Challenges for Construction Leaders During Economic Shifts - Term Paper Example

Challenges For Construction Leaders During Economic Shifts And Their Implications For Leadership Style Introduction Construction is one of the major industries that greatly contribute to the gross domestic product of any country. The latest economic crisis that started in 2008 had daunting implications for leaders in the construction industry. Not only did they have to cope with the usual challenges in the inherently risky construction business, but they had the added responsibility of sustaining the business through changing economic scenario. Business strategy of a construction company changes during economic struggling times, thus imparting a need for leaders to serve as the changed strategy’s embodiment. Construction leaders, regardless of the size of business, need to adjust their style of leadership according to changes in the economic climate in which the business operates. The way leaders communicate with the staff and the techniques they employ to optimize growth during recession plays a decisive role in the success of their companies. The Problem Switch from economic growth to recession and back to growth raises numerous challenges for leaders in the construction industry. Many construction leaders around the world were not adequately prepared for the challenges that surfaced with the latest economic crisis that started in 2008. Out group relationship between leaders and followers as defined by LMX leadership theory during economic recession developed mistrust thus causing harm to the companies (Nilsson, Oldengard, and Asforsen, 2009) Many construction companies downsized and cut-short pays as measures to sustain during the recession (Lowth, Prowle, and Zhang, 2010). 2014 is the sixth year since the construction industry has been emerging from recession. In this time, case studies of construction leaders combating the challenges of recession provide valuable insights into what can be done differently to better lead construction companies during possible recessions in the future. Abu Bakar (2006) predicted another economic downfall in the construction industry between 2020 and 2024 because of human resource crisis. Leadership involves development of a compelling vision to better guide an organization through challenges. The recent economic recession has caused the construction leaders to rethink the way they lead. This paper briefly overviews the challenges faced by construction leaders during economic recession and recommends ways in which leaders can effectively manage those challenges in the future in light of LMX approach to leadership. Literature Review and Analysis Leadership can be defined as “a process whereby an individual influences a group of individuals to achieve a common goal” (Northouse, 2001, p. 3). Leadership approaches can be classified into seven major theories including trait, style, path-goal, contingency, situational, transformational, and leader-member exchange (LMX) (Green et al., 2006). LMX is a special leadership theory because it includes transformational and transactional processes as well (Gerstner and Day, 1997; Graen and Uhl-Bien, 1995). The quality of exchange between leader and members does not affect the transactional processes in the LMX relationships. In addition to that, no leadership theory except LMX places the dyadic relationship between leader and members at the leadership process’s stage (Green et al., 2006). However, LMX also has its limitations because a certain style of leadership cannot be generalized to be effective in all situations (Campbell, Bommer, and Yeo, 1993). Economic recession is a time when leaders need to challenge the norms. Construction leaders, during recessions, place their focus on survival, thus feeling shorter term outlook. This imparts the need to empower more staff members down the hierarchy of organizational structure so that they can resolve the matters before bringing them to the attention of the top management, thus simplifying the process of leadership for the top management. “You have to allow good people to thrive and make their own decisions, to risk-manage their own section of the business and move forward longer term without worrying they’re going to be in trouble for getting the smallest thing wrong” (Fox cited in Barker, 2014). This is the essence of the leader-member exchange theory. A number of studies (Graen and Uhl-Bien, 1995; Graen and Scandura, 1987) have concluded that increase in the quality of leader-member exchange increases the productivity of workers. Empowering young workers is a trend consistent with the changing cultural values of the young generation that will take managerial and leadership positions in the construction companies in the coming years. Young workers “are losing verbal skills but have the ability to maintain large networks, absorb more information and filter out non-essential material to avoid overload” (CBRE Genesis, 2014). Construction companies typically tend to downsize during economic recessions as a way of cutting cost and maintaining the profitability of business. The remaining workers are overloaded with work and cannot deliver the assigned tasks in time. Such situations impart a need for the leaders to collaborate with the subordinates and assign them tasks after prudent assessment of the workers’ abilities and their optimal productivity. Leader outcomes are more positive when the leader develops high-quality relations with the followers compared to lower quality