Introduction
Leadership is an integral component of nearly every sphere of contemporary life. It is equally applicable to business, education, or healthcare. On the whole, it is an ability to provide an impact on other people using one’s personal qualities and values. Management is another important sphere of any company or organization. While being frequently used as synonyms or misinterpreted, these concepts are different because managers and leaders have different functions and purposes.
In the contemporary challenging business environment and conditions of high competition, companies struggle for customers and leading positions in the market, which indicates their high performance. Leadership has the potential to become a tool for the successful development of a business. This paper is dedicated to the analysis of the concepts of leadership and management, an investigation of the transformational leadership theory, an evaluation of the effectiveness of the leadership selection and training program at General Electric, and the analysis of this program in the context of the transformational leadership paradigm.
Thus, it is necessary to differentiate between leadership and management since these concepts have different backgrounds as well as different outcomes for companies. Moreover, there is a need to understand diverse leadership theories because each of them determines the leadership style of a company or organization, which directly impacts its performance. Among the list of theories, this paper concentrates on Transformational Leadership as one of the most popular and widely applied theories. Leadership style and programs aimed at preparing new effective leaders are better traced on the example of a successful company.
Therefore, this paper studies the leadership selection and training program at General Electric, one of the most successful corporations in the United States. Finally, the transformational leadership theory will be applied to the analysis of the leadership selection and training program and its effectiveness.
Body
The Difference Between the Concepts of Leadership and Management
The concepts of leadership and management are frequently used in the contemporary business world. Managers in organizations are frequently called leaders while these two notions are different. Murphy and Murphy (2018) call the problem of differentiating between leadership and management the ‘Gordian Knot’ and believe it needs to be solved because these notions are not identical. First of all, the core difference is in the person called a manager and a leader.
Thus, a manager is someone occupying a managerial position in a company with a specific set of duties and responsibilities. At the same time, a leader does not necessarily occupy a managerial position. Anyone can be a leader and does not need to be an authority in a company or organization. Speaking in more detail, a manager is a person employed by an organization to carry out the major functions such as planning, organizing, leading, and controlling.
Therefore, leadership is expected to be an integral component of management. Nevertheless, not all managers are successful leaders able to influence the employees. Leadership presupposes the fact that leaders are followed due to their characteristics, values, beliefs, and behavior and not because of a hierarchy in an organization.
Arruda (2016) singles out nine significant differences between managers and leaders. The first difference is that leaders develop a vision to follow while managers create goals. With this vision, leaders can inspire other people and involve them in this or that activity, disclose the potential of individuals, and lead them to something better than what they have. Managers are more concerned with setting goals, planning their achievement, and measuring the outcomes.
Their function is to control, not to inspire. Secondly, leaders stimulate change, while managers preserve current achievements. Innovation is crucial for leaders and they search for new ways to the improvement of everything they are involved in (Arruda 2016). Managers prefer improving the existing systems and processes without challenging innovations. The third significant factor is uniqueness. While leaders develop their exclusive ideas, managers usually adopt a certain style and follow it.
Attitude to goal-setting is another peculiarity that helps to differentiate between a leader and a manager. Thus, leaders are usually strongly motivated to achieve a big goal and they do not need regular stimulation and recognition. At the same time, managers prefer short-term goals and need regular rewards and approval of their actions.
One more difference is related to personal development and growth (Arruda 2016). While leaders believe that it is necessary to learn something new every day to continue growing, managers are frequently satisfied with already developed skills. Another difference is the focus of activity for managers and leaders. The latter is concentrated on people they need to contact and influence to achieve their goals and realize their vision.
The former is more focused on systems and structures needed for achieving their goals than on human resources (Arruda 2016). The type of activity in leadership and management is also different. Leaders usually prefer a coaching style and do not give strict instructions, while managers direct activities and give definite tasks with guidelines for their completion. The last difference is in the people who surround leaders and managers. Leaders have followers who share their vision and spread their ideas (Arruda 2016). Managers are in charge of staff who is expected to act according to the accepted duties and instructions.
The key question answered by leadership is ‘why?’ while ‘how?’ is a more frequent question for management (Hancott 2016). Leaders are strategic and managers are tactical. The major elements necessary for the functioning of leadership are people relationships and culture while systems and hierarchy are more significant for management. The type of learning in leadership is usually innovative and in management, it is conventional (Hancott 2016).
Communication in leadership is informal, implying diverse networks. Management subscribes to more simple, formal, and structured communication. Also, leadership is more tolerant to change and risk than management. As for addressing change, leadership is usually “leading, embracing, proactive,” and management is “managing, accepting, reactive” (Hancott 2016). Furthermore, the difference is observed in the major tasks typical of these two concepts. Leadership deals with both internal and external customers, communicates the vision of the company, and “pulls” people compared to management, which deals with internal customers, follows certain processes, and “pushes” people.
