Paradoxes and Incongruities in Leading Organisations

Strategic leadership is constantly faced with challenges in managing and decision-making, usually in circumstances that are vague, variable, and uncertain. With the exception of the rare occasions when it is possible to find the optimal solution to a problem, situations where one has to choose between a set of discrete options or find solutions on a curve of possibilities, are encountered on daily basis.

It is marked by extraordinary challenges when it comes to overcoming complex contradictions and marrying up hardly compatible ideas, constructs, and behaviour patterns while at the same time implementing different directions of action. That is not an issue whenever it is possible to select, in the given conditions, a solution that is “satisficing”, meaning that we make an adaptive decision which creates the prerequisites for improvement compared to the initial situation.

Serious temptations emerge when contradicting factors appear to be true at the same time and—as such—generate tension in leaders’ actions (De Wit & Meyer, 2005). This is a situation of paradox (in Greek: παράδοξος), involving two equally valued but completely opposite and different ideas (directions, characteristics, or behaviours) which make such situations impossible or very difficult to understand.Footnote 1

Storey and Salaman (2009) underlined those paradoxes are a systemic characteristic of social organisations which are by nature complex and contradictory, with many emerging conflicts, tensions and conflicting goals and decisions. This characteristic gives organisations better chances of adapting to a fast-changing, complex, and uncertain environment.

First-class strategic leadership is characterised by very particular skills: from cognitive elasticity and ability to think dialectically, to tolerance of contradictions and discrepancies.

Paradoxes and incongruities are undoubtedly the defining characteristics of organisational ambience, and it is the strategic leader’s task to overcome them, orchestrate the organisational tensions and develop mechanisms that will contribute to the organisation’s better embeddedness in the present and future social context.

Organisational adaptation is often the result of combining the uncombinable in dealing with contradictions and conflicts in an attempt to create additional quality necessary for survival and operational success. An example of a paradoxical situation in which strategic leaders find themselves is aspiring to organisational stability and change at the same time (e.g., Pettigrew et al., 2001; Taylor-Bianco & Schermerhorn, 2006).

Considering that there is no logical, internally consistent method of integrating contradicting elements, strategic leaders have to create the space in which different approaches will be accepted simultaneously and where possible but radical solutions for facing unknown challenges will not be dismissed.

An illustrative presentation of organisational paradoxes, dilemmas and conflicts was given by Cameron and Quinn (1988, p. 11), explaining the opposing pressures that leaders have to deal with in their intent to establish organisational effectiveness. Their competing values framework refers to some crucial, but contradictory organisational values and directions that leaders have to accept and know how to deal with. The concept of behaviour complexity is underlined as being especially important, as it refers to the leader’s ability to simultaneously assume competing and contradictory leadership roles (Quinn, 1989).

Contrasting concepts, such as (1) flexibility and control in the organisation or (2) internal vs. external focus, indicate that there are natural organisational tendencies that appear as the key dimensions of the competing values framework. Organisational dilemmas and conflicts can be identified in a series of other dichotomies as well, such as for instance: (3) adaptability and stability, (4) communication and growth, (5) productivity and employee morale, and (6) value of human resources and rational planning. All six dichotomies depict how organisational leaders are torn between opposing choices, which can be illustrated by four models: (1) human relations model (how to win the members’ loyalty), (2) open systems model (how to adapt to the environment and expand), (3) internal process model (how to consolidate and have continuity) and (4) rational goal model (how to maximise output).

Apart from the tensions listed by Cameron and Quinn (1988), one can also identify numerous other dilemmas and contradictions that organisations are faced with. For example, these include choosing between: incremental or discontinuous innovation, exploration or exploitation of resources, learning systems based on feedback and feed-forward (Vera & Crossan, 2004), and tensions between focus on the present or on the future, or choosing between competing or cooperating with others, and so on (e.g., Evans & Doz, 1992; Child & McGrath, 2001).

Strategic Leadership Tensions Framework

Conflicting discourses, concepts, interests, understandings, or aspirations lead to much organisational tension and many paradoxes that strategic leaders have to deal with on daily basis.

Kriger and Zhovtobryukh (2013) underlined that organisational leaders have to continually balance between seven seemingly opposing demands: (1) continual adaptation of the formal organisation (organisational design, including structure) and informal organisation (informal networks and personal relationships based on shared history and group beliefs within the organisation); (2) harmonisation of actual behaviour and decisions of the managerial elite, who act as important role-models for most of the members of the organisation, with accepted organisational values and culture (congruence between actual behaviour and values of the organisation); (3) adaptation of the internal organisation (including both formal and informal organisation) to the continually changing environment; (4) relationship between short-term and long-term investments; (5) balancing between local market and integrated global markets; (6) relationship between explicit and tacit knowledge; (7) balancing between decisions based on reason and those based on intuition.

Furthermore, by reviewing the results of a large-scale research looking into how CEOs of major companies operate, Porter and Nohria (2018) differentiated between six dimensions which involve dualities that strategic leaders constantly have to account for. These involve: (1) balancing between direct action (setting goals, strategic decision-making, participating in meetings, and alike) and indirect action through other individuals (based on strategy, culture and processes that effectively integrate the collective and motivate members); (2) finding the right measure between relationships, focus and time spent with internal factors (members of the collective) and external ones (a myriad of external stakeholders); (3) balancing between proactive action (visioning, targeted directing and strategizing) and reactive action (responding to unexpected events and crisis situations); (4) dichotomy between the leverage enjoyed by leaders (based on their position and control of resources, which gives them great power) and the constraints that emerge from the collective (the need to send the right messages and connect others); (5) difference between the leader’s tangible work (such as shaping strategy and organisational structure, allocating resources, selecting key people) and symbolic activities that communicate norms, shape values and imprint meaning in organisational life; and (6) relation between influence based on formal power (authority) on the one hand and legitimacy based the leaders’ character and trust they earn from the collective as a result of their demonstrated values, fairness and commitment.

