Charismatic Leadership and its emergence under crisis conditions: A case study from the airline industry

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University of York The York Management School Working Paper No. 45 ISSN Number: March 2009 Charismatic Leadership and its emergence under crisis conditions: A case study from the airline industry
University of York The York Management School Working Paper No. 45 ISSN Number: March 2009 Charismatic Leadership and its emergence under crisis conditions: A case study from the airline industry Dimitra Kakavogianni This paper is circulated for discussion purposes only and its contents should be considered preliminary. Charismatic Leadership and its emergence under crisis conditions: A case study from the airline industry ABSTRACT Charismatic leadership is perceived as emerging under conditions of crisis. This study examines to what extent this statement is confirmed in an organizational context. Employing a case study from the airline industry, the behaviour of leaders and the perception of followers, regarding attributions of charisma in a crisis situation, are explored. A questionnaire based on the C-K scale is used to assess leaders engagement in charismatic behaviour from the followers point of view, whereas interviews at senior level management are conducted to verify the leaders reactions. The findings demonstrate that crisis is a significant, but not sufficient, factor for the emergence of charismatic leadership in a business context. Differences in business settings, organizational dynamics, followers certain features and culture have a significant role to play as well. The limitations and implications of the study are discussed and recommendations for future research are outlined. 2 CHAPTER 1 Introduction Numerous studies, books and articles have appraised the role of leadership and its importance in political, religious and organizational contexts. According to Schein, leadership is a critical factor for the success or failure of an organization (Schein 2004). Different theoretical approaches are employed in order to shed light upon this phenomenon and various terms have been attributed to leadership so far. As Northouse points out, Leadership can have many names whose differences overlap and intermingle with each other (Northouse 2004 p.174). Goleman (1998) argues that different situations call for different leadership styles. However, defining a leadership style or a leader s type is not a straightforward process (Yukl 1999). The focus of this study is on charismatic leadership in an organizational environment, a field which saw great evolution during the late 1970 s mainly because of dramatic changes which occurred in the business world (Conger and Kanungo 1998). Charismatic and transformational leadership are two of the most popular approaches which both identify charisma as a necessary condition for effective leadership (Northouse 2004). Charisma is a Greek word used to describe a gift, a talent or a special quality that makes the person who owns it able to do extraordinary things (Weber 1947). According to Conger and Kanungo, this term is attributed to leaders whose personality and individual abilities have a powerful effect on their followers. Charismatic leaders are usually dominant figures within an organization; they inspire trust and devotion, articulate future vision and build up relationships based on respect and admiration (Conger and Kanungo 1998). Charismatic leadership can transform the nature of work and the vision of an organization by making them appear meaningful, morally correct and more heroic (House and Shamir, cited in Northouse, 2004). As Beyer (1999) suggests, having charismatic vision may contribute to outstanding leadership. However, in order to assess the effectiveness of leadership, both the leader s and the followers characteristics should be measured and the contextual variables of a situation also need to be observed (Mumford et al. 2008). There is supporting evidence that charismatic leadership is more likely to emerge under conditions of crisis than other leadership types (Weber 1947; Bass 1985; Bryman 1992). Followers seem more prone to attribute charisma to a leader who is acting in a changing and turbulent environment (Hunt et al. 1999, Halverson et al in Mumford et al. 2008). According to Northouse (2004), charismatic leadership becomes possible in cases where followers feel more confused and helpless. 