National Conference

On

Challenges and Opportunities in

Management in the 21st Century

July 15 – 16, 2009 at 10:00 A.M.

Organizing Secretary

Dr. Y .Satyanarayana
Director School Of Management Studies

Co-Coordinators

Dr.V.Sailaja
Associate Professor A.Sandhya Rani
Assistant Professor
Organized By

School of Management Studies

Sreenidhi Institute of Science & Technology
Yamnampet, Ghatkesar
HYDERABAD
 RECENT DEVELOPMENT IN BUSINESS LEADERSHIP

1. Introduction:
Some of the issues around executive compensation – giving executives a stake in
company profits – has been very influential, and arguably played a big role in the recent financial
sector’s down fall in U.S. Failure of Layman Brothers in September 2008 followed by other
banks resulted in severe financial melt down in U.S. followed by other countries. Managers are
in the line of fire for their greed in the present economic crisis, especially managers in the
financial sector. It has spread to the rest of the corporate sector – information technology,
manufacturing, constructions, textiles, retailing etc. Every country in the world including India
took a serious hit. Economic growth rates have dwindled and about 50 million of employees
have lost jobs in developed as well as developing countries.

2. Leadership Studies in Business Schools:

2.1. Society has lost confidence in many institutions – investment banks, commercial banks,
credit rating agencies, Central banks and business schools. Most of the managers at different
levels in the investment banks in general and Layman Brothers in particular were MBAs from
the reputed management schools - Harvard in U.S.A., IIMS in India etc; Many people believe
that management education has contributed to the failure of value-based leadership and ethics
that led to the current financial crisis. According to Prof. Joel M Podolony of Harvard Business
School, “unless America’s business schools make radical changes, society will become
convinced that MBAs work to serve only their own self interests – I am angry about the
inattention to ethics and values-based leadership in business schools. We didn’t need the current
meltdown to tell us that, the Enron and World.com scandals proved it more than seven years
ago” (1). A severely depleted cadre of leadership talent lies at the very heart of to day’s corporate
world.

_____________________________________________________________________________
_
Dr. Y Satyanarayana, B.E., MBA., Ph.D., I.S.P.., (HARVARD),
Director, School of Management Studies,
Sreenidhi Institute of Science and Technology, Yamnampet, Ghatkesar, Hyd. – 501 301.

2.2. According to Podolony, “those leadership and ethics courses that are taught are flawed, as
the recent collapse of Wall Street firms suggests. The business schools seem to have convinced
MBAs that once they rise to positions of prominence, they are responsible only for setting vision,
fashioning a strategy, and developing an agenda. Their subordinates will sweat the details”.

2.3. According to Podolony, “Academics capable of teaching soft skills such as leadership,
values and ethics are in a distinct minority at most business schools. Without more faculty
members in those areas, schools can’t weave such disciplines into the fabric of MBA education’.
This indicates the situation in U.S. Business Schools. The situation is still worst in Indian
business schools. Most of the business schools in India do not have even a single faculty
member to teach these courses.

2.4. The past decade may well be remembered as the era of the bold, high – flying, sky’s – the –
limit leaders. According to Podolony, “Through out the 1990s, our society seemed to have a
fettish for aggressive chiefs like Enron’s Kenneth Lay, Tyco’s Dennis Kozelowski, and
World.com’s Bernard Ebbers” Before the corporate scandals in the U.S. broke out, every one
believed that CEOS should be charismatic, larger – than life figures. Jim Collins of Harvard
Business School was the first to blow that belief out of the waters after a major research for more
than five years (2).

3. Need for Effective Business Leadership:

3.1. Leadership has always been a hotly debated topic and it continuous to be a prime business
issue even in the new millennium. The leader’s ability to act dynamically is the need of the hour,
which, when ably managed, enables the organization to have an edge over its competitors. When
the leader is able to influence the people and achieve performance, he / she is styled a successful
and effective leader. People want to follow and be guided by a leader who has a clear sense of
direction.
3.2. In the new millennium, the leaders have to keep in mind the changing times and design a
winning formula or blue print for leadership, which will take their organization to excellence and
success. To inspire the people into higher levels of team work, there are certain things that a
leader must know and do. These do not come naturally, but are acquired through constant work
and study. The best leaders constantly work and study to improve their leadership skills.

