COMPLEXITY LEADERSHIP THEORY: ENABLING PEOPLE AND ORGANIZATIONS FOR ADAPTABILITY……

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WHAT IS COMPLEXITY?

Although many are feeling and experiencing complexity in the workplace and in their lives, it is harder for them to describe exactly what it is. Despite the name, the concept of complexity itself is really quite simple: Complexity is about rich interconnectivity. Adding the word ‘‘rich’’ to interconnectivity means that when things interact, they change one another in unexpected and irreversible ways. Complexity scholars like to describe this as the distinction between ‘‘complexity’’ and ‘‘complicated.’’ Complicated systems may have many parts but when the parts interact they do not change each other. For example, a jumbo jet is complicated but mayonnaise is complex. When you add parts to a jumbo jet they make a bigger entity but the original components do not change–—a wheel is still a wheel, a window is a window, and steel always remains steel. When you mix the ingredients in mayonnaise (eggs, oil, lemon), however, the ingredients are fundamentally changed, and you can never get the original elements back. In complexity terms, the system is not decomposable back to its original parts.
Once we understand this, we can see complexity all around us. It occurs when networked interactions allow events to link up and create unexpected outcomes, or emergence. As mentioned earlier, the Global Financial Crisis (GFC) is a complexity emergence event in that a variety of factors linked up in an interconnected system and produced an outcome that was largely unpredictable, other than in the short term, and had far-reaching effects. After it happened there was no going back–—organizations and economies around the world had to operate in the new reality. Moreover, the impact can be long lasting. We are still feeling the effects of the GFC, and it influences decision-making and activities in our current contexts.

The ‘‘Order’’ Response

In this new reality, it is more essential than ever for organiza- tions to adapt–—to pivot in real time with the changing needs of the environment. They must fit the mantra of complexity theorists that it takes complexity to beat complexity. Despite this, what we see in our data over and over again is that when faced with complexity, the natural proclivity of people and organizations is to respond with order–—to turn to hierarch- ical approaches of leading and managing change top-down. Snapping back to previously successful, ordered solutions provides a sense of control that satisfies not only the needs of managers who have been trained in traditional leadership models, but also organizational members who look to leaders to take care of them and make things ‘‘right’’ again.
What we see in our research is that when confronted with complexity, organizations most often seek greater account- ability. They demand ‘‘more from less’’ and instill better risk mitigation strategies. When these fail, they turn to greater regulatory control. These ‘‘order’’ responses can actually do more harm than good. An example is the recording industry’s response to the emergence of Napster in the 1990s. From June 1999 to February 2001, the peer-to-peer music sharing entity grew from zero to over 26 million users. For the first time ever, individuals were able to gain access to their favorite songs without having to purchase entire CDs. But the Recording Industry Association of America (RIAA) responded by filing a suit for vicarious copyright infringement under the U.S. Digital Millennium Copyright Act. The result was that in July 2001, Napster was forced to shut down………………………………………………
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SOCIAL VALUES AND CROSS-NATIONAL DIFFERENCES IN ATTITUDES TOWARDS WELFARE

Studies on public opinion about welfare already acknowledge the role context plays in individual attitudes towards welfare. However, the much-debated effect of socially held values and beliefs on attitudes towards social policy has not been empirically investigated. Drawing on studies in political and social psychology, as well as Shalom Schwartz’s work on universal human values, this article argues that social values, specifically egalitarianism and embeddedness, affect individual support for social welfare policies. Moreover, we posit that social values condition the effect that individual ideological orientations have on attitudes towards government responsibility, such that the effect of embeddedness is much stronger for right-wing and moderate identifiers than those who lean towards the left. We test our hypotheses using data from the European Social Surveys (ESS) and International Social Survey Programme (ISSP) Role of Government module and employing multi-level modelling. Our results provide evidence of the importance of social context and shared values in influencing attitudes towards welfare.
Keywords: values; social values; public opinion; welfare; social policy
No man is an island, and this interconnectedness with others guides all aspects of human experience (Christakis and Fowler, 2009). This mutuality is most clearly seen in modern politics in welfare policies that are designed to redistribute public funds to provide security and promote equality. Given vast country-level variations in approaches to the principle of state responsibility, it is often suggested that individual-level welfare attitudes are, at least to some extent, driven by contextual influences. So far the literature on the role of contextual factors on attitudes towards welfare has focused on institutional factors, arguing that support for government provision of social services is conditioned by the type of welfare regime and incentives provided to individuals under different welfare policies (Arts and Gelissen, 2001; Castles and Mitchell, 1992; Korpi, 1980; Svallfors, 1997). However, institutions are not the only contextual factor shaping individual attitudes (Lawson, 2008). For example, citizens of a particular country share notions of justice, solidarity and reciprocity norms resulting from their collective history, identity and reference points; in turn, these social-level values manifest themselves in individual attitudes (Davidsson and Marx, 2013; Hall, 1986; Mau, 2004; Rothstein, 1998; Van Oorschot, 2007). This link between social values and individual-level welfare opinions remains under-theorised and rarely addressed empirically, despite the recent ‘cultural turn’ in the study of welfare attitudes (Dion and Birchfield, 2010; Van Oorschot, 2010; Van Oorschot et al., 2008).
This article attempts to fill this gap by studying the effect of social values on attitudes towards social welfare services and support for welfare spending, building on insights from social and political psychology, particularly Shalom Schwartz’s (2004) theory of cultural values. Using multi-level modelling on data from the most recent waves of the European Social Surveys (ESS) (2008) and International Social Survey Programme (ISSP) Role of Government module (2006), we show that individuals in nations that emphasise egalitari- anism and embeddedness are more supportive of social insurance and increased welfare spending, and tend to evaluate welfare policies more positively.
Social values also condition the effect of ideological predispositions on social welfare preferences, such that certain ideological orientations are more susceptible to social envi- ronmental influences. We show that the welfare attitudes of right-wing identifiers are more affected by embeddedness values than those of their left-wing counterparts, making right-wing identifiers in countries ranking high on embeddedness quite supportive of government responsibility. Overall, our findings highlight the multilayered and interactive character of political attitudes, as informed by personal predispositions and broader societal contextual influences.

Social Values and Individual Attitudes

The effect of institutional or economic context on attitudes towards welfare and redistribution is well recognised. Guided mostly by Gosta Esping-Andersen’s worlds of welfare paradigm (Esping-Andersen, 1990), it has been suggested that different types of welfare regime produce different cleavages among socio-economic groups, leading to differences in attitudes towards welfare and redistribution among these groups (Arts and Gelissen, 2001; Castles and Mitchell, 1992; Svallfors, 1997). For example, since Nordic countries have social democratic welfare regimes offering universal entitlements and comprehensive social security benefits, all groups are expected to be supportive of redis- tribution. In contrast, in liberal welfare regimes such as the United States and United Kingdom, social security systems only deliver benefits to those who are in absolute need; so support for social welfare is expected to be highest among the most disadvantaged, such as the unemployed or the disabled. Thus, institutional context is expected to influence individual attitudes towards welfare through the conditioning of individual self-interest.
However, studies have provided, at best, mixed empirical support for the regime hypotheses (Arts and Gelissen, 2001; Jaeger, 2006; Svallfors, 1997; but see Linos and West, 2003), and some empirical findings even run counter to its predictions (Bean and Papadakis, 1998; Gelissen, 2000). In addition, while many studies show that the effect of some individual-level variables on welfare attitudes varies cross-nationally, they do not directly test whether these variations are due to the effect of welfare institutions or some other contextual factor. Thus, for example, Christian Larsen (2008) suggests that welfare regimes actually shape the way people perceive the poor or poverty – that is, whether poverty is due to luck or laziness – rather than conditioning self-interest. The potential role of social values as a fundamental contextual influence in shaping individual attitudes towards redistribution has been understudied (Dion and Birchfield, 2010, p. 331). Below, drawing on research in social and political psychology, we discuss social values and derive hypotheses regarding how they influence individual attitudes.
Social or cultural values may be defined as values representing a society’s shared ideas about what is good, right and desirable (Schwartz, 1999, p. 25). Social values have been found to be increasingly important in explaining cross-national variations in political outcomes, such as institutions (Greif, 1994) and their performance (Licht et al., 2007;
Putnam, 1993), economic development (Tabellini, 2010) and public policy (Arikan, 2010; 2011; Jacobs, 1992; Lockhart, 2003).
Social values have evolved over long periods of time and function as the broadest and most fundamental context for social interaction (Johnston and Klandermans, 1995, p. 4). The dominant social values in a society offer accessible frameworks for thinking about political issues by defining the relevant information for the debate, and the applicable principles and standards for evaluating events (Nelson et al., 1997; Reese, 2001, p. 11). In addition, they define social and political problems and indicate solutions to them (Gamson, 1992), while influencing how the media and elites frame issues (Hertog and McLeod, 2001).
Even when individuals do not fully adopt the values their society emphasises, their mental schemas and ways of thinking, acting and behaving are affected by them (Smith et al., 2006). Individuals tend to use terminology and refer to principles central to their society’s shared values when discussing policy preferences, even if their personal value orientations conflict with those of the society (Feldman and Zaller, 1992). Despite sharp societal disagreements, citizens of the same country may show more than a little consensus on certain issues since they share a common moral vocabulary (Bellah et al., 1985). Social values also mould individuals into certain ways of thinking (Triandis, 1994) as they serve as a standard for judging events (Smith et al., 2006). For example, both the American public and the media tend to attribute poverty to lack of individual effort and laziness, thereby placing responsibility on the individual, while citizens of most European countries tend to blame contextual factors like luck or social and economic conditions (Alesina and Glaeser, 2004; Iyengar, 1991; Semetko and Mandelli, 1997, p. 206). Similarly, political actors in different countries emphasise different concerns when considering the proper role of government in the economy (King, 1973).
Individuals are also exposed to contextual influences through their social networks and interactions with others (Huckfeldt et al., 2004), so become aware of opinions reflecting socially dominant value orientations (DiMaggio, 1997). Most people are neither suffi- ciently well informed nor cognitively active enough to develop counter-arguments to these influences (Iyengar, 1991), tending instead towards conformity and identification with in-group norms (Tajfel and Turner, 1979). Consequently, they end up retaining nearly all the information that reaches them (DiMaggio, 1997), making social values an important influence on individual attitudes. The next section discusses the types of social value that are relevant in influencing welfare attitudes.

