Leadership Theories and Organisational Direction

Management & leadership style matters a lot in deciding fate of an organisation. These styles are reflected in both long term and short term strategies of the company. Considering the importance of management and leadership style lot of theorist came up with their philosophies. Some of them consider charismatic personality of leader the key to success while other considers team work the best solution. This report is being produced for the directors of NEWG to explain various management and leadership concepts. It shows how these theories can affect working of an organization and can play a decisive role in the achievement of organisational objectives. If applied in relevance to the needs of organization can lead to ultimate success.

Leadership Theories and Organizational Direction

Every organisation is setup with some objectives in mind. It can be profit earning, charity, law enforcing or voluntary, whatever the objective it reflects in the policies of an organisation. Leadership sets the direction for an organisation and management ensures to implement policies that lead organisations to achieve set goals. Keeping in mind aims of organisation different management theories can be adapted to support core objectives that set the style of management in an organization.

Transformational Leadership Theory

Initially developed by James McGregor Burns in the decade of 1970, the theory gained a lot of popularity among business world. This theory has four constituents i.e. charismatic personality, encouragement through motivation, intelligent inspiration and personalized attention.

Being charismatic means leader has qualities that attract people around him. It can be leader’s personality, sex appeal, style of communication, vibrant, robust and authoritative presence.

Take an example of Martin Luther King, an activist and strong American leader who stood for the African American civil right cause. Such leadership with their excellent communication skills persuade people for change. They bring the idea that existing system is not helping them reduce their problems and they need to adopt new strategies. They motivate people to think differently, create new ways of doing things that is where the word ‘transformational’ comes from. Such leaders show a lot of care for people; focus on their needs and touch their concerns. This way they try to win hearts of their followers, because change is a difficult thing to grasp. People feel relaxed in their old environments and it is utmost difficult to change someone’s habits. This needs a lot of effort and commitment without which it would be impossible to bring about change.

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Having good personality, vision, inspiration through motivation and personal attention to audience are excellent traits for a good leader. This helps wining sympathies of people who will then work whole heartedly to achieve objectives. This strategy is especially very effective when an existing system is not working very well and there is need to change. But for this system to work, leadership should have very good knowledge and understanding of the environment in which organisation is operating. This is era of information and if the leadership is not aware of all that is happening in the surrounding it cannot persuade people. Second thing that needs consideration is that leader should understand different situations and proceed accordingly because actions which are suitable for one environment need not be the best fit in some other surroundings. Thirdly facts alone will not help changing minds of the people but the leadership should have very good communication skills to convey their idea. Last but not least taking people into consideration is another important factor because nothing can be achieved without contribution of followers. To achieve sympathies of people, one needs to show concern and sympathy with them, coordinate with them on personal terms. Change is a painful thing and majority of people resist change. In order for a venture to be successful the most important requirement is that people are ready to adopt change which is only possible if they understand that the person in-charge of change i.e. leadership has a heart to feel their concerns. Otherwise merciless change will face strong resistance and will not achieve its ultimate goal.

This is excellent, cost effective theory of management that can be applied at Milky Bits and workings on the principles of transformational theory company can achieve faith, loyalty and hearts of workers that would enormously improve the efficiency in Milky Bits.

Transactional Leadership Theory

As described by Bernard M. Bass in 1981, transactional leadership is based on performance & reward. Tasks are assigned to the employees and if they are successful they are rewarded else punished, i.e. transaction, exchange as a result of performance.

Rather than relying on the concept of motivation as described in transformational theory it brings about the idea of incentive and penalty. It develops kind of relationship between leader and follower that is doing as directed. If an employee performs his / her task meeting the deadline, within budget and as per directives of its manager, employee will get benefits. If the employee somehow misses to achieve what was required, he would be punished. This is an extreme type of relationship and shows reactive approach of management.

This theory is focused on authority of manager who sets the rewards / punishments for short term goals. In order to work it effectively the manager should clearly identify tasks that are in line with the overall objectives of organisation and provide sufficient resources to member of staff while assigning tasks. Manager should have enough authority and control to reward or punish subordinates and he should continually monitor the actions of subordinates. According to the theory, employees have single objective for job i.e. to get incentive that is mainly in the form of financial benefits but it could be something else like recognition or promotion etc.

Enticements are the most powerful driver for workers to concentrate on their tasks; hence carefully designed target incentive system can improve worker’s output in Milky Bits. Although it is a short term solution, because if used permanently it can develop a culture where no one will work without clear incentives, but it can bring good results if managers succeed to clearly identify tasks that lead to ultimate objectives. Assign these tasks to the relevant employee, provide them with all sufficient resources and give them proper training. It can produce excellent results for Milky Bits, which is growing organisation, in very short period of time.

