Corporate Leadership and Change Management - Case Study Example

Corporate Leadership and Change Management Introduction Driven by international trade and investment through the use of information technology, globalization can be described as “a process of interaction and integration among people, companies, and governments of different countries” (The Levin Institute 2008). Because of the continuous process of interaction and intergration of people, companies, and government; businesses today are being challenged to improve the quality of their daily operational management to make it easier for them to compete in the global market. In relation to the tight competition in the global market, the need to differentiate a leader from a manager arises. In the past, many people failed to distinguish the difference between the two because of its close similarities. As a common knowledge, leaders and managers are both in control of their subordinates and these two groups of individuals practice authority or power up to a certain degree each time they delegate tasks to their subordinates. For this reason, many people think that both concepts are just the same. Despite the fact that there are millions of people around the world who have studied business related courses such as management, many of them are still confused and unaware of the fact that the functionality of a leader and a manager is different in so many aspects. In general, individuals who remain unaware of this matter would think that being a manager automatically makes them a good leader. Although often mistaken as one, corporate leadership and management are two different concepts that each manager should know. Even though most managers are fully equipped with proper management skills, the problem why most of the business organizations today failed to compete in the global market is because of the absence of good leadership skills which is necessary to enable managers become more effective in terms of delegating task to subordinates and implementing a long list of organizational change (Kotter 1999, p. 1). In line with this, knowing the difference between these two business functions will make managers have a better competitive edge in terms of maximizing the overall business performance under their control and leadership. Therefore, it is crucial for managers in multinational companies to become aware and learn the differences between corporate leadership and change management. Using relevant theories and real-case scenarios, this study will critically discuss the observation of John Kotter (1999, p. 10) such that “Leadership is different from management, and the primary force behind successful change is the former, not the latter. Without sufficient leadership, the probability of mistakes increases and the probability of success decreases accordingly". Upon distinguishing the similarities and differences between corporate leadership and management, the reasons why the use of effective leadership style could increase the success rate of implementing organizational change will be provided using the case of Starbucks as a real-life scenario. After going through a list of different leadership styles, possible things that could have happened to Starbucks if Schultz did not use an effective leadership style will be tackled in details followed by discussing some of the recommended ways on how managers could improve their leadership skills. Similarities and Differences between a Corporate Leadership and Management Although commonly mistaken as one, corporate leadership and management skills are different in so many ways. In line with the differences between the two, it is important to know that leaders are individuals who do not only influence, select, equip, and train the followers with different abilities and skills but also persuades them to willingly participate with the leader in terms of achieving a common goal (Winston and Patterson 2006, p. 7). With the use of proper management skills, managers are individuals who are trained to conduct business affairs (Merriam-Webster 2010). As part of the similarities between a corporate leadership and management skill, it should be clear to us that managers will never be born a manager. Likewise, it is a myth to think that “leaders are born leaders” since leadership skills are learned and acquired through many years of experience in handling a diverse group individuals (Cox 2010). In the real world, anyone can be appointed as a manager within a business organization. A corporate leadership is a special skill that each manager should possess in order to make them become a competitive leader. In almost all circumstances, it is unacceptable for a leader to make a quick judgment towards people and/or a business situation without having a concrete evidence to back him up in the end. For this reason, a good leader is expected to have a combination of wisdom, integrity, sensitivity, and tenacity (WITS) (van Maurik 1994). Since a manager must always base decisions on concrete facts, the author mentioned that a good leader must have these traits to be able to have a clear vision of the business trends. Researchers and supervisors from different organizations struggle to answer the question “what makes a leader a good leader?” (Bambacas and Patrickson 2008). In line with this question, Barling, Slater and Kelloway (2000) noted that there is much empirical scrutiny of leadership and management theory that focuses on the question of influencing the follower’s motivation in an efficient and effective manner. As explained by Dessler (2001, pp. 296 – 297), leaders are individuals who are capable of inspiring other people and often times have important characteristics such as: (1) the drive to achieve their goals; (2) desire to lead; (3) self-confidence; (4) competitive cognitive ability; (5) honesty and integrity; and (6) sufficient knowledge in doing business. On