Leadership – Part Six

Leadership – Part Six

Continuing with GE…..

Looking at the style of leadership that Jack Welsh followed, it seems like it is a transformational style of leadership. As defined above, transformational style of leadership is the one that not only focuses on themselves but also on others. Jack had this energy in him that used to uplift people around him, filled them with enthusiasm and passion. He had the ability to inspire and make people follow him. He had a great vision and always used to increase the horizon to greater heights and also achieved them.

Switching gears to IT, let’s talk about Microsoft….

Microsoft

Bill Gates, the founder of the company, Microsoft, is considered to be one of the greatest influential leaders of the world. He had a vision and worked towards it. Bill Gates was fascinated with computers at a very young age of 14. His fascination and enthusiasm led to building an empire in the computer field. When he was working on the computers, he saw the huge potential that computers had both in commercial and home based environments and thus purchased the rights of writing in MS – DOS and  at a very young age of 23 years, he sold a DOS program of his to Seattle Computers for $25,000. He felt that many people will need to use MS- DOS and this will lead to purchase of the software that he owned. As expected, IBM purchased the rights for MS-DOS from Bill gates and renamed it as PC-DOS. Though his parents were completely against his idea of walking into the path that no one where it would lead to, he still carried on. He has a neurotic desire to excel in whatever he does.

Bill Gates was an authoritative person. He is quite known for having heated board meeting. In his initial ages, when people used to sell illegal copies of his software, he publicly wrote an open letter to all those who were using the illegal copies of MS – DOS. He always breeds an environment of constructive criticism which compels his fellow mates to use creativity for technical problems. Bill Gates gives autonomous power to his managers, by doing so, there is a feeling of my company amongst the managers and they will work in unison to achieve the targets set and use the resources considerably. This was the trust that Bill Gates had on his team members as he always hired the best of the best talent in the town and believed that they can be trusted. He is quite famous for his competitive nature and nurtures a healthy competitive environment in his organization.

Thus, it can be inferred that the kind of leadership that Bill Gates follows is a transformational style of leadership. He adapts himself based on the environment that he is working in, inspires and motivates his team through an environment of constructive criticism.

From the previous blogs, the most prevalent form of leadership in most of the organizations is the transformational leadership style. As defined by Burns (1978) and Bernard Bass (1994) that transformational leadership style is the one that works towards building and shaping the goals of the members thereby achieving a change in the organization. The approach of transformational leader is to instill energy and passion with the members that they work with. Rather than worrying about themselves they show interest in you, motivate you to achieve your goals and achievements.

In all of the examples that we have noticed, all of them had a vision. They worked for achieving a goal. This is what used to excite them every day and made them work harder to achieve their vision. They always thought of the future. All of the above leaders created trust amongst their followers. This helped them to sell a new vision to them and convince them to work for that vision. The final point that makes transformational leaders click in the real world of business is the ability to take charge and lead the team. They constantly instill a very high level of commitment from their followers to the envisioned vision. It seems like they believe that success comes every time there is a commitment towards the vision by the followers.

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Leadership – Part Five

Leadership – Part Five

Continuing with British Railways….

Mr. R.B. Reid came into power when the British Railways was plagued with crisis and was to be taken over by private companies. Mr. Reid, chairman of BR, had a vision. He wanted the British Railway system to be accident proof as was supported by the British Rail’s Rule Book.  He worked towards his mission and also motivated and encouraged his team to work towards the same. When Mr. Reid took over as the Chairman, there was a lot of non-coherence within the team. He built trust into the team by having a one to one relationship with them. He ensured that every penny used for the British Railways was being used in the right way. He put in different measures ensure that a proper scrutiny is being done to ensure that the many being sanctioned is used for the cause it’s been asked for.

In this case, we see a transformational style of leadership wherein Mr. Reid had a vision and worked towards it. Every time he achieved his goals he increased his vision further. He had the benefit of strong network that helped him to improve the system.

General Electric, Imagination at work

The former Chief Executive of CEO, Mr. Jack Welsh, is a very prominent figure in GE. He not only took GE to the zenith but also showed his successors a way to do so. He changed the model of the company as a whole and revamped it such that it is a leader in whatever it does. Jack Welsh worked on a model that worked to inspire, motivate and encourage its people.  Those are the 4 E’s of leadership which are:

Energy Any employee in GE is fully energized and works to excel in his own capabilities. Right from the top management to the executives all of them work with a zeal to achieve the goals set. This is built in by the team leaders for the lower management who draw their inspirational energy from the top management.

