leadership and organizational change notes

8/3/2019 Leadership and Organizational Change Notes

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CHAPTER 1: The Nature and Importance of Leadership

CHAPTER OUTLINE AND LECTURE NOTES

I. THE MEANING OF LEADERSHIP

To be a leader, one has to make a difference and facilitate positive changes. Leaders inspire andstimulate others to achieve worthwhile goals. A useful definition ofleadership is the ability to

inspire confidence and support among the people who are needed to achieve organizational

goals.

A. Leadership as a Partnership

A current perspective on leadership is that it constitutes a partnership, being connected to

another in such a way that the power between the two is approximately balanced. Partnership

occurs when control shifts from the leader to the group member. According to Peter Block, a

partnership involves (a) an exchange of purpose, (b) the right to say no, (c) joint accountability,and (d) absolute accountability.

B. Leadership as a Relationship

Leadership is a relationship between the leader and the people being lead. Research indicates that

having good relationships with group members is a major success factor for the three top

positions in large organizations.

C. Leadership Versus Management

Leadership is but one of the four major functions of management (planning, organizing,controlling, and leading). Leadership deals with change, inspiration, motivation, and influence.

In contrast, management deals more with maintaining equilibrium and the status quo. Table 11summarizes these differences. Despite these distinctions, organizational leaders must still be

good managers, and effective managers must also carry out leadership activities.

II. THE IMPACT OF LEADERSHIP ON ORGANIZATIONAL PERFORMANCE

An important justification for studying leadership is that leaders affect organizationalperformance. Many faltering business firms and athletic teams bring in a new top leader to

spearhead a turnaround.

A. Research and Opinion: Leadership Does Make a Difference

A smattering of evidence supports the contention that leadership affects organizationalperformance. A team of researchers investigated the impact of transactional (routine) and

charismatic (inspirational) leadership on financial performance, as measured by net profit

margin. They found that transactional leadership was not related to performance, and thatcharismatic leadership was most strongly related to performance in an uncertain environment.


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A group of researchers analyzed 200 management techniques as employed by 150 companies

over ten years. It was found that CEOs influence 15 percent of the total variance in a companysprofitability or total return to shareholders.

An overview of research on managerial succession over a 20-year-period found a consistent

relationship between who is in charge and how well an organization performed by a variety ofindicators. A leader might be responsible for somewhere between 15 and 45 percent of a firms

performance.

Whether or not leaders do make a difference, organization members perceive that they do, as

suggested by attribution theory, the process of attributing causality to events.

B. Research and Opinion: Formal Leadership Does Not Make a Difference

According to the antileadership argument, leadership has a smaller impact on organizational

outcomes than do situational forces.

1. Substitutes for Leadership. One viewpoint is that many organizations contain substitutesfor leadership, factors in the work environment that provide guidance and incentives to perform,

making the leaders role almost superfluous. These substitutes for the leader and the leadershipfunction include closely knit teams of highly trained individuals, intrinsic satisfaction, computer

technology (monitoring of work by computer), and professional norms.

Newer research suggests that the theory of substitutes for leadership may be flawed and that

leadership does indeed have an impact on group effectiveness. The sample consisted of 940

employees and 156 leaders. The likeability of the leader and whether the leader provides rewardswere the major correlates of performance.

2. Leader Irrelevance. Pfeffer argues that leadership is irrelevant to most organizational

outcomes because factors outside the leaders control are important. Part of the argument is that

leaders have limited control over resources, and that top leaders whose values are compatible

with those of the firm are chosen. Jim Collins argues that the leaders personality is lessimportant the personality of the organization. Also, leadership today is usually shared. We

believe strongly that despite these constraints leaders still have key roles.

3. Complexity Theory. This theory holds that organizations are complex systems that cannot be

explained by the usual rules of nature. Leaders and managers can do little to alter the course of

the complex organizational system. The real question might be, under what conditions do

leaders make a difference?

III. LEADERSHIP ROLES

Understanding leadership roles helps explain leadership. A roleis an expected set of activities or

behaviors stemming from the job. The nine leadership roles covered here are:

A. Figurehead(ceremonial activities).


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B. Spokesperson (keeping key groups informed about the activities of the organization or

organizational unit).

C. Negotiator(making deals with others for needed resources).

D. Coach and motivator(recognizing achievement, giving feedback, and giving suggestionsfor performance improvement).

E. Team builder(building an effective team).

F. Team player(being a good team member oneself).

G. Technical problem solver(advising others on solving problems and being an individual

contributor).

H. Entrepreneur(suggesting innovative ideas and furthering the business).

I. Strategic planner(setting a direction for the organization, helping the firm deal with theexternal environment, and policy setting).

An important implication of these roles is that managers at all levels can and should exertleadership.

IV. THE SATISFACTIONS AND FRUSTRATIONS OF BEING A LEADER

Being a leader offers many joys but also some frustrations. Because most readers of this bookaspire toward leadership positions or currently occupy such a position, this information allows

for meaningful class discussion.

A. Satisfactions of Leaders

The specific satisfactions of leaders are somewhat a function of the leadership position.Nevertheless, here is a list of satisfactions that may be present in varying degrees in many

leadership situations:

1. A feeling of power and prestige.

2. A chance to help others grow and develop.

3. High income.

4. Respect and status.

5. Good opportunities for advancement.

6. A feeling of being in on things.


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7. An opportunity to control money and other resources.

B. Dissatisfactions and Frustrations of Leaders

Despite the glory of being a leader, occupying a leadership or management role has many built-

in potential frustrations:

1. Too much uncompensated overtime.

2. Too many headaches.

3. Facing a perform-or-perish mentality.

4. Not enough authority to carry out responsibility.

5. Loneliness (being a leader limits the number of people one can confide in).

6. Too many problems involving people.

7. Too much organizational politics.

8. The pursuit of conflicting goals (the central theme of these dilemmas is attempting to grant

others the authority to act independently, yet still get them aligned).

9. Being perceived as unethical, especially if you are a corporate executive.

V. A FRAMEWORK FOR UNDERSTANDING LEADERSHIP

Certain major sets of variables influence leadership effectivenessattaining desirable outcomes

such as productivity, quality, and satisfaction in a given situation. The basic assumption

underlying the framework is as follows:

L = f (l, gm, s)

This formula means that the leadership process is a function of the leader, the group members,

and other situational variables. The model presented in Figure 12 extends the situationalperspective. The model states that leadership effectiveness can best be understood by examining

its key variables: leader characteristics and traits, leader behavior and style, group member

characteristics, and the internal and external environment. The four sets of variables areinterrelated, with some linkages stronger than others. An example of a strong link is that leadercharacteristics and traits affect leader behavior and styles.

VI. SKILL DEVELOPMENT IN LEADERSHIP


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Leadership skills are in high demand. Developing leadership skills is more complex than

developing a structured skill, yet these skills can be developed by following a general learningmodel:

A. Conceptual knowledge and behavioral guidelines.

B. Conceptual information demonstrated by examples and brief descriptions of leaders in

action.

C. Experiential exercises. Cases, role plays, and self-assessment quizzes are included here.

D. Feedback on skill utilization, or performance, from others. Implementing some of the skillsoutside the classroom will provide opportunities for feedback.

E. Practice in natural settings. A given skill has to be practiced many times in natural settings

before it becomes integrated comfortably into a leaders mode of operation.

VII. FOLLOWERSHIP: BEING AN EFFECTIVE GROUP MEMBERS

To be an effective leader, one needs good followers (or group members).

A. Types of Followers

Followers differ substantially in talent and motivation.

1. Isolates are completely detached, and support the status quo.

2. Bystanders are free-riders who are frequently detached.

3. Participants show enough engagement to invest some of their own time and money to make

a difference.

4. Activists are considerably engaged, and eager to demonstrate their support or opposition.

5. Diehards are super-engaged, and willing to go down for their cause, or oust a leader they

believe is headed in the wrong direction.

B. Essential Qualities of Effective Followers

Certain effective group member characteristics facilitate followership: (1) self-management orthinking for oneself, and working well without close supervision; (2) commitment to something

beyond oneself; (3) building competence and focusing direct effort for maximum impact; and (4)

the courage to think independently, and to fight for what one believes is right.

