They can be persons who know what the company wants to do ... Further, Kotter (1996) stresses the importance of good leadership in driving ... organizations, that people are able to undergo continuous change, .... Usually locals are considered as less qualified .... executives that act like super heroes. ... discussed before.
Björn Tropf, Georgios Pardalis, Gudmundur Ingi Sigurleifsson,Hannes Bjartmar Jonsson,Konstantin Mina
Strategy and Leadership Development of leaders who ensure the implementation of strategic goals within a company
Executive summary Strategy in itself is a broad topic, full of paradoxes and surprises. It is impossible to be completely sure where a company will end up, even if management “guarantees” execution of all planned processes. But it is important to focus on selection and training of management personnel. That would not only control the schedules of planned activities, but also motivate employees to follow the strategic line. This could be done through proper training of future leaders within the company.
Introduction Planning is a key process for any company when structuring the actions and expected achievements in a logical sequence. On the micro-‐level, companies use schedules, briefings, and financial and intrinsic incentives for organising the employees. On the macro level, strategy plays a huge role in the lifecycle of the entire organization. Strategy is usually incepted and developed by top management. Implementation of strategy, however, is often forgotten, or looked at as something that will happen by itself. This mind-‐set is dangerous, because it reveals the lack of detailed planning and increases the possibilities of misinterpretation of strategic goals during key decision-‐ making meetings. It also tends to lead to employees lacking an idea of what is the company is actually working on or changing, leaving the message of strategic management unresolved. One approach that a company could develop is preparing new leaders. Leaders are the steering wheels of how the company actually works, forming the performance of the employees and representing the company’s image as strong, just as the company’s brand. They can be persons who know what the company wants to do and also care about it, rather than just about their wages and personal performance assessments.
The problem statement of this paper is: “How should the development of leaders in companies guarantee the implementation of strategic goals?” For the sake of a smaller scope of possible answers, no recruitment of leaders from other companies or other external development will be analysed in this paper. In addition, national companies will be omitted, with the focus being on globally known, multinational companies. The paper will present a collection of theoretical propositions from scholars, two case studies, and a comparison part between theoretical and empirical parts. In addition, key strategic paradoxes will be discovered and compared. The focus of all the parts is connected to the problem statement, following the delimitations provided.
Theory Competitive advantage As the pace of change in the dynamic environment firms compete in increases, firms have to be vigilant and flexible to survive (Martin et al., 2000). Companies do not merely compete on the products or offered services but increasingly on how successfully they can differentiate from their competitors, manage change, and stay vigilant in the face of ever-‐present competition. Thus, it becomes vital for companies to identify and successfully manage critical factors that differentiate and ensure survival in the market, for example through strategic actions made by top management. A stream of research devoted to this issue has shed light on some of these factors. Wernerfelt (1984) identified the usefulness of analysing the firm from the resource side. One beneficial aspect of this approach is understanding and explaining the competitive advantage of firms that cannot be explained by industry participation. Building on this research, scholars such as Peteraf (1993) suggested that valuable, rare, inimitable and non-‐substitutable resources could provide sustainable competitive advantage that can be classified as tangible and intangible. On the
intangible side, Grant (2001) suggests that human resources, such as competent staff and prominent leaders can be classified as important blocks towards competitive advantage. Illustrated by Barney (1991), understanding sources of sustained competitive advantage for firms has become a major area of research in the field of strategic management. A firm’s strategy is highly related to the firm’s competitive advantage and its resources as Powell (2001) demonstrates with the view that business strategy is the tool that manipulates the resources and creates competitive advantage. Hence, a viable business strategy may not be adequate unless it possess control over unique resources that has the ability to create such a unique advantage. The term competitive advantage is the ability gained through attributes and resources to perform at a higher level than others in the same industry or market (Porter, 1980). According to Reed and Filippi (1990), to gain competitive advantage a business strategy of a firm manipulates the various resources over which it has direct control and these resources have the ability to generate competitive advantage. Successfully implemented strategies will lift a firm to superior performance by facilitating the firm with competitive advantage to outperform current or potential players (Porter, 1980). As Barney (1991) points out, it may be the case that a manager or a managerial team is a firm resource that has the potential for generating sustained competitive advantages. Resources held by a firm and the business strategy will have a profound impact on generating competitive advantage. One firm resource required in the implementation of almost all strategies is managerial talent (Hambrick and Finkelstein, 1987). Traditional strategy researchers (e.g. Learned et al., 1969) often cited the unique circumstances under which a new management team takes over a firm, as important determinants of a firm’s long-‐term performance. Firms cannot expect to purchase sustained competitive advantages on open markets (Wernerfelt, 1989). Rather, such advantages must be found in the rare imperfectly imitable, and non-‐substitutable resources already controlled by a firm (Dierickx & Cool, 1989).
