Discussion Reply

PAF 410 Building Leadership Skills

Session 4

Transactions & Servant Leadership

Recap

• Vision and charisma

• What does an effective vision look like?

• What communication tools/tactics can leaders employ to effectively convey visions and values in organizations?

Transactional Leadership

An Economic Perspective on Motivation

What is it?

• Management as “taking care of the shop”

• “Transforming” vs “transactional” leadership (Burns 1978)

• Standard economic assumptions about motivation (self- interest, rationality)

• Focus on aligning followers’ self-interest with organizational goals

Setting the stage

• Homo economicus: Self-interest and rationality

• Rewards:

• Pecuniary (wages, bonuses, promotion etc.)

• Near-pecuniary (a better office, professional development etc.)

• Non-pecuniary (recognition, job autonomy etc.)

Identifying the problem

• Principal (e.g., leader) wants agent (e.g., follower) to exert a task on his or her behalf

• Agent wants compensation for costs, but …

• Asymmetry in information

• Actions impact payoff for principal and agent

The principal’s problem

• Principal-agent theory focuses on …

• How incentives can provide leverage for the informationally disadvantaged principal to:

• Minimize shirking (suboptimal performance) and agency loss (losses imposed by inability to perfectly align agent’s self-interest with the interest of the principal)

Manifestations

• Principal’s problem manifests in three ways:

• Adverse selection (how to get the right candidate for the job?)

• Moral hazard (how to prevent agent from engaging in risky behaviors?)

• Verification (how to determine whether the agent delivers his or her best effort?)

Moral hazard

• Information asymmetry opens up for ‘hidden actions’ …

• Why? All behaviors cannot be monitored; costly

• Solution? Invite agent to take on risk …

• Example from insurance: Introducing deductibles to make it costly for agent to engage in risky behaviors (incentive)

BUT!

• Incentives offer second-best solution!

• Why? Transaction costs and transfer of risk cannot be effective with asymmetric information

Transactional leadership

• Based on the same logic (‘quid pro quo’) and assumptions. Applied to organizational management

• Focuses on the exchanges between leaders and followers

• Example: Surpass goals = bonus, promotion etc.

Transactional leadership factors

• Three transactional leadership factors according to Bass:

• Contingent reward

• Active management by exception

• Passive management by exception

Contingent reward

• Focus on the exchange process where effort is traded for specified rewards

• Pecuniary (e.g., bonus, promotion)

• Non-pecuniary (e.g., recognition)

Management by exception

• Behaviors to correct criticism, provide negative feedback and negative reinforcement

• Active: Watch followers and correct proactively

• Passive: Intervene after failures or problems have arisen

Transactional Leadership

Extensions and Limitations

Credible commitment

• The success of transactional leaders hinges on credibly committing to incentives or rules

• But! The principal’s other problem (moral hazard)

• Principals self-interest (often shortsighted) is the problem. Incentive to deviate from commitment

Credible commitment - solutions

• How to credibly commit as a leader?

• Odysseus

• Hire agent with different preferences (E.g., Curtis ‘Boom Boom’ LeMay)

• Delegation

Multiple principals

• Assumption 4 in PAT: Unified principal

• Yet! Often agents have multiple principal (e.g., team leadership). What happens if principals have different preferences?

• Room for strategic behaviors. Neither principals are likely to have their preferences satisfied

Strategic behaviors I: Distortion

Strategic behaviors II: Manipulation

Ultimatum bargaining - Game

• Pair up with the person sitting next to you

• Select one to be principal, the other to be agent

• Task: Principal can divide $10 between principal and agent. Write down your offer on a piece of paper and hand it to the agent

• The agent can choose to: Accept or decline (which results in zero payoff for each player); no counteroffers

Rationality

• Contrary to the ’common knowledge’ assumption experiments show that principals do not expect agents to behave rationally!

• Usually significant surplus is transferred to the agent and most agents provide high effort despite potential for moral hazard

Rationality (cont.)

• Other examples of irrational decision making …

• Heuristics: Routinized (unconscious) decision making rules to reduce complexity

• A few examples …

Biases

• Anchoring: We give disproportionate weight to the first information we receive and use it to judge subsequent impressions (e.g., last years budget)

• Status-Quo: Comfortable: Minimize psychological risk. The more choices the more people pull the status quo!

