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DO YOU WORK WITH PROBLEM PEOPLE?

You know the type - the boss who is always moving the goalposts, uncooperative colleagues, undelungs who fail to do things as well as you do. If you are plagued by these or other problem types, perhaps you think the situation is beyond your control. If so, think again. A good starting point is to recognize that behaviour breeds behaviour, which is one of those great truths that hasn't really dawned on a lot of people. Through your behaviour you may, quite unintentionally, be triggering a behaviour pattern in someone else that is for you a problem.

One of the commoner problem types is the authoritarian. Authoritarians talk too much and don't listen enough. They assume that people are basically lazy, can't be trusted and must not be allowed to make their own decisions because they would get it wrong. Authoritarians expect unswerving obedience and for someone with ideas and initiative it can be very frustrating. Doing nothing is not a good idea - unless it suits you to have someone taking all the decisions and telling you what to do.

You can alter your perception of the problem by recognizing that authoritarian behavior indicates not strength but rather feelings of inadequacy. But there is little point in trying to persuade authoritarians to change, so try to modify the situation. Nobody is authoritarian all the time: sometimes they are extremely bossy, sometimes less so. The key lies in understanding what sort of situation triggers their authoritarian behaviour. It could be the risk of chaos, which authoritarians loathe. Or it might be a threat to or violation of a non-negotiable matter, or insubordination by a junior. You will reduce the problem if you are compliant on the issues that are sacrosanct and non-negotiable, but otherwise assertive. A useful approach is to assume that it's all right to do things until told otherwise. This will give you some space for initiatives, and you can win their trust slowly - but make sure that any initiatives you take do not jeopardize the orderliness which the authoritarian holds so dear.

The defensive person is another problem type. Defensive people do not accept responsibility for their actions, and therefore never learn from their experience. Nothing is ever their fault; there is always a seemingly plausible explanation. The best way to tackle a defensive person is to choose a time when he has made a mistake and invite him to join you in analysing why it happened and what should be done to avoid it happening again. A softly-softly approach is essential to stop the defensive barriers being raised. So start by asking for their advice, initially about what you should do differently, and then slowly turning it round to establish what they are going to do differently in future. This will provoke more defensiveness, but you must not let them off the hook. Just keep repeating your challenge and eventually they will accept responsibility for their part in the mistake. When they do, ease up on them. In this way they will learn that defensiveness doesn't pay.

PAN-EUROPEAN TEAMWORK

Slowly they entered the room in ones .and twos, anxiously looking for familiar 'faces. Some took refuge in intense conversation to avoid the searching eyes of strangers. Others were preoccupied rearranging papers.

The Scandinavians were the first to arrive, conspicuous in their plaid jackets and open-necked shirts. Exactly on the stroke of nine o'clock the Germans entered, debating with their Austrian colleagues. The US participants followed, introducing themselves to everyone they passed.

Then two hesitant figures in dark, pinstripe suits filled the doorway, their formal

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handshakes unmistakably betraying them as the British representatives. The seats around the circle of tables were almost filled and the buzz of polite conversation began falling off when the Italian participants, dressed in fine tailored suits, were the last to arrive.

The group of managing and marketing directors from nine national subsidiaries of a large international company had gathered in a European capital city for a three-day meeting with a dual purpose.

Their primary task was to draw up a pan-European marketing strategy to exploit the EC's single market. The meeting was also seen as an opportunity for the executives to learn about working within a multicultural team, and to recognise how it differed from their team-working back home. I was one of two consultants assigned to facilitate the process and crystallise the learning.

As with many multicultural groups, the first difficulties emerged over language. The meeting was conducted in English, but not all the participants were equally fluent or confident about expressing themselves. Not surprisingly, native English speakers dominated the early discussions, until the facilitator asked others for their ideas.

