Impacts of leadership on organizational culture and values and competitive advantage
The term leadership carries extraneous connotations that create ambiguity of meaning. Additional confusion occurs due to the use of imprecise terms like power, management, authority, control, administration and supervision to refer to the same thing. Therefore, most researchers and scholars define leadership according to their individual perspectives and aspects that interest them.
The definition of leadership has taken different terms reflecting traits, influence, behavior, role relationships, interaction patterns, and occupation of an administrative position. Almost all elements of definitions of leadership reflect a process whereby intentional influence is exerted over people in guiding, structuring, and facilitating activities and relationships in an organization (Yukl, 2010).
There are three dimensions of leadership capacity that share common features but are not the same. These include organizational practices, leadership behavior, and leadership culture. These three dimensions work together to drive leadership capacity. Leaders who embrace a holistic approach define standards for their colleagues, and for the next incoming future leaders. Organizations must use sound practices to shape, and reinforce the right behaviors, and encourage holistic behavior. This is because both behaviors and practices have an influence on the nature of leadership culture. Consequently, leadership culture influences the behavior of leaders and the type of practices that the organization develops. The alignment of individual behaviors, leadership culture, and organization’s practices form a self-sustaining engine that builds leadership capacity (Hiebert and Klatt, 2001).
Competitive advantage aligns organizations with customers and markets. The process of aligning an organization with its business strategy starts with the leadership. Leadership controls, guides and nurtures people’s thinking and behavior, and with time creates an organization’s culture. Leadership must align organizational culture i.e. how various organizations conduct their affairs, with the business strategy. This is the way to check and ensure alignment within the organization’s leadership style, culture, business strategy, and consumer needs or markets (Jeff and Hartman, 2002).
The organization’s leadership sets the business strategy within the context in which an organization competes i.e. organization’s industry and the surrounding environment. In order to understand an organization’s competitive advantage, we must scrutinize its interactions with competitions, customers, and external and internal resource providers, which constitutes an organization’s structure.
Economists have studied the structural characteristics of the industry from the point of view of the structure-conduct-performance model. This is where Michael Porter’s five forces model comes in to show the relations in industry structural characteristics and performance. These studies suggest that the nature of the industry and its structure and all stages of the product lifecycle are essential determinants of the competitive behavior of organizations in the industry and their average profitability (Koontz and Ramachandra, 2010).
Empirical works have tried to measure the impact of different forces of both an organization’s positioning and industry on organization performance. These measures vary substantially. Industry membership of an organization affects its performance, but its positioning within an industry seems to matter much more. (Tidd, 2006).
An organization’s strategy and resources that are critical for competitive advantage depend on the characteristics of the industry, as well as actions of the industry players. This is where a firm’s leadership influences its strategy and success. Key success factors of an organization should explain the performance of a firm and its competitive advantage. These factors point back to the leadership and an organization’s resources, which give a firm an advantage over the competition in an industry (Miles and Snow, 2003).
Studies show that demographic changes have created a scarcity of pool of young leaders with the talent that can assume senior roles in organizations. This has created a talent gap for organizations. The baby boomer generation had many leaders. However, the implication for organizations is that there are not many of such leaders today. In the recent past, organizations have experienced leadership talent exodus associated with restructuring creating lean hierarchies and structures.
These occurrences have left many organizations with no pool of leaders in their succession plan. Lack of hierarchical layers creates career gaps since work force have no ways of improving their skills, capabilities, and maturity as was in the past. Shortages of leadership capacities are putting pressure on organizations to be vigilant in their efforts to attract, retain and develop a strong group of potential leaders from within and outside the organization (Weiss, Molinaro and Davey, 2007).
According to Evans and House, the path-goal theory of leadership emanated to elaborate on how the behavior of a leader affects the satisfaction and performance of subordinates. This theory looks at the motivational functions and immediate or future satisfactions and performances of the subordinates. This is when subordinates can accept such behaviors.
