The dissertation is a study of the organisation where I am presently employed: THE MAURITIUS DUTY FREE PARADISE CO. LTD, which relates how ineffective leadership over several years have resulted in a decrease in revenues, period ended December 2011 and poor profitability and disengagement of employees.
My choice has been for this organisation because employees encounter ineffective leadership in their place of work on a daily basis and in the report, the author tries to analyse the causes and make recommendations to improve the profitability of the organisation and how to promote organisational identification so that employees are ready to go the extra miles.
The Mauritius Duty Free Paradise Company Limited (MDFP) which is owned 80% by Airports of Mauritius Limited (AML) and 20% by the State Investment Corporation (SIC) was set up on 26th March 2002 to take over the activities of World Duty Free (Mauritius). The Company is located in the premises of SSR International Airport, presents a unique opportunity to the traveller who may enjoy shopping in a pleasant environment. MDFP was voted the Most Distinctive Retailer in Africa in 2008.
However, the figures published for the financial year 2009, 2010 and 2011 give a clear insight into the poor state of things at Mauritius Duty Free Paradise Co. Ltd.
At MDFP, the company fails because those who manage the organisation are ineffective leaders, nominated by political parties. These managers do not have any planning, vision and clear objectives. With these situations, employees at the MDFP no longer identify them with the company. There is a high rate of absenteeism, indiscipline, and go-slow and willingly employees do not achieve their sales target.
A comparison of the financial results for the last three years shows a constant deterioration in the areas of turnover, profits before and after tax. There is reason to believe that this decline is due to poor or lack of leadership as there have been major changes at the level of the Board of Directors and also at the level of the management. There is reason to believe that the problem of poor profitability is as a result of employee disengagement. It is a widely accepted fact that all businesses are striving to increase their profitability. The Mauritius Duty Free Paradise Co. Ltd has to consider how to solve the problem of profitability with effective leadership and people engagement.
Profit before tax (Rs)
413, 767, 297
315, 277, 704
243, 702, 944
Profit after tax (Rs)
268, 071, 048
233, 469, 500
Profit after tax as a % of sales revenue
2: LITERATURE REVIEW
2.1 Definition of a Leader.
Leadership is another key element of this assignment. It is therefore important to have a good understanding of leaders and leadership.
“A leader is one who knows the way, goes the way and shows the way” (Dr. John C Maxwell, 1985)
The leader must be in a capacity to motivate others to act in such a way as to achieve group goals. “Leadership is the process in which an individual influences other group members towards the attainment of group or organisation goals” Shackleton (1995).
The project is on profitability and non-profitability. It would therefore be appropriate to first understand what is meant by profitability and non-profitability.
According to the Business dictionary, “profitability” is “The state or condition of yielding a financial profit or gain. It is often measured by price to earnings ratio”.
An organisation needs to be profitable in order to grow. Growth ensures sustainable cash flows which will help the business not to fail and add value to its resources. Sustainable profit will bring investment in new products, new plants and machinery, new technology and talented human resources.
In different study, CIPD has demonstrated that enhancing employee attitudes can affect an organisation performance. Citizenship behaviour has direct effects on turnover and absences. The ‘black box’ model produced by Bath Universities has proved that front line manager should create a working environment that encourage employee to offer ‘discretionary behaviour’.
2.3 POOR PROFITABILITY
Almost all companies pay attention about their profit margins. There are a number of areas that can cause poor profit performance and should be targeted to sustain profitability some organisations yield a poor profit because they do not have a clear plan of action to follow and it is easy for the firm to become stagnate or even fail. Some organisations have low return rates on assets, no costs control, loss in market share and high degree of risk resulted in poor profitability.
2.4 Leadership Theories
Going through textbooks, journal articles and other publication, the researcher found different thoughts of what a leader is, what are their traits and behaviours. Some thoughts are described out in the literature
2.4.1 Trait approach
The trait approach suggested that people are born with innate qualities and characteristics that help them to be a good leader, often called a born leader’. During the twentieth century, there was a lot of research to identify the definitive traits of leaders (Bass, 1990).
2.4.2 Style approach
The Style approach focuses on what leaders do and how they act (Northouse, 2007). This approach focuses on behaviour of the leader, namely the task and relationship behaviours. The task behaviour is goal oriented and help subordinates to achieve objectives, whereas the relationship behaviours help members to feel comfortable between them and with the situation that they have to face.
Many studies have been conducted to investigate the Style approach, namely, The Ohio University Study, The University of Michigan Study and Adair (1983).
2.4.3 Contingency theory
According to this theory effective leadership depends not only on the style of leading but on the control of a particular situation. Fiedler (1964) developed this approach by studying leaders who worked in different contexts, namely military organisations.
