Influence Of Leadership And Culture - Essay Example

 INFLUENCE OF LEADERSHIP AND CULTURE 1 Abstract Changes in the organization are inevitable for working towards competitive advantage. J.C. Penney too needed these changes to reverse the losses it was facing and undertook these changes under leadership of its two CEO’s. The entire case was examined in the light of the role of the leaders and the organizational changes they brought about with their visionary strategies. That the leaders made significant change in the business itself becomes secondary to the more difficult but primary change they brought about in the culture of the organization. It has been established in this essay, through theory and practice, that true leadership is involved deeply with the culture of the organization for making successful changes. 2 Introduction Despite its size, and in fact because of it, J.C. Penney (JCP) fell into terrible times in the nineties. It failed to realize that with time it had to change along with changing demographics of younger customers who had a different outlook. It neglected the aspirations of the new customers and carried on with old ways that were no longer valid in the face of current competition. It had lost its competitive advantage. It was working on the concept of decentralized purchasing that gave the store manager the authority to purchase locally in the faulty belief that the man closest to the customer knew what the customer needed. This resulted in adding huge varieties to the stock and overburdening inventories. Fashion changes rapidly and eventually these stocks became a burden and had to be disposed later at huge discounts. Inventory management became a headache and the company was unaware of its contents as it did not upgrade technologies. The competition too became varied. Mall based stores like Gillard offered a more fashionable experience to customers while free standing stores like Kohl offered lower prices. JCP found itself being removed from the preferred list of the younger customers that passed it over for both value and style. The effect in the financial market was no less disastrous. JCP shares fell to a low of $ 10 and were placed in the junk class. As a consequence it lost leverage in the market and access to commercial paper was denied; indeed it had to resort to purchasing in cash as it had lost credit facilities. The competition’s fashion category formats also underwent changes and here JCP lost its uniqueness as the difference between competitions narrowed. Everyone was offering similar fashions in an already mature market. JCP was primarily a clothing retailer but it had diversified its portfolio to operating a drug store chain and was also selling insurance, travel and auto club programs. It also sold through catalogues that carried thousands of items. This change of focus affected efficiencies and resulted in mediocre service that did not help in retaining customers. Compensation to employees was not linked with performance and everyone was placid in approach. There was general incompetence all around from top to bottom and the giant was propelling under momentum and not on any strategy. That it only staggered along for a long period and did not take a fall was an attribute to its glorious past. 3 Strategic Management The heart of strategy lies in its competitive advantage (Porter M.E. 1980). According to Porter M.E. (1985), to achieve competitive advantage the firm or company has to make a choice. For profitability and cost effectiveness it must offer its customers quality, value and comparable features in its products. Beyond this there must be some unique attribute that can attract customers and offer them value for money. It must also focus on its chosen segments for offering this advantage. This makes the firm structurally balanced between the five forces of power; buyers, suppliers, rivals, potential new entrants and substitutes. This means bringing changes. This is a clear call for a strategy which will bring about the changes in the organization for realization of competitive advantage. Since change is about improvement and it will alter the status quo there are bound to be cultural and behavioral obstacles that need to be overcome for the change to be effective. The key features of this obstacle are the company’s culture, the leadership that will supervise this change and the sources of power that will have to be understood and managed during the change process. 4 Changing Organizational Culture Shared views, aims, ideals and practices are the basis of cognitive behaviour. These are the ingredients that form the culture of an organization. According to Nelson and Winter (1982) routine interactions within the working environment forms the basis of organizational culture and a predictive pattern emerges. Deal and Kennedy 19820 describe it as “the way we do things here”. The importance of this routine is gaining importance as has been acknowledged by Cohen et al (1972) and Hedberg et al (1976. Ritual activities form another view of practices as shown by Trice and Beyer (1984, 1985). Training, assessments and promotions resulting in awards and recognition are other practices. The culture of the organization has been defined by Edgar Schein (1985) and acknowledged at three levels of cultural phenomenona: basic assumptions, values, and artifacts. Basic assumptions are the conditions taken for granted in an organization and considered to be the "correct" way of doing things. These are the foundations and are the deepest level of culture and are the most difficult to change. At the next level are values and these are perceived to be changeable and also that need to be changed. The artifacts are behavioral usages at the front like rules, procedures, communications and technology