Leadership has been the topic of discussion and research in the Organizational Behavior literature. A great collection of different theoretical framework has been developed to make out elements of leadership. Incessant self assessment, learning, guidance, experience and never ending process of self-study develops good leaders in a society. Many companies are facing high turnover, absenteeism, low morale among employees and many other such issues related to the job environment. For all these problems companies need proper effective leadership. The purpose of this paper is to have an in-depth insight on the major research findings of an effective leadership styles and situations and their role in organizational performance by reviewing the research literature.
In this review paper organizational performance is being judged by the motivational level of the employees and job satisfaction factor. So this review paper gives a clear insight concerning (the theories of leadership) factors that boost leadership among employees which is then linked with organizational performance. This review paper will help managers to look at the major concerns which lead to great leadership and how to handle challenges and unexpected situations occurring in an organization. Effective leadership can be expressed where leaders influence group members, followers or subordinates in a way that this will help them to achieve common goals.
Leadership and its Meaning:
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As this world is changing so is the definition of leadership. Over the years leadership has been described according to the circumstances. Effective leader is the one who is able to match his level of skills to the maturity of the subordinates. The word has been defined in so many terms that giving a single definition will not be justified. In order to understand the true meaning of leadership one has to study the topic itself thoroughly. Today's world is so complex and fast changing that we cannot just stick to one definition of the leadership. As the competition from the other firms comes in the organization so the ideas, so they broaden the meaning of what leadership is. As described by Thomas B. Allen (1988); "the word leadership refers to a process of social influence, in which one person can enlist the aid and support of others in the accomplishment of a common task". A more apt and inclusive definition with regard to followers comes from Robert J. House (1996) who states that "leadership is ultimately about creating a way for people to contribute to making something extraordinary happen". Another definition comes from literature which states that effective leadership is the ability to successfully integrate and maximize available resources within the internal and external environment for the attainment of organizational or societal goals. Kirkpatrick & Locke (1991) suggested through their study that effective leader "is an individual with the capacity to consistently succeed in a given condition and be recognized as meeting the expectations of an organization or society". The analysis suggests that effective leadership can have positive impact on overall performance.
Effective leadership can be described as giving a vision to the team-members and developing the path for the followers to achieve the maximum output. In order to gain high level of organizational performance leaders' have to adopt new, innovative and challenging techniques to guide, motivate and manage the subordinates. Leadership is all about performance of the subordinates, groups, and organizations; good leadership promotes valuable group performance which in turn leads to high growth and expansion of a firm.
A leader's background, life experiences, and daily communications define his or her leadership style. The difference between a good leader and a great leader is his or her ability to adapt to change. In an organization usually leaders and subordinates work together to understand the behavior of each other and try to manage their behavior to produce more beneficial results, Davis RV Tim & Luthans. F (1979). According to Avery, G.C. & Jing F.F. (2008) due to the complexity of leadership it is broken into five different perspectives: competency, behavioral, contingency, transformational, and implicit. Leadership is a method by which an individual persuades other people in a group to achieve an objective and leads the organization in a way that makes the team members interconnected and coherent. Bass (1989 & 1990) explains three types of theories of leadership. According to him there is a trait theory which states that in some people have in born traits which lead them to become a leader. Second theory is great event theory which is related to the crisis or important event. It states that sometimes some major events or crisis leave their marks on an individual personality which may bring out leadership qualities in an ordinary person, making him an extraordinary leader. Third is Transformational leadership theory which is most widely accepted theory of recent years. In it people by choice prefer the path of becoming leaders through learning and proper education. Leadership has certain set attributes like values, ethics, belief, knowledge and skill etc., which if followed properly can make an individual a good leader.
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Robert D. Rossel (1970) in his paper argued that there are two kinds of orientations, instrumental and expressive, attached to the effective leadership in an organization. According to him, leadership orientation depends on the nature of organization. Different organizations require different kind of leadership orientation among supervisors and managers. He further stated, if we take an example of organizations like mental hospitals, prisons etc where the environment is more segregated and isolated, the most successful leadership will be informal and expressive. Whereas formal and instrumental leadership will be required in organizations dealing in production and service side. Author explained the instrumental orientation to leadership as one which is more task oriented, the main focus of such type of leadership in an organization is to motivate team members, to maintain product quality. While, expressive orientation to leadership is all about getting along with the group members and the conduct of perverseness, and inattentiveness in leadership may interfere with the goals of organization. Author stated that the orientation to leadership also vary depending upon the labor commitment required for any particular organization. According to the findings of this paper, this can be affirmed that organizations where there is a high labor commitment demonstrate a very definite instrumental orientation in top management (F-Ratio 2.39, Mean 1.25) and an expressive orientation in lower supervisors (Mean -0.17).