Further, Kotter (1996) stresses the importance of good leadership in driving change, a critical skillset in dynamic market environment. It can thus be hypothesized that the identification and training of great leaders is one of the key aspects of healthy firms that want to stay competitive in the market. Supporting that argument, in his article, Benjamin (1999) criticizes organizations for lack of necessary formal leadership development and notes that little is done to reinforce and support leadership skills, forcing individuals, who have high ambitions to develop the organizations, to leave. Ready (2002) echoes this concern in his paper and points out that organizations facing tough competition due to globalization fail to address this issue but instead hope that the “cream would rise to the top” so to say. This can arguably have a negative impact for any company trying to stay competitive in the long run. According to Pardey (2008) it is important to realize what kind of leadership style works and what is expected from leaders to deliver the best result, which can vary significantly between companies.
A Need That Creates Strategies International business arrangements have led to the formation of multinational corporations (MNCs), companies that have a worldwide approach to markets and production or one with operations in more than one country. In his paper, Ready (2002) raises his concerns regarding the lack of necessary formal leadership development, and points out that organizations facing tough competition due to globalization fail to address this issue but instead hope that the “cream would rise to the top” so to say. Mintzberg (1978) claims that strategy should be defined as the aspects that firms actually do to improve their performance in some respect. Fredberg & Kalling (2013) extend that definition by adding that strategy theory consists of groups of theories, which all aim to explain or describe performance variation in some form, over time or across a group of organizations. However, the field of strategy has been getting increasingly diverse, and now includes the management of both external factors, e.g.
customers, markets and competition; and internal factors, e.g. capabilities, competence and resources, which is the main focus of this paper. Porter (1985) focused on the concept of competitive advantage as a dependent variable of strategy work and assumes that there can only be two holders of competitive advantage within the industry: The one with the lowest cost and the one with the most effective differentiation. This view has been challenged, and perhaps the most significant criticism of Porter came with the birth of the resource-‐based view (RBV) of strategy. Successful firms, according to the RBV, have valuable, rare, costly-‐to-‐imitate and well-‐organized resources that constitute competitive advantage and subsequently lead to certain rents (Barney, 1994). Strategy is then identified by means of the resource line-‐up, and the challenge is to manage and invest in resources in a way making them valuable, rare, costly-‐to-‐imitate and well-‐ organized. This is somewhat the reason for many MNCs having strategies to invest in developing their own leaders in different places of the world to be able to create rare resources, which are difficult to imitate, since many of the previous resources are getting easier to imitate.
Change management and resistance to change With business environments experiencing increased change, organizations must learn to be comfortable with change as well. Therefore, the ability to manage and adapt to organizational change is an essential ability required in the workplace today. In reference to organizations, change involves a difference and development of how the organization functions, the roles of members of the organization and in the development and behaviour change of individuals (Huber, Sutcliffe, Miller, & Glick, 1993; Porras & Robertson, 1992). According to Rieley and Clarkson (2001), the early approaches and theories to organizational change management suggested that organizations could not be effective or improve performances if they were constantly changing. However, it is now argued that it is of vital importance to organizations, that people are able to undergo continuous change, according to Burnes (2004) who identifies continuous change as the ability to change
continuously as a fundamental manner to keep up with the fast moving pace of change. Almost every change program will meet resistance in the organization at some point (Nevis, 1987). The main reasons for resistance are that people do not see the value in change or they are afraid of failure (Williamson & Blackburn, 2010). That is why the most important factors in the change, is to thoroughly explain it and its value to the employees (Stanislao & Stanislao, 1983). If the employees do not see the value and a positive impact from the change soon after the change effort, it is likely that they will fall back to old habits. That is why the leadership in the company plays a vital role when driving the change, but they have to believe in the change and be clear in their communication on the change down the line (Beer & Eisenstat, 2000). A stream of research within the field of change management is concerned with cultural aspects in relation to change efforts within organizations. Hofstede (1980) noted that aligning the way a change effort is initiated and communicated within a company with the local culture is usually beneficial although there are examples of managers successfully inflicting their practices in a different culture. Thus, it can be assumed that developing leaders from within can be strategically important for several reasons. First, a leader who is developed within a MNC can be developed with the mind-‐set of the importance of continuous change. Second, the leaders are more likely to see the positives in the change and believe in it, which is vital to implement changes down the line. Finally, developing local leaders at a MNC site will ease the way for changes, as they will know how to align the changes with the local culture. As companies are called to operate in a multinational environment, they need to develop new strategies to increase their level of competence, as it becomes more urgent. One of these strategies is related to the human resources (HR) department of the company with the creation of new potential leaders that will be able to respond to the challenges of the new environment. The idea, around which this strategy is based, comes from the contingency theory that Fiedler (1967) proposed. According to that theory the context in which a leader is called to apply his skills
gradually moderates his personality traits and effectiveness (Dorfman, 1996). As pointed out above, in today’s world companies have to face a new global environment, so the need of leaders who can apply new strategies to deal with the challenges of these environments is a step forward in organisational thinking. During the 1990's, companies such as IBM, AIG, Black & Decker and others had realised that in order for their growth to be sustainable they had to create a strategy that could expand them beyond the limits of their operative area. The assumption that they made was to develop a strategy in their HR management departments, which could identify "specific leadership attributes" of individuals "that could apply around the world" (Morrison, 2009). The objective was to create an internal selection, evaluation and identification within the company, of all those that have the competencies to lead, form strategies, and become the future managers who would promote the interests of the company in other countries. Unfortunately the great variety of competencies that had to be checked, some companies identified 250 different competencies while others only 20, created a problem in the development of a common model that could be applied in every company. As a result this initial plan had poor acceptance by both academics and companies and was not developed any further.
