1. Does
leadership
impact
upon
the
effective
governance
of
organisations?
Prepared
by
Nicole
Brown
December
2013

2. The
Impact
of
Leadership
on
Governance
Prepared
by
Nicole
Brown
(December
2013)
Page
1
of
11
1. Introduction
Strong
leadership
and
governance
processes
are
vital
for
organisations
to
survive
in
a
complex,
rapidly
changing
environment.
Emerging
research
also
suggests
relationship
exist
between
organisational
outcomes
and
both
leadership
development
and
effective
followership.
This
essay
aims
to
explore
the
effect
of
leadership
on
governance
outcomes,
and
the
influence
of
leadership
development
and
followership
on
organisational
outcomes.
The
first
section
of
this
essay
will
clearly
define
the
terms
‘leadership’
and
‘governance’.
Section
two
will
contrast
the
roles
of
leaders
and
the
roles
of
executives
or
managers.
The
third
section
of
this
essay
will
argue
leadership
is
the
key
internal
driving
force
behind
governance
outcomes
in
organisations.
Section
four
will
provide
examples
that
demonstrate
how
well-­‐designed
leadership
development
programs
can
greatly
enhance
organisational
outcomes.
The
fifth
and
final
section
will
present
evidence
that
supports
the
relationship
between
effective
followership
and
superior
organisational
outcomes.
Leadership
and
Governance
Definitions
Defining
the
scope
and
intent
of
the
terms
‘leadership’
and
‘governance’
is
elusive
(Davila
et
al.
2012).
Although
leadership
can
be
defined
simplistically
as
“the
influence
of
others
toward
a
collective
goal”
(Mumford
2010,
p.
5),
Van
Wart
(2005,
p.
27)
argues
that
leadership
is
“a
complex
process
involving
numerous
traits
and
skills.
Leaders
must
refine
and
modify
their
styles
for
different
situations.
Leadership
achieves
predetermined
goals
and
leaders
continually
self-­‐
evaluate
their
own
performance.”
Organisations
need
governance
structures
to
determine
their
direction
and
achieve
optimal
performance
outcomes
(Carcello
2008).
Governance
structures
also
maintain
an
organisation’s
accountability,
reputation
and
integrity
(Broni
&
Velentzas
2012).
du
Plessis,
Hargovan
and
Bagaric
(2011,
p.
10)
define
corporate
governance
as
a
system
that:
• Regulates
and
oversees
corporate
conduct;
• Considers
the
interests
of
both
internal
and
external
stakeholders;
• Ensures
responsible
behaviour
by
corporations;
and
• Achieves
the
maximum
level
of
efficiency
and
productivity.

3. The
Impact
of
Leadership
on
Governance
Prepared
by
Nicole
Brown
(December
2013)
Page
2
of
11
2. Differences
between
Leaders
and
Managers
Table
1
below
summarises
the
key
differences
between
leaders
and
managers,
yet
these
roles
are
not
mutually-­‐exclusive
because
“a
good
manager
can
be
a
leader”
(Khan
2008,
p.
96).
Table
1:
Key
differences
between
leaders
and
managers.
Characteristics
of
Leaders
Characteristics
of
Managers
• A
leader
is
“a
strategist,
a
visionary,
and
someone
who
inspires
to
greatness”
(Carlson
&
Donohoe
2010,
p.
8).
• Leaders
emerge
depending
on
situational
factors
and
have
personal
power
to
lead
by
influencing
others
(Tripathi
&
Reddy
2008).
• Leader
share
mutual
objectives
with
their
followers
(Tripathi
&
Reddy
2008).
• Leaders
are
innovative,
proactive
and
get
compliance
without
invoking
position
(Khan
2008).
• A
leader
can
“initiate
change
by
communicating
a
vision
or
goals
and
seeking
to
inspire
others
into
action”
(Mumford
2010,
p.
7).
• A
manager
“focusses
on
efficiency,
effectiveness
and
making
sure
the
right
things
happen
at
the
right
time”
(Carlson
&
Donohoe
2010,
p.
8).
• Managers
are
appointed
to
positions
of
power
and
have
authority
over
subordinates
(Tripathi
&
Reddy
2008).
• Managers
seek
objectives
that
often
clash
with
subordinates’
objectives
(Tripathi
&
Reddy
2008).
• Managers
are
followers
of
an
initiative
who
are
reactive
and
depend
on
authority
to
get
compliance
(Khan
2008).
• Managers
supervise,
control
or
direct
a
group
of
employees
towards
the
achievement
of
a
common
goal
(Zimmerman
2002).
• Managers
are
employed
in
a
defined
position
within
an
organisation
with
employees
that
report
to
them
(Zimmerman
2002).
• Managers
“produce
organisation,
structure,
clear
problem
solving
and
action”
(Mumford
2010,
p.
6).

