a stakeholder model of organizational leadership

A Stakeholder Model of OrganizationalLeadership

Marguerite SchneiderNew Jersey Institute ofTechnology, School of Management, University Heights, Newark, New Jersey 07102-1982

mschneid@adm. njit. edu

AbstractOrganizations are evolving from the bureaucratic form basedupon hierarchy to the new-form or radix organization that hasthe value chain as its relatively fluid foundation. This articleexplores the relationship between the radix organization andleadership, viewed through an organization-environment co-evolution framework. It explicates the changes in the leader'srole-sets and relationships brought about with the evolutionfrom bureaucracy to the radix organization, developing a modelof leadership that is referred to as the stakeholder model oforganizational leadership. Stakeholder theory provides the ap-propriate theoretical basis for this model, as it offers the flexi-bility to accommodate various leader relationships. The stake-holder model of organizational leadership helps to predictleader effectiveness in organizations characterized by fuzzy or-ganizational boundaries, flattened hierarchies, and work rela-tionships sometimes brought about through contracts instead ofemployment.(Leadership, Stakeholder Theory, New Business Practices; Complexity; Ef-fectiveness)

Organizatiotis are experiencing an unprecedented rate ofenvironmental change due to such forces as globalization,rapid transformation and dissemination of technologies,and movement toward market-based socioeconomic sys-tems. According to early organization-environment the-ories based on the principle of requisite variety (Ashby1952), an organization's survival depends on its adapta-tion to environmental changes. More recent theorizingtranscends this view, highlighting that organizations alsoeffect environmental change (Lewin et al. 1999, Pfefferand Salancick 1978). Specifically, through their explo-ration activities (March 1991) individual firms developnew practices that may infiuence various levels of theirenvironments (Dijksterhuis et al. 1999).

One of the manifestations of organizational change ismovement from bureaucracy toward a new organizationalform, referred to here as the radix organization or the

radix. This term, which means root or foundation inLatin, provides a meaningful critical contrast with bu-reaucracy. Radix stresses the organization's foundationwhich must meet the challenges of fiuctuating vertical,lateral, and extemai demands, while bureaucracy hascome to connote a more narrow emphasis on relativelyless fiuctuating vertical demands. Just as bureaucracy isan umbrella term encompassing a wealth of related or-ganizational forms, so too is the radix organization. Itsrelated forms share a conceptualization of the organiza-tion's foundation as a value chain, the primary and sup-port activities that create value for customers (Denison1997). The magnitude of the change associated with theradix has not been seen since the industrial revolution andthe emergence of bureaucracy (Victor and Stephens1994).

This article revisits Daft and Lewin's (1993) challengefor theory regarding the new-form organization. It ad-dresses the research question: How do recent changes as-sociated with the new-form or radix organization affectthe practice of leadership? Leadership theories have as-sumed that the leader has power over those being led,specifically institutionalized power or authority. Chang-ing business practices have blurred the concept of au-thority and the distinction between management and non-management personnel. Can an organizational leader beeffective with no reliance on institutionalized power orauthority? Indeed, can one be an organizational leader buthave no authority? It has also been assumed that the do-main of organizational members is largely intemal, andthat relatively few members are in boundary-spanningroles (Thompson 1967). However, many members in theradix organization are in boundary-spanning roles. Canan organizational leader's institutionalized power extendto those outside the leader's hierarchical domain, includ-ing those outside the leader's organization?

In the attempt to answer these questions, recent theo-rizing regarding the radix organization is reviewed. Amodel is developed in which organizational leadership is

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ORGANIZATION SCIENCE, © 2002 INFORMSVol. 13, No. 2, March-April 2002, pp. 209-220

MARGUERITE SCHNEIDER Stakeholder Leadership Model

shown to both respond to, and induce, environmentalchange. Stakeholder theory is drawn upon as the basis forthe new nonhierarchical conceptualization of leadership,referred to as the stakeholder model of organizationalleadership, as stakeholders may include those inside thefirm or outside of it, with no assumption of managerialauthority over stakeholders. A review of business prac-tices associated with the radix is next presented, fromwhich it is determined that we are witnessing the relativedecline of traditional managerial authority in leader re-lationships and a concomitant increase in alternate typesof authority. In the radix organization, authority tends tomean power to guide cooperation for task accomplish-ment, rather than power to direct the actions of a prede-fined group of persons within the organization. This is achange from "power-over" or authority of command, to"power-to," the ability to implement (Ackoff 1993, p. 26).Propositions are developed regarding leader effective-ness, based on the changes in the leader's role-sets andrelationships that occur with migration to the radix or-ganization.

The stakeholder model of organizational leadershipcontributes to the management literature. It is alignedwith ongoing organizational trends in which leaders in-creasingly rely on nonhierarchical relationships, and inwhich leaders may or may not be managers. The modelextends the application of stakeholder theory, which hastraditionally been applied at the firm's executive level, toindividual leaders at various organizational levels. Themodel also incorporates and extends research regardingleader complexity to the radix organization.