Another way of framing the qualities of effective followers is that they display the personal

characteristics and qualities of effective leaders.


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C. Collaboration between Leaders and Followers

A key role for followers is to collaborate with leaders in achieving organization goals. Bennis

says that the post-bureaucratic organization requires a new kind of alliance between leaders and

the led. The new leader and the led are close allies.


The belief that certain personal characteristics and skills contribute to leadership effectiveness in

many situations is the trait-based perspective on leadership. Traits tend to help us understandleadership behavior and effectiveness when integrated in meaningful ways. Old as well as new

research concludes convincingly that effective leaders are made of the right stuff. A useful

presentation of this research is The Essence of Leadership by Locke.

I. PERSONALITY TRAITS OF EFFECTIVE LEADERS

Possessing certain characteristics contributes to leadership effectiveness in many situations aslong as the leaders style fits the situation reasonably well.

A. General Personality Traits

A general personality trait in the context used here is a trait that would be observable within or

outside the context of work. The same general traits are related to success and satisfaction in

both work and personal life.

1. Self-Confidence. In almost every leadership setting, it is important for the leader to be

realistically self-confident. Self-confidence is akin to being cool under pressure.

2. Humility. Being humble at the right times also contributes to leadership effectiveness. Part

of humility is admitting that you dont know everything, and admitting your mistakes to teammembers and outsiders. According to Jim Collins,Level 5 Leaders are modest, yet determined to

achieve their objectives.

3. Trustworthiness. Group members consistently believe that leaders must display honesty,

integrity, and credibility, thus engendering trust. Trust is a persons confidence in another

individuals intentions and motives, and in the sincerity of that individuals word. The popular

clich, Leaders must walk the talk, holds true. Also helpful is telling the truth and conductingyourself in the way that you ask others to conduct themselves. A study found that 72 percent of

employees believe their immediate managers act with honesty and integrity in their work, butonly 56 percent believe that about company leadership. An example of a trust builder is to make

your behavior consistent with your intentions.

A meta-analysis of 106 studies involving 27,103 individuals found that trust of a leader washighly associated with a variety of work attitudes of group members, such as satisfaction. The

relationship between trust and job performance was positive, but low.


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4. Authenticity. Embedded in the trait of being trustworthy is authenticitybeing genuine and

honest about your personality, values, and beliefs, as well as having integrity. To become anauthentic leader, and to demonstrate authenticity, be yourself rather than attempting to be a

replica of someone else.

5. Extraversion. Being extraverted contributes to leadership effectiveness, and extraverts aremore likely to want to assume a leadership role and participate in group activities.

6. Assertiveness. Assertiveness refers to being forthright in expressing demands, opinions,

feelings, and attitudes. Being assertive helps leaders perform tasks such as confronting group

members, demanding higher performance, and making legitimate demands on highermanagement.

7. Enthusiasm, Optimism, and Warmth. Group members respond positively to enthusiasm,partly because enthusiasm may be perceived as a reward for constructive behavior. Enthusiasm

also helps build good relationships with team members. Enthusiasm often takes the form of

optimism which helps keep the group in an upbeat mood, and hopeful about attaining difficultgoals. Being a warm person and projecting that warmth is pat of enthusiasm and contributes to

leadership effectiveness in several, ways including giving emotional support.

8. Sense of Humor. The effective use of humor is considered an important part of a leadersrole. Humor helps dissolve tension and defuse conflict. Self-effacing humor is the choice ofcomedians and organizational members alike. One of the research-based rules of humor is thathigher-status people joke at a higher rate than those of lesser status, and ten to be more

successful at eliciting laughter from others.

B. Task-Related Personality Traits

Certain personality traits of effective leaders are closely associated with task accomplishmenteven though they appear to be more accurately classified as traits than as behavior.

1. Passion for the Work and the People. A dominant characteristic of effective leaders is theirpassion for their work and to some extent for the people who help them accomplish the work.

Passion for the work is especially evident in entrepreneurial leaders and small-business owners

who are preoccupied with growing their business. Being passionate about the nature of thebusiness can be a major success factor in its survival. One of the ways for an entrepreneur to

inject passion into a business is to tell a creation story that inspires people to understand how the

companys product or cause will make the world a better place.

2. Emotional Intelligence. How well a person manages his or her emotions and those of others

influences leadership effectiveness. Emotional intelligence refers to qualities such as

understanding ones feelings, empathy for others, and the regulation of emotions to enhanceliving. Four key factors are included in emotional intelligence: (1) self-awareness helps you

understand your impact on others; (2) self-managementis the ability to control ones emotions

and act with honesty and integrity in a consistent and adaptable manner; (3) social awareness

includes having empathy for others and having intuition about organizational problems; (4)


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relationship managementincludes the interpersonal skills of communicating clearly and

convincingly, disarming conflicts, and building strong personal bonds. Research suggests that a

leaders moods and associated behaviors greatly influence bottom-line performance. A sense of

humor is the most contagious mood.

3. Flexibility and Adaptability. A leader must be flexible and adaptable enough to cope withchange, especially because a leader is someone who facilitates change. Flexibility, or adjusting

to situations, has long been recognized as an important leadership characteristic.

4. Internal Locus of Control. People with an internal locus of control believe that they are the

primary cause of events happening to them. A leader with an internal locus is perceived as morepowerful than one with an external locus because he or she assumes responsibility for events.

5. Courage. Leaders need the courage to take risks and to take the initiative. Courage in

the present context refers to behaviors such as prudent risk taking, facing

responsibility, and a willingness to put ones reputation on the line.

II. LEADERSHIP MOTIVES

Leaders can be differentiated from nonleaders and ineffective leaders in terms of their motives

and needs. The motives described here are task-related.

A. The Power Motive

Effective leaders have a strong need to control resources. They vigorously exert power, think

about how to alter the behavior of others, and care about status.

1. Personalized Power Motive. Leaders with a personalized power motive seek power mostlyto further their own interests, and enjoy dominating others. Donald Trump is an extreme

example.

2. Socialized Power Motive. Leaders with a socialized power motive use power primarily to

achieve organizational goals or a vision. These leaders are less defensive than those with a

personalized power motive, and they are more willing to accept expert advice.

B. Drive and Achievement Motive

Leaders are known for the strong effort they invest in achieving work goals. Drive refers to a

propensity to put high energy into achieving goals. Achievement motivation refers to finding

joy in accomplishment for its own sake.

C. Tenacity and Resilience


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Leaders are better than nonleaders at overcoming obstacles. Tenacity multiplies in importance

for organizational leaders because it can take so long to implement a new program. As Benniscontends, the central ingredient of power is purpose.

III. COGNITIVE FACTORS AND LEADERSHIP

Mental ability as well as personality is important for leadership success. Problem-solving andintellectual skills are referred to collectively as cognitive factors..

A. Cognitive (or Analytical) Intelligence

Strong problem-solving ability is a fundamental characteristic for effective leaders in all fields.Research spanning 100 years has demonstrated that leaders received higher scores than most

people on mental ability tests. The relationship is likely to be higher when the leader plays an

active role in decision making and is not overly stressed.

B. Knowledge of the Business or Group Task

An effective leader has to be technically or professionally competent in some discipline,particularly when leading a group of specialists. The importance of knowledge of the business is

strongly recognized as an attribute of executive leadership. Knowledge of the business is

critically important for strategy formulation.

C. Creativity

Many effective leaders are creative in the sense that they arrive at imaginative and original

solutions to complex problems. Creative ability lies on a continuum, with one end being

represented by business leaders who think of innovative products and services. At the other endof the continuum are leaders who rely on standard solutions to problems.

D. Insight into People and Situations

Another important cognitive trait of effective leaders is insight, a depth of understanding thatrequires considerable intuition and common sense. A manager with keen insight is able to make

good choices in selecting people for key assignments. Insight also facilitates the leaders

adapting his or her style to the situation. Executive intelligence combines analytical intelligence

and insight. The concept refers to superior reasoning and problem-solving skills that enable theexecutive to cut through conflicting data to create a solution that uniquely fits the situation at

hand.