This intervention, however, only exposed another cultural trait that impeded progress. Impatient with the time it took others to formulate their views, British and US participants frequently interrupted the long periods of silent contemplation with even more suggestions of their own. To construct coherent arguments in a non-native language takes time and requires concentration.

The use of only one language was the most obvious barrier to multicultural teamworking. As the first working session progressed, however, the comments made and ideas proposed revealed how unconscious cultural biases and corporate myths dominated the participants' thinking.

French executives argued for their proposal, since it was manifestly the most logical. No, said the Germans, their approach should be endorsed because it was technically superior and had a proven track record. No one gave serious consideration to the Danish proposal. The ideas produced by the Italians were seen as elegant and seductive, but impractical.

The members of this multicultural team, brought together for the first time, reacted like all human beings. In the absence of more reliable information, they made liberal use of preconceived stereotypes about the nations they did not know. Or where they had some experience, they generalised by using one past incident to predict the behaviour of that nationality.

Like 'groupthink', where all members of a team home in on one powerfully argued but possibly flawed idea, this multicultural team was taking refuge in simplistic stereotypes and over-generalisations.

To address this obstacle to effective teamworking. time was taken to learn about the characteristic behaviour of the nations present. Each national group had to act as informants on their own culture, and heard how their cultural behaviour influenced the perceptions and attitudes of others.

This cathartic activity produced much laughter. The linear, time-conscious Northern Europeans discovered the mysteries of their Latin colleagues' flexible approach to time and capacity to deal with several projects simultaneously. The Anglo-Saxons learned about alternatives to adversarial relationships in industry from the consensusorientated Scandinavian managers.

Each group explored the emphasis it placed upon personal relationships in getting things done, cultural preferences for long-term outcomes and the importance attached to being liked, a theme that proved sensitive for many of the executives.

Many significant messages and difficult observations were delivered in jest and

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mimicry throughout the remainder of the meeting. But all the participants acknowledged the pain of learning, and the importance of more accurate perceptions in putting together a draft marketing strategy.

Yes, they agreed, it might need more work, but their future efforts would be less likely to be side-tracked by superficial differences of culture.

© International Management

UNIT 7

INCENTIVE SYSTEMS

Incentives refer to the devices used to reward appropriate employee behavior. Many employees receive incentives in the form of annual bonus pay. Incentives are usually closely tied to the performance metrics used for output controls. For example, setting targets linked to profitability might be used to measure the performance of a subunit, such as a global product division. To create positive incentives for employees to work hard to exceed those targets, they may be given a share of any profits above those targeted. If a subunit has set a goal of attaining a 15 percent return on investment and it actually attains a 20 percent return, unit employees may be given a share in the profits generated in excess of the 15 percent target in the form of bonus pay. For now, however, several important points need to be made. First, the type of incentive used often varies depending on the employees and their tasks. Incentives for employees working on the factory floor may be very different from the incentives used for senior managers. The incentives used must be matched to the type of work being performed. The employees on the factory floor of a manufacturing plant may be broken into teams of 20 to 30 individuals, and they may have their bonus pay tied to the ability of their team to hit or exceed targets for output and product quality. In contrast, the senior managers of the plant may be rewarded according to metrics linked to the output of the entire operation. The basic principle is to make sure the incentive scheme for an individual employee is linked to an output target that he or she has some control over and can influence. The individual employees on the factory floor may not be able to exercise much influence over the performance of the entire operation, but they can influence the performance of their team, so incentive pay is tied to output at this level.

