Charisma, Culture and Performance


 

Abstract:  Charisma Culture and Performance

The paper explores the relationship between charismatic leadership, national culture and organizational performance based on a review of relevant literature and proposes hypotheses on the nature of the relationships in the Jamaican context as a basis for further study.

Beginning with the concept of charismatic authority or leadership as first presented by Max Weber in his essay, The Three Types of Legitimate Rule, and ending with the transformational leadership constructs of Idealized influence, attributed and behavioral, as developed by Bernard M. Bass, Bruce J. Avolio in a series of books and articles, the paper synthesizes the literature on charismatic leadership to give a clear assessment of its impact on follower and ultimately organizational performance.  Importantly, the ethical dimensions of charismatic leadership and its classification as either authentic or pseudo is also presented.

The paper then considers the moderating effect of national culture on the impact of charismatic leadership on follower and organizational performance.  Possible mediating effects of national culture are examined from the theoretical framework developed by Geert Hofstede who has provided extensive data supporting four classifications of national culture; power distance, uncertainty avoidance, individualism-collectivism and masculine-feminine.  The fact of cultural differences in how management and leadership is viewed is explained through Implicit Leadership Theory (ILT) which contends that people’s underlying beliefs and assumptions influence how followers may assess leadership style.  Developing the interplay between charismatic leadership, national culture and organizational performance, the paper includes a review of the Global Leadership and Organizational Behavior Effectiveness research project (GLOBE) which builds on the work of Hofstede and Implicit Leadership Theory to derive a Culturally Endorsed Implicitly Leadership Theory (CLT).  Among the six leadership dimensions identified by the GLOBE study is charismatic/leadership.

A hypothesis is presented which proposes the possible impact of charismatic leadership on follower and ultimately organizational performance within the context of the Jamaican cultural disposition towards the charismatic leadership style.  A study is then proposed to test the hypothesis.

 

 

Presentation: CHARISMA, CULTURE AND PERFORMANCE

Presented by: N. Christian Stokes

PhD Candidate:  Economic Development Policy

The Sir Arthur Lewis Institute of Social and Economic Studies (SALISES)

University of the West Indies, Mona Campus

Charisma

  • Aristotle (trans., 1954) In the Rhetoric:
    • Leader must gain the confidence of her followers by using creative rhetorical means (i.e., charismatic and transformational),
    • The Rhetorical means include:
      • Rousing follower emotions (the “pathos”),
      • Providing a moral perspective via her personal character (“ethos”), and
      • Using reasoned argument (“logos”).
    • Weber
      • Max Weber (1947) normally credited with developing the term “charisma” as used in leadership theory today
      • “The three types of legitimate rule”, Published posthumously in 1958
      • Three types of legitimate authority:
        • Traditional
        • Charismatic, and
        • Legal-rational authority
      • Charismatic leadership arises “in times of psychic, physical, economic, ethical, religious, [or] political distress” (Weber, 1968)
  • Etzioni (1964)
    • Three types of power:
      • physical power, entailing the use of threats or coercion;
      • material power, entailing the use of rewards; and
      • symbolic (charismatic) power, entailing the use of normative or social power
    • Symbolic (charismatic) power leads to greater commitment and less alienation than physical or material power
  • Downton (1973)
  • Proposed a theory of transactional, charismatic, and inspirational leadership in the context of the rebel political leader.
  • Contractual relationship between leader and follower vs charismatic leadership
  • Charismatic Leaders
    • Transcendental ideals and authority that facilitate the followers’ identification with the leader
    • Commitment and trust augmented by inspirational leadership
    • Persuasive – followers invest in and make sacrifices toward the identified ideals,
    • Gives followers a sense of purpose, and
    • Creates meaning for actions distinct from the charismatic appeal
  • Inspirational leadership independent of charismatic leadership; according to Downton (1973), inspirational leadership does not foster follower dependence on the leader. Rather, “inspirational commitment is always contingent on the leader’s continuing symbolic presentation of the follower’s world view”
  • House (1977)
  • Presented an integrated theoretical framework and testable proposition to explain the behavior of charismatic leaders:
    • Focused on the psychological impact of charismatic leaders on followers.
    • Referred to charismatic leaders as having the necessary persuasive skills to influence others
    • Described the personal characteristics of charismatic leaders
    • Suggested that individual differences of charismatic leaders might be measurable
    • Proposed that the basis for the charismatic appeal is the emotional interaction that occurs between followers and their leader
  • Charismatic leaders are those “who by force of their personal abilities are capable of having profound and extraordinary effects on followers”
  • Behaviors:
    • Display confidence in their own abilities and in their followers,
    • Set high expectations for themselves and their followers, and
    • Show confidence that these expectations can be achieved.
    • Display a high degree of self-confidence, pro-social assertiveness (dominance), and moral conviction.
    • Model what they expect their followers to do, exemplify the struggle by self-sacrifice, and
    • Engage in image-building and self-promotion actions to come across as powerful and competent.
  • Results
    • These leaders become role models and objects of identification of followers,
    • Followers emulate their leader’s ideals and values and are enthusiastically inspired and motivated to reach outstanding accomplishments
  • Burns (1978)
    • Defined leadership as “inducing followers to act for certain goals that represent the values and the motivations—the wants and needs, the aspirations and expectations—of both leaders and followers
    • The leader–follower interaction was either:
      • Transactional leadership, which entailed a relationship based on the exchange of valued items, whether political, economic, or emotional; or
      • Transforming leadership, where the motivation, morality, and ethical aspirations of both the leader and followers are raised.
    • Transforming leadership
      • Raised the consciousness of followers for what is important, especially with regard to moral and ethical implications, and make them transcend their self-interest for that of the greater good
      • Focused on transcendent and far-reaching goals and ideals—has a greater effect on followers and collectives as compared to
    • Transactional leadership
      • Focused on promoting self-interest and is thus limited in scope and impact
      • Opposing ends of a spectrum – one or the other
  • Bass’s (1985)
  • Transformational-transactional theory includes both elements of:
    • “New leadership” (i.e., charisma, vision, and the like) and
    • “Old leadership” (i.e., transactional leadership behavior focused on role and task requirements).
  • Bass theory in its current form (Avolio & Bass, 1991; Bass & Avolio, 1997). Leadership constructs:
  • Transformational:
    • idealized influence attributes, (charisma)
    • idealized influence behaviors, (charisma)
    • inspirational motivation,
    • intellectual stimulation, and
    • individualized consideration
  • Transactional
    • contingent rewards,
    • management-by-exception active, and
  • Passive Avoidant Leadership
  • Charisma and Authentic Transformational Leadership
    • Howell and Avolio (1995) Charisma itself was value neutral and that effective charismatic leaders can vary widely in their ethical standards
    • Leaders could only be truly charismatic if their leadership resulted in a positive transformation within their organization.
    • Authentic and pseudo transformational leaders may exhibit the same behaviors but the underlying values, morals and intentions may be vastly different. Noticeably lacking in the behavior of pseudo transformational leaders is their lack of individualized consideration.

