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Term Paper (Advanced seminar), 2018
12 Pages, Grade: 1,3
List of figures
List of tables
2. Underlining complexities and paramount challenges
3. Leadership style of Sergio Marchionne
4. Change Management at the Fiat Group
5. Future recommendations for Fiat
7. Statutory Declaration
Figure 1: Four I’s of Transformational Leadership
Figure 2: Kotter’s 8 steps of transforming an organization
Figure 3: The New Fiat Group - A New Focus on Leadership as the Instrument of Change
Table 1: Traits applied to Fiat’s CEO
Abbildung in dieser Leseprobe nicht enthalten
Since market power has moved from enterprises to consumers, and global competition has increased substantially, managers in almost all industries need to face enormous per- formance challenges. To avoid red figures, they are forced to be more innovative in estab- lishing and performing their competitive strategies. Long-term success will not be achieved solely through competitiveness but instead will depend on the ability to adapt to changes in a business’ environment and develop a consistent leadership style.
Everything belonging to this part of the paper is traced back to the article in the Fortune Magazine (2007). The first thing when reading through it, describing how the new CEO in charge of the Fiat Group, Sergio Marchionne, saved the traditional Italian car manufactur- er, that attracts attention are several complexities and challenges to be faced when over- taking this heavy scepter. As a first and simultaneously enormous challenge, Fiat Auto- mobile’s share of the Italian market dropped from 52% in the 1990s to less than 28% in 2003 (page 34). In addition, the company was predicted to lose more than one billion USD in 2004 (page 33). It is assumed, that the main reason for above-mentioned problems was the neglect of the automobile division while expanding into banking, insurance, and ener- gy (page 34). Moreover, the culture within the whole group was outdated in terms of sus- tainability and unused capacities, no well-funded responsibility structure, low investments, and a totally static management (page 34). To make it even worse, strikes against job cuts took place (page 34) and completely wrong sales forecasts, e.g. only half of Fiat Stilo’s expected amount sold, reinforced the disaster (page 35). Furthermore, the Italian enterprise had four CEOs in a row within three consecutive business years due to deaths of Agnelli family1 members, who still own 30% of the Fiat Group.
Additional complexities and challenges for Marchionne included the company’s shield between the different brands, since engineering processes, like research, design, and manufacturing were carried out completely independent for each brand of the Fiat Group (page 35). To give an example, the comparatively size related cars Fiat Stilo and Alfa Romeo 149 did not share any common elements throughout the whole manufacturing procedure. The necessity to merge processes within the entire group might have been the biggest challenge for the CEO, who described Fiat as “… a very hierarchical, status-driven, relationship-driven organization. ” (Sergio Marchionne, Fortune Magazine, 2007, page 35).
It is for all those reasons, that Marchionne was forced to take action, in form of restructur- ing the whole group from production, over sustainability to the management level, imme- diately.
“ A leader is one who knows the way, goes the way, and shows the way. ”
John C. Maxwell
This quote by John C. Maxwell, American author and speaker, famous for his main focus on leadership, seems to be a short and concise definition of a leader, on the first view. But, when dicking deeper into this specific topic, it becomes clear that it is not only about knowledge, going ahead, and showing the way, but further about influencing, motivating, communicating, representing, and understanding the employees.
Sergio Marchionne, CEO of the Fiat Group, applied all the mentioned criteria by mixing those together in an inimitable way, e.g. Luca De Meo, at this time in charge for the Lan- cia brand, said that “… Marchionne has a real ability to read people ’ s psychology. ” (For- tune Magazine, 2007, page 33). His leadership style is highly diversified since on the one hand, he admits using unorthodox approaches is considered as normal in this industry (page 34), like replacing people starting from the very top management and firing an addi- tional 2,000 employees in and around the headquarter in Turin. At this time, he recruited a lot of outsiders and promoted talents from the middle ranks of the industry to bring fresh air into the old-fashioned organization. On the other hand, he wants his executives to take risks and gives them a lot of freedom which is nevertheless linked to the delivery of re- sults, of course. Furthermore, when he received the information of 2,000 Alfa Romeo cli- ents calling the company without any response, he wanted all of them to be called back with excuses, again showing his caring side for one thing, but his dominant and focused leadership style otherwise. Additionally, he sometimes demonstrated an aggressive style of leading, e.g. when he formed collaborations with China, Russia, India, and Turkey to sell Fiat cars through local dealers, and in early 2005, when he made a deal with General Motors worth two billion USD in exchange for canceling a former agreement. Employees confirm, that he is extremely tough and always focused, but anyway they know they can trust him, because he has a warm side from a human point of view, as well. Lastly, his workers mention that betimes they see him acting as kind of an imitator, but not in a nega- tive way of thinking, when considering competition, since he is often linking processes to global champions like Toyota and also Apple.
In the following, the focus is on describing, explaining and applying leadership models, which include trait theories (linking good leadership to personal characteristics), style or behavioral theories (mainly about relating good leadership to a certain behavior respec- tively style), contingency or situational theories (connecting good leadership to adaptability in various situations), and last new leadership approaches (mixture and advancement of the other concepts). As seen before, in theory, many leadership models do exist, but it would go beyond the scope of this paper to present all of those in detail, so subsequent the concentration is solely on trait theories.
