Leadership Behavior for Effective Decision Making Effective

Leadership Behavior for Effective Decision Making

Effective decision making in the competitive business environment is closely linked with leadership skills. Managing change in existing organizations can often be extremely difficult, as it requires changing the organizational culture, the very roots that bind its members. This paper analyses the characteristics of a successful leader, illustrated with a practical example. Contrary to popular understanding, there is no unique style of leadership for all situations and the leader needs to be flexible and change his approach depending on case to case basis. The analysis takes into account the various theories on leadership - behavioral, contingency and transformational and evaluates the response of the leader to various situations in a typical organization operating in a fiercely competitive environment.

From the analysis, it is observed that the leader exhibited varying leadership styles and behavior to address and resolve various issues. The leader is found to be democratic, participative and relationship-oriented, which are the general hallmarks of a successful leader. However, he does not lose focus on the organizational goals and has clearly identified short-term and long-term goals for the organization. He seems to have has a grand vision, which if achieved, will take the organization to great heights, in future. One of the weaknesses found in the leader was the tendency to go too soft with employees, which is an area he needs to improve. This also could lead to a situation, which could lead to inconsistencies and lack of clarity in the performance appraisal process of employees, meaning that it would be difficult to distinguish the high performing employees from the average ones. The analysis also describes how the leader is required to contend with five major challenges of leadership.

Introduction:

leader is 'an individual who significantly affects the thoughts, feelings and/or behavior of a significant number of individuals'. (Gardner, 1997). Three elements are seen common to most definitions of leadership; first, it is fundamentally a social phenomenon, second, leadership results in changing activities and structuring relationships and third, to be categorized as a leader, the person must be recognized as having a higher ability to influence decisions. It is now widely accepted that leadership need not be an inherent quality in people, but can be taught and developed through transformation of knowledge and training. The skills of leadership are closely linked to the skills of complex decision-making, which is the fulcrum on which organizations thrive in the competitive environment. Decision making comes to the fore, when one or more members of a group decide that the status quo is changing or likely to change and hence recognizes the need to change actions that affect organizational performance. (Rosenfeld and Wilson, 1999). The effect of successful leadership on organizational performance is illustrated in detail with a case study.

Case Study:

I am the Business Development Manager for a software company that has operations in many countries and delivers cutting-edge real time solutions to many leading international companies. After years of growth, the company at the start of year 2003, found itself riddled with many problems and faced a possible impedance of growth. While the company continued to enjoy the confidence of most of its major customers and thus repeat businesses, there was a significant reduction in income from new business opportunities. Competition was gobbling up new contracts by aggressive marketing, pricing and promising better deliverables. With the passing of every quarter, profitability was showing a negative growth and many felt that it was only a matter of time before the company slipped into losses.

One fine Monday morning, the news hit us that the existing Chief Executive Officer (CEO) was stepping down and a new CEO would shortly take his place. The new CEO, a rather youngish man in his early forties, joined the company in April 2003. Within a few days, he identified the key problems afflicting the organization:

lack of marketing drive leading to slowdown in growth of sales declining competitive advantages, leading to higher costs and lower profitability skilled manpower leaving the organization for better prospects low level of motivation among many sections of employees, due to lack of career growth opportunities decline in team work approach, growing incidence of indiscipline among the lower level programmers, leading to slippage in project schedules reluctance of the project teams to take on new and challenging assignments due to the uncertain environment prevailing within the organization lack of co-operation among the senior managers on goal setting

Within six months of taking over the mantle, the new CEO had successfully managed to turnaround the company's performance by solving most of the problems. Sales growth rate was back on track and expected to increase further, costs were down and profits started climbing. What was more visible was the improvement in motivation at almost all levels across the organization and better team work. In my assessment, the new CEO's leadership qualities were chiefly responsible for this remarkable improvement in the company's performance. Before making an analysis of how the leadership qualities of the CEO drove the company to the path of success, it is necessary to understand the major approaches to leadership.

