Merged

Leadership and Change Management
Block
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THE MYSTIQUE OF LEADERSHIP
UNIT 1
I
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Understanding Leadership 1-26
UNIT 2
Leadership Styles 27-43
UNIT 3
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Leadership Skills and Tactics 44-69
UNIT 4
The Making of a Leader 70-81
Expert Committee
Dr. J. Mahender Reddy Dr. M Raja
Vice Chancellor Vice Chancellor
IFHE (Deemed to be University) IU, Sikkim
Hyderabad
Prof. Y. K. Bhushan Dr. O. P. Gupta
IU, Meghalaya IU, Nagaland
Dr. G P Srivastava Prof. D. S. Rao
Vice Chancellor Director, IBS, Hyderabad
IU, Dehradun IFHE (Deemed to be University)
Hyderabad
Course Preparation Team
Prof. Vivek Gupta Ms. Hadiya Faheem
IFHE (Deemed to be University) IFHE (Deemed to be University)
Hyderabad Hyderabad
Prof. Debapratim Purkyastha
I Ms. Pushpanjali Mikkilineni

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Hyderabad Hyderabad
Prof. Tarak Nath Shah Mr. Mrinmoy Bhattacharjee

IU, Dehradun IU, Mizoram
Mr. Manoj Kumar De Ms. Ch Syamala Devi

IU, Tripura IU, Meghalaya
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Course Introduction
Leadership is often considered a mysterious quality, often linked with charisma and
other exotic personality traits. It is considered more inspiring than management.
However, such assumptions have no place in a study of leadership and management of
businesses. Leadership and management are essential, distinctive, and complementary
systems of action. If they fail to complement one another in practice, the result is
chaos or stagnation.
A majority of tod -managed and under-led. They are lacking

in leadership. Well-led organizations do not wait for leaders to emerge on their own,
but actively seek out people with leadership potential and groom them into leaders,
while exposing them deliberately to varied work experiences. The leadership process
can be institutionalized with careful selection, nurturing, and encouragement. Leaders
have to be groomed, and leadership has to be institutionalized.
Organizations grow by expanding into new competitive spaces, attaining a complex
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mix of financial, material and knowledge assets, expanding market scope, and
replicating and standardizing their wins in similar market spaces. Competitive spaces
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undergo change, new technologies emerge, and customers change. However,
companies sometimes fail to change and make the most of new opportunities. Instead,
they choose the more convenient and less risky option of trying to get the best out of
the old opportunities.
Any newly espoused strategy, however explicit and sensible, inevitably comes up
against an implicitly enacted strategy supported by all the aged, compounded steering
mechanisms that the company already has in place. This is largely because people fear
uncertainty. They fear that if they embrace change, their current status maybe
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adversely affected. Defensive mechanisms stop an organization from adapting to

change. Overcoming this resistance to change is one of the greatest challenges facing
leaders today.
Leadership and Change Management, deals with the theories of leadership and
highlights its significance in the cut-throat competitive business world. It captures the
essence of the growing need for nurturing learning organizations and the path
traversed by the leader to develop organizations.
Block I
The Mystique of Leadership

The first block to the course on Leadership and Change Management deals with
understanding the concept of leadership, leadership styles, leadership skills, and how
leaders are developed. The block contains four units. The first unit discusses the
concept of leadership and several leadership theories. The second unit discusses
different leadership styles. The third unit deals with different leadership skills and
tactics. The fourth unit discusses how next generation leaders can be developed.
The first unit, Understanding Leadership, explains the basic differences between
leadership and management. It then discusses the various leadership theories. Finally,
it discusses attributes of effective leaders.
The second unit, Leadership Styles, discusses different leadership styles. It then
behavior developed by Tannenbaum and Schmidt. The unit finally discusses the
impact of leadership styles on the work atmosphere in the organization.
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The third unit, Leadership Skills and Tactics, discusses the classification of
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executives. It then explains the general methods of motivation. It then discusses the
skills possessed by leaders to resolve conflicts in an organization. The unit concludes
with a discussion on the tactics adopted by the leaders to deal with their subordinates
and superiors.
The fourth unit, Making of a Leader, discusses how leaders are made. It then explains
the components of developing leaders. The unit finally discusses the steps that link
leadership development to organizational goals.
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Unit 1
Understanding Leadership
Structure
1. Introduction
2. Objectives
3. The Difference between Leadership and Management
4. Evolution of Leadership Theories
5. Attributes of Effective Leaders
6. Summary
7. Glossary
8. Self-Assessment Exercises
9. Suggested Reading/Reference Material
10. Answers to Check Your Progress Questions
1. Introduction
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In the 1970s and 1980s, IBM was a great organization, its name synonymous with
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technical and business excellence. Never before had an organization dominated a
major industry as IBM dominated the computer industry. But, by 1993, the company
was floundering. It reported a net loss of US$ 8.1 billion for the year the biggest
loss ever reported in business history. Some industry analysts were quick to write
IBM off as dead. However, eight years down the line, in 2001, the company reported a
net income of US$ 7.7 billion. During the period 1993-2001, its share price had
increased by nearly 800%.
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What were the factors behind this remarkable turnaround? Many people believe that
one important factor could have been the leadership provided by Louis V. Gerstner
Jr., the CEO of the company during the period.
Gerstner, who became the CEO of IBM on April 1, 1993 was able to spot the
emerging trends in the IT industry. He was among the few people who visualized that
networking could transform the way people worked. Under his leadership, IBM
positioned its server family strategically to meet the needs of new Enterprise Resource
Planning (ERP) and e-commerce applications. The company also changed its focus
from product-centric to customer-centric, to enable it to provide complete solutions to
its clients. Gerstner transformed the IBM from a company which primarily
manufactured mainframes to a company which offered complete solutions in
hardware, software, and other technologies. During his time at the company, he
demonstrated an exceptional ability to visualize the future and move into areas of
potential opportunity.
One major difference between the IBM of 1993 and the one after 1993 was the quality
of leadership. Continuing from this example of successful leadership in IBM, this
chapter unit at how leaders are different from managers, what attributes effective
leaders possess, and what personality theories say about leadership.
This unit will explain the basic differences between leadership and management. It
then discusses the various leadership theories. Finally, it discusses attributes of
effective leaders.
2. Objectives
By the end of this unit, students should be able to:
understand the differences between leadership and management.
discuss several leadership theories.
discuss several attributes of effective leaders.
3. The Difference Between Leadership and Management

According to Harvard Business School professor, John Kotter, leadership and
management are certainly different, but they are also essentially complementary. The
difference between the two is that a leader strives to promote change in an organization,
while a manager works to ensure stability. However, in a business world that is constantly
changing, one quality cannot be effective without the other. In such an environment,
organizations need both leaders and managers, if they are to survive and grow.
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The emergence of large organizations in the early twentieth century led to the
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development of many of the modern managerial practices and procedures. Without
proper management, these large and complex organizations would not have survived.
Thus management brings order and consistency into the activities performed by the
people in an organization.
On the other hand, to cope with change, leadership is required. Leadership gained in
importance in the late twentieth century as the business environment became highly
competitive and volatile. Small improvements in productivity no longer guaranteed
success. To thrive in this more competitive environment, new initiatives and
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innovative solutions to problems were required and organizations needed leaders to

embark on new initiatives.
The military provides a good example of the difference between management and
leadership. A peace-time army does not need inspiring leadership it can survive
comfortably with good administration and management. On the other hand, an army at
war needs capable leaders at every level of the hierarchy. There is no instance where
an army was managed effectively in war without strong leadership. Armies are led
during wars not merely managed.
Two different functions, namely, coping with complexity, and coping with change,
determine the range of the managerial and leadership activities. Both involve creating
networks of people, building relationships with them, and ensuring that a job is done
according to the set agenda. But the tasks are accomplished in different ways.
3.1 Leadership Provides a Direction for Change, while Management
Deals with Planning and Budgeting
As leadership is concerned with coping with change, its primary function is to bring in
organizational change that is consistent with changes in the environment. The leader
has to set the direction for that change. Setting the direction for change is different
from both short-term and long-term planning. Planning is a management process,
which is deductive in nature and aimed at producing orderly results. But planning
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does not give rise to substantial change. Setting direction, in contrast, is a leader-
driven process. It involves gathering a wide range of data, and looking for patterns,
relationships and linkages that can explain the ever-changing environment. Direction-
setting further involves creating a vision, and strategies in line with the vision. The
vision and strategies give a direction to the business, and to the technology and culture
it is going to adopt. A leader also sets the goals for the organization and articulates
ways to achieve these goals.
that rarely occurs to ordinary individuals. On the contrary, vision is the product of a
tough, exhausting process of gathering and analyzing information. Hence, people who
articulate visions are neither mystics nor magicians. Rather they are broad-based
strategic thinkers who are ready to take risks.
Visions and strategies are not always brilliant or highly innovative. In fact, a majority
of effective business visions are mundane in nature, and rely on ideas that are quite
well known. Scandinavian Airlines System (SAS) provides one example of such a
vision. When then CEO Jan Carizon set forth his vision of making SAS the
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anything that was not known to other players in the industry. Everyone in the industry
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knew that business travelers fly more often; pay higher fares; and offer the airline the
possibility of high margins, steady business, and significant growth. But no one
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thought of putting these ideas to use. Only SAS did, and it succeeded.
The success of a vision does not always depend on its originality; rather, it depends on
how well customers,
stockholders, employees and on how easily it can be converted into an effective
competitive strategy.
Overmanaged and under-led companies often make the mistake of considering long-
term planning as the cure for their lack of direction and inability to adapt to dynamic
environments. Long-term planning is a time-consuming process, and when
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business environment where unexpected events are a common occurrence, long-term

plans tend to become burdens. This is the reason why many successful organizations
now limit the time frame of their plans.
In a company without proper direction, planning is likely to be a waste of time and
energy. In the absence of a vision or strategy to guide planning actions, the company
will have no alternative but to prepare plans for every eventuality. Thus planning and
contingency planning go on infinitely, draining organizational resources and diverting
Planning is effective only when it is used to complement direction-setting. An

appropriate planning process can be a useful checkpoint for direction-setting. So too,
proper direction-setting can provide a much-needed focus for planning activity. Proper
direction-setting helps to differentiate between relevant and irrelevant planning.
3.2 Leadership Deals with Aligning People, while Management Deals
with Organizing and Staffing
In modern organizations, employees are interdependent. They are linked to each other
by their work, technology, hierarchy, and management systems. These linkages
sometimes work against the process of change in an organization. Unless all the
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people involved move together in the same direction, desired changes will not take
place. It is the leader who must provide this sense of direction to the people in his
organization.
In order to implement their plans, managers organize their subordinates into human
systems. This organizing helps to bring efficiency and precision into the
implementation process, and involves several complex decisions choosing the
structure of jobs and reporting relationships, staffing the unit with the right
individuals, training them, communicating the plans to the workforce, identifying
people to whom authority can be delegated, delegating appropriate levels of authority,
designing economic incentives to accomplish the plan, and creating systems that help
monitor the implementation. Decisions taken in the context of organizing are similar
to architectural decisions. Managers have to be careful about how to fit a decision in a
particular context. Thus design is the prime consideration in organizing.
Aligning is different; more than design, communication matters in aligning. In
organizing, a manager communicates only to his subordinates, whereas aligning
usually involves communicating to a larger number of people. When a manager
attempts to align the organization, the target population includes individuals at every
level of the hierarchy from his bosses, peers, staff in other parts of the organization,
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suppliers, government officials, and even customers. Every person who plays a role in
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implementing the vision or strategies or who can obstruct the implementation has to
be taken into consideration.
Communicating a vision of an alternative future is a challenging task and requires
different skills from those required for organizing people to achieve short-term goals.
The difference between organizing and aligning can be compared to the difference
between the captain of a cricket team describing to his team the game plan for the next
two or three games, and his explaining a new approach to the game to be followed for
the entire season.
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Even when people comprehend a lead

accept it and follow him. Understanding the vision is not the same as accepting, or
sharing the vision. Hence, the leader has to build credibility i.e. he must make people
depends upon his past performance, the context in
which the message is delivered, his reputation for integrity and trustworthiness, and
consistency between his words and deeds.
Aligning also leads to empowerment, which is not always possible in organizing.
Organizations often fail to adjust to change because most people in the organization
are not empowered. Employees learn, often through painful experience, that their
views and perceptions on changes within or outside the organization are usually
ignored by their senior managers.
Alignment helps empower people in two ways:
Communicating a clear sense of direction at all levels of the organization
encourages lower-level employees to take initiatives without feeling vulnerable.
Once the direction is clearly communicated, a supervisor cannot legitimately
reprimand his subordinates for taking steps to move in the desired direction.
As every stakeholder is aiming at the same target, there is less chance of conflict
between the initiatives of different stakeholders.
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3.3 Leadership Motivates People, while Management Controls and Solves

Problems
As change is one of the functions of leadership, it is important for leaders to energize
the participants in the change process, so as to enable them to cope with the obstacles
to change. Motivation provides people the energy required to overcome obstacles.
Managers use control mechanisms to compare actual performance with the planned
performance, and take corrective action to address deviations, if any. For example, in
a well-managed factory, the quality targets will be set during the planning process.
This will be followed by the process of organizing the set-up through which these
targets can be achieved. Subsequently, the control process ensures that lapses in
quality are identified immediately and corrected. While control is central to
management, highly motivated behavior is not. Managerial processes are expected to
-safe and risk-
dependent on depend on factors or capabilities that are unusual or hard to obtain. Thus
managerial systems and structures are meant to ensure that normal people can
complete routine jobs successfully by following the normal routes. Highly motivated
or inspired behavior is hardly necessary in this system.
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On the other hand, leadership necessarily involves motivating people because
realizing a grand vision needs a high level of commitment and energy. And only a
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high level of motivation can ensure these.
A leader can motivate his people by satisfying their human needs: the need for
achievement, a sense of belonging, recognition, self-esteem, a feeling of control over
Example: Steve Jobs Leadership at Apple

Steve Jobs (Jobs) is the CEO of Apple Computers Inc. (Apple). The employees of
Apple regard Jobs as a source of motivation and inspiration. Jobs emphasized
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constancy of aim and effort. An example of this was the leadership he provided to
the team that developed the Macintosh Computer. The team was motivated to
pursue their dream through grueling hours of work and against formidable odds. A
early 1980s was traumatic, joyful, grueling, lunatic, rewarding and ultimately the
Jobs was reportedly an enigma to most of his colleagues and business

acquaintances. He could be very sweet and seductive when wooing prospective
employees or when finalizing deals with business partners. He would praise and
inspire his employees in many creative and imaginative ways. But, at times, he
would also intimidate, berate, goad, belittle, and even humiliate them. Many
mstances.
he hurt, as long as he pushed them to work better.
and approval; and when he suddenly withheld it, they put in extra effort at work
to win it back. Louise Kehoe, a Financial Times reporter who had covered Jobs
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It seemed to be unclear whether this unusual people
harder, or a matter of instinct. Conscious or instinctive, it seemed to have worked.

Jobs was able to get his employees so motivated that they worked maniacally to
achieve goals and develop technologies far beyond what they thought was possible.
Compiled from various sources.
vision in terms of their own sense of self-worth and the values they consider
important. When this is done, work becomes a means of self-expression, and deeply
important to the people involved. An effective leader gets the people he works with
involved in taking decisions on h
involvement gives them a sense of control. He can also motivate them by encouraging
and supporting their efforts in realizing the organizational vision by coaching and
mentoring them, through feedback on their work, and through role-modeling. These
approaches help people grow professionally and enhance their self-esteem, while also
motivating them. Finally, the effective leader recognizes and rewards success to
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part of an organization that takes care of them, and this contributes to a higher level of
intrinsic motivation.
When the business environment is characterized by rapid change, stronger motivation

is required in the organization, and the leader should work on raising and keeping
motivation levels high. Many people in the organization are also required to assume
leadership responsibilities. When more people begin to act as leaders, leadership gets
spread across the whole organization. When employees assume leadership roles at
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even in a complex business. However, there is a danger that with diffused leadership,
organizational conflict may increase. Hence, a mechanism for coordination of actions
is required.
While formal structures are normally used to coordinate managerial activities, strong
networks of informal relationships are needed to effectively coordinate leadership
activities and roles. Informal networks are often more effective in dealing with the
kind of coordination required for non-routine activities and change. Such networks are
based on trust, so accommodation and adaptation are easier. When there are conflicts
between individuals, non-rule-based dialogue and mutual accommodation can lead to
creation of compatible visions.
Though most organizations have informal networks of some sort or the other, these
networks are often weak (some people are well connected while others are not) and
fragmented (strong networks exist within departments but not across departments).
For example, there may be strong networks within the production department and the
R&D department, but not across the two departments. Networks across departments
are desirable for supporting multiple leadership roles. Organizations should create or
strengthen informal networks by creating an environment that promotes employee
interaction. All major leadership initiatives should percolate through the networks.
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Check Your Progress

1. A vision is a product of
a. a measurable, realistic objective that a individual intends to achieve
b. a tough, exhausting process of gathering and analyzing information
c. an easy thought that does not synthesize information
d. a mysterious insight that occurred to an individual
2. Which are the ways in which alignment helps empower people?

a. When communicating vision for an alternative future
b. When organizations do not change to adjust with people
c. When communicating with a clear sense of direction at all levels of the
organization and reducing conflict among stakeholders who aim at the same
target
d. When superiors communicate only to few important employees
3.
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A leader motivates the people working with him/her by articulating the
organizati
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consider are important.
a. wealth
b. culture
c. motivation
d. self-worth
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4. Evolution of Leadership Theories

There are many theories that have attempted to pinpoint the characteristics of effective
leaders. Confusingly, not all these theories are in agreement with each other. There are
three important theories that attempt to explain leadership personality trait theories,
behavior theories, and contingency theories. According to trait theories, leaders possess
some personality traits that non-leaders do not possess at all, or possess only to a small
extent. The behavioral theories explain the behavioral characteristics of leaders.
Though both the trait and behavior theories attempted to explain leadership in simple
terms, they have been severely criticized for their unsupported and oversimplified
assumptions regarding the concept of leadership. Further research on leadership led to
the development of contingency theories. These theories tried to overcome the
inadequacies of the trait and behavior theories.
The three important theories of leadership are described below:
4.1 Trait Theories
Early research into leadership concentrated on the traits of leaders. It was believed
that there was something unique about an individual that enabled him to emerge as a
leader. Early researchers studied the personality characteristics that made a person a
leader and concluded that leaders are born, not made. For example, famous
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personalities in history like Alexander and Napoleon were natural leaders and would
have become leaders even if the situations they faced had been different. These trait
theories also suggested that leaders possess some personality traits that are unique and
essential for effective leadership.
There are some trait theories, however, which contradict this idea. One such trait
traits can be acquired with training and experience. They may not be inborn. Unlike
the ea
pragmatic approach to leadership because it stated that leaders might not be born with
the desired traits. The theory reflected the influence of behavioral psychologists, who
believed that leadership traits could be acquired through learning and experience.
Research has not thrown up any definite answers to whether there are universal traits
to be found in all leaders. The only trait that all leaders seemed to possess was above
average intelligence. Identifying the physical traits associated with leadership has
been given up as quite an irrational exercise. No links have been found between
physical traits such as height and strength, and leadership. Many followers are taller,
stronger and more intelligent than their leaders.
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Today, researchers look more for the combination of characteristics that leaders are
seen to possess. For instance, some researchers who have studied the emotional
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intelligence of leaders suggest that empathy, graciousness, optimism, and ability to
read non-verbal cues in a social situation are important characteristics of successful
leaders. Some general characteristics found in leaders are ambition, high levels of
energy, desire to lead, honesty, integrity, self-confidence, intelligence, and job-
relevant knowledge.
However, the trait approaches only provide descriptions of leaders; they have little
analytical or predictive value. Though some researchers still embrace the trait approach
to leadership, their emphasis has shifted from personality traits to job-related skills.
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4.2 Behavioral Theories

Since no clear relationship was established between the possession of certain traits
and effective leadership, researchers turned their attention to the study of the behavior
of successful leaders. They attempted to identify the kind of behavior that was unique
to leaders, and which distinguished them from non-leaders. Establishing a link
between behavior and leadership is also difficult, however, since there is a variety of
leadership styles, and certain types of behavior are not always associated with
leadership, and vice versa.
We look at four important behavioral theories the Ohio State Studies, the University
of Michigan Studies, the Managerial Grid, and the Scandinavian Studies that have
sought to identify the behavior of leaders. All the four studies sought to identify the
specific behaviors exhibited by effective leaders. These studies are briefly discussed
in the following section:
The Ohio State Studies
In 1945, researchers from different disciplines psychology, sociology, and

economics carried out some studies on leadership at Ohio State University. They
used a questionnaire specially developed for the purpose, called the Leader Behavior
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Description Questionnaire, to analyze the differences in the behavior of leaders across

various groups (e.g. supervisors on the shop floor, teachers, college administrators,
students, and Air Force commanders) and situations. They wanted to identify the
could be studied. Initially, they defined about a thousand dimensions, which were later
consolidated into two dimensions initiating structure and consideration.
Initiating Structure:
who score high on this dimension will put pressure on their subordinates to meet
deadlines and maintain certain standards of performance.
Consideration: This refers to the extent to which a leader cares for his
subordinates, respects their ideas and feelings and establishes work relations
which are characterized by mutual trust and respect. Individuals who score high
on this dimension are open and friendly with subordinates, help them solve both
personal and work-related problems, and treat all the subordinates as equals at the
workplace.
The studies revealed that people who scored high on both the dimensions initiating
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structure and consideration were able to achieve higher levels of performance as
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well as job satisfaction compared to those who scored low on either one, or both the
dimensions. Leaders high on initiating structure but low on consideration faced
problems like high absenteeism, high turnover, and more employee grievances. On the
other hand, leaders high on consideration but low on initiating structure faced
problems such as poor performance and negative performance ratings and warnings
from their superiors.
high
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some exceptional situations in which this kind of leadership was not successful.
University of Michigan Studies
Research along lines similar to the Ohio State Studies was carried out at the Survey
Research Center at the University of Michigan during the same period. As a part of
this study, twelve high-low productivity pairs of sections were selected and kept under
observation at the Prudential Insurance Company. Each pair consisted of one high
producing section and another low producing section with all other factors such as
type of work, working conditions, and work methods remaining the same. During the
course of the study, the researchers interviewed 24 supervisors and more than 400
workers.
The findings of the study were similar to conclusions of the Ohio State Studies. Here
too, the researchers found that leadership behaviors could be categorized along two
dimensions: employee-oriented and production-oriented.
The employee-oriented dimension is the dimension which emphasizes inter-personal
relations. Leaders who score high on this dimension take a personal interest in their
observed that the more productive groups had employee-oriented supervisors.
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Leaders who score high on the production-oriented dimension are more concerned
with tasks and goals. They consider employees to be the means to achieve goals and
pay little or no attention to any problems the employees may face. For them,
employees are no different from machines. It was found that such a leadership style
resulted in lower motivation levels among employees and lower productivity. Groups
which exhibited low productivity tended to have production-oriented supervisors.
The researchers, therefore, concluded that employee-oriented leaders achieve higher
job satisfaction and higher group productivity. Production-oriented leaders achieve
lower job satisfaction and group productivity.
The Managerial Grid
Blake and Mouton developed a two-dimensional matrix model of leadership styles

based on their own research and the results of the earlier Ohio Studies and Michigan
Studies. The model consists of nine rows and columns. The rows represent the
eople.
With nine possible positions on each side, leaders can be located at any one of a total
of 81 positions on this grid. Blake and Mouton found five intersection points in this
model 1,9; 1,1; 9,1; 5,5; and 9,9. These intersection points are shown in Figure 1.1.
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People whose behavior falls into the 1,1 cell on the grid, follow the impoverished
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style of leadership, and exhibit low concern for people and for production. Hence,
they often fail as leaders. People who follow the 1,9 style of leadership have high
concern for people but low concern for production. This is referred to as the country
club style of leadership. People who exhibit the 9,1 style of leadership have high
concern for production and low concern for people. This is referred to as the
authoritarian style of leadership. People whose leadership style fall into the 9,9 cell
show high concern for both people and production. This position on the grid is
referred to as the team management style of leadership.
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Blake and Mouton suggested that managers who practice a 9,9 (team management)
style of leadership are more effective compared to the 9,1 (authoritarian) style, or the
1,9 (country club) style. Leaders whose behavior falls into the 5,5 style are also
considered to be fairly effective.
One criticism of this model is that it provides a framework for conceptualizing
leadership styles but fails to reveal any new facts or establish any new relationships
which could clarify the conflicting views on leadership.
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Figure 1.1
The Leadership Grid
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Note:
1,1 Impoverished Management: Exertion of minimum effort to get required work done is
enough to sustain organization membership.
1,9 Country Club Management: Thoughtful attention to needs of people for satisfying
relationships leads to a comfortable, friendly organization atmosphere and work
tempo.
9,1 Authority-Compliance: Efficiency in operations results from arranging conditions of
work in such a way that human elements interfere to a minimum degree.
9,9 Team Management: Work accomplishment is from committed people;
relationships of trust and respect.

5,5 Middle of the Road Management: Adequate organization performance is possible
through a balancing of the necessity to get out work with that of maintaining morale
at a satisfactory level.
Harvard Business Review, (November-December 1964) / James

A.F. Stoner, R. Edward Freeman and Daniel R. Gilbert,Jr., Management (New Delhi: Prentice-
Hall of India Private Limited, Seventeenth Indian Reprint, 1998) 478.
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Scandinavian Studies
The three behavioral theories discussed above were developed between 1945 and
1965. This was a period characterized by relative economic and business stability.
However, these theories are of limited value today, as they do not consider the
dynamic, or even chaotic, environments in which modern organizations operate.
Finnish and Swedish researchers revised the earlier studies in the context of modern
businesses. Their main purpose was to verify whether the existing two dimensions
could explain leadership fully or whether more dimensions needed to be added to
factor in th
On the basis of their research they decided to introduce a new dimension called
development-oriented behavior. According to the researchers, development-oriented
leaders experiment with new ideas and practices and embrace change. The Ohio State
elieve that
development-orientation is a significant aspect of effective leadership. The study also
found that subordinates consider development-oriented leaders to be more competent
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than non-development oriented leaders. The subordinates of development-oriented
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leaders also showed higher levels of job satisfaction.
The four theories discussed above attempted to explain leadership in terms of
behavior. They succeeded to some extent in identifying the relationships between the
behavior of leaders and the performance of their subordinates. However, these
theories did not take into account one important aspect of leadership, i.e., the
situational factors which have a great impact on the success or failure of leaders.
When the context or situation in which leadership is exhibited changes, leaders should
be capable of adapting their behaviors to meet the demands of the changed situation,
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in order to be effective.
Check Your Progress

4. Leaders scoring high on production-oriented dimension focus on achieving
a. Tasks and goals
b. Inter-personal relations
c. Job satisfaction of employees
d. Both people and production
5. Productivity is high under which of the following category of leadership

dimension?
a. Production-oriented leadership
b. Employee-oriented leadership
c. Two-dimensional matrix model of leadership
d. Level 5 Leadership
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4.3 Contingency Approaches to Leadership

Although the behavioral approaches state that a positive, participative, and considerate
style of leadership is the most effective, there is evidence that such a style may not be
successful in some situations. This implies that there is no one style of leadership that is
appropriate for all situations. Contingency theories of leadership postulate that leaders
have to change their style depending on the situation they face. The theories also suggest
that a leader should analyze the nature of the situation carefully before deciding on the
style of leadership to be adopted. Some contingency models are discussed below.
Contingency Model
One of the earliest models of contingency leadership was developed by Fred Fiedler
and his associates. Their model was an extension of some of the existing theories
relating to task and employee orientation. According to this model, leadership
requirements depend on the situation facing the leader; and the choice of the most
appropriate style of leadership depends on whether the overall situation is favorable or
unfavorable to the leader. The favorability or unfavorability of a particular situation to
a leader is analyzed on the basis of the following parameters:
Leader-member relationships
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This indicates the extent to which a leader is accepted by his subordinates. If there is
friction between the leader and a majority of his subordinates, then he scores low on
this dimension.
Figure 1.2
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Task-directed
Style of
leadership
Human relations-
directed
Very - Unfavorable Favorable + Very

unfavorable favorable
Favorableness of the Situation

Source: Fred Luthans, Organizational Behavior, 8th edition (India: Irwin McGraw-Hill, 1998) 388
Degree of task structure
This refers to the degree to which the task on hand can be performed efficiently by
following a particular method.
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This is the power or formal authority that is bestowed on the leader within the
organization. For instance, a leader has more power if he is in a position to decide the
rewards and incentives for his followers.
A situation is considered to be favorable to the leader if the scores on all the three
dimensions are high. Fiedler proposed that a task-oriented, tough leadership style is
most effective in highly favorable or highly unfavorable situations and a people-
oriented, more lenient leadership style is most appropriate in moderately favorable or
unfavorable situations.
operate in terms of people, task, and organization, and adapt their style of leadership
to suit the situation. If this is not possible, they must attempt to change the elements of
the job to suit their style.
Hersey and Situational Theory
-
and Blanchard, the maturity level of the subordinate plays a major role in influencing
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the leadership style of the superior. The ability of an employee to carry out a
particular task and the extent to which he is motivated to perform the task constitute
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the maturity of an individual. If the manager gives appropriate guidance to an
employee, the employee is likely to develop the necessary job-related abilities in a
short time. However, all employees will not have the same level of competence and
commitment to the assigned tasks. Therefore, leaders have to adopt different
leadership styles to deal with different subordinates.
According to Hersey and Blanchard, leadership styles can be categorized into four
types telling, selling, participating, and delegating which vary in the nature and
extent of guidance and support offered by the superior to his subordinate. The
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leadership style selected by an effective manager depends on the development level

of the employee. If an employee is low in his ability to perform as well as his
willingness to perform, the manager needs to adopt the telling style, i.e., he must
constantly give directions to the employee. If an employee is high in ability but low
in willingness to perform, the manager has to use the selling style of leadership. He
has to give directions as well as the required support to the employee to perform the
task. If an employee is capable of performing but not willing to perform the task,
the manager has to apply participating style of leadership. He has to give less
direction and more responsibilities but extend support to the employee in carrying
out his responsibilities. If an employee is capable, and is also willing to car ry out
the task, then the manager can simply delegate the tasks and responsibilities to the
employee. The employee does not need detailed instructions and extensive support
to accomplish the tasks.
The strength of the Hersey-Blanchard model lies in its simplicity and intuitive appeal.
undertake a specific task. This is an important contingency factor which was ignored
by earlier researchers. However, the model does not take into account several other
Therefore, it is not widely accepted among researchers.
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Leader-member Exchange Theory

Most of the traditional theories of leadership (although not the Hershey-Blanchard
model) assume that leaders treat all subordinates alike. But George Green & Mitchell
observed, in 1979, that leaders often act very differently towards different
subordinates. This observation led to the development of the Leader-Member
Exchange (LMX) theory of leadership.
According to the LMX theory, leaders establish a special relationship with a small
group of subordinates, usually early in their interaction. This usually happens because
time constraints make it difficult for the leader to interact with all the subordinates.
This small group of subordinates is referred to as the in-group, while the rest are
referred to as the out-group. The leaders trust the subordinates who belong to the in-
group, give them more attention, interact with them frequently and offer them special
privileges. The subordinates in the out-
attention. Also, the interactions between the leader and the out-group are less frequent
and are purely formal.
Although the theory does not explain the basis on which a leader chooses his in-group
members, research has indicated that generally, leaders favor the people who have
attitudes and personality characteristics that are similar to their own, and select such
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people as in-group members. The other factors that form the basis of selection into the
in-group include a higher level of competence (than out-group members) and
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extroversion. The LMX theory suggests that the in-group people receive high
performance ratings and thus obtain rewards and promotions quickly. As a result,
there is greater satisfaction with the leader and lower turnover among in-group
members when compared to out-group members. Further research in this area has
supported the LMX theory by proving that leaders do differentiate among
subordinates, not randomly but on the basis of their competence and performance.
Leadership-participation Model
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In 1973, Victor Vroom of Yale University and Philip Yetton of the Australian
Graduate School of Management conducted extensive research on leadership behavior
to establish the relationship between leadership behavior and style of decision making.
Leaders have to carry out different types of activities routine and non-routine.
Therefore, they have to adjust their behavior depending on the situation. The
leadership-participation model proposed by Vroom and Yetton is normative in that it
provides a sequential set of rules that can be followed for ascertaining the type and
amount of participation required in decision-making in different situations. Initially,
the model consisted of a decision tree with seven contingencies and five alternative
leadership styles. Later Vroom worked with another academician, Arthur Jago and
came up with a revised model. The new model had twelve contingencies instead of
seven as in the original model. The contingencies are also called problem attributes.
Problem Attributes
According to the model, the leader should assess a situation in terms of its problem
attributes. The twelve problem attributes can be broadly categorized into two classes
decision-quality and employee-acceptance. Decision-quality dimensions include cost
considerations, information availability, and nature of problem structure (structured or
unstructured). Employee-acceptance problems can have dimensions like the need for
commitment, congruence of employee goals with those of the organization, and
conflict among the employees. Other factors considered in the model are level of
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subordinate information, time constraints, geographical distance between
motivation to develop subordinates. Even complex and apparently unique problems

can be identified and categorized into known classes, if the problems are analyzed
using the above format.
Leadership Styles
Once the leader identifies the nature of the problem, he can adopt one of the following
five styles of leadership:
a. Autocratic I (A-I) Using the information available, the leader takes a decision
on his own.
b. Autocratic II (A-II) The leader obtains relevant information from
subordinates and then attempts to find the solution to the problem. However, he
does not reveal the problem or seek the advice of subordinates in finding a
solution or making a decision.
c. Consultive I (C-I) The leader explains the problem to concerned subordinates
individually and invites their ideas and suggestions to solve the problem.
However, he takes the final decision.
d.
I
Consultive II (C-II) The leader meets a group of subordinates, discusses the
problem with them and listens to their ideas and suggestions. Later, he may take
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suggestions.
e. Group II (G-II) After sharing the problem with the subordinates, the leader
initiates a group discussion on alternative solutions, and moderates the
discussion till the group reaches a consensus on the solution to be adopted. In
this case, the leader accepts the solution offered by his subordinates.
Activity: XYZ Furnitures Ltd. is a UK-based furniture company. The company is

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known for its innovative concepts of designing a home. The company is very
successful though it premiumly priced its products. Of late the company noticed
that many competitors were coming out with similar concepts. This led to a decline
in its sales. The manager of the company Adrian called its staff members for a
meeting. After discussing the problem with them, he asked his staff members to
suggest suitable ideas so that the company can regain its sales. The employees
suggested the manager to design concept stores where the furniture would be
displayed like in a home so that he consumers could feel how the furniture would
look in their home. The manager immediately took the idea and designed its stores.
This generated interests among consumers and also helped the company arrest the
decline in its sales. Identify the leadership style adopted by the manager. Also
discuss other leadership styles.
Answer:
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The leader-participation model is based on three important assumptions which may

not always be fulfilled. These are: 1) Leaders can classify problems precisely by
following the decision tree format; 2) Leaders have the willingness and the capability
to adapt their styles to suit the situation; and
classification of the situation and the changes in his leadership style from situation to
situation. If the above assumptions hold true, then the model is effective as a tool for
selecting a leadership style appropriate to the situation.
Path-goal Theory
The path-goal theory is a contingency model of leadership developed by Robert

House. It borrows some important elements from the Ohio State Studies and the
expectancy theory of motivation. According to the path-goal theory, the leader should
provide required support and guidance to his followers and help them achieve
organizational goals. He should also establish individual (or group) goals for
employees that are compatible with the broad organizational goals. Thus, the leader
defines the path to achieve goals; he also removes any obstructions that come in the
way of employees achieving these goals.
Further, according to the path-goal theory, the behavior of a leader is acceptable to
subordinates as long as:
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i. The subordinates find that the satisfaction of their needs (such as promotion and
rewards) depends on their effective performance, and
ii. They are provided with the guidance, support and rewards that are needed for
effective performance.
Under the path-goal theory, House suggested four types of leadership:
a. Directive leadership: The leader tells his subordinates clearly what is expected
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task. This is similar to the initiating structure defined in the Ohio State Studies.
b. Supportive leadership: The leader attempts to address the needs and problems
of his subordinates. This is similar to the consideration dimension identified in
the Ohio States Studies.
c. Participative leadership: The leader discusses problems with subordinates and
seeks their suggestions before making a decision.
d. Achievement-oriented leadership: The leader attempts to develop his
subordinates by giving them challenging tasks and higher responsibilities, and
encouraging them to perform at their best.
behavior, which does not change over time or with the situation, House assumes that a
leader behaves in a flexible manner. He suggests that a leader can exhibit any of the
above types of behaviors, based on the situation at hand.
The path-
variables environmental factors (like the formal authority system or the nature of
task), and personal characteristics of the subordinates (experience, capabilities and
locus of control). Job satisfaction and employee performance are likely to be
influenced positively when the leader compensates for what is lacking in the work-
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characteristics. For example, directive leadership, if used with highly capable or

highly experienced subordinates, may prove to be counter-productive and lead to
employee dissatisfaction.
Subsequent research in the area has provided empirical support for the path-goal
theory. However, the acceptance and applicability of the theory could be improved by
carrying out further research and incorporating more contingency variables.
Activity: ABC Media Ltd. is a US-based media company. The company was a
leader in the market. However the company noticed that several players were
copying its business model and the increasing competition had triggered many
clients to look out for cheaper options. The manager of the company, James
decided to revive the company and make up for its losses. He had a meeting with
his subordinates and decided to include several other tasks such as search engine
optimization, etc. This made the work even more challenging for the employees.
The manager motivated the employees to perform these challenging tasks and
achieved the desired results. Which path goal leadership style was adopted by
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James? Do you think this style would help the company regain its market
leadership position? Why (not)? Suggest and discuss other style that would help the
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company in this situation.
Answer:
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Check Your Progress

6. not the parameter to be
analyzed to assess the favorability or unfavorability of the situation?
a. Leader being accepted by the subordinates
b. Degree to which a task can be performed efficiently in a specific method
c. Assessing the maturity level of the subordinate
d. Power or formal authority bestowed on the leader by the organization
7. - Blanchard includes four types of

leadership styles. Identify which one of them is a part of this model.
a. Lenient leadership style
b. Autocratic leadership style
c. Laissez Faire leadership style
d. Participating leadership style
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8. For an employee _____________ but _____________ the manager uses selling

style of leadership.
a. high in ability; high in willingness to perform
b. low in ability; high in willingness to perform
c. high in ability; low in willingness to perform
d. low in ability; low in willingness to perform
9. What does LMX stand for?

a. Leader-Member Exchange
b. Lender-Money Extract
c. Leader-Mentor Exchange
d. Leader-Motivation Expert
10. An Autocratic II (A-II) leader is

a. One who obtains relevant information from subordinates and then attempts to
find a solution to the problem
b.
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One who makes a decision on his own without the involvement of the
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subordinates
c. One who shares the problem with the subordinates and seeks alternative solution
from them
d. None of the above
11. Which of the following is the contingency variable on which leadership behavior
depends on?
a. Job satisfaction
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b. Personal remuneration
c. Environmental factors
d. All of the above
5. Attributes of Effective Leaders

Effective leaders employ different ways to direct a team, a division, or a company.
Some maintain a low profile but are analytical; some are charismatic and intuitive.
There is no single leadership style that is effective in all situations. The effectiveness
of a leadership style is situation-specific. For example, mergers are more successful
when a sensitive negotiator is involved in the process, whereas turnarounds are
successful when a forceful personality is at the helm. But one thing that is common to
all effective leaders is that they have a high degree of emotional intelligence.
According to Goleman, emotional intelligence is indispensable for leadership. The
components of emotional intelligence are self-awareness, self-regulation, motivation,
emotional make-
objectives.
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Example: Southwest Airlines

In 1994, some 16,000 Southwest Airlines employees drafted a special Thanksgiving
note for their CEO and raised a sum of US$ 60,000 to publish a full-page
im for his
names. For supporting the Ronald McDonald House. For helping load baggage on
Thanksgiving. For giving everyone a kiss (and we mean everyone). For listening. For
running the only profitable major airline. For singing at our holiday party. For singing
only once a year. For letting us wear shorts and sneakers to work. For golfing at the
LUV Classic with only one club. For out-talking Sam Donaldson. For riding your
Harley D
5.1 Self-awareness
Leaders are said to possess self-awareness, when they have a deep understanding of
their emotions, strengths, weaknesses, needs, and drives. Leaders with strong self-
awareness are neither overly critical of their subordinates, nor unrealistically hopeful
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in their expectations. They are honest with themselves and with others.
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Leaders with high self-awareness understand how their feelings affect themselves and
others, and also their performance on the job. For example, when stiff deadlines tend
to bring out the worst in the leader, advance planning and anticipation can help reduce
the tension associated with the situation.
Highly self-aware leaders understand their values and goals clearly. They are sure of
what they are doing and where they are heading. For example, a self-aware leader
does not take decisions that result in financial gain at the cost of principles or long-
term goals. The decisions of highly self-aware leaders gel with their values. As a
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result, they often find work enjoyable and energizing.

Self-aware leaders are able to assess themselves realistically. They admit their
failures, are comfortable talking about their strengths and weaknesses, and appreciate
constructive criticism. They are self-confident and yet willing to take help when
necessary. They do not overstretch themselves on assignments but are eager to take
calculated risks.
5.2 Self-regulation
Self-regulation frees people from being prisoners of their own feelings. It helps them
control bad moods and emotional impulses, and even redirect them to achieve a
purpose.
Self-regulation is an important characteristic of effective leaders. Effective leaders can
control their feelings and impulses and create an environment of trust and fairness.
Such an environment facilitates focusing all energies on achieving the desired
objectives rather than on politics and infighting. Talented people prefer to join, and
stay on at, such organizations.
Self-regulation is important for other reasons as well. Change and ambiguity are
environment. Companies merge and demerge from time to time. Rapid

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transformations in the work environment take place with the introduction of new
technologies. In a constantly changing environment, employees are often disturbed in
their routines, and the external changes may cause internal turmoil too. Leaders who
have greater emotional stability are better placed to cope with changes in the work
environment.
According to Goleman, self-regulation enhances integrity, a personal virtue which is an
organizational strength as well. Most unethical incidents that occur in organizations arise
from impulsive behavior. In most cases, people do not plan to exaggerate results, or use
power for selfish purposes. However, when they come across an opportunity, they
surrender to their baser impulses as they lack self-control. Effective leaders are capable
of a high degree of self-regulation, and do not allow themselves to act on impulse.
5.3 Motivation
One attribute that is shared by all effective leaders is motivation. Effective leaders are
not motivated by external factors such as fat salaries. They are motivated by a
missionary zeal to achieve for the sake of achievement. They seek creative challenges,
have a passion for learning, and take pride in a job well done. They display
remarkable patience in improving on past performance. Effective leaders are highly
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energetic and are often restless. They question the existing ways of doing things, and
are intent on exploring new ways to work.
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5.4 Empathy
Empathy is the most visible trait of an effective leader. Empathy does not mean
along with other

factors in the process of making intelligent decisions.
Goleman gives the following example to illustrate empathy in action. After the merger
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of two brokerage firms there were going to be redundancies in all the divisions. When
the manager of one of the divisions addressed his group, he gave a gloomy speech that
focused mostly on the number of people who were going to be fired. In contrast, the
manager of another division was upfront about his worry and confusion. He promised
that he would keep his people informed no matter what decision was taken. He also
assured them that he would see to it that all of them got fair treatment.
The difference between these two leaders lies in their levels of empathy. The first leader
focused on the problem from his own point of view the problem for him was the
number of employees in the division. The second leader understood the feelings of the
employees and acknowledged their fears. The importance of empathy is more obvious
people left, whereas in the second division, the manager continued to be a strong leader.
The talented people stayed back, and the division continued to be productive.
Empathy is an important component of leadership today for the following reasons:
Increased use of teams: Reaching consensus in a team is always a challenge. It
becomes even
common even in groups of four or five members, for some members to form
alliances and set their own agendas. Thus, a team leader must understand such
behavior and appreciate the views of all the team members.
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Rapid pace of globalization: Cross-cultural dialogue can result in

misunderstandings. Empathy can bridge the gap between different cultures. Leaders
with empathy can read the body language behind the words spoken. They appreciate
the existence and importance of cultural and ethnic differences, and this helps them
communicate with individuals without allowing the differences to act as barriers.
Growing need to retain talent: Empathy can help in retaining talent in an
information-based economy. Leaders have always used empathy to retain good
people, but this has become even more important today. Coaching and mentoring
can decrease turnover, while raising performance levels and job satisfaction. The
most beneficial aspect of coaching and mentoring is the nature of relationship
itself. Empathetic leaders know how to give effective feedback, when to push for
better performance, and when to hold back criticism or praise.
5.5 Social Skills
Social skills are often assumed to be simply the ability to make friends. However,
social skills involve much more than that. In the context of business leadership, social
skills refer to a capacity for friendliness with a purpose, namely, moving people in the
desired direction.
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Socially skilled people have a wide circle of acquaintances. They are extremely good
at establishing common ground with all kinds of people. This ability helps them in
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building rapport quickly. They believe that nothing important gets done alone.
The characteristics of effective leaders complement and reinforce each other. As
mentioned earlier, effective leaders are good at self-regulation: they understand and
control their emotions. Their self-regulation helps them in building and managing
relationships. Their high level of motivation also helps them in displaying their
superior social skills. Motivated people are optimistic even when they face setbacks
and failures. They are upbeat in their conversations and social encounters. This too
helps them in building relationships.
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Socially skilled people are adept at managing teams. Their persuasive skills,
complemented by self-awareness, self-regulation, and empathy, make this possible.
They know when to make an emotional plea and when to appeal to reason.
Check Your Progress

12. According to Goleman, the following is not a component of emotional
intelligence.
a. self-awareness
b. motivation
c. sympathy
d. empathy
13. Empathy for a leader is essential for the following reasons:

a. To gain popularity among employees
b. To retain talent in information-based economy
c. To grab promotion
d. All of the above
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14. The persuasion skills of socially-skilled leaders are complemented by

a. Self-awareness
b. Self-regulation
c. Empathy
d. All of the above
15. In the context of business leadership, social skills refer to:

a. a capacity for friendliness with a purpose, namely, moving people in the desired
direction
b. befriending people for selfish motives
c. moving around in social circles for business expansion
d. motivating the subordinates
6. Summary
Leadership and management are essential, distinctive, and complementary
systems of action.
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Three types of theories have been formulated on the basis of research into
leadership. They are the trait, behavioral, and contingency theories.
According to the trait theories, some traits such as extroversion, aggressiveness,
self-confidence, honesty and integrity, and intelligence differentiate leaders from
non-leaders.
According to the behavioral school, successful leadership depends more on
appropriate behavior and skills, and less on personality traits. Four different
behavioral theories the Ohio State Studies, the University of Michigan Studies,
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the Managerial Grid, and the Scandinavian Studies sought to identify the
different behaviors adopted by leaders.
The contingency theories deal with the situational aspects of leadership styles.
Some of the well-
-Member exchange theory,
the Leader-Participation model, and the Path-Goal theory.
Effective leaders are characterized by attributes like self-awareness, self-
regulation, motivation, empathy, and social skills. These leaders understand their
own emotional make-up as well as that of the others with whom they work, and
use thi
7. Glossary
Autocratic I (A-I) In this leadership style, using the information available, the
leader takes a decision on his own.
Autocratic II (A-II) In this leadership style, the leader obtains relevant
information from subordinates and then attempts to find the solution to the
problem.
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Consultive I (C-I) In this leadership style, the leader explains the problem to
concerned subordinates individually and invites their ideas and suggestions to
solve the problem.
Consultive II (C-II) In this leadership style, the leader meets a group of
subordinates, discusses the problem with them, and listens to their ideas and
suggestions.
Group II (G-II) In this leadership style, after sharing the problem with the
subordinates, the leader initiates a group discussion on alternative solutions, and
moderates the discussion till the group reaches a consensus on the solution to be
adopted.
1. Leadership and management are certainly different, but they are also essentially
complementary. Explain the difference between leaderships and management.
2. Explain in brief the trait theories of leadership.
3. Briefly describe the behavioral theories of leadership.
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4. Explain the different contingency theories of leadership.
5. Explain the various attributes of a successful and effective leader?
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1. John P Kotter, Leading Change, Harvard Business School Press, 1996.
2. Miller, Mike, Emotional intelligence helps managers succeed, Credit Union
Magazine, July 99, Vol. 65 Issue 7.
3. Lee Roy Beach, Leadership and the art of change: a practical guide to
organizational transformation, Sage Publications, 2006.
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Following are the answers to the Check Your Progress questions given in the unit.
1. b. a tough, exhausting process of gathering and analyzing information
A vision is a product of a tough, exhausting process of gathering and analyzing
information.
2. c. When communicating with a clear sense of direction at all levels of the
organization and reducing conflict among stakeholders who aim at the same
target
Alignment helps empower people in two ways:
Communicating a clear sense of direction at all levels of the organization
encourages lower-level employees to take initiatives without feeling
vulnerable. Once the direction is clearly communicated, a supervisor cannot
legitimately reprimand his subordinates for taking steps to move in the
desired direction.
As every stakeholder is aiming at the same target, there is less chance of
conflict between the initiatives of different stakeholders.
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3. d. Self-worth
An ideal leader motivates people to realize their self worth and nurture values
which ultimately fall in sync with the vision of the organization. The sense of
self-worth drives an individual to perform at his/her best which in turn sums up to
the growth of the organization.
4. a. Tasks and goals
Leaders scoring high on production-oriented dimension focus on achieving tasks
and goals
5. b. Employee-oriented leadership
In this kind of a leadership, the leader is employee-friendly and scores high on
understanding the needs and concerns of the employees, which results in high
motivation employees ultimately leading to higher productivity.
6. c. Assessing the maturity level of the subordinate
According to this model, leadership requirements depend on the situation facing
the leader; and the choice of the most appropriate style of leadership depends on
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whether the overall situation is favorable or unfavorable to the leader. The
favorability or unfavorability of a particular situation to a leader is analyzed on
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the basis of the following parameters leader-member relationships, degree of
Hence option c is incorrect.
7. d. Participating leadership style
This is one of the four types of leadership styles developed by Hersey and
Blanchard in which the employee is capable of performing but not willing to
perform the task. The other leadership styles include telling, selling, and
delegating.
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8. c. High in ability; low in willingness to perform

If an employee is high in ability but low in willingness to perform, the manager
has to use the selling style of leadership.
9. a. Leader-Member Exchange
LMX stands for Leader-Member Exchange.
10. a. One who obtains relevant information from subordinates and then finds a
solution
An Autocratic (II) leader is one who obtains relevant information from
subordinates ad thn finds a solution.
11. c. Environmental factors
As per the path-goal theory, a behavior depends on two variables
environmental factors and personal characteristics of the subordinates.
12. c. sympathy
According to Goleman, the components of emotional intelligence are self-
awareness, self-regulation, motivation, empathy, and social skill. Hence
sympathy is not a component of emotional intelligence.
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13. b. To retain talent in information-based economy

Empathy can help in retaining talent in an information-based economy.
14. d. All of the above
Socially skilled people are adept at managing teams. Their persuasive skills,
complemented by self-awareness, self-regulation, and empathy, make this
possible.
15. a. a capacity for friendliness with a purpose, namely, moving people in the
desired direction.
In the context of business leadership, social skills refer to a capacity for
friendliness with a purpose, namely, moving people in the desired direction.
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FA
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Unit 2
Leadership Styles
Structure
1. Introduction
2. Objectives
3. Leadership Styles
4. Four Styles
5. Tannenbaum & Schmidt Continuum of Leader Behavior
6. The Impact of Leadership Styles on Drivers of Work Climate
7. Summary
8. Glossary
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1. Introduction
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Let us take a few minutes to recall what you learned in the previous unit. You learned
about the basic differences between leadership and management. You were also
introduced to the various leadership theories and the attributes of effective leaders. This
unit explains the essence of various leadership styles. We start with an example of a
unique leadership style that of Herbert Kelleher, chairman of Southwest Airlines.
The September 11, 2001, terrorist attacks left Southwest Airlines (Southwest) and the
entire airline industry in the US reeling under devastating losses. Major airlines rushed
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to the US Congress for relief in the form of federal assistance. The industry was
allocated US$ 15 billion. However, this was just not enough to get the industry out of
its heavy losses. Airlines continued to lose millions of dollars every day. To reduce
their losses, the airline industry in the US cut the number of their flights by 20% and
laid off 16% of their workforce in the weeks following the attacks. In stark contrast, ,
Southwest did not lay off a single employee. Not only that, the airline actually posted
profits in the same year.
Southwest had been profitable every year since it started operations in 1971. Compare
that with the fact that during this period, most airlines had struggled to achieve even
three or four consecutive years of profitability. In 2002, the total market value of
Southwest was US$ 9 billion, which was more than the value of all the other major
airlines in the US put together. The airline achieved high levels of employee
satisfaction and was included in Fortune
So, what was behind this extraordinary
performance? Most analysts are firmly of the view that it was due in large part to the
leadership of Herbert Kelleher.
Herbert Kelleher, chairman of Southwest Airlines, created a family feeling among his
employees by taking a genuine interest in them. He actually remembered the names of
all 16,000 employees and personally sent out birthday cards to them. His hands-on
leadership style won him the respect and allegiance of his employees. In an attempt to
stay competitive in the deregulated airline industry, he asked for, and received,
considerable concessions from employees and their union. However, the austerity
measures he undertook applied not just to the employees but also to the management
of Southwest. His office, for example, was in a barracks-style building. Kelleher led
by example. He got the work done while showing real concern for his people. His
leadership style wa
and keeping costs low. The example of Kelleher shows you how leadership style
influences organizational performance.
In the rest of the unit, you will get to learn about different leadership styles. You will
get to know about leadership styles and the continuum of leadership behavior
developed by Tannenbaum and Schmidt. What kind of impact leadership styles have
on the work atmosphere in an organization forms the last part of the unit.
2. Objectives
describe the different leadership styles.
discuss
I
discuss the various patterns of leadership behavior indicated by the continuum of
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leadership behavior developed by Tannenbaum & Schmidt.
discuss the impact of leadership styles on the work atmosphere in the
organization.
3. Leadership Styles
What do you think leadership style refers to? Take a minute to think about it.
Leadership style is the way leaders, either consciously or subconsciously, influence
their followers. The style of a leader depends on the circumstances in which he/she
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operates, the type of followers he/she has, and his/her own personality. There are
different leadership styles. Let us take a look at these.
3.1 Authoritative Style
According to Daniel Goleman, the most effective of all leadership styles is the
authoritative style. Why? Authoritative leaders are visionaries. They are clear about
what they are doing and why they are doing it. And authoritative leaders try to instill
the same clarity in their followers as well. The followers know what work they are
doing, why they are doing it, and where their work will fit into the grand vision of the
organization. This meaningful work becomes the source of motivation for them. By
assigning individual tasks within a grand vision, authoritative leaders define the
standards around the vision. They also provide feedback both positive and negative.
The sole objective of the feedback is to make sure that individual performance is in
accordance with the vision of the organization.
For greater flexibility, authoritative leaders just determine the end to be reached; they
leave the choice of means to their subordinates. They allow their subordinates to
innovate and to take calculated risks. According to Goleman, this style of leadership is
effective in almost all business situations. However, it is most effective when the
business is drifting. In that kind of situation, an authoritative leader charts a new
28
Leadership Styles
course and provides a fresh long-term vision. But this leadership style does have
certain limitations. It may not work when an authoritative leader is working with a
team of experts or peers who are more experienced than him/her. Another limitation is
that this style of leadership may weaken the democratic spirit of an effective team.
3.2 Autocratic Style
Let us move from the most effective to the least effective leadership style. Leaders
who adopt the autocratic style keep all the authority and decision making power in
their own hands , or views.
They believe that they are more competent and intelligent than their subordinates.
are expected to carry out all the tasks they are given, be obedient, and abide by the
Autocratic or coercive leaders create a reign of terror, bullying and demeaning their
executives, and showing displeasure at the slightest mistakes. Communication flows
only from the leader to the followers; thus the leader is always in control of the
information. This style is considered the least effective of the leadership styles as such
leaders do not make use of the ideas and creativity of their subordinates. Employees
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who are motivated by things other than money just do not perform well under leaders
who follow an autocratic style of leadership.
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Given the impact of this style, you might assume that it cannot be useful in any
situation. However, research shows that there are a few occasions when this style
actually works quite well. Examples are: in cases of emergency, like in the aftermath
of a fire in a company or an earthquake; during a turnaround or when a hostile
takeover is looming. This style can change unproductive business practices and
convert people to new ways of working. The autocratic leadership style is also useful
when employees are new, inexperienced, and need guidance.
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Example: Lee Iacocca: Autocratic Leader?