2.4.4 Situational Approach
This approach has been developed by (Blanchard, Zigarmi, & Nelson, 1993). Different leadership style can be applied to subordinates, depending on their hierarchy and working experience. Effective leader knows the development of the subordinates in a task situation and adopt appropriate leadership style for this particular situation.
2.4.5 Path goal theory
This theory appeared in the study of House (1971) and House & Mitchell (1974). The theory relates the relationship between a leader’s style, the work environment and the characteristics of the subordinates. House (1996) argued that subordinates performance, job satisfaction and motivation are related to the leadership style used by his superior.
2.4.6 Leader Member Exchange theory
Going through various literature review, the researcher emphasise leadership from the approach of the leader, subordinates and the situation. The Leader Member Exchange Theory was first developed in his study by Dansereau, Graen & Haga (1975). The theory is the relationship developed between the leader and each member of his team. But the process, behaviours and actions used by the leader to make his followers performed is unknown.
2.5 Change through a transformational leader
With significant global economic changes after second war two, many company such as General Motors had to consider changes in their way of doing business. Because of these changes new approaches to leadership has been adopted.
According to Bass (1990a) transformational leadership “occurs when leaders broaden and elevate the interests of their employees…when they stir employees to look beyond their own self-interest for the good of the group”
Effective leadership is crucial for sustainable organisations success. According to CIPD, UK Highlights: Global Leadership Forecast,” reveals that only a third (36%) of UK Leaders and one in five (18%) UK HR professionals rate the quality of leadership as ‘High’ in their organisations”.
Following Carlson and Perrewe (1995), ERIC (1992), Lussier and Achua (2004), and Yukl (1989) there are four stages of organizational change under transformational leadership:
The transformational leader must convince his followers that there is a case for change.
Leader should have a long term vision and involved followers in the process of change
Climate of urgency must prevail; team spirit in a learning organisation must be of utmost importance.
Change should be rooted, team members empowered and both individual and organisational interests aligned.
Transformational leaders have traits not found in others. They are change agents who can create significant change in both followers and organisation. They lead changes in mission strategy, structure and culture.
The concept of effective developmental leadership theory has its root from transformational leadership (Bass & Avolio, 1990b), followership (Berg, 1998) and servant leadership (Greenleaf, 1983) theories. Though transformational leadership have positive features, it depends too much on information and data about leaders.
The researcher thinks that nowadays leadership must be present at all levels in the organisation and not be kept only in hands of top executives
2.6 High Performance Working
The Chartered Institute of Personnel and Development has proposed a new way of promoting employee engagement through the HPW. The general consensus is that whilst there is no one definitive list of practices that will drive performance.
This approach creates an organisation based on employee involvement, commitment, and empowerment and encourages employees to put discretionary effort and fully utilise skills. With this work system, employee is self controlled and self managed
Leaders must have clear vision, mission and goals. Well-structured systems with clear processes and practices, proper attitudes and behaviour must be in place in order for employee to be able to use them to add value and as a results discretionary effort is manifested.
High Performance working sustained organisation performance and employee well-being. This approach brings wider benefits for both individual and organisation. There is greater opportunities for innovation and creativity, lower absenteeism, lower labour turnover and improved staff retention
2.7 People engagement
According to CIPD:
‘Employee engagement can be seen as a combination of commitment to the organisation and its values and a willingness to help out colleagues (organisational citizenship). It goes beyond job satisfaction and is not simply motivation. Engagement is something the employee has to offer: it cannot be required as part of employment contract’.
In a study of CIPD’s in collaboration with Kingston Business School, the make clearly stated that employees are either engaged emotionally or on a transactional level. Emotional engagement happens when the employee links and identifies himself with the organisation mission, vision and values. At the transactional level, the employee sticks to job description, salary and interesting career.
In the CIPD employee outlook spring 2012, 38% of employees are engaged compared with 36% for last quarter. The survey also pointed out that there is a strong correlation between employee engagement and the relationship the line manager has with his employee, such as individual discussion on his self development, career path, coaching, recognition and praise.
3: Research Methodology
Research is a systematic and organised effort to investigate a specific problem that needs a solution (Sekeran, 1992). In research, organisations designed steps to follow in order to address any specific problems.
3.1 Central Research Question
How effective leadership and people engagement can improve the problem of poor profitability at Mauritius Duty Free Paradise Co. Ltd
3.2 Research design
There are two main means to approach a research topic, namely the qualitative and quantitative methods.
Henning (1980) defines quantitative research as “the kind of research that involves the tallying, manipulation, or systematic aggregation of quantities of data”.
