Organization itself Empowers the Chief Executive to make Changes
4.2.3. The Micro-Level Factor: The Degree to Which Individual Top Managers are able to Change Structures
This third point is particularly interesting. Is it similar to Max Weber's concept of the charismatic leader (die charismatische Herrschaft) (Weber, 1980):
discretion is derived in part from executives themselves. By virtue of their personal characteristics, chief executives dier in the degree to which they generate and are aware of multiple courses of action. Some executives see alternatives that others do not. Some executives, because of their own persuasive and political skills, can consider options that others cannot. [The] speci c individual-level attributes aecting discretion: aspiration level, tolerance for ambiguity, cognitive complexity, locus of control, power base, and political acumen. (Finkelstein et al., 2008: 33).
The authors essentially argue that top executives can increase their latitude, freedom and power to make profound changes by applying their sheer will:
executives can shape their own discretion. Eective managers nd and create options that others do not have. They may do this through creativity and insight, political acumen, persistence, or sheer will. Managers, even in a given situation, are not uniformly hemmed in. Child (1997), for example, noted that executives have various interpersonal linkages to the external environment, and can often use these linkages to in uence the environment's eect on the organization, thus setting their own level of discretion (within limits). (Finkelstein et al., 2008: 33).
Here, the authors seem to detect a self-ful lling prophecy when they argue that per-sonality is an important factor in individual-level discretion, and that a given manager's perceived level of discretion is an important determinant of actual discretion. If the elites believe they can make profound changes, they are more likely to be able to make these changes indeed.
Charisma is not exactly a personality trait, but a special relationship between the elite and its followers (e.g. employees), but only elites with certain personality characteristics are likely to build up a charismatic relationship with their followers (see below). The
followers put great hope and con dence in their charismatic leader and are willing to follow him/her wherever he may lead (Finkelstein et al., 2008: 71). The charismatic leader is the most genuine expression of the original meaning of the term elite (The chosen one). In the perception of its followers, the charismatic leader comes to the organization in order to save it from failure and lead it into a great future, into `the promised land'. The charismatic leader can be described as a hero, ghting for the survival of the group, organization, enterprise, etc., often giving a higher priority to the survival and well-being of the group than to his or her personal ambitions. The charismatic leader can make things possible that were considered to be impossible just a short time before his or her arrival. The charismatic leader has the power to unify the group and organization, reduce the feeling of complexity and uncertainty among his followers, nish disputes and lead all energy of the organization and groups in one and the same direction in order to achieve one common goal and objective. One may argue that many members of an organization need to have a charismatic leader they can deeply believe in because they do not believe in themselves. They have doubts about themselves and their capabilities, which strongly constrain, limit and block the development of their true potential. The charismatic leader can dissolve these blockades and give them the con dence they need to excel. According to Finkelstein et al.: The particular kinds of follower responses constituting a charismatic relationship include performance beyond expectations (Bass 1985); changes in the fundamental values of followers (Etzioni 1975);
devotion, loyalty, and reverence toward the leader (House 1977); a sense of excitement and enthusiasm (Weber 1957; Bass 1985); and willingness on the part of subordinates to sacri ce their own personal interests for the sake of a collective goal (Finkelstein et al., 2008: 71). The charismatic leader seems to have the greatest impact in times of crisis and uncertainty, when the followers are hoping for somebody who is going to rescue them (Roederer, 2011: 51). According to one study the positive eect of charismatic CEOs was magni ed under poor economic conditions, in line with the prevailing view that charisma has its greatest eect under situations of adversity (Finkelstein et al., 2008: 71).
4.2.3.1. The Personality Traits and Skills Which Underlie and Create a Charismatic Relationship
Which personality characteristics may increase the probability that a member of the elite is able to build up a charismatic relationship with his or her followers? Finkelstein et al. summarize the research ndings of several studies:
What are the personality qualities of leaders that tend to evoke such responses from oth-ers? Bass (1985) inventoried the following: self-con dence, self-determination, insight into needs and values of their followers, and the ability to enhance or en ame those needs and values through persuasive words and actions. Conger and Kanungo (1988a) also included high activity level, con dence, commitment, and need for power as leader characteristics typi ed in the charismatic in uence process. In an elaborate study of U.S. presidents, employing extensive public accounts and historians' analyses, House, Spangler, and Woycke (1991) empirically examined the personality qualities associated with charisma. They found that charisma was (1) positively related to the president's need for power; (2) negatively related to the need for personal achievement; and (3) positively related to activity inhibition (a measure of the extent to which the executive uses power to achieve institutional rather than strictly personal goals). The authors' interpretations of these results were that (1) a need for power is prerequisite to devel-oping the strong persuasive abilities that accompany charisma; and (2) charisma-prone executives have a genuine desire for institutional and collective achievement, rather than personal achievement. (Finkelstein et al., 2008: 71-72).