4. The
Impact
of
Leadership
on
Governance
Prepared
by
Nicole
Brown
(December
2013)
Page
3
of
11
3. The
Influence
of
Leadership
on
Governance
Outcomes
The
long-­‐term
success
and
vitality
of
any
organisation
depends
on
both
strong
leadership
and
governance
processes
(Davila
et
al.
2012).
Ideally
corporate
governance
and
leadership
will
have
a
symbiotic
relationship
(Davies
2006),
since
“good
leadership
can
‘energize’
governance,
while
good
governance
can
serve
to
sustain
leadership”
(Davila
et
al.
2012
p.
70).
Good
corporate
governance
helps
leaders
to
engage
stakeholders
while
remaining
focused
on
the
company’s
purpose
and
interests
(Davies
2006).
Leaders
have
to
achieve
the
company’s
economic
goal
of
profitability,
while
simultaneously
integrating
the
objectives
of
creating
a
stimulating
work
environment,
exceeding
customer
expectations,
making
sound
investments,
creating
sustainable
relationships
with
external
stakeholders
and
demonstrating
outstanding
social
responsibility
(Canal
2010).
Leadership
is
the
key
internal
driving
force
behind
corporate
governance
(Davies
2011,
Broni
&
Velentzas
2012)
because
“leadership
provides
the
motivation
and
impetus
to
make
corporate
governance
effective”
(Davies
2006,
p.
41).
Leaders
exert
a
strong
influence
on
an
organisation’s
governance
outcomes,
particularly
in
times
of
financial
decline
because
effective
leadership
is
needed
to
restore
financial
stability
(Kassey,
Thompson
&
Wright
2005).
For
example,
leadership
by
a
Continuous
Improvement
Team
effectively
transformed
“a
sluggish,
unprofitable
bureaucracy
into
a
streamlined,
world-­‐class
manufacturer
with
a
solid
reputation
as
an
innovator”
(Broni
&
Velentzas
2012,
p.
63).
The
outcomes
of
governance
structures
that
regulate
corporate
conduct
and
uphold
responsible
corporate
behaviour
can
be
strongly
influenced
by
leadership.
Leaders
that
pursue
ethically
virtuous
choices
honour
governance
obligations
and
also
create
greater
long-­‐term
wealth
for
the
organisation
(Caldwell,
Hayes
&
Long
2010).
Leaders
demonstrate
ethical
conduct
through
their
interpersonal
relationships,
communication
and
decision
making
(Brown,
Trevino
&
Harrison
2005),
and
ethical
culture
infuses
ethical
values
throughout
an
organisation
(Schwartz
2013).
Unethical
leadership
can
significantly
harm
an
organisation
(Hunter
2012),
particularly
given
that
a
leader’s
decisions
influence
the
governance
of
shareholders’
wealth
(Yocam
&
Choi
2010).
A
leader’s

5. The
Impact
of
Leadership
on
Governance
Prepared
by
Nicole
Brown
(December
2013)
Page
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inaction
can
lead
to
irresponsible
corporate
behaviour,
for
instance
leaders
that
fail
to
ensure
the
reliability
of
financial
reporting
for
investment
and
credit
decisions
(Carcello
2008).
Conversely,
ethical
leaders
can
improve
accountability
and
transparency
within
the
organisation
by
positively
influencing
the
behaviour
of
followers,
since
employees
with
ethical
leaders
are
more
willing
to
report
problems
(Hunter
2012).
Given
ethical
leadership
reduces
absenteeism
(Schwartz
2013),
counter-­‐productive
employee
behaviours
(Hunter
2012)
and
business
costs
(Walumbwa,
Morrison
&
Christensen
2012),
ethical
leadership
enhances
governance
structures
that
improve
an
organisation’s
efficiency
and
productivity.
The
third
section
of
this
essay
has
explained
why
ethical
leadership
is
the
key
internal
driving
force
behind
governance
outcomes
in
organisations.
The
next
section
will
explore
the
role
of
leadership
development
programs
in
enhancing
organisational
outcomes.
4. The
Influence
of
Leadership
Development
on
Organisational
Outcomes
Leadership
development
is
the
strategic
investment
in
structured,
integrated
opportunities,
training
and
experiences
to
support
an
individual’s
learning,
growth
and
change
(Lawson
2008).
Well-­‐designed
leadership
development
programs
can
greatly
improve
organisational
performance
and
outcomes
(Pfeffermann
2012).
Effective
leadership
development
programs
“fit
the
requirements
of
both
the
organizations
and
the
leaders”
(Riggio
2008,
p.
390)
by
focusing
on
learning
and
development
at
the
individual
and
the
organisational
level
simultaneously
(Wolf
et
al.
2011).
Effective
leadership
development
programs
also
“need
to
be
theory-­‐driven,
use
proven
methods,
be
integrated
into
ongoing
organizational
processes,
evaluated
for
effectiveness
and
substantial”
(Riggio
2008,
p.
390).
In
complex,
rapidly
changing
environments
the
leadership
outcomes
of
direction,
alignment
and
commitment
help
organisations
to
remain
effective
and
sustainable
(Van
Velsor,
McCauley
&
Ruderman
2010),
since
“effective
leadership
is
integral
to
organisational
effectiveness”
(Muchiri,
Cooksey
&
Walumbwa
2012,
pp.
663).
According
to
Seshie
(2011)
leadership
development
enables
leaders
to
improve
organisational
outcomes
by:

6. The
Impact
of
Leadership
on
Governance
Prepared
by
Nicole
Brown
(December
2013)
Page
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of
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• Learning
to
recognise
opportunities
to
change
systems
and
procedures
so
that
the
organisation
can
function
and
perform
better.
• Building
the
organisation’s
capacity
to
avoid
risks
that
could
compromise
the
organisations
existence,
and
therefore
improving
the
economic
sustainability
of
an
organisation.
• Acquiring
the
skills
and
knowledge
to
identify
and
respond
appropriately
to
potential
resistance
to
the
organisation’s
growth.
• Gaining
skills
to
cope
with
any
change
within
the
organisation.
Companies
invest
billions
of
dollars
every
year
on
leadership
development
training
(Shuck
&
Herd
2012),
and
the
value
of
this
investment
is
reflected
in
the
following
five
examples
that
describe
the
significant
impact
of
leadership
development
on
long
term
organisational
outcomes:
1. McGurk
(2010)
demonstrated
an
‘Inspirational
Leadership’
programme
significantly
contributed
to
strategic
change
because
participants
defined
and
addressed
their
own
learning
needs
surrounding
specific
strategic
implementation
issues.
2. Hayward
(2011)
reported
that
the
company
Hiscox
achieved
almost
a
700
per
cent
return
on
investment
on
a
leadership
development
program,
based
on
the
program
cost
per
participant
and
by
using
participants’
salaries
increases
since
completing
the
program
as
the
performance
indicator.
Other
benefits
of
Hiscox’s
leadership
development
program
included
“open
and
frequent
communication”,
“improved
performance
management
involving
honest
conversations
with
staff”
and
“positive
behavioral
and
cultural
changes”
(Hayward
2011,
p.
33).
3. Coloma,
Gibson
and
Packard
(2012)
surveyed
over
ninety
supervisors
of
leadership
development
program
graduates,
who
reported
significant
improvements
in
the
graduates’
job
performance
and
increased
work
quality,
quantity
and
responsibilities
that
contributed
to
the
fulfilment
of
organisational
performance
goals.
Among
the
twenty-­‐precent
of
graduates
that
had
been
promoted,
the
leadership
development
program
was
perceived
to
be
pivotal
to
their
promotion
to
a
moderate
or
great
extent.
4. Pfeffermann
(2012)
demonstrated
the
effectiveness
of
leadership
development
programs
for
health
organisations
in
the
developing
world.
As
a
result
of
a
leadership
development

7. The
Impact
of
Leadership
on
Governance
Prepared
by
Nicole
Brown
(December
2013)
Page
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of
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program
used
by
EngenderHealth’s
ACQUIRE
projects
in
Tanzania
and
Egypt,
the
number
of
new
clients
visits
increased
by
20%.
5. McCallum
and
O’Donnell
(2009)
demonstrated
a
leadership
development
enhanced
social
capital
skills
and
significantly
improved
outcomes
in
organisations
with
shifting
supplier
relationships
and
ongoing
personnel
changes
due
to
mergers
and
acquisitions.
The
five
examples
above
demonstrated
that
well-­‐designed
leadership
development
programs
can
greatly
improve
organisational
outcomes.
The
final
section
of
this
essay
will
explore
whether
effective
followership
also
affects
organisational
outcomes.
5. The
Influence
of
Effective
Followership
on
Organisational
Outcomes
An
organisation’s
success
depends
on
the
effectiveness
and
contribution
of
each
follower
(Mercer
2011),
and
followership
enhances
organisational
effectiveness
(Crossman
&
Crossman
2011).
Favara
(2009,
p.
14)
defined
followership
as
“the
capacity
and
behavioural
volition
to
be
influenced
in
order
to
actively
partner
and
participate
in
the
accomplishment
of
a
shared
goal
or
outcome”.
Followership
culture
creates
synergism
between
employees
and
their
work
and
produces
superior
organisational
outcomes,
particularly
when
clear
principles
guide
work
and
harmonious
relationships
(Mercer
2011).
Organisational
outcomes
can
be
improved
by
enhancing
followership
skills,
since
“good
followers
derive
greater
satisfaction,
attract
higher
remuneration,
achieve
self-­‐
actualization
and
enhance
organizational
effectiveness
and
adaptability”
(Crossman
&
Crossman
2011).
A
recent
study
by
Kim
and
Schachter
(in
press)
provided
empirical
evidence
that
followership
mediates
the
relationship
between
participative
leadership
and
organisational
performance.
These
Authors
demonstrated
followers
improved
organisational
outcomes
by
being
actively
engaged,
participative,
professional
and
proactive,
thinking
independently
and
getting
the
job
done.
Argo
(2009)
demonstrated
a
perception
among
surveyed
senior
executives
that
effective
followers
influence
work
performance,
quality
of
work
output,
satisfaction
and
morale,
and
cohesiveness
of
work
groups.

