BUS8421 Leadership Management and Social Responsibility

A leader is a person who sees how things can be done right and improved. An effective leader creates an inspiring vision and influences the people to align with that vision. A leader always provides mentoring to the team members to become more effective and efficient. Leadership is bringing together all such qualities to produce desired results. This report will analyze and evaluate the leadership and management within an organization. The report will also assess the effectiveness of these in relation to the organization and its overall performance. The organization chosen for this assessment is Burberry PLC. Burberry is a global luxury brand found in 1856 by Thomas Burberry. Burberry serves worldwide and has its headquarters in Horseferry Road, Westminster, London, UK. Burberry invented its one of a kind breathable, hardwearing fabric “Gabardine” in 1879 and patented it in 1888 (Burberry, 2021).

The company is listed on London Stock Exchange (London Stock Exchange, 2021) and is a part of Financial Times Stock Exchange 100 (London Stock Exchange FTSE100, 2021). The manufacturing of most of the company`s products takes place in Europe. The company`s business model is created in a way to provide long-term sustainability and value for all the stakeholders. The report will further discuss about the contemporary theories of leadership including their comparison with each other. The leadership style followed in Burberry PLC is also discussed in this report. Burberry is a leading fashion luxury brand and it shares its KPIs and financial reports to all its stakeholders. KPIs of the company have been presented in the later section of the report. The supporting evidences are also presented in the appendix section.

Leadership and Contemporary Leadership Theories

Leadership means, the ability of an individual to lead and influence others to work towards common goals which is, for the success of the organization. Here, in this section a comparison of two most common and highly followed Contemporary Leadership Theories, Transformational and Transactional is done.

Transformational Leadership

This leadership style refers to the style in which the leaders use their innovative and creative skills to upgrade the organization`s overall working and efficiency. The leaders in transformational leadership orient employees` and their goals. Thus, influencing them to work for common and bigger goals rather than working for individual ones. The leaders commit to create modifications which provide benefit to all the parties involved which means, that leaders work for mutual benefit of employees, leaders and the organization (Ghasabey, et al., 2015). Transformational leaders are said to be more influential than any other leader because they endlessly work to creatively transform their skills and their implementation. For example, Barack Obama, John F. Kennedy, are seen as charismatic leaders. They are one of the transformational leaders (Business Because News, 2021).

Transactional Leadership

In 1947, Max Weber described a number of leadership styles for corporate management. One of those leadership styles is Transactional leadership. This leadership style refers to the style in which rewards are involved for the work done or targets achieved by the employees. It is like an exchange system of accomplished tasks and rewards between leader and the followers (Sithole, et al., 2014). The leader understands the value of rewards and uses it to influence the followers to put their best efforts. Active leadership states not to interfere in the employees` work but simultaneously also keep a check on potential and efficiency of the employees and prevent any prospective problems.  For example, Steve Jobs is known for using transactional style of leadership. He always makes his employees believe that they are capable of doing great (Inside Apple, 2021).

Comparison of Transformational and Transactional Theories

In Transformational Theory there is a shared purpose between leader and followers while in Transactional theory there is no shared purpose. Everyone works for their own personal purposes of getting rewarded.

Transformational leaders work with moral suits while there is no surety if the Transactional leaders are working for moral or immoral suits. Morality here refers to the change they can create in the society or fulfill the followers` authentic needs.

Transformational leadership is often long-term goal based as it works on transforming but Transactional leadership works on short-term goals as it is more concerned with rewards and similar short-term needs.

Transformational Leadership is where learning and growing together is a concept. Each member gets involved with one another in an inspirational way.

This comparison was given by author McGregor Burns and Bernard Bass (Odumeru & Ogbonna, 2013).

Management and Scientific Management Theory

Management includes directing and controlling of a group of people for the purpose of synchronizing the group towards achieving the goals. Management is task oriented and works for actual results which contribute to the company`s growth. Management creates strategies and frame policies for the smooth working of the organization. The Scientific Management Theory and Theory X and Y are the most common theories. These are discussed below.

Scientific Management Theory

Frederick Winslow Taylor published “The Principles of Scientific Management” in 1909 in which he talked about increasing labour productivity by simplifying jobs and minimising the wastes. The waste here refers to the energy waste and not the material waste. He emphasized on cooperation between managers and workers. He believed that money is the motivation of any worker (Waring & Stephen, 2016). So, he gave the idea of giving fair pay for the fair work. This established that a worker who would be more productive would be paid more. He also stressed on work distribution and placement of right person at the right job. This means a person should be assigned work according to his efficiency. By this, Taylor gave four principles of scientific management. These are:

1. Replacing working  by “Rule of Thumb”. This says not to only use common sense but use scientific methods to analyse the most efficient way to perform tasks.
2. Assign jobs as per the capability and efficiency of the workers.
3. Monitor the performance of workers and supervise them to make sure that the most efficient ways of working are used.
4. Delegate the work between managers and workers so that the managers can give their time to planning and other tasks and that the workers can become more efficient.

Theory X and Theory Y

Theory X and Theory Y was given by Douglas McGregor in his book “The Human Side of Enterprise” in 1960. This theory refers to the two different aspects of human behaviour at work.

Assumptions of Theory X

Theory X assumes that an employee innately does not like to work and tries to keep away from it whenever possible. Employees do not want to take responsibilities and are also reluctant to change. A close supervision is required from managers and employees look for directions for every work. Managers need to compel the employees to work and to achieve the desired goals. It is more like dictatorship style.

Assumptions of Theory Y

Theory Y is more relaxed. This assumes that employees work in a relaxed manner to produce results. Employees work with self-direction and not always need an external force to persuade them to work. If  the  job is rewarding and satisfying the employee will automatically be loyal and committed to the organisation. Employees` creativity is brought to utilisation and so, he learns to admit and feel a sense of responsibility (Coccia, 2018).

