The Role of Leadership in Organizational Success

Introduction

The element of leadership is the core constituent of the organisational success achievement measures of any business enterprise operating within the currently volatile market scenario. The benchmarking process of the efficacy and competence of leadership abilities is primarily performed through multiplicity of measures. These outline the factors such as transcending of organisational work boundaries, efficiency improvement and most significantly, growth achievements which are essential for any business organisation to attain completely so that operating within the complicated globalised business conditionalities could become a possibility for the respective companies. The turbulent business conditions within the current hypercompetitive market scenario are demanding, on part of business organisations and associated leadership elements, of managing competitive market leverage, fulfilment of government requirements and value addition to the stakeholder initiatives and investments. Navigation of the organisational cultural considerations through strategic foresight is the primary constituent for any effective leadership element in the current situational prospects. In this context, the corresponding essay would be deliberative about the exploration of various aspects pertaining to the Environmental, Social and Governance (ESG) based metrics through which the efficacy and proficiency of organisational leadership elements could be evaluated. For students looking for business dissertation help, understanding these leadership dynamics is crucial.

Evaluation of success of CEOs in the current turbulent world

According to Alford (2019), exclusive focus on the financial metrics to evaluate the measures of organisational success is rather a traditional and constricted approach in terms of interpretation of the organisational performance information derived from indicators of success. According to Bender, Sun & Wang (2017), financial performance indicator metrics have been traditionally applied to evaluate the profitability and organisational directions of any business discipline through numerical information utilisation only. The advantage of this metric could be outlined as the fact that financial ratios could provide effective analytical basis and could assist the organisational management echelons in formulation of strategic decisions with greater measure of accuracy and clarity in terms of determination of deliverables. However, according to Clinton (2018), the drawbacks of such an approach are numerous as well. Thorpe (2016) has outlined that financial valuation metrics could not provide inter-organisational comparability in any measure since organisation specific accounting processes are formulated on the basis of particular selection of differential policies which could be divergent in cases of individual business entities. Incomparability of valuation measures is the core factor in this case which does not permit the effective strategic performance comparisons to take place involving multiple organisations. According to Daft (2018), the case of IBM and the respective CEO of the organisation, Virginia Marie Rometty, is significant in this context. Under the leadership of V.M. Rometty, the organisation under consideration had been utilising only the liquidity achievement ratio for the purpose of tracking of improvement and performance measures of the company. However, in the current intensely competitive market conditions, it had become impossible for the organisation to utilise the financial metrics exclusively since the last-in-first-out valuation method had proven to be incapable to properly reflect the inter-organisational performance on the basis of inventory based liquidity ratio since market competitors utilising the first-in-first-out methods had been demonstrating divergent performance indicators which where incompatible to those of the IBM. One particular reason, pointed out by Eccles & Stroehle (2018), had been the dearth of indication of change causality representation which is integral to the financial ratio based evaluation approaches. In case of IBM, as the CEO V.M. Rometty discovered, the problem became evident with the application of Accounts Receivable Turnover ratios. According to Evans et al (2016), this ratio indicates the swiftness of the collection of account receivables. With slowing of the turnovers, the congregation of receivables in comparison to the sales within a definite period of time could be indicated. In case of IBM, this involved multiplicity of reasons such as disorientation of credit policies, customer dissatisfaction increment and employee inaptitude due to inexperience. However, for the IBM CEO, the overt emphasis on the financial metrics based performance evaluation prevented the discernment of the root causes of performance deviation of the concerned organisation.

According to Ewers, Obied & Braun (2017), this culminated in the executive decision of formulation of the Corporate Service Corps (CSC) of IBM as a pro bono program of consultation with the triple objective of development of leadership training, enhancement of brand recognition of IBM in the developing markets and improvement of community engagement by various organisations hosted by IBM at various social domains. This required the application of the ESG criteria in the form of a standardised set of operational approaches of any organisation through which the screening of the concerned organisational prospects of investment could be performed by potential investors with social consciousness. Environmental leadership criteria are associated with the projection of the concerned organisation to perform the stewardship of nature. According to Hales (2018), the Social criteria outline the customer, employee, suppliers and community based relationship management by the business organisations. According to Jeffers, Romero & Aquilino (2018), the Governance aspect emphasises on the leadership elements of the organisation and the executive competencies, internal and external control mechanisms as well as organisational audits and preservation of shareholder rights and values. In this context, according to Kotsantonis, Pinney & Serafeim (2016), the broadest definition of success could be considered to be the holistic achievement of business objectives which could be substantiated and verified through the application of all of the financial and non-financial subsets of performance indicators (ESG metrics) including the corporate governance, ethics and sustainability related yardsticks so that accountability could be instituted throughout the organisational footprint in the corporate and social realms of the related market spectrum.

