STUDY BRIEF: LEADERSHIP IN AUSTRALIA WHEN ONLY THE BEST WILL DO

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1 Mb: Introduction STUDY BRIEF: LEADERSHIP IN AUSTRALIA WHEN ONLY THE BEST WILL DO In 1995, the Australian government commissioned the Karpin Committee to examine leadership within Australian enterprises. It s report was critical of the deficiencies in Australia s managers, finding them under-educated, under-skilled, and less than fully effective (Karpin, as cited in Hampson & Morgan, 1997, p.459). The report pointed out that Australia is sliding down the league table of economic performance (Karpin, 1995, p.4) and unless Australian management adopted the new paradigm of management and was brought up to world best practice levels, economic demise would likely continue. This apparent shortfall in leadership occurs at a time when Australian leaders must also cope with the huge business demands associated with rapid worldwide economic change in response to globalisation, new technologies and deregulation of markets, and the transformation of economies from industrial to service and knowledge based (Tharenou, 2000). Top quality leadership is critical to business success because at no other time in our history has the firm s human resources seemed so central a business weapon in this competitive war for profits. In the Industrial Age, MACHINES were the cornerstone of competitive edge; in the Information Age, it is now PEOPLE. Business success today will depend largely on how effectively this people resource (often a businesses single largest expense) is managed and led. Sarros comments that the quality of the management-employee relationship to a large extent determines the success of the operation (Sarros, 1991, p.270). This view is supported by substantial research evidence. Since the very beginnings of the academic field of organizational behaviour (OB) at the Hawthorne Works of the Western Electric Company, a clear relationship between leaders/managers and their employees positive feelings and their performance has been recognized (Luthans, 2002, p.1).

2 There is now also considerable empirical evidence that directly links economic results of an enterprise and how effectively it manages its people. Huselid found that a one standard deviation increase in [high performance work practices] is associated with a relative 7.05% decrease in turnover and, on a per employee basis, $27,044 more in sales and $18,641 and $3,814 more in market value and profits respectively (Huselid, 1995, p.649). In later research on a further 702 firms, Huselid found an even larger economic benefit an increase in shareholder wealth of $41,000 per employee (cited in Pfeffer & Veiga, 1999, p.39) and providing a source of competitive advantage (Becker, Huselid, Pickus & Spratt, 1997, p45). High Performance Work Practices (HPWP) comprise the management work of recruitment and selection, performance management, employee involvement and training. Leadership then is growing in importance to business profitability and there is evidence that Australia s business leaders are not up to the current task, let alone ready to cope with the enormous demands of global competition. So, how can a business identify the best leaders, to sure up profitability and competitiveness? To answer this question, a more in-depth review of managerial leadership theory is needed. First however, a definition of leadership is needed. Many researchers today like Harvard University s Kotter and Zaleznik (cited in Robbins, Millet, Cacioppe & Waters-Marsh, 2001, p.399) argue that leadership differs from management. The author does not agree with this distinction, which can give the impression these are mutually exclusive constructs; to the contrary, they are interdependent. In this paper, management is defined as achieving results through others by controlling, planning, organising and leading the work activity - a traditional definition first coined by Henri Fayol in 1916 (cited in Sarros, 1991, p.3) and although much has since been written on this subject, his original definition has lasted the test of time with only minor modification. Leadership therefore, is seen here as an integral part not separate from the management function. As pointed out by McConkey, a good leader must also be a good manager. The leader is concerned with effectiveness are the right things being done. The manager s primary concern is with efficiency are things being done right A person can be a good manager without being a good leader (McConkey, 1989, p.21). But Sarros adds you can t have good leadership without good management (Sarros, 1991, p.2). Successful management requires both astute management skills, as well as a touch of leadership magic (Sarros, 1991, p.8)the relative importance of each management function and the changing mix of skills and abilities needed by managers to perform each function successfully is what appears to have altered overtime, as will shortly be discussed. 2. The Theoretical Leadership Framework So, what makes for an effective leader? Many models of leadership are proposed, each with its own contribution to this question and so it is worth reviewing the major perspectives that have occurred over the past 100 years from the trait to the behavioural-situational leadership models.

