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The Private Equity Style of Leadership: Transformational

Private equity firms don’t invest resources into an organization to maintain the status quo. Private equity builds healthy and vibrant organizations with cultures oriented towards teamwork, organizational learning, creativity and innovation while providing customers exceptional value through quality products and service. Building healthy and vibrant organizations often requires significant transformational change and therefore demands a style of leadership known as transformational leadership.

We are confident that all private equity firms will tell you that a positive and sustainable performance outcome only occurs when organizational culture continues to transform. A transformational leadership model guides the organizational learning and creative and innovative thinking required to stay competitive.

Other Leadership Styles

Leadership styles (individual and teams) come in many forms. In his book, Leadership: Theory and Practice, Dr. Northouse describes that leadership styles “consist of the behavior pattern of a person who attempts to influence others” (p. 94). Dr. Northouse describes several leadership styles:

  • Transactional
  • Transformational
  • Authentic
  • Servant
  • Adaptive

Organizational leaders have many different characteristics, attributes and styles, and all leaders are certainly not alike. Moreover, not all leaders are best suited for significant organizational change. While all leadership styles benefit organizational leadership teams, our focus is on leadership that is transformational

Years of sound objective research indicate transformational leadership should be a concept known to all organizational leadership teams. From the findings of our own independent studies, along with many others, the authors of this article would argue that transformational leadership is a critical success factor for an organization during large-scale ERP organizational change.

Defining Transformational Leadership Styles

Organizational change literature suggests that executive teams and leaders with real – not perceived, assumed or desired – transformational leadership qualities may benefit from a known ERP organizational change critical success factor: effective leadership with a transformational mindset.

Transformational leadership is a recurring theme in ERP organizational change research.

  • In Leadership: Theory and Practice, Dr. Northouse describes transformation leadership as “a process that changes and transfers people. It is concerned with emotions, values, ethics, standards, and long-term goals” (p. 161). Dr. Northouse adds that transformational leadership involves an exceptional form of influence that moves followers to accomplish more than usually expected. Furthermore, Northouse (2016) describes transformational leadership as the consistent act of engaging with others and connecting in a way that increases motivation and morality, being perceptive to needs and motives, and helping followers reach their greatest potential. 
  • In their book Reframing Organizations: Artistry, Choice, and Leadership, Bolan and Deal (2016) describe the central idea of transformational leadership as one in which “transformational leaders use inspiration, idealized influence, and the like to generate followers’ trust, respect, and willingness to go above and beyond” (p. 341).
  • Transformational leadership enhances followers’ commitment, involvement, loyalty, and performance and helps deal with stress among followers (Bass, 1998). Additionally, transformational leaders inspire and motivate, are intellectual in their approach, and are intellectually considerate of employees. These attributes are signs of a transformational leader compared to transactional leaders who practice a contingent reinforcement style of leadership (Bass, 1999). 

These transformational leadership styles, as described by organizational change researchers, can provide a transformational leadership model for ERP success.

encouraging and inspiring organizational culture

Transformational Leadership Factors Affecting Culture

A transformational leadership model advocates an organizational culture that transitions employees beyond self-interests, creates a highly motivated culture, promotes a robust learning environment and is highly considerate of others’ well-being.

Transformational leaders are well suited for ERP organizational change through encouraging, inspiring and establishing trust to best accomplish a successful implementation (Goldston, 2020; Nestell, 2020). Research suggests that transformational leaders are strong advocates of the organizational change process through creating team decision-making while being mindful of and managing behavior with empathy and understanding.

Transformational leadership factors that build a culture for successful organizational change include leaders as exemplary role models and advisors, associate buy-in to the organization’s vision and critical thinking and problem-solving.

 

Transformational Leadership Value and ERP Organizational Change

Organizations may benefit from recognizing the value and application of transformational leadership during ERP organizational change. As ERP organizational change agents, it is essential to understand, assess and be honest about leadership styles and their strengths and weaknesses. ERP organizational change efforts often consist of:

  • An iterative process of improvement
  • Business process re-engineering
  • Increased demands on internal time and effort
  • Diversity in terms of experience, perspectives, opinions, and knowledge
  • Organizational change mitigation strategies

In other words, ERP organizational change can be quite disruptive to the norm and require significant organizational resources (time, money, effort). Burns and colleagues (2013) describe transformational leaders as possessing organizational cultural characteristics such as strategic vision, celebrating successes, employee support, innovation, goal setting and organizational culture orientations and identification that exceed some of the cultural orientations of transactional leadership.

