Organisational Processes

UNIT 5 LEADERSHIP AND DECISION

MAKING

Objectives

After completion of the unit you should be able to :

• define leadership.
• understand the background and classic studies of leadership.
• understand the traditional theories of leadership, including the trait, group
and exchange, contingency, and path-goal approaches.
• understand modern theoretical processes for leadership, such as charismatic,
transformational, substitutes, and now authentic leadership.
• define decision making
• understand types of decision making
• understand process of decision making.

Structure
5.1 What is Leadership?
5.2 Leadership Studies
5.3 Traditional Theories of Leadership
5.4 Modern Theories of Leadership
5.5 Case Study
5.6 Decision Making and Importance
5.7 Types of Decisions
5.8 Making Rational Decisions
5.9 Making Good Decisions
5.10 Making Intuitive Decisions
5.11 Making Creative Decisions
5.12 Summary
5.13 Self Assessment Questions
5.14 Further Readings

5.1 WHAT IS LEADERSHIP?

Leadership has probably been written about, formally researched, and informally
discussed more than any other single topic. The introduction to a recent article
on leadership noted, “Professors and pupils, historians and psychologists,
management gurus and motivational speakers, political hacks and statesmen—
is there anybody who doesn’t have an opinion on what constitutes a good leader?”1
Despite all this attention given to leadership, there remains considerable
controversy. For example, in one of his articles, leadership guru Warren Bennis
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gives the title “The End of Leadership” to make the point that effective leadership Leadership and Decision
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cannot exist without the full inclusion, initiatives, and the cooperation of
employees. In other words, one cannot be a great leader without great followers.
Another leadership guru, Barry Posner, makes the following observations about
the needed change in how business leadership is viewed:

In the past, business believed that a leader was like the captain of a ship: cool,
calm collected. Now, we see that leaders need to be human. They need to be in
touch, they need to be empathetic, and they need to be with people. Leaders need
to be a part of what’s going on, not apart from what’s going on.

Globalization has also changed the traditional view of an organizational leader

as “the heroic individual, often charismatic, whose positional power, intellectual
strength, and persuasivegifts motivate followers. But this is not necessarily the
ideal in Asia, nor does it match the requirements in large global corporations,
where forms of distributed and shared leadership are needed to address complex
interlocking problems.”

There are also problems with the ways leaders have been traditionally developed,
a multi-billion dollar effort. For example, we note on the opening page of our
(Avolio and Luthans) book on authentic leadership development that “we are
dismayed at how few leadership development programs actually can substantiate
that even one leader has been developed as a consequence of most programs.”5
As a result, new paradigms of leadership development are beginning to emerge.
For example, the director of Leadership at Google recently commented, “In the
’90s at Pepsi, I taught leaders to develop leaders.

Now I ask people within the company to name employees they respect and then
give them training tasks.”

In spite of the seeming discontent, at least with the traditional approaches to

leadership theory, practice, and development, throughout history the difference
between success and failure, whether in a war, a business, a protest movement,
or a basketball game, has been attributed to leadership. A Gallup survey indicates
that most employees believe that it is the leader, not the company, that guides the
culture and creates situations where workers can be happy and successful.6 As
the opening statement of a recent cover story on leadership in Fortune declares,
“Your competition can copy every advantage you’ve got—except one.

That’s why the best companies are realizing that no matter what business they’re
in, their real business is building leaders. Precisely spelled out. Despite these
inherent difficulties, many attempts have been made over the years to define
leadership. Unfortunately, almost everyone who studies or writes about leadership
defines it differently. About the only commonality is the role that influence plays
in leadership.

In recent years, many theorists and practitioners have emphasized the difference
between managers and leaders. For example, as Bennis has noted: “To survive
in the twenty-first century, we are going to need a new generation of leaders—
leaders, not managers.

The distinction is an important one. Leaders conquer the context—the volatile,

turbulent, ambiguous surroundings that sometimes seem to conspire against us
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Organisational Processes and will surely suffocate us if we let them—while managers surrender to it.”10
He then goes on to point out his thoughts on some specific differences between
leaders and managers. Obviously, these are not scientifically derived differences,
but it is probably true that an individual can be a leader without being a manager
and be a manager without being a leader.

Although many specific definitions could be cited, most would depend on the
theoretical orientation taken. Besides influence, leadership has been defined in
terms of group processes, personality, compliance, particular behaviors,
persuasion, power, goal achievement, interaction, role differentiation, initiation
of structure, and combinations of two or more of these. The extremely turbulent,
adverse environment facing organizational leaders in recent years has led Bennis
and Thomas to conclude:

One of the most reliable indicators and predictors of true leadership is an

individual’s ability to find meaning in negative events and to learn from even the
most trying circumstances. Put another way, the skills required to conquer
adversity and emerge stronger and more committed than ever are the same ones
that make for extraordinary leaders.

Importance of Leadership
Leadership is an important factor for making an organization successful. It is the
art or process of influencing people to perform assigned tasks willingly, efficiently
and competently. Without leadership a line manager simply cannot be effective.
Leadership of the line managers transforms potential into reality. When good
leadership is in place in the organization, it can be felt throughout the entire
organization. With good leadership, organizational culture is not forced but
developed. Communication is effective and open. Everyone understands the
vision and goals of the organization, and everyone has input into how they can
be improved. People feel that they are an important part of the organization and
they give their best for the success of the organization. The leadership in the
organization is to meet the three challenges. The first challenge is to provide a
shared vision of where the organisation is heading and what its purpose is (the
mission). The second challenge is to set objectives, that is, to convert the strategic
vision and directional course into specific performance outcomes for each key
area which leaders deem important for success. The third challenge in providing
strategic direction is to generate and develop a strategy that will determine how
to achieve the objectives. Strategic direction is imperative in identifying a
systematic intervention that will provide the most leverage to the organisation,
as an organisation cannot focus on everything all of the time.
http://ispatguru.com/importance-of-leadership-for-organizational-excellence/

Leadership is an important function of management which helps to maximize

efficiency and to achieve organizational goals. The following points justify the
importance of leadership in a concern.

Initiates action- Leader is a person who starts the work by communicating the
policies and plans to the subordinates from where the work actually starts.

Motivation- A leader proves to be playing an incentive role in the concern’s

working. He motivates the employees with economic and non-economic rewards
and thereby gets the work from the subordinates.
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Providing guidance- A leader has to not only supervise but also play a guiding Leadership and Decision
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role for the subordinates. Guidance here means instructing the subordinates the
way they have to perform their work effectively and efficiently.

Creating confidence- Confidence is an important factor which can be achieved

through expressing the work efforts to the subordinates, explaining them clearly
their role and giving them guidelines to achieve the goals effectively. It is also
important to hear the employees with regards to their complaints and problems.

Building morale- Morale denotes willing co-operation of the employees towards

their work and getting them into confidence and winning their trust. A leader can
be a morale booster by achieving full co-operation so that they perform with best
of their abilities as they work to achieve goals.

Builds work environment- Management is getting things done from people.

An efficient work environment helps in sound and stable growth. Therefore,
human relations should be kept into mind by a leader. He should have personal
contacts with employees and should listen to their problems and solve them. He
should treat employees on humanitarian terms.

Co-ordination- Co-ordination can be achieved through reconciling personal

interests with organizational goals. This synchronization can be achieved through
proper and effective co-ordination which should be primary motive of a leader.2
https://managementstudyguide.com/importance_of_leadership.htm

5.2 LEADERSHIP STUDIES

The Iowa Leadership Studies
A series of pioneering leadership studies conducted in the late 1930s by Ronald
Lippitt and Ralph K. White under the general direction of Kurt Lewin at the
University of Iowa have had a lasting impact. Lewin is recognized as the father
of group dynamics and as an important cognitive theorist. In the initial studies,
hobby clubs for ten-year-old boys were formed. Each club was submitted to all
three different styles of leadership— authoritarian, democratic, and laissez-faire.
The authoritarian leader was very directive and allowed no participation. This
leader tended to give individual attention when praising and criticizing, but tried
to be friendly or impersonal rather than openly hostile. The democratic leader
encouraged group discussion and decision making. This leader tried to be
“objective” in giving praise or criticism and to be one of the group in spirit. The
laissez-faire leader gave complete freedom to the group; this leader essentially
provided no leadership.

Unfortunately, the effects that styles of leadership had on productivity were not
directly examined. The experiments were designed primarily to examine patterns
of aggressive behavior. However, an important by-product was the insight that
was gained into the productive behavior of a group. For example, the researchers
found that the boys subjected to the autocratic leaders reacted in one of two
ways: either aggressively or apathetically. Both the aggressive and apathetic
behaviors were deemed to be reactions to the frustration caused by the autocratic
leader. The researchers also pointed out that the apathetic groups exhibited
outbursts of aggression when the autocratic leader left the room or when a
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Organisational Processes transition was made to a freer leadership atmosphere. The laissez-faire leadership
climate actually produced the greatest number of aggressive acts from the group.
The democratically led group fell between the one extremely aggressive group
and the four apathetic groups under the autocratic leaders.

Sweeping generalizations on the basis of the Lippitt and White studies are
dangerous.