Second, the successful execution of strategy in the multinational firm often requires significant cooperation between managers in different subunits. For example, as noted earlier, some multinational firms operate with matrix structures where a country subsidiary might be responsible for marketing and sales in a nation, while a global product division might be responsible for manufacturing and product development. The managers of these different units need to cooperate closely with each other if the firm is to be successful. One way of encouraging the managers to cooperate is to link incentives to performance at a higher level in the organization. Thus, the senior managers of the country subsidiaries and global product divisions might be rewarded according to the profitability of the entire firm. The thinking here is that boosting the profitability of the entire firm requires managers in the country subsidiaries and product divisions to cooperate with each other on strategy implementation, and linking incentive systems to the next level up in the hierarchy encourages this. Most firms use a formula for incentives that links a portion of incentive pay to the performance of the subunit in which a manager or employee works and a portion to the performance of the entire firm, or some other higher-level organizational unit. The goal is to encourage employees to improve the efficiency of their unit and to cooperate with other units in the organization.

Third, the incentive systems used within a multinational enterprise often have to

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be adjusted to account for national differences in institutions and culture. Incentive systems that work in the United States might not work, or even be allowed, in other countries. For example, Lincoln Electric, a leader in the manufacture of arc welding equipment, has used an incentive system for its employees based on piecework rates in its American factories (under a piecework system, employees are paid according to the amount they produce). While this system has worked very well in the United States, Lincoln has found that the system is difficult to introduce in other countries. In some countries, such as Germany, piecework systems are illegal, while in others the prevailing national culture is antagonistic to a system where performance is so closely tied to individual effort. For further details, see the accompanying Management Focus.

Finally, it is important for managers to recognize that incentive systems can have unintended consequences. Managers need to carefully think through exactly what behavior certain incentives encourage. For example, if employees in a factory are rewarded solely on the basis of how many units of output they produce, with no attention paid to the quality of that output, they may produce as many units as possible to boost their incentive pay, but the qualify of those units may he poor.

Organizational Culture and Incentives at Lincoln Electric

MANAGEMENT FOCUS

Lincoln Electric is one of the leading companies in the global market for arc welding equipment. Lincoln's success has been based on extremely high levels of employee productivity. The company attributes its productivity to a strong organizational culture and an incentive scheme based on piecework. Lincoln's organizational culture dates back to James Lincoln, who in 1907 joined the company that his brother had established a few years earlier. Lincoln had a strong respect for the ability of the individual and believed that, correctly motivated, ordinary people could achieve extraordinary performance. He emphasized that Lincoln should be a meritocracy where people were rewarded for their individual effort. Strongly egalitarian, Lincoln removed barriers to communication between "workers" and "managers," practicing an open-door policy. He made sure that all who worked for the company were treated equally; for example, everyone ate in the same cafeteria, there were no reserved parking places for "managers," and so on. Lincoln also believed that any gains in productivity should be shared with consumers in the form of lower prices, with employees in the form of higher pay, and with shareholders in the form of higher dividends.

The organizational culture that grew out of James Lincoln's beliefs was reinforced by the company's incentive system. Production workers receive no base salary but are paid according to the number of pieces they produce. The piecework rates at the company enable an employee working at a normal pace to earn an income equivalent to the average wage for manufacturing workers in the area where a factory is based. Workers have responsibility for the quality of their output and must repair any defects spotted by quality inspectors before the pieces are included in the piecework calculation. Since 1934, production workers have been awarded a semiannual bonus based on merit ratings. These ratings are based on objective criteria (such as an employee's level and quality of output) and subjective criteria (such as an employee's attitudes toward cooperation and his or her dependability). These systems give Lincoln's employees an incentive to work hard and to generate innovations that boost productivity, for doing so influences their level of pay. Lincoln's factory workers have been able to earn a base pay that often exceeds the average manufacturing wage in the area by more than 50 percent and receive a bonus on

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top of this that in good years could double their base pay. Despite high employee compensation, the workers are so productive that Lincoln has a lower cost structure than its competitors.

While this organizational culture and set of incentives works well in the United States, where it is compatible with the individualistic culture of the country, it did not translate easily into foreign operations. In the 1980s and early 1990s, Lincoln expanded aggressively into Europe and Latin America, acquiring a number of local arc welding manufacturers. Lincoln left local managers in place, believing that they knew local conditions better than Americans. However, the local managers had little working knowledge of Lincoln's strong organizational culture and were unable or unwilling to impose that culture on their units, which had their own long-established organizational cultures. Nevertheless, Lincoln told local managers to introduce its incentive systems in acquired companies. They frequently ran into legal and cultural roadblocks.

