The Effectiveness of CEO Leadership Styles in the Technology Industry
Total Page：16
File Type：pdf, Size：1020Kb
The Effectiveness of CEO Leadership Styles in the Technology Industry Sean Dougherty, Andrew Drake Advisors: Dr. Jonathan Scott and Professor Katherine Nelson Temple University Explanation of research The purpose of this research is to determine the impact of leadership style on financial success. A great deal of research has been done on the factors that affect the financial success of a company, but leadership is one factor that tends to be overlooked. That is due to the nature of leadership; like other aspects of human resources management such as company culture, leadership is not easily quantifiable. In order to study leadership’s effect on company success, we needed to make leadership less abstract and more concrete. We needed a means of distinguishing the way one person leads in comparison to another person, and the solution was presented to us upon reading Primal Leadership. Authors Daniel Goleman, Richard Boyatzis, and Annie McKee make the detailed claim that the way a person leads can always be categorized into at least one of six distinct emotional leadership styles. We seek to build on the research of Goleman, Boyatzis, and McKee by analyzing the effectiveness of each of these styles in terms of driving financial success. To measure financial success, we looked at the behavior of stock price in the time following an initial public offering. For our data set, we chose to study 60 companies in the technology industry that have gone public since the year 2000. With each company, we researched the CEO who led the company during the IPO and assigned him or her one to two leadership styles that he or she exhibits. Then, we looked at the price history of the company’s stock, and calculated the rate of return from the close of the first day on the market to present day. If the CEO who lead during the IPO is not presently still the company CEO, we calculated the return from first day close to that CEOs final day leading the company; our goal is not to measure the financial success of a given company in general, but instead to measure the success of that company while under the leadership of a given CEO. We grouped all of the companies together according to the leadership style exhibited by the CEO, and calculated the average long run IPO return for each leadership style. By looking at the average return for each style, we are able to make conclusions about the effectiveness of that leadership style in terms of driving financial success. Importance of Leadership Throughout the business world, the intelligent use of leadership has been seen to essential to the success of both individuals and companies as a whole. “Great leaders move us. They ignite our passion and inspire the best in us,” (Goleman, Boyatzis, & McKee, 2013). This research is focusing specifically on how CEO leadership affects IPO success in one industry, but the importance of leadership can be essential to success in all areas of business. “… in a study of nineteen insurance companies, the climate created by CEOs among their direct reports predicted the business performance of the entire organization: In 75 percent of cases, climate alone accurately sorted companies into high versus low profits and growth,” (Goleman, Boyatzis, & McKee, 2013). These climates alone created by leadership choices can have a significant impact on both companies and their employees, which can dedicate the future success of an organization in the majority of cases. Leadership when properly used can promote success and growth in any business. “No matter what leaders set out to do— whether it’s creating strategy or mobilizing teams to action— their success depends on how they do it,” (Goleman, Boyatzis, & McKee, 2013). The leadership style implemented by people in key positions, such as CEOs, determine exactly how a leader will go about doing their job and how successful they will be at this task. The importance of this method by which individuals lead shows how leadership factors into every aspect of a business’s ability to succeed. Every action and decision made by a leader can possibly help or hinder the direction a company is going. “Throughout history and in cultures everywhere, the leader in any human group has been the one to whom others look for assurance and clarity when facing uncertainty or threat, or when there’s a job to be done,” (Goleman, Boyatzis, & McKee, 2013). Followers depend on leaders to guide them and the company forward. A good leader acts as part of the foundation of his organization that his followers can build off of and grow the company. Emotional Leadership Styles Within Primal Leadership, Daniel Goleman, Richard Boyatzis, and Annie McKee described six leadership styles that focused on the effects these styles had on the emotions of followers. Most leaders use multiple styles to effectively lead their companies. The research focuses on these leadership styles because these styles focused on the human responses to leadership, which is key to what the research is looking at when attempting to understand how the human side of companies affects IPO Success. The following are brief descriptions of each leadership style. Visionary This leadership style focuses on the creation of a shared vision. In this vision, a leader establishes the direction in which the company is going, but leaves the method of how to get to the end goal open to followers to figure out. A visionary leader is open to sharing information. This type of leadership is most effective when a new direction is needed and overall can have a tremendous impact on a company’s climate. Affiliative This leadership style is focused on fostering personal connections and utilizing these relationships to promote a sense of accord within the organization. Collaboration is a major component of affiliative leadership, which creates a sense of openness and positivity within the workplace. An affiliative leader focuses more on emotional needs over professional needs. Affiliative leaders can effectively deal with managing with stressful circumstances and they are helpful for fixing rifts within an organization. Democratic This leadership style places a large emphasis on the participation of followers in decision-making and other important processes within the organization. A democratic leader listens to both bad and good news. Democratic leaders get everyone involved in running the company and understanding what is going on within the organization. Coaching This leadership style connects the individual desires of employees to the larger goals of a company. A coaching leader holds long conversations with followers to help them better understand their strengths and weaknesses and how they can utilize these qualities to achieve their goals. Coaching leaders excel at delegating challenging tasks, fostering loyalty amongst employees, and building up followers’ long-term capabilities. Commanding This leadership style is focused around very clear directions. A commanding leader is upfront about what he wants and how he expects it to be done. This style of leader takes control of whatever situation he is dealing with establishes what needs to be done and expects compliance in return for his direction. Commanding leaders need emotional self-control to be successful and need to be aware that some followers will think they are cold and distant. Pace-setting This leadership style focuses on challenging employees through exciting goals and a rapid work rate. A pace-setting leader expects excellence and leads by example. They are very demanding on employees to improve and perform at their full capacities. An individual utilizing this leadership style is likely to intervene directly is a situation needs to be rescued. Pace-setting leaders tend to be productive in the short term, but this style can lead to various long-term issues, such as exhaustion. In order for this leadership style to be executed efficiently the leader using it must careful implement emotional intelligence. Nature of Technology Industry In the modern economy, the technology industry is a constantly growing sector that is rapidly gaining importance. This industry has especially been important in the United States in the past few decades as the American economy has become more based in technological services. Within the greater world society, technology has become an essential part of everyday life. Technology has gained tremendous importance culturally as it has become pervasive in both the professional and personal lives of members of the world economy. The reasoning to focus on this specific industry for this research is rooted in this importance the technology has in the modern business climate. The exact nature of the technology industry is complex and deals with the services and products that companies within it provide and the various issues that plague these organizations. Throughout the global economy, there is approximately $3.7 trillion spent on technology services every year. In the United States alone, the combined annual revenue of the 130,000 technology companies is about $340 billion. The main services provided by the industry include software support, computer systems design, and data center management. Rapid advances in technology drive consumer demand for technological services. The success of a technology company is dedicated by its ability to effectively utilize technical expertise, innovation, and marketing to present its services. The key to success in the technology industry is constantly staying on top of innovation and what is new. The technology industry is a constantly shifting field in the economy that is gaining significant importance. Leadership is a core component of the business environment that can lead company to either succeed or fail depending on how it is used. What it means to go public Issuing an Initial Public Offering marks a company’s transition from public to private.