How has it affected your life to be two-handed?

Agility and hierarchy: can leaders lead with both hands?

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1 1st report 2020: Agility and hierarchy: Can managers lead with both hands? Management style: trend towards agility

2 About the Hernstein Management Report For over 20 years, the Hernstein Management Report has been gathering a picture of sentiment and opinions among managers in German-speaking countries. We ask about daily challenges, the trends and developments that managers perceive and how they fare in their leadership role. KEY QUESTIONS OF THIS HERNSTEIN MANAGEMENT REPORTS Hierarchical and agile management style: Which one is used by managers today, which one is expected in 3 years? What is the contribution of these leadership styles to corporate goals such as profitability, innovation, employee satisfaction and so on? How has the COVID-19 crisis affected management behavior? Have the executives adjusted their style? How do managers feel about ambidexterity, i.e. a two-handed leadership style in which both a hierarchical and an agile approach are lived depending on the situation? To what extent do managers trust themselves to use a two-handed leadership style in practice? What are the pros and cons? THE MOST IMPORTANT KEY DATA OF THE SURVEY Survey period: May 2020 Respondents: Executives and entrepreneurs Austria: 632 respondents Germany: 916 respondents Survey type: Online survey Implementing institute: General information can be found on our website under FOR QUESTIONS ARE AVAILABLE TO YOU Mag Isabelle Maurer, MSc t Hernstein Institute for Management and Leadership 2

3 Executive Summary 6 out of 10 companies trust in agile self-organization 60% of managers rely on the agile self-organization of their employees and not on hierarchical structures. That is not a large majority, but it is a clear majority. Female executives trust agility more (63%) than men (58%). The longer a person works as a manager, the less they rely on agile self-organization. For people with up to 3 years of management experience it is 64%, for those with over 10 years it is 59%. The IT and telecommunications sector stands out as an industry: 69% rely on agile self-organization. This is probably due to the high level of innovation in this industry. The trend is in the direction of more agility. The proportion of companies that as a whole very or rather relies on agile self-organization will rise in 3 years from the current 60% to 64%. 13% of those surveyed believe that a management style that is fully based on agility will be required in the next 3 years (choose the extreme value 6 on a 6-point scale). Today it is 6%. The share of agile companies would therefore double. This essentially applies to all age groups. The gender differences persist and are even increasing. According to functional areas, it is surprising that managers with sales responsibility see a decline in the importance of agile self-organization (today: 60%; in 3 years: 58%), in contrast to all other functional areas. The development towards more agility places high demands on managers and employees in terms of professional qualifications, personal development, communication and organization. COVID 19: One in five or one in five has changed management style 19% of managers have changed their management style due to the COVID-19 crisis. Before the start of the pandemic, 49% relied on agile self-organization, after that 52%. Younger managers have adjusted their management behavior significantly more often than older ones. 23% of Austrian executives under 40 have changed their style (Germany: 24%). Among her colleagues aged 40 and over, the figure was 18% in Austria and 15% in Germany. Among the management levels, the members of the upper management stand out. 29% of them changed their behavior, in lower management, for example, it was only 18%. The IT and telecommunications sector is again showing above-average dynamism. In this industry, 24% have adapted their leadership behavior. Executives appreciate the effectiveness of hierarchies Of 10 corporate goals to be evaluated, 7 are more likely to be achieved through a hierarchically-oriented management style than an agile one, according to the opinion of the managers surveyed. The goal of profitability is seen as guaranteed particularly through the use of hierarchical structures. 65% of managers share this view. The goals of corporate image and customer orientation are more likely to be achieved through hierarchical structures. This is the opinion of 54 or 53% of managers. Hernstein Institute for Management and Leadership 3

4 According to the respondents, the goals of employee satisfaction, innovation and diversity are more likely to be achieved through an agile management style. The agreement with regard to satisfaction is particularly strong (64%). 60% of the executives surveyed believe that an agile leadership style is more suitable than a hierarchical one in order to enable innovations. Pro ambidexterity: executives lead situation-related with both hands There is a clear agreement that a two-handed, situation-related leadership style should be lived (ambidexterity). 69% of the executives surveyed hold this opinion. Female executives are even more in favor of living ambidexterity (72%) than their male colleagues (67%). Owners agree more than average to the use of ambidexterity (72%). In the lower management it is 69%. There is a particularly high level of approval in the financial sector (78%). Ambidexterity in practice: The majority dares to use a two-handed leadership style, 64% of managers think that it is very or rather easy to live a two-handed leadership style. Male executives see implementing a two-handed style as slightly easier (66%) than their female counterparts (62%). Upper management (80%) and owners (72%) are particularly optimistic about the use of ambidexterity. The longer the leadership practice, the more likely it is to be considered feasible. 70% of managers with 20 or more management years agree. The most important prerequisite for ambidexterity is one's own flexibility. 26% of executives who consider ambidextrous leadership to be feasible see themselves as flexible. Inner barriers are seen as the most important obstacle to the realization of ambidexterity. This is the opinion of 35% of managers who find implementation difficult. 14% also believe that a two-handed management style leads to disorientation among managers and employees. Hernstein Institute for Management and Leadership 4

