Resilience and Sustainable Leadership

#### **Chapter 10**

## The Social Infrastructure of Organizational Resilience, Agency Capacity and Resilience Spirals: Starting Points for Resilient Leadership

*Holger Pfaff*

#### **Abstract**

The aim of this chapter is to analyze the social preconditions and dynamics of organizational resilience and the role of leadership in managing these conditions and dynamics. The chapter begins with an examination of the concept of organizational resilience, presents an individualistic and systemic perspective on this construct, proposes a social infrastructure model of organizational resilience and describes the phenomenon of resilience spirals. The chapter presents a functional performance level model of organizations and describes the possibility of upward spirals where organizations move up the functional performance levels and the possibility of downward spirals where organizations move down the functional performance levels. The importance of leadership in building and maintaining the social infrastructure of resilience and in managing resilience spirals is emphasized.

**Keywords:** organizational resilience, collective action, collective agency, resilience spirals, social infrastructure, social capital, leadership

#### **1. Introduction**

In times of crisis and adverse events, a certain type of leadership is required which is often called resilient leadership [1–8]. The literature on resilient leadership delivers rich knowledge about the characteristics of resilient leadership [2], the leadership styles of resilient leaders [1, 9], their actions and activities during crisis to foster collective and organizational resilience [4, 9] and ways to enhance resilient leadership [8, 10]. In contrast to this, comparably little is known about the role of leadership in building and maintaining the social foundation of organizational resilience. Some scholars have gone in this direction explaining how leaders could cultivate and activate social and cultural resources which foster organizational resilience [11–13]. The aim of this paper is to continue this work by more closely examining the social preconditions for and dynamics of organizational resilience and the role and starting point of leadership in shaping these phenomena. For this purpose, the chapter focuses first on the concept of organizational resilience, second on the social foundation of organizational resilience and third on the phenomenon of

resilience spirals. The role of leadership in building and maintaining this social core of resilience and managing resilience spirals and the starting points to do so are emphasized.

#### **2. Organizational resilience: perspectives and preconditions**

This chapter presents two perspectives on the nature of organizational resilience and stresses the importance of examining the preconditions of organizational resilience.

#### **2.1 Two perspectives on the nature of organizational resilience: the individualistic and systemic perspectives**

The individualistic perspective on organizational resilience regards the individual resilience of the members of an organization as the main basis for organizational resilience [14–16]. Individual resilience could be defined as "the ability to bounce back from adversity, frustration, and misfortune" [17]. From the individualistic perspective, organizational resilience is the result of the aggregation of the individual resilience of all members. The factors that foster the resilience of individuals are a mixture of pessimism and optimism [14, 16], a proactive orientation [14, 18–20], sense-making abilities [14, 21], autonomy and self-determination [22], risk awareness [16], the ability to connect to others' knowledge [23, 24], the ability to use available resources [24], individual readiness to change [25, 26] and tolerance for ambiguity [27, 28].

The systemic perspective conceptualizes organizational resilience as an attribute of the organization. The literature describes at least four different systemic conceptions of resilience. The ecological resilience concept characterizes resilience as a system's ability to absorb external energy without structural change. This means that "the measurement of resilience is the magnitude of disturbance that can be absorbed before the system changes its structure by changing the variables and processes that control behavior" [29]. The second systemic concept describes resilience as the ability to bounce back to the previous equilibrium. This type of resilience "concentrates on stability near an equilibrium steady state, where resistance to disturbance and speed of return to the equilibrium are used to measure the property" [30]. The third conception of resilience defines resilience as the ability to achieve a new equilibrium, thus attaining a renewal state [16, 31]. The most dynamic systemic conception describes resilience as the ability of a system to switch between different equilibria [32–34] without changing the stable core of the system [33]. This core consists of the "keystone structuring processes which enables systems to adapt across a number of scales, sources of renewal and reformation" [33]. One aim of this chapter is to propose the hypothesis that in the case of social systems, the social infrastructure of collective systems is an important part of this core.

