Distance Leadership in decentralised sales organisations of small and medium sized medical enterprises

Master's Thesis 2014 83 Pages

Business economics - Business Management, Corporate Governance


Table of Contents

Executive Summery

List of Illustrations

List of Tables

List of Abbreviations

Comment on gender specific Wording


1 Introduction
1.1 Background and Research Theme
1.2 Motivation for choosing this theme
1.3 Objectives of the present master thesis
1.4 Approach and methodology

2 Distance Leadership within the context of macroeconomic development
2.1 Decentralisation efforts of modern enterprises
2.2 Effects on Leadership Tasks
2.3 Challenges of leading employees at a distance
2.4 Distance Leadership in small and medium-sized companies (KMU)

3 Theoretical Approaches on Research
3.1 Definitions
3.2 Selection of Literature and multiparadigmatic evaluation
3.2.1 Distance-Leadership-Compatibility of leadership styles within the context of conventional motivation theory
3.2.2 Distance-Leadership suitability of established leadership models Management by Objectives Management by Exception Management by Delegation Management by Empowerment Situational Leadership Model St. Gallen Management Model
3.2.3 Distance Leadership Adequacy of organisational and communicative leadership instruments Organisational Leadership Instruments Communicative Leadership Instruments
3.3 Summary of the theoretical research results
3.4 Research gap and research questions
3.5 Hypothesis

4 Empirical Research Approach
4.1 Design and Methodology
4.2 Quality Criteria
4.3 Survey and Analysis of Questionnaires
4.4 Summary of the Empirical Research Results

5 Conclusion and Verification of Hypothesis

6 Limitations and Future Research Questions

7 Bibliography
7.1 Books
7.2 Internet sources and Scientific Journals

8 Annex: Survey Original Hardcopy (German)

Executive Summary

This master thesis analyses the theoretical basis for Distance Leadership. It examines how decentralised structures affect specifically in the area of ​​personnel management of sales organisations which organisational and communication management tools prove to be useful in this situation and lead to the choice thereof is applied in small and medium-sized companies (KMU). The objective of this work is to gain an overview of the state of research on the topic of Leadership and Distance to substantiate adequate for the medical industry segment and the defined size of the company range of management concepts. The empirical part of this work focuses on the research of suitable management tools for Distance and Leadership focuses on the management of distributed configuration sales organizations in the KMU/SME segment.

List of Illustrations

Illustration 1: Structure of the Master Thesis

Illustration 2: Control Functions of Management

Illustration 3: Tri-Distance-Construct

Illustration 4: Variations of Challenges and Intensity of Distance Leadership

Illustration 5: Share of KMUs in German economy

Illustration 6: Distance Zones

Illustration 7: Navigation Range of Distance Leadership

Illustration 8: Loss of Control and Monitoring vs Requirement of Trust

Illustration 9: Situational Leadership

Illustration 10: The Social Media Spectrum

Illustration 11: Survey-Distribution ratio of KMUs to large Enterprises

Illustration 12: Survey-Distribution based on the positions in the company

Illustration 13: Survey-Farthest distances where Sales Employees are localised

Illustration 14: Survey-Frequency of Sales Conventions

Illustration 15: Survey-Self assessment of the used leadership style

List of Tables

Table 1: Definition of Terms

Table 2: Overview of the Basic Literature researched for the present master thesis

Table 3: Synopsis and evaluation of the six analysed leadership models

Table 4: Organisational Leadership Instruments

Table 5: Communicative Leadership Instruments

Table 6: Survey-Branch Distribution

Table 7: Survey-Centralisation Degree of Sales organisations in the companies of the interviewees

Table 8: Survey-Sizes of Sales Units in the companies of the interviewees

Table 9: Survey-Farthest distances where Sales Employees are localised

Table 10: Survey-Perception of the effect of distance on leadership tasks

Table 11: Survey-Actually used leadership models

Table 12: Survey-Efficiency of the actually used leadership models

Table 13: Survey-Organisational Leadership Instruments

Table 14: Survey-Communicative Leadership Instruments

Table 15: Survey-Influence on the used leadership concepts

List of Abbreviations

illustration not visible in this excerpt

Comment on gender specific Wording

For simplicity and readability, gender formulations used in this thesis were mostly used in the masculine form, the feminine form is enclosed. The author asks the female readers politely for their understanding.

`Life is like a landscape. You live in the midst of it but can describe it only from the vantage point of distance.´

Charles Lindbergh

1 Introduction

`Dezentralisierung und Internationalisierung von Unternehmenstätigkeit resultieren in personellen Verflechtungen zwischen Unternehmenseinheiten. Hierdurch ist insbesondere das Feld der Personalführung zunehmend vor entsprechende Herausforderungen gestellt, da die beschriebenen Tendenzen das Phänomen einer Führung auf Distanz im Sinne einer standortübergreifenden Mitarbeiterführung auslösen´ (Eichenberg 2007b: p454).

The development of Distance Leadership has changed management work. Leading employees over physical distances is on the rise. Executives’ expectation, however, to achieve predictable results by using human resources has not changed, nor has the expectation by employees to be led by modern instruments or methods of leadership concepts despite their physical absence or their persisting desire to be integrated into the company and to be instructed according to their assignments. These things have still been valid and have become more important within the framework of ever more developing social networking. According to the assessment of Melchar et al. (2008) and Holt & Seki (2012) this new development creates higher exigencies on executives to bridge distances and to cope with their daily requirements on management and its tasks despite a partly or even a whole lack of immediate personal contact and regular face-to-face communication. To deal with it there are a multitude of options of electronic communication media that seem easy to handle. `People around the world are now bound together by our interconnectedness as well as economic uncertainty´ (Holt & Seki 2012: p33). The surrogate use of electronic media, however, may lead to management misinterpretation and misjudgement, because the immediate reaction of the person being led, depending on the medium, will be vague or will stay entirely non-transparent.

