Organisational Analysis - The impact of leadership styles on organizational effectiveness - Assignment Example

? Organizational Analysis - The Impact of Leadership Styles on Organizational Effectiveness                     A key facet in achieving a company’s goals, strategies and visions depend on the kind of leadership present in the company. An effective leader has the mandate to influence and motivate his followers in a positive manner in order to realize the goals and visions of an organization (Kiger 2010, 25). A leader may have the traits, which give him the capability of being an effective leader. Additionally, a leader can take up the transactional-transformational leadership model, which will enhance his leadership. Transactional leadership and transformational leadership are closely related units of leadership; however, they are distinct dimensions. Jack Welch, former CEO of General Electric, had traits that made him an effective leader and he combined transformational and transactional leadership styles, which helped him, turn GE into a success story. Leadership is the ability to impact a group towards the attainment of goals (Kiger 2010, 25). General Electric is a corporation, whose main objective is to generate profits, which will be pleasing to the shareholders (Brady 2010, 26). Jack Welch influenced his team to achieve this goal, which was evident in the increased market share, profits and revenues. In 1981, the company had a market value of 13 billion USD when Welch became the CEO. However, this grew to more than 400 billion USD when Welch retired. Welch possessed some traits that ensured his success as a leader. According to the Trait Theory, there are six traits, which are frequently associated with leadership. These traits are: desire to lead; energy and ambition; integrity and honesty; intelligence; self-confidence and job-relevant knowledge. Welch is a competitor; hence, full of ambitions. These ambitions are translated into ideas, and then decisions, which are eventually, implemented that saw the turnaround of GE. Jack Welch believed in energizing his followers in working hard to increase the performance of the company. Being full of energy, he seldom ran out of the excitated energy that was necessary to push his employees to reach their potential. The self-confidence of Welch enabled him to take risks, which even meant the falling of the company. He restructured the hierarchical systems, regrouping the business units and introducing an informal system of carrying out business in the company. Furthermore, Welch had an extraordinary passion, which he used to motivate and empower his employees to attain the goals of the company (Slater 2004, 19). Bass and Riggio (2006, 10) acknowledge that transformational leadership is made up of four fundamental elements, which they called the “4 I’s.” A transformational leader has the capability to achieve superior performance through: inspirational motivation; idealized influence; individualized consideration and intellectual stimulation (Judge & Piccolo, 2004, 755). In order to effectively turn around General Electric, transformational leadership had to be an important element in Jack Welch’s leadership style. One of the critical decisions that Welch had to make as the Chief Executive Officer was to create and implement a strategy and a vision, which suited all the businesses in the company. The intention of this decision was to unify all the businesses under a similar and distinct banner (Abetti 2006, 78). Jack Welch developed a three circle model, whose function was to ensure that all the businesses within the company fitted in one of the categories. These categories were: the main business, which the Power Generation production was part of, differentiated by restrained investments and returns was carefully selected; the high-tech businesses, which had a high growth, comprising of Medical Systems or Plastics, more often than not had negative cash flows and demanded heavy investments; services, which incorporated General Electric Capital and other businesses, which were typified by high returns for somewhat low investments, and produced important cash flows (Abetti, 2006, 78). Through the three-circle model, Jack Welch ensured that the objectives of General Electric and the followers were aligned. Consequently, Welch elaborated a clear vision for the company, which entailed the future and the markets that the company was to serve (Bass & Riggio’s 2006, 3). Welch spent up to 75 % of his time dealing with people and he emphasizes the importance of mutual affection that exists between him and the individuals working for him. This interest for followers and people in particular is an attribute of transformational leadership. This is because transformational leaders are concerned with individuals’ emotions and take care of them primarily as human beings (Northouse 2007, 75&176). The influence Welch exerted and success as a manager was very strong that many people and the workforce of General Electric considered Jack Welch to be inseparable from the company (StrategicDirection 2006, 16). According to Bass and Riggio (2006, 7), transactional leadership entails a relationship between a leader and his followers, which is founded on punishing or rewarding of the followers on the basis of the appraisal of their performance. This means that there is the thought of exchange of resources between the two parties (Judge and Piccolo 2004, 755). Jack Welch was not only a transformational leader, but also a transactional leader. From 1985 to 