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BACKGROUND

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BACKGROUND

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Introduction

Manager is defined as a formal directorship authority in transforming organizational resources towards

opportunities (Kotter, 2001). On the other hand, leadership means the ability of influencing individuals

and organization towards the achievement of goals (improvement). It focuses on the holistic scope:

creating vision that everyone understands and wants to follow.

Managers must not necessarily have leadership skills in them, and a leader may or may not have any

formal authority. "Management is doing things right; leadership is doing the right things", (Drucker,

1994).

However, to become an extraordinary leader in the nature of current situation, it requires combination

of both: thus, Quinn et. al, (2011) put it as ‘managerial leaders’. In most circumstances, both

leadership and management are equally important as “a leader knows what’s best to do; a manager

knows merely how best to do it”, (Adelman, 1989).

The aim of this essay is to evaluate the concept of great leadership based on views and opinions from

several business scholars. The essay will focus in business organization setting, and use the

experiences of two chosen business leaders to demonstrate the comparison and contrast of

managing the complexities of business, the paradoxes of management, and the challenges of

leadership.

Part 1: The Complexities of Business

Business is entities that do transaction with the motive of profit, and it requires a business model that

indicates a whole structure about the vision, mission, objective, and how the operation is to be

conducted to achieve business organization’s goals. The concept may sound simple but the

complexity lies within every process from managing resources, converting it into profit and strategizing

the organization’s growth. To succeed, managerial leaders in a company must have exceptional

understanding on the theory of business, and do a better job of communicating those understanding.

1.1 Theory of Business

Theory in business is an assumption of evaluating; who your customers are and their demands, what

are the benefits that your company can provide to customers and how, and what are the core

competencies of your company. Great business leaders need to ensure that the business has an

outstanding financial performance, and to achieve that, they must understand about how the business

can thrive in the face of ever-changing consumer demands and ever-increasing competition.

From Michael O’Leary’s leadership experience in Ryanair, it shows clearly that a great business

managerial leader needs to have an exceptional understanding on theory of business. He technically

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understood how the airline industry works, and further developed the low-cost business model that

uses receipt from other business streams (i.e.: on board shopping, internet gaming, car hire and hotel

bookings) to replace the ticket revenue from selling airline seats.

In contrast, in some situations, Jack Welch did not have any knowledge in businesses that GE had

invested. However, he understands the principles of business are to deal with resources and focus in

the area of employees’ core competencies (i.e.: investment in NBC Universal). As a result, he

creatively managed to incorporate the business synergy from that investment to improve the value of

GE as a conglomerate. During his tenure at GE, the company's value rose 4000% and was the most

valuable company in the world for a time.

1.2 The 4 + 2 Formula

Aside from exceptional understanding on the theory of business, business leaders need to further

implementing the “4+2 Formula” (suggested by Nohria et. al, 2003) to ensure a successful business.

The four primary management practices (key areas) that drive high performance in organizations

include strategy, execution, culture and structure. It will then need to be supported by any 2 elements

from secondary management practices: talent, innovation, leadership or mergers and partnership.

Figure 1: The 4+2 Formula.

Source: Nohria. N, Joyce. W & Roberson. B, 2003, What Really Works, Harvard Business Review.

General Electric and Ryanair have outstandingly demonstrated primary management practices. For

examples:

Both companies have the same type of structure practice where they eliminated

bureaucracy system and implemented less formality between employees. Bureaucracy does

not inspire ideas and makes a company less competitive as it requires unnecessary

approvals. In GE, they often held informal meetings and get together, while Michael O’Leary’s

casual appearance clearly indicated that Ryanair does not tolerate bureaucracy system.

Strategy practice: In GE Company for instance, the management had shown to their

stakeholders (internal and external), that they will only keep their business portfolios for

subsidiaries that ranked at #1 or #2 best in their respective industries. Ryanair on the other

hand, focused more on lowering costs to increase profit margin. The company negotiates for

everything and pays as less as possible for their operation and overhead costs.

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4 Primary Management Practices + Any 2 of Secondary Management Practices

StrategyExecution

CultureStructure

TalentInnovationLeadership

Merger and Partnership

Execution practice: Ryanair delivers the products and services based on what the

customers pay. In exchange for cheap fares, the company offers minimal customer service..

