What are the Factors that Affect Leadership Practice in a Globalised Economy?
Introduction
Leadership in a globalised economy requires the leaders or managers to understand and handle challenges arising from diversity and differences in markets. The leadership approach or style adopted by the leader is affected by the prevailing business environment and economic conditions, political conditions, and social dynamics. These factors require the leaders to acquaint themselves with specific aspects that are likely to affect the operations of their organisations in certain countries. The successful global leader understands that followers or employees have to be comfortable with cultures of countries in which they are working, and influence them to be productive in such conditions. Leadership in a globalised economy is affected by a range of factors that determines the leadership style to be adopted and the success of the approach in ensuring that goals and objectives of the organisations are achieved.
Leadership involves a process whereby a person influences others to attain a common goal or objective. Leadership has been considered as a major aspect in effective performance of organizations, and is being promoted in place of management on the basis that leaders are able to achieve more than managers (Schedlitzki & Edwards, 2014). With many organisations choose to expand their operations into international markets, a huge responsibility is placed on leaders to provide guidance and make decisions that will ensure the achievement of the set goals and objectives. However, globalisation has appeared to overwhelm many organizations and their leaders due to the fast pace of growth into international market. In a globalised market, leaders have to handle and understand varying societies across the globe where competition is increasing, and new challenges are emerging every day.
Due to globalisation, the business environment has increasingly become fluid and complicated due to various issues that affect the operations and success of organisations in the international market. The nature of the globalised economy has brought about new and complicated issues that have far-reaching effects on the decision making process by leaders in organisations (Northouse, 2016). The high rate of change in technology, stakeholder’s awareness, and regulations require that leaders to overlook some conventional leadership theories in order to be relevant and succeed in the global arena. In order to leader others in such turbulent times, the leader must have qualities that will enable him to influence employees or peers from varying background, and who are working in different conditions (Northouse, 2016). The factors that are likely to affect leaders of organisations operating in such an environment include economic, business, and political conditions, and social-cultural dynamics
Business Conditions
The effects of globalisation have brought about increased study on the various perspectives of the environment in which business operations of organisations are located. The effects are mostly felt by multinationals or transnational organisations, and the studies have held universal views of the impact of the aforesaid factors. The results of the studies affect the process of decision making, development of alternative solutions, and the implementation plans for the best courses of action (John & Chattopadhyay, 2015). Hence, leaders’ perspective and practices, and resulting strategies that are relevant for specific a business environment will be inapplicable in another environment. In one economy, organisation’s leaders may be praised for increasing the value of shareholder by way of effective global supply, but in another country, the organisation may encounter huge criticism and attack due to human costs associated with shutting down factory in the local environment. Hence, integrity is an important leadership trait I a globalised economy. Integrity involves ethical and honest behaviors that enable leaders to build trustworthy relationships in a global economy that is knowledge-based (Robbin et al. 2014). Leaders with integrity will create good relationships with shareholders and the society in which their organisations operate.
With constant changing facets of globalisation, organizational leaders should to reconsider their assumptions about the strategies to employ in different past of the world. This situation calls for more than just knowledge of the prevailing business conditions, and come up with strategies that will help the organisation’s leader to achieve the set goals and objectives. In order to successfully deal with these challenges and changes, the leader has to self- equip with analysed information about their local conditions (John & Chattopadhyay, 2015). Leaders tend to develop strategies that fit an environment since such strategies can be used for many years but changes in the environment determine the success or failure depending on the choice of strategy. Leadership has to consider the external forces that have an impact on the operations or functioning of an organization (John & Chattopadhyay, 2015). Moreover, leaders have to intentionally make varying decisions or choose various set of activities that will ensure the organisation gains competitive advantage in the prevailing business environment. The nature of the prevailing conditions will determine the strategies to be adopted and implement by the leader of an organisation.
Economic Conditions
The economic connections among different countries and the impact of global crisis have emerged as conditions that organizational leaders should consider in the decision making process. The prevailing economic conditions are determined by the labor and industrial practices, role of Non-Governmental Organisations , and trade policies have be incorporated in decision making and strategy formulation. Different countries have different economic conditions, and they influence the approach the leader takes in specific countries (Knights & McCabe, 2015). Since the 2008 financial crisis, there has been a wide discrediting of practices of organizational leaders and managers, which has given rise to new thinking about the leadership of companies within financial-services and their related business (Knights & McCabe, 2015). The crisis precipitated a call for new business values and norms championed by industry leaders including changes in governance and management structures. Hence, global economic crisis will majorly be attributed to a leadership problem or challenge since executives are expected their employees focused towards finding internal and external solutions. The leaders are faced with two unique challenges which include keeping their organisations on the right path in amidst a weak global economy and maintaining the functionality of the firm until the economy improves (Knights & McCabe, 2015). The decisions made and strategies adopted by leaders will be focused on keeping their business organisations together, as a short-term approach, while developing and implementing plans for long-term sustenance (Knights & McCabe, 2015). The leadership practices of the organisation will be influenced by the need to contain the situation and keep the business operations afloat in an uncertain global economy.
