Survive in the dynamic and competitive business environment

Organizations have to endure significant and traumatic changes in order to survive in the dynamic and competitive business environment. Leadership plays a vital role in the implementation of organizational change.

This study will discuss how leaders would effectively implement such strategic changes with specific approaches, theories and styles of leadership.

The author will relate to appropriate organizational examples and incorporate academic frameworks & models of leadership.

Defining Leadership

Although many people have tried to define leadership there is no single definition that would capture the essence of leadership. Daft suggested that “Leadership is an influence relationship among leaders and followers, who intend real changes that reflect their shared purposes” (Daft 2008, p.4).

Yukl stated that “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” (Yukl 2006, p.26).Both Daft & Yukl gave similar view points and spoke about the ability of a leader to influence followers in order to achieve a shared objective.

For some people, leadership is a trait or ability, for others it is a skill or behavior whereas still for others leadership is a relationship. Therefore it is evident that people have a wide range of perspective on leadership (Northhouse, 2009).

Therefore it is taken into author’s consideration that leadership is the ability to influence followers to improve performance in sequence to achieve a shared objective. For a leader to be able to achieve the objective he/she should possess the right attitude and right skills.

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Defining Change

Dawson (2003 , p.11) stated that “there can never be a universal theory for organizational change, as change involves a movement to some future state that comprises a context and time that remains unknown”. Whereas Matcheva (2010) mentioned that “organizational change refers to the fundamental and thorough reorientation in the way the organization operates.”

Organizational change may occur due to several internal and external environmental factors. The external factors will consist of political, economical, social and technological stimuli where as internal factors will be factors such as organization’s management policies and styles, systems, procedures and employee attitudes. (Buono, 2009)

Perry (2006) argued that change is inevitable and therefore should be planned for and form part of the normal process of management. Burke (2011, p.1) gave a different view mentioning “Organizations change all the time each and every day. The change that occurs in organizations is for the most part unplanned and gradual.”

Relationship between leadership and change

Change has been a challenging area and has affected many organizations. Organizations have to endure such significant change in order to survive in the dynamic and competitive business environment. The change must be aligned according to organizational culture, values, people and behaviors to encourage the desired results. Therefore human leadership plays a key role in making change a success.

Such transformation is difficult and will definitely result in resistance and resentment by employees. The social and psychological fear of change and the lack of technical expertise will affect the change process. Therefore Leaders should be equipped with skills that would enable effective strategic change.

David (2004) also emphasized how leadership could help overcome resistance to change. He indicates that “In order for World Class Organizations to survive, management must understand that change is inevitable and that they themselves are responsible for overcoming employee resistance through sound management and change-oriented leadership” (David, 2004).

Globalization, technological changes, knowledge management and cross boundary collaboration are the four major forces affecting organizational change. Change could occur either in the external environment or macro environment. Organizations are in need of innovative and creative visionaries who understand how to make decisions in such changes Tappin (2009).

An effective change leader should have a sense of purpose and a vision, ability to manage people through tough situations, ability to take accountability and responsibility and motivate people to achieve respective goals. Once people believe in leaders, the excitement will drive them to achieve targets.

Therefore it is evident that there is a strong relationship between leadership and change. Leadership plays a major role in minimizing resistance to change as well as ensuring smooth execution of change.

Importance of leadership in change

The most challenging aspect of a business is leading and managing change. With the business environment being subject to fast paced economic and social change modern businesses need to adapt and be flexible to survive. The main challenge in leading change is to manage human resources.

As mentioned by Kotter (1999, p.19) “More change demands more leadership…” Kotter emphasized the need of a leader to manage change. Nilakant & Ramanarayan (2006) also mentioned the importance of leadership during each phase of change, mainly the execution stage.

Kotter (1999, p.7) identified one of the most common errors of organizational failures during change as its inability to create a powerful guiding coalition. He stressed on the importance of strong line leadership during change.

Kotter identified a 8 stage change process which consist of

Establishing a sense of urgency.

Creating a guiding coalition.

Developing a vision and strategy.

Communicating the change vision.

Empowering broad based action.

Generating short term wins.

Consolidating gains and produce more change.

Anchoring new approaches in the culture.

(Kotter, 1996, p.21)

In order to follow the above steps, an initiative needs to be taken which demands leadership. Through the above approach leaders would be able to act as a change agent minimizing resistance to change.

Tappin (2009) mentioned that a leader needs to develop the following characteristics in order to manage change.

A vision, and be able to communicate it to their organizations

An orientation to serving

An entrepreneurial mind-set

A commitment to continuous innovation

A global mindset

Ease and confidence with technology

Know-how in systems thinking (a broad view of the inter-relationship of an organization’s parts, rather than a narrow view that is focused on one part or event.)

