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Leadership and governance Essay

Executive Summary

The following essay will analyse two important elements in every organisation, leadership and governance, the interaction between them and how they influence in organisations outcomes. This paper will cite different journals and studies to support the ideas referents to this topic. Firstly this essay will discuss on leadership to understand why this culture of influence and motivation has become so important for nowadays organisations and explain the role of the modern leader, among all the perspectives and theories aroused about this subject. The second point is about governance; the term organisational governance is defined and evaluated to find out how governance enhances the management in organisation. Also is discussed what is the managers role in the governance scheme in order to expose the difference between leaders and managers.

They are different but complementary, while leaders have a compromise with the vision on the long term, manager focuses on how to achieve the vision strategically. Furthermore the next logic step is to evaluate the relationship between these elements analysed previously. Leaders can affect positively and negatively the governance outcomes, basically if there is no self-control or lack of ethic among leaders even the best governance scheme would collapse. On the other hand collective leadership will have a beneficial effect in the board of director’s performance.

The last point assesses how the leadership development and effective followership can affect the organisations outcome, being the relationship between leader and follower the most important key for leadership effectiveness and consequently a more effective organisation. It is clear that leadership play an important role in organisation path to succeed in this modern world where constant changes and uncertainty require more competitive and adaptable organisations. Introduction

Nowadays, organisations are exposed to global uncertainty and they have to adapt rapidly and become more effective in order to survive in this competitive world. Major organisations invest millions in human capital and technology with the explicit objective of increase their organisations effectiveness. Organisational effectiveness is a broad concept represented by several perspectives, organisations are effective when they have a good fit with their external environment, when their internal subsystem are efficient and effective, when they are learning organisations and when they satisfy the need of key stakeholders (McShane, Olekalns & Travaglione 2010).

There are many studies and theories about leaderships, due to its importance for organizations success. According with Rodsutti and Swierczek (2002, p. 250) different dimensions of organisational effectiveness including return on asset, most admired, job satisfaction and personal satisfaction are related to specific aspects of leader characteristics, organisational culture and multicultural management style.

This is the main reason why leadership has become the base of modern organisations success. In order to understand the leader’s role in effective governance in organisations, it is necessary define leadership and governance separately and then analyse the correlation between then, this will help us to understand why leader and managers are different but complementary, they should reinforce and support each other, however this is not always the case (Lussier & Achua 2010). Organisations performance is measured constantly in order to value if the outcome satisfy the stakeholders goals, thus the influence of leaders over the governance outcomes need to be evaluated.

The organisation outcomes it is also affected by effective fellowship as a result of a leadership development. Leadership behaviours are perceived as trustworthy through the observer’s mediating lens, trust increases and leaders are more likely to be viewed as ethical stewards who honour a higher level of duties (Caldwell, Hayes & Long 2010).

Organisational leadership
Everybody somehow have the idea of the leadership meaning that probably belongs to yesteryear image of command –and- control boss. The concept of leader is no longer the person that is seen as the company’s hero. Leaders exist throughout the organisation, not just in the executive suite. The first studies about leadership was published in 1904, the main researches in this field occurred while the First World War, it first interest was investigate the leadership characteristics and the mechanism of how the employees obtained promotions. A decade ago fifty-four leadership expert from thirty eight countries reached consensus that leadership is about influencing, motivating and enabling others to contribute to the effectiveness and success of the organisation of which they are members (McShane Olekalns & Travaglione 2010). Even today there is still considerable debate about the exact role and definition of a leader.

Most parties agree that one of the primary functions of a leader should be to set a path towards a goal and then inspire and motivate others to follow (Prewitt 2003). Furthermore (Lussier & Achua 2010) brought a more simplified and brief concept defining leadership as ‘‘the process of influencing leaders and followers to achieve organizational objectives through change. There are many studies and theories about leadership and different perspectives of this concept, the most relevant of those perspectives in the last 20 years are charismatic and transformational leadership. Transformational leadership perspective explains how leaders change teams or organisations by creating, communicating and modelling a vision for the organisation or work unit and inspiring employees to strive that vision (McShane, Olekalns & Travaglione, 2010).

The charismatic and transformational leader, according to many scholars and practitioners, represents a new paradigm of leadership that may be capable of steering organisations trough the chaos of the twenty first century (Lussier & Achua 2010). There is some confusion and controversy to define the distinction between charismatic and transformational leader. Many researchers either use the words as they would have same meaning or view charismatic leadership as an essential ingredient of transformational leadership. However there are managers that may lack of charisma but they can lead by applying transformational leadership behaviours, for example Alan Lafey, CEO of Proctor and Gamble or Sam Palmisano CEO of IBM. The point is that effective transformational leaders are not necessary charismatic (McShane Olekalns & Travaglione 2010).