Energizer The energizer for these employees is the one to one relationship that the team leaders have with their teams. This is one of the foremost things every team leader is taught about. Having a one to one relationship with their employees shows that you care for them and are willing to help them in every possible way. By doing so, the employees are highly dedicated and work for the company with lots of enthusiasm.

Edge These are the officials with an competitive edge. They are the ones who have authority and control on critical decisions such as hiring new people, promotions etc.

Execute  This plays the most important role in the leadership model. It is the execution of the activities by the employees to achieve targets and to reach the goal of the company.

All the above mentioned play a very critical role in GE. In one of the interviews on CNBC, Jack Welsh, answering to a question as to how one can become a leader, Jack constantly emphasized on the need of building great teams. He strongly believed that for a success in any organization, team coherence makes all the difference. He also emphasized on the need to energize people. People who have an edge, people who have passion for their jobs, who can change and still continue to go further is what he believes is required to be a leader. He also says that if he had to employ anybody, the characteristics that he will be willing to look at are innovation in him. As per him, a leader is one who is smarter, who is energized, has the ability to get the work done, has an edge and most importantly has a passion for the role. Talking about leadership, he believes that every organization has a mix of people, i.e., in every organization; there is at least 20% of the employees who are highly motivated and will do anything to get the job done and always give high performance, 70% of them who are moderate and 10% of them whose performance is not of any worth. The method that Jack followed in GE to mobilize those 10% of them is by talking to them and helping them to achieve their best. If they do not feel comfortable in the job they are performing, they themselves will realize it and leave.

Leadership – Part Four

Leadership – Part Four

Patience No matter how many attempts did a leader make and the number of failures happened, it will never deter a leader. A leader keeps pushing forward and works relentlessly until and unless they reach what they aimed for. This is one of the important characteristics of a leader.

Passionate  In any of the interviews that Kack Welsh, the Ex- CEO of GE, gave, every time he mentions “Be passionate”. A leader is very passionate of his job, about his organization and wants to do something different every time. There is a never dying thirst in a leader to reach the top.

Leaderships in Organizations

A person who has the capability to inspire others to dream more, to learn more and become more is a leader. Leadership in an organization is an action not a job position. A leader does not wait for a problem to come and then work on it but anticipates it and starts working on it before it can cause any damage.  Leadership plays a very critical role in any organization. If an organization excels it is because of the leadership provided by the leader of the company and vice versa. Just being in a high position will not make them leaders. A leader need sot have a vision to work for and needs to motivate his people around such that they are ready to excel their own capabilities to attain organizational goals.  A leader can follow any of the above mentioned theories to motivate his team. But what happens in reality. Are these theories just theories or are they implemented in the real life. Looking at the various companies and their leadership styles following are the observations made:

The British Railways British Railways was a pioneer in railway system. It gifted the world; the most easiest and convenient means to travel across to many places. However, the British Railways was in a complete mess in the 1980’s.Every CEO who wanted to reform the British railway system could not do so as the political influence was very high and the budget allocated to reform the system was sufficient enough. Here, I would like to talk about R.B.Reid who completely revamped the system of British railways, who initially was ruled out to be unfit for the position of CEO.  Many of his successors tried to change the system but every trial of their ended in a vain effort.

What makes R.B.Reid unique was he was from the system. He started his career as an Engineer soon after finishing his MBA studies and gradually grew from there to become the CEO of the company. He had a good rapport with various departments and made good friends.  This nature of building networks helped him to achieve what was impossible for his predecessors. British Railways is a very huge organization with many operational and safety regulations and various obligations to fulfill the statutory requirements of the government.  It was place which was bound with traditions, cultures and history. Mr. Reid being a part of the system from the beginning understood these very well unlike his competitors who were hired from outside the railway system. One of the necessary moves to be made to improve the services of British Railways was to reduce the debt on the organization for which Mr. Reid went on a cost cutting mode. He slashed most of the jobs that were unnecessary and unwanted. Within two years of he taking charge as a CEO, he has successfully delivered productivity improvements and cost reductions magnificently which was never achieved before.  By this he proved his worth and this gave him power to bid for the maintenance efficient rolling stock and the electrification and upgrading of major routes.  He made some major changes in the railway industry such as changing the double routes to a single route and so on and so forth.

Leadership – Part Three

Leadership – Part Three

Characteristics of Leader

Communication A leader has the ability to communicate well. Communication is an important aspect for any team building. It is imperative for a leader to explain and help his team to understand the importance of the work that they are doing. Communication has the power to make or break a team. Thus, every leader needs to be a good orator so that his ideas are conveyed to others the right way.

Ability to form one on one relationship By having a close relationship, the leader wins the confidence of the team and builds a strong relationship because which the team is completely dedicated to him and will stretch to any lengths in order to reach the goals set by their leader.