1.1 Background and Research Theme

The development of distance leadership described in the chapter above has been distinctly visible in subdomains of company management which deal with Sales tasks. Next to Sales organisation per se they also include the supporting performance units, such as Customer Service, Customer Support on the phone or Complaint Processing. These organisational domains are requested, although divided by distance, to exchange information quickly and promptly in order to satisfy customer requirements and needs to cope with pressing problems. Sales organisations have already been nationally and internationally decentralised while acting through small regional Sales locations or through home office-based Sales representatives. As an example of a globally and therefore virtually organised Sales organisation Badrinarayanan et al. (2011) mention the global Software Group Microsoft in their article about Global Virtual Sales Teams, GVSTS. Microsoft works with a force of about 8.000 geographically divided Sales-Representatives, 1.000 Call Center employees and about 1.000 sales partners in order to sell its products world-wide and to safeguard customer service. A Sales organisation of the size of about 10.000 employees and executives can only be organised in a decentralized way to allow them a worldwide presence, as regular meetings of all the Sales staff cannot be organised for reasons of an unaffordable expenditure of time and money. Electronic information flow is paramount. Management tasks are carried out across national and international distances. Management work, in this case, can be termed Distance Leadership. Along this development Distance Leadership has been a phenomenon of the long-standing reality of networked enterprises. More and more executives and employees, especially in Sales, do not work from a traditional office, but preferrably from a home office or from somewhere else along a person’s itinerary.

The present master thesis is analysing the theoretical base of Distance Leadership and investigates the pertaining concepts and instruments of organisation and communication that have been in place so far. Contrary to the above-mentioned virtual Sales organisation of the worldwide operating software group Microsoft the small and medium-sized enterprises (abbr. in German ‘KMU’) do perhaps not feature comparable electronic or organisational equipment with lots of media. For that reason the empirical part of the thesis concentrates on the study of suitable management tools for Distance Leadership within KMUs and focuses on the leadership of decentralised Sales organisations.

1.2 Motivation for choosing this theme

Within the framework of his own management role in a Sales organisation of the industry segment of medical technology, the author of the present thesis has been entrusted with the task of leading employees across considerable distances. The Europe-wide operating enterprise distributes its products and services through Sales agents whose work location is based outside the company location, normally at their place of residence. The motivation for choosing this theme stems from the recurring challenge to professionally lead this organisation despite the physical distance while coping with and satisfying the individual needs of all the persons led. In any classical education - including a university one - the training of leaders faced with the specific challenges of Distance Leadership finds only little consideration. For this reason the author is specifically researching management tools within the field of Sales choosing the example of medium-sized dental or medical technology companies or dental and medical product manufacturers, plus the companies or industries operating closely with the medical branch such as medical services or pharmaceutical industries; in compliance with the aforementioned he is exploring management tools to give recommendations for action to executives within the KMU segment.

1.3 Objectives of the present master thesis

The present master thesis will discuss the effects of decentralised structures specifically within the field of employee management of Sales organisations and their pertaining organisational and communicative management tools that proved to be suitable for this specific management situation, plus a number of choices appropriate for the KMU segment. The objective of the present thesis is to get an overview on the status of research on the subject of Distance Leadership. It will serve as a starting point to find suitable management concepts for defined industry segments and company sizes.

The empirical research part will verify the results observed after the implementation of the above and its effects on the management situation to offer recommendations of action to executives in the conclusion of this thesis below.

1.4 Approach and methodology

The structure of the present thesis has been divided according to the research steps. With the introduction to and the presentation of the problem the macro-economic conditions which have caused decentralisation with Distance Leadership will be illuminated. This will entail the investigation of the effect any of the researched conditions has on management situations and how they increase the challenge of mastering Distance Leadership. Afterwards a delimitation of big enterprises to KMU enterprises will be made.

In the theoretical part the relevant literature on the theme will be evaluated and summarised. The results gained from literature analysis will concretise the research gap from which the author derived the research questions and the hypothesis. In its beginning, the empirical part will discuss the research design and the methodology followed by the weighing and evaluation of the results of the empirical study. Finally, the conclusion will be drawn and a presentation of possible limitations will be shown to give food for future research questions.

Abbildung in dieser Leseprobe nicht enthalten

Illustration 1: Structure of the Master Thesis (Source: illustration by the author)

2 Distance Leadership within the context of macroeconomic development

`Zwischen 1990 und 2008 stieg die Gesamtzahl der transnationalen Unternehmen von rund 35.000 auf 82.000. Parallel stieg die Zahl der Tochterunternehmen der TNU von 150.000 auf mehr als 800.000´ (Bundeszentrale für politische Bildung 2014).

In the wake of progressing globalisation even small and middle-sized enterprises from west Europe have increasingly operated internationally or transnationally. `Technological advances and changes in the global economy are motivation and enabling an increasing geographic distribution of work. Many leaders today communicate regularly with individuals, with their team members, and with larger organizational units at a distance´ (Weisband 2008: p5).

This development has caused the interdependency and interrelationship of work progress across wider distances and has significantly changed the work relationship between executives and their employees in physically divided structures. According to Remdisch (2005) there have already been 100 m people worldwide who work outside the notion of a traditional office. According to Eichenberg (2007a) worldwide companies have become rather the rule than the exception in the meantime. According to his definition Distance Leadership has been understood as a management task being done across distances whose communication only features face-to-face interaction as an exception. Opposed to this he defines immediate leadership as the contact leadership that takes place directly in the vicinity of the leader. If the leadership task is extended by the component of distance, according to Miller (2010), some cooperation will result which is divided and spread by the condition of spatial distribution and which lacks the link of a common place.

The bigger the distances between superiors and their subordinates or between the coworkers in general the more technical communication media must be used. So-called virtual teams are set up communicating mainly by electronic media. For this kind of virtual cooperation the importance of physical distance will diminish. With the involvement of many nations in globally operating enterprises, according to Miller (2010), a second challenge arises by leading across distances: Culture. All in all, according to Batool (2013), Distance Leadership rather requires a more comprehensive range of communicative competence and skills of leaders than face-to-face contact. `Leaders who do well in this element of emotional intelligence are great communicators.