The challenges of focusing on just financial metrics to the long term success of organisations

According to McManus & Mosca (2015), the most intractable problem with the exclusive financial metrics based focus on performance evaluation is the imprecision associated with book value based approach which guides such financial metrics parameters. Mendenhall et al (2017) have specified the consequence of book value based formulation of financial statements involving to the most extent the historical costs, as the prevention of reflection of existing conditional reality of the concerned business disciplines and associated organisational performance. This problem becomes exacerbated while asset based ratio could be utilised since the volatility of market conditions could ensure that the value reflected through financial balance sheet based assessment could be widely off the mark in terms of outlining the actual value of the considered assets. Mone & London (2018) further have stated that financial metrics based considerations become irrelevant while the organisations could be experiencing financial distress since the liquidation value could become unstable as a benchmark retention value.

According to Monsen & Boss (2018), organisational capability management through financial ratios exclusively does also suffer from the fact that no appropriate evaluation of the existing management abilities could be outlined through such performance indicators since the financial statements and parameters are not equipped to reflect the experience and quality of management which guide organisational corporate functionalities. According to Mountfield et al (2019), the process of focusing exclusively on the financial metrics fosters, as a cerebral model of assessment of organisational performance, within the decision formulation echelons of the organisational management strata, leads to the formulation of the Abilene Paradox within organisational personnel which consists of the tendency of concealing the actual perceptions, thoughts and opinions for the explicit purpose of conflict avoidance and not to antagonise others. This could be countenanced as a perceptual blind spot in the process of accurate assessment development of the challenges and obstacles which afflict any business organisation.

According to Robin & Sendjaya (2019), the element of systems thinking management is significant as this is a holistic approach which emphasises on the manner through which any operational system could institute cohesion and correlation in between different systemic components within the overarching organisational working context. The approach focuses on the methodical study of each individual element existing within such a context. Romero et al (2018) have stated that the application of systems thinking based assessment could become critical in terms of evaluation of the environmental, social and governance based considerations of the organisational operational footprints by leadership compliments of the concerned organisations. To this effect, systems behaviour assessment could be performed under the theoretical ambit of the systems process. This assessment could become the outcome of the processes of balancing and reinforcement of both the organisational criteria evaluation in the form of the tools of ESG and financial metrics. According to Sendjaya (2015), the reinforcement process of such balancing responsibilities could culminate in the increment of various components of the working systems. In this context, the organisational balancing process is vital in terms of maintaining the equilibrium between the existing exigencies and the process reinforcement methods. Without the proper balancing act, which indicates to the relationship management with multiplicity of stakeholders, the entire process could be brought to the verge of collapse. The element of organisational leadership could become the deciding factor in this context consummately.

According to Serafeim & Grewal (2016), the case study of Pablo Isla, the CEO of Inditex fashion group, is significant. As the chief executive leadership element of Inditex, Isla is oriented towards the utilisation of transformational leadership qualities and processes for the purpose of instating progress within the organisational working architecture of Inditex. This involves the envisioning of a grand approach in terms of the future corporate orientation of the company. Furthermore, Isla intends to communicate the organisational vision in the most acceptable and accommodative manner to the overall workforce. This could be comprehended, as have been outlined by Shields et al (2015), by the vision of Isla to make the company completely devoid of any toxic footprint. This involves the ESG criteria based evaluation of redeeming the products, clothing and accessories endorsed and sold by Inditex of all of the substances which could be deemed to be detrimental to the environment and for the people. This objective pertains to the environmental and social engagement based criteria and benchmarks for evaluation of organisational performance within the framework of ESG approach. Apart from this, Isla is also determined to reduce gross consumption of energy by Inditex business processes. This pertains to the Governance aspect of the ESG framework since this would require extensive corporate governance based approaches to be implemented by Isla. Isla has utilised the referent power measure of leadership to inspire the organisational workforce to transcend their capabilities in terms of transmuting their self-interests into serving the organisational interests. According to Sosik & Jung (2018), this process has entailed the utilisation of the 6 principles of leadership influence assertion in the mode of convincing the Inditex workforce to endorse the vision of the chief executive strata and the utilisation of rational persuasion has been instrumental in this discourse and reciprocity as well as socialisation of leadership abilities by Isla has assisted this process as well. The outcome has been the conversion of the lower level physical necessities of the employees into the higher level of psychological necessities of the same. The direct outcome has been the growth of the group from 2692 stores globally during 2005 when Isla joined the group to the staggering amount of 7000 stores internationally by 2015. The Inditex Spanish fashion group currently controls the international brands such as Massimo Dutti, Bershka, Pull & Bear, Stradivarius, Oysho, Zara and Uterque.

