Form 2 RETENTION
THE UNIVERSITY OF NEW SOUTH WALES
DECLARATION RELATING TO DISPOSITION OF THESIS rl�his is to certify tl1at I ...... J.q.4.Il: ..��.��.P.:�t� ... �t Witness .. THE UNIVERSI� OF NEW This is to certify that I, John McKenzie Middleton� being a candidate for the degree of Master of Business Administratic declare that this 'rbesis, "The Concept of Leadership in a Business Organisation", bas not been submitted for a degree or similar award to any other University or Institution. Signature:. ( Witness: ,, I Date: •J:B&: CONCEPT OF LEADERSHIP IN A BUSINESS ORGANISATION ------...------MAS'IER OF BUSINESS AIXINISTRATION JOHN McKENZIE MIDDLEmN DAm OF SUJ:W:ISSION: CHAPTER TABLE OF CON'IENTS PAGE I. SlThIMARY l II. INTRODlTCTIO~T 3 III. TIIB BUSINESS ORGANISATION 5 (A) Development of the Business Organisation 7 (B) The Environment 14 (C) The Framework 21 (D) The Formal Framework 24 (E) The Informal Framework 28 (F) The Military Organisation 33 (G) The Roman Catholic Church Organisation 42 IV. LEADERSJ-J IP 49 (A) Definition 49 (B) Theories and Results of Research (I) The individual 52 (II) Leadership - heredity or environmen.t 64 (III) The Situation 68 (IV) The Follower 71 ( V) The Group 74 (VI) The Effect of Stress 78 (VII) Authoritarian and Democratic Leadership 82 (VIII)Leadersr.ip and Cornmunication 88 CF.AP'IER TABLE OF COI~IJ.ENTS PAGE v. RELATIONSHIP OF LEADBRSHIP TO TEE BUSilIBSS ORGANISATION 92 VI. AN EXAMPLE OF BUSilIBSS ORGANISATION, THE EFFECT, DEVELOP~1ENT AND CLIMA'IE OF LEADERSHIP -- THE COLONIAL SUGAR REF1 INitlG COMPANY LTD. (A) Development of the Company 100 (B) The Environment 113 (C) The Framework 122 EIBLIO GF.APHY 138 ---.------TABLE OF CHARTS CHART NO. OPPOSI'IE PAGE Nm,1BER 1. Organisation Structures 28 2. Organisation of c.s.R. 06. Ltd. 122 C.S.R. General Management Structure 125 4. Example of Organisation of Operating Division -- Australian Sugar Mills 128 5. Operational and Functional Spheres of Influence on the Mill Chief Chemist 129 THE CONCEPT OF LEADERSHIP IN A BUSINESS ORGANISATION. SUMMARY. The business organisation, as a segment ot society, is subject to social forces which constrain and limit its treedom ot action. ibe primary objective ot the business organisation to maintain itself, and the disunit,- ot the corporation shareholders, allow management to set its own ru.les. develop ita own growth potential, finance its own actions, and subject society to singularly one-sided propaganda. provided it sta~s within the social limits. nie nature of leadership in such an organisation is a function of leader, follower and situation, with all three making up group interaction. 'lheoriea on leadership have, in the past, emphasised each of the above variables~ with current research focusing on group interaction. '!he task situation and the basic needs of self, leading to concepts such as socio-group and psyche-group, are important features or leadership 1n the business organisation, particularly with increasing specialisation and the social complexity ot the "statf0 situation. - 2 - ib.e Colonial Sugar Refining Company is an ideal case study in that the development or the company, and the demands imposed on the role of leadership, can be traced over a long time span. Its dominating role in the sugar industry, ita quasi-governmental role. its recent wide diversification, all combine to produce a leadership climate unique in business. - 3 - CBAP'IER II. INTRO DUO TION. Management is a social science in that its object is to accomplish tasks with indiv~duals and with groups ot individuals. 1 "His (the manager) moat important function is to reconcile, to co-ordinate. to compromise and to appraise the various viewpoints and talents under his direction to the end that each individual contributes his full measure to the business at band". In many ways, the manager must consider his job of managing in the same light tb~t the engineer considers the performance ot a machine. ~e machine bas a rated capacity and quality of performance which a good engineer will achieve in production; a very good engineer will achieve better than rated performance from the machine. In the sa:m.e w.y, a good manager will motivate and so influence his subordinates that they will work as effectively and as creatively in a given direction as they think: they are capable; a very good manager will achieve a performance 1. Crawford H. Greenwalt, ~e Uncommon Man, McGraw-Hill. New York, 1959~ P• 64. - 4 ~ that he thinks they are capable, and an even better manager will achieve a performance which neither he nor they think they are capable. The art/science of this individual and group influence~ called leadership, is the subject examined in the following pages. Leadership 1s a process which is influenced by environment and the demands of society. 'lb.us the business organisation, as a segment of society, is examined tor its social and organisational framework -- the climate ot leadership. Leadership is defined, and the theories and results ot leadership research are reviewed from the literature. Finally, atter leadership is related to the business organisation specifically, the Colonial Sugar Refining Company is examined as a social group, with attention being paid to the social strength and weaknesses influencing the leadership process. - 5 - CHAPTER III. THE BUSINESS ORGANISATION. Organisation means ditterent things to different people. To the sociologist, organisation is the means of an examination into the interactions of people, the classes of hierarchy of an enterprise. To the psychologist, organisation means an attempt to explain, predict and thereby influence individual and group behaviour in an enterprise. To the manager, organisation means the grouping together of tunct1onal components in the best possible combination so tbat the entetprise can achieve its objectives. 1he business organisation, reterred to in this paper, connotes the social and technological environment in which the business man exists. It is not only a configuration ot individual and group interaction; not only a composite ot individual motives or reactions ot need fulfilling desires; not only an architectural framework of tasks, responsibilities and relationships; but it is a small segment ot society, influenced by social pressures, whether they originate from within the legal enterprise or from those sections of society with which the enterprise comes in contact. There are also dehumanising pressures. such as - 6 - technological discoveries, techniques of work designed to engineer machine-like workers, and the loss ot 1nd1vidual identity in very large enterprises. In this business environment or society there are a number of smaller organisations. such as industry organisa tion, single enterprise organisation, or an organisation of a number of single enterprises not necessaril7 in the one industry-. In this paper, the discussion ot the business organisation will focus, in the main, on a single enterprise. ihe three main forms ot enterprise in operation to-day are the sole trader or sole proprietorship, the partnership, and the limited liability company which will be referred to tor simplicity as the corporation. Whilst it is theoretically possible for the sole trader or partnership to extend his business extensively in competition with large companies it 1s highly improbable as the advantages ot limited liability-• the ability to finance growth and the continuity ot the enterprise all tend to greatly advantage corporate structure. iheretore references to the business organisation or enterprise will, in most cases. embrace the corporation. To understand the modern business organisation one must examine its evolution and the development of attitudes which - 7 - tashioned its growth. (A) DEVELOPMENT OF BUSINESS ORGANISATION. Whilst the business organisation as we know it to-day has developed over several centuries, it is only within the last half century that it has reached a degree of sophisti cation and. complexity, part1cularl7 in the United States of \ America, necessitating the rise or a new breed of business administrators. Business impetus, in many ways, bas followed from the discoveries of science. In exploiting these scientific opportunities, business bas built its empires and created its unique society which is represented by the corporationo 'lhe industrial revolution in England heralded such discoveries aa the flying shuttle and spinning jenny, the use of coke instead of charcoal, the cylindrical air pump, the steam hammer and. the rolling mill• and the great discovery ot steam as a source of power. These were only a few ot the ways in which men forced change, a process which in itself was a revolution. 'lbe tradition·oriented society of previous centuries distrusted change and retarded creative etfort in the sciences. In England. society was structured 1n classes. the acceptance of which was well nigh universal. ih.e landed gentry were regarded as the ruling class, a fact that was not just - 8 - proclaimed by the upper classes but was accepted and affirmed by the agrieul tural and 1ndus trial workers. It was only with the rise of the middle class industrialists that, socially outcast though they were in England the opportunities created by the discoveries were exploited. Conditions 1n the United States were radically different from those in industrial England. Untettered by a class environment, the "robber barons", and "industrial mognls" were able to exploit, to the full, the vast natural resources and to influence industrial society to an extent impossible in England. After Vanderbilt,Drew. Fisk, Gould, Rockefeller and Carnegie and others had applied their talents to e.xplo1t- 1ng opportunities. using strategies both within and outside the law, the power groups 1n soc1ety;government. public opinion and industrial workers set about curbing each in 2 their own particular way. this all too powerful group; 0 ita.e bright serene noon ot their days began to pass in 1877. From then onwards, capitalists and 1ndustral1sts or all degree bad to use more ingenuity than before. '!hey- had to tight harder. 'lhey were watched more closely. '!hey were harassed infinitely more. And the most successful of them 2. Steward H. Holbrook. The Age of the Moguls, Victor Gollantz, London. 1954• p. 94. .. 9 - quickly developed new abilities of survival amidst the new complexities, complexities that aigb.t well have been too great tor pioneers like Commodore Vanderbilt. Daniel Drew and others of their comparatively simple eran. 'lhis veey process of business grasping opportunities, forcing change, creating its own environment, followed by curbing restrictions imposed by injured sections of society, has been a feature of the American business scene, culminatins in the business restraining measures ot the New Deal. 'lhia enviromnent unique in the business world, was encouraged by- a national regard tor freedom. Independ.ance not only cut America ott from England and from its values and mores of society, but also gave them a working formula. 3 "We hold these tl'Uth.a to be self-evident, that all men are created equal, that they are endowed by their creator with certain unalienable rights; that among these are life. liberty and the persu1t of happiness; that to secure these rights governments are instituted among men, deriving their just powers from the consent of the governed; that whenever any trom of government becomes destructive to these ends, it is the right of the people to alter or to abolish it, and to 3. Declaration ot American Independance. - 10 - institute new government, laying its foundations on such principles and organising its powers in such form, as to them shall· seem most likely to effect their safety and happiness." Whilst this declaration was meant to set the limits for national government, other power blocks, particularly business, adopted its ideology and leant on its liberty ideals as a baukground for their actions. In this environment. able men like Rockefeller, Carnegie~ Morgan, Schwab, Ford, Durant were able to transpose their dreams of bigness into reality. Rockefeller in oil, Carnegie, Morgan and Schwab in steel, and Ford and Darant in automob1lea, built huge empires the power ot whioh rivalled in many wa7s that of governments. 4 nBy the time Model A made its appearance, Henry Ford's empire was generally believed to be the greatest industrial enterprise in the world. The River Rouge plant alone covered 1100 acres. In it were employed more than a hundred thousand men, most of them were robots. Tbe company oper14ted thirty-five branches in the United States. Thirty one ot these were assembly plants." Whilst laws were passed to curtail this cult of bigness, they were largely unsuccessful ancl bigness became part of the American scene. David E. Lilienthal, 1n examining the 4. Holbrook, op.cit., p. 210. • 11 - standard of living and iJDmense power of the u.s., of to-day, 5 states "The time baa come when it is in the interest of the whole country that we promote and encourage and nourish those principles and practices ot Bigness that can bring us, in creasing measure vast social and individual benefits. We can deliberately and consciously fashion public safeguards and private incentives whereby through Bigness we can bring closer to reality the American dream; individual freedom, social justice, material well-being, world moral leadership;" 6 and "despite our antagonism, despite handicaps of law and public opinion, Bigness of units has nevertheless developed rapidly until today size is a chief and outstanding characteristic of the way we do business, the way we live.• In other words large size is a characteristic of the American business organisation. As indicated in the July and August, 1966 editions of Fortune Magazine, 60~ of the two hundred largest industrial companies 1n the world, outside the communist bloc, are incorporated and based in America. (In this group of companies annual turnover ranges from ~u.s. 20,734 million to ~.s. 550 million). 5. W. Lloyd Warner & Norman H. Martin, Industrial Man, Harper & Broe., New York, 1959, P• 474. 6. ibid. P• 481. - 12 .. It was not till after the second world war that industry in Australia was given any impetus. Prior to this world war, and during the immediate post war period, Australia was not only predominantly a :rural society, but this condition was regarded as Australia's function 1n the global community. But the Australian high propensity to consume and fluctuating rural product markets continually created balance of payment problems, to such an extent that govermnents, industry and public opinion all agreed that Australian industry bad to start manufacturing products then being imported. Industrial expansion was also needed to supply employment for the rapidly increasing population caused by the government's extensive migration policy. For this task know-how and capital were required, much of which was supplied from the United Sta tee. Companies, along the American lines, were set up and even 1n firms where Americans only had partial ownership, their inf'luence was considerable. American methods of organisation and management have not only greatly effected. the Australian scene, but the older societies ot the United Kingdom, France and Germany have all undergone minor management revolutions largely brought on by the knowledge that, relative to theirs~ American business was tar more efficient. So American inf'luence has not only originated directly from that country but has effected Australian methods indirectly through know-how and capital - 13 - from the older indoctrinated nations. Size is also beginning to play an important part in I business thinking in Australia. Americans have demonstrated that the~e are managerial efficiencies to be had with large scale enterprises, whether they be centralised or decentralised. 'lhe managerial and specialised skills that th.e large corpor ation can afford, place it in a more advantageous competitive position than the small corporation. Originally, the benefits of large scale production were demonstrated in capital intensive industries such as oil, chemicals and steel where it is a question ot economics that the larger the production unit the lower will be the unit cost of production. To-day, the high cost ot labour has forced business to look tor machines that can accomplish the work of people and this trend is beginning to convert the labour intensive industry into a capital intensive one, with the resultant economies of scale. ~e trend therefore is for bigger and bigger organisations, not only in America. but in industry throughout the world. For these reasons, and tor the practical reason that most of the research into organisations bas been centred there. the following discussion on organisation 1s based on American experience. - 14 - (B) 'l'HE BUSINESS - TEE ENVIRONMENT. Over forty years ago, Oliver Sheldon set out a philosophy of industrial management in which he suggested a professional creed for management. His first point describes the function of :lbdustry and thereby establishes the purpose behind the business organisation. 7 "Industry exists to provide the commodities and services which are necessary for the good life or the community, in whatever volume they are required. 'lb.ese commodities and services must be furnished at the lowest prices compatible with an· adequate standard of quality, and distributed in such a way as directly or indirectly to promote the highest encl.a of the community." In attempting to set up a code of ethics, as it were~ the approach Sheldon took was necessarily ideological. He set out to give managements' responsibilities to society the greatest priority. Where the industry is made up of a number or enterprises, the rule of the market place will ensure that, in the long run, the wishes. or society will be met. With the rise of big business and the resultant 7. Harwood F. Merrill, ed., Classics in Management, American Management Association, New York, 1960, P• 300. - 15 - diminishing of the market's power, society, again in the long run, erects power blocks such as restrictive trade p~ctice legislation. labour unions, consumer and shareholder associations. So whether the business administrators, in manipulating the organisation, consciously endeavour to apply Sheldon's code of ethics or not, society, providing the rule or law is applied, has the power, over a period, to apply its own constraints. The great business problem is to set priorities tor the different sections of society which come in touch with the enterprise. Somerorm ot balance must be agreed betore the administrator can make any business decisions. Owners, lenders of finance, customers, competing firms, labour ( whether they be factory workers or "white collar" workers), the government, providers of specialist services such as financial legal or engineering; all are interest groups with which managment must work and for which management must set priorities. 'Ihat segment of society for which management appears to give highest priority is tbe owner, the shareholder to which the enterprise legally belongs. Written into the objects ot most enterprises is the primary goal of earning a pro:rit, without which the business organisation cannot exist. Ruthlessly applying a maximum prorit goal, the enterprise would - 16 - manipulate high prices and cut 1mput costs. But, as stated above, competitive pressures and/or society's control ot prices and imputs would over a period, effedt a profit constraint. Whether the enterprise of to-day is converting profit into return to the owner is a moot point and one 1n which establishes the real power ot the owner with respect to the enterprise. With the rise or the large corporation, the owners have become progressiwely divorced trom the management. In most cases, the larger the corporation, the larger will be the number of shareholders making up corporate ownarship; and the larger the number of shareholders, the less control- they can exhibit on the actions of the management. Drucker points 8 out "Altogether, our industrial economy has become split into two parts; a •real" economy of plants, mills, machines. ~ managers and workers, and a "symbol" economy of negotiable securities, legal titles and empty ownership rights." He charges that the power management wield is theirs,not because they usurped it, but because the shareholder baa relinquished his rights and duties. Aa tar as shareholders are concerned, a business enterprise is anot:tier form of a. Peter F. Drucker. ~e Future ot Industrial Man, Mentor Books, New York, 1965, p. 76. - 17 - investment in which he places his money tor a return he hopes will be adequate. 'lbe institution of the stock exchange, in that it acts as a market for the tree exchange of these "investment" securities, encourages this attitude. The suppliers of input resources have traditionally been a segment of society that bas been used by the enterprise tor whatever ends it hopes to achieve. 