In terms of superior performance, effective leadership leads to people who find fulfillment in their jobs, work with enthusiasm passion, and perform quality work, with innovation and creativity. Effective leaders need to be able to endorse ideas and concepts as well as promote ideologies. Another quality seen in efficient leaders is how they can shift their group's attention towards the goals and objectives at hand by providing strategies regarding how to achieve the desired goals. They not only provide the physical resources required for the job such as tools and administrative or technical assistance, but also the psychological ones such as motivation, education and understanding. The most efficient leaders can also adapt to different environments according to the need of the hour and provide their workers with all the support and attention they require in order to successfully fulfill the task at hand.
Hogan & Kaiser (2005) defined leadership as a process of team building in which every member work well according to the set rules defined by the leader to outperform the competition. They further elaborated regarding the conventional definition of leadership over time, which defined leadership as the person who has the ability to influence others can be a leader but according to the author group performance should be the measure of leadership. They stated that in order to judge and assess the leadership one should look at the team performance. Three implications of this view should be noted. First, leadership involves influencing individuals willingly to contribute to the good of the group. Second, leadership requires coordinating and the guiding group (by adopting the most appropriate way) to achieve its goals. Finally, goals vary by organization and their life cycles. Leadership is the most essential item required for creating a team out of a group of individuals. One of the most imperative qualities of a good leader is that they can make individuals on team a single unit leading to synergy. Effective leaders can convince their team members to concentrate on their role within the team rather than their individual goals. An indicator regarding the success of a leader is the success of his or her followers. The key difference in explaining the long term performances of the firms is mostly attributed to an exceptional leadership. Superior performance is achieved when an organization is generating the maximum level of profitability possible with the help of three key determinants; efficiency, adaptations, and human resources. A business environment is more likely to succeed when it has people with high levels of skills, commitment and mutual trusts. Many times leader's performance is constrained with respect to the nature and size of an organization. Each leader performs within the set limits of an organization, which actually hinder the real outcomes. In other words, the structure and size of a firm basically depicts the extent of leader's performance.
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In order to understand the meaning of organizational performance first we have to look at the definition of organization. Aldrich (1979) in his book "organizations and environment" explained organization in three ways a) goal oriented; b) boundary maintaining, and c) activity system. By goal directed he means that the end objective of all organizations is to earn profit and to maximize the wealth of shares holders. Members of an organization behaves as if they have some defined goal, all of them work to achieve some specified purpose. This means members of an organization are task-oriented do not merely work for social interaction. Goal-directed behavior and deliberate design of activity systems distinguish organizations from other groups, such as families, friendship circles, audiences and mass publics. By boundary maintain he meant that organizations have defined clearly among the members of an organizations and non-members. And all members of an organization work collectively under the supervision of some authority to obtain defined goals. Activity system can be described as a system in an organization where all members are assigned some activities to achieve some predefined goals within boundary of an organization.
The major component of effective organization is having a talent management team, which will be headed by a leader. Organizational performance need to be studied in relation to the status of employee satisfaction to assess how good the firm is doing in the market. In order to evaluate the effectiveness and efficiency of an Organization one has to look at the performance of the workers. Employees perform best when they are highly motivated resulting in increased number of customers and high growth rate.
Thomas. B. Alan. (1988) entailed through his study that organizational performance is highly variable term. He further argued that organizational performance depends on various kinds of factors such as leaders' styles and behavior, leader-subordinate relation, firm size etc. which definitely has a great impact on the performance of a firm. One of the main reason behind this is that assets like leadership behaviors, organization culture, skill and know-how, and motivation are seen as the most important factors of strength in those firms which involve group, procedures and organizational performance, Avery, G.C. & Jing F.F. (2008). Therefore, leaders and their leadership style influence both their subordinates and organizational outcomes.
Organizational performance increases if the employees are highly motivated and satisfied with team leader and their work. As per Ohio State University research successful leadership has two behavioral dimensions which play very important role, a. Consideration: in this kind of behavior leader of a group is concerned about the team members. This aspect of leadership is linked with leadership traits of kindliness, discussion with subordinates, appreciation and respect of team members and supportiveness, b. Initiating Structure: this type of leader's behavior is more towards work done. They are more concerned about work and task. Leaders who fall into this category of style are much planned, coordinated, and clear about their goals, criticize poor work, and always pressurize subordinates to work more effectively.