Preadolescent boys making masks and carving soap are a long way from adults
working in a complex, modern organization. Furthermore, from the viewpoint
of today’s behavioral science research methodology, many of the variables were
not controlled. Nevertheless, these leadership studies have important historical
significance. They were the first attempts to determine, experimentally, what
effects styles of leadership have on a group. Like the Hawthorne studies presented,
the Iowa studies are too often automatically discounted or at least marginalized
because they are hard to generalize to modern organizational leadership. The
value of the studies was that they were the first to analyze leadership from the
standpoint of scientific methodology, and, more important, they showed that
different styles of leadership can produce different, complex reactions from the
same or similar groups.

Ohio State Leadership Studies

At the end of World War II, the Bureau of Business Research at Ohio State
University initiated a series of studies on leadership. An interdisciplinary team
of researchers from psychology, sociology, and economics developed and used
the Leader Behavior Description Questionnaire (LBDQ) to analyze leadership
in numerous types of groups and situations.

Studies were made of Air Force commanders and members of bomber crews;
officers, noncommissioned personnel, and civilian administrators in the Navy
Department; manufacturing supervisors; executives of regional cooperatives;
college administrators; teachers, principals, and school superintendents; and
leaders of various student and civilian groups.

The Ohio State studies started with the premise that no satisfactory definition of
leadership existed. They also recognized that previous work had too often assumed
that leadership was synonymous with good leadership. The Ohio State group
was determined to study leadership, regardless of definition or whether it was
effective or ineffective.

In the first step, the LBDQ was administered in a wide variety of situations. In
order to examine how the leader was described, the answers to the questionnaire
were then subjected to factor analysis. The outcome was amazingly consistent.
The same two dimensions of leadership continually emerged from the
questionnaire data. They were consideration and initiating structure. These two
factors were found in a wide variety of studies encompassing many kinds of
leadership positions and contexts. The researchers carefully emphasize that the
studies show only how leaders carry out their leadership function. Initiating
structure and consideration are very similar to the time-honored military
commander’s functions of mission and concern with the welfare of the troops.
In simple terms, the Ohio State factors are task or goal orientation (initiating
structure) and recognition of individual needs and relationships (consideration).
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The two dimensions are separate and distinct from each other. Leadership and Decision
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The Ohio State studies certainly have value for the study of leadership. They
were the first to point out and emphasize the importance of both task and human
dimensions in assessing leadership. This two-dimensional approach lessened
the gap between the strict task orientation of the scientific management movement
and the human relations emphasis, which had been popular up to that time.
Interestingly, when Colin Powell, usually considered one of the most-effective
and most-admired leaders of recent years, speaks of his own leadership process,
he uses this two-dimensional approach. Today leadership is recognized as both
multidimensional, as first pointed out by the Ohio State studies, and multilevel
(person, dyad, group, and collective/community).

Michigan Leadership Studies

At about the same time that the Ohio State studies were being conducted, a
group of researchers from the Survey Research Center at the University of
Michigan began their studies of leadership. In the original study at the Prudential
Insurance Company, high-low productivity pairs of groups were selected for
examination. Each pair represented a high-producing section and a low-producing
section, with other variables such as type of work, conditions, and methods being
the same in each pair. Nondirective interviews were conducted with the 24 section
supervisors and 419 clerical workers.
Results showed that supervisors of high-producing sections were significantly
more likely to be general rather than close in their supervisory styles and be
employee-centered (have a genuine concern for their people). The low-producing-
section supervisors had essentially opposite characteristics and techniques. They
were found to be close, production centered supervisors. Another important, but
sometimes overlooked, finding was that employee satisfaction was not directly
related to productivity, the type of supervision was the key to their performance.
The general, employee-centered supervisor, described here, became the standard-
bearer for the traditional human relations approach to leadership. The results of
the Prudential studies were always cited when human relations advocates were
challenged to prove their theories. The studies have been followed up with
hundreds of similar studies in a wide variety of industrial, hospital, governmental,
and other organizations. Thousands of employees, performing unskilled to highly
professional and scientific tasks, have been analyzed. Rensis Likert, the one-
time director of the Institute for Social Research of the University of Michigan,
presented the results of the years of similar research in his books and became
best known for his “System 4” (democratic) leadership style.

5.3 TRADITIONAL THEORIES OF LEADERSHIP

The Iowa, Ohio State, and Michigan studies are three of the historically most
important leadership studies for the field of organizational behavior.
Unfortunately, leadership research has not surged ahead from this relatively
auspicious beginning. Before analyzing the current status of leadership research,
it is important also to examine the theoretical development that has occurred
through the years.

There are several distinct theoretical bases for leadership. At first, leaders were
felt to be born, not made. This so-called great person theory of leadership implied
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Organisational Processes that some individuals are born with certain traits that allow them to emerge out
of any situation or period of history to become leaders. Similar to research on
personality, showing the impact of genetics and neurology/brain research there
is recent interest in the role that genetics and hardwiring may play in leadership.
For example, one non-research-based analysis noted: “Our experience has led
us to believe that much of leadership talent is hardwired in people before they
reach their early or mid-twenties” and researchers at the University of Minnesota
using large samples of twins are investigating whether genetics predicts leadership.
Although this research is ongoing, the findings so far do indicate that genetics
may account for about 30 percent of the variance in leadership style and emergence
in leadership roles, but the majority still comes from development. Perhaps the
best way to view the born versus made issue is to recognize the interaction between
the two. As noted by Avolio and Luthans:

We already know that how a person’s genetic makeup engages and is affected by
its environment is not stable. Instead, the genetic–environment interaction is
elastic (i.e., changes) over time. Specifically, as the “genetic program” unfolds,
it is greatly affected by the context in which it unfolds.

In other words, as was pointed out in the discussion of personality, leadership is

affected by both nature (genetics) and nurture (development).
Traditionally, however, the great person approach became associated with the
trait theory of leadership. The trait approach is concerned mainly with identifying
the personality traits of the leader. Dissatisfied with this trait approach, and
stimulated by research such as the pioneering Ohio State studies, researchers
next switched their emphasis from the individual leader’s traits to the group
being led. In the group approach, leadership is viewed more in terms of the
leader’s behavior and how such behavior affects and is affected by the group of
followers. This role of the follower in leadership has received little attention
over the years. As Avolio concluded in his summary of the leadership research
literature, “unfortunately, most leadership research has considered the follower
a passive or nonexistent element when examining what constitutes leadership.
In addition to the leader’s traits and the group, the situation then began to receive
increased attention in leadership theory. The situational approach was initially
called
Zeitgeist (a German word meaning “spirit of the time”); the leader is viewed as
a product of the times and the situation. The person with the particular qualities
or traits that a situation requires will emerge as the leader. This view has much
historical support as a theoretical basis for leadership and serves as the basis for
situational—and then termed contingency and now contextual—theories of
leadership. Fiedler’s classic contingency theory, which suggests that leadership
styles must fit or match the situation in order to be effective, is the best known.
Another traditional situational, or contingency, theory took some of the expectancy
concepts of motivation and applied them to leadership and situations. Called the
path-goal theory of leadership, it is an attempt to synthesize motivational and
leadership processes. The following sections examine these traditionally
recognized trait, group, contingency, and path-goal theories of leadership.

Trait Theories of Leadership

The scientific analysis of leadership started off by concentrating on the trait
32 approach to leadership. Attention was given to the search for universal traits
possessed by leaders. The results of this voluminous early research effort were Leadership and Decision
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generally very disappointing. Only intelligence seemed to hold up with any degree
of consistency. When these findings were combined with those of studies on
physical traits, the conclusion seemed to be that leaders were bigger and brighter
than those being led, but not too much so. For example, this line of research
concluded that the leader was more intelligent than the average of the group
being led, but, interestingly, was not the most intelligent of the group. Political
analysts indicate that candidates should not come across as too intelligent to be
electable, and the most intelligent member of a criminal gang is not the leader,
but usually a lieutenant of theleader, the “brains” of the outfit.
When the trait approach was applied to organizational leadership, the result was
even cloudier. One of the biggest problems is that all managers think they know
what the qualities of a successful leader are. Obviously, almost any adjective can
be used to describe a successful leader. However, it should be recognized that
there are semantic limitations and historically, little supporting evidence on these
observed descriptive traits and successful leadership. In recent years, however,
with the emergence of the importance of the “Big Five” personality traits in
organizational behavior the trait approach to leadership effectiveness has
resurfaced. For example, a recent qualitative and quantitative meta-analysis review
found strong empirical support for the leader trait perspective when traits are
organized according to the five-factor model. Specifically, the personality trait
of extraversion had the highest (.31) average correlation with leader emergence
and leadership effectiveness, followed by conscientiousness (.28), openness to
experience (.24), neuroticism (_.24), and non significant agreeableness (.08).
These results and newly developed trait like theoretical frameworks such as the
motivation to lead (MTL), which has been demonstrated to predict leadership
potential, indicate that a dispositional, trait like approach to leadership is still
alive and may have potential for the future.
From Traits to States and Skills Development
Picking up where the fixed, trait like approach to leadership has left off are the
newly emerging states and more-established skills for leadership development.
Still in the tradition of concentrating on the great person approach, but moving
away from a strict traits approach and serving as a bridge to the situational theories,
are the newly emerging psychological states. The state like (situationally based
capacities, those open to development and change, as opposed to the dispositional,
relatively fixed traits) positive organizational behavior (POB) constructs have
potential for understanding and developing leadership. Specifically, both intuitive
and beginning research evidence indicate that optimism, hope, resiliency,
emotional intelligence, and especially self-efficacy are related to effective leaders.
Incorporating these POB variables of the leader—describing who they are—into
newly emerging theories such as authentic leadership (described in the
introductory definitions and more fully later in the chapter) seems important for
the development of leadership to meet today’s challenges. In addition to
developing the POB states, another departure from the trait approach that still
focuses on leaders themselves is their skill development. For example, a number
of years ago, Katz identified the technical, conceptual, and human skills needed
for effective management. Yukl includes leadership skills such as creativity,
organization, persuasiveness, diplomacy and tactfulness, knowledge of the task,
and the ability to speak well. These skills have become very important in the
application of leadership theory.
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Organisational Processes Closely related to the skills approach is the study of leader “competencies.” One
stream of research has identified several such competencies that are related to
leadership effectiveness both in the United States and other cultures:
1) Drive, or the inner motivation to pursue goals
2) Leadership motivation, which is the use of socialized power to influence
others to succeed
3) Integrity, which includes truthfulness and the will to translate words into
deeds
4) Self-confidence that leads others to feel confidence, usually exhibited through
various forms of impression management directed at employees
5) Intelligence, which is usually focused in the ability to process information,
analyze alternatives, and discover opportunities
6) Knowledge of the business, so that ideas that are generated help the company
to survive and thrive
7) Emotional intelligence, based on a self-monitoring personality, making
quality leaders strong in situation sensitivity and the ability to adapt to
circumstances as needed
Importantly, these competencies seem to hold in the current environment facing
organizational leaders, but require further theory building and research.

