bscb(im) 6 semester bachelor thesis author: rikke krogh...

BscB(IM) 6 semester Bachelor Thesis

Institution of Management

Author:

Rikke Krogh

Counsellor:

Thomas Nagbøl Mejlgård

Aarhus School of Business

2010

A Theoretical Discussion

of Motivation and Leadership

In the Danish Public and Private Sector

A Theoretical Discussion of Motivation and Leadership in the Danish Public and Private Sector

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TABLE OF CONTENT

1 SUMMARY ................................................................................................................... 3

2 INTRODUCTION ............................................................................................................ 5

2.1 PROBLEM STATEMENT ............................................................................................................... 6

2.2 LIMITATIONS ............................................................................................................................ 6

2.3 DEFINITIONS ............................................................................................................................ 8

2.4 METHODS AND STRUCTURE ......................................................................................................... 8

3 MOTIVATION ............................................................................................................. 11

3.1 THEORY ................................................................................................................................ 12

3.1.1 HISTORY ....................................................................................................................................... 12

3.2 INTERNAL MOTIVATION ............................................................................................................ 13

3.2.1 MASLOW NEEDS HIERARCHY ........................................................................................................... 13

3.2.2 VROOM’S EXPECTANCY THEORY........................................................................................................ 15

3.3 EXTERNAL MOTIVATION ............................................................................................................ 16

3.3.1 HERZBERG TWO FACTOR THEORY ..................................................................................................... 16

3.3.1.1 New Wage System .................................................................................................................. 18

3.3.1.2 Motivation and money in the private sector ......................................................................... 19

3.3.2 HACKMAN AND OLDHAM’S JOB DESIGN ............................................................................................ 19

3.4 SUM UP ................................................................................................................................ 21

4 LEADERSHIP ............................................................................................................... 21

4.1 THEORY ................................................................................................................................ 24

4.1.1 BEHAVIOURAL THEORIES ................................................................................................................. 24

4.1.1.1 ACV ......................................................................................................................................... 26

4.1.2 SITUATIONAL THEORIES ................................................................................................................... 27

4.1.2.1 Real life examples ................................................................................................................... 30

4.1.3 LEADERSHIP BY TRUST ..................................................................................................................... 31

4.2 SUM UP ................................................................................................................................ 34

5 PUBLIC AND PRIVATE SECTOR .................................................................................... 35

5.1 LEADING AND MOTIVATING ....................................................................................................... 35

5.2 CHALLENGES .......................................................................................................................... 37

5.2.1.1 Unimerco ................................................................................................................................ 38


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5.2.2 THE USE OF MONEY TO MOTIVATE ..................................................................................................... 39

5.2.3 MOTIVATION AND TIME .................................................................................................................. 40

5.2.4 FUTURE ........................................................................................................................................ 40

5.3 LEADING IN DIFFERENT SECTORS .................................................................................................. 41

5.3.1 WELFARE MANAGEMENT................................................................................................................. 43

5.3.2 NPM AND VALUE BASED LEADERSHIP ................................................................................................ 43

5.4 SUM UP ................................................................................................................................ 45

6 CONCLUSION ............................................................................................................. 46

7 DISCUSSION ............................................................................................................... 50

8 LITERATURE LIST ........................................................................................................ 53

9 ENCLOSURE 1 – ARTICLES NO MORE VIEWABLE ON THE GIVEN WEBPAGE .................. 57


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1 Summary

The society changes rapidly at the moment and this also means, that peoples wants, needs and ex-

pectations changes. This puts a pressure on the leadership and motivational aspect in the society.

Companies and organizations have to follow the trend and continue to follow the changes. These

changes give challenges both in the public and in the private sector and for Denmark to keep being

one of the best competitive countries in the world, a strong focus on leadership and motivation is

needed.

The purpose of the thesis is to answer the following problem statement:

1) What is the difference between leadership and management? Why is there a need to move from management to leadership?

2) What is the link between leadership and motivation in the public and the private sector?

3) What are the main challenges of increasing employee motivation for leaders in the public and private sector?

4) What are the current challenges in managing people in public and private sector and how can leadership and motivational theories overcome these challenges?

To answer these questions an examination of different theories within the concepts of motivation

and leadership has been made and furthermore seen in relation to the public and private sector.

Motivation and leadership are connected and are very important in our society. Motivation is what

drives us and what gets us up in the morning. It is the intrinsic factors which have an impact. This

means that in general people are motivated to work when they are passionate about their job and

satisfied. This is seen in relation to the feelings of being challenged, having meaning and getting re-

wards from the job. The concept of motivation has been gone through with the use of different theo-

ries such as Maslow’s Hierarchy of Needs, Vroom’s Expectancy theory, Herzberg’s Two Factor theory,

and Hackman and Oldham’s Job Design.

Leadership on the other hand, is what should create and increase the motivation. Therefore it can be

seen that there is a strong link between the two concepts and for it to be optimal, it should be a posi-

tive link. In this thesis, three aspects of leadership are looked at namely behavioural, situational and

trust. When talking about leadership, it is important to consider all of these aspects. It is not enough


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only to consider one or two of them. The behaviour has to be seen in relation to the specific situation

and furthermore the new concept of trust has also to be incorporated.

When having to lead and motivate it can sometimes be a bit difficult due to all the aspects that have

to be considered. It could moreover be argued that it is more difficult to do it in the public sector,

than in the private. The reasoning behind this is the different context the public sector is in, mainly

the relationship with the politicians.

The concepts of motivation and leadership have therefore been seen in relation to the two sectors

and how it is used in these sectors. How does it work and is there a difference in how it is used?

What was found was that there is a difference, and this is mainly due to the public sector’s relation-

ship with politics. This means a different control system, power system, impact on how fast things

can be done and changed and who decides what. This means that the private sector in some way has

more freedom to do what they want, opposite the public sector where everything has to be decided

by the politicians.


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2 Introduction

Now and perhaps more than ever, we have a need of good leadership and motivational methods. To

get through the financial crisis we are experiencing at the moment, a strong focus on these two con-

cepts has to be made. As of today in Denmark 2010, we are having the highest unemployment rate in

4 years of 4,4% (Epn, 2010, jan). In the latest years we have experienced an increase in firings and it

has become more difficult to get a job. This is a problem both for the newly educated but also for the

established career person who has been fired. Therefore especially in a situation of crisis, concepts

such as leadership and motivation are important. This does not mean that they have to be forgotten

when the crisis is over. Leadership and motivation are two of the most important concepts when

talking about a company being successful. The companies and organizations in the public and private

sector depend on having good leadership and leaders that are able to motivate in the right way.

In relation to the crisis, but also just in general to the changes in the society, there have come differ-

ent aspects or worries up to the surface, for people both in the private but also in the public sector.

This is also seen in relation to leadership and motivation. When time changes and the society is in a

crisis, there might also be a need for change in the leadership and the way the leaders are motivating

the employees. In organizations both public and private, the aspect of uncertainty has come up. This

has to do with all the firings and closed down companies. Many employees do not feel that they are

safe anymore in their job. According to Maslow’s Hierarchy of Needs, security is one of the lower-

level needs and for an employee to strive to the higher levels and perhaps in that way perform opti-

mal, the lower levels have to be satisfied (Brooks, 2009, p. 88-89). If people do not feel secure and

safe in their jobs, it will be a challenge to find a way to motivate and lead them.

The topic of leadership and motivation is interesting because it is very relevant and also very present

in the media. Through time the two issues have been much discussed and there is a lot of theory.

From the beginning, with the focus on theory, there were the traditional approaches which stated

that work was unpleasant and if paid enough, the workers would do anything. Money was the driving

force (Brooks, 2009, p. 81). Through time there have been some changes in the viewpoints and new

theory has come up, as new situations have come. This is also one of the things that make leadership

and motivation interesting issues because it is not static but new theory come up and new ways at

looking at things.

On the personal level, the issues of leadership and motivation caught my interest in the course of Or-


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ganizational Behaviour at BscB(IM). I found it fascinating that different methods and ways of leading

would give different result and is demanded in different situations. The same goes for motivation.

Different people need different motivation and different organizations use different motivational

methods. Therefore I find it interesting to see what the theory says and how it works in practice.

2.1 Problem Statement

This thesis is going to be a theoretical paper, discussing the issue of leadership and motivation seen

in relation to the public and private sector in Denmark.

The thesis will answer these questions:

1) What is the difference between leadership and management? Why is there a need to move from management to leadership?

2) What is the link between leadership and motivation in the public and the private sector?

3) What are the main challenges of increasing employee motivation for leaders in the public and private sector?

4) What are the current challenges in managing people in public and private sector and how can leadership and motivational theories overcome these challenges?

2.2 Limitations

The thesis will have its stand in the course of Organizational Behaviour and will have the focus on the

problem statement which will be answered in a theoretical manner with the use of description, dis-

cussion, setting things in perspective and making conclusions.

Since this is a theoretical thesis, I delimit myself from using primary data and literature such as per-

sonal research, interviews, questionnaires and the like. The thesis will be based on secondary data

and the problems will be looked at from a theoretical point of view. One of the reasons that I am lim-

iting myself from using primary data is because this kind of data is often time consuming and I do not

believe that for this kind of paper, there is enough time to really benefit from it.

Even though the financial crisis will be mentioned in the thesis, the thesis will not have an economi-

cal point of view but focus on the “softer” areas of leadership and motivation. Although we in Den-

mark have experienced the crisis for some years now, it does not change the fact that there is still a

need for leadership and also motivation and perhaps an even stronger need for good leadership and


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motivational methods in crises. People have been fired and therefore it is important to keep the em-

ployees motivated, especially when the job situation is uncertain.

Since leadership and motivation are broad topics, there are certain areas that I have delimited myself

from covering. When talking about leadership and motivation the aspect of culture would also come

to mind. In the world we live in today many companies and organizations are international or in

other ways have a mix of cultures. Therefore it is important to be aware of this and have it in mind

when you are a leader and need to find ways of motivating your employees. However in this thesis,

to narrow down the field, I have chosen not to focus on the culture in the organizations but see it as

one general.

Furthermore the thesis is seen in relation to the public and the private sector. When focusing on this

and looking at the differences and challenges, it will not be a one-to-one comparison. When doing

this, it can easily become very small and complicated and lead to other little areas which is difficult to

get out from again. Therefore it will be looked at in broader terms, however still with a clear indica-

tion of the differences in each sector. Moreover in connection to the public sector, the political as-

pect will be mentioned, however this aspect will not be a main focus and therefore it will not be ex-

plained in details.

In the thesis different theories will be used. This is theories both from the point of leadership and

from the point of motivation. Since leadership and motivation is very broad topics and something

that have been studied for many years, a lot of theories have been made and therefore not possible

or relevant to have all of them represented in this thesis. Some theories are also very alike because

they are built from the same basis and some built their theories further from others such as Porter-

Lawler from Vroom’s. I have chosen to deal with theories such as Maslow, which date all the way

back to 1943 and theories up till now, such as Leadership by Trust and Welfare Management. Theo-

ries that I have delimited myself from are among others the theory of Frederick Taylor and Scientific

Management and the reasoning behind this has been made under the heading “3. Motivation”. Fur-

thermore in the section of leadership I mention there are broadly three schools of thoughts; Trait

theory, Behavioural theory, and Situational theory. Here I have delimited myself from Trait theories

because it does not have the same kind of relevance as the others and furthermore the theory does

not give the full picture, only superficial (Brooks, 2009, p. 165).


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2.3 Definitions

Before beginning the main part of the thesis there are some things that has to be defined and ex-

plained so no misunderstanding will occur and everything will be clear from the start.

When mentioning the private sector it should be seen in its general form. When looking up the defi-

nition of the private sector, you can read that it is part of the national economy, which is made up of

resources owned by private enterprises. It is both dealing in the personal sector and in the corporate

sector (Business dictionary). Therefore when mentioning the private sector, it is not a specific area

or business which is being referred to. Furthermore when mentioning the public sector the same

goes. It is meant in its general form and when looking up its definition, it is part of the national econ-

omy which provides basic goods and services. It includes the national and local governments and

public corporations. Moreover the public sector is the largest sector of any economy (Business dic-

tionary).

