Cultural Aspects and Prevailing Leadership Styles: The Deloitte Company - Case Study Example

The Deloitte Company Cultural aspects and prevailing leadership styles: Hofstede’s dimensions of culture in the work related environment are also evident at the Deloitte Company. For instance, according to Hofstede, cultures characterized by power relations which are democratic rather than authoritarian are low distance cultures, while those where members define themselves as individuals rather than as belonging to a group are individualistic cultures (www.geert-hofstede.com). At Deloitte, both these aspects apply because there is a higher level of informality and freedom in interaction among members in an organization and individuals do not define their own identity only as a part of a group. Diverse groups are represented within the Company and the Company is focused upon quality and innovation in all their actions. (www.annualreport.deloitte.co.uk). As a part of this initiative, the Company seeks to pull in the best people and to provide them opportunities to progress quickly by providing opportunities for individual progress and improvement, a feature characteristic of individualistic cultures. The Uncertainty Avoidance Index as spelt out by Hofstede is low in the case of Deloitte, precisely because of such flexibility that is allowed. Employees are also provided with mentors, hence there is no strict hierarchy in place as is the case with high distance cultures. In terms of the distribution of roles among genders, masculine cultures are characterized by greater inequalities between men and women so that women tend to be more aggressive, assertive and competitive. However, Deloitte appears to conform more to the mould of a feminine culture where there is less differentiation between men and women. For example, Deloitte actively offers flexibility in the work environment, with work hours and educational opportunities (www.annualreport.deloitte.co.uk). According to the Company’s Annual report for 2008, Deloitte is emerging as one of the four companies where women most want to work. In terms of connectivity, or the extent to which an organization is able to keep its people linked with and engaged to itself and Deloitte won the award in this category. It is actively directing its efforts towards attracting and retaining women and one of the salient goals of the company is to improve the firm’s gender diversity. Hofstede’s fifth dimension is Long Term Orientation, and Deloitte appears to be applying such an orientation because it is focusing upon the goal of perseverance in the achievement of long term success in the market. Prevailing leadership styles at Deloitte: As pointed out by Hughes et al(2002), “Leadership is a complex phenomenon involving the leader, the followers and the situation.”(p 6). Therefore leadership cannot be assumed to be a position, rather it is a process of interaction between a leader, followers and the situation. The existing leadership styles at Deloitte appear to conform more to the transformational rather than the transactional style of leadership, especially because of the gender policies of the Company, as mentioned above. A transformational leader is a charismatic and visionary person. He/she is able to inspire his/her followers in a manner that extends far beyond rewards (Howell and Forst 1989). Transformational leadership transcends daily mundane affairs and works by enhancing the motivation of the follower (Gardner and Avolio 1998) and by impressing upon such a follower the value and meaning of the leader’s goals (Bass 1985). As may be noted from the brief on leadership that is available from the Company, leadership patterns in the organization are based upon an MCT or managing complex transformations approach (www.deloitte.com). The MCT approach has six basic themes, which also appear to suggest a path goal theory oriented approach. The path-goal theory of leadership states that a leader is instrumental in helping followers reach their goal by setting out a clear path for them to follow (Silverthorne, 2001). For instance, the first step is programme management, which requires the development of vision in leaders. Charismatic leadership leads an organization away from everyday events and everyday life; it transcends the routine (Takala, 1998). Hence, the development of vision suggests that a clear goal has been set out, which is to be achieved. Most importantly, although a top down approach appears to be the prevalent guiding philosophy, there is a great emphasis that has been placed on team work; the Company works with specialists as well as with colleagues in human capital and technology integration (www.deloitte.com, pg 5). This provides a clear indication that a participative path-goal theory approach is being applied at Deloitte; there is a greater focus on teamwork with specialists and human resource teams, in order to derive common