5 At this point we would like to point out that the survey for the Hernstein Management Report among executives in Austria and Germany took place in the first half of May 2020, i.e. during the COVID-19 shutdown. This must be taken into account when interpreting the results. 6 out of 10 trust in agile self-organization Exactly 60% of the executives surveyed believe that they rely on the agile self-organization of the employees in their management work. On a six-point scale, 6% choose the extreme value 6, which means that they fully trust agility. The largest group of executives, 30%, assign themselves the value 4. This stands for a moderate degree of involvement and trust in the agile self-organization of the employees. This specification seems important because it indicates that structures and orderly processes already play a noticeable role. What executives rely on Figure 1: Localization of their own leadership style Question text and answer scheme: On the subject of leadership style and understanding of leadership as you understand and live it today. Please classify your management style first using the following scale: In my management work, I rely on classic hierarchical and tried-and-tested structures or on the agile self-organization of the employees. (Scale 1 to 6; 1 = completely based on classic hierarchical structures, 6 = completely based on agile self-organization). Female executives rely a little more on an agile leadership style than their male colleagues (63% versus 58%). This difference is in the moderate area of ​​value 4 but significant there. This means that female executives also consider framework conditions and rules to be important and give them more freedom to implement them than their male colleagues. These individual groups show clear deviations from the average: Austrian executives under 40 tend more towards an agile leadership style (63%) than their colleagues over 40 (60%). In Germany the pattern is similar (under 40: 61%; from 40: 59%). The longer a person works as a manager, the less he relies on agile self-organization: For people with up to 3 years of management experience, it is 64%, for those with over 10 years it is 59%. In small companies with up to 10 employees, 53% focus on agility, in large companies with over employees it is 62%. Hernstein Institute for Management and Leadership 5

6 Among the industries, the IT and telecommunications sector stands out: Here 69% rely on the agile self-organization of their employees. The trend is towards more agility. When asked which leadership style will be in demand in their own company in 3 years, 64% of the executives surveyed believe that this will be an agile and not a classic hierarchical one (again for comparison: 60% see today Agile leadership style as more relevant). This expected trend appears moderate, but it should be noted that it is a short projection horizon. The development should therefore be definitely noticeable. This is supported by the fact that the extreme value 6 rises sharply and more than doubles. While only 6% of those surveyed give the highest grade 6 and fully rely on agile self-organization with regard to the present, the projection for the next 3 years is 13%. This pattern runs through most of the individually evaluated groups of characteristics (countries, age groups, gender, etc.). The 3-year trend in leadership style Figure 2: Development of leadership style in 3 years The trend evaluated according to individual groups of characteristics shows: Women also tend more towards agility with this question: While 63% see this in the foreground today, 67% expect women Executives do this for the next 3 years. The comparative values ​​of their male colleagues: 58% today, 61% in 3 years. By country and age group, all of the executives surveyed expect agility to increase in importance, although this is more pronounced for Austrian executives up to 40: 70% believe that an agile management style will be in demand in their company in 3 years (today: 63%). By comparison, their German colleagues aged 40 and over are more skeptical: 62% see an increasing importance of agile self-organization. According to operational areas of responsibility, two groups stand out: on the one hand, executives with commercial and administrative responsibility who notice an above-average development towards more agility (today: 61%; in 3 years: 68%); on the other hand, their colleagues from sales, who even see a slight decline in the importance of the agile leadership style (today: 60%; in 3 years: 58%). In terms of sectors, the IT and telecommunications sector again showed a remarkable result. Here, too, the overall value for agility is slightly lower than in the 3-year projection (from 69% to 66%). The top grade 6 shoots up from 6 to 19%. This means that one in five or one in five expects that their or their company will fully rely on the agile self-organization skills of their employees. This scenario places very high demands on both managers and employees in terms of professional qualifications, personal development as well as communication and organizational skills. Hernstein Institute for Management and Leadership 6