#### **2.2 Preconditions of organizational resilience**

There are specific and nonspecific preconditions that contribute to organizational resilience. Scholars have identified specific conditions that promote resilience. According to Hollnagel [35], resilient organizations are characterized by four abilities, namely (1) the ability to anticipate, (2) the ability to monitor possibly dangerous developments, (3) the ability to respond quickly and appropriately and (4) the ability to learn from past events and crises [36]. These abilities can be fostered by different measures [37], such as focused Human Resource (HR)

#### *The Social Infrastructure of Organizational Resilience, Agency Capacity and Resilience Spirals… DOI: http://dx.doi.org/10.5772/intechopen.101786*

strategic management [19, 22, 31], collective risk awareness tools, critical incident reporting systems [38–40], preparedness strategy [16], uncertainty strategies [19] and analysis tools such as the resilience analysis grid [35, 41].

Nonspecific preconditions for organizational resilience are factors that are necessary but not sufficient for resilience. They are useful not only for coping with crises but also for managing routine, everyday demands. Nonspecific preconditions lay the foundation for resilience but are unable to produce resilience on their own. Research into organizational resilience has identified many attributes in organizations that could contribute to resilience in a nonspecific way [37]. Identified nonspecific preconditions for organizational resilience include ritualized ingenuity [14, 42], flexibility [42], elasticity [28], adaptive capacity [16], organizational readiness to change [26, 43], proactiveness [19, 44], robustness [16], redundancy [16], resourcefulness [16], rapidity [16] and the regeneration capacity of an organization [45]. Other nonspecific preconditions are financial resources [46, 47], technical resources [28, 47] and informational resources [28]. With regard to the social foundations of organizational resilience, it is worthwhile to more closely examine the social resources which have been identified as relevant for organizational resilience. These are communication (to exchange information and knowledge relevant in times of crisis) [16], commitment and emotional attachment to the organization [16, 24, 26], common values [21, 48], trust and open communication [26, 28, 48–50] as well as social capital, sense of belonging and relational reserves [16, 26, 28, 46, 51].

#### **3. The social infrastructure of collective agency: the social foundation of resilience management and organizational resilience**

One purpose of this paper is show, that the stable core, which Gunderson [33] describes as a property of higher order resilient systems, is—in the case of social systems—equivalent to the social infrastructure of these systems. This social infrastructure guarantees that fast collective decisions and action could be made and that the collective systems experiences collective agency during normal times and during crisis. This social infrastructure consists of at least four infrastructural components: adaptive structures, goal-attaining structures, integrative structures and pattern maintenance structures. According to the infrastructural model of organizational resilience (see **Figure 1**), these structures together heighten the agency capacity of an organization, which is its basis for collective action and collective agency. Collective agency itself is a general precondition for all management activities in an organization as long as these activities are based on collective action. This is also true for resilience management, which if properly done leads to a higher amount of organizational resilience. Additionally, organizational resilience is not only dependent on resilience management alone but also on infrastructure, agency capacity and collective agency in a direct way. The amount of organizational resilience in turn influences the amount and quality of the social infrastructure of collective agency (**Figure 1**).

**Figure 1.** *The social infrastructure model of organizational resilience.*

#### **3.1 The social infrastructure of collective action and agency capacity**

According to the structural-functional theory, I distinguish functions from structures. The underlying hypothesis is that certain structures may have certain functions [52–54]. The structure is then a solution to a systemic problem. Talcott Parsons' structural-functional theory further states that a social system has to fulfill four functions to act and survive: adaption (A), goal attainment (G), integration (I) and latent pattern maintenance (L; AGIL functions). The hypothesis here is that if all four functions are fulfilled, the collective possesses systemic agency capacity (see **Figure 2**) and by this, the ability to be an autopoietic social system. This autopoietic system is "self-producing or self-constructing" [55]. In this case, all four functions work together, forming the systemic agency capacity (**Figure 2**) and making a collective system able to act and react, to regulate itself according to its own value-based standards and to rebuild and reconstruct itself in times of crisis. Thus, if the metafunction systemic agency capacity exists within an organized collective, the emergence of an autopoietic social system from this collective is highly probable.

I now more closely examine the structures necessary to fulfill these four functions. They form the social infrastructure for collective agency and action. Adaptive structures enable a collective to produce (common) goods and deliver services and thus obtain resources from the environment in exchange, which can be used as general resources to adapt to new situations [53]. Goal-attaining structures enable a collective to make consensual decisions, set goals, control the goal-attaining process, analyze the gains and losses in a reflective way and redirect activities that have not been helpful to achieve a goal [56]. Integrative structures are necessary to prevent disintegration, subgroup conflicts and noncohesiveness and to build social capital. Integrative structures include reciprocity-based and trustful social networks [51, 57, 58]. Latent pattern maintenance structures [59], such as a system of values, knowledge, beliefs and symbols are necessary to guide and evaluate action with regard to the systems´ own value standards. Institutionalization and socialization agents and processes are part of this structure because they have the task of transferring the values, knowledge, beliefs and symbols into the collective system and to the next generation of individual members (see **Table 1**).

