The Role of a Leader and its impact on Organisational Performance

PURPOSE OF STUDY?

The aim of the study was to find out about the qualities of a good leader by understanding different kind of leadership behaviours of leaders and we also found out the impact of leadership behaviours on organizational performance. One of the main, reason of study is to find out the importance of a good leader for an organisation with the help of case study of two companies namely- Tesla and Nokia. Through the case study we tried to find out what was the reason of failure of Nokia and success of Tesla and what role did the leaders had in their failure and success respectfully. We also tried to understand the concepts and types of leadership behaviours. Through the study we tried to demonstrate that the role and importance of a leader for an organisation. Therefore, the purpose of this paper is to explain how the leader plays a role for success or failure of an organisation.

INTRODUCTION – What is leadership?

So, who’s a leader? Leadership means different things to different people around the world We often hear that leader is someone who takes important decisions for the growth of any organisation. I think in that way everyone is a leader because everyone takes important decision of their life in order to grow as a human being.

Leaders play a key role in any organisation because not only they help others but they also inspire, set direction and build a vision for their organisation. Leadership is about mapping out the road for the organisation in order to achieve their goal. Not only leaders set direction but they also guide the people with proper management skills to move towards the right direction in a smooth and efficient way. (“What Is Leadership?:”)

WHAT MAKES A GOOD LEADER?

A good leader knows how to lead. A good leader shares his vision with other. And it’s only when you inspire others that a collective purpose can be expressed to lead the commitment and determination of the whole team. What does Vision mean? Vision is not only a pitch to the leader but a more philosophical matter, it is “why we are here”, “why we work”, “what are our goals”. A good leader knows how to motivate his co-worker to work in order to achieve the goal. Another key factor of any good leader is transparency. Transparency can be another tool for leaders to motivate their co-workers. (“What Is Leadership?:”)

Why is leadership important

The leader is in the team’s service, and not the other way around. The co-workers must feel the support and trust shown by the leader. Because when you show trust on somebody then other person gets motivated more in order to not break your trust on him. The co-workers should understand that there is a person who is there to correct your mistakes and give recognition for their efforts. Another key element of a good leader is emotional intelligence. The leader should understand what his co-worker is going through so that they can understand their problem and solve it. Having empathy is important for any leader. A good leader is the one who is able to create a good working environment for his co-workers. A good leader is the one who not only leads and guides the organisation but a good leader is the one who is ready to listen to people. One of the biggest challenge faced by leader is people management. Leadership is important because the leader is responsible to keep the team motivated to act towards achieving the common goal. A leader is the one who is responsible to do the work and take the risks which others aren’t taking and at the same time the leader should have the courage to rectify and accept his mistake without blaming on others because this will give confidence to others to take decisions without any hesitation. (Team)

How Does Leadership Work?

In industry, leadership is related to performance, and that must be taken into account in the concept of leadership. Therefore, while leadership is not intrinsically related to benefit, those who in corporate environments are seen as successful leaders are the ones who improve the bottom line of their organization. Although there are individuals that appear to be instinctively equipped with more leadership qualities than others, by developing necessary skills, everyone can train to become a leader. History is filled of people who have come to the center in emergencies and convinced everyone to pursue their proposed form of action, despite possessing no prior leadership experience. They had attributes and abilities that allowed them to move into leadership positions. (“What Is Leadership?”)

Leadership can be defined in many ways as there is no set definition of it because every leader has his own style of leadership according to which the culture and direction of the company is built. But in a organisation its better to have definition of leader than no definition so that there is a clarity on what is expected of a leader of that organisation. (Morgan)

Why organisations need good leader?

For maximum efficiency, organisations require good leadership. Both human psychology and expert tactics are dealt with by organisational leadership. Organizational leadership emphasises the acquisition of appropriate leadership qualities and skills through organisations. It implies people’s willingness to tackle the tough times in the company and continue to thrive during those times. It specifically defines the leaders and distinguishes them from the managers. A good leader should lead the people under him, offer everybody a feeling of purpose to effectively attain corporate objectives and act responsibly.

