Ethical Values of Transactional and Transformational Leaders - Research Paper Example

?Running Head: LEADERSHIP AND INTEGRITY Leadership and Integrity Leadership and Integrity Introduction Leadership A typical definition of leadership is that it is a process that achieves organizational goals by exerting influence (i.e., through direction, motivation, and inspiration) over others (Jones, 2000). When a member of a group affects the motivation and abilities of other group members, then leadership is occurring (Bass, 1981). Burns (1978) further elaborates that leaders influence followers toward their own motives through conflict or competition, while both engaging and satisfying each follower's purpose or goals. For leadership to occur there needs to be some leader-follower relationship­ without followers, there is no leader (Hay & Hodgkinson, 2006). Though a leader might be chosen as part of a formal system, a person can be a leader without official authorization. The actual leader of a group might not be the "assigned" manager, and in reality, the roles of leader and follower may be ever-changing, as needs and circumstances change (Burns, 1978, 2003). Leaders are a means toward change (Bass, 1981). Burns (1978, 2003) points-out that the primary, driving force for leadership is change, and leaders/followers have a dynamic interdependency. They succeed or fail, based on how well they work through change. According to Bolman and Terrence (2003), although leaders may share some common qualities (i.e., vision), a major factor in making leaders is the situation or environment in which they lead and/or develop. Kouzes and Posner (1995) state that job assignments, relationships/contacts with other people, as well as formal training and education can help develop leadership. Integrity and Moral Leadership Merriam- Webster's Collegiate Dictionary defines integrity as "firm adherence to a code of especially moral or artistic values; an unimpaired condition; the quality or state of being complete or undivided." But integrity is more complicated than these simple definitions. Persons of integrity must be independent enough to choose freely the values by which they will guide their lives. They must have an awareness and understanding of both their strengths and weaknesses and the capacity to evaluate themselves in a realistic fashion without self-deception (Spencer, 1996). Integrity may be seen as related to the desires with which we identify in order to act effectively in our lives. This identification signifies our capability to focus on reasons for carrying out certain actions other than our simple desire to do so. We therefore possess values relevant to our behavior and not just desires. We can be said to value something provided the identifications are sufficiently consistent and derived through practical reasoning and a sense of responsibility to act according to them. Integrity is displayed through self­ awareness and self-control in acknowledging these values (Taylor, 1985). According to Ciulla (1995), in defining "good" leaders, consideration must be given of their ethics, as well as their effectiveness. It is a leader's character that really matters (Bass & Steidlmeier, 1999). Leadership quality can't be considered without evaluating character, and core values are more critical than anything else (e.g., expertise, techniques, knowledge) (Sankar 2003). "Moral literacy is as important as computer literacy to a leader's effectiveness" (Sankar, 2003, p. 52). Ethical leadership in an organization can be heavily influenced by its senior leadership. Hood (2003) found that, in order to understand an organization's ethical practices, it is significant to understand the moral orientation of its CEO. Even the most ethical supervisors will have difficulty if their own upper management is unethical. For there to be an ethical organization, along with top management support, there needs to be a corporate-wide ethics policy, and, most importantly, there is a need for individual leaders who practice ethical behavior (i.e., integrity, honesty, trustworthiness) (Carlson & Perrewe, 1995). In essence, a leader's character needs to be based on a strong foundation of values (Sankar, 2003). Bass and Steidlmeier (1999) state that leaders address key moral issues through authenticity, credibility, truthfulness, and integrity. Behaviors that enhance a leader's integrity include: humility and selflessness; fairness and forgiveness; keeping commitments and taking responsibility; and the development and celebration of others' successes (Sankar, 2003). Leadership without integrity can place an organization's future at risk (Parry & Proctor-Thomson, 2002). Moreover, organizations that lack ethical leadership will, in the long-run, also lack effectiveness. The Enron scandal might be one such example. In contrast, people with high integrity can be more innovative and productive (Sankar, 2003). When morally inspired, groups can become mobilized, and followers can be