The Impact of Transformational Leadership on Organizational Innovation - Research Paper Example

?The impact of transformational leadership on organizational innovation moderated by organizational culture The world today is indicative of a rapidly changing environment fuelled with a series of revolutionary technological advancements and the simultaneous change in the economic and political spheres, thus placing a huge demand on the organizations to adapt to the change in order to survive and prosper. Factors such as globalization, changes in consumer preferences and markets, economy, and the changing environment trends are causing changes not only in the organizational structures but also in the types of leadership, with a view to attain sustainability and improve competitiveness in the market place. The manner in which organizations and the management reacts to such changes plays a key role in determining its success in sustaining it’s competitive standing in the market against the external pressures. This paper aims to discuss, analyze and review the impact of transformational leadership on change management and the role and influence of the same on the overall organizational culture. Table of Contents: Sr. # Topic Pg. # 1. Introduction 4 2. Literature Review 7 2.1. Transformational leadership and Organizational Culture 10 2.2. Theoretical perspectives 11 2.2.1. Change Management Theory 11 2.2.2. The Transformational Leadership Theory 13 2.3. Transformational Leadership and Continuous Change 14 2.4. Impact of leadership styles on organizational change 15 3. Analysis: Case study – Apple Computers 17 Conclusion 18 References 19 I. Introduction: "A lot of companies have chosen to downsize, and maybe that was the right thing for them. We chose a different path. Our belief was that if we kept putting great products in front of customers, they would continue to open their wallets" "Innovation distinguishes between a leader and a follower" Steve Jobs There are wide spread transformations in the corporate market place which is becoming more and more competitive on account of globalization, technological innovations, changes in the economy etc., thus leading to an added pressure on the organizations to enhance employee performance in order to survive and sustain their competitive standing in the industry. The organizations today thus need to constantly innovate and develop novel approaches to withstand the high competition posed by the external environment. The changes in the global economy is yet another factor which is pressurizing the organizations as well as the leaders to develop and implement effective measures to ensure better and higher employee productivity, inspire innovation and create a favorable organizational environment and culture that supports and encourages employee creativity. Such transformations can be made through effective transformational leadership approach on the part of the management. There is documented evidence on the basis of various studies conducted over the years which point to the fact that transformational leadership plays a key role in bringing about revolutionary changes in the organizational environment and positively affects and influences various key areas such as: organizational productivity, employee creativity, increased job satisfaction, reduction in stress levels of employees and workers, greater levels of team commitment etc., among many others (Bass & Avolio, 1994; Bass, 1985; Dionne, Yammarino, Atwater & Spangler, 2004; Howell & Avolio, 1993). Such studies suggest that transformational leadership can greatly influence and encourage organizational innovation and creativity as well as the development of appropriate and effective skills required to compete in this highly dynamic and ever changing external environment. There are various approaches to initiate and implement organizational change, however regardless of such approaches the key role in influencing such changes is played by the managers and leaders, who are required to influence and guide the employees through such a process. Organizations today are representative of a highly diverse workforce and coupled with the rapid innovations and globalization there is an urgent need for a strong and effective leadership to help and guide it towards successful attainment of its key goals and objectives (Eisenbach, Watson, and Pillai, 1999). The attainment of objectives requires the effective application of change management strategies and a strong leadership approach which helps in creating new systems and policies to achieve such a change. The managers and leaders today are not restricted to merely supervising the successful accomplishment of tasks or monitoring the status of work, but are required to share broader responsibilities which include developing a common vision for the organization; creating and developing revolutionary policies to achieve those goals; and create a healthy environment which represents a learning organization. They are also required to entrust greater responsibilities to the employees, achieve consensus, encourage and enhance team performance and commitment, and develop a competitive advantage for the organization to help in sustaining its position in the industry. The key characteristic traits of an effective manager / leader includes strong human value systems, charisma, ability to encourage and motivate the employees, encourage creativity and innovation in the organization, and steer the employees towards one goal in order to achieve the organizational mission, and at the same time provide greater benefits to the environment and society as a whole. The leaders are required to identify and utilize the potentials of its workforce and use it to achieve optimum benefits for the organization. Effective management requires the leaders of today to imbibe the characteristics of transformational leadership. The concept of transformational leadership transcends beyond the effective management of organizations since it provides the leaders an added benefit of the ability to transform the organizations through creation of a collective vision, encourage the employees to work towards one goal, create and instill a sense of unity among the employees, and delegate greater responsibilities and freedom through decentralization of authority (Eisenbach, Watson, and Pillai, 1999). Such a leadership helps in creating a favorable organizational environment whereby the workforce is encouraged to unleash