Leadership and Governance of Organizations

Introduction

A leader has a definitive and distinctive position in an organization and the activities of the organization spin around the decision he or she approves (Bews& Rossouw, 2002). Leadership skills are thus an important factor to have in leaders to enable them to tackle the daily challenges they face in the organizations that they run (Amour et al, 2009). This implies that leaders have a major role in ensuring that the organizations they run are effective (Caldwell et al, 2008). Therefore, this essay will discuss the leaders’ role in effective governance of organizations with the aim of demonstrating an understanding of leadership and governance, be able to distinguish between the roles of leaders and the roles of executives or managers, explaining how leaders can affect governance outcomes in organizations, explain how leadership development and effective followership can affect organizational outcomes and finally critically assess and use multiple sources of information to explore the topic of discussion.

Meaning of “Leadership” and “Governance”

Several practitioners and scholars have shown interest in the field of leadership and have come up with definitions of leadership but there does not seem to be a generally accepted definition. Either way, there is a shared view by a majority of researchers stating that leadership is about influencing followers. In that regard, leadership is the ability to influence people to follow a leader. According to Avolio et al, leadership is a collective activity that is based on relationships between individuals and it can occur in an environment that is coordinated and mutual (2009). Such an organization should be based on shared visions, values and beliefs in order to work towards promoting growth of the organization.

The mention of the word leadership evokes thoughts related to management and executive positions while in the real sense, it is important to realize that it is a process that is dynamic and followers are reciprocal an individual who does not necessarily have to an executive in an organization. In addition to that, when people associate leadership with executive positions, people who have the abilities to lead are excluded from taking positions that are formal. Managers are referred to as leaders but they may lack the skills to actually influence their team to follow his direction (Carcello, 2009). In other words, what makes them to be influential in an organization is the power that is associated with their position that makes people comply with their rules but it does not necessarily imply that all managers have leadership skills. This is evident when some employees in an organization express dislike towards supervisors claiming that they lack leadership skills (Shapira, 2009).

On the contrary, other leaders in the same organization may be admired by the same employees because they are approachable, they are able to hold dialogues with the employees, they are eloquent and address the grievances of employees in an effective manner. Such are the kind of personalities that are likeable in a leader and this is what makes a leader. By employing such skills, then the leaders of an organization will be able to influence all employees towards achieving the goals and objectives of an organization, and this is leadership (Watson, 2002). Furthermore, leadership is not about managers and executives but it includes all employees in a firm that show the potential of being leaders. Therefore, leaders with good leadership skills are in a position to spin the organization to good governance.

In that connection, it is evident that there is a relationship between leadership and governance. Governance entails a relationship between various stakeholders, shareholders, management and the board while corporate governance involves the development of structures that aid the organization to achieve its goals (). In practicing governance, the management and the employees should exercise transparency, stewardship and responsibility. Corporate governance cuts across several types of organizations like non-profit organizations, governments and companies. Most of these organizations have differing frameworks and strategies that they utilize in their management systems, depending on their priorities but what seems to be common are the use of transparency and responsibility of each leader in order to attain the goals of the organization. Governance is actually influenced by the culture of the organization, its policies, rules and procedures that are practiced by the employees. This is the reason why the framework of corporate governance of a company may be formulated based on its policies while that of a business may be designed based on its culture.

Rappaport (n.d.) supports this view by comparing two companies, Coca-cola and Hillenbrand industries. Coca-cola intends to increase the value of its shareholders by ensuring a continuous annual growth earnings and increased equity returns. On the contrary, Hillenbrand industries also intends to increase the value of share holders but planned achieve this by generating cash flow that is above the investments of shareholders.