Leadership and the Coevolution ofOrganizations and EnvironmentsLeadership is one of the most widely studied constructsin the management field (Bass 1981, Yukl 1994), and hasmany definitions. It will be defined here as " . . . influentialincrement over and above mechanical compliance withroutine direction of the organization" (Katz and Kahn1966, p. 302), connoting leadership with organizationalchange. This article will focus on the relatively unex-plored relationship of organizational leadership with su-praorganizational change, through adaptation of the co-evolution framework (Lewin et al. 1999).

The coevolution framework transcends previous theo-ries. While theories such as population ecology andresource-based theory contribute to our understanding,they are single-themed and fragmented, placing insuffi-cient emphasis on how environmental change mayemerge from the organizational level (Lewin and Volberda

1999). Organizational change may indeed beget environ-mental change—and organizational leadership is instru-mental in this process. The environmental force of infor-mation technology can be traced to firms such as Apple,Microsoft, and AOL, whose influence is inextricablylinked to the leadership of Jobs, Gates, and Case, respec-tively. Globalization intensified through the transforma-tional leadership of Branson of Virgin, Barnevik of ABB,and Simon of British Petroleum (Kets de Vries andFlorent-Treacy 1999). And Toyota's production system,spearheaded by its leadership, came to serve as a modelfor Japanese industry and the world (Womack and Jones1996).

The new-form or radix organization reflects the tran-sition from the industrial to the postindustrial orknowledge-based age. The industrial age was character-ized by the conventional wisdom that land, labor, andcapital were the factors of production. The transition tothe postindustrial age has brought to the forefront a factorof production—knowledge—which is critically differentfrom the others. Land, labor, and capital are subject todiminishing retums; i.e., the output associated withgreater use of the factor increases at a decreasing rate.Knowledge is not subject to decreasing retums; outputassociated with it instead increases at an increasing rate(Reich 1992). This implies that we have little experienceupon which to understand this factor; indeed, our expe-rience with other factors may be a hindrance here.

Due to automation, a better-educated workforce, andother determinants, in advanced economies the humanfactor of production is largely shifting from labor, thosewho are employed to do as told, to human capital, thosewho are employed to think (Pfeffer 1996). The earlierdistinction between managers/leaders and other employ-ees has disappeared somewhat with the migration to thepostindustrial age. For example, quality circles and othernew practices are based upon the assumption that thosewho perform a function are capable of thinking about howto improve the function, and should be empowered to doso for the benefit of the organization. An implication,which is similar to that of the point above, is that rela-tionships between manager/leaders and other employeeshave changed, and that use of industrial-age models mayexacerbate rather than alleviate current problems.

While knowledge is created by the firm's human cap-ital, individual employees are not the sole influence inknowledge creation. Knowledge might instead be theproperty of a collective, such as a team, in which it isgenerated and shared across members. The firm's socialcapital, based upon its trusting relationships or networks.

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also influences knowledge creation. Indeed, the acquisi-tion and exploitation of knowledge are predominately so-cial processes (Kogut and Zander 1992). The firm's abil-ity to generate social capital, and thus generate collectiveknowledge, is related to its structure, culture, and pro-cesses, its intangible assets or resources. These resourcesare particularly critical to the firm's strategic position, asthey may be firm-specific and socially complex, renderingthem difficult to imitate by others (Bamey 1991). Theimplication is that a firm's ability to sustain competitiveadvantage by creating value for customers is increasinglybased upon its treatment of human capital and its gener-ation of social capital, as well as its ability to discem andinfluence environmental forces.

The radix organization is a reaction to bureaucracy, theorganizational form of the industrial age, and attempts toovercome bureaucracy's tendencies toward excessivesize and hierarchy through implementation of market-based techniques within the firm (Ackoff 1993). Its pri-mary focus is the customer, who may be a global customer.Accordingly, organizational design should facilitate cus-tomer relationships that are seamless across multipleproducts and regions (Galbraith 2000). Some of the com-mon characteristics of the radix are flexibility and agility(Volberda 1996), fluid and permeable boundaries (Kanter1990), and emphasis on lateral relationships across func-tions, business units, and geographic regions (Galbraith1994). These characteristics reflect that the new-form isintentionally underdetermined (Denison 1997), renderingit more responsive and adaptive than bureaucracy(Wheatley 1992).

The radix organization utilizes the collective resourcesof several firms located along the value chain, recogniz-ing that multiple value chains may exist and that shifts invalue chains based on evolving core competencies mayrepresent strategic opportunities. Thus, the radix organi-zation acknowledges the unique competencies of otherorganizations, and tends to link them into its value chain.This reconfiguration of the value chain offers the firm theadvantages of greater flexibility and speed, and lowerrisk, compared to the other strategic options of confiscat-ing the competencies through takeover activity, or at-tempting to replicate them through intemal expansion toachieve vertical integration.

The coevolution framework makes use of multidirec-tional causality and multiple environments in explainingnew organizational forms. Multidirectional causality is il-lustrated in the previous examples of how organizationalleadership influences, as well as is influenced by, environ-mental forces (See Figure 1). The framework's multipleenvironments consist of extrainstitutional, institutional,and industry. As noted above, the extra institutional forces

of technological advances and globalization facilitate evo-lution toward the radix organization. Managerial logic,with recent movement from a modem to postindustriallogic, supports the radix and its relative emphasis on ex-ploration of the new rather than exploitation of the exist-ing.

