The Role of Business Leadership in Organisational Success

Introduction & Overview

The concept of business leadership and its role in organisational success continues to be an intensely debated topic in modern day management theory and practice (Bryman, 1986, P 3 to 72). Whilst Anglo-American society and its media have traditionally glorified the role of leaders in organisational success, other societies, especially those of Germany and Japan have placed more value on the significance of organisational efficiency and long term orientation in ensuring such achievement (Bryman, 1986, P 3 to 72).

Up to the beginning of the 20th century, such glorification of leaders was by and large restricted to areas of national importance like politics, governance and military affairs. Most famous leaders were either kings, monarchs, politicians or generals; their list being practically endless and stretching from historical figures like Alexander of Greece and Richard the Lion Hearted of England to men like Washington, Lincoln or Nelson in more recent times. Important leaders started emerging from the domains of industry, business and trade from the time of the Industrial Revolution, when commerce started becoming an important human endeavour, rivalling traditional upper class occupations like political governance and the military (Bryman, 1986, P 3 to 72). The 20th century has seen the emergence of numerous business leaders, not just in the UK and the United States but also in Europe, Latin America, Japan and other Asian countries. Whilst the earlier decades of the 20th century were dominated by the likes of Henry Ford and Alfred Sloan, contemporary times have seen the emergence and rise of people like Jack Welch, Steve Jobs, Richard Branson, Bill Gates, Akio Morita and Ratan Tata.

Although much of society, especially the media is apt to attribute organisational success or failure to leaders, tending to glorify people like Welch and Branson, even as it consigns the leaders of lesser successful organisations to oblivion, a growing body of management academics are investigating the role of business leaders (Conger & Kanungo, 1998, P 1 to 18). A good body of extant management literature is devoted to the subtle and not so subtle differences between leaders and managers. Whilst some experts feel leaders to be far more instrumental in creation of organisational success than managers, others feel that total organisational and managerial effectiveness is possibly more important for organisational success than one larger than life leader at the helm (Conger & Kanungo, 1998, P 1 to 18).

A significant body of literature is devoted to various theories of leadership. Such theories include (a) the Great Man Theory, (b) the Trait Theory, (c) Behavioural Theories like the Role Theory and the Managerial Grid, (d) Participative Leadership Theories like those proposed by Lewin and Likert, (e) Situational Leadership Theories like Hersey and Blanchard’s Situational Leadership, Vroom and Yetton’s Normative Model and House’s Path-Goal Theory of Leadership, (f) Contingency Theories like Fiedler’s Least Preferred Co-Worker (LPC) Theory, Cognitive Resource Theory, and Strategic Contingencies Theory, (g) Transactional Leadership like Leader-Member Exchange (LMX) Theory, and (h) Transformational Leadership like Bass’ Transformational Leadership Theory, Burns’ Transformational Leadership Theory, Kouzes and Posner’s Leadership Participation Inventory (Connell & Others, 2005, P 139 to 149). Recent years have also seen extensive work occurring on the relationship between charisma and leadership; a number of experts feel it to be one of the extremely significant differences between leaders and managers.

Literature on leadership has also been generated by successful business heads like Alfred Sloan, Jack Welch, Thomas Watson Jr, Akio Morita, Bill Gates and Steve Jobs (Carter, 2008, P 2 to 75). Such organisational heads, be they entrepreneurs like Gates or Jobs, or executives like Sloan or Welch have written autobiographical treatises, focussing more on leadership qualities and practical experience than on leadership theory (Carter, 2008, P 2 to 75). Jack Welch for instance elaborates on as many as twenty five leadership qualities that he used to look for and tried to develop in his business leaders at GE (Welch, 2007, P 1).

This short study aims to investigate the role of leadership in business organisations and the qualities of leaders that are essential for organisational success. Whilst some use has been made of leadership theory, greater emphasis has been placed on connecting theory with practice by using real life examples from western and international organisations. The role of charisma is specifically taken up in the assessment of the impact of larger than life leaders on organisational success.

