The link between competition and leadership - A statistical analysis of the EPOC questionnaire

TABLE OF CONTENTS

Summary

1. Introduction

2. Methodological design
2.1 Research goal
2.2 Central question
2.3 Conceptualization
2.3.1 Leadership and leadership style
2.3.2 Uncertainty
2.3.3 Degree of competition
2.4 Operationalization
2.4.1 The independent variable
2.4.2 The dependent variable
2.5 Research questions
2.6 Research design
2.7 Methods of observation
2.8 Data analysis
2.9 Validity/reliability

3. Theoretical framework
3.1 Theory description
3.2 Motivation of theory choice

4. Statistical analysis and discussion
Sub-question 1
Sub-question 2
Sub-question 3

5. Conclusion

Bibliography

Summary

The following report is intended to describe a possible relationship between competition and leadership. In order to conduct a sound data analysis with the help of the statistical analysis program SPSS, the two variables have been conceptualized down to a more concrete level, namely degree of competition and leadership style as defined by Geert Hofstede. With the help of the EPOC questionnaire and a solid methodological framework it has been possible to investigate the research hypothesis that suggested a relationship between the two variables.

Derived from the statistical analysis, it can be said that this research does by no means support the hypothesis that an increasing environmental uncertainty, measured by degree of competition, will lead to a more authoritarian style of leadership.

Finally, it can be said that this research has shown that the hypothesis of the supposed causal relation between an increasing environmental uncertainty and a resulting increase in the use of an authoritarian style of leadership, cannot be supported. Until a certain extent, mainly concerning consultation at the group level, an increase in environmental uncertainty will lead to a more consultative style of leadership instead of more authoritarianism in the company.

Additional follow-up research by fellow colleagues can be of important help to furthermore investigate the relationship.

1. INTRODUCTION

Today’s world in general and perhaps the world of organizations in particular, can be characterized by its continuous and rapid changing environment. Every manager’s challenge is to find the best way of dealing with these rapid changes and the resulting uncertainty in the environment of the organization. It is the aim of this report to find out what the influence of the level of uncertainty, measured by means of the degree of competition, is on the preferred style of leadership within the organization. Since contingency theories have predominated the course of, mainly modernist, organization theory throughout the last 50 years, it is most probable that different environmental conditions require different approaches to leading an organization. Since both authors are interested in the phenomena of leadership and in influences of leadership styles, this topic does not come as a surprise.

Of course, leadership is a widely studied concept and as with so many topics studied in the academic world, generally agreed upon and accepted definitions and dimensions are hard to find. Burns (1978, p.15) cites one study with 130 definitions of the term. However, by means of later to be explained work of mainly the well-known Dutch anthropologist G. H. Hofstede, but also supported by G.A. Steiner J.B. Miner, L.J. Bourgeois and M. J. Hatch, a framework that lies at the heart of the research has been constructed.

Summarizing these concepts, an authoritarian and a more participative style of leadership can be distinguished. In times of uncertainty, measured by means of a changing degree of competition, a different style (more authoritarian and control focused) is to be expected than in times of low uncertainty/competition. It will be the task to see whether or not that theory will hold according to our information.

Literature from several different sources has been gathered for this purpose. The actual empirical data that will be analyzed is from the Employee Participation in Organisational Change (EPOC) questionnaire, which will be explained in more detail in the following chapter. However, for the theoretical as well as the methodological framework of our research, we have made use of available literature in the form of books, articles, journals etc. Together, the literature and other information makes it possible to conduct thorough research, which enables us to either support or reject the following central hypothesis:

A changing degree of competition will result in a more authoritarian style of leadership.

However, it should not be forgotten that, as with all research, the results can be subject to debate. Since the scope of this research is only limited to ten European countries and the researchers had to deal with time and money constraints, we do by no means claim to have found an all true causality.

The report consists of several sections. The first one is the methodological design and provides the information about what, why, when and how we did our research the way we did it. Second, as is the case with all true scientific research, a solid theoretical framework cannot be neglected. A brief but thorough overview of Hofstede’s as well as the supporting authors work is needed to truly understand the research. This can be translated into the scientific argumentation and justification. Only after having explained all the above it is time to present our facts, findings and the answers to our research questions, followed by the conclusion which will attempt to answer the central hypothesis of the research.

2. METHODOLOGICAL DESIGN

2.1 Research goal

The objective of our research is to gain insight in the effect that environmental uncertainty has on the leadership style in use within an organization. To be more precise, we will examine the influence that an important pillar of environmental uncertainty, degree of competition, has on leadership style. In a methodological sense, our research goal is the following:

To gain insight in the influence of environmental uncertainty on leadership style.

2.2 Central question

The central question that we will be answering is the following:

What is the influence of high environmental uncertainty on the style of leadership?