Effective leadership involves the study of different styles of leaders. The literature suggests that some types of leadership styles are preferred over others. This is especially true under different working conditions as well as the subordinate's relation with the leader. Rotemberg. J.J & Saloner. G. (1993) concluded through their study that leadership style of a firm is selected by the stakeholders to maximize the ex ante profits. According to their study the leader of the group (team Manager) exercises his power in different ways. They considered leadership styles as; a) Locus of control, internal locus of control in which leader feels whatever happens is because of their own strategies and actions, external locus of control in which they feel environment is responsible for whatever happening in their lives, b) Flexibility, few leaders are flexible and they are open to new ideas and thoughts, whereas some leaders have been identified as rigid. CEOs whose style is more rigid tend to lead firms with fewer innovations and do not delegate easily. Leadership style includes not only motivating and providing direction to the people but also implementing the plans. The needs of the employees play an important role in identifying the approach that a leader uses. An often overlooked quality within leaders is helpfulness. They not only need to encourage teamwork but also provide all sorts of support required to their team members. Studies also suggest that there is evidence that states considerate leaders tend to perform better. Leaders need to use multiple approaches while dealing with their subordinates, some of which include relationship development, training and professionalism of subordinates and time allotments. The three well known styles of leaderships are authoritative, participative and delegating, James D. Boulgarides & William A. Cohen (2001).
This is a style where the leader is in complete control and orders his subordinates regarding their duties without any consultation from them. This style is not very popular with the subordinates and is only effective if the leader has complete knowledge regarding the subject as well as definitive plans regarding how to execute the project. This style is looked down upon and should only be practiced on the rarest of occasions when time is of the essence. It can be used within certain limits if the subordinate is unfamiliar with the job in order to guide them more effectively.
This is the suggested style of leadership within organizations as it makes sure all the involved parties are taken into account while making decisions. It is used when the leader knows about the final goal but wants to discuss the different options regarding procedures required to complete the goals. In this style the subordinates are informed of the goal by the leader and then an interactive discussion is carried out regarding how to achieve the stated goals. Even though all the subordinates are taken into consideration the leader remains in firm control and is the one who determines the plan of action based on the input provided by the subordinates. This style is mutually beneficial and ensures an environment of teamwork which leads to better performance.
This is when the leader leaves the decision up to the subordinates. This style is usually used when the employees are more informed regarding the subject than the leader and can analyze the situation better and come up with a better plan regarding what needs to be done. Even though the employee is the one taking the decision, it is still the leader's responsibility. The leader still has to delegate tasks in this style. This style is only suggested when the leader has complete confidence in the ability of his subordinates.
Davis. R.V.Tim & Luthans. F. (1979) envisioned a model consisting of four basic styles called the decision style model. These styles included Directive, Analytic, Behavioral and Conceptual.
This is an autocratic style which is usually adopted when the leader has a need for power. Such kind of leadership style is more effective in situations where subordinates are ill informed or ill equipped for the task at hand. The model focuses on technical decisions and leaders do not consult and take very less advice from the subordinates. The leaders who practice this style are very performance oriented and therefore they operate with a lot of control. They tend to be aggressive and tend to achieve their desired results by hook or by crook. They also tend to have very dominating personalities.
This type of leader is a lot less authoritative than the directive type of leader and has more tolerance for ambiguity. They also tend to have more approachable attitude as they tend to want input from everywhere before reaching a decision. This style is best suited for the ability to cope with new situations which is why this system is an efficient problem solver. These leaders are usually not too hasty with decisions and take their time in evaluating all their options.
This style uses data from various sources and analyzes all possible solutions with great details and looks at each and every alternative. It is quite similar to the behavioral style. The relationship between the leader and his team is one of openness and trust. The leaders are usually idealists therefore ethics and values play a key role. They have a long range focus and have high amounts of organizational commitment. They are usually understanding towards their team and adapt well according to different situations. They tend to like to have less control and tend to encourage a team effort and participation on an equal level. They want to see their team develop as a whole and even though they are achievement oriented they value independence as well.
The managers who practice this style of leadership are highly concerned with their workers well being and tend to be a great source of support for their employees' as they are highly people oriented. They are very open and easy to communicate with. They are also willing to compromise more and can be persuaded and welcome suggestions. All these qualities show that they tend to have lost control. They aim to be accepted and liked and avoid conflicts. They have a low data input.
