Leading Generation Y. An analysis of the generation and its preferred style of leadership

Table of Contents

II. List of Abbreviations

III. List of Figures

1. Introduction
1.1 Problem Definition and Objective
1.2 Structure

2. Generation
2.1 Definition of Generation
2.2 Characteristics, values and performance

3. Generation-Specific Leadership
3.1 Leadership Theory
3.2 A new Definition of Business Leadership
3.2.1 The ideal leader traits according to Generation
3.2.2 The ideal style of leadership for Generation
3.2.3 Adapting working conditions for Generation

4. Conclusion and Outlook

IV. List of References

V. ITM-Checklist

II. List of Abbreviations

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III. List of Figures

Figure 1 - Schematic representation of the age structure of the population

Figure 2 – Historical conditions of the generations

Figure 3 – Classical categorization of leadership styles

Figure 4 - Six dimensions of transformational leadership

Figure 6 - Full Range Leadership Model

Figure 7 - Associated personality traits of leaders according to Generation Y (in %)

Figure 8 - Average rating leader traits

Figure 9 - Factors of leadership.

1. Introduction

1.1 Problem Definition and Objective

Already back in 1997, Ed Michaels - American director of McKinsey - identified a specific phenomenon on the job market and coined the term “War for Talents” (Michael et al. 2001, p.1). Root cause for the phenomenon is the schematic distribution of the age structure, which has changed significantly in the course of about 100 years. In the future it is even expected that the narrow base of younger citizens will continue to diminish, like it is also shown in the following figure (Gruenheid and Fiedler 2013, p.10). The term “War for Talents” describes the consequences of this past and future demographic change, which reversed roles and made applicants for jobs to addressees of applications from companies (Michael et al. 2001, p.1).

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Figure 1 - Schematic representation of the age structure of the population from 1910 to 2060, in percentage of total population.

Source: Bundesinstitut für Bevölkerungsforschung (2013, p. 10).

Due to this problematic, it becomes – as the term war for talents describes - increasingly essential for companies to be attractive for the needed target group of employees, in order to recruit and retain the fitting human resources (Kuenzel 2013, p. VI). The heterogeneity of the various age groups in general and the partly contradictory appearing characteristics of Generation Y therefore forces companies to look deeper into this generation in the context of human resource management (Hucke et al. 2013, p.128). However, many companies have not focused this so far and did not adapt their corporate- or leadership culture to the ideas of the young talents. Now, companies should make up for their omissions, as research found out that Generation Y – e. g. in Germany – shows a strong willingness to pursue their ideas of a good working environment and would be even willing to terminate their job if necessary (FAZ 2015, p. 1).

This assignment therefore examines the target group of Generation Y – a new and already much discussed age group, which begins to shape the labor market with their specific values, expectations and attitudes. Hereby the focus will be on the style of leadership that this generation needs, in order to answer the question, how companies have to adapt to maintain or become attractive for the young generation during this mentioned war for talents.

1.2 Structure

In order to answer this question, the mentioned generation will be defined and then characterized in order to create a common understanding of the wording. The third chapter will afterwards outline several leadership theories and their main characteristics and ideas.

The second part of the third chapter will then focus on the various needs and preferences of Generation Y and their impact on the corporate world:

1. Which traits make a leader a good leader?
2. Which leadership style matches their preferences best?
3. How should a leader adapt the working environment?

After addressing and answering those questions, a recapitulation will be done and further research suggestions will be given.

2. Generation Y

2.1 Definition of Generation Y

In literature, there are several terms for the cohorts being born after 1980: Digital Natives, Millenials, Net Generation or – meanwhile established worldwide – Generation Y. The temporal extension of the definition hereby ranges from the late 70s up to the turn of the millennium. A clear distinction is due to the smooth transitions between the individual generations impossible – and also not necessary (Hucke et al. 2013, p.125). As successor of the so-called Baby Boomers and Generation X, generation “WHY” is said to question conditions and ideas, which used to be taken as a matter of course (Parment 2013, p. 1).

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Figure 2 – Historical conditions of the generations.

Source: Own creation, based on M. Hucke et al. in Stock-Homburg, R. (2013, p. 127).

2.2 Characteristics, values and performance

Like shown in the figure above, each generation is influenced by historical events and developments, leading to dissimilar ways of thinking, living and values. The following table gives an overview on main characteristics and distinguising features of the previous generations:

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Table 1 – Comparison of generation characteristics.

