BookPDF Available

Finding a Solution to Leadership: The Development of an Effective and Sustainable Leader-ship Concept Based on the Considerations of the Pioneers of Management and Leadership

Authors:

Abstract

Business and employee management are key subjects in business administration. For decades, actually for centuries, there has been a discussion about how effective leadership of people or employees can be realized. It has always been a major concern within market-based economic systems to learn how its products and services should be designed in order to generate consumer demand. That the discussion about business and employee management is more relevant than ever is linked to the fact that leadership situations are influenced by a variety of external factors. They include, in particular, political, cultural, social, demographic, economic, and technological developments. It is therefore required for business and employee management to be adapted to those external framework conditions on a permanent basis. In former times, the assumption in mainstream leadership research was that leadership success relied on specific personal characteristics. Later on, the prevailing view was that the decisive factors in employee management lied in specific leadership behavior or leadership styles. Today's research on leadership is dominated by situation-oriented approaches, providing for specific leadership concepts for specific organizational and employee-related structures. The present thesis is an attempt to bundle a variety of approaches to leadership with the aim of providing an overarching framework for concepts of a similar nature. Therefore, the leadership concept to be developed in what follows is to be characterized by the principles of holism and sustainability. The first step is to present the fundamentals of leadership and management in order to introduce key terms and concepts and provide an overview of the research on leadership. Chapter 3 deals with separately displaying the business and employee management approaches of various management pioneers, distinguishing between early and con-temporary pioneers. Each approach is presented in consideration of its key elements, its strengths and opportunities, as well as its weaknesses and limitations. The fourth chapter, finally, is devoted to developing a holistic and sustainable leader-ship concept.
I
Niels Brabandt
Finding a Solution to Leadership
The Development of an Effective and Sustainable Leadership
Concept Based on the Considerations of the Pioneers
of Management and Leadership
London 2015/2016
II
Table of Contents
List of Tables ...................................................................................................................... VIII
List of Figures ......................................................................................................................... X
1. Introduction .......................................................................................................................... 1
2. Fundamentals of Leadership ................................................................................................ 2
2.1 Definition of Management / Leadership ............................................................. 2
2.2 Management Duties ............................................................................................ 4
2.2.1 Task-Related Management ......................................................................... 5
2.2.2 Person-Related Management ...................................................................... 6
2.2.3 Self-Leadership ........................................................................................... 7
2.3 Leadership Style and Leadership Behavior ........................................................ 8
2.4 Leadership Responsibility and Leadership Success ........................................... 9
2.5 Management Levels .......................................................................................... 12
2.6 Institutional Elements of Corporate Management ............................................ 14
2.6.1 Corporate Vision ....................................................................................... 14
2.6.2 Corporate Values and Corporate Mission Statements .............................. 15
2.7 Management Tools ........................................................................................... 17
2.7.1 Employee Assessment .............................................................................. 18
2.7.2 Management by Objectives / Management by Indicators ........................ 19
2.7.3 Appraisal Interviews ................................................................................. 21
2.8 Approaches to Leadership ................................................................................ 22
2.8.1 The Property-Oriented Perspective ........................................................... 23
III
2.8.2 The Behavior-Oriented Perspective .......................................................... 25
2.8.3 The Situation-Oriented Perspective .......................................................... 26
3. Pioneers of Management .................................................................................................... 27
3.1 Early Pioneers of Management ......................................................................... 27
3.1.1 Igor Ansoff ................................................................................................ 27
3.1.2 Chris Argyris ............................................................................................. 31
3.1.3 Chester Barnard ........................................................................................ 38
3.1.4 Warren Bennis .......................................................................................... 44
3.1.5 James Champy .......................................................................................... 50
3.1.6 Alfred Chandler ........................................................................................ 56
3.1.7 W. Edwards Deming ................................................................................. 62
3.1.8 Peter Drucker ............................................................................................ 69
3.1.9 Henri Fayol ............................................................................................... 76
3.1.10 Mary Parker Follett ................................................................................. 82
3.1.11 Sumantra Ghoshal ................................................................................... 87
3.1.12 Frederick Herzberg ................................................................................. 94
3.1.13 Geert Hofstede ........................................................................................ 98
3.1.14 Elliott Jaques ......................................................................................... 103
3.1.15 Joseph M. Juran .................................................................................... 108
3.1.16 Rosabeth Moss Kanter .......................................................................... 112
3.1.17 Philip Kotler .......................................................................................... 117
3.1.18 Theodore Levitt ..................................................................................... 123
3.1.19 Kurt Lewin ............................................................................................ 129
3.1.20 Abraham Maslow .................................................................................. 136
IV
3.1.21 Elton Mayo ........................................................................................... 139
3.1.22 Douglas McGregor ............................................................................... 144
3.1.23 Henry Mintzberg ................................................................................... 148
3.1.24 John Naisbitt ......................................................................................... 151
3.1.25 Kenichi Ohmae ..................................................................................... 156
3.1.26 Laurence Peter ...................................................................................... 160
3.1.27 Tom Peters ............................................................................................ 165
3.1.28 Richard Tanner Pascale ........................................................................ 172
3.1.29 Edgar Schein ......................................................................................... 177
3.1.30 Peter Senge ........................................................................................... 181
3.1.31 Sun Tzu ................................................................................................. 187
3.1.32 Alvin Toffler ......................................................................................... 190
3.1.33 Fons Trompenaars ................................................................................. 196
3.1.34 Max Weber ........................................................................................... 201
3.2 Contemporary Pioneers of Management ........................................................ 205
3.2.1 Clayton Christensen ................................................................................ 205
3.2.2 W. Chan Kim & Renée Mauborgne ........................................................ 209
3.2.3 Don Tapscott ........................................................................................... 215
3.2.4 Vijay Govindarajan ................................................................................. 220
3.2.5 Michael E. Porter .................................................................................... 224
3.2.6 Marshall Goldsmith ................................................................................ 229
3.2.7 Jim Collins .............................................................................................. 233
3.2.8 Gary Hamel ............................................................................................. 240
3.2.9 Nirmalya Kumar ..................................................................................... 245
V
3.2.10 Nitin Nohria .......................................................................................... 250
3.2.11 Teresa Amabile ..................................................................................... 256
3.2.12 Richard Rumelt ..................................................................................... 261
3.2.13 Jeffrey Pfeffer ....................................................................................... 266
3.2.14 Richard Florida ..................................................................................... 272
3.2.15 John Paul Kotter .................................................................................... 277
3.2.16 Kenneth Blanchard ............................................................................... 281
3.2.17 Daniel Goleman .................................................................................... 286
3.2.18 Henry Chesbrough ................................................................................ 293
3.2.19 Julian Birkinshaw ................................................................................. 298
3.2.20 Rakesh Khurana .................................................................................... 305
4.1 Focus of the Leadership Concept .................................................................... 311
4.1.1 Holistic Leadership ................................................................................. 311
4.1.2 Sustainable Leadership ........................................................................... 314
4.2 Principles and Elements of Holistic and Sustainable Leadership ................... 318
4.2.1 Ethical Leadership .................................................................................. 319
4.2.2 Corporate Social Responsibility ............................................................. 325
4.2.3 Servant Leadership ................................................................................. 331
4.2.4 Authentic Leadership .............................................................................. 332
4.2.5 Leadership and Gender ........................................................................... 337
4.2.6 Diversity Leadership ............................................................................... 341
4.2.7 Employee Involvement / Bottom-Up Processes ..................................... 347
4.2.8 Adaptive Leadership ............................................................................... 348
4.2.9 Health Leadership ................................................................................... 349
VI
4.2.10 Symbolic Leadership ............................................................................ 355
4.2.11 Focussing on Quality and Excellence ................................................... 356
4.2.12 Leadership within the Context of Knowledge Management ................ 361
Source: author’s own illustration based on .......................................................................... 363
4.3 Leadership within the Context of Socioeconomic Developments .................. 370
4.3.1 Leadership within the Context of Changing Demographics ................... 370
4.3.2 Leadership within the Context of New Technologies ............................ 375
4.3.3 Leadership within the Context of Value Change and Value Pluralism .. 379
4.4 Leadership within the Context of Corporate Organizational Structures and
Specific Corporate Developments ........................................................................ 382
4.4.1 Leadership in Company Networks and Virtual Companies ................... 383
4.4.2 Shared Leadership ................................................................................... 387
4.4.3 Leadership within the Context of Part-Time Employment ..................... 389
4.4.4 Leading Leaders ...................................................................................... 391
Table 39: Comparing Emotions and Behavior of Middle-Level Managers with
those of ‘Regular‘ Employees and Top-Level Managers ................................ 392
4.4.5 Leading Talents ....................................................................................... 394
4.4.6 Leadership within the Context of Corporate Crises ................................ 401
4.4.7 Leadership within the Context of Corporate Change Processes ............. 410
4.4.8 Leading Work and Project Teams .......................................................... 411
4.5 Instruments for Holistic and Sustainable Leadership ..................................................... 418
4.5.1 Storytelling .............................................................................................. 419
4.5.2 Self-Motivation and Self-Leadership ...................................................... 421
4.5.3 Mediation Procedures ............................................................................. 422
VII
4.5.4 The ‘World Café‘ Instrument ................................................................. 427
4.5.6 Appreciative Inquiry ............................................................................... 429
4.5.7 Coaching of Leaders / Coaching by Leaders .......................................... 432
4.5.8 Outdoor Training .................................................................................... 435
5. Conclusion ....................................................................................................................... 439
6. Bibliography ..................................................................................................................... 440
VIII
List of Tables
Table 1: Distinguishing between Management and Leadership .............................................. 3
Table 2: Dimensions and Indicators of Leadership Success .................................................. 11
Table 3: The Four Management Levels ................................................................................. 13
Table 4: Ansoff’s Product-Market Matrix ............................................................................. 27
Table 5: Guidelines on Effective Learning according to Argyris and Schön ........................ 35
Table 6: Organization Styles according to Bennis ................................................................. 45
Table 7: Contrasting Business Process Reengineering with Kaizen ...................................... 51
Table 8: Corporate Activities ................................................................................................. 76
Table 9: Fayol’s 14 Principles of Management ..................................................................... 78
Table 10: Follett’s Leadership Model .................................................................................... 84
Table 11: Strategic Orientation of Enterprises ....................................................................... 88
Table 12: Opposite Cultural Dimensions According to Hofstede .......................................... 99
Table 13: The Three Stages of Change Management according to Lewin .......................... 133
Table 14: Differentiating Mayo’s Human Relations Approach from Taylor’s Scientific
Management Approach ........................................................................................................ 141
Table 15: Megatrends according to Naisbitt and Aburdene ................................................. 152
Table 16: Capturing the 7-S Factors based on a Management Survey ................................ 170
Table 17: Behavioral Factors for Corporate Success ........................................................... 173
Table 18: Edgar Schein’s Three-Level Model of Organizational Culture ........................... 178
Table 19: Learning Disabilities according to Senge ............................................................ 184
Table 20: Characterizing Toffler’s Three Waves ................................................................. 191
Table 21: Contrasting Red Ocean Strategies with Blue Ocean Strategies ........................... 210
Table 22: The Four Actions Framework using the Example of the Cirque Du Soleil ......... 212
IX
Table 23: Juxtaposing Feedback with Feedforward ............................................................. 230
Table 24: Characteristics of Successful Corporate Leaders ................................................. 234
Table 25: Strategy Paradigm according to Hamel and Prahalad .......................................... 241
Table 26: Applying the 3 V Approach to Three Different Types of Companies ................. 246
Table 27: Evidence-Based Management of Change Processes ............................................ 267
Table 28: The 3 Ts and its Indicators ................................................................................... 272
Table 29: Reasons Why Change Projects Can Fail/Recommendations ............................... 277
Table 30: Four Levels of Maturity To Classify Employees ................................................. 281
Table 31: The Model of Emotional Intelligence .................................................................. 287
Table 32: Leadership Styles within the Context of Emotional Intelligence ......................... 289
Table 33: Contrasting Structural and Contextual Ambidexterity ......................................... 300
Table 34: Corporate Social Responsibility Tools ................................................................ 329
Table 35: Forms of Knowledge ............................................................................................ 362
Table 36: Barriers to Knowledge and Learning ................................................................... 364
Table 37: Measures of Age-Appropriate Personnel Policy .................................................. 372
Table 38: Ideal-Type Presentation of an Innovation Process Based on Collaboration ........ 385
Table 39: Comparing Emotions and Behavior of Middle-Level Managers with those of
‘Regular‘ Employees and Top-Level Managers .................................................................. 392
Table 40: Identification of Roles.......................................................................................... 415
Table 41: Types of Storytelling............................................................................................ 420
Table 42: Coaching of Leaders ............................................................................................ 434
X
List of Figures
Figure 1: Management Scorecard .......................................................................................... 20
Figure 2: Appraisal Interviews as a Key Management Tool .................................................. 21
Figure 3: Scheme of Approaches to Leadership .................................................................... 22
Figure 4: Levels of Learning according to Argyris and Schön .............................................. 33
Figure 5: Organizational Theory according to Barnard ......................................................... 39
Figure 6: Corporate Structure as a Consequence and Antecedent of Corporate Strategy ...... 61
Figure 7: The PDCA Cycle .................................................................................................... 63
Figure 8: The Deming Reaction Chain .................................................................................. 65
Figure 9: The Systematics of Managements by Objectives ................................................... 70
Figure 10: The Fayol Bridge .................................................................................................. 80
Figure 11: The Transnational Enterprise Model .................................................................... 90
Figure 12: Herzberg’s Two-Factor Theory ............................................................................ 95
Figure 13: Hofstede’s Onion Model ...................................................................................... 99
Figure 14: Juran’s Quality Spiral ......................................................................................... 109
Figure 15: Stages of Strategic Planning ............................................................................... 120
XI
Figure 16: Product Typology according to Levitt ................................................................ 124
Figure 17: Maslow’s Pyramid of Needs ............................................................................... 137
Figure 18: Demonstrating the Vicious Circle of Theory X compared to the Reinforcing
Effect of Theory Y ............................................................................................................... 145
Figure 19: Strategy Development and Strategy Implementation in Mintzberg ................... 149
Figure 20: Ohmae’s Strategic Triangle ................................................................................ 156
Figure 21: The McKinsey 7 S Model ................................................................................... 166
Figure 22: Growth Limits .................................................................................................... 181
Figure 23: How Disruptive Technologies Change Markets ................................................. 206
Figure 24: Typology of Roles according to Govindarajan and Gupta ................................. 220
Figure 25: Porter’s Five Forces ............................................................................................ 225
Figure 26: Level 5 Leader .................................................................................................... 236
Figure 27: Management Practices ........................................................................................ 251
Figure 28: Amabile’s Componential Theory of Creativity .................................................. 256
Figure 29: Rumelt’s Discrete-Categorical Measures of Diversification .............................. 262
Figure 30: The Situational Leadership Theory of Blanchard and Hersey ............................ 283
Figure 31: Inefficiency of Conventional Innovation Exploitation ....................................... 293
Figure 32: Open Innovation Model ...................................................................................... 295
Figure 33: Typologizing Companies based on Performance Management and Social Support
.............................................................................................................................................. 301
Figure 34: The Triangle of Sustainability ............................................................................ 315
Figure 35: Performance Effects of Corporate Social Responsibility ................................... 327
Figure 36: The Different Roles of a Leader ......................................................................... 334
Figure 37: Four Layers of Diversity ..................................................................................... 342
Figure 38: Objectives of Corporate Health Promotion ........................................................ 350
Figure 39: Areas of Work-Life Balance ............................................................................... 353
XII
Figure 40: Symbolic Leadership and Employee Behavior ................................................... 356
Figure 41: The EFQM Model for Business Excellence ....................................................... 359
Figure 42: Media, Methods, and Theoretical Background of Blended Learning ................. 367
Figure 43: Stages of IT Perception....................................................................................... 376
Figure 44: Framework Conditions of Project Management ................................................. 412
Figure 45: The Riemann-Thomann Cross ............................................................................ 416
Figure 46: Using Mediation at Various Levels of Conflict .................................................. 424
Figure 47: The Principles of the World Café ....................................................................... 428
Figure 48: The Four Phases of the Appreciative Inquiry Process ........................................ 430
Figure 49: Possible Arrangements of Outdoor Training ...................................................... 437
1
1. Introduction
Business and employee management are key subjects in business administration. For
decades, actually for centuries, there has been a discussion about how effective lead-
ership of people or employees can be realized. It has always been a major concern
within market-based economic systems to learn how its products and services should
be designed in order to generate consumer demand. That the discussion about business
and employee management is more relevant than ever is linked to the fact that leader-
ship situations are influenced by a variety of external factors. They include, in partic-
ular, political, cultural, social, demographic, economic, and technological develop-
ments. It is therefore required for business and employee management to be adapted
to those external framework conditions on a permanent basis.