Good Listener Not only should the leader have the ability to communicate well but also needs to have the art of listening. It’s a give and take process. Nobody will be willing to anything to a person if they are not willing to listen to their subordinates. It not only enhances the relationship between a leader and a follower but also provides solutions and ideas based on which the company can grow further.

Surrounds with Like-minded People There is a famous saying:” Birds of one feather flock together”. This is true even in everyday life. One likes to be in a company that makes them feel like one amongst them. A leader surrounds himself with like-minded people so that there is a constant encouragement and motivation around.

Refuse others to dictate how they should do certain things Leaders are their own boss. They will ask suggestions on a particular topic but will not take any orders as to how to do a particular work.     

Knows his or her strengths and weaknesses Every leader knows their strengths and play to their fullest potential utilizing their strengths and also knows how to utilize their strengths to win others.

Recognizes Change A leader has this unique ability to recognize change and also knows how to implement it. A leader also has this ability to recognize change and work accordingly. It’s a well-known thing that the only thing that can remain constant is change. Whenever a change happens in the external factors, environment, a leader immediately recognizes it and works on it to make it a strength for the organization than working about it.

Optimistic and Confident A leader is optimistic all the time. He is always looking for opportunities even in the gloomiest of the times. One of the quality that differentiates a leader from the lot is being confident. When the whole world is following one thing, a leader does not think twice to follow the way he feels has more potential and does that with utmost confidence.

Leadership – Part Two

Leadership – Part Two

X and Y Model of Leadership Style

In this model of leadership style there are two different types of managers, the X type of managers and the Y type of managers. In the X type of managers, they believe that the employees are less motivated to do the job and always try to escape from doing their job. In the Y type of managers, they believe that the employees are self-motivated and they do not need not be pushed to finish their tasks or responsibilities.

Situational Leadership Style

In this type of leadership approach, it is believed that the nature of work performed the external factors and the characteristics of followers provoke managers to exhibit different types of leadership styles.  

Contingency Models

After the trait theory and the behavioral theory, it has become apparent that there is not just one style of leadership that can be followed in all times. This has given rise to contingency theories. The word contingency is defined as “it depend”, as per the dictionary. It means that adopting the right kind of leadership style based on the situation. The various theories that can be treated as “contingency theories” are as follows:

  • Leadership continuum Theory
  • Path Goal Leadership Theory
  • Normative Leadership Theory
  • Leadership Substitutes Theory
  • Multiple Linkage theory
  • Cognitive resource theory
  • Contingency theory of Leadership Effectiveness.

Functional Theory (Hackman & Walton, McGrath, 1962)

This theory addresses the specific behavior of the leader expected to contribute for the organizational and unit effectiveness. As per this theory, a leader has done his job well when they contribute sufficiently for the effectiveness and cohesiveness of the group. This type of leadership is applied majorly for team leadership. As per Kozlowski et al. (1996), Zaccaro et al. (2001), Hackman and Walton (1986), Hackman & Wageman (2005), Morgeson (2005)), Klein, Zeigert, Knight, and Xiao (2006) observed five major functions a leader provides when promoting unit efficiency. These functions include: (1) environmental monitoring, (2) organizing secondary activities, (3) training and coaching subordinates, (4) motivating others, and (5) intervening actively in the group’s work.

Transactional and Transformational Theories  These theories were proposed by Burns

Transactional Leadership Theory  According to this theory, the leader has the power to perform certain tasks and reward or punish for the team’s performance. The leaders lead the group to attain goals.

Transformational Leadership Theory As per this theory the leader motivates and encourages his team to be efficient and effective. In this theory, the leader communicates to his team effectively in order to convey their goals to achieve. Here, the leader is always looking for ideas and has a big vision. As per this theory, the leaders and the followers raise each other to higher levels through motivation and commitment.  As per this theory, the leader instills great enthusiasm and provides direction to a group of individuals or team.

Leadership – Part One

Leadership – Part One

Management is doing things right; leadership is doing the right things” – Peter F Drucker.