Group and Exchange Theories of Leadership

The group theories of leadership have their roots in social psychology. Classic
exchange theory, in particular, serves as an important basis for this approach.
This means simply that the leader provides more benefits/rewards than burdens/
costs for followers. There must be a positive exchange between the leaders and
followers in order for group goals to be accomplished. Pioneering theorist Chester
Barnard applied such an analysis to managers and subordinates in an
organizational setting more than a half-century ago. More recently, this social
exchange view of leadership has been summarized by Yammarino and Dansereau
as follows:

In work organizations, the key partners involved in exchange relationships of

investments and returns are superiors and subordinates. Superiors make
investments (e.g., salary, office space) in and receive returns (e.g., performance)
from subordinates; subordinates make investments in and receive returns from
superiors; and the investments and returns occur on a one-to-one basis in each
superior-subordinate dyad.

This quotation emphasizes that leadership is an exchange process between the

leader and followers. Social psychological research can be used to support this
notion of exchange. Importantly, although traditionally ignored, there is
considerable evidence that followers affect leaders, and there is considerable
theory and research on the relationship, or exchange-based, approach to
leadership.

Followers’ Impact on Leaders

A growing number of research studies indicate that followers/associates may
actually affect leaders as much as leaders affect followers/associates. For example,
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one study found that when associates were not performing very well, the leaders Leadership and Decision
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tended to emphasize the task or initiating structure, but when associates were
doing a good job, leaders increased emphasis on their people or consideration.
In a laboratory study it was found that group productivity had a greater impact
on leadership style than leadership style had on group productivity, and in another
study it was found that in newly formed groups, leaders may adjust their supportive
behavior in response to the level of group cohesion and arousal already present.
In other words, such studies seem to indicate that followers affect leaders and
their behaviors as much as leaders and their behaviors affect followers.

Some practicing managers, such as the vice president of Saga Corporation, feel
that employees lack followership skills, and there is growing evidence that these
skills are becoming increasingly important. In other words, it is probably not
wise to ignore followership.

Most managers feel that their associates have an obligation to follow and support
their leader and Kellerman argues that this arrangement is in the natural order of
things (e.g., the “pecking order” of chickens in the barnyard or the dominant
alpha male in the wolf pack). She concludes, “in order for large groups to govern
themselves effectively, some must be willing to be leaders, others must be willing
to be followers, and the majority must be willing to go along with this
arrangement.” As the CEO of Commerce

Union Corporation noted in a Wall Street Journal article: “Part of a subordinate’s

responsibility is to make the boss look good.”

The Leader-Member Exchange (LMX) Model

Relevant to the exchange view of leadership is the vertical dyad linkage (VDL)
approach, now commonly called leader-member exchange (LMX). LMX theory
says that leaders treat individual followers differently. In particular, leaders and
their associates develop dyadic (two-person) relationships that affect the behavior
of both. For example, associates who are committed and who expend a lot of
effort for the unit are rewarded with more of the leader’s positional resources
(for example, information, confidence, and concern) than those who do not display
these behaviors.

Over time, the leader will develop an “in-group” of associates and an “out-group”
of associates and treat them accordingly. Thus, for the same leader, research has
shown that in-group associates report fewer difficulties in dealing with the leader
and perceive the leader as being more responsive to their needs than out-group
associates do. Also, leaders spend more time “leading” members of the in-group
(that is, they do not depend on formal authority to influence them), and they tend
to “supervise” those in the out-group (that is, they depend on formal roles and
authority to influence them). Finally, there is evidence that members of the in-
group (those who report a high-quality relationship with their leader) assume
greater job responsibility, contribute more to their units, and are rated as higher
performers than those reporting a low-quality relationship. This exchange theory
has been around for some time now, and although it is not without criticism, in
general, the research continues to be relatively supportive. However, as
traditionally presented, LMX seems to be more descriptive of the typical process
of role making by leaders, rather than prescribing the pattern of downward
exchange relations optimal for leadership effectiveness. Research is also using
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Organisational Processes more sophisticated methodologies and suggests that there are a number of
moderators in the LMX-performance relationship.

Graen and Uhl-Bien have emphasized that LMX has evolved through various
stages: (1) the discovery of differentiated dyads; (2) the investigation of
characteristics of LMX relationships and their organizational implications/
outcomes; (3) the description of dyadic partnership building; and (4) the
aggregation of differentiated dyadic relations to group and network levels. New
insights into the manner in which leaders differentiate between employees in
order to form in-groups and out-groups may in part be explained by social network
analysis. Positive social networks and exchange processes assist leaders in
selecting those who may become part of the inner circle of an organization.
Also, the fourth stage recognizes the new cross-functional or network emphasis
in organizations and even external relations with customers, suppliers, and other
organizational stakeholders.

Research that identifies leader-follower relationships that are best suited to specific
environmental contingencies is still needed. Finally, from the social cognitive
perspective taken by this text, it should be remembered that leader-member
exchanges are a reciprocal process. Evidence of this process of interaction suggests
that leaders may be inclined to change follower self-concepts in the short term to
achieve performance goals and more enduring changes. At the same time,
followers reciprocally shape leaders’ self-schemas through their responses, both
as individuals and through collective or group reactions. These and other elements
of the continual negotiation between the leader and followers, which is also
recognized by the psychological contract, deserve additional consideration in
the future.

Contingency Theory of Leadership

After concentrating just on leaders themselves proved to fall short of being an
adequate overall theory of leadership, attention turned not only to the group
being led and the exchange relationship, but also to the situational or contextual
aspects of leadership. Social psychologists began the search for situational
variables that affect leadership roles, skills, behavior, and followers’ performance
and satisfaction. Numerous situational variables were identified, but no overall
theory pulled it all together until Fred Fiedler proposed the now classic situation-
based, or contingency, theory for leadership effectiveness.

Fiedler’s Contingency Model of Leadership Effectiveness

To test the hypotheses he had formulated from previous research findings, Fiedler
developed what he called a contingency model of leadership effectiveness. This
model contained the relationship between leadership style and the favorableness
of the situation. Situational favorableness was described by Fiedler in terms of
three empirically derived dimensions:
1) The leader-member relationship, which is the most critical variable in
determining the situation’s favorableness
2) The degree of task structure, which is the second most important input into
the favorableness of the situation
3) The leader’s position power obtained through formal authority, which is the
third most critical dimension of the situation.
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Situations are favorable to the leader if all three of these dimensions are high. In Leadership and Decision
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other words, if the leader is generally accepted and respected by followers (high
first dimension), if the task is very structured and everything is “spelled out”
(high second dimension), and if a great deal of authority and power are formally
attributed to the leader’s position (high third dimension), the situation is favorable.
If the opposite exists (if the three dimensions are low), the situation will be very
unfavorable for the leader. Fiedler concluded through his research that the
favorableness of the situation in combination with the leadership style determines
effectiveness.

The leader who makes a wrong decision in this highly unfavorable type of situation
is probably better off than the leader who makes no decision at all. In essence,
what Fiedler’s model suggests is that in highly unfavorable situations, the effective
leader takes charge and makes the decisions that need to be made to accomplish
the task without asking for input or trying to keep everyone happy.