In former times, the assumption in mainstream leadership research was that leadership
success relied on specific personal characteristics. Later on, the prevailing view was
that the decisive factors in employee management lied in specific leadership behavior
or leadership styles. Today’s research on leadership is dominated by situation-oriented
approaches, providing for specific leadership concepts for specific organizational and
employee-related structures.
The present thesis is an attempt to bundle a variety of approaches to leadership with
the aim of providing an overarching framework for concepts of a similar nature. There-
fore, the leadership concept to be developed in what follows is to be characterized by
the principles of holism and sustainability.
The first step is to present the fundamentals of leadership and management in order to
introduce key terms and concepts and provide an overview of the research on leader-
ship.
Chapter 3 deals with separately displaying the business and employee management
approaches of various management pioneers, distinguishing between early and con-
temporary pioneers. Each approach is presented in consideration of its key elements,
its strengths and opportunities, as well as its weaknesses and limitations.
The fourth chapter, finally, is devoted to developing a holistic and sustainable leader-
ship concept.
2
2. Fundamentals of Leadership
2.1 Definition of Management / Leadership
According to Bea (2010, p. 23), management is the ‘goal-oriented design of business
organizations (= corporate management) or the goal-oriented influencing of persons
(= personnel management), respectively‘
1
.
For Lindinger and Zeisel (2013, p. 4), leadership means ‘to achieve results with people
in an inspiring and meaningful environment while further developing oneself, other
people, processes, the market, and the business‘
2
. In the view of Sharma and Jain
(2013, p. 310), leadership is ‘a process by which a person influences others to accom-
plish an objective and directs the organization in a way that makes it more cohesive
and coherent’.
According to Tulowitzki (2014, pp. 49 & 50), the term leadership is often used syn-
onymously with the German word Führung. A characteristic feature, Tulowitzki
holds, is that in conventional definitions both terms are used to express social and tar-
geted exertion of influence. Exertion of influence can happen indirectly or directly.
Indirect exertion of influence occurs through the conscious design of leadership-rele-
vant framework conditions, which include, in particular, corporate culture, corporate
strategy, and corporate structure. Direct exertion of influence, meanwhile, is carried
out by way of direct, situational, and in many cases individualized communication.
Özbek-Potthoff (2014, p. 4) points out that leadership hinges not only on the person
assuming the leading role, but also on those who follow and observe the leader in
question. Thus, leadership is a cognitive process in which those being led make a com-
parison between their ideal image of the leader and their perception of the actual leader.
Leadership is frequently equated with management, especially in Germany, where the
term Führung is historically burdened. However, such an equation does not do justice
to the phenomenon of leadership (Grasselt & Korte 2007, p. 26). For leadership goes
beyond conventional business management. While management is focused on solving
1
‘zielorientierte Gestaltung von Unternehmen (= Unternehmensführung) bzw. zielorientierte Beeinflus-
sung von Personen (= Personalführung)
2
Ergebnisse mit Menschen in einem inspirierenden und Sinn stiftenden Umfeld zu erzielen und dabei
sich selbst, andere Menschen, Prozesse, den Markt und das Business weiterzuentwickeln
3
everyday problems within the predominant system, leadership pertains to designing
the system (Matzler et al. 2013, p. 173). As depicted in Table 1 below, management
and leadership can be distinguished in the following manner.
Table 1: Distinguishing between Management and Leadership
Management
Leadership
Implementation of agreed outcomes with
an optimal use of resources. The future
development of the business is consid-
ered to be fairly predictable.
Encouragement of employees to deliver
and develop their full potential and en-
ergy in an effort to achieve certain goals.
The term manager is derived from the
Latin word manus (English: hand) and
is related to the Italien word maneg-
giare (English: to manage). Hence,
management designates the organiza-
ton, planning, execution, control, and
evaluation of working activities and pro-
cesses.
Leadership is to be understood as a dy-
namic process which includes such as-
pects as the following:
- development and living of values
- conveying a sense of purpose through
communication
- encouragement and support
- development of one’s own pesonality
Management is directly focused on
work. It is responsible for the work re-
sults. Managers produce results.
Leadership is oriented towards employ-
ees. Leaders motivate employees and en-
courage loyalty, trust, and recognition.
The management concept is associated
with the myth of feasability. Since eve-
rything is considered to be predictable,
success is regarded as a logical conse-
quence of correct behavior.
The leadership concept is associated
with empowerment of employees. In
view of the manifold challenges and
changes that are being faced, it is imper-
ative to provide orientation.
‘Managers do things right‘
Leaders do the right things’
Source: author’s own illustration based on Köster (2010), p. 101
4
On the one hand, the management of a company can be carried out by the company
owner, as is the case with partnerships in particular. On the other hand, management
can occur separately from the owner, such that the roles of executives are assumed by
external managers, i.e., by persons who are not part of the community of owners. Such
a practice is particularly common in limited companies (Hutzschenreuter 2009, pp. 57
& 58).
2.2 Management Duties
In the relevant literature on business management, a distinction is often made between
task-related management (sach- und aufgabenbezogene Führung) and person-related
management (personenbezogene Führung). This is done against the backdrop that ex-
ecutives both design working conditions (task orientation) and control qualitative work
relations (employee orientation) (Holzträger 2012, p. 137). The distinction between
task-related and person-related management is in line with the distinction between
management and leadership, which means that task-related management typically cor-
responds with activities relating to management, whereas person-related management
usually corresponds with activities relating to leadership. Equating person-related
management with leadership would be inappropriate insofar as person-related man-
agement pertains to designing social systems with regard to person-related issues,
while leadership is solely focused on the interaction between leaders and those who
are led (Göke & Wirkes 2010, pp. 34 & 35).
5
2.2.1 Task-Related Management
Conventional task-related management includes the planning, organization, and con-
trol of activities and processes. Added to this is the assumption of responsibility for
outcomes, and the design of the company’s future (Kolb 2010a, p. 410). In doing so,
the development of strategies, too, falls within the scope of task-related management.
(Kaehler 2014, p. 57). Moreover, another task of executives is to initiate and pursue
changes (Kolb 2010a, p. 410). Executive positions in companies are typically charac-
terized by the fact that executives carry out a wide range of tasks, for example within
the framework of superordinate projects or with regard to customer loyalty. An exec-
utive’s specific tasks are heavily dependent on the executive’s functional activity (e.g.,
manufacturing, purchasing etc.). What can also be regarded as part of task-related
management is the activity of representing the company to external reference groups.
(Kaehler 2014, p. 57) It should be noted that almost all decisions that are made by an
executive have an impact on employees. Thus, strictly speaking, there are no genuine
task-related management functions. (Meifert et al. 2013, p. 30).
6
2.2.2 Person-Related Management
Person-related management, i.e., employee leadership, always involves at least two
individuals namely, a leader and someone who is led whose relationship is based
on social interaction (relationship of reciprocity) (Schalk 2015, p. 9). Employee lead-
ership frequently happens in terms of direct, personal contact between the superior and
the staff. However, employee leadership can also be carried out through instruments
and arrangements such as job descriptions, control instruments, or remuneration sys-
tems (Meifert et al. 2013, pp. 30 & 31).
Person-related management constitutes a form of exerting social influence on employ-
eesʼ or employee groupsʼ needs, attitudes, and behavior. Such influence should not be
confused with manipulation or supervision. Rather, its aim is to ensure that employee
tasks can be optimally implemented. Employee leadership is based on communication,
information exchange, and human interaction (Hungenberg & Wulf 2007, p. 30).
Among the tasks of person-related management are the selection and introduction of
employees, communication with the staff, the delegation of tasks, the agreement of
targets, as well as the motivation, promotion, and evaluation of employees (Kolb
2010a, p. 410).
In this context, employee motivation is one of the most important tasks of a leader. It
allows to actively focus work activities on a target state which is assessed positively.
Thus, a characteristic feature or motivation is that a staff member performs actions
with the deliberate aim of reaching a state that is of major importance both to him/her
and to the company. Here, the leader’s task is to create incentives that have a stimulat-
ing effect on employees. However, it should be taken into consideration that the effects
of incentives may vary depending on the individual staff member (Lohaus & Haber-
mann 2012, pp. 65 & 66).
Another task area of person-related management is the control and steering of corpo-
rate change processes. In order to be able to adapt to the changing socioeconomic
framework conditions, companies are faced with the task of applying change manage-
ment. In this context, leaders often have to make considerable restructuring efforts and
7
changes in direction, and to communicate them to employees. In many cases, employ-
ees tend to respond to change processes with resistance. Hence, leaders have the func-
tion to deal with those resistances in a constructive and respectful fashion by support-
ing employees during the change process. What is important is to convince employees
of the necessity of changes and, where need be, to actively integrate them in the change
process (Frank 2010, p. 71).
It should be added that a great deal of the theoretical fundamentals of employee lead-
ership originate in social science, especially in sociology and psychology (Bea 2010,
p. 23).
2.2.3 Self-Leadership
Self-leadership is also partly considered to be falling within the scope of leadership.
Hence, the job of leaders is not only to lead employees, but also themselves, although
this ultimately involves similar tasks. It is one of the particularities of self-leadership
that the leader knows his/her tasks, asks for feedback, and acts in a motivated manner.
Self-organization and correspondence too can be regarded as being part of self-lead-
ership, especially in cases where the leader is lacking someone to fulfill secretarial
duties (Kaehler 2014, pp. 57 & 58).
According to Zirbik (2013, p. 176), self-leadership can be divided into cognitive, emo-
tional, behavior-related, and physical self-leadership. Cognitive self-leadership is
based on the conscious reflection on personal goals in business as well as in private
life. Here, the task of the leader is to develop successful strategies of willpower and
goal-setting and to break through existing mental blocks and thought patterns. Emo-
tional self-leadership, in contrast, aims to strengthen motivation by associating, re-
calling, or anticipatively envisioning positive emotions or experiences with regard to
the task. Behavior-related self-leadership exhibits a similar orientation as emotional
self-leadership. Its purpose is to enable the leader to reflect upon and, if necessary,
correct behavior patterns in order to be able to cope with situations more effectively.
Physical self-leadership may be regarded as conscious vitality management (Zirbik
2013, p. 175 & 176).
8
Hence, this type of self-leadership is also a frequent subject of discussion within the
context of health promotion. On the one hand, health is a major condition to enable
leaders to fulfill their tasks. On the other hand, due to their function as role models,
the health behavior of leaders has an impact on the health behavior of employees as
well. A fundamental factor of healthy self-leadership is that the leader knows specific
means and measures of health promotion, and that he/she implements them systemat-
ically (Spreiter 2014, p. 158).
2.3 Leadership Style and Leadership Behavior
According to Jung (2011, p. 422), the concept of leadership style includes ‘the charac-
teristic, time-specific, yet situationally adaptable basic orientation of leadership as it is
helped design by all involved in leadership technique, leadership of people, and con-
tents of leadership‘
3
. Thus, leadership style can be referred to as the manner in which
leaders carry out their activities. Leadership styles express the specific attitudes and
behavior towards employees and thus have an impact on the behavior of those being
led. They cannot clearly be distinguished from one another and vary with regard to its
concrete design depending on the individual superior (Naegler 2011, p. 270).
Leadership style pertains to the reciprocal relationship between leader and employees,
taking into consideration that differences in leadership style are particularly reflected
in different cooperation relationships between the leader and those being led (Jung
2011, p. 421).
The difference between leadership style and leadership behavior resides in the fact that
leadership style constitutes a leader’s guiding principle. Unlike leadership behavior,
which is rather dependent on the specific situation, leadership style remains constant
over an extended period of time (Knecht et al. 2011, p. 34).
3
die charakteristischen, zeitspezifischen aber situativ adaptierbaren Grundausrichtungen der Führung,
wie sie von allen Beteiligten im Bereich der Führungstechnik, der Menschenführung und der Führungs-
inhalte mitgestaltet werden
9
2.4 Leadership Responsibility and Leadership Success
Leadership responsibility includes, for one thing, the obligation for special care and
prudence with respect to the performance of tasks. For another thing, leadership re-
sponsibility comprises personal accountability. Leadership responsibility differs from
the responsibility for action, which pertains to the implementation of tasks. Responsi-
bility for action, unlike leadership responsibility, may be delegated to employees (Mül-
ler 2008, p. 31).
A key element of leadership responsibility is that leaders comply with and implement
ethical norms and values, which are often defined by the companies, in day-to-day
operations (Franken 2010, p. 246). According to Glauner (2013, p. 81), leadership re-
sponsibility rests on ‘the knowledge that people are not only a means but also an end
and that at times they behave differently than they are expected to do. Responsible
leadership appears as an open interaction with people and implies to be responsible for
the counterpart’s developing and being trained as to his personality‘
4
. A typical value
of leadership responsibility includes the respect for employees, to the effect, for in-
stance, that they are not discriminated against, insulted, bullied around, humiliated, or
sexually harassed. Equal opportunities, fairness, and justice too can be considered con-
ventional leadership values. They are supposed to ensure that employees are not
treated arbitrarily or according to a standardized scheme. Responsibility towards em-
ployees also implies humane working conditions, the recognition of good work, and
constructive criticism (Franken 2010, p. 246).
The result gained by a leader after completion of a leadership tasks respresents lead-
ership success. Leadership success arises from the interplay between leadership per-
sonality, leadership behavior, and leadership situation (Müller 2008, p. 30).
As a general rule, it can be stated that it is hardly possible for leadership success to be
measured precisely. Therefore, a company’s success is determined by a variety of in-
ternal and external variables, with leadership being just one among many. That is to
4
im Wissen, dass Menschen nicht nur Mittel, sondern Zweck sind und sich zuweilen anderes verhalten
als ihnen erwartungsgemäß zugeschrieben wird. Verantwortliche Führung gestaltet sich als offener Um-
gang mit Menschen und bedeutet, verantwortlich zu sein, dass sich das Gegenüber in seiner Persönlich-
keit entwickelt und schult‘
10
say that leadership success is not necessarily accompanied by corporate success. A
further aspect is that the construct of leadership success can only be determined by
means of indicative criteria such as economic and social-psychological effectiveness
(Herbig 2005, p. 29). Thus, as to economic and employee-related effectiveness, lead-
ership success, as illustrated by the table below, can be captured by means of various
indicators. In this context, Kühlmann (2008, p. 25) distinguishes between proximal
and distal factors of success. Proximal indicators of success include factors that can be
detected within the scope of the responsibility of the leader, for which the leader can
be held personally responsible, and that take place closely to the leadership events
(Kühlmann 2008, p. 25).
11
The category of distal success factors includes effects that cannot arise in dependence
on direct success indicators or the leadership actions of a single leader alone, but which
are also influenced by other variables outside its sphere of responsibility (corporate
structure, competition, economic situation) (Kühlmann 2008, p. 26).
Table 2: Dimensions and Indicators of Leadership Success
Description
Distal Success In-
dicators
Economic Effec-
tiveness
Realization of the
company’s goals
and objectives
Profit, turnover,
profitability, li-
quidity, product
innovations, stock
exchange value,
corporate image,
customer loyalty,
market share
Employee-related
Effectiveness
Fulfillment of em-
ployee expecta-
tions and needs
Employee loyalty,
fluctuation, times
of absence, staff
image, accident
frequency
Source: author’s own illustration based on Kühlmann (2008), p. 25.
12
2.5 Management Levels
Large companies, in particular, are characterized by various management levels. The
consequence of this is that an executive has managerial authority over certain employ-
ees or employee groups. In the literature on business management, a distinction is fre-
quently made between four levels of management, i.e. top-level management, middle-
level management, lower-level management, and management at the execution level
(Ruthus 2010, pp. 185 & 186).