The Beginning of a Global Human Resources Strategy Nowadays the competition between MNCs, in terms of increasing and expanding their international sales, has become difficult. As knowledge-‐based societies grow and as the need to open new markets becomes more emerging, the significance of human resources and intellectual capital becomes almost equal to this of financial assets. This has been identified as vital for a company to build a sustainable competitive advantage towards its competitors. The reality forced companies to revise completely their strategies and HR was given a seat in the boardroom. What defines an effective HR policy is the ability to get the right people, put them in the right place at the right time, and have them earn more money for the company (Ready, Conger, & Hill, 2010). There is also the need to ensure that internally
qualified executives will stay on ship in order to be used when vacancies will occur around the world instead of going to a competitor. Only a few companies have managed to achieve something similar. The main reason for that is the lack of managerial mobility, which is the key factor in connecting business strategies with HR strategies. Another reason is the ethnocentric tendencies that MNCs seem to have. The HR strategies so far are concentrated in putting nationals of the headquarters country in managerial positions around the globe. Instead of looking to expand by using more efficient HR strategies, companies had a one-‐sided view of the situation, which only provided the opportunity for a global career to local "stars" that in many cases could not deliver the required results. A solution to these problems was given by benchmarking a HR strategy that has been developed in Eastern countries over the last two decades. Researchers, such as Caligiuri (2006), have identified this tendency for internationalisation of Eastern companies and introducing to us the strategy that they have followed. Essentially, organizations promote to higher managerial positions, people that belong to their personnel tank, who have studied and done stints outside their home market. This means that the future managers already have, to some extent, the competencies and skills required to meet the challenges of an international environment. In the Western world, companies that are new to the global scene have applied this strategy. These companies are trying to build a competitive global profile by creating the next generation of trustworthy leaders that could operate abroad, create business profit for the company, and shorten the lead of their larger competitors. In simple words, these companies have managed to emulate the function of recruiting and training companies and have used this new HR strategy as a source to gain competitive advantage.
Global Human Resources Strategy Forming and applying a global Human Resources strategy is, by principle, a tough and challenging task. A variety of factors have to be put under consideration and
small steps should be followed in order for this strategy to produce the results desired. The first step into building a global Human Resources strategy is the end of the assumption that managers from the company's home country are more eligible for top positions within the organisation. Usually locals are considered as less qualified and a whole "us versus them" philosophy is created. This approach creates great disadvantages for these companies. Considering such a company as xenophobic is, by principle, a disadvantage. In addition, qualified "local nationals" understand that they do not get the opportunity to prove their skills, and move on to possible competitors. Moreover, companies lose the chance to recruit top-‐notch locals, and as a result developing markets are left with weak bench strength. Last but not least, companies miss a great opportunity to invest, train and develop the careers of promising locals in order to ensure sustainability and create valuable assets for their organisation. Another step deals with the revision of the personal database of each company. As a part of their HR strategy, companies have a database of their personnel around the globe. This database, though, when it comes to managerial recruitment has to do only with the top of the organisation. That creates a handicap in monitoring the career development of middle managers, line managers or potential “future leaders” that can be valuable for the company in the long run. Evaluating the abilities and experience of your managers as well as their willingness to expatriate, is something that HR strategies have to put under consideration. The policy followed so far in terms of mobility divided managers into two categories: Movable and non-‐movable. The global operating environment that companies have to face nowadays has created a changing concept for HR departments of companies. All the potential top managers, line managers, or talents are encouraged to work on overseas assignments and enforce their competencies. That had developed a new model in the companies that can be described in the following pyramid.