top of these personality traits, leaders are expected to be influential among his followers without having the need to use violence or coercion. Aside from his ability to know the specific needs and wants of other people, a good leader make use of his personal power through the application of good communication skills which includes their ability to write and speak effectively in public (Huth 2001). One of the most important secret behind the success of leaders is to select the right people at the right time (Murphy 1996; DePree 1989). In line with the importance of getting the right people at the right time, Collins (2002) explained that getting the right people is similar to the idea of “getting people in the right seats on the bus” (Colins 2002). It means that the leader should personally know the strength and weaknesses of each subordinate to enable him to distribute the right task based on the capabilities of his followers. Therefore, the role of a leader is not limited to gathering the right people; it is also their responsibility to “move the followers beyond their own self-interests for the benefit of the whole group” (Bass 2000, p. 21; Davis, Schoorman and Donaldson 1997). In other words, a good leader should focus on what is best for the entire group whereas a bad leader is concern only on his own self-interests. The main role of a manager is not limited to planning, organizing, controlling and leading his subordinates within the business organization. It is equally important for managers to be a motivator and encourage employees to work together to improve the overall performance of a business organization. To do so, managers are expected to be a good role model not only within the boundary of his department but also in other business groups. Managers should also function as negotiator in case there is a need to solve organizational conflicts (Dessler 2001, pp. 8 – 9). In line with this, being persistent in getting things done can often make a manager effective in terms of getting good result from his people (Huth 2001). In a corporate management, managers are expected to have analytical mind useful in solving management problems. Likewise, managers should have the ability to influence, supervise, communicate, and lead employees who belong to the different levels of the organizational structure (Dessler 2001, p. 11, 291). Emotional competence is equally important in terms of enabling managers surpass any forms of emotional and interpersonal crisis within the business organization. Unlike a leader, managers have the legal authority to develop and implement managerial strategies which is useful in making a group of employees work together to meet the organizational goal. Contrary to the strategies used by effective leaders, managers tend to become impersonal rather than emotional when it comes to delegating task to his subordinates. Reasons that Makes Leadership Increase the Success Rate of Implementing Organizational Change At any point in time, anyone can be appointed as a manager within a business organization. However, it is sad to admit that not all managers who are appointed to manage a business have a good leadership skill which is necessary in increasing the success rate of implementing organizational change (Cox 2010). Based on the discussion regarding the similarities and differences of a leader and a manager, it was made clear that leaders can easily become effective managers but it is not possible that all managers are good leaders. In relation to the possibility that some managers lack the necessary leadership skills that will increase the success rate of implementing organizational change makes leadership skill an important decisive factor in search for a manager. Having a strong analytical skill is only one component that makes a good manager. Even though managers have successfully developed their analytical skills necessary in solving organizational problems, the absence of good leadership skill makes them unable to effectively implement the strategies they have developed when implementing an organizational change. The strong support coming from all members of a team is essential behind the success of an organizational change. It is the influential people or effective leaders that have the capacity to enable their subordinates willingly follow and support them when they are conducting either a national or international major event. However, there are some managers within the corporate world who have the legal authority to lead but are not able to effectively lead his group due to the absence of effective leadership skills. Since the lack of leadership skill can make managers unable to win the loyalty and support of his subordinates, the probability for resistance-to-change or internal errors to occur increases whereas the success of implementing an organizational change decreases. This explains why managers without a good leadership skill can cause a business organization to stagnate and eventually suffer from the negative consequences of mismanagement (Kotter 1999, p. 2). For this reasons, it is safe to conclude that leadership is the primary force behind the implementation of a successful organizational change. The Different Leadership Styles Applicable in Implementing Organizational Change Using the right type of leadership style would help in making the new strategic plan effective and efficient. Therefore, each manager should be responsible in making the organizational change plan successful. This can be done by knowing exactly the type of leadership style that is more effective with the kind of organizational change he is planning to implement. Each type of leadership style has its own advantages and disadvantages. In relation to globalization, the use of autocratic leadership style is no longer effective when dealing with a diverse workforce since a self-efficient employee has gained importance in terms of