transformed into leaders (Burns, 1978). Parry and Proctor-Thomson (2002) conclude that integrity affects the organization's "bottom-line" and its overall effectiveness. Transforming Leadership Learning & Development Burns (1978) argues that learning is one of the most influential forces in leadership and that both effective leadership and education can work to develop the potential of followers, as well as of students. In building his transformational leadership model, Burns(1978) emphasizes the importance of developmental theories such as Adler (i.e., motivation), Erikson (i.e., identity), Kohlberg (i.e., moral), Maslow (i.e., needs), Piaget (i.e., cognitive), and Rokeach (i.e., values) in the development of his own leadership theory. Kotler explains that good leaders need to anticipate and address follower's wants and unfulfilled needs. Burns (1978) argues that, if we could develop a common set of wants and needs across all cultures, then we would have the basis for understanding leadership, and he believes that Maslow's Hierarchy of Needs is a good foundation for this understanding. The Hierarchy of Needs According to Maslow (1970), individuals have five basic needs: physiological, safety, belongingness and love, esteem, and self-actualization. These needs are hierarchical in that in order to achieve self-actualization, the individual must have satisfied the lower needs (e.g., physiological, safety, belongingness and love, and then esteem). Once a lower need is satisfied, then individuals are encouraged to pursue the next higher need. For example, once physical/biological needs are met, then security becomes a new focus; once security is felt, individuals seek affection and belongingness, and once this condition is achieved, individuals develop self-esteem; finally, self­ development is the focus, which is driven by the highest need for self-actualization (Burns, 1978, 2003). Burns (1978) considers this hierarchy of needs from a leadership development perspective. For example, when people are still at the security need level, their leadership potential might still be limited because they are still wanting another leader to "protect" them. However, once people reach the belongingness stage, they may begin to feel comfortable enough to lead a small group. Eventually as they move up the hierarchy of needs, they move from being a "passive" follower, through more participation, and finally become leaders. A person's individual leadership style and behaviors are often related to the followers' needs that are being addressed. Lower needs are often tackled by transactional leadership behaviors (Keeley, 1995). Transactional and Transformational Leadership Transactional leadership happens when, based on a follower's performance, the leader either disciplines or rewards the follower (Bass, 1996). Transactional leadership is a relationship of exchange, both the leader and the follower have purposes that they want to achieve and each is in a bargaining position to help the other achieve their mutual purposes. As long as this bargaining process can be maintained the relationship continues, but once the need for bargaining ends, the relationship will no longer endure (Burns, 1978). For example, a leader needs work to be done, while followers may need money to meet their basic needs (e.g., physiological, security). As long as the leader's needs are met, the followers get paid, and as long the followers are satisfied with the compensation, they continue to work. While this type of exchange may very well satisfy lower needs, there isn't any guarantee that higher wants and needs will be met, but most people, given the proper leadership and direction, will be motivated and want to attain higher needs. "Work is no longer about completing tasks to make money for a company and its shareholders…. It is also about you as an individual needing and wanting choices, meaning, rewards, motivation, and success in your work" (Jansen, 2003, p. 236). It is through transformational leadership that these higher needs can be met. According to Burns (1978), while the transactional leader is focused on exchanges that address existing needs, the transformational leader is working to identify the potential of followers, satisfying their higher needs, and engaging the full attention of the follower. Moreover, unlike transactional leadership, where leaders' and followers' purposes may be different, transformational leadership creates an environment where both leaders and followers can share mutual, higher purposes, and indeed, transform each other. As followers and leaders move higher, away from the lower needs, their interests become less egotistical and short-run oriented and more focused on other people. Transformational leadership is elevating in that it "converts followers into leaders and may convert leaders into moral agents" (Burns, 1978, p. 4). Transformational leadership works toward developing moral leaders within a moral environment (Bass & Steidlmeier, 1999). The