Leadership and Information Processing

Linking Perceptions and Performance

Robert G. Lord, Karen J. Maher

• Publisher: Routledge
• Year: 2002
• Print ISBN: 9780415099011
• eBook ISBN: 9781134858514
• Topic: Psychology
• Subtopic: History & Theory in Psychology
• Index: Psychology

Executive leadership is critically important to understanding the workings and performance of organizations, yet it is a topic that is usually ignored by mainstream leadership research. Leadership and Information Processing provides a much-needed analysis of this crucial element of organizational behaviour.
Robert G. Lord and Karen J. Maher examine how executives make decisions and how decision acceptance is constrained by the leadership perceptions of others. Focussing in particular on leadership and social perceptions, perceptions of female leaders, organizational culture, and the effects of executive succession. Leadership and Information Processing offers crucial information for students, researchers and teachers of mangement, business, organizational behavior and organizational/social psychology.

Part I
Leadership and Information Processing

Chapter 1
Introduction

Who is Philip Caldwell? Our guess is that most laypeople—and most leadership researchers—cannot answer this question. Yet most would immediately recognize the name of his counterpart in a competing organization. The question is interesting from a theoretical and a practical point of view. Philip Caldwell orchestrated one of the most dramatic corporate turnarounds in recent history, taking a company that lost $3.26 billion over three years (net losses of $1.54 billion in 1980, $1.06 billion in 1981, and $658 million in 1982) and turning it into a company that in 1986 outearned all its competitors with net profits of $3. 29 billion, and that in 1987 set an all-time industry profit record of $4.62 billion (Halberstam 1986).

Philip Caldwell was the chairman and chief executive officer of Ford Motor Company. During his tenure as CEO, Caldwell and his management team, headed by Donald Peterson (who succeeded Caldwell as chairman and CEO of Ford in 1985), dramatically improved profits, product quality, sales, and stock prices. In the process Caldwell also changed the corporate culture, the nature of decision-making processes, and the strategic orientation of Ford Motor Company. Philip Caldwell created the prototypical American success story in one of America’s most important industries.

Caldwell’s more famous counterpart is Lee Iacocca. Fired from the presidency at Ford in July 1978, Iacocca went on to engineer the dramatic rescue of Chrysler, turning this near-bankrupt company into a profitable organization. There are many parallels between these two turnarounds, yet the more flamboyant and charismatic Iacocca achieved much greater recognition. His leadership qualities and reputation were so widely known that he went on to head the campaign to renovate the Statue of Liberty, wrote a best-selling autobiography, and was even seen as a potential candidate for president of the United States in 1988. Caldwell, on the other hand, achieved much more limited recognition, though his accomplishments at Ford were in many ways more impressive than those of Iacocca at Chrysler.

This contrast illustrates two of the major issues addressed in this book—understanding leadership perceptions and understanding how CEOs can influence the performance of their organizations. Obviously, both Caldwell and Iacocca were very effective leaders, each engineering a dramatic turnaround at his respective organization. Yet their style of leadership and approaches to management were very different. A suitable theory of leadership should explain both the differences in the way these two individuals were perceived and how their alternative approaches to corporate leadership were successful. We address both these important issues in this book.

At this point we should distinguish between the constructs of leadership and management. We conceptualize leadership as resulting from a social-perceptual process—the essence of leadership is being seen as a leader by others. Management, in contrast, involves discharging a set of task activities associated with a specific organizational position. Leaders may or may not be good managers, and managers may or may not be viewed as leaders. Managers, though, can generally perform social tasks better if they are seen as leaders, and being perceived as a leader may be a significant determinant of recognition and promotion for managers. For these reasons, the theory of leadership perception developed in this book is relevant to managers as well as to top-level leaders. A discussion of managerial task activities, however, is beyond the scope of this book.

Who is Ann B.Hopkins? Again we expect that most readers will be unfamiliar with this individual’s name. Yet her story is just as interesting and just as important as that of Philip Caldwell or Lee Iacocca. Ann B.Hopkins joined Price Waterhouse in 1978 and quickly became a successful manager and developer, bringing in more then $40 million in new business. She was the only woman out of 88 nominees for partnership in 1982, and she brought more business to the firm than any other nominee (Greenhouse 1989). But she was not made a partner, whereas 47 of the 87 men were granted this promotion. Her supporters described her as outspoken, independent, self-confident, assertive, and courageous. Opposition to Hopkins centered on her “interpersonal skills.” Her detractors interpreted the same behavior as overbearing, arrogant, self-centered, and abrasive (American Psychological Association 1988, 15). In addition, many comments centered on the sex of Ann Hopkins and her “fit” with sex-related stereotypes. For example, one evaluator suggested that she take a “course at charm school,” while another said the complaints about her use of profanity came up only because “she is a lady using foul language” (Bales 1988). Thus, the way Ann Hopkins was perceived by other partners was a key determinant in the decision to reject her bid for promotion. We suggest that her difficulties partially reflect the differential use of cognitive categories in the perception of men and women. Though Ann Hopkins’s interpersonal style could be interpreted as connoting leadership, we believe it was interpreted differently because Ann Hopkins is a woman and “leadership” is a categorization that is less likely to be applied to women than to men.