'lhe very tact that they were the means to an end left them in an interior position. Where there is little competition, or where supply is limited, input resources, such as finance, labour, materials and know-how, can command some authority, but the strategy employed in using that authority can divert the enterprise away from its use. With more and more emphasis being placed on efficient techniques ot production, based on sc1ent1f1cally designed processes and machinery, the suppliers ot this know-how and specialised equipment have become a powerful influence on management. In a process whereby industry, in countries such aa Australia, is gradually starting the manufacture ot products originally imported, it is, in most cases~ particularly important that they be protected from global competition. If the industry is influenced by economies of scale• countries, where the national market is small, will probably always need some protection, whether they be in the form ot - 18 - tariffs, quantitative restrictions or some kind of subsidy. In the granting of such protection, governments have a strong influence on profits, and thus on management. In its role as protector of the interests of society, govern ments not only protect enterprises from disruptive, injurious, global competition, but in legislature, such as companies acts and restrictive trade practices acts, they attempt to protect other areas of society. such as customers and owners, against the actions of the enterprise. Governments also provide business with its largest individual cost --- taxation. Depending on the type of enterprise and industry, pressures exerted by customers can vary quite markedly. Large ttims producing finished consumers• goods are not ordinarily subject to serious direct pressure from this group. However, their tastes and incomes are among the most fundamental data which the producer must take into consider ation when making decisions. Not withstanding the necessity of the enterprise to predict market forces, if consumers are small, numerous and unorganised, their bargaining pressure is small. On the other hand, in an industry- where enterprises are supplying goods or services to large and dominant customers, the pressure these customers can exert can pale into insignificance the influence ot - 19 - other interest groups. For every industry and enterprise eaoh power group of society exerts a unique influence, thus forcing decision makers of the industry and enterprise to set priorities relative to each groups need requirements. Therefore, whilst it 1s certainly true to say that the industry exists to serve society, the firms that constitute the industry serve society to "stay alive", to exist. To do so, they must·satisfy the needs of the various sections of society that are influenced or have an interest in them. Hence management's task is to be cognizant of the power influenced by these groups, and to adjust the objectives and policy of the enterprise to take account of it. But this is a secondary task;· the primary task of the enterprise to-day appears to be to maintain itself. Drucker recognises it when he states that the task of management is not to make a loss •. Barnard 9 supports this view when he declares that •once established, organisations change their unifying purpose. They tend to per:petuate themselves, and in the effort to_survive may . 10 change the reasons for existence", and later "executive 9. Chester I. Barnard, '!he Fu.notions of the Executive,Harvard University Press, Cambridge Massachusetts, 1958, P• 89. 10. ibid., P• 215. - 20 - work is not that of the organisation but the specialised work of maintaining the organisation in operation." 11 ''In the modern corporation the decisive power, tbat of the managers is derived from no one but from the managers themselves controlled by nobody and nothing and responsible to no one. It is in the most literal sense unfounded, unjustified. uncontrolled and irresponsible power.• Drucker argues on thie question of power from the baaia of 12 the contract theory of Locke. "In the social contract of the corporation a social entity is actually created through the subjection of each members individual property rights under corporate management." The question ot sovereignty of the shareholders in the corporation 1a a legal one and is the source of all legitimate power 1n the corporation. He goes on to say that the legit1mate p01rer ot management is derived from individual property rights and, whilst it remains so, managements power will always be le g1 t:lrna te. In relinquishing his political rights .ot control and decision, as mentioned earlier in this paper. the shareholder 11. Drucker, op. cit., p. 64. 12. ibid. P• 63. - 21 - has taken away the legitimacy of management's power. shareholder exercises no influence on management, an objective which was entirely contrary to his purpose in becoming a shareholder. The power of the management of enterprises which have divorced ownership from management is therefore 1mrnense, their freedom of action ranging between the several constraints imposed by society. (C) 'iflH: BUSINESS ORGANISATION - l'AE: FRAMEWORK. Management's power within each corporation, whether legitimate or not, is subject to social forces which are unique to that corporation. The individuals who comprise the staff of the corporation, whilst remaining a segment of society subject itself to manipulation by management, have a power of their own. Management's use of their power in the manipulative process is sanctioned by the fact that management effective ness is subject to the ability and efficiency of the people who make up the enterprise. Management cannot poss1blt run the modern large organisation single handed. Gone are the days when men, like General Henry Du. Pont, were able to represent the only deo1s1on making unit in the enterprise. - 22 .. 13 "The General's method of management was one-man control. For almost forty years he made all the major decisions and m,any minor ones." The very purpose behind corporation structure in the business organisation is clarified by Dale 14 in his discussion of the Du Pont corporation. "'lhe beginnings of systematic management at Du Pont can be traced in large part to the company's attempt to solve the problems of succession that arose when General Henry Du Pont died and it became necessary to substitute system for the "Caesar" type· of management." By- "system" was meant a structure designed to account for the delegation of decision- Mlting. Because of the inadequacies, or rather limitations of human beings, relative to the needs of the growing corporation, it is necessary to pass on, to a number of people, the jobs that were once carried out by one 15 individual. 11 It becomes necessary to set off groups of workers, to divide responsibilities, duties and processes so that affairs may be kept within the scope and ability of those who are directing the undertaking." 13. Ernest Dale. The Great Organisers, McGraw-Hill, New York, 1960, P• 33. 14. ibid., P• 32. 15. H.F. Merrill, ed., Classics in Management, AMA. New York, 1960, P• 161, - reprinted f'rom 11Lectures on Organisation" by Russell Robb. .. 23 - The veey process of structuring the organisation of an enterprise determines or limits the degree to wh1eh the individuals, who till the subsequent positions, can carry 16 out their leadership roles. Follett declares that 11 1f the best leader takes all the means in hia power to develop leadership among his subordinates and gives them opportunity to exercise it• he has then, his supreme task, to unite all the different degrees and different types ot leadership that come to the surface in the ramifications or a modern business." In a sense, the objective of structuring the organisation is not only to delegate formally a function or task (a process of separation) but also to integrate or unite into the whole the functions and tasks so delegated (a process ot integration). Whilst leadership 1s usually confined to interpersonal influence, other factors which greatly effect this influence. this human process, especially when it is directed toward accomplishment of tasks, can be said to assume a role of leadership. It therefore can be argaed that the establishment of an organisation structure creates another leadership role, the leadership of organisation. 'lhe subject of organisation, within the business 16. Henry c. Metcalf and L.F. Uniek, ed •• Administration, Pitman & Sons, London, 1960, P• 282. - 24 - enterprise, has been widely researched, analysed and reported by business experts tor over half a century-. 'lhe bibliography ot March and Simon's book "organisations" covers thirty-five pages and, even then, the authors state that it is a sample of the literature only. (D) 'JHE! BUSINESS ORGANISATION - FORMAL FRAMEWORK. Mentioned earlier 1n this chapter was management's understanciing of organisation as a structuring process, a grouping together of functional components. 'lhe ver7 function of management of working with, and through, people implies a necessity tor the group to work bartnon1ously, with individual effort channelled into an area whereby optimum co-ordination is accomplished. .Allen defines 17 organisation as "the process of 1dent1t1ing and grouping the work to be performed, defining and delegating responsibility and authority, and establishing relationships for the purpose or enabling people to work most effectively together 1n accomplishing objectives." Brech regards it as a defining process in which; 17. Louis A. Allen. Management and Organisation, McGraw-Hill, New York, 1958, P• 57. - 25 - 18 0 (a) the responsibilities of the executive, supervisory and spee1al1at positions into which the management process bas been subdivided; and (b) the formal interrelations established by virtue of such subdivided reapons1b111tiea." The more explicit definition ot Allen has the virtue also of pointing out the essential presence ot people in the organisation equation. Setting the framework of management, by structuring the organisation, surely is the starting point of the social interaction process. The very balancing of the tasks to be performed by the subordinates, the followers. emphasises the importance people have in the structuring process. Urwic~ points out that the organiser 19 "can't sit down in a cold-blooded, detached spirit and -- - draw an ideal structure, an optimum distribution ot duties and responsibilities and relationships, and then expect the infinite variety of human nature to fit into it." 18. E.F.L. Brech, Organisation, ihe Framework of Managemen~, Longm.ans Graen & Co •• London, 1957, p. 13. 19. L.F. Urw1ck, The Element of Administration, Second Edition. Sir Isaac Pitman & Sons, London, 1950, p. 36. - 26 - '!here are three essential elements of the structuring process -- identification and division of the task. source and division of authority, and the clarification of individual relationships. Mooney and Reilly, and later Urwick, in setting out the prineiples of organisation and 20 co-ordination, agree in that, "co-ordination finds its principle in authority, •••••• enters into process with the scalar cbain •••••• and takes effect in the assignment and integration of functions." With the development of large and complex business enterprises, the task of co-ordination has become progressively more difficult. It was inevitable that this growing complexity tended to diminish the application of the old line type of organisation, in which each person was responsible for most, if not all, aspects concerning his own particular sphere of activity. '!be finding of new knowledge, and its application in modern business, baa established the need tor specialists in restricted fi~lds of activity, to ensure that the highest level ot technology is available to the organisation. '!he result has been the development of the staff function, and a growing problem of integrating the staff functions with those responsible tor the operation. 20. Urwick. _op. cit •• P• 43. - 'Z1 - An organisational concept that concerns the growing corporation is centralization and decentralization. Although related often to organisation, centralization and decentralization more accurately describe the degree of delegation of authority and responsibility. Decentra- lization refers to the systematic delegation ot authority; centralization to the non-delegation ot authority 1n the context of the organisation as a whole. Whilst decentralization is not necessarily a function of the type ' of organisation structure;it can be found in functional and d1visional1sed structures; it is usually applied extensively in d1v1sionalised structured organisations. A feature of centralization is that it allows comparatively free rein to the leadership talents of the chief executive. It is ideal for facilitating integration, promoting uniformity of action and allows the quick handling of emergencies. Decentralization~ on relieves executive burden from top management, facilitates d1vers1f1cat1on, puts emphasis on the product and market, improves motivation and facilitates the development of managerial talent. 'lb.a functional and d1v1s1onalised structure stated above refers to the method of structuring an(;.organisation. A.a noted in Chart No. I the functional organisation structure -CHART 1- ORGAN\SA TION AL ' STRUCTURES FUNCTIONAL STRUCTURE Board of Di,-ecit>r-s Gener-al Manager P\J~h~s,nq PI t::1 nn i"" C3 Depor-tme.nt ll>epc:11.--t"m er,f Pr-o of uct-i OI"'\ Maw- k a +•"-S l)epat'°'tM e,n-t DGpOlr-.tmen-t DIVISIONAL STRUCTURE • .,___ __,..______,.r l ' i Finance ' Marketi~g I f'roc,tuc.-t or Pf'Ua uef' o.-- Geogrophic Regioi ~ - - - _.;.: ,ic P.sicr Personnel AccountiV\g ~rSof'\neJ Accovn-ting Prodve,tion - 28 - features the departm.entat1on of major functions under one co-ordinating head. The grouping or the interests ot the corporation into divisions, referred to as a d1v1sional1sed structure, can focus on either or both of products and regions. By reference to Chart No. I it can be seen that the staff functions have been complemented by the addition of both manufacturing and marketing divisions. (E) THE BUSINESS ORGANISATION - INFORMAL FRAMEWORK. Originally, organisation was thought to be only a mechanical process whereby well defined positions were created, defining responsibility, authority and accountabi~ 11ty. Following the rise of the human relations school in management, the concept of informal organisation was 21 devel_9ped. Barnard declares tba t "By informal organisation I mean the aggregate of the personal contacts and interactions and the associated groupings of people." He explains that people are continually in contact with each other. with resultant interaction, even though their relationships are not covered or governed by any formal organisation. More simply, in informal organisation people work together or come in contact because of their personal likes and dislikes. ih1s unique organisation is not 21. Chester I. Barnard, The Functions of the Executive. Harvard University Press. Cambridge Mass., 1958. P• 115. - 29 .. 22 structured and "may be regarded as a shapeless mass ot quite varied densities, the variations in density being a result of external factors affecting the closeness of people geographically or of formal purposes which bring them specially into contact for conscious joint accomplish ments~ Barnard postulates three functions of the informal organisation; (1) A vehicle of communication. (2) Regulates the willingness to serve and the stability ot objective authority thus maintaining the cohesiveness of formal organisations. (3) Maintains the feeling of personal integrity, self-respect and independent choice. These functions indicate~ to some extent, the homeostatic nature or man. Coined originally to label the equilibrium adjusting function ot primary needs of the h1unan being. a similar adjusting function to homeostasis can be applied to the social or secondary- need.a ot man. As far as formal organisation of business 11 concerned, the rather strict order laid down takes little cognisance of the social 22. 1srcr., P• 11s. - 30 - needs of individuals, such as communication. willingness to work, and a feeling of belonging or of being an independant part of the whole. Individuals look tor the satisfaction of these needs, and it the formal, officially recognised structure does not provide the means to satisfy them. then people tend to create their own personal structure which will provide the means of satisfaction. 'lhe human relations movement which developed from the work of Elton Mayo, looked into the non-financial incentives of the worker. More modern writers, such as Argyris postulate a psycho-social approach to the h1unan relation school. Argy-ris, in particular, attacks the formal organisation as·1nh1b1ting the "mature personality." He discusses each of four principles of organisation -- task specialisation, chain of command, unity of direction and span of control. Task specialisation, the concentration of effort on a limited field of endeavour, specialises skills by reducing skill requirements, thereby reducing learning time. It assumes that:- (a) the individual will become more efficient with greater specialisation, (b) the one best method of accomplishing a task can be discovered and - 31 - (c) more tasks and skills are transferred to machines. It therefore conflicts with the development of the healthy adult hnrnau personality. It inhibits self-actualisation (an Argyris concept ot personality growth) and provides expression for few superficial abilities that do not provide challenge desired by healthy personalities. '!he impact of Chain of Command is to IJ&ke people 23 "dependent upon, passive toward and subordinate to" the superior. 'lhus the individuals time perspective is shortened because he does not control the information necessary to predict his future. Those adults, who are forced to be passive and subordinate and who have little control and short time perspective, are showing dimensions or immaturity not adulthood. Unity of Direction. the principle that each unit has a single activity that is planned and directed by a boss, assumes that goals, and barriers to overcome the goals, are set by a superior and this creates ideal conditions for psychological failure. 23. dliria Argyris, Personality and Organisation, Harper & Brothers, New York, 1957, p. 60. - 32 - Presupposing close supervision, Span of Control tends to increase the individuals feelings of dependance, submissive ness and passivity which are typical of immature personalities. Argyr1s thus comes to the -conclusion that there are what 24 he calls "basic incongruancies between the growth trends of a healthy personality and the requirements of the formal organisation." ihis fostering of a working environment fit only tor immature individuals creates frustration~ .. conflict and failure within healthy personalities. Whilst Barnard agrees that certain effects ot formal organisations tend to disintegrate the personality, he is certainly not as radical as Argyris, and insists that there 25 must be a system or co-operative effort. "Complete absence or formal organisation would be a state of nearly complete individualism and disorder." Systems of co-operative effort have been devised and perfected in numerous societies for many centuries. Of these particular institutions, the ar1ay and the Roman Catholic Church h_s.ve perhaps been of greatest influence in the development of techniques and principles applied to the business organisation. 24. iold., P• 66. 25. Barnard, op. cit., P• 120. - 33 - (F) TI-E MILITARY ORGANISATION. In examining military organisation, the relation of the organisation to its doctrine must be clarified_. Most powerful of military doctrines 1s the intangible factor, 26 morale. "Morale is the sum of the several psychic qualities that include courage# fortitude, resolutions and above all, confidence." In war the d.emands on courage and f1xid1ty of purpose are so extreme that, the army possessing to the greater extent these attributes will, with all things comparatively equal, be more successful. One of the prime purposes of military organisation is thus to create and maintain high morale and many techniques or war are developed. for the express purpose of damaging enemy morale. Mooney believes that morale is traceable to tangible causes, 27 "and among such causes none is more potent tban consciousness of membership in a better and more efficient organisation." Although the main contributing factors of morale are discipline, technique of war and thoroughness of training, the overall bond that unites all ranks in an efficient 28 fighting unit is the 11 unity of doctrine." "Unity of doctrine in the military sense means more than a common 26. Jam'es D. Mooney, The Principles of Organisation. Harper • & Row. revised edition. New York, 1947, p. 127. rz?. ib1£., P• 128. 28. ibid •• P• 129. - 34 - training, a common technique or•••••• a common creed of military procedure, although it includes all these. Above everything, it means that the entire organisation is cemented together by a common spirit." A feature of modern armies is the large front line offensives operating, not only in one country, but in many. In the da7s or Napoleon, a battle could be observed from one vantage ground. With the need to co-ordinate the army activities over such a wide area, the modern army had to develop organisational systems to cope. The system used was basically decentralized operations, with centralized cononand and control. The only environment in which this system can operate efrieiently is one in which the unity or doctrine is of an intensive kind. The sheer size of the modern army means that its scalar chain is longer tban in other forms of organisation; supreme connnand, group of armies, field army, eorps, division., brigade, regiment, battalion, company, battery, platoon and section. The principle of decentralized operations implies that it 1s physically impossible tor an anny connnander to plan and execute orders in every theatre of war, large and small. '!he task of military organisation 1s simply to delegate tasks that fit into the general plan. Such delegation must be based on principles of action which - 35 - influence ~adership decisions, rather than inflexible rules. Of the E·rench General Foch, S1:r Ian Hamilton 29 states ''Foch took form before system and began to crush personality." With the longer the scalar chain, the problem of communication becomes more acute, with the greater probability of distortion and confusion. Hamilton 30 recognises this importance "'!he functions of an army are (1) to defeat the enemies main force; (2) to sieze upon his vitals. The royal road to success in these endeavours is to cut the communication of the enemy army whilst keeping open its own communication." War experience has enabled armies to discover that the smallest wholly independent body of men, comprising all arms and functions of service including a general staff, 1a the division. Below the division in the scalar chain~ the different specialist activities are functionalised into separate units. Mooney points out that functions in organisation are the determinative~ the executive and the judicial; the determinative function 1s the planning -- 29. Sir. Ian Hamilton, G.C.B., tJ.he Soul & Body of an A:nny, Edward Arnold & Col, London, 1921, P• 76. 