Another word that might need some deeper explanations is the word of an employee. In the thesis I

will be using the word employee and this is meant in its general form. When talking about employees

I see it as a homogeneous group. This means that there is no difference when it comes to age, sex,

profession, job title, or anything in that manner. This is the case both in the public and in the private

sector. When focusing in more detail on one of these points, it will be stated explicit, e.g. a discussion

of age and motivation will be made and it will be clear that employees are differentiated according to

age.

Furthermore a definition of the concept fringe benefits is needed. In the thesis this concept has been

used in relation to motivation of employees. In connection to the thesis, fringe benefits are additions

to the basic wage. This could be bonuses for a job well done, medical insurance, pension, food/fruit

arrangement, free car, free telephone and stock option opportunities.

2.4 Methods and Structure

In relation to my thesis and to be able to answer my problem statement, I have a theoretical part

based on motivation and leadership with some examples relating to the theories from the public and

the private sectors. There will also be a more analytical part, which will connect the theories and re-

late them to the aspect of public and private sector. From this it will be possible be extract conclu-

sions and give fulfilling answers to the problem statement.


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I have chosen to show models when describing the different theories. The models in this thesis has

been made with the use of different sources and then drawn by myself. This gives the thesis a more

harmonious layout.

Within the motivational theories I have chosen to deal with the internal motivation and the external

motivational. Theories within internal motivation I have chosen to focus on are Maslow Hierarchy of

Needs and Vroom’s Expectancy model. These I have chosen because even though they are not the

newest theories, they still in one way or another count. Something might have changed, but it is still

the basic terms that these theorise introduced that is used today. For example what Maslow put in

his hierarchy is still relevant, however just rearranged, which will be seen later. Furthermore we have

all expectations. Especially today we have very high expectations and we expect that certain actions

will lead to certain rewards, which motivates you.

It is not only internal motivation that exist but also external. Here I have chosen to deal with the

theories of Herzberg and Hackman and Oldham. These theories have been chosen because they give

a good overview of the external factors that have an impact on motivation such as money, the job it-

self, responsibility and variety.

Moving into the theories of leadership I have chosen to focus on Behavioural theories, Situational

theories and a rather new theory built on trust. Within the Behavioural theories, I have chosen to fo-

cus on the Ohio State University Model and the model of Blake and Mouton. These have been cho-

sen because they give a good picture of the different kind of behaviours a leader can have and where

the focus of the leader is, whether it is more towards the people or more towards the production.

However the behaviour of the leader is not enough to understand a leader. The situation also has to

be accounted for. This is why Situational theories are important. One cannot look at a leader without

looking at the situation the leader is in. The theories that have been chosen in this context are the

theories of Hersey and Blanchard and the theory of Fiedler. These have been chosen because they

both state that the situation is important however they have different view on the flexibility of the

leader, which is quite interesting. Furthermore the models are rather good at simplifying and show-

ing what kind of leader there is needed in different kind of situations. Lastly I have chosen the theory

built on trust. This is a rather new theory, which is partly why I have chosen it. Things changes over

time and therefore theories made in the time we live in could have some interesting points. This is

the case with the theory chosen here.


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As can be seen from figure 1 of the structure, after having gone through the theories of motivation

and leadership, the thesis will more specific focus on the differences in the two sectors in our society.

This has mostly been done by extracting information from the two sections before and with informa-

tion from different articles related to the topic. In relation to the theory part of motivation and lead-

ership, mostly books and e-books have been used with articles supporting the examples.

Figure 1 – Structure of thesis

Introduction

Motivation

Internal

External

Leadership

Behavioural

Situational

Trust

Public and private

Leading and motivating

Challenges

Leading in different sec-

tors

Conclusion

Discussion


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3 Motivation

Motivation has been important for many years both in the personal life but also in the work life.

When looking at motivation from a psychological point of view, it is about achieving a goal, and lead-

ing towards goal-directed behaviour. In relation to the concept of motivation there are two aspects

present. The first aspect is the drive, which is an innate biological mechanism that determines ones

activity/instinct. It covers the biological needs, such as hunger. The other aspect is the motive, which

is an innate mechanism that is built and made personal by learning. Motives satisfy needs that are

not directly based on the requirements of the body, such as companionship. Motives can be used to

achieve greater satisfaction and stimulation (The Columbia Encyclopedia, 2008).

Since this thesis is about the public and private sector in Denmark it would also be interesting to see

what motivation means in relation to business. Therefore when looking up the word “motivation” in

a business dictionary, one gets this definition:

Source: Business dictionary 2

Motivation has many aspects. There is the internal and the external motivation. Within these two

concepts there are further sub points. In relation to internal motivation there are rational factors

such as expectation, self-confidence and goal management. Furthermore there are the irrational fac-

tors such as needs, qualities, and personality. Looking at the external motivation, there are the sub

points of job design, which account for motivations factors and job characteristic. The other sub

point, being economic and social factors, such as rewards, justice, and personally wages (Lægaard,

2008, p. 13). These aspects will be looked at in the next section of theory.

The effect motivation has on the behaviour of employees is that it creates a focus on specific assign-

ments, persons or topics that might be in question. Furthermore it creates energy, effort, and a de-

“Internal and external factors that stimulates desire and energy in people to be con-tinually interested in and committed to a job, role, or subject, and to exert persistent effort in attaining a goal. Motivation is the energizer of behavior and mother of all ac-tion. It results from the interactions among conscious and unconscious factors such as

the (1) intensity of desire or need, (2) incentive or reward value of the goal, and (3) expectations of the individual and of his or her significant others.”


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termination which creates more persistence. Lastly it affects the job, in the sense that the employees

will make plans for how the given job will succeed (Lægaard, 2008, p. 11). The effect motivation has

on people is why motivation has been and still is an interesting topic to focus on. Motivation is

needed in every aspect of life from the basics of getting up in the morning to the more specific of

getting a particular job done.

Throughout the years there have been a lot of different theories about motivation. It all started with

the traditional or the classical theories such as the Scientific Management, developed among others

by Frederick Taylor (1856-1915). The assumption behind this theory is that people act rationally in an

attempt to maximise the economic return to their labour. At that time it was believed that working

was not fun and something you would not chose if you had a choice. Furthermore the reason behind

people wanting to work was money. If people were paid enough, they would perform any job

(Brooks, 2009, p. 81).

This view on motivation is no longer valid or at least not the full view. It is outdated due to differ-

ences in the society but also more aspects have been found and motivation is no longer as simple as

that. This is what will be discussed in the next section. Here different theories developed after the

Scientific Management will be looked at and seen in relation to different aspects.

3.1 Theory

In this section of motivation the different theories that have been chosen will be discussed and ap-

plied to different real life examples. To begin with, a brief introduction of the background of motiva-

tional theories will be given. Thereafter internal motivation will be discussed with the use of

Maslow’s Hierarchy of Needs and Vroom’s Expectancy theory. A discussion of the external motiva-

tions will also be made. This is with the use of Herzberg’s Two Factor theory and the theory of Hack-

man and Oldham. The example of the New Wage system in the public sector will be given, followed

by a short discussion of the use of money to motivate in the private sector.

3.1.1 History

After the time of Frederick Taylor and the Scientific Management, came the time of more focus on

behavioural theories. Lots of the theories that we know today and have experienced in newer times

is developed out from the studies made by Elton Mayo, the so call Hawthorne studies from 1928-


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1943. The reason why he and these studies are important to mention, is that a lot of later studies are

build out from what was found at that time.

The study was carried out on Western Electric Company in California. What came out of the studies

were the experimenter effect and the social effect. What the experimenter effect did was making

changes and these changes were then seen as a caring and interest of the employees by the man-

agement and it gave a boost to the morale and productivity. What the social effect did was develop a

bond and a different kind of friendship then just colleagues, which also increased productivity due to

the special treatment (Scheuer, 2000, p. 44).

The Hawthorne studies most important result was the demonstration of the significant influence so-

cial relations had on productivity. This was a major step away from the Scientific Management and its

idea of the “economic man”. The interpretation of the Hawthorne experiments is the understanding

of the man as the “social man”. Therefore these studies and experiments formulated the concept of

Human Relations. Among others, Maslow and Herzberg were inspired by Mayo and the Hawthorne

studies in relation to Human Relations (Scheuer, 2000, p. 99-101).

3.2 Internal motivation

3.2.1 Maslow Needs Hierarchy

Within internal motivation an interesting theory to discuss, is the theory of the American psycholo-

gist Abraham Maslow (1908-1970), who came up with the Hierarchy of Needs in 1943. One might ask

why this theory is still relevant. It is after all 67 years ago and a lot have happened since. However

the basic ideas behind the Hierarchy of Needs are still present in today’s society. Perhaps just in a dif-

ferent order and/or having different importance to people. However to understand how the Hierar-

chy of Needs might look like today, a brief description of the original model is needed.

What Maslow came up with, was a set of needs that were ranked hierarchically in relation to satisfy-

ing motivation. Looking at the pyramid in figure 2a, we see the five steps. In the bottom there are the

basic needs and for a person to move up the steps, the step before has to be satisfied and fulfilled

(Brooks, 2009, p. 88-89). To say it in another way, it is only the unsatisfied needs that work as moti-

vation. Furthermore the needs have different meanings for people. This means that the hierarchy

should be used in specific situations and therefore the leader need to built the motivational behav-

iour out from the needs of the employees and not on the leaders own needs or interpretations of the

employees needs (Lægaard, 2008, p. 20).


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As seen from figure 2b, the pyramid has been put upside down. This has been done because this is

perhaps more what it looks like today, at least in the western part of the world and in the developed

countries such as Denmark. The reason for the upside down hierarchy is that, the basic needs from

the original model, has moved away from being a need and moved on to be something that is al-

ready present. It is something that is there and not something that is “needed”. The motive to work

today is no longer only income for consumption but it is the job in itself that is motivating (Christen-

sen, Ibsen, 2001, p 36). Therefore one could say that the needs for people in the society today begin

at the second or third level and upwards.

What people want from their job today is to be respected, valued, recognized, appreciated, grow as a

person, have status and success. This is what counts the most and therefore the pyramid is upside

down, so that these needs are represented with the largest space. Furthermore it can be seen that

the income do not count as much as before. The income (money) was the most important, when the

basic needs in the original model needed to be satisfied. However now that we have moved upwards

in the hierarchy, it is other things than income (money) that counts (Christensen, Ibsen, 2001, p. 37).

This is also what will be seen in the theory of Herzberg later in the thesis.

The idea behind Maslow’s model can be seen in other theories and in theories that are present in

2010. Some theories and models hav build further on Maslow’s theory and some have use different

aspects from the theory. This is why this particular model has been chosen and not models such as

Aldefer and McClelland’s (Brooks, 2009, p. 89-91). Later in the thesis, the use of Maslow’s theory will

be seen in examples related to people employed in organizations.


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3.2.2 Vroom’s Expectancy theory

This theory is important because it is a good tool for a leader and an employee to see which factors

are decisive, when it comes to choosing ones actions to get a specific outcome, whether intrinsic or

extrinsic (Christensen, Ibsen, 2001, p. 100). This is both important in the private and in the public sec-

tor. This can be seen especially in the public sector in Denmark with the New Wage system which

came in 1997. This is furthermore connected to the theory of Herzberg. Before going into more de-

tail about the New Wage system from 1997, a description of Vroom and Herzberg’s theory will be

made.

The Expectancy theory saw its light in the 1930’s and was another way to look at things. Vroom is

one of the well known names in the theory of motivation. Vroom continued developing from the

theory from the 1930’s and his theory, as we know it today, came out in 1964. This theory tries to

explain and predict the motivated behaviour. It is a framework which has different levels of motiva-

tion, performance, employee turnover and absenteeism, in addition to leadership effectiveness and

career choice (Brooks, 2009, p. 83). In Ian Brooks’ book the explanation is:

From this, the expectancy equation can be formulated: Motivation (M) = Expectation (E) x Valence

(V).