Cultural Considerations

  • Geert Hofstede (1980) – Geert Hofstede, widely regarded as the foremost expert on national cultures, produced Cultures’ Consequencies (1980)
    • Four classifications of national culture;
      • power distance,
      • uncertainty avoidance,
      • individualism-collectivism and
      • masculine-feminine
  • Hofstede (1991) added a fifth dimension – long term orientation.
  • Jamaica
  • Power distance
    • This dimension deals with the fact that all individuals in societies are not equal – it expresses the attitude of the culture towards these inequalities amongst us.
    • Jamaica scores low on this dimension (score of 45). Features:
      • Independent, hierarchy for convenience only, equal rights, superiors accessible, coaching leader, management facilitates and empowers, Power is decentralized and managers count on the experience of their team members, Employees expect to be consulted, Control is disliked and attitude towards managers are informal and on first name basis. Communication is direct and participative
  • Individualism
    • The fundamental issue addressed by this dimension is the degree of interdependence a society maintains among its members. It has to do with whether people´s self-image is defined in terms of “I” or “We”.
    • Jamaica, with a score of 39. Features:
      • Considered a collectivistic society, Close long-term commitment to the member ‘group’ paramount over-rides most other societal rules and regulations, Strong relationships where everyone takes responsibility for fellow members of their group, Offence leads to shame and loss of face, Employer/employee relationships are perceived in moral terms, Hiring and promotion decisions take account of the employee’s in-group, Management is the management of groups.
  • Masculinity / Femininity
    • A high score (masculine) on this dimension indicates that the society will be driven by competition, achievement and success, with success being defined by the winner / best in field – a value system that starts in school and continues to impact organisational behaviour.
    • A low score (feminine) on the dimension means that the dominant values in society are caring for others and quality of life. A feminine society is one where quality of life is the sign of success and standing out from the crowd is not admirable.
    • Jamaica scores 68. Features:
      • A masculine society, People “live in order to work”, Managers are expected to be decisive and assertive, Emphasis is on equity, competition and performance Conflicts are resolved by fighting them out.
  • Uncertainty avoidance
    • The dimension Uncertainty Avoidance has to do with the way that a society deals with the fact that the future can never be known: should we try to control the future or just let it happen? This ambiguity brings with it anxiety and different cultures have learnt to deal with this anxiety in different ways. The extent to which the members of a culture feel threatened by ambiguous or unknown situations and have created beliefs and institutions that try to avoid these is reflected in the UAI score.
    • Jamaica scores 13. Features:
      • Low preference for avoiding uncertainty, Maintain a relaxed attitude in which practice counts more than principlesDeviance from the norm is more easily tolerated
      • People believe there should be no more rules than are necessary and if they are ambiguous or do not work they should be abandoned or changed
      • Schedules are flexible,
      • Hard work is undertaken when necessary but not for its own sake, precision and punctuality do not come naturally, innovation is not seen as threatening.
  • Long term orientation
    • The long term orientation dimension is closely related to the teachings of Confucius and can be interpreted as dealing with society’s search for virtue, the extent to which a society shows a pragmatic future-oriented perspective rather than a conventional historical short-term point of view.
    • So far there are no scores for Jamaica on this dimension.