The institutional environment reflects differences inregulation, capital markets, and govemance. These dif-ferences help to explain variation in organization formacross countries (Whitley 1994), and the relative accep-tance of, or resistance to, the radix organization. In tJiethird aspect of the environment, industry, new hyper-competitive strategies emphasizing speed encourage amore adaptive and flexible organization form (Ilinitch etal. 1996). Intemal organizational aspects of the coevo-lution framework include managerial action, strategic in-tent, organizational adaptation (exploitation and explo-ration), and leadership.

As the radix organization is primarily organized later-ally across a flexible value chain, and the generation ofsocial capital is viewed as critical to knowledge creationand competitive position, its leaders are involved in amultitude of intra- and interorganizational relationships.Accordingly, the ontological basis for the leader's role-set, historically the leader's hierarchical position, shouldbe changed. Stakeholder theory contributes the neededtheoretical basis for organizational leadership in the radixorganization.

Applying Stakeholder Theory toOrganizational LeadershipStakeholder theory conceptualizes the firm as a series ofgroups with different respective relationships to it. Stake-holders consist of intemal organizational members, in-cluding employees, managers, and board members; ex-temai members, such as owners, customers, suppliers,and competitors; and hybrid members engaged in inter-organizational cooperative activity with the firm. Whilea primary focus of stakeholder theory has been the ethicalprinciples guiding management, Mitchell et al. (1997)conclude that normative concems alone are necessary butinsufficient criteria for addressing stakeholder interests.Clarkson (1995) offers that stakeholders are defined interms of a focal social actor, permitting the theory to beapplied appropriately to individuals as well as organiza-tions. Thus, the theory is rendered suitable for integrationwith literature regarding organizational leaders' domains.

Stakeholders have the potential to influence or affectthe firm, and/or be influenced or affected by it (Freeman1984). They influence the firm through their words anddeeds, through covert signals and overt protests, and most

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Figure 1 A Stakeholder Model of Organizational Leadership

Extra Institutional Environment

- Globalization- Technological Advances- Management Logics

Institutional Environment

- Regulation- Capital Markets- Govemance Structure

IndustryEnvironment

- CompetitiveDynamics

Organizational Contextof Leaderslup

- Radix Practices-Teams- Contingent Workers- Strategic Alliances- Outsourcing

Components of Leadership

- Leader Role-Sets- Decrease in traditional vertical

dovmward stakeholders- Increase in other intraorganizational

stakeholders- Increase in interorganizational

stakeholders

- Leader Relationships- Less use of managerial authority- More use of other types of authority- Match of type of authority to

relationship

ILeader

Efffectiveness

Leader Attrihutes

- Cognitive Complexity- Social Complexity- Behavioral Complexity

importantly, through their ability to help or hurt the firm'sability to create value. Stakeholders are conceptualizedhere as the various parties along the firm's value chainconfigurations that influence its value creation. Theymight contribute to, or benefit from, the value creation,or they might hurt or suffer from it. Their bargainingpower influences their ability to appropriate the rents as-sociated with value creation (Coff 1999). Some stake-holders may not be supportive, which may justify a de-fensive reaction. However, effective leaders will tendtoward cooperative stakeholder relationships, to maxi-mize their potential benefits (Hooijberg and Schneider2000). For example, a competitor may present the op-portunity for a cooperative alliance into a new market,and compensating employees at above-market wagesmay lead to greater commitment and a high performanceculture.

In keeping with much leadership theory, the stake-holder model of organizational leadership has leader ef-fectiveness as its dependent variable (see Figure 1). It isdefined as the collective sense of the leader's efficacy,based on the perceptions of multiple stakeholders. Thisdefinition follows and extends measures employed in pre-vious research, in which perceptual data have been usedto measure leader performance (Denison et al. 1995). Asfew leaders are able to gain reputational effectiveness

concurrently from multiple constituencies (Hart andQuinn 1993, Tsui 1984), this criterion is a critical test ofthe leader. Effectiveness reflects stakeholders' narrow as-sessment of how the leader is performing in terms of theirrespective expectations, and broad assessment of theleader's overall effectiveness across stakeholder groups.This approach is related to Hooijberg's (1996) concep-tualization of leader effectiveness, which includes mul-tiple perceptions and measures of the leader's perfor-mance.

In order to delineate the independent variables withinthe model, the next two sections specify how practicesassociated with the radix organization both influence, andare influenced by, leadership. The sections correspond totwo major areas of study within the leadership literature:leader role-sets and relationships. (See Figure 1.) Eachsection brings forth how evolution to the radix organi-zation has affected the practice of leadership. The sectionon leader role-sets develops a proposition regarding thebreadth of the leader's role-set and leader effectiveness.Immediately following is the section on leader relation-ships, which includes a discussion of the various types ofauthority. Propositions are developed regarding thebreadth of the leader's repertoire of authority types, theleader's tendency to engage in the specific authoritytype(s) that are most appropriate for a given relationship.

