Managers Leadership Styles and Organizational Performance - Essay Example

Running head: The EU legislation and Labour movement The EU legislation and Labour movement s Introduction: Managers' leadership styles have a crucial impact on the achievement of both individual and organisational performance in corporations (Bass, 1990a; Yukl & Van Fleet, 1992). This is attested to by the fact that vast leadership research has been conducted over the past two decades (Northouse, 1997). Nonetheless, even with the global acceptance and acknowledgement of the importance of leadership in the business context, research on leadership behaviour rarely presents studies dedicated to region or country-specific entrepreneur ship (e.g., Baum, Locke, & Kirkpatrick, 1998; Eggers & Leahy, 1995; Hunt & Handler, 1999). Moreover, while there has been progress in the study of managerial leadership behaviour in various countries of the globe (Den Hartog, House, & Hanges, 1999; Kuchinke, 1999; Maczynski & Koopman, 2000), world wide research in leadership styles of entrepreneurs is minimal (Ardichvili, Cardozo, & Gasparishvili, 1998). Lastly, while there have been several studies that have been undertaken on psychological and behavioural distinctions between entrepreneurs and managers within a Western setting (i.e. the UK) (e.g., Brockhaus, 1982; Brockhaus & Nord, 1979; March & Sharipo, 1987), there is a dearth of literature on the comparison of leadership styles of Western and non-western entrepreneurs and managers. While there is a wealth of literature discussing leadership styles across countries, there is a dearth of research specifically tackling the topic of entrepreneurial leadership. The fact that legislation is a catalyst for economic growth and development is well known. Differing economic, cultural and political circumstances abroad also suggest the need for a better understanding of employees with a broad context is important. Fortunately, the ability to study the implications of policies on economic growth abroad is expanding rapidly as a result of the emergence of global private equity markets and micro finance. International entrepreneur ship spans cultural boundaries and involves a variety of stakeholders, including the entrepreneur, investors and policy makers (Asel, 2003). "Social considerations must be given the same status as economic, financial and environmental concerns in a holistic approach. It is time for global thinking and local action. The implementation of the Core Labour Standards and the laws and regulations that give effect to them at national levels can be significantly enhanced if the capacities of national labour inspectorates are built up and strengthened. Labour inspectors have a crucial role to play because they are the only ones with the authority to directly access and impose changes in the workplace."(Albracht, 2005) The European union was expanded in May 2004 having 25 members. The aim of the creation of the union was to create the most competitive and dynamic knowledge-based economy in the world, capable of substantial economic growth with more, and better, jobs and greater social cohesion (Elizabeth Hunt Recruitment). All the member states of the EU have to follow common trade and employment laws, which on the one hand provided them with the ease of free trade and larger availability of work force and a vast product market on the other. Working Time in Europe: "According to the EU Working Time Directive (93/104/EC), implemented on 23rd November 1993 and laid down the following: - There should be a minimum rest period of 11 consecutive hours for every 24-hour period. - There should be a rest break if the working day is longer than six hours. - There should be a minimum rest period of one day per seven-day period. - There should be a minimum of four weeks' paid annual leave. - There should be an average of no more than eight hours work per night in a 24-hour period. Although there are significant variations relating to paid holiday leave across the member countries; in all cases the average paid annual leave exceeds the guidelines laid down in the EU Directive." (Elizabeth Hunt Recruitment) Minimum Wages: In the EU countries where a minimum wage ranges between 406 and 1,290 EUR. EU Race Directive: "The EU Race Directive made it essential for all the member states to ensure equal treatment is concerned with the principle of equal treatment between people, irrespective of their racial or ethnic origin. It sets minimum standards of protection, which all Member States of the EU must meet. Member States may exceed these standards and introduce more favourable provisions, but article 6(2) of the Directive states that they cannot reduce the standards of protection they already provide. The Race Relations Act 1976 (Amendment) Regulations 2003 ('The Race Regulations') incorporates the EU Race Directive into UK law. " (Elizabeth Hunt Recruitment) EU Member States will also have to outlaw discrimination on the basis of age and disability. Legislation on age discrimination comes into force in the UK in 2006, and disability discrimination was made unlawful in 1996. Most of the European countries are suffering due to the harsh labour laws. The countries having much flexible laws before joining the