The execution level does not exhibit any management competences. It is the level
where the employees performing the work are located. The next higher level is consti-
tuted by lower management, which consists of department managers and area manag-
ers. These managers are assigned with implementation work, but they also excercise a
certain monitoring function. The (senior) heads of department are located at a com-
pany’s middle-management level. They are in charge of implementing executive tasks
and dispositional decisions (Ruthus 2010, pp. 185 & 186). A characteristic feature of
middle-level management is that it is situated in a kind of ‘sandwich position‘ between
top-level management and lower-level management (Landes et al. 2012, p. 193).
Top-level management constitutes the highest management level. It includes a com-
pany’s owners and/or the executive board.
13
The four levels of management are illustrated by the table below. It should be noted
that in business practice, the dividing line between the individual management areas
may be blurred (Ruthus 2010, pp. 185 & 186).
Table 3: The Four Management Levels
Management Levels
Members
Orientation of Activities
Top-level management
Owner, board of directors,
managing director
Strategic decisions
Middle-level manage-
ment
Senior head of depart-
ment, head of department
Dispositional decisions
Lower-level management
Department managers,
foremen, team leaders
Arrangements
Execution level
Performing employees,
workers
Implementation work
Source: author’s own illustration based on Ruthus (2010), p. 185 & 186 and Schwab
(2010), p. 46.
Middle-level and lower-level management assume particular importance within the
various management levels. A characteristic feature of middle-level and lower-level
managers is that, on the one hand, they are leaders of employees and, on the other
hand, they are led by a superior. Thus, they exercise a dual function, which often in-
volves role conflicts. Due to their being in a ‘sandwich position‘, middle-level and
lower-level managers are at risk of finding themselves in the center of a so-called intra-
role conflict (Helm 2009, p. 25). One of the characteristics of such a conflict is that
different incompatible expectations are placed upon the same role. In this context, the
conflicting role demands are made both by the executive board and by their subordi-
nate employees (Hausmann 2009, p. 72).
14
2.6 Institutional Elements of Corporate Management
2.6.1 Corporate Vision
Corporate visions are deemed to be able to contribute to increased employee motiva-
tion and employee performance as well as to enhance identification with the business.
In addition, they are credited with providing a deeper meaning to everyday work ac-
tivities. It is against this backdrop that corporate visions constitute a core component
of many management theories (Hajas 2013, p. 10). A corporate vision is at the top of
a company’s target hierarchy. It expresses the general ideas concerning the company’s
future role (Junge 2012, p. 17). Using a clear wording, it therefore represents corporate
management’s far-reaching ideas, mainly with the aim of motivating employees and
stimulating their interest in what the company is trying to do. The corporate vision is
frequently substantiated by a mission statement (Thiesen 2011, p. 49).
The corporate vision, also often referred to as corporate philosophy, includes the ways
of thinking and acting as well as the behavioral norms a company is committed to
(Junge 2012, p. 17) Visions can be regarded as mental images of a worthwile and
realistic future (Hajas 2013, p. 7) A corporate vision forms the basis for deriving long-
term corporate goals and provides the framework for future actions (Kiski 2002, p.
103) The corporate vision does not directly refer to the daily business activities and
the quaterly and annual targets associated with it. Hence, it should have a qualitative
rather than a quantitative character (Hauer & Ultsch 2010, p. 15). This also implies
that the work contents determined in corporate visions are focused more strongly on
emotional than rational aspects (Kiski 2002, p. 103).
In principle, corporate visions may have a positive impact on employeesʼ behavior and
decisions. Desirable decisions and practices ‘are, on the one hand, the actual perfor-
mance of tasks, which can be properly described through job descriptions and specific
objectives, and, on the other hand, tasks which go beyond the actual work content and
which are rarely covered by specific objectives‘
5
(Eigenstetter 2011, pp. 131 & 132).
5
sind einerseits die eigentliche Aufgabenerfüllung, die meist gut durch Stellenbeschreibungen und
spezifische Ziele beschrieben werden können, andererseits auch Aufgaben, die über den eigentlichen
Arbeitsinhalt hinausgehen und eher selten über spezifische Ziele abgedeckt werden
15
Examples include qualities such as self-initiative, conscientiousness, helpfulness, and
straightforwardness (Eigenstetter 2011, p. 132).
There are two different levels to be distinguished with respect to corporate visions: a
strategic level and an ideational level. The scope of the strategic vision includes a com-
pany’s strategic goals, for instance in terms of determining what market position is to
be achieved on what markets by means of what products. The strategic vision also
involves the demands the firm puts on its own performances (quality, product and pro-
cess innovation, service etc.). The ideational vision, on the other hand, is directed at
the social mission the company aims to fulfill. Accordingly, the ideational vision in-
cludes values the company wishes to implement both internally and externally. Such
values offer an idea of how the public is supposed to be provided with information
about corporate events (Jung 2006, pp. 299 & 300).
2.6.2 Corporate Values and Corporate Mission Statements
Due to its more specific nature, mission statements can serve as a basis for strategies
and measures more simply than corporate visions (Watrinet 2008, p. 82). In principle,
the mission statement is the starting point for establishing not only economic goals,
but ethical guiding values, principles, and voluntary commitments in the business as
well (Marz & Dierkes 2013, p. 5). Mission statements combine the ‘intuition and (prac-
tical) knowledge of people, organizations, and professions about what appears to be
feasible on the one hand and desirable on the other hand‘
6
(Marz & Dierkes 2013, p.
5). Conventionally, mission statements are characterized by the following elements:
explanation of the company’s purpose and self-understanding
key value priorities and objectives
description of corporate activities and the needs the company wishes to sat-
isfy
task-related principles
description of the relationship with relevant reference groups (Paul & Wollny
2011, pp. 53 & 54).
6
Intuition und das (Erfahrungs-) Wissen von Menschen, Organisationen und Professionen darüber,
was einerseits als machbar und andererseits als wünschbar erscheint
16
Mission statements allow to transfer visionary and normative ideas on the future de-
velopment of the company to institutional structures. Aside from that, they can be
translated into specific decision-making and action patterns in the operational area
(Watrinet 2008, p. 83).
Closely linked to corporate mission statements are corporate values. Like corporate
visions, they represent formalized values (Von Groddeck 2011, p. 135). Corporate val-
ues, which constitute a company’s DNA, as it were, set the direction towards which
the business is to move. Corporate values can be divided into two categories: corporate
guide values, serving to express corporate identity and to represent the organization,
and the process values anchored in the company (Glauner 2013, p. 62). Process values
represent practiced corporate culture. They particularly include standards and proce-
dural requirements which determine how the cooperation of the individual company
divisions as well as the individual work processes are to be designed, and how the
individual employees ought to behave within this system. For example, they determine
how to deal with conflicts, violations, and changes. Corporate guide values, in contrast,
have the function of generating benefits (Glauner 2013, pp. 63 & 64). The generation
of benefits pertains to the company’s goals in the fields of economy and society, with
the benefits being directed at the company’s reference groups (Köster 2010, p. 65).
Corporate values may be regarded as as a tool for business and employee management.
One of the tasks of such management by values is to make all values which con-
sciously or unconsciously predominate in the company transparent and transfer them
into a consistent value structure. Within the scope of management by values, the aim
is to ensure that the values are shared and lived by all management levels (Glauner
2013, pp. 64 & 65).
According to Von Groddeck (2011, p. 135), those values which are formalized by the
corporate mission statement, in particular, constitute a paradoxical way of corporate
management and corporate control since they both maximize and minimize employ-
eesʼ scope of action. Employeesʼ scope of action is maximized insofar as they are au-
thorized to act in a autonomous, flexible, creative, and innovative way when uncer-
tainties or obscurities occur. It is minimized insofar as the definition of values brings
17
about guidelines regarding the conduct expected from employees. Since values gener-
ally have a certain abstract nature, concrete action situations always offer several ways
of interpreting them. Therefore, values should be regarded as a management tool which
does not involve any determinacy as to certain decisions and actions (Von Groddeck
2011, p. 135).
2.7 Management Tools
The function of management tools is not only to contribute to enable executives to
implement their tasks more effectively and efficiently. They also make it easier for the
company to gather information about the quality of the management function’s per-
ception (Brand-Noé 2008, p. 42). In what follows, various management instruments
are displayed. In doing so, the focus is not set on presenting the entire range of man-
agement tools. Rather, the intention is to exemplarily examine some key instruments
which demonstrate how they allow to implement management tasks.
18
2.7.1 Employee Assessment
In principle, a number of employee assessment systems can be distinguished, espe-
cially in methodological terms. A common feature of all assessment systems is that
they relate to three different dimensions of assessment, i.e. performance assessment,
personality assessment, and potential assessment. Performance assessments are always
focused on the past: they deal with evaluating an employee’s performance within a
predefined period of time. In doing so, they not only allow to capture a performance
in its pure form, i.e. the performance which is measured with respect to an employee’s
workplace requirements, but also to display employeesʼ behavior within the context of
rendering performance. Performance assessment is based on the assumption that em-
ployee behavior has a sustainable effect on the performance result. An absolute pre-
requisite for performance behavior and, with it, performance results is an employee’s
ability and willingness to perform. Potential assessment, meanwhile, deals with an em-
ployee’s suitability for future tasks. Here, the aim is to determine the possibilities of
the employee’s individual professional development. Potential assessments are there-
fore used when filling vacant positions, for individual career planning, within the scope
of succession planning as to the specialist and managerial staff, and for determining
educational needs. Last but not least, personality assessments are focused on an em-
ployee’s personality, with a view to recognizing specific behavioral patterns and char-
acteristics. Since personality assessments require a high level of psychological exper-
tise, they are rarely employed in business practice (Menzel et al. 2014, pp. 147).
19
2.7.2 Management by Objectives / Management by Indicators
Agreements on objectives are management tools which are related to the ‘management
by objectives‘ approach, which was developed in the 1960s and 1970s and which has
been further developed ever since (Kolb 2010b, p. 6). Experience has shown that man-
agement by objectives has by now been expanded to all company areas as well as to
all employee levels. While formerly it was ‘the top-level executives and sales people
who were primarily managed by objectives, it [i.e., management by objectives] can
today be considered a comprehensive tool that is characterized by flexibility and agil-
ity, independence and room for manoeuvre, the solution of problems relating to con-
ventional employee assessments, and the possibility of being ‘connected‘ to perfor-
mance-based remuneration‘(
7
Kolb 2010b, p. 7).
A crucial aspect within the context of management by objectives is the so-called man-
agement scorecard (Führungs-Scorecard), which derives from the employee-related
balanced scorecard. The purpose of the management scorecard is to allow executives
to make objectives and management principles transparent, to convey them within the
company, and derive the necessary strategies for action. The basic idea of the manage-
ment scorecard is to establish a connection between the different dimensions of em-
ployee management. The four perspectives of the management scorecard read: market,
employees, corporate management, as well as improvement and learning ability
(Bonack 2014, pp. 26).
In this context, the focus lies on a few number of indicators that are vital for effective
employee management. As for the market dimension, the strategic aim is for manage-
ment to take account of the requirements of the market. Here, possible indicators are
share of executives familiar with customer demands, customer reaction times, and
number of benchmark visits. The dimension of corporate management, on the other
hand, is about making sure that management considers the requirements of corporate
7
die oberen Führungskräfte und der Vertrieb, die über Ziele gesteuert wurden, so kann es heute als
flächendeckendes Tool gelten, das sich durch Flexibilität und Beweglichkeit, durch Eigenverantwor-
tung und Handlungsspielraum, durch die Lösung von Problemen herkömmlicher Mitarbeiterbeurteilun-
gen sowie durch die Möglichkeit zum ‚Anschluss‘ leistungsorientierter Vergütung auszeichnet
20
management. In this connection, possible indicators are fluctuation rate, share of ex-
ecutives with a written agreement on objectives, and number of promoted employees
per executive. The dimension of improvement and learning ability involves the strate-
gic aim to strengthen the willingness to accept change within the company. Here, in-
dicators are: share of executives providing training courses by themselves, number of
training days, and increase in the number of implemented improvement suggestions
per employee per year. Within the employee dimension, the strategic aim reads ‘em-
ployee orientation‘. In this context, suitable indicators are number of areas with visu-
alizations, number of employees working in teams, transfer requests per executive/de-
partment, and number of appraisal interviews (Weibler 2012, p. 471).
Figure 1: Management Scorecard
Source: Bonack (2014), p. 27.
21
2.7.3 Appraisal Interviews
Another management tool is presented by appraisal interviews. Especially in the case
of management by objectives or management by indicators, respectively, it is impera-
tive to conduct interviews with employees at regular intervals. The interviews focus
on evaluating the level of achievement of objectives. In addition, appraisal interviews
provide executives with the opportunity of talking with employees about their wishes,
concerns, needs, as well as their future role and the requirements they have to meet for
that purpose. Such interviews help executives gain access to employees, which typi-
cally benefits management success (Hurtz & Flick 2002, p. 186).
Figure 2: Appraisal Interviews as a Key Management Tool
Source: Kolb (2010b), p. 7.
Appraisal interviews may also include criticism, which usually occurs when there has
been any violation of instructions and rules on the part of an employee. The aim of
critical talks is to ensure that in future the employee in question will behave according
the rules. Critical talks might put the relationship between executive and employee
under strain. Critical interviews with negative outcomes may lead to a decrease in per-
formance on the part of the employee. On the other hand, they can also help create a
new, stable work level (Dahms 2010, p. 55).
22
2.8 Approaches to Leadership
Leadership approaches, at least as far as classical leadership theories are concerned,
can be categorized according to three perspectives: the property-oriented perspective,
the behavior-oriented perspective, and the situation-oriented perspective. As can be
seen from the figure below, all leadership approaches aim to explain leadership success
(Lippold 2013, p. 491).
Figure 3: Scheme of Approaches to Leadership
Source: Lippold (2013), p. 492.
23
2.8.1 The Property-Oriented Perspective
Property-oriented leadership theories constitute the oldest approaches within the over-
all complex of leadership research (Lippold 2014, p. 211). Especially in the 1930s and
1940s, many studies arose which dealt with the characteristics of leaders (Reichwald
& Möslein 2005, p. 2).
The focus of leadership theories assuming a property-oriented perspective lies on ex-
amining a leader’s personal characteristics and its relation to leadership success
(Stock-Homburg 2013, pp. 351 & 352). Hence, in order to distinguish successful lead-
ers from less successful ones, property-oriented leadership theories take account of
social, psychological, or cognitive outlasting properties (Becker 2014, p. 20). This ap-
proach is important with a view to the fact that many famous leaders from industry
and politics are attributed certain characteristics that distinguishes them from other
persons (Becker 2014, pp. 19 & 20). The property theory is oriented on the so-called
Great Man Theory, with which it is frequently equated. The Great Man Theory is pri-
marily focused on famous persons from politics, the military, and the social field. It
states that there is only a small number of people who by virtue of their personality
structure are capable of implementing leadership tasks. Due to innate skills and char-
acteristics, the theory goes, these personalities are naturally destined to become leaders
(Lippold 2014, p. 212).
Early property-oriented approaches put particular emphasis on physical properties
such as age, appearance, weight, level of education, or intelligence. Subsequent ap-
proaches, in contrast, mainly analyzed psychological characteristics such as neuroti-
cism, dominance, or extraversion/introversion (Özbek-Potthoff 2013, p. 67).
One of the properties which allegedly or actually characterize successful leaders is a
high level of expertise, since it facilitates task-related management and promotes the
leader’s acceptance among employees. Many property-oriented theories also count in-
telligence among the key characteristics of successful leaders. This includes both in-
telligence in the conventional sense (e.g. in terms of analytical thinking) and emotional
intelligence. According to property-oriented theories, leadership is facilitated if the
leader is capable of recognizing, understanding, and influencing employeesʼ emotions,
24
as well as of actively mobilizing and controlling his or her own emotions too (Becker
2014, p. 20). According to Lippold (2014, pp. 212 & 213), the property groups men-
tioned below are prominent characteristics that occur in all property-oriented ap-
proaches:
ability (intelligence, communication ability, power of judgement, originality,
vigilance)
performance (school performance, physical performance, knowledge)
responsibility (reliability, stamina, self-confidence, initiative, desire to distin-
guish oneself)
participation (willingness to cooperate, adaptability, activity, sociability, hu-
mor)
status (socioeconomic position, popularity).
