Strategic Management and leadership Skills analysis

Identify the management and leadership styles adopted by Ricardo Semler. What impact do you think these styles have had upon the company’s strategic decisions?

Ans-1:

Relationship between Strategic Management and Leadership:

Strategic management deals with planning a business with direction and scope where, Leaders play an important role by building a solid underlying structure through the configuration of resources, with mutual efforts of individuals in the company to meet the challenging environment.

“Management is about coping with complexity. Leadership, by contrast, is about coping with change”.

Kotter.

Thus, management deals with transaction and complexity, while leadership is concerned with change and transformation. The manager Organises, plans, directs and controls; Leaders aligns people and establishes direction.

Thus,

Leadership and management are two distinct and complementary systems of action necessary for success of an organisation.

Table 1: Effects of Leadership and Management Styles on Strategic Decisions:

Leadership

Styles:

Explanation:

Effect on Strategic Decisions:

Advantages:

Disadvantages:

Autocratic

Leader dominates team members and takes decisions.

Effective in small firms with fast decision making.

Can be demoralizing for employees.

Democratic

Participative leadership, as leaders takes decision after consulting the team.

Workers feel motivated.

Creating relation within the team resulting in better performance.

Decision making slows, as staff needs to be consulted.

Laissez-faire

Little or no interference of managers.

Workers get motivated.

Might not accomplish objectives within specified period.

Source: tutor2u.net

Introduction to SEMCO:

“Semco”, a non-descript industrial complex on the outskirts of Sao Paulo Brazil is a role model in the new world of business. Founded by, Antonio Curt Semler in 1952 and being initiated by the founder’s son Ricardo Semler in 1980 has turned into one of the world’s most unusual and admired workplace. In 80’s, it started up with Naval Industry and within thirty years, the company went far from exotic in what it makes and does. It is now one of the most preferred companies in Brazil, manufacturing over two thousand different products, including marine pumps, digital scanners, mixing equipment, etc.

Leadership at Semco:

Ricardo involved people in taking decisions. He eliminated needless layers of hierarchy. Managers were elected by employees according to their performance. One manager had experience, after finding his wife had illness. “He was depressed and the system still expelled him. There is no room for compassion when the bottom line has taken its place”. This was a participative decision being taken by the employees at Semco.

The company’s policy manual is a twenty page booklet filled with cartoons and brief description of the organisational culture, with respect to participation and states that,

“Our philosophy is built on participation and involvement. Don’t settle down. Give opinions, seek opportunities and advancement, always say what you think. Don’t be just one more person in the company”.

An indication of Semco’s adoption of a democratic management is, associates were encouraged to openly oppose and reject proposals by upper management, and were comfortable doing so.

Thus, at Semco it is a “Democratic or Participative Leadership.

Ricardo believes, people crave to achieve excellence but cannot succeed under pressure. He initiated ‘Corporate Oppression’ by keeping aside working hours, dress codes, security procedures, privileged office spaces and perks. SEMCO leaves employees mould it through their efforts, interests and initiative, by setting their ideas, making the feel of a Laissez-Faire Management.

“Give people the freedom to do what they want, and over the long haul their successes will outnumber their failures.”

-Ricardo Semler.

Effects of Leadership on Semco:

Ricardo’s participative and free-reign leadership drove SEMCO to 900 percent growth in twenty years with only 3000 employees of the world and made it one of Brazil’s fastest growing companies. Its annual turnover for 2009 is approximately US$38 Million which was US$4 Million in 1980. SEMCO Group has proven itself as an “Active Portfolio Manager” with proven records which acts as a tremendous path for multinational companies to merge with it in future and the SEMCO Holding division looks for new business groups to endorse collaborations amongst them.

Q-2. Explain the link between selected strategic management and leadership theories. What impact do these theories have had on organisational and leadership strategy?

