LEADER STYLE IN STRATEGY AND ORGANIZATIONAL PERFORMANCE: AN INTEGRATIVE FRAMEWORK

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Journal of Management Studies 3013 May 1993 0022-2380 LEADER STYLE IN STRATEGY AND ORGANIZATIONAL PERFORMANCE: AN INTEGRATIVE FRAMEWORK* AFSANEH NAHAVANDI ALI R. MALEKZADEH Arizona State University West ABSTRACT By means of reviewing existing literature about the role of leaders in deter- mining organizational strategy, an integrative analytical framework is devel- oped. The framework considers the leader to be key to both the formulation and implementation of strategy. It further identifies factors that moderate the leader’s impact on strategy. Hypotheses are presented along with implica- tions for future research regarding the role and impact of leadership. INTRODUCTION The interest in the effect of leader characteristics on strategy and perform- ance, as compared to small group effectiveness and satisfaction (e.g. Fiedler, 1967; House, 1971), is relatively new. However, the background of top executives has continued to be linked to the strategic direction taken by organizations (Levitt, 1974). In spite of the popular appeal of the above suggestion, it has received somewhat inconsistent support in the academic field. To some, organizations are driven by factors other than their manage- ment (Cyert and March, 1963; Hannan and Freeman, 1977; Lieberson and O’Connor; 1972; Salancik and Pfeffer, 1977). To others, management, in the form of a top management team (TMT) or an individual, plays an essential role in an organization’s strategy and performance (Channon, 1979; Ham- brick and Mason, 1984; Michel and Hambrick, 1987; Mott, 1972; Selznick, 1957; Smith et al., 1984). Hambrick and Mason (1984) presented a review and synthesis of the existing research findings and suggested that the link between the micro (individual) and the macro (organizational) aspects - particularly strategy - is still unclear and requires further theoretical and empirical development. Others (e.g. Day and Lord, 1988) have also called for the need to develop executive leadership theories that would predict how an organization’s upper echelon affects performance. This article reviews studies that pertain to the role of leader style in affecting strategy and performance. Through this review, an integrative framework for the role of the leader in organizations is developed. Hypotheses Address for reprints: Afsaneh Nahavandi, Arizona State University West, 4701, W. Thunder- bird Rd., P.O. Box 37100, Phoenix, AZ85069-7100, USA. 0 Basil Blackwell Ltd 1993. Published by Blackwell Publishers, 108 Cowley Road, Oxford OX4 lJF, UK and 238 Main Street, Cambridge, MA 02142, USA.

Transcript of LEADER STYLE IN STRATEGY AND ORGANIZATIONAL PERFORMANCE: AN INTEGRATIVE FRAMEWORK

Journal of Management Studies 3013 May 1993 0022-2380

LEADER STYLE IN STRATEGY AND ORGANIZATIONAL PERFORMANCE: AN INTEGRATIVE FRAMEWORK*

AFSANEH NAHAVANDI ALI R. MALEKZADEH

Arizona State University West

ABSTRACT

By means of reviewing existing literature about the role of leaders in deter- mining organizational strategy, an integrative analytical framework is devel- oped. The framework considers the leader to be key to both the formulation and implementation of strategy. I t further identifies factors that moderate the leader’s impact on strategy. Hypotheses are presented along with implica- tions for future research regarding the role and impact of leadership.

INTRODUCTION

The interest in the effect of leader characteristics on strategy and perform- ance, as compared to small group effectiveness and satisfaction (e.g. Fiedler, 1967; House, 1971), is relatively new. However, the background of top executives has continued to be linked to the strategic direction taken by organizations (Levitt, 1974). In spite of the popular appeal of the above suggestion, it has received somewhat inconsistent support in the academic field. To some, organizations are driven by factors other than their manage- ment (Cyert and March, 1963; Hannan and Freeman, 1977; Lieberson and O’Connor; 1972; Salancik and Pfeffer, 1977). To others, management, in the form of a top management team (TMT) or an individual, plays an essential role in an organization’s strategy and performance (Channon, 1979; Ham- brick and Mason, 1984; Michel and Hambrick, 1987; Mott, 1972; Selznick, 1957; Smith et al., 1984). Hambrick and Mason (1984) presented a review and synthesis of the existing research findings and suggested that the link between the micro (individual) and the macro (organizational) aspects - particularly strategy - is still unclear and requires further theoretical and empirical development. Others (e.g. Day and Lord, 1988) have also called for the need to develop executive leadership theories that would predict how an organization’s upper echelon affects performance.

This article reviews studies that pertain to the role of leader style in affecting strategy and performance. Through this review, an integrative framework for the role of the leader in organizations is developed. Hypotheses

Address for reprints: Afsaneh Nahavandi, Arizona State University West, 4701, W. Thunder- bird Rd., P.O. Box 37100, Phoenix, AZ85069-7100, USA.