Egalitarianism, Embeddedness and Support for Welfare Policies

Scholars from various disciplines have constructed different theories and instruments for mapping and comparing national cultures (Hofstede, 1980; Inglehart, 1990; Inglehart and Welzel, 2005; Triandis, 1994). Here, we use Schwartz’s theory of cultural values since it provides a comprehensive and fine-tuned characterisation of those social values relevant to understanding social welfare attitudes.
Schwartz’s value theory posits that social value dimensions reflect how societies resolve basic issues in regulating human activity (Schwartz, 2006, p. 138, p. 140). He identifies three major universal human requirements, and a number of values that reflect various ways of satisfying these needs (Schwartz, 2004; 2006; Schwartz and Ros, 1995). The first issue confronting human societies is the nature of the relationships between the person and the group, that is, to what extent people are embedded in their groups as opposed to being autonomous. Embeddedness characterises societies in which the individual is not autono- mous but embedded within the collectivity with responsibility for fulfilling the group’s goals. Embedded societies emphasise the values of social orderrespect for traditionsecurityobedience and wisdom, an emphasis celebrated, for instance, in Confucian-influenced coun- tries (Bond, 1996) and Middle Eastern nations (Schwartz, 2004). In contrast, autonomous societies focus on the values of broad-mindednesscuriositycreativitypleasure and an exciting life, which are often emphasised in many West European countries (Ester et al., 1994; Schwartz, 2004).
We expect embeddedness to be positively related to support for social insurance since this dimension also stresses taking care of members of the collectivity. This is in accord with the framing of welfare policies as part of a social duty towards the poor and the needy, and as a matter of collective virtue and promoting a collective good life (Freeden, 2003, pp. 14–5). Welfare policy may also be seen as a way of integrating the individual into an organic entity (Esping-Andersen, 1990, p. 40), as opposed to promoting individual autonomy and self-reliance. Further, social insurance and welfare policy often represent a tension between two important values: liberty and security (Freeden, 2003, p. 15). Consequently, individuals socialised in settings that stress a collectivity’s responsibility for the security and well-being of others may be more willing to accept government intervention in the economy to provide for the society’s needy groups. Since societies that emphasise embeddedness prioritise group responsibility towards others, and stress security and obedience, we expect these values to be associated with greater individual support for welfare policies (H1).
The second societal problem Schwartz considers is guaranteeing that people behave in a responsible manner that preserves the social fabric, which corresponds to the egalitarianism vs. hierarchy dimension. Egalitarian societies seek to induce people to recognise each other as moral equals, emphasising the internalisation of in-group cooperation, and to socialise people to be concerned with everyone’s welfare. Equalitysocial justiceresponsibilityhelp- fulness and honesty are the types of value egalitarian societies emphasise, such as Western European democratic welfare states (Ester et al., 1994). In contrast, hierarchy values socialise people into accepting hierarchical roles as legitimate and complying with the duties and obligations attached to their roles, breeding values such as social powerauthorityhumility and wealth. A heavy emphasis on hierarchy and a rejection of egalitarianism is also known to characterise some Asian and Latin American societies (Schwartz, 2004).
Since the goal of welfare policies is to ensure equal opportunity and safety nets to those who are in need, egalitarianism, with its emphasis on equality, social justice and respon- sibility, is expected to be highly relevant in influencing attitudes towards social insurance policies that aim at enhancing the welfare of the society’s members. In egalitarian societies, individuals are exposed to frames emphasising equality, social justice, concern for and responsibility towards others, and thus are expected to be more supportive of the welfare state and increased spending on social welfare programmes (H2).
The final societal issue is regulating how people manage their relations to the natural and social worlds, represented by the harmony vs. mastery dimension. Since this dimension concerns the individual and societal relationships with nature and is not directly associated with caring for the well-being of others, we do not expect it to affect welfare attitudes.

Social Values, Ideology and Welfare Attitudes

We next argue that social values influence the relationship between individual predispo- sitions and attitudes towards redistribution and welfare. Individuals’ pre-existing inclina- tions such as ideology, socio-economic background or subjective beliefs that are crucial in shaping attitude formation may be in line or clash with dominant social orientations, and the social context might also affect the way individual characteristics shape opinion formation (Arikan, 2010; Ben-Nun Bloom and Levitan, 2011). That is, although egali- tarianism and embeddedness are expected to lead to pro-welfare attitudes, we expect these values to influence certain types of individual more than others.
Social values reinforce the way ideological predispositions influence attitudes towards welfare (Arikan, 2010; Arikan and Ben-Nun Bloom, 2013). When individuals are exposed to social influences that reinforce already existing beliefs and considerations, the end result is to strengthen their position regarding the attitude in question.
Ideological predispositions are key predictors of welfare attitudes, as the left–right ideological divide is conceptually and empirically closely related to the debate about welfare (Jaeger, 2008; Lipset and Rokkan, 1967), with economic equality being the core issue (Bobbio, 1996, p. 60). While the meanings of left and right vary across contexts and time, they still have significant power to explain economic policy positions, with the majority of people and political parties locating themselves and political parties along this continuum (Mair, 2007).1
Right-wing ideology generally does not support principles of fairness, supporting instead the rhetoric of individual achievement and restoration of social hierarchy. Right- wing framing of the welfare debate frequently focuses on government waste and individual responsibility, considering it unnecessary to reduce social status differences (e.g. Jacoby, 1994). However, right-wing orientations are also compatible with the rhetoric of patrio- tism and cultural pride. Thus, framing poverty or welfare so as to emphasise the interconnectedness of the country’s citizens and collective responsibility, or alternatively in terms of security, so that avoiding poverty and providing social insurance becomes a matter of promoting social interests and order (Freeden, 2003; Taylor-Gooby, 1983), may have a particular effect on how right-wing identifiers think about welfare, while reinforcing already existing predispositions.
Since embeddedness values emphasise obedience and the shared faith in collectives, which are compatible with right-wing orientations, we expect them to be associated with welfare frames that reinforce the effect of right-wing ideology, thereby increasing right- wing and, to an extent, centrist identifiers’ support for welfare policy. Thus, in a social context where social order, responsibility and collective well-being are emphasised, right- wing and moderate identifiers may, to a larger extent, consider social insurance as pro- moting social order and traditional values, and strengthening national identity. Therefore, we expect right-wing identifiers to be more supportive of welfare services in societies that are more embedded.
Left-wing ideology, which has historically been associated with promoting welfare, social justice and equality, stresses redistribution of wealth and income, and calls on government to take more economic responsibility (Piurko et al., 2011). Social justice and provision of social insurance is a core concern of left-wing identifiers in almost all countries (Mair, 2007), and left-wing identifiers are almost universally united by the view that government should assume full responsibility for society. Given these already very strong individual-level predispositions, additional framing in terms of societal-level egali- tarianism or embeddedness may not be able to increase left-wing identifiers’ support for redistribution further.
Thus, we expect embeddedness orientations to affect right-wing and centrist identifiers more than left-wing identifiers. Specifically, we predict right-wing and moderate indi- viduals to be even more supportive of welfare policies with increased societal-level embeddedness. On the other hand, social values are hypothesised to have less impact on left-wing identifiers: individuals who lean more towards the left will be less susceptible than right-wing identifiers to the effect of social values in terms of issues concerning welfare and social insurance (H3).

Methods

Data

We used data from the fourth wave of the ESS (2008) and the ISSP Role of Government (2006) module. While the ESS comprises a large pool of European nations, the ISSP comprises a diverse pool of advanced industrialised nations as well as some developing countries.2 The range of countries included in the samples and the slightly different wordings for the dependent variables increase the robustness of our findings.