Path-Goal Leadership Theory

The other widely recognized theoretical development from a contingency
approach is the path-goal theory derived from the expectancy framework of
motivatio. Although Georgopoulos and his colleagues at the University of
Michigan’s Institute for Social Research used path-goal concepts and terminology
many years ago for analyzing the impact of leadership on performance, the
recognized development is usually attributed to Martin Evans and Robert House,
who at about the same time wrote separate papers on the subject. In essence, the
path-goal theory attempts to explain the impact that leader behavior has on
associate motivation, satisfaction, and performance. The House version of the
theory incorporates four major types, or styles, of leadership.

Briefly summarized, these are:

1) Directive leadership. This style is similar to that of the Lippitt and White
authoritarian leader. Associates know exactly what is expected of them, and
the leader gives specific directions. There is no participation by subordinates.
2) Supportive leadership. The leader is friendly and approachable and shows
a genuine concern for associates.
3) Participative leadership. The leader asks for and uses suggestions from
associates but still makes the decisions.
4) Achievement-oriented leadership. The leader sets challenging goals for
associates and shows confidence that they will attain these goals and perform
well.
This path-goal theory—and here is how it differs in one respect from Fiedler’s
contingency model—suggests that these various styles can be and actually are
used by the same leader in different situations. Two of the situational factors that
have been identified are the personal characteristics of associates and the
environmental pressures and demands facing associates. With respect to the first
situational factor, the theory asserts:

Leader behavior will be acceptable to subordinates to the extent that the

subordinates see such behavior as either an immediate source of satisfaction or
as instrumental to future satisfaction.
37
Organisational Processes And with respect to the second situational factor, the theory states:

Leader behavior will be motivational (e.g., will increase subordinate effort) to

the extent that (1) it makes satisfaction of subordinate needs contingent on
effective performance, and (2) it complements the environment of subordinates
by providing the coaching, guidance, support, and rewards which are necessary
for effective performance and which may otherwise be lacking in subordinates
or in their environment.

Using one of the four styles contingent on the situational factors as outlined, the
leader attempts to influence associates’ perceptions and motivate them, which in
turn leads to their role clarity, goal expectancies, satisfaction, and performance.
This is specifically accomplished by the leader as follows:
1) Recognizing and/or arousing associates’ needs for outcomes over which the
leader has some control
2) Increasing personal payoffs to associates for work-goal attainment
3) Making the path to those payoffs easier to travel by coaching and direction
4) Helping associates clarify expectancies
5) Reducing frustrating barriers
6) Increasing the opportunities for personal satisfaction contingent on effective
performance.

5.4 MODERN THEORIES OF LEADERSHIP

Charismatic Leadership Theories
Charismatic leadership is a throwback to the old conception of leaders as being
those who “by the force of their personal abilities are capable of having profound
and extraordinary effects on followers.” Although the charismatic concept, or
charisma, goes as far back as the ancient Greeks and is cited in the Bible, its
modern development is often attributed to the work of Robert House. On the
basis of the analysis of political and religious leaders,

House suggests that charismatic leaders are characterized by self-confidence and

confidence in their associates, high expectations for associates, ideological vision,
and the use of personal example. Followers of charismatic leaders identify with
the leader and the mission of the leader, exhibit extreme loyalty to and confidence
in the leader, emulate the leader’s values and behavior, and derive self-esteem
from their relationship with the leader. Bass has extended the profile of charismatic
leaders to include superior debating and persuasive skills as well as technical
expertise and the fostering of attitudinal, behavioral, and emotional changes in
their followers.

Charismatic leaders will produce in followers performance beyond expectations

as well as strong commitment to the leader and his or her mission. Research
indicates that the impact of such charismatic leaders will be enhanced when the
followers exhibit higher levels of self-awareness and self-monitoring, especially
when observing the charismatic leaders’ behaviors and activities and when
operating in a social network. House and his colleagues provide some support
for charismatic theory and research finds a positive effect on desirable outcomes
38
such as cooperation and motivation, and recent conceptualization proposing that Leadership and Decision
Making
alternative forms (personalized versus socialized) are relevant to successful
implementation of mergers and acquisitions. However, as with the other leadership
theories, complexities are found and more research is needed. For example, one
study that assessed charismatic leader behaviors, individual level correlates, and
unit-level correlates (outcomes) in the military yielded only limited support for
the theory’s propositions and led the researchers to conclude that greater sensitivity
to multiple constituencies of leaders is needed in theories and studies focused on
charismatic leadership. Also, extensions of the theory are being proposed. For
example, Conger and Kanungo treat charisma as an attributional phenomenon
and propose that it varies with the situation. Leader traits that foster charismatic
attributions include self-confidence, impression-management skills, social
sensitivity, and empathy. Situations that promote charismatic leadership include
a crisis requiring dramatic change or followers who are very dissatisfied with
the status quo. For example, a study in a university setting revealed a situation in
which a charismatic leader was able to successfully implement a technical change,
but at the same time suffered through major political turmoil, which appeared to
be side effects of the technical change.

This suggests that studies of charismatic leadership must be considered in the

context in which the leader operates, and the nature of the task or work being
performed should be included in the analysis.

Transformational Leadership Theory

Many years ago James MacGregor Burns identified two types of political
leadership: transactional and transformational. The more traditional transactional
leadership involves an exchange relationship between leaders and followers, but
transformational leadership is based more on leaders’ shifting the values, beliefs,
and needs of their followers.

More recently, the “charisma” characteristic of transformational leadership has

been changed to “idealized influence.” This was done to not confuse
transformational with charismatic leadership, which Bass treats as different
theories. Although there are a number of contrasts between the two theories, the
major differentiators are how followers are treated. Key to transformational leaders
is that they seek to empower and elevate followers

(i.e., develop followers into leaders) while charismatic leaders may try to keep
followers weak and dependent on them (i.e., instill personal loyalty to the leader
rather than developing them to attain ideals).

In contrast to transactional leaders that behave in one of the ways Avolio notes
that transformational leaders characterized by idealized leadership, inspiring
leadership, intellectual stimulation, and individualized consideration represent
a cluster of interrelated styles aimed at the following:
1) Changing situations for the better
2) Developing followers into leaders
3) Overhauling organizations to provide them with new strategic directions
4) Inspiring people by providing an energizing vision and high ideal for moral
and ethical Conduct.
39
Organisational Processes On the basis of his research findings, Bass concludes that in many instances
(such as relying on passive management by exception), transactional leadership
is a prescription for mediocrity and that transformational leadership leads to
superior performance in organizations facing demands for renewal and change.
He suggests that fostering transformational leadership through policies of
recruitment, selection, promotion, training, and development will pay off in the
health, well-being, and effective performance of today’s organizations.

A meta-analysis of 39 studies found that the transformational behaviors of

charisma (idealized influence), individualized consideration, and intellectual
stimulation were related to leadership effectiveness in most studies, but, except
for the contingent reward behaviors, the transactional leadership styles did not
enhance leadership effectiveness, and this more positive impact of
transformational over transactional leadership has held through the years. For
example, a recent meta-analysis of 87 studies found transformational leadership
related (.44) to the composite of desired outcomes (follower job satisfaction,
follower leader satisfaction, follower motivation, leader job performance, group
or organizational performance and rated leader effectiveness). However, in this
meta-analysis, contingent reward transactional leadership also related (.39) to
the same composite of outcomes, and transformational leadership failed to
significantly predict leader job performance.

Substitutes for Leadership

Because of dissatisfaction with the progress of leadership theory and research in
explaining and predicting the effects of leader behavior on performance outcomes,
some of the basic assumptions about the importance of leadership per se have
been challenged over the years. One alternative approach that received attention
proposed that there may be certain “substitutes” for leadership that make leader
behavior unnecessary and redundant, and “neutralizers” that prevent the leader
from behaving in a certain way or that counteract the behavior. These substitutes
or neutralizers can be found in subordinate, task, and organization characteristics.
For example, crafts persons or professionals such as accountants or software
engineers may have so much experience, ability, and training that they do not
need instrumental/task leadership to perform well and be satisfied. Those
employees who don’t particularly care about organizational rewards (for example,
professors or musicians) will neutralize both supportive/relationship and
instrumental/task leadership attempts. Tasks that are highly structured and
automatically provide feedback substitute for instrumental/ task leadership, and
those that are intrinsically satisfying (for example, teaching) do not need
supportive/relationship leadership. There are also a number of organizational
characteristics that substitute for or neutralize leadership.

Authentic Leadership
Although there are a number of newly emerging theories such as servant
leadership, political leadership, contextual leadership, e-leadership, primal
leadership, relational leadership, positive leadership, shared leadership, and
responsible leadership, in these times of unprecedented challenges facing
organizational leaders, we (Avolio and Luthans and our colleagues working with
the Leadership Institute at the University of Nebraska) believe that authentic
leadership is a needed approach. Drawing from Luthans’s work on positive
organizational behavior and psychological capital, and Avolio’s work on
40
transformational and full range leadership, we have recently proposed a specific Leadership and Decision
Making
model of authentic leadership development.

Authenticity has its roots in ancient Greek philosophy (“To thin own self be
true”) and descriptive words include genuine, transparent, reliable, trustworthy,
real, and veritable.