Lee Iacocca (Iacocca), former chairman of Chrysler, is often portrayed as a
visionary who could see far beyond the day-to-day activities of business. He
thought differently from others and came up with innovative ideas. Iacocca was
popular for his bold decisions and risk-taking abilities. He believed that every
business and every product has its own inherent risks that have to be overcome to
achieve success. He was not afraid of taking unpopular decisions to solve major
situation very quickly. An attribute that set him apart from others was his ability to
take quick decisions.
and his leadership qualities, a section of analysts and media reports highlight the
rship style
as dictatorial, and say this contributed to his being disliked by his subordinates.
-confidence sometimes took the form of
arrogance, and this affected everyone he dealt with including his employees,
suppliers, the government, and banks. Iacocca is also portrayed as headstrong and
over-enthusiastic in some reports.
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3.3 Benevolent Style

Another style of leadership is the benevolent or affiliative style. The primary focus of
benevolent or affiliative leaders is their people. They value individuals and their
emotions. These leaders keep their employees happy and create harmony among them.
Naturally, this means better communication and sharing of ideas. Such leaders also
provide inspiration and build trust. Besides, they promote flexibility among the
employees. As the employees have the freedom to do their jobs, they work in the most
effective way possible. Benevolent leaders are relationship builders by nature. They
create a sense of belonging in their employees by spending time with them after office
hours. For example, they take their subordinates out to lunch on occasion. This type of
behavior enhances one-to-one understanding and creates fierce loyalty. Benevolent
leaders motivate their people by giving them only positive feedback on their day-to-
day efforts. This positive feedback is highly effective in motivating employees. In
most organizations, people rarely get feedback except during the annual review. For
these reasons, such leaders are well liked by their subordinates.
The benevolent style is most effective when a team lacks harmony and is low in
morale. Benevolent leaders change this by improving communication among the team
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members and creating trust. Let us look at an example: a team leader in an
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further by creating enmity among the team members. When he failed as a leader and
left, the team had members who were suspicious and wary of each other. To remedy
the situation, a benevolent leader was called in. This leader brought with him
emotional honesty and he tried to rebuild the ties among the members. Within months,
the team was back in form with a renewed sense of commitment and energy.
Despite the advantages of this style, it cannot be used effectively all the time. Can you
think of some reasons why? Well, though giving positive feedback certainly builds the
self-esteem of employees, it also makes people ignore their drawbacks. This happens
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because benevolent leaders do not give constructive suggestions to their people. So

the responsibility to improve themselves lies solely with the employees. Also, as
employees feel that their jobs are not at risk, they may not try to learn on the job. They
may feel that mediocrity will be tolerated. This attitude could lead to organizational
decline and, ultimately, failure.
3.4 Coaching Style
Leaders who follow the coaching style help their employees to identify their strengths
and weaknesses and align them with their personal goals and career aspirations. They
encourage the employees to plan and pursue their long-term development goals. They
also help their subordinates with their development plans by providing feedback. Such
leaders are extremely good at delegation. They take pleasure in giving challenging
assignments to their employees, even if this results in delays in the work being
accomplished. It is clear then that such leaders are willing to accept short-term failure
in return for long-term learning.
Though this style appears to concentrate more on personal development than on
immediate results, it is usually effective when it comes to attaining long-term goals.
The constant dialogue between the leader and his/her followers promotes flexibility in
the organization. Employees will be ready to experiment because they know that their
leader will provide quick and constructive feedback. The regular interaction between
30
Leadership Styles
the leader and the employees also promotes responsibility in the organization.
Employees are clear about what is expected of them and they perform according to
/her
employees also promotes a culture of commitment in the organization. Employees
know that their leader believes in them, and invests in them. And they will not let
him/her down when he/she expects performance from them. Thus, the coaching style
of leadership brings about significant improvements in the work climate and ensures
superior performance.
Example: Jack Welch: The Coach

Jack Welch (Welch) is considered one of the most successful corporate leaders
ever in corporate history. He was a change agent throughout his tenure as CEO at
GE. Being a change agent needs a thorough grasp of what the organization is all
Most importantly, he had created something unique at a big company informality.

The hierarchy that Welch inherited with 29 layers of management was completely
changed during his tenure. Everyone, from secretaries, to chauffeurs to factory
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chain of command, and communicating across layers.
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Welch knew the value of surprise. Every week, he made unexpected visits to plants
and offices. There were luncheons with managers several layers below him, and
many
In April every year, Welch undertook an annual review of personnel in the

executive level and above, called the Session C meetings. The meetings ran for 20
days. This process started in February when every employee filled a self-
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assessment review, which was later discussed with the review manager. One of the
that the best business leaders were rewarded properly. To identify the best, Welch
process to make sure that the best performing employees were being rewarded and
recognized.
class sessions and trained more than 15,000 GE managers and executives. He went
to the academy every two weeks, for 17 years, to interact with new employees,
middle managers, and senior managers.

According to Goleman, the coaching style is not very common in organizations. The
reason is that leaders do not have time to teach employees and help them grow.
their people except in their first session. Once they give feedback, and align
o
except follow up. Another reason why most leaders avoid coaching is that they lack
the expertise to help their people. They are inept and unfamiliar with giving
31
continuous performance feedback. It is encouraging, however, to find that some

companies are choosing employee development as their core competence. Some
companies are even tying the annual bonuses of managers with the development of
their subordinates.
3.5 Democratic Style
Leaders following the democratic style spend time getting ideas from their people.
They create trust, respect, and commitment among their employees by giving genuine
consideration to their ideas. Democratic leaders bring flexibility and responsibility
into the organization by involving their people in the decisions that influence the way
they work and achieve their goals. They boost the morale by listening to
and addressing their concerns. As people led by a democratic leader have a say in
setting their goals and standards for evaluating success, they are realistic about what
they can accomplish.
Let us see what the drawbacks of this leadership style are. A democratic style might
not have substantial impact on the work environment. It is possible that a consensus
will not emerge even after ideas are discussed thoroughly in endless meetings. Lack of
a consensus might again lead to a series of meetings, resulting in wastage of time. A
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democratic leader might postpone crucial decisions, expecting that discussions will
inevitably result in remarkable insights. But even at the end of all this, people may end
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up confused and leaderless. This style can also result in conflicts among the people
involved in the discussions.
So, in what kind of situation is this kind of leadership style most effective? This style
works best when the leader himself/herself is uncertain about what to do, and is in
need of ideas and guidance from some of his/her more able employees. This style is
also beneficial when the leader has a clear vision, but needs fresh ideas to execute it.
A democratic style is, however, not effective if the employees are incompetent or ill-
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informed. It is also not effective in a crisis.

3.6 Pacesetting Style
Pacesetting leaders set high performance standards and they themselves adhere to the
stipulated standards. They are passionate about increasing quality and productivity
and expect the same from others. They identify non-performers quickly, and ask them
to shape up. If any of the subordinates fail to meet expectations, they
replace them with new people. Though the pacesetting leaders expect to improve
performance, in reality, it rarely works this way. Can you think of a few reasons for
this?
Employees feel overwhelmed by the demands of such leaders for ever-improving
performance. As a result, their morale drops. There are several other complications
with this style. Such leaders have certain yardsticks for performance in their minds but
they never state them or explain them clearly. They expect their subordinates to know
these yardsticks automatically. As a result, work for the employees becomes more of
second-guessing what these leaders expect than doing their best. People feel that these
leaders do not trust them as they are rarely given any freedom to work in their own
way or to take new initiatives. Work becomes task-focused and routinized.
Consequently, people lose their flexibility and abjure responsibility.
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Leadership Styles
Activity: GM Motors is a US-based leading automaker. The company had its own
manufacturing plants in North America and South America. For some of the
components, the company had deals with suppliers in the US. The workers were very
knowledgeable about the components and parts used in the automobiles. The
headquarters of the company was in North America. The CEO of the plant inspected
senior managers explained to the CEO that expensive parts were being used in the
manufacture of a vehicle. The manager said that though he and his colleagues wanted
to use less expensive parts, they did not have the authority to take such decisions. The
CEO immediately delegated authority to the manager to take decisions about parts to
be used. Identify the leadership style adopted by the CEO. How would the company
benefit with this style. Discuss other leadership styles.
Answer:
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As for rewards, pacesetting leaders rarely give feedback. What is more, they intervene
in the work whenever they find that their people are lagging behind. If such leaders
were to leave suddenly, their subordinates would be directionless because they have
got so used to their leader setting the rules. Under pacesetting leaders, commitment
levels also come down, because people have no idea of where their personal efforts
will fit into the grand picture.
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3.7 Expert Style

In the expert leadership style, persons with a high level of knowledge and abilities
lead the group. To maintain their leadership position, these leaders have to
continuously demonstrate their expertise. However, if the situation changes and a
/she will be replaced by another
person with the required knowledge and expertise.
This style is useful when the survival of a group is in question or the group members
feel that they need to be guided by an expert.
3.8 Manipulative Style
Manipulative leaders believe that employees should be manipulated to get them to
behave in the way they want. They identify the needs and desires of the employees
and use this knowledge to exploit them. These leaders promise rewards for good
performance. The employees, lured by the promise of rewards, put in their best efforts
and achieve the set goals. However, the leaders offer very few or no rewards at all,
once their goals have been achieved. As you can imagine, this behavior often leads to
a high level of dissatisfaction and resentment among employees. This style of
leadership is successful only in the short term. It is ineffective in creating a long-
lasting relationship between the subordinates and the leader.
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3.9 Bureaucratic Style

Bureaucratic leaders set certain rigid rules, regulations, and procedures. Both the
leaders themselves and their subordinates are expected to obey these rules. The
subordinates are obliged to carry out their tasks in a particular, specified, way. They
carry out their tasks mechanically, without a sense of commitment toward the
organization. The rules indirectly indicate the minimum level of performance an
employee must reach, if he/she wants to continue in the organization. Therefore,
employees put in only the minimum amount of effort required to keep their jobs. They
identify loopholes in the rules so that they can defy a rule under the pretext of
conforming to another rule. The employees constantly look for ways to express their
resentment about the rules laid down by the organization. If a mistake occurs, they
pass on the blame to other employees.
Example: Michael Dell as a Participative Leader

Michael Dell (Michael), CEO of DELL Computers (DELL), believes that business
is all about building teams and talent in the organization. According to him, it is the
most essential component of success, as a diversity of ideas and inputs leads to
I
better decisions. Michael always encourages his teams, even if some of their
products fail or have to be scrapped. He tries to motivate them to work better on
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their next product.
Michael makes sure that everyone in his company feels that they are part of
something great something special perhaps something even greater than
themselves. He strongly believes that the ability to find and hire the right people is
a le
at DELL includes finding and developing his/her successor as part of an ongoing

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performance plan. Michael takes part in the recruitment process of not only
managers but also of summer interns. He asks even interns about their experiences
at DELL and pays careful attention to their observations to see whether they have
any new perspectives on the company. If they enjoy their work at DELL and their
date.
3.10 Participative Style

Participative leaders encourage employees to participate in decision making. These
leaders listen to the ideas and opinions of subordinates, but take the final decision
themselves. The leaders delegate some of their responsibilities to subordinates and
believe that these people are capable of carrying out those responsibilities. Generally,
these leaders assign the task to be performed to their subordinates, but do not specify
any particular procedure for carrying out the task. Participative leaders allow both
upward and downward communication. They encourage their subordinates to express
their suggestions, ideas, and feelings. A participative leadership style is useful when
subordinates are competent and capable of working independently with little or no
supervision by the leader.
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Leadership Styles
Check Your Progress

1. What kind of a leader is a visionary?
a. authoritative leader
b. autocratic leader
c. democratic leader
d. benevolent leader
2. One of the limitations of an authoritative leadership is that it might fail to work:

a. when the team of peers are more experienced than the leader
b. when the leader allows his/her subordinates to innovate and take calculated risks
c. when the followers work as per the grand vision of the company
3. In the autocratic style of leadership, communication flows from __________to

the ___________.
a. follower; leader
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b. leader; follower
c. both (a) & (b)
d. neither (a) nor (b)
4. Which type of leadership is effective when the team lacks harmony and is low in
morale?
a. autocratic
b. benevolent
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c. authoritative
d. democratic
5. A democratic leader brings flexibility and responsibility into the organization by

involving people in ____________.
a. meetings
b. decisions that influence the way they work and achieve their goals
c. creative activities
d. none of the above
4.
Professor Rensis Likert and his associates at the University of Michigan studied the
patterns and styles of leaders and managers over three decades and came up with
certain ideas and approaches to understand leadership behavior. According to Likert,
an effective manager is one who is strongly oriented toward his/her subordinates and
relies on communication (to a great extent) to keep all the departments or individuals
working in unison. Likert suggested four systems of management.
35
4.1 System 1 Management

-
leadership behavior. All the decisions are made by the manager and there is little
employee participation. Autocratic managers do not trust their subordinates; they use
negative motivation tactics like fear and punishment; and they retain all decision-
making powers.
-
managers behave in a patronizing manner, they have confidence and trust in their
subordinates. They permit upward communication to a certain degree and ask for
participation from subordinates. Managers in this system use both rewards and
punishment to motivate employees. They allow subordinates to participate to some
extent in decision-making, but retain control over policy matters.
I
have complete confidence and trust in their subordinates. Though they seek advice
from subordinates, they retain the right to take the final decision. In this management
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style, managers (i) motivate employees through rewards and occasionally punishment
(ii) make broad policy and general decisions but leave specific decisions to the lower
levels, (iii) use both upward and downward communication flow, and (iv) act as
consultants in order to resolve various problems.
ystem,
managers trust their subordinates completely and have confidence in their abilities.
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They always ask the opinions of their subordinates and make use of their ideas. They
encourage the participation of employees at all levels in decision-making and use both
upward and downward communication. The managers in this system work with their
subordinates and other managers as a group. The involvement of employees in setting
objectives and achieving goals is financially rewarded.
Likert found that those managers who adopted the System 4 approach had the greatest
success as leaders: they were most effective in setting goals and achieving them, and
were generally more productive. Likert and his research team concluded that high
productivity is associated with Systems 3 and 4, while Systems 1 and 2 are
characterized by relatively lower output.
Activity: CWS Solutions Ltd. is a software development company specializing in

the development of enterprise applications. Since there was lot of competition in
the market, the top management encouraged employees to participate in the
decision making process. The management took the final decision. It rewarded
employees individually for meeting their targets and coming up with excellent
user-friendly enterprise applications. The employees were offered incentives for
their excellence. For the non-performers, the management gave a C rating which
indicated that the employees would not get a promotion or any incentives. Which
36
Leadership Styles
the management use? Explain. Suggest and

discuss other styles that would help the company to compete successfully in the
market place while encouraging its employees to perform better.
Answer:
5. Tannenbaum & Schmidt Continuum of Leader Behavior

Modern managers are often uncomfortable with choosing a leadership style. They do
not know how to behave: whether to be strong leaders or permissive ones. Their
training in human relations management encourages them to choose a democratic
I
style, whereas their experience tells them that they had better choose an authoritative
style. Similarly, they are not clear when to take the help of the group. Tannenbaum
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and Schmidt have tried to address these problems and have suggested a framework
which managers can employ to overcome their confusion.
5.1 The Patterns of Behavior
The continuum of leadership behavior developed by Tannenbaum and Schmidt
indicates a range of different patterns of leadership behavior. Leaders can choose an
appropriate style in relating to subordinates, from this continuum. The styles are
presented in Figure 2.1.
Figure 2.1
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Tannenbaum & Schmidt Continuum of Leader Behavior

(Autocratic to Democratic)
Subord-inate
Boss Centered
Centered Continuum
Leadership
Leadership
Freedom for subordinates < ------------------------- > Use of authority by manager
7. 6. 5. 4. 3. 2. 1.
Manager Manager Manager Manager Manager Manager Manager
permits defines presents presents presents makes
subordinates limits; problem, tentative ideas and decision decision
to function asks group gets decision invites and
within limits to make suggestions, subject questions announces
defined by decision makes to it
superior decision change
Share Consult Sell Tell
Adapted from Tannenbaum,
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1. Leader as an Announcer
In this role, the leaders identify the problem, make a list of all the solutions available,
choose the solution that appears best to them, and give this to their subordinates for
implementation. They do not care what their subordinates might think about their
decision. They do not give the employees any opportunity to either participate directly
in the decision making process or voice their opinions. They may also use coercion to
get the work done.
2. Leader as a Seller
Leaders playing this role identify the problem, identify the potential solutions, and
make the decision. But instead of announcing it, they try to persuade their
subordinates. They use persuasion because they know they may meet resistance from
subordinates who have to face the consequences of their decision. In order to
minimize resistance from the subordinates, these leaders highlight the benefits the
subordinates will derive.
3. Leader as a Clarifier
I
Leaders following this pattern of behavior arrive at a decision, seek the approval of
their subordinates, and give their subordinates an opportunity to understand their line
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of thinking and their intentions. They present their ideas and ask their subordinates to
raise questions if they have any. They clarify any doubts that the subordinates may
have because they want them to understand what they are trying to accomplish. This
quid pro quo between these leaders and their subordinates results in better exploration
of the consequences of decisions taken by the leaders.
4. Leader as a Senior Partner
In this style, the leaders are still in charge of identifying and diagnosing the problem.
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Although they come up with solutions to the problem, these solutions are not final.
They give their subordinates a chance to voice their concerns and show their reactions
before they finalize the decision. Their attitude to decision making is something like
ar what you have to say about this plan that I have developed, I
5. Leader as a Seeker
These leaders identify problems but do not come to the group with their own
solutions. Rather, they ask their subordinates to suggest possible solutions to the
problem.
The group provides as many solutions as possible. The idea behind this approach is to
capitalize on the knowledge and first-hand experience of the people in the group.
Once the alternatives are available, the leader selects the option which he/she feels is
the best.
6. Leader as an Equal Partner
Here, the leaders define the problem and set the boundaries within which decisions
have to be taken, but transfer the right to make decisions to the group.
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Leadership Styles
7. Leader as a Follower
This pattern is seen only in extreme cases, and rarely in formal organizations. The
team identifies and diagnoses the problem, and then identifies and finalizes the
solution. If at all there are some limits on the decision making process, they are set by
the boss or the team leader. The leader of the team declares his/her readiness to
implement whatever decision the team takes, even before the decision is known.
6. The Impact of Leadership Styles on Drivers of Work Climate

The leadership style affects the work atmosphere in the organization. Daniel Goleman
and the Harvard Business Review group conducted a research study to determine to
what extent leadership styles influence the drivers of work climate or atmosphere. The
results are shown in Table 2.1.
or the freedom employees have to innovate, unencumbered by red tape; the
people set; the sense of accuracy about performance feedback and aptness of rewards;
the clarity people have about the mission and values of the organization; and finally,
the level of commitment to a common purpose. The figures in Table 2.1 show the
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correlation between a specific leadership style and a specific driver of the climate. For
example, in the case of standards (a driver of organization climate), the pacesetting
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style has a 0.27 correlation while the affiliative style has a 0.31 correlation (as strong
as the first, but in the opposite direction).
From the data it is clear that the authoritative leadership style has the maximum effect
on climate, closely followed by the affiliative, democratic, and coaching styles.
However, research indicates that no style can be relied upon in entirety, and that all
the styles have limitations in some circumstances.
Table 2.1
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The Impact of Leadership Styles on Drivers of Climate
Flexibility -0.28 0.32 0.27 0.28 -0.07 0.17
Responsibility -0.37 0.21 0.16 0.23 0.04 0.08
Standards 0.02 0.38 0.31 0.22 -0.27 0.39
Rewards -0.18 0.54 0.48 0.42 -0.29 0.43
Clarity -0.11 0.44 0.37 0.35 -0.28 0.38
Commitment -0.13 0.35 0.34 0.26 -0.20 0.27
Overall impact -0.26 0.54 0.46 0.43 -0.25 0.42

on climate

39
Check Your Progress

6. According to Rensis Likert, an effective manager is strongly oriented toward:
a. subordinates
b. superiors
c. rewards
d. rules and regulations
7. Which of the following is not a part of consultative leadership style?

a. motivate employees through rewards and occasionally punishment
b. make broad policy and general decisions but leave specific decisions to the lower
levels
c. trust their subordinates completely and have confidence in their abilities
d. act as consultants in order to resolve various problems
8.
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Which pattern of leadership behavior arrives at a decision and then seeks the
approval of the subordinates by making them understand his/her line of thinking
FA
and his/her intentions?
a. Leader as a seeker
b. Leader as a senior partner
c. Leader as a seller
d. Leader as a clarifier
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7. Summary
Leadership style is the way leaders choose either consciously or subconsciously
to influence their followers.
The authoritative style is the most effective of all leadership styles. Authoritative
leaders are visionaries. They are clear about what their business is and where it is
headed. The least effective leadership style is an autocratic style.
Autocratic leaders create a reign of terror, bullying and demeaning their
executives, showing their displeasure at the slightest mistakes. Communication
flows only from the leader to the followers.
The primary focus of a benevolent leader is their people. They value individuals
and their emotions. These leaders keep their employees happy and create
harmony among them. This ensures better communication and sharing of ideas,
while providing inspiration and building trust.
Leaders who prefer the coaching style identify the strengths and weaknesses in
their employees and try t
career aspirations. They encourage them to plan and pursue their long-term
development goals.
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Leadership Styles
Democratic leaders bring flexibility and responsibility into the organization by

involving their people in the decisions that influence the way they work and
achieve their goals. They boost the morale of their subordinates by listening to
and addressing their concerns.
Pacesetting leaders set high performance standards and themselves adhere to the
stipulated standards. They are passionate about improving quality and
productivity.
In the expert leadership style, people with a high level of knowledge and abilities
lead the group. Democratic leaders delegate their responsibilities, and decision
making power to their subordinates.
Manipulative leaders believe that employees should be manipulated to get them
to behave in the way they want.
Bureaucratic leaders set certain rigid rules, regulations, and procedures. Both
leaders and their subordinates are expected to obey these rules.
Participative leaders encourage employees to participate in decision making.
These leaders
decision themselves.
I
According to Likert, an effective manager is one who is strongly oriented toward
subordinates and relies on communication (to a great extent) to keep all the
FA
departments or individuals working in unison. He suggested four systems of
management: System 1 management, System 2 management, System 3
management, and System 4 management.
Tannenbaum and Schmidt suggested a framework which managers can employ to
choose an appropriate leadership style.
Leadership style affects the work atmosphere in the organization. Daniel
Goleman and the Harvard Business Review group conducted a research study to
determine to what extent leadership styles influence the drivers of work climate
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or atmosphere.
8. Glossary
Authoritative style: Authoritative leaders are visionaries. They are clear about
what they are doing and why they are doing it. Authoritative leaders try to instill
the same clarity in their followers as well.
Autocratic style: Leaders who adopt this style retain all the authority and
,
or views. They believe that they are more competent and intelligent than their
job.
Benevolent style: The primary focus of benevolent or affiliative leaders is their
people. They value individuals and their emotions. These leaders keep their
employees happy and create harmony among them. This ensures better
communication and sharing of ideas, while providing inspiration and building trust.
Bureaucratic style: Bureaucratic leaders set certain rigid rules, regulations, and
procedures. Both the leaders themselves and their subordinates are expected to
obey these rules. The subordinates are obliged to carry out their tasks in a
particular, specified way.
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Coaching style: Leaders who follow the coaching style help their employees to
identify their own strengths and weaknesses and align them with their personal
goals and career aspirations. They encourage them to plan and pursue their long-
term development goals. They also lend them help in enacting their development
plans by providing feedback.
Democratic style: Leaders following this style spend time getting ideas from
their people. They create trust, respect, and commitment among their employees
by giving genuine consideration to their ideas.
Expert style: In this leadership style, a person with a high level of knowledge
and abilities leads the group. To maintain his/her leadership position, the leader
has to continuously demonstrate his/her expertise.
Manipulative style: Manipulative leaders believe that employees should be
manipulated to get them to behave in the way they want. They identify the needs
and desires of employees and use this knowledge to exploit them.
Pacesetting style: Pacesetting leaders set high performance standards and they
themselves adhere to the stipulated standards.
Participative leadership: These leaders discuss problems with subordinates and
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seek their suggestions before making a decision.
FA
1. ers, either consciously or subconsciously,
description of the various influential styles
of leadership and explain how they vary from one another.
2. .
3. Explain the various patterns of leadership behavior indicated by the continuum of
leadership behavior developed by Tannenbaum & Schmidt.
4. Explain the impact of leadership styles on the work atmosphere in the organization.
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John P Kotter, Leading Change, Harvard Business School Press, 1996.
John Adair, Leadership Skills, CIPD Publishing, 1998
Marlene Caroselli, Leadership Skills for Managers, McGraw-Hill Professional,
2000
Lee Roy Beach, Leadership and the Art of Change: A Practical Guide to
Organizational Transformation, Sage Publications, 2006.
What Makes a Global Leader?, http://knowledge.wharton.upenn.edu, October 4,
2007.
1. a. authoritative leader
Authoritative leaders are visionaries. They are clear about what they are doing and
why they are doing it. Authoritative leaders try to instill the same clarity in their
followers as well. Their followers know what work they are doing, why they are
doing it, and where their work will fit into the grand vision of the organization.
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Leadership Styles
2. a. when the team of peers are more experienced than the leader
The authoritative style of leadership does have certain limitations. It may not
work when an authoritative leader is working with a team of experts or peers who
are more experienced than him/her.
3. b. leader to follower
In the autocratic style of leadership, communication flows only from the leader to
the followers; thus the leader is always in control of the information.
4. b. benevolent
The benevolent leadership style is most effective when a team lacks harmony and
is low in morale. The benevolent leader changes this by improving
communication among the team members and creating trust.
5. b. decisions that influence the way they work and achieve their goals
Democratic leaders bring flexibility and responsibility into the organization by
involving their people in the decisions that influence the way these employees
work and achieve their goals. They boost the morale of their subordinates by
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listening to and addressing their concerns. As they have a say in setting their
goals and standards for evaluating success, people led by a democratic leader are
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realistic about what they can accomplish.
6. a. subordinates
According to Likert, an effective manager is one who is strongly oriented toward
subordinates and relies on communication (to a great extent) to keep all the
departments or individuals working in unison.
7. c. trust their subordinates completely and have confidence in their abilities
In the consultative leadership style, managers do not have complete confidence
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and trust in their subordinates. In this management style, managers (i) motivate
employees through rewards and occasionally punishment (ii) make broad policy
and general decisions but leave specific decisions to the lower levels, (iii) use
both upward and downward communication flow, and (iv) act as consultants in
order to resolve various problems.
8. d. Leader as a clarifier
A leader as a clarifier arrives at a decision, seeks the approval of his/her
subordinates, and gives his/her subordinates an opportunity to understand his/her
line of thinking and his/her intentions. He/she presents his/her ideas and asks
his/her subordinates to raise questions if they have any. He/she clarifies their
doubts because he/she wants his/her subordinates to understand what he/she is
trying to accomplish.
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Unit 3
Leadership Skills and Tactics
Structure
1. Introduction
2. Objectives
3. Persuasion Skills
4. Motivational Skills
5. Conflict Resolution Skills
6. Leadership Tactics
7. Summary
8. Glossary
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FA
1. Introduction
The previous unit
leadership styles. It then discussed the continuum of leadership behavior developed by
Tannenbaum and Schmidt. The unit finally discussed the impact of leadership styles
on the work atmosphere in the organization. This unit discusses the skills that are the
prerequisites of a good leader and tactics they adopt for effective management. There
have been numerous leadership styles demonstrated by various people that helped in
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the success of their respective organizations. One such example is Charles Schwab,
under whose leadership Bethlehem Steel became one of the largest steel makers in the
US, and one of the most important heavy manufacturers in the world.
Charles Schwab (Schwab), the US steel magnate, epitomized the new industrialist of
the 20th century. He was the individual behind the rise of Lehigh Valley in
commercializing advanced techniques in the manufacture of steel. One hundred years

later, his contributions are still remembered at the Bethlehem Steel Company.
company. In subse
US Steel Corporation (US Steel), the largest steel manufacturing company in the
United States at that time. In 1901, at the age of 39, Charles Schwab became the first
president of US Steel. In 1903, he left US steel to run Bethlehem Steel.
The famous inventor, Thomas A. Edison, was a friend of Schwab and used to call him
the master hustler. The following inciden
toughest persuasion job Schwab had to handle was buying a coal mine in Lehigh
valley. The owner, a hard dealing German, was adamant not to sell it. Schwab and two
of his subordinates, Grace and Johnston, went to meet the man. After seeing the
persuade the man. Schwab began to tell him stories and the German knew that he was
being charmed by a master persuader. He ultimately succumbe
This unit discusses the classification of executives. It then goes on to explaining the
general methods of motivation. It then discusses the skills possessed by leaders to
resolve conflicts in an organization. The unit concludes with a discussion on the
tactics adopted by the leaders to deal with their subordinates and superiors
2. Objectives
By the end of this unit, you should be able to:
discuss the classification of executives into five decision-making types.
discuss the general methods of motivation and the steps to motivate problem
people.
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understand the conflict resolution skills of leaders.
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understand the tactics used by leaders to deal with their subordinates and
superiors.
3. Persuasion Skills
Consider a situation where a company has to take an important decision about funding
a lucrative yet risky project. The manager entrusted with the responsibility calls a
meeting of his superiors and peers to convince them to go ahead with the project.
Although his arguments are objective, his logic sound, and his data reliable and
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concrete, he fails to persuade them. This is not an uncommon situation in most

organizations.
Often people fail to persuade others because they concentrate more on the content of
their message while ignoring how the message is delivered. Ineffective presentation of
information often leads to failure to persuade. Persuasion skills can be improved by:
Identifying who the decision maker is in the group one is trying to persuade;
Identifying the decision-making style of that person; and
Tailoring the arguments/presentation to the decision making style of the leader in
the group.
Executives can be classified into five decision-making types:
Skeptics
Charismatics
Followers
Controllers
Thinkers
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3.1 Skeptics
Skeptics are suspicious of data that contradict their views. They have strong
personalities. The characteristics of such personalities are demanding, disagreeable,
rebellious, and even disruptive at times. Executives with such characteristics are very
-absorbed
behavior, and mostly act on feelings. They demand time and energy of their peers and
subordinates. A skeptic may leave while a presentation is being made, and may ask
even personal questions during the presentation. In such circumstances, the presenter
must maintain his/her composure. One benefit of trying to persuade skeptics is that the
persuader knows immediately whether the individual is convinced or not as skeptics
articulate their reactions immediately.
How to Persuade Skeptics?
The following points should be kept in mind while attempting to convince a Skeptic:
As the term suggests, Skeptics are highly suspicious. They look for credibility in
the persuader. So the persuader should attempt to gain as much credibility as
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possible before making a presentation. Skeptics trust people with backgrounds
similar to theirs. This could be a similar educational background, employment
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background, or cultural background. Hence, the persuader should try to find
something in common with the Skeptic and highlight it subtly to gain his/her
trust. The persuader can also gain credibility by getting the endorsement of
people trusted by the Skeptic.
A persuader should never challenge a Skeptic. A skeptic needs to be handled
correct the information in such way that the Skeptic has room to save face.
The task of persuading a Skeptic seems daunting but in reality it is not so. In order to
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persuade a Skeptic successfully, a persuader should remember the following: Skeptics

want to race ahead with revolutionary ideas, but they accept these ideas only if they
are coming from people whom they trust; skeptics also make decisions quickly.
Some of the words that can be associated with Skeptics are: feel, grasp, agreeable,
trust, power, demand, action, suspect, and disrupt.
3.2 Charismatics
Charismatics are talkative, dominant, captivating, enthusiastic, and persistent. They
are enthralled by new ideas. They have the ability to absorb large amounts of
information. They are good at moving from big ideas to the specifics of
implementation. Though Charismatics are not averse to taking risk they are also
responsible. They are emotional yet rational. Though they are enthusiastic about new
ideas, it can be difficult to get their commitment because from their past experience
they have learnt to balance enthusiasm and reality. When examining an idea they look
idea. They show interest in ideas that address bottom line results. Also, they look for
proposals that increase the competitiveness of the firm. Charismatics take methodical
decisions based on balanced information.
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How to Persuade Charismatics?
The following points should be remembered while attempting to persuade a

Charismatic:
The persuader should control the urge to match the excitement of a charismatic.
He/she should not spend time describing an idea that interests a Charismatic;
rather he/she should spend time discussing the risks involved in adopting that
idea. The persuader should provide an honest and upfront analysis of risks. In
addition, he/she must highlight the measures to be taken to minimize those risks.
When persuading a Charismatic about an idea one must never make an attempt to
hide its drawbacks. Thus, the persuader should try to gain trust and confidence by
being realistic.
Charismatics have short attention spans. They do not relish lengthy single-sided
presentations. So the persuader should present critical information at the earliest.
Though Charismatics appear to be independent decision makers, in reality, they
take suggestions from high-profile executives while making any major decision.
Though the initial enthusiasm of a Charismatic toward an idea may give one the
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feeling that he/she makes decisions fast, in reality he/she takes his/her own time
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and expects people to wait for him/her to make a decision.
Words associated with Charismatics are results, proven, actions, show, watch, look,
bright, easy, clear, and focus.
Example: Sourav Ganguly: A Charismatic Leader

Sourav Ganguly (Ganguly), the former captain of the Indian cricket team was
considered as a leader with a vision, who could set goals and inspire his team-
mates. Experts credited Ganguly with bringing in an optimistic vision to Indian
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cricket. Ganguly felt that India could achieve better success in international cricket
than it had been doing till then. Experts believed that the Indian team had a
defeatist mind-
countries, the fans in India considered the Indian team to be inferior to other teams
and did not expect to win. Experts too subscribed to this view and said that what a
leader thought had great implications for his followers.
His optimism, strong determination to win, and positive attitude turned around the
fortunes of Indian cricket. His confidence in his own leadership ability coupled
with a touch of aristocratic arrogance held him in good stead. Experts said that with
his vision, Ganguly had turned a group of talented underachievers into a very
competitive unit that could also win away from home. His foresight helped him in
spotting and backing the right candidates and placing them in the right position.
Unlike earlier captains, Ganguly was viewed as a captain who was consciously
building a team. He had a knack for spotting talented cricketers. Once Ganguly felt
that an individual had the talent and potential to be a match-winner, he backed him
wholeheartedly.
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ayer was not guided by parochial

feelings. He backed talented individuals irrespective of the state or zone they
played for. Experts felt that this was unlike earlier captains who invariably backed
players from their own zones. Team selection was often based on internal politics,
and it was alleged that sometimes, even money changed hands. But under
-winning potential were the only criteria.
Experts felt that Ganguly had earned the respect of the team by standing up for the
team members at selection meetings and shielding them from the harsh criticism of
the media, ex-cricketers, etc. This was the sign of a true leader, they said.
the team. Ganguly came to symbolize individualism and rebellion, and his
aggressive attitude rubbed off on the team. He encouraged his young team
members to be aggressive and wear their passion on their sleeves.
unga, former captain of the
Sri Lankan national cricket team (Ranatunga) mold. While in the field, he adopted
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a combative stance bordering on brinkmanship. Soon the young members of the
, this
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attitude did not earn Ganguly any friends from among the competing teams. On the
contrary, it led to disciplinary action against the captain and the team members.
Ganguly himself was summoned to the match referee on about 12 occasions. But
he did not see any problem with this attitude.
was motivating the team. He was a great motivator. By backing the team to the hilt
he earned their undying loyalty. The players he backed more often than not
vindicated his faith on them through their performance.
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Ganguly was very candid and every individual knew what exactly the captain
thought about him. He had his own unique way of dealing with each individual.
His people skills were something that even the seniors in the side such as Dravid
admired. The seniors in the side received due respect from Ganguly and the
feelings were mutual. He made allowances for the occasional quirkiness of young
players knowing full well that youngsters from different cultural and academic
backgrounds took time to mature. But he ensured that each individual player
aligned with the objective of the team.
honesty was the strongest trait of his character. But once the expectations were
communicated, he became an uncompromising leader and a tough taskmaster. He
needed.
lities also earned him the admiration of corporate
leaders. His attitude, management and people management skills were appreciated
by people in the industry. His various traits and skills, and reasons for his success
were dissected, discussed, written, and presented in various forums.
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3.3 Followers
While making decisions, Followers rely on past decisions made under similar
circumstances. Their decision-making also depends on how other trusted executives
made decisions in the past. Followers fear making wrong choices and, therefore, they
are never early adopters. Though Followers are usually very cautious in making
decisions, occasionally, they may make spontaneous decisions. Followers are
responsible decision makers. Like Skeptics, Followers may raise many issues, and
challenge the persuader but unlike skeptics they are ready to learn from others.
Followers do not often consider themselves as followers; they consider themselves as
innovative and forward thinking and try to convince others that they are so.
How to Persuade Followers?
The following points will help in persuading followers:

Followers are the easiest to persuade. The persuader should make them feel
confident. Using anecdotes of successful people who took decisions in the same
way is one way to do this. As Followers believe in proven methods, the persuader
should use as many references and testimonials as possible while persuading them.
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A persuader should try to sell his/her idea to the Follower only if he/she has a
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successful track record. A safe` bet is to dwell on the past decisions made by the
Follower or his/her trusted executives and explain how those decisions are similar
to the ones the proposed by the persuader.
Followers like proven and reliable ideas. The persuader should not suggest any out-
of-the-box ideas to the Followers; neither should he expect similar ideas from them.
Words and phrases that can be associated with a follower are: innovate, similar to,
previous, what works, swift, bright, expedite, just like before, expertise, and old way.
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3.4 Controllers
Controllers can be described as detail oriented, accurate, logical, unemotional,
analytical, objective, accurate, and sensible. They are more interested in pure facts and
the logic of arguments. They experience fear and insecurity. They hate uncertainty
and ambiguity. Like Skeptics, Controllers have strong personalities and are sometimes
overbearing. They think they know the best in any area, be it sales, strategy or
operations. Unlike Followers who always see fr
see everything from their own perspective. They make snap judgments, and curt
remarks which alienate them from others. As they are loners and self-absorbed they
are prone to taking unilateral decisions. Though they may discuss their decisions with
others, they rarely take these inputs seriously.
How to Persuade Controllers?
The following points will help in persuading Controllers:

A persuader should try to overcome the internal fears of the controller (which the
controller will feign as not having). To cover up this fear and insecurity the
controller pays great attention to intricate details of processes and methods. Thus,
the persuader must be prepared to answer questions that ask for minute details.
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As Controllers can be self-absorbed during meetings, the persuader should be

prepared for long silences during presentations. A persuader should never
challenge a Controller directly, as Controllers never surrender while arguing on
what they believe.
Though Controllers demand accurate information they do not always take rational
decisions. On the contrary, they can make illogical and irrational decisions and
also avoid being held accountable for their decisions.
When persuading a Controller, the persuader should put forward an argument that
is structured, linear, and credible as Controllers only have faith in the details
given by experts. The persuader should not try to sell his/her ideas to the
Controller but should leave it to the discretion of the Controller. The persuader
should provide all the necessary information to the controller and leave him/her to
make a decision.
Skeptics and Controllers have many similarities but the key difference between
them is that while Skeptics take decisions fast, Controllers take a lot of time to
arrive at decisions. So the persuader should not try to force a controller to take
quick decisions.
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Some words and phrases that can be linked to controllers are: details, facts, grab,
handle, just do it, keep them honest, logic, make them pay, physical and power.
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3.5 Thinkers
Thinkers are the most difficult to understand, and so the toughest to persuade. They
are academic, cerebral, intelligent, and logical. They are voracious readers and use
words carefully when they talk. They like arguments which are quantitative and
backed by data. Often, thinkers do not possess good social skills, and guard their
emotions. Thinkers take pride in out-maneuvering and out-thinking the competition.
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As Thinkers always ask for comparative data, it often becomes difficult to persuade
them. Thinkers try to gain a holistic perspective of a given situation and, unlike
charismatics, are averse to risk taking.
How to Persuade a Thinker?
The following points will help in persuading Thinkers:

The persuader should communicate the drawbacks of the idea at the beginning of
the meeting because thinkers are more effective in taking decisions when they
know beforehand the risks involved.
Using presentations and arguments that appeal to their intelligence can influence
Thinkers. Their thought process is not always as methodical as it appears to be.
They break from their usual way of decision making if they feel it is going to save
them time and money.
Thinkers rarely forget any bad experience. Hence, the proposal made must appear
to be the best available option to the thinker.
The persuader should give enough time and space to the thinker to come to a
conclusion.
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Thinkers often take contradictory views in meetings. The persuader must

remember that thinkers do not like to express what they are thinking. Taking
contradictory points of view is one way to hide their inclination. They do not
voice their opinion until they take the final decision.
Words that appeal to thinkers are: academic, competition, expert, intelligent, makes
sense, numbers, plan, proof, quality, and think.
Check Your Progress

1. Ineffective presentation of information often leads to failure to
a. motivate
b. make decisions
c. persuade
d. dominate
2. The personality traits such as demanding, disagreeable, rebellious, and disruptive

are applicable to
a. skeptics
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b. charismatics
c. followers
d. controllers
3. Which of the following is the trait of a charismatic?

a. enthusiastic
b. dominant
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c. logical
d. voracious readers
4. Who among the following are the toughest to persuade?

a. controllers
b. charismatics
c. followers
d. thinkers
4. Motivational Skills
Motivating people needs clear thinking and hard work. A leader should have a clear
understanding of the situation in order to be able to motivate people. Motivating
people also requires an insight into human nature. Moreover, the leader needs to set
clear goals and expectations. These goals and expectations provide the much needed
direction to people. Having clear direction enables them to feel that their contributions
are meaningful. This clarity complemented by rewards (both tangible and intangible)
for the desirable behavior motivates people to achieve organizational goals.
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4.1 General Methods of Motivation

Motivating people is not as easy as it sounds. A leader has to know how to motivate
different people with different motivation levels. It is also difficult to ensure high
levels of enthusiasm and commitment during bad times. Let us look at how a leader
can motivate his/her people.
Truth as the Highest Virtue

Understanding the real situation is important. Confronting reality is not always easy.
Only after this is done should one attempt to set high aspirations. So the process of
realizing a goal necessarily follows honest appraisal, and setting of high aspirations.
Carly Fiorina, the then CEO of Hewlett-Packard (HP), had to go through this process.
The biggest motivational challenge she faced was reinventing HP. Reinventing an
organization necessarily involves reinventing its people as well. Reinventing her
people started with self-appraisal. She attempted an honest self-appraisal when she
first met 700 senior leaders of her organization. She led them in a process of
appraising various dimensions such as customers, the competitive situation, and
performance of the company. Then she recalled the comments which the same leaders
had made two years earlier. Most of the leaders had said that HP was slow and
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company. This comparison helped them understand how true they were in their
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appraisals and beliefs. Once this was done, she set goals for the company. She ensured
that the goals were achievable.
Whenever these leaders reached a significant milestone in achieving their goals, she
congratulated them and reminded them how far they had come and how near they
were to achieving their goals. This reminder- a recognition of their efforts- motivated
them further to realize their goals.
Desire to be Great
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People have a great desire to contribute to something lasting and get motivated
naturally when they feel that they are working on something important, rare, and
marvellous. For example, the design group of BMW headed by Christopher Bangle
(Bangle) faced a challenge. The Pinakothek der Moderne, a new modern-art museum
was hesitant
as such an installation would cost time, money, and effort. Also there was hardly three
months left for the museum to open.
museum space, and he got excited at the idea of doing something great. There was not
much time left and he had to convince the board about spending a large amount of
money on a design that offered no tangible benefits. While addressing the Board he
-in-a-lifetime cultural opportunity with the newest,
permission to go ahead. Getting the approval was just the beginning; the actual test
was finishing the project in time. The design team worked with missionary zeal. In 40
installation -
consumed 50 tons of Carrara Marble. Six screens were used to display video loops.
All this was done in a matter of 40 days. Only the desire to be part of something great
made this feat possible.
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Communicate, Communicate, and Communicate
Effectiveness of people at the workplace depends upon their awareness of: what they
are doing, how their work will fit into the grand vision of the organization, and what
the future holds for the organization and for them. To ensure effectiveness in the
organization, the leader should communicate repeatedly on all these aspects.
When Robert A. Eckert (Eckert), the then Chairman and CEO of Mattel in California,
joined the company it was undergoing transition. Eckert spent time with senior
managers, employees from all levels, and stakeholders, explaining what the company
was doing and how it is going to achieve its objectives. He traveled extensively to
communicate his ideas to all the stakeholders. Eckert also encouraged regular e-mail
updates from his people and responded personally to all the mails; this ensured two-
way communication.
Even after the company was in a comfortable position, Eckert did not stop
communicating the vision of the company. His consistent and constant
communication always reassured different stakeholders: customers, investors,
employees, media, and senior management. Direct communication with the CEO
made employees feel respected and part of the team. This motivated them to put in
their best efforts.
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Sharing the Burden of Risk
Motivating people to take risk can be truly challenging. Ross J Pillari (Pillari), the
then President of BP America, experienced this first hand in the early 1990s, when he
was asked by his the then
operations and make it more commercial. At that time, Pillari
retail operations. He thought commercializing an R&D group was not a good idea. He
sensed potential disaster in heading a group of scientists as he was a marketing person
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and was not conversant with science. He feared that he would not be able to
communicate to the group and was hesitant to accept the assignment.
Instead of cajoling or forcing Pillari into the job, the CEO discussed the risks the
organization and Pillari would face if they attempted to commercialize the R&D
group. The CEO assured Pillari that he was not the only one to bear the risk; it would
be spread across the organization After getting this assurance and support, Pillari took
up the job and later was successful in turning the R&D group into a more
commercially focused outfit.
People can be motivated to take up reasonably higher levels of risk. This can be done
by having a frank discussion on the chances of success, making roles and
responsibilities clearer, spreading risk across the team and organization, and by
supporting the initiatives irrespective of the chances of success.
Motivating by Caring
Top managers rarely understand the problems faced by employees at the lower levels.
If a leader cares for employees at the lowest level then he/she inspires and motivates
not only them but also people at all the levels of the organization. This is what Herb
Baum (Baum), the then CEO of Quaker State Corporation experienced.
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When Baum joined Quaker as its CEO, he observed that all the lower rung employees
had very modest lifestyles; every dollar they earned mattered a lot. They spent each
dollar with utmost care. The lower level employees were earning US$ 25,000-US$
40,000 a year and getting US$ 500 as bonus, whereas the top people got much larger
bonuses. Baum decided to give away US$ 1000 from his annual bonus to each of the
155 people with the lowest salaries. This he reasoned would help them to meet some
of their needs such as sending a child to school, meeting health care expenses for an
ailing parent, etc. Baum feels that if a leader shows genuine concern towards his
people, it goes a long way in inspiring them and creating loyalty in them, which will
undoubtedly improve organizational performance.
Motivating People at Different Levels

In general, organizations have three levels of people: executive team members, middle
level managers, and line staff. Each of these groups has its own expectations. In order
to meet these different expectations incentives have to be different.
Liu Chuanzhi (Chuanzhi), the then Chairman of the Legend Group based in Beijing,
addressed this problem in the following ways:
Executive team: People of this team need recognition and a sense of ownership.
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To fulfill this expectation Chuanzhi created a new ownership structure, adopting a
joint stock company structure. Then he distributed
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among the senior executives to make them feel that they too are owners of the
company. Chuanzhi ensured that they got recognition by seeing to it that these
executives have regular interaction with the media. Legend was one of the best
growing and most promising companies in the whole of China. No senior
executive has left Legend for another company.
Middle level managers: Middle level managers yearn for opportunities to
demonstrate and develop their talents. So they are most likely to take up
challenges. Chuanzhi recognized that providing right challenges can motivate
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talented and capable individuals. Hence he set high performance standards for his
middle level managers. He also allowed them to participate in strategic processes
that determined the way they did their work. Finally he saw to it that all good
performers were adequately rewarded.
Other staff: Line employees value a sense of stability. Chuanzhi saw to it that
they got predictable bonuses if they took on adequate responsibility and behaved
in the desired manner.
Example: How Mario Mazzola Retained Talented People?
Motivating and retaining talented people can be difficult. There are situations when
a leader has to motivate his/her people to find a complex solution rather than a
simpler one. There are occasions where he/she might have to make people find
really simple solutions. Mario Mazzola (Mazzola), chief development officer at
Cisco Systems, suggests that one effective way to retain talented people is to
provide them with challenge.
Some talented people are good at finding complex solutions to complex problems.
But simple solutions can be useful sometimes. So Mazzola encourages these kinds
of people to design simpler solutions by mastering the basics. Designing simpler
solutions needs discipline, imagination, and self-confidence. This task provides
them with enough challenge.
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Some talented people are good at finding efficient and innovative ways to develop
new technologies. But since customers use existing technologies, what they really
need most of the times, is an integrated solution. Creating an integrated solution
can be a complex problem and a complex problem might need a complex solution.
To encourage people to develop complex solutions, Mazzola first acknowledges
their resourcefulness and also encourages them to meet customers to understand the
situations in which customers operate. This provides them with healthy challenges,
while giving recognition to their ingenuity.
Adapted from Carly Fiorina, Christopher Bangle, Chauncey Veatch, L.M Baker, Jr., Robert A.
Eckert, Susan Butcher, Ross J Pillari, Herb Baum, Mario Mazzola, Robert D Ballard,. Liu
Chuanzhi, Hank McKinnell, Harvard Business Review, Jan 2003.
Motivating by Setting Difficult Goals
A goal is a desired consequence of an action. In other words, a goal is the end toward
which efforts are directed. Researchers have examined the relationship between the
level of difficulty involved in attaining a goal and performance levels of workers. Of
the 192 field studies conducted in this area, 175 concluded that the difficulty level of
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the goal and the performance of employees had a linear relation. In other words,
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difficult goals stimulate greater effort and performance than relatively easier ones.
It is generally believed that participation in the goal setting process enhances
performance. However, research has shown that participation has a positive impact
only on the level of commitment to the goal and not necessarily on the performance.
Motivating in Times of Crisis
People often mistake coaxing, wheedling, and persuading for motivating. However, in
times of emergency, a leader may have to just take a decision and ensure that people
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stick to it.
The experience of Robert D. Ballard (Ballard), an underwater explorer whose team
discovered the Titanic and the Bismark, tells us that people do their work brilliantly in
times of emergency even when they had no say in the decisions.
land.
The film was to be telecast live in classrooms in several schools in the US. Equipment
worth US$ 6 million was collected for the purpose, and transported to the exploration
site with the help of the navy. A week before filming was to begin; the barge carrying
the equipment sank 600 miles offshore. 0.25 million children had studied Galpagos
Island all through the year with this exploration in mind, and so canceling the project
was out of the question.
Ballard organized a hunt for equipment. He divided his team of 20 into smaller teams
and started to mobilize funds from every source available. A lot of universities,
organizations, governments, and individuals came forward to help. The CIA, the
American intelligence agency, even lent its plane. All the 20 people worked
relentlessly. The equipment thus collected was flown to California and then to
Ecuador. The program was telecast live on schedule. It was a rewarding experience
for Ballard and his team.
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Activity: Sam Peter (Sam) is a newly appointed plant manager at Sunnyvale Steel
Corp. He is given the responsibility of handling the entire production process. The
top management has instructed Sam to offer incentives to workers who completed
their production schedules on time. But he did not follow this incentive scheme.
Instead he informed workers that the incentives would be given only to workers
who would produce more number of quality output units than their regular
schedule. This however did not motivate the workers. Most of the workers
delivered quality output and thus made themselves eligible for incentives. Which
motivation method was used by Sam to motivate its employees? Do you think this
method was suitable? Why (not)? Suggest other suitable methods of motivation.
Answer:
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4.2 Motivating Frontline Staff: Lessons from the US Marine Corps
Most organizations rarely try to motivate their front line people. The reason is that
they think these people are dispensable and need not be bothered about. Consequently,
these employees rarely involve themselves emotionally in the work they do. Often
these people are unskilled, paid low wages, and used to repetitive work. Their work is
monotonous, and they rarely have opportunities for career advancement. The only
thing that connects them with the company is the pay check. Obviously, they cannot
-term performance. However, they play an
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experience. Sometimes they have the most original i

try to motivate their frontline people?.
McKinsey & Company and The Conference Board conducted a study to identify the
companies which tap the emotional energies of their frontline people. It is a well
known fact that Home Depot, Southwest Airlines, KFC, and Marriott International
take good care of their frontline people. But one organization which demonstrated a
highly effective way of motivating frontline employees was none other than the US
Marine Corps. After studying this organization for three months, and conducting
nearly a 100 interviews, McKinsey & Company concluded that the Marines can teach
a lesson or two to the captains of industry in motivating their frontline people.
Marines motivate their frontline people by investing a lot of time and energy to
cultivate strong values, preparing everyone to take up leadership positions, bringing
clarity between teams and single-leader work groups.
Invest to Inculcate core Values

In general, when new people join an organization, the organization communicates its
values to them. Different organizations have different ways of communicating their
values. But often, only a sketchy idea about the organization and its values is
communicated.
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The Marines, however, give a lot of importa

new recruits. Indoctrination of values starts right from the recruitment stage. Instead of
relying on headhunters and HR people, they send their best sergeants and mid-career
officers for recruiting. These are the people who know the Marine values the best and
have a missionary zeal. People who are recruited by the sergeants and officers have
already understood the Marine Corps values and are prepared to accept them.
In the Marines, training lasts for 12 weeks. This training for the most part involves
physically and emotionally demanding exercises. The Marines involve their most
experienced and talented people in the training of new recruits. Involving the best
people in training, and conducting it for weeks certainly requires more investment.
However since these people become role models for new recruits and build in them
commitment and focus, this benefits the organization immensely in the long term.
Prepare Everybody to Lead
Most organizations separate frontline e
take special care to nurture the so-called potential leaders. But the number of potential
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leaders is quite small because organizations classify people into potential leaders
based on a standard business leadership model which includes attributes like strategic
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thinking, delegation, and setting and meeting demanding targets. Almost every
business leader would agree that there are various leadership styles and concentrating
only on the above three aspects in identifying leaders, is not the right way to groom
future leaders.
The Marine Corps, however, does not differentiate between leaders and followers. It
believes that every Marine has the potential to take up a leadership position. The
nature of war dictates that everybody should able to take and give orders. Thus, each
enlisted Marine is trained to lead a fire team (four-person unit of Marine operations)
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and every officer is trained to lead a rifle platoon. Training all the frontline people in
leadership has tremendous impact on their morale. The belief that everybody can be a
leader creates collective pride, and mutual trust.
Differentiate between Teams and Single-leader Work Groups
Most businesses do not distinguish between teams and single-leader work groups and
most executives do not know the difference between the two. This lack of clarity leads
to confusion, lack of motivation and ultimately to lower performance. Real teams are
difficult to find. What organizations often label as teams are in fact single-leader work
groups. In these work groups, members depend on the leader for purpose, goals,
motivation, and assignments. These work groups are fast and efficient and are
preferable when the individual task is more important than collective work, and when
the leader is sure of what to do. In real teams, members are motivated by the mission
and goals rather than by their leader. Members of the team treat other members as
their peers and are bound by mutual accountability for results. An individual member
never fails or succeeds in a team, only the team does.
The Marines are extremely good at separating teams from single-leader work groups.
They are clear about when to function as a team and when as a work group. This
clarity helps them to be motivated.
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4.3 Motivating Problem People