3.3. Warren Bennis of Harvard Business School feels that the need for leadership has never
been greater than the present times, amidst the governance crises, growing competition, and the
inability of the organizations to cope with the changing times (3).

3.4. To lead on organization in the present times and in the new millennium (times to come),
successfully, the leaders are inevitably expected to practice effective and extraordinary
leadership skills. It is necessary to study the developments in the leadership styles and practices.
Thus, it is imperative for them to be conversant with the various deeply researched and highly
recommended practices of leadership by the thought leaders.

4. Are Leaders Born or Made – The Great Man Theory of Leadership:

4.1. The great man theory of leadership says that the art of leadership is something that a few
are endowed with by birth. And leadership is a skill that can not be learnt. In other worlds
leaders can not be made; leaders are born. Greatman theory of leadership had a great impact on
the literature of leadership. The Greatman theory of leadership continues to be of popular
interest to show case individual leadership in the political and corporate world.

4.2. But Greatman theory of leadership has been connoting a negative flavour as it conveys that
only great men can be leaders and the rest can’t. The theory, “Leaders are born, not made”, rests
on a shallow research and limited scope of illustrations is to be accepted as a generalized
conclusion. The theory, for instance had considered those leaders who hail from aristocratic
background. Early research on leadership which supports Greatman theory, was based on the
study of people who are already great leaders. These people were already from the aristocratic
families, born with a silver spoon in their mouth, as few from lower classes had the opportunity
to lead. As a result, Greatman theory of leadership had to face a string of critics. The Greatman
theory was not supported by convincing proof.

4.3. Some experts say that it is almost a sin, if one still believes that leaders are born and can
not be made. Leadership is no more a privilege limited to a few born with silver spoon in their
mouth. It is an art, which can be learnt and nourished by anyone with proper guidance,
consistent practice and continuous learning. Bennis with no hesitation expresses his resentment
towards the “Greatman theory of leadership” (3).

4.4. When Greatman theory of leadership was loosing it’s luster, there emerged the new theory
of leadership, viz., the trait theory of leadership. In the trait theory of leadership, emphasis was
put on discovering leadership traits, which supported successful leadership style.

5. Personality Traits theory of Leadership:

5.1. When “Greatman theory of Leadership” was loosing it’s luster, there emerged a new theory
of leadership viz., the trait theory of leadership. In the trait theory of leadership, emphasis was
put on discovering leadership traits, which supported successful leadership style. Stogdill in
1974 identified the traits critical to leaders. The traits required for leadership are a combination
of heredity, environment and learning.

5.2. The traits approach to leadership studies the traits, motives and other characteristics of
leaders. The general personality trait associated with leadership are 1) emotional intelligence (2)
charisma (3) self-confidence (4) humility (5) trust worthiness (6) extraversion (7) assertiveness
(8) enthusiasm (9) sense of humour (10) warmth and (11) high tolerance for frustration.

5.3. Some of the leadership researchers consider emotional intelligence and charisma as the
most important traits for effective leadership. Emotional intelligence refers to qualities such as
understanding one’s feelings, empathy for others, and the regulation of emotions. Emotional
intelligence is composed of four traits; (1) self-awareness (2) self-management (3) social
awareness and (4) relationship management.
5.4. Charisma has been referred to as “a fire that ignites follower’s energy and commitment,
producing results above and beyond the call of duty”. The charismatic leader has the ability to
inspire and motivate people to do more than they would normally do, dispute obstacles and
personal sacrifice. Charismatic leaders are characterized by vision, self-confidence, impression –
management skills, creating confidence and high expectations for subordinates, social sensitivity,
empathy and the use of personal example. They see beyond current realities and help followers
believe in a bright future.

5.5. Charismatic leaders possess superior debating and persuasive skills as well as technical
expertise and the fostering of attitudinal, behavioural and emotional changes in their followers.
Managers can improve their image as charismatic by engaging in favourable interactions with
group members.