Dependent Variables

Three dependent variables were constructed. The first is support for government responsibility in providing social welfare services, coded using six ESS items (answered on a 0–10 scale) asking whether or not it should be the government’s responsibility to: (1) provide a job for everyone; (2) ensure adequate health care for the sick; (3) ensure a reasonable standard of living for the elderly; (4) ensure a reasonable standard of living for the unemployed;

  • ensure sufficient childcare services for working parents; (6) provide paid leave from work for people who temporarily have to care for sick family

We used multiple group confirmatory factor analysis (MG-CFA) to test for the internal consistency of the items and differential item functioning (Reise et al., 1993; Van de Vijver and Leung, 1997). We first ran a baseline model in which all factor loadings for each scale were constrained to be equal in all countries, while factor means, variances, covariances and residuals were freely estimated for each country (CFI = 0.957, TLI = 0.946, RMSEA = 0.095). Next, we evaluated the modification indices and introduced several modifications to the models by relaxing the measurement invariance constraints for certain items. We then saved the factor scores from the final partial invariance model (CFA = 0.987, TLI = 0.980, RMSEA = 0.058), in which items that performed differently across countries were given different weights to ensure a common measurement scale (Reise et al., 1993).
The ISSP Role of Government Survey also has a number of items that tap support for government responsibility in providing welfare services. We used six items (measured on a five-category Likert scale) asking whether it should or should not be the government’s responsibility to provide: (1) a job for everyone; (2) health care for the sick; (3) a decent standard of living for the elderly; (4) a decent standard of living for the unemployed; (5) financial help to university students from low-income families; and (6) decent housing for those who cannot afford it. We also used MG-CFA in order to correct for potential item biases across nations (full invariance model, CFA = 0.832, TLI = 0.918, RMSEA = 0.172; final partial invariance model CFI = 0.920, TLI = 0.956, RMSEA = 0.126). Again, factor scores from the final partial invariance model were saved to use as dependent variables.
The second type of dependent variable came from the ESS and measures the extent to which individuals believe that welfare services are beneficial for the society, that is, the positive moral consequences of the welfare state (see Van Oorschot, 2010). Respondents were asked (on a five-point Likert scale) how much they agreed or disagreed that social benefits and services in their country: (1) make people lazy; (2) make people less willing to care for one another; and (3) make people less willing to look after themselves and their family. The final partial invariance model had excellent fit statistics (CFA = 0.997, TLI = 0.995, RMSEA = 0.045).
From the ISSP dataset, we also constructed a support for increased welfare spending depen- dent variable, using three five-category items asking respondents whether they would like to see more or less government spending on health, old age pensions and unemployment benefits. Again, the items were coded so that higher values represent higher support for welfare spending. Factor scores from pooled CFA models (CFI = 1.000, TLI = 1.000, RMSEA = 0.000) were used in the subsequent analysis.
Higher values of the dependent variables indicate greater support for government provision of social services, greater support for increased spending on welfare and more positive attitudes towards welfare services. To ensure they were all on the same metric, all the dependent variables were standardised to vary between 0 and 1.

Measuring Social Values

Since individual and social value orientations are conceptually different and refer to different levels of measurement (Fischer et al., 2010; Schwartz, 2006), social values cannot be inferred from the aggregate predispositions of a cultural group, that is, by simply taking the mean of group members on a particular item, or using within-society correlations (Hofstede, 1980). Instead, between-country correlations calculated from mean values of each variable for each society are used to assess the dimensions of social value orientations using either exploratory factor analyses (Hofstede, 1980; Inglehart and Welzel, 2005) or multidimensional scaling (Schwartz, 2004; 2006).
Schwartz derived social value structures using countries as units of analysis, although the assumption that a nation shares common attitudes and values may be problematic since it assumes that a degree of consensus exists among the nation’s citizens. For example, in some societies, Kathleen Dowley and Brian Silver (2005) have found disparities in inter- personal trust, achievement motivation and confidence in institutions across ethnic and/or linguistic minorities and majority groups. Yet while a degree of within-nation cleavage
may exist, it is still possible to talk about nationally meaningful value orientations. Forces encouraging integration, such as a common dominant language, political and educational systems, the mass media and national symbols, combine to produce substantial sharing of values (Hofstede, 1980; Smith et al., 2006). Despite significant ethnic diversity, a country’s institutions push its inhabitants towards greater cultural unity (Smith et al., 2006, p. 56). As a result, a nation’s various ethnic groups often produce similar profiles on psychologically relevant measures vis-à-vis other nations’ citizens (Smith et al., 2006). In fact, Schwartz’s (2004, p. 57) comparison of both within- and between-country cultural distances4 shows that cultural distances between samples from different countries are almost always greater than those between samples from the same country, suggesting that nations may be taken as meaningful cultural units.
Schwartz’s egalitarianism and embeddedness scores are taken from Amir Licht et al. (2007). The descriptive statistics by nations shown in Table S1 in the online Appendix typically reflect the theoretically expected profile. Overall, the scores suggest that West European culture emphasises egalitarianism and is low on embeddedness, as expected from a region of developed, democratic states (Ester et al., 1994). Countries such as Norway, Denmark, France, Germany and the Netherlands, and some Southern European countries – specifically Spain and Portugal – rank high on egalitarianism and low on embeddedness. Some post-communist countries such as Hungary, Poland, Slovenia and the Czech Repub- lic which have, according to some researchers, rejected the rhetoric of authoritarian communist regimes (Schwartz and Bardi, 1997), score among the lowest on egalitarianism, while others, particularly Estonia and Poland, are also the most embedded countries, together with a number of developing countries such as Cyprus, the Philippines and Turkey. Next, consistent with analyses of Confucian culture (Bond, 1996), Confucian- influenced countries in the sample, specifically Taiwan and Japan, reject egalitarianism, scoring the lowest on that scale. However, while Taiwan also scores high on embeddedness, Japan falls in the mid-scale. Generally, English-speaking countries such as the US and the UK lie mid-scale on both value orientations, being more clearly distinguished by two other value dimensions not studied here, mastery and individualism (Schwartz, 2004).

Other Controls

The models also controlled for age, gender, marital status, having children, level of education (measured by number of years of schooling), income,5 self-placement on the left–right scale,6 interpersonal trust, level of religiosity, satisfaction with the country’s economy, and dummy variables for being retired, permanently disabled, unemployed or having union membership. All independent variables except age and years of education were coded to vary between 0 and 1 (See Table S2 in the online Appendix).
It has been suggested that welfare regimes reflect enduring, deeply rooted social values (Esping-Andersen, 1990; Van Oorschot, 2010), so certain types of welfare state could be associated with some of these core social values. It is therefore possible that the dominant values of a society are closely related to its welfare regime type, which may also influence individual attitudes towards social insurance. However, the similarity in mean egalitarian- ism and embeddedness scores across countries with each of the three types of welfare state identified by Esping-Andersen, or the Southern type of welfare state or post-communist nations, suggests that certain types of welfare regime are not necessarily distinguishable by their dominant value orientations (See Table S3 in the online Appendix). Only the post-communist nations included in the study are distinguishable from other types of welfare regime, in that their mean levels of embeddedness are higher, while their mean egalitarianism is lowest. Nevertheless, this study controlled for the effect of welfare institutions using a combined index of social security laws that indicates the generosity of benefits for the elderly, disabled and sick (Botero et al., 2004), public social spending as percentage of GDP, measures of de-commodification, and a benefits generosity index to account for the welfare regime type (Esping-Andersen, 1990; Scruggs and Allan, 2006).
National economic conditions such as unemployment levels (Blekesaune, 2007; Blekesaune and Quadagno, 2003) and income inequality (Dion and Birchfield, 2010) are also known to influence individual support for redistribution and welfare policy. There- fore, we also controlled for GDP per capita, levels of inflation and unemployment, as well as communist legacy.

