Transformational Leadership Theory in Relation to General Motors Recall Scandal - Case Study Example

Transformational Leadership Theory in Relation to GM Recall Scandal (Name) (University Affiliation) (Date) Introduction Over the recent past, there has been a significant proliferation of concern associated with poor leadership in the corporate world, not least because of several scandals in huge multinationals such Enron, BP oil Spill, Toyota pedal recall and even the recent case of Volkswagen gas emission scandals. Lack of proper leadership frameworks, as well as management ethics, has threatened not only the financial survival of large enterprises, but also the position of various senior corporate managers. In effect, this paper aims to analyse General Motor recall scandal of 2014, which was associated with its handling of faulty ignition switches. Using the charismatic and transformational leadership theory, the paper will also give a clear analysis of how organizational leadership can be associated with the issues surrounding the scandal. In 2014, General Motors was faced with an uproar with regard to its handling of a faulty ignition switch within some vehicles it had manufactured, an issue that led to several deaths and injuries (Bennett & Spector, 2015). Within the first four months of 2014, General Motors ordered the recall of nearly 2.6 million automobiles due to defective ignition switches that had been associated with over 100 deaths since 2007 (Bennett & Spector, 2015). Investigations ascertained that the faulty switches had the ability of inadvertently shutting off the vehicle engine as well as airbags when or motion or when one is driving. Some of the recalled car models included Saturn lons, Chevrolet as well as Cobalts. The following section will give a brief overview of General Motors Company. The subsequent section will discuss the theory of Charismatic and transformational in relation to the incident that occurred in General Motors. General Motors Company Overview Founded by William Durant in 1902, General Motors Company is known for designing, manufacturing as well selling of automobile parts and trucks to their customers across the globe. General Motors Company has grown over years and at some point before 2009, and it was considered as the leading auto manufacturer with regards to its burgeoning sales. Today, the company is operating in more than 157 countries and sells eighteen automobile brands thus satisfying the needs of various types of patrons located in different parts of the world. General Motors is the largest manufacturer of automobiles in the United States as it has scooped more than 18% of the automotive market share (GM, 2015). Its success can be linked with its profound knowledge in the automobile industry as well as its customers. Headquartered in Detroit, United States, General Motors also provides financial services related to automotive acquisition through its subsidiary known as General Motors Financial Company Inc. The General Motors Ltd. has four segments which include General Motors North America (GMNA), Generals Motors South America (GMSA), General Motors Europe (GME) as well as General Motors International Operations (GMIO). The firm is also engaged in the selling of cars as well as trucks to fleet clienteles who include renowned leasing companies, governments, commercial fleet customers and leasing companies. The General Motors Company often retails its cars to fleet clients both directly and through an extensive network of dealers located around the globe. Besides, the fleet of clients can as well obtain a variety of automotive aftersales services as well as products from the company’s designated dealers. Some of the aftersales car services include collision repairs, maintenance, vehicle accessories, light repairs as well as extended service warranties. Furthermore, the firm provided 13 FlexFuel vehicles in America for four models including the 2015 model to fleet as well as commercial patrons who are capable of operating on gasoline, E86 ethanol. Moreover, the General Motors North America is known to offer vehicles, which are manufactured, developed and marketed under the Chevrolet, Buick, Cadillac and GMC brands to its clients in North America. On the other hand, General Motors also offers vehicles to its customers outside North America under the Cadillac, Buick, Opel, GMC, Chevrolet and Vauxhall brands. Equally, the company is known to produce CNG bi-fuel capable cars such as the Chevrolet Express in the America as well as Opel Zafira in Europe. The company also develops vehicles that use liquefied petroleum gas (LPG) in selected markets internationally depending on regulatory and infrastructure aspects as well as the availability of natural resources in such markets. With regards to electric vehicles, General Motors produces seven different models linked with some form of electrification in America. Charismatic and Transformational Leadership Theory in Relation to GM scandal Before applying the theory of transformational leadership in General Motor’s recall case, it would be significant to delineate the concept itself thus highlighting the important aspects associated with this theory. First mentioned in 1973, the theory of transformational leadership is associated with charisma as well revolution (Moriano et al. 