Adaptation of Leadership Theories in Organizational Strategy and Performance

Leadership Theories
8 mn read

Astro Airlines

The first case study outlines the charismatic leadership style, and it is divided into two parts. The first half depicts the organizational strategies that lead to the success of Astro Airlines. Whilst the second half demonstrates the reason why the Airline could unsuccessfully sustain its success for a longer time. With the passage of time, the company was unable to manage the organizational operations with the required changes to recruiting talented managers and change in the organization structure, and it also failed to implement the required strategies; hence in the end, the company’s share fall down, and finally, it went bankrupt. A further review of the question is presented below.

The leadership behavior demonstrated by Burton was truly charismatic, immediate, and cardinal. From the get-go, he had a clear vision of his organization and his employees, which is depicted by the fact that he recruited young and visionary people to whom he could convince and motivate to work according to his plan. His leadership behavior strongly shows the nonverbal dominance that he had over his employees. An immediate and nonverbal dominant behavior has a positive impact on the employees (Sacavem et al., 2017), which is why even though the time of recession in the airline industry, Burton’s employees not only believed in him, but he was able to recruit even more employees for his company. Moreover, he strongly appreciated the employee’s ownership structure and was certain of employee empowerment. This is the reason he created opportunities for his employees to buy shares of the company at a lower price so that they could become partners. His future-oriented and foreseeing ability as a leader helped his firm to remain rock solid whilst other companies faced a credit crunch. His transformational leadership led to the unanimous handwork of all the team members to accelerate the success rate of the company in such a short time span of 3 years.

Burton was surely a charismatic leader, without any doubt. Credibility is a pivotal element of charismatic leadership which Burton has in abundance. As people tend to follow people they admire, hence this is the reason why consumers believed in Burton’s airline company’s strategies and his nonverbal dominant behavior, including the exclusion of “status perks” and cheap flight rates, attracted customers. With his immediacy and dominant behavior, which are key elements of charismatic leadership, he convinced his present and forthcoming employees to believe in his vision for his airline company. The firm confidence, visionary approach, and rock-solid determination are the key components of Burton’s charismatic leadership and ground basis for the accelerated success of his company.

In this scenario, a lot many dysfunctions can be seen in Burton’s charismatic leadership skills. A charismatic leader believes in the continuous growth of the organization, and for this purpose, he makes perilous decisions for the expansion of his business. Similarly, Burton purchased new aircraft as a value addition to the current business operations and also expand low-cost carriers from domestic airlines to international ones. This is the reason he had to face a severe crisis in the regional airline. He also refused to recruit new talented employees, that’s why current employees’ job responsibilities increased, and suddenly, employees were overburdened and stressed. Such a situation causes conflict among employees, and the company can suffer huge losses. In addition to this, he himself became overwhelmed by taking up two positions, CEO and the presidential position, and fired senior executive officers of his company. Therefore he was unable to make pragmatic decisions for his company himself. Finally, the overconfidence and risky decisions led the airlines towards downfall.

Costco Company

The following case study is about one of the largest retail companies in the US. The basic strategy of Costco is to provide quality-oriented goods to their customers and fulfill their basic necessities at a minimum price. The company deals with clothing, eatables, and electronics. Moreover, it also provides a limited-time supply and discount on luxury goods. The membership of the company costs a little bit higher than its competitors, but due to the loyal and satisfied customers, the company has a competitive advantage over the market. The company provide high compensation and reward to their employees by cutting their advertisement cost and in-store and warehouse layout and design cost.

According to flexible leadership theory, this case is based on three performance determinants:

Efficacy: The effectuality of Costco Company relies on their hardworking and dedicated employees. It motivates them to work harder and increase the company’s gross output. Costco believes in cognitively utilizing fewer resources that yield better outcomes. They cut their expense cost by exercising the no-fringe strategy by reducing their advertisements and maintaining basic building structures and standard layouts.

Adaption: Although Costco believes in keeping standard layouts in all of its stores worldwide, a few items like food are variable according to the local taste. Similarly, it sells items at a higher rate as opposed to its competitors, but they provide sale at some luxury items at the same time.

Human Capital: Costco appreciates the contribution of its employees. It provides them with higher wages, medical and retirement insurance, and other fringes such as bonuses and promotions as well, which are comparatively higher than their competitors. Their creativity and ideas are valued and implemented. Such employers ultimately satisfy their loyal customers hence promoting the good name of the company.

Question 2

Costco provides compensation facilities to its employees in the form of health and medical insurance; in addition to this, 91 % of employees have retirement plans too. It also provides high salaries to its employees as compared to its competitors. This is the reason why its turnover ratio is 40% lower than the other companies. Costco minimizes its cost through a no-frills approach which helps them cut its expenditures on the store and the warehouse. The company keeps the business process very simple with no advertisement expenditure and utilizes this saved amount to motivate their employees, which in turn satisfies their customers.

Question 3:

CEO Jim Sinegal is a very competent and accomplished leader. Employees’ and customers’ satisfaction is the core principle of his leadership strategy. Above-average salaries, low turnover, and a friendly environment for its employees are recognized worldwide. One of his humble qualities is that he listens to his employees’ ideas or complaints and is accessible to them no matter what the circumstances are. Uncompromising on quality, he is not only concerned with the profit but also makes balanced strategies to provide benefits to the customers as well, setting an example of customers friendly environment in his stores. He always tries to find new ways to satisfy his customers. For example, if the customer is not satisfied with the electronic product, he can return the product within 90 days of purchase. This new policy in turn, surprisingly increased the revenue of the company by hundreds of millions of dollars.

