Leadership styles and different communication styles.
Organizational Behaviors
Lack of proper communication and feedback from leaders
Prepared By
Vinod Krishnan, ID # 90434
Western International University
MGT 340/Organizational Behavior
Instructor: GEORGE STRAGALAS III
TABLE OF CONTENTS
The Issue 1
Industry Context 1
Organization's Overview 4
Organization's Hierarchy Structure 5
Leadership Hierarchy Chart 6
American Express's current strategy in historical context 7
External Environment Assessment 8
Internal Environment Assessment 9
Strategy Evaluation 10
Recommendations 10
References 12
APPENDIX I 13
APPENDIX II 14
The Issue
Different leaders have different leadership styles and different communication styles. The lengthy lateral hierarchy leadership structure of American Express makes it even more complicated for the employees to get proper communication and feedback from their top leaders. Decisions affecting the employees are taken at different hierarchy level and are not properly communicated to the affected employees.
The lack of proper communication from the top leaders of the company and the individual departments to the employees of the company has been one of the reason for lesser job satisfaction and that in turn accounts for increased turnover and absenteeism and reduced productivity.
An overview of American Express's history, coupled with a review of its organization hierarchy structure and its leadership style to a more balanced leadership style is shared.
Finally, an external and an internal environment assessment of the leaderships and communication styles needed to succeed in the credit card industry is analyzed to offer an evaluation and recommendation for advancement in the credit card industry.
Industry Context
In the early 1850's travel was done by horseback, carriages, wagons, trains and by steam ships. Transportation of small packages of gold, silver was proving to be very expensive. The transportation of packages from one end to the other end of the United States was profitable. American Express was founded on March 18, 1850 at a mansion house in Buffalo, New York; it was no means a start-up company in the modern sense. Three men who established American Express- Henry Wells, William G Fargo, and John Butterfield were old hands in the Express business. Each was engaged in his own Express enterprise, and the three enterprises were competing for business along the routes in New York. As the railroads grew, these men could see the frontier and the raise of demand for Express services. They were not just at the right place at the right time, but they were shrewd businessmen who could backup their ambitions with the capital necessary to achieve some degree of scale in Express business. The three enterprises merged to form American Express.
Initially, American Express was not in the market of financial services though most of its business partners were banks. Wells partnered with the banks to introduce American Expresses money order. The "Money Order" launched by American Express in the year 1882 received tremendous response from the consumers. Approximately 12,000 money orders were sold in less than a month. The "Money Order" concept provided American Express an opportunity to build alliances with railroads and drug stores and to enter into the European market.
Berry introduced the "Travelers Check" sold in denominations of $10, $20, $50 and $100. American Express launched the concept in July 1891. Before the end of the year, American Express had sold 248 Checks with a total transaction amount of $10,000. To date American Express reports approximately $6,000,000 in annual Travelers Check sales.
American Express started to flourish in the market of travel and tourism. It started branches all over the world with the travel concept. It opened branches in Australia, France, Germany and the other European countries.
In 1910 Francis F Flagg led American Express into the international trading market thus creating the first foreign exchange transactions in the United States.
Although the banking industry encountered a setback, American Express was able to sustain its sales through money orders.
During the World War I, American Express had to close most of the European branches. American Express tired to serve the people to the maximum extent it could. The organization had to lay off most of its European employees, and consequently revenue was reduced.
Post-World War I, American Express reopened all its European branches. American Express started the first military banking facility. Services offered were loans, savings account, demand accounts and certificates of deposit. Within a short span, there were 194 military banking facilities established. The company once again started thriving. The traveler's checks, money orders and foreign exchange transactions bought a dramatic change in the revenue.
October 1st, 1958 American Express launched its first credit card after many debates. Prior to the launch, the American Hotel Association was the first organization to offer American Express an opportunity to generate 150,000 cards with 4500 participating establishments. American Express added another 40,000 people to its base of future card members.