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and leader effectiveness. The section that immediatelyfollows, on leader attributes, culminates in a final prop-osition regarding the leader attributes positioned to beparticularly critical to leader effectiveness.

Leader Role-Sets Within the StakeholderModel of Organizational LeadershipThe Literature on Leader Role-SetsThe management field has historically tended to link andconfound the constructs of leadership and management.The seminal Ohio State studies emphasized leadership be-haviors within the manager-subordinate relationship (Bass1981), and leadership has been viewed as an interpersonalmanagerial role having to with motivating subordinates(Mintzberg 1973). Leadership came to be associated withthe empowered party in vertical authority-based relation-ships.

But researchers also put forth that many relationshipsinfiuence managerial leaders' behaviors and effective-ness. Networking, the development and maintenance ofcooperative organizational relationships, has been linkedto managerial leader effectiveness (Yukl 1994). Osbornet al. (1980) stressed the importance of the leader's ori-entation toward vertical and lateral relationships. Studiesfound that their broader sets of relationships influencemanagerial leaders' behaviors (Pfeffer and Salancik1975), and that managers gain a reputation for effective-ness by meeting the varying expectations of superiors,subordinates, and peers (Tsui 1984). The vertical dyadiclinkage model came to be extended into a network ofmultilevel, multidomain relationships (Graen and Uhl-Bien 1995).

In summary, by defining leadership as a managerialrole and limiting subjects in leadership studies to man-agers, much research confounded the constructs of lead-ership and management. Yet, it was found that leaders'relationships with others also infiuence their effective-ness. Recent research has extended the managerial lead-ers' role-set beyond subordinates to include supervisorsand peers, but leaders' wider role-sets continue to be ne-glected; e.g., persons outside the organization, and thoselinked to the leader by a diagonal relationship. However,the neglect of both leaders without managerial authorityand leaders' wider role-sets was not a shortcoming his-torically, given that organizations depended on supervi-sion as a key control mechanism and that most managerswere not in boundary-spanning positions. It was appro-priate to assume that the leader had managerial authorityand that their relationships with subordinates were pri-mary infiuences on leader effectiveness. But new businesspractices have come to undermine this assumption.

New Business Practices and the Leader's Role-SetTo specify the characteristics of leadership associatedwith effectiveness within the stakeholder model, this sec-tion examines the key business practices that have de-veloped under the managerial logic of the postindustrialage. Their effects include the expansion of leaders' role-sets to include new stakeholders, an increased propensityfor leaders to lack managerial authority, and greaterleader role complexity brought about through their si-multaneous involvement in several organizations or so-cial systems (Katz and Kahn 1966).

Increased Use of Teams. Organizations have increasedtheir reliance on team-based structures (Stewart andManz 1995). A team is a collection of task-interdependentindividuals who share responsibility for outcomes, areembedded within a larger organization/social system, andmanage their relationships across organizational bound-aries. Team classification criteria include their degree ofself-management, the nature of team memberships, andthe purpose or function of the team (Dunphy and Bryant1996). Team effectiveness encompasses both organiza-tional components, such as improvements in productquality, and employee components, such as improvementin job satisfaction (Cohen et al. 1996).

Teams are frequently self-managed and/or cross-functional. Self-managed teams demonstrate collabora-tive teamwork (Kirkman and Shapiro 1997). They haveincreased autonomy and are delegated many responsi-bilities that were traditionally under the domain of man-agers. Self-managed teams may also be self-led whenmembers are innovative and set their strategic direction.The design of the team's organizational context, however,remains management's responsibility (Hackman 1987).

Cross-functional teams consist of members with dif-ferent functional expertise. These teams cut across func-tional silos and hierarchy to create competitive advan-tages including increased speed to market, improvedcustomer focus, and enhanced organizational leaming(Parker 1994). It has been noted that "The context of crossfunctional teams is complex and differs from that of moreconventional teams in that it includes hierarchical, lateral,and inter-team dependencies that require continuous ne-gotiation" (Denison et al. 1996, p. 1011). For example,team members may also have an alternate membership intheir functional area, leading to potential role confiict.

Team leaders may be assigned by management andthus have managerial authority over other team members,or may emerge through the team's informal processes(Manz and Sims 1987) and thus lack managerial author-ity. Teams with no appointed leader refiect trends toward

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greater employee empowerment and autonomy. The useof teams suggests decreased reliance upon managerial au-thority as a coordinating mechanism.

The use of teams is also associated with the expansionof leaders' role-sets and greater leader role complexity.In the case of cross-functional teams, appointed leadersoften maintain their traditional functional position androle-set relationships while serving as team members.Thus, the cross-functional team leader faces role-set ex-pansion and increased role complexity in negotiating therequirements of several roles. In the case of self-managedteams, role-set expansion occurs as intemally selectedteam leaders assume responsibility for tasks that were for-merly performed by managers. Fulfilling the new tasksmay also result in increased role complexity.

