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Generating Cash or Creating Value?

Linking Person-Environment Fit to Impact of Leadership on Business Models and Sustainable Leadership Development
Ho Yi Chuen 085122L03 Mechanical Engineering Year 4

Leadership has come a long way since the start of civilizations. The first leader was probably a charismatic person who saw the opportunity to achieve what he dreamt of having. By creating a new system and making people believe him, the leader undoubtedly benefitted from the participation of many parties as it was his strategy to obtain his dreams. As people went through the system and experienced firsthand that they were in fact losing more than they were gaining, things started to crumble as people fought for their own rights and benefits. This issue would then cripple the system and the charismatic leader as it is not within his means to control anymore. The emergence of someone physically or psychologically powerful, led to the development of leadership as it moved towards autocracy. In this style of leadership, people could actually fight for what they wished and ensured that they could get it if they were more powerful. There was less understanding between people as they fought selfishly. The concept of rightness transformed into a concept of might, where the stronger ones would decide while the weaker ones had to obey or face punishment. Eventually, when the consolidation of power became strikingly obvious that a small group of people were deciding on the lives of people more than thousands of times larger, the one who will push for equal power to everyone stood out as a popular choice. The democratic leader, one who will let the people enjoy equal opportunities and power, clearly is the choice of modern day civilizations. The Laissez-faire leader, though in existence since the Han dynasty, had not been a leader in any civilization, but a strong leader of businesses, notably in the Ming Dynasty (Li & Yin, 2001), Britain and France in the 1800s (Harling &Mandler, 1993). Leadership and learning are indispensible to each other. These were the last words by John F. Kennedy. Indeed, there is no right way to run a business especially when learning is part of the process. However, as people gain experience over time, and learn from their mistakes, it would seem to be that there will be a tendency for businesses to head towards one direction. In this paper, the relationship of two very different aspects of business, mainly financial success and social responsibility, will be evaluated based on the four leadership types that exist. In addition, there will be two hypotheses. The first hypothesis is that organizations which have strong emphasis on demand-ability (DA) fit tend to be organizations with successful financial models as the top priority, while organizations with strong emphasis on affective organizational commitment tend to have a pro-social stance, with corporate social responsibility as one of the top priorities in their business model. The second hypothesis is a proposed model based on business model and the sustainable leadership development theory. A leader, who focuses on building successful financial models, is unlikely to develop new leaders to replace themselves. The other leader, who focuses on upholding high levels of pro-social intents, will have a more successful sustainable leadership development.

Person-Environment Fit (PE Fit) PE fit is defined as The compatibility between people and organizations that occurs when: (a) at least one entity provides what the other needs, or (b) they share similar fundamental characteristics, or (c) both (Kristof, 1996). This concept of PE fit is multidimensional, in the sense that there are different types of fits, like person-organisation fit (PO fit), person-group fit (PG fit) and demandsabilities fit (DA fit) (Greguras & Diefendorff, 2009). The basis of PE fit is self-determination theory (SDT). SDT is a theory in motivation psychology based on human beings innate desire to develop and grow towards their fullest potential (Deci & Ryan, 2000). The three psychological needs in every human being, need for autonomy, need for relatedness, and need for competence, have to be satisfied before individuals can develop to their fullest potential and optimal functioning. The needs in SDT should not to be confused with desire to succeed. In SDT, the satisfaction of the psychological need always leads to a positive outcome, as opposed to the strength of a desire, which does not necessarily lead to a favorable outcome (Deci & Ryan, 2000). The psychological needs are to be treated as universal and the only variance is in the degree of which an individual requires to satisfy these needs. As the PE fit theory is built based on SDT because SDT has widespread empirical support in various disciplines (Carver & Scheier, 2000) and has relevance to predict employees attitudes and behaviours (Gagn & Deci, 2005). Sustainable Leadership Development (SLD) SLD is a complicated conceptual model which could be easily confused if taken at face value. Sustainable leadership is actually the building of a system which cultivates future leaders within the organization so that the leadership can be sustained and not outsourced or rebuilt from scratch. This system is based on three critical areas: (a) sustained communication in the ICT/Blended environment, (b) sustained mentoring, and (c) sustained curriculum and learning. (Grooms & ReidMartinez, 2011) By creating a modelling and mentoring system, leadership sustainability is possible as the new batch of followers take over the roles and the cycle repeats itself. Sustainable leadership should be seen as a process and not as a means to an end (Grooms & Reid-Martinez, 2011).