As evident from the described conceptualisation, there is an entire ocean of contradictions and conflicting constructs for organisational leaders to swim and brave the waves in.

Leaders don’t always have the same understanding of reality and perspective of the type and nature of their connection with the organisation. Their motives and behavioural patterns can be fundamentally different; it is also possible for internal tension to develop between the extremes that affect their choices and directions of organisational action.

Complicated situations, unexpected events and controversies are all parts of their day-to-day work, and the way they deal with them is what defines their substance. It is not uncommon for them to encounter situations in which contradictory and/or mutually exclusive factors both appear true at the same time. They find themselves stretched between multiple extremes and torn between choices that are very hard to make. Besides that, tensions also appear when different leadership styles based on completely different leadership principles are combined in the organisation.

How to prevail the seemingly unprevailable and combine the seemingly uncombinable is the core issue of the most important challenges of strategic leadership.

We have identified what we believe to be six key tensions that strategic leaders face, and we have presented them here to facilitate better understanding of the possible extremes in their action. These are: (1) the doubt that we perceive as tension between aligning the organisation with one’s own self and one’s own interests on the one side and adjusting oneself and one’s actions to suit the interests of the organisation on the other; (2) the dilemma between transactional and transformational leadership; (3) choice between one-dimensionality and multifacetedness of strategic leaders’ goals in choosing the direction and mode of operation of the organisation; (4) the time factor when it comes to the dilemma between short-term and long-term perspective in creating organisational future, as well as (5) tensions between exploration and exploitation processes in the organisation (ambidexterity), and (6) contrasts between logical and creative thinking about strategy, or in other words, hesitation in deciding whether to establish order or to give freedom and permit chaos in organisational behaviour (Fig. 10.1).

Fig. 10.1
An illustration of challenges in strategic leadership. Different challenges are categorized under present, collectivism, future, and individualism. Challenges include serving others, long term, creative thinking, opportunism, short term, transactional leadership, control, and more arranged in cardinal directions pattern.

Strategic leadership tensions framework

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These tensions show that strategic leaders are torn between collectivist and individualistic behaviour, and destined to a dilemma between relying on the present or focusing more on the future.

Balancing between Opportunistic Behaviour and Serving Others

There are two opposing lines that demonstrate the basic relationship between the leader and the collective.

Firstly, leaders can create a new (or adapt the existing) collective in order to establish a context in which their own goals will be pursued through influencing and engaging others. The organisation is perceived as an instrument used to realize the leader’s intentions.

Conversely, leadership can be understood as a function of the collective tasked with directing and connecting members and building their commitment in order for the collective to survive and successfully complete their mission in the environment. The leader acts in the collective’s common interest and serves the organisation and its objectives.

This kind of tension is present, more or less intensely, in all collectives.

Based on the first line, leaders aspire to adapting the organisation to themselves, seeing it (as already noted) as its own mental reflection (Hambrick & Mason, 1984), or in other words, as a means of ensuring their own social recognition and personal gain, and a manifestation of their power in the social fabric they are woven into.

The organisation is subsidiary: it is the long arm of its leader, who imposes upon it their own understanding of the world, and places their own aspirations and intentions before all others. It is the means to fulfil the leader’s strategic intent and the social mechanism used to materialise the leader’s footprints in the environment. In such situations, strategic leaders are motivated by opportunism: they are guided by their own interests and wish to maximise personal gain.

The agency theory is a suitable framework in which one can analyse opportunistic behaviour of strategic leaders.

The collective (or another external entity, such as the owners, community or society, for example) may be defined as the principal, and the strategic leader as the agent. The problem arises because the principal is unable to fully and costlessly supervise the agent’s actions. More specifically, according to the postulate of the agency theory, owing to the nature of his position, the agent is not directly interested in maximising gain for the principal. The principal, on the other hand, does not directly participate in the activities that are intended to maximise their personal gain by achieving the best effects of agency. The principal can never be sure that the agent is working in the principal’s best interests and, as a result, has to find a way to make sure that the agent’s behaviour is focused on fulfilling and protecting the principal’s goals.

The agency problem emerges if the leader works against the interests of the principal (the collective or some other social entity that assumes this role) (Eisenhardt, 1989). The leader will opt for such level of effort invested in performing a task as is required to maximise their own personal gain irrespective of the consequences for the collective.

Existence of contradictory objectives and informational asymmetry are the core elements when it comes to using the agency theory, whereby its essence lies in offering a contract that will maximise the gains for the agent and minimise the costs for the principal. Consequently, it is necessary to develop mechanisms of control, supervision and incentive to ensure that the leader acts in the interest of the principal. Eisenhardt (1989, p. 61) underlined: if the costs of supervising the agent are not excessive, then it is best to have a behaviour-based contract. If supervisory mechanisms are too costly, then it is better to have an outcome-based contract, because that ensures convergence of objectives.

As some studies have shown, where there is no control or motivation, managers will work only in their own best interests (Tosi et al., 2003).Footnote 2 On the other hand, there is a problem that emerges as a result of control: it actually strengthens individualism, curbs pro-organisational behaviour and diminishes credibility, and consequently destroys trust in the principal–agent relationship (Argyris, 1964).

The assumption of egoistic interests is controversial, but the arguments supporting it are hard to disprove (Roberts et al., 2005). Plausibility of this premise is based on the fact that self-serving behaviour has become widespread and generally accepted in the Western culture. The advocates of the agency theory believe that most people, in most situations, act in their own personal interests.

Is that always the case? According to the other approach, leaders may exhibit radically different behaviour: they may be dedicated to the collective and far removed from opportunistic ideas. Their role comes down to fulfilling organisational needs and providing for the organisation’s present and future; they guide, coordinate, inspire and motivate members in order to make common interests of the collective a reality.

This idea is based on the premise that strategic leaders are committed to serving the organisation, they are not selfish and see the common interests as a matter of priority.