In contrast, at GE, the execution practice focuses on internal process. Jack Welch’s 4Es

wrapped in a P leadership principle: (Energy, Energize others, Edge, Execution and wrapped

in a Passion), indicates his seriousness in demanding high productivity rate from GE’s

employees.

Culture practice: both companies motivate their employees by providing them an opportunity

to earn more and to receive high rewards such as bonuses and share scheme through the

pay-for-performance strategy. It creates a culture that is more geared towards the recognition

of individual performance.

Most of successful business organizations have common styles in primary management practices, but

factors in their secondary management practices may differ.

To conclude this section, it is noted that in order to become a great business managerial leader, the

first important benchmark is, he or she must be able to manage the complexities of business and

delivers outstanding results for the company by implementing 4+2 Formula.

Part 2: The Paradoxes of Management

Paradoxical means a seemingly absurd or contradictory statement or proposition which when

investigated may prove to be well founded or true (Oxford Dictionary, 2012). To succeed, a great

managerial leader needs to have extraordinary opinions that challenge the common belief (status

quo), and reflect well with paradoxical challenges.

It is clear to see the value in many of the theories of organisation and management practice has

evolved and developed over this past century. The ‘best’ theory is depending on the managerial

leader’s ability to apply general theoretical frameworks accordingly. One of the theories is Competing

Values Framework.

2.1 Competing Values Framework (CVF)

Below is the CVF, combining with 4 Primary Management Practices that has been discussed earlier:

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Figure 2: Competing Value Framework.

Source: Cameron, Quinn, DeGraff, Thakor, 2007, Competing Values Leadership: Creating Value in Organizations.

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People: Ryanair has implemented flat hierarchical structure within the company and against the

bureaucracy system. Ryanair does not recognize the contribution of trade unions as the company offers

high rates of pay (pay-for-performance strategy) and a generous share scheme (more than the unions

will bargain for, and more than employees at Aer Lingus) with expectation of higher levels of

productivity in return.

External Issue: Ryanair enjoys a strong media profile by making confrontations with the government,

various authorities and even their competitors. The company successfully changed flying for “only the

elite" to be available for everyone, and makes public believe that Eindhoven airport is the same as

Amsterdam airport.

Production: The 10-70-20 discrimination principle has motivated GE’s employees to increase their

productivity. Each year, the bottom 10% will be fired, 70% will be issued a warning letter to improve,

and only 20% will receive rewards (promotions or bonuses). Discrimination helps GE differentiates their

winners (the ones who drove growth in GE).

Internal Process: Welch adopted Motorola's Six Sigma quality program in late 1995. Among the

benefits of Six Sigma is the decrease in defects that are allowed to reach the customer (Adams Six

Sigma, 1999).

Part 3: The Challenges of Leadership

The discussion now goes further to focus on the challenges that arise from the nature of the leadership,

and what are the best leadership practices to solve it. That is answering of “what leaders need to do”

and “why others should be led by leaders?”

3.1 Leadership Traits

The leadership traits theory by (DuBrin and Dalglish, 2003), suggests a one size fits all approach:

focusing on perception of leadership rather than measuring the person’s actual performance. This

approach focuses on the type of person that makes the best managerial leader. It consists of:

Personality Traits – As for Michael O’Leary, he has high sense of humour and self-confidence

(personality) as being extravagantly outspoken in criticizing how incompetence the Irish

government is. He also has a massive ego.

Motivational Traits – His achievement in transforming Ryanair into a market leader in the

aviation industry motivated other airline companies to follow his strategy (motivational traits). In

fact, he did not mind being copied as he believes in healthy competition.

Cognitive Traits – He is also an imaginative person (cognitive) with seemingly nutty thoughts

to make air travel cheaper, like the idea of pay toilets and flying with a solo-pilot.

The leadership traits theory, however, contradicts with Goffee and Jones (2000) emphasis that

highlights the idea of being yourself, and discover your own authentic styles of leadership as suggested

by George et. al, (2007). It is the responsibility of the managerial leaders to establish direction rather

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than following instruction set by others.

3.2 Leadership Practices

Better managerial leaders must have proactive roles by questioning why others must be led by them. In

order to define their leadership authenticity, the excellent leaders need to engage with these leadership

practices (Kouzes and Posner, 2007):

1. Model the way: Welch acts as a role model, and set other people up for success. He

sometimes went down to the grass root level (production line) just to encourage them to do

better. He joined General Electric in 1960, worked as a junior chemical engineer and

moved up the ranks to become GE's youngest chairman and CEO in 1981.

