Leadership’ Influence on Market Performance of Companies

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Table of Contents

Introduction
Effective Business Leadership
Relationship between Leadership and Company Performances
Conclusion
References

Introduction

Leadership plays an important role in defining the ability of a firm to achieve success in the market. According to Blanchard and Cathy (2002), organizations depend on leadership to define the path that should be taken in order to reach a specific destination. Successful companies in the world attribute their achievements to effective leadership.

The Virgin Group, Apple, and Microsoft are some of the largest and most successful companies in the world. The success story of these companies cannot be told without the mention of the pivotal roles played by their leaders. The Virgin Group owes its success to the effective leadership of Sir Richard Branson. No one can talk about the massive success that Apple Inc has achieved without mentioning the name of Steve Jobs.

Microsoft Corporation and Bill Gates are names which are inseparable. These leaders were able to understand the needs of the employees, the changes taking place in the market, and the technological dynamics.

In Australia, there are a number of companies that have experienced massive success due to effective leadership. Aussie Commerce Group, Schnitz, Drilltechniques, and Fossil Energy Services Pty Ltd are some of the companies that have experienced massive success in the past.

These companies have been in existence for only half a century, but because of effective leadership, they have experienced massive growth of their market share within the country. This research focuses on the extent to which leadership influences the market performance of companies.

Effective Business Leadership

According to the research by Ferch and Spears (2011), effective business leadership is one of the most important ingredients that are needed to succeed in the current competitive market. The level of competition has become so stiff that many organizations are now forced to find a way of developing superior strategies to protect their market share.

Many scholars say that the success of a firm heavily relies on the effective company leadership. Company leadership goes beyond developing policies and forcing the stakeholders to apply them as per the wishes of the leader. It also surpasses providing the needed resources to undertake specific activities. Leadership is about managing people within an organisation.

Employees form a very important part of an organisation. The effort they put in what they do, and the desire they have to see the firm successful defines the ability of an organisation to achieve its objectives (Annabelle, 2006). A leader is expected to create and then share the ambitious visions with the employees and all other stakeholders so that they are convinced that the future is bright.

Transformational leadership is one of the recent leadership models that have been considered effective in managing stakeholders who have varying interest. For instance, while the shareholders will demand for increased interests, the employees may desire increased wages. These interests may affect the financial position of an organisation if they are not managed properly.

A leader must find a way of convincing the stakeholders to take a common path that would benefit everyone in the long run. Miller (2012) says that an effective leader must learn to treat the stakeholders, especially the employees, as individuals other than groups.

Giving stakeholders a personalized approach not only creates a close bond between the stakeholders and the management, but it also enables the management understand the diversity that exists in a firm and how it can be managed.

Northouse (2010) says that irrelevant company leadership is the reason why some firms have failed to achieve success. Leadership may be considered irrelevant if the leader does not understand the industry within which his or her company is operating. For example, it may be difficult for a plumber to offer relevant leadership to a firm operating in the health sector.

Employees look upon the leader to offer directions when handling some of the complex tasks. When the leader has no knowledge on the basic concepts as to what should be done, then his or her authority as a leader will be lost. The employees will lose trust in him or her, and when this happens, they will have no hope for a better future in the firm.

This is what Adetule (2011) describes as underwhelming leadership. It is a case where the leader is not in a position to offer the employees guidance based on the expert knowledge. In fact, it may take a long time, probably constant complaints from the customers, for such a leader to realize that there is a problem that needs to be addressed within the organisation.

Relationship between Leadership and Company Performances

Leadership and employee management

The main role of a leader is to manage the employees and ensure that they remain motivated and committed to their duties. According to Hughes, Ginnett and Curphy (2012), some of the newly emerging firms in Australia have been very successful because they have leaders who know how to manage their employees in various contexts.

This means that the success that Aussie Commerce Group, Schnitz, Drilltechniques, and Fossil Energy Services Pty Ltd have experienced in the Australian market is largely associated with the effective employee management. There are various aspects of employee management that a leader should be aware of in order to achieve success in the market.

Managing communication is one of the most important tasks of leaders in the normal running of an organization. In order to manage a group of people, one would need to have a system that allows free communication between various entities in an organization (Sipe & Frick, 2009). The leader must be informed about the successes and various challenges the firm is experiencing in the market by the marketing unit.

He or she will also need to be informed about the financial position of the firm by the finance department. The human resource management unit must always update the leader about the quality of the current personnel, their ability to meet the expectations of the firm, and any need to expand or reduce the size of the workforce (Aquinas, 2006).

The leader needs relevant information from the logistics unit, the insurance department, and other departments about various issues that affect the firm directly or indirectly. It is, therefore, vital to have a proper communication system that will make it possible for the leader to get these pieces of information from all the responsible individuals.

When the decision has been made, the manager will need a system that will make the information reach all the relevant stakeholders so that it can be implemented (Bass, 2005). The communication system must facilitate close relationship between the junior employees and the top management of a firm. These are some of the strategies that have been perfected by the successful firms mentioned above.

Other than effective communication, a leader needs to formulate an effective employee relation system. According to Kouzes and Posner (2012), no organisation can achieve success without a team of dedicated staff. Employees are the wheels upon which an organization runs towards achieving its set objectives.

When the leader has formulated strategic policies, it is the workers who will be expected to put the policies into practice. However, it is vital to note that the workforce can only be productive if they feel that the leader cares for their interests. Employee relation management is an essential aspect of leadership that defines the ability of a firm to achieve success. It enables the leader to maintain a pool of loyal employees (Bell, 2005).