Hunt. J. G. (1971) discovered through his study that an ineffective leader leads to conflicts on multiple levels as well as a highly uninviting work environment both of which lead to organizational inefficiency. The overall environment becomes negative as employees do not take their managers seriously and through study it can be concluded that leadership requirement at different levels of management may vary markedly. It seems likely that when a leader has enough knowledge of two different types of management level then they perform better as compare to managers who have knowledge of only one management level, but definite kind of knowledge is likely to be dependent on various kinds of situations. Many managers use penalties which instill fear of mistakes within the employees. Authoritative leaders may cut days off, yell and demean their workers and abuse their power. They feel that intimidating their employees and increasing their authority will lead to more productivity however what happens is that there is more tension, employees become scared, morale falls and the organizational performance is affected. The autocratic style of leadership is greatly discouraged within organizations and should only be used when dealing with new employees who are unfamiliar with the organizational culture as it does not work well with the more experienced employees as suggested by research. A separate style of leadership is a laissez-fare style in which the leader does not manage his employees and only guides them. This happens only when the employees themselves select an informal leader for guidance.
All these different styles of leaderships are suited to different environments. A behavioral style might be very successful in a certain environment yet might fail abysmally in another so a good leader adapts to these different environments with different styles. Therefore not all leaders are successful in all environments which is why certain leaders are chosen for certain situations. Spillane. J.P., Halverson R & Diamond. B. J (2004) proposed this approach is not a viable option in the current day scenario as there is constant change. He suggests that leaders should now be chosen for their ability to deal with a wide range of tactics and that leaders should become more efficient in applying tactics rather than approaching different styles of leaderships. He also states that extremes of flexibility and rigidity are the least efficient styles. According to Fielder (1967) almost anything is easier to change than a manager's style which is why a leader should not pretend to be something they are not. Leaders who act as facilitators are most liked among the followers and are most easy to understand. Flexible leaders also tend to adapt more easily to new situations compared to rigid ones. Efficient Flexibility doesn't mean a change in personality, all it is, is a change in tactics.
The objective of this review paper is to explain effective leadership in different situations and its role in a firm. It is essential to elaborate few theories which have substantial importance in Organizational Behavior literature. Situational leaders are those who can coordinate, guide, handle and direct his team members in all kinds of known and unknown situations (situational factors). There are few aspects which lead to situational decisions such as motivation and capability of followers. This, in turn, is affected by factors within the particular situation. Another factor which may affect leader's behavior is the relationship shared between followers and leader.
According to the situational theory purposed by Hersey and Blanchard (1969) leader should be able to motivate his followers in order to make them perform their task efficiently and effectively. Leaders should work in a way that they will motivate their followers and increase their development level. On the basis of these lines they have come up with four leadership styles that are consistent with the four development levels for followers. 1) S1: Telling / directing: when in a team followers are unable to understand the task and afraid to perform their duties then the leader will guide and coordinate them properly. Leaders in this situation identify the real problem occurring to the follower and try to solve it. Leaders uphold the position of boss so that all assignments will be done properly within time. 2) S2: Selling / coaching: when the follower is able to understand his task to some extent and he looks confident in this, then "telling" him will be equal to discouraging them. So in this type of situations leaders have to guide his team members very carefully and instead of telling, the leaders have to "sell" the techniques of working, explaining and clarifying decisions. First two styles are more leader oriented. 3) S3: Participating / supporting: when followers can perform and they don't show the results then leaders have to be very patient and deal this situation with expertise. Leaders should find out different ways to motivate the followers and if reasons of not showing performance would have been found then leaders should tackle them properly. 4) S4: Delegating / Observing: in this type of situations followers know their jobs and they don't need any guidance but still it's important for leaders to keep a check on the performance of the followers in order to ensure that everything moving according to the set plan.
Bruno Leo F.C. (2006) explained the profile of leadership styles of Brazilian supervisors or CEO based on the situational leadership styles purposed by Hersey et al (1969). In his paper he elucidated that results showed that most of the executives are seen accepting the styles S2 (48.29% frequency distribution) and S3 (28.60% frequency distribution). So this shows that they have capabilities of working with followers of average level of willingness. Though they sometimes face problems regarding discipline and work with groups.
Management theorists of the past tried to discover the "best" form of leadership for all situations however modern day researchers have realized that different environments lead to a significant impact on the effectiveness of a leader. Fielder (1967) carried out extensive research regarding how different situations affect leadership effectiveness. According to his research the relations motivated manager is most effective where the leader doesn't need much power whereas the task related manager performs well when his relations with his employees are good and when he has a strong control. In an unfavorable condition neither of the leaders would be effective so an alternative solution would be to replace the leader.
In order to provide a solution for the style-situation issue Vroom & Jago, Arthur. G (2007) found an approach that dealt with the interaction between the leader and his subordinates. The model suggested that situation played a great role for a style to be effective. It also concluded that subordinate motivation and technical effectiveness play a key role in sharing of leader power and if neither of these are important than the leader himself takes the decision. If motivation is low but technical difficulties are still important then the leader tries to gain more information and if technical difficulty is not important and motivation is high then delegation might be the answer. Lastly if the problem level is high and a need for acceptance is present then the decision is shared within the group. This shows that there is a consistency in the behavior in different situations. Sometimes interpersonal behavioral patterns are also transferred when work performances change in order to meet new requirements. Different task demands also lead to changes in leaders. Another point of view regarding styles of leaders is one of Fiedler (1974).