Hypothesized Model Linking Types of Leadership to PE fit to Business Models The four types of leaderships in various organizations are closely related to the type of PE fit present in the organizations. Aristrocrat


Laissez faire Charismatic

Based on a perception questionnaire, one can point out the various strategies which the four leaders would place emphasis on. For the purpose of this paper, the following assumptions are made as no prior study on this link is carried out. The autocratic leader focuses only on the PG fit, the democratic leader focuses on the PO fit and DA fit, the Laissez-faire leader focuses only on the DA fit while the charismatic leader focuses on the DA and PO fit. The autocratic leader has undergone the autocratic system within the organization as an employee and knows the rules of the game. To continue staying in an autocratic environment, the person would have developed a PG fit where they would passively resist the superiors together. There is no need for a PO fit as the organization is usually too huge for the employees to feel any relatedness. There is also no emphasis on DA fit as employees usually just do what they are told by their autocratic leader. Thus, it is most relevant to claim that autocratic leaders would make decisions or come up with systems that only favour PG fit. Whether organizations led by an autocratic leader would be pro-business or pro-social depends on the personal motivation of the leader. Some organizations might have a good remuneration system, and new leaders who have had a good life might decide to try out pro-social initiatives. Others who have been through the bad pay scale throughout their employee days might take the opportunity as a leader to head for business-centric initiatives, going all out to make as much money. The democratic leader focuses on the PO fit and DA fit solely because democracy means that everyone has the right to contribute and that without the required abilities, it is hard for them to contribute. Democratic leaders usually structure their organization to make every employee feel related to the organization, competent, and yet expecting a certain degree of independence amongst employees. This would mean that the system has higher chance of motivating employees and the direction of the organization lies with the makeup of the organization. Usually, a democratic

leader would not be as driven towards great financial success, and thus they would be likely to engage in more CSR activities. The Laissez-faire leader is a business-oriented leader. With the emphasis on maximizing returns, these leaders would create organizations which would only accept employees with a high DA fit. There is little emphasis to garner organization commitment as there will always be a pool of talents waiting to join the organization. The Laissez-faire leader would not hesitate to go for any valuable business initiatives but regarding pro-social activities, it is definitely a no-go. There is no financial incentive in doing CSR and the leader would definitely steer away from such activities. The charismatic leader leads organizations by giving them a purpose and this would require employees to have high levels of fit in both PO and DA. Without DA fit, the employees could only be inspired and powerless to carry out the tasks. As charismatic leaders usually engage in innovation, and they query the status quo, there is no fixed strategy or direction which these organizations head towards. However, it is noted that when organisations demand a DA fit for employees, they usually concentrate first on business-centric initiatives. Engaging in pro-social activities would be the direction of later phase when the financial stability of the organization is ensured. Linking Business Models to SLD Aristrocrat Pro-Social Centric Sustainable Leadership


Laissez faire Charismatic

Business Centric

Unsustainable Leadership

Business-centric business models tend to maximize returns and cut losses. This would require the organization to have a high demand for talented employees and a focus on results-driven goals. Motivation provided by this model will come in the forms of extrinsic incentives as they are the most convenient and objective way of quantifying productivity. This however brings about counter-effects such as decreasing employees intrinsic motivation (Geen, 1995) to work for the organization. This would mean that every action and task would have to carry a price tag or employees would not be as driven to work for it, although the higher the reward, the better the job performance, as compared to no or little reward. (Geen, 1995) By having such a culture in the organization, it is hard to implement Grooms SLD conceptual model as most of the time, incentives are on an individual basis and there is no incentive for giving tutelage to someone who might outperform oneself. This is especially true when organizations are so profit-driven and there is a lack of PO and PG fit, which results in fragmentation. Extrinsically motivated people are less likely to connect with others in a close, authentic and interpersonally trusting way (Kasser & Ryan, 2001). Given that none of the

criteria for SLD is fulfilled, it can thus be said that business-centric organizations have to resort to other methods of developing a sustainable leadership, and not by using the proposed SLD model. Pro-social organizations are not entirely social enterprises (SE), though the trend of SEs is on the rise in recent years. This type of organization usually comprises of a main emphasis on either PO or PG or both fits. As the need for relatedness mediates organizational affective commitment, the leader of the organization would try to enhance the efforts through company policies in fulfilling these needs. This not only increases the commitment, it also promotes pro-social motives and behaviour (Pavey el al., 2011). This means that by shifting the organizational paradigm towards fulfilling employees psychological need for relatedness, the organization not only benefits from having more committed employees, but also employees who will support the organizations pro-social initiatives. Grooms SLD model is best suited for pro-social organizations as the pool of committed employees is larger and the environment suits the cultivation of protgs to replace the current leaders. Sustained mentoring and learning is easily inducted into the environment as there is less focus on hitting insane financial goals. In addition, the diversity of the pool is greater due to the lack of DA fit, which could mean that there will be room for improvements in terms of diversity, innovation could enter through this available channel and thus bring about not only sustainability of leadership, but renewable and fresh tweaks to the present system. Intrinsic motivation in this group of people drives them to take up the additional challenge because they want to do it. There is however no need to highlight the rewards or incentives as they would take up the additional work for it gives them a reassurance that the organization values them. The fulfilment of these basic psychological needs provide more satisfaction than the pay raise or job promotion. Cross Referencing of Hypothesized Model with Present Studies With results from two independent studies, the relevant points in each study would be lifted and compared against the hypothesized model. Result from first source (Campbell el at., 2008) Most organizations are lagging on aligning their leadership development programme with their overall business processes. Only about 14% of the organizations in the study reviews their current and future leadership needs consistently, indicating that 86% of the organizations have no sustainable leadership programme. The limitation that leads to the poor response is that there were no special assignments or global assignments which they could use to carry out such training. Only a mere 10% of the organizations conduct such trainings. In addition, only 13% of high potential employees get to interact with senior management. A health insurance company, Hamana, identified 150 top leaders and actively develops them through the companys succession programme (Campbell el at., 2008). Results from second source (Casserley & Critchley, 2010) Leaders who sustained themselves over long terms manage to survive past the burnout phase. The same group of people also pursued their jobs and careers in a irresponsible and unsustainable way. The three main sins of these leaders include: addiction to power, career success orientation and masters of the Universe. This usually involves lack of long term planning, imposing their views as the