Turnaround at Nissan

The following case study investigates the change astonishing change in the management strategies of Nissan (a Japanese car manufacturing company). Nissan was near to bankruptcy when Carlos Ghosn was designated as Chief Operating Officer of the company. Ghosn started investigating the reason for Nissan’s failure and made nine cross-functional teams, u traditional to a Japanese workforce culture. The purpose of such teams was to highlight various aspects of Nissan’s failure that majorly included bad financial performance, poor management, and lack of strategy execution. Due to the very weak distribution system, Nissan’s sales were decreasing. Ghosn made his company strategy in accord with the lessons learned from Nissan and made major changes in HRM, and finally achieved his target in 2001 when Nissan sales began to accelerate (Burgess & Bates, 2010).

Some determinants of effective leadership are given below:

Efficiency: Ghosn, the Chief Operating Officer of Nissan, makes many strategic and HRM changes to improve the working environment of the company and increase its efficiency. He decided to shut down five factories, therefore, eliminating 14% of Nissan’s global workforce. Moreover, he reduced the number of car platforms by half and the number of power train combinations by a third. Similarly, purchasing power was also reduced to 20% by buying larger amounts of goods from smaller sources. The result of this decision was the reduction of the overall operational cost.

Adaption: The new CEO of the company made changes in Nissan’s manufacturing blueprints to introduce a new model of car to attract local and international customers and stop the manufacturing of old and outdated models.

Human capital: Many HRM-based policies were altered and enhanced for better employability. A performance-based pay plan was established rather than a lay plan that was based on employees’ seniority. Reward and bonuses were offered to the best performing employees, whilst the 21,000 Nissan workers who were fired during the process of the company’s recession, were either given early retirement, part-time jobs, or compensated by selling subsidiaries and using natural attrition.

Change is crucial for the organization’s success, and in Nissan’s case, change played a positively succeeding role in rectifying the organization’s overall performance. By exercising a cooperative strategy, Ghosn decided to change the management team and appointed new team members whose purpose was to note and report the reasons for Nissan’s credit crunch. He decided to close the unused manufacturing unit of the factories, and the employees fired in the process were compensated through other financial subsidiaries. He changed the HR policies and procedures and introduced the concept of bonuses and rewards and compensation systems.

Ghosn characterized different leadership styles, including democratic, autocratic, participative, and toxic leadership. In the following case scenario, Ghosn depicted his great leadership qualities when he appreciated his skilled employees and encouraged them to perform their duties effectively. He promoted a decentralized leadership style while discussing with his team before taking any kind of decision, therefore promoting employee empowerment strategies. Whilst being participative, he always appreciated the cooperation among employees and team members (Dessein & Prat, 2019). His style of leadership was based on the following characteristics:

  1. Transparency
  2. The relationship between execution and strategy.
  3. Communication.

Strategy Formulation

The strategic formulation provides the following six guidelines (Bolisani & Bratianu, 2017):

  1. Define the organization’s vision/goals: The vision of an organization is the purpose of its foundation. For example, the goal of every organization is profit maximization and by fulfilling the demands of its buyers, the company can earn money and maximize its profit, thus achieving its ultimate objective.
  2. Explain strategy/mission: An organization’s mission is based on the guidelines, rules, policies, and procedures set by the leadership management. The mission is based on the vision of the organization, but it is broader than its goals and objectives.
  3. Define objectives: Objectives are the targets. They can be divided into long-term and short-term targets, where long-term objectives are based on a five to ten years plan, and short-term goals are less than one year plan.
  4. Elaborate competitive strategies: These strategies help an organization to define its position in the market. If the organization aims to become the market leader, the company should have a clear idea about its position, which means where it stands in the marketplace.
  5. Implementation: Elaboration of the strategic management process is useful only if it is effectually implemented. Despite being the most crucial step of the strategy formulation process, the majority of the companies fail at the time of implementation of their cognitively planned strategies.
  6. Evaluation/results: An organization must monitor the progress of the strategic management process by evaluating it at a deeper level and keeping the results under observation to make sure business processes are moving in the right way.

Importance of monitoring the external environment:

There are two foremost responsibilities of strategic leadership, the first is to monitor the internal and external environment, and the second is to make competitive strategies (Sharifi et al., 2017). The main purpose of external monitoring is to provide information regarding the company’s external factors, such as consumers, economy, competitors, and societal and political factors, which would eventually help in making effective decisions while planning the company’s strategy. The information collected from external sources helps the firm’s leader to make important decisions in order to improve organizational performance. Strength and weakness are related to internal factors whereas opportunities and threats are related to the company’s external factors, and the balance of both of them is crucial to an organization’s sustainability.

An instance of a fail strategy:

A few years ago, Nokia, an extremely well-known mobile company, used to be the market leader in the telecommunication industry. As time went by, Nokia’s mobile phones were replaced by Samsung and Apple. According to research, the main reason of the fall of Nokia was its inability to change its strategy timely (Cechet, 2018). Nokia was unable to cope with the paradoxical global growth of technological processors as other mobile companies did. Nokia was the leader of the mobile phone company due to its visionary management team in the early days. Between 1996 and 2000, the demand of Nokia increased, but after some time, it failed to attain consumer demand. Poor managerial decisions, ineffective leadership strategies, and non-creative ideas to cope with the developing technology ultimately led to its downfall. Undoubtedly Nokia has lost its credibility in the market, but it has not completely fallen yet. The brand owners sold it to Microsoft early enough to save its worth but late enough as the tables have been turned towards Android and Apple.

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