Ann B.Hopkins left Price Waterhouse and set up her own consulting firm. She also sued Price Waterhouse for sex discrimination under Title VII of the Civil Rights Act. She claimed that Price Waterhouse violated her civil rights by the discriminatory application of sex-role stereotypes in considering her request for promotion. Hopkins won at both the district and the appeals court levels. At the Supreme Court level, however, the Court acknowledged that sex-stereotype bias was discriminatory but remanded the case back to the appellate court to decide whether damages should be awarded (Greenhouse 1989). At the time of this writing, the appellate court has not yet ruled on damages.

LEADERSHIP AND FAILURE

Philip Caldwell, Lee Iacocca, and Ann B.Hopkins were all highly successful businesspeople but received varying degrees of recognition as leaders. Ironically, top executives of failed businesses (corporations filing for Chapter 11 bankruptcy) cannot escape receiving blame for the demise of their organizations (Sutton and Callahan 1987). Though executives play a role in organizational downturns, other factors, such as market conditions and technological innovations, also affect an organization’s performance. Unfortunately for executives, these factors are often minimized by perceivers. Here, social and selfperceptions are critical, and a common issue is the perceived failure of such executives to exert sufficient leadership. For these individuals, corporate failure is interpreted as personal failure and their reputations are permanently tarnished. Such interpretations limit their future job opportunities and affect their personal lives. Moreover, these top managers often express considerable guilt over their corporations’ performances, as quotations from presidents of bankrupt firms indicate: “I feel as if I committed some kind of sin”; “I think that it is the equivalent of having accidently [sic] killed your spouse and then having to live with it the rest of your life” (Sutton and Callahan 1987, 421). Thus, the attribution of business failures to top executives can have dire consequences for those involved.

LEADERSHIP PERCEPTIONS

Each of these examples highlights the importance of leadership perceptions. Being perceived as a leader affects social and self-evaluations, creates or limits future job opportunities, and enhances the ability of top leaders to garner the resources needed by their organizations. One of the major objectives of this book is to provide a detailed theory explaining leadership perceptions based on social-cognitive principles. We will do so by specifying both the features that distinguish leaders from nonleaders and the perceptual processes used by perceivers. These perceptual processes used by perceivers will be analyzed using the framework we developed in an earlier work (Lord and Maher 1990a). In that piece, we noted that leadership perceptions can be formed based on two alternative processes. Leadership can be recognized based on the fit of a person’s characteristics with perceivers’ implicit ideas of what leaders are—Lee Iacocca is recognized immediately as the prototypical leader, whereas Philip Caldwell and Ann B. Hopkins are not. Alternatively, leadership can be inferred based on outcomes of salient events. Business failures are usually attributed to executives, connoting a lack of leadership; dramatic successes, such as performance “turnarounds,” usually cause top executives to be perceived as leaders. Similarly, in the political realm, favorable election outcomes can enhance leadership perceptions; unfavorable outcomes can detract from a candidate’s perceived leadership qualities (Foti, Lord, and Dambrot, in press).

Our approach to understanding executive leadership is both social and cognitive. Leadership has long been recognized as a social process involving the mutual behavior (and perceptions) of both leaders and followers. Researchers concerned with behavior or perceptions have, however, increasingly turned to cognitive explanations of these processes. For example, behavior may be explained by the implicit theories that help a leader interpret a situation and generate appropriate responses. Similarly, perceptions may be explained by the cognitive categories (like leadership) that perceivers use to classify others. Social-cognitive research, which attempts to understand social processes in terms of the more fundamental cognitive processes that guide both parties in an interaction, has become very popular in the past decade. We apply this socialcognitive perspective to executive leadership, but it is also relevant to other areas of industrial/organizational psychology, such as performance appraisal and motivation.

