This paper sets out to explore the integral role of leadership competencies in driving organisational innovations and enhancing overall performance. It establishes the notion that contemporary leadership has significantly evolved from its traditional form that emphasized strict rules and control over subordinates, to an approach that encourages and values new ideas, innovations, and performance. Today's competitive market conditions and growing customer expectations mandate an affirmative management style, necessitating leaders to inspire and harness the innovative potential of their teams while working towards a common goal.
The research focuses on the significance of effective leadership methods, appropriate techniques, and their successful implementation in professional environments, particularly within the context of research and development departments where innovation is critical for company growth and profitability. Through a careful blend of literature review and a mixed-method approach, this study aims to provide a comprehensive view of the landscape of leadership competences within organisations and determine the competencies that significantly contribute to promoting innovation and overall performance.
In conducting this study, the leadership competencies of higher management in an anonymised, medium-sized, service-oriented company, referred to as company XYZ, will be assessed using the KODE® personality tests. The overarching aim is to draw a connection between leadership competencies and innovation, thereby forming a strong foundation for future, large-scale research work. Ultimately, this paper seeks to aid leaders and policymakers in improving development programs, recruitment policies, and organisational practices, while also contributing valuable insights to the current discourse on the competencies required for leaders to successfully boost innovation and performance within organisations.
Table of content
Abstract
Acknowledgements
Glossary and Definition of Terms
List of Abbreviations
List of Tables
List of Figures
1. Introduction
2. Literature Review and theoretical framework
2.1 Leadership
2.1.1 Leadership theories
2.1.2 Leadership styles
2.1.3 Leadership competences
2.2 Innovation
2.2.1 Types of innovation
2.2.2 SME as technological driver introducing radical and disruptive innovations
2.3 Organisational performance
2.4 Literature synthesis
3. Methodology
3.1 Philosophical approach
3.2 Research Design
3.3 Pilot Study
Pilot Study Results
Declaration of contribution
References
Abstract
Leadership in business has developed from focusing on strict rules and control over subordinates towards a supportive role of the leaders valuing new ideas, innovations, and performance in the employees. Continuously more competitive market conditions and increasing customer expectations for affirmative management styles paved the way towards new leadership approaches, with the need to not only increase the innovative potential of the employees but also to unite them for a joint goal in their performance. Therefore, leadership is crucial for organisations to address all opportunities and challenges on the market, independent of their size and industry.
The effective leadership methods and appropriate leadership techniques and their implementation play an important role in today's professional environment. Especially in research and development departments and innovations, which are critical for the company, its turnover, and its growth. Thus, innovations require the necessary knowledge and competences to meet the change in the working world towards more automation and higher employee qualifications. Leaders need to know the sources of their own capabilities and that of their employees to set creative processes in motion. To control such processes effectively, specific impulses are required in the various phases.
Consistent innovation leadership and the combination of market potential and competences ensure innovative and proactive action on the market. The leaders should discover their own motivation and sources of creativity, develop their leadership role in the creative process and personal leadership style, as well as use leadership tools to activate the creativity of their employees. A skilful balancing of the competence areas combines seriousness and lively experimentation, analytical mind, and the inexhaustible creative potential of the unconscious-intuitive working extension memory. Awareness of own leadership competences and assessment of the competences of the employees allows the leader to successfully control the creative processes and to establish the unique innovation structure in the company. These are primarily the responsibility of the leaders. First, it depends on the right constellation of team members, a team spirit that promotes creativity and meaningful, inspiring goals. In the innovative process, it depends on the leadership to skilfully control the interplay between two opposing thought and communication patterns. Therefore, personal leadership competences and awareness of the competences of the employees can be great assets for a leader to establish a successful structure within an organization, boosting its innovations and performance.
This thesis based on literature review as well as a mixed method approach, explores, if leader’s competences can influence organisational innovations and performance. As these aspects play a crucial role for organisational success, companies need to focus on constant improvement within them. Especially performance of an organization needs to be frequently analysed, and the strategy adjusted, even if the company is providing reliable products / services, not focusing only on innovations. Hence, solid performance, as the realization of a strategy assessed alongside predetermined requirements (e. g. costs or accuracy), need to be rapidly implemented into action.
The aim of this final thesis is to provide a picture of the leadership competences within an organisation and offer an extensive review of which competences should be considered significant for being effective for a leader related to his / her contribution promoting innovations and overall performance within an organisation. The thesis estimates leadership competences in higher management by conducting KODE® (“software-based, scientifically founded analysis process for measuring and developing competences”, KODE GmbH, 2021) personality tests. With such an estimation, the leader can observe which of his / her competencies are strongly developed and which are still in the development phase. An additional advantage is also a broader perspective on own competences and a better view of the current situation with his / her employees, and the places where an urgent adjustment of the strategy is required. Such assessment of competences can also make the leader aware of where there is still potential and how it can be addressed.
An anonymised, medium-sized, service-oriented company XYZ will be a subject of the following attempt to estimate the competences, which can have an impact on organisational innovations and overall performance of a company. The focus is placed on the competences of the departments’ leaders (currently 35), their performance, and innovations implementation, hence, the exact name and industry of this company is not relevant for the purpose of this final research. It is an example of a dynamic SME within the industry, which is developing independently unique, patented products and distinctive solutions. With dynamic, structural growth each year, and an innovative approach, company XYZ is a technological driver on the market and represents unique values and leadership competences in the international arena. Consequently, it is a suitable example from the industry for the purpose of this final research. It is to mention that this thesis is a first attempt to grasp the dependencies between the leadership competences and innovation. With the clear first results this study should therefore form a strong basis for the future, large scale research work.
Based on the above-mentioned background and holding in mind the crucial role of technological industry and its continuous development in Europe, the following research could assist leaders and policy makers in improvement of the offered development programs, recruitment policies, and organisational practices. Furthermore, focusing on the required competences nowadays leaders need to successfully boost the innovations and performance within an organisation, the following final thesis integrates not only leadership concept and leadership competences, but the perception of innovation and its aspects as well.
Acknowledgements
Undertaking the following final thesis has been a truly inspiring and life-changing experience for me and it would not have been possible to achieve without the guidance and support I received from many people.
I would first like to thank my supervisor, Professor Werner G. Faix, for the wonderful collaboration, valuable guidance, and insightful feedback throughout my studies, which sharpen my thinking and allowed me to bring my research to a higher level.
In addition, I gratefully acknowledge all people at SIBE and SAPHIR for their assistance at every stage of the research and analysis.
I offer my sincerest gratitude to all participants, who took part in the study with interest and dedication, providing me with all needed information and kindly supported me through my final journey. The data I gathered from the organisation proved vital to the development of my final thesis.
I dedicate this dissertation to my husband, Rémy Devos. Thank you for your patient support, wise counsel, and encouragement.
Glossary and Definition of Terms
Competence – defined as “an underlying characteristic of an individual that is causally related to effective or superior performance in a job” (Roe, 2020, p. 352).
- leadership competences – “leadership skills and behaviours that contribute to superior performance” (Society for Human Resource Management, 2018).
Competitiveness –
- on the firm level - “ A firm is competitive if it can produce products and services of superior quality and lower costs than its domestic and international competitors. Competitiveness is synonymous with a firm’s long-term profit performance and its ability to compensate its employees and provide superior returns to its owners” (Aldington Report, 1985).
- on the country level - “ a country’s ability to create, produce, distribute and/or service products in international trade while earning rising returns on its resources” (Scott & Lodge, 1985, p. 26).
Innovation – “A new or unique idea or concept that adds value to the organisation and its customers. Innovation is the act of taking new unique and creative ideas developed, funded, produced, and distributed to external customers that result in creating value to both the organisation and the customer or consumer” (Harrington, 2018, p. XXIX).
- disruptive – “ a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent business” (Christensen et al, 2017, p. 31).
- incremental – “incremental innovation produces relatively small improvements, refinements and extensions of existing technologies” (Lohse, 2018, p. 7).