E. Farsightedness and Conceptual Thinking

To develop visions and incorporate strategy, a leader needs farsightedness, the ability to

understand the long-range implications of actions and policies. Many of todays business leaders

are accused of having a shortsighted emphasis on quick profits. Conceptual thinking refers to the


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ability to see the overall perspective and makes farsightedness possible. A conceptual thinker is

also a systems thinker.

F. The WICS Model of Leadership in Organizations

The WICS model of leadership encompasses and synthesizes wisdom, intelligence, andcreativity to explain leadership effectiveness. The highly effective leader synthesizes these threecomponents. Intelligence in this model includes both analytical and practical intelligence.

Wisdom is the most important, but is rare.

IV. THE INFLUENCE OF HEREDITY AND ENVIRONMENT ON LEADERSHIP

The traits, motives, and characteristics required for leadership effectiveness are a combination of

heredity and environment. Personality traits and mental ability are based on certain inherited

predispositions and aptitudes, which, however, require the right opportunity to develop. For

example, a person may inherit high mental ability but needs the right experiences to learn to

develop innovative solutions to problems facing the group. Leadership appears to be acombination of nature and nurture.

The outermost areas of the brain govern analytical thinking and technical skills, whereas the

innermost areas of the brain govern emotions. A person therefore has the genes that influence the

emotional intelligence necessary for leadership. However, experience is important for emotional

intelligence because it increases with age.

Some leadership traits are more difficult to awaken or develop than others, with passion for work

and people being an example.

V. THE STRENGTHS AND LIMITATIONS OF THE TRAIT APPROACH

The evidence is convincing that leaders possess different personal characteristics from those of

nonleaders. A knowledge of the traits associated with leadership effectiveness helps in theselection of leaders. Awareness of these characteristics can also point a person toward the right

developmental experiences, such as learning to become more assertive. The current emphasis on

emotional intelligence, which is really a group of traits and behaviors, reinforces the importanceof the trait approach. The trait approach is limited because it does not specify which traits are

absolutely needed in which leadership situations and how much of each trait is needed. For

example, when does ambition cross the line and become greed and gluttony?

Drucker believes that a leader cannot be categorized by a particular personality type, style, or setof traits. Instead, a leader should be understood in terms of his or her constituents, results,

example setting, and responsibilities.

Certain traits increase the probability of a persons becoming an effective leader, but the

situation often influences which traits will be the most important.


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The study of charismatic and transformational leadership, an extension of the trait theory, has

become an important way of understanding leadership Charisma facilitates leaders carrying out

their roles.

I. THE MEANINGS OF CHARISMA

Charisma is a special quality of leaders whose purposes, powers, and extraordinary

determination differentiate them from others. The various definitions of charisma have aunifying theme. Charisma is also a positive and compelling quality in a person that creates a

desire in many others to be led by him or her.

The attributes of charisma are important because they lead to behavioral outcomes such as

commitment to the leader, self-sacrifice, and high performance. A study with law enforcement

workers and business students showed that network members influence our attributions of

charisma.

A. Charisma: A Relationship Between the Leader and Group Members

According to John Gardner, charisma applies to leader-constituent relationships in which the

leader has an exceptional gift for inspiration and nonrational communication. Charismaticleaders work deliberately at cultivating the relationship with group members through impression

management. These leaders recognize that the perceptions of constituents determine whether

they function as charismatics. Charismatic leaders are skillful actors in presenting a charismatic

face to the world.

B. The Effects of Charisma

House developed a theory of charismatic leadership that defines charisma in terms of its effects.

A charismatic person brings about these effects to a high degree. Halpern has factor analyzedthese nine effects into three dimensions: referent power, expert power, and job involvement.

Referent power is the ability to influence others and stems from the leaders desirable traits and

characteristics. Expert power is the ability to influence others because of ones specializedknowledge, skills, or abilities. Job involvement is the feeling of being heavily committed to the

job.

Another way of understanding the effects of charisma is to understand that top-level leaders

sometimes lose their power and position because they are perceived as not being charismaticenough to get constituents to accomplish important goals.

II. TYPES OF CHARISMATIC LEADERS


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Charismatic leaders have been categorized into five types: (1) socialized charismaticuses

power to benefit others; (2) personalized charismaticuses power to serve own interests; (3)office-holder charismaticmuch of the charisma stems from the glitter of the office the leader

holds; (4)personalcharismaticpower stems from the faith people have in the leader; (5) divinecharismaticleader is endowed with a gift of divine grace.

III. CHARACTERISTICS OF CHARISMATIC LEADERS

Charismatic leaders have unique characteristics, and many of these characteristics also apply to a

transformational leaderone who brings about positive, major changes in an organization. In

addition to the characteristics described in Chapter 2, charismatic leaders have other attributes:(1) they are visionary; (2) they have masterful communication skills; (3) they have the ability to

inspire trust; (4) they are able to make group members feel capable; (5) they have energy and an

action orientation; (6) they have emotional expressiveness and warmth; (7) they romanticize risk;

(8) they use unconventional strategies; (9) they have a self-promoting personality; (10) theychallenge, prod, and poke; and (11) they are dramatic and unique. The last tactic is an amalgam

of many others.

IV. THE VISION COMPONENT OF CHARISMATIC LEADERSHIP

Vision is the ability to imagine different and better conditions and the ways to achieve them.

Recent neuroscience research suggests that visionaries have higher levels of brain activity in theareas of the brain associated with visual processing and the organization of information.

Creating a vision is one of the major tasks of top management. Effective leaders have clear

visions, and vision is an important part of strategy implementation and bringing about change.Charismatic leaders inspire others with their vision, because a vision uplifts and attracts others.

The charismatic leader also helps implement the vision. A good example of a vision is that ofGoogle: To make nearly all information accessible to everyone all the time.

To create a vision, it is helpful to obtain information from many sources, including (1) personal

intuition, (2) the work of futurists, (3) group discussions with group members, (4) other vision

statements, (5) the hopes and dreams of constituents, and (6) the larger organizations vision.Visions can be inspiring but they need to be supported by managers who are strong at

implementation.

V. THE COMMUNICATION STYLE OF CHARISMATIC LEADERS

Charismatic and transformational leaders communicate their visions, goals, and directives in acolorful, imaginative, and expressive manner. They also communicate openly and encourage

feedback.

A. Management by Inspiration

An important factor in inspiring others is the ability to craft and articulate a highly emotional

message. Two such rhetorical techniques follow:


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1. Using Metaphors and Analogies. A well-chosen analogy or metaphor appeals to the

intellect, imagination, and values.

2. Gearing Language to Different Audiences. Metaphors and analogies are inspiring, but to be

effective, leaders must also choose the level of language to suit the audience. An executives

ability to speak on a colloquial level helps create appeal.

B. Management by Storytelling

Management by storytelling is the technique of inspiring and instructing group members bytelling fascinating stories. The technique is a major contributor to building a strong company

culture. Storytelling as a leadership tool has been elevated to such a level that some companies

hire corporate storytelling consultants to help their executives develop the art.

VI. THE DEVELOPMENT OF CHARISMA

By developing some of the traits, characteristics, and behaviors of charismatic people, a personcan increase his or her charisma. Suggestions for developing charisma include the following: (1)

Create visions for others and connect the visions to their dreams; (2) be enthusiastic, optimistic,and energetic; (3) be sensibly persistent; (4) remember names of people; (5) develop synchrony

with others (which helps make connections); (6) develop a personal brand including making an

impressive appearance; (7) be candid; and (8) display an in-your-face attitude.

VII. TRANSFORMATIONAL LEADERSHIP

The focus of transformational leadership is on what the leader accomplishes rather than on the

leaders personal characteristics and relationships with group members. The transformational

leader helps bring about major, positive changes. In contrast, the transactional leader focuses onmore routine transactions, with an emphasis on rewarding group members for meeting standards.