Fenwick F Jing, Avery, G.C. (2008) found out trough their research that it is very difficult to define the relationship of leadership-performance. After doing concentrated research they accepted the four leadership paradigms as a tool of measuring the concept of leadership, (visionary, transactional, classical and organic paradigms).Avery (2001) identified 13 indices to measure these above mentioned leadership paradigms out of which 9 were used in the research of Fenwick F Jing, Avery, G.C. (2008). Many researchers who are constantly working on defining the leadership concept in groups have been able to link it with functional approach. In functional approach the main target of a leader is to get the job done and increase the level of performance. Thus, in such kind of approach leader ensures that every task should be completed in time. All team members actively participate in order to accomplish the task. The main objective of a leader behind this approach is to complete the functions, while leadership can be categorized as a way of problem solving achieved by common responses to social problems. In order to understand the functions four broad types of functions have been identified: 1) well informed and structured team, 2) proper use of information in hand to solve the problems, 3) managing and control human resources, and 4) proper usage of resources. Burke, C. S., Stagl, K. C., Klein, C., Goodwin, G. F., Salas, E., & Halpin, S. M. (2006).
Several studies show that the leader faces few obstacles regarding the organizational life cycle. There are five different stages of an organization and the changes which include, changes in management focus, organizational structure, top management style, control system and reward emphasis. Things that added to these changes and made the decision process harder included the size and age of the organization, its stage of evolution and the growth rate of the industry.
Substantial numbers of management scholars have debated the effectiveness of leadership styles, behaviors and situations when selecting measurements of performance there is a correlation between financial performance and customer satisfaction. Several reasons indicate that there should be a relationship between leadership and performance. The first reason relates to practice. Today's intensive, dynamic markets feature innovation-based competition, price/performance rivalry, decreasing returns, and the creative destruction of existing competencies therefore effective leadership behaviors can facilitate the improvement of performance when organizations face these new challenges. Lumijärvi.I. (2007). Understanding the effects of leadership on performance is also important because leadership is viewed as one of the key driving forces for improving a firm's performance.
The Contingency Model of Leadership Effectiveness
In this section contingency theory has been described which was actually originated by Fiedler. Fiedler. E. Fred (1972). Contingency theory helps executives and leaders to motivate and guide their followers in order to get better results for an organization. This theory is all about how leaders lead their groups in different situations, which predict followers' capabilities and behaviors. There are few similarities between Contingency theory and situational theory. Former deals with the ability of leaders and see how they handle their followers to achieve high organizational performance in all kinds of situations. Also there is an important difference between the two theories. Situational Theory is more focused towards the behavior of the leader, depending upon the situations (often about follower behavior); whereas contingency theory talks about the bigger picture and it embraces group aspects about leader competence and other variables within the situation.
This model was purposed by Fiedler in (1964) and (1974). According to this model they have explained two categories of motivational oriented leaders i.e. one is the task-motivated leaders and second category is relationship- motivated leaders. Author described that whenever some unexpected situation occurs in an organization both types of leaders react or respond to the situation differently. Many researchers have worked on this model and proves that leaders with task-motivated orientation mostly perform effectively in all types of situations, whereas leaders which fall into the second category (relationship-motivated) perform best in situations in which their control and influence is moderate. They further elaborated that leader's performance is linked with situations. Thus, if more power would be assigned to the leader probably it will increase the performance of some types of leaders, but decrease the performance of others, all depends on situations.
Contingency model has explained few hypothesis regarding the performance of leaders, which are, a) changes in an organization environment decreases the leaders' control, power, and influence ; b) changes in situations will have less disturbing impact on experienced leaders than the inexperienced ones and similarly change in job environment will not affect the performance and behavior of the experienced leaders than the inexperienced ones; and c) relationship- and task- motivated leaders both work and carry out their duties differently according to their level of experience.
Fiedler's (1972) model was basically done in order to clarify the ambiguities related to two major questions focused on leadership study at that time; what are those personality factors which make someone a leader and what the personality traits are which make them effective. Fiedler & Bons (1974) sees group performance as being "contingent upon both the motivational system of the leader and the degree to which the leader has control and influence," viewing "the leadership situation as an arena in which the leader seeks to satisfy his own as well as the organization's goals" Fiedler (1974).