This social-cognitive perspective will also be used to explain how leadersubordinate relationships develop and unfold over time. Dyadic relationships between superiors and subordinates will be interpreted in terms of the perceptual processes of both leaders and subordinates. Such perceptual processes provide a context for the development and continuation of the leader-subordinate relationship. Leadership perceptions are also central to more abstract processes, such as symbolic management and the development and maintenance of organizational cultures. This basic information processing approach helps us to understand the processes of symbolic management and the important context for actions that is created by an organization’s (or a nation’s) culture.

Our approach to leadership is unique in two primary respects. First, much prior leadership research has focused on motivational processes pertinent to lower-level superior-subordinate interactions, such as path goal theory (Georgopolis, Mahoney, and Jones 1957; House 1971), reinforcement theory (Komaki 1986; Podsakoff 1982), supervisor feedback processes (Larson 1984, 1986), substitutes for leadership (Kerr and Jermier 1978), or self-leadership (Manz and Sims 1987), In contrast, our approach focuses on the cognitive processes of subordinates and superiors. This approach complements such theories by providing a broader theoretical base that helps to integrate much prior leadership research. It can be extended to upper- and lower-level leadership perceptions using the same basic social-cognitive principles. Moreover, the cognitive processes of superiors can be tied to many factors that influence organizational performance, in addition to the traditional focus on subordinates’ performance. The second unique aspect of our approach is a focus on executive leadership and organizational performance. We will discuss this aspect below.

EXECUTIVE LEADERSHIP AND PERFORMANCE

In this book we will combine several perspectives to show how executive decisions are made, how they are accepted, and how they affect organizational performance. A cognitive perspective explains how executive decision making occurs using both logical and intuitive processes. For example, executives may use either rational processes or implicit theories to generate and evaluate alternatives in strategic decision making. Support for executive decisions can also be explained by the social-cognitive perspective. This approach helps clarify how executives are able to mobilize power to gain commitment and acceptance for their decisions, leveraging their impact on organizational performance. Executives can expand the latitude of managerial action (Hambrick and Finkelstein 1987) by appropriately managing the perceptual processes of key constituents.

Finally, we use work on systems and organizational theory to explain how executive-level actions can affect organizational performance. Our framework organizes both internally and externally oriented actions that may have either direct or indirect effects on performance. This comprehensive approach to executive actions and cognitions allows us to distinguish between executive leadership and the kind of executive decision making that is associated with routine management activities. For example, many decisions that top-level executives make on a day-to-day basis are not related to leadership activities.

We believe that theoretical and practical advancement requires a dual focus on leadership as a perceptual phenomenon and leadership as a determinant of performance. Yet these two foci must be integrated to develop an adequate theory of leadership. Some approaches underemphasize the effect of executive leaders on performance, while overemphasizing the importance of perceptual processes (Calder 1977; Meindl and Ehrlich 1987; Pfeffer 1977). Other approaches explain how executives can dramatically affect the performance of organizations, while underemphasizing the perceptual factors involved in leadership (Tushman and Romanelli 1985). Our approach addresses both the perceptual and the performance components of executive leadership, since perceptions and performance are reciprocally related in a process that unfolds over time. Different sets of theories are required to explain the perceptual and performance components crucial to executive leadership. Ultimately, however, these different theories should be integrated to create a useful theory of executive leadership. In separate sections of this book, we will develop a theory of leadership perception and a theory of executive performance. Then, in the final section of the book, we will combine these separate sets of theory into a more integrative theory of executive leadership—that is, we will explain when top-level executives need to be perceived as leaders to be effective and what processes produce leadership perceptions at that level of an organization. At the top level, leadership may be strongly associated with specific offices—for example, CEO or chairman of the board—but executive-level leadership may also be provided by other individuals who possess special qualities, such as expertise.

Returning to our examples of successful and unsuccessful business outcomes illustrates how the perceptual and performance aspects of leadership interrelate. Lee Iacocca had many highly visible successes at Ford Motor Company, such as his “Ford for $56 a month” in 1956 and his Ford Mustang in 1964. These successes helped establish his reputation as a leader, a crucial factor in his ability to marshal the resources needed to “rescue” Chrysler after he became CEO of that corporation. The success of Iacocca’s effort at Chrysler in turn made additional resources available to buy companies like Lamborghini and American Motors. Lee Iacocca was even approached by disgruntled General Motors dealers who wanted to engineer an unfriendly takeover of General Motors by Chrysler (Iacocca and Kleinfield 1988, 121–22).