their creativity to their optimum levels, and thus achieve higher performance outcomes. The concept of transformational leadership was first developed and introduced by James McGregor Burns who defined it as an long-term relationship between individuals which transcends beyond agreements and includes the manner in which the leader seek active involvement of the followers to help them attain higher levels of motivation and morality (Lee Whittington and Galpin, 2010). According to Bass and Aviolo (1994) transformational leadership is based on four key characteristics namely – idealized vision, inspirational motivation, individualized consideration and intellectual stimulation. The transformational leaders play a key role in helping the organization to adapt to change through effective management of organizational tasks, and by motivating and encouraging the employees towards attainment of a common organizational goal, which is achieved through creation of a culture of trust (Herrera, 2001). The transformational leaders have the ability to successfully manage and adapt to change through sustained efforts and by focusing on the organizational objectives (Simons, 1999). II. Literature Review: The rapidly changing external environment requires a prompt response on the part of organizations in terms of change in leadership styles, organizational efforts, and adoption of novel and unique strategies to address such changes confronting them today. Various business leaders such as GE’s Jack Welch or Apple’s Steve Jobs and other management scholars have advocated for implementing an adaptive leadership approach with a view to respond favorably to the corporate environment facing organizations in recent times (Bass, Avolio, Jung, & Berson, 2003). The leadership approach adopted by top multinational companies is indicative of the transformational approach which is characterized by the use of various key elements such as inspirational motivation, intellectual stimulation, idealized influence and individualized consideration. According to Egan (1985) transformational leaders have the ability to create and shape organizational values, guide the employees towards the right path, and mould the organizational culture in a manner which supports innovation and creativity. They are persistent and consistent in their efforts to motivate and encourage their followers and lead them towards organizational success. They have a good strategic sense and have the capability to create a productive and supportive organizational culture, which encourages the employees to constantly create and innovate and gives them a sense of direction. Transformational leaders help in creating an organizational culture based on values, beliefs and norms which are most suitable for the attainment of the overall organizational goals. Such leaders have the talent and the knowledge to understand the type of organizational culture which will be best suited to absorb and respond to the changes occurring in the external business environment. According to a research conducted by Anderson, Gisborne & Holiday (2006), the transformational leaders need to possess certain key qualities which help them in establishing and building strong relationships with their followers. These qualities include a strong sense of understanding, a caring nature, respect their fellow colleagues, genuineness; and being precise in giving instructions. The quality to understand people helps the transformational leaders in assessing the personal as well as organizational needs; identify problems and set goals and visions for the future. Transformational leadership helps in resolving organizational problems and facilitates achievement of goals through application of innovative and novel strategies. The organizational culture developed by transformational leaders comprises of key elements such as trust and liberty, plays a key role in encouraging better relationships between the leaders and their followers and hence attain higher performance outcomes and greater job satisfaction. The attribute – respect possessed by the transformational leaders enables them to respect other individuals as well as their uniqueness, imperfections, and shortcomings, and help them in assisting their followers in overcoming the same. This further helps the leaders in gaining respect of their followers. The attribute of specificity entails effective communication on the part of the leaders with their teams, and ensure that the instructions given are communicated appropriate through effective channels of communication, which includes written as well as verbal communication. According to Anderson et al., (2006) such qualities in a transformational leader are integral to their personalities and help them in gaining trust and improving their interpersonal relationships within the organization and in the process enhance organizational credibility. II.1. Transformational leadership and Organizational Culture: The leadership style followed by organizations plays a key role in influencing the organizational culture. According to Schein (1995) the beliefs, values and assumptions of the leader are followed by the other members of the organization. He further stated that the transformational leaders hold immense power and authority to embed their values and beliefs within an organizational culture. According to Bas and Avolio (1993) the transformational culture is one which is comprised of feelings and values inherent in a family. It includes commitments which are long-term in nature, and the leaders and followers share mutual interests as well as a sense of shared fates and the relationship between them is highly interdependent in nature. The transformational leadership culture plays a key role in building, developing or augmenting the transactional culture in organizations. According to Tucker & Russell, (2004) the impact of transformational leaders on the organizational culture can be estimated through the manner in which the employees work in an organization. The transformational leaders help the employees in assessing and identifying their key strengths and weaknesses and in assessing the roles and contribution they are required to make to achieve organizational goals and objectives. In a transformational organizational culture the employees are fully aware of the exact roles expected of them by the leaders. The transformational organizational culture enables and ensures free and effective channels of communication