The four behaviors of a leader consist of supportive leadership where leaders strive to create a culture of consideration and show concerns for staff welfare. Directive leadership tends to inculcate a culture of giving guidance, follow rules, schedules, and coordinate works. The participative leadership approach takes into account the consultation processes with subordinates and puts their suggestions into action. Lastly, achievement-oriented leadership sets challenging goals, strives for better performances, insists on excellence, and exudes confidence that subordinates will embrace as part of the organization culture (Miner, 2005).
Leaders give directions and then provide motivations for others to believe and follow (Latham, 2007). For instance, leadership is mandatory in putting together an organization’s budgeting process, demonstrating reporting relationships, setting up governance procedures, creating and providing staff for departments, creating competitive strategies, and establishing the company financial models. This demonstrates that the basic conception of a strategy and an organizational design are thus matters of leadership.
Leaders must be responsible for the provision of a vision of the strategy in an organization, indicating the defining principles and how an organization controls the basic matter. They must communicate such models in a transparent and compelling manner, such that subordinates will understands and embrace it and get motivation in trying to inculcate such models as organizational culture (Pandya and Shell, 2005).
Leaders must also solve the design problem of an organization. This is because managers cannot directly control the formal aspects of organizational culture and networks. Subordinates, individually and collectively choose what they have to believe, value, behavior norms they will adopt, and informal interaction with others. These are the most vital features in determining behavior and influence how well an organization performs. Leaders must shape these choices in every organization in order to create a competitive advantage (Roberts, 2004).
The notion of organizational imperatives tends to identify what must change in the organization’s systems, technology, structures, skill base, processes, and staffing needs so that an organization can achieve its strategic business imperatives successfully. Leadership must influence all these elements of organizational change. Likewise, leadership must also focus on cultural imperatives. This shows the norms, or collective way in working, being and relating to the firm.
These must change in order to support and drive the organization’s designs, operation, and strategy. For example, organizations with a culture of teamwork tend to believe in support from all departments so as to support the reengineering process (organizational imperatives) and drive the strategy (business imperative) for organizational, competitive advantage. There is always an aspect of a leader and employee behavior. Leaders who have a collective behavior approach create and express an organization’s culture. This is because organizational behavior affects more than an aspect of its actions. Behavior influences style, tone and reflects the culture of an organization’s practices. The behavior will show how leaders and subordinates will behave towards change and adopt a new culture and finally sustain a new organizational design successfully (Havinal, 2009).
Strategic leadership theories of today focus on how leaders can influence the overall effectiveness of large organizations. Influences of leaders in organizations are elaborate in some cases than in others. Therefore, Yukl and Lepsinger developed the Flexible Leadership Theory (FLT). The FLT theory aims at answering the question of how leadership achieves influence in large organizations. FLT borrows from other leadership studies such as organization theory, strategic management, human resource management, and change management. The FLT depends on four aspects such as organizational performance (effectiveness), performance determinants, leadership processes, and situational variables (Yukl, 2010).
Organizational performance looks at the long-term achievement and survival of the organization. This relies on three areas of performance determinants such as efficiency and process reliability, human relations and resources, and adaptation to the industry environment. These performance determinants differ relatively in the same organization with time (Lusier, 2009).
Situational aspects that determine the performance determinants include the type of organization, products and services organization offers, and the amount of volatility and competition from the eternal environment such as political and economic conditions, competition within the industry, changes in customer demands, and changes in technology. Situations of complex relations and trade-offs among the performance determinants create extreme challenges for leaders. This is because attempts to influence one performance determinant affects the other, either positively or negatively (Nagy and Peter, 2011).
Some scholars classify most forms of direct leadership behavior into three categories, which depend on their primary objectives. Therefore, we have task-oriented behaviors focus on the improvement of efficiency and process reliability. Leadership change-oriented behaviors look into the improvement of adaptation to external influences. On the other hand, relations-oriented behaviors take into account methods of improving human relations and human resources in the organization. Leaders will find these classifications of behaviors more useful in some situations than in others. For instance, leaders must apply change-oriented behaviors in a rapidly changing environment than in stable situations.
Leaders must make decisions about competitive strategy. Top executives have the primary responsibility of deciding on an organization’s competitive strategy. These decisions are vital sources that influence an organization’s performance. Leaders’ decisions regarding competitive strategy affect the relative importance of the performance determinants and their optimal level. Leaders’ approach primary focus on strategy aims at establishing an organization’s adaptation mechanisms.
