Running head: TRANSFORMATIONAL LEADERSHIP

Transformational Leadership in Business: How Firms are Finding Measurable Success in Their Employees Cody D. Cooper University of Central Oklahoma

TRANSFORMATIONAL LEADERSHP Abstract

This paper examines transformational leadership in firms that have adopted the theory. The paper explains how, through transformational leadership, firms can utilize employees to their full potential. The topics covered identify what the principles of transformational leadership are and how firms change in the process. Sources for the research include, scholarly reviewed articles, case studies and empirical data.

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Leadership in firms has become one of the most important aspects of businesses today. Leadership shapes the culture and health of a firm. Todays ever changing business environment calls for a higher degree of knowledge of how employees perform. A firms employee base is its most valuable asset and thus, should be acknowledged and utilized. Transformational leadership seeks to develop and empower employees in ways never utilized before. Many firms have adopted the principles of transformational leadership and show how it can be used as a successful business model. (TL) originated through research on political leaders by James McGregor burns in 1978. It was further expanded upon to encompass the business world by Bernard Bass. Gardner (2010), cites that Bass developed the notion of (TL) which calls for a charismatic leader. Bass also developed how it could be measured as well as how it impacts follower motivation and performance. The success of a leader is measured on the influence one has over followers. (TL) seeks higher goals over those of personal gain or the status quo. (TL) leaders give followers, a mission, goals, and an identity within an organization. Bass believed that leaders can use charisma, intellectual stimulation, and individual consideration to motivate followers. The change that follows, results in higher levels of employee job satisfaction and increased motivation. Basss research shows that (TL) is applicable to businesses. Transformational leadership takes what is traditionally believed to be an employee and turns them into a firms most valuable asset. Transformational leadership takes employees to higher levels of job satisfaction, morale, and productivity. (TL) can be divided into four components; Intellectual stimulation, individualized consideration, spiritual motivation, and

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idealized influence. Each component has far reaching implications for employees and leaders, not only in the firm but in the surrounding community as well. (Sosik 1998) Transformational leaders challenge their employees to think and be creative. Creativity does not have yield a physical object. Employees can be challenged to generate solutions. If given the opportunity to solve problems, employees will find ways to achieve them. They are on the front line for a firm after all. They are better suited than anyone to address them. Leaders can encourage employees to challenge norms. What was done before isnt always the correct way. The vast intellect a firm has in its employees is an invaluable resource. (TL) identifies this and utilizes it to full potential. (TL) acknowledges the person first rather than an employee. According to Sosik (1998), encouraging and acknowledging each employees ideas as valid and viable, leads to an expanded source of knowledge and information to use in problem solving. Each persons ideas are unique. An employee, who feels that theirs is equally important to others, is more apt to share, and to contribute their ideas. By acknowledging their capacity to contribute, employees have a greater sense of involvement; the feeling that their contribution plays a larger role in the firm as a whole creates a higher sense of dedication. Inspiration is the core to a persons motivation. (TL) uses inspiration by encouraging employees. This encouragement engenders commitment to higher degrees of performance. Leaders who inspire speak of the future with optimism. They are enthusiastic when they talk about the process. Leaders convey confidence that goals will be met. They create an aura of excitement and take up challenging problems. (Jandaghi et al., 2009) Inspiring employees

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creates a shared vision for them to follow. Because they are inspired, they perform higher, not because they are told to do so, but because they genuinely believe it to be true and have the desire to carry it out. An integral aspect of a successful leader is displaying high levels of integrity. Integrity is someones values and principles. As a leader, it is important to always act and rule with integrity. There are many values one should possess to convey integrity. Honesty, consideration, responsibility, persistence, excellence and commitment are examples of what integrity entails. (Brown, 2011). Integrity conveys that the follower can trust and emulate the leader. Followers need their leader to be the prime example of what is required for success in a firm. Leaders who act and lead with integrity can expect to see the same behavior emulated in their followers. A leader must possess certain traits that people desire to emulate. Idealized influence encompasses the visible traits and behaviors a leader possesses. It can also be identified as charisma. According to Merriam-Webster, charisma is defined as a personal magic of leadership arousing special popularity or enthusiasm. Traits such as honesty, respect, service, excellence, and integrity create visual examples for employees. Followers feel a sense of trust. They see their leader as someone who is brave, at the forefront of the organization, and someone who shares the values they desire as well. These traits instill honor and pride in employees. The leaders example is a behavioral model that employees can follow. (TL) leaders must have vision. Vision is the desire to make a difference. It is the drive to create something that never was before. Vision is necessary for effective leadership. A leader can develop vision for any group, project or organization. Vision guides and directs organizations

