15Leadership and Management Behavior in Multinational Companie.docx

15
Leadership and Management Behavior in Multinational
Companies
Chapter
© 2013 Cengage Learning. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
Learning Objectives (1 of 3)
Know the characteristics of global business leadership.
Describe traditional North American models of leadership,
including trait theory, behavioral approaches, and contingency
theory.
Explain the Japanese performance-maintenance model.
Apply the cultural-contingency model of leadership
Develop sensitivity to national cultural differences in preferred
leadership traits and effective leadership behaviors.
Discuss how national culture affects the choice of leader

influence tactics.
Discuss how national culture influences subordinates’
expectations regarding appropriate behaviors and the traits of
leaders.
Explain the role of transformational leadership in multinational
settings.
Understand how national culture affects a leader’s attributions
regarding subordinates’ behaviors.
Diagnose cultural situations and suggest appropriate leadership
styles to fit them.
Leadership
The GLOBE’s universal definition of Leadership:
“the ability of an individual to influence, motivate, and enable
others to contribute toward the effectiveness and success of the
organizations of which they are members.”
Effective multinational leadership is more challenging than
being a good domestic leader.
Widely different leadership styles may be equally effective in
reaching goals in various cultures.

Global Leadership:
The New Breed
The Global Leader must have the skills and abilities to interact
with and manage people from diverse cultural backgrounds in
their multinational organization.
Characteristics of a global leader:
Cosmopolitan
Skilled at intercultural communication
Culturally sensitive
Capable of rapid acculturation
Global Leadership: Characteristics
Characteristics of a global leader: (cont’d)
A facilitator of subordinates’ intercultural performance
A user of cultural synergy
A promoter and user of the growing world culture
Emotionally intelligent

Three Classic Models:
A Vocabulary of Leadership
The three basic models of leadership entail:
Leadership traits
Leadership behavior
Contingency leadership
Leadership Traits (1 of 2)
Are leaders born or made?
The Great-Person Theory is the idea that leaders are born with
unique characteristics that make them quite different from
ordinary people.
Contemporary views of leadership traits do not assume that
leaders are born.
Although leaders are different, aspiring leaders can achieve this
difference by training and experience.
Leadership Traits (2 of 2)
In the U.S., successful leaders exhibit:
High intelligence & self-confidence
Great initiative
Assertiveness & persistence
A great desire for responsibility and the opportunity to
influence others

A high awareness of the needs of others
U.S. Perspectives:
Leadership Behaviors (1 of 2)
Although leaders have different traits than subordinates, traits
alone do not make a leader.
The behaviors leaders use to manage employees may be more
important.
Classic U.S. studies of leadership reveal two types:
A task-centered leader gives specific directions to subordinates
so that they can complete tasks.
A person-centered leader focuses on meeting the social and
emotional needs of employees.
U.S. Perspectives:
Leadership Behaviors (2 of 2)
The distinction between task-centered and person-centered also
applies to how leaders make decisions:
Leaders who adopt an autocratic leadership style make all major
decisions themselves.
Those who employ a democratic leadership style delegate the
decision-making to subordinates.
The consultative and participative leadership styles falls
midway between the autocratic and democratic styles.

Exhibit 15.1:
Likert’s Four Styles of Management
Japanese Perspectives:
Performance Maintenance Theory (1 of 2)
The Performance-Maintenance (PM) Theory of leadership
represents a Japanese perspective, balancing task- and person-
centered leader behaviors
Has two dimensions
Performance (similar to task-centered)
Maintenance (similar to person-centered)

Japanese Perspectives:
Performance Maintenance Theory (1 of 2)
There are two components of performance function:
Planning component: the leader works for or with subordinates
to develop work procedures
Pressure component: the leader then pressures employees to put
forth more effort and to do good work
Contingency Theories
The Contingency Theories assume that the appropriate style and
leader depends on the situation.
Successful leaders choose leadership style based on situations.
There are two North American contingency theories of
leadership:
Fiedler’s theory of leadership
Path-goal theory
Fiedler’s Theory of Leadership (1 of 2)
Fiedler’s Theory of Leadership holds that managers tend to be
either task- or person-centered leaders.
Success depends on three contingencies or characteristics of
work situation:
The relationship between leader and subordinates
The degree to which subordinates’ tasks are clearly defined

