Case Study Analysis:
FUNDAMENTALS OF LEADERSHIP
SAP: LEADER OF THE PACK
Your ID No:
1.1 Leadership Definition
The dictionary definition of leadership is, “The office or position of a leader.” It can be further defined as, “…the quality of a leader or the capacity to lead…the act or an instance of leading” (Webster’s, 2002) The concept of leadership has evolved to include leadership as both vision and transformation as well as leadership as an exchange or reward for following the leader. (Bass, 2008) The concept of leadership as a charisma can be attributed to Robert House in his work first published in 1976. (House, 1976) Bass also presents the concept of leadership as the ability to transform and cites James Burns as presenting the concept in 1978.
The “The Bass HANDBOOK OF LEADERSHIP: Theory, Research, & Managerial Applications” covers leadership in 36 chapters covering some 1,200 pages. He begins with definitions of leadership by pointing out that one author found 221 definitions of leadership by examining no less than 587 publications. He then traces the definition of leadership chronologically from the 1920 when leadership was defined as, “Impressing the will of the leader on those led and inducing obedience, respect, loyalty and cooperation. (Bass, 2008 p. 15) He then goes on to the 1930s when leadership was organizing people to move in a specific direction and 1940 when it was the ability to persuade and direct. In the 1960s it was the ability to influence others to move in a desired direction and by 1980 as was inspiring others. By the first decade of the twenty-first century leadership had evolved into the leader being responsible and accountable for the organisations actions. (Bass, 2008 p. 15) In a publication based on discussion with one hundred top leaders the following six concepts were identified as important in the twenty-first century.
Ø Leadership is no longer the exclusive domain of top managers
Ø Leadership facilitates excellence in others
Ø Leadership is not the same as management
Ø Leadership has a sensitive humanistic dimension
Ø Leadership requires a holistic approach applying a variety of skills, qualities and capabilities
Ø Leadership is the mastery of anticipating, initiating and implementing change (McFarland, Senn, Childress, 1993)
1.2 Leadership Theory
Perhaps the first theory of leadership is the great man theory, which is based on military concepts, which involved troop leadership and obviously the dynamic personality that create leadership. The theory is usually based on the concept that group performance is determined by the quality of “leadership.” This implies that good leadership will produce both high levels of accomplishment and high levels of satisfaction within the group. (Borgatta, Bales, Couch, 1954)
The second,“traits” is similar in many ways to the “great man” theory above in that it focuses in particular on traits that presumably make one better suited to leadership. Much of this is based on the extensive work of Gordon Allport as summarized in “Personality Theories.” (Boeree, 2006)The “Contingency” theory of leadership focuses on the ability of a given personality to respond to a given situation or environment. While no style is best for all situations this theory holds that success depends on variables, such as leadership style, the qualities of followers and other aspects of the situation. (Northouse, 2010) “Situational” theories are based on the ability to select the most advantageous course of action based upon situational variables. Various leadership styles may be more appropriate for particular types of decision-making. (Vecchio, 1987)
“Behavioural” leadership theory is based on the proposition that leaders are made, not born. It is based on the concept that people can learn to become leaders through teaching and observation and that the actions of leaders do not necessarily depend on mental qualities or internal states. (Conger, Kanungo, 1987)
“Participative Management” proposes that input from others is essential to being a truly successful leader. (Vroom &Yetton, 1973). Management theories of leadership or transactional theories focus on supervisory position and group performanceand are based on rewards and punishments. (Cherry, 2011) “Transformational” leadership theory or “transformational theory” is based on relationships or connection between leaders and followers. The leader strives to maximize performance and assist each individual in the group to realize his or her potential. (Cherry, 2011)
The original approach of SAP was to effectively have no management, that managers, hence leaders were unnecessary. As the company grew it developed a rigid and complex seven-layer hierarchy. One of the original founders of the company Hasso Plattner became effective co-CEO and was a tough minded aggressive visionary. He was also confrontational and was described as provocative, rigid, rude and stressful, but managed to move subordinates to be creative. He facilitated excellence in others and was visionary in seeing the necessity for anticipating, initiating required changes. At the same time employee turnover under him was very high, a sign of unacceptable leadership.
Henning Kagermann, the other co-CEO was an academic who relaxed over weekends by solving mathematical problems. He was the antithesis of Plattner in that he was quietly but efficiently analytical, communicative and used polished professorial rhetoric and was the opposite in terms of his discomfort in human relations. Where Plattner had no interest in what others thought and had no hesitation to irritate others Kagermann was a gentle soul and an acknowledged expert in finance and accounting.