0 Basil Blackwell Ltd 1993. Published by Blackwell Publishers, 108 Cowley Road, Oxford OX4 lJF, UK and 238 Main Street, Cambridge, MA 02142, USA.

406 AFSANEH NAHAVANDI AND ALI R. MALEKZADEH

are presented regarding (1) the role of leadership in strategy formulation and implementation, and (2) the conditions under which the leader has either a direct or an indirect impact on an organization.

RESEARCH IN STRATEGIC MANAGEMENT

Selection Criteria f o r the Review Two criteria were used in selecting articles to be included in this review. First, the empirical studies or theoretical propositions had to use strategy or performance as their outcome variables. This criterion led to the exclusion of many of the micro and organizational behaviour studies that consider the effect of individual characteristics on work outcomes such as job design, or satisfaction. The latter literature has been extensively reviewed by Weiss and Adler (1984) and, although some of the findings about the effect of individual characteristics could have applications to our topic, it does not have direct relevance. Application of the above criterion further led to the exclusion of most of the studies that use Jungian cognitive styles as measured by the Myers Briggs Type Indicator (MBTI) (Myers, 1963). A major contribution of that research stream has been to link personality and cognitive types with perceptions of environmental events (e.g. Nutt, 1986). In some cases, links to strategy have been established, although specific strategic typologies are not used (e.g. Nutt, 1986). When the focus was on strategy, the studies have been included in our review. However, since most of the research using managers’ Jungian cognitive types focuses on micro variables (e.g. Haley and Stumpf, 1989; Hellriegel and Slocum, 1980; Mitroff and Mitroff, 1980; Slocum, 1978), those studies are not included in our review.

The use of a second criterion led to the exclusion of the majority of the articles that deal with executive succession. Research in that area has been very prolific and has focused on resolving the controversy over the effect of change of leadership on organizational performance (e.g. Beatty and Zajac, 1987; Hambrick and Finkelstein, 1987; Lierberson and O’Connor, 1972; Weiner and Mahoney, 1981). The findings remain contradictory, although recent developments have seriously challenged the assertions that leadership has only a minimal effect on organizational performance (Day and Lord, 1988; Thomas, 1988). Because succession research focuses on the effects of change of leadership without further consideration of leadership characteris- tics, it was not included in this review.

T h e Role of the Leader in Strategy Implementation In attempting to determine the role in the organization played by leadership, the field of strategy seems to have adopted the well-established and well- tested contingency view proposed by theory and research in leadership at the micro level. Such theories have established that the leader’s personality, style, or behaviour has to be matched to situational requirements in order to achieve high group performance (Fiedler, 1967; House, 1971; Vroom and Yetton, 1973). In most cases, since traditional leadership theories were developed for small groups, they are applicable to mid-level management.

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The theories correctly consider the leader to have limited discretion in defining and changing the work environment or the task. The situation (e.g. the routineness of task, the power of the leader) is established by the organization and the leader’s boss.

Given the above scenario, it is appropriate to match the leader to the situation. Accordingly, the contingency/interactionist approach has domin- ated leadership research for the past three decades. Either as a result of a conscious decision, or due to the overwhelming influence of the contingency approach in the field of management, strategy researchers have adopted the ‘matching’ concept, and have identified a number of contingency factors that would allow for identification of the appropriate managers. The central assumption is that strategies are set prior to executive selection (Gupta, 1988). In doing so, strategy research has primarily focused on the role that the leader plays in the implementation rather than in the formulation of strategy. Gupta (1988) proposed such a view as one of the prevailing assumptions in executive leadership research. Such an approach is most appropriate when looking at situations where the strategy is already formu- lated and managers are asked to implement it. Barring a few exceptions (e.g. Gupta, 1986), there is no argument that when there is an existing strategy, the manager has to be matched to it in order to facilitate performance.

Table I summarizes the empirical research and theoretical propositions that have focused on the role of the leader in the implementation of strategy and on hidher effect on organizational performance. Strategy theory and research has focused on environmental (Aldrich, 1979; Dess and Beard, 1984; Lawrence and Lorsch, 1969), structural (Duncan, 1979; Hedberg et al., 1976; Jelinek, 1977), and more recently on cultural (Ackerman, 1984; Davis, 1984; Schwartz and Davis, 1981) determinism. The common underlying theme of all the studies in table I is the assumption that the leader’s psychological, demographic, or behavioural characteristics have to be matched to predeter- mined strategies. For example, Szilagyi and Schweiger (1984), along with many others (Chaganti and Sambharaya, 1987; Michel and Hambrick, 1987), suggest that the leader’s individual characteristics (skills, behaviours, demographic factors) have to be matched to the strategy of the organization. The leader is therefore considered to be a factor only in the implementation of a given strategy (Gupta, 1986). Many of the studies summarized in table I further suggest that either new management be brought in to support a new strategy (Hofer, 1980), or that current managers change their styles or behaviours to adapt to the implementation needs of the new strategy (Kerr, 1982; Leontiades, 1982). Once again, the leader is assumed to play a role only after the strategy is formulated.

