Why Classical Management Theories Fail In The Present World - Case Study Example

Leadership Introduction The organisations over the last 100 years have earned unprecedented productivity gains that have led to the wealth creation of the present business world. A large portion of such gains are attributed to the management ideals of Frederick Winslow Taylor who supported the idea of an hierarchical system at the office where the employees are only asked to follow orders regardless of whether they consider it right or wrong. However the modern workplace has undergone a sea change in the last few decades. Globalisation and rapid technological innovations have made the businesses interconnected and interdependent. Business firms are constantly seeking out innovative solutions to the constantly changing as well as challenging economic environment and that would help the firms increase their productivity. In the present changed scenario it is neither feasible nor acceptable for leaders to have a top down approach. It is also known as a command and control style leadership which is being reconsidered in the present scenario. Collaborative leaders are more respected and valued in the present world as they take into consideration the opinions and feelings of the team members. After analysing the different opinions of the members, the leader takes a final decision. Brainstorming sessions, occasional team meetings are an important part of such a form of leadership. Slow evolution of the top down management style to a more collaborative effort is able to empower the employees with a better and respectful stance in the decision making procedure and also successfully blurs the lines between the leader and the employee thereby creating a more amicable environment at work (Gentry, Mondore and Cox, 2007). Command and Control leadership This kind of leadership is based on establishing and maintaining power over the employees, and also to gain control of organizational processes. On the surface, this theory sounds good as the traditional leadership concepts are based on the idea of having control and authority and be able to delegate. However the reach of this kind of a leadership is limited and does not create a healthy atmosphere at office. There are a number of wrong assumptions that for the basis of such a leadership theory and therefore it is flawed to the core. The assumptions are as follows. 1. The leaders or the managers know best 2. The leaders are supposed to know what is in the best interest of the company and accordingly set the goals. Hence the course of action is predetermined by the leaders and the employees have to abide by the rules thus set. 3. A prerequisite for the plan to be successful is to allow minimal deviations from the pre-determined plan and therefore this type of leader4ship allows for least consideration for human behaviour and the wants and the needs of the employees. 4. The market place or the business environment is not a dynamic one and is not subject to changes. However in case if there is a massive change, the leaders should be able to deal with that issue at any cost. In such situations it is generally found that the leaders exercise excessive control over the employees and treat them as the leaders want. 5. The leaders should be able to delegate tasks and also have the ability to deal with any negative change in the market environment. Therefore the leader should have excellent problem solving skills that would help them formulate strategies in times of need (Waugh and Streib, 2006). 6. It is assumed that the employees are inherently lazy and would try to avoid work at the first opportunity. The interests of the company are not of any concern to the employees and they do not care about the profits earned by the organisation. Hence it is the duty of the leader to be able to make the employees work and “help” them stay in the right path by commanding and controlling them. Therefore it is the duty of the leaders to force cooperation from the employees. 7. It is believed that the need to alter a preset plan is to the discredit of the leader since that denotes the inability of the leader to make full-proof plans by making provisions for the future and deal with contingencies (Jameson, 2006). Even though few of these assumptions are true yet the application of the same is faulty and hence the classical leadership model fails to yield results in the present global scenario. The authoritative leaders are goal oriented and are less concerned about the welfare of the employees. Hence the relationship between the leaders and the employees is not based on trust and mutual respect and therefore there is no room for operational efficiency. The work place environment also gets deteriorated by such leadership style. More often than not the market conditions change and there are variations in the demand and supply of goods. Such market variations require transformation process (Scribner, et al., 2007; Blase and Blase, 2000). Reasons why Classical Management theories fail in the present world Firstly the business world is becoming exponentially complex and fast paced. The risk factors are higher as are the stakes to lose in case strategies fail. Some examples of the intensity of such factors are illustrated below. The standard size of a Fortune 500 company is presently almost three times larger than it was before in the 19890s. The revenues of such companies have also increased over the time. Previously the average time to develop a new car model was around 60 months. The average time span has presently fallen from 60 to 19 months. The value of the Mergers & Acquisitions in the US has shot up from $44 billion in the 1980 to $1425 billion in the 1999 (Graetz, 2000). Hence it is almost impossible for a large firm to maintain direct control over such a large domain. Secondly this present era demand intellectual capital more than physical capital. Hence value creation is dominated by the innovation of new technologies. A factory which is a physical capital lends itself to central control and corporate ownership. On the contrary intellectual capital is subject to more of a distributional control. Capital is generated and owned at individual levels. Thirdly the revolutions of the complexity theories have