However, the interrelations among performance determinants create difficult conditions of improving adaptation in an organization, unless leaders implement consistent changes in efficiency and human capital. For instance, the decision to give low process as the aim of increasing sales and profits may require a reduction in the cost of operations. Therefore, leaders must decide to adopt the use of improved technology, use less expensive materials, and reduce salaries of current staff and new recruits, or outsource high paying jobs to low wages countries. At the same time, leaders’ decisions to provide unique products or improve customer service may make it necessary to retain current staff or recruit highly skilled workers (Becerra, 2009).
The strategic formulation in an organization takes into account the use of specific leadership behavior with concerns of monitoring the external factors, assessing threats and opportunities, identifying core competencies, and evaluating other alternative strategies. Leaders must also identify some systems for monitoring and evaluating the external environment in order to get additional information needed for the formulation of an organization’s competitive strategy.
Most leadership behaviors are useful in implementing a new strategy or significant change in the organization. Leaders must influence the organization’s culture by implementing a new strategy through modification of management systems, structures in the organization, and to some extent, may also involve negotiations with external relations (Paul, Kenneth, and John, 2004).
Top executives have a fundamental of ensuring that the required organizational leadership capacity is available whenever the need arises. Therefore, leadership must focus on shaping the business environment, delivering business strategy and creating the required leadership capacity. Leadership for the future must also be a consistent force for all the ongoing processes of leadership capacity as a condition necessary for change.
Leaders should also strive to sustain investment in building leadership capacity during downtime and unfavorable business times. The final role of leadership for the future must create a model of commitment to building leadership capacity. Studies show that executive leadership commitment to creating leadership capacity will have an effect on the organization’s overall leadership culture. Accountability among the top executives for leadership capacity motivates other leaders in the organization to adopt the same culture.
Kerr and Jermier produced a model that helps in the identification of aspects of the situation that reduce the importance of leadership by managers and other formal leaders. This model is a leadership substitutes theory. This theory differentiates between substitutes and neutralizers. These scholars argue that substitutes make leader behavior unnecessary and redundant. These include tasks performed by subordinates, or in cases where an organization make sure that subordinates understand their jobs, know how to perform their task, highly motivated staff, and satisfied staff.
Conversely, neutralizers are features of tasks or organizations that inhibit a leader from acting in a given manner or disregarding the effects of the leaders’ actions. For instance, a leader may lack the authority of rewarding exceptional performance. This limits the leader’s use of contingent reward behavior. Likewise, a subordinate’s lack of interest in the reward a leader gives is a situation that results in pointless behavior. The leadership substitutes theory identifies task motivation and role clarity as to the implicit factors in rendering the role of leaders in the organization pointless.
The theory attempts to highlight whether workers get needed task guidance and incentives in order to perform without taking any task simply because the top executive is the primary supplier. Therefore, substitutes become aspects of a condition that influence the intervening variable at an optimal level. On the other hand, neutralizers look at factors that discourage a leader from conducting a duty that aims at improving the deficiencies in the intervening variables. In effect, elements of a supportive leadership look at consideration, while instrumental leadership focuses on the initiation of structures.
Bob Johansen notes that leaders must learn how to make a future in the midst of volatility, uncertainty, complexity, and ambiguity (VUCA). He argues that the discipline of foresight can help leaders make better decisions today. Therefore, they must not passively accept the future. Johansen further notes that foresight is most relevant during times of difficulties. The global future perspectives can help leaders make sense of the chaotic patterns of change in the external world. Therefore, paying attention to the distant future can provide a new insight for the present situations. Leaders of today are experiencing difficulties, but their responses to such conditions are not constructive and future prospects for leadership are not secure.
Depending on the leadership behaviors in managing a volatile environment, some leaders may judge to soon and offer simplistic conclusions, while others may react too late and suffer the consequences of their inactions or lack of courage. Different behaviors of leaders, when faced with VUCA situations, vary from one leader to another. However, these reactions are both understandable and dysfunctional in most situations. In light of all these, Johansen notes that leaders should not be overwhelmed by difficulties. Instead, they should take the advantages and opportunities that the future presents through the use of their skills and agility in eliminating such challenges (Johansen, 2009).
