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Human Resource Development

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Human Resource Development (HRM-627)
Lesson 15
The study of leadership has progressed from a simple description of traits to examining complexities of
interaction between leaders and followers and since 1940s, the main approach in studying leadership focuses on
leadership styles (Athanasaw, 2003).
Hambrick and Pettigrew (2001) note two distinctions between the terms leadership and strategic leadership;
first, leadership theory refers to leaders at any level in the organization, whereas the strategic leadership theory
refers to the study of people at the top of the organization, second, in contrast to the micro focus of leadership
research on relationship between leaders and followers, strategic leadership research focuses on executive work,
not only as a relational activity but also as a strategic activity and a symbolic activity. One branch of leadership
research which has proven useful to the study of CEO-level management is the framework of
transactional/transformational leadership (Vera and Crossan, 2004). This framework stems from the visionary
or charismatic school of leadership theory, which along with other five main schools, trait school, behavioral or
style school, contingency school, emotional intelligence school and, competency school, formulate the six main
themes or schools of leadership theories over the past 70 years or so (Dulewicz & higgs, 2003; Handy, 1982;
Partington, 2003). Recent work has suggested that the positive relationship between charismatic leadership and
performance found in earlier studies also holds true at the strategic (CEO) level (Waldman et al., 2004).
Transactional leadership, primarily task-focused (Turner & Muller), motivates individuals primarily through
contingent-reward exchanges. These leaders set goals, articulate explicit agreements regarding what the leader
expects from organizational members and how they will be rewarded for their efforts and commitment, and
provide constructive feedback to keep everyone on task (Howell & Hall-Merenda, 1999; Jung and Avolio,
1999). Operating within an existing system, transactional leaders seek to strengthen an organization's culture,
strategy, and structure and hence is similar in nature to the cultural maintenance for of leadership described by
Trice and Beyer (1993) They clarify the performance criteria for followers and also explain to them what they
would receive in return (Hartog, Muijen and Koopman, 1997; Waldman et al., 2001).
Transformational leadership, primarily people-focused (Turner & Muller, 2005) in contrast, is charismatic,
inspirational, intellectually stimulating, and individually considerate (Avolio et al., 1999; Carless, 1998; Hartog et
al., 2004). Some researchers have treated charisma and transformational leadership as distinct concepts but
others mention transformational leaders talking of articulating a vision, which creates considerable loyalty and
trust among the followers (Tichy and DeVanna, 1986) which sounds very similar to charisma. Similarly, some
researchers use the term empowering leadership to capture five themes of this type of leadership, the themes
are leading by example, participative decision making, coaching, informing and showing concern for team
members (Srivastava, Bartol and Locke, 2006). These five themes of empowering leadership are no different
than the definition of charismatic/transformational leadership. In this paper, therefore, the terms
transformational and charismatic leadership are used interchangeably. Similarly, House and Shamir (1993)
propose that charisma is the central concept in the theories of charismatic, transformational or visionary
leadership. Transformational/charismatic leaders help individuals transcend their self-interest for the sake of
the larger vision of the firm. They inspire others with their vision, create excitement through their enthusiasm,
and have everybody do the same. These leaders seek to raise the consciousness of followers by appealing to
higher ideals and moral values such as liberty, justice, equality, peace, and humanitarian, and not to basic
emotions such as fear, greed, jealousy, or hatred. Transformational leadership has been specified as an
important mechanism for introducing organizational change in the recent research literature (Masood, Dani,
Burns and Backhouse, 2006).
Based on these research findings, following is the second proposition formulated in this paper:
Proposition 2: Organizational democracy would be implemented more successfully in organizations with an organic structure and
where the strategic leadership style is that of empowering or transformational/charismatic type.
Organizational Democracy, Structures, Strategic Leadership and Turbulent Environment
The relationship between organizations and environment is perhaps the most popular and conceptually
appealing aspect of the structural-contingency model (Hrebiniak and Snow, 1980). Present day theorists view
the interaction between the organization and the environment as the critical variable in determining the nature
of internal strategies and processes and point to the need to develop appropriate systems of differentiation and
Human Resource Development (HRM-627)
integration, depending on the degree of turbulence within the environment (Shipton, Dawson, West and
Patterson, 2002).