effectiveness of transformational leadership is based on values. Transformational leadership is value-centered (Bass & Steidlmeier, 1999; Burns, 2003). Value-centered Leadership In a value-centered group or organization, the relationship between followers and leaders is founded on internalized values, and these values become so internalized that they develop and characterize individual personalities and behaviors (Burns 1978). According to Burns (1978, 2003), moral leadership transcends the meeting of day-to-day, lower needs. Achieving values-based goals becomes the measurement of success. For example, organizational success might be based on not only short-run profits and fiscal growth, but on the achievement of "higher" organizational goals (e.g., diversity, employee development). Also, by successfully achieving value-based goals, leaders are able to meet their own higher needs (e.g., self ­esteem). Burns (2003) summarizes the power of values: values unify leaders and followers within a common moral framework; common values allow leaders to reach-out to other groups/organizations for support; and values help us to understand the distinction between concepts like self-interest versus altruism, individualism versus collectivism. Indeed, there are some values that are focused more on the means, while other values are more ends-oriented. Respectively, these are called modal values and end-values (Burns, 1978). Burns (1978) states that the major measurements for successful transactional leadership are modal values (e.g., fairness, honesty, and honoring commitments). Without these values, agreements and exchanges could not be effectively executed. For example, followers will not be motivated without trusting the commitment of management in providing fair compensation for work performance. On the other hand, transformational leadership is focused more on end-values (e.g., equality, justice, Integrity). Both sets of values and leadership styles need to be considered. For example, organizations can fail at attaining end-values because appropriate modal values were not executed. However, when used jointly, the combination of modal and end-values present powerful instruments for effective leadership (Burns, 1978). Kanungo (2001) considers the differences in transactional and transformational by considering teleological versus deontological ethics. Teleological ethics are more self­ centric, pragmatic, focused on particulars, and atomistic or independent; transactional leadership, which is focused more on day-to-day tasks, tends to address teleological ethics. Deontological ethics are more socio-centric, idealistic, focused on duty/principles, and organic or interdependent. Transformational leadership, focused more on attaining higher values, is more likely to address deontological ethics. Along with its emphasis on values, the transformational leadership model measures-up well with moral development theory. Transformational Leadership & Moral Development Building from the strong relationship between transformational leadership and Maslow's Hierarchy of Needs, Burns (1978) argues that understanding the synthesis between needs and the stages of moral development is what provides leaders with the insights for attaining moral purpose. Maslow's lower needs (i.e., physiological and security) compares with Kohlberg's pre-conventional stage (i.e., punishment and "deals"), and followers are focused on conformity. Maslow's belongingness level compares with Kohlberg's conventional stage (i.e., concern about approval by others and authorities), and followers are focused on law and social order. Maslow's higher levels (e.g., self-­esteem) compare with Kohlberg's post-conventional stage (concern with community, self-­critical/condemnation), and both followers and leaders develop collective norms. In general, there appears to be a relationship between the self-centered, reward/punishment bottom/middle levels of Maslow and Kohlberg's models, while the higher needs/less self-­involved levels of the two models are more congruent. Higher needs and higher moral levels compliment further development. A leader's need for self-actualization, at a higher moral stage, will be outward-facing toward followers, and both leaders and followers can emphatically work toward mutual self-actualization. Both leaders and followers become mutual moral agents (Burns, 2003). As leaders rise to higher stages of moral reasoning, their leadership ability increases due to a better appreciation of followers' needs. Moreover, because leaders are able to work closely with them, followers are lifted up toward the leaders' moral level (Burns, 1978). According to Burns (1978), it is this process that ultimately makes this type of leadership transforming. Transformational leadership functions at levels (i.e., needs, moral) higher than the followers', and it exploits the tension and conflicts between lower and higher levels, enabling both leaders and followers to further their moral