3 Following this review, the author proposes a simple conceptual model on managerial~ leadership for Australian business - a cocktail of features from previous leadership models. 2.1 The Trait Return Prior to the 20th century, the selection of leader within many societies was primarily a function of bloodline. It seemed popularly accepted there were some biological, genetically acquired characteristics or traits that ensured capability/capacity to lead, although this was not formally measured. Around World War 1, researchers set about measuring everything from height, weight and appearance, trying to understand what factors contribute to effective leadership. A key focus of these early studies was on the inherent personal qualities (traits) that a leader brought to the situation. Much of this early trait research was atheoretical and suffered methodological flaws; few studies were replicable. Interestingly, Jennings comments that fifty years of study have failed to produce one personality trait that can be used to discriminate leaders from nonleaders (cited in Hersey & Blanchard, 1982, p.83). Yetton adds that hundreds of studies.searched for evidence of traits, [but] factors that discriminated leaders in one study typically failed to replicate in subsequent studies...overall then, the considerable trait research has failed to establish any clear link between personality or other individual characteristics, and leadership (Yetton, 1995, p ). Recently however, research has provided some evidence to support the importance of a number of traits to leadership. Robbins (2001) comments that research on leaders seems to point to eight consistent traits on which leaders differ from non leaders: (a) honesty & integrity, (b) intelligence, (c) self-confidence, (d) emotional maturity, (e) stress tolerance, (f) task-relevant knowledge, (g) ambition & energy, (h) the desire to lead. He adds that the correlation of these traits to leadership isn t high - predicting only about 10% of what makes a successful leader. Quite a strong association has been found on a trait called emotional intelligence (EI); a construct coined by Goleman which he and others have found to be the sine qua non of leadership (Goleman, 1998, p.94). Goleman identifies five traits which combine to make up EI; selfawareness, self-regulation, motivation, empathy and social skills. Goleman stated that although IQ and technical job skills/knowledge were important threshold capabilities, his analysis of

4 competency models from 188 companies suggested that 90% of the difference [between star and average senior leaders]...was attributable to emotional intelligence factors (Goleman, 1998, p.94). Another trait supported by research is achievement motivation (popularly referred to as drive), although House found that it will be positively related to the effectiveness of leaders of small task-oriented groups and leaders of relatively small entrepreneurial firms, and negatively related to effectiveness of middle and high level managers in large complex organization (House, 1997, p ). House (1997) also comments that there is empirical evidence showing that a desire for influence will predict managerial success and leader effectiveness (House, 1997, p.414). Finally, charisma is yet another trait that has received recent research attention. Charismatic people are said to present a new vision of the future that challenges the way things are today and offers new possibilities. House found that charismatic leaders are exceptionally self-confident, are strongly motivated to attain and assert influence, and have strong conviction in the moral correctness of their beliefs (House, 1997, p.416). There is then, some empirical base that a component of successful leadership is founded upon a core group of personal traits including emotional intelligence, drive, influence and charisma; traits which may predispose a person to becoming a leader. 2.2 Behavioural Theories Mature After World War II, various behavioural models were proposed. Ohio State University, Harvard, Survey Research Center at University of Michigan and Fleishman (International Harvester) each contributed towards isolating two broad classes of leader behaviours - task oriented and people oriented behaviours (variously termed consideration and member relations ). Blake & Mouton refined the results of these studies into their explanatory framework The Managerial Grid, suggesting that the effective manager was high on both concern for people and concern for task. House wrote that much of this early behavioural research was largely inductive.lacked theoretical orientation...was also plagued by limitations of measurement [and] questionnaires were of questionable validity (House, 1991, p.420). Additionally, behavioural theorists were unable to identify a universal set of behaviours that were consistently associated with manager/leader effectiveness. Fiedler s least preferred co-worker (LPC) model was the first theory to specify how situational factors interact with leader personality and behaviour. Fiedler hypothesised that task-motivated leaders perform best in situations of high and low control while relationship-motivated leaders perform best in moderate control situations (House, 1997, p.422). The path-goal theory also took into account situational factors although the model s author recently declared this theory, when tested empirically, met with mixed results (House, 1997, p.422).

