Effect of CEO Leadership Style and Decision-Making - Research Paper Example

Effect of CEO Leadership Style and Decision-Making Contents Contents 2 Autocratic leadership 3 Democratic leadership 5 Laissez-faire 7 Bureaucratic leadership 9 Transactional leadership 11 Transformational leadership 12 Situational leadership 14 Charismatic leadership style 15 References 16 CEOs have significant control over their organizations, and their style of leadership is crucial to the success of the organization. The success of the organization usually comes with proper decision-making in order for an organization to function optimally. The type of leadership that a CEO exhibits is an essential determinant of the ways in which the employees of the organization make crucial decisions. Autocratic leadership A CEO that practices authoritarian leadership style is a hindrance to effective decision-making. The CEO makes sure that employees follow policies and strategies that he/she sets. Such a CEOs usually fear the domination of other managers over them, and they are keen on ensuring that they remain superior over the other managers (Decision-Making Confidence, 2014). Authoritative leaders tend to maintain close supervision of their employees in order for the employees to remain productive. This autocratic form of leadership puts more emphasis on efficiency, and the CEO considers him/herself as the one to enforce the efficiency (Flood, Hannan, Smith & Turner, 2000). The CEO has the final say and may bully the workers and expect no one to raise complaints. Autocratic leadership has a significant adverse impact on decision-making. Since the CEO has the final say, decision-making is a one-person affair. The making of decisions by one person discourages consultations and dialogue in the process of making decisions. The employees and other managers may feel the process of decision-making to be a time-wasting activity since their contributions will not influence the final decision (Ackley, 2014). The making of decisions by the CEO is likely to result into errors in decision-making since the CEO is making uninformed choices. The authoritative CEO will then impose wrong decisions on the subordinates without expecting corrections and modifying decisions since this may interfere with his/her authority (Decision-Making Confidence, 2014). The pride of the autocratic CEOs is a barrier to sober decision-making, since they do not welcome contrasting opinions and feel they have a monopoly of knowledge. The lower level managers and employees usually fear and submit without additional opinion to the decision of the authoritative CEO. This fear stifles creativity and espouses the generation of innovative solutions among subordinates. The followers in the organization may not receive an opportunity to provide their expertise and knowledge in the solution of problems. When the followers receive an opportunity to make decisions, the authoritative CEO usually overrules decisions if they fail to appeal to him/her. The lack of opportunity and the subsequent overruling of decisions demotivate employees from taking part in decision-making (Gleeson, 2012). The employees may feel that the organization underutilizes and demeans them, and they may frustrate the implementation of decisions. The CEO discourages meaningful participation in decision-making, and this sole decision-making process ends up having a limitation in scope, ideas, and expertise. These limitations bring about the making of decisions that are likely to be suboptimal and decisions that have a little positive impact on the organization. The non-participative process of making decisions in the authoritative leadership style may also lead to resistance in accepting decisions (Decision-Making Confidence, 2014). The resistance may be active or unintentional. Active resistance occurs when employees directly stifle the process of decision-making and its outcomes since they are aware that they are of little value in decision-making. Unintentional resistance may arise from a genuine lack of understanding of the decisions that the CEO imposes on them. However, authoritative leadership creates a sense of direction in the whole organization. The decision-making by the CEO helps avoid time wastage in making decisions and directs everyone to the decision of the CEO. Democratic leadership A CEO who practices a democratic form of leadership, is engaging and values the opinions of his subordinates (Ackley, 2014). The CEO gives opportunity to everyone to offer his or her expertise and contributions in the process of decision-making. The CEO ensures that at the end of the process of decision-making, everyone concludes that the decision covers the perspectives of all. The decision is always the option that has the support of the majority, while the minorities receive the chance to present their case (Flood, Hannan, Smith & Turner, 2000). Employees usually feel in control over the destiny of the organization. The employees are likely to accept the final decision since it combines everyone’s perspective. A democratic CEO inspires the participation of employees in decision-making. Employees feel that the CEO values them and sees their views as important in ensuring organizational success. This feeling of value enhances commitment in making good decisions since the CEO motivates the subordinates to be accountable in their choices. The involvement of subordinates in the making of decisions promotes the creativity and generation of innovative ideas in the realization of optimal decisions. The lower level managers and employees are likely to be active in bringing up useful ideas and insights in order to develop concrete decisions (Leadership Management, 2014). The involvement of different people with diverse ideas in the making of decisions results in a deeper understanding and insight of the problem. Employees willingly provide their expertise in the solution of problems since they are sure that their contributions are essential to arriving at a final decision. However, a democratic CEO may experience several challenges in decision-making. There may be a compromise on the quality of the decisions. Group thinking sometimes may hinder objectivity in decision-making and this may lead to suboptimal decisions (Vroom & Jago, 1974). The domination of some people among the followers may influence the making of decisions in support of the informal leaders