Strategic Leadership Influence Culture Organization Eventually Organization

Strategic leadership influence culture organization eventually organization succeed fail. Show examples Air Asia, Apple Enron (Failure). I limit references subject matter Edgar Schein's theories culture organization business management authors.

The influence of strategic leadership on organizational culture and the ultimate success or failure of the organization

The focus on strategic leadership and organizational culture has been increasing exponentially throughout the past recent years, in both the academic community, as well as among the practitioners' community. The assessment of the role of strategic leadership in shaping the organizational culture and influencing the company' final success or failure has to start out with a review of the available literature. This effort as such represents the centralization of important and relevant data from the literature and its presentation in a relevant manner.

The sources addressed at this stage include books, journal articles and internet articles. Each of these sources has its own benefits and shortages. The books for instance might be outdated and they could integrate data from over three decades ago; in the fast changing economy, such information might lose relevance. Then, the journal articles will focus on specific issues of strategic leadership within organizations, but will be more difficult to access and the issues approached might be niche and of a low relevance for the current research. Finally, the internet articles, while not peer reviewed, have the advantage of presenting actual information, which will be highly useful in the analysis of Apple and Enron.

1.1. Abstract of the literature review

The literature review endeavor starts out with a look at the practitioners' community in order to set the basis for the future research effort. It reveals the background to the current research and presents the context of corporations today, with the example of Enron and its culture. It then moves on to presenting the positive and negative effects of strategic leadership for the wider context of the organization, but also outside it, at the level of the community.

1.2. Academic objectives of the project

1.3. Outline of sections

The current project is constructed from four main sections, namely an introductory part, one focused on setting the basis for the review, a third focused on the actual review of the literature -- with emphasis on the concepts of leadership and organizational culture, as well as the positive and negative effects of the influences --, and culminates with a section on concluding remarks, which integrate a summary of findings and the limitations of the study.

2. Setting the scene

2.1. The background

The act of leadership has been present within the society since the very creation of mankind. Leadership has been used in the construction of the ancient pyramids or in the creation of the original settlings. Still, the act of leadership as a theoretical stance has not been addressed until the recent decades, with the increase of the business operations.

Historically, the business operations had been limited to trade -- sometimes not even in money -- and understandings between the people. During the Industrial Revolution nevertheless, factories were open and business operations gained a more formal and practical nature. Factory owners were forced to manage their resources and their people in order to create profits. Still, in those days, the factory owners had an immense power and their leadership was discretionary and focused on their own benefit, to a point at which their laborers were exploited and union efforts were crushed in violence (Grantham, 1994).

Gradually, the employees gained more territory in their fight against the injustices of the factory owners and a crucial part in this fight was played by the policy makers, who developed legislations to protect the employees (Arup, 2006). The staff members as such gained more power within the economic climate and the act of leadership flourished as the company owners and managers were forced to motivate, reward and integrate the staff members. In other words, their objective remained that of profitability increases, yet leadership shaped the path through the attainment of this goal.

"The Industrial Revolution shifted America's economy from an agriculture base to an industrial one and, thereby, ushered in a change in how leaders would treat their followers. The Industrial Revolution created a paradigm shift to a new theory of leadership in which "common" people gained power by virtue of their skills (Clawson, 1999). New technology, however, was accompanied and reinforced by mechanization of human thought and action, thus creating hierarchical bureaucracies" (Stone and Patterson, 2005).

At this stage, the leadership emphasis fell on increasing the levels of organizational productivity, reducing bureaucracy and further integrating technology. In such a setting, the classical approach to leadership maximized the role of the mechanized work and minimized the role of the people, failing to recognize organizations as complex constructions.

By the middle of the twentieth century, organizations began to understand that people were not mechanic and it was not efficient to treat them as such; also, hierarchic structures commenced to show their limitations. Gradually then, a leadership style was formed to emphasize more on the role of people, to stimulate them and to link them to the final success of the firm. At this stage, researchers began to understand the factors that motivated the people and motivational theories were formed and issued, such as Maslow's hierarchy of needs or Herzberg's dual factory theory.

"Consequently, the goal of effective leadership was evolving and moving away from the earlier concepts of the classical and scientific management theories that treated workers as machines. Leaders were now challenged to actively involve followers in achieving organizational goals" (Stone and Patterson, 2005).

