Leadership Skills Theory at HSBC Life Assurance Malta

Chapter 1

Introduction

Leadership skills are the focus of this study and therefore the author will be, in this chapter introduce leadership and the concept of the leader versus the manager as a primary source. In this section the author will define the meaning of leadership enabling one to understand better the next stages of this study. Furthermore one can find the objective of this study and the organisation studied. The structure section will define the construction of the complimenting chapters.

1.1 Objective

The scope of this organisational case study is to compare and contrast the leadership skills theory and the selected organisation’s leadership and provided the concept of leadership versus management in order to understand better leadership skills which are defined later on in this study. Leadership skills will be reviewed by means of secondary research. Subsequently the leadership skills within the organisation will be studied by means of a primary research methodology. This will enable the author to reach the main objective which aim is to highlight the theory of leadership skills and present findings of the selected organisation’s current leadership practices. One will eventually benefit from the authors recommendations and conclusions based on the out come of the data analysis.

1.2 The Organisation

The selected organisation for this study was HSBC Life Assurance Malta Limited. HSBC Life Assurance Malta Limited was set up in 1995 and is a fully owned subsidiary of HSBC Bank Malta Plc, regulated by the Malta Financial Services Authority. Over the years, HSBC Life has developed into one of the leading life assurance product providers on the island with its full and diversified product range, including group and individual term assurance products, mortgage protection policies, etc. This study research thus moves towards assessing all the concepts of leadership styles, skills, coaching, team building.

The organisation is in the direction of the Managing Director.

1.3 Structure

The structure of this study will be based on 5 chapters. The introduction, chapter 1, has highlighted leadership and the concept of leadership versus management, the objective and the organisation under investigation. Chapter 2 will follow with a literature review of leadership skills from previous studies whilst chapter 3 will cover the research methodology. Chapter 4 will present the findings and finally chapter 5 will cover the author’s views and recommendations.

Chapter 2

2.0 Leadership

Leadership can be defined as: ‘The ability to persuade others willingly to behave differently. The function of team leaders is to achieve the task set for them with the help of the group’ (Michael Armstrong 2003: 259).

Another definition of leadership is: ‘The task of a great leader is to get his people from where they are to where they have not been… Leaders must invoke an alchemy of great vision. Those leaders who do not are ultimately judged failures, even though they may be popular at the moment’ (Henry Kissinger).

Clawson (2006) explains that leadership consists of three components: the ability to influence others; the willingness to influence others; and the exercise of influence in a way that others respond voluntarily. Thus, while leadership included the use of power, not all uses of power are leadership.

The highlight of leadership within an organisation is an emphasis on the importance of a strong human relation and the importance of creating rewarding high-performance teams of motivated and empowered employees. Human understanding and sensitivity are absolutely critical for leadership success. Leadership also consists of identifying proven talent within an organisation and optimising on this talented human resource by developing, retaining and partnering smartly together. Leadership has been perceived to be a primary key to successful strategy implementation. One of the key factors in implementing a strategy is building consensus. A consensus built by motivating, persuading people and by shaping culture and values within an organisation to support the new strategy (Ashby and Miles, 2002).

Taking IBM as an example CEO Sam Palmisano has embarked on a leadership mission to get people within the organisation to focus on strategy formulation and implementation. He embarked on a mission to persuade people to focus on the on-demand vision and communicating clear directions. With this positive attitude and employee empowerment he made employees feel motivated and challenged to follow new strategic goals. In this changing world of globalisation, organisations are constantly facing changes within their set ups and therefore leadership plays an important role. Three important aspects of leadership would be people, influence and goals. In order to influence, the relationship between the leader and the follower must not be passive but assertive (Draft, 2006).

Within an organisation, leadership directly impacts the effectiveness of costs, revenue generation, service, satisfaction, earnings, market value, share price, social capital, motivation, engagement, and sustainability. In this view one can identify the importance of vision within leadership. In order to move a group successfully towards its goal the leader must communicate the vision or visions with his or her followers. For effectiveness, a vision should appear to be simple, appear desirable enough to energise followers and should describe the organisation’s future position, which must be credible and preferable to the present state. The leader must communicate these visions adequately to ensure the followers feel as if the vision has been created by themselves (Renesch, 1994).

