The Leader and Change Agent in Action - Coursework Example

Introduction As in life, change is the only constant in business too. Ever since the Industrial Revolution of the 18th century business processes have undergone radical changes. From individual ownership to becoming a corporate set up of the 21st century, business has seen evolution of numerous theories and practices on how an industry should be managed. Ideal conditions always change and without doubt external environments have played a major role in shaping business strategies. Yet the core activity of any business has always been the entrepreneurial spirit that guides the formation and nurturing as well as strategising constant growth of a business enterprise. The vital question is setting the objectives of a business enterprise as this has direct bearing on strategy. The most obvious aim is to make profits and adding to wealth. While making a profit in a profession is possible by use of personal and individual skills, knowledge and endeavours; it needs collaborative or participatory effort in a business environment. Therefore profits cannot be made unless they are shared by other stakeholders; employees, workers, suppliers and shareholders. In the wider context even the consumer and the society at large have become stakeholders too. For a business to succeed and survive it has become imperative to offer a win-win situation for all stakeholders. This situation becomes more complex in the global context where there are many different and divergent aspirations. The disparities between the developed and emerging economies are so great that exploitation of one by the other is inevitable. Justifications are made and offered for such global collaboration but the underlying fact remains that a win-win situation is but anomalous. Such inconsistencies give rise to opportunities that have created groups and businesses that thrive on making profits out of deals rather than the plain old manufacturing and trading of physical goods and commodities. New methods of business have been invented under financial and service industries. This has resulted in unprecedented levels of business being done in which the major assets comprise of people. Human capital has repositioned itself as the most important asset of all service based business. This new development has robbed the business of its true entrepreneur. Innovations are more intangibles than the corporeal products. This leads to surreal belief that mind over matter is what creates profits. Business Strategies Michael Porter is among the top writer and thinker on Business Strategies. He proposed that business is all about competitive advantage (Porter M.E. 1980). He argued that to survive a business needs to develop competitive advantage over its rivals and for this he proposed what he called the Five Forces that a firm needs to combat with in order to create the edge that will give the impetus to growth. These are all external pressures a business has to contend with through strategies that can withstand, circumvent or capitalize on these forces. Porter divides the competitive environment into five forces of ‘powers’, these are Power of buyers, Power of suppliers, Threat of new entrants, Threat of substitutes and Intensity of rivalry between existing firms (Porter, M. E.1985). Porter also argued that when a firm becomes different by offering value, quality and some attributes through which it offers some uniqueness then it will become an above average performer in its industry. But to arrive at this stage the firm must make difficult choices. In a later essay Porter M.E., (1996) redefined strategy to be a combination of differently performed activities. While the activities remain the same, the approach taken to perform or enact them is the strategic decision that pays off. This brings about strategic positions that are unique by themselves and set the organisation apart from its rivals. Porter has described three generic strategies; cost leadership, differentiation and focus that are the foundations of competitive advantage or difference. A cost leader lowers cost through different activities while a differentiator asks for a premium due to the unique features of its product or service. The two can combine to form another generic strategy that offers unique feature while remaining a cost leader. The third strategy of focus is aimed at serving a niche segment limiting to serve a segment with its needs giving up other opportunities. This paradigm has been challenged by Smirchich and Stubbart (1985) who claim that current theories wrongly perceive that environments dictate strategies and that environments themselves are a creation of actions of organisations. They argue that all actions by all people in the organisation contribute to the development of the environment. This is almost diagonally opposite thinking. They break the existing assumption that organisation is entrenched in and confined within the environment. Ordinarily strategists make imaginary linkages between events, objectives and activities and create the environment. But for Smirchich and Stubbart both the environment and the organisation are results of what they term as “enactment”. They support this radical thinking by stating that the social interactions of the important members of the organisation produce both the organisation and the environment. This novel virtual framework simulates and creates the environment. Consequently it is this pattern of activities that are labelled as organisational culture and pave the way to find new strategies. It becomes the job of the strategist to find meaning and interpretations of these activities or enactments to determine strategies. The enactment theory decidedly discards