Role of Leaders

Leaders, it is widely accepted, play a major role in achievement of organisational success in areas of business and industry (Goleman, 2002, P 18 to 38). Despite there being some fuzziness over the overlap between leadership, management expertise and business acumen in business firms, the role of leadership is becoming increasingly crystallised in an era of business growth and huge commercial organisations (Goleman, 2002, P 18 to 38). Whilst organisational success in smaller businesses is often dependent upon the business acumen, efficiency in cost management and good sales skills of the business head, the situation changes radically with increase in organisational size, business activity and environmental complexity (Goleman, 2002, P 18 to 38). Traits like good sales skills, efficient administration ability or good cost management, whilst important are not adequate for organisations that employ large numbers of people, operate from many locations, sell in local and international markets and deal with governments, businesses and individuals across the world (Goleman, 2002, P 18 to 38). The role of leaders in medium and large business organisations thus becomes more akin to those of national leaders or policy makers (Goleman, 2002, P 18 to 38).

Such leaders are responsible for actual organisational change and for making things happen in ways that benefit organisations (Connell & Others, 2005, P 139 to 149). They need to have vision and foresight to enable them to challenge and change the status quo and should be able to think in unorthodox and different ways (Connell & Others, 2005, P 139 to 149). Bringing about organisational change is a complex and demanding process and very often leads either to the failure of such change initiatives or to organisational disaster (Connell & Others, 2005, P 139 to 149). True leaders are expected to guide and steer organisations through times of change and provide direction, set goals, initiate processes, build change champions and move organisations from their existing positions to where they wish them to be (Connell & Others, 2005, P 139 to 149).

Business organisations often face severe challenges and threats from different quarters, which require overcoming for them to survive, grow and prosper (Kritsonis, 2004, P 1 to 8). Whilst some challenges are operational in nature and can be met through efficient planning and utilisation of resources, major organisation threatening challenges can occur because of reasons like advancement in technology, change in nature of competition, environmental conditions, or even natural disasters (Kritsonis, 2004, P 1 to 8). Leaders play a major role in such times, steering their organisations by providing direction, motivating managers, networking with governments, structuring alliances, energising their workforce and devising and executing numerous other strategies (Kritsonis, 2004, P 1 to 8).

When Alfred Sloan took over as chairman of General Motors in the 1930s, the giant auto maker was under severe pressure from a number of internal and external forces and in danger of breaking up into small units (Conger & Kanungo, 1998, P 1 to 18). The company under his leadership became a cohesive and efficient organisation and the largest car maker in the world. Lakshmi Mittal, one of the inheritors of a medium sized steel business in India split with his brothers, took his money and purchased a small and badly run steel plant in Indonesia (Lakshmi, 2009, P1). Turning the mill around in record time, Mittal constantly bought unprofitable and poorly managed steel plants and converted them into profitable units, building in the process the largest steel company in the world. Jack Welch became chairman of GE when the company had entered into a decline that many thought to be terminal. Over the next 20 years he made GE into an ultra-profitable umbrella company with numerous businesses that were leaders in their respective fields. Whilst all three, namely Sloan, Welch and Mittal had numerous organisational managers, presumably of good quality, working in their organisations, they provided new thinking and new direction to their organisations, introduced and brought about significant change and steered their organisations from times of trouble and despair to tremendous organisational success.

Important Factors for Successful Leadership

As is evident from real life scenarios, there does appear to be a significant difference between successful leaders and efficient managers. Whilst many leaders do come from managerial ranks, all managers do not become good leaders (Kritsonis, 2004, P 1 to 8). The converse is also true to a certain extent, because some business leaders may not be effective as business managers (Kritsonis, 2004, P 1 to 8).

There is general consensus on the opinion that the real function of leaders is to make organisations ready for change and help them to cope with and overcome the many challenges that arise from such change (Kotter, 2001, P 14 to 27). Whilst leaders set direction, develop vision and formulate strategies, managers resolve complexity through the establishment of order and stability in the main dimensions of organisational environments (Kotter, 2001, P 14 to 27). They plan, budget and set future targets. Again whilst leaders motivate, inspire and energise employees to move in the right directions, managers construct organisational structures, recruit people, plan and implement training programmes and develop quality systems. “Carlopio, Andrewartha and Armstrong (1997) propose that “leadership has been equated with dynamism, vibrancy and charisma; management with hierarchy, equilibrium and control” (Kritsonis, 2004, P 2).