that are readily changed and indeed do not change values or traditions but are mere change of presentations or mannerisms. The need for change is threefold and all are external factors. Customer requirement, competitive environments and societal expectations all force changes. This was highlighted by George Gordon (1991). He has concluded that these outside influences change both basic assumptions and values. Organizations that fail to recognize these pressures will loose their competitive advantage. The most practical way to bring about any change is to work through the existing culture. This avoids vacuums that are created if one culture is to be replaced by another. This also provides smooth transition from one state to another in gradual and regulated fashion. After studies undertaken by Beer et al (1990) they concluded that if work is the focus of change then it will be successful. They suggest that instead of trying to change the culture, effort should be on changing the work. Hofstede (1990) clarifies this as change in work practices. They go on to state that organizational renewals should begin at the bottom for any change to be effective, and not with the top. Direction from top as diktat fails to change the basics. Instead they argue that their study reveals that outside consultants are more effective in bringing about the coordination, commitment and competencies in the staff and departments as compared to the organization’s own specialists. This has been corroborated by Bates (1990) who further states that actually focus on networking and relationships brings about successful change. The ingredients of change are coordination, commitment and competencies. Coordination is the key to improving the organization. Commitment is the key to concerted effort to achieve the vision that magnifies the desired improvement. Competencies are the skills that are required to bring about the change. 5 Leadership & Culture "Where there is no vision, the people perish,” so says the Book of Proverbs. This holds good both in life and in business. Organizations without visionary leaders are doomed to death by following tradition. Vision is not a dream. It is a reality that has not yet come around. But there is a process for its realization and it reshapes the culture it wants to change. The specialized consultant may be useful in assisting the change management process, but he cannot replace the top management, especially the Leadership represented through the CEO as it is the Leader who has the vision to forecast and foresee this change and to bring about policies for its achievement. The role of the Leader is critical in any change program. It is the top management under the leadership of the CEO who decide the strategies for obtaining competitive advantage. It is the function of the CEO to supervise the activities and initiate the programs to bring about the changes that are required in the actualization of the vision stated in the strategy. Indeed David Nadler and Michael Tushman (1990) suggest institutionalization of this leadership responsibility right through the management system. They suggest that entire senior management team should share the responsibility of creating and communicating the new vision to the whole organization. There are some typical leadership behavior patterns that are very critical to change programs. Jerry Porras and Susan Hoffer (1986) opine that open communication meaning sharing of intentions, listening and collaborating through making team decisions were most relevant for success in organizational development efforts. Similar conclusion was drawn by Teresa Covin and Ralph Kilmann (1990) when they surveyed several individuals. They noted two more traits of leaders. One, that they demonstrated discernible and unfailing support for the change programs, and secondly, they related the change to business needs. This calls for building of teams towards the effort and communicating the expected results in terms of profits, productivity, quality, performance, quality of work life etc. There are some problems too. The two biggest causes of failure are the spreading of rumors or circulation of wrong information. Mostly the sources of these are the outsiders and are a result of communication failure on part of the management. This has been highlighted by Larry Smeltzer (1991) who goes on to say that the worst kind of communication is a lean one which uses a memo as the means of conveying instructuion or information. This is too cold and impersonal. They emphasize the importance of face-to-face meetings, the personal touch being vital and convincing. 6 Leaders & the Sources of Power Every organization is beset with internal politics. It is common to find power groupings that aim at self development for individuals or groups of people. These are vested interests and can be detrimental to any change effort. But again these can be used for the cause of the change as well. With deft handling they can be convinced that it is in their best interest to support the change program. For this however the power groups have to be identified and their compulsions have to be understood. Only then they can be deconstructed and drafted for the cause of change. It is suggested by Anthony Cobb (1986) that, in an organizational change effort, the investigation of its political centers must be carried out at three levels: individual, coalition, and network. People who hold powerful positions and have developed reputations for power, possibly through their influence reflected in important decisions need to be identified. This is the individual level. Power groups or coalitions are to be identified by the influence the group exerts over certain areas and the decisive role their opinions play in the final outcomes. These groups