In Expectancy theory it is argued that the expectations of the humans are conscious and furthermore

the behaviour is directed by “subjective probability”. To say it in another way, it is the expectations of

one’s behaviour that will lead to a certain outcome. As the example in Brooks (2009, p. 83), when a

person works long hours, that person expects to get a certain outcome. Rationally the person will

behave in this way because the person would like to be promoted or get a higher wage in the future.

Furthermore the theory states that the equation will be different from person to person. Therefore

according to the theory, the motivation is only present if there is a connection between the prob-

“...the motivation to behave in a particular way is determined by an indi-

vidual’s expectation that behaviour will lead to a particular outcome, mul-tiplied by the performance or valence that person has for that outcome.”


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abilities of success, the expectations of rewards and that these rewards have a value to the person

(Lægaard, 2008, p. 14).

As stated above, the theory is based on conscious and rational thinking however we are human and

as it is well known, we do not always behave in a rational way and it is not always easy to find out the

precise connection between efforts, results and reward values (Lægaard, 2008, p. 14).

As mentioned, Vroom’s theory is connected to the theory of Herzberg. This can be seen in the way

that the wanted result can either be an internal reward or an external reward. More specific it is ei-

ther the satisfaction of doing the job (internal) or an increase of salary, promotion or recognition

from the leader (external). In Vroom’s theory the motivational aspect of income (money) is de-

pended on the individual person and what he/she prefers to have as a reward. When he/she knows

what kind of reward he/she wants, then they can take different actions to get the reward. Christen-

sen, Ibsen, 2001, p. 37-38).

Now that Herzberg’s theory has been mentioned a couple of times, a more thorough examination of

the theory will be made in the next section.

3.3 External motivation

3.3.1 Herzberg Two Factor theory

In 1968 Frederick Herzberg (1923-2000) came up with his theory of intrinsic and extrinsic rewards,

the so called Two Factor theory. This theory was based from the motivation in the workplace and is

able to show the influence of the factors on performance and job satisfaction (Brooks, 2009, p. 93).

The reason for this theory being mentioned is, that one of the things that this theory states is that

money do not motivate. This is something that has been and still is a debate about. Before going

more into depth about this, an explanation of the theory will be given.


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Figure 3 – Herzberg’s Two Factor theory

Source: businessballs

As can be seen from the figure above, Herzberg has shown two factors. The “motivaters“ and the

“hygiene” factors. The reasoning behind this theory is that the hygiene factors (left hand side), are

extrinsic factors. This means that it is influences from the outside that are affecting you. These hy-

giene factors do not give any motivation. The extrinsic factors will be dissatisfying if they do not live

up to the expectations by the people. On the other hand when they do live up to the expectations

and are satisfying, they will not give anything to be more motivated. Therefore the hygiene factors

have to live up to the expectations otherwise people will be dissatisfied. To give an example, one

could mention the salary. If one believes that the salary is too low for the effort they put in, they will

be dissatisfied, however if the salary lives up to the expectations, it will not necessarily result in more

motivation (Brooks, 2009, p. 94).

In figure 3 on the right hand side, the “motivators” are shown. These are the factors that will lead to

satisfaction and thereby motivation, also called the intrinsic factors. It is factors that are directly con-

nected to the work. If managers/leaders want to get the most out of their employees, fulfilling the

intrinsic factors is a good way to do it. Looking at the Two Factor theory and the Hierarchy of Needs,

one could say that the intrinsic rewards are the higher level needs in the hierarchy and the extrinsic

rewards are the lower level needs (Brooks, 2009, p. 94-95).

From Herzberg theory it can clearly be seen that this is almost the opposite from what Taylor stated.

According to Taylor money was the best way to motivate employees, where Herzberg states the

more or less opposite, that money do not increase motivation. Money can either effect negatively or

neutral in the long run.

Hygiene factors

•Status

•Security

•Relationship with subordinates

•Personal life

•Relationship with peers

•Salary

•Work conditions

•Relationship with supervisor

•Company policy and administration

•Supervision

"Motivators"

•Personal growth

•Advancement

•Responsibility

•Work itself

•Recognition

•Achievement


Page 18 of 58

However was Taylor, back in 1911, all that wrong when it is seen in relation to today? Is it as black

and white as Herzberg and Taylor make it to be or is there a gray? To find an answer to this question

one might look at the public sector. Even thought there is a lot of theory saying that money do not

motivate and there are other factors and tools that work better, then within the public sector the be-

lief is that money motivates. They are convinced that there is a positive connection between bonus,

allowance and increased motivation and that it is the key factor when it comes to motivating the

employees to make an extra effort (Christensen, Ibsen, 2001, p. 87, 101). This is among other things

what can be seen with the New Wage system in Denmark.

3.3.1.1 New Wage System

Back in 1997 in Denmark a New Wage system saw its light in the public sector. It is known that work-

ing in the public sector, it is perhaps more the job itself that counts and not the money. However the

New Wage system is very focused on motivating with the use of money and this might take the moti-

vation of joy for the job away and replace it with just working to get money. In the new system there

is a basic wage and for doing an extra effort there are different types of additions such as qualifica-

tion bonus, function bonus, and result-wage (Christensen, Ibsen, 2001, p. 44, 153).

In a study from Denmark there has been looked at whether bonuses motivates to do an extra effort.

What was found was that 62% of leaders believe that it motivates and 54% of employees believe so.

This is the majority however there are still 38% leaders who does not believe that it motivates and

46% employees (Christensen, Ibsen, 2001, p. 344). When looking at these percentages, one might

question whether money really does not motivate like the theory states. A fact that might contradict

this is when asked what motivates people most in the daily. The result was that it was not money. In-

stead it was the job itself and the work environment (Christensen, Ibsen, 2001, p. 355). Therefore

one might question why the public sector has chosen this method to motivate their employees. It

might be another way of copying the private sector where there are many different types of wage

systems, which gives personal bonuses (HK, 2009). This could perhaps also be interpreted from what

the ministry of finance stated about the New Wage in 1998. According to the ministry there were

two overall purposes with this new system; contribute to a larger effectiveness and quality in the go-

vernmental sector and create better work places, among other things to secure the opportunities of

recruiting and maintaining employees (Finansministeriet, 1998).


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3.3.1.2 Motivation and money in the private sector

Now that the public sector has been looked at, it could be interesting to see how the private sector

looks at money. It could be said that the private sector looks at money as a motivational factor rather

than a hygiene factor. At least there has for many years been a strong focus on money and the use of

money to motivate the employees. After all, it is from the private sector, that the public sector has

taken the ideas of the different kinds of ways to pay employees, such as the result based salary and

bonuses. Furthermore in the private sector there is a so called free formation of salary, which means

you have the right to participate in the setting of your salary (Krifa).

In the private sector the focus is on the end result and making money. Therefore they reward em-

ployees with extra money when making an extra effort and giving good results. In relation to the bo-

nuses there is no rule for how high they can be, and in the private sector some really exceptionally

cases has been seen. To mention a few there have been the case of Flemming Østergaard, former

president of Parken Sport & Entertainment, who in 2006/2007 got DKK 10,2 millions in salary as pres-

ident of the corporation and DKK 11 millions as a consultant (Politikken, 2010, 9. marts). Furthermore

in the Bank sector there are different examples of high salaries and bonuses also in relation to the

stock option opportunity they have (Politikken, 2010, 24. marts). Just to mention an example of a

salary, Peter Straarup, the director of Danske Bank, got DKK 8,6 millions in 2008. This was without a

bonus but pension included (Politikken, 2009, 5. feb).

3.3.2 Hackman and Oldham’s Job Design

Moving back to theory and to a theory, which is based on the theory of Herzberg, is Hackman and

Oldham’s theory. They wanted to give more details to the understanding of how job characteristics

are related to job satisfaction. Therefore they suggested five characteristics which have an influence

on the psychologically relationship towards the job. They suggested that there should be a wide

range of the use of the employee’s skills, the job should be meaningful and therefore the employee

should feel responsible for the job. Moreover the job should have some degree of positive influence

on others lives and welfare, the degree of freedom and independence when doing the job. Lastly

there is feedback, which works as the result for the employee (Lægaard, 2008, p. 26).

These five characteristics should have a positive influence on the three psychological states, which

they suggest to be experienced meaningfulness, experienced responsibility, and knowledge of re-

sults. This can all be put into a model which can be seen below in figure 4.


Page 20 of 58

Core Job Characteristics

Skill Variety

Task Identity

Task Significance

Autonomy

Feedback from Job

Critical Psychological States

Experienced Meaningfulness of the

Work

Experienced Responsibility for

Outcomes of the Work

Knowledge of the Actual Results of the

Work Activities

Outcomes

High Internal Work Motivation

High "Growth" Satisfaction

High General Job Satisfaction

High Work Effectiveness

Moderators:

1. Knowledge and Skill

2. Growth Need Strength

3. "Context" Satisfaction

Figure 4 – Hackman and Oldham’s Jobdesign

Source: Brooks, 2009, p. 105

As can be seen from the model, the outcome will be that the employees will be motivated and satis-

fied and they will experience growth and an increase in effectiveness (Brooks, 2009, p. 105). When

looking at these characteristics, one can see a resemblance to the intrinsic rewards of Herzberg. This

is of cause also due to the fact that Hackman and Oldham built their theory from the theory of Herz-

berg. Furthermore one might notice that in the theory of Hackman and Oldham, money as a “Core

job characteristics” is not present. Moreover the result is not based on being more satisfied by get-

ting more money. The belief behind the end result in this theory is in the same direction as Herzberg

and also Maslow. When looking at the top of Maslow’s hierarchy, in both the original model and in

the upside down model, it is more or less the same end result.

When looking at this model, one can see that it really fits the examples given under the theory of

Herzberg. As mentioned according to studies, people want to have variety in the job, have a job that

means something and have an impact on others, to follow it trough, yourself being in control of what

you are doing, and lastly you want to have feedback on your work, so you know you are appreciated.


Page 21 of 58

3.4 Sum up

With these four theories about motivation, similarities can be seen. They all point in the direction

that motivation should be something associated with intrinsic factors, such as the job itself, personal

growth, recognition, and the ability to keep advancing. None of these theories count extrinsic factors

as factors that are able to motivate. Extrinsic factors are referring to money in this situation. There

has been taken a distance to the theory of Taylor and the statement that money is the most impor-

tant form of motivation. However this is at least done in theory, another thing is what is done in real-

ity. As could be seen in Denmark with the New Wage system, the focus is on money when it comes to

motivating people.

Either it is the theories that do not want to see money as a motivating factor or else it is the sectors

both public and private that make it difficult not to count money as the reason why we work. It might

be more of a question of how much or how important money is, when talking about motivation seen

in relation to other factors. It was the majority in the public sector that answered that bonuses would

motivate them to do an extra effort. However when asked which factors that motivates them the

most in the daily, it was not money. Instead it was the job. It is having a diversified and independent

job, and having a good work environment. However in the private sector the focus from both the

leader and the employees is more on money. In the private sector it is more common to motivate

with a high salary or extra bonuses than in the public sector.

Therefore in relation to the theories described in this section, it can be said that in general, people

are motivated to work when they are passionate about their job. This also means that they are satis-

fied and this is related to the feelings of being challenged, having meaning, and getting rewards from

the job (Burke and Fiksenbaum, 2009).

4 Leadership

One cannot talk about motivation and then not talk about leadership. The two are interlinked and

when talking about one of them, you have to talk about the other. Both in the public and in the pri-

vate sector leadership is very important. There is always a need for someone to take a lead and lead

others. Otherwise things might not be done or perhaps it will be done, but not necessarily in a pace

or way that is wanted by everyone. Leadership is about getting things done the right way and to do

that, you need people. Furthermore to get people to follow you, you need to have them trust you.

And if you want them to trust you and do things for you and the organization, they need to be moti-


Page 22 of 58

vated (Baldoni). Therefore it is the leader’s job to constantly have their employees motivated and

that is not always easy. There are different factors depending on the outcome of the behaviour of a

leader and the motivation of the employees. In this section three theories has been chosen and they

are Behavioural, Situational and Trust based leadership.

