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How the process of leadership may be used in order to maximise potential of the organisation and its employees - Essay Example

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Banking industry Instructor Date Industry The industry which this essay is going to be based on is banking the industry. Brief description of issues affecting banking Technological advancement and globalization has exposed banks to numerous challenges…
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How the process of leadership may be used in order to maximise potential of the organisation and its employees
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Download file to see previous pages This is as far as the investigation carried by Stephen A. Cohen and some of his employees at SAC Capital Partners on the same is concerned (Fisher et al.1992, p56). They found out that Goldman Sachs moved aluminum around from one warehouse to another so that they can improve their market position and at the same time increase their prices to consumers. Such kind of events imposes a major impact on peoples’ trust in financial institutions. The survey indicates that nearly eighty percent of Americans has a great mistrust for the big banks and that close to two-thirds of the Americans think that the corporate corruption is much widespread among the banks in the US as well as across the globe. There has been a significant increase in both the figures in the level of mistrust for the banking industry exhibited by Americans a few years ago (Yukl,2001,p65). This loss of trust is very costly on the part of banks because it is normally expensive and wasteful to regulate and monitor system when there is no trust among the stakeholders. This is so because market competition cannot easily be an efficient substitute for integrity and trustworthiness. Another event that has led to the loss of trust is the disappearance of banking proper goal. At first banks main goal was to maximize stakeholders’ welfare but the banks have greatly transformed and are now only interested in maximizing the shareholders wealth by just concentrating on accumulation of profit and personal wealth. Loss of trust among customers was largely brought about by leadership styles adopted by the banks. The main reason is the agency problem whereby the Conflict of interest between the management and the shareholders exists. And management, therefore, engages in activities that pose a high financial gain to them as in the case of insider trading. They enter into agreements that increase the shareholders’ wealth at the expense of other stakeholders (Kotter,1996, p34). To maximize the profits, they charge exorbitant interest rates to customers. These autocratic leaders formulate policies on their own and then tell the employees what need to be done without involving them at all. This kind of leadership does not put leaders to task and therefore they cannot easily be monitored or commented upon (Isaksen & Tidd, 2006, p52). Staff, on the other hand performs the tasks as assigned to them which may perhaps even be poor and unsatisfactory services to bank customers. These poor services rendered to customers make them develop a negative image and even mistrust to bank. In addition, lack of employee involvement in the formulation of objectives leads to low motivation and commitment. This in turn lowers the returns for banks and therefore huge layoffs of personnel may occur to help reduce the operational costs. Leadership styles adopted to restore trust In order to solve the problem and maximize the potential of the organization and its employees, the banks should use transformational leadership. A transformational leader is that who motivates the employees, enhances their morale and performance through a variety of mechanisms such as connecting the employee’s sense of identity and self to the project and the collective identity of the organization (Northouse, 2010, p53). He challenges the employees to take greater ownership and responsibility for their work and understands their weaknesses and strengths. This allows the leader to align the ...Download file to see next pagesRead More
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