/her
ability to execute and deliver. With right incentives, people move in the desired
direction. But this is applicable only to few employees, and still fewer leaders. Also,
the assumption that motivation lectures, cash incentives, and memos can motivate all
the employees is flawed. There will always be some disgruntled employees (let us call
them problem people) with whom these motivational tools will not work.
From their experience, managers say that managing these problem people takes most
of their time and energy. So it is important that these problem people be motivated.
Some steps are suggested below to motivate such people.
Step 1: Learn More about Them, about Yourself, and about the Situation
In order to motivate a problem employee, a leader should first understand him. He/she
should know the drives of the employee. Once, these are known, he/she should see
whether there are any blocks that stop him/her from pursuing his/her drives. He/she
To know all these about a problem employee, leaders need information. Subordinates,
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peers, and previous leaders can be the sources of information. A problem employee
himself/herself can be a source of information. A leader can use informal
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conversations that occur during lunch or social events to gather the needed
information. The following information can be collected:
How the problem employee looks at the world?
How past events have influenced his expectations and desires?
What factors influence his choices?
What factors in the work place act as impediments in fulfilling his drives?
Most of the time, the problem lies with the direct boss. He/she can be a source of
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dissatisfaction and the reason for an employee quitting his/her job. To know whether
he/she is a part of the problem, the leader has to do some soul-searching. He/she
should also ask his/her subordinates whether there is a problem with his/her behavior
and way of doing things. A problem employee might not reveal this to the leader, but
other subordinates might. Over a period of time, a leader can expect a reasonably
accurate picture of himself/herself - the way he/she is perceived by his/her
subordinates. At this point, if the leader finds that his/her relationship with the
problem employee cannot be mended, then he/she should pass on the task of
motivating the problem employee to some other person.
The situation can also create a problem employee. So the leader should see whether a
problem employee is that way because of the situation he/she is in. For example, an
apparent deterioration in performance may be the result of increased performance
expectation due to restructuring or some other reason, rather than any actual falling
off in performance. Due to this situation, an impression may have been created that
the employee is not performing well, even when there is no real deterioration in
performance.
behavior could be the reason behind the problem. Understanding an employee and the
context in which his/her performance has deteriorated can help the leader to go
beyond a narrow mind-set. This can result in better employee performance, and most
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Have a Range of Alternatives
Sometimes, a leader gets frustrated and feels that while he/she is a reasonable person
trying to find a sensible solution to a problem, the unreasonable employee is not
in doing what he/she was doing. A leader thinking along these lines may either give
up altogether or fire the employee.
Instead, if the leader changes his/her attitude from that of punishing an errant
employee to that of rehabilitating him, then he/she would certainly find some new
alternatives to the problem. For this the leader has to give up the pre-determined
solution. Framing a range of solutions should not be seen as a sign of capitulation. The
leader should understand that different people have different perceptions. If he/she
ignores this truth and tries to impose his/her solution on a problem employee, then the
leader might end up either losing the opportunity to motivate a problem employee or
ignoring options to solve the problem.
It is possible that having a range of alternatives would result in the leader setting
modest and achievable goals for his/her problem employee. As he/she comes to know
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him/her better, the leader can set some novel or even ambitious targets. This way,
while the leader may fail to get a problem employee do what he/she wants, he/she
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would succeed in getting more than expected. However, this list of alternatives should
either provide a solution or resolve the issue (in this case, through employee
termination).
Have a Formal One-to-one Session
The aim of this session is revise the working relationship. The session must be
handled systematically and carefully. Sometimes it is possible that more than one
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session is necessary to meet the objectives. The session needs no special material or
preparation.
The leader can start the session with a brief introduction of the problem
/she can then talk about
the current problem. He/she should mention clearly how he/she looks at the
problem and stress that things cannot and will not continue the way they are.
He/she can then conclude by saying that he/she expects a mutually beneficial
outcome from the meeting.
After the introduction, the leader should ask questions that involve intense and
extended inquiry to test the hypotheses made in understanding the problem situation.
The other objective is to see whether there are any unknown and potential areas of
agreement between the leader and the problem employee. The final objective is to
bring differences into the open.
The leader should be careful during the session. He/she should avoid the pitfall of
letting the session degenerate into an opportunity to use facts and arguments to nail
the employee. The goal of the session should be to identify new views of the
situation.
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Check Your Progress

5. People of executive team need __________.
a. an opportunity to showcase talent and motivate talent
b. sense of stability and enhance performance
c. recognition and a sense of ownership
6. In what way are people motivated to take higher levels of risk?

a. by making roles and responsibilities clearer
b. by understanding the problems faced by them
c. by giving the required sense of ownership
d. by coaxing
7. A ______ is a desired consequence of an action.

a.
b.
rotivation
Reaction
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c. vision
d. goal
8. What is the aim of having a formal one-to-one session?

a. To revise the working relationship
b. Set modest and achievable goal for problem employee
c. For better leadership performance
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5. Conflict Resolution Skills

Conflicts are common in all organizations. They may arise due to disagreements over
goals or the means adopted to attain them. Conflict is also a perceptual issue.
Individuals or groups may have differences of opinion. These differences in opinion
or perspective may lead to conflict. Conflict can be harmful to the interests of an
organization. So a leader must have adequate skills to resolve conflict. Conflict
resolution professionals suggest that there are four areas of skill development in
conflict resolution: Listening; questioning; communicating non-verbally; and
mediation skills.
Active listening is a skill that can be useful in resolving a conflict. Active listening
involves paying strict attention to the speaker, asking suitable questions, and double
checking what one understands. Most of the time, listeners do not pay full attention to
what the speaker is saying or are more bothered about what they themselves are going
to say next. Active listening on the contrary demands active engagement in the
communication process. A leader should listen carefully to the parties in the conflict.
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A leader with good questioning skills understands the root of the problem, why the
conflict arose, and how to resolve it. Generally he/she avoids posing loaded or leading
questions because such questions could give the impression that the leader is trying to
impose his/her values or solutions on the parties in the conflict.
A leader with good non-verbal communication skills can use these skills in a conflict
situation to put the parties at ease, and demonstrate his/her willingness to help them
arrive at a mutually acceptable solution. For example, positions such as sitting
squarely in an open position and affirmative gestures like nodding the head promote
an atmosphere in which disputants feel free to share their facts and feelings. Similarly,
clenched fists, turning away, crossing arms and wiggling the feet signal tension,
hostility or nervousness. An ability to read and use non-verbal skills promotes better
understanding and problem solving. With the help of these skills, a leader can
comprehend what is actually causing the conflict. Without an insight into non-verbal
communication, the leader may be misled by what the disputants are saying, and may
never be able to resolve the situation.
Arriving at a win-win solution in conflict situations needs mediatory skills and traits
such as open-mindedness, flexibility and resilience, the capacity to demonstrate
empathy and sensitivity, objectivity and the ability to depersonalize situations, a sense
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of timing, patience and the willingness to hear all sides without interruption and with
credibility and integrity.
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By mastering listening, questioning, non-verbal communication, and mediation skills,
a leader can be more effective in situations that involve inter-personal conflict.
Activity: XYZ Scooters Ltd. is a two-wheeler company in India. The company

encouraged its employees to work in groups. Since the company faced shortage of
human resources, it recruited some more employees. To train the new employees,
the management made these new employees work with the experienced employees.
This often led to conflicts between the new and the old employees. This resulted in
production delays and losses for the company. The manager of the company, Steve
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asked the employees to resolve their conflicts within themselves. However the
conflicts became worse. Suggest and discuss how Steve can intervene and arrive at
a mutually acceptable solution.
Answer:
6. Leadership Tactics
6.1 A Model of Power and Influence

Leaders not only have to deal with just their subordinates who are under their control,
but also with their superiors and people who are beyond their chain of command.
Hence, they cannot get their work done just with their positional power. Thus leaders
employ different tactics to get their work done.
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Relationships beyond the Chain of Command
Effective leaders extend their sphere of influence beyond the formal chain of
command involving superiors and subordinates. This makes them more effective in
handling their responsibilities. An effective leader identifies the source of all lateral
relationships; identifies people who may resist cooperation; develops relationships to
overcome resistance and if the resistance still continues, implements more forceful
methods. These actions can be classified into four steps.
Step one: This involves identifying the people who have to be led. The leader tries to
find relevant lateral relationships. This is a difficult task because these lateral
relationships are often subtle and invisible. There are no well-defined ways to
understand interdependencies among people beyond the chain of command. There are
no organizational charts or job descriptions to clarify these relationships. And these
relationships are highly fluid and change far quicker than relationships that exist as a
part of the chain of command.
How do Leaders Identify these Relationships?
Effective leaders try to identify people whose cooperation and compliance would be
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necessary in the future. For this leaders need to clearly understand:
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Where they themselves are headed?
What they intend to do?
Whose involvement is crucial to reach the intended goal?
Which individuals could prove an obstacle to them in fulfilling their leadership
responsibilities?
Effective leaders never alienate individuals who could have a role to play in their
scheme, when they deal with the problems caused by lateral relationships.
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Step two: The second step involves identifying people who may resist cooperating
with the leader for some reason. Effective leaders identify such people, understand the
reasons for their resistance, and assess how strong their resistance would be. One
often-quoted reason for resistance is diversity. People may resist because they have
different priorities, abilities, and stakes. They might also resist because they assess the
situation differently. All these factors can create conflict instead of cooperation. These
differences are more pronounced when the parties are involved in lateral relationships
than when they are in formal chain of command hierarchies.
How do Leaders Assess Power?
Effective leaders understand the differences that lead to conflicts. They try to avoid
differences and to derive benefit from commonalities. For example, most successful
business leaders clearly comprehend the dissimilarities between themselves and
business journalists. They also perceive the commonalities and mutual interests. With
this understanding, they let mutual interests guide their interactions with the press.
Effective leaders understand differences well enough to predict where resistance and
conflict can arise. They try to avoid these as much as possible. When they become
unavoidable they try to predict the intensity of resistance. Assessing power is an
important skill that is essential for leaders to master. The power they derive out of
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position is only one source of power in the organization. Other sources of power are
information and control of information channels, control over important resources
such as money, people, and machines, a track record of expertise in a specific area,
energy, intelligence, good relationships, and interpersonal skills. People who resist the
leader may have access to some or all of these sources of power. In some cases their
power can overwhelm the power of leaders.
Step three: Effective leaders use different methods to overcome resistance. Developing
relationships is one common way of overcoming resistance. Leaders build personal
relationships with people who are capable of resisting their efforts. Then they employ
these relationships to communicate, educate, and negotiate with the resisting parties.
How do Leaders Develop such Relationships?
There are different ways to build relationships. The basis of all these is an
understanding of the people with whom the leader wishes to enter into a relationship.
Next he/she can try to meet the expectations and needs of these individuals in a
reliable way. This creates trust, which encourages these people to start paying
attention to the advice and ideas of the leader. The people also reciprocate by meeting
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the needs of the leader. This seems easy and obvious, and it is. Anyone with
sufficient effort can develop a good relationship with someone else. But creating
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relationships outside the chain of command needs sufficient time. This is a constraint
leaders often face. In order to create relationships in the little time they have, they
need careful planning and organizing.
Step four: Good relationships and good communication are often enough to minimize
the resistance leaders face in their lateral relationships. However, in some jobs, the
relational structure breeds and promotes stubborn resistance.
How do Effective Leaders Handle this Stubborn Resistance?

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In such cases leaders are left with no other alternative except using complicated and
forceful methods. These methods are risky, and may invite retaliation. Effective
leaders are ready to fight it out if that is the only way left to attain their organizational
objectives.
6.2 Relations with Subordinates

Relations with subordinates also can be difficult to handle. However, in case of
relations with subordinates, the nature of the difficulties may not be the same.
Leaders, even when they are effective, are dependent on their key subordinates. This
dependency is greater in the case of subordinates than in the case of people who are
outside the chain of command. Key subordinates can create special problems. They
might demand special privileges and need careful attention. There is greater
interdependency among subordinates, than among subordinates and outsiders. Thus a
system
relationships among subordinates pose additional challenges. The following types of
subordinates have a certain amount of power in relation to the leader:
Subordinates who have skills which are difficult to replace.
Subordinates who have unique or exclusive information or knowledge.
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Subordinates who maintain good relationships with their leaders. Leaders find it
difficult to take strict action or impose severe restraints on these subordinates
even when they are necessary.
Subordinates whose jobs are related to other important jobs in the organization, thus
making other important people in the organization indirectly dependent on them.
How do Effective Leaders Handle their Subordinates?

In order to deal with subordinates effectively, leaders bring additional sources of
power to their job. They acquire job related skills and abilities; enter into working
relationships; acquire information and tangible resources. Effective leaders combine
all these elements to strengthen their position in relation to their subordinates.
6.3 Relations with Superiors

The effectiveness with which leaders maintain their relationships with their
subordinates and outsiders depends upon the support of their own superiors. As the
/she can determine how his subordinate
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relates to the organization. The boss has a say in providing resources, determining
priorities (in such a way that they align with organizational objectives), and setting up
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rewards for performance. An effective leader knows that he/she has to maintain a
good relationship with his superior to fulfill his responsibilities as a leader. The
importance of subordinates in the success of their leaders is a well-known fact. But
bosses too have a very important role to play in the success of leaders.
How do Effective Leaders Deal with their Superiors?
Effective leaders understand that their relationship with their bosses is one of mutual
interest. They accept the fact that they are at least as dependent on their bosses as the
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bosses are on them. They understand fully well that they and their bosses have
different backgrounds and that these differences can be a source of conflict. They
manage the relationship, keeping this in mind. Also, they are aware that the
relationship between a subordinate and his superior is different from that between a
child and a parent. They believe that the burden of maintaining the relationship does
not lie only with the superior. All good leaders know that wisdom and maturity is not
always the privilege of bosses.
Effective leaders unde
weaknesses, and his working style. They also understand their own needs, objectives,
strengths and weaknesses, and personal styles. They use all this information to build
and maintain their relationship with their superior. They maintain a good relationship
by providing information on what is happening, by being open and reliable, and by
6.4 A Model of Effectiveness and Influence

Effective leaders and senior level executives face two major challenges: Finding out
what to do even when they have potentially relevant information, and getting things
done through a large number of people with diverse backgrounds over whom they do
not have complete control. Effective leaders respond to these challenges by setting
their own agendas and building a network of people.
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Setting Agendas
Generally, in the first six months of taking up an assignment, leaders mostly
concentrate on setting their agendas: loosely connected goals and plans that address
long, medium, and short term responsibilities. These agendas address finance,
production, marketing, and organization related issues. Most agendas are different
from the formal plans because they include the goals, priorities, strategies and plans
not included in the formal plans. Effective leaders never express their agendas in
formal written plans.
Leaders try to obtain the information required to set their agendas from their discussions
with people with whom they maintain formal and informal relationships. They are not
very specific about whom they collect the information from. For example, they gather
information on planning even from people who are not connected with the planning
function. Questioning is the most commonly used technique in obtaining information.
Leaders question on the basis of their existing knowledge of business, management, and
organization. They gather information on a continual basis.
Building a Network
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Effective leaders invest significant time and effort in building their network. The
network is basically made up of cooperative relationships. They build relationships
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with people who are going to be helpful to them in implementing and updating their
agendas. The relationships extend beyond their immediate subordinates. Leaders also
The nature of these relationships differs significantly. Leaders make it obligatory for
other people to enter into a relationship with them by granting favors. They behave in
ways that encourage people to identify with them. They also build their professional
reputation carefully. Leaders may even maneuver some people into believing that they
depend on the leader for resources, career advancement, and other support.
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Implementing Agendas
Effective leaders try to implement their agendas by taking help from all the people in
their network. They take the help of their peers, corporate staff, subordinates, bosses,
supporters, customers, and even competitors. Leaders use symbolic methods such as
meetings, language, and stories about the organization to implement their agendas.
The best of the leaders influence more people and employ innumerable number of
tactics. They encourage, cajole, ask, praise, reward, demand, manipulate, and motivate
with great skill. They are also better than other leaders at using indirect influence.
Check Your Progress

9. Which of the following is not among the four areas of skill development in
conflict resolution?
a. listening
b. motivation
c. mediation
d. questioning
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10. A leader with good ____________skills can put the parties at ease during a
conflict and demonstrate his/her willingness to help them arrive at a mutually
acceptable situation.
a. verbal communication
b. questioning
c. non-verbal communication
d. all of the above
11. This is one of the important powers that leaders should master.
a. assessing power
b. dictating subordinates
c. enhance persuasion skills
d. building network of people
12. Which of the following type of subordinate have a certain amount of power in
relation to the leader?
a. subordinates who dominate their leaders
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b. subordinates who listen to their superiors
c. subordinates who create conflict
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d. subordinates who have skills which are difficult to replace
13. Effective leaders and senior level executives face two major challenges: Finding
out what to do even when they have potentially relevant information, and
____________.
a. getting things done through a large number of people with diverse backgrounds
over whom they do not have complete control
b. taking up assignments for setting agendas
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c. investing significant time in building networks

d. gathering information on a continual basis
7. Summary
Based on their personality and decision making process executives can be classified
into five types: Skeptics, charismatics, followers, controllers, and thinkers.
Motivating people needs clear thinking and hard work. A leader should have a
clear understanding of the situation in order to be able to motivate people.
Motivating people also requires an insight into human nature. Moreover, the
leader needs to set clear goals and expectations. These goals and expectations
provide the much needed direction to people. Having clear direction enables them
to feel that their contributions are meaningful. This clarity complemented by
rewards (both tangible and intangible) for the desirable behavior motivates people
to achieve organizational goals.
Conflict resolution professionals suggest that there are four areas of skill
development in conflict resolution: Listening; questioning; communicating non-
verbally and mediation skills.
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Leaders not only have to deal with just their subordinates who are under their
control, but also with their superiors and people who are beyond their chain of
command. Hence, they cannot get their work done just with their positional
power. Thus leaders employ different tactics to get their work done.
8. Glossary
Goal: A goal is a desired consequence of an action. In other words, a goal is the
end towards which efforts are directed.
1. Explain how persuasion skills of leaders can be improved. Describe the
classification of executives into five decision-making types.
2. Explain the general methods of motivation.
3. Describe the steps involved in motivating problem people.
4. Conflicts are common in all organizations. Why does a conflict arise? Suggest
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ways in which conflict can be resolved.
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5. Explain the tactics used by leaders to deal with their subordinates and superiors.
6. Effective leaders and senior level executives face two major challenges: Finding
out what to do even when they have potentially relevant information, and getting
things done through a large number of people with diverse backgrounds over
whom they do not have complete control. Explain how effective leaders respond
to these challenges.

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John Adair, Leadership Skills, CIPD Publishing, 1998.
2000.
2007.

1. c. persuade
Often people fail to persuade others because they concentrate more on the content
of their message while ignoring how the message is delivered. Ineffective
presentation of information often leads to failure to persuade.
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2. a. skeptics
Skeptics are suspicious of data that contradict their views. They have strong
personalities. The characteristics of such personalities are demanding,
disagreeable, rebellious, and even disruptive at times. Executives with such
3. a. enthusiastic
Charismatics are talkative, dominant, captivating, enthusiastic, and persistent.
4. d. thinkers
Thinkers are the most difficult to understand, and so the toughest to persuade.
They are academic, cerebral, intelligent, and logical. They are voracious readers
and use words carefully when they talk. They like arguments which are
quantitative and backed by data.
5. c. recognition and a sense of ownership
People of this team need recognition and a sense of ownership.
6. a. by making roles and responsibilities clearer
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People can be motivated to take up reasonably higher levels of risk. This can be
done by having a frank discussion on the chances of success, making roles and
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responsibilities clearer, spreading risk across the team and organization, and by
supporting the initiatives irrespective of the chances of success.
7. d. goal
A goal is a desired consequence of an action. In other words, a goal is the end
toward which efforts are directed.
8. a. To revise working relationship
The aim of having a formal one-to-one session is to revise the working
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relationship.
9. b. motivation
Conflict resolution professionals suggest that there are four areas of skill
development in conflict resolution: Listening; questioning; communicating non-
verbally; and mediation skills. Hence option b is incorrect.
10. c. non-verbal communication
A leader with good non-verbal communication skills can use these skills in a
conflict situation to put the parties at ease, and demonstrate his willingness to
help them arrive at a mutually acceptable solution.
11. a. assessing power
Assessing power is an important skill that is essential for leaders to master.
12. d. subordinates who have skills which are difficult to replace
The relationships among subordinates pose additional challenges. The following
types of subordinates have a certain amount of power in relation to the leader:
Subordinates who have skills which are difficult to replace.
Subordinates who have unique or exclusive information or knowledge.
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Subordinates who maintain good relationships with their leaders. Leaders

find it difficult to take strict action or impose severe restraints on these
subordinates even when they are necessary.
performance.
Subordinates whose jobs are related to other important jobs in the
organization, thus making other important people in the organization
indirectly dependent on them.
13. a. getting things done through a large number of people with diverse
backgrounds over whom they do not have complete control
Effective leaders and senior level executives face two major challenges: Finding
out what to do even when they have potentially relevant information, and getting
things done through a large number of people with diverse backgrounds over
whom they do not have complete control. Effective leaders respond to these
challenges by setting their own agendas and building a network of people.
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Unit 4
The Making of a Leader
Structure
1. Introduction
2. Objectives
3. The Making of a Leader
4. Developing Next Generation Leaders
5. Tying Leadership Development to Organizational Goals
6. Summary
1. Introduction
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Before we begin this unit, let us recall what you learned in the previous one. You saw
how executives are classified. You learned about the general methods of motivation
and the skills that leaders need to have to resolve conflicts in their organizations. A
discussion on the tactics adopted by leaders to deal with subordinates and superiors
wrapped up the unit.
As you know, the business environment and technology of today are going through
rapid changes. Organizations are being forced to reexamine the way they conduct
business and to their dismay, they are finding that old approaches to conducting
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business are no longer relevant. They find that in these circumstances, a leader who
can coach his/her subordinates and who can think strategically is an important source
of competitive advantage for them. The focus of organizations is, therefore, on
identifying and developing such leaders.
Since leadership development is too critical and specialized a function, many
organizations feel that it should not be left solely to the human resource department.
In companies such as General Electric, Johnson & Johnson, Shell International, which
are known for their leadership practices, the top management involve themselves in
leadership development programs. As you can see then, for these leadership
development programs to be successful, top management involvement and support is
crucial.
Organizations can sustain the momentum of desirable change by promptly assessing
the effectiveness of its leadership development programs, capitalizing on early
successes in these programs, and communicating the success to all stakeholders.
What you will learn about in this unit is how leaders are made. Another aspect that
you will get to read about relates to the components of developing leaders. In the final
part of the unit, you will learn the steps that link leadership development to
organizational goals.
2. Objectives
understand how leaders are made.
understand the components of developing leaders.
discuss the steps that link leadership development to organizational goals.
3. The Making of a Leader

How are leaders made? How do effective leaders inspire confidence, hard work, and
loyalty when other people who are equally bright and visionary fail? What makes
them extraordinary? Do they deal with adversity in a different way?
These are the questions to which Warren Bennis (Bennis) and Thomas Robert
(Robert) tried to find the answer through extensive research. They interviewed nearly
40 top leaders in business and the public sector. And what emerged from their
research was that most of the leaders had had intense, traumatic, and unplanned
experiences that had transformed them. These experiences became the source of their
leadership capabilities. Many of the leaders said that while undergoing these
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experiences, they went through a phase of thorough and deep self-reflection in which
they questioned their values, assumptions, and priorities. They tried to find out who
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they were and what the purpose of their lives was. All these experiences and learning
helped them become more adept in their judgments.
According to Bennis and Robert, the ability to find meaning in negative events and to
learn from extremely demanding and often painful circumstances in life are the right
indicators of true leadership. Due to these abilities, true leaders conquer adversity and
emerge stronger and more committed than they were.
3.1 Learning from Experience

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Most of the leaders interviewed by Bennis and Robert had been victims of some type
of prejudice. This prejudice led to traumatic experiences and distorted pictures about
themselves. However, it also helped them to clarify their opinion about themselves
and get a clear picture about who they were and where they stood.
Commenting on the making of a leader, Philip J. Carroll Jr, the then CEO of Fluor
difficult, challenging circumstances where you are outside of the comfort level that
you have. It helps to be scared sometimes, to be actually worried. Not to obsess or not
to let it get the best of you but to feel like, I may have bitten off more than I can chew.
Example: Liz Altman in Japan

Liz Altman (Altman), the then Vice President of Motorola, underwent a difficult
was a victim of both estrangement and sexism at this place. The Japanese culture,
which emphasizes group performance rather than individual performance, came
as a shock to Altman. Altman, the only woman engineer in the plant, found that her
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male colleagues did not accept her though the women welcomed her. Altman spent
time with her women colleagues during breaks. However, she observed what the
men did during breaks.
Altman noticed that some men spent the breaks reading magazines and she decided to
do the same. She also noticed that some of them were interested in mountain biking.
When she wanted to buy a mountain bike, she approached these people. That is how
her association with the male employees in the plant started. Slowly the men started
seeing her as a free agent who was comfortable spending time with women as well as
men. Also, the department secretary who was the wife of an engineer working in the
plant made it a point to invite Altman to all the social occasions. These occasions also
offered her opportunities to interact with other engineers.
After going through this testing experience, Altman had a clear understanding of
her strengths and capabilities and was ready to face difficult situations. In the year
she spent at this plant she learnt how to observe closely, and how to avoid jumping
to conclusions based on cultural assumptions. This learning proved invaluable to
her in her job at Motorola, where she was responsible for creating alliances with
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Business Review, Sep 2002, Vol. 80, Issue 9.
This example shows you how a

overcome adversity and emerge stronger from the experience. We can explain adaptive
capacity in terms of two qualities. The first is the ability to grasp the context. This
requires weighing different factors such as how different people interpret gestures to
getting a holistic perspective on a situation. The ability to grasp the context is important
because only then will a leader be able to connect with his/her constituents. The second
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quality is hardiness. This is the ability to persevere and overcome difficult situations.
Together, the ability to grasp the context and hardiness ensure the survival of a leader
and also help him/her to emerge stronger and more committed.
4. Developing Next Generation Leaders

Organizations are increasingly realizing the need to develop next generation leaders
who can -to-
Any method that aims at building next generation leaders should take two aspects into
consideration. One: Learning is most effective when it occurs where it is going to be
practiced. Only then can it deliver real and immediate value. Two: One can learn
leadership lessons better when the lessons come from trusted and respected people in
the organization. When emerging leaders learn from the top executives, they get to
them for leadership positions in the future. According to Douglas A Ready (Ready),
one approach that top executives can adopt in building leadership is storytelling.
Ready says storytelling by senior executives in an organization results in potential
leaders getting to know how their role models behaved. This can generate impressive
results when they replace these leaders.
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As you know, storytelling has been used down the ages successfully to communicate
messages. The Bible is an example of how storytelling was used effectively to shape
behavior, cultural norms, and core values.
Stories evoke rich visual imagery in the minds of the listeners, which enables them to
receive the message with interest and intensity. This is why storytelling is a popular
method of developing new leaders in an organization. However, storytelling involves
hard work and demands energy and time. According to Ready, there are five
components necessary for shaping great stories that build leadership. Let us take a
look at each of these:
4.1 Context-Specific
s
the effectiveness of the initiative by building strategic competence and strengthening
organizational character. However, a storyteller can also narrate experiences that
about his/her experiences in his/her early career in another company as well. The only
factor to be kept in mind is that the narrated experience should in some way relate to
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4.2 Level-Specific
The experiences the storyteller narrates should pertain to his/her handling of the same
level of responsibilities that the program participants deal with. Even high-potential
executives will not learn much about leadership by listening to great leaders unless
they can relate to those experiences. The speeches may be motivational and inspiring
but if there is a big gap between the experiences of the leaders and those of the
program participants, the participants will not gain much. Thus, the challenge for the
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storyteller is to frame stories with which participants can identify and which they can
reflect on to resolve their problems.
4.3 Use of Role Models

Stories must create a relationship between the coaches and their trainees based on
learning. To create such a relationship it is necessary that the coach commands trust
and respect. If the coach does not have a high standing, his/her stories will be met
with skepticism. It is also essential that the leaders are approachable and accessible.
4.4 Dramatic
A story should be such that it grabs the attention of the listeners. Stories should
involve instances in which the storyteller was faced with having to make tough
choices. For example, a story can be relate to situations that the storyteller had to face
that challenged his/her can also include
situations where the storyteller had to struggle with new assignments or remove key
people from his/her team to give new direction to the business. The stories narrated
should challenge the participants to think of similar circumstances, and how they
would cope with the situation.
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4.5 Learning Value

An effective story stimulates learning. The impact of this learning can be seen in the
changes in behavior. Different organizations focus on different skills and behaviors as
components of effective leadership. Thus, stories must concentrate on building these
skills or promoting the desirable behaviors. For example, a particular story can
concentrate on leadership competencies (skills) while another can concentrate on a
shared set of values (behaviors). However, effective stories emphasize both.
Activity: ABC Ltd. is one of the leading retailers in Germany and is known for its
premium label products. The company was ahead of its competitors due to the
availability of company-label as well as other products. Of late, the company has
started facing competition from low-cost retailers. To combat them, the manager,
John called the staff and discussed the problem. However, this did not have any
nued to face a decline
in sales. If you were the manager of ABC how would you make the employees
understand the problem and come out with an appropriate solution? Discuss.
Answer:
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4.6 Storytelling in Practice
For storytelling to be effective in developing leadership in the organization, these
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steps should be followed:

The top team should be actively involved in the storytelling program. A
leadership development initiative of this kind should not be left to a single person
or a few senior executives. The involvement of a majority of the top management
is necessary to make the program successful. The top management should be
engaged and visible throughout the process.
Getting a collective point of view on leadership is essential. Before the top
management starts teaching leadership effectiveness, it should understand what
effective leadership means in the context of the organization.
Before taking up the storytelling approach to developing leadership, all other
approaches should be considered. It is not necessary that every leadership lesson
be taught through stories. Other approaches such as benchmarking, executive
programs offered by universities, action learning, and structured coaching can be
employed along with storytelling.
It is necessary to have the right team in place to carry out leadership development
initiatives. The most enthusiastic members of the top team should be chosen as
leader-coaches. Such people will infuse passion into the collective effort. HR
executives also can be a part of the team. They can help in identifying high
potential people.
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The storytellers should be coached. People who specialize in leadership issues

can advise leader-coaches on how to shape their stories to ensure optimal
learning. Advisers can also help the coaches rehearse so that the stories have the
intended impact. Participants have to be selected after careful consideration. Once
they have been identified, they should be made aware of the objectives of the
program and their responsibilities as partners in the program.
Stories should be used to facilitate dialogue, reflection, and action. They should
not be mere speeches but agents for discussion. The stories should be short
(generally lasting for 30 minutes) followed by dialogue and an in depth
discussion on the leadership challenges found in the story. This discussion should
be followed by a reflection on the leadership stretch objectives that were
identified before the program and action plans to reinforce the learning.
Check Your Progress

1. Adaptive capacity is
a. an important source of competitive advantage for any organization
b.
c.
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the ability to overcome adversity and emerge stronger from experience
the ability to deliver real and immediate value
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d. All of the above
2. Organizations are increasingly realizing the need to develop next generation

leaders who can .
a. translate strategy into results and core values into day-to-day behaviors
b. coach subordinates
c. carry out succession planning
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d. develop leadership programs
3. This is one of the aspects to be taken into consideration while grooming next
generation leaders
a. People should be taught to capitalize on early success
b. People should be prepared to face traumatized experiences
c. One can learn leadership lessons better when they come from trusted and
respected people in the organization
4. Certain steps have to be followed for storytelling to be effective in developing

leadership in the organization. Which of the following statements is false in this
context?
a. The top management should be engaged and visible throughout the process
b. Getting a collective point of view on leadership is essential
c. It is necessary to have the right team in place to carry out leadership development
initiatives
d. The storytellers do not require any coaching
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5. Tying Leadership Development to Organizational Goals

In the late 1990s, Robert Fulmer, in association with the American Productivity &
Quality Center and the American Society for Training and Development, conducted
extensive research to understand how organizations design processes that transform
managers into leaders and how the best leadership development organizations design
their world-class programs. What he found was that best practice organizations tied
their leadership development programs with their business strategies. They also
invested adequate financial resources in these programs. The research revealed that
the CEOs of these organizations supported the leadership programs because they felt
that the programs would help in aligning functional areas with corporate strategy.
Carly Fiorina (Fiorina), while serving her term as the CEO of Hewlett-Packard (HP)
during 1999 to 2005 was trying to reinstate HP to its previous place as a top high-
tech-innovator. It was a tough task, given the fact that she had to convince HP
employees first that the company could become a hot new company in the Internet era
without compromising on the quality and integrity so characteristic of HP. The
problem was that most of the HP engineers were concentrating on what used to be
important, rather than what was necessary for the future.
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Once leadership development began improving in HP, the company started making
prudent business decisions. Senior executives at HP actively participated in the
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leadership development programs and Fiorina used these programs to articulate her
However, researchers were of the view that only having strategic vision is not enough
to bring about change or link leadership development to company goals. An
organization has to take five critical steps to achieve this.
5.1 Consciousness
Let us see what organizations that have the best leadership development practices do.
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These organizations look for ideas from within and outside. They pay attention to the
changes taking place in the external environment; emerging business opportunities
and strategies; developmental needs of the organization, and the leadership
development efforts of other leading organizations. So, where do these organizations
get their information from? The sources of information for them are marketing
research agencies, researchers of business trends, and leading-edge thinkers. These
organizations create leadership development programs keeping all these aspects in
mind. They also ensure that the leadership development programs meet the short-term
and the long-term goals of the organization.
One organization that makes sure its leadership development programs address its
long-term demands is Shell International (Shell). Its LEAP team interacts continually
with managing directors of all geographic and functional areas to bring about
corporate transformation.
The team prepares the budgets for its projects and sets time expectations and goals for
the leadership development programs only after discussions with the key people who
will take part in the program.
To get ideas from outside the organization, Shell has joined the Global research
consortium run by a group of transnational companies. The company also keeps in
touch with consultants and professors so that it is aware of the latest in leadership
research.
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Example: Leadership Development at Intel

Intel Corp. (Intel), the leading semiconductor manufacturer based in the US,
employs three systems to groom its people into leaders. The first system is based
on peer-to-peer interaction. This system helps participants to get management
experience at a young age. As a part of this system, 10 employees, who are going
to be promoted shortly, are brought together. They are encouraged to teach one
another on a continuous basis. This exercise serves as a preliminary training for the
department.
The second system is based on peer and mentor interaction. Each new manager
joining Intel gets a
manager can also choose one mentor who has a proven ability to help employees
reach their goals.
The third system is based on action-oriented learning. Managers based in different

parts of the world come together and work in virtual teams to solve business
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problems. These teams are proactive. Senior members in the teams seek projects
that enhance the leadership skills of all the members.
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Senior managers at Intel have to participate in at least four leadership development
programs every year and their annual bonus is linked to their participation. Intel
also employs leadership assessment tools. These tools are not related to the
ed with
the feedback mechanism and to check whether the employees are following

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Activity: CS Ltd. is a leading business conglomerate in the US. The company has
several business lines such as in cement, steel, pharmaceuticals, plastics,
computers, telecommunication, etc. The company is 80 percent privately owned by
its CEO, Frederick James (James). James is known for his leadership skills and the
effective way in which he manages his staff. The company is planning to expand
into other diverse areas. James wants the managers of each department to handle
the businesses effectively and to attain the organizational goals. What should James
do to make the employees across its diverse business lines to attain the
organizational goals? Discuss.
Answer:
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5.2 Future Orientation

The best leadership development programs focus more on the future than on the
present or the past. Companies with top leadership development programs use
learning tools to prepare themselves for the future. They use focus groups to identify
potential challenges or to measure the impact of emerging technologies. They conduct
analysis of future scenarios and employ tools such as decentralized strategic planning,
and the Delphi method. The Merlin process, an example of decentralized planning, is
both participative and future-centered.
Managers employing this process imagine what the organization, if completely
successful, would look like in the next ten years. This type of planning can provide
insight and input to senior executives, and lead to more productive leadership
development sessions.
5.3 Execution
Execution is the goal of any leadership development process. Gaining knowledge
without the intention of using it is, of course, meaningless. So the best leadership
development organizations use real-time business issues to develop leadership skills.
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The instructor leading the discussion group often does not have the answers to
difficult questions. He/she tries to find solutions along with the participants. In some
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organizations, participants even implement the recommendations they made during
the leadership development program. However, this type of experiential learning can
be complex and costly as it involves both pre-program and post-program work. So
what happens is that some organizations follow a modified approach. Before the
beginning of the course, the organization determines the criteria for selecting the
client with a problem. It also determines the protocol for interviewing the client. A
team of learners identifies the recommendations for the client. After the course, the
team presents the recommendations to the actual client.
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5.4 Integration
Organizations with the best leadership development practices understand the
importance of aligning leadership development with other corporate functions.
Leadership development efforts in such organizations are linked to formal succession
planning. Both the leadership development function and the succession planning
function report to the same executive. Some organizations merely assume that
leadership development programs will naturally lead to better succession planning.
Some companies have started integrating the assessment, development, feedback,
coaching, and succession planning functions. In organizations following this kind of
integrated approach, leadership development exercises ensure a continuous flow of
information and help in identifying and grooming leaders.
5.5 Evaluation of Development Efforts

Companies with great leadership development skills lay much emphasis on measuring
and evaluating the impact of their leadership development programs. They use
different tools and techniques to gather information on the perceived value provided
by these programs. The Kirkpatrick Four-level Model of Evaluation is one such tool.
This tool measures participant reaction, knowledge acquired, behavioral changes, and
business results. Participants in the development program, HRD staff, consultants, and
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financial staff conduct this evaluation. Many companies use the Kirkpatrick levels to
quantify the impact of leadership programs on business results. Companies also use
metrics such as corporate performance, customer satisfaction, and employee
satisfaction to evaluate the effectiveness of their leadership development efforts.
Check Your Progress

5. Which one of the following are the sources of information for organizations
seeking to keep track of changes taking place in the external environment?
a. Marketing research agencies
b. Researchers of business trends
c. Leading-edge thinkers
d. All of the above
6. What do best leadership development organizations use to develop leadership

skills?
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a. Employ tools such as decentralized planning
b. Allocate budgets for the projects
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c. Research on leadership
d. Real-time business issues
7. In the integrated approach of leadership, leadership development exercises

ensure:
a. provision of insight and input to senior executives leading to more productive
leadership development
b. identification of potential challenges, or measurement of the impact of emerging
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technologies
c. continuous flow of information, and help in identifying and grooming leaders
d. criteria for selecting the client with a problem
8. The Kirkpatrick Four-level Model of Evaluation is one such tool that measures
a. participant reaction, knowledge acquired, behavioral changes, and business
results
b. the number of recommendations given to the clients
c. the
d. the
9. The effectiveness of leadership development efforts can be evaluated through

a. corporate performance
b. customer satisfaction
c. employee satisfaction
d. All of the above
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6. Summary
Great leaders demonstrate one important ability
ability to overcome adversity and emerge stronger from the experience. This
ability can be explained in terms of two qualities. The first is the ability to grasp
the context. This is the ability to weigh different factors that influence the
situation; to understand how another person will interpret a gesture; and to
communicate perspectives on the situation. The second is hardiness --
perseverance and toughness. Hardiness helps people to overcome devastating
circumstances. The combination of the ability to grasp the context and hardiness
ensures that a leader not only survives, but also learns and emerges stronger and
committed from adverse situations.
According to Douglas A. Ready, the following components are necessary for
shaping great stories that build leadership: they should be context-specific, level
specific, should use role models, be dramatic, and have learning value.
Researchers are of the view that strategic vision alone is not enough to bring
about change or link leadership development to company goals. An organization
has to take five critical steps to achieve this: consciousness, future orientation,
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execution, integration, and evaluation of development efforts.
FA
1. How are leaders made? Explain the key factors that help in the making of a leader.
2. to develop next generation
To what extent is it important for organizations to nurture next
generation leaders? Explain the components that are essential to build leadership.
3. Describe the steps that link leadership development to organizational goals.
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John Adair, Leadership Skills, CIPD Publishing, 1998.
2000.
2007.

1. b. ability to overcome adversity and emerge stronger from experience
and emerge stronger from experience.
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2. a. translate strategy into results and core values into day-to-day behaviors
Organizations are increasingly realizing the need to develop next generation
-to-day
3. Answer: c. one can learn leadership lessons better when they come from
trusted and respected people in the organization
Any method aimed at building next generation leaders should take two aspects
into consideration. One: Learning is most effective when it occurs where it is
going to be practiced. Only then can it deliver real and immediate value. Two:
One can learn leadership lessons better when they come from trusted and
respected people in the organization.
4. d. the storytellers do not require any coaching
For storytelling to be effective in developing leadership in the organization, the
following steps should be followed:
The top management should be engaged and visible throughout the process.
Getting a collective point of view on leadership is essential.
I
Before taking up the storytelling approach to developing leadership, all other
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approaches should be considered.
It is necessary to have the right team in place to carry out leadership
development initiatives.
The storytellers should be coached.
Stories should be used to facilitate dialogue, reflection, and action.
Organizations that have the best leadership development practices look for ideas
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from within and outside their organizations. Such organizations pay attention to
changes taking place in the external environment; emerging business
opportunities and strategies; developmental needs of the organization and
leadership development efforts of other leading organizations. The sources of
information for these organizations are marketing research agencies, researchers
of business trends, and leading-edge thinkers.
6. d. real-time business issues
The best leadership development organizations use real-time business issues to
develop leadership skills.
7. c. continuous flow of information, and help in identifying and grooming
leaders
In organizations following the integrated approach of leadership, leadership
development exercises ensure continuous flow of information, and help in
identifying and grooming leaders.
8. a. participant reaction, knowledge acquired, behavioral changes, and
business results
The Kirkpatrick Four-level Model of Evaluation is a tool that measures participant
reaction, knowledge acquired, behavioral changes, and business results.
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Course Structure
Block I: The Mystique of Leadership
Unit 1 Understanding Leadership
Unit 2 Leadership Styles
Unit 3 Leadership Skills and Tactics
Unit 4 The Making of a Leader
Block II: Path to Leadership
Unit 5 Leading a Learning Organization
Unit 6 Coaching Leaders
Unit 6
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Developing Performing Teams
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Unit 8 Leadership Succession
Block III: Leadership Culmination
Unit 9 Level 5 Leadership
Unit 10 Narcissistic Leaders

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Unit 11 Leadership Challenges
Block IV: Change Mastery
Unit 12 Understanding Change
Unit 13 Implementing Change
Unit 14 Change Agents
Unit 15 Disruptive Innovation

Block
II
PATH TO LEADERSHIP
UNIT 5
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Leading a Learning Organization 1-14
UNIT 6
Coaching Leaders 15-25
UNIT 7
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Developing Performing Teams 26-43
UNIT 8
Leadership Succession 44-57
Expert Committee
Hyderabad
Hyderabad
Hyderabad Hyderabad

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Hyderabad Hyderabad


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Block II
Path to Leadership
We now come to the second block of this course on Leadership and Change
Management. What you will learn about in this block is how a learning organization is
led, the role of a leader as a coach, developing performing teams, and the importance
of leadership succession. We have divided the block into four units. Here is what you
will learn about in each:
Unit 1: The learning organization and how it is led.
Unit 2: The role of a leader as a coach.
Unit 3: How performing teams are developed.
Unit 4: The significance of leadership succession.
In the first unit, Leading a Learning Organization, you will be introduced to the
concept of learning. You will learn about the various ways of organizational learning
and the different ways in which an organization pursues learning. Finally, the unit will
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touch upon the different roles of a leader in a learning organization.
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The second unit, Coaching Leaders, will tell you about the different types of
coaching. It will discuss the role of a leader as a coach. How a coach can be improved
is a question this unit will answer.
In the third unit, Developing Performing Teams, you will see why organizations have
moved from a command and control style of leadership to a team-based approach.
What exactly is a team? You will find the answer to this question in this unit, which
will also explain the concept of teamwork, and list the differences between a team and
a workgroup. You will learn about the principles of a great team and how to determine
the right size of a team. The unit discusses the skills necessary for a team and the
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different leadership approaches that foster team performance. A discussion on the

importance of continuous learning for teams wraps up this unit.
In the fourth unit, Leadership Succession, you will get an overview of leadership
succession. You will learn about the importance of having the right CEO and about
who would be a better fit as a CEO an insider or an outsider. The unit discusses the
different ways in which companies can ensure the right successor. Finally, you will
take a look at the emergence of women as CEOs of companies and the various
challenges they face in a male-dominated corporate world.
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Unit 5
Leading a Learning Organization
Structure
1. Introduction
2. Objectives
3. Learning
4. The Learning Organization
5. Innovative Learning
6. Leading a Learning Organization
7. Summary
8. Glossary
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1. Introduction
Before we begin, let us briefly review what you learned in the previous block.
You got an overview of leadership and several leadership theories. Different
leadership styles and different leadership skills and tactics formed part of the
block, which went on to discuss how next generation leaders can be developed.
Here, in this unit you will get to know what a learning organization is and how
learning organizations are led.
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Learning, as you know, is an ongoing and creative process. Every organization, has to,
therefore, nurture learning in order to create its own future. A learning organization
encourages its employees to develop creative ideas that will bring in desirable results.
In this unit, you will learn about the concept of learning and the various ways of
organizational learning. You will also get a look at the different ways in which an
organization pursues learning. Finally, the unit will discuss the different roles of a
leader in a learning organization.
2. Objectives
By this end of this unit, students should be able to:
understand the concept of learning.
discuss the various ways of organizational learning.
discuss the different ways in which an organization pursues learning.
understand the different roles of leader in a learning organization.
Path to Leadership
3. Learning
What are the personal qualities that leaders should have that will help them run their
organizations? Warren Bennis and Burt Nanus conducted a survey to determine just
this and they found that most of the respondents listed the following qualities:
persistence,
self-knowledge,
willingness to take risks and accept losses,
commitment,
consistency, and
readiness to face a challenge.
However, it was learning that they rated as the most important quality.
You may be surprised to know that most leaders are learning all the time. Effective
leaders are voracious learners. Many learn from friends and associates. For example,
Sam Walton, the founder of Wal-Mart was known for spending time with customers,
to learn from them.
I
Most leaders part of the survey said they learned from experience, and identified a few
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mentors and key experiences that had helped in shaping their personalities,
aspirations, and operating styles. And most of the leaders believed in stretch, growth,
and breaking new ground all the time. Learning provides leaders with energy and
keeps up the momentum for change by bringing in new understanding, new ideas, and
survive in a rapidly changing and complex business environment. A leader cannot

sustain his or her position without learning.
The survey revealed that leaders not only know how to learn, but also how to learn
something that will be beneficial to the organization. They can identify what is
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important for the organization and use the organization as a learning environment.
According to Donald Michael, successful leaders do this by identifying a set of skills
a. Acknowledging and sharing uncertainty

b. Embracing error
c. Responding to the future
d. Becoming interpersonally competent (e.g., listening, nurturing, coping with value
conflicts, etc.)
e. Gaining self-knowledge.
Warren Bennis and Burt Nanus also found through their research that leaders
acknowledge and share uncertainty with their colleagues while setting their tasks.
They learn from their mistakes and engage in goal-setting exercises to re-examine
current assumptions and priorities. They use their inter-personal skills to motivate
their colleagues to look for new ideas. They try to understand their limits and biases
by comparing their views with knowledgeable colleagues or outside experts. Thus
leaders know what to learn and how to learn.
Take a minute to recall the qualities that leaders should have that will help them run
their organizations.
2
4. The Learning Organization

Some management experts believe that several eastern philosophies have the right
approach to continuous learning. Such philosophies assert that one never can
understand anything completely and that life is a continual process of learning. Peter
c
Chinese. It is literally impossible, because all you can ever do is practice constantly.
Organizations are continuously changing due to both internal and external forces.
These changes can be either rapid and significant, or slow and insignificant. But in
both cases, the organizations are changing and are trying to adapt themselves to the
changing environment. In other words, they are also learning.
What exactly do you understand by organizational learning? You can define it as a
process by which organizations obtain and use new knowledge, tools, behavior, and
values. There are three levels at which organizational learning occurs: the individual
level, the group level, and the system level. Individuals learn when they interact with
one another and the outside world in the course of their regular work. Group learning
I
occurs when the members of the group cooperate with each other to accomplish
common goals. The whole organization (system level) learns from the feedback it
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obtains from the environment and by anticipating further changes. The newly acquired
You can classify organizational learning into: maintenance learning and

innovative learning.
So what is maintenance learning? It means acquiring fixed ways, methods, and rules
to deal with situations that are known and recurring in nature. It improves problem
solving ability in cases where the problem is known. This type of learning is designed
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to maintain the existing system. According to Bennis and Nanus, for the long-term
survival of the organization, however, and especially in times of turbulence, change,
or discontinuity, it is innovative learning that is more important. Innovative learning
ensures long-term survival by bringing in change, renewal, and restructuring.
Most organizations have mastered the art of maintenance learning. They have
developed and institutionalized ways to ensure maintenance learning. While this
orientation is necessary, it is not sufficient for growth. In maintenance learning,
current performance is compared only with past performance, not with the
performance that might have been or that is going to be. So corrective actions based
on maintenance learning address only perceived weaknesses or failures; they do not
focus on building strengths or creating new opportunities.
The aim of innovative learning, on the other hand, is to prepare organizations for
action in new situations. This requires an imaginative understanding of the
environment yet to appear. Innovative learning deals with emerging issues that are
unique and so cannot be learned by the trial and error method. These issues do not
have known solutions. This is one reason why organizations tend to neglect innovative
learning. As a result, they find it extremely difficult to adapt to environmental
responsibility to ensure that innovative learning takes place too.
3
Path to Leadership
Check Your Progress

1. Which of the following is not a skill acquired by a successful leader in using the
organization as a learning environment?
a. Becoming interpersonally competent (e.g., listening, nurturing, coping with value
conflicts, etc.)
b. Responding to the past
c. Embracing error
d. Acknowledging and sharing uncertainty
2. Organizational learning is defined as a process:
a. in which organizations learn a lot
b. that improves problem-solving abilities
c. by which organizations obtain and use new knowledge, tools, behavior, and values
d. that helps organizations to develop tools that can be used on the (?) job
3.
I
means acquiring fixed ways, methods, and rules to deal with situations
that are known and recurring in nature.
FA
a. Innovative learning
b. Experiential learning
c. Spatial learning
d. Maintenance learning
4. According to Bennis and Nanus, innovative learning is crucial:
a. when the morale of the people is low
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b. in times of turbulence, change, or discontinuity

c. when people lack self-development skills
d. when the organization is on the path of growth
5. Maintenance learning can be taken care of by the _________; it is the _________
a. managers; leaders
b. leaders; managers
c. employees; managers
d. managers; employees
5. Innovative Learning
learning?
operating style, and ability to absorb change. An organization pursues learning in

different ways. Let us see what these ways are:
4
Peep into the past: Every organization goes through some experiences. It has its own
traditions,, its share of successes and failures. And these past experiences can prove
invaluable. Warren Bennis says that organizations can learn from their past
experiences by re-examining them in the context of the new and evolving
environment. The lessons learned can help the organizations adapt to different
environments. Table 5.1 shows you how Cisco Systems learned to behave differently
in a new environment.
Table 5.1
Overhauling Cisco
Prior to change Post-change (2001-03)
Engineering Engineers were free to do Top executives took back the
what they thought responsibility of setting the direction
appropriate for the for the company. As a result of these
company. They had changes,
absolute freedom. by 27%, to 24,000 models.
Culture Cisco had little Teamwork became a major mode of
I
coordinated planning. decision-making. Even top executives
were expected to work in a
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collaborative mode. Thirty percent of
their annual bonuses depended on their
ability to work with their peers.
Operations Each unit in Cisco was A committee took care of all such
free to choose its own decisions. This resulted in a lower
suppliers and number of suppliers and
manufacturers. manufacturers. Sales per worker in
2001 increased to $ 548,000, a rise of
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24%, in 2003.
Growth Only focus was Cisco began concentrating on six new
Strategy networking gear. markets, which included security and
net phones.
Source: Peter Burrows, Business Week, Nov 24, 2003, p 44.
Cisco, the networking giant from the US, suffered from the major slump in the IT
industry in 2001 like many other companies. Unlike others, however, it emerged from
it with renewed vigor. Its share prices in 2003 zoomed by 80% over that of the
corresponding period in 2002.
Controlled experiments: It is important for organizations to be aware of the direction
of change in the environment. So organizations usually carry out controlled
experiments and study their effects. Many organizations employ market research
operate by feel and by feedback. They grope their way into the future, moving one
Organizations learn from the experiences of

other organizations as well. Leaders learn by reading trade publications, attending
trade association meetings, and discussing the problems of the industry with other
leaders.
5
Path to Leadership
Example: Ideas and Techniques Adopted by GE from Other

Companies
1.
business, had
double and triple inventory turnover rates and move toward a goal of zero
working capital. GE teams successfully adopted it and obtained dramatic
results in the Power Systems, Plastics, and Medical Systems divisions.
2.
-50% out of product costs over a two-year
-of-the- -
functional teams to remove obstacles to cost reduction, was fully operational in
3. Quick Market Intelligence -- the weekly direct customer feedback technique --

was originally learned from Wal-Mart and implemented with great success in
GE
4.
I
service in its credit card operations.
Caterpillar reduced its service cost structure and new product introduction time
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through part standardization disciplines. The implementation of these
disciplines was the key to the rapid new product introduction successes in
cycle times were cut by more than half.

5. half the parts, half the weight,
in half the time and it was expected to become a key element of engineering
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Source: www.ge.com, Annual Report 1994.
Learning through analysis: According to Warren Bennis and Burt Nanus, many
organizations learn by continuously analyzing trends in the external environment,
identifying emerging issues, and designing new ways to cope with those issues.
According to Alfred P
business judgment is, of course, intuitive.... But the big work behind business
judgment is in finding and acknowledging the facts and circumstances concerning
technology, the market and the lik of the
leaders that Warren Bennis and Burt Nanus interviewed felt the same. They were of
precede intuitive decision-making.