5.6. Charismatic leaders include Mahatma Gandhi, Mother Theresa, Martin Luther King Jr.,
Indira Gandhi, Atal Behari Vajpayee and Osama Bin Laden.

5.7. The trait theory approach to leadership is supported by many studies showing that leaders
are different from non leaders and effective leaders are different from less effective leaders.
Nevertheless, the traits approach does not tell which traits are most important in which situations
or the amount of trait required.

6. Traditional Leadership Styles:

6.1. Leadership style is the typical pattern of behaviour that a leader uses to influence his
followers or employees to achieve the organizational objectives. The traditional leadership
styles are:
1. Autocratic Style
2. Participative or democratic Style
3. Lessez-Faire or Free-reign Style
4. Managerial or Leadership grid styles.
6.2. Typical autocratic leader takes decisions, tell people what to do and asserts in
implementation. Autocratic leader is a task - oriented leader, who retains most of the authority
for himself or herself. They are not concerned about group members attitudes or reactions
towards their decisions. The autocratic leader does not make use of the ideas and creativity of
his followers. It does not support team work, effects performance and hence is generally
considered in - sufficient.

6.3. Typical participative leader shares discussion making with group members. The
participative style encompasses team work approach. This style is suitable in managing
competent people who are eager to accept responsibility. However it is not effective if the
employees are incompetent and it is generally time – consuming.

6.4. The Lessez-Faire or Free-reign style leader uses his or her power very little, and allows
subordinates to set their own targets and goals and the means of achieving them. He considers
his role as one of furnishing information and acting as a contact with the external environment.

6.5. According to Blake who developed the managerial grid, there are basically two types of
styles (4).
1. Employee – centered or Concern for people.
2. Task-centered or Concern for task or work
In “employee-centered” or “concern for people” style, the leader has close personal relationships
with the members of the group, and there is open communication and emotional support to them.

In “task-centered” or concern for task” style, the leader organizes and defines the roles of
members of the work group, explains the tasks and closely monitors and supervise their work.

6.6. A leader may focus mainly on the work or people or both in the following styles:
1. High concern for task and low concern for people
2. High concern for people and low concern for task
3. Low concern for both task and people
4. High concern for both task and people
The style 4, viz high concern for both task and people is considered to be the best style.

7. Situational Leadership:
7.1. There is no one best style: Leaders must adjust their leadership style to the situation as well
as to the people being led. Situational leadership is about specific guidelines about which style
to use under which circumstances. Leaders are more effective when they make their behaviour
contingent upon the situational forces. It is a precondition of a leader to know and adopt the
style that the situation calls for and one that is based on the three other factors which are:

1. Managers personal back ground -

What traits, intellectual capacity, principles, ethics, and familiarity does the manager
have, what does the manager think or believe will work?

2. Nature of the employees being supervised –

Every employee has a different personality and back ground. Managers to be successful
leaders, should vary their leadership style depending upon the capabilities and motivation of the
employees.

3. The company’s organization culture and it’s interests will have an impact on the manager’s
action.

8. Transactional Leadership:
It is an approach in which the people works within the rules, and it is more commonly
seen in large organizations. Transactional leadership is largely based on exchanges between the
leader and the group members, such as using rewards and presentiments to control behaviour.
Transactional Leadership makes it clear that it is only give and take relation between employees
and the employer. Transactional leaders get things done through luring the employees with some
extrinsic motivational factors like a pay-hike or bonus or a promotion.

9. Transformational Leadership:
9.1. The principal focus of transformational style is to make change happen smoothly in –
oneself, others, teams and in business. It generates and maintains a frame work that capitalizes
on people and organizational capabilities through transformation. A transformational leader is
one who brings about positive, major changes in an organization. The transformational leader
moves group members beyond their self-interests for the good of the group, organization, or
society.

