The leader’s role in effective governance of organizations

The leader‘s role in effective governance of organizationsThis essay will discuss the significant role played by leaders in effective governance of organizations. Leadership and governance has been a central focus of strategic management research in the organizations, particularly the associations among leadership behaviors, perception of trustworthiness and ethical stewardship. Extant research, however, provides extensive reviews of other leadership research propose relationships between organizational leadership, leadership development, followership, organizational governance and organizational performance. In this essay will focus on the relationship between leadership behaviors, perceptions of trustworthiness and ethical stewardship, and how leadership and governance influence organizational performance. The paper will describe how leaders and followership can affect governance outcomes of organizations, and perceptions of trustworthiness and ethical stewardship might be more pronounced in the creation of ethical governance within effective organizations.There is consensus of opinion that organization need to rethink the governance and leaderships structures in terms of long-term sustainability. Conger, (2004) has point out Governance is the manner in which power is exercised in the management oforganizational resources in order to achieve the organizational mission. Governance is concerned with processes, policies, procedures, systems and practices, both formal and informal, the manner in which they are applied and followed, the relationships that these processes create or determine, and the nature of these relationships. (Carcello, 2009: 11) Good governance is quality in terms of the response of the organization to the guiding principles and strategic direction: to do what is right, reliable and responsible to assure the desired performance within a context of holistic oversight that is provided through a system of business controls. In short, Governance has become an issue of world-wide importance. The efficiency and accountability of organisations is a matter of both public and private interests. Therefore, in today ethical leaders are more important than ever. This coincides with massively increased awareness and interest among people everywhere in corporate responsibility and the many related concepts, such as Fair Trade, sustainability, social and community responsibility.For organization is able to get the governance effectively, the importance of organizational leadership has to be emphasized. Leadership in the context of this study is the process of establishing direction and influencing others to follow that direction. The definition, leadership is the ability to influence, is totally relevant as governing bodies strategise on the direction organisations should take, and the overall management and programme priorities. (Sendjaya, Sarros, & Santora, 2008) However, there is no universal definition of leadership because leadership is complex, andbecause leadership is studied in different ways that require different definitions, as in leadership research studies, when people think about leadership, images come to mind of leadership is a process by which a person influences others to accomplish an objective and directs the organization in a way that makes it more cohesive and coherent. Leaders carry out this process by applying their leadership attributes, such as beliefs, values, ethics, character, knowledge, and skills. Although your position as a manager, supervisor, lead, etc. gives you the authority to accomplish certain tasks and objectives in the organisation, this power does not make you a leader; it simply makes you the boss. According to Mintzberg (2004), the leader role is that of performing the management functions to effectively operate the managers‘ organisation unit. In other words, the leader role influences how the leader performs other roles. However, as Boccialetti (1995) has maintained that Leadership differs in that it makes the followers want to achieve high goals, rather than simply bossing people around. Leaders of course need to be able to make tough decisions when required, but most importantly leaders should concentrate on enabling the team to thrive, which is actually a ‘serving‘ role, not the dominant ‗leading‘ role commonly associated with leadership. On the contrary, management refers to decisions and actions by staff working in the organisation that is necessary to implement decisions made by the leadership. While leaders determine policies and strategic direction, managers operate these policies through procedures, systems, rules and operational plans. All managers perform four major functions: planning, organizing, leading, and controlling. Thus, Leadership is a part of the manager‘s job. However, there are managers are noteffective leaders.The foundation of trust is an important mechanism in creating and enhancement of stewardship behavior. Stewardship behavior is defined as management behavior that places the long-term best interests of the stockholders and other stakeholders ahead of a one‘s self-interest. Researchers have referred to trust in a variety of ways (Bachmann & Zaheer, 2006:201; Hardin, 2002:98; Kramer & Cook, 2004:67; Kramer, 2006:87). Rousseau et al. (1998) note that the most widely cited definition of trust is that of Mayer et al. (1995), who characterized trust as a willingness to be vulnerable. When individuals take risks in relationships with others they become vulnerable to the party to whom they extend their trust. The definition of trust employed in this research is the willingness of a party (trustor) to be vulnerable to the actions of another party (trustee) based on the expectation that trustee will perform an action important to the trustor, regardless of the trustor‘s ability to monitor or control the trustee (Mayer et al., 1995). Mayer et al. have argued that three factors, ability, benevolence, and integrity, appear most frequently in the literature and explain a major portion of perceptions of trustworthiness. Ability, benevolence and integrity provide unique perceptual perspectives from which to consider the manager‘s trustworthiness. This framework has been adopted by a number of researchers investigating the antecedents of trust (e.g., Colquitt, J. A., Scott, B. A. and LePine, J.A., 2007) and will be adopted in this