Leadership through change, change through leadership

Table of content

Table of content

List of tables

List of figures

Literature

Declaration

1. Objectives of the thesis

1.1 Structure and methodology

1.2 Research

2. Leadership approaches

2.1 Major characteristics of a leader

2.2 Leadership styles and roles

2.2.1 Goleman’s six leadership styles

2.2.2 Situational leadership

2.2.3 Transactional leadership

2.2.4 Transformational leadership

3. Reasons for strategic change

3.1 Transactional change

3.2 Transformational change

4. Different levels of change in organisation

4.1 Individual change: reasons for resistance

4.2 Team change: the role of teams in a change management process

4.3 Organisational change: organisation metaphors

4.3.1 Three models of organisational change

4.3.2 Change of organisational culture

4.3.3 “New” approach for conducting organisational change

5. Nissan’s U-turn: 1999-2001

5.1 Overview of Nissan’s economic situation in 1999

5.2 Carlos Ghosn: the European leader versus the Japanese tradition

5.2.1 Different leadership styles implemented by Carlos Ghosn

5.2.2 The U-turn of communication in Nissan

5.2.3 Cultural U-turn of Nissan with Carlos Ghosn

5.3 Leading change: the secret of Carlos Ghosn success as a leader

5.3.1 Character

5.3.1.1 Attributes

5.3.1.2 Behaviours

5.3.1.3 Emotions

5.3.2 Competence

5.4 Transformational change of Nissan according to 8 steps to New Organisation approach

6. Conclusion

II. List of tables

Table 1: Six leadership styles according to Goleman

Table 2: Nine team roles according to Belbin

Table 3: Kotter’s and Kanter’s leading change models

III. List of figures

Figure 1: Leadership styles model of Hersey and Blanchard

Figure 2: Credibility

Figure 3: Inspiring leadership

Acknowledgements

At this point I would like to thank all those people who made this thesis possible and an unforgettable experience for me.

I would like to express a special thanks to Prof. Dr. Gaspardo who offered his continuous advice and encouragement throughout the course of this thesis. I thank him for the support by his helpful advice.

In particular, I would like to thank Susane Katz, Karl Heinz Müller and Rodrigo de la Pena for assistance in difficult moments when the writing was not so easy to me, thank you.

Lastly, and most importantly, I wish to thank my family, especially my dear mother and my aunt Olga. They supported me, taught me, and loved me. To them I dedicate this thesis.

Thank you!

1. Objectives of the thesis

In times of globalisation, more and more enterprises try to strengthen their market position through acquisition or alliance with new partners, so that the problem of uniting two companies and establishing a globally effective organisation gets on weight. Statistics on transformational change is not very positive though, only around 30 percent is reported to be successful.^[1] Nevertheless, some positive examples of the past and present show that transformational change indeed can succeed - if done correctly. What are the factors that define whether a change will succeed or fail?

The main objective of the thesis will be to analyse the success criteria of transformational change and the leader’s role in it on example of a Japanese car maker. Nissan’s turnaround in 1999 was initially criticised by industry insiders, but two years after the beginning of the transformation it was widely discussed in the international media and claimed as “sensational” because of its prompt and astonishing results. One man behind this change was Carlos Ghosn, who had a double function at that time as COO, both of Nissan and Renault, and could bring the heavy in-debt Japanese car maker into the black again.

1.1 Structure and methodology

The focus of the work is predominantly on leadership and on change management. The work consists of theoretical and practical parts. At first, leadership styles and roles will be presented, followed by the reasons for strategic change as well as different types of change such as individual, team, organisational change and transformation of organisational culture. After the known models on organisational and cultural transformation will be introduced, a “new” model of organisational transformation will be worked out to provide the framework for analyzing Nissan’s successful turnaround. The model can be adopted for analysis of transformational changes in general or for planning one.

In the practical part, the turnaround of Nissan will be analysed according to the “new” model and Carlos Ghosn leadership as well as reasons for his success will be examined.

1.2 Research

There is plenty of literature on research of leadership and change management. One type of literature provides the overview of theories and research results, the next one deals with case studies and is aimed at developing leadership skills, the third type of literature on leadership unites both features. The following overview illustrates the most important works on leadership and change management.