Increased Use of Contingent Workers. The long-termemployment contract has been broken, replaced in partwith the use of contract or contingent employees. Con-tingent workers include temporary employees recruitedby the hiring firm, those hired through temporary agen-cies, and independent contractors who are either self-employed or employed by another firm (Rousseau andLibuser 1997). Firms hope that using contingent workerswill cut costs, increase fiexibility, and avoid potentialproblems associated with legal and regulatory complianceregarding permanent employees.

As has been discussed, traditional theories of leader-ship have assumed that those leading and those being ledare employed by the same organization and are in amanager-subordinate relationship. The contingent work-force therefore represents a significant area for study dueto the challenge it poses to traditional theory and practice(Pearce 1993). First, while a leader and contingent workermay be in a vertical dyadic relationship, it will differ sub-stantially from the traditional vertical dyadic relationshipbased upon managerial authority. Second, contingentworkers may be members of other organizations whileperforming tasks within the leader's organization, andthereby increase their leader's role complexity.

Strategic Alliances. A hallmark of the current businessera is that many firms are choosing to engage in coop-erative interorganizational activities (Ring and Van deVen 1994). Strategic alliances are driven both by strategicneeds to develop or enhance competitive advantage, andby social opportunities that infiuence the emergence ofinterfirm cooperation (Eisenhardt and Schoonhoven1996). Some alliances exploit the productivity of capitaland assets through joint maximization of complementaryassets, while others are exploratory, involved in the pur-suit of new opportunities (Koza and Lewin 1998).

Cooperative relationships present a need to develop in-fiuence without the formal authority to command. Mem-bership in alliances results in a new boundary-spanningrole for leaders not based on managerial authority, andincreases their role complexity through involvement withother organizations.

Outsourcing. Outsourcing refers to a firm's reliance onextemai sources for particular value chain activities thatwere previously performed intemally. Increased use ofoutsourcing refiects the view of the firm as a series ofintemal markets that contract with one another and withextemai markets based on efficiency and other criteria(Halal 1994). Accordingly, the firm should bifurcate itsvalue chain activities into areas in which the firm hasgreat value-adding competency, or which are consideredcritical strategic needs, and areas in which the firm hasno special capability, or which are not critical. The formergroup should remain intemalized and the latter shouldbe outsourced, so that the firm can concentrate its effortson developing and fully exploiting its competencies(Saunders et al. 1997).

The outsourcing of previously intemal functions resultsin the need for boundary-spanning activities by leaderswho previously interacted solely with intemal organiza-tional members. Thus, outsourcing results in a new inter-organizational role for leaders and increases their rolecomplexity. Furthermore, the outsourcing relationship isnot based on the managerial authority of the leader. In-deed, the practice may be viewed as an attempt by or-ganizations to mitigate reliance upon managerial author-ity as a control mechanism.

As organizations tend to develop the leadership thatbest suits them at a point in time (Wheatley 1992), mi-gration from bureaucracy to the radix organization infiu-ences the practice of leadership. It is proposed that thoseleaders who are viewed as effective across multiple stake-holder groups will tend to engage successfully in the busi-ness practices that have been outlined here. Thus, theywill attract and retain a diverse array of organizationalstakeholders in their intrafirm and boundary-spanning ac-tivities:

PROPOSITION 1. There will be a positive relationshipbetween the breadth of a leader's role-set to include mul-tiple stakeholders and leader effectiveness.

Leader Relationships Within theStakeholder Model of OrganizationalLeadershipThe review of the radix organization's business practicesindicates that, contrary to traditional models, many of the

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leader's role-set members are no longer subordinate tothe leader's managerial authority; indeed, the leader maynot have managerial authority. This section reviews theliterature on authority to ascertain whether the constructis sufficiently broad to include the new relationships as-sociated with the stakeholder leadership model.

Authority and Intraorganizational RelationshipsThe concept of authority, also known as managerial au-thority or institutional power, is found in Weber's (1968,p. 954) typology of power. Managerial authority is obe-dience to rational rules ". . . which meet with obedienceas generally binding norms whenever such obedience isclaimed by him whom the mle designates." It is associ-ated with position in a bureaucracy, defined as the powerto make decisions that guide the actions of others. Man-agerial positions are authority laden, as evidenced by sub-ordinates' acknowledgment of the legitimacy of thepower and willingness to yield to it (Simon 1957). Whilemanagers may indeed have other sources of power, it isauthority or legitimate power that differentiates managersfrom nonmanagers.

However, the authority that characterizes vertical re-lationships has never been the sole type of authority inorganizations. Weber (1946, p. 947) noted that ". . . re-lationships of domination may exist reciprocally. In mod-em bureaucracy, among officials of different depart-ments, each is subject to the others' powers of commandinsofar as the latter have jurisdiction." As the tidy fiowof authority in vertical relationships becomes muddied bylateral relationships, the management field has generallytended to dwell on vertical authority relations (Osbom etal. 1980). Some attempt has been made to fill the gap intheorizing about authority in lateral relationships with theconcepts of staff and matrix authority. Staff authority isthe ability to infiuence or advise but not direct. Matrixauthority is specific to managers who have authority overassigned projects, but rely on other managers to accom-plish the process. Because the domains of staff and matrixauthority are specific to certain types of lateral relations,they are not sufficiently broad to encompass the wealthof lateral relations in organizations that have been out-lined in studies (Whyte 1969).