The term "glopat" is a newly introduced term that describes those executives who are used in short or medium-‐length assignments in different markets around the globe (Conger et al, 2007). Aligned to this step, each personal profile in the database of the HR department should also give information about the ability of an individual to work abroad, and for which reasons this individual would expatriate (Ready, Conger & Hill, 2010). All the persons mentioned above can be put in different positions in this pyramid at various stages of their career. The mobility pyramid is different for each company. It depends on the company's business, markets, and global development stage. Every employee in the company should create a personal profile template, top managers included. On this template people describe their talents and initiatives and provide HR department with valuable info. People that have potential and willingness to offer their best for the company do not live in obscurity, and the company is able to exploit their talents to create business value.
As a part of their Global HR strategy, HR departments can create training programs, outside courses, etc. in order to enforce the skills of their employees, in order to fill the skill gap between executives within the company and identify those that can be 100% eligible for an expatriate job. The major benefit from that policy is the development of the necessary people from the organisation, internally, rather than trying to find them from the outside (Lobel, 2007) What is essential for every company in order to expand globally is to search for new recruits in local markets. The rate of this recruitment has to be as regular as the one in the company's home country. Companies should approach the best universities in the countries in which they operate and seek for graduates that match the desired profiles that can be used in order for the global growth of the company to be achieved (Tarique & Schuler, 2009). The profit from that policy is double. Apart from recruiting straight from the source (universities), the company establishes a very attractive profile and the best are seeking to be part of the organisation. A company that wants to create a sustainable philosophy should be able to form a system of succession within the organisation. Every manager in a lifeline job has to evaluate his subordinates and is required to nominate those who have the ability to take over crucial duties. In that way the transition period becomes more normal and former managers are obliged to select their successors with meritocracy. The names of the successors though, have to remain secret as tension may occur within the company and a flow of talented personnel may occur. In addition to that the potential successors are not complacent and keep on being productive and competitive for the profit of the company. The most important challenge that HR departments of companies have to deal with is to retain their talented trainees and continuously challenge their existing managers. Companies that transfer the gained knowledge and their good practices all over the body of the organisation ensure their continuity. The inter-‐organisational competition for talented people grows as markets become more globalised. By training people that are committed to the company ensures that this company will have a competitive advantage. As people are satisfied with their job they become
even more motivated to grow their skill and competencies and that leads to a sustainable business value for the company. As a part of strategic planning of the company, the managerial capital of it should be continuously challenged in order to keep a high level of motivation. Existing managers should be trained all the time, assigned with expatriate tasks and become members of task forces abroad. In that way managers become challenged and they develop their skills. They should also be awarded through a system of bonuses or "internal promotions". With all these managers become an active part of the business strategy and not just facilitators, and the level of their motivation grows bigger and stronger.
Make Things Work Strategies that have been followed so far by HR departments tried to form executives that act like super heroes. Organizational effectiveness became weaker as the talents and skills of all the members were not exploited to the maximum level. By following a Global HR strategy, as it is described above, a common culture is created in the company in every location. Such a strategy should be fully supported by the CEO, top managers and HR department. The HR executives are needed to facilitate that strategy, but its success is directly connected with the way that line managers apply it in action. Such a strategy introduces every employee of the company to the art of transformational learning. As a result everyone, from top to bottom, feels challenged, the way of thinking and acting is being altered and the way of thinking of individuals becomes more liberated and out of the box (Schein, 2002). As a result the sustainable growth of the company in global environment becomes ensured and the business profit of it is gradually increased.