The theories described in this section have been chosen because they give a good picture of the well

known theories that have been used for many years and also theories which are new and may, may

not be a better match for the time we are in now. However it will be shown that there is a basic un-

derstanding of what leadership is and how it should work. The issue is perhaps more whether it fits

entirely to reality and the time we are in or not.

To start up looking at what leadership is and how it works some different questions could be asked

such as; what is leadership? What is a leader? Is it the same as management and a manager? In Eng-

lish the word leadership and management have two different meanings. Both are used to represent a

person who has employees. In other languages such as Danish, we only have one word which broadly

can be translated to “leadership”. However in literature there have been made a distinction between

a manager and a leader from the English terms (Lægaard, 2008, org, p. 7-8).

In Brooks the definition of a manager and a leader is (2009, p. 163):

A further distinction is made by John Kotter (Kotter) who is a well known professor with focus on

leadership and change. He puts it up like seen below:

Management – makes systems of people and technology, work well day after day, week after

week, year after year.

o Planning & budgeting

“Managers perform functions in organisations and hold a particular, formal, title and/or

fulfil a role.” *

“Leaders, on the other hand, aim to influence and guide others into pursuing particular ob-jectives or visions of the future and to stimulate them into wanting to follow.”


Page 23 of 58

o Organizing and staffing

o Controlling & problem solving

o Taking complex systems of people and technology and making them run efficiently and ef-

fectively, hour after hour, day after day

Leadership – creates the systems that managers manage and changes them in fundamental

ways to take advantage of opportunities and to avoid hazards.

o Creating vision & strategy

o Communicating & Setting direction

o Motivating action

o Aligning people

o Creating systems that managers can manage and transforming them when needed to al-

low for growth, evolution, opportunities and hazard avoidance

Broadly the difference between the two is that management is for the short run and leadership is for

the long run. Furthermore managers seek to do things right, whereas leaders seek to do the right

things (Lægaard, 2008, org, p. 9).

The points that describe leadership and management are all important when having a company.

Therefore to be a good leader you need to have both good leadership and good management. To run

a company and have the optimal outcome, a mix of leadership and management is the best

(Lægaard, 2008, org, p. 9). The reasoning behind this can also be seen in the definition of manage-

ment and leadership by Kotter above. With leadership you have the visions and directions and by

combining with management you still have control and planning. This has become necessary in to-

day’s society which can be seen next.

As stated above a mix of leadership and management would be optimal. This also means that it is not

enough to manage. Then one could ask why it is not enough to manage? Why is there a need to

move over to more leadership? According to different persons within the field of management and

leadership there are good reasons why. According to Kouzes and Posner, employees look for leader-

ship instead of management because in the world today, employees want to be a part of what is go-

ing on in the company with decisions, planning, and evaluations. Furthermore according to Lynch due

to constant changes, there is a need for leadership and he even states that those companies or or-

ganizations who continue only to manage will have problems. So managers have to be able to lead as

well as manage. To elaborate on what Kouzes and Posner said, when managing you want to create


Page 24 of 58

order, stability, and make sure things run like they should with the use of control. However when

leading it is more as a sort of guide or helper who provide information, resources, trust, and have an

overview (Merrill associates).

When looking at the theories of leadership, there are quite a lot. There are broadly three schools;

Trait theory, Behavioural theory, and Situational theory. In the next section different theories within

Behavioural and Situational theory will be looked at and discussed. The reason behind not looking at

Trait theory has been argued for under limitations.

4.1 Theory

In this section of leadership the different theories that have been chosen will be discussed and ap-

plied to different real life examples. To begin with, the Behavioural theories will be discussed, with

the use of Ohio State University Model and Blake and Mouton with their Managerial Grid. Further-

more an example from the public sector will be given. Thereafter the Situational theories will be dis-

cussed, with the use of Hersey and Blanchard and their Leader Behaviour model and Fiedler with his

contingency theory. Here examples of different leaders in the private sector have been given. Lastly

there is the Leadership by Trust which is mostly based on the theory of Stephen M. R. Covey, who

has written the book “The Speed of Trust”. Here an example from a Danish bank has been given.

4.1.1 Behavioural theories

Behavioural theory focuses on the behaviour of the leader in relation to motivation of the employ-

ees. In the 1940’s and 1950’s, the Ohio State University found two types of leader behaviours. The

first one is “initiating structure”, where it is the “behaviour which focuses on the achievement of ob-

jectives and includes clear supervision and role clarification, planning of work and a results orienta-

tion.“ The second is “consideration” where it is the “behaviour which encourage collaboration and

focus on supportive networks, group welfare and the maintenance of the job satisfaction.” The Uni-

versity of Michigan found similar things at that time. In their findings they just call it “task” and “peo-

ple” orientations (Brooks, 2009, p. 167-168). The theory of the Ohio State University is shown in a

model below.


Page 25 of 58

Figure 5 – Ohio State University Model

Ohio State University Model

High

Low

Co

nsid

eratio

n

Less emphasis is placed on structuring employee tasks while the leader con-

centrates on satisfying employee needs and wants

The leader provides a lot of guidance about how tasks can be completed

while being highly considerate of the employee needs and wants

The leader fails to provide necessary structure and demonstrates little con-

sideration for employee needs and wants

Primary emphasis is placed on structur-ing employee tasks while the leader demonstrates little consideration for

employee needs and wants

Low High

Initiating Structure

Source: From class, Week 12 Motivation, management and leadership, Dias 27, made by Carsten Bergenholtz

From the model, it is seen that the best leader is one with high consideration and a high level of initi-

ating structure (Brooks, 2009, p. 167). Some of the same can be seen from another study by Blake

and Mouton in the 1960’s, called the Managerial Grid.

In the model of Ohio State University, it was stated that it was possible to identify the best leadership

style. This is where the theory and model from Blake and Mouton differs a bit. In their theory and

model there is no worst and best style. They state that no leadership style is best for every situation,

which means that as a leader you need to understand them all and use the different styles to the

right situations. However some leaders are from the beginning either very people oriented or very

task oriented or both. So either interested in making the employees feel good, wanting to set and en-

force schedules or setting schedules from the basis of the employees needs and wants (Mindtools).

In the model of Blake and Mouton, there are five leadership styles that can be pointed out, which can

be seen in figure 6 below. Two of the points in the model refer to another theory, namely the theory

of X and Y by Douglas McGregor. From the model it can be seen that “Produce or perish leadership”,

is where you have high focus on production and low focus on people. This is where the needs of the

employees come after efficiency and production. The leader is very autocratic. It is his way or the

highway. This is the same view there is on the X-type leader. On the other hand there is the “Team

leader”, where there is high focus on production and high focus on people. Here the two things are

equally rated. It creates an environment which focuses on team, thrust, and respect, which in the

end will motivate the employees and give high production. This is the Y-type leader (Mindtools).


Page 26 of 58

Figure 6 – Blake and Mouton, Managerial Grid

Blake and Mouton – Managerial Grid

High

Low

Co

nce

rn fo

r Pe

op

le

Country Club Team Leader

Impoverished

Produce or Perish

Low High Concern for Production

Source: From class, Week 13, Management and leadership, Dias 4, made by Carsten Bergenholtz

What this model can be used for, is for a leader to realize that there are different styles and help un-

derstand the different styles and the end result the different actions will give. Therefore leaders need

to understand, when focusing more on people, it is at the cost of production and vice visa.

4.1.1.1 ACV

To relate these theories to reality, an example will be given. This example is from the public sector.

Autisme Center Vestsjælland (ACV), has been elected as the best public working place in Denmark in

2009. This is a center for children, young and adults with behavioural problems and also in the form

of autism. The election has of cause something to do with the leadership and the style which is used

or at least how the leader wants it to be like. Relating to the behavioural theories in this case, the

goals, leadership politics and personnel politics have been looked at. As mentioned, this is a public

company and public leaders have had a tradition of being anonymous. This means that the public

leaders do not, like a lot of the private leaders, express personal opinion or show their personality to

the public (Ledelseskanon, 2008). Therefore instead of looking at how the leader behaves publicly,

the organizations different politics and goals will be analyzed.

From ACV personnel handbook, it can be seen that the leadership is mostly in the upper right corner

in both Ohio State University Model and in Blake and Mouton’s Managerial Grid. The statements in

the handbook, leads to the impression that the leadership is high in both Consideration/Concern for

People and Initiating Structure/Concern for Production. To give a few examples of the reasoning be-

hind this; in their goals they want visible leadership based on common values, trust rather than con-

Middle of

the Road


Page 27 of 58

trol, delegating responsibility and competence. From their leadership politics, guidelines for the

company has been given, such as developing clear goals, define structures and plans and having visi-

ble expectations to the employees. From the personnel politics, expectations for the employees are

given. A few examples which can be given are seeing themselves as part of the team, taking respon-

sibility, being loyal to the company and prepared to develop both professionally and personally.

From this it can be derived that, “The leader provides a lot of guidance about how tasks can be com-

pleted while being highly considerate of the employee needs and wants” (statement from Ohio State

University Model – upper right corner). Also as mentioned in connection to the “Team Leader” in

Blake and Mouton’s model, the “Team Leader” creates an environment which focuses on team,

thrust, and respect, which in the end will motivated the employees and give high production.

When talking about leadership it is not always enough just to look at the behaviours of the leaders.

The Behavioural theories have been criticized for being incoherence with situation or context. So be-

cause of this criticism the leadership behaviours were beginning to be looked at in connection with a

situation such as in an organization or another context (Brooks, 2009, p. 165).

4.1.2 Situational theories

Situational theories are about the development of employees through effective leaders. Therefore it

is the relation between the level of development of employees, the job, and the leadership style. A

very good model was developed by Hersey and Blanchard which shows this connection. The model

can be seen below (Hersey and Blanchard, 1996).


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Figure 7 – Hersey and Blanchard, Leader Behaviour

Leader Behaviour

High

Relationship Behaviour

Low

3 Share ideas and facilitate in de-cision making Participating

High Relationship

Low Task

2 Explain decisions and provide

opportunity for clarification

Selling

High Task High Relationship

Low Relationship Low Task

Delegating 4 Turn over responsibility for de-cisions and implementation

High Task Low Relationship

Telling

1 Provide specific instructions and

closely supervise performance

Low Task Behaviour High

Source: From class, Week 13 Management and leadership, Dias 22, made by Carsten Bergenholtz

As in the theory by Blake and Mouton, this theory also states that there is no best leadership style

(Hersey and Blanchard, 1996). This can perhaps also be interpreted by the title “Situational theory”.

It is the situations that decide which leadership style that is most efficient.

Like in the Behavioural theories there are two dimensions. In this theory it is called “Task” and/or

“Relationship” oriented. What Hersey and Blanched states, is that leadership style should be adapted

to the employees and thereby said, not what the leader feels most comfortable with or is used to.

Therefore whether the leadership is going to be successful, depends on the follower’s readiness,

meaning how able and willing the employees are. Moreover it can be said that leadership style can

be changed and therefore is flexible (Hersey and Blanchard, 1996).

From the model it can be seen that when the task readiness for the employees is low (R1), the leader

should focus on the task and not so much on the relationship towards the employees. However as

Follower Readiness

High Moderate Low

R4 R3 R2 R1

Able and will-ing or confi-dent

Able but un-willing or in-secure

Unable but willing or confident

Unable and unwilling or insecure


Page 29 of 58

the employees move more over to moderate task readiness (R2, R3), the more the leader should fo-

cus on the relationship than the task. When employees have a high task readiness (R4), the leader

can be low in both relationship and task because the employees are able to do the job without the

leader telling them what to do every minute. Here the leader just delegate instead of telling them

what to do (Hersey and Blanchard, 1996).

Another Situational theory is the theory of Fiedler. Back in the 1950’s, Fiedler was the first in the field

of contingency theory. One of the interesting reasons for talking about this theory and also in rela-

tion to the theory of Hersey and Blanchard is that where Hersey and Blanchard’s leadership style is

flexible, Fiedler’s is unchangeable or fixed. An interesting discussing would then be whether or not a

leadership style is changeable or not in today’s society. However before such a discussion a more de-

tailed examination of Fiedler’s theory will be given.