or coalitions are formed over a period of time and exercise great influence over key areas or resources of the organization. They have to be brought on board for the change program. Often, a whole group of people or team needs to be removed from the scene in change management process or they will block the change. At the macro level management needs to find out the network that functions within the organization. These networks can be between individuals, between coalitions and between individuals and coalitions. The network cannot be eliminated but it is to be converted to become positive towards change. The forces of power have to be understood and harnessed for effective change management. Political maneuvering, not unlike that at national level, is required and Kumar and Thibodeaux recommend (1990), that the extent of political manipulation and maneuvering should vary with the level of change required. It is here that the leader at the top plays a vital role. Some higher level of political bargaining or persuasion can be done by the leader to facilitate change through felicitation. Sometimes and interventionist approach is useful (Kumar and Thibodeaux 1990) where the management takes an activist attitude by encouraging dissent against present beliefs. 7 Critique For survival organizations need to retain or obtain competitive advantage. For this they must have strategies. Strategies are made by leaders who have a vision and a mission to accomplish. For achieving this they need to change the organization’s focus to the future that is more profitable, productive and provides a better quality of life to its stakeholders. All this points towards, and calls for, changes. These changes are met with resistance through clash with the existing culture of the organization that is under threat from these changes. The current beliefs, values and customs form the ingredients of culture. The first two are difficult to break but easier to mould. Changes should be introduced in an adaptive mode to work through existing cultures. But this is not easy as there are barriers to the effort exercised through powerful individuals and groups who resist change. There is also a negative perception of change that has to be removed through effective communications. Power politics of vested interests has to be identified and either manipulated or eliminated for change to proceed smoothly. The balance of power has to be redistributed amongst the constituents to facilitate change. At the end of the day most people are not motivated by being pushed. The motivation comes out of the desire to meet their own needs, to achieve something that holds value for them, to be in control, to be recognized, to have self esteem and the satisfaction of having achieved their personal objectives. A successful leader connects with these human values and excites people with his vision that will help them achieve their personal objectives through his visionary strategies. This involvement must be real and for this the leader has to formulate a vision that takes these aspirations into account. The results of this vision come out in the shape of recognition and reward for the people. 8 Conclusion In this entire effort the leader is to play the critical role stepping in wherever required and intervening directly or through change agents to smooth out the effort and to achieve his strategic goals by means of changes in the organization. This is what was finally realized by JCP. Beginning from 1999 a complete revamp of JCP commenced and lasted through 2004 when it finally bounced back with share prices soaring to $ 50 and restoring the faith of all stakeholders. The company achieved this turnaround on the vision of two of its leaders, Allen Qustrom between 1999 and 2004 and Myron Ullman 2004 onwards. Between these two, new strategies were devised and changes brought about that resulted in the turnaround of the company. They introduced central purchasing, sold off extraneous business ands returned to nourish the core competencies of JCP. Technological enhancements and training of staff improved efficiency levels. Fresh hiring was done on basis of qualification fitting the job. Compensations were linked to performance. Store formats were changed and a more appealing range of products was introduced to attract the growing younger customers. With central purchasing and efficient inventory management there was marked improvement in working capital availability. As many as 120 non performing stores were closed down, contemporary fashion was introduced, and the customer again became important to the company. The allied business activities apart from the core business were sold off, and the merchandise was revamped with latest styles that were preferred by the younger customers especially the school going generation. This segment was very promising and unless the company kept abreast of fashion changes, products became outdated in a matter of months. But by far the most important step the leaders took was to change the attitude of the employees by giving them targets attached with rewards. Performance became the buzzword. Special training was offered to existing staff and fresh recruitments now underwent great scrutiny to find suitable people to fill positions. According to Senge (1990b), by sharing the vision with more people the vision becomes more real and people imagine it to be achievable. With this sharing the leaders now have partners, co-creators; the vision no longer set on their shoulders alone. This then is the measure of success of a leader. 9 Bibliography Bate, P. "Using the Culture Concept in an Organization Development Setting," Journal of Applied Behavioral Science, 26 (1990): 83-106. Beer, M. Eisenstat, R.A and. 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