1995, a period that corresponds to the middle of his term, he made decisions, which allowed him to have a competent transactional leadership style. Abetti (2006, 7) explains that Welch cut down the hierarchical levels from eight to four, which was in line with his enthusiasm to appraise every worker from the highest to the lowest unit in the company. Abetti (2006, 78) and Strategic Direction (2006, 16) add that Jack Welch instituted a new system designed to reward employees on the basis of their performance. This system was centered on bonuses instead of salaries so as to offer the personnel incentives to perform well. Furthermore, he scraped off employment security that employees had, which meant that any employee could be sacked or dismissed any time, regardless of the number of years worked. The primary objective of this action was to improve the performance of the company (Abetti 2006, 78). Moreover, Jack Welch initiated a categorization of General Electric’s existing leaders. The categorization was based on their sharing of General Electric’s values, and not on their performance. These categories were: Type I, Type II, Type III and Type IV, which enabled Welch to deal with them easily (Abetti 2006, 78). Jack Welch imposed his assumptions and values on the company, which he felt were going to change the performance of the company. In turn, the assumptions, that is, the ideas, become embedded in the company and became the new culture of General Electric. For example, the company had a red tape and bureaucratic system and numerous hierarchical structures, which was affecting the general performance of the company. Welch started by de-layering, which resulted in the cut of several levels in the hierarchy, particularly in the middle management (Strategic Direction 2006, 16). Consequently, this reduced the bureaucracy that was within the company, which led to the employees having more responsibilities since they had fewer bosses. In 1989, Welch launched the Work-Out initiative, which eased the process and hastened the rate of decision making. This is through putting into consideration the thoughts of all internal and exterior stakeholders from all positions and functions, such as: workers; managers; engineers; suppliers or customers when concentrating on and evaluating a problem or an opportunity. Jack Welch gave an attractive vision to his workers, when he launched the Six Sigma in 1995 (Brady 2005, 68). He later went ahead to declare that the company was going to be “the only real value choice” for its customers. This means that the consumers were going to prefer GE to GE’s competitors, by bringing the enhancement of excellence to a brand new level. The provision of attractive goals to employees and placement of emphasis on the importance of quality turned the company into “the only real value choice” or “better than the best”. Whilst using inspirational motivation, Welch committed his workforce into the realization of goals and the vision of the company. Furthermore, Welch motivated his managers through provision of attractive vision of their responsibilities and work. According to Welch, the managers were to function as leaders instead of managers. Managing was a synonym of complicating, controlling and lack of inspired people; whereas, leading is a synonym of simplifying, facilitating and inspired individuals with a vision. This led to the effective implementation of the vision and generation of enthusiasm of employees, who are motivated about their work (Colvin 2009, 71). The Work-Out Initiative introduced a platform to find new ideas not only from the managers and top executives but from everyone in the company. Moreover, Welch invited other speakers from outside the company in order to generate new ideas among the personnel. As a result, this encouraged innovation and creativity among the employees (Immelt 2006, 17). The de-layering of the hierarchical system gave Welch an opportunity to evaluate the performance of each individual employee in General Electric in spite of the employee’s status. Welch classified his workers into three different classes: the high 70% performers; the top 20% performers and the bottom 10% performers. Jack Welch wanted to treat the top performance exclusively, since they were bringing up the company. Welch acknowledged that the top performers were to be appreciated, fostered and rewarded in the wallet and the soul. Additionally, Welch established a reward system in which the best employees were assigned the biggest opportunities and access to the required resources to accomplish their tasks. In conclusion, it is evident that an effective leader determines the success level of a company. It is not only important to have the leadership traits, but the leader has to know how to apply the different leadership styles. The combination of the two leadership styles leads to motivated employees keen on achieving a company’s goals and visions, and at the same time enhancing their overall performance. Finally, it is fact that an effective leader leads to an effective organization, which is clearly seen in a realization of goals and efficient integration and functioning of systems and personnel. Bibliography Abetti, PA 2006. “Case Study: Jack Welch’s Creative Revolutionary Transformation of General Electric and the Thermidorean Reaction (1981-2004).” Creativity & Innovation Management; Vol. 15, Issue 1, p.74-84. Bass, BM & Riggio, RE 2006. Transformational Leadership. 2nd Edition. Lawrence Erlbaum Associates: Mahwah. 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