Aspects of Governance

Aspects of Governance are the common ways of executing governance in organizations. Many companies have different ways of carrying out governance but all the aspects should ensure that transparency and accountability is adhered to since good governance will ensure that benefits are delivered to all organizational stakeholders. It is also important to appreciate the fact that all stakeholders are entitled to rights that are significant for their contribution to the company (“Principles of Corporate Governance,” n.d). The rights of shareholders includes transfer of shares, the right to have methods of ownership that are secure, gain access to information about the corporation on a regular and timely basis, take part in voting in shareholder meetings, elect the board members and share profits gained by the organisation. In addition, shareholders should be treated with respect despite their race or background. On the other hand, stakeholder’s rights should be recognized by the various aspects of governance. These aspects should encourage the active corporation of stakeholders especially in the creation of wealth, sustainability of sound enterprises and creation of employment opportunities (Minkes et al, 1999). They should also have the right to access information about the company that seems appropriate.

Board members need to be informed before making decisions and should act in care and diligence showing the interest of the shareholders and the company. The board should also ensure that it has complied to the law and should show a keen interest of stakeholders. Guiding and reviewing corporate strategy should also be fulfilled by the board. In addition the board should fulfill its function in replacing executives and ensure that there is transparent nomination of board members during its meetings and manage all conflicts that may arise.

One of the aspects of governance is ensuring that the customers of a company together with its employees are satisfied. This aspect can be executed in a way that all their needs are addressed and this will lead to good business management and efficient provision of services. Another aspect is also ensuring that compensation packages to employees are fair and there exists a secure working environment. By doing this, the management can be assured of a satisfied team of employees. In addition to that, the method of governance can assure shareholders that the leaders and managers will be able to make decisions from an arm’s length. It will also ensure fiduciary interest and ownership to be a priority (Fairholm, 2000). In general terms, the aspects of governance should ensure that a company still sticks to its mission and set business perspectives that are long-term for public responsibility and ethical conduct.

Roles of leaders and the roles of executives or managers

The integrity of an organisation is dependent upon the managers or executives (Rappaport, n.d.). In this case the meaning of integrity is about holding together the organisation and this is the role of the managers or executives. It is crucial factor in the running of organizations because if employees and shareholders are not satisfied, they normally withdraw from the organisation. This means that the organisation will suffer losses on capital, labour and customers and it follows that its image will also be ruined. In that regard, the stakeholder theory states that every organisation should be ran while favouring all its stakeholders who are the employees, community, investors and customers (Argenti, 1997). If one of these stakeholders withdraws from the organisation, the company will face adverse effects. Therefore, integrity of a corporation is the core responsibility of executives and managers to protect the organisation against ruining its image and other activities of management that they are required to perform will emerge from this role.

Leaders, on the other hand have a role to play in ensuring that governance plays a major role in the integration of the organisation (Elisabet &Domenec, 2004 ). They achieve this by utilising their leadership skills in influencing the entire team of employees to be performance oriented so that the organisation can achieve its goals and objectives in order to enable the company to achieve wide profit margins.

Trust together with ethics are seen as essential roles in leadership and leaders thrive in trust since their role is to unify employees to work together; and this cannot be achieved if there is no trusting culture (Fairholm, 2000). Every employee and leader will work efficiently if they can trust one another or if an existing trusting culture dominates the organisation. For leaders to initiate change in an organisation or among the workers, they first have to gain their trust so that they can work together in harmony. In fact, the presence of a trusting culture in an organisation will create an atmosphere of comfort and a good working environment. However, developing a culture of trust in an organisation is a daunting task since there are several factors that are hindrances. As a leader’s role, the building of trust seems to be the biggest challenge to tackle since it involves taking lots of risks. One of the risks taken is communicating confidential and sensitive information to a second party and trusting the information will not be known to outside forces. Many employees do not trust each other enough to share information that is sensitive to their leaders. However, it is the leaders’ role to inculcate high levels of trust among the staff. Other individual forces that are a hindrance to trust culture are alienation and apathy, the fear of taking the risk to trust others since the outcome is unknown, selfish interest and the sensitivity of the leader to the needs of the follower.