The organizational environment is typically divided into two levels. The most influential level is termed the task
environment and consists of firms that directly influence the setting and achievement of goals for a particular
organization. The general environment, on the other hand, has no out boundary and includes the source of
conditions, trends, political pressures, norms and social trends. Changes originate in the general environment
and, in turn, influence task environment phenomena (White, 1998) and it is also suggested that organizational
uncertainty is derived from failure to understand a task environment and from interdependence with elements
of task environment (Lang and Lockhart, 1990).
Milliken (1987), in a review of the literature and research on environment, developed a general definition of
environmental uncertainty, calling it "an individual's perceived inability to predict an organization's
environment accurately" because of a "lack ... of information" or "an inability to discriminate between relevant
and irrelevant data" (Buchko, 1994). Key managers in the industry rely on, "some minimum level of perceived
predictability ­ specifically, predictability relating to customer demands and competitor actions" to formulate
strategies to cope with the environmental uncertainty (Dickson and Weaver, 1997).
Environmental uncertainty has also been defined as the degree to which an environment is stable-unstable,
simple-complex, and concentrated-dispersed (Karimi, Somers and Gupta, 2004). The stable-unstable dimension
refers to whether the elements in organization task environment are dynamic. Organizational task
environments, "include all the sectors with which organizations interact directly and have the potential to
impact organizations' ability to achieve their goals and typically include industry, market sectors, raw materials,
human resources, and, perhaps, international sectors" (Daft, 2001). Under unstable conditions, organization
task environment shift abruptly, and companies react with aggressive moves and countermoves regarding
advertising and new products. Dynamism is characterized by the rate of change and innovation in production
and service technologies, as well as the uncertainty of customer taste and actions by the firm's main industries.
Firms in more unstable environments face a number of similar external elements that change frequently and
unpredictably. Environmental dynamism poses the challenge of planning and control as managers must cope
with unpredictable external events and must seek to integrate and improve operating processes. To do so the
managers and decision-makers require detailed, timely information that allows them to coordinate the flow of
activities, at all levels in organization, with an understanding of process dynamics and their relationship to
organizational performance. As environmental uncertainty increases, interdependency becomes more important
due to increased need for coordination for internal resolutions and the need to link the organization with the
key elements in the task environment to detect, bring, and send information about changes in the environment
(Maier et al. 1997; Schwab et al. 1985).
The simple-complex dimensions concern environmental complexity and refer to heterogeneity, which is the
degree of similarity or differentiation within the organization task environment. Firms in these environments
face many distinctive elements that remain the same or change slowly and require very different marketing,
production, and administrative practices. Organizations in such environment have a great need for information
processing to reduce uncertainty and it is expected that the decision-makers in these organizations are more
likely to face a higher frequency of non-routine and interdependent tasks.
The concentrated-dispersed dimensions refer to scarce material and financial resources and the need to ensure
the availability of resources. Hostile task environments are characterized by severe regulatory restrictions, a
harsh and overwhelming business climate, intense competition in price, product, technology, and distribution, a
shortage of labor or raw material and the relative lack of exploitable opportunities and resources (Miller and
Friesen, 1983). Under these conditions, the organizations' responses can be in the forms of greater integration
and coordination and establishing favorable links with key elements of its task environment. These responses
can be in the form of joint ownership, contract, joint ventures, interlocking directorates, executive recruitment,
buffering, advertising, and public relations (Daft, 2001; Kopp and Litschert, 1980). Some companies also use
innovation, marketing differentiation strategies, high quality, auxiliary services, convenient distribution, and
comprehensive warranties to induce customer loyalty in the face of a changing and turbulent environment
(Miller, Droge and Toulouse, 1988). The firm's perception of environmental uncertainty has been attributed to
its perceptions of the level of control it exerts over its environment (Perrow, 1967). Research evidence further
suggest that firms operating in highly uncertain environments are more likely to form exchange relationships
that mitigate their organizational risk levels; conversely, firms that perceive that they have a greater degree of
control over their current and future technologies (more certain environment) are less likely to forge relational
customer-supplier exchange relationships (Pfeffer and Salanick, 1978; Fink, Edelman and Hatten, 2006).