30. ibid., P• 58. - 36 - what is to be done and how; the executive function 1s tbe performing or operating; the judicial is the function with which the discipline of the organisation is effected. Possibly the largest functional distinction in army organisation 1s that between line and staff -- the actual fighters and the supporting services. Although military in origin, the terms line and staff have been applied to most organisations, particularly the catholic church and to business. ihe modern military application, however, inherent in the use of "general staff", is generally unique to the military machine and deserves closer examination. '!he use of a general staff, maintained by such ancint conquerors as Alexander the Great and Roman generals, was rediscovered and developed by the Swedish King Guatavus Adolphus who gave particular attention to supply. It was left to the Germans, or more correctly the Prussians, to bring the concept ot the general staff to its apex of efficiency. Perhaps no feature of German military history has been so generally misunderstood, or spread so much confusion, as that of the General Staff; partly because its nature and status have changed radically, and several tim.8' during the century and a half of its existence. - 37 - ihe General Staff originally was the group of officers who advised and assisted the King ot Prussia in military operations. Since the King was not only the sovereign but the commander-in-Chief of the Army, it was natural t:bat he should need such a staff and should come to rely on the Chief of his General Staff as his principal operational assistant. Under Seharnhorst (who filled this position from 1808 to 1812), part or the General Staff was allotted to the corps and divisional commanders and called the "Armee-Generalstab", while the part retained at the royal headquarters in Berlin was called the "Grosser Generalstab" (Great General Staff). The General Staff, constituted a separate "corps" of officers, wore the distinctive wine red trouser stripes of office, which became a mark of prestige and an object of envy throughout the army. Until the end of the Napoleonic era, the Prussian General Staff' was in no fundamental way different from those of the other European monarchs. In 1821, however, the then Chief of the Great General Staff (General Von Muffling) assumed command over the officers of the Armee-Generalstab as well, and took the title "Chief of the General Staff of the Army." .. '!he military allegiance of the staff officers at field headquarters was thereafter divided between the battle commanders, to whom they were attached, and the Chief of - 38 - the Army General Staff, who thereby acquired a status and power unknown in the armies or other countries. These were greatly augmented when, during the war with Austria in 1866, William I gave von Moltke, the Chief of Statf, supreme authority in the field. Since von Moltke and the minister of War (von Roon) were able to work together, their relative authority never came to an open issue, but after •von Roon retired' the Minister of War was overshadowed by the Chief of Staff. During the first world war, under the influence of Hindenburg and Ludendorff, the authority exercised by- General Staff officers was enormous. A special communications system linked the staff officers at the various field head quarters to which they were assigned and enabled them to report directly to Supreme Headquarters outside the purview of the field comm.anders to whom they were attached. The German General Staff achieved greatness during the latter part of the 19th century under the guidance of von Moltke and von Roon. Sir. Ian Hamilton suggests tbat the war Minister von Roon was the greatest influence in this 31 period. "Von Roon's army was the greatest army the world has ever seen; built only for a six-month's spurt, it held 31. lbid., P• 34. - 39 - the best half of the world at bay f'or years." A feature of the organisation, devised by Roon/Moltke~ was the use of a highly centrallised command. Moltke clearly demonstrated in the Seven Weeks War (1866) that an army can be controlled at a point some considerable distance from the front line. Moltke's whole staff theory was bound up in his following 32 statement "'lbe organisation of the military hierarchy should be such as to insure subordination even in thought, and to give the right and the duty of presenting a single opinion for the critical examination ot the general in chief to one man and only to one. ~ough the advice given may not always be the best, yet is the action taken be consist~nt and the leading idea, once adopted, be steadfastly adhered to, the affair may always be brought to a satisfactory issue." In military procedure, the vital thing is the plan, the preparation of which requires the co-ordinated effort of the General Staff. '!he staff submits its results to the Commander in Chief, who thereupon makes his decision. 33 "ib.e coniaiander in chief will always have, as compared with 32. J.D. Hittle, The Military Staff, The Stackpole Coy., Pennsylvania, 1961, P• 79. 33. ibid., P• 79. - 40 - his advisers, the infinitely weightier merit or having assumed the responsibilities ot executing the advice given." '!he General Staff is not only a co-ordinated advisory 34 body; Clausewitz has written, "the general staff ia intended to convert the ideas of the commanding general into orders, not only conveying the former to the troops, but also working out all matters ot detail, thus relieving the general from a great amount of trouble." In most armies, a general staff means a highly organised and co-ordinated staff service, which implies a supreme co-ordinating authority. In the German army, we have seen that this authority exercises a function which constitutes a real line authority. In other national armies, this rather extreme step is not followed; but, in many respects, they are based on the Prussian model. The modern British army staff organisation sets aside the administrative staff (which co-ordinates the functions of the adjutant-generals branch and the quartermaster- generals branch), from the General Staff. The General Staff performs the operational and intelligence functions; the adjutant general's branch bas authority over personnel, !i: J.D. Mooney, op.cit., P• 152. - 41 - discipline, prisoners, military police etc., the quarter master general's branch 1s charged with logistics, the military term for supply. Field or division general staff is essentially organised on similar lines to headquarters' staff. The senior general staff officer co-ordinates the work of the entire staff, but the chief administrative staff officer has the prerogative of going direct to the commander in any matter which he considers necessary. As a highly efficient organisation of large numbers of people, the military organisation has features which warrant attention by the busihess organiser. Discipline. technique and training are necessary factors contributing to a "unity of doctrine", so essential for high morale. Large numbers of men require several levels of command and makes necessary a high. degree of system for accurate and speedy communication. The technical functions of the modern army are so wide and diverse_ and so important for efficient operation of front line groups, that a large and flexible staff organisation is called tor. 'llle addition of the planning and judicial functions to this composite, requires a high degree of co-ordination, which can only be efficiently carried out by a powerful central command. - 42 - '!he modern soldier 1s thoroughly trained so that he becomes an efficient fighting machine, in many respects a robot, who must instantly obey the commands or his superior. This feature closely resembles the c11rnate of the modern factory~ where specialisation makes necessary the machine-like actions of the worker. In such a setting, morale plays a humanising role, and its fostering is one of the essential functions of the industrial leader. (G) TBE ROMAN CATHOLIC CHURCH ORGANISATION. Possibly the most highly centralised of world organisations, the catholic church, is based on a doctrine founded on dogma defined by its head and which implies a fixed objective, not influenced by the peculiarities of local conditions. The catholic church bases its organisation on the supreme authority of God. delegated to the pope. 'nlus the pope represents the supreme co-ordinating authority. Unlike growth through military conquest~ in which the objective is to extend the power of the central authority~ the catholic church bas grown through faith-propaganda. '!he very essence of military conquest is to bring the conquered into the fold of the central authority-~ a centralising function. Religious growth on the other band tends to be decentralized - 43 - in function; as the veey- bringing of the converted under the influence of God makes them independent of each other. Therefore, the central authority of the catholic church rests on its doctrine alone, and the power of this doctrine must be strong enough to overcome all destructive forces. The scalar principle of organisation is represented, in the main, by the bishops and priests who operate in a line function. 'lhe priest is in charge of a church and tm bishop is responsible for a group of churches~- a diocese. '!he evolution of the complete scalar chain became a process over centuries of superimposing successive degrees of higher authority over the priests and bishops. 'lhe higher authority is in the form of archbishops and cardinals and they form the popes counsel. After thep:,pe. the cardinals are the highest dignitaries of the church. and exercise both a lin~ and staff function. '!heir line function is as representatives of the conclave, whose principal function 1s the election of the pope. As members of the consistory, the~ perform a staff function and as such constitute the popes senate or oouno11. The cardinals, resident in Rome, perform leading roles in the 35 several departments of the Curia Romana. ''Each of these 35. James D. Mooney, The Principles of Organisation~ Harper & Row, New York, 1947, P• 107. - 44 .. departments has a delegated line authority but in preparing business for papal approval they perform a staff service. '!he work of all these departments is thus correllated through the central line authority." Functionalism in the catholic chu:rch organisation is represented by the following orders. -- priests, deacons, subdeaeons, acolytes, exorcists, readers and door-keepers, the minor orders of which are regarded as elevated steps 36 towards priesthood. "'lhe distinctions between the seven orders are functional, and the fact that they all lead as a finality to the priestly office identifies the priesthood as functionally the highest office in the catholic church. Each member of the upper hierarchy, including the pope, derives his eligibility for his office simply from the fact tba t he is a priest. " For echelons higher than a priest the distinctions becomes scalar and not functional. 'lhe functional difference between the secular and regular clergy 1s most important in understanding the organisation of the catholic church. ~ne orders discussed above are secular clergy, or static clergy, as they are bound to one geographic area entrusted with the responsibility of a parish. '!he regular, or dynamic clergy, evolved from the institution of monasticism, into the present day orders of monks, such 36. 16Ia•• P• 118. - 45 - as those of St. Benedict, St. Augustine, St. Francis and St. Dominic. With a few exceptions, these orders have relative freedom of movement, in that they are free to go where their superiors send them in response to calls. Their primatty purpose is to assist the secular clergy in meeting special needs and, as such, are functional specialists. 37 "One fact to be observed in the history of organisation is the suitability of collective staff functions. In such cases the council may achieve a line authority like the Roman senate and the parliaments of modern constitutional states, or the functions becomes departmentalised and the complete body retains only a formal and ceremonial dignity. ib.e consistory of cardinals and the British privy council are outstanding historical examples of the latter trend." Originally formed centuries ago to advise the pope in all matters, the function of the consistory of cardinals is now carried out by the departmentalised curia. ib.e formal staff institutions, like the consistory of cardinals and the ecumenical councils, are one of two distinct spheres in which the staff prino1ple operates in the eatholio church organisation. 3?. rsra:., P• 11a. - 46 - Summonned for special purposes, ecumenical councils are attended by holders of high ecclesiastical office and men of special learning and respect in the church. Its function is to advise, and even advisory decisions must be put to the vote~ which for the council is a line function. The compulsory staff service, in operation throughout the whole church~ is the second sphere of staff principle operation. In the 6th century, the Rule of St. Benedict was instituted whereby the abbot must consult the senior monks, and on matters of vital L~portance he must consult everyone of his monastery. 'n:lis rule does not out across his authority as abbot, but until he has obeyed this rule, he is prohibited from making a decision. Tb.is rule is now followed by the whole church and ensures that a subordinate can always have his say. The Jesuits, being the most rigorous of all catholic orders, must follow the rule of obedience, -- the key note of their policy. This appears at first sight a policy 38 precluding staff functions as each jesuit "obeys his superior, who obeys the rector, who obeys the provincial. who obeys the general, who obeys the pope, who derives his authority from God." This obedience is absolute, 38. ibid., P• 120. - 47 - immediate and unquestioned. However. the staff function is present in the form of a council, who advises the general on important matters. '!be unique feature here is that these special advisers are chosen by the general congregation and cannot be removed by the general. Here there 1s the situation where the leader, before making an important decision must take counsel with a body, the appointment or dismissal over which, he has no control. 'lb.e advising body can thus undertake its function without rear of overt pressure from the leader. A large international business corporation, which is highly centralised, would need to have a functional organisation at headquarters similar to that of the Curia Romana. The centralised nature of decision making would also necessitate a staff mobility whieh would advise groups in distant geographic areas, similar to the roll of some orders of the regular clergy. Speed of action does not play such an important part in the environment of the church as it does in business. If a rule, similar to the rule of St. Benedict, was instituted in a business organisation, then that organisation would fail through inaction. However, the sentiments conveyed by_ such a rule are valuable ones for business, and the business leader needs to display judgement in following it. - 48 - In carrying out his responsibilities, a decision maker applies varying degrees of objectiveness or subjectiveness to his task, and the relative predominance of one over the other will influence his approach to every problem. An autocrat, whilst probably objective in his outlook in getting to the top, is prone to act in a highly subjective manner in the exercise of his power position. Translated into their acts is a regard that their eminent power is a measure of their own superior faculties. Autocrats of this type, mostly ignore the efforts of staff personnel, but if a polioy similar to the Jesuit order of staff independence was operative, then some more objectivity could be injected into the decision-making process. - 49 - CHAP 'lE R IV. LEADERSHIP • (A) DEFINITION. Leadership, the ability to lead, has been given a number of meanings in the Oxford English Dietionary. There are two distinct groups into which these meanings fall:- (a) the ability "to conduct", "to show the way", "to guide","to march at the head of (an army) and direct the movement of", 11 to induce to do something'' and "to bring by persuasion or counsel to or into a condition"; and (b) the ability "to go in advance of others", "to have the first place in" and "to perform one's own part so as to guide the others. " 39 Barnard points to a similar distinction, "leadership was confused with pre-eminence or extraordinary usefulness" and continues; "among the meanings of the verb to lead we 11ay say that one is: 1 to excell, to be in advance, to be pre-eminent•; and another is •to guide others, to govern their activities•••••• to hold command." 39. c.t. Barnard, Organisation and Management,- selected papers, Harvard University Pre&J Massachusetts, 1952, P• 81. - 50 - It bas been a common practice in business to appoint the technically best man, be it accountant, engineer, chemist or salesman for the job of managing. Many turn out to be poor managers as they lack the ability to plan and co-ordinate people's efforts. ihey bave been appointed for their ability in understanding and applying a certain specialty not for their ability in leading people. Barnard 40 writes of the specialist, "the man bas been trained tor leadership only with respect to a narrow range of activities. Otherwise he is untrained and hence the mobility of leader ship resources may be seriously reduced because it is 'difficult to use a good leader of one narrow field in more general work." Of the pre-eminent specialist chosen to 41 lead for his grasp of the subject, Barnard continues "while men are concentrating upon techniques, machines, processes and abstract knowledge, they are necessarily diverted to a considerable extent from experience with men~ organisations and social situations, the distinctive fields of application of leadership ability." Barnard thus s11ms up clearly the fallacy of leadership by specialist expert. '.lhe business leader certainly does not have to be expert in a particular field to be adequate. He needs to have 40~ ibid., P• 88. 41. ibid., p. as. - 51 - sufficient expertise however, to evaluate data for effective decision making. Barnard makes it quite clear that he regards the first sector of any leadership behaviour as the 42 ''determination of objectives." However. he warns us that 43 "we all tend to overlook superior leaders who at the moment may be lacking particular technical qualifications." 44 Barnard defines leadership as "the quality of the behaviour of individuals whereby they guide people or their activities in organised effort." Bass declares that 45 "leadership bas been equated with any positive influence act; with behaviour required to direct a group and with behaviour making a difference among groups." Leadership has also been regarded as an interaction between members ot a group; the management of interindividual tensions; behaviour in the execution of a given position. Each definition emphasises at least one of the variables, which goes to make up the function of leadership, the individual, the group of followers, the situation or the conditions. 42. ibid., P• 85. 43. ibid., P• 88. 44. ibid., P• 83. 45. Bernard Bass, Leadership, Psychology: and Organisational Behaviour, Harper and Row, New York, 1960, p. 89. - 52 - Tannenbaum, Weschler and Massarik describe leadership 46 in more precise terms "interpersonal influence, exercised in situations and directed through the comm.unication process, toward the attainment of a specified goal or goals." It is a feature of leadership that any one ot the above definitions could describe specific leadership acts. Any definition which includes the three essential variables;the individual,followers and the s1tuat1on,1s essentially adequate. However, if one was forced to summarise with one brief, simple definition, Barnard's would be entirely adequate-~ "the quality of the behaviour of individuals whereby they guide people or their activities in organised effort". The business environment plays an important part in leadership as it not only is one of the three basic variables of the leadership function but it both influences and moulds the individual, the behaviour of the leader, and the group of followers consisting of a ntnnber of individuals. 46. 1iniienbaum, Weschler and Massarik, LeadershiE and Organisation, Mc-Graw-Hill, New York, 1961, p. 24. - 52 (a) - (B) 'i*AE:ORms AND RESEARCH. Theories or approaches to leadership appear to lay emphasis on one of the three variables of leadership expression; the individual, the followers, and the situation. (1) 'ltiE INDIVIDUAL. Early theories and philosophy on leadership stressed the leader himself; the characteristics, traits or inherent features that were responsible for his leadership position. It was believed that conditions of leadership were qualities of the individual, being a basic asset inherent in his makeup. A development from the ideology that leadership was a traditionally inherited instinct (a theory fostered by the hereditary aristocracy, fortifying itself from contender power seekers), it attracted more attention following acceptance of the belief that leadership was a learnable ability that could be developed from rational study, organisation and discussion. 