It should be pointed out that property-oriented leadership theories have enjoyed some
rennaissance since the early 1990s. The reason for this was an increased interest in
emotional and social intelligence, alternative management skills, and charismatic lead-
ership (Reichwald & Möslein 2005, p. 3).
The thematic complex of charismatic leadership as well as the approaches to trans-
actional/transformational leadership may be considered a major trend within prop-
erty theories. The theory of charismatic leadership proclaims that a leader’s charisma
has a large impact on employee behavior, whereby charisma is understood as a key
factor in triggering authority. Ideally, charismatic leadership provides a leader with
trust, acceptance, and loyality on the part of employees. What is viewed as a problem-
atic aspect of charismatic leadership is the danger that employees fail to question the
leader’s vision and actions (Lippold 2014, p. 213).
Transactional leadership is characterized by an exchange relationship between leader
and employees. A transactional leadership style is supposed to control employee be-
havior directly through conditioned reward, particularly in terms of feedback and tar-
get agreements (Kauffeld 2011, p. 74).
Transformational leadership aims to ‘transform‘ those being led. Given its proximity
to charismatic leadership, it is also referred to as a neo-charismatic approach (Röttcher
2009, p. 9). Unlike transactional leadership, where behavior control is mainly based
25
on employeesʼ need structures, transformational leadership is focused on the relation-
ship aspect and the cognitive structures of employees. To be able to apply a transfor-
mational leadership style, the leader must have the following characteristics:
idealized influence (leadersʼ role model function)
inspirational motivation (leadersʼ ability to motivate and inspire others)
intellectual stimulation (stimulation of employee intellectual and creative
abilities)
individual consideration (appreciation of employees) (Zaugg 2009, p. 218).
2.8.2 The Behavior-Oriented Perspective
Leadership theories characterized by a behavior-oriented perspective are concerned
with how successful leaders behave towards employees (Stock-Homburg 2013, p.
352). Behavior-oriented leadership theories differ from property-oriented approaches
in that leadership and leadership behavior can be learned. A characteristic of behavior-
oriented theories is that they involve the definition of various leadership styles (Özbek-
Potthoff 2013, p. 68). In addition, it is assumed that a leader’s success relates to his or
her behavior towards employees (Lippold 2014, p. 210). Behavior-oriented leadership
concepts particularly emerged in the 1950s and 1960s (Reichwald & Möslein 2005, p.
3).
In behavior-oriented leadership theories, two different paradigms are expressed. Ac-
cording to the first paradigm, a leader is ‘the ‘doer‘ who, driven by tremendous energy,
gives a clear direction, and expects maximum employee commitment to achieve the
targets set‘(
8
Hinterhuber & Krauthammer 2015, p. 14). Within the framework of the
second paradigm, the leader fulfills the function of a wise man who supports employ-
ees in committing themselves for the corporate vision in order to implement it. The
second paradigm is characterized by such elements as trust, understanding, empathy,
openness, commitment, and employee involvement (Hinterhuber & Krauthammer
2015, p. 14).
8
‘der ‚Macher‘, der […] von ungeheurer Energie getrieben, eine klare Richtung vorgibt und von seinen
Mitarbeitern höchsten Einsatz zur Erreichung der vorgegebenen Ziele verlangt‘
26
2.8.3 The Situation-Oriented Perspective
If one considers leadership from a situation-oriented perspective, emphasis is placed
on situations in which leadership takes place. Here, the aim is to examine what specific
leadership behavior leaders should exhibit in different situations. A particular point of
interest within situation-oriented leadership theories is the power structure between
superior and subordinate employees (Stock-Homburg 2013, p. 352).
In situation-oriented approaches, a leader’s success is particularly ascribed to his or
her adaptability. Such theories go beyond the analysis of personality traits and behav-
ior patterns, for they assume that ‘the successful use of certain characteristics or be-
havior varies depending on the respective leadership situation‘ (
9
Lippold 2014, p. 211).
Even though they do concede that a leader’s traits and behavior have an impact, they
do not assume the existence of universally effective properties or behavioral manners
(Reichwald & Möslein 2005, p. 5).
By now, situation-oriented leadership theories play a dominant role in leadership re-
search (Lippold 2014, p. 211).
9
der erfolgreiche Einsatz bestimmter Merkmale bzw. Verhaltensweisen in Abhängigkeit der jeweiligen
Führungssituation variiert
27
3. Pioneers of Management
3.1 Early Pioneers of Management
3.1.1 Igor Ansoff
3.1.1.1 Presentation of Ansoff’s Approach
Igor Ansoff (19182002) created a system of marketing strategies that are referred to
as product-market combinations. His theory includes different basic strategies to gen-
erate corporate growth. From the business point of view, the key question is whether
or not current products allow to create growth in an optimal manner. Ansoff (1966,
pp. 130) distinguishes between four strategies, i.e. market penetration, market devel-
opment, product development, diversification, whereby application of one of the strat-
egies depends on whether a particular business uses its existing or future products in
existing or future markets. If the product-market combination is structured in such a
way as to offer existing and established products in existing and established markets,
then the market penetration strategy proves suitable. If existing products are predom-
inant in new markets, Ansoff recommends the market development strategy. While
the product development strategy is suitable in the case of new products in established
markets, the diversification strategy is appropriate in the event of using new products
in new markets.
Table 4: Ansoff’s Product-Market Matrix
Existing Products
New Products
Existing Markets
Market Penetration
Product Development
New Markets
Market Development
Diversification
Source: author’s own illustration based on Milz (2013), p. 19.
28
The main characteristic of the market penetration strategy is that it tries to penetrate
the market more systematically and deeply using existing products. The aim in this
context is to gain market shares from competitors, to increase sales on the basis of
existing customers, or to reach new target groups. In this strategy, growth opportunities
are relatively small since most markets show a high degree of saturation and, further-
more, since competitors struggle hard to maintain their market position (Scheuss 2012,
p. 115). If the market development strategy is being used, a company wishes to expand
its market presence by reaching new customer groups and market sectors using current
product know-how. This can transpire through an internationalization strategy, for in-
stance. It should be noted that, in the context of this strategy, market development not
only includes the development of new markets in spatial and geographical terms but
also in terms of developing new application areas for existing products (Deimel et al.
2013, p. 159). The product development strategy, i.e., the strategy to develop new
products in existing markets, aims to satisfy customer needs using new products. Ap-
plication of this strategy can be useful where product variants or innovations have been
developed. One of the measures relating to the product development strategy is unbun-
dling, meaning that products and services which have previously been offered in bun-
dles are now sold separately (Scheuss 2012, p. 116). The diversification strategy in-
volves a complete recasting of market development, such that new markets are entered
using new products. On the one hand, diversification may pertain to products used in
the same stage of production, which is referred to as horizontal diversification. If, on
the other hand, a company adds ‘upstream or downstream products to its range of
products, e.g. by shifting procurement of a building component from external procure-
ment to in-house production, vertical diversification takes place‘(
10
Steven 2012, p.
284). Last but not least, lateral diversification occurs if there is no recognizable link to
a company’s existing product range (Steven 2012, p. 284).
10
Produkte von vor- oder nachgelagerten Fertigungsstufen in sein Produktionsprogramm auf, z.B. in-
dem der Bezug eines Bauteils vom Fremdbezug auf Eigenfertigung umgestellt wird, so liegt eine verti-
kale Diversifikation vor
29
3.1.1.2 Strengths and Opportunities of Ansoff’s Approach
The Ansoff Matrix is a ‘systematic analysis tool applicable to every business and de-
signed to be a tool for companies to locate and juxtapose various growth possibilities,
rather than a comprehensive, sole tool of growth planning‘(
11
Teiner 2014, p. 40). With
the help of further tools, it is then possible to test those growth possibilities for its
feasability (Teiner 2014, p. 0).
3.1.1.3 Weaknesses and Limitations of Ansoff’s Approach
According to Pepels (2013, p. 112), one of the weaknesses of Ansoff’s approach is that
it is one-sidedly oriented to growth. This may be explained by the fact that in economic
thinking in the 1960s, an approximately infinite growth potential was assumed. How-
ever, Pepels contends, the present economy is marked by stagnation or even by a
shrinking markets, which diminishes the applicability of Ansoff’s theory. In this con-
text, Pepels considers it necessary to complement the theory by the two strategic alter-
natives of market withdrawal or product feeding. In his opinion, withdrawing from the
market is useful, if the remaining market demand appears too low, if there is an in-
creasing competition intensity going on, if non-tariff barriers and protectionism are
predominating, or if local trading partners turn out to be unsuitable. In contrast, a prod-
uct feed may be carried out, if growth no longer seems to be desirable, for example
due to a product’s adverse ecological effects. A further point of criticism regarding
Ansoff’s theory is that it implies that (sub) markets, customer groups, and product
categories are clearly identifiable, and that sector boundaries remain stable for ex-
tended periods. Today’s markets, however, are frequently characterized by the emer-
gence of entirely new competition situations as well as by the convergence of various
industries (Michel & Oberholzer-Michel 2011, p. 82). Additional concerns as to An-
11
systematisches, auf jedes Unternehmen anwendbares Analyse-Tool, das nicht darauf ausgerichtet ist,
ein allumfassendes, alleiniges Werkzeug der Wachstumsplanung zu sein, sondern ein Werkzeug, mit
dem Unternehmen verschiedenste Wachstumsmöglichkeiten ausfindig machen und einander gegen-
überstellen können
30
soff’s approach pertain to the fact that the financial resources required for implement-
ing a recommended growth strategy remain unconsidered. Precisely because the
growth strategies discussed by Ansoff are cost-intensive, the availability of financial
resources constitute the major limitation. Moreover, Ansoff’s theory hardly makes any
mention of the influence of competitors, thus ignoring the fact that the decision about
which growth strategy to choose is also dependent on the competitive environment,
for example in cases where already established rival providers have set up market bar-
riers which hamper market penetration (Pepels 2013, p. 113).
31
3.1.2 Chris Argyris
3.1.2.1 Presentation of ArgyrisʼApproach
Chris Argyris (19232013), together with Donald Schön, designed a theory of organ-
izational learning at the end of the 1970s (Reinhardt 2014, p. 321). Chris Argyris, who
had been a disciple of Douglas McGregor and Kurt Lewin, proclaimed that the main
goal of organizational learning is for a company to improve the accomplishment of its
tasks over a specific period of time. Organizational learning takes place when a com-
pany by whatever means gains all sorts of information. That is to say that in com-
panies learning is ubiquitous (Röhrich 2013, p. 70).
Argyrisʼ approach is based on theories of action, which exist in all companies and
which, for example, contain strategies for carrying out difficult tasks (Klein 2011, p.
156). The basic idea of theories of action is that in companies actions always come
from a reservoir of organizational knowledge. Theories of action make reference to
specific situations in which a specific result is intended to be achieved as well as to the
specific action strategy used to achieve that result. (Liebsch 2011, p. 70).
Argyris differentiates two theories of action, i.e., espoused theory and theory-in-use.
Espoused theory is applied in order to explain or justify a particular activity pattern.
Theory-in-use, on the other hand, is a theory of action that is implicitly contained in
the implementation of the activity pattern (Klein 2011, p. 156). It consists of collec-
tively shared expectations and knowledge, and includes the current valid truths on the
reality of the company and its environment (Liebsch 2011, p. 72). Argyris and Schön,
then, distinguish ‘between a basic concept of action which is ususally ‘hidden‘ and
unarticulated as well as deeply rooted in an individual or an organization (theory-in-
use) and which forms the actual basis for action, and a publicly expressed and repre-
32
sented concept of action that individuals believe is implemented by their actions (es-
poused theory)‘ (
12
Hartmann 2003, p. 17). The discrepancy between these two con-
cepts of action, as well as employeesʼ failure to perceive that discrepancy constitute
fundamental factors for ineffective actions. In other words, the failure to recognize the
difference between what is intended to be done and what is actually done is the reason
for having difficulties in acting effectively. As a matter of fact, organizational learning
according to Argyris and Schön is viewed as a process in which the learning of em-
ployees presupposes a company’s capability to learn as a collective. Thus, only
through the experiences and actions of its employees can a company gain the capability
to learn (Hartmann 2003, p. 17). Organizational learning commences when employees
have recognized a particular problem within the company and begin to conduct a prob-
lem analysis as well as initiate an inquiry process on its behalf (Richta 2012, p. 48). In
that process, reflection is made on the company’s strategies, beliefs, roles, and rules
(Hartmann 2003, p. 17). The ultimate goal of the inquiry process is to bring result and
expectation back into harmony. The result is a change in the way employees perceive
the company and understand organizational phenomena. This, in turn, changes their
actions and theory-in-use, respectively (Richta 2012, p. 48). The important part is that
employeesʼ reflections and conclusions can become rooted in the company, not only
in terms of written documents, processes, and routines, but also in terms of changed
behavioral dispositions (Hartmann 2003, p. 17).
12
‘zwischen einem meist ‚verborgenen‘ und unartikulierten, in dem Individuum oder der Organisation
tief verankerten, grundlegenden Handlungskonzept (theory-in-use), das die tatsächliche Basis für Hand-
lungen darstellt, und einem öffentlich geäußerten und vertretenen Handlungskonzept (espoused theory),
von dem die Individuen denken, es werde durch ihre Handlungen verwirklicht‘
33
According to Argyris and Schön, organizational learning is characterized by three lev-
els of learning, i.e. single-loop learning, double-loop learning, and deutero learning
(Gust von Loh 2012, p. 137).
Figure 4: Levels of Learning according to Argyris and Schön
Source: Schreyögg (1996), p. 522
Single-loop learning constitutes a form of ‘instrumental learning which changes action
strategies and assumptions underlying strategies in such a way that the values relating
to a particular theory of action remain unchanged‘ (
13
Klein 2011, p. 157). The starting
point of this learning process is the task of defining a ‘correct‘ system state in order to
register and correct deviations that might occur during day-to-day business operations.
The definition of the correct system state is done on the basis of theory-in-use (Klein
2011, p. 157). Single-loop learning takes place when a company or individual employ-
ees undertake the task of identifying changes in the internal and external environment
and initiating adaptation measures without changing prevailing theories in use (Rein-
hardt 2014, p. 321). Single-loop learning is simple troubleshooting, aimed at changing
individual situations rather than the system as such (Gust von Loh 2012, p. 137). Ac-
cordingly, the purpose of this level of learning is to recognize and rectify errors or
deficiencies. However, singe-loop learning can only be successful if the company en-
sures a smooth functioning of receiving and communicating feedback. In everyday
business, feedback, Argyris and Schön believe, is frequently rejected in various ways,
13
‘ein instrumentales Lernen, das Handlungsstrategien oder Annahmen, die Strategien zugrunde liegen,
so verändert, dass die Wertvorstellungen einer Handlungstheorie unverändert bleiben‘
34
with the result that the basic requirement for single-loop learning is not met (Klein
2011, p. 157).
Double-loop learning is characterized by the fact that the first loop analogous to
single-loop learning is directed at changing individual strategies and actions. The
second loop, by contrast, is directed at reflecting and developing the goals, values, and
norms underlying actions (Röhrich 2013, p. 72). Thus, the focus here is to bring about
comprehensive changes to processes (Gust von Loh 2012, p. 137). In the case of any
deviations between the actual value and the target value at this level of learning, the
appropriateness of the target values, too, is assessed. Through common reflection, the
agents not only gain insight in the conditions of their own actions but also in the action
of others. From this level upwards, it is possible to achieve profound changes in the
company (Röhrich 2013, p. 72). The key prerequisite for double-loop learning is open-
mindedness. In a way, double-loop learning is about unlearning conventional orienta-
tion patterns in order to create the scope for new perspectives and conceptions (Klein
2011, p. 158).
Deutero learning is the highest level of learning, dealing with the learning of learning.