Human Resource Development (HRM-627)
The use of uncertainty as an environmental variable flows from an information-processing view of
organizations, a view that explains organizational adjustments, like changes in structure, by variations in
information, as filtered by managerial perceptions of their external environment (Koberg, 1987). Duncan
(1972) made a distinction between the internal and external environments of a company. The internal
environment refers to all those internal forces operating within an organization itself, such as the company's
goals and objectives, nature of its' products and services, communication processes and networks within the
organization, and the educational background of the employees; the external environment refers to all those
forces outside the company, such as customers, competitors, suppliers, governments, and trade unions (Tung,
1979). Overall, the literature suggests that firms should adopt a more organic structure to cater to a more
complex environment where jobs are less specialized and more complex, companies should apply a mechanistic
structure to a more predictable environment with greater subdivision of tasks and similar job assignments
(Chang, Lin and Sheu, 2002). Similarly, other theorists and researchers have suggested that increase in
environmental complexity increases need for strategic activities like developing interorganizational linkages to
cope with complexity and uncertainty of the environment (Stearns, Hoffman and Heide, 1987). The
recognizable pattern of organizational responses to environmental conditions is determined not so much by the
objective characteristics of organization-environment interactions as by managerial perceptions of the strategic
importance of the critical areas contained within different organizational functions. Researchers investigating
the link between perceived environmental uncertainty (PEU) and the relative strategic importance of different
organizational functions have found that "externally oriented functions (e.g., market research and product
development) received emphasis with high PEU but internally-oriented functions (e.g., production) assumed
more strategic importance with low PEU (Hitt, Ireland and Palia, 1982). Organizational contingency theories
traditionally have argued that when contextual variables (technology, environmental conditions) are matched
with appropriate organizational responses (centralization, communication, formalization, subdivision of work),
effectiveness of the unit will be enhanced (Morrow, 1981).
Environment and Strategic Leadership Link
While developing a theoretical model of the impact of CEO and top management leadership styles and
practices on organizational learning, Vera and Crossan (2004) argue that, "in times of change, these
(organizational learning) processes make evident the need to alter a firm's institutionalized learning ­ a task best
suited to transformational leadership....in times of stability, organizational learning processes serve to refresh,
reinforce, and refine current learning ­ a task best suited to transactional leadership".
Howell and Higgins (1990) suggest that champions of innovation have characteristics of transformational
leaders. These leaders rely on innovation and risk taking more than non-champions. Pinto and Slevin (1989)
found that aspects of transformational leadership, such as mission awareness, predicted the success of R&D
projects. Similarly, Keller's (1992) work found that transformational leadership of project leaders in R&D
organizations predicted performance at two times, concurrently and a year after leadership was measured. Thite
(2000) notes that transactional leadership also predicts project success but to a lesser extent than
transformational leadership (Berson and Linton, 2005).
Organizations exhibit three types of inertial forces; cognitive inertia, motivational inertia and obligation inertia
(Gersick, 1991). During changing environments, overcoming these organizational inertial forces is viewed as an
important condition for improving organizational performance (Tichy & DeVanna, 1990). Charismatic leaders
overcome cognitive inertia (inability to think beyond one's own schema) because their strong values shape
choices concerning strategy as they can create exciting visions of future and promote unconventional problem-
solving approaches. Motivational inertia (desire to avoid change) can be overcome through a leader's ability to
provide followers with confidence that changes can be positive. Finally, obligation inertia (commitment to
constituencies) can be overcome through leader's ability to change current contractual relationships with
various stakeholders (Agle et al., 2006).
Transformational leaders, in unstable, shaky, risky, or crisis situations take on greater symbolic importance as
the followers feel the need for direction and guidance under these conditions, and therefore, willingness to a
follow a leader may be more pronounced in unstable and turbulent environments (Agle et al., 2006). Studies
also suggest that crisis and the associated stress and uncertainty may foster the emergence of charismatic
leadership and Waldman's (2001) study empirically prove that charismatic leadership of CEO is highly related
to an organization's performance when the environment is perceived to be uncertain and volatile, and the same
link between charismatic leadership and performance, does not come strongly in the face of certain and stable
Human Resource Development (HRM-627)
Based on the above discussion, following is the third proposition of this paper:
Proposition 3: Organizational democracy would be implemented more successfully in organizations with an organic structure and
where the strategic leadership style is that of empowering or transformational/charismatic type and where the surrounding task
environment of the organization is dynamic (complex and unstable).
