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Financial and economic crisis in the USA have created a domino effect with the global economy and now the recession is expanded to Europe, Asia and other regions. Thailand cannot avoid this effect either. In coping with the organizations need to adjust themselves for protection from the changing or uncertain situation. The leaders of the organizations or CEOs are required to help the organizations survival amidst the crisis. In the twenty first century successful leaders will respond to the new reality or paradigm shift. Therefore, an interesting thing mention about the leadership of successful organizations is whether the organization is succeeding with its leadership or management? This article focuses on the new reality for leadership in the crisis situation. And how leader in the private sectors in Thailand are adjustable the organization in the uncertainly economic.
We are in the crisis? When considering the third to fourth quarter of 2007, the global stock markets were dramatically dropping because of the Sub-Prime crisis in the U.S. The problem of the Sub-Prime in U.S. initiated from the liquidity loss of financial institutions which resulted from the real estate loan deterioration. In the beginning, most of analyst estimated that the aftermath of the Sub-Prime crisis would not be quite severe. However because of the U.S. real estate recession, the Ministry of Finance of the US made the decision to take over two loan institutions, Fannie Mae and Freddie Mac. Those were in the process of being urgently strengthened by the Federal National Mortgage Association in order to bring the investors confidence back (Siam Intelligence Unite, 2007).
The great impact of global financial crisis was clearly apparent in 2008. Start with the collapse of Lehman Brothers and the forced sale of Merrill Lynch which took shape over the weekend of 13-14 September 2008 have confirmed the scale and gravity of the global financial crisis (Pettifor, 2008). Coca-Cola Enterprises Inc. reported a loss of 1.1 billion for 2006 and said that it would cut 3,500 jobs as its costs rise (JobBank USA, 2007). The largest bank of Russia, Sberbank Bank wanted to slash up to 70,000 jobs before 2013(The Economic Times, 2008). Citigroup Inc. announced job cuts of up to 50,000 employees worldwide (Azhar & Lim, 2008). Moreover, AIG looked like it would become bankrupt and they had made the US government to support them by providing loan 85,000 million dollar. (Siam Intelligence Unite, 2007). The above example events were enough for US government to announce a plan for recovery of their economy by budgeting 3.25 trillion dollar to relieve the crisis but it seems to have little effect to help them away from the crisis (Suwanaporn, 2009).
According to the mentioned crisis, all organizations need to adjust themselves for protecting themselves from the changing or uncertainty situation. The leaders of the organizations or CEOs are thus required to help the organizations survival amidst the crisis. The effective leaders should be able to change the organization or manage their organization in the every situation especially in the crisis time. In west Jack Welch of General Electric Company (GE), Bill Gates of Microsoft, and in Thailand Chumpol Na Lamlieng of Siam Cement Group (SCG), and Dhanin Chearavanont of Charoen Pokphand Foods LPC. (CP) are the good ideal for leaders. When considering by the characteristics found that these have their own same and different characteristics, experience as well as education. But all of them have the same thing, which is the ability to lead their organization to a high effectiveness in every environment (Promsri, 2005).
And now a day, in the rapidly changing economy the necessary skill for leaders is the ability to bring an organization to overcome the moment crisis; but the question is how they can defeat the dilemma.
Propose of the Article
This article focuses on the new reality for leadership in the crisis situation. As well as, how leader in the private sectors in Thailand are adjusting their organizations in the uncertain economy will be discussed.
Crisis in Thailand
Financial and economic crisis in USA have created a domino effect in global economics and now the recession is expanded to Europe, Asia and other regions. Thailand cannot this effect either. Between 1997 - 2009, Thailand has faced many crises from economics, natural disaster, political uncertainty and diseases. In 1997, we faced the financial crisis called Tom Yam Kung Crisis. Then 1998, 56 financial institutes were shut down by the regulation of fund from Bank of Thailand. Three year later in 2002, SAR flu spread from foreign countries to Thailand. In 2003, Bird flu disease happened. And in 2004, we lost more than 8,000 peoples from a Tsunami harmful (Thainewyork, 2005). Between 2006 - 2007, Thailand faces uncertainty from politics: starting with reformative government by military and after that Thailand had 3 governments within one year. Since 2008 until now, Thailand was economically affected by the impact of global financial crisis. And the Swine flu (H1N1) disease has spread to Thailand.
Tom Yam Kung Crisis
First time financial crisis in Thailand
Council of National Security - CNS
(Reformative government by military.)
Gen. Surayuth Government
1. Samak Government
2. Somchai Government
3. Aphisit Government
(Global Financial Crisis)
Close 56 Finance Institution
Crisis in Thailand: See it to be familiar.