at the expense of the organization’s success. Democratic leadership may encourage deliberations for insignificant issues, and this will encourage pettiness in the organization. In democratic leadership, the CEO requires a lot of effort in bringing all subordinates in place in order to make decisions. This bringing of people together requires financial expenditure and may be overwhelming especially for large organizations (Mindtools, 2014). The decision-making process is usually characterized with chaos if there are many people to involve and there is poor organization. The organization usually wastes considerable time in making decisions instead of focusing on the business activities. The arguments that employees bring forward and the propositions may vary, and this may require a lot of time to reach a consensus. The involvement of all people in decision-making may lead to weak decisions. Some decisions may require technical analysis and expertise in reaching meaningful decisions. The diversity in expertise in the organization and lack of expertise on a particular problem may lead to uninformed decision-making (Vroom & Jago, 1974). The likelihood for the organization to have incomplete projects is high because of the issues on consensus that arise from time to time. Competitors and other people with ill motives against the organization may capitalize on democratic leadership of the CEO in order to gain access to the organization’s decision-making. The people with ill motives may influence informal organizational leaders to mobilize support for suboptimal decisions in order for an organization to collapse. These ill-driven people may use some criminal ways such as bribery to entice organizational members to contribute to the downfall of the organization. Democracy may be of a negative impact to decision-making if the motive is not clear. Laissez-faire This type of leadership by the CEO gives employees all the rights and powers to come up with decisions that fit their needs. The CEO has no control over the individual decisions employees make and provides no guidelines in making of decisions. The CEO delegates the duties and offers no direction but leaves every aspect of the job and decision-making to the subordinates (Mindtools, 2014). This kind of leadership places the privilege of decision-making on the duration of the project upon the employee. The employee has a significant level of autonomy. This type of leadership offers employees with a great opportunity for growth and responsibility. Employees find themselves in control and make decisions, which they deem fit for the organization. The decision-making is participative for every employee at his/her discretion. The employees learn how to make good decisions, and the quality of decision-making improves with time. The CEO appreciates the capacity of every employee in coming up with good decisions, and this motivates employees to make good decisions for the interest of the organization (Ackley, 2014). However, the decision-making without guidance may lead to challenges in the organization. Different employees have diverse capabilities in coming up with decisions. Some employees come up with good decisions; other employees are good in implementing decisions and not making decisions. Laissez-faire ignores the reality of difference in abilities among workers and provides an opportunity to weak decision-makers a chance to make even crucial decisions (Adair, 2002). Decision-making by weak employees compromises the quality of decisions, and this negatively affects the organization. Laissez-faire provides employees with a sense of autonomy in the organization. Autonomous decision-making may cause challenges in maintaining the cohesiveness of the organization. The CEO faces the challenge of ensuring decision-making of every individual does not adversely affect the whole organization’s decisions. Individual decisions are likely to conflict in certain occasions, and these conflicts may affect the operations of the organization (Brousseau, Hourihan, Driver & Larsson, 2006). The lack of coordination in decision-making may lead to conflicts in the organization and lack of direction. An employee who decides to start his/her project in two months’ time and take three months to complete it, may conflict with an employee who relies on the output the projects to complete his in 2 months. In a situation where the employees feel insecure at the absence of a leader, this type of leadership may have negative implications on decision-making. Employees who are not confident in their abilities and tend to place much reliance on the CEO will develop inadequate decisions. The CEO has to provide constant feedback to the employees to guide them to understand their progress. In the case where the CEO fails to provide constant feedback, employees will continue making wrong decisions or suboptimal decisions without knowing(Gleeson, 2012). The leadership style is effective when employees have the motivation for the success of the organization. Followers who lack the drive to succeed may shy away from decision-making and may make inappropriate decisions. Laissez-faire enables the CEO to place a lot of trust and confidence in the subordinates. The CEO trusts that his/her subordinates will make the best decisions for the organization. However, employees are humans, and they may exhibit unique characteristics. The employees may use the trust put upon them to frustrate the CEO and the organization. There is a likelihood of outside attack by the competitors when the organization operates in a state of laissez-faire. The competitors may manipulate the employees of the organization to make suboptimal decisions in order to make the organization succumb to competition (Vroom & Jago, 1974). Bureaucratic leadership Bureaucratic CEOs create policies and use them as a guide for organizational effectiveness in operations. The CEOs employ policies in mobilizing support and create an impression that policy is fundamental in the direction of the entity. The CEOs who embrace this type of leadership tend to put more value on policies than on people (Adair, 2002). The CEOs are likely to respond adversely to change and may present an impersonal trait. The inconsiderate development of policies and the rigid implementation processes are demotivating to the employees. Bureaucratic leadership by the CEO is helpful in helping the organization