They are just as open to hearing bad news as good news. … Leaders who have good social skills are also good at managing change and resolving conflicts diplomatically´ (Batool 2013: p90).

2.1 Decentralisation efforts of modern enterprises

Berger (2009) comments on the subject that Dax-listed corporations make about 70% of their profits outside Germany and employ more than half of their employees there. In his opinion multi-national teams that will have to be led across national borders will be the rule in a business world that has become increasingly more complex on an international level. For Mankin & Cohen (2004) national borders will even be irrelevant. New technologies will make the world a smaller place where competition and cooperation will be equally globalised and information will be the most important resource of modern enterprises, irrespective of the location where they are developed or deployed.

This will of course diminish the importance of distance, and at the same time leadership and cooperation will be more complex and more demanding. This will affect all parts of an enterprise, particularly all Sales structures and activities, as they are frequently decentralised and therefore predestined for the study of Distance Leadership.

Becker (2013) discussed that globally-operating enterprises have to organise Sales structures and especially their management structure flexibly in order to be successful. `Unter Vertrieb wird der Prozess vom Verkaufshinweis bis zur Unterschrift des Kunden verstanden´ (Amman 2005: p12). Based on the example of the Sales organisation of worldwide operating ABB AG, he describes how a decentralised Sales organisation works and is networked by e-business solutions. Overall and everywhere, a distinct intensification of decentralisation efforts of enterprises is noticable making them more agile and more responsive in their habitual markets, with their Sales organisations pioneering for further enterprise decentralisation.

2.2 Effects on Leadership Tasks

According to Drumm (1992) leadership means the target-oriented influence on employee behaviour. Leadership has been defined by Thommen & Achtleitner (2009) as the exertion of influence on people for the purpose of completing tasks and solving problems. Macharzina & Wolf (2010) point out that human resources leadership within company leadership has a double importance. On the one hand leadership behaviour is regulated and standardised by authorised leadership rules on the company level. On the other hand the leaders regulate and control the creative leeway of leadership by the actual relationship between superiors and subordinates on an individual level.

The phenomenon of leadership therefore always appears where several people have to contribute to solving a common task or problem. `Sind nämlich mehrere Personen an einer Problemlösung beteiligt, so muss aus verschiedenen Gründen, wie z. B. Zielerreichung, Effizienzsteigerung, Sicherheit, Lösung von Konflikten oder Konsensbildung ihr Verhalten beeinflusst werden´ (Thommen & Achtleitner 2009: p842).

Thence, a characteristic feature of leadership is communication skills, making the above-described exertion of influence only possible if it is extended by mutual trust of the employees in the implementation of the changes of behaviour that have been insisted on. According to Batool (2013) and Armstrong (2000) the classical understanding of leadership is based on the notion that the exertion of influence is done in a personal or, if not feasible, in a telephone dialogue. Finding consent between superiors and subordinates aiming at a subsequent implementation by an employee is either achieved by defined instructions in authoritative leadership styles or the exchange of opinions with subsequently agreed decisions in cooperative leadership styles. Leadership from the company point of view is a control function exercised on the basis of some special legitimation: it is the active influence on the behaviour of employees and work processes. `Your goal as a leader isn’t to make friends. Your goal is to build strong working relationships´ (Eikenberry 2013: p7). According to Rüegg-Sturm (2003) and Thommen & Achtleitner (2009) there are `die konstitutiven Elemente der Führung:

- Planung,
- Entscheidung,
- Aufgabenübertragung,
- Kontrolle´ (Thommen & Achtleitner 2009: p942f).

They need to be understood in different ways: institutional, instrumental and process-oriented. According to Thommen and Achtleitner (2009) every leading function in the social system needs to be entrusted to persons or positions that can be described as leading organs in the sense of institutional hierarchy. The process-oriented approach deals with processes of leadership dependant on time and logical progression and precise procedures and processes of planning and decision-making. The instrumental approach rather observes tools and aids which serve as instruments for carrying-out leadership tasks. The study of such instrumental leadership components fit for Distance Leadership is at the focus of the present master thesis and will be narrowed down to suitable instruments for KMUs in the course of this study.

As shown in illustration 2, classical management literature still sees establishing interpersonal relationships as an integral part of staff leadership.

`Aus der Tatsache, dass bei jeder multipersonalen Problemlösung und somit Führungssituation Interaktion zwischen Menschen stattfindet, entstehen vielfältige zwischenmenschliche Beziehungen´ (Thommen und Achtleitner 2009: p944). With Distance Leadership, however, situations establishing and maintaining interpersonal relationships are impeded by physical distance reducing personal meetings in individual cases to a few contact meetings per year and sometimes even none, making electronic media the substitute for keeping up relationships and exchanging information.

Abbildung in dieser Leseprobe nicht enthalten

Illustration 2: Control Functions of Management (Source: Illustration by the author based on Thommen & Achtleitner 2009 and Rüegg-Sturm 2003)

Leadership as Interaction requires regular information exchange with the employees to be led according to Rüegg-Sturm (2003), Hofstede (2005), Sohm (2007) and Macharzina & Wolf (2010). With Distance Leadership information exchange is limited and in most cases done via electronic media. `In diesem Zusammenhang bedarf der Begriff Distance Leadership einer näheren Charakterisierung. Seine Verwendung birgt die Gefahr begrifflicher Unschärfen: hinsichtlich des Begriffs Distance existieren unterschiedliche Deutungsmuster, die jedoch in der Literatur nicht näher expliziert werden. In Bezug auf den Begriff Leadership bestehen relativ geringe Deutungsprobleme, da dieser mit Führung im Sinne der Personal- oder Mitarbeiterführung übersetzt werden kann und die darunter subsumierten Inhalte umfasst´ (Eichenberg 2007a: p66).

The term of Distance Leadership is logically understood in the present thesis as the leadership across distances, based on an actual physical distance between superior and subordinate which cuts the chances of regular personal dialogue and which includes even linguistic and cultural distances in exceptional cases.

