Transformational Leadership and Culture Clash in Organizational Management

The Major Problem

The many challenges inherent in starting their business formed a very strong bond between Charlie Chan and Richard Lim. As HKBT, founded in 1992, continued to prosper, both leaders began creating a highly unique culture within their organization. The culture that Mr. Chan and Mr. Lim created valued exceptional work and commitment, yet also rewarded total loyalty and performance with cash bonuses, holiday trips to exotic locations, and the creation and continual support of a thinking space and brainstorming weekends. The initial success of Sinovax in 1995 and its subsequent sale to a U.S. drug company for $10 million indicated just how committed Mr. Chan and Mr. Lim were to the business. They hired ten additional scientists and five lab assistants, and continued to invest in the key aspects of what they believed kept their corporate culture strong.

With the untimely death of Mr. Chan, the company lost a large part of its emotional intelligence. An example of how effective Mr. Chan had been was seen in the exceptional success of Limvax. Mr. Lim, however, decided to sell the company to Syntec, an American drug company, which placed Larry Bush in charge. Defections, low morale, and a lack of ownership of key tasks soon followed as Mr. Bush concentrated on nothing but efficiency and conformity. The spark of innovation had been lost.

Critical Incidents

The progression of HKBT from a vibrant, highly effective drug producer to one that seemed to have lost its innovative spark is described in this section. First, the founders Mr. Chan and Mr. Lim had created a highly unique, innovative, and risk-taking culture through the emotional intelligence (EI) of Mr. Chan, as evidenced by the results of his leadership. There is an abundance of research specifically showing how leaders who have exceptional levels of EI significantly reshape and reorder the cultures of the companies around them (Klem & Schlechter, 2008). The outward manifestations of this were not necessarily the financial support of a thinking space, the funding of brainstorming weekends, or the cash bonuses and holiday trips to exotic locations. They were, rather, Mr. Chan's ability — guided by his emotional intelligence — to create a unique sense of ownership in each employee, which translated into exceptional commitment.

Mr. Chan had the leadership attribute of being able to infuse a high degree of task ownership in each of his employees, as each saw their unique role as crucial to the company's overall performance. This is in fact one of the key attributes of leaders who have a very high degree of emotional intelligence: they have the ability to instill a high degree of task ownership and role-based identification in subordinates (Turner & Lloyd-Walker, 2008). These aspects of EI were what led to the company being exceptionally successful during the years Mr. Chan ran the development teams. It is important not to judge his leadership ability solely by the outward activities he engaged in; rather, it was his ability to instill a very high level of ownership and uniqueness of role responsibility in each employee that contributed most to their success.

Following the initial success of the company, Mr. Chan and Mr. Lim also sent a very clear message to their employees, shareholders, investors, and the general public. Instead of spending the $10 million made from the sale of Sinovax on a more luxurious lifestyle, the two founders promptly invested the entire amount in furthering their thought leadership in the pharmaceutical business. Hiring ten scientists and five assistants, and bolstering investments in equipment, Mr. Chan and Mr. Lim said more with their actions than thousands of words could: they were resolutely and completely committed to the long-term success of the company. This act alone gave them significant credibility and demonstrated exceptional emotional intelligence and strong leadership (Klem & Schlechter, 2008; Cichy & Singerling, 2005).

As the company was on a brainstorming weekend working on what would eventually become the drug Limvax, Mr. Chan passed away. This was a devastating blow to the company and its employees. Mr. Lim recognized that Mr. Chan's exceptional emotional intelligence — and his ability to get employees to personally identify with their jobs (Reinhard et al., 1991) — had been crucial to the company's growth. The difficulty of leading the company alone proved too daunting for Mr. Lim, and he sold the company to the American pharmaceutical firm Syntec. He received a substantial sum and retired to the Cayman Islands, leaving the company to be run by executives from the acquiring firm. This turned out to be a poor decision, as Syntec placed Larry Bush in the role of running HKBT.

The strategic error that Mr. Chan and Mr. Lim committed was not having a succession plan that outlined how HKBT could effectively develop new leaders internally under Mr. Chan's guidance. Succession planning in start-up companies and those run directly by founders is often the largest strategic error new companies make (Barnett & Davis, 2008). Instead, the company had to be sold because no succession plan was in place, and the culture went through a turbulent, costly period that risked ruining its ability to develop new products if Larry Bush from Syntec was not careful.

What followed was a classic clash of corporate cultures, driven by the autocratic, conformity-driven culture of Syntec and the more open, collegial, and egalitarian approach to leadership that Mr. Chan and Mr. Lim had worked so hard to create, investing $10 million and years of effort. Mr. Bush demonstrated a very low level of cultural awareness by instituting rigorous levels of conformity and adherence to standards. Further, by cancelling the thinking space and brainstorming weekends, and curtailing many of the outward strategies Mr. Chan had used to support employees' commitment to internalizing their jobs, he moved in the exact opposite direction. At the center of HKBT's competitive strength was a strong cross-functional team orientation and work ethic — also symptomatic of companies where leaders with high EI make major contributions (Klem & Schlechter, 2008).