- radical – “often occurs unexpectedly, due to a creative process emerging in an organisation. This innovation breaks the previous technological paradigm and creates a new trajectory. This conceptualisation is synonymous with that of revolutionary technical change” (Rakic, 2020, p. 97).
- sustaining – “does not create new markets or value networks but rather only evolves existing ones with better value, allowing the firms within to compete against each other's sustaining improvements” (Čiutienė & Thattakath, 2014, p. 17).
Leader – Defined as: “a leader is able to motivate and is achievement oriented” (Lee, 2021, p. 30).
Leadership – “Leadership means to lead oneself and human communities with personality – reasonably, responsibly, and ethically into an innovative and creative future in open and complex situations under unclearly defined and dynamic conditions while always considering the framework conditions and collective rationality” (Faix, Windisch, Kisgen, Paradowski, Unger, Bergmann & Tippelt, 2020, p. 3).
KODE® – “a software-based, scientifically founded analysis process for measuring and developing competences” (KODE GmbH, 2021)
Organisation – “a company, corporation, firm, enterprise, or association of any part thereof, whether it is incorporated or not, public or private, that has its own function and administration. It can be as small as a first-line department and as large as the government in the United States” (Harrington, 2018, p. XXX).
Performance – “the accomplishment of a given task measured against preset known standards of accuracy, completeness, cost, and speed. In a contract, performance is deemed to be the fulfilment of an obligation, in a manner that releases the performer from all liabilities under the contract” (Business Dictionary, 2019).
SME – “Small and mid-size enterprises (SMEs) are businesses that maintain revenues, assets or a number of employees below a certain threshold. Each country has its own definition of what constitutes a small and medium-sized enterprise (SME). Certain size criteria must be met and occasionally the industry in which the company operates in is taken into account as well” (Liberto, 2020).
List of Abbreviations
illustration not visible in this excerpt
List of Tables
Table 1: SMEs (European Commission, 2020)
Table 2: Innovations, costs & revenue SEILWORX
Table 3: Innovations & Competences SEILWORX - complete view
List of Figures
Figure 1: Holistic view on business leadership (Kisgen, 2017, cited in Faix, Windisch, Kisgen, Paradowski, Unger, Bergmann & Tippelt, 2020, p. 63)
Figure 2: transactional and transformational leadership (Bass & Avolio, 1997, cited in Kabir & Mitul, 2017, p. 5)
Figure 3: The holistic view on leadership (Gandossy & Guarnieri, 2008)
Figure 4: Competences of an entrepreneurial thinking and innovation driving graduate (Heyse & Erpenbeck, 2009)
Figure 5: Seilworx in performance
Figure 6: Competence profile SEILWORX
Figure 8: Innovations SEILWORX
1. Introduction
“An organisation’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage.” – Jack Welch (Twitter 2016.07.29)
The above quote is the ultimate message that the following dissertation endeavours to underline. Nowadays the professional world is developing and changing so dynamically that organisations, to be able to become and especially remain a competitive player on their specific market, need to adapt to the needs and expectations of the employees, the industry, and the economy (Berlemann & Jahn, 2014). Clinton and Whisnant (2014) summarised this change in requirements well “as global trends — environmental, social, political, technological — continue to shift the foundations of our current business models, incremental innovation will become less and less effective in enabling companies, industries, and whole economies to adapt and succeed. There is an urgent need for fundamentally different approaches to value creation” (Clinton & Whisnant, 2014).
Whereas the traditional approach to the business was about strict rules, control and regulations, the modern business world focuses on the values of new ideas, innovations, and people (Götz & Jankowska, 2017; Summerfield, 2020). A century ago, during industrialization in Central Europe, business was less service-oriented and stronger driven by factories, in which employees needed to follow a strict time schedule, worked shifts, and were mostly paid in piecework to warrant a smooth production process at the production and assembly lines. This meant that from an employer’s or factory owner’s perspective, it made sense to subject the employees to rather strict rules. They should work at maximum speed with little respect for individual needs, obey the working rules, and be part of a team rather than individuals questioning their supervisor’s decisions (Morrison-Smith & Ruiz, 2020).
Nowadays, by contrast, people live in a highly dynamic, global, and digitalized world with a lot of pressure. Especially in the technological field, both the dynamic and quick adjustments to the new needs of the customers, as well as the new inventions are extremely popular. This demands flexibility, forward-thinking, and innovative approaches to adapt to changes quickly, and to interconnect with people with different backgrounds (Kolibáčová, 2014). Therefore, a significant increase in the degree of innovation of enterprises of various sizes, as a necessary condition for their competitiveness and, consequently, for maintaining a good economic condition and market position, is the main challenge faced by all companies today. To be competitive on the market, two-pronged actions must be taken and carried out in parallel. The first is breaking the awareness barrier expressed in underestimating, and often even in misunderstanding, the role and importance of innovation in business activity, including its impact on the development of the enterprise. This requires the leaders to be convinced that broadly understood innovative activity, consisting in introducing progressive changes not only in products and manufacturing technologies, but also in the sphere of organization and functioning of the enterprise, its leadership, and its market activity. The second direction is breaking the knowledge barrier, or rather ignorance. The organisational system should be focused on systematic, rational, and organized innovation, constant search for innovation opportunities and pro-innovative attitude of the management, rewarding new ideas and encouraging employees to develop new innovative solutions.
The goals that encourage the implementation of innovations in a modern enterprise are of an economic and social nature and boil down to providing conditions for the implementation of a long-term development strategy of the company, which is to lead primarily to meeting the needs of customers. This strategy, of course, means permanent changes, so every organisation who has the ambition to develop and stay a valid player on the market should create and introduce innovations. Challenges of the market and expectations of the customers within the economic environment create a need for dynamic change and strong leadership competences, which not only maximise the potential of the leaders but also unite the people for common success (Ruzzier et al., 2006). “Leadership means to lead oneself and human communities with personality – reasonably, responsibly, and ethically into an innovative and creative future in open and complex situations under unclearly defined and dynamic conditions while always considering the framework conditions and collective rationality” (Faix, Windisch, Kisgen, Paradowski, Unger, Bergmann & Tippelt, 2020, p. 3).
Leadership is, therefore, an active and dynamic approach of a person within an organisation, which is affecting the individual and organisational performance in a creative way, considering all conditions. Because of the leaders’ competences and performance, companies can innovate and develop further. Leadership as a term has many different definitions, depending on the aspect the author was focused on, or rather wanted to highlight. The definition given by Faix, Windisch, Kisgen, Paradowski, Unger, Bergmann & Tippelt (2020) covers the most characteristics and qualities of leadership within one definition and will be used within this thesis.
Leadership is performed by the individual (Brown & Starkey, 2000), with specific personality traits (Campion, Fink, Ruggeberg, Carr, Phillips, & Odman. 2011; Ghoshal, 2005), underlining the importance of the united workforce, its diversity (De Cremer & Van Knippenberg 2002), embracing its innovative potential (Bratton et al., 2005), positively influencing employees’ satisfaction, motivation, and trust, contributing to performance and organisational success (Campion, Fink, Ruggeberg, Carr, Phillips, & Odman. 2011; Hollenbeck, McCall, & Silzer, 2006; Kets de Vries, 1996; Shamir et al., 1998). Developing leadership competences (Podgórska & Pichlak, 2019), maximising the internal strengths, and adapting the strategy to today’s situation are crucial to the increase of organisational innovations and performance (Prahalad & Hart, 2002). Leadership is effective when it is adapted to the current needs and leads to the expected result.
Along with global changes and the ongoing social and generational changes, the existing business paradigms have also changed, and the portrait of an effective leader has changed. The market today needs a new model of leadership competences. Their application gives impressive results and increases the creativity of employees. It is thanks to motivating and engaging employees to cooperation and creating new ideas that businesses can compete with the innovation of offered products and services. However, the fact that the leader must always be up to date with trends, respect others and promote diversity is the same. It is not enough for a contemporary leader to observe market trends only closely. The key is to try to overtake them, to anticipate the best direction of development. By his / her attitude, he / she gives credence to the values on which his company is based, and above all, to conduct open, multilateral communication. Transparency and a sense of influence on decisions made as well as awareness of the motivations behind the leader's actions make people believe in what they are doing.