This type of leader is characterised by collectivist behaviour. Long-term benefits for the organisation are the priority of their action; their own goals and interests are subsidiary, as are the interests and goals of other individuals or groups within the organisation or beyond it. Leaders build trust and develop commitment to the organisation, which ultimately results in fulfilment of normative and instrumental organisational objectives.

Discord between fulfilling one’s own goals and serving the organisation can be overcome by the deconstruction of opportunistic behaviour as the natural and the only rational choice leaders have.

One method of deconstruction is provided by the stewardship theory, which rejects the main premise of the agency theory that leaders and managers are always selfish opportunists motivated by their own interests, ready to turn each situation to their own advantage (Davis et al., 1997).

The starting point of the stewardship theory is the premise of pro-organisational and collectivist behaviour of leaders and other managers who experience more gratification in serving the organisation than in pursuing only their own personal agendas.

The theory holds that the leader will maximise their own utility function through action that will ensure the organisation’s success. By investing effort in fulfilment of organisational objectives, the leader can ensure that their own personal needs are satisfied, which means that the utility of pro-organisational behaviour, as the theory postulates, significantly exceeds the utility of individualistic behaviour.

As underpinned by Hendry (2004, p. 210), a strategic leader is motivated by the need for achievement and the responsibility for ensuring organisational success. The leader is perceived as one of the organisation’s indivisible constituents, sharing its values and mission, embracing strategy as their own, and accepting responsibility for its fulfilment. Comments or discussions about the organisation will be taken very personally, and organisational success will likewise be perceived as the leader’s own.

In a sense, this is a merging of social entities: the strategic leader’s strong identification with the organisation erases the boundaries between their respective objectives and the dilemma of instrumentalization becomes meaningless. Research has shown that leaders exhibiting greater identification with the organisation are more likely to act as stewards (Vargas Sanchez, 2004).Footnote 3

The strategic leader’s objectives are identical to those of the organisation, so there is no need for additional motivational factors: success is a direct function of the leader’s competence, the organisation’s quality and governance structures, and the environmental impacts that are beyond their control. There is no room here for the agency theory: if assumptions of different objectives and informational asymmetry are given lesser relevance (or even removed from the equation), the agency problem becomes trivial.

Unlike the opportunistic leader that needs to be incentivised in order to exhibit pro-organisational behaviour, the collective trust in a steward-type leader reduces the need to control or incentivise their action to ensure that it remains consistent with organisational objectives. Any form of control can be counter-productive because it undermines pro-organisational behaviour and decreases the steward-type leader’s motivation.

Collectivist behaviour can lead to extremes where the interests and welfare of the followers and the collective are put above the personal interests of the strategic leader, who is, in some cases, even willing to sacrifice themselves for the common good.

The type of leadership that is completely focused on others is referred to as servant leadership. Key elements of this kind of leadership are the following: altruistic mission to serve others and an empathic sensitivity to their needs (Searle & Barbuto, 2011); strengthening and development of human resources, humility, authenticity, interpersonal understanding, guidance and helpfulness (Van Dierendonck, 2011); sharing of status and power for the common good of every individual involved, the organisation, and everyone that the organisation serves (Smith et al., 2004).Footnote 4

Respect for collective members, leading by example, building a community, striking a balance when it comes to relationships with stakeholders, and a strong accent on interpersonal relationships, all characterise servant leadership.

Organisational support for realisation of this type of strategic leadership implies an adequate organisational structure, culture, policies, and activities based on cooperation, support and empowerment. Decentralisation of decision-making, participation, transparent and two-way communication, complete availability of information across all organisational levels are only a part of organisational support that is necessary for servant-type leaders to ensure overall welfare in the long run.

The assumption of servant-like behaviour of strategic leaders and other managers is not easy to grasp in a world that is cruel, where self-serving behaviour is an acceptable social pattern and the main motivation for many individuals. Serving others emerges as a phenomenon that comes with civilisational development, shaking the foundations of the neoliberal paradigm of selfishness and self-interestedness that is balanced by the omnipresent market instrument.

Collectivist discourse does not imply negation of the individual, their freedom or needs, but rather a recognition of mutual dependence and responsibilities we have to one another and to the society as a whole.

A growing awareness of socially responsible behaviour, climate change and the need to save the planet has played a role in reinforcing the idea that the individual is not the centre of the universe.

From the perspective of first-class strategic leaders, it is clear that working in the interest of the collective has to be balanced with fulfilling one’s own goals. This is the kind of tension that leaders are faced with and forced to overcome on daily basis.

Transactional vs. Transformational Leadership

Transactional and transformational leadership represent broad meta-categories that encompass different leadership approaches based on different principles and assumptions in the context of relations between organisational actors (Bass, 1985; Yukl, 1981).

These concepts were established by Burns (1978) when he explored the differences in leadership styles of political leaders.Footnote 5 As he sees them, these are non-overlapping and completely opposite approaches to leadership. However, studies have shown that transactional and transformational leadership can hardly be separated as fully distinct constructs, owing to a high degree of their mutual interrelation (e.g., Judge & Piccolo, 2004; Vera & Crossan, 2004).

Transactional leadership is based on having an implicit agreement between the leader and the followers that ensures the achievement of individual and collective goals. It can be defined as a process in which the leader secures reward-based transactions for the followers in order to motivate them to act (Carter & Greer, 2013; Smith et al., 2004).

Transactions between the leader and the followers are at the centre of this leadership style, as are unbiasedness, agreement and mutual benefit.

The essence of transactional leadership lies in fair exchange: followers commit to and deliver results (desired behaviour, expected performance) and in return they receive “payment” in the form of rewards (which can be direct or indirect, e.g., incentives, praise, or other). (Bass, 1985, 1988; Yukl, 2006).