Positive psychologists refer to authenticity as both owning one’s personal

experiences (thoughts, emotions, or beliefs, “the real me inside”) and acting in
accord with the true self (behaving and expressing what you really think and
believe). We specifically define authentic leadership in organizations as:

A process that draws from both positive psychological capacities and a highly
developed organizational context, which results in both greater self-awareness
and self-regulated positive behaviors on the part of leaders and associates,
fostering positive self-development. The authentic leader is confident, hopeful,
optimistic, resilient, transparent, moral/ethical, future oriented, and gives priority
to developing associates to be leaders.

Abusive Leadership*
Abusive leaders exercise power to serve their own interest by dominating and
authoritative ways to achieve what they want. They manipulate others to gain
their purposes. They want to win at any cost. Although they know how to show
that they are loyal and working for the organization, actuality they are preoccupied
to be numberone. Baron and Neuman (1998) explain that abusive behavior is
the behavior which is harmful to others.

Ashforth (1994, 1997) defines petty tyranny as a manager’s use of power and
authority cruelly, erratically, and unkindly. He finds following six dimensions of
a petty tyrant: behaving in an illogical and conceited manner; putting down
subordinate; lacking kindness for other; forcing divergence ruling; discouraging
inventiveness and using non-contingent penalty.

Tepper (2000) defines abusive supervision as the perception of subordinates about

the hostile verbal and nonverbal behavior of their supervisors which does not
include physical abuse. He feels that supervisors may not mean to cause harm
and are forced to act abusively in order to achieve some other goal.

5.5 CASE STUDY

She is among the top 100 most influential people according to Time magazine’s
2008 list. She is also number 5 in Forbes’s “Most Influential Women in the
World” (2007), number 1 in Fortune’s “50 Most Powerful Women” (2006), and
number 22 in Fortune’s “25 Most Powerful People in Business” (2007). The
lists go on and on. To those familiar with her work and style, this should come as
no surprise: Even before she became the CEO of PepsiCo Inc. (NYSE: PEP) in
2006, she was one of the most powerful executives at PepsiCo and one of the
two candidates being groomed for the coveted CEO position. Born in Chennai,
India, Nooyi graduated from Yale’s School of Management and worked in

Source: http://pakacademicsearch.com/pdffiles/ech/517/821%20Vol%205,%20No%
204%20(2013).pdf
41
Organisational Processes companies such as the Boston Consulting Group Inc., Motorola Inc., and ABB
Inc. She also led an all-girls rock band in high school, but that is a different story.

What makes her one of the top leaders in the business world today? To start
with, she has a clear vision for PepsiCo, which seems to be the right vision for
the company at this point in time. Her vision is framed under the term
“performance with purpose,” which is based on two key ideas: tackling the obesity
epidemic by improving the nutritional status of PepsiCo products and making
PepsiCo an environmentally sustainable company. She is an inspirational speaker
and rallies people around her vision for the company. She has the track record to
show that she means what she says. She was instrumental in PepsiCo’s acquisition
of the food conglomerate Quaker Oats Company and the juice maker Tropicana
Products Inc., both of which have healthy product lines. She is bent on reducing
PepsiCo’s reliance on high-sugar, high-calorie beverages, and she made sure
that PepsiCo removed trans fats from all its products before its competitors. On
the environmental side, she is striving for a net zero impact on the environment.
Among her priorities are plans to reduce the plastic used in beverage bottles and
find biodegradable packaging solutions for PepsiCo products. Her vision is long
term and could be risky for short-term earnings, but it is also timely and important.

Those who work with her feel challenged by her high-performance standards
and expectation of excellence. She is not afraid to give people negative feedback—
and with humor, too. She pushes people until they come up with a solution to a
problem and does not take “I don’t know” for an answer. For example, she insisted
that her team find an alternative to the expensive palm oil and did not stop urging
them forward until the alternative arrived: rice bran oil. Nooyi is well liked and
respected because she listens to those around her, even when they disagree with
her. Her background cuts across national boundaries, which gives her a true
appreciation for diversity, and she expects those around her to bring their values
to work. In fact, when she graduated from college, she wore a sari to a job
interview at Boston Consulting, where she got the job. She is an unusually
collaborative person in the top suite of a Fortune 500 company, and she seeks
help and information when she needs it. She has friendships with three ex-CEOs
of PepsiCo who serve as her informal advisors, and when she was selected to the
top position at PepsiCo, she made sure that her rival for the position got a pay
raise and was given influence in the company so she did not lose him. She says
that the best advice she received was from her father, who taught her to assume
that people have good intentions. Nooyi notes that expecting people to have

Source: Case written by [citation redacted per publisher request]. Based on information from
Birger, J., Chandler, C., Frott, J., Gimbel, B., Gumbel, P., et al. (2008, May 12). The
best advice I ever got. Fortune, 157(10), 70–80; Brady, D. (2007, June 11). Keeping
cool in hot water. BusinessWeek. Retrieved April 30, 2010, from http://
www.businessweek.com/magazine/content/07_24/b4038067. htm; Compton, J. (2007,
October 15). Performance with purpose. Beverage World, 126(10), 32; McKay, B.
(2008, May 6). Pepsi to cut plastic used in bottles. Wall Street Journal, Eastern edition,
p. B2; Morris, B., & Neering, P. A. (2008, May 3). The Pepsi challenge:
Can this snack and soda giant go healthy? CEO Indra Nooyi says yes but cola wars
and corn prices will test her leadership. Fortune, 157(4), 54–66; Schultz, H. (2008,
May 12). Indra Nooyi. Time, 171(19), 116–117; Seldman, M. (2008, June). Elevating
aspirations at PepsiCo. T+D, 62(6), 36–38; The Pepsi challenge (2006, August 19).
Economist. Retrieved April 30, 2010, from http://www.economist.com/business-
42 finance/displaystory.cfm?story_id =7803615.
good intentions helps her prevent misunderstandings and show empathy for them. Leadership and Decision
Making
It seems that she is a role model to other business leaders around the world, and
PepsiCo is well positioned to tackle the challenges the future may bring.

5.6 DECISION MAKING AND ITS IMPORTANCE

Decision making refers to making choices among alternative courses of action—
which may also include inaction. While it can be argued that management is
decision making, half of the decisions made by managers within organizations
ultimately fail (Ireland, R. D., & Miller, C. C. (2004). Decision making and firm
success. Academy of Management Executive, 18, 8–12; Nutt, P. C. (2002). Why
decisions fail. San Francisco: Berrett-Koehler; Nutt, P. C. (1999). Surprising but
true: Half the decisions in organizations fail. Academy of Management Executive,
13, 75–90).

Therefore, increasing effectiveness in decision making is an important part of

maximizing your effectiveness at work. This Unit will help you understand how
to make decisions alone or in a group while avoiding common decision-making
pitfalls.

Individuals throughout organizations use the information they gather to make a

wide range of decisions. These decisions may affect the lives of others and change
the course of an organization. For example, the decisions made by executives
and consulting firms for Enron ultimately resulted in a $60 billion loss for
investors, thousands of employees without jobs, and the loss of all employee
retirement funds.

But Sherron Watkins, a former Enron employee and now-famous whistleblower,

uncovered the accounting problems and tried to enact change. Similarly, the
decision made by firms to trade in mortgage-backed securities is having negative
consequences for the entire economy in the United States. All parties involved
in such outcomes made a decision, and everyone is now living with the
consequence of those decisions.

Importance of decision making

1) Pervasive Function

Decision making is essential in each level of management. Top level

management makes strategic decisions such as planning, organizing,
directing and controlling. Middle level management makes tactical decisions
such as division of works, fixation of authority and responsibility, integration
of efforts etc. Operating level management makes regular operating decisions
such s preparation of schedule of daily works, divisions of works, delegation
of authority etc. Thus, decision making function is performed in all the
levels of management according to needs. This is necessary to bring
uniformity and smoothness in the organizational performance.

2) Indispensable Component
Decision making is known as an inseparable part of management functions.
It is one of the essential processes for successful operation of business. It
determines all management functions and covers every part of the
43
Organisational Processes organizational structure. Every manager from top level to the first line is
involved in the decision making process according to the nature of works.

3) Evaluation of Managerial Function

Decision making is a time consuming process and decision makers spend
more time to select the alternative. The quality of decision serves as the
yardstick for evaluating managerial performance. It provides a clear line of
guidance to the management for the achievement of defined objectives. The
achievement of managerial performance is evaluated and measured with
planned performance.

4) Selection of Best Alternatives

Decision making is the process of selecting a best course of action from
among many alternatives. A problem might be solved in different ways on
the basis of time and situation. The decision maker evaluates all the possible
alternatives on the basis of organizational process and suitability. The
selection of the best course of action is significant to bring smoothness in
operation and achieve organizational goals.

5) Establishment of Plans And Policies

The establishment of plans and policies is the initial part of decision making.
Every organization is established for a definite objective and for this,
formation of plans and policies is necessary. Thus, at the initial stage, the
management decides the clear line of action and the procedures to gain
defined objectives. The practical implementation of defined line of actions
and procedures is an efficient way in bringing smoothness and uniformity
in organizational performance. Finally, it is helpful in achieving
organizational goals.