the idea of a concrete, material organisation/environment nexus and adopts a socially created symbolic world (Winch 1958). There is no such thing as an industry and it is the pattern of activities that end up as manufacturing or distribution. This gives rise to new methodologies of managing in the enacted world. The managers do not set objectives; rather they seek answers to questions like what to do and where to go. This creativity forms the strategy by thinking out of the box. This is what gives shape and meaning to desires rather than trying to fit a mould that might be meaningless. They forgo traditional thinking and try novel methods thereby creating unprecedented values. Enactments are really about doing things differently and will mean discarding past practices, forgetting previous learning, innovating and persuading the masses to go along with thinking and acting out different perspectives. Change All this points towards, and calls for, changes. These changes are often met with resistance through clash with the existing culture of the organization that is under threat from these changes. The current beliefs, values and customs form the ingredients of organisational culture. The first two are difficult to break but easier to mould. Changes are therefore required to be introduced in an adaptive mode through existing cultures. Here is where leaders demonstrate their ability to do the same thing in a different way. They are capable of converting their radical thoughts during this transition. There are some typical leadership behaviour patterns that are very critical. Jerry Porras and Susan Hoffer (1986) opine that open communication meaning sharing of intentions; listening and collaborating through making team decisions were most relevant for success in organisational development efforts. Similar conclusion was drawn by Teresa Covin and Ralph Kilmann (1990) when they surveyed several individuals. They noted two more traits of leaders. One, that they demonstrated discernible and unfailing support for the change programmes, and secondly, they related the change to business needs. This calls for building of teams towards the effort and communicating the expected results in terms of profits, productivity, quality, performance, quality of work life etc. Leadership Traditional Leadership roles have been fearsome and ruled by diktat rather than reasoning. The maximum a leader would do was to provide for training and would consider it to be his benign gesture and would expect a far higher value for this investment. The humane feeling was limited to the extent of providing some extrinsic rewards. Recognition was a remote concept and the employee was expected to keep improving by experience and to offer his loyalty in return for wages alone. However there is perceptive change from the Taylorist and Fordist mould of yester years in modern leadership roles. A great amount of writing is available about management techniques, strategies, change management and competitive advantage by a variety of authors but it has been acknowledged that the central role in all these theories is that of a leader. In turn the leader has been described as one who leads from the front, has a vision and a plan, believes in teamwork and someone who is a great believer in the power of the people and has the ability to harness this power into generating a successful organisation. Kevin and Jackie Freiberg (2003) have portrayed the leader as a person with Guts. They have analysed this to be the result of some exceptional qualities of those successful leaders who have said a go-by to conventional wisdom and pursued different methods to achieve their vision and goal. They have shown remarkable versatility and have produced startling but effective results and they have managed to make their organisations role models of excellence. Amongst the outstanding qualities mentioned by them is that Gutsy Leaders have a firm conviction of their belief. But this does not make them arrogant. Their flexibility is not a show of weakness and their ability to accept opinions of smarter people is a fine example of their humbleness. They are capable of overriding the opposition while they have the guts to admit their mistake and to make remedies. The leader described by the authors is an individual who believes in confiding with his subordinates to earn their loyalty and offers recognition of their performance as the paradigm of their deep commitment to the organisation’s, and the leader’s, cause. He will encourage the employees to take pride of ownership of the result of their efforts to sustain their motivation. He aspires to build an organisation that offers hope, love, service, freedom, communication, fun, and trust. He believes that these are the fundamentals to build great and sustainable organisations. He is steadfast in his belief that this is the way to attract the best talent for his company. Two Extraordinary Leaders of the Modern Era There are plenty of success stories that exhibit that when traditional shackles are broken and innovations replace conventions the results are remarkable. The two leaders considered and compared here are Ricardo Semler of Semco (Brazil) and Nicolas Hayek of Swatch (Switzerland). Semler has a unique strategy, that of empowerment. He inherited a company that was unable to face competition and that had several layers of hierarchy that could not use the aspirations of its labour force to overcome the difficulties faced by it. He therefore decided to reposition his company and took the enactment route to empower everyone on the rolls. He believed that in the importance of values and relationships with his workers as a critical part of success for his organisation. The biggest stake was that of