'lhus, with the rise of the middle class, the dictum that "leaders - 53 - are born, not made" was not accepted, without considerable question, and in fact was held in disrespect, with emphasis being placed on the environmental development of leaders. With the premise that leaders can be made, and with the realisation that leadership is just as much a social problem as unemployment, the elderly, ill or infirm, cons1deragle research, thought and ultimately published data became available to the socially conscious, the academies and the student. Most of this data originated in America, where the universities and other research centres bad the benefit of adequate funds for the purpose of examining leadership in a scientific way. American social consciousness, and particularly bureaucratic interest in the mysteries of leadership heightened during and after the second world war. Much of the criticism of later research centred around these bureaucratic origins. Published data in the United Kingdom is confined, in the main, to the utterances of estaQ11ahed leaders and thinkers on the subject, not to the results of controlled tests. Purporting to isolate "traits" possessed by the leaders. many studies were undertaken~ with subjects ranging from the - 54 - military and other armed services to children, gangs of youths, athletic teams or most any social group which fostered leader/follower stimuli and was observable. Ralph Stogdill, in 1948, published a surve~ of the 47 literature in which some attempt bad been made to determine the characteristics and traits of Jaaders. He listed seven primary- methods which bad been used to identify and study these traits. (a) Observation and Time Sampling of behaviour in group situations with periods of observation ranging from five seconds to over an hour. (b) Used mainly with children, choice of associate by noting, naming and ranking. (c) Nominations of qualified observer with control group comparison. (d) Selection of individuals occupying positions of leadership. (e) Analysis of biographical and case history data. (f) Testing of traits considered essential to lea,1ership. 47. Ralph M. Stogdill, Personal Factors Associated with Leadership, A survey of the Literature, '!he Journal of Psychology, 1948, 25, P•P• 35 - 71. - 55 - (g) Objective teats to supplement value judgements, vis et vis intelligence tests, personality tests, rating scales, questionnaires, interviews. Of all these methods of study~ Stogdill came to the conclusion that direct observation, and biographical and case history studies were the most fruitful methods, from the point of view of understanding leadership. Stogdill sets out his results painstakingly and using the criteria of averages and correlation to isolate meaningful characteristics. He discusses separately such traits as intelligence, scholarship, knowledge, judgement and decision, insight, originality, adaptability, introversion/extroversion, dominance, initiative, responsibility, integrity, self confidence, social and economic status, social activity, bio~social activity1 popularity, co-operation and emotional control, and lists the authors who have considered it in their research. Using correlation as a measure, Stogdill found that origiriality, co~operativeness, sociability, judgement, aggressivenesaj desire to exceed, humour and popularity correlate the highest with leadership. Using averages he determined a different answer. - 56 - 48 "The average person who occupies a position of leadership exceeds the average member of his group in the following respects, intelligence, scholarship, dependability in exercising responsibility, activity and social anticipation and socio-economic status." In summary, Stogd111 states that the characteristics, demanded by leadership, are influenced or determined by the emergencies of the situation in which the leader is operating. In discussing the literature, Stogdill found that these traits and characteristics could be logically grouped under Six headings:- capacity (intelligence, alertness, originality, judgement) achievement (scholarship, knowledge) responsibility (dependability, initiative~ persistence) participation (activity, sociability, co-operation) status (socio-economic position, popularity) situation (mental level) Stogdill stated, quite early in his survey, t!.l.8.t he and his team of readers only examined published data of the results of character studies of leaders, studied by a team of at least three persons. '!his obviously excluded the work of 48. Ibla., P• 60. - 57 - such authors as Tead, Barnard, Schell, Urwick, Follett and others, whose lifetime of experience of leadership observa tion have qualified them to speak qualitatively on the subject. When discussing leadership, high ranking officers of the armed services tend.to concentrate on personality character istics. Great names, such as Wavell, Montgomery, Hamilton, De Gaulle and Slim, all with extensive army experience, emphasise traits and personal qualities. '.Ihis has been conditioned somewhat to leader environment and purpose in the army. The army group must be trained to follow their leader no matter what the circumstance; group influence on the leader tends to be small. But as group morale can be quite unstable in wartime, the leader must give it much consideration; there is little or no questioning of decisions -- decisiveness and confidence are essential. It is obvious, the leader/follower conditions in the army are, in many respects, different from the conditions under which business operates. But if one ean recognise these differences, army experiences in organised e~fort is invaluable 1n understandihg the subject. In his book "Leadership in the 20th Century", Urwick sets - 58 - out lists of qualities which Sir William Slim, Viscount Archibald Wavell, Henri Fayol and Chester Barnard, regard as essential for leadership. Those of Slim and Barnard bear comparison. Sir William Slim Chester Barnard Courage Decisiveness Will Power Persuasiveness Flexibility of Mind Intellectual Capacity Knowledge Responsibility Integrity Vitality and Endurance It is clear that the concept of leadership of both writers is essentially at variance, with emphasis being placed on different premises. To combat the critic who overemphasises the divergence of environment or business and the military, Slim states that 49 "I. Personal leadership exists as long as the officers demonstrate it by superior courage, wider knowledge, quicker initiative and a great readiness to accept responsibility than those they lead. 49. Field Marshall Sir. William Slim, 'Ihe Fourth William Queale Memorial Lecture, The Australian Institute of Management, Adelaide, 1957, p. 6. - 59 - II. Again military command is not just a matter of bawling orders that will be obeyed for fear of punishment. Any commander's success comes from being trusted than from being feared; from leading rather than driving. III. Officers and men feel themselves on the same side only as long as the officers, in all their dealings~ show integrity and unselfishness and place the well-being of their men before their own. IV. In war the general may not be haunted by finance, but his is the responsibility for good management and economy in matters more important than money-~ his men's lives." Although Slim1 s attitudes to leadership -- relationship to authority, relationship to subordinate, and relationship to measurement of effect -- is not altogether dissimilar to those followed by business; Barnard creates an altogether different environment of leadership, with emphasis on the democratic process. In discussing the business environment, Barnard raises four dilemmas of the democratic process. 50 (1) Opposition between partial consent and complete conformance. (2) The discrepancy between abstract decisions or concrete action. - 60 - ( 3) time lags (4) political conflict In setting out the leadership requiren1ents to cope with such problems, Barnard isolates himself from the supporters of trait theory, who look to personality characteristics entirely for leadership study. Slim's opinion is different, 51 simple and to the point "Instead of rifles they handle tools; instead of guns they serve macb.ines. They have changed their khaki and jungle-green for workshop overalls and civie suits. But they are the same men and they will respond to leadership of the right kihd as they have always done." 'lb.ere are thus two opinions~ as to the importance of personal qualities alone, in the leadership equation. There are those, like Slim, who maintain that traits are the only criteria of leadership determination. They believe that traits possessed by a leader of one group would also tend to dominate the makeup of leaders or other groups and, as a corollary, leaders of one group would tend to be leaders of others. Not withstanding the arguments of Bertrand Russell, if one takes the equation; if not a leader then a 5I. Slim,op. cit., P• 15. - 61 - follower; it follows that a follower of one group will tend to be a follower of another. Russell sees leaders and 52 followers as functions of power. 11 'lhe power impulse bas two forms explicit, in leaders; implicit, in their followers. When men willingly follow a leader, they do so with a view to the acquisition of power by the group which he commands, and they feel that his triumphs are theirs. Most men do not feel, in themselves, the competence required for leading their group to victory, and therefore seek out a captain who appears to possess the courage and sagacity necessary for the achievement of aupremacy.u Russell however, believes 53 the leadership equation is not a dichotomy; "there is a third type, namely those who withdraw. 'lb.ese are men who have the courage to refuse submissions without baving the imperiousness that causes the wish t o command.'' 'lb.ere are others who believe that a leader is a member of a group, that 1s subject to a network of relationships. All groups have their rules of membership, whether formal or informal, that differ one to the other. Criteria of membership could be anything from politics, religion, living 52. Bertrand Russell,"Power - Aney social Analysis". Unwin Books, London, 1962, P• 12. 53. ibid., P• 18. - 62 - area, fondness of cards, or colour of hair, to specialty skill, social status, age or education. One group will tend to have group qualities of attracting; repelling and selecting more or less in common with others, but with some unique qualities of its own. As leaders are firstly members of groups, they, by their very inclusion, possess traits regarded as essential for group membership. Jenkins 54 in a :-post war·· survey summarises, "leaders tend to exhibit certain characteristics in common with members of their group. Two of the more obvious of these characteristics are interests and social background." Whilst it is possible that some groups have similar selection mechanisms, which attract - 55 leaders with similar qualities, "the probability seems great•••••• that the leaders of some groups possess some traits different from the leaders of other groups and that leadership traits are not universal." 54. W!IIiam o. Jenkins, "Review of ~ader~hip Studies with particular refe~ence to Military Problems"~ Psychological Bulletin, January, 1947, P• 75. 55. Alvin w. Gouldner, ed., Studies in Leadership, Harper and Brothe-rs, New York, 1950. p. 27. - 63 - 56 Cecil Gibb states ''There is no one leadership type of personality. One man might achieve leadership status because he has superior intellectual endowments which force him consistently upon the notice of others and make them dependent upon him. A second achieves leadership because he has a quiet helpful interest in fellow group members. Leadership resides not exclusively in the individual but in his functional relationship with other members of his group." · 57 Stogdill concludes his survey "the total weight of evidence presented•••••• suggests that if there are general traits _which characterise leaders, the patterns of such traits are likely to vary with the leadership requirements of different JI situations. Jenkin1 s first conclusion of his summary of 58 leadership studies; "Leadership is ppecif 1c to the particular situation under investigation. \f.h.o becomes a leader of a given group engaging in a particular activity and what the leadership characteristics are in the given case are a function of the specific situation." 56. Cecil A. Gibb, The Principle and Traits ot Leadersh~, Journal of Abnormal and Social Psychology, 1947, P• 231. 57. Stogdill, op. cit., P• 62. 58. William o. Jenkins, Review of Leadership Studies, Psychological Bulletin, 1947, p. 45. - 64 - ( II) LEADERSHIP -- HEREDITY OR ENVIRONMENT. It is important to recognise the place leadership bas in the makeup of the person. Where are leadership characteristics derived? What is the relative importance of heredity and environment in the concept of leadership? The ihf'luence of heredity and environment has interested scholars for centuries. Aristotle pu~ forward the theory that the mind was similar to a blank tableJ1-.. "tabula rasa" -- that is written upon by experience. Hippocratea developed the theory that temperament was clos~ly limited to the biochemistry of the body. Darwin recognised that diversit~ among members of a species was both normal and expect ed and that individual differences exist at all levels of the phylogenetic scale. He added that some variations have greater survival value than others, thus bringing attention to bear on the important and complex question of how an organism adjusts to its environment. To-day personality psychologists recognise that personality characteristics develop as a person attempts to establish and maintain an effective relationship with his environment. 'lhe concept of adjustment and the development of leadership qualities are closely linked. 'lhe theory behind this adjustment concept involves the relationship between a - 65 - person and his environment. A basic tension develops between them if this relationship is inadequate then any behaviour that reduces this tension is adjustive. The homeostatic type adjustment process begins at a very early age and a pattern of behaviour develops as the growing person adjusts to his equilibrium. Personality may be thought of as the result of the adjustment process and once developed, influences a person's subsequent acts of adjustment. Indeed Kempf (1919) went so far as to define 59 personality as "the habitual mode of adjustment which the organism efftebii between its own egocentric drives and the exigencies of the environment." Other definitions o~ personality consider it in terms of its stimulus value i.e., one's effect on others. 60 Floyd Allport believes that "personality is the individuals characteristic reactions to social stimuli and the quality of his adaptation to the social features of his enviromnent." Whilst the above two definitions of Kempf and Floyd Allport give so~e indication of some or 59. ~oss Stagner, Psychology of Personality, 'lhird Edition, Mc Graw-Hill, New York, 1961, p. 4. 60. ibid., P• 5. - 66 - the manifestation of personality, and some of its stimulants, it remains for Gordon Allport to clarify its meaning. He 61 states that personality "is the dynamic organisation within the individual of whose psychophysical systems determine his unique adjustments to his envirobrn.ent." Whilst putting more emphasis on inherited qualities Gordon Allport clearly postulates an inner system of beliefs, drives, needs and values. Personality 1s not synonymous with behaviour or activity and it is certainly not merely an impression that is made on others. Rather it is what lies behind specified acts and within the individual. The adult personality is probably the most complex phenomenon studied by science. On the one hand it is concerned with physiological components, biochemical processes such as the function of glandular and nervous systems. On the other band the soo ial situation plays a large part in personality development. People are influenced by the family environment, theeoonomic situation, education etc. Leadership has been referred to above as "quality of behaviour of individuals", "behaviour required to direct a group", "behaviour in the execution of a given position", 61. ibid., P• 7. - 67 - and.. "interpersonal influence." Although Gordon Allport clearly discusses the concept that personality and behaviour are not synonymous he points out that personality is 62 expressed_ by behaviour. "The systems tr..a t constitute personality are in every sense detennining tendencies and when aroused by suitable stimuli provoke those adjustive and expressed acts by which the personality comes to be known." The systems themselves are not and can never be observable but they can be inferred from behaviour that is observable. It the re:rore appears that leadersh.ip is a way of describing a certain type of behaviour expressing a personality characteristic. It is evident that many authors on the subject of leadership freely refer to it both as a type of behaviour andA also as a segn1ent of the personality system deterraining leadership tendencies. 63 "T.tl.e most important point of scientific agreem.ent is that no feature or quality is excll1sively hered.itary and none is exclusively environmental in origin." Researchers have shown that whilst heredity plays a major part in establishing 62. E. Eare Baughman & Georges. Welsh, Personaliti: A Behavioural Science, Prentice-Hall, New Jersey,1964, p.31. 63. Gordon w. Allport, Pattern of Growth in Personality, Holt, Rinehart and Winston, New York, 1964, P• 68. - 68 - the "raw materials 0 of personality such as intelligence, physique, and verbal and mechanical abilities~ environmental factors mould and otherwise fashion these raw materials. (III) THE SI'l'UATION. 64 Koontz and O'Donnell claim that the situationist approaoh to leadership is more concerned with identifying leaders rather than adding another aspect to leadership theory. They cite practices used, in the second world war, by the German general staff and the United States Office or Strategic Services in order to identify the best man for particular assignments. Recent examination into the organisational communication system has thrown further light on the situational emergence of' a leader. Assuming that the basic organisational problem is one of gathering and passing on 1nf'onnat1on, controlled experiments were undertaken by A. Bavelas and D. Barrett to determine the effect of varying the communication 65 stl'llcture of a group on "speed, accuracy, organisation, emergence of the leader and morale. 64. toontz & O'Donnell, Principles of Management. McGraw-Hill, New York, 1959, .>·. 65. Harold Koontz & Cyril O'Donnell, PrinciEles of Management, McGraw-Hill, New York, 1959, p.432 - 433. - 69 - Fig. 1. Relation between group characteristics and selected communication nets. C D Results Item --I II III Speed Slow Fast Fast Accuracy Poor Good Good Organisation No stable form Slowly emerging Almost or organisation but stable 1rnm.ediate organisation and stable organisation Emergence of Leader None Marked Very pronounced Morale Very Good Poor Very poor These experiments imply that the leader is, by definition, the person possessing the. maximum helpful infom&tion and that, on the other hand, no leader emerges if all participants have equal access to information." Hence, for varying types of connnun1cat1on situations~ the emerging leader could be - 70 - predicted. The situationists believe that, with any situation, a leadert. will emerge to lead group activity. The -orocess of selection operates in such a way that the most competent, so made by the inherent skills in his possession, is regarded as the most eminently suited to lead. The assumption 66 underlying this approach is that "great value is placed on specialised skills as a basis of legitimating occupancy of a great variety or roles." '!his assumption may be correct in the American society, wh.ere the democratic process is allowed comparative free rein. But in societies, where exist seniority, social standing, and social pre-eminence of certain educated classes, and where leadership skills are set by class realisation, grave doubt attaches to the legitimacy of the situationist approach. The situationist concept, requires of its leader to be responsive to the needs of the group, to possess a certain 67 plastic f'luidi ty with regard to s1.1ch response "It may be hypothesised that the personality which would react as 66. Gouldner, ed., Studies in Leadership, Harper, New York, 1950, P• 28. 67. ibid., P• 29. - 71 - responsi~ely or immediately to current group pressures is, perhaps, likely to manifest a weak or insecure ego and is in some measure, because of this, extremely dependent on group judgements." There are thus conditions where the free emergence of the situational leader is clogged, o·r where the leader is manipulated by the group and by- such weakness, although officially in a leadership role, is actually a follower. '!here are thus definable boundaries, both cultural and psychological, which tend to restrict the validity of the situationist propositions, relative to the adaptability of personality. (IV) TEE FOLLOWER. Koontz and O'Donnell point out that, due to the 1nadequancies of the trait and situationist approaches, F.H. Sanford looked to the followers as an important factor in the leadership equation. He reasoned that followers have basic needs~ and would tend to be content, if led by a person cognisant of these needs and who was prepared to 68 satisfy them. Russell states that "when men willingly follow a leader, they do so with a view to the acquisition or power by the group which he commands, and they feel that 68. Bertrand Russell, Power, Unwin Book, London, 1962, p.12. - 72 - his triumphs are theirs." Mary Parker Follett essentially 69 thinks of leadership from a similar approach "The job of' the man higher up is not to make decisions for his subordinates but to teach them how to handle their problems themselves, how to make their own decisions•••••• '!he leader in scientifically managed plants tends not to persuade men to follow his will. He shows them what it is necessary for them to do in order to meet their :responsibility." Follett's view is not strictly a realisation of followers needs, but she points out the inherent power in the group, if the leader refrains from authoritarian :rule and subordinates himself to the group task and identifies 70 himself with his followers, ·~ leader, not ordering his .71 men, but serving his men", and ''There are leaders, to--day who, far from keeping their purposes from their subordinates, think that the greatest aid to leadership consists in uniting one's followers, executives or manual workers, in a comm.on purpose." Sanford's comments referred to above on the importance offollowers was made in 1950, but as far back as 1928 Follett 69. Mary Parker Follett, - her collected papers contained in Dynamic Administration edited by Metcalf & Urwick, Isaac Pitman, London, 1960, P• 282. 