6) Successful Operation of Business

Decision making is one of the important tools for the successful operation
of the business. In course of operation, many problems may arise at different
situations and times. The management solves those problems in time by
using decision making tools
Leadership and decision Making
It is inevitable that leaders, no matter what type, will be faced with many
different decisions. Some decisions will be minor and may not affect anyone
but themselves. Other decisions can be quite large and have the capacity to
affect everyone and anyone under their leadership. Decision making is part
of a leader’s daily expectations. This makes decision making important for
those in a leadership role. Leaders have a responsibility to make good
decisions for everyone involved, and therefore, should have some kind of
framework for which to make those decisions.

There are four basic decision-making styles that effective leaders use. These
styles can vary by department or organization, the leader’s own philosophy and
style, as well as other outside influences, such as money or subordinates.

Source: https://accountlearning.blogspot.in/2013/05/significacne-of-decision-making.html
44
1) Command Leadership and Decision
Making
Leaders who tend to make decisions without consulting anyone on their
team are said to be command leaders. However negative it may sound, it
can be a good style of decision making, especially for quick moving situations
that need guidance immediately. Leaders use this style most effectively
and strategically when they apply it to monetary decisions and crisis
decisions. In these types of situations, there may be no time to consult with
others, and doing so could lead to bigger problems and an outcome
determined by a delayed decision.

2) Collaborative
Collaborative decision making requires and uses the opinions and insight of
others on the team. Leaders who routinely ask those under them for their
feedback and viewpoints are seeking to make a collaborative decision. This
doesn’t give those under the leader the right to make the decision, however,
it can give the leader the information need to make the best decision fit for
the situation, especially if it affects a lot of people. Collaborative decision
making also falls under evidence based decision making. If a leader is using
collaborative decision making, it is actually best to not surround him or
herself with people who always agree with them. People should feel open
and willing to argue either side of the coin. Even if the leader ends up not
taking their advice, it will help bring the decision and situation more clarity.

3) Consensus
Decision making done with a vote is called consensus decision making. It
is similar to that of a democratic vote. Leaders can gather their teams, explain
the decision at hand, and then everyone gets a vote.   If a leader needs to
make a decision that will not affect the bottom line, but does, however,
affect a vast majority of those under him or her, then a consensus is a good
way to go. When using a consensus, leaders need to remember that they
cannot please everyone. Decisions made by consensus tend to help mold
the culture of a company or organization and can help give everyone a voice.
Being heard is important to most people on a team or in a group, and
satisfaction will go up when they feel like they are heard.

4) Convenience
Some leaders choose to delegate their decision making tasks. This can be
out of convenience and can have several benefits, including the
empowerment of team members and evaluating the decision-making skills
of other team members. It is important for leaders to remember that those
new to making decisions may have some fresh an innovative ideas or ways
of looking at a problem and its solutions.

Leadership decision making (LDM) is defined as a dynamic process of choosing

from the best different alternatives and associated with the systemic act of making
a choice. In organizational worldview, decision making has been a serious
educational and organizational issue for many years and had continued to baffle

Source: https://projectmgmt.brandeis.edu/resources/articles/leadership-and-decision-making/
45
Organisational Processes many researchers as they look for creative and effective solution for this profound
societal and organizational challenge. Therefore, to understand organizational
decision making process, leadership must define what the future should look
like, aligns with that vision, and inspire them to make it happen despite the
challenges and obstacles involved. Leaders must know how to lead as well as
manage, otherwise, without leading as well as managing effectively, today’s
organizations will face the threat of extinction . Thus, leaders and workers in
every organization should be influenced by their policy and decisions while
working together to attain strategic goals and objectives. Complexity and other
factors or challenges had shown that there is a great need for the development
and implementation of proper policy by organizational leaders. Basically, some
recent studies have shown that decision making has a central role to play in
developing and influencing organizational activities. These activities include
healthy working environment and trust that helps in developing effective
communication and openness in the relationship between employees and
management; between superiors and subordinates; between trade union and
management; and among workers in the workplace.

Decision making is the key role of leadership and people always associate
leadership in business and politics with making good decisions and a great
emphasis on being the head of a group. Leaders must be effective in their
organizational decision making by pulling rather than pushing; by inspiring their
subordinates rather than ordering them; by enabling people to use their own
initiative and experiences rather than by denying their efforts or constraining
their experiences and actions in the organization. It of vital importance to know
that functional leadership is not usually defined by a specific set of behaviors but
instead by generic responses that is prescribed for and will vary by different
problem, issues, challenges, circumstances, and different situations. Every
organization is a systemic whole and network that is dynamic, challenging,
complex in nature, and established for the purpose of serving the common good,
and goal accomplishments. While no leader exists and operates outside the
organization, all organizations need leaders to exist, and survive in all its
operations. Leaders must know how to lead as well as manage. Otherwise, without
leading as well as managing effectively, today’s organizations face the threat of
extinction. The crux of good leadership is the ability to make thoughtful, reasoned
decisions. In order to be the best judge, a leader should have critical thinking
skills. They must respond quickly to situations. They must also reflect and be
able to point out areas that need improvement. Good judgment in the context of
educational leadership requires that the leader have a firm grounding in the
educational enterprise, combined with a keen sense of awareness of the complex
factors that impinge on school practice.

People in leadership positions, be it in institutions, businesses, government, or

nonprofit organizations are challenged every day with a myriad of leadership
decision making in their individual company. These business leaders and managers
are always making decisions that are associated with their subordinates, policy,
planning, controlling, methods, training, and compensations do so often in a
critical, complex, and challenging situations. Leadership decision-making is an
integral part of any organization. It involves a sequence of activities that involves
leadership’s courage, and evaluation, as well as “gathering, interpreting and
46
exchanging information, creating and identifying alternative courses of action, Leadership and Decision
Making
choosing among alternatives by integrating the often differing perspectives and
opinions of team members; and implementing a choice and monitoring its
consequences”

As a process of selecting from the many different alternatives, organizational

leaders must consider, analyze, and evaluate the best of all different alternatives
from which advantages and disadvantages are known. This particular process
will help them to make good decisions and enhance the successful operation of
their business.

The more skilled leaders are, the more likely they will feel confident in their
abilities and competent to make good decisions. For it is only the leader that
understands the nature and principles of decision making will be able cope with
complex and challenging situations more effectively than the leader who does
not possess any of the ideas. For example: the leader who had the knowledge
and have studied the qualities and characteristics of organizational diversity stands
a better chance of making decision on team building when compared with a
leader who have not. Decision making is of vital importance in organization
because it permeates through all managerial functions and all areas of business
including; recruitment, selection, job description, organizing, planning, training,
marketing, policy, and compensation among others. Simply put, it is the act of
carrying out managerial tasks and responsibilities.

5.7 TYPES OF DECISIONS

Despite the far-reaching nature of the decisions in the previous example, not all
decisions have major consequences or even require a lot of thought. For example,
before you come to class, you make simple and habitual decisions such as what
to wear, what to eat, and which route to take as you go to and from home and
school.

You probably do not spend much time on these mundane decisions. These types
of straightforward decisions are termed programmed decisions, or decisions
that occur frequently enough that we develop an automated response to them.
The automated response we use to make these decisions is called the decision
rule. For example, many restaurants face customer complaints as a routine part
of doing business. Because complaints are a recurring problem, responding to
them may become a programmed decision. The restaurant might enact a policy
stating that every time they receive a valid customer complaint, the customer
should receive a free dessert, which represents a decision rule.

On the other hand, unique and important decisions require conscious thinking,
information gathering, and careful consideration of alternatives. These are called
non programmed decisions. For example, in 2005 McDonald’s Corporation
became aware of the need to respond to growing customer concerns regarding
the unhealthy aspects (high in fat and calories) of the food they sell. This is a non
programmed decision, because for several decades, customers of fast-food
restaurants were more concerned with the taste and price of the food, rather than
its healthiness. In response to this problem, McDonald’s decided to offer healthier
47
Organisational Processes alternatives such as the choice to substitute French fries in Happy Meals with
apple slices and in 2007 they banned the use of trans fat at their restaurants. A
crisis situation also constitutes a nonprogrammed

decision for companies. For example, the leadership of Nutrorim was facing a
tough decision. They had recently introduced a new product, Charge Up with
Lipitrene, an improved version of their popular sports drink powder, ChargeUp.
At some point, a phone call came from a state health department to inform them
of 11 cases of gastrointestinal distress that might be related to their product,
which led to a decision to recall ChargeUp. The decision was made without an
investigation of the information. While this decision was conservative, it was
made without a process that weighed the information. Two weeks later it became
clear that the reported health problems were unrelated to Nutrorim’s product. In
fact, all the cases were traced back to a contaminated health club juice bar.
However, the damage to the brand and to the balance sheets was already done.
This unfortunate decision caused Nutrorim to rethink the way decisions were
made when under pressure. The company now gathers information to make
informed choices even when time is of the essence. (Garvin, D. A. (2006, January).
All the wrong moves. Harvard Business Review, 84, 18–23).

Level of Examples of Decision Who Typically Makes

Decision Decisions

Strategic Should we merge with Top Management

Decisions another company? Teams, CEOs, and
Boards of Directors
Should we pursue a new
product line?
Should we downsize our
organization?