Apart from their ability to bring about organisational change, true leaders are associated with charisma and inspire trust. The traits theory of leadership has evolved from studies that reveal leaders to differ from others in six major ways (Connell & Others, 2005, P 139 to 149). The most important trait leaders possess is the desire to lead (Connell & Others, 2005, P 139 to 149). The overwhelming majority of leaders are driven by psychological compulsions to lead organisations or groups of people for the achievement of their predetermined aims and objectives (Connell & Others, 2005, P 139 to 149). It however needs to be recognised that leadership is also on many occasions thrust upon people because of their birth in business families or because of natural progression in jobs (Connell & Others, 2005, P 139 to 149). The majority of business corporations in Asia, Latin America and Africa are controlled by families, where businesses that are set up and established by first time entrepreneurs are thereafter enhanced or ruined by succeeding generations (Prentice, 2004, P 7 to 21). Again, professional managers often rise to positions of leadership, because of success in lower positions and are thereafter expected to meet leadership responsibilities (Prentice, 2004, P 7 to 21). Many organisations have well-structured leadership development programmes that aim to convert efficient managers into effective business leaders (Prentice, 2004, P 7 to 21). Unilever, the foods and soaps giant with operations across the world, shortlists select executives in their early forties for future CEO positions and routes their careers through structured job responsibilities and leadership development programmes in order to enable them to fulfil leadership roles (Prentice, 2004, P 7 to 21).

The story of Jack Welch is especially fascinating, not just because of the success achieved by GE under his leadership but also because of his detailed account of the numerous ways in which he energised and changed a bureaucratic and moribund organisation (Welch, 2007, P1). When Welch took up the leadership of GE in the 1980s, corporate America was bureaucratic, stagnant and fixed in its ways. Welch brought in a range of significant changes, appointing leaders who were focused on strategic issues, avoiding micro management, welcoming great ideas and leading by example. With him, the four leadership Es, namely energy, energise, edge and execute was always given precedence. Welch broke up GE into numerous small business units, selected leaders to head each of them and provided them with leadership blueprints. He asked them to be specific in the articulation of vision, see opportunity in change, get good ideas from everywhere, get rid of bureaucracy and keep things simple. Stressing on the need for ethics and integrity he asked his leaders to create learning cultures, build confidence, grow teams, focus on innovation, concentrate on quality and act with speed (Welch, 2007, P1).

Narayan Murthy the chairman Emeritus of Infosys India’s largest software company represents a new type of Asian management. Entering a business environment that was dominated by family run Indian businesses and giant multinational corporations, Narayan Murthy, after qualifying as an engineer, started a small software company, much like Gates and Allen. Merging business ethics, a passion for quality, respect for professionals, job competence and employee empowerment, he built a company that is run by professional managers, where leadership is nurtured intensely and where the chairman and directors give way for younger people with rapid frequency (Narayan Murthy, 2007, P1). Narayan Murthy emphasises on a few specific requirements for leadership, namely obtaining the trust of followers, subscribing to a strong value system, creating a value and self-esteem based environment, maximising shareholder value, even whilst ensuring fairness to all stake holders, and creating organisational transparency. Calling for the need for intense integrity among organisational leaders in an environment known to be corrupt, his mottos for corporate leadership are exceedingly simple.

"In conclusion, keep in mind two Sanskrit sentences: Sathyannasti Paro Dharma (there is no dharma greater than adherence to truth); and Sathyameva jayate (truth alone triumphs). Let these by your motto for good corporate leadership." (Narayan Murthy, 2007, P1).

Akio Morita, the legendary chairman of Sony and the father of miniaturisation felt creativity to be a cornerstone of leadership because change cannot occur without creativity (Morita, 1991, P1). Fostering an atmosphere of constant creativity, Morita transformed Sony into a world beating technology leader, known for path breaking concepts and products.

Whilst the qualities required for leadership espoused by Welch, Narayan Murthy and Morita are widely accepted, some experts feel that leadership is also dependent upon and influenced by the situation faced by an organisation and the existing business environment. Leaders who are very effective in crisis situations may for example prove to be inadequate in times of normalcy, when organisations need steady consolidation and growth (Thomas, 2003, P 18 to 36).

Significant research is being conducted on the relationship between charisma and effectiveness of leaders. Whilst the theory of charismatic leadership originally springs from Weber’s theory of personal power, it was elaborately articulated by Robert House in 1977. Charismatic leaders, experts feel, can influence their followers by structuring and articulating their vision, such that commitment is built towards fulfilment of organisational objectives (Conger & Kanungo, 1998, P 1 to 18). Whilst charisma in historical figures is more associated with spiritual leaders like Buddha and Jesus, it has in the modern day been associated with political change agents like Hitler, Roosevelt, Gandhi and Mao.

