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Transformational Leadership is a leadership approach that is defined as, leadership that creates valuable and positive change in the followers, with the end goal of developing followers into leaders.
The notion of Transformational Leadership is significantly important to the corporate world and organizations, since it enables to gain strategic advantages and improve organizational effectiveness in the rapidly changing business environment. The term Transformational Leadership first coined by J.V Downton in Rebel Leadership: Commitment and Charisma in a Revolutionary process (1993).
James MacGregor Burns first introduced the concept of Transformational Leadership in his book Leadership (1978). Burns wrote, "I define leadership as leaders inducing followers to act for certain goals that represent the values and the motivations- of both leader and followers" (Italics original). Burns insists that for leaders to have the greatest impact on the "led", they must motivate followers to action by appealing to shared values by satisfying the higher order needs of the led, such as their aspirations and expectations.
Transformational Leaders will also be similar to the "Level 5 leaders" identified by Jim Collins in his book "Good to Great" (Appendix-1)
Dr Nalaka Godahewa who has held top positions in Sri lankan companies like, Unilever, Suntel, MAS, and Sri Lanka Insurance shared his thoughts on transformational leadership.
"â€¦To me transformational leadership is one's ability to drive the organizational changes for betterment while harnessing everyone's commitment for it...."
Transformational Leaders raise the bar by appealing to ideals and values of followers. Burns was influenced by Abraham Maslow's Theory of Human Needs. This theory recognizes that people have a range of needs, and the extent to which they will perform effectively in the work place will be affected by the extent to which these needs are satisfied. (Appendix-2)
Ideals are higher in Maslow's Hierarchy, which does imply that lower concerns such as health and security must be reasonably safe before people will pay serious attention to the higher possibilities. Using social and spiritual values as a motivational lever is very powerful as they are both hard to deny and also give people an uplifting sense of meaning and identity.
Bernard Bass, a disciple of Burns, defined transformational leadership in terms of how the leader affects followers, who are intended to trust, admire, and respect the transformational leader.
He identified three ways in which leaders transform followers;
Increasing the awareness of task importance and value.
Getting them focus first on team or organizational goals, rather than their own interest.
Activating their higher order needs.
Transformational Leadership Vs Transactional Leadership - Which is more effective?
Transactional Leadership is based on a transaction or exchange of something of value of the leader possess or controls that the follower wants in return for his/ her services.
In determining which leadership style is more effective, it is important to understand the kind of leaders and followers who will most likely to succeed in a challenging environment. Thus it can be stated that today's networked, interdependent, dynamic and turbulent business environment requires transformational leaders, as it is only the transformational leaders, who can bring out and enhance the creativity and best efforts of their followers.
For an organization to adopt the transformational model, both leaders and followers must be in tune with the same culture and share similar values. Once these values internalized deeply, the holders of values will follow the dictates of these values in the absence of incentives, sanctions or even witness.
2.1 Kamath, the man who built ICICI Bank
ICICI bank is the second largest bank in India. It has total assets of over Rs one Trillion. Heading it is its dynamic leader, Vaman Kamath, currently the non-executive Chairmen of the bank, who in 7 years transformed this project finance institution in to a global bank.
Kamath says this transformation took place mainly because of the way Team ICICI responded to the strategic vision of the organization. He gave complete freedom to the teams in the way they want to achieve the goals, and created a highly energized atmosphere where teams quickly internalized vision and targets. This made the teams going after the vision as if they were running their own business, rather than working for someone else.
Components of Transformational Leadership
How do leaders develop the necessary bonds to make Transformational Leadership possible? Bernard Bass has four interrelated components that he views as essential for leaders to move followers into the transformational style.
Charisma or Idealized Influence:
This is about the leader having a clear set of values and demonstrating them in every action, providing a role model for their followers. Trust for both leader and follower is built on a solid, moral, and ethical foundation.
Dr Hans Wijayasuriya is one of the best known business leaders in our country. He serves as the Group Chief Executive of Dialog Telekom PLC. According to him the best way to influence followers is making them understand about the challenge and why change is required.
Tata Steel success story
Tata steel (formerly TISCO) was the single largest integrated steel works in the private sector in India as at 2001. Dr Jamshed Irani who retired in July 2001 as Managing Director, was the change agent led his teams to achieve this unique status.
He says it is important for a leader to maintain credibility and build up trust, in order to influence and inspire the people who work for him. The principle "you must do what you say you will do" is cardinal for establishing credibility.
Jamshed says in his voyage the biggest challenge he faced was getting the people's acceptance him as a leader. He believes that you have to earn respect for yourself as a person, for the quality of leadership you provide. Acceptance comes from the heart and you have to work for it.