A. How Transformations Take Place

To accomplish his or her lofty purposes, the transformational leader attempts to overhaul the

organizational culture or subculture. Seven ways in which the leader brings about such

transformations are: (1) raising peoples awareness; (2) helping people look beyond self-interest;

(3) helping people search for self-fulfillment; (4) helping people understand the need for change;

(5) investing managers with a sense of urgency; (6) committing to greatness; (7) adopting a long-

range perspective and at the same time observing organizational issues from a broad rather than a

narrow perspective; (8) building trust, and (9) concentrating resources on the areas most needingchange.

B. Attributes of Transformational Leaders

Eight qualities are particularly helpful in bringing about transformations: (1) charisma including

agreeableness and extroversion; (2) high emotional intelligence; (3) vision creation; (4)


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encouraging thepersonal development of staff member; (5) supportive leadership; (6) practicing

empowerment; (7) innovative thinking; (8) lead by example; and (9) moral reasoning,

C. The Impact of Transformational and Charismatic Leadership on Performance and Behavior

Several empirical studies have been conducted on the effects of charismatic and transformationalleadership in work settings.

1. Overall Validity of Transformational Leadership. A meta-analysis revealed that among

transformational leadership, transactional leader, and laissez-faire leadership showed the highestoverall relationship with six criteria including group or organization performance. Transactional

and transformational leadership were shown to be related.

2. Business Unit Performance. Howard and Avolio conducted a study with financial managers

about transformational leadership and business unit performance. Leaders who displayed more

individualized consideration, intellectual stimulation, and charisma contributed positively to

business unit performance. Leaders who used management by exception and positivereinforcement were less likely to increase unit performance.

3. Team Level Performance. A study with financial service teams in U.S. and Hong Kong

branches of a bank found that being perceived as transformational indirectly improved team

performance based on ratings. Transformational leadership enhanced group potency which led to

improved performance.

VIII. CONCERNS ABOUT CHARISMATIC LEADERSHIP

The topic of charisma and transformational leadership has been challenged from two major

standpoints: the validity of the concept and the misdeeds of charismatic leaders.

A. Challenges to the Validity of Charismatic Leadership

Most leadership researchers doubt that charisma can be accurately defined and measured. Also,

charismatic leaders are not liked by everyone. According to the concept of leadership polarity,

leaders are often either revered or vastly unpopular. People rarely feel neutral about them. Also,

charisma may not be required for leadership effectiveness. Bennis and Nanus hypothesize thatpeople who are outstanding leaders are perceived as charismatic by their constituents as a result

of their success.

B. The Dark Side of Charismatic Leadership

Some people are concerned that charisma can be exercised for evil purposes. Some charismatic

leaders are unethical and lead their organizations toward illegal and immoral ends. People are

willing to follow the charismatic leader down a quasi-legal path because of his or her referent

power. Some charismatic leaders thus neglect their social responsibility, the idea that


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organizations have an obligation to groups in society other than owners or stockholders and

beyond that prescribed by law or union contract.

Boards of directors currently seek CEOs who do not overemphasize charisma and celebrity at the

expense of running the business, thereby minimizing the dark side of charisma.


This chapter covers pioneering information about leadership behaviors and attitudes that served

as the basis for studies of leadership styles and contingency theories of leadership. A sampling ofthese styles is presented as well as current information about behaviors, attitudes, and styles. An

effective leader is one who facilitates group members attaining productivity, quality, andsatisfaction.

I. THE CLASSIC DIMENSIONS OF CONSIDERATION AND INITIATING STRUCTURE

The Ohio State studies developed questionnaires about leaders that included self-assessmentsand assessments by subordinates. This research became the foundation for most of the future

research about leadership behavior, attitudes, and styles. Two dimensions (as identified by factor

analysis) accounted for 85 percent of the variance in descriptions of leadership behavior.

Consideration is the degree to which the leader creates an environment of emotional support,

warmth, friendliness, and trust. Leaders who score high on the consideration factor typically are

friendly, trustful, earn respect, and have a warm relationship. Making connections with people is

part of consideration.

Initiating structure is the degree to which the leader organizes and defines relationships in thegroup by activities such as assigning specific tasks, specifying procedures to be followed,scheduling work, and clarifying expectations with team members.

An important output of the research on initiating structure and consideration and initiating

structure was to categorize leaders with respect to how much emphasis they place on the two

dimensions. As implied by Figure 41, the two dimensions are not mutually exclusive.

A current examination of the validity of consideration and initiating structure indicates that these

classic dimensions do indeed contribute to an understanding of leadership because they are

related to leadership outcome such as satisfaction and performance.

II. TASK-RELATED ATTITUDES AND BEHAVIOR

Task-relatedmeans that the behavior, attitude, or skill focuses more on the task to be performed

than on the interpersonal aspects of leadership.

A. Adaptability to the situation. Effective leaders adapt to the situation by choosing a tactic

based on the unique circumstances at hand (the contingency approach).


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B. Direction setting. The leader must set the direction of change. According to Kotter, leaders

gather voluminous data and search for patterns, relationships, and linkages that help createevents. Direction setting creates vision and strategies.

C. High performance standards. Effective leaders consistently hold group members to high

standards of performance. Setting such standards increases productivity, partly because of thePygmalion effect.

D. Concentrating on the strengths of group members. Making good use of the strengths of

group members rather than concentrating effort on patching up areas for improvement is an

effective tactic. The effective leader helps people improve, yet still capitalizes on strengths.

E. Risk taking and execution of plans. To bring about constructive change, the leader must

take risks and be willing to implement these risky decisions.

F. Hands-on guidance and feedback. The leader who provides hands-on guidance helps the

group accomplish important tasks, and at the same time group members learn important skills.Too much guidance, however, can lead to poor delegation and micromanagement. The leader can

rarely influence the actions of group members without appropriate performance feedback.

G. Ability to ask tough questions. Many times leaders can be effective by asking tough

questions rather than providing answers. A tough question is one that makes a person or group

stop and think about why they are doing or not doing something.

III. RELATIONSHIP-ORIENTED ATTITUDES AND BEHAVIORS

Leadership involves influencing people, so it follows that many effective leadership attitudes,

behaviors, and practices deal with interpersonal relationships.

A. Aligning people. Many people have to be aligned (a state of pulling together) to create

significant change toward a higher purpose. Alignment enables people to have a clear sense ofdirection because they are pursuing a vision. Alignment of people also incorporates getting the

group to work together smoothly. Mobilization is easier with an agreed-upon mission.

B. Openness to worker opinion.Management openness is a set of leader behavior behaviors

particularly relevant to subordinates motivation to voice their opinion. Being open to worker

opinions is part of the consideration dimension, and also central to participative leadership.

C. Crating inspiration and visibility. Inspiring others is an essential leadership practice. Anexample of an inspiring practice is building enthusiasm about projects and assignments. Being

visible and available facilitates inspiration.

D. Satisfying higher-level needs. Motivation and inspiration energize people by satisfyingneeds for achievement, a sense of belonging, recognition, self-esteem, and a feeling of control

over ones life.


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E. Giving emotional support and encouragement. Supportive behavior toward team members

usually increases leadership effectiveness. A supportive leader gives frequent encouragementand praise, and also displays caring and kindness even about non-work related matters such as

the health of a workers ill family member.

F. Promoting principles and values.A major part of a top leaders role is to help promotevalues and principles that contribute to the welfare of individuals and the organization. Covey

advises that an organizations mission statement must be for all good causes. What constitutes

the right values depends on the leaders core beliefs.

G. Being a servant leader. Wanting to serve others as a leader is a relationship behavior thatencompasses several other key behaviors. A servant leader serves constituents by working on

theirbehalf to help them achieve their goals, not the leaders own goals. A servant leader is a

moral leader. Key aspects of servant leadership include the following:

1. Place service before self-interest.

2. Listen first to express confidence in others.

3. Inspire trust by being trustworthy.

4. Focus on what is feasible to accomplish.

5. Lend a hand.

IV. 360-DEGREE FEEDBACK FOR FINE-TUNING A LEADERSHIP APPROACH

Many leaders solicit systematic feedback to improve their leadership behavior and attitudes. 360-

degree feedback is a formal evaluation of superiors based on input from people who work for

and with them, sometimes including customers and suppliers. 360-degree feedback is more

frequently used for leadership and management development than for performance evaluation.When used for development, 360-degree feedback should emphasize qualitative comments rather

than strictly quantitative ratings. Professional counseling can sometimes help a person benefit

from critical feedback and place it in perspective.