For this piece of work a quantitative enquiry has been used to explore problems of poor leadership since the past years and how employee engagement can improve the profitability. Quantitative research is fully adaptable to the study because it will provide accurate numerical answers to our research questions and to identify views, attitudes and behaviours of the whole population feeling on leadership and people engagement.
3.3The Setting – Target Population
According to Universal Accreditation Board for a population of 373, the sample size is 197 (Sekaran, 1992, p.253). Only 100 employees were interviewed. A simple random sampling method has been used because researcher thinks that population is almost homogeneous.
3.4 Questionnaire Design and Data Collection
Primary data was collected through an empirical study. A questionnaire (see Appendix I) with a five point Likert Scale was used to assess effective leadership and people engagement. Secondary data was collected through a theoretical study which comprises of books, journal articles and internet.
3.5 Pilot Study
Five questionnaires were tested by different employee’s grade in order to rule out any difficulty and reveal deficiencies in the design and improve the quality and efficiency of the study.
3.6 Ethical Approval
Approval was thought from the Director, Human Resource and CSR (See Appendix II and III) prior to data collection at the MDFP. Participants were informed of the purpose of the survey. The respondents answered the survey anonymously and participants were strongly reassured about the strict confidential nature of data.
3.7 Limitations of study
The main problem encountered during the survey was that certain blue collar employees were afraid that confidentiality was not respected. But the researcher reassures them that the information will be treated with great confidentiality and identities will not be revealed.
4: Analysis and Findings
4.1 Software used
The statistical analysis of the survey will be conducted with the help of SPSS, version 13.0 and exported on Excel.
4.2 Data Analysis
Raw data obtained from survey are transformed in acceptable data and used for analysis in order to make recommendations and conclusions.
4.3 Results of the study
The section explains the findings obtain from the survey.
4.3.1 General characteristics of the participants
A cross tabulation has been carried out for question 31 and 32
Gender*How old are you?
How old are you
% within gender
MDFP has a workforce comprising mainly of male workers and Table I clearly demonstrates that majority of respondents are male with 53% compared with 47% Female. There is a tendency for a male ageing workforce of 45.3% between age group 41-50.
Findings for question 33 in Figure 1 show that the highest rate of respondents (37%) lies in the range of 11-15 years of service, while 21% are within the range 16- 20 years of service. The smallest percentage (11) is between the range of 1-5 years of service and this can be explained by the fact that the organisation has not make recruitment since the past three years.
Figure 2, is the findings for question 34. Operations department has the highest rate of respondents (52%), followed by Warehousing and Logistics (39%). Figures reflect the population of the organisation. Operations department has the highest workforce, followed by Warehouse and Logistics.
4.4 Survey findings
Part two of the questionnaire was divided into six themes, each with five questions related to effective leadership and people engagement.
Figure 3 overall results on leadership theme demonstrate that half of the respondents (54%) disagree/strongly disagree with the leadership of the organisation.
Figure 4, question 1, 59% disagree/strongly disagree when asked if they are confident in the leadership of their organisation. Only 28% agree/agree strongly.
Question 2, 59% participants agree/strongly agree that their organisation has a transactional leadership
Question 3, 61% respondents thinks that MDFP do not have a transformational leadership.
63% of participants for question 4 are of opinion that emotional leadership do not exist in their workplace.
When questioned whether they are aware of the corporate objectives of their organisations, 58% disagree/strongly disagree.
Tendency shows that employees are not confident in their leaders. With a transactional leadership style and absent of emotional leadership, it seems that decisions are taken only at higher level. Employee voice does not exist and this resulted with disengaged employees. Because people do not even know their corporate objectives, they are not connected with their organisations and leaders must concentrate on this lack of vision and direction.
4.4.2 Corporate Culture
Overall findings for the corporate culture theme in figure 5 shows a negative respond from participants (53.4%) disagree strongly or disagree.
For question 14, (59%) respondents are not aware of the vision statement.
Employees (60%) are or opinion that their organisation do not have a clear sense of direction.
Employees (62%) think that individual initiative is not encouraged.
There is consistency in answers for both questions 9 and 10. Respondents (44%) are of opinion that their organisation delivers service quality compared with 42% who strongly disagree/disagree and 44% said that something stops them from doing their best at work compared with 43% who agree/strongly agree that nothing keeps them from doing their best.
From the opinion that has been voiced out, it seems that employees are not aware of corporate values which give a direction on how people should behave. Organisation with outstanding cultures has a shared and inspiring vision; with employees pulling in the same direction, with the same goal which sustain performance. With a bad quality service, organisation cannot retain customers and therefore profitability decline. When employees are not encouraged to take initiatives they do not give the best of themselves and there is no clear psychological contract.
