BUSINESS LEADERSHIP

MMGT 503

Abeba Beyene (PhD)

abebamengistu2011@gmail
.com 1
 CHAPTER ONE
INTRODUCTION TO LEADRSHIP
Outline
Introduction
Leadership Conceptions
The Significance of Leadership
Evolution of Leadership (Reading Assignment)
The New Reality for Today’s Organizations
Leadership vs. Management
Challenges of Being a Leader
Contexts of Business Leadership

2
1.1 Introduction
What does it mean to be a leader?

Loving what you do and infusing others with

energy and enthusiasm.

Creating an inspiring vision and building an

environment where people have the ability,
the freedom, and the will to accomplish
amazing results.

3
Introduction,...
The Nature of Leadership

Leadership has been a topic of interest since ancient times.

Scientific studies began only in the twentieth century.

Scholars and other writers have offered more than 350

definitions of the term leadership.

One authority concluded that leadership “is one of the

most observed and least understood phenomena on
earth.”
4
 Leadership would mean different things to different people.
The Nature of Leadership,...
There is no universally accepted or a standard
definition for leadership.
Some say it’s a process, some say it is ability, others say
it is a relationship.

 Some define leadership as an integral part of the group

process;

 Others define it primarily as an influence process;

 Still
others see it as the initiation of structure and the
instrument of goal achievement. 5
1.2 Leadership Conceptions
Leadership is the ability of a superior to
influence behavior of subordinates and persuade
them to follow a particular course of action
(Chester Barnard, 1938)

Leadership is “influencing people so that they

will strive willingly towards the achievement of
group goals” (Koontz, and O’Donnell, 1976)

"Leadership is influence - Nothing more -

Nothing less.“ (Maxwell)
6
Levels of Influence
,

7
Elements of Leadership
Leadership is an influence relationship among leaders
and followers who intend to bring about real changes
and outcomes that reflect their shared purposes.

Personal
Influence Intention responsibility
and integrity

Shared
Followers
purpose
Change
8
Elements of Leadership,...
1. Leadership involves influence
Implies the relationship among people is not
passive;
 Who influences? Superior or subordinate?

2. It occurs among people

Not something done to people.

3. People intentionally desire significant changes.

Leadership doesn’t want to maintain status
quo
9
Elements of Leadership,...
4. The changes reflect purposes shared by leaders
and followers.

Changes sought are not dictated by leaders;

They reflect purposes that leaders and followers

share.

5. Leadership is influencing others to come together

around a common vision.
10
Elements of Leadership,...
Leaders are sometimes followers.

Good leaders know how to follow, and they set an

example for others.

6. Intentions
Each one takes personal responsibility to achieve the
desired future.

Are leaders different from followers?

Are the qualities needed for effective leadership the
same as those needed to be an effective follower?
11
Elements of Leadership,...
Effective followers think for themselves and carry
out assignments with energy and enthusiasm.

They are committed to something outside their

own self-interest.

They have the courage to stand up for what

they believe.

Good followers are not “yes people” who

blindly follow a leader.
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Comprehensive Definition of Leadership
Leadership is “the art or process of influencing people
so that they will strive willingly and enthusiastically
towards the achievement of the organizational goals”
(Koontz et al. 1984:507).

It includes making people perform near to their full

capacity”.

Therefore, leadership is the function of the leader, the

follower and the situation.

Leadership= f(L,F,S)
13
1.3 THE SIGNIFICANCE OF LEADERSHIP
Does leadership in organization matter?

Two opposing views

1. Leadership does make a difference

2. Formal leadership does not make a

difference

14
1.3.1 Leadership does make a difference
Leadership had a direct impact on organizational
climate.

 That climate in turn is accounted for nearly one third of the

financial results of organizations (Goleman, 2000).

Leadership is one of the many important

organizational factors
They claim that leadership behavior accounts for almost
50 per cent of the difference between change success and
failure .
(Malcolm Higgs, 2006).
 Leadership is critical in orchestrating change.
15
Leadership does make a difference,...
 Leadership accounted for more variations in
performance than any other variable (Northouse, 2006).