9.2. Leaders often encounter the need to transform organizations from low or poor performance
to acceptable performance or from good – to – great organizations. Transformational leader
attempts to overhaul the culture and organizational changes. They have the respect, confidence
and loyalty of group members. Transformational leadership is a more positively affirmative
approach to leading people and corporations. Transformational leaders tend to appeal to the
higher ideals of their followers. They create visions, translates them into values and like them to
the needs and beliefs of the followers.

9.3 To be able to exert transformational leadership on others, the leader him / her self ought to
be transformed first. The studies suggest that if the leader is transformed first, leadership will
then naturally tend to be transformational in it’s impact on organizational members.

9.4. Transformational Leadership calls for the traits like humility and voluntary subordination.
This is in conformity with Rabindranath Tagore and Bible and this to some extent goes in
accordance with Jim Collin’s concept of Level 5 leadership. According to Robindranath Tagore,
(1)
“serving is synonymous to enjoying” . To put it in other words, serving is the best means of
creating a channel of compatibility with another person. Serving the person is the best way to
gain trust from him and thus lead him. This very idea has led to the concept of level 5 and
Servant Leadership.

9.5. The concept of Level 5 leadership and servant leadership finds it’s origin in Bible. The
classic image that embodies Level 5 and servant leadership would be that of Jesus washing the
feet of his disciples. It is an image nearly 2000 years old and a message that true leaders are
servants first. The Bible says that the leaders first anchor themselves in service to God and stand
ready to serve and lead others. It is the desire to enrich and enhance the lives of those being led
through unselfish servanthood. It stands against the styles like autocratic, top down, command
and control styles of leadership.

10. Level 5 Leadership:

10.1. Jim Collins and his research team from Harvard Business School researched to see
whether a good company becomes a great one and if so, how? They studied 1435 companies
listed in Fortune 500 between 1965 to 1995 and identified eleven companies that made the leap
from good results to great results and sustained those results for atleast fifteen years. The project
consumed 10.5 people years of effort and had about 20 researchers worked on the project. They
compared the good to great companies to the comparison companies to discover the essential and
distinguishing factors at work.

10.2. The study revealed that it was neither vision, strategy, tactics, organization structure nor
technology that made companies great. It was uniformly leadership. The research study found a
uniform pattern of leadership in the eleven good-to-great companies and named them as great
leaders.

10.3. The study indicated that good – to – great leaders were self – effacing, quiet, reserved,
even shy – these leaders are a paradoxical blend of extreme personal humility with intense
professional will and were termed by Jim Collins as Level 5 leaders.

10.4. According to the study, the term Level 5 leadership refers to the highest level in a
hierarchy of executive capabilities. Leaders at other four levels in the hierarchy can produce
high degrees of success but not enough to elevate companies from mediocrity to sustained
excellance. Good – to – great transformation don’t happen without Level 5 leaders at the helm.

SUMMING UP:
The domain of leadership is experiencing a metamorphosis. Studies revealed that a severely
depleted cadre of leadership talent lies at the heart of the recent economic down turn and for
many problems in today’s corporate world. The traditional command and control practices of
leadership are no longer considered effective. The Earstwhile popular styles of leading viz.
Great man theory, traits theory and the traditional styles like autocratic, democratic, lessez-faire,
managerial grid etc., demands a major overhaul as the trends have changed and paradigms have
shifted. The leaders must shift from the traditional “Do as I say” to a more amicable and friendly
styles. The transactional styles of leadership should be replaced by transformational leadership
styles like Level 5 leadership, servant leadership etc. to help the organizations to develop a new
vision and for committing people to action and transforming followers into effective leaders.
The Level 5 leadership can result in a good organization becoming a great organization.

References:
1. Prof. Joel M Podolony “The Buck Stops (and starts) at business school”. Harvard Business
Review, June 2009.
2. Jim Collins, “good-to-great – why some companies make the leap --- and other’s don’t”
Harper Collins publications. October 2001.
3. Warren Bennis and Burt Nanus, “Leaders: Strategies for making change”. Harper Collins
Publishers. October 2003.
4. Robert R Blake and Anne Adams, “Leadership Dilemmas and Solutions”. Gulf publishing,
Houston U.S.A. 1991.