3 Consistent with Boal and Bryson s definition, Hunt describes crisis as a condition where a system is required or expected to handle a situation for which existing resources, procedures, policies, structures or mechanisms are inadequate (Hunt et al p.425). Crises may involve major entrepreneurship activities, rapid growth and increased followers needs within a threat perceived environment. Hunt distinguishes between visionary and crisis responsive charismatic leaders and argues that the latter type deals with crisis by attempting to re-establish the link between followers behaviour and their positive outcomes in turbulent times. According to Hunt, followers charismatic attributions to crisis responsive leaders are likely to be short-lived unless the leader is able to relate the management of crisis to a new meaningful culture with which followers remain identified (Hunt et al. 1999). When leaders neglect vision, after responding to crises, then there is a likelihood that followers will cease to view them as charismatic. George Bush after the Gulf War and Winston Churchill after World War II are two significant historical figures who seem to confirm this perception. One the other hand, exceptional personalities such as Martin Luther King and Mahatma Gandhi became Father figures by establishing a long term vision as a natural way to justify and support measures they had taken to deal with crisis. However, in turbulent times, followers are more likely to develop unhealthy dependence and over reliance on the charismatic leader (Reave 2005). Blind obedience to the leader does not allow individual action and development; hence motivation and freedom may be suppressed (Kaiser and Hogan 2007). In such an environment a kind of charismatic obsession, which ignores reality and disregards others views, can emerge from the leader s side. Charisma is believed to be a central characteristic of destructive leaders (Howell and Avolio 1992). Kellerman (2004) ranks destructive leaders behaviour from ineffective to unethical and evil and uses the examples of Hitler and Stalin. Although these political figures built constituencies of some value and inspired people to pursue objectives, eventually, they brought harmful outcomes and, personal and social destructiveness (Kaiser and Hogan 2007). Lowe and Mumford propose some potential explanations for the effects of crisis on transformation or charismatic leadership (Mumford et al. 2008). The former proposes that under crisis circumstances, normative routines are undermined and this provides leaders with discretion that allows them to exercise exceptional influence. The latter explains that the behaviour of the complex social systems becomes unpredictable in situations of crisis or significant change. People fail to understand the causes and consequences of the changing events and seek for a leader who is engaged in sense making activities. Such a leader is able to exercise exceptional influence by clarifying goals and defining pathways to goal attainment 4 (Mumford et al. 2008). A general model of the effects of crisis on leadership perceptions adopted by Pillai and Meindl is presented below. Figure I: A General Model of the effects of Crisis on Leadership Perceptions Crisis Emergence Of Leadership Leader Evaluation Source: Pillai and Meindl 1998, p.236 The aim of this thesis is to explore whether a theory, when applied to a real life instead of an experimental setting, can provide safe guidance in a specific organizational context. Employing a case study, I will attempt to give some further insight to the role of charisma in leadership, when it is appropriate, to what extent it is used by leaders in situations of urgency, to what extent it is understood by followers, and whether it contributes to leadership effectiveness in an organization. For this reason the case of Olympic Airlines (Olympic Airlines) is deliberately selected. Consistent with Pillai and Meindl s model above, Figure 2 indicates the model adopted for this study. Figure II: A General Model of the effects of Crisis on Charismatic Leadership Perceptions Emergence Leader Crisis Of Satisfaction Charismatic Leadership and Effectiveness Source: Pillai and Meindl 1998, p.238 5 Olympic Airlines is the Greek flag air carrier based in Athens. Since the early 70 s, when the charismatic tycoon Aristotle Onassis sold all of his shares to the Greek state, the organization has been state owned and unprofitable (Olympic Airlines Official Website). Over the last few years Olympic Airlines has been facing serious financial and legal problems. Poor performance and failure in meeting goals were attributed to senior management and recently (October 2007) a new leadership programme was launched in order to help the organization recover and lead it to privatization (Kostas Hatzidakis, Minister for Transport and Communication in the Greek Press, Eleytherotupia, 2007). The constant changes in top management positions and the outsiders involved in this transformation process have created a highly distressed situation with the leadershipemployee relationship going through a phase of crisis. As a result the present study was carried out in quite a tense environment. The study is based on the theory of charismatic leadership and its different approaches. As Yukl (1999) notes, most of the studies in charismatic leadership employ the Conger-Kanungo (C-K) Scale and the Multifactor Leadership Questionnaire (MLQ) which are also used to measure transformational leadership. However, Brown argues that several leadership styles and particularly transformational/charismatic leadership are greatly influenced by interpersonal affect raters when assessed with