Towards the end of the twentieth century, the societies were also developing and creating more demands for the business agents, in the meaning that social well-being was sought instead of economic gains. Also at this stage, the technologic field was evolving at a pace more rapid than ever. In such a context, the focus of the leaders once again shifted from mechanized work to the value of the people; leadership by transformation and performance became quintessential in the modern day companies. The evolution of leadership is not expected to end here, but it is likely for it to become more interesting as the micro and macro environments rapidly change.

2.2. Corporations today

The modern day society is characterized by high levels of competition and demand from the various stakeholder categories, such as customers, employees, business partners, governmental and non-governmental institutions, the general public and so on (Chinyio and Olomolaiye, 2010). In such a setting, the companies have to attain their profitability objectives through the satisfaction of the needs and wants of these stakeholder categories.

Creating quality products and services is no longer sufficient to ensure survival in the industry and market place, but the firms have to devise a wide array of strategies that ensure their triumph. Examples of such strategic endeavors could include strong relations with the customers, innovative products, the creation of comparative advantages or the emphasis on operational efficiencies.

However challenging these situations might appear, there are some organizations that have managed to develop and implement leadership strategies that have brought them the highly anticipated success. Some examples in this sense include Apple Inc. Google Inc. Or Air Asia.

Apple is, without a doubt, one of the strongest and most popular companies across the globe. Its success is due to a powerful business model of leadership, based on strong relationships with the customers. Apple Inc. is for instance renewed for its customer relationship management, which places customer satisfaction at the center of the company's focus. Apple's strategy of customer satisfaction -- and ultimate corporate success -- is based on strategic efforts such as ensuring that the products send a statement, not just integrate a functionality; the creation of a wider product of complementary and independent products; the pursuit of innovation, the creation of independent stores to transmit the Apple design and values and the provision of reliable customer support (Inside CRM). All these values were inspired and transmitted by the late Steve Jobs, the mastermind behind the company's triumphs.

Successful strategies have also been implemented by Google Inc. which has focused on the hiring of highly skilled and intellectual capable engineers, and the creation of a working environment that fostered innovation (Griffin and Moorehead, 2009). Also, a success story is revealed by Air Asia and its leader, Tony Fernandes. The success of the company has been due to the creation of operational efficiencies which allowed the company to reduce its prices and make flinging accessible to everyone (Tony Fernandes Blog). The key success factor at Air Asia is represented by the low cost products, which generate increased demand from the customer base, coupled with the strong managerial model.

2.3. Enron leadership

Aside from the companies which have managed to use leadership strategies to attract success, there were also some companies which implemented faulty organizational cultures that eventually led to their dismay. And the most relevant example in this sense is represented by the case of Enron, a multi-operational activity, which, in the end, turned out to inflate its value through fraud. The company had set positive values and vision, through which it had promised to support the well-being of its stakeholders, but in the end it engaged in false accounting actions (Turner, 2009).

The company placed an increased emphasis on enhancing the value of its shares through tempering with the annual balance sheets and the promise of superior values for the customers, as well as the promotion of an organizational culture focused on the employees (Ulrich, Zenger and Smallwood, 1999). The leadership style at Enron was highly charismatic and close to a cult, in which the members were asked to conform and were penalized when they did not. While the accountancy issues ultimately generated the failure of Enron, it was the leadership style and culture created by Kenneth Lay and Jeffrey Skilling that allowed for the fraud to flourish.

According to Dr. Dennis Tourish, the causes of Enron's leadership failure included "a particular emphasis on charismatic leadership, particularly in the persons of Kenneth Lay and Jeffrey Skilling; the promotion of a compelling vision by these leaders, of a totalistic nature; individual consideration, expressed in a recruitment system designed to activate a process analogous to conversion; and the promotion of a culture characterized by conformity and the penalizing of dissent."

3. Literature review

3.1. Leadership and its influence on the organizational culture

The concepts of leadership and organizational culture are intriguing notions in the meaning that their meaning is simple to deduce, yet the provision of a universally accepted definition is an intricate endeavor which has yet to be completed. In a general note, leadership is understood as an act by which one individual leads other people to attain a common goal. It is important to note that leadership is different from management in the meaning that leadership is more about influencing people to attain the objective, whereas management has a more practical nature and refers to the administration of the resources in a means that they support the attainment of the pre-established objective (Howatt, 2008).