Nonetheless one would need to understand that although leadership focuses on people, influence and goals it cannot be easily defined in such a generic context. However according to Scott (2007) a leader needs to understand that the follower may value a leader differently. Some may prefer a task oriented leader where others may prefer a people oriented leader. In this view the leader must identify the followers’ needs and how they construe effective leadership. One can see that self awareness is the foundation of effective leadership and one ought to communicate the vision and help the followers fit into that vision. Effective leaders need to change their approach according to the situation, as with one follower, a leader may need to be directive while with others, a leader may need to coach.

2.1 The History of Leadership

Leadership, and the study of it, has roots in the beginning of civilisation. Egyptian rulers, Greek heroes and biblical patriarchs all have one thing in common – leadership. There are numerous definitions and theories of leadership; however, there are enough similarities in the definitions to conclude that leadership is an effort of influence and the power to induce compliance (Wren, 1995). Our work, our environment, the motivation to work, leaders, leadership, leadership style, and a countless of other work-related variables have been studied for almost two centuries.

The organisational focus of the leader has evolved over this same period. Early organisations with authoritarian leaders who believed employees were basically lazy transitioned into way to make work environments more conducive to increased productivity rates. Today, organisations are transforming into places where people are empowered, encouraged, and supported in their personal and professional growth throughout their careers. As the focus of leaders has changed over time, it has influenced and shaped the development and progression of leadership theory.

2.1.2 Early Leader Studies

The Industrial Revolution shifted America’s economy from an agriculture base to an industrial one and, thereby, ushered in a change how leaders would treat their followers. The Industrial Revolution created a paradigm shift to a new theory of leadership in which ‘common’ people gained power by virtue of their skills (Clawson, 1999). New technology, however, was accompanied and reinforced by mechanisation of human thought and action, thus creating hierarchical bureaucracies (Morgan, 1997).

One major contributor to this era of management and leadership theory was Max Weber, a German sociologist who ‘observed the parallels between the mechanisation of industry and the proliferation of bureaucratic forms of organisation’ (Morgan, 1997, p. 17). He noted that the bureaucratic form routinized the process of administration in the same manner that the machine routinized production.

2.1.3 Classical Management Theory and Scientific Management

Weber’s concerns about bureaucracy, however, did not affect theorists who set the stage for what is now known as ‘classical management theory’ and ‘scientific management’. Classical theorists focused on the design of the total organisation while scientific managers focused on the systematic management of individual jobs. In contrast to Weber, classical theorists such as Henri Fayol and F. W. Mooney, staunch advocates of bureaucratisation, devoted their energies identifying methods through which this kind of organisational structure could be achieved (Bass, 1990; Morgan, 1997). Collectively, these theorists set the basis for many modern management techniques, such as management by objectives.

Scientific management, an approach heralded by Frederick Taylor, was technological in nature (Hersey, Blanchard & Johnson, 1996). Taylor fused the perspective of an engineer into management with a strong emphasis on control, ruthless efficiency, quantification, predictability, and de-skilled jobs. He initiated time-and-motion studies to analyse work tasks to improve worker productivity in an attempt to achieve the highest level of efficiency possible. Consequently, he has been accused of viewing people as instruments or machines to be manipulated by leaders. The function of the leader under scientific management theory was to establish and enforce performance criteria to meet organisational goals; therefore, the focus of a leader was on the needs of the organisation and not on the individual worker.

Although the classical and scientific approaches were different, the goals were similar – organisations are rational systems and must operate in the most efficient manner possible to achieve the highest level of productivity (Morgan, 1997). Both theories relied on the machine metaphor with a heavy emphasis on mechanisation of jobs, which undermined the human aspect of the organisation and failed to recognise organisations as complex organisms.