5 These concepts were adapted by Hersey and Blanchard into a behavioural leadership model which (despite a lack of empirical validity) has become the most widely taught and practiced leadership model in Western society - situational leadership. This model asserts that successful leadership is a function of the leader adapting their style of leadership (styles are telling, selling, participating and delegating) to the maturity level of the people the leader is attempting to influence (Hersey & Blanchard, 1982, p.151). A current and promising approach to leadership makes the differentiation between transactional and transformational leadership. Transactional leaders are said to guide or motivate their followers in the direction of established goals (Robbins et al, 2001, p.421) whilst transformational leaders are said to excite, arouse and inspire followers [and] instill a vision in followers (Robbins et al, 2001, p ). The transactional leader works within the constraints of the organization; the transformational leader changes the organisation (Bass, 1997, p.132). Transformational leaders are able to motivate others to do more than they originally intended and often more than they thought possible (Bass & Avolio cited in Sarros, Gray & Densten, 2001, p.8). Bass developed the Management Leadership Questionnaire (MLQ) in the mid-80s to measure transactional-transformational leadership. This questionnaire has been administered in many organisations and cross-cultural settings with encouraging validity of the effectiveness of transformational and strategic leadership. However, despite thousands of empirical investigations over 100 years and all of this theorising, Bennis comments that no clear unequivocal understanding exists as to what distinguishes leaders from non-leaders (cited in Yetton, 1995, p.1189). Yetton supports this view stating that the search for the leadership panacea has failed everywhere when you actually examine the hard data, the different trait, charismatic and behavioural models people talk about simply aren t supported There have been over 5000 studies on leadership since the early 1900 s. If some of our simple notions of leadership were true, it would stand out like a sore thumb in the research evidence [but] it doesn t.at this stage, it appears that the only thing successful leaders share is success (Yetton, 1995, p.1214). And finally, Goleman states that virtually no quantitative research has demonstrated which precise leadership behaviours yield positive results. Leadership experts proffer advice based on inference, experience and instinct (Goleman, 2000, p.78). It is extraordinary then to consider the millions of dollars each year spent by business on management-leadership training despite the fact that there remains limited empirical evidence showing what constitutes successful leadership. Baker comments there is no way to differentiate what makes a good leader [and] people who emerge from these training programs rarely become what anyone might define as good leaders (Baker, 1997,p.343).

6 3. Australian Experience of Leadership In addition to this cynicism, most theorising on leadership has been based on specifically North American experience and a further question remains whether these theories can be generalised to a culture like Australia. Unfortunately, a literature search of leadership research within Australian organisations identified very few Australian based studies, and what is available unfortunately lacks scientific precision. The Karpin Committee (1995) was of course specifically established to examine leadership in Australia. Its report was very critical of the lack of competiveness of Australian managers, citing the following as significant leadership deficiencies: entrepreneurship, global orientation, people management skills, teamwork skills and strategic skills. The Karpin Report was also scathing of the ethics and trustworthiness of Australian leaders, which should not surprise given large business failures of some well-known Australian entrepreneurs of the day. Professor Sarros of Monash University has clearly been at the forefront of research into leadership in Australia, although the research inferences seem to be limited by sampling and methodology problems. His research has included surveys with members of Australian Institute of Management (AIM), plus interviews with senior Australian public and corporate figures. In 1995, Sarros conducted research with 800 AIM business executives over a 3 year period via the Leadership Research Unit at Monash University. This study identified six factors common to successful business leadership; planning, team building, direction setting, responsibility, mentoring and vision. He went on to say that our findings indicate that successful leaders are also proficient managers (Sarros, 1995, p.2). Professor Sarros more recently headed joint research by AIM and Monash University in Melbourne that administered the MLQ (which assesses transformational leadership) to nearly 2000 AIM members. Research results are currently being calculated with some limited data already reported on the AIM website. The research has two unfortunate flaws; sampling bias and a reliance on acknowledged inflated self-reporting. However (like the Karpin review of 1995) it highlighted that AIM managers don t feel their staff trust them [which is concerning given that] trust is central to positive and productive workplace relations (Sarros et al, 2001, p.1). Full results are not published at time of writing. Australian research to date leaves much to be desired and unfortunately adds little to our understanding of what makes for a successful leader in Australian business. 4. Towards an Australian Managerial Leadership Model Management science has provided ambiguous findings and still has much to unravel empirically with respect to understanding the causes of successful leadership and its impact on business success. Despite this, the leadership theories developed over the last century has provided