Source: Own creation, based on K. Hurrelmann and E. Albrecht (2014, p. 24), P. R. Rebore and A. Walmsley, (2010, p.2) and C. E. Schmidt (2011, p. 518).

The main difference between the generations for the corporate world is hereby the mentioned attitude towards working and living: While the generation of the Baby Boomers often sacrificed und subordinated their personal life, Generation X considers work often as a necessary evil. Generation Y however considers living and working no longer as excluding each other and combines them smoothly (Schmidt et al. 2011, p. 518).

3. Generation-Specific Leadership

3.1 Leadership Theory

Worldwide, leadership is praised as a solution for most of the problems of organizations. In history, researchers in this field have always aimed to find the best leadership style that will be most effective. Nowadays, it is assumed that there is not one best style, but rather a combination of styles, depending on the situation of the leader (Palestini 2009, p.1).

The classical categorization of leadership styles is the differentiation between authoritarian, democratic and laissez-faire.

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Figure 3 – Classical categorization of leadership styles.

Source: Own creation, based on R. K. Conyne (2010, p. 335) and P. G. Northouse (2015, p. 92).

The latter categorization of laissez-faire leadership is also a contemporary sociological thought and practice, as it is one part of the model of transformational, transactional and laissez-faire leadership which was developed by Bernard M. Bass in 1985 (Northouse 2015, p. 92).

- Transactional Leadership

This term refers to the bulk of leadership models, which focus on the exchanges that occur between leaders and their followers (Northouse 2010, p. 172). This transactional leadership, that motivates followers by exchanging rewards for high performance and noticing and reprimanding subordinates for mistakes and substandard performance, is therefore called contingent reward leadership. According to another transactional leadership style, the leader helps the followers to identify what must be done to accomplish the desired results, taking into account the follower’s self-concept and esteem needs. Rewards for the expected performance are defined and a path-goal concept shows the follower clearly how to achieve the reward. Afterwards, the leader steps aside and does not intervene unless the goals are not being achieved – this method is therefore called passive management by exception. If the leader looks at the subordinate and makes corrections throughout this mentioned process, then it is active management by exception (Bertocci 2009 p. 49).

- Transformational Leadership

In contrast to transactional leaders, transformational leaders have the ability to inspire and motivate followers to achieve results greater than originally planned through internal rewards rather than external rewards (Bertocci 2009 p. 49). Based on the theories of Bass and Avolio (1990, p. 21-27), the behavioural patterns of a transformational leader have been categorized into the "four I’s”: Idealized influence, inspirational motivation, intellectual stimulation and individualized consideration. The main characteristics of a transformational leader are the following six:

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Figure 4 - Six dimensions of transformational leadership.

Source: Own creation, based on J. Rowold (2013, p. 191f.).

During the past decades, the mentioned styles of leadership have been evaluated intensively, coming to the classification as it is shown in the following figure. The effectiveness-dimension is based on research results, while the active-dimension represents how frequently a leader displays leadership.

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Figure 5 - Full Range Leadership Model.

Source: Own creation, based on B. J. Avolio (2011, p. 66).

Which of those styles of leadership is most applicable to Generation Y and their needs, will be investigated in the following.

3.2 A new Definition of Business Leadership

As outlined above, there are several different ways of leading. Therefore, companies nowadays face the question, whether the entry of Generation Y into the workforce will change the notion of the ideal leader (Hill et al. 2010, p. 644).

3.2.1 The ideal leader traits according to Generation Y

In order to answer this first question, whether the entry of the Generation Y into the workforce will change the notion of the ideal leader, several research studies have been carried out. The following figures display the findings of two of those studies, which tried to identify the most important main personal traits of a leader, according to GenY.

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Figure 6 - Associated personality traits of leaders according to Generation Y (in %).

Source: Own creation, based on Deloitte (2015, p. 4f.), annual survey, n = 7.800.

The annual carried-out millennial survey by Deloitte shows that especially the strategic orientation as well as the inspirational charisma are being highly appreciated. Moreover, the ideal leader should stand out by his or her firm personal skills and vision. The need for strong personal skills can also be seen in the wish for the decisiveness of the leader. He or she should show passion and enthusiasm for their work, and be able to pass this to the employees. On the other hand, it becomes very clear which kind of leader discourages this generation: It is the domineering boss, who cares mainly about the financial results instead of the employees’ needs, and tries to impose his or her will on others in an insistent or arrogant manner.

This characterization can be supplemented by the findings of another, smaller and therefore only indicative survey, which are shown in the following figure.