Groups have been classified as sharing proximity, similarity and a common fate on task related events. Contingency model explains "groups" in which all team members' work together to achieve a common goal which provides benefits as a whole, and not "individuals working separately towards a common goal". The leader in a group is defined as, the one who directs and coordinates his group Task-oriented activities in a way that maximizes the outcome.
Further the effects of leadership training and experience can be explained through the contingency model. Fiedler (1972) in his paper talks about the relationship between years of experience and performance and with the evidence of different studies it has been shown that there is a median correlation between two of them. Some studies Fiedler, Nealey and Wood (1968) showed that the correlation between performance and the amount of training and experience is as low as 0.10 percent.
A lot of research has been conducted in order to answer the question why leadership experience and training has not led to better organizational performance. Research based on recent leadership theories and the contingency model developed by researchers like Fiedler tried to answer the query.
It has been predicted that the performance of a group / team can be based on two contingent factors (1) leadership style; which is divided into a) relationship-motivated and b) task-motivated (2)"situational favorableness", which is determined by three factors; a) relationship between leader/member, b) how organized, clear, structured and defined task is, and c) leader position and power in a group.
The theory is consistent with the evidence present in the past that the behavior of a leader and organization performance depend on situation to situation. So, in order to see which type of leaders perform better in what kind of situations we have to study different types of leaders and situations. But the question arises that what kind of leadership does each of these situation requires?
Leadership is all about leading a group of people, and one can lead a group more effectively and efficiently if he has a power and ability to influence others. So it perhaps easy to classify situations in terms of how much right and influence the situation gives to the leader.
Fiedler (1967) research has been shown that the healthy relationship between leader and group members lead to a good performance. Leaders will enjoy more power and influence others if they have a good relationship with their team members, than, if they are respected, trusted and liked. It will help leaders to work effectively. According to the author, it has been seen that leaders given more respect and they can easily motivate their team members if they planned assignments instead of unplanned and indistinguishable work. Also group members work more enthusiastically if they observe and know the fact that the leader of their group has a power of rewarding, punishing, firing or hiring them. After realizing this fact they work even better.
The second major factor which leads to the effectiveness of an organization is the motivational system existing in groups. After reviewing the contingency model it can be concluded that leader prefers to change their work situation to gain effectiveness, rather than changing their leadership style.
The Leadership-Performance Debate
Alan B Thomas(1988) in his paper, "does leadership make a difference to organizational performance?" examined the research of Lieberson and O'Connor's (1972) and related studies in order to clear the conceptual confusion attached to the leadership-performance issue, Bryman (1986).
Lieberson and O'Connor's (1972) research into leadership and performance in large corporations was a study to verify the environmental issues on leader influence. "A key research issue," they wrote, "is simply to determine the relative importance of leadership and organizational environment for organizational outcomes. How much variance in organizational performance can be attributed to persons in top leadership roles?"
To deal with this question, authors gathered the data on profit margins, sales, earnings (profits), and periods of leader incumbency for 167 major publicly owned, U.S. corporations for the years 1946-1965. Samples from six to eighteen firms were drawn from within each of thirteen industries, these being chosen to reflect varied conditions with respect to technology, market attributes, government influence, size, and so on. Leadership periods were defined as those during which the CEO or the president of the organization was the same. Three dependent performance variables were used in the study analysis (sales, earnings, and profit margins) and four independent variables in the form of year, industry, company, and leadership. The year variable was measured in order to see the effects of general economic conditions, such as interest rates and inflation, on the firms over time; the industry variable includes the effects like technology and competition which are common to an industry; the company variable to reflect differences between firms, such as size, location, facilities, and reputation; and the leadership variable to represent the influence of leaders over the period they held office.
On the basis of these studies it can be concluded that leadership differences have minimal impact on organizational performance, for in each case the vast majority of performance variation is accounted for factors not related to leadership. But Lieberson and O'Connor (1972) found that when a firm changes its manager it has no direct effect on organizational indicators, such as profits. Pearce, Stevenson, and Perry (1985), study the relationship between leaders' performance and managerial pay system in a firm. They analyze the performance after and before the implementation of a new compensation system and found out that though money is a great incentive for the managers, however, it cannot guarantee the high performance by the leaders. Finally, Tim R V. Davis and Fred Luthans (1979) mentioned that in an organization usually leaders and subordinates work together to unfold the hidden traits of each other and try to co-op with their behavior to work more effectively and to produce beneficial results. According to them organizational consequences or performance can be judged through the behavior of supervisors with their subordinates, how well or bad a supervisor explains the task to the follower and follower behavior can be taken as a result of leaders communication with his/her team members.