Ans-2:

McKinsey 7S Model by, Peters and Waterman: To ensure, all parts of the organisation works in harmony, we use McKinsey 7S Model. Its seven internal factors need to be aligned to make an organisation successful.

2.1.a Figure 1: McKinsey 7S Model

Source: coursework4u.co.uk

The model involves seven interdependent factors: Strategy, Structure, Systems, Skills, Style, Staff and Shared Values. Hard elements are strategy statements, organisation charts, reporting lines, IT systems, carried out by the managers. Soft elements are difficult to describe and are more influenced by culture and only leadership abilities can change these. For making the organisation successful, soft elements are as important as the hard elements.

2.1.b Table 2: Hard and Soft Elements:

Hard Elements:

Soft Elements:

Strategy

Skills

Structure

Style

Systems

Staff

Shared Values

Source: 12manage.com

In an organisation, changes can be achieved through business leaders and manager’s decisions, actions, attitudes and motivation, achieved through multiple theories and concepts. Leadership and management theories go well with ethics, values and decision making, affecting Customer service of the business in long terms.

Effects of Leadership and Management theories on Company’s Strategy:

Ethics, Values and Decision Making

Customer Service

Theoretical Framework

Leadership Theories

Management Theories

2.2.a Figure 3: Framework of Management and Leadership Theories:

Source: OpenAIR at Robert Gordon University, Aberdeen

Leadership Theories:

Leading decision makers have the key influence on formulating social responsibilities of their organisations. A brief discussion of leadership theories is presented below:

2.3.a Table 3 Leadership Theories

Author

Theory

Traits Approach

McCall and Lombardo (1983)

Studies into leader’s performance and behaviour regarding success and failure, interpersonal skills, emotional stability and admitting errors.

Situational Theory:

Hersey and Blanchard’s Situational Leadership Theory (1988)

Explains the behaviour of the followers on the willingness to perform actions and formalises the leadership styles: Telling, Selling, Participating, Delegating.

Continuum Theory:

Tannenbaum and Schmidt Theory

Positive way for team and managers to develop, as manager delegates responsibility to the group. Team makes decision according to their abilities.

Contingency Theory:

Fiedler’s Contingency Theory:

Group performance is the result of interaction between Leadership style and situational favourableness.

Vroom and Yetton’s contingency theory:

Depends upon the situation: the importance of the decision, the amount of relevant information, and the likelihood if subordinates would accept and cooperate in making decision.

Path-Goal Theory:

House’s

Path-Goal

Theory:

Focuses on situation and leader’s behaviour: directive, supportive, participative and achievement-oriented.

Charismatic Leadership:

Leaders possess vision and articulation, personal risk; environmental sensitivity, understand follower’s need, self-confidence and have strong convictions about the behaviour.

Transactional Leaders:

Transformational Leaders:

Use vision and passion;

Deals with Long term goals;

Motivates people through inspiration by creating trust;

Engages heart and mind of others for achievement of goal.

Manages and controls procedures , processes, rules and takes decisions;

Deals with Present situations ;

Motivates people by promising rewards;

Use power for achievement of goal.

Leadership Styles:

Autocratic :

Democratic:

Lasseiz-faire:

Leader takes decision.

Leader delegates work to subordinates.

Workers take own decisions.

Source:stewartassociates.co.uk;changingminds.org;valuebasedmanagement.net

Resemblance in Leadership Theories:

Contingency Theory, Situational Theory and Path-Goal Theory: Leader has to act according to the situation.

Trait Theory and Behavioural Theory tells about Leader’s behaviour;

Transformational and Charismatic Leadership speaks about Charisma of Leaders;

Transactional Leadership and Democratic Leadership: Delegation of authority to workers.

Table 4: Management Theories:

Management Behaviour:

Henry Fayol

(1916):

F W Taylor (1881):

Peter Drucker (1954):

Mintzberg

(1973):

Planning

Creating a coordinated plan of action

Plans information

Organising

Providing resources

Resource allocation

Training

Scientific methods to train workers

Training and Coaching

Initiates , supervise and control change

Commanding

Getting the best out of staff

Using SMART Techniques for measurement

Interpersonal role of leader with complete authority and status

Motivating

Rewards for meeting expectation.