7 us with substantive useful and practical insight, with some empirical support and considerable face validity. In summary then, the insights which have been pinned down by researchers as the key drivers behind effective leadership and which could be usefully adopted as Managerial~Leadership selection criteria by Australian business are: intellectual ability (IQ), technical job knowledge, various innate personal traits, particularly emotional intelligence, self-efficacy/confidence, trustworthiness and achievement motivation (drive), some specific skills, especially interpersonal and influencing skills, and the ability to adapt leadership behaviour. Importantly, the author views that the optimum mix required of these Managerial~leadership criteria in different roles, will be situationally different. That is, different management roles and different organisational contexts will require a different mix of managerial~leadership competencies/skills to secure effective leadership. The author has termed a specific mix of management skills a managerial~leadership set. So a business needs to assess its own specific situation to determine the specific managerial~leadership set it requires. A framework for helping business to assess the set it requires is shown in the following illustrative chart. Managerial~Leadership Sets High Goal Achievement (Make things happen) Low Transactional (Manager) Laissez-faire (Administrator) Transformational (Leader) Charismatic (Promoter) Low Strategic Influence (Create change) High There is inadequate available space in this paper to fully elaborate on this leadership paradigm. In summary, the model suggests that the managerial~leadership set that is most suitable for a business will largely depend on the level of goal achievement and the level of strategic influence needed to get the particular managerial job done. Each of the four Managerial~Leadership sets (Administrator, Manager, Leader and Promoter) would require a different mix of the key abilities, knowledge, traits and skills earlier noted.

8 It is worth particularly noting that knowledge work will dominate the 21 st century and this will require more envisioning, enabling and empowering leadership, all of which are central to transformational leadership (Bass, 1997, p.131). The transformational leadership set appears a rising business need. The model is theoretical speculation and research is needed to detail the specific management criteria of each managerial~leadership set and to assess the model s empirical validity. Importantly, such research needs to account for the organisational context (size, culture, strategy, technology, demographic, industry) in which leadership is played out, which has been largely ignored in past research. 5. Conclusion Pettinger comments that there is a substantial body of knowledge upon which to draw the assessment of. who will make a good leader There are lessons here for those in charge of organisations. It is possible to take positive, informed and enlightened steps towards the successful and effective identification, development and appointment of the right people for [leadership] positions (Pettinger, 2000, p.135). The author has presented a model that can be developed to help Australian business to more effectively identify leaders, whilst noting that much more Australian research is needed. Not everyone is suited to leadership. Australia business must find ways to effectively identify managers most suited to their particular situation. The effort is worth it because today managers are a key determinant of the success, the profitability of the business. Today s business context places management~leadership at the very heart of enterprise profitability. Clearly, a business situation when only the best will do. References Baker, R (1997) How can we train leaders if we do not know what leadership is? Human Relations, New York, April p Bass, B (1997) Does the transactional-transformational leadership paradigm transcend organizational and national boundaries? American Psychologist, February, p Goleman, D (1998) What makes a leader? Harvard Business Review, November-December, p Goleman, D (2000) Leadership that gets results. Harvard Business Review, March-April, p

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