Managing Organizations during Crisis - Case Study Example

Managing Organizations during Crisis Name Institution Tutor Date Introduction Transformational leadership is an approach that comes up with clear goals and expectations, encouraging others, offers support, recognition, stimulation of emotions, self-reflection and inspiration, and acts as a fairness and integrity role model (Ahmad et al. 2014). It involves ensuring that social systems and individuals are changed, with the end result of being developed into leaders in themselves (McCleskey 2014). The leader will identify closely with what needs to be done, come up with a vision that will inspire everyone and ensure that implementation is done with maximum willing support of all members (Brown & Harris 2014). This is especially important nowadays, because globalisation has brought competitive challenges which require businesses to be as adaptable as possible, hence the importance of transformational leaders (Bremmer 2014). This paper discusses the idea of transformational leadership, outlining its advantages and obstacles as an approach, and what organisations need to do during times of corporate crisis in terms of leadership. Advantages of Transformational Leadership during Crises Transformational leadership plays a major inspirational role (Chou et al. 2013). In its execution, the leader will usually motivate his followers through enabling them to share a vision, and because he or she will usually show enthusiasm and passion for what is to be done, team members are rallied more easily towards maximizing their performance (Soliman 2014). They will motivate the employees in the most skillful way, with positive effects on the outcomes of business, especially productivity (McCleskey 2014). As each employee takes part in the achievement of set goals, they will tend to become more integrated into the group, hence a form of psychological contract is created with the leader and the organisation in general therefore commitment (Wilson 2013). During a crisis therefore, the leader will use the passion they have to gather employees and have them directed towards one direction, and his or her energy will be transmitted to every other employee. Transformational leadership is a good approach because of its provision of a clear standard for performance. According to Chou et al. (2013), the aim of transformational leadership is to increase performance, morale and motivation levels through providing inspiration, improved identification with the organisation and mission and acknowledging everyone’s strengths and weaknesses so that individuals can be harnessed in the best way that will ensure maximum performance. Brown & Harris (2014) add that the transformational framework usually makes it possible to make a swift assessment of the state of the organisation and knowing exactly how it should be changed, through alignment with the vision and mission. A transformational leader will therefore pursue a clearer communication of the vision, as a result of which the leader can easily handle crises as they always have the big picture of the problem at hand. Transformational leadership will ensure greater job satisfaction. The workforce is the main resource that will help the organization to cope (Day & Moorman 2012). Organisational culture is always about basic philosophies, financial interests and technical concerns, and the transformational leader will on his part work on changing the culture by means of organisational values, policies and norms (Cummings & Worley 2013). An effective transformational leadership will try as much as possible to recognize the needs of followers, provide a vision and motivate them to put more effort that they normally would while conveying inner strength and maximum self-confidence (Beatty 2015). Meanwhile, job satisfaction is closely related to whether the approach of leadership is transactional or transformational. According to Ahmad et al. (2014), the satisfaction of employees is greater when a leader applies intellectual stimulation and commitment to vision rather than application of contingent rewards. Related to this, the approach promotes the development of people skills. Jati et al. (2015) argues that the transformational leader will use the vision as a way of clarifying the objectives and refocussing the organisation’s direction. When the leader is intellectually stimulating, the followers are also likely to be creative and innovative, as they are able to view challenges in new perspectives and will be questioning previous assumptions. Transformational leadership will help to minimize costs in competitive pressure. According to Day & Moorman (2012), this is especially in relation to customer and employee turnover as the leader will always work towards satisfying their needs, while aligning them to organizational objectives. Sohmen (2013) believes that as a result, a better corporate fit becomes possible amongst employees. With lower turnover, there is a decreased training and hiring costs, which will help to maximize productivity and profitability. During the leader’s interaction with customers, there is a greater retention rate, which will in turn mean less marketing costs. In the meantime, organisational learning will be facilitated. İkinci (2014) adds that organisations always train their employees as a way of enhancing performance. When a transformational leader facilitates corporate learning, there is the possibility of improved effectiveness amongst staff, hence competitive advantage. Examples of Transformation: IBM International Business Machines (IBM) is usually cited as one of the greatest cases of a corporate turnaround after crisis. In 1993, it was in extreme financial crisis. The entry of Louis V. Gerstner as CEO however saved it (Day & Moorman 2012). There was initially a lot of focus on internal conflicts and rules, with units competing hard with one another and keen on protecting its own prerogatives and privileges. To deal with these, he instituted cultural change. Teamwork was given a new value in place of the previous consensus-building and customers were henceforth considered as being people who simply wanted solutions. In its new tradition, the company further took up an open standards policy unlike in the past. In the transformational process, Gerstner tried to create conditions that would favour the transformation and offer incentives to embrace it. E-mails were consistently sent out to employees to update them on what was being done, and the compensation system was adjusted so as to base rewards on overall corporate performance instead of unit performance as was the case previously. Rules for employee promotion were also radically changed (Davies 2016). Ford Motor Company When Allan Mulally became Ford’s CEO in September 2006, the company was in trouble. The stock price was on a declining trend that brought it to a $1.01 per share by 2008. It was also deeply in debt, leading to a historic loss of $12.7 billion in 2006. It was believed that Ford would go bankrupt, but this never happened. Mulally’s strategy involved realignment of personal leadership where he tried to understand his priorities, values and how they would contribute to organisational success. There was also a focus on teamwork and fixing external relationships with customers and suppliers. His