The organisations that practice strategic business management are better performing firms than those who do not practice it (Wheelen & Hunger, 2005).
Strategic business management (SBM) leads to a competitive advantage for a company, because it helps organisation to identify its goals and the strategies to achieve the goals. Strategic management helps organisation to anticipate the changes, and make strategies according to the changing environment and changing market demands. SBM involves long run business planning, which focus on the business goals and objectives. In the long run planning, the business cannot take intuitive decisions; therefore, SBM is a logical way of decision making, which becomes a competitive edge for a business. It helps organisations to identify the threats from the environment and then making strategies to convert those threats into opportunities.
SBM defines organisation’s vision and mission statement that will guide employees about the long term business strategies and business plans for each business unit. It then integrates all the business units to achieve the common mission of the organisation. The implementation of any strategy is done while keeping in mind the current market environment, competitors, and the business’s resources. The fast the company observes the changing demand pattern of consumers and accordingly make strategic decisions to cater those changing demands will lead an organisation towards profit maximization and increase growth prospects (Baum & Wally, 2003). The strategies are then evaluated to make changes if needed.
SBM balance out the organisation’s resources and the changing demands of consumers by making strategies that can be profitable for the business unit itself as well as it can satisfy the changing demand of its consumers.
Leadership in past was considered as an inborn human characteristic and focused only on the leaders. But unlike past, now leadership is not focused on the leaders alone, but on the employees and followers as well. Luthans & Avolio (2003) introduced the concept of authentic leadership, which suggests that the leader should motivate his employees by considering their opinions and ideas in decision making process. A leader can influence his employees and improve their performance so that they can achieve organisational goals and objectives.
Developing leadership at every level of organization helps sustain the organization’s long-term success. The organization should develop leadership skills in their employees through proper training programs and guide them how to use those leadership skills in different situations.
An effective leader is one who is a good influencer and a role model for the employees, the employees can trust them blindly. He increases the moral of his people, increase their self esteem, confidence by letting them participate in the decision making process, which results in more committed employees and ensures organizational success. An effective leader uses a leadership style which fits best in the situation.
How SMB is linked with leadership:
A leader is a key player of a successful organisation who handles major organisational activities like planning, controlling, evaluating, motivating employees to participate in the decision making process and influence them to perform well. A leader manages a team who include people from cross cultural backgrounds he influence them to achieve a common goal of business (Griffin , R. W. 1999).
Fairholm (2004a) suggests that leaders are the problem handlers and perform control function. In the implementation process of SBM, there may be some issues but the leader controls the problems and difficulties. The leader motivate the employees to perform well in order to achieve organisational goals, he motivates employees to share their opinions while making strategic decisions. Leaders encourage trust, so that everyone can contribute independently for the success of the business. Leader encourages strategic thinking within his followers/ employees so that they can make strategic decisions independently for the achievement of organisational goals.
SBM and leadership are interlinked to each other. The organisation will not be successful if it has done good strategic planning but don’t possess right person to motivate the employees to execute the strategy.
How management and leadership can impact strategic decisions for any organisation?
As Kotter (1990) suggested that Management has plan and strategies and they focuses on execution of the strategy, while a leader maintains human resource, it direct the employees, control, coordinate and motivate them to execute the strategy with their best performance in order to accomplish the final mission of the business. The leadership styles and management can impact the strategic decisions because right leadership style is needed while making a strategic decision. Richard L.H. & Katherine C. B. (2005) introduced the 5 leadership styles. While making a strategic decision, if a right leadership style is not followed then it will lead to failure of the decision. Therefore, the organisation should know which leadership style should be used in which kind of strategic decision. The business environment of today’s world is more competitive, therefore organisation should use best management and leadership skills in making strategic decisions to achieve organisational goals.
A right leadership style is needed for the organisation to be successful. If right leadership style is not followed the organisation would not be able to achieve its business objectives.
Appraise different leadership styles and how they can be adopted in different situations?
Richard L.H. & Katherine C. B. (2005) introduced the 5 leadership styles.
It is a leadership style in which a leader is a decision maker, he is a dictator who orders the task and does not allow the employees to participate in the decision making process. In this leadership style the leader is the decision maker, while the employees are the followers of the decision. This leadership style can be used in situations where the company has to take quick and efficient decisions and cannot afford to waste time in consulting with employees or other members. Thus the decision maker uses his absolute power to make a final decision which has to be followed by everyone.