solve problems through the availability of policies. The policies guide the organization’s activities and guide the implementation and decision-making process of the organization. This guidance makes it easier to make a decision since a point of reference is always available for the organization. Decision-making is also thorough when a CEO employs bureaucratic leadership style. The decision-making process is stepwise and undergoes a thorough scrutiny at every level of the organization. The presence of guidelines in decision-making helps the CEO to keep the organization in focus towards the goals. The lack of policies and rules is responsible for chaotic decision-making. This presence of clear policies enables the organization to maintain focus and avoid extreme decisions that may disrupt the organizations processes (Germano, 2010). However, bureaucratic leadership strategy by the CEO seems to have more challenges in the decision-making process of an organization. The availability of policies and their rigid implementation stifles the ability of subordinates to think creatively and generate innovative solutions to problems. The policies seem to be the solution to every challenge the organization faces (Vroom & Jago, 1974). The employees may feel that the organization is underutilizing their potential. The underutilization of employees’ potential in decision-making demotivates them the employees making them unwilling to take part in rigid decisions. The CEO may experience slow decision-making processes that may lead to inefficiencies in the organization. The various levels in decision-making and steps and procedures may require a lot of time and effort in managing to make the decisions. The employees waste time and effort in order to make decisions instead of working. This form of leadership is a hindrance to making urgent decisions since these decisions are most likely to go against the set policies of the organization. The time for making decisions may lead to decisions that are out of date and irrelevant to the current situations (Gleeson, 2012). The rigidity that bureaucratic leadership has presents challenges in the introduction of change in the organization. The policies that the organization embraces may hinder effective change especially in making decisions on competition and market share. The organization may find itself lagging behind in the market since the changes in the market trends cannot fit in the organization’s policies. The delay in changing the policies further contributes to the increasing failure of the organization. The impersonal touch that bureaucratic leadership engages in discourages participation of employees in decision-making. The employees are likely to feel left out in everything since policies seem to be of great importance. This type of leadership also loses touch with the real current problems. The policies are usually overdue and fail to capture the changing problems organizations face. The resultant effect is that the organization makes suboptimal decisions using outdated policies (Leadership Management, 2014). The organization is likely to stagnate since employees with great ideas to influence decisions fear that the organization may never acknowledge their ideas. The employees fear that due to the long procedure in bureaucratic leadership, someone else may claim the credit for their ideas and so they would rather stay with the ideas. Transactional leadership A CEO practicing transactional leadership style motivates his/her employees or followers in order to reach a goal. The CEO may offer incentives both material and psychological in order to facilitate an improvement in work performance. The CEO only intervenes when the employees fail to meet the set expectations (management by exception). The CEO is keen to ensure every member of the organization follows the set policies in order to increase the rate of efficiency of operations and productivity. Motivation of workers by the CEO enables the organization to nurture employees who are ready contribute immensely in decision-making. The employees feel they have an obligation to assist the organization in making quality decisions (Brousseau, Hourihan, Driver & Larsson, 2006). The sense of obligation arises from the conviction to reciprocate for the benefits they get from the organization. The employees will then provide their expertise in a bid to make good decisions. The employees of the entity have a commitment to make quality decisions since they are aware that the CEO trusts them. The CEO avails to the employees all the power to make decisions and he/she only steps in where an employee needs guidance or correction. This delegation allows the decision-making process to happen at the lower level of the organization and reduce the time one needs to make urgent decisions (Adair, 2002). The delegation of the roles of decision-making to subordinates allows the CEOs to focus more on strategic decision-making and company stewardship. Transactional style of leadership is beneficial, but it needs sustainability. In the case of resource constraints, the employees may withdraw their commitment from the organization. The CEO will encounter challenges in decision-making in a situation where employees withdraw their support (Penrod, 2003). He/she will find employees showing little interest and commitment in the provision of quality decisions. The employees may develop the habit of receiving incentives in order to make good decisions, which kills initiative among the employees. The provision of incentives to employees in order for them to deliver makes them appear like contract workers that lack the will to promote the success of the organization. Transformational leadership A transformational CEO inspires change and motivates subordinates to achieve goals they consider impossible. The transformational CEO focuses on changing the thinking of his/her followers in order to initiate change in the overall organization. The CEO has wide perception of view, in-depth knowledge of the organization, and its strategy (Flood, Hannan, Smith & Turner, 2000). The transformational CEO is ready to take chances and employs unique strategies to mobilize support and action. The CEO has high energy levels and shows a strong commitment to achieving organizational goals. The CEO has a great vision for the organization and manages to convince the followers to accept his vision. The