McShane and Glinow define leadership as the process of persuading, inspiring, andenabling others to contribute toward the effectiveness and success oforganisations which they are members (Mc Shane and Glinow, 2015).
Within thebusiness world, there are a number of varying leadership styles, all possessingdiffering advantages and disadvantages. These styles include, but are notlimited to, Autocratic, Transformational, Charismatic, and Democratic styles.Some leaders often adopt a combination of two or more of these styles toeffectively manage their groups and organisations. This paper serves toillustrate the leadership style adopted at a financial institution known asDirectional Lending Credit Union (DLCU) by highlighting the current style andmanagerial culture, along with the negative impacts this has had on the overallproductivity of the organisation. It will also provide possible solutions andrecommendations for improvement, and further growth and productivity.DirectionalLending Credit Union has been in operation since 1973 and has managed to buildquite a name for itself over the years. They have opened nine (9) branchesthroughout Trinidad and Tobago and have successfully become the premier CreditUnion in both product and service type and delivery.
They have gone beyond whatis generally expected of a credit union, so much so that their main competitorsare now banks, as opposed to other credit unions like itself. Within DLCU, anautocratic leadership style has generally always been assumed. This means thatone person or group, in this case, the board, executive management and upward,controls all decisions with little to no input from the rest of the staff body.These decisions are usually made based on their own beliefs and views.
Thistype of leadership is common among financial institutions since the main goalof these organisations is to make choices with error-free outcomes (Tsolakis,2016). It is argued that this style also allows for quicker decision making,reduced time wastage, and increased efficiency. Lately,however, in addition to this already autocratic style, a new management stylehas also emerged and is becoming more prominent.
Some executive managers havenow become more concerned with the feelings and needs of members in theirparticular “group”. This “group” consists of employees from varying levels ofthe organisational chart (See Appendix). This type of management as described by Blake Mouton on the ManagerialGrid, is known as Country Club Management. In the 1960’s Robert Blake and JaneMouton devised a graphic representation of five leadership styles inorganisations and the level of their focus on people and production (Heskett etal, 2008). These styles are tiered from one (1) to nine (9) on the grid, withnine being the highest level of concern, and one being the lowest.
With CountyClub Management, managers usually have little or no concern for production, butrather, promote an environment for members of their group that is more relaxedand friendly. In this case, responsibilities are given on the basis of trust,as opposed to actual efficiency (Farooq, 2009). As a result of this, promotionsto new jobs are usually given to those who are a part of the “group”. Hard workand effort are frequently disregarded in an attempt to ensure that these other adherentsare satisfied. Consequently, the efficient employees feel victimised andunrewarded for the work that they do.
Centralisation is also practiced; therefore, all formal decision-makingauthority is held by the executive managers (Mc Shane 2015). These leaders, arefor the most part, on level one of the John Maxwell’s leadership scale known as”Position” (Maxwell,2016). The majority of staff are unwilling to follow theseleaders, and only do so because they have to, based on the title and positionof those in charge. Inthe financial sector, profits are directly related to the status of theeconomy. Presently, Trinidad and Tobagoare encountering an economic recession.
According to the Cambridge dictionary, a recession occurs during a periodof general economic decline marked by reducing GDP over six months, highunemployment rates, stagnant wages, and a fall in retail sales. An articlewritten in the Trinidad Guardian stated that this is evident in our country dueto the cutbacks in government spending, layoffs in many industries and sectors,and the conscious spending of citizens (Williams-Sambrano, 2017). Thisrecession has also affected DLCU through reduced member share investments,reduced lending occurring, and increased delinquency profiles.
To combat this,staff are heavily relied on to work twice as diligently and effectively as theyusually would. However, as indicated prior, this hard work is usually notrewarded as it should be, leaving the employees feeling dissatisfied with theirjobs. Once the remaining staff body is not satisfied they then begin feelingunmotivated. It is critical that employees feel appreciated for the work theydo because this would encourage and inspire them to put in even more effortthan they already are. This extra effort is what is needed to continue pushingDLCU in the right direction. Job satisfaction, as described by Mc Shane, 2015,is a person’s evaluation of their job and work context. Job satisfactionaffects many individual behaviours including performance, absenteeism, andorganisational citizenship.
Staff at DLCU have responded to this jobsatisfaction in a number of ways. To illustrate the behaviour thus far atDirectional Lending Credit Union, the EVLN Model will be observed. The EVLN model identifies four ways in whichemployees respond to dissatisfaction at work.Action 1: Exit – A fewemployees have transferred to different branches and departments.
Some haveopted to leave the organisation entirely and seek employment at otherorganisations. However, due to the instability of the economy and difficulty infinding employment, many prefer to not consider exiting the institutionaltogether.Action 2: Voice –Employees voice their opinions and concerns about upper management and theirdecision making on a nearly daily basis. However, these often fall on deaf earsas generally, the talk of dissatisfaction usually does not go any further thanthe Branch manager level. Formal complaints or suggestions are rarely given toupper management as several employees perceive that this action will causefurther victimisation to them. Action 3: Loyalty – As mentioned previously, many ofthe workers prefer to remain quiet about the situation. They wait penitently,and sometimes “suffer in silence”, for the problem to work itself out or forothers to resolve them. Action 4: Neglect – Thisseems to be the preferred method of dealing with job dissatisfaction by DLCUstaff.
