How is Leadership Related to Management in a Contemporary Business Environment?

How is Leadership Related to Management in a Contemporary Business Environment?

Organisations and their leaders and managers are operating in a complex environment in which globalisation and technological advancement are bringing uncertainty and turbulence. This has increased competitive rivalry among organisations and the need to meet increasing and conflicting stakeholder interests. This has pressurised leaders and managers to focus on maximising profit, conserve the planet, and meet people’s needs: they must perform on all areas of a triple bottom-line. This article considers the relationship between leadership and management with regard to corporate social responsibility, ethics, and culture.

Leadership and Management for Corporate Social Responsibility

Corporate social responsibility (CSR), sometimes called corporate sustainability, refers to corporation’s initiatives aimed at considering economic, social and environmental issues in its attempts to remain competitive in its business environment. Due to popularity of CSR initiatives among stakeholders, organisations of all sizes are expected to consider their economic, social, and environmental performance: maximising profit is no longer enough. They have to consider their impact on people and planet as they struggle to maximise profit. Leaders have to ensure that they are inspiring their followers to view the need to evaluate their performance based on the triple bottom line of people, planet and profit (3Ps). This is when an organisation can be judged on whether it is enabling creation of a sustainable society. This implies that every organisation should have goals that are categorised as economic, social and environmental.

The need for having economic, social and environmental goals shows that the role of organisations and leaders has changed and continues to change as the business environment changes. This requires leaders to have a transformational mindset in which leaders perceive their role as being that of a change agent.  Leadership can therefore be described as a continuous process through which a leader formulates a vision and mission and inspires his followers to accept and support the achievement of the vision. The leader is the vision-bearer who should be ready to encourage and facilitate flexible and adaptive behaviour among the followers. In doing this, every member of the organisation should be encouraged to consider the impact of each decision and action on other people, the planet and profit. Whereas the leader is the vision-bearer, a manager is the one who controls resource allocation to ensure that strategies to achieve the vison are implemented efficiently.

The Role of Leadership in Implementing a Sustainability Agenda

Sustainability refers to meeting the needs of today without compromising the needs of the future generation. This necessitates caring for people/society and the planet/environment: having social and environmental goals in addition to economic goals. Complexity of these goals implies that no single organisation can push a sustainability agenda alone. This is because an organisation is part of a complex system composed of a diverse group of stakeholders: competitors, customers, employees, suppliers, pressure groups, government, etc.

Leadership’s role is to ensure that the leader inspires employees and rallies them behind sustainability initiatives as they coordinate with all stakeholders. This is a challenge since some competitors may not be willing to cooperate in such initiatives. When this happens, it takes a strong leader to keep focused on non-economic goals when competitors are not doing the same. This is possible since in the long term, sustainability initiatives can lead to improved financial performance. For example, when customers value social and environmental goals, an organisation that prioritises such goals will have its reputation improved and this can translate into increased sales and increased profits. This will encourage reluctant competitors to follow suit and integrate social and environmental goals with economic goals. An example of an environmental goal is “reducing carbon emissions by 50% within three years.” Management ensures that such goals are met regardless of the pressure to maximise profits.

When Is A Leader Considered As Sustainable?

A sustainable leader contributes to creation of a better society in which making profit does not harm people and the planet/environment. He/she has to consider the needs of all stakeholders and the impact of decisions and actions that the organisation’s leadership makes. This highlights the need for: inter-organisational cooperation on sustainability initiatives; promotion of sustainability awareness among diverse stakeholders; designing of sustainability-focused products and services.

Visser and Courtice (2011) give key characteristics of sustainability leadership: systemic understanding; emotional intelligence; values orientation; compelling vision; inclusive style; innovative approach; and long term perspective. These are not helpful if implementation of strategies aimed at achieving the vision is not enough. This is why leadership needs the complementary role of management such that required level of control is achieved in resource allocation and restraining employee actions and behaviour.

Why Is There A Need for Ethical Leadership?

CSR and sustainability leadership include principles of ethical leadership: respecting individuals; valuing truth and honesty; handling people’s problems with a high level of fairness; and offering services to support the common good. This necessitates leaders to consider interests of both shareholders and other stakeholders: shareholder interest of profit maximisation should not be pursued at the expense of people and planet. Ethical leadership focuses on creating a sustainable society for the benefit of all stakeholders. However, this is challenging since stakeholder interests sometimes conflict. For example, customers can want high quality products and services at low price yet this conflicts with shareholders’ interest of maximising profits.