Results

To test the effect of cultural-level values on welfare attitudes, national-level egalitarianism and embeddedness scores were submitted to a multi-level regression analysis with a set of individual-level predictors explaining support for government responsibility (Model 1a, using the 2008 ESS data, and 1b, using the 2006 ISSP data), opinion on social welfare services (Model 1c, using the 2008 ESS data) and support for increased welfare spending (Model 1d, using the 2006 ISSP data). Table 1 presents the results of this analysis.
Figure 1: The Conditional Effect of Embeddedness and Ideology on Attitudes towards Welfare
Figure 1 The Conditional Effect of Embeddedness
The findings present strong evidence for the effect of social values on individual attitudes towards support for social welfare policies. In accord with Hypotheses H1 and H2, both embeddedness and egalitarianism had positive and statistically significant effects on the dependent variables, indicating that, ceteris paribus, the more egalitarian and/or embedded a country is, the more likely its citizens are to support government provision of social insurance and spending on social welfare services, and to believe in the positive moral effects of welfare policies. However, in Model 1c, the standard error of the coefficient for egalitarianism was just too high to justify rejecting the null hypothesis.
Next, we were interested in the conditional effects of the social value dimensions. For this, we re-ran the same multi-level models appearing in Table 1, adding a cross-level interaction of social values and individual-level ideology. Table 2 presents the coefficients for these four models with cross-level interactions.
The cross-level interaction of national-level embeddedness and individual-level ideology was positive and statistically significant in three models, the exception being Model 2d, where the dependent variable was support for increased welfare spending. Figure 1 plots the conditional effect of country-level embeddedness by individual-level ideological orientation. The predicted levels of support for government provision of welfare services (the upper left panel for ESS data and the upper right panel for ISSP data) and positive evaluations of welfare policy (bottom left) as embeddedness increases are presented for extreme leftists (thin black line), moderates (dark grey line) and extreme right-wing identifiers (light grey line).
As expected, individuals from different ideological orientations were all positively affected by societal emphasis on embeddedness, but in accordance with H3, this effect was not uniform across all individuals. The results indicate that moderate to right-wing identifiers are much more affected by social values emphasising embeddedness than left-wing identifiers. All else being equal, the difference in predicted level of support for government responsibility for left-wing identifiers in the least and most embedded societies is about 4 per cent of its range (0.04 on a scale of 0 to 1), while for extreme right identifiers this difference is about 15 per cent of the range (ESS 2008 data), with the increase being about 9 per cent for moderate identifiers. Findings from both datasets thus show that moderate and right-wing identifiers are more prone to the effect of embeddedness while left-wing identifiers are less affected as predicted by H3.
The conditional effect of embeddedness was even more dramatic for positive evaluations of welfare policy (see lower left-hand panel of Figure 1). While there was no difference in the level of support of left-wing respondents across nations with differing levels of embeddedness, moderate and right-wing identifiers’ belief in the beneficial effect of welfare policies increased the more their society emphasised embeddedness. In addition, in highly embedded cultures, the predicted level of positive evaluations of welfare policies was higher for moderate and right-wing identifiers than for left-wing respondents.

Robust Analysis

We ran a number of models to ensure that the effects of our key level 2 variables are robust when controlling for other sources of contextual influence. Full results are presented in the online Appendix (Table S4), while key findings are presented below.
Random Intercept Models (Models 1a to 1d). We were first interested in testing the robustness of the effects of social values when integrating additional level 2 covariates. Each institutional and economic control variable was first submitted to multi-level analysis as the single level 2 control, before being run together with the two value orientations in the same model in an alternative specification.7 This showed that unemployment, inflation and GDP per capita all had positive effects on government responsibility and welfare spending when they were the only level 2 regressors, although their statistical significance usually disappeared when social values were added. Communist legacy did not have any statistically significant effects on the dependent variables. Social security laws, public social expenditure and Esping-Andersen and Scruggs and Allan indices were all statistically significant predictors of belief in government responsibility (in most cases, even when they were included with values in the same model), but not of support for welfare spending. In all models where government responsibility was the dependent variable, and in the majority of models that predicted welfare spending, both values retained their positive and statistically significant effects. These results were replicated using either egalitarianism or embeddedness as single level 2 predictors. The findings suggest that, while institutional structure and welfare regime affect individual attitudes towards social policy, their effects are less robust than the effect of social values.
Random Coefficient Models (Models 2a to 2c). We re-ran the models with multi-level interactions for government responsibility and evaluation of welfare services, adding each level 2 control one at a time. Controlling for unemployment, inflation, GDP per capita, post-communism and social security laws did not substantively change the results. Since some controls, such as the Esping-Andersen and Scruggs and Allan indices, reduced the level 2 degrees of freedom significantly, which leads to unreliable estimates, we did not control for the effects of these variables. These results were replicated using egalitarianism or embeddedness as single level 2 predictors.
Measurement of Social Values. Finally, some researchers prefer to use Schwartz values by subtracting the score of one type of value from the score of the value type constituting the opposite end of the dimension (e.g. egalitarianism minus hierarchy) so that the resulting score reflects the relative emphasis given to a particular value (Schiefer, 2013; Schwartz, 2006). Such scores correlate strongly with the scores used in the analyses (usually over 0.9) and models employing these measures yield the same results (Table S6A and S6B in the online Appendix). Therefore, we do not additionally present the results of models using these subtractive scores in this study.

Conclusions

Although Columbia School scholars have consistently stressed the effect of social context and ‘cross-pressures’ on the formation of political attitudes and behaviour (Berelson et al., 1954; Lazarsfeld et al., 1944), the role of social context has been largely neglected in the studies of attitudes. This study provides new empirical evidence for the key role of social values, an important component of social context, for welfare attitudes. Building on Schwartz’s theory of social value dimensions, we have shown that both embeddedness and egalitarianism increase support for social welfare, above and beyond other contextual influences, such as institutions or national economic conditions. Individuals in societies that emphasise equality and social justice, as well as social order and collective responsibility, are overall more supportive of government provision of welfare services, and tend to evaluate the societal effect of welfare policies more positively.
The results of this study suggest that support for social policy may be conditioned by different motivations. Individuals in egalitarian nations, such as Western European coun- tries, seem to be more supportive of welfare policies because these policies are believed to create equal outcomes for the members of that society. Members of embedded societies, such as post-communist nations or developing countries, are also more supportive of social welfare than those of autonomous societies, which seems mostly to be due to a concern for social order and security, and a sense of collective duty towards others in the society. These cross-national differences in societal motivations for supporting welfare policy deserve further scholarly attention. Thus, for example, egalitarian societies may be more supportive of policies redistributing income to all members of the society, while embeddedness could result in support for specific policies that uphold traditional social structures. In addition, embedded societies may be more opposed to policies that provide more autonomy to the individual, such as social assistance for single mothers, while rejecting social policies that assist groups seen as undeserving.
Our findings also suggest that social values may account for cross-national variation in elite or political party positions. For example, Sidney Verba et al. (1987) found substantive variation among political elites who come from parties with the same ideological orien- tations or those with similar interests (such as labour union leaders), with the more egalitarian Swedish political elites being more supportive of redistribution than American and Japanese elites. Stefan Svallfors (1997) notes that the Norwegian Conservative Party is much less right-wing than its Swedish counterpart Moderate Party, which may again be explained by the higher emphasis given to egalitarianism in Norway compared to Sweden. Future research could therefore focus on the effect of socially held values on cross-national differences in elite opinions and party positions.
So far, the literature on context effects on individual attitudes towards welfare has focused on the role of welfare institutions in shaping these orientations (Rothstein, 1998; Svallfors, 1997). Indeed, our findings confirm that variables such as communist legacy, social security laws and public social expenditure are generally significant predictors of welfare attitudes. However, we have also shown that socially shared values are an additional important influence on welfare attitudes, above and beyond institutional arrangements. In fact, some of the institutional variables lost their statistical significance as predictors of attitudes when we specified social values in the model, which leads to the tentative suggestion that their effect is due to shared variance with social values. Accordingly, future research should also consider the role of social and cultural values in affecting attitudes towards redistribution.
In addition, we have demonstrated that social values may even influence the way individual predispositions affect attitudes towards government responsibility. More specifi- cally, we found that moderate and right-wing identifiers are more influenced by embeddedness than left-wing identifiers. This also suggests a boundary condition for the effect of social values: when individuals have strong predispositions that are generally compatible with the values framework offered by their social environment, these societal dispositions affect their views. That is, cultural context influences the extent to which personal ideology determines individual support for redistribution and social welfare. Thus, in more embedded countries, even right-wing individuals do not seem to question the role of government in redistributing income, whereas less embedded nations are characterised by more variation in the redistributive attitudes of identifiers of different ideological orientations.
Individual attitudes, however, are not just shaped by an individual’s political ideology or the characteristics of political issues; they are also shaped by the broader social context, particularly by socially dominant value orientations. In addition, the effect of social context is not necessarily additive. Context rather constitutes a complex interplay with individual- level preferences, such that individual-level political ideology and social environment interact in moulding political attitudes. Therefore, a complete theory of political behaviour has to consider carefully the interplay across several levels of analysis. Future studies of welfare and social policy preferences should thus not only consider the role of personal predispositions and social environment, but also the interaction between them.