Empirical part Case study: BMW The Munich based company BMW (Bayerische Motoren Werke) is one of the world’s 12 largest car manufacturers with 15 production sites as of 2011 and distribution locations in 26 countries. While being able to resist many takeover and consolidation attempts, their leadership has to cope with an oversupply of cars that they are not able to sell. In 1999 the CEO of BMW, Bernd Pischtsrieder left the company for VW, leaving it up to new CEO Helmut Panke to develop a new strategy and generate profit. He was able to achieve a profit of €1209 million in 2000 and €1866 million in 2001. The latter is especially remarkable, as the world market for cars was stagnating in 2001. How did he manage to do so? In 2000 BMW started to market their cars with “sheer driving pleasure” to attract potential clients that enjoy “high-‐performance, innovative, luxury vehicles” (et. al., 2004). Professionalism and high standards for every element were key parts of their new strategy. The goal of the strategy was to create a strong brand and consistent position in the market. Customers should buy their cars not because they were cheaper than other car brands but rather because BMW as a brand offered superior quality and service in comparison to all competitors. The only market sector available for this strategy was the premium level, giving the strategy the name of “pure premium”. The result can be seen in the MINI brand that was positioned as a premium product, even if it was a very small car. With the acquirement of Rolls-‐Roys in 2003, BMW continued to stick to pure premium strategy. Creating a strategy is only half way to success; it has to set into place by the whole company, from the production workers up to the CEO. BMW used several concepts to achieve this, all evolving around a high degree of autonomy. Self-‐organizing teams of 8 to 15 high-‐skilled employees were set up in production areas. Because BMW believed in leadership by empowering, the teams were allowed to make their own
decisions and choose how tasks were rotated within the team. Team-‐based incentives were put into place to keep the teams motivated and involve every member of the team in the decision and contributions. The classical supervision was abolished and replaced by the self-‐control of the teams. To get each worker in line with the pure premium strategy, BMW expected every employee to think in business terms. Again, incentives were used to motivate business-‐ and quality-‐focused workers, moving the responsibility for these concepts away from the management and towards the workers. Every team elects a spokesperson for the team to chair discussions and represent the group in the company. This person has no power to give order or take disciplinary action and therefore can be seen as a steward leader, who is leading by following for the purpose of the team. Besides the teams, there are other important values for BMW. One is essential for generating profits in the long run and the other for staying in the pure premium market. The key values are: Innovation and Quality. Without progress BMW is not able to provide benefits and pleasure to their customers. Since “Innovation is a state of mind” (Avery et. al., 2004), BMW founded a special Research and Engineering centre with 6000 workers. From engineers and designers to information technologist, every part of a BMW is challenged. Moreover, supply chains and logistics are also researched. Especially in the area of information technology, BMW focused on inventing sensors for every part of the car to put the driver in control of the whole car. Quality reaches back to the teams discussed before. Each team should be focused on customers to deliver superb quality. With new concepts like “quality function deployment, cross-‐functional teams, statistical process control, as well as risk analysis and process optimization” (Avery et. al., 2004), BMW tracks and controls the quality of the car at every stage of production. Again the teams are empowered and required to participate Quality Circles during which the production line is stopped. Problems, ideas and solutions about the manufacturing process are discussed to increase the overall quality. Furthermore, every team can choose out of 35 training modules on quality.
While sustainability is a not particularly important from a leadership perspective, it is an essential part of the BMW strategy. BMW places equal importance on sustainability in diverse areas like employees, environment, economy and society as a whole. For the latter they actively sponsor cultural and sporting events, especially in the local region. First experiments with a hydrogen-‐powered car started in 1973, followed by water-‐based paints in 1989 and powder-‐based paints in 1997 that were solvent-‐free, therefore causing no harm on the environment. As of 2011, BMW is able to recycle most of their cars and leaving almost no waste: The 3 series is almost completely recyclable while the 5 series is about 85% recyclable. Additionally, the reduction in fuel consumption and transportation of parts by trains is important to have a small environmental footprint. A proof for the effectiveness of the sustainability part of their pure premium strategy is the fact that “BMW has been nominated the worldwide leader in the automobile industry by demonstrating high achievements in economic, ecological and social spheres” (Avery et. al., 2004), by the SAM Sustainability Group that assess around 2000 of the world’s largest companies. From a financial perspective, BMW spends over €90 million every year in the training and development of its employees. The training and development is also relevant for the HR policy of BMW and the knowledge management within the company. BMW focuses on enhancing staff performance rather than bringing in new people. This is secured by staff opportunities like compensation or flexible working. According to Avery et. al. (2004), “Learning is regarded as life-‐long at BMW, enabling employees to keep up to date, contribute to the process of change, and capitalize on opportunities.“ They therefore offer a wide range of training possibilities.
Case study: SAP The German company SAP was founded by a few early age IBM workers and is now the worlds largest inter-‐enterprise software company and a market leader in definition of software solutions for rapid and sustainable customer value. Although being criticized for poor customer service and quality assurance problems, SAP soon
managed to win over 80% of the German market simply by promising efficiency gains for the companies. A big step was to partner up with Microsoft in 1993 to define industry standards for the fast growing Internet expansion. However 10 years later this partnership caused many conflicts regarding business software solutions. In the late 1990s, SAP was caught off guard by the increasing competition in the US and its customer interest in e-‐markets and the World Wide Web. Their response was a rapid development of “mySAP.com”, which enabled companies to engage their employees and customers in capitalizing on the Internets capability. The software gained many followers but later ran into many problems due to the haste of its development and marketing. SAP business strategies were reframed in the 1998 Enterprise conference where co-‐ CEO Plattner made a bold move announcing that from now on the focus would be on delivering their products via the internet, estimating a growth from 10 millions users to 100 millions users. To follow up on that strategy, and in order to stay ahead of the competition, SAP evolved from being a product vendor to becoming a solution provider. This sudden change of direction created leadership challenges since the company was focused to support ERP sales but in the coming years the ERP vendors were no longer a driving force behind SAP due to the Internet. This called for a lot of retraining and restructuring within SAP to become more knowledgeable about the Internet. In the more recent years SAP has again developed their strategies from being a solution provider into becoming a service provider. By the year 2000 some concerns were raised about the organizational structure of the company since it had seven layers of management, making it very hierarchical. This caused a bad impact on collaboration and communication between teams and departments. From the perspective of a manager this is catastrophic because without the support and trust of the other departments and fellow managers it becomes harder to meet the ever-‐changing requirements of software projects that need to stay up to date with the fast growing technology.