Although mechanistic organisations proved productive, there were limits to hierarchical bureaucracy. Emerging theorists encouraged leaders to recognise that humans were not machines and could not be treated as such. A post bureaucratic shift in the mid-1940s moved toward everyone taking responsibility for the organisation’s success or failure (Heckscher & Donnellon, 1994). Researchers began to examine the relationship between leader behaviour and follower satisfaction level and organisational productivity and profitability.

2.1.4 Hawthorne, Maslow, and Herzberg – Environment and Worker Needs

Much organisational research during this era focused on overcoming the perceived shortcomings of the classical and scientific schools of management. Elton Mayo’s Hawthorne Studies focused on the work situation and its effect on leaders and followers, indicating that the reactions of human beings influence their work activities as much as the formal design and structure of the organisation. Early on leaders could focus their attention on the environment factors of the organisations. The early theories and studies provided researchers with tangible and measurable performance outcomes that were directly transferable to profitability and spreadsheet bottom-lines. A new theory of organisations and leadership began to emerge based on the idea that individuals operate most effectively when their needs are satisfied. Maslow’s (1959) Hierarchy of Needs posited that once a worker’s physiological, security, and social (intrinsic) needs were met, productivity would only be possible of the employee’s ego and self-actualising (extrinsic) needs were also met. Leader focus became redirected toward worker needs.

Herzberg’s Dual Factor Theory, the evolution of intrinsic and extrinsic needs, furthered Maslow’s work stating the employees’ intrinsic and extrinsic needs could, and should, be met simultaneously. Herzberg’s (1966) Motivation-Hygiene theory furthered the work of Maslow by providing insights into the goals and incentives that tend to satisfy a worker’s needs. Herzberg concluded that people have two categories of needs, which he termed hygiene (environmental factors such as working conditions, company policies, etc.) and motivators (factors involving the job itself). According to Herzberg, an employee’s intrinsic and extrinsic needs could and should be addressed simultaneously.

2.1.5 The Shift to Behavioural Factors

Leader focus had moved to understanding the relationship between a leader’s actions and the follower’s satisfaction and productivity. Theorists began to consider behavioural concepts in their analysis of organisational leadership. For example, Chester Barnard was instrumental in including behavioural components (Bass, 1990). Barnard’s work emphasised the ways in which executives might develop their organisations into cooperative social systems by focusing on the integration of work efforts through communication of goals and attention to worker motivation (Hatch, 1997). Barnard, for example, identified an effective organisational leader as one who determined objectives, manipulated means, initiated action, and stimulated coordinated effort (Bass, 1990, p. 31). Barnard (1938), whose work focused on the functions of the executive, was instrumental in including behavioural components in his analysis of organisational leadership, which claimed that leadership involves accomplishing goals with and through people.

The theorists of this age argued that in addition to finding the best technological methods to improve output, it would behove management to address human affairs as well. It was claimed that ‘the real power centres within an organisation were the interpersonal relationships that developed among working groups’ (Hersey, Blanchard & Johnson, 1996, p.100).

A new theory of organisations and leadership began to emerge based on the idea that individuals operate most effectively when their needs are satisfied. Additionally, when this happens they are more likely to increase their productivity which in turn impacts the organisation’s bottom line.

According to McGregor (1960), the traditional organisation with its centralised decision making, hierarchical pyramid, and external control of work is based on certain assumptions about human nature and human motivation. He dubbed these assumptions Theory X and Theory Y. Theory X assumes that most people prefer to be directed, are not interested in assuming responsibility, and want safety above all else.

Accompanying the Theory X philosophy is the belief that people are motivated by money, fringe benefits, and threat of punishment. Managers who espouse Theory X assumptions attempt to structure, control, and closely supervise employees. Although McGregor himself questioned whether Theory X was as accurate view of human nature, the assumptions persisted for a long time in leadership theory circles because it explained ‘some’, though not all, of human behaviour within organisations (Pugh & Hickson, 1993). Drawing heavily from Maslow’s (1959) Hierarchy of Needs, McGregor ultimately concluded that Theory X assumptions about human nature, when universally applied, are often inaccurate and that management approaches that develop from these assumptions may fail to motivate individuals to strive toward organisational goals (Hersey, Blanchard, & Johnson, 1996).