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Figure 7 - Average rating leader traits.

Source: Own creation, based on A. Horeczy et al. (2011, p. 7). Indicative research study, n = 149, born between 1980 - 1994.

Again, a strong personality in the form of accountability and honesty belongs to the most preferred traits of a leader. Similar to the first survey, being strategy oriented belongs again to the main results. Nevertheless, most importance is attached to a strong work ethic.

3.2.2 The ideal style of leadership for Generation Y

In addition to the preferred traits of a leader, the shown behaviour and leading style of this person are just as important. Generation Y hereby brings a new attitude into the corporate world. They are said to overwhelmingly believe that business needs a reset in terms of paying as much attention to people and purpose as it does to products and profits (Deloitte 2015, p. 1). In the next step it will be examined, how their preferences fit to the various styles of leadership.

Bearing in mind the presented leadership styles, one way of leading can be eliminated directly according to the results of the preferred traits in the previous chapter: The authoritarian style of leadership. Like already outlined in the previous chapter, this kind of behaviour seems to be least attractive for the new generation of employees.

Considering the remaining leadership styles which have been introduced, first indicative research studies come to the conclusion that laissez-faire, a non-leadership style, is almost 30% less popular than transactional styles and almost 40% less attractive for the Generation Y than a transformational leadership. Having a closer look at the results of this research study, especcially the differences between the several sub-styles or dimensions become clear, as shown in the following figure:

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Figure 8 - Factors of leadership.

Source: Own creation, based on A. Horeczy et al. (2011, p. 6). Indicative research study, n = 149, born between 1980 - 1994.

It hereby becomes clear that not only on average, but that each dimension of transformational leadership is more popular than the other three options.

Fourth place is the dimension of “Inspirational Motivation”, which attaches importance to incentive visons of the future and which is able to arouse feelings and actions among employees (Klaußner 2009, p. 202). This finding fits well with the preferred traits of figure 7, where having a vision and being inspirational belongs to the top results. Even more popular and both on the third rank are the “Intellectual Stimulation” and the “Individualized Consideration”. The “Intellectual Stimulation” hereby describes a part of the leader’s behavior, which increases the followers’ awareness of problem solving, imagination and values. The intellectual leaders are capable of formulating strategies which enable the transformation of organizations. Leaders who demonstrate high levels of intellectual stimulation transformational leadership behavior also tend to question old assumptions, traditions and beliefs (Bertocci 2009, p. 49), which matches the observation on Generation “WHY”, as they are also said to refuse to settle for an answer that they are given and that they will constantly question why things are the way they are (Jordan 2013, p. 126). As mentioned, “Individualized Consideration” seems to be just as important to Generation Y as the described dimension of Intellectual Stimulation. This term describes – like the name already indicates – a behavior of a leader, where he or she listens actively and identifies the individuals’ personal concerns, needs and abilities. They also provide matching challenges and opportunities to learn in a supportive environment, give developmental feedback and coach their followers (Gill 2006, p. 52). Nevertheless, the most important transformational factor for Generation Y seems to be the “Idealized Influence”. This dimension describes charismatic leaders who represent a strong role model for their followers. The subordinates identify themselves with the high moral and ethical demands of their leader whom they respect and trust. The leader becomes a source of inspiration and charismatic identification through the enthusiasm and past accomplishments (Winkler 2010, p. 41). This result is underlined by the findings of the preferred leader traits, where work ethic is for Generation Y one of the most valued characteristics of a leader.

In general, surveys show that Generation Y views leadership in a way which runs contrary to how this generation feels their current leadership teams operate. It shows a “leadership gap” between what Generation Y would prioritize if they led an organization and what they believe their senior leaders are currently focused on. Although they share the current leaders’ priority of ensuring the long-term future of the organization, they would place far greater emphasis on employee well-being and employee growth and development (Deloitte 2015, p. 3f.). Those needs have also been verified again by the results of the shown research study (Horeczy et al. 2011, p. 6). Moreover, social aspects like contributing to local communities and the wider society are more important than before. Less emphasis would be placed by this generation on personal income and short-term financial goals (Deloitte 2015, p. 3f.). The generation therefore has special requirements regarding their leadership, they want their work to be appreciated and respect towards employees is very important (Dahlmann 2014, p.85). According to the shown results, the theory of transformational leadership along its four dimensions seems to fit best to the preferences of the generation and seems therefore to be the most appropriate leadership style to use.

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