Strategic leadership's influence on organizational culture and success

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 The books for instance might be outdated and they could integrate data from over three decades ago; in the fast changing economy, such information might lose relevance.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 Finally, the internet articles, while not peer reviewed, have the advantage of presenting actual information, which will be highly useful in the analysis of Apple and Enron.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

3.2.1. 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).

4. Summary and conclusions

4.1. Summary of findings

The importance of leadership in the modern day society is increasing and its role is also changing within the organizational context. Traditionally unrecognized, and then seen as a force of exploitation, leadership is now emerging as a motivation and transformational force, aimed to attain the business objectives through the creation of social benefits and the satisfaction of the needs and wants of various stakeholders (customers, business partners, employees, the public and so on).

The increasing role of leadership is made more obvious by the end results of various economic agents, such as the success of Google, Apple or AirAsia, on the one hand, and the failure of Enron, on the other hand. In all cases, leadership and organizational culture represented crucial determinants of the end results.

The concepts of leadership and organizational culture are generically difficult to define in a universal manner, yet their common understandings are rather simplistic. Still, within the theoretical and the practical communities, the two concepts cannot be separated as they both have strong influences upon one another. As Fairholm and Fairholm (2009) put it, "leadership is a consequence of corporate culture and culture is a result of leadership."

The current project has nevertheless focused on the more detailed impact of organizational leadership onto the organizational culture and has found that these impacts are numerous and varied in nature, being both positive as well as negative. In terms of the positive examples, some examples in this sense include increases in productivity and profitability, as well as increases in the company's reputation among investors and within the community. Then, at the level of the negative impacts of leadership on organizational culture, some examples in this sense include harmful impacts upon the manager as a result of though uniformaization and loss of identity, but also an inability to adapt to the demands of the market or the generation of negative impacts upon the community, such as the propagation of poverty in already poor regions.

4.2. Limitations of the study

The first limitation of the current effort is represented by the fact that it relies primarily on the usage of secondary data, rather than primary information. This virtually means that the sources consulted might be biased by the personal stand and opinion of the independent researcher; this limitation has however been addressed through the consultation of reliable sources and the consultation of more sources to verify the correctness of the information.

The second limitation is represented by the fact that the study uses a qualitative method of reviewing the situation, rather than integrating quantitative data. In such a setting, the limitations are represented by the inability to extrapolate the findings to a wider community, but the need to understand the findings in the context that has been set out. This limitation is nevertheless accepted as most emphasis is hereby placed on the context of the study.

References:

Adler, N.J., Gundersen, A., 2008, International dimensions of organizational behavior, Cengage Learning

Albarran, A.B., Chan-Olmsted, S.M., Wirth, M.O., 2005, Handbook of media management and economics, Routledge

Andrews, M.M., Boyle, J.S., 2007, Transcultural concepts in nursing care, Lippincott Williams & Wilkins

Argyris, C., 1976, Increasing leadership effectiveness, R.E. Krieger

Arup, C., 2006, Labor law and labor market regulation: essays on the construction, constitution and regulation of labor markets and work regulations, Federation Press

Barclay, A., 2010, Economic organization culture, Journal of Management Research, Vol. 2, No. 1

Black, R.J., 2003, Organizational culture: creating the influence needed for strategic success, Universal Publishers

Canton, J., 2011, Steve Job's innovation leadership at Apple: my lessons learnt, Global Futurist, http://www.globalfuturist.com/blog/2011/08/25/steve-jobss-innovation-leadership-at-apple-my-lessons-learned/last accessed on August 10, 2012

Chemers, M., 1997, An integrative theory of leadership, Routledge

Chinyio, E., Olomolaiye, P., 2010, Construction stakeholder management, John Wiley and Sons

Clawson, J.G., 1999, Level three leadership: getting below the surface, Prentice Hall

Daft, R.L., Lane, P.G., 2008, The leadership experience, Cengage Learning

Day, D.V., Antokanis, J., 2011, The nature of leadership, SAGE

Duygulu, E., Ozeren, E., 2009, The effects of leadership styles and organizational culture on firm's innovativeness, African Journal of Business Management, Vol. 3, No. 9

Dwivedi, R.K., 1995, Organizational culture and performance, M.D. Publications Pvt. Ltd.

Fairholm, M.R., Fairholm, G.W., 2008, Understanding leadership perspectives: theoretical and practical approaches, Spinger

Fiedler, F.E., 1967, A theory of leadership effectiveness, McGraw Hill

Gompers, P., Lerner, J., 2004, The venture capital cycle, 2nd edition, MIT Press

Grantham, G., 1994, Labor market evolution: the economic history of market integration, wage flexibility and the employment relation, Routledge

Griffin, R.W., Moorhead, G., 2009, Organizational behavior: managing people and organizations, Cengage Learning

Haneberg, L., 2009, How leaders can optimize organizational culture, MPI Consulting, http://managementcraft.typepad.com/Culture%20Whitepaper%204-09.pdflast accessed on August 10, 2012

Howatt, W.A., 2008, Leadership vs. management, Way with Words Editorial Services

Keyton, J., 2011, Communication and organizational culture: a key to understanding work experiences, SAGE

Kristian, E., Organizational culture and negative effects, eHow, http://www.ehow.com/info_8211344_organizational-culture-negative-effects.html last accessed on August 10, 2012

Lowe, R., Marriott, S., 2006, Enterprise: entrepreneurship and innovation: concepts, contexts and commercialization, Routledge

Manheimer, A., 2005, Child labor and sweatshops, Greenhaven Press

McKinney, P., 2012, The secret to Apple's innovation leadership, Forbes, http://www.forbes.com/sites/philmckinney/2012/04/04/the-secret-to-apples-innovation-leadership / last accessed on August 10, 2012

Meindl, J.R., Ehrlich, S.B., 1987, The romance of leadership and the evaluation of organizational performance, Academy of Management Journal, Vol. 30, No. 1

Miller, K., 2008, Organizational communication: approaches and processes, Cengage Learning

Paul, J., 2011, International business, PHI Learning

Phillips, J.J., Connell, A.O., 2003, Managing employee retention: a strategic accountability approach, Routledge

Robbins, S.P., 2009, Organizational behavior: global and Southern African perspectives, Pearson Education Africa

Rost, J.C., 1993, Leadership for the twenty-first century, Greenwood Publishing Group

Russ, M., 2010, Knowledge management strategies for business development, Idea Group Inc.

Schein, E.H, 2010, Organizational culture and leadership, John Wiley and Sons

Steele, C., 2011, 7 Steve Jobs products that failed, PC Magazine, http://www.pcmag.com/slideshow/story/286886/7-steve-jobs-products-that-failed/7 last accessed on August 10, 2012

Stone, A.G., Patterson, K., 2005, The history of leadership focus, School of Leadership Studies, Regent University

Tourish, D., Charismatic leadership and corporate cultism at Enron: The elimination of dissent, the promotion of conformity and organizational collapse, http://www.rickross.com/reference/general/general782.html last accessed on August 10, 2012

Turner, C., 2009, Corporate governance: a practical guide for accountants, Butterworth-Heinemann

Ulrich, D., Zenger, J., Smallwood, N., 1999, Results-based leadership, Harvard Business Press

Webber, R.A., 1969, Culture and management: text and readings in comparative management, R.D. Irwin

11 effective strategies Apple uses to create loyal customers, Inside CRM, http://www.insidecrm.com/features/strategies-apple-loyal-customers/last accessed on August 10, 2012

Blog of Tony Fernandes, http://www.tonyfernandesblog.com/main.php?disp=comments last accessed on August 10, 2012