Tactical What should we do to help Managers

Decisions facilitate employees from
the two companies working
together?
How should we market the
new product line?
Who should be let go when
we downsize?

Operational How often should I Employees throughout

Decisions communicate with my new the organization
coworkers?
What should I say to
customers about our new
product?
How will I balance my new
work demands?

48 Source: Bauer.T, Erdogan. B. An Introduction to Organizational Behaviour, V1.1.p523

Decisions can be classified into three categories based on the level at which they Leadership and Decision
Making
occur. Strategic decisions set the course of an organization. Tactical decisions
are decisions about how things will get done. Finally, operational decisions
refer to decisions that employees make each day to make the organization run.
For example, think about the restaurant that routinely offers a free dessert when
a customer complaint is received. The owner of the restaurant made a strategic
decision to have great customer service. The manager of the restaurant
implemented the free dessert policy as a way to handle customer complaints,
which is a tactical decision. Finally, the servers at the restaurant are making
individual decisions each day by evaluating whether each customer complaint
received is legitimate and warrants a free dessert.

5.8 MAKING RATIONAL DECISIONS

The rational decision-making model describes a series of steps that decision
makers should consider if their goal is to maximize the quality of their outcomes.
In other words, if you want to make sure that you make the best choice,
going through the formal steps of the rational decision-making model may make
sense.

Let’s imagine that your old, clunky car has broken down, and you have enough
money saved for a substantial down payment on a new car. It will be the first
major purchase of your life, and you want to make the right choice. The first
step, therefore, has already been completed—we know that you want to buy a
new car.

Next, in step 2, you’ll need to decide which factors are important to you. How
many passengers do you want to accommodate? How important is fuel economy
to you? Is safety a major concern? You only have a certain amount of money
saved, and you don’t want to take on too much debt, so price range is an important
factor as well. If you know you want to have room for at least five adults, get at
least 20 miles per gallon, drive a car with a strong safety rating, not spend more
than $22,000 on the purchase, and like how it looks, you have identified the
decision criteria. All the potential options for purchasing your car will be
evaluated against these criteria.

Before we can move too much further, you need to decide how important each
factor is to your decision in step 3. If each is equally important, then there is no
need to weigh them, but if you know that price and mpg are key factors, you
might weigh them heavily and keep the other criteria with medium importance.
Step 4 requires you to generate all alternatives about your options. Then, in step
5, you need to use this information to evaluate each alternative against the criteria
you have established. You choose the best alternative (step 6), and then you
would go out and buy your new car (step 7).

Of course, the outcome of this decision will influence the next decision made.
That is where step 8 comes in. For example, if you purchase a car and have
nothing but problems with it, you will be less likely to consider the same make
and model when purchasing a car the next time.

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Organisational Processes
1. Identify the
problem

2. Establish
8. Evaluate the
decision
decision
criteria

7. Implement 3. Weigh
the decision decision
criteria

6. Choose the 4. Generate

best alternatives
alternative
5. Evaluate the
alternatives

Source: Bauer.T, Erdogan. B. An Introduction to Organizational Behaviour, V1.1.p525

5.9 MAKING GOOD DECISIONS

The bounded rationality model of decision making recognizes the limitations
of our decision-making processes. According to this model, individuals knowingly
limit their options to a manageable set and choose the first acceptable alternative
without conducting an exhaustive search for alternatives. An important part of
the bounded rationality approach is the tendency to satisfies (a term coined by
Herbert Simon from satisfy and suffice), which refers to accepting the first
alternative that meets your minimum criteria. For example, many college
graduates do not conduct a national or international search for potential job
openings.

Instead, they focus their search on a limited geographic area, and they tend to
accept the first offer in their chosen area, even if it may not be the ideal job
situation. Satisficing is similar to rational decision making. The main difference
is that rather than choosing the best option and maximizing the potential outcome,
the decision maker saves cognitive time and effort by accepting the first alternative
that meets the minimum threshold.

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 Leadership and Decision
5.10 MAKING INTUITIVE DECISIONS Making

The intuitive decision-making model has emerged as an alternative to other

decision making processes. This model refers to arriving at decisions without
conscious reasoning. A total of 89% of managers surveyed admitted to using
intuition to make decisions at least sometimes and 59% said they used intuition
often (Burke, L. A., & Miller, M. K. (1999). Taking the mystery out of intuitive
decision making. Academy of Management Executive, 13, 91–98). Managers
make decisions under challenging circumstances, including time pressures,
constraints, a great deal of uncertainty, changing conditions, and highly visible
and high-stakes outcomes. Thus, it makes sense that they would not have the
time to use the rational decision-making model. Yet when CEOs, financial
analysts, and health care workers are asked about the critical decisions they make,
seldom do they attribute success to luck. To an outside observer, it may seem
like they are making guesses as to the course of action to take, but it turns out
that experts systematically make decisions using a different model than was earlier
suspected. Research on life-ordeath decisions made by fire chiefs, pilots, and
nurses finds that experts do not choose among a list of well thought out
alternatives. They don’t decide between two or three options and choose the best
one. Instead, they consider only one option at a time. The intuitive decision-
making model argues that in a given situation, experts making decisions scan
the environment for cues to recognize patterns (Breen, B. (2000, August). What’s
your intuition? Fast Company, 290; Klein, G. (2003). Intuition at work. New
York: Doubleday; Salas, E., & Klein, G. (2001). Linking expertise and naturalistic
decision making. Mahwah, NJ: Lawrence Erlbaum Associates).

Once a pattern is recognized, they can play a potential course of action through
toits outcome based on their prior experience. Thanks to training, experience,
and knowledge, these decision makers have an idea of how well a given solution
may work. If they run through the mental model and find that the solution will
not work, they alter the solution before setting it into action. If it still is not
deemed a workable solution, it is discarded as an option, and a new idea is tested
until a workable solution is found. Once a viable course of action is identified,
the decision maker puts the solution into motion. The key point is that only one
choice is considered at a time. Novices are not able to make effective decisions
this way, because they do not have enough prior experience to draw upon.

5.11 MAKING CREATIVE DECISIONS

In addition to the rational decision making, bounded rationality, and intuitive
decision-making models, creative decision making is a vital part of being an
effective decision maker. Creativity is the generation of new, imaginative ideas.

With the flattening of organizations and intense competition among companies,

individuals and organizations are driven to be creative in decisions ranging from
cutting costs to generating new ways of doing business. Please note that, while
creativity is the first step in the innovation process, creativity and innovation are
not the same thing. Innovation begins with creative ideas, but it also involves
realistic planning and follow-through. Innovations such as 3M’s Clear view
Window Tinting grow out of a creative decision-making process about what
may or may not work to solve real-world problems.
51
Organisational Processes The five steps to creative decision making are similar to the previous decision
making models in some keys ways. All the models include problem identification,
which is the step in which the need for problem solving becomes apparent. If
you do not recognize that you have a problem, it is impossible to solve it.
Immersion is the step in which the decision maker consciously thinks about the
problem and gathers information. A key to success in creative decision making
is having or acquiring expertise in the area being studied. Then, incubation occurs.
During incubation, the individual sets the problem aside and does not think about
it for a while. At this time, the brain is actually working on the problem
unconsciously.

Then comes illumination, or the insight moment when the solution to the problem
becomes apparent to the person, sometimes when it is least expected. This sudden
insight is the “eureka” moment, similar to what happened to the ancient Greek
inventor Archimedes, who found a solution to the problem he was working on
while taking a bath. Finally, the verification and application stage happens when
the decision maker consciously verifies the feasibility of the solution and
implements the decision.

A NASA scientist describes his decision-making process leading to a creative

outcome as follows: He had been trying to figure out a better way to de-ice
planes to make the process faster and safer. After recognizing the problem, he
immersed himself in the literature to understand all the options, and he worked
on the problem for months trying to figure out a solution. It was not until he was
sitting outside a McDonald’s restaurant with his grandchildren that it dawned on
him. The golden arches of the M of the McDonald’s logo inspired his solution—
he would design the de-icer as a series of Ms.In person interview conducted by
author Talya Bauer at Ames Research Center, Mountain View, CA, 1990. This
represented the illumination stage. After he tested and verified his creative
solution, he was done with that problem, except to reflect on the outcome and
process.

Step 5
Step 1 Step 2 Step 3 Step 4 Verification
Problem
Immersion Inclubation Illumination &
Recognition
Application

Source: Bauer.T, Erdogan. B. An Introduction to Organizational Behaviour, V1.1.p529

Google (NASDAQ: GOOG) is one of the best-known and most admired

companies around the world, so much so that “googling” is the term many use to
refer to searching information on the Web. What started out as a student project
by two Stanford University graduates—Larry Page and Sergey Brin—in 1996,
Google became the most frequently used Web search engine on the Internet with
1 billion searches per day in 2009, as well as other innovative applications such
as Gmail, Google Earth, Google Maps, and Picasa. Google grew from 10
employees working in a garage in Palo Alto to 10,000 employees operating around
the world by 2009. What is the formula behind this success?

