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Part 2—ESSENTIAL MANAGEMENT FUNCTIONS

CHAPTER VII. ORGANIZATIONAL LEADERSHIP AND CONTROL

A. Organizational Leadership

“Leaders don’t create followers; they create more leaders.” –Tom Peters

OVERVIEW

After the various requirements for maintaining a business organization are put in place, the firm
will still need a sort of an engine that will propel it to become a successful venture. When
competitors are beginning to demonstrate the ability to derail plans of the company, somebody
must take charge of not letting this happen.

Assets, even if they are abundant, cannot, on their own, achieve company objectives. Human
resources, even if they are fully trained and properly motivated, may still proceed to move
towards the wrong direction. The effective use of assets will need the wisdom of somebody who
will provide guidance on their proper utilization. Somebody must show the employees the right
direction from time to time.

What is Leading?

Leading is the management function which involves influencing others to engage in the work
behaviors necessary to reach organizational goals.

While leading refers to the function, leadership refers to the process.

How Leaders Influence Others?

Managers are expected to maintain effective work forces. To be able to do so, they are required
to perform leadership roles. Leaders are said to be able to influence others because of the power
they possess. Power refers to the ability of a leader to exert force on another.

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College of Business and Management CENTRAL MINDANAO UNIVERSITY
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Bases of Power

The power possessed by leaders may be classified according to various bases. These are as
follows:

1. Legitimate power. A person who occupies a higher position has legitimate power over
persons in lower positions within the organization. A supervisor, for instance, can issue
orders to the workers in his unit. Compliance can be expected.

2. Reward power. When a person has the ability to give rewards to anybody who follows
orders or request, he is said to have a reward power. Rewards may be classified into two
forms: material (money and other tangible benefits) and psychic (recognition and
praises).

3. Coercive power. When a person compels another to comply with others through threats
or punishment. Punishment may take form of demotion, dismissal, or withholding of
promotion.

4. Referent power. When a person can get compliance from another because the latter
would want to be identified with the former, that person is said to have referent power.

5. Expert power. Experts provide specialized information regarding their specific lines of
expertise. This influence is possessed by people with great skills in technology.

THE NATURE OF LEADERSHIP

Leadership may be referred to as the process of influencing and supporting others to work
enthusiastically toward achieving objectives. One cannot expect a unit or division to achieve
objectives in the absence of effective leadership.

Traits of Effective Leaders

There are certain leadership traits identified by researchers and which may be useful in
developing effective leaders. These are the following:

1. High Level of Personal Drive. Persons with drive are those identified as willing to accept
responsibility, possess vigor, initiative, persistence, and health.
2. The Desire to Lead. Persons who do not have the desire to lead but are forced to act as
leaders will not be effective because their efforts will be half-hearted.
3. Personal Integrity. One who does not have personal integrity will have a hard time
convincing his subordinates about the necessity of completing various tasks.
4. Self-confidence. The steps of conceptualizing, organizing, and implementing will be
completed if sustained efforts are made. For the moves to be continuous and precise,
self-confidence is necessary.
5. Analytical Ability. A leader with sufficient skill to determine the root cause of the problem
may be able to help the subordinate to improve his production.
6. Knowledge of the Company, Industry, and Technology. A leader who is well-informed
about his company, the industry where the company belongs, and the technology utilized
by the industry, will be in a better position to provide directions to his unit.
7. Charisma. When a person has sufficient personal magnetism that motivates people to
follow his directives, this person is said to have charisma.
8. Creativity. The ability of the manager to find and new and better ways of accomplishing
his work.
9. Flexibility. People differ in the way they do their work. One will adapt a different method
from another person’s method. A leader who allows this situation as long as required
outputs are produced, is said to be flexible.

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College of Business and Management CENTRAL MINDANAO UNIVERSITY
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Leadership Skills

Leaders need to have certain skills to be effective. These are as follows:

1. Technical Skills. These are the specialize knowledge

needed to perform a job. When a leader has the
technical skill related to his area of responsibility, he will
be more confident in performing his functions.

Example:

✓ The sales manager must be able to perform the salesman’s job if he wants to
maintain a motivated work force.
✓ The manager of an accounting firm must have sufficient technical skills to
undertake accounting work.
✓ The President of a university must possess teaching and research skills.

2. Human Skills. These skills refer to the ability of

the leader to interact with people inside and outside of
the organization. Good leaders must know how to get
along with people, motivate them, and inspire them.

3. Conceptual skills. These skills refer to the ability

of a person to think in abstract terms and to see how
parts fit together to form the whole. When implementing plans, a very basic requirement
is clear and well-expressed presentation of what must be done.

LEADERSHIP THEORIES

Vince Lombardi once said, “Leaders are made, they are not born.” If this is the case, then why are
some leaders successful, why others fail? The truth is that there is no magic formula of what
makes a leader successful, leader’s characteristics matter in every circumstance.

a) Trait Theories—What Type of Person Makes a good Leader?