Setting appraisals through MBO

Negotiation

Source:tutor2u.net

Resemblance in Management Theories:

Planning: Henri Fayol and Mintzberg.

Training and motivating people: Taylor, Drucker and Mintzberg.

Commanding: Fayol, Drucker and Mintzberg; and

Controlling: Fayol and Mintzberg.

Shared Objectives of Leadership and Management Theories:

House and Taylor (Path-Goal Theory): Achievement of goal is a common aspect.

Vroom and Yetton: Selecting the best alternative;

Fayol and Mintzberg: Creating a coordinated plan.

(Planning is common in both).

Fredrick and Taylor: Motivating people through rewards.

Emotional Intelligence:

“All learning has one emotional base”.

Plato.

It is the ability that a Leader possess to monitor own’s and manage others emotions.

Five domains of Emotional (Daniel Goleman,1995):

Knowing;

Managing;

Motivating;

Recognizing; and

Handling one’s emotions.

Higher Levels of Emotional Intelligence are repeatedly linked to improve better output from the company as:

2.6.1.a Figure 4: Achievements through Emotional Intelligence

Source: thecollingwoodgroup.com

Requirements of a Leader for Company’s upcoming strategy:

Hence,

Leaders and Managers implementing particular theories, with personal skills, including Emotional Intelligence when equally tailored into McKinsey 7S Model,meet the company needs and improves effectiveness of the individual, team and of the Organisation.

Q-3.Utilise appropriate techniques to review Semco Leadership requirements.

Ans-3. Managers or Leaders of a company practises STEEPLE to know the Strength, Weakness, Opportunities and Threats in which a business operates and access better changes to compete with competitors.

Analysing SEMCO using STEEPLE:

Social: (freedom, colour signs, flexibility in job hours)

Employees are given flexibility in job hours and location. They put mood tags (Green-Good Mood, Yellow-Careful, and Red-Not Today) to express emotions. At Semco, there are no formalities and the doors are always open for opinions. Unionization is free within the company as Semco believes that constant relationship with unions is healthy for company and employees.

Technological: (Network Technology)

While merging with International companies, Semco looks for the technological advancement in engineered products and complex services.

Environmental: (Marine and bio-fuel)

Semco started up with Naval Industry but combined with Tarpon Investments and Brenco producing bio-fuels.

Economical: (Profit margin and Growth)

Semco maximizes value of its businesses by concentrating more on profitable growth and less on acquisitions. E.g.: NATCOMM (The engineering and construction business segment of SEMCO) focuses on internal growth through expansion of its geographic reach and customer base. Political instability causes economic fluctuation within the country effecting business worldwide.

Political and Legal: (Taxation)

Semco deals with shipping Naval Products and hence, taxation has been implemented by the Government. Political instability creates imbalance between the shares and the companies.

Ethical: (Value for work than money)

As per Zero Tolerance, Ricardo says, “You can run a successful business or be ethical, take your pick”. Thus, ethical effect states, to do the right thing as Semco doesn’t value for money.

Analysing Semco, here employees work with ample freedom deprived of formalities, working hours, rules and regulations and with respect for each-other, where work is given priority and everyone feels content at work. There is a huge technological growth with wings spread in different directions providing customer service worldwide. Semco doesn’t follow the rules of other corporates having bureaucracies and the existing Leadership used at Semco tells about the Democratic or Participative style of Leadership, ’employees working together with freedom to lead the company’.