Figure 1. Crisis in Thailand
Source: Adopt from Thai HR Forum, 2009
As shown in the figure that more than 10 years Thailand has confronted many uncertainty events that affect to our economics, tourism and society, and we can not forecast the future environment that will affect our economics again. So every organization should prepare itself to deal with the rapidly changing and uncertainty environments. Because of the unpredictable future environment will affect our economics, in this situation we need the effective leader. That is why the leaders are very important to every organization to over come the crisis situation or difficulty. How leadership influence on the organization? How private sectors in Thailand survive in the last 10 years of Thailand crisis?
Leadership has been a topic of interest since olden times. The scientific studies in leadership began around the end of nineteen century. Until now we have more than 350 definitions of leadership term offered by scholars and other writers (Daft, 2005). This article will present some definitions of leadership as follows:
The principal dynamic force that motivates and coordinates the organization in the accomplishment of its objectives (Bass, 1990 cited in DuBrin, 2006). Daft; definition of leadership is an influence relationship among leaders and followers who intend real changes and outcomes that reflect their shared purpose (Daft, 2005). O'Leary says leadership means that the ability of convincing people to follow up what the one wants (O'Leary, 2000).
Most definitions of leadership imply that a leader has effect on organization performance. Leaders, action and personal influence bring about change. Leaders are people who have authority in organization that is highest level, executive or top management. Highest level executive are importance in organization. Major organizational problems are solved by these leaders, In here may be leadership change the hope that the newly appointed leader will reverse performance problem (DuBrin, 2006). For example, Mr.Viwat Limsakdakul, Managing Director of TIPCO Foods Group (TIPCO). was appointed managing director of TIPCO in 1998. In that time major problem of TIPCO was accumulative deficit 800 million baht (Viwat, 2009). So, first task target was making deficit business to become a benefit business. Within three year, he achieved the target. Viwat addressed that he can solve the problem in TIPCO. He started with strong consideration the objectives of organization. He has changed concept of marketing and paid attention to customer. Viwat said that he found one of philosophy of management the TIPCO which is "Buy in to the staffs' heart". His philosophy has run by sharing the goal and working together. Viwat ended the conversation with a philosophy he has gained from his past working experiences that "When you are at a reaching point to be the stage of administrator or organization leadership, the thing proved and assent to the leadership must be from other people because it means acceptance from other (Viwat, 2009). It might be said that the leadership of leader is a key success factor to lead an organization to achievement.
In summary, leadership is important for leader and organization. Leadership can pull the employee efforts to reach the organization goals. The effective management of organization in the crisis timing is depended on leadership behavior that encourages members to actively engage in knowledge acquisition and the formulation of strategies to resolve the crisis (Dutton & Jackson, 1987; Wooten & James, 2004 cited in Wooten & James, 2008).
The New Reality for Leadership: Paradigm Shift
As mentioned above the leadership of leader affects organizational performance. In the past, the leaders think about if they keep the organization running on a steady course, the organization should have achievement. Today the economic world is changing. Globalization, high technology, high competition in marketing, telecommuting and rapid environment changes are causing fundamental shifts that have impact on organizations and present new challenges for leaders (Daft, 2005). So that why, leader need to the New Paradigm.
Daft mention about the new reality for leadership. "A paradigm is a shared mind-set that represents a fundamental way of thinking about, perceiving, and understanding the world." (Daft, 2005, p 8). The New Paradigm, is outlined in Table 1
Table 1 The New Reality for Leadership
OLD Paradigm New Paradigm
Stability Change and crisis management
Self-centered Higher purpose
Source: Daft, 2005, The Leadership Experience.
As shown in the Table 1, the old paradigm shifts from Stability to Change and crisis management.
Change and crisis have become the norm for many organizations
(Mitroff, & Anagnos, 2001). Present, the inevitability of change and crisis are accepted by the best leader and they recognize that leadership is a potential source of energy and self-renewal. They have to develop effective crisis management skill that can help their organizations in the crisis timing and move the organizations toward something better. The leader had taught by the pervasiveness of environment change to actively embrace and create changes within the organization which can develop individual workers and move the organization forward (Daft, 2005).
More importantly the old paradigm shifted from Control to Empowerment.
"No longer can organization afford to have workers check their mind at
the door." (Draft L Richard, 2005, P.17). Leaders were top management who believed strict control is important for their organization. "What to do it? When to do it? How to do it? and Who to do it with?" That quotation mark show everyone know the leader on the top has more power than the bottom. But today's leader shares power rather than centralizing. He finds ways to increase an organization's brain power by getting everyone in organization involved and committed (Daft, 2005).