The process of deciding leadership is guided by intuition, and in management, logic plays a major role. Finally, as for the traits necessary for leaders and managers, the following aspects should be mentioned. Leaders should possess such traits as integrity, honesty, trust, vision, passion, risk-taking, and implications for continuous learning (Hancott 2016). Managers, on the contrary, are expected to demonstrate such traits as expertise, efficiency, preservation, and be risk-averse. On the whole, leadership implies more communication and empowerment whereas management is responsible for organization and control.
Nevertheless, despite the evident differences, both management and leadership are significant for the sustainable development of companies and their success in the market. The major fundamental elements of any business provided by management include planning, motivating, organizing, and controlling (Hancott 2016). Planning presupposes the evaluation of opportunities and threats faced by a company as well as providing guidelines for achieving high effectiveness. Motivating includes interventions that help achieve the identified goals. Organizing implies assigning tasks to appropriate people and distributing resources necessary for every task.
Finally, controlling includes determining standards for a company’s performance and comparing the achieved results to the previously set goals (Hancott 2016). The fundamental elements provided by leadership include envisioning, establishing trust, communicating, and empowering (Hancott 2016). Envisioning presupposes the definition of a vision and purpose to follow, which are usually oriented to the result.
Establishing trust is an important component that makes the company reliable, trustworthy, and consistent in decisions and following the vision. As for communicating, it comprises the distribution of information about the necessity of constant change and translating its essence to all stakeholders. After all, empowering implies a high level of commitment and demonstration of shared vision (Hancott 2016). On the whole, while both concepts are meaningful for contemporary companies, leadership contributed more to the image of a company and its successful performance.
Leadership Theory: Transformational Leadership
Every company selects a leadership style based on a certain leadership theory, such as Trait Theory, Behavioural Theories, Contingency Theory, Charismatic Leadership, or Transformational Leadership. Among these leadership theories, transformational leadership theory is one of those that imply the most motivation. It is a popular theory, which is the basis for leadership styles of companies concerned about culture and its significance for employee satisfaction as well as high performance and success. The notion of transformational leadership was first developed by James Burns (Nongard 2014).
A different researcher-developed their definitions, while the major point in transformational leadership belonged to motivation and inspiration. Moreover, transformational leadership presupposes mutual stimulation of leaders and followers for achieving common goals and improving general performance. Transformational leaders are considered to be respected, trusted, and admired by their followers.
Transformational leadership comprises four major components, such as idealized influence, inspirational motivation, intellectual stimulation, and individualized consideration (Nongard 2014). Idealized influence or charisma implies the degree to which the leader’s role can shape behaviors corresponding to the general vision and strategy they developed and if this role has the potential to stimulate employees to approach the leader and the vision. Inspirational motivation presupposes the creation of a vision compelling for the followers, which can clear up the goals able to motivate employees and disclose their potential as well as provide employee development.
Intellectual stimulation comprises the process of enabling employees to be concerned not only about their interests and needs but also those of a company as a whole and their team in particular. Employees are expected to face challenges that encourage their creativity and teach them to cooperate in a team and achieve excellence. Finally, individualized consideration demands the transformational leader to pay attention to the personal needs and concerns of the employees and followers thus creating conditions that can stimulate both personal and professional growth and contribute to the company’s performance.
Some researchers speak about radical transformational leadership. For example, Sharma (2017) uses the term ‘radical’ in the meaning of ‘a root,’ implying that radical transformational leadership is a root of leadership. The author stresses that his ideas are not related to ‘radical’ or extreme actions as they are traditionally used in the political context. He rather claims that there is a need for radical responses powered by “values of dignity, equity, and compassion” to address contemporary radical changes in social, economic, or political life (Sharma 2017, p. 3).
In fact, these radical responses provide an opportunity to disclose perspectives of change and improvement. Transformational leadership is frequently analysed in the context of performance as one of the factors that have a positive impact on both employee and company performance (Hancott 2016). Thus, transformational leaders’ behavior frequently leads to “above-average performance by subordinates” (Hancott 2016, p. 193). It is one of the reasons to consider the transformational leadership theory as a basis for the leadership model of a company.
On the whole, transformational leadership theory has several useful practical applications for leaders in different spheres. For example, a transformational leader should be able to develop a vision, both challenging and appealing to his or her followers. Another important thing is to connect this vision to the company’s strategies, thus providing its achievement. Moreover, it is necessary not only to develop a vision but also to put it into definite action. Finally, a transformational leader should be confident, critically thinking, able to make decisions, and optimistic about the developed vision and its implementation within the activity of the company.