policies. At the same time, the approach also appears to be achievement oriented, i.e, as a celebration of the £2billion in revenues that was earned in 2008, the Company awarded each employee who worked towards this strategic goal with a performance award of £1000. The influence of situational variables on leadership styles: Leadership styles at Deloitte have been influenced by the changing perceptions of leadership over the years and have increasingly moved towards the path goal theory of leadership. This theory may be diagrammatically represented as follows: (Source:www.stewart-associates.co.uk) Leader behaviours Matched against: 1. Directive (a) Subordinate characteristics (b) nature of task itself 2. Supportive Ability Routine 3. Achievement Oriented Perceived control of destiny Ambiguous 4. Participative TO PRODUCE Leader Effectiveness in influencing subordinates a Based upon the diagram above, it may be noted that Deloitte policies appear to be increasingly moving towards a leadership style that is more achievement oriented and participative, seeking to actively involve employees in the company policies and operations. It may also be noted that the Company has actively sought to improve its gender equations by including more women among its base of employees. In recognition of the globalization in the world today, the Company has been following a policy of diversity by drawing in more employees from unconventional groups, such as women. Hence, its path-goal leadership approach has been participative, seeking to provide an atmosphere of flexibility for more employees from diverse backgrounds for participation in the workplace. According to Leah Reynolds at the Deloitte Consulting LLP in Detroit, the expectations of employees have changed over the years, because they expect a faster pace and greater rewards (www.deloitte.com/assets/). Deloitte’s approach in providing performance awards suggests a growing awareness of such changing expectations from employees. Folger, Poole and Stuntman (1997) have stated that the flow of power within an organization will impact upon the way in which people within the organization relate to each other. In the changing business environment that most corporations have to cope with, leadership may need modification according to situational variables. Hershey and Blanchard have put forward four assumptions about situational leadership, wherein leaders are expected to adapt their style in accordance with the readiness of the followers to carry out the tasks the leaders may choose to assign to them. The model may be demonstrated through the use of a matrix as provided below: (Source:www.changingminds.org) Leadership Style Low High Follower Level High Leadership/ S3 S2 Supportive Behaviour S4 S1 Low S1: Directive Style of Leadership: The follower has a low level of competence and commitment, hence the leader directs him totally in getting the task accomplished. S2: Selling/Coaching style of leadership: The follower has some level of competence but may be unwilling or unmotivated. The leadership style is then similar to coaching where the leader listens and advises, helping the follower to gain the necessary skills (Hershey and Blanchard, 1999). S3: Participating/supporting: The follower in this instance may have a high level of competence but variable commitment. In this case, the leader does not show the employee what to do, rather s/he focuses upon finding out the reasons why followers are showing insufficient commitment and providing the necessary motivation S4: Delegating/Observing: This style of leadership is appropriate with followers who are not only competent but also highly motivated. In such cases, the leader merely delegates the responsibility and keeps an eye on them. The flow of power and leadership styles at Deloitte have changed over the years; while earlier the power structure was largely hierarchical and the leadership style directive as laid out by Hershey and Blanchard (1999), in recent years it has become more flexible and team oriented, thereby conforming more to a participative or delegating style of leadership. The management at Deloitte has changed such that managers are required to possess better soft skills and the ability to interact in teams (www.deloitte.com), thereby indicating that a participative approach appears more common. The recent recessionary trends have also contributed to changes in both corporate governance practices as well as compensation levels within the organization. The recession has produced financial constraints, including the transformation and regulatory re-engineering of the banking system (www.deloitte.com/assets). This has resulted in a re-evaluation of corporate priorities, such that financial policies are geared more towards survival rather than growth. Hiring and compensation policies are geared towards hiring the best possible talent from the most diverse range of backgrounds to enhance the competitiveness of the organization. For instance, this may be noted in its graduate recruitment strategy, where apart from actively going out on campuses, the Company is also a part of the Duke of Edinburgh’s Award scheme to recruit graduates from a broad range of socio economic backgrounds.