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Leadership and Influence Processes

How do executives impact their respective organizations? This question has been asked by many leading researchers in the field of leadership. Hambrick (2007) believes that leaders within the upper echelon behave on the basis of their personal views and understanding of “strategic situations”, as well as their cultural values, personal experiences and individual personality. This has been the basis of the upper echelon theory for many years, which developed on the principle of bounded rationality (Cyert & March, 1963; March & Simon, 1958). However, despite these types of completely complex situations and “uncertain situations” (Mischel, 1977), leaders within the upper levels of an organization have certain processes in which they can influence and change an institution.

Specifically, six influence processes allow leaders to shape the strategic direction and performance of the organization. Starting with direct decisions, leaders have the ability to shape the choices of their followers based solely on the control they have over the vision and mission of the organization (Nahavandi, 2006). These two variables (ie, vision and mission) thus affect the culture of the institution by clearly focusing on what the organization considers important and valuable (Nahavandi, 2006). In addition to the ability of leaders to affect the vision, mission and strategy of an institution – upper echelon leaders have a direct relationship with management, who play an important role in shaping (or reshaping ) strategy, dictating decision-making and setting the organizational climate or structure (Miller and Droge, 1993; Nahavandi, 2006). Leaders determine the structure of the organization through “direct decisions” on variables that affect the structure or indirectly through the people they influence (Nahavandi, 2006). As a fictional example, Stanley Wang of Acme Toys joined the company before the founder’s retirement. The founder, James Green, was forced to make a direct decision whether or not to make Stanley the new Chief Executive Officer (CEO) of the company. This decision will directly affect the organizational structure and influence the organizational culture based on Stanley’s personal values ​​and experience.

The allocation of resources is also a way that upper echelon leaders have a significant impact on an organization (Schein, 2004). These leaders are the primary decision makers in the allocation of resources (ie, people, technology, money, etc.) to individuals and organizational units (Nahavandi, 2006). For example, a CEO may want to push the sales of a series of new products, so the CEO may dedicate a large part of the total budget of the business units to sales and marketing and pull of funding from other business units of less concern. In this example, the allocation of resources supports specific goals (ie, mission) in support of the corporate strategy and creates a structure that can produce the desired results (Nahavandi, 2006; Miller, 1987).

In addition to direct decisions and allocation of resources, reward systems (formal and informal) also have a significant impact on the culture of an institution or its employees (Schein, 2004; Nahavandi, 2006). Most of us are familiar with this type of behavior in the form of monetary incentives if we follow or comply with certain standards of behavior and / or achieve the goals that reflect the mission of the organization. For example, an employee may receive a 10% bonus if he achieves a certain sales revenue or gross margin target for a product or service.

However, reward systems are not only limited to monetary gain, but also through the selection and promotion of other leaders (Nahavandi, 2006). Those who follow and fit the culture and structure of the organization, as well as achieve individual goals and objectives are more likely to be promoted to high leadership positions – as opposed to those who do not (Nahavandi, 2006). This process can be true in almost any situation; those who naturally fit well with the organization’s mission and culture are more apt to be selected and rewarded in some way.

Both of these influence processes appear across the board in our example scenarios. Again using Acme Toys as an example, Stanley Wang was rewarded significantly by his boss, James Green, by giving him all the high profile projects of the company. He was immediately given every possible award the company could offer; thus justifying his future choice for CEO.

According to Nahavandi (2006) while rewarding employees encourage certain “behaviors and decisions” that are in line with the organization’s culture, leaders who act as models and set standards for creating decision has a greater impact on the organization. For example, a top echelon leader may ask their top sales managers to create a strategic sales plan that will meet the organization’s goals and objectives. However, he does not dictate how they achieve the goals, he can trust that they can achieve the desired result by creating decision-making patterns and clear instructions.

An additional way that leaders affect organizations is through their own behavior or role modeling (Nahavandi, 2006; Schein, 2004). A leader who is passionate about customer service will focus on this love of information transferred to his employees. It can also be shown in terms of behavior, and how a leader communicates and expects employees to behave. This can be communicated through the vision and/or mission or through regular communication to employees. For example, as President of Uniform Data Link, Leslie Marks makes it a point to be a role model for her employees. He moved his office from the third floor to the first floor to show that everyone is equal and your title within the company does not dictate the level of importance you have. He always encouraged everyone to share ideas and worked directly with engineers instead of working through layers of management. Leslie also reinforces her values ​​of comfort in the workplace by going to work in jeans almost every day.

Whether it is direct decisions, rewards, role models or the allocation of resources – leaders have many influence processes that affect their organizations (Nahavandi, 2006). By using these processes, upper echelon leaders essentially create a mirror image of their own personal style, values, preferences and experiences.

References

Cyert, RM, & March, J. (1963). A behavioral theory of the firm. Upper Saddle River, NJ: Prentice Hall.

Hambrick, DC (2007). Upper echelons theory: An update. Academy of management review, 32 (2), 334-343.

March, JG, & Simon, HA (1958). Organizations. New York: Wiley.

Miller, D. (1987). The origin of the configuration. Academy of Management Review, 12, 686-701.

Miller, D., & Droge, C. (1986). Psychological and traditional determinants of structure. Administrative science quarterly, 31 (4), 539-560.

Michel, W. (1977). The interaction of person and situation. In D. Magnusson, & NS Endler (Eds.), Personality at the crossroads: Current issues in interactional psychology (pp. 217-247). Hillsdale, NJ: Lawrence Erlbaum Associates.

Nahavandi, A. (2006). The art and science of leadership. Upper Saddle River, NJ: Prentice Hall.

Schein, E. (2004). 2004. San Francisco: Jossey-Bass.

Schein, EH (1983). The founder’s role in creating organizational culture. Organizational dynamics, 12 (1), 13-28.

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