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forward. A leaders vision is the path the organization takes to achieve its main objectives. Employees need to feel that their work is moving their organization to the goal. Many leaders fail because they do not have an effective vision in place. (TL) leaders need to have energy. Their energy sets the tone for the entire organization. As in the case with idealized influence, a leaders energy is a guide for employees to emulate. Energy can be the will to continue in the face of significant change or the desire to pursue goals even though the economy is down. Energy is a significant influence on the overall environment of an organization. Examples of leaders with energy are evident. Steve Jobs of Apple, and Sam Walton of Wal-Mart are examples of leaders who displayed energy, and who were able to channel it to their employees. The success of their firms hinged greatly on their outward expression and how they were perceived by employees. A significant quality that (TL) leaders have is the ability to empower their employees. Employee empowerment is the way leaders delegate authority and decision making powers to employees. In contrast to more authoritative leadership, empowerment allows for employees to problem solve, and to create solutions that can be carried out. Empowerment can be divided into three areas. Situational, which is the structural aspect, pertains to the organization of a firm. It is the delegation of tasks down the hierarchy that allow employees to make decisions and to take risks which have direct impact on the direction of a firm. Motivational empowerment is the psychological impact a leader has on an employees motivation. Motivation is integral to the success of an employee. Without motivation, employees see their jobs as tasking, and a means to an end. They desire only to perform what is required,

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and to achieve minimal goals. A leader has the power to motivate them to do the opposite. If the employee can feel motivated, they will work harder, and will achieve higher goals than someone who is unmotivated. The third aspect is leadership empowerment. It encourages employees to act directly in achieving the vision and its goals. According to Stander (2009) Delegation of authority, accountability for outcomes, self-directed and participative decision making, information sharing and coaching and the developing of people have been identified as leadership behaviors that will empower people Empowering employees through any of the aforementioned ways creates an increased sense an employee has in regards to their own control over their position. It motivates them. This motivation in turn helps to achieve higher levels of organizational commitment. Empowerment also translates to higher overall job performance and job satisfaction. According to Daft (2011) effective leaders share power rather than hoard it and find ways to increase an organizations brain power by getting everyone in the organization involved and committed. (TL) relies heavily on feedback to continuously adapt and change its practices to meet the needs of employees. How successful (TL) is within a firm can be measured by the Multifactor Leadership Questionnaire (MLQ). The benchmark test measures key factors that set leaders apart. It identifies effective and ineffective leadership styles. The test is applicable for all organizations and cultures. Questions address areas of (TL) such as, idealized influence, idealized behaviors, inspirational motivation, intellectual stimulation, individualized consideration, active and passive leadership, and gauges outcomes of (TL). As part of (TL) a

