Submission Number: 14333 WHAT MAKES LEADERS EFFECTIVE? A STAKEHOLDER APPROACH TO LEADERSHIP EFFECTIVENESS Robert Hooijberg IMD International Institute for Management Development Chemin de Bellerive 23 Lausanne, SWITZERLAND 1001 41-21-618-0172 41-21-618-0707 (fax) [email protected]Daniel R. Denison IMD International Institute for Management Development Chemin de Bellerive 23 Lausanne,SWITZERLAND 1001 41-21-618-0311 41-21-618-0707 (fax) [email protected]Division: Organizational Behavior The authors gratefully acknowledge the support for this paper provided by IMD. We are also grateful for the data analysis expertise provided by Hee Jae Cho.
Transcript
Submission Number: 14333
WHAT MAKES LEADERS EFFECTIVE?
A STAKEHOLDER APPROACH TO LEADERSHIP EFFECTIVENESS
Robert Hooijberg
IMD International Institute for Management Development
Division: Organizational Behavior The authors gratefully acknowledge the support for this paper provided by IMD. We are also grateful for the data analysis expertise provided by Hee Jae Cho.
1994). This area of research also helps provide a second model of how to examine leader
effectiveness from a stakeholder perspective.
In addition, several other areas of research have taken an approach that focuses on
“facets” as a way to define important criterion variables. For example, many researchers
have divided overall job satisfaction into various facets and have acknowledged that, “the
effects of personality dispositions on all facets and global satisfaction items are not
necessarily uniform” (Dorman & Zapf, 2001: 499). In addition to examining overall job
satisfaction, these researchers have examined such dependent variables as satisfaction with
supervisor, pay, coworkers, promotion and work (e.g., Jung, Dalessio & Johnson, 1986),
burnout (e.g., Klein & Verbeke, 1999), and openness to change (Wanberg & Banas, 2000). A
similar approach has been taken to examining organizational commitment. In this area,
researchers have examined in-role and extra-role organizational citizenship behaviors (e.g.,
Morrison, 1994), intent to leave the organization (e.g., Levine, 1993), and absenteeism. Derr
(1986; 1987) observes that the careers literature has been dominated by a getting-ahead
orientation. As an alternative, he distinguishes five career orientations rather than just one
and argues that people with a different career orientation value different aspects of their work
environment. In other words, depending on their career orientation they hold different
definitions of career success. Researchers have found that these criterion variables, while
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being components of overall satisfaction, commitment or career success, are predicted by
different independent variables depending on the context in which they are examined.
Interestingly, while in much of the leadership literature researchers seem to have
relied on a single, overall measure of effectiveness, early studies such as those conducted by
Seashore, Indik and Georgopoulos (1960) and Friedlander and Pickle (1968) have often
pointed out that the correlations among various effectiveness criteria are generally low and
sometimes even negative. Few researchers have followed up on those findings by examining
more than one criterion variable. There are several exceptions.
Zammuto, London and Rowland (1982), in a multi-source study of hospital nurses
and university resident advisors, explicitly examined whether overall performance means the
same to different raters. They found that different groups of raters “appeared to focus on
different aspects of performance in their evaluations of overall performance” (p. 649).
Borman and Motowidlo (1993) also argued for expanding the domain of criterion variables
and proposed that we should distinguish between task and contextual performance.
Motowidlo and Van Scotter (1994) found support for the notion that task and contextual
performance contribute independently to overall performance. While Antonioni and Park
(2001) acknowledge the distinction between task and contextual performance in their study of
multi-source feedback and affect, they focus only on the contextual performance criterion.
Given these approaches have been so central in other literatures, it seems important to
explore the idea that direct reports, peers and bosses use different criteria of effectiveness.
Given that we are entering a relatively new area, we test four general hypotheses.
HYPOTHESES
Consistent with findings in multi-source feedback research, we expect that bosses,
peers, and direct reports will vary in the extent to which they see various leadership roles as
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critical for overall effectiveness. This hypothesis asserts that our findings regarding an
overall measure of effectiveness will reflect the typical findings in the existing literature.
P1: Direct reports, peers, and bosses associate different leadership roles and in different degrees with overall effectiveness.