Organizational leaders articulate organisational mission, strategy and agendas clearly in order to establish morale for workers, maintain successful company operations; help employees improve effectively and make a positive contribution to the mission of organisations. (Morgan)

7 major reasons for leadership failure:

  1. Over-confidence: Excessive of anything is bad and such is the case with confidence as well. People normally tend to overestimate their capabilities and expectations. People need to understand that confidence is good but not overconfidence. Even under-confidence is a reason for failure. (Morgan)
  2. Poor attitude: Leaders are expected to be pillar of the organisation who motivates and encourages its co-workers. But if the leader himself lacks motivation to work and has poor attitude then it will have a negative effect on people working under him. (Morgan)
  3. Failure to delegate authority: Poor leaders are those who blame its co-workers for failure of task and don’t take the responsibility of it .And yet don’t give them the authority to carry out assigned duties(Morgan).
  4. Blindness to reality and having wrong expectations: It is important of any leader to know what’s going on and also its wrong to have false expectations as well. So as a leader its important to be aware of reality and be practical(Morgan).
  5. Failure to communicate a vision: As a leader not only its important to create a vision for which the whole organisation needs to collectively work upon but its also important that the workers are clear about the vision and the way to achieve it. (Morgan)
  6. Failure to listen, Ignoring relationship building and Lack of social skills: No leader knows everything but individual knows something hence leader should be open to ideas and should be ready to listen to its co-workers as it will help him take better decisions. In this way you are not only giving importance to your co-worker but also building good relations. (Morgan)
  7. Leader refuse to adapt: In today’s fast changing world it’s important to adapt depending on the need and requirement of the time. Being flexible is important for any leader. (“Top 10 Reasons Why Leaders Fail”).

Consequences of bad leadership on organizational performance

1. Loss of motivation to work leading poor work culture: If there is poor leadership then it will have a negative impact on whole environment as the workers will lose motivation to work, come up with innovative ideas or contribute to company growth. (Hopkin)

2. Poor sales performance: According to AZCentral, poor leadership will have direct impact on sales as according to them poor leadership will lead to poor sales since there is lack of motivation and purpose to work which will indeed result in low productivity and the organisation won’t be able to achieve its targets. (Hopkin)

3. Lack of ownership and transparency:

A good leader may inculcate the importance of responsibility to his or her team-mates. On the other hand, a weak leader makes individuals feel oblivious to accepting responsibilities within the organisation for their own jobs. Weak leaders may appear to struggle to be accountable to their staff. (Hopkin)

4. Mismanaged resources

A resource is a waste or useful depending on how the user uses it. So, poor leadership can not only negatively effect the sales of the company but a poor leader doesn’t make best the best use of the resources which results in huge loss as the resource gets wasted and even lot of time goes in vain in order to correct it. (Hopkin)

5. Lack of coordination and teamwork

A poor leader just looks after himself rather than other just to look good in front of the top management in expense of others. Which leads to bad relations, distrust etc. (Hopkin)

6.. Lack of direction

Poor leaders lack the ability to set a direction for his/her team which is due to their lack of vision. (Hopkin)

Different leadership styles AND Relationship between Leadership Styles and Organizational Performance

Leadership has a relationship of direct cause and effect with organisations and their performance. Below is a brief overview of the above traditional leadership types and their possible effect on a group and their relative utility.. (“Leadership Style And Organizational Impact – Library Worklife:”)

  1. Autocratic leadership and Organizational Performance

Autocratic leaders are classic forms of “do as I say.” Autocratic leaders are harmful for any organisation as they force their employees to work on subjective idea of what success looks like in a very narrow way. Due to such leadership there is no mutual goal or motivation in the team.(“Leadership Style And Organizational Impact – Library Worklife:”)

  • Bureaucratic leadership and Organizational Performance

Bureaucratic executives develop strategies to accomplish corporate priorities and focus on them. Policies guide implementation, plan, priorities and performance The actual challenge or challenges involved with the use of leadership policies are not necessarily evident until the harm is done. The risk here is that the biggest rewards of leadership empowering and improving persons, are neglected by bureaucratic leaders. Policies are clearly ineffective for the role of empowering and building interaction. The basic risk for bureaucratic leaders is the assumption that policies come before persons, and opposition or disinterest is typically met with protests to that effect. Policies are not in themselves harmful, but policies that are thoughtlessly designed and automatically enforced will de-motivate workers and frustrate desired performance. (“Leadership Style And Organizational Impact – Library Worklife:”)