In Autocratic leadership, the manager makes as many decisions as possible and thus uses his absolute decision making authority. In the decision making process the manager is the key decision maker who does not allow his people to contribute in the decision making process, rather they are given directions to follow. This leadership style is best for employees who are average or poor performer because in this approach the leader keeps an eye on his people who are supposed to perform the task on the given directions; this will increase the performance of employees as well as the quality.
Bureaucratic leaders are those who follow theories and procedures very strictly. This leadership style is best for situations where exact standards or formulae are to be followed. This leadership style is practiced in Pharmaceutical firms since exact formula is needed to prepare a drug.
This approach helps organization to better achieve their standards, maintain their quality and increase safety.
This is a leadership style which is a natural trait of a leader and that cannot be easily learned. These leaders are the influencers for the employees and motivate the employees to perform well. The employees follow them with high trust level. The leaders use their personal charm to influence people, he helps follower to visualize the vision and mission of the organisation and helps them to visualize how they can contribute to the success of the organisation. This leadership style can be followed in situations where organisation wants employees to put efforts to achieve extra ordinary performance.
The leader uses this leadership style to promote trust level within the employees and the decision maker. This leadership style is used in situations where the employees are motivated to participate in the decision making process. It is used in situations where the ideas and opinions of employees can result in effective and efficient outcomes.
This approach create an environment where everybody is allowed to share his or her view points, therefore employees will be motivated and love the work they do since they were involved in the decision making process. This approach is used in companies who encourage creative thinking. This approach will reduce employee turnover ratio because when the employees will be encouraged to share their ideas and they will become more committed to their work. This approach will make an environment which would be free from office politics, since the leader motivate the employees to participate and discuss their feedbacks on the decision, which will increase the trust level between the employees and the leader.
This leadership style is used in situations where the employees are skilled, possesses enough knowledge to make decisions. The leader gives employees an authority to make decisions on their own, while they the doors of guidance from the leader is always opened for the consultancy.
The organisation should use the best leadership style that can fit to their situation and can result in achievement of organisational goals and objectives.
2.1 How the Management and leadership theories can impact Organisational strategy?
Management and leadership theories are important for formulating, executing and controlling the organisational strategies. Different management theories like behavioural theory, functional theory, situational theory, contingency theory etc; all can be used in making organisational strategies. Similarly different leadership styles can also be used in organisational strategy implementation.
The leadership styles can be used to analyze whether the employees are satisfied with their leaders or not. For this purpose transactional or transformational leadership styles can be used for the achieving successful organisational strategy (Laohavichien et al., 2009).
Transformational leadership is a charismatic leadership (Richard L.H. & Katherine C. B. 2005), in which the leader uses his personality charm to influence his employees to achieve organisational goals. He psychologically links organisational strategies and employee’s personal benefit which leads to achievement of organisational goals.
Transformational leadership theory can impact organisational strategy. If the organisation is following a cost leader-ship or a differentiation strategy, then it cannot afford high turnover rate because it incur cost to train the employee, similarly with the differentiation strategy; human resource is an asset for the organisation so it cannot afford to lose its asset. Thus a leader motivates employees to perform well; he becomes an inspirational motivation for the employees which decrease the turnover rate (Jiang, 2002).
Transactional leadership is based on the assumption that employee will better perform if it is linked with their self interest. Therefore this leadership style is a based on a theory of reward and punishment. This theory can be used to achieve organisational strategies by giving the directions or task to the employees and on the basis of their performance they should be rewarded or punished. This leadership style can be used in situations where problems are clearly defined, so the employees can be asked to find out solution of the given task. The employees in this case are not allowed to give their opinion and find alternative ways of problem solving other than directed by the leader (Bass, 1985).
This leadership style can achieve organisational strategy of companies that require less creative ideas from their employees and their work environment is standardized and stable. They have proper formulae or standardized rules and procedures which doesn’t promote employee participation in decision making for example manufacturing companies, pharmaceutical firms etc.
2.2 What leadership strategy can support organisational long term goals?
For achieving a long term goal, a leader can create a strong organisational culture. The employees, the executives will come and go but it is the culture of an organisation that will last forever. Therefore the leader can create a culture which promotes team work, coordination, support from the upper management etc. The leadership strategy for the long run should share a positive vision about the company, so that employees will be clear about organisations goals, objectives, mission and vision. The leader should influence employee and link their personal interest with the organisational goals so that they will be motivated to achieve goals and hence employee turnover rate will be reduced. The leader can use transformational strategy and give limited authority to the employees for decision making so that their confidence level will increase, they will participate in decision making and they will contribute to achieve the mission of the organisation. Through proper leadership style an organisation can convert its threats into its opportunities.