The tasks of a company are production of goods or performing a service. This requires employees who keep the company marketable through innovation, defined as a new or unique idea or concept (Harrington, 2018), depending on the human imagination, collaboration, and motivation, is crucial for a company’s success (Kanter, 2011; Roe, 2020). To orchestrate their work, leaders are needed, and they in turn can increase production by showing leadership competence. Hence, the “leadership skills and behaviours that contribute to superior performance” (Society for Human Resource Management, 2018). An effective leader is one who realizes that he / she cannot know everything. That is why he / she needs trusted co-workers with different competences, skills, and experiences. There are many situations where decisions cannot be made authoritarian, and it is necessary to trust specialists in each area.
Innovation becomes measurable, for example, as the number of newly invented products in each time, or in the revenue that a specific item is generating. Performance, on the other hand, as a skill that leads to innovation, is defined as the accomplishment of a given task (Sholihin et al., 2011) measured against pre-set known standards of accuracy, completeness, cost, and speed. In a contract, performance is deemed to be the fulfilment of an obligation (Merchant & Van der Stede, 2011), in a manner that releases the performer from all liabilities under the contract (Business Dictionary, 2019). Performance can be expressed as a long-term competitive advantage through non-financial terms such as innovations (Kaplan & Norton, 2004), or through purely financial figures such as revenue (Lau & Sholihin, 2005).
Despite the growing popularity of the topics of leadership and innovation, there is still a need for specific examples from the industries (Gawer & Cusumano, 2013; Cox, Hannif & Rowley, 2013; Summerfield, 2020) with a focus on the leadership competences required for enhancing performance (Coetzee, Visagie & Ukpere, 2013; Roe, 2020), and innovations (Argus & Samson, 2021). As these organisations understood the challenges of the market and changing needs of their customers, they adjusted their performances to meet them. In such dynamic circumstances, it is valuable to present specific examples from the industries, as “the businesses have a learning culture” (Pattberg & Zelli, 2015). Small and medium-sized enterprises (SMEs) are facing specific challenges since they act differently than big organisations, the experience of which is more often used during the scientific leadership and innovation research (Szczepańska-Woszczyna, 2014, p. 1). Modern science is not an effort of one person, but a teamwork. Leadership is a role, not a post, that can be used to encourage a team to accomplish a common objective. Scientific leadership includes the capability to reinforce a varied team and generate an all-encompassing culture that offers assistance and dedication so that everybody can make their greatest contribution. Such collective attitude of an organization forms its culture and execution. Each of the team members brings a set of beliefs, viewpoint, methods, or records to this cooperative mindset (White, Mische & Winn, 2019).
SMEs often serve more restricted, local customers, and they mostly do not own the global strategic advances that large companies can rely on, such as spreading of (financial) risk, forward integration of production chains, or internationally renowned branding. Hence, in day-to-day operations, small and medium companies react more flexibly to the need for resource-consuming R&D activity on the customer demand to implement specific problem solutions instead of on a regular basis. It allows to act directly and develop tailored solution for the upcoming issues.
Closing the gap in the understanding of the relationship between leadership competences, innovation, and corporate success improves existing business strategies, allows to harness the potentials, and leads the organisations towards their goals (Roe, 2020). Since leadership research is not enough for effective guidance, there is a need for a practical perspective to stimulate leadership behaviours (Bratton et al., 2005, Bruch et al., 2006; Roe, 2020; Summerfield, 2020).
While the time of industrialisation, there were not many rights for workers and work rules protecting them. Occupational medicine was not yet advanced, and many issues (e. g. disadvantages of shift work, damages to health due to stress, lack of natural light, etc.) were not yet known (Montgomery, 2022). In the industrialization of 1870-1910, the factory owners gave the workers strict rules. “Factory workers have to work sixteen hours in a day merely to save the family from starvation. Industrial Revolution created a wide gap between the rich and the poor” (Mohajan, 2019, p. 377). The goal was to increase the productivity, reduce the costs, trying to fight on a very competitive market. The precipitous expand of technological innovation and volume of production caused a lot of stress, which harmed workers’ health and restricted their freedom, where only manufacturers benefited from this situation.
The workers could barely stand this devastating situation, and therefore they demanded more rights, founding trade unions, and organising strikes. In reaction, business holders demanded to government agencies to detain strikers, acquire court sanctions against union movements, and cripple the capability of workers’ leaders to develop their unions (Niiler, 2019). Because of the relentless opposition to the unfair working conditions, the improvement of employee rights was slowly progressing, e. g. more organisational effort, greater flexibility from the employers, joint stock companies with participation, and later adaptation to digitalisation.
The digitalisation era facilitated many different processes and improvements, but also placed new demands on the company owners and workers, e. g. constantly higher pressure to innovate, increase of data security, more flexibility of the workplace and structures. These changes have a lot of advantages, as the workers have higher motivation due to more flexibility and freedom, the productivity increases and improves the overall performance. On the other hand, it means fewer uniform structures and less collegiality, what made it more difficult to establish consistent rules to ensure the same product standards in every batch (Mohajan, 2019). Since maintaining customer satisfaction is necessary for the business, more security and quality controls were introduced. Today’s market as well is market with high performance, implementing innovative solutions and sustaining customer satisfaction created a void for leaders, which can lead the employees throughout the high work pressure with inspiration and sense of common mission.
Considering the nowadays challenging market situation described above, and the urgent need for specific industrial examples, the current thesis focuses on the importance of leadership competences within SME organisations to influence the organisational innovation and performance. Hands-on experience of real-life successful organisations allows to draw practical conclusions and factual lessons for the current and future leaders. Aspects, such as creating a consistent organisational strategy, adapting to the dynamically changing market conditions, and constantly improving leadership practices, stand in the foreground for the company’s success.
This final thesis attempts to answer the question, if the leader’s specific constellation of competences could impact organisational innovations and performance at the example of the anonymised, medium-sized, service-oriented company XYZ. The products of the company XYZ are mainly used in various areas of industrial production, research, and throttle technology. They often must face the toughest conditions there and prove their reliability and precision every day in 24/7 mode. The company has proven itself in this environment for many years. The anonymised, medium-sized, service-oriented company XYZ is an award-winning European leader in the technological industry. Anonymised, medium-sized, service-oriented company XYZ is therefore an example of a dynamic SME in an industry that has achieved a high degree of independence through patented products and independently developed solutions.
The company's self-image in terms of quality does not only apply to the product itself - in the company XYZ, quality means keeping what is promised. The needs of demanding customers from industry and research therefore determine how we see ourselves, how we think and how we act. The creative and motivated employees of the company guarantee pleasant and successful communication and cooperation in all areas. It is important in this company to maintain close, long-term relationships with customers and business partners – characterized by mutual respect, fairness, and trust. The self-image also includes customer satisfaction: the company reacts flexibly and quickly to customer requests; all orders are implemented with the help of innovative technologies. Ultimately, only safe, and trouble-free processes ensure efficient use of the devices and products. The issue of safety is therefore a central component of the company's high-quality requirements. Extensive support services such as training, maintenance, service or commissioning and instruction when new devices are delivered are a matter of course for the company XYZ. As a modern, medium-sized company, XYZ takes responsibility for its own entrepreneurial actions as a matter of course. Impact assessment and environmental awareness have been important parts of the philosophy from the very beginning. The employees use the materials in an environmentally friendly manner, pay attention to efficient manufacturing processes and use recyclable components. They take precautions to avoid environmental pollution from the outset.
The analysis within this final thesis contributes to better understanding of leadership and its influence on innovation and performance by highlighting key competences and tendencies within higher management aiming to boost the strategy and implementation of innovations within an organisation, as well as the company’s performance. It serves as a first attempt and a suggestion for future strategy, research, and orientation of the field to build and improve more reliable and effective leadership practises.