2. Inspire a shared vision: Welch communicated his vision and persuaded others to commit

to it. His concept to GE’s subsidiary companies was simple: to be the #1 or #2 best in their

respective industries. It was clearly communicated throughout the organization, thus,

reminded the employees to be more focused and not waste effort for unnecessary

operations.

3. Challenge the process: Welch cut bureaucracy and encouraged GE’s employees to

speak-out ideas to champion innovation and challenge the conventional way of doing

business. GE has challenged the common investment portfolio of energy and resources

companies by shifting the main operation in other areas like in technology infrastructure

(General Imaging, GE Healthcare) and in financial services industry (GE Commercial

Finance, GE Insurance).

4. Enable others to act: GE fosters collaboration and get people to work together, thereby

strengthening others. Welch encouraged and empowered GE’s employees to take risks

(“take a swing” concept) and learn from mistakes and successes. He emphasized what he

called the “edge” in his executives: the ability to make tough “yes” or “no” decisions. GE’s

10-70-20 principle has been the important reason for employees to work efficiently.

5. Encourage the heart: GE rewards individual contributions, and celebrate group

accomplishments. Aside from firing bottom 10% of under-performance employees, he

rewarded those in the top 20% with bonuses and stock options. He also expanded the

broadness of the stock options program at GE, from only for top executives to nearly one

third of all employees.

Conclusion

As a conclusion, the key factor to become an excellent managerial leader is through credibility.

Credibility is earned, not conferred by title or position. To build credibility, leaders need to walk their talk.

“Conquering yourself is the first step to building credibility”, (Sun Tzu).

“Conquering yourself means learning about yourself”, (Kouzes and Posner, 2007).

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References:

Cameron K. S., Quinn E., DeGraff J., Thakor A. V., 2007, ‘Competing Values Leadership:

Creating Value in Organizations (New Horizons in Management)’, Edward Elgar Publishing, ISBN-

10: 1847204953, ISBN-13: 978-1847204950.

Drucker P., 1994, ‘The Theory of the Business’, Harvard Business Review, September-October.

DuBrin A. J., & Dalglish, C., 2003, ‘Leadership, an Australasian focus’, Milton, Qld., Australia:

John Wiley and Sons Australia.

George B., Sims P., McLean A., and Mayer D., 2007, ‘Discovering Your Authentic Leadership’,

Harvard Business Review, February.

Goffee R., and Jones G., 2000, ‘Why Should Anyone be Led by You?’, Harvard Business Review,

September.

Adelman K., 1989, ‘The Great Universal Embrace, Arms Summitry - A Skeptics Account’, Simon

and Schuster, 1989, ISBN: 0671672061, United States.

Kotter J., 2001, ‘What leaders really do’, Harvard Business Review, December.

Kouzes B., and Posner J., 2007, ‘The Leadership Challenge’, 4th edition, Jossey-Bass, Chapter

One: the Five Practices of Exemplary Leadership.

Lowe J., 2008, ‘Jack Welch Speaks: wit and wisdom from the world’s greatest business leader’,

John Wiley & Sons.

Nohria N., Joyce W., and Robertson B., 2003, ‘What Really Works?’, Harvard Business Review,

July.

Oxford Dictionary, 2012, viewed on Tuesday, 10 April 2012, at:

(http://oxforddictionaries.com/definition/paradox).

Quinn R., Faerman S., Thompson M., McGrath M., St Clair L., 2011, ‘Becoming a Master

Manager’, Fifth Edition, John Wiley & Sons.

Ruddock A., 2007, ‘Michael O’Leary: A Life in Full Flight’, Penguin Ireland, ISBN-10: 1844880559,

ISBN-13: 978-1844880553, 27 July 2007.

Sun Tzu, ‘The Art of War – Spirituality for Conflict’, annotation and translation by Thomas Huynh,

Sky Light Illuminations, 2008 First Printing.

Welch J., 2001, ‘Jack’, Headline, London.

Wikipedia, viewed between Saturday, 7 April 2012 to Tuesday, 10 April 2012, at:

- (http://en.wikipedia.org/wiki/Jack_Welch)

- (http://en.wikipedia.org/wiki/GE)

- (http://en.wikipedia.org/wiki/Michael_O%27Leary_%28businessman%29)

- (http://en.wikipedia.org/wiki/Ryanair)

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