Vertical relationships within the organization are oftenlabeled as "formal" and lateral relationships as "infor-mal." For example, Mintzberg (1979) puts forth that ver-tical relationships generally rely on the formal controlmechanism of direct supervision, whereas lateral rela-tionships rely on the informal communication of mutualadjustment. Jaques (1976) instead argues that authority isa matter of degree and type, and has developed a typologyof authority relationships in organizations (see Table 1).

Several types of authority found in the typology reston long tradition. Managerial authority (Type 1), the rightto direct subordinates, has dominated the managementliterature. Supervisory authority (Type 2) is associatedwith managerial authority because it gives supervisors theright to monitor subordinates, while a higher-level man-ager sets the standards that are inherent in the supervisor'smonitoring. Staff authority (Type 3) is the right to advisebut not direct, and attachment (Type 4) is akin to matrixauthority.

The typology includes several types of authority thathave not been the subject of much discourse in manage-ment, despite the fact that some can be traced to the sem-inal writings of Weber and others. These nontraditionaltypes of authority are more prevalent and more critical inthe radix organization than they were in bureaucracy. Pre-scribing authority (Type 5) is a strong type of authority,second only to managerial. It is exemplified by thedoctor-nurse relationship in hospital settings. Like man-agerial authority, prescribing authority grants one therights to decide limits, appraise conformity to them, andgive orders to others regarding tasks. However, the pre-scriber, unlike the manager, does not have the power toconfer the prescribee's performance evaluation, althoughthe prescriber can make recommendations regarding it.

Monitoring/coordinating and collateral authorities areapplicable to lateral relationships. Under monitoring/co-ordinating authority (Type 6), the coordinator workswithin a task-based framework that has been agreed uponby all concemed parties. This authority is associated withthose who monitor and coordinate teams, relying uponpersuasion in place of direction. Collateral authority(Type 7) suggests the reciprocal authority described byWeber. It is bilateral, characterized by the equal abilityto persuade and to be persuaded. Collateral authority de-pends on mutual interests to develop the cooperation nec-essary for task achievement.

Authority and Strategic AlliancesJust as authority is one of several control mechanismswithin an organization, so too is authority one of severalmechanisms within cooperative alliance relationships.Some have positioned such relationships as hybrid gov-emance stmctures, which bridge the stmctures of marketsand hierarchies (firms) and incorporate some aspects ofeach (Hennart 1993, Williamson 1991). Accordingly, theuse of authority would be manifested in cooperative re-lationships that tend toward the features of hierarchies,and would appear less in more marketlike relationships.But, greater development of the association between au-thority and cooperative relationships is necessary, to il-lustrate how effective leaders in the radix organization

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Table 1 A Typology of Authority

Number NameTraditional orNontraditionai Limit Setting Task initiation

Appraisai ofPersonnei Competenoe

1234567

ManagerialSupervisoryStaffAttachment/MatrixPrescribingMornitoring/CoordinatingCollateral

TraditionalTraditionalTraditionalTraditionalNontraditionalNontraditionalNontraditional

DeoideRecommendRecommendDecideDecideRecommendLimited

OrderOrderOrderOrderOrderPersuadePersuade

DecideRecommend—

LimitedRecommend—

Limited

Adapted from Elliot Jaques. 1976. A General Theory of Bureaucracy. Halsted Press, NY. p. 263.

depend upon a repertoire of authority types with theirhybrid stakeholders.

Grandori (1995) describes the key types of alliances ornetworks. Social networks such as industrial districts, aninformal type, are distinguished by personal relationshipsin which coordination is not codified into a contract. Bu-reaucratic networks such as franchising and cartels areformalized contractual agreements. Proprietary networksor joint ventures are common when uncertainty and thepotential for opportunism are particularly present, andrely upon property rights or ownership to control mem-bers' behavior. In operator joint ventures, one partner as-sumes responsibility for the venture; and in shared jointventures, partners contribute complementary skills andcomanage the venture. In the autonomous type, the jointventure is its own company with relatively little directinfluence from the partners (Galbraith 2000).

I put forth that effective alliance leaders will tend to-ward use of the types of authority that are most appro-priate for the type of cooperative relationship. The use oftrust as the key control mechanism in social networksindicates that leaders in these networks will largely relyupon the nontraditional types of authority—prescribing,monitoring/coordinating, and collateral. There will berelatively little use of any type of authority in bureaucraticnetworks, in which there is greater reliance upon contract.In operator joint ventures in which one firm dominates, Isuggest that leaders will rely upon a mix of types of au-thority, but may have to rely upon the more traditionaltypes when conflicts arise. In shared ventures with co-operation across lateral relationships, leaders will placegreater reliance upon the nontraditional types of author-ity. And in the autonomous type, in which ventures op-erate independently of their owner-firms, leaders will relyupon the broad mix of types outlined in the previous sec-tion on organizational relationships.