Leaders define objectives, articulate explicit agreements based on expectations about what collective members need to do, about the way they should be rewarded for their effort and commitment, and about ensuring constructive feedback so that all members can be focused on getting the job done (Bass & Avolio, 1993). Their reputation is based on respecting transactional obligations (Bass, 1985, 2003).

Mutual agreement ensures and guides the kind of conduct that will generate benefits for everyone involved. The actors’ motivation lies in working in their own interests (Bass, 1988), and the crucial elements of the relationship are reciprocity and the time horizon in which transactional effects are visible (Yukl, 2006; Sashkin & Sashkin, 2003).

Transactional leadership is, in and of itself, passive and reactive, connected with exchange-based relations and transparent chains of command. Planning, organising and controlling are focused on a short-term period. The leader is expected to fully analyse all important issues and to have an in-depth understanding of the situation inside and beyond the organisation, while the followers are expected to exhibit willingness and knowledge in performing the tasks delegated to them. Another important factor is the setting of unambiguous standards of performance and expectations (Bass, 1985, 2003).

Reliance on power and authority is an important assumption of transactional leadership. The main management mechanism is management by exception, which involves rewarding the followers for good performance in fulfilling the terms of the agreement (Avolio et al., 1999).Footnote 6

Transactional leaders aspire to strengthen the organisation’s culture, strategy and structure in stable conditions (Vera & Crossan, 2004). Personal development of the followers is not their primary focus; instead, they focus on fair compensation for the job done or effort invested in performing a task.

The main downsides of this style of leadership are, among other things, potential for manipulation and lack of inspiration in the collective’s actions (Carter & Greer, 2013).

On the other hand, transformational leadership is based on authenticity and motivational capacity to inspire the organisational members to follow the leader and enthusiastically perform the tasks and jobs in the collective interest. The prerequisite for leadership success is a distinct vision accompanied by the leader’s personal values and strong character.

Transformational leadership has to encourage others to be committed to working to the benefit of the organisation (Yukl, 2006). It can be understood as a distinct type of strategic leadership that emphasises the organisational members’ transformation and integration of individual and group interests (Pawar & Eastman, 1997). This is a process in which, as initially noted by Burns (1978), leaders and followers help one another reach a higher degree of morale and motivation.

Leaders create an environment in which generating gain for oneself is not the only motivator; they bring followers together and help them understand the context in which they operate; they also reinforce the members’ identification with them (the leaders), with the organisation or simply with an appealing notion around which collective action is developed. They also integrate the collective by their own example.

Transformational leadership is not individualistically oriented: the collective is at the centre and everything revolves around it and its benefit.

Transformational leaders help others overcome their own opportunistic interests in order for the “higher common goals” to be fulfilled, in the form of a powerful and plausible strategic purpose created or advocated by the leaders (Sashkin & Sashkin, 2003; Vera & Crossan, 2004). They encourage followers toward self-actualization and other higher-level goals.

A challenging, attractive and powerful vision is the cornerstone of transformational leadership, as are determination and an ability to connect vision, strategy and the set of required actions in a way that is easy to understand and implement. A leader should have the communication skills to communicate the strategic vision in a way that is understandable, precise, powerful and attractive.

Transformational leadership should include and bring people together, which means that it is important to build trust and optimism in the collective regarding the organisational strategy. That helps the followers identify more easily with the organisation’s values, mission and vision, as has been confirmed by some empirical research (e.g., Epitropaki & Martin, 2004). It affects the mindset of the people inside the organisation and the overall organisational culture, which additionally reinforces the main elements on which such leadership has been built. It spreads optimism about the objectives and gives meaning to organisational action.

Strategic leaders are often the role models when it comes to ethical behaviour and they earn people’s trust due to their values, self-sacrifice and commitment. The followers feel trust, admiration, loyalty and respect for the leader and they are willing to invest more effort than usual. The leader-followers relationship can be described as a bonding process (Sashkin & Sashkin, 2003).

Understanding and accepting the purpose of common action helps members invest maximum effort in performing their tasks, but it also helps reinforce their identification with the organisation and participation in the collective identity. This is a leadership style that gives every member of the collective more space to take risks, learn, think independently, and be creative, and it also encourages the finding of new solutions to existing organisational problems and the improvement of the current strategy.

Transformational leader stimulates the followers to come up with new and unique ways to deal with external and internal challenges and creates an ambience in which change is welcomed and desirable. They successfully motivate the members of the collective to invent and innovate in organisational action. Openness of communication and empathy help the leader define goals and tasks that will be easier to understand, especially if an organisational environment has been created where individual or team contribution is valued and appreciated.

Transformational leadership integrates charisma, inspiration and intellectual stimulation, and takes the individual into consideration with a view of increasing the degree of enthusiasm and achieving satisfaction in raising the level of organisational success. Moreover, it is capable of overcoming organisational inertia and increasing the chances of the organisation’s better adaptation to its environment (Agle et al., 2006).

There is much empirical evidence in support of that leadership style being connected with the followers’ dedication to the organisation, satisfaction, motivation and performance (e.g., Bass, 1998; Nemanich & Keller, 2007; Walumbwa et al., 2004). Furthermore, the leader’s compassion and self-confidence are critical determinants of leadership success (Vera & Crossan, 2004). Accent is also on follower development (Northouse, 2007), morale and shared values (Bass & Steidlmeier, 1999) and on the ability to develop vision and inspire others to follow it (Goldman & Casey, 2010).

Bass (1985) summarised key activities of a transformational leader: (1) the leader has to successfully motivate members of the collective and influence their development, (2) reinforce ethical standards in the organisation, (3) create a work ambience with clear values, priorities and standards, (4) build a culture of acting in the common interest, (5) put emphasis on authenticity, cooperation and open communication in the collective, and (6) act as mentor and coach and delegate decision-making powers to others in the organisation.Footnote 7

In another source, Bass (1997) noted that one should not be misled into thinking that this kind of approach has to a priori be participative. He underlined in particular that transformational leadership can be directive (more autocratic) or democratic, depending on the context in which it emerges.