McGregor (1960) believed that management needed practices based on a more accurate understanding of human nature and motivation. The resulting concept, Theory Y, proposed that individuals are not, by nature, lazy and unreliable. People can be self-directed and creative at work if properly motivated (Pugh & Hickson, 1993). Therefore, an essential task of management is to unleash this potential.

Consequently, the goal of effective leadership was evolving and moving away from the earlier concepts of the classical and scientific management theories that treated workers as machines. Leaders were now challenged to actively involve followers in achieving organisational goals. McGregor (1960), whose work was closely linked to that of the behavioural theorists, is a reflection of that era, providing a foundation for the future emergence of the transformational leadership.

McGregor’s Theory X and Theory Y assumed that employees and leaders had progressed beyond Taylor’s productivity models that employees could find ways to satisfy their needs within the organisation’s structure. McGregor assumed employees far more complex that the trait and behavioural theories of leadership assumed and that their complexity and the leaders’ response to that complexity would affect how and whether the leader and followers worked in tandem to reach mutual organisational goals.

McGregor proposed a replacement of direction and control of employees with humanistic motivation. The resulting concept, Theory Y, proposed that individuals did not inherently dislike work and, and that under certain conditions, work could actually be a source of great satisfaction. Theory Y assumed individuals would exercise self-direction and self-control, accepting and seeking responsibility (Pugh & Hickson, 1993). The essential concept McGregor and other behaviourists proposed was that organisations are interacting groups and that leaders are a part of these groups. The leader’s interaction and relationship with the employee must be a supportive relationship so all members of the organisation feel the organisation’s objectives and their achievement, are of personal importance to them (Pugh & Hickson, 1993).

2.1.6 Situational/Contingency Theory – The Circumstantial Focus

Unprecedented social change in the mid-1960s to the mid-1980s shifted societal focus from increasing economic wealth to ensuring social rights and equality. Along with this social change, technology was again preparing to jolt American businesses. The advent of the computer age was shifting employee requirements from brawn to brains. Leadership became an intricate process of ‘multilateral brokerage’ where leaders were forced to focus on constituencies within and without the organisation to survive (Vanourek, 1995).

The internal and external environments of organisations were changing. The transference of power from those doing the work to those possessing knowledge about how to organise work more closely levelled the playing field for leaders and followers. Society acknowledged that traditional methods of leadership were no longer effective.

McCollum (1995) implied that companies in the information age were unsuccessfully trying to conduct their business using obsolete industrial age leadership theories. Change was the only thing of which everyone could be sure, a factor requiring leadership research and society to consider contingency/situational approaches to leadership if businesses were to remain successful and profitable in an ever-changing and increasingly complicated environment (Contee-Borders, 2003).

Heysey and Blanchard (1996) proposed a contingency/situational theory advocating a leader’s use of differing leadership behaviours dependent upon two interrelated maturity factors: (a) job maturity – relevant task and technical knowledge and skills, and (b) psychological maturity – the subordinate’s level of self-confidence and self-respect (Yukl, 1998).

An employee who has a high level of job and psychological maturity requires little supervision; while an employee who has a low level of job and psychological maturity requires hand-on attention.

Fielder’s contingency theory is viewed as the opposite of Hersey and Blanchard’s theory, maintaining that leaders are less flexible in their ability to change their behaviour based on followers’ maturity (the basic concept of Hersey and Blanchard’s theory) (Hughes, Ginnett, & Curphy, 1993). Fielder’s contingency theory posited that leader effectiveness is determined by not the leader’s ability to adapt to the situation, but by the ability to choose the ‘right’ leader for the situation (though this theory does not identify who would be responsible for making this choice). Some leaders are simply better for specific situation than others and the situation determines the identified leaders’ success, though leaders would need to be capable of understanding when they were not right for the situation and remove themselves – a task of humility.

2.2 Leadership Styles

From a very classical autocratic approach to a very creative, participative approach, different styles were needed for different situations and each leader needed to know when to exhibit a particular approach.