The Effectiveness of the Leadership Selection and Training Programme at General Electric
General Electric is the company that was started in 1878 by Thomas Edison as the Edison Electric Light Company. It has had a long way of development from the invention of the first light bulb to constructing the first Central Power Station in the United States. Nowadays, it is an international corporation managing aviation, capital, digital, healthcare, power, transportation, and other businesses. It employs people in 81 countries around the world (Culture 2018).
One of the major traditions accepted and valued at General Electric has been life-changing innovation. At present, the company employs 295,000 people united by common goals and values. The president of General Electric Aviation, David Joyce, claims that “What matters most is the human capital. We need great ideas, innovation, and leadership to stay current and relevant” (Culture 2018, para. 7).
Thus, leadership selection and training programs at General Electric are aimed at developing outstanding leaders able to introduce innovation and provide sustainable development. John Flannery, the Chairman, and CEO state that the company is concerned about the preservation of its culture and values as well as about being involved in constructive dialogues with its business partners and customers.
Leadership selection is a crucial process for General Electric. With almost 300,000 staff around the world involved in diverse businesses, there is a need to lead and manage all the spheres the company is involved in. the company pays much attention to staffing policy. There are leadership programs empowered by General Electric around the world, for example, in Italy, Switzerland, Poland, India, and others.
One of these is a Digital Technology Leadership Programme aimed at obtaining international experience in software and digital technology, which are crucial both for company projects and teamwork. This program lasts for two years and includes four rotations thus placing participants in different countries. Also, there is an Experienced Commercial Leadership Programme which is available for candidates with MBA degrees and substantial work experience.
It is aimed at the preparation of leaders for General Electric businesses, mainly for sales and marketing departments. This program is also rotational and lasts for two years. It provides its participants with international leadership and commercial preparation and motivates their growth in the sphere of business. There are other programs provided by General Electric, including Communications Leadership Development or Financial Management Programme.
Thus, General Electric is one of the companies applying action learning as an integral part of their leadership development systems. For example, its action learning program concentrates on solving real business problems and providing continuous support for leadership development, including the strategic business goals and objectives of the company. It should be mentioned that there is a particular program for future executives.
General Electric is famous for the careful selection and preparation of its presidents, vice presidents, CFOs, and CEOs (Kosur 2015). This program started in 1910 and years of successful performance of General Electric in the market are proof of its effectiveness. It is a five-year program that involves common employees of the company in the peculiarities of technology, audit, and operations work. It is also called the corporate audit staff (CAS) meaning that only the staff members can enter it and get a chance to become one of the future executives.
Every year, from 200 to 300 applicants are accepted, but only 2% of them finish the program and obtain a position at the executive level of the company (Kosur 2015). The program comprises all the aspects of General Electric activity from manufacturing to finance because effective executives should be aware of every sphere of the company.
After the application process is over, the candidates enter a pilot program, which lasts for four weeks. Its major goal is to evaluate their leadership skills and the ability to think critically. The candidates face many challenges such as working in unfamiliar conditions in remote locations (Kosur 2015). This stage also checks resistance to stress which is crucial for leaders. After the pilot program, applicants who confirmed their high leadership capacity and the ability to think critically are invited to a two-year program, during which the participants are sent to diverse locations of General Electric around the world to study their peculiarities (Kosur 2015).
This program is grounded in regular feedback provided by the participants and their managers. Moreover, there are formal appraisals that evaluate the work of every participant in different locations during a year. Not all the participants complete five years of the program. About a half of them usually get audit manager’s positions after three years and 20% take-up senior audit-management position after the fourth year is finished.
The peculiarity of CAS at General Electric is the fact that it provides the company with highly professional executives. 80% of chief financial officers working for General Electric have passed the CAS program (Kosur 2015). They are employed by seven industrial segments of General Electric such as GE Aviation, GE Healthcare, GE Power, GE Transportation, etc., as well as GE Capital. The program itself is intense and demands a commitment of the participant. Networking and cooperation are also the aspects that are significant for the program and future leaders.
The annual report of General Electric provides evidence of the effectiveness of the selected training program. According to the company’s CEO, General Electric delivered solid performances and revenues decreased only slightly (2017 annual report 2017). The company invests in its leaders and is interested in the development of talent on the global level empowering leadership programs outside the United States and thus providing the company with highly professional leaders able to fulfill the mission of the company. General Electric is active in a diversity of spheres including aviation, healthcare, renewable energy, transportation, oil and gas, lighting, capital, and power.
Such distribution and preservation of leading positions in all of those spheres demand efficient leadership. The company made an important choice not to attract outside human resources but to organize inner preparation. The existing training program has been functioning for more than a century and the fact that the company holds leading positions in the industries it operates is another proof of the appropriateness of the selected system.
On the whole, the selected policy of building its leaders in General Electric proves to be effective. It has been functioning since 1910 and led to the fact that the majority of the company’s leaders grew up from its employees. For example, one of the new leaders appointed in 2017, John Flannery, has been working for General Electric for 30 years before becoming another chief executive (Hill 2017). The leadership selection and training program at General Electric provides future leaders with excellent opportunities to learn from the company from the inside, which is a precondition of a successful and efficient leader.