An ethical leader is one who makes decisions, behaves and takes actions in a way that is generally seen as just and inspires followers to do the same in their daily routines and processes. This implies that an ethical leader is seen as: a “moral person”—he/she is honest, trustworthy, rational and principled; and a “moral manager”—he/she uses his power and authority to motivate others to behave and act in a just way. This implies that every decision and action a leader takes needs to be judged using ethical principles. The leader should ask some questions before making decisions. For example, if I do this, will I be perceived as an honest person? Will I be trusted by my followers and other people?

It is not always easy to make ethical decisions. Leaders and their followers can face ethical dilemmas. In such situations, a leader should be available to provide answers that will solve the followers’ dilemma. For example, in case a company’s produced cars start catching fire, should the employees be transparent about the cause of such disastrous incidents? Should they hide the real cause of the fires in order to protect their sales and profit?

Choice between profit and transparency makes followers face an ethical dilemma and an ethical leader will encourage followers to choose transparency over profit. This is when the leader will retain trust of his followers, customers, the general public, and other stakeholders. Ethical leaders will thus enhance the organisation’s ability to meet economic, social and environmental goals: the organisation can be viewed as a corporate citizen and a sustainable entity. It shows that ethical leadership facilitates formulation and implementation of CSR initiatives whereby performance is judged based on benefit of all stakeholders. This requires rewarding ethical behaviour and decisions among followers. This is when followers will imitate their leader’s concern for people and planet as he leads them towards increasing profit: ethical leadership and CSR are complementary.

Monitoring and controlling implementation of CSR initiatives is the role of management. For example, a leader can influence ethical behaviour using both codes of conduct and ethics and his ethical behaviour and decision making. However, a manager will be responsible for reinforcing the values expected of them in the organisation using rewards and punishments. This reinforces and/or changes an organisation’s values and beliefs: an organisation’s culture will either be enhanced or changed as required.

In conclusion, leaders and managers are operating in an uncertain and turbulent complex environment where leaders and managers are pressurised to focus on maximising profit, conserving the planet, and meeting people’s needs: they must perform on all areas of a triple bottom-line. Leadership provides an inspiring mission and vision while management controls resource allocation and ensures efficient strategy implementation. This relationship is relevant with regard to corporate social responsibility, ethics, and culture.

Learn more about the concepts of leadership and contemporary management with iQualify UK with our Level 7 Award in strategic management and leadership or if you already are a manager, you can get awarded a Chartered Manager status by Chartered Management Institute via iQualify UK.

 

References

Ahmad, I., Gao, Y. and Hali, M. H. (2017) A Review of Ethical Leadership and Other Ethics- Related Leadership Theories. European Scientific Journal, 13(29), pp. 10-23.

D’Amato, A., Henderson, S. and Florence, S. (2009) Corporate Social Responsibility and Sustainable Business—A Guide to Leadership Tasks and Functions. Greensboro: Center for Creative Leadership.

Giberson, R. T., Resick, J. C., Dickson, W. M., Mitchelson, K. J., Randall, R. K. and Clark, A. M. (2009) Leadership and Organizational Culture: Linking CEO Characteristics to Cultural Values. Journal of Business Psychology, 24, pp. 123-137.

Hortensia, G. (2017) Leadership and Corporate Social Responsibility. International conference KNOWLEDGE-BASED ORGANIZATION, 23(1), pp. 372-377.

Kapur, R. (2018) Ethical Leadership. Available at: https://www.researchgate.net/publication/323829602_Ethical_Leadership (Accessed: 4 December 2020).

Metcalf, L. and Benn, S. (2013) Leadership for Sustainability: An Evolution of Leadership Ability. Journal of Business Ethics, 112(3), pp. 369-384.

Northouse (2006) Culture and Leadership. Available at: https://www.sagepub.com/sites/default/files/upm-binaries/12223_Culture_and_Leadership.pdf (Accessed: 4 December 2020).

Scholl, A. J., Mederer, J. H. and Scholl, R. (2016) ‘Leadership, Ethics, and Decision-Making’, In Farazmand (Ed.) Global Encyclopedia of Public Administration, Public Policy, and Governance, pp.1-11. Springer International Publishing Switzerland.

Visser, W. and Courtice, P. (2011) Sustainability Leadership: Linking Theory and Practice. SSRN Electronic Journal. Available at: http://ssrn.com/abstract=1947221 (Accessed: 4 December 2020).