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Illustration 3: Tri-Distance-Construct (Source: Illustration by the author based on Eichenberg 2007a)

Eichenberg (2007a) combines these aspects in his Tri-Distance Construct, as shown in Illustration 3. He distinguishes three distance zones between employees-to-leader situations and relationships:

- `Räumliche Distanz: sie ist durch eine physische, geographische Entfernung der Beteiligten gekennzeichnet. Implizit enthält die räumliche Distanz damit auch eine zeitliche Komponente. Sie erlangt einen gewissen Bedeutungsgrad, wenn sich Führer und Geführter in verschiedenen Zeitzonen aufhalten.

- Beziehungsorientierte Distanz: die zweite Dimension konzentriert sich auf den originären interaktionsorientierten Bezug zwischen Führungsperson und Geführtem, also auf Fragen des persönlichen Verhältnisses der Interaktionspartner zueinander.

- Kulturelle Distanz: diese beinhaltet drei weitere Dimensionen: kulturelle, administrative und ökonomische Distanz´ (Eichenberg 2007a: p70f).

These lead to tremendous consequences on leadership tasks implying limitation and restriction. Remdisch (2005) noticed the effect of distance mainly in the limitation of the immediacy of communication.

Due to physical distance:

- behaviour cannot be directly watched and monitored,
- the lack of facial expressions and gestures reduces information transfer,
- a person’s feelings or emotions are difficult to identify and cannot be interpreted.

Physical distance remains at the core of all problems of Distance Leadership and requires overcoming or compensating the reduced communicative opportunities of interaction.

2.3 Challenges of leading employees at a distance

Distance Leadership in literature is often termed e-leadership, as a part of leadership communication is done via electronic media, e.g. via e-mail. Executives are faced with the challenging situation to, according to Winkler & Hofbauer (2011), be forced to replace face-to-face leadership situations, such as all the personal discussions with employees which are usually caused by current events or an incident, or may even be a regular fixture in day-to-day business, by communication via electronic media. Eichenberg (2007a) illustrates clearly that up to now it has not been clarified to which degree face-to-face interaction will be able to be permanently substituted by e-mail, the phone, video conferences or other electronic transmission. `Eine weitere Herausforderung stellt der immanente physische Kontrollverlust und damit einhergehend die erforderliche Veränderung im Führungsverhalten dar:

- höhere Entscheidungskompetenz der Mitarbeiter,
- zunehmende Bedeutung des Vertrauensverhältnisses zwischen Vorgesetztem und Mitarbeitern sowie der Mitarbeiter untereinander,
- Befähigung zur Selbstorganisation des Mitarbeiters,
- Aufgabe von kontinuierlicher Kontrolle durch den Vorgesetzten,
- tendenzielle Verlagerung von autoritärem zu delegativem Führungsstil,
- verstärkte strukturelle Führung über Unternehmenskultur´ (Eichenberg 2007a: p5).

As a logical consequence of the above the lack of physical interaction again has to be largely substituted by surrogate, mainly electronic communication in Distance Leadership. This implies that - depending on the chosen communication media – there will be a substantial loss of information on the nonverbal or paraverbal level. In compliance with the above the probability of misunderstandings compared to face-to-face communication will increase according to Eichenberg (2007a). Based on the above problems, there are limitations of Distance Leadership. Kadner (2004) and Miller (2010) discuss that such work relationships are more appropriate for information-based performances and services but less appropriate for work relationships that produce a physical end product such as a machine. Therefore, decentralised Distance Leadership work relationships logically proliferate in Sales organisations but not in production fields.

The lack of immediate exertion of influence on employees poses a crucial challenge on the executive, as it corresponds to an equivalent of an immediate loss of control, according to Weisband (2008). Any increase of distance therefore requires a linear increase of trust in the employee that he will implement the communicated tasks and that his reported work results are true.

Abbildung in dieser Leseprobe nicht enthalten

Illustration 4: Variations of Challenges and Intensity of Distance Leadership (Source: illustration by the author based on Eichenberg 2007a)

As shown in illustration 4 Distance Leadership appears in varied forms of requirements. By expatriation of employees to company locations all over the world, which started in some industries centuries ago, internationalisation and decentralisation have been on the rise increasing the demands on Distance Leadership.

As shown in the left part of the illustration it may involve an extension of the range of leadership caused by job enlargement throughout additional divisions of the enterprise increasing the number of employees to be led and the range of responsibilities.

2.4 Distance Leadership in small and medium-sized companies (KMU)

The term of KMU describes a category of enterprises comprising small and medium-sized companies. According to the Bundesministerium für Wirtschaft und Technologie (2012) KMUs are defined as follows:

- microenterprises are companies that have less than 10 employees and an annual turnover or an annual balance sheet total of 2 m euros at the most;
- small enterprises are companies that have less than 50 employees and an annual turnover or an annual balance sheet total of 10 m euros at the most;
- medium-sized enterprises are companies that have less than 250 employees and an annual turnover of 50 m euros or an annual balance sheet total of 43 m euros at the most.

Following the above categories the focus of research of the present master thesis has been laid on enterprises that are considerably smaller in size and equipment than large companies or companies that are part of a business group.

KMU enterprises characterise according to the Bundesministerium für Wirtschaft und Technologie (2013) the significant part of German economy and comprise 99.7% of 3.7 m companies. The biggest part of medium-sized companies is family-run. They employ according to the key figures of Institut für Mittelstandsforschung Bonn (2012) 15.291 m employees.

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Illustration 5: Share of KMUs in German economy (Source: illustration by the author based on Bundesministerium für Wirtschaft und Technologie 2013 and Institut für Mittelstandsforschung Bonn 2012 )

As an amendment to the above the European definition of so-called SMEs needs to be explained. It is used synonymously within an international context by the Bundesministerium für Wirtschaft und Technologie (2012) for KMUs of small and medium-sized companies with a maximum of 250 employees and 50 m annual turnover at the most.

Comparing sales of a Company Group with the ones achieved by KMUs one is often confronted with completely different company structures, especially sales structures. According to Widmann-Rapp (2007) even experts underestimate how different the work conditions in Sales and Distribution are between large companies and KMUs.