The “gurus” of leadership such as Bernard Bass provided theoretical models on leadership as well as new insights from cognitive social psychology, communication, political and social studies. John Kotter, known for his eight steps change management process, gave valuable information on leading change from the experience he gathered in long years of consulting. Andrew DuBrin, along with descriptions of leadership styles and behaviours, offered leadership skills development techniques as he believes that leadership can be trained. John Maxwell gathered practical experience of leading different churches as a pastor and wrote more than 60 books on leadership, mainly dealing with improving leadership qualities. Esther Green and Mike Cameron provided a detailed and deep overview of change management models as well as leadership approaches and came up with their own comparative analysis of examined models. After years of research on organisational behaviour Stephen Robbins showed how to approach organisational transformation from the individual, group and organisational point of view and gave a solid theoretical basis on understanding organisational behaviour. Posner and Kouzes conducted hundreds of interviews with business and non profit organisations leaders and provided a view on leadership as a critical aspect of human organisation, answering the question what leaders shall do in order that they are followed.

2. Leadership approaches

Since the 1950s, leadership has been subject of numerous studies, theories and approaches all around the world. Barnhard Bass, for example, demonstrated the increasing interest in leadership with the following example:

“By 1948 Stodgill was able to locate 128 studies of leadership. There were 124 articles, books, and abstracts on leadership published in England and 4 in Germany up to 1947. In contrast, 188 articles on leadership appeared in just one journal Leadership Quarterly btw. 1990 and 1999.“^[2]

In their researches scholars wanted to answer the questions „Can leadership be learned? Or is it the destiny of the chosen ones?” Two approaches appeared and were supposed to answer this question: the trait and the process approach. The trait approach is the oldest one and is backed up by one hundred years of research.^[3]

The trait approach sees leadership as a number of traits that a leader must have in order to lead his followers. The trait approach is intuitively appealing because we get used to view leaders as people with extraordinary abilities who do extraordinary things.^[4]

If leadership at first was connected with definite traits and qualities, the next step in leadership theory was a shift in leadership paradigm and it was viewed as a phenomenon that resides in the context of the interaction between leaders and followers and makes leadership available to everyone. This process approach claims that as a process leadership can be observed in leader behaviours and can be learned.^[5]

Sadler divides a leadership process into several distinct areas^[6]:

1. The processes involved are: influence, exemplary behaviour and persuasion.
2. Interaction between actors who are leader and followers.
3. Nature of interaction is influenced by the situation. For example, commander and troops on the battlefield is different from interaction between a team leader and group of scientists.
4. Process has various outcomes, economic success is just one way to measure leadership, but there are other goals that can be achieved through efficient leadership such as commitment of personnel, change of the organisational culture and team cohesion.^[7]

In the 1970s, the empirical research on leadership turned its attention to situation and context in which leadership takes place.^[8]

After the trait, process and situation approach on leadership the last known shift in leadership theory took place in the early 1980s. Since that time there is a rising interest on charismatic, visionary, and transformational leadership and a perspective that both personal traits and situations are important in determine the emergence, success and effectiveness of leadership.^[9]

There are further approaches on leadership such as emerged versus assigned^[10] as well as leadership as a role in organisation, but those are not going to be viewed in detail here.

As there are many definitions of leadership, the understanding of leadership as influence on people’s way of thinking, emotions and feelings according to John Maxwell will be applied here.^[11]

Another quite important distinction shall be made between leaders and managers. Managing focuses on planning, organizing, staffing, and controlling, whereas leadership emphasizes the general influence process.^[12]

2.1 Major characteristics of a leader

According to the trait approach traits can be divided into general qualities and task accomplishment qualities that a leader needs to have. ”The general traits are: self-confidence, humility, core self-evaluation, trustworthiness, authenticity, extraversion, assertiveness, enthusiasm, optimism, warmth, sense of humour“.^[13]

These qualities help to build good relationship with employees as well as to persuade, to influence and to lead. With his self-confidence a leader gives strength to his followers, provides a secure atmosphere and encourages employees to be involved in the process. ”Task accomplishment traits are the following: passion for the work and people, courage, internal locus of control, flexibility and adaptability, emotional intelligence.“^[14]

Emotional intelligence that consists of four major parts - self-awareness, self-management, social awareness and social skills - was emphasized as very important characteristics by Goleman.^[15] Goleman studied 181 management competence models drawn from 121 organisations worldwide and indicated that 67 % of abilities deemed essential for management competence. The heart of emotional intelligence for him was self-awareness.“^[16] Because leaders can settle behaviour patterns acting in a special way, it is important that a leader is optimistic, confident and goal oriented. ”As moods are contagious the moods of a leader can influence the whole team till the last bottom-line worker”, wrote John Welsh in his book Wining (2005) where he emphasized that leaders should exude positive energy, energize others, reward and teach followers. He also believed that leaders should invent future, instead of focusing on what has been done in the past.“^[17]

Katz suggested the Three Basic Personal Skills approach for effective leadership and insisted on differentiation between skills and traits because skills can be accomplished whereas traits are what the leaders are.^[18] Thus, he defined skills as the ability to use one’s knowledge and competencies to accomplish a set of goals or objectives. Katz‘ Three Basic Skills approach included: technical skills, human skills and conceptual skills.

