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Authoritarians, who impose discipline and obedience, make the best leaders when the going is tough, study finds

January 6, 2016

For more information, contact: Ben Haimowitz , (718) 398-7642, press@aom.org

Several years ago, when the bite of the global recession was being keenly felt, a leading management consultancy published a summary of interviews with CEOs of 14 major U.S. companies on how they had responded to hard times. Prominent in their responses was a combination likely to come as no surprise to students of contemporary management – the need for decisiveness on the one hand and for congenial openness on the other. For example, the chiefs emphasized "the power of openness at all levels" and "the need to assure employees that the CEO has faith in them."

 

A study in the current issue of Academy ofManagement Discoveries begins by citing this paper. It then proceeds to find virtues in an authoritarian approach diametrically opposite the openness endorsed there.

 

Yes, the researchers concede, authoritarian leadership is out of favor and there is plenty of evidence that employees don't like it. But there has been little research on its effect at the company level. And, in what the authors believe to be a first, they find that "authoritarian leadership does have a positive impact on firm performance when firms operate in a resource-scarce environment. In such a situation, authoritarian leaders, who reinforce discipline and obedience, can help followers and organizations to achieve operational efficiency and effective coordination, which are critical in harsh environments."

 

Comments Xu Huang, a professor at Hong Kong Polytechnic University and a co-author of the study, "Despite its drawbacks, such as its tendency to suppress creativity and innovation, authoritarian leadership remains prevalent in business enterprises not only in China, where we conducted this research, but through much of the world, including the US and EU. Our findings suggest why this remains the case."

 

Collaborating with Prof. Huang on the study were Erica Xu of Baptist University of Hong Kong, Warren Chiu of the Hong Kong Polytechnic University, Catherine Lam of City University of Hong Kong, and Jiing-Lih Farh of the Hong Kong University of Science and Technology.

 

The new research is based on data from 102 subsidiaries of a major telecommunications company in a Chinese province about the size of Germany, units operating with a high degree of independence that makes them comparable to small firms. The research analyzes the interrelationship among three factors – 1) economic conditions in the county where each of the subsidiaries operates; 2) the extent of transformational or authoritarian leadership in each of these units, as revealed by manager surveys; and 3) the performance of each subsidiary as measured in revenue growth over the four months and 12 months post-survey. Economic conditions ("economic resource munificence," as the authors put it) were calculated for each county from four measures -- gross domestic product (GDP) per capita, GDP growth, average income of the population, and total retail sales per capita. 

 

As the authors explain, "there are two alternative perspectives on the role of leaders when their firms operate in resource-scarce environments.... Advocates of the motivational perspective assert that transformational leadership is particularly effective because [it] helps followers transcend their self-interests and increases their awareness of larger issues and collective goals, while also enhancing their motivation and reducing their frustration. In contrast, the efficiency perspective posits that in a resource-constrained environment operational efficiency and effective coordination are essential for firm survival [and best achieved] by an authoritarian leader [who] exerts absolute authority and control over subordinates and demands unquestioned obedience." 

 

To choose between these perspectives, the professors gauged the extent of the two types of leadership through surveys in which members of the top management team in each subsidiary were asked to respond on a scale of 1/strongly disagree to 7/strongly agree to statements about their boss the managing director.

 

Transformational leadership was measured through the managers' response to such statements as “paints an interesting picture of the future for our group”; "inspires others with his/her plans for the future"; "develops a team attitude and spirit among employees"; "shows respect for my personal feelings"; and “has stimulated me to rethink the way I do things.”

 

Authoritarian leadership was assessed by responses to such statements as “always behaves in a commanding fashion in front of employees”; “determines all decisions in the team whether important or not”; “exercises strict discipline over subordinates”; “scolds us when we can’t accomplish our tasks”; and “requires we follow his/her rules or we are punished severely.”

 

In counties where economic conditions were strong (those roughly in the top 15% of the sample), greater authoritarian leadership was associated with significantly lower performance in both the four months and 12 months post-survey; by contrast in counties where economic conditions were poor (lowest 15%) greater authoritarian leadership was associated with significantly higher performance. No such relationships were found for transformational leadership.

 

In short, the results "support the efficiency perspective but not the motivational perspective."

 

The authors acknowledge that these findings "may be somewhat surprising, because in the literature transformational leadership has long been lauded as a humanistic and effective leadership style... inspir[ing] employees to achieve excellence and to contribute extra effort...In contrast, authoritarian leadership has a negative connotation in the literature and has been seen as a less desirable leadership style by employees across a variety of nations."

 

And clearly this view has been widely accepted by top executives too, Prof. Huang observes, as evidenced by the responses of the 14 U.S. CEOs cited above. "It may be that their response to the recession partly reflected the munificent conditions in which they normally operate," he surmises. "Possibly, too, there was an element of political correctness in what they said. In any event, what our study suggests is that the best leaders have more than one style of leadership and adjust them based on circumstances. For example, we cite the case of Steve Jobs, who was as inspirational a leader as one can find but who resorted to an authoritarian approach when Apple was on the brink of bankruptcy."

 

The professor adds that his own interest in the issue stemmed from an experience teaching a class of CEOs and senior executives of some of the largest companies in China. "They didn't buy the idea of transformational leadership," he says. “They were quite sure the authoritarian approach worked best. My co-authors and I decided to put the issue to the test, and this study is the result.”

 

The paper, entitled "When Authoritarian Leaders Outperform Transformational Leaders: Firm Performance in a Harsh Economic Environment,"  is among the research published in the fall/winter issue of Academy of Management Discoveries, a new journal dedicated to exploring management issues at ground level. The Academy of Management, with about 18,000 members in 117 countries, is the largest organization in the world devoted to management research and teaching. The Academy's other publications are Academy of Management Journal Academy of Management Review, Academy of Management Perspectives, Academy of Management Learning and Education, and Academy of Management Annals.

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