signify that the need for effective leadership has become greater than ever. He affirms that the situation will further accelerate in the near future. However, most organizations are totally unprepared to date.
Organizations continue to develop, since the demand is getting much higher, while some indications state that preparedness is relatively much slower. Leaders of organizations, small, medium or large ones, face key challenges as they encounter a greater diversity of people and the complexity of business they handle.
Over the years, different definitions of leadership have come from various studies. Conger (1992) defines a leader as an individual entity that sets the direction for a working group of people, receives a commitment from these groups to this direction, and motivates these members in achieving the set goals.
Zaleznik (2004) states that leadership is a process of encouraging members of an organization to work hard in order to achieve key tasks. After carrying out his research on leadership during five years, Bennis (1989) came to one of most significant conclusions as to the difference between managers and leaders. According to him, leaders are individuals who do the right thing, whereas managers are those who do things right. He asserts that both roles are critical but differ vastly. He pointed that he had often seen leaders in top positions performing the wrong thing well. He noticed that many businesses are under-led and over-managed, and leaders and managers do not pay the desired attention to doing the right thing, while they give too much concentration on doing things right. In recent years, one of the most topical questions in the study of leadership in recent years is whether leaders inherit leadership by birth or leadership is a skill that can be developed and improved. Practice suggests both.
Besides, Handy (1989) confirms that some people by birth possess leadership qualities, but the question arises as to how to reveal their talent; in other words, how they will know and how they can exhibit their leadership skills unless they have an opportunity. He supports that for some people, it is natural to lead, and they can act well. Others may dislike it, but unless one has the experience and gets an opportunity to practice it, they can never know.
Leadership should be experienced by all members of an organization; actions and outcomes of leadership should be automatically recognized. Successful leaders see themselves as stewards of the company. It does not mean that they are merely caretakers. They work for their organization’s interest, taking care of assets, people, and activities of their organization.
Such issues always play a central role in leadership planning for many small and large organizations. In today’s competitive environment, if an organization does not have enough efficient leaders and others awaiting to step into leadership, it could easily fall behind.
2. Leadership Modeling
Leaders can be a role model or a personal model for effective leadership. They can serve as a guiding spirit for an organization and suggest best ways of doing business. However, it is necessity for an organization to exhibit leadership modeling, which is a part of the succession planning process.
As a rule, normative modeling is a suitable way to establish characteristics and best traits of known leaders. In general, there are six essential skills that need to be consistent: (1) developing a winning strategy, (2) living with integrity and by example, (3) building a strong management team, (4) creating responsive organizations, (5) inspiring and motivating employees, and (6) implementing management systems to reinforce values in an organizational structure. These skills can be employed to a leader’s behavior and equally to the succession planning process of an organization (Robbins 2003).
Building a talented management team is a concept of succession planning; it is also important to have an uninterrupted supply of the best talent. Leading by an example is the recognition of true values and modeling of behaviors across an organization. In the true sense, leadership and its behavior models should set the best example for the new generation of leaders. Besides, principles of the social learning theory state that the learning process also happens by vicarious reinforcement. This occurs when observers watch their role model receiving rewards for their excellent outcomes.
Leader should become a role model by performing all those functions which they expect from their followers. It reinforces faith and trust, while showing a disposition to sacrifice. One should not preach, but set an example. Leaders can establish the model leadership they desire. Being responsible for an organization and meeting their objectives, they make an organization more productive. Leaders’ influence does not come through acquiring power, control or manipulation, but the technique with which leaders multiply their influence on producing and shaping new leaders. Finally, each organization must develop its own model. This is a determinant of those skills, values, and competencies that lead an organization to success (Peck 1994).
2.1. A Case Study of Ford Motor Company
In 2007, the Ford Motor Company suffered unprecedented overcapacity and decline in global sales. Its business model maintained stability. The stock dropped approximately 10 times less than its earnings. The company’s CEO explained that the company had become too slow and rigid to gain momentum and survive the competition; it needed to find challenging leadership, which could give a new direction to the company.
He felt that it was necessary to empower decision-making at different levels and to enable lively leadership to prevail in the company. He wanted leaders who could make decisions at all levels of the organization to take risks and know how to come out from such risks. The company had always had an abundant stock of capable managers, but it failed to do the same for change leaders and agents.
The company made a sweeping attempt for mass-production of leaders. The company wanted people who were courageous and possessed skills to overthrow old ideas and who believed in the importance of change strongly enough to make a way for powerful leadership. Ford deputed 2,500 senior executives to its Leadership Development Centre to instill in them not simply some vocabulary of a revolutionary system, but also leadership tools essential for carrying out a revolution.
It is expected that leaders teach themselves, because self-learning would make them powerful and decision-making leaders. The company set out to establish “total leadership” that could efficiently integrate their work into community and the Ford family. It implemented group work as an instructive learning tool to promote managers’ understanding of Ford operations as a whole, demanding accountability and feedback. Simultaneously, the company also needed fast business results, so Ford Motors set every component of its leadership development strategy into action.
The Ford Company begins to shake up its managers due to the fact that a leadership project that caused inconvenience promised profound learning and significant improvement.
In fact, the new leaders were responsible for causing discomfort by forcing undesirable change up to the higher levels of the organization, while the management wanted it down from the top. Interestingly, an article published in January 2007 in the Irish Times mentioned that Ford Motors was experiencing a sharp decline of $12.7billion revenue, which has been the biggest failure in their history (Shaw 2008).
