Theories of Leadership (Essay Sample)

Theories and Frameworks of Analysing Leadership
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Theories and Frameworks of Analyzing Leadership
The Ford Company Case Study: The Year 2006
The Ford Company is a manufacturing firm that produces vehicles such as cars, trucks, vans and Crossover Utility Vehicles. In the year 2006, Alan Mulally was elected the new Chief Executive Officer (CEO) of the Company. The company was facing problems that made it incompetent and trounced by the other car producers such as Toyota and Honda. The company was going out of its core business, and its problems began. Ford mainly concentrated on its non-core activities and as a result, loses were made. The company reported an annual loss of $17 billion since money was lost in every car that the firm produced. Three months after Alan was elected as the CEO, he had to make a tough decision that was despised and considered as a desperate move. The decision was the reason behind the success of the company and even its future. Due to the losses made by the company, the dividends were very small for the shareholders. An annual loss of $17 billion meant that the shareholders received little or no dividends. The decision made the CEO was triggered by the losses made during the year and the defeat by the competitors. While the other companies requested part of the taxpayer’s money to improve their efficiency, Ford decided to make a riskier decision that has seen the company emerge a top competitor in the vehicle manufacturing industry.The Decision Made The CEO decided to mortgage all the firm’s asset and secure a loan of $23.5 billion. The funds were used to finance the overhaul of the company. By obtaining the funds, the company was back on the right track and gradually making profits. One year later, Alan made a decision to concentrate on the core business activity of the firm by producing only the Ford and Lincoln brands of vehicles. The company sold off the other brands that included Jaguar, Volvo, Aston Martin and Land Rover. With an aim of rebuilding its core brand, the company also reduced its stake in the Mazda brand. The decisions were tough and seemed desperate but reinstated the firm’s real performance. The decision made by the CEO had consequences to the company and its stakeholders. Firstly, the shareholders equity was reduced in the few consecutive years as the company settled automotive debts and the undefined pension scheme. There were slight losses between the years 2006 and 2008. From the year 2009, the company started gaining significant profits that raised the dividends of the shareholders.Leadership TheoriesTransformational Leadership Theory In transformational leadership theory, leadership is based on the decisions of the leaders to shift or change the beliefs, values and the needs of their followers. This leadership may entail the reshaping of the strategies in an organization. Transformational leaders have the obligation of elevating the goals of the subordinates and enhance self-confidence in them to strive and achieve higher goals (Miner, 2005). The transformation leaders have some distinctive characteristics. Firstly, these leaders are charismatic in providing visionary ideas and creating the sense of mission. The leaders also gain respect and trust as well as instilling pride into the followers. In the case, Alan is charismatic by providing a sense of survival and sustainability of the company through his brilliant idea. Currently, the Ford Company is a world competitor in the manufacture of vehicles, and the progress earns respect for the protagonist who still serves as the firm’s CEO. The decision made in the year 2006 strengthened the mission of the company. Secondly, transformational leaders are inspirational. By being inspirational, the leaders communicate high expectations and express critical purposes in a simple way. In this case, Mr. Alan communicates the high expectations of the firm’s sustainability by securing funds that facilitated the operations of the automakers. Thirdly, transformational leaders apply intellectual stimulation (Miner, 2005). Through intellectual stimulation, leaders promote intelligence, solve problems carefully and develop rationality. The protagonist, in this case, addresses the financial constraints correctly by mortgaging all the assets of the company and securing a loan of $23.5 billion. The decision that was made by Alan portrays an act of intelligence though criticized by many pessimists. Assuming that the CEO did not make the wise decision, an alternative to solving the problem was borrowing in terms of long-term loans or borrowing taxpayer’s money from the federal government. Instead of mortgaging its assets, the Ford Company had an option of taking loans that incur interest expenses and paid within the agreed period. The intervention of the government is the other option where the company may have requested funds from the federal government. The decision had consequences such as employee layoffs and minimal dividends for the shareholders in the following two years. From the external environment, the company maintained competence by bringing stiff competition in the market and a sense of sustainability. Although the decision was considered as a desperate move, Ford Company is currently competing with three other car manufacturers.Contingency Theory of Leadership The contingency leadership theory revolves around the situation variables and the group that is managed by a leader. The situational variables include the leader’s roles, skills, behavior and the follower’s level of performance and satisfaction. The essentials of the contingency theory include the exchange relationship b...