Charismatic Theory

German sociologist Max Weber in 1920 introduced Charismatic Theory that revolves around personality that has traits to attract followers. These could be natural God gifted attributes that sets them apart from general public like their family / religious background, their sex appeal, their vision and dynamism of their personality. Besides that some qualities can be learnt like good analytical and communication skills. Without having authority or powers gathers people around him, as a matter of fact charismatic leader uses the power of people. Such leaders have the ability to understand mood of people and design their acts accordingly. People blindly faith and follow their leader which is great achievement for any leader.

Later on Conger and Kanungo in 1998 described Charismatic Leader is one having attributes of vision and communication, compassion to the environment, care to the needs of people, risk-taker and doing un-usual things. Hence charismatic leader should have the ability to foresee the future i.e. vision. He should be able to effectively communicate with people because if he has some ideas but cannot convince the general public it would be waste. He should understand the environment in which he is working because different situations need different form of action. Charismatic leader should understand feelings and needs of the people for this he should involve with the people, understand and realise their problems and understand their requirements. Without strong understanding of people’s issues it is difficult to motivate them. Leader is torch bearer of change, in this respect this theory is closely linked with transformational theory, but change is a difficult phenomenon. First of all people normally have strong resistance for change and secondly you can anticipate to some extent but nobody is cent per cent sure about the outcome of change. Things can go wrong at point, for this very reason a leader should be bold risk taker. Leader is a person who takes unexpected decisions at critical times because difficult situations need tough decisions. Ordinary people don’t expect such decisions to be taken; hence Conger and Kanungo added risk taker and un-usual decision maker as the traits of charismatic theory of leadership.

This theory could prove to be very effective in certain kind of situations. When there is need of some strong decision and there is no time to negotiate with people. If such decisions come from a person whom everyone trusts, gives respect and has blind faith in him it would be easy to implement such decisions. It is a cost effective solution as people following their leaders merely on the basis of their followership. This means you don’t need to give them incentives to do something rather they are doing most of the things voluntarily. But this needs a very strong personality having all the traits to win hearts of people.

This can prove to be successful, effective and cost efficient method of management at Milky Bits.

Contingency Theory

Earliest contingency theory presented by Fiedler suggests that that there is no ideal way of organizing things. Different type of actions needs to be taken in different situations.

This theory is different from other theories based on characteristics of leaders or reward system and focuses on the situational aspects. It describes that management decision are affected by various factors like working environment, kind of task at hand and position of the manager at that very time. When taking some decision it is wise to understand the surrounding and visualise the impact of certain actions that could affect the entire process. It is also important to consider nature of task, like if something is very important and time bound it would need different strategy than one needed to perform routine tasks. Also important to consider is the power position of manager because in organisations there are lot of ups and downs. If manger is not in authoritative position or feels he would face bitter criticism he should avoid taking hard decisions.

Verbal meaning of the word contingency is something that is cause by some other incident but in this theory it suggests line of action taken by management keeping in view environment created by people working in a certain situation. Although it is exceptional theory to deal with certain awkward situations it heavily relies on streamlining actions with the group environment. Its success largely depends on exposure and willingness of group member to put their efforts for the achievement of organisational objectives.

It is very useful idea to tailor acts according to situations in order to get maximum benefits of situation rather than sticking with strict and static policies. Managers at Milky Bits should be trained to respond different situations accordingly. This will help improve company’s performance and take corrective decisions at the time of need. This will help avoiding conflicts between management and employees and further to avoid any untoward situation creating chaos in the working environment.

Situational Theory

This theory presented by Kenneth Blanchard and Paul Hersey suggests that managers should use different styles depending upon situations. Manager should have strong ability to analyse different situations. They should understand capability of their subordinates and keeping in view the existing circumstances, manager’s behaviour could be different with the same person at different times. According to Blanchard and Hersey leadership style is characterized by extent of support and direction given by manager to subordinates.

At stage 1 manager defines the roles and responsibilities of employees, assigns tasks to them and then closely supervises or monitors them. In this scenario choices are made by manger hence most of the communication is one-way. Employees are committed to do their tasks diligently but they need direction and support from their seniors.

At 2nd stage manager still defines roles and responsibilities but with consultation of sub-ordinates. Communication is somehow two-way. Employees are competent in their area of expertise but lack commitment so supervision is needed. Manager takes their consultation which increases their confidence and sense of being involved makes them more committed.

