Carl-Henric Svanberg's leadership style during Ericsson's crisis

Erikson Leading in Times of Change

Erikson: Leading In Times Of Change

The Leadership Style of Carl-Henric Svanberg

The leadership style of Carl-Henric Svanberg can be explained in terms of the context of the leadership situation. Svanberg's appointment as CEO of Erikson was an unprecedented move in the history of the company because he was the first CEO to be brought in from outside the industry. This created some discomfort to people within the organization. But most external to the company also felt optimistic about his taking control of the affairs of the company. The company itself was passing through a historic crisis in the form of declining profitability and a shrinking market. Network operators had ceased expanding their infrastructure which was a big blow to the growth Erikson had been experiencing for almost a decade. Svanberg was sensitive to the unique position he and the company were in and sought to make the best of the available resources. He leveraged on the optimism of those who expected him to bring a new perspective to the restructuring of the ailing company.

Through his positive outlook and framing of the situation along with his inclusive approach towards everything from strategy development to implementation, Svanberg helped to instill new values and a culture of conscious responsibility among the employees. This sensitivity to the context is reflected in the study of Osland et al. (2000). They state that leadership demands cultural sensitivity and an appreciation of the context (p. 70) on the part of the leader to bring about change in the organization without disrupting positive relationships. Svanberg's approach to leadership is based on participation and openness. Yukl (2007, p. 100) advocates a participative style of leadership that incorporates delegation over an authoritarian style of leadership. Jackson and Parry (2008, p. 84) also support that leadership is a shared transformational activity rather than an individual effort. Western (2008, p. 86) also decries the notion of the leader as a messiah or a controller in favor of a more inclusive and distributive concept of leadership. Even before he joined the company, Svanberg was seen on the premises interviewing employees and getting their ideas for how he could help the organization. This style created confidence among the employees who had been shaken with the massive layoffs in the company. It helped to establish Svanberg's authenticity (Guthery and Jackson 2005, p. 1078) as a leader and his commitment towards the organization. His authenticity was also strengthened when he pursued the maxim of "qualify every day" to encourage his employees to reflect their commitment in actions and in words. His belief in "leading by example" was also reflected in the fact that he invested SEK 100 million in the stock of the company to assure employees and outsiders of his commitment to improving the situation of the company. In this way, he was able to inspire his employees to accept a new culture where professional accountability was taken to a new standard. According to Grint (2005), the responsibility of a leader is to inspire responsibility instead of compliance among employees. Svanberg succeeded at achieving this by setting a personal example through his words and conduct for his employees to emulate. What played a large part in the success of Svanberg's leadership style is the positive way in which he articulated his vision for the business even during a period of crisis. Even while he was contemplating a fourth round of cost cutting measures at the company, which many on the management team though would jeopardize the leadership position of the company, he held an optimistic outlook by stating that much more successful companies were smaller than Erikson. Also, at the time of joining the company, he was positive about the prospects of the company. When others around him were concerned about the survival of the company, Svanberg described it as a rebirth of the company. This reflects the positive representation of issues and ideas stated by Elliott (2009, p. 178).

Svanberg also played great emphasis on communicating with his employees. Simplicity was an important part of his communication strategy. He believed in giving complete information to all employees in a way that assured understanding instead of awe. Svanberg believed that information had empowering value and empowered employees was what Erikson needed to survive the crisis. He explained what his plans for the company were in simple words so that all employees could understand them. In this way, he was able to structure a new relationship between the employees and the organization, which is an important role of a leader as identified by Alvesson and Svenningsson (2003, p. 367).

Svanberg practiced an open door style of management where employees were welcome to offer suggestions and identify problems that required his attention. Grint (2007, p. 3) suggests that such an approach to management is important because the leader's approach should not be such that he is perceived to be firm in his approach. Although this is an important attribute for a leader, he should also be perceived as approachable and flexible.