Leadership is key in providing vision and direction.

Leadership can account for up to 44 percent of a firm's

profitability.

16
1.3.2 Formal leadership does not make a difference
Leadership has smaller impact on organizational
outcomes than do forces in the situation.

They raise three major arguments to strengthen

their idea:
a) Substitutes for leadership:
 Closely knit teams of highly trained individuals
 Intrinsic satisfaction,
 Computer technology
 Professional norms

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Formal leadership does not make a difference,...
b) Leader irrelevance:
 Leadership is irrelevant for most organizational
outcomes.
 It is the situation that must be carefully analyzed.
 Factors outside the leader’s control have a larger
impact on business outcomes than do leadership
actions

c) Complexity theory
 Argues leaders and managers can do a little to alter the
course of the complex organizational systems.

 Factors outside the leader’s control determine the

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Formal leadership does not make a difference,...
Further arguments:

External environmental factors affect organizations more than

leadership.

Internal structure and strategy determine the course an

organization takes.

Leadership accounts for only 7 to 15 percent of financial performance.

Leaders have little discretion to really make an impact.

Leadership is a romantic myth rather than a real organizational

factor.

19
1.3.3 Effective Leadership
Although several authors define leadership
differently, they have three elements in common:

1. Leadership is a group phenomenon; there can be no

leaders without followers.

2. Leadership is goal directed and plays an active role in

groups and organizations.

3. The presence of leaders assumes some form of

hierarchy within a group.
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Effective Leadership,...
Who is a Leader?
A person who influences individuals and groups within an
organization, helps them in establishing goals, and guides
them toward achievement of those goals, thereby allowing
them to be effective.

"The job of a good leader is to articulate a vision that others

are inspired to follow" (Canabou and Overholt, 2001: 98).

Role of followers in leadership:

Romney believes that "You have to build the right team. I
look for bright people with strong personalities who will
argue with me" (Prospero, 2004).
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Effective Leadership,...
What Is Effectiveness? When Is a Leader Effective?

Leaders are effective when their group performs well.

(e.g Fred Fiedler—Contingency Model).

Leaders are effective when their followers are satisfied

(Robert House's--Path Goal Theory).

Leaders are effective when they successfully implement

large-scale change in an organization
(Researchers working on the transformational
and visionary leadership models).
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 Effective Leadership,...
 Some examples of effectiveness provided by different good leaders:

 Restoring lives is both a personal and an organizational goal

(Cardiologist)

 Helping people communicate more, collaborate more, and innovate more

(civil rights & anti-discrimination activist,
personnel director and change manager)

 Cooperation, aligning people's self-interest, and getting buy-in from the

people who are affected by his decisions
(mayor)

 Divine service, helping the community, and being self-sufficient

(religious father)

 A satisfied customer that can only be achieved by providing "attentive,

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Effective Leadership,...
 Fred Luthans (1989) proposes an interesting twist on the concept of
leadership effectiveness by distinguishing between effective and
successful managers.
 Effective managers are those with satisfied and productive
employees, whereas successful managers are those who are
promoted quickly.

 Successful managers and effective managers engage in different

types of activities.

 Effective managers spend their time on communicating with

subordinates, managing conflict, and training, developing, and
motivating employees,.

 The primary focus of successful managers is not on employees.

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 Instead, they concentrate on networking activities such as
Effective Leadership,...
Overall, leaders are effective when:

Their followers achieve their goals

Can function well together,

Can adapt to changing demands from external forces.