The most familiar model is the ‘leadership scale’ devised by Tannenbaum and Schmidt. In this model, the leader is advised to choose a leadership style that it appropriate for the particular situation. These styles or behaviours, can be placed along continuum ranging from ‘boss-centred’ at one-end of the scale to ‘subordinate-centred’ at the other end, as illustrated in Figure 1.1

Inevitably, the opposite poles of this ‘continuum’ have been labelled Authoritarian (or task-centred), and Democratic (or people-centred) and the inference has been drawn that a concern forgetting the job done is at the opposite end of the scale of the people involved. Tannenbaum and Schmidt’s article is not as shallow as that, but, like it or not, the impression is left that the two concerns are somehow incompatible.

Other commentators advised that authoritarian leadership styles would be most effective in situations that were ‘favourable to the leader’ and democratic styles would better suit situations that were ‘unfavourable to the leader’. ‘Favourable’ in this context means that the leader has high formal authority, relations between the leader and the staff are good, and the task is highly structured. This further reinforces the assumption that democratic styles are for the leaders to fall back on when things are not going entirely their way; they would not want to be democratic if it could be avoided.

The Democratic styles should be the preferred option, falling back on authoritarian styles only when circumstances require it. For example, when the fire alarm sounds tell everyone to leave the building; do not hold a decision about the best course of action. Or, when something bad can not be avoided, accept your responsibility as a manager and give instructions clearly and assertively. Otherwise, the benefits of the bringing several brains to bear on an issue, and the commitment that democratic approaches tend to foster, usually outweigh the inevitable untidiness of getting everyone involved in decision-making .

Interestingly, research into animal social groups has found that decisions arrived at communally – or ‘democratically’ – are usually more beneficial for the group and its individual members than ‘despotic’ decision-making, and tend to be less extreme. Whether lessons drawn from the observation of animal behaviour can usefully be applied directly to human groups depends on how much corroborating evidence there is.

2.3 Leadership versus Management

Creech (1995) defines the manager versus the leader. She explains how a manager is typically well-educated and would generally possess very high conceptual skills. Managers are mostly focused on the latest management literature. Furthermore managers are very aware of the system, rules and procedures both documented and undocumented. They tend to be very productive oriented rather than people oriented persons and this style proves that they are usually inaccessible or have very little time to listed to the people they manage. This also results form their heavy busy schedules.

In addition managers face highly intensive stresses and become very intolerant of any mistakes. They rarely motivate their people to take significant risks to improve operationally or personally and in moments of crisis they can easily consider to re-establish who is in charge, believing that they will achieve the expected performances and organisational goals. Nonetheless, they are very conscious of what others think about them and expect to be liked, despite being aware that this is rather impossible, due to the conflicting roles between management and workers. Furthermore managers ask subordinates for participative input, but rarely encourage real dissent with their own views (Creech, 1995).

In contrast, leaders are very people oriented and although they are conscious of what people think of them they are generally less concerned. However, leaders feel themselves as helpers to the organisation as opposed being in command. They are inventive and imaginative movers and participate in achievement of goals. Arguably, leaders have a more positive style to achieving goals and during time of financial or operational turbulences they focus on asking team members for help in strategies and innovation in order to regain competitive advantage. Opposed to this, managers would consider downsizing and cost cutting (Creech, 1995).

One can that this is visionary and leaders do communicate widely with simple clear cut visions and goals. They intend to simplify communication to ensure the message gets through without ridiculing anyone in the event of misunderstandings. Additionally they are tolerant of mistakes during the process of development and goal achievement and they are fond of acknowledging their mistakes and do not fear to take whatever measures are required to rectify them (Creech, 1995).

Bennis and Goldsmith (1997) define the difference between manager and leader using the following paired contrasts:

‘The manager administers; the leader innovates. The manager maintains; the leader develops. The manager accepts reality; the leader investigates it. The manager focuses on systems and structures; the leader focuses on people. The manager relies on control; the leader inspires trust. The manager has a short-range view; the leader has a long-range perspective. The manager asks how and when; the leader asks what and why. The manager has his or her eye always on the bottom line; the leader has his or her eye on the horizon. The manager imitates; the leader originates. The manager accepts the status quo; the leader challenges it. The manager is the classis good soldier; the leader is his or her own person’ (Bennis and Goldsmith, 1997, p.9).