70. ibid., P• 274. 71. ibid., P• 287. - 73 - 72 was stating "part or the task of the leader is to make others participate in his leadership•••••• the best leader knows how to make his followers actually feel power them- selves, not merely acknowledge his power." But Follett is never one to isolate an important attribute of leadership to the detriment of others. Constantly one is reminded of the complementarity of variables in the leadership 73 equation. "ihe leadership of function and the leadership of personality are of course by no means separate; but if' we have to separate them for the purposes of discussion, we may say that in business the leadership of functions is tending to become more important than the leadership of personality•••••• the success of a business depends partly upon its organisation being sufficiently flexible to allow the leadership of function to operate freely -- to allow the men with the knowledge and the technique to control the situation.'' Her theory of uniting experience is s11:ouned up in 74 "but if' the followers must partake in leadership, it is also true that we must have followsh1p on the part of leaders. Tb.ere must be a partnership of following. The basis of 72. ibid., P• 290. 73. ibid., P• 278. 74. ibid., P• 290. .. 74 - industrial leadership is creating a partnership in a common task, a joint responsibility. tt (V) THE GROUP. Group behaviour, which Follett touched on 40 years ago, has been the subject of considerable research 1n recent years, and sociometric studies in leadership have attempted to delve into the influence of interpersonal behaviour on leadership. Originally developed for the therapeutic treatment of groups, sociometry became a recognised method of leadership study because of its broad approach to group behaviour, both formal and informal. It recognised that there are two general factors associated with the need structure of individuals in group activity, -- those related to the task situation, and those related to the basic needs of self such as self-respect, self-expression, security and a feeling of ease. T.h.e chief method of measurement, in this concept, is the sociometric test, in which each individual selects one or more colleagues to share with him an activity important to his group. The preference structure, identified by such choices, can be charted in the "sociogramn, where group members are given varying degrees of units of attraction or rejection. From this information, the group is re-organised - 75 - into supposedly a more efficient unit -- efficiency being measured in term.a of satisfaction of task accomplishment and need accomplishment. Following from the acceptance of such an approach, leadership acts could be said to 75 facilitate "either the task process or the social process related to maintenance of basic need satisfactions." Hemphill went as far as to describe leadership as a function of task accomplishment. Successful leadership, resulting in a group act, though not necessarily accomplishing any task, is set apart from effective leadership, which results in task accomplishment. One of the earliest researchers in this field, Moreno, defined leadership as a pattern of relationships involving transmission of influence. But of the type of influence used~ he said little. By definition, the kind of influenceoonveyed is one which satisfies the social motives of the group. However, Helen Jennings has developed a sociometric approach to leadership in that she bas varied the criteria of preference, so as to identify what she calls the "sociopsyche continuum", extending from the more formal t~sk activity to the informal idle time association. The formal type structure, she called the "sociogroup" and the informal structure, the "psychegroup. 11 75. t. Petrullo and B.M. Bass, Leadership and Interpersonal Behaviour,ed., Holt, Rinehart and Winston, New York, 1961, P• 14. - 76 - Her experiments showed that for sociogroups, leaders had regard for the well-being of the group, rather than for individuals striving continually in molding a teamwork and improving group morale. However, in the psychegroup, persons who were b.1ghly chosen could not realistically, be called. lead.ere, as they were self, rather than group, 76 oriented.. "Relationships in the psycheg:roup are intimate and emotionally supportive but not closely related to the comm.on group life." Another worker, in this field, attempted to relate socio-group leadership with the effectiveness of leadership, measuring effectiveness by accomplishment of task. Fied.ler, in 1958~ found that socio-leadership was by no means synonymous with task leadership, but that effective leadership required a measure of sociogroup acceptance. He 77 concluded that effective leadership "requires a certain social distance between lead.er and followers. 'lb.is suggests a curvilinear relationship between psychestatus and sociostatus; too high a position in psyche structure might handicap a socioleader in task functions." As do econometricians in the study of economics, the disciples of sociometry turn to ~uantification in their 76. ibio., P• 16. 77. ibid., P• 17. - 77 - attempt to analyse the social role of the group. Criteria used in the sociometric study of leadership are now, designation (chooser selected a companion as the leader of his group); need satisfaction; task behaviour; role perception (perception rather than preference). Results from sociometric experiments are in the form of numbers which are subtracted, added, correlated, regressed, charted, graphed and otherwise put through the mathematical mill to grind out the refined social product. Such a mill is the 11multi--relational sociometric survey" developed by Massarik, 78 Tannenbaum, Kahana and Weschler and is concerned with "the measurement of interpersonal variables associated with organisational effectiveness." It is simply an extension of the normal sociometric approach, expanding the matrix to include more variables. However, the larger the matrix, the more complex the analyses become and the less specific appear the conclusions. Other research workers have examined leadership roles from the point of view of ego psychology, group dynamics and homeostasis; but, because of its particular relevance to the business environment, the studies based on the principles of stress, appear to warrant further elaboration in this paper. 78. R. Tannenbaum, I.R. Weschler, F. Massarik, Leadership and Organisations, McGraw-Hill, New York, 1961, P• 346. - 78 - ( V) 'mE EFFECT OF STRESS. Torrance separates the effects of duration and intensity of stress on the leadership role~ claiming that character of the leadership and interpersonal behaviour of a group, mediate the effects of stress. 79 "One usef'ul way of studying the process of adaptation or groups through effective leadership and interpersonal behaviour is to think in terms of linkages or forces which hold groups together, for example, affect, power, communica tions and goals." So Torrance thus confines himself to four major forces of interpersonal behaviour and, although his work is quite preliminary in scope_ some important behaviour tendencies are isolated. He firstly isolates the forces of like/dislike, what he calls "affect linkage." Research suggests that after the first shock of stress, there usually is manifested a stronger feeling of like/dislike, which will gradually return to normal. If however the stress situation continues, and intensify the force influential in the groups, adaptation to the situation tends to break down, and open hostility and 79. Petrullo and Bass, Leadership and Interpersonal Behaviour, Holt, Rinehart and Winston, New York, 1961, p. 105 - 106. - 79 - personal inability follows, as this one force must bear the brunt of the stress frustrations. Torrance states that, after normality returns, there may be feelings of anger expressed by group members, at their seeming weakness in drawing closer to each other during the stress period. Power, connnunication and goal linkages appear to follow a similar pattern -- at first signs of stress, the force is strengthened in the over compensation of the initial disruption, followed by final collapse. As stress increases, the leader tends to delegate more responsibility and power to subordinates~ tightening, in the process, his checking of their task accomplishment. After a particular intensity is reached, however, the leader feels so insecure that he withdraws all power from others, or abdicates his power role. Torrance emphasises that there is a high degree of interaction in the above types of forces. For example, strong affect forces may be offset completely by lower power and communication linkages. 80 "'lhe process of adjustment to the stressful situation 1s aided by factors which reduce the abrupt nature of the change, factors such as readiness of the group to perceive 80. lb!d., P• 109. - 80 - and accept an emergency, good communication networks, willingness to experiment with new types of organisations and new types of behaviour, and the presence of relevant skills in group members." Torrance virtually states that the ability of any group to overcome stressful situations depends upon its degree of flexibility; -- flexibility in planning, flexibility in organisations and flexibility in member skills. This is undoubtedly true and it surely is the manager's function in business to ensure that this environment or something approaching it is in existence. From the results of his research, Torrance suggests that certain leadership behaviour adversely affects groups under stress. 1. Failure of official leaders to accept the informal leadership structure. 2. Reduction of the power of the group by the leader with an accompanying increase in hostility (here Torrance is not referring to the power of the group,as envisaged by Bertrand Russell, but he is undoubted1y talking of group member power) 3. Changes in leadership, or failure of leader to fulfil groups expectations. 4. '!he failure of the leader to resolve his increased feelings of loneliness and isolation. - 81 - 5. Discrepancies between the values of the leader and the predominant values of group members. Further analysis of these behaviours, suggests that, in conditions of stress, the leader should ensure that (a) he is influenced by the group informal leader, (b) he is careful to maintain group membership power, (c) his values are basically the same as those of his members. It would also appear that if he maintains his isolated position, his position of loneliness, it is difficult for him to grasp an understanding of group needs. On the other band, if his empathy for the group is absolute, as the above implies, be has little chance of failing to reach the groups expectations. 'Ihese conclusions, however, seem to conflict with the 81 rather paradoxical statement by Torrance; "In general, leaders appear to feel a greater than usual need to seek the judgements of group members when conditions become stressful. At the same time group members are increasingly willing to place their lives in the bands of a strong leader who promises to get them out of the predicament." 81. ibid., p. 114. .. 82 - (VII) AU'IHORITARIAN AND DEMOCRATIC LEADERSHIP. With the rise or the sociology ef business and the b1unan relations school, leadership swung from the individual to the group. With an executive's effectiveness being evaluated by group results, and with the freedom and mobility of group mem.bership, the authority wielded by the business leader is being regarded as a function of group acceptance. The terms, formal and informal authority, and official and unofficial authority, have been coined to separate the leadership appointment to a position of authority, from group acceptance of the leadership role of authority. Not only has authority got 82 to be gained, but it has to be maintained "You cannot take the authority which you won yesterday and apply it to-day. In the ideal organisation authority is fresh, always being distilled anew." Obviously, the use ot authority in leader -- group relationship will depend on the situation and the personalities of both parties. Some individuals admire authority and tend to submit to it. Others lack security 82.Follet\, op. cit., p. 151. - 83 - and are strengthened by it. Daniel Bell argues that the 83 "principal social avenue of eacape is submission to a leader. Where the character type of the people involves a basic dependance upon authority, the wish to surrender oneself and lose oneself becomes strong." The degree to which, and the way in which, authority is used by the leader is the criteria distinguishing between authoritarian and democratic leadership. '!he authoritarian leader dominates his group, centralises all decision-making to himself, determines group goals, regards group members as wholly object$ of his power any weakness in which earns contempt. On the other hand, the democratic leader identifies himself with the group, allows policies and goals to be fashioned or determined by the group, gives sufficient freedom in method of task accomplishment, and delegates decision-making. Mary Parker Follett recognises this distinction in terms of power separation, what she calls 84 "power over" from "power-with." "I am pleased to be able to say that these two propositions are used to mark a distinction in law; you have rights over a slave, you have rights with a servant. 11 Thus an authoritarian leader demands 83. Gouldner, Studies in Leadership, Harper, New York, 1950, p. 405. 84. Follett. op. cit., p. 101. - 84 - that he be followed slavishly and to obey without question, whilst the democratic leader permits more freedom, seeks advice and approval, and whose chief task, Follett believes, is to organise group member experience. Pigors sees democratic leadership as simply a moment in the process toward domination by despotism. Crisis or emergency, in which autocratic measures are taken by the leader to save the group or general group passivity, can permit aggregation 85 of power influence and information by the leader. "'lb.us while we must rely on leaders, we cannot forfeit our functions as policeman, censor, and supreme court without at the same time, forfeiting our position as a member of a democratic group." 86 "If the best leader takes all the means in his power to develop leadership among his subordinates and gives them opportunity to exercise it, he bas then, his supreme task, to unite all the different degrees and different types of leadership that come to the surface in the ramification of a modern business." Follett•s approach to this distinction in leadership is different, in one important respect, to that expounded by the latter day sociologists. She points a!. Gouldner, op. cit., p. 461. 86. Follett, OE• cit., p. 282. - 85 - out that, to gain effective group power, the leader must know how to unite group experience. The sociologists put more emphasis on the leadership of the group, with the goal not so much in attaining power but in the maintenance of the group. Authoritarian and democratic leadership are the two extremes on the leadership barometer, between which lie many positions of degrees of leader/group interaction. Tb.is leader/group interaction is a fluid relationship, markedly influenced by the leaders ability and use of power, culminating in leadership by persuasion, coercion and permission. In his book "Leadership, Psychology and Organisational Behaviour", Bass commented on the emergence of leaders in leaderless groups. He concluded that not only does leadershiI emerge through active parti~ipation, and demonstration of a capacity to carry co-operative tasks through to completion, but effective leadership depends on the leaders ability to 87 solve the group's problems. "Ability permits the leader to serve as an indirect and secondary reinforcer of the behaviour of others. He cues the other members concerning how they may obtain their goals." This 1s persuasion. 87. Bass, Leadership Psychology and Organisational Behaviour, Harper & Row, New York, 1960, p. 162. - 86 - Sociologists claim that those responses leading to individual task accomplishment are reinforced, those responses tried but failed are not reinforced. Over years, a pattern of responses is developed for overcoming varying problems, or abstracts based on the acceptance of successful responses, and the elimination of unsuccessful ones. One can look at expectation as a habit, developed like other habits through reinforcement or the experience of re~ard. As rewards are repeated for making certain responses to a given stimulus situation, the anticipation of reward is increased. Hence, members will increase in anticipation of task accomplishment, the more they experience reward in the group, that is the more the group is effective. Therefore, one of the leading premises, on which sociologists base their arguments, 1s that group effectiveness is the extent the members are rewarded# or the extent they avoid punishment~ by belonging to the group. Bass lists the experimental literature supporting the concept of the leader as an indirect or secondary reinforcing agent. A leader is going to be more effective if he can warn, inform, signal or indicate whether given behaviour is likely to lead to goal attainment. A necessary condition in ability to solve group problems is the ability to understand, appreciate, and exhibit sensitivity to these problems. 'lhe problem has to be - 87 - known before it can be solved. Empathy, or social sensitivity, thus improves the effectiveness of attempted leadership. 'Ihis is particularly so in democratic leadership. In the situation where leader authority is granted by the group; where granting of power is inherent in the groups desire for leadership influence; where the leader's task is the co-ordination of experience; where group satisfaction is measured by the homeostatic relief of individual needs, the skill, with which the leader can recognise the need for leader pressuring on group forces; can recognise the individual and group needs and translate these needs into satisfaction giving action; can understand and inter~elate the experiences of the group, is an ability highly essential for group effectiveness. His very success depends on it. In fact, by definition, if the leader cannot identify group needs, then the group effectiveness suf~ers, and a new leader will emerge. 'Iha term "group needs" would appear to be a trite term of easy definition, but of difficult determination. Chester Barnard argues in terms of "motives" and "satisfactions" arriving at a quasi mathematical equilibrium position of 88 "burdens" and "satisf'aations". ''If the individual finds 88. Cfiester I. Barnard, The Function of the Executive, Harvard University Press, Cambridge Massachusetts, 1958, P• 57. - 88 - his motives being satisfied by what he does, he continues his co-operative effort; otherwise he does not. If he does not, his subtraction from the co-operative system may be fatal to it•••••• Thus the efficiency of a co-operative system is its capacity to maintain itself by the individual satisfactions it affords •. '!his may be called its capacity of equilibriums, the balancing or burdens by satisfactions which results in continuance." Written in the later 30 1 s, Barnard's concepts gave impetus to the study of sociology in business. He postulates three main ends to executive effort; -- to provide and maintain a system of communication; to encourage the "securing of essential efforts"; to formulate and clarify purpose. Although Barnard is talking of objectives or goals, and leadership is essentially one of tlie means to such goals., it is interesting to note the predominance Barnard gives to communications, both formal and informal., and to relate leadership to this important function. Whilst leadership, in the situationist approach, was discussed earlier, it remains for some relationship's to be considered between leadership and interaction. (VIII) LEADERSHIP AND COMMUNICATION. Communication, sometimes limited to the concept of persuasion, is referred by March and Simon in the following - 89 - 89 way; "Information and stimuli move from sources to points of decision; instructions move from points of decisions to points of action; information of results move from points of action to points of decision and control." Such communication networks have been the object of a number of studies from which several theories have been substantiated. '!he arrangement of channels of communication to increase, or reduce, the interaction potential among pairs of members, strongly influences the group's task and interaction effectiveness; the previous structure, strangeness of the problem solutions and number of decisions to be made~ determines the behaviour that will occur in various networks; the satisfactions of the persons occupying a central position in the communication net was due mainly to their access to data, rather than their greater opportunity to interact. 