One of the organisational factors that prevent a company form developing trust among its employees is the lack of mechanisms that have accountability. An organisation that does not appreciate accountability will find it difficult to develop trust. A lack of accountability has elements of dishonesty and there is no way trust can be built in such an environment. Furthermore, if the company has a history of untrustworthiness especially in its events, then the goal of setting up a trusting culture seems to be far reached. In addition to that, another factor that leads to the ineffective implementation of a trusting culture in an organisation is actions of the leaders. A controlling authoritative figure that is always around employees to criticise them will definitely erode trust (Colley et al, 2003). Therefore leaders should be more careful when supervising employees. Moral values that uphold trust in individuals seem to have decayed over the years and people no longer seem to appreciate the issue of trust in an individual. This has therefore had a direct impact on the employees who do not see the need of trust especially in the work place. In spite of all these challenges to develop a trusting culture, leaders are required to be in a position to have the skills to influence employees to develop the value of trust by for example, using ethics.

Ethics has a major role in ensuring that trust will eventually prevail in an organisation. In many occasions, the consequence of behaviour that is unethical in companies is normally caused by distrust. However, trust can still be abused and thus give rise to unethical behaviour. This will occur especially when relationships that are based on trust are used to cover up for malpractices and also to sideline others from gaining access to better chances that they have an entitlement to. It is thus important for managers to know that ethics is an efficient tool in the facilitation of trust. The factors that facilitate trustworthiness are openness, benevolence, personality factors and history of interactions (Bews & Rossouw, 2002). When the management is more open with its employees about the challenges that are facing the organisation, then they can easily gain their trust. Moreover, the admirable and likeable personalities of leaders in an organisation can easily influence the employees to trust them. In addition to that, if the history of interactions between managers and employees has been healthy, then the introduction of a trusting culture will not be difficult as such. Benevolence involves managers taking into consideration the personal needs of all their employees and in this way, gain their trust in an effective and efficient way.

Managers have the role of encouraging employees to trust them by sticking to the guidelines that have been stipulated in the ethical codes (Bews & Rossouw, 2002). In fulfilling their role of integrity, managers or executives who adhere to the ethical codes

will be seen as individuals who value the company and can win the trust of their subordinates. By developing such ethical behaviour then intra-trustworthiness can easily be attained in the organisation. Ethics therefore, has a close link to the development of trust in an organisation and it is therefore the role of managers to make sure that these two factors dominate in the organisation if they are interested in achieving goals of the company.

Effects of Leaders on governance

The organisation’s reality can be fulfilled by leaders who focus on good governance practices (Minkes et al, 1999). Such practices, as mentioned earlier includes engaging in trustworthiness and sticking to the ethical codes of the company. When leaders misuse the power placed on them by the management, then the issue of trust in the company will be unheard of. Leaders can be in a position of studying the behaviour of their work team and can tell which kind of employees care about the development of the company. This will help the leaders to know when to pay attention to this kind of employees. Governance can be reinforced by leaders by developing a professional relationship with employees so that the employees do not play games with them because this destroys trust. In addition, if trust is eroded, communication and governance will also be undermined. Therefore, this calls for a leader with upright and moral principles who can stand firm in times that call for a compromise of those values. Governance can hence be developed based on trustworthiness and ethical codes that can be incorporated in employees by leaders.

Leadership Development and Effective Followership

Followership entails responding to the influence of leaders by doing whatever they instruct (Pillai &Williams 2004). Thus followership is mostly influenced by the relationship between organisational members and leaders. In essence, the performance of all followers can easily influence the behaviour of leaders in various ways. For instance, if the followers of the leader respond to suggestions and are more cooperative, then the leader will be more motivated to be more effective and productive. This will also influence the organisational outcomes of a company. According to the contingency model of Fiedler, that dwells the relationship between a leader and his or her followers a leader may lack a strong influential power when in a certain position (Meyer, 2004). On the other hand follower maturity can be assessed based on their ability and willingness though this level of maturity may change with time due to factors such changing a leader or the introduction of new rules in the organisation (Katinka & Koopman 2004).