8. The
Impact
of
Leadership
on
Governance
Prepared
by
Nicole
Brown
(December
2013)
Page
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Although
Caldwell
et
al.
(2008,
p.
155)
suggested
“leaders
influence
followers
to
achieve
organisational
objectives
through
change’’,
followership
can
also
lead
to
destructive
organisational
outcomes.
For
example,
in
organisations
with
an
unethical
culture
followers
can
use
power
and
influence
tactics
to
conform
and
collude
with
destructive
leaders
(Uhl-­‐Bien
et
al.
in
press).
Since
followership
complements
leadership
(Crossman
&
Crossman
2011),
it
can
be
argued
that
different
leadership
styles
that
influence
followership
will
also
impact
on
organisational
outcomes.
For
example,
Sosik
and
Jung
(2010)
assert
that
followers
who
experience
transformational
leadership
achieve
positive
organisational
outcomes
because
the
followers:
• Feel
more
empowered
and
engaged
in
their
work.
• Exert
extra
effort.
• Perform
tasks
that
go
beyond
their
formal
job
description.
• Are
more
satisfied
with
their
leader.
• Perform
better
and
more
creatively.
Although
over
twenty-­‐five
types
of
followership
behaviours
have
been
identified
in
the
literature
(Crossman
&
Crossman
2011),
Favara
(2009)
argues
that
‘exemplary’
followers
are
strategically
advantageous
for
organisations
to
attract,
train
and
keep.
Contrary
to
the
perception
good
followers
take
direction
without
challenging
their
leader,
“exemplary
followers
take
initiative
without
being
prompted,
assume
ownership
of
problems,
and
participate
actively
in
decision-­‐
making”
(Banutu-­‐Gomez
2011).
Blackshear
(2004)
argued
the
development
of
exemplary
followers
optimises
an
organisation’s
productivity
by
enabling
individual
employees
to
provide
their
best
contributions.
According
to
Favara
(2009),
exemplary
followers
can
improve
organisational
outcomes
by:
• Empowering
leaders;
• Cooperating
with
others
in
order
to
achieve
organisational
goals;
• Experiencing
higher
levels
of
job
satisfaction
than
pragmatist
or
conformist
followers;
and
• Performing
more
effectively
than
pragmatist
or
conformist
followers.
Given
the
benefits
exemplary
followers
offer
organisations,
and
the
other
evidence
presented,
the
final
section
of
this
essay
has
demonstrated
a
strong
relationship
between
followership
and
organisational
effectiveness.

9. The
Impact
of
Leadership
on
Governance
Prepared
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Nicole
Brown
(December
2013)
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6. Conclusion
This
essay
has
explored
the
profound
influence
of
leadership
on
the
effective
governance
of
an
organisation.
The
third
section
of
this
essay
positioned
leadership
as
the
key
driving
force
behind
corporate
governance,
and
argued
the
long-­‐term
success
and
vitality
of
any
organisation
depends
on
both
strong
leadership
and
governance
processes.
The
examples
in
the
fourth
section
of
this
essay
demonstrated
how
well-­‐designed
leadership
development
programs
can
help
an
organisation
to
remain
effective
and
sustainable
by
enhancing
direction,
alignment
and
commitment.
The
final
section
of
this
essay
provided
empirical
evidence
to
support
the
critical
role
of
effective
followership
in
achieving
superior
organisational
outcomes.
This
essay
has
demonstrated
that
organisations
operating
in
complex,
rapidly
changing
environments
can
achieve
optimal
organisational
outcomes
and
maintain
effective
governance
processes
by
encouraging
ethical
leadership,
implementing
well-­‐designed
leadership
development
programs
and
supporting
effective
followership.

10. The
Impact
of
Leadership
on
Governance
Prepared
by
Nicole
Brown
(December
2013)
Page
9
of
11
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