#### **3.2 Agency capacity and collective agency**

Organizational resilience requires (a) fast and consensual collective decisionmaking to react to new events in a timely fashion; (b) common collective actions of the leaders and followers to execute resilience management in an impactful way; and (c) a robust organization with a stable core, absorptive capacity and the property of general agency, which enables organizational fitness. The first point should not be taken for

**Figure 2.**

*Systemic agency capacity as a higher-order function of the AGIL functions.*

*The Social Infrastructure of Organizational Resilience, Agency Capacity and Resilience Spirals… DOI: http://dx.doi.org/10.5772/intechopen.101786*


**Table 1.**

*The social infrastructure of collective agency.*

granted within organized collectives, especially within management boards [60] and top management teams [61], where leadership in singular is replaced by leadership in plural. Leadership in plural is the new normal [62]. In sum, resilient organizations need collective agency and the general capacity to execute this agency as the foundation for fast, united and impactful collective action with regard to adverse events.

Collective action could be defined as "joint activities by a wide group of actors on the basis of mutual interests" [63]. Because people often do not have mutual interests, collective inaction is commonly observed [63, 64]. To overcome the default tendency of collective inaction and enter the state of collective action, collectives have to transform themselves into a collective agent [63] and in the long run into an autopoietic social system [65, 66].

A collective agent "is a collective (…) that can (…) be the subject of attitudes and can perform actions as a collective" [67]. An important property of a collective agent is collective agency. According to the social cognitive theory perspective, "people's shared beliefs in their collective power to produce desired results are a key ingredient of collective agency" [68]. This includes not only "shared knowledge and skills of its different members, but also (…) the interactive, coordinative, and synergistic dynamics of their transactions" [68]. According to Bandura, "perceived collective efficacy is not simply the sum of the efficacy beliefs of individual members (…) it is an emergent group level property" [68].

Systemic agency is a special type of collective agency. It is produced if the collective transforms itself into an autopoietic social system [69] by incorporating additional structural features. The social ontology perspective within collective research [67] delivers some hints about these necessary features. According to this approach, the collective agency of an autonomous collective agent consists of at least three components. First, a collective which possesses collective agency should be a "social entity that consists of an unspecified number of individuals who share some properties that allow for their identification as a collective" [67] and which "exhibit a certain degree of persistence regarding their own identity in the case the identity of their constituents is changed" [67]. Examples of this are common values or even a common worldview of the members of the collective. Second, a collective agent which possesses collective agency should be clearly distinguishable from its environment and able to actively shape this environment and evaluate its own behavior with regard to normative standards and values, which are generated by the collective itself [67]. Third, the collective agency should be a significant property of the collective agent as a whole [67]. Out of this perspective, collective agency is a potential: "possessing agency (…) does not imply that the collective actually performs any particular action or holds a specific attitude at any instance", but it implies "that it would be possible for it to do so" [67]. To distinguish this form of collective agency from the term used by Bandura [68], I propose to call the socialontological-based term "systemic collective agency" or "systemic agency".

The amount of collective and systemic agency depends on functional preconditions. As in the case of humans where personal agency requires that the human body is able to fulfill basic functions like body coordination [70], collective agency requires that the collective system is able to fulfill basic functions necessary for acting and surviving as a social unit. The agency capacity is the most important of


#### **Table 2.**

*Stages of collective development, AGIL functions and capacity type.*

these basic functions. The amount and quality of the agency capacity of a collective corresponds with the development stage of the collective (**Table 2**).

A mere collective (stage 1 collective) is transformed into a cohesive collective (stage 2 collective) by adding social cohesion to the disorganized mere collective. In this case, the group fulfills the function of integration (I-function). The social group is therefore able to shape the actions and behavior of its members, producing conformity, group think and behavior change [51, 71–73]. This enables cooperation between individuals, including those with divergent interests [57, 74]. In cohesive collectives, social cohesion bundles otherwise chaotic individual energies and transforms these into social energy [56]. This kind of collective system can be called an action-shaping social system or social system capable of shaping action [75], and the type of capacity this collective possesses can be called action-shaping capacity.

