Introduction
21st-century business models aim to look beyond shareholder value in assessing organizational performance. CEOs adopt an approach that addresses the needs of all stakeholders while staying aligned with their business objectives. However, various studies have argued that staying focused on the main goal while serving the stakeholders is challenging.
An article by Lemoine et al. (2021) examines the ability of an organization to serve its shareholders while ‘helping’ other stakeholders effectively. Although it is the right thing to do, businesses will often prioritize shareholder success over other considerations.
An article by Hartnell et al. (2020) presents a different perspective on the subject by examining the problem from a leader’s viewpoint. The authors demonstrate that a servant leader may not sufficiently achieve financial performance goals when their primary focus is on serving stakeholders. These arguments are worth responding to because servant leadership theory is an essential practice for modern and socially responsible businesses. Therefore, although servant leadership is a responsible business-oriented aspect, it challenges organizations to balance meeting performance goals and adequately serving stakeholders.
Lemoine et al.’s Article
Author Arguments
The article “Organizational performance with a broader focus: The case for a stakeholder approach to leadership” by Lemoine et al. (2021) examines organizational performance from the perspective of serving all the stakeholders. The authors’ concerns are whether or not businesses can thrive by focusing on stakeholders beyond shareholders. The primary focus of profit-making businesses is to maximize profits by prioritizing the shareholders ‘ needs. Businesses also demonstrate concern for their stakeholders by adopting a servant leadership model.
The servant leadership concept prioritizes stakeholders over shareholders. It serves customers, employees, suppliers, the government, and the community (Lemoine et al., 2021). The theory suggests that the organization should focus on serving its stakeholders while maximizing profits. The authors conclude that balancing the performance goals and stakeholders’ needs proves novel and unintuitive.
Personal Opinion
I fully agree with the arguments made by Lemoine et al. (2021). In the 21st-century business world, the intention and interest of all business investors are to earn maximum returns from their investments (Abeysekera & Fernando, 2020, p. 107). Investors expect these results from organizations that continue to be socially responsible to all stakeholders. However, their profits are reduced when firms lose their shareholders’ focus by concentrating more on the stakeholders.
For example, my organization is socially responsible and participates in charitable activities from time to time. Employers adopt a vision of serving all stakeholders while staying aligned with their business objectives. Most employees attend the function on the day of a charitable function to represent the firm socially. Today, the employees in charitable events do not contribute financially to the business. The organization records fewer profits on the days of these events than on regular working days.
Another example is that my organization occasionally discounts the suppliers and customers. During these days, the business earns fewer profits than on other regular sales days. The organization also financially supports employees and other community members by attending their events.
The firm allocates less than 20 days a year to act socially responsible by serving its stakeholders. If the firm increases its expenses these days, it will lose more money than it gains. In return, the organization would not meet the shareholders’ interests and needs. Every business aims to maximize shareholder value in all seasons (Inkpen & Sundaram, 2022). Therefore, it is accurate to argue that balancing adequate organizational performance with sufficiently serving stakeholders is merely a fiction.
Application
I would apply servant leadership theory to my leadership role by serving more stakeholders and contributing to the organization’s goal. Although stakeholders contribute to a business’s growth, not all contribute to the shareholders’ interest (Northouse, 2022). Customers, suppliers, and employees directly contribute to business growth through their performance.
Therefore, I would focus on supporting these major stakeholders to improve my leadership capabilities. In doing so, I would practice all the servant leadership characteristics, including valuing people, trusting, listening, caring, and humility (Northouse, 2022). These elements of a servant leader would enable me to serve effectively across all stakeholders, while paying particular attention to the selected few.
I would focus on employee development to increase morale and productivity (Ocampo et al., 2018, p. 6). I would then develop favorable terms for customers and suppliers to benefit from while working with the organization. These terms would include occasional discounts that would increase business sales and general performance.
Hartnell et al.’s Article
Author Arguments
The article “Does Servant Leadership’s People Focus Facilitate or Constrain Its Positive Impact on Performance? An Examination of Servant Leadership’s Direct, Indirect, and Total Effects on Branch Financial Performance” by Hartnell et al. (2020) examines the impact of servant leadership. The authors aim to investigate whether a servant leader’s focus on people constraints has a positive impact on organizational performance. Servant leadership has a direct, positive impact on employees. The theory dictates that a servant leader prioritizes people over business products.
Hartnell et al. (2020) say that servant leadership duties to employees constrain organizational performance through organizational citizenship behaviors. When working as a team, the servant leader and his team might be pressured to increase their helping behaviors, thus losing focus on performance goals. Therefore, maximizing servant leadership theory in an organizational unit can deliver a supportive climate but may also result in insufficient financial performance.
Personal Opinion
I fully agree with the arguments of Hartnell et al. (2020). Servant leadership that mentors employees to practice organizational citizenship behaviors may fail to meet a company’s financial goals. According to Liao et al. (2021), servant leaders can help employees to their depletion. This argument suggests that servant leaders may become so focused on their people that they lose sight of their organizational duties and goals.