The Role of the Leader in Strategy Formulation Although most of the research focuses on the concept of match by viewing the leader as the moderator of the strategy-performance link, some studies have considered the role of the leader in the formulation of strategy (see table I1 for a summary of studies). Their focus has been on identifying the role of the leader as a main effect on strategy and performance. For example, leaders’ personal values (Christensen et al., 1985; Guth and Tagiuri, 1965), as well as

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Table I . Studies about the role of the leader in implementation of strategy and performance (contingency approach)

Studies Leadership characteristics

Begley and Boyd (1987)

Chaganti and Sambharaya (1987)

Davidson, Bates and Bass (1976)

Gerstein and Reisman ( 1983)

Govindarajan (1988)

Gupta (1984)

Gupta and Govindarajan ( 1984)

Hambrick (1 987)

Locus of control, type A, risk-taking, achievement for ambiguity (P)

Functional background, tenure (D)

Management styles (B)

Values, background, personality (P,D,B)

Locus of control (P)

Interpersonal orientation, Risk-taking, functional background (P,D,B)

Tolerance for ambiguity Functional background (P,D)

TMT’s aptitudes, values, skills, cognitive style, knowledge, and behaviour (P,D,B)

Findings/propositions

Entrepreneurs are higher in need achievement, risk-taking, and tolerance for ambiguity. Internal locus of control managers are related to lower firm liquidity ratios. Excessive risk-taking related to lower ROA. Excessive tolerance for ambiguity related to inability to respond to environmental change (E)

The upper echelon of Defenders had lower proportions ofoutsiders. Prospectors had higher proportion ofoutsiders. Strategy and manager orientation have to be matched (E)

Different styles needed at different stages of the product life-cycle (E)

Executive selection should be linked to strategy. Strategic characteristics have to be matched to background, values, and personality of leaders (T) Managers’ locus of control has to be matched to SBU strategy. Higher performance results in SBUs with a differentiation strategy that have managers with internal locus of control. Managers’ external locus of control leads to higher strategy performance in cost leadership strategies (E)

I 0 more effective at SBU rather than corporate. Risk-taking better in related diversification. Marketing experience more effective in unrelated diversification (T)

Marketinghales background, risk- taking, and tolerance for ambiguity contribute to build but hamper harvest strategy (E)

Choice of TMT depends on external and internal contextual factors. Management qualities have to match with the environment (T)

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Table I. (continued)

Studies ~~~~~

Leadership Findiys/propositions characteristics

Hofer (1980) Tenure (D)

Hofer and Schendel

Ibrahim and Kelly (1978)

( 1986)

Kerr (1982)

Khandwalla (1976)

Kitching (1976)

Leontiades (1982)

Levitt (1974)

Michel and Hambrick (1987)

Miles and Snow (1978)

Norburn (1986)

Style (P or B?)

Style (P or B)

Personality and behaviour (P or B?)

Seven management styles (P or B?)

Functional background

Management style (P or B?)

(D)

Management style (P or B?)

TMT background and cohesion (D)

Functional background (D)

Age and functional background (D)

New management is more successful in turnaround strategy. Managers have to change behaviours to match strategy (T)

Different styles needed at different stages of the product life cycle (E)

The leader’s style has to match the strategy. For example: entrepreneurs fit aggressive growth strategies; care-takers fit decline and retrenchment strategies (E)

Rewdrds to be used to encourage the right behaviour in each PLC stage (T)

Entrepreneurs and neoscientists perform best (E)

Different backgrounds are needed for different strategies (E)

Style has to fit strategy. Strategy used as basis for CEO selection. Activist managers fit steady state; remote controller managers for evolutionary strategy (T) Need for congruence between management style and organization (T) The need for integration driven by degree and type of diversification influences composition and profile ofTMT. Higher interdependence related to more T M T cohesion, longer tenure, and core functional backgrounds. Homogeneity of T M T related to better performance (E)

Defenders need managers with financelproduction background; prospectors need marketing/R&D. Analysers need managers with a combination of backgrounds (T)

Growing, volatile, and declining firms had CEOs with varying backgrounds (E)

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Table I. (continued)