V. LEADERSHIP STYLES

A leaders combination of attitudes and behaviors leads to a certain regularity and predictabilityin dealing with group members. Leadership style is the relatively consistent pattern of behavior

that characterizes a leader. Most classifications of leadership style are based on the dimensionsof initiating structure and consideration.

A. Participative Leadership


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Sharing decision making with group members, and working with them side-by-side, has become

the generally accepted leadership approach. Participative leaders share decision making withgroup members. The style encompasses three subtypes: (1) consultative leaders confer with

group members before making a decision, but retain the final authority; (2) consensus leadersstrive for consensus; and (3) democratic leaders confer final authority on the group. The

participative style is based on management openness because the leader accepts suggestions fromgroup members for managing the operation. The same style encompasses the teamwork

approach.

The participative style is well suited to managing competent people who want to get involved in

making decisions and giving feedback to management. However, the style often results inextensive and time-consuming team meetings and committee work.

If democratic leadership goes one step further, it results in extreme macromanagement, referred

to as the laissez-faire leadership style. A study with Norwegian workers found that laissez-faireleadership created role ambiguity.

B. Autocratic Leadership

In contrast to participative leaders, autocratic leaders retain most of the authority. Autocraticleaders are considered task-oriented because they place heavy emphasis on getting tasks

accomplished.

C. Leadership Grid Styles

The Leadership Grid is a framework for simultaneously specifying concern for production andconcern for the people dimensions of leadership. The Grid changes frequently, and we present

the latest version. Grid styles are based on the extent of a persons concern for production andpeople: Controlling (Direct & Dominate) (9,1); Accommodating (Yield & Comply) (1,9); StatusQuo (Balance & Compromise) (5,5); Indifferent (Evade & Elude) (1,1) and Sound (Contribute &

Commit) (9,9). Two other styles are Paternalistic (Prescribe & Guide), and Opportunistic

(Exploit & Manipulate). In both styles, the leader attempts to take advantage of people.

The ideal position is the 9,9 orientation, which integrates concern for production and concern for

people. This sound management style usually results in improved performance, low absenteeismand turnover, and high employee satisfaction. The manager should use principles of human

behavior to size up the situation.

D. Entrepreneurial Leadership

Many entrepreneurs use a similar leadership style that stems from their key personality

characteristics and circumstances. A general picture emerges of a task-oriented and charismaticleader. Even if it is not a true leadership style, at least there are some traits and behaviors

characteristic of entrepreneurs:


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1. Strong achievement drive and sensible risk taking.

2. High degree of enthusiasm and creativity.

3. Tendency to act quickly when opportunity arises.

4. Constant hurry combined with impatience.

5. Visionary perspective combined with tenacity..

6. Dislike of hierarchy and bureaucracy.

7. Preference for dealing with external customers.

8. Eye on the future.

E. Gender Differences in Leadership Style

Several researchers and observers argue that women have certain acquired traits and behaviors

that suit them for relations-oriented leadership. Consequently, women leaders frequently exhibita cooperative, empowering style that includes the nurturing of team members. The other facet of

this stereotype is that men are inclined toward a command-and-control, militaristic leadership

style.

1. The Argument for Male-Female Differences in Leadership Style

Based on self-reports, Rosener found that men tended toward a command-and-control style. In

contrast, women tended toward a transformational style, relying heavily on interpersonal skills.Bass found that women are less likely to practice management-by-exception and are slightlymore likely to be described as charismatic.

Another perspective on gender differences in leadership is whether men or women are moreeffective leaders. Eighteen hundred men and women managers from the U.S. and Canada were

matched on organization level, job function, and management experience. Managers were

evaluated by an average of one boss, four peers and four direct reports. Among the findings werethat (a) women scored higher on scales measuring orientation toward production and obtaining

results, (b) men scored higher on strategic planning and organizational vision, (c) women scored

higher on relationship-oriented leadership skills, and men score higher on task-oriented

leadership skills, and (d), men and women were perceived as equal on overall effectiveness.

Fundamental differences in the biological and psychological makeup of men and women have

been used as evidence that the two sexes are likely to manifest different leadership styles.Women might feel more natural in using a relationship-oriented style.

2. The Argument Against Gender Differences in Leadership Style


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Based on a literature review, Grant concluded that there are apparently few, if any, personality

differences between men and women managers. As women move up the corporate ladder, theyidentify more with the male model of managerial success. An important point is that both men

and women differ among themselves in leadership style. As researchers put it, The within-group

variance is greater than the across-group variance.

Also of importance, many women believe that women managers can be more hostile and

vindictive than male managers.

More important than searching for differences is to capitalize on both male and female leadership

tendencies. To compete in the global marketplace, companies need a diverse leadership teamincluding men and women. Not recognizing that both male and female styles are needed can

leader to confusion for women managers.

F. Selecting the Best Leadership Style

A study with 3,000 executives revealed that leaders who get the best results do not rely on onestyle. Instead, they use several different styles in one week, such as being autocratic in some

situations and democratic in others. The cultural setting must also be considered, such as using a

strong task orientation with German workers. The organizational culture also influences whichleadership style will be effective, such as a collaborative culture calling for a more consensus

style of leadership.

Stogdill made a statement about selecting a leadership style that still holds today: The mosteffective leaders appear to exhibit a degree of versatility and flexibility that enable them to adapt

their behavior to the changing and contradictory demands made on them.


Contingency theories specify the factors that determine which style of leadership will achieve the

best results in a given situation. The four best-known contingency theories are described in this

chapter, along with a concept of contingency leadership for CEOs, and leadership during a crisis.We also mention evidence-based leadership and management as contributing to the contingency

approach.

I. SITUATIONAL INFLUENCES ON EFFECTIVE LEADERSHIP BEHAVIOR

The essence of the contingency approach to leadership is that leaders are most effective when

they make their behavior contingent upon situational forces, including group membercharacteristics. Both the internal and external environments have a significant impact on leader

effectiveness.

A useful perspective on implementing contingency theory is that the managers must be flexible

enough to avoid clinging to ideas that no longer work. Being stubborn about what will work in a


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given situation, and clinging to old ideas can result in ineffective leadership. The organizational

culture is a major situational variable the leader needs to take into account in choosing whichapproach to leadership will lead to favorable outcomes.

Vroom and Jago have recently identified three conclusions about the role of situations in

leadership, and these findings support the model presented in Figure 1-2, Chapter 1.

A. Organizational effectiveness is affected by situational factors not under leader control.

B. Situations shape how leaders behave.

C. Situations influence the consequences of leader behavior.

II. FIEDLERS CONTINGENCY THEORY OF LEADERSHIP EFFECTIVENESS

Fiedlers theory states that the best style of leadership is determined by the situation in which the

leader works.

A. Measuring Leadership Style: The Least Preferred Coworker (LPC) Scale

A managers leadership style is classified as relationship-motivated or task-motivated. Onesstyle is considered relatively fixed. The least preferred coworker (LPC) scale measures the

degree to which a leader describes favorably or unfavorably his or her least preferred coworker.

One who describes the least preferred coworker in favorable terms is relationship-motivated. Incontrast, a person who describes his or her least preferred coworker unfavorably tends to be task-

motivated.

B. Measuring the Leadership Situation

Leadership situations are divided into high control, moderate control, and low control. A high-control situation is the most favorable. Amount of control is determined by rating the situation on

three dimensions:

1. Leader-member relations measure how well the group and the leader get along.

2. Task structure measures how clearly the procedures, goals, and evaluation of the job are

defined.

3. Position powermeasures the leaders authority to hire, fire, discipline, and grant salaryincreases to group members.

Leader-member relations contribute as much to the favorability of the leadership situation as do

task structure and position power combined.