Charismatic leaders do often have narcissistic personality traits (see section on narcis-sism) and are in some aspects similar to the visionary-type of leader. Charismatic leaders are so convinced of themselves and their ideas and objectives that they are not very in-terested in analyzing empirical data, the past or present situation. They only focus on the (imagined) future. They tend to ignore facts, arguments and decisions which do not
t into their world-view, because they have no doubt that their point of view is the only true one. According to Finkelstein et al:
Executives with personalities that evoke charisma will place less credence in information unsupportive of their vision than will executives without such personality characteristics [. . . ] [They] will be more persistent in their pursuit of a chosen strategy (even in the face of discon rming evidence) than will executives without such personality characteristics.
(Finkelstein et al., 2008: 73).
Although charismatic leaders are often celebrated like a savior (el Salvador), their impact on the organization can be devastating. The only thing that is for sure is that charismatic leaders are going to make profound changes. But its unsure whether these changes are advantageous or disadvantageous for the enterprise or any other organization they lead. Charismatic business elites will lead the company to the top (to new heights) or to the abyss.
4.2.3.2. How the Attitudes and Moods of Leaders In uence the Emotions of their Employees
There is plenty of anecdotal evidence suggesting that the attitudes and moods of leaders have a signi cant emotional impact on the people they lead. The psychologist Daniel Goleman (2003), who has focused much of his research on emotional intelligence, uses new ndings from neuroscience to investigate how this emotional impact takes place. He provides insights into how elites in uence their employees' and followers' emotions. He puts special attention to the attunement of emotions, that is, how emotions spread from one person to others and how this attunement impacts the moods, attitudes, thoughts and even the physiology of the others (Goleman et al., 2003: 1).
According to Goleman et al.: Scientists have captured this attunement of emotions in the laboratory by measuring the physiology such as heart rate of two people as they have a good conversation. As the conversation begins, their bodies each operate at dier-ent rhythms. But by the end of a simple fteen-minute conversation, their physiological pro les look remarkably similar a phenomenon called mirroring. This entrainment occurs strongly during the downward spiral of a con ict, when anger and hurt reverber-ate, but also goes on more subtly during pleasant interactions (Goleman et al., 2003: 7).
Another experiment provides further insights into the process during which emotions spread through non-verbal channels from one person to others:
when three strangers sit facing each other in silence for a minute or two, the one who is most emotionally expressive transmits his or her mood to the other two without speaking a single word. The same eect holds in the o ce, boardroom, or shop oor;
people in groups at work inevitably `catch' feelings from one another, sharing everything from jealousy and envy to angst or euphoria. The more cohesive the group, the stronger the sharing of moods, emotional history, and even hot buttons (Goleman et al., 2003:
7).
Applied to the case of business elites and multinational enterprises, the question is: who spreads his or her emotions stronger and more widely than others and, therefore, has a larger emotional impact on the group as a whole and why? According to Goleman et al.: The continual interplay of limbic open loops among members of a group creates a kind of emotional soup, with everyone adding his or her own avor to the mix. But it is the leader who adds the strongest seasoning. Why? Because of that enduring reality of business: everyone watches the boss. People take their emotional cues from the top.
Even when the boss isn't highly visible for example, the CEO who works behind closed doors on an upper oor his attitude aects the moods of his direct reports, and a domino eect ripples throughout the company's emotional climate (Goleman et al., 2003: 9).
How do leaders exactly impact the emotions of the people they lead? Which attitudes, actions and communication channels are crucial? Goleman provides further details:
Careful observations of working groups in action revealed several ways the leader plays such a pivotal role in determining the shared emotions. Leaders typically talked more than anyone else, and what they said was listened to more carefully. Leaders were also usually the rst to speak out on a subject, and when others made comments, their remarks most often referred to what the leader had said than to anyone else's comments.
Because the leader's way of seeing things has special weight, leaders `manage meaning' for a group, oering a way to interpret, and so react emotionally to, a given situation.
But the impact on emotions goes beyond what a leader says. In these studies, even when leaders were not talking, they were watched more carefully than anyone else in the group. When people raised a question for the group as a whole, they would keep their eyes on the leader to see his or her response. Indeed, group members generally see the leader's emotional reaction as the most valid response, and so model their own on it particularly in an ambiguous situation, where various members react dierently. In a sense, the leader sets the emotional standard (Goleman et al., 2003: 8-9).