Methodologically, the leadership competences of higher management at the example of anonymised, medium-sized, service-oriented company XYZ will be explored by carrying out the KODE® personality test within a mixed methods approach. Using statistical modelling, the case study results are correlated with both financial and non-financial parameters of the organisations of the company XYZ as a representation of the company’s overall performance. The aim of this final thesis is an attempt to answer the question, if the leader’s specific constellation of competences could impact organisational innovations and performance at the example of the anonymised, medium-sized, service-oriented company XYZ. In-depth interviews concerning leadership skills in day-to-day performance with the anonymised, medium-sized, service-oriented company XYZ participants serve as a confirmatory measure for the obtained correlation results. The following study is an attempt to observe a correlation between the leadership competences, innovation, and organisational performance. To obtain valid and legitimate results and answer the question, the study needs to be developed further, within other organisations within the industry, but also within other branches.
As leadership is “an integral component of organisations and one that defines their direction and shapes their vision” (Niekerk & Waghid, 2004), the results of this thesis can have various applications within the studied company, as well as in other organisations in human resources (HR) - such as improving recruiting processes to choose the most suitable candidates -, as well as in research and development (R&D) driving future innovations (Lohse, 2018, p. 6), and in other higher management areas. More precisely, this study seeks to provide a solid basis for future research.
Since the market and the business are driven by innovations, they need employees able to responsibly lead others towards common and personal goals, by creating a creative and innovative atmosphere. To do so, they need to have specific competences. From this point of view there seems to be a correlation between the leaders and the organisational ability to innovate.
In this point there is a research question: Are the innovations dependable from the competences?
In sum, the current thesis thus contributes to the further improvement and development of leadership in business to promote capacity of SMEs to face nowadays challenges and fulfil the changing expectations of the customers and the market, by:
- Portraying leadership competences as an essential asset of higher management for organisational innovations and performance
- Examining leadership competences in a real-life company and investigate the dependencies with the number of innovations and revenue within 5 years’ perspective
- Verifying a potential dependency of these variables by in-depth interviews with company directors.
2. Literature Review and theoretical framework
The strongly competitive economy around today’s world creates a high demand for innovations (Sadiq, Marjanovic & Orlowska, 2014; Summerfield, 2020) that not only solve the current problems or deliver solutions to solve them, but to especially push forward a given business and aid in further developing the organisation, giving them a noticeable competitive advantage over the competing market players (Kanter, 2011; Roe, 2020). As Ringberg and colleagues (2019) put it, “modern managers are increasingly pushed from both in- and outside the organisation to innovate their processes including products and services” (Ringberg, Reihlen & Rydén, 2019, 102). Innovation depends on human imagination, collaboration, and motivation, addresses existing issues and needs, and as a result, plays a key role within the organisation (Roe, 2020). Therefore, the modern professional world and the global market demand innovative employees who have a deep understanding, not only of a company’s administrative structures, but of the entire business processes and their dynamic interconnections (Sadiq, Marjanovic & Orlowska, 2014; Summerfield, 2020).
Despite the organisations’ potential to facilitate innovations, in practice they are still challenged by the need to find suitable employees, manage time and funds, to successfully address the “complex, multidimensional, and unpredictable” nature of innovations (Nilsson et al, 2012, p. 886). Technological advances are not the only factor contributing to the need to constantly modify business models. Societal changes also have a major impact on the business world. Modern employees have a good understanding of technological innovations, which they are using on regular, daily basis. They are usually people open to changes, much more flexible than their predecessors, but at the same time valuing independence. They expect that the job will enable them to continuously develop and gain international experience. It is intended to be a challenge, not to be mechanical and reproductive.
Nowadays employees are striving for a balance between work and private life, which also translates into specific requirements for the employer. Preferred are those who allow flexible work or a permanent schedule that facilitates the planning of other activities. To encourage people to work, companies must give them a chance to achieve non-business goals (social or charity) (Northouse, 2021). It is also fundamental to function in an open environment, in a culture based on trust, joint decision-making and mutual respect. Hence, forming a diverse workplace with suitable employees allows an organisation to be more innovative and approach current or upcoming situations from different perspectives, creating a competitive advantage for the company (Shafique, Rafi & Kalyar, 2021). It must be noted that introducing innovations does not guarantee immediate success, nor does introducing changes per se guarantee expected profits.
Qualified employees know the organisation well and are able to notice the internal capabilities and competences as well as the external factors, which might influence the company itself. Noticing and using them create the base for the competitive advantage of the organisation, which is original in its performance and difficult to copy by the competition on the market (Wickham, 2001; Yucl, 2010). The leader of the present and the future is a person with a great openness to change and a very good understanding of his environment - both on the micro and macro scale. In this context, new generations are and will be a challenge.
For organisations, this means major changes and the need to actively seek to retain talent in their ranks in the future. It will not be easy, people who are used to dealing with technologies work dynamically and are not afraid of changes. Many things that challenged their predecessors are obvious to them. Unlike previous generations, they do not attach so much importance to the vertical structure and hierarchy. Therefore, talent management within an organisation is often seen as a strategic tool for motivation and inspiring personal development, new behaviours, and innovative potential of the employees (Northouse, 2021). Hence, if properly designed, it can not only support managers in creating tailored goal and process transparency, but also create an appropriately encouraging environment for the team. Consequently, appropriate training of employees represents a key skill in implementing the planned goals successfully.
An important role of a leader is played by acting for diversity understood as building teams of people with different competences, views, and methods of operation. The subconscious desire to employ people with characteristics like their own, which often appears in leaders, is not optimal. Hiring people with similar profiles may risk being less innovative. Different views and experiences of colleagues allow them to go beyond the learned patterns of thinking and force them to break the routine. In the course of discussions, the most valuable solutions are usually developed, and inhibiting them may lead to resignation and silent acceptance of decisions that they consider to be far from optimal (McGiboney, 2018).
The increased interest in the management of employee competencies results, First, from the new conditions for the functioning of modern organizations and a new approach to the factors determining their success. This is because they increase the requirements for professionalism not only of the management staff, but also of directly executive employees in the scope and level of their competences. Managers are needed; especially well educated; with appropriately shaped mental and moral predispositions; decision makers and inspirers (McGiboney, 2018). Employees having creative abilities and not afraid of risk; imaginative, energetic, agile, flexible, and convincing, are the most valuable candidates not only for the leading positions within an organisation, but also in the long-time perspective. Being able to motivate people to get involved in the processes of developing and implementing the organization's strategy is crucial for lowering employees’ turnover, which leads to the path of innovation and change towards non-lasting but still reproducible success, thanks to the creation of distinctive competences in the organization.
Executive workers are subject to similarly high demands. Since the development of employee competencies is nowadays treated as a key factor in the flexibility of human capital, it is necessary to build in organizations – for the purposes of the human resource management process – various competency models that define the scope and level of key competences required for specific positions. They are used not only at the stage of recruiting employees, but also in the process of creating competency-based evaluation systems in organizations and developing their competences, with simultaneous motivation and remuneration (Northouse, 2021). Hence, it is necessary not only to analyse the competency needs in the organization, but also to constantly improve the training and training process of both the management and executive staff.
One of the best methods to measure the employees’ competences, as dispositions for self-organised action (Erpenbeck, 1996), is of the so-called KODE® test developed by Erpenbeck and Heyse (2008). It allows the diagnosis and the development of competences, defining 64 competences divided into 4 categories, and building a unique map of personnel competences. Since this test provides a very detailed picture, especially showing the capabilities and innovation-driving skills of a person, it is a valid and reliable method to assess leader competence (Erpenbeck, Rosenstiel & Grote, 2013). The companies can use the KODE® test to choose the candidate with the most desirable competences for a certain job (Adam, 2015).