In addition, the old paradigm shifted from Competition to Collaborate.
"New ways of working that emphasize collaboration over competition
and conflict." (Daft, 2005, P. 11). Although some companies still encourage internal competition but most of organizations are stressing teamwork and cooperation. Some competition can be healthy for an organization, but many leaders are resisting the idea of competition as a struggle to win while someone else loses. A new form of global business is made up of network of independent companies that share financial risks and leadership talent and provide to technologies and markets (Friedheim, 1999).
The move to collaboration presents greater challenges to leaders than did the old concept of competition. Within organization, leaders need to create an environment of teamwork and community that fosters collaboration and mutual support. The call for empowerment, combined with an understanding of organizations as part of a fluid, dynamic, interacting system, makes the use of intimidation and manipulation obsolete as a means of driving the competitive spirit (Daft, 2005).
In addition, the old paradigm shifts from Uniformity to Diversity
Draft confirms that the organizations were built on assumptions of uniformity, separation, and specialization. People who think alike, act alike, and have similar job skills are grouped in to a department, such as accounting or manufacturing, separate from other departments. Homogenous groups find it easy to get along, communicate, and understand one another. Still bringing diversity into the organization is the way to attract the best human talent and to develop an organization mind-set broad enough to thrive in a multinational world (Daft, 2005).
More over the old paradigm shifts from Self-Centered to Higher Purpose
The ethical turmoil of the early twenty-first century has prompted a determined and conscious shift in leader mind-set from a self-centered focus to emphasis on a higher purpose. Public confidence in business leaders in particular is at all-time low, but politics, sport, and nonprofit organizations have also been affected. In the new paradigm, leader emphasize accountability, integrity, and responsibility to something larger than individual self interest, including employees, customers, the organization and all stakeholders (Sellers, 2002). The new paradigm respects that honesty, integrity, and accountability to stakeholder are importance for leaders.
The old paradigm shifts from Hero to Humble.
In this term, humble are their personal humility. For the organization the leaders still are highly ambitious. Leaders change from the "leader as hero" to the hard working behind the scenes. Humble leaders build a sustainable company by supporting and developing others rather than trying to dominate them (Collins J., cited in Daft, 2005).
In the past leader often build an organization around a hero and troop of helper. New paradigm leaders build an organization with many strong leaders. Many strong leaders will develop their organization continuously and achieve sustainability in the long run. (Draft, 2005)
How leaders in private sectors in Thailand adjust their organization in the economic uncertainty?
In Thailand we are in a situation of uncertainty more than 12 years until now. How can Thailand survive until now? Is leadership really related to organization achievement? Is the organization successful by leadership not by management? We have thousands of questions about what the real factor bringing the organization to overcome the crisis. From these questions, in HR perspective, the author understands one word from Professor Dr. Gary McLean said "It depends".
"McLean's Philosophical approach to HRD is to look for multiple rather than single answers to a question." (McLean 2000 cited in Chiraprapha, 2002,).
When the organization is in the crisis, there are many ways to solve problems. It has not a single answer or single way to solve problems because it depends on situation that organization confronts. If it depends on situation, why this article still focuses on leadership. Because top management or CEO is last people who make decisions to do something.
In a crisis situation, we need collective and dynamic leadership, and leaders require perception and sense making skills in order for them to determine appropriate courses of action. The crisis leadership competencies are expected to be included in activities such as decision making, communication, creating organization capabilities, and developing human capital (Wooten & James, 2008). Therefore, it is very interesting about the successful organizations with leadership is whether the organization succeeding because of leadership or management?
It is important to grasp the difference between leadership and management. Management emphasizes on planning, organizing, directing and controlling. Leadership deals with interpersonal aspects of a manager's job, change, inspiration, motivation, and influence (Dubrin, 2006).
For clear understanding, Daft compared between management and leadership in five crucial areas as shown in figure 1.
Figure 2. Comparing Management and Leadership
Source: Kotter, 1990 cited in Daft, 2005
From figure 2. Daft summarizes the difference between management and leadership from John P. Kotter, Joseph C. Rost and Dumaine in five areas:
(1) Providing Direction:
In terms of direction, management focuses on plans and schedules for achieving, then allocating resources to accomplish the plan. Leadership emphasize for creating a vision of future and developing strategies. Management keeps eyes on the bottom line. Leadership calls for keeping an eye on the horizon.