Required Skills for Leaders of Semco:

Companies have leaders with Compelling Vision, Threshold/Core Competencies and Networking skills. But, Semco being a reengineered and fast growing industry, with wings of: Railway, Forging, Industrial Equipment, Real estates, etc. and creating partnership with world leaders: Pitney Bowes, Brenco, Tarpon Investments, etc. for its growth, needs leaders with core (unique) competencies with the abilities to collaborate with leading companies, form Joint Venture, Controlling budget and assets and Alliancing with other companies to keep the company away from bankruptcy. Hence, the future leader for Semco should be Innovative, creative and passionate with flexibility to different environment, encouraging workers with threshold skills, helping in promoting ideas with passion for establishing an inordinate Semco ahead.

Analysing GAP at Semco (2010-2015):

GAP Analysis defines the present state, the target state and the gap between them.

Semco Maritime Joint Venture with Conoco Philips for oil and gas production

Company

GAP-1

Semco Energy Inc. alliance with and Enstar alliance for ‘Pad Gas’

GAP-2

2009 2010 2011 2012 2013 2014 2015

YEARS

3.3.1 Figure 5 : GAP Analysis at Semco from 2010 – 2015

Source:www.alaskajournal.com/stories/071610/oil_semco.shtml; www.offshorecenter.dk/log/nyhedsbreve/OnOff24.pdf

GAP Analysis at Semco :

GAP – 1: The Norwegian Oil Industry Association has estimated 3 billion Euros can be made before 2015 by focusing on new technologies and by collaborating. So, Semco Maritime is preparing the technical specifications for communication solutions for Ekofisk field, Norway. An American oil company, Conoco Philips has collaborated and had made a deal for 5 years with Semco Maritime, helping to future proof the oil and gas production in Ekofisk an Eldfisk fields.[1]

GAP – 2: Semco Energy Inc. has filed for permits to construct $200 Million natural gas storage facility in the Cannery Loop gas. Enstar and two regional electric utilities, Chugach Electric Association and Anchorage’s city-owned Municipal light and power have contracted with Semco Energy Inc. The facility will be able to meet all of Enstar’s needs to supplement supplies from producing wells through winter 2012 and 2013. About 4 billion cubic feet of “pad gas” will have to be kept in the reservoir to sustain pressure. Semco and Enstar had been working with TransCanada subsidiary ANR storage on the project, but when ANR withdrew, Semco took it over.[2]

Scoping and Planning Leader/Manager Acquisition:

Organisation short and long term goals, scope, breadth and flexibility.

Benchmarking

Diagnostic Assessment Centres

Preferred Attitude, Skills

and Behaviour

Outline job description and person specification

3.4.1 Fig 6 : Scoping and Planning of Leader/Manager acquition

Source: booklet provided by STC on “Planning for Leadership”

Taking work-force into consideration, we expect the future Leader of Semco to be Transactional, with effective people management skill, motivating people for innovative ideas, be able to share feedback and manage project and team effectively and set milestones. He should also be a skilled negotiator, risk analyser, well versed in finance to get the company expanded in various sectors with the leading technology providers with the ability to perform alliance and joint ventures, spreading the wings of Semco globally.

Q-4. Produce a future leadership skills plan for Semco. Report on how useful was the methods used to plan the development of leadership skills. Ensure you evaluate each method and discuss what you think of each method.

Ans-4: Leaders are people who think and act creatively in non-routine situations, setting to influence the actions, beliefs and feelings of others to achieve their goal.

Essential segments for crafting an eminent leader:

Organisational Development;

The Learning Organization;

Development Planning;

Skills Development;

Implementation Plan.

Organisational Development:

“It is the systematic approach of behavioural science knowledge at various levels such as group, inter-group, organization, etc. to bring about a planned change.”

-Newstrom, Davis, 1993.

4.1.1.a Table 5: Characteristics of Organisational Development:

Characteristics:

Description:

Humanistic Values

Way in which human diversity is respected and tolerated, enabling and encouraging individuals to maximize their potential without discrimination, with freedom by believing the potential of employees.

Systems Orientation

All parts of the organisation: organisation, structure, technology and people must work together.

Experiential Learning

Getting experience through training with practical exposure.