Figure 8 – Fiedler’s contingency theory

Fiedler’s contingency theory

Ch

aracteristics o

f

the

situatio

n o

r co

nte

xt

1 2 3 4 5 6 7 8

Leader-member relations: poor/good

G G G G P P P P

Task structure: struc-tures/unstructured

S S U U S S U U

Power positions: weak/strong

S W S W S W S W

Situation favourability Highly favourable situation

Average situation-al favourability

Highly un-favourable situation

Most effective leader orien-tation

Task oriented Relationship oriented

Task oriented

Source: From class, Week 13, Management and leadership, Dias 13, made by Carsten Bergenholtz

Above in figure 8, Fiedler’s model can be seen. From this model it is seen that the effectiveness is

determined by the behaviour of the leader and the situation. There are three situations that are

looked at and they are; the relationship between the leader and the member, whether the task is un-

structured or structured, and whether the power is weak or strong. Depending on this, the leader is

either task oriented or relationship oriented. What this model does is mapping the leader’s leader-

ship style. This means, if a leader is in a highly favourable situation then an effective leader is one

who is task oriented. This means that he/she already have good relations with the employees and

can therefore focus on the task. On the other hand if the leader is in an average situational favoura-


Page 30 of 58

bility, an effective leader is one who is relationship oriented. This also means that the relationship

with the employees is not the best and the leader needs to rebuild that relationship. The last situa-

tion is the highly unfavourable situation where everything is bad and therefore before concentrating

on relationship, the task has to be focused on and the situation has to be turned around.

What this theory states is that the leadership style cannot be changed, so an organization should not

try to change the leaders style or personality, but should instead chose leaders who fits the situa-

tion’s favourability (Brooks, 2009, p. 172).

What this means is that if the leader does not fit the situation any more, for example if the situation

have changed for the better or the worse, a new leader should be found, a new leader who fits the

new situation. However one might question whether this is always a good idea. Another question is if

the statement of the leadership style being fixed is correct or if it is changeable as Hersey and

Blanchard states. Where Fiedler believes that leaders (humans) have a somewhat stable view of hu-

man nature, which means that a leader is either task oriented or relationship oriented (Brooks 2009,

p. 172), Hersey and Blanchard believes that the most effective leader is a leader who adjust his/her

style to the situation and the needs of the employees (Hersey and Blanchard, 1996).

4.1.2.1 Real life examples

Perhaps one should not see it as black and white as that. Perhaps both of the theories are right de-

pending on the leader in question. Some leaders especially in the private sector have very strong

personalities and have a certain way of being and leading. To give an example of a leader that might

not change his style is the former president of “Parken Sport og Entertaintment”, Flemming Øster-

gaard. He is a very charismatic and controversial person and there has been a lot of debate about

him as a person. He has been called the godfather and he is seen as full of initiative and energy but

also a risk taker (Information, 2009). In his time as president of “Parken Sport og Entertainment”, the

company’s turnover has been increase more than ten times. However now the situation is another

and perhaps therefore a new leader is needed. Now it is believed that the capital is negative with

several hundred million Danish kroner (Politikken, 2010, 22. feb).

Therefore it can be seen that Flemming Østergaard, did not adjust to the new situation but stopped

being the president. He perhaps could not or would not change his style and others in the company

perhaps saw that a new leader was needed. This is what could be seen in the theory of Fiedler. A

leader cannot be changed so therefore a new leader has to be found who fits the new situation.


Page 31 of 58

Flemming Østergaard is not the only one in that situation. Other companies have experienced the

same. There are actually quite a lot of companies and organizations that have used the method of

changing the leader if the situation has changed. Most often it is when the situation has changed to

the worse. Other examples are B&O, which have had a rough time in the last years. Therefore in

2008, they got a new director to hopefully turn it around, Kalle Hvidt Nielsen. Last example that will

be given is the example of LEGO. In LEGO’s history there have been some ups and downs. Through

the down times the company have changed CEO a few times. The latest appointed CEO in LEGO is

Jørgen Vig Knudstrop in 2004. He was also hired because they had a new situation of a down turn,

which needed to be fixed and therefore they changed leader (Business, 2006).

From this one can see that it is most often the person in charge, the leader, who is replaced when

the company comes in a new situation. This is what Fiedler states but what about Hersey and

Blanchard? In reality is it possible to find leaders who change style so that it fits to the situations? An

answer to this could be that it is possible to find, however perhaps not when the situations are as

drastic as when the company or organization have big financial problems. Hersey and Blanchard’s

theory is perhaps more used in the daily. Meaning that depending on the employees and their readi-

ness, the leader should be able to handle different styles such as, Telling, Selling, Participating, and

Delegating. As also stated by Hersey and Blanchard (1996), to change a style is difficult and takes a

long time and it has to be done gradual. However this might be the problem, when companies or or-

ganizations are in big problems. These problems have to be dealt with right away and not when the

leader between 1-7 years has been able to change his/her style. This is too late and perhaps there-

fore it is needed that a new leader is found. What the theory of Hersey and Blanchard can be used

for is perhaps to get aware that they have to be able to have different style to lead, depending on the

employees they have.

These theories described until now are theories that are quite old. Therefore it would be interesting

to look at a theory, which is new and therefore can be argued as very present and based on the reali-

ty we are living in now.

4.1.3 Leadership by Trust

The most resent theories on leadership are based on trust. This concept of trust has arisen because

of the employees abilities to lead themselves. Employees today are very knowledgeable and de-

mands individual treatment and a certain degree of freedom. This also means that a tight control will


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in no way motivate the employees because tight control will only signal distrust from the leader. It

will be a great challenge and take a lot of trust for the leader to release the control. Vallentin et al.

believes that there are five understandings of leadership, Scientific Management, Human Resource

Management, Human Relation Management, Vision leadership, and Value based leadership. These

are the understandings that leaders today can consult, but according to Vallentin et al., these do not

give trust a chance. They believe that these leadership styles exclude trust. Therefore leaders most

think outside these understandings and incorporate trust (Vallentin et al., 2008, p. 40-41).

With the concept of trust in leadership, comes also the concept of self-management. Because the

employees are very independent and do not need tight control from the leaders, the employees be-

come self-managed. Therefore leaders are leading self-managed employees. Giving room to the em-

ployees to be self-managed, is a very good thing because this gives room for them to be innovative.

This can also be seen with the example of Goggle, Vallentin et al. gives. At Google the employees

have “20% people time” or the so called “Innovation Time Off”. This means that 20% of the em-

ployees working time, they can decide what to focus on and what they believe in and thinks is inter-

esting (Vallentin et al., 2008, p. 207-208).

However sometimes it can be difficult in organizations to incorporate trust because leaders of today

have their focus on the future and the future is uncertain. Furthermore according to Vallentin et al.

(2008, p. 39), leadership is still based on the idea of power and putting the leader in the position of

controlling, and this will in the end not give much room for any trust.

Another author who believes that trust is the foundation of a successful company, organization or

just life in itself is Stephen M. R. Covey, who has written the book “The Speed of Trust”.

Source: Covey, 2006, p. 6

“You can’t have success without trust. The word trust embodies almost everything you

can strive for that will help you to succeed. You tell me any human relationship that works without trust, whether it is a marriage or a friendship or a social interaction; in the long

run, the same thing is true about business, especially businesses that deal with the public” – Jim Burke, Former Chairman and CEO Johnson and Johnson


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In this quotation from Covey’s book, Jim Burke expresses that trust is everything and is needed for

anything to be a success. Having said that it is not under the best conditions, trust exits. According to

a study in different countries, people do not have that much trust in other people. Examples can be

given of Americans who only have 34% trusts in other people. In Great Britain it is only 29%. However

in Scandinavian countries it is 68% of people, who have trust in others (Covey, 2006, p. 11). When

people do not have trust in others, that of cause also counts in the business world and this will make

it more difficult for the concept of trust to become a way of leading.

However according to Covey, trust can do remarkable things. In his book he is in some way showing a

guide to implement trust and showing how important it is to have. As Covey explains, by having high

trust things will be done quicker and thereby also decrease the cost (Covey, 2006, p. 13). Covey’s

theory or model of trust is built from two concepts; character and competence. From this he has

made a model called the “5 Waves of Trust”. This model specifies the five levels that establish trust

and the model can be seen below (Covey, 2006, p. 33).

Figure 9 – 5 Waves of Trust

Source: Covey, 2006, p. 33

Trust is one of the most important things in life and therefore also in business life. It does not take

much knowledge to know that in a business situation, trust is extremely important. If you do not

trust your employees, your leader, your co-workers, partners, stakeholders and such, what kind of

business do you have?

Most, if not all companies and organizations, would agree that trust is important. Now more and

more companies and organization have also implemented trust. When looking at different web sites

for companies and organizations, the concept of trust is easy to find. Looking at a company, which in

Self Trust

Relationship TrustOrganizational TrustMarket TrustSocietal Trust


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2009 was chosen as Denmark’s best workplace in the private sector, we have Middelfart Sparekasse

(Greatplacetowork). With just a few clicks on their web site one can see that trust is very important

in this company. They have different statement such as, ”Trust before control” where they believe

the employees are responsible, want to do their best, not out to cheat and therefore there is no

need to control. Furthermore in Middelfart Sparekasse trust and respect is fundamental for both the

leader and the employees. In relation to the trust they show their employees, is also the concept of

self-management. Middelfart Sparekasse believes that this form of management is the right way for

them to work (Middelfart Sparekasse). It was also seen that ACV had the concept of “trust before

control”.

As mentioned, Trust based leadership is the new trend. It is said that trust would have a positive ef-

fect on the organization. However according to Martin Gargiulo, who is a Professor in Organizational

Behaviour at Insead, trust can also be damaging. In an article he states that you can have too much of

the good stuff. Gargiulo has with a colleague, done research the last 20 years on trust. What they

found was that too much trust can be direct damaging for an organization. Trust becomes a problem

when trust is excessive trust. All the positive effects there are with trust can easily become negative.

It becomes blind trust and this is the effect of loosening control and supervision due to a greater

trust to each other.

A consequence of too much trust is that the leader will look very positively on the employees work

and therefore the leader might not as quietly see problems with the performance of the employee.

This could in the end cause very big problems for the organization (Finans TV2, 2010).

4.2 Sum up

Even though the leadership theories described in the last section spreads from around the 1950’s

and up till now they are all, in one way or another, still relevant. The first theories of Behavioural

theories do not take into account the context or situations the leader is in. These theories are only

based on the behaviour of the leader. It is based on different orientations; concern for produc-

tion/structure oriented or concern for people/consideration. People have different behaviours and

therefore leaders will have different behaviours. We are not all going to act in the same way. In rela-

tion to a company what the Behavioural theories can be used for, are for the leader to be aware of

the different types of leadership that exists and figure out which one he/she is. When they know

want kind of leader they are, they will know what that will lead to and what the result will be.


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However it is not enough to just look at the behaviours. The situation in which the leader is in has to

be considered too. When taking the situation into consideration, it is a question whether a leader can

be in the company or organization, when the situation changes or not. According to Hersey and

Blanchard it is possible to change style depending on the situation, such as the employee’s readiness.

Depending on how the employees are, the leader should adjust to that situation, for the company to

be most efficient. The theory of Hersey and Blanchard could in some way also be seen in relation to

self-management which is mentioned under “Leadership by Trust”. When the employees are high on

“Followers readiness”, they are “Able and willing or confident”, which means that the leader has to

be delegating and turn over responsibility and decisions. This also means that there have to be a

great trust between the leader and the employees. Turning back to the Situational theories, in con-

trast to Hersey and Blanchard’s statement of the leader being flexible, there is Fiedler’s theory, which

states that leaders are fixed. If a company gets in a new situation, such as a financial down turn, the

existing leader cannot continue but a new leader with a different behaviour that fits the new situa-

tion has to take over.