If a cohesive collective is also able to set goals and attain them and if the members of this collective develop a sense of purpose [76], the goal attainment function (G-function) is fulfilled. Stage 3 collectives fulfill the G-function plus the I-function. This leads to the "GI factor" [56, 77]. This factor "produces collective energy within a group and gives this energy a direction, producing goal-oriented collective action" [56]. The result is a collective with "a sense of purpose and unity", speaking with one voice [56, 77] and possessing shared beliefs of collective efficacy [68]. This kind of collective system could be called a collective agent or, from the social system perspective, a social system capable of acting [75]. These types of collectives possess "collective agency capacity".

Social systems capable of acting (collective agent) could further transform themselves into an autopoietic system by fulfilling two functions, namely the adaptive function (A-function) and the latent pattern maintenance function (L-function).

The A-function is achieved if the collective produces goods and services for the environment to receive needed resources in exchange in order to accumulate needed resources as well as slack resources like social, human, economic and cultural capital [60, 78, 79]. The A-function is also fulfilled if the collective internally produces slack resources and flexible structures to be able to adapt to new situations in turbulent times [79, 80].

*The Social Infrastructure of Organizational Resilience, Agency Capacity and Resilience Spirals… DOI: http://dx.doi.org/10.5772/intechopen.101786*

The L-function is fulfilled if the collective has incorporated value systems, knowledge systems, belief systems and symbolic systems (a) which serve as guiding standards and values against which the collective system's behavior is evaluated by itself and (b) which could be transferred to the next generation of members via socialization and internalization [54, 81]. Additionally, the L-function is fulfilled if these cultural elements are institutionalized into the collective system by roles, positions and norms [54, 64, 81]. This leads to an organization-culture fit [82]. By these three means—socialization, internalization and institutionalization of cultural structures—social systems, which are capable of acting, are additionally able to maintain the latent pattern of these systems over time. This and the ability of the social system to evaluate its own behavior by the cultural values which the system has generated itself ensure self-organization and autopoiesis independent of the strategies and personalities of the individuals who are temporarily members of this system.

If a social system fulfills all four AGIL functions, systemic agency capacity is produced (see **Figure 2**). This is a necessary condition for sustainable agency and the emergent birth of an autopoietic social system. From Coleman's action theory perspective, this type of system can be called a corporate actor [57]. From the sociological systems theory perspective, such a collective can be called an autopoietic social system [65, 66, 83–85].

#### **3.3 Resilience management**

Resilience management comprises different dimensions [86–88]. As already outlined, resilience management rests on four abilities: the ability to anticipate, the ability to monitor possibly dangerous developments, the ability to respond quickly and appropriately and the ability to learn from past events and crises [35]. The basis for these abilities is the capacity to perform collective action in a self-organized way. Without a minimum amount of this agency capacity, resilience management would be less impactful.

Resilience management could be defined as the process of collective coping with an adverse event and its consequences with the aim to prevent and reappraise adverse events and to buffer their impact or compensate for losses or damages. The concept of resilience management presented here consists of four types of collective resilience management, namely (1) appraisal-focused, (2) problem-focused, (3) impact-focused and (4) spiral-focused resilience management.

With regard to appraisal-focused resilience management, leaders can shape and influence the collective perception and appraisal of a given or expected situation with regard to its threat and loss potential. Leaders are also able to shape and influence the collective appraisal of the coping resources available to handle the situation properly. Additionally, they can support the collective reappraisal of a given situation [89]. In a positive scenario, a perceived threat could with the help of the leader be reappraised collectively as less threatening or as no longer threatening [90]. Charismatic leaders in particular are good at this [90].

Problem-focused resilience management aims to prevent adverse events in the future by altering the dangerous environment in the midterm and long term and/or decreasing the burden of the existing adverse event. Measures that fall into this category of resilience management include altering by political, regulatory or technological means the natural, technical, biological and psychosocial environment with the goal to minimize the probability and severity of adverse events in the future [91]. Other measures within this category include monitoring of possible threats, learning from crises (e.g., [92]), critical incident reporting [38, 39], preparedness strategy [16] and uncertainty management [19].