During economic crisis, the leader of an organisation is expected to engage the employees and stakeholders regarding the way forward. A bad global economy is a test for the leader, and the organisation’s culture that he or she helps create (Maak & Pless, 2009). When the global economy is good, consumer demand may hide the gaps in productivity caused by leader’s disengagement from the operations. But when the global economy is in crisis, the performance problems caused by disengagements cannot be hidden. The leader has to rise to the occasion and come up with ways of mitigating losses and even closure of business operations. The leader has to engage the employees to be positive and influence their reactions towards global crisis so that the operations and performance of organisations does not falter due to uncertainty over job losses and future personal career direction (Maak & Pless, 2009). The leader has to ensure that employees remain committed to the improving performance and helping the organisation to wither the effect of crisis. The above abilities summarize the qualities of participative leadership style. Participative leadership involves using an approach that is centered on both people and work, and allows followers to be part of decision making (Saee, 2005). In difficult economic conditions, the leader allows followers to take part in decision making and problem solving.
The global economic crisis and related changes can also lead doubt to the strategies employed in an organisation. The challenge can make stakeholders including employees and shareholders to lose confidence in the current leadership style. The lack of confidence can be caused by failed expectations, especially when the effects are rapid and severe (Maak & Pless, 2009). The leadership practices can easily be discredited and options sought to replace them. The impact can be felt at the level of board of directors, and driven by fear of being exposed the leaders can easily change their behavior. The directors will want to have more informed about corporate risks and practices, and information to substantiate the more dimensions of organisation’s performance (Maak & Pless, 2009). With increased risks in a globalised economy, leaders may feel that their positions are not safe. The result will be increased demand for increased performance from staff, while reviewing intensively the areas that have conventionally been left to junior management. Moreover, crisis will make leaders at the board level to reconsider structures of corporate governance, adjust composition of teams and review the qualifications of the individuals occupying management positions (Maak & Pless, 2009). Due to economic crisis at the global level, top corporate leaders will strive to align leadership structures and methods to the current requirements in the market.
Political Conditions
The effect of regulatory policies adopted by government on business and organizational leadership cannot go unnoticed. Politics in different countries around influence business operations in the global market. Fiscal policies including taxes and interest rates, and inter-country agreements affect the manner in which businesses have to operate in the global market. Leaders have to recognize the role of politics in businesses, and align their strategies to specific political environment of country they are operating in.
Also, leaders have to develop strategies that they can use in evaluating the interaction between their organisations and governments. The multinational firms may operate in volatile political environments, and corporate leaders may be forced to ignore some values or leadership principles due to the influence of political leaders. Managers may have to submit to the demand and wishes of political leaders so that their firms can operate peacefully in the hostile countries. The scenario calls for leaders who are intelligent and self-confident, which are important leadership traits in a globalised economy. Intelligence involves the cognitive capacity for critical thinking, solving problems, and making the right decisions. Self-confidence involves being sure of one’s decisions and capabilities, and fostering confidence among the employees in an organisation (Robbin et al. 2014). Intelligent and confident leaders are required in a globalised economy for formulate strategies that will withstand the political conditions of specific countries.
Cultural Dynamics
Culture can influence most of the aspects that relate to leadership especially at the global level, including the right management practices, compensation expectations, engagement of employees, and work/life balance. Culture refers to people’s way of doing things and involves a set of values and rules, and habits (Paramova, & Blumberg, 2017). National cultures influence organisational cultures, and increased globalisation has placed the issue of national culture at the forefront of agenda of businesses with operations in foreign countries. A major implication for business organisational leaders in the international concept involves the need to understand and respect cultural differences, and various cultural perspectives (Paramova, & Blumberg, 2017). If the operations of the organisation are contracted to another organisation abroad, leaders for each organisation have to acquire some cultural cognizance to forestall and understand each other’s reaction. Culture is made of certain norms comprising of beliefs and values, and all these can be found in all countries, and the ethnic, regional or religious culture lead to the differences among counties. In some regions or countries, cultural groups go beyond political borders of a country (Nazari et al.2012). Hence, a global leader has to be sensitive to the cultural differences, understand and appreciate the people’s differences, and try to allow for such aspect during communication with representatives of the specific cultural groups.