Transformational leadership is especially important when the organisation needs radical changes that can only be implemented with committed joint effort of all members of the collective.Footnote 8

There are numerous examples of successful transformational leaders. One of them is Danone CEO Emmanuel Faber, who, right after being nominated in 2014, initiated a radical organisational transformation from a food & beverage conglomerate to a corporation oriented to products promoting healthy and sustainable eating habits among families and supporting sustainable agriculture. Danone disinvested its production of biscuits and beer, while at the same time expanding its dairy products core business, establishing (through a USD 17 billion acquisition) a new strategic unit (Nutritia), which integrates baby food and protein and health products and generates almost thirty percent of total revenue (Anthony & Schwartz, 2017). Changes of that magnitude were only possible with a transformational leader such as Faber.

The greater the uncertainty and volatility of the environment, the more it is safe to assume that transformational leadership will be more efficient than transactional leadership (Bass et al., 2003), owing to an organisational culture founded on proactivity, empowering the members of the collective, and innovativeness (Smith et al., 2004). Similarly, transformational leadership is better accepted by members of the collective in conditions of crisis because traumatic situations activate emotion centres in the brain, which are more easily stimulated by visions and dreams inspired by transformational leaders (Crossan et al., 2008).

According to this belief, transactional leadership has the advantage in a stable and predictable environment and in the context of a short-term horizon. Actual effects of transformational leadership become evident in the long term, for example trust (Bass et al., 2003) and a stimulating organisational culture (Geyer & Steyrer, 1988).

It is a widespread belief that transactional leadership is associated with existing cultural arrangements, whereas transformational leadership continually challenges the assumptions on which organisational culture rests.

As far as organisational learning is concerned, it is hard to directly associate with the observed leadership styles. Organisational learning processes can be started both in transactional and transformational leadership, depending on numerous situational factors (Vera & Crossan, 2004).

Nevertheless, a comparison of these two leadership styles and the results of the research show that the two are intertwined and interrelated. Bass (1988) suggests that a leader can have only one, both, or neither of these leadership styles, and that this depends on the leader’s own character, organisational characteristics, and the environmental and time-related conditions. Numerous studies have confirmed this hypothesis, having demonstrated that individuals may at the same time exhibit the characteristics of both styles, to different extents, which explains (to some degree) the empirically proven high correlation between the constructs used to measure those styles.

If we were to delve deeper into the generative mechanisms that determine those styles, we would see that having clear standards, expectations and trust in the leader, which are the foundations of transactional leadership, also appears as an indispensable prerequisite for transformational leadership. Moreover, consistent observance of transactional arrangements encourages development of trust, reliability and an image of consistency that is attributed to transformational leaders as well (Shamir, 1995; Vera & Crossan, 2004).

The perspective which compares the transactional and transformational leadership styles side by side is useful for understanding strategic leadership and, as underlined by Cannella and Monroe (1997), it contributes to a more realistic perception of top management. Unfortunately, there have not been many empirical studies focusing on transactional and transformational leadership styles at the strategic level of an organisation, and we have not been able to find even one study focusing on their comprehensive and detailed comparison.Footnote 9

Single Objective vs. Multiple Objectives

The purpose of leadership lies in successfully envisaged and implemented collective action, in furtherance of the objectives that are defined and intended to be fulfilled. Without easy-to-understand objectives, leadership becomes an irrational phenomenon.

Strategic leadership is, at its core, a process of shaping and expanding the picture of the organisation’s future with the members of the collective, encouraging and motivating followers, and performing activities intended to bring about changes that will support the organisation’s strategy (Elenkov et al., 2005).

Strategic leaders are focused on strategic direction and intent: what the organisation tries to do and what it wishes to become in time. The basis of their action is a transposition of vision into a set of strategic objectives that are to be fulfilled through organisational action. These are the highest-level objectives: they impact the organisation’s overall ability to survive, as well as its direction of development, and appear as a translation of strategic intent into defined frameworks of action. They are intended to operationalise organisational direction and are defined as desired future conditions that the organisation intends to achieve with rational use of available resources. They are an important element of that which the leader has envisaged or accepted as the starting point of organisational strategy. They are necessary for strategic decision-making: they determine the direction that the organisation will take, prepare the ground for strategic action, and define measures of strategic success.

Strategic leaders are faced with the problem of figuring out which objectives will be placed at the centre of collective action.

There are two opposing perspectives in this context: (1) the neoclassical, which sees the organisation as an instrument used for achieving economic objectives, and (2) the stakeholder perspective, which perceives the organisation as a reflection of multiple interests and alignment with its environment.

The “mother of all objectives” from the point of view of the neoclassical perspective is pretty straightforward. Successful leadership is only possible if there are clear and unambiguous objectives and if there is coherent control of the achievement of those objectives. Profit maximization is either the objective from which all other objectives derive or it is itself a derivative of the objectives that serves to balance out security and success of business operations.

The usual framework for setting strategic objectives is profitable growth, which should be the result of strengthening the market and competitive position, development of strong technological and innovation potential and capacities, excellent management of the company’s resource base, and development of human resources. This objective is achieved by having superior resources that make it possible to incur significantly lower costs or to have sustainable differentiation advantage over a longer period of time.

Profitable growth is a category that depends on the relationships between owners and strategic leaders. Owners aspire to profit maximisation, while leaders and managers aspire to maximisation of the growth rate. Profitability drops when high growth rates are the result of inappropriate use of cash flow by the managers (especially in case of bad investments or acquisitions that generate no added value). Objectives are the result of negotiations, agreement, compromise and/or mutual manifestation of power. The degree of targeted growth of the company is restricted, in any case, by realistic expectations and demands of the owner as regards minimum acceptable profit rates on the one hand, and the leader’s and manager’s risk appetite and aspirations regarding desirable growth rates on the other.

