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Leadership & Decision Making
BUS815 Week 10/11
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Leadership Theories
Leaders move things forward
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What is leadership and how does it differ from management? • Management is the advantageous exercise of
an organisation’s resources (Brooks 1999)
• ‘the art of getting things done through and with people in formally organised groups’ (Koontz in McKenna p28)
• Role of management is to promote stability or to enable the organization to run smoothly (Schermerhorn Ch 11)
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What is leadership and how does it differ from management? • Leadership
– process of influencing others to understand and agree about what needs to be done and how to do it, and the process of facilitating individual and collective efforts to accomplish shared efforts
– Formal leadership – Informal leadership
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What is leadership and how does it differ from management? • Formal leadership
– exerted by persons appointed to or elected to positions of formal authority in organizations
• Informal leadership – exerted by persons who become influential
because they have special skills that meet the resource needs of others
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What is leadership and how does it differ from management? • Approaches to leadership
– Trait and behavioral theory perspectives – Situational contingency perspectives – Transformational and charismatic perspectives
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What is leadership and how does it differ from management?
• Trait perspectives – assume that traits play a central role in
differentiating between leaders and non-leaders or in predicting leader or organizational outcomes.
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What is leadership and how does it differ from management? • Behavioral theories
– assumes that leadership is central to performance and other outcomes
– Focuses on leader behaviors rather than traits
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What is leadership and how does it differ from management? • Michigan leadership studies
– Employee-centered supervisors • Place strong emphasis on subordinate’s welfare • Also know as human relations oriented
– Production-centered supervisors • Place strong emphasis on getting the work done • Also known as task oriented
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What is leadership and how does it differ from management? • Ohio State leadership studies
– Consideration • Sensitive to people’s feelings and making things pleasant
for the followers
– Initiating structure • Concerned with spelling out the task requirements and
clarifying other aspects of the work agenda
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What is leadership and how does it differ from management? • Leadership Grid
– Developed by Blake and Mouton – Built on the Ohio U work - particularly the dual
emphasis of consideration and initiating structure – Measured people along those two dimensions and
plotted them on a 9 x 9 Grid (matrix) reflecting levels of concern for people and concern for task
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What is leadership and how does it differ from management? • Leadership Grid
– The aim was to become a 9,9 manager, someone with a “team management” style
– Well accepted in industry in the 1960s and 70s – Widely used in IBM, a world leading organisation
at the time, and a user of teams and matrix structures
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What is leadership and how does it differ from management? • Leadership Grid Difficulties
– Same as for Ohio work – model is based on two independent dimensions
• Are they independent? • Is it possible to be maximally concerned for both at the
same time? • Do we tend to emphasise one over the other at different
times?
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What are situational contingency approaches to leadership?
– The previous behavioural models considered leadership as a set of behaviours for all situations
– Situation/Contingency-based leadership models start from the belief that leader traits and behaviors can act in conjunction with situational contingencies
– The effects of leader traits are enhanced by their relevance to situational contingencies
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What are situational contingency approaches to leadership?
– So, if you are you and cannot change there will situations where you will be a good leader and others where you will not. It depends on the match between your traits and behaviours and the situation you are in.
– Situation/Contingency models set out to define the situation that the manager is in and then either the managers style (to determine fit) or the required style (to enable managers to adapt their style)
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What are situational contingency approaches to leadership?
• There are a range of approaches. The major theories are: – Fiedler – House – Hersey and Blanchard – Graen
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What are situational contingency approaches to leadership?
• Hersey and Blanchard – There is no single best way to lead. – The critical situational contingency is “follower
readiness” - the extent to which people (followers) have the ability and willingness to accomplish a particular task(s)
– Ability and willingness are two separate dimensions
– Four readiness states are identified based on different combinations of high and low levels of the two attributes
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What are situational contingency approaches to leadership?
• Hersey and Blanchard – Leadership is again about two dimensions - one
about people and relationships and one about tasks and productivity
– Each of the four types of Readiness have a matching Leader Behaviour
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What are situational contingency approaches to leadership?
• Hersey and Blanchard – People can develop in terms of ability and
willingness. Leadership style can adapt to compensate. For example R1 to R3 implies Telling to Participating
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What are situational contingency approaches to leadership?
• Romance of leadership – is where people attribute romantic, almost
magical, qualities to leadership
• Benefits of leadership? – For the manager/unit – For the company
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What is implicit leadership?
• Inference-based – Emphasizes leadership effectiveness as inferred
by perceived group/organizational performance outcomes
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What is implicit leadership?
• Recognition-based – is leadership effectiveness based on how well a
person fits characteristics of a good or effective leader
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What are charismatic/transformational perspectives?
• Charismatic leaders – Leaders who by force of their personal abilities,
are capable of having a profound and extraordinary effect on followers
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What are charismatic/transformational perspectives?
Conger and Kanungo’s three-stage charismatic leadership model Stage 1: the leader critically evaluates the status
quo Stage 2: the leader formulates and articulates future
goals and a idealized future vision. Stage 3: the leader shows how the goals and vision
can be achieved, emphasizing innovative and unusual means.
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• Transactional leadership – Involves leader-follower exchanges necessary for
achieving routine performance that is agreed upon by leaders and followers
What are charismatic/transformational perspectives?
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What are charismatic/transformational perspectives?
• Leader-follower exchanges involve: – Use of contingent rewards. – Active management by exception. – Passive management by exception. – Abdicating responsibilities and avoiding decisions.
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What are charismatic/transformational perspectives?
• Transformational leadership – Leaders broaden and elevate followers’ interests,
generate awareness and acceptance of the group’s mission, and stir followers to look beyond self-interests
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What are charismatic/transformational perspectives?