For achieving the long term goal, the organization should use right leadership strategy required for particular situation. For situations where the decision should be taken only by the executives of the company for example setting rules and standards, the opinion of employee is not important here; therefore leadership strategy in this situation should be aligned with the requirements of the situation.
3.1 Review current leadership requirements of the given organisation?
For Enterprise Rent-A-Car combination of democratic and Laissez-faire leadership style is required. Autocratic leadership is required in situations where only the top executive of Enterprise Rent-A-Car can take decision about what is good for the organisation in long run.
This organisation needs to have democratic leadership style as its owner believe in delivering its customers best value and satisfaction. For this objective to be accomplished, the leader has to consider the viewpoints of his employees and then make final decision which can better satisfy customer’s needs.
Democratic leadership style will help employees to share their opinions and ideas which will make them more confident, their self esteem, moral and loyalty towards the organisation will increase, which will reduce the turnover rate. When their ideas will be encouraged in the organisation they will become more committed to it. When the employees will participate in the decision making process they will be more satisfied will that decision, hence their productivity will be increased.
Laissez-faire leadership style is also required at Enterprise Rent- A- Car, since this a huge organisation, therefore employees should be given autonomy to make decisions on their own which will improve the decision making skills of employees, they will take right decision and right time.
3.2 Plan for your organisation’s future leadership needs?
For the future, the Autonomy leadership style is required for Enterprise Rent-A-Car, since the demands of customers are ever changing; they are more influenced by customization, the competitive environment cannot let such a huge company to take so long in decision making process, therefore the employees should be allowed to take decisions which they consider suitable at that particular point in time. This will increase the sense of ownership in the employees. They will be motivated when they will take right decision on their own. The leaders should always be welcoming to give consultancy to the employees if they find any difficulty in decision making.
Centralized decision making in such a competitive environment will not let the company achieve its goal of delivering better customer value and satisfaction. For the autonomy leadership style to pursue, the employees should be capable enough to make right decisions which are beneficial for the organisations, they should possess the enough knowledge and skills needed to take right decisions without the consultancy of the leaders. Enterprise Rent-A-Car can train their employees the leadership style and give them proper training of how to take decision in different situations that can better deliver customer value and satisfaction and be beneficial for the company. The employees, who take right decision according to the situation they faced, should be rewarded to increase their moral and self esteem.
4.1 Make an appropriate plan for developing leadership skills for Enterprise Rent a Car
For Enterprise Rent-A-Car democratic leadership style should be brought in that will give autonomy to employees to make certain decisions. Enterprise operates through an extensive network of local offices. Branch managers and their staff cannot wait for the higher authority to make decisions that are suitable in current situations; therefore they need to make decisions to meet the changing needs of customers in a fiercely competitive market. In the Democratic leadership style, employees can share their ideas and contribute to the achievement of organisational goals. For the Enterprise, the consultative democratic management is appropriate, since there objective is to deliver better customer service, this can be better serve by consulting the employees, their ideas and opinions should be considered in the decision making process and the a final decision should be made by the leader after group contribution to decision making.
This will motivate the employees and they will contribute more efforts since they were involved in the decision making process. This is how our need to satisfy customers will be met
Then by giving autonomy to employees, their self esteem need would be satisfied. When employees would be self esteemed and confident they will relate themselves to the organisation and feels their responsibility towards it. They will perform well and contribute to the success of the organisation. Their trust level will be increased. They will put more efforts to perform well and would participate to meet organisation’s objectives.
Therefore, democratic leadership leads to autonomy to employees, which leads to employee’s increase self esteem, which would results in better decision making, the better decision making will result in ultimate customer satisfaction, the satisfied customer generates repeat purchase, which will lead to finally gain of customer commitment and eventually gains/profits for the Enterprise.
4.2 Assess the usefulness of the plan for developing leadership skills for Enterprise Rent a Car.
It is extremely useful because if this leadership style is not followed or planned properly, Enterprise Rent-A- Car would never be able to achieve customer satisfaction in long run within competitive environment.
Secondly, Enterprise Rent-A- Car is huge in size, it has 75000 employees that is a large organisation where centralization can never work
There has to be a decentralized management style. Every branch will lead in its own way which they consider suitable.
Different customer segments have variant needs and want that can only be satisfied when front line managers have enough authority to deliver service.