successfully demonstrated that the large corporations are more ably run if the culture of the organisation is in tune with the mission and goals of the same. There is a natural development of adaptive self organisation that is more robust and developed than a central mode of control. Running the company under a strict regime is detrimental to the same in the long run. There are enough theoretical and empirical researches that support this above mentioned management theory (Yang, 2007). Fourthly there has been a significant growth in the shareholder value and it has shifted from cost reduction to top-line growth in the US. Such a shift has had major implications on the role of top management in the creation if shareholder value. Cost reduction also was previously done by way of exercising central control. Budget allocations were reduced and factories were shut down. But in case of a vertical integration it is not possible for a company in the present scenario as cost reductions also includes maintain favourable relationships with the suppliers as well as the customers. With the fast changing business environment the organisations also have to adapt quickly to the changes. Such dictator leadership models might have been useful in an era when there was less marketplace fluidity and the size of the corporations were small and employees had lesser options and were trained to follow orders. But in the present world, management leaders are clamouring for a favourable position with the employees such that they can exercise more control in an amicable manner and make the employees feel a part of the organisation (Bass, 1991; Gronn, 2008). The command and control leadership can be summarised as follows 1. Unrealistic expectations 2. Demanding standards 3. Even though there is an open door policy, the manager has a closed mind 4. Low rate of feedback acceptance 5. Rarely accepts others’ ideas 6. Micro-manager, too little trust and too much accountability 7. Feedback from managers mostly/always critical 8. Low levels of praise and rewards 9. The overbearing nature of the boss always gives the impression that efforts/results of the employees are “never good enough” 10. Standards for measuring performance or behaviour are inconsistent 11. Defensive when challenged 12. Mistakes of the employees not tolerated 13. Reacts harshly to bad news 14. Places blame vs. solution focused 15. Communication style implying the body language and tone are often inappropriate and bordering on offensive Collaborative Leaders Such leaders take laissez-faire and hands off approach. They allow for an unstructured work environment where the employees are supposed to figure out their own problems and set targets. Such leaders follow an open door policy and do not conduct frequent quality checks on the employees. The employees have a right to opine and take part in the decision making process. Group meetings and brainstorming sessions are conducted before a strategy or a policy is decided upon. Therefore the leader has a respect for the members’ opinion and preferences with regard to implementation of the policies (Yukl and Van Fleet, 1992). Such a work environment also helps the employees feel more closely about the organisation as they are an active part of the core decisions that are being taken. Personal relationships are built with the boss or the leaders. Such a leadership style is useful when there is a team where the members are from different cultural backgrounds. In such situations a clash of cultures is inevitable and the problems can be offset by able and collaborative leadership. The leaders have a level of respect for each member’s cultures and hence it is feasible for the organisation to have an amicable work environment. There is trust among the team members and a sense of teamwork is incorporated as part of the team building procedure. A people-centric approach requires relinquishing control to the other team members and having the trust on the employees that they would not abuse that responsibility. It is not an easy task for most leaders and it requires someone who is immensely confident and comfortable in his or her role and has the ability to trust his or her employees enough to believe that they can pull it off. In times of stress it is normal human tendency to narrow down the field of vision and tolerance and revert back to the controlling behaviours (Ferris, et al., 2007; Ford, 2006). Maintaining control over the subordinates makes the leader feel safe and there is scope for lesser risks, hence for a leader to be a collaborative one it is imperative that he or she be calm and composed during times of difficulty. Even though it is a much better approach of leadership, however such a leadership style has its drawback as well which are listed below. 1. Unclear standards 2. People pleaser 3. Unclear expectations 4. Cutting too much slack leads to inefficiencies and hence the open door policy might work against the leader 5. Gives lip service to other’s ideas 6. Too much trust and hence there is not enough accountability 7. Demands improvement but appropriate accountability is not enforced, thereby the feedback and the development systems are not suitably formed. 8. Some leaders are deceptively collaborative implying that they would ask for other’s ideas and opinions and on the surface try to be inclusive. However they end up taking their own decisions by completely disregarding other’s opinions. 9. Such leaders sometimes play favourites and implements different rules for different people. Personal relationships are given more importance over performance and rewards given without proper justification 10. There is a lack of addressing system in the workplace and the leaders do not care much about office decorum. 