Leadership development is influenced by followership in that a leader can develop or not depending on the kind of followers he or she has. It is known that if followers want to receive things like rewards, they work towards an excellent performance. Therefore, good organisational outcomes can be achieved when followers are motivated to be more productive with the knowledge that by doing so, their efforts will be appreciated.

Among followers of the leader are some that are unique that makes the leaders favour them in certain circumstances (Radner, 1976). For instance, such followers can be highly skilled and very competent that they are a major benefit to the organisation. The competence of their work makes the leader treat them preferentially which can also be a benefit to the outcome of an organisation since skilled employees can boost the performance of the organisation. Another trait that unique followers may have are they can easily be trusted even when they are not under close scrutiny (Prendergast, 1999). The leader therefore can give the follower tasks to perform with the knowledge that they will be completed (Walumbwa et al, 2000). Other followers can also be motivated to handle greater responsibilities that are beyond their job description (Freeman, 1994).

Such followers are excellent resources to the organisation in that they can improve organisational outcome by performing more tasks and hence boost the performance of the company (Levinthal,1988). All unique followers should therefore be seen as resources to the company since they boost the performance and productivity of other employees by being leaders themselves (Hillman & Keim, 2001). The rest of the followers who cannot be trusted as deemed to handle simpler tasks and the leader maintain a formal level of relationship with them (Sussland, 2004). Therefore, for such employees to build a good relationship with their leader, they ought to be more productive and demonstrate the willingness to work. In addition to that, leaders should also encourage such employees to be responsive and effective so that they do not feel left out and for purposes of encouraging team work among organisational members.

This implies that leadership behaviour will easily influence the outcome of the performance of other employees. For instance, a leader who encourages team work and is effective in conflict resolution, will make all members of the team to feel that they are not sidelined and this will also build cooperation and mutual trust. Moreover, a leader who has the habit of involving other team members in making decisions will encourage commitment and good quality performance. This will also make other employees of followers to feel important since they are included in making decisions that concern the organisation.

Types of Leadership

Types of leadership such as charismatic leadership and transformational leadership influence the attitude of workers towards their leaders. Charismatic leaders stand out because their traits and personalities differ from that of other leaders (Matthew & Fairholm, 2000). Charismatic leaders will always have leaders who think of them as effective, approachable and likeable. The followers of a charismatic leader will respond to the instructions of their leaders based on the mere fact that they admire their leadership qualities.

On the other hand, transformational leadership is task-oriented ( “Principles of Corporate Governance,” n.d.). Transformational leaders not only possess charismatic qualities, but also have the ability to make their followers to be ambitious in whatever they do by driving them to attain higher goals. Intellectual simulation and inspirational motivation is what drives a transformational leader (Lussier& Achua, 2007). This kind of leadership is mostly about motivation and inspiring followers to be more independent while charismatic leadership is about impression management and obtaining the skills to lead in extraordinary ways.

Conclusion

Leadership and governance of an organisation demands a lot from both the management and leaders. Leadership is the process of influencing others to follow a leader while governance entails the relationship between the organisation with its investors, customers and community while corporate governance involves the development of structures that aid the organization to achieve its goals. The view of leaders as individuals in high positions is common but it has come to be established that leaders can be those employees who are not recognised but possess the ability to influence others. Therefore, leadership behaviour should be in a position to recognise such unique individuals by appreciating their efforts (Husted & Allen, 2000). Types of leadership can also influence the response of followers, with most of them showing preference to charismatic leaders due to their qualities and skills. It is also important to establish the different roles of managers and leaders that are demonstrated in an organisation. The issue of trust and ethics have a huge impact on the performance and productivity of employees (Freeman & Philips, 2002). A trusting culture is therefore important for both the management and employees in order for the organisation to achieve its goals and objectives.

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