Trait theories argue that effective leaders share some common personality
characteristics, or “features”.

Early trait theories said that leadership is an innate, instinctive quality that you do or do
not have. Trait theories help us identify traits and qualities (for example integrity,
empathy, assertiveness, good decision-making skills, and likability) that are helpful when
leading others. However, none of these traits, nor any combination of them, will
guarantee success as a leader. Traits are external behaviors that emerge from the things
going on in our minds—and its these internal beliefs and processes that are necessary for
effective leadership.

b) Behavioral Theories—What Does a Good Leader Do?

Behavioral theories focus on how leaders behave. For instance, do leaders dictate what
needs to be done and expect cooperation? Or do they involve their teams in decision-
making to encourage acceptance and support?

In the 1930s, Kurt Lewin developed a framework based on a leader’s behavior. He argued
that there are three types of leaders:

1) Autocratic Leaders make decisions without consulting their teams. This style of
leadership is considered appropriate when decisions need to be made quickly

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College of Business and Management CENTRAL MINDANAO UNIVERSITY
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when there is no need for input, and when team agreement is not necessary for
a successful outcome.

2) Democratic Leaders allow the team to provide input before deciding, although
the degree of input can vary from leader to leader. This style is important when
team agreement matters, but it can be difficult to manage when there are lots of
different perspectives and ideas.

3) Laissez-faire Leaders do not interfere; they allow people within the team to make
many of the decisions. This works well when the team is highly capable, its
motivated, and does not need close supervision. However, this behavior can arise
because the leader is lazy or distracted; and this is where this style of leadership
can fail.

Clearly, how the leaders behave affects their performance. Researchers have realized,
though, that many of these leadership behaviors are appropriate at different times. The
best leaders are those who can use many different behavioral styles and choose the right
style for each situation.

c) Contingency Theories—How Does the Situation Influence Good Leadership?

The realization that there is no one correct type of leader led to theories that the best
leadership style depends on the situation. These theories try to predict which style is best
in which circumstance.

For instance, when you need to make quick decisions, which style is best? When you need
the full support of your team, is there a more effective way to lead? Should a leader be
more people-oriented or task oriented? These are all questions that contingency
leadership theories try to address.

d) Power and Influence Theories—What is the Source of the Leader’s Power?

Authority and influence theories of leadership take an entirely different approach—these

are based on different ways that leaders use power and influence to get things done, and
they look at the leadership styles that emerge as a result.

B. ORGANIZATIONAL CONTROL

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College of Business and Management CENTRAL MINDANAO UNIVERSITY
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The long-term existence of many companies is placed in jeopardy because of difficulties caused
by problems which could have been avoided in the first place. Examples of such problems are as
follows:

1. The transmission of confidential information to competitors. For instance, if the

introduction of a new product by the company is known in advance by the competitor,
the advantage of such introduction is negated.

2. The hiring of personnel way above the required number. Unnecessary additions to the
existing workforce mean waste of manpower and scarce resources.

3. Unethical conduct of an employee. For instance, the loan officer of a bank, for
consideration, connives with a borrower for loan approval inspite of defective collaterals.
The bank suffers in the end when it forecloses on the mortgage.

What is Controlling?

Controlling refers to the process of ascertaining whether organizational objectives have been
achieved; if not, to determine why not; and determining what activities should be taken to achieve
objectives in the future. It completes the cycle of management functions. Objectives and goals
that are set at the planning stage are verified as to achievement of completion at any given point
in organizing and implementing stages. When expectations are not met at scheduled dates,
corrective measures are usually undertaken.

Importance of Controlling

When controlling is properly implemented, it will help the organization achieve its goal in the
most efficient and effective manner possible. The introduction of effective control measures
minimizes the ill effects of negative occurrence. An effective inventory control system, for
instance, minimizes if not eliminate losses in inventory.

The importance of controlling may be illustrated as it is applied in a typical factory. If the required
standard daily output for individual workers is 100 pieces, all workers who do not produce the
requirement are given sufficient time to improve; if no improvements are forthcoming, they are
asked to resign. This action will help the company keep its overhead and other costs at expected
levels. If no such control measure is applied, the company will be saddled with escalating
production costs, which will place the viability of the firm in jeopardy.

Steps in the Control Process

1. Establishing performance objectives and standards

2. Measuring actual performance
3. Comparing actual performance to objectives and standards; and
4. Taking necessary action based on the results of the comparison.

Figure 7.1 Controlling Process

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College of Business and Management CENTRAL MINDANAO UNIVERSITY
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I. Establishing Performance Objectives and Standards

For effective controlling, what has to be achieved must first be determined. Typical examples of
objectives and standards are as follows:

a) Sales targets—which are expresses in quantity or monetary terms

b) Production targets—which are expressed in quantity and quality
c) Worker attendance—which are expressed in terms of rate of absences
d) Safety record—which is expressed in number of accidents for a given periods; and
e) Supplies used—which are expressed in quantity or monetary terms for given periods.