"Finally, charisma finds itself as an important aspect of business leadership, as executives who are visionary, agents of organisational change, and capable of arousing commitment among employees tend to be described as charismatic. Among the most popular charismatic business leaders, such as GE’s Jack Welch and Apple’s Steve Jobs, have separated themselves as particularly attractive to stakeholders both inside and outside of their respective organisations." (Piccolo & Other, 2006, P 3)

Conclusions

Whilst the importance of leaders in public and military life has always been considered to be important for national well-being, the progressive spread of neo-liberal economic systems has created similar demands and expectations for business leaders across the world.

Modern management literature is replete with work on leadership and the need for good leaders in today’s rapidly changing and intensely challenging business environment. Although hordes of theories jostle to define the characteristics of good leaders and contemporary organisations put great effort into developing leaders, some facts about leadership remain constant.

“Great leaders lead with the best interests of their employees in mind. A leader must lead according to the unique needs of the organization. The leader must not only be successful as a leader, but also bring success to the organization and its employees. There is no right or wrong answer regarding leadership.” (Kritsonis, 2004, P 1)

References

Billsberry, J, (1996), The Effective Manager, The Open University

Brooks, I, (2003), Organisational Behaviour, Individuals, Groups and Organisations, 2nd Edition, Prentice Hall

Bryman, A, (1986), Leadership and Organizations, Routledge & Kegan Paul, London

Butler, J, Cantrell, R. & Flick, R, (1999), Transformational leadership behaviors, upward

Trust, and satisfaction in self-managed work teams, Organization Development Journal,

17(1), pp. 13-28

Branson, S, R, & Prescot, C, (2000), To the Edge of Space, The Adventures of a Balloonist, Boxtree, ISBN 0-7522-1865-4 Retrieved, December 30 2009 from www.pdf-search-engine.com/screw-it-lets-do-it-pdf.html

Branson, S, R, (2006), Screw it, let’s do it, ISBN 0-7535-1099-5, Retrieved, December 30 2009 from www.virgin.com/richard-branson/books/screw-it-lets-do-it/

Carter M. N, (2008), Overview of Leadership in Organizations, Routledge

CIPD, (2009) Learning and Development Annual survey report 2009, Retrieved January 2, 2010 from www.cipd.co.uk/surveys

Conger, J.A., (1993), The brave new world of leadership training, Organizational Dynamics,

21(3), pp. 46–58

Conger, J, A, & Kanungo, R, N, (1998), Charismatic Leadership in Organizations, Thousand Oaks, CA, Sage

Connell, J, Cross, B & Parry, K, (2005), Leadership in the 21st Century: Where is it Leading Us? International Journal of Organisational Behaviour, 5, 2, 139 to 149

David, E, S, (1998), International Business, Retrieved, December 30 2009 from www.nytimes.com/…/business/international-business-recipe-for-trouble-falling-dominoes-leadership-vacuum.html

Ehrhart & Klein, (2001), Predicting follower’s preferences for charismatic leadership, the

Influence of follower values and personality, The Leadership Quarterly, 12(2),

pp. 153-179

Fincham, R, & Rhodes, P, (1999), Principles of Organisational Behaviour (3rd Edn) Oxford, Oxford University Press

Fuller, J, B, Patterson, C, E, P, Hester, K, & Stringer, D, Y, (1996), A quantitative review of

research on charismatic leadership, Psychological Reports, 78, 271-287

Galford, R, & Anne D, (2004), The Trusted Leader, QuickMBA.com

Goleman, D, (2002), Leadership That Gets Results, Harvard Business School Publishing Corporation

Goleman, D, (2004), What Makes a Leader, Harvard Business School Publishing Corporation

George, J.M, (2000), Emotions and leadership, the role of emotional intelligence, Human

Relations, 53(8), pp. 1027-1055

Howell, J.P. & Dorfman, P.W, (1986), Leadership and Substitutes for Leadership among

Professional and Non-Professional Workers, Journal of Applied Behavioral Science, 22,

pp. 29–46

House, R, J, (1977), A 1976 theory of charismatic leadership, In J. G. Hunt & L. L. Larsen (Eds.),Leadership, The cutting edge, Southern Illinois University Press