Implications of Theory X and Theory Y

Today only a few organizations might be following Theory X because it consists of tight control over the employees which is not acceptable and effective nowadays. It suppresses the innovation instead of encouraging it.

Many organisations use Theory Y. This implies that managers create an engaging work environment in which employees can share their ideas and views and take initiative of self-direction. Employees in this way, gets more engaged in their work and feel a sense of value. Decentralization of Authority makes the employees participative in the organizational activities. It aligns employees` needs and desires with organization`s needs and goals.

Leadership and Management at Burberry

Burberry PLC uses Transformational Leadership style in broader ways. Broader ways here means that it is creating greater impact on society. Also, it uses 100% renewable sources for its operations. The company is very much committed to its “Creating Tomorrow`s Heritage” initiative which is to stay dedicated to environment protection. Burberry always motivates its team to improve their efficiency and reinforce their behaviours. The Board in Burberry leads and provides direction for the management by forming strategies.

Transformational Leadership emphasizes on use of creativity in such a way that it not only provides benefit but also align everyone to work for bigger goals. Burberry does the same with its employees. They are motivated to work for shared goals while creating an impact on the society. Although, some specific key decisions at Burberry still need approval by the Board. These decisions majorly include finances such as capital expenditure and dividends. But, apart from these decisions employees are free to operate in anti-bribery governance by exploring their creativity.

Burberry did not step back even in the pandemic situation. The company had a pay cut although, retaining the base pay. The company converted its Castleford trench coat company into PPE manufacturer for medical care workers. Also, savings on executive salaries were donated for vaccines and for alleviating food poverty (Inside Retail Asia, 2021). These are some of the instances of how Burberry creates impact on society and how it takes care of its employee needs. Burberry has always given instances of its strong management and employees` loyalty with it. Burberry retained its employees even during the pandemic by turning its trench coat manufacturer into PPE manufacturer.

Key Performance Indicators of Burberry

Key Performance Indicators are the measurable values which indicate how effectively a company is achieving its objectives and goals. Organizations use KPIs at different levels to evaluate their progress in reaching targets.

The financial performance of a company includes its revenue, cash, adjusted operating profit, operating profit, EPS and dividend per share. Key performance indicator includes revenue growth, comparable sales growth, adjusted operating profit growth, adjusted operating profit margin, adjusted profit before tax, adjusted diluted EPS growth and adjusted retail wholesale ROIC.

Revenue Growth: Thus measures the appeal of brand for customers through sales channels.

The revenue for the FY 2019/20 of Burberry was declined by 4% CER with retail sales being down by 4% and wholesale being down by 3%. The decline was a result of the pandemic. This measures the growth in productivity of existing stores. It is calculated as the annual percentage increase in sales from retail stores that have been open for more than 12 months. It includes all digital revenue.

The Comparable sales declined by 3% in FY 2019/20. The year to date growth of 4%  was seen after three quarters were offset by the impact of COVID-19.This measure tracks the ongoing operating profitability and reflects the combination of revenue growth and cost management.

Adjusted operating profit in FY 2019/20 was 8% down year on year, mainly as a result of the impact of COVID-19 on revenue. Reported adjusted operating profit was down 1% year on year, due to the some of the cost of leases being recorded in finance cost under IFRS 16 This measures how operational leverage and disciplined cost control is driven, with thoughtful investment for future growth building the long-term value of the brand.Adjusted operating profit margin was seen -70bps at CER due to reduction in revenue more than offsetting a 4% reduction in adjusted operating costs. Adjusted operating profit margin was seen +30bps due to impact of adoption of IFRS 16.

Adjusted PBT growth is a key profitability measure to assess the ongoing performance of the Company.Adjusted PBT in FY 2019/20 was down 7% year on year at CER, in line with operating profit decline. Reported adjusted PBT at CER was also down 6%, reflecting the insignificant impact on PBT of adopting IFRS 16 in the year.Growth in EPS reflects the increase in profitability of the business, improvement in the tax rate and share repurchase accretion.

Adjusted diluted EPS was down 4% year on year at 78.7p in FY 2019/20. This reduction was due to the decline in adjusted PBT, partly offset by a reduced effective tax rate and the impact of the share buyback program.Adjusted retail/wholesale ROIC measures the efficient use of capital on investments. It is calculated as the post-tax adjusted retail/wholesale operating profit divided by average operating assets over the period.Adjusted retail/wholesale ROIC was 13.5% in FY 2019/20, down 200bps due to lower profitability. Group ROIC reported under IFRS 16 is also presented. At 20.0%, this is ahead of pro forma ROIC due to the inclusion of licensing segment and the higher operating profit under IFRS 16 compared to IAS 17. The Group will adopt Group ROIC under IFRS 16 as its return measure in future (Burberry, 2021).

Conclusion

The report tells that leader is a person who does the right thing and leadership is a set of qualities which help the leader to achieve those goals of making things right and beneficial for all. Leadership has different styles but nowadays contemporary leadership styles are followed more because these deal with the current mindsets of people and help them to align with the organization`s environment. The transformational leadership style is the most prevalent along with the flexible management style. People do not want to be controlled like earlier management practices and want to be participative. Therefore, companies nowadays have become more relaxed in dealing with the employees. Renowned companies like Burberry have this success formula of allowing their employees to be free for sharing their ideas and completely utilizing their creativity in their work. This is one of the key reasons why employees are automatically retained in such firms. Also the company has also retained its employees during pandemic by providing them work by turning its trench coat manufacturing into PPE manufacturing. This shows that company has a cooperative management system and a truly transformational leadership which is why the company is a leading brand.

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