The diversity of culture in a globalised economy requires a leadership styles that allows enough flexibility. Hence, contingency leadership is very crucial in such an economy. The contingency leadership enables leaders operation’s to be successful in environments with multicultural backgrounds or experiences (Robbin et al. 2014). Flexibility entails the capacity to comfortably adjust to varying situations, and a leader should adapt to the constantly changing business environment (Robbin et al. 2014). The leader of an organisation with a global presence should be able to adapt to the different cultural backgrounds of employees and his or her peer managers.
The global cultural differences also influence the lifestyles of people that managers lead in their organisations. The variances in cultural lifestyle may be understood from various cultural dimensions including individualism, equality levels power distance in a society, uncertainty avoidance, masculinity, and long-term orientation (Ozdemir, 2010). These cultural dimensions apply differently in different cultures across the world, and determine the leadership style that fit certain organisations in a globalised economy. Also, knowing the similarities along the cultural dimensions enables the leaders to group regions and countries, and chose the appropriate national and regional marketing approach or business programmes (Ozdemir, 2010). The leader needs cultural knowledge to gain insight into the best way to influence organisational culture, and influence people with different cultural backgrounds. Moreover, companies’ subsidiaries, divisions, organisational departments, and specializations are occupied by individuals with subcultures, and they can enhance or undermine the communications and achievement of set goals (Ozdemir, 2010). Successful leaders have to be adopt a leadership style that transcends all the subcultural differences, bring harmony, and ensure that goals and objectives are achieved across board.
The cultural differences affect the management approach organisations’ leaders do adopt to ensure employees’ individual development in line with organisation goals. As managers, leaders wishing to know how to be intercultural successful managers should learn how to handle cultures. The leaders have to embark on culture training, which will allow them to provide followers or employees with necessary information when they have to work in new cultures (Ozdemir, 2010). The leaders have to guide the followers through various experiences, and assist them in development of a set of skills that will enable them deal handle new cultures. Approaches to culture general lean towards experiential in nature, and aims at equipping individuals with broad experiences almost similar to the kinds of experiences they may face when interacting with people from different cultures. Leaders will find that training is important for the right influence to be felt in their organisations. The leadership approach will have to integrate culture training to ensure their business transit smoothly towards becoming an actual global organisation irrespective of whether it is a small or large firm or sole proprietorship (Ozdemir, 2010). The leader and his followers will be able to enhance their all-round capacity and capability in an increasingly globalised economy.
Organisational culture starts with leaders who impose personal assumptions and values on employees or teams. If the team succeeds and the assumptions are not taken seriously, there emerges a culture that that determines for future members of the team or organisation the acceptable type of leadership. Previously, it has been assumed that differences in cultures presented barriers to effective interaction and communication in a global setting (Ozdemir, 2010). Presently, successful global leaders perceive cultural differences as resources but not barriers if handled well. The global leaders are forced to recognize the cultural recipe and their degree of malleability, identify the recipe’s characteristics and its layers, and determine the appropriateness of the recipe for the needed global strategy. The leaders have to embrace transformational skills and values to establish the right organisational culture (Ozdemir, 2010). One culture is also distinguished from another by certain solutions it choses for a specific problem that is seen as a dilemma.
In the global economy, some markets are similar mostly because of the many attributes that help in keeping the culture together including ethnicity, language, religious beliefs, location, and the degree of economic growth or development. In such markets, leaders may have to employ common styles of leadership or management to ensure the success of organisation’s operations (Ozdemir, 2010). The global leader must have the abilities and skills to learn the differences in different cultures, lead and manage people with diverse cultural backgrounds. The leaders have to employ the right leadership style that will ensure employees in global corporation are comfortable working in a diverse environment and motivate them to perform amidst the arising challenges. The leader is required to learn and acquire intercultural communication skills that will endear him to others who are looking up to him for direction and decision making.
Conclusion
Leadership in a globalised economy is affected by the business, economic, and political conditions prevailing in specific countries. The underlying factors influence the leadership style to be adopted and the impact of leadership in ensuring organisations succeed in their endeavors. For international corporations or multinationals, leaders have to understand the economic conditions and business environment, and make decision and develop strategies that suit the specific markets. The leaders have to align the organisations’ operations to the countries rules and regulations established. The cultural dynamics requires the leader to understand the culture diversity that will affect organisation culture, and how to lead a diverse team of employees.
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