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Effective Leadership,...
The definition of leadership effectiveness, therefore, contains three
elements:

Goal achievement, which includes

 Meeting financial goals,
 Producing quality products or services,

 Addressing the needs of customers, and so forth

Smooth internal processes, including

 Group cohesion,
 Follower satisfaction, and

 Efficient operations

External adaptability, which refers to

 A group's ability to change and evolve successfully

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1.4 Evolution of Leadership
Year Leadership \Definition
1900– Leadership definition emphasized control and centralization
1929 of power with a common theme of domination
“the ability to impress the will of the leader on those led
and induce obedience, respect, loyalty, and
cooperation” (Moore, 1927:124).
1930s Traits became the focus of defining leadership, with an
emerging view of leadership as influence rather than
domination
1940s The group approach came into the forefront with leadership
being defined as the behavior of an individual while
involved in directing group activities (Hemphill, 1949)
Leadership by persuasion is distinguished from
“drivership” or leadership by coercion (Copeland, 1942).

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Evolution of Leadership,...
Year Leadership \Definition
1950s Three themes dominated leadership definitions during this
decade:
1. Continuance of group theory, which framed leadership
as what leaders do in groups;
2. Leadership as a relationship that develops shared goals,
which defined leadership based on behavior of the leader;
3. Effectiveness, in which leadership is defined by the
ability to influence overall group effectiveness
1960s The prevailing definition of leadership as behavior that
influences people toward shared goals was underscored by
Seeman (1960:53) who described leadership as “acts by
persons which influence other persons in a shared direction”.

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Evolution of Leadership,...
Year Leadership \Definition
1970s The group focus gave way to the organizational behavior
approach, where leadership became viewed as “initiating
and maintaining groups or organizations to accomplish
group or organizational goals” (Rost, 1991:59).

“Leadership is the reciprocal process of mobilizing by

persons with certain motives and values, various economic,
political, and other resources, in a context of competition
and conflict, in order to realize goals independently or
mutually held by both leaders and followers”. (Burns’s
(1978:425)

1980s Years of bringing leadership concept to the apex of the

academic and public consciousnesses.
Scholarly and popular works on the nature of leadership
flourished.
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Evolution of Leadership,...
Year Leadership \Definition
21st Leadership scholars agree on one thing: They can’t
Century come up with a common definition for leadership.
Debate continues as to whether leadership and
management are separate processes, while others
emphasize the trait, skill, or relational aspects of
leadership.
Because of growing global influences and generational
differences, leadership will continue to have different
meanings for different people.
The bottom line is that leadership is a complex
concept for which a determined definition may long
be in flux.

30
1.5 The New Reality For Today’s Organizations
Transformations as a result of:
globalization, deregulation, e-business, telecommuting,
virtual teams, and outsourcing.

Economic uncertainty, widespread ethical scandals, and

the insecurity associated with war and terrorism.

Impact on employees

Tough job for leaders to keep people grounded, focused

and motivated toward accomplishing positive goals.

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The New Reality For Today’s Organizations,...
These shifts represent a transition from a traditional to a
new paradigm.

A paradigm is a shared mind-set that represents a

fundamental way of thinking about, perceiving, and
understanding the world.

Successful leaders in the twenty-first century will respond

to the new reality in a different way.

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The New Reality For Today’s Organizations,...
Old Paradigm New Paradigm
Stability Change and crisis
management
Control Empowerment
Competition Collaboration
Uniformity Diversity
Self centered Higher purpose
Hero Humble

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1.6 Leadership versus Management
Managers and leaders share a number of traits.

Leadership and management are two distinctive and complementary

systems of action.

Both are necessary for success in an increasingly complex and volatile

business environment.”

Strong leadership with weak management is no better, and is

sometimes actually worse, than the reverse.

Management is about coping with complexity.

Without good management, complex enterprises tend to become chaotic.

34
Leadership versus Management,...
Good management brings a degree of order and consistency.

Leadership, by contrast, is about coping with change.

More change always demands more leadership.

“Companies manage complexity by planning and budgeting, by

organizing and staffing, and by controlling and problem solving.

In contrast, leading an organization to constructive change

involves setting a direction (developing a vision of the future and
strategies to achieve the vision), aligning people, and motivating
and inspiring them to keep moving in the right direction."