(www.business.timesonline.co.uk). Factors driving organizational success: Mullaly (no date) points out that the starting point of organizational success often starts off as a passionate desire to see a different outcome; hence the key to achieve success may often lie in developing a well defined vision for the Company. The levels of competition in the industry also play a significant role. Deloitte’s primary competitors in the accounting business are Ernst and Young Global, KPMG and Pricewater Coopers. PwC is one of the world’s largest accounting firms and provides assurance, tax and advisory services. Ernst and Young is one of the oldest firms and also provides legal services. KPMG is a cooperative Company that operates an umbrella organization for its network of member firms. In view of the recession and the decline in stocks, there is increased pressure upon organizations According to Vladimir Vakht, Deloitte’s Managing Partner in the Ukraine, the success of the Company is built around its ability to attract and retain quality talent (www.cushwake.com). Several companies have successfully achieved a competitive advantage through the restructuring of their human resource systems. Effectively motivating employees and retaining them has also been identified as one of the reasons for increased organizational productivity and this has also been responsible for Deloitte’s good performance, even during a recession. In the knowledge economy, creativity and innovative ideas become the driving force, brain is more important than brawn and human capital …… becomes of paramount importance.(Warhurst, 2008:72). Since knowledge management has thus been identified as one of the key factors contributing to organizational success, Deloitte’s design of its human resource systems is such that it has not only been able to attract the best and most skilled employees to join the Company but also to retain them. The Company has a well defined policy of investing in people with a system of shared values for the organization that binds its employees across all its divisions and subsidiaries. (www.deloitte.com/view). The Company policy is to respect human dignity and it has a policy of inclusion and cultural diversity, so that women are also well represented among its employees. In a global context, with skilled talent increasingly being available from different geographical regions, with the rights of women and other minorities becoming increasingly important, this may have also contributed to Deloitte’s success. The Company also has well defined ethical principles, among which one is a responsibility to society. This enhances the reputation of the Company as an accounting firm with principles in a global environment where corporate scandals such as Enron have impacted negatively upon the confidence of members of the public on the integrity of accounting firms. Key leadership and cultural challenges facing Deloitte: One of the leadership challenges facing the Company is developing the kind of leadership skills that would be effective in influencing subordinates. The Company may need to refine its leadership to include more women and employees from among minorities and other non traditional leadership groups. Since there is an increasing representation of these groups within the workforce, it is important for such employees to feel their interests are adequately represented at decision making levels. Furthermore, the proportion of skilled workers is also increasing, since such employees are being attracted by Deloitte’s policies of flexibility and reward systems. Therefore, the leadership style needs to increasingly move from a coaching or directing approach to a more participative or delegative style. While its policy of inclusion and incentives to employees may be enhancing its reputation as a good place to work, leadership styles must be geared towards working with its skilled employees and effectively motivating them. More importantly, it also requires that leaders realize when not to interfere and to stand back and adopt a supervisory approach in order to stimulate and motivate the innovation, creativity and skill of the employees. The recessionary trends have also caused oil prices to escalate, but the projected growth that is to occur in oil sands is likely to increase the demand for skilled labour. In a survey carried out by Deloitte’s energy and resource talent survey in 2006, 80% of the respondents were found to be experiencing limited productivity and efficiency due to the limited availability of talent (www2. Deloitte.com/assets). Although there is an awareness of the