At level 3 leaders focus less on tasks and more on relations, they discuss situations with their sub-ordinates and leave them with their strategy to do the tasks. This technique works with employees who are competent enough to do the tasks independently but due to lack of confidence need support of their superiors.

Level 4 is a stage where sub-ordinate has both competence and commitment, so manager although has authority and control on decisions delegates these to the sub-ordinates. Sub-ordinate himself takes decisions and has total control of project / task. It is up to him to involve manager or not.

Effective managers’ use these level as and when required at particular stages. There is no set pattern but only innovative capability of manager decides which path to take in a particular scenario.

Such a policy could be helpful for Milky Bits as it will help managers understand capabilities of their staff and assign tasks to them accordingly. It will also benefit the organisation in staff development by following different levels giving them appropriate guidance and support building confidence on them that will help them work independently on upcoming tasks.

Vroom and Yetton’s Normative Model

Vroom and Yetton suggested Narrative Model as “There are number of alternatives to deal with any situation. Leader should have the ability to select the best option in any situation. It also proposes that while selecting the best possible course of action willingness of employees should also be given weight.”

This theory assumes that acceptance of decision increases its effectiveness and commitment. Also willingness of employees adds to the acceptance of decisions taken by managers.

Vroom and Yetton also identified decision procedures as follows.

Firstly manager uses his own exposure to take decision; this strategy is useful if acceptability among employees is not very important, manager has enough knowledge and exposure about the subject area, secondly manager seeks information from his sub-ordinates and then takes decision; this is useful when manager does not have enough information and needs enough first hand information, thirdly manager shares problem with sub-ordinates individually, seeks their opinion to reach some decision; this is useful when some of the employees have expert knowledge of the subject domain that will help manager reaching a good decision; fourthly discusses the issues with sub-ordinates in groups to come at conclusion; when all the employees have same level of knowledge and manager intends to benefit from their knowledge and tries to bring harmony in his team members and fifthly puts these issues before sub-ordinates as a group and bases his decision on the consensus of employees; this strategy targets on the acceptance of employees more than the quality of decision taken.

One wrong decision taken at critical stage can be decisive for an organization. Management at Milky Bits should be given appropriate training to deal with such situations that will help the organization to come out beneficent at the time of crisis.

Tri-Dimensional Leadership Theory (Yukl)

Yukl’s tri-dimensional theory suggests that there is no set course of action which will be successful in all the circumstances. It is management and leadership who decide what action to take at a particular time. It heavily relies on effectiveness and efficiency, human resource relations and innovation & adaptation.

If management’s focus is effectiveness and efficiency, its strategy will be task-oriented. To improved efficiency first step is that everyone should know his roles and responsibilities, what is expected of him / her. This clear cut job assignment will help an employee concentrate on his job and facilitate managers to evaluate employee’s performance. This will improve sense of responsibility and employees will be more focused on their job roles which will improve their effectiveness and efficiency.

In case of human resource relations, strategy will be relations-oriented. Management will try to build good relations with employees in order to come closer with them, understand their views and negotiate with them. This helps management obtain 1st hand knowledge of employees problems and come up with solutions that will win the hearts of employees. This involvement of employees and their participation in decision making will help them do their tasks with more motivation and achieve organisational goals and objectives.

Innovative and adaptation style is required when an organization is in need of change. Management will sort out new ways of doing things. Change is the only constant thing in nature, internal & external factors both influence an organisation to change its strategies to survive and thrive in business. This needs strong thinking and analysis followed by careful decision making.

This theory suggests that leaders should be able to analyse the situations and they should be flexible enough to meld their strategies accordingly. Leaders should have strong analytical and diagnostic qualities to determine strategy most relevant to situation.

New Leadership Strategy

Reviewing all research and findings of previous theorists and being student of Strategic Management & Leadership if I am asked to develop my own strategy, I would suggest following 3 points.

1. Leadership should have strong knowledge of subject area and exceptional relationship with their followers.
2. Motivate followers combining organisational objectives with the goals of individuals. Give them respect & reward.
3. Management should always have plan B to work around un-acceptable situations and they should involve sub-ordinates to prepare these contingency plans.

Leadership should lead by example, their words will worth more if they themselves follow what they ask their followers to do. No strategy will work if followers are un-satisfied. Respect and financial gains are instinct for every human being. It should be made sure that employees benefit from prosperity of organisation. Business world is ever-changing, stagnant policies and leadership will suffer in this dynamic environment so leadership should be innovative enough to counter these challenges. If possible leadership should involve followers in policy changes.