  • Democratic leadership and Organizational Performance

As the name suggests that it is democratic i.e. instead of one specific leader, the group leads themselves. The problem with democratic leadership is that 

It sounds easy enough. Instead of one defined leader, the group leads itself. The key issue with democratic leadership is its implicit expectations that everybody has a fair interest in the results as well as mutual decision-making degrees of competence. Rarely is that the case. Although political leadership sounds fantastic in principle, in its own sluggish phase, it is always bogged down, and workable outcomes typically take a massive amount of effort. (“Leadership Style And Organizational Impact – Library Worklife:”)

  • Charismatic leadership and Organizational Performance

Charismatic leaders have a vision in mind and have a personality that motivates all the co-workers. But the only problems that lies in Charismatic leadership is that if the leader leaves the organisation then the co-workers will be left with no direction and vision.(“Leadership Style And Organizational Impact – Library Worklife:”)

  • Situational leadership and Organizational Performance

Situational leadership suggests that the best leaders are the one who are flexible and can adapt different styles depending upon the situation. The problem rises if the leaders choses the wrong leadership style. (“Leadership Style And Organizational Impact – Library Worklife:”)

  • Transactional leadership and Organizational Performance

Transactional leaders are those who will give you something in return if you follow them. It can be a promotion or raise etc. But the problem is the expectations.

(“Leadership Style And Organizational Impact – Library Worklife:”)

  • Transformational leadership and Organizational Performance

Transformational politicians are seeking to modify those they are leading. They will portray sustainable, self-replicating leadership doing so. Transformative leadership is widely valued because it has no arbitrary buy-in limitations but rather relies on bringing followers on board based on their own developing reasoning process and shifting reactions to problems in leadership. For fast-paced, change-laden environments that involve innovative problem solving and customer loyalty, it is especially suitable. (“Leadership Style And Organizational Impact – Library Worklife:”)

Let’s try to understand the role of Leadership in a Organisation better with help of case study of 2 companies.

Through these case studies we are trying to understand the reason of failure and success of the companies and what role the leaders played in it.

NOKIA

Nokia was a brand which built name for itself that contributed to the revolution in mobile phones. It developed quickly to be one of the world’s most noticeable and valuable brands.  Although its journey to the peak was swift, so was its descent. (“5 Reasons Why Nokia Failed In The Mobile Phone Market”). Let’s now try to understand few important reasons why Nokia Failed:

  1. Focusing only on one aspect:

Nokia as a brand had kept its focus only on one hardware as it didn’t get associated itself with Android with the help of which it could have made a comeback in the industry. Instead, it went on to get associated with Microsoft which resulted in huge loss for both of them. Hence, it was a bad decision to stick to one hardware and later on joining with Microsoft and not Android. Which proves that a leader should have good decision-making skills. (“5 Reasons Why Nokia Failed In The Mobile Phone Market”)

  • Lack of innovation: Nokia lacked innovation as in a era of 4G also it struggled to have 3G since it didn’t had 3G enabled phones. Although later on Nokia tried to make a comeback with the Asha series but by then everything was over for them. Risk aversion and wrong decisions led to failure of Nokia. (Shrivastava, and Gupta)
  • Not becoming a part of the ecosystem: Nokia was resistant to become part of an ecosystem unlike other new brands who were happy to try them since they were used to UI of Android. Nokia was never in the competition and this isolation made the public lose its interest from Nokia. This is also another failure of leadership group as they were hesitant to try. (“5 Reasons Why Nokia Failed In The Mobile Phone Market”)
  • Later on Chinese brands started making their presence felt in the market as they were manufacturing smartphones at a unbeatable pace. Hence, we can say that due to poor decisions of leadership group and not willing to try new things, gave an opportunity to other brands to make a name for themselves (“5 Reasons Why Nokia Failed In The Mobile Phone Market”)
  • Picking the wrong CEO: Although Stephen Elop was a skilful leader but sometimes only skills aren’t enough to transform a company. Elop although took big decisions since he realized about the situation of Nokia but all decisions went in vain as none of them worked.(“5 Reasons Why Nokia Failed In The Mobile Phone Market”)
  • Nokia management chose to create mobile phone products for short-term consumer needs instead of allocating capital to accomplish long-term targets such as designing a new operating system.(“5 Reasons Why Nokia Failed In The Mobile Phone Market