Studies Leadership characteristics

Findings/propositions

Norburn and Birley Age, tenure education, TMT with output functional ( 1988) and functional background background, multiple experiences,

and wider education outperform others (E)

(D)

Porter (1980)

Reed and Reed (1987)

Rockart (1979)

Functional background Match leader background with SBU-level strategy. Cost leadership requires managers with process engineering background. Differentiation requires product engineering/marketing background (T)

(D)

Functional background CEO experience affects implementation but not formulation of strategy (E) Different backgrounds needed for

(D)

Functional background (D) different strategies (E)

Szilagyi and Schweiger Personality, skills, Match strategic job requirements ( 1984) behaviour (P,B) to managers. Focus on

implementation (T)

Tichy, Fombrun and Devanna (1982)

Fit management to strategy (E)

Wissema, Van Der Pol and Leadership types Effectiveness of leader depends on Messer (1980) (P or B?) situation. For example: pioneer

managers improve competitive position quickly; administrators focus on cost reduction (T)

P: Personality; D: Demographic; B: Behaviour; E: Empirical findings; T: Theoretical propositions

the values of the T M T (Christensen et al., 1982) have been proposed as key influences in strategy formulation.

In addition, there appears to be considerable agreement over a main effect for leader demographic characteristics on organizational elements, although such an effect is not always strong. Factors such as leaders’ functional background, age, and tenure have been linked to organizational decision- making and performance. For example, several researchers have suggested that younger CEOs are more change-oriented, encourage growth and innova- tion strategies, and have more volatile sales in their organizations (Alutto and Hrebiniak, 1975; Child, 1974; Hart and Mellons, 1970). Leaders selected from outside the organization have been shown to be more change-oriented than insiders (Carlson, 1972; Kotin and Sharaf, 1976). The leader’s function- al background has also been proposed to affect strategic decisions and performance in a variety of ways (Song, 1982).

In addition to demographic characteristics, some personality constructs have also been used. For example, leaders with internal locus of control

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(Rotter, 1966) are considered to design more innovative strategies (Miller et al., 1982), to be more entrepreneurial (Brockhaus, 1975), and to be more effective in times of crisis (Anderson et al., 1977). Another group of studies has considered the effect of the leader’s other personality characteristics or behaviours on organizations (see table 11). The focus has been to link leader characteristics either to strategic choices (e.g. Child, 1974), or directly to performance (Channon, 1979). Overall, the demographic, personality, and behaviourally focused studies have established that the leader can impact the choice of strategy. The relatively weak results of some of these studies, however, may be attributed to the lack of distinction between formulation and implementation, and lack of consideration given to potential moderating factors. Furthermore, few studies have used broad leadership style categories as the main leader characteristic.

AN INTEGRATIVE FRAMEWORK

When one is concerned with the upper echelon of the organization, one needs to focus on individuals who, in most instances, are the ones who have the charge of both the formulation and the implementation of the strategy of the organization. The contingencyhteractionist view of leadership is by no means inaccurate; however, it can only partially explain leadership in the upper echelons. The concept of match is not as relevant when considering the question of how strategy is formulated. Several researchers (e.g. Gupta, 1988) have suggested that the leader is just ‘as likely to precede strategies as the reverse’ (p. 161). Thus, one of the basic questions to answer is: given the constant and dynamic formulation and reformulation of strategy (Miller, 1988; Mintzberg, 1978), how does the leaders’ style affect the choice of strategy? The issue of matching the leader to the strategy is not as germane to a situation where the strategy is either not yet formulated, or is undergoing change. Therefore, we need to understand the factors that influence such strategy-making.

Figure 1 represents an integrative framework for studying the relationship between the leader and strategy. The framework proposes that the leader can be both a main effect and a moderator and identifies conditions that would allow for each of the effects to take place. It does not negate the matching concept, rather it points to several areas where the matching of the leader to strategy would provide insufficient insight. The framework focuses on leader- ship style and suggests that it directly affects the formulation of strategy. The extent to which a leader’s style is reflected in the choice of strategy is, in turn, moderated by organization size, the degree of uncertainty, stage of organiza- tional growth, and the presence and power of a TMT. Each of these moderators affects the degree of power and discretion of the leader in formulating strategy.