CEO, who embraces this kind of leadership, can gain support from his followers in terms decision-making. He/she can nurture talent in the organization since the transformational leader helps subordinates to discover their abilities. Upon discovery of these abilities in decision-making, the organization can have individuals who understand the organization well and can develop decisions consistently and quality decisions (Germano, 2010). The transformational effect that the CEO create in the organization will enable the members of the organization adapt to the culture and practice of quality decision-making. This type of leadership encourages participative decision-making. The CEO starts with developing the employees, making them understand the vision of the organization, and assign to them roles in achieving the vision of the organization (Adair, 2002). In assigning the roles, the CEO ensures every person participates in the decision-making for the strategic success of the organization. The sense of participation in the success of the entity will promote meaningful engagement in decision-making in the future. Transformational CEOs encourage creativity and generation of innovative ideas in the process of decision-making. The subordinates develop the motivation to come up with new ideas and offer innovative solutions to the problems the organization is facing (Penrod, 2003). These creative inputs are essential in reaching decisions that are comprehensive and effective in solving the organizational challenges. The CEO enables the followers to understand the vision and the goals of the organization. The understanding of the vision and goals of the organization keeps employees aware of the direction of the organization (Adair, 2002). The knowledge of the direction of the organization helps the employees to develop decisions that support that focus on organization prosperity and long-term growth. The subordinates can construct strategic decisions since they understand the organization’s strategy and its goals. Situational leadership CEOs that engage in situational leadership are keen on applying different leadership styles to different circumstances (Germano, 2010). For these CEOs, there is no one best way of leading the organization. The CEO identifies the best strategy to tackle a given problem or situation. This type of leadership is experimental (Brousseau, Hourihan, Driver & Larsson, 2006). Managers practice this leadership in order to identify the leadership type that suits the organization. However, some CEOs use this as the main leadership style for their organizations. This leadership style offers the reality of decision-making as situational. The CEO can identify, and the employees identify a problem as unique on its own and seek to solve it based on the prevailing circumstances. This special treatment of problems enables the critical analysis of the problems in order to generate the most suitable decisions. The practice of situational analysis of problems inspires creativity among the subordinates (Leadership Management, 2014). The employees develop insights into a problem and generate potential solutions to the problem. The subordinates engross themselves in critical thinking for any problem, which enhances their ability to solve non-conventional problems and decisions. However, situational leadership may raise challenges in the decision-making process. Lack of minimum standards in the organization may encourage employees to make suboptimal decisions (Germano, 2010). The CEO may encourage the subordinates to engage in situational decision-making in many instances. Situational analysis for every decision may be time wasting and require a lot of efforts. The separate treatment of each problem also creates confusion in the organization on how to solve certain challenges. Arguments may arise on which is the best way out, and this may result in delays in decision-making. Charismatic leadership style A CEO that has charisma can gain a large following due to his/her good articulation of the organization’s vision and by use of his engaging personality (Germano, 2010). The CEO highly motivates his/her subordinates, engages them, and shapes their thinking to enhance creativity. The CEO creates a sense of deep attraction to his/her followers such that the followers want the CEO to continue being a leader. Charismatic style of leadership enables the CEO to secure commitment among his/her subordinates in developing quality decisions. The commitment that charismatic CEOs elicit is essential for proper decision –making. The CEO articulates the vision of the organization in a manner that the subordinates understand well (Gleeson, 2012). The sense of understanding among the subordinates enables them to develop informed decisions for the success of the organization. However, charismatic CEOs may negatively influence decision-making in the organization. Since the CEOs have an irresistible attachment to their followers, they may influence them to make subjective and suboptimal decisions. The charismatic CEOs tend to leave their subordinates dependent on them. This sense of dependence raises challenges in decision-making in the absence of a charismatic leader (Germano, 2010). Decision-Making Confidence,. (2014). Authoritative decision making and other leadership styles. Retrieved 18 October 2014, from http://www.decision-making-confidence.com/authoritative-decision-making.html References Ackley, D. (2014). Six Leadership Styles: Selecting the Right Leader. Eqleader.net. 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(2012). 4 Ways For Leaders to Make a Decision. Forbes. Retrieved 18 October 2014, from http://www.forbes.com/sites/brentgleeson/2012/11/07/4-ways-for-leaders-to-make-a-decision/ Leadership Management,. (2014). Decision Making Style and its Effect On Morale. Retrieved 18 October 2014, from http://www.leadershipmanagement.com/html-files/decision.htm Mindtools,. (2014). The Vroom-Yetton-Jago Decision Model: Deciding How to Decide. Retrieved 18 October 2014, from http://www.mindtools.com/pages/article/newTED_91.htm Penrod, J. (2003) (1st ed.). Retrieved from https://net.educause.edu/ir/library/pdf/pub7007d.pdf Vroom, V., & Jago, A. (1974). Leadership and Decision Making (1st ed.). Retrieved from http://www.researchgate.net/profile/Philip_Yetton/publication/37708348_Leadership_and_Decision-Making/links/0046351b8d43cf238f000000 Read More