need for talent, there is still a shortfall of the required talent, as a result, ensuring the recruitment of skilled employees and/or investing in training programs for employees may need to be a vital part of Deloitte’s future strategy. Although the Company’s current human resource policy does allow for diversity and inclusion, it may need to make a sustained effort to make itself attractive to the most skilled personnel. Additionally, the challenge of training employees may also be an important issue for the Company to deal with. In another survey that was carried out by Deloitte in 2007, leaders from some of the world’s largest organizations expressed the view that human resources would have to play a more strategic role in the years ahead (www2. Deloitte.com/assets). About 95% of the participants in this survey expected human resources to become a strategic, value-adding function. On this basis, it would appear that Deloitte may need to align its HR policies from a more strategic perspective in order to continue to achieve success. This further underlines the importance of cultivating and developing the commitment of skilled employees by developing effective human resource strategies (Shiverick et al, No date). The Company also faces the challenge of effectively utilizing the tools of technology to achieve the desired interactivity and interoperability between the various subsidiaries of the organization. Globalization has introduced aspects such as outsourcing due to the increased costs and the recessionary environment also poses the challenge for Deloitte to cope with the cultural differences among employees in developing a unified Company policy that improves upon its existing policies of inclusion. The current recession also poses financial challenges to the Company and it may need to focus more on organizational strategies directed towards survival rather than expansion; for example by developing more stringent corporate responsibility and sustainability in order to improve its public reputation and improve productivity. References: * Avolio, B. J., and Bass, B. M, 2002. “Manual for the Multifactor Leadership Questionnaire (Form 5X”). Redwood City, CA: Mindgarden. * Bass, Bernard, 1985. “Leadership and Performance beyond expectations” New York: Free Press. * “Corporations should”, Retrieved November 25, 2009 from: http://www.deloitte.com/assets/Dcom-Shared%20Assets/Documents/dtt_dr_insidesupplymgmt080107.pdf * “Corporate responsibility”, Retrieved November 25, 2009 from: http://www.deloitte.com/view/en_GX/global/about/corporate-responsibility/index.htm * “Deloitte secures new headquarters in Kiev”, Retrieved November 25, 2009 from: http://www.cushwake.com/cwglobal/jsp/newsDetail.jsp?repId=c14200018p&LanId=EN&LocId=GLOBAL * “Developing our high performance culture”, Retrieved December 7, 2009 from: annualreport.deloitte.co.uk/.../developing_our_high-performance_culture.pdf * Gardner WL, Avolio BJ, 1998. The charismatic relationship: a dramaturgical perspective. Academy of Management Review, 23:32-58 * “Geert Hofstede – cultural dimensions”, Retrieved December 5, 2009 from: http://www.geert-hofstede.com/ * Hershey, P and Blanchard, K.H., 1999. “Leadership and the one minute manager”, William Morrow. * Hughes, Richard L, Ginnett, Robert C and Murphy, Gordon C, 2002. “Leadership: enhancing the lessons of experience.” McGraw Hill * Howell JM, Frost PJ, 1989: “A laboratory study of charismatic leadership”. Organizational Behavior and Human Decision Processes, 43:243-269 * “Managing Complex transformations”, Retrieved November 25, 2009 from: http://www.deloitte.com/assets/Dcom-UnitedKingdom/Local%20Assets/Documents/Industries/EIU/Mining%20and%20Metals/UK_EIU_Managing_complex_transformations.pdf * Mullaly, Mark, No date. “What drives organizational success?”, Retrieved November 25, 2009 from: http://www.mariosalexandrou.com/blog/what-drives-organizational-success/ * “Models and theories”, Retrieved December 6, 2009 from: http://www.stewart-associates.co.uk/leadership-models.aspx * Pillai, R., Schriesheim, C. A. and Williams, E., 1999. “Fairness perceptions and trust as mediators for transformational and transactional leadership: A two-sample study.” Journal of Management, 25(6), 897-934. * Shiverick, Brad, Janelle, Peter and Anichini, Mary Ann, No date. “Cultivating employee commitment to achieve excellence”, Retrieved November 25, 2009 from: www.aahsa.org/WorkArea/DownloadAsset.aspx?id=9653 * Silverthorne, Colin, 2001. “A test of the path-goal leadership theory in Taiwan”, Leadership and Organization Development Journal, 22(4): 151-158 * “Stress testing governance: the impact of the recession on governance parties”, Retrieved Novembers 25, 2009 from: http://www.deloitte.com/assets/Dcom-Canada/Local%20Assets/Documents/ERS/ca_en_directorsseries_stresstesting_oct09.pdf * Takala, T, 1998. “Plato on leadership”, Journal of Business Ethics, 17(7), pp 785-799 Read More