The word got into press that American Express was planning to issue its own card, the company was inaugurated with request from potential card members, many of whom wanted cards with lucky members. Unanswered mails began to pile up at head quarters, yet the company still had not decided what kind of fee the card might carry, and all of the critical operations-application processing, credit approvals, sales, billing and collections-were still being established. Even so, by the launch date of October 1, American Express had issued more than 250,000 cards carrying a fee of $6 and there were 17,500 establishments signed to accept the American Express card. The $6 fee was decided upon because it was $1 higher than the fee for diners club. (Massengill, 1999, p.250).
Accomplishing the launch on time was a Herculean feat, and it was not without its drawbacks. One senior executive at the time said, "We have made every mistake we could possibly have made in getting it going," Launching the card was expensive; start-up expenses in excess of revenues in 1958 amounted to $2,498,166. Establishments signing up to accept the card were catalogued-not in sophisticated database- but on 3x5-inch index cards. Workers in the mailroom at 55 Hudson Street struggled to deal not only with correspondence but also with cash, since many applications included a $5 bill to cover ...
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Accomplishing the launch on time was a Herculean feat, and it was not without its drawbacks. One senior executive at the time said, "We have made every mistake we could possibly have made in getting it going," Launching the card was expensive; start-up expenses in excess of revenues in 1958 amounted to $2,498,166. Establishments signing up to accept the card were catalogued-not in sophisticated database- but on 3x5-inch index cards. Workers in the mailroom at 55 Hudson Street struggled to deal not only with correspondence but also with cash, since many applications included a $5 bill to cover the initial $6 annual fee. The company also was severely behind in corresponding to customer correspondence. There were serious problems, and numerous service establishments began to complain, that they were not being on time. Customers whose application had not been approved were also complaining, and American Express-, which prided itself in serving customers under even the direst circumstances-, found itself unusual unenviable position of being criticized for poor service. Still increasing numbers of employees were being assigned to the card Division, and they struggled to meet the growing demand. Not only had customer service become an issue; so had the company's senior leadership (Massengill, 1999, p.250).
Also prior to the launch of the credit card, American Express Board of directors appointed a special committee on retirement to address the board's concerns about management succession. The following month, the special committee recommended to the full board that both Reed, as president, and Robert clarkson, as chairman, should be eligible for reelection at the board's organizational meetings in 1958 and 1959- "and not thereafter" the board minutes noted. The committee awarded them lucrative five-year consulting contracts, provided that in the judgment of the board, they continued to competently perform their services (Massengill, 1999, p.138).
With the introduction of computers, American Express was able to tackle most of the customer problems. In 1963, the American Express card had passed several important milestones. The sales force had bought the number of participating establishments to more than 85,000 within and outside the United States; the card member base had passed the one million mark. The same year 25 airlines accepted American Express cards. In 1944, the American Express Field-Warehousing Corporation (AEFWC) was established. This entity offered storage space and certificates to manufacturers, suppliers of commodities who leased storage from AEFWC. This became a "field" warehouse under the control of AEFWC, which took ownership of inventories and issued warehouse receipts to manufacturers or suppliers for the goods received. Those receipts were acceptable to banks and brokerage houses as collateral. This new concept of providing storage bought about the need for Insurance coverage.
American Express moved into a diversified market of insurance. American Express started its diversion into Investor Diversified services (IDS). American Express bought IDS for 1 billion dollars. IDS was re-framed as American Express Financial Advisors (AEFA) later.
American Express subsequently plunged into two diversified fields, those being financing and mutual funds. According to Massengill, the Federal housing was the next milestone for American Express. American express was financing one of every 50 new homes built in the country. Facing success in a continuous way the organization started its business strategies in the Mutual funds.
Organization's Overview
Business Units:
TRS - Travel Related Services
AEFA - American Express Financial Advisors
AEB - American Express Bank
Organization's Hierarchy Structure
Most employees in American Express report to a manager who is their immediate boss. The manager is the lowest leader in the leadership hierarchy. The manager reports to a director who manages one ore more managers. The director reports to a Vice President who manages one or more directors. The vice president reports to the head of the department who manages on or more Vice presidents. The manger communicates and relays all information he gets from his boss to the employees who report to him directly. If the information is coming from the senior vice president it goes to the Vice President then to the Director and then to the Manager who then passes it on to the employees.