The officially granted power of the leader
Fiedler’s Theory of Leadership (2 of 2)
Effective leadership occurs when the leadership style matchs
the situation.
Fiedler’s Theory suggests that task-centered leadership works
best in situations that are either favorable or unfavorable for a
leader.
Person-centered leadership works best in situations that are not
clearly favorable or unfaborable.
Exhibit 15.2:
Predictions of Leader Effectiveness under Different Conditions
Path-Goal Theory
Using Path-Goal Theory, a leader might adopt one of four
leadership styles, depending on the situation. These four styles

are:
Directive (give subordinates specific goals)
Supportive (show concern for their needs)
Participative (consult with them and encourage)
Achievement-oriented (set goals and reward goal
accomplishments)
Exhibit 15.3:
A Simplified Model of Path-Goal Theory
Path-Goal Theory:
Key Suggestions
When subordinates have high achievement needs, adopt the
achievement-oriented style.
For subordinates with high social needs, adopt the supportive
leadership style.
When the job is unstructured, adopt a directive style or an
achievement-oriented style.

Traits, Behaviors & Contingencies
Leaders have a variety of behaviors they can use to get the job
done.
Most experts now believe that no one leadership trait or
behavior works best in all situations.
A successful leader must diagnose the situation, pick the
behaviors and develop the leadership traits that fit best.
National Context Contingency Model of Leadership (1 of 2)
Successful leadership in multinational companies requires that
managers adjust their leadership styles to fit different
situations.
Learn what local managers do to lead successfully in their own
countries.
Use that knowledge to modify your leadership style
appropriately.
National Context Contingency Model of Leadership (2 of 2)

In a multinational setting, these components are all affected by
the national context:
Leader behaviors & traits
Subordinates characteristics
Work setting
Exhibit 15.4:
National-Context Contingency Model
of Leadership
Leadership Traits and Behaviors in the National Context
People prefer certain traits and behaviors in their leaders
depending on their cultural backgrounds, though some behaviors
& traits are cultural universals.
GLOBE (Global Leadership and Organizational Behavior
Effectiveness) conducted cross-national research of 60 nations
on differences in leadership.
Their study contains insights that can help a manager develop
leadership styles to navigate successfully through a maze of
cultural settings.

Exhibit 15.5
Culture-Free Positively and Negatively Regarded Leadership
Traits & Behaviors
Exhibit 15.6:
GLOBE’s Study Clusters and
Countries Included in Each Cluster
Exhibit 15.7:
Culturally Contingent Beliefs Regarding Effective Leadership
Styles

Exhibit 15.7: (cont’d)
Culturally Contingent Beliefs Regarding Effective Leadership
Styles
GLOBE Findings
Leadership styles vary by country.
Team-oriented leaders preferred in Latin European, East
European and Southern Asian societies.
Participative leaders are preferred by Anglo, Nordic European,
and Germanic European cultures.
Humane leaders preferred in Southern Asian cultures.
All agreed that autonomous leaders and self-protective leaders
universally impeded leadership.
National Context and Preferred Leader Influence Tactics
Influence Tactics are tactical behaviors leaders use to influence
subordinates.
U.S managers favor seven influence tactics
Assertiveness
Friendliness
Reasoning

Bargaining
Sanctioning
Appeals to a higher authority
Coalitions
Exhibit 15.8:
Preferred Leader Influence Tactics
in Four Countries
National Context and Subordinates’ Expectations (1 of 2)
The national context affects Subordinates’ Expectations: what
leaders “should” do and what they may or may not do.
Power distance has profound effects on expectations:
In high power-distance countries, autocratic leadership is
expected.
In low power-distance countries, the leader should forego status
symbols, & involve subordinates in decision-making.

Exhibit 15.9:
Subordinates’ Expectations
under Three Levels of Power Distance
National Context and Subordinates’ Expectations (2 of 2)
Other cultural values affect subordinates’ expectations:
Strong masculinity norms lead to the acceptance of more
authoritarian leadership
Strong uncertainty-avoidance norms lead subordinates to expect
the leader to provide more detail in directions
Contemporary Leadership Perspectives:
Multinational Implications
There are two contemporary approaches to leadership:
Transformational Leadership
Attribution Approach
The GLOBE study found that Transformational Leadership was
considered superior in almost all societies.