A big part of a being a successful IT company is to grow from the inside out. It depends a lot on keeping the staff happy and making sure they are valued and supported by their managers. By doing so, the innovation is bound to increase as well as development of new products as we have seen at Google and many other companies. SAP implemented a strategy to retain its people by creating career paths, giving employees the opportunity to try new things outside their expertise, and by promoting people rather than looking for external managers. Despite these efforts SAP lost a lot of promising employees to their competitors, partly because German law prevented them from offering stock options, which was a very common thing in the US and sought after by executive management. Top management responded by battling this law and won, also increasing salaries, implementing bonuses and management was adjusted to a more employee-‐oriented culture to improve communication and lower the hierarchy. To underline these changes they promised to be committed to continuous improvements by having staff satisfaction surveys every two years. This was all nicely painted, but SAP still had to deal with leadership problems since the employers perceived the leaders as ineffective and in many times working against the common vision of the organization. Again, the seven-‐layer management caused problems, as too few people at SAP could take decisions, making them dependent on the next layer of the hierarchy. The strange thing is that the top management does not seem to be part of these seven layers and kind of skipped the formal structure. The most visible ones in the top management were the two CEOs, Plattner who led SAP and Kagermann who managed it. Their determination and resourcefulness over the years fit the ideal leadership description mentioned by Hoving (2007) who claims that the IT leader of the past, present and future has to be an executor with a keen sense of what it takes to get the right things done. As it turned out, resistance to change came from both older and newer employees and it then came down to Plattner to drive the change through by creating a top down current through his informal top management and eventually down through the seven layers.
Identification of similarities and differences Leadership is something that cannot be standardized and applied similarly at different organizations or even in different positions at the same organization. Most of the popular modern leadership styles, such as transformational leadership, are essentially based on allowing every single individual who is affected by the leader to grow and bring out their full potential. In order to successfully create an internal environment that supports modern leadership the organization cannot benefit much from standardized models (contradiction -‐ talent pools is a standardised model); these models would then be adjusted to the extent that the models would become useless. Furthermore, the effective exercise of leadership needs to be adapted to the leader individually, in order to let that person get the opportunity to bring out their full potential. No matter if an organization wants to train their own leaders or recruit leaders directly to the specific positions, it is usually the recruitment that is the key to success in both cases. Qualities available on paper in the form of school performance and work-‐related accomplishments are often easier to measure and compare between applicants, which is why they are usually the main focus of the recruitment. This means that the leader gets recruited based on their expertise on the paper which leads to less account being taken of the applicants’ personality and genuine leadership abilities. The required leadership abilities are either missing entirely or forced forth, which undermines the authenticity and creates uncertainty and fear towards the leader. No matter how much leadership training two individuals would get at the very same company, their genuine style of leadership would never be similar or anticipatable as long as their personalities are disregarded. However, the focus could be shifted from individual coaching to creation of a suitable environment for self-‐realisation of one’s potential. If all the employees were given the chance to prove themselves to become possible game-‐changers in the business, then tarring everyone with the same brush would be avoided. The leaders would show up to claim both responsibility and recognition, and the “doers” would do their job without distractions on matters beyond their focus and interest.
In BMW’s case, where the group participants chose the leader of each group, there is knowledge about the personality and genuine style of leadership among the people that choose the leader that is incredibly much deeper than the knowledge that a recruiter has the possibility to get. It is therefore much more likely to create teams with a high degree of synergy, and to get leaders that are chosen on the basis that matter the most for leaders; to succeed in bringing forth the most potential among those that are being led. Each employee, each team member would then be appropriately picked for the job. Personality traits are key recognition factors for identification of leaders. However, they are difficult to formalise, to structure formally according to functional management style. It is an intangible human resource that are often failed to be recognised when identifying and selecting the leaders -‐ be it because of the hierarchical issues or detachment of top management from the real-‐time problems. In SAP’s case the top management was missing the point. Lack of communication was due to strong hierarchy, which lead to lack of support -‐ and leaders need support in order to be motivated to drive the company. The focus of top management was to battle the German government about the laws forbidding company shares to be included in bonuses and contracts for managers. The message provided to the rest of the organization was that SAP was willing to put in more effort than any other company would in order to only directly benefit an extreme minority of the people involved in the organization. It was thought at SAP that problems occurred due to resistance to change. The solution to it was to create a top-‐down current, which would motivate better performance, solve lack of communication. But this approach could not motivate all the employees to do their best, because it imposed the personality traits and shifted problems from one tier manager to the next -‐ and to the employees. It was more like an argument as “who must do something”, rather than “who wants to do something”.