About the Authors

Gizem Arikan is an Assistant Professor in the Department of International Relations at Yasar University, Izmir, Turkey. Her research focuses on the effect of political culture and values on public opinion and policy. She also conducts research on religiosity and attitudes towards democracy. Gizem Arikan, Department of International Relations, Yasar University, Selcuk Yasar Kampusu, Agacli Yol 35–37, Bornova, Izmir 35100, Turkey; email: gizem.arikan@yasar.edu.tr
Pazit Ben-Nun Bloom is an Assistant Professor in the Department of Political Science at The Hebrew University of Jerusalem, Israel. Her research examines the role of morality, religiosity and values in political behaviour. Her broad research interests are in political psychology, comparative political behaviour and political methodology. Pazit Ben-Nun Bloom, Department of Political Science, The Hebrew University of Jerusalem, Mount Scopus, 91905 Jerusalem, Israel; email: Pazit.BenNun@mail.huji.ac.il

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Supporting Information

Additional Supporting Information can be found in the online version of this article at the publisher’s website:
Table S1: Schwartz values scores for countries included in ISSP and ESS datasets.
Table S2: Summary Statistics.
Table S3: Mean egalitarianism and embeddedness scores for different types of welfare regimes and postcommunist nations*.
Table S4: Alternative random intercept models*.
Table S5: Alternative random coefficient models**.
Table S6: (a) Random intercept models using alternative measure of social values.
(b) Random coefficient models using alternative measure of social values
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FINC 0300 FINANCIAL MANAGEMENT ASSIGNMENT 2: CASE STUDY ON PEAR COMPUTER HORIZONS

Assignment 2: Case Study – Pear Computer Horizons
________________________________________
It is January 1st, 2018. You are a senior analyst at Pear Computer Horizons Limited (PCH), one of the leading global technology providers for computers, cell phones, and business services in Canada. The CEO of PCH, Amanda Morrison, has reached out to you to draft a report to evaluate two investment proposals, building on your analysis from Assignment 1.
Purpose
For this case approach, you will demonstrate your ability to develop costing methods and a set of forecasts of future cash flows for two proposed investment projects. You will also be required to identify the cost of financing through the issuance of bonds.
How to Proceed
Building on your analysis and proposal from Assignment 1, develop your investment proposal business case draft:
1. Create a title page with the project proposal names and author identification.2. Calculate the bond yield to utilize as your required return.3. Prepare a summary narrative (i.e., a detailed description) of each proposal with detailed elements on the initial investment, as well as the costs/revenues over the life of each of the projects. Identify which revenues and costs are relevant to your analysis, and which costs are irrelevant. Identify the time horizon for each investment.4. Calculate the after-tax cash flows during the life of each of the projects. Be sure to identify the total costs of ownership and deduct those costs from the benefits to arrive at the net cash inflow per year.5. Utilizing the after-tax cash flows from Part 4, evaluate each investment proposal utilizing the following criteria (unless directed otherwise):
a. changes in payments from beginning of period to end;
b. Payback;
c. Discounted payback;
d. NPV;
e. Profitability index.
6. Clearly indicate whether any of the above criteria support each of the project proposals, and what the company should ultimately decide to do.
Format for Submission
• Your report narratives may be done in Word or Excel, but calculations and tables of values must be prepared in Excel with the amounts derived from actual formulas that use your variables, rounded to four (4) decimals or lower.
• The Excel tab worksheet must be print and presentation ready, formatted to print in 2 to 3 pages without page fragmentation of equations or tables between pages.
• It is permissible to break your report down using the questions listed above as headings.
• Submit your report file(s) into the Assignment 2: Case Study dropbox on UM Learn.
Your assignment must be submitted by the deadline date found in the course schedule provided in the Course Outline.
 

Q1 Title Page, Readability, Format, Spelling and Grammar Marks
Title Page, Readability, Format, Spelling & Grammar 12
Q2 Bond Yield Marks
Bond Yield 2
Attempt to use weighted average of debt 2
Q3 Summary Narrative Marks
Description of Investment 1 4
Description of Investment 2 4
Time horizons identified 4
Irrelevant and relevant costs identified 4
Q4 After-tax Cash Flows Marks
Investment 1: Acquisition of Camera Company
Initial Investment Including Equipment & development 3
Old tax shield included 1
Investment horizon utilized 2
Reasonable inclusion of inflation 1
Correct volume for phone sales 1
Correct sales price for phones 1
Warranty Costs Considered 1
Manufacturing Costs Considered 2
Software support costs considered 2
Incremental Marketing costs included 2
Salary of twenty employees considered 2
Other overhead costs considered 2
Incremental R&D costs included 2
After-tax cash flows (ATCF) calculated 4
Attempt at Tax Shield 2
Investment 2: New Product Launch
Initial Investment Calculation (ignore sunk costs) 2
Correct amount of clients identified 1
After-tax cash flows (ATCF) calculated 2
Ten-year horizon utilized 1
Opportunity cost of lost cash flow included 2
Q5 Investment Criteria Calculated Marks
Investment 1: Acquisition of Camera Company
Payback Period 2
Discounted Payback Period 2
Net Present Value 6
Internal Rate of Return 2
Profitability Index 2
Investment 2: New Product Launch
Net Present Value 4
Profitability Index 2
Q6 Evaluation of Two Investment Proposals Marks
Investment 1 Recommendation 6
Investment 2 Recommendation 6
Total 100

Pear Computer Horizons Case Study
Investment Proposals
Amanda Morrison, CEO of PCH, wants you to evaluate two investment proposals that the company is considering:
1. The acquisition of a Canadian camera company; and
2. The launch of a new product for government and business enterprises.
Ms. Morrison reminds you that only relevant costs and revenues should be considered. “Relevant costs have to be occurring in the future,” explained Ms. Morrison. “And have to differ from the status quo. For example, if we choose to buy the Canadian camera company, it is only the incremental revenue and costs related to the purchase that should be considered. We also need to take into account the opportunity costs associated with the alternatives. For example, for the new product launch, we need to factor in the lost sales from some of our current products in catering to those customers.”
More details on each investment proposal are included below. Ms. Morrison wants you to recommend if PCH should invest in one, both, or none of the investment proposals.
Required Return
Ms. Morrison wants you to use the weighted average bond yield for your required return. The total market value of debt PCH is expected to have going into this investment is $200M, which includes the current amount of bonds on the financial statements of $150M at a 6% interest rate and a planned new debt issuance of $50M at a higher 8% rate. All long-term debt is in the form of bonds. Ignore income tax effects when calculating the required return (i.e., do not take the after-tax cost of debt). Use current interest rates as a proxy for bond yield.
Acquisition of Canadian Camera Company
Ms. Morrison is considering acquiring a high-tech Canadian camera company for $50M in cash consideration. The camera phones that the target company is developing are only in the prototype stage, and would need an initial investment of $10M for development costs (to be expensed immediately) and $6M for production equipment. The camera company currently only has $1M of available tax shield left, excluding any tax shield related to the additional equipment to be purchased, for equipment that was originally purchased for $10M. Furthermore, PCH plans on spending an additional $2.025M in research and development (R&D) costs every year to continue to innovate with the camera phones and adopt new advancements in technology, as they are internally developed or externally acquired.
The manufacturing costs for the camera phones are expected to be 45% of sales, once the phone passes the prototype stage into the final product stage when the phones can start to be sold. Software support costs for upgrades and warranty & repair costs are expected to be 6% and 5% of sales, respectively. These costs, as a percentage of sales, are expected to remain consistent over the time horizon. It is anticipated that twenty employees from the camera company will be absorbed into PCH, with the average employee having a salary (including benefits) of $100,000. Other incremental manufacturing overhead costs (property taxes, maintenance, security, etc.), excluding depreciation, are estimated to be $1M annually. Wages are expected to increase with inflation (estimated at 2%) over the time period, while other fixed costs are expected to remain steady.
Due to the integration process of the camera company into PCH operations and the additional development required for the prototype camera phones, initial sales are only expected to reach a volume of 50,000 units in the first year. However, production is expected to double in Year 2, Year 3, and Year 4, before stabilizing at 400,000 units per year. Additional marketing costs of $3M per year will be spent to promote the product among the millennial segment through a social media campaign and promotional events.
The camera phone’s retail price to consumers is $500, but that includes the 30% markup that retailers apply to the phone to make a profit. Thus, the sales price for PCH would be 70% of the retail price, and this price is expected to increase by inflation over the time horizon.
Ms. Morrison wants to see if the project will reach profitability after 5 years, so she wants you to evaluate the return on investment in that period using the investment criteria of payback period, discounted payback period, NPV, IRR, and profitability index. The following table will help in the calculations of the tax shield for the new equipment:

Class CCA Rate Description
43 30% Machine and equipment to manufacture and process goods for sale

Tax Shield Formula:

Assume no salvage value when calculating the tax shield, and that the half-year rule applies for each class. The tax rate Ms. Morrison wants you to utilize is 20%. When calculating the tax shield, the present value should be in the same period as the initial investment (Year 0), which also means that deprecation (i.e., CCA) should not be taken from the cash flows in subsequent years, since their tax shelter effects are already accounted for in the tax shield.
New Product Launch
Ms. Morrison also wants you to evaluate if PCH should go forward with a new product launch for business and government enterprises. Over the past several years, PCH has spent over $50M on R&D on a new laptop and associated software. An additional investment of $20M is required before the product is ready to launch. There are 40 universities and 25 government ministries across Canada that are interested in entering ten-year contracts with PCH, which would lead to $75K in before-tax cash flow from each client. However, the interested parties are also existing clients of PCH, which means that the current contracts (with ten years remaining) that lead to $15K in before-tax cash flow per client would be nullified. Ms. Morrison wants you to evaluate the profitability of this investment after a ten-year period using the investment criteria of NPV and profitability index.
 