The concept of servant-leadership emanated from Robert Greenleaf, and since then, there are growing concerns over the servant-leadership approach in the corporate world in the past decades. Scholars see the servant-leadership approach as specific, service concept revolutionizing workplaces. They have noted that the traditional forms of leadership such as autocratic and hierarchical models of leadership have failed to yield any new models. The new model of servant-leadership seeks to create teamwork and community, involve all decision-making processes, enhance the personal growth of individual workers and improve the quality of many institutions (Lawrence, 2002).
Robert coined the terms, servant and leader, to create a paradoxical notion of servant-leadership. The idea is both logical and intuitive. This is because people tend to believe that the traditional approaches to leadership since the industrial revolution have treated workers as objects, and organizations have considered staff as cogs within a machine system. However, the growing adoption of servant-leadership aims at changing these long-term held beliefs.
Scholars and writers such as Peter Senge, Stephen Covey, Max DePree, and many others have suggested servant leadership as the better way of managing modern organizations. Consequently, there has been a growing concern for a team-oriented approach to leadership and management.
Just like Johansen noted the importance of foresight in leadership, Greenleaf also puts foresight as one of the fundamental pillars of the servant-leadership approach. This may be difficult to define but may be easy to recognize. According to Greenleaf, the concept of foresight should allow the servant-leaders to comprehend the past lesions, a true reflection of the present, and the likely impacts of a decision for the future. Foresight goes along with the intuitive mind. Foresight can be innate or consciously develops from experiences. However, the challenge is that not much material is available on foresight as a concept of leadership.
One of the fundamental applications of servant-leadership is its use in programs of personal growth and transformation. It operates both at an organizational and a personal level. Individuals get professional, emotional, and intellectual growths from the servant-leadership approach. The approach of servant-leadership creates an organization’s culture whereby everyone has an opportunity to serve and lead others. This sets up the potential for raising the quality of workers in an organization.
Impacts of current economic (foreign money exchange), technological and social trends on organizational leadership for the future
We believe in the potential of innovations that can produce social and economic opportunities and education that can play a transformational role in this change. Management education should strive at developing future entrepreneurial leaders who will engage a different set of logic in business decision-making, based on the fundamentally different rationale for the existence of the business. Future leaders must recognize that profit maximization and creating value for shareholders are no longer the driving force of organizations. The trend has shifted to maximizing the common good and reducing social injustice and environmental impacts (Greenberg, McKone-Sweet and Wilson, 2011).
The concept of entrepreneurial leadership looks at individuals who, through comprehending themselves and their industry environment, act to shape opportunities that create a competitive advantage for their organizations, stakeholders and society. Leadership for the future should aim at simultaneously creating social, economic, and environmental opportunities (Laszlo, 2003). They never dwell in a limited supply of resources or by high levels of uncertainty. Such leaders tackle situations by taking actions and evaluate new solutions using past experiences. Future leaders cynically or lethargically refuse to resign themselves to the problems of the markets. They combine aspects of self-reflection, resourcefulness, analysis, and creative thinking and action to find ways to inspire and lead others to tackle problems (Randall, 2003).
The current economic, technological and social trends require leaders who possess cognitive ambidexterity. This is a mode of thinking and acting through flexibly switching back and forth between prediction and creation approaches. The prediction approach in future leadership looks at existing information in conducting analysis under situations of certainty and low levels of perceived uncertainty. Conversely, the creation looks at actions that aim at generating data that do not exist or inaccessible. These concepts serve leaders in a dynamic environment characterized by extreme uncertainty and unknown occurrences. Leaders can apply the concepts of prediction and creation logic to inform and progress other ways of thinking. Future leaders can engage in prediction and creation to create values that adopt one approach in challenging situations (Duane and Hitt, 2005).
The modern trends call for a flexible and adaptive leadership approach. Leaders’ decisions and actions aiming at improving a performance determinant, always have implications for the other performance determinants. Worse still, the consequences may not be intentional and not beneficial. Leaders who put too much emphasis on influencing one performance determinant may have a severe effect on another determinant. This may lead to low organizational performance.