35
Leadership versus Management,...
Subject Leader Manager
Essence/Focus Change/Leading people Stability/Managing work
Have/Horizon Followers/Long-term Subordinates/Short term
Seeks Vision Objectives
Approach Sets direction Plans detail
Decision Facilitates Makes
Power Personal charisma Formal authority
Appeal to/Energy Heart/Passion Head/Control
Dynamic Proactive Reactive
Persuasion Sell Tell
Exchange Excitement for work Money for work
Likes/Wants Striving/Achievement Action/Results
Risk/Rules Takes/Breaks Minimizes/Makes
Conflict Uses Avoids
Direction New roads Existing roads
Truth/Concerns Seeks/What is right Establishes/Being right
Credit/Blame Gives/Takes Takes/blames
36
Leadership versus Management,...
Management produces order, consistency and predictability,
where as leadership produces change and adaptability to new
products, markets, competitors, customers and work processes.

Management is more likely to produce a degree of

predictability and order

Leadership, in contrast to management, involves having a

vision of what the organization can become and mobilizing
people to accomplish it.

Leadership requires eliciting cooperation and teamwork

from a large network of people and keeping the key people in
that network motivated by using every manner of persuasion.
37
Leadership versus Management,...
Leadership produces change, often to a dramatic
degree, such as by spearheading the launch of a new
product or opening a new market for an old product.

Top level leaders are likely to transform their

organizations, whereas top level managers just
manage (maintain) organizations.

 A leader creates a vision to direct the organization.

In contrast, the key function of the manager is to
implement the vision.

38
39
Leadership vs. Management
Leadership and management are distinct,
yet complementary systems of action

Effective leadership
Effective management
produces useful change
controls complexity

Effective leadership + good management

= healthy organizations
1.7 Challenges of Being a Leader

Mental and
Rejection Loneliness Physical
Fatigue

●
Price Paid
●
Pressure
by Those
●
Criticism and
Closest To
Perplexity
You

41
1.8 Context of Business Leadership
Context refers to the interrelated conditions in which
something exists or occurs.
Four distinct contexts of business leadership have
emerged around the globe over the last 100 years.

42
Context of Business Leadership,...
Each context represents a fundamental change
in how we view the nature of business
leadership.
Where we are today:
Each of the four contexts of business leadership
still exists.
The rationalist is now in now in its decline,

The humanistic is now in its prime;

The wholistic is now in its development;

The spiritual-based is newly emerging.

43
Context of Business Leadership,...
 One way of understanding the core process of business is the
conversion of matter, energy, and knowledge into useful products
and services for customers through the power of mind and spirit .

 Spirit connotes courage, enthusiasm, meaningfulness, and

transcendence.

 Therefore, business has a special affinity to three fields of study:

 Science (matter and energy),
 Psychology (knowledge and mind), and
 Spirituality (spirit).

 The influence these three disciplines have had are assumed to help
shape a context for business leadership.
44
 The Rationalist Context for Business Leadership:
influence from science and psychology
This rationalist context for business leadership dominated leadership
thinking well into the 1960’s, and still continues to dominate in some
circles today.

The distinguishing characteristics of the rationalist context.

 The purpose of business is survival of the fittest, and competition is a win-

lose game.

 The goal of business and its leadership is wealth creation – specifically,

profit-maximization – on behalf of business owners.

 The common employee is usually seen as an interchangeable part in the

big machine.
 Managing “the parts” of the corporate machine (people) for greatest

efficiency and profitability.

45
The Rationalist Context for Business Leadership,...
Tasks/jobs are well defined, typically by job designers, who
usually hold the efficiency ideas of Frederick W. Taylor.

Securing the maximum prosperity for the owners coupled with the
maximum prosperity for the employee.
 This can exist only as a result of maximum productivity.

Leading by Scientific Management:

Jobs and tasks within jobs are specified in detail,

Employees are primarily extrinsically motivated, and good ones

are those who just do what they are assigned to.

And if one person can’t do the job, the Personnel department

brings in a replacement.
47
The Rationalist Context for Business Leadership,...
Only specialists are given the job of coming up with
new ideas for small or large improvements.