Learning through formal and informal means: Many organizations have formal
training programs. Though most of these are aimed at building the individual skills of
employees, some of them concentrate on team building and group learning
experiences. For example, courses on new technologies and industry trends are aimed
at ensuring organizational learning about changes in the environment. Informal
training such as briefings by vendors, consultants, and external auditors also result in
organizational learning. Similarly, newsletters and bulletin boards promote learning in
the organization.
6
Example: Learning at FedEx

In the mid-
which developed several training programs for various levels of management-cadre
employees. The training courses were conducted in three disciplines Core
Management Principles, Outdoor-based Learning, and Electives. The faculty at the
senior m -line managers, LDI

developed an 11-
and field operations.
FedEx gave its Information System (IS) employees training in both IT skills and
management skills. In 1995, the company tied up with the Christian Brothers
University (CBU) to offer a 40-week training course specifically designed for IS
employees. In this course, the employees were given training in marketing,
accounting, and economics as well as in object programming, transaction
management, distributed data management, and client-server computing. FedEx
paid the entire fee for the course. The program became an integral
I
training module for IS employees. The employees were given time off from their
jobs to attend the classes, which were conducted twice a week.
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Unlearning: Organizations have to unlearn; they have to discard old knowledge when
their actions conflict with the realities of market place. Incidents such as losing a key
customer can force an organization to question its old assumptions, and recombine,
reorder, or change them. Learning organizations place a lot of value on unlearning
experiences as they serve as reality tests and make it possible for them to change in
order to avoid major mistakes in the future.
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The six modes of innovative learning just discussed help organizations to reconfigure
themselves, replace old rules, improve information flows, and improve their creative
abilities. Some organizations are fast learners while others are not; but it is the
leadership that makes this difference. An organizational learning effort without
appropriate leadership will undoubtedly lack energy, force, cohesion, and purpose.
Can you recall the six ways of innovative learning? Take a moment to remember.
Activity: Fly High Airlines, a low-cost airline company in India, had been
performing extremely well as a niche player competing with other high-end
passenger carriers. However, the increasing prices of aviation turbine fuel and taxes
had increased the costs for the airlines. The management therefore decided to
rethink the fundamentals and practices of the airline. The company decided to have
more trips and improve the customer service management like informing customers
of flight delays via phone or mail and to upgrade its website to respond quickly to
passenger bookings. Training, therefore, was inevitable for the employees. Most of
the employees found it difficult to understand the new ways such as embracing
high-end technology solutions that would make issuing of tickets faster. In this
case, what kind of learning methodology should the company adopt? Do you think
7
Path to Leadership
informal means of learning will help the employees understand and embrace the
change in an easy way? Why (not)? If you were the CEO of the airline, how would
you assess the situation during a crisis? What suitable learning methods would you
adopt?
Answer:
6. Leading a Learning Organization
I
In a learning organization, a leader plays three roles: that of a designer, a teacher, and
a steward. The skills required for these roles are an ability to bring shared vision to the
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surface and challenge existing mental models and an ability to foster systematic ways
of thinking in the organization. Leaders in learning organizations have to make sure
that their people expand their capacities and shape their futures. In other words, they
are responsible for the learning of the organization and the people in it.
According to Peter Senge, leadership in a learning organization is based on the
principle of creative tension. Creative tension occurs when the leader sees clearly
where the organization should be and understands clearly where the organization
currently is. The gap between where the organization should be and where it is
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generates creative tension. Senge says there are two ways of resolving creative tension
raise the current reality toward the vision or lower the vision toward the reality.
Organizations which learn to work with creative tension know how to channel the
energy created by that tension to move reality toward their vision.
6.1 Leader as a Designer

An organization with a poor design will be ineffective, even if it has a great leader.
Organizational design is concerned with designing the governing ideas of the purpose,
vision, and core values by which the members of the organization will work. The first
task of leadership is to design the governing ideas. The second task is to apply them in
policies, strategies, and structures that translate the guiding ideas into business
decisions. The appropriateness of policies, strategies, and structures depends to a large
extent on effective learning processes. Thus,
organization is to create such processes.
6.2 Leader as a Teacher

y. He/she should help his/her people to
get accurate, insightful, and empowering views of current reality. Thus, the leader
assumes the role of a teacher. According to Peter Senge, the role of a teacher in a
8
learning organization can be developed by paying

and with the help of systems thinking. A leader as a teacher has to bring the mental
models of those working in the organization to the surface. This is important because
a mental picture of how the world works influences how the workforce perceives
various problems and opportunities. It also influences how the courses of action are
identified and how people make their choices.
organization often mistakenly think that passing events represent the underlying
reality. They see the pressures they have to bear, the crises they must react to, and the
limitations they must accept as reality. But these are just visible and temporary
conditions. There are some underlying causes to these problems. A leader as a teacher
indicates what is beyond these obvious events. There is often a pattern behind events.
And there could be some basic problems behind this pattern. A leader has to make
his/her people restructure their views of reality. By addressing the problems behind
the patterns of events (such as crises and pressures), a leader can help workers create a
new future.
Reality can be viewed at three different levels: events, patterns of behaviors, and
systemic structure. Now the question is: where does a leader focus his/her attention,
I
and the attention of the organization? Contemporary society concentrates, for the most
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part, on events. The media encourages this by highlighting short-term and dramatic
events. It tries to explain what is happening in terms of the events. For example, stock
market analysts may say that the Sensex has dropped because the Prime Minister fell
ill. Analysts believe this explanation and the public accepts it. But there could be a
pattern in this and other falls in the Sensex. Reality can be understood at this level
the level of the pattern -- as well. Systemic structural explanations seek to explain
problem or reason which causes certain patterns of behavior. Understanding reality at

this systemic level is understanding the persisting problem or reason.
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Explanations at all three levels may be valid. But their usefulness may differ.
Explanations about events promote a reactive stance to change. Pattern of behavior
explanations attempt to identify long-term trends and measure their implications.
These explanations help organizations over a period of time to adapt to changing
circumstances. Structural explanations are the most beneficial over the long term.
They try to provide explanations of the underlying causes of behavior. Such
explanations hold out the hope that patterns of behavior can be changed to the
concentrate largely on events and
to a lesser extent on patterns of behavior. Under their leadership, organizations too do
the same. This is why most organizations are reactive while only a few are generative.
Leaders in learning organizations try to understand reality at all the three levels, but
focus on the systemic structure. They also encourage people in the organization to do
the same. As a result, learning organizations are better prepared for the future.
6.3 Leader as a Steward

Regarding the role of the leader as a
role of leadership. Unlike the roles of designer and teacher, it is almost solely a matter
9
Path to Leadership
Peter Senge says that while people have realized that stewardship is an aspect of
seminal book, Servant Leadership, provides a useful explanation of stewardship. In

ader is servant first.... It begins with the
natural feeling that one wants to serve, to serve first. This conscious choice brings one
to aspire to lead. That person is sharply different from one who is leader first, perhaps
because of the need to assuage an unusual power drive or to acquire material
As a steward, a leader can operate at two levels: stewardship for the people in the
organization and stewardship for the larger mission that underlies the organization. At
the first level, the leader understands the impact his/her leadership can have on his/her
people. He/she understands that people can suffer economically, emotionally, and
spiritually under incompetent leadership. People working in a learning organization
are positively influenced by their leader due to their own commitment and sense of
ownership. A leader who understands all this develops a sense of responsibility for the
people in the organization.
At the second level, a leader of a learning organization has a sense of personal
I
purpose and commitment toward achieving his/her
Peter Senge says, he/she unleashes the energies of his/her people by appealing to their
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natural impulse to learn. He/she does this by engaging them in an endeavor they
consider worthy of their fullest commitment. Lawrence Miller puts it plainly,
noble forces of our
purpose that extends beyond his/her organization. He/she attempts to transform the
way his/her business operates with the conviction that he/she can create an
organization that is more productive, that can achieve higher levels of organizational
success, and that can provide personal satisfaction.
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Activity: CS Foods Ltd. is a fast food company in India. The employees at the
company were trained to cook all kinds of cuisine domestic as well as
international. The management of the company noticed that the employees wasted
a lot of resources. A member of the top management, Celia, inspected the
employees personally and made them realize how resources were being wasted.
She also gave them innovative ideas on how to make use of the resources in a
different way. This instilled a sense of responsibility among the employees and the
management soon noticed that there was hardly any wastage of resources. Identify
and discuss the role played by Celia. Also discuss other roles played by a leader in
a learning organization.
Answer:
10
Check Your Progress

6.
i. Environment
ii. Competition
iii. Culture
iv. Financial position
a. i, ii, and iii
b. i and iii
c. i, iii, and iv
d. ii, iii, and iv
7. Some of the formal training programs aim to:
a. gain knowledge
b. concentrate on team building
c. analyze the business trends
I
FA
d. build customer relations
8. The various modes of innovative learning help the organizations to .
a. retain old rules
b. improve their creative abilities
c. make leaders
d. increase training and development expenses
9. What is the role played by a leader in a learning organization?
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a. A designer
b. A teacher
c. A steward
d. All of the above
10. Which of these is not a skill of the leader in a learning organization?
a. ability to bring shared vision to the surface
b. ability to challenge existing mental models
c. ability to create tension
d. ability to foster systematic ways of thinking in the organization
11. Organizational design is concerned with of the purpose, vision, and
core values by which the members of the organization will work.
a. designing the governing ideas
b. training
c. revealing hidden assumptions
d. learning behavioral pattern
11
Path to Leadership
7. Summary
Organizational learning can be defined as a process by which organizations
obtain and use new knowledge, tools, behavior, and values.
Organizational learning occurs at three levels: the individual, group, and system
levels.
Organizational learning can be classified as maintenance learning and innovative
learning.
Maintenance learning is concerned with acquiring fixed outlooks, methods, and
rules. This type of learning is meant to deal with known and recurring situations,
and improves the problem solving ability of organizations.
Innovative learning aims to prepare organizations for action in new situations. It
requires an understanding of the environment before it actually appears. There are
six ways in which an organization can pursue innovative learning: By taking a
experiences, learning through analysis, learning through formal and informal

means, and unlearning.
I
maker. A leader in a learning organization is a designer, a teacher, and a steward.
FA
In order to lead a learning organization, a leader needs to possess special skills:
an ability to bring shared vision to the surface and to challenge existing mental
models, and ability to foster systematic ways of thinking in the organization.
According to Peter Senge, leadership in a learning organization is based on the
principle of creative tension. Creative tension occurs when the leader sees clearly
where the organization should be, and understands clearly where the organization
currently is. The gap between these positions generates creative tension.
8. Glossary
IC
Organizational learning: Organizational learning is a process by which

organizations obtain and use new knowledge, tools, behavior, and values.
1. ? Explain the
importance of learning for a leader and list the skills that are required for a
learning leader.
2. Define organizational learning. Describe the various methods of organizational
learning.
3. Describe the different ways in which an organization pursues learning.
4. Explain the different roles of leader in a learning organization.

David E. Meen and Mark Keough, Creating the Learning Organization,
McKinsey Quarterly, February 1992.
12
Mark Easterby-Smith, Luís Aráujo, and John G. Burgoyne, Organizational

Learning and the Learning Organization: Developments in Theory and Practice,
SAGE, 1999.
Alan T. Belasen, Leading the Learning Organization: Communication and
Competencies for Managing Change, Suny Press, 2000.
Peter M. Senge, The Fifth Discipline: The Art and Practice of The Learning
Organization, Doubleday/Currency, 2006.

1. (b) Responding to the past
According to Donald Michael, successful leaders do this by identifying a set of
Acknowledging and sharing uncertainty

Embracing error
I
Responding to the future
Becoming interpersonally competent (e.g., listening, nurturing, coping with
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value conflicts, etc.)
Gaining self-knowledge.
Hence option b is incorrect.
2. c. by which organizations obtain and use new knowledge, tools, behavior,
and values
Organizational learning can be defined as a process by which organizations obtain
and use new knowledge, tools, behavior, and values.
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3. d. Maintenance learning
Maintenance learning means acquiring fixed ways, methods, and rules to deal
with situations that are known and recurring in nature.
4. b. in times of turbulence, change, or discontinuity
According to Bennis and Nanus, for the long-term survival of the organization
and especially in times of turbulence, change, or discontinuity, innovative
learning is more important.
5.
Innovative learning deals with emerging issues that are unique and so cannot be
learned by the trial and error method. These issues do not have known solutions.
This is one reason why organizations have neglected innovative learning. As a
result, they find it extremely difficult to adapt to environmental changes.

6. b. i, iii
environment, operating style, and ability to absorb change.
13
Path to Leadership
7. b. concentrate on team building

Some of the formal training programs aim to concentrate on team building and
group learning experiences.
8. b. improve their creative abilities
The various modes of innovative learning help organizations to reconfigure
themselves, replace old rules, improve information flows, and improve their
creative abilities.
In a learning organization a leader is a designer, a teacher, and a steward.
10. c. ability to create tension
The skills required by a leader in a learning organization include an ability to
bring shared vision to the surface and challenge existing mental models, and an
ability to foster systematic ways of thinking in the organization. Hence option c is
incorrect.
11. a. designing the governing ideas
I
Organizational design is concerned with designing the governing ideas of the
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purpose, vision, and core values by which the members of the organization will
work.
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14
Unit 6
Coaching Leaders
Structure
1. Introduction
2. Objectives
3. Demystifying Coaching
4. Leader as a Coach
5. Improving as a Coach
6. Summary
7. Glossary
1. Introduction
I
FA
Let us take a minute to recall what you learned in the previous unit. You were
introduced to the concept of learning. You saw the various ways in which organizational
learning occurs and the different ways in which an organization pursues learning.
Finally, you learned about the different roles of a leader in a learning organization. What
you are going to learn in this unit is about the role of a leader as a coach.
If you think of any great leaders, you will see that they have a powerful impact on the
people. In fact, their actions influence the thought processes of their people. Often,
CEOs of the companies have risen from the bottom thanks to the skills they have. But
sometimes their strategies fail to impress in the long run and they realize they need
IC
some help at this point. It is here that coaching serves as an effective tool for
leadership development. Leadership coaching has grown exponentially over the years
with the realization that people in the organization can become effective and
productive if they are coached well.
So let us go on to look at different types of coaching in this unit. You will also learn
about the role of a leader as a coach. The unit ends with a discussion on how a coach
can improve himself/herself.
2. Objectives
state the characteristics and skills of a coach and discuss the types of coaching.
understand the role of a leader as a coach.
discuss the approaches which make coaching effective.
3. Demystifying Coaching
Good coaching is also good leadership. Being a good coach needs the same skills as
being a good leader. So, what skills do you think a leader or coach should have? Take
a minute to think about it.
Path to Leadership
Well, some of these skills are: keen powers of observation, sensible judgment, and the
ability to take appropriate action. Both leaders and managers have the same goal to
make the most of the resources. However, not all leaders are good
coaches. A good coach knows the relevant questions to ask when evaluating a
situation or assessing problem behaviors. Take a look at Box I to see what the
characteristics of a good coach are.
Box I: Characteristics and Skills of a Coach

Helps people in planning for their personal and professional development.
Is seen as successful and draws respect in the organization.
Works closely with employees, observes their behavior in different situations,
and at various organizational levels.
Respects the people he/she is coaching. Is supportive and non-judgmental.
Has expertise in the area in which people have to be coached.
Has a thorough understanding of the culture in the organization and knows
I
Sets the right goals, and is honest and reliable.
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Takes a personal interest in those he/she coaches. Invests time in building
relationships aimed at employee development.
Shows empathy in regard to personal and professional matters of employees.
Has a clear idea of the macro picture of the whole organization.
Is comfortable and secure. Allows people to grow under him/her.
Provides both formal and informal feedback.
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May 96.
According to Antonioni David, coaching is a partnership between a leader and an

individual who reports directly to him or her, in which the coach focuses on helping
the direct report optimize his or her potential. Coaching involves a non-judgmental
style of inquiry and teaching, and aims at helping people improve their abilities,
knowledge, and skills. To be a successful coach, a leader should adopt a non-fault
finding style and identify the areas for improvement in people and give them the right
feedback. But giving feedback may not be as easy as it sounds. It needs courage to be
candid and caring when giving feedback. In a survey, leaders identified giving
constructive feedback as the most difficult part of coaching. 87% of the leaders who
offered constructive feedback encountered defensive behavior from their direct
reports. It is clear then that, leaders need to build their coaching skills through training
and practice.
Coaching is of two types: performance management coaching and performance
enhancement coaching. Performance management coaching comes into the picture
when the leader finds that there is a gap between his/her
expected performance. In such a situation, the leader takes the initiative and tries to
16
Coaching Leaders
correct his/her
coaching takes place when a subordinate is performing up to expectations but wants to
acquire new skills to perform at higher levels. Here, the coaching process can be
initiated by either the coach or the subordinate. It has been observed that most leaders
spend much more time in performance management than on performance
enhancement; in fact, leaders spend 80% of their coaching time on performance
management alone.
For coaching to be effective it has to take place regularly. Also coaching
conversations should be brief normally of 5 to 15 minutes duration. Brief
conversations have more impact and also allow the leader to spend his/her time
appropriately on other high-priority tasks. The process of coaching involves several
steps:
making observations
conducting an analysis
giving feedback
engaging in inquiry
setting goals
I
FA
planning action steps
recognizing improvements
You can see how important it is for leaders to play the role of a coach. But not all
leaders are happy doing so. Some of them spend much less time coaching their people
than necessary. Why? Because they are fearful of taking on too much responsibility,
playing the role of psychologist, and finally, of overstepping personal boundaries.
Activity: XYZ Auto Ltd. is a US-based auto component manufacturing company.

IC
The company offered training to its employees in component manufacturing. The

employees were expected to perform even better than what was expected of them.
While most of the employees worked toward the target, a major portion of them
just could not achieve their targets. In fact, they found their performance
deteriorating. Which type of coaching will help the employees achieve the desired
results? Explain.
Answer:
4. The Leader as a Coach

Jonathan P. Doh conducted a series of interviews with leading business school
professors involved in leadership research, education, and development. When he
asked them their opinion on who should coach leaders, most of them said that leaders
17
Path to Leadership
would be the most effective in teaching potential leaders. Others felt that though the
characteristics of every leader are interesting, students of leadership can rarely and
only with difficulty imitate those characteristics.
According to Steve Stumpf, students of leadership are definitely more interested in
learning from real life leaders as these leaders have credibility. However, not much
can be learnt from them as real learning occurs only when the students actually
experience something they have heard about.
Though it is often believed that leaders are the best coaches of leadership, Kim
Cameron says this is not so. He points out that though Jack Welch (Welch) is
considered a good coach, he might not be very effective. This is because the
experiences and events described by Welch are unique to him and his handling of
these events cannot be imitated by the person being coached. The person being
coached will not experience the same events in the role he/she plays, the type of
organization he/she belongs to, and the types of problems he/she faces.
Example: The Coaching Style of David Ogilvy

The lady in discussion was a new recruit in the company. She was eight months
pregnant. One day when she was working late night, she saw her boss standing
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outside her cabin. He asked her how she was doing, how she liked the job, what her
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career aspirations were, whether she would continue to work after having a child,
etc. This friendly conversation went on every day, for the next month till the lady
had her child. The boss here was David Ogilvy, the founder of Ogilvy & Mather,
the renowned ad agency and the lady under discussion was Shelley Lazarus, the
CEO of Ogilvy & Mather. The bond she formed with the founder during those
after-hour conversations was one of the main reasons for her stay at the agency
even decades later.
Adapted from The New Leaders: Emotional Intelligence at Work, By: Daniel Goleman,
published by Little, Brown, 2002.
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The person being coached needs some framework, some tools which will work in
varied circumstances. Good coaches provide such frameworks that allow people to
succeed as leaders.
Michael Useem refers to the example of Abbott Laboratories to demonstrate how
leaders can be coaches. Abbott Laboratories (Abbott) is a US-based healthcare
company. Abbott brings groups of high-potential officials including directors and vice
presidents together for 3 weeks of leadership development spread over 9 months.
consider alternative leadership approaches, and also receive feedback on their

leadership style and the impact of such styles.
The leader as a coach should set performance goals and standards, ensure effective
coaching, and eliminate any activity that leads to undesired work behavior or
performance. Coaching also requires a leader to take a personal interest in the life of
his/her subordinates. This act of taking a personal interest creates the much-desired
trust and builds up long-standing bonds between the leader and the subordinates.
for having deep conversations with his employees. These conversations went beyond
the short-term concerns of his employees. During these conversations, he used to
18
Coaching Leaders
Example: Coaching Style of Jack Welch

Jack Welch, the former CEO of GE, says it was easy for him to get hooked on
Crontonville, the General Electric training facility in New York. He spent an
extraordinary amount of time there but each time he went to Crontonville, it
rejuvenated him, he said. When Jack Welch went to Crontonville, he never
lectured; he loved the open exchanges with people there. He says the students
taught him as much as he taught them. He was just a facilitator, helping them learn
from one another. Jack Welch brought new ideas to every class, and the exchanges
that took place enriched them. Welch wanted everyone to challenge him and they
did. Before coming to class, Welch would sometimes send handwritten memos of
what he planned to cover during a session. He would also ask each person to be
prepared to describe a leadership dilemma that they had faced in the previous 12
months, such as a plant closing, a work transfer, a difficult firing, or the sale or
purchase of a business. Then Welch and the trainees would share their experiences
and what they had learned from the events.
Adapted from Straight from the Gut, by Jack Welch, John A. Byrne, Warner Books, 2001.
Check Your Progress

1.
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Coaching involves a non-judgmental style of inquiry and teaching, and aims at
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.
a. dictating to people on how to work
b. helping people improve their abilities, knowledge, and skills
c. evaluating the behavior of the subordinate
d. learning how to train people
2. What must a leader do in order to be a successful coach?

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a. Teach others how to be like him/her

b. Teach the employees how to become successful
c. Identify the areas for improvement in people and give them the right feedback
d. Spend 10% of coaching time on performance management
3. When does performance management coaching come into the picture?

a. When subordinates perform up to expectations
b. When people become uncomfortable and insecure
c. When people are not clear about the benefits they reap
d. When the leader finds that there is a gap between his/her
expected performance
4. What type of coaching takes place when a subordinate is performing up to

expectations but wants to acquire new skills to perform at higher levels?
a. Performance management coaching
b. Skills coaching
c. Performance enhancement coaching
d. Executive coaching
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Path to Leadership
5. Which of the following does the process of coaching involve?

a. Setting goals
b. Conducting an analysis
c. Engaging in inquiry
d. All of the above
6. Which of the following is the most difficult part of coaching?

a. Giving constructive feedback
b. Teaching subordinates how to become leaders
c. Being unable to set goals
d. Playing the role of a psychologist
5. Improving as a Coach
How do you become an effective coach? To do that, you should be ready to change
your behavior to the extent the person you are coaching needs. In other words, one
I
you should be responsive in your behavior. The type of behavior that makes a person
a successful coach may not always be the same as what a successful executive needs. .
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But an executive should not change his/her behavior in entirety as specific forms of
behavior may be required in other contexts; he/she should only hold them back while
coaching. An executive has to learn the type of behavior required in an effective
coach. For this, he/she has to first identify the reflexes that come in the way of his/her
being an effective coach. To be an effective coach one needs to introspect.
Let us try to identify the behavioral characteristics of a successful senior executive.
Generally, a successful senior executive is highly competitive, thinks fast, makes
quick and sound judgments, and is eager to act and speak. As the executive has to
manage the complexities of the business, he/she is under pressure for time and
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tolerates very few excuses from his/her direct reports. He/she is under constant
them. The executive
focuses all his/her attention on the success of the business in the short run, and hardly
has any time to build relationships with his/her subordinates.
But a coach needs different behavioral characteristics altogether. To be a successful
coach one needs to be a teacher, not a competitor. Coaches should act as helpful
colleagues and not as judges. They must be careful and patient observers. They must
first observe people to understand them. Only then can they venture to criticize them.
Even when they are criticizing, they must do so with the intention of improving those
under them. Coaches must reflect and take sufficient time to think before they act.
-term
rather than short-term performance. An effective coach forms collaborative relations
with the people he/she is coaching through regular meetings.
A leader or senior executive who needs to coach his/her people has to accord high
priority to the activity of coaching. He/she needs to consider that coaching is as
important as other major business activities. When necessary he/she should be ready
to set aside other business activities temporarily and spend the time in coaching. For
example, for leaders like Jack Welch and Larry Bossidy, coaching people was one of
the most important jobs. They spent nearly 50 percent of their time on people issues,
whenever that was necessary.
20
Coaching Leaders
Coaches who feel that their purpose is to enhance the

for future benefits are more successful than those who expect immediate benefits from
their coaching relationships. Those who take a long-term view are less prone to feel
conflicting pressures and to recognize coaching as a legitimate business activity. To
have a positive outlook toward coaching, it is necessary for the coach to remember
two important things: even excellent performers need help; and people have a desire
to be effective in their workplace. This is even truer of those who are goal-oriented
and important for the organization. Since effective people are the key to success for an
organization, coaching is essential to increase effectiveness. Coaching aims not
merely at avoiding failure, but at ensuring success.
5.1 What Can a Coach Do to be a Better Coach?
Coaching is meant to change behavior or add a particular set of behaviors. A plan of
action to change behavior must be specific and well thought out. Any significant and
lasting change in the person being coached needs his/her assent, sincere involvement,
and reflection. Hence, a coach needs to design a thoughtful program that encourages
the people being coached to reflect on their behaviors and learn from those reflections.
Some simple techniques given here can help leaders become better coaches.
I
Be an active listener: A coach must listen carefully to what the person (who is
being coached) is saying, rephrase that in his/her own words, and repeat it. This
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assures the person being coached that his/her coach was listening to him/her. This
also helps undo misunderstandings in communication if any, as the coach repeats
what he/she had heard earlier. This act of repeating what the person being
coached has said improves the articulating ability of the coach as well. He/she can
use this ability in other situations to increase his/her effectiveness.
Complement learning with action and reflection: The coach can support the
learning process by asking questions after a specific event. The questions could
be:
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What happened?
What did you do?
How did you feel before, during, and after?
How did the other people react?
Did you get any feedback?
Do you need to follow up?
The coach has to convince the people being coached that their behavior determines
their success. One way to do this is to ask the people being coached to imagine how
their behavior will be received by others. The coach can improve his/her effectiveness
by adopting one or more of these approaches.
Move from easy to hard tasks: An executive should be allowed to move
gradually from easy to hard tasks. This will give him/her the confidence to take
up future challenges. It is also possible that reaching the goal of changing
behavior may require some trial and error. The coach should try to choose the
goal which is easiest to change. Then he/she can build upon his/her success and
attempt to change more entrenched and hard to change behaviors.
21
Path to Leadership
Using tape delay: Coaches can use the tape delay technique. In this technique, the
coach encourages the person who usually speaks before thinking to wait for some
time before he or she speaks or reacts in a meeting.
Script writing & role playing: A coach can encourage people with
communication problems to write out their scripts and play out possible scenarios
before they communicate.
Repairing relationships: A coach can ask questions about the problem
relationships of the person he/she is coaching. He/she can help repair the
relationships by acting as a facilitator in organizing a meeting for this purpose.
Positive feedback: When coaching, leaders have a tendency to concentrate more
on problems and less on successes. When coaching, they should consciously
emphasize positive elements to encourage the person being coached to also think
positively.
In coaching, it helps to be imaginative and to invent an array of solutions. The
coach should be aware of the complexity and difficulty of changing behavior. He or
she should also anticipate the impact that it is going to have on other people.
I
Changes induced by the coach will sometimes cause pain. Also changes take time,
and may not happen in days or weeks. A coach should have endurance and a will
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strong enough to bring in the desired behavior change. Behavioral change also
needs faith. In the beginning the improvements toward the desired behavior may be
marginal, but gradually the improvements will become significant. Coaching leaders
retain faith in the ongoing process. Vigilance and self-discipline are other attributes
needed for overseeing behavioral change. The coach may be not be given
recognition even after the goal of changing behavior for the better has been
accomplished, so the coach should look mainly for the sense of satisfaction he/she
derives from the process.
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Activity: Trivial Solutions is a BPO company that has around 1000 employees.
Due to the global economic slowdown, its clientele declined. The management
realized that people needed to be trained well to perform well. Thus a coach, Jack,
well-versed with the BPO industry was brought in to train the employees in other
growing areas of the industry so that they could cope with the growing trends in the
industry. Despite receiving training from Jack, the employees failed to perform.
When the top management questioned the employees, they complained that the
coach did not answer their questions and this resulted in their not understanding the
process and hence the poor performance. Suggest ways in which Jack can become a
better coach.
Answer:
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Coaching Leaders
Check Your Progress

7. What are the prerequisites that a coach must remember in order to develop a
positive outlook toward coaching?
i. Immediate benefits can be expected from his/her coaching relationships
ii. People have a desire to be effective in their workplace
iii. Concentration should be more on business activity
iv. Even excellent performers need help
a. iii & iv
b. i & ii
c. ii & iv
d. i & iii
8. In the process of coaching, the executive needs to move from ___________.

a. one place to another place
b. easy to hard task
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c. one process to another process
d. All of the above
9. What should a coach do when the person has a problem communicating with
people?
a. Consciously emphasize the positive elements to encourage the person
b. Try to choose a goal which is easiest to communicate
c. Convince the person being coached that his/her behavior determines his/her
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success
d. Encourage people to write out their scripts and play out possible scenarios before
they communicate
10. ________ ____________are some of the attributes needed for overseeing

behavioral change.
a. Endurance and etiquette
b. Soft skills and time management
c. Vigilance and self-discipline
6. Summary
Coaching is a partnership between a leader and an individual who reports directly
to him/her in which the coach focuses on helping the direct report optimize his or
her potential.
Coaching activity is non-judgmental and involves teaching. This process aims at
helping people build abilities, knowledge, and skills.
23
Path to Leadership
An effective coach knows what questions to ask while evaluating a situation or

assessing problem behaviors, or calibrating his/her own coaching capabilities.
Coaching can be classified into two types: performance management coaching
and performance enhancement coaching.
Coaching ensures the personal development of the workforce while creating a
positive emotional environment. It usually brings about better results, because
emotionally positively charged people certainly strive to accomplish the tasks
expected of them.
The coach can improve his/her effectiveness by adopting one or more of these
approaches -- Move from easy to hard tasks, use tape delay, script writing & role
playing, repair relationships, and giving positive feedback.
7. Glossary
Coaching Style: A leader who follows the coaching style helps his/her employees
to identify their strengths and weaknesses and align them with their personal
goals and career aspirations.
1.
I
Is coaching necessary for organizations? If yes, what type of coaching is essential
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for an organization to grow? What is the role of a coach in grooming the
individuals of an organization? Describe the characteristics and skills of a good
coach.
2. Explain the role of a leader as a coach.
3. Describe the various approaches which make coaching effective

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Daniel White, Coaching Leaders: Guiding People Who Guide Others, John Wiley
and Sons, 2005.
Estienne de Beer, Coaching as a Leadership Style Scores Big,
www.indusbusinessjournal.com, September 15, 2007.
Daniel Harkavy, Steve Halliday, Becoming a Coaching Leader: The Proven
Strategy for Building a Team of Champions, Thomas Nelson Inc, 2007.
Sean Meehan, The Advantages of a Coaching Leadership Style,
www.associatedcontent.com, January 12, 2009.

1. b. helping people improve their abilities, knowledge, and skills
Coaching involves a non-judgmental style of inquiry and teaching, and aims at
helping people improve their abilities, knowledge, and skills.
2. c. Identify the areas for improvement in people and give them the right
feedback
To be a successful coach, a leader should adopt a non-fault finding style and
identify the areas for improvement in people and give them the right feedback.
24
Coaching Leaders
3.
actual and expected performance
Performance management coaching comes into the picture when the leader finds
performance.
4. c. Performance enhancement coaching
Performance enhancement coaching takes place when a subordinate is performing
up to expectations but wants to acquire new skills to perform at higher levels.
Here, either the coach or the subordinate can initiate the coaching process.
The process of coaching involves the following steps: making observations,
conducting an analysis, giving feedback, engaging in inquiry, setting goals,
planning action steps, and recognizing improvements.
6. a. Giving constructive feedback
In a survey, leaders identified giving constructive feedback as the most difficult
I
part of coaching. 87% of the leaders offering constructive feedback encountered
defensive behavior from their direct reports. Thus, leaders need to build their
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coaching skills through training and practice.
7. c. ii & iv
To have a positive outlook to coaching, it is necessary for a coach to remember
two important things: even excellent performers need help and people have a
desire to be effective in their workplace.
8. b. easy to hard task
An executive should be allowed to move gradually from easy to hard tasks. This
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will give him/her the confidence to take up future challenges.

9. d. encourage people to write out their scripts and play out possible scenarios
before they communicate
A coach can encourage people with communication problems to write out their
scripts and play out possible scenarios before they communicate.
10. c. Vigilance and self-discipline
Coaching leaders retain faith in the ongoing process. Vigilance and self-discipline
are other attributes needed for overseeing behavioral change.
25
Unit 7
Structure
1. Introduction
2. Objectives
3. Moving from Command and Control to Teamwork
4. Understanding Teams and Teamwork
5. Principles of Great Teams
6. Team Size and Skills
7. Leadership Approaches that Foster Team Performance
8. Team Learning
9. Summary
10. Glossary
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1. Introduction
The previous unit discussed the types of coaching. It then discussed the role of a
leader as a coach. The unit finally discussed how a coach can be improved. This unit
will discuss how performing teams are developed.
Michael Dell (Michael), the founder and CEO of Dell, believes that business is all about
building teams and building talent in the organization. According to him, it is the most
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essential component of success as diversity of ideas and inputs help a lot in making
better decisions. Michael always encourages his teams, even if some of their products
fail or have to be scrapped. He motivates them to work better on their next product.
put in charge of the Notebook division of Dell. By the time he took over, one product
had already been canceled and the development of other products was taking longer
than expected. After a realistic assessment of the situation, it was felt that only one of
the products under development the Latitude XP would be competitive in the
market. The company decided to cancel several products that were in the development
stage. This demotivated the engineers who had spent a lot of time and energy
developing the products that had been canceled. To motivate them, Michael reinforced
the compa
make the Latitude XP a success.
Michael realized that aligning teams toward a common objective and creating the
same incentive system across the entire company would help direct
toward creating value for customers and shareholders.
At Dell, people work in teams of two to receive, manufacture, and pack an order for
delivery to a customer. The profit sharing incentive encourages them to be productive
as a team. Hourly metrics are posted on monitors on the factory floor so that each
Michael also believes that 360 degree performance appraisals help identify areas that
might require further development or improvement and also keep people focused on
achieving their goals as a team. He believes that teamwork is all about people who are
This unit will discuss why organizations have moved from a command and control
style of leadership to a team-based approach. It then goes on to define a team, explain
the concept of teamwork, and state the differences between a team and a workgroup.
It then discusses the principles of a great team. It then explains how to determine the
right size of a team and discusses the skills necessary for a team. It then discusses the
different leadership approaches that foster team performance. The unit finally
discusses the importance of continuous learning for teams.
2. Objectives
understand why organizations have moved from command and control to
teamwork.
define a team, understand the concept of teamwork, and state the differences
between workgroups and teams.
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FA
discuss the principles of a great team.
understand how the right team size is determined and discuss the skills necessary
for a team.
understand the various leadership approaches that foster team performance.
discuss the importance of team learning.
3. Moving from Command and Control to Teamwork

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As more and more organizations move toward a team-based approach to work, the
command and control style of leadership is becoming redundant. Leaders are playing
the role of facilitators more and are now expected to teach their team members, and let
them make decisions for the team.
A team-based approach is expected to improve efficiency and productivity levels in an
organization. However, the transformation from a command and control style to the
team based approach can be confusing and grueling. Companies expect their middle
level managers to transform themselves into team leaders. They are expected to coach,
motivate, and empower their people. However, very few managers or companies
really understand the transformation process. Most managers find the transition
difficult to make. Often, the things they were encouraged to do during the command
and control days are no longer appropriate. These managers do not realize the shift in
mindset and the behavioral skills required to be successful team leaders.
Managers in their new role are not sure what long-term effect this team-based
approach will have on their careers. Soft skills such as communication, conflict
resolution, and coaching though crucial for success as team leaders may not add much
value to their resumes. According to some, being an effective team leader does not
guarantee promotion within a company or opportunities outside.
27
Path to Leadership
Managers should not worry if they are asked to make the transition from the command
and control style to the team-based approach. They can acquire the skills needed to be
decisions, and willingness and ability to share power with team members.
4. Understanding Teams & Teamwork

What is a team? A team is a small number of people with complementary skills who
are committed to a common purpose, a set of performance goals, and an approach for
which they hold themselves mutually accountable. To become a powerful unit, all the
team members should have a common commitment. Without a common commitment,
all the team members will perform as individuals. Developing common commitment
requires a common purpose in which the team fervently believes. The way they shape
their purpose is contingent upon the demands and opportunities placed by the top
management. The top management determines the character, rationale, and
performance challenges for teams. The management should give enough flexibility to
the teams to develop commitment based on the given purpose, specific goals, timing,
and approach.
Successful teams invest significant time and effort to determine collective and
I
individual purpose. Unsuccessful teams fail to create a collective and challenging
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aspiration due to various reasons such as lack of emphasis on performance, lack of
effort, and poor leadership. Successful teams convert their common purpose into
specific performance goals. Without these specific performance goals, members of the
team lack clarity on their contribution and perform in a mediocre manner. When
purposes and goals of the teams are consistent, and are backed by team commitment,
they lead to improved performance.
Teamwork plays an important role in the success of any organization. Teamwork
characterizes
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views, providing support, and recognizing the interests and achievements of others.
These values ensure team performance, individual performance, and organizational
performance.
Example: Cross Functional Teams at Kodak

Kodak has always recognized the importance of teams and effective teamwork in
its organization. It believes that teams help an organization gain customer focus,
improve work efficiency, achieve successful restructuring and re-engineering of
work processes, and foster a spirit of cooperation and collaboration within the
organization.
Forming cross-
management to improve the overall efficiency of the organiza
cross-functional teams, people from departments across the organization pooled
their ideas to improve the various work processes and operational flows in the
organizational structure. By forming such teams, Kodak brought together the skills
and ideas of employees working in different departments of the organization. This
enhanced the ability of the organization to solve problems and led to better
decision-making.
28
The cross functional teams established at Kodak were successful:

In building a shared vision, and developing shared values and principles;
In creating a focus on customers;
In restructuring and re-engineering work practices;
In identifying the best ways of operating;
In reducing operational costs;
In assessing business risks and opportunities;
In dealing with issues in accounting and administration; and
In solving problems in Information Systems and Logistics.
This team-oriented approach has helped Kodak to enhance organizational
productivity, and encourage collaboration and participation among people belonging
to different departments in the organization. With the introduction of cross-functional
teams, Kodak has been able to empower its people and the whole organization.
I -3.
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Any group of people working together does not form a team. Thus, committees,
councils, and taskforces are not always teams. There is a clear difference between
teams and work groups. The performance of a work group is a function of its
-
surveys, and experiments generally need involvement of more than one person. Such
-
Working groups are common and more useful in large organizations where individual
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accountability is important. They are formed to share information, insights, and

perspectives. The members of work groups come together to help each other perform
better. The meeting of these groups also reinforces individual performance standards.
The focus of work groups is on individual performance and accountability. There is
no mutual
question of incremental performance-contribution that results from two or more
people working together in groups. The emphasis of work groups is always on
individual goals and responsibilities. For better understanding of differences between
working groups and teams refer to Table 7.1.
Table 7.1
Difference between Work Groups and Teams

Work groups Teams
1. There is a single strong leader. And 1. Team members share leadership

only the leader is clearly focused. roles based on the needs and
2. There is no scope for mutual circumstances.
accountability. Only individual 2. Members of team have individual
accountability matters. and mutual accountability.
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Path to Leadership
Work groups Teams

3. The purpose of the group is always 3. The team shapes its purpose taking
the same as the mission of the into consideration the top
organization.
4. A group delivers performance 4.
based solely on individual work- individual and collective work-
products. products.
5. Efficiency is the criterion in work 5. Team meetings involve open-ended
group meetings. discussions and problem-solving.
6. The success of a working group is 6.
determined by the impact it makes on its collective work-products.
on others. For example, a working 7. Discussions, decision-making, and
group is successful when its execution are done by the whole
activities improve the quality of team.
products, or financial performance
of the organization.
7. The working group activities
involve discussion,
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decision-
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making, and delegation.
business review, Mar/Apr93.
5. Principles of Great Teams

Warren Bennis conducted a study to identify the principles that made great teams
successful. He studied teams that worked on the Manhattan project, and those who
worked in the Palo Alto Research Center (PARC) of Xerox, Apple Computers,
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Lockheed Skunkworks, and Walt Disney animation studios. According to Bennis

though all these teams were extraordinary in their own way, there were some
principles that were common to all and these principles apply to all the organizations
where these teams worked. The principles are:
5.1 Shared Dream

All the great teams shared the dream of making the world a better place to live in.
They sincerely believed that they would change the world for the better. These teams
were obsessed with what they were doing and did not treat their work as simply a job
but a fervent quest. The shared dreams and beliefs gave them the cohesiveness and
energy needed to work.
5.2 Mission is Bigger than Ego

During the Manhattan project, one team member had a problem working with a
colleague, and decided to leave. But the project leader reminded him/her that the
mission was more important than individual egos and this made the team member
rethink his/her decision, and ultimately stay back. This example shows how great
teams placed mission way above individual egos.
30
5.3 Protection from Leaders

All the great teams had leaders who protected the team members from the corporate
headquarters. These leaders managed to keep the headquarters satisfied and told their
team members to remain focused on their work. In all these cases, the leaders tried to
maintain physical distance from the headquarters and this seemed to have helped in
achieving their missions.
5.4 Fostering Enmity
A team with even the noblest of missions benefited when it had real or invented
enemies. For example, the enemies of the Manhattan project were the Japanese and
the Germans. An implicit mission such as destroying the enemy is more motivating
than an explicit mission. During the heyday of Apple computers, its mission was to
5.5 Dare to be Different

Great teams generally consist of people who consider themselves as mavericks and
are generally at the periphery of their disciplines. They like to operate on the fringes
and do not have respect for the mainstream thinking or activities. As Bennis says,
I
their sense of operating on the fringes feeds their obsession to succeed.
5.6 Pain & Suffering
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A place in great teams is rarely assured without personal sacrifice. The nature of their
work is such that the team members generally go through intense pain and suffering.
At the Skunkworks of Lockheed, the team members could not disclose information on
their project even to their families. The team had to work in a cheerless, rundown
building at Burbank, away from headquarters and main plants.
5.7 Strong Leaders
Though great teams are nonhierarchical, egalitarian, and open, yet they have strong
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leaders. As Bennis observed, the leaders in great teams are not always the most
intelligent or capable in the team but neither are they passive players. They are like
curators who appreciate and preserve talent in the team. Great teams make great leaders.
5.8 Meticulous Recruiting
Great teams are a result of understanding what talent is needed in the team, and
spotting where the talent is available. The leader of the team and the other members
consider recruiting a serious exercise. This ensures that the right people are in the
right place.
5.9 Young and Energetic
All great teams had people who were quite young. Young people have the physical
stamina necessary to withstand the arduous tasks involved. They do not consider
anything impossible and that makes them accomplish the impossible. Great teams are
also young in spirit, ethos, and culture.
5.10 Great Teams Deliver
Great teams always believe in tangible outcome. Steve Jobs gave adequate importance
to this aspect at Apple. He/she reminded his/her team that their work was not good
enough unless it resulted in a great product at the end.
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Path to Leadership
Activity: ABC Ltd. is a project management company. The company was known
for its successful completion of projects in time. The company attributed its success
to its employees which worked as a team. The company bagged a major project for
which its existing human resources were insufficient to ensure successful
completion of the project in time. Thus the company recruited some new
employees. The new employees were young and dynamic individuals who gave
several innovative ideas while working on the project. On the other hand, the older
employees did not like the working style of the young recruits. The older
employees complained to the management that they could not work as a team.
However the management encouraged the older employees to work as a team and
focus toward completing the project successfully. In this instance, the older
employees are displaying which team principle. Explain. Also discuss other
principles of a team.
Answer:
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Check Your Progress
1. Which approach ensures higher productivity and efficiency in an organization?
a. Command and control approach
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b. Team-based approach
c. Tape delay technique
d. Brain storming approach
2. A team is a small number of people with _____________who are committed to a

common purpose, a set of _______________, and an approach for which they
hold themselves _________________.
a. complementary skills, self-made goals, mutually accountable
b. leadership skills, daunted tasks, responsible
c. common ideas, unachievable tasks, important
d. complementary skills, performance goals, mutually accountable
3. Which is not a
a. having collective and individual purpose
b. poor leadership
c. lack of emphasis on performance
d. lack of effort
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4. Which of the following is a crucial success factor for teamwork?

a. recognizing the interests and achievements of others
b.
c. providing support
d. All of the above
5. The performance of a work group is a

individuals. The performance of a team is a .
a. function of only the individual results
b. function of both individual results and collective work-products
c. function of shared leadership
6. Team Size and Skills

Generally the number of people in a team ranges from 2 to 25. The majority of teams
I
studied by Katzenbach and Smith had less than ten members. According to them
though a team of 50 or more members is theoretically possible, but such a team will
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invariably break off into sub teams and will rarely function as a single and cohesive
unit. This is because interactions can be rarely constructive in such teams. A team
with around 10 members can be far more effective than a team that has more than 50
people. In the latter, individual differences, functional differences, and hierarchical
differences are more when compared to a team with 10 members. It is also easier to
have joint accountability in small teams.
Large teams also have to address issues such as availability of physical space (more
people means more space), time (it is difficult to identify an appropriate time for so
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many people to meet), and crowd or herd behavior. Such issues limit the wholesome
involvement of people in the team and as a result a cohesive team rarely gets built. It
is also difficult for large teams to shape their common purpose.
As the group has too many people, common purpose ends up as superficial missions
or well-meaning intentions. Without a clear purpose, no concrete objectives can be
reached and without concrete objectives, team members are not sure about their roles
in the team. This leads to cynicism, which blocks future team efforts.
For teams to be successful, a right mix of skills is as important as right size. Teams
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these skills are lacking in many potential teams. The skills necessary for teams can be
broadly classified into technical or functional expertise, problem-solving and
decision-making skills, and interpersonal skills.
6.1 Composition of Teams
Teams are often formed based on personal compatibility or formal position. Very
rarely are they formed based on the functional expertise of their members. It is
important for teams to have problem-solving skills to identify problems and
opportunities, evaluate the different options, available to them and decide which
option is better. The understanding among team members and shaping of a common
33
Path to Leadership
purpose depends on effective communication and constructive conflict. This is turn

depends on interpersonal skills such as risk taking, active listening, helpful criticism,
and appreciation of the interests and achievements of others.
Only rarely do teams have all the skills necessary to accomplish the task. So selection
of team members should be based on proven skills. Commitment to a common
approach (the way things have to be accomplished) is at least as important as
commitment to purpose and goals. The team must have a clear idea as to how its
purpose and goal are going to be accomplished. There should be an agreement on:
Who will do what?
What are the schedules, and how they are to be met?
What are the skills that need to be developed?
How will the team take decisions?
On what basis will the team change the existing way of accomplishing its purpose?
The shaping of a common approach needs:
Details of the task to be accomplished; and
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A fit between individual skills and the team task.
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In effective teams all the members do equivalent amount of work. Everyone in the
-product in a concrete
way. The feeling that everyone is fulfilling his or her role can be an emotionally
motivating factor, which can stimulate improved performance.
Team accountability is as important for the success of a team as a common purpose
and a common approach are. One characteristic of great teams is mutual
trust. These will naturally grow when all the members of the team are diligently
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pursuing a common objective. The common purpose and common approach will
effective teams surveyed felt that working with a common purpose, a common
approach, and mutual accountability made their experience both energizing and
motivating unlike their regular work.
Example: Team Learning At Boston Celtics

Boston Celtics is a basketball team. This team won 11 of the 13 World
championships held between the years 1957 and 1969. How did it do so?
Red Auerbach, the coach of the team, made sure that every player was on the team
Russell (Russell) (arguably the best basketball player ever), a player on the team,
the ball off the backboard and pass it quickly. This, plus defense, was to be my
fundamental role on the team, and as long as I performed these functions well, he
would never pressure me to score more points. That conversation was worth a
ess.
34
The coach of the team was intensely focused on bringing out the collective
The coach and the team used to explore various ways to improve their game and
tactics. The team members had a high level of solidarity among themselves.
Retiring players used to give tips to new players on the competition.
Robberts, Richard B. Ross, Bryan J. Smith, Bantam Doubleday Dell Publishing group (1994),
p351.
Check Your Progress

6. What is the size of a team on an average?
a. 1-10
b. 5-50
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c. 2-25
d. greater than 100
7. Which one of the following is the skill required for a team?

a. interpersonal skills
b. problem solving and decision-making skills
c. technical or functional expertise
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d. All of the above
8. One of the criteria for shaping the common approach of a team is

a. Decisions taken by a team leader
b. A fit between individual skills and the team task
c. Being accountable for the work of others
7. Leadership Approaches that Foster Team Performance

Though there are no guaranteed approaches to improve team performance, yet some
approaches mentioned below can help in ensuring higher performance levels.
7.1 Recruit for Skill and Skill Potential

In general, the management starts thinking about the skills required in a team only
after the team has been created. This seems to be a wrong approach. People should be
selected based on their existing skills and their ability to learn new skills in the future,
and not on the basis of personalities.
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Path to Leadership
7.2 Be Concerned About First Impressions

Initial impressions matter a lot. Members of a potential team look for signals in the
first meeting to confirm, suspend, or dispel their assumptions and concerns. They
observe people in authority (team leaders; executives who setup, oversee, or influence
team formation) very carefully. A leader has to reflect on what he/she is doing and
what he is saying and realize that he is being observed critically.
7.3 Spend Time Together

Team members have to spend a lot time (both scheduled and unscheduled) together at
least at the beginning. Such collective spending of time can bring in creative insights
and personal bonding. A leader has to ensure that the members of the team interact.
He/she needs to understand that when they are interacting, higher intelligence, which
is far superior to that of any single member in the team, is at work. Unfortunately
executives and managers are not used to deliberately spending time with their
subordinates. They need to change this behavior. Successful teams have always spent
lot of time together learning how to be coherent teams. Spending time together does
not just mean time spent physically together. It also includes time spent interacting
I
through electronic means, fax, or phone.
7.4 Frame Necessary Guidelines to Govern Team Behavior

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Guidelines help teams to bring about predictability in their behavior. Guidelines help
teams to fulfill their purpose and achieve organizational goals. A leader can setup
guidelines on issues such as attendance for meetings, matters to be discussed, the level
of secrecy to be maintained, the analytic approach that is going to be followed, and the
7.5 Promote a Culture of Urgency and High Standards

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A leader must make his/her team members believe that the team is there to accomplish
while they experience demanding and compelling situations. This is the reason why
organizations with high performance ethics can form successful teams easily at short
notice.
7.6 Value Contribution and Positive Feedback

Teams, like individuals need positive reinforcement. So a leader has to give positive
feedback to his/her team members. Giving recognition is also important because it
creates, and affirms desirable and new behaviors that improve team performance. A
leader can give recognition and rewards in different ways. He/she can, for example,
address the team directly about the urgency and importance of its mission. He/she can
also offer direct compensation for contribution to the team.
7.7 Identify Tasks That Can Be Accomplished Immediately

Effective teams trace their cohesiveness and optimism to key performance oriented
events. A leader has to set some challenging goals for his/her team in the initial stages.
These goals should be such that they can be accomplished in the early stages.
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7.8 Let the Team Redefine Purpose and Goals

A team can commit the mistake of assuming that all the information it needs is
available in the collective experience and knowledge of its members. A leader must
ensure that his/her team always has access to the latest information because this
information can help the team to understand its performance challenges better. This
understanding can further motivate the team to reinvent and redefine its common
purposes, goals, and approaches.
Activity: XYZ Pharma Ltd. is a leading pharmaceutical company in India. The

company is headquartered in Delhi and had several divisions across India. For each
region, the company had sales managers and several sales executives working
under the manager. The company encouraged team performance and hence
instructed the sales managers to achieve sales targets in teams. The sales executives
received incentives based on their team performance. This encouraged the sales
executives to work harder as a team and achieve the sales target in time as
individual performance was not measured. All the divisions were known to achieve
timely results. To foster team performance, the company doubled the sales targets
of every region. This however did not demotivate the sales executives, they strived
to perform better and achieve the results. Identify and discuss the leadership
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approach used by the company in fostering team performance. Discuss other
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leadership approaches that foster team performance.
Answer:
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8. Team Learning
We all know that the real work in organizations is done by teams and not lone
individuals. So for organizations to be effective, they need effective teams. Teams
need to constantly operate at a higher level of intelligence than that of individual
members. Thus, teams need to be continually learning. The cost of neglected learning
can be high. To avoid this, teams need to be aware of the following:
8.1 Conflicts
It is commonly assumed that great teams do not entertain or have conflicts. According
to Peter Senge, on the contrary, great teams encourage productive conflict. In these
teams, the free flow of conflicting ideas leads to creative thinking. Conflict becomes,
in effect, part of the ongoing dialogue. In fact, visible conflict of ideas can be one
reliable indicator of continual learning. Conflict is a common feature in most
organizations. Organizations arrive at their vision only after going through certain
level of conflict. The shared vision of an organization emerges from the conflict of
personal visions. Even when a vision is shared there are different ways of realizing it.
This difference is certainly a source of conflict.
37
Path to Leadership
In mediocre teams, one observes two situations surrounding conflict: the appearance
of no conflict, and rigid polarization. In the first condition, team members suppress
their conflicting views to continue as a team. In the second condition, though the team
members speak out their conflicting views, their positions are clear, and no exchange
or change of views takes place.
8.2 Defensive Routines
Chris Argyris studied management teams for 25 years to identify why managers fail to
learn in management teams. He found that these managers avoid constructive conflicts
and are defensive when a conflict arises. He also identified some basic differences
between mediocre teams and great teams. A mediocre team is different from a great
team in how it faces a conflict, and how it copes with defensiveness that arises due to
routines, and cover them up with further defensive routines...This programming

occurs early
Argyris further says that defensive routines are entrenched habits people use to protect
themselves from the embarrassment and threat that comes once they express their
views. People use defensive routines as a protective shell around their deepest
I
assumptions. They employ defensive mechanisms to protect themselves from the pain
that occurs when these assumptions are questioned or the thinking behind these
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assumptions is exposed. While these defensive routines protect them from pain, they
also prevent them from learning about the causes of the pain.
What is the source of defensive routines? Argyris feels that people become defensive
not because they believe in their views, or desire to preserve social relations but
because they dread others finding errors in their thinking. As Argyris says, this fear
starts in childhood, and is reinforced throughout life. Defensiveness stops people from
knowing about the validity of their reasoning.
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Defensive routines can do more damage in organizations where incomplete or faulty

understanding is seen as a sign of weakness or incompetence. In such organizations, it
is often believed that managers should know everything that is happening in the
organization. Thus, they become incapable of accepting their ignorance. Obviously,
knowing everything that is happening in the organization or having solutions to all the
problems in an organization is impossible. But these managers cannot accept that. As
a result, they put on an appearance that they know what is happening, and why it is
happening. Over a period of time, their assumptions and behaviors get reinforced.
They attain mastery at appearing to know what is happening. These managers are
forced to behave in either of the ways shown below:
Some managers internalize the air of confidence and believe that they have
solutions to important problems in the organization. To protect their belief they
do not accept other alternatives and choose to be closed to other ideas. They
believe that to remain confident they have to be rigid.
Other managers believe that they need to know what is causing problems in the
organization. They also believe that they have solutions to the problems but are
not very confident of the solutions. However, they maintain a mask of confidence
and hide their ignorance.
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Thus, some managers become highly skilled at using defensive routines that preserve
their image as capable decision makers. Slowly, this behavior sinks into
organizational culture. According to Argyris individuals play political games in
organizations because that is human nature and the nature of organizations. Human
beings are carriers of defensive routines, and organizations are hosts. Once the
organizations are infected they too become carriers.
As teams are part of organizations, they too exhibit defensive routines. These routines
8.3 Overcoming Defensive Routines

Peter Senge suggests two ways to overcome defensive routines. The first is to
diminish the emotional threat that causes defensive behavior. If the assumption that
enforced strongly in the organization, managers would definitely be less defensive.

The second way to reduce defensive routines is to make them the subject of
discussion. Leaders must learn to confront and discuss defensiveness without arousing
I
further defensiveness. Leaders can adopt self-disclosure as a primary step to confront
defensiveness. They can start with an attempt to identify reasons for their own
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defensiveness. While exploring the causes, they can invite members for joint inquiry.
This method aims at reducing defensive routines through reflection and mutual
inquiry. The leader is revealing his/her own assumptions, exposing his/her thinking,
opening them to influence, and encouraging others also to do the same. This method
helps in overcoming defensiveness in the team.
Check Your Progress

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9. Which of the following is a leadership approach that fosters team performance?

a. participative approach
b. authoritative approach
c. value contribution and positive feedback
d. constantly drive behind deadlines
10. When do teams in general perform well?

a. when they experience demanding and compelling situations
b. when they have all the information that is required
c. when a feedback either positive or negative is given
d. when they are given a set of guidelines to work
11. Chris Argyris studied management teams for 25 years to identify why managers
fail to learn in management teams..State the reason for the failure.
a. attrition
b. defensive routines
c. layoffs
d. loss of market share
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Path to Leadership
12. When do defensive routines cause damage to an organization?

a. when highly skilled people become capable decision makers
b. when incomplete or faulty understanding is seen as a sign of weakness or
incompetence
c. when productive conflict is encouraged
d. when people speak out about their conflicting views
9. Summary
As organizations are increasingly moving from the command and control style
toward a team-based approach, managers find themselves playing the role of
facilitators more often. They are now expected to teach their team members, and
let them take decisions for the team.
A team is a small number of people with complementary skills who are
committed to a common purpose, a common set of performance goals, and a
common approach to which they hold themselves mutually accountable.
I
The essence of a team is common commitment. When it exists a team becomes a
powerful unit of strong performance. Building this common commitment needs a
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common purpose in which the team fervently believes.
Working groups are different from teams, and are common and more useful in
large organizations where individual accountability is important. They are formed
to share information, insights, and perspectives. The members of work groups
discuss or debate to make decisions that help each person in the group do his/her
job better. The meetings of these groups also reinforce individual performance
standards.
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Great teams follow some principles such as: They have a shared dream, have
respect for mission, have protection from organizational politics, and are
characterizes by fostered enmity.
Teams are often formed based on personal compatibility or formal position. Very
rarely are they formed based on functional expertise of their members. It is important
for teams to have problem-solving skills to identify problems and opportunities,
evaluate options available to them and decide which option would be better.
Generally the number of people in a team ranges from 2 to 25. When a team has
50 or more members the team will invariably break off into sub teams and will
rarely function as a single and cohesive unit. A team with around 10 members can
be far more effective than a group that has more than 50 people.
Though there are no guaranteed approaches to improve organizational
performance, yet some approaches help in ensuring higher performance levels.
Teams are supposed to operate at a higher level of intelligence than the
intelligence level of their members. However, often they operate at a far lower
level of intelligence than that of individual members. Even more worrying is the
fact that these teams organize and run themselves in such a way that they avoid
learning. The cost of this neglected learning can be high. To avoid high costs and
to operate at their true potential, teams have to continually learn.
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10. Glossary
Team: A team is small number of people with complementary skills who are
committed to a common purpose, a set of performance goals, and an approach for
which they hold themselves mutually accountable.
Teamwork: Teamwork characterizes values that encourage listening and
, and recognizing
the interests and achievements of others.

1. Explain why organizations have moved from command and control to teamwork.
2. Define a team and examine the role of teamwork in the success of an
organization? Differentiate between teams and work groups with suitable
examples.
3. Describe the principles that make great teams.
4.
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In the light of the given statement, does size of a team
matter in terms of efficiency and productivity of work? Justify your answer with
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appropriate reasons.
5. Explain the skills necessary for a team.
6. Describe the various approaches that foster better team performance.
7. What should organizations do to ensure a continuous learning process? What are
the possible pitfalls in the process of team learning and how can the organizations
contain this situation?

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Michael Colenso, High Performing Teams--in brief, Butterworth-Heinemann,

1997.
Erika Herb, Keith Leslie, and Colin Price, Teamwork at the Top, McKinsey
Quarterly, May 2001.
Role in Leading
Transformation, McKinsey Quarterly, February 2007.
Frederico Oliveira, Transforming a High-performing Company: An interview
with Roberto Setubal, McKinsey Quarterly, April 2009.
Geoff Sheard, Andrew Kakabadse and Nada Kakabadse, Leadership Teams:
Developing and Sustaining High Performance, Palgrave Macmillan, 2009.

