Gary Shawhan, Phil Phillips Contributing Editors
The CHEMARK Consulting Group
The quality and effectiveness of leadership is ultimately graded on the results that are achieved. A company’s goals and business objectives provide the framework within which leaders operate in performing their job.
For this discussion, we will narrow the scope of our comments on leadership styles to include mid-sized companies up to the larger multi-national organizations. In general, we consider mid-sized companies as ones that have sufficient organizational structure and depth to successfully employ several alternative leadership styles.
Excluded in this article are smaller, privately owned companies or start-ups that by their nature have individual constraints that are typically much different and outside of our intended scope.
Leadership style is often viewed in the context of an individuals’ approach to carrying out their job. Depending on the source, anywhere from 3-10 (or more) leadership styles have been referenced in various articles and publications. As it relates to the CASE markets, CHEMARK identifies 6 alternative styles that characterize distinct differences in the way leaders perform their jobs. These are illustrated in Figure 1.
6 Alternative Leadership Styles
Transformational leaders are individuals who project and practice creativity in the way they do their job. They generate excitement and inspire others in the company to think out-of-the-box.
This style is also often unstructured in its approach to management. The consequence is that focus on the goals and objectives of the organization can be lost. If complemented by others in the company that can contribute these managerial skills to the process, this leadership style can be very effective.
Transactional leaders are structured in the way they do their job. Organizational hierarchy and chain-of-command represent the normal way communications and strategic decision-making happens. This style of leadership is opposite of what occurs with transformational leaders.
Innovation and creativity, unfortunately, are frequently compromised in this environment.
Individuals who focus on the collective inputs of others, including teams or groups within the company, are relational leaders. Building consensus and buy-in is their key characteristic. This style if most effective when there is an endpoint to the “team” process that allows for a clear decision to be made.
Autocratic leaders want and frequently have control of the decision-making process. Decision-making by committee or through a defined group of individuals is mainly window dressing. The leader calls most of the shots leaving the suggestion box empty. Morale and motivation among employees is typically low and un-engaged with the long-term direction of the business.
Democratic leaders seek the input and council of others in the company but retain the decision-making role. Cajoling and seeking opinions, to ensure that other feel their opinion counts, is the principle trait of democratic leaders. Inclusion of a number of employees in the decision-making process requires time but strengthens morale. To be successful democratic leaders need to manage an endpoint to the process.
Versatility and adaptability is the goal of situational leaders. Being able to adjust leadership style to fit with the situation is a unique but important talent. Selecting the right individuals to form the team or group that need to be involved in the decision-making process is a valuable skill. Altering your style to get the most from each group (and individuals) is what situational leaders do.
Aligning Leadership Style with Market Position and Business Situation
Porter’ Market Positioning Chart, often referred to as the “Smiley” chart (Figure 2), is a traditional way to profile a company’s or business units current market situation. When used to contrast one company with its key competitors, the Porter model provides useful information for developing growth strategies going forward. In the context of leadership, it also offers a basis for considering the merits of several alternative types of leadership styles and how they can impact the future direction of the company.
Figure 2: Porter’s Market Positioning Chart.
A market nicher has a unique, well defined market position. This strength is typically reflected in a combination of strategic advantages over their competition. Items such as technology, quality, service, market image, or brand identity are examples.
Leaders that employ a transformational style are a good fit in market niche’ situations as they inspire and foster creative thinking. Organizational enthusiasm and spirt strengthen market image and reinforce the identity of the company in their designated market space.
When using this leadership style, it is important that sufficient management structure is in place to support a well thought out strategy for the business going forward.
Market followers are characterized as companies having mainly me-too, un-differentiated products. The competitive environment is crowded. Market followers do just that- they follow the market leader.
Market followers have little leverage in the marketplace to gain share excepting price and special situations such as favorable plant locations. Frequently they feed off those less attractive elements of the market where market leaders and challengers have much less interest.