development. As in cognitive and moral development, conflict can cause individuals to lose their "equilibrium." Leadership at a higher moral level can help individuals adapt at a higher moral equilibrium. According to Burns (1978), transformational leadership offers both followers and leaders choices between higher values. The greater the conflict, the larger the role that leadership can play in facilitating the process of adaptation. The Impact and Effectiveness of Transformational Leadership Transformational/Transactional Leadership can be quantitatively measured through the Multifactor Leadership Questionaire (MLQ) (Avolio & Bass, 2004). Through a meta-analysis of MLQ studies, Lowe, Kroeck, and Sivasubramaniam (1996) found transformational leadership behaviors to be very effective; more effective than transactional behaviors. Specifically, several other studies have shown that transformational leadership behaviors improved the performance of follower and/or group performance (Charbonneau, Barlin, & Kelloway, 2001; Dvir, Avolio, & Shamir, 2002; Howell & Avolio, 1992; Keller, 2006; Whittington, Goodwin, & Murray, 2004). Also, transformational leadership has influenced followers in their working beyond expectations (Purvanova, Bono, & Dzeiweczynski, 2006), providing extra effort (Dvir et al., 2002), increased job satisfaction (Bono & Judge, 2003), and an increase interest in task difficulty (Whittington et al., 2004). In contrast, two studies (Howell & Avolio, 1992) have shown that transactional leadership had a significantly negative relationship on performance. Furthermore, transformational leadership has been shown to increase followers' feelings of competence (Kark, Shamir, & Chen, 2003; Ozaralli, 2003), risk-taking behavior (Berson & Avolio, 2004), and beliefs in being more capable to do tasks. Mumford, Scott, Gaddis, and Strange (2002) propose that the charismatic aspect of transformational leadership enhances creativity and innovation, factored by feelings of competence due to intellectual stimulation. Moreover, charisma may have a positive impact on group cohesiveness (Jung & Sosik, 2002; Pillai & Williams, 2004), social identification with the group and/or personal identification with the leader (Kark et al., 2003), and/or mentoring from the leader (Sosik, Godshalk, & Yammarino, 2004). Followers may also feel more empowered through transformational leadership by feeling a greater impact on outcomes (Kark et al., 2003; Ozaralli, 2003), as well as reporting feelings of increased ability to influence their job (Avolio et al., 2004). Mediated through feelings of self-efficacy and team cohesiveness, transformational leadership was also shown to positively affect commitment (Pillai & Williams, 2004). Commitment was also increased through the transformational behavior of intellectual stimulation (Rafferty & Griffin, 2004). In contrast, Shamir, House, and Arthur (1993) showed that transactional leadership (e.g., rewards) had a negative impact on commitment. In summary, while research shows that transformational behaviors can have a measurable, positive impact on organizations, the evidence for practicing transactional leadership is weak. Ethical and Unethical The Charisma Dilemma Though transformational leadership offers the opportunity to transform followers toward higher end-values, the role of idealized influence, or charisma, may be more ambiguous. Judge and Bono (2000) argue that charisma might be the most important behavior within transformational leadership. After all, having an inspiring, energetic role-model to mimic can be very motivating. However, charisma may be "value neutral." The existence of a charismatic leader comes with the risk that charisma, by itself, does not differentiate between moral and immoral behavior (Howell & Avolio, 1992). According to Ciulla (1995), the charismatic leader can be the best or the worst leader. At one extreme we might find a "Gandhi," at the other extreme, a "Charles Manson." By appealing to the ideologies and the hopes of followers, charismatic leaders may be most noticeable during a crisis, but in order to truly transform followers' needs and values, a leader needs to be more than just charismatic (Carlson & Perrewe, 1995). Sankar (2003) warns that charismatic leaders can emerge from narcissistic personalities, focused on personal gain and making themselves the center of attention, while the transformational leader will accentuate more on mission or vision. Without a higher calling, charisma is little more than a false sensation. Burns (2003) goes so far to warn that "pure" charismatic leadership may be, at best, undemocratic, and at worst, may be totalitarian. Sankar (2003) summarizes that charisma is not tied to morals or ethics, but rather, it is the integrity of the leader that matters; charisma is beneficial, but only when it comes from a truly ethical leader. As such, it's necessary to understand and consider if a transformational leader is really ethical. The Hitler Test There needs