One of the oldest topics and the one that is always in news because of new findings, new assumptions, and contradictory findings is the term Leadership. The term Leadership has caught the world in a whirlwind. It has been associated with different words since time immemorial, words such as brave, clever, victorious, powerful, dynamic so on and so forth. Many studies have been conducted and many theories have been written and many conclusions have been made. Leaders like Mahatma Gandhi, Nelson Mandela, and Winston Churchill have created history.  Leaders attempt to accomplish a task through the efforts of others. Leadership has changed the corporate world completely. A leader is the one who can lead the organization to success or vice versa. It’s their vision, their strategy, effective interpersonal communications all put together makes an organization successful. The quality of leadership is one of the important characteristics in an organization. Leadership is all about influence, group and goals.   CEO’s of any company will agree that the foundation for organizational success is a good leadership. In this report, I will emphasize on the various theories about leadership style in organization and the leadership style that is prevalent in companies, how does leadership help in an organizational success. Also, in the end I also aim to draw a leadership plan for myself and how I plan to improve it. There are many theories given about leadership. Some of them are

Trait Theory of Leadership

This theory was developed from Great Man Theory of Leadership and works on the following assumptions:

  • People are born with innate traits and not made.
  • People who are good leaders have the right combination of traits since their birth.

This further describes the qualities of the leaders in terms of physical appearance such as they tend to be slightly taller or shorter than others, are more self-confident and come from a high class. It also compares the characteristics of effective leaders such as they are more intelligent, initiative and self-assured when compared to others.

Behavioral Approach to leadership

In this leadership, it says that unlike trait theory, behaviors can be learned through appropriate leadership behavior and such individuals are more capable of leading more efficiently. This theory focuses on leadership functions and leadership styles. In leadership functions, it is further classified into task oriented and group oriented functions. In task oriented leadership style, managers supervise the employees to ensure that the task is done appropriately. In such leadership style, to ensure that the work gets done by the employees play a major role than the employee’s growth or personal satisfaction.  In the group oriented leadership style, more importance is given to motivate the team than controlling them. This approach is friendlier in nature which works on trust, respect and thoughtfulness for the employees.

Path Goal Approach Leadership

This theory was developed by Robert House (1971) and is based on the expectancy theory. This leadership style is based on the expectancy model of motivation, which says that an individual’s motivation depends on his or her expectations of rewards and the attractiveness of the reward. Based on this, the path goal leadership style says that the ability of a manager to provide rewards and to mention the ways to obtain it.

This style of leadership works well when there is a change in the system. Change instills fear in any individual as they are moved out from their comfort zone and need to strive again to find their comfort zone in the new system. If a system is changed and the management expects a high resistance to this change, employing a path goal approach will help them to mitigate resistance to a great extent. It defined four types of leadership behavior. They are behaviors, result oriented, directive, participative and supportive that are dependent on the environment and the followers characteristics.

Principal-Agent problem

Principal-Agent problem

The principal-agent problem arises because an agent is given the responsibility and authority to take actions that affect both the principal, but can also affect the agent. The key to the principal-agent problem is that principals and agents are people, people who seek to maximize utility. As people, they prefer more to less. To satisfy unlimited wants and needs these people take actions and make decisions that generate as much utility as possible. We can go into details and do more research on what models work or don’t work for P-A problems and or the situations which results in P-A problem, but bottom line we are dealing with humans who have needs/wants. Practices like offshoring workforce and allowing employees to work from home, the process of monitoring the agent (manager) by principal (CEO) is getting optional. So the question whether the agent is working towards the best interest of principal, if so why and if not why.

What makes the agent to work in the best interest of the principal?
• Incentives
• Performance Bonus
• Recognition by awarding
• Stock options
Reasons why the agent does not work in the best interest of principal:
• Conflicts of interest
• Risk averse
• Disconnect between goals/objectives

Mining industry especially precious metals (Gold, Silver etc.) is very sensitive to the metal prices and the fluctuations in metal prices in the market will result in adjusting the operating model and philosophy how we operate mines. The P-A problem can arise when the agent (manager of the mine) has different approach or method in operating the mine, basically making sure the mine makes profit (free cash flow) and also sustainable for the community stakeholders, on the contrary the principal (CEO) might have a different interest or opinion about the mine as he/she is looking at the portfolio of the organization. To solve the P-A problem we need to know what is the production process and it varies widely across industries.

Doing some research I came across some of the principal-agent problems:
1. Adverse selection problem
2. Monopolistic screening problem
3. Moral hazard problem
4. Effort-aversion

Recommendations:
• If the goals/objectives of the CEO are aligned with the manager the probability of principal-agent problem can be minimized.
• Compensation, awards and recognition of effort on projects/reports are some ways to keep the manager engaged and motivated to input maximum efficiency at work.
• Most of the major firm executives have modeled their benefits and compensation towards the improvement of the share prices. The P-A conflict between manager and CEO can be avoided when the strategy map is aligned between them.
• The payment process should emphasize on stock bonuses and multi-year performances, so that long-term strategies are pursued by the management.
• Must be cautious when investing in assets which you don’t understand and don’t take things granted from your agent and perform risk analysis.