Concluding Remarks
This paper raises the critical question of the suitability of the application of organizational democracy in
different organizations and under the influence of the interaction between their structural and contextual
dimensions, resulting in unique settings or organizational designs and as such should serve as a food for
thought for researchers to probe the following research areas:
 Empirical testing of the underlying theme of this paper and the proposed model (figure 1) that
organizational democracy cannot be justified in mechanistic structures with stable environments
around them and that it would be more successful in organic set ups in turbulent environments and
where the leadership style of the top management is empowering or transformational/charismatic.
 The cultural differences across various nations and their role in preparing organizations for
organizational democracy also need to be empirically studied. For example, Western societies with
their long history of involvement with democracy are perhaps more suited to apply democracy in
organizations in contrast to those nations where democracy has not been the preferred style of
 Certain industrial sectors, for example service sector, have inherently different structural requirements
as compared to organizations in production sector. It would make an interesting study to examine the
possibility of employing organizational democracy principles in service organizations and to gauge
their success in terms of productivity and performance to those service sector organizations where
principles of democracy are not applied.
 Similarly in high-velocity industries like Information Technology and Electronics, where the
environment is dynamic and turbulent and the rate innovation is high, the need for empowering
leadership, horizontal structures and organizational democracy would be more pronounced as
compared to other traditional production-focused industries.
 Organizational democracy as a construct needs further development in the sense that measuring
instruments be developed to try to measure it empirically. Their relationships with other
organizational variables like performance, job satisfaction, strategic leadership style and, uncertain
environment would also shed further light on this construct.
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Table of Contents:
  1. INTRODUCTION TO HUMAN RESOURCE DEVELOPMENT:The Concept and its Dimensions, Targets of Development
  2. FOUNDATIONS OF HUMAN BEHAVIOR:Attitudes, Personality, Emotional Intelligence
  3. PERCEPTION:Attribution Theory, Shortcuts Frequently Used in Judging Others
  5. FIVE FACTOR MODEL:The Basis of Intrinsically Motivated Behavior, Intrinsic Motivation and Values
  10. TRANSACTIONAL ANALYSIS:EGO STATES, Parent Ego State, Child Ego State
  11. TYPES OF TRANSACTIONS:Complementary Transactions, Crossed Transactions, Ulterior Transactions
  15. LEADERSHIP:Environment and Strategic Leadership Link, Concluding Remarks
  16. UNDERSTANDING GROUP BEHAVIOR:Stages of Group Development, Advantages of Group Decision Making
  17. UNDERSTANDING TEAM BEHAVIOR:TYPES OF TEAMS, Characteristics of Effective Teams,
  20. HUMAN RESOURCE DEVELOPMENT:The Concept and Its Dimensions, Targets of Development
  22. REPORTS:Criticisms of Freedom House Methodology, GROSS NATIONAL HAPPINESS
  24. NON GOVERNMENTAL ORGANIZATIONS (NGOS):Types, Methods, Management, Citizen organization
  25. HEALTH SECTOR:Health Impact of the Lebanon Crisis, Main Challenges,
  27. ADULT EDUCATION:Lifelong learning
  28. THE PRACTICAL PERSPECTIVE OF ADULT EDUCATION:Problems of Adult Literacy, Strategies for Educating Adults for the Future
  29. TECHNICAL & VOCATIONAL EDUCATION:VET Internationally, Technical Schools
  31. SCIENCE & TECHNOLOGY EDUCATION:Social responsibility, Curriculum content
  32. ENVIRONMENT:Dark Greens and Light Greens, Environmental policy instruments
  33. HDI AND GENDER SENSITIVITY:Gender Empowerment Measure
  35. ENTREPRENEURSHIP:Characteristics of entrepreneurship, Advantages of Entrepreneurship
  38. PUBLIC PRIVATE PARTNERSHIP:Origins, The Desired Outcomes of PPPs
  41. GOOD GOVERNANCE:Participation, Rule of law, Accountability
  45. GOVERNMENT PRIORITIES AND POLICIES:Role of Government, Socio Cultural Factors in Implementing HRD Programs