11. The “let things go” attitude is often detrimental to the organisation and reflects on the revenues of the same (Everton, et al., 2007). Therefore too much of both the above mentioned leadership styles is not favourable for the organisation and a leader should know how to strike a balance between both the styles. The leaders thus have to know the perfect balance between being too overbearing and cutting too much slack. According to Forsyth and Polzer-Debruyne (2007) there are four skills that a leader has to possess in order to effectively resolve problems and disagreements: Recognition: It is important to recognise the areas of differences in understanding and to identify the loopholes in the process such that common grounds can be identified that would help resolve the issues. It is very difficult for a leader to let go of his or her ego and accept the faults. But it is imperative that he or she does that for long term benefits. It also sets a good example to the subordinates. Initiation: A leader should have the ability to be able to bring issues to the surface, even in situations where the fault lies with the leader himself. Moreover a leader should also be able to take initiative during a new venture. Every new venture has its pros and cons and it is imperative that the waters are tested before the headlong plunge. However in order to make the plunge, proper initiative is required from the leader. Listening: The mark of a good leader is to patiently listen to the opinions of the team members and take into consideration their inputs. Such a quality is also helpful in times when there is a confrontation between two parties and the leader has to take an unbiased stance. Listening to the grievances of both the parties in an unbiased manner as well as analysing the emotional aspects of the members is extremely important to resolving issues. Problem Solving: The last process is extremely important and should be inherent to every good leader as it entails data gathering, analysing the collected data. After detailed analysis there should be a plan chalked out and the alternatives considered to develop and implement the final plan of action. Creating Value with the Employees instead of Exercising Unnecessary Control Studies have revealed that hierarchical structures are not well-suited to dynamic and evolving environments. Decisions must be made and strategies developed by the team to solve the problems. Therefore building trust at all levels is extremely important and there should be a similar amount of respect in both vertical and downward communication. Therefore in such situations that demand fast devising and implementation of plans, leadership is less about directed structured approaches and more about seeking predictable outcomes to those problems and also empowers team members to take good decisions timely. A study by the Center for Creative Leadership was conducted in 2007 that took into account 389 mid-to-upper level managers. The study revealed that 84 per cent of the managers who participated in the survey believe that the definition of effective leadership has changed. There are over 60 per cent leaders who have to face challenges in the daily conducting of business that is beyond their capabilities. Therefore the leadership skills require collaboration, innovation, mending and building relationships, collaborating across boundaries and developing a participatory environment at office (Dunford, et al., 2007). Co-creation implies working as a team to create value. Operating as a team aligned across functional and hierarchical boundaries is effective and creates more value. A collaborative leader who operates in a co-creative style views the employees as strategic partners and not just subordinates. Therefore the employees are provided with the marketplace information regarding the changes that are required for the betterment. The problems are discussed with the employees and their inputs are taken into consideration regarding the direction of change and the possible outcomes. There is also enough involvement of the employees in the designing the strategies needed for the change. The employees can be divided according to their capabilities into different teams such as communication team, design team and the change leadership team. Such divisions in work would help the organisation function better. The employees are more related to the actual projects as they are the ones that execute those. Hence while taking decisions it is important that their views are taken into account (de Onzono and Carmona, 2007). Therefore the employees are entrusted with enough authority to devise strategies pertaining to their respective fields. However along with delegating authority to the employees, they should also be provided with a proper structure and a process should be created that would enable them to report to the authorities and discuss the issues that are pertinent to the successful implementation of the plan. Co-creating regards the actual change process and does not try to stamp out the negative outside influences that the plans did not have provision for. Instead it is about including those changes and incorporating them in the original plan such that a new plan can be made that has provisions for contingencies. A command and control leader would try to eradicate the outside influences such that the original plans made by him can be implemented. As against such a rigid approach, the co-creative leader would prefer to listen to the problems and try to uncover any underlying issues that might be inherent to the plan and would accordingly take remedial measures. The leader generally assumes that such disruptions would occur in future and is thus more prepared than a command and control leader in such situations (Davis, 2007; Denning, 2008) Therefore according to such a leader disruptions in the process are actually considered as boons because it would reveal the inefficiencies in the plans and changes could be made such that the plan achieves best results and maximise revenues in the long run. The command and control leaders often fail to accept the faults and determinedly implement the wrong plans that ultimately doom the project and brings about huge losses in revenues. Therefore in the present world of business characterised by cut-throat competition, where there is little scope for mistakes, co-creating solutions to problems is extremely important and indispensible (Golden and Veiga, 2000). A study by the Center for Creative Leadership has identified the following ten skills as most important for the future. The study was conducted over 2200 leaders from 15 organizations in India, the U.S and Singapore. The graphical representation of the study is given below. (Source: Center for Creative Leadership, 2009) Types