1. b. Team-based approach
A team-based approach is expected to improve efficiency and productivity levels
in an organization.
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Path to Leadership
2. d. complementary skills, performance goals, mutually accountable

A team is a small number of people with complementary skills who are
committed to a common purpose, a set of performance goals, and an approach for
which they hold themselves mutually accountable. To become a powerful unit, all
the team members should have a common commitment.
3. a. having collective and individual purpose
Unsuccessful teams fail to create a collective and challenging aspiration due to
various reasons such as lack of emphasis on performance, lack of effort, and poor
leadership.
Teamwork plays an important role in the success of any organization. Teamwork
characterizes values that encourage listening and responding constructively to
recognizing the interests and achievements
of others. These values ensure team performance, individual performance, and
organizational performance.
5. b. function of both individual results and collective work-products
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There is a clear difference between teams and work groups. The performance of a
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performance of a team is a function of both individual results and collective
work-products.
6. c. 2-25
Generally, the number of people in a team ranges from 2 to 25.
For teams to be successful, a right mix of skills is as important as right size.
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task. Often these skills are lacking in many potential teams. The skills necessary
for teams can be broadly classified into technical or functional expertise,
problem-solving and decision-making skills, and interpersonal skills.
8. b. a fit between individual skills and the team task.
The shaping of a common approach needs: details of the task to be accomplished;
and a fit between individual skills and the team task.
9. c. value contribution and positive feedback
Value contribution and positive feedback improves team performance.
10. a. when they experience demanding and compelling situations
Teams generally perform better while they experience demanding and compelling
situations. This is the reason why organizations with high performance ethics can
form successful teams easily at short notice.
11. b. defensive routines
Chris Argyris studied management teams for 25 years to identify why managers
fail to learn in management teams. He found that these managers avoid
constructive conflicts and are defensive when a conflict arises. Argyris further
says that defensive routines are entrenched habits people use to protect
42
themselves from the embarrassment and threat that comes once they express their
views. People use defensive routines as a protective shell around their deepest
assumptions.
12. b. when incomplete or faulty understanding is seen as a sign of weakness or
incompetence
Defensive routines can do more damage in organizations where incomplete or
faulty understanding is seen as a sign of weakness or incompetence. In such
organizations, it is often believed that managers should know everything that is
happening in the organization. Thus, they become incapable of accepting their
ignorance.
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Unit 8
Leadership Succession
Structure
1. Introduction
2. Objectives
3. Leadership Succession-An Overview
4. Importance of the Right CEO
5. Insider Vs Outsider for the Position of CEO
6. Choosing the Right CEO
7. Women CEOs
8. Summary
9. Glossary
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1. Introduction
The previous unit discussed why organizations have moved from a command and
control style of leadership to a team-based approach. It then defined a team, explained
the concept of teamwork, and stated the differences between a team and a workgroup.
It then discussed the principles of a great team. It then explained how to determine the
right size of a team and discussed the skills necessary for a team. It then discussed the
different leadership approaches that foster team performance. The unit finally
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discussed the importance of continuous learning for teams. This unit will discuss the
significance of leadership succession.
Till the early 1900s, Colgate was an extraordinary company. It had been in existence
for a century by then. Founded in 1806, it had a steady growth rate and was roughly
the size of P&G. But by the 1940s, P&G was double the size of Colgate, and was four
times as profitable. The ratio stayed this way into the 1980s. What happened to
Colgate, this vibrant company that survived the American civil war? Facts point to the
lack of proper succession planning in the company. The top management of the
company was in the hands of the Colgate family for four generations of leaders. Later
the company failed to groom appropriate people for the top job. By the late 1920s, the
company was so starved of top management talent that it chose to merge with
Palmolive-Peet to keep a strong management in place. A Fortune article noted in
1936:
The brothers Colgate were getting old. Gilbert, the President, was seventy, Sidney
was sixty-six. And Russell, who was only fifty-five, took no great part in the
management..
That, for a Colgate, was too young. So the brothers listened attentively when Charles
Pearce offered to merge Palmolive-Peet with Colgate.....[After the merger], they
resigned themselves to virtual retirement.
After the merger, Charles Pearce became the CEO of the new entity. But his stint as
CEO proved to be a disaster for the company. In an uncontrolled drive for expansion,
he tried unsuccessfully to merge with Standard Brands, Hershey, and Kraft to form a
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11.6% to 12.0%. Unaccustomed to Colgate ways, he drove for hard bargains with
retailers. Fortune wrote in 1936:
Druggists were especially irate: they had long been accustomed to the conservative
dealings of the Colgates. The tactics of the Pearce.....management pleased them not at
all. And since Colgate....was depending on substantial profits from its toilet articles,
....the defection of the druggists...was a ruinous blow.
Astonished with what Charles Pearce had done, the Colgate family appointed Bayard
Colgate (age thirty-six) as the CEO. But Bayard Colgate could not handle the job for
long as he had not been groomed for the job. After five years of dabbling, he passed
over the reins to Edward Little, the international manager of the company. Meanwhile
Colgate fell behind P&G, never to catch up. Colgate thus got accustomed to the trend
of poor succession. Edward Little who had been the CEO of the company from 1938
to 1960 ran Colgate as a one-man show. By the time he retired at the age of 79,
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Colgate was in serious trouble. On the other hand, P&G rarely suffered the leadership
gaps that plagued Colgate, though it had moved away from family governance just
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like Colgate. Cooper Procter groomed Richard Deupree - an insider who joined P&G
in 1909. Deupree took over as a CEO in 1930, and continued for eighteen years
providing stable leadership to P&G in tumultuous times. The obvious fact is that the
choice of these individuals had a significant influence on entire enterprise.
This unit gives an overview of leadership succession. It then goes on to explaining the
importance of a right CEO. It then discusses on who can be a better fit an insider or
an outsider as the CEO. It then discusses the different ways in which the companies
can ensure the right successor. Finally, it discusses the emergence of women taking up
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the charge as CEOs of the companies and the various challenges they face in a male-
dominated corporate world.
2. Objectives
understand the importance of leadership succession.
understand the importance of a right CEO for the success of an organization.
understand why an outsider is preferred as the CEO and discuss the guidelines for
choosing an inside CEO.
understand the different ways in which organizations can ensure the right
successor to an outgoing CEO.
discuss the emergence of women CEOs in the business and the challenges they
face in male-dominated corporate world.
3. Leadership Succession- An Overview
duties. Though succession is important, not many organizations give it any serious
attention. When Phil Condit resigned as the CEO of Boeing in December 2003, there
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Path to Leadership
was no successor to take his place. The company had to put Harry Stonecipher, the
previous president, in that position to avoid the embarrassment of being an
organization without a CEO. This was not an isolated case. Many other organizations
time; the company had no succession strategy

in place.
Why do companies not give attention to leadership succession? Most incumbent
CEOs want to continue in their post, in spite of their age. According to a study
conducted by Jeffrey Sonnenfeld of Yale University which covered a survey of 100
recently retired CEOs, most of them were less than willing to step down from their
position. Nearly 30% of these CEOs did not have any succession plan, and even after
their successors took charge, 57% of them held some job at the company for the next
two years.
Today, organizations need to give more attention to leadership succession because the
tenure of CEOs has come down to less than 5 years, from 8 years a decade ago. This
short tenure does not offer enough time to CEOs to groom their successors.
an important issue worth years of preparation. Sometimes, especially when the CEO
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has founded the organization, he is happy only when another member of the family
takes over. When there is no able and willing member of the family, the CEO is
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unwilling to plan for a successor from outside his own family.
Leadership succession is not an issue only for companies in the west. It is an area of
major concern in many publicly traded companies in Asia as well. According a World
Bank report, two-thirds of publicly traded companies in Asia are controlled by a
single shareholder, often the founder (in the US, the figure is only 3%). These family
businesses throw up some unique challenges for succession planning. Often the family
firms are founded by an entrepreneur with a strong personality and tremendous
determination. These are the very attributes which make him a successful leader. In
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such organizations, if proper succession planning is not done i.e. if the attributes of the
founder (leader) are not inculcated in the successor, the organization may not survive.
In such organizations it very often happens that though the leaders transfer their
position, they do not transfer their power.
Many Asian companies are led by aged CEOs. The companies are often run by the
founders who are in their 70s and 80s. Though some of their children have business
degrees from American B-schools, they are hardly groomed for the CEO position. The
result: investors, business partners, and employees are apprehensive about the future
of the organization about the next generation taking over.
There are some examples of good leadership succession planning in Indian
companies. Parvinder Singh, the late CEO and Managing director of Ranbaxy, took
zation from Rs 3.5 crores to Rs 7,300 crores in the 17
years he was heading Ranbaxy. Ranbaxy is not only one of the largest Indian drug
companies, it is also one of few companies from third world countries that has been
successful in the toughest markets in the world like the US and the UK. Parvinder
Singh was aware that he was suffering from a terminal illness, and took enough
precautions to ensure smooth succession in 1999. He chose D S Brar as the next CEO
and managing director of the company.
46
Though there are some instances of good leadership succession planning in Indian
companies, there is no reason to be complacent. Rashmi Barbhaiya, president of R&D
at Ranbaxy Labora t see the kind of emphasis that it
gets in the West, in any industry. That is changing very rapidly here as well. Its one of
the ways I will judge myself. When I am ready to retire, there must be at least three
outstanding
Activity: ABC Financial Services is a leading financial services company in India.

The bank was privately owned by the founder and CEO Sam Wilson (Wilson). The
bank had grown tremendously under the leadership of Wilson and had become one
of the leading banks in India. Of late, Wilson is feeling ill and could not continue to
manage the affairs of the bank. In his absence there was no one to occupy his
position. This often led to delay in decision-making and the bank suffered loss of
major clients. How Wilson could have avoided this situation? Explain.
Answer:
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Example: Succession Planning at Edwards Lifesciences
hemodynamic monitoring
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management strategy. For each of the critical positions, the company identified at
least two employees who could act as replacements. To have such a depth of talent,
the company had to not only identify people who were potential successors for
critical jobs, but also high-potential employees and key talent. According to Robert
differentiation between high-potentials and key talent is that high-potentials are

those people we see getting into a critical job in the next five to seven years. Key
talent we identify as someone with more technical or specialized skills, who we
may not see as supervising a lot of people or even wanting to do that but
having technical ability that is so critical to one of our business units that we would
In this, training and development played a key role. For instance, if the company
identified someone as a potential successor for a particular position, the company
decided on which jobs he/she should be involved in so that he/she could easily fit
into the critical job. They were also given priority in terms of leadership
development interventions.
47
Path to Leadership
Even for its employees in technical areas such as clinical, Edwards had definite
career paths. The company offered two career paths technical and management
and the clinical person had the opportunity to choose either. Their training and
development requirements we
often than not, people who are really technically oriented move up the technical
path. Not only is there learning and development associated with that technical
career path, but also rewards, recognition, and incentives. We treat our technical
career path as important as our management career path because of the importance
4. Importance of the Right CEO

Though many studies have been conducted to understand the impact of leaders on the
performance of organizations, not many have been systematic. A systematic study was
conducted by economists Marianne Bertrand of Chicago Graduate School of Business
and Antoinette Schoar of MIT in 2002. They studied CEOs of companies in similar
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businesses. They found that though these CEOs were in similar businesses, yet they
conducted their businesses in different ways, and this was reflected in performance
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which was obviously not the same for all the companies. Some CEOs chose to hold
more cash and less debt for their companies. Others undertook more acquisitions than
an average CEO. Both these types of CEOs performed at lower levels than their
competitors. This study shows that CEOs certainly play significant role in the
performance of their organizations.
Nitin Nohria and his colleagues at Harvard Business School studied a group of companies
from diverse industries over a period of 20 years. During this period, these companies had
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greatly from industry to industry. The CEOs had the highest impact on performance in the
hotels & motels industry and the lowest in the paper manufacturing industry. In the hotels
paper manufacturing industry it was only 4.6%. On an average, they found that, 14% of
Another study conducted by researchers Michael Porter and Anita McGahan, also at
Harvard Business School, however, suggests that the industry in which the firms
performance of the CEO in the success of organizations is nearly as important as the

industry in which the firm is operating. There have been instances of CEOs leaving
the organization soon, and diluting the market value of the firms. For example, Jill
Barad of Mattel and Douglas Ivester of Coca-Cola left their organizations in less than
three years of their appointment as CEOs. In their period as CEO, the companies lost
billions of dollars in their market capitalization. (Mattel s market capitalization came
down by US$ 2.5 billion in Jill Barad s tenure, while Ivester s tenure cost Coke US$
14.4 billion in market capitalization. This happened when the industry was in one of
its best growth phases). The wrong CEO creates disarray and chaos in the
organization, losing employee confidence, before he is fired from the company. This
failure can do substantial damage to the company.
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for it or are corporate boards and predecessors equally at fault? How can the board
make a mistake in selecting the most important position in the company?
Boards often do not handle their responsibilities the way they should. They delegate
CEO selection to recruiters, or just to the existing CEO. Thus they forgo the
opportunity to understand their CEO candidates. Understanding and selecting the right
CEO is important because the CEO is the fulcrum on which a company is run.
Choosing the wrong CEO does not
market value, it can lead to the destruction of the company itself. Two or more wrong
CEOs in succession can destroy a company.
strategy. Culture and strategy, no doubt, play key roles in the success of a company,
but culture is energized and strategy is designed mainly by the CEO. If we take the
example of Southwest Airlines, its culture is its formidable competitive advantage, but
who can downplay the role played by the CEO Herb Kelleher in putting the culture in
place? The same goes for strategy; the board of directors does not choose strategy, but
it chooses an individual who in turn chooses strategy. So the strategy is going to be as
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proceed from the choice of that individual.
5. Insider Vs Outsider for CEO Job

Companies usually prefer outsiders for the CEO position when they are in turmoil.
For ex
retailers- was chosen as its CEO when the company had lost its focus after a merger.
Louis Gerstner, an outsider to IBM, was chosen to head the company only when it
was on the verge of collapse.
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Though outsiders are preferred to insiders in some circumstances, they lack some
advantages that insiders have. Insiders have well-built networks of loyalists who help
them when they become CEO. In the case of an outsider, he/she has to build these
networks after joining the company. An outsider CEO needs at least two and half
years to get adjusted to new colleagues and a new culture, and to take charge. But
markets may not give a CEO that much time. Worse, an outsider CEO may be isolated
by existing managers. As a result, while attempting to create a network of loyalists
quickly, an outsider might end up choosing the wrong people.
Companies are also more ready to fire an outsider than an insider. It was found that
the tenure of an outsider CEO is on an average three years less than of an insider
CEO. According to Booz Allen, outsider CEOs deliver 7% higher returns than insider
CEOs to their shareholders in the first half of their term. However, in their second
half, insider CEOs deliver a 5½% higher returns than outsider CEOs to their
second half in performance is that outsiders who join as CEOs are often star
performers in their previous assignments. When they join a failing company,
expectations mount, and the share price goes up. But after some time when it becomes
clear that solving problems at that company is going to take time, markets get
disillusioned and the market value of the share falls.
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Path to Leadership
Hiring an outsider as a CEO is a risky decision. A company can follow the following
guidelines suggested by Jim Collins when hiring an outsider:
Look at the earlier company run by this outsider. See how the company is
performing after the outsider has left. This shows whether the outsider has
compromised long-term growth for the sake of short-term growth.
Check the track record of the head-hunting firm that is helping in the recruitment
of the CEO. If the CEOs recommended by this firm have stayed with the
recruiting firms only for a short duration and have been fired later, then avoid
dealing with that head-hunting firm.
Choose the CEO from the same industry or at least from a relevant industry.
nced by his/her
background: the industry from which he/she is coming, the company in which
he/she worked, and the culture in which he/she operated before.
6. Choosing the Right CEO

Organizations are increasingly becoming conscious of the need to be choosy about
their CEOs. Human resources departments are giving more attention to this issue.
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Boards are also taking the issue seriously. Given below are some of the ways in which
organizations can ensure the right successor to an outgoing CEO:
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6.1 Involve the Whole Board of Directors
Some boards leave the task of selecting future CEOs to the incumbent CEO. This can
be disastrous. An incumbent CEO often ignores the drawbacks of internal candidates
whom he/she has nurtured. Assigning a committee for this task is usually beneficial.
The committee should not have more than five members, so that it can be cohesive
and its leadership development. Though the incumbent CEO should be a part of the
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committee, he/she should not be the chairman of the committee.

On September 6, 2001, Jack Welch stepped down as Chairman and Chief Executive
Officer of General Electric Co. (GE). Jeff Immelt succeeded him as the CEO. The
succession process in which Immelt finally emerged as the choice was fair, rigorous,
and participative. The process involved the board of GE as well. As a part of this
process, Jack Welch presented the list of potential CEO candidates to the board first in
1994. Since then till Immelt took up the job of CEO, Jack Welch and his board
reviewed the succession process, every June and December. Jack Welch also gave
real-time assessments of how the process of succession was going on to the board
every February and September.
Directors Should Design Detailed Criteria for the Successor
The board can develop three to five specific criteria that should characterize the future
CEO. Often the board will come up with attributes such as strong leadership, maturity,
aggressiveness, and integrity. Though these qualities are essential, they do not
determine whether the person has the right fit for the organization. The board must
identify where the company needs to focus more in the next five to ten years, and look
for skills in the CEO candidate essential to remain focused in that direction. For
example, in industries which are undergoing consolidation, such as telecom, the
desired skill in a CEO would be deal-making.
50
Boards Should be Given the Option to Choose from a List of Outside Candidates
Also, Along with Insiders
Though the incumbent CEO may not be pleased with this as he/she may feel that
he/she has groomed the internal candidates well, nevertheless the board should scout
for outside candidates. These candidates have to be compared with the best internal
candidates of the incumbent CEO before choosing the new CEO.
In Campbell Soup Co. (Campbell), a careful and intricate six-month process finalized
internal candidate Dale F. Morrison as the president and CEO in 1997. Campbell s
board, the best board for the year 1996, according Business Week, conducted an
elaborate screening of two internal candidates and three external ones. It conducted
many interviews, background checks, and discussions within the search committee
without the then-CEO David W. Johnson present to influence the outcome.
Directors Should Base Succession Decisions on Real Human Interaction
Many companies commit the mistake of turning succession planning into a passive,
dull exercise, and this rarely yields the best future leader. Boards tend to choose a
good CEO when they meet personally with promising leaders, sometimes years before
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on for seven years; this appears to be an appropriate timeframe for selecting a
promising candidate.
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members had informal interactions with them: played golf, and attended Christmas
parties with them. There were many instances when the committee members in charge
of the succession exercise spent a whole day with each of the potential candidates and
his team (from the business unit he was heading). After each such day, the committee
gave the CEO, Jack Welch, feedback on the candidate.
Boards Should Not Rely too Much on Headhunters While Scouting for
Candidates from Outside
Boards can definitely use executive search consultants to identify outside candidates.
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But a search firm is not as well placed to understand the

job as the board is. The reports provided by headhunters on prospective CEO
candidates hardly supply the deep, insightful information directors need. Yet boards
often assign the succession responsibility to search firms, with dismal results.
However headhunters can help the board to:
Identify candidates when the board specifies differentiating criteria to the headhunters.
Make introductions and provide background, without deciding which candidate is
best.
Boards Should Have an Open and Fair Process
The selection process must be fair. It should not involve any games or politics. Then
only the board may be able to find the right candidate for the company. CEO selection
at GE was a model on how succession has to be planned and conducted. A longtime
GE consultant Noel Tichy, and editor of Fortune Stratford Sherman described it in the
The management-succession process that placed venerable General Electric in
[Prior CEO Reginald] Jones spent years selecting him from a group of candidates so
highly qualified that almost all of them ended up heading major corporations...Jones
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Path to Leadership
insisted on a long, laborious, exactingly thorough process that would carefully

consider every eligible candidate, then rely on reason alone to select the best
qualified. The result ranks among the finest examples of succession planning in
corporate history.
Jack Welch used the same process for selecting his successor. While making the
choice among the three final candidates Jack Welch spent lot of time to decide who
fits the job better. McNerney, the current CEO of 3M, and once CEO hopeful at GE,
conveys the openness of the process. He spoke these words to Jack Welch when he
was told that Jack Welch had chosen Jeff Immelt as the CEO:
wanted the job, but I also want to tell you I think the process was fair because you
Smart Human Resources People Should be Involved
The right HR person can help the CEO and Board understand the candidates better
through interaction and discussion. At GE, the list of potential CEO candidates in
1994 included 16 names. Jack Welch and his HR head then laid development plans for
all these candidates till the year 2000. This was meant to ensure that the younger
candidates got broader, deeper, a
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Over the next few years, Welch and his HR head observed these candidates by letting
them undergo several new tests. By 1998, eight candidates were short listed from the
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earlier list of sixteen candidates. In a matter of four years these eight candidates went
through 17 separate jobs. This rotation offered candidates opportunities to address the
areas in which they were lacking, and helped the CEO and the Board to get a proper
perspective of the candidates.
would have surely found this process too demanding and time consuming.
Succession Planning Should be a Continuous Process
Effective boards or CEOs begin succession planning years before the actual event
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takes place. Paul Galvin, the founder of Motorola, started grooming his son Bob
Galvin long before he transferred power to him. Bob Galvin started working at
Motorola in 1940 when he was in high school. He was with Motorola for sixteen years
before he became the president of the company, and for nineteen years before he
became the CEO. Paul Galvin ensured that (his son) understood clearly what his
company was all about. He made his son start as a stock clerk with hardly any special
iographer noted that the transfer of experience from one
generation to the next was a daily process that went on for years. When he became
CEO in 1959, Bob Galvin immediately started thinking about management
development and succession planning for the next generation, twenty-five years
before he passed on the reins to his son.
Even if there are no suitable candidates inside the organization, boards can search for
potential outside candidates, who are young, and who can be groomed into CEO
positions. They also can invite some potential candidates to be members of the board;
this way they can interact with the candidate better. Alcoa used this method
successfully with Paul O'Neill, who was CEO of the company from 1987 to 1999. If
organizations have long-term perspectives on leadership succession, directors can
interact with potential candidates at various levels of the organization, and form a
detailed view of those who fulfill the requirements for the company's leadership.
52
Activity: GS Ltd. is the largest electric equipment company in India. Around 60

percent of the company is privately held and the remaining stake is publicly held.
The owner and founder of the company Dilip Singh (Singh) believed that
ture growth. Thus he
groomed his vice president Ajay Gill (Gill) to occupy his position in future. Gill
who had worked in the company since 17 years was considered to be the most
Gill
had to occupy his position. However, after he retired, Singh gave his position to his
son Milind Singh, who had a degree in pharmaceutical sciences. Do you think the
CEO succession process was fair? Why (not)? Discuss the different ways that help
in choosing the right CEO.
Answer:
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7. Women CEOs
All over the world, the CEOs of large public companies are predominantly male. In
the US, out of the top 500 companies listed in Fortune, only seven have women as
their CEOs. In the UK, only one of the 100 FTSE companies has a woman CEO.
Women CEOs are usually seen only in family-run businesses. Daughters or widows
small and do not involve the same level of leadership as large, publicly listed firms.
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Example: CEO at Thermax

Anu Aga (Aga) has been working in Thermax Limited since 1985 and headed the
the Thermax Group in February 1996, after the death of her husband, Rohinton
Aga. Aga stepped down in September 2004 as chairperson to let her daughter,
Meher Pudumjee (Pudumjee) succeed. Pudumjee has been groomed for the job all
along. She joined Thermax, the energy and environment company, as a trainee in
August 1990. In April 1991, she and her husband Pheroze Pudumjee were assigned
the job of managing the UK subsidiary of Thermax. Here she got an opportunity to
handle marketing, procurement, shop floor assembly work, and general
administration. This assignment was part of the grooming process for her
succession. In 1996 she returned to India to join the board of directors of Thermax.
management functions. She currently leads the newly created corporate strategic
planning unit. Thus she has been involved in consolidation of new ventures and
acquisitions as well as planning for the growth of the company.
Adapted
Times, August 3, 2003.
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Path to Leadership
There are several social reasons for the lower number of women CEOs. But the trend
is changing, and today there is an increasing number of women reaching positions just
below that of CEO. In many cases, the women in these positions have had
considerable functional experience in sales, marketing, and finance.
However, according to Herminia Ibarra of INSEAD, at present, women are still not
preferred at the CEO level in stretch jobs. A study found that companies prefer men to
women to turn around an ailing division or to start a new venture. Experience in line
management is necessary to grow into leaders of the organizations (in big US
companies, nearly 90 % of line management positions are held by male employees),
so it is important for women take up tough and broad assignments. Only such
assignments give the required experience for promotion to top posts.
Another major problem with women which acts as a hindrance for climbing the
corporate ladder is the lack of a network of friends and acquaintances in the corporate
world. Male employees generally have networks that encompass both work and social
life. This is not so for most women.
For them their work and social life are entirely different. Women may also face
problems in tuning their image to leadership. Aggressive male leaders are revered
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while aggressive female ones are often scorned, even by women. In a study conducted
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at the Academy of Management, 26% of male owners wanted to be seen as an
authority figure, while only 5% of female owners expected this.
Check Your Progress

1. A successful culture and strategy is attributed to:
a. the board of directors
b. the top level management
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c. the middle-level managers

d. the CEO
2. When does a company prefer an outsider as its CEO?

a. when the companies are in turmoil
b. when the employees within the company do not have proper qualifications
c. when the companies diversify into other businesses
d. when they do not trust insiders of the company
3. Which of the following is a possible advantage of choosing an insider as the

CEO?
a. insiders have well-built networks of loyalists who help them when they become
CEO
b. insider as a CEO promises huge benefits to their employees
c. insiders deliver higher returns to the company
d. insiders can influence the board easily
54
4. As suggested by Jim Collins, what can a company adhere to while choosing an

outsider as a CEO?
a. choose the CEO from a diverse industry
b. check the term served by the CEO in the previous firm
c. check how the short-term growth of the previous firm served by the CEO
d. choose the CEO from the same industry or at least from a relevant industry.
5. In which one of the ways do organizations choose the right successor to an

outgoing CEO?
a. prepare a list of outside candidates, but select only insiders
b. should adopt a secretive voting process
c. directors should base succession decisions on real human interaction
d. succession planning should be done only when the CEO plans to quit
6. Which of the following criteria do the directors design to choose a successor for
the company?
a.
b.
experience
integrity
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c. age
d. family background
7. How can headhunters be useful to the board in scouting for a right CEO?
a. make introductions and provide background, without deciding which candidate is
best
b. they act as advisors as to who can be the right choice
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c. they prepare a set of criteria and filter the candidates for the board
d. they conduct interviews
8. One of the reasons that act as hindrance to women to climb up the corporate
ladder is:
a. lack of functional expertise
b. lack of a network of friends and acquaintances in the corporate world
c. lack of recommendations
8. Summary
or duties. Though succession is important, not many organizations pay serious

attention to it.
strategy. Culture and strategy, no doubt, play key role in the success of the
company, but culture is energized and strategy is designed mainly by the CEO.
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Path to Leadership
Companies recruit an outsider for the job of CEO when they are in turmoil. The
insider has some inherent advantages. He/she has well-built networks of loyalists
who will help in the running of the firm. For an outsider this is not so. A company
can choose the right CEO by involving the whole board in the selection process,
by allowing the directors to decide the criteria for selection, and by using
recruiting agencies only to the extent necessary.
Organizations are increasingly becoming conscious of the need to be choosy
about their CEOs. Human resources departments are giving more attention to this
issue. Boards are also taking the issue seriously.
There are several social reasons why there are fewer women in CEO posts. But
this may change with changing times. Today there is an increasing number of
women reaching positions just below that of the CEO.
9. Glossary
Succession: Succession is
office, rank, or duties.
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1.
succession for an organization?
Highlight the importance of leadership succession in the organizations.
2. he
com What makes a right CEO?

3. Compare and contrast as to who can be the right choice as the CEO of a company
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an insider or an outsider. Examine the benefits and pitfalls of appointing either

of them.
4. Describe the various ways of choosing the right CEO.
5. Explain the reasons why women are not a preferred choice for the post of a CEO?
Can women make better CEOs? Justify your answer.

Stewart D. Friedman, Leadership Succession, Transaction Publishers, 1987.
James Merrill Brickey, Leadership Succession: What a Difference a Change
Makes, Harvard Graduate School of Education, 1988.
Family Ties: Succession Seen Through a Successor s Eyes,
http://www.wharton.universia.net, September 24, 2003.
CEO Succession: Has Grooming Talent on the Inside Gone by the Wayside?,
http://knowledge.wharton.upenn.edu/, November 28, 2007.
Ana Dutra and Joseph E. Griesedieck, Planning for your Next CEO, McKinsey
Quarterly, February 2010.
56

1. d. the CEO
strategy. Culture and strategy, no doubt, play key roles in the success of a
company, but culture is energized and strategy is designed mainly by the CEO.
2. a. when the companies are in turmoil
Companies usually prefer outsiders for the CEO position when they are in
turmoil.
3. a. insiders have well-built networks of loyalists who help them when they
become CEO
Though outsiders are preferred to insiders in some circumstances, they lack some
advantages that insiders have. Insiders have well-built networks of loyalists who
help them when they become CEO. In the case of an outsider, he/she has to build
these networks after joining the company.
4.
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d. choose the CEO from the same industry or at least from a relevant
industry.
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Hiring an outsider as a CEO is a risky decision. A company can follow the
following guidelines suggested by Jim Collins when hiring an outsider: a. look at
the earlier company run by this outsider; b. check the track record of the head-
hunting firm that is helping in the recruitment of the CEO; and c. choose the CEO
from the same industry or at least from a relevant industry.
5. c. directors should base succession decisions on real human interaction
Directors should base succession decisions on real human interaction is one of the
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ways in which organizations choose the right successor to an outgoing CEO.

6. b. integrity
The board can develop three to five specific criteria that should characterize the
future CEO. Often the board will come up with attributes such as strong
leadership, maturity, aggressiveness, and integrity.
7. a. make introductions and provide background, without deciding which
candidate is best
Headhunters can help the board to:
Identify candidates when the board specifies differentiating criteria to the
headhunters.
Make introductions and provide background, without deciding which
candidate is best.
8. c. lack of a network of friends and acquaintances in the corporate world
One of the major problems with women which act as a hindrance to climb up the
corporate ladder is the lack of a network of friends and acquaintances in the
corporate world. Male employees generally have networks that encompass both
work and social life.
57
Course Structure
Unit 6
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Block
III
LEADERSHIP CULMINATION
UNIT 9
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Level 5 Leadership 1-15
UNIT 10
Narcissistic Leaders 16-29
UNIT 11
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Leadership Challenges 30-40

Expert Committee
Hyderabad
Hyderabad
Hyderabad Hyderabad

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Hyderabad Hyderabad


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Block III
Leadership Culmination
The third block to the course on Leadership and Change Management deals with the
classification of leaders, the concept of narcissistic leaders, and the challenges faced
by leaders. The block contains three units. The first unit gives on overview of Level 5
leadership, and the characteristics of Level 5 leaders and their operating style. The
second unit deals with narcissistic leaders, their characteristics, and their operating
style. The third unit discusses the different challenges faced by leaders.
The first unit, Level 5 Leadership, discusses the classification of leaders. It then
discusses the characteristics of Level 5 leaders. The unit finally concludes with a
discussion on the operating style of Level 5 leaders.
The second unit, Narcissistic Leaders, discusses the concept of narcissistic leadership.
It then discusses the characteristics of narcissistic leaders. It then discusses the
operating style of narcissistic leaders. The unit concludes with a discussion on the
ways to balance a narcissistic leader.
I
The third unit, Leadership Challenges, discusses the challenges faced by a leader in a
knowledge-based economy. It then goes on to explaining how a leader should deal
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with the realities of the e-commerce environment. Finally, the unit discusses the
factors that lead to diversity and how leaders foster creativity through diversity.
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Unit 9
Level 5 Leadership
Structure
1. Introduction
2. Objectives
3. Classification of Leaders
4. Characteristics of Level 5 Leaders
5. Operating Style of Level 5 Leaders
6. Summary
1. Introduction
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The previous block gave an overview of how a learning organization is lead, the role
of a leader as a coach, developing performing teams, and the importance of leadership
succession. This unit will discuss classification of leaders, and characteristics of Level
leaders and their operating style.
In 1971, Darwin E. Smith (Smith), the in-house lawyer, was appointed the CEO of
Kimberly-Clark. At the time, he seemed an ordinary, mild mannered man. Shy,
unpretentious and sometimes awkward, he also disliked being in the limelight. Some
of the company directors thought that he was the wrong choice for the post of CEO.
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Smith himself was not sure whether the Board had taken the right decision in
appointing him as the CEO. However, Smith was the CEO of Kimberly-Clark for the
next twenty years and demonstrated an intense professional will. Under his leadership,
Kimberly-Clark became one of the leading consumer paper products companies in the
world. Smith turned Kimberly-Clark from a merely good, to a truly great company.
consumer paper products business. This attracted a lot of criticism from the business
media. The media called it a stupid move and Wall Street down
stock. But Smith did not dither. His decision was based on sound logic. Shortly after
becoming CEO, he came to the conclusion, after consulting his team, that Kimberly-
Clark would never be a great performer in its traditional coated paper business. The
coated paper industry was not offering good returns. And there was no strong
competition in the industry, which could galvanize Kimberly-Clark into a high
performing company. Hence, Smith decided to divest the coated paper business and
enter the fiercely competitive consumer paper products business.
The consumer paper products industry was making good profits. But Kimberly-Clark
would have to compete with world-class competitors like P&G, and Scott Paper.
Smith realized that there are two options when one is competing with world-class
companies: to become a great company, or to perish. Smith invested all the proceeds
from the sale of the old mills in the consumer paper business. He invested heavily in
building brands like Huggies diapers and Kleenex tissues. At the time, these moves
seemed ridiculous. It was a case of a mediocre company competing with the best
everyone wound up in this thing, all up and down the company, right down to the
different. Scott Paper was no longer an independent company. It was owned by

Kimberly-Clark. P&G was beaten by Kimberly-Clark in 6 out of 8 product categories.
-Clark
outperformed the market by a ratio of 4:1. This performance was far better than those
of great companies like HP, 3M, Coca-Cola, and even GE.
Jim Collins researched 1,435 companies to understand what makes a company
to the criteria set by the research team. According to Collins all the eleven companies
had Level 5 leaders. Darwin E. Smith is a classic example of Level 5 leadership. He
epitomized both humility and strong will.
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This unit discusses the classification of leaders. It then goes on to explaining the
characteristics of Level 5 leaders. The unit finally concludes with a discussion on the
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operating style of Level 5 leaders.
2. Objectives
discuss the various types of leaders.

discuss the characteristics of Level 5 leaders.
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understand the operating style of Level 5 leaders.
3. Classification of Leaders
Jim Collins classifies leaders into five levels. A Level 1 leader is a highly capable
individual. He/she plays an important role in the success of his/her organization
through his/her own talent, knowledge, skills, and good work habits. A Level 2 leader
is a contributing team member. He/she is very good at working with his/her team
members and ensures that his/her team meets its assigned objectives, and fulfills the
core purpose. A Level 3 leader is a competent manager. He/she is skilled at organizing
people and resources toward the effective and efficient pursuit of organizational
objectives. A Level 4 leader is an effective leader. He/she sets high performance
standards. He/she is remarkable at motivating his people and leading them single-
mindedly toward realizing his/her vision for the organization. A Level 5 leader
transforms the organization into a great institution. He/she epitomizes personal
humility and fierce professional will. The five levels are shown in the Figure 9.1.
2
Level 5 Leadership
Figure 9.1
Five Levels of Leaders
Level 5: Level 5 Executive

With personal humility & professional will, constructs
enduring & great organizations.
Level 4: Effective Leader

Motivates his people. Sets high standards and leads towards
realizing his vision for the organization
Level 3: Effective Manager

Effectively channelises organizational resources towards
achieving objectives.
Level 2: Effective Team player

Good team player. Helps group in meeting its objectives.
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Level 1: Effective Individual Contributor
Contributes to the growth of the organization with his
skills, knowledge.
3.1 The Level 5 Leader

According to Jim Collins, there are some significant differences between a Level 4
leader and a Level 5 leader. A Level 5 leader is highly ambitious for the success of
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his/her company. He/she wants his/her company to succeed irrespective of his/her

presence at the helm. For example, Sam Walton (Walton), a Level 5 leader, had a
unique and charismatic personality. When he was suffering from cancer in 1992,
everybody wondered what would happen to Wal-Mart once Walton was gone. But
Walton wanted to prove that his company was bigger than himself. He wanted to
show that the company would be equally successful even when it was not headed by a
charismatic leader like him. He chose David Gloss, who was not a charismatic
personality, to succeed him. The company continued to be great even after its founder
was no longer its head.
3.2 The Level 4 Leader

In contrast to a Level 5 leader, a Level 4 leader is not very concerned about the
greatness of the company once he/she is no longer in charge. Lee Iacocca (Iacocca),
for example, is usually considered a Level 4 leader. A Level 4 leader ensures a high
level of performance during his/her tenure, but does not care about the performance of
the organization after he/she has left. A Level 4 leader is often more bothered about
his/her
Iacocca was instrumental in the successful turnaround of Chrysler. Undoubtedly, he
saved the company. But later he seemed to be more interested in building up his own
image. He wrote an autobiography and toured all over the world promoting his book.
3
He was a regular participant in talk shows such as the Today show and Larry King
Live. He starred in 80 commercials, and even fancied running for the US presidency.
general market in the first half of his tenure; was 51% behind the general market in
the second half of his tenure. After getting used to exercising the power associated
with the posts of CEO and Chairman posts, he was totally unwilling to let go of the
reigns. His unwillingness to retire and constant postponement of his retirement made
and stock options from the board. After leaving Chrysler, he teamed up with Kirk
Kerkorian in an unsuccessful hostile bid for Chrysler.
Activity: Tom Adams (Adams) is the CEO of May Air Airlines. The airline is a
premium segment airline, known for its customer service. The staff was give
adequate training that helped them served customers better. The success of this
training was attributed to Adams who took care of all the aspects that made the
airline a successful company. In order to maintain its success, Adams chose David
Kleinfeld (Kleinfeld) to take charge of his position after his retirement. The
employees however did not want to continue working under the new CEO. Thus
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many employees also left the organization. However, the airline continued to reap
profits under Kleinfeld. What kind of leader is Adams? Explain. Also discuss the
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other levels of leaders classified by Jim Collins.
Answer:
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4. Characteristics of Level 5 Leaders

Level 5 leaders are a paradoxical blend of fierce will and personal humility. They are
stubborn and ruthless, yet they are humble. They are highly ambitious for their
Though they accomplish great things for their organizations they never take the credit.
They attribute their remarkable accomplishments to their people, external factors, and
sheer luck. They are inspired only by the greatness of their organizations. They expect
their organizations to be even better after they leave. The following quote of a Level 5
leader reflects this attitude.
see the company as one of the great companies in the
To ensure this they choose superb successors. What makes them uncomfortable is
unrealized potential and complacency. Level 5 leaders regard leaving potential
unrealized as a sin. They are highly intolerant of complacency. For them good is never
good enough.
4
Level 5 Leadership
4.1 Fierce Will

Level 5 leaders demonstrate their fierce will in ensuring superb results for their
companies. They play the most important role in transforming their companies that
were merely good, to great companies. Once they are decided about what to do to
ensure the best long-term results, they will go through the process with unwavering
resolve. Robert Aders of Kroger sums up this will:
e was a certain Churchillian character to what we were doing. We had a very
strong will to live, the sense that we are Kroger, Kroger was here before and will be
here long after we are gone, and, by God, we are going to win this thing. It might take
us a h
Level 5 leaders inspire standards, and build enduring and great companies against the
odds.
Example: Cain as a Level 5 Leader

George Cain (Cain), the then CEO of Abbott Laboratories (Abbott), was definitely
a Level 5 leader. At the time he became CEO, Abbott was a mediocre, family-run
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organization. It was among the bottom one-fourth of pharmaceutical industry. The
company had only one good product: erythromycin. After taking charge, the first
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thing Cain did was to raise the performance bar. He inspired higher standards of
performance, while showing intolerance for complacency. He never accepted the
the company with relentless ambition and professional will. As soon as he came in
then started a systematic rebuilding of the executive team and board. He made sure
that being a family relation was no longer a short cut to a high position in the
company. He made it very clear that any executive in the company had to be the
best in the whole industry, with a well-defined span of responsibility. He fired
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every executive who was not upto the standard. This sort of ruthlessness is usually
expected only from an outsider who joins as CEO. But Cain had been an insider for
18 years. He was a member of the family that had been running Abbott in this
fashion. In the end, even the family was happy as the company performed 4.5 times
better than the general market between 1974 and 2000. Blue chip companies like
Merck and Pfizer performed only twice as well as the general market in this period.
Board, Sep/ Oct 2001, Vol. 38, Issue 5.
4.2 Compelling Humility

Level 5 leaders are characterized by compelling humility. They shun public attention.
They are never boastful. They are always happy to discuss at length about their
company and the contribution of their people. But they are generally averse to
discussing their role in the success of company. Jim Collins reports one CEO saying
the Level 5 leaders Jim Collins came across in his research were responsible for the
remarkable successes of their companies but they never admitted that.
story will go down in the annals of American business history as one of the most
successful, quickest turnarounds ever, (making) others turnarounds pale by
5
into situations against all odds, expecting to get his brains blown out.
At the end of the day he succeeds, he gets rid of the bad guys. He creates peace out of
arly, Lee
Iacocca used to brag that running Chrysler was a bigger job than running the country.
Level 5 leaders are quiet, and show calm determination when a task is to be
accomplished. In case of poor results, they do not blame the external environment.
5. Operating Style of Level 5 Leaders

Level 5 leaders lead with the help of disciplined people, disciplined thought, and
manage them
the system. Then they attempt disciplined thought. Discipline is necessary to face hard
facts. Also, disciplined people bring in the discipline necessary in the organization for
executing ideas. Finally, disciplined action is necessary. This ensures the desired and
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expected results. Figure 9.2 shows the operating style of a Level 5 leader.
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Figure 9.2
Operating Style of a Level 5 Leader

Disciplined
People
First who,
then what
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Disciplined thought
Have faith, face hard facts
Hedgehog concept
Disciplined action
Discipline vs Freedom
Adopting
technology
Adapted from various sources.
6
Level 5 Leadership
5.1 First Who, then What

Level 5 leaders first identify the right people. The right people to work with are those
who are willing to adapt to change. They are enthusiastic about moving in the new
direction set by the leader. The right people are internally driven and motivated. A
company cannot move in the right direction without such motivated people and it is
important for the leader to identify these people and place them in positions of
responsibility. Once this is over, then only they turn to the task of setting new
direction and strategy for making their organizations great (Refer to Figure 9.3 for
priorities of a Level 5 leader ). This approach has some obvious advantages:
Figure 9.3
Priorities of a Level 5 Leader
Level
5
Leader
I First who?
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Identifies and recruits best
people in the Industry.
Builds a
great team.
Then what?
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After identifying right

people he turns to the
task of identifying
the path which can lead to
greatness
Once the right people are on the team, adapting to changes becomes relatively
easy. If people join the team primarily because they are impressed with direction
of the firm or the strategy it is adopting, they will be dissatisfied when the firm
changes its direction or strategy according to situational demands. These
dissatisfied people will rarely be enthusiastic pariticipants when the firm is
moving in a new direction with a new strategy.
The right people will not have motivational problems. A leader need not motivate
them or monitor them closely. They have an inner drive to achieve the best results
and leave their mark.
7
A great company has never been created without the right people in place. The
wrong people will not be of much use even when the firm is moving in the right
direction. Similarly, great vision or strategy is hardly meaningful without the
right people in place.
5.2 Have Faith, Face Hard Facts

Level 5 leaders encourage their people to face hard facts. They believe that once
enough effort is put into knowing the reality of the situation, the right decisions will
follow. Of course, this may not always be the case. There may be situations where
there is enough information on the situation, and yet decision making is difficult. But
one thing is certain a leader can make the right decisions consistently only when he
is in touch with the realities of the situation. Level 5 leaders use various techniques to
understand the real situation.
Question and question: Level 5 leaders use the technique of constant questioning to
gain an understanding of any situation. They spend most of their meetings trying to
understand the prevailing situation. During informal meetings they interact casually
with groups of managers and employees discussing what is happening in the
marketplace and in other companies. They ask questions such as:
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Can you tell me about that?
Can you help me understand?
What should we be worried about?
By asking such questions they try to understand the current realities which are usually
not immediately obvious to higher-ups in management.
Welcome arguments and debates: Level 5 leaders encourage dialogue and debates
before taking any decision. To create the right environment for the dialogue they
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establish a practice of regular meetings of general managers across various

departments.
Ken Iverson (Iverson), the then CEO of Nucor, was very open about generating
widespread discussion and debate, even on issues of critical importance to the company
own steel, invest in their own mini-mill, and build a second mini-mill. All general
managers got an opportunity to share their views, even when they were at loggerheads
with one another. Iverson (and other Level 5 leaders) believed that the best decisions
would result only after considering all the points of view on the issue at hand.
Learn from mistakes: When things go wrong, Level 5 Leaders say something like
this: I will take responsibility for this bad decision. But we should try to extract the
For example, in 1978 Phillip Morris
acquired the SevenUp Company (a soft-drink company from the US). But after eight
total assets, the management did not brush it aside but discussed it openly and tried to
learn from their mistake. No one blamed others for the decision to sell the Seven-Up
the then CEO Joe Cullman took the blame himself, and
said he was at fault, mainly for not paying enough attention to those who had opposed
the buyout in the first place. He a
hours learning from this mistake.
8
Level 5 Leadership
Use red flags: Level 5 leaders also use red flags or early warning mechanisms. For
Granit
satisfaction with the product or service. They did not have to return the product or
take permission to use this option. All they had to do was to circle the offending
product or servic
before more customers were dissatisfied and deserted the company. This kind of red
flag is useful because otherwise managers come to know of a problem only when it
has already become unmanageable.
5.3 Hedgehog Concept

An organization is not always best at its core business, which it may have been
engaged in for years, maybe even decades. And if an organization is not the best in the
world in its core business then it cannot be a great company. For this reason, Level 5
leaders identify the area where their company can be the best in the world. They also
identify the areas where they cannot be the best. They divest from businesses where
they cannot be the best, and enter those where they can.
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Level 5 leaders also identify suitable economic indicators to measure their
performance. They are masters at ensuring continuous and healthy cash flows, and
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profitability. They employ a single denominator: profit per X. X here is the indicator.
It can be an employee, a branch, etc.
Dick Cooley, the then CEO of Wells Fargo, realized in the 1980s that deregulation in
the banking industry would change banking into a commodity business. He was
convinced that standard banker metrics like profit per loan or deposit; were no longer
evolved from this. The company was one of the first banks to change its distribution
system. It reduced the number of employees to the bare minimum and instead
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increased the number of ATMs.
5.4 Discipline vs Freedom

Level 5 leaders perpetrate a culture where disciplined people are involved in
disciplined thought and disciplined action. According to Jim Collins, an organization
with disciplined people does not need hierarchy, an organization with disciplined
thought does not need bureaucracy, and an organization with disciplined action does
not need excess control. When a culture of discipline is combined with a spirit of
entrepreneurship the organization performs extraordinarily.
Example: The Culture of Discipline at Abbott

Under the leadership of George Cain (Cain), CEO of Abbott Laboratories (Abbott)
system the managers were held responsible for all the items of the cost, income,
and investment which came under their sphere of activities. Every manager, no
matter what job he was responsible for, was assessed for return on investment
(ROI). The organization was more like an investor and the managers were like
entrepreneurs. This system promoted rigor and discipline while stimulating
creativity and a spirit of entrepreneurship.
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George Rathmann, cofounder and former CEO of Amgen, who had been an
not in a linear way of thinking. It was exemplary at having both financial discipline
and the divergent thinking of creative work. We used financial discipline as a way
lowest in the industry. The company was also highly innovative. By the early
1980s, 65% of revenues flowed from new products that were launched in the
previous four years.
cross the Board, Sep/ Oct 2001, Vol. 38, Issue 5.
In the example mentioned above, Cain recruited entrepreneurial leaders and gave
them enough freedom to follow their own ideas in attaining objectives. However, he
expected tremendous commitment from them, and made them rigorously accountable
against their objectives. Leaders thus recruited had freedom, but within the specified
concept (contributing to cost-effective health care) of the organization. Cain thus
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retained entrepreneurial zeal, discipline and opportunistic flexibility in the
organization.
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5.5 Adopting Technology
Under the leadership of Iverson, Nucor pioneered steel manufacturing through mini
mills. Nucor made significant investments in slab casting and electric arc furnaces.
The company then went on to become the biggest steel manufacturer in the US. This
example is seen by outsiders as a classic case of a small company overthrowing the
old order through application of new technology.
But when Iverson was asked to rank the top five factors that contributed to the
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transformation of Nucor from good to great, technology figured nowhere. According

to him, the consistency of the company, and its ability to project its philosophies
throughout the organization (made possible by the lack of layers and bureaucracy)
were the major factors that made it possible. His executives also felt the same. They
rated the right people (both workers and key managers), and the performance culture
of the organization, far above technology.
As the example shows, technology is just an accelerator of momentum in an
organization. It can never create that momentum. Hence, Level 5 leaders never
emphasize technology first in their quest for transforming their companies. They
believe that in order to use the technology appropriately, they should first understand
how relevant the technology is. They apply the technology only once they understand
ng great
companies. But how to find them and where to find them? Collins has two
suggestions. The first is to stop looking for leaders who are larger than life. In a
majority of cases, such leaders are good at ensuring only short-term returns, and quite
often harm the long-term interests of organizations. The second is to look for a place
where extraordinary results are the norm and where no single individual claims the
credit. There surely hides a Level 5 leader.
10
Level 5 Leadership
Activity: General Co. is an Indian hardware and software development company.

The company was very successful in its business. The company planned to expand
its business. The top management was keen to foray into consumer appliances,
plastics, cement, steel, furniture, pharmaceuticals, etc. The CEO of the company,
Adrian Verinder (Verinder) noticed that the business lines proposed were not the
core business of the company. However, the company launched the businesses.
After a year, the management found that its newly launched businesses were not
generating any revenues. Thus the board decided to come out with a solution to
make their businesses profitable. Verinder found that the company had moved from
its core business i.e. hardware and software development and had forayed into
several non-core businesses. Thus Verinder closed all its non-core business lines
and focused on its core business. Identify and discuss the operating style of
Verinder. Also discuss other operating styles of Level 5 leaders.
Answer:
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Check Your Progress
1. A Level 5 leader is:
a.
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b. ambitious for the

c. not concerned at all about his/her company
d. All of the above
2. A Level 4 leader is:

a. not very concerned about the greatness of the company once he/she is no longer
in char
b. concerned about his/her company though he/she is no longer in charge of the
c. Both a and b
3. Level 5 leaders are characterized by _________________.

a. boastfulness
b. arrogance
c. compelling humility
d. goodness
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4. What do level 5 leaders do to gain an understanding of any situation?

a. start off a debate
b. appoint a committee
c. refer to management books to see if there is a solution
d. use the technique of questioning
5. What is the advantage of having right people in a team?

a. adapting to changes takes some time
b. will not have motivational problems
c. great vision and strategy is hardly meaningful to them
d. will be of use when the firm is moving in the right direction
6. When things go wrong, how does the Level 5 leader react?

a. I will not take the responsibility for this bad decision. And we should try to
b. You will take responsibility for this bad decision. But you should not try to
c.
extract the max
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I will take responsibility for this bad decision. But I can try to extract the
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d. I will take responsibility for this bad decision. But we should try to extract the
maximum
7. What kind early warning mechanisms do Level 5 leaders adopt to caution

managers?
a. Red flags
b. Red card
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c. Red signal
d. Red ribbon
8. According to Jim Collins, an organization with disciplined people does not need
______________.
a. bureaucracy
b. control
c. hierarchy
d. leadership
9. Level 5 leader?
a. look for leaders who are larger than life
b. look for leaders who are tech-savvy
c. look for a place where extraordinary results are the norm and where no single
individual claims the credit
12
Level 5 Leadership
6. Summary
Leaders can be classified into five levels. A Level 1 leader is a highly capable
individual. He plays an important role in the success of the organization through
his own talent, knowledge, skills, and good work habits. A Level 2 leader is a
contributing team member. He is very good at working with his team members
and ensures that his team meets its assigned objectives, and fulfills the core
purpose. A Level 3 leader is a competent manager. He is skilled at organizing
people and resources towards the effective and efficient pursuit of organizational
objectives. A Level 4 leader is an effective leader. He sets high performance
standards. He is remarkable at motivating his people and leading them single-
mindedly towards realizing his vision for the organization. A Level 5 leader
transforms the organization into a great institution. He epitomizes personal
humility and fierce professional will.
Level 5 leaders are stubborn and ruthless, yet they are humble. They are highly
ambitious for their company, yet they rarely allow their ego to come in the way of
mplish great things for their
organizations they never take the sole credit. They may attribute their remarkable
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accomplishments to their people, external factors, and sheer luck.
Level 5 leaders first identify the right people for their teams. Only once they have
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identified the right people, do they turn to the task of setting new direction,
strategy and vision for their organizations.
Level 5 leaders encourage their people to face hard facts. They believe that once
enough effort is put into learning the reality of the situation, the right decisions
will follow.
Level 5 leaders never lose faith, even when they face hard facts. They try to
emerge stronger and better from testing circumstances.
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Level 5 leaders do not attempt transition in their company by beginning with a

strong emphasis on technology. They believe that in order to use the technology
appropriately, they should first understand how relevant the technology is. Only
when they have understood its relevance, and ensured its conformity with the
1. Jim Collins classifies leaders into five levels. Explain those levels in detail.
2. Who is a level 5 leader? State the characteristics of level 5 leaders. Analyze how
different are they from the other type of leaders.
3. Explain the functioning/operating style of Level 5 leaders.