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EMOTIONAL INTELLIGENCE AND LEADERSHIP MANAGEMENT ASSIGNMENT

Leadership and Intelligence: The Power of Emotional Intelligence by Daniel Goleman

Much evidence testifies that people who are emotionally adept—who know and manage their own feelings well, and who read and deal effectively with other people’s feelings—are at an advantage in any domain of life, whether romance and intimate relationships or picking up the unspoken rules that govern success in organizational politics. —Daniel Goleman

Enhancing one’s leadership impact is clearly much more than applying a recipe or following a list of steps. First, recipes may or may not fit one’s style and personality. Second, if one is not skilled or genuine in using the recipe, potential followers will see through it in a New York minute. And third, formulaic approaches to managing people often run into the dilemma of what to do with the exceptions. People are so “organic,” they keep creating variations on  themes. Even in surgery, for example, doctors know that every person’s anatomy will be a little bit different. That said, most observers believe that intelligence is an important precursor to effective leadership. Smart people are generally considered to have the best potential for being the leaders of industry, nations, and institutions. Interestingly, a study of valedictorians,  however, indicates that after twenty years, most of them are working for their classmates.1 This counter-intuitive result causes us to rethink our beliefs about intelligence and its relationship to effective leadership.
For more than a century, business leaders have, for the most part, tried to downplay emotions in business as unprofessional, undisciplined, and unrelated to good decision-making. This stems in part from the philosophy of the Age of Enlightenment in western civilization. Knowledge, said Sir Francis Bacon, is power. Like the other philosophers of the Enlightenment, Bacon saw knowledge as the pathway to universal liberation and emotions and passions as obstacles to knowledge. Many of the leadership models taught in business schools have focused on rational decision making in which emotions are viewed as detriments or obstacles to making good decisions. Students are taught to search for the “right answer” and to do so in a rigorously analytical and logical way.
Further, American school systems have focused on the notion of rational intelligence in striving to educate millions of children. The concept of intelligence quotient (or IQ) has been the most prominent measure of intelligence. School systems designed curricula with the intent of utilizing more of students’ IQs if not adding to them. While the validity of IQ tests and their general intelligence or aptitude substitutes have come into question in recent years,2 tests of purely rational thinking—the Scholastic Aptitude Test (SAT) and the General Management Aptitude Test (GMAT), for example—still wield a great deal of influence over our individual academic opportunities and those of our children.
Recently, however, some startling conclusions about the nature of intelligence—many of them directly at odds with old assumptions—have begun to emerge. Daniel Goleman points out three important inferences we can draw from recent studies:

  1. Existing standardized intelli- gence tests fail to predict success in life or in business because they do not tell the whole story. Intelligence is not singular; it comes in a number of forms—i.e.,multiple intelligences—and intellectual intelligence, the kind measured by IQ tests, is only one
  2. Emotion, while it can sometimes sabotage clear-headed thought, has been scientifically shown to be an indispensable contributor to rational thinking and decision-making. As oxymoronic as it would have seemed to Sir Francis Bacon, there is a range of intelligences which can be called emotional; they are important for aspiring business leaders to understand better.
  3. Despite traditional views that IQ is inherited and that one cannot do much to change it, the newly recognized various intelligences seem to be, to a large extent,

Not One Intelligence, But Many: Gardner’s Research

Goleman draws on the work of several researchers to demonstrate the existence of multiple intelligences. Howard Gardner, a psychologist at the Harvard University School of Education, found the longstanding notion of a single kind of intelligence both wrongheaded and injurious. He blamed this belief largely on the IQ test itself—calling it the “IQ way of thinking: people are either smart or not, are born that way, that there’s nothing much you can do about it, and that tests can tell you if you are one of the smart ones. The SAT test for college admissions  is based on the same notion of a single kind of aptitude that determines your future. This way of thinking permeates society.”3 Statistically speaking, IQ measurements, SAT scores, and grades turn out to be relatively poor predictors of who will succeed in life and who will not. (Goleman puts the contribution of IQ to a person’s success at about 20 percent.)
Howard Gardner’s groundbreaking 1993 book, Frames of Mind, repudiated the idea of one kind of intelligence and the IQ way of thinking by positing a wide array of intelligences. Gardner identified seven: verbal, mathematical-logical, spatial (as demonstrated by painters or pilots), kinesthetic (as seen in the physical grace of a dancer or athlete), musical, interpersonal (upon which a therapist or a diplomat might rely), and intra-personal intelligence (something akin to self-awareness). Gardner’s perspective explained why traditional tests had been ineffective in predicting success: they measured only one or two of many necessary and important kinds of intelligence.
Goleman took Gardner’s “personal” kinds of intelligences—the inter-personal and the intra-personal—and cited hundreds of studies to create a story that described something he called “emotional intelligence,” or EQ. Goleman asserted that EQ was just as important as IQ in helping people become effective leaders.  As Gardner pointed out, “Many people with IQs of  160 work for people with IQs of 100, if the former have low intra-personal intelligence and the latter are high. And in the day-to-day world no intelligence is more important than the interpersonal. If you don’t have it, you’ll make poor choices about who to marry, what job to take, and so on. We need to train children in the personal intelligences in school.” It’s a compelling argument. Let’s examine IQ and EQ and some related concepts in more detail.

Intellectual Intelligence

IQ (which we will use as a substitute for mental capacity in general) is largely genetic but can be honed or made more manifest by curiosity, by discipline in studying, and by adding a range of experiences to a person’s life. While your IQ depends in large part on the mental machinery you inherited from   your   parents,   if   you   are   curious,  learn  to discipline yourself in your study habits, and seek out new experience, you can bring your mental capacity to the fore. You may not be able to change your IQ score on IQ tests much, but you can learn to do more with what you have been given. If you don’t know your IQ, don’t worry about it, for, broadly speaking, while standardized tests have some predictive power (those with very low IQs often end up making little money, and those with high IQs frequently take demanding, high-powered, better paying jobs) IQ tests reflect only one kind of intelligence. There are other kinds that are equally if not more important to being “successful, and to developing leadership influence.

Characteristics of IQ
Genetic Revealed in Curiosity Honed by Discipline in Study Supported by Range of Experiences

Emotional Quotient

Emotional intelligence, as introduced by Goleman, is basically the ability to manage your own emotions. It begins with the ability to recognize your emotions, then to understand them, and finally to manage yourself out of what Goleman calls “emotional hijackings.” In this view, IQ is your brain power while EQ is your emotional control power.
The first step to developing your EQ is to learn to recognize your emotions. Many people are not very aware of their emotions, although   they   often  say they  are.
Have you ever talked with someone who seemed visibly upset, whose neck veins were bulging, whose face was red, whose voice was raised? Yet, when you asked them to calm down, they screamed, “I AM calm!” This person is not in touch with his or her own emotional reality or experience. Another manifestation of the difficulty people have in recognizing their emotions appears when you ask people how they are feeling; they often will describe behaviors or thoughts. Many are not skilled in recognizing and paying attention to their own emotional state. For many of these people, this is because they have learned that the emotional world is not legitimate, and after years of practicing to suppress or subdue their emotions, they have lost touch with how they feel. I’m repeatedly surprised by how few talented, practicing managers  and leaders are able to identify and talk about their emotions.
 
emotional-intelligence-and-leadership
 

Components of Emotional Intelligence EQ
Recognizing your own emotions Managing your emotions appropriately Productive self-talk out of emotional hijackings