She defines the distinguishing characteristics between the two company forms:

- Large companies usually have the required power in the market to actively create a market for their products and services. KMUs generally can only do that when they operate in market niches or within a certain region or locally. Very often, however, they act as suppliers of large enterprises and depend on only a few key customers while they are faced with trade-rivalry with lots of competitors in their segment. Therefore their customers impose the conditions why they have to be extremely flexible and customer-oriented.
- Large enterprises usually have sufficient assets. Therefore, they can afford to develop long-term strategic sales concepts. Whereas KMUs are comparably weak in view of the risks of the books and have to plan their marketing or sales activities for the short-term in order to achieve the aspired turnover and profits.
- Large enterprises possess a big number of specialist departments employing specialists receiving tasks to competently deal with them as marketing experts. If they are not available within the pool of employees they are hired from external service companies, e.g. market researchers, product designers and commercial artists to create advertisement. KMU does not feature these services to the same extent. The distribution of tasks is less divided. There are not so many specialist employees to delegate tasks to. Often they do not have the financial resources to hire external services and specialists which results in many tasks being carried out with limited resources.
- Large enterprises employ a bigger number of sales and distribution staff. Besides, they cooperate with Sales and Trade organisations that take the burden of implementing specific framework sales activities while operative sales tasks of executives are widely limited to contacting key accounts in person and to monitoring sales units. That way more time is available to do conceptual and communicative leadership tasks. Small and medium-sized enterprises, however, dispose over only a few sales staff. In small enterprises sales managers often parallelly take care of a limited number of customers along with their management tasks. Therefore, Sales and Distribution managers of KMU are more deeply involved in operative sales tasks than their colleagues of large enterprises, and the quality of their work is rather measured by short-term turnover.

A study of RKW Berlin (2010) on personnel development explains that KMUs compared to larger enterprises and company groups therefore are often at a disadvantage.

Various difficulties are named, ranging from planning and taking defined actions up to controlling. In fact, there is less money for additional internal processes and changes. Due to the lesser number of employees it is mostly not possible or even pointless to establish additional staff units or supporting departments.

This is also true for the development of Sales and Marketing and documents the specific challenges of executives in Sales and Marketing who have significantly lesser resources and technical support for instructing and guiding their employees in remote places than comparable job holders in large companies.

3 Theoretical Approaches on Research

In the following part of the present master thesis the theoretical foundation of Distance Leadership and suitable leadership concepts including the pertaining organisational and communicative instruments will be researched by comprehensive quantitave literature analysis.

3.1 Definitions

For the present thesis a few terms need clarification. Some have been used in a comprehensive function, others have been used inflationarily. So the attributes ‘decentral, virtual, global, international, multinational used by various authors have been used within this thesis in comparable semantic contexts.

Table 1 below is going to explain the terms used within the context of the title of the thesis. ‘Distance Leadership’ in decentrally-organised Sales and Marketing organisations based on the example of a medical company of the KMU segment does not claim to be an exhaustive term or to be exclusive. It is merely used to find a comprehensive designation within the present thesis. While searching for well-received and widely-known terminology the confusing multitude of explanations got obvious, why the author referred to additonal explanation when a term was used.

The term of Distance Leadership in this context is understood to be any leadership activity that involves leading employees worldwide or at least at a bigger number of nationally or internationally spread locations on the one hand and the cooperation with employees of varied nationalities, cultures and languages on the other hand. Distance Leadership is pertinantly understood to be the leadership of decentralized, virtually acting teams and individual employees, which has become the rule in the process of internationalisation of enterprises. Based on the above Remdisch (2005) considers and defines the following features of virtual work relationships:

- multinational division of labour
- worldwide transactions
- high speed information exchange
- cultural differences

Remdisch (2005) extends the list by interconnected factors of cooperation such as distance, virtuality and interculturality, which together with the above-listed features make the total of the framework conditions that have been laid down as a basis of Distance Leadership here.

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Table 1: Definition of Terms (Source: research by the author)

Equally relevant for any further elaboration is a closer definition of the term of ‘distance’.

Illustration 6 shows the respective distance zones. A distance of more than 400 cm belongs to the public zone, of 150 – 400 cm to the social zone, from 60 – 150 cm to the personal zone and of less than 60 cm to the intimate zone. The zones depend on age, temperament and gender and differ according to the various culture groups according to Hall (1990).

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Illustration 6: Distance Zones (source: illustration by the author based on Hall 1990 and Miller 2010)

3.2 Selection of Literature and multiparadigmatic evaluation

In order to approach the illustrated peculiarities of Leadership by Distance, well-known management and leadership models will be researched on their compatibility with Distance Leadership.

The author researched the relevant literature and compared traditional, authoritarian vs. cooperative leadership styles to innovative leadership models, such as the so-called ‘management-by-techniques’.

The list of the selected literature in table 2 documents the most important sources compared to the relatively new and strongly developing research approach of employee leadership according to Eichenberg (2007a). `Unter Berücksichtigung der einleitend festgestellten Tendenzen und Entwicklungen der Unternehmensaktivitäten ist davon auszugehen, dass derartige Führungsverhältnisse in der Zukunft eine Bedeutung erfahren´ (Eichenberg 2007a: p3).

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Table 2: Overview of the Basic Literature researched for the present master thesis (Source: research and compilation by the author)

3.2.1 Distance-Leadership-Compatibility of leadership styles within the context of conventional motivation theory

`Today, theories of leadership have shifted from vertical leadership to distributed leadership´ (Weisband 2008: p5).

Under the influence of a work landscape that has been constantly changing, the demands by employees and executives have been changing, too, initiating a consequent change of leadership theories. Starting from the classical motivation models of Maslow (1959), Herberg et al. (1981), Lawler & Porter (1968) and Hackman, Lawler & Porter (1983) the motivation of employees is determined by the interplay of material and non-material incentives. The above authors’ motivation theories developed on the question of why humans behave in a certain way.