However, instead of a classical question, we have opted for a central hypothesis as the heart of our research. The hypothesis is the following:

An increasing environmental uncertainty will lead to a more authoritarian leadership style.

The following steps are to enable the reader to understand our line of argumentation in defining the research question. For that reason, we chose to change the generally accepted order in the methodological design and carry out the conceptualization and operationalization phase before actually posing the sub questions we will answer in this research.

2.3 Conceptualization

For the purpose of clarity and validity, several concepts have to be explained in more detail, supported by literature. First of all, let us take a closer look at the concept of leadership and leadership style.

2.3.1 Leadership and leadership style

As stated before, several definitions of leadership and leadership style are in use at the moment. One common way to define leadership is:

“Leadership is the ability to influence a group towards the achievement of goals” (Robbins, 1994, p.138).

However, that still not yet solves the problem of leadership style. Again, numerous authors have written about this topic, presenting various dimensions of leadership. Taking into consideration the nature and content of the EPOC survey questions and the main theory, Geert Hofstede’s distinction between an authoritarian and a more consultative leadership style seems most appropriate for the purpose of our research. Many authors have made a contribution to define, clarify and make a fundamental distinction between those two kinds of leadership since other approaches can be mainly derived from these two.

Hofstede made use of four types of managers, each showing a different style of leadership. As he stated in his book Culture ’ s Consequences:

“Manager 1: Usually makes his/her decisions promptly and communicates them to his/her subordinates clearly and firmly. Expects them to carry out the decisions loyally and without raising difficulties.

Manager 2: Usually makes his/her decisions promptly, but, before going ahead, tries to explain them fully to his/her subordinates. Gives them the reasons for the decisions and answers whatever questions they may have.

Manager 3: Usually consults with his/her subordinates before he/she reaches his/her decisions. Listens to their advice, considers it, and then announces his/her decision. He/she then expects all to work loyally to implement it whether or not it is accordance with the advice they gave.

Manager 4: Usually calls a meeting of his/her subordinates when there is an important decision to be made. Puts this problem before the group and tries to obtain consensus. If he/she obtains consensus, he/she accepts this as the decision. If consensus is impossible, he/she usually makes the decisions himself/herself” (Hofstede, 2001, p. 470).

Mainly used for his power distance dimension, which is the extent to which unequal distribution of power, wealth and prestige is accepted, to be explained in the next chapter, he made a distinction between the four types of managers. Whereas the first two managerial types are associated with an authoritarian style of leadership and the resulting high power distance index (PDI), the reverse is true for manager 3 and 4. They are seen as the consultative/participative leaders, belonging to countries with low scores on the power distance index (Hofstede, 2001, pp. 85-108).

In general, it can be said that consultative leadership style values and supports the opinion, experience and expertise of subordinates to the top-management. The lower levels are therefore consulted to a certain extent when crucial decisions are to be made that affect the organization as a whole or only in detail.

Authoritative leadership, on the contrary, does base decisions mainly on the topmanagement, without any further consultation of lower level management, which task it is to implement the decision made by their superiors. Often, increased bureaucracy is associated with a more authoritarian style of leadership as well.

We found that the EPOC dataset will give fruitful data from question 24, since it provides insight in the extent to which companies practice employee consultation. It can be assumed that a high degree of employee consultation is a powerful indicator for a high degree of consultative leadership as well.

2.3.2 Uncertainty

As is stated by Bartol and Martin in their book Management:

“Environmental uncertainty is a condition in which future environmental circumstances effecting an organization cannot be accurately assessed and predicted. The more uncertain an organization’s environment the more time and effort managers must expand monitoring it. Assessing the implications for the organization and deciding what present and future actions to take. The degree of environmental uncertainty is a function of two major factors: complexity and dynamism” (Bartol and Martin, 1994, p.82).

With reference to Bartol and Martin, the environment of an organization consists of different aspects, the degree of competition and rivalry being one of them. The higher the degree of competition and the rate of change of that competition, the more unstable an environment is perceived (Bartol and Martin, 1994, p.77).

Since the EPOC questionnaire does only cover the degree of competition, we were forced to narrow our research to that aspect. We will therefore treat the concept of degree of competition as environmental uncertainty, even though this has an effect on the validity of the research. Please refer to that section for an elaborated explanation.

It should be noted that, with reference to Bartol, environmental uncertainty consists of other aspects as well, such as the buyer power, supplier power, technological changes and the like. These aspects, however, are not covered in the questionnaire and will therefore be neglected.

2.3.3 Degree of competition

The term "competition" means the activities conducted by two or more business enterprises vying with each other to obtain market superiority, including offering competitive prices, quantities, quality, services, or other conditions (Sampras, 1971, p 5-8). As stated previously, competition is one of the aspects that are of importance in assessing an environment as either stable or unstable.

After having conceptualized the main concepts of this research, the following general conceptual model can be constructed:

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