In keeping with the role-set expansion and increased

boundary-spanning activities associated with migrationfrom bureaucracy to the radix organization, I propose thateffective leaders will utilize a broad repertoire of author-ity types rather than largely rely upon managerial au-thority. Further, the leader-stakeholder relationship willbe a moderating variable regarding authority type. Effec-tive leaders will differentiate leader-stakeholder relation-ships from each other in meaningful ways, and will tendto engage in the type(s) of authority that are most appro-priate for a given leader-stakeholder relationship:

PROPOSITION 2. There will be a positive relationshipbetween the breadth of a leader's repertoire of authoritytypes and leader effectiveness.

PROPOSITION 3. There will be a positive relationshipbetween a leader's tendency to engage in the specifictype(s) of authority that are most appropriate for a givenleader-stakeholder relationship and leader effectiveness.

Leader Attributes Within theStakeholder Model of OrganizationalLeadershipEffective leaders are able to assess stakeholders' respec-tive abilities to influence and affect, and to be influencedand affected by, the leader. The leader needs to discem". . . who and what really counts . . ." (Mitchell et al.1997), which is a significant intellectual challenge giventhe maze of stakeholders. Some stakeholders may be wellknown and predictable; others are more peripheral andambiguous. Further, stakeholders may not have dyadicties with the leader, but may instead form networks tofortify their positions (Rowley 1997).

Mitchell et al. (1997) develop the criteria of legitimacy.

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power, and urgency to classify stakeholder salience. Le-gitimacy is the perception that the actions of a stakeholderare desirable or appropriate. A stakeholder has power tothe extent that he/she develops an image of access to co-ercive, utilitarian, or normative power, and utilizes thisimage to impose his/her will. Urgency reflects the per-ception of time sensitivity, and the criticality or impor-tance of a stakeholder claim. Effective leadership requiresthe cognitive ability to make keen assessments of the rela-tive legitimacy, power, and urgency of stakeholders.

I have proposed that effective leaders have relation-ships with a broad range of stakeholders that make useof various types of authority. Given these challenges, ef-fective leaders must possess signiflcant cognitive, emo-tional, and behavioral abilities to cope with their complexenvironments. Several research streams theorize aboutleadership as a complex systems phenomenon (Jacobsand Lewis 1992). Osbom et al. (1980) posit that leader-ship is subject to multiple influences such as setting,group environment, and the nature of the group. Othersput forth that leaders must deal with tensions among com-peting values (Denison et al. 1995, Hart and Quinn 1993),and competing constituency expectations (Tsui 1984).

The Leaderplex Model of Hooijberg et al. (1997) pro-poses that individual attributes and their interactive ef-fects are related to the leader's effectiveness in dealingwith organizational complexity. Leader complexity is es-sential for effectiveness, given the organizational com-plexity that the leader faces: "Complexity implies theability to respond to a host of ambiguous and contradic-tory forces, including the simultaneous presence of op-posites" (Denison et al. 1995, p. 526). The complexityattributes of the Leaderplex Model have been incorpo-rated into the stakeholder model of organizational lead-ership to reflect the individual leader's relative ability torespond to a context of multiple stakeholders and author-ity relationships. (See Figure 1.)

Cognitive complexity is the ability to think in a mul-tidimensional, abstract manner and to synthesize infor-mation at various levels of abstraction (Jaques 1976). Ithas two dimensions: differentiation and integration. Dif-ferentiation is the number of characteristics of a problemone discerns, and integration is the number of connectionsand rules governing the connections made among the dif-ferentiated concepts (Boal and Whitehead 1992). Leadersparticularly require cognitive complexity when the timespan of decisions is lengthy, the decision environment isuncertain, and tasks require the ability to synthesize com-ponent parts (Jacobs and Lewis 1992).

Social complexity, the ability to apply interpersonalskills in a socially appropriate manner, reflects theleader's social perceptiveness and response flexibility

(Zaccaro, Foti, and Kenny 1991). Leaders who are so-cially complex have more developed and complex knowl-edge structures regarding people and situations, greaterunderstanding of critical social organizational problems,and more adaptive responses to these problems than non-leaders do (Zaccaro, Gilbert, Thor, and Mumford 1991).The Leaderplex Model highlights the dimensions of so-cial differentiation and integration. Social differentiationis the ability to discriminate aspects of a social situation,including the capacity to differentiate emotions in one'sself and others. Social integration is the capacity to syn-thesize the components of a social situation that leads toincreased understanding of the social context and accom-plishment of instrumental objectives.

Cognitive complexity is thought to be necessary butinsufflcient for leader effectiveness in complex situations.Effective leaders are also behaviorally complex, tendingto ". . . act out a cognitively complex strategy by playingmultiple, even competing roles, in a highly integrated andcomplementary way" (Hooijberg and Quinn 1992, p.164). Accordingly, effective leaders will demonstrate awider repertoire of roles than less effective leaders. Thistendency has been supported in empirical testing of theroles associated with the Quinn Leadership Model(Denison et al. 1995, Hart and Quinn 1993). Hooijberg(1996) has proposed that two components of behavioralcomplexity, repertoire and differentiation, respectivelyreflect leaders' behavioral flexibility and the suitability oftheir behaviors to their organizational context.