The Leadership Selection and Training Programme within the Transformational Leadership Theory
The leadership selection and training program at General Electric can be analyzed within the Transformational Leadership Theory. Transformational leadership applies to the mission and vision of the company. The current CEO claims in the Annual report that “the passion, meritocracy, diversity, and integrity of our people have been—and always will be—the cornerstone of who we are,” thus underlining the company values (2017 annual report 2017, para. 49).
All those ideas are to some extent united in the leadership selection and training program applied at General Electric for more than a century. The program correlates with the major principles of the transformational leadership theory. For example, the theory comprises intellectual stimulation as an integral component, which also comprises elements of creativity. The program implemented at General Electric is also aimed at the selection of intellectual leaders. Its organization implies diverse directions of training, which consider all the spheres of the company. Consequently, it develops not only leadership skills but also intellectual abilities.
As for individualized consideration, which is another component of transformational leadership and presupposes encouragement and support for the employees or followers, it can be also traced in the leadership selection and training program of General Electric. Individualized consideration is evident in feedback provided individually by every participant and for every participant (Kosur 2015). Moreover, a formal appraisal, which is a part of the program, also provides an individual consideration of the achievements of every future leader. An individual approach is also implemented in the aspect of appointing the participants of the program to positions.
Thus, some of them are offered audit manager’s position after three years of the program, and about the one-fifth select senior audit-management position after the fourth year. Finally, those who complete the program can become chief executives or occupy other positions in the company. An important fact is that even if a person fails to graduate from the program, he or she will not become less valuable for the company. Still, this person has a chance for promotion to a suitable position that would meet both the career implications of this person and the needs of the company.
Inspirational motivation, which is the third component of the transformational leadership theory, is also significant for General Electric as a whole and its leadership selection and training program in particular. The first motivational aspect is observed at the beginning of the program, during the first four weeks. The participants are motivated to demonstrate the best results and good leadership skills to be admitted to the program. Also, they are expected to be inspired and apply the best of their skills and experiences when they are placed in an unfamiliar location where they have to work.
Future leaders are both inspired and motivated to learn from the company from inside to be able to lead any direction of the company’s activity. Moreover, the company is famous for innovations and constant change. Therefore, its leaders should be taught how to motivate and inspire the staff to accept change and innovation, which is frequently challenging. Also, a transformational leader should be able to serve as an example.
The leaders prepared in the program of General Electric have this potential because they came from different departments and lower positions, and can demonstrate the opportunities for the rest of the staff. This aspect is also related to the fourth component of transformational leadership, which is idealized influence. Thus, General Electric leaders are living models of careers at the company stimulating young employees to be ambitious and, probably, join the program as well.
On the whole, the theory of transformational leadership applies to the selection and preparation of leaders at General Electric because the company is constantly involved in innovation, which presupposes transformation and change not only in technology or products but also in leadership styles (Ngoie 2014). Thus, leaders should be prepared to motivate the other employees, translate the mission and vision of the company, and show the opportunities for achieving the company’s objectives thus leading to better performance.
Conclusion
Leadership and management are the integral components of any contemporary business. They can follow different theories and styles, but both should be applied to the functioning of the company. However, it should be kept in mind that management and leadership are not synonyms. These concepts have different functions and purposes for companies. Thus, the primary task of leadership is to create a vision and strategies that help to follow the vision.
At the same time, management is responsible for planning, organizing, and controlling. Leadership is considered to be tactical while management is strategic, but both are significant for every company. However, at present, leadership and its theories are a more frequent topic for business discussions than management due to its relation to innovation and constant change. This paper discovered the application of a leadership theory on the example of General Electric.
On the whole, General Electric is a company with a unique history of success. It traditionally pays much attention to creating effective leaders able not only to manage the business but also lead people through constant innovation and change, which is typical of General Electric. To achieve the best performance, the company prefers not to hire leaders from outside but to create a strong school of leadership inside.
Therefore, there is the leadership selection and training program in the company, which provides all the businesses the company manages with leaders who know every aspect from inside because they come from employees and are trained to be able to work in an international business environment. Transformational leadership is, evidently, one of the theories applicable to the model of leaders’ preparation used by General Electrics.
Its major components, such as intellectual stimulation, individualized consideration, inspirational motivation, and idealized influence, can be traced to the scheme of leadership training at General Electric. Therefore, transformational leadership can be considered one of the leadership styles applied by the company and contributing to its success in adapting to constant change and innovation, which are the integral parts of the company’s progress and high competitiveness in the market. Generally, leadership for General Electric is a never-ending opportunity for development, which should be used for growth and improvement.
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