Here, the focus is on reflecting organizational learning processes that may concern
single-loop and double-loop learning (Reinhardt 2014, p. 324). As for single-loop
learning, ‘this might imply the acquisition of skills and the creation of learning con-
texts that allow to carry out corrections of errors relating to single-loop learning more
quickly and efficiently‘(
14
Reinhardt 2014, p. 324). With regard to double-loop learn-
ing, deutero learning might lead to improving reflective processes with respect to the
cognitive framework in an effort to obtain adequate, commonly accepted theories in
use (Reinhardt 2014, p. 324)
According to Argyris and Schön, it is not easy for double-loop learning or deutero
learning to be implemented within a company. For it is not sufficient for a company to
merely plan to become a learning organization. Rather, it is imperative to align the
entire corporate culture with the requirements of such an organization (Gust von Loh
2012, p. 138).
14
kann dies bedeuten, dass Fähigkeiten erworben und Lernkontexte erschaffen werden, die es erlauben,
Fehlerkorrekturen im Rahmen des singele-loop learning schneller und effizienter zu vollziehen
35
Based on their approach, Argyris and Schön have developed guidelines on effective
learning, which are presented in the table below.
Table 5: Guidelines on Effective Learning according to Argyris and Schön
Learning from experi-
ence
The learner has to become aware of his or her own be-
havior and realize that although it may be in line with
one’s own values, it may bring about unforeseen conse-
quences. The learner has to recognize the discrepancy be-
tween basic and represented action concepts.
Examination of dilem-
mas
In a protected atmosphere, the learner examines dilem-
mas while experiencing that conclusions must be drawn
from reliable information and feedback.
Appreciation of indi-
viduality and conflicts
The individual learns to bring conflicting views into a
discussion and discuss conflicts with other people in an
open manner.
Believing in one’s own
capabilities
The learner develops own solutions. Feelings of guilt as
a result of inefficient actions disappear in favor of an in-
clination to explore own inadequacies. The aim is to ex-
perience own inacapabilities and to learn from them in a
productive way.
Limitations of learning
Learning depends essentially on an individual’s motiva-
tion and skills.
Integration of
thoughts and feelings
Thoughts and feelings should not be regarded as distinct
entities. Feelings provide a clear indication when search-
ing for reducing inconsistencies.
Courage to react spon-
taneously
The learner should not reject spontaneity but be aware of
his or her feelings in order to be able to express them
spontaneously.
Source: author’s own illustration based on Hartmann (2003), p. 24.
36
3.1.2.2 Strengths and Opportunities of Argyris’ Approach
Argyris and Schön have the merit of having developed a model of organizational learn-
ing that is characterized by a cultural perspective. For as shown above, organizational
learning according to Argyris and Schön is coupled with the assumption that all actions
rest on individual convictions and values. The subjective values and norms of individ-
uals or employees are confronted with corporate culture, meaning that organizational
learning and therein lies the innovative character of Argyris and Schön’s approach –
involves a change in a company’s culture-bound action patterns (Kling 2000, p. 62).
According to Hartmann (2003, p. 16), Argyris and Schön’s approach is not only a
sophisticated concept for identifying inadequate learning behavior, but also a differ-
entiated theory of intervention aimed at overcoming ineffective actions on the part of
companies or employees. The ‘methodological richness of action-theoretical interven-
tion approaches to organizational learning and the precise descriptions of organiza-
tional and individual obstructions provide concise concepts of intervening in favor of
effective actions in organizations‘ (
15
Hartmann 2003, p. 16).
15
methodologische Reichhaltigkeit des aktionstheoretischen Interventionsansatzes zum organisationa-
len Lernen und die präzisen Beschreibungen organisationaler und individueller Blockierungen liefern
prägnante Konzepte des Eingreifens zugunsten eines effektiveren Handelns in Organisationen
37
3.1.2.3 Weaknesses and Limitations of Argyris’ Approach
Schröer (2004, p. 102) takes the critical view that Argyris and Schön’s approach leaves
it unclear precisely how single-loop learning, double-loop learning, and deutero learn-
ing interact with each other. As to raising the intensity of learning in companies, the
authors, Schröer avers, consider it necessary for executives or external consultants to
introduce appropriate processes at the right time. In Schröer’s estimation, the key to
reaching a higher level of learning is therefore the interventionist, and not the company
itself. According to that, Argyris and Schön assume that discrepancy between theory-
in-use and espoused theory can be recognized only if it is being detected by an inter-
ventionist. In this regard, the authors can be criticized for taking a mechanistic view
of companies since they assume that companies a priori lack any self-induced double-
learning ability. Even so, the interventionist, they contend, is omnipotent, knowing
both the right time and the right method to change into double-loop learning. What
Argyris does not explain, however, is what training and what knowledge is required
for someone to be an interventionist (Wiegand 1996, pp. 222).
A limitation of Argyris and Schön’s approach to which the two authors point out them-
selves is that a change in theory-in-use may contribute to an organizational learning
process leading to wrong or inapplicable results. As a possible consequence, employ-
ees learn joint patterns of thinking and behavior that render productive learning im-
possible. This may be the case, for example, where critical matters are evaded through
establishing taboos (Richta 2012, p. 49).
38
3.1.3 Chester Barnard
3.1.3.1 Presentation of Barnard’s Approach
Chester Barnard (18861961) deals with business management from the perspective
of organizational sociology. The main aim he pursues is to answer the question as to
what structures and mechanisms are responsible for the fact that some organizations
rapidly disintegrate, while others remain intact for the long term (Sanders & Kianty
2006, p. 129).
In his 1938 book The Functions of the Executive, Barnard develops the then new
thought that organizations constitute cooperative systems. Contrary to classical organ-
izational theory, where organizations are regarded as some sort of machines, he con-
siders organizations a ‘coalition of individuals‘ (Klein 2009, pp. 35 & 36). According
to Barnard, companies are open systems. In order for them to fulfill its specific tasks
in an efficient manner, they need to encourage all employees whose actions are essen-
tial for the achievement of the common purpose to cooperate (Klein 2011, p. 136).
The focus of Barnard’s approach is the so-called inducement-contributions balance.
According to that balance, a company’s employees receive tangible and intangible in-
ducements in return for making certain contributions. If the contributions made suffice
to balance all induecements offered by the company, it maintains an economic equi-
librium. In order for the company to achieve a stable balance for the long term, it needs
to have a high degree of efficiency and effectiveness (see Figure 5). This requires an
ongoing process of adjustment that relates to internal and external processes.
39
It is the main task of strategic management to create this complex economic balance
(Hartmann 2014, p. 25).
Figure 5: Organizational Theory according to Barnard
Source: Hartmann (2014), p. 25.
It should be stressed that there is no direct link between the purposes and targets of
organizations and those of its members or employees. Hence, the organization’s pur-
poses are of no particular importance for the individual. For companies, this implies
that they should not only be directed at the organization’s impersonal aims, but need
to take account of the personal motives and goals of the organization’s members as
well (Bonazzi 2014, p. 78).
According to Barnard, one of the tasks of executives is to establish and manage a com-
munication system. In addition, they are to build employeesʼ motivation for the pur-
poses the company pursues, which first of all requires to formulate objectives in such
a way that they are comprehensible. For corporate communication to be effective, each
employee should be granted access to a formal communication channel. The important
thing in this context is for employees to know the company’s communication channels.
Moreover, communication channels should be as direct and short as possible (Kennedy
1998, p. 39).
40
Barnard’s approach to organizational structure is particularly characterized by five di-
menions which are supposed to help ensure an organization’s continued existence in
the long term. They include:
a high hierarchy and strong authority
a high degree of specialization for the division of labor
a narrow span of control
a clear distinction between advisory and decision-making positions
a high degree of centralization
Barnard advocates a high hierarchy and sharp lines of authority from top to bottom.
This, he believes, corresponds to employeesʼ basic need to turn over responsibility to
the next higher level in the hierarchy. From Barnard’s point of view, authority does
not emanate from the person exercising authority, but rather from the person accepting
other people’s authority by carrying out orders. To ensure the continued existence of
companies, it is required for the authority of orders to be observed (Kirchler et al. 2004,
pp. 72 & 73). Since, for Barnard, organizations ‘are dependent on the membersʼ con-
scious and voluntary willigness to cooperate, individual employee decision as to
whether or not to obey an order becomes the most important indicator for the existence
of authority‘ (
16
Klein 2009, p. 37). If employees are not obeying orders, they do not
ascribe any authority to them (Klein 2009, p. 37). As a rule, authority is accepted if
orders do not run counter to personal goals to the effect that implementation of the
order is of low relevance to the person in question. A high degree of authority can also
be achieved if the connection to the company involves personal benefits to the indi-
vidual employees. Another factor for ensuring the company’s continued existence in
the long term is a high degree of specialization for the division of labor. In this context,
specialization refers to the organization as an entity and not to its individual employees
(Kirchler et al. 2004, pp. 72 & 73). The more specialized the division of labor, the
fewer the number of tasks performed by an employee at a particular workplace. A high
degree of specialization is typically accompanied by a high degree of quality. It should
be noted that the range of division of labor depends on the size of the company. Large
16
von der bewussten und freiwilligen Bereitschaft der Mitglieder zur Kooperation abhängig sind, wird
zum wichtigsten Indikator für das Vorliegen von Autorität […] die Entscheidung der einzelnen Mitar-
beiter, einer Anordnung zu gehorchen oder eben auch nicht
41
companies have more opportunities to carry out specializations. Another core dimen-
sion of organizational structures is the span of control which indicates how many em-
ployees are assigned to a particular executive. The characteristic feature of the narrow
span of control proclaimed by Barnard is that an executive examines the behavior of
few employees. A narrow control span is associated with the fact that employees have
comparatively little decision-making power. It should be stressed that there is a con-
nection between control span and hierarchy. While flat organizations are structured by
a wide span of control, highly hierarchical organizations typically exhibit a narrow
span of control (Kirchler et al. 2008, pp. 21 & 22). According of Barnard, a control
span ideally comprises a maximum of 15 employees. In the case of more than 15 em-
ployees, the executive’s time resources and communication skills will be exceeded.
(Kirchler et al. 2004, p. 73). The clear distinction between advisory and decision-mak-
ing positions relates to the fact that employees assume either decision-making posi-
tions (‘line positions‘) or advisory positions (‘staff positions‘). The characteristic of
the latter is that employees collect and bundle information without, however, making
autonomous decisions. Staff positions are frequently taken by young and inexpere-
inced employees (Kirchler et al. 2008, p. 22). Barnard supports the idea of advisory
staff members being assigned to executives with major line positions. Last but not
least, Barnard’s organizational theory is characterized by a high degree of centraliza-
tion. Thus, for Barnard, companies should have centralized decision-making structures
running from top to bottom. (Kirchler et al. 2004, p. 73). Accordingly, decisions are
made by a few number of executives, with the result that the number of advisory po-
sitions is considerably higher than the number of decision-makers. In companies with
a decentralized structure, which Barnard tends to refuse, decisions are delegated to
hierarchically lower levels, exhibiting a lower number of advisory positions (Kirchler
et al. 2008, p. 22).
42
3.1.3.2 Strengths and Opportunities of Barnard’s Approach
Barnard has the merit of belonging to the founders of business-related social psychol-
ogy. He was the first to define companies as social systems, analyzing its internal
structure and the interaction with its environment. Also, Barnard was among the first
theorists analyzing the crucial role of executives with respect to corporate success,
which also makes him a co-founder of the later leadership concept (Simon 2006, p.
28).
Barnard’s theory was particularly innovative as it ‘comprises all types of employess
entering in whatever form into an exchange relationship of contributions made and
inducements received with the cooperation system‘ (
17
Bonazzi 2014, p. 78). It thus
classified a company’s employees, executives, shareholders, suppliers, and customers
within the same conceptual category of cooperating organization members. Further-
more, the theory’s high degree of abstraction allows to apply it to all sorts of organi-
zations. Therefore, Barnard’s approach may be viewed as a first contribution to devel-
oping a general organizational theory (Bonazzi 2014, p. 78).
3.1.3.3 Weaknesses and Limitations of Barnard’s Approach
One argument against Barnard’s approach – as well as against all other so-called open
organizational theories is the lack of predicability of organizational reactions arising
from the lack of system rationality. Once organizational processes are not character-
ized by criteria of rationality, they are neither predictable nor controllable. Even
though Barnard’s theory may be intuitively comprehensible, it is difficult to implement
and therefore difficult to verify (Kirchler et al. 2004, p. 73).
It is precisely because Barnard’s theory is formulated in a general and abstract manner
that it takes insufficient account of the peculiarities of different organizations. Thus,
what remains unconsidered, for example, is the great difference between business or-
17
alle Arten von Mitarbeitern umfasst, die mit dem Kooperationssystem in welcher Funktion auch
immer in ein Austauschverhältnis von geleisteten Beiträgen und erhaltenen Anreizen treten‘
43
ganizations and religious organizations. Barnard’s theory neither contains any instru-
ments that allow to identify the particularities of various organization types nor any
means to analyze relevant economic phenomena (e.g., financial speculation, exploita-
tion of labor, business negotiations etc.) (Bonazzi 2014, p. 78).
44
3.1.4 Warren Bennis
3.1.4.1 Presentation of Bennisʼ Approach
Warren Bennis (19252014), in unision with Burt Nanus, developed an approach to
so-called transformational leadership, in which they classify various types of organi-
zations. The starting point of Bennis are ‘three types of organization which differ with
respect to the following elements: its origin, its fundamental principles of operation,
the type of work performed, the handling of information, decision-making processes,
as well as power, influence, and status‘ (
18
Simon 2006, p. 214). The three types of
organization are characterized by a formalistic, collegial, and personalistic organiza-
tion style, respectively. The characteristic feature of the formalistic organization style
is a decentralized corporate management system, combined with a centralized corpo-
rate policy. In formalistic organization styles, a clear hierarchy prevails, with execu-
tives having a high degree of power and control. Superiors, who frequently lead by
means of regulations, bonuses, and sanctions, lay store by keeping employees at a dis-
tance. The collegial organization style is marked by a democratic decision-making
process, where the freedom of expression is to provide the basis to generate consensus.
Complex issues, in particular, are supposed to be settled quickly and properly using
various approaches. The collegial style is frequently linked with a corporate philoso-
phy that proclaims flexibility and peak performance. The personalistic organization
style is characterized by a close relationship of trust between leaders and employees.
Here, superiors are committed to maintaining the closeness to employees. One of the
aims of the personalistic style is to ensure employeesʼ individual self-realization so as
to have a positive influence on their performance and productivity (Simon 2006, pp.
214 & 215). The three organization styles are presented in a summarized form in the
table below.
18
von drei Organisationstypen aus, die sich durch folgende Elemente unterscheiden: ihre Entstehung,
ihre grundlegende Funktionsweise, die Art der geleisteten Arbeit, die Handhabung der Informationen,
der Entscheidungsfindung und der Macht, Einfluss und Status
45
Table 6: Organization Styles according to Bennis
Values / Behavior
Formalistic Style
Collegial Style
Basis of decision-
making
orders from above
debates, consensus
Forms of control
laws, regulations
interpersonal rela-
tionships, group
bonding
Sources of power
superiors
collective thinking
and feeling
Aspiration
performance of du-
ties
consensus
Aspects to avoid
assumptions of
risk, discrepancies
as to orders from
above
failure to achieve
consensus
One’s position to-
wards others
hierarchical
group-oriented
Human relations
fixed
group-oriented
Foundation for
growth
perpetuation of the
conventional sys-
tem of order
membership in
group of equals
Source: author’s own illustration based on Simon (2006), p. 215
The concept of transformational leadership originates from an empirical study carried
out by Bennis and Nanus in the course of which 90 leaders were surveyed and, in some
cases, also observed. The purpose of the interviews was to question the respondents
about their strengths and weaknesses. Furthermore, they were also asked to provide
information on experiences and events that had had a sustained impact on their own
46
leadership style, and to indicate the major turning points in their career while assessing
the individual decisions made at the time. Based on these interviews and observations,
the authors derived common characteristics of leadership. Their basic conception of
leadership is characterized by four strategies which were applied by all study partici-
pants:
- Strategy 1: to create attention through a vision
- Strategy 2: to convey meaning through communication
- Strategy 3: to acquire trust through establishing a position
- Strategy 4: to develop self through positive self-regard (Schwartz 2006, pp. 176
& 177).
The first strategy pertains to leaders who have a specific, credible, and realistic vision
directed at the company’s future and derived from employeesʼ needs (Stippler et al.