The theories that have been known so far assume that the reasons for a certain human behaviour or employee behaviour are founded in a person or can be influenced by adequately created framework and environment conditions. Lawler & Porter (1968) particularly studied how an individual’s motivation for their work can be determined by the probability that increased effort will lead to improved work performance, and increased work performance will lead to the targets and results that a person deems worth the effort. They consider targets and results from the efforts of the employees to be first and foremost non-monetary incentives such as belonging to a group, appreciation by other co-workers and executives. This means, the leadership style of an individual executive directly influences the motivation and work performance of an employee next to any further environment factors.

Thommen & Achtleitner (2009) explain motivation in a work environment as the activation or increase of a person’s readiness to meet certain targets when they are in compliance with the satisfaction of their own needs. Maslow (1959) demonstrates in his famous motivation mode,l the ‘Pyramid of Needs’, that the satisfaction of the basic physiological and existential needs is immediately followed by the satisfaction of social needs such as the need for appreciation and individual fulfilment. Shaping the leadership function by executive behaviour significantly contributes to the satisfaction of the needs of employees or is considered as an impairment of the satisfaction of needs. Leadership style includes according to Thommen & Achtleitner (2009) the result of shaping the leadership functions of planning, decision-making, the delegation of tasks and control and monitoring as shown in illustration 2.

`Der Führungsstil ergibt sich aus:

- der Bestimmung der an der Führung Beteiligten, der Gestaltung der Führungsprozesse sowie der Führungsinstrumente sowie,
- der Integration der individuellen Mitarbeiterbedürfnisse der Mitarbeiter im Führungsprozess, der Gestaltung der Vorgesetzten-Untergebenen-Beziehung und der Berücksichtigung sozialer und kultureller Normen.

Ein bestimmter Führungsstil hat zur Folge, dass jede Führungssituation durch ein einheitliches Verhalten gekennzeichnet ist´ (Thommen & Achtleitner 2009: p985). However, if employees need to be led across wider distances, two determining liminations arise:

- Leadership behaviour of an executive is only visible by the employee to a limited degree. Any possible acceptance or non-acceptance of an employee’s behaviour by the executive is only vivible to a limited degree and has to be expressly articulated in order to be noticeable as a leadership impulse to the employee.
- The behaviour of employees is only visible by the executive to a limited degree.
The delivery of the performance is only noticeable based on seemingly objective measurement criteria. Supporting or limiting environment factors to the delivery of a performance may be overlooked by the executive if they are not expressly researched, which may lead to errors of assessment.

A leadership style that is exclusively authoritarian is marked decision-making by the executives without any involvement of their employees, and by an icreased risk of the limitations described above with respect to errors in the leading function; these include planning, decision-making, controlling of tasks and employee monitoring. The executive-based, authoritarian leadership style is opposed by the cooperative leadership style. It is marked by employee participation in management processes and the delegation of decision-making competence and responsibility. As shown in illustration 7, there is a multitude of mixed forms of leadership styles depending on the degree of employee participation. According to Eichenberg (2007a) leadership styles last, but may vary by wide ranges depending on situational factors such as qualification, motivation or the sort of task an employee needs to do. The variation of leadership styles, however, has to be free of contradictions. From the employees’ view a leadership style mirrors the personal attitude of executives towards their employees. Physical distance causes a diffuse leadership style and is perceived by the employees as unsettling while reducing employees’ readiness to perform.

Illustration 7 demonstrates the range where Distance Leadership is located within the cooperative and authoritarian leadership styles. A totally authoritarian leadership style would be unsuitable for this specific leadership situation, as physical distance excludes continuous control. It would be equally unsuitable to lead employees in a cooperative style or even laissez-faire style, as there have to be clearly-defined agreements giving employees orientation concerning their tasks and transparency concerning the targets to reach, especially if there is only little contact between executives and employees. The navigation range of Distance Leadership is settled more in the cooperative leadership segment and gives employees sufficient leeway for decisionmaking, which safeguards the delivery of performance even in an executive’s absence.

Abbildung in dieser Leseprobe nicht enthalten

Illustration 7: Navigation Range of Distance Leadership (source: illustration by the author)

For leading decentrally-localised personnel at a physical distance the cooperative leadership style is more appropriate according to Kadner (2004). It gives employees sufficient leeway for filling their tasks and for making decicions that are consistent with the company policy. It also integrates them into the management process and increases the readiness to take on responsibility. That way motivation will stay on a constant level provided the remaining framework conditions stay the same. Cooperative leadership styles are based on trust in the employees’ performance, while demanding a versatile and experienced leader who will always be in the position to judge employee performance across distances, and on mature and motivated employees who do not abuse the freedom given to them. Alternative options, however, are limited with Distance Leadership. According to Miller (2010) the substitution of trust by monitoring and control causes higher cost and lower efficiency in the actual business activities of an enterprise. `Führen heißt vertrauen und Vertrauen vermitteln´ (Löhner 2005: p101). Illustration 8 shows how the loss of control through physical distance needs to be compensated by increasing trust in the overall cooperation. The navigation range for Distance Leadership starts where a stage of limited control mechanisms has been reached.

The schematic illustration also documents that total renunciation to control and monitoring and blind trust in their place will not be possible neither for leaders nor for employees. Mutual work routines will have to settle down at an appropriate and stable trust-control-level.

Abbildung in dieser Leseprobe nicht enthalten

Illustration 8: Loss of Control and Monitoring vs Requirement of Trust (Source: illustration by the author)

For Distance Leadership cooperative leadership styles based on the trust in good cooperation and the entrepreneurial initiative of employees are better suited than authoritative ones. Cooperative leadership requires – as mentioned above – an experienced leader who is in the position, due to his personal and technical expertise, to establish trust across distances without losing focus of the measurement parameters laid down to implement the tasks. On the employees’ side there is an analog requirement for readiness to take on responsibilities on an independent level, and for good self-organisation. Especially here, mutual trust within physically distributed company structures plays a decisive role for decentralised structures according to Miller (2010), Kadner (2004) and Mankin & Cohen (2004). Hall (1990) gives an orientation with the high- and low-context-cultural clashes he has researched: in so-called low-context cultures like Germany or Switzerland for instance, physical distance will not have the same trust-reducing effect than in high-context cultures, such as the Asian countries. The less westernised the team to be led or the bigger the mix of nations, the more face-to-face communication will be required and will become an important supplementation of Distance Leadership, provided it can be organised. Personal contact through regular international meetings is to be preferred, but can also be replaced by some communication-supporting leadership instruments as described in chapter, such as video conferences or facetime-telephoning according to Weisband (2008).