How effective would charismatic leadership be in this culture?.

Culture and Organizational Performance

  • The impact of culture on organizational operations and leadership may be analyzed at three different levels (Trompenaars and Hampden-Turner, 1997)
    • National culture,
    • Organizational culture and
    • Professional culture.
  • We will concern ourselves here with national and organizational culture.
    • National culture has been defined by Geert Hofstede (1991) as “the collective programming of the mind distinguishing the members of one group or category of people from others”
    • Hofstede (1998) defined organizational culture as ‘the collective programming of the mind which distinguishes the members of one organisation from another’. While many organizational cultures may exist within a single national culture, it is generally accepted that national culture has a higher degree of influence at the individual level than does organizational culture.

Impact of Culture on Leadership

  • In reviewing the existing literature on leadership it is important to acknowledge that the practice of leadership is influenced by the culture in which leadership is practiced (Dorfman and Howell, 1997)
  • .Yokochi (1989) found that contingent reward is more implicit in Japan than in the US.
  • The GLOBE project (Den Hartog and House, 1999) investigated transformational leadership in 64 nations and identified attributes associated with charismatic/transformational leadership that are universally applicable.
    • The most important of these attributes were:
    • Motive arouser, foresight, encouraging, communicative, trustworthy, dynamic, positive, confidence builder and motivational
  • Shahin and Wright (2004) tested Bass and Avolio’s (1994) assertions in the context of Egypt. Studying employees of 10 different banks, the researchers found that only 3 of the 7 US ideal leadership factors corresponded with those in Egypt.  The other four factors appeared unique to Egypt though they could be extended to the greater Middle East.
    • The findings suggest that transactional and transformational leadership as currently configured may not be applicable in non-western cultures. These findings were supported by Casimir, Waldman, Bartam and Yang (2006) in their study of transactional and transformational leadership in China and Australia.
    • Their results indicated that transformational leadership significantly predicted performance and trust in the Australian population, while only predicting trust, and not performance in the Chinese population. Transactional leadership did not predict trust or performance in either population. This is another indication that these theories may not be as universal as proposed.
  • Contrary to Casimir et al’s findings, Walumbwa, Lawler, and Avolio (2007) compared data from China, India, Kenya, and the U.S. and found that as long as the appropriate style of leadership (either transactional or transformational) is used in the correct country, followers will respond positively.
  • Bass and Avolio (2004) therefore found location to be a contingent issue in the leader follower relationship. The researchers looked specifically at individualism versus collectivism as a cultural contingency.  They concluded that collectivist cultures provide a responsive environment for transformational leaders and found that this leadership style was positively related to efficacy beliefs, job satisfaction, and commitment.
  • Corporate culture can also have an impact on leadership style. Bass and Avolio (1993) observe that while leaders play a role in fashioning corporate culture, corporate culture can itself influence leadership style and efficacy.  A new leader, for example, in an environment that favors strict adherence to policies, procedures, and processes, may in order to be effective, adapt a transactional approach and over time move towards a transformational style in order to effect change in the culture.
  • Hofstede (1980 and 1983) studied the interaction of culture, leadership, motivation and organization with leadership style and effectiveness. Individualism and power distance were shown to have the greatest impact on leadership.
  • Cultures with high power distance are more tolerant of centralization and autocratic leadership while those with low power distance are more inclined to decentralization and participative leadership.
  • Yeung and Ready (1995) global leadership study found that that less than 40 percent of leadership practices valued in the United States business culture were also valued in Korea.
  • Cultural differences could have a significant impact on the efficacy of one transformational or transactional leadership. Transformational leadership relies on participation, open communication and loyalty (Avolio and Bass, 2004) and as such may meet resistance in high power distance cultures, and high individualism cultures where a more directive style is expected and accepted (Hofstede, 1983).  Similarly, a transactional leadership style may not be well accepted in low power distance, participative cultures (Hofstede).
  • Leader effectiveness relies substantially on the ability to motivate followers to perform. Cultural dimensions impacting motivation are:
    • individualism-collectivism,
    • uncertainty avoidance, and
    • masculinity-femininity (Hofstede, 1980).