The KODE® is one of the most successful and established processes of all to promote and develop employees, teams, and organisations individually, efficiently and in a contemporary way (Heyse, Erpenbeck & Ortmann, 2010; KODE GmbH, 2021; Saiz-Alvarez & Manuel, 2019). The detailed description and analysis of the competences measuring tools is places in the leadership competences chapter. The KODE® test is a complex personal competences development tool allowing clear definition and organisation of different competences into categories, identifying a set of requirements for the competences for a long-term scope, as well as specific profiles outlining competence requirements for a specific function, task, position or activity, and impulses for the targeted competence development (Heyse, Erpenbeck & Ortmann, 2010; Erpenbeck, Rosenstiel, Grote & Sauter, 2017; Saiz-Alvarez & Manuel, 2019).
A caveat of the KODE® test is that it may lead to unification and lack of diversity among the candidates, which may result in the wider perspective of difficulties in solving unusual problems, as none of the candidates with similar characteristics will be able to overcome unexpected difficulties. That is why it is so important to choose a group leader to manage a given team. Therefore, a leader “is able to motivate and is achievement oriented” (Lee, 2021, p. 30). Identifying and analysing a leader’s unique set of competences on the other hand allows finding the most suitable candidate for a specific job, increasing organisational performance by boosting employees’ motivation and innovation, considering all conditions (Roe, 2020). Leaders with suitable competences and behaviour influence employees’ innovation activities and processes, “both through their deliberate actions aiming to stimulate idea generation and application as well as by their more general, daily behaviour” (Sutanto, 2017). The leader's task is, on the one hand, to build on the strengths of his employees, but in such a way that they still constitute a comprehensive team, and not a set of individuals incapable of teamwork. Maintaining this balance seems to be of key importance for teams initiating the innovation process in workplaces.
It is to note that all the factors which can enhance the competitive advantage of the company, such as staying within budgets, the knowledge base of the employees, relationships with the customers, suppliers, employees, and distributors, organisational performance, etc., must be implemented at the highest level of an organisation’s management (Westeren, 2011). Being an effective leader is more than just motivating the team to work harder or more efficiently towards common goals. By directing the team and having the power to and responsibility of making the crucial decisions in an efficient manner to achieve expected results, leaders are shaping the future of the team and the overall organisation, and therefore call for a deeper understanding of the underlying concept and its traits (Lee, 2021), which will be addressed in more depth in the following section.
2.1 Leadership
Lack of stability, continuity of changes, and at the same time the enormity of possibilities are the reality with which modern business is struggling. Such an environment poses many more challenges and puts enterprises to more serious tests. Consequently, unique resources as well as efficient and effective management are no longer a guarantee of a stable market position. The only constant element is constant change. In operating in such a complex, rapidly changing world, organizations recognize the importance of leadership. It helps in shaping the development strategy and focusing the attention of the organization and employees on the most important issues. Leadership helps to define boundaries, empower employees, and provide the necessary support.
Changes in enterprises have always occurred but have never been as intense in terms of extent, intensity, and frequency as they are today. Due to the unprecedented technical and technological development and the civilization leap that we have participated in for the last few decades, working conditions, entertainment and the rules of social coexistence change not over generations, but within just a few years. Each organization, if it wants to exist and develop in a competitive environment, must not only adapt its own variability to the variability of its structure and dynamics, but also release opportunities for creative and flexible action (Alabi, 2021). Therefore, it is crucial that organisations focus on their leaders to become and stay a dynamic, intelligent, market-oriented company, constantly verifying the effectiveness of undertaken actions.
To fully comprehend the leadership concept, few explanations need to be given, as many people use the term leadership and management interchangeably and use them as synonyms. As leadership has common areas with management, as well as those that show how different these definitions are. “From a scholarly viewpoint, distinctions provide clarity about what one is studying, investigating, or evaluating. From a practical perspective, distinctions between specific roles help one understand their related tasks and responsibilities and provides indicators for how effectiveness may be measured” (Beerel, 2021, p. 197). When it comes to management and leadership, a different emotional characterization of these concepts can be seen already at the linguistic level. The word "manager" brings order, toning and rationality to mind, while the term "leader" can be associated with slogans such as inspiration, authority, and inspiration. Thus, at the outset, the leader appears to be the one who concentrates intensified, positive emotions around himself, while the manager is perceived much more neutral. These roles differ from each other, starting from different assumptions, using different means, and pursuing different goals (Alabi, 2021). However, neither of them diminishes the other in terms of importance for the proper functioning of the organization.
Most often, nevertheless, it is believed that these two concepts are separate, which to a large extent overlap. It can be assumed that management is the achievement of goals set by someone else. However, every well-managed company needs something more, so leadership has five additional elements, which are: setting the course of action, provided inspiration, building teams, setting an example, and being accepted (Maulding Green & Leonard, 2019; Walker, 2021).
The concept of a manager is a person managing an organization, i.e., planning and organizing its functioning and, at the same time, motivating to implement such formulated activities and controlling the effectiveness with which the planned goals have been achieved. Consequently, although the element of soft skills in the form of motivating to action is present here, analytical, organizational and control skills are in the foreground. Manager more often than the question "why?" replies to "how?" something must be done (Alabi, 2021). It focuses on resources and tools, making sure that the individual gears in the machine, which is the organization, play their role smoothly.
However, good organization is not enough to achieve success. Original visions are necessary that allow the organisations to stand out from the competition, but also strengthen structures from the inside – convincing the people present in them about the rightness of the actions taken, about fusing their values with those that guide the undertaken undertakings, and finally – about the fact that it is worth following for those who lead them (Northouse, 2021). Therefore, an effective manager is not limited to management, but also wants to lead, becoming a symbol of the organization with which, the rest can identify and follow.
The goals and visions of the greatest leaders in the world were never obvious to be achieved, and the way to achieve them raised hundreds of doubts and questions. Still, they had to keep going with unwavering confidence, because most people have a natural desire to withdraw from something they don't know and fear. In addition to that, everything that the leader says and does must be 100% consistent, otherwise other people will not trust the leaders, and thus they will not cooperate with them (McGiboney, 2018). If a leader cannot communicate well with other people, communicate his/ her values and describe the goals he/ she intends to achieve, then he/ she cannot think about being able to do something for him. The authenticity and credibility of a leader are the crucial for his/ her followers to truly know the person they are following and share the vision for the future together.
While leadership is a well-established concept in business, the degree of expectations for its skills and flexibility has never been as high as it is nowadays. Although in currently dynamic times leadership requires a different set of skills than it used to in the past, the focus on cooperation and collaboration remained the same. The role of the leader and his or her competences have heavily gained importance within organisations (Roe, 2020; Heyse, Erpenbeck & Ortmann, 2010; Erpenbeck, Rosenstiel, Grote & Sauter, 2017; Saiz-Alvarez & Manuel, 2019), especially considering the fact that competences “replaced the contents era” (Van der Sijde, 2012) (meaning purely theoretical knowledge), creating a new direction in business organisation and a new approach to leadership (Heyse, Erpenbeck & Ortmann, 2010; Roe, 2020). This means that competences are becoming more important than knowledge within the company, especially in leading positions.
Organizational competences are one of the key features of effective leaders. Thanks to them, harmonious cooperation of subordinates and effective planning of activities increase the quality and efficiency of the team. They are complemented by the ability to work with people, and the right choice of ways to motivate entire task groups and individual employees. Good relations with customers and other business partners are important. The ability to think globally allows the leader to see the organization as a whole and understand how its various parts contribute to collective success.
It is related to the ability to see relationships between various factors which, when creating a specific solution, serve the interests of the company. A modern leader should be very creative in making decisions and solving problems. By engaging other team members to cooperate, using the knowledge, capabilities and experience of subordinates or partners, it increases the possibility of developing innovative solutions. The most important function of a modern leader, requiring several skills, is that of a leader. The ability to lead, effectively motivate others to achieve the company's mission and goals, is the basic factor of the company's success. By employing, training, encouraging, and evaluating, the leader plays the role of a symbol that inspires subordinates to work together.
In general, the term leadership is considered as the most effective way, in which organisations can grow and develop, as well as achieve and sustain their competitive advantage on the market (Burke & Cooper, 2006; Hlupic, Pouloudi & Rzevski, 2002; Horak, 2001; Götz & Jankowska, 2017). Despite the various roles of leadership defined, scholars have not distinguished one and final definition of this term. Leadership includes all dimensions within the organisation though, which help to determine the different aspects of this term.
