The role of leadership traits in driving organizational life cycle decisions

Of the many decisions a leader makes, none has more impact than the strategic decision made during the final phase of the organizational life cycle. The leader can discontinue the original organization through merger, acquisition, or closure, or the leader can reinvent the organization and begin its life cycle anew. During this complex decision-making process, with so many internal and environmental factors in play, the impact of the traits of the resident leadership is significant and often underestimated. The conceptual model used in this study is an adaptation of Greiner’s (1998) organizational life cycle construct, a construct operationalized by overlaying combinations of seven transformational and transactional leadership traits (Burns, 1978; Bass, 1985) and two environmental factors onto the five life cycle phases. This construct depicts variations in the resident leadership traits by life cycle phase, shows how leadership traits process the surrounding environmental input during decision making, and indicates that decisions will vary by phase as a result of the resident leadership traits. The model is evaluated using a qualitative research methodology that analyzes and compares primary data from nine case studies. The cases encompass global organizations headquartered in the U.S. that had 2009 revenues greater than $5 billion and that faced a strategic crisis in its final life cycle phase. Further, the nine organizations fell into one of three industries: food, electronics, and consumer products. Each case was analyzed using three of seven life cycle phase differentiators (i.e. focus, communication, and systems); two environmental factors (i.e. customer and communication); and seven leadership traits. The study compared the firms company-tocompany and within industry, looking for patterns linking leadership traits and the strategic decision to reinvent or discontinue. The results of the research support the conceptual model and central thesis that the leadership traits possessed by the decision maker have a significant influence on organizational decisions. In all nine cases, the expressed leadership traits predicted the strategic decision to reinvent or discontinue. The research also found that while customers and competition serve as critical factors in motivating change, the degree of influence varied by case with no discernable pattern.ABSTRACT Title of Dissertation: THE ROLE OF LEADERSHIP TRAITS IN DRIVING ORGANIZATIONAL LIFE CYCLE DECISIONS Martha Crawford Reider, Doctor of Management, 2011 Dissertation Directed By: Dr. Thomas J. Mierzwa, Graduate School, University of Maryland University College Of the many decisions a leader makes, none has more impact than the strategic decision made during the final phase of the organizational life cycle. The leader can discontinue the original organization through merger, acquisition, or closure, or the leader can reinvent the organization and begin its life cycle anew. During this complex decision-making process, with so many internal and environmental factors in play, the impact of the traits of the resident leadership is significant and often underestimated. The conceptual model used in this study is an adaptation of Greiner’s (1998) organizational life cycle construct, a construct operationalized by overlaying combinations of seven transformational and transactional leadership traits (Burns, 1978; Bass, 1985) and two environmental factors onto the five life cycle phases. This construct depicts variations in the resident leadership traits by life cycle phase, shows how leadership traits process the surrounding environmental input during decision making, and indicates that decisions will vary by phase as a result of the resident leadership traits. The model is evaluated using a qualitative research methodology that analyzes and compares primary data from nine case studies. The cases encompass global organizations headquartered in the U.S. that had 2009 revenues greater than $5 billion and that faced a strategic crisis in its final life cycle phase. Further, the nine organizations fell into one of three industries: food, electronics, and consumer products. Each case was analyzed using three of seven life cycle phase differentiators (i.e. focus, communication, and systems); two environmental factors (i.e. customer and communication); and seven leadership traits. The study compared the firms company-to-company and within industry, looking for patterns linking leadership traits and the strategic decision to reinvent or discontinue. The results of the research support the conceptual model and central thesis that the leadership traits possessed by the decision maker have a significant influence on organizational decisions. In all nine cases, the expressed leadership traits predicted the strategic decision to reinvent or discontinue. The research also found that while customers and competition serve as critical factors in motivating change, the degree of influence varied by case with no discernable pattern. THE ROLE OF LEADERSHIP TRAITS IN DRIVING ORGANIZATIONAL LIFE CYCLE DECISIONS By Martha Crawford Reider Dissertation submitted to the Faculty of the Graduate School of the University of Maryland, University College, in partial fulfillment of the requirements for the degree of Doctor of Management 2011 Advisory Committee: Dr. Thomas Mierzwa, Chair Dr. Yung-Chi Sung © Copyright by Martha Crawford Reider 2011 ii DEDICATION This dissertation is dedicated to James Patrick Miller. Thank you for your unwavering support, intellectual challenging, and never ending encouragement, without which this journey would not have happened. You never doubted me for a minute. iii ACKNOWLEDGEMENTS This dissertation represents the culmination of more than 3 decades of experience with the effects of leadership on decision making from within global organizations and those based in the United States, from start-ups to multibillion dollar enterprises. It has long been my belief that the practical effects of leadership—positive and negative—have been misunderstood and underestimated. This research has enabled me to structure my thoughts and has given me the opportunity to develop a tool that industry and academics could use beyond the scope of this study. I would like to thank Dr. Claudine SchWeber for providing the initial spark and support for the concept that lead to the exploration of the intersection of leadership and organizational life cycle. Special thanks to Dr. Yung-Chi Sung, Dr. Michael Evanchik, and Dr. Malcolm Odell for the time and effort they invested in helping to mold and mature this study and for ensuring the high quality of the result. Further, I extend my thanks to Jim Miller for providing the graphics and to the subject matter experts whose observations, feedback, and invaluable guidance helped to direct this work. Finally, I offer my sincere thanks to Dr. Thomas Mierzwa for his invaluable support, guidance, and assistance throughout this journey. Without his patience and persistence, this endeavor could not have been achieved. All shortcomings of this document are mine alone. iv TABLE OF CONTENTS LIST OF TABLES............................................................................................................. vi LIST OF FIGURES .......................................................................................................... vii Chapter 1: Introduction and Management Problem.............................................................1 Introduction..............................................................................................................1 Management Problem................................................................................. 