This kind of one-dimensional objective justifies the economic essence of the company and places action inside a rational frame in which strategic leadership, in its “strategizing”, has to rely primarily on “economizing”. Strategic decision-making mostly comes down to a comprehensive process of selecting actions that will generate maximum profit with desired growth rates. Hence, the logic of strategy lies in creating a competitive advantage that will make it possible to achieve above-average profitability in the long run.

Such traditional discourse instrumentally directs the life and reality of the organisation more toward efficiency and effectiveness than toward analysing and incorporating social and environmental values (Levy et al., 2003, p. 97).

Organisational purpose, on the other hand, cannot be reduced merely to technical economic rationality. In the business world, strategic leaders are no longer solely in charge of maximising the wealth of the owners, but they are also expected to fulfil the ever-greater expectations of stakeholders (Carter & Greer, 2013).

Stakeholders are the individuals and groups that are capable of influencing the achievement of organisational objectives and—based on the symmetry of influence—the individuals and groups that organisations themselves can influence in turn, by achieving their objectives (Freeman & Reed, 1983).

In other words, organisations are not distinct integrated entities with a clear, unambiguous objective, but rather they are coalitions of groups and individuals who all have different and often contradictory interests and goals.

The advocates of the stakeholder approach believe that the wealth generated by the organisation belongs to all acquirers of critical resources that directly contribute to increasing its capacity to generate that wealth. They underline that, if we observe economic operators, mere maximisation of profit becomes unacceptable from a moral point of view; the capacity to generate wealth for the shareholders cannot be the only measure of success, nor can its purpose be to maximise the function of any other stakeholder’s objective (Tipurić, 2006, 2011).

Existence of a large number of constituents that affect the survival of organisations, the interwovenness and multifacetedness of their interests and demands, as well as the diversity of and conflicts between expectations of suppliers of critical resources, all indicate that organisational objectives that strategic leadership has to aspire to are multi-dimensional.

Conflicting objectives create great organisational tension that is only additionally amplified by pressures coming from the environment. The role, action and position of strategic leadership depends on the constellations of power of stakeholders; on the structures of power and influence, interactions and shifts in negotiation positions. Moreover, one must not forget the importance of stakeholders when it comes to legitimation of the leader’s decisions and actions.

Considering that interests of different groups are divergent (it is often the case that not even the interests of the same groups are homogeneous), and strategies employed by stakeholders to maximise the function of their own objectives are different, the differences in power and influence that each group manifests toward the organisation create a context in which strategic leaders can reaffirm their position and make the targeted function operate to their own benefit, or to some other end, as they see fit. They have the ability, often under the guise of active management of stakeholder relations, to change the structure of power inside the organisation in a way that makes it possible for them to build or reinforce their dominant position (Coff, 1999).

Strategic leaders are pressured by different interests and demands of stakeholders. Setting strategic objectives is, among other things, a sort of political process that involves plenty of (often exhausting) balancing, negotiation, bargaining and trade-offs between key groups within the organisation. Constellations of power in the organisation and around it have a significant influence on the content of strategic objectives and the positions strategic leaders take in the process.

Finally, besides the relationships with key organisational stakeholders, strategic leaders also have to deal with the broad context in the process of defining objectives. Firstly, organisations are often parts of an ecosystem that comprises multiple interconnected institutions and organisations that have a significant impact on their existence. Secondly, objectives have to be aligned with interests of the society and the cultural inheritance brought by civilisational progress.

In short, the role of the managerial elite cannot be limited solely to ensuring profit-maximising action. The main objectives are efficiency, growth and survival, but provided that there is no value-destroying in the environment. Profit has to be created in a socially acceptable and responsible way, respecting the interests of all stakeholders without whose support survival and purpose of the company would be brought into question.

The era of growing social responsibility keeps bringing new challenges that cannot be reduced (merely) to a power game. One has to align, mediate between and reconcile differing interests, and design management mechanisms in a way that will ensure organisational prosperity and protect fair return on investment for key stakeholders.

When organisational objectives are unclear and ambiguous (defined by interests, needs, demands and expectations of different stakeholders), it is not easy to specify the exact task of strategic leaders and other managers, nor can outcomes be measured easily or judged by any fixed standards (Eisenhardt, 1989).

A question that should sometimes be raised is to what extent could existence of conflict between a multitude of objectives undermine their role in the leadership process. Jensen (2001) noted that having multiple objectives cannot serve as an objective, but we cannot agree with this argument, even though we acknowledge the problems that strategic leaders are faced with in reconciliation of and compromising between objectives, which often implies a lengthy process of bargaining and negotiating between important individuals, their coalitions, and important stakeholders inside the organisation and beyond it.

This perspective leads to the conclusion that a strategic leader should be a mediator that balances the interests of various stakeholders, relying on profitability, market value, quality of products and services, development and stability of the staff, the community and the market (Bass, 2007). Strategic leadership of this new age requires simultaneous focus on multiple interests of the collective and its environment in the context of passage of time.

Short-Term vs. Long-Term Perspective

Strategy means looking into the future and into the past at the same time: the time factor is a key element in it.

Strategy is about focusing on what is important at a given time: it necessitates first construction and then interpretation of the future from the point of view of the present and the past. The actuality of strategy becomes part of the bigger picture, and the chaotic relations between a multitude of inexplicable elements of an elusive reality beyond our comprehension become irrelevant in the world in which we exist.

The meaning of strategy is relative: the construction and interpretation of the past (why not call it “reading into the past”) influences the way future is formed; but at the same time, it affects the way leaders shape and interpret the future, the way past is perceived and understood. As already mentioned, the present is a remnant of the past retroactively created and interpreted by strategic leaders to construct the future.

Strategic leaders can base their actions on the present, the past or the future. They can also have a shorter or longer time horizon in their aspirations and modes of operation in the future. This depends on various characteristics of the environment (dynamism, unpredictability, turbulence), but also on the leaders’ personality and the skills they have.