In a business environment characterized by high expectations from stakeholders and a demanding market, modern leaders must engage all employees of the organization so that they can increasingly contribute to the company's success by maximizing operational efficiency, using technical and intellectual potential. Leadership is performed by a person (leader), having specific personality traits (Campion, Fink, Ruggeberg, Carr, Phillips, & Odman. 2011; Ghoshal, 2005; Zhou, Zhou, Zhang, Obschonka & Silbereisen, 2017) and enhanced by specific competences (Thach & Thompson, 2007), which provide needed flexibility and reactivity for the upcoming challenges (Holsapple & Joshi, 2000), boosting innovative potential of the employees and overall organisational performance (Ruzzier et al., 2006; Zaccaro, Green, Dubrow & Kolze, 2018). Therefore, leadership can be seen as a differentiated role within an organisation. “Everyone wants to have a role in the group (…) One person might generate enthusiasm and start the ball rolling on new initiatives. Someone else might be able to relieve tension” (Cole, 2018, p.95). To be a leader, a person does not need a formally established authority or position, hence, it is the ability to effectively draw people with you and motivate them to act.
Everyone within an organisation takes a different position, where leadership is viewed as the interaction between these individuals in the group. Each member of the group has their unique role and different level of influence on others within the group. The leader is therefore a role of a person within an organisation, integrating group functions (Cole, 2018), underlining the importance of the united workforce and its diversity (De Cremer & Van Knippenberg 2002; Zaccaro, Green, Dubrow & Kolze, 2018). To maintain the agreement of actions in accomplishing organisational objectives (Campion, Fink, Ruggeberg, Carr, Phillips, & Odman, 2011), a leader is required to have a wide range of skills, a person who can integrate the team on the one hand and, on the other hand, to rely on the strong individualities that make up the team. In addition, all these activities must be correlated to a specific goal, which requires a lot of flexibility and constant work modifications, strong enough to maintain the desired course, and weak enough not to undermine the entire mechanism of the group's functioning.
As mentioned, a leader has an influence on his or her followers, leading them towards mutual goals. Therefore, leadership is an influence, focusing on specific actions, interacting with all members of the group, and building strong relationships within it. It is “an ethic of caring, which pays attention to followers’ needs and the importance of leader-follower relationships” (Northouse, 2018). Leaders positively influence employees’ satisfaction, motivation, and trust (Bratton et al., 2005; Zhou, Zhou, Zhang, Obschonka & Silbereisen, 2017), contributes through his or her actions to the overall performance of the group and organisational success (Campion, Fink, Ruggeberg, Carr, Phillips, & Odman. 2011). Actively managing change and actions of the followers, a leader manages the carried extends of his or her influence on the employees based on the outcome and feedback (Northouse, 2018). It is not difficult to notice that not everyone has an appropriate set of features, and the level of responsibility of a given leader in terms of duties against the background of the entire enterprise is also important.
In case of occurring obstacles, leadership takes the form of persuasion. The leader’s role is to engage others and have a fair and positive impact on them in all conditions. If within a group there is special attention or special treatment for some people and not the others, „the perceived inequalities created using in-groups can have a devastating impact on the feelings, attitudes, and behaviour of out-group members” (Northouse, 2018). Therefore, it is crucial for a person of a leader to use his or her power to persuade others fairly and ethically. The key is managing people in an inspiring and motivating way, and not using the power of force or threat to execute the influence (Zhou, Zhou, Zhang, Obschonka & Silbereisen, 2017; Cole, 2018). Being able to recognize possible problems, disagreements, and feelings of dissatisfaction with an imaginary or actual sense of injustice is one of the most important competencies of a good leader.
“Leadership means to lead oneself and human communities with personality – reasonably, responsibly, and ethically into an innovative and creative future in open and complex situations under unclearly defined and dynamic conditions while always considering the framework conditions and collective rationality” (Faix, Windisch, Kisgen, Paradowski, Unger, Bergmann & Tippelt, 2020, p. 3). Leadership is, therefore, an active and dynamic approach of a person within an organisation, which is affecting the individual and organisational performance in a creative way, considering all conditions. Because of the leaders’ competences and performance, companies can innovate and develop further. The term of leadership is defined in various ways, depending on the focus of the author on a specific aspect of this term. As previously stated, the definition given by Faix, Windisch, Kisgen, Paradowski, Unger, Bergmann & Tippelt (2020) encompasses the most traits and qualities of leadership within one definition, consequently author decided to use the following definition of leadership within this thesis. Nevertheless, to fully understand the wide range of the mentioned term, some details of the definition need to be clarified. Concentrating on the key aspects of the definition, the following explanations can be given.
Leading means setting clear goals, precise describing the roles of the employees, giving individual tasks, according to the skills and experience of the individual, and creating such conditions for the team, which enhance the level of performance, as well as building and upholding the team as an effective whole. Being a leader is therefore being a reason for the employees to perform and be a part of his/her team.
Leading human communities (such as: “organisations, companies, research groups, political parties etc. as well as their sub-communities and networks” (Faix, Windisch, Kisgen, Paradowski, Unger, Bergmann & Tippelt, 2020, p. 61)) means influencing the activities of group members related to its tasks to achieve the set goals in the future. Leading requires from a leader to have a clear vision for the future with all prospective results, as well as objectives obtained from these scenarios. As a leader is shaping the goals for the future and steering the employees, he / she is additionally taking a personal responsibility for the outcomes.
Leading in a reasonable, responsible, and ethical way means developing a positive, valuable, and sustainable path for the future within a community. As the relationship between a leader and the employees is based on the foundation of trust and motivation, a leader is taking the responsibility for making decisions and actions to create a value for a society within his/her possibilities.
Leading into an innovative and creative future means following the future path, doing things right, developing plans and strategies. Every act of influence is an act of leadership, but organizational leadership is related to going beyond the routine, repetitive organizational mechanisms, which indicates more surplus value for the community.
Leading while considering the collective rationality means creating a supportive environment for as many participants as possible, to accomplish the real changes and common objectives. Intended influence of employees’ actions reflect the set common goals, which sets the direction of the path, motivates, and inspires the employees, as well as gains more participating stakeholders.
Leadership is, therefore, a complex concept, combining not only a person of the leader and his/ her followers on the mission fulfilling the future goals set by the leader within an organisational context. Business leadership, as Kisgen (2017) noted, is a dynamic structure of relationships between stakeholders on the various levels, hence it is not only limited to the simple relationship between a leader and the team, but influences (so is responsible for) the employees, management, culture, customers, suppliers, government, society, nature, and other stakeholders. As “personality is an ideal that can be shaped” (Kisgen, 2017, cited in Faix, Windisch, Kisgen, Paradowski, Unger, Bergmann & Tippelt, 2020, p. 62), it plays one of the crucial roles in leadership, together with innovations, and sustainable corporate development. Leader’s innovative vision for the future outcomes and his/ her ability to inspire and motivate the employees with own leadership competences lead to high quality performance and realisation of innovations in a more effective way. Shaping the future for others and leading them towards common goals are the key responsibilities of the true leader.
Figure 1: Holistic view on business leadership (Kisgen, 2017, cited in Faix, Windisch, Kisgen, Paradowski, Unger, Bergmann & Tippelt, 2020, p. 63)
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From the explanations above it is clear, that leadership concerns the organisation and employees in very different facets, influencing their motivation and actions, which are directly related to the overall performance of the organisation. People involvement leads to performance at work; the interdependence resulting from the community of sustainable goals and the organization is conducive to creating an atmosphere and mutual mission. An important task of a leader is paying attention to people's needs to maintain harmonious relationships. He / she recognizes, modifies, and meets the needs and expectations of employees, and reacts to changing situations, not only within the team, but also within a company, on the market and in a global perspective. Leadership focused on social interactions between the leader and employees, and more precisely the assessment of the leader's abilities and the expectations of the employees, leads to a mutual understanding of the goals, motivated team, convenient pace of work, and a friendly atmosphere.