As mentioned, self-management is a big part of Leading by trust. It requires trust to one another

when leading self-managed employees. Control has to be set aside and make room for trust. When

having high trust you increase speed and lower costs which is basically what every company or or-

ganization wants to do. However it should not get out of hand and become blind trust because it will

only create problems.

Now that the relevant theories to this thesis has been examined and seen from a organizational point

of view, more detail and analysis of how it relates to the public and the private sector will be given.

5 Public and Private Sector

5.1 Leading and motivating

Sometimes it can be difficult to figure out how to motivate employees. However looking at it from

another perspective, it might not be the “getting-the-ideas”, that is wrong but simple the leader who

is the problem. According to an article from Harvard Management Update, leaders do not have to

motivate their employees, but have to stop demotivating them. This can be seen in relation to some

interesting findings. In the research, 85% of the companies, the employee’s motivation declined after

half a year and would continue. This is of cause very interesting because when people start a new job

they are usually very eager and very motivated to do their best.


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Therefore what can be done from the leader’s side is to understand what motivates the employees.

What it is that the employees want and what is it they need? According to the study, what the em-

ployees want from their job is to be respected and fairly treated in situations such as pay, benefits,

and job security. Furthermore they want to be proud of their jobs, their accomplishments and of

their employer. Lastly they want to have a good relationship with their colleagues. Therefore to have

the optimal satisfied and motivated employee all these points have to be fulfilled (Sirota et al., 2006).

There are different ways and methods a leader can fulfil the employee’s needs and wants. It will have

a positive effect if the leader sets out a clear and inspiring purpose of the organization. To say it in

another way; it is important that the leader communicates the visions and missions for the organiza-

tion so that the employees feel there is a greater purpose with their work. Furthermore one of the

things that are on the top of motivational factors is recognition. When employees feel they are being

recognized, they feel that the leader cares and notice the good work they do. This will in the end cre-

ate effective and productive employees. In this relation, communication and feedback is very impor-

tant. This builds trust and respect in the organization. Moreover it is important for the leader to show

that he/she is involved with the employees and their work. When the leader is involved, listens to

employees’ ideas, and understand their needs, it will increase the quality of the work and it will have

a positive effect on the organization (Sirota et al., 2006, Oates, 2006).

As for the above stated, it is the leaders who are able to motivate the employees or as mentioned,

stop demotivating them. However as the above stated might be in general terms how does it really

look when going into the different sectors in the society. Both in the public and in the private sector,

it is the leader who set the framework at the workplace for the environment and options available.

However it is under different conditions in relation to the two sectors.

When looking at the public and the private sector, one cannot compare them directly. One cannot

say that one of them is more successful than the other one. They are built on different grounds and

have different purposes. However overall they have a shared want and need which is to make money

for them self and the society as a whole. Back in 2007/2008 in the Global Competiveness Report,

Denmark was one of the most competitive countries in the world (Lederne, 2007, 6. dec). This is of

cause a combination of our great public and private sector and the leaders and employees within

each. According to Teddy Jeppesen, leader of ACV, good leadership effects profit, efficiency, em-


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ployee well-being, absence due to illness, and employee flow. Therefore whether it is in the private

sector or in the public sector, a good leader should be present.

As mentioned, the two sectors are in different contexts which means, they do not operate in quite

the same ways. Could this also mean that there is different ways of leading and motivation? This is a

very interesting question when looking at the two sectors.

For some reason there has been and perhaps still is the view that the private sector work and func-

tion better than the public sector. According to Kurt Klaudi Klausen, who is a professor in public or-

ganization theory and leadership, this is one of the many myths there are about the two sectors

(Klausen, 2001, p. 16). This is also seen in relation to the leaders and in regard to motivation. As

stated by the president of FOA, Dennis Kristensen, the public sector has become a rubbish dump of

private management theories (Personaleweb, 2009). The reasoning behind this is that the public sec-

tor has looked to the private sector for methods and theories that work, and have applied those the

private sector has used. However that is not always optimal. To get to the point of the differences

between the public and the private sector, the biggest and most obvious difference is that the public

sector is connected to politics and the private sector is not. Because of the public sector being con-

nected to and control by politics, it can be argued that the same theories and methods, which are

used in the private sector, are not applicable to the public sector.

5.2 Challenges

The public sector has to follow the rules and demands, the politicians set and therefore the public

sector does not have the same kind of “freedom” as the private sector. This is perhaps one of the big

challenges for the public sector. When looking at the private sector and its possibilities to use and

implement different theories on leadership and motivation, they can just chose which one they be-

lieve works in their company and which they believe will motivate their employees the most. They

have no overruling power, but are individual companies who can decide within their own little area

which method to use. When looking at the different methods the private sector uses, there are many

examples to chose from. Beginning with the motivational theories, the companies values can be seen

through which methods they chose to motivate with. This can for example be seen with the company

Unimerco.


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5.2.1.1 Unimerco

When looking at a company such as Unimerco (Unimerco), they are a distributor and producer of

tool solutions and services within selected segments. To get a deeper insight of the company a few

details are given. They have approximate 600 employees and in 2008/2009 they had a turnover of

DKK 545 millions. In 2002 they were elected as the best working place in Denmark by the “Great

Place to Work Institute Europe” and since this institute started in 2001, Unimerco has been the best

industrial work place in Denmark. One of the reasons why they have come so high up on the list is

that, as they say themselves, ”they are a different kind of company”. What makes them different

than other companies is their unique share scheme, which means that the employees also become

joint owners. A whole 77% of the employees have bought ownership in the company. As they write

on their website it is a:

Source: Unimerco, (own translation from Danish into English)

Beside the part where the employees can become joint owners of the company, Unimerco also have

other methods they use, to increase employee motivation.

Studies have shown, when being healthy and exercise, it leads to greater satisfaction with the

workplace which then prevents absence due to sickness, stress and burnouts (Lederne, 2007, 26. aug

and 27 aug). What Unimerco offers is a fitness room which can be used any time and there is also a

physiotherapist available. Furthermore Unimerco supports clubs which the employees themselves

form such as gulf club, biking club ect. (Unimerco). What all of this does, is to create a community

spirit and at the same time keep the employees healthy and motivated. When linking this to the mo-

tivational theories, through the different social clubs and fitness room, the employees get a feeling of

belongingness (Maslow’s hierarchy). Furthermore by offering the employees to have a joint owner-

ship of the company, the employees feel a stronger sense of responsibility, and know what they want

to achieve (Herzberg). By this the employees will get recognition (Herzberg), but they will also have a

feeling of meaningfulness of the work, responsibility and knowledge of the outcome (Hackman and

”…suggestion of a new independent culture where the employees gets the opportuni-ty to become independent without the need to master all the business disciplines. They keep the community of a good workplace with great colleagues and at the same time experience the independent excitement, joy, and ownership interest.”


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Oldham), because the employees get feedback of how it goes in the company since they are joint

owners.

5.2.2 The use of money to motivate

These offers and ways to motivate employees are great ideas and initiatives done in the private sec-

tor. However it is not possible to do exactly the same in the public sector. As mentioned the public

sector does not have the same kind of “freedom” as the private sector. When looking at the public

sector and seeing it in relation to benefits, the public sector does not have that many possibilities

compared to the private sector. In the public sector the money has to be spent wisely and fair, oth-

erwise they will be in great trouble from the citizens, because it is after all their money. However in

the private sector these benefits are a natural part of the organization. So the difference of the two is

that, in relation to the public sector it is the taxpayer’s money, and in relation to the private, it is the

buyer’s money. However in the end, it is after all the same people who pay, just in different ways

(Klausen, 2001, p. 18-19).

When going through the theories, it was mentioned that economical incentive is not a motivating

factor but a hygiene factor according to Herzberg. That might be argued depending on the circum-

stances and in this respect whether it is in the public or private sector.

In relation to the public sector economical incentive might have a negative or a neutral effect in the

long run. This is due to the fact that many public employees are motivated by the socially oriented

ideals, meaning that they really want to make a social difference. Both leaders and employees place

great value in integrity, responsibility and devotion to the job. Furthermore a study has shown that

public employees are less interested in long working days and a high income, because it conflicts

with their own free time activities and family life. Therefore based on this, economical incentives

might not be the best way to motivate the employees. This is also what a professor from the Busi-

ness School BI in Oslo believes. He states that economical incentives are not necessary and worst

case scenario is that it will have a very negative effect, by ruin the employees idealistically motivation

(Epn, 2010, feb, Khojasteh, 1993).

The situation is then a different one when it comes to private employees. Here the professor from

Oslo argues that economical incentives are what are wanted by the private employees. These em-

ployees are driven more by the want of a high salary and they are willing to work extra (Epn, 2010,

feb). Therefore one could question whether money really is a hygiene factor and not a motivating


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factor, at least for some people. This could also have something to do with age. Throughout our lives

our needs and wants change. Perhaps at some point in our lives money is more motivating then

other points?

5.2.3 Motivation and time

Some studies have shown that time is very important when it comes to needs. In the study by Chi-

noy, it was discovered that as the employee grew older the needs changed. This is unlike the theory

of Maslow, since his theory is without relation to time. When taking time into consideration with

Maslow’s theory, it could be seen such that when starting on a career, employees would follow

Maslow’s hierarchy. However when getting older they would downsize their ambitions and goals.

This means they redesign their view on life and values (Scheuer, 2000, p. 106). This also means that

in relation to time, the young employees are more motivated by money, where older employees are

more motivated by time off work and better opportunities for further education (Epn, 2009, sep).

This is perhaps a statement that has not and will not change even though time changes. To look at

motivating and time from a different angle, besides looking at time in the term of age, it could be in-

teresting to look at time as in 20 years ago and now, in relation to the construction of the family and

motivation. 20 years ago it was not as important for both parents to have a great career going as it is

now. Today both the man and the woman want to have a career besides the children and family life.

However that does not leave much time for each other and the children. Therefore a motivational

factor could be to have the opportunity to get “time”. This means jobs which either are structured in

a way that gives more time than others or jobs that have a better flexibility. This could be one of the

motivational factors when choosing to work in the public sector. The public sector has a lot of jobs

that have a certain time to start and to stop, where the private sector have a lot of jobs that de-

mands longer working hours and where free time and working time are more mixed together. There-

fore in families today where both parents want to have a career, the public sector can use “time” as a

motivational factor and also as a means to recruit new employees.

5.2.4 Future

When looking into the future and looking at how to maintain employees, motivate them and recruit

new ones, fringe benefits are a big part of that. It has been shown that it pays off to spoil employees

because it motivates them and according to a study, the majority of employees experience fringe

benefits as recognition for their effort (Ugebladeta4, 2008, 1).


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As a futurologist, Anne Marie Dahl, says that once it was the machine, which was the most important

working tool which you had to take good care of. Now it is the employees who are the most impor-

tant tool and therefore Anne Marie Dahl says, that the oil on the “machines” in the future is coach-

ing, wellness, and health systems (Ugebladeta4, 2008, 2). Now that we know that fringe benefits are

the future, it has been shown that it especially counts for the young employees. This means that the

public sector has to figure something out, otherwise they will experience recruitment problems be-

cause the public sector cannot match the private sector and their fringe benefits. The reasoning be-

hind the difference of the older and younger employee, according to Anne Marie Dahl, is that the

older employees have the traditional approach to work, where they want to make money so they can

get home and live their lives. The younger on the other hand live their lives on the job. Through their

job they experience self-realization and identity. This is why they expect more than just salary be-

cause it makes them feel accepted and recognized (Ugeblandeta4, 2008, 3).

As can be seen, it is or at least will become a big problem for the public sector, and it is not easy to

see a clear solution to the challenge or problem. It is the tax payer’s money they have to spend on it

and this will mean an increase of taxes and that is up to the politicians. However what the public sec-

tor can do to compete with the private sector, according to a professor in economy at Roskilde Uni-

versity center, Bent Greve, is to make the public sector more attractive with a combination of job se-

curity, better personnel leadership, better supplementary training, and better career opportunities

(Ugeblandeta4, 2008, 3). Furthermore also focus more on the “time” as mentioned in the last sec-

tion.