In terms of the organizational culture, this would simply be understood as the culture and atmosphere within an organization, which would be a force generating direct and indirect impacts upon the means in which the company conducts its operations and attains its pre-established objectives (Russ, 2010). Still, in order to better understand the two concepts, it is useful to present some notable definitions, as these are provided in the available literary sources. In this order of ideas, according to Richard L. Daft and Patricia G. Lane, the concept of leadership is rather simplistically defined, as follows:

"Leadership is an influence relationship among leaders and followers who intend real changes and outcomes that reflect their shared purposes" (Daft and Lane, 2008).

At the level of this seemingly simple definition, it is important to note that four distinctive functions of leadership are forwarded, namely (1) leadership is based on influence; (2) the leadership relationship is constructed by leaders and people; (3) the leaders and their followers aim for real changes, and last (4) the leaders and their followers develop mutual rationales and scopes. In other words, leadership is a relationship between people, aiming common goals and this relationship is multilateral and influential; it functions in all directions, without being top-down. Additionally, leadership as a relationship is noncoercive, "meaning that it is not based on authority, power or dictatorial actions, but is based on persuasive behaviors, thus allowing anyone in the relationship to freely agree of disagree and ultimately to drop into or out of the relationship" (Rost, 1993).

In terms of the concept of the organizational culture, the following definitions are worthwhile presenting:

"Organizational culture refers to a system of shared meaning held by members that distinguishes the organization from other organizations. Organizational culture provides employees with a clear understanding of the way things are done around here" (Dwivedi, 1995).

The organizational culture represents "a pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid, and therefore, to be taught to new members as the correct way to perceive, think and feel in relation to those problems" (Schein, quoted by Katherine Miller, 2008).

Last, a final effort of understanding the organizational culture is offered by Stephen P. Robbins (2009) in his Organizational behavior: global and Southern African Perspectives. In the book, Robbins does not seek to offer a strict definition of the concept of organizational culture, but more so, he focuses of the comprehension of the concept of organizational culture through the lenses of characteristics which shape the organizational culture. In this order of ideas then, Robbins pin points to seven distinctive characteristics through which would sit at the basis of the organizational culture and shape it. These refer to the following:

The level to which the organizational staff members are encouraged to take risks and be innovative

The level to which the organizational staff members are expected to reveal attention to details, analysis and precision in their operations and decisions

The degree to which the managerial team at the organization focuses on the end results to be retrieved, in the detriment of the tools and mechanisms employed in the goal attainment processes.

The degree to which the decisions of the managerial team within the origination are taken with consideration to the impact they would have on the people within the entity.

The focus on team work, referring specifically to the degree to which the organizational operations are developed by teams, rather than individuals

The nature of the people within the entity, referring specifically to the people being aggressive as opposed to easy going, and last

The organizational stability and perception of change, revealed particularly at the level of the company's emphasis on the maintenance of the status quo in the detriment of further growth and development (Robbins, 2009).

Edgar H. Schein (2010) points out an interesting fact that the concepts and manifestations of leadership and organizational culture are strongly interconnected. According to the author of Organizational culture and leadership, the link between leadership and organizational culture is best observed at the level of small size entities and micro-cultures. At these levels, the leadership style adopted by the manager shapes the culture of the organization by pointing out what is expected of the staff members, what is acceptable behavior and what it is not. Then, as the organization and the working environment grow in strength, the culture comes to shape the future managers. An already formed and powerful culture, which is entered by a new leader, has the power to shape the leadership style and approach, also by point out the acceptable behavior.

"The connection between culture and leadership is clearest in organizational cultures and microcultures. What we end up calling a culture in such systems is usually the result of the embedding of what a founder or leader has imposed on a group that has worked out. In this sense, culture is ultimately created, embedded, evolved ultimately manipulated by leaders. At the same time, with group maturity, culture comes to constrain, stabilize and provide structure and meaning to the group members even to a point of ultimately specifying what kind of leadership will be accepted in the future" (Schein, 2010).

In such a setting, it is important to assess the interconnectivity between the two concepts of leadership and organizational culture, in the meaning of assessing the impact one has on the other. In other words, the following lines would focus on the assessment of:

The impact of leadership on the organizational culture, and The impact of the organizational culture on leadership.