C. Overall Findings


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Leadership effectiveness depends on matching leaders to situations in which they can exercise

more control. Task-motivated leaders perform the best in situations of high control and lowcontrol. Relationship-motivated leaders perform the best in situations of low control. Figure 51

summarizes these findings.

D. Making the Situation More Favorable for the Leader

A practical implication of the contingency theory is that leaders should modify situations to

match their leadership style best, thereby enhancing their chances of being effective. To increase

control over the situation, the leader can do one or more of the following: (a) improve leader-

member relations, (b) increase task structure, and (c) exercise more position power.

E. Evaluation of Fiedlers Contingency Theory

Fiedlers theory has prompted extensive research. The model has also alerted leaders to the

importance of sizing up the situation to gain control. Yet the contingency theory is too

complicated to have much of an impact on most leaders. A major problem centers on matchingthe situation to the leader.

III. THE PATH-GOAL THEORY OF LEADERSHIP EFFECTIVENESS

The path-goal theory of leadership effectiveness specifies what the leader must do to achievehigh productivity and morale in a given situation. A leader attempts to clarify the path to a goal

for a group member so that the latter receives personal payoffs. At the same time, job satisfaction

and performance increase. Path-goal theory is based on expectancy theory. The major

proposition of path-goal theory is that the manager should choose a leadership style that takesinto account group member characteristics and task demands. Furthermore, initiating structure

will be effective in situations with a low degree of subordinate task structure, but ineffective inhighly structured task situations.

In his reformulated version of path-goal theory, House offers this metaproposition: For leaders to

be effective they should engage in behaviors that complement subordinates environment andabilities. They should engage in these behaviors in a manner that compensates for deficiencies,

and that enhances subordinate satisfaction as well as individual and work-unit performance.

A. Matching the Leadership Style to the Situation

The leader should choose among four leadership styles to achieve optimum results in a given

situation. Two key sets of contingency factors are the type of subordinates and the type of workthey perform. Key subordinate characteristics include their locus of control and perception of

their ability with respect to the assigned task. Environmental contingency factors are (1) the

group members tasks, (2) the authority system within the organization, and (3) the work group.The following describes the four styles and their appropriate circumstances.

1. Directive style. The directive leader emphasizes formal activities, such as planning,

organizing, and controlling. The directive style improves morale when the task is unclear.


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2. Supportive style. The supportive leader displays concern for the well-being of group

members and creates an emotionally supportive climate. The leader also emphasizes developingmutually satisfying relationships among group members. The supportive leader enhances morale

when group members work on dissatisfying, stressful, or frustrating tasks.

3. Participative style. The participative leader uses group input when making decisions. He orshe is best suited for improving the morale of well-motivated employees who perform

nonrepetitive tasks.

4. Achievement-oriented style. The achievement-oriented leader sets challenging goals, pushes

for work improvement, and sets high expectations for group members. This style works wellwith achievement-oriented team members and with those working on ambiguous and

nonrepetitive tasks.

B. Steps Leaders Can Take to Improve Performance and Satisfaction

The path-goal theory offers many specific suggestions to leaders. Four representative suggestionsare:

1. Recognize or activate group members needs over which the leader has control.

2. Increase the personal payoffs to team members for attaining work goals.

3. Help group members clarify their expectations of how effort will lead to good performance,and how performance will lead to a reward.

4. Reduce frustrating barriers to reaching goals.

Leaders can benefit from following the specific suggestions of path-goal theory. Unfortunately,

path-goal theory has so many nuances and complexities that it has attracted little interest frommanagers.

IV. SITUATIONAL LEADERSHIP MODEL II (SLII)

Situational leadership model II (SLII) explains how to match the leadership style to the

capabilities of group members on a given task. Leaders are taught to use the leadership style thatmatches or responds to the needs of the situation.

A. Basics of SLII

The major premise of SLII is that the basis for effective leadership is managing the relationship

between a leader and a subordinate on a given task. The major concepts of the SLII model arepresented in Figure 5-3. Effective leaders adapt their behavior to the level ofcommitmentand

competence of a particular subordinate to complete a given task. The combination of the

subordinates commitment and competence determine his or herdevelopmental level. SLII


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explains that effective leadership depends on two independent behaviors: supporting anddirecting. The four basic styles are as follows:

S1Directing. High directive behavior/low supportive behavior.

S2

Coaching. High directive behavior/high supportive behavior.

S3Supporting. Low directive behavior/high supportive behavior.

S4Delegating. Low directive behavior/low supportive behavior.

No one style is best: an effective leader uses all four styles depending on the subordinatesdevelopmental level on a given task. For example, enthusiastic beginners require a directing style

of leaders, and self-reliant achievers need a delegating style.

B. Evaluation of SLII

The model is based on a fundamental truth about leadership and management: Competent peoplerequire the least specific direction. The situational model (the earlier version included) has

proved useful in training, and it alerts leaders to the importance of diagnosing the readiness of

group members.

A challenge in applying SLII is that the leader has to stay tuned into which task a group member

is performing at a given time, and then implement the correct style. Also, SLII presentscategories and guidelines so precisely that it gives the impression of infallibility. Another

concern is that the prescriptions from situational leadership work only part of the time. Finally,

there are few leadership situations in which a high-task, high-relationship orientation does not

produce the best results.

V. THE NORMATIVE DECISION MODEL

Another contingency viewpoint is that leaders must choose a style that elicits the correct degree

of group participation when making decisions. The normative decision model views leadershipas a decision-making process in which the leader examines certain factors in the situation to

determine which decision-making style will be the most effective.

A. Decision-Making Styles

The five decision-making styles in the model are based on the amount of authority retained bythe leader; from most to least they are Decide, Consult (Individually), Consult (Group),

Facilitate, and Delegate.

B. Contingency Factors and Application of the Model

The leader diagnoses the situation in terms of seven variables for either making a decision under

pressure, or with the desire to develop group members. Based on those variables, the leader


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follows the path through a matrix to choose one of the five decision-making styles. Figure 54

depicts the decision tree for time-driven group problems. Working through the model is self-explanatory for some students but we provide a step-by-step example in the text.

Accurate answers to the seven situational variables can be challenging to obtain. Different people

giving different answers to the situational factors will arrive at different conclusions about therecommended decision style. Nevertheless, the normative model is valuable because it prompts

managers to ask questions about contingency variables in decision-making situations.

VI. COGNITIVE RESOURCE THEORY: HOW INTELLIGENCE, EXPERIENCE, AND

STRESS INFLUENCE LEADERSHIP

The general thrust ofcognitive resource theory is that stress plays a key role in determining

how a leaders intelligence is related to group performance. The same theory describes the linkbetween directive behavior and intelligence. Several of the predictions in the theory are as

follows:

A. Leaders with greater experience but lower intelligence are likely to have higher performing

groups under high-stress conditions. Under low-stress conditions, leader experience is less

necessary.

B. Highly experienced leaders will often use old solutions to problems when creativity is

necessary. Leaders with high intelligence are more valuable than experienced leaders wheninnovation is needed and stress levels are low.

C. If a leader is experiencing stress, his or her intellectual abilities will be diverted from thetask at hand.

D. The intellectual abilities of directive leaders will correlate more highly with groupperformance than will the intellectual abilities of nondirective leaders.

E. A leaders intellectual abilities will be related to group performance to the degree that thetask requires the use of intellectual ability.

VII. CONTINGENCY LEADERSHIP IN THE EXECUTIVE SUITE

An interview analysis of 163 top executives revealed five distinct approaches, all of which are

based on contingency factors. The study concluded that successful CEOs assess their companies

needs, then adapt their leadership style to fit the particular situation. Table 51 provides anoutline of the approaches and accompanying contingency factors.

A. The strategic approach is a systematic, dispassionate, and structured analysis of a

companys strengths and weaknesses, and its mission. Key contingency factors are an unstableenvironment, a high rate of change, and complexity.


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B. The human assets approach adds value to the organization through its hiring, retention, and

development programs. The key contingency factor is a case in which business units are betterpositioned than headquarters to make strategy.

