ACTION LEADERSHIP, MULTI-CONTINGENCY THEORY AND FIT
2. THEORETICAL PERSPECTIVES ON LEADERSHIP STYLE AND STRATEGY
2.1 Leadership style
In terms of relating leadership style to the Multi-Contingency Model it is worthwhile to take point of departure in the information processing view. By taking an information processing perspective, a leadership style is reflective of the CEO's information processing patterns and behaviours, i.e. it is consistent with a cognitive view of leadership. This way, leadership style can be related to other contingencies by judging whether the CEO's information processing capacity fits the information processing demands, as determined by contingency factors.
Burton and Obel's (2004) Multi-contingency Model is one of the few frameworks which focuses on leadership style as information processing.
They (p. 100-103) summarize several traditional leadership models on six dimensions: preference for delegating decisions, attitude towards proactive or reactive decision-making, time horizon of decisions, the level of detail in decision-making processes, the degree of risk aversion, and the preference for motivational or control-oriented leadership. A CEO who is characterized by low preference for delegation, reactiveness, short-term horizon, high level of detail, high risk aversion, and preference for control over motivation is similar to literature's theory X, as opposed to theory Y (McGregor, 1969), autocratic as opposed to democratic (Likert, 1967); or manager as opposed to leader (Zalesnik, 1979; Kotter, 1988). An advantage of Burton and Obel's framework is that it captures the variety inherent in managerial decision- making by taking an explicit focus on information processing. The six dimensions measured as high or low capture considerable idiosyncrasy in the CEO's use of information. The question is, however, whether their one dichotomous representation of leadership allows sufficient detail. It would seem likely e.g. that a leader could rate high on preference for delegation while at the same time rate low on riskiness.
In their behavioral theory of the firm, Cyert and March (1963) describe how decisions are the result of what they call problemistic search which is motivated by the problem, simple-minded and biased by the experience of the decision-maker. Further, they describe how decision-makers avoid the uncertainty of long-run anticipation and commitments by focusing on the immediate problems and utilizing short-term feedback. Thus, decision- makers use reasonable heuristics rather than normative optimization - an information-processing view of managers.
When relating the Cyert and March's concepts of problemistic search and uncertainty avoidance to the six Burton and Obel (2004) dimensions, they
seem to capture their dimensions well. For instance, the managerial propensity to delegate is a reasonable decision-making heuristic when a CEO finds it efficient in terms of the available time, and when the CEO believes decisions made by others will be congruent with her own preferences. Similarly, the Burton and Obel dimensions of risk avoidance, preference for detail, reactiveness, short term decision-making, and control vs. motivation can be summarized by the notion of uncertainty avoidance.
One way to avoid the uncertainty of long-run anticipation and commitments is to simply avoid correctly anticipating events in the distant future by using short-run reaction to short-run feedback, i.e. solve pressing problems rather than developing long-run strategies and avoid anticipating the environment by negotiating with it.
Thus, building upon an information-processing perspective, leadership styles can be described and measured by a manager's preference for delegation and a manager's preference for uncertainty avoidance. Here the cognitive link is that leaders use information to define problems or identify misfits; then subject to their own style in terms of preference for delegation and preference for uncertainty avoidance, they develop action plans or strategies which are consistent with the leadership preferences; and the fit is important in terms of performance.
2.2 Strategy
Probably two of the most well known, competitive strategy frameworks are Porter's (1980) and Miles and Snow's (1978). Porter (1980) describes two generic strategies: low cost and product/service differentiation. Even though usually depicted as generic and opposing strategies (Govindarajan, 1988, Venkatraman & Camillus, 1984), Porter himself argues that the pursuit of one strategy does not allow the ignorance of the other - there will always be trade-offs. The original Miles and Snow (1978) model addresses organizational adaptation seen as a response to three simultaneous problems:
entrepreneurial, engineering and administrative problems which are confronted differently. In order to describe different responses to the problems they developed a four-category typology: defenders, prospectors, analyzers, and reactors. Nicholson, Rees and Brooks-Rooney (1990), and Burton and Obel (2004) extended this typology to include a distinction between analyzers with innovation and analyzers without innovation.
Analyzers with innovation can have innovation with regular production, while analyzers without innovation merely adopt new ideas by copying from competitors.
While Porter's framework stems from industrial economics and consequently argues that the effectiveness of strategies is dependent on the
Action leadership 185 industry, Miles and Snow explicitly acknowledge the strategic choice
argument and argue that the effectiveness of their strategies is dependent on the management philosophy of the firm. Because this fits well with our ideas of uncertainty and information processing, we chose their framework as point of departure. Miles and Snow (1978) viewed their categories as being points on a scale going from defenders to prospectors with the analyzers rating high on both efficiency and effectiveness, and reactors as outliers. The question is, however, whether such dichotomous ratings sufficiently capture the richness of strategic typologies. Instead, it could be argued that the two dimensions, efficiency and effectiveness, are independent, thereby making it possible to conceptually capture whether organizations pursue strategies that are highly efficient and effective at the same time.
Clearly, many factors make up a firm's strategy. Essentially, however, strategy is about adapting the organization to its environment under uncertainty - either proactively or reactively (Mintzberg, 1978). March (1991) discussed how organizations, when relating to their environments, must continuously search for a mix of exploration and exploitation.
Exploitation includes: refinement, choice, production, efficiency, selection, implementation, and execution (March, 1991:71). Exploration includes:
search, variation, risk-taking, experimentation, play, flexibility, discovery, and innovation (March, 1991:71). Organizations search for a mix of the two:
exploration alone creates innovativeness, but is likely to result in too many underdeveloped ideas; exploitation alone, although assuring efficiency and perhaps competitiveness, is likely to lead to inertia. Based on this, a firm's strategy will always be the outcome of decisions made between exploration and exploitation. March's (1991) concepts have usually been used as constituting two ends of a continuum. We argue that organizations can rate high on exploration and exploitation independently. Thus, exploitation and exploration should not be seen as end-points on the same scale, but rather be depicted as orthogonal dimensions in a two-dimensional space. Relating the Miles and Snow (1978) framework to the March (1991) categories, the prospector strategy would rate high on exploration, and the defender strategy high on exploitation. The analyzer with innovation strategy, however, would be expected to rate high on both exploration and exploitation, and the analyzer without innovation would be expected to rate high on exploitation, but less high on exploration than the analyzer with innovation. The two- dimensional space also seems consistent with Porter's argument that the pursuit of one strategy does not allow the ignorance of the other. Thus, with two dimensions rather than just one, we obtain more accuracy in the description of strategy types, and provide a better operationalization of how firms prioritize their resources between exploration and exploitation.