Assignment 2.1 Profitel Inc.
Which perspective of leadership best explains the problems experienced in this case?
Chapter 12, Leadership In Organizational Settings, discussed five perspectives of leadership – (1) competency, (2) behavioral, (3) contingency, (4) transformation, and (5) implicit. The competency perspective of leadership best explains the problems experienced by Profitel.
Profitel had many years of extreme profitability and minimal competition. As competitors entered into the telephone market, Profitel’s board of directors recognized that the competition in the cellular and voice over IP business posed a threat. The board responded by hiring an outsider to become the new CEO.
The board decided to hire Lars Peeters, an executive who served as the CEO for a publically traded European and CEO for a cellular telephone company in the United States. Lars appeared to be a perfect fit; he had extensive industry knowledge and global experience, a high-octane energy level, self-confidence, decisiveness and a persuasive style. Of the various leadership competencies listed in the text (personality, self-confidence, drive, integrity, leadership motivation, knowledge of the business, cognitive and practical intelligence and emotional intelligence), Lars appeared to have most of them.
However, McShane1 (pg. 352-355)points out that competency perspective have limitations and practical implication. The competency perspective assumes that all effective leaders have the same personal characteristics. Some competencies might not be important all of the time and an alternative combination of competencies may be equally successful. In addition, leaders tend to rely mainly on one style that is consistent with their personality and values. Competencies indicate leadership potential and not performance.
Lars Peeters’ leadership competency contributed to the problems experienced by Profitel. His strategy presented to the board was quite aggressive and included – heavy investment in wireless technology, cost savings through reduction in force and reduction of peripheral services. While Lars worked to execute his strategy, he did not address a few significant issues that were developing. While the subscriber list grew quickly, so were the problems – (1) declining customer satisfaction, (2) declining employee morale, (3) unfavorable public image, and (4) an aggressive campaign against government regulation had a significant negative impact on the customers and government leaders. Lars failed to use cognitive and practical intelligence and emotional intelligence. His failure to be insightful, flexible, and diagnose problems as they were developing proved to be catastrophic. He believed that Profitel would be awarded any large contract due to market dominance and technology infrastructure.
McShane (pg. 366-367) explains that under the implicit leadership perspective there are two components, prototypes of effective leaders and the romance of leadership. The romance of leadership exists because people want to believe that leaders make a difference. Leaders are given credit or blame for a company’s success or failure because people do not readily see the external forces that also influence the outcome of events. This is known as attribution error. While Lars Peeters may have been able to diagnose problems as they were developing, he was ultimately fired for his deemed failure by the board because a competitor was awarded a massive government contract.

What can organizations do to minimize the leadership problems discussed above?
To minimize leadership problems, organizations should recognize that there are various leadership perspectives and a combination of these perspectives may reduce leadership problems. For example, McShane (pg. 357) notes that the contingency perspective of leadership is based on the idea that the most appropriate leadership style depends on the situation. Effective leaders must be able to adapt their behaviors and styles to the immediate situation. Typically, leaders have a preferred style and it takes a lot of effort to adapt a style to match a situation. Ultimately, leaders are trying to influence, motive and guide others to contribute to the organization.
McShane, S., Von Glinow, M., (2013), Organizational Behavior, New York McGraw-Hill [Book]