Hofstede (2001, p. 359) put the differences between those approaches into a cultural context: long-term orientation refers to encouraging virtues oriented toward future rewards, especially perseverance and frugality, whereas short-term orientation is about cultivating virtues that are connected with both the past and the present, especially by respecting tradition and fulfilling social obligations.

Strategic leadership defines objectives for relatively long periods; however, this is not always the case. In some situations, extremely (existentially) important objectives may also pertain to a shorter period (e.g., crisis conditions, hypercompetition, sudden shocks, and alike), while in others, the time horizon considered by strategic leaders may be five or ten years, or longer, with far-reaching consequences of the decisions they make at the present.

The problem arises as a result of the need to observe the present from the perspective of a desired future.

It is easy to see the tension continually weighing down on strategic leaders: being torn between (1) what needs to be done right now in response to immediate pressures and challenges, and (2) the things the leader passionately aspires to and that occupy their imagination when thinking about what tomorrow may bring. A paradox emerges between the usual methods of constructing the reality as it is and reshaping future conditions in the ambience through fulfilment of superior, challenging visions.

Leaders can focus on strategic planning, which implies a sophisticated organisational process with developed procedures and complex analytical techniques. Creating scenarios is another way of potentially stretching the time horizon so that tasks could be focused on visioning. However, environmental variability and complexity reduce the potential and usability of planning as a reliable guidance for organisational action, and consequently, the ability to adapt quickly and strategic resourcefulness appear as important traits found in only the best of leaders.

This tension has been noted in literature and it has served for arriving at various classifications.

For example, Rowe (2001) referred to “managerial leadership” when speaking of the kind of leadership that is sensitive to and reliant on both the present and the past, and of “visionary leadership”, thinking of the kind only focused on the future.

Managerial leadership is based on managing day-to-day operations and focusing on short-term objectives and observed results. The attitude towards the objectives is a passive one: objectives emerge from demands that developed in the past, not from aspirations or imagination. Order and stability are the cornerstones of this kind of leadership, and so is control across all segments of the organisation. Leaders see themselves as the conservators and regulators of the existing order of things. They are focused on managing transactions and making sure that standard operating procedures are followed.

Visionary leadership, on the other hand, is proactive and focused on shaping the future; it is characterised by reliance on beliefs and values, willingness to take risks, and sharing the leaders’ own view of the future with others in the collective. Visionaries have the ability to influence collective members in order for them to accept the far-reaching consequences of leadership. They are convinced that their choices make a difference in their organisations and surroundings.

Their strong suits are networking and social capital, non-linear thinking, communication skills and successful encouraging of identification and loyalty of members. On the other hand, they have a perception of being separate from their surroundings. They operate in organisations, without really belonging in them.

The orientation on the past and present is undoubtedly in conflict with acting prospectively and being oriented toward the future. Leaders are continually faced with this tension and with the dilemma of choosing between acting in the short or in the long term. Those who are capable of articulating a long-term vision and managing day-to-day operations with the requisite sense of detail are few and far between.

First-class strategic leaders successfully combine the characteristics needed for managerial and visionary leadership (Rowe & Nejad, 2009).Footnote 10

This entails an ability to cope with the paradox of time: strategic leaders are capable of integrating those two dimensions into a unique competence of top-quality leadership. They encourage innovations and manage change, but at the same time they provide for organisational stability and system organisation. Their goal is sustainable organisational development.

They use and exchange tacit and explicit knowledge on the individual and organisational level, and use linear and non-linear thinking patterns. They have great positive expectations regarding the performance they expect from their superiors, co-workers, subordinates, and themselves.

Their skill is being able to focus on the short and on the long term at the same time, and to take operational and strategic responsibility for the organisation’s actions.

Logical vs. Creative Thinking

Strategy is, ipso facto, tension between the prudent and the inventive, continually meandering, moving between analysis and synthesis, and back again.

Logical thinking is an indispensable attribute and trait of successful strategists: well-implemented strategic analysis and rigorous testing of propositions of values of individual and group models can prevent the construction and maintenance of erroneous interpretations and models of reality in which the organisation is placed (De Wit & Meyer, 2010, p. 60). In this context, strategy can be defined as a coherent set of analyses, concepts, policies, arguments, and actions in response to important challenges we are faced with (Rumelt, 2011, pp. 5–6).

To establish order in the organisation means to build systems of control in all organisational segments. The goal is to achieve stability and prevent behaviour that goes outside the defined framework; leaders attempt to monitor and stay informed of everything, leaving nothing to chance.

On the other hand, logical consistency and analytical intensity cannot substitute creativity and inventiveness in shaping strategies. Structuredness, non-discrepancy and certainty rarely accompany strategic action. Strategies are mostly formulated in new, insufficiently familiar and inadequately defined conditions, in contexts characterised by poorly structured elements and high uncertainty.

Logical thinking and information interpreted based on existing paradigms cannot explain the leaps of imagination that often open up new perspectives on reality, or construct a completely new reality. Mintzberg (1994, p. 77) noted that if strategy is about outsmarting the competitors, or simply depositing the organization in a secure niche, then it is a creative phenomenon dependent more on redrawing lines than on respecting them.

A successful strategy is, first and foremost, imagination and an exploration process: creative individuals’ visionary creativity turned into organisational action.

A departure from logical, consistent and non-contradictory reasoning can be fertile ground for new strategic pathways and for finding space in which the organisation can achieve greater advantage in the long run (Fig. 10.2).

Fig. 10.2
An illustration. A situation leads to desired future through creative strategic thinking and strategic design while desired future leads to situation through logical strategic thinking and strategic analysis. Individual and group mental model in between points to creative and logical strategic thinking with problem of inertia and new models.

Logical and creative strategic thinking

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Creative thinking is an ingredient without which there can be no talk of superior strategy. Creative and innovative solutions, new business and resource combinations, original business models, redrawing of the lines when defining activities, identifying new market niches and entrepreneurial “destruction” of the rules of the game—are all becoming increasingly important and in fact irreplaceable in the new circumstances emerging as a result of revolutionary industrial and market developments that are changing the world around us from the bottom up. In such conditions, strategy has to be different, distinct and singular.