The manager works with the employees to set their goals and development plans for them. In some departments mangers have limited powers in regards to employee development and certain other employee related benefits like, promotion, bonuses, training, team building activities, etc. The managers have to ask his/her director for approval. And on some issues like bonuses and funding for team building activities the director might have to get the approval for his/her Vice President. The Vice presidents control the groups along with directors. The mangers have limited powers when it comes to employee related decisions.
Leadership Hierarchy Chart
American Express's current strategy in historical context
American Express much like Citizens Fidelity bank and Trust company discovered similar things about their leadership team. Today, American Express is well known for its appreciation for all employees. The company's Diversity vision is
"In order to effectively compete in a global marketplace, each person at American Express will be in an environment where he or she will have an opportunity to participate fully, grow professionally, and develop to his or her potential in meeting business objectives, regardless of individual differences"(American Express, 1994).
The creation of this vision did not evolve without a great deal of work. During the early 1990s there were discussions occurring throughout corporate America concerning the glass ceiling. A shift in employee and leader relationships was also occurring. Employees wanted to voice their opinions about the organization's vision, leaders, and their career opportunities and be heard. As a result, American Express administers the first employee survey to capture the employee's thoughts and opinions, measuring the results by gender and ethnicity. Several Fortune 500 companies were conducting similar surveys. Companies were familiar with the "Workforce 2000" report published by the Hudson Institute emphasizing the organizational need to prepare for the influx of diverse job applicants. The report reveals that in year 2000 and beyond the majority of new job applicants are female and minorities. American Express's response to this report was to review its employee survey results and respond in a positive manner to resolve all issues and lessen the attrition rate.
An assessment was conducted across different units to feel employees' job satisfaction and the communication they receive from their leaders. The questionnaire is attached at the end. (Appendix I ). Although this questionnaire was provided to thirty employees, only twenty-four responded. The survey results shows 83% of employees are pleased with American Express as a place to work. Even better 87.5% of employees have very favorable opinion about their immediate manager's honesty and integrity. But when it comes to communication the numbers drop dramatically and significantly. Only 45% of employees are satisfied with the communication they get from their immediate manager. Even worst only 8% of employees are satisfied with the communication they receive from their department leaders. Another noteworthy point in the survey is NO ONE agreed to the fact that their department leaders give them a clear picture of the direction in which the business unit is headed. And no one agreed that when new changes are implemented the leaders clearly communicate the effect the change will have on employees. Though majority of the employees agreed that their immediate manager is concerned about their personal and professional development the same number feel that their immediate manager has no power to make decisions regarding their personal or professional development. So the gist of the survey is "Employees are pleased to work for American Express but hate to be part of their current department". Since they don't receive proper communication for all the new changes that take place they feel so insecure in their current position. Though leaders are doing good job in defining reasons and setting expectations when implementing new changes they are failing miserably in the following areas.
> Engaging others in changes that effect them
> Communicating forthcoming changes in a timely, truthful, consistent, positive manner up and down the organization especially to the affected parties
> Communicating the value of change and the big picture
> Ensuring people feel heard
Though employees are pleased with American Express as a place to work they are dissatisfied with their individual department leaders' communication style as well as leadership style. Employees are moving from one department to another department hoping that the situation would be better.
Employees' job dissatisfaction is the main reason for high turnover within American Express. Moreover absenteeism is on rise and productivity is going down. According to one report to perform the same kind of job within a specific time frame, American Express would need three times more employees than Citibank. This is a serious situation affecting the productivity of American Express that requires serious changes to improve the employee job satisfaction.
American Express recognizes this and takes necessary measures to correct and improve their leaders' communication styles and leadership styles. It conducts lot of leadership forums and increases diversity of the leadership team. This diversity of the leadership team has brought a balance of both the transactional and transformational leadership styles. One example of the transformational leadership model is the creation of the "Alternative Work Arrangement" program. This program allows an employee to work from home and report onsite to work 2 days per week. Other very positive incentives for retention of their employees include bonus reward and recognition programs, midyear and year-end stock offerings and opportunities to lead business units globally practicing the various leadership styles by aligning with the situational leadership model.
Although American Express is utilizing some of the best models of leadership in the industry still there is room for improvement. It needs to do lot of work in improving leaders' communication style.