This is what happened in Home Depot when it tried to improve efficiency, which had adverse effects on human relations and adaptation. This shows that future leaders will find it hard to integrate technology, and human relations to improve efficiency and innovation whereby changes depend on workers who have no motivation, and skills needed to achieve new changes. Therefore, future leaders should look for ways of enhancing more than one performance determinant simultaneously. The solution to this challenge lies in the adoption of the concept of organizational ambidexterity. This helps leaders to embrace innovative adaptation and efficiency simultaneously.
Kash Mansori looks at local causes of the euro crisis that analyze the wasteful and irresponsible behaviors of governments and individuals in the eurozone countries such as Portugal, Greece, and Ireland. The governments of these countries had large debts and investors lost confidence when the recession of 2009 reached them. Investors saw the inability of the eurozone countries in remaining solvency states. Subsequently, some withdraw from the bonds trading. This action started the euro crisis. This is a clear lack of leadership in handling crises (Mansori, 2011).
Organizational transformation shows how they respond appropriately to trends in the markets. Organizational transformational in the face of leadership has become significant due to the unpredictable economy. Market forces and performance determinants are changing at a rapid rate. However, due to organizational leadership and other factors, some organizations are changing very slowly. The problem is that these changes are rippling across the global economy and do not have uniform results. For instance, markets in developed nations are changing faster than markets in emerging nations.
Most organizations choose to wait for the future to present itself. However, such a sort of approach merely promotes an even slower response to changing trends in the market. The inability to respond swiftly and appropriately to sudden changes in the industry environment has proved fatal for most organizations. Organizations whose leadership is ill-prepared to handle rapid changes find themselves spiraling to collapse. On the other hand, organizations that strive to prepare for change and nurture a corporate culture that incorporates continuous business transformation will survive. The leadership of such organizations develops processes and frameworks that promote and support continuous organizational transformation, reward innovative approaches to business growth and engage in active sales of products and services generated by their internal transformation processes.
Innovative use of technology is a prime requisite for success in today’s competitive industry environment. However, we must note that it is not the only condition for success, but it is almost impossible for modern organizations to succeed without it. The leadership of today and the future, cannot imagine technology, without dwelling on costs. Therefore, organizations’ top executives must defend their preferences for IT by showing how much cost IT implementation will save when in use. The problem is that most organizations find it hard to keep up with the dynamic world of IT. What worked a year ago becomes obsolete as competition increases. These changes make some leaders argue that IT is not the best method for competitive strategy (Anderson and Linda, 2001).
The fundamental point is that savings will not catapult an organization to greatness. Therefore, future leadership should not engage in balancing innovation and cost-cutting but instead should concentrate on balancing innovation and value creation. This is because most business exists to create value and not cut costs. Therefore, future leadership must shift from the old paradigm, which forced the IT department to express expenses in terms of associated savings. Leadership must now move to a new paradigm and demonstrate how much value it will create. The old leadership looked at IT in terms of innovation and cost-saving. On the other hand, future leadership must look at IT in terms of innovation and business value.
The latest cycles in the continually unfolding IT industry have caught the old and current leaders unaware. Severe economic challenges of the past few years have created leadership capacity that is highly innovative, extremely cost-conscious and acutely aware of the need to create value. This must be a normal approach for future leaders in embracing IT (Muller, 2011).
Western ideologies of leadership have influenced the Chinese social leadership style of paternalistic leadership. Chinese leadership shares social networks so that their subordinates can refer to them as wateristic. Such leaders strive to instill these values in their followers through sharing leadership. This theory argues that subordinate choose to share network leadership once the leader has offered it. On the other hand, leaders who refuse to share network leadership subordinates see as authoritarian (Chen and Lee, 2008).
However, the emergence of IT and admired leadership values, such as those of wateristic using modern and scientific production and service technology have created struggles between the old and modern leadership styles. The proliferation of American leadership values in China has also resulted in a struggle between Chinese and American leadership values.