In many countries, piecework is viewed as an exploitive compensation system that forces employees to work ever harder. In Germany, where Lincoln made an acquisition, it is illegal. In Brazil, a bonus paid for more than two years becomes a legal entitlement! In many other countries, both managers and workers were opposed to the idea of piecework. Lincoln found that many European workers valued extra leisure more highly than extra income and were not prepared to work as hard as their American counterparts. Many of the acquired companies were also unionized, and the local unions vigorously opposed the introduction of piecework. As a result, Lincoln was not able to replicate the high level of employee productivity that it had achieved in the United States, and its expansion pulled down the performance of the entire company.

CONTROL SYSTEMS, INCENTIVES, AND STRATEGY

IN THE INTERNATIONAL BUSINESS

The key to understanding the relationship between international strategy, control systems, and incentive systems is the concept of performance ambiguity.

Performance Ambiguity

Performance ambiguity exists when the causes of a subunit's poor performance are not clear. This is not uncommon when a subunit's performance is partly dependent on the performance of other subunits; that is, when there is a high degree of interdependence between subunits within the organization. Consider the case of a French subsidiary of a U.S. firm that depends on another subsidiary, a manufacturer based in Italy, for the products it sells. The French subsidiary is failing to achieve its sales goals, and the U.S. management asks the managers to explain. They reply that they are receiving poor-quality goods from the Italian subsidiary. The U.S. management asks the managers of the Italian operation what the problem is. They reply that their product quality is excellent – the best in the industry, in fact – and that the French simply don't know how to sell a good product. Who is right, the French or the Italians? Without more information, top management cannot tell. Because they are dependent on the Italians for their product, the French have an alibi for poor performance. U.S. management needs to have more information to determine who is correct. Collecting this information is expensive and time consuming and will divert attention away from other issues. In other words, performance ambiguity raises the costs of control.

Consider how different things would be if the French operation were selfcontained, with its own manufacturing, marketing, and R&D facilities. The French operation would lack a convenient alibi for its poor performance; the French managers would stand or fall on their own merits. They could not blame the Italians for their poor

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sales. The level of performance ambiguity, therefore, is a function of the interdependence of subunits in an organization.

Strategy, Interdependence, and Ambiguity

Now let us consider the relationships between strategy, interdependence, and performance ambiguity. In firms pursuing a localization strategy, each national operation is a stand-alone entity and can be judged on its own merits. The level of performance ambiguity is low. In an international firm, the level of interdependence is somewhat higher. Integration is required to facilitate the transfer of core competencies and skills. Since the success of a foreign operation is partly dependent on the quality of the competency transferred from the home country, performance ambiguity can exist.

In firms pursuing a global standardization strategy, the situation is still more complex. Recall that in a pure global firm the pursuit of location and experience curve economies leads to the development of a global web of value creation activities. Many of the activities in a global firm are interdependent, A French subsidiary's ability to sell a product does depend on how well other operations in other countries perform their value creation activities. Thus, the levels of interdependence and performance ambiguity are high in global companies.

The level of performance ambiguity is highest of all in transnational firms. Transnational firms suffer from the same performance ambiguity problems that global firms do. In addition, because they emphasize the multidirectional transfer of core competencies, they also suffer from the problems of firms pursuing an international strategy. The extremely high level of integration within transnational firms implies a high degree of joint decision making, and the resulting interdependencies create plenty of alibis for poor performance. There is lots of room for finger-pointing in transnational firms.