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leader must be aware of actions and their results. Identifying what is effective and what is not allows leaders to adapt and change to their organizations needs. (MLQ, 2013) While the MLQ is efficient at identifying traits, another test, the Leadership Practices Inventory (LPI) examines traits of leaders. According to Gardner (2010), the (LPI) strongly focuses on leader follower relationships, providing a comparative reference for approaches concerned with how the organization experiences leadership. The questionnaire examines 5 key areas; 1) challenging the process 2) inspiring a shared vision 3) enabling others to act 4) modeling the way 5) encouraging the heart. There are 30 statements regarding leadership behavior. Each statement addresses the overall effectiveness of their leaders behavior. The (LPI) gives leaders tools and feedback to be a more effective leader. (Leadership Challenge, 2013) Research has shown that firms whom adopt (TL,) see goals met, enjoy higher levels of employee job satisfaction, and see the overall health of the firm improve. (TL) is adapted to firms depending on the situation and what the corporate climate requires. According to Brown(BOK) Highly innovative companies need to have a free flow of knowledge and structure that will stimulate communications among individuals and teams. W. L. Gore, most known for its Gore-tex products, uses (TL) in a radical way. Instead of having a traditional pyramid corporate organization, they use a system they call Lattice. Gore has no managers, few job titles, and their communication is horizontal. (Brown, 2011, p. 225) Gore uses Sponsors instead of managers and employees are called associates. They believe that everyone should communicate with everyone. They allow employees to figure out what they want to do on their own. Projects are started and people decide if they want to work on

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them. The idea is that people will choose what they are passionate about. There is no set leader of a project merely the originator is and the Sponsors guide associates through the process. The team decides when to end a project or to continue. Team members even interview and hire new employees. Gores Sponsors make up about 20 percent of the company. Every new associate is assigned to a Sponsor. Gore believes that as a sponsor you have the most at stake when it comes to the success or failure of the new associate. Sponsors give the new associates opportunities to succeed in the company. Gore believes that if you are mentoring and contributing to the health of your team you are adding value to the company. The employee is successful and so is the team. Gore notes that there are no appointed leaders. Leaders develop out of what they call followership. (Brown, 2011, p. 225) Gores employees adhere to four guidelines. 1) Fairness to each other and everyone with whom we come in contact. 2) Freedom to encourage, help, and allow other associates to grow in knowledge, skill and scope of responsibility. 3) The ability to make ones own commitments. 4) Consultations with other associates before undertaking actions that could impact the reputation of a company. Gores guidelines instill in employees integrity, which is an important aspect of (TL) (W. L Gore and Associates, 2013). It is noted that Gores leadership style is best suited for groups encompassing 150 to 200 employees. Many would assume that the environment at Gore would be uncontrolled and would lack the ability to meet goals in line with the company standards. However, Gore has annual sales over $2 billion, employs about 8000 people, and has 45 manufacturing facilities worldwide.

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Gore began its plan over 50 years ago however. Time has allowed them to adapt (TL) to suit their needs and the benefits they have received though adopting principles of (TL) are evident. (Brown, 2011, p. 225) (TL) can be adapted to suit needs of different companies. Disney uses (TL) to remove boundaries that separate managers from their employees. Disneys management philosophy is, that although it has traditional managers, its managers are not acting alone. Managers spend 70 to 80 percent of their time working directly with employees. They are not monitoring or reviewing. They are there to be as the employee is. They call is walking the front. Managers gather information from guests and employees. By being able to convey information directly to them immediately, they believe they are encouraging employees to take ownership. Research by Disney has shown that where they implement their leadership programs, the guest return rate can rise above 10 percent, and their turnover rate has dropped as well. (Disney Institute 2011 ). Disney believes that the overall success of a firm is directly related to every employee involved and that it is leaderships responsibility to channel it into a guided direction (Disney Institute 2011). At times, the need for a change in leadership can begin a shift towards (TL). Cisco Systems was one of the most valuable companies during the late 1990s. But by 2001, they were seeing net losses of $1 billion. Ciscos CEO, John Chambers took the opportunity to change the company. He realized that the culture, operations and priorities had to undergo a massive over haul. Chambers began by removing the top-down communication chain it used. Cisco now uses a network of councils and boards that have been empowered to develop and launch new products. Councils are groups of executives that have the ability to act on opportunities $10 billion or

TRANSFORMATINAL LEADERSHIP more. Boards are team managers who can make decisions on projects around $1billion.