In summary, effective leaders exercise judgment in as-sessing the salience of stakeholders, possess the ability toapply interpersonal skills in a socially appropriate man-ner, and have a repertoire of leadership roles that spans arange of potential situations. (See Figure 1.)

PROPOSITION 4. There will be a positive relationshipbetween a leader's cognitive, social, and behavioral com-plexities and leader effectiveness.

ConclusionLeadership exists because of changing environmentalconditions that affect the organization, and the incom-pleteness of organizational design (Katz and Kahn 1996).The emergence of the radix organization has indeed in-creased the need for leadership, to respond to changingenvironmental conditions and to flll the empty space re-sulting from the "collapse of structure" (Hatch 1999) aswe have known it. The stakeholder model of organiza-tional leadership is markedly different from the dominantconceptualization of leadership that developed under bu-reaucracy. Traditional leadership theories apply within anorganizational context of discernible organizational

ORGANIZATION SCIENCE/VOI. 13, No. 2, March-April 2002 217


boundaries, a tendency toward towering hierarchy, andreliance on managerial authority. The stakeholder modelof organizational leadership applies to an era of fuzzyboundaries, relatively flattened hierarchies, and work re-lationships sometimes brought about through contract in-stead of employment.

The stakeholder leadership model displayed in Figure1 and its related propositions address issues regarding therelationship of a leader with those outside of the leader'shierarchical domain. It is offered that multiple types ofauthority are possible in relationships within and acrossorganizations. Some may disagree with this position,viewing authority as limited to managerial authority andother types of relational control as informal mechanisms,such as mutual adjustment. Accordingly, organizationsare becoming more informal and authority is employedless frequently.

I instead offer that an organization's sanctioning of itsleaders as legitimate is necessary to signal support fortheir efforts. Authority, or organizationally sanctionedpower, continues to be required in organizations to pro-mote the cooperation necessary for goal achievement. Asorganizations become more flexible and place more em-phasis on lateral and interorganizational relationships, theconcept of authority is adapting to reflect these relation-ships. Authority is coming to mean power to guide co-operation for task accomplishment, rather than power todirect the actions of a predetermined group within theorganization. While the concept of authority is broadenedin this definition, it remains distinct from the broader con-cept of power. Power includes influence that may not beinstitutionally sanctioned; indeed, charismatic influencecan actually work against institutionally sanctionedpower.

The stakeholder leadership model describes how lead-ership has come to evolve with the radix organization.The model is at a developmental stage, and is presentedwith the intention of promoting research to further fill thegap between leadership theory and practice. Study of thetypes of authority is in order, particularly regarding theleader's sensemaking process of discerning which type isappropriate for a relationship, and regarding the stake-holder's role in influencing or negotiating the authority(Barnard 1938/1968). In addition, study should addressthe interplay between leadership and the institutionalforce of culture in terms of the radix organization. Di-versity in leadership practices will tend to emerge as theradix becomes diffused across cultures, reflecting how in-stitutional forces come to shape both the diffusion processand its outcomes.

In particular, study is necessary regarding leader be-haviors within the radix organization. Leaders will con-tinue to initiate structure by creating and defining roles

to facilitate goal attainment, and will continue to exhibitconsideration for others by developing relationships char-acterized by trust, respect, and concem (Fleishman andPeters 1962). However, the specific behaviors associatedwith these tasks have adjusted to reflect the radix orga-nization. Bureaucracy had emphasized hierarchy and re-liance on managerial authority. Accordingly, leader be-haviors associated with initiating structure were about thedelineation and direction of the activities of subordinates.Leader behaviors associated with consideration tended tobe guarded and paternalist, given the bureaucratic form'smechanistic and impersonal qualities.

In the postindustrial age, the facilitation of knowledgecreation through the development of social capital is re-placing direction of subordinates as the key manifestationof initiating structure. While leadership remains in partabout the leader's own human capital, it is increasinglyabout developing social capital by creating relationshipsthat provide access to the human capital of others (Brass2000). These relationships are not necessarily betweenthe leader and stakeholders. The leader may encouragethe development of networks across multiple membersfrom disparate parts of the organization, or encourageinterorganizational networks, which are then independentof the leader. But, I offer that the leader's direct relation-ships with others will remain critically important, and willbe characterized increasingly by power with others.Leader behaviors within the radix organization will en-courage interactions and connections, and use relativelyintense, positive emotion in so doing, for in the radixorganization stakeholders tend to join, not follow, theleader.

AcknowledgmentsThe author is very grateful to those whose encouragement and critiqueassisted in the development and refinement of this article, including DanDenison, (Special Editor), four anonymous reviewers, Robert Hooijberg,Chao Chen, Jaepil Choi, Fariborz Damanpour, Mark Somers, Lori Verste-gen Ryan, and L. Richard Hoffman.

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