Behavioral Theory:

The essence of behavioral theory is that leadership could be taught and good leadership is the result of exhibiting the right behavior when attempting to lead. Tannenbaum and Schmidt, the popular behaviorists, predicted that the leadership styles available to a manager can be related to the behavior ranging from a manager-oriented approach to the sub-ordinate oriented approach. Blake and Mouton developed this fundamental theory and stated that a leader may either adopt the behavior based on 'concern for the task' or 'concern for people'. Ideally, a manager should follow a mix of task-oriented and people-oriented approach, keeping in mind the final goal.

A managerial grid taking into account the two approaches provides several management styles, of which five are rated the most important - authority-obedience, 'country club' management, impoverished management, organization management and team management. Of the five styles, team management is the most effective as it directly improves performance. The theory suggests that managers need to respond with appropriate styles of leadership that are best suited for a given situation and such managers tend to become successful leaders. While the behavioral theory has been hailed widely and held the attention of researchers for several years since it was first propounded, the principal drawback was that there is no satisfactory evidence of correlation between behavior and performance. This led to the development of contingent theories.

Contingency Theory:

Contingency approach to leadership: Developed by Fiedler, Chemers and Mahar, this theory supposed that leadership style could vary from situation to situation, unlike other theories which worked on the premise that there was only one best style of leadership. In an organization, when the leadership style matches the demands of the work situation, then efficiency results. According to this theory, there are two measures to assess the match between leadership style and situation. They are (1) assumed similarity between opposites (ASO) and (2) least preferred co-worker (LPC). The ASO scale measures the similarity between the most and least preferred co-workers as perceived by the leader, while the LPC scale measures the extent of which leader favorably perceive the least preferred co-worker. According to Fiedler, the LPC scale is a better predictor of match in leadership style than the ASO. These scales were expected to give indication of three types of leadership - relationship motivated, task directed and choice of task/relationship style.

The first type of leader attaches great importance to human relationships and believes that once the human angle is taken care of, results will be easy to achieve. On the other hand, the task oriented leader spares nothing to achieve the set goals and often overlooks human related factors. This type of leadership can result in unfavorable co-worker disposition. The third style represents a blend of relationship and task orientation and such leaders have the ability to swing from one disposition to the other, depending on the needs of the situation. The leader's effectiveness is based on the synchronization of the leader's style and the situational favorableness or control, which is governed by three variables - the work group accepting or rejecting a leader, the extent of complexity of the task and the level of formal authority by virtue of position in the organization. (Nicholas, 1990). Fielder contemplated that there is no single style of leadership suitable for all kinds of situations and the appropriate style of leadership can be determined by measuring the ASO and LPC in the work group.

A different approach, namely the path-goal theory, based on the contingency model was attempted by House, according to which the role of influence through leadership is to compensate for things lacking in the work place. Leaders tend to be more effective and influential when they are in a position to fill the gaps in the work context. There are four styles of leadership - leader directiveness, leader supportiveness, and leader achievement orientedness and leader participativeness.

Yet another approach focuses on decision making and supposes that leaders should be flexible and alter their styles to match the practical situations (Vroom and Yetton, 1973). The theory suggests two measures of decision effectiveness - decision quality and acceptance. When a decision of is of high quality and accepted, the leadership can be said to be high caliber. The argument is that even when a decision is correct, it can be made to fail by the resistance of those in the workgroup responsible for carrying out the decision. Vroom and Yetton identified three alternate styles of leadership - autocratic, consultative and collective or group style. There is evidence to suggest that autocratic style of leadership leads to poor performance and non-acceptance by others. (Lickert 1967, Reddin, 1970) and participative or democratic leadership is more likely to catalyze high performance. Hersey-Blanchard's theory, another well-known variant of contingency approach, suggests four situational leadership styles - telling, selling, participating and delegating.

This theory argues that a situational leader adapts leadership behavior in line with the changing situation and features of the individuals in the work group. In measurable terms, the leadership style must match up the psychological maturity and job skill of the employees in the organization. As the employee maturity goes up the scale, the leadership style should be more relationship oriented than task-oriented. In a nutshell, the development levels of subordinates determine which style the leader should adopt, to deal with a given situation. Under this theory, leaders can exhibit two types of behavior - directive, in which the communication flows from the leader to the group and supportive, which is based on two-way communication and interaction. Contingent theories were successful to the extent of covering a wide range of factors relating to leadership and giving new dimensions to successful leadership. However, the main criticism is that this approach is more suited to managers, as sub-ordinates will always prefer a participative approach, irrespective of the demands of the situation