making a business organization competitive in the global market. On the other hand, the use of authoritative leaders tends to mobilize employee towards a single organizational vision. Unlike the use of autocratic or authoritative leadership style, transformational leaders tend to go beyond what is happening around his environment because of their ability to implement new ideas all the time (Johannsen 2004). Often times, these people are flexible with the changes that may occur within the business organization and could easily adapt with the implementation of a new strategic plan to improve the business situation. Once a group of employee is guided by a transformational leader, there is a strong possibility that the members of the team will instinctively adopt with the organizational change (Burke 2002, p. 243). The application of Transformational leadership style is more beneficial in the implementation of a discontinued change process in a business organization rather than the use of a transactional leadership style (Burke 2002, pp. 201 – 203). On the other hand, the Transactional leadership style is more effective when applied for a continuous organizational change process. Similar with the use of transformational leadership style, the use of charismatic leadership style is also effective in terms of making effective implementation of organizational change. This is possible since charismatic leaders are able to inspire employees. However, this particular leadership style does not focus on the fact that each employee demand respect and freedom of choice (Posakoff and Schriesheim 1985). Collaborative leaders do not only have the initiative to do a job but is also competent and supportive in guiding the development and implementation of their own organizational culture and structure necessary in achieving the organizational goal. This type of leaders also works well with their colleagues by creating, supporting, and maintaining a work environment wherein employees can learn and develop their competency to improve their knowledge. As a result of globalization, the need for continuous organizational change becomes necessary to empower a business organization to compete in the global market. In response to globalization, a strong collaborative leadership becomes an essential part of doing business not only in terms of enabling the managers to successfully implement a long list of organizational changes but also in terms of solving organizational problems and decision-making. In line with the importance of collaborative leadership in the implementation of change, let us examine the real-case scenario of Starbuck in the U.S. market when the company had to implement new strategies that will make the business sustain the negative consequences of the global economic crisis. Real-Case Scenario of Starbucks in the United States Upon combining the company’s creativity and innovation strategies, Starbucks strictly followed its traditional organizational model which was very much focused on creating a company that offers a unique coffee experience not only to its customers but also its employees over the past 25 years (Starbucks 2008a). Specifially the company’s traditional organizational model enabled the company develop a highly recognized brand throughout the global markets. As a consequence of globalization, unemployment rate throughout the US increased from 5.7% in 2007 up to 6.1% in 2008 (Bureau of Labor Statistics 2008). Since a large number of Americans need to cut down on unnecessary expenses, Starbucks in US is currently experiencing profit loss over the last few years (MSN Money 2008). For this reason, Starbucks’ management has recently developed a transformed organizational model to counteract the negative effects of the US economic position over the profitability of the business. Starbucks’ transformational strategy is to shift back its emphasis to customer-facing initiatives and aligning its operational costs with the new business model. Considering that Starbucks’ profitability in the US has been declining over the past few years, the new model is designed to improve its business performance in the US market. First, the company will provide its employees with sufficient trainings and tools needed in launching new product lines within the US market followed by improving its store design to enhance the ‘Starbucks Experience’ that connects the company with its customers (Starbucks 2008a). In the process of implementing these changes, Starbucks re-aligned the entire business organizational structure to support the specific needs of its customers. This was done by improving the IT system in each Starbucks’ retail store outlet. On top of these significant changes, Starbucks also decided to offer light lunch options which include salads and pasta in order to increase the company’s sales on food items (Harris 2007; The Queens Gazette 2007). Starbucks Coffee also decided to sell two yogurt parfaits throughout the country (Reuter UK 2007). Because of a lot of internal pressure that is associated with resistance to change among the members of the organization, the implementation of the organizational change within the business organization normally takes a much slower pace as compared to implementing the change externally (Burke 2002, pp. 92 – 94, p. 259). Since the organizational change at starbucks required a major internal change, Howard Schultz’s good leaderhsip skill was the key factor behind its succcess. In relation to the case of Starbucks, the use of a good leadership style did not only increase employees’ morale but also solved internal conflicts caused by resistance to change. Basically, increase in employees’ morale is very important in developing a peaceful working environment. In all cases, implementing organizational changes has to be systematic. Likewise, it was Schultz’s consistency and persistency in the implementation of the business