Studies show that there are four prominent leadership models dominating the leadership studies in China. These include the paternalistic leadership (modern father-son style emanated from Confucianism), transactional leadership (reward and punish), sharing network leadership (creating trust with followers), and transformational leadership (focus on ministering to subordinates). Studies have focused on all these approaches to leadership and found varied results. For instance, the American transformational leadership style does not work in the social Chinese organizations dominated by the notion of sharing network leadership. Some scholars predict an approach of leadership based on organizational citizenship behavior (OCB) in the future so that the two can merge.
Anderson, D. and Linda, S., 2001. Beyond Change Management: Advanced Strategies for Today’s Transformational Leadership. San Francisco: Jossey-Bass Inc.
Becerra, M., 2009. Theory of the Firm for Strategic Management. Cambridge: Cambridge University Press.
Chen, C. and Lee, Y., 2008. Leadership and Management in China: Philosophies, Theories, and Practices. Cambridge: Cambridge University Press.
Duane, I. and Hitt, M., 2005. The Blackwell Encyclopedia of Management: Entrepreneurship. 2nd ed. Malden, MA: Blackwell Publishing Ltd.
Greenberg, D., McKone-Sweet, K. and Wilson, J., 2011. The New Entrepreneurial Leader: Developing Leaders Who Shape Social and Economic Opportunity. San Francisco: Berrett-Koehler Publishers, Inc.
Havinal, V., 2009. Management and Entrepreneurship. New Delhi: New Age International Publishers.
Hiebert, M. and Klatt, B., 2001. The Encyclopedia of Leadership: A Practical Guide to Popular Leadership Theories and Techniques. San Francisco: McGraw-Hill.
Jeff, H. and Hartman, S., 2002. Organizational Behavior. New York: The Haworth Press.
Johansen, B., 2009. Leaders Make the Future: Ten New Leadership Skills for an Uncertain World. San Francisco: Berrett-Koehler Publishers, Inc.
Koontz, H. and Ramachandra, A., 2010. Principles of Management. New York: McGraw-Hill.
Laszlo, C., 2003. The Sustainable Company. London: Island Press.
Latham, G., 2007. Work Motivation: History, Theory, Research, and Practice. Thousand Oaks, California: Sage Publications.
Lawrence, M., 2002. Focus on Leadership: Servant-Leadership for the Twenty-First Century. New York: John Wiley & Sons, Inc.
Lusier, R., 2009. Management Fundamentals: Concepts, Applications and Skill Development. New York: Pearson Education Publishing.
Mansori, K., 2011. What really Caused the Eurozone Crisis?. Web.
Miles, R. and Snow, C., 2003. Organizational Strategy, Structure and Process. California: Stanford University Press.
Miner, J. B., 2005. Organizational behavior I: Essential theories of motivation and leadership. New York: M.E. Sharpe.
Muller, H., 2011. The Transformational CIO: Leadership and Innovation Strategies for IT Executives in a Rapidly Changing World. New Jersey: John Wiley & Sons, Inc.
Nagy, H. and Peter, K., 2011. Seeking Transformation Through Information Technology: Strategies for Brazil, China, Canada and Sri Lanka. New York: Springer.
Pandya, M. and Shell, R., 2005. Nightly Business Report Presents Lasting Leadership: What You Can Learn from the Top 25 Business People of Our Times. New Jersey: Wharton School Publishing.
Paul, D., Kenneth, S. and John, R., 2004. Strategic Management: Issues and Cases. Malden: MA: Blackwell Publishers.
Randall, R. M., 2003. The Strategic Leader: Understanding the triad of great leadership – context, conviction and credibility. New York: MCB UP Limited.
Roberts, J., 2004. The Modern Firm: Organizational Design for Performance and Growth. New York: Oxford University Press.
Tidd, J., 2006. From Knowledge Management to Strategic Competence: Measuring Technological, Market and Organisational Innovation. London: Imperial College Press.
Weiss, D., Molinaro, V. and Davey, L., 2007. Leadership Solutions: the pathway to bridge the leadership gap. Ontario: John Wiley & Sons.
Yukl, G., 2010. Leadership in Organizations. 7th ed. New Jersey: Prentice Hall.