The more important contribution of this paper, however, is to examine the impact of
multiple criteria of leadership effectiveness. In order to do this, we selected three additional
criteria of effectiveness that we thought would be valued differently by direct reports, peers,
and bosses: 1) the degree to which the leader serves as a role model in their organization, 2)
the future potential of the leader, and 3) their effectiveness in customer relationships. We
briefly elaborate on these three criteria to formulate our hypotheses.
Direct reports look at the behavior of their leaders to see whether they “walk the talk.”
In other words, can they really believe that their leader is a role model? We expect that direct
reports will be more concerned with the degree to which their boss is a role model and that
peers and bosses are more concerned with actual results, rather than the way in which they
were received. Thus, we propose that:
P2: Direct reports will associate leadership roles more strongly with the role-model criterion than will peers or bosses.
Peers will look to see who among them has the most potential to be a leader in the
future. In assessing that they may take into consideration current performance but also assess
to what extent the person is ready for the next level of leadership. Peers do as a form of
social comparison (i.e., “who are my competitors?”) and from a point of view of objectively
assessing their colleagues performance. We expect peers to be more concerned with this
criterion relative to direct reports and bosses. Therefore, we propose that:
P3: Peers will associate leadership roles more strongly with the future leadership potential criterion than will direct reports or bosses.
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Bosses will be most concerned with current results. One of the ways I which they
assess this is by examining the quality of the relationships their managers have with the
internal and external customers. We do not say that direct reports and peers do not feel
concerned about customer relationships, just that this criterion will be more prominent in the
minds of bosses than in the minds of direct reports and peers. We propose, therefore, that:
P4: Bosses will associate leadership roles more strongly with the customer relationship criterion than will direct reports or peers.
METHODS
Sample
1254 Managers participated in the study between 1996 & 2001. In addition to the
responses from the managers themselves we received responses from 1201 bosses, 4518
peers, and 4323 direct reports. Of the participating managers 25% were female, 60% had at
least a Bachelor’s degree, 66% were between the ages of 30-49, 85% had been at least 2
years with their company, and 85% were White Caucasian. This sample of managers came
from a broad collection of companies in a broad range of industries, and include both private
and public sector managers. Approximately 75% of these managers reside in North America,
with approximately 15% in Europe and 10% in Asia.
Measuring Leadership Behaviors
To define the leadership roles for this study we used Denison & Neale’s (1996)
leadership framework (see Figure 1). Denison identifies four broad leadership traits;
involvement, consistency, adaptability & mission. Each of these traits is measured with three
indexes made up of eight survey items each.
Insert Figure 1 About Here
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Involvement - Building human capability, ownership and responsibility. Individual
managers who know how to create "high-involvement" strongly encourage others to be
involved and create an environment of experimentation and exploration, as well as a sense of
ownership and responsibility.
Highly involved individual managers depend on informal, voluntary and implicit
leadership skills to move their work group or organization forward rather than formal,
explicit, bureaucratic directives. Out of this sense of ownership grows a greater commitment
to the organization, an increasing capacity for leadership, and a sense of autonomy.
Receptivity to the ideas of others increases leadership quality and improves implementation
of new ideas. The three measures of the Involvement role are: Empowers People; Builds
Team Orientation; and Develops Organizational Capability.
Consistency - Defining the values and systems that are the basis of strong leadership.
Consistency provides a central source of integration, coordination and control. Consistent
individual managers develop a mindset and a set of operations that create an internal system
of governance based on consensus. They have highly committed employees, key central
values, a distinct method of doing business, a tendency to promote from within, and a clear
set of "do's and don'ts."
Consistency produces leadership based on a shared system of beliefs, values, and
symbols that are widely understood by members of a work group or organization. Implicit
control systems based on internalized values can be a more effective means of achieving
coordination and integration than external-control systems that rely on explicit rules and
regulations.
The power of leadership consistency is particularly apparent when organizational
members encounter unfamiliar situations, when it enables leadership to react in a predictable
way to an unpredictable environment by emphasizing a few general, value-based principles
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on which actions can be grounded. The three measures of the Consistency role are: Defines
Core Values; Works to Reach Agreement; Manages Coordination and Integration.
Adaptability - Translating the demands of the organizational environment into action.