3.2.2 Distance-Leadership suitability of established leadership models

Macharzina & Wolf (2010) differentiate between normative and situative leadership models. Normative models impose recommendations for action that are supposed to be fit for each and every leadership situation. Situative models offer custom-made recommendations for actions in varied leadership situations. The present master thesis uses the term ‘leadership model’ which covers the normative Management-by-Techniques as well as situative leadership approaches, such as Situational Leadership models or the St. Gallen leadership model. The focus is on finding out if certain Distance Leadership models are appropriate and in particular how they can be applied to KMU enterprises.

When comparing the various models the question arises which special characteristics are required to make them appropriate for Distance Leadership. Remdisch (2005) lists the following special characteristics of Distance Leadership situations and the virtual relationships between executives and employees whot do not work together on a regular basis.

- flexible incorporation of experts from various locations
- high degree of self-organisation of the employees,
- optimised information flow;

possible drawbacks can be:

- some insecurity concerning the tasks, roles and responsibilities,
- the feeling of isolation,
- difficulty with feedback on the actual performance,
- misunderstandings and conflicts arise much more quickly.

From the collected leads can be concluded that the applicability of a Distance Leadership model is mainly targeted on the substitution of physical presence and has to focus on the intensivation of interpersonal communication in accordance with the growing limitation of the former. Literature has expressly elaborated on the latter experience. As the relationship level is always dominated by the content level, according to Sprenger (2002), an appropriate model needs to support the employees while they are autonomously implementing their tasks, and to further and convey the team spirit and their feeling of belonging to the company as much as possible under the circumstances of physical distance. Remdisch (2005) lists the following general tasks within Distance Leadership:

- to motivate employees,
- to delegate tasks,
- to develop a team,
- to agree targets,
- to monitor assignments and tasks,
- to support employees and help them to develop,
- to give feedback,
- to communicate with and to inform employees,
- to represent the team to the outside.

An executive has to cope with these tasks and give consideration to an actually physical or sometimes a feeled distance. For achieving this, according to Remdisch (2005), Miller (2010) and (Eichenberg 2007a) he needs first and foremost the ability to build trust across a distance. That cannot be expected as a given fundamental as Löhner (2005) documents in his research. According to his results most enterprises lack two essential bases of company management. These are a consistent management model and a strong and sustainable culture of trust. In his research he studied six leadership models which are - due to their cooperative approach - suitable for Distance Leadership according to Sohm (2007), Eichenberg (2007a), Remdisch (2005) and Weisband (2008) where Leadership is understood as a `… Prozess, der Menschen stimuliert, ihre Arbeit aus einem neuen Blickwinkel zu betrachten und durch eine vom Leader initiierte Transformation zur Höchstleistung motiviert´ (Sohm 2007: p22). This process orientation and cooperative leadership has been perceived by Johnson (2012) as fundamental for effective distance leadership work within the framework of a leadership that he describes as virtual. In the following chapters the up-to-date leadership models according to Sohm (2007) will be researched for their applicability to Distance Leadership and KMUs. Management by Objectives

The Leadership Model of Management by Objectives understands leadership to be `Führen mit Zielvorgaben durch den Vorgesetzten´ (Drumm 1992: p392). Beyond that, the common creation of targets in the sense of a target agreement is in the foreground with Thommen & Achtleitner (2009) and Kadner (2004). Two variants of MbO can be identified: the directive variant of leading by objectives and the participative variant of leading by setting targets. In practice a complete delimitation is difficult and sometimes not possible, as any target that has been set up participatively by employees and their superior has to be subjected to the company objectives, according to Macharzina & Wolf (2010). Therefore it is barely possible to grant a more easily achievable target to an employee who may want to negotiate that for himself, because it would disadvantage the rest of the employees. Usually, there is a basic target range laid down to every target agreement which it means to meet for the whole organisation. Within this scope, the superiors have the task to break down the overall target range to the individual strengths and competence of the individual employees in their teams and to convince them in their discussions that they are achievable.

According to Marcharzina & Wolf (2007) Management by Objectives is the most comprehensive of a whole family of personel leadership models which have always become well-known by the name of Management-by techniques. `Bei MbO wird das Verhalten der Mitarbeiter anhand von Zielen gesteuert. Die Grundannahme des Konzepts besteht darin, dass Mitarbeiter, die über klare Ziele verfügen, zu selbstständigem Handeln bereit und fähig sind´ (Marcharzina & Wolf 2007: p587). The employees are relatively free in their decision about the means and ways how they will achieve the targets. Based on their own personal view of the matter and how they evaluate the chances to be more favourable, employees decide whether to acquire new customers or whether to stick to the present pool of customers to reach the sales targets. The targets are often combined with additional variable salary components, no matter whether they are set from above or whether they are communally agreed on,

`Stärken des Management by Objektives könnten mit Bezug auf die Mitarbeiter darin liegen, dass durch Zielvereinbarung die Selbstmotivation, ein eigenständiges, verantwortungsbewusstes Handeln und die Eigeninitiative gefördert wird´ (Kadner 2004: p14).