Ismael D, T, (2009), Qualities of a Good Leader, Retrieved, December 30 2009 from leadership.bestmanagementarticles.com/a-34963-qualities-of-a-good-leader.aspx

Joseph, C, S, (1993), Charisma and Leadership in Organizations, Retrieved, December 30 2009 from findarticles.com/p/articles/mi_m1038/is…/ai_13594763

Knight, D, & Willmott, H, (2007), Introducing Organisational Behaviour and Management, London, Thompson

Kotter, J, (2001), What Leaders Really Do, 14 to 27, Harvard Business School Publishing Corporation

Kerr, S. & Jermier, J.M, (1978), Substitutes for Leadership, Their Meaning and Measurement,

Organizational Behavior and Human Performance, 22, pp. 375 – 403

Kirkpatrick, S, A, & Locke, E, A, (1996), Direct and indirect effects of three core charismatic

Leadership, components on performance and attitudes, Journal of Applied Psychology, 81, 36-51

Kritsonis, A, (2004), Leadership In Organizations, National Implications, 1 to 8, Retrieved December 30 2009 from, www.nationalforum.com/…/Kritsonis

Koch, C, (2006), The New Science of Change CIO Magazine, pp 54-56, Retrieved, December 30 2009 from, http://www.cio.com/archive/091506/change.html

Lakshmi Mittal, (2009), Investing Value, Retrieved January 2, 2009 from http://www.investingvalue.com/investment-leaders/lakshmi-mittal/index.htm

Mullins, L, (2009), Management Organisational Behaviour, (8th edition), Pearson, Harlow

Morita, A, & Shintaro, I, (1991), The Japan That Can Say No, ISBN 0671758535, ISBN 4334051588, Retrieved, December 30 2009 from en.wikipedia.org/wiki/AkioMorita

Narayana Murthy N, R, (2005), The essence of leadership Retrieved, December 30 2009 from www.rediff.com › BUSINESS

Narayana Murthy, N, R, (2007), leadership and values Retrieved, December 30 2009 from http://getahead.rediff.com/money/2007/jan/22murthy.htm

Paglis, L.L. & Green, S.G, (2002), Leadership self-efficacy and manager’s motivation for

leading change, Journal of Organizational Behaviour, 23(2), pp. 215-235

Prentice, W.C.H, (2004), Understanding Leadership, Harvard Business School Publishing Corporation

Robbins, S, (2003), Organizational Behavior, 10th Ed, Upper Saddle River, NJ: Prentice

Hall

Piccolo, R. F, Judge, T, & Tosi, H, (2006), CHARISMATIC LEADERSHIP Retrieved, December 30 2009 from, www.bus.ucf.edu/…/Leadership–Charisma-Final%2012-19-06.pdf –

Savery, L, Mazzarol, T, & Dawkins, P, (1996), The Quality of British Management,

Asia-Pacific Perceptions, Warwick Business School Research Bureau Paper No. 228

Shamir, B, House, R, J, & Arthur, M, B, (1993), The motivational effects of charismatic leadership, A self-concept based theory. Organization Science, 4, 577-594

Thompson, P, & McHugh, D, (2009), Work Organisations (4th Edition) Houndmills, Palgrave

Thomas, A. (2003), Controversies in Management, Issues, Debates, Answers. 2nd Ed. London, Routledge

Vcasimir, G, (2001), Combinative aspects of leadership style, The ordering and temporal

spacing of leadership behaviours, The Leadership Quarterly, 12, pp. 245-278

Vadim, K, (2009), Corporate Change Leader, Retrieved, December 30 2009 from www.1000ventures.com/business…/cs_leadership_welch.html

Welch, J, (2007), Jack, Straight from the Gut, Retrieved, December 30 2009 fromwww.straightfromthegut.com/

Yukl, G, (2001), Leadership in Organizations, (5th Ed), Upper Saddle River, NJ, Prentice Hall

Zaleznik, A, (2004), Managers and Leaders, Are they Different, Harvard Business Online, Harvard Business School Publishing Corporation

Zaccaro, S.J, Rittman, A, & Marks, M, (2001), Team leadership, The Leadership Quarterly,

12 (4), pp. 451-483 Leadership Charisma,