by encouraging the employees to interact freely with the leaders, thus in the process succeed in instilling a sense of commitment among the employees, which subsequently play a key role in enhancing their performance. Transformational leaders significantly impact the organizational culture by enhancing organizational productivity. According to Niehoff et al., (1990) the values and culture of an organization are influenced by the organizational productivity and innovation. Furthermore, transformational leaders influence the organizational culture by presenting a diverse and unique way of perceiving situations and events, and assessing external factors affecting organizational performance (Mink, 1992). They help in adapting to the external environment by making appropriate and effective changes in organizational culture and influencing the employees to adapt to the new environment (Smith, 1990). II.2. Theoretical Perspectives: II.2.1. Change Management Theory: Various change management theories and models have been studied and analyzed by scholars and researchers alike which focus on the management of change by organizations, the issues and challenges faced by them; contextual issues; as well as factors affecting and influencing organizational change in the contemporary business environment (Armenakis and Bedeian, 1999). A three step model based on the change management theory was proposed by Kurt Lewin, which discussed the planned change within an organization, which includes – freeze, unfreeze and refreeze change paradigms. The author also suggested various processes of change management such as planned change, directed change or spiral change (Cummings and Worley, 2008). Also, apart from Lewis’s change management model, various other theorists have put forward change models which are based on factors such as downsizing, restructuring or reorientation. These models include the cognitive impact of change such as resistance to change, grief experienced by the members in an organization on account of change or the paradoxes to change. The study and researches on the issue of change management includes the theory of evolution of change. According to the Darwin’s model of evolutionary change, the process of change entails transition from a small mutation towards various diverse forms, as observed in a corporate environment (Gersick, 1994). The theory is indicative of a change process which is incremental and episodic in nature and takes place gradually through a series of events. According to yet other set of researchers and theorists, the process of change is indicative of long sustained periods of stability whereby the change takes place in preset patterns followed by oft repeated activities which in turn are highlighted by intermittent outbursts of fundamental / revolutionary change (Kuhn, 1970: Tushman and Romanelli, 1994). The punctuated equilibrium model of change states that the process of change exists for a prolonged period of time, wherein change occurs at an incremental rate with intermittent breaks followed by radical changes (Tushman and Romanelli, 1985; Gersick, 1994). According to Browne and Eisenhardt (1997) the survival of organizations in the highly competitive market place is highly dependent on their ability to invest and involve in the continuous process of change, rather than the episodic / intermittent change process as proposed by the punctuated equilibrium model of change. This observation was based on a study conducted by them with regard to multiple processes of change and innovation within the computer industry. The study revealed that the ability of the firms to compete within the computing was high as compared to firms in other industries because of their ability to respond rapidly to the changing environment. In other series of studies conducted by various researchers to assess the receptivity of organizations under various types of leadership approaches it was observed that most of the organizations under transformational leadership were found to be highly receptive to change as compared to other types of leadership (Eisenbach, Watson, and Pillai, 1999). On the basis of various theories based on leadership styles, it is observed that the ability of organizations to adapt and respond to change is based on certain key characteristic traits of the leaders. These can be discussed with regard to the following theory: II.2.2. The Transformational Leadership Theory: The transformational theory of leadership was first introduced by Burns (1978) in the 20th century. According to him, a leadership style can be described to be transformational when “one or more persons engage with others in such a way that leaders and followers raise one another to higher levels of motivation and morality” (Pp. 20). He was of the opinion that the transformational leaders have the ability to motivate and encourage followers from the lower to higher levels of needs as described in Maslow’s hierarchy of needs theory. Another theory on transformational leadership was proposed by Bass (1985). He defined a leader as “one who motivates us to do more than we originally expected to do” (Pp. 20). According to him, motivation can be achieved thorough attainment of higher levels of awareness with regard to the significance of performance outcomes and establishing policies and strategies to attain those outcomes. He further stated that transformational leaders encourage their followers to enhance their performance by venturing beyond their self-interests and working towards the attainment of overall objectives of the team or the organization. II.3. Transformational Leadership and Continuous Change Various studies conducted over the years with regard to the impact of transformational leadership in influencing change within organizations, have shown the relationship between the two. The transformational leaders possess all the key characteristic traits to ensure that they provide an organizational culture and environment which is most suited to help the employees adapt to such change and extract effective performance outcomes from their followers. According to Kotler (1995) transformational leaders have the ability to communicate effectively with their followers and convey the manner in which the followers are required to react and respond to the changes taking place in the external environment. According to Brown & Eisenhart (1997) transformational leaders or managers in possess certain key characteristics which include the ability to delegate precise instructions, set priorities and assign appropriate responsibilities to their followers, and give adequate liberty to them to improvise on their performance. They have the power to innovate and introduce novel ideas to cope with the rapidly changing external environment; and establish a connection between their projects on hand and those they are likely to take up in the near future. According to them, in an environment of continuous change, the organizations are more likely to focus on implementing planned strategies by establishing deadlines within which the strategies are required to be implemented, the tasks are to be evaluated and policies to be reconfigured to suit the changing needs and demands of their customers. 