Rapid technological developments, volatile oil pricing, changing demographic trends, new emerging political structures and chaotic financial markets have created a turbulent, unstable and highly competitive environment in which organisations must adapt and change faster and more profoundly than ever before.
Traditionally, transactional management has been concerned with the day-to-day operational requirements of the organisation, focusing on planning, organising, controlling, rewarding or penalising those handling the daily transactions.
But now, the deeply unstable environment requires organisations to constantly recreate themselves, their products and their services.
A new model of transactional management, based on transformational leadership, is needed, one that can anticipate technological and market changes while showing insight and concern about the strategic direction the organisation must take. It must also have the skill and passion to convince others of the need to change.
Let me compare the fortunes of the electronic giants Sony and Samsung. A decade ago, Sony was the world leader in its field. It was innovative, profitable and a brand to be proud of. Samsung operated in its shadow.
In July this year, Sony posted its fourth straight annual loss of millions of dollars while Samsung’s Q2 earnings came in at $5.86 billion operating profit. This is a profound change in only a decade.
Consider the recent history of mobile phones. I think it is fair to say that Motorola pioneered the mobile phone and was market leader in the 1990s. It lost market share and after being split off and rebranded as Motorola Mobility in 2011, was acquired by Google a year later.
Its role as market leader was taken by Nokia, who burst on the scene almost out of nowhere with great innovation and creativity.
After a stellar rise, Nokia too has declined. Though the world’s biggest volume maker of handsets, Nokia lost the top spot in the smartphone market to Apple and others last year, in the inevitable rise and fall of great companies.
In the past, this process took decades; now it takes a few years. These are all great companies packed with talent and the capability to operate effectively and efficiently.
Transactional managers have historically been able to focus and manage these businesses in the more stable environment of the past.
But now, transformational leaders need to focus on the leadership skills that enable them to establish and communicate vision and goals, guiding and empowering others to accomplish them.
Transformational leadership requires us to take risks, think creatively and courageously, be decisive, and communicate the vision of where we are going and how we are going to get there. This approach and the skills required are quite different from the traditional skills of management.
Ultimately, transformational leadership is about change and four stages of change have been identified:
Make a compelling case for change.
Inspire a shared vision, seeking broad input and encouraging everyone to think of a better future.
Lead change. Instil a sense of urgency. Encourage collaboration and increase the self-confidence of followers.
Embed the change. This is achieved by, for example, monitoring progress, changing appraisal and reward systems and hiring staff with a commitment to empowerment and collaboration.
Transformational leaders articulate their vision in a clear and appealing manner, explain how to attain the vision, lead by example and empower followers to achieve the vision.
They promote new possibilities and generate a compelling vision of the future. They are a source of inspiration and visibly model appropriate behaviours. Their goal is change and their energy, enthusiasm and vision open up new and exciting possibilities within their organisations.