Transformational Leaders (1 of 2)
The Transformational Leader:
Articulates a vision
Breaks from the status quo
Provides goals and a plan
Gives meaning or a purpose to goals
Takes risks
Is motivated to lead
Builds a power base
Demonstrates high ethical and moral standards
Transformational Leaders (2 of 2)
Transformational leaders succeed because subordinates respond
to them with high levels of performance, personal devotion,
reverence, excitement about leader’s ideas, and willingness to
sacrifice for the good of the company
Transformational Leaders go beyond Transactional Leadership
which uses punishment and rewards.
The same leadership traits may not lead to transformational
leadership in all countries.

Attributions and Leadership (1 of 2)
The attributional approach to leadership emphasizes the
leader’s attributions regarding the causes of subordinates’
behaviors.
In determining how to respond to a subordinate’s behavior, the
leader makes two key distinctions:
External attribution: factors outside the person and beyond the
person’s control (illness); or
Internal attribution: characteristics of the person (e.g.,
personality, motivation, low ability, etc.)
Attributions and Leadership (2 of 2)
Once leader makes an attribution, the leader responds to the
subordinate based on that assumption.
Internal attribution : behavior corrected or rewarded
External attribution: modify the work environment
Fundamental attribution error: an assumption by a manager that
people behave in certain ways because of internal motivations,
rather than outside factors
Successful leaders make the correct attributions.

Getting the Results: Should You Do What Works at Home?
The contingency view of leadership suggests that managers
cannot assume that successful home leadership styles or traits
will result in equally successful leadership in a foreign country.
Managers need to modify and adapt leadership styles to be
congruent with the cultural setting.
Without adequate cross-cultural training, expatriates may
continue to apply their previously successful home style
leadership in international settings.
Exhibit 15.10: Leadership Behavior and Job Performance of
U.S. Managers in U.S. & Hong Kong
The Cultural Context and Suggested Leadership Styles
Because of the extreme variability among cultures and nations,
there are few prescriptive theories of multicultural leadership.
But there may be some general recommendations based on
research re power distance & uncertainty:
In high power distance cultures, behave more autocratically.

In high uncertainty cultures, remove ambiguity from the work
setting.
Exhibit 15.11:
National Culture and Recommended Leadership Styles
Summary
All multinational managers should strive to become global
leaders.
Chapter 15 provides important information on the nature of
leadership and understanding of leadership in the international
setting.
The Chapter also reviews classic leadership theories and applies
them to the international settings.
Effective leadership is essential for the success of the
multinational company.

Management 88 Read Ahead Notes
While the definition of leadership by Global Leadership and
Organizational Effectiveness (GLOBE) project and European
Foundation for Quality Management (EFQM) may be slightly
different, the former's definition has been widely accepted
universally. According to GLOBE, leadership quality is
demonstrated when an individual can influence, motivate, and
enable others to contribute towards the effectiveness and
success of an organization. More important, we need to be
mindful of the fact that while domestic leadership has its unique
challenges, leadership in the international business environment
comes with its own brand of complexities. However, the global
leader must have essential skills and abilities to interact with
and manage people from diverse cultures. Such persons must
possess identifiable characteristics. He or she must possess
intercultural communication skills, be flexible in operating in
diverse cultures, be able to rapidly acculturate, be adroit at
cultural synergy, and must be emotionally intelligent.
A review of the three basic classical models of leadership will
help us better understand the vocabulary used in multinational
leadership environment. The three models are leadership traits,
leader behavior, and contingency leader. The leadership trait
theory emanates from discussions regarding whether good
leadership is as a result of nature or nurture (i.e., whether
leaders are born or made). This leads us to the great person
theory which states successful organizational leaders are born
with unique characteristics that make them quite different from
others, making them exemplary. Based on a number of
researches conducted, theorists have concluded that while traits
arguments may be valid, behavior of leaders may play a more
important role. The behaviors of those leaders place them into
four categories. The first, the task-oriented leader, concentrates
primarily on assigning subordinates tasks, standards, and
schedules with little consideration for their social and emotional