Impact-focused resilience management aims to manage the consequences of the adverse event. The aim of the measures in this category is not to solve the primary problem but to prevent the occurrence of follow-up problems caused by the primary adverse event and to mitigate the impact of the adverse event and the follow-up problems on the organization and their members. Measures within this category include using financial reserves, staff overhang, organizational slack, storage capacity, social capital and other impact-absorbing structures and resources (e.g., [47, 92, 93]). Other measures are to compensate for losses or impairment and to ameliorate the collective pain caused by the adverse event by organizing, for example, positive events to replace negative emotions with positive emotions. Another form of impact-focused resilience management is to accept the negative structural consequences of the adverse event and to adapt the organization to the new situation by restructuring it and attaining a new, often lower equilibrium. The fourth form of resilience management—the management of resilience spirals—is explained later in detail.

#### **3.4 Organizational resilience**

Organizational resilience occurs if an organized collective is able to prevent, appraise, absorb and cope with adverse events and their consequences in such a way that the organized collective can either (a) maintain the previous equilibrium; (b) bounce back to the previous equilibrium; (c) find a new, satisfying equilibrium; or (d) find new equilibria by maintaining a stable core within the system [33, 37, 94]. An optimal form of organizational resilience is obtained when an external adverse event can be managed by the organized collective without loss of collective performance.

The concept of functional performance levels outlined here proposes a hierarchical model of optimal organizational resilience. This model consists of five main levels of equilibria and five levels of a functional performance (see **Table 3**). The levels of equilibria are the (1) nonautonomous, (2) autonomous, (3) routine, (4) innovation and (5) resilience equilibria levels. These levels are separated by five functional thresholds: (a) survival, (b) autonomy, (c) routine, (d) innovation and (e) resilience. If an organized collective system falls below a threshold, it immediately moves to a lower functional performance level.


#### **Table 3.**

*The concept of functional performance levels of organizations.*

#### *The Social Infrastructure of Organizational Resilience, Agency Capacity and Resilience Spirals… DOI: http://dx.doi.org/10.5772/intechopen.101786*

An organized collective system which is located on the functional performance level 5 fulfills all the requirements for good organizational resilience while still accomplishing innovation work as well as routine work in a parallel way. An organized collective system at functional performance level 4 (see **Table 3**) is able to innovate and do routine work but is unable to manage disruptive events without damaging innovation management and routine processes. This functional status is close to the status known in the management literature as ambidexterity. Ambidexterity is defined as an organization's ability to simultaneously exploit the present (by routine work) and explore the future (by innovation management) [95, 96]. Ambidexterity is regarded as a prerequisite for organizational survival [97], and there are empirical results that support this hypothesis [98]. Ambidexterity could be regarded as a prerequisite for resilience [99, 100] because "ambidextrous firms are better than others at responding to disruptive new business models and emerging technologies" [101]. Factors that promote ambidexterity include a collaborative community [102], support [103] and trust [103]. These factors are important parts of the social infrastructure of collective action as previously shown in this article.

If organized collective systems are unable to perform at level 3, they fall below the routine threshold, which means that they act autonomously but cannot manage routine tasks in the necessary quantity, quality, efficiency or timeliness.

If organizations also fall below the autonomy threshold, they reach functional performance level 2. This means that they need external support to act and survive. This external support could stem from the government or investors. An example of this are the bailouts of airlines during the COVID-19 pandemic [104] or bankruptcy. Some scholars argue that bankruptcy leads to a relief of financial burdens, but it does not change the structures and processes that led to bankruptcy. Therefore, without changing structures and processes and achieving a new equilibrium, longterm survival is doubtful in these cases [105].

If organizations also fall below the survival threshold, the organization will no longer survive.

#### **4. Resilience spirals**

Organizations differ with regard to the levels of their functional abilities and can be located according to these abilities on the functional performance ladder already shown in **Table 3**. Organizations that are close to bankruptcy are at the bottom of this ladder, and organizations that are flourishing are at the top. The important point is that first, organized collective systems are able to move up or down this functional performance ladder and that second, this move takes on the form of a spiral: an upward spiral in the case of organizational success and a downward spiral in that of organizational failure.