strategies that positively affect the progress of the organizational changes. Once the team members start losing trust on Starbucks’ management, it would be very difficult to convince the entire workforce to support these changes. Schultz’s decision to develop a new corporate vision and mission served as a guide in allowing employees to know which direction the company is heading. As an effective leader, Schultz was able to clearly communicate the need to develop and implement new marketing strategies that will enable the company maintain its annual revenue despite the global economic crisis. The good collaborative and transformational leadership skill of Schultz made it easier for him to persuade the staff to support his plan for change. As soon as Starbucks’ management developed a new business structure and work processes, the top management started delegating new tasks to its employees. Discussion Even though Schultz was able to develop a long list of new business strategies on how to make Starbuck maintain its expected annual revenue, Schultz will not be able to successfully implement the plan in case he failed to use effective leadership style. Most of employees today are well educated and would prefer to have jobs that could compensate their financial needs and provide them a room for growth and improvements. Although the use of authoritative leadership style is effective in terms of mobilizing employees to work towards a single organizational goal, the use of pure authoritative and/or autocratic leadership style will not be effective in terms of motivating employees to participate in the company’s implementation plan for change since most employees today are trained to be self-efficient. Particularly the Transformational leadership style has four components: charisma or idealized influence, inspirational motivation, intellectual stimulation, and individual consideration (Burke 2002, p. 243). Transformational leaders possess charisma, inspire his subordinates, and have the ability to create vision for future development and insinuate intellectual stimulation1 (Bass 1985; Weber 1947). Schultz as a leader uses transformational leadership style making him able to use his legal authority and powers as the CEO of Starbucks to radically reshape the organization and destroy the old habits of his staff by creating a new one. All these qualities under transformational leadership style are important in terms of motivating the entire work group to instinctively adopt with the organizational change as implemented by Schultz. Aside from strengthening Schultz’s ability to implement new ideas, the application of transformational leadership style also made Schultz have a better competitive edge against his competitors by having the power to go beyond what is happening around the business environment (Johannsen 2004). Collaborative leadership style is equally important in the sense that this particular leadership approach promotes equal respect, fairness and equality among each employee. For this reason, each employee is expected to be able to inspire their co-workers to work towards a single organizational goal (Bennet and Bennet 2004). In case Schultz failed to apply both transformational and collaborative leadership style during the implementation of its plan for change, there is a strong possibility for him to encounter a lot of internal conflicts caused by resistance to change. As a common knowledge, failure to control resistance to change could result to internal problems caused by miscommunication and mistrust. All of these negative factors could make employees decide not to participate in the implementation of the new business plan. There are several factors that may possibly contribute to the failure of implementing a plan in relation to organization change. One of the most common failures is caused by the inability of the CEO and managers to handle resistance to change (Burke 2002, p. 262). Among the three common factors that triggers the development of resistant to change include: (1) the possibility that some staff may feel that they have no control over the sudden organizational changes; (2) employees may see change as a threat to their current positions or authority within the business organization; and (3) employees may develop fear such that change could result to a loss of status or privileges within the business organization (Uris 1964). Within a normal business setting, it is normal for the CEO and the managers of Starbucks to encounter resistance to change. In line with this matter, it was a good thing that Schultz as a good leader was creative and resourceful enough to find a solution to the organizational problem rather than to stop the whole organizational change plan and take this matter negatively. Perseverance and consistency to the implementation of the new business plan are two of the most important traits that could have empowered Schultz in solving a lot of internal and/or external problems that was present within the business organization. The fact that Schultz viewed resistance to change as a challenge made him able to develop a more effective strategic plan and successfully implemented the plan with the use of good leadership approach. Recommended Ways on How Managers could Improve their Leadership Skills There are many ways on how managers can effectively improve their leadership skill. Since each type of leadership approach has its own strength and weaknesses, managers should be able to combine the existing leadership style based on what could possibly work for a given situation. There is simply no ground or rules in choosing the best leadership style since a type of leadership approach that works for a manager may not work the same for others. Either the application of a transformational leadership style or authentic leadership style can work effectively in a business organization. Basically, the effectiveness of using