James Charles Collins, Good to Great: Why Some Companies Make the Leap
and Others Don t, HarperBusiness, 2001.
Good Vs. Great Leaders: The Difference is Humility, Doubt and Drive,
Knowledge@Wharton, June 20, 2001.
13
Colgate-Palmolive s Reuben Mark: On Leadership and Moving the Bell Curve ,

Knowledge@Wharton, October 3, 2007
-main/resources/pdfs/comm/microsoft/level-
five.pdf>

1.
According to Jim Collins, a Level 5 leader is highly ambitious for the success of
his/her company.
2. b. A Level 4 leader is not very concerned about the greatness of the company
A Level 4 leader is not very concerned about the greatness of the company once
he/she is no longer in charge.
3. c. compelling humility
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Level 5 leaders are characterized by compelling humility.
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4. d. use the technique of questioning
Level 5 leaders use the technique of constant questioning to gain an
understanding of any situation. They spend most of their meetings trying to
understand the prevailing situation. During informal meetings they interact
casually with groups of managers and employees discussing what is happening in
the marketplace and in other companies.
5. b. will not have motivational problems
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The right people will not have motivational problems. A leader need not motivate
them or monitor them closely. They have an inner drive to achieve the best results
and leave their mark.
6. d. I will take responsibility for this bad decision. But we should try to extract
the
When things go wrong, Level 5 Leaders say something like this: I will take
responsibility for this bad decision. But we should try to extract the maximum
7. a. Red flags
Level 5 leaders also use red flags or early warning mechanisms. This kind of red
flag is useful because otherwise managers come to know of a problem only when
it has already become unmanageable.
8. c. hierarchy
According to Jim Collins, an organization with disciplined people does not need
hierarchy, an organization with disciplined thought does not need bureaucracy,
and an organization with disciplined action does not need excess control.
14
Level 5 Leadership
9. d. look for a place where extraordinary results are the norm and where no
single individual claims the credit
Jim Collins has two suggestions. The first is to stop looking for leaders who are
larger than life. In a majority of cases, such leaders are good at ensuring only
short-term returns, and quite often harm the long-term interests of organizations.
The second is to look for a place where extraordinary results are the norm and
where no single individual claims the credit. There surely hides a Level 5 leader.
I
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Unit 10
Narcissistic Leaders
Structure
1. Introduction
2. Objectives
3. Understanding Narcissism
4. Characteristics of a Narcissistic Leader
5. Operating Style of a Narcissistic Leader
6. Balancing a Narcissistic Leader
7. Summary
8. Glossary
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1. Introduction
The previous unit discussed the classification of leaders. It then explained the
characteristics of Level 5 leaders. The unit finally concluded with a discussion on the
operating style of Level 5 leaders. The unit will discuss the concept of narcissistic
leaders.
The Apple Lisa was the most fascinating and user-friendly computer in the market
when it was introduced in January 1983. It was the result of millions of dollars of
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investment, and the most creative efforts in the budding PC industry. Lisa had some
highly innovative features. It could rearrange paragraphs of text or insert words into a
sentence. Using Lisa, it was possible to insert footnotes, tables of contents, indexes,
and bibliographies, with simple commands. Before Lisa, to convert a single-spaced
text to double-spaced text, one had to retype the entire manuscript. Unlike earlier
computers, Lisa had an icon-driven display, and the ability to do complex tasks. In
spite of having so many advantages, Lisa died a premature death, and disappeared
from the market in six months. Why did Lisa have such a quick fall, in spite of its
obvious advantages? Many suggest that the narcissistic style of leadership of Steve
Jobs (Jobs) was responsible for the failure of Lisa.
Jobs, the co-founder of Apple Computers (Apple), had earlier played a key role in the
success of the Apple-II computer. He had promoted it extensively. But it was Steve
Wozniak who had designed the product. Jobs wanted to prove to the world that he
could spearhead the creation of a revolutionary product, and single-handedly bring it
to market. So when the Lisa project was conceptualized, Jobs was determined to make
it his baby. Ken Rothmueller was appointed the project leader. But Jobs did not like
the model designed by Rothmueller and he took over as the project leader. However,
halfway through the project, Jobs was replaced by Jon Couch as the head of the
project (though Jobs was the co-founder, the board of the company had complete
Instead, Jobs became the project leader of the Macintosh project. When Jobs
introduced Lisa to the press, he did not talk about the Lisa, but about Macintosh, his
brainchild. He said that when Macintosh was introduced in another six months, it
would be the most incredible computer in the world another Apple II. He boasted
-fourth its price
(Lisa cost US$ 10,000 then). This caused potential buyers to postpone their purchase
to wait for the Macintosh that was expected in six months. This was the beginning of
the decline of Lisa. Jobs also made it clear that Macintosh would be incompatible with
Lisa. This meant whoever bought Lisa would have no other option but to dump it, if
Macintosh became the standard PC in the future.
of which had cost the organization millions of dollars. He himself proclaimed that he
wanted to win acclaim for producing a great computer, no matter what the cost. He
wanted to prove that his own creation, Macintosh, could beat Lisa in the same field.
To him it did not matter that both the models were from the same company and were
meant to serve customer needs. Rather, to Jobs, they were testimonies of his creative
skills and prowess. Jobs destroyed Lisa, and according to some analysts, almost
destroyed Apple itself. Later Macintosh went on to become one of the best selling
products of the company.
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This unit discusses the concept of narcissistic leadership. It then discusses the
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characteristics of narcissistic leaders. It then discusses the operating style of
narcissistic leaders. The unit concludes with a discussion on the ways to balance a
narcissistic leader.
2. Objectives
understand the concept of narcissism.
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discuss the characteristics of a narcissistic leader.

understand the operating style of a narcissistic leader.
discuss the ways to balance a narcissistic leader.
3. Understanding Narcissism
Narcissism is often associated with egotism, self-centeredness, and exaggerated self-
love. Some amount of narcissism is essential for functioning in human society. It is
that it becomes negative. Narcissistic elements form the basis of self-esteem and
identity. If these elements are either excessive or too little, the individual loses his/her
balance and has an unstable personality.
personality. It is during this period that the core patterns of personality are shaped. The
foundation laid at this stage of life determines what type of person he or she will
his or her
early years.
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Parents and caretakers play a key role in the development of narcissism. Factors like
whether they were supportive or indifferent; whether family circumstances led to the
child experiencing deprivations; whether there was a solid foundation for the
-regard and ability to establish relationships; whether
the child given enough opportunity to develop self-esteem, all these affect the
development of narcissism.
Frustrations in tolerable doses are necessary to ensure the normal development of the
individual. A child manages this frustration by trying to regain the original impression
of bliss of childhood by creating a grandiose image of himself or herself, and an
idealized image of the parents. If a child gets adequate care, he/she will adapt
himself/herself to reality by getting rid of his/her grandiose image. This is where
parents and siblings have a role to play. They can translate the
images into realistic ambitions, stable values, a secure sense of self-esteem and
identity, and well-defined career interests. Such normal development does not occur in
all cases. Things do go wrong. In situations of prolonged disappointment caused by
parental overstimulation, understimulation, inconsistent and arbitrary behavior, or
violence and abuse, children grow up believing that they have nobody to love or show
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loyalty to, except themselves. This behavior takes complete hold when they become
adults. Though they demonstrate self-sufficiency, at the depth of their being, they feel
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sense of deprivation, anger, and emptiness. While coping with these feelings and
insecurities, their narcissistic needs turn into obsessions. They will be obsessed with
power, beauty, status, prestige, and superiority. Narcissists maneuver people into
strengthening their shaky self-esteem. They even go the extent of taking revenge for
what happened to them when they were children.
4. Characteristics of Narcissistic Leaders

The following are the characteristics of narcissistic leaders:
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4.1 Compelling Vision

Narcissistic leaders are not extraordinary at analysis. They may not be able to break up
big questions into manageable problems. They may not be remarkable at number
crunching. But they are truly exceptional at envisioning the big picture. George
Bernard Shaw, an Irish playwright
4.2 Charisma
Narcissistic leaders are often good orators. This adds to their charisma. They use
language that evokes images and symbols. They firmly believe that inspiring speeches
change people. For example, Bill Atkinson, considered by many to be the most gifted
programm
independent leaders. But it is not so. They depend on their followers for affirmation
and adulation. Their speeches generally have the hidden motive of arousing adulation,
which can soothe their ego, and affirm their self-confidence.
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4.3 Closeness Leads to Isolation

Subordinates come close to their charismatic boss easily. But this can also result in
leade -assured as the number of
his/her followers increases. Then he/she starts taking spontaneous decisions without
much thought and consideration. He/she assumes that he/she is invincible. This energy
and false confidence inspires still more followers. The increasing adulation of larger
numbers of followers makes him/her ignore caution and advice. He/she continues with
his/her unassailable logic that he/she was sure and right earlier when everybody was in
doubt. He/she does not try to persuade people who disagree; he/she starts to ignore
them. As a result he/she gets isolated from people. Finally, this behavior creates
situations where avoidable mistakes end up as catastrophes.
4.4 Emotionally Isolated

A narcissistic leader is emotionally isolated. As he/she is uncomfortable with his/her
own emotions, he/she /she is
very sensitive, he/she sees criticism as a threat to his/her self-image and confidence.
Unless there is a really big problem, he/she never takes feedback for fear of criticism.
I
He/she cannot tolerate dissent. Narcissistic leaders are tough with people. An Apple
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would
teamwork is nothing more than working with a team of yes-men. As a result of this
attitude, independent minded people either leave the organization or are told to leave
and this leads to a succession problem.
4.5 Lack of Empathy

While narcissistic leaders yearn for empathy from others, they are rarely empathetic
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toward their followers. This lack of empathy can stifle their ability to communicate.
As a result they may have to rely entirely on their passion and conviction to lead
people. They do not bother about any genuine feedback, let alone 360-degree
feedback. They believe that they need not change as long as they are successful.
Narcissistic leaders seem to be emotionally intelligent, but they possess street
smartness rather than empathy. They clearly understand who is on their side and who
is not. This understanding helps them in using and even exploiting their people. This is
the reason why people do not like narcissistic leaders in spite of their charisma and
initial successes.
Example: Larry Ellison and His Narcissism
personality, as far as determining my success goes, has been my questioning

conventional wisdom, doubting the experts and questioning authority. While that
management style.
19
controversial figure, with a notorious reputation for developing serious differences
and intelligence were impressive, his leadership was just not right. Commenting on
the company in terms of who do we stand for or how do we operate or what are our
principles of behavio
According to media reports, there were several instances when Ellison confused the
INGRES and others had a semantic optimizer. However, the fact was that Oracle
never had an optimizer, while the other products had this feature. In another
em. Oracle was successful in making its

customers believe in the existence of such a feature. However, Oracle had no such
I
feature, and when the user instruction manual was released, it included a note
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4.6 Bad Mentors

As they lack empathy, narcissistic leaders fail to be mentors or to be mentored
themselves. When they are being mentored they yearn to control their mentors.
Narcissistic leaders lack the intimacy necessary to be mentors. Even when they are
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involved in such activity willy-nilly, they do more of instructing than coaching.
4.7 Relentless and Ruthless

All successful managers are ruthless and have a relentless spirit. But what differentiates
them from the narcissist is that they have a conscience. Narcissists do not feel bothered
by a conscience. For them winning is all that matters. Organizations headed by
narcissists have high internal competition. People in these organizations are passionate
about winning. But they are only driven by promise of glory or fear of extinction. These
motivating factors definitely energize companies by creating urgency, but this can
nevertheless be dangerous as well. People in such organizations see everything as a
threat. Narcissists are so taken by fear, distrust and aggression, that they imagine
enemies ev
mode. This type of behavior might be useful in certain industries which are going
through tumult. But in general, it harms organizations in the long term.
4.8 Workaholics
Narcissistic leaders work for long hours. They sacrifice their personal lives by
spending all their time and energy on their work. Even when they are not at their
workplace, they spend their time thinking and planning for work. They also expect
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others also to work in the same way. Narcissists rarely take vacations. Even when they
take vacations, they fix them around work activities. When ill and forced to stay
home, narcissistic leaders work from their homes.
4.9 Loyalty toward the Organization

Narcissistic leaders are loyal to their organizations and their values. They try hard to
keep themselves abreast of the latest developments in their organizations and their
performance. Narcissistic leaders also maintain contacts with outsiders to keep
themselves up to date of the latest developments in their fields. They are eager to take
on more responsibilities, so that more people are accountable to them. Narcissistic
leaders love to maintain their reputation for getting things done.
4.10 Power Hungry

The need for gaining power over others is a dominant characteristic of narcissistic
leaders. They always look for various management techniques to expand their span of
control over others. This behavior is a result of a sense of powerlessness over the self.
Narcissistic leaders use different ways to gain power such as manipulating others,
I
controlling communication and information, and controlling decision making.
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Activity:
Wilson (Wilson) worked for long hours and expected the employees to work even
after office hours. Though the employees were not compensated for extra work,
they continued to work. The employees could hardly go on leaves. If they were
offered leaves, they were asked to work from home. What kind of leader is Wilson?
Identify and discuss the characteristic of Wilson. Also discuss other characteristics
of such leaders.
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Answer:
Check Your Progress

1. What kind of trait exhibits narcissistic behavior?
a. selflessness
b. soberness
c. self-centeredness
d. humbleness
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2. arcissist?
a. family circumstances led to the child experiencing deprivations
b. -
regard
c. whether the child given enough opportunity to develop self-esteem
d. All of the above
3. For a narcissistic leader, teamwork means working with a:

a. Team of men who say no
b. Team of yes-men
c. Team of flamboyant men
d. Team of good men
4. Lack of empathy can stifle a narcissistic leaders ability to ________________.

a. scold
b. impress
c.
d.
understanding
communicate
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FA
5. In what way are successful managers different from narcissists?
a. They have confidence
b. They have a conscience
c. They have more ideas
d. They have passion
6. Which one of the following is not a technique adopted by narcissistic leaders to

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gain power?
a. manipulating others
b. controlling communication and information
c. encouraging people
d. controlling decision making
5. Operating Style of Narcissistic Leaders

A narcissistic leader is concerned all the time with creating a saleable image for
himself/herself. To some extent his/her behavior is consistent with that image. But for
the most part, he/she creates the image by controlling communication and information
related to him/her and his/her department. A narcissistic leader might not be willing to
/she is certainly bothered about what others think of
him/her. To project a good image he/she invents stories that seem realistic. When
events go out of control, he/she projects himself/herself as the master of damage
control by issuing statements in the press regularly till the damage is controlled. A
narcissistic leader thus wants to be seen as one who is always in control, successful
and heroic.
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5.1 Manipulative
One of the operating styles of narcissistic leaders is manipulation. It is a common
characteristic of such leaders, and one that is most hated in them. A narcissistic leader
may even treat others as objects or modules. He/she uses subtlety, finesse, and charm
to get his/her work done. For example, when he/she
he/she does not ask that with an intention to understand or learn from the subordinate.
Rather, he/she does that to identify ways to convince the person.
5.2 Controls Communication

A narcissistic leader reviews all the written communications going out of his/her
department. He/she edits staff memos. This he/she does to ensure that his/her ideas
and intent are not misunderstood. Complete and regular updates are an overriding
concern for him/her. He/she spares no effort to understand what is happening in
his/her department and staff meetings often turn out to be interrogation sessions. A
narcissistic leader always wants to be kept informed about the minutest of details
regarding a project, in order to show that he/she is in complete control of the project.
Example: Charming Branson
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Richard Branson the CEO of the Virgin Group of companies is immensely
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charming when trying to convince people to do what he wants. He was able to
convince a reluctant Mike Oldfield to perform on stage at a concert that was
intended to create visibility for the artist and for Virgin records Branson took him
out for a drive in his car and asked him whether he would like to keep the car,
although it had been given to Branson as a wedding gift. Branson asked Mike
Oldfield in return to perform at the concert. Mike Oldfield agreed and the album
went on to become one of his greatest hits and sold more than five million copies in
Britain.
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A narcissistic leader going to a meeting will tell his/her staff what he/she thinks about
the particular issues which are to be discussed in the meeting. This he/she does with
the expectation that they will work with him/her and support his/her ideas. During
meetings he/she uses different tactics:
Narcissistic filibuster. A narcissistic leader keeps on talking endlessly till the
opposition gets exhausted and loses interest in the issue.
Beating around the bush. A narcissistic leader talks about the issue in a
roundabout way often using abstract and complex terms. He/she adopts this tactic
to make the opposition believe that they lack both the critical information and
intelligence needed to understand the issue at hand.
Analogies and metaphors. A narcissistic leader uses analogies and metaphors to
convince other members in the meeting that what he/she is talking is plain
common sense and truth.
5.3 Controls Decision Making

Narcissistic leaders control all decision making in their department. At times
narcissistic leaders make decisions which are meant to be made by people far below
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trust others, they cannot think of empowering their employees. To trust one needs to
believe that the person who is delegated responsibility can make decisions on his/her
own, and that the decisions may be different from those the leader might have taken
under similar circumstances, but still be valid. Narcissistic leaders do not want others
to make independent decisions. Hence, situations involving delegation and trust rarely
arise.
Narcissists trust people who are their mirror images, people who invariably reflect
their ideas and make decisions similar to theirs. Narcissistic leaders believe that they
alone know best. The employees they value are like extensions of themselves, who
narcissistic leaders experience frustration. They try hard to recruit a few people who
can act as their clones and direct the rest as they would. Whenever they spot a
immediate, on-the-spot correction. This is the type of control a narcissistic leader

looks for.
5.4 Builds Empire

A narcissistic leader tries to build a personal empire using the power he/she has
I
acquired. A narcissistic leader tries to acquire more money, power, and people to
buttress his/her shaky self-esteem. A narcissistic leader sees workplace as the
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appropriate environment to gain self-assurance. This is the reason why he/she takes
his/her job seriously. He/she works hard and tries to achieve results to gain more
power and influence. This way he/she tries to become indispensable in the
organization. As he/she gains more power, he/she expands his/her span of control.
And more control means enough freedom to construct his/her image. More power also
allows him/her to hire and develop his/her clones of himself/herself - like-minded
people who will implement his/her ideas, allowing him/her to build his/her empire.
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5.5 Craves Visibility

A narcissistic leader believes that visibility is essential for maintaining his/her grand
image. He/she uses all the available means to make himself/herself more visible. For
him/her achievement is valuable primarily because it bestows recognition, and praise.
He/she believes that visibility is necessary for recognition and behaves accordingly.
For example, Lee Iaccoca acted in 80 commercials.
5.6 Blames Others for Failures

A narcissistic leader does not accept and learn from his/her failures. When there is no
way to escape the consequences, he/she blames the circumstances. When he/she
cannot do that he/she does not hesitate to blame even his/her own subordinates for the
Activity: XYZ Ltd. is a component manufacturing company in Gurgaon, India. The

company had around 10,000 workers. The workers often complained to their plant
manager, Vijay Mehta (Mehta), of the faulty machinery. Despite several requests,
the manager did not talk to the top management and the workers had to continue
working on the old machinery. The top management noticed that the production of
24
the components had become very slow and this delayed the delivery of the
components to various suppliers. On inquiring the plant manager, the top
management found that the workers were very slow in their work. The plant
manager did not tell the truth that the machinery was old and hence the production
was slow. Identify and discuss the operating style of Mehta. Also discuss other
operating styles of narcissistic leaders.
Answer:
6. Balancing a Narcissistic Leader
I
Narcissistic leaders can avoid getting trapped in their own personality. Michael
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Maccoby suggests two ways for them to do so:
: The associate here is a completely reliable
person for the narcissistic leader. He/she is the anchor who keeps the narcissistic
leader grounded to reality. With his/her unbiased insights and realistic
understanding, such a mentor understands what the narcissist is and what he/she is
trying to do. He/she is sensitive and mature enough to manage his/her relationship
with the narcissistic leader. Two CEOs who have/had associates to act as anchors
are Bill Gates of Microsoft and Larry Ellison of Oracle. Bill Gates has Steve
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Ballmer (CEO) as his anchor and Larry Ellison had Ray Lane (President and
COO).
Use psychoanalysis. Narcissistic leaders can become self-reflective by taking the
help of psychoanalysts. They can explore their personalities by reflecting on their
dreams. This can make them understand what they are, what their drives are, what
their biases are, etc. When they reflect in this manner, they can detach themselves,
and identify their irrational needs. This detachedness can indeed breed humility in
them. With this humility, narcissistic leaders can be more open, likeable, and
good-humored.
Check Your Progress

7. /she
/she does not ask that with an intention to
a. He/she is an authoritarian
b. He/she is manipulative
25
c. He/she is very knowledgeable

d. He/she is stubborn
8. Narcissistic filibuster is a tactic used by the narcissistic leader where he/she:

a. talks endlessly till the opposition gets exhausted and loses interest in the issue
b. talks about the issue in a roundabout way often using abstract and complex terms
c. uses analogies and metaphors to convince other members
d. none of the above
9. Whom does a narcissistic leader trust?

a. People who have expertise in their respective fields
b. People who believe that they know best
c. People who invariably reflect their ideas
d. People who are unlike them
10. A narcissistic leader sees workplace as the appropriate environment to gain

_______.
a. self-assurance
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FA
b. money
c. position
d. satisfaction
11.
a. Indivisibility
b. Sustainability
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c. Influence
d. Visibility
12. What does a narcissistic leader do to escape the consequences?

a. Learn from the failures
b. Blames the circumstances
c. Blames himself/herself
d. Learns to face the situations
13. Michael Maccoby suggests two ways that can help narcissistic leaders avoid
getting trapped in their own personality take the help of an associate or
.
a. use socio analysis
b. use economic analysis
c. use psychoanalysis
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7. Summary
Narcissism is often associated with egotism, self-centeredness, and exaggerated
self-love. But these are only instances of extreme narcissism. Some amount of
narcissism is essential for functioning in human society.
The characteristics of a narcissistic leader include compelling vision, charisma,
closeness leads to isolation , emotionally isolated, lack of empathy, bad mentors,
relentless and ruthless, workaholics, loyalty towards the organization, and power
hungry.
One of the operating styles of narcissistic leaders is manipulation. It is a common
characteristic of such leaders, and one that is most hated in them.
A narcissistic leader reviews all the written communications going out of his
department. He edits staff memos. This he does to ensure that his ideas and intent
are not misunderstood.
Narcissistic leaders control all decision making in their department. At times
narcissistic leaders make decisions which are meant to be made by people far
below their level.
I
A narcissistic leader tries to build a personal empire using the power he has
acquired.
FA
A narcissistic leader believes that visibility is essential for maintaining his grand
image.
A narcissistic leader does not accept and learn from his failures.
Narcissistic leaders can avoid getting trapped in their own personality. Michael
Maccoby suggests two ways for them to do so:
use psychoanalysis.
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8. Glossary
Narcissism: Narcissism is often associated with egotism, self-centeredness and
exaggerated self-love.
1. Explain the concept of narcissism.
2. Explain the characteristics of narcissistic leaders.
3. Describe the operating style of a narcissistic leader.
4. Describe the ways in which a narcissistic leader can be balanced.

Stephen P. Robbins, et al., Basic Approaches to Leadership, Organizational
Behavior, 12th edition.
Michael Maccoby, Narcissistic Leaders: The Incredible Pros, the Inevitable Cons,
Harvard Business Review, January-February, 2000.
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Dean B. McFarlin, Paul Sweeney, Where Egos Dare: The Untold Truth about
Narcissistic Leaders and How to Survive Them, Kogan Page Publishers, 2002.
Birgit Schyns, Tiffany Hansbrough, When Leadership Goes Wrong: Destructive
Leadership, Mistakes, and Ethical Failures, IAP, 2010.
Narcissism on Leadership and Sustainability <http://ceres.ca.gov/tcsf/pathways/
chapter12.html>

1. c. self-centeredness
Narcissism is often associated with egotism, self-centeredness, and exaggerated
self-love.
Parents and caretakers play a key role in the development of narcissism. Factors
like whether they were supportive or indifferent; whether family circumstances
led to the child experiencing deprivations; whether there was a solid foundation
-regard and ability to establish
I
relationships; whether the child given enough opportunity to develop self-esteem,
all these affect the development of narcissism.
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3. b. Team of yes-men
For narcissistic leaders teamwork is nothing more than working with a team of
yes-men.
4. d. communicate
While narcissistic leaders yearn for empathy from others, they are rarely
empathetic toward their followers. This lack of empathy can stifle their ability to
communicate. As a result they may have to rely entirely on their passion and
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conviction to lead people.

5. b. They have a conscience
All successful managers are ruthless and have a relentless spirit. But what
differentiates them from the narcissist is that they have a conscience. Narcissists
do not feel bothered by a conscience.
6. Answer: c. encouraging people
Narcissistic leaders use different ways to gain power such as manipulating others,
controlling communication and information, and controlling decision making.
Hence option c is incorrect.
7. b. He/she is manipulative
implies that a
narcissistic leader is manipulative. It is a common characteristic of such leaders,
and one that is most hated in them.
8. a. talks endlessly till the opposition gets exhausted and loses interest in the issue
Narcissistic filibuster is a tactic used by the narcissistic leader where he/she talks
endlessly till the opposition gets exhausted and loses interest in the issue.
28
9. c. People who invariably reflect their ideas

Narcissists trust people who are their mirror images, people who invariably reflect
their ideas and make decisions similar to theirs. Narcissistic leaders believe that
they alone know best.
10. a: self-assurance
A narcissistic leader sees workplace as the appropriate environment to gain self-
assurance.
11. d. Visibility
A narcissistic leader believes that visibility is essential for maintaining his/her
grand image. He/she uses all the available means to make himself/herself more
visible.
12. b. blames the circumstances
A narcissistic leader does not accept and learn from his/her failures. When there is
no way to escape the consequences, he/she blames the circumstances. When
he/she cannot do that he/she does not hesitate to blame even his/her own
13. c. use psychoanalysis
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FA
Michael Maccoby suggests two ways that can help narcissistic leaders avoid
getting trapped in their own personality take the help of an associate or use
psychoanalysis.
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Unit 11
Leadership Challenges
Structure
1. Introduction
2. Objectives
3. Challenges of Knowledge Work
4. Realities of the E-commerce Environment
5. Managing Diversity
6. Summary
7. Glossary
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FA
1. Introduction
The previous unit discussed the concept of narcissistic leadership. It then discussed
the characteristics of narcissistic leaders. It then discussed the operating style of
narcissistic leaders. The unit concluded with a discussion on the ways to balance a
narcissistic leader. This unit will discuss the challenges faced by leaders.
/she will
have some stars as in an opera, who will not take orders. He/she will have some
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support staff and line people, who correspond to the supporting cast. He will also
have back office people, just like those who work behind the scenes for an
orchestra. And he/she will have customers, similar to the audience. A leader is
expected to lead or serve all these groups of people, who are entirely different -
different in their behaviors and their expectations. The key attribute of leadership in
the future will be to ensure the desired results by converging the interests of these
various groups.
The leader should concentrate on the essential aspects of his/her role, and his/her
importance as a leader will flow from that. He/she should be able to distinguish
situations that need partnering from those that need clear orders. Financial objectives
need to be integrated seamlessly with the need to build and maintain the business. In
addition, leaders will face new challenges that are characteristic of knowledge work,
the e-commerce environment, and diversity in the workforce and in the market. In
facing these challenges lies the future of the organization.
This unit discusses the challenges faced by a leader in a knowledge-based economy. It
then goes on to explaining how a leader should deal with the realities of the e-
commerce environment. Finally, the unit discusses the factors that lead to diversity
and how leaders foster creativity through diversity.
2. Objectives
understand the challenges faced by leaders in a knowledge-based economy
discuss how leaders deal with the realities of the e-commerce environment.
discuss the factors that lead to diversity and understand how leaders foster
creativity through diversity.
3. Challenges of Knowledge Work

The emergence of knowledge-based work, the knowledge worker as capital, and the
transformation of the industrial economy into a knowledge-based economy, have
influenced the way businesses are run very significantly. According to Peter Drucker,
what we refer to as the information revolution is, in fact, a knowledge revolution.
Software involves the reorganization of traditional work, through the application of
knowledge, specifically of systematic, logical analysis. The electronics in computers
and other equipment make it possible to reorder traditional work processes in this
way. But apart from the hardware, it is the cognitive science as applied by knowledge
I
professionals that actually make diverse computer applications possible. This suggests
that organizations which want to maintain leadership in the economy and in emerging
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technologies need to give enough consideration to the social position of the
knowledge professionals they employ, and their values.
Traditionally, capital was treated as the key resource, the financier as the boss, and
knowledge workers as employees who would be content with bonuses and stock
options. Drucker says that this attitude will work only as long as the stock-markets are
booming. Knowledge workers are not likely to be content with fringe benefits such as
stock options and
organizations. For example, even companies that have implemented compensation
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systems that offered benefits and stock options have been found to have a very high
turnover.
Running an organizat
concern for people, could become counterproductive, because the performance of
these knowledge-based organizations will depend to a large extent on how they can
attract, hold, and motivate knowledge workers. Since, beyond a point, these people are
not satisfied with money, they should be offered recognition and power within the
organization. This is possible only when subordinates are treated as fellow executives,
and employees as partners.
Example: Knowledge Communities at Tata Steel

Tata Steel is the only manufacturing company in India to have a knowledge
management system in place. It was T. Mukherjee, the deputy managing director of
Tata Steel, who launched the knowledge management program in the company.
Later he was instrumental in creating 24 knowledge management communities in
the company. Every employee irrespective of his department is allowed to
participate in the community of his/her choice. The most important goal of creating
these communities is to nurture a culture of experimentation.
31
These communities are evaluated on the basis of their effectiveness. They are
encouraged to manage information in their area of interest on a knowledge
management website. Employees are also encouraged to conduct seminars, engage
in problem solving, and identify and implement best practices in their area of
interest.
According to Drucker, the knowledge worker is a participant in an economy where

information and its manipulation are the commodity and the activity. Contrast this
with the industrial age worker who was primarily required to produce a tangible
object. Examples of knowledge workers include - but are not limited to - marketing
analysts, engineers, product developers, resource planners, researchers, and legal
counselors. Leading an organization in a knowledge-based environment needs a
thorough overhaul of management philosophy. A different mindset is essential to lead
an organization of knowledge workers. New measurements of performance, new
values, new goals, and new policies have to be designed. A leader cannot expect all
these things to happen overnight. Creating and bringing in all these needs long-term
commitment.
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Mentoring is an important role that businesses leaders will have to play more often in
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the future. In the knowledge economy they have to spend a lot of time with promising
knowledge professionals. They have to understand them. They have to make
themselves more approachable and transparent. Leaders have to listen to these
professionals. They have to challenge them, and encourage them as well.
Leaders in the future must move away from just managing work to participating in it.
Earlier there was a clear demarcation between what a worker did and what his/her
superior did. In a knowledge economy, this is no longer the case. In a knowledge
economy, a knowledge professional may have to play the role of a leader. When the
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professional is clear about what is to be done, the leader-in-charge (managerial leader)

must be ready to play the role of a follower.
Leaders of the future will need to be skilled at creating and nurturing knowledge
communities in the organization, instead of organizational hierarchies. By definition,
these communities are groups of people informally bound together by shared expertise
and a passion for joint enterprise to complement knowledge creation. Though
knowledge is created continuously in organizations, only a few organizations take
advantage of their store of knowledge. By institutionalizing knowledge communities,
organizations can benefit more widely from the knowledge of the professionals they
employ. Knowledge communities enable knowledge workers to share their knowledge
through social interaction. Some consultancies like Ernst & Young, and McKinsey,
and other organizations like Wipro, Infosys, and Satyam have active knowledge
communities.
4. Realities of the e-Commerce Environment

In the future, the delivery of goods, services, and spare parts will be done by
organizations that function in a completely different manner from the organizations of
the last century. E-commerce needs a different outlook on manufacturing and
commerce. Different yardsticks will be used to measure the performance of e-
32
function. This function is treated as a part of routine work, which is taken for granted
unless something goes drastically wrong. But with e-commerce, organizations can
create competitive advantage through this function. They can transform delivery into
factors for the organization.

E-commerce does not simply cover the distance. It eliminates the distance. With e-
commerce, neither the vendor nor the customer knows where the purchase order
comes from. Any organization that can organize delivery can operate in any market
without maintaining a physical presence there. CarsDirect.com, an online seller of
new passenger automobiles, is one of the fastest growing businesses in the US.
Founded in January 1999, the company had become one of the largest car dealers in
the country by July 1999. Although based in Los Angeles, it operated in forty states in
behind bigger and older e-commerce automobile dealers such as Autobytel.com or

CarPoint.com (a Microsoft subsidiary), CarsDirect.com succeeded because it created a
unique delivery system. It entered into an agreement with 1,100 traditional car dealers
delivery date. Under the agreement, the car dealers would also offer quality service to
customers.
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FA
Leadership in the age of e-commerce is more about connecting people than
connecting technology. Dave Tolmie, the then CEO
success of a new economy company is based on the collective capabilities of its
people. Every company needs to be more collegial and less structured so that the
has to seek new ways to communicate his/her vision, create a culture, and think about
what a company is and how it must be in the future. This search for new ways may
force organizations to abandon their age-old hierarchical organizational structures and
governing systems.
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In the age of e-commerce, a leader has to think and act like an entrepreneur. That is a
prerequisite for success. Meg Whitman, the then CEO of eBay, talks about her
In the beginning, I was certainly not an entrepreneur who came
up with the idea, but I think I was fairly entrepreneurial in trying to figure out how to
bring that idea to life and build a backbone for the company that could take it to the
Employees who handle e-commerce operations are generally young. So a leader must
ensure that work culture reflects fun, trust, and openness. The leader must also ensure
The companies in the future will be judged on parameters such as number of new
ideas generated, ability to attract and retain talent, methods employed to satisfy
employees, etc.
Activity: Euphoria Furnitures Ltd. is a Sweden-based furniture company. The

company is known for its innovative designs. To make purchase easy for customers
worldwide, the company has started an online site, where the customers can easily
access furniture designs and place an order online. The online selling model was
33
not received well by the employees. If you were the CEO of this company, how
would you perform your role as a leader in creating an environment that would
communicate the employees the benefits of using e-commerce?
Answer:
Example: Meg Whitman: A Leader and a Pioneer

At the start of the 21st century, Meg Whitman (Whitman) emerged as one of the
I
most popular leaders in the dotco
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goals and her positive frame of mind distinguished her from most of her
counterparts. Since the Internet business was a dynamic one that demanded timely
-making style paid rich dividends.
She had the talent to persuade others to deliver what she wanted. Scott McNealy,
the then CEO, Sun Microsystems, who had an opportunity to work with Whitman
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-glove
touch. Instead of making me angry, she made me want to do just about anything we
Similarly, in 1999, when Whitman realized that advanced credit-card processing

capabilities provided Amazon.com a competitive advantage, she quickly acquired
BillPoint, an online system, which allowed customers to pay via e-mail. In the
same manner, in 2001, when Whitman noticed that the fixed-price sales of
half.com were increasing she began promoting fixed-price sales on eBay, with the
objective of making eBay the biggest retailer on the Internet.
Whitman shared a cordial and friendly relationship with all her employees. She
dressed casually and worked from a cabin like many of her employees. However,
despite her friendly demeanor, Whitman did not spare executives who did not
deliver on promises or were slow. When a newly hired technology chief failed to
fix problems fast during site crashes, she fired him immediately. According to
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Con
Analysts remarked that though Whitman did not invent eBay, she transformed it
from a start-
very, very enamored of other areas the company could participate in. She has made
Michael Useem, Director, Wharton Center for Leadership and Change
top of the heap. Here is a pioneer who has built a company into a fully developed
Check Your Progress

1. The performance of the knowledge-based organizations depends on:
a.
b.
recruiting more employees
creativity
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c. increasing work productivity
d. attract, hold, and motivate knowledge workers
2. In what kind of an economy does a knowledge worker participate?

a. where information and its manipulation are the commodities
b. where information and its manipulation are the commodity and the activity
c. where information is the manipulation of the activity
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3. Which of the following is an important role that business leaderers will have to
lay more often in the future in a knowledge economy?
a. Mentoring
b. Teaching
c. On-the-job training
d. Listening
4. What are the groups of people informally bound together by shared expertise and
a passion for joint enterprise to complement knowledge creation called as?
a. social networking communities
b. informal groups
c. knowledge committees
d. knowledge communities
5. Leadership in the age of e-commerce is more about connecting with __________.

a. technology
b. ecology
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c. people
d. companies
6. What is the prerequisite for the success in the age of e-commerce?

a. think and act like an employee
b. think and act like a boss
c. think and act like a CEO
d. think and act like an entrepreneur
5. Managing Diversity
Diversity refers to differences among people with respect to goals, values, stakes,
assumptions, and perceptions. When an organization has high level of diversity and
interdependence taking unilateral action is hardly possible. While taking decisions,
whether significant or insignificant, people belonging to diverse backgrounds tend to
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block or retard initiatives. This is possible because these people yield power through
formal authority, control over financial or human resources, and have unique expertise
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or knowledge.
In organizations, people with diverse backgrounds are linked by interdependency.
These people may have different goals, values, stakes, and outlook. These diverse
people naturally tend to reach different conclusions about events in the organization.
As there is more diversity, and more interdependence, there are more differences in
opinion. Conflicting opinions can lead to conflicts in action. Thus diversity can create
conflict in the organization. Addressing this conflict is a challenge for leaders.
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5.1 Factors that Lead to Increased Diversity

John P. Kotter identifies some factors that have led to increased diversity in
organizations:
As a result of internationalization of business, many organizations are operating
in more countries today compared to in the first half of twentieth century.
Diversification has become a growth engine. On average, firms of today are
larger in size compared to those in 1960. The increased size is mostly due to the
creation of new products, services, and entry into new market areas.
Increasing influence of government, consumer groups, and business press on the
organization. These institutions along with customers, suppliers, competitors, and
unions are influencing the behavior of business firms.
Workforces of organizations are getting more heterogeneous. Women and
minorities are becoming key constituents in the workplace.
Technological innovations such as microprocessor technologies and genetic
technologies are creating new industries, and reshaping traditional industries.
These new industries value different skills from those in traditional industries.
These skills need employees from varied backgrounds. For example, at PARC,
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teams included people from pure sciences, sociology, anthropology, psychology,

cognitive and behavioral sciences, and philosophy. This allowed the organization
to develop socio-technical innovations, which were harmonious with human
cognitive processes.
A better educated workforce in the organization. This has changed the social
milieu of workplace.
An aging workforce.
5.2 Fostering Creativity through Diversity

Diversity and interdependence can stimulate excellent decisions, creative solutions,
and innovative products and services. People experienced in the decision-making
process appreciate the ways in which diversity and interdependence can stimulate
original ideas. A single decision maker or a group of decision makers thinking on the
same lines will not have breadth of information that is useful in addressing any
problem.
When there are more people and different perspectives, more information is available
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for decision-making. Organizations that are leaders in their industries or that start new
industries are characterized by diversity, interdependence, and conflict. These
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organizations have to be adept at managing these characteristics.
Leaders at well-managed organizations foster conflict deliberately. They do this by
creating interweaving organizational structures that necessitate complex
interdependent relationships. They encourage and force interaction among diverse
elements in the organization. While doing this, they are quite conscious of the short-
term problems and challenges that result from their actions. Yet they encourage such
actions as they know that if the conflicts that arise can be managed productively, they
help stimulate new ways of thinking, which can make their organizations more
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competitive, responsive and adaptive in the long term.

Organizations like IBM and GE understand the benefits of fostering and managing
conflict. They do not recruit homogeneous people and keep them in autonomous jobs
in a structured hierarchy. Instead they accept the inevitability of social complexity and
conflict, and try to manage them. They recruit people from varied backgrounds.
In ailing firms studied by Kotter, the top management had tried to eliminate diversity
and interdependence in the jobs to make them more manageable. They recruited
managers who were like alter egos of themselves.
These organizations had semi-autonomous departments or divisions where there was
no need for interdependency. In these departments or divisions, communication
travelled from up to down, and vice versa. There was very little lateral
interdependency. But lateral interdependency is crucial for any innovation. In their
eagerness to eliminate conflict, the top managers had undermined the performance of
the organization in the long run. Their mediocre products and services drove existing
customers to competitors. Also international competition with better products and
better prices lured away the loyal customers of these firms. In both cases, the result
was less income and revenues to these firms. This in turn reduced the discretionary
resources available for experimentation or R&D. Scarcity of resources forced various
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departments to be interdependent. This resulted in a scramble for resources. But since

these firms did not have capable leadership to manage these conflicts productively, the
conflicts degenerated into bureaucratic infighting, parochial politics, and destructive
power struggles.
The wasted organizational energies in these power struggles further reduced
organizational efficiency, increased costs, and stifled innovation. Further hurried
efforts of the managements to reduce costs by firing employees and bring the situation
under control led to alienation of the workforce. With this, the situation got further
complicated and difficult to manage. This shows that conflict alone cannot lead to
innovation. What is important is skillful leadership to manage the conflict.
Activity: ABC Ltd. is a US-based consumer appliances company. The company is

planning to expand its operations in Japan. After setting up its operations in Japan,
the company recruited some Japanese employees. The company also had some of
its US staff members at the Japanese plant. Of late, the owner and CEO of the
company, Michael Gates (Gates), found that conflicts were taking place between
the American and Japanese employees . What do you think is the reason for the
conflicts? What can Gates do make an amicable working environment?
Answer:
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Check Your Progress

7. __________refers to differences among people with respect to goals, values,
stakes, assumptions, and perceptions.
a. Mentoring
b. Diversity
c. Training
d. Narcissism
8. Which of the following factors leads to increased diversity in the organizations?

a. Workforces of organizations are getting more homogeneous
b. Diversification has become a growth engine
c. Boom of traditional industries
d. Nationalization of business
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6. Summary
The emergence of knowledge work, the knowledge worker as capital, and the
transformation of the industrial economy into a knowledge-based economy have
influenced the way businesses operate very significantly. This suggests that
organizations which want to maintain leadership in the economy and in emerging
technologies need to consider carefully the social position of knowledge
professionals and their values, as related to the organization.
In an e-commerce environment, a leader has to seek new ways to communicate
his/her vision, create a culture, and think about what the company is and how it
should be in the future. This search for new ways may force organizations to
abandon their age-old hierarchical organizational structures and governing systems.
In organizations, people with diverse backgrounds are linked by interdependency.
These people may have different goals, values, stakes, and outlooks. Diverse people
will naturally reach different conclusions about events in the organization. As there
is more diversity, and more interdependence, there are more differences in opinion.
Conflicting opinions can lead to conflicts in action. Thus diversity can create
conflict in the organization. Addressing this conflict is a challenge to leaders.
7. Glossary
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Diversity: Differences among people with respect to goals, values, stakes,
assumptions, and perceptions is referred to as diversity.
Knowledge communities: Knowledge communities are groups of people
informally bound together by shared expertise and a passion for joint enterprise to
complement knowledge creation.
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1. The emergence of knowledge-based work, the knowledge worker as capital, and

the transformation of the industrial economy into a knowledge-based economy,
have influenced the way businesses are run very significantly. Highlight the
need and importance of knowledge-based work for an economy.
2. Describe how leaders deal with the realities of the e-commerce environment.
3. Explain the factors that lead to diversity and explain how leaders foster creativity
through diversity.

Robert T. Golembiewski, Managing Diversity in Organizations, University of
Alabama Press, 1995.
Celia de Anca, Antonio Vázquez Vega, Managing Diversity in the Global
Organization: Creating New Business Values, Palgrave Macmillan, 2007.
Robbin Derry, The Gilligan-Kohleberg Controversy and the Diversity Debate,
Knowledge@Wharton.
Guide to Managing Human Resources, Chapter 12: Managing Diversity in the
Workplace, http://hrweb.berkeley.edu/guide/diversity.htm.
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1. d. attract, hold, and motivate knowledge workers
concern for people, could become counterproductive, because the performance of

these knowledge-based organizations will depend to a large extent on how they
can attract, hold, and motivate knowledge workers.
2. b. where information and its manipulation are the commodity and the
activity
According to Peter Drucker, the knowledge worker is a participant in an economy
where information and its manipulation are the commodity and the activity.
3. a. Mentoring
Mentoring is an important role that businesses leaders will have to play more
often in the future. In the knowledge economy they have to spend a lot of time
with promising knowledge professionals. They have to understand them. They
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have to make themselves more approachable and transparent.
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4. d. knowledge communities
Leaders of the future will need to be skilled at creating and nurturing knowledge
communities in the organization, instead of organizational hierarchies. By
definition, these communities are groups of people informally bound together by
shared expertise and a passion for joint enterprise to complement knowledge
creation.
5. a. people
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Leadership in the age of e-commerce is more about connecting people than

connecting technology.
6. d. think and act like an entrepreneur
In the age of e-commerce, a leader has to think and act like an entrepreneur. That
is a prerequisite for success.
7. b. Diversity
Diversity refers to differences among people with respect to goals, values, stakes,
assumptions, and perceptions.
8. b. Diversification has become a growth engine
Diversification has become a growth engine is one of the factors that leads to
increased diversity in the organizations.
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Course Structure
Unit 6
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Block
IV
CHANGE MASTERY
UNIT 12
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Understanding Change 1-18
UNIT 13
Implementing Change 19-39
UNIT 14
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Change Agents 40-53
UNIT 15
Disruptive Innovation 54-68
Expert Committee
Hyderabad
Hyderabad
Hyderabad Hyderabad

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Hyderabad Hyderabad


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Block IV
Change Mastery
The fourth block to the course on Leadership and Change Management deals with
understanding change, implementing change, change agents, and disruptive
innovation. The block contains four units. The first unit deals with the evolution of an
organization through several stages, factors inhibiting change, classification of
change, and different modes of change. The second unit deals with the concept of
transformation of an organization, understanding organizational culture, the need to
change culture, and how culture is changed. The third unit discusses the role of CEOs,
middle-level managers, HR personnel, and consultants as change agents in
organizations. The fourth unit deals with the concept of disruptive innovation.
The first unit, Understanding Change, discusses the evolution of an organization. It

then goes on to explain the factors that inhibit change. It then discusses the
classification of change. The unit concludes with a discussion on different modes of
change.
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The second unit, Implementing Change, discusses the steps involved in the
transformation of an organization. It then explains the concept of organizational
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culture. It then discusses the need to change culture. The unit finally discusses how
culture is changed using mental models.
The third unit, Change Agents, discusses the role of CEO as change agents in
organizations. It then goes on to explaining the role of middle-level managers as
change agents. The unit then discusses the role of HR personnel and consultants as
change agents.
The fourth unit, Disruptive Innovation, discusses how companies have become
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successful after adopting disruptive innovation. It then goes on to discuss the concept
of disruptive innovation and the factors affecting disruptive innovation. It then
discusses the ways in which capabilities can be created to cope with disruptive
innovation. The unit concludes with a discussion on the reasons that state why
developing countries are ideal locations for disruptive innovations to take place.
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Unit 12
Understanding Change
Structure
1. Introduction
2. Objectives
3. Evolution of an Organization
4. Factors that Inhibit Change
5. Classification of Change
6. Mode of Change
7. Summary
8. Glossary
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1. Introduction
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The previous block gave an overview of Level 5 leaders, narcissistic leaders, and the
challenges faced by leaders. This unit will discuss how an organization evolves
through different stages, the factors inhibiting change, classification of change into
different categories, and different modes of change.
Indian Bank was set up as a part of the Swadeshi Movement in 1907. As a bank
backed by the government, Indian Bank flourished, and boasted of the trust it had
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in the 1990s, when the Indian government and the Reserve Bank of India (RBI)
introduced a new set of norms for the banking sector. The once-respected bank had
the ignominious distinction of being classified as one of the three weak banks in India,
alongside UCO Bank and United Bank of India.
Efforts to revive Indian Bank began in July 2000 when Ranjana Kumar (Kumar),
chairperson and managing director of the bank, submitted a plan to the Government of
India detailing the steps it proposed to take during the three-year restructuring period.
Kumar requested recapitalization funds from the finance ministry, but the government
decided to defer the release of the funds until such time as the bank showed a distinct
improvement. Restructuring was initiated with a written agreement with the trade
unions, seeking their cooperation on the three-year long initiative.
When restructuring got under way, the structure of the bank was modified to make
operations simpler and to ensure speedy decision-making. The original four-tiered
structure was modified into a three-tiered one, by doing away with the zonal office
level. The three levels in the new structure were head office, regional offices, and
branches. Regional offices were given more power to enable them to take decisions at
their level and consequently, provide better services to customers. Similarly, branch
segmentation was undertaken to cater to the needs of various target markets. The
Change Mastery
branches were segmented into four categories corporate, commercial, personal, and
rural. To create a more streamlined structure, several branches across the country were
also merged. By 2003, 119 of the 1,400 branches in existence before the restructuring
had been merged.
In an effort to pare down excess staff and make the organization leaner, the bank
implemented a Voluntary Retirement Scheme (VRS). Through the VRS, the bank
shed over 3,400 employees, bringing the staff number down to 22,400 by March 2003
from nearly 26,000 in 1999. Indian Bank also adopted the practice of employing fresh
MBAs for three months in summer, to get a different view of things.
To bring down the huge NPA (non-performing assets) levels that were bogging it
down, the bank took advantage of the Securitization Act passed by the Indian
Parliament (this act authorized bank to foreclose and seize assets). It issued over 700
notices to defaulters and confiscated 12 properties. Restructuring also involved the
company, for around Rs. 6.2 million. The bank also entered into a five-way tie-up
with other public sector banks for sharing of ATMs. (The other partners were Punjab
National Bank, Bank of India, Syndicate Bank, and United Bank of India). To keep up
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with private and foreign banks, Indian Bank went on a technology drive and
computerized its branches across India.
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During the restructuring period, the bank began to focus on retail products, which it
-2002, it introduced 12 new retail schemes
for customers. During 2001-02, it disbursed close to Rs. 10.2 billion under these.
Home loans were the major form of loans, followed by personal loans, trade finance,
and the like. To diversify its portfolio of services, Indian Bank also entered into an
The official turnaround period set for Indian Bank was three years 2000 to 2003.
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However, efforts started yielding fruit in the first year itself. In 2000-2001, the bank
posted an operating profit of Rs 615.9 million. The turnaround finally materialized,
when Indian Bank posted its first net profit of Rs 330 million in 2001-2002, after six
years of losses. In fiscal 2002-2003, net profits increased by 468 percent to Rs. 1.88
billion.
Indian Bank seemed to have managed change well and the result has been a successful
turnaround.
This unit discusses the evolution of an organization. It then goes on to explain the
factors that inhibit change. It then discusses the classification of change. The unit
concludes with a discussion on different modes of change.
2. Objectives
understand the various stages of evolution of an organization.
discuss the factors that inhibit change.
understand the three categories of change.
discuss the different modes of change.
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3. Evolution of an Organization
According to Larry E. Greiner, an organization evolves through five stages. These
include creativity, direction, delegation, coordination, and collaboration in this
sequential order. As an organization evolves from one stage to another, it needs to
change its culture, skills, and operations.
3.1 The Creativity Stage
During its inception, the founders of an organization focus primarily on creating a
product and a market. They are technically and entrepreneurially oriented and do not
give great weightage to management activities. All their energies are directed at
making a new product and selling it.
At this stage, the organization does not have any formal communication channels.
Communication is frequent and flows through informal channels. Employees are not
paid high salaries yet they stick to the organization because the management promises
them a share in the ownership in the form of stock options or partnership. The
feedback from the market greatly influences the decisions of founders and the
motivation of employees.
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As the organization grows and gets involved in more than individualistic and creative
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activities (such as large scale production), it faces many problems. To produce on a
large scale, the organization has to acquire knowledge about the efficiencies of
manufacturing. Large-scale production needs a large number of employees and
informal communication channels are no longer adequate to lead or manage a large
number of employees. New recruits are not motivated by dedication to the product or
the organization. At this stage, an organization has to adopt new accounting
procedures to ensure prudent financial control. All these activities add more
responsibilities and burdens on the founders. Conflicts arise among the leaders and
these may even lead to a leadership crisis at the top.
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At this stage, the organization is poised for a major change. It needs a leader who can
clear the confusion in the organizational thinking, and address managerial problems.
The organization needs a strong leader who has the requisite knowledge and skills to
bring new business techniques into the organization. Finding such a manager and
putting him in charge of the organization is not easy, however. Even if the
organization is lucky enough to have such a manager, the founders may not be willing
to let go of their control, even when they are clearly unsuitable to head the
organization at that stage. This is the time for the organization to make a critical
choice: get a strong leader who can get along with the founders and also take the
organization into confidence or fail to evolve.
3.2 The Stage of Direction-setting
Once an organization emerges successful from the first round of transformation, i.e.
after it gets a strong manager to take care of the organization, it starts growing. Under
the new leadership, a functional organizational structure is introduced. Manufacturing
activity is separated from marketing activity, and specialization determines job
assignment. At this stage, accounting systems are introduced in inventory and
purchase departments, and incentives, budgets, and work standards are introduced.
The organization also adopts a hierarchical structure where communication is more
3
Change Mastery
formal. Decision-making now lies with a few managers. The new leader and his/her
trusted managers set the future course for the company. Managers at the lower level of
the organization are regarded as functional specialists. They no longer have the
freedom to make independent decisions.
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some time the structures and systems created by these changes become cumbersome
for a diversified and complex organization. The controls that brought orderliness into
the organization now breed bureaucracy in the organization. Centralized hierarchy
becomes a burden for employees at the lower levels.
Lower-level employees face a peculiar situation. They have gathered first-hand
experience about the markets and machinery, and may know more about the markets
than their leaders. Thus they are pulled between competing alternatives: acting on
their own, which might benefit the organization; or sticking to procedures.
At this stage the organization passes through a crisis of autonomy. The organization is
again in need of a major change: prudent delegation. However, delegation is not easy
to achieve. The top managers in the organizations who are used to giving directives
may not be very comfortable delegating. The lack of decision-making experience of
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lower-level managers further complicates the problem. Thus many companies stick to
centralized decision making at this stage, and this makes employees at the lower
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levels dissatisfied and they may leave the organization.
3.3 The Stage of Decentralization
In the next stage, the organization adopts a decentralized organizational structure.
Managers of manufacturing plants and sales territories are given more autonomy,
authority, and responsibility. The organization introduces profit centers and bonuses
to motivate employees. The top management intervenes only when it is necessary. It
starts to rely on periodic reports from the field to run the organization. The top
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management does not communicate very frequently with the lower level management.
At this stage, the organization looks for possible acquisitions. The idea is to acquire
expands during this phase of delegation owing to the dynamism of motivated

managers at the lower levels. With their new-found freedom and power, these
managers enter new markets, formulate opportunistic strategies, respond quickly to
customer needs, and create new products.
Over a period of time, this management style leads to another type of problem. The
top management realizes that it is losing control ov
operations. They come to the painful realization that autonomous field managers are
getting increasingly bold and are interested in running their own fiefdoms. The field
managers often make no efforts to coordinate operations and activities with other
managers. This lack of coordination leads to bloating expenses for the organization.
This was the case with IBM in the early 1990s, before Louis Gerstner took over as
CEO. All its international operations in different countries were run by country
managers who ran them as their fiefdoms. The company was close to collapse.
When the top management realizes that the organization is falling into a crisis of
control, it tries to get hold over the whole organization. Some organizations that face
control problem return to the centralized system. But these organizations eventually
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fail because, by this time, their scope of operations has increased and they cannot be
managed through a centralized system. Some organizations, however, adopt special
coordination techniques, which lead to better coordination.
3.4 The Stage of Coordination
At this stage, special coordination techniques are adopted. The executives at the top
take on the responsibility of introducing these new systems. Formal systems are put in
place to ensure greater co-ordination. Formal planning procedures and intense reviews
of these plans are a desirable course of action. Staff members placed at the company
headquarters begin to guide line managers on setting up control and review programs.
Capital expenditures are approved only when they are prudent. Decentralized units in
the earlier set-up are restructured into product groups. These product groups are
treated as investment centers. Funds are allocated for these investment centers on the
basis of the returns they generate. While technical functions like data processing are
centralized, daily operating decisions remain decentralized. Employee involvement
becomes a key issue. To ensure employee involvement, the organization introduces
stock options and profit sharing. These gestures are aimed at making employees
identify with the whole organization and not just the units where they work.
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The new coordination system ensures growth through better allocation of resources.
Field managers learn to look beyond their local units. They cooperate with managers
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in other departments. Though they have substantial responsibility for decision-
making, yet they behave responsibly as they are accountable to the top management at
the headquarters. However this setup also leads to a new type of problem.
A lack of confidence develops between the line and staff employees and between the
people at the headquarters and those in the field. Line managers start taking advantage
conditions. The staff in turn begins to complain that the
line managers have become uncooperative. Both the groups blame the bureaucratic
system for the problems. Procedures become more important than problem solving.
Unnecessary procedures discourage new initiatives and new thinking in the
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organization. As a result, innovation takes a back-seat in such organizations. Once again

the organization is ripe for a major change. The organization has become so large and
complex that it cannot be governed by just formal programs and rigid systems.
3.5 The Stage of Collaboration
At this stage, the emphasis of the organization is on interpersonal collaboration to
minimize the red-tapism that was prevalent in the previous stage. Here the emphasis is
on teamwork and efforts to minimize interpersonal differences. Quick problem-
solving based on a team approach becomes the accepted phenomenon. Cross-
functional teams are formed to address specific tasks. Staff people at the headquarters
are minimized, and are made part of interdisciplinary teams. Staff employees no
longer direct the field units and instead play an advisory role to them.
A matrix type of structure is employed to form useful teams that address
organizational problems. Formal control systems are simplified into single
multipurpose systems. Key managers meet fairly frequently to address major
problems. They use real time information systems in regular decision making. In
order to institutionalize teamwork, rewards are based on team performance rather than
on personal accomplishment. Experimentation such as adopting new practices is
encouraged in the organization.
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Change Mastery
Many US organizations are in this collaborative stage. Even this style of working is
not without difficulties. Evidence shows that employees get physically and
emotionally exhausted when they work in teams. Working in teams can be very
demanding as it necessitates the constant generation of innovative solutions. Greiner
says that new structures and programs are necessary to address this problem.
Employees might need time to rest, reflect, and revitalize their energies. A dual
organization structure could provide a solution. Organizations with a dual structure
employ one structure to take care of daily work, and another structure to create new
perspectives and ensure personal enrichment. These organizations shift their
employees from one structure to another as the situation demands.
Change does not happen easily. Many obstacles crop up while initiating and
overseeing it. As Machiavelli said, there is nothing more difficult to plan, more
doubtful of success, nor more dangerous to manage, than the creation of a new
system. For the initiator has the enmity of all who would profit by the preservation of
the old institutions, and merely lukewarm defenders in those who would gain by the
new ones.
Activity: She Needs is a cosmetics company in the UK. The company is planning
to expand its operations in Asia. A research conducted by the company revealed
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that the Indian cosmetics market is a growing market. The company also noted that
the market is intensely competitive with already established domestic as well as
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international players. Hence the top management of the company decided to focus
on creating its product and the market. The management initially did not focus on
other activities. Identify and discuss the stage of evolution in case of She Needs.
Discuss other stages of evolution of an organization.
Answer:
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4. Factors that Inhibit Change

Companies grow by expanding into new competitive space, attaining a complex mix
of financial, material and knowledge assets, expanding market scope, and replicating
and standardizing their wins in similar market spaces. Competitive spaces undergo
change, new technologies emerge, and customers change. But companies sometimes
fail to change and make the most of new opportunities because they are still trying to
get the best out of the old opportunities. They find this convenient and less risky.
Steering mechanisms in organizations grow as the organizations get involved in more
complex activities. These steering mechanisms are essential to make meaning out of
the innumerable activities that go on inside the organization. Steering mechanisms are
While most of organizations have mechanisms that are aligned with their vision, there
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are a few organizations in which mechanisms are aligned with the realities in the
business environment. Only organizations in which mechanisms steer the organization
in line with business realities can remain tuned to change.
Obsolete steering mechanisms downgrade or ignore market signals. Rigid steering
mechanisms ignore complaints and unwelcome feedback, which can be valuable if put
to the right use. As managers rely on steering mechanisms, whenever an unexpected
circumstance arises, they tend to ignore any information that does not fit into the
existing mechanism. Mechanisms have a limited period of validity; they may have
served the company well in the past when a particular strategy was successful. But the
usefulness of the mechanisms may be limited when managers address new problems.
In such situations, managers are often perplexed as to why their decisions go wrong.
As Chris Argyris says, any newly espoused strategy, however explicit and sensible,
inevitably comes up against an implicitly enacted strategy supported by all the aged,
compounded steering mechanisms that the company already has in place. This is
largely because people fear uncertainty. They fear that if they embrace change, their
current status maybe adversely affected. Defensive mechanisms stop an organization
from adapting to change.
Check Your Progress
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1. In a decentralized organizational structure, how are employees motivated?
a. Through profit centers and bonuses
b. By assigning more work to the employees
c. By taking them for an outing
d. By giving them promotions
2. In the coordination stage, data processing is ____________and daily operating

decisions are _________________.
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a. decentralized; centralized
b. important; unimportant
c. centralized; decentralized
3. At the stage of collaboration, interpersonal collaboration helps an organization to:

a. address organizational problems
b. minimize the red-tapism
c. use real time information system
4. What kind of steering mechanism downgrades or ignores market signals?

a. Rigid steering
b. Obsolete steering
c. Defensive steering
d. Systematic steering
7
Change Mastery
5. Classification of Change
According to Henry Mintzberg, and Quy Nguyen Huy, change can be classified into
three categories: dramatic change, systematic change, and organic change. Dramatic
change is initiated by the top management. This change incites revolution. Systematic
change originates at lateral level of the organization. Middle-level managers initiate
such change. Organic change begins at the grassroots level (for a diagrammatic
representation, refer to Figure 12.1).
Figure 12.1
Change and its Origins
Dramatic
Change
Fostered by top
management
I Systematic Change
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Initiated by specialists like
consultants, and staff people
Organic Change
Initiated by people at grassroots
level of the organization

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5.1 Dramatic Change

Top leaders in the organization attempt dramatic change in times of crisis or
extraordinary opportunity. Some examples of dramatic change are: reducing costs,
organizational restructuring, repositioning strategy, and changing the organizational
mind-set. The leadership resorts to dramatic change with the expectation that this
initiative would be welcomed by everyone. But there is usually some covert or overt
resistance.
Example: Dramatic Change at HP

Immediately after taking over as the CEO of HP, Carly Fiorina (Fiorina) introduced
several changes to set things right at HP. She demanded regular updates on key units.
She also injected much-
reportedly developed a habit of lowering sales targets at the end of each quarter. Sales
compensation was tied to performance and the bonus period was changed from once
a year to eve
making improvements to existing products. To encourage innovation and product
8
In 2000, the increasing competition and slowdown in the technology sector had
compensation structure and initiate several cost-cutting measures. Previously a

g employees based on their
salary. Bonuses were paid when the company beat its own numbers for revenue,
profit and return on assets. Fiorina came up with a new system, where the bonus
-à-vis its competitors. Thus, in spite of HP
reporting a profit in the first half of financial year 2001 for the first time in 39
years, the employees did not get their bonus. In July 2001, HP laid off 6,000
employees
even though she knew she was sure to attract a lot of criticism.
5.2 Systematic Change

As compared to dramatic change, systematic change is more focused and carefully
constructed. Systematic change is often characterized by orderliness. This type of
change is attempted only after thorough planning and careful consideration. Quality
I
improvements, work reprogramming, benchmarking, and strategic planning are
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examples of systematic changes. Staff groups and consultants from planning and
organizational development functions attempt these changes.
Though these changes are less risky, yet they emerge only after a lot of formalities are
gone through.
5.3 Organic Change
While dramatic change is led by the formal leadership, and systematic change is
stimulated by specialists, organic change is brought about by people at the grassroots
level in the firm. Organic change is fragmented and anarchical in nature. This change
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often emerges as a challenge to authority. The results after the change can be
dramatic, yet it runs the risk of chaos. Groups infusing such change may work at
cross-purposes and engage in fighting over resources. In other cases, while serving
their narrow interests, groups might acquire competencies that are incompatible and
not beneficial to the organization as a whole. This type of change can also be brought
about by an intelligent leader. He/she can do this by institutionalizing respect for this
type of change.
Activity: IMT Computers Ltd. is one of the leading computer manufacturers in

India. of late the company is witnessing a decline in its sales. The company found
that the competition in the computer manufacturing industry had intensified and
thus the decline in sales. The CEO of the company Mark Simpson (Simpson)
decided to cut the incentives of its employees. He also reduced the structures in the
organizational hierarchy to make the process of communication easier. This helped
the employees at the lower-level to communicate ideas to the top management.
What is the change brought about at the company by Simpson? Do you think these
initiatives would help the company to arrest the decline in its sales? Why (not)?
Suggest how the company can deal with the crisis.
9
Change Mastery
Answer:
6. Mode of Change
In an organization none of the changes mentioned above occurs in isolation. Dramatic
change needs to be balanced by orderly change. The top leadership must involve
people at other levels in the process of change. They should explain, convince, and
justify the need for such dramatic change. Otherwise chaos and a sense of alienation
may prevail in the organization. This may lead to the ultimate failure of the entire
effort to change. Similarly, systematic change fomented by specialists needs the
I
approval of the top leadership, and the broad engagement of all the people in the
FA
organization. Then only can this type of change reap the intended benefits. Though
organic change is natural, yet it needs to have the support of leaders at all levels to be
beneficial to the organization.
systematic change by itself can be deadening, and organic change without the other
two can be chaotic; they must be combined or, more often, sequenced and paced over
ti
in three modes: Revolution, Reform, and Rejuvenation. Revolution is by and large a
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dramatic change. But the roots may lie with organic change and may need systematic
consolidation. Reform is systematic, but it may also fuel organic change and be driven
by dramatic change. Rejuvenation is organic in nature. But its consequences may be
dramatic. (The relationship between types of change and modes of change is shown in
the Figure 12.2.).
10
Figure 12.2
Mode of Change
Revolution
Dramatic change
Systematic
change Organic
change
Reform Rejuvenation
Systematic change
I Organic change
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Dramatic
Organic Dramatic
change Systematic
change change
change
Management Review, Summer 2003.
6.1 Revolution
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Revolution appears to consist entirely of dramatic acts which change society.