The majority of Participants (55.2%) in the survey is of opinion that there is not a clear communication channel in the organisation.
It seems from respondents (54%) of question 11 that there is no effective communication between top and low level of employees.
Once more there is consistency in answers for question 12. Employees (47%) think that there is no cross-functional communication amongst department of the organisation whereas 40% of respondents agree.
It would appear (question 13) that majority of Staff (59%) is of opinion that management do not involved staff in decision making.
For questions 14, most respondents (60%) views that performance appraisal which is a formalised process to review performance are not used to assess individual performance.
Answers obtained from question 15, clearly give an indication that trade union are not involved in decision making. 56% disagree/strongly disagree compared with 30% agree/strongly/agree.
It seems that there is no constant communication throughout the organisation to spread information. With no performance management system, employees are not assessed on objectives and criteria and therefore it is difficult to achieve organisation goal. When trade union is not involved in decision making, there is little opportunity for employee involvement and participation. With no cross functional departmental communication, team spirit which bring synergy will difficultly prevail.
4.4.4 Working conditions, Recognition and Rewards
More than half (54.4%) disagree/strongly disagree with their working conditions.
Most respondents (59%) think that their working place is safe but 58% thinks that they do not have a working life balance.
Participants (58%) are of opinion that they are not fairly compensated.
They (59%) are of opinion that they do not have an attractive benefit package and are not valued.
It seems that leaders in this organisation are not aware of the benefits that work life balance can bring such as reduce absences, raise morale and increase job satisfaction. Unsatisfied salary can result in poor performance, unmotivated and bad attitudes. Management should be aware that without a flexible benefits package where employees are free to decide their pay packet; employees will not have a culture of engagement and will not boost performance
4.4.5 Training and Career Path
Overall respondents (58%) said that they do not have enough training and there is no career path in the organisation.
With a generalised opinion on this topic we can conclude that management does not take into consideration that training can enhance commitment of employee and can refrain them from leaving the organisation. Without a proper succession planning, the organisation may lack talented people to fill each key role. Because more than half of employees think that there is no career path and no sharing knowledge culture at MDFP, management must play a key and career facilitating and supporting role in the development of an employee as this can exploits the full potential of the workforce
4.4.6 Change and Employee Engagement
The last sections are discussed all together as they deal with change management.
Most respondents (68%) agree that there is an urgent need for change
The majority (68%) will response positively if there a process changes.
Participants (60%) are of opinion that MDFP do not exist in a state of rapid and continuous change.
Employees (64%) are not committed to their organisation
A great majority of respondents (61%) do not work as a team for a shared goal.
Inspiring and visionary leaders which can drive change will be benefit as employees are willing to embark for change. A change agent will identify and manage difficulties that may arise in the early process. Consultative communication must prevail because employees said that they are not involved in decision. If those concerned in the change are not consulted, problems may arise.
There are some areas to be addressed urgently in order to built an engaged workforce at Mauritius Duty Free Paradise Co. Ltd.
MDFP must adopt a transformational leadership in order to survive in duty free market. A strategic reliable leader will involve employees in writing the vision statement in order for them to be informed about the core values and norms that they serve. The leader must be able to embark employees in the overall business strategy, communicate to them how they contribute in the business objectives and inform them in business performance. The leader should set a clear direction and involved those at the lowest level in decision making process.
To facilitate effective communication through the organisation, top management can adopt “management by walking around”. Top management can visit the shop floor, where they can meet lower level employees and line managers on the job and this can create a wealthy working atmosphere. Newsletters and intranet should be used as quick means to keep employee informed of updated decisions. Union should be consulted in important decision making and cross functional communication between departments can improve cooperation, coordination, which could lead to organisational effectiveness.
Flexible working conditions like flexitime, home-working, compressed hours will bring high level of engagement. A safe and equitable working environment, where there is no harassment and discrimination and where employees are treated as valued assets will enhance job satisfaction.
Mauritius Duty Free Paradise Co. Ltd has to retain employees who are able to adopt themselves with rapid changing skill sets. Product knowledge, customer care training, job rotation, cross-training, mentoring, lateral move, action learning will increase productivity and employee performance. Management development, continuous professional development will develop core competences at top management. Mauritius Duty Free Paradise Co. Ltd must be a learning organisation where people can go extra miles, where team work is encouraged to create synergy and trial and error is accepted.
MDFP need to focus on change because the government is targeting 2 million tourists by Year 2012. A good leader has to introduce and embark employees in the change process and ensure that they are committed both during and after implementation.
Talking and listening to employees and being kept informed what is happening in the organisation in an effective means to engage employees. Employees should be fully involved in important decision and frequent employee opinion is useful in order to have a picture of morale in the organisation.
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