Chapter 3

Literature Review

For the purpose of this literature review it has been classified as follows: – Human Relation Skills including follower – leader relation, and conflict management and counselling as intrapersonal skills. Intrapersonal Skills includes self confidence, stress management, and time management whilst Organisational Skills include leadership styles and motivation and finally Creativity Skills.

Human Relation Skills and Intrapersonal Skills follow the same paths and are the abilities how one interacts with others. However Intrapersonal Skills is one’s own personal development whilst Organisational Skills is the skill to have a conceptual focus. Finally, Creativity Skills are the having of new ideas.

The author introduced these skills in the above sequence as she believes that without having human relation skills one cannot help one’s personal development and cannot encourage motivation or creativity. Needless to say, that without motivation one would find difficulties creating new ideas.

3.1 Human Relations and Intrapersonal Skills

3.1.2 Follower – Leader Relation

In order for a leader to achieve effectiveness through human relations, Isaac, Zerbe and Pitt (2001) shared four important insights and beliefs about the nature of their relationships with their followers:

Firstly, they explain how positively effective it is, to gradually and gently direct the follower towards the established goals rather than throwing them into heavy burdens to accomplish corporate purposes. When a mutual agreement of mutual interest is established leaders would smartly lay down the red carpet to the follower and will satisfy the goals of both parties. Rigid commands from the hierarchy within an organisation normally lead to unsatisfactory results and frustration (Isaac, Zerbe and Pitt, 2001)

Secondly, it is in the leader’s interest to strongly understand their followers, by recognising their needs, what motivates them , their various stages of personal development, and their goals. This is seen through a flow of communication and observations. The leaders challenge in such scenario would be to reach satisfactory levels of both the follower and the organisation. During such a process of identifying the followers’ needs the leader must show sensitivity, ingenuity and judgement when putting together corporate and personal objectives through communication. The leader should address those areas identified to be low in self confidence and capability by the follower in order to achieve maximum results (Isaac, Zerb and Pitt, 2001)

Thirdly, leaders have to establish motivating conditions not only to motivate the follower but to encourage self motivation. One of the motives encouraging the self motivation process would be organisational rewards however this makes the leader’s responsibility intense, as he/she would need to determine the various intrinsic or extrinsic rewards to followers. Intrinsic motivational states are beyond leader’s control however they can possibly enhance such feelings and emotions by:

• ‘Spending time with the follower and enhancing, rather than undermining, self-confidence.
• Increasing follower knowledge, skills and abilities through exposure to various educational and training programs, as well as experiences. These activities enhance both follower capability and self-confidence.
• Establishing realistic, meaningful and attainable goals with the follower to both parties.
• Creating a climate of mutual respect.
• Showing appreciation when the follower meets or exceeds expectations, or addressing problematic issues regarding the follower’s performance by focusing upon the work rather than the individual’. (Isaac, Zerbe and Pitt, 2001, p.212)

The fourth and final insight relates to the importance of honesty and consistent behaviour showed to the followers. Leaders can loose credibility through promises that are rather difficult to fulfil at a later stage, and will also be exposed to deducting the follower’s motivation. On the other hand consistency generates a clear path to the followers especially in matters such as fairness, expectations and personal cose of conduct. In addition, leader must reduce distinctions of status that might cause some followers to feel degraded and not regarded (Isaac, Zerbe and Pitt, 2001).

‘Relationship closeness, is the extent to which an employee has a sharing, open, familiar relation with management. Thus, relationship closeness is a broad concept that encompasses several specific constructs like interaction, open communication, and informal relations between employees and management’(Mcknight, Ahmad and Schroederet, 2001, p.466).

As one can see from the above four insights of human relations skills incorporates a strong degree of interpersonal skills and as