Both had some of the traits of the “Great Man” leader and some of the “contingency theory” of management. The company was in need of a new style of leadership at the point they became important and need transformation from a free form organism into a more formal organisation. Neither had the ability to recreate the company into a new format that would keep it in a leadership position. The hierarchical structure of the company in a strict Germanic form inhibited the development of innovative leadership except at the most senior levels. When combined with the profit goals as the prime measure of achievement this is clearly an inhibition to develop leadership at lower levels.
The HR situation at the time of the case study was an unhappy workforce with a high turnover rate. The requirement based on the case study was knowledge transfer and training to empower employees. This would imply that it wanted at least quasi-entrepreneurial types. The Swiss model with its emphasis on the “profitability” of the individual reinforces this image. The emphasis on sales and revenue generation precluded the retention of technical and theoretically oriented individuals in spite of the fact they were necessary to develop the new products that are the life-blood of the enterprise.
SAP is apparently a sales organisation with a programming capability grafted on to it. In spite of rhetoric to the contrary the only real motivation is the sale of products at high prices. There is no real organisational structure based on any mission statement other than profitability. The structure needs to be revised with missions at the group or lower levels that are based on customer satisfaction and creativity in both customer problems solutions and the development of new products and initiatives.
The need for new initiatives
The key element here is the high turnover rate that is clearly indicative of dissatisfaction in the workforce. There is also clearly a disconnect between the senior management and the rank and file of workers and a serious misalignment of the interests of the work force and senior management. The need for criteria other than simple profitability on an individual basis is an element that must be addressed. The recreation of the company based on missions that the individual can relate to would be a step in the right direction.
SAP as a learning organisation
The company has a tradition of exerting considerable effort to retain people. In a high tech environment such as SAP this implies on going training, retraining and education. Herr Plattner was adverse to people leaving the company for any reason and made it a policy not to release people because their skills and knowledge had become out-dated. There is an emphasis on promotion from within and allowing employees to switch department if they have the necessary skills and knowledge to function in another area. This clearly implies that SAP makes considerable efforts to be a learning organisation
An example of how the organisation has attempted to develop both in terms of employee retention and being a learning organisation is its adoption of the concepts of the Swiss division to incorporate best practice, best frame (working conditions and environment), best team and best people.
SAP as a global organisation
There has probably been some progress in true globalisation since the period covered in the case study, but probably SAP is still the basically provincial Germanic operation it was at the turn of the millennium. In 2000 SAP maintained control of its employees primarily through fear based on elaborate bureaucratic control by the seven tiered management system. The examples provided include videotaping people in meeting and the firing of an entire level of management in the US operation including valuable people. This engendered a fear of job loss for little if any reason and a “big brother is watching” environment. There was if not a prohibition against international postings at least an organisational distaste for the practice. The repressive atmosphere probably made the Plattner attempt to retain people difficult to implement. Plattner’s own abrasive approach, remnants of his military school upbringing and confrontational style probably contributed to the problem of retention in spite of his intentions. In order to become a global organisation SAP needs or at least needed an entirely new approach and less formal bureaucratic structure.
SAP and self-leading teams
Given the atmosphere of fear and the hierarchical structure of SAP the functioning of self-leading teams would be totally impractical. The concept of self-leading teams is that of empowerment and is a direct challenge to the traditional manager as a supervisor. (Fisher, 2000 p. 3) There could be little that is further from the Germanic strict control management model of SAP than any sort of self-leadership of empowerment. The company is inherently conservative in its approach to management and control where the empowerment of a new type of leader in a changing business environment is contrary to its fundamentals. The academic models of the self-leading team involve what is referred to as a second industrial revolution. (Fisher, 2000 p. 13) While this should be inherent in a technological learning based organisation it is far from the Plattner model. This is the contemporary management model, but at least in the time frame covered by the case study could not really have been further from the facts. To achieve this goal the company would have had to virtually reinvent itself.
Developing organisational sustainability at SAP
From the time period covered by the case study the company has survived for a period of ten years. This would indicate that if changes were required that they were at least to some extent implemented. This is demonstrated by the on-going existence of the company and its revenue growth. Based on the situation presented in the study an almost compete reorganisation of the company would be in order. This should include recognizing the need to convert the operation into a true global company and a movement away from the existing management structure to a more flexible approach. The empowerment of staff to operate on a series of goals as opposed to total focus on profitability without ignoring it would be a powerful step in the direction of sustainability as a viable and flexible organisation.
A description of the organisational culture of SAP
The organisational culture, as described in the case study, seems almost despotic in form. Henning Kagermann and Hasso Plattner as co-CEOs apparently ran every facet of the company and Plattner in particular brooked no challenge to his ideas. The culture of fear is discussed above, and is clearly not a suitable environment for building a vibrant and growing corporate entity. Fear is obviously an emotion that apparently was obvious in the SAP corporate culture. There are question as the appropriateness of both spirituality and emotion in the workplace. Spirituality in particular can create dissonance and hypocrisy in the management of a business enterprise. Emotion is almost unavoidable in most life situations and its application in management is more difficult to determine. (McGuire, 2009) It is difficult to support how either would be beneficial and if so how to enhance them in an operations such as SAP.
