Meg Whitman is the head of one of the most successful companies of the Internet era, the online auction site eBay. Her success with the company reflects both the basic ingenious structure of eBay itself as well as her own abilities as a leader. This paper examines two specific qualities of Whitman's leadership qualities, her transformative and transactional styles of leadership.
A basic definition of these two types of leadership is in order first. Transactional leadership is based on the principle that business leadership should use the fact that people follow their own self-interest, demonstrating that an employee's self-interest can parallel the interests of the business. (In other words, the transactional leader helps employees to see their working hard - and increasing the company's profits - as being a win-win situation for both employees and employers.
Transactional behavior focuses on the accomplishment of tasks and good worker relationships in exchange for desirable rewards. Transactional leadership may encourage the leader to adapt their style and behavior to meet the perceived expectations of the followers (http://www.leadingtoday.org/Onmag/jan03/transaction12003.html).
There are generally considered to be four types of transactional leadership used in the business world today. These include:
Contingent Reward - To influence behavior, the leader clarifies the work needed to be accomplished. The leader uses rewards or incentives to achieve results when expectations are met.
Passive Management by Exception - To influence behavior, the leader uses correction or punishment as a response to unacceptable performance or deviation from the accepted standards.
Active Management by Exception - To influence behavior, the leader actively monitors the work performed and uses corrective methods to ensure the work is completed to meet accepted standards.
Laissez-Faire Leadership - The leader is indifferent and has a "hands-off" approach toward the workers and their performance. This leader ignores the needs of others, does not respond to problems or does not monitor performance (http://www.leadingtoday.org/Onmag/jan03/transaction12003.html).
Transformational leadership is based on the desire of a leader to appeal to significant moral values or ideals. "The leader is able to transform followers beyond the dishonorable emotions of jealously, greed and fear to higher principles of liberty, justice and humanitarianism." (http://www.leadingtoday.org/Onmag/feb03/transform22003.html).There are also four may elements of transformational leadership. They are:
Idealized Influence - This is a behavior that arouses followers to feel a powerful identification and strong emotions toward the leader.
Inspirational Motivation - A leadership behavior that models high values as an example, and includes communication of an inspiring vision. It also promotes powerful symbols to arouse greater effort and a feeling of belonging.
Individualized Consideration - This behavior provides coaching, support and encouragement of specific followers.
Intellectual Stimulation - A behavior that influences followers to view problems from a fresh perspective and with a new increased awareness (http://www.leadingtoday.org/Onmag/feb03/transform22003.html).
The World of eBay
To understand Whitman's leadership style it is important to understand the basics of the company, given how different it is from other firms. The company was founded seven years ago and now boasts over 30 million registered users (those who may either offer goods for sale or may bid on goods to buy) and is the most popular shopping site on the Internet as measured by total user minutes. In 2000, $5 billion in annualized gross merchandise sales traded hands on eBay as people sold all kinds of practical, unique, and interesting items, such as automobiles, jewelry, musical instruments, cameras, computers, furniture, sporting goods, tickets, and boats" (www.ebay.com).
A large measure of the company's appeal is not only the sheer amount (and variety) of items that is available on the site but also the allure that auctions have always held for participants: They simultaneously offer the promise of getting something at a bargain with the thrill of competition and have been able - by being first in the door - have been able to capture a very high percentage of the market share.
Yahoo! And Amazon... may have similar technology and software for their customers, but they have to get the scale of bidders and sellers. They must actively pursue "stealing" market share from eBay to take advantage of network externalities. This is easier said than done however, since bidders would prefer to shop in a larger marketplace with many identical items causing competition among sellers and ultimately a lower price. The same bidder would be lucky to find one or two of the items he is looking for on another auction, which would create more competition among bidders and result in a higher price. Sellers also face a similar dilemma. They know that eBay has many more bidders looking at its products than the other auctions, which means that their items will get more page views. They expect more bids and a higher price for their product. Therefore, neither eBay bidders nor sellers are willing to switch to another auction, even though they are not locked in to eBay (http://www.mahller.com).
This then is the world that Whitman has overseen since she joined eBay as its CEo in 1998, and her success (and so the company's) results from the fact that she is able to blend transactional with transformational qualities. Among the key ways in which she is able to use transactional leadership qualities is by helping people understand how their own and the company's goals overlap. This eBay vendor, who has had her own bricks-and-mortar store as well as running her own website, said that this quality of Whitman's leadership is what has lead her to do so much business on eBay.
I have my own website, and certainly I sell from it. But with eBay, you're part of a team while at the same time maintaining your independence. Meg is a great leader: She keeps track of every single detail. She's even sent me suggestions on how to improve my auction offerings. I'm a power seller, but still that's pretty amazing that she would take the time to do something like that. And with her it's never: "Do this because I'm the CEO." Instead it's always: "Here's something that I think would be good for you and also good for all of eBay."
Whitman has a greater chance to use such a transactional quality than do many leaders who are in a more conventional management-employer relationship. This attention to detail and the emphasis on the importance of every transaction being good for the buyer, the seller and the company (a win-win-win strategy) permeates the company, including those who actually work for eBay as well as those who use its auction sites.
The superficially casual, fundamentally businesslike quality permeates eBay. Employees are cheerful and informal. Their no-nonsense cubicles are littered with sports souvenirs, Godzilla figurines, and Beanie Babies. There are free sodas in the break rooms. But when you talk to eBay people, you don't head much about fun and games. Your hear about plans, systems, numbers and results.
In other words, by creating an arena in which people feel appreciated and valued and so part of a team, Whitman has been able to create (through an emphasis on transactional leadership) an emphasis on working together for common goals: A company that is financially healthy enough to reward its employees and that is also generally a good place to work.
Whitman has gotten her employees, her vendors and her buyers to believe that they belong to a community. This frequent eBay buyer comments on the transactional nature of Whitman's leadership as it applies to the seller.
I know that it sounds odd that I should feel more connected to people that I buy from on eBay than the people that I buy from at Target or Macy's or some other big store. But it's true. I really do feel that way. And that's partly because the sellers have a relationship to the things that they are selling that you just don't get in any other market with the size and variety of eBay. For example, I just bought a whole batch of vintage gloves. And the person I bought them from told me that she had bought them at a yard sale that was raising money for a local library. I like that - these gloves connect me to people I've never met. The seller gets to make money and I get the gloves that I wanted. It all seems very personal - the way eBay lets everyone come out ahead.
There are a number of transactional elements to Whitman's style, including the uses of contingent rewards, active management by and a relatively laissez-faire style of management. It should perhaps be pointed out here that the laissez-faire style of management that Whitman is pursuing is not entirely hands-off: One of the reasons that she has been so successful as a business leader is that she pays attention to the level of detail that many CEOs do not concern themselves with. Her style of laissez-faire management is that she allows her employees and her vendors sufficient autonomy that they feel that they can bring their own…