In such dynamic and continuously changing times as nowadays, it is not enough for a modern leader to observe market trends only closely, but actively try to anticipate the best direction of their development and outpace them. On the one hand, it is forced by the ongoing digital transformation. On the other hand, the changes taking place in societies contribute to it. The new reality affects customers, users, and consumers, but also leaders of business organizations. Young people entering the labour market have strongly defined expectations as to how they want to work and what products to receive. These preferences affect the way companies operate and their internal culture. Success in the modern economy depends primarily on people: on their innovation, creativity, initiative, ability to cooperate. It is worth promoting diversity in companies and supporting leaders in their roles.
Being a true leader is not so much what a person can do, but above all what he / she is as a human being and what is his / her ability to influence the environment, develop and release the potential of others. Living in times of rapid changes and social transformation in various dimensions, where the digital revolution is only one of the components of changes, organisations need true leaders more than ever.
A leader has specific personality traits (Brown & Starkey, 2000; Zaccaro, Green, Dubrow & Kolze, 2018), such as character (Campion, Fink, Ruggeberg, Carr, Phillips, & Odman, 2011), intelligence (De Cremer & Van Knippenberg, 2002) and ethics (Ghoshal, 2005), and others. Organisational leadership improves the common cooperation and underlines the importance of the united workforce and its diversity (diversity in the cultural influences, beliefs, assumptions, and motivation) (Hollenbeck, McCall, & Silzer, 2006; Zaccaro, Green, Dubrow & Kolze, 2018). The individual character traits represented by the leader should be tailored to the nature of the team so that it can achieve maximum effectiveness and efficiency in achieving the set goals (Hollenbeck, McCall, & Silzer, 2006), and best match the needs of the company and the market. Effective leader treats each employee in an individualized way, motivates and creates an opportunity to learn by raising the level employees' skills and confidence. Enhanced confidence of the employees stimulates them to question the adopted assumptions and established patterns, encourages thinking and using the imagination. The leader inspires the team with an image of the future, spreads its optimistic and realistic vision and encourages subordinates to increasing efforts to achieve the goal.
All the above shows the importance of following contemporary leadership concepts related to the interaction in its every aspect. Effective leaders in business successfully lead the members of their team and care about their subordinates’ job satisfaction (Sholihin et al., 2011; Zhou, Zhou, Zhang, Obschonka & Silbereisen, 2017), and, by establishing a coherent identity and common purpose, create an essential part of the overall success of an organisation (Zaccaro, Green, Dubrow & Kolze, 2018; Cetin, Karabay & Efe, 2021) including generation of new ideas, championing, entrepreneurship, project leading, sponsoring, and coaching (Podgórska & Pichlak, 2019). All these roles not only help to develop the individual personal expertise of the employees but is also necessary for the research and development department, supporting innovations and stable position of the organisation in the market (De Cremer & Van Knippenberg 2002; Zaccaro, Green, Dubrow & Kolze, 2018), converging into a long-term strategy for success.
Under the influence of the trends described earlier, such as the expectations of new employees, the desire to stand out on the market or the widespread dissemination of the practice of social responsibility, organizations increasingly witness a departure from the model of management by objectives. Gradually, its place is taken by quality, where a holistic view of the company and its environment is important. In times of unlimited access to information, increasing competition and increasing customer disloyalty, building a lasting relationship with the buyer is becoming a real art and requires a new approach to company management. The broadly understood quality seems to be the best basis for creating relationships with both external and internal customers. In this concept, the constant improvement of employees' qualifications and work in teams are of fundamental importance. Customer satisfaction, thanks to it, leads to success pro-quality and process approach.
The effectiveness of the leader depends on the interaction between the individual characteristics of the leader and the characteristics of the situation. Leaders present two types: people or task orientation, and the effectiveness of both types of leadership depends on the leader's degree of control over the situation. Controlling the situation is conditioned by the relationship between the leader and colleagues, the degree of task structuring and the leader's power. The role of a leader is to show the direction of action and support subordinates in achieving goals. The leader's behaviour is supposed to complement the situation.
Strategic leadership means sharing the long-term vision for the organisation and managing daily operations and short-term challenges without losing the perspective and attention to detail (Faix, Windisch, Kisgen, Paradowski, Unger, Bergmann & Tippelt, 2020). Well-communicated values and the mission of the company guide employees in their everyday performance and give a sense of purpose (Yucl, 2010; Cetin, Karabay & Efe, 2021). Creating a culture of support based on this conveys a coherent image of the company and enables employees to advance and identify more deeply with the organisation (Bock, Opsahl, George & Gann, 2012; Zaccaro, Green, Dubrow & Kolze, 2018; Roe, 2020).
Hence, as the financial results remain significant, because by definition businesses are established to generate profit and increase their value, other factors that contribute to the development of the enterprise and the growth of its competitiveness in the market in the long term are also gaining importance. Adapting to the changes within the industry, market, and customer expectations by transforming the business allow companies to not only stay valid players on the market and manage day-to-day processes. It creates an opportunity for the organisation to establish its value based on the clearly articulated long-term vision, good relationships with customers, suppliers, and own employees, as well as on the trust towards employees and their decisions (Rowe & Nejad, 2009; Zaccaro, Green, Dubrow & Kolze, 2018).
A decisive step towards building quality-oriented organizations is the fact that most organisations create formal feedback systems. In this concept, teamwork plays a fundamental role, and information systems help to improve the work culture and understand mutual expectations in teams. While they are currently mainly used as a tool to help meet business goals, there is already a group of leaders who treat them as employee appreciation. Leadership is a kind of responsibility for the entire organization, for a team of people, but also for individual people. Like a herd keeper who is committed to keeping them healthy, thriving, and achieving excellent results. It also translates into the way investment decisions are made.
It should also be noted that, especially in hierarchical and extensive businesses, there is a need for different leaders depending on the level of responsibility of the team at a given level in the hierarchy. The leader's behaviour and the result depend on environmental variables independent of the leader (structure, tasks, formal dependencies) and variables concerning the subordinate (place of control, experience, talents) (Northouse, 2021). Collaboration also between team leaders / chiefs is also indispensable for the trouble-free operation of the company. Nevertheless, achieving long-range goals requires constant improvisation and adaptation to a frequently changing environment. Not all problems can be solved in a way that can be predicted but it has a significant impact on people’s behaviour.
2.1.1 Leadership theories
There are many ways of thinking about leadership, ranging from focusing on the personality traits of a leader to highlighting aspects of the situation that help define how people lead. Like most concepts, leadership is a very multi-faceted topic and is a mix of many aspects that help determine why some people become great leaders. Leadership theories attempt to describe how and why some individuals become leaders (Meuser, Gardner, Dinh, Hu, Liden & Lord, 2016). These theories focus on leadership qualities, as well as on behaviours that leaders can apply to improve their leadership competences in a variety of situations.
Transactional leadership, also known as managerial leadership, concentrates on the supervisory role, organisation, and performance of the group. Leaders who implement this style focus on specific tasks and use rewards and punishments to motivate subordinates. This leadership theory indicates that people work best when the chain of command is defined and clear. The system of rewards and penalties motivates employees (Northouse, 2021). Employees are expected to comply with team rules and expectations and are rewarded or punished based on their performance. Following the leader's instructions and commands is the primary goal of followers, and they must be carefully monitored by the leader to ensure that expectations are being met. These leaders are good at setting expectations and standards that maximize the efficiency and productivity of the organization. They tend to provide constructive feedback on the observer's performance, which allows group members to improve outcomes for better feedback and reinforcement (Bono & Judge, 2004). However, they do not act as catalysts for growth and change in the organization. Instead, they focus on keeping it as it is and enforcing current rules and expectations, that is, maintaining the status quo. Transactional leaders tell group members what to do and when to do it, unlike transformational leaders who motivate, inspire, and pursue their vision for the future with workers. They are leaders who lead by example with their behaviour and attitude, keeping in mind the development of employees, the team, and the entire company in a broader perspective.