External Environment Assessment
American Express faces major competition from Visa and Master card. Even though it is in business for more than 150 years, the competition is very high and more challenging. It has to be very dynamic and more productive to stay and compete in the business. There are many unpredictable changes that may affect the organization's performance. One important change worth mentioning is "Economic downfall". If there is an economic slowdown, the card members will cut back on spending and that will have an adverse effect on American Express' revenue.
American Express should also maintain its growth to be successful in this competitive external environment by providing innovative products and services. By keeping that in mind American Express has recently launched new products with low interest rate and improved the payment system by providing facilities like online payment through Internet.
The business in American Express is also complex. Even though there are very few tough competitors, the competitors come up with new ideas and new products
making the business environment more heterogeneous and dispersed for American Express. So, it is very clear that American Express has a very dynamic, scarce and complex external environment.
Internal Environment Assessment
American Express has a very good marketing strategy. It has launched new products and increased its growth in international arena and US. It has a major tie up with international banks in different countries.
American express has a very good human resources system. Human resources department has its own database and individual employees can access all the HR information online. Employees can contact the HR department through email or phone to make any changes. At the end there will be a feedback survey about the information given by HR department and based on the feedback actions will be taken to improve the system further.
American express offers its employees lot of benefits ranging from tuition reimbursement, training, 401K plan and retirement benefits. American Express employees are pleased with the facilities, policies and benefits of the company. Even though our survey results show that majority of the employees are not satisfied with their department leaders, they don't leave the company, but try to move to different departments. That is why the turnover within American Express is very high. Since the employees are always moving within the company, absenteeism is high and productivity is low. The main reason for employees' dissatisfaction with their department leaders is lack of proper communication regarding any new changes.
One classic example is sudden major organizational changes without any prior communication to the affected parties. This kind of communication gap will make employees very nervous and unhappy. They may feel insecure in their current job and constantly worry about any unexpected forthcoming changes. Making employees to guess about their job security will have a very adverse effect on their productivity.
It has become the culture in American express to move employees from one department to another or merging departments without any proper communication. For example, there was one new department that started three years before. The department was running fine. But the management saw lot of money was spent in technical aspects. Instead of trying to cut cost on technical aspects, management brought a new vice president without any prior communication to the affected group. The vice president did micro management, which many employees didn't like. The Director resigned from the department. Employees were not satisfied with the leadership style of the vice president and became unsatisfied with their current job, which led to lot of absenteeism and turnover. Majority of the employees left the department. Had there been a proper communication about all the forthcoming changes, at least to the affected parties, there wouldn't be this many dissatisfied employees and turnover. This is a classic example of lack of proper communication's effect on employees' job satisfaction, turnover, absenteeism, and productivity.
Productivity is the victim of uncertainty in the job location. When sudden major changes happen without any proper prior communication employees become nervous and afraid of their current situation. They may feel insecure about their job. This creates lot of stress among employees within the department. It is normal human tendency to look for safe haven in those situations. So people float from one department to another department hoping for better things. So employees are always on constant move and that will affect their productivity. American express needs to address this issue to be more productive to compete in the market place.
Strategy Evaluation
"The ultimate objective of American Express is to accelerate growth in the market share and profits. Build a sustainable long term position as the best payments systems network in the world" (American Express, 1996, p4). The organization focuses on the following three principal themes to compete and grow:
> expansion of the international business
> strengthening the American Express card network
> broaden the financial service offerings
Today, globally both men and women are enhancing their education, providing greater opportunities to practice their styles. But most of the American Express leaders in the individual department level do not communicate properly. Before implementing any changes even though they define reasons and set expectations for the changes they fail to communicate forthcoming changes to the affected parties. Moreover leaders fail to communicate the value of change and the bigger picture. Because of this employees become dissatisfied with their leaders. They feel their views are not heard and they become dissatisfied with their job. Employee's job dissatisfaction is the main catalyst for high turnover within American Express, absenteeism and productivity. If American Express does not continue to enhance their leaders' communication styles, it will lose its position in the market place.