Application of the Swiss HR success factors
The Swiss model is not unique. The first element is “Best Practice.” The case does not make it clear, but apparently the Swiss concept was to base success on qualities such as feedback, goals identification and accomplishment and implementation of change. This was in contrast to the overall company model of profitability as a measure of accomplishment. “Best Frame” relates to providing overall working conditions and environment. It also encompasses support provision from good laptops communications. It goes a step further toward making work fun as opposed to drudgery.
The “Best Team” approach addresses the concept of setting “team goals” with appropriate rewards for achieving the defined goals. The example cited is a group vacation or trip provide to the entire staff for achieving its goals. The final element was “Best People” which moves in the direction of self-leading team as discussed above. The best people oar self-organising, self-managing, self-motivated and want to work in an innovative and enthusiastic environment where work can be fun. Included in the concept are a form of corporate networking were employees are pro-active in contacting other both inside SAP and externally.
There is no debate about the intellectual powers of the leadership in the period covered by the case study. Both Kagermann and Hasso are brilliant men, but neither had the leadership quality and training necessary to provide the dynamic leadership and inspiration to create a truly great company. The underlying concepts of enterprise software fit the market’s needs exactly at the time it was introduced. Once the initial market position was established the company failed to grow more than nominally. In the period following the years covered in the case study there were periods of modest growth, but it is clear that the Kagermann and Hasso era failed to build the leadership foundation required to create a truly great company.
This is a classic case where technical brilliance without leadership can produce revenues and profits, but fails to build the other elements of a great company. In spite of offering financial opportunity to its staff, the company suffered high turnover and lacked inspiration and innovation. This was related to the inability to move in new directions that would have been provided by superior leadership. This is a classic case of mediocre leadership producing a mediocre company when there was an opportunity to build a great one in a bourgeoning industry. The financial summary below illustrates the results in periods following the case study time frame. It is obvious that even considering the problem related to the international financial crisis the company has demonstrated little dynamic progress.
Bass, B. Bass, R. (2008) “The Bass HANDBOOK OF LEADERSHIP: Theory, Research, & Managerial Applications, FOURTH EDITION.” New York, Free Press Simon & Schuster, Inc.
Boeree, C. G. (2006) “Gordon Allport.” Personality Theories. Recovered 18/01/2011 from: http://webspace.ship.edu/cgboer/allport.html
Borgatta, E. Bales, R. Couch, A. (1954) “Some Findings Relevant to the Great Man Theory of Leadership.” American Sociological Review, Vol. 19 No 6 pp. 755-759
Cherry, K. (2011) “Leadership Theories – 8 Major Leadership Theories.” About.com, Psychology. Recovered 01/17/2011 from: http://psychology.about.com/od/leadership/p/leadtheories.htm
Conger, J. Kanungo, R. (1987) “Toward a Behavioural theory of Charismatic Leadership in Organisational Settings.” Academy of Management Review, Vol. 12 No 4 pp. 637-647
Fisher, K. (2000) “Leading self-directed work teams: a guide to developing new team leadership” New York, McGraw-Hill
House, R. (1976) “A 1976 Theory of Charismatic Leadership.” Paper presented at the Southern Illinois University Fourth Biennial Leadership Symposium, Carbondale Il. 10-26/28, 1976
McFarland, L.J. Senn, L. Childress, J. (1993) “21st century leadership: Dialogues with 100 top leaders.” New York, Leadership Press
McGuire, T. (2009) “From Emotions to Spirituality: “Spiritual Labor” as the Commodification, Codification, and Regulation of Organizational Members’ Spirituality.” Management Communication Quarterly, Vol. 24 No 1 pp. 74-103
Northouse, P. (2010) Leadership Theory and Practice.” London, SAGE Publications pp. 111-118
Vecchio, R. (1987) “Situational Leadership Theory: An Examination of a Prescriptive Theory.” Journal of Applied Psychology, Vol. 72 No.3 PP. 444-451
Vroom, V. (no date) “Leadership and Decision Making, Yale University. Recovered 18/01/2011 from: http://www.lederne.dk/NR/rdonlyres/E8715858-DCEE-4355-88BB-B3E82FE7DA9B/0/18VictorVroom2.pdf
Vroom, V.H. and Yetton, P.W. (1973).Leadership and decision-making. Pittsburg: University of Pittsburg Press
Webster’s Third New International Dictionary, Unabridged.Merriam-Webster, 2002. Recovered 17/01/2011 from: http://unabridged.merriam-webster.com