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Leadership Theories in the Automotive Industry Report

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Updated: Aug 4th, 2020

Introduction

The automotive sector is a business segment which is strongly associated with success, innovation, and generally serves as a flagship of leadership practices to the rest of the businesses worldwide. Many prominent leadership strategies and approaches originate from it, with Fordism being the brightest example. At the same time, the changes in the industry and the economic environment of the recent years have led to the situation where the leaders of the field lost their definitive advantage and faced a risk of closure. Such setting triggered a radical shift in leadership practices. The following paper aims at exploring the use of different leadership theories characteristic for the automotive industry. By reviewing the available academic sources on the matter, we aim at determining the preferred leadership theories at different points in time of the industry, identifying the reasons for change, outlining the benefits and challenges of each theory pertinent to the field, and provide the recommendation that would improve the situation.

Literature Review

With the exception of the gradual shift towards customer-oriented practices, the automotive industry showed little change in leadership practices for almost half a century, with command and control being the preferred strategy (Crossan, Lane, & White, 1999). However, the recent alternations in the global market dramatically changed the requirements for leaders (Hernandez et al. 2011). While there is no conclusive evidence of the prevalence in specific leadership theories, several inquiries illustrate a shift in characteristics expected from the leader in automotive industry. For instance, a study by Spencer Stuart’s automotive practice (2012) suggested the priority of result orientation, global perspective, strategic orientation, team-leading skills, and communication, as top five priorities. Interestingly, the same survey highlighted a dominant requirement for alliance and partnership management as desirable functional experience for a leader in the industry (Spencer Stuart’s Automotive Practice 2012). The appendix Chart 1 presents the most important characteristics for future automotive leaders (Spencer Stuart’s Automotive Practice 2012).

A study by Korn Ferry Institute produced somewhat similar results, with strategic agility as a preferred attribute of a leader, followed by innovation, capacity for handling ambiguity, inspirational skills, and cultural adaptability (Korn Ferry Institute 2015).

While inspiration, teamwork, and, to some degree, innovation, are relatively common candidates, all other categories are results of the changing economic landscape. Considering the identified priorities, we can align the demand for leaders in automotive industry with the transformational leadership theory since it offers global perspective and requires most of the said traits, such as adaptability, flexibility in unfamiliar situations, innovation, strategic orientation, and inspiration capacity, among others (Hernandez et al. 2011).

Another suitable theory is authentic leadership, which offers good communication, inspiration, and cultural adaptability (Ilies, Morgeson, & Nahrgang 2005). However, it lacks feasible strategic orientation currently required by the industry. Finally, transactional leadership theory, which has strong economic principles at its core, has potential application advantages (Hernandez et al. 2011). Besides, according to Wang, Waldman, & Zhang (2014), it is associated with result orientation, which is among the current priorities in the sector. However, it also introduces uncertainty, since the diminishing stability of the automotive market can weaken the contingent reward possibilities.

Application

With the specific set of traits in mind, we can predict the positive outcomes of the shift towards transformational leadership theory. The orientation at innovation will help meeting the expectations of the modern customers who are predisposed towards the use of novel technologies which are often beyond the capacity of the producers. The cultural adaptability will help attaining a global perspective in the historically conservative industry to reach out to the new audiences and seek recognition on the global market.

The proficiency in dealing with ambiguity will improve the stability of companies in the rapidly changing economic environment while the strategic orientation will allow closer collaboration with managerial department (Rowe 2001). Finally, alliance and partner management is arguably the most important trait in the light of recent advent of electric and hybrid vehicles. Since they require significant presence of unfamiliar technology, the companies which are able to foster partnerships are expected to perform more cost-efficiently than those expanding their field of operation independently (Mathieu et al. 2008).

It is important to note that transformational leadership theory contains several factors which can be hampering in the automotive field. Most prominently, the reliance on change and innovation is expected to conflict with the traditional nature of many industry leaders in the field. Resistance to change, backed by the existence of tremendous resource bases, can pose as a significant barrier to transformational leadership practices unless a merge occurs that will add a collective factor (Hernandez et al. 2011).

Next, transformational leadership is often characterized with broad scope of operation, which sometimes leads to significant shortcomings in small details and technicalities (Burke et al. 2007). As a result, the growing sophistication of the automotive industry may potentially face consequences of lacking attention to specifics. Finally, transformational leadership is sometimes criticized for the inherent reliance on individual training which poses certain challenges considering the volume of the industry in question and introduces the possibility of uneven development.

Recommendations

Having considered the strengths and weaknesses of the transformational leadership theory applied to the automotive industry, we suggest several adjustments aimed at minimizing adverse effects. First, leaders need to pay closer attention to collaboration with technology department to ensure the inclusion of important details coming from unfamiliar industries (e.g. the integration of IT, hybrid technologies, and autonomous technologies). Second, they need to ensure the presence of both horizontal and vertical communication channels and shared values to reinforce trust and achieve uniformity of development and minimize uneven distribution of proficiency (Wang, Waldman, & Zhang 2014). Finally, it is necessary to utilize inspirational capacity to communicate the necessity for change across the company to ensure the pace and adaptability of the industry and overcome the newly emerging challenges in the field. With these recommendations in mind, the transformational theory is expected to improve the performance of the automotive industry.

Reference

Burke, C., Sims, D., Lazzara, E. and Salas, E. (2007). Trust in leadership: A multi-level review and integration. The Leadership Quarterly, 18, pp.606-632.

Crossan, M., Lane, H. and White, R. (1999). An Organizational Learning Framework: From Intuition to Institution. The Academy of Management Review, 24, p.522.

Hernandez, M., Eberly, M., Avolio, B. and Johnson, M. (2011). The loci and mechanisms of leadership: Exploring a more comprehensive view of leadership theory. The Leadership Quarterly, 22, pp.1165-1185.

Ilies, R., Morgeson, F. and Nahrgang, J. (2005). Authentic leadership and eudaemonic well-being: Understanding leader–follower outcomes. The Leadership Quarterly, 16, pp.373-394.

Korn Ferry Institute. (2015). Web.

Mathieu, J., Maynard, M., Rapp, T. and Gilson, L. (2008). Team Effectiveness 1997-2007: A Review of Recent Advancements and a Glimpse Into the Future. Journal of Management, 34, pp.410-476.

Rowe, W. (2001). Creating wealth in organizations: The role of strategic leadership. Academy of Management Executive, 15, pp.81-94.

Spencer Stuart’s Automotive Practice. (2012). Web.

Wang, D., Waldman, D. and Zhang, Z. (2014). A meta-analysis of shared leadership and team effectiveness. Journal of Applied Psychology, 99, pp.181-198.

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