Zenger, Folkman and Edinger offered a model for analyzing the inspiring leadership which is quite close to Katz’ approach and consists out of three elements such as attributes, behaviours and emotions. Attributes address such set of qualities as role model, change champion and initiative. Six most typical behaviours of inspiring leaders are defined as: stretch goals, clear vision, communication, developing people, teamwork and innovation. Emotions address leader’s ability to connect with people.^[19] This model seems to have the attributes of both Katz’ and Goleman’s approach because it unites the inborn characteristics, emotional intelligence and acquired skills.

Conceptual skills play a significant role for leadership as they help a leader to create a vision, to make a strategic plan for organisation. The higher the managers’ position the greater the meaning of both human and conceptual skills for him.^[20] When a leader has charisma - it is an additional advantage, but not every leader has it. A visionary leader shares his vision with followers and can motivate them to move towards his vision that finally becomes theirs.

In order to do so, a visionary or a charismatic leader has the ability to connect with people. This ability, argue some scholars, cannot be learned, whereas others say it can be learned. To connect means to inspire people to go new ways. In their article on inspiring leadership, Zenger, Folkman and Edinger presented six types of inspiring leaders as well as features that each type of these leaders has in order to create emotional connection.^[21] The classification was made after analysis of 1,000 most inspiring and motivating leaders out of 10,000 candidates. Six types of highly inspiring leaders are:

- The enhancers
- The enthusiasts
- The experts
- The visionaries
- The principled
- The drivers

This approach suggests that using not only one, but different approaches will highly increase a leader’s ability to be inspiring for the followers and make emotional connection.^[22] It seems though that a leader doesn’t make a rational choice which approach to apply. He rather acts intuitively according to his character and temperament and can display qualities of different types of inspiring leader. Being the driver a leader can also be the enthusiast, if motivation and enthusiasm is what his followers need at the moment.

To sum up characteristics that are important for a leader, two main areas must be mentioned: emotional intelligence and conceptual or visionary skills. At the top is credibility. In a study of Kouzes and Posner with thirty thousand leaders was figured out that leader’s most important quality is credibility.^[23] If someone wants to be a leader in a team, his or her actions must be consistent with his or her words.

2.2 Leadership styles and roles

The role of a leader in the change process was studied in depth, and, as a result, several major theories with different perspectives appeared. Green and Cameron offer a detailed overview of different theories on leader’s roles in the change process, including O’Neill’s four key roles, that are advocate, change agent, implementer and sponsor, as well as Senge’ three types of leaders, that are local line, executive and network.^[24] The idea to have different types of leaders seems to be very helpful in a complex change process, and if a leader can provide strong types of leaders in different parts of the organization the change has a much better chance to succeed. Also Senge provides the valuable awareness that a change can’t succeed if done top down, it should take place within the organisation.^[25] His view on leader’s role warns about depending on a hero leader. “It means that there is a vicious circle because a search for a new CEO starts with a crisis, then a new CEO comes that makes some short term changes in cost reduction and productivity improvement. The employees start to please a new CEO and start to comply rather than work on challenging the status quo and thus a new crisis occurs.”^[26] He argues that one or two people at the top of organisation can’t tackle the enormous range of problems. Senge introduced three types of leader: local line, executive and network leaders. Senge recognised the necessity of interaction between all three types, but in reality communication between three types of leaders often fails which makes a change process fail.

2.2.1 Goleman’s six leadership styles

Depending on the situation, a leader can apply different leadership styles. The issue of leadership styles was thoroughly studied by Goleman, he classified the leadership styles into six groups.^[27]

Table 1: Six leadership styles according to Goleman

illustration not visible in this excerpt

To choose an appropriate style isn’t easy and often leaders are not even aware of different styles and use only one or two styles. As a consequence, their leading effectiveness is stiff and they can’t lead to their full potential.

2.2.2 Situational leadership

Kenneth Blanchard and Paul Hersey suggested that there is no ideal leadership style, and that leaders must adapt their style depending on the situation. Their model dates back to late 1960s and lets to analyze the needs of the situation and suggests an appropriate leadership style according to the development level of the "follower". This model is considered to be the most applied one in a business world because it is easy to use. According to Blanchard & Hersey leaders can vary their emphasis according to task, what is in contrast to Fiedler’s theory of situational leadership that says that leadership style is hard to change.^[28] The model of Blanchard and Hersey will later be used for analysis of Carlos Ghosn leadership style during the Nissan’s U-turn.