Suggested Research – Charisma, Culture and Performance in Jamaica

  • Examine:
  • National culture response to Charismatic leadership
    • Which dimensions of culture enhance or reduce the efficacy of charismatic leadership
  • Organizational culture response to charismatic leadership
    • Which dimensions of culture enhance or reduce the efficacy of charismatic leadership
    • Impact of normative or chaotic conditions
    • Charisma vs Inspirational leadership
    • Impact of dissolution of charismatic power
    • Efficacy of bureaucratic vs charismatic power and leadership

References:

Coser, L. A. (1971). Masters of sociological thought. New York: Harcourt Brace Jovanovich.

Weber, M. (1958). “The three types of legitimate rule”. Berkeley Publications in Society and Institutions, 4 (1): 1-11. Translated by Hans Gerth.

Riesebrodt, M. (1999). “Charisma in Max Weber’s sociology of religion”. Religion, 29: 1-14.

Yukl, G. A. (1999). An evaluation of conceptual weaknesses in transformational and charismatic leadership theories. The Leadership Quarterly, 10, 285–305.

Antonakis, J., Cianciolo, A. T., & Sternberg, R. J. (2004). Leadership: Past, present, future. In J. Antonakis, A. T. Cianciolo, & R. J. Sternberg (Eds.), The nature of leadership (pp. 3–15). Thousand Oaks, CA: Sage.

Conger, J. A. (1999). Charismatic and transformational leadership in organizations: An insider’s perspective on these developing streams of research. The Leadership Quarterly, 10, 145–179.

Hunt, J. G. (1999). Tranformational/charismatic leadership’s transformation of the field: An historical essay. The Leadership Quarterly, 10, 129–144.

Lowe, K. B., & Gardner, W. L. (2000). Ten years of The Leadership Quarterly: Contributions and challenges for the future. The Leadership Quarterly, 11, 459–514.

Bass, B. M. (1985). Leadership and performance beyond expectations. New York: Free Press.

Avolio, B. J., & Bass, B. M. (1991). The full range leadership development programs: Basic and advanced manuals. Binghamton, NY: Bass, Avolio & Associates.

The Invisible Hand of the Diaspora

The Invisible handThe Ministry of Foreign Affairs and Foreign trade hosted the 6th Biennial Jamaica Diaspora Conference from June 13th – 18th at the Montego Bay Conference Center.  The Conference saw the highest attendance in its short history of 3,000 persons.  By any standard that’s a lot of people.  As these things go it was well organized and executed.  There were the late starts, registration hitches and technical glitches but having taken on the advice of Benjamin Franklin not to be ‘disturbed by accidents common or unavoidable’ I did not allow these things to infect the otherwise good vibe.

At the opening Plenary titled ‘Brand Jamaica and Diaspora Investment Opportunities’ the erudite Professor Alvin Wint gave what was the most insightful and succinct presentations I have heard for a long time on what helps and hurts Jamaica’s economic development.  The size of Government was one of the three areas of some consequence in which we were stymying our growth.  Within the context of public sector wage negotiations, and the IMF’s tangential and coincidental comments on the same, the point resonated.  When asked why, if we know what the problems are, don’t we fix them, Professor Wint became suddenly non-academic.  His answer was plainly said, we are not good at implementation, was the point.

I will leave arguments on the opposing ideas of John Maynard Keynes and Milton Friedman with respect to the size of Government to those who have debated it for the past many decades.  What I will seek to elucidate further is the matter of implementation.  Effective implementation of anything is hard; from the startup of a one man jerk stall to national development policy and all in between.  It’s more try, fail, learn, try, succeed than brilliance.

Infrastructure is the work of Government, not implementation of business initiatives.  In fact, infrastructure is one of the three roles of Government identified by Adam Smith, the other two being national defense and the administration of law.  I present no more as evidence than the vast and impressive Montego Bay Conference Center, which for all is splendor, hosts, I understand, no more than 6 conferences per year.  Adam Smith was right on the role of government, as he was right on the virility of the pursuit of self-interest which brings me to my next point.

