In Their Image
A transformational leader’s personal values can help or damage a company
Management experts have identified a concept known as transformational leadership as one important factor in motivating employees. Transformational leaders have a vision for their organizations and they express that vision passionately to their followers. They encourage their followers to forego self-interest for the sake of the larger group, whether it is a work team or the entire company.
But a study of corporate leaders in China found that transformational leadership may not be enough if a key ingredient is missing: a CEO who holds the right internal values.
Mid-level managers are likely to rally around their company only if their CEO truly values the interests of the organization and is not motivated primarily by self-interest, according to the study by Arizona State University’s W. P. Carey School of Business Management Professor Anne S. Tsui, Ping Ping Fu of the Chinese University of Hong Kong, Jun Liu of Renmin University of China, and Lan Li of Chinese Entrepreneur Survey System.
“People can see your values based on your actions, your behaviors, your words, how you make decisions, and what decisions you make,” Tsui said. “In other words, you really can’t hide your values from other people.”
Measuring values and commitment
Using both face-to-face interviews and self-administered surveys, Tsui and her colleagues examined the external leadership behaviors and internal values of CEOs at 42 companies in China. The researchers also surveyed middle managers in those companies to gauge their attitudes, and especially commitment, toward the firms. Some 605 middle managers and 177 higher level managers, as well as all 42 CEOs of the firms, were included in the study, which took five years to complete.
In companies in which chief executives with transformational leadership behaviors valued above all the interests of the company and people — both inside and out — middle managers demonstrated strong commitment to the companies and said they were unlikely to look for jobs elsewhere. But where transformational CEOs placed the highest values on personal fulfillment, the middle managers below them were less committed to the firm and more likely to seek positions outside the company.
“When a company loses talented middle managers, it will eventually have consequences in terms of company performance,” Tsui said. “Most of the work is done by middle managers.”
The findings of the project were published recently in an article entitled “Pursuit of Whose Happiness? Executive Leaders’ Transformational Behaviors and Personal Values,” in the June 2010 issue of the journal Administrative Science Quarterly, published by Cornell University’s Johnson School.
CEO values and the financial crisis
The notion of transformational leadership — the ability to motivate followers and enhance their morale and performance for the good of an organization — has become an important concept in the social sciences in recent decades. Introduced by the political scientist James MacGregor Burns in 1978, the concept of transformational leadership has been applied and expanded upon by scholars in management science and organizational psychology.
The concept has taken on new significance in the United States since the global financial crisis exposed weaknesses in corporate leadership. Critics have complained that one factor in the crisis may have been that the leaders of certain financial firms — some of them highly transformational in their leadership approach — were looking primarily to enrich themselves.
China was chosen for this study, in part, because there is a strong expectation in Chinese culture that leaders will be oriented toward the interests of the group, the researchers state in the journal article. The values behind transformational leaders
By questioning high-level officials in the companies, the researchers determined that the CEOs included in the study had demonstrated transformational leadership behavior. The researchers next wanted to discover whether the internal values of the executives supported their transformational leadership behaviors.
The researchers measured the values of the executives in two different ways. First, the CEOs were given stacks of cards, each of which had written on it statements representing certain values. The CEOs were told to sort the cards in order of importance.
The second method involved lengthy, far-ranging interviews in which the executives discussed their jobs, their backgrounds, the purpose of their leadership and important goals in life. Words used by the CEOs that indicate values were coded, allowing the investigators to categorize CEOs by their values.
Some CEOs talked about the importance of the company as their highest value, while others discussed personal happiness or the well-being of their families.
Tsui said there are more CEOs with other-oriented values than CEOs with self-interested values.
“We also must point out that no one has pure type of values,” she said. “Everybody has a little bit of both. It’s a matter of proportion.”
The study also suggests that the values of top executives should be considered when they are being hired or promoted.
“Do we really want those who are going after the shareholder value only (which also enriches the executives’ own pockets),” Tsui said, “or do we want someone who can have a broader perspective of the value of the firm to society, which involves caring for others’ happiness?”
A version of this article first appeared on Knowledge@W. P. Carey, an online resource from Arizona State University’s W.P. Carey School of Business that offers the latest business insights, information and research from a variety of sources. To read more, visit knowledge.wpcarey.asu.edu.