The matrix of Hersey and Blanchard below shows the dependence between the leadership style and followers maturity. According to follower’s readiness, a leader can choose the style he uses. The four styles are: Participating, Selling, Delegating and Telling.^[29]

Abbildung in dieser Leseprobe nicht enthalten

Figure 1: Leadership styles model of Hersey and Blanchard^[30]

2.2.3 Transactional leadership

Leader’s influence on organisational culture can be defined either through the transactional or through the transformational leadership.

Transactional leadership satisfies follower’s needs by entering into a relationship of mutual dependence in which both sides are recognised and rewarded.^[31] This leadership is based on setting objectives for employees and delegating the tasks. There are two types of objectives that are discussed: the qualitative and the quantitative ones. The positive side of this leadership is partner-like relationships between leader and followers, employees have sovereignty in taking decisions, and management has more room in taking care of operative business solutions.^[32]

2.2.4 Transformational leadership

Unlike the transactional leadership the transformational leadership goes beyond the notification of exchange, and according to Burns it has two major elements: it is relational and produces real change.^[33] ”Transformational leadership occurs when one or more persons engaged with others in such a way that leaders and followers raise one another to higher levels of self and morality.“^[34] Burns emphasizes that the ultimate test of this approach is the realization of change in people’s lives, attitudes, behaviours and in their institutions. Mhatma Ghandi could be probably the best example of this leadership style because of his nonviolent and egalitarian values that exposed changed people and institutions in India.

A distinct feature of a transformational leader according to Jim Burns is that he is not only charismatic, inspiring, morally uplifting, but his focus lies on developing followers into leaders.^[35] Nearly the same aspect of transformational leadership was stressed by Mary Follet in her book The Creative Experience: ”The most essential work of a leader is to create more leaders.”^[36] Transformational leadership thus is a process of creating real change and developing leaders of the future.

3. Reasons for strategic change

The nature of change is versatile and because of that it is influenced by various factors. And thus the reason for change may have different objectives, the main one is though nearly always to make a company more effective and profitable, to gain market share, which may lead to creating new organizational structures, strategy, set of systems, resources and company’s culture. Strategic change takes place within the contexts of external, competitive, economic and social environment and the organisation’s internal resources, capabilities, culture.^[37] Tichy has figured out four main reasons for strategic change and they are:^[38]

- Environment - new regulations of the government or major political or social events
- People - who may bring new ideas to the organisation, innovative and strategic thinking
- Technology – new advance technologies that influence company’s products or organisation
- Business relationship

The success of change depends on how well the strategic planning was done. It means that the organisation must have the ability to evaluate the environment it operates in as well as to know where it wants to get and how to get there. A leader plays a major role in defining all these strategic and operational issues.

3.1 Transactional change

This kind of change includes the alteration of ways in which the organisation does business and how people interact with one another on a day-to-day basis. As Jack Welsh put it: “We want to be a company that is constantly renewing itself, shadding the past, adapting to change.“^[39] An example of transactional change would be introducing a new technology, like electronic data exchange in resource planning, CRM, supply chain automatisation. Changes to systems and processes affect daily people lives, the way they do their jobs and how they are treated. The impact of transactional change is high or can be even higher than strategic or organisational change. A transactional change does not alter the fundamental form, fit or function of the components of the company; it isn’t that costly as transformational changes.

3.2 Transformational change

Transformational change is the process of ensuring that an organisation can develop and implement major change progress so that it responds strategically to new dimensions of effective functioning in the environment it operates. Organisational transformation may involve radical changes to the structure, culture and processes of organisation. Transformational change may be forced by investors or government decisions. It may be initiated by new management with a wish to ”turnaround“ the business.

There are plenty examples of transformational change in business or government organisations. Just a few of them are going to be named to demonstrate the diversity of factors influencing it.

Some companies, such as Nokia, have undergone transformational change by changing their core products or focus as new technology came along. Nowadays Nokia is known as one of the world's leading makers of cellular phones, but just a few know that the company began in 1865 as a paper mill.^[40] Nokia transformed itself into a manufacturer of cell phones during the Finnish recession of the 1990s, when the company streamlined its business to stay profitable.