needs. Second, the person-centered leader is more interested in
the subordinates’ social and emotional needs than in the
completion of assigned tasks. Third, the autocratic leader makes
decisions solely without allowing subordinate contributions.
Last, the democratic leader seeks the input of subordinates in
decision making. Following Rensis Likert's study, another
leadership behavior, the consultative or participative leadership
style, is created. This style falls midpoint of the autocratic and
democratic leadership styles.
It would be a disservice if we failed to discuss the Japanese
perspectives on leader behaviors, considering the slew of
research that has been conducted in that country on leadership
and management. One important theory derived from the
research efforts is the performance maintenance theory. The
two- component performance function (P) asserts that first the
leader works collaboratively with subordinates to develop
procedures, and second the leader exerts pressure on employees
so that they can put in more effort to perform better. The
maintenance component of this theory, (similar to the person-
centered theory), represents leader behaviors that resultantly
promote group stability and social interaction: key identifiers of
the Japanese culture.
However, the question is which one of these leadership styles
should multinationals use, and what are likely to be the
implications? This is where contingency theories come in. The
theories assume that certain situations will demand the use of
different leaders and styles. In other words, the myriad of inter-
related factors (culture, language, business practices, and
national context) will be the key determinants of what
leadership style will be used. Research work has enlightened us
about two North American contingency theories: Fiedler on
leadership effectiveness and path-goal theory. The Fiedler on
leadership style states with regard to the task- or people-
centered leader, his or her success depends largely on
relationships between them and the subordinates, the degree to
which subordinate tasks are easily and clearly defined, and the

officially granted organizational power of the leader. The path-
goal theory states that a leader may use a particular leadership
style as necessitated by circumstances. Those leadership styles
are identified as directive, supportive, participative and
achievement-oriented. Nonetheless, we can agree that culture
and related social institutions affect leadership practices.
Multinationals can rely on the contingency approach in their
leadership styles. The embrace of such an approach requires
making necessary adjustments to fit the national context of
countries of operation. An initial step may be studying the
leadership styles of local managers, which will provide
fundamental knowledge on how to modify their leadership
styles accordingly. National context aside, there may be a need
to use influence tactics (a kaleidoscope of tactical behaviors
leaders use to influence subordinates). Examples of such tactics
are assertiveness, friendliness, reasoning, bargaining, and
collaborations. We know, however, that different cultures would
require the use of different tactics.
In discussing the multinational implications for contemporary
leadership perspectives, we touch on two very important
contemporary approaches to leadership: transformational
leadership and attribution approach. Transformational leaders
are characterized as those with the ability to articulate a vision,
break from the status quo, set attainable goals and plans, take
risks, ready to lead, able to build a power base, and demonstrate
high ethical and moral standards. However, it is well argued
that transformational leaders can only exist when there is need
for major transformation, in times of crisis and other
undesirable phenomena. Attributional approach to leadership
stresses that leaders behave in a certain way in response to what
they feel may be responsible for subordinate behaviors. The
attributions are classified into external attribution (factors
beyond the control of subordinates, e.g., lack of training) or
internal attribution (the personal characteristics of the
subordinate, .e.g., laziness). Unfortunately, organizational
leaders are not perfect, and they can be flatly wrong in their

internal attributions! When such errors are made by leaders
claiming that internal problems may be responsible for
subordinate behavior rather than external factors is called
fundamental attribution error.
So, what should multinationals do to prevent this? The answer
is to gain a strong knowledge of the culture. More important,
the multinationals should try to not import their own culturally
biased attributions into the host country of operations.
In this lesson, we have been opportune to review several
leadership theories that have shed some light on some of the
different kinds of leadership styles. More important, we have
been able to determine implications for multinationals and tools
they will need to lead internationally. We should be mindful of
the fact that leadership styles that are used will depend largely
on the national context, local culture, and social institutions of
target country and other related variables.
UNIT VIII STUDY GUIDE
Leadership and Management Behavior in Multinationals
Management 88 Questions
1.) Explain the leadership traits and behaviors you think may
negatively impact organizational effectiveness in multinational
companies.
2.) Do you think that multinational managers must understand
subordinate expectations in order to lead effectively? For a
country with high power distance, which leadership style would
you recommend? Why?
3.) Do you think that transformational leaders are similar
regardless of cultural background or are there different types of
transformational leaders for each cultural group? Explain to
support your answer.
4.) What is the fundamental attribution error? What are some
implications for leadership in multinationals?

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