transformational and authentic leadership styles could contribute to the increase in the managers and employees’ morale. With the use of either one of these two leadership styles, it is possible for the manager to easily create a peaceful working environment. Since employees with high morale tend to be more loyal and active at work, managers will be able to enhance the overall business performance of a business organization. Transformational leaders are the ones that do not practice positional authority. Therefore, it is easier for managers to win the respect and support of employees. Because of the managers’ flexibility when dealing with organizational changes, employees managed by transformational business leaders could easily adapt with the implementation of a new business strategic plan. However, excessive use of transformational leadership style is not always applicable to all business situations such as those that require a strict authority when managing a group of employees. Authentic leaders are able to recognize and value the personality, purpose, and potential of each individual. For this reason, authentic leaders are able to communicate their recognition in such a way that employees would feel valued and respected as a unique individual and a special part of the team. Authentic leaders are also known for their ability to inspire, motivate, and encourage employees to grow intellectually. Since authentic leadership style enables other people to go through the process of self-reflection and self-awareness, employees will be able to learn to express themselves and inspires other people along the process (Covey 2004). Similar to the application of transformational leadership style, the practice of pure authentic leadership may not be able effective in controlling all the employees within the business or other organization. There is always the possibility that other type of leadership would work better and more effective just like in the case of the military, army, or navy. In fact, the use of pure authoritative leadership style should be avoided since this style delimits the growth and full work potential of each employee. In most cases, the use of too much authentic leadership style could cause a business organization to lose most of its competitive and valuable employees to its competitors. Regardless of the type of leadership style, managers should practice and establish a two way communication in the work environment. In general, organizational miscommunication could lead to operational errors. Therefore, maintaining a two way communication within a business group is useful in terms of allowing the manager to minimize possible internal conflicts and prevent unforeseeable financial loss in the future. Conclusion There are a long list of similarities and differences between leaders and managers. A good leader, together with a good analytical skill can become a good manager whereas a manager should be a good leader to be an effective manager. Aside from the fact that managers need to have analytical skills, managers should also have a good leadership skill in order to get a good performance from his subordinates. The challenge of having an effective leadership skill among the managers is on the rise due to the tight competition that exists within the domestic and international markets. Managers should prevent organizational mismanagement and operational errors by establishing a two-way communication within the business group. In general, a good managerial leadership is important since it contributes to the success and profitability of the company. In line with this, it is the savings that will be derived from strengthening good leadership skills could result to increasing revenue generation for the company. There is no right or wrong when it comes to the proper way of choosing or strengthening the leadership skill of a manager. In general, different people have their own way of developing their own leadership style based on their own strength and weaknesses, personality, and beliefs. Since each leadership style has its own strong and weak points, managers should be able to combine the use of the available leadership approach depending on what the situation calls for. Resistance to change is the major cause of organizational change failure. Other than coming up with an effective and more efficient solution to a business problem, managers should convince the rest of the team members to participate and support a newly proposed strategic plan by using a good leadership approach. In the case of Starbucks, Schultz was able to successfully implement organizational change using transformational and collaborative leadership style. As a competitive leader, Schultz was able to effectively deal with all the internal conflicts that took place out of employees’ resistance to change. To increase the effectiveness of implementing organizational change, planning has to be systematic. Aside from guiding Starbuck’s employees with the new plan, Schultz was able to successfully implement the plan when he decided to develop a strong corporate vision and mission statement which served as a foundation for the development of a new organizational culture that is open to change. Starbucks’ management’s decision to align its organizational vision and mission with the organizational structure also contributed to the increase in the success rate of implementing organizational change. *** End *** References Bambacas, M., and Patrickson, M. (2008). Interpersonal communication skills that enhance organisational commitment. Journal of Communication Management , Vol. 12, No. 1, pp. 51 - 72. Barling, J., Slater, F., and Kelloway, E. (2000). Transformational leadership and emotional intelligence: an exploratory study. Leadership and Organizational Development Journal , Vol. 21, No. 3, pp. 157 - 161.. Bass, B. (1985). 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