So I am front and center at the opening Plenary and look behind me expecting to see some large portion of the 3,000 attendees.  A substantial number were not at that session, or for that matter, many of the other sessions.  Where were they?  Networking, meeting, greeting, doing deals, making money, acting in their own interest (as distinct from acting selfishly).  I am taken back to Adam Smith’s words which lasts until this day as the fundamental articulation of capitalism.

‘By directing that industry in such a manner as its produce may be of the greatest value he intends only his own gain and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.  Nor is it always the worse for society that it was not part of it.  By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.’

So when Dr. Harold Mignott got on stage at the closing plenary and said that he was seeing too many actions items for Government in the presentation of main recommendations from the Conference, and not enough for private initiative, he was on good ground.  The vast majority of people in the Diaspora he pointed out had no interest in a talk shop, but wanted to know, what’s in it for me.  There is, by some estimates USD 40 billion on wealth in the Diaspora, and USD 5 billion in investable private savings.  The money is there but it’s not going to come to Jamaica out of patriotism or out of the goodness of anyone’s heart.  Large numbers of Jamaican’s send money home annually, to the tune of 17% of Jamaica’s GDP.  This is not done to sheer up the national economy, it’s done to support families, buy food, pay rent, and pay school fees.  That the national economy is supported more ‘effectually’ is an outcome not an aim.

The challenge in continuing to engage the Diaspora therefore is to align all our interests, so that the Jamaican abroad in seeking to improve herself does so in a way that also improves the homeland, and all are better off.  From a Diaspora policy perspective, the direction has to be, as is evident from the Conference, that we graciously accept good deeds and reciprocate by clearing the way for good deals.

Do you. Your best chance for extraordina

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Grasping the Struggle

Mau ZedongOnce all struggle is grasped, miracles are possible.
Mao Zedong

To be sure, Chairman Mao is one of the most controversial figures of the 20th century, revered by many cursed by some, the world power we see today as China stands on foundations he lay. He leaned to poetry and philosophy as much as war and politics and it is from these gentler leanings that we have received this most potent aphorism ‘Once all struggle is grasped, miracles are possible.’ This may be held to be true in many endeavors but my interest here lies in its profundity in relation to great leadership.
While I am on the dichotomy of autarchs and angels, let me continue with the case of Napoleon Bonaparte. Napoleon was from Corsica, an island state conquered three months before his birth by France. He of course rose from this subjugated state to rule all of France. Remarkable really. Napoleon BonaparteNapoleonic scholars cite many struggles which prepared him for the miracle of his ascension to the apogee of military, political and economic leadership in Europe. But there was one experience in particular which many view as an inflection point for him, the nadir from which he sprung to unimaginable heights.

PBS describes the aftermath of his failed ambition to gain political power in Corsica:
“Bonaparte no longer had the right to live in Corsica, he had been given a death sentence by his own people. His idealism was shaken…The defeat in Corsica, the break from his hero Paoli had toughened him, made him shrewd and turned him toward France.
Warren Bennis and Robert Thomas in their 2002 Harvard Business Review article, Crucibles of Leadership, explore what they call a crucible experience and the role of that experience in creating outstanding leaders. According to the authors ‘ A crucible is, by definition, a transformative experience through which an individual comes to a new or an altered sense of identity.’ and from this transformative experience they emerge stronger, more confident in themselves and their purpose, and more committed to their work. In other words, crucible experiences make better leaders.
As a leader challenges will come; there seems to be no shortage of those, and they will come fast and furious, without regard for your strength of spirit or your strength of cash or your daily schedule or without regard to any of the more convenient times in the future which they may present themselves or better yet, not come at all. They will just show up uninvited with an air of their right to be there, and say to you, ‘deal with me and grow or quiver and shrivel’.
Disposition to disaster is more important than disaster itself. Great leaders don’t just try to get by or survive their obstacles, they actively drain every pint of lesson and learning from them and add that to their arsenal. When they rise, they are better armed, better equipped tougher, more formidable.
The mark of a leader is in the rising up. Bennis and Thomas put it this way ‘Our recent research has led us to conclude that one of the most reliable indicators and predictors of true leadership is an individual’s ability to find meaning in negative events and learn from even the most trying circumstances. Put another way, the skills required to conquer adversity and emerge stronger and more committed than ever are the same ones that make for extraordinary leaders.’
This is not an easy thing to do, but I have found Jim Collins’ observations a useful practice and recommendation. He notes in his article Level 5 Leadership, The Triumph of Humility and Fierce Resolve the Stockdale Paradox:
“Named after Admiral James Stockdale, winner of the Medal of Honor, who survived seven years in a Vietcong POW camp by hanging on to two contradictory beliefs: His life could not be worse at the moment, and his life would someday be better than ever. Like Stockdale, people at the good-to-great companies in our research confronted the most brutal facts of their current reality, yet simultaneously maintained absolute faith that they would prevail in the end. And they held both disciplines-faith and fact-at the same time, all the time.”
Do not be deceived by the outward trappings of leadership that you may aspire to, money, power influence, deference, and someone bringing you lunch on a platter and calling you Mr. Leader. Understand that once you decide to do something extraordinary with your life, to test yourself, to see how good you are, how far you can go, you will be faced as much with serendipity as with calamity. To succeed, to achieve, to lead, those moments of disaster and despair must be used as a launching pad and not a headstone.

