Do Leaders Matter?

It is often said that the performance of an organisation is strongly dependant on its leader. In
support of this statement, the following essay argues that an organisation is ultimately never
independent from a higher authority and that a leader is required at some point for it to
survive and prosper. This topic is one on which there has been considerable debate, with
some researchers claiming that leadership has far less influence on performance than is
generally believed. In order to determine the validity of this argument, this paper will analyse
relevant materials, examine theories for leadership and provide examples of leaders in
organisational settings.
From the beginnings of human enterprise, leadership has been a central theme for political
and social theorists (Rejai & Phillips, 1997, p.1). Nevertheless, the topic remains to be “one
of the most observed and least understood phenomena on earth” (Burns, 1978, p.2). With
over 350 definitions of the term “leadership”, there is no one universally accepted
understanding of the term (Lim & Daft p.5). One definition that encompasses the
fundamental elements of leadership is in the statement made by Rost (1993, p.102) which
suggests that ‘Leadership’ is an influence relationship that exists between leaders and
followers who intend changes that effectively reflect their joint purposes. Many great
business managers and entrepreneurs are also considered great leaders in their field. This
could imply that the definition of leadership is synonymous with ‘entrepreneurship’ and
‘management’. However, a study by Dalglish and Evans (2000) points out that the tasks and
characteristics of entrepreneurs and leaders are distinctly different from each other.
Leadership entails a personal set of skills that can be applied to a wide range of
circumstances. Entrepreneurship, on the other hand, requires only business related skills
particularly in new ventures (Dubrin, Dalglish & Miller, 2006, p.335). Similarly,
management also differs from leadership. A manager must deal with the interpersonal aspect
of leading as well as the administrative tasks of planning, organising and controlling.
Leadership is about aligning people, providing inspiration and motivation and driving change
(Dubrin et al., 2006, p.4). According to leadership theorist Warren Bennis, “Leadership is all
about innovating and initiating, whereas management is all about copying and managing the
status quo” (Warren, 1997, p.I).
A key underlying reason for the study of leadership is that is it assumed that leadership
improves organisational performance, and that leaders, through their action and influence,
create a climate of change (Dubrin et al., 2006, p.5). According to Rejai and Phillips (1997,
p.89), leadership studies may be difficult to assess because there is no universally agreed
upon definition of the concept. Several researchers have pointed out that despite the increased
research into leadership and organisational performance, major gaps still exist in measuring
leadership effectiveness (Barling, Kelloway and Loughlin, 2002, p.493). Jing and Avery
(2008, p.68) found that there is a lack of integration between organisational performance and
leadership; previous studies have used a narrow set of variables and the context has been
ignored in these studies. One study examined the impact of using leadership substitutes to
replace formal leadership. These substitutes included closely knit teams, intrinsic satisfaction,
computer technology, and professional education (Howell, Bowen, Dorfman, Kerr &
Podsakoff, 1990, p.23). Kerr and Jermier (1978, p.393) concluded in their research that when
substitutes exist within the organisation, leadership will fail to contribute to organisational
commitment. However, this model was heavily criticised. Empirical researchers have found
inconsistencies with the results from Kerr and Jermier’s research (Howell & Dorfman, 1981,
p.716). Furthermore, Dionne, Yammarino, Atwater, and James (2002, p.455) found that that
the substitute leadership model did not moderate the effects of leadership. When the results
were mediated, approximately 50 percent revealed a significant leadership effect (Dionne et
al., 2002, 460). Lieberson and O’Connor (1972, p.118) considered the influence of leaders on
organisational performance. They concluded that leadership has little effect on organisational
performance, and that performance variance can be largely explained by non leadership
factors. The findings of Lieberson and O’Connor were criticised and deemed “highly
suspect” (Thomas, 1988, p.389-90). They failed to account that variance in organisational
performance can be attributed to differences among individuals (Nohria & Khurana, 2010,
p.66).