7 COVID 19: One in five or one in five has changed management style 19% of the managers surveyed have changed their management style through and during the COVID-19 crisis. Among these respondents, the trend was clearly in the direction of agility: of these 19%, 49% relied on a (rather) agile style before the COVID-19 crisis, and 52% after the beginning of the crisis. Has your leadership style changed due to the COVID-19 crisis? Figure 3: COVID 19 and change in management style It is clear that the consequences of the pandemic have increased the demands on employees in terms of agility and self-organization. The increased or partially newly introduced use of home working alone set standards here. In many companies it was necessary to set up a home office practice within a few days, which would hardly have been possible without the proactive participation of employees. In this respect, the COVID-19 crisis could represent an opportunity for a new corporate partnership across the organizational levels. In the individual groups of characteristics, there are the following findings with regard to the change in leadership behavior due to COVID 19: Younger executives have adjusted their leadership behavior significantly more often than older ones: In the group of Austrian executives under 40, 23% have changed their style (Germany: 24%). Among their colleagues aged 40 and over, the figure was 18% (Austria) and 15% (Germany). Experienced managers were particularly stable: those with 20 management years and more changed their management behavior by 14%, managers with up to 3 years of practical experience changed their management behavior by 22%. Among the individual management levels, the members of the upper management stand out. Here 29% have adapted their behavior. There were significantly fewer among the other hierarchical levels: owners 20%, middle management 19%, lower management 18%. In terms of sectors, the IT and telecommunications sector is again conspicuous. Here 24% changed their management style, followed by trading with 22%. The trend is inconsistent among the company size classes. Executives from companies with 250 to 500 employees adapted their leadership behavior the most (27%). Among the small businesses with 2 to 10 employees it was only 17%, the same figure is it for companies with up to 10 employees. Hernstein Institute for Management and Leadership 7

8 Executives value the effectiveness of hierarchies With regard to the achievement of leadership goals, 7 out of 10 are more likely to achieve a hierarchically oriented leadership style than an agile one, according to the opinion of the executives surveyed. While these 10 corporate goals do not claim to be exhaustive, they do cover a good part of management and corporate practice. In this respect, a kind of overall balance can be read from it. It should be noted that with 6 goals there is only a slight lead of the hierarchy-oriented style (sum of the pro votes between 51 and 55%). So there are roughly two groups of the same size who see advantages in a hierarchical or an agile leadership style. Which style pays more to the achievement of individual corporate goals? Figure 4: Advantages of hierarchical and agile management style in achieving corporate goals There is only a clear vote in favor of a hierarchical style for the corporate goal of profitability. Approximately a two-thirds majority (65%) thinks that hierarchically oriented action brings advantages. In terms of quality, efficiency, image, future security, customer orientation and competitiveness, the result is comparatively balanced. It is noticeable that on the part of the hierarchy advocates the extreme evaluation 1 (hierarchy pays more and more towards goal achievement) is chosen more often than on the other side the extreme value 6. The extent of the conviction is therefore greater or the opinion has become more solidified. Hernstein Institute for Management and Leadership 8

9 The respondents see a significantly higher contribution of an agile management style to the achievement of goals in the satisfaction of the employees, in the creation of and handling of diversity and in the ability to innovate. The following detailed analysis shows that Austrian executives and women see fewer advantages in a classic hierarchical management style. For a better overview, mean values ​​were calculated based on the scale from 1 to 6.The higher the mean, the more an agile leadership style is advocated for this goal, the lower, the more hierarchical. Austrian executives and women see fewer advantages in hierarchical style Figure 5: Detailed analysis by gender and country In addition, there are the following special features for selected company goals: With regard to the company goal of profitability, a total of 65% believe that a hierarchical style contributes more to this goal. Efficiency (total hierarchical value: 54%): Here there is a certain dividing line through the management levels. While 61% of the owners and 60% of upper management see advantages in a hierarchical style, 51% in middle management and 53% in the lower management. Customer orientation (total hierarchical value: 53%): HR executives are above average (59%). Their approval of a hierarchical style, for example, is much stronger here than among managers with generalist responsibility (48%). Future security (total hierarchical value: 54%): For this aspect, small companies in particular seem to rely on hierarchies; 61% of companies with up to 10 employees think that the hierarchical management style brings more for future security. Among companies with over employees, the figure is 52%. Competitiveness (total hierarchical value: 52%): The picture here is similar to that of future security, which appears consistent. 58% of small business executives see benefits in a hierarchical style, compared with 51% among large business executives (5,000 plus). Employee satisfaction: A majority of executives think that this is one of the 3 goals that are more strongly influenced by an agile leadership style (total: 63%). This opinion is particularly pronounced among Austrian executives under 40 and the health and social services (70% each). Most clearly below the average are members of the upper management (56%). Diversity (total agile value: 56%): Austrian executives up to 40 see particular advantages of an agile style (63%). In the various economic sectors, approval is given by the Hernstein Institute for Management and Leadership 9