The Ablest Navigators

Of winds and waves
Winds and Waves
The eighteenth century historian and British Parliamentarian Edward Gibbon provides one of the deepest insights into leadership success, almost in passing, as he describes an encounter between Christian crusaders and Ottoman Turks in The History of the Decline and Fall of the Roman Empire:
In the Christian squadron, five stout and lofty ships were guided by skillful pilots, and manned with the veterans of Italy and Greece, long practiced in the arts and perils of the sea. Their weight was directed to sink or scatter the weak obstacles that impeded their passage; their artillery swept the waters; their liquid fire was poured on the heads of their adversaries, who, with the design of boarding, presumed to approach them; and the winds and waves are always on the side of the ablest navigators.
destroying-an-armada-straggler
The account may be read as an allegory for organizational leadership. He did not say the pilots were new and inexperienced, he did not say they turned around when they saw the obstacles and most importantly, he did not offer that the winds and waves were not in their favor. Rather, for the best leaders, the winds and waves are always on their side. This is not to say that the winds and waves are always favorable, but to say that able leaders know how to turn difficult circumstances to their advantage.

X Friends
Let me introduce you to Mr. X Plain, though you know him already. X is the boy who blamed the stones on the field when he miskicked a ball, he would have said he lost the 100m dash because there was a headwind (in his lane only), or his cricket team lost because the ball was soft, though both teams played with the same ball. no-excuses X Plain never really became good at anything, proving the truth again of Benjamin Franklin’s words “He that is good for making excuses is seldom good for anything else.” X Plain is destined to rue in his later years with the words of Paul Sartre “Circumstances have been against me, I was worthy to be something much better than I have been”
His friend, X Cell, would have made the adjustment on the stony field to be more aware of the bounce of the ball, he would have taken responsibility for losing the race and committed to training harder, he would be more cautious as a batsman; always looking, learning, adjusting, innovating, never blaming.

You have sat in meetings with an adult X Plain. He cannot resist the temptation to expound on the circumstances which led to his missing his targets, or failing to deliver on a project task. He does so in great detail, presenting sophisticated arguments, spurious to the point of being believable and expertly soliciting sympathy. This is a teachable moment for transformative leadership. X Cell, who is now CEO of the company, either subtly or forcibly, depending on style, asks for an end to the ‘long story’ and uses the moment to instruct the group; what he is interested in as leader is results. He will do his best to support you in solving problems and overcoming obstacles, but at the end of the day success is not built on a recognition of challenges, it is built on overcoming them. As baseball pitcher Johnny Sain put it, “The world doesn’t want to hear about the labor pains. They just want to see the baby.’

The Economics of Challenge
Every challenge is an opportunity to differentiate yourself from your competitors. To the extent that you succeed where your competitors fail, or find solutions where your competitors have none, then you strengthen your position in the market, fortify your competitive advantage and set yourself up for supernormal profits. Arie de Geus, past V.P. of Strategy at Royal Dutch Shell said it well, “The ability to learn faster than your competitors may be the only sustainable competitive advantage.”
The business reverberations of the challenge / excuse or challenge / success alternate pathways is put succinctly by John Maxwell, in his book The 360 Degree Leader “It is easier to move from failure to success than it is from excuses to success.”

Challenge is a filter. It separates the ordinary from the good from the extraordinary. The single greatest threat to overcoming challenge is the propensity to offer an excuse as to why it cannot be overcome. As if that makes it OK. Worse yet is to believe that excuse yourself. That only loosens your resolve and turns off your minds subconscious ability to solve problems. The mind needs tension to come up with creative solutions. Excuses slacken that tension.
solve-problems

Leading businesses welcome challenges because while their competitors are offering excuses to investors as to why those challenges could not be overcome, they are busy overcoming them, achieving their mission and creating value. To the extent that you can purge your organization of the culture of excuses and engender a culture of solutions, you will be a good leader and an able navigator.