Transformational Theory:

The more recent theories suggest that the qualities of individual leaders must be linked with the ability to transform the organization's fortunes and provide a long-term viable vision. History has shown that leaders, while becoming prey to populist goals, have shown the willingness and ability to push leadership towards the concept of transformation. (Bennis, 1994). Also referred to as visionary leadership, the transformational approach enables leaders to evolve a mental image of the organization's future position. Leadership spurs this vision into action, leading to results. Thus transformation is all about leadership providing the vital link between the present and the future, with inspiration forming a major component of the process. The transformational theory is criticized for the problems posed in making the assumptions that form the vision for the future (Hampden-Turner, 1994). However, many experts have supported this approach and the perceived value of transformational leadership has prompted Bennis to state that 'without such leadership, even the most brilliant management strategy is likely to fail', (Bennis, 1994)

Analysis of the CEO's leadership style:

Within a few days of taking over, everyone expected that the CEO will organize a series of meetings to decide on the organizational goals and he will implement tough measures such as downsizing, freezing of bonuses and promotions to keep costs under control. But to everyone's surprise, there was no announcement of a meeting. Instead, the CEO invited department heads and key personnel and held face-to-face informal discussions. Without suggesting anything, he asked the key personnel to present their views, suggestions and recommendations on the ways and means to improve the company performance. He discussed the various problems faced by the department heads and team members and asked them to identify solutions.

At the end of the discussions, almost all the key personnel agreed that the company's performance was far off its normal levels, thus allowing competition to eat into the market share. They also agreed that it is not difficult to push it to more acceptable levels and given the right environment and resources, such improvement could be achieved with internal efforts. In the subsequent discussions, the CEO impressed the need for the company to put its best foot forward by becoming world-class in whatever it does and this found immediate acceptance among the managers. In the first stage, the CEO succeeded in making the employees commit wholeheartedly for a radical organizational change.

This is a classic example of contingent leadership, where the CEO apparently adopted a relationship-oriented approach by first focusing on people related issues. The logic behind this strategy is because of the nature of the situation that confronted the CEO. Here was a professional and competent company that had a good track record of success and high caliber individuals, who knew the nuances of the business and had the capability to overcome the challenges. Perhaps the solution lay in improving the working environment and motivating the employees. Obviously, the task-oriented leadership would have alienated the CEO and he was right in choosing the relationship-oriented approach. In dealing with employees, the CEO where required, urged them to use self-assessment tools to measure decision making skills and motivation levels.

After getting to understand the people-related issues, the CEO then started fixing goals - short-term and long-term. He got the department heads themselves to do this and participated in the process of decision making to make improvements, where possible. He was careful not to fix unrealistic or unreasonable goals himself, but motivated the key personnel to improvise and arrive at the best possible targets. This way, the employees were fully involved in the decision making process and at the same time, they were aware of the support and commitment of their leader. It was a bit surprising to note that, at the end of the budget sessions, the target income was increased by 25% and cost figures were down by one-third, with the promise that these figures will be revisited from time to time. If necessary, the figures will be revalidated and revised to ensure that the goals and targets are realistic. In the entire course of formulating business plans and budgets, the CEO took an approach that showed concern for both tasks and relationships. He did not lose sight of the main objective - the task, and for attaining this objective he concentrated more team leadership, which is stressed by the behavioral theory of Blake and Mouton.

In the course of the entire process, the CEO gained trust, respect, credibility and admiration of almost all managers and executives. In essence, he had the charisma to influence decisions. Backed up with this advantage, the CEO finally announced his vision for the company - he expected the company to be among the top ten in the country, within the next five years, in terms of sales, profits, service and corporate image. He was successful in selling this idea of vision to the managers, who started feeling as part of the mission in achieving this long-term goal. Given the current size of the company and its resources, it was going to be a Herculean task to achieve the vision objectives, but the employees had a sense of belonging to the vision, which gives the CEO a fair chance of reaching it. This is the essence of transformational leadership theory, which culminates in the effective leader influencing the work group to recognize and act for the vision. If successful, the company as well as the employees will bear the fruits of success.