Aware of them or not, people can often become prisoners of their emotions. In Goleman’s terms, they get “hijacked” by their emotions and lose control of their rational processes. An emotional hijacking occurs when a person begins with a little emotion that then builds and builds in intensity until the person is not thinking clearly and is overwhelmed by the emotion. The most common emotional hijackings are related to anger, fear, and depression. A person hijacked by anger, for instance, may be a little irritated at first, but as time passes, becomes more and more angry until they are bursting at the seams, and acting openly hostile, whether the situation calls for such behavior or not. People with a low EQ who become angry, afraid, or depressed find themselves in an ever-widening spiral of emotions to the point where they are unable to think clearly or to make good decisions.
Consider a hijacking by fear. Modern equipment has given us much greater insight into how this hijacking occurs, because we can trace with increasing accuracy the electrical impulses that course through the brain during different events. We used to think that when a person saw something dangerous like a snake, the eye would send a signal to the thinking part of the brain, the brain would consciously register “danger” and send signals to the muscles to move quickly— and we would jump. We’ve learned in fact, that there is a “short circuit” that bypasses the thinking part of the brain and transmits danger signals directly to two small, almond-sized structures (the amygdalas) that sit atop the human brain stem.
The amygdala is an old structure in terms of the development of the human brain; it evolved earlier than the neocortex above it (that handles conscious thought) and its functioning is largely beyond the control of the thinking brain. When it receives a short-circuit signal from the optic nerve that you’ve seen a snake, the amygdala immediately begins a complex chemical process which pumps muscle stimulants into the blood stream and you literally jump without thinking. If a person’s ability to manage these chemical outbursts is underdeveloped, this can create a growing whirlpool of fear, so strong that you could jump when you should hold still or be paralyzed by the fear when you should jump. When you’re so enraged that you can’t “think straight,” or “so blue in the face that you can’t function,” you could blame your amygdala and its partners in the limbic system.
Dr. Antonio Damasio, a neurologist at the University of Iowa, studied patients with damage to the circuits between the amygdala and the brain’s memory center. These patients showed no IQ deterioration at all, and yet their decision-making skills were amazingly poor. They made disastrous choices in their careers and personal lives; the most mundane decisions— white bread or wheat?—often left them paralyzed with confusion. Damasio concluded that their decision making was impaired because they had no access to their emotional learning. Searching their memories for the last time they were in the same situation, they didn’t remember how they felt about the outcome because the emotional lessons, stored in or regulated by the amygdala, apparently were out of reach.
One of the most dramatic examples was of a man working with dynamite on a road crew. In an accident, the steel tamping rod he used to pack the dynamite in a hole drilled into rock was propelled out of the hole and through his brain, leaving him miraculously alive and physically well. But as time passed, it became clear that the limbic (the part of the brain related to emotion) portion of his brain had been damaged, so that although he could calculate numbers and solve equations, he could not express a preference for meeting time, sock color, or any of the other myriad decisions you and I make every day. He had lost the emotional value of alternatives— and became unable to make even simple decisions.4
Damasio’s research (and that of those like him) suggests that the conventional wisdom imparted to us by the Age of Reason philosophers and the intervening years of scientific and business experience was, at least part of the time, wrong: emotions are in fact essential for rational decisions. Memories of ecstatic successes and painful failures help steer the decisions  we make every day.
By contrast, people who have a strong connection between the amygdala and the neocortex seem to be better equipped to make good decisions, good decisions that are based on a balancing of rational and emotional input rather than one without the other. Applying this  insight to business and organizational life, it seems clear that people who have learned over the years to manage their emotions have learned to manage their behavior and their relationships better—and that this translates into more success in the social world of business.
To a certain extent, just like IQ, we’re stuck with the emotional cards we’re dealt at birth: depression, for instance, has been shown to have a hereditary component. But the good news is that EQ seems to be more responsive to learning activities than IQ. You can develop emotional skills which will help enrich both your personal and professional life. Let’s explore some ways one can improve one’s EQ.
Recognizing your own emotions. The first step toward building your EQ, of course, is recognizing,  being aware of, your emotions.  It may seem to you a simple task, that your feelings are self-evident and that this point is hardly worth making, but closer examination reveals otherwise.
We all sometimes lose sight of our emotions. Goleman offers examples of situations we all recognize: “getting up on the wrong side of the bed” and being grouchy all day long. What  we would call “getting up on the wrong side of the bed” might actually have stemmed from kicking your toe on the bathroom door, from a curt exchange with your significant other, bad news on the radio, a bad night’s sleep stemming from heavy dinner or some modest chemical imbalance. Perhaps it was related really to rainy weather. Whatever the source, with this initial emotional set, many people are unaware that they are behaving crossly or seem depressed or “down” throughout their work day.
Being aware of emotions requires reflection. If one learns to pause, to focus inward, and to seek one’s emotions, one can become more aware of them. You might begin asking yourself several times during a normal day, “What am I feeling now?” If you do this for a week, you will probably be able to notice what you feel more readily. Then the challenge, one accepted by people with high EQs, is to manage those emotions in a more positive way. People who have developed a high EQ do not yield to their emotions easily; they seek to manage them.
Managing your emotions. Maybe the thought of managing your emotions is too  “rational” for you, or too contrived. Perhaps you prefer to allow your emotions to ebb and flow and you like the spontaneity of them. That’s fine. The point here is that the data seem to suggest that if you manage your emotions—not just suppressing them and ignoring them, but becoming more aware of them and dealing with them—you are more likely to have a positive impact on yourself and the people around you at work or elsewhere. This is particularly true in the case of the potentially debilitating emotions of anger, fear, and depression.
To a person with low EQ, emotional hijacking may seem like an irresistible call to action: anger leads to shouting, fear leads to fleeing, depression leads to crying or withdrawal. But with practice, the urgings of the amygdala can be overcome through what Goleman calls (borrowing from Albert Ellis among others) productive “self-talk.”5 When someone cuts you off on the highway, in other words, you don’t have to respond by yelling, pounding on the steering wheel, and clenching your jaw and arm muscles. There are options.To manage one’s emotions, one must first decide that one wants to be in control of them. This is not to say that one can manage emotions by will power alone, but unless one decides to do so, one is not likely to increase one’s EQ. If you say to yourself, I want to learn how to not be angry so often, or not to be depressed so often, or to be more courageous, this is a start.
Productive Self-Talk. Next, we begin to develop productive self-talk: recognizing our emotions and then pausing to “talk to ourselves” and to examine the perhaps irrational links that we make between an external event and our emotional reactions to it. Consider the rude driver again. If you imagine that maybe, just maybe, the driver who cut you off is in a hurry to get to the hospital, there suddenly seems to be less to get angry about. Even if you conclude that driver is just being self-centered and rude, you can still say to yourself, “Well, I may wish that he weren’t that way, and I cannot control the behavior of others, so why should I let a complete stranger ruin my moment or day?”
In the case of anxiety, the analytical thought process is itself often the source of trouble: some people can worry about almost anything. If you choose, however, to look at your pessimistic assumptions critically (Is this bad outcome really inevitable? What other possible outcomes are there? Isn’t there something constructive I could do to improve my chances for a favorable outcome?), you may be able gradually to break them down. People with a high EQ have learned over the years how to do this. Sometimes they use productive self-talk, other times they might even use physical relaxation methods such as meditation or prayer, as means to help stem the onset of anxiety, once it has been recognized.
All of this is a personal challenge. Do you think you can manage your emotions? Would you like to be able to do so? Are you willing to test your abilities to do so? If you can, I think, not only will you feel better about your life, you’ll be better able to manage your relationships. While Goleman lumped the personal and interpersonal aspects of EQ into one concept, I’ll separate them here for clarity’s sake.

Social Quotient

Goleman asserted that a high EQ had a positive impact on one’s relationships. If EQ is the ability to manage one’s emotions, then social quotient or SQ has to do with recognizing and managing the emotions in interpersonal relationships. SQ skills are similar to those used in EQ, but they are directed toward others in relationship. Hence, the SQ skills include recognizing emotions in others, developing a concern or caring about the emotional state of others, and being able to help them manage their emotional states.
Like EQ, SQ can in large part be learned. And in an organizational world which places a premium on interpersonal skills—in which you can’t, as they say, “fax or e-mail a handshake”— a well-developed SQ can take you places that IQ, by itself, cannot. Similar to EQ, the skills of recognizing, caring about, and managing emotions are important in SQ.
Recognizing the emotions of others. This is the interpersonal corollary to the EQ skill of recognizing your own emotions. The better you are at under-standing   your   own emotions,  the more likely you are to be adept at picking up on the feelings of others. The difficulty with “tuning in” on the emotional state of another, of course, is that people don’t usually put their emotions into words. More often, they express them nonverbally—through cues like tone of voice, facial expression, gesture, and other forms of “body language.” Some research suggests that, in general, women are better than men at this kind of attunement; however, the ability to see emotions in others is something that anyone with some attention and effort can learn.

Components of Social Intelligence SQ
Recognizing emotions in others. Listening Caring about the emotional state of others. Helping others manage their emotions.