'lbese cohclusions, described by Bass, point out some of the important features of communication. There have been too many studies into this requisite of interaction to delve into the subject in this paper; suffice it to say that it is an essential ingredient in the concept of leadership. It is not possible to have interaction between individuals unless there is some form of communication between them, and likewise, 89. James G. March and Herbert A. Simon, Organisations, John Wiley & Sons, New York, 1958, P• 167. - 90 - interaction is a necessary feature of leadership. Hence, one of the essential variables of the leadership equation is connnunieation, any influence on which can effect interactions and group effectiveness. Also for this reason, communication effects are not only related to persuasive leadership but to authoritanian, charismatic and democratic varieties. 90 "It 1s a well known fact that the same social pressures are experienced in different ways by d:lfferent people. In other words, reactions to persuasion are determined not only by who says it and by what is said but also by the social and personality characteristics of the persons to whom it is said." 'lb.is statement is very .,. similar to Chester Barnards beliefs in the three leadership variables -- the leader, the situation, and the follower. '!he psychologists would argue, however, that, "what is said" will depend on the empathy of one "who says it" and the needs and desires of one "to whom it is said. 8 March & Simon differ in that they believe "what, is said is dependant 91 on other criteria -- the connnunication network. "In part the connnunication network 1s planned; in part it grows up in 90. W. Sehranm, ed., The Science of Human Communication, Basic Books, New York, 1963, p. 54. 91. March and Simon, op. cit., p. 168. - 91 - response to the need for specific kinds of communication; in part it develops in response to the social functions of connnunications." Communication, the external expression of leadership behaviour, is thus dependent on a number of variables; - the ability of persuasion, the resceptibility of persuasion and the network of communication which, over a period, evolves by adapting to varied problems. 'Ibis network of communication is one example of the influence of organisations on human behaviour, the constraints imposed on qualities of hum.an behaviour (such as leadership) by environment, and the rules and regu.lations developed over periods of environment/individual/purpose relationship. - 92 - CHAP'lER V. RELATIONSHIP OF LEADERSHIP 'ID *l*AF: BUSINESS ORGANISATION. In a previous chapter, emphasis was placed on leadership as a function or the individual, the situation, the follower and the group. Although each was considered separately, it was stressed tl:'lat their effect on leadership was not entirely due to their separate and exclusive influence, but that they represented variables in a leadership matrix. Barnard's claim that any leadership expression was the result of the interaction of the three variables-~ individual, follower and situation, was brought out in the examination on leadership. '!he process of relating leadership to the business organisation therefore, is one in which the limits or confines of the concept of leadership are narrowed down to a particular situation or environment. '.Ib.e business organisation, as a segment of society, presents a matrix of variables which is an aggregation of the variables experienced by a single/enterprise. The enterprise can therefore be taken as a social technical organisation which 1s representative of the larger business organisation. 'lhe social and technological forces which confront the business leader - 93 - both condition& are influenced by him in the process of his leadership role. 'Ihe importance of individual attributes to the leader~hip role, as pronounced by Slim, Tead, Schell and others, 1s in many ways diminished by the degree of sophistication and complexity of the modern society. The very process, by whieh 19th century American society curbed the freedom of action of the Vanderbilts and Drews, has continued, so that to-day leadership is less of the front man -- follow me variety, but more of guiding, co-ordinating type. In a large organisation, a chief executive is wholly dependent on his lieutenants, and their subordinates, for the necessary information for decision-making. No matter how limiting the modern organisation is, there will always be those fortunate few who can command in any sit,1ation. Their combination of attributes, whether they be eourage, will power, flexibility of mind, knowledge and integrity or decisiveness, persuasiveness, intellectual capacity, responsibility, vitality and endurance, will 92 always suffer men to f'ollow. "Try as we will• we can create no synthetic genius, no composite leader. Men are 92. Crawford H. Greenawalt, '!he Uncommon Man, McGraw-Hill, New York, 1959, p. 57. - 94 .. not interchangeable parts like so many pinions, gears or carburettors; genius as John Adams said is bestowed 11 imperiously" by nature on individuals." But genius is rare and leadership positioIBmany in business organisation. ihe problem for business is thus to identify those individuals who have sufficient leadership qualities as to adequately undertake the tasks and responsibilities required in positionsor authority. But because this very large group is not of genius calibre, it will consist of individuals who will be effective leaders only in certain situations. Their effectiveness will depend on their own attributes. those of their followers and the technological and co-operative requirements of their positions. With the growth of specialisation and the role of "staff" departments in business, leadership has taken on a peouliar role, in that the co-operative requirements of staff positions make essential a satisfactory- relationship with other staff and line departments. The effective interrelationship with other departments is not dependent on effective leadership at higher levels, though this can influence the interaction, but it is dependent on the ability with which the staff leader can identify his role with those of his colleagues. Hence a leader of a staff department can be an ef£ective leader, as far as his department is concerned, in that he - 95 - co-ordinates and unites t·he experiences of his group~ and 1s completely in touch with the technological requirements of his position; but a failure in the content of the enterprise, because of inadequate relationships with leaders of other departments. Barriers, not only personal, make co-operation difficult. In any organisation, there are several role conflicts; configurations of personalities, education and tasks which must be overcome for effective co-operation. One example is the conflict of roles between accountants and engineers. The desire and temperament of the engineer is to design and install the perfect plant, whereas the accountant is only concerned with efficiency relative to its cost and sometimes, in a capital rationing situation, only its cost. 'Ihe frustration of one relative to the other, and the distrust of one relative to the other, engenders a situation not conducive to easy co-operation. Any new accounting or engineering leader has to find a solution to this conflict or, in terms of the enterprise, fail in his task. There are certain situations in the business organisation which undergo more frequent and more intensive periods of stress than others. In such a situation~ a leader who is effective in an environment which is highly skilled but routine can be a failure with the resultant loss of power over - 96 - his group. It usually takes only one collapse of the group in a stressful situation for the leader to lose all power over subsequent events in the group. As Torrance points out, the ability of the leader to inject flexibility into his group, in terms of planning organisation and member skills~ usually can overcome stressful situations. Possibly the greatest change in a leadership variable, over the last two decades, is that of the follower. The education explosion has created a specialist elite, who are skilled in a wide variety of technologies. With business convinced in the advantages of science, and thereby not only giving it an important position in the formal framework but voting large sums of money to it, branches of science are becoming wider and wider. Resulting from such specialisation the efficient unification and co-ordination of such experiences into the whole organisation, becomes more difficult. The complexity of other functions, such as engineering, accounting, ~inance,personnel, and legal, have followed a similar trend with resultant specialisation of skills. The leader in such a situation if he is, as Follett states, to unite group experience, must be able to judge the worth of such skills. nierefore, he cannot remain content with a smattering of knowledge in all branches, but must develop - 97 - and continue developing (for knowledge 1s dynamic) his own technological skills. Group interaction in the business organisation is therefore not only a social function, but a technological one as well. The task of management in reducing the uncertainties of business, and competing in a highly sophisticated society, has created the need for a leader who c~n suocessfully fulfill the needs of the group, relative to individual social wants. and the demands imposed by technology. 'Ihe increasing size of the business enterprise and tb.e deb_mnanis1ng aspects of form.al organisations, as argued by Argyris, both tend to anesthetize the individual into a general organisational paralysis, wh.ich stultifies growth, both individual and group, and operates against the effectiveness of the organisation. A task of the leader is thus to overcome these tendencies and to marry· individual effort to that of the group, whilst encouraging individual initiative and creativeness. To do this, the leader must practice leadership by persuasion, rather than lead.ership by coercion. To the modern ed..uca ted person whose "zone of indifference", relative to authority acceptance, tends to be narrow, communication by persuasion will be more readily accepted and acted upon. Coercion may indeed facilitate speedy action, and may even be a successful - 98 - technique in a group whose members have a wide "zone of indifference"; but initiative will almost always need.. to emanate from the leader and there will be little co-operation J upwards making integration of skills and experience vi~tually impossible. It is significan.t, that the lessons that can be learnt from examining the organisation of the military and the Roman Catholic Church, focus on the use of staff. 'lhe framewor~ of centralised headquarters and decentralised field staff has been followed by many of the large businesses, especially in a divisionalised. structure. The rule of St. Benedict, although unreal in the business situation, has a counter part in the environment of the business committee, particularly the top management executive committees. Free interchange of views and information. allows every member to be heard and to contribute to the ultimate decision. In such an environment, wb_ere hierarchy and status are left in the corrid.or, if allowed by the chairman, particular problems will force the emergence of different leaders. , w·1th the d_ifficulty of co-ordinating specialist functions, business is discovering an easy way out in their use of committees. There are two grave problems however, an all 4 - 99 - too frequent tendency to relax into a quort1.m of discussion, and a lack of accountability of decision-making emanating from a connnittee. Setting a formal framework lays an important part in the leadership process. Follett 1 s point, that the task of .the leader is to show men what to do to meet their responsibilities, emphasises this importance. '!he difference between successful leadership and effective leadership is that, in the latter, there is task accomplishment. The object of structuring an organisation is to separate the tasks,responsibilities and autho~ity, so that individual task accomplishment is enhanced and is integrated into the whole organisation. Therefore, part of the leader's task is undertaken by the formal structuring process. The formal framework, as mentioned above, is a process whereby tasks are established. It is not a process in which individual needs and aspirations are identified and structured. This surely is the task of the leader in modern business -- to identify his followers with the organis ation, to subject their desires to that of the organisation and yet enhance. their "self actualisations.'' - 100 - CHAP'JER VI. COLONIAL SUGAR REFINING CO. LTD. ---- A BUSINESS ORGANISATION. (A) DEVELOPMENT OF THE COMPANY. A partnership of unlimited liability, the Colonial Sugar Refining Company was formed in January 1855 to take over the interests of the Australasian Sugar Company, which 93 had been formed in 1842 "to carry on the Trad.a or Business of purchasing and refining raw sugar, the sale of sugar whether raw or refined by the company, the sale of molasses, or the distillation of such molasses into spirits, the manufacture of Animal Charcoal, Ivory Black, Soda, Sal Ammoniac, Black Ink, and such other business connected with the general objects of the company as the Directors shall think fit." Edward Knox, ex-general manager of the dissolved company, led the operations of the new company. Born in Denmark of Scottish parents, Edward Knox, emigrated to Australia to seek 93. Terms of the deed of settlement of 31st March, 1842, contained in South Sea Enterprise, a book describing C.S.R., as seen through the eyes of some senior officers of the company and edited by - A.G. Loundes, Angus & Robertson, Sydney, 1956, P• 12. - 101 - his fortune as a pastoral1st. His interests lay in business however, and in 1843 at the age of 24 he took over the management of the Australasian Sugar Company. During the 1850 1 s, even though the market for refined sugar was growing with the rapid increase in population of the young New South Wales colony, the raw sugar refining business was highly hazardous. Great distances between suppliers of raw sugar and the colony, coupled with unreliability of transport and highly fluctuating prices, added up to a highly risky undertaking. Nevertheless, the profits were such that in 1856 a 50% dividend was declared, indicating great optimism for the future. But in 1858, a global fall in raw sugar prices, together with a severe depression in the colony, brought the company to its knees. With the assistance of English capital, Knox averted disaster but the experience had a profound influence on his future actions, and on the policy of the c0Wpan7. 94 ''He was faced with ruin and he had been bitterly criticised for paying such a large dividend in 1856. His fortune and his reputation were in jeopardy. Before he left for England Knox had sold nearly £20 1 000 of c.s.R., stock, on which he had guaranteed to double any deficiencies 94. iold., P• 19. - 102 - in the company's dividend. below 20% for the next five years." An expansion of the European beet sugar industry, which caused the world wide drop in raw sugar prices, also enabled merchants to dump large parcels of refined sugar onto the local market. Ironically enough, one b.undred years later C.S.R. were to experience the very same conditions with their newborn industrial chemicals venture. In both cases, the results were decidedly injurious to profits. One way of partly overcoming these problems was to produce the raw sugar. Following the establishment of the first sugar car.)plantations in 1863, and the resulting mild boom in cane growth and raw sugar milling, Knox decided to venture into milling, on the basis of large centrally situated mills drawing their supplies of cane from neighbouring indep- endent growers. 'Ihree mills were built on the Macleay and Clarence rivers and, to gain first hand experience, Knox himself spent a whole season on one of them. Sugar milling on thisacale was a new industry in those days, the previous - plants being little more than one man village units. After several difficult seasons, milling proved such a profitable business, that by 1894 c.s.R. had opened seven mills (on the N.s.w. model) in Australia and four in Fiji. - 103 - In 1880 E.W. Knox. one of Edward Knox's four sons, succeeded to the position of general manager. Whilst this position meant that E.W. Knox was nominally the chief executive of the company, Edward Knox still largely cohtrolled the company as chairman of the board or directors. However, it was in the first few years of E.W. Knox's general managership that much of the expansion into milling took pla_oe. Between 1880 and 1885, (a) the mills on the Clarence were merged into Harwood Mill, (b} Broadwater and Condong on the Richmond and Tweed respectively began crushing, (c) Homebush Mill 1n the Mackay district, Victoria Mill on the Herbert and Goondi Mill on the Jonstone river began operating. (d) To supply these three Queensland mills (c) with cane, large tracts of land were cleared of jungle and plantations opened. (e) Nausori Mill and Rarawai Mill began crushing in Fiji. (f) Chelsea Refinery in Auckland, New Zealand, began refining. - 104 - In this period, refining was regarded as the company's main objective, the development in mills being a move to stabilise a source or supply of a rather unstable raw material. The refinery, operated by the Australasian Sugar Company at Canterbury, was not taken over when the company was formed, but two other refineries in Sydney, built in the 1840 1 s by independent entrepeneurs, were purchased, --- 11Br.isbane House" on Parrama tta Road and "Bowden' s Works" in 95 Liverpool Street. "In those early days the company also bought Robey's refinery on the north shore of Sydney Harbour. '!'he cost of "putting down opposition" loaded the company with debt for many years and burdened it with several unproductive properties." Two years after commencement of business, Knox moved into the colony of Victoria and, with the backing of a number of Melbourne merchants, formed an associate company, the Victoria Sugar Company. A year after Joshua Bros. had built I a large refinery at Yarraville, the Victoria Sugar Company's refinery at Sanr1dge burnt down, and the subsequent taking 96 over of the Yarraville refinery achieved ''elimination of competition and continuity of production in one coup." In 95. ibid., P• 43. 96. ibid., P• 43. - 105 - 1887, Knox took over the remaining 50% of shares of Victoria Sugar Company and incorporated the partnership as a company with limited liability known as the Colonial Sugar Refining Company Ltd., commonly called c.s.R. In 1883, Knox went fttrther afield and formed the New Zealand Sugar Company, with one-third shareholding of looal New Zealand interests. Five years later, this minority interest was bought out. New Zealand Sugar Company's "Chelsea" refinery at Auckland refined raw sugar milled in Fiji. In the early 1890 1 s c.s.R. expanded its refining activities into South Australia with the Glanville refinery, and into Queensland with the New Farm refinery. c.s.R. had now five large modern refineries in operation; "Brisbane House" and "Bowdens Works" had been closed down and a new refinery at Pyrm.ont had commenced operations in 1878. In Victoria and Queensland~ there was some degree of competition in refining but, in the period 1870 to 1907, all except one of these companies were either voluntarily dissolved, or taken over by c.s.R. '!he exception was Millaqu1n refinery, which was established in 1882 in the Bundaberg district. - 106 - 97 "Af'ter the purchase of the Poolman refineries in Sydney and Melbourne in 1907~ c.s.R. shared the Australian refined sugar market with only the Millaquin refinery in Bundaberg, but this situation involved continual watchfulness and appropriate adjustment of prices to keep out large imports. At that time Australia had little secondary industry and the refineries of c.s.R. stood out as impressively large factories on the skylines of the capital cities. '!he company was the biggest industrial organisation in the Connnonwealth." The process of "doing away with competition that has proved troublesome" was not the device of a large inefficient organisation, with excess liquid reserves, but the economic device of an efficient enterprise, battling to achieve economies of scale in a capital intensive industry. In fact, in the report of the 1912 Royal Connnission, the 98 Commissioners "rejected proposals for reviving competition in refining because they considered it would reduce efficiency." Efficiencies were experienced at the refineries and mills, not only by reason of their size, but by strict detailed scientific control. 97. ibid., P• 45. 98. ibid., P• 47. - 107 - Due to his ten year personal experience at sugar mills, E.W. Knox came to regard the measurement of efficiency not in terms of profit, or a profit relationship to capital, but in terms of sucrose content of cane-~ essentially a technical approach. Sugar cane contained. a certain content of sucrose and the mill achieved 100% efficiency if all that sucrose was extracted. Although his mill managers assured. him that they extracted all there was possible of extracting, E.W. Knox was not satisfied. In 1881, and later in 1883, he engaged two expert sugar chemists, a Scot, T.O. Walton and a German, G. Kottmann, to evolve methods of sampling and analysis of cane and intermediate products. From the efforts of these two men, and fully supported by E.W. Knox, a system of chemical control, based on scientific analysis, was implemented which subsequently gave C.S.R. a long sustained advantage over Australian competitors and assisted in combating the threat of Im.ports. By 1914, c.s.R. had grown to dominate the Australian, New Zealand and Fiji sugar industries; in fact, as early as the 1880 1 s, it had adhieved this position. As the main refiner C.S.R. gave the industry an assured outlet ror its product at world sugar prices, thereby introducing an element of stability by an effective form of organised marketing. As a miller, it produced approximately 40% of the total Australian production. - 10 8 - Owing to the wartime inflation of the world raw sugar price 1 in 1915 the Commonwealth Government, in association with the Queensland Govermnent, placed a prohibition on import and exports and became responsible for overseas procurement of raw sugar, in sufficient quantities necessary to satisfy the home demand. Legislation was passed in Queensland whereby all raw sugar produced in that state was acquired by the goverrunent. At the same time, a controlling body, called the Central Sugar Cane Prices Board, was formed, whilst the federal government set about fixing prices to be paid to the miller. After the war, government control was retained and in 1923 the Queensland Government took over the responsibility of controlling the industry. 