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Chambers is rarely involved in any decision making now. The empowerment allows employees to react quickly and to take advantage of a market which changes rapidly. Chambers notes that fifteen minutes and one week to get a business plan, where it used to take six months! (Brown, 2011, p. 383) Chambers also sought to change how employees were rewarded. Previously Cisco executives were encouraged to act alone and to compete with one another to achieve goals. To reinforce the implementation of change, Chambers shifted the emphasis from competiveness to team work. Chambers explains that I now compensate our leadership team based on how well they do on collaboration and the longer-term picture. If we take the focus off of how they did today, this week, this quarter, it will work (Brown, 2011, p. 383). Chambers emphasis on the long term vision, encourages employees to work together to accomplish goals for the greater good of the company as a whole. Chambers plan to turn Cisco around was successful. According to Brown (2011), by 2003, Cisco had record profits of $3.6 billion. The changes at Cisco show how aspects of (TL) can shape and transform a firm. Chambers empowered his employees. He removed himself from the traditional sense of CEO. Chambers actions allowed employees to feel like that they were integral in saving Cisco. They were allowed to direct the company and allowed for Cisco to operate more efficiently as a result. Chambers plan occurred drastically in contrast to other case examples. Yet, although the change occurred rapidly, it was successful in saving Cisco.

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In 2006 and 2007, Jandaghi, Matin, and Frajame, examined the relationship between (TL) in successful and unsuccessful companies. They sampled managers and employees from private manufacturing companies in Qom, Iran. The team used industry recognized data from 2003-2006 to gauge the overall success of each company respectively. The areas identified for research were, idealized influence, intellectual stimulation, inspirational motivation, and individualized consideration. The team was able to identify that (TL) traits are higher in successful companies in comparison to the level apparent in unsuccessful ones. The data showed that the successful companies had higher mean levels of the four areas. Because of the lack of (TL) present in unsuccessful companies, they showed the lowest means in idealized influence. One can see that leaders in these companies are lacking in (TL) traits. Other calculations revealed that the more (TL) traits present, overall performance and success of the companies increased as well. (Jandaghi et al., 2009) Although the study focused on one particular industry and in a specific region, the results speak highly in favor of (TL). Firms where (TL) was implemented, were able to display actual data that correlates with reports made by employees. One could argue that (TL) can benefit any organization at some level. The cases presented and the data shown give rise to the argument that (TL) can change organizations. (TL) attributes can be adapted to fit many different types of organizations. Leaders today can expect, through (TL), to gain a deeper understanding of what it takes to keep employees motivated and to keep them with their organization. Leaders are able to motivate, and empower their employees to move beyond what is expected and to go farther than they ever imagined. (TL) respects employees for who they are not what they produce. Leaders can

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influence employees by better understanding what is required for them. (TL) is a tool that will lead to measurable success for companies who adopt its principles and practices.

TRANSFORMATINOAL LEADERSHIP References

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Brown (2011). An experiential approach to organization development. Upper Saddle River, NJ: Pearson Education Inc. Cisco (2013). Retrieved from http://www.cisco.com/ Daft, Richard L. (2011) The leadership experience. Mason, OH. Cengage Learning Jandaghi, GH, Matin, H. Zarei, Farjami. (2009). Comparing transformational leadership in successful and unsuccessful companies. International Journal of Sciences, 4(3), 211-216. Disney (2011). Disney institute, leadership excellence. Retrieved from http://disneyinstitute.com/ Stander, Marius W. (2009) Psychological empowerment of employees is selected organizations in South Africa. South Africa Journal of Applied Psychology. 466 Sosik, John J. (1998) Transformational leadership and dimensions of creativity: motivating idea generation in computer mediated groups. Creativity Research Journal. 11(2) 111-121. MLQ (2013). Retrieved from http://www.mlq.com.au/Products/mlq/body_mlq.html LPI (2013). Leadership practices inventory. Retrieved from http://www.leadershipchallenge.com/Professionals-section-LPI.aspx Charisma (n.d.) In Merriam-webster online. Retrieved from http://www.merriam-webster.com/dictionary/charisma