This is evident in the reduced work efforts by some, reduced quality ofservices to customers, and increased absenteeism and lateness. Thereis a reasonably positive relationship between job satisfaction and employeeperformance. Mc Shane 2015 highlighted that workers tend to be more productivewhen they have more positive attitudes towards their jobs and workplace. Thereis also a positive relationship between job satisfaction and customerservice. Great customer service isextremely important at Directional Lending Credit Union, as well as all otherservice related organisations. Our customers are the ones that ensure that thebusiness thrives, and employee satisfaction usually results in customersatisfaction as well.
The service profit chain model (Appendix) suggests thatjob satisfaction has a positive effect on customer service, which, in turn,increases stockholder financial returns (Mc Shane, 2015). Coincidentally, asrecent as the reduced employee job satisfaction, reduced motivation anddownfall in production, the level of customer service has also declined. All ofthese aspects are interrelated and can be a result of an ineffective style ofleadership and management.
Witha reduction in job satisfaction, comes a reduction in staff motivation andmorale as well. Both Maslow’s Hierarchy of Needs model, and the Max Neef modelof human scale development, seek to illustrate the importance of self-esteemand self-actualisation within the workplace. According to Maslow, the need forself- fulfilment, and esteem (recognition for a particular action) are at thetop of the motivational hierarchy. Employees who are not considered a part ofthe” country club” often feel as though their hard work and efforts are beingoverlooked and opportunities for growth, given to someone else based onpreference.
As a result, employees work esteem needs cannot be fulfilled. Max Neef’s model looks at human needs moreas a whole, as compared to a hierarchical structure. However, it stillindicates the importance of fulfilling the need for participation and esteem.
Currently,DLCU is at a stage where productivity is at an all-time low, and staff moraleis also at an all-time low. The low staff morale is seen as an effect of thepoor leadership and managerial styles adopted. In order to combat this,management has to make drastic changes in the way operations are done in anattempt to get staff back to that point they once were. This firstrecommendation is that both the leadership style and managerial style arechanged. Although it is customary for financial institutions to have a somewhatautocratic style of leadership (Tsolakis, 2016), given the size of DLCU, itshould allow for more decentralisation. In a research study conducted by theModul Vienna University on effective leadership styles, examining the RoyalBank of Scotland and the Hong Kong Shanghai Banking Corporation, it wasconcluded that authoritarian leadership styles lead to a hostile andunproductive working environment (Tsolakis,2016). What ought to be implementedis a leadership style which is more in sync with the overall goals andobjectives of the Credit Union, which would be a blended style of Transactionaland Transformational styles. ATransactional leader places emphasis on the organisation, performanceevaluations, and reward systems, and is task and outcome oriented.
In thisregard, DLCU will still maintain to an extent, its inflexible nature (as iswith many institutions in the financial sector) and other operations throughthe existing boundaries of processes and goals. Increased employee performancewill now be promoted through the use of rewards and incentives. If managementclearly illustrates to all workers that their increased endeavours will besubstantially rewarded and recognised, it is more than likely that moreindividuals may feel a sense of purpose, knowing that their efforts arecontributing to the overall production of the organisation. However, because itis believed that Transactional leadership only satisfies a human’s basic needsand barely addresses those on the higher level of Maslow’s Hierarchy of needs,a blend of a Transformational leader is encouraged (Lumen Learning, Accessed 2018).This style of leadership focuses on employee motivation and encouragesengagement by attempting to connect the individual self, with the goals of theorganisation. The ideal individual or individuals for this type of style leadsprominently by example and therefore, must be at least a level three (3) onJohn Maxwell’s leadership levels (Maxwell, 2016). According to Mc Shane andGlinow 2015, under this style subordinates feel more satisfied, have a higherorganisational commitment, better job perception and encourages more creativedecision making.
One study on bank branches reported that this organisationalcommitment and financial performance seemed to increase whenever a branchmanager finished a transformational leadership training programme (Mc Shane andGlinow, 2015). Transformational leadership focuses on the higher levels ofMaslow’s hierarchy by focusing on individualised consideration and motivation. Whenconsidering a change in the leadership style of DLCU, we must also take intoaccount the management style. The leadership style depends on the Board ofDirectors, CEO and Deputy CEO in DLCU’s Organisational Chart, however, themanagement style depends mainly on the executive management team, and thebranch managers.
As indicated before, the seemingly prevalent Management stylewhich has recently infiltrated the organisation is one of a Country clubaccording to the Blake Mouton grid. In terms of effectiveness, this gridmeasures this management style as being a level nine for focus on concern forpeople (people in the group) and level one for concern for tasks. In theopinion of this model, the most effective management style occurs when TeamManagement is implemented (Farooq, 2009).
Team management focuses on both theorganisations production needs and the needs of all of the employees. It doesnot exclude a particular group from its focus, but instead, seeks to understandhow the work of each individual can benefit the organisation in itsentirety. Inconclusion, the ineffective leadership and management at Directional LendingCredit Union have had negative effects on both employee motivation and staffmorale, and as a result, organisational productivity and service delivery havesuffered. The only way things may begin to change for the better is if we adoptnew and effective ways of leading and managing the overall staff body.