relations. Decision-making is one of the cardinal functions associated with leadership (Yukl and Becker, 2006). Alongside, the importance of good negotiation skills for being a good leader cannot be overestimated (Nanus and Dobbs, 1999). Construction leaders need to create a culture that fosters negotiation, innovation, and understanding among the workforce. Creating a culture where the whole team works to identify the causes of errors by negotiating with each other rather than blaming each other for their occurrence is primarily a leader’s role. Good negotiation includes everything ranging from installing the means of communication like digital technology at the workplace to being more approachable for the workers. Negotiation also means identifying conflicts in the views and opinions between the leader and the followers and trying to resolve these differences through mutual collaboration and dialogue. In order to reach the root-causes of problems, it is imperative that the leaders become approachable to the staff and lend them the confidence that they will be encouraged rather than criticized for negotiating the real problems with the leader. High quality exchanges between leader and members are both transactional and transformational in nature; “the mature relationship developed between dyadic members throughout history of exchange results in progressively higher degrees of mutual trust, respect, and obligation within the relationship, persuading followers to engage in more responsible activities than they otherwise would” (Graen and Uhl-Bien, 1995, p. 232). An individual does not qualify as a leader if he/she is not able to influence others. Persuasion and consultation are some of the time-consuming influence methods that leaders can rely on. The pre-requisite of developing the influential ability is developing trust among the followers (Makhdom and Ghazali, 2013). LMX theory terms high-quality relations between leader and followers as “in group” relations and asserts that these relations are based on mutual respect and trust whereas low-quality relations are termed as “out group” relations and are said to be based solely on fulfilling the contractual obligations (Day and Antonakis, n.d.). Members that have in group relations to the leader resemble their leader in their approach toward work. They can be trusted with more responsibilities and can be included in the inner circle of communication of the leader. In group relations between the leader and followers reduce turnover rate of the employees and makes them more committed to the organization. These are the qualities typically needed of workers in construction companies during the switch from economic progress to recession. On the other hand, out group relations between the leader and followers are administered through formal rules and policies. Leaders having out group relations with the followers attend to the followers less and keep them out of their communication circle. This increases the possibility for the followers to retaliate against the organization. Construction companies cannot deal with such challenges during the time of recession. This imparts a need for the construction leaders to establish in group relations with the followers. Changing company’s strategies as the economy starts to pick up post-recession imparts a need for the leaders to again adapt their leadership style to the new strategies. Many leaders feel emotionally exhausted to change their leadership style while switching from economic recession to growth strategy because they have heavily invested in a difficult strategy during recession. “Experience shows it can be quite difficult to be an effective leader during both phases of the cycle” (Barker, 2014). However, this does not automatically imply the need of a new leader, though companies need to adapt the leadership style to the changing economic environment. Post-recession role switch is relatively easier for a leader than the switch from economic growth to recession. Post-recession is the time when leaders can reanalyse if they are equipped with the right resources to maximize business opportunities for the future. Leaders in the post-recession time, need to maintain their relationships with the workforce, thus providing the subordinates with attention and responding to their needs in a timely manner (Yukl, 2002). Conclusion Change in the economic scenario affects construction business and raises new challenges for the construction leaders. They have to cope with the need to maintain optimal balance between workforce’s needs and company’s profits. This is particularly hard to achieve when economy is switching from growth to recession than the other way around. The role of a construction leader in helping the company deal with the challenges associated with the times of economic switch is extremely important. LMX theory implies that leaders should develop close ties and “in group” relations with the followers, opening lines of communication with them, so that realistic and achievable goals can be assigned to the workers best-suited for them because of their competencies and abilities. It is recommendable for the construction leaders to keep the workforce informed about the changing economic scenario and its implications for business. The construction leader should negotiate with the followers to bring all employees on the same platform so that they make their best effort to lead the construction company through the time of economic crisis successfully. 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