dissertation.The trust shared in interpersonal interactions within organizations serves a critical role in shaping the one‘s stewardship behavior. Thus, the model of trust basic to stewardship pushes beyond ephemeral self-interest to long-term identity and group value concerns. A dynamic perspective of trust is posited in the stewardship model where ongoing experiences can escalate interdependence, attachments based on reciprocated interpersonal care and concern (McAllister, 1995). In addition, recent theoretical development and empirical tests on the relationship between leadership and trust lend further support to the notion that the interpersonal relationship is an essential part of effective leadership. In particular, trust within the interpersonal relationship has been identified as a critical aspect of a high-commitment or involvement-oriented management philosophy, which characterizes stewardship outcomes (Davis et al., 1997). Because of the relational behaviors exhibited by a leader within this management philosophy, the resultant leader-follower relationship is a highly participative one; it involves open communication, which demonstrates a leader‘s care and respect for the follower, and leads to the establishment of trust (Whitener, Brodt, Korsgaard and Werner, 1998).Leaders and followers are both essential to the organization, but only a few scholars in recent years have focused on followers in detail (Shamir, Pillai, Bligh, & Uhl-Bien, 2007 & Kellerman, 2008). These authors have suggested that followers are active participants in the leadership relationship and motivate themselves. Good followersalso perform leadership roles when needed. (Zahra, 2003:11) Thus in definition of leadership need to be added, the influencing process is between leaders and followers, not just a leader influencing followers; it‘s a two way street. As Bennis (2004) maintain that effective leaders influence followers, and their followers influence them.A follower can be a manager or a non-manager. Good followers are not ‗yes people‘ who simply follow the leader without giving input that influences the leader. Indeed, exemplary followers add value to the leader and organization because they focus on goals, take initiative to increase their value to the organization by improving their skill set, and realize ―they add value not just by going above and beyond their work but in being who they are—their experiences, ideals, dreams‖(Kelley, 1992: 131). Followers support their leaders by helping them to achieve established goals for the organization. They take ownership of what they do and often look for more responsibilities that take advantage of their skill sets. The excellent follower help others succeed. On the other hand, followers who perceive the leader as responsible for making decisions (Uhl-Bien & Pillai, 2007) are less likely to take an active role in the decision-making process, thereby giving up autonomy. They may expect the leader to motivate them rather than taking the responsibility to motivate themselves. A follower‗s self-concept informs all he or she does and can augment or hinder the relationship between that of the leader and follower.Contemporary business environment is rapidly changing and forcing management and organizations in pursue for developing ethically responsible, innovative andprofitable businesses. The satirical insights of business humorists remind leaders that those who lead the modern organization need to be laughed at, lest they cry in frustration at the seemingly unending examples of mismanagement, ethical misconduct, and patterned dishonesty of a society currently dubbed ―the cheating culture‖ (Callahan, 2004: 1), In contrast to the constant pessimism about what seem to be unending ethical blunders in business ethics, A small but growing group of management scholars have advocated that business leaders can help their companies create long-term wealth (Paine, 2003; Pfeffer, 2005) and build organizational trust by governing as ethical stewards (Caldwell and Karri, 2005; Pava, 2003; Caldwell, Hayes, Karri & Bernal 2008). Stewardship paradigm and trust as competitive asset in terms of sustainable competitive advantage. Davis et al. (1997) defined stewardship theory as a governance model in which the motivations of the manager are based upon pro-organizational rather than self-interest behaviour. Block (1996: 24) suggested that a stewardship role as ‗service over self-interes t‘ and that treated employees like ‗owners and partners‘. Caldwell and Karri (2005: 251) extended the definition of Stewardship theory is that the maximization of long-term economic wealth will ultimately serve to be in the best interests of the principals and the various stakeholders collectively, in addition to maximizing social welfare and the long term economic benefit to society. Ethical steward integrates long-term wealth creation, a commitment to the transformational interests of stakeholders, and creating organizational systems that reinforce both instrumental and normative organizational goals (Hosmer, 1996).In conclusion, Lynn Paine (2003) has noted that Business success depends upon merging the social and financial performance in the integration of effective governance. However, business leaders continue to view governance through the traditional way, even when mounting evidence suggests that stewardship theory and ethical stewardship are required to create sustainable competitive advantag e in today‘s economy (Pfeffer, 2005). Ethical stewardship can help business leaders reframe their moral responsibilities and honor the duties that they owe society. Ethical stewardship can enable leaders to build trust within their organizations, improve employee commitment which the ability of organizations to achieve normative and instrumental goals is likely to increase and create long term wealth and sustainable competitive advantage. A growing body of literature has acknowledged the correlation between sustainable competitive advantage and the creation of powerful relationship-based upon commitments to employees that integrate trustworthiness and effective governance (Caldwell et al., 2008; Pfeffer, 2005). The dissertation overall objective is to theoretically and empirically demonstrate that management systems which build trust and promote stewardship behavior represent source of sustainable competitive advantage. 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