99 "'lhe position then created has changed little in principle or method. Broadly the Commonwealth agrees to maintain an embargo on sugar imports, thereby reserving the whole internal market for Australian raw sugar, provided that the Queensland Government, acting on behalf of the raw sugar industry, sells refined sugar to the Australian public at prices agreed between the two governments to be fair." 99. ibid., P• 188. - 109 - Much of the marketing activities of c.s.R. were not greatly affected by the new control. As far back as the 19th century, c.s.R. had contracted to buy the Queensland mills output for a price based on the average price of refined sugar undertaking to transport from the mill port and to finance advance payments. A similar system is now in operation. The Queensland government effected control of affairs outside its state by a contract with c.s.R. 1 whereby the company agreed to sell them N.S.W. produced raw sugar, to refine the sugar required for Australian demand and to supply the Australian public with refined sugar at a price agreed between the Queensland and Commonwealth governments. 100 n'lhus began the Australian raw sugar marketing pool, controlled by the ·-Queensland government through its Sugar Board managed and operated by the Colonial Sugar Refining Company. n A tight control on cane and raw sugar production is effected by the Central Sugar Cane Prices Board through its control of individual g~ower cane acreage and quantity of sugar and the "peak" quota system on mill production. 166. iofd.~ P• 190. - l].0 - With the saturation of the sugar markets in Australia, Fiji and New Zealand, C.S.R. looked for other areas of expansion. The development of sugar industries in other countries, after examination, was not considered feasible, so the company looked to its sugar by-products. Megass, the fibre which remains after the sugar cane has been crushed, and normally used as fuel in mill boilers, was considered an ideal base for a pressed wallboard. After pilot plant trials had been undertaken, a factory at Pyrmont was constructed and in 1939 it began production of the low-density wallboard known as "Caneite". By this development, C.S.R. found themselves in an industry which cormnonly experienced severe fluctuations, so to reduce the effects of this cyclical demand for any one product, other building materials were produced; "Gyprock" wallboard, a ~ypsum plaster based product; "Timbrock" a pressed hardboard of basically 4ustralian eucalyptus; 11 Fibrock", a product using white and blue asbestos; fibrous plaster and other plaster products; vinyl floor tiles of basically polyvin"jrl chloride plastic. Masonite corporation, an American based hardboard competitor, was tal{en over in the 50 1 s, and in 1964 C.S.R. branched out into another field of the building industry by taking over, in conjunction with Blue Metal Industries, the large, successful Ready Mixed Concrete. By - 111 - the end of 1965, C.S.R. were producing building materials from twenty seven factories -- a big development from the original utilisation of megass by-product. c.s.R. early recognised the value of the other main by-product of the sugar industry, molasses. As early as 1873, a distillery had been operating at Harwood mill producing industrial spirit and rum. Just after federation in 1901, the distillery operation moved to Pyrmont where a large plant was erected. During the second world war, when large quantities of alcohol were required as a petrol additive, a second distillery was erected at Yarraville in Melbourne. The requirement of molasses at Pyrmont and Yarraville meant the movement of this material from the far distance production areas of Queensland, N.s.w., ahd Fiji. Special ships were built for the company, and currently the company operates three vessels for this purpose and for the movement of ethyl alcohol. To utilise the ethyl alcohol derived from molasses, the company decided to enter the organic chemi.cal industry, and in 1939 did so by taking over, in conjunction with the Distillers Company of U.K., Robert Corbett Pty.Ltd. In 1953, a second factory was opened at Rhodes in which ethyl alcohol was used as a feedstock for acetic acid, acetic - 112 - anhydride, celJ.. ulose acetate flake and moulding powders. The Lane Cove factory of Robert Corbett was merged into the operations of the Rhodes factory, and a subsidiary company, c.s.R. Chemicals was formed, ownership being shared 60% to c.s.R. and 40% to Distillers. 'Ihe Lane Cova factory, subsequent to the takeover, was gradually expanded and to-da7 produces acetic acid, phthalate plaaticiser,acetate esters, ace-tone and butanol and metallic soaps, most of which are derived either directly from molasses or indirectly from molasses through ethyl alcohol. In the late 1950's, c.s.R. Chemicals moved away from the molasses base by opening plants in the petrochemicals complex at Altona, Victoria. For this venture, the company formed joint companies with Dow International and B.F. Goodrich Chemical, both of u.s.A. At ~Ith.odes, C .s.R. chemicals is currently const:ructing a synthetic alcohols plant based on petrochemical olefins and it has recently announced plans to erect a plant to produce phthalic anhydride, both projects again tending to move the chemical activities away from the original molasses base. The 1960 1 a has seen a diversification of interest completely away from sugar. Mini·ng looms high in these - 113 - developments with minority shares being bought into companies in oil exploration, iron ore and bauxite mining. Interests in television and a maeadamia nut project completes a picture of diversification far reaching in scope. (B) THE ENVIRONMENT. 101 "Many large companies to-day are in a relatively early stage of development and as institutions they are still, as Emerson put it, the lengthened shadow of a man." In many respects~ C.S.R. can be included in this category. Whilst it can rightfully be argued that a company, after one hundred and eleven years of existence, is not in an early stage of development, relative to other younger companies, it certainly appears that recent developments have indicated a growth pattern which could move the company well away from its sugar origins. Be that as it may, the more important relevancy of this quotation, to the case of c.s.R. is the relative sophistication of the institution in its development subsequent to the Knox era. For a company to be led for seventy-eight years by father and son certainly attested to the dominating leadership of 101. Crawford H. Greenawalt, The Uncommon Man, McGraw-Hill, New York, 1959, p. 9. - 114 .. the two men, and their powerful influence on the turn of events experienced by the company. Even though E.W. Knox retired from his position as General Manager in 1920, he still greatly inf'luenced the decisions of succeeding general managers until his retirement in 1933. 102 "Although W.H. Rothe took over the title Knox had held for forty years he was subject to Knox 1 s close oversight and he could not, in the circumstances, take over his full authority. When W.H. Rothe was succeeded in turn by H.11. Dixon and P.H. Goldfinch • • • • • • they also were more subject to the board and to the influenoe of expert advice. 11 It has been stated of E.W. Knox that he was veey conscious of his father's example in both character and achievement, 103 and although impetuous and autocratic. "he surrounded himself with able lieutenants, who supported him with the greatest loyalty•••••• but he was not disposed to let his officers assume they were his equals when it came to a decision." The influence of both Knoxs bas, in many ways 1 created a tradition oriented philosophy in the company. 102. Loundes. op. cit., P• 53. 103. ibid., P• 26. - 115 - This approach is encouraged by the system of staff officer elite that has been operating since before the turn of the century. Basically a division between weekly paid and monthly paid personnel, the difference in the social structure of C.S.R. is very wide indeed. In the sugar mills, staff houses are grouped in a separate block from the workers houses and are larger, and better equipped; staff officers and families make up a closed group to which outsiders look for authority and superiority. Geographically c.s.R. activities are spread very wide. Based in Sydney the company operates refineries in every major city in Australia and New Zealand except Hobart; operates seven mills in Australia from as far north a• Cairns in Queensland to the Clarence River of N.s.w. in the south; operates four sugar mills in Fiji; operates twenty-seven building material factories in Australia situated in all major states except Northern Territory and Tasmania; operates sales offices in all major marketing centres of Australia and New Zealand. This creates a demand for personnel that only a well organised staff policy can supply and due to c.s.R.•s policy of central recruitment and training, calls for great mobility in their staff. This policy of central recruitment and training arose out of the need to imbue a "service" philosophy into the staff, essential for greater mobility, and a desire to train staff in skills for which outside - 116 - training institutions were not adequately organised to supply. The introduction of scientific control in mills and refineries by implementing methods of sugar balance and heat balance required skills then not available in Australia. The company thereupon instituted a training scheme which produced chemical technicians of a standard not then in existence in other sugar based firms. This training centre was. based in Sydney, as were other functional departments which were used for the training of other required skills. Sydney therefore became the major recruiting area of ~~e company. Young men were engaged on leaving high school as cadet officers and were trained not only in essential skills but also in the methods, policies and procedures of the company. '!his is a recruiting and training policy, similar to a number of other large companies, but C.S.R. differed in that they recruited mainly from private schools, schools which had a high social standing and were protestant in religion. To be a staff officer in c.s.R. was the objective of a great number of private school boys and in fact there were usually more boys than jobs available. With such conditions, it became a question of "c.s.R. staff contact", which meant that a boy was eitl1.er "in" or 11 out 11 depending on the strings that could be pulled on his behalf. Sons of c.s.R. staff were given high priority and friends, relations and sons of the social elite were also given some priority. - 117 - Coupled with this, the inter-family marriages, that resulted from the closed mill staff communities, meant that, over a period of years., c.s.R. became, in more ways than one, "one ' ' big family," and by many counts appeared to be a happy one. In such a. setting, arose tl1.e concept of "c .s.R. staff". A concept which socially separa. ted the "men fro1n the boys" and created a leadership elite. An appointment to this elite, was essentially a permanent one, depending on the appointee moulding himself into the organisation and accepting the rules of the service. Security played a very large part in the motives of the young man entering the service. He was assured that the company would look after his interests and welfare, and that only for extreme misdimeaners would this security be in jeopardy. '!he company trained him in skills necessary to enhance his career with the Company, paid him a salary which was above average, and provided allowances, such as the benefits of a pension fund and a free house if stationed at mills. When independent institutions were formed to teach ihdustrial skills, C.S.R. did not avail themselves of them, preferring to keep to their own in-company training. The result was that such specialists were highly qualified for work within c.s.R. but unqualified for positions outside the company. After the 1939/45 war, this policy was gradually - 118 - changed to one where university education was encouraged for a high proportion of cadets, on the basis of approximately two years. part time followed, on adequate performance, by the balance of the course full time. In a comparatively short period, particularly during the 1960 1 s, this policy has created a veritable small army of young graduates who are thirsting for promotion opportunities and whose security lie in their degree, rather than in the company. In consequence, c.s.R. have bad to revise their concepts of permanent employment and responsibilities to individual welfare for this educated group, and, as a result, a high turnover rate of graduates has been experienced. Those who remain will, in the course of their service with c.s.R. experience the veiled conflict of those who desired, but were deprived of university education during their pre~war cadetsh1ps. It is too early yet to observe the effect of this tertiary educated group on the closed social structure of the staff elite, but it is not too difficult to surmise that a process of regrouping under different criteria is taking place which will tend to make the organisation less flexible tban before. 104 "It was not till I visited Europe in 1885, and saw there to what extent the supervision of industrial work was 1o4. ibid., P• 409. - 119 - passing into the hands of those having chemical knowledge, that any large portion of practical work was entrusted to members of our chemical staff. I sought, however, authority for such a change, and during the past two or three years have gradually as chances offered. transferred to men who were trained chemists or analysts the management of a large part of our manufacturing operations." Th.us wrote E.W. Knox in.1890 of the organisational emphasis, technical specialists, particularly chemists, were being given in the company. Not that this process was painless, Knox it appears had to be firm in giving direction to mill management of this new 105 role. In a letter to mill managers, Knox stated "I therefore wish that to the chemical staff be entrusted the oversight and to a certain extent, the control of the manufacture from the rollers to the packing of the sugar. The managers will, as hitherto, have the regulation of the work entirely in their hands•••••• but they will be expected to give effect to any reaso!1.~~l1le requests of the chemists and be guided by their advice in all questions rela. ting to tl1e treatment of the juice, sugar and syrups." Whether for tl1.e purpose of emphasising this new role or not, Knox gave to this position the title of "Mill lv1anager" as distinct from the - more senior "Ivianager of the Niill". This terminology has persisted to the present day, and is most confusing to the 105. ibid., P• 37. - 120 - unenlightened. The remaining section of the mill plant, the crushing train, is similarly the responsibility of the mill engineers. The results of these moves on the organisa- tion was that chemists rose to fill senior management posts in the mills and the millihg divisions. '!his management by technical specialists has ter1ded to put tecl1.nical excellence very high on the company's priorities. In fact, C.S.R. a:reextremely proud of this technical efficiency, and have claimed that because of it have been able to weather the effects of the severe depressions of the 1890 1 s and 1930 1 s. In the Royal Commission of 1912, the commissioners stated 106 "we do not hesitate to express our admiration of the economic efficiency which characterises every branch of its business which has come under our notice." The economic efficiency mentioned was due mainly to technical excellence. Other functional specialists, those of marketing and accounting departments have not experienced the sa~e managerial success as their chemical and engineering colleagues. 'lhe expansion of the building materials division, and the interna tlon_al raw sugar marketing activities, bas placed~ more emphasis on the marketing function since the end of the 1939/45 war, and the trend is for further development in this area. Even though the sugar industry is fully protected. by controlled b.ome price and import embe.rgos --, the ioS. ibid., p. 47. - 121 - recent increase in the consumption of synthetic sweeteners has increased the need for further market promotion in refined sugar. C.S.R. 1 s innovations during the 1880 1 s in scientific control of production, emphasised. to Knox that scientific research should be fostered in the company. Not only on production efficiencies, but also in farm tech.niques, agronomy., the reaea1,cb. for sweeter canes and the eraa_ica tion of pests, science bas played a lead.ing part. The company, wishin.g to u.se the in.no,,a tiona from such research. to increase its competitive strength, kept much of it confidential and over the years this habit of secrecy spread to other areas of the company, aided and abetted by a policy of routing mail through the general manager. '!his has effed.ted.. the communication both within the fompany, and ems.nating from the company to outsctders. '!his seJ_f imposed. isolation appears to be a feature of more than one large company in Australia, as a financial ed.i tor of the Sydney press was heard to remark that for all the information that is fed to the public, the staff of C.S.R. and The Broken Hill Proprietary Co. Ltd. might as well work in monasteries. Whetber due to its size or to the smell of monopoly which has followed c.s.R., the company has always been "fair game" for the politicians. It appears that the public were all too ready to believe the ao-called iniquities or c.s.R. '!his political licence CHART 2- ORGANISATION OF c . s .R. co. LTD. BOARD of DIRECTORS TOP GENERAL MANAGEMENT SUGAR DISTI LLERIES . BUILDING GENERAL ADMINI STRATION IN HEAD OFFICE SUGAR MANUFACTURING MARKET ING MATERIALS DIVISIONS DIVISION SEN I OR SPECIALI ST OFFICERS DIVISION DIVISION FUNCTIONAL DEPARTMENTS GENERAL MANAGEMENT MANAGEMENT AND Association with General SECRETARY CHIEF DIRECTOR OF & ADMINI STRATION TECHNICAL ADMINISTRATION Management CHEMIST RESEARCH sugar industry in Head Office Finance IN HEAD OFFICE in Australia Production Insurance Central Lab. esearch Labs. eduction & ·Account i ng Engineering Production -Chemical Process rocess Control Control Legal (Specialist (Pla~t Organisation of Development ( Chemical Services R h Planning & Control . esearc Accounting ngineering Commercial Investments ( & Marketing, Planning (C ent re Marketing Policies Shares Engineering -Planning Financing and - Planning Sales - Control of Shipping of all Taxation -Control of Plant Operation Marketing A ustralian & Fiji Chief Plant Operation Design - Forecasting Prov. Fund Chief Technical raw sugar White spirit En ine - Construction Field Officer -Design Methy'd spirit - Sales (Operations (Speciali st -- Promotion (Research Head Office Rum (Eng'r'g Ser vices Agricultural -Construction Liquid & Solid nvestigation Sales Data (and Planni ng Research & Investigation & Development -- '- London Office Co nd Development Management Processing Advisory Accounting Control 2 (Design Drawing . Service 2 Distilleries (Office 3 Co2 Plants (Engineering Experiment AUSTRALIAN Chief .. Distribution of (Workshops - Stations (3) MILLS GROUPS Refined sugar c.s.R. Ships Accounting (Engineering Q'land-4- Mills in Australia and Genetics N.S.W.-3Mills 2 Vessels (Control .._ (Purchasing New Zealand FIBREBOARD GYPSUM PRODUCTS Pathology Technical - Agronomy FIJI MILLS Cane-ite Gypsum Mining Budgeting Market Research . s .R. Chemicals Library Agriculture Timbrock Plaster Milling 4 Mills Pty. Ltd. Central Masonite Plaster Boards 1 Rice Mill Packaging ( 6o% C . S .R Co Ltd Accounting Chief Staff 40% Dis tiller s Cfficer 1 ~ Interna l Sales Company Ltd. INERAL FIBRE ,__j _F_l_o_or_T_i_·l_e_s_ · ·_ ___, REFINERIES in L Audit Chief Ext ension sbestos Mines Head Office Subsidiari es Cos t i ng Industrial work . Capital Cities sbestos Prods Pyneboard l Officer in Australia 5 Capit al Cit y Rockwool I 12 Stations and N.Z. Br anches I nsula ting Chief 6 Fact ories Materia l s Commercial Services Publicity Customs Officer 18 Factories Purchasing St atP R.· r o,intn· •. c:: t r, ~· p" . ,:.: \;- - 122 - E.W. Knox found bewildering, for it was unthinkable to him that once he had submitted an explanation at a shareholders meeting, anyone should question his motives. 'Ihis experien.ce undoubtedly reinforced.. the policy of minimum connnunication to the public, a section of society 107 he d.isdained. "What the company wants most is to be left alone, so long as its actions are in conformity with the law." ~e feeling of subjection of individual action to that of the group also contributed to with-holding information from those who were not members of the group. '!he C.S.R. staff "family" atmosphere was end is a powerful uniting and protective bond. (C) THE FRAMEWORK. The formal organisation of C.S.R. includes eight operating divisions, with assistance from eleven functional departments, each division reporting to the "general management" group. At the head of the general management group stands the General Manager, who is responsible to the board of directors for the administration of the company. A very much simplified version of the organisation of c.s.R. is given in chart 2. '!his chart, which is largely a summary of c.s.R. activities, is used by the company to lo?. ibid., P• 4?. - 123 - show new staff the extent of C.S.R. operations, and the separation of the manufacturing and marketing divisions f:rom the functional departm.ents. A disadvantage of this chart, from the point of view of organisational analysis, is that it fails to show the relationship of those "staff" departments to the manufacturing and marketing 11 11ne" divisions. What it clearly shows, however, is the degree of centralisation inherent in the structure. Not only do the heads of manufacturing and marketing divisions (referred to as the operating divisions) report to what is known as "general management", but so do all the functional depart- mental heads. 