MLQ, and ignore the empowering behaviour and the causal effects of a leader on the organizational processes (Yukl 1999). On the other hand, relying solely on questionnaires does not provide sufficient information about the context of leadership (Bass 1996). In my attempt to eliminate ambiguity and bias, and in order to obtain expanded and complementary data, a combination of both qualitative and quantitative research methods is used in this study. The data is collected by employing semi-structured interviews at senior management positions of the organization and a survey for employees. The interviews consist of open and focused questions whereas the questionnaire draws on the C-K scale. Data derived from the interviews is then cross checked with data derived from the survey by way of validation. 6 CHAPTER 2 Review of the background literature The literature review of this study adopts a topical approach and is divided into three parts. The first part explores leadership theories and the role of charisma as an important ingredient for effective leadership. The second part works on a brief history of the airline industry and the emergence of charismatic leaders in this industry, their main characteristics and the way they engage in organizational transformation. Finally, the third part of the review is concerned with the emergence of charismatic leadership in conditions of crisis and provides useful explanations for crisis perceptions in the case organization. Part A Theoretical Framework Several definitions of the term leadership have emerged over decades of academic research, most of which have significant differences from each other, as Stogdill (1974) and Bennis and Nanus (1985) point out. Some scholars argue that leadership is by definition a positive force (Howell and Avolio 1992; Kellerman 2004), while others support the view that leadership may also have a dark side, involving power misuse and corruption (Bass 1990; Mumford et al. 2003; Tourish and Vatcha 2005). The fact is that the whole topic of leadership has drawn, and continues to draw, much attention, distinguishing itself from the notion of management and administration (Zaleznick 1977; Schein 2004). Leadership is necessary to help organizations develop a new vision of what they can be, then mobilize the organization to change toward the new vision. (Bennis and Nanus 1985 p.3). Leadership is the ability to decide what is to be done, and then to get others to want to do it. (Larson quoting Eisenhower, 1968 cited in Bennis 1997 p.17). Leadership is a process whereby an individual influences a group of individuals to achieve a common goal. (Northouse 2004 p.3). The aforementioned quotations give us a slight insight into the various and diverse concepts of leadership which shape a range of different approaches in this domain. Yukl (1998) grouped leadership theories according to the research approaches that they entail. According to Yukl, the six categories that result are the Trait, Behavior, Power and Influence, Situational, Charismatic, and Transformational Approaches (Yukl 1998). Early studies on leadership adopted the trait approach focusing on individual traits of leaders and the perception that leaders are born, not made (Bass 1985). The emergence of the 7 Great Man theory suggested that leadership is an innate ability that gives the person who owns it authority to lead effectively (Bryman 1992). As Stogdill (1974) noted, adaptability to situations, persistence, self confidence, intelligence, creativity and persuasiveness are some of the characteristics of an effective leader. However, Kirkpatrick and Locke (1991) proposed that traits can only tell one part of the story. According to them, traits endow people with the potential for leadership while activities such as creating a vision actualize this potential (Kirkpatrick and Locke cited in Bryman 1992 p.21). Growing frustration with the trait approach and parallel changes in psychological paradigms led to the emergence of the behavioral approach which turned the emphasis on the way leaders behave. The Ohio State research is in a prominent position in support of this approach and it demonstrates that once the effective leadership style is known, then leaders can learn to adopt it and achieve greater effectiveness (Bryman 1992). A later study by Kouzes and Posner (1987) provided supportive evidence about a number of behavioral commitments that characterize effective leaders, such as searching for opportunities, taking risks, envisioning the future, fostering collaboration and recognizing individual contributions (Kouzes and Posner 1987). Yet, the neglect of a group-level emphasis from the traditional approaches on leadership presented above, resulted in the development of the power and influence approach. Research in this field concentrated on social exchange processes between leaders and other individuals (Hollander 1958). Following the notion of departing from a vertical dyad linkage approach, the situational approach in the study of leadership gained ground in the late 1960 s (Bryman 