Once objectives and standards are established, the measurement of performance will be
facilitated. Standards differ among various organizations. In construction firms, project
completion dates are useful standards. In chemical manufacturing firms, certain pollution
measures form the basis for standard requirements.

After the performance objectives and standards are established, the methods for measuring
performance must be designed. Every standard established must be provided with its own
method of measurement.

II. Measuring Actual Performance

There is a need to measure actual performance so that when shortcomings occur, adjustments
could be done. The adjustments will depend on the actual findings.

The measuring tools will differ from organization to organization, as each have their own
objectives. Some firms, for instance, will use annual growth rate as standard basis, while other
firms will use some other tools like the market share approach and position in the industry.

III. Comparing Actual Performance to Objectives and Standards

Once actual performance has been determined, this will be compared with what the organization
seeks to achieve. Actual production output, for instance, will be compared with the target output.
This may be illustrated as follows:

A construction firm entered into a contract with the government to construct a 100 kilometers
road within ten months. It would be, the, reasonable for management to expect at least 10
kilometers to be constructed every month. As such, this must be verified every month, or if
possible, every week.

IV. Taking Necessary Action

The purpose of comparing actual performance with the desired result is to provide management
with the opportunity to take corrective action when necessary. If for instance, the construction
firm found out that only 15 kilometers were constructed after two months, then, any of the
following actions may be undertaken:

a) Hire additional personnel

b) Use more equipment
c) Require overtime work

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College of Business and Management CENTRAL MINDANAO UNIVERSITY
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Types of Control

1. Feedforward control

When management anticipates problems and prevents their occurrence, this type of
control measure is called feedforward control. This type of control provides the assurance
that the required human and non-human resources are in place before operations begin.
An example is provided as follows:

The manager of a chemical manufacturing firm makes sure that the best people are
selected and hired to fill jobs. Materials required in the production process are carefully
checked to detect defects. The foregoing control measures are designed to prevent
wasting valuable resources. If those measures are not undertaken, the likelihood that
problems will occur is always present.

2. Concurrent Control

When operations are already on-going and measures to detect variances are made,
concurrent control is said to be undertaken. It is always possible that deviations from
standards will happen in the production process. When such deviations occur,
adjustments are made to ensure compliance with requirements. Information on the
adjustments are also necessary inputs in the pre-operation phase.

3. Feedback Control

When information is gathered about completed activity for purposes of evaluating and
deriving required steps for improving the activity, feedback control is undertaken.
Corrective actions aimed at improving future activities are features of feedback control.

Feedback control validates objectives and standards. If accomplishments consist only of

a percentage of standard requirements, the standards may be too high or inappropriate.

The supervisor who discovers that continuous overtime work for factory workers lowers
the quality of output. The feedback information obtained leads to some adjustments in
the overtime schedule.

Figure 7.2 Types of Control

CONTROL METHODS AND SYSTEMS

Control techniques or methods are described as either quantitative or non-quantitative.

Quantitative Methods use data and various quantitative tools to monitor and control production
output. Two common quantitative tools are budgets and audits. By far mostly recognized
quantitative tool is the chart. Charts used as control tools normally contrast time and
performance. The visual impact of a chart often provides the quickest method of relating data. A
difference in numbers is much more noticeable when displayed graphically.

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a) The Budgetary Control

Budgets are the most widely used control

system because the plan and control
resources and revenues are essential to
the firm’s health and survival.

Budgeting is the formulation of plans for

a given period in numerical terms. By
stating the plans regarding numbers and
breaking them into parts of an
organization, budgets correlate planning
and allow the authority to be delegated
without loss of control.

By far the best-known control device is

the budget. An organization’s budget is an expression in financial terms of a plan for
meeting the organization’s goals for a specific period. A budget is an instrument of
planning, management, and control.

Budget is used in 2 ways: 1) establish facts that must be factored into operational
planning, 2) prepare narrative descriptions and financial information that the chain of
command uses in its annual request and management of its funds.

b) Audits

Internal auditing provides an independent review and appraisal of accounting, financial,

and other non-tactical operations. As a management tool, the audit measure and
evaluates the effectiveness of management controls.

c) Performance Standards

Top managers control their organization by establishing certain performance standards.

These are often just more clearly defined objectives. For example, the president of a
company may want to increase market share and profits by 5 and 10%, respectively, in
the new fiscal year. He may also want his marketing vice president to introduce new
products within the year. Top managers usually hold various managers accountable for
accomplishing goals and results through their specific job responsibilities. This job
description is a summary of an employee’s primary job responsibilities. These job
descriptions must be clearly defined by both executives and human resources when direct
reports are hired by top management.

BA 41.Business and Management Integrals.2020

College of Business and Management CENTRAL MINDANAO UNIVERSITY