A sense of ethics and appreciation of spirituality in the workplace

A commitment to continuous learning, personal and professional development

Tappin stated characteristics that he believes should be present in a change leader. An in-depth analysis need to be taken in order to identify the most effective approach a leader could follow when managing change.

As the characteristics of a change leader have been laid down above. It is appropriate to carry out a thorough analysis on leadership styles and approaches and thus identify which style or approach is greatly suited.

Styles of Leadership

There have been many studies conducted to evaluate and identify different types of leadership styles. Goleman (2011) identified six leadership styles. They are Coercive, Authoritative, Affiliative, Democratic, Pacesetting and Coaching. He argued that leaders who have four or more styles especially Authoritative, Democratic, Affiliative and Coaching styles will be able to drive a better business performance and maintain a good climate delivering better results.

According to Northouse (2009) the primary study on styles of leadership was conducted by Lewinn, Lippitt and White (1939). The main styles of leadership they identified are Authoritative, Democratic and Lassiez-faire. Northouse (2009) mentioned that a leader may display a combination of these styles and execute each of these styles in a given circumstance.

Coercive style

This style is also known as the Autocratic model. According to Goleman (2011) coercive type leaders expect immediate compliance from its followers. These types of leaders are very competent in self control, initiating and achieving results. The above style works best in crisis situation where quick change is required as well as situations with problem employees. But the coercive model may have a detrimental effect on the employees therefore should be used with extreme care. It may impact the morale and feelings of the followers and may negatively affect employee motivation.

In almost all cases, autocratic leadership style helps improve organizational efficiency and contribute to the bottom line in the short-term. This improvement is however a quick fix, coming at the cost of erosion of a company’s underlying assets and laying the foundation for permanent damage in the future (Nayab, 2010).

Therefore this can be considered as the least effective style of all leadership styles since it has a negative influence on the overall climate of the organization.

In 2007 Martha Stewart single handedly turnaround her ailing Martha Stewart Living Omnimedia. In her we find a substantial amount of controversy but she continues to prosper with her organization and is effectively served by her autocratic style of leadership as well. But critics say that she wouldn’t have reached the verge of bankruptcy and would have achieved more if she had not followed her autocratic style (Nayab, 2010)

This example suggests that Martha was not able to reach her full potential and achieve success with her autocratic style during the turnaround because of its aggressive nature.

Authoritative Style

An authoritative leader is a person who guides people towards a vision and follow organizational goals and strategies. This is a more flexible strategy where the followers are permitted to be innovative, experiment and take calculated risk which will give the follower a sense of belonging and involvement to the organization (Goleman, 2011).This style of leadership works best when change is required in a new vision or clear direction is needed.

His research indicates that this is the most effective style of leadership. But a leader who is working with experts who are more experienced will find it difficult to apply this style. The team members may sense that the leader is trying to dominate.

Northouse(2009) also gave a similar view on authoritative style of leadership. He mentioned that “Authoritarian leadership is used to give direction, set goals, and structure work”. He identified positives and negatives of using such style for leadership. The positives are that there is a person to give direction and clarity to employee’s work which will bring about productivity and efficiency enabling accomplishments of goals in a shorter period. On the other hand this style will hamper individuality and will create dependence on the leader which will result in subordinates losing interest and becoming dissatisfied with their work.

Both of the viewpoints above can be related to Mc Gregor’s Theory X. The assumptions he made are applicable for the followers of authoritarian leaders. He made three assumptions which are as follows.

The average person dislikes work and will avoid it if possible.

Because people dislike work, they need to be directed, and sometimes threatened with punishment or reminded of rewards to make them work.

The average person prefers to be directed, wishes to avoid responsibility, has little ambition, and wants security more than choice.

(Northouse, 2009)

The authoritarian leader needs to provide direction to its followers and control them. Therefore they will be in charge and take up responsibility to control the group.

Considering the above three authors ideas the authoritative style of leadership would be a suited style of leadership in managing change because during change the entire company needs to be given proper direction and their needs to be someone to take responsibility and take initiative by creating a vision to manage change.

The CEO of Microsoft Bill Gates is considered an authoritative leader who was able to successfully move Microsoft in the direction he saw the industry moving. He is considered as a leader with a vision who aligned Microsoft with that vision (Authoritative Leaders,2006)

CEO of DELL Michael Dell identified the requirement of change in their customer services department and executed a unique strategy of his own to retain and satisfy its large customer base, unlike other companies he introduced a strategy where customer queries are directed to a real human voice not a voice mail system. In an environment where the trend is towards voicemail systems Michael Dell introduced such a system (Franklin, 1998)

This in fact displays his leadership and vision in understanding the work his people do at all levels as well as his understanding the requirement for change according to the trend.