2000, p. 10). The vision functions as a guide both for leaders and for those being led.
The success of this strategy depends on whether the leader manages to convince the
entire company of his or her vision and to ensure that it pervades it. (Schwartz 2006,
p. 176). The vision needs to be capapble of encouraging employees to commit them-
selves to the company. Such a vision has an inspiring effect on employees, motivating
them to put their intentions into effect (Hammann 2008, p. 115).
The second strategy is based on the idea that leaders act as social architects, as it were.
They support employees in developing a new, i.e., collective, identity as well as a
jointly shared philosophy (Stippler et al. 2000, p. 10). What business enterprises need
is ‘a content of meaning which everyone agrees on, which allows an interpretation of
reality, and which provides the possibility of deriving actions‘ (
19
Hammann 2008, p.
115). When conveying meaning, the aim is to show a convincing picture of the com-
pany’s target state which arouses enthusiasm and commitment on the part of employ-
ees (Schwartz 2006, p. 177). In the course of this strategy, leaders do not confine them-
selves to solving problems. Rather, they are looking for challenging topics and create
inventive ideas (Hammann 2008, p. 115).
19
einen Sinngehalt, über den sich alle einig sind, der eine Interpretation der Realität zulässt und aus
welchem Handlungen abgeleitet werden können‘
47
The third strategy involves the task to build up a relationship of trust by providing a
clear direction, whereby it is important for the leader to comply with his or her own
principles in a consistent manner (Stippler et al. 2000, p. 10). Through establishing a
clear position, a leader becomes controllable and predictable. The associated con-
sistency, in turn, contributes to ensuring that innovative ideas are able to assert them-
selves against potential oppositions (Hammann 2008, p. 115).
The characteristic feature of the fourth strategy is that developing one’s personality in
a creative way constitutes a key element of effective transformational leadership
(Schwartz 2006, p. 177). In this context, it is imperative for the leader to reflect his or
her own strengths and weaknesses and to link his self-image with the company (Stip-
pler et al. 2000, p. 10). This also requires the leader to assess to what extent his or her
skills might be reconciled with professional requirements. For only in this way can
leaders receive a feeling of self-worth that is transmittable to those being led (Ham-
mann 2008, p. 116). The characteristic of a leader according to a transformational lead-
ership approach is that he or she works constantly and consistently on developing his
or her own talents and personal advancement (Schwartz 2006, p. 177). According to
Bennis, personal development can be hampered in cases where leaders have consider-
able success at a very early stage. For then there would no longer be a possibility to
learn dealing with failures, resistances, and problems (Handelsblatt Management Bib-
liothek 2005, p. 23).
Based on the four strategies as well as the empirical results gained from the survey,
Bennis and Nanus deduce several skills that a leader should have. For one thing, lead-
ers should accept employees as they are. They should treat employees with care and
place their trust in them in critical situations too. In addition, they should be capable
of approaching challenges with a focus on the present rather than on the past. Moreo-
ver, leaders should not become dependent on employeesʼ permanent recognition and
approval, but should also be able to take unpopular measures (Hammann 2008, p. 116).
Incidentally, it can be mentioned that the distinction made in Chapter 2 between man-
agement and leadership largely originates from Warren Bennis, who also coined the
well-known phrase ‘Managers do things right – Leaders do the right things‘ (Schul &
Ziegler 2014, p. 42).
48
3.1.4.2 Strengths and Opportunities of Bennisʼ Approach
Bennisʼ approach was a major force in arousing academic interest in the topic of lead-
ership in the 1980s (Handelsblatt Management Bibliothek 2005, p. 20). In unision with
Nanus, Bennis identified a global leadership crisis accompanied by an increasing loss
of employee morale, for which he blamed leaders (Simon 2006, p. 301) Bennis drew
attention to the fact that ‘leadership is not only the prerogative of those at the top of an
organization, but rather that it is a crucial element at all levels, and that the role of a
leader is not to act as an omniscient problem solver‘ (
20
Handelsblatt Management Bib-
liothek 2005, p. 20). In doing so, he placed emphasis on leadersʼ task to stimulate
employeeʼ creativity and to create an atmosphere allowing them to develop further
(Handelsblatt Management Bibliothek 2005, p. 20).
One of the most important aspects within the context of transformational leadership is
for leaders to create a vision concerning the future of the company and to use it as a
basis for their behavior and decisions. Only if leaders manage to acquire trust can they
gain the commitment of those being led (Hammann 2008, p. 116).
20
Führung nicht allein das Vorrecht derjenigen sei, die an der Spitze einer Organisation stehen, sondern
dass sie vielmehr auf allen Ebenen ein wichtiges Element sei, und dass die Rolle einer Führungskraft
nicht darin bestehe, als allwissender Problemlöser aufzutreten‘
49
3.1.4.3 Weaknesses and Limitations of Bennisʼ Approach
Even though Bennisʼ concept of transformational leadership takes account of various
variables, it falls short with respect to the influence relationships underlying leader-
ship. The primary focus is set on mapping the process between leader and employee,
thus neglecting the question as to how the influence relationship between leader and
employee is shaped, or exactly how organizations are changed (Hammann 2008, p.
116). The tranformational leadership theory has a normative orientation as it is directed
at the personal development of leaders and those being led. This is countered by the
fact that the main objective of a company is to generate profit. In that context, person-
ality development can solely be seen as a means to an end, i.e., as a means to generate
long-term competitive advantages (Hammann 2008, p. 116).
The distinction between management and leadership, which goes back to Bennis, has
by now become some sort of fashion trend which occassionally yields absurd fruits.
Whereas the term management is often regarded as being outmoded, the term lead-
ership has extremely positive connotations and is used in an inflationary way. This is
apparent, for example, where companies require leadership even from common em-
ployees. If understood as a separated maximum requirement, it is absurd because in
business practice many tasks simply need to be performed reliably and processed in
continually recurring process stages (Drath 2014, p. 92).
50
3.1.5 James Champy
3.1.5.1 Presentation of Champy’s Approach
James Champy (born in 1942), together with Michael Hammer, is known for having
developed the concept of business process reengineering (BPR) in the early 1990s
(Macharzina & Wolf 2008, p. 510). The two authors define their approach as follows:
Reengineering is the fundamental rethinking and radical redesign of business pro-
cesses to achieve dramatic improvement in critical, contemporary measures of perfor-
mance, such as cost, quality, service and speed’ (Champy & Hammer 1993, p. 32).
They contend that in order for companies to be successful in the long term they require
fundamental reorganization. The concept is focused on reorganizing companies to-
wards increased process orientation. In the process, the first step is to conduct a sys-
tematic analysis of all the company’s value-adding activities. The purpose of process-
oriented reorganization is to present a radical change compared to the previously used
organizational forms (Macharzina & Wolf 2008, p. 510). In business process reengi-
neering, a company’s business model undergoes a rethinking process, whereas the con-
tinuous improvement process, which has a similar orientation, is a long-term develop-
ment process. Business process reengineering, then, pursues a much more radical im-
provement approach than does permanent business process optimization. What
Champy and Hammer criticize about the business process optimization approach is the
fact that a smooth realignment of processes, carried out with the least amount of dis-
comfort for those involved, run inefficiently because it prevents from looking for un-
conventional, innovative solutions (Dobler et al. 2011, p. 78).
51
The characteristics of BPR become particularly apparent when being contrasted with
the Kaizen approach of improvement.
Table 7: Contrasting Business Process Reengineering with Kaizen
Business Process Reengine-
ering
Kaizen
Nature of change
radical, structural
incremental, cultural
Starting point
‘green meadow‘, i.e., draft of
target processes without anal-
ysis of current processes
existing processes
Time frame
one-time
steady
Implementation period
long-term
short-term
Implementation orienta-
tion
top-down
bottom-up
Scope
wide, cross-functional
narrow, functional
Risk
high
low
Instruments
information technology
statistical control proce-
dures
Procedure
reengineering team
group work
Evaluation criteria
measurable target values
efforts, not just results
Source: author’s own ilustration based on Krahe (1998), p. 28.
The short definition of BPR Hammer and Champy provide, i.e., ‘starting all over
again‘, ‘…begins by asking the fundamental question of what an enterprise should do,
and only then turns to the question of how this should happen‘ (
21
Hegewald 2003, p.
16). A fundamental redesign of procedures and processes is almost tantamount to cre-
ating a new company. One of BPR’s key objectives is to reduce the inefficiency re-
sulting from fragmentary and specialized division of labor by holistic and process-
21
‘setzt bei der fundamentalen Fragestellung an, was eine Unternehmung tun sollte, und wendet sich
erst danach der Fragestellung zu, wie dies geschehen sollte‘
52
oriented organizational structures. In this context, the main aim is to reduce complexity
within the company, and to remove interfaces that generate friction losses. Another
target is to enhance flexibility, to accelerate process procedures, and to increase qual-
ity. Traditionally, BPR implies dismantling hierarchies and decentralizing decision-
making responsibilities. Even so, process responsibilities are clearly determined
(Hegewald 2003, p. 16). It can be stated that in BPR several positions and tasks which
were previously seperated from each other are integrated and combined. Upon such
integration, single employees are entrusted with tasks that were previously carried out
by several specialists. Alternatively, those tasks may also be performed by teams
which are referred to by Champy and Hammer as case workers or case teams (Krall-
mann et al. 2013, p. 231).
BPR not only concerns corporate processes but rather affects all divisions of the com-
pany. Frequently, specialist departments are dissolved in favor of process teams. The
role of employees, too, is subject to change; there might even emerge new professions.
Oftentimes, management gives up its control function so as to focus more on its coach-
ing function. Moreover, further changes may concern corporate values and norms. Ide-
ally, the focus is no longer set on positional safeguarding, but on productivity (Müller
2014, p. 43).
On account of the profound changes made in the course of BPR, it is required for such
a project to be initiated by corporate management. Involvement of top-level manage-
ment is mandatory, even though BPR’s entire implementation is carried out using a
top-down approach (Dobler et al. 2011, p. 78). To be more specific, Champy and Ham-
mer recommend that a top-level manager appoint a process owner who in turn is to put
together a re-engineering team. Such a team deals with redesigning a selected business
process. The team members do so ‘with the support of the ‘reengineering tsar‘ – i.e.,
an employee who is responsible for developing appropriate reengineering techniques
as well as for realizing synergies among separate reengineering projects and under
the direction of the steering committee‘ (
22
Heuermann & Tomenendal 2011, p. 140).
The steering committee constitutes a body consisting of top-level executives. It makes
22
mit der Unterstützung des ‚Reengineering-Zaren‘ – eines Beschäftigten, der in der Organisation für
die Entwicklung von geeigneten Reengineering-Techniken sowie für die Realisierung von Synergien
zwischen getrennten Reengineering-Projekten zuständig ist und unter der Leitung des Lenkungsaus-
schusses‘
53
policy decisions, formulates the company’s BPR strategy, and monitors progress
(Heuermann & Tomenendal 2011, pp. 140141).
Champy and Hammer recommend to implement BPR in five steps:
- Identify and document each process;
- Select processes suitable for reengineering;
- Create an understanding for the processes selected;
- Provide a complete redesign program for existing processes;
- Implement the new processes (Krallmann et al. 2013, p. 231).
According to Champy und Hammer, three types of companies are predestined for im-
plementing BPR. The first company type includes companies which suffer economic
hardship, that is to say, they find themselves in a situation which requires certain ac-
tions. Among the second company type are companies with far-sighted managers who
realize already during stages of corporate growth that the company’s position might
worsen considerably in the future. The third company type is characterized by high-
performance companies using BPR as a means to extend its lead over the competition
(Müller 2014, p. 43).
54
3.1.5.2 Strengths and Opportunities of Champy’s Approach
Hermanutz (2006) highlights BPR’s complexity, stressing that it comprises main areas
of business processes. She states that BPR involves orientation towards processes, cus-
tomers, employees, value creation, performance, and competence. Process orientation
is characterized by focusing on customer-oriented processes. Customer orientation
pertains to designing and controlling business processes which, in turn, are reconciled
with customersʼ wishes and needs. In employee orientation, employees are motivated
by process reengineering and process improvement for process optimization. Value-
creation orientation is to ensure that value-adding business processes are optimized.
Performance orientation is expressed by increasing the efficiency and effectiveness of
business processes as well as of further process control and process monitoring using
appropriate parameters (e.g., process time, process quality, process costs). Compe-
tence orientation is aimed at supporting the development and expansion of core com-
petencies (Hermanutz 2006, p. 18).
Integrating work activities in terms of case workers and case teams can be advanta-
geous insofar as handovers are reduced or eliminated in such a way that previous er-
rors, delays, or rework diminish (Krallmann et al. 2013, p. 231).
55
3.1.5.3 Weaknesses and Limitations of Champy’s Approach
Heuermann and Tomenendal (2011, p. 141) point out that despite the great popularity
the BPR concept enjoyed among companies in the 1990s, many of the BPR projectsʼ
envisaged targets, some which were quite ambitious, were missed. According to the
authors, the reason for this is that the top-down implementation method led to disre-
garding the fact that companies are also shaped by experience-based organic bottom-
up processes, which above all ensure the continuous development of innovation.
A failure of BPR projects is also attributable to the fact that replacement of existing
processes is inevitably associated with a high risk. If redesigned processes turn out to
be indequate, they might become an existential threat to the company (Krallmann et
al. 2013, p. 233).
Due to the broad interest in BPR in business practice, the term business process reen-
gineering became a sort of buzzword, with business consultants using this trend to
declare old concepts as BPR. This gave rise to some confusion in that executives fre-
quently did not realize how BPR differed from existing concepts (Krahe 1998, p. 27).
56
3.1.6 Alfred Chandler
3.1.6.1 Presentation of Chandler’s Approach
Alfred D. Chandler, Jr. (19182007) ranks among the founders of strategic manage-
ment (Alberti 2011, p. 36). He dealt with how changing environmental influences and
corporate growth affect an enterprise’s strategy and structure. In doing so, he deter-
mined the interplay between strategy and structure. According to Chandler, strategy
pertains to what goals are set for the long term, how those goals are to be achieved,
and what resources are provided. Structure, on the other hand, means the design of the
organization which runs the undertaking (Poensgen 1973, p. 62). Structure particularly
includes the formal lines of authority and the communication channels between de-
partments, as well as the actual flows of information between them (Grunwald &
Schwellbach 1999, pp. 7 & 8).
Chandler holds that corporate structures not only follow the context, but also are af-
fected by organizational concepts developed by managers: ‘A new strategy required a
new or at least refashioned structure if the enlarged enterprise was to operate effi-
ciently‘ (Chandler 1962, pp. 15 & 16)
In his work Strategy and Structure, Chandler analyzes corporate processes of General
Motors, DuPont, Standard Oil of New Jersey, and Sears Roebuck. In the process, he
summarizes ‘the findings depending on the change of the corporate structure and or-
ganization as a result of the strategic decisions made‘ (
23
Alberti 2011, p. 37). The pur-
pose of his investigation was to clarify why the companies in question had introduced
a divisional structure. The study revealed that companies do not directly adapt its or-
ganizational structure to the evironment; rather, in order to achieve its goals, they
against the backdrop of specific environmental conditions and opportunities develop
specific strategies that subsequently might cause problems in the internal relationship
which in turn may be compensated for by organizational changes. Thus, the starting
point are strategic considerations of corporate management, with corporate structure
23
‘die Ergebnisse in […] Abhängigkeit der Veränderung der Unternehmens der Unternehmensstruktur
und -organisation durch die getroffenen strategischen Entscheidungen zusammen‘
57
being considered a means to implement a predefined strategy. Chandler recognizes a
temporal sequence of structure and strategy in the sense that organizations in principle
start out by seeking appropriate strategies to seize actual or presumed opportunities.
Considerations on how to design a corresponding organizational structure take place
only in a second step. This line of thought is expressed by Chandler in the formula
‘structure follows strategy‘. If structure does not follow strategy, Chandler contends,
inefficiency occurs (Grunwald & Schwellbach 1999, pp. 7 & 8).