From the perspective of small businesses, they typically do not produce either powerful managers or powerful leaders. They tend to be a “one-man show,” which is probably the founder or from the second generation of family, and the team underneath is not capable of leading or managing. In such environment, if the owner possesses a substantial and solid share of the market and does not face stiff competition, this approach can be quite adequate. However, this can be again a dangerous road to lead a business in such business environment in which a lot of companies are struggling today.
3. The Difference between a Manager and a Leader
Not all leaders are managers, and, conversely, not all managers are leaders. Furthermore, merely because an organization has fixed an executive into formal authority does not imply that this executive will be an effective leader. However, these two terms are complementary because in today’s changing business environment, both are necessary. John Kotter mentions that each term performs its own activities and functions. Effective leadership is to prepare and direct organizations for changes and cope with them in their struggle until they come out through them; on the other hand, managers deal with complexity by establishing consistency in significant dimensions of working conditions (Bennis 1998).
Figure II exhibits characteristic activities that originate from differences between managers and leaders.
4. Significance of Trait Theories and Behavioral Theories in Leadership
Trait theories of leadership present one of the views in this section. The study shows six key traits in which powerful leaders differ from other leaders. These traits include the ambition to lead, desire and energy, self-confidence, integrity and honesty, job relevant knowledge, and emotional intelligence. Findings have led to the conclusion that these traits can increase the probability of being a successful leader, but never guarantee success.
Behavioral theories explain leaders’ behavior and imply that leaders can be trained. For example, scholars at MichiganUniversity have developed two behavioral dimensions in the area of leadership. They have labeled them production-oriented and employee-oriented.
Production-oriented leaders stress the fulfillment of technical functions or tasks of a job, and a worker is simply the means of doing so. Conversely, employee-oriented leaders insist on interpersonal relations by involving personal interests of employees and also accepting their differences. Two more aspects of behavior theories stem from a behavioral study carried out at OhioState. These aspects are consideration and initiating structure. Consideration means the degree to which a leader can develop job relationships depicted by mutual trust, regard for subordinates’ feelings, and respect for their ideas. Initiating structure defines the degree to which a leader is likely to structure their role in the search for goal attainment with active participation of subordinates. A Scandinavian study discusses the behavioral approach in detail. The significance of behavioral leadership in the present changing world is the aim of this study. Development-oriented leaders invent innovative and new ideas, implement and promote change, and support experimentation (Bass 1993).
Leaders who possess the qualities mentioned above make their employees happy and satisfied. However, it is significant to highlight that these behavioral theories do not take into account situational factors affecting a leader’s effectiveness.
5. Emotional Intelligence and Leadership Styles
Leadership styles leave a unique and direct impact on financial success and working environment of a company. Thus, they play a key role in the topic of discussion. Goleman’s research recognizes six distinct styles of leadership that stem from different elements of emotional intelligence. These styles are: authoritative, coercive, democratic, affiliative, coaching, and pacesetting. However, only four styles have a consistent, positive effect on a company’s financial success. Goleman’s research observes that leaders who show positive results in an organization derive better financial gains than those having a negative impact. Significantly, leaders who are masters of democratic, authoritative, coaching, and affiliative styles possess most preferential environment and show excellent business performance. Furthermore, these leaders are always careful of the impact they have in the environment and adapt their style to make it best suitable for each employee and situation. Consequently, different situations demand different styles of leadership. It is significant to observe that leaders cannot possess all styles of leadership. However, it is possible to learn these styles through thorough knowledge and emotional intelligence competencies, which each style incorporates (Goleman 1993).
Goleman also distinguished effective leaders possessing one common trait, which is a high level of emotional intelligence. Some key elements of emotional intelligence include self-regulation, self-awareness, motivation, and social skills. Through practice, effort, desire, and time, these emotional intelligence skills can be achieved, equipping a leader with powerful insight and positive results.
6. The Hershey and Blanchard’s Situational theory
This theory defines followers’ willingness and ability to accept guidance. Hershey and Blanchard distinguished four behaviors of leaders that fluctuate from highly authoritative to highly laissez-faire. A leader’s behavior oscillates according to an aptitude of an employee. For example, a leader adopts a high authoritative approach when an employee is unwilling and does not want to follow instructions. This theory is extremely important for strong leadership in an organization. However, certain inconsistencies have come into observation when implementing this theory, and organizations should refrain from implementing this theory (Bass 1993).
Another theory of leader-member exchange vastly differs from other theories, as it recognizes that leaders are partial in treating their followers equally. This theory asserts that leaders group their followers according to their competency levels and professional characteristics. Therefore, those followers who are not competent do not form a part of a group.
The study supports that followers in the “in-group” category are consistent performers and possess a higher level of job satisfaction than those in the left-out category. Strong leadership is possible in an organization when a leader has the capability to adapt according to a change and mold their followers with their style of working. Moreover, four leadership behaviors should be effectively implemented considering personal traits of employees and organization environment (Robbins 2003).
It is difficult to evaluate the right or wrong leadership in an organization because leadership is not an accurate science. A brighter picture will appear as research continues by leading experts. Besides, an ongoing study may throw some light on the necessity of strong leadership in an organization, which is equally significant. However, one aspect is clear: Powerful leaders lead an organization keeping interests of their employees in mind. Many techniques and styles have surfaced to attain goals through cooperation of employees; yet trust is still lacking in the relationships between leadership and employees.
This study examines growth of organizations in this fast-emerging global market and those reluctant to take a high risk. For this difficult task, organizations require powerful leaders at all levels that will be capable of taking substantial risks and also know how to reduce such risks and deal with them. In order to achieve long-term success, planning and implementation must be of great priority. The present scenario of successful organizations shows that the leadership factor has become more significant than ever before, and it also plays a prominent role in the strategic agenda of all organizations today.