Introduction

Regardless of their higher profitability and continuous business growth, Lippo Group organization is not without significant management challenges. Under the leadership of James Riady, the organisation has managed to command the 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 a 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 need to change their leadership approach to transformational leadership. This will ensure 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

Transformational leadership theory focuses on how a leader creates value and positive changes in his/her subjects by taking care of the followers’ interest and the interest of the organization as a whole. According to Odumeru and Ogbonna (2013) transformational leadership focus on improving the performance of the followers through inspiration, empowerment, understanding of the strengths and weaknesses of the followers, as well as challenging them to actively take part in the organization’s activities. Transformational leadership style consists of four major components including charisma, intellectual simulation, idealized influence and personal attention (Banks, McCauley, Gardner & Guler, 2016). Charisma refers to the extent through which a leader conducts him/herself in an admirable way that convinces the followers and other stakeholders to identify with the leader and the organization at large. Inspirational motivation entails the ability of a leader to understand the organisation’s vision and goals and inspire the employees to work towards their accomplishment. The intellectual stimulation component entails the extent through which the leader is involved in encouraging the employees to engage in creative activities while individual attention focus on the degree through which a leader attends to the needs of the followers and the organization’s stakeholders at large.
Proponents of the theory argues that leaders that possess all the identified components of transformational leadership style do not only have clear direction in accomplishing the organization’s goals, but also show a higher level of honesty and credibility in their dealings (Breevaart, Bakker, Hetland, Demerouti, Olsen & Espevik, 2014). In fact, Odumeru and Ogbonna (2013) has pointed out that transformational leaders are more respected and admired owing to the higher level of trust that their subjects have developed in them. Similarly, these leaders are likely to develop a positive reputation in the face of their subjects and the organizations stakeholder.
Despite its perceived importance as presented by various scholars, transformational leadership theory has also been criticized by some scholars. Tyssen, Wald and Spieth (2014) pointed out that the assumption by the theory that all leadership processes and outcome are similar is untrue. According to the scholars, transformational leadership theory fails to provide sufficient specification of situational variables that are likely to affect a leadership process. Since the variables are likely to influence the effects of the transformational leadership style on the followers, it was vital that the theory include the possible outcomes that are likely to be observed in various situations as well as point out the situations where the leadership style can either be detrimental or successful. Antonakis and House (2014) has also asserted that the theory encompasses more than one leadership style including charisma, transactional and ethical leadership styles, making it difficult to be fully implemented in a real organizational set-up. The theory has also failed to give a clear differentiation amongst the behaviors that are required of a transformational leader, further making its applicability impossible (Antonakis & House (2014). The critics believes that different situational variables as well as clear distinction of the behavior expected in each component ought to have been included to enhance its effectiveness, otherwise, the effective implementation of the theory in an organizational setting is jeopardized.
In spite of the various criticism presented, the popularity of the application of the transformational leadership theory in business management has remained higher. A number of studies have indicated the successful outcome have been reported following the adoption of the transformational leadership in different business settings and environment (Odumeru & Ogbonna (2013). This suggests that the theory can be applicable in any business situation, justifying its effectiveness in business management. Recent studies by Banks, McCauley, Gardner and Guler, 2016) also indicates that transformational leaders have not only been successful in accomplishing the organizational goals but have equally developed a positive reputation and become more promotable more than those adopting the transactional leadership style. This explains why the theory is still widely applicable in business management, making it the most appropriate style that should be adopted by leaders who desire to gain trust from their followers and consequently register a higher level of performance.
Recommendations
To improve the organisation’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 leader’s reputation, thus the importance of exhibiting a positive reputation. Men (2014) evidenced the significant influence of the leadership style adopted on reputation. Transformational leadership style is considered an approach that can lead to the development of a positive reputation (Yukl, Mahsud, Hassan & Prussia, 2013). Leaders who embrace charisma and idealized influence component of the theory are likely to be honest in their dealings and therefore receive maximum trust from their followers and the organization’s stakeholders. Moreover, transformational leaders are likely to develop positive reputation as perceived by the organisation’s stakeholders.
The leader of Lippo Group organisation should therefore adopt the transformational leadership style in his subsequent management of the organization. The leader should focus more on changing his behavior to be honest in his dealings either within or without the organization, concentrate on developing a positive relationship with the entire stakeholders to earn their respect and trust that will contribute positively towards the improvement of his reputation. The leader should also abide by the ethical standards and procedures as demanded by the community to gain their acceptance that will lead to further enhancement of his 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.