of management models (Source: Booz. Allen and Hamilton, 2000) Model 1: the firms engage in such a model believe that value is created by way of choosing the right company to invest in and also delegating the correct duties and tasks to the correct people. Making the correct choices would help the company make the right choice in the future and enforce a rigorous, disciplined and accountable model. Here is no central committee and Human resource (HR) managements and the key businesses operate independent of each other. It is not a very popular model as there is little value in being a part of a holding company and the returns are less. The management of the holding companies are also not proper as the leaders do not have enough authority. Model 2: Companies like General Electric make use of this model as it creates value in two points: by the operating companies that are close to the consumers and also by the corporations that links the operating companies. The corporate core helps decide the corporation’s strategies, decide policies and identify ways that would create value for the corporations by creating new avenues and businesses. This is generally a profitable model for companies that are engaged in diversified activities. Model 3: The companies like NationsBank engage it this type of models and has a strategic shift in the company philosophies as it is believed that value would be created by active participation of the head office staff in the strategic business units and if they take an active part in the decision making procedure. The Corporate Core acts as a consultant or overseer of the strategic business units and begins to expand in such companies and the delegation of the line managers are less. Individual risks are high and the lines between the individual businesses get blurred Model 4: Companies like Emerson Electric Company use this model and believe that value is created by the active participation of the head office. Such models are implemented in simple and single line businesses that are under regulatory control. The active involvement of the businesses leads to a large head office. This type of a model enables employee participation and has a lesser degree of autonomy. The managers are not of the control and command type and are more tolerant towards the team members’ opinions (Crossan, Vera and Nanjad, 2008; Handin and Steinwedel, 2006). Effective Leadership models There are a number of leadership models that are effective in bringing about a success and higher revenues and at the same time create a healthy atmosphere at work. Charismatic/Transformational Leadership Such leaders have a clear vision of the goals and a passion for the work thereby delivering high levels of performance. Such leaders are effective in generating a zeal for the work even in the employees and raise their aspirations. Studies have revealed that charismatic leadership is related to leadership effectiveness and a number of other important organizational outcomes across the different levels of the firm and the different types of situations and cultures (DAbate and Eddy, 2007). Authentic Leadership It focuses on the genuineness of the leader and checks whether the leader is acting in accordance with the true self. Four factors that form part of authentic leadership are balanced processing, implying objectively analysing the data, internalised moral perspective, which is being guided by moral standards, relational transparency and self awareness. The leader should be able to openly share information and the true feelings regarding fellow colleagues. Moreover the leader should know his or her unique strengths and weaknesses and be fearless to share that with the team. Shared Leadership Under such a leadership, it is more about relationships among individuals than the leadership of a single person. There is thus a serial emergence of official and unofficial leaders. Since there is a shared purpose in this type of leadership style, the team members are supportive of each other and help in times of need (Haas Edersheim and Wynett, 2008). E-Leadership Such a leadership model involves managing people from different backgrounds, departments, countries and organisations. Sometimes it also involves people working in virtual teams working across time lines, zones and cultural barriers. Virtual teams often face greater challenges such as differing priorities, lack of face-to-face interaction that would help build relationships and also a lack of cohesion and trust. Therefore the team leaders have to have the ability to make the members work with each other in an amicable manner, agree on goals and targets of the company, clarify the roles of each members and the expectations from them. Moreover the leader needs to conduct video conferencing among the members so that a level of interaction is developed such that they learn to trust each other. The leader should also be able to monitor their progress effectively and encourage effective and transparent communications (Guglielmino and Guglielmino, 2008). Conclusion Therefore from the above theories it can be safely concluded that in the modern world with rapidly changing structures, an effective leader should possess the qualities of having strong people skills as well as strong analytical skills. Both individuals and organisations are to be viewed holistically and dynamically. Along with personal involvement and commitment, it also requires the leader to be trustworthy. When the members of a team can place their trust on the leader, only then can the team develop trust among themselves and help each other in times of need. The leaders should also be able to delegate responsibilities to the employees and devise methods to verify performance standards of the team. Inspiring and motivating other members of the team should be inherent to the leader as well as good communication skills as the lack of the same leads to miscommunications and negativity in the team. Hence the leaders need to lead by example and be role models to the team. Reference List Bass, B. M., 1991. From transactional to transformational leadership: Learning to share the vision. Organizational dynamics, 18(3), pp. 19-31. Blase, J., and Blase, J., 2000. 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