Directing employees is a matter of commanding and

convincing.
They are rarely consulted for their ideas.

Motivation is by carrot and stick; i.e., rewards and

punishments.

Top leaders encourage internal competition, believing

it will bring out the best of everyone.
48
 The Humanistic Context for
Business Leadership
Abraham Maslow developed his view of man’s
hierarchy of needs.
Man was by nature seeking to express his full

potential (to self actualize) after taking care of

more basic needs.

49
Self-Actualization needs - realizing
personal potential, self-fulfillment,
seeking personal growth and peak
experiences.

Esteem needs - achievement, mastery,

independence, status, dominance,
prestige, self-respect, respect from
others.

Love and belongingness needs -

friendship, intimacy, affection and love, -
from work group, family, friends, etc.

Safety needs - protection from elements,

security, order, law, stability, freedom
from fear.

Biological and Physiological needs - air,

food, drink, shelter, warmth, sleep.
The Humanistic Context for Business Leadership,...
The purpose of business and leadership from the humanistic
view is still wealth creation.

But with a win-win mentality in which “enlightened self-

interest “ supplants “self-interest”.

 Enlightened self-interest is a philosophy in ethics which

states that persons who act to further the interests of others
(or the interests of the group or groups to which they belong),
ultimately serve their own self-interest.

 Everyone whoassists in creating the wealth (shareholders,

management, and employees) should directly benefit from
it.
51
The Humanistic Context for Business Leadership,...
To instill stronger motivation for performance, a larger
group of managers and employees are offered the
opportunity to become shareholders through various
employee bonus and stock option plans.

And the code of business is more like profits with dignity

rather than profits alone.

J. Edward Deming and others brought the humanistic

view into practical business through Total Quality
Management (TQM):

Poor quality costs; high quality can save. 52

The Humanistic Context for Business Leadership,...
The humanistic context reached its peak period during late 1980s
when Fortune Magazine began to annually publish the “100 Best
Companies to Work For” using employee-based assessments with five
“humanistic” criteria:

Credibility/trustworthiness
Respect
Fairness
Meaning of work
Sense of family/ community.

Leading and Managing

How to motivate people became “relative” to their needs.
How to lead people became “situational,” depending on the circumstances.
Began to see “situational ethics,” along with the “situational leadership”
model of Ken Blanchard and Paul Hersey.
53
The Humanistic Context for Business Leadership,...
Douglas MacGregor formulated his “Theory Y”
 People are basically good, want to do a good job, could be trusted
to do right, people became a resource to be managed sensitively,

54
The Humanistic Context for Business Leadership,...

Personneldepartment evolved to be called

“Human Resources:

In this context:

Leaders see people as having unique talents
 They build jobs around that talent, as much as fit
talent into pre-defined jobs.

Leadership is more consultative, even participative,

with an emphasis on empowerment.

55
The Humanistic Context for Business Leadership,...

It was a norm to involve employees in assessing their

annual performance appraisals.

The concern was on how to fulfill their human

potential through the workplace.

Employee loyalty decreases as they identify more with

their profession than their company.

Company loyalty also decreases with re-engineering

and downsizing.
56
The Humanistic Context for Business Leadership,...

In 1970s, visionary leadership, team building, and

empowerment were valued capabilities.

The job of leaders is to provide the right environment

for the individual growth and performance of workers.

Humanistic context of business leadership first

gained momentum in the 1950’s and 1960’s, and
became the norm of many major corporations by the
1980’s.

57
 The Wholistic Context for Business
Leadership
In “wholistic” psychologies, people are
motivated by something beyond “individual
needs” and “individual self-actualization.”

They are “moved” to do good work on behalf

of a dual-focus:

Self-focused achievement

The well-being of the larger whole

58
The Wholistic Context for Business Leadership,...
The goal of business and leadership evolved
beyond wealth creation for shareholders to
wealth creation for the optimal benefit of all
stakeholders including:
Shareholders, employees,
Customers,
Community,
Nature,
Society, and
Future generations.