Successful individual managers hold a system of norms and beliefs that support his or her
capacity to receive and interpret signals from the environment and translate them into internal
changes that increase the organization's chances for survival, growth and development.
Three aspects of adaptability influence an individual manager's effectiveness. First is
the ability to perceive and respond to the external environment. Successful individual
managers are very focused on their customers and their competitors. Second is the ability to
respond to internal customers, regardless of level, department or function. Third is the
capacity to restructure and re-institutionalize a set of behaviors and processes that allow the
organization and its employees to adapt. Without this ability to implement adaptive response,
an organization cannot be effective. The three measures of the adaptability role are Creates
Change, Emphasizes Customer Focus, and Promotes Organizational Learning.
Mission - Defining a meaningful long-term direction for the organization. The
individual manager's mission provides purpose and meaning by defining goals and a purpose
for his or her unit. It provides a clear direction that defines an appropriate course of action for
the individual manager and his/her employees. The individual manager is able to align the
mission and goals for his/her functional area or unit to the mission and goals of the
organization. A sense of mission allows an individual manager to inspire, to direct activities,
and to formulate strategy by envisioning a desired future state. Being able to translate his/her
mission into action contributes to both short and long-term commitment to the organization.
Success is more likely when individual managers and organizations are goal directed. The
three measures of the Mission role are: Defines Strategic Direction and Intent; Defines Goals
and Objectives; and Creates Shared Vision.
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Validity and Reliability
To establish the reliability and validity of these measures, we include in this paper a
brief summary of our validity testing. This model was developed from the general model of
organizational culture and effectiveness developed by Denison (Denison, 1990; Denison &
Mishra, 1995). Ninety-six items are used to define twelve separate measures of the four basic
traits. All items were rated on a seven-point agree-disagree scale. A response of seven
indicates that the respondent strongly agrees. All items are presented in Appendix A.
Each of the indexes is highly reliable. Indeed, reliable measures can be formed form
five of the eight items in all cases. The alpha coefficients for these measures are presented in
Table 1. A correlation matrix of the twelve measures is presented in Appendix B.
Insert Table 1 About Here
Next, we present a confirmatory factor analysis that tests for the presence of three
separate measures for each leadership traits. This analysis focused on the 24 items used for
each trait, to see if they fit into the three separate measures as prescribed by the framework.
The fit statistics presented for these models shows that the three-factor model fits better for
each trait than does a one-factor model. The fit statistics also show that a one-factor model
fits quite well in three of the four traits, but fits less well for the Adaptability role. This
analysis is presented in Table 2.
Insert Table 2 About Here
The next step in our validity analysis was to analyze the twelve measures to see if
they in fact fit into the four basic traits defined by the model. The results of this analysis are
presented in Table 3. These results show that the four-factor model is indeed a significant
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improvement over a one-factor model. The model parameters for this model are presented in
Figure 2.
Insert Table 3 About Here
Insert Figure 2 About Here
This analysis helps to establish the validity of the model and measures. Similar
results were obtained for separate analyses of each of the sub-groups of bosses, peers, direct
reports and the leaders themselves. But a detailed discussion of these results is well beyond
the scope of this paper. For the purposes of this paper we focused on the four main
behavioral traits of involvement, consistency, adaptability, and mission as our independent
variables.
Dependent Variables
This study uses four dependent variables. The first is a question about overall
effectiveness to compare and contrast our results with those of previous research. This item
asks, “Overall this individual is a highly effective leader.” In addition, we use three items to
assess the focal manager’s effectiveness as a role model (“This individual’s leadership style
serves as a role model for others in the organization”), his/her potential as a future leader
(“This individual has great potential as a future leader in our organization”), and his/her
effectiveness in relating to customers (“This individual develops high quality relationships
with internal and external customers”). These last three criteria of effectiveness will help us
explore to what extent overall effectiveness is an effective criterion variable.
