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Management Concepts: Lippo Group Case Analysis

Introduction

Regardless of their higher profitability and continuous business growth, Lippo Group organisation is not without significant management challenges. Under the leadership of James Riady, the organisation has managed to command lead in the Indonesian real estate industry in terms of its growth and expansion. However, James Riady failed in embracing ethics and good business conduct. It has not only affected his reputation, but also had negative implications on the overall business reputation. The constant engagement of the organisation in legal disputes with its competitors has further escalated the issue of bad corporate reputation. As reported by Lourenço, Callen, Branco and Curto (2014),a good corporate reputation is fostered by the leader and is vital in enhancing the organisation’s worth and supporting a sustained competitive advantage. Even though the current leadership has embraced charismatic leadership style, there is need for the management to move towards a transformational leadership style which encompasses both charisma and honesty to ensure that the entire organisation develops a positive business reputation. The current paper argues that the leaders of Lippo group needs to change their leadership approach to transformational leadership.This will ensure that the leaders uphold a higher level of integrity in their management.

  • Issue Identification

The management issue identified from the case is that Lippo group leadership has failed to develop a sustainable positive corporate reputation. According to Men (2014),the behaviors and actions of a leader have significant influence on the image of the organisation. Failing to adhere to the required business code of conduct as well as lack of honesty in any business will lead to the subjects and the community at large, developing a negative attitude towards the leader and the organization at large (Men, 2014). On the contrary, a strong positive reputation exhibited by the leadership calls for a high level of trust, respect and credibility from the entire stakeholders to the organization (Lourenço, Callen, Branco&Curto, 2014). This justifies the need for the leadership to develop a positive reputation.

Focusing on the case of Lippo group organisation, the leadership involvement in the USA politics that was termed a “conspiracy to defraud the United States” largely affected his reputation. The involvement of the leadership in legal disputes with individuals and organisations that challenges their actions also intensified the strong negative reputation. The protests by the Muslim community that the leadership of Lippo Group does not take into consideration the ethical and social values of the Muslims in their educational program also painted the leader as unethical in his dealings.This has further deteriorated his reputation. The bad leadership reputation is an issue since it has not only affected the leaders to the organisation, but also led to many of the stakeholders loosing trust in the organisation, making it prone to significant loses if the issue is not addressed.

  • Critical Discussion

Emotional intelligence theory focus on the ability of individual to understand and manage their emotions, recognize the emotions of others that they interact with, as well as manage effectively the resulting relationships. In the context of leadership, proponents of the theory argue that successful leaders do not only have the technical skills required in managed but also have learnedthe vital aspects of emotional intelligence (Siegling, Nielsen &Petrides, 2014). According to Kaygin, Yilmaz, Güllüce and Salik(2016)the five components of emotional intelligence theory, including self-regulation, self-awareness, social awareness, motivation and relationship management are associated with various aspects of effective leadership such as integrity, intuitive ability, honesty, empathy and motivating power. Leaders that adhere to the identified five components of emotional intelligence theory maintains a higher level of self-control when handling issues, have an understanding of their strengths and weaknesses, focus on accomplishing the set organisational goals and engage in diplomatic management of conflicts or changes arising within the organisation (Føllesdal&Hagtvet, 2013). Mastering the elements of the theory therefore allows the leaders to manage effectively any changes arising within the organization and to develop positive relationship with all the individuals that they interact with including the entire stakeholders to the company.

The emotional intelligence theory has been adopted in explaining leadership reputation as an aspect of effective leadership. A number of scholars argue that positive relationships between the leaders and their subjects as well as the external stakeholders can only be observed when the said leader is able to deal with the rising emotions effectively(Føllesdal&Hagtvet, 2013). Reputation is about perceptions that can either be based on justified or unjustified assertions; dealing with negative perceptions therefore requires a leader to have self-control, understand his weaknesses, respond appropriate to feelings and possess the necessary social skills required to amicably resolve conflicts without destroying the relationships between the organization and its stakeholders(Siegling, Nielsen &Petrides, 2014). Mastering the elements of emotional intelligence theory is therefore a sure way of restoring one’s reputation.

Despite the wide application of the Emotional intelligence theory in the development of effective leadership the theory has received criticism from various scholars. Cherniss, Extein, Goleman and Weissberg(2006)pointed out that that the claim that leaders with a high emotional intelligence are effective in their management is ludicrous. According to him having a clear understanding of one’s emotions and the emotions of others, give an opportunity to the leaders to disguise their feelings. Leaders with ill motives towards certain actions can use their understanding of emotions to manipulate their subjects; the effects are likely to be devastating. McCleskey(2014) has also pointed out that mastering the elements of the emotional intelligence theory does not translate to change of behavior thus cannot be associated with effective leadership. Change of behavior requires hard work, discipline and time and not just simple awareness of emotions, thus having a higher emotional intelligence does not necessarily translate to effective leadership.