TESLA

The massive growth of Tesla Inc to become the most profitable carmaker in the world might signal the beginning of a new age for the global automobile industry, characterised by a Silicon Valley tech strategy that overtakes the know-how of old-school manufacturing. The elevation of Tesla caught numerous investors by surprise. (“The Rise And Rise Of Tesla: How The Visionary Car Maker Is Defining A New Era For The Auto Industry”). Let’s now try to understand few important reasons why Nokia Failed:

  1. Elon Musk had a game plan from day one: Elon Musk was a good example of a good leader as he had a vision for Tesla from day one. Even before launching the first vehicle the vision and long-term goal of Tesla were clear and set which is the reason why Tesla is one of the most successful brands. As we discussed earlier, the importance of having a vision and making it clear to the co-workers is very important. And Elon Musk was able to do so. (“Reshoring: Everything Manufacturing Execs Need To Know | Smart Manufacturing | Manufacturing Global”)
  2. Compromise was never an option:  In tesla nothing happened by chance as everything was well planned since vision was very clear not only to Elon but all the employees working in Tesla. Elon musk and his team’s determination made sure that they never compromise anything.  (“Reshoring: Everything Manufacturing Execs Need To Know | Smart Manufacturing | Manufacturing Global”)
  3. Tesla never simply follows a trend: Elon musk at graduation speech at USC made it clear that “success doesn’t come from following a trend.” He said that “if you want to make something new then you need to boil down thing down to the most fundamental truths you can imagine, and you reason up from there even though if it takes effort”. Which shows that he as a leader is ready try new things. (“Reshoring: Everything Manufacturing Execs Need To Know | Smart Manufacturing | Manufacturing Global”)
  4. It hired like-minded people: A organisation cannot be run just by a single person, it requires team effort if it wants to taste success. And Tesla managed to hire like minded people who had the same vision and goal as the leader. This is another important aspect of being a good leader that you are able to hire the right people for the organisation. (“Reshoring: Everything Manufacturing Execs Need To Know | Smart Manufacturing | Manufacturing Global”)
  5. Its cars are sustainable and futuristic: Since Tesla had a clear vision and had like- minded people they were able to make cars that were sustainable and futuristic since it was aware that the fashion drove clean tech. Tesla made the drivers look cool by the association with famous movie stars that owned them.

 (“Reshoring: Everything Manufacturing Execs Need To Know | Smart Manufacturing | Manufacturing Global”)

  • Technology is the number one priority: Tesla was able to build such a great technology that other car companies relied on it. Which shows that if a organisation has a good leader then the organisation is capable to make a team of like-minded people with a clear vision of mind which can achieve great heights.

(“Reshoring: Everything Manufacturing Execs Need To Know | Smart Manufacturing | Manufacturing Global”)

  • It handles its own supply chain: A good leader is never afraid to take bold decisions. Tesla unlike other decided to own the entire distribution chain. So, unlike other companies Tesla doesn’t use dealers rather it itself owns and manages service centers and stores. (“Reshoring: Everything Manufacturing Execs Need To Know | Smart Manufacturing | Manufacturing Global”)

CONCLUSION

The collapse of Nokia in mobile phones cannot be based on a single, clear answer: management decisions, fragmented corporate processes, increasing hierarchy and profound internal rivalries all performed a role in preventing Nokia from realising the change from product-based to platform-based rivalry. The tale of Nokia demonstrates a typical characteristic that we see in big, profitable businesses: success creates conservatism and hubris, resulting in a deterioration in planning processes leading to weak decisions over years. However, when firms adopted new ideas and innovations to boost growth, they became risk averse and less creative with success. For enterprises that wish to thrive and escape one of the greatest disruptive risks to their future, their own growth, such factors would be critical. (“The Strategic Decisions That Caused Nokia’s Failure”)

Meanwhile, the rise of Tesla showed us that if we have a good leader who can take good decisions and is able to make a team of like-minded people where there is no hierarchy and profound internal rivalries then nothing can stop Tesla from becoming a successful company. Hence through these case studies we understood the importance of leaders and what role they play in making a company successful or failure.

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“The Strategic Decisions That Caused Nokia’S Failure”. INSEAD Knowledge, 2020, https://knowledge.insead.edu/strategy/the-strategic-decisions-that-caused-nokias-failure-7766.

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