At the level of the impact of leadership onto the organizational culture, this is vast and complex, and can virtually include anything from the fact that leadership can create a culture, to the fact that leadership can destroy a culture. At the level of the impact of culture on leadership, it is noted that culture can shape the leadership act by pointing out the norms of acceptable behavior; in other words the organizational culture generates direct impacts in terms of the behavior of managers, such as the decisions they make, how they implement them and so on. Matthew R. Fairholm and Gilbert W. Fairholm (2008) believe that the two concepts are strongly interconnected, and that, from both practical and theoretical level, can only be understood in relationship to each other.

"In actuality, leadership is a consequence of corporate culture and culture is a result of leadership. The two are inextricably intertwined" (Fairholm and Fairholm, 2008)

3.2. Positive impacts of leadership on the organizational culture

3.2.1. Economic and financial success of the organization

The larger body of literature focuses on the immaterial impacts of leadership on the organizational culture, yet it has to be remembered that the eternal scope of the economic agent is that of strengthening its financial position. In such a setting, Allen Barclay (2010) points out that there are also some notable economic impacts of leadership onto culture. At a first level, leadership and culture shape production and productivity, which subsequently increase sales levels, revenues and profitability. Also, at a secondary and more salient level, the leadership style and the organizational leadership also help leaders and managers within economic constructions to make decisions in a better understood economic context, at the levels of both national and international operations (Barclay, 2010).

3.2.2. Positive impact on the community

At the internal level, a positive leadership style with beneficial impacts at the level of the organizational culture could materialize in commitments to supporting the well-being of the community through the sponsorship of community events, the commitment to operate in a manner which causes minimum damage onto the environment or the pledge to create more employment opportunities for the people in the community (Andrews and Boyle, 2007). All these dimensions generate positive impacts upon the reputation of the firm and its perception within the community.

3.2.3. Benefit of comparative advantage

In a highly dynamic and competitive market place, it is no longer a guarantee for success that economic agents should create and deliver high quality services. They have to also create points of difference that set them apart from the competition and trigger satisfaction among the customers. Leadership can exert such an impact on the organizational culture at several levels, one relevant example in this sense being represented by the organization's commitment to innovation. Ethem Duygulu and Emir Ozeren (2009) point out how a relaxed internal environment and an adhocracy culture help remove the barriers in thinking and creating, stimulating as such higher levels of organizational innovation. And it is undisputable that innovation represents one of the most solid comparative advantages today.

3.2.4. Improvement of business value and reputation

An economic agent that invests in and strives to create a positive business model and a culture promoting the well-being of the various stakeholder categories will also enjoy the benefits of an improved public image; this would subsequently improve its reputation as well as the business value of the firm. These outcomes are directly linked to final business success, through the generation of several benefits, such as acceptance by the public or raised interest from potential investors (Gompers and Lerner, 2004).

3.2.5. Promotion of long-term profits

As it has been already discussed, the economic agents in the modern day community are faced with more and more challenges, as they have to serve the growing needs of the stakeholders. Some new pressures to which the economic agents must respond include the satisfaction of the needs and wants of customers in a quick and efficient manner, the promotion of social well-being, the protection of the environment and so on (Albarran, Chan-Olmsted and Wirth, 2005).

In essence, the scope of the economic agent is the eternally living and omnipresent goal of profitability, yet the complementary requirements have intensified. And the economic agents have to devise a wide array of strategies to create these complementary tools for success. One example in this sense is represented by the usage of the leadership model to foster an organizational culture and environment based on performance. While the employees are engaged in performance enhancement, the productivity rates at the firm increase and better support the firm's profitability objectives (Meindl and Ehrlich, 1987). Additionally, the generation of profitability through the pursuit of performance is a sustainable course of action for the future and the long-term, not just an immediate measure.

3.2.6. Business survival

Another important impact of leadership on the organizational culture is revealed at the level of business survival. Specifically, a powerful leadership model supports a strong and solid culture within the organization, which in turn creates stability and long-term attainment of the objectives. Additionally, the ultimate attainment of the pre-established objectives is supported by1997 leadership and culture when these are consistent and consequent and they manifest the necessary influence in the sense of reaching the organizational goals (Chemers, 1997).

3.2.7. Training of future leaders

A final benefit of the impact of leadership on the organizational culture is revealed at the level of the employee training, including the training and formation of the future managers. A positive impact of leadership on the organizational culture is that of fostering continuous development of the staff members, which in turn materializes in the ongoing development of the firm, and the support for its long-term success.

