BUSS4 Example Essay - Leadership & Change

Here is a final example BUSS4 essay using the PAnEL (paragraph) and AJIM (conclusion) approach to structuring BUSS4 essays.

QUESTION

To what extent is new external leadership essential in order for a business to achieve successful change?

INTRODUCTION

When businesses need to achieve significant change they often turn to a new leader from outside the business. Is this the best approach? In this essay I will examine whether new external leadership is an essential part of driving change or whether internally-appointed leaders are just as likely to be successful.

One reason why new external leadership is essential in order for a business to achieve successful change is that the change required is likely to have arisen because of an inappropriate strategy by the previous leader, indicating that a new direction is required. This line of analysis can be explained as follows. Businesses, in particular large ones, often suffer from strategic drift - which means their strategy becomes disconnected from a changing external environment. Sometimes this is because the leadership becomes complacent and assumes that previous business success will continue despite changes to the nature of competition. As a consequence of this complacency, a business may lack investment in innovation or the firm becomes too bureaucratic in terms of decision-making. This can then lead to a business losing its competitive edge, either because its costs are too high or it lacks the innovation required to keep up with more agile competitors. In this situation it is the existing leadership that needs replacing, ideally by leaders who have not allowed the business to drift off course. Put simply, a new strategy needs a new perspective which is most likely to come from a new external leader. Two examples help illustrate this line of analysis. When Howard Schultz returned as CEO of Starbucks he found a business that had suffered from strategic drift: it had over-expanded in the US and had lost much of the focus on customer experience that had previously made it successful. Schultz quickly spotted the need for a new strategic direction having seen from the outside what the problems were and so was better placed to implement a turnaround strategy. Similarly, when Adam Crozier joined ITV as a new CEO (from Royal Mail) he identified a business that had failed to respond to the changing digital environment in the TV industry and needed to scale back after a failed diversification strategy by the existing leadership team. His external perspective and experience of other industries helped identify a much clearer sense of strategic direction which has resulted in ITV achieving significant change in recent years. Linking back to the essay, these examples argue strongly for the importance of external leadership as the stimulus for putting a business strategy back on track, particularly where a business has become complacent as a result of previous success.

Another reason why new external leadership is essential for a business to achieve successful change is that new external leadership will have a mandate for change, which means it will be better able to overcome resistance to change. This analysis focuses on the importance of effective leadership in being able to both identify and respond to the forces against change in a business. Lewin's Force Field Analysis highlights the importance in any change management process of identifying the key forces resisting change so that these can be addressed in order for change to be possible. Under Lewin's model, a key role of leadership is to find ways of weakening the forces resisting change so that they are overcome by the driving forces, such as the need for better business performance or to respond to competitive threats. It can be argued that stakeholders such as employees and trade unions are more likely to accept the need for change if new leadership is seen to be coming from outside the business and has a clear mandate from shareholders to push change, no matter how painful it is to those stakeholders. Two contrasting examples can be used to support this analysis. An example where change proved too hard because the new leader was internal, not external, was Barclays. Antony Jenkins was appointed as CEO having worked for Barclays for many years and he tried to change Barclays' organisational culture through Project Transform. However, perhaps because Jenkins was an "insider" he found it very difficult to overcome Lewin's resistance forces and was subsequently removed as CEO. Contrast this with Moya Greene at Royal Mail. Greene was an external appointment as CEO and faced significant forces resisting change, particularly a heavily-unionised workforce and long-standing organisational structures that she thought impeded Royal Mail's productivity. What enabled Moya Greene to lead one of the most successful change management projects in recent years was of course her experience and personality, but also the clear mandate she had as someone coming into Royal Mail from outside to drive a new strategy. Linking back to the essay question, it is clear that in order for change to be possible (and forces resisting change to be overcome by forces driving change) a leader needs a strong mandate. Coming from the outside is more likely to provide that mandate.

A reason why new external leadership may not necessarily be essential for a business to achieve successful change is that internal leaders are just as capable of driving successful change as an external leader. The logic of this analysis is as follows. A new leader drawn from the existing business is more likely to have in-depth experience of the business, both in terms of its competitive strategy and also the important organisational cultural issues that need to be considered as part of change. Experience and sensitivity to culture matter. Taking the culture argument further, a leader with deep experience in a business will understand what Handy called "the way we do things around here" and will have empathy with what Schein described as the "organisational paradigm" (the unspoken understanding of what makes the organisation successful). A leader immersed in the existing organisational culture ought to be better placed to understand the key internal forces resisting change and identify a strategy to overcome them by bringing the whole organisation with him or her. Two examples help support this line of analysis. Firstly, Kazou Hirai who was appointed CEO of Sony in 2012 after previously leading Sony's PlayStation division. He stated that "Sony Must Change, Sony Will Change" as he launched a significant change and retrenchment strategy. Hirai has slowly managed to address the forces resisting change at Sony partly through his appreciation of and sensitivity to the strong organisational culture at Sony, whereas the previous external leader (Howard Stringer) was unable to do so. Tony Hall, the CEO is another example of an internally-appointed CEO who has successfully led complex change - this time at the BBC. Organisational culture has been particularly important too in this example, as the BBC has had to restructure in the face of political pressure, cuts in licence fee income and the impact of scandals such as Jimmy Saville. Linking back to the essay question, the success of CEOs such as Kazou Hirai and Tony Hall suggests that there is a case for internal leaders being as effective as external leaders in driving successful change.

Overall, I believe that new external leadership, whilst not absolutely essential, is most appropriate in order for a business to achieve successful change. This is because of the need for businesses needing change to be led by people with a fresh perspective, not restricted by being associated with a previous failed strategy or poor business performance. Of course there is no guarantee that a new external leader will prove able to lead successful change. There are many examples such as Marissa Mayer (Yahoo), Stephen Elop (Nokia) and Sir Howard Stringer (Sony) where an external CEO has struggled with the challenge of change, often because the underlying strategic weaknesses of the business cannot be addressed through new leadership alone. New leaders, whether external or internal, need the resources to be able to drive change and always need a little luck too! However, the main reason why new external leadership is so important for change is the need for that leader to have a clear mandate to push for change. A new CEO coming from outside the business is free from the failures of the past and can start with a clean sheet of paper.