2 Research Question ...................................................................................... 4 Scope........................................................................................................... 6 Definition of Terms .................................................................................... 7 Significance of the Study.........................................................................................8 Flow of Dissertation Chapters ...............................................................................11 Chapter 2: Literature Review.............................................................................................13 Introduction............................................................................................................13 The Utility of Organizational Life Cycles .............................................................15 The Design of an Organizational Life Cycle and Phase Characteristics ...............18 Environmental Factors Affecting Customers and Competition.............................23 The Application of the Life Cycle Model Using the Five-Phase Life Cycle Differentiators........................................................................................................27 The Initial Input Phase of Market Need and Solution Innovation............ 28 Phase 1: Create (Start-up) ......................................................................... 28 Phase 2: Direction (Growth) ..................................................................... 29 Phase 3: Delegate (Mature)....................................................................... 30 Phase 4: Coordinate (Sustain)................................................................... 31 Phase 5: Decline or Reinvent.................................................................... 33 The Role of Leadership Traits in a Life Cycle Model...........................................34 CHAPTER 3: CONCEPTUAL MODEL ..........................................................................44 Overview................................................................................................................44 The Framework Components of an Organizational Life Cycle.............................44 Components of Environmental Factors .................................................................48 The Leadership Trait Component ..........................................................................50 The Phase Dynamics of an Organizational Life Cycle..........................................55 Thesis Statement ....................................................................................................58 CHAPTER 4: RESEARCH METHODOLOGY...............................................................59 The Research Design .............................................................................................59 The Study Set-up ...................................................................................................60 Set-Up ....................................................................................................... 60 Case Selection........................................................................................... 61 Evaluation Framework.............................................................................. 67 Case Study Analysis ..............................................................................................69 Data Collection ......................................................................................... 69 v Data Analysis............................................................................................ 70 Concept Integration................................................................................................70 Shaping Findings ...................................................................................... 70 Threats to Validity .................................................................................... 71 CHAPTER 5: DATA ANALYSIS, RESULTS, AND DISCUSSION..............................73 Individual Case Analyses and Results ...................................................................73 Starbucks Corporation .............................................................................. 73 Corn Products International, Inc............................................................... 76 Yum! Brands, Inc...................................................................................... 78 Kraft Foods, Inc. ....................................................................................... 81 Hewlett-Packard........................................................................................ 82 Motorola.................................................................................................... 84 Xerox Corporation .................................................................................... 87 Proctor and Gamble .................................................................................. 89 Nike Corporation ...................................................................................... 91 Summary Analysis.................................................................................................94 Phase Differentiators in a Life Cycle........................................................ 94 Customer and Competitor Environmental Factors ................................... 96 Leadership Traits ...................................................................................... 98 CHAPTER 6: CONCLUSIONS AND FUTURE WORK...............................................101 Conclusions..........................................................................................................101 Implications to Theory.........................................................................................102 Implications to the Leadership Theory ................................................... 102 Implications to the Theory of an Organizational Life Cycle .................. 