Leaders with inspirational motivation challenge followers with high standards, communicate optimism about future goals, and provide meaning for the task at hand. This includes articulating a vision that is appealing and inspiring to followers. Dr Hans Wijayasuriya says Dialog's culture is as such, once the people start to believe in a particular challenge, they are very much motivated to achieve it. And just achieving it and being able to surpass the boundaries gives the motivation to go forward further. This shows the leader's appeal to what needs to be done, provides the impetus for all to move forward.
Intellectual Stimulation helps followers to question assumptions and to generate more creative solutions to problems. By giving them more freedom, followers will start to think deeply about things and figure out better ways to execute their tasks.
Dr Wijayasuriya explains the transformation should emerge within the organization, and the employees need to be encouraged to come up with their own solutions and to transform themselves. A leader who catalyze that transformation will get faster and sustainable results, and it will be least damaging to the organization in the long run.
Richard Branson's Virgin Success- The Incredible Triumph of an Enigmatic Entrepreneur
Richard Branson is the man behind 150 or so enterprises that carry the Virgin name, with personal wealth estimated at nearly $ 3 billion. He had that rare ability to connect with people mind to mind, and the power to energize the ambitions of others so that they too, rise to the level of their dreams.
He keeps each enterprise small and relies on his magic touch of empowering people's ideas to fuel success. Richard Branson is a leader who can turn possibilities even unlikely ones, into raging success. He says "it all comes to people".He writes them all, all 5000 Virgin employees once a month, and invites them to write or call him with their problems, ideas, and dreams, they doâ€¦. and new Virgin successes are bornâ€¦..
Individual consideration treats each follower as an individual and provides coaching, mentoring, and growth opportunities. This approach not only educates the next generation of leaders, but also fulfills the individuals need for self - actualization, self-fulfillment and self worth.
According to Dr Hans Wijayasuriya, a Transformational Leader needs to be empathetic and encourage diversity within the organization. He says, "People should feel like home when working and this will create the best work environment. There can be employees who are silent, aggressive, or reserved but everyone will have a place in the company. It is the duty of the leader to maintain one to one empathy to each employee's characteristics and needs."
Dr Nalaka Godahewa explains the key components of Transformational Leadership;
"â€¦Ability to see the future, and articulate a clear vision, ability to communicate the same to people and win the buying, ability to drive the organization for results, flexibility and adoptability in handling obstacles while not loosing focus on the final goalâ€¦."
Working for a Transformational Leader can be a wonderful and uplifting experience. They put passion and energy in to everything. They care about you and want you to succeed.
In order for the notion of Transformational Leadership to be relevant, four elements must be present;
A clearly articulated vision- Transformational Leadership starts with the development of a vision, a view of the future that will excite and convert potential followers.
Statements that inspire people to connect / selling the vision- The next step, which in fact never stops, is to constantly sell the vision. This takes energy and commitment as few people will immediately buy in to the vision and some will join the show, much more slowly than others. Here the leader will encounter the dilemma of the bell curve.
Resist change Reluctant to change Actively seek change
15% 70% 15%
Organization Population Distribution- indicating preparedness for change
Therefore the Transformational Leader needs to convince others to climb on board and to make the vision a reality. The vision will come alive once the people start to believe that it will take them from where they are to where they want to be.
Determining the way forward- In order to increase the ownership process, people need to be educated on seeking the way forward. According to Dr Wijayasuriya a leader should define the challenge and provide some degree of certainty to the followers by explaining how to achieve the targets.
Leading the way- The final stage is to remain upfront and central during the action. Transformational Leaders are always visible and will stand up to be counted rather than hide behind their troops.
Venu Srinivasan- TVS Group
TVS Group is the largest automotive component manufacture and distribution group in India. The group comprises of 29 companies and Venu Srinivasan is its self-effacing Managing Director. He believes that organizational transformation has to begin at the top. That means a CEO must lead the change process and be the first to change.
Relationship between, Change, Leadership and Management
The current business environment is so dynamic and it is generating numerous threats and opportunities to all organizations. This will of course trigger a change in the organization, where it will lead to making changes to the existing process, products, services, structure, and culture etc.
Therefore the fundamental purpose of leadership should be to successfully handle the change which occurs in an organization. Further the fundamental purpose of management should be to keep the process and systems functioning.
In brief Leadership envisions the future course and management builds the administrative process to get there. Transformational Leadership style in particular will strengthen the relationship between change, leadership and management, since it appeals to higher ideals and values of followers.
How does a Transformational Leader work in today's Turbulent Business Environment?
Running a company in today's business environment is like playing basketball with a moving basket. Globalization, shifts in consumer needs and demographics as well as technological changes are all environmental forces that have led to increasing levels of organizational complexity.
This has also increased the demand for speed and change in every aspect of the organization. With increasing rates of environmental changes as well as the diversified nature of most large firms, continuity and durability of organizational strategy no longer guarantee success.