(2) Aligning Followers:
Daft argues that Management focuses on organization structure to achieve the plan, developing policies, and monitor implementation of the plan. Leadership is concerned with communication the vision and developing culture.
(3) Building Relationships:
Management focuses on objects such as reports and machines. In the other hand leadership focuses on inspiring and motivating employee.
(4) Developing Personal Leadership Qualities:
Management focuses on encourages emotion distance in the other hand leadership means being emotionally connected to other. Leadership is more than set of skills. These include integrity, courage, enthusiasm and humility. "Great leadership is people who love what they do and want to share that love with others." (Daft, 2005, p 20).
(5) Creating Outcome:
The differences between leadership and Management create differing outcome. Leadership creates change within culture of integrity that builds honesty, positive relationship. In the other hand management maintain about stability, predictability, and order through a culture of efficiency (Daft, 2005).
In Short, management concerns putting organization goals into effectiveness through planning, directing, staffing and controlling organization resource. Leadership approach focuses on change, empowerment and relationship. Many managers already have abilities and quality needed to be effective leaders. Leadership cannot replace management it should be an addition to management.
Another important question is leadership affect upon achievement of organization breaking through the financial crisis? This question will be considered in the next section.
The Best practice in Thailand, from Sombat Kusumawalee's research which used Siam Cement Group (SCG) as a case, the study found that SCG is successful because SCG is harmonious with four characteristics of good organization which are (1) Principle-base organization (2) Productive organization (3) Adaptive organization and (4) Living organization. SCG has applied four principle which is "SCG code of ethics", consisting of four ideals (Adherence to Fairness, Dedication to Excellence, Belief in the Value of the Individual and Concern for Social Responsibility) and Corporate Governance.
The importantly mention of principles is not lip service. Regard this study, it is found that every level of SCG personnel take this rule until it becomes a tradition or organizational culture
According to a research, it was found that one of the successful factors of SCG was the executives' role model of leadership that follows the set up principles. SCG board executives along with appointees mostly have their own private and working behavior in line with the ethics of SCG, showing a prominent feature which is low profile/high productivity: easy lifestyle, working hard, not really having a social role, honesty, professional, and high disciplines. This kind of executive's characteristics becomes a model for other staff to follow (Kusumawalee, 2006).
The crucial key in building an efficiency and proficiency for the company business process and leading the company to the accomplishment with sustainable domestic as well as international competitiveness is the personnel administration of SCG.
SCG has its own concept which is "Employees are important and valuable resources". Therefore, the business administration of SCG focuses upon developing employees' potential including physical, mental, and intellectual competency in order to allow them to have adequate knowledge and improve themselves along with using their own potential to lead the SCG to the best sustainable business. The SCG has devoted such a heap of resources while simultaneously developing knowledge, conscience, and mentality towards the employees (Peetawan, 2009).
In regard to offering special curricula to support and encourage working lifestyle, namely Functional training, Business Management and Leadership, Oversea Expansion and Valued Innovation, those above are assumed that they are Business Management and Leadership Development Curriculum.
Figure 3. SCG Training & Development Program
Source: Peetawan, S. (2009). Knowledge Sharing: Company visit by TLCA
When considering the road map of efficiency development and personnel's potential encouragement, besides emphasizing upon employees' knowledge and competency improvement of SCG according to Core Competency needed in business, SCG still pays parallel attention to leadership, for example, any employees who work for 1-2 years will be offered a study of entrepreneurship in the curriculum of Abridged Business Concept Development (ABC). They will be able to learn about knowing yourself and they will be able to work with others effectively. For leadership Development Program Curriculum: Leading Yourself (LDP1), the employees, who work for upper 6 years, will be able to learn about Business Concept Development (BCD) in depth and how to be a proficient leader through Leadership Development Program Curriculum: Leading Team (LDP2). Those in managing level, who work for over 10 years, will be offered an intensive curriculum of Management Development Program (MDP) by academically cooperating with Wharton Business School, University of Pennsylvania. The curriculum contents consist of Information Resource Management, Leadership and Change, Financial Management and Control, Operational Excellence and Innovation & Entrepreneurship, Strategic Marketing Management and Strategic Management. There is also a special curriculum in Leadership Development namely, Leadership Development 3: Facilitative Leadership (LDP3). Those in medium managing level will be offered the Executive Development (EDP) by the cooperation of Columbia University in order to better leadership, working through people, entrepreneurship, implement change, and global mindset. Advanced Management Program (AMP) at Harvard Business School and Wharton Business School stands for senior executives. The curriculum contexts consist of Accounting and Financial Management, Managing Organizational Effectiveness, Marketing Leadership, Business Government & International Economy and Competitive & Corporate Strategy. It is explicit that even though SCG specially gives importance to Business Knowledge, it still does the same thing with leadership skill starting from new employees to CEO level. Those show about organizational development which not only focuses on human development as priority, but also leadership skill should not be ignored. Kan Trakulhoon, President and CEO of SCG, feels confident that having a good leader in any organizations enables to produce plenty of other leaders widespread. In contrast, having a bad leader can exactly cause destruction of employees; thereby, leadership curriculum study contributes to broadening perspectives which are easily integrated (Thannews, 2007).