2014). The theory is closely linked to the type of leadership that causes change in the organization as well as the employees or followers. In its ideal form, the theory of transformational leadership creates valuable as well as positive change in the employees with the sole purpose of making them leaders at individual capacity. Enacted in its authentic form, this theory boosts morale as well enhance performance and motivation for followers or employees through various ways. Some of these mechanisms include linking the employee’s sense of self and identity to the mission as well as the collective identity of the company. In other words, the theory posits that charismatic and transformational leadership maintains that transformational leaders should be role models to the followers as well inspire them. Moreover, a charismatic and transformational leader should often challenge his or her followers to understand their strengths and weaknesses, take greater ownership of their work. As far as charismatic and transformational leadership is concerned, the leader is expected to align follower with duties that improve their performance. In 1979, James MacGregor Burns identified the theory of transforming leadership in his study as a process whereby leaders as well as followers assist each other to progress to a higher degree of motivation as well as morale (Roueche, Baker III, & Rose, 2014). MacGregor associated the difficulty in differentiation between management as well as leadership and argued that the differences are in behaviors and characteristics. In his descriptive research, MacGregor came up with models, that is, transactional leadership and transformational leadership. As MacGregor (1978, cited in Roueche, Baker III, & Rose, 2014) argues, the transformational leadership concept comes along with a considerable change in the life of an organization as well as people. In other words, it redesigns the perceptions as well as values of and alters aspirations and expectations of the staff. Different from the transactional model, the charismatic and transformational leadership which is founded on a “give and take” relationship is based on the leader’s traits, personality as well his or her ability to make a change. The leader can make a change through an enunciation of an energizing vision as well as challenging and acting as an example. The concept of charismatic and transformation leadership maintains that effective leaders should be somewhat idealized hence creating a perception associated with working towards the benefit of the followers, community, team as well as organization. According to Northouse, (2015) transformational leadership is the opposite of transactional leadership and the former works towards a cultural change in the organization while the latter is associated with maintaining the status quo and ensuring that the employees stick to the organizational culture. Looking in the General Motors Scandal, one would realize that the company’s dependency on a transactional type of leadership was harming the company’s reputation and in the long run, the organization could crumble down. As it would be delineated in this subsection, the company had to adopt a transformational type of leadership during and the recall. Before the General Motors recall, which happened after a new Chief Executive officer, Mary Barra, had been appointed, the company already knew about the problem several years back. Furthermore, it knew that it had produced and sold vehicles that had faulty ignition switches to the public, and this can significantly be attached to the poor leadership model that had been employed in the organization for long. The organization majorly relied on the transactional type of leadership instead of charismatic and transformational type of leadership (Argenti, 2014). In the previous management, the company’s employees had often raised the issue regarding the technical issues surrounding the ignition switches based on the report they had filed. However, since the leadership had a culture that depicted the leaders as the final decision maker and could not be questioned, it chose to ignore the continuous alarms that were raised by the employees. As the United States regulation indicates, in case a firm learns that one or more of the products are defective and could harm the customers, the significant step that the firm is supposed to take is to report immediately the issue to the National Highway Traffic Safety Administration (NHTSA) As Valukas (2014). Importantly also, the automotive company is required to take prompt measures to remedy the issue. In General Motors' case, issues linked with defective ignition devices was realized in advance, but due to the long-running internal problem in the firm, which, was associated with the transactional type of leadership forced the employees to keep quiet with the problem. Due to this conventional type of leadership, the employees not be could be incorporated into the highest decision-making management team to give their expert opinion. Apparently, the transactional type of leadership, which was closely linked to the organizational culture at GM, did not encourage the employees to speak up, but it focused on the bottom line. All these inefficiencies happened under the leadership of Dan Akerson, GM’s Chief Executive Officer