At another point, Grint (2005, p. 1471) states another aspect of a leader's role that is reflected in the leadership style of Svanberg. Grint proposes that leadership styles can be understood as a combination of trait and situational theories. The leader attempts to apply the relevant traits possessed by him or her to the leadership situation to get the best results for the organization. Svanberg displayed such flexibility when he adopted his natural consensus-based approach towards leading the change at Erikson. Previously at Asea, he had adopted an authoritarian style of leadership because that was the requirement of the situation. This flexibility of Svanberg's is also reflective of a higher sense of self-awareness and self-regulation, both of which are important aspects of individual leadership (Day 2000, p. 584). At the same time, he also possessed social awareness and social skills because of which employees became less anxious under his leadership. His sensitivity to the social context enabled him to address the anxieties and concerns of the employees by seeking their input and suggestions on a regular basis. He did not seek to impose his ideas n the employees. Instead his approach is similar to Knights and Wilmott's (1992, p. 771) view that social reality is constructed through a negotiation of the new approach with stakeholders. Barge and Fairhurst (2008, p. 240) also stress the importance of co-creation of reality through the interaction of the leader and the led. The role of the context in developing leader responses is also stressed in their study. Morrell and Hartley (2006, p. 490) also describe the importance of interdependent networks of social relationships that can influence the behavior of leaders in the organization. In addition, Morrell (2006, p. 178) has described that an understanding of setting and sequence is important to demonstrating appropriate leadership behaviors. The issue of sequence is noticeable in Svanberg's approach where he took prudent steps to gain the confidence of his employees knowing that three rigorous rounds of cost cutting measures had already left the morale shaken.

Svanberg's emphasis on soft skills was suitable for Erikson because it allowed the management and employees to restore the previous levels of trust in one another. Once this had been attained, further steps at increasing efficiency would be welcomed with less resistance and resentment. Svanberg's efforts at reaching out to employees personally by interviewing them and asking for their suggestions communicated authenticity of his intentions and his words. This increased his credibility and he was able to undertake a fourth round of cost cutting. Svanberg's change strategy revolved around bringing managers and employees on board before any plan was announced. In this way, employees remained informed about the strategy of the company and could be more productive as a result of reduced anxiety levels. This strategy also enabled employees to become "intellectually stimulated" by the transformational leadership of Svanberg (Northouse 2003, p. 175).

Sinclair (2005, p. 403) describes the role played by the physical features and gestures of a leader in achieving successful outcomes and acceptance among the led. However, information in the case does not provide information that could lead one to conclude that Svanberg made particular use of his nonverbal messages to achieve his goals. Similarly, Adler's (1996) ideas that leadership styles should be understood from a gender point-of-view can also not be applied in the case of Svanberg.

Despite being optimistic and inclusive in his approach, Svanberg also displayed pragmatism and practicality in taking serious decisions. Examples include his decision to undertake a fourth round of cost cutting in the company and the decision to terminate the CFO Sten Fornell. The role of practical wisdom in successful leadership has also been stressed by Grint (2007, p. 237) in his study of the Aristotelian theories of leadership. He identifies this quality as phrenesis or practical wisdom.

Measures and Strategies Ignored by Svanberg

Svanberg adopted an inclusive and participative approach to leadership so that he could steer the organization back to profitability and market leadership. He implemented the operational excellence ladder to promote a culture of customer responsiveness, cost consciousness and continuous improvement in quality and design. There are, however, other strategies and measures that the leader could have found useful to be implemented in the given situation. As suggested by Grint (2005), collaborative leadership would be more appropriate compared to the consultative leadership style or selling behavior (Robbins 1996, p. 425) followed by Svanberg. He collaborative leadership style would involve creating structures, teams and mechanisms for tapping into the knowledge of the workers and their suggestions to enable them to propose plans for improving the profitability of Erikson. The collaborative style could have made the employees feel more empowered and in control of the situation after being fearful of losing their jobs during the past several months. Svanberg's style mostly involved consulting and interviewing thee employees to learn about their concerns and suggestions. The suggestions could then be incorporated into an improvement program that was developed by Svanberg along with the team of executives that he had created.

There were other measures that Svanberg could have used to determine progress towards profitability. Traditionally, Erikson had depended on sales to attain profitability. Account management was an important activity that had not been incorporated into the operational excellence plan. The focus had been on customer responsiveness and the selling strategies had been ignored. The measures that could have been included in the new strategy could have allowed the management to measure the success a retaining key accounts and making new ones. The sales volume of existing clients also had to be increased by offering high quality products with shorter lead times. These measures are missing in the operational excellence ladder.