From this, one can extract that the motivational theories still hold even though some of them date

some years back. People, and especially the young, want to feel recognized and achieve self-

actualization. What leaders therefore can do is to provide fringe benefits to motivate them and make

them more effective. However as mentioned, it is easier for the private leaders to make use of these

methods, than it is for the public leaders.

5.3 Leading in different sectors

According to Kurt Klaudi Klausen, being a leader in the public sector is more difficult, than being a

leader in the private sector. The reason for this is that the public context is far more complex than in

the private. Therefore public organizations cannot just copy theories and models that work in the

private sector and think it will be a success in the public sector. The public sector needs its own theo-


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ries and models which take account for the special context. The special context is among other

things the political control, bureaucratic control and regulations (Klausen, 2001, p. 103). This also

means that opposite the private sector, the public sector cannot totally make decisions alone. When

large things have to be decided, the politicians have to be in over it. Another point made by Klausen

is that when things goes well and when decisions and actions are a success, it is the politicians who

gets the credit. However when it goes bad, it is the public leaders who takes the blame for the bad

decisions made by the politicians. This will also create image problems because nothing positive is

said about the public sector and the leaders (Ledelseskanon, 2008). This will further create recruit

problems, which is an addition to the fringe benefit problems the public sector also have. It really

does not look bright for the public sector as to getting new and attractive employees. This is of cause

a big problem but Klausen (2001) suggests, that the public leaders should make themselves noticea-

ble and go out to the public and tell how well it works and give the public an insight of how the lead-

ers in the public sector are doing. This also creates role models like in the private sector.

One might argue that it is more difficult to be a leader in the public sector as Klausen (2001) has

done. However when leaders in the private sector have a company or organization, there is no mercy

if it goes bad. No one can help them and the company or organization will go down. This means that

the leader does not get a second change like in the public sector. When it goes bad in a public com-

pany or organization it does not necessarily go down. As long as it has political legitimacy, it can sur-

vive. However the public leaders still have to prove that they are cable of surviving and good visions,

employees and leaders are needed for that (Klausen, 2001, p. 20).

Since the private leaders can chose freely among exiting and developing theories, theories which are

mostly based on the private sector, what should the public leaders do, when it is not beneficial to use

the leftovers of these theories? Now the time has come for new theories to the public sector. It will

not come as a big surprise that it has been the politicians who have come up with a new way of ap-

proaching it. In November 2009, Denmark got a new centre for Welfare management. What this cen-

tre is going to do, is analyze which leadership tools are going to increase the quality in the welfare

area (UCC, 2010, 1). At the centre they want the theories and research to be in touch with the

leader’s everyday life because they want to have it more realistic and not just abstract theories. The

big challenge here is to find out want to have instead of all the regulations and documentations,

which have characterize the public sector for many years (UCC, 2010, 2). According to Lene Espersen,

(former minister of economic affairs, now minister for foreign affairs), the public leaders need special


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tools and furthermore she mentions that the start of this new centre is also a means to cut back on

the bureaucracy. A further initiative they have started in 2009 is the new master program in Public

Governance (UCC, 2010, 3).

5.3.1 Welfare management

In the last section Welfare management was mentioned. However what is Welfare management and

how does it fit with the public sector?

In 2007 the quality reform was agreed on. This reform was made to ensure better welfare for the cit-

izens, better conditions, and increased job satisfaction for public employees, who delivers the wel-

fare (Kvalitetsreform). Welfare management, according to FOA, is an alternative to management,

control and bureaucracy. As also mentioned before in the thesis, trust is very important and this also

counts here, therefore it is trust before control. This means that Welfare management is not just

administration but it creates welfare in a very complex public sector. Since there are limited theories

for management and leadership in the public sector, the establishment of the centre of Welfare

management, is used to research management and leadership in relation to welfare and leadership

in practice and different educational programs have been established (Velfærdsledelse, 2009, p. 8-

10). At this moment there are three universities in Denmark that offer educational programs such as

the master in Public Governance (ASB)

5.3.2 NPM and Value based leadership

When mentioning leadership style and method in the public sector, it would also be in its place to

briefly mention New Public Management (NPM) and Value based leadership. It can be argued

whether they are still used and still relevant. The two concepts have been around for a long time and

have had a great impact on the public sector. The reasoning behind only introducing these two con-

cepts briefly and not using them as main theories in the thesis is due to the fact of relevance and the

time the Danish society is in at the moment. They are however still relevant to the point of introduc-

ing because a connection to new leadership styles (Welfare management) is present.

In the next sections a short introduction of NPM will be made and thereafter a short introduction of

Value based leadership. Last there will be a discussion of the two and their relevance.

As mentioned before in the thesis, a lot of the theories the public sector uses have been taking from

the private sector. In the case of these two concepts it is no exception. NPM was introduced in


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Denmark in around 1983, when the government wanted to make the public sector more modern.

This meant they took a lot of control and leadership tools from the private sector. The idea of NPM

was to increase efficiency and have better quality (Tidsskriftetpolitik, 2008). This was also what hap-

pened because with the introduction of NPM, came new responsibilities and demands for leaders.

The public sector became more service orientated, got more user influence, increased productivity

and efficiency, more co-responsibility, and the leadership became more visionary and strategic. Fur-

thermore some of the key argumentations in NPM were that it was possible to take theories and

principles from the private and put into the public sector in relation to marketization, organizational

and managerial (Klausen, 2001, p. 43-57). The term NPM is an overall name for all the reforms that

have taken place and still takes place. The quality reform, which introduced the New Wage system,

can be mentioned among many (Tidsskriftetpolitik, 2008).

Value based leadership came approximately at the same time as NPM. This concept however focuses

on value control instead of market control which was the focus of NPM. What Value based leader-

ship is about is to create meaning through interpretation of reality. It is the internal values of the or-

ganization and the values of the individual person. In relation to this, trust is also an important word

because to move away from hierarchy and rule control, you need to have trust. With Value based

leadership you create a common platform, identity, vision and mission. This creates a common obli-

gation or said in another way a psychological contract. It is also connected to motivation. This is in re-

lation of employees feeling a commitment towards the work community. It can create motivation

because you are driven by a desire to work, a mutual trust relation, a loyalty towards your colleagues

and workplace. By this you get conscientious at work and an ambassador outside work (Klausen,

2001, p. 200-201).

It is possible to see the good intensions with these two concepts. There is nothing wrong in wanting

to make the public sector more modern with increased efficiency and better quality, and have the

organization and employees controlled by common values. It might have been the right thing to do

at the time, however with changes in the society and new knowledge it might not be so relevant an-

ymore. In relation to NPM, even though it has existed for 25 years now, it is not the same as saying

that it still works. In the past years there has been an increase of critique against NPM. This is related

to the amount of report, evaluations and documentations. The system has become too focused on

control, where it should have been on leadership and trust (Fokus-net, 2010). The same can be said

for the Value based leadership. Even though they wanted to move away from the concept of control


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and be more focused on the values, a new control system was created also with a lot of documenta-

tions, namely the ethical account (Klausen, 2001, p. 205).

Finally, one could be tempted to say that the public sector has understood, that taking theories and

principles from the private sector does not equal success, but they have to come up with their own

theories and principles that fit their exact situation. This can be seen with the initiative of the Wel-

fare management. One might say that Welfare management has been created out from NPM and

Value based leadership, where the bad has been tossed and the good has been built further on, such

as the concept of trust.

5.4 Sum up

Denmark is one of the most competitive countries in the world and this is due to our effective and

productive sectors. The private and the public sector contribute in their own way. This also means

that one cannot compare the two sectors. They have different backgrounds and different higher

powers they have to be accountable for. In the private sector each company or organization can do

whatever it wants without having to ask “permission”. However the public sector does not have the

same freedom. They have to ask “permission” and do what they are told because they have to be ac-

countable for the politicians and the general public.

From this one might argue that it is easier to lead and motivate in the private sector than in the pub-

lic. A private leader has only the pressure from themselves, where the public leader has pressure

both from themselves, the politicians and the citizens. Because of the different context of the public

sector, it has had some difficulties with having the right theories and methods. They have used what

the private sector have used and tossed out and this has not always been a great idea.

In the area of motivation, the public sector does not have the same opportunities as the private sec-

tor has. The private sector has more different kind of ways to motivate their employees. It is just up

to their beliefs, values and how much money they are willing to spend. As mentioned with different

examples, the private companies can have stock options opportunities, provide healthier way of liv-

ing such as fitness, fruit arrangements, and furthermore provide fringe benefits that make people at-

tracted to the sector and keep them and motivate them.

To the same extent is not done in the public sector. It is the politicians who decide how much money

the sector gets and how it should be used and the money has to be spend responsible and to the

benefit of the citizens. However spending money on the employees in the public sector would in the

end also affect the citizens because by having happier, more satisfied and motivated employees, they


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will provide a better service to the citizens. So knowing that the public sector will have difficulties re-

cruiting new employees and that fringe benefits are what the new young employees want, perhaps

the public sectors has to really consider changing something.

In some way the politicians have realized that something has to be changed. A need to move away

from NPM and Value based leadership. Therefore they have now introduced the concept of Welfare

management which should ensure better welfare for the citizens, better conditions, and increased

job satisfaction for public employees who delivers the welfare. Another thing that the public sector

has to change and which they can copy from the private is the communication to the general public.

The private leaders are much better at expressing their opinions and using the media to get positive

publicity.

6 Conclusion

The purpose of this thesis was to uncover the aspects of motivation and leadership in the Danish

public and private sector. In the society today it is important to have motivated employees and have

a good leader, who is able to keep motivating them and able to both lead but also manage. To un-

cover the questions in the problem statement different theories have been studied in the two sec-

tions of motivation and leadership. Thereafter they have been seen in relation to the public and the

private sector and conclusions have been drawn.

In the problem statement four questions were asked to see how leadership and management work

in relation to the public and private sector. Throughout the thesis these questions have been an-

swered and have given a picture of how it works in the two sectors. In relation to the first question of

the differences in leadership and management, it was seen that leadership and management is two

very different things and cannot be merged into one word like we have in Danish. The overall differ-

ence of the two concepts is the time frame. Management is for the short run and leadership is for

the long run. This also means that there are different ways of handling things. In the short run it is

the daily work that has to run smoothly, such as the planning, budgeting, organizing, and controlling.

When looking at the long run, it is the broader picture which is important such as the vision, strategy,

giving direction and motivation. What leadership is doing is making managers able to manage and

transform them, give room for growth, evolution, opportunities and hazard avoidance. The optimal

leader is therefore one who is able to management in the short run and lead in the long run. The rea-

son behind the increased focus on leadership is that there are constant changes and this creates a


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need for clear visions and strategies. If you only look at day to day basis and not take the whole into

account, you will not get far.

The next aspect wanted to be answered, was about the link between leadership and motivation in

the public and private sector. It is almost impossible not to touch upon the point of leadership when

talking about motivation and also the other way around. In a company or organization, it is important

to have motivated and engaged employees who are willing and able to work and give their best. The

employees are the resources of the companies today and therefore they need to be motivated and

satisfied. However it is not up to the employees to motivate themselves and find ways so that they

become satisfied. This is a job for the leader. It is the leader’s job to make an environment and a

framework where the employees get motivated. Therefore it has to be a positive link between lead-

ership and motivation. One can express it as a vicious circle in the sense that, if the leader is not good

enough, one who is able to both lead and motivate, the employees will not do their best and give an

extra effort. This will then give bad results for the company and the leader will get fired and if the

next leader is not able to make things right, it will just continue or stop if the whole company goes

down.

This also indicates that there are some challenges when it comes to increasing employee motivation

for leaders in the public and private sector. Since the two sectors are different in how they are built

up, they also have different challenges. The public sector perhaps having more challenges than the

private sector, or at least have certain constraints that the private sector does not have. What can be

said for both sectors is that motivation is not the same for every person. People require different

ways of being motivated and this has to be taken into account by the leader. Not everybody wants to

reach self-actualization, some are perhaps happy if they have they belongingness and love needs

covered, in relation to the theory of Maslow. Furthermore people have different expectations and

therefore also want different results in relation to Vroom’s theory. Therefore a leader needs to know

the employees and know what they want, to be able to set the right framework and thereby moti-

vate in the right way.