Leadership Dimensions and Style Given the variety of typologies used in classifying leadership style, it is very difficult to find one set of categories which would provide enough breadth

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Table 11. Studies about the role of the leader in formulation of strategy

Studies Leadership Findings/propositiom characteristics

Alutto and Hrebiniak Age (D) (1975)

Anderson et al. (1 977) Locus of control (P)

Brockhaus (1975) Locus of control (P)

Carlson (1972) Outsiders vs. insiders (D)

Channon (1979) Management types. Social status (D, B)

Child (1974) Age (D)

Guth and Tagiuri ( 1965) Values (P)

Hambrick and Mason (1984) Demographic. Functional background. Education (D)

Hart and Mellons (1970)

Kets De Vries and Miller ( 1986)

Kimberly (1979)

Kotin and Sharaf (1976)

Miller (1987)

Miller, Kets De Vries and Toulouse (1982)

Nutt (1986)

Neurotic styles (P)

Outsiders vs. insiders (D)

(P7 B) Traits and behaviours

Locus of control, tenure (P, D)

Jungian styles (P)

Older CEOs avoid risk and maintain status quo (E)

Internals adapt better to change and are more effective (E)

Internals are more entrepreneurial (E) Outsider CEOs make more changes (E)

Entrepreneurs are the best performers. Entrepreneurs pursue more diversification (E)

Younger CEOs encourage growth and have more volatile sales (E)

Leader values impacts strategy formulation. The extent to which TMT’s values match the leader’s reinforces the leader’s impact on strategy (E)

Leader characteristics have potential to affect organizational strategic choices and performance levels (T) Younger CEOs encourage growth and have more volatile sales (E)

Organizations are reflections of the CEOs neurotic styles (T)

Personality affects both structure and strategy (E) Outsiders make more changes (E)

Leadership imperative operates under birth, decline and revival stages of organizational development (T)

CEOs’ internal locus of control is related to an emphasis on R&D, frequent product changes, and higher degree of differentiation

Managers with different styles are likely to perceive different amounts of risk in the environment and select different strategies. For example: managers with a judicial style are more

(E)

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Table 11. (continued)

Studies Leadership Findings/projositions characteristics

Nutt (1986) Jungian styles (P) action-oriented and are inclined to adopt capital expansion projects, whereas, managers with a systematic style are action averse (E)

Pfeffer ( 1983)

Saunders and Stanton (1976)

Schwenk ( 1988)

Song (1982)

Tenure and age (D) Youth related to more innovation; longer tenure related to centralized power (T)

Personality traits (P) Personality is related to selection of market goal setting (E)

Cognitive heuristics and Cognitive heuristics and biases biases related to strategic cognitive

maps. Personal and industry experience affect construction of maps (TI

Functional background Internal diversifiers have marketing and production background; acquisitive diversifiers have law, accounting, and finance background (E)

(D)

P Personality; D: Demographic; B: Behaviour; E: Empirical findings; T Theoretical propositions

and at the same time be accepted by a majority of researchers in the field. However, the two categories of task-and people-orientation seem to dominate the field (Bass, 1960; Bass and Valenzi, 1974; Bowers and Seashore, 1966; Cartwright and Zander, 1960; Fiedler, 1967; Fleishman, 1957; Likert, 1967; Lewin and Lippit, 1938; McGregor, 1960; Mann, 1965; Vroom and Yetton, 1973. These two categories are relatively narrow and have not been applied directly to strategy. They do, however, point to the importance of (1) the task-versus people-orientation dimension, and (2) the participative and decentralized versus autocratic and centralized leadership dimension.

Dimensions. Dimensions of leadership developed by strategy researchers (e.s. Gupta, 1984; Khandwalla, 1976; Leontiades, 1982) have been more directly applied to strategy-making. For example, Khandwalla ( 1976) identifies five dimension of risk-taking, technocracy, organicity, participation, and coercion that can be used to classify managers. Miller and Friesen (1982) consider the two dimensions of futurity and consciousness of strategy to be key in strategic decisions, while Covin and Slevin (1988) focus on the entrepreneurship dimension which includes risk-taking, innovation, and the extent to which an organization is mechanistic. Others (e.g. Gupta, 1984) consider interpersonal orientation and risk-taking to be key dimensions of strategic leadership. In spite of the many differences, several common themes emerge from the various classifications.

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Leadership style

AFSANEH NAHAVANDI AND ALI R. MALEKZADEH

Strategy Strategy formulation implementation Performance

Figure 1. An integrative model for the role of leadership style in strategy formulation and implementation

The first theme can be summarized as the degree of challenge-seeking. This theme can be found in the concept of risk-taking (Khandwalla, 1976), entrepreneurship (Covin and Slevin, 1988), and futurity (Miller and Friesen, 1982). All indicate the extent to which a manager is open to change and innovation. Generally, risk-taking, entrepreneurial, and future-oriented man- agers seek challenge and enjoy entering and navigating uncharted waters. They attempt high-risk strategies as well as new and never-before-attempted ones. On the other hand, challenge-averse leaders avoid risk and focus on maintenance of the status quo by formulating strategies that require only minimal adjustments in the organization’s functioning.