Despite the research implications mentioned earlier, several studies have established that a
positive correlation does exist between leaders and organisational performance. One study
found that leaders accounted for 12.8 percent of variance of profit in an organisation (Weiner
& Mahoney, 1981, p.465). A more recent study of leaders and profit variance indicated a 20
45 percent of the variance in organisational outcomes (Day & Lord, 1988, p.458). This
increase in leadership importance and effectiveness reflect the observations made by
Psychoanalyst Michael Maccoby who proposed that leadership is required more than ever in
these changing times. Maccoby saw increased competition, technological advances and
changing government regulations as challenges that organisations will potentially face, and
that leadership was required for organisations to survive (Dubrin et al., 2006, p.6).
Having determined that leaders can have a significant impact on their organisations’
performance, the next step is to examine how they can effectively do so. Several studies
have talked about leadership effectiveness and qualities that produce the best outcomes for
organisations in both business and non-business contexts (House, Spangler & Woycke, 1991,
p.390). Leadership effectiveness is dependent on whether the leader achieves desirable
outcomes in a given situation such as an increase in productivity, quality or satisfaction
(Dubrin et al., 2006, p.16). This has been formulated as E = f(l, f, s) were the effectiveness
(E) depends on the leader (l), the followers (f) and the situational variables (s) (Spencer,
Nolan, Ford, Rochester, 1977, p.5).Through an large amount of surveys, questionnaires and
interviews with successful business leaders, Kouzes and Posner (2003, p.1) identified five
practices for leadership effectiveness (not in any order). The first is to “Model the Way”. This
principle establishes that leaders must have clear beliefs and principles, as well as the ability
to guide projects, measure performance and take remedial action (Kouzes & Posner, 1990,
p.11). This is consistent with several research studies which indicate that a leader must have
certain personality traits (Kirkpartick & Locke, 1991, p.49). These traits may be divided into
general personality traits and task related traits. General personality traits are apparent within
and outside the work environment such as extroversion, self confidence, trustworthiness,
warmth etc (Dubrin et al., 2006, p.28-29). These traits add value to the organisation, for
example, evidence has indicated that a climate of trust (trait of trustworthiness) leads to
increased cooperation and ultimately increased organisational performance (Jones & George,
1998, p.531). A practical example of trustworthiness is entrepreneur Anita Roddick, who
based her company ‘The Body Shop’ around ethical standards of animal testing and
cosmetics (Pless, 2007, p.437). Roddick has built her reputation on what she thinks is morally
correct, regardless of the political consequences, and thus maintains a high level of integrity
(Dubrin et al., 2006, p.30). Certain personality traits may relate to the achievement of a task,
such as emotional intelligence, internal locus of control, flexibility and adaptability etc
(Dubrin et al., 2006, p.34). The importance of these traits has been observed by several
authors, including psychologist Daniel Goleman, who highly advocates emotional
intelligence in leaders (Goleman, 2003, p.26). Goleman described several attributes of
emotional intelligence including self awareness, motivation, self regulation and social skills
(Goleman 2000, p.1). In his research, Goleman concluded that: “emotional intelligence is the
sine qua non of leadership. Without it, a person can have the best training in the world, an
incisive, analytical mind, and an endless supply of smart ideas, but he still won’t make a great
leader” (Goleman 1998, p.82). Richard Branson, the entrepreneur for the Virgin Group of
Companies, exemplifies emotional intelligence. Branson was a dyslexic and struggled
academically, achieving poor results in IQ tests. Yet at age 17, Branson published an
innovative newspaper, a business which was a financial success (Miller and Ramsey 2010,
p.170). Many authors have attributed Branson’s success and stimulating leadership to his
high level of emotional intelligence (Williams, 2000, p.47).