RESULTS
The regression analyses presented in Table 4 show that our results are consistent with
previous multi-rater feedback research. The analyses show that involvement has the
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strongest association with overall effectiveness for direct reports and that mission has the
strongest association with overall effectiveness for the bosses. The strength of the association
between involvement and overall effectiveness is strongest for the direct reports, weaker for
the peers and weaker yet for the bosses. The pattern for mission is quite different. The
association between mission and overall effectiveness is strongest for the bosses, weaker for
the peers, and weakest for the direct reports. This confirms that for overall effectiveness, in
general terms, direct reports have a more internal focus and bosses a more external focus.
This is consistent with findings by Hooijberg and Choi (2000; 2001).
Insert Table 4 About Here
The results of the regression analyses for the three components of effectiveness show
interesting differences from this overall picture. Table 5 shows the results for the regression
analyses of the effectiveness of the leader as role model. Surprisingly we see few differences
among the direct reports, peers, and bosses as to which leadership roles have the strongest
association with perceptions of the leader as role model. Consistent with hypothesis 2 the
direct reports perceived a slightly stronger association between involvement and consistency
and the leader as a role model effectiveness than the peers and bosses, but these differences
were small.
Involvement and consistency have the strongest association with a leader’s
effectiveness as a role model for the organization for direct reports, peers and bosses alike.
Adaptability has little or no association with a leader’s effectiveness as a role model for the
organization. Only mission has a stronger association with a leader’s effectiveness as a role
model for bosses (.39) than it has for direct reports (.27) and peers (.25).
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These results show that effectiveness as a role model comes from empowering people,
building teams, developing people, defining core values, working to reach agreement, and
creating coordination and integration.
Insert Table 5 About Here
The results for the second effectiveness criterion of future leadership potential are
very interesting because the three groups of raters associate different leadership roles with
this criterion. Table 6 shows that direct reports associate the involvement, consistency and
adaptability leadership roles with future potential as a leader; peers associate the consistency
and adaptability leadership roles with future potential as a leader; and bosses associate the
adaptability and mission leadership roles with future potential as a leader. The bosses do not
see a significant association between involvement and future potential as a leader.
While all three groups of raters associate a different set of leadership roles with
effectiveness as a future leader, hypothesis 3 does not get support. That is, peers do not
associate leadership roles more strongly with this role than do the direct reports and bosses.
The one consistent part in this picture is the role of the adaptability leadership role.
While the adaptability role had only a small association with effectiveness as a role model,
direct reports, peers and bosses all see a strong association between the adaptability role and
effectiveness as a future leader. Especially bosses see a strong relationship here.
Insert Table 6 About Here
Table 7 presents the results for the third criteria of effectiveness in customer relations.
The results provide some support for the proposition that the bosses see the strongest
association between the leadership and effectiveness with customers. This is especially true
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for the strong association bosses see between consistency and customer relationship
effectiveness (.66).
Overall, however, the results are similar for the direct reports, peers and bosses. All
three groups see the strongest association between consistency and adaptability and customer
relationship effectiveness. It is interesting to see that effectiveness in managing the
relationships with internal and external customers comes from balancing seemingly opposite
roles (see Figure 1). This seems to suggest that the leaders who are judged most effective
with respect to the customer effectiveness criterion are in fact those that manage the value
chain of internal and external customers (Denison, 1997). Interestingly enough, the mission
leadership role has no association with customer relationship effectiveness in the perceptions
of the bosses and even a small negative association in the perceptions of the direct reports (-
.06) and peers (-.11).
Insert Table 7 About Here
DISCUSSION
This paper set out to explore the extent to which differences among raters in multi-
source feedback studies stem from implicit differences in definitions of overall effectiveness.
We first confirmed the basic finding in multi-source feedback that different groups of raters
tend to associate different leadership roles with overall effectiveness. Specifically, we
confirmed two general findings. First, direct reports see a stronger association between
internally oriented leadership roles, such as involvement, and overall effectiveness than do
peers and bosses. Second, bosses see a stronger association between externally oriented
leadership roles, such as mission, and overall effectiveness than do direct reports and peers.
Then we explored the extent to which these same relationships would hold up when
we explored components of overall effectiveness. Specifically we explored three components
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of overall effectiveness: effectiveness as a role model; effectiveness as a potential future
leader; and effectiveness in relationships with internal and external customers. We found
limited support for our formal propositions, but did uncover several interesting findings.
