University of Rome Tor Vergata

1
University of Rome Tor Vergata

• Department of Enterprise Engineering

Leadership in organizations impact on the
Executive team and on the Departments
Discussant Gianluca Murgia
2
Presentation index

• Experiments in leadership
• Research questions
• Description of the experiment
• Analysis of the Departments behaviour
• Analysis of the Executive teams behaviour
• Analysis of the firm effectiveness

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Experiments in leadership
About 7,5 of leadership studies

• Advantages
• High internal validity
• Useful for innovation and discovery
• Few resources requirement

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Subjects of the experiments
Small groups
Social dilemmas
GDSS
Transformational leadership
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Position vs. Personal power
Formal leadership
Authority
Key elements
Reward
Knowledge
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Research questions

• Influence of formal leadership on Departments
  behaviour
• Influence of formal leadership on Executive
  teams behaviour
• Relationship between formal leadership and firm
  effectiveness

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Description of the experiment

• 4 firms in price-based market

Transfer price system
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Methodological notes

• Group homogeneity
• Training pre-experiment
• Dry-run session
• No role revelation
• No contact during the experiment
• Common knowledge production cost range

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Sessions of the experiment
5 sessions

• 2 x 2 factorial design with repeated measures on
  the same subjects
• Authority
• Mediator
• Dictator

• Knowledge
• Ignorant
• Omniscient

1 session without Leader
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Departments task

• Each session
• From production cost (PC),
• fix transfer price (TP)
• Production cost known
• Time limited
• Agreement or voting

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Executive team task
Each session From each transfer price (TP),
fix final price (FP) fix distribution
(FP) Transfer price known by Director (and
Leader) Time limited Agreement or voting (or
dictation)
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Reward system

• Relative performance indexes
• Departments effectiveness (DepEff) FP PC
• Directors effectiveness (DirEff) FP TP
• Leaders effectiveness (LeaEff) FP
• Reward
• Department DepEff LeaEff
• Director DirEff LeaEff
• Leader LeaEff, with lower bound

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Internal validity
Salience

• Students
• behaviour

Monotonicity
Dominance
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Hypotheses
Analysis of Departments behaviour

• Departments with Leader Dictator behave more
  opportunistically than Departments with Leader
  Mediator
• Departments with Leader Omniscient behave more
  opportunistically than Departments with Leader
  Ignorant
• Departments with Leader behave more
  opportunistically than Departments without Leader

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Indicator
Analysis of Departments behaviour

• Transfer Price - Production Cost ratio (TP/PC)

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Results
Analysis of Departments behaviour
LD-LO
LD-LI
LM-LO
LM-LI
LA
Indicator
1,501
1,257
1,197
1,262
1,237
M
TP/PC
0,314
0,156
0,128
0,189
0,228
SD
Note. LI Leader Ignorant, LO Leader
Omniscient, LM Leader Mediator, LD Leader
Dictator LA Leader Absent
Dunnett test supports H3 only with LD-LO (? lt
0,01)
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Discussion
Analysis of Departments behaviour

• Information power as neutralizer
• High opportunism with strong formal leadership
• Bounded rationality
• Moderate formal leadership

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Hypotheses
Analysis of Executive teams behaviour

• Without Leader, the effectiveness of negotiation
  process inside Executive team diminishes, while
  the Directors negotiation power augments.
• With Leader Dictator, the effectiveness of
  negotiation process inside Executive team
  augments, while the Directors negotiation power
  diminishes.

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Indicators
Analysis of Executive teams behaviour

• Final Price Sum Transfer Price ratio (FP/?TP)
• Directors Effectiveness (DirEff)

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Results
Analysis of Executive teams behaviour
LD-LO
LD-LI
LM-LO
LM-LI
LA
Indicator
0,843
0,869
0,929
1,406
0,759
M
FP/?TP
0,116
0,109
0,075
0,983
0,512
SD
-26,767
-22,458
-11,025
70,833
-35,85
M
DirEff
24,108
20,577
11,47
154,62
70,594
SD
Note. LI Leader Ignorant, LO Leader
Omniscient, LM Leader Mediator, LD Leader
Dictator LA Leader Absent
Dunnett test on DirEff contradicts H4 only with
LM-LI (? lt 0,05)
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Analysis of Executive teams behaviour
Discussion

• Presence of formal leadership
• Directors opportunistic behaviour
• Need for Authority
• Absence of formal leadership
• Cooperation and team effectiveness
• Formal leader as negative focal point

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Indicators
Analysis of firm negotiation

• Final Price Sum Production Cost ratio (FP/?PC)
• Departments Effectiveness (DepEff)

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Results
Analysis of firm negotiation
LD-LO
LD-LI
LM-LO
LM-LI
LA
Indicator
25,417
10,667
13,742
105,917
M
DepEff
-8,667
16,952
10,916
12,792
157,657
SD
65,293
1,245
1,082
1,11
1,787
M
FP/?PC
0,925
0,098
0,082
0,05
1,288
0,618
SD
Note. LI Leader Ignorant, LO Leader
Omniscient, LM Leader Mediator, LD Leader
Dictator LA Leader Absent
Dunnett test on DepEff significant only with
LM-LI (? lt 0,005)
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Final remarks

• Redundancy of formal leadership
• Presence of automatic reward system
• Low information power
• High formalization of roles and procedures
• Negative impact of formal leadership
• More attention on self-advantage
• Moderate formal leadership

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University of Rome Tor Vergata

• Department of Enterprise Engineering

Leadership in organizations impact on the
Executive team and on the Departments
Discussant Gianluca Murgia