Aldrich (1979), in his significant book on organizations and environments, stated that Lieberson and O'Connor had established only inadequate effects of leadership changes on company performance. He further explained that "generalizing from their findings is risky, however, given definitional dependence between their three performance variables and the lack of organization-specific control variables" (p.19). Later he highlighted on important point that apparently revealed the flaw in their study. Lieberson and O'Connor's findings showed that leaders had little impact on net earnings (profits) and sales but a considerable impact on profit margins. Since the profit margin is the ratio of the net earnings and therefore by definition dependent on them, Aldrich argued that "it is simply implausible that executives who failed to have an impact on sales or net earnings could nevertheless have an impact on profits" (by which he clearly meant profit margins). He concluded that Lieberson and O'Connor's findings were "highly suspect" (1979).
After the literature review it can be stated the particularly successful style of leadership in one set of circumstances may be most unsuccessful in another setting. It's more relevant to put the leadership styles into two categories. The first is the formalized/authoritarian type of leadership; and supportive/participative type of leadership. The authoritarian leadership is characterized by the dominance of the leader who controls all aspects of the work, gives detailed orders and makes all decisions. The quality most required of followers is obedience. On the other hand, supportive leadership is more flexible, incorporating participatory decision-making and a certain degree of professional freedom and initiative. Leaders should switch between the different leadership styles because the most effective leaders use multiple leadership styles depending upon the situation at hand. Within the duration of a week they will use most or all of the leadership styles in certain measures depending upon the business situation those styles are; Coercive leaders - the ones who demand immediate compliance, Authoritative leaders - the ones who mobilize people toward a vision, Affiliate leaders - tend to focus on emotional and are known for creating emotional bonds and accords, Democratic leaders - tend to focus on building harmony through participation are the ones who expect excellence and self-direction, and lastly coaching leaders - those who develop people for the future. As far as the leadership tactics are concerned, there is a right time and place for tactics. If a leader has a signature tactic, it tends to become part of his behavior and style which kills the purpose of tactics. The decision of selecting a tactic in a situation depends upon numerous factors such as the personality of the workers, their frame of mind, the leader's own frame of mind as well as his objectives, the commitment levels, laws and the authority of the leader. The leader in a company acts as a catalyst, driving others to succeed. Team building and idea exchanging are concepts that become more important with the growth of a company. Involvement tactics or Following Up to Support Improvement-tactic where the leader achieves high standards by building and sustaining momentum toward improvement, discussing lack of improvement openly and supportively, helping others see natural consequences of their continued lack of improvement and by introducing formal consequence are used more and more. Once the organizational units are created the major question becomes regarding the division of work. This requires the Productivity and Growth-tactic where the leader act as catalyst, stretching people's abilities by delegating meaningful work therefore increasing new demands on leaders caused by expanding spans of control. Once a company starts production, the tasks become more frequent however time becomes more critical. This then calls for more direction. In deciding on which mix of leadership types and styles is needed to achieve high performance, we have to analyze the stage in which the organization is. According to the organizational lifecycle, at innovation stage the organization requires a leader whose style is a mixture of authoritarian style with core skills for building commitment tactic. Where the focus is on evolving role of leader where by the Leader acts as catalyst (someone who sparks action vise a vie performance in others) of relationship-building principles, interaction process, and feedback skills. This type of leader is an entrepreneur with not only bright ideas but also the strength to put them in practice. This amalgamation of style work best when the leader has courage to put new ideas into his team. In situations where subordinates don't know much about the task assigned to them and they need proper guidance, at such circumstances leaders with vision, knowledge, self-confidence, and industry knowledge play a vital role. Innovative leader can motivate and change the scenario of a firm by endorsing ideas and concepts and make the group focus on the goals and objectives. An effective leader in this situation would also provide plans required to achieve the goal which shows that he has a directive style thus having the necessary drive. Typically, the creative leader is more interested in inventing new ideas directive in implementing those ideas.