to be caution in only considering a literal meaning for transformation, and assuming that any leader who dramatically changes an organization be considered "transformational." For example, Burns (1978, 2003) postulates, and attempts to answer, the question: was Hitler a transformational leader? Did he not, after all, transform Germany? "Adolf Hitler would argue that he spoke the true values of the German people, summoned them to a higher destiny, [and] evoked the noblest sacrifice from them" (Burns, 1978, p. 426). However, ethically, Hitler failed three tests: 1) his use of modal values (e.g., integrity, honesty) to truly advance humanity; 2) his attainment of end-values (e.g., liberty, justice, equality); 3) and his impact on the overall happiness and meaningful opportunities for all of the people whose lives he affected (Burns, 1978, 2003). Indeed, Gardner (1990) adds that Hitler only used people as a means for serving his own goals. One only needs to be reminded of the millions of lives lost in World War II, the concentration camps, and the Holocaust to realize that, as a transforming leader, Hitler failed miserably. Burns' (2003) answer: "Hitler ruled the German People, but he did not lead them" (p. 29). Ethical versus Unethical Leadership There are several potential moral issues that need to be considered for leadership, and Bass and Steidlmeier (1999) summarize the ethical concerns of transactional and transformational leadership. Within transactional leadership, concerns include the morality of ends/means as related to completing tasks, how freedom and principles are weakened by rewards and punishments, the importance of truthfulness/commitment/fairness in policies and processes, and the egotistic versus altruistic nature of outcomes. Transformational leadership concerns include whether idealized influence (i.e., charisma) is just egotism and manipulation, whether inspirational motivation is truly focused on follower empowerment and self-actualization, if intellectual stimulation truly encourages open thinking or merely propagates propaganda, and whether individual consideration really focuses on followers as ends or just means, versus a real consideration for followers’ interests. An unethical leader can make agreements and transactions for dishonest reasons by structuring the "vision" to manipulate followers and telling them what they may "want" to hear. Within transformational leadership, Bass and Steidlmeier (1999) differentiate between the ethical and unethical leader in terms of the "authentic transformational" leader versus the "pseudo-transformational" leader, respectively. In reviewing the transformational dimensions in more detail, we find that pseudo-transformational (i.e., unethical) leaders don't practice individualized consideration. Leaders are not sensitive to followers' needs and goals. They want the followers to depend on them in an almost "parent-child" relationship, using their power to dominate them, and expecting absolute conformity. Instead of getting closer to followers, leaders may actually keep a distance in order to increase their perceived "status." In addition, leaders are mostly concerned with power and how to get more of it (Bass & Steidlmeier, 1999; Howell & Avolio, 1992). Unethical leaders are only interested in using followers as a means for reaching the leaders' goals. In contrast, the authentic (i.e., ethical) transformational leader individually coaches/mentors/develops followers' skills and morality, is actually interested in helping followers become competent enough to succeed the leader, and uses power to serve followers while sharing success with these followers (Bass & Steidlmeier, 1999; Howell & Avolio, 1992). For ethical leaders, follower development is a major goal. For the unethical leader, intellectual stimulation of the followers is also not a high priority. The leader's authority out-weighs reason, and the leader uses anecdotes instead of facts to support decisions. Communication is one-way, and leaders are not interested in hearing opposing views. In fact, the leader will prefer followers who are "loyal" and not critical, expecting decisions to be accepted unquestionably (Bass & Steidlmeier, 1999; Howell & Avolio, 1992). Unethical leaders are intellectual tyrants and are not interested in diversity. In contrast, the ethical leader encourages and incorporates open, two-way communication, listens to followers' ideas and needs, learns from criticism, and encourages followers to be independent thinkers and to seek out new perspectives (Bass & Steidlmeier, 1999; Howell & Avolio, 1992). Ideally, groups with ethical leaders share "thought" leadership. The unethical leader's inspirational motivation is often only the leader's personal vision, derived only from the leader. It tends to accentuate the negative (e.g., plots, excuses, false dangers), and falsely shows concern, while deceiving others in order to maintain power (Bass & Steidlmeier, 1999; Howell & Avolio, 1992). In contrast, the