Most interesting were the findings that different leadership traits had strong
associations with the three effectiveness components. Involvement, adaptability and mission
showed interesting variations across the three effectiveness criteria. Consistency, in contrast,
showed great uniformity across the three effectiveness criteria.
Involvement showed a strong association with the effectiveness criterion of leader as
a role model, but much weaker associations with the effectiveness criteria of future potential
leadership and quality of customer relationships.
Adaptability role showed the weakest association with overall effectiveness and
leader as role model of all four leadership roles, but it did show a strong association with
future potential leadership and quality relationships with customers. In particular, the contrast
for the bosses for the association between adaptability and overall effectiveness (.18) and for
the association between the adaptability role and future potential leadership (.53) is striking.
Based on these results, we would conclude that it is highly important to include multiple
criteria of effectiveness in future leadership studies. A study using overall effectiveness
measures only would conclude that adaptability was not very important. Using multiple
effectiveness measures adds a powerful caveat – adaptability appears to be highly important
for organizations that want to have customers and leaders in the future!
Mission also shows some interesting effects, several of which are in the opposite
direction of the adaptability role. Mission has strong associations with overall effectiveness,
but none of its associations with the more specific criteria of effectiveness exceed that of the
association with overall effectiveness for any of the three groups of raters.
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The results even show negative associations between mission and the quality of
customer relationships. This seems to indicate that having a shared vision and a clear
strategy at best (for bosses) does not affect the quality of relationships with internal and
external customers, and at worst (for direct reports and peers) may get in the way!
Consistency showed the opposite effect of mission. In all but one case, it exceeded
the strength of the associations with overall effectiveness. It showed especially strong
associations with the effectiveness criterion of the quality of relationships with internal and
external customers.
In general, consistency seems to play an important part in the perceptions of all three
groups of raters for all three criteria of effectiveness. If we had used only the overall
effectiveness criterion we would have been unable to detect this central role of consistency.
It indicates that defining core values, working to reach agreement and managing coordination
and integration represent key leadership behaviors for managers’ effectiveness as a role
model, as a future potential leader, and for having high quality relationships with both
internal and external customers.
Given that this was an exploratory study, we expect that future research will build a
more comprehensive framework of leadership effectiveness. Company, industry, and other
contextual factors may also have a strong effect. But at a minimum, the strong contrast
between the strength of the results for mission and consistency between overall effectiveness
and the more specific criteria indicates that researchers have not yet uncovered all of the
criteria that make up leadership effectiveness. Thus, we conclude that this exploratory study
has shown that a single criterion of overall effectiveness can hide many interesting and
important dynamics. In answer to the question posed by this paper, we conclude that a focus
on overall effectiveness alone is not very effective!
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Appendix A Denison Leadership Development Survey: Items by Index and Trait
Trait Index Item
Involvement
Empowers People
1. Sees that decisions are made at the lowest possible level. 2. Shares information so that everyone gets the information s/he needs. 3. Creates an environment where everyone feels that his/her effort can make a difference. 4. Involves everyone in shaping the plans and decisions that affect them. 5. Ensures that the necessary resources are available to do the job. 6. Conveys confidence in people’s competence to do their job. 7. Encourages others to take responsibility. 8. Delegates authority so that others can do their work more effectively.
Builds Team Orientation
9. Builds effective teams that get the job done. 10. Encourages effective teamwork by others. 11. Knows how to use a team approach to solve problems. 12. Knows when to use a team approach to solve problems. 13. Fosters teamwork within the work unit. 14. Knows how to design work so that it can be done by a team. 15. Values the contributions of the people s/he works with. 16. Acknowledges and celebrates team accomplishments.
Develops Organizational Capability
17. Builds the capabilities of employees into an important source for competitive advantage. 18. Knows how to utilize the diversity of the workforce. 19. Coaches others in the development of their skills. 20. Is sensitive and responsive to diversity issues when dealing with others. 21. Helps direct reports create realistic development plans and create opportunities for them. 22. Uses rewards and recognition to motivate good performance. 23. Develops his/her own people so that they are ready for promotion. 24. Builds employee skills so that the organization always has good “bench strength”.