The challenges leaders face in balancing financial and ESG performance metrics and the methods of addressing the same

According to Stewart (2015),the challenges are multifarious in nature. Some of it could be outlined in the obvious mode of organisational financial objectives achievement regarding the intense price and market share competition in the current market scenario. Factors such as competitive pricing strategy through cost adjustment, fulfilment of the demands and expectations of multiplicity of stakeholders in terms of business success achievement, are integral to such challenges. The obvious solution to such challenges could be considered to be the element of Moral Leadership. This leadership format is indicative of the orientation of distinguishing the right from that of wrong or unjust practices and implementation of just, good and beneficial leadership principles. This has to involve the participative management of employee relationships as well as leadership responsibilities. According to Storey (2016), the underlying factors could be outlined as encouragement of increased participation of employees through suggestion and advice generation programmes as well as participation fostering study groups and information sharing circles, paternalistic psychological framework based leadership approaches, obtainment of suggestions of quality improvement from the employees, teamwork fostering through greater emphasis on the accountability and responsibility acceptance prospects and finally, the prerogative of leaders to finalise the ultimate decisions.

According to Tamimi & Sebastianelli (2017), the addressing of such challenges also involves the judicious application of control and power by the leader to effectively garner the necessary services from the subordinates. This judicious application could be premised upon the combination of hard and soft powers which is an integral aspect of the participative management of employee and stakeholder relationships. The development of courage as well as employee contribution, as quintessential to the synergistic balancing between financial and ESG metrics based evaluation, could be performed through the application of Acquired Needs Theory of McClelland. The underlying psychological constituents of human beings, as per the dictates of this theoretical constructs, are achievement, affiliation of worth and achievement of power by individuals. This could be better utilised by Socialised Leadership approaches through which empowerment of employees as well as egalitarian supporting policies could be achieved. This could serve the purpose of meeting the higher needs of the workforce personnel. The essentiality of focussing on reasonable and meaningful aims in terms of the objective analysis of the existing situation could be palpable in this context. This could reinforce the desire of individuals to accomplish the apparently difficult work prospects so as to attain the highest standards of success through greater improvement in their mastery of work operations.

According to Streimikiene, Mikalauskiene & Ciegis (2019), the case study involving the former CEO of Novo Nordisk, Lars Rebien Sorensen, is significant. The underlying rationale could be understood as the application of the components of the employee motivational theoretical constructs within the Novo Nordisk by Sorensen which included the reinforcement of the employee behavioural modification impetus which involved appropriate utilisation of ESG metrics based approaches. The achievement of Sorensen had been the subjective nature of his leadership which encouraged the employees of Nordisk to accept accountability and responsibility of their performance consequences. This fostered better conformity and compliance to the existing legal stipulations involving the environmental and social prospects associated with the pharmacy industry.

The outcome of the leadership services of Sorensen within the company under consideration was the $16 billion revenue earnings achieved by the pharmacy and the increment of the share value of the organisation by 840 percent during the tenure of Sorensen as the chief executive officer. The points of significance of such a leadership had been focusing on the actual and underlying interests of the employees and not overtly on the financial metrics based current demand measures.

Conclusion

At the conclusive stage, it could be observed that the in the above demonstrated essay, comparatively traditional financial metrics have been utilised as well to highlight the cases of 3 organisational leaders to evaluate the leadership decisions of such selected personnel. The emphasis has been on the challenges related to exclusivity of utilisation of financial metrics to evaluate leadership success measures and the complications which afflict the current organisational leaders in properly balancing ESG and financial performance metrics application in addressing such challenges.

Looking for further insights on The Origins and History of the Batavian Tribe in the Netherlands? Click here.

Reference ListItem

Alford, A. W. (2019). Some Considerations for Investors Exploring ESG Strategies. The Journal of Investing, 28(2), 21-31.