Affiliative style

Affiliative style of leadership is a more human friendly style. It’s a style which helps to create harmony and build emotional bonds. People come first always. Communication is considered a key element. This style is best suited to motivate people during stressful situations. Even though there are certain advantages of using this style constant use of this style will also have its drawbacks. When employees are over praised they might lose focus and may lead to poor performance. Over reliance on this model may lead the company to fail (Goleman 2009).

Kotter (1999, p.37) mentioned “Communication of ideas helps people see the need for and the logic of change”. Therefore according to his findings the affiliative style could be considered a suitable style of leadership to adopt during change due to it focusing on communication as a key element.

Democratic Style

The democratic style of leadership gets the followers to participate and express their opinion. The leader builds trust, respect and commitment from the employees. Communication collaboration and team leadership plays an important role. The leader will listen to employee’s ideas and concerns thus learning how to keep the spirit of the employees high (Goleman2010).

This style will work best when the leader itself is uncertain about the path to be taken. The drawback of such a style is that the leader will be receiving endless opinions resulting in difficulty of making a proper decision.

Northouse(2009) also gave a similar view on democratic style of leadership. He said that democratic leaders always try to treat its subordinates fairly. This leader will not to be controlling rather they will listen and obtain support from all subordinates. This is a collective approach of leadership where the leader will be consulting subordinates.

The democratic leadership style resembles the assumptions of Mc Gregor’s Theory Y. Which are as follows

People like work

People are self motivated

People accept and seek responsibility.

(Northouse, 2009)

Since people are fully capable of doing their work alone theory Y stresses that people needn’t be controlled by their leaders as they are self motivated.

Kotter(2009, p.38) has also mentioned the importance of participation and involvement to overcome resistance to change . The democratic style concentrates on participation and involvement which will help overcome resistance to change. Therefore could be considered as a good style of leadership to manage change.

Anne Mulcahy, CEO of Xerox also used a democratic style of leadership. She led Xerox through a major transformation. In the task of cutting costs quickly, she used the knowledge of employees and encouraged them to give their opinion. Together they were able to do so. (Helliriegel, Jackson and Slocum, 2008, p.509)

Pace setting style

This style focuses on developing people for the future. The leader set high standards and expect employees to follow them. The leader demands for excellence, therefore employees will feel that they are being stretched beyond their capability. This is best suited when quick results are needed from a motivated and competent team, but gives an overall negative impact on organizational climate (Goleman 2010).

Since change in a company is a long term effect the pace setting leader may have a negative effect. They do more harm than good when an organization needs long term results (Chynoweth 2008).

The 8th CEO of General Electric Jack Welch strongly believed in leading by example. He was a persistent and demanding executive and showed characteristics of a pace setting leader. He turned the company from $12 billion into a $500 billion market capitalization. He was renowned for his human process to drive change having respect for each individual in the process of change (Pace Setting Leadership, 2006)

Coaching style

“Personal success purely brings achievement. Helping others succeed confers genuine accomplishment. Passion for “success through others” -the common aspiration of the consultant, counselor and coach is a source of synergy and a hallmark of leadership” (Goldsmith & Lyons, 2006.p.1).

These types of leaders train new leaders for the future. The leaders help employees to learn and develop their skills even if it may take time and not achieve organizational goals. This style is the least used by leaders the reason being leaders not having time to go through teaching employees in a highly pressurized competitive business environment. The style will work best where the employees are willing to improve their performance and build long term strengths (Goleman, 2010).

Other than Authoritarian and Democratic style of leadership Northouse identified the Lassiez-faire style which does not resemble any of the characteristics of the above six styles.

Lassiez Faire

Northouse (2009, p44) mentioned that “The Lassiez-faire leader is a nominal leader who engages in minimal influence”. This style has no relation to either Theory X or Theory Y. The leadership responsibilities are shared by all. This mainly relies on good team work and good interpersonal relationship skills also can be useful in businesses where creative ideas are important. Unlike the autocratic method this style of leadership can be highly motivational as people have control over their working life. (Northouse 2009).

This style is suited for less critical areas of change where followers are specialists who are capable and independent. But it is arguable whether change could be successful with such a hands-off style of leadership.

Gucci CEO Robert Polet uses the lassiez-faire style but within a framework so that he doesn’t lose control (Gitman & Daniel, 2009). He may have opted to choose the above strategy due to the drawbacks of the leadership style

Theories of Leadership

Trait Theory

There are many different types of leadership attributes, traits and qualities; these may differ from person to person. E.g. Bill Gates is known for his intelligence and for being a visionary, whereas Oprah Winfrey is recognized by the world as a very influential leader and an excellent communicator.