1992). This trend recognized the significance of contextual factors affecting the leadership task, such as the nature of the task itself, the nature of the external environment and the characteristics of the subunits involved. House s Path-Goal Theory (1971), Fiedler s Contingency Model of Leadership (1967) and Kerr and Jermier s Leadership Substitute Theory (1978) are three of the most representative works on this approach. Path-goal theory is related to the expectancy theory of work motivation and draws on a supportive, directive, participative and achievement-oriented leader, who understands the followers expectations, clarifies roles and meanings (House and Mitchell 1974) and makes the path to the pay-offs easier to travel (House 1971 p.324). Adopting a contingency view, Lord et al. (2001) claim that effective leadership varies from one situation to another due to different interactions and organizational settings. As a result no single leadership style seems to be desirable or applicable to all situations. Nevertheless, some theorists, such as Kerr and Jermier (1978) and 8 Podsakoff et al. (1993), found that leadership can be effective regardless of the situation because of certain individual, organizational and task characteristics which act as substitutes for leadership and eliminate the significance of the leader s role. In the early 1980 s another theoretical trend makes its appearance in the leadership setting which is often referred to as New Leadership (Bryman 1992). The new approach deals with terms such as transactional, transformational, visionary and charismatic leadership (House 1977; Burns 1978; Bass 1985; Bennis and Nanus 1985; Tichy and Devanna 1986). Burns (1973) presented the perspective that We must see power -and leadership- as not things but as relationships. We must analyze power in a context of human motives and physical constraints. (Burns 1973 p.11). He also underlined the importance of a transforming leadership appealing to reasoned, explicit and conscious values. Influenced by Burns work, Bass (1985) distinguishes between transactional and transformational leadership. According to Bass (1985), transformational leadership is the one that inspires trust and admiration in followers, motivating them to achieve collective goals, but it does not necessarily have to appeal to positive moral values as Burns suggested. In contrast to the transactional leader, who is limited to exchange behaviors, contingent rewards, and a bureaucratic and laissez-faire leadership style, the transformational leader seems to be more ideological and revolutionary (Bass 1985). He is more likely to communicate his vision effectively and foster performance beyond expectations. Moreover, Bass (1985) identifies four main behaviors of the transformational leader which include idealized influence (in other words, charisma), individualized consideration, intellectual stimulation and inspirational motivation (perhaps another side of charisma). These behaviors appear to be crucial in Tichy and Devanna s transformational leadership process which consists of four sequential acts: a) recognizing the need for revitalization, b) managing the transition, c) creating a new vision and d) institutionalizing the changes (Tichy and Devanna 1986). The transformational leader is supposed to be a change agent who can effectively manipulate culture, and articulate and enforce his vision while providing temporary stability and emotional reassurance (Schein 2004; Tichy and Devanna 1986). It is thought by many leadership researchers that charisma is a significant attribute of leaders who possess transformational roles within an organization (Bass 1985; Bennis and Nanus 1985). Though the conceptualization of charisma by social scientists dates back to the early 20 th century, charisma was rarely studied in an organizational context before the 1980 s (Weber 1947; Bryman 1992). In a business setting charisma is believed to arise when traditional authority and legal, rational, and bureaucratic means have failed (Bennis and 9 Nanus 1985 p.37). It seems that in such conditions followers become charisma hungry and shift their perceptions according to the actual leadership, their needs and expectations. The theories of transformational and charismatic leadership over the years have attempted to enhance our understanding regarding the role of a leader in relation to the followers performance and his ability to motivate and influence the people working for him in order to achieve more than what is needed. According to Choi (2006), the motivational effects of charismatic leadership are demonstrated in the figure below. 10 Figure III: The Motivational Effects of Charismatic Leadership Charismatic Leadership Motivational Mechanisms Effects on Followers needs Further Consequences Envisioning Creative strategies for goals Followers positive selfperceptions Followers specific goals High standards of performance Need for achievement Task performance Role perceptions Job satisfaction Empathy Trust in le
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