Leaders are particularly effective if they engage in transformational leadership behaviours, such as articulating a captivating vision for the future, acting as charismatic role models, fostering the acceptance of common goals, setting high performance expectations, and providing individualized support and intellectual stimulation for followers (Menges et al. 2011). In the last years has been agreed that leadership it is not about rely in only a person as a leader, leadership can be considered as a collective practice, leaderful leaders develop sufficient trust in others to make leadership a shared and yet very powerful tool for action and responsibility (Raelin 2005).

Understanding organisational governance
There is not a specific definition for the term “organisational governance”, however as a first approximation, organizational governance refers to the instruments of governance that organizations deploy to influence organization members and other stakeholders to contribute to organizational goals (Foss & Klein 2007). This idea clearly is consistent with other more frequently used terms as “corporative governance”, “organizational control” and “governance structures and mechanisms.” Similar definition we found about strategic management.

Strategic management is the set of decision and actions used to formulate and implement specific strategies that will achieve a competitively superior fit between the organisation and its environment, so as to achieve organisational goals (Lussier & Achua 2010). According with Commonwealth Australia (2009) governance may be described as “…the process by which agencies are directed and controlled. It is generally understood to encompass authority, accountability, stewardship, leadership, direction and control”. Top management plays an important role in firms’ achieving an orientation to quality creating values and establishing objectives and systems to satisfy customers’ expectations and improve performance in the organisation (Albacete-Sáez, Fuentes & Bojica 2011).

Furthermore the aim of governance is not only improve the organisations performance but also achieve the stakeholders economic and social satisfaction. A firm that manages for stakeholders allocates more resources to satisfy the needs and demands of its legitimate stakeholders than would be necessary to simply retain their wilful participation in the firm’s productive activities (Harrison, Bosse & Phillips 2010).

Theories of governance for many years had been based on assumptions about the leader as an agent who might act with opportunism to take advantage of superior information or self-serving personal interests however latest studies have demonstrated that corporate governance imposes on businesses and their leaders an instrumental duty to maximize long-term wealth creation to benefit all of the stakeholders served by the firm (Caldwell, Hayes & Long 2010). In the last few years due to scandals and financial crisis, board of director has gain especial interest in corporate governance debate.

The corporate governance rely on the board of directors capabilities to conduce the companies and take the best decision for their stakeholders benefit. However organisations not only need managers they need leaders as well, and governance have to provide the conditions to promote both in their schemes as per Zaleznik (2004, p.74) suggest organizations need both managers and leaders to succeed, but developing both requires a reduced focus on logic and strategic exercises in favour of an environment where creativity and imagination are permitted to flourish.

Leaders and governance
Manager and leaders play different role in organisations, their personalities and attitudes towards goals are different as Zaleznik (2004, p.74) stated managers embrace process, seek stability and control, and instinctively try to resolve problems quickly-sometimes before they fully understand a problem’s significance. Leaders, in contrast, tolerate chaos and lack of structure and are willing to delay closure in order to understand the issues more fully. In previous studies on governance, board scholars have mainly limited themselves to a strict input-output approach in their studies, directly linking board demographic indicators (e.g., board size, age of directors, number of independent directors, etc.) to board and firm performance (Vandewaerde et al. 2011).Lately scholars focus is about leadership, examination of leadership processes and behaviours inside the board team.

As stated before leadership can be considered as a collective practice, this is applicable for tams or board of director where every member has different capabilities and knowledge leadership influence based on knowledge and expertise in the team network will have a beneficial effect on the board’s problem-solving capabilities and, therefore, board task performance (Vandewaerde et al. 2011). Painter (2008, p.523) also supports this idea stating that ‘the capacity to take responsibility when and where needed should be nurtured throughout the organizational system and among all of its members, despite the existence of a formal organizational hierarchy and various specialized functional units’. In this context, governance provides support rather than limits to develop a better organisation. The fact that different people can play a leadership role does not mean that no structure is required for leadership to be exercised (Painter 2008).