EU had to impose the rigid laws levied by the EU which are only playing part in weakening and threatening the economic growth of the EU member states. Czech Republic Legislation: "In the Czech Republic, the current minimum wage is less than 200 EUR. Legal paid vacation in the Czech Republic is four weeks - the same as set by the European directive. On the basis of the European directive, a maximum working hours limit was set in the EU countries at 48 hours per week and the Czech Republic follows this requirement. This maximum number of hours can be exceeded in the short term; however, it should be followed on average over four months." (Subrtov, 2006) German Legislation: "With relatively generous wages and the shortest working week on the continent, workers in Germany are likely the envy of many of their European counterparts. But unlike their counterparts in many other countries on the continent, they don't have the protection of a statutory minimum wage." (Deutsche Welle, 2006) French Legislation: "The national minimum wage was $9.64 (8.03euros) per hour, which provided a decent standard of living for a worker and family. The Employment Ministry was responsible for enforcing the minimum wage. The official workweek was 35 hours however, in certain industries, the government allowed a greater number of overtime hours that could result in a de facto 39-hour workweek. Overtime was limited to 180 hours annually. Maximum hours of work were fixed at 10 hours per day, 48 hours per week, and an average of 44 hours per week over a 12-week work period. Employees were guaranteed a daily rest of at least 11 hours and a weekly break of 24 hours, not including the daily rest period. Employers must accord workers a 20-minute break for a 6-hour workday. Premium pay was required for overtime. These standards were effectively enforced." (Bureau of Democracy, 2006) "To see the magnitude of how rigid EU labour laws are, one must only look as far as Germany. In Germany, in order to hire and fire employees, companies must get prior approval from workers' representatives. This practice is steeped in the rich traditions of workers councils and guilds. Unlike the US, where trade unions have limited power, European labour unions wield great control over corporate operations. Throughout European history, strikes have crippled many segments of national economies, which is the major reason they have not been abandoned. To further illustrate the rigidity in hiring and firing workers, German companies must wait an average of six months to hire new workers, and must file extensive paperwork to employ temporary workers in the meantime. "For one multinational German Company, a recent round of layoffs took two weeks to accomplish in the US, four weeks in the UK, and three months in Germany." Although Germany does not have a minimum wage, labour unions have set minimum standards for both compensation and benefits, including while working and after. This has forced many companies to limit the number of new hires they make, allowing for a more attractive outsourcing option. A further embellishment of labour laws concerns market restrictions such as price regulations, zoning laws and subsidies. By providing subsidies to companies, European governments are removing the need for companies to innovate. This loss of innovation and novelty hinders European corporations' ability to compete with foreign firms whose sole right of conquest is derived from a thirst for getting there first."(Kirby) The implementation of the European legislation to make it free market has also effected some of the steep financial traditions such as more flexible laws and less working hours. As in the case of France, the working hours are reduced to 35, working hours a day making approximately 210 hours per week. Although the extended working hours not only adversely effect the productivity of an employee but also affect the emotional and social setting of the family and community. Technical workers are in severe demand due to the increase in technology use and automation of organisations but on the other hand these workers are more in requirement of implementation of work life balance principles. Since their work involve more mental fatigue and psychological concentration. The increased working hours pose several external costs to the employees and employers both. They give rise to different health problems such as heart problems, high blood pressure, gastrointestinal disorders, psychological wellbeing and circadian disruption. The resulting increase in sick leave makes the organisation bear the cost of the illness of employee. The external cost effect thus transfers to society in shape of increasing tax burden on taxpayers and on Government for the provision of more social care facilities (Dawson, McCulloch and Baker, 2001). But in order to compete internationally it is important to increase the working hours. As Berry (2005) "Europe's productivity is lagging behind the US and Asia because inflexible labour laws are preventing companies restructuring and investing in new technologies, a report shows. A DTI-sponsored study, published to coincide with the UK's presidency of the EU, criticises member countries, particularly France, Germany, Spain and Italy, for