Bender, J., Sun, X., & Wang, T. (2017). Thematic Indexing, Meet Smart Beta! Merging ESG into Factor Portfolios. The Journal of Index Investing, 8(3), 89-101.

Clinton, R. (2018). The making of a leader: Recognizing the lessons and stages of leadership development. Tyndale House Publishers, Inc..

Daft, R. L. (2018). The Leadership Experience (7th edn). Cengage Learning

Eccles, R. G., & Stroehle, J. C. (2018). Exploring Social Origins in the Construction of ESG Measures.

Evans, P., Smale, A., Björkman, I., & Pucik, V. (2016). Leadership development challenges and dilemmas in multinational corporations. In Leadership in Organizations (pp. 227-245). Routledge.

Ewers, B., Obied, T. M., & Braun, P. (2017, November). Designing an Effective Leadership Development and Succession Strategy to Deliver Value Creation. In Abu Dhabi International Petroleum Exhibition & Conference. Society of Petroleum Engineers.

Hales, J. (2018). The Future of Accounting Is Now: Financial Performance Is Linked to Sustainable Growth. The CPA Journal, 88(7), 6-9.

Jeffers, A. E., Romero, S., & Aquilino, F. (2018). The Increased Demand for Transparency on ESG Roles and Metrics in Sustainability Investing Strategies. Proceedings of the Northeast Business & Economics Association.

Kotsantonis, S., Pinney, C., & Serafeim, G. (2016). ESG integration in investment management: Myths and realities. Journal of Applied Corporate Finance, 28(2), 10-16.

McManus, J., & Mosca, J. (2015). Strategies to build trust and improve employee engagement. International Journal of Management & Information Systems (IJMIS), 19(1), 37-42.

Mendenhall, M. E., Osland, J., Bird, A., Oddou, G. R., Stevens, M. J., Maznevski, M., & Stahl, G. K. (Eds.). (2017). Global leadership: Research, practice, and development. Routledge.

Mone, E. M., & London, M. (2018). Employee engagement through effective performance management: A practical guide for managers. Routledge.

Monsen, E., & Boss, A. D. (2018). Integrating Corporate Entrepreneurship and Organization Development Through Learning and Leadership. In The Challenges of Corporate Entrepreneurship in the Disruptive Age (pp. 63-87). Emerald Publishing Limited.

Mountfield, A., Gardner, M., Kasemir, B., & Lienin, S. (2019). Integrated Management for Capital Markets and Strategy: The Challenges of “Value” Versus “Values” Sustainability Investment, Smart Beta, and Their Consequences for Corporate Leadership. In Rethinking Strategic Management (pp. 105-128). Springer, Cham.

Robin, M., & Sendjaya, S. (2019). Looking Back to Look Forward: Lessons for Leadership Development. In Leading for High Performance in Asia (pp. 159-184). Springer, Singapore.

Romero, S., Jeffers, A. E., Aquilino, F., & DeGaetano, L. (2018). Using ESG Ratings to Build a Sustainability Investing Strategy. The CPA Journal, 88(7), 36-43.

Sendjaya, S. (2015). Servant Leadership Development. In Personal and Organizational Excellence through Servant Leadership (pp. 117-130). Springer, Cham.

Serafeim, G., & Grewal, J. (2016). ESG Metrics: Reshaping Capitalism?.

Shields, J., Brown, M., Kaine, S., Dolle-Samuel, C., North-Samardzic, A., McLean, P., ... & Plimmer, G. (2015). Managing employee performance & reward: Concepts, practices, strategies. Cambridge University Press.

Sosik, J. J., & Jung, D. (2018). Full range leadership development: Pathways for people, profit, and planet. Routledge.

Stewart, L. S. (2015). Growing demand for ESG information and standards: Understanding corporate opportunities as well as risks. Journal of Applied Corporate Finance, 27(2), 58-63.

Storey, J. (2016). Changing theories of leadership and leadership development. In Leadership in Organizations (pp. 17-41). Routledge.

Streimikiene, D., Mikalauskiene, A., & Ciegis, R. (2019). Sustainable Development, Leadership, and Innovations.

Tamimi, N., & Sebastianelli, R. (2017). Transparency among S&P 500 companies: An analysis of ESG disclosure scores. Management Decision, 55(8), 1660-1680.

Thorpe, R. (2016). Gower handbook of leadership and management development. CRC Press.

Thorpe, R. (2016). Gower handbook of leadership and management development. CRC Press.