In theory, management positions should not be a privilege, but a need for potential leaders to get recognition for their work. Based on experience from Eastern companies, employees, that have studied or worked abroad, have a broader view on the various topics related to the company’s success. If this would be taken into consideration for more companies as well -‐ to develop some employees with the focus on the markets outside of their country, or to identify employees with traits more akin to other cultures – then the intangible resource pool would be richer. There is no clear proof that BMW did this, but SAP did cooperate with Microsoft – in that sense developing employees of German culture with influence from American culture.
Proposals on working through the quirks When it comes to the parts of leadership that concern strategy, one of the single most important factor is to convey the strategy, to ensure that everyone can understand it, accept it, and have the possibilities to work towards it. A leader who can influence their employees does this. Influence does not, in this case, involve having power or control over the subordinates -‐ which is considered one of the single most important tasks for leaders in organizations with out-‐dated leadership. The possibilities for leaders to influence co-‐workers ultimately derives from being respected, being a role model of sorts. Secondly, it derives from communication both ways, where the leader has to be tremendously attentive to signs of uncertainty towards the strategy. Communications both ways is not ensured by having staff satisfaction surveys every two years as in the SAP case, this could not be considered entirely useless in that aspect, but close. In order to fully understand the big picture, why the organization has chosen a particular direction or strategy, autonomy is a keystone. As with the BMW case where the teams were handed objectives and had complete autonomy in the decisions on how to reach the objectives. This enables each individual to fully realize what the objectives are and why they have been set in contrast to teams that are
just given specific tasks which puts the focus on only the tasks at the expense of people failing to see the bigger picture. Another solution could be to focus on sustainability in more than an environmental meaning. To find an edge in the car market, BMW developed their luxury class brand MINI, which offered high quality of product, sustainable materials and fantastic service. It created a sense of “belonging” for the customer, which would be long-‐ term and would help forget relatively high prices for the product. Management could carry in this “value over price” and “sense of belonging” attitude through HR management and detainment. The focus could be on “what is the value that our employees can create”. This could help SAP to solve problems of communication and support – a fresh look at the staff, not oriented on their price and following of orders, imposed by strong hierarchy, but value creation through empowerment. The chain could be kept unbroken, and links could become stronger through recognition of steward leaders.
Proposals for identified paradoxes A set of proposals for how the identified paradoxes can be handled in the empirical context was chosen. These paradoxes were interpreted in the selected case studies according to Bob de Wit and Ron Meyer (2010) book “Strategy Synthesis. Resolving Strategy Paradoxes to Create Competitive Advantage”.
Profitability – Responsibility A classic paradox that never gets old is the one between profitability and responsibility. Even though the cases do not concern environmental aspects much, one could still look at the social responsibilities taken by BMW and SAP. Where BMW’s approach is influenced by autonomy that permeates the structures of the organization from the bottom-‐up and SAP has an approach that is more fixed and clear to all of the employees. Considering this, the BMW autonomous organizational style could be claimed to be socially responsible since it enables the employees to
bring out more of their potential and also motivates them according to many motivation theories that has autonomy as a main part. On the other hand SAP could, for some people, also be seen as socially responsible towards their employees with career paths and a focus to promote existing employees rather than hiring external managers.
Logic – Creativity Considering the hierarchy, career paths and so on at SAP, one could consider this organization to be leaning towards logic. However, some major decisions, such as restructuring all products to be web-‐based, enabling SAP to grow tremendously suggest that the organization is actually rather creative. It seems that such decisions had their origin from the top management and were also enforced from there. This means that SAP cannot actually be considered a consistently creative organization thoroughly which then suggests that they lean towards logic.
Revolution – Evolution Although SAP in the paragraph above is categorized towards the logical direction, their achievements definitely categorize them as at least partly revolutionary. There can basically be two ways an organization can manage to be revolutionary, either employees are given opportunity to think outside the box, which is also supported and in some cases established by the rest of the organization, or they have a very strong top management, usually just an individual that has ideas that are revolutionizing the existing business idea. Steve Jobs’ work in Apple could be considered the latter. Plattner in SAP can in this case be categorized there as well. BMW could perhaps be considered investing in the former method with its autonomous teams. However, it seems that the automotive industry in recent decades has become stuck on evolution. No matter how much space individuals are given to provide alternative solutions and think outside the box, the result will never be more revolutionary than the organization dares to. No matter how good the possibilities for revolutionary ideas there are, without support for the ideas the next step will never be taken.