In dispute of the assertions made to justify the irrelevance of the emotional intelligence theory pointed out that despite the time and commitment required for leaders to change their behavior understanding one’s emotions and being able to manage them is a prerequisite in the initiation of behavior changes. In fact, Kaygin, Yilmaz, Güllüce and Salik(2016) assert that the process is hastened when one has self-control, know his/her weaknesses and has the needed social skills to resolve conflicts without affecting negative the relationships developed with others. Leaders who perform well in the identified elements of the emotional intelligence theory are likely to experience a hastened change of behavior to acquire the desired attributes of an effective leader(Føllesdal&Hagtvet, 2013). This therefore justifies the application of the theory in the development of effective leadership that encompasses honesty, empathy, good reputation, and motivating power.

  • Recommendations

To improve the organization’s reputation, the leaders should focus on improving his reputation. According to Lanaj, Johnson and Lee (2016),more than 50% of the organisation’s reputation is attributed to the leadership reputation, thus the importance of exhibiting a positive reputation (Lanaj, Johnson & Lee, 2016). Men (2014)evidenced the significant influence of the leadership style adopted on reputation. Ethical and transformational leadership styles are considered as approaches that can lead to the development of a positive reputation(Yukl, Mahsud, Hassan & Prussia, 2013). However, the effectiveness of the transformational leadership style is more pronounced since it does not only focus on integrity as the case of ethical leadership style, but also focus on charisma, empowerment, intellectual simulation and symbolism as approaches that need to be adopted in leading. As such, the transformational leadership style is the most appropriate for leaders who desire to improve their reputation.

The leader ofLippo Group organization should consider moving from the charisma approach to a more transformational approachthat will not only focus on motivating the subjects through inspiration, but also ensure a higher level of integrity is observed. Honesty and transparency in any business dealings will enhance the integrity of the leader thus improving his admiration and consequently reputation as indicated in the idealized influence element of transformational leadership. Moreover, upholding acceptable ethical behavior will also improve his acceptance, thus development of a positive reputation. Upholding all the elements of the transformational leadership style will therefore result in an improvement in the reputation of the leader that will consequently cause significant positive changes on the corporate reputation.

  • Conclusion

Lippo group has a management issue of a negative corporate reputation. It is vital that the issue is addressed since it is likely to have long-term negative effects on the organisation. The leaders should adopt a transformational leadership style that will aid in improving the reputation of the leader and consequently the development of a positive corporate reputation.

 

 

References

Cherniss, C., Extein, M., Goleman, D., &Weissberg, R. P. (2006). Emotional intelligence: what does the research really indicate?. Educational Psychologist41(4), 239 245.http://alliance.la.asu.edu/temporary/students/katie/MultipleIntelligenceEmotional.pdf

Føllesdal, H., &Hagtvet, K. (2013). Does emotional intelligence as ability predict transformational leadership? A multilevel approach. The Leadership Quarterly24(5), 747-762.doi.org/10.1016/j.leaqua.2013.07.004

Kaygin, E., Yilmaz, T., Güllüce, A. Ç.,&Salik, N. (2016). A Research for Determining the Relationship between the Organizational Cynicism and the Organizational Commitment. Management and Organizational Studies4(1), 1-4,doi:10.5430/mos.v4n1p1

Lanaj, K., Johnson, R. E., & Lee, S. M. (2016). Benefits of transformational behaviors for leaders: A daily investigation of leader behaviors and need fulfillment. Journal of Applied Psychology101(2), 237, doi: 10.1037/apl0000052

Lourenço, I. C., Callen, J. L., Branco, M. C., &Curto, J. D. (2014).The value relevance of reputation for sustainability leadership. Journal of Business Ethics119(1), 17-28, doi: 10.1007/s10551-012-1617-7

McCleskey, J. (2014). Emotional intelligence and leadership: A review of the progress, controversy, and criticism. International Journal of Organizational Analysis22(1), 76-93, doi 10.1108/IJOA-03-2012-0568

Men, L. R. (2014). Internal reputation management: The impact of authentic leadership and transparent communication. Corporate Reputation Review17(4), 254-272, doi: 10.1057/crr.2014.14

Siegling, A. B., Nielsen, C., &Petrides, K. V. (2014).Trait emotional intelligence and leadership in a European multinational company. Personality and Individual Differences65, 65-68. doi.org/10.1016/j.paid.2014.01.049

Yukl, G., Mahsud, R., Hassan, S., & Prussia, G. E. (2013).An improved measure of ethical leadership. Journal of Leadership &Organisational Studies20(1), 38-48. doi: 10.1177/1548051811429352