In the organizational environment, opportunities for this kind of learning are plentiful. In meetings, sales presentations, and chance exchanges with subordinates and superiors, attention to nonverbal cues can yield sharp insights into what another person is experiencing emotionally. Knowing how to read the signs is a valuable interpersonal skill. Practice in your conversations,  in your meetings, and in group settings. While you listen, see if you can identify the emotions of the people you’re talking with. At first, this may be confusing to you; however, if you practice,  it will become second nature. You’ll learn to listen more completely.
Listening. Lots of people give lip service to the concept of listening as an important leadership skill. Yet many don’t listen well because they focus only on content. Listening, as it applies to SQ, means more than just letting someone else speak. It means listening attentively, with an ear—and an eye—toward recognizing emotion in addition to content. It means putting out of your mind, for a moment at least, what you plan to say when it’s your turn to respond. It means seeing if you can register what the other person’s heart—not just their mouth—is saying. The challenge is to be conscious of the emotions the other person is experiencing. If you’re able to see what the other is feeling, then the question is, “Do you care?”
Empathy and caring. When you become open to and aware of the feelings of others, you become able to empathize—to tune into their emotional experience. Empathy—and the caring for another’s well-being which usually, but not always, results—is a Level Three connection  that binds us in our personal lives and strengthens our attempts at leadership. When we can see what others feel and when we care about that, we have a major opportunity to influence and be influenced. If you are able to help others manage their emotions, you can be a Level Three leader.
Helping Others Manage their Emotions: If you see the emotions of others, if you care about that emotional reality for them, and if you have the skills that allow you to help them manage their emotions, you will have the opportunity to influence others. This is a powerful form of leadership.
In some cases, you may help others manage their internal emotions, to help them out of emotional hijackings. A personal example relates to my youngest child. As an eight-year-old  girl, she was very talented and energetic, and she also had a tendency to become overwhelmed by daily events. When she was feeling this way, she could talk herself into a dither until she wound up a sobbing heap on the couch or in her bed. As parents, we could see this emotional storm developing almost as clearly as the gathering rain clouds on the horizon outside. Armed with Goleman’s insights, we tried to help her manage her emotions by talking with her and helping her to see that a) she could get control of her feelings and could stop the downward spiral, b) she could focus on only one thing that needs to be done and do it without worrying about the others, and c) she could begin to feel good about herself not only for doing that one thing but also for managing her feelings. I’m happy to note that several years later, now, she has become much more adept at seeing her own emotions and at managing them. Perhaps it was just the passage of time. I think not. For many, the passage of time does nothing more than reinforce their earlier conclusions.
Coworkers in business are similar. You can help some of them learn to manage their emotions more effectively. One starts with trying to find out why they are feeling what they feel. Often, emotions are based on a comparison between an event and an underlying VABE (value, assumption, belief, or expectation). If you ask yourself or them, “Why are they feeling that way?” you can begin to get insight into their basic values and assumptions. If you can  understand those, you can see more clearly how they respond to the world around them. Then you may begin to help the person reexamine those assumptions. While many managers feel ill at ease with this approach, those who have some skill at it are able to have some profound impact on colleagues.
SQ also can come into play in helping others manage their emotions in relationships.  One of the most valuable skills in the organizational environment—and one of the most striking examples of SQ in action—lies in resolving conflicts and disputes. Conflicts arise frequently in the business world, sometimes accompanied by heated feelings and accusations. All too often, “solutions” are handed down from above—and emotionally speaking, these are solutions in  name only: business goes on, but someone inevitably comes away feeling wronged and resentful—and perhaps in search of “payback.” In the long run, as morale and cohesiveness breaks down, the organization as a whole will suffer.
Developing skill in managing emotionally charged conflict situations is a valuable personal asset. When people have low EQs and SQs, they can let their emotions get the better of them. When one is skilled in recognizing emotions and in managing emotions, in themselves  and in their relationships, one can help balance the rational content and the emotional content and influence people to make better decisions. Good mediators are not only smart, they have strong EQ and SQ skills.
Here’s a simple example. An employee reacts to a coworker’s criticism, gets hijacked, and launches a volley of defensive remarks that make matters more volatile and charged. A person with high EQ skills would instead have turned to “self-talk,” interpreting the criticism judiciously in order to keep destructive emotions in check. In much the same way, a high-SQ mediator can explain to the injured party that the remarks may not have been intended to wound; that at any rate, the comments are only data and not necessarily fact; and these need not be internalized unless one chooses to do so. The mediator might then explain to the critic better words to have chosen, if one wants to influence others.
“Common sense!” you say? Yes, common for people with high SQ, maybe not so common for people with lower SQs. One person, gifted in SQ, can help offset the EQ deficiencies of many others—and in so doing, is likely to be seen by coworkers as an extra- ordinary kind of person, a person worthy of leadership. Needless to say, organizations find such mediators and leaders extremely valuable. And conflict-resolution skills, the skills of SQ, as any diplomat or marriage counselor will tell you, can be learned.

Change Quotient

Another kind of intelligence should be introduced here. It’s not one that Gardner or Goleman identified explicitly, but it has a big impact on leadership and the ability to lead. I call  it “CQ” or Change Quotient. People seem to vary in their change intelligence, their ability to recognize the need for change, their comfort in managing change, and their understanding of and mastery of the change process.
High-CQ people are the so-called lifelong learners who adapt to rapidly changing business environments much better than their more stubborn counterparts. When high CQ people look at challenges, they see opportunities rather than threats. They are willing to learn whatever skills a situation calls for rather than look for ways to reapply what they already know. Here are a few ideas for managing your development  in CQ.
 

Components of Change Intelligence CQ
Recognizing the need for change Understanding the Change Process Mastering implementing the Change Process Comfort in managing the Change Process

Recognizing the need to change. Many people find it difficult to recognize signals of change that surround them in the environment. Maybe the signals are coming from customers, from significant others, from employees, from the financial indicators, or from colleagues and peers. E.C. Zeeman, an English researcher, made an interesting observation in this regard. He noted that drunk drivers are very dangerous: they begin to steer off the road, see a tree, overcorrect, see oncoming headlights, and overcorrect again, perhaps plowing into the next set of trees. Then he noted that, paradoxically, sober drivers drive the same way. That is, sober drivers never drive perfectly straight, they see disconfirming data coming in and make a small mid- course correction. The difference is that the drunk driver’s ability to see the disconfirming data  is impaired, and he or she waits until too late to make the appropriate correction. Of course, the opposite is equally dangerous: people who are hypersensitive to incoming data may get so overloaded that they become paralyzed.
We can apply the same reasoning to business leaders. Effective leaders will have a high CQ, that is, they will be able to recognize the need for change before it’s too late. In fact, Jack Welch, CEO of General Electric for the last twenty years of the last century, takes as one of his six core leadership maxims, “Change before you have to.”9 The ability to sift from among a multitude of signals; pick out the ones that are important, combined with a willingness to change; to consider new ways of doing things; and the mastery or skill of implementing new changes are critical for leaders-to-be.
Understanding and Mastering the Change Process. Many people are afraid of things  they don’t understand. The more we understand and become competent with something, the less frightening it becomes. Change is no different. There are some predictable  patterns  and reactions to change that can be described and understood. One can practice managing small change efforts and in so doing become more adept at managing larger ones. A general change process and ways of managing it are presented in a later chapter devoted to that topic.
Emotional comfort with change. For many of us, there isn’t much that’s comforting, in and of itself, about change; by definition it means getting out of our comfort zone and experiencing different things. While some people enjoy and seek “out of the comfort zone” experiences, most of us seek comfort and solace in the things we know well. But one sign of a high CQ is a positive emotional attitude toward regular change: the feeling that change will be for the better, and ought to be embraced. In one management seminar, a participant describing one of his core leadership principles, said, “Pain is your friend.” What he meant by that was that learning is almost always the result of something that is uncomfortable or in some way, even a small way, painful, and that learning is good because it helps enhance your competitive advantage, hence, pain is your friend.
This idea is consistent with the theme of the best-selling book, The Road Less Traveled, by Scott Peck.10 Peck argues that most people take the comfortable road, the one they know, but that the person who learns and grows and contributes more takes the road less traveled, the one with a little discomfort, a little pain, a little learning in it. He notes that taking this path usually means a little extra effort. And it usually means a person who is better adapted to the world around them and more influential in it.

Conclusion

In Emotional Intelligence Goleman uses the metaphor of a journey to underscore the idea that emotional learning is not a single lesson but a course of study: “In this book I serve as a guide in a journey through these scientific insights into the emotions, a voyage aimed at bringing greater understanding to some of the most perplexing moments in our own lives and in the world around us.” As with most journeys, a guide can only take you so far. In the end, each traveler must make the effort to get from one place to another. The challenge and invitation presented by this chapter to each of us is to assess our emotional preparedness for leadership and to invest in our abilities to improve that kind of intelligence. This means viewing intelligence in a broader context, one that includes not only IQ, but also EQ, SQ and CQ.

Principles of Effective Leadership Introduced in this Note

  1. While intelligence is often associated with good leaders, recent research suggests that effective leaders have many kinds of
  2. Effective leaders have a high EQ; they are able to manage their emotions
  3. Effective leaders also have a high SQ, in that they are able to recognize and help manage emotions in
  4. Effective leaders also have a high CQ, the ability to recognize the need for change, and some comfort and skill in understanding and managing the change

Questions for Reflection

  1. How well do you manage your emotions? If you’d like a little help in assessing your EQ, you might try the Internet site, http://www.utne.com/azEQ.tmpl. This site may change. If it does, you can search the web for Emotional Intelligence to find, perhaps, another method.
  2. How well can you discern the emotional states of the people you work with on a daily basis? Do you ever check with them to confirm or disconfirm your views? What emotions did you observe at work this past week?
  3. When did you last help someone else manage their emotions? What did you do? How did it go? What could you have done better?
  4. How is high EQ different from stuffing or ignoring emotions? What is the consequence of both approaches?
  5. List the major changes you’ve made in your life. How well did you navigate them?  What did you learn from them? What feelings were associated with those changes?
  6. What signals for change do you see around you today? What kinds of changes are these signals asking you make? How do you feel about that? Do you anticipate changing or do you avoid it?
 
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