As listed by Northouse (2007) some of the positive leadership attributes are, trust worthy, positive, dynamic, honest, encouraging, motivational, builds confidence and intelligent. However there are also some negative attributes that leaders carry with them which are asocial, egocentric, loner, dictatorial and ruthless. One or more of these attributes are usually very commonly seen in every individual although they would differ from person to person.

Leadership traits are the qualities that people often associate with leaders. As indicated by Shead (2007) the five most important leadership traits are, honest, forward looking, competent, inspiring and intelligent.

Both Northouse and Shead mentioned the importance of honesty as a key attribute to leadership. When Toyota had to recall vehicles due to faulty brakes Jim Lentz, CEO of Toyota handled the situation really well by being transparent and honest. He was brave enough to face a live interview. His quick response helped minimize the damage made to Toyotas reputation.

Therefore it is evident that leaders should be equipped with the necessary skills and competencies to handle change.

Transformational Theory

Bass & Riggio (2006, p.3) described transformational leaders as “those who stimulate and inspire followers to both achieve extraordinary outcomes and in the process, develop their own leadership capacity”. Transformational leaders behave inspire and motivate people, encourages creativity and stimulate followers, pays individual attention to its followers in order to become successful (Bass & Riggio 2006).

Hacker & Roberts (2004, p.3) “Transformational leadership is the comprehensive and integrated leadership capacities required of individuals, groups or organizations to produce transformation as evidenced by step functional improvement.

The two statements above have a common thinking which suggests that the leader should be the transformer and has to act as the initiator.

Hacker & Roberts gave a broader view concentrating on the individual as wel the organization. Whereas Bass & Riggio gave a more specific view as in how leaders could be transformational as an individual.

To be successful at transformational leadership there are some components that were put forward by Bass and Riggio (2006). They mention four components that describe the transformation leader and leaders are strongly required to possess these components in order to be successful transformation leaders. The components put forward by Bass and Riggio (2006) are;

Idealized Influence: Leaders should behave as role models; they can be counted on to do the right thing demonstrating high standards of ethical and moral conduct.

Inspirational motivation: Leaders must behave in ways that inspire and motivate followers. Team spirit should arouse while displaying enthusiasm and optimism.

Intellectual stimulation: Stimulate follower’s efforts to be innovative and creative, by questioning assumptions, reframing problems and approaching old situations in new ways.

Individualized consideration: Leaders should pay attention to each individual follower’s need to achieve and grow by being a coach and mentor to them. The leader also improves communication between the followers and also must be a careful listener.

Through idealized influence, individualized consideration, intellectual stimulation and inspirational motivation, transformational leaders are likely to promote performance beyond expectations and achieve enormous changes within individuals and organizations.

The above four components are evident in Sam Walton the founder of Wal-Mart. He showed his appreciation and thus inspired his associates and spoke to his customers by visiting all of the Wall-Mart stores around the country. His approach enabled to minimized resistance to change in Wall-marts culture of constant change (Bergdahl, 2006).

Charisma could be considered a key ingredient in transformational leaders. Bass & Riggio (2006, p.5) “Transformational leadership has much in common with charismatic leadership, but charisma is only part of transformational leadership.”

Steve Jobs is also considered a transformational leader. His vision, charisma and communication skills are part of his success (Krietner, 2007, p.453). His vision enabled him to position his company in the changing world market by introducing cutting edge products like iMac, iPad and iPhone.

Conclusion

The global competitive business environment has changed dramatically over the past. As a result the need for competitive leadership to handle change is clear. One of the most difficult responsibilities of leadership is leading change. This study reveals certain leader skills and abilities necessary for successful organizational change.

Leaders who exercise attributes such as a vision, good interpersonal skills, communicational skills, motivational skills and supportive team skills are more effective in driving change because they are the key elements through which successful results can be achieved.

There are lots of arguments for and against each of the leadership styles and approaches. According to author’s observation the lassiez-faire style, coercive style and pace setting style may considered least effective whereas affiliative, coaching, democratic style and transformational approach could be considered the most effective.

There is no exact model of leadership that could be used; rather there are multiple models all of which have their place depending on the demands of the organization. The leader should be capable of identifying the best method appropriate in a given situation taking into consideration the individual leader and organizational environment.

Different styles of leadership will suite different types of change. There is no hard and fast rule that a certain type of leadership is perfect for a given change situation. The leadership style will depend on the organization, individual skill levels and attitude of follower’s. Therefore authoritative style and democratic style could be recommended in general as the author thinks it is the most appropriate because it powers commitment, communication as well as direction.