In contrast, Sutton and Callahan (1987) note that the failure of a CEO’s company can dramatically reduce the capacity of that individual (and the organization) to garner needed resources: suppliers of bankrupt companies refuse to extend credit and may dump inferior products on struggling companies; bankers are unwilling to provide needed capital or to grant freedom of managerial action; consumers are hesitant to buy the company’s products; and the most talented and mobile employees may leave for more secure positions in other companies. Moreover, the tarnished reputations of top executives in failed companies discredit any attempts to prevent such erosion of resources. Thus, successes enhance the leadership perceptions of CEOs, increasing CEOs’ opportunities for further successes, whereas dramatic failures severely limit the potential actions of CEOs, diminishing their capacity to improve future organizational performance.

APPROACH TO LEADERSHIP THEORY

Our approach to understanding leadership is to develop a comprehensive theory addressing both leadership perceptions and organizational performance. Further, we support our theory by relying on our own empirical work, on the growing literature concerning decision making and social cognitions, and on work in organizational and economic theory. In drawing from this broad social science background we have been forced to ignore many traditional theories of leadership. (Yukl [1989] provides an excellent summary of such theories.) Our aim is to extend the theoretical basis and potential application of the leadership field, not to catalog past leadership theory. Yet when it is feasible to do so, we integrate more traditional theories with the framework we develop.

Two issues concerning our scientific philosophy should be briefly mentioned. First, we frequently use examples to illustrate the points we are making. We believe this approach makes a book more readable, more understandable, and more accessible to a broad audience of scholars, students, and/or practitioners. We acknowledge, however, that our examples do not prove the theories we propose. Theoretical support requires careful empirical work, which we will stress where it is available.

Second, we believe that theory in any scientific area is an ongoing social process. Theories develop and change as new data and perspectives are developed. Thus, a scholarly book on leadership theory should be as concerned with where the field should be going and how it should develop as it is with summarizing past research. It should attempt to go beyond empirical data to develop ideas that can be tested by future research. We propose ideas for future research, particularly in chapters 12 and 13, but we also tie these extensions to empirical and theoretical work whenever possible. Further, we will try to indicate clearly which theoretical ideas have been extensively investigated and which need additional empirical support. In short, we try to communicate both what we have found through research on leadership and what we as leadership researchers think about this topic.

ORGANIZATION OF THE BOOK

We have organized this book into four parts. The first part provides a basic introduction to leadership, describes a cognitive/ information processing approach, and shows how that approach can be applied to leadership. The second part focuses on perceptual processes associated with leadership, at both a dyadic and a more aggregate level. In this section we also examine the joint role of perceptual and performance processes relevant to female executives. Reciprocal influence in leader-subordinate dyads operates under a dual perceptual process involving both leader and subordinate perceptions of each other. At a more aggregate level, power, symbolic management, and organizational culture are shown to operate from a perceptual basis. The third part centers on explaining performance. In this section we briefly address the effects that lower-level leaders have on performance. Our primary focus, however, is on executive-level leadership and its relationship to organizational performance. Based on prior research, we will establish that executive-level leaders do have a substantial impact on organizational performance, either directly, through their effect on organizational strategy, or indirectly, through symbolic management and organizational culture. The fourth and final part integrates the two preceding sections into a more comprehensive theory of executive-level leadership. Readers with interests closely tied to social-cognitive work will find the second part to be especially relevant, while readers whose interests center on organizational performance may find the third part most relevant.

DEFINITION OF LEADERSHIP

Before proceeding, our definition of leadership should be clearly specified. According to Katz and Kahn (1978, 528), leadership involves an “influence increment” that goes beyond mechanically complying with one’s role in an organization and routinely applying rewards or coercive power. A key argument we will make is that the ability to go beyond one’s formal role depends on how a person is perceived by others. If a person is perceived as a “leader,” he or she can exert more influence than if he or she is not labeled a leader by others. This influence increment can be traced directly to social perceptions.

Based on this logic, we define leadership as the process of being perceived by others as a leader. One of the aims of this book is to explain that process in terms of social-cognitive theory. Leadership at any level of an organization is defined in terms of the perception of relevant others, not merely by holding a specific organizational position. This definition implies that at the most fundamental level, leadership is an outcome of the social-cognitive processes we use to label others. The locus of leadership is not solely in a leader or solely in followers. Instead, it involves behaviors, traits, characteristics, and outcomes produced by leaders as these elements are interpreted by followers. Further, leadership processes are merely a specific example of more general socialcognitive processes that continually occur in everyday life. The content of leadership categories may be unique, and the...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• List of Tables
• List of Figures
• Acknowledgments
• Series Editor's Introduction
• Part I Leadership and Information Processing
• Part II Perceptual and Social Processes
• Part III Leadership and Organizational Performance
• Part IV Stability, Change, and Information Processing
• Bibliography
• About the Authors