								TABLE 1
	Strategy		Interdependence		Performance		Cose of Control	Interdependen
					Ambiguity			ce,
								Performance
	Localization		Low		Low		Low	Ambiguity,
								and the Costs
	International		Moderate		Moderate		Moderate	of Control for
								the Four
								International
	Global		High		High		High	Business
								Strategies
	Transnational		Very high		Very high		Very high

IMPLICATIONS FOR CONTROL AND INCENTIVES

The arguments of the previous section and the implications for the costs of control are summarized in Table 1. The costs of control might be defined as the amount of time top management must devote to monitoring and evaluating subunits' performance. This will be greater when the amount of performance ambiguity is greater. When performance ambiguity is low, management can use output controls and a system of management by exception; when it is high, they have no such luxury. Output controls do not provide totally unambiguous signals of a subunit's efficiency when the performance of that subunit depends on the performance of another subunit within the organization. Thus,

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management must devote time to resolving the problems that arise from performance ambiguity, with a corresponding rise in the costs of control.

Table 1 reveals a paradox. We saw in Chapter 12 that a transnational strategy is desirable because it gives a firm more ways to profit from international expansion than do localization, international, and global standardization strategies. But now we see that due to the high level of interdependence, the costs of controlling transnational firms are higher than the costs of controlling firms that pursue other strategies. Unless there is some way of reducing these costs, the higher profitability associated with a transnational strategy could be canceled out by the higher costs of control. The same point, although to a lesser extent, can be made with regard to global firms. Although firms pursuing a global strategy can reap the cost benefits of location and experience curve economies, they must cope with a higher level of performance ambiguity, and this raises the costs of control (in comparison with firms pursuing an international or localization strategy).

This is where control systems and incentives come in. When we survey the systems that corporations use to control their subunits, we find that irrespective of their strategy, multinational firms all use output and bureaucratic controls. However, in firms pursuing either global or transnational strategies, the usefulness of output controls is limited by substantial performance ambiguities. As a result, these firms place greater emphasis on cultural controls. Cultural control – by encouraging managers to want to assume the organization's norms and value systems – gives managers of interdependent subunits an incentive to look for ways to work out problems that arise between them. The result is a reduction in finger-pointing and, accordingly, in the costs of control. The development of cultural controls may be a precondition for the successful pursuit of a transnational strategy and perhaps of a global strategy as well. As for incentives, the material discussed earlier suggests that the conflict between different subunits can be reduced and the potential for cooperation enhanced, if incentive systems are tied in some way to a higher level in the hierarchy. When performance ambiguity makes it difficult to judge the performance of subunits as stand-alone entities, linking the incentive pay of senior managers to the entity to which both subunits belong can reduce the resulting problems.

UNIT 8

GENDER DIFFERENCES IN LEADERSHIP

Are there gender difference in leadership styles? Are men more effective leaders, or does that honor belong to women? Even asking those questions is certain to evoke emotions on both sides of the debate.

The evidence indicates that the two sexes are more alike than different in the ways that they lead. Much of this similarity is based on the fact that leaders, regardless of gender, perform similar activities in influencing others. That‘s their job, and the two sexes do it equally well. The same is also true in other professions. For instance, although the stereotypical nurse is a woman, men are equally effective and successful in this career.

Saying the sexes are more alike than different still means the two are not exactly the same. The most common difference lies in leadership styles. Women tend to use a more democratic style. They encourage participation of their followers and willing to share their positional power with other best through their «charisma, expertise, and their interpersonal skill». Men, on the other hand, tend to typically use a task-centred leadership style – such as directing activities and relying on their positional power to control the organization's activities." But surprisingly, even this difference is blurred. All

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things considered, when a woman is a leader in a traditionally male-dominated job (such as that of a police officer), she tends to lead in a manner that is more task centered.

Further compounding this issue are the changing roles of leader in today's organizations. With an increased emphasis on teams, employee involvement, and interpersonal skills, democratic leadership styles are more in demand. Leaders need to be more sensitive to their follower's needs, be more open in their communications, and build more trusting relationships. And, many of these are behaviors that women have typically grown up developing.