not having the courage to reform labour laws. EU heads of state agreed a 10-year programme in 2000 to increase investment and make the EU "the most dynamic and competitive knowledge-based economy in the world". However, the DTI report said little progress has been made in achieving this goal. Companies in Europe have to pursue a policy of "creative destruction" to change the way they do business and learn from the "hire and fire" culture of the US to compete globally, the report said. At a conference this week key European players from business and government discussed the challenge of the future of information and communication technologies (ICT) policy. Viviane Reding, EU commissioner for information society and media, said many workers were concerned about their jobs and the EU would only strengthen economic growth by investing in ICT and abolishing "superfluous regulation" Although the hire and fire culture seems an easy way of achieving economic goals but the change in the policies regarding the employment can adversely effected the ties between Government and people. In order to avoid the strict policies and rigid laws most of the companies are considering the option of outsourcing so that they can avoid the strict laws governing how they hire and fire native citizens. The trend will give rise to unemployment rate, which will increase the anti foreigners, emotions. Although these trends will inevitably result in shape of relaxation in labour laws to increase the no. of native employment. However the Governments of the member states should avoid these clashes of cultures by keeping a balance in adopting the new policies and blending them with the existing policies in a way not to harm the rights of the native workers. This will help in preserving the European identity and improved economic conditions of the region. Since it is according to the EU legislation that the member countries can re apply the national measures, which have been stopped due to the EU legislation in case of serious problem threat from the labour market. The member country will have to ask the Commission and the Commission will decide about which of the restrictions can be imposed and for what time period. The decision should also be required to be passed by a qualified majority in order to amended or annulled. Legal Implications: With the EU annexation the states it is essential for the member states to apply EU laws in order to establish uniformity. Many of the new rules have not been tested. Most of the new members suffer the problem of limited administrative capacity of the public sector and the Judiciary to ensure effective application of EU law. Other legal implications include: Competition Law. Employment Law and the Free Movement of People. E-Commerce. Data Privacy and Protection. Taxation. Intellectual Property: Protection for Brand Owners. Customs and International Trade Law. Environmental Law. (Dackiw, 2004) Solutions: According to Bass (1985) the transformation of followers can be achieved by raising the awareness of the importance and value of desired outcomes, getting followers to transcend their own self-interests and altering or expanding followers' needs. Bass (1985) defined the transactional leader as one who recognises what followers want to get from their work and tries to see that followers get what they desire if their performance warrants it; exchanges rewards for appropriate levels of effort; and responds to followers' self-interests as long as they are getting the job done. Numerous research studies have been conducted in this area, and, collectively, the empirical findings demonstrate that leaders described as charismatic, transformational, or visionary have positive effects on their organisations and followers, with effect sizes ranging from .35 to .50 for organisational performance effects, and from .40 to .80 for effects on follower satisfaction, commitment, and organisational identification (Fiol et al., 1999). The approach followed in transformational leadership is important in order to deal with the multicultural settings in today's global organisations. Studies have been carried out in many different countries, and research in this area also shows that transformational leadership is closer to perceptions of ideal leadership than transactional leadership. As Lord and Maher (1991) note, being perceived as a leader is a prerequisite for being able to go beyond a formal role in influencing others. They hold that leadership perceptions can be based on two alternative processes. First, leadership can be inferred from outcomes of salient events, and attribution is crucial in these inference-based processes (Lord & Maher, 1991). For example, a successful business 'turnaround' is often quickly attributed to the high quality 'leadership' of top executives or the CEO (Hartog et al., 1999). Leadership can also be recognised based on the fit between an observed person's characteristics with the perceivers' implicit ideas of what 'leaders' are (Hartog et al., 1999). Cultural groups may vary in their conceptions of the most important characteristics of effective leadership. As such, different leadership prototypes would be expected to occur naturally in societies that have differing cultural profiles (Bass, 1990a; Hofstede, 1993). In his book Leadership and Performance Beyond Expectations, Bass (1985) drew a sharp contrast between a leader who is transformational as opposed to merely transactional. Transactional leadership proves instrumental in bringing about anticipated or expected outcomes in which the leader not only 'recognises the role the follower must play to attain the outcomes desired by the leader' but also, crucially 'recognises what the follower needs and clarifies how those needs will be fulfilled in exchange for the follower's satisfactory effort and performance' (Bass, 1985, p. 13). Further, Hater and Bass (1988) state: The dynamics of transformational leadership involve strong personal identification with the leader, joining in a shared vision of the future, or going beyond the self interest exchange of rewards for compliance (Hater & Bass, 1988, p. 695). Bass' (1995) definition of transformational leadership has four dimensions: Charisma. The leader provides vision and a sense of mission; instils pride, faith and respect; excite, arouse, and inspire their subordinates. Individual consideration: The leader provides coaching and teaching; delegates projects to stimulate learning experiences; provides for continuous feedback; and treats each follower as an individual. Intellectual stimulation: The leader provides subordinates with a flow of challenging new ideas; motivates followers to think in new ways: emphasises problem solving and the use of reasoning before taking action. Inspiration: The leader acts as a model for subordinates; behaves in ways that motivate and inspire followers by providing meaning and challenge; communicates a vision. Research has noted the distinction between membership and decision making behaviours required by organisations and the quite different sources of these behaviours. In one such study, the motivation to acquire and keep organisational membership from productivity was distinguished. Membership motivation results from a favourable inducements-contributions balance. Employees must perceive a continuing favourable balance if they are to remain members.The motivation to perform represents a much more complex psychological contract between the individual and the organisation involving perceived alternatives, perceived consequences of these alternatives, and individual goals (March & Simon, 1958). Organisations have no choice but to provide membership motivation if they wish to remain organisations. Process or theories explain the operation of motivation, or the factors that influence an individual to choose one action rather than another.Process theories are subdivided into cognitive and non-cognitive approaches.Cognitive theories see behaviour as involving some mental process.Non-cognitive theories see behaviour as caused by environmental contingencies. The major cognitive theories are equity theory, goal-setting theory, and expectancy theory.All of them focus on perceptions of the outcomes that flow from behaviour. Equity theory suggests that motivated behaviour is a form of exchange in which individuals employ an internal balance sheet in determining what to do. It predicts that people will choose the alternative they perceive as fair. The components of equity theory are inputs, outcomes, comparisons, and results.Inputs are the attributes the individual brings to the situation and the activities required. Outcomes are what the individual receives from the situation.The comparisons are between the ratio of outcomes to inputs and some standard. Results are the behaviours and attitudes that flow from the comparison, but other standards of comparison, including oneself in a previous situation, seem equally probable (Adams, 1965) The governments of all the member states can play a significant role in strengthening the economic & financial position of these countries in order to make all the member countries compete effectively it is important to apply effective ICI policies and invest in new technologies. It is also important to promote, monitor and enforce occupational safety and health in the work environment. In order to achieve these goals the governments of member countries should establish a common strategy of health & safety culture. To make sure the imposition of the EU directives for labour betterment the governments should carry on the labour inspection processes with in their states. The governments should appoint different agencies which should investigate all the labour laws which act as an obstacle in the easy movement of labour with in EU member countries and on the other hand point out the policies which will effect the rights of the native employees of that country. A system to monitor economic progress of the country should also be establish, which allows the comparative analysis with other countries and pinpointing the strategic weaknesses. These agencies should also facilitate dialogues between all the stakeholders in order to play effective role in the progress of the country while keeping balance in adopting different policies. These agencies should also play a role of bridge between the employers and employees in order to solve their problems without effecting any ones rights. 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