Recommendations
American Express is doing well, in capturing the responses from Employees surveys. The problem is, the actions that are taken from the survey are not being addressed fully. The internal communications needs to be increased and the amount of training the leaders receive on various leadership styles and communication styles needs to be increased. American Express leaders must embrace both transactional and transformational styles to a greater degree. This will allow the appropriate style to be used for situations as needed. American Express does well in providing tools to develop their leadership style but they are not being practiced consistently among the employees. To improve the overall situation the following actions are recommended.
Management must be consistent on behavior, say what you mean and mean what you say, be consistent in the message. Once the decisions are made and aligned COMMUNICATE as soon as possible, debug situations before communicating, lay out the plans clearly so there are no misunderstandings. To improve the communication situation the leaders should follow the following ground rules:
> Define reasons and set expectations for changes, communicate the value of changes and the big picture
> Engage others in changes that effect them and communicate forthcoming changes in a timely, truthful, consistent, positive manner up and down the organization especially to the affected parties
> Provide forum that allows people to deal with change and ensure people feel heard by seeking and actioning on feedbacks
> Provide team communication through newsletter and town halls, to 'own' the communication
> Communicate laterally, translate from 'conceptual' to 'real'
> Provide tools for managers to help their team translate
Employees also should help to improve the situation. They should actively participate in any survey process and must speak up if not understood. Take advantage of opportunities to speak up and have courage to speak up and more importantly stay focus on communication that impacts the team.
References
. Massengill, Reed, (1999), 150 Years of American Express. New York, New York: American Express Tower.
2. Mize, Sue (1992). Shattering the Glass Ceiling. Training and Development.
3. Segal, Jonathan A., (1991) Women on the Verge...of Equality. Hr Magazine.
4. David Evans and Richard Schmalersee Paying with Plastic.
Team B
OB Issues Paper
20 October 2003
Many issues and concerns arise when two companies form a
conglomerate, or merge. Every merger is unique, and most items that
rise to the surface as concerns are situational. In the instance
provided, Mergers, Inc. shareholders approved a merger with the company
that we are department heads of. It is our duty to begin the process of
creating changes that are considered necessary for this newly formed
company to succeed. We will also be held accountable for maintaining
our department's performance standards and measures while approaching
human relations as well.
In this essay, we will catalog and reflect upon the numerous
organizational behavior issues that may arise from the acquisition of
our company. The outstanding issues include competition between
managers from each company, differing operational procedures, employee
resentment, job security, differing human relations policies from dress
code to health benefits, diversity issues (especially if the two
companies are from different nations), management styles, creating a new
group identity with common goals, and the always-hovering power
struggle.
We have chosen the differences in human relations policies to go
into more detail with. This issue will be framed by explaining how, as
management, we would research, evaluate, and ultimately provide a
solution to this concern. A list of steps taken and critical questions
that must be asked in order to evaluate the situation objectively will
also be provided.
As Robbins (2000) mentions, while there are a few constants in
operational behavior, "OB concepts must reflect situational, or
contingency conditions." (p. 14) The initial action that should be
taken is a list of the commonalities and differences in personnel
policies. It would make sense that hiring practices can be honed and
altered with little trouble in most cases. It would also make sense
that the parent company, or company instigating the merger, would have
more clout or say in what happens when the dust settles. There is a
uniqueness to our situation; most mergers occur with heavy employee
lay-offs from the smaller/merged company. This is not the case in this
instance. So, employees should be resolved, first off, in the fact that
they are not losing their jobs. Does this mean that they are valued in
the same way, positively or negatively, as they were in the past?
Certainly not. But they must understand that their knowledge and
experience in these positions is valued by the newly-formed company.
In it's rawest form, operational behavior in any company, including
new mergers, must strive for total quality management, which Robbins
(2000) describes as a, "philosophy of management that is driven by the
constant attainment of customer satisfaction through the continuous
improvement of all organizational processes." (p. 17) It would make
more sense that a merger is done for the improvement of a business, than
merely for the monetary benefit of a few big wigs. What needs to come
across to the retained employees is that they are a vital part of the
new company's success. The core values really remain the same. The
mission statement may change, the product may even change, but the drive
and motivation is based on the core values of business.
Team B 2
References
. Robbins, Stephen R. (2000). Operational Behavior. Upper Saddle River,
New Jersey: Prentice-Hall, Inc.