It also helps the leader to develop a close bond and trust with the employees in an organization. This creates an environment where the employees are always willing to follow the guidelines given by the leader. They will always be willing to make an extra effort in order to please the leader.

According to Matha and Boehm (2008), teamwork is important in the current society where close coordination of employees is a powerful weapon in managing the market wars. Recent researches have confirmed that when employees are allowed to work as a team, they easily learn from their colleagues and this enhances their skills.

In such teams, spreading of new information in a practical way is possible, reducing the need to conduct regular on-job trainings. Team building strategies are very important to a leader in a number of ways (Polelle, 2008).

In cases where there are effective strategies to make employees work as a team, the cost of their supervision is always reduced because the employees will be monitoring themselves as they struggle to complete the duties assigned to them. Teamwork also promotes motivation among the employees, the fact that promotes their productivity.

Leadership and innovation

According to Schuttler and Burdick (2010), the current dynamic market environment requires firms to embrace creativity and innovation as a way of gaining the competitive edge over the competitors. A firm must continually seek to find new ways of addressing different tasks in convenient ways and at reduced costs. Leadership plays an important role in promoting creativity and innovation within a given organisation.

Creativity among the employees can only be exploited if the leader creates an enabling environment. Employees who are always involved in handling various tasks are in a better position of coming up with suggestions about how their tasks can be done differently in order to yield better results, reduce the resources used, and to cut down time needed for the processes.

Transformational leadership has been considered as an effective way of evoking skills and knowledge of employees to deliver better results (Clawson, 2011). A leader needs to positively challenge the employees to come up with creative ideas that can make the firm more successful.

This is one of the areas that have made Aussie Commerce Group very successful in the market. With about 150 employees, this firm has been keen on delivering new and better products to its customers on a regular basis in order to maintain their loyalty to this firm.

The top leadership of the firm has given the employees power to come up with creative ideas of meeting the customers’ needs, cutting of costs of operation, or reducing time that it takes to deliver products to the customers. Any idea that goes through the evaluation process successfully and is finally adopted earns the innovator financial and social benefits within the firm (Kouzes & Posner, 2003).

This has created a positive competition within the firm where employees are always making efforts to ensure that they invent better ways of delivering high value to the firm. This explains why this firm has achieved massive success in its market performance over the recent past.

Leadership and financial planning

In order to achieve success, organizations need to have proper financial planning system that will help in meeting the needs using the limited resources available. As a leader, it is important to know how to prioritize the needs of a firm. The leader must know the needs that are urgent, those that cannot be ignored, and those which may have a massive impact on the overall performance of the firm.

Such needs should always be prioritized (Collins, 2001). Unnecessary expenses, especially on issues that do not have direct value to the firm, should be avoided at all costs. This means that a leader should have financial literacy.

This will enable him or her to make wise investment decisions that will have a positive influence on the firm. Drilltechniques is one of the emerging Australian firms that have started from humble beginnings, but because of the financial management skills of its leader, it has managed to grow into a large company with a large financial base.

Leadership and external relationships

Another aspect of leadership that has a direct impact on the market performance is the ability to relate well with the external stakeholders. These stakeholders include the government, the competitors, regulatory agencies, and any other body that have direct or indirect impacts on the firm. The days when market rivals viewed one another as enemies are long gone.

Competitors need to work together and face the market challenges as a team as a way of creating a positive competitive environment (Flint, 2012). The leader also needs to find a working relationship with the government and other regulatory agencies in order to ensure that the operations of the firm are smooth.

Leadership and ethics

The leadership of any organization has ethical and social responsibilities to various stakeholders that should be properly fulfilled. It is an ethical responsibility of the management to ensure that the employees are not mistreated in any way within the organization (Gallos, 2008).

The management also needs to ensure that the interests of stakeholders such as the government, shareholders, customers, and the public are taken care of as may be necessary. This will influence the market performance of the company.

Conclusion

It is clear from the discussion above that leadership has a massive influence on the market performance of a company. A firm operates under the guidance of the leader. A leader is expected to understand the internal and external environmental factors, and find a way of making an organisation to maximize on its strength.

The manner in which a leader treats the employees defines the level of output of a firm. The way the leader relates with the external stakeholders and manages the finance of the firm directly influences the company’s ability to achieve success in its market performance.

References

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Aquinas, P. (2006). Organisational behaviour: Concepts realities applications and challenges. New Delhi: Excel Books.

Bass, ‎ B. (2005). Transformational Leadership. New York: Simon & Schuster.

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Clawson, J.G. (2011). Level Three Leadership: Getting Below the Surface. New York: Prentice Hall.

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Matha, B., & Boehm, M. (2008). Beyond the babble: Leadership communication that drives results. San Francisco: Jossey-Bass.

Miller, K. (2012). Organizational communication: Approaches and processes. Boston, MA: Wadsworth Cengage Learning.

Northouse, P. G. (2010). Leadership: Theory and practice. Thousand Oaks: Sage Publications.

Polelle, M. (2008). Leadership: Fifty great leaders and the worlds they made. Westport: Greenwood Press.

Schuttler, R., & Burdick, J. (2010). Laws of communication: The intersection where leadership meets employee performance. Hoboken, NJ: John Wiley & Sons.

Sipe, J. W., & Frick, D. M. (2009). Seven pillars of servant leadership: Practicing the wisdom of leading by serving. New York: Paulist Press.

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