Management by Objectives has been appraised to be fit for Distance Leadership due its participative approach and result-oriented leadership concept; it enables employees to proceed autonomously to achieve their targets without the need for continuous coordination procedures. This leadership model is both fit for large enterprises and for KMU. Management by Exception

Management by exception means `Führen durch Abweichungskontrolle und Eingriff in Ausnahmefällen´ (Thommen & Achtleitner 2009: p939). Employees receive an action span controlled by a regular comparison of target values to actually-achieved values or guidelines ruling the regular or the exceptional cases. Within this span they can decide how to use their resources independently in an entrepreneurial way. According to Kadner (2004), Mankin & Cohen (2004) and Eichenberg (2007a) independent and entrepreneurial orientation of leadership is decisive fort Distance Leadership. Only with a deviation from the regular conditions or an exception from the rule the next-higher authority will be involved. `Management by Exception führt nur dann zur Information und Einbeziehung des Vorgesetzten durch den Mitarbeiter, wenn eine bestimmte Zustandsvariable, z. B. ein Kostenbudget eine Bandbreite zulässiger Ausprägung über- oder unterschreitet´ (Drumm 1992: p392).

So, for instance, a monthly sales development compared to the previous year could be defined for Sales and an exception would only be acute when the figures fall below.

Key-figure-controlled leadership work saves time and leaves more leeway for efficient work to top executives according to Thommen & Achtleitner (2009). They criticise, however, that this leadership model focuses only on negative deviations, whereas creativity and initiative stay mainly reserved to superiors. Despite this, Management by Exception is assessed to be fit for Distance-Leadership. Literature does not assist with any delimitation concerning its applicability to defined company sizes. Management by Delegation

Management by Delegation or the Harzburg Model is based, according to Drumm (1992), on the complete delegation of all tasks within a clearly-defined framework of activities and responsibilities. The concept has been developed for executives in economy in Bad Harzburg as early as 1956. It counts among the participative and cooperative leadership models while concentrating on leaderhip within a relationship among the employees based on the delegation of responsibilities. The precondition for the effective use of Management by Delegation is that, according to Thommen & Achtleitner (2009), job descriptions are available and company’s targets are totally transparen, which will enable the employees to meet the given targets by using the given resources. The model replaces authoritarian, patriarch leadership principles based on orders and obedience, which are deemed as old-fashioned. The need to give orders will be replaced by the use of employees’ competence, initiative and independent capacity to act. This leadership model is marked by, according to Drumm (1992) and Simon (2003), the complete delegation of responsibility, authority, leadership responsibility, supervision and success control to employees. Management by Delegation according to the Bad Harzburg model demands both, according to Wirtschaftslexikon24 (2014a), the delegation of responsibility and independent employees. The competencies of superiors are fixed. They delegate and only interfere in situations that deviate from the rule. Löhner (2005) considers the responsible involvement of employees and their independence to be the fundamental mechanism of action for leading employees that are localised at bigger distances.

The leadership model of Management by Delegation extends the concepts of Management by Objectives and Management by Exception by defined and formal framework conditions, such as tailored job descriptions. It provides for, according to Wirtschaftslexikon24 (2013), Sohm (2007) and Macharzina & Wolf (2010), the delegation of decision-making tasks to subordinate employees whose ranges of tasks are clearly divided as to competencies and responsibilities. This is supposed to unburden top management. At the same time it is targeted at integrating qualified employees into company decision-making. This leadership model is an expression of a cooperative, partnership-oriented leadership concept and particularly contributes to, according to Weisband (2008), Distance Leadership of experienced employees. Executives let opportunities to exert influence and for decision-making out of their hands to a very great extent. There was no limitation to be found as to the applicability to only certain company sizes. Management by Empowerment

Simon (2003) understands Management by Empowerment to be marked by the creation of a job environment where employees have a wider range of responsibility and action and where they can integrate their abilities to the fullest possible extent. The concept is aiming at increased personal responsibility of employees which will result in a distinctly greater performance and efficiency, as amployees feel enticed to greater performance and better results when they are allowed to act independently and responsibly. Blanchard et al. (1998) put that down to a greater initiative of employees. To achieve this, Management has to create a job environment that encourages the workers to give their best and where responsibility and support count much and where they find plenty of opportunities to engage in action with all their power and resources. In their opinion, people who are in an environment that encourages them to independent dealing feel like being co-owners of the company. It enables executives to rather play the role of a `Eingreifreserve oder eines Coaches´ (Blanchard et al. 1998: p68). They will give their employees more leeway for creativity and idea,s and more responsibility.

The concept clearly aims at a more comprehensive information flow and quality, and at trustful cooperation. `Die oft ungenutzt gebliebenen Potenziale an Intelligenz, Innovation und Talenten werden erkannt und sollten nunmehr genutzt werden´ (Simon 2003: p 372). This point of view corresponds to the demands of modern employees for more transparency and to have a voice and influence in company decisions. Management by Empowerment has also been discussed critically in literature. Simon (2003) elaborates in detail that delegating tasks to employees may cause executives to fear for their status in the company, as the delegation of tasks and competencies to employees may also mean the delegation of a part of their power. The leadership model of Management by Empowerment is rated positive for the application in Distance Leadership. The leadership model is better-suited for KMUs than for larger enterprises or company groups, as it does not take organisational company structures into consideration. Situational Leadership Model

The so-called Situational Leadership Model was developed by the American management consultant Kenneth Blanchard based on the results of the Ohio study. Blanchard et al. (1993) describe two different leadership orientations and differ between the employee-oriented and task-oriented leadership styles. The differing degrees of maturity of employees cause executives to decide for either an employee-based or a task-based leadership, depending on the situation. The degree of maturity is defined by both personal maturity, such as a developed character and motivation and the expertise, that is the employee’s qualification and competence for the job. According to Blanchard et al. (1993 und 1998), Weisband (2008) and Löhner (2005), further important factors governing an employee’s performance are competence and commitment which have been integrated into the present model with a maturity scale from 1 to 4. `Kompetenz ergibt sich aus den Kenntnissen und Fertigkeiten, die jemand durch Ausbildung, Übung und Erfahrung gewonnen hat. … Engagement ist eine Kombination aus Selbstvertrauen und Motivation´ (Blanchard et al. 1993: p51).



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Prifysgol Cymru University of Wales
Distance Leadership Small and medium-sized Companies Decentralised sales organisations Leadership Models Sales Management Medical devices Health care industry




Title: Distance Leadership in decentralised sales organisations of small and medium sized medical enterprises