The second theme found in various dimensions of strategic leadership focuses on the degree of control a leader wants to have over internal organizational functioning. This theme is present in the dimensions of organ- icity and participation (Khandwalla, 1976), and interpersonal orientation (Gupta, 1984) which refer to the way in which a leader structures and organizes people and activities within the organization, and to the extent to which power and responsibility is shared. On one hand, there are leaders who maintain high control over their organization through high centralization and little delegation. Other leaders maintain less control, thereby allowing for decentralization and delegation of many activities. High centralization will often take place at the expense of attention to process and employee participa- tion as well as little encouragement of diversity. At the other end of the continuum, decentralization resulting from a leader’s low control, will entail focus on employee involvement and tolerance and encouragement of diver- sity.

The challenge-seeking dimension is focused on risk-taking and innovation and is most relevant in the formulation rather than in the implementation of strategy. On the other hand, the leader’s need for control will have the greatest impact on the way he/she manages implementation of strategy. The combination of the two dimensions yields four types of leader, each represent- ing one extreme category (see figure 2).

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Low challenge- seeking

Challenge- seeking

who does not delegate and maintains control over all implementation

who deligates th; process of implementation

Type 111 Type IV Challenge-averse leader Challenge-averse leader who does not delegate and maintains control over of implementation implementation

who delegates the process

High challenge- Type I1 seeking Challenge-seeking leader Challenge-seeking leader

High control Low control

Desire for control

Figure 2. Strategic leadership dimensions

Four extreme bpes. As indicated in figure 2, Type I and Type I1 leaders are challenge-seekers. They are, therefore, likely to take risks and seek innovation in their strategic choices. They are both entrepreneurs. However, they differ in the way they manage their organization. Whereas Type I leaders want to retain control of most decisions and want to be involved in most activities, Type I1 leaders relinquish much of the control and thus allow for decentrali- zation and openness. Furthermore, the Type I leaders’ desire for control will lead them to require conformity to their way of managing, whereas Type I1 leaders will tolerate dissent and diversity in their employees’ decision-making and behaviours.

Type 111 and IV leaders are challenge-averse. They will both seek strate- gies that deviate little from existing ones and they will attempt to maintain the status quo. However, where Type I11 leaders’ high desire for control will create centralized organizations, Type IV leaders’ low desire for control will lead to a participative organization where decisions are delegated. For the purpose of this article, it will be assumed that although leadership style may have a dispositional nature and trait-like characteristics, it will restrict leaders to a behavioural range rather than a single behaviour. For example, challenge-averse leaders who generally avoid risk and attempt to maintain the status quo may still be able to take some risks when encouraged, supported, or forced to do so by internal or external pressures (e.g. industry changes or board of director requests). They, however, will be at their best and most comfortable when behaving according to their dominant style.

Strategy Ppes Two of the most commonly used classifications of strategy are Miles and Snow’s typology (1978) and Porter’s competitive strategies (1980). Although the models differ in terms of their focus on industry competitiveness, they use

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similar continua to classify strategy. Miles and Snow (1978) use the concepts of Defender/Analyser/Prospector whereas Porter ( 1980) relies on the concepts of cost leadership/ differentiation. Defenders are generally equivalent to cost leaders in that both types refer to a low-risk strategy that is production- and efficiency-oriented and focuses on well-defined markets and domains. Both strategies require centralized control and autocratic decision-making and mechanistic structures in order to succeed (Miles and Snow, 1978; Porter, 1980, 1985). At the other end of the continua are prospector and differentia- tion strategies which are high risk innovation and R&D oriented and focus on growth and marketing opportunities. These strategies require decentral- ized control, participative decision-making, and organic structures in order to succeed (Miles and Snow, 1978; Porter, 1980, 1985).

HYPOTHESES

Leader as Formulator Since Type I and I1 leaders are generally challenge-seekers, they are likely to engage in high-risk strategies. Therefore, they are likely to select prospector and differentiation strategies. On the other hand, Type I11 and I V leaders tend to avoid challenge and novel situations. Thus, they are likely to seek low-risk strategies such as defender and cost leadership strategies that focus on tried and true methods and mechanisms.

HI: Type I and I1 leaders are likely to select Prospector and differentiation

HZ Type I11 and I V leaders are likely to select Defender and cost strategies.

leadership strategies.

Leader as Implementor Since Type I1 and I V leaders have a low need for control, they are likely to take a hands-off attitude towards implementation of strategy. Consequently, they will decentralize their organization, delegate many activities, allow participation in decision-making, and encourage differences of opinion. Type I and I11 leaders’ high need for control, on the other hand, will lead them to be closely involved in the implementation of strategy. Their organizations are likely to be centralized, with most responsibilities and authority vested in the leader, little employee participation, and much encouragement of conformity to existing ideas.