The investigation revealed that the companies surveyed began to introduce a functional
structure following an increase in sales. Subsequent corporate growth was ensured by
diversification, which on the other hand brings about business area organization (Mül-
ler 2003, p. 171). Thus, multidivisional structures are the result of strategic manage-
ment decisions. Chandler distinguishes four different growth strategies. The first strat-
egy is for a good’s or service’s production quantity to be increased. While the second
strategy concerns geographical growth due to new locations, the third strategy includes
the pursuit of vertical integration. The fourth strategy is product diversification (Müller
2013, pp. 4 & 5).
In principle, the development of large corporations, according to Chandler, takes place
in four stages, the starting point being a small business whose performance function
does not yet show any structuring:
(0) Establishment and management of the small business;
(1) Accumulation of resources;
(2) Rationalisation;
(3) Development of new markets as well as expansion of product range in order to
ensure full utilization of resources;
(4) Creation of a new structure in order to achieve effective mobilization of re-
sources (Poensgen 1973, p. 62).
In his investigations, Chandlers explored the structural differences between one-prod-
uct companies and such companies as General Motors or DuPont which pursue a dis-
tinct product diversification strategy. The results showed that companies operating in
only one product market as well as trying to grow through vertical integration in the
58
value chain and/or through increasing the production volume exhibit a highly central-
ized structure specialized in functions, with related activities and processes being sum-
marized into central departments. Companies producing different goods and offering
them in various markets show a tendency towards decentralization and divisionaliza-
tion. Such companies shift the focus of its departments from functions to products and
product markets so that each division is specialized in a certain product or product
market. Those newly formed divisions include all functions for the production, distri-
bution, and marketing of a product. The control and monitoring of daily operational
business is carried out entirely by divisional management, although the strategic align-
ment of personnel and financial planning is performed by a central control unit (Müller
2013, pp. 5 & 6).
Furthermore, Chandler considers the development of corporations in a historical con-
text, his main focus being the co-evolutionary development of technology and business
enterprises. Chandler identifies three historical stages, each being subject to distinct
technological laws and corresponding to the emergence of large corporations. The first
stage (17901840) is characterized by the predominance of family or individual com-
panies managed by owners. The second stage (18401880) is marked by major tech-
nological innovations, especially in the fields of communication and transportation. At
that time, company management had to come to grips with new technical, organiza-
tional, and commercial challenges. The focus of the third stage (18801920) was to
integrate mass production and distribution (Matys 2011, p. 67).
In the wake of these stages and developments, a transition from owner-based to man-
ager-based companies took place. Owner families gradually refrained from managing
their businesses directly. In the process, they finally also lost control over the corporate
strategy of their enterprises. At the end of the historical development as outlined by
Chandler are large corporations with professionally trained, employed managers and
a broad shareholder structure (Schäfer 2000, p. 144).
Chandler’s finding regarding the development of large corporations contrasts to a cer-
tain extent with neo-classical economic theory, according to which production and
distribution processes are best executed by traditional, i.e., small-sized companies.
Chandler recognized that large corporations would increasingly replace small-sized
59
companies, if this led to increased productivity and profits. Such increases can be ex-
pected once new technologies are being introduced and existing markets expanded.
Remarkably enough, the first large corporations emerged in the field of railway and
telegraph communication (Kiefer & Steininger 2014, p. 353). In contrast, according to
Chandler, the development towards modern corporations failed to appear or appeared
only with delay where technology-based production growth did not occur and markets
remained small and specialized (Kiefer & Steininger 2014, p. 353).
3.1.6.2 Strengths and Opportunities of Chandler’s Approach
Müller (2003) points out that in spite of all criticism against Chandler’s theorem that
structure follows strategy, his basic idea still applies today: With growing complexity
and dynamism of the environment, companies first of all make a transition from a
simple, functional organization to a regional and product organization. Subsequently,
they develop into a matrix or network organization. Applying this thought to the inter-
national business world, it follows that decision are made within the multilocal struc-
ture of foreign subsidiaries, while company headquarters merely lays down the condi-
tional framework (Müller 2003, p. 171).
Chandler has the merit of having shown that there may be coordination problems
among and within functionally-structured departments that are particularly due to the
varying and changing requirements of different product groups. For Chandler, those
problems can be solved through divisionalization of strategic and operational decision-
making, coupled with the separation of personnel. Accordingly, strategic and opera-
tional decisions are no longer made by department managers, since following the es-
tablishment of a multidivisional structure, division heads make independent decisions
on the operational workflow. Another advantage of multidivisional structures over
functional structures is the reduction of interdependencies given the separation into
autonomously operating units. Due to the fact that a division disposes of all functions,
interactions with other units within the organization are rarely required. This ensures
the decrease in workflow complexity and the equalization of processes (Müller 2013,
pp. 6 & 7).
60
3.1.6.3 Weaknesses and Limitations of Chandler’s Approach
The ‘structure follows strategy‘ paradigm has been criticized from various theoretical
angles. Contingency theory as well as the situational approach denies the existence of
a strategic choice. Chandler’s approach is based on the assumption that differences
between real organizational structures can be attributed to differences existing in those
situations in which the respective company finds itself. The situational approach, by
contrast, is a deterministic approach, which as such excludes the possibility of making
strategic choices (Grunwald & Schwellbach 1999, pp. 8 & 9). Urselmann (2006), too,
criticizes the ‘structure follows strategy‘ paradigm. He argues that Chandler’s assump-
tion is not entirely tenable because, ‘conversely, organizational structure defines con-
straints that might influence the choice of strategy, which means that one might as well
state that ‘structure leads to strategy‘‘(
24
Urselmann 2006, p. 38). Furthermore, there is
also empirical evidence against the general validity of the ‘structure follows strategy‘
paradigm. Richard Rumelt investigated the influence of diversification strategies on
corporate structure. 262 American companies were surveyed during the period from
1949 to 1974. As a result, it was shown that in numerous companies strategy followed
preceding structural changes. The main reason for the change of corporate structure
was that the companies followed current trends, i.e., they imitated things to a certain
extent (Hansen 2000, p. 75). It can be assumed that companies operating in similar
environments observe each other carefully and, at the same time, undertake an align-
ment process. Rumelt summarizes his view in the formula ‘structure follows fashion‘
(Grunwald & Schwellbach 1999, p. 9). One argument in favor of the ‘strategy follows
structure‘ approach is that organizational information and communication systems
have an impact on management’s environmental perception (Hansen 2000, p. 75).
Also, there are approaches that aim to couple the two contrasting paradigms ‘strategy
follows structure‘ and ‘structure follows strategy‘. As illustrated by figure 6, the two
paradigms are compatible with one another. Management’s strategic intentions may
causally determine existing corporate structures. As proclaimed by Chandler, a struc-
ture is created in order to implement a certain strategy. Structure-oriented approaches,
24
umgekehrt die Organisationsstruktur Handlungsrestriktionen definiert, welche die Strategiewahl be-
einflussen könnte, so dass die These ‚structure leads to strategy‘ ebenfalls vertretbar ist‘
61
on the other hand, state that corporate structure ‘potentially has two effects on imple-
mented strategic action patterns: The desired strategic patterns at least in part are
caused by structure; however, it is also possible that the new organizational structure
additionally gives rise to unintended strategic behavior as well‘ (
25
Schrader 1995, pp.
70 & 71). The emerging strategic behavior patterns, in turn, may be a reason for mod-
ifying the intended strategy, which might change the existing structure again. The dot-
ted arrows in the figure below represent feedback processes, signifying that structure
and strategy might have an interdependent relationship (Schrader 1995, pp. 70 & 71).
Figure 6: Corporate Structure as a Consequence and Antecedent of Corporate Strategy
Source: Schrader (1995), p. 71.
A further point of criticism about Chandler’s approach is that it provides a highly sim-
plified presentation of the processes he investigated. In reality, there is a complex in-
terplay between strategy and structure; hence, contrary to Chandler’s theory, only in a
perfect world would it be possible for companies to develop perfect strategies and cre-
ate ideal organizational charts and structures (Handelsblatt Management Bibliothek
2005a, p. 40).
25
potenziell zwei Effekte auf die realisierten strategischen Handlungsmuster ausübt: Die gewünschten
strategischen Muster werden jedenfalls teilweise durch die Struktur hervorgerufen; es ist jedoch
auch möglich, dass aus der neuen Organisationsstruktur zusätzlich nicht-intendierte strategische Ver-
haltensweisen resultieren‘
62
3.1.7 W. Edwards Deming
3.1.7.1 Presentation of Deming’s Approach
William Edwards Deming (19001993) was a physicist, statistician, and pioneer of
quality management. Deming was a student of Walter Shewhart, the founder of statis-
tical process control. From the 1940s onwards, Deming developed a process-oriented
perspective on corporate activities; his approaches later made its way into various qual-
ity management teachings and quality standards (Hochheimer 2011, p. 56).
Deming puts forward the view that quality can be improved, if the principles of statis-
tical process control are strictly observed by all executives and employees at all stages
of the production of goods and services. The goal of statistical process control is to
minimize variations during production processes (deviating process results) (Schnei-
der et al. 2008, p. 69). In this context, Deming underlines the importance of customers:
The customer is the most important part of the production line. Without someone to
purchase our product, we might as well shut down the whole plant’ (Deming 2000, pp.
174 & 175).
63
A key component of Deming’s approach is the PDCA cycle, also referred to as the
Deming cycle, consisting of four elements, namely, Plan, Do, Check, and Act. The
PDCA cycle is a tool of quality and process improvement that can be applied to all
hierarchical levels (Ebel 2011, p. 36). It is illustrated in the figure below.
Figure 7: The PDCA Cycle
Source: Schneider et al. (2008), p. 70.
The first step of the cycle concerns the planning of measures (‘Plan‘) (Van Bon 2009,
p. 6). The focus here is on scrutinizing the current state of affairs with regard to im-
provement potential, and developing a plan for quality optimization. In the process of
analyzing weak points or improvement potential, respectively, specific measures for
changes frequently become discernible (Ebel 2011, p. 36). To gain realistic planning
values, consideration is given to past experiences (Schneider et al. 2008, p. 70). Sub-
sequently, the planned activities are implemented (“Do”) (Van Bon 2009, p. 6). At this
stage, the change measures developed in the previous step are carried out (Ebel 2011,
p. 36). What is important here is to document the activities undertaken as well as the
results achieved (Schneider et al. 2008, p. 70). The next step is about checking whether
activities have led to the desired results (‘Check‘) (Van Bon 2009, p. 6). As for the
64
previously defined goals, it is asked whether any side effects have occurred and, if so,
how they can be assessed (Ebel 2011, p. 36). When checking, measurement results and
other relevent process data are evaluated in an effort to recognize systematic causes of
problems and errors (Schneider et al. 2008, p. 70). The final step (‘Act‘) involves – if
required adjustments to the original plans (Van Bon 2009, p. 6). To be more specific,
‘the results of the analysis are assessed by the persons responsible in addition to mak-
ing decisions regarding the change of targets, processes, and the use of resources, and
considering them for the next planning period‘ (
26
Schneider et al. 2008, p. 70).
The aim of the four-step cycle is to identify possible need for improvement, as well as
to create and implement improvements. Thus, the PDCA cycle is geared at ensuring
continuous development of quality management (Ebel 2011, p. 36).
Deming developed a management system characterized by 14 key points:
1. Create a constant purpose for continuous improvement of products and services;
2. Adopt the new philosophy to ensure economic stability;
3. Stop dependence on inspection;
4. Cease the practice of doing business on low prices;
5. Never cease to search for the causes of problems so every system for production and
service can improve continually;
6. Provide modern training methods on the job;
7. Use modern leadership methods to help employees and machines enhance their
work performance;
8. Eliminate fear by effective vertical and horizontal communication;
9. Break down barriers between corporate departments;
10. Get rid of slogans, targets, and exhortations;
11. Eliminate numerical targets and quotas for employees; use quality bonuses and
rewards and express personal praise;
12. Remove barriers that deprive superiors and employees of pride in their work;
13. Implement a vigorous training program and motivate employees to improve them-
selves;
26
die Analyseergebnisse von den Verantwortlichen beurteilt sowie Entscheidungen über die Verände-
rung der Ziele, Prozesse und über den Mitteleinsatz getroffen und für die nächste Planungsperiode vor-
gesehen
65
14. Define management principles for permanent improvement of quality and produc-
tivity (Ertl-Wagner et al. 2013, p. 5).
The above 14 points provide the starting point for the Deming Chain Reaction, which
is illustrated in the figure below. It is characterized by achieving an improvement of
quality that, in a second step, leads to increased productivity. This increase, in turn,
allows to reduce cost and, thereby, to offer more competitive prices. As a consequence
of secured market shares, on the other hand, the company can manage to provide se-
cure jobs. In order for the individual reactions to occur, it is required to fulfill two
fundamental requirements: Firstly, every activity needs to be perceived as a process;
secondly, it is imperative to make fundamental changes, rather than provide mere so-
lutions (Rothlauf 2014, pp. 72 & 73). Moreover, Deming considers it necessary for
top-level management to actively design the quality process. Merely assuming respon-
sibility, Deming holds, is insufficient (Kühl & Schmidt 2004, p. 103). Shortcutting the
chain, according to Deming, is not possible; for if e.g. one started with a reduction in
costs, the rationale goes, the result would at best be short-term or only ostensible suc-
cess (Zollondz 2011, p. 87).
Figure 8: The Deming Reaction Chain
Source: Hellmich (2010), p. 31
66
With the reaction chain, Deming was trying to ‘also capture economic consequences
when explaining in a conditional manner that quality improvement must be coupled
with cost-conscious, entrepreneurial activity, and has a macroeconomic impact on em-
ployment (unemployment) and prosperity‘ (
27
Zollondz 2011, p. 87).
Deming distinguishes ‘seven diseases‘ that might lead to the failure of the 14-point
management program. They include:
- Lack of a constant purpose;
- Emphasis on short-term profits;
- Performance evaluation, appraisal systems, annual review of performance;
- High fluctuation in management staff;
- Figure-oriented management, without taking account of non-quantifiable pa-
rameters;
- High social costs
- High costs due to product liablity risks (Kühl & Schmidt 2004, p. 105).
Deming’s rejection of performance evaluation and appraisal systems is accounted for
by his view that evaluations can only take place within a predefined process, with em-
ployees being unable to influence them either positively or negatively. The conse-
quence is that evaluations are carried out using inappropriate or wrong criteria, finally
leading to the overall purpose getting out of sight in favor of short-term goals (Kamiske
2010, p. 39).
27
auch die volkswirtschaftlichen Konsequenzen zu erfassen, indem er konditional begründete, dass die
Verbesserung der Qualität mit kostenbewusstem, unternehmerischem Handel verknüpft werden muss
und gesamtwirtschaftlich sich auf Beschäftigung (Arbeitslosigkeit) und Wohlstand auswirkt‘
67
3.1.7.2 Strengths and Opportunities of Deming’s Approach
The requirements Deming formulated in the middle of the 20th century are now stand-
ard in quality management. For instance, it has by now become common practice for
organizational design measures and quality-related processes to be implemented after
target processes have been defined (Zollondz 2011, p. 91).
By taking the view that ‘quality cannot be checked on the basis of results, Deming is
taking account of the development process and statistical procedures of process control
and process regulation to sustainably improve production quality at the intraorganiza-
tional level‘ (
28
Kühl & Schmidt 2004, p. 106). In order for such statistical procedures
to be adopted within the company, specific training programs for executives and spe-
cialists are required. In addition, it is imperative for every division to be supported by
statisticians (Kühl & Schmidt 2004, p. 106).
Deming’s approach enjoyed particular popularity in Japan, where he is regarded as the
father of the quality movement. According to Ebel (2011, p. 36), Deming’s approach
contributed to Japan’s economic revival when after World War II Deming was able to
put his theory into practice there (Ebel 2011, p. 36). In 1949, the Union of Japanase
Scientists and Engineers (JUSE) approached Deming in an effort to organize some
seminars with him. In these seminars, Japanese engineers, managers, and students
were introduced to the methods of quality assurance (Zollondz 2011, p. 86). Deming
succeeded in increasing the quality and productivity of Japanese companies. In doing
so, he placed special emphasis on the extensive use of statistical methods during qual-
ity improvement processes in the fields of development, sale, services, and manufac-
ture. Moreover, he advocated the use of a systematic method to detect and reduce de-
viations, as well as to identify and eliminate process-impairing causes. Also, Deming
supported the idea of establishing intense communication and cooperation among em-
ployees in an environment characterized by freedom of expression (Graf 2003, p. 34).