the employee and it was him/her that needed assurance that their jobs are safe but in return they had to ensure that the company was managed successfully and at a profit. The workers have been empowered to hire managers who they believe will lead them to growth of their company as well as their careers. They have equal say in all appointments and at any one time as many as thirty five people interview candidates at least four or five times before confirmation. This gives both sides an equal opportunity to assess each other and find a proper fit. The workers also have right to fix their own wages and the salaries of their managers. This could have been a contentious area as each person would then look after his well being but the answer lay in the open access policy of revenue earning and distribution and that sobered up everyone as it was realised that without equitable distribution of wages the company would not make profits nor could face competition. It was the same in case of working hours and output. Groups of workers undertook to be present at specific times in order to see that the assembly lines were kept in motion and targets as well as quality matched each other. Flexibility was the watchword and a Sunday or holiday was equally important like any weekday; the priority in all case was work and productivity. As a result Semco is a truly democratised company with hardly any attrition. While Semco is a closely held company and owned by the Semler family, he was elected to be chairman due to his leadership abilities and not due to his shareholding. He has one vote like any other person and his recommendations have sometimes been turned down. Yet the workers realise that his contribution to decision making is vital for the company although not essential. Numerous decisions are taken in his absence. In fact he does not have a regular office in the company premises and works out of wherever he is. When a few years back he met with a serious accident and was in intensive care on account of multiple surgeries, the company carried on business as usual and there was neither a dip in the profit/growth path nor were the suppliers or customers worried over his absence. Semco does not face succession problems unlike most other corporates of the world. Nicolas Hayek is also a unique leader. He believes that hierarchy blocks achievements and his doors and communication lines are always open for any of his employee at all times. At the same time he is ruthless enough to fire any of his topmost executive who he feels is not contributing to the corporate goal. He believes that the largest single mistake made by USA, Canada and Europe was to let their industry relocate in Asia and Africa. Globalisation has had a disastrous effect on manufacturing which has shifted almost entirely to the developing countries in search of cheaper production. The Western manufacturing industry erred in believing that they would be better off through various methods categorized as market seeking, resource seeking, efficiency seeking and strategic resource seeking motives. In his opinion the developed economies of the West have erroneously relocated their manufacturing in the East. The result is that the Eastern countries notably Japan, China, Korea and Taiwan have become the shop floors of the world. The West is left with management only and in time even this is being matched and in some cases surpassed by the East. For him the idea that it was cheaper to manufacture in the East for the consumer in the West is anomalous and incorrect. He argues that the West is still capable of manufacturing at 40% of the cost of the East. He proved his point by turning around the watch industry, which was lost by the Swiss to Japanese manufacturers, and brought it back firmly into the hands of the Swiss once again. He made this remarkable achievement by mixing innovation with manufacturing. His company Swatch was able to manufacture superior watches for the masses at lower prices than the Japanese and with much better quality. He restored all this through bring back manufacturing to Switzerland; despite the fact that the Swiss wages are the highest in the world. He followed the cost leadership strategy to promote competitive edge over his rivals. Breaking the Mould An entrepreneur is a person who’s chief and distinctive abilities are to take risks, has knowledge of market functions and manufacturing know-how, has marketing and management skills and finally possesses the ability to co-operate with others (Littunen 2000). He is able to foresee the unknown, and be daring enough to try it out of absolute desire to take risk. He identifies an opportunity, goes against conventional wisdom and pursues an untried strategy for the joy of achievement of his desired intention. Profit is but a secondary motive to the individual entrepreneur although in a corporate environment, as he cannot ignore it, he skilfully builds his actions around it. Both Semler and Hayek have broken out of the mould to recreate and reinvent their businesses but in different ways. They are both entrepreneurs at heart that believe in being different they have proved their point that it takes a different mindset to be successful. This is confirmed by Bird (1988, 1992) who says that entrepreneurship is a state of mind that reflects how a person focuses his attention and uses his experience and behaviour to a specific objective. Intentions are what differentiate an entrepreneur from a normal person. According to Wiklund and Shepherd (2003) they have a mindset that has a strategic orientation for decision making in a specific style, method and practice. These characteristics can be individualistic or may even exist in a team and are capable of making strategic responses