Discussion and Recommendations
In the view of the author, leadership skill is essential for organizations. How about the recent financial crisis? How can leadership assist the organizations to beat the dilemma while they are undergoing the economic crisis? Administration policies to survive the organizations depend upon the leaders' decision that is ultimately crucial on either organizational evolution or recession. While the organizations are undergoing with the financial crisis, problem resolution are relies upon the CEO. How can those survive among the predicament? Also, the decision made by the CEO in many policies has an influence upon all level of employees such as Lay Off, down Size, Over Time, annual bonus, as well as salary decrease. Those are the policies of many organizations to decline their capital. However, employees' moral support is attacked and it can be such a big deal for the enterprises. Ethical guideline should be issued in making decision during the period of economic crisis.
In the context of Thailand, whenever the organizations are attacked by the financial crisis, large Thai corporations including SCG, Denzo International (Thailand) Ltd., Western Digital and other top entrepreneurs try to keep a retention as well as they could rather than use unemployment policy. (Personnel Management Association of Thailand, 2009) What's important is direct communication between the executives and employees to call for empathy while the organizations are at risk. Thavorn Charassathein Executive committee of Denzo International (Thailand) Ltd., stated that communication for making all level in the enterprises understand about the cause of the economic recession is such a good way. It should also be usually talked about how to decrease expenditure the most by not conducting the unemployment policy to totally expand the torture towards the companies not merely for employees but also employers to feel empathetic. The executives should be such a dominant example such as salary decrease, bonus decrease, flight class change, and employees' recreation program decrease. It is clear that ethics of leadership have played an important role in many large organizations towards policies during the period of economic slump. The executives and employees should cooperate in breaking through the crisis more than applying the unemployment as priority as they did before (Charatthein, 2009).
Applying the Sufficiency Economy Philosophy is another crucial factor that many top enterprises often put into action and follow up. The philosophy is possessed by His Majesty the King of Thailand which is a way for employees to seriously conduct based on knowledge and morality (Charatthein, 2009). With regard to the philosophy, it is evident that whenever the organizations are down, the leaders are so important to expose such an example role for employees and try to communicate with them so as to well understand the real situation before conducting the unemployment policy. In the author's point of view, this would result from being under the crisis of Thailand, as already previous explained. The organizations then try to retain as many employees as they could so that when the economy becomes gradually better in the future and those enterprises will be ready to run the process immediately. On the grounds of being under the dilemma for such a long time, it changes leadership and paradigms of the executives also. The economic crisis has an effect upon everyone, causing the change of leadership ethics by emphasizing on the importance of human values rather than taking the period of the crisis to decrease unemployment or launching such any policies for the enterprises' benefits without concern about other coworkers who are experiencing the same difficulty.
More than 10 years ago Thailand has confronted many uncertainty events that affect upon our economy and our society. Because of the unpredictable effect of future environment to economy, the leaders are very important for every organization to overcome the rapidly changed situation. Nowadays, successful leaders will respond to new reality or paradigm shift. The shift discussed in the previous section, informs that leaders shift from a rational management approach is concerned about stability and control to leadership approach which is valued to empowerment and relationship.
The new paradigm requires managers to become such successful leaders. Management and leadership should be a combination of leadership qualities and rational management skills.
Leadership is easy to be teaching and understand; however, it is quite difficult to implement and not every corporation can be successful, according to the author view point. The executives should be open-minded and good roll model towards employees. Some realize that they are too strict; while, others realize that they know themselves well and they do not want to change anything. In current circumstance, where the world is rapidly changed and it globally encounters with the financial crisis; a new leaders' role should be adapted. It is needed to be shift paradigm so as to bring our organizations in breaking through the financial and economic difficulty. Nevertheless, ethics for leadership is a thing that helps us in management, administration, effective communication, and honesty towards each other. Those can make balance between the employers and employees. Even though they are suffering from this severe financial problem, they are ready to successfully break through the crisis for our organization.