However, small events at the organic level can also trigger dramatic acts. Small
incidents may spark revolutions in the organization; following this, leadership may
arise, and if the circumstances are favorable, a full-blown revolution occurs. Most
revolutions in the corporate world are driven by leaders.
6.2 Reform
Reform is a change that occurs in a calculated and systematic way. The Marshall Plan
designed to rebuild Europe after World War II is an example of reform with a view to
change. Plans aimed at re-development of Japan after World War II were also systematic
in nature. Reforms can be classified into educated reforms and energized reforms.
Example: Revolution at British Airways

In the 1970s, British Airways (BA) was notorious for its poor customer service. It
was losing money fast. By 1993, the same company had become famous for its
customer-friendliness. It was also the most profitable European carrier. All over the
world, airline companies were now benchmarking themselves against BA.
11
Change Mastery
How did this revolution occur at BA? It was a new CEO who brought about the
BA revolution. Immediately after taking over as the CEO of BA, Colin Marshall
brought in many dramatic changes. He reduced the workforce and sold off assets.
As a part of this restructuring exercise, 161 managers and executives were laid off.
In 1985, BA introduced programs that encouraged managers to improve their
for its passengers. In 1987, by leveraging advances in information technology, the

company introduced systematic and faster paced re-engineering of work processes
(BA was one of the first companies to introduce an IT-based reservation system).
Thus by minimizing employee costs, creating a new work culture and speedier
processes, and aggressively investing in new technology, the company gained a
reputation for excellent service.
6.3 Educated Reform
I
Many organizations implement systematic training and development programs to
FA
create a suitable atmosphere for desired organizational change. This was the method
ICICI used to ensure successful educated reform after Bank of Madura (BoM) merged
with it.
ICICI Bank faced strong resistance to change in December 2000, when BoM merged
with it. Though ICICI was nearly three times the size of BoM, its staff strength was
grades, designations and salaries of personnel in the two entities. There was great
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uneasiness among the staff of BoM as they felt that ICICI would want to drive up the
productivity per employee, to match the levels of ICICI. BoM employees feared that
their positions would come in for very close scrutiny. They were not sure whether
-
oriented.
Their fears obviously had a sound basis. While the BoM management had
concentrated on the overall profitability of the Bank, the ICICI management turned all
its departments into individual profit centers, and employee bonus was related to the
performance of the individual profit center rather than the profits of the whole
organization.
In order to address the fears of the erstwhile BoM employees, and ensure smooth
integration, ICICI took some significant measures. The company appointed
consultants Hewitt Associates to help in working out a uniform compensation and
work culture, and to take care of any change management problems. ICICI
conducted an employee behavioral pattern study to assess the various fears and
apprehensions that employees typically went through during a merger. (Refer to
Table 12.1).
12
Table 12.1
- havioral Pattern
Period Employee Behavior
Day 1 Denial, fear
After a month Sadness (slight improvement)
After a Year Acceptance (significant improvement)
After 2 Years Relief, liking, enjoyment, business development activities

Adapted from www.sibm.edu.
Based on the above findings, ICICI established systems to take care of the employee
essed by
smooth integration of the human resources of the two banks (Refer to Table 12.2).
I Table 12.2
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Managing HR during the ICICI-BoM Merger
The HR Blueprint Areas of HR Integration Focused on
A database of the entire HR Employee communication

structure Cultural integration
Road-map of career Organization structuring
Determining the blueprint of HR Recruitment & compensation
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moves
Performance management
Communication of milestones
Training
IT Integration People Integration
Business Integration. Employee relations
Source: www.sibm.edu.
To ensure employee participation and to decrease the resistance to change, the
management established clear communication channels throughout the organization.
Training programs were conducted, emphasizing knowledge, skill, attitude, and
technology in order to upgrade the skills of employees. The management also worked
on contingency plans and initiated direct dialogue with the employee unions of the
BoM to maintain good employee relations.
In June 2001, the process of integration between ICICI and BoM was started. ICICI
transferred around 450 BoM employees to ICICI Bank, while 300 ICICI employees
were shifted to BoM branches. Promotion schemes for BoM employees were initiated,
and around 800 BoM officers were found to be eligible for the promotions. By the end
of the year, ICICI seemed to have handled the HR aspects of the BoM merger
-win situation created by HR
initiatives have resulted in a high level of morale among all sections of the employees
13
Change Mastery
6.4 Energized Reform

Energized reforms are meant to bring about organic change directly. Changes brought
in by Louis Gerstner at IBM can be called energized reforms. The reforms at IBM
involved no new vision or revolution. These changes were steady, and consistent; and
IBM again started listening to its customers, began to build relationships with them,
and became more responsible about the results it delivered. Line managers were given
more authority and accountability. Work processes were re-engineered to reduce costs
in the long-term.
6.5 Planned Reform
Reform in the organization is also brought about through planning. Strategic plans, for
example, offer an opportunity to bring in necessary change. A change leader
attempting this type of change has to be careful not to clutter the process with too
many procedures. Too many procedures and too much obsession with planning can
obstruct real strategic thinking.
6.6 Rejuvenation
I
Rejuvenation is largely an organic change. It happens in many ways:
Inadvertent Rejuvenation
FA
Sometimes organizations learn new things accidentally or through unplanned
experimentation. The best learners in an organization are the people who are nearest
to operations or customers. An engineer in a glass manufacturing company in
England, once hit upon a new way of manufacturing glass when he was doing the
dishes at home. This idea was to manufacture glass by floating it on a bath of liquid
tin. With encouragement from the board, he experimented on the method for seven
years. Even after wasting so many years and 1,00,000 tons of wasted glass, his idea
still proved impractical. Yet he persisted, and the company board continued to be
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supportive. Finally the effort was a success. The company obtained patents for the
innovation, and licensed the process worldwide. Thus an idea which emerged at the
grassroots level and by chance went on to revolutionize the company as well as the
industry.
Imperative Rejuvenation
Sometimes an organization finds itself in a situation where it is losing market share,

losing money as costs spiral upward, or having to look for new ways to satisfy
customer needs. The top leadership in the organization resorts to dramatic changes by
bringing a new executive team, downsizing the workforce, bringing in hoards of
consultants, and restructuring the company. But these initiatives may not meet with
success. On the other hand, when middle-level managers take sound initiatives, these
may spawn the desired change. When middle-level managers are successful in
inducing change, one can say that imperative rejuvenation is under way in that
organization.
Steady Rejuvenation
Companies like 3M maintain their capacity for innovation over a long period of time.
They do this introducing the right combination of steady organic change and
systematic change. They invest systematically in a wide variety of low-cost
14
experiments to explore emerging markets and technologies. Balancing organic change

and systematic change helps an organization to sustain its capability to innovate. For
steady rejuvenation to happen, organizations balance chaos and inertia by keeping
their business units at the optimum size. Too small a size and too many units lead to
chaos. Too big a size breeds bureaucracy and leads to inertia. By rightsizing their
units they ensure speed and flexibility.
Driven Rejuvenation
Some leaders bring in change by setting a personal example or by changing the

ure to encourage employees to undertake organic initiatives. Some
organizations rejuvenate their people by encouraging specific behaviors. A global
electricity firm based in Virginia, US, encourages its frontline employees to enhance
their expertise and autonomy. It does this, not just by providing training, but also by
providing them with sensitive and strategic information generally meant only for
senior managers. Such acts may result in rejuvenation.
Check Your Progress

5.
I
Which of the following is not an example of dramatic change?
FA
a. Repositioning strategy
b. Changing the organizational mind-set
c. Strategic planning
d. Reducing costs
6. Which of the following is an example of systematic change?

a. Group infusion
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b. Benchmarking
c. Organizational restructuring
d. Cost reduction
7. As compared to dramatic change, systematic change is more _________

__________.
a. focused and carefully constructed
b. sudden and forceful
c. gradual and eventual
d. thoughtful and abstract
8. Many organizations implement __________to create a suitable atmosphere for

desired organizational change.
a. stringent rules and regulations
b. systematic training and development programs
c. Marshall Plan
15
Change Mastery
9. In the process of imperative rejuvenation, who can successfully induce change?

a. Top leadership
b. Grassroot level employees
c. Middle-level managers
d. Consultants
10. What is the result of balancing organic change and systematic change?
a. Helps an organization to sustain its capability to innovate
b. Helps an organization to sustain its culture
c. Helps an organization to sustain its employees
d. Helps an organization to satisfy its customer needs
11. In driven rejuvenation, how do leaders rejuvenate their employees?

a. by setting personal example
b.
c. encouraging specific behaviors
d. All of the above
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FA
7. Summary
According to Larry E. Greiner, an organization evolves through five stages. These
include creativity, direction, delegation, coordination, and collaboration in this
sequential order. As an organization evolves from one stage to another, it needs to
change its culture, skills, and operations.
Companies often fail to change and make the most of new opportunities because
IC
they are focused on getting the best out of old opportunities. Obsolete steering
mechanisms downgrade or ignore market signals. Rigid steering mechanisms
ignore complaints and unwelcome feedback, which can be valuable if put to the
right use.
According to Henry Mintzberg, and Quy Nguyen Huy, change can be classified
into three categories: Dramatic change, systematic change, and organic change.
A synthesis of dramatic change, systematic change, and organic change appears
in three modes: Revolution, reform, and rejuvenation.
1.
culture, skills, Discuss the various stages of organizational
evolution and the hurdles faced by them to overcome turbulent times.
2. What are the factors that limit organizational change? Discuss the measures to be
taken by the companies to ensure smooth transition.
3. Examine the various kinds of change that take place in the organizations and the
role of employees at different levels.
16
4. Explain the modes of change that steers the companies towards path of growth.
According to you, which mode of change is beneficial for the company? Justify
your answer with appropriate examples.

Jeff Hiatt and Timothy J. Creasey, Change Management: The People Side of
Change, Prosci, 2003.
Linda Holbeche, Understanding Change: Theory, Implementation and Success,
Butterworth-Heinemann, 2006.
V. Nilakant and S. Ramnarayan, Change Management: Altering Mindsets in a
Global Context, SAGE, 2006.
Josep Isern and Caroline Pung, Driving Radical Change, November 2007.

1. a. Through profit centers and bonuses
I
In a decentralized organizational structure, the organization introduces profit
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centers and bonuses to motivate employees.
2. c. centralized, decentralized
In the stage of coordination, technical functions like data processing are
centralized and daily operating decisions remain decentralized.
3. b. minimize the red-tapism
At the stage of collaboration, the emphasis of the organization is on interpersonal
collaboration to minimize the red-tapism that was prevalent in the previous stage
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of evolution.
4. b. Obsolete steering
Obsolete steering mechanisms downgrade or ignore market signals.
5. c. Strategic planning
Some examples of dramatic change are: reducing costs, organizational
restructuring, repositioning strategy, and changing the organizational mind-set.
6. b. Benchmarking
Quality improvements, work reprogramming, benchmarking, and strategic
planning are examples of systematic changes.
7. a. focused and carefully constructed
As compared to dramatic change, systematic change is more focused and
carefully constructed.
8. b. systematic training and development programs
Many organizations implement systematic training and development programs to
create a suitable atmosphere for desired organizational change.
17
Change Mastery
9. c. Middle-level managers
The top leadership in the organization resorts to dramatic changes by bringing a
new executive team, downsizing the workforce, bringing in hoards of consultants,
and restructuring the company. But these initiatives may not meet with success.
On the other hand, when middle-level managers take sound initiatives, these may
spawn the desired change. When middle- level managers are successful in
inducing change, one can say that imperative rejuvenation is under way in that
organization.
10. a. Helps an organization to sustain its capability to innovate
Balancing organic change and systematic change helps an organization to sustain
its capability to innovate.
In driven rejuvenation, some leaders rejuvenate their employees by setting a
employees to undertake organic initiatives. Some organizations rejuvenate their

people by encouraging specific behaviors.
I
FA
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18
Unit 13
Implementing Change
Structure
1. Introduction
2. Objectives
3. Transforming an Organization
4. Understanding Organizational Culture
5. The Need to Change Culture
6. Changing the Culture
7. Summary
8. Glossary
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FA
1. Introduction
The previous unit discussed the evolution of an organization. It then explained the
factors that inhibit change. It then discussed the classification of change. The unit
concluded with a discussion on different modes of change.
The groundwork for the implementation of Six Sigma at General Electric (GE) had
IC
company realized that its employees were an important source of intellectual power
for new and creative ideas. The WorkOut program gave each employee an opportunity
the groundwork for Six Sigma. The goals were: Build trust, empower employees,
eliminate unnecessary work, and create a new paradigm for GE.
The WorkOut program helped in inculcating the Six Sigma principles of being
productively and efficiently. The program redefined the way GE employees

behaved, while Six Sigma redefined the way they worked. In 1991, GE took a few
major moves toward adopting Six Sigma; the company began allocating
resources, coordinating training programs, and changing its work culture and
management style. GE did not allow its existing corporate culture to stand in the
way of implementing Six Sigma. Unlike other companies that customized Six
Sigma to their existing culture, GE did not reconstruct the Six Sigma initiatives to
fit its existing processes. Instead, the company made concerted efforts to reduce
bureaucracy and create a new culture.
Training was the most important part of the implementation of Six Sigma at GE.
Training in the Six Sigma quality program was accorded more importance than other
professional development programs in the first few years of its implementation. As a
Change Mastery
part of this transformation, GE asked each business unit to identify and develop
Champions, Master Black Belts, and Green Belts. In 1996, the company invested US$
200 million to train 200 Master Black Belts, and 800 Black Belts. In March 1997,
Jack Welch, the then CEO of GE, asked every manager at GE to start Black Belt or
Green Belt training by January 1998, and complete the training by July 1998. He
linked this tr
to take to the idea of Six Sigma. When the employees were convinced that some form
of training was necessary for even minimal advancement within the company, they
began to sign up for training in greater numbers.
As Six Sigma placed a strong emphasis on the customer, GE developed a tool that
ers were
expected to list the most critical-to-
products or services. The tool helped employees find out how well the company was
fulfilling customer needs, in quantifiable, objective terms. GE also developed an
Intranet site, for employees to study the Six Sigma process. The site offered
information and status reports on Six Sigma projects. Employees could also share
I
their best practices for completing the projects.
GE made its employees realize that Six Sigma could be used not only for
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improving the quality of products but also for the quality of services offered.
Thus, the company applied the tool to its transactions and services businesses
also. Managers were trained in Design for Six Sigma (DFSS), to help the
company design and induce Six Sigma into every product and service. DFSS
could be used for everything ranging from designing an engine blade to answering
statistical processes were cri

quality in its products were met.
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Thus, implementing change needs a clear plan and the adequate involvement of
people in the organization. The process of considered change has to be well-played,
and consistently reaffirmed. Unless the change is rooted in the culture of the
organization, the chances of its having a significant impact are poor.
This unit discusses the steps involved in the transformation of an organization. It then
goes on to explaining the concept of organizational culture. It then discusses the need
to change culture. The unit finally discusses how culture is changed using mental
models.
2. Objectives
discuss the steps an organization goes through while attempting to change.
understand the concept of organizational culture.
understand the need to change culture.
discuss how culture is changed using mental models.
20
Implementing Change
3. Transforming an Organization
Transforming an organization requires initiative, cooperation, and a willingness of the
employees and managers in the organization to make sacrifices. Though change
involves a certain amount of pain, according to John P. Kotter, an organization
attempting to change can minimize this pain by:
establishing a sense of urgency
creating a guiding coalition
developing a change vision and strategy
communicating the change vision
empowering employees for broad-based action
generating short-term wins, and
consolidating change.
Each step is part of the process of change, and lasts for quite a long time. Mistakes
made in any of these steps can undermine the momentum of the change process
significantly. The steps are explained in detail below:
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3.1 Establishing a Sense of Urgency
Complacency is one of the obvious reasons why organizations do not change.
Complacency prevails in the organization for the following reasons.
There are no signs of visible crisis. For example, the firm may not be losing
money; it may not be bankrupt at that point of time. As a result managers and
employees feel comfortable and do not take change seriously. But if one looks
closer, there certainly could be a crisis. The company might be gradually but
consistently losing its market share and margins. As this is not an immediately
IC
engulfing issue, the sense of urgency may not be apparent.

Employees and managers work in an office environment that still reflects past
glories and not current realities. As a result, they are not constantly reminded of
where they are, and where they are headed.
The structure of the organization defines performance in terms of functional goals
only, and not in terms of goals at the organizational level. In such organizations
all the departments have their own indices to rate their performance. But none of
these indices reflect the overall performance of the organization on parameters
such as total sales, return on equity, and net income. This mechanism breeds an
environment where none of the employees are concerned when the organization
goes down in terms of these parameters.
Managers and employees manipulate internal planning and control systems. They
not only change objectives but also the way the organization sets its objectives.
But neither this objective nor its subsequent objectives

were concerned with the results of this campaign. Results means responsibility,
and accountability for their actions. Managers and employees seemed to want to
avoid these. When managers in the organization do not accept responsibility for
growth, naturally a sense of complacency prevails.
21
Change Mastery
Lack of appropriate performance feedback owing to faulty internal systems. For

example, even when a company is losing its market share because of the poor
quality of its products, it may not receive any complaints from irate customers
because of the absence of a mechanism for receiving complaints. Further, when
some responsible employees try to get down to work and address the problems,
they are either ignored or discriminated against.
How can One Create a Sense of Urgency?
Creating urgency demands bold and risky actions. Such actions might include drawing
up a balance sheet reflecting losses accurately. Other hard options would be to sell
luxurious headquarters, which the firm can no longer afford. Or to tie 50% of top
Return
On Equity targets. To establish a sense of urgency, the leadership in the organization
needs to remove the factors that breed complacency. Some steps that can bring in
urgency in place of complacency are:
Establishing systems for evaluating managers based on their contribution to
broader performance of the organization, rather than on a narrower definition of
their function.
I
Promoting interaction between unsatisfied customers, unhappy suppliers, and
FA
disgruntled shareholders on the one hand and employees on the other. Such
interaction wakes employees up from the slumber of complacency.
Distributing data on customer satisfaction, particularly data that concentrates on
employees and managers as possible.

Asking consultants to participate in managerial meetings, so that the managers at
the meeting get to know a different perspective from their own.
Highlighting future opportunities, and the current inability of the firm to
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capitalize on those opportunities.

Earnest steps in this direction can minimize the levels of complacency in an
organization.
3.2 Creating a Guiding Coalition

Often, programs aimed at change or renewal get the support of only a few people and
resources. In the initial stages this may be sufficient, but to progress, and attain
successful change, wider support through additional resources and people are essential.
Generally, a coalition is formed to guide change in an organization. This coalition
usually comprises the CEO and his/her team of senior managers, and other managers
and employees. The coalition should be powerful enough, in terms of titles, information,
expertise, reputations, and relationships, to guide change in the organization. Whenever
possible, the coalition should try to engage board members, union leaders, and even key
customers, to gain backing for bringing in the necessary changes.
The guiding coalition in a firm does not always include the senior management. Some
times it has to operate outside the normal hierarchy (a coalition outside the normal
hierarchy is chosen because the hierarchy no longer meets the purpose). Such a
coalition has to operate beyond set boundaries, expectations and protocol. This way of
operating may pose additional challenges.
22
Implementing Change
A sense of urgency among managers eases the process of creating a guiding coalition.
This sense of urgency at the managerial level helps the top leadership to bring suitable
threats. Such an understanding creates trust and facilitates clear communication

among the coalition members. Undertaking an off-site retreat for two to three days is a
popular method for promoting a shared understanding.
Organizations that succeed are characterized by teamwork at the top. The high-level
team is led by a powerful line manager, and not by a staff executive. Without a
powerful leader at the top and an equally powerful coalition, the forces opposing
change can easily defeat the forces for change.
Activity: Gulmohur Collections Ltd. (Gulmohur) is a leading fashion house in

India. It is known for its leading fashion brands and top notch designers. The
company targeted the premium segment customers and hence was very profitable.
The designers launched creative designs and were fast in delivery the products to
the market. Of late the company witnessed that an upcoming fashion house, Petals
India was also launching innovative products and were fast in delivering the output.
Petals India targeted customers at the middle and the premium segment. Though
I
the new fashion house did not have any effect on the profitability of Gulmohur, the
CEO of Gulmohur, Dilip Singh (Singh) felt the need to transform the organization
FA
before the crisis took place. Suggest what steps Singh should take in order to bring
about a change in the organization. If you were the CEO of Gulmohur, how would
you tackle such a situation?
Answer:
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3.3 Developing a Vision and Strategy for Change

The guiding coalition needs a vision or a clear picture of the future. The vision
provides the direction in which the organization needs to move. Hence, it is referred to
as the change vision. This vision should be easy to communicate. It should appeal to
customers, stockholders, and employees. In ordinary circumstances, the vision for
change arises from a single individual, and is often not clear. After a thorough
discussion of the vision by the partners in the coalition, the vision becomes more
clear, and the coalition can even chalk out a strategy to achieve the vision.
An unclear change vision can derail the transformation of a company. Without a
guiding vision, the efforts aimed at change are fragmented, and amount to nothing
more than confusion as they are often incompatible. Efforts without a clear vision are
bound to fail, even if plans, directives, procedures, programs, goals, and deadlines are
properly laid out. The many details of transformation can confuse or alienate
employees unless they have a clear understanding of where they are being led.
23
Change Mastery
A change vision should be compelling enough to motivate fundamental rethinking at

all levels of the company. However, it should not be impossible to realize. If the
change vision is difficult to attain then it will have no credibility, and change will
never take place.
The success of a change vision depends upon the circumstances in which the firm
s ability to communicate. The feasibility of a change vision
depends to a great extent on the ability of the leader to carry others with him/her. A
leader who is good at convincing people can make ambitious goals appear quite feasible.
Judging the feasibility of the vision also depends on a clear and rational understanding
organization operates, and competitive trends. Formulating a strategy that takes into
consideration all these aspects is a prerequisite to realizing the change vision.
how easily and quickly the leader communicates the change vision to his/her employees
and on how readily the employees understand and take an interest in the vision.
3.4 Communicating the Change Vision

The power of the change vision can be realized fully only when most people in the
I
organization understand the goals and direction in which they are being led. A shared
FA
sense of a desirable future can motivate and coordinate actions in such way that it
leads to the desired transformation in the organization.
But often the change vision is not communicated clearly. This happens because the
people in the organization, who are una
attention to information that clarifies the change vision. This can also happen when
the guiding coalition is not coherent, and creates and sends message that describe the
change vision inappropriately.
For people who are trained as managers, communicating a vision is often difficult.
IC
They normally think only in terms of their immediate subordinates and superiors, and
not about the broader constituents (such as policy makers, NGOs, etc) who are
relevant to the vision. Managers are comfortable with routine factual communication,
but not future-oriented strategizing. The communication of a change vision needs a
clear sense of the problem and how it can be solved. Managers tend to blame the so-
called limited intellectual capabilities of lower-level employees and human aversion
to change for their own inability to communicate. These can be real problems, but the
main problem according to Kotter is the process itself. Making employees and
n is challenging, both intellectually and emotionally.
People should be ready to go beyond their vested interests and insecurities, and make
sacrifices in order to be comfortable with the envisioned future. Convincing people to
change in these dimensions is a difficult task.
3.5 How can One Ensure Clear Communication of the Change Vision?
In order to communicate the change vision well, the guiding coalition overseeing
change should pay attention to the following aspects:
The language used to communicate the change vision should be simple and not
involve jargon. It should not leave any scope for multiple interpretations or
misinterpretations.
24
Implementing Change
Whenever appropriate, the message should use metaphors, analogies, and

examples. These can help paint a clear picture of the future for members of the
organization.
The change vision can be conveyed well if the guiding coalition uses multiple
channels. It can take advantage of meetings - both big and small, formal channels
like memos, media like newspapers, and informal channels, to spread the ideas
that underlie the change vision.
Ideas pertaining to the change vision do not sink in immediately. They need
consistent repetition with a view to reminding people in the organization of the
ideas.
The deeds and words of important people in the organization must be consistent.
If the behavior of important people is not consistent with their words, it will
undermine the credibility of communication.
3.6 Empowering Employees for Broad-Based Action

Organizational change needs the full support of employees and managers in the
organization. For this to happen, the guiding coalition needs to empower people to
I
take action. In many cases the guiding coalition simply communicates the new
direction to the people. But this is not sufficient to bring about change in the
FA
organization. The obstacles to change should also be removed. Very often, the people
at different levels in the organization want to move in the new direction visualized by
the coalition, but they are hampered by obstacles which block the way to change. The
obstacles may be organizational structures, skills, systems, and superiors. To
overcome these obstacles, the following steps are necessary:
Ensure Compatibility between the Structure and the Change Vision
Structures that are not aligned with the change vision block the required action. If
IC
structural barriers are not removed when the change vision is publicized, employees get
frustrated, and this undermines the transformational effort. If the structure is aligned
with the change vision at a later point in time, the organizational energies necessary to
employ new structures to realize the change vision, may simply not be generated.
Changing structures can be difficult because employees are accustomed to a basic
organizational design, and are blind to other alternatives. Also they have invested
significantly in the existing structure in terms of personal loyalties and functional
expertise, and do not want to shift to a different structure. Though senior managers may
appreciate the need to change the existing organizational structure, they might not be
willing to arouse dissatisfaction among middle managers and their peers. Hence, any
effort aimed at changing the structure must be carefully planned and executed.
Train Employees
Employees feel empowered and show an inclination to change, when they are
equipped with the right skills and attitudes to operate in the intended organizational
environment. As skills and attitudes are acquired over a long period of time,
employees cannot be expected to shed all their old skills and attitudes and acquire new
ones within a few days of training. Employees and managers need enough time for
this. Sometimes, employees are provided training to acquire only technical skills and
25
Change Mastery
not social skills and attitudes. It is also common to find that after training the
employees, nobody bothers to check how successfully they are employing their skills,
and what problems they are encountering while using these skills.
Leaders overseeing the change process need to pay enough attention to the new
behaviors, skills and attitudes necessary to bring about the desired change.
Align organizational systems to the vision
Organizational systems that are not aligned with the vision act as blocks to the
required actions. Though systems are easier to change than culture, simply erasing all
inconsistencies between the new vision and current systems in a day or two may not
be possible. This too needs proper planning and consistent effort. For example, the
HR department needs time to align the HR systems such as performance appraisal,
compensation, promotions, etc. with the new vision.
Confront errant managers
Managers resisting change can derail the process of change. Senior managers
confronted with such errant managers, take recourse to marginalizing them. But
I
precious time and energies. Another option, Kotter suggests, is to have an honest
FA
dialogue with such managers. The senior manager must make clear what the
/she should also ask what the organization can do
to align the manager concerned with the change vision. If this dialogue does not yield
any results, the errant manager should be fired.
3.7 Scoring Short-term Wins

If a re-engineering effort delivers cost reduction as promised in a given time, then it is
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development cycle from 10 months to 3 months, then it too is a win. These wins are
short-term wins because they are attained in a relatively short period. Whatever the
size of the organization, some small wins are clearly necessary in the initial stages of
transformation. According to Kotter, a short-term win has the following
characteristics:
It has to be clearly visible and verifiable. The result of this win has to be concrete
and real; not subjective or similar to hype.
The win should result in an improvement in the organization. There should not be
any confusion over that aspect.
The win should be relevant to the change effort.
Why are Short-term Wins Important?
Scoring short-term wins is important for the following reasons:

They reinforce that sacrifices made by the organization are worth the effort. The
wins provide justification for short-term costs.
Positive feedback that comes with these wins boosts the morale of the people
attempting change, and improves their motivation levels.
26
Implementing Change
As short-term wins provide concrete data to test the vision against reality, they
help fine-tune the vision and the strategies to achieve it.
They provide evidence that clears the doubts of cynics, and undermines the
resistance of people interested in maintaining the status quo. Improvements in
performance reduce the obstacles that stand in the way of change.
Short-term wins also step up the momentum of the change effort by converting
people who were earlier undecided, to supporters of change, and transforming
reluctant supporters into active helpers.
Identifying performance improvements that indicate short-term wins is often difficult as
organizations rarely have information systems that track improvements accurately. So
special care should be taken to generate and take note of short-term wins that are visible.
3.8 Consolidating Change

Any major change takes time to take effect. Many factors influence the movement
toward change. If there is a turnover of some principal change agents, this reduces the
momentum of change. A similar problem arises when the change leaders in the
organization are exhausted by their efforts. Short-term wins help the firm continue in
I
the direction of change with the same momentum. But if short-term wins are
celebrated too much, this can lead to a reduction in the sense of urgency. Once this
FA
urgency is lost, forces opposing the change take over, and derail the change process.
Change does not take place easily. There are two reasons for this: changing corporate
culture is extremely difficult; and the inter-connections between the different parts of
the organization make it difficult to change anything without changing everything.
One part of the organization influences decision making in another part of the
organization either directly or indirectly. In order to bring about change in an
organization, it is usually not enough to change a particular element in the organization.
IC
Several elements in the organization need to be changed at the same time.

In the phase of consolidation, the guiding coalition attempts to cash in on the
credibility generated through short-term wins. It does so by taking up larger change
projects. More people are brought into change mode to promote and bring in more
changes. The top leadership makes an effort to ensure clarity in the shared purpose of
change, and maintain a sense of urgency. People from the lower levels of the
organization also start taking initiative, and provide leadership in specific projects.
Senior managers attempt to remove redundant interdependencies to make change easy
both in the short term and the long term.
Check Your Progress

1. According to John P. Kotter, an organization attempting to change can minimize
this pain by: establishing a sense of urgency, creating a guiding coalition,
developing a change vision and strategy, , empowering employees
for broad-based action, generating short-term wins and consolidating change.
a. communicating the change vision
b. foreseeing a vision
27
Change Mastery
c. developing a Six Sigma culture

2. Which one of the following ways should an organization adopt in order to remove
complacency and instill a sense of urgency?
a. making a comparison of the strengths of the organization with that of their
competitors
b. establishing systems for evaluating managers based on their contribution to
broader performance of the organization, rather than on a narrower definition of
their function
c. minimizing future opportunities of growth for shareholders and employees
d. conducting a customer satisfaction survey
3. ?
a. How quickly employees leave the organization
b. Rigidity of the environment
c.
d.
By formation of coalition
I
How easily and quickly the leader communicates the change vision to his/her
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employees
4. Which of the following is an aspect that is to be ensured while communicating the

change vision?
a. use metaphors, analogies, and examples
b. consistent repetition with a view to reminding people
c. change vision should be simple and not involve jargons
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d. All of the above
5. Which of the following is not a characteristic of a short-term win?

a. The win should be relevant to the change effort
b. The win may not show any improvement in any process
c. The win has to be clearly visible and verifiable
d. The win should result in an improvement in the organization
6. Change does not take place easily because of two reasons for this:
and the inter-connections between the different parts of the organization make it
difficult to change anything without changing everything.
a. changing the decision-making is difficult
b. changing corporate culture is extremely difficult
c. changing organizational structure is difficult
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Implementing Change
4. Understanding Organizational Culture

According Edgar H. Schein (MIT), organizational culture is the pattern of basic
assumptions that a given group has invented, discovered or developed, in learning to
cope with its problems of external adaptation and internal integration, and that have
worked well enough to be considered valid, and, therefore, to be taught to new
members as the correct way to perceive, think, and feel, in relation to these problems.
Culture is influenced by unconscious assumptions which determine how a group
perceives, thinks, and feels. The assumptions are actually learned responses. Members
of the group learned to react according to the need of the situation. These learned
responses were in turn espoused values at some point of time in the past. Values are
reflected in behavior. When the behavior addresses the problem at hand, the values are
slowly taken for granted, and they become, over a period of time, underlying
assumptions. As people assign importance to the values giving rise to their behavior
by following them and continuing to behave in a certain way, the values underlying
the behavior become unconscious assumptions.
Such unconscious assumptions are very powerful. They become sacred to the people
who hold them. These people often refuse to even discuss them. For example,
I
FA
is an unconscious assumption. Today, most people consider these assumptions as self-
in an organization, employees get dissatisfied, and sometimes even leave the

organization. This is what happened at Netscape when it was taken over by AOL.
Netscape was known for its casual, flexible, and independent culture. Employees were
not bound by rigid schedules and policies, and were free to come and go as they
pleased. They were even allowed to work from home. The company promoted an
environment of equality everyone was encouraged to contribute his/her opinions.
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the then
CEO Barksdale, worked in a cubicle. The company promoted experimentation and did
was the culture at Netscape prior to the merger with AOL.

After the merger, in spite of assurances to the contrary by the CEO of AOL, people at
Netscape were required to change the way they worked. As a result, by late 1999, most
of the key employees who had been associated with Netscape for many years, had left.
US$ 4 million
salary at AOL to join Epinions.com. He was soon joined by Lou Montulli and
x founding engineers. Other Netscape employees
helped start Responsys. Some employees joined Accept.com and others AuctionWatch.
Spark PR was staffed almost entirely by former Netscape PR employees.
David B. Yoffie, professor at Harvard Business School, ex
the world through the media. This difference of emphasis made many employees feel
that they were working in the wrong place. So most of the engineers left and Netscape
was transformed from a technology company to a media company.
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Change Mastery
4.1 Formation of Organizational Culture

Culture is formed and survives in an organization, as embedded in groups. The
strength of the culture depends on the homogeneity and stability of group
membership. If the members of the group leave the group after a brief stay then they
will not imbibe much of the culture. In this case, the culture of the group will not be
strong. The strength of the culture also depends upon the length and intensity of
shared experiences. If the members of a group go through difficult experiences or
survive difficult organizational problems, then they tend to imbibe and pass on a
strong organizational culture to new members in the group. If not, though the
individual members hold strong assumptions the group may not reflect a strong
culture. Such groups constitute the organization. The culture of the organization is
sum and substance of cultures of all these groups.
4.2 Role of Founders in the Formation of Organizational Culture

The founding group forms theories and paradigms based on how the group reaches
consensus on various matters. Naturally, the evolution of culture is a multi-stage
process. The organization and the development of its culture evolve through several
I
stages of group formation. The final organizational culture then depends on the
complex interaction between the assumptions and theories founders set in the
FA
beginning, and how the organization learns from subsequent experiences.
How are solutions (which subsequently form the core of the culture) developed in an
organization? The founders and early leaders in the organization bring cultural
solutions into the new group of people comprising the organization. They arrive at
these solutions by trying out different options, and adopting or rejecting them based
on their usefulness. Initially, the founders have a high level of influence on the
organization. But as the organization ages and acquires its own experiences, it starts
adopting its own solutions.
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5. The Need to Change Culture

The culture of an organization has to evolve with the changing marketplace. This can
be a matter of survival. The example of Digital Equipment Corporation (DEC) shows
Ken Oslen founded DEC as a hardcore engineering company in 1957. The engineers
prided themselves on their ability to create innovative products. The values upheld at
DEC were freedom and creativity. Driven by such a culture, which upheld these
values, the company became the second largest computer manufacturer in the world.
The company was successful for nearly three decades. But the same culture turned out
to be its undoing. The company failed to evolve when computers became a
commoditized product. DEC was not founded and run for making profit. It was
founded for giving life to innovation and creativity. But the commoditized computer
market wanted a product that was economical. The innovativeness of the product was
not that important.
Under the innovation-based culture, products were required to compete with each
other internally. Based on this culture, DEC funded every good idea that ever occurred
to its engineers. When computers became a commodity, nobody in the company was
sure which model to back (three groups were working on three different PC models).
30
Implementing Change
The lack of focus on a single product delayed the arrival of the final product in the
market, and the company was also less competitive in the marketplace. The major
problem was the lack of adequate resources for competing models within the firm.
One group was working on a large water-cooled computer that needed expensive
technology and a lot of funding. Another group was
needed the same level of funding. DEC could not fund both adequately at the same
time. It could have chosen one of the two. But neither the founder nor the board was
sure which would be the best bet. Neither of the groups was willing to allow higher
priority to the other. Each was sure about the potential of their product and wanted the
founder and the board to focus on it.
Innovation demands a culture which encourages debates and arguments. For over
three decades this style characterized decision-making at DEC. But this model of
decision-making degenerated into indecision, with each group manoeuvring for
resources for its pet project.
The new market conditions demanded a culture that emphasized cost-cutting. A
culture that abhorred inefficiency was the need of the hour. But the top management at
products would generate enough growth to make up for its inefficiencies. Changing
I
the culture was absolutely necessary. But the founder himself believed in the old
culture. Bringing in any change would have required a complete overhauling of the
FA
leadership might also result
off many promising projects.
But despite the strains, the board decided to go ahead and overhaul the company.
Oslen, and slashed the product line. It also fired most of its employees. Finally the
company survived as an entity, but was an entirely different DEC.
In the case of DEC, the company had to go through turmoil because it was not ready
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to change its cultural fabric when the market environment changed. As long as the
survival of organization depends on its success in the marketplace, it has to pay
attention to changing trends. Culture is a binding force that gives coherence to
organizational efforts. It should propagate success and not failure. When it is not
steering the company toward success, it has to be changed or abandoned, using all the
available means.
Activity: CVL Ltd. (CVL) is a leading consumer appliances company in India. The
company encouraged its employees to offer innovative ideas for new product
development. The ideas were collected and scanned by the top management and the
best idea was selected and implemented. Sometimes more than one idea was
selected and two projects ran at the same time. The company invested considerable
resources in such projects. This however delayed the delivery of the products to the
market. This gave an edge to its competitors and led to a decline in the sales of
CVL. Thus the top management decided to focus on one project at a time so that
resources were invested adequately. Moreover, all the employees were asked to
work one project. This was not well-received by the employees since they aimed to
grow the company by working on multiple projects. In this situation, what should
the top management do to change its culture? If you were the CEO of the company,
how would you explain the employees the need to change the culture? Discuss.
31
Change Mastery
Answer:
6. Changing the Culture

Organizational culture is powerful, and changing it is difficult. Because people in the
organization are carefully selected based on their compliance with the exiting culture,
and they are further indoctrinated. And culture exerts itself through the actions and
thinking of thousands of people. To change culture one needs to change all these
people. Once a particular culture is set, it often develops further without conscious
I
intent or knowledge. It becomes difficult to either challenge or discuss it. In order to
change a cultural unit it is necessary to identify the group that is the culture s creator,
FA
host, or owner. Systems thinking helps in identifying these and facilitates the change
of culture.
6.1 Changing Culture by Changing Mental Models

One way to change organizational culture is to change the mental models of
employees in the organization. Organizational culture is significantly influenced by
the mental models the employees in the organization hold. Mental models are the
beliefs, images, and stories which people carry in their minds about other people,
IC
institutions, and every aspect of the world. Mental models determine how people see
the world. They are invaluable for day-to-day living. But all mental models are flawed
in some or other way. When employees are forming their mental models, their past
bias is already influencing the way this happens. From the beginning, mental models
are only approximations of reality. They do not represent the situation exacly as it is.
Mental models play a key role in decision making in organizations. Some mental
models might cause behavior that is not in the best interests of the either the
This mental model might be useful in the short-term, but it could be dangerous in the
long-term. Once the organization becomes reasonably successful, people get
complacent and the organization starts ignoring customers and competition. Mental
models such as these have to be changed. But the problem is that mental models are
employees become aware of how they think, they can identify their mental models,
and then move to change the organizational culture if necessary.
Experiments conducted by Stanford psychologist Leon Festinger in 1957 show that
people change their mind-sets only when they see the purpose of changing. When they
are convinced about the purpose, they are more ready to change and serve the
intended purpose. People are comfortable with change and will be enthusiastic about
32
Implementing Change
changing their mental models when they understand their role, and are satisfied about
the importance of their role in the context of organizational change. So any leader
attempting to change culture has to first understand, thoroughly, why he/she is doing
what he/she is doing, and then he/she must explain it to the others in the organization.
Changing culture does not merely mean going beyond the existing culture. It also
involves creating new beliefs, attitudes, and systems. Toward this end, organizations
can engage in building mental models.
Changing Beliefs
The beliefs that influence specific behaviors needs to be changed. First one has to
understand how these beliefs are formed. People form beliefs relating to work during
training, or during their experiences in the organization, or when they hear inside or
perspectives when they hear them or see them doing something.
Example: Jack Welch and the Alignment of Mental Models

Jack Welch (Welch), the former CEO of General Electric (GE) believed that the art
I
of running a business involved ensuring that all important decision makers had
access to precisely the same set of facts. If this had happened; they would
FA
approximately reach the same conclusion about how to deal with a business issue.
In ensuring that the same information was reaching all the decision makers, Welch
was ensuring that all the decision makers were operating based on the same
leaders at GE exchanged their ideas. This exchange was an important part of

learning, in his opinion. By exchanging their ideas the leaders at GE were
d heavily on employee
surveys as part of its learning culture. What is GE doing here? It was ensuring that
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organization.
People change only when they see new evidence that proves that their old beliefs are
false. This is what leaders are supposed to do. They should communicate as much as
possible using the available new evidence.
Changing culture is possible only when people who are part of the culture become
aware of their beliefs and behaviors. Dick Brown, the then CEO of EDS between
1998 and 2003, tried to change his organization's culture by focusing on beliefs and
behaviors in the organization. In a senior leadership meeting in January 2000, he
asked his people to try to state the beliefs that had shaped their view of the company
in the last five years, and then the beliefs that were needed to take the organization
forward at that point. They came up with the following list.
The new EDS beliefs became the agenda for attitude change among all EDS leaders.
Bringing a new set of beliefs and practices into the culture of an organization can be
difficult, even when the beliefs and practices are consistent with the core of the
culture. Imagine how difficult it would be to bring in practices that are contrary to the
existing culture.
33
Change Mastery
tioning and positive

reinforcement in nurturing the desired behavior. Organizational designers must design
reporting structures, management and operating processes, and measurement
procedures (such as setting targets, giving rewards) in such a way that they reinforce
employees will not adopt the desired culture all the time.
Organizations often make the mistake of expecting their employees to change their
culture without providing them the skills required to do so. Employees generally
encounter problems in adapting general guidelines to their specific situations. To
transform themselves, the first thing employees need is time. They rarely get
sufficient time to change their behavior. David Kolb, an American educational
theorist, demonstrated in the 1980s that adults cannot learn to behave in a desirable
way just by listening to instructions. He showed that in order to learn, they have to
absorb new information, experiment with it, and integrate that knowledge with their
existing knowledge. Hence, teaching aimed at creating and nurturing new culture must
give enough consideration to the time frame necessary. It should be kept in mind that
large-scale change never occurs in a day or two. It is a slow and arduous process.
Table 13.1
I
Changing Beliefs at EDS
FA
Old EDS Beliefs New EDS Beliefs
1. We are in a commodity business. (The 1. We can grow faster than the
company is in a mature industry, where market-profitably, and by
there is hardly any product differentiation using capital efficiently.
or new growth opportunities.) 2. We can increase
2. We cannot grow at market rates. ( EDS is productivity year after year.
the biggest player in the commodity 3. We are committed to our
business. EDS can rarely find profitable clients success.
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growth opportunities.)
4. We will achieve service
3. Profits follow revenues. (EDS can make excellence.
profits only when there is an increase in
revenues.) 5. Collaboration is the key to
our success.
4. Each leader owns all the resources - control
is the key. (This belief resulted in lack of 6. We are going to be
coordination among business units.) accountable and committed.
5. My peer is my competitor. (The competitor 7. We will be better listeners

in actuality is in market place, not in the to our clients.
next unit.)
6. People are not accountable. (This amounts
7. We know more than our clients. Our people

will tell the client what solutions he or she
needs. (This belief prevented EDS from
listening and learning about actual
customer needs.)
The Discipline of Getting Things D
Charan, Crown Business, 2002.
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Implementing Change
Example: Going beyond the Depression Era

John P Kotter writes about a company in the years of depression and post-
d
1928 - the depression era. As a result, the practices followed in the company were
conservative. The norms and values also reflected the same conservatism. When
the company faced problems in the 1980s, the top management tried to make major
changes in the way the company operated. Though they were necessary, and
though the company had no other alternatives, tensions mounted in the organization
between the people who were conservative and those who were more willing to
take risks. The evidence indicated that new methods were appropriate. These
methods had the full support of the management, yet the old culture refused to die.
The top management took the following steps:
1. It communicated extensively on how new practices were leading to

performance improvements.
2. It discussed the origins of the old culture, how it had served the organization
well, and why this culture was no longer useful.
3.
I
It encouraged people over 55 years to retire, and did its best to retain people
FA
who were enthusiastic in their support of the new culture.
4. It ensured that new hires were not recruited based on the old norms.
5.
adherence to norms.
6. It ensured that the three candidates most likely to replace the CEO did not hold
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Check Your Progress

7. On what does the strength of a culture depend?
a. on theories and paradigms based on groups
b. when people assign importance to traditions
c. the homogeneity and stability of group membership
d. innovative products
8. ________________ is a binding force that gives coherence to organizational

efforts.
a. Leadership
b. Innovation
c. Human resources
d. Culture
35
Change Mastery
9. In which of the following ways, an organizational culture can be changed?

a. Change the mental models of employees
b. Apply force or coercion
c. Give more incentives or benefits
d. Give authority to all the employees
10. What is the significance of a mental model in cultural change?

a. Retains the beliefs, stories, and images which people carry in their minds
b. Helps in developing leadership qualities
c. Makes people self-sustainable
d. Plays a key role in decision making in organizations
11. When can the employees of an organization accept culture change?

a. when they are satisfied that their old beliefs are retained
b. when they understand their role, and are satisfied about the importance of their
role in the context of organizational change
c. when they are promoted
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FA
d. when the core values and beliefs are changed
7. Summary
Transforming an organization requires initiative, cooperation and willingness to
make sacrifices from most of the employees and managers in the organization.
The transformation process will be successful, when the organization goes
IC
through a step-by-step process.

John P. Kotter suggests some preliminary steps before attempting to change the
culture of the organization. The steps are: establishing a sense of urgency,
creating a guiding coalition, developing a change vision and strategy,
communicating the change vision, empowering employees for broad-based
action, generating short-term wins, and consolidating change.
Organizational culture is the pattern of basic assumptions that a given group has
invented, discovered or developed, in learning to cope with its problems of
external adaptation and internal integration, and that have worked well enough to
be considered valid, and, therefore, to be taught to new members as the correct
way to perceive, think, and feel in relation to these problems.
Culture is a binding force that can give coherence to organizational efforts. It
should propagate success, and not failure.
One way to change organizational culture is to change the mental models of
employees in the organization. Organizational culture is significantly influenced
by the mental models the employees in the organization hold. Mental models are
the beliefs, images, and stories which people carry in their minds about other
people, institutions, and every aspect of the world.
36
Implementing Change
8. Glossary
Organizational culture: Organizational culture is the pattern of basic
assumptions that a given group has invented, discovered or developed, in
learning to cope with its problems of external adaptation and internal integration,
and that have worked well enough to be considered valid, and, therefore, to be
taught to new members as the correct way to perceive, think, and feel, in relation
to these problems.
1. Explain the process of change as suggested by John P. Kotter.
2. What are the various hurdles that organization faces in the process of
transformation?
3.
perceives, thinks, and f Discuss the need for understanding the culture of an
organization.
4.
5.
I
Describe need to change culture.
Explain how culture is changed.
FA
Josep Isern and Caroline Pung, Driving Radical Change, McKinsey Quarterly,
November 2007.
Thomas G. Cummings, Christopher G. Worley, Organization Development &
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Change, Cengage Learning, 2008.