Now it comes to the actions which can be made in the two sectors and here is where the real differ-

ence exits. In the private sector the leaders can chose freely between all of the opportunities which

are available to them. It is only themselves who sets the limit. They can, as was the case of Unimerco,

make the employees joint owners with the use of stock options or offer fringe benefits such as fit-


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ness, health care systems and food systems and so on. There are no limits. However when it comes

to the public sector, it is another story. Here there are limits. The public sector cannot choose freely

because they have the politicians, who are providing them with money and decides how much

money they get and what they should be spent on. This means that there is not much room for fringe

benefits. However fringe benefits are the future and the new way of attracting new employees. The

public sector will have a hard time recruiting new and young employees if they do not in one way or

another incorporate these benefits.

Furthermore there are challenges when managing people in the public and private sector. There are

a lot of things a leader has to keep in mind when managing and leading employees. It is important for

the leader to know what kind of leader he/she is and thereby said which behaviour he/she has. By

knowing this, the leader will know whether the focus is mostly on the production or more on the

people. This is not enough to look at alone and therefore the situation is central. When taking the

situation into account, it is still focusing on whether the behaviour is based on people or production.

However it is also seen in relation to the employees and their readiness. So depending on the em-

ployees, the leader can change his/her leadership style. However this might be easier said than done.

Not everybody is able to change their leadership style and this will lead to replacement of the leader,

so that the new leader fits better to the situation. Furthermore whether you are a leader in a public

or a private company, trust is essential. For a leader to manage and lead with success, trust is

needed. Employees today are very independent and like when they are trusted to do the job and not

be controlled all the time. Employees of today have become more self-managed and this means that

trust needs to replace control. This is not a bad thing. With trust comes increased speed and all in all

decreases costs.

This brings us to the point of how leadership and motivational theories can overcome the challenges

there are in both the public and the private sector. By the theories available, it is possible to see what

works and in which way. With the theories of motivation it is possible to see what motivates and

what does not motivate. This information can be used for the leaders to set the right framework to

have the optimal motivation. So by knowing that self-actualization, responsibility, a good work envi-

ronment and the job it-self is of high value when it comes to be motivated, it is possible to offer the

right things to achieve that, such as fringe benefits. It is however not always that these theories are

used. In the case of the public sector it might look as if money is a motivational factor and not a hy-

giene factor, with the New Wage system from 1997.


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In relation to the leadership theories, according to the behaviour of a leader and existing situation, a

match can be found and thereby the optimal leader chosen. Furthermore the theories tend to follow

the trend in the society and therefore it is a good idea to keep an eye out for what is new and

thereby also what the employees and the society needs. As mentioned people have become more

self-managed and this gives a challenge for the leader to give up some of their control and rely more

on trust and here leaders can use the theory of trust and the different initiatives that has been made

in the area. This applies both in the public and in the private sector. However it might be more diffi-

cult to lose the control in the public due to the specific context and the bureaucracy. As the public

sector has discovered, they need different theories and methods than the private sector. They have

moved from the concepts and theories of NPM and Value based leadership. This has lead to the the-

ory of Welfare management and programs to educate leader to be public leaders, such as the new

master program in Public Governance.

We are in a time where things changes rapidly. This also means companies and their structures and

focus changes rapidly. Therefore it is important for companies and leaders to be aware of the

changes and be aware of the theories and methods that work in the specific situation. It is therefore

not possible to compare the two sectors. They are in two different situations with different condi-

tions. Even though they have a shared mission of making money and serving people, it is done in dif-

ferent ways and under different conditions. The private sector does not have a power over them to

help, if experiencing a crisis. Furthermore they do also not have a power that can control them and

decide which actions to take.


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7 Discussion

In the Danish society the public and private sector have developed a lot. This has something to do

with the change in the society and with new knowledge on areas such as motivation and leadership.

In the beginning there was more or less only one way to look at things and that was the Scientific

Management, developed among others by Frederick Taylor. It was the idea of the “economic man”,

where work was believed not to be fun but something you had to do and if paid enough, people

would perform any job. We have come a long way since then. Now we do not just see employees as

labour or “tools” to get a job done but also as “real” people. Through time many theories have been

developed to improve production and this has also meant looking at the employee as a person, who

has to be taken good care of, just like the machines back in the days was taken care of. Now the em-

ployees are the most valuable asset and resource a company can have.

The development of theories has especially been seen in the private sector, since this is where most

research has been done. However in the past years an increased focus on the public sector has been

made. In the private sector, they have been able to decide which theories and methods that they

want to follow, and through time the private sector has kind of followed the trends which were pre-

sent in the society. Up till now the public sector has just copied the theories which have worked best

in the private sector and incorporated them. However they have realized that this is not optimal.

Even though the public sector has moved from a very bureaucratic structure to a less bureaucratic

structure, there are still areas which have to be improved. Therefore it is a good thing that they have

come up with Welfare management and offer education of Public governance. It will be interesting

to see what kind of theories will be developed and how they differ from the present ones and the

ones used in the private sector.

Another thing that would also be interesting to follow in the future is the way the public sector and

also to some extent the private sector, will deal with the control issue and the recruit problem of the

society. In the private sector the concept of self-managed employees are becoming more and more

popular. It is perhaps not possible for the public sector to have self-managed employees at the same

extent as the private sector, however the concept and thought behind, would be something that the

public sector could look more into and built it more around trust than control. Furthermore the new

generation of future employees is a very small one compared to the generation before and therefore

there will be great competition between the public and the private sector. This demands new attrac-

tive ways and offers to persuade the new young employees.


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In the past years, there has also been a stronger focus on co-operation between the public and the

private sector. It could be argued, that once the two sectors was two separate bodies but now they

have moved closer to each other and have interaction also beyond the aspect of the public outsourc-

ing to the private. 15 years ago this was more or less the only interaction the public and private sec-

tor had. However there exist other types of co-operations, which could advance competition and in-

novation. This could for example be joint companies or actual public-private partnerships (Lars Jo-

hansen) and also public-private innovation co-operation, which is meant as a co-operation between

public and private companies in preparation for new thinking and development of public solutions

(FTF, 2009). The advantages of using these types of co-operations are that it gives opportunities to

further develop on existing services and develop new and also increase innovation. It is a good way

to use the competences from each sector in a co-operation (Lars Johansen and Finansministeriet).

Furthermore the world is getting smaller and smaller in relation to globalization. This has and will al-

so affect Denmark and the public and private sector. This gives challenges to the leaders. Now the

aspect of multicultural leadership has to be focused on. More and more companies outsource or

have businesses in other countries and this demands having knowledge of different cultures. Fur-

thermore people with different cultures than our own come and work in Denmark and in the Danish

companies and this also demands a focus on multicultural leadership. The leaders need to under-

stand the different cultures, to be able to lead and also motivate in the most effective way. Cultures

differ and therefore people are not motivated by the same things and perhaps need to be managed

in a different ways. This is one of the more important aspects that companies have to focus on both

in the private and in the public sector in relation to globalization.

Other aspects that could be interesting to look at in relation to the topic of this thesis are the con-

cepts of Change management and Empowerment. At the moment these two concepts are very rele-

vant because the society changes rapidly and employees are becoming more and more self-

managed.

Modern organizations are dynamic and in constant movement. What Change management does is to

connect the expected and the wanted change and the feeling of safety within the employees (Leder-

web, 2008). You cannot avoid changes and therefore you might as well realize that it will happen and

be prepared. Besides Change management, the concept of Empowerment has shown to be an impor-

tant one and one that demands focus. It can be seen as being in the same direction as self-


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management. According to Blanchard, Carlos and Randolph, Empowerment is the engage-

ment/involvement, ownership, responsibility and pride. Therefore Empowerment is important for

companies, who wants to be competitive today and in the future (Blanchard, Carlos and Randolph,

2008, p. 6-7). So by Empowerment the employees feel engaged and have pride in their job which

means they will do an extra effort for the company. The employees will become a kind of ambassa-

dor for the company which will have a positive effect.


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Vallentin et al., 2008: Steen Vallentin, Niels Thygesen, Sverre Raffnsøe, Tilliden og magten,

Om at lede og skabe værdi gennem tillid, Børsens Forlag, 2008

Velfærdsledelse, 2009: Velfærdsledelse, Seks indlæg om offentlig ledelse - dokumentation fra

en offentlig høring, 2009,

http://www.ucc.dk/public/dokumenter/Om%20UCC/Nyheder/VelfaerdsledelseSep09.pdf

http://www.ucc.dk/omucc/aktuelt/magasin/nr.1-februar2010/nytcenterskalstyrkeoffentligledelse.html

http://www.ucc.dk/omucc/aktuelt/magasin/nr.1-februar2010/nytcenterskalstyrkeoffentligledelse.html

http://www.ucc.dk/omucc/aktuelt/magasin/nr.1-februar2010/32502.html

http://www.ucc.dk/omucc/aktuelt/magasin/nr.1-februar2010/32499.html

http://www.ugebreveta4.dk/2008/200836/Baggrundoganalyse/Frynsegoder_skaber_oeget_ulighed_paa_arbejdsmarkedet.aspx

http://www.ugebreveta4.dk/2008/200836/Baggrundoganalyse/Frynsegoder_skaber_oeget_ulighed_paa_arbejdsmarkedet.aspx

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http://www.ugebreveta4.dk/2008/200836/Baggrundoganalyse/Frynsegoder_skaber_oeget_ulighed_paa_arbejdsmarkedet/Unge_skal_lokkes_med_frynsegoder.aspx

http://www.ugebreveta4.dk/2008/200836/Baggrundoganalyse/Frynsegoder_skaber_oeget_ulighed_paa_arbejdsmarkedet/Unge_skal_lokkes_med_frynsegoder.aspx

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Page 57 of 58

9 Enclosure 1 – Articles no more viewable on the given webpage

Præstationsløn kan undergrave idealisme Offentliggjort 09.02.10 kl. 17:00 Mange offentligt ansatte er idealister, der brænder for at gøre en samfundsmæssig forskel.

Den drivkraft risikerer man at sætte over styr, hvis man indfører økonomiske incitamenter, lyder det advarende fra professor Rune J. Sørensen fra Handelshøyskolen BI i Oslo.

Han forklarer i en artikel på handelsskolens hjemmeside, at forskningen viser, at der er noget om snakken, når det siges, at offentlige ledere er mere motiveret af samfundsorienterede idealer end ledere i private virksomheder, som i højere grad drives af ønsket om mere i løn-ningsposen

"Empiriske studier giver støtte til denne opfattelse. Både ledere og ansatte i den offentlige sektor lægger mere vægt på værdien af organisationens resultater for brugere og samfund. Offentligt ansatte værdsætter i større grad integritet, ansvar og opofrelse i arbejdet, mens ansatte i private virksomheder mener at høj personlig indtægt er vigtigere."

Det er dog ikke ensbetydende med, at de offentligt ansatte føler stor loyalitet over for deres organisation. I modsætning til ansatte i private virksomheder, som ofte er villige til at give den en ekstra arbejdsmæssig skalle, så viser interview-undersøgelser, at offentligt ansatte er mindre interesserede i lange arbejdsdage og en høj indtægt, fordi det går ud over fritidsinte-resser og familieliv.

På den baggrund mener professoren, at økonomiske incitamenter bør undgås i den offentli-ge sektor, da de ikke er nødvendige for at motivere de ansatte. I bedste fald vil de kun have beskeden effekt på arbejdsindsatsen og i værste fald kan de virke ødelæggende for de of-fentligt ansattes idealistiske motivation. Han påpeger dog, at den svagere loyalitetsfølelse hos de offentligt ansatte taler for, at man bruger en eller anden form for incitamentsystem.

Kilde: www.bi.no

bscb(im) 6 semester bachelor thesis author: rikke krogh...

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