Leaders de ne what is perceived as valid, adequate and correct within the group.
They make and set the unwritten rules of the group and de ne what is a correct and (emotionally) adequate response to a given situation. They also distribute respect, recognition and importantness among group members, discussion issues and opinions.
When the leader listens carefully to a certain person, most group members will listen carefully to that same person, too. When a leader does not pay attention to what a certain person says or to certain issues, most group members are likely to pay less at-tention as well. When a leader interprets a certain situation as a serious problem, most group members are likely to take over this interpretation. When the leaders are
satis- ed, content and happy with the situation, most group members are likely to gravitate towards these optimistic feelings, too.
This may help to better understand and explain why enterprises which are similar in most aspects (e.g. they are from the same home country, are active in the same industry, oer the same product or service and are of similar size, etc.) dier signi cantly in their environmental and social performance. It seems that in some enterprises managers as
well as rank-and- le workers tend to be more socially and environmentally conscious than in others. One explanation could be that the leaders act as role models and by practicing their own convictions, they de ne what is important, what everybody should be conscious about and how people should interact and treat each other. This example of values, behavior and actions trickles down through the whole enterprise, from the top-management level to the rank-and- le workers and even to the supplier rms.
When the top managers are role models, lead by example, and reward certain attitudes while sanctioning others, they may create common and shared values which spread through the whole enterprise and even to the families and friends of the employees.
Dunning and Lundan have emphasized that the costs of environmentally friendly pro-duction are relatively low, allowing enterprises to have a sound environmental record and at the same time being highly competitive:
Even in the most polluting industries, that is, chemicals, paper, petroleum re ning and mineral processing, the annual costs of environmental compliance have not typically exceeded 5% of total cost (Dunning and Lundan, 2008: 313).
The crucial point is: the impact of the top managers on the social and environmental performance of the enterprise and the employees is currently strongly underestimated in the academic literature.
Taking into account this point may help to understand and explain the issues of the maquiladora industry in Mexico. There is some evidence that the social and environ-mental problems associated with this industry (sexual harassment and abuse, extremely high turn-over rates, low wages and short contracts, violence and other forms of degrad-ing treatment of employees, environmental pollution, tax avoidance and evasion, etc.) are not primarily caused by structural constraints (e.g. market pressures to lower prices) but by bad management (Blackman et al., 2003; Cravey, 1998; Guendelman and Silberg, 1993). The top managers who work in the maquiladora industry are usually the ones who did not nd work elsewhere. When the US American MNEs decided to build up the maquiladora industry in Northern Mexico, they sent the managers who were willing to leave their safe homes and their families in the USA and go to Mexico. Most managers who had other options avoided working in places which are perceived to be seriously dangerous, such as Northern Mexico. In addition, even the salaries of the top managers in the maquiladora industry are lower than in other industries, further discouraging the best top executives to work in this industry.
Usually, the managers who nally agreed to go to Mexico, did not speak Spanish and were not willing to learn it either, so they employed English-speaking Mexican engineers,
technicians and supervisors, who, again, were not necessarily the best engineers, techni-cians and supervisors, but only the best English speakers. These subaverage managers then laid the groundwork and basic structure of the maquiladora industry as well as the culture of the organization in Northern Mexico. Several Mexicans who have worked in the maquiladora industry reported that they were shocked by the gross expressions and bad manners of the expatriate managers, as they expected something else from US American managers. These expatriate managers were not the best the US American MNE could oer, but the only ones who were willing to go to Mexico as they did not have any other option.
Of course, there are structural causes, too. As the maquiladora industry competes on price and not on quality, the top managers have less room for maneuver because they have to compete with Chinese low-cost enterprises. But even this is not a purely struc-tural problem because with sound management, the maquiladora industry could have moved up the value chain, producing higher quality and more sophisticated products and in this way being able to sell the products at higher prices, thus enabling the man-agement to pay higher wages. Indeed, some maquiladoras have achieved to do that, now producing parts for the aerospace industries (The Economist, 2013). But most maquiladoras lag behind and still compete with low quality products from Asia because they lack innovative management.
Today, about 50 years after the maquiladora industry was founded, many factories have
mexicanized and most of the managers and engineers are Mexicans now. One problem is that the Mexican educational system produces managers and engineers for middle management positions which lack the attitudes and strategic skills required for top-management tasks and innovative product development:
Mexican universities and colleges tend to produce engineers expert in industrial process rather than products; they are good at making production lines more e cient, but not at inventing what goes on them (The Economist, 2013).