C. The expertise approach means that the CEOs key responsibility is selecting and

disseminating throughout the organization an area of expertise that will give the firm acompetitive advantage. The key contingency factor is a case in which expertise can be a source

of significant competitive advantage.

D. The box approach occurs when the corporate group adds value by creating, communicating,

and overseeing an explicit set of controls. The key contingency factor is the presence ofgovernment examiners who insist on strict controls to protect consumer and company.

E. The change agent approach is used by CEOs who believe that their most critical role is tocreate an environment of continual reinvention, even if such an emphasis on change creates

short-term disturbances such as poorer financial results. A key contingency factor is that the

company wants to remain a leader in the field, and the status quo is unacceptable.

VIII. LEADERSHIP DURING A CRISIS

Leading during a crisis can be regarded as contingency leadership because the situation demands

that the leader emphasize certain behaviors, attitudes, and traits. Crisis leadership is the process

of leading group members through a sudden, largely unanticipated, intensely negative, andemotionally draining circumstance. Attributes and behavior for effective crisis management are

as follows:

A. Be Decisive. The leader should take decisive action to remedy the situation.

B. Lead with Compassion. Displaying compassion toward the concerns, anxieties, andfrustrations of the group is a key interpersonal skill for crisis leadership.

C. Reestablish the Usual Work Routine. An effective way of helping people deal with a

workplace crisis is to influence them to return to their regular work. However, workers should

first express their feelings about the crisis.

D. Avoid a Circle-the-Wagons Mentality. To strongly defend yourself against your critics or

deny wrongdoing is a mistake.

E. Display Optimism. Pessimists abound in every crisis, so optimism by the leader can helpenergize the group members to overcome the bad times.

F. Prevent the Crisis through Disaster Planning. The ideal form of crisis leadership is to

prevent a crisis though disaster planning.

G. Provide Stable Performance. Remaining steady under crisis conditions contributes to

effectiveness because it helps team members cope with the situation.


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H. Be a Transformational Leader. During times of large and enduring crisis transformational

leadership may be the intervention of choice.

IX. EVIDENCE-BASED LEADERSHIP FOR THE CONTINGENCY AND SITUATIONAL

APPROACH

A leading-edge way to practice contingency leadership would be to look for research-basedevidence about the best way to deal with a given situation. Evidence-based leadership or

management takes place when managers translate principles based on evidence into

organizational practice. Many of the principles and suggestions presented throughout the text

would help a manager practice evidence-based leadership.


Being ethical and socially responsible is part of being an effective leader even if many financiallysuccessful executives are unethical and socially irresponsible.

I. PRINCIPLES OF ETHICAL AND MORAL LEADERSHIP

Ethics is the study of moral obligations, or separating right from wrong. Also, ethics are the

accepted guidelines of behavior for groups or institutions. Morals are an individuals

determination of what is right or wrong and is influenced by his or her values. A moral leaderwill practice good ethics. Edwin H. Locke argues that ethics is at the center of leadership becausethe goal of a rational leader is to merge the interests of all parties so that everyone benefits and

the organization prospers.

A. Five Ethical Leadership Behaviors

1. Be Honest and Trustworthy and Have Integrity in Dealing with Others. Trustworthiness

contributes to leadership effectiveness. It appears, however, that trust in business leaders is low.

Integrity refers to loyalty to rational principles, thereby practicing what one preaches regardless

of emotional or social pressure. (A criminal can have integrity by consistently engaging incriminal behavior.)

2. Pay Attention to All Stakeholders. Maximizing shareholder wealth is not a sufficient role fora leader. Another behavior ofauthentic leaders is to perceive their role to including having an

ethical responsibility to all of their shareholders.

3. Build Community. The leader helps people achieve a common goal, and searches for goals

compatible to all. The Global Compact seeks to build community by getting member companies

to make explicit statements about human rights in their policies.


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4. Respect the Individual. Respecting individuals is a principle of ethical and moral leadership

that incorporates other aspects of morality. For example, if you tell the truth, you respect otherswell enough to be honest. Keeping promises also shows respect.

5. Accomplish Silent Victories. Joseph Badaracco, Jr. observes that modesty and restraint are

largely responsible for the achievement of the most effective moral leaders in business.

B. Factors Contributing to Ethical Differences

One key factor is the leaders level of greed, gluttony, and avarice, as reflected in some instancesof excessive executive compensation (see Table 6-1). People sometimes choose the wrong path

based on rationalization, leading people to focus on the intention of the action, not the action

itself. A third factor is implied permissionnobody is telling me to stop, so it must be okay.

A fouth key factor behind ethical differences is the leaders level of moral development:preconventional (intent of receiving rewards and avoiding punishment); conventional (conform

to societal norms); andpostconventional (internalized set of principles that may go beyond lawsof a society). A fifth factor contributing to the moral excesses of business leaders is that many of

them have developed a sense ofentitlement. Some CEOs lose their sense of reality and feel

entitled to whatever they can get away with or steal. A sixth factor is the situation, particularly

the organizational culture. A persons character is a seventh factor that contributes to ethicaldifferences.

C. The Ethical Mind for Leaders

Howard Gardner believes that for a leader to stay ethical, he or she must develop an ethical

mind, or a point of view that helps the individual aspire to good work that matters to their

colleagues, companies, and society in general. A starting point is to believe that retaining anethical compass is essential to organizational health. Early-life influences are helpful. WarrenBuffet appears to have an ethical mind.

II. GUIDELINES FOR EVALUATING THE ETHICS OF A DECISION

The Center for Business Ethics at Bentley College has developed six questions to evaluate theethics of a specific decision:

A. Is it right?

B. Is it fair?

C. Who gets hurt?

D. Would you be comfortable if the details of your decision or actions were made public in the

media or through email?

E. What would you tell your child, sibling, or young relative to do?


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F. How does it smell?

Ethical issues that require a fun through the guide are usually subtle rather than blatant or an

issue that falls into the gray zone.

A Job Seekers Ethics Audit, presented in Table 61, presents an ethical screen from thestandpoint of an individual screening a potential employer.

III. A SAMPLING OF UNETHICAL LEADERSHIP BEHAVIORS

Table 62 presents a sample of the type of unethical, immoral, and often illegal behavior

engaged in by business leaders whose acts have been publicly reported. It is possible than anappeal may have changed the final outcome of a ruling against an executive. A quick Internet

search will bring the table entries up to date.

IV. LEADERSHIP, SOCIAL RESPONSIBILITY, AND CREATING AN ETHICAL

ORGANIZATIONAL CULTURE

Good deeds are important for leaders. Corporate social responsibility is having obligations tosociety beyond their economic obligations to owners or stockholders and also beyond those

prescribed by law or contract. Social responsibility involves a firms impact on society. Here we

look at a few socially responsible actions. Being socially responsible fits into the Thou Shalt

approach, versus Thou Shalt Not..

A. Providing for Strategic Leadership of Ethics and Social Responsibility

Senior managers can become ethics leaders. If high ethics receive top priority, workers are more

likely to behave ethically. Strategic leadership of ethics and social responsibility includes leadingby example.

B. Creating a Pleasant Workplace

A social responsibility initiative that directly affects the well-being of people is the creation of acomfortable, pleasant, and intellectually stimulating work environment. The Fortune designation

of best company to work for fits directly here, as measured by the Great Place to Work

Institute.

C. Helping Build a Sustainable Environment

Socially responsible leaders influence others to preserve the external environment through a

variety of actions that go beyond mandatory environmental controls. Helping build a sustainable

environment can involve hundreds of different actions such as making packaging smaller, usingmore fluorescent lighting, and using solar panels and wind turbines. Another way for a leader to

help the environment is to be directly in the recycling business.

D. Engaging In Philanthropy


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A standard organizational leadership approach to social responsibility is to donate money to

charity and various causes. A recent development is for corporate leaders to demand a goodreturn on investment for their donated money, such as obtaining evidence that literacy rates

improved when money was donated to a reading program. Another approach to getting a rapid

turnaround on charitable giving is for a company to respond directly to immediate needs, such as

aiding wildfire victims.