10 particularly high in the public sector (64%). The same applies mutatis mutandis to members of Viennese companies (62%). In the south of Austria, the agile management style receives the least approval (57%). Innovative ability (total value agile: 60%): When it comes to innovation, there is a clear majority in favor of an agile management style. Companies in the public sector (69%) and Viennese executives (67%) have the highest approval ratings. Owners are the most skeptical (52%). Pro ambidexterity: executives lead with both hands depending on the situation We define ambidexterity as the two-handed leadership style, which is characterized by the change between a leadership style that is classic, division of labor and plannable, and the agile style, in which variable structures, flat hierarchies and a high degree of Self-organization of the employees come into play. 69% of the executives surveyed agree that, depending on the situation, both leadership styles should be used. 24% think that it is better to stick to one style in order to keep a clear line. Female managers are even more in favor of the use of ambidexterity than their male colleagues (72% versus 67%). In Austria, the tendency towards this diversity of leadership style is also more pronounced than in Germany. Austrian executives under 40 are particularly strong advocates of situation-related change (76%). The lowest approval rate is found among German executives under 40 at 67%. Clear majority for ambidexterity, especially among women and Austrian executives Figure 6: Approval of ambidexterity by gender and country Hernstein Institute for Management and Leadership 10

11 There are further special features in the individual groups of characteristics: Owners agree with the use of ambidexterity more than average (72%). In the lower management it is 69%. Executives with generalist responsibility also agree particularly strongly (77%), while sales managers are less convinced (62%). Managers with more than 20 years of management experience are well above the average at 75%. Among the industries, finance stands out with 78% approval. Ambidexterity in practice: the majority trusts themselves to live a two-handed leadership style 64% of the executives surveyed believe that it is very or rather easy to implement a two-handed leadership style (ambidexterity). This means that a hierarchical, work-sharing and planning-oriented style OR a style with variable structures, flat hierarchies and a high degree of self-organization is used. It should be noted that 53% say that it is rather easy and 11% that it is very easy. A two-handed leadership style is feasible especially for male and Austrian executives under 40 years of age Figure 7: Feasibility of ambidexterity Male executives see the implementation of a two-handed leadership style somewhat more optimistically (66%) than their female colleagues (62%). The values ​​of the Austrian executives surveyed are above average: 67% of the under 40-year-olds consider the feasibility to be rather or very easy. For comparison: 61% of their German colleagues aged 40 and over. What are the special features of the individual groups of characteristics? The upper management (80%) and owners (72%) are particularly optimistic that a two-handed management style can be implemented. Obviously, the (subjectively perceived) flexibility in the management style increases with the management level. Executives in sales and in the commercial area are more skeptical (60% agreement each), while HR managers are more optimistic (69%). The longer the management practice, the more likely it is to be considered feasible: 70% of managers with 20 or more years of management experience agree. Hernstein Institute for Management and Leadership 11

12 By industry, executives in the IT and telecom sectors have particularly strong expectations that ambidexterity is possible (71%). Depending on the size of the company, it is more the small businesses that consider a two-handed management style to be feasible. Among companies with up to 10 employees, 66% of managers agree, and among those with over employees it is 60%. Two-handed leadership style: Pros and Cons Reasons why ambidexterity is easy to use Figure 8: Reasons why ambidexterity is easy 26% of the executives surveyed, who consider a two-handed leadership style to be easy or rather easy to implement, attest to the flexibility they need. It is emphasized again and again that an individual distinction depending on the employee is necessary or beneficial. 20% cite their experience as the reason and that they have already used different styles in previous cases. Almost as many, 19%, see an advantage in the fact that a situation-dependent application is possible and this is, so to speak, a fact that benefits itself. Several respondents agreed that there were situations where one had to take tough action. Reasons why ambidexterity is not easy to use Figure 9: Reasons why ambidexterity is difficult Hernstein Institute for Management and Leadership 12

13 35% of the respondents who consider the use of ambidexterity to be difficult find it burdensome and time-consuming. This argument is often made by executives who generally tend towards agile leadership behavior. They state that they do not have the internal prerequisites for the hierarchical. 14% of executives are skeptical about the need to rethink the two concepts. They see this as a burden for the employees and therefore as a lack of orientation. 11% state that two-handed guidance is not possible due to the structures in the company. Owners (14%), older respondents (14%) and those with commercial administrative (14%) or HR responsibility judge the two-handed management style as impossible. Hernstein Institute for Management and Leadership 13

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