Transformational Leaders will have their own way of handling these challenges, by selecting actions that directly meet the needs of the environment and the people around. Transformational Leaders speaks to the being level of people and inspire them to follow.
Exemplar- Dr Nalaka Godahewa
Dr Nalaka Godahewa explains the business environment in Sri Lanka today, as highly competitive in all industries. In particular to the insurance industry he says, price undercutting and lack of public awareness are key challenges.
When he was first appointed to Sri Lanka Insurance in 2006 as its CEO, he had the vision to propel SLI to benchmark status, as a world class financial service provider. Delivering on that promise, Godahewa during his tenure instituted benchmark systems and process, instilling a customer centric culture across the company. His strategies enabled SLI to achieve 31% growth in 2007.
In his second era as the MD of SLI, after SLI was reverted back to the government upon a Supreme Court ruling in 2009, Godahewa came up with a unique motto for the company, "protect like a father, and care like a mother". This is to reflect that SLI is envisioned to provide government protection and private sector service standards.
With his correct leadership SLI declared a staggering Rs. 3 billion in total as bonus for 2009, to its life policy holders.
When asked how he handled the transformation he explained it asâ€¦ "By articulating a clear vision, and developing the strategies to achieve the same, by getting people involved, identifying the right people for the right job, and giving them responsibilityâ€¦"
His statement exhibits genuine traits of a Transformational Leader, and that is how Dr Godahewa was able to guide SLI successfully under both private and government ownerships.
Exemplar- Dr Hans Wijayasuriya
Dr Hans Wijayasuriya is the man behind the success of Dialog Telekom. Dr Wijayasuriya points out the business environment which prevailed in year 2008/2009 were extremely challenging. He says during that period many companies experienced a downstream impact of a global recession which has led to a domestic recession.
Inflation rate and interest rate continued to increase and outcomes of these was compounded by the collapse of certain finance companies like Golden Key. Reduction in consumer spending power due to lower savings and aggressive tariff cuts in the mobile telecommunication industry led to a reduction in company revenue. Dr Wijayasuriya says this can be called as a "Perfect Storm".
During this period Dialog underwent a companywide "cost rescaling exercise" to scale down its cost to be in line with its revenue and to suit the environment.
But he saysâ€¦ "We made it very clear to our managers that we're not going to do rational cost cutting, instead it is rescaling our cost baseâ€¦" It was short term strategy with a long term survival in mind, Dr Wijayasuriya explained. But he stressed that they did not compromised on branding, marketing, customer service, and quality of service which are their biggest strengths.
This shows that it is important for a Transformational Leader to prioritize the list of strategies and actions when operating in a turbulent business environment.
In Q2 2010 company achieved a 13% reduction in operating cost relative to Q1 2009, which signifies the strategies they undertook in previous quarters.
Dr Wijayasuriya joined Dialog in 1994 and in 1997 was appointed as the CEO with the vision of being the market leader by year 2000. They indeed achieved the market leadership and have a subscriber base of 6.74 million as at 2010.
Dr Wijayasuriya says now Dialog has a broad vision i.e. "to be the undisputed leader in multi- sensory scenarios such as delivery of education, sharing information, emotions...etc. This means for anything which needs connectivity, Dialog would be the undisputed leader".
Therefore it can be stated that depending on the life cycle of the company a Transformational Leader will decide whether the vision should be broad or short term in order to succeed in a turbulent business environment.
Why Turbulent Business Environments is the place for Transformational Leaders?
When the business environment undergoes dramatic and continual change, the basic assumptions and practices underlying strategic decisions must be reframed to incorporate new challenges. In addition, flexibility to adapt to changing market conditions, ability to assess the situation quickly and implement decisions under conditions of uncertainty become crucial success factors. Further people will work at cross-purposes in the absence of a clear direction.
A transformational leader will address to the higher order needs of these people, will align all initiatives and will get them focus on team and organizational goals.
When Dr Godahewa was reappointed to Sri Lanka Insurance in 2009 the organization was in chaos. Market share was dropping. Productivity was low. Unions were gaining control. He addressed these issues by getting people involved. Setting high targets jointly and sharing the glory of success with everybody.
According to Dr Hans Wijayasuriya, a leader needs to transform all the time and should regularly ask the question; "what business we are in?". Here he mentioned the "Parker pen story", where a new CEO was appointed to the company and in a management meeting he had raised this question. There were answers like; we make quality pens, expensive pensâ€¦etc. but one has correctly pointed out that "we are in the business of making gifts". This answer revolutionized the entire company creating a new demand for pens.
Dr Wijayasuriya says by regularly asking this question a leader can transform and redefine what they are doing.
That is how Dialog changes its vision from time to time. Their current motto "Future Today" indeed reflects that Dialog is ready to transform!