who was replaced in December by a transformational leader, Mary Barra. According to (Frizell, 2014) General Motor’s problems began back in 2008 when the company experienced shrinking sales in a time when the company was already facing burgeoning labor as well as pension costs. The company continued to face financial issues until it was declared bankrupt hence seeking a $49.5 billion from the government as bailout (Frizell, 2014). Later on after the bailout, an alarming concern was being raised by stakeholders who believed that the Company’s leadership was in jeopardy hence a significant change was needed before the company could entirely fall. Consequently, Barra Mary was appointed to replace Dan Akerson and in January 2014, General Motors had a new leader who would later carry out a series of major transformations. Similar to what the charismatic and transformational theory posits, Barra came in with a different type of leadership that aimed at changing the organizational culture and incorporating the views of every stakeholder into the company’s decision-making process. Under her leadership, Barra went against the norm of hiding the company’s inefficiency by exposing what had happened with regard to the faulty ignition switch issues. This clearly reflects a transformational leadership whereby the leader is ready to accept and own up the mistakes that the company has done and gives a way forward or resolution. According to Hackman and Johnson (2013), one important trait of a transformational leader is that he or she admits error, in that he or she owns up to mistakes, instead of putting a great deal of energy into covering up. This aspect is a significant determinant of leadership ability. Unlike the previous leadership that chose to hide the faulty ignition switches hence bringing long-term problems to the company, Barra, who is a transformational leader chose to be open to the stakeholders thus bringing back the customer’s confidence. In her quest to bring transformation to the already negatively perceived company, Barra decided to address the ignition switch crisis that was now yielding an increasing number of law suits by issuing a recall for over 2.7 million cars. These vehicles included Cobalts, Chevy Saturn lons as well as other models that had been equipped with default ignition switch. Barra went ahead and gave out a statement relating to the faulty ignitions switches and the technical hitch behind them for the public to understand. In her statement, she asserted that the switch was faulty in the sense that it could turn to the off position or accessory position if inadvertently bumped or pulled down by the key chain’s weight. As such, when this occurs, the car’s engine, power steering wheel, power brakes as well as the airbags were disabled. Barra’s decision to come with a clear and succinct explication for the public was a bold step that is often typical with transformational leaders. As Moriano et al. (2014) posits, transformational leaders highly uphold business and organizational ethics thus often frank when an issue arises. According to him, the customers are very crucial to company hence they deserve the right to know the truth thus make proper decisions with regard to the purchasing the firm’s product. Besides, this concept is strongly buttressed by Owens et al. (2013) who believe that every leader has the obligation of providing his or her followers the proper information that is free of deceit. By the end of 2015, General Motors had verified nearly two thousand compensation claims associated with the victims who experienced accidents due to the faulty switch. In effect, Barra ordered an investigation to be done and consequently a hundred compensation claims were deemed eligible for compensation, as the defects were directly associated with the forty deaths, which had been reported (Muller, 2014). From the above analogy, one would realize that transformational leadership involves being pragmatic and taking care of all the concerns that may be raised by different types of stakeholders such as the compensation claims. As a transformational leader, Mary Barra, the firm’s first female Chief Executive Officer committed herself to try opening up the traditionally top-down line of communication between the workers and the management during her first ten months of tenure. This was to comply with all the investigations associated with the ignition switch issue. Accordingly, Barra ordered an internal investigation to take place in General Motors to get the course of the problem. Later, Barra appeared before Congress four times regarding the incident admitted on record that the old GM management had indeed done a grave blunder as they knew about the issue but decided to conceal every detail. Moreover, Barra fired fifteen employees from GM, who had the knowledge about the issue but did not alert the top management (Fletche, 2014). Besides, she also started implementing new corporate culture incentives (Wayland, 2014). By coming out clearly and showing where the problem was and doing away with the top-communication style, which is associated with a dictatorship kind of leadership, Barra depicts an actual type of a transformational leader who is obsessed with change and often implements new ideas irrespective of who proposes them. Just like Burn (1978, cited in