"Generally, what they are saying is that they want people to grow and be receptive to changes and willing to take on new tasks. A culture of continuous learning goes deeper than this, although these behaviors are certainly important. Employees value continuous self-development and choose to make learning a priority in the face of competing demands. Leaders, also, match their intention to seek coaching and development with the attention they give learning each day and week" (Haneberg, 2009).

3.3. Limitations of the leadership influence on the culture of organizations

3.3.1. Leadership tailored to the organization

A first notable shortage of a powerful leadership model influencing the organizational culture is represented by the fact that the culture would be tailored to the specifics of the firm. In most instances, such a feature is a positive one by maximizing the strengths of the company and minimizing its weaknesses. Still, there also exists a situation in which the company's internal structures might not be consistent with the features of the external environment. In such a setting, pursuing the organizational course might prove devastating to the firm (Lowe and Marriott, 2006).

A relevant example in this sense is revealed at the very level of Apple Inc., which, following its organizational leadership, culture and commitments, has increased its production line with items such as the Apple Lisa, NeXT, Apple III, ROKR or the Mobile Me (Steele, 2011). All these items were consistent with the firm's business model, yet, they were not desirable within the market place. Limiting its financial loses, the company eventually removed these items from its production lines.

3.3.2. Influence of culture upon the leader

Another means in which leadership and culture could create negative impacts upon the company is represented by the effect it could have on the leader. For instance, it could strive to form the leader in the culture of the organization, without giving him the necessary space to be an individual and develop and implement his/her unique means of solving organizational problems. This could lead to the loss of the leader's identity, as well as the generation of negative impacts upon the personal life of the leader (Kristian). Ultimately, these impacts materialize in the company having an unfit leader, who is unable to create new visions and lead the company towards further development.

3.3.3. Lack of skills and perception

A negative impact which is observed at the level of the leadership impact on culture is revealed at the level of the skills and perceptions of the organizational parties. A relevant example in this sense is offered by Richard J. Black in his Organizational culture: creating the influence needed for strategic success. In this work, Black assesses the case of IBM, a high powered company in the Information Technology field, which however lacks in terms of internal strength at the cultural level. The conclusions reached by Black as a result of his study indicate that at various organizational levels, different cultural perceptions were present. The people employed in the departments also revealed different levels of skills and education, and this further increased the perceptual discrepancies of the organizational culture (Black, 2003). In other words, leadership can generate negative impacts upon the organizational culture unless it is able to unify the perception of culture across the entire entity and ensure that it is accepted in the same manner by all organizational staff members, across all organizational departments, regardless of their skills, capabilities and backgrounds.

3.3.4. Differences between leader and organization

Another notable shortage of the impact manifested by leadership upon the organizational culture is represented by the existence of differences between the leader and the organization. At this level, it is possible for the leader to manifest values different from those which are shared within the organization. Such a situation would materialize in discrepancies within the organization, as the employees would act in one manner, and their leader in a different manner. The effects of such a situation are internal tensions and conflicts, coupled with decreases in productivity, and ultimately profitability (Keyton, 2011). Employees could also be lost and there is a possibility of higher employee turnover rates, with the adjacent costs to the company, e.g. additional expenses with employee replacement and training (Phillips and Connell, 2003).

3.3.5. Power of unions or the influence of government and religion

A final issue to be addressed at this stage is represented by the role of tertiary parties in the creation of the organizational culture, including unions, governments, society, religion and any other parties which belong to the environment in which the firm operates.

While the leadership style and the organizational culture are initially perceived as independent elements within the economic agent, fact remains that these are often adapted to the features of the local culture. Furthermore, in the context of globalization and market liberalization, more and more economic agents transcend boundaries and develop their operations within the international market place. In such a setting, it is often difficult for them to preserve their culture intact (Adler and Gundersen, 2008).

Multinational corporations then adapt their organizational culture to the traits of the local community (Day and Antonakis, 2011), but these adaptations might not always be beneficial. In the case of McDonald's, the company has successfully managed to adapt its culture to the local traits, such as the diversification of the menus based on national preferences or the provision of separate spaces for men and women in the Arab countries (Paul, 2011). Still, aside from retail, the majority of the economic agents launch international operations as part of outsourcing agreements. Companies in economically developed regions open manufacturing plants in third would countries in order to benefit from cost advantages. The organizational cultures in these areas are permissive, with people being overworked and underpaid and the culture of the MNC immediately adapts to this culture, leading to the further propagation of poverty in the region (Manheimer, 2005).