Profits generated by the service industry account for more than 70 percent of Taiwan's total GDP.
A recent business climate report indicates that business confidence within Taiwan's service industry has dropped to a five-year low. The report was based on a monthly survey conducted by the Taiwan Institute of Economic Research.
Although various sectors of Taiwan's economy lack confidence because of external factors, companies can still work to improve their operations.
After all, internal structure and efficiency is what decides how well a company handles external changes and challenges.
One way to accomplish that is by adopting effective leadership practices. It may seem cliche, but most Taiwanese companies have managers, but not leaders.
Western firms normally foster a democratic environment in which leaders can address issues of individualism, inequality and autonomy. Successful leaders encourage their followers to make decisions rooted in their own values. In the West, company employees tend to resist leadership derived from standard operating procedure that promotes top-down power.
The flexibility of western style leadership enables companies to remain true to their values. But the management and work relations found in the outdated, bureaucratic and hierarchic systems of some Taiwanese firms cuts down efficiency.
Although democratic organization is the mainstream in the developed world, different leadership styles are adopted depending on the kind of company to allocate resources, including human resources.
Given the diversity of companies around the world, no one particular style of leadership is effective in all situations. Thus a leadership style should be chosen to meet the needs of any particular situation.
The rapidly changing nature of external factors presents complex challenges. Leaders are held responsible for predicting and addressing potential financial losses and managing human consequences related to failure.
External changes that affect companies occur over a period of time.
Some internal factors that can deter effective leadership in a company are convergence, transition and reorientation. Effective leaders are expected to recognize and manage these factors.
The company, through effective leadership, interacts with dynamic environmental contexts to pursue desired outcomes. A leader must therefore manage the relationship between a company and its environment and obtain necessary resources by developing appropriate strategies. This is crucial, especially for the many Taiwanese businesses making due with limited resources.
The leader can also be an ethical decision maker. Company ethics is a complicated process that involves decision-making, leadership and institution building.
In that process, effective leadership is crucial for launching ethical decision-making with respect to strategic ethics. Effective leadership requires ethical values and the ability to help employees internalize ethical values with respect to a sound ethical climate. Altruism positively influences leadership, and leadership builds a positive environment for ethics.
As a semi-developed economy, it is about time Taiwanese business leaders take a closer look at company ethics.
A company's leader can also pursue change. But many Taiwanese organizations have failed in their pursuit of change.
The main reason for this is the failure to manage employees effectively throughout the company's period of change.
Human factors can be building and stumbling blocks for leading change. Leading change means helping engage employees to follow along with those changes.
When addressing the challenge of implementing change, leaders need to exercise effective leadership that executes the changes and ensures capacity for change.
Leaders in Taiwanese companies don't spend enough time communicating with their stakeholders about their strategies. This lack of communication means that stakeholders may not be committed to changes that they don't understand.
An effective leader must be a good communicator. A qualified leader should be able to build a capable management team by communicating an exciting vision. The leader's ability to convey an inspiring vision can win over stakeholders.
In particular, financial soundness is another attribute that helps. To ensure financial soundness, the leader must devlop partnerships with senior managers, especially the chief financial officer.
As a final point, quality products are an additional positive attribute to help a company perform well and a leader must communicate a vision of high quality and ensure the company follows these standards.
On the subject of how to evaluate performance, Taiwanese usually rely on useful and simple criteria. The criteria involve evaluating the organization's short-term performance and long-term performance. Managing a company's short-term and long-term performance is different.
They involve different sets of strategies, culture, capacity and leadership. Factors contributing to short-term performance are mostly internal, whereas those that affect long-term performance are normally externally oriented.
The business environment heavily influences organizational performance because the organization environment is becoming difficult to predict.
Managers tend to focus on short-term organizational performance; however, leaders emphasize long-term performance.
To survive in the rapidly changing business environments Taiwan's organizations need leaders instead of managers.
Darson Chiu is an associate research fellow at the Taiwan Institute of Economic Research.
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