Deliberatness – Emergence This is a popular paradox occurring during the flow of strategic activities. BMW was put in a situation when the amount of cars produced was more than they could sell. There was at a certain moment an emergence of change of strategy to handle the “oversaturated” car market. However, the way this change was handled is interesting -‐ it was not reduction or cheapening of production, it was a deliberate creation of premium class cars. In addition, changing the functional level structure into a more independent one deliberately changed the way strategy was implemented. Leadership was sought through empowering, keeping the team in line with strategic goals through team based incentives. In the SAP example, the strategic tension between deliberateness and emergence could be noted in the choice to switch to Internet based product provision. That choice was made deliberately to increase the number of software customers, however, it led to emergence of leadership challenges. There was a strong need to keep the staff happy under the increase of responsibility, but SAP management perceived the leaders to work against the company strategic goals. Another emerging issue was the bureaucracy of a seven-‐layer management structure being avoided in an informal way. The Internet is a rapidly changing medium, and when the business incorporates it as the main service channel, a more integrated approach is needed.
Markets – Resources This strategic paradox deals with the fact that strategy can be perceived as a company's position on the market, or as a company's resource. If strategy is marked-‐ based, organisational outcomes depend on how “market-‐fit” the product or service of the company is. If the strategy is resource-‐based, the outcomes depend on what resources are in the organization's possession: materials, technologies, intellectual, etc.
In BMW’s case the paradox may be viewed as a battle between these two bases. The
new formulated strategy proposed entrance to the new market with very expensive, but higher quality products. The forces acting from the market had to be taken into consideration. But additionally, the development of strategy was also envisioned by change of handling of resources. Subsequently, it was all about quality over quantity, where every customer counted and required attentive service. Both professional and communicational resources of the employees had to be improved, and the implementation of this was a more self-‐developing, autonomous structure of the team. In SAP the change of market led to change of resources. The challenge of a new way for distributing their product put a strain on the organisational structure. The marked was switched from product vendor to solution provider. The followed increase of customers required more resources and created tensions. A way of solving this was development of employees, letting them try new things outside their expertise. However this strategic tension could be viewed in resource change requiring market change. If the period of partnering with Microsoft is chosen, it is obvious that the new partnership opened new possibilities -‐ and to new resources with the partner. Then, the sequence of strategic development is opposite, as later the statement to change markets followed. To sum up, there was a switching between strategic development focuses, which facilitated the strategic content.
Responsiveness – Synergy Responsiveness describes the ability to respond to competitive demands of a business on time and in an adequate way. Synergy assumes creation of additional value by working in multiple business areas. The amount of created value is bigger in realised synergy situations, than if multiple business unit values were to be summed up separately. At BMW on the organizational level, the strategic choice is more responsive, an answer for the changing car market. But on the functional level the employees, who perform their respective functions, have to work in a more team-‐based structure.
This structure requires synergy, because the new premium cars must be competitive, of high quality and great value to justify the extra costs of the product. In SAP it is responsiveness rather than synergy. Strong hierarchical structure does not officially give way for the synergetic processes. This issue is partially solved by top management, but the way is to work around the structure.
Conclusion Today’s field of strategy has gotten much more diverse than before, and companies need to seek even further to create competitive advantages. Competitive advantages of previous times are getting easier to imitate, and companies have therefore increased their focus on recruiting promising personnel, and developing them into valuable, customized resources, which are difficult for competitors to imitate or lure away from them. Literature suggests that developing leaders from within, aids the process of implementing changes in organizations, as continuous change is now considered a vital part of strategy for most organizations. Furthermore, leaders that have been developed within a company, and have grown with the company’s strategy are likelier to succeed in reaching the company’s strategic goals, as they tend to know the strategy in details and believe in it, rather than an outside leader hired to the company at later stages. Some progress has been made in developing HR strategies to develop leaders for the future. However, there seems to be space for improvements, especially when it comes to development of current middle managers, likely to develop into top executive positions in the future. Efforts such as giving them international experience within the global organization is an example of what is likely to develop their skills even further within a MNC. Every company must have its own strategy and its own form of leadership. However, examples at MNCs show that it can be beneficial to have people-‐focused strategies. Even though people might have to change roles within a company, they already hold
the valuable mind-‐set of the company and its culture, which takes time to train with new employees. This especially applies for leaders, as they are the ones who should spread the company’s strategy and get the best out of its employees. Therefore, strategies at MNCs should have a focus on the development of leaders to create a valuable competitive advantage and guarantee the implementation of strategic goals.
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