Therefore it can be stated that, it is only a Transformational Leader can survive in the turbulent business environment and drive the company to achieve its vision. Today many companies seek change and thousands of investors, venture capitalists, shareholders wait helplessly for their investments to yield respectable returns. The only hope they might like to explore, is to look for a transformational leader for the company in which they have stakes, to turnaround the company and drive it to a new direction.
What conclusions can be drawn about the usefulness of Transformational Leadership in today's Turbulent Business Environment?
Indeed change can happen in any organization when there are transformational leaders who clearly articulate the vision, inspire people to connect, and detail the plans in order to achieve the vision. It is this type of leadership that will bring about true innovation, productivity, and employee satisfaction to any company.
Dr Hans Wijayasuriya, Dr Nalaka Godahewa, Vaman Kamath, Dr Jamshed Irani, Venu Srinivasan and Richard Branson can be considered as true transformational leaders, who have transformed their organizations to a high level of standard and performance by successfully handling the challenges emerging from the business environment.
The above leaders have certain characteristics in common, they;
See change as an opportunity
Take the lead in innovation and try to make a difference
Have an inspirational vision
Are ready to transform
Never give up
Encourage followers to find solutions by giving them more responsibility.
When transformational leaders are connected with their followers great things can happen. When leaders and led shares a common vision, followers don't have to be supervised- they will know what to do when the time comes, and isn't this what exactly we require in today's turbulent business environment?
(Words- 3650, excluding appendices and references)
Burns.J.M. (1978), Leadership, New York, Harper & Row
Bass.B.M. (1985), Leadership & Performance Beyond Expectation, New York, Free Press
Bass.B.M. (1990), From Transactional to Transformational Leadership: Learning to share the vision, Organizational Dynamics, (Winter)
Harvard Business Review on Leadership (1998), USA, Harvard Business School Press
Collins.J. (2001), Good to Great: "Why some companies make the leap & others don't", London, Random House Business Books
Pandit.S. (2005), Exemplary CEOs: Insights on Organizational Transformation, New Delhi, Tata McGraw- Hill Publishing Company Ltd
Tompkins.A.J. (2007), Bold Leadership for Organizational Acceleration, USA, Tompkins Press
The Transformational Leadership Report, (2007), Retrieved date: 15/04/2010
Homrig.M.A. (21/12/2001), Transformational Leadership, Retrieved date: 25/04/2010
Ulrich.D, Wiersema.M.F. (1999), Gaining Strategic & Organizational Capability in a Turbulent Business Environment, The Acadamy of Management Executive, Vol. (3/No2) p115-122, Retrieved date: 15/04/2010
Phillip.A.B (2008), How Transformational Leadership Inspires Change, Retrieved date: 15/04/2010
Transformational Leadership, Wikipedia: the free encyclopedia,
Shepler, J. Richard Branson's Virgin Success, Retrieved date: 15/05/2010
News Paper Articles:
" Dialog Telekom improves quarterly results", Business Times, 16/05/2010,
"SLIC declares Rs.3 Bn bonus to policyholders", Business Times, 12/06/2009
"Dr Nalaka Godahewa heads SLIC", Daily News, 13/06/2009
Level 5 Hierarchy
Builds enduring greatness through a paradoxical blend of personal humility and professional will.
Make productive contributions through talent, knowledge, skills, and good work habits
Contributes individual capabilities to the achievement of group objectives
Organize people and resources towards the effective and efficient pursuit of pre-determined objectives.
Catalyses commitment, to vigorously pursue a clear and compelling vision, stimulating higher performance standards.
"Level 5 leaders channel their ego needs away from themselves and into the larger goal of building a great company. It's not that Level 5 Leaders have no ego or self-interest. Indeed they are incredibly ambitious- but their ambition is first and foremost for the institution, not themselves"
Author of "Good to Great": Why some companies make the leap, and others don'tâ€¦
Maslow's Hierarchy of Needs
Questions presented to Dr Hans Wijayasuriya
How do you describe the Business Environment today and what are the key challenges you face?
Could you explain the objectives of the cost rescaling exercise conducted by Dialog in 2008/2009?
How did you convince the objectives of the exercise to your employees and how did you get their support?
You joined Dialog in 1994, and the company was at a zero status at that time, but today it has a subscriber base of 6.74 million, so how did you achieve that transformation?
What was your vision for the company when you were appointed as the CEO in 1997?
What is your current vision?
In your opinion what qualities a leader should possess in order to succeed in today's turbulent business environment?
In theory it says there are four components of transformational leadership, namely; Idealized influence, Inspirational motivation, Intellectual stimulation, and Individual consideration, how far do you agree?
What you value in your employees and how do you address them?
Finally, "Transformational Leadership" What does it mean to you?