Problem Solving

Research problems by accumulating data and taking corrective actions against it.

Contingency Orientation

Actions carefully chosen and adjusted to fit the requirement.

Change Agent

Encourage, Organise, Assist changes.

Levels of Interventions

Complications may arise at any level and so the strategy involves more interventions.

Source: nwlink.com, humanismtoday.org

At Semco, the rules created with regard to union relations are humanistic and takes seriously the position that the decisions of unions are to be respected. E.g.:

Don’t fire anyone during the strike, but make sure everyone sees that a walkout is an act of aggressiveness. (Semler, 1993, p.103)

Work culture at SEMCO demonstrated distinctive signs of fatigue. Thus, Ricardo developed a humanistic approach enhancing employee’s commitment, morale and motivation by three fundamental values: Employee involvement, Profit sharing and Information-dissemination. Employees are creative and imaginative, seeking responsibility with commitment to work through participative problem solving proficiency. Therefore, manager at Semco should have “humanistic values” for his subordinates.

The Learning Organisation:

According to Senge (1990), people expand their ideas of create aspiring results, nurturing new ideas with shared objectives to achieve a specified goal.

4.1.2.a Table 6: Models of Organisational learning:

Models:

Concepts:

Behaviourism

Study, Observe and Change Human Behaviour.

Active listener and direct admirers.

Operant Conditioning

Performing job tasks sequentially, with rewards for actions.

Cognitive

Using experience, receiving information and implementing, with dynamic construction of knowledge in mind.

Social Learning Approach:

Incorporates social and cognitive process for understanding emotion and action with sharing and construction of knowledge.

Source: Booklet provided by STC on “Developing Management and Leadership skills”

Due to bankruptcy in 1990 in Brazil, bank seized 80 percent of people savings to reorganise the economy. Most of the Brazilian Company almost collapsed, where Semco suffered a 40 percent drop in sales thus, closing plants and laying off workers from 830 to 300. Ricardo took over the circumstance by applying cognitive thoughts to survive from complete collapse. He started up with small units of satellite plants with small groups of employees in participative style, where employees choose their shares and fix their salaries according to company’s profit, and from then, it became the company’s hallmark. Thus, “Cognitive approach” as Ricardo’s would be flawless for selecting a imminent leader on behalf of Semco.

Development Planning: Consists of:

Object Setting;

Performance Metrics;

Rewards;

Short Term Training.

Object Setting:

“Setting objectives”, what a business wants to achieve. This has two levels: Corporate level and Functional level. Both the levels should keep an eye on the SMART criterions, conveying the specific objectives to be accomplished within a significant time frame.

Performance Metrics:

Way of manipulating things brings significant results in the business performance, measured by Key performance Indicators (KPI). KPI emphases on Outputs, Quality and Culture of the Organisation, where output of a company is good if it is measured properly with respect to quality. This can be done by improving Technical or specialist skills and transferable skills.

Employees at Semco expand their learning and performance through creativity, innovativeness and problem solving skills. Semco introduced a work unit, “Nucleus of Technological Innovation”, with three members for designing innovative products, improving old ones, refining market strategies, uncovering production inefficiencies, and visualising new lines of business. They pick their ideas, set their own goals and have freedom to alter decisions. Semco’s philosophy is built on participation and involvement of employees in providing opinions, making us to feel that the future leader of Semco should have good “transferable skills”, “negotiating skills” and better “performance matrices”.

Rewards:

Leader should also have the quality of “motivating” employees by providing rewards through promotions, recognition, responsibility, bonus for their better performance.

Balanced Score Card used for Organisational Development:

4.2.a Figure 7 : Balanced Score Card

Source: performanceweb.org

By applying vision, Leaders should be able to control and keep track of the internal business activities being executed by subordinates and monitor consequence on the market strategy arising due to varied reasons, Check the financial budgets and assets and learn the overall business perspective by using a balanced score-card for measurement of performance within the organisation.