Burns et al. (2013) also suggest that transformational leaders may be best oriented to provide, promote and develop a more adaptive organizational culture in times of crisis and significant organizational challenges. Bass and Avolio (1990) state that transformational leaders can stay in tune with employees’ desires and maintain the alignment of realities and expectations required for a successful ERP organizational change.

Transformational leadership focuses on driving the organization to outperform expectations, working through difficult situations and adapting to change. As a result, transformational leadership is a significant cultural influence on the success of ERP organizational change.

 

Successful ERP Organizational Change is Dependent Upon Transformational Leadership

Three highly relevant principles contribute to the notion that successful ERP organizational change is dependent on transformational leadership. 

  1. The first principle is that those leaders who are more satisfying to their followers, and who are more effective as leaders, are more transformational and less transactional (Avolio & Bass, 1991). 
  2. Second, transformational leadership enhances followers’ commitment, involvement, loyalty and performance and helps deal with stress among followers (Bass, 1998). 
  3. And third, there are strong links between aspects of transformational leadership and work performance (Lowe et al., 1996). 

These principles suggest that executive stakeholders benefit from further understanding and not assuming their leadership abilities, characteristics, weaknesses and strengths. Furthermore, these principles would also indicate that executive stakeholders understand the different transformational leadership styles. Accordingly, the executive team should survey leadership style and then participate in educational sessions to discuss results and the value of transformational leadership during an ERP organizational change effort.

 

ERP Success Factors: Learning From Others

Shao and colleagues (2012) presented one of the first studies that examined the triad of transformational leadership, organizational culture, and knowledge sharing in the context of ERP success. They collected and analyzed data from 115 information systems executives and 413 ERP system end-users across 115 organizations. 

Results indicate that transformational leadership is indirectly related to, but critical to, ERP organizational change success. Furthermore, Shao and colleagues suggest that the research can be beneficial in guiding executive stakeholders in promoting organizational culture to facilitate ERP organizational change success.

Elkhani and colleagues (2014) suggested that transformational leadership and ERP system self-efficacy are critical ERP success factors. Elkhani and colleagues deployed a survey with 151 usable responses. Their findings indicate that transformational leadership can directly impact the recognition and understood usefulness via the utilization and understanding of self-efficacy application and measures.

The work of Elkhani and colleagues has practical implications because transformational leadership development programs would encourage ERP organizational change methodology that could increase assimilation and application of self-efficacy when deploying and utilizing ERP systems. Elkhani and colleagues contribute a better understanding of how ERP practitioners can leverage transformational leadership knowledge and behavior to motivate and promote employee self-efficacy to achieve ERP assimilation.

 

 

Transformational leadership begets transformational culture, a critical ERP success factor.

 Nestell & Associates can help guide your organization through ERP organizational change using a transformational leadership model that determines the culture and styles of leadership, transformational or otherwise, unique to your organization. 

Related Podcasts

Episode 19: How The Kirkpatrick Model Enables Optimal Organizational Training Evaluations

In this episode, we will discuss “How The Kirkpatrick Model Enables Optimal Organizational Training Evaluations” with Dr. Jim Kirkpatrick. The Kirkpatrick Model has evolved over multiple decades through application by learning and development professionals around the world. Let’s learn more about the new world Kirkpatrick model, and principles of education and training together.

Listen Here

References

Bolman, L. G., & Deal, T. E. (2013). Reframing Organizations Artistry, Choice and Leadership. San Francisco: Jossey-Bass. https://www.amazon.com/Reframing-Organizations-Artistry-Choice-Leadership/dp/1118573331

Elkhani, N., Soltani, S., & Ahmad, M. N. (2014). The effects of transformational leadership and ERP system self-efficacy on ERP system usage. Journal of Enterprise Information Management, 27(6), 759-785.

Northouse, P. G. (2018). Leadership: Theory and practice. Sage publications. https://www.amazon.com/Leadership-Practice-Peter-G-Northouse/dp/1483317536

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About Nestell & Associates

Nestell & Associates is a strategy and management firm. We can help you take your portfolio companies to the next level by demonstrating how to execute a scalable, methodical, and disciplined approach to digital transformation success.

Merger and acquisition ERP digital transformations can be a significant challenge. But a solid framework is built on good practices with proven success. We have a successful track record with integrations, upgrades, mergers, and acquisitions, and we want to share our methods with you.

Our leadership experience in organizational change, information technology, ERP, and digital transformation crosses multiple industries.

Nestell & Associates

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Newport Beach, 92660, USA

Phone (949) 608-2299

Email Info@nestellassociates.com

Private Equity IT & ERP Consulting

Nestell & Associates is a proven industry leader, providing private equity consulting for merger and acquisition and digital transformation leadership. Our advisory, private equity ERP consulting services can take your business to the next level.


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