H 3 Type I1 and I V leaders are likely to delegate the implementation of

H4: Type I and I11 leaders are likely to maintain close control over the strategy.

implementation of strategy.

Moderators of the Leadership Style-Strategy Relationship The integrative framework proposes that the size of the firm, internal and

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environmental uncertainty, organization life-cycle, and power and composi- tion of the T M T moderate the impact of the leader in strategy formulation.

Size. Leaders have less impact in large organizations, because of decentralized structure and decision-making (Kets De Vries and Miller, 1986), and wide distribution of power (Tannenbaum et al., 1961). Hence, in large organiza- tions, the personal impact of a leader on the various elements of the organiza- tion and on the formulation of strategy is reduced. Overall, there is a linear relationship between organizational size and the impact of the leader’s style on the organization. As size increases, the leader’s impact decreases.

H 5 The larger the organization, the less its strategy will be a reflection of the leader’s style.

Environmental and internal uncertainty. The role of the leader is particularly essential in times of uncertainty and change (Hall, 1977). When decisions to be made are not programmed and the situation is non-routine, the established culture does not provide a ready-made path for action. At such times, a powerful leader can impact strategy formulation and organizational perform- ance (Miller, 1987). The environmental uncertainty may be due to a competi- tive industry, economic factors, or any of the other environmental elements. Particularly, Gupta ( 1986) proposes that the existence of outside regulations, for example, and the scarcity of resources impact a manager’s latitude for strategy formulation. Furthermore, research on managerial discretion (Ham- brick and Finkelstein, 1987; Hrebiniak and Joyce, 1985) proposes that when environmental determinism is low, managers have more discretion about strategic choices.

However, high environmental uncertainty and turbulence may also reduce the power of the leader. As environmental determinism increases, strategy is determined less by the leader and more by the nature and extent of environ- mental change. In sum, there is a non-linear, inverted U-relationship between environmental uncertainty and the impact of the leader on strategy formula- tion. The leader’s style has the least impact on strategy in times of high and low uncertainty. When a moderate level of environmental uncertainty is present, the potential for the leader’s impact is the highest.

H6: The leader’s style will be reflected in the strategy of an organization more in moderate than in very low or very high environmental uncertainty.

Internal uncertainty is proposed as another moderator of the leader style/ strategy formulation relationship. The support for such a suggestion can be found in leadership substitute research which has shown that the importance and impact of leadership decreases when task clarity, possibility for feedback, number of rules and procedures, and group cohesion increase (Kerr and Jermier, 1978; Manz and Sims, 1987). Although the above research has generally taken a micro level of analysis, the findings can be used to lend partial support to the moderating effect proposed in figure 1. Overall, higher

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internal uncertainty allows for greater impact of leader style on strategy formulation.

H 7 The leader’s style will be reflected in the strategy of an organization more when there is a high degree of internal uncertainty.

Stage of organizational growth. Various stages of organizational growth each present different characteristics. The early and late stages are often chaotic and confusing with either the absence of rules and norms, or refusal to abide by existing but unsuccessful ones. The inherent ambiguity present at the birth and decline/rrvival stages of organizational growth, or during a major strategic reorientation provides an opportunity for leader influence (Greiner, 1972; Miller, 1987, 1988; Quinn and Cameron, 1983; Romanelli and Tush- man, 1988). In mature and relatively successful organizations, strategy formulation is, to a large extent, determined by well-established procedures, cultural, and organizational norms. However, at the birth or decline/revival stages, there is either no established procedure or the effectiveness of existing ones is being questioned (Miller, 1987). As a result, the leader has the opportunity to impact strategic direction. The relationship between stages of growth and leader characteristics is non-linear as the leader has potential for highest impact in early and late stages of development.

H 8 The leader’s style will be reflected in the strategy of an organization more at the birth and decline/revival than the maturity stages of organization growth.

Top management team. The last moderator is the power of a top management team (TMT), and the degree to which the members of that team are demographically and stylistically similar to one another and to the CEO (Hambrick, 1987; Kets De Vries and Miller, 1986). The presence of a strong T M T curtails the power and discretion of a CEO as responsibility and authority for strategy-making is distributed more widely. In addition, the T M T can complement the leader’s weaknesses by acting as a moderator of the leader’s style. A homogeneous T M T (similar to CEO and one another) allows for maximum impact of a leader’s style (Guth and Tagiuri, 1965), whereas one which is heterogeneous (different from CEO and one another) moderates and complements the leader’s style. The homogeneity and power of the T M T are both related to the impact of leader style in a linear fashion. The more the T M T is homogeneous, the higher the impact of the leader; however, the higher the power of the TMT, the less the impact of the leader.