Leaders can fail, sometimes because of the rush to make decisions they relied too much in the intuition, or due to ethical or moral lapses in judgment. The ultimate goal of the strategic leader should be to build sustainable integrity programs into the strategic management framework that encourage positive self-regulation of ethical behaviour as a matter of routine within the organisation (Lussier & Achua 2010). Without ethic and integrity among the leaders, governance would be ineffective under this scenario. The key in successful governance relies in the role that leadership play in the organisations. As Lussier and Achua (2010 p.418) point out strategic leadership ensure that strategic management process is successfully carried out and yields the desired result for the organisations.

Effective followership and organisation outcomes
As defined previously, leadership is about influencing, motivating and enabling others to contribute toward the effectiveness and success of the organisation (McShane, Olekalns & Travaglione, 2010). When leadership in organisations is affected there is an immediate reaction in employees’ performance. For instance in some cases of merging there is a transition stage where employees lost the direction and leadership is replaced for uncertainty. When members of the community feel abandoned, trust in the organization and its new leader or leaders becomes an issue. During the change process, if the view of the organization becomes less positive,
association with it may become less appealing (Curry, 2002). The major influential factors related to job performance can be found in the aspects of social and organizational cultural contexts, but leadership is one of the most critical factors affecting individual job performance. (Baek-Kyoo, 2012). Leadership create an environment where subordinates are more satisfied and have higher effective organisational commitment. They also perform their jobs better, engage in more organisational citizenship behaviours and make better or more creative decision. (McShane, Olekalns & Travaglione 2010).

As stated leadership is one of the most important elements of organisation effectiveness. However to develop a culture of leadership in an organisation is not easy task. Effective leadership requires effective followership, because without followers there are no leaders. (Lussier & Achua 2010). In the way to success organisations need good followers to support and influence positively their leaders. In order to develop effective leadership in organisations there has to be a harmonic relationship between the leader and follower, this interaction is essential to reach organisational success. Regardless the structure or governance applies in organisations, the commitment between leaders and followers have to be clear and accepted in both sides.

As Derue and Ashford (p.643, 2010) suggest, whether that leadership-structure schema is hierarchical or shared its strength as a norm should facilitate reciprocal claiming and granting and allow for the rapid development of well-defined leader-follower relationships. These norms are the rules game that will make leadership flourish easily among employees, otherwise the organisation effectiveness could be compromised, organizations without such norms organisations going through significant changes might experience greater conflict over leadership and within leader-follower relationships (Kan & Parry 2004), which, in turn, may distract from effective work performance (Derue & Ashford 2010).

Today’s work environment is characterized for uncertainty, volatility and global competition; organisations have to change constantly in order to
survive and success. Thus nowadays organisations not only need managers, they need leaders as well. As explained leadership and governance in organisations are important for organisations success, leaders and managers have different roles but they are complementary. Basically the difference between leaders and manager is defined by their behaviour toward organisations goal, while leader’s focus is on their organisation vision in the long term; managers are looking how to accomplish firm’s goals in the short term.

It is clear the governance outcomes will define the success or failure of companies, in order to have effective governance, organisations need human resource capable of create, communicate and model a shared vision for the team or organisation, and inspire followers to strive that vision. Thus, governance has to provide the conditions to flourish not only good managers but leaders as well. Leadership is one of the most critical factors that affect job performance. It is important establish a scheme that promote followership among employees in order to develop a quality leadership culture in the organisation. To do so, leaders and followers roles have to be clearly defined and be accepted. Only if leaders and followers are committed with the organisation vision the organisation effectiveness would be enhanced generating a positive outcome for stakeholder benefit.

Albacete-Sáez, C, Fuentes, M & Bojica, A 2011,’Quality management, strategic priorities and performance: The role of quality leadership’, Industrial Management & Data Systems, Vol. 111, no. 8, pp. 1173 – 1193. Baek-Kyoo, J 2012, ‘Leader-Member exchange quality and In-Role job performance: The moderating role of learning’, Journal of Leadership & Organizational Studies, Vol. 19, no. 1, pp.25–34. Caldwell, C, Hayes, L & Long, D 2010 ‘Leadership, trustworthiness, and ethical stewardship’, Journal of Business Ethics, Vol. 96, pp. 497–512. Commonwealth of Australia 2009 fahcsia.gov.au/sa/disability/pubs/general/CorporateGovernanceHandbook/Pages/Concepts.aspx Curry, B. K. 2002, ‘The influence of the leader persona on organizational identity’ Journal of Leadership Studies, Vol. 8, no. 4, pp33, Online Expanded Academic ASAP. Derue, D & Ashford, S 2010, ‘Who will lead

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