So what do you think? Is there a difference between the sexes in terms of leadership styles? Do men or women make better leader? Would you prefer to work for a man or a woman? Explain.

WHAT IS TEAM LEADERSHIP?

Leadership increasingly exists within a team context. As teams grow in popularity, the role of the team leader takes on heightened importance. This role is different from the traditional leadership role performed by first-line supervisors. J. D. Bryant, a supervisor at Texas Instruments' Forest Lane plant in Dallas, found that out. One day he was happily overseeing a staff of 15 circuit-board assemblers. The next day he was informed that the company was moving to teams and that he was to become a "facilitator." "I'm supposed to teach the teams everything I know and then let them make their own decisions," he said. Confused about his new role, he admitted "there was no clear plan on what I was supposed to do." In this section, we consider the challenge of being a team leader, review the new roles that team leaders take on, and offer some tips on how to perform effectively in this position.

Many leaders are not equipped to handle the change to teams. As one prominent consultant noted, "even the most capable managers have trouble making the transition because all the command-and-control type things they were encouraged to do before are no longer appropriate. There's no reason to have any skill or sense of this." This same consultant estimated that "probably 15 percent of managers are natural team leaders; another 15 percent could never lead a team because it runs counter to their personality. [They're unable to sublimate their dominating style for the good of the team.] Then there's that huge group in the middle: Team leadership doesn't come naturally to them, but they can learn it."

The challenge for most managers, then, is to become an effective team leader. They have to learn the patience to share information, the ability to trust others and to give up authority, and the understanding of when to intervene. Effective leaders have mastered the difficult balancing act of knowing when to leave their teams alone and when to intercede. New team leaders may try to retain too much control at a time when team members need more autonomy, or they may abandon their teams at times when the teams need support and help.'

A study of 20 organizations that had reorganized themselves around teams found certain common responsibilities that all leaders had to assume. These included coaching, facilitating, handling disciplinary problems, reviewing team/individual performance, training, and communication.' Many of these responsibilities apply to managers in general. A more meaningful way to describe the team leader's job is to focus on two priorities: managing the team's external boundary and facilitating the team process. We've broken these priorities down into four specific roles (see Exhibit).

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Exhibit. Team Leaders Roles

First, team leaders are liaisons with external constituencies. These include upper management, other internal teams, customers, and suppliers. The leader represents the team to other constituencies, secures needed resources, clarifies others' expectations of the team, gathers information from the outside, and shares this information with team members.

Second, team leaders are troubleshooters. When the team has problems and asks for assistance, team leaders sit in on meetings and help to resolve the problems. This rarely relates to technical or operational issues because the team members typically know more about the tasks than does the team leader. The leader is most likely to contribute by asking penetrating questions, helping the team talk through problems, and getting needed resources from external constituencies. For instance, when a team in an aerospace firm found itself short-handed, its team leader took responsibility for getting more staff. He presented the team's case to upper management and got approval through the company's human resources department.

Third, team leaders are conflict managers. When disagreements surface, they help process the conflict. What's the source of the conflict? Who is involved? What are the issues? What resolution options are available? What are the advantages and disadvantages of each? By getting team members to address questions such as these, the leader minimizes the disruptive aspects of intrateam conflicts.

Finally, team leaders are coaches. They clarify expectations and roles, teach, offer support, cheerlead, and whatever else is necessary to help team members improve their work performance.

BUILDING TRUST: THE ESSENCE OF LEADERSHIP

Trust, or lack of trust, is an increasingly important leadership issue in today‘s organization. We briefly introduced you to trust in our discussion of high-performing work teams. In this chapter, we want to further explore this issue of trust by defining what trust is and show you how trust is a vital component of effective leadership.

What is Trust?

Trust is a positive expectation that another will not through words, actions, or decisions act opportunistically. The two most important elements

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