105 Implications for Practice of Management............................................................106 Recommendations for Future Research...............................................................109 REFERENCES ................................................................................................................113 CURRICULUM VITAE..................................................................................................127 vi LIST OF TABLES 1 Phase Differentiators of an Organizational Life Cycle ..............................................46 2 The Influence of Customer and Competition on the Phases of an Organizational Life Cycle ...................................................................................................................50 3 Life Cycle Phases and the Blended Sets of Corresponding Leadership Traits ..........52 4 The Research Methodology........................................................................................60 5 The Case Studies ........................................................................................................66 6 Postcrisis Response of Starbucks ...............................................................................76 7 Postcrisis Leadership Response of Corn Products International................................78 8 Postcrisis Leadership Response of Yum! Brands.......................................................80 9 Postcrisis Leadership Response of Kraft Foods.........................................................82 10 Postcrisis Response of Hewlett-Packard ....................................................................84 11 Postcrisis Leadership Response of Motorola .............................................................87 12 Postcrisis Leadership Response of Xerox ..................................................................89 13 Postcrisis Leadership Response of Proctor and Gamble ............................................91 14 Postcrisis Leadership Response of Nike ....................................................................94 15 Summary Analysis of the Phase Differentiators of a Life Cycle ...............................96 16 Summary Analysis of Environmental Influence ........................................................97 17 Summary Analysis of Leadership Traits Expressed Postcrisis ................................100 vii LIST OF FIGURES 1 The Framework of an Organizational Life Cycle.....................................................45 2 The Framework of an Organizational Life Cycle With Dynamic Movement. .........48 3 Influence of Environmental Factors on the Framework An Organizational Life Cycle. ........................................................................................................................49 4 The Role of Leadership Traits in the Decision Process of an Organizational Life Cycle. ................................................................................................................54 5 The Dynamic of a Life Cycle Phase. ........................Error! Bookmark not defined. 6 The Conceptual Model of Life Cycle-Leadership Trait Relationship. .....................57 1 CHAPTER 1: INTRODUCTION AND MANAGEMENT PROBLEM Introduction Leadership is one of the most researched concentrations within the field of management. This is due to its broad and varied influence across all aspects of business, social, and personal life. Having a working understanding of the many aspects that make up leadership is of value to business leaders (Masood, Dani, & Backhouse, 2006). Leaders operate within a complex business milieu, simultaneously influencing and being influenced by the corporation, the staff, the industry, the community, the customer, and the competitive environment within which they work. Their decisions directly affect the business lives of many by establishing corporate culture and setting the direction of an organization. Leaders are looked upon to provide a measure of stability, yet at the same time remain flexible, such that they can enable the organization to adapt to the unstable, diverse, and rapidly changing technologies and global marketplace (Bass & Avolio, 1992). Of the many roles and responsibilities assigned to a leader, decision-making is arguably one of the most complex and broad reaching in its impact. The outcome of a single decision can set the course and determine the fate of an organization. Decision-making is intertwined with a variety of contextual factors, resulting in an infinite number of unique combinations. A multiplicity of internal and external environmental factors influences the process in a myriad of ways. Proximal context such as corporate culture and leadership, and distal context such as competition, industry, and regulatory influences 2 go to creating a decision-making scenario that is unique; therefore, it is difficult to predict (Avolio, 2007). The type, roll, and degree to which any one environmental factor influences the decision-making process are specific to the circumstance. The result is that no two decision-making events are the same. One proximal factor that affects decision-making is the executive’s set of leadership traits. Each leader comprises a set of traits, characteristics, experience, and knowledge exclusive to the individual. The executive decision maker processes environmental inputs through his or her leadership trait filter. The leadership traits embodied by the organization’s decision makers, made more or less effective because of the complex, fluid, and dynamic nature of the surrounding proximal and distal environmental factors, directly shapes the leader’s abilities to implement successful, meaningful, and sustainable change. That processing is always unique, as the combination of leader, circumstance, and influencing factors are singularly distinct. It is unlikely that any one leader possesses and expresses all possible leadership traits; thus, it is equally doubtful that any two leaders will process the same facts in the same manner under the same circumstances. In addition to trait differences between leaders, certain leadership traits become more dominant and effective depending upon the circumstance. When combining the three variables of circumstance, variation in leader’s traits, and variation in trait expression, it is reasonable to conclude that it is unlikely that any individual leader will be ideally positioned to maximize success under all decision-making situations. Management Problem When it comes to the overall fate of an organization, no decision is more important than that made at the end of the organization’s life cycle. Should the 3 organization continue the current path—eventually ending by being acquired, merging, or becoming stagnant and declining in financial performance as market share erodes and market size shrinks—or should it reinvent, innovate, and start the life cycle anew? The flexible and adaptable nature of the life cycle model has provided scholars with a structure upon which to explore the decisions, strategy, and evolution of an organization. The multiphase model of the life cycle depicts organizations progressing through a series of predefined phases that proceed forward in a unidirectional and sequential manner (Greiner, 1998; O’Rand & Krecker, 1990). The individual phases are each described by a distinct set of characteristics, expectations, deliverables, and challenges related to the phenomenon being explored. This organizational exploration exposes the relationships between the organization and influencing environmental factors, providing a map of the dynamics that occur throughout an organization’s life (Jawahar & McLaughlin, 2001; Kimberly & Miles, 1980). As long as market and business needs are being met, an organization will likely continue to reside within a particular phase. However, nothing remains stationary. Market dynamics are fluid. Proximal and distal environmental influences