ethical leader is follower-driven, and therefore, derives a vision that aligns with followers' needs and interests, which provides a vision that challenges, motivates, and brings meaning to followers and focuses on the positive (e.g., charity, harmony) (Bass & Steidlmeier, 1999; Howell & Avolio, 1992). Finally, consideration must be given to idealized influence or charisma, which, as mentioned earlier, can be the most ambiguous behavior for the transformational leader. Unethical leaders ask to be trusted, but in demonstrating contradictory and unpredictable behavior, can't be trusted. They are engaged in self-promotion and impression management, and build personal power at the expense of followers' accomplishments. They create imaginary "us" (good) versus "them" (bad) conflicts with other groups who don't share the same "values," and twist moral standards and manipulate others to meet their own self-interests (Bass & Steidlmeier, 1999; Howell & Avolio, 1992). The group with an unethical, charismatic leader may appear to be a close clique, but such groups may also seem to be always at "war" with other groups. On the other hand, the ethical leader demonstrates courage, fairness, and integrity, and commits to internalized ethical conduct for self and others. He or she will work toward cooperation within and without the organization (Bass & Steidlmeier, 1999; Howell & Avolio, 1992). As mentioned earlier, charismatic leadership may emerge during a time of crisis. Unethical leaders see crisis as a time to strengthen their power, taking the uncertainties/insecurities/lack of confidence that exist among followers and encouraging them to be dependent on these leaders, even after the crisis is over. In contrast, ethical leaders use crisis to help followers to be more independent and confident in their own abilities, and able to handle new challenges with or without the leader (Howell & Avolio, 1992). The goal of the unethical leader is follower dependence, while the ethical leader is striving for follower independence. Even in success, unethical leaders may be trapped by their own "hype," ignoring the shaky moral foundations of their power-base. Whereas ethical leaders will more likely have built a value-centered organization that will better withstand crisis (Howell & Avolio, 1992). Parry and Proctor-Thomson (2002) summarize that a major difference between the authentic and pseudo-transformational leader is that the authentic/ethical leader has an internal, moral/ethical intention, while the unethical leader is focused more on external displays of behavior. The result of unethical leadership is compliant, obedient followers who are completely dependent on the leader's vision and morality (or lack thereof), while ethical leadership develops followers into leaders who are independent and confident individuals who rely on a collective set of internal values to guide behavior (Howell & Avolio, 1992). Summary Successful moral leadership needs to start with top management. Ethical policies and training is useless if leaders don't have the integrity and don't honestly practice ethical values (Sankar, 2003). Howell and Avolio (1992) argue that a major condition for promoting employees into management should be based on their ability to truly demonstrate key ethical behaviors, and suggests ways for promoting an ethical environment. There should be commitment from upper management, selection of managers with high moral/ethical standards, rewards and recognition that emphasize moral behavior (e.g., respect for others), diversity training for leaders, and the establishment/identification of role-models demonstrate high moral behavior. A successful moral organization needs to have a consistent commitment to moral standards from the top to the bottom of the leadership hierarchy. Moral leadership engages leaders and followers in a common enterprise focused on addressing universal needs, aspirations, values, and goals (Burns, 1978). By effectively practicing transformational leadership, an organization can be transformed to encourage and promote ethical and moral behavior (Carlson & Perrewe, 1995). Burns (1978) summarizes that leadership is cooperative, but it also contains meaningful conflict that challenges and develops leaders/followers to higher levels. It is causative in that the interactive processes between leaders/followers produce a higher contributory effect on community relationships. It should be morally focused and structured, and should morally raise followers through self-sacrifices, not just exchanges. The transformational leader communicates and reinforces a higher vision, understands and considers the needs of followers, and is committed to a strong set of values that are shared with followers (Carlson & Perrewe, 1995). References Avolio, B. J., & Bass, B. M. (2004). Multifactor leadership questionnaire: Manual and sampler set. (3rd Ed.). Menlo Park, CA: Mind Garden, Inc. Avolio, B. 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