organizations views and reluctance to comply with company rules because there is no limitation on their powers. (Casserley & Critchley, 2010) Discussion The results from the first study show the feasibility of developing a sustainable leadership programme. It is noted that even as companies try to implement Grooms model of SLD, only about 10-15% of them could follow through to see the programme mature. Although the success of the various SLD programmes was not announced, it shows that companies were generally reluctant to devote manpower and resources to develop a proper SLD programme. It seems more economically sound for them to hunt for senior leaders from other companies than to have their own SLD programme. The other limitation that can be seen is the lack of expertise for most companies to start a SLD programme. This is most visible from the low numbers in all aspects which would contribute to a good SLD programme. Another possibility could be due to the high turnover rate of talents and high potential employees. This would have been the last major stumbling stone which is preventing companies from throwing more resources into SLD. The results of the second study show that this particular group of leaders, mainly autocratic and Laissez-faire style leaders, put a lot of emphasis on results. Surviving the hard part of their journey as an employee and triumphing over other colleagues to finally become the leader, these people would do anything to commit the three sins listed above. This sort of vicious cycle never ends until someone who finally becomes a leader puts an end to it. However, employees in such working environments have been conditioned to withstand the autocratic and demanding lifestyle, such that they have totally suppressed or lost their intrinsic motivation to work and rely solely on extrinsic motivation to pull through. As a result, when many become leaders, they would carry and continue the culture being indoctrinated to them for it symbolises the act of revenge. SLD can never happen or work properly in such a hostile work environment. Leaders with selfish intents will never give way to future leaders. This results in poor mentoring, undeveloped learning and communication and even to unethical backstabbing. For these two types of leaders, they would prefer to sustain their own leadership than to create a sustainable leadership for the organization. Removing such a mindset and work environment is the first step if the organization wants to have a functional SLD. The second study also showed how the integration of three core values (a) reflection on action, (b) psychological intelligence, and (c) physiological well-being can contribute towards better work performance and into the environment to allow a conducive environment for developing sustainable leadership (Casserley & Critchley, 2010). Conclusion The whole idea of sustainable leadership development hinges on the availability of the right workplace environment. As shown in the two studies, we have seen that only 10% to 15% of organizations actually get to see through a full SLD programme, while up to 27% gave a considerable effort to keep up with a decent SLD programme. This supports the hypothetical model that only the democratic leaders would be most likely to engage in the most pro-social activities, and thus will generate the best workplace environment for a SLD programme to start off. We have also seen the adverse effects of having a bad work environment helmed by the autocratic and Laissez-faire

leaders. These are undoubtedly hard environments to develop a successful SLD programme, even though they may be very successful in financial terms. Further Studies More details should be drafted and implemented into the SLD model. Also, a proper experiment should be conducted to collect accurate data on the present SLD programmes and also, the match between the four types of leaders and the workplace environment and how a modified form of SLD can be introduced to the other three types of leaders in order to encourage sustainability. References Li, B. & Yin, Z. (2001). 5000 years of Chinese history. Greguras, G. J. & Diefendorff, J. M. (2009). Different Fits satisfy Different Needs: Linking PersonEnvironment Fit to Employee Commitment and Performance Using Self-Determination Theory. Gagn, M., & Deci, E. L. (2005). Self-determination theory and work motivation. Journal of Organizational Behavior, 26, 331-362 Harling, P. & Mandler, P. (1993). From Fiscal-Military State to Laissez-faire State, 1760-1850 Deci, E. L., & Ryan, R. M. (2000). The what and why of goal pursuits: Human needs and the selfdetermination of behaviour. Psychological Inquiry, 11, 227-268 Carver, C. S., & Scheier, M. F. (2000). Autonomy and self-regulation. Psychological Inquiry, 11, 284291. Grooms, L. D., & Reid-Martinez, K. (2011). Sustainable Leadership Development: A Conceptual Model of a Cross-Cultural Blended Learning Program Geen, R.G. (1995) Human motivation: A social psychological approach. Pavey, L., Greitemeyet, T., Sparks, P. (2011). Highlighting Relatedness Promotes Prosocial Motives and Behavior. Kasser, T., & Ryan, R. M., Couchman, C.E., & Sheldon, K.M. (2004). Materialistic values: Their causes and Consequences. Campbell, B., Schweyer, A., Armatys, M. A., Caldwell, D., Eggert, J., Jones, K., Kohn, M. & MacLeod, M. (2008). The State of Talent Management: Today's Challenges, Tomorrow's Opportunities. Casserley, T., Critchley, B. (2010). A new paradigm of leadership development.