to situations in a different manner as these people are always on the lookout for opportunity. They are known to possess proactive, prospector mindset that is in pursuit of attractive opportunities. They are capable of using the energies of others to focus on implementation of innovative ideas, are willing to take risks but are driven by a desire to be independent and be competitively responsive to customer needs (McGrath and MacMillan 2000). The entrepreneur is also a leader as he possesses leadership qualities that enable him to lead his organisation in formulating and implementing strategies. It will therefore be appropriate to equate the entrepreneur and the leader in this context. Although not all leaders can be entrepreneurs, especially in corporate environments where they are bound by hierarchies and bureaucracy, yet when such leaders display entrepreneurial qualities, they find success and are able to transform their organisations. Analysis Various theories have been expounded to explain how people act and react in different situations. The primary image of an organization is akin to family, clan or tribe where relationships, needs, feelings and skills are the characteristics of its members. The objectives are empowerment, liberation, fulfilment and self actualization of both the individual and the group and the challenge is how to develop attitude to achieve this goal. Semler found convincing answers to the two core questions posed by stakeholder theory, which underscore the moral assumptions of managing. He gave total control of the company to his workers. This was done over a period of several years in gradual fashion but for the last 15 years this democratisation of the corporate structure has resulted in Semco becoming a billion dollar company with average annual growth of 27.5% over this period. In contrast Hayek believed in core competencies and proved that by putting emphasis back into them was the answer for regaining domination in the worldwide watch market. Core competencies are described as those products or services that have four distinct characteristics. They must be rare, they are difficult to imitate, and they must have special value for the consumers. The most important competency is however the ability of the organisation to use its resources in creation and use of these core competencies. However the level of performance of employees is not just a result of their skills but also the result of motivation each person exhibits. There are two sources of motivation, intrinsic and extrinsic. Since it is not always possible to have external rewards all the time for all activities the management has to promote intrinsic motivation that is the outcome of internal factors like self satisfaction or the pleasure of satisfactory performance (Hagedoorn and Van Yperen 2003). The intrinsic motivation is also preferable as in this environment the employee develops affinity with the organisation and considers the welfare of the organisation to be his wellbeing. This improves his productivity and performance since it will go along with his personal satisfaction. Such employees are also loyal to the company’s cause. Finally human relationships have also become a purpose of successful business. The separation thesis had so far held that ethics and economics can be neatly and sharply separated. The Stakeholder theory now begins with unequivocal statement that values are necessarily and explicitly a part of doing business, and rejects the separation thesis (Freeman 1994). Even if it is argued that the objective of business is profit then it has to be understood that a successful business is about collaboration under which the suppliers, customers, employees, communities, managers, and shareholders are all involved as beneficiaries. It has been concluded by Venkataraman (2002) that at some level, stakeholder interests have to be shared, they must be working for the same purpose, otherwise business will come to an end and new collaborations will be formed. Leadership is a process that changes the economic equilibrium by disturbing a set of accepted processes through innovative practice. It is a dynamic progression that changes the rules of the game and often creates new events. It symbolizes change and a departure from tradition. It challenges and tests conventions and commences upon new variations. It thrives on devising a new future for consumers which they not even be aware of at that moment in time. While entrepreneurship is not an institution nevertheless the process can be considered as pivotal in an institutional setting as well. Entrepreneurs are individuals that that have the exceptional qualities to do the extraordinary, both in individual setting or in an organisational set-up. Their frame of mind is same but they work with different strategies in either situation. (3556 words) Bibliography Bird, B. (1988). Implementing entrepreneurial ideas: The case for intention. Academy of Management Review, 13, 3, pp 442-453. Retrieved January 17, 2007, from Library and Information Service, Curtin University of Technology. Bird, B. (1992). "The operation of intentions in time: the emergence of new venture", Entrepreneurship Theory and Practice, 17, 1, pp 11-20. Retrieved January 17, 2007, from Library and Information Service, Curtin University of Technology. Covin T.J.and Kilmann, R.H. "Participant Perceptions of Positive and Negative Influences on Large-Scale Change," Group and Organization Studies, 15 (1990): 233-248. Freeman, R. E. (1994). The politics of stakeholder theory. Bus. Ethics Quart. 4(4) 409–421 Freiberg, Kevin, and Jackie Freiberg., (2003), Doubleday & Company, Inc. Hagedoom, M. & Van Yperen, N. (2003). 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