The first hypothesis might be that people are deciding between physical, inherited, and personality characteristics of a leader, but in real life, it is much more appreciated how the leader acts and behaves towards the personnel. In the 1950s, it was stated that the traits did not seem to be sufficient predictors for leadership effectiveness, but since the 2000s, new empirical research proved that some leadership traits are able to foretell leadership effectiveness.
Table 1: Traits applied to Fiat’s CEO: Author’s own illustration (according to lecture notes)
Abbildung in dieser Leseprobe nicht enthalten
To sum up, it is essential to know that these traits do correlate, but are not able to declare leadership effectiveness completely, since other variables like leadership behavior and situation management do have an impact, as well. Sergio Marchionne seems to be a very effective leader when looking at the results of Table 1, which are directly linked to statements of his employees. Anyway, this outcome is solely based on one of many models, so a profound analysis to publish a significant result is needed.
Another concept, Transformational Leadership, is mainly about motivating your person- nel intrinsically, so creating a feeling of being part of the success, by e.g. changing their behaviors and awareness in terms of focusing more on interests and priorities of the en- terprise instead of solely on their own ones. This might be achieved by the leader through being a role model, inspiring them for goals and visions of the company, push them to make the most out of themselves, and take care of their individual circumstances.
Figure 1: Four I’s of Transformational Leadership: Author’s own illustration (Avolio, et al., 1991, pages 9-16)
Abbildung in dieser Leseprobe nicht enthalten
A transformational leader typically shows the four I’s of transformational leadership, illustrated in Figure 1, which were established by Avolio, et al. in 1991. Sections highlighted in dark grey are related to the leader, whereas the light grey ones to the personnel. Mainly a leader is in charge to demonstrate integrity, inspire himself before convincing others, illustrate empathy and respect towards employees, giving guidance, and bear in mind to not expect anything from his personnel that he cannot deliver himself. In contrary, the followers should see their leader as a role model, trust him, should be inspired by him, feel safe and comfortable, and experience challenges and stimulation to achieve the firm’s goals.
When looking at Sergio Marchionne’s leadership style, many overlaps to the theory of Avolio, et al. (1991), like trust and respect, feeling safe and comfortable, and feeling challenged, are counted among his characteristics according to employees (Luca De Meo, Fortune Magazine, 2007, pages 32-37). It seems as the CEO of the Fiat Group is perfectly aligned to the four I’s of transformational leadership, since he is fulfilling all criteria. Any- way, when reading between the lines it sounds like Sergio Marchionne is delegating but not giving too much guidance in advance (Fortune Magazine, 2007, page 33).
From the beginning of this chapter, the concentration was primarily on the leaders’ behav- ior, skills, and characteristics, but it is fundamental for them to understand how their em- ployees are behaving in terms of needs they have and values they consider as important. For the last decades, hardly anybody focused on doing research on followers, but this topic became more and more important over the years and that is why the interest in this field increased enormously. According to Kellerman (2007), Robert Kelley, executive coach Ira Chaleff, and professor Abraham Zaleznik from Harvard Business School were pioneers in this field of studies, since they were the ones who set the ball rolling by classi- fying employees in terms of their personal characteristics and behaviors at work. Zaleznik subdivided subordinates into dominant versus submissive and active versus passive peo- ple and ranked them afterward, whereas Kelley classified them into five types referring to independence and activity. In contrary, Chaleff subdivided followers into four categories based on the degree of supporting and challenging the leader as an employee. As the working environment is underlying a dramatical change due to continuously published new regulations, democratic change, education systems, and migration, these frameworks might still be applicable but need to be adjusted to recent circumstances. Overall, it is im- possible that there is a leader without at least one follower! Since every leader is enor- mously dependent on his employees he is in charge to not only understand their needs and values but also their personalities and specific circumstances of various situations. When looking into the case of Fiat, it seems that Sergio Marchionne put interest into pri- vate life of followers at an executive level, e.g. Antonio Baravalle, at this time head of Alfa Romeo, stated that the CEO always respected the time with his daughter, but there is no evidence that he treated the subordinates of lower levels in the same way.
To sum up, leadership is not solely about applying theoretical frameworks in terms of styles and skills, formulating a vision, and delegating others, but also about the leader’s behavior, characteristics, and ability to understand followers’ needs, values, and personal- ities. When referring to Fiat, Marchionne definitely fulfilled a lot of the underlying criteria and that is why he might be seen as an exceptional leader in a theoretical and practical point of view. Anyway, according to his subordinates, he could have done better in giving guidance before delegating work.
The following section concentrates on introducing Kotter’s eight steps of transforming an organization and applying each of those steps to recent change management processes at the Fiat Group.
Before getting started with Kotter’s model, it is essential to explain why change manage- ment is fundamental for every organization, whether SMEs or global players, and how it interacts with leadership. On the one hand, change is seen as a necessity and an oppor- tunity to generate competitive advantage, but on the other hand, it has to be considered that changes in the environment might influence enterprises’ performance negatively. Since primarily macroenvironmental changes may have a high impact on a firm’s efficien- cy, an up-to-date PESTEL- analysis can help to prevent unpleasant surprises, especially when disruptive changes take place.
1 In 1899, Giovanni Agnelli (1866-1945) and a group of investors founded the company Fabbrica Italiana di Automobili Torino, Fiat (Wikipedia, 2018).
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