Ernest Shackleton - Endurance

The Ablest Navigators

The Ablest Navigators

Leadership through the M&A Mirage Sagicor Bank’s Challenge

merging 1Mergers and acquisitions (M&A) is a feature of the free enterprise landscape. The reasons for this activity are diverse; from strategic to operational, from stabilizing an industry to satisfying the ego of a CEO, M&A activities are prevalent.

Whether it’s the embattled acquisition of Time Warner by Comcast, or two small real-estate businesses merging in a slowing economy, the issues in an M&A are complex and the odds in favor of success are slim.merging II

The recent acquisition of Royal Bank of Canada’s Jamaican operations by Sagicor Group Jamaica is of particular consequence because of its size and potential impact on customers and investors alike.

What eventually became RBC Royal Bank Jamaica Limited emerged from a series of mergers and acquisitions. Sagicor now steps to the wicket and will seek to succeed where many before have failed.

M&A Failure

Succeeding in M&A is difficult business. A leading global expert of M&A, Orit Gadiesh, now Chairman of consulting firm Bain and Company has pointed out that “50-70% of the acquisitions actually destroy shareholder value”. She identified five root causes of M&A failure; 1) poor understanding of the strategic levers, 2) overpayment for the acquisition, 3) inadequate integration planning and execution, 4) a void in executive leadership and strategic communication, and 5) a severe cultural mismatch.

M&A Success

Gadiesh explains further in her article, ‘The ‘why’ and ‘how’ of merger success’ factors necessary for a successful M&A.

  1. Setting rationale: 6 key rationales are active investing, growing scale, building adjacencies, broadening scope, redefining business, and redefining industry.
  2. Letting the ‘why’ inform the ‘how’: the right strategic rationale will inform the preparation and valuation of the merger, what leadership and communication style to adopt, and how to plan for post-merger integration.
  3. Fusing at full speed: set clear milestones, require active management to achieve these milestones, act fast. A sense of urgency is essential during the early stage.
  4. Keeping customers in the forefront: teams from both sides of the transaction must work together to develop a new marketing plan for the combined company.
  5. Communicating the vision: executives need to communicate forcefully the new company’s vision, and motivate people to channel their energies in the direction desired.
  6. Managing three phases of integration: 1- Set the stage, 2- Design the new company, 3- Make the integration happen.

Leadership

Success of an M&A relies heavily on leadership.

MA Pyramid

Jean-Pierre Garnier, former executive director and CEO of GlaxoSmithKline pointed that “In any merger or acquisition, investment banks and equity analysts will provide you with a plethora of figures quantifying the synergistic strategic benefits of the union. Yet what determines whether a merger succeeds or fails is really its people.’ Leadership is at the heart of getting people to work together towards a common objective.

A useful framework for improving leadership capabilities during an M&A is the Six Domains of Leadership model proposed by Sim Sitkin ,Allan Lind of Duke University and Christopher P. Long of Washington University, St. Louis

Six Domains of Leadership

Personal: Enhance and project your leadership capability. Be authentic and demonstrate dedication.
Relational: Show that you respect and understand your team.
Contextual: Build team identity and purpose.
Inspirational: Cultivate a team mindset for excellence and innovation.
Supportive: Protect your people from political minefields.
Responsible: Take responsibility as a leader.

Early and continuous communication is critical in any M&A. You cannot over-communicate, but you must be consistent and stay on message. Whisperings and rumors have a life of their own and are mortal enemies to the successful M&A. Know whom MA Leadershipyour internal conspiracy theorists are and make an extra effort to be clear and direct with them. Group meetings should definitely be an integral part of your communication plan. Let as many people hear the same thing as possible. Create an opportunity for the parking lot speculation to be addressed directly. If you don’t know something say you don’t know, trust me, staff knows when you don’t know. Establishing and maintaining your credibility is essential.

Be very careful not to try to give too much comfort since it is likely that not everyone in the room is going to be retained after the merger. People give their energy and commitment to the organization. Treat them with honor and respect, and if they have to go, invest in preparing and supporting them for the exit. It will enhance the confidence of those who remain. People know, same knife that stick sheep stick goat.

Sagicor Bank

Beautiful rebranding notwithstanding, the outcome of the Sagicor Group acquisition is to be seen. Will we end up with the Blah experience of RBC or the Ahhh experience of Sagicor? Will the new bank be able to clear a plot beneath the feet of the twin colossi of NCB and Scotiabank, get some sunshine, and against the odds, grow profitably? Whatever the challenges, leadership will make the difference.