After several literature reviews the research implications are there, concerning the degree of the leaders power, power distance between the leader and the subordinates, the character and personality of the leader and the type of work group, the task and the environment and the situation of diversity within the organization which also makes a great impact on organizational performance. The character and personality of the leader are important factors to take into consideration because the style of leadership must be one that he or she feels comfortable in. Each person naturally has a particular style of work and this style will enhance his or her effectiveness. Leadership styles do depend to a large extent on the leader's values and preferred style of operation. As described in the study of Kirkpatrick. A.S and Locke .A.E (1991) that leaders are different from ordinary people, because they do possess certain set of traits which help them in formulating firm vision and an effective plan to follow it; and take the appropriate steps to achieve the vision in reality. A leader who is both self-confident and confident of the subordinate's competence and trustworthiness may allow a greater degree of flexibility and more decision-making at lower levels. Where as someone who lacks both self-confidence and confidence in others will need greater self control and insist on all decisions being taken only at the highest level. An authoritarian style of leadership provides certainty as decisions will be made by one person or a small group of people, whereas relinquishing absolute control so that decisions are made at different levels by different groups of people may reduce predictability. When managers choose whether to have either a more structured or a more flexible leadership style, they are influenced by a number of important considerations. For example, when the leader's personal success and performance, speed and efficiency are of the essence, then the structured authoritarian style is the best. However, if the leader believes that it is important for the workers to experience job satisfaction and participate in decision-making, then absolute and unquestioning obedience from subordinates will not be seen as a desirable objective at all. Many leaders combine certain aspects of a structured authoritarian system with aspects of a flexible system. The particular degree of structured or flexibility may depend on the related factors of the type of work group, the type of task and the environment. In some cases absolute authoritarianism may lead to intransigence and opposition from subordinates, and in extreme cases this will lead to strikes, work stoppages, violence and hence impede performance. On the other hand, too much consultation and too much flexibility may be interpreted as weakness and lack of direction and may well result in disaffection by subordinates, disorientation of goals and hence poor performance. Generally, a well-educated, competent and professional work group desires greater initiative and decision-making power. Such people believe they have a great deal to offer and will feel frustrated if they are expected merely to obey. A less educated and less technically competent group will feel a need for greater authoritarianism and formal structuring. They will feel unhappy and threatened if they are required to show initiative or take decisions. Moreover, inexperienced people and learners appreciate a greater degree of structuring and detailed instructions they can follow. Much also depends on the experiences of managing teams and groups. A group that has never made decisions before or has never worked as a cooperative team will find a flexible decentralized situation seriously disturbing. However, a group that has previously enjoyed a great deal of decision-making power may find the role of passive obedience both insulting and oppressive. The relationship within the group is also significant. A group whose members respect and trust each other and who feel confident in their own competence will be happier and work far harder in a flexible and responsible position whereas a group that is distrustful of each other lacks confidence and feels incompetent needs a strong authoritarian leadership. The interest of the group in the problem or work in hand is another key factor. If the problem interests and affects them deeply, they will want to become more involved in the decision-making, whereas if the problem appears unimportant or peripheral to their interests they may be quite happy to have the decisions made by others. Cultural and sub cultural values influence the work group and their work style and performances. Traditional value oriented culture doesn't encourage discussions, consultation or group decision-making. Instead it placed a premium on passivity and obedience. Western culture in contrast, works thorough discussion, consultation and consensus and consensus implies lengthy negotiations. This means that certain broad principles and guidelines are agreed upon, but within, these local groups have a great deal of decision-making power, particularly in terms of how they apply these principles to their actual situations. In deciding upon the leadership style it is essential to be aware of the local cultural demands, for what might appear to be a very effective system of leadership in one country, or context, may well be disastrous in another. Finally, the expectations of the group and the way they associate themselves with authority must be considered. A group may regard flexibility as a weakness and a leader who consults such a group may end up losing the group's respect. Another group may regard lack of flexibility as tyrannical and may feel a need to undermine and defy a leader who is not sufficiently consultative. Some groups may tolerate and even welcome periods or ambiguity and uncertainty which they may regard as necessary aspects of a creative process, whereas other groups may regard ambiguity and uncertainty as chaotic and disturbing. Creative people have very different expectations from routine loving people. Similarly people who have knowledge of the business will not tolerate systems of work which may be taken for granted by unskilled workers.
Leadership is one of the most researched and talked about subjects in the field of organizational behavior. It can be concluded that for the benefits of an organization leaders should experiment with different kinds of styles and situations. The term leadership is very broad and cannot be defined with help few variables. Effective leadership is very demanding job with a lot of responsibilities from within and outside the group. They believe that employee's performance lead to organizational effectiveness and efficiency, which is a result of effective leadership. Leadership styles can smooth the progress of both Leaders' leadership competence and stimulate or persuade employees to perform better, improve their commitment and satisfaction. This eventually boosts up organizational performance. Finally, it is evident that leadership-performance is a never ending debate. Over the past few years, many researchers have been trying to find the best single style of effective leadership. Yet, the evidence from the literature review indicates that there is no single leadership style which assures the organizational performance. With the creation of new technologies and advancements in the organizations, it is obvious that mixture of different leadership styles is important to gain maximum return. Effective leaders are those who adopt styles according to demand of the situations and tackle every kind of problem so smartly that it doesn't harm their image. Situational leadership is a model which is about the matching the behavior of a leader with the needs of a group in order to accomplish organization goals.
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