E. Working with Suppliers to Improve Working Conditions

An excellent opportunity for practicing social responsibility is for company leaders to work with

suppliers to improve physical and mental working conditions. The justification for helping the

supplier to improve working conditions is that the suppliers employees are often in dire need ofa paying job.

F. Establishing Written Codes of Ethical Conduct

Written codes of conduct are widely used as guidelines for ethical and socially responsiblebehavior. Regardless of the industry, most codes deal with quite similar issues such as conflicts

of interest, and vendor relationships.

G. Developing Formal Mechanisms for Dealing with Ethical Problems

Many large employers have ethics programs of various types. An ethics committee to establish

policy and conduct audits is typical. The United States Federal Government has a unit for dealing

with ethical problems called the Pentagons Standards of Office Conduct.

H. Accepting Whistleblowers

A whistleblower is an employee who discloses organizational wrongdoing to parties who can

take action. Whistleblowers are often ostracized and humiliated by the companies they hope to

improve, and half the time they are ignored. The Enron Corporation case was originally exposedby a whistleblower who was a vice president at the firm. More than half the time, the pleas of

whistleblowers are ignored.

H. Providing Training in Ethics and Social Responsibility

Ethics training programs reinforce the idea that ethically and socially responsible behavior isboth morally right and good for business. Much of the content of this chapter reflects the type of

information communicated in such programs. Training programs in ethics and socialresponsibility are most likely to be effective when the organizational culture encourages ethical

behavior. At the annual Caterpillar ethics training, all 95,000 employees ponder a series ofquestions presented to them via the Internet or paper.

I. Placing Company Interests over Personal Interests


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People who look beyond self-interest to build partnerships in pursuit of the greater good

contribute to success in todays interdependent world. We leaders unify, rather than divide.

V. ETHICAL BEHAVIOR AND ORGANIZATIONAL PERFORMANCE

A new model states that when demand for social responsibility investments increase, value-maximizing managers will find it in their self-interest to make these investments even if cashflow is reduced. Also, when demand for social responsibility investments is high, making these

investments the companys market value might increase.

The relationships between social responsibility and profits can also work in two directions. More

profitable firms can better afford to invest in social responsibility initiatives, and these initiatives

can in turn lead to more profits. The virtuous circle means that corporate social performance and

corporate financial performance feed and reinforce each other.

Being ethical also helps avoid the costs of paying huge fines for being unethical, including

charges of discrimination and class action lawsuits because of improper financial reporting.


To function effectively, leaders must use power effectively, including applying political tactics to

acquire and retain power.

I. SOURCES AND TYPES OF POWER

To exercise influence, a leader must have power, the potential or ability to influence decisionsand control resources.

A. Position Power

A standard method of classifying power is based on whether the power stems from theorganization or the individual.

1. Legitimate Power. Power granted by the organization is referred to as legitimate power.

This power increases as one moves up the organization ladder.

2. Reward Power. The authority to give employees rewards for compliance is referred to asreward power.

3. Coercive Power. The power to punish for noncompliance is referred to as coercive power.

It is based on fear.

4. Information Power. Having formal control over information that people need to do their

work is referred to as information power.


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B. Personal Power

Three sources of power stem from characteristics or behaviors of the power actor: expert power,

referent power, and prestige power. All are classified as personal power because they are

derived from the person rather than the organization. Prestige power is the power stemming

from ones status and reputation.

C. Power Stemming from Ownership

The strength of ownership power depends on how closely the owner is linked to shareholders

and board members. A leaders ownership power is also associated with how much money he orshe has invested in the firm. The CEOs of high-technology firms are typically company

founders. The New Golden Rule applies: The person who holds the gold, rules.

D. Power Stemming from Dependencies

According to the dependence perspective, a person accrues power by others being dependent onhim or her for things they value. Dependence can be positional or personal. Richard M. Emerson

noted that power resides implicitly in the others dependence.

According to the resource dependence perspective, the organization requires a continuing flow

of human resources, money, customers and clients, technological inputs, and materials if it is tocontinue to function. Organizational subunits, or individuals who can provide these key

resources, accrue power from this ability. Losing power to control resources leads to a decline in

power.

E. Power Derived from Capitalizing on Opportunity

Power can be derived from being at the right place at the right time and taking appropriate

action. You also need to have the right resources to capitalize on the opportunity. Go where the

action is to capitalize on opportunity power.

F. Power Stemming from Managing Critical Problems

The strategic contingency theory of power suggests that those units best able to cope with the

firms critical problems and uncertainties acquire relatively large amounts of power. Also, a

subunit acquires power by virtue of its centrality, how much its activities are linked into thesystem of organizational activities.

G. Power Stemming from Being Close to Power

The closer a person is to power, the greater the power he or she exerts. Likewise, the higher a

unit reports in a firms hierarchy, the more power it possesses. Robert A. Caro reminds us thatacquiring power alone does not make for great leadership. Creating and implementing a useful

vision is also required.


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II. TACTICS FOR BECOMING AN EMPOWERING LEADER

It is paradoxically true that power and influence increase when the leader shares power with

others. As team members receive more power, they can accomplish more. Because the manager

shares credit for their accomplishments, the manager becomes more powerful. To empower

others is to be perceived as an influential person. In a competitive environment increasinglydependent on knowledge, the most successful organizations will be those that effectively use the

talents of all players on the team.

An advantage of empowerment from a cost perspective is that empowering workers to assume

more managerial responsibility enables the organization to get by with fewer bosses. Usingtechnology to communicate and help monitor work can also reduce the span of control.

A. The Nature of Empowerment

Empowerment refers to passing decision-making responsibility from managers to group

members. One study identified four components of empowerment.Meaning is the value of awork goal evaluated in relation to a persons ideals or standards. A person doing meaningful

work is likely to feel empowered. Competence, or self-efficacy, is an individuals belief in his or

her capability to perform a particular task well. Self-determination is an individuals feeling ofhaving a choice in initiating and regulating actions. Choosing a method to solve a problem leads

to a high level of self-determination.Impactis the degree to which the worker can influencestrategic, administrative, or operating outcomes on the job. A fifth dimension is internal

commitmenttoward work goals.

B. Empowering Practices

The practices that foster empowerment supplement standard approaches to participativemanagement such as conferring with group members before reaching a decision. Specificempowering practices are described below.

1. Foster Initiative and Responsibility. Encourage team members to take the initiative and givethem broader responsibility.

2. Link Work Activities to the Goals of the Organization. Empowerment works better when the

empowered activities are aligned with the strategic goals of the organization.

3. Provide Ample Information. Give employees ample information about everything that

affects their work. This is the basis of open-book management.

4. Allow Group Members to Choose Methods. Explain to the individual or group what needs tobe done and let the people involved choose the method. Also explain why the task needs to be

done.

5. Encourage Self-Leadership. Encourage team members to practice self-leadership because it

is the heart of empowerment. The basic idea ofself-leadership is that all organizational


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members are capable of leading themselves at least to some extent. When employees lead

themselves, they feel empowered.

6. Establish Limits to Empowerment. To prevent dysfunction, workers need a clear perception

of the boundaries to empowerment.

7. Continue to Lead. Although the leader empowers group members, the leader should stillprovide guidance, emotional support, and recognition.

8. Cultural Differences. Cross-cultural factors influence empowerment, such as a study of asingle firm with operations in the United States, Mexico, Poland, and India. Among Indian

workers, empowerment lowered job satisfaction.

C. Effective Delegation and Empowerment

A major contributor to empowerment is delegation, the assignment to another person of formal

authority and responsibility for accomplishing a specific task. Delegation is narrower thanempowerment because it relates to a specific task. Delegation can be motivational because it

offers group members the opportunity to develop their skills and demonstrate their competence.

III. FACTORS THAT CONTRIBUTE TO ORGANIZATIONAL POLITICS

Organizational politics refers to informal approaches to gaining power through means other

than merit or luck. Views of organizational politics are becoming increasingly positive, such as

Political skill is an interpersonal style that combines social awareness with the a

leadership and organizational change notes

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