Leadership style, in this scenario, is often transactional with a structured approach in the way business is conducted. Thinking is short-term with little emphasis on creativity. There is also a regimentation and closely monitored accountability for most employee’s activities.
In some situations, leadership style among market followers, particularly in smaller mid-sized, privately owned businesses, can evolve into a more autocratic style of management. This is where one individual control’s most of the decision making in the organization.
A market challenger is an innovator. This can include leadership in their technology, in their approach to the market, and/or in the way they manage products and company brand image in the marketplace. Market challengers have a high market share and are positioned to gain share against the market leader.
Leaders of market challenger companies benefit from having some of the qualities of a transformational style of leadership. Fostering creative thinking and inspiring others in the organization adds to the competitive culture needed for an effective market challenger. The lack of an accompanying structure in management practice is a “Achilles heel” for this type of leadership style.
Situational leaders are a good fit for market challengers. They are able to adjust their style to accommodate individual business and organizational situations. The ability to interact and work in a team environment and achieve buy-in from others adds depth to the strength of the organization as they challenge the market leader. The addition of some of the attributes of a transformational leader to their skill set can be an added benefit.
A market leader has the highest market share and is the low-cost producer within each market segment where they have this distinction. The company has established itself with technology that is competitive if not leading edge and includes a broad array of products able to serve a variety of individual sub-market segments. Brand identify is high and geographic reach is broad.
Market leaders vary in their leadership style. The large corporations typically evolve (by necessity) into a hierarchical structure of leadership or a transactional type. The chain-of-command for decision making is clear and the organizational layers that exist slow the speed at which decisions are made.
Market leaders, especially the multi-national corporations, can strangle themselves with bureaucracy losing their competitive edge and opening themselves up to share loss to the market challenger(s). Leaders that can bring elements of situational leadership and a transformational style of managing into the mix can help retain their competitive edge.
Some Leadership Challenges & Opportunities in Today’s Marketplace
Dealing with Cultural Differences in a Global Business
Multi-national companies, with a diversified technology platform and a broad market reach, face the challenge of dealing with the significant differences that exist between geographic regions. Within the same market segments, the structure of the business, customer needs and the channels-to-market required to effectively serve these markets are frequently not the same. A separate region-by-region game plan is often needed.
Leadership style that is one dimensional and implemented universally across all regions typically does not work well. Whatever the style, its best fit is normally within the region where the company is based. Often this is where the highest market share and highest level of success has been achieved. Outside of the home region, this is not necessarily the case.
A transactional model of leadership, that employs a structure with significant centralized control of strategic direction, often has problems when administered universally on a global scale. A situational leadership style, which adds flexibility to the decision-making process, is a more successful leadership model when dealing with the business and cultural differences that exist across global organizations.
Virtual meetings have become a widely used method for bringing the right individuals in the organization together from multiple global locations. Using the team concept and some level of empowerment, this approach works when leaders listen and support the recommendations from these interactive teams.
The Reality of Limited Resources
Resources are always in demand no matter what the size of the company. For the most part, there are never enough resources to do the things that need to be done to meet all the company’s strategic objectives or take advantage of opportunities that exist for growing sales revenue.
For mid-sized companies, the resource pool is more limited. This increases the challenge of making the right decisions and focusing on those activities which can provide the best chance for success and return on the investment. In this regard, leaders that employ a relational style and build consensus are often a good fit as long as they insure there is and endpoint to the decision-making process.
A transactional leadership style is often too rigid and does not allow for sufficient engagement with others in the company who can provide valuable input on priorities. Transformational leadership traits can be a real asset in that they can inspire others involved in determining resource priorities to reach consensus.
When this style of leadership over-rides the input of others and dominates the setting or priorities, leaders isolate themself from the value others in the company bring to the management decision making process. Individuals closer to the market and customers begin to accept the fact that their opinion and efforts matter little. As a consequence, morale is low, and the decision-making process is more of a one-person show.