For example, my unit leader in my organization encourages us, employees, to serve beyond our assigned duties. He mentors us to always be alert and ready to serve the firm’s best interests. However, we can only assist with other organizational duties once we have completed our assigned work. Servant leaders have direct duties and responsibilities to influence employees to achieve performance goals.
Furthermore, the firm expects the leaders to support employees in increasing their productivity. Hariharasudhan et al. (2022) state that effective citizenship behavior is formulated towards meeting business goals. If the leader mentors employees to engage more in helping behaviors, they will fail to meet financial goals.
For example, while employees are expected to be at work, our unit manager may request us to help move stationery materials to a new office. Other employees and I will be happy and willing to help, having received these instructions from our mentor. In the evening, we will not have finished our allocated duties for the day, which will reduce our overall productivity. Therefore, servant leaders must know their influential limits by focusing on performance goals.
Servant leaders who are overly attached to organizational citizenship behavior could grow irrelevant to the business. For example, if the leader encourages employees to do more work but fails to fulfill their duties, the employees could be fired. According to Bilal et al. (2020), effective servant leadership should mentor and protect employees from job insecurities.
If an employee loses their job due to underperformance and the reason is that their manager assigns them irrelevant work, then their managers are unreliable. Allocating extra duties to employees could also interfere with their work morale. Profit-making organizations cannot rely on leaders who, instead of motivating, demotivate employees. Therefore, indulgence in climate support reduced the chances of attaining performance goals.
Application
I would apply servant leadership theory and utilize article-based knowledge to focus on supporting employees and increasing their productivity. Bilal et al. (2020) noted that effective servant leadership enables employees to perform their duties to the best of their abilities. I would apply this concept by encouraging employees to go beyond their allocated duties, which directly enhances their performance (Northouse, 2022).
For example, employees can conduct additional research on a subject to expand their knowledge and expertise. I would also encourage them to offer a helping hand sometimes, but only when convenient. Employees must prioritize their work by eliminating and avoiding tasks that could interfere with their productivity.
Conclusion
Both articles suggest that balancing the roles of a servant leader and achieving performance goals is challenging. Servant leadership theory emphasizes that leaders should focus more on supporting their team members than on meeting goals. Indeed, leaders are expected to develop a supportive climate for employees and other stakeholders, which overlooks the need to sell a product. Organizations that focus more on stakeholders tend to lose sight of their shareholders’ interests. Effective servant leadership entails striking a balance between supporting stakeholders and achieving organizational goals.
Applying this aspect to practice would mean serving stakeholders while prioritizing the needs of shareholders. It could be problematic for leaders who encourage employees to be more helpful. Promoting organizational citizenship behavior could cause pressure on the employees.
The employees could abandon their duties and responsibilities while they help, hence reducing their overall productivity. Applying servant leadership to enhance leadership capabilities involves prioritizing the organization’s goals. Therefore, the effective promotion of organizational citizenship behavior acknowledges and prioritizes both performance goals for employees and the team.
References
Abeysekera, A.P. and Fernando, C.S., 2020, ‘Corporate social responsibility versus corporate shareholder responsibility: a family firm perspective,’ Journal of Corporate Finance, vol. 61, pp.101-370, Web.
Bilal, A., Siddiquei, A., Asadullah, M.A., Awan, H.M. and Asmi, F., 2020, ‘Servant leadership: a new perspective to explore project leadership and team effectiveness,’ International Journal of Organizational Analysis, vol. 29, no. 3, pp. 12-32, Web.
Inkpen, A.C. and Sundaram, A.K., 2022. ‘The endurance of shareholder value maximization as the preferred corporate objective,’ Journal of Management Studies, vol. 59, no. 2, pp.555-568, Web.
Hartnell, C.A., Karam, E.P., Kinicki, A.J. and Dimotakis, N., 2020, ‘Does servant leadership’s people focus facilitate or constrain its positive impact on performance? an examination of servant leadership’s direct, indirect, and total effects on branch financial performance,’ Group & Organization Management, vol. 45, no. 4, pp.479-513, Web.
Lemoine, G.J., Eva, N., Meuser, J.D. and Falotico, P., 2021, ‘Organizational performance with a broader focus: the case for a stakeholder approach to leadership,’ Business Horizons, vol. 64, no. 4, pp.401-413, Web.
Liao, C., Lee, H.W., Johnson, R.E. and Lin, S.H., 2021, ‘Serving you depletes me? a leader-centric examination of servant leadership behaviors’ Journal of Management, vol. 47, no. 5, pp.1185-1218, Web.
Northouse, P.G. (2021) Leadership: theory and practice, 9th edn, Washington, D.C., SAGE Publications, Web.
Ocampo, L., Acedillo, V., Bacunador, A.M., Balo, C.C., Lagdameo, Y.J. & Tupa, N.S., 2018, ‘A historical review of the development of organizational citizenship behavior (OCB) and its implications for the twenty-first century,’ Personnel Review, vol. 47, no. 4, pp. 1-13, Web.