H9: The more similar the members of the TMT are to the leader, the more the strategy of an organization will be a reflection of the leader’s style.

H I 0 The more power the TMT has, the less the strategy of an organiza- tion will be a reflection of the leader’s style.

Matching the Leader’s Style to Existing Strategy In accordance with much of the recent research on the impact of the leader on strategy implementation and the concept of matching the leader to existing

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strategy, the model proposes that a proper match between leader style and strategy facilitates performance. Type I1 and IV leaders, who are open and participative will be best at implementing prospector and differentiation strategies which require decentralization. It is interesting to note that although Type IV leaders, being challenge-averse, are not likely to select high-risk strategies, they can be effective in managing the implementation of such strategies. On the other hand, Type I and Type I11 leaders with their focus on centralization and control will facilitate the implementation of bottom-line focused strategies. As was the case with Type IV leaders, Type I leaders can be effective in the implementation of a strategy that they are not likely to select ( i . e . defender or cost leadership).

H I ] : Performance will be facilitated if the leader’s style matches with existing strategy.

H12: Type I1 and IV leaders will be best at implementing strategies that require decentralization and participation such as prospector and differentiation strategies.

H13: Type I and I11 leaders will be best at implementing strategies that require bottom-line focus and centralized decision-making such as defender and cost leadership strategies.

CONCLUSION

The integrative model focuses on the role of the upper echelon of the organization in formulating as well as implementing strategy. Several mod- erators of the potential main effect of the leader on an organization are also identified. The leader is considered to be an independent variable in strategy formulation and a moderating variable in the strategy implementation/ performance linkage. The integrative model extends a body of research that considers the leader to have a direct effect on the organization. As such, the framework advances the work of researchers such as Guth and Tagiuri (1965), Christensen et al. (1982), Hambrick and Mason (1984), and Gupta (1988) by linking leadership style to strategy, by considering the role of the leader on both formulation and implementation, and by identifying modera- tors of the impact of leader’s style on strategy. Specific testable hypotheses are presented that further clarify the distinction between formulation and implementation.

Given the variety of variables and dimensions used in classifying upper echelon leadership, challenge seeking and control are proposed as two integ- rative strategic leadership dimensions. The former addresses the degree of risk-taking and innovation which has been found to be pertinent to the formulation of strategy; the latter focuses on degree of openness and participa- tion which is often mentioned as key to implementation of strategy. The use of the two proposed dimensions, however, requires further development and testing, perhaps using existing constructs. In spite of much controversy over the role of leadership characteristics in strategy and performance, where reliable constructs such as locus of control have been used, the results of the research have been encouraging (e.g. Miller and Droge, 1986). Locus of

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control is, however, only one of many well-developed psychological constructs that has applications to organizational research. Other characteristics, such as Type A coronary prone behaviour pattern (Friedman and Rosenman, 1974) have been shown in laboratory findings to have relevance to managerial behaviour (for a review see Ganster et al. 1989), but have not been used in organizational research. The centrality of the need for control to the Type A points to potential similarities with the proposed strategic leadership dimen- sions and begs for further research. Furthermore research using the MBTI could also be extended and the construct could be linked to strategy. A recent leadership model (i.e. transformational leadership - Bass, 1985; Tichy and Ulrich, 1984), has been suggested to be pertinent to upper echelon leadership. Some recent applications of the model to macro organizational elements (Howell and Avolio, 1989) have shown promising results.

In addit‘ In to inclusion of leader personality, the processes by which the leader affects strategy have to be studied. These processes involve various cognitive and behavioural mechanisms that leaders use to design and imple- ment strategy. For example, the leader can aTect strategy through direct decisions or through allocation of resources, encouragement of an organiza- tional culture that supports a certain strategy, and creation of structures that facilitate desired outcomes and discourage undesirable ones (Kets De Vries and Miller, 1986; Miller, 1987). Each of these processes deserves further study.

The integrative framework further points to the need to supplement currently used methodologies and data collection techniques, often based on secondary data, with primary sources of data focused on leader style. The need to establish chronological precedence in order to clarify the question of whether the leader precedes organizational strategy or vice versa, also becomes evident. Little of the research concerning the impact of leader characteristics on an organization establishes clear causal linkages or answers the above question.

One of the most striking conclusions from the present review is that the topic of executive leadership in strategy research provides a tremendous opportunity for further development. We have very few well-developed and well-tested models, and there is much room for further integration of leader- ship style in strategy formulation and implementation and in organizational performance.

NOTE

* The authors would like to thank Martin Chemers and Deborah Bickford for their comments on earlier drafts of this article.

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