Economics for Future Leaders

1. Economics for Future Leaders Lecture 1 – The Functions of Leadership, June 26, 2012

2. The Functions of Leadership in Organization • “Leadership is a process of social influence in which one person is able to enlist the aid and support of others in the accomplishment of a common task.” • Key points: • Leadership is a group activity. • Leadership is based on social influence. • Leadership revolves around a common task.

3. The Functions of Leadership in Organization • The specification seems simple, but the reality of leadership is complex. • Intrapersonal factors (i.e., thoughts and emotions) interact with; • Interpersonal processes (i.e., attraction, communication, influence) to have effects on; • A dynamic external environment.

4. Organizational Functions • Groups and organizations are by nature inefficient. • If one person could accomplish a job, the creation or assignment of a group would not be warranted. • Groups require coordination of the efforts of their members.

5. Organizational Functions • The time and energy spent in that coordination are diverted from productive activity. • Organizations, which are groups of groups, demand even greater resources applied to coordination.

6. Organizational Functions • But, most of the productive activities in society cannot be accomplished by individuals. • Organizations are essential to the realization of the goals of productive endeavor, and leaders are essential to organizational coordination.

7. Organizational Functions • Internal maintenance. • The primary function that an organization must achieve is the regularization of activities to provide a stable base for productive operation • Reliability – recurrent events are responded to in the same way every time they occur.

8. Organizational Functions • Internal maintenance (contd.). • Predictability – members of the organization know what is likely to occur and when. • Accountability – reliability and predictability allows leaders to allocate responsibility for errors and identify methods of correction.

9. Organizational Functions • External adaptability. • Organizations must know what is going on around them and adapt to changes in the environment. • Sensitivity. • Flexibility. • Responsiveness.

10. Organizational Functions • Balancing contradictory demands. • Problem: procedures that ensure reliability and predictability reduce flexibility and responsiveness. • Organizational survival is a question of balance. • Organizations with stable environments will benefit from the efficiencies of regularized processes. • Organizations with competitive, unstable environments will need to sacrifice reliability to enhance responsiveness.

11. The Organizational Functions of Leadership • In an orderly, structured, and well-understood environment, the primary responsibilities are guidance and motivation. • Assign people to tasks or responsibilities, to outline what is expected, and to facilitate and encourage goal attainment.

12. The Organizational Functions of Leadership • In a less orderly environment calling for external adaptability, the crucial functions are problem solving and innovation. • The leader must create the kind of atmosphere that encourages sensitivity, flexibility, and creativity. • The leader must be a change agent.

13. Status Differentiation • The concept of leadership implies a differentiation of authority and responsibilities between group members. • This differentiation is known as status.

14. The Functions of Status Bestowal • Positive functions. • The elevation of competence. • The assignment of authority. • The distribution of rewards. • The modeling of normative expectancies. • The facilitation of innovation.

15. The Functions of Status Bestowal • Negative functions. • Means-end reversal (status for its own sake). • Distortion of communication. • Rigidification of the status structure. • Primogeniture. • Territoriality, cronyism, and petty competition.

16. The Cultural Evolution of Effective Leadership • The desirability of leadership characteristics will be influenced by social context. • Every culture (whether religious, national, or organizational) prescribes which behaviors are normative in a social context. • Culture is the way in which a social unit adapts to its environment over time. • The culture is first determined by external adaptability, then internal maintenance processes are brought into coherence.

17. The Cultural Evolution of Effective Leadership • Examples: if climate or lack of arable land make hunting and gathering more feasible than agriculture, hunting and gathering will tend to be adopted as the primary means of subsistence. • Hunting and gathering cultures must encourage cooperation while developing independent and resourceful members.

18. The Cultural Evolution of Effective Leadership • Democratic political structures (e.g., tribal councils) and egalitarian religious systems help to encourage the growth of self-sufficient and cooperative group members. • An unpredictable supply of food makes creativity in resource use important and making sharing necessary to reduce the problems of temporary shortages.

19. The Cultural Evolution of Effective Leadership • A premium on cooperation and a penalty for competition. • Leadership is situational (temporary roles for particular tasks) or generalized (roles determined by progress through the life cycle).

20. The Cultural Evolution of Effective Leadership • The transition to horticulture increased the opportunities for the society to exploit its environment to generate surpluses. • Created a type of semiegalitarian leadership called managerial leadership with power over redistribution of goods and services. • Primary skills are persuasion and negotiation. • The redistributor model may lead to more autocratic structures.

21. The Cultural Evolution of Effective Leadership • Large scale agrarian societies tend to develop hierarchical power structures and restrict access to leadership roles. • Agrarian economies place a primary premium not on resourcefulness but on reliability.

22. The Cultural Evolution of Effective Leadership • The most prized personality trait of the masses is obedience. • Autocratic leadership style, high on direction and low on participation combined with “benevolent paternalism.”

23. The Cultural Evolution of Effective Leadership • Many modern organizations reflect the experiences of the hunter-gatherer or agrarian cultures. • Organizations with complex and unpredictable environments draw on hunter-gatherer leadership structures. • Organizations with stable and predictable environments more closely reflect agrarian societies.

24. Leadership Question #1 • Looking out at the real world of private, nonprofit, and public organizations, would you say that most of them draw on the hunter-gathering tradition or the agrarian tradition of leadership? That is, do most organizations have complex and unpredictable or stable and predictable environments? Or are other factors relevant?