philosophy additionally aimed at integrity and authenticity and development of talent as a way of reaching the turnaround’s objectives. Cultural change involved the development of honest, straightforward and open communication, and Mullally started with personally pitching his proposal to the biggest American banks, and within ten days, enough money had been raised to finish car designs and keep the company afloat for three years even with a deep financial crisis. There was also strengthening of an objective of being the best corporate citizen, as for instance it opted to avoid taking any funds from the government because Mulally felt that Chrysler and General Motors deserved them better (Hitt et al. 2013). Obstacles to Transformational Leadership Effectiveness The implementation of transformational leadership is often faced with a number of obstacles. These include resistance to change from the employees’ side (Wilson 2013). According to Hughes (2015), this arises from the normal dynamics of any disruptive process. As a result, the transformational leader’s efforts are likely to encounter considerable resistance. Bremmer (2014) notes that this may be worsened by a rigid, risk-minimizing culture. In case for instance the corporate culture emphasizes the protection of everyone’s territory as was the case at IBM, then transformative efforts are likely to be faced with challenges. The risk of failure is in this case lesser when collective success is valued more than individual achievement. Inadequate motivation is a great obstacle to transformation. According to Poole & Holt (2013), the entire organisation needs much more than the willingness to remain avoid remaining within the status quo. Motivation is only achieved successfully where reinforcements are altered. In many instances however, organisations choose to use the same kinds of reinforcements throughout, even when they expect a change in behavior that is transformational in nature. Additionally, ineffective communication can significantly limit transformation. Kamarudin et al. (2014) suggests that radical change will need the communication strategy to be different from day to day processes. The most important thing to do here would be to adjust psychological cues that are expressed in such communication. For instance, the need to pursue a radical transformation might need to be accompanied by a change in media used. Additionally, lack of clarity in scope can pose a great challenge. Transformational change therefore needs to be accompanied by a clear plan, yet in some cases there is the pursuit of different objectives simultaneously, which might imply several actions needing the same resources. What Organisations Should Do The leadership must come up with a structure that will enable it to understand and respond to the changes that are brought by crises (Banks 2012). According to Poole & Holt (2013), the transformational leader will help his followers to get through the process of making sense of the situation, therefore reducing the amount of stress that they will be undergoing in the uncertain times through inspirational motivation. He can further reframe the chaotic events that arise and convert them into opportunities that they can act on. Sohmen (2013) argues that when the vision that he has formulated it compelling enough, the goals that are set will be forward-looking hence promote team spirit while offering the best guidance while unifying the followers towards the goals and identifying the expectations on how the future is to be. During crisis situations, effective leadership will further need to be provided. According to Jati et al. (2015), the leader should particularly empower followers through delegation of tasks, promotion of independent thinking, encouraging self-awareness and a tendency to challenge the current situation. Soliman (2014) adds that the person will also ideally raise followers’ awareness by being a role model and verbalizing the ideals suggested by the vision. Apart from implementing transformational strategies, there will be the need to sustain the support of leadership by top management, as the transformation is likely to last for a relatively long time. There is usually the possibility that resources may be diverted elsewhere due to distractions even before the transformation agenda is fulfilled. Management will need to predict the possibility of a lot of change occurring in leadership, hence the need to secure the support from the new faces that will rise. The organisation needs to ensure proper discipline within its governance structure. In case for instance the transformation process is to be done across the organisation, management should ensure that the approaches applied are unified, and that there is a reliable oversight mechanism for what is happening (Davies 2016). Whoever is sponsoring the process will in this thinking need to be provided with a good line of sight, right from the strategy to its portfolio and eventually projects and or sub-projects, otherwise there will be indiscipline that will compromise transformational outcomes.   Critical Analysis  Crisis situations require leaders to offer inspiration, motivation and guidance to a greater extent (Haddon et al. 2015). Therefore, an ordinarily effective leader might not be as good during crises. Based on the discussion, transformational leadership is the ideal. However, in addition to the identified obstacles, transformation is likely to be difficult because it may not be easy to predict the future, therefore some element of trial and error might become necessary as information is acquired. Because of this, the idea that transformation can really be managed becomes questionable, especially if a rigid plan is to be used. From the discussion also, a lot of resistance is likely to be generated, as a result of which the leader could be forced to come up with a clear plan. Even with the communication that has been recommended, an entire emphasis on communication might still produce resistance. Nevertheless, leaders have a significant role to play in the transformative process. Because the desired state of the organisation will be very different from the current one, culture has to be changed and a new mindset and organisational environment has to be adopted, making it necessary for everyone to change their worldviews. Conclusion Transformational leadership involves getting the best out of employees, through provision of inspiration and guidance. This is important especially because in a globalized world, the need to be competitive has become even more important. Transformational leaders provide a better approach through inspiration, performance standards, skill development and cost minimization. However, it usually faces obstacles such as resistance to change, inadequate motivation, ineffective communication and lack of scope clarity. Dealing with crisis situations especially requires adequate leadership, discipline and governance. Although there are limitations therefore, transformational leadership is a major instrument for dealing with crisis situations in an increasingly challenging global context. Reference List Ahmad, F., Abbas, T., Latif, S. and Rasheed, A. 2014. Impact of Transformational Leadership on Employee Motivation in Telecommunication Sector. 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