The second and third principle that Kouzes and Posner (2003, p.2-3) identified in their
research, “Inspire a Shared Vision” and to “Challenge the Process”, relates to the concepts of
transformational leadership and charisma. Charisma refers to the ability of the leader to
influence values, beliefs, behaviour and performance (House et al., 1991, p.366). A
transformational leader is one who, by appealing to higher ideals of followers, can bring
about major organisational change (Masood, Dani, Burns & Backhouse, 2006, p.942). Many
of the characteristics of charisma also apply to transformational leaders because charisma is a
component of transformational leadership. Charismatic leaders inspire vision among their
followers by creating an ideal version of the future (Dubrin et al., 2006, p.97). An example of
a visionary leader is former CEO of BHP Billiton, Paul Anderson, who led the merger
between the mining companies. Despite his background in finance, Anderson focused on the
people and vision within the organisation by providing a set of directions for the company
(Dubrin et al., 2006, p.6). To “Challenge the Process” refers to the leader’s ability to take
risks to innovate and experiment to improve organisational performance (Kouzes & Posner,
1990, p.8). Charismatic leaders are risk-takers who seek opportunities to find unconventional
strategies to achieve goals (Dubrin et al., 2006, p.99). According to Robert Metcalfe,
entrepreneur and executive of 3COM, innovation “requires gambling and risk taking. We tell
our folks to make at least ten mistakes a day. If they’re not making ten mistakes a day,
they’re not trying hard enough” (Kouzes and Posner, 1990, p.8).
The final two principles in Kouzer and Posner’s (2003, p.5-6) model, “Enable Others to Act”
and “Encourage the Heart”, refer to empowering others. Empowerment involves the manager
sharing power and responsibility with group members in order to increase motivation (Zhang
and Bartol 2010, p.107). When Renn Zaphiropoulos, president and CEO of Versatec,
required a table for the company conference room he had his managers build one in his
garage rather than purchasing one. The exercise was used to develop a better relationship
between Zaphiropoulos and the managers and effectively empower them (Kouzes and Posner,
1990, p.11). This is consistent with research conducted by Chen and Klimoski (2003, p.598)
who found that leaders were able to empower and motivate their group members effectively
by developing better relationships through the cultivation of mutual respect and trust.
Harvard Professor, Rosabeth Moss Kanter, found that several projects in her leadership
research had been unsuccessful because the leader in these studies had failed to build
relationships between the followers (Kanter, 1997, p.108). Kanter concluded that by
developing relationships with followers and by enabling them to act resulted in feelings of
empowerment and increased levels of motivation (Kouzes and Posner, 1990, p.11).
A formal evaluation such as a 360-degree feedback should be used to assess the leader’s
performance. This will aid the leader in fine-tuning their behaviour so that they may
exemplify leadership traits that are appropriate to the organisation and situation (Dubrin et
al., 2006, p.71). It can also be used by leaders to determine if any if any barriers exist that
hinder leadership performance such as inflexibility, lack of initiative or inappropriate
leadership style (Hoffman 1995). One study, by the Indra Gandhi National Open University,
observed the impact of a 360 degree feedback on a sample of 56 school principles. After the
evaluation, which consisted of interviews and questionnaires, a positive change was observed
in leadership roles, behaviour and individual performance (Rao & Rao, 2005, p.183).
In conclusion, while there are those who disagree with the impact leaders can have, the
research presented by Lieberson and O’Connor and by Kerr and Jermier has been highly
criticised and at times rendered invalid by newer research. It is evident from the research
examined that leaders have been able to affect organisational performance through their
personal influence. Leaders who personify the personality traits, are charismatic and
empower their followers were found to be able to benefit the organisation not only to achieve
profitability, but also to increase the motivation of the followers. This is demonstrated
through the various studies which offer support to this conclusion, including a higher profit
variances being attributed to leaders. Leaders have also been found to benefit their
organisations by not only achieving profitability, but also increasing the organisations ability
to survive and prosper in the long run by making effective business decisions on potential
opportunities. In this time of increasing competition, rapid technological advancement and
changing government regulations, leaders are still as relevant today in their organisations, if
not more so than ever before.
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