Roueche, Baker III, & Rose, 2014) indicates in his study, a transformational leader often incorporates the views and opinions of his or her followers and does not apply the supervisor-junior ideology when making daily decisions that affect the firm’s daily operations. Reflection From the lessons covered in class, as well as when tackling this assignment, I have gathered significant insights that have so far changed my perception towards leadership. Prior to the leadership lessons, I held this view that leaders are the sole decision makers and as such what they believe is right for the organization is what should be embraced. However, after learning about various leadership theories, specifically, the Transformational leadership model, I learned that leadership entails motivating the followers and sharing with them the visions and embracing their views as well. As Burns (1978, cited in Roueche, Baker III, & Rose, 2014) argues transformational leadership occurs when leaders alter the attitudes as well as the beliefs of the subordinates. Accordingly, they inspire workers in their own interest parallel to the firm’s success (Moriano et al. 2014). These leaders facilitate new ideas by altering the approach on issues. Furthermore, they foster excitement and inspiration to put extra efforts in achieving common goals (Dubrin, 2015). Burns (1978, cited in Roueche, Baker III, & Rose, 2014) summarizes transformational leadership by basing it in four facets: communication, charisma, individual consideration and intellectual stimulation. From the research I did with respect to this assignment, I have learned that transformational leader’s way of working is based on intellectual stimulation (Owens et al., 2013). More often than not, transformational leaders work out of the organizational culture as they challenge the existing status quo and are not afraid of failure. In additional, they often promote an environment, which is safe for having conversations, a place where subordinates feel valued and an environment that is creative and voice ideas (Efferin & Hartono, 2015). Ideally, the transformational leaders think outside the box regardless of the organizational norms to inspire passion within their teams as well as peers. For in instance, a manager may encourage workers to use their formulas in carrying out their task if they so wish; they are not confined to the routines and norms of the organization for its success. Ultimately, transformational leadership is turning “me moments into we moments.” I also agree with Gumusluoglu and Ilsev (2009), who maintain that Transitional leaders work with subordinates based on individualized consideration. In effect, transformational leaders treat workers the way they want to be treated. They regard individual desires, as they are different. Moreover, these leaders have learned to adapt their style in accommodating the skills and people in their team. I also find Heuston and Wolf’s (2011) assertion that transformational leadership is associated with Idealized influence true. A transformational leader leads by example and is a mentor of all sorts. Through their charismatic vision and behavior, they engender loyalty, trust, respect and admiration amongst the workers. These leaders achieve this, through delineating a vision as well as explaining how to attain it in an appealing manner. Second, they lead by example, share risks with subordinates and act confidently and optimistically. Third, these leaders emphasize values and reinforce them through symbolic actions. Lastly, they often display a high level of moral conduct and ethical behavior. I also learned that transformational leadership a leader will require a decision-making capability that works for the greater good (Harbin and Humphrey, 2015). Muenjohn, (2015) asserts that value-based leadership is often necessary in driving a sustainable change since it ensures results are based on a strong ethical and moral foundation. In this regard, they can always stand up any scrutiny as well as resistance to change. Ultimately, managers who employ idealized influence on their subordinates gain confidence and trust of their followers (Muenjohn, 2015). It is therefore evident that in any given situation, workers will always admire a manager as a role model based on how he makes decisions. Transformational leaders persevere through conflict: research shows that transformational change creates conflict. Accordingly, through transformational change, the managers will experience resistance as well as people ignoring them (Miner, 2015). As such, a transformational leader knows how to bring all such kinds of people to work with him or her. Conclusion In summation the paper has comprehensively applied the theory of charismatic and transformational leadership on the General Motors’ ignition switch scandal. The paper has further given profound insights to how transformational leadership can be of significance to the organization as opposed to transactional leadership style. The paper has also indicated how Transformational Leadership can always impact each unit in the organization in positive ways. As such, the organization can benefit a great deal from transformational leadership, as it is not resistant to change. References Argenti, P. L. 2014, March 11. 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