Restructuring products is another way for companies to transform. One example of a company that achieved transformational change by altering its product line is Apple Computer. In 1996, Apple was losing money and had very little market share when it purchased former owner Steve Jobs' Software Company, NeXT. In 1997, Jobs become CEO of Apple and began restructuring the product line, placing greater emphasis on style and the use of proprietary operating systems, rather than systems it licensed from other designers.^[41] The transformation to focus on quality and innovation led to a return to prosperity.

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^[1] Baumgärtner, Stephanie; Horz, Claudia; Klein, Uwe: Transformationsmanagement. Rennstrategien für erfolgreiche Veränderungen, in: Zeitschrift Führung+Organization, 82. Jahrgang, 1/2013, p. 54

^[2] Bass, Bernhard M.; Bass, Ruth: The Bass Handbook of Leadership: Theory, Research, and Managerial Applications. 2008, p. 6

^[3] Compare to Bass, B.; Bass R. 2008, p. 6

^[4] Northhouse, Peter: Leadership: Theory and Practice. 2010, p. 26

^[5] Compare to Northhouse, P. 2010, p. 5

^[6] Compare to Sadler, Philip: Leadership. 2003, p. 5

^[7] Compare to Sadler, P. 2003, p. 5

^[8] Compare to Bass, B. 2008, p. 6

^[9] Compare to Bass, B. 2008, p. 6

^[10] Compare to Northhouse, P. 2010, p. 4

^[11] Compare to Maxwell, John: Developing a Leader Within You. 1993, p. 2

^[12] Compare to Northhouse, P. 2010, p. 6

^[13] Compare to Du Brin, Andrew J.: Research, Findings, Practice and Skills. 2012, p. 38

^[14] Du Brin, A. 2012, p. 63

^[15] Compare to Cameron, Eather; Green, Mike: Making Sense of Change Management. 2009, p.165

^[16] Compare to Cameron, E.; Green, M. 2009, p.165

^[17] Shriberg, Arthur; Shriberg, David: Practicing Leadership Principles and Applications. 2010, p. 71

^[18] Compare to Northhouse, P. 2010, p. 40

^[19] Compare to Zenger, J.; Folkman, J.; Edinger, S.: Unlocking the Mystery of Inspiring Leadership, in: The ASTD Leadership Handbook. 2010, p. 260-262

^[20] Northhouse, P. 2010, p. 41

^[21] Zenger, J.; Folkman, J.; Edinger, S. 2010, p. 262

^[22] Zenger, J.; Folkman, J.; Edinger, S. 2010, p. 263

^[23] Huszczo, Gregory E.: Tools for Team Leadership: Delivering the X-Factor in Team Excellence. 2010, p. 42

^[24] Compare to Cameron, E.; Green, M. 2009, p. 153

^[25] Compare to Cameron, E.; Green, M. 2009, p. 154 f.

^[26] Compare to Cameron, E.; Green, M. 2009, p. 153

^[27] Compare to Cameron, E.; Green, M. 2009, p. 160

^[28] Leadership. A Leader Lives in Each of Us. Internet: http://higheredbcs.wiley.com/legacy/college/schermerhorn/0471734608/module16/module16.pdf, 19.04.2013

^[29] Schermerhorn, John R.: Introduction to Management. 2011, p. 320

^[30] Schermerhorn, J. 2011, 9.320

^[31] Schriberg A; Schriberg, D. 2010, p. 78

^[32] Compare to Franken, Swetlana: Verhaltensorientierte Führung. Handeln, Lernen und Ethik in Unternehmen. 2010, p. 271

^[33] Compare to Schriberg A.; Schriberg, D. 2010, p. 78

^[34] Compare to Schriberg A.; Schriberg, D. 2010, p. 78

^[35] Compare to Avolio, Bruce J.: Pursuing Authentic Leadership Development, in: Handbook of Leadership Theory and Practice. Nohria N.,Khurana, R. (Edit.). Harvard Business Press. 2010, p. 742

^[36] Compare to Avolio, B. 2010, p. 741

^[37] Compare to Graetz Fiona; Rimmer, Malcom: Managing Organisational Change. 2012, p. 78

^[38] Compare to Farhad Analoui; Azhdar Karami: Strategic Management: In Small and MediumEnterprises. 2003, p.280

^[39] Michael Armstrong; Tina Stephens: Management and Leadership. 2005, p. 93

^[40] Compare to Magloff, Lisa: Examples of Transformational Change. Internet: http://smallbusiness.chron.com/examples-transformational-change-18261.html, 28.03.2013.

^[41] Compare to Magloff, L. Internet: http://smallbusiness.chron.com/examples-transformational-change-18261.html, 28.03.2013.