• Dimensions of transformational leadership – Charisma – Inspiration – Intellectual stimulation – Individualized consideration
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What are charismatic/transformational perspectives?
Can people be trained in the new leadership? – People can be trained to adopt new leadership
approaches. – Leaders can devise improvement programs to
address their weaknesses and work with trainers to develop their leadership skills.
– Leaders can be trained in charismatic skills.
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Emerging Leadership Perspectives
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What is integrative leadership?
• A range of theories about leadership which extend the previous models in various ways. – Full Range Leadership Theory - uses nine dimensions
covering both transformational and transactional leadership, emphasizing contextual variables
– Shared Leadership - leadership is “owned” by more than one person in a situation
– GLOBE, Cross-cultural Leadership - incorporates cultural factors
– Leadership at the strategic apex
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What is moral leadership?
• Moral leadership – A range of leadership approaches that have
gained more prominence recently due to ethical failures such as Enron
– Ethical leadership – Authentic leadership – Servant leadership – Spiritual leadership
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Decision Making
Leaders are decisive
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Decision Making Defined
Decision making is a conscious process of making choices among one or more alternatives, with the intention of moving toward some desired state of affairs
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Rational Choice
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Rational Choice Paradigm
• Rational choice paradigm: effective decision makers identify, select and apply the best possible alternative
• Two key elements of rational choice 1. Subjective expected utility: determines choice with
highest value (maximisation) 2. Decision-making process: systematic application
of stages of decision making
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Subjective Expected Utility Estimating the best possible alternative (maximisation) Expected—probability of an outcome occurring • E.g. chance that outcome 3 will occur is 90% if choice ‘A’ is chosen, 30% if choice ‘B’ is chosen
Utility—value or happiness produced by each option from value of expected outcomes • Choice ‘B’ has higher utility (value) than choice ‘A’ • Choice ‘B’ expected utility is (0.8×7)+(0.2×–2)+(0.3×1)=6.4
Outcome 1 (+7)
Outcome 2 (-2)
Outcome 3 (+1)
0.8
0.2
0.3
Outcome 1 (+7)
Outcome 2 (-2)
Outcome 3 (+1)
0.2
0.5
0.9
Utility (expected happiness)
Probability of outcome occurring
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Rational Choice Decision Process
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Rational Choice Decision Process
• Identify problem or opportunity – Symptom vs problem
• Choose decision process – e.g. (non) programmed
• Develop/identify alternatives – Search, then develop
• Choose best alternative – Subjective expected utility
• Implement choice • Evaluate choice
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Rational Choice Decision Process
• Identify problem or opportunity – Symptom vs problem
• Choose decision process – e.g. (non) programmed
• Develop/identify alternatives – Search, then develop
• Choose best alternative – Subjective expected utility
• Implement choice • Evaluate choice
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Problems with the Rational Choice Paradigm
• The model assumes that people are efficient and logical information-processing machines
• In reality, people have difficulty recognising problems and failures and cannot simultaneously process huge volumes of information
• The model focuses on logical thinking and completely ignores emotions
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Identifying Problems and Opportunities
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Problems with Problem Identification
• Stakeholder framing
• Mental models
• Decisive leadership
• Solution-focused problems
• Perceptual defence
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Identifying Problems and Opportunities Effectively
1. Be aware of perceptual and diagnostic limitations
2. Fight against pressure to look decisive
3. Maintain ‘divine discontent’ (aversion to complacency)
4. Discuss the situation with colleagues—see different perspectives
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Making Choices: Rational vs OB Views
Goals are ambiguous, conflicting and lack agreement
Goals are clear, compatible and agreed upon
People are able to calculate all alternatives and their outcomes
People evaluate all alternatives simultaneously
People have limited information processing abilities
People evaluate alternatives sequentially
Rational choice paradigm assumptions
Observations from organisational behaviour
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Making Choices: Rational vs OB Views continued
People evaluate alternatives against an implicit favourite
People use absolute standards to evaluate alternatives
People make choices using factual information
People choose the alternative with the highest payoff (SEU)
People make choices using perceptually distorted information
People choose the alternative that is good enough (satisficing)
Rational choice paradigm assumptions
Observations from organisational behaviour
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Problem - Biased Decision Heuristics People have built-in decision heuristics that bias evaluation of alternatives
1. Anchoring and adjustment—initial information (e.g. opening bid) influences evaluation of subsequent information
2. Availability heuristic—we estimate probabilities by how easily we can recall the event, even though other factors influence ease of recall
3. Representativeness heuristic—we estimate probabilities by how much they are similar to something else (e.g. stereotypes) even when better information about probabilities is available
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Paralysed by Choice • Decision makers are less likely
to make any decision at all as the number of options increases
• Occurs even when there are clear benefits to selecting any alternative (such as joining a company retirement plan)
• Evidence of human information processing limitations
Courtesy of Microsoft
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The four perspectives on decision making Rational process to get to the right answer
Open process to build consensus
Ritual to build legitimacy
Process in which different coalitions exercise power
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What is involved in the decision-making process?
• Decisions are made in the context of three general environments. – Certainty – Risk – Uncertainty
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What is involved in the decision-making process?
A decision environment is certain – When information is sufficient to predict the
results of each alternative in advance of implementation.
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What is involved in the decision-making process?
A decision environment is risky – When decision makers lack complete certainty
regarding the outcomes of various courses of action, but they are aware of the probabilities associated with their occurrence.
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What is involved in the decision-making process?
A decision environment is uncertain – When managers have so little information on
hand that they cannot even assign probabilities to various alternatives and their possible outcomes.
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Figure 9.3 Decision making viewed from the classical and behavioral perspectives
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end of lecture