59
The Wholistic Context for Business Leadership,...
Corporate social responsibility, sustainability, etc have
become new trends.
 Driven by consumers voicing their preference for dealing with
companies that act as ethical stewards for the good of the larger whole.

In this context, business and nature are very

interdependent:
If the environment goes bankrupt (resources depleted), the
economy will go bankrupt with it.

This begin to bring a new perspective to “win-win” by

integrating individual needs with the good of the whole.
60
The Wholistic Context for Business Leadership,...
Leading and Managing

From this wholistic, systems perspective, the organization is

now clearly not a machine; everything is inter-related, as in
a complex ecosystem.

The people aspect of the organization evolved beyond

“Personnel” and even “Human Resources” to that of “Talent
Development” and” Human Capital.”:
 The recognition that people are the principal assets of

wealth creation, especially in the knowledge-intensive,

learning organizations that Peter Senge describes.
61
The Wholistic Context for Business Leadership,...
Since those assets go home every evening, they need to be treated in a
new, stewardship way.
Stewardship is the art of taking care of what has been entrusted for safe-
keeping.
 That is, the interests of customers, employees, suppliers, society, future generations,
and nature itself.

The acceptance of ideas is based on the quality of the idea, not on

authority.

Power becomes more a matter of serving than controlling.

The entire range of people working with and impacted by a person

gives input to “360-degree” performance appraisals.
 In this fashion, the employees are principle implementers, day-to-day, of the
wholistic principles of the business.

62
The Wholistic Context for Business Leadership,...
The context was first voiced in the late 1960's and gained
momentum in the 1980's and 90's.

It has yet to fully mature as the norm of major

corporations, but there are signs of its increasing
strength, such as the momentum of corporate social
responsibility.

By 2000, business leadership was primarily a mixture of

these three contexts:
Rationalist (its influence in decline);
Humanistic (in its prime); and
Wholistic (on the rise).

63
 The Spiritual-Based Context for Business
Leadership
The word “spirit” comes from the Latin word “spiritus”
meaning “breath.”

Spirit is the animating principle, the supernatural

essence (beyond material nature), which “breathes”
life into creation.

People throughout the world describe spirituality in

varied ways, and may or may not base it on
participation in an organized religion.

64
The Spiritual-Based Context for Business Leadership,...

Tapping into a meaning in life that transcends

physical existence.

Having a relationship with the Source of creation.

Experiencing oneness with Divinity.

Living in “full consciousness” of the Source of life.

65
The Spiritual-Based Context for Business Leadership,...

Spiritual-based business leaders are best described as

those who have a consciously held spiritual view of life
and may be expressing it in their leadership in one of the
following ways:

They are taking their first steps to bring their spiritual

view of life into their leadership.

They are integrating their spiritual view of life with their

leadership more fully.

They are consciously leading from their spiritual view of life.

66
The Spiritual-Based Context for Business Leadership,...
The spiritual-based context transforms the nature of business itself.

The primary purpose of business and leadership is spiritual fulfillment

and service to society.

Both are derived from and motivated by a Transcendent consciousness.

Wealth creation is no longer the goal; it becomes a means for enabling

and sustaining this larger purpose of spiritual fulfillment and service to
society.

Business leaders promote the spiritual fulfillment of everyone touched

by the business.

Likewise, business leaders develop selflessness in their service to society.

67
The Spiritual-Based Context for Business Leadership,...
How does a purpose of “spiritual fulfillment and service to society” sound
in actual practice?

For example:
“When confronted with a situation, I am basically guided by the question,
‘What would the Lord do?’ We are here to do good – to make the world a
better place, to be a better person, and to help others to have a better life.
This is what I keep trying to do everyday.

“In our case, profitability and social impact are fundamentally

intertwined. Businesses have a role to play in nation building and in
building the character of the people. If we all do something, we can all
gain. In this we are very blessed. We feel that it is God Who has made us who
we are.”

Floy Aguenza, President

Development Bank in The Philippines
68