Google strives to operate based on solid principles that may be traced back to its
founders. In a world crowded with search engines, they were probably the first
company that put users first. Their mission statement summarizes their
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commitment to end-user needs: “To organize the world’s information and to Leadership and Decision
Making
make it universally accessible and useful.” While other companies were focused
on marketing their sites and increasing advertising revenues, Google stripped
the search page of all distractions and presented users with a blank page consisting
only of a company logo and a search box. Google resisted pop-up advertising,
because the company felt that it was annoying to end-users. They insisted that all
their advertisements would be clearly marked as “sponsored links.” This emphasis
on improving user experience and always putting it before making more money
in the short term seems to have been critical to their success.

Keeping their employees happy is also a value they take to heart. Google created
a unique work environment that attracts, motivates, and retains the best players
in the field. Google was ranked as the number 1 “Best Place to Work For” by
Fortune magazine in 2007 and number 4 in 2010. This is not surprising if one
looks closer to how Google treats employees. On their Mountain View, California,
campus called the “Googleplex,” employees are treated to free gourmet food
options including sushi bars and espresso stations. In fact, many employees
complain that once they started working for Google, they tend to gain 10 to 15
pounds! Employees have access to gyms, shower facilities, video games, on-site
child care, and doctors. Google provides 4 months of paternal leave with 75% of
full pay and offers $500 for take-out meals for families with a newborn. These
perks create a place where employees feel that they are treated well and their
needs are taken care of. Moreover, they contribute to the feeling that they are
working at a unique and cool place that is different from everywhere else they
may have worked.

In addition, Google encourages employee risk taking and innovation. How is

this done? When a vice president in charge of the company’s advertising system
made a mistake costing the company millions of dollars and apologized for the
mistake, she was commended by Larry Page, who congratulated her for making
the mistake and noting that he would rather run a company where they are moving
quickly and doing too much, as opposed to being too cautious and doing too
little. This attitude toward acting fast and accepting the cost of resulting mistakes
as a natural consequence of working on the cutting edge may explain why the
company is performing much ahead of competitors such as Microsoft and Yahoo!
One of the current challenges for Google is to expand to new fields outside of
their Web search engine business. To promote new ideas, Google encourages all
engineers to spend 20% of their time working on their own ideas Google’s culture
is reflected in their decision making as well. Decisions at Google are made in
teams. Even the company management is in the hands of a triad: Larry Page and
Sergey Brin hired Eric Schmidt to act as the CEO of the company, and they are
reportedly leading the company by consensus. In other words, this is not a
company where decisions are made by the senior person in charge and then
implemented top down. It is common for several small teams to attack each
problem and for employees to try to influence each other using rational persuasion
and data. Gut feeling has little impact on how decisions are made. In some
meetings, people reportedly are not allowed to say “I think…” but instead must
say “the data suggest….” To facilitate teamwork, employees work in open office
environments where private offices are assigned only to a select few. Even Kai-
Fu Lee, the famous employee whose defection from Microsoft was the target of
a lawsuit, did not get his own office and shared a cubicle with two other employees.
53
Organisational Processes How do they maintain these unique values? In a company emphasizing hiring
the smartest people, it is very likely that they will attract big egos that may be
difficult to work with. Google realizes that its strength comes from its “small
company” values that emphasize risk taking, agility, and cooperation. Therefore,
they take their hiring process very seriously. Hiring is extremely competitive
and getting to work at Google is not unlike applying to a college. Candidates
may be asked to write essays about how they will perform their future jobs.

Recently, they targeted potential new employees using billboards featuring brain
teasers directing potential candidates to a Web site where they were subjected to
more brain teasers. Each candidate may be interviewed by as many as eight
people on several occasions. Through this scrutiny, they are trying to select
“Googley” employees who will share the company’s values, perform at high
levels, and be liked by others within the company. Will this culture survive in the
long run? It may be too early to tell, given that the company was only founded in

1998. The founders emphasized that their initial public offering (IPO) would not
change their culture and they would not introduce more rules or change the way
things are done in Google to please Wall Street. But can a public corporation
really act like a start-up? Can a global giant facing scrutiny on issues including
privacy, copyright, and censorship maintain its culture rooted in its days in a
Palo Alto garage? Larry Page is quoted as saying, “We have a mantra: don’t be
evil, which is to do the best things we know how for our users, for our customers,
for everyone. So I think if we were known for that, it would be a wonderful
thing.”

Source: Case written by [citation redacted per publisher request]. Based on information from
Elgin, B., Hof, R. D., & Greene, J. (2005, August 8). Revenge of the nerds—again.
BusinessWeek. Retrieved April 30, 2010, from http://www.businessweek.com/technology/
content/jul2005/tc20050728 _5127_tc024.htm; Hardy, Q. (2005, November 14). Google thinks
small. Forbes, 176(10); Lashinky, A. (2006, October 2). Chaos by design. Fortune, 154(7);
Mangalindan, M. (2004, March 29). The grownup at Google: How Eric Schmidt imposed
better management tactics but didn’t stifle search giant. Wall Street Journal, p. B1; Lohr, S.
(2005, December 5). At Google, cube culture has new rules. New York Times. Retrieved April
30, 2010, from http://www.nytimes.com/

2005/12/05/technology/05google.html; Schoeneman, D. (2006, December 31). Can Google

come out to play? New York Times. Retrieved April 30, 2010, from http://www.nytimes.com/
2006/12/31/fashion/31google.html; Warner, M. (2004, June). What your company can learn
from Google. Business 2.0, 5(5).

5.12 SUMMARY
Perhaps the most vital leadership quality is being a good decision maker. This
especially applies to tough decisions, the ones that have a lasting impact on the
trajectory of your business. Anyone can make easy decisions for what to wear,
which restaurant to visit for lunch, or how to arrange the furniture in their office,
but mastering the process of making tough decisions separates great leaders from
mediocre ones.

Since leadership involves managing people, the most effective leaders foster
good decision making in a team setting. This requires establishing a constructive
decision-making environment, removing elements that inhibit successful decision

54
making, and bringing everyone together after the decision is made, including Leadership and Decision
Making
those who opposed the outcome or were adversely affected by the result. Hence
in order to gain effective leadership decision making outcome, the leader’s are
suggested to consider the following ideas:

a) Delegate More Responsibility

When you feel an employee is ready to take on greater leadership roles in
your business, create vehicles for allowing him to do so. Create a new position
with supervisory oversight or allow him to take the lead in running meetings
or developing project plans. Task the employee with conducting
brainstorming sessions with other employees or researching a concept and
presenting findings and recommendations in a group setting.

b) Assign Independent Projects

Turn over significant projects to qualified employees and give them the
leeway to run with them as they see fit. Help establish initial parameters
and then allow them to decide the best course of action. Make yourself
available for trouble-shooting and input, but otherwise, allow them to take
the reins and learn from mistakes

c) Enhance Leadership Roles

Assign appropriate employees to head up internal committees or external
advisory boards. Allow them to set specific goals and objectives and oversee
implementation of plans and programs. Put employees in “point positions”
for different administrative responsibilities for which you feel they’re
qualified. Not only does this promote leadership and decision-making skills,
but it also allows you to delegate tasks and free up your own schedule for
more important endeavors.

d) Allow Budget Decisions

Give department managers set budgets and allow them to use them as they
see fit. Require detailed accounting and expenditure justifications as well
as regular check-ins, but don’t otherwise micro-manage spending. If a budget
manager goes over-budget, help him determine where mistakes were made.

e) Provide Mentoring
Be a mentor for employees you want to polish and give them the full extent
of your experience. Invite them to be part of strategic planning sessions and
explain the factors that go into the corporate decision-making process. Ask
for input and for their thoughts on the best way to proceed in various areas,
and then provide constructive feedback on why or why not their suggestions
are valid.

f) Offer Professional Enrichment Opportunities

Send promising employees to corporate conferences and trade shows.
Reimburse qualified employees for continuing education programs that focus
on learning the management skills of your industry. Provide ongoing
enrichment opportunities through motivational speakers, career coaching
and job shadowing opportunities.

55
Organisational Processes
5.13 SELF ASSESSMENT QUESTIONS
1) Define leadership and discuss the clerical theories of leadership.

2) Explain the modern theories of leadership with the help of examples.

3) Discuss the concept and process of decision making and the process. Enlist
the measures for creative decisions.

5.14 FURTHER READINGS

Luthans, Fred (2016), Organistional Behaviour, McGrawHill Publications, Indian
Edition.
Robbins, Stephens P (2014), Organisational Behaviour, Pearson Publications,
Indian Edition.

References:
Retrieved from https://bdpad.files.wordpress.com/.../fred-luthans-organizational-
behavior-_-an-evidence
Retrieved from https://2012books.lardbucket.org/.../an-introduction-to-
organizational-behavior-v1.1
Retrieved from www.damits.ac.in/library_doc/Organizational_Behaviour.pdf
Retrieved from https://www.mnsu.edu/activities/leadership/leadership_styles.pdf
Retrieved from https://pdfs.semanticscholar.org/943e/0cf04a820e79fc0e8fcfa5e
588b1b0be7916.pdf
Retrieved from https://jerosystems.com/2016/ob.pdf
Retrieved from https://www.springer.com/cda/content/document/cda.../
9783319207735-c2.pdf?

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