Josep Isern, Mary C. Meaney, and Sarah Wilson, Corporate Transformation under
Pressure, McKinsey Quarterly, April 2009.
http://www.marshall.usc.edu/assets/
001/5112.pdf>

1. a. communicating the change vision
According to John P. Kotter, an organization attempting to change can minimize
this pain by: establishing a sense of urgency, creating a guiding coalition,
developing a change vision and strategy, communicating the change vision,
empowering employees for broad-based action, generating short-term wins and
consolidating change.
2. b. establishing systems for evaluating managers based on their contribution
to broader performance of the organization, rather than on a narrower
definition of their function
37
Change Mastery
To bring in urgency in place of complacency, organizations need to establish

systems for evaluating managers based on their contribution to broader
performance of the organization, rather than on a narrower definition of their
function.
3. d. how easily and quickly the leader communicates the change vision to his
employees
on how easily and quickly the leader communicates the change vision to his
employees and on how readily the employees understand and take an interest in
the vision.
In order to communicate the change vision well, the guiding coalition overseeing
change should pay attention to the following aspects:
The language used to communicate the change vision should be simple and
not involve jargon. It should not leave any scope for multiple interpretations
or misinterpretations.
I
Whenever appropriate, the message should use metaphors, analogies, and
examples. These can help paint a clear picture of the future for members of
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the organization.
The change vision can be conveyed well if the guiding coalition uses
multiple channels. It can take advantage of meetings - both big and small,
formal channels like memos, media like newspapers, and informal channels,
to spread the ideas that underlie the change vision.
Ideas pertaining to the change vision do not sink in immediately. They need
consistent repetition with a view to reminding people in the organization of
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the ideas.
The deeds and words of important people in the organization must be
consistent. If the behavior of important people is not consistent with their
words, it will undermine the credibility of communication.
5. b. The win may not show any improvement in any process
According to Kotter, a short-term win has the following characteristics:
It has to be clearly visible and verifiable. The result of this win has to be
concrete and real; not subjective or similar to hype.
The win should result in an improvement in the organization. There should
not be any confusion over that aspect.
The win should be relevant to the change effort.
Hence option b is incorrect.
6. b. changing corporate culture is extremely difficult
Change does not take place easily. There are two reasons for this: changing
corporate culture is extremely difficult (this aspect is discussed in detail below);
and the inter-connections between the different parts of the organization make it
difficult to change anything without changing everything.
38
Implementing Change
7. c. the homogeneity and stability of group membership

The strength of the culture depends on the homogeneity and stability of group
membership.
8. d. Culture
Culture is a binding force that gives coherence to organizational efforts.
9. a. mental models of employees
One of the ways to change organizational culture is to change the mental models
of employees in the organization. Organizational culture is significantly
influenced by the mental models the employees in the organization hold.
10. d. Plays a key role in decision making in organizations
Mental models play a key role in decision making in organizations.
11. b. when they understand their role, and are satisfied about the importance of
their role in the context of organizational change
Experiments conducted by Stanford psychologist Leon Festinger in 1957 show
I
that people change their mind-sets only when they see the purpose of changing.
When they are convinced about the purpose, they are more ready to change and
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serve the intended purpose. People are comfortable with change and will be
enthusiastic about changing their mental models when they understand their role,
and are satisfied about the importance of their role in the context of
organizational change.
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39
Unit 14
Change Agents
Structure
1. Introduction
2. Objectives
3. CEOs as Change Agents
4. Middle-level Managers as Change Agents
5. HR Personnel as Change Agents
6. Consultants as Change Agents
7. Summary
1. Introduction
I
FA
The previous unit discussed the steps involved in the transformation of an
organization. It then explained the concept of organizational culture. It then discussed
the need to change culture. The unit finally discussed how culture is changed using
mental models.
When Terry S. Semel (Semel) joined Yahoo! as CEO in 2001, he faced the challenge
of bringing the company back into profitability and improving its revenues
significantly. The task was even more difficult
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revenue online advertisements sales - had fallen sharply, by 35%, in 2001. Semel
company within a very short period. Another tough task that awaited him was to bring
, and a
sense of urgency in employees while also ensuring their loyalty.
Unlike Timothy A. Koogle (Koogle), the previous CEO of Yahoo!, who had promoted
an informal culture, Semel made efforts to build a more serious, performance-oriented
reduced the number of business units from 44 to just 5. He also laid off 400 people
from -strong workforce. Semel asked his managers to prepare
exhaustively before proposing any new projects. Any such proposal would now go
through a series of tests and analyses, with very few of them being finally accepted.
Semel also introd
every new project was not just profitable, but also beneficial and complementary to
synergizing the work of various business units and encouraging their managers to
think, execute, and contribute for the benefit of the company as a whole, rather than
focusing narrowly on their own business units.
Change Agents
During his initial months in Yahoo!, Semel focused on putting in the kind of
technology that would enable the company to offer premium services. Semel then
new premium consumer services including online personals, e-mail forwarding, and
Internet access for its customers. Yahoo! unveiled a host of new service offerings, for
could access through broadband online connections. The company also launched a
subscription-base
business. During its good days, Yahoo! had been in a position to dictate terms to
advertisers. This had made its salesforce arro
traditional media sales personnel who focused on traditional media companies,

explaining to them the significance of online advertising. This move was very
successful because when the online ad market recovered, several traditional media
companies advertised on Yahoo!. Forty two movies were advertised on Yahoo! in the
first quarter of 2002 compared to zero in the corresponding quarter of 2001.
I
With his vast experience in the movie business, Semel used his deal-making skills to
enter into major acquisition and partnership deals. The most profitable partnership
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deal that Semel brokered for Yahoo! was with Overture Services (Overture), an
Internet search technology provider, in November 2001. It generated US$ 130 million
deriving from this deal were expected to increase further to US$ 230 million in 2003,
represent
The measures Semel took paid rich dividends. By December 2002, the company was
generating one-third of its revenues from subscription-based offerings with more than
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2.2 million paid subscribers. Yahoo! also reported improved financial results. For the
subscription-based services and enterprise solutions (like website hosting for

corporates) reported revenues of US $89.4 million, an increase of 120 percent
compared to the corresponding quarter in 2001.
This unit discusses the role of CEO as change agents in organizations. It then goes on
to explaining the role of middle-level managers as change agents. The unit then
discusses the role of HR personnel and consultants as change agents.
2. Objectives
understand how CEOs act as change agents in an organization.
discuss how middle-level managers bring about change and influence people in
an organization.
understand the traditional and new roles played by HR personnel as change
agents.
understand the role of management consultants as change agents.
41
Change Mastery
3. CEOs as Change Agents

Bringing in change on a large scale is a demanding task for any CEO. He/she needs to
leverage the forces for change latent in the organization to ensure successful change.
A CEO has to be clear about his/her role and his/her plan of action. Translating a
powerful new strategy into effective action needs an active leader at the helm, a
constructive corporate staff and a compatible organizational structure. Suitable
management processes and a supportive corporate environment are essential for
change to take place.
These are the basic assumptions a CEO has to keep in mind:
Organizations are unique, and so are the working systems in these organizations.
Leadership is the engine that drives the vehicle called change in the organization.
Leading change is a process, not an event.
Managers in an organization know the direction of change better than outsiders
such as consultants.
Change has to be driven, both bottom-up, and top-down.
I
People participation is the key that unlocks change. People support what they
create.
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Organizations are systems.
Change can involve both rational and non-rational situations.
A sense of timing is as important as leadership is, in ensuring change.
The change process might get derailed if the CEO falls into certain traps on the way.
As he/she is heading the organization he/she is expected to be impartial, and to ensure
uniformity in the organization in terms of the goals the business units pursue, the
organizational structure they adhere to, the various business activities they engage in,
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the rewards they are bestowed with, and the strategies they adopt. This effort to
maintain uniformity across the organization is praiseworthy if the business units are
similar in all aspects. However, this treatment is inappropriate in the case of
diversified organizations. In such organizations, each business unit has different
priorities and needs a different approach to meet the new situations it faces.
situations in which he/she has to be conservative. But if conservative behavior

becomes the norm, it may stifle creativity in the organization. In an uncertain business
environment, risk cannot be entirely eliminated but it can be anticipated and managed.
A CEO who is overly conservative in his/her approach discourages creative initiatives
that come with a certain level of risk. When a CEO is trying to avoid risks like this,
other managers and employees in the organization also adopt the same approach, and
become fault-finders rather than catalysts for change.
In most cases, the CEO has many years of line experience in the industry concerned.
This should not lead him/her to believe that he/she is totally conversant with whatever
is happening in the marketplace. The CEO should not also accept changes in strategic
plans suggested by the senior managers in the organization, without scrutinizing them
carefully. He/she should question the hidden assumptions that underlie the strategic
plans drawn up for the organization.
42
Change Agents
A CEO heading a large and diversified organization learns to delegate his/her

authority. As a result he/she tends to lose first-hand experience. Subsequently, he/she
loses the feel for business activities. He/she may be forced to rely on his/her
subordinates for crucial information. To ensure that he/she obtains such critical
information, the CEO should encourage open communication. He/she should be
prepared to discuss issues on which he/she himself/herself is uncertain, with his/her
subordinates. He/she should encourage them to convey all the information they have,
irrespective of whether it carries good news or bad news.
Corporate strategy is the prime instrument for ushering in change in an organization.
When the CEO is keen to bring in change, he/she should not delegate the
responsibility of creating corporate strategy to others. Managers should be allowed to
formulate strategies, at the level of their business units. But it is the CEO who has to
define the vision for the organization. This vision must be consistent with the
corporate strategy he/she he
formulation of corporate strategy should not mean that he/she is the only one to be
involved in the process. He/she has to take the help of his/her subordinates to analyse
and define important components of the vision. A CEO can send signals about the
intended change, in the following situations:
I
While guiding the activities of staff employees
When defining a specific vision for the company
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During discussions
By issuing public statements.
Thus a coordinated program of change, backed by sound and relevant strategy, and led
by an active chief executive, can ensure significant progress in the desired direction in
an organization.
Activity: Spin Motors (Spin), a manufacturer of electric engines and electric

motors, was once a leading auto maker in the US. The
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adapt new models and reluctance to phase out its non-selling models resulted in the
company facing losses. Thus the company appointed a new CEO Marshall
Robinson (Robinson) to bring about changes in the organization and make it
profitable. As a first step, Robinson restructured the organization. He changed the
designations, new machinery was bought, and many fringe benefits of employees
were cut down. These changes were not well-received by the employees and they
refused to work till the benefits were restored. Do you think Robinson had not
implemented change in an effective manner? Why (not)? What should Robinson do
so that employees do not resist change and accept them in order to make the
company profitable? Discuss.
Answer:
43
Change Mastery
Example: Fred Smith as a Change Agent

Frederick W Smith (Smith), the Chairman, President, and CEO of FedEx
Corporation (FedEx), was presented the Peter F Drucker Strategic Leadership
Award for the year 1997. Impressed by ntrepreneurial
skills, Drucker commented,
ability to ask the right questions and to find the right answers. Under his leadership,
FedEx management has developed rigorous processes with extremely low defect
rates; employees are highly motivated and are empowered through information,
technology, and thorough training; and information technology has transformed the
from a once loss-making company to a global logistics industry leader. Smith
visionary leadership, Edward Wolfe, a financial analyst with the Bear Stearns, said
I
FA
Smith was one of the few business leaders who anticipated the application of
Internet in business operations very early, launching the
www.fedex.com that enabled customers to do business online, back in 1994.
4. Middle-Level Managers as Change Agents

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The role of middle managers is crucial in managing change. They act as a connecting
link betw
and the capabilities of the work force.
At Fort Wayne, Indiana (USA), the electrical motors business of General Electric had
been languishing with zero percent return on investment. But with some remarkable
initiatives taken by middle managers at this unit, the returns reached 25% in a few
years. How did they do it? The doses of market reality infused by these middle-level
managers stimulated employee innovation, and higher levels
managers interacted with customers frequently, and did competitor product analysis.
Information relating to the marketplace was shared during Monday morning meetings.
This information helped the business unit to adapt to change in the marketplace (in
terms of customer preferences) and competitor practices.
Middle-level managers can bring about change in the actions of people around them.
They influence the actions of people reporting to them as well as the people who they
report to. At Texas Commerce Bank (TCB) the top management led by the CEO
envisioned a complete redesign of processes. The visible objective of the change
effort was to reduce costs by US$ 50 million. The middle-level managers felt that the
mission was uninspiring. The mission did not appeal to employees at lower levels
44
Change Agents
also. Just as the change initiative was about to fail, a group of middle-level managers
suggested a new objective to the top
employees. Finally, the change effort went far beyond meeting the financial objective.
The change effort at TCB still continues, based on the partnership between the then
CEO Marc Shapiro (Shapiro) and a group of middle-level managers. The relationship
is remarkable because it went beyond rigid vertical hierarchies and informal networks.
As Shapiro himself has admitted, without the initiative and regular feedback from the
middle-level managers, he might have ignored the importance of going beyond cost
reduction.
In spite of a great team at the top management level, a major change initiative will
never succeed unless there is dedicated cadre of middle-level managers signed up for
the change.
Example: Tom West at Data General

Tom West (West) of Data General was the manager of the Eagle Project, a project
to build a new 32-bit computer. Work on the project began in 1979 and lasted for
nearly a year and a half. But, this project, it seemed, was not the topmost priority
I
FA
computer that was being built at its R& D labs in North Carolina. There were not
enough resources left for this project. Instead of feeling defeated by the constraints,
West, a middle-level manager inflamed his engineers with entrepreneurial spirit
and channeled their energies in the right direction.
Although they had no hope of any great material rewards, more than two dozen
engineers worked extremely hard, and gladly, for the time it took to complete the
project. The secret was that these engineers were extremely excited about building
this new computer. West divided up the project systematically, but did not reduce it
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to a boring routine. The engineers were given a fair amount of freedom to do things
their own way. Moreover, the engineers were themselves driven by a passion for
good engineering, which West encouraged and supported wholeheartedly.
Tracy Kidder an American writer reported what Jim Guyer, an engineer, said about
the thrill comes from knowing that the thing you designed works, and works almost
the
It is common in many organizations that employees complain about declining

technical challenge, mis-utilization of resources, limited freedom of action, and
tight control of working patterns. Work on the Eagle project was never a cause of
complaint. The work was divided, but never over-simplified into a cookie cutter
job. Every engineer was assigned some important part of machine. Many people
had a choice over which part to work on. The work they did needed far more than
routine labor. In 1980, Data General introduced the computer in the market as
Eclipse MV/8000. This was the first 32-bit computer built by Data General. The
computer went on to become one of the best products of the company for many
years.
-little Brown (1981).
45
Change Mastery
Check Your Progress

1. While implementing change the CEO has to keep the following in mind:
a. leading change is an event and not a process
b. change is driven only from top to down
c. leadership is the engine that drives the vehicle called change in the organization
d. consultants know the direction of change better than the managers
2. __________________ is the prime instrument for ushering in change in an

organization.
a. Corporate strategy
b. Diversification strategy
c. Layoff
d. Cultural dynamics
3.
a.
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A CEO can communicate the desired change in the organization by:
delegating the responsibility of creating corporate strategy to others
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b. accepting changes in strategic plans suggested by the senior managers in the
organization
c. conducting informal meetings
d. defining a specific vision for the company
4. Who acts as the catalyst between the top management and the
market realities while enforcing change?
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a. CEO
b. HR personnel
c. Middle-level managers
d. Consultants
5. HR Personnel as Change Agents

HR departments in organizations are meant to improve performance levels by
minimizing costs, to develop leadership in the organization, and to bring in the
necessary change in the culture, structure, systems, and processes at the workplace.
5.1 Traditional Role in New Circumstances

Detailed planning and quick execution are extremely important for managing change.
Some critical issues that may surface during change management are:
Creating new job descriptions (changes in roles and responsibilities of employees,
redefining the role of managers)
Compensation and other reward systems
46
Change Agents
Methods of transferring knowledge and education

Maintaining high performance levels
Maintaining appropriate relations with the employees and among them.
HR personnel have an important role to play during both the planning of change and
its execution. During the merger between HP and Compaq, their HR departments
acted swiftly and decisively. They designed the entire organizational structure top-
down immediately after the merger was announced. Teams were set up in each
business area to look after the regular business activities. Country general managers,
sub-region managers, function and customer business managers were in place by the
time the merger was announced. This clarity in planning reduced the confusion that
usually accompanies any merger.
HR departments worked with business managers in ensuring the proper representation
of employees of both the companies on all the important teams. This made the
integration process easier. One critical issue the departments faced was to ensure the
compatibility of the new HR strategy with the business strategy of the merged entity.
As a part of the reorganization of the company, the departments instituted a new
employee selection process. This process was arrived at after looking into the scope
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and structure of the new business entity and staff requirements to perform the
er alignment of the
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new organizational structure with the overall business strategy.
HR departments had to face challenges such as the diverse employee laws and
consultation agreements in 39 countries in Europe, Middle East, and Africa. They had
to address these new challenges while ensuring business continuity in a competitive
environment. If employees lack adequate knowledge of developments during a
merger, they tend to misconceive the merger process and become victims of insecurity
and poor morale. In order to address this problem, the HR departments of HP
-
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discussion meetings for every employee. These meetings were intended to promote
interaction between employees and their newly announced managers. During these
meetings, the managers helped their employees get better understanding of the new
company, its approach to customers, and its culture, to the specific strategy for the
business unit to which they belonged, and business unit goals, down to individual
roles within a team.
One of the most important contributions made by the HR people was in the
reorganization of job titles and base pay. They reorganized the global job structure
and designed a common system of job codes, titles, and functions. The global grade
structure and common pay ranges were implemented across units in different
countries. Thus the active role played by the HR personnel as change agents resulted
in a smooth integration process.
5.2 New Role amid New Circumstances

In some organizations such as Serco, HR is no longer seen simply as a personnel and
administration function but also as a strategic component of the business itself. The
47
Change Mastery
The new role of the HR department at Serco is:
To play a key role in the development of business strategy

- an organizational process for
bringing and managing internal change
To train, educate, and develop Serco managers by providing the tools and
techniques necessary for ushering in the desired change.
When bringing in change, HR departments face many challenges. Though traditional
skills are important there is a need for broader business and commercial skills to
manage change. Serco also faced this problem. To overcome this problem, the HR
department at Serco identified the broad spectrum of skills that are necessary to
facilitate change and began recruiting people who possessed these skills. Today, the
top HR personnel at this company act as strategic advisors to the board.
6. Consultants as Change Agents
I
The role of management consultants in creating new perspectives aimed at bringing
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about change has received lot of attention in recent times. According to Smircich and
Stubbart management consultants challenge existing thinking patterns.
management to take a fresh look at the organization. Gattiker and Larwood say that
consultants are experienced at observation and analysis. And they can take an
objective view of organizational problems because they do not need to defend their
past actions. Though there are varied perspectives on the role of consultants, they
certainly have a significant role to play as change agents.
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Consultants play the role of change agents by changing the perspectives of the
management on the emerging environment. Consultants need to possess the skills to
perspectives on resistance, to develop internal resources that will be needed to address

similar problems in the future, and to give the appropriate non-judgemental and open
feedback. They familiarize the management of the organization with the problem-
solving process. While reporting the results of a McKinsey study conducted in 1970 to
We decided that their recommendations on both the operating front and the staff
front, conceptually were very sound. They hit right at the nut of the problem, but the
implementation tha
was concerned. We accepted about 100% of their conceptual contribution and
virtually none of their implementation recommendations.
As the quote shows, consultants provide information, concepts, tools, and procedures
necessary to understand the problems at hand.
Consultants provide the authority of knowledge necessary for a change initiative. For
example, Philips Electronics benefited immensely from the reputation of Cap Gemini
(a consulting organization). Before restructuring, the company had 24 divisions and
48
Change Agents
300,000 employees spread all over the world. It had antiquated managerial systems
and was governed from its headquarters in Holland. This was the time when Japanese
electronics giants such as Sony were dominating the consumer electronics market.
Many felt that Philips Electronics would be wiped out. Media reports said that the
company would split up and sell off key divisions. When Cap Gemini took on the role
of change agent at Philips, investors and lenders began to regain confidence in the
company.
personnel. The taskforce, in most of the cases, has adequate technical knowledge.
Members of the taskforce are clear about the objectives of the change initiative. A
pitfalls. Consultants help minimize conflict of opinion by making the decision-making

context clear and by introducing objectivity and relevance into the organizational
decision-making system. The leader of the organization is responsible and accountable
for the problems in the organization. Consultants do not have such deep institutional
responsibility. Hence, consultants are required to complement and not supplant the
leadership in the organization.
A process-based consultant acts as a catalyst for change. He/she plays a key role in
I
influencing the approaches taken, methods used, and values applied by employees (of
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his/her client), and thus facilitates the desired change. His/her business knowledge,
analytical skills, and familiarity with the client give him/her considerable power to
influence the thinking of the management. Yet he/she has no say in implementation.
He/she cannot ensure that his/her recommendations are followed.
Most consultants are package-based rather than process-based. Package-based
consultants are experts in their field. They relate to the client in a doctor/patient model
of consulting. In this model of consulting, it is assumed that whenever a client
(company here) faces a problem, it will be a standard problem and the consultant is
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already aware of the nature of such problem and he/she can suggest a solution for it.
Though this approach seems convenient, if there is no generic solution to the problem
at hand, the problem may not be solved at all, and new problems may arise. So this
approach should be used with caution.
On the other hand, a process-based consultant takes a client-centered approach.
He/she /she is
a good listener. More than just listening he/she can step into the shoes of his/her client
and understand the reality the client is facing. He/she knows the importance of feeding
back the language the client is using. As he/she does this, he/she tries to identify
/she does is facilitative
in nature. This facilitative approach educates people in the organization and enhances
their problem-solving ability. Thus a process-based consultant helps his/her client
solve the problems on his/her own. That way he/she strengthens the learning process
of his/her client. This task of developing internal resources is crucial to manage long-
term change. Consultants can act as catalysts to build the organizational capacity
necessary to change. But real change is said to have occurred only when change is
apparent in the day-to-day working of the firm. Then only can one say that change has
materialized. This sort of comprehensive change takes a lot of time. Consultants
cannot be expected to oversee this comprehensive change fully.
49
Change Mastery
James Smith, founder of Resources for Change, a consulting partnership located in

Shoreview, says, the consultant serves his clients by helping them find ways of
environment.
Activity: CSL Ltd. is a leading semiconductor manufacturing company in the US.

Of late, the company witnessed that several local as well as international
semiconductor manufacturers had entered the US market. This also led to a decline
in its sales as the competitors offered their products at cheaper rates. To arrest the
decline in its sales, the CEO of the company, Jack Milton (Milton), employed a
consulting agency Alexa Consultants (Alexa). Alexa found that the company had
rigid hierarchical structure which made communication process difficult. The
consultant also advised the company to spun off all its diverse business segments.
Having taken the suggestions, Milton reduced the hierarchical structure of the
organization. He also spun off its non-performing business segments. But he
retained some of its diverse profitable businesses. In this instance, Alexa is which
type of consultant? Do you think the measures taken by Milton would help the
company in becoming profitable? Why (not)? Suggest how else the consultants can
deal with this problem.
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FA
Answer:
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Check Your Progress

5. Which of the following is a critical issue that may surface during change
management?
a. Delegation of work
b. Creating new job descriptions (changes in roles and responsibilities of employees,
redefining the role of managers)
c. Need for a merger
d. All of the above
6. What is the skill that a consultant must possess in the process of bringing in
change in the organization?
a. Understand and appreciate the perspectives on resistance
b. Offer advices irrespective of the nature of change
c. Study in detail about organizational change
d. Bridge the gap between the employees and management
50
Change Agents
7. Which type of consultant is ideally a catalyst for change?

a. Organization-based
b. Task-based
c. Process-based
d. Package-based
8. Package-based consultants are those who:

a. are already aware of the nature of the problem and can suggest a solution for it
b. are facilitative in nature
c. educate people in the organization and enhance their problem-solving ability
d. give importance to long-term change
7. Summary
Bringing in a dramatic change on a large scale is a demanding task for any CEO.
I
He/she needs to leverage the forces latent in the organization to ensure successful
change. A CEO has to be clear about his/her role and his/her plan of action.
FA
The role of middle managers is crucial in managing change. They connect and
of the marketplace.
The HR department is actively engaged in the strategic component of the business
as well. In bringing in changes, HR departments face many challenges. Though
traditional skills of HR managers are important there is a need for broader
business and commercial skills to manage change.
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Consultants help introduce new techniques into an organizational system.

Sometimes they act as an extra resource in the organization to complement the
efforts of internal staff. Consultants are also hired because they legitimize the
process of change attempted by the management.
1. Bringing in change on a large scale is a demanding task for any CEO. Discuss
the role played by the CEO in executing organizational change? What are the
challenges encountered by him/her during the transition phase?
2. Evaluate the importance of a middle-level manager as a change agent. In your
opinion, to what extent can a manager succeed in influencing people to adapt to
change?
3. HR personnel have an important role to play during both the planning of change
and its execution. In the light of the given statement, what is the contribution
made by the HR personnel dealing as a change agent?
4. The role of management consultants in creating new perspectives aimed at
bringing about change has received lot of attention in recent times. How
significant is the contribution made by the consultant in coping with change?
51
Change Mastery
Richard Barrett, Building a Values-driven Organization: A Whole System

Approach to Cultural Transformation, Butterworth-Heinemann, 2006.
Thomas G. Cummings and Christopher G. Worley, Organization Development &
Change, Cengage Learning, 2008.

1. c. leadership is the engine that drives the vehicle called change in the
organization
The basic assumptions a CEO has to keep in mind:
Organizations are unique, and so are the working systems in these

organizations.
I
Leadership is the engine that drives the vehicle called change in the
FA
organization.
Leading change is a process, not an event.
Managers in an organization know the direction of change better than
outsiders such as consultants.
Change has to be driven, both bottom-up, and top-down.
People participation is the key that unlocks change. People support what they
create.
IC
Organizations are systems.

Change can involve both rational and non-rational situations.
A sense of timing is as important as leadership is, in ensuring change.
2. a. Corporate strategy
Corporate strategy is the prime instrument for ushering in change in an
organization. When the CEO is keen to bring in change, he/she should not
delegate the responsibility of creating corporate strategy to others. Managers
should be allowed to formulate strategies, at the level of their business units.
3. d. defining a specific vision for the company
A CEO can send signals about the intended change, in the following situations:
While guiding the activities of staff employees
When defining a specific vision for the company
During discussions
By issuing public statements.
52
Change Agents
4. c. Middle-level managers
The role of middle managers is crucial in managing change. They act as a
market realities, and the capabilities of the work force.

5. b. Creating new job descriptions (changes in roles and responsibilities of
employees, redefining the role of managers)
Detailed planning and quick execution are extremely important for managing
change. Some critical issues that may surface during change management are:
Creating new job descriptions (changes in roles and responsibilities of
employees, redefining the role of managers)
Compensation and other reward systems
Methods of transferring knowledge and education
Maintaining high performance levels
Maintaining appropriate relations with the employees and among them
6. a. to understand and appreciate the perspectives on resistance
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Consultants play the role of change agents by changing the perspectives of the
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management on the emerging environment. Consultants need to possess the skills
perspectives on resistance, to develop internal resources that will be needed to

address similar problems in the future, and to give the appropriate non-
judgemental and open feedback.
7. c. Process-based
A process-based consultant acts as a catalyst for change. He/she plays a key role
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in influencing the approaches taken, methods used, and values applied by

employees (of his client), and thus facilitates the desired change.
8. a. are already aware of the nature of such problem and he can suggest a
solution for it
Package-based consultants are experts in their field. They relate to the client in a
doctor/patient model of consulting. In this model of consulting, it is assumed that
whenever a client (company here) faces a problem, it will be a standard problem
and the consultant is already aware of the nature of such problem and he/she can
suggest a solution for it.
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Unit 15
Disruptive Innovation
Structure
1. Introduction
2. Objectives
3. The Rise and Fall of Great Companies
4. Disruptive Innovation
5. Factors that affects Disruptive Innovation
6. Creating the Capabilities to Cope with Disruptive Innovation
7. Target Markets for Disruptive Innovation
8. Summary
9. Glossary
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FA
1. Introduction
The previous unit discussed the role of CEO as change agents in organizations. It then
discussed the role of middle-level managers as change agents. The unit then discussed
the role of HR personnel and consultants as change agents.
te 1970s, Grameen Bank of

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Bangladesh pioneered the concept of microcredit. This innovative way of lending

benefited the people in rural areas of Bangladesh immensely. Another innovation of
the Grameen group was Grameen Telecom, a firm which provided information and
communication technology to rural Bangladesh.
More than three billion people in the world do not have access to reliable
telecommunications services. The reason is the high cost of installing wire-line
infrastructure from urban to rural areas. In the case of Bangladesh, the average per capita
income is US$ 286 per year. With such a low per capita income the existing business
models for telecom service are not feasible. Thus, the need for a disruptive business model.
Grameen Telecom aimed to provide wireless telephone services to poor people
residing in the rural areas of Bangladesh. At first, nobody believed that this was a
viable project. Critics pointed to the fact that only the richest city residents in
Bangladesh used their own mobile phones. But Grameen Telecom followed in the
approach. It lent up to US$ 175 to women in rural villages (later they came to be
ere independent,
small-time entrepreneurs. The loan amount included the cost of a mobile phone, and
the woman-entrepreneur was also given a solar recharge unit, and the training needed
to use and service equipment. After being trained, these women sold the phone service
to other villagers. The villagers were charged on a per-call basis at an affordable price.
The pilot project included 950 villages, and yielded promising results. The income of
US$ 300 per year. And they spent this
The additional income and their ability to provide this service also improved the social
status of these women considerably.
This innovative service was a boon to users as well. Now they could cut down on
expensive and time-consuming travel, to secure information such as crop prices, and
on their use of the unreliable postal system to place orders with distributors. The total
savings amounted to 10% of their household monthly income. The service yielded
environmental benefits also. It reduced the use of vehicles for travel, and the
construction necessary for wire-line infrastructure.
Grameen Telecom also benefited from this innovative business model. A single phone
connection in a rural area generated revenues of US$ 100 revenue per month
compared to US$ 30 in a city area. Analysts felt that if this model was extended to all
rural areas it could generate revenues of more than US$ 100 million per year. They
also believed that if this concept was applied successfully in countries like India and
China, revenues could well go up to tens of billions of dollars. Such is the power of
disruptive innovation.
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FA
Innovation is the successful exploitation of new ideas and is a vital ingredient for
competitiveness, productivity, and social gain within businesses and organizations.
But, disruptive innovation is an innovation that is of highly discontinuous or
revolutionary nature, which is the opposite of evolutionary or incremental innovation.
Thus one can say that all disruptive innovations are innovations, but all innovations
are not disruptive.
This unit discusses how companies have become successful after adopting disruptive
innovation. It then goes on to discuss the concept of disruptive innovation and the
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factors affecting disruptive innovation. It then discusses the ways in which capabilities
can be created to cope with disruptive innovation. The unit concludes with a
discussion on the reasons that state why developing countries are ideal locations for
disruptive innovations to take place.
2. Objectives
understand how companies have become successful after adopting disruptive
innovation.
understand the concept of disruptive innovation.
discuss the factors that affect disruptive innovation.
understand the ways in which capabilities can be created to cope with disruptive
innovation.
discuss the reasons which make developing countries ideal locations for
disruptive innovation to take place.
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Change Mastery
3. The Rise and Fall of Great Companies

Toyota, the Japanese car manufacturer, severely undercut the competitiveness of
American automobile manufacturers in the lowest tiers of the car market with the
launch of its Corona model in the 1960s. Corona was simple and reliable, and soon
became the second car of middle-income customers. Inspired by the success of
Corona, other Japanese automobile companies such as Honda and Datsun (later
renamed Nissan) entered these segments and started to compete with Toyota. In order
to maintain its profit margins, Toyota entered the upper segment of the market with its
launch of the Corolla, the Tercel, the Camry, the 4Runner, the Lexus, and the Avalon
lines. Honda and Datsun followed suit. These small Japanese companies of the 1960s
which manufactured cheap products eventually became huge global corporations
manufacturing the highest-quality automobiles. Here, Toyota created a new growth
market through its disruptive innovation.
Another good example of disruptive innovation is the Sony transistor radio of the
1950s. It was a disruptive technology; it was different from standard radios of the day
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were mainly teenagers did not mind the low volume as they could listen to their
favorite rock-and-roll music without their parents knowing about it. Within a few
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years, Sony had driven American high quality radio manufacturers out of the market.
Sony followed the same approach in the television market. It entered the market with
the launch of a cheap black and white model, going on to produce the super-
sophisticated Trinitron later when it was well-established in the market.
Japanese companies gained success through disruptive innovation. But disruptive
innovations have a limited applicability. The best customers of these companies
become sophisticated and demanding. They stop accepting disruptive products. In
order to serve sophisticated and demanding customers, the Japanese companies
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planned in advance, and this enabled them to compete in established markets. But as
companies get used to serving their best customers in a planned way, they lose their
capacity to be aggressive, take risks, and create new markets. When they attempt to
enter new markets or lower segments, their profit margins fall. As a result, they tend
to get stuck in the upper segment of the market. This phenomenon is not peculiar to
Japanese companies. It can be seen in American companies as well. Major growth
markets are always stimulated by disruptive innovations. Subsequently, migrating
from lower segments to upper segments yields greater revenue and can be rewarding.
Nucor, Intel, Dell, Cisco Systems, Wal-Mart, Charles Schwab, Intuit, and Qualcomm
- all US companies - experienced this ride to the upper segments of the market. But
once they reached this segment, they realized that there were not enough volumes to
sustain growth. This resulted in painful consolidation.
According to Christensen and Thomas, both the Japanese and the US companies face
able to pursue disruptions at the lower end of the market. But according to them, the
US economy has performed better than the Japanese economy in recent years, because
the United States was able to repeat the cycle of disruption. When the top US
companies are stuck at the upper segment in their markets, their employees leave the
company, approach venture capital firms, and start companies that create disruptive
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innovations. All the American companies mentioned in the paragraph above, played
the disruptive game once. But, even when established companies fail in disruptive
innovation, fresh cycles of disruptive innovation have been seen in the Silicon Valley,
where fluid labor and capital markets have attracted the resources necessary to create
these innovations.
Example: Model T: A Disruptive Innovation

Model T was a disruptive innovation because it was simple, light, flexible,
powerful, and easy to use. The success of the model owes more to the convenience
it offered, than its features. The first Model T rolled out in October 1908. It was
Model T was priced at US$ 850. The car was targeted primarily at farmers and had
higher than normal ground clearance.
In the very first year, Ford set new industry records by manufacturing nearly
10,660 Model Ts. In the second year, 18,257 more Model Ts were produced. On
account of the significant increase in demand for Model Ts, Ford decided to set up
a new factory. The facility at Highland Park was inaugurated in 1910. It had four-
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storeys, encompassing a radius of 62 acres. Production in the factory was structured
to move from top to bottom. Body panels were rolled out on the fourth floor and
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sent to the third floor, where tires were fitted on to the wheels and the bodies of
cars were painted. Assembling took place on the second floor and the vehicle was
then lowered on to the ground floor, where the car was finally made ready for use.
In the first three years, production of cars went up from 19,000 in 1910 to 34,500 in
1911 and to 78,440 in 1912. From a market share of just 9.4% in 1908, Model T
grabbed a market share of 48% in the US by 1914. By 1921, the Model T had a
global market share of 56.6%.
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Japanese companies were once disruptive innovators. But today, they no longer have
the same growth options. They cannot even attempt disruptive innovations now, as the
Japanese industrial structure is very inflexible. In the Japanese economy today, it is
difficult to start new companies that promote disruptive innovations. Immobility of
labor is one major obstacle. Japanese employees usually stick to a single large
company for life. They aspire to climb the corporate ladder of the company rather than
start their own companies. This tendency is a hindrance to the development of a
vibrant venture capital infrastructure in Japan. The absence of venture capital keeps
talented people in the same old companies where innovation is not possible, thus
creating a vicious cycle.
Most Japanese firms rely on debt from financial institutions to fund their finance
needs, rather on the more flexible private and public equity markets seen in the US.
Financial institutions offering loans look for clear plans and predictability in the
where the new technology is valued. The initial business plans, product concept, and
expected customer reaction are quite uncertain. As a result lending institutions
discourage disruptive innovations. Successful disruptive innovations take place when
outstanding talent from established companies and venture capital are both available.
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Change Mastery
4. Disruptive Innovation
When the best products in the market are offering technology that is far beyond what
the customer needs, disruptive innovation involves introducing products that are not
as good as those in use in established markets. The performance of these innovative
products is not good enough to be in mainstream markets. However, these products
are simple and convenient to use, and are less expensive. They are meant for
customers from new, small, and initially unattractive segments. Disruptive innovation
helps the customer meet his/her needs, but at a far lower price and more conveniently.
requirements, higher performance ceases to be the criterion on which the customer

bases his/her decision to buy. The prime criterion then becomes reliability. When both
the products are reliable, then the basis of product choice is convenience (here
disruptive innovation starts gaining ground). When convenience is no longer a
differentiating factor, price becomes the most important criterion. Here the product
with high technology is almost edged out of the competition since the combination of
high technology and a lower price is not sustainable in the long run (because
competitors will be
advantages they enjoy.) When the larger company can no longer offer a
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technologically superior product at a cheap price, through the economies of scale it
derives, disruptive innovation is likely to replace the product. This is how disruptive
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innovations enter an established market.
Disruptive innovations occur in small new markets in which large companies are not
interested. Large companies prefer to take a wait-and-see approach when a new
market is evolving, but this could be a mistake. A new market is often the ideal
ground for disruptive innovators. And a disruptive innovator gains significant first
mover advantages once it enters and establishes itself in the new market.
Even seasoned market researchers and business planners find it difficult to measure
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new markets created by disruptive innovations. Evidence from industries such as the
diskdrive, motorcycle, and microprocessor markets shows that forecasts made about
the evolution of new markets are unreliable. Hence, companies that rely on the
analysis of market sizes and financial returns before entering new markets are often
wrong-footed when faced with disruptive innovations. In new markets there is hardly
any market data, and the revenues and costs cannot be reliably estimated.
Activity: HML Scooters Ltd. (HML Scooters) is a leading scooter company in

India. The company is known for its innovative models. Of late the company
noticed that an upcoming scooter company, VS Scooters Ltd. (VS Scooters) started
manufacturing scooters for low-end customers that offered good mileage and was
priced much lesser than majority of the scooter brands. The new company
succeeded in attracting middle-class consumers since they could buy a scooter at an
affordable price. Moreover, the scooter offered good mileage. To combat
competition, HML Scooters launched a scooter targeting the middle-class
consumers. However, the company did not record much sales since the price of the
scooter was a little higher than the scooters offered by VS Scooters. In this
instance, how did VS Scooters succeed in attracting the customers? What criterion
were the consumers looking for while buying the scooter? Suggest how HML
Scooters can succeed in the market.
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Answer:
5. Factors that affect Disruptive Innovation

The general belief is that outcomes of innovation efforts are impossible to predict. But
Clayton Christensen thinks that it is not so. According to him, even an undesirable
outcome has a cause. Outcomes appear random because all the variables that affect
successful innovation are not known. If these variables are understood and managed,
innovation will be less risky. Christensen classifies the variables into four sets: taking
root in disruption, the necessary scope to succeed, leveraging the right capabilities,
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and disrupting competitors, not customers.
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5.1 Taking Root in Disruption
Many previously successful companies that fall from their dominant position in a
market are not badly managed. In fact, they are well managed. These companies listen
to their best customers. They help them meet their needs. But they also commit
themselves, willingly or unwillingly, to strategies that constrain their ability to unleash
disruptive innovations: they concentrate on the most profitable segments of the
market, and make significant investments in them.
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By sticking to the principles of good management, leading firms create sustaining

innovations that bring better products to established markets. These market leaders are
the best in their industries at adopting sustaining innovations. However, these firms
face a threat from firms that create disruptive innovations.
Some new companies employ strategies to create sustaining innovations. They create
better products than those offered by incumbents in the market, and sell these to the
of company is likely to succeed in only about 6 out of 100 cases. If a company creates
a product meant for ignored customers, even when it is inferior in quality compared to
the existing products in the market, the company is likely to be successful 33 out of
100 times. This disparity can be understood by looking at the motivation and position
of leading firms. The leading firms have more resources than entrants. When new
entrants try to attract their customers, incumbent firms overwhelm them with their
financial muscle or other resources. When new entrants are targeting ignored
customers or customers who are unattractive for leading firms, they are relatively safe.
In this segment, money power and proprietary technology do not matter. Hence it is
better for new entrants to take root in disruptive innovation rather than in sustaining
innovation.
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Change Mastery
5.2 Degree of Integration
scope, and success of innovation. Highly integrated companies manufacture and sell
proprietary components or products. They have a wide range of product lines and are
into different businesses.
expectation of it, companies compete by producing better products. In such a scenario,
engineers try to fix the pieces of their systems together in as efficient a way as
possible. This is to ensure the best performance with the available technology. At this
stage technology is the barrier. Innovations at this point are aimed at pushing back the
technological barriers. Integrated firms are better placed to address this task; they do
not need to convince or force the suppliers of components to innovate as in the case of
non-integrated firms. For example, it was only when IBM, Apple Computers, RCA,
Xerox, and AT&T became fully integrated companies, that they were able to address
technological challenges systematically.
standardization of interfaces occurs in the industry. Components and subsystems of

the products are clearly specified. This leaves less scope for innovation in overall
design. At this stage, disruptive innovations come in, in the form of different ways to
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reach market quickly, and changes that bring simplicity and convenience to the
customer, and allow for customization of the product (for small market niches).
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Companies respond to individual customer needs by creating customized products. In
these customized products, there is upgradation of a few individual systems or
components. Upgradation is not brought in across the board for all the components or
all the items produced. In the case of integrated firms, when disruptive innovation
occurs, all the components are upgraded to ensure the best performance. Hence, at the
point when customer needs can be easily met by the available technology, firms that
outsource components have an advantage over integrated firms. Outsourcing majors,
like Dell & Cisco Systems, are fast, flexible, and responsive to the needs of the
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Leveraging the Right Capabilities

Disruptive innovations fail to materialize when the organization fails to create the
right environment for them. Disruptive innovations fail under three circumstances:
1. When the organization has limited resources to support them. Inadequate
resources might disallow innovations.
2. Organizations are limited by their processes. Unsuitable processes can restrain
innovations from becoming effective.
3.
1. Inadequate resources: Managers and money play key roles in the success of
disruptive innovation. Very often managers who are successful in mainstream
business are appointed to look after the disruptive innovation process. This could be
dangerous, as the skills needed and the challenges faced by these managers in their
previous careers are entirely different from the challenges they face and the skills
necessary to promote disruptive innovation. They make wrong assumptions about
customer needs, and the strategies necessary to address these needs. They often
employ the strategies which proved useful in mature and stable markets. Disruptive
innovations create new markets and new opportunities. But these managers are ill-
equipped to operate successfully in such markets.
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While managing the other resource money, managers must avoid two misconceptions;
general belief that having large reserves is an advantage for the growth of new
businesses. This is not always so. Large reserves available for a new venture might
result in managers sticking to the wrong strategy for too long. Instead, when there is less
money, managers will naturally be more responsive to customer needs, and fulfilling
them would generate revenues. As a result, a viable strategy emerges quickly.
It is also often believed that when there are disruptive innovations, losses have to be
borne for a long period before profits begin to arise. And so, being patient is a virtue.
But according to Christensen, innovators should be patient about the size of the
business and not about profits. When profit is the driving force, a valid strategy
emerges. But if the venture is concerned about its size from the very beginning, it may
gamble on over-expansion which may lead to failure of the new venture.
2. Inflexible processes: While resources as such as technology, cash, and technical
talent are flexible and can be used for different purposes, processes are not. Processes
are more inflexible than resources. Processes are usually not adaptable but are meant
to do same job reliably, and repetitively. Hence, if a process works well for a
particular task, this does not mean it will work well for other tasks as well. Failure can
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occur when disruptive innovation is attempted, keeping existing processes in place.
For example, Sony brought out 12 disruptive innovations (in radios, TVs, VCRs, and
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Walkmans, to name a few) between 1950 and 1980. These innovations created new
markets, and brought down industry leaders. However, between 1980 and 1997, the
company was not able to bring out a single disruptive innovation. Sony relied
increasingly on sustaining innovations. Though the PlayStation, and the Vaio
Notebooks were dramatic products, they were introduced late, and in established
innovation? Before 1980, Akio Morita and his team used to decide on new product
launches. No market research was done. The process of decision-making was based
entirely on intuition. When Akio Morita retired from active management in the 1980s,
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decision-making was left to newly recruited marketing and product planning

professionals. These professionals institutionalized data-intensive, analytical
processes for market research. These processes identified segments in existing
markets where customer needs were unmet, but the personal intuition required for
disruptive innovations was missing.
3. Organizational values that are hostile to disruptive innovation: If there are rigid
values in force in an organization, a separate independent unit or venture should be
created to deal with innovations. Values play a crucial role in decision-making in the
organization. Values are often more inflexible than resources. They are ingrained in
the minds of top executives, other managers, and employees. Even the suppliers and
distributors associated with a particular firm hold certain fixed values. A new venture
may be more successful than an existing one in targeting orders to attract better
resources and utilize new opportunities. When new sales people, distributors, and
retailing channels embodying new values and ideas are employed, the chances of
disruptive innovations breaking through are improved.
5.3 Bringing Simplicity and Convenience to Customers

A disruptive innovation succeeds when it brings simplicity and convenience into what
the customer is doing. It must minimize the need for customers to change their lives in
ways they are not inclined to do. An innovation should aim at disrupting the
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Change Mastery
competitors and not the customers. In order to find what the customer is doing,
observation is necessary. A popular method to know what the customer is doing is to
conduct market research. But market research can mislead organizations. Customers
do not always tell surveyors about what they do. It is necessary for organizations to
watch the customers to know what they are doing.
Many times, innovations do not materialize due to the incompatibility of resources,
processes, and values. The success of a few companies often inspires other companies
to attempt innovation. But these successful companies operated under different
circumstances and with different independent variables, from the organization in
which disruptive innovation is being attempted. It is only the organizations that
identify the variables in their unique situation, and manage them well, that can
succeed in disruptive innovation.
Check Your Progress

1. What makes a successful disruptive innovation?
a. When a new product replaces the old one
b.
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When there is a demand for a new product
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c. When the growth options are ample
d. When outstanding talent from established companies and venture capital are both
available
2. Which of the following is not the criterion of disruptive innovation?

a. Reliability
b. Convenience
c. Cost leadership
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d. Price
3. Which of the following is not a variable of disruptive innovation as classified by

Christensen?
a. Taking root in disruption
b. Making forecasts about evolution of new markets
c. Disrupting competitors, not customers
d. Necessary scope to succeed
4. By sticking to the principles of good management, leading firms create

_________________ that bring better products to established markets.
a. sustainability
b. blue ocean
c. sustainable innovations
d. resources
5. What determines the nature, scope, and success of innovation?

a. roduction process
b. The degree of disruption
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c. New entrants attracting their customers

d. When technological barriers are pushed back
6. Disruptive inovation aims to create a better product when:

a. the scope for innovation is less
b. a product functionality is lower
c. the demand for product increases
d.
7. ___________ play a crucial role in decision-making in the organization.

a. Ethics and morals
b. Vision
c. Disruptive innovation
d. Values
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6. Creating the Capabilities to Cope with Disruptive Innovation
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Disruptive innovations require a set of new capabilities in a firm: new resources, new
processes, and new values. This does not occur by accident but by design. New
organizational space has to be created to develop these capabilities. There are three
ways in which the new capabilities can be created. First, one can create a new
organizational structure (to develop new processes) inside the existing corporate
boundaries. The second option is to spin out a new organization where new processes
and values are nurtured. Thirdly, the firm can acquire an organization that already has
the desired resources, processes, and values.
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6.1 Building a New Structure in an Existing Organization

New processes are formed when different people or groups interact differently and at
a different pace than they used to do. In order to create new processes, these people
have to be brought together and kept separate from others in the organization. A
boundary needs to be created around the new group. The boundary separates the old
processes and people from the new. New team boundaries help establish new patterns
of working together, which ultimately develop into new processes
These new teams have new
challenges. They are physically close together at the workplace. The members of these
teams take personal responsibility for the success of the project. IBM used teams like
this to design diskdrives. Thus heavyweight teams work as vehicles to create new
processes that can develop improved products within a relatively short span of time.
6.2 Creating a Spin-off

If the values of the mainstream organization are blocking resources meant for an
innovation project, a spin-off may be necessary to meet the challenges of disruptive
innovation. Often, large organizations do not allot critical financial and human
resources meant for mainstream business to innovative projects. Assigning such
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Change Mastery
resources to mainstream business is more important to them than trying to create a

strong position in small and emerging markets. The cost-structure of these
organizations is tuned to high-end markets and does not work for low-end markets.
Hence, a new venture is more of a compulsion than a choice.
Example: A Spin-off at HP
Hewlett-
successful division. It had high profit margins and a reputation for superior product
quality. This division also housed an ink-jet project that was promising a disruptive
innovation. But the managers at the division were unwilling to divert the resources
necessary to the ink-jet project from the mainstream HP printer business line. The
process involved in developing the two types of printers was the same. But the
managerial values necessary were different. To be successful in the ink-jet market,
managers would have to adjust to lower gross margins, a small market, and lower
performance standards, which were characteristic of the ink-jet market. They were
unwilling to adjust or change their values and as a result the project languished. It
succeeded only when it was transferred to a separate division in Vancouver, British
Columbia.
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Challenge of Disruptive Change
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Overdorf, Michael, Harvard Business Review, Mar/Apr2000, Vol.78, Issue 2.
When the project is relocated as in the example, there is no longer competition

between the project developing a disruptive innovation, and those that are supporting
the mainstream business. Creating and nurturing such a new project is often difficult
for the top management of a running concern. They perceive the development of the
disruptive new operation as bringing about the death of old operations that are still
doing well and are profitable. They hate doing this. The managers at the top have to
learn to be comfortable with two businesses, in cases like this. The CEO of the
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organization has to take particular care to allot the necessary resources, and ensure the
freedom necessary to create new processes and values. Then only can the spin-off
meet its intended purpose and address new challenges.
6.3 Acquiring an Organization

An organization thinking of creating capabilities through acquisition must first
conduct a thorough assessment of its own capabilities, disabilities, resources,
processes, and values. Then only will it know what to look for in the company it seeks
to acquire. When the organization is acquiring a particular company for its processes
and values, then the organization must not try to integrate the acquired company with
its own company. Rather, it should allow that company to exist as a separate unit and
Then only can the acquired company try to meet the challenge of disruptive
innovation. But most often, the acquired company is slowly integrated with the
acquiring company. This can defeat the purpose for which the company was acquired.
On the other hand, Cisco Systems (Cisco) was quite successful in its acquisition
process that lasted between 1993 and 1997. Most often, it acquired small companies
which were less than two years old. The prime motivation for the acquisition was the
64
resources these companies had. The resources were the engineers working in these
companies, and the products these companies were selling. Cisco took all these
resources and bolstered their logistics, manufacturing, and marketing processes, while
ignoring the nascent processes and values of these companies. This was possible
because these companies were very young and their processes and values were not
strong enough to create any disruptions in Cisco itself. When it acquired StrataCom, a
mature company, it let it continue as a separate entity. Cisco inducted its resources
into the company and helped it grow as an individual company. Thus, managers need
to be clear about what their organization needs. This is of utmost importance.
7. Target Markets for Disruptive Innovation

Developing countries are ideal locations for disruptive innovations to take place for
two reasons. First, disruptive innovators compete against non-consumption. The
product or service that emerges out of disruptive innovation serves people who were
either not served earlier or were used to poor service. So the customers welcome
disruptive innovation that offers a simple and modest version of the product in the
high-end market. Also, new businesses do not have to compete with established
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players when they enter comparatively unserved markets (developing countries).
The second reason why developing markets are a good location for disruptive
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innovations is that business models designed for low-income markets can be
successfully employed in other markets, but business models developed for high-
income markets cannot be applied to low-income markets.
Activity: ABC Appliances Ltd. (ABC Appliances) is a leading vacuum cleaner

company in Japan. The company sold simple and affordable vacuum cleaners for
middle class consumers in Japa
prices, and yet make profits by squeezing costs as much as possible. In a bid to
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expand its business, the company entered the US market with its ABC 1346
vacuum cleaner. The product immediately captured a particular segment of the
market. The product was simple and low-priced. Americans who could not afford
an expensive vacuum cleaner were happy to buy an ABC 1346 instead. ABC
disrupted the US vacuum cleaner market. The US vacuum cleaner manufacturers

were unwilling to offer their vacuum cleaners at the price at which ABC
successful in Japan was also successfully employed in the high-income US market.

What do you think are the major reasons for the success of ABC Appliances in the
US vacuum cleaner market? Discuss.
Answer:
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Change Mastery
Check Your Progress

8. Disruptive innovations require a set of new capabilities in a firm:
a. new resources
b. new values
c. new processes
d. All of the above
9. There are three ways in which the new capabilities can be created. They include
building a new structure in an existing organization, creating a spin-off, and
.
a. acquiring an organization
b. turning around an organization
c. conducting induction
d. recruiting employees
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10. What are the key factors to be considered by the organization while creating
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capabilities through acquisition?
a. Resources
b. Processes
c. Values
d. All of the above
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8. Summary
When the best products in the market are offering technology that is far beyond
what the customer needs, disruptive innovation involves introducing products that
are not as good as those in use in established markets.
The factors affecting disruptive innovation include: taking root in disruption, the
necessary scope to succeed, leveraging the right capabilities, and disrupting
competitors, not customers.
There are three ways in which the new capabilities can be created. First, one can
create a new organizational structure (to develop new processes) inside the existing
corporate boundaries. The second option is to spin out a new organization where
new processes and values are nurtured. Thirdly, the firm can acquire an
organization that already has the desired resources, processes and values.
Developing countries are ideal locations for disruptive innovations to take place
for two reasons. First, disruptive innovators compete against non-consumption.
The second reason why developing markets are a good location for disruptive
innovations is that business models designed for low-income markets can be
successfully employed in other markets, but business models developed for high-
income markets cannot be applied to low-income markets.
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9. Glossary
Disruptive innovation: Disruptive innovation refers to introducing products that
are not as good as those in use in established markets.
10. Self-assessment Exercises

1. What is disruptive innovation? Brief about the need for disruptive innovation by
citing examples of companies that benefitted through it.
2. Explain the key factors affecting disruptive innovation?
3. Describe the ways in which the new capabilities can be created to cope with
disruptive innovation.
4. State the reasons why developing countries are ideal locations for disruptive
innovations to take place.
I
John Seely Brown and John Hagel III, Innovation Blowback: Disruptive
Management Practices from Asia, https://www.mckinseyquarterly.com, February
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2005.
Why an Economic Crisis Could be the Right Time for Companies to Engage in
, http://knowledge.wharton.upenn.edu, November 12,
2008.
Clayton M. Christensen, Curtis W. Johnson and Michael B. Horn, Disrupting
Class: How Disruptive Innovation Will Change the Way the World Learns,
McGraw-Hill Professional, 2010.
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Key Concepts Disruptive Innovation <http://www.claytonchristensen.com>

1. d. When outstanding talent from established companies and venture capital
are both available
Successful disruptive innovations take place when outstanding talent from
established companies and venture capital are both available.
2. c. Cost leadership
When two products offer the same
requirements, higher performance ceases to be the criterion on which the
customer bases his decision to buy. The prime criterion then becomes reliability.
When both the products are reliable, then the basis of product choice is
convenience (here disruptive innovation starts gaining ground). When
convenience is no longer a differentiating factor, price becomes the most
important criterion. Hence cost leadership is not a criterion of disruptive
innovation.
67
Change Mastery
3. b. Making forecasts about evolution of new markets

According to Christensen, even an undesirable outcome has a cause. Outcomes
appear random because all the variables that affect successful innovation are not
known. If these variables are understood and managed, innovation will be less
risky. He classifies the variables into four sets: taking root in disruption, the
necessary scope to succeed, leveraging the right capabilities, and disrupting
competitors, not customers. Hence making forecasts about evolution of new
markets is not a variable of disruptive innovation as classified by Christensen .
4. c. sustainable innovations
By sticking to the principles of good management, leading firms create sustaining
innovations that bring better products to established markets.
5.
nature, scope and success of innovation.

6. ation
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disruptive innovation aims to create a better product.
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7. d. Values
Values play a crucial role in decision-making in the organization. Values are
often more inflexible than resources. They are ingrained in the minds of top
executives, other managers and employees.
Disruptive innovations require a set of new capabilities in a firm: new resources,
new processes and new values.
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9. a. acquiring an organization
There are three ways in which the new capabilities can be created. They include
building a new structure in an existing organization, creating a spin-off, and
acquiring an organization.
An organization thinking of creating capabilities through acquisition must first
conduct a thorough assessment of its own capabilities, disabilities, resources,
processes, and values.
68
Course Structure
Unit 6
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FA

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Leadership and Change Management

Leadership Skills and Tactics 44-69

Prof. Debapratim Purkyastha

I Ms. Pushpanjali Mikkilineni

Prof. Tarak Nath Shah Mr. Mrinmoy Bhattacharjee

Mr. Manoj Kumar De Ms. Ch Syamala Devi

© The ICFAI University Press, All rights reserved.

Ref. No. LCM SLM 05 2K11R 22 B1

The ICFAI University Press, Hyderabad

A majority of tod -managed and under-led. They are lacking

Organizations grow by expanding into new competitive spaces, attaining a complex

adversely affected. Defensive mechanisms stop an organization from adapting to

The Mystique of Leadership

3. The Difference Between Leadership and Management

innovative solutions to problems were required and organizations needed leaders to

business environment where unexpected events are a common occurrence, long-term

Planning is effective only when it is used to complement direction-setting. An

Even when people comprehend a lead

3.3 Leadership Motivates People, while Management Controls and Solves

Example: Steve Jobs Leadership at Apple

Jobs was reportedly an enigma to most of his colleagues and business

he hurt, as long as he pushed them to work better.

It seemed to be unclear whether this unusual people

harder, or a matter of instinct. Conscious or instinctive, it seemed to have worked.

I This makes employees feel that they are

When the business environment is characterized by rapid change, stronger motivation

Check Your Progress

2. Which are the ways in which alignment helps empower people?

4. Evolution of Leadership Theories

4.2 Behavioral Theories

In 1945, researchers from different disciplines psychology, sociology, and

Description Questionnaire, to analyze the differences in the behavior of leaders across

observed that the more productive groups had employee-oriented supervisors.

Blake and Mouton developed a two-dimensional matrix model of leadership styles

The Leadership Grid

relationships of trust and respect.

Harvard Business Review, (November-December 1964) / James

Check Your Progress

5. Productivity is high under which of the following category of leadership

4.3 Contingency Approaches to Leadership

Very - Unfavorable Favorable + Very

Favorableness of the Situation

leadership style selected by an effective manager depends on the development level

Therefore, it is not widely accepted among researchers.

Leader-member Exchange Theory

subordinate information, time constraints, geographical distance between

motivation to develop subordinates. Even complex and apparently unique problems

Activity: XYZ Furnitures Ltd. is a UK-based furniture company. The company is

The leader-participation model is based on three important assumptions which may

The path-goal theory is a contingency model of leadership developed by Robert

characteristics. For example, directive leadership, if used with highly capable or

Check Your Progress

7. - Blanchard includes four types of

8. For an employee _____________ but _____________ the manager uses selling

9. What does LMX stand for?

10. An Autocratic II (A-II) leader is

5. Attributes of Effective Leaders

Example: Southwest Airlines

Compiled from various sources.

result, they often find work enjoyable and energizing.

environment. Companies merge and demerge from time to time. Rapid

along with other

Rapid pace of globalization: Cross-cultural dialogue can result in

8. For an employee _ but _ the manager uses selling