2.4 Impact of leadership styles on organizational change: Transformational leadership encourages and inspires the followers to recognize and associate with the visions of their leaders and work in favor of the collective interests of the team / organization rather than pursuing their own self-interests. Transformational leadership brings out the best in the employees and motivates them to perform better and enhance their performance outcomes. According to Pillai & Williams (2004) motivation plays a key role in gaining the confidence of the followers, and inspires them to identify and recognize their self-worth, while self-efficacy on the other hand, entails the belief in one’s capabilities which further helps in effective organization and execution of strategies required to manage prospective situations and challenges faced by the organization. Such type of leadership sharpens the key determinants of self-efficacy which includes role modeling, the art of verbal persuasion, as well as psychological arousal. The success of a transformational leader to initiate and achieve effective change within organizations is highly dependent on the motivational strategies applied by them. The various leadership styles which help in achieving such effective change are described by the path-goal theory. This theory was put forward by House & Dessler describes various qualities which are expected of an efficient leader. These include the ability to direct, participate, support and achieve goals for organizational success (Head, et al, 2007). The expectancy theory proposes that people are highly likely to be motivated when they believe that certain expected behavior results in higher rewards (Gallos, 2006). The study of the above literature and theories suggest that in a constantly changing environment the efficient leaders must practice and implement various motivational strategies which help them to achieve organizational profitability throughout the punctuated process of change and the same can be achieved through transformational leadership. III. Analysis Application of Change management and leadership theories: Case Study – Apple computers The following case of Apple computers help in further understanding the impact of transformational leadership on organizational innovation and the impact of such changes on organizational culture: Contemporary leaders such as the former CEO of Apple Computers - Steve Jobs, or the British entrepreneur Richard Branson of the Virgin Group are the key examples of transformational leadership. They created a futuristic vision based on innovation and creativity and brought about significant changes in their organizational environment, influenced and transformed their organizational cultures with a view to adapt to the changing environment (Andriopoulous, Dawson, 2009; Belasen, 2000). The former CEO of Apple computers believed in innovation and creativity and used it as tools to effectively sustain the competitive positioning of the company within the industry. It is on account of innovative products such as the iPod, the iPad as well as the iPhone which catapulted the company to greater heights and led it to be known as one of the most innovative companies in the industry. At a time when other companies were busy downsizing their workforce, Apple computers propagated the significance of innovation and creativity as a means of sustaining and confronting the challenges posed by the dynamic external environment. Such creativity could only be fostered in an environment which promotes creativity and affords the employees the freedom to innovate (Mascarenhas, 2011). Steve Jobs symbolized a leader who had an inherent power and will to create innovative products and had the energy to pull people emotionally towards following his chosen path. The case of Apple computers which rose from the ashes to a position of unprecedented success as a market leader, is indicative of the sheer impact of transformational leadership on organizational innovation moderated by organizational culture. Conclusion The study of various theories and researches with regard to the impact of transformational leadership on organizational culture and innovation provide an insight into the role of leaders in managing change and influencing the employees to achieve higher performance outcomes. On the basis of the extensive research and studies carried out in this behalf, it can be safely claimed that transformational leadership has a direct impact on organizational innovation, culture, and vision. It instills various characteristic traits among the employees and followers such as a sense of commitment to team efforts; self-efficacy; increased job satisfaction; trust and motivation. Furthermore studies and empirical research have pointed to the impact of transformational leaders on organizations in terms of building a strong and positive culture, indicating that such leadership style provides better opportunities to the leaders to influence their followers and building an environment which is effective in achieving the overall goals. The studies also suggest that there is a direct and positive relationship between transformational leaders and the organizational vision. The transformational leaders encourage innovation and provide a conducive environment to innovate and develop novel ideas to respond to the dynamic and rapidly changing external environment. Such a culture further helps in creation of new and long term visions for the organization which in turn helps it in sustaining its competitive positioning in the market by giving them a competitive edge. References: Anderson, T. D., Gisborne, K., & Holliday, P. (2006). 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