The problem is that creative thinking is often based on breaking existing rules and norms, going beyond imprinted ideas and long-standing systems of reasoning present in an activity. This kind of lateral thinking leads to new knowledge without objective proof or previous arguments that would go in favour of an idea, design, intent, plan or action “making sense” (De Bono, 1970, p. 61).Footnote 11

However, this deviation may only be of temporary character: establishing a new strategic framework requires continual refinement and improvement; this is accompanied by a structuring of the context (to a greater or lesser extent) and reconnecting of individual elements of the situation into new representations and accepted interpretations, which leads to logical thinking and analytical consistency gaining importance once again.

Consequently, there is no single answer to the question if (and when) strategic leadership is a creative or analytical process; or in other words, to what extent it is the result of strategic thinking or of imagination and inventiveness. This is a strong tension, and one that persists.

Control vs. Autonomy

The tension between control and autonomy is also characteristic of the challenges of strategic leadership. It can be additionally illustrated by asking the question to what extent strategy results from deliberate planning carried out and monitored by strategic leaders, and how much from continual adaptation and organisational learning where the collective plays an important role and which is manifested in incremental improvements.

Strong control on the part of the strategic leader implies the establishment of a framework in which other members of the organisational have little freedom to act.

Strategic leaders play a key role in creating strategy, by making crucial strategic choices that are aligned with the patterns of the organisation’s embeddedness in its environment. Strategy is the result of their conscious efforts, rational and calculated decisions about how to deal with the primary issues of the organisation’s self-determination, competitiveness, and survival. They primarily impact the development trajectory, attempting to predict future events, develop alternative possible scenarios, and create good-quality strategic plans aiming to paint a picture of the organisation’s desired future. Organisational members have an instrumental role in common action: they are to implement the leader’s ideas and intentions.

Hence, a strategic leader guides the collective members’ actions and inspires them to achieve the defined objectives; integrates coordination efforts in the performance of activities; helps solve major disputes and disagreements; encourages members to perform to the best of their abilities; gives sense to moves made and activities performed so far, in the light of an envisaged future or set of principles that justify organisational collectivity.

Transformation of a designed strategy into action happens in the context of a formal process that includes activities of strategic planning and programming, budgeting and managerial adjustments, which all takes place in numerous meetings and strategic workshops. This kind of strategic design is characterised by top-down processes inside the organisation.

In such processes, a distinct organisational language is created, containing symbols and networks of meaning that are monitored by strategic leaders and are beyond the control of other participants in intraorganizational goings-on. Their rhetoric is given a strong foundation, their interpretations of the ambience are given sense, and the decisions they make are explained by a specific rationalisation.

On the other hand, the main mission of strategic leadership can also be fulfilled by creating a stimulating ambience in which there will be no all-encompassing control mechanisms that would regulate the organisational members’ conduct. Absence of control can unblock and unleash ideas and lead to discovering new methods of solving problems.

Giving freedom to associates means allowing them to self-organise, experiment, develop unusual and different ideas and initiatives and potentially depart from the “normal” (usual) course of organisational events.

That way, strategic leaders release energy, creativity and entrepreneurial potential locked in the organisation. Consequently, they need to permit some mess and disorder to achieve the synergy effects (De Wit & Meyer, 2010, p. 488). This can be a paradoxical situation where the means create an end that is the opposite of what was expected and intended (Storey & Salaman, 2009).

It is an indisputable fact that much of what we refer to as strategy need not be the result of any actions, decisions or aspirations of strategic leaders. In any organisation, strategies are (more or less so) created without any master plan or grand design created by the managerial elite.

In many situations, strategies are created in bottom-up processes; they come as a result of actions and behaviours that were not initially planned and that need not be (and often are not) coordinated from the top towards the bottom of the organisational pyramid. They emerge from a series of unrelated activities, without any conscious efforts, or through accumulation of daily adjustments made in organisational routines (Quinn, 1980; Mintzberg & McHugh, 1985). They can also emerge as the result of trial and error, or as the effects of a successfully adopted philosophy of learning by doing. They can appear spontaneously, suddenly and unexpectedly—sometimes even completely accidentally: beyond any logical or defined guidelines.

In conclusion, strategic leaders should be successful in simultaneously grasping and solving paradoxical situations and overcoming seemingly insurmountable organisational tensions that emerge in the space between the need to control and the desire to include more participants in the strategic process. Successful strategy is the result of long and intense negotiations, agreements and compromises, and it involves many individuals and groups inside the organisation, with the managerial elite playing the key role.

Strategic leaders’ role in both cases is extremely important: they are the initiators, catalysts and coordinators that have to manage the space in which strategy is formulated and implemented.

Regardless of the tensions and paradoxes, strategic leadership has to legitimise organisational aspirations; it creates an impressive illusion filled with symbols and stories of collective existence.

The role of strategic leadership is changing, as are approaches to organisational strategy: what is required is less planning and control, but more adaptability, learning and improvising (Crossan et al., 2008). Collective mental models have to be constructed that will be based on simplification of a complex reality and acceptance of uncertainty as an inevitable element in the decision-making process. Strategic flexibility is becoming an imperative, and leaders’ imaginativeness and innovativeness are the prerequisites for progress.

Furthermore, the society needs capable, humble and moral leaders who can successfully respond to ever-emerging new socioeconomic, demographic and geopolitical challenges.

Strategic leaders have to be responsible, committed and creative in finding solutions that will be good not only for the future of the organisation, but also for the future of the entire civilisation and our planet. Their task is to release people’s potentials and strengthen togetherness and a synergy of knowledge and action to contribute to creating a better world. This can only be achieved through decisive departure from selfishness, creation of open dialogue and networking of partnerships with institutions.