Consistency
Defines Core Values
25. Does the “right thing” even when it is not popular. 26. “Practices” what s/he “preaches”. 27. Has an ethical code that guides his/her behavior. 28. Helps define the organization’s culture, values, and ethical standards. 29. Helps employees learn to apply the organization’s values when dealing with others. 30. Lives up to promises and commitments. 31. Has earned the confidence and trust of others. 32. Clearly articulates a set of fundamental beliefs that are not negotiable.
Works to Reach Agreement
33. Helps people to reach consensus, even on difficult issues. 34. Works to find alternatives that will benefit all when confronted with a disagreement. 35. Helps people in his/her organization be effective at reaching agreement on key issues. 36. Incorporates diverse points of view when making decisions. 37. Promotes constructive discussion among people with conflicting ideas. 38. Is willing to compromise when necessary in order to reach agreement. 39. Works toward win/win solutions when disagreements occur. 40. Reconciles differences by seeking to clarify and understand other’s points of view.
Manages Coordination and Integration
41. Works hard to foster the alignment of goals across all functional areas. 42. Builds coordination across departmental boundaries. 43. Uses informal networks to get things done. 44. Builds relationships with key people in other functions and levels. 45. Helps create an environment that facilitates coordination of projects across functional units. 46. Makes certain that things do not “fall between the cracks”. 47. Builds support for ideas through contracts with other departments. 48. Establishes mechanisms that facilitate effective cross-functional communication.
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Appendix A, Continued Denison Leadership Development Survey: Items by Index and Trait
Trait Index Item
Adaptability
Creates Change
49. Continuously looks for new and better ways to do work. 50. Encourages creative thinking. 51. Challenges the way that things have always been done and looks for a better way. 52. Champions change that goes beyond the scope of his/her job. 53. Challenges organizational practices that are nonproductive. 54. Foresees problems before they arise. 55. Serves as a model that creates change in other parts of the organization. 56. Generates innovative ideas and solutions to problems.
Emphasizes Customer Focus
57. Encourages direct contact with customers. 58. Responds quickly and effectively to customer feedback. 59. Ensures that employees have a deep understanding of customer wants and needs. 60. Uses customer comments and recommendations to change organizational practices. 61. Actively seeks feedback from customers. 62. Continuously tries to improve service to customers. 63. Incorporates customer input into the planning process. 64. Recognizes the need to respond quickly to customer concerns.
Promotes Organizational Learning
65. Deals constructively with failures and mistakes. 66. Views failures as an opportunity for learning and improvement. 67. Creates a working environment in which learning is an important objective. 68. Openly accepts criticism without being defensive. 69. Works well under conditions of ambiguity and uncertainty. 70. Knows the strengths and weaknesses of the competition. 71. Encourages others to learn about the best practices in the industry. 72. Helps others to understand “the big picture”.
Mission
Defines Strategic Direction & Intent
73. Provides employees with a clear mission that gives meaning and direction to their work. 74. Implements strategies by developing clear goals, objectives, and tactics. 75. Focuses on long-term strategies, rather than quick fix “band-aid” solutions. 76. Effectively allocates resources in line with strategic priorities. 77. Helps define strategies and tactics that keep his/her organization competitive. 78. Has a clear strategy for the future of his/her own part of the organization. 79. Is able to meet short-term demands without losing sight of the long-term strategy. 80. Communicates a clear and compelling rationale for the business strategy.
Defines Goals & Objectives
81. Sets clear goals that are ambitious, but realistic. 82. Holds individuals and teams accountable for achieving goals and objectives. 83. Provides clear directions and priorities for employees. 84. Establishes high standards of performance. 85. Involves employees in the goal-setting process so goals and objectives are understood and shared. 86. Tracks progress against stated goals. 87. Effectively communicates the goals and objectives of the organization. 88. Aligns goals and objectives with the strategy and vision.
Creates Shared Vision
89. Helps create a shared vision of what this organization will be like in the future. 90. Communicates the organizational vision to his/her employees. 91. Uses the vision to create excitement and motivation for employees. 92. Realizes short-term goals without compromising long-term vision. 93. Organizes work so that everyone sees the connection between the vision and daily activities. 94. Translates the vision into reality in a way that helps guide individual action. 95. Inspires others with his/her vision of the future. 96. Engages others in ways that ensure buy-in and commitment.
