Theories and Principles Which Leaders Must Adopt in Case of Mc Donalds and Chrysler Financial - Essay Example

To live coherently in the society of organizations, there must be theories and principles which leaders must adopt. Power, influence, leadership, communication and motivation techniques help a manager or a leader to make the power structures effective. The simulation illustrates the influence of power and politics in managing different situations. McDonalds and Chrysler Financial have been facing similar situations where power and politics influence the leaders in managing different situations. The fast food industry is based on the Taylorist principles of mass production where the work is routinised, dull and standardized. It is low skilled, low paid and offers few career opportunities. McDonalds has often been the target of anti-globalization protesters. At the end of 2003 it employed more than 1.6 million people and is considered to be America’s largest job training program. They claim to make the world a better place and claim to respect and value their employees, but reports suggest that pay and working conditions are far from being ‘overwhelmingly positive’ (Royle, 2005). Even though work in the fast food industry is considered a low-profile job, workers at McDonalds feel they develop general work competencies and maturation skills like reliability, strong work ethic, responsibility, concentration, punctuality and diligence (Allan, Bamber, Timo, 2006). This is because all the operations are mechanized; every job is broken down into small steps and the entire process is automated. In terms of Kreitner and Kinicki (2004), McDonalds is a mechanistic organization where because of heavy competition in the industry there is a need for uniform product, quality and service. People work like machines and become experts in their area of operations. The employees satisfy themselves saying that working in the areas like fast food promotes team working and reinforces the identification of the workers to the organization to one another. This practice of moving workers around jobs and tasks as per needs is known as functional flexibility (Dyer, 1998). This allows for movement and redefinition of working time. Since McDonalds offered low wages, they could move workers around jobs and functions but this benefits the organization and is no way employee-centered. Work at McDonald’s is low-paid, hard and often unrelenting. As labor turnover is very high, workers seldom get beyond the basic wage or qualify for additional benefits. Wages have not moved with inflation and being market leaders they depress the wages for the whole sector. This amounts to violation of employees’ rights. The new CEO at McDonalds convinces that change in leadership does not change in strategy. His roots lie in the details and discipline of restaurant operations. This means being a leader and being a manager are two different things. To continue the business momentum, McDonalds needs innovative leadership. Despite the financial losses, various lawsuits and claims, the company has been able to surge ahead. The CEO has been able to motivate the followers and raise the awareness towards achieving the organizational goals. The organizational goals and missions have to be set before self-interest. A leader can be anyone within the organization and contribute to organizational effectiveness. In the case of McDonalds, the leaders demonstrate centralized decision making process. Goal effectiveness has been set as the effectiveness criteria for the organization. As the power from the centre rules, the employees have practically no say in the day to day operations and nor in the decision-making process. The company follows the Situational Leadership Theory (SLT) which is more of a training tool. Here the power and influence of the leaders are used for employees with low readiness. Managers have to use power with discretion as the effectiveness of the follower depends upon the readiness to complete the job. The follower must possess the ability and willingness to complete the task but at McDonalds the employees are just shifted from one job function to another and the motivation is low, resulting in high turnover of employees. Chrysler Financial Corporation was a holding of Chrysler Corporation and heavily used commercial paper. Chrysler has appointed a new CEO who is fresh to the auto industry and who comes with both accomplishments and controversies (Higgins, 2007). He has a proven track record of success and an unwavering focus on performance (Business Week, 2007). The previous chairman is now the No. 2 executive at Chrysler as vice chairman and president. Since 80.1% of Chrysler holdings in DaimlerChrysler have been transferred to Cerberus Capital Management, they have dictated these terms. The CFO at Chrysler who has worked with the company for 23 years is also expected to leave the company and pursue other interests. The new CEO has a unique management style and has doubles sales and store operations. He has the ability to motivate people around for a mission; he can excite them about it and make it happen. The adverse reports in the media were put to rest by the new CEO who convinced the shareholders that Chrysler has ample liquidity (The Auto Channel, 2007). The company is fully funded with working capital to meet the present and future needs and objectives. The market is competitive but they are moving aggressively. The changes at Chrysler also demonstrate that leadership and management are different. The CEO at Chrysler has no experience of the industry but has nevertheless been selected as the leader. The management will be left to the veterans of the auto industry. Chrysler is a corporation with multi-specialty tasks and requires multitalented people. These are organic organization that performs a variety of tasks. There are no walls or departmental barriers and is horizontally run. Decision making process is decentralized for effective and smooth working of the company. They are globally spread and decisions have to be taken every moment. Without autonomy, things would get stuck and hence the middle and the lower level managers are empowered with certain decisions. Usually organizations of this size remain in an unstable environment due to which they run into losses. The new CEO’s of both the companies are concerned about continuing the business momentum. In a stable and certain environment like McDonalds, the success is achieved as the work is mechanistic. Leadership and communication travels top down and consequently there is no intrinsic motivation among the members. This is the reason why McDonalds experiences high level of employee turnover. The employees do not have any sense of freedom or self-determination. Bureaucracy prevails and because the intrinsic motivation is low, the mechanistic attitude only increases among the employees. At the same time, without the mechanistic approach, McDonalds will not be able to achieve the desired quality and service standards so essential for this industry. Thus, the use of power influences the decision-making process which helps the management to manage any situation. On the other hand, Chrysler has been steadily losing for the past two years in the face of heavy competition. Here there has to be innovation at every stage and it has to be an ongoing process. Due to its sheer size, behavioral problems arise and employees remain alienated from each other resulting in high absenteeism and turnover. Again, strategic change is the combined effect of organizational performance and managerial characteristics. Political resistance and vested interests make change difficult. Poor performance acts as a catalyst to change and the managers can easily overcome resistance to change. This is the reason why the CEO has been changed recently at Chrysler as they have not been performing well. He has been brought in to steer the company and in the hope of a turnaround essential at this juncture. Chief executive is normally responsible for change in organizational strategy and it has been seen that a change in the chief executive normally results in strategy change (Boeker, 1997). The new executive would like to replace the prevailing norms and expectations. Even the power relations are altered. Secondly, in poorly performing organizations, changes are more likely to occur with change in the chief executive officer and may not occur when there is no change in the top executive even when the performance of the organization is poor. If the tenure of the CEO in big organizations stretches for too long, he resists change because his cognitive structures become rigid. It becomes difficult to overcome or break old behavior patterns especially in policy decisions. At Chrysler, the top management team is from diverse background and cohesion is unlikely which would result in conflicting demands. This would lead to diverse information collection, interpretation, and solution generation among the top management team. The chief executive and the top managers are important links between the organization’s performance and strategic change. At Chrysler, even the change in the CEO is not likely to change the situation whereas at McDonalds, even the mechanistic attitude would reap benefits. While the intrinsic motivation is low at McDonalds and the employees have low self-esteem, turnover is high in both the firms for different reasons. At Chrysler power relations matter whereas in the case of McDonalds power is centralized and it is bureaucracy that matters. Conflicts are more likely at the top management level at Chrysler which is easily avoided at McDonalds due to concentration of power. Thus, the two companies also demonstrate that power and politics assist in managing different situations. References: Allan, C., Bamber, G. J., & Timo, N., (2006), Fast-food work: are McJobs satisfying? Employee Relations Vol. 28 No. 5, 2006 pp. 402-420 Boeker, W (1997), Strategic change: The influence of managerial characteristics and organizat ional growth, Academy of Management Journal. 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