Migrant Workers’ Economic Value to the Turks and Caicos Islands

Significant Contribution

Filipinos provide legendary service

Filipinos provide legendary service

I am happy to see an overdue public discourse on the contribution made to the local economy by migrant workers. According to FSC statistics, in 2013, $74.9 million was remitted from the Turks and Caicos Islands through three licensed money transmitters, International Transfer Company Ltd. (doing business as CAM), NCS eMoney Services (offering MoneyGram services) and The Money Center by Fidelity Ltd. (offering Western Union services). The vast majority of these funds, about 70%, were remitted by migrant workers from Haiti, the Dominican Republic, the Philippines, and Jamaica, though persons from over 75 countries as diverse as Argentina and the Congo to Serbia and China remit funds monthly. If we are to be generous and say that migrant workers on average remit 33% of their take home pay then we can conservatively estimate that they would have made a contribution of $224.7 million to an economy whose size at the time would have been in the neighborhood of $560 million. This contribution was made in the finest of free enterprise traditions, the payment of wages for the provision of services. Migrant

Much of the construction is done by Haitian and Dominicans

Much of the construction is done by Haitian and Dominicans

workers can be justly proud of their role in the economy of the TCI; so to my Haitian brothers and sisters, merci; to my Dominican amigos, muchas gracias, at sa aking kapatid na lalaki Pilipino, salamat., and to all the Yardies ‘big up yuself’.

With its strong complement of migrant workers, Beaches is the major driver of the TCI economy

With its strong complement of migrant workers, Beaches is the major driver of the TCI economy

Taxes

There are those who would seek to advance the idea that funds remitted by migrant workers should be taxed. Presently, Domestic Financial Services Sales tax is payable on local money transfer fees at 10%. The argument seems to be that the funds being sent should be taxed. Now there are a plethora of reasons why this would be socially unjust, bad public policy, and bad economics. Here are a few:

Far more funds are sent out of the island through the banking system by white-collar workers and companies repatriating profits etc., than are sent by the working class. Yet we would propose to tax the working class and leave the white-collar worker and capitalist to move money freely without concern for a tax. I understand the frustration with the process of agreeing on a tax but do not believe the fair minded people of the TCI with such a keen sense of justice, and repulsion of themselves being oppressed would readily agree to a solution built on the backs of the poorest and most vulnerable in the society. We ought to be seeking to protect the vulnerable, not to take advantage of them because their protests would have no ear to care, boardroom to resound in, or halls of power to echo through.

If we were to tax the repatriation of the wages of labor then we should also tax the repatriation of the profits of capital. Our banks, RBC, CIBC FCIB, and Scotiabank, would then, in the name of equity, be required to pay a tax on the remittance of their profits to their home country. I do not believe we want to set out on this road. We are at a stage where we need to encourage

Any tax should be shared

Any tax should be shared

foreign direct investment, not chase it away with the risk and precedence of taxing the repatriation of earnings. On the eve of the long awaited formation of the Invest Turks and Caicos Islands Agency, let us not add unnecessarily to the considerable challenges which that body will face.

Finally, a tax on remittance outflows lends itself too easily to avoidance. Migrant workers in the US send more money to Latin America with people travelling than by either banks or MoneyGram. Taxing remittances would only encourage the use of various informal methods of remitting funds which comes with it a significant increase in money laundering and terrorist financing exposure. With the significant work done by the FSC, our legislature and the banking system, to improve TCI’s compliance image and practices, it would be irresponsible to incentivize actions which would put the country at further risk. We have a hard enough time securing our borders against the illegal movement of people without increasing the work of policing the undeclared movement of cash. We need more transactions going through the formal system, not less.

Capital Formation

Capital formation and the growth of indigenous entrepreneurial and middle classes are important to the development of the TCI

Capital formation and the growth of indigenous entrepreneurial and middle classes are important to the development of the TCI

It seems to me that a discussion about encouraging the retention of more funds in the local economy would be very useful. Generally speaking as long as we have expatriate workers we will have the remittance of funds to their home countries, however there is an argument to be made to encourage local capital formation. TCI has the good fortune, or bad, that it does not need the capital from savings of its residents to be lent out as investment capital for projects. Thanks to our Canadian banks, projects in the TCI can be financed from the savings of Canadians, and the international capital markets. Yet, if we are to encourage the development of a vibrant business class, we will need savings to be accumulated for use as equity capital by the local capitalist. There may be a role for fiscal policy to encourage this in conjunction with the development of domestic savings and lending institutions more geared towards domestic capital formation and small business lending.

We cannot though expect the migrant worker to participate in retaining funds in the TCI and participating in this capital formation if she is ever mindful of the knock-on-the-door which will see her taken off to the detention center for deportation or if the work permit granting process seems protracted, arbitrary and unpredictable, or if prospects of residence status are remote, or if the loved ones for whom she must care have no opportunity to legally enter the TCI.

We may have 99 problems but remittances is not one.