The theory of transformational leadership refers to traditional leadership theories that have dealt with transactional leaders, i.e., those who lead or motivate subordinates by explaining to them their tasks to achieve the goal. Transformational leadership, on the other hand, inspires my subordinates to go beyond their own interest for the good of the organization. In other words, they encourage creativity and innovation. Transformational leadership theory, therefore, is also known as Relationship theory, as it focusses on the connection between a leader and a follower (Bass & Riggio, 2008). Transformational leaders motivate subordinates to set ambitious goals for themselves, explain the strategic goals of the organization and, above all, present the company's vision to their subordinates. Leader supports and encourages employees to become better at the task by showing its importance and added value for them and the community, thanks to which employees believe that the goals of the organization are personally important to them as well.
In the figure presented below, researchers Bass & Avolio (1997) offered the correlations of transactional leadership with transformational leadership. They also suggested that there are four different components to transformational leadership. First of the four components is charisma. The transformational leader serves as a role model for followers. Because followers trust and respect the leader, they imitate the person and internalize their ideals. Second component is inspirational motivation, which means that transformation leaders have a clear vision that they can articulate followers. These leaders are also able to help employees’ experience the same passion and motivation to achieve these goals. Third component is the intellectual stimulation, where transformation leaders not only question the status quo; they also encourage creativity among followers. The leader encourages observers to discover new ways of doing things and new learning opportunities, thus, they encourage creative and innovative thinking (Bass & Riggio, 2008). Transformative leadership also includes offering support and encouragement to individual observers, hence, individualized consideration. To foster supporting relationships, transformation leaders keep lines of communication open so that followers can freely share ideas and those leaders can directly recognize each observer's unique contribution.
Figure 2: transactional and transformational leadership (Bass & Avolio, 1997, cited in Kabir & Mitul, 2017, p. 5)
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The theory of charismatic leadership relates to the concept of charism. The word charisma comes from the name of the goddess Charis, who bestowed grace and beauty. She was also associated with true altruism and purity. According to other sources this Greek term means “divinely inspired gift” (Lussier & Achua, 2006, p. 321). Charismatic leaders are described as people with a certain grace, exceptional quality, giving them a primary form of authority and setting them apart from ordinary people, hence, the followers (Takim, 2012). By way of explanation, the foundation of this type of leadership is charisma, i.e., personality traits that allow a person to interact with others. The key characteristics of charismatic leaders can be summarized in four points: vision, personal risk, sensitivity to the needs of the followers, and unconventional behaviour. A charismatic leader needs to have a vision, a goal that is presented to the followers as a better path for the future in a way they understand and can identify themselves with it. Personal risk indicates that the leader can take risks, bear the costs of his/ her own decisions, and sacrifice himself/ herself to achieve this vision (Bono & Illies, 2006). It is crucial to note that the charismatic leader is not sacrificing others to achieve the vision, rather he/ she himself/ herself bears the costs of his/ her own decisions. Sensitivity to the needs of the followers means that the leader notices and reacts to the emotions and needs of the followers. The leader builds the trust of the followers by creating ties with them that inspire them to follow, and by maintaining an optimistic and enthusiastic approach. The leader's behaviour is also perceived as unconventional, new, and inconsistent with the norms.
Fiedler's Contingency Theory suggests that the effectiveness and efficiency of subordinates is conditioned by the interaction between the leader’s personality and the situation. Within this context, leader’s personality is understood as the leader's motivations to give goals the appropriate meaning, and situation is understood as the degree to which a given situation allows the leader to control and influence. During research in the contingency model, attempts were made to answer the question why, in situations with high levels of stress, leaders tend to make decisions based on experience and not on mental qualities, e.g., intelligence (Hogan & Kaiser, 2005). If the situation requires a task-oriented leader and the leader is relationship-oriented, then for optimal effectiveness either the situation needs to be modified or the leader replaced with someone else. Fiedler argued that leadership style is innate – it cannot be changed to suit the situation (Vroom & Jago, 2007). Therefore, contingency theory studies the fit of situations, or more precisely, favourable situational conditions, defined by the relationship between the leader and his/ her followers, task structure and power in each position, in which leaders, contradictory in mental and personality characteristics, showed the utmost effectiveness.
A leader who can influence his employees will be able to create bonds in the organization that will build a community capable of creating value. Organizational performance depends on the leader's actions, which can either stimulate or hold back workers. A key aspect of leadership is the ability to exert influence in such a way that subordinates are willing to take additional initiatives (Beerel, 2021). Where there are leaders, people work more efficiently. This fact significantly reduces the likelihood of a conflict that may have a negative impact on the activities of the organization or enterprise.
Additionally, leaders, while achieving the organization's goals, help to achieve the personal goals of its employees. The behaviour of employees and the way they perform their duties depends to a large extent on who they work for and whether the people managing them can bring out their full potential. The fact is that the great leaders enhancing innovations within their departments and / or organisations don’t all have the same approach (hence, following the same leadership theory, consciously or unconsciously). Within this research the several leadership theories will not be distinguished or analysed, as they are not the focus of this study.
2.1.2 Leadership styles
Many factors contribute to the success and direction of development of an organization. One of the most important is the leadership style promoted in the company. The leadership style is the method that the driver chooses and intends to influence subordinates to achieve the goals set. In turn, the real style is the way in which the superior carries out the tasks entrusted to him. It means that his/ her leadership style is no longer theoretical but practical (Kaleem, 2016). Numerous studies (i.e., Kaleem, 2016; Albejaidi, Kundi & Mughal, 2020; Debebe, 2020) have shown that the more leadership styles a leader use, the better. Leaders who have mastered several styles create the best working atmosphere and achieve the best results. Plus, the most effective leaders juggle different styles as needed, and they do it naturally. They subconsciously sense what approach in each situation will bring them better results, and they just act that way. As this research focuses on the innovation dependency from the leadership competences, the styles of the researched organisation won’t be distinguished or analysed.
Considering the most basic division, there are 3 primary leadership styles. It differs from each other in several basic dimensions, such as the decision-making of employees, their relationship with the leader, their creative activities, sharing their opinion, the degree of control of their subordinates' work and their freedom in action.
Autocratic leadership style is characterized by the supervisor's lack of trust in employees. The superior independently selects goals and strives to achieve them, allocating tasks to subordinate employees. Decisions are then an order and then the employee has no right to express his opinion but must follow the orders of the superior and then is accountable for the tasks entrusted to him. This leadership style assumes that unattended employees will not perform their tasks reliably. Therefore, each employee is given clearly assigned tasks, which are then accounted for. Its effect on the working atmosphere is destructive and should always be used with the utmost caution, and only in those situations where it is necessary (Debebe, 2020). This style is appropriate for emergency situations i.e., rebuilding the company after various disasters, or when it comes to dealing with difficult employees who are not affected by anything else. Nevertheless, when a leader views this style as his only tactic, the consequences of his disregard for the morale and feelings of those he leads will be deplorable in the long run.
The authoritative style is the most effective because it has a positive effect on all factors that determine the working atmosphere. The authoritative leader is visionary; his way of motivating employees is to explain how their work fits into the company's broad vision of development. People who work for such leaders understand that what they are doing is important and why. In addition, the authoritative style of leadership allows you to get the maximum commitment from employees to the implementation of the company's goals and strategy. By placing individual tasks in the framework of a broad-based mission, the authoritative leader sets the appropriate standards. The only criterion he uses when giving employees positive or negative feedback about their work is whether their achievements increase or decrease the chance of accomplishing the mission. In this way, the conditions for success and for receiving awards become clear to everyone (Debebe, 2020). The authoritative leader indicates the goal, but usually gives his people plenty of freedom to choose the means to achieve it. Under these leaders, workers have a free hand to innovate, experiment and take balanced risks.
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- Quote paper
- Malgorzata Devos (Author), 2022, Leadership Competencies in Action. Fuelling Organizational Innovation and Performance, Munich, GRIN Verlag, https://www.grin.com/document/1325583
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