• Sunk-Cost: We use irrecoverable investments to justify choices

Biases

• Confirmation: We tend to favor information that support our priors

• Framing: How a problem or question is posed help define its answers. E.g., gains versus losses; people more risk-seeking when problem is framed as avoiding loss

• Forecasting: We tend to be overconfident about our decisions

Recommendations

• Outcome-based incentives: Incentives tied to the results of the agent’s actions not the actions themselves

• Efficiency tradeoffs: Transfer of risk necessary implies compensation

Performance evaluation

• Information about the performance of a program, an organization, a team or an individual

• BUT: Performance = Effort + error

• Things to consider:

• Risk profile; distortion; job design; manipulation …

Recap

• Delegation raises questions of control and verification

• Principal agent theory provides one lens for thinking about these relationships and how incentives can help the informationally disadvantaged principal

• Designing - and implementing! – incentive systems is a complex task that can lead to adverse effects

• It is important to recognize the potential of incentives (pecuniary and non-pecuniary!) but also to critically assess the assumptions we make about individual motivation

PAF 410 Building Leadership Skills

Session 4

Servant Leadership

Servant Leadership

What is it?

Servant leadership

• Paradox: Service and influence

• Prescriptive rather than descriptive

• Focuses on a set of characteristics or behaviors (?) of leaders tied to ‘putting’ followers first (leader-centric)

Definition

“Servant leadership begins with the natural feeling that one wants to serve, to serve first. Then conscious choice brings one to aspire to lead. . . . The difference manifests itself in the care taken by the servant—first to make sure that other people’s highest priority needs are being served. The best test . . . is: do those served grow as persons; do they, while being served, become healthier, wiser, freer, more autonomous, more likely themselves to become a servant? And, what is the effect on the least privileged in society; will they benefit, or, at least, will they not be further deprived?” (Greenleaf 1970 p. 15)

• Note! Some focus primarily on traits while others see it as behaviors

Exercise: 10 characteristics

• Northouse (2016) lists 10 characteristics of servant leadership

• Review pages 227–229 and discuss the 10 characteristics of servant leadership

• Discuss whether we see similarities between one or more of these characteristics and components of other leadership theories that we have discussed so far (e.g., transformational leadership, charisma, transactional leadership …)

10 characteristics

1. Listening: Acknowledge viewpoints of the followers. Listen first.

2. Empathy: “Standing in the shoes” of followers. See the world from their perspective

3. Healing: Help followers overcome personal problems

4. Awareness: Attention to surrounding environment

5. Persuasion: Communication to convince others to change

10 characteristics (cont.)

6. Conceptualization: Ability to be visionary. Provide clear sense of goals and direction

7. Foresight: Ability to predict future based on experience

8. Stewardship: Accepting responsibility to manage

9. Commitment to the growth of people: Treating followers as unique individuals (e.g., career development)

10.Building community: Establish sense of unity and relatedness

Traits or states?

• Other characteristics? See Figure 10.1 (p. 230)

• As noted by Northouse some tend view servant leadership is made up by traits or behaviors

• Based on the 10 characteristics and the additional characteristics in Figure 10.1 discuss if servant leadership is a fixed (trait-like) or dynamic (changeable behaviors) construct

A model of servant leadership

• Liden et al. (2008) has created a model of servant leadership

• Three components …

• Antecedents: Context and culture; leader attributes; follower receptivity

• Behavior: 7 different behaviors (extensive overlap with 10 characteristics)

• Outcomes: Performance; personal growth; societal impact

Servant leadership behaviors

1. Conceptualization: Ability to be visionary. Provide clear sense of goals and direction

2. Emotional healing: Help followers overcome personal problems

3. Putting followers first: To put others’ needs over personal needs

4. Helping followers grow and succeed: Treating followers as unique individuals (e.g., career development)

5. Behaving ethically: Doing what is right in the right way

6. Empowering: Allowing followers to be independent, involved in decision making etc.

7. Creating value for the community: Create link between organization and the community

Key points

• Servant leadership differs from many other leadership theories by emphasizing behaviors that put followers first

• Servant leadership speaks to altruism among leaders. A strong motivation to help others may therefore be a prerequisite

• It is critical that followers are receptive to servant leadership; otherwise perception of micromanagement

Strengths and weaknesses

Strengths

• Emphasis on sharing control (empowering leadership)

• Takes context seriously – followers receptivity

• Sound measure (you will see it shortly)

Weaknesses

• Multitude of traits and behaviors – what does a definitive list look like?

• Are we considering traits or behaviors (implications for leader development)

• Prescriptive overtone: Conflict with classical ideas of directing, concern for production etc.

• Conceptualizing not unique to servant leadership

Midterm Review!

Material/discussion.docx

Zhiwei Li 

Week 4

COLLAPSE

窗体顶端

In this week, we talk about the servant leadership which means a servant leader leads by serving others. In other words, servant leaders place the interest and needs of their followers ahead of their own self-interests and needs.

A more modern example of a servant leader is Martin Luther King. He certainly did not choose the easy road when he assumed a leadership role in the Civil Right Movement and chose to champion the non-violent approach. He knew that approach would be more difficult, but he also knew it would ultimately be more beneficial to those he was trying to serve. In other words,he cared more about how he helped others than any recognition he could ever receive.

Article: https://www.huffingtonpost.com/james-perry/martin-luther-king-jr-a-t_b_427417.html