Leadership and Organizational Change at Blue Sky

Introduction

The assessment that Blue Sky made only a temporary adjustment to a larger problem is correct. The company is currently facing a situation in which new leadership is poised to bring about significant cultural change. There will be considerable resistance, and some changes will be both necessary and painful. The organization is confronting shifts in the external environment that threaten the long-run viability of key business units, which creates an urgent impetus for organizational reform. Perhaps the most formidable challenges Willis faces, however, are internal: a deeply ingrained culture that will prove highly resistant to change. He will need to be very deliberate about how that change is pursued if it is to succeed.

Some of the issues involve personnel — including certain executives — so a degree of interpersonal conflict is inevitable. There is also the question of Willis's mandate. He was hired by Max Blue as his replacement, yet Max Blue remains Chairman of the Board. Willis must therefore navigate those political waters carefully. He has at least one clear ally in Hubres, but she is likely still viewed as an outsider and will have to fight for influence within the existing power structure.

Leadership Style

The former CEO, Max Blue, employed an autocratic leadership style. He was often willing to listen to others but retained a highly centralized form of decision-making. Iqbal, Anwar, and Haider (2015) studied this leadership style and found that while it can be useful in the short run, a more democratic approach is more likely to produce higher performance over the long run. In the short run, the autocratic style can move things forward — particularly when there are seemingly intractable conflicts within the executive leadership team. This actually suggests that autocratic leadership may have some merit in the present situation for Willis, even if it is not his natural style.

Willis ultimately needs to bring about a transformation in the organization, particularly over the longer term. Research has shown that a transformational leadership style is more conducive than an autocratic one to generating motivation and higher levels of employee commitment (Naile & Selesho, 2014). This implies that achieving the changes Blue Sky needs in order to thrive going forward will require transformational leadership behaviors, despite the apparent short-run case for autocratic direction. The key difficulty is that shifting abruptly from autocratic to transformational leadership is unlikely to succeed; the transition will need to be at least somewhat gradual, or it risks being too disorienting for the organization.

It is imperative that Willis understands the role that leadership style plays in an organization. Blue Sky grew under a style that was probably beneficial because it provided the company with a steady hand during its growth stages. But the company is now under new leadership and, in terms of strategy, is also at an inflection point. It cannot continue with the same approach, both because Willis is not Blue and because of the new external threats the company faces. Willis must adopt a leadership approach that positions the company for sustained success going forward.

Motivation

There were likely two main approaches to motivation at Blue Sky in the past. One was that employees bought into Max Blue's vision for the company. One element of the more transactional approach that characterized the company in recent years — as Blue moved toward retirement — is contingent reward (Khan, Nawaz, & Khan, 2016). This is exemplified by the ownership stake that employees hold in the company. The implicit arrangement was that if employees performed well, the company would prosper, and that prosperity would form a substantial part of their retirement savings. Given that the company has only been in existence for fifteen years, most employees are not close to retirement, meaning they still have a strong stake in a contingent reward system: the company must continue to perform well for decades to come if that stake is to pay off.

If Willis intends to transition the company toward a more transformational leadership model, he will need to tap into new and different sources of motivation. A primary source of resistance at this stage appears to be employee risk aversion, driven by the fact that their retirement security depends on the company's ongoing success. The prevailing attitude is one of "if it ain't broke, don't fix it." However, this attitude assumes the company is not broken — which may not be the case. Blue Sky does many things poorly, such as operating without formal meetings or strategic planning. If the company has succeeded to this point, some of that may be attributable to Max Blue's leadership and some to fortunate circumstances. Either way, past success does not guarantee future performance, and it certainly does not when the primary motivator for employees is to resist all change.

Willis needs to engage other forms of motivation that the company has largely neglected, including intrinsic motivation and the drive to achieve. Trust and the cultivation of group-level motivation have both been linked to transformational leadership and to higher overall motivation levels (Zhu & Akhtar, 2014). Motivating employees may well have to begin with trusting them — or at a minimum, trusting them to understand the situation the company faces and allowing them to contribute to identifying solutions. The existing culture may mean that employees still prefer to bring their ideas to Willis and have him make the final call, but Willis can work to change that dynamic over time as well.

References

Iqbal, N., Anwar, S., & Haider, N. (2015). Effect of leadership style on employee performance. Arabian Journal of Business and Management Review, 5(5), 145–151.

Karadag, H. (2015). Financial management challenges in small and medium-sized enterprises: A strategic management approach. Emerging Markets Journal, 5(1), 26–40.

Khan, Z., Nawaz, A., & Khan, I. (2016). Leadership theories and styles: A literature review. Journal of Resources Development and Management, 16(2016).

Kreutzer, M., Walter, J., & Cardinal, L. (2014). Organizational control as antidote to politics in pursuit of strategic objectives. Strategic Management Journal.

Naile, I., & Selesho, J. (2014). The role of leadership in employee motivation. Mediterranean Journal of Social Sciences, 5(3).

Zhu, Y., & Akhtar, S. (2014). How transformational leadership influences follower helping behavior: The role of trust and prosocial motivation. Journal of Organizational Behavior, 35(2014), 373–392.