'Ihe Board. consists of five "outside" directors ( not C.S.R. staff), one or whom is the chairman. 'lhe General Manager and the Deputy General Manager are tb.e only members of management who are on the board, the General Manager having the power and authority of the chief executive officer. The Board's main function is to approve capital expenditure on a budgetary system and ind.ividually approve all considerable expenditure. Based on recomendationa of management, the board decides on expansion and new ventures and decides on general policy. As it takes little part in the organisation, planning, controlling or staffing of C.S.R. its power lies in its final sanction of approval. Whilst it uses this very considerable power judiciously, its effect - 124 - on the company as a small segment of society, the structuring of its organisation, the departmental and individual interrelationships, are comparatively minor. In this regard, the gen.eral management of C .s .R. is supremely powerful. A feature of the organisational structure of C.S.R. is the absence of the chief executive officer at the apex of the hierarc:by. Although the general manager is the highest managerial officer, reporting to the board, and as such is ultimately responsible to the board for the operation of the company, this responsibility is not isolated in the official structure. Rather, is this responsibility diffused in a "group" concept of top management. '!his group is made up of th.e Depu.ty General Manager (also on the board), two Assistant Gen.eral Managers and three Senior Executive Officers. In an address given to the New South Wales Regional Group of the Royal Institute of Public Administration in July 1957, J.M. Dixon, then Assistant General Manager, commented on some aspects of management and organisation in c.s.R. In this e.dd.ress which was later published- in "Public Administration" he disclosed the function of the general management group. CHART 3 ·C. S. R. GENERAL MANAGEMENT STRUCTURE A Deputl:J General Manaaer Ge.ne-rol Managers Senior Executive Officers B General Mano qe...- De-put~ General Manoqer- I General I, Managers I SeY"'ior Executive Of{icer.s - 125 - 108 "each • • • • • • takes a supervisory and policy interest in two or more main areas of the company, but not to the extent of managing divisions or functions in those areas, except in periods of transition. They, with the General Manager, watch to see that longer-range planning is being done, that the operating divisions keep on seeing the wood as distinct from the trees. They pay particular attention to speed of action and co-ordination, to the pursuit of common policies and practices amongst divisions but only as far as seems appropriate; no special importance is attached to uniformity for its own sake, but its administrative convenience is not disregarded. Staff development, aided by the Staff Department, is an important preoccupation of the General Manager and those who assist him closely, because it is almost true to say "If' the men are.the right men the health of the company is good". 'Ihe obtaining of proper use and ad.. vantage from the specialist services and functional departments that do not belong to particular operating divisions requires a lot of care and attention." The individual interrelationships of this group are little known as far as outsiders are concerned, and one can only conjecture as to how the group is structured. Chart 3 postulates two different structures in this group. 'lhe titles given to each of general management implies a structure as in part A. This rather inflexible, unwieldy framework no doubt takes effect to seniority, b1.1t from Dixon's staten1ent above, it would. appear that the structure approaching part Bis closer to reality. Dixon goes on to 108. J.M. Dixon, Management and Organisation in the Colonial Sugar Refining Comp~ny Ltd., appearing in Public Administration (Syd.) Vol.XVI, No. 4, (New Series) December, 1957, P• 233. - 126 - say that the person occupying general management positions 109 "have offices adjacent to one another and informal exchange of views and ad hoe discussions are virtually continuous; in c.s.R. this is considered very important. '!he senior men of the division and functional serviaes can usually get immediate decisions from the General Manager, or from one of this group, for urgent matters, for interpretation of policy, for matters which overlap division or functional departments." It is apparent that leadership in this senior group operates in an environment which is more free of constraints such as established hierarchies, status, and communication barriers than any in c.s.R. Individual skills and strength of personality would have a great influence on ad hoe interaction, for each individual is free of the urge to empire build and to create a front to the rest of the organisation. Written position descriptions, in which a job is spelled out relative to the task,. and line and staff relationships, are not in existence, though a subsidiary company c.s.R. Chemicals, is beginning to develop their use. In some corporations, the absence 0£ these descriptions would TI59. ibid., P• 233. - 127 - create a good deal of confusion and conflict, culm.inating in the break down of the organisation. In c.s.R., however, this potential confusion is reduced by the results of the policy or recruitment and early training. Recruiting largely straight from school, part of the junior education is concerned with gradual acclimatisation with respect to tasks, relationships and hierarchy. 'Ihis enables the staff officer, not only to recognise the general function of various departments, but teaches him to exist in such a settihg. 'Ihis may, or may not, be necessary depending on personality; however, every organisation bas its peculiar features which makes individual adjustments essential. Whilst diversification has taken a leap forward during the 1960 1 s, the major business of c.s.R. remains that of sugar. But it is a business which is closely controlled by government and subject to industry wide long term agreen1ents covering the purchase of cane, the major raw material and determination of sugar price. With seven mills in Australia and four in Fiji, all producing the same product from a similar raw material; with a policy of staff mobility for development of skills and leadership training; with a desire to standardise on the best methods of production available, it was obvious that a system of centralised functional authority was going ART - EXAMPLE OF ORGAN IZATION OF OPERATING DIVISION AUSTRALI AN SUGAR MILLS - 7 FACTOR IES GENERAL SENIOR SPECIALIST TOP GENERAL MANAGEMENT CLOSE ASSOCIATION OFFICERS AND . r--- OF THE COMPANY ~- --7 WITH AUSTRALIAN AND ----1 '------.------' I FUNCTIONAL DEPTS. : + ~------SUGAR INDUSTRY DIVISIONAL IN HEAD OFFICE : GENERAL MANAGER : AND CANE PRICES - MANAGEMENT L______AUSTRALIAN MILLS ~------_; BOARD (CHIEF INSPECTOR) I I I I TECHNICAL INSPECTING INSPECTING INSPECTING CHIEF TECHNICAL AOMINISTRATION ENGINEER CHEMIST ACCOUNTANT FIELD OFFICER OF DIVISION I (PROCESS) /AGRICULTURAL) fROM HEAD OFFICE \ \ RESEARCH DEVELOPMENT I SECTION --- FACTORY """'-.,.,.,.,,,...,._,.,,._...,..,_-""""""',..,,,..,,.,_..,..,.,.,..,.,..,,..-.,...,..,.,..\,L..,c.. MANAGER *"1/:::::~::;::;:;;:~~:;;:::;:::;:;;;;:;;;:~;::z~ I MANAGEMENT .P OF MILL t - -- - I J • ~..J'- I '-\., --- ,..r' I --"'1:r--,- ..,------...... ------1------.....------,• ....--____,•.___-../ + ,.., + ... ) CHIEF MILL CANE ACCOUNTANT TECHNICAL ENGINEER MANAGER INSPECTOR (OFFICE FIELD OFFICER DEPARTMENTAL ( PLANT (MANUFACTURI NG (CANE SUPPLY, ORGAN IZATION, (AGRlCULTURAL MANAGEMENT OPERATION & PROCESS) LIAISON WITH PAV, COSTING, WORK MAINTENANCE: FARMERS, SlORES,ACC0UNTS CANE BREEt>UiG 1 ' CAHET RANSPORT, CANE DISEASES, CANE PAYMENTS, AGRICULTURAL CONTROL OF ~ETMODS ) CUTTERS.) I ,. ,. t ,, .. SUPERVISING SUPERVISING FIELD OFFICE EXPERI MENTAL £HGINEERS CHEMISTS STAl=F= STAFF ANO EXTENSlON SUPERVISION t ... TRADESMEN FACTORY OFFICERS ANO OPERATIVES SKILLED MEN - 128 - to be essential for efficient operation. Chart 4 sets out the organisation structure of the Australian Milling Division, and clearly shows the superimposing of a head office "functional" type structure over a similar functional structure for individual mills. 'lb.is structure equates closely to tb.e orthodox divisionalised structure based on geographic regions as mentioned in a previous chapter, and as shown in chart No. 1. Reporting to the divisional general manager (official title "chief inspector" -- a c.s.R. tradition) are the divisional engineer, chemist, accountant, agriculturalist and seven managers of mills. The Manager of each mill bas reporting to him the mill ct1emist., ( official title n1v1111 Manager" --- a C .S .R. tradition), engineer, cane 1pspector, accountant and agriculturalist. 'lhe only function not represented officially by a divisional head is the cane inspector. In reality, as most managers of mills are experienced in cane inspecting, and as one of the main functions of his position is cane grower liaison, he adequately represents this function at divisional level. Cane inspecting is different to other functions, in that it is learnt more through experience than formal training, and problems that arise are mostly represen.tative of the area rather tban the function. Hence most careinspecting problans are solved by the managers of the mill, rather than by a head office expert. CHART 5 OPERATIONAL & FUNCTIONAL SPHERES OF INFLUENCE ON THE MILL C~IIEF CHEMIST General Manoge.me.nT Chie{ Chemist ChieJ Inspector Austral ion Mills Div,Sionol Chemical St-off Divis ionoJ Inspectin~ Cher-n i st- Manager o1 Mi 11 Mi II Chemi ea/ Stoff ~ + t l, I, . ,, " M·, l I Mano 9ef9 (Mi II Cnem,-6t J t Mi 11 Cor\e Mi IJ Tech n ,·co I. Eng~neer- lns ctor Accountan7 Fielo1 Of ice - 129 - The other mill functional heads have authority which is comparatively less individual, their decisions being influenced by their operating and functional superiors. The Manager of each mill also has a narrow scope for leader ship in that the function of the en.gineer, chemist and accountan.t are highly routine and thus more influenced by functional standard practices and technical matters. The greatest scope for leadership is in the cane inspecting function, and due to leadership constraints of other more technical functions, cane inspecting receives rather more attention from the manager of the mill. Chart 5 postulates an effect centralised functional control bas on a typical mill executive, the ''Mill Mane_ger" or mill chief chemist. No attempt has been made to weight the degrees of influence, as they are greatly influenced by individual personalities, the circumstances of individual problems, and. the influence of other func·cions. In such e.n environment an individual who is co-operative, articulate, confident in decision-making and is able to judge when to side with the specialists or with the line management without causing conflict, tends to stand out. Th.e general 1.nanagement sincerely atternpts to decentralise decision-malting as much as its unique business environment will permit. - 130 - 110 nin c.s.R. we place responsibility on the divisions to carry out their functions efficiently; and we try to ensure that authority and skills are commensurate with responsibility. Inside the divisions this process extends down to local managers, and further down to department heads. But there remains the great responsibility on headquarters -- the headquarters of the company in relation to.the divisions and the headquarters' sta.f'f or the divisions in relation to the actual theatres of operation -- to make available the knowledge and help that will enable the men who directly control tl1e work to do it better." c.s.R. is not lost to the disadvantages of the centralised system; Dixon listed four major ones:~ 111 (a) "It puts a severe strain - probably a too great a demand - on the qualities. skill, time and ability at headquarters, where the work burden becomes excessive (presuming that H.Q., has not relapsed into ease and is still striving f'or progress); 116. ibid., p. 239. 111. ibid •• P• 236. - 131 - (b) it tends to diminish the initiative and enthusiasm of the men in the operational units; (c) it tends towards a static condition ot affairs. rigidity, hardened arteries; (d) it makes for slowness of decision and actions." c.s.R. recognises that authoritarian leadership is a logical development of the centrally organised social 112 entity. "Centralisation appeals to the desire for power to which human beings are so subject•••••• linking up with the genuine need for more and more specialist expertise as well as with the desire for administrative ease." o.s.R. 1 s solution to the problem is in the men they appoint to management positions. They attempt to encourage persuasive leadership, which will result in action without the use of authoritarian commands. ihe lack of job definition is regarded as being welcomed by the capable manager, and damned by the incapable. The manager worth his place in the enterprise is forced to assess tor himself the individual and functional relationships peculiar to his position and he has to judge how much personal authority he can attempt in a given situation. Although more decentralised than the sugar devisions, the Building Materials Division has a large head office functional 112. ibid., P• 237. - 132 - and managerial group on similar lines to the Company. However, the building materials division (B.M.D.) is dissimilar to the sugar divisions in that its products are many and varied. Because of this. the division is structured around product groups, which have their own functional departments. Each group is responsible for the production and sale of their products and the accounting function is mainly decentralised. Many ot the functional departments at divisional headquarters mainly co-ordinate, rather than supply expert service. As tar as company management 1s concerned, the B.M.D. is autonomous, except 113 for "major policy, finance, staff' supply, senior appointments and to a considerable extent, industrial (labour relations) policy-" which are centrally controlled or require central c.s.R. approval.· c.s.R. industrial chemical activities are grouped in the subsidiary company O.S.R. ·Chemicals which has a high degree of autonomy, controlled only to the extent that c.s.R. representatives are on the board of directors. The functional organisation of C.S.R. assists to the extent of staff recruitment and industrial policy. c.s.R. Chemicals (C.S.R.C.) operates a functionally structured organisation with the technical Manager, Secretary-/ 113. ibid., P• 235. - 133 - Controller, Marketing Service Manager and Australian Sales Manager, all reporting to the General Manager who, in turn, reports to the Managing Director. Whilst the Managing Director 1s responsible for representing c.s.R.C.•s interests in subsidiary companies, and the operation of the activities of the holding company~ he leaves the day to day management of the Lane Cove and Rhodes factories to the General Manager. Written position descriptions are used to clarify duties, responsibilities and relationships of members of staff, -- a feature which indicates a management philosophy wholly different from that of the controlling parent company. SUMMARY. In the latter part of the 19th century, c.s.R. was the largest industrial concern in Australia. It was dominated by father and son, Edward and E.W. Knox, who not only had a genius for exploiting the opportunities occassioned by a colonial need for sugar, but were able to create an organisa tion of which staff members were proud and loyal. principles whieh the organisation derived from the Knox influence could be categorised as discipline, integuity, hard work and thriftiness. ib.e staf't' elite, which was developed early in the company's history, fostered a service philosophy and resulted in a close "family" relationship. Recruiting straight from school enabled the company to imbue - 134 - the cadet with the company spirit; to mould him into the "c.s.R. staff officer". In many respects the family philosophy 1n the company fostered intensive use of the informal organisation framework and allowed the company to erect a skeleton of a formal framework. Most officers knew their place in the social structure of the company, and were content to remain in their place. In such an atmosphere, a great respect tor seniority was engendered and some figures assumed God-like proportions. In an environment in which it was difficult for the junior staff officer to believe tbat father figures could make mistakes, it was natural that several figures were held up as model characters. Although leadership was mainly of the persuasive variety (resulting from the easy informality) because of the underlying authority assumed by the leadership position,it would have been extremely difficult to discern coercive from persuasive leadership. A feature of the organisation was its extreme flexibility. Not only in low echelons was there easy and free mobility ot staff, but this mobility was also present in top management, occasioned by the use of the concept of the top management group. - 135 - In such an environment, change came very slowly; shown in the tact that the organisation, procedure and titles bave changed very little over the years. The social, industrial and educational revolutions in Australia after the 1939/45 wa~ and the process of d1vers1f1cat1on undertaken by the company has tended to shake the social and organisational foundations of c.s.R. Intensive use ot tertiary- education, resulting in the emergence of a young group of graduate status; increase in size through company takeovers; recruitment at graduate level to plug staff gaps; a widening of skills, knowledge and interest 1n staff, following greater diversification; the increased use of the subsidiary company, have all tended to break down this "family" atmosphere and place more emphasis on the formal framework. 'lb.a formal framework has undergone changes in this time with the growth of building material division and with c.s.R. Chemicals Pty.Ltd. In both cases the framework has fostered decentralised responsibility and authority, giving greater scope for leadership and providing opportunities for a comparatively new breed or leaders. The new large scale activities in the diversification programme planned tor the 19601 s and 1970 1 s could possibly - 136 .. be the cause in the future, of major changes in organisation particularly at the senior level. Whether it provides more than just a skeleton of a formal framework will depend on the complexity of relationships and hierarchy of authority forthcoming from these changes. 'Ihe authoritarian approach to leadership practiced by the Knoxes was not only due to the influence of strong individuals. The Knoxes were typical leaders of their era. The 19th and early 20th centuries experienced a class consciousness and a British attitude to class leadersh.:tp which encouraged au tho1~i tarian methods. Followers accepted the class superiority of their leaders thereby convincing themselves that group needs were those of their leader. The authoritar·ian leadership persued by the Knoxes·, did not carry with it the stigma of contempt for subordinates. Rather was emphasis placed on group member welfare resulting in extreme loyalty to the group. Since the Knox era~ leadership has changed within c.s.R. Changes in society have brought about changes particularly in the follower. The follower to-day is more skilled, better educated and far more mobile than he was half a century ago. There is now not the great urgency to join c.s.R. by the product of private schools as there was; a - 137 - far greater number of state school boys are being employed thus widening the social composition of the staff elite. As a result group pressures are forcing a more democratic approach to leadership particulary in the top management group and the top echelons of divisions and subsidiaries. Group acceptance of authority is tending in the more specialised "staff" departments to be more a function ot sp.ecialist skill, especially- where there is a deal ot individual autonomy. 'lhe more specialised and expert the skill, the needs of the group tend to be more technical than social. Hence individual and group technical skills ... force their attention on the leader who must identify himself with the group. Examination of c.s.R. gives an example of the evolution and pattern of social and organisation framework of a large Australian Company.. Because of the limited formal framework. the potential tor leadership has increased and the constraints on leadership expression are effected by the leadership expression of his colleagues, not by the strict inflexible decision of an organiser. Flexibility 1s the major attributes of this policy with existence of a dynamic power network constrained by individual relationships and. the overall dlimate. beliefs, and traditions of the organisation. - 138 - BIBLIOGRAPHY. A11en, Louis A. - Management and Organisation, McGraw-Hill Book Company, New York, 1958. Allport. 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