28
Qualität nicht ergebnisbezogen überprüfbar sei, nimmt Deming den Entwicklungsprozess sowie sta-
tistische Verfahren der Prozesssteuerung und Prozessregelung in den Blick, um die Produktionsqualität
intraorganisational nachhaltig zu verbessern‘
68
Deming, who became the epitome of quality control in Japan, is credited to a large
extent for the export strength of Japanese companies. In the wake of Japanese compa-
niesʼ strongly expanding exports, the Western industrial world began to take notice of
Deming’s approach (Kamiske 2010, p. 31).
The popularity Deming enjoyed in Japan was reflected among other things in the fact
that in 1951 the Union of Japanase Scientists and Engineers founded the Deming Prize,
which is awarded to companies that have achieved notable success as a result of ap-
plying the priciples of total quality management. The contest, which since 1986 is open
to foreign companies as well, places very high demands on participating companies.
The criteria to be met concern such categories as corporate policy and goals, training
and further training, standardization, quality and cost control, quality assurance, and
plans for the future (Müller 2004, pp. 226 & 227).
3.1.7.3 Weaknesses and Limitations of Deming’s Approach
Graf (2003, p. 34) criticizes that Deming failed to develop a concept for a social system
in spite of the fact that half of the 14 points refer to behavioral dimensions whose
importance Deming is fully aware of. Hence, according to Graf, Deming paid little
attention to complex issues such as employee motivation, leadership style, and work
atmosphere.
Zollondz (2011, pp. 94 & 95) contradicts other authors who contend that Deming’s
approach had a huge impact on the success of Japanese companies. In reality, Zollondz
believes, the success of those companies was due to the works of Taiichi Ohno and
Kaoru Ishikawa. Zollondz further states that the Deming Prize can be regarded as an
expression of his quality approach only to a limited extent, for one has to keep in mind
that there is a tendency in Japan to award foreign personalities for achievements which
are in fact made by Japanese people.
69
3.1.8 Peter Drucker
3.1.8.1 Presentation of Drucker’s Approach
Peter Drucker (19092005), in his book The Practice of Management, introduces the
concept of management by objectives (Leimböck et al. 2015, p. 189). His approach to
management is based on various other authorsʼ theories, especially the theory of Fred-
erick Winslow as developed in his 1911 book Principles of Scientific Management
(Krause 2003, p. 16).
According to Drucker, managers show the strong tendency to be stressed by their daily
tasks in such a way that they lose sight of the objectives underlying them. Management
by objectives, Drucker holds, ensures that emphasis is put on results rather than activ-
ities (Russell-Walling 2011, p. 128). In Drucker’s estimation, what business enter-
prises need is ‘a principle of management that will give full scope to individual
strength and responsibility, and at the same time give common direction of vision and
effort, establish team work and harmonize the goals of the individual with the common
welfare’ (Drucker 2011, p. 70).
The basic idea of management by objectives is that employees will increase their per-
formance and show greater motivation if there are clearly defined objectives, such that
the entire workforce knows in what direction to go. If employees are also involved in
the development of objectives, then acceptance and identification with objectives is
additionally increased (Christe-Zeyse 2004, pp. 83 & 84).
Management by objectives is structured in such a way that there is a direct connection
between the corporate strategy, which is developed at the highest level, and its imple-
mentation at the lower levels. In order for strategy and objectives to be followed con-
sistently, it is required to regularly review what progress has been made on the way to
reach the defined objectives, and to evaluate employee performance. For Drucker,
evaluation should be accompanied by feedback. Feedback involves a comparison of
expectations and actual results. The idea of feedback is to show employees their
strengths and weaknesses, i.e. what they are good at and to what extent there is still
need for them to improve (Russell-Walling 2011, p. 129).
70
As demonstrated in the figure below, management by objectives can be depicted as a
cybernetic control principle, with the company being a controlled system featuring an
input (production factors) and output (produced goods and services) channel. The out-
put’s actual value and target value are compared with each other on a regular basis. If
the actual value exceeds or at least corresponds to the target value, no further activities
are required, for then the desired target value has been (over) achieved. If, on the other
hand, the actual value is lower than the target value, it is required for managers to make
changes, for instance by modifying the input in such a way that the target/actual dif-
ference on the output side disappears (Vieweg 2013, pp. 216 & 217).
Figure 9: The Systematics of Managements by Objectives
Source: Vieweg 2013, p. 217.
To implement management by objectives, Drucker considers it necessary for compa-
nies to employ general management guidelines regulating internal cooperation (Boos
et al. 2011, p. 35). In addition, there should be a contract of objectives between man-
agers and employees, so that the latter are primarily controlled by the objectives the
company has set for itself, rather than by their superiors (Russell-Walling 2011, p.
129).
Another requirement for implementing management by objectives is to define objec-
tives in a clear and specific manner. For example: Merely setting the target of increas-
ing productivity is not enough; rather, it is necessary to specify to what extent produc-
tivity is to be increased. Usually, employees are involved in the process of setting ob-
jectives. The corporate objectives are divided into sub-objectives so that they form a
hierarchy of objectives, with the objectives of the lower levels being linked to those of
the higher levels (Kirchler & Rodler 2001, pp. 66 & 67).
71
According to Drucker, there are five major principles of management, i.e., setting ob-
jectives, organizing, motivating and communicating, establishing measurements of
performance, and developing people. Organizing includes a variety of tasks, such as
analyzing activities, establishing organizational structures, and selecting people. The
tasks of motivating and communicating reflect Drucker’s idea of a manager, which
includes social skills as well. As for establishing measurements of performance,
Drucker assumes that employee performance can be measured by appropriate param-
eters, which serve as a guideline for employees. Developing people not only refers to
employees but to managers as well (Wagner 2013, pp. 106 & 107).
Another topic Peter Drucker dealt with intensively is knowledge management, intro-
ducing the term knowledge worker to the literature on business management.
Knowledge workers are ‘individuals who use their individual know-how, their crea-
tivity, their intuition and the capabilities related to it in order to analyze and solve
complex and new problems as well as to generate new knowledge‘ (
29
Kels et al. 2015,
pp. 14 & 15). The 21st century is referred to by Drucker as the age of knowledge
economy, meaning that our industry and service-oriented society has developed into a
society of knowledge (Handlbauer & Renzl 2009, p. 153). During work processes,
knowledge workers are able to deal with extensive knowledge stocks, using their
knowledge for the purposes of their company and sharing it with others. They have
profound as well as extensive expert knowledge that cannot be simply replaced be-
cause it is based on professional training and several years of occupational experience.
According to Drucker, knowledge workers differ from conventional employees in
many ways:
- Knowledge workers are particularly productive when being allowed to decide how
to implement their work, and when being provided with the appropriate framework to
focus on the activities in the best-possible manner;
- Knowledge workers take responsibility for their own productivity, which is why they
require the necessary scope for action to manage themselves;
- Continuous innovative contributions are a constituent part of their role and task re-
sponsibility;
29
Individuen, die ihr personengebundenes Wissen, ihre Kreativität, ihre Intuition und zugehörigen
Handlungskompetenzen einsetzen, um komplexe und neuartige Problemstellungen zu analysieren und
zu lösen sowie neues Wissen zu generieren‘
72
- Knowledge workers show permanent learning activity and are challenged and pro-
moted properly;
- Knowledge workersʼ labor productivity is not primarily measured on the basis of
quantitative output, but rather on the basis of the quality of their work and the benefits
it generates for the company;
- Knowledge workers should be regarded as assets rather than cost factors. Attractive
framework conditions must be provided to link knowledge workers close to the com-
pany and keep their valuable knowledge within the company (Kels et al. 2015, pp. 14
& 15).
Drucker committed himself greatly to promoting humane working conditions. Even
though it is true that work systems need to be organized according to the logic inherent
to the task, they nevertheless require a humane design, allowing employees to be con-
sidered whole beings, as it were. Work systems, therefore, need to be structured in
such a way as to provide an environment that promotes learning as well as possibilities
for direct involvement and self-actualization (Schat 2014, p. 37). This aspiration is
founded ‘in Drucker’s conviction that people need to be free people even at work a
conviction which Drucker had already developed before the National Socialist German
Workersʼ Party’s assumption of power made it necessary to emphatically emphasize
this attitude‘ (
30
Schat 2014, p. 37).
30
in Druckers Überzeugung, dass Menschen auch als Arbeiter freie Menschen sein müssen eine
Überzeugung, die Drucker bereits entwickelt hatte, bevor die Machtübernahme der Nationalsozialisti-
schen Deutschen Arbeiterpartei es notwendig machte, diese Grundhaltung nachdrücklich zu unterstrei-
chen‘
73
3.1.8.2 Strengths and Opportunities of Drucker’s Approach
Drucker is occassionally referred to as the ‘father of management‘ or ‘management
guru‘. What makes him special is that his works not only deal with topics relating to
the economic world but also with behavioral structures within governments and non-
governmental organizations (Russell-Walling 2011, p. 130).
Management by objectives is a comprehensive management concept that is also con-
sidered to be the ideological foundation for management control, a planning and con-
trol concept which has become indispensable for the world of business (Vieweg 2013,
p. 59).
One of the supposed advantages of management by objectives is that formulating ob-
jectives in a clear manner leads to increased employee performance. Moreover,
Drucker’s approach is said to contribute to increasing employeesʼ identification with
corporate objectives (Havranek & Niedl 2013, p. 131) by involving them in the process
of defining them. As a result of measuring employee performance on the basis of fig-
ures, the possibility is provided to pay performance-based salaries (Boos et al. 2011,
p. 35).
What is more, owing to permanent feedback, the company rises to the position of a
learning system (Havranek & Niedl 2013, p. 131). Due to a controlled process of up-
dating and modifying objectives, the company shows a greater degree of flexibility.
Conventionally, management by objectives involves the improvement of the infor-
mation and control system and the disburdening of top management (Thom & Ritz
2008, p. 406). For example, Drucker’s approach may help relieve top management of
routine tasks and, thereby, focus more on other management tasks (Boos et al. 2011,
p. 35). Thus, individual instructions of managers for employees are no longer neces-
sary. Since work results are evaluated on agreed (intermediate) dates, further control
in terms of self-control and control of results can be delegated to employees in terms
of self-control (Stroebe & Stroebe 1992, p. 15).
Management by objectives has not only found its way into many business enterprises
but has by now become a crucial concept for public administrations too. The admin-
istration paradigm of the New Public Management (NPM) approach, then, is directly
74
linked to the management by objectives approach. Public administrations following
that paradigm are characterized by impact and performance orientation in assessing
the output of the administration or administrative staff (Promberger 2009, p. 203).
3.1.8.3 Weaknesses and Limitations of Drucker’s Approach
One of the weaknesses of the management by objectives concept is that setting, docu-
menting, and regularly evaluating objectives involves a great administrative burden
and large amounts of time (Russell-Walling 2011, p. 130). According to Havranek and
Niedl (2013, p. 131), another disadvantage is that it encourages competitiveness
among employees. A further weakness is that it involves conflicts of objectives, espe-
cially between economic and individual-social objectives (Thom & Ritz 2008, p. 406).
Moreover, there is the possibility that some departments pursue objectives running
counter the overall corporate goal. To prevent such departmental egoism from occur-
ring, it may be useful to institute cross-divisional project groups (Kirchler & Rodler
2001, p. 67).
It appears to be difficult in principle to harmonize corporate objectives with personal
objectives. When choosing such an approach, there is the danger of objectives losing
their driving power. In order for corporate objectives and personal objectives to be
brought together, certain agreements if possible might be made (Stroebe & Stroebe
1992, p. 14).
An additional problem is that the orientation towards results or figures, respectively
frequently does not involve any empirical verification of the relevant effect mecha-
nisms. Furthermore, the management by objectives approach is not necessarily suita-
ble for every hierarchical level; it is considered to be suitable only for middle-level
management. Aside from that, it neglects group-dynamic aspects, focusing solely on
the bilateral relations between managers and employees (Thom & Ritz 2008, p. 406).
In addition, it is required to check objectives with regard to its up-to-dateness. Once
objectives become an end in itself, the danger arises that they become obsolete without
noticing (Stroebe & Stroebe 1992, p. 14).
When adopting the management by objectives concept in public administrations, the
problem exists that it is oftentimes impossible to operationalize clearly defined target
75
and result values. Measuring success on the basis of specific target values is difficult
because many states of affairs do not allow to be represented by figures (Brüggemeier
1998, p. 47f).
It should also be noted that the introduction of the management by objectives approach
takes a comparatively large amount of time. The implementation period may take sev-
eral months or even years. First-time definition of operational objectives requires be-
tween five to 15 hours per employee (Stroebe & Stroebe 1992, p. 48).
76
3.1.9 Henri Fayol
3.1.9.1 Presentation of Fayol’s Approach
Henri Fayol (18411925), who was an engineer and general director of a mining com-
pany, is the founder of the administrative approach (Boos et al. 2011, p. 20). He holds
that there are six different types of corporate activities, i.e., technical, commercial,
financial, managerial, security, and accounting activities (Claussen 2012, p. 22). Table
8 provides a more detailed description of these activities.
Table 8: Corporate Activities
Activities
Tasks
technical activities
manufacturing, production, transformation
commercial activities
purchase and sale, exchange
financial activities
raising and utilizing capital
managerial activities
planning, organizing, directing, coordinating, and
controlling
security activities
protection of property and employees
accounting activities
financial statements, inventory, purchase prices,
statistics
Source: Claussen (2012), p. 22
The above classification of corporate activities form lays the groundwork for Fayol’s
approach. According to these six functions, ‘he subdivides the corporate plan, deter-
mines managing bodies, and assesses staff skills according to the management hierar-
chy‘ (
31
Rudolph 1994, p. 14). Having quantified the individual skills, Fayol came to
the conclusion that ordinary workers should have a 85 percent share of technical skills
31
unterteilt er den Plan des Unternehmens, bestimmt […] die Leitungsorgane und bewertet […] die
Fähigkeit des Personals entsprechend der Leitungshierarchie‘
77
and a 5 percent share of accounting skills, managerial skills, and security skills respec-
tively. Higher-ranking positions, in contrast, require increasing managerial skills. For
example, a general director should have a 50 percent share of managerial skills,
whereas the remaining skills only require a share of ten percent each (Rudolph 1994,
p. 14).
In his 1916 book Administration Industrielle et Générale, Fayol identifies five mana-
gerial functions, namely, planning, organizing, commanding, coordinating, and con-
trolling (Boos et al. 2011, p. 20). Planning includes forecasting and anticipating the
future with regard to corporate objectives and decisions. For Fayol, it is the most sig-
nificant as well as most difficult function to fulfill (Sachenbacher 2000, p. 26). Without
forecasts, the consequences will be steps in the wrong direction, hesitant actions, and
frequent changes of course (Boos et al. 2011, p. 20). In the English translation of his
work, Fayol (1967, p. 43) describes planning as follows: ‘Planning is manifested on a
variety of occasions and in a variety of ways, its chief manifestation, apparent sign and
most effective instrument being the plan of action. The plan of action is, at one and the
same time, the result envisaged, the line of action to be followed, the stages to go
through, and methods of use’. Commanding pertains to the idea that commands con-
tribute to ensuring that tasks will be carried out according to the overall corporate goals
even in spite of possibly divergent interests on the part of employees (Sachenbacher
2000, p. 27). Only through commanding is it possible for a company to be a unit ca-
pable of acting on a long-term basis (Boos et al. 2011, p. 21). Coordinating, on the
other hand, refers to management’s task of setting corporate resources and measures
up for a uniform action context in functional, spatial, and temporal terms (Sa-
chenbacher 2000, p. 27). Controlling involves a comparison of the results achieved
with the plan data. This, in turn, provides the basis for initiating corrective measures
or plan changes (Laßleben 2002, p. 115).
Similar to Max Weber, Fayol worked out basic principles regarding the rationalization
of work and company organization. To this end, he defined 14 principles of manage-
ment and administration (Müller-Jentsch 2003, p. 84), which are listed