The reciprocal nature of the relationship between organizational success and organizational resources nurtures the organizational spiral. During upward spirals, the availability of resources leads to organizational success, this success leads to additional resource gains and so on. Some of the resources gained through success include financial or human resources (e.g., attracting young talent). This resource gain provides fertile ground for even more success in the future. In short, success breeds success. This effect is also known as the Matthew effect [106], which is the central pillar for upward spirals. Organizations on an upward spiral experience an accumulation of institutional advantages over time. Contrary to this, in downward spirals, a depletion of resources could provoke organizational failure, and this organizational failure reduces the probability of gaining additional resources in the near future. The causal path "resource depletion > failure > resource depletion > failure"

**Figure 3.** *The resilience spiral: downward spirals (*-*), upward spirals (+) and steady state (=).*

produces a downward spiral. Organizations on a downward spiral experience an accumulation of institutional disadvantages over time [107].

Resilience spirals are a subtype of organizational spirals. The basic causal path is illustrated in **Figure 3**. The social infrastructure promotes organizations' agency capacity. This agency capacity enables collective agency, which is necessary to execute resilience management. Additionally, this collective agency leads to strong organized collective systems, which due to their stable "social infrastructure" core can withstand even strong disruptive events by their mere stability and absorptive structures. If an organization is resilient by its mere presence and stability, it is able to gain resources even during times of trouble. This gain in resources could further foster the infrastructure of the social system, which leads to a causal chain of "infrastructural resources → organizational resilience → gain in infrastructural resources → gain in organizational resilience". This pattern could be called an upward resilience spiral.

In the case of a downward resilience spiral, the causal chain is "weak organizational resilience → loss of infrastructural resources → weaker organizational resilience → additional loss of infrastructural resources". For example, the collective learning process after a disaster could lead to the conclusion that the organization needs to strive for a new equilibrium. A move from the previous equilibrium to the new one could be associated with a gain or loss of resources (see also [108]). If the new equilibrium is on a higher functional level, the move is associated with a resource gain, while if the new equilibrium is on a lower functional level, there is a loss of resources. In this last scenario, the organization is stabilized on a weaker resource level than before. This loss of resources leads to lower collective agency, which could weaken organizational resilience and heightens the possibility of further loss of resources. In this case, there will be a downward resilience spiral. Upward resilience spirals are based in part on the Matthew effect [106]. Downward spirals are characterized by an accumulation of systemic disadvantages. This can be described as a negative Matthew effect.

Upward and downward resilience spirals are processes where old equilibria are abandoned and new equilibria achieved: lower ones in the case of downward spirals and higher ones in the case of upward spirals. In all these cases, the core of the system—the social infrastructure and the resulting agency capacity—should be protected to ensure stability during change and to make change possible. If this protection is no longer possible, the downward spiral has reached a critical phase.

This critical phase occurs when further resource loss leads to a situation where the social infrastructure and the corresponding agency capacity function is impaired in such a way that the functioning of the collective system, meaning its ability to act and to do this in effective way, is endangered.

#### **5. Leadership and organizational resilience: starting points**

Resilient leadership exists if leaders care about organizational resilience in at least three ways. One way is to lay the groundwork for long-term organizational resilience by building the social infrastructure for collective action. Another way is more specific, namely to develop resilience management, run it and activate it fully in times of trouble. In addition to these two leadership strategies, there is a third one, namely the strategy of managing organizational spirals in general and resilience spirals in particular. Therefore, we distinguish three starting point for resilient leadership: (1) the social infrastructure of collective action and agency, (2) resilience management and (3) resilience spirals. Because we already discussed resilience management, we now focus on how leaders could foster the social foundation and then on how they are able to manage resilience spirals.

#### **5.1 Leadership: building up, maintaining and modernizing the social infrastructure of collective action and agency**

A central leadership task is building and maintaining the social infrastructure for collective action by accumulating and conserving the adaptive, political, integrative and cultural structures. These structures are necessary to fulfill all four basic AGIL functions and their higher-order function systemic agency capacity. Leaders who manage social systems, which possess systemic agency capacity, are more successful in reaching their goals. This is greatly independent from the content of the goals and measures as long as they are compatible with the value system of the organized collective. Organizational resilience is an example of such a goal.

In times of rapid change, leaders have to build up structures which enable adaptation. This fosters the A-function and the capacity to adapt to new situations [109]. The primary way to do this is to promote adaptive leadership [110]. This is the ability of leaders "to become more fit with the environment in which they operate, including but not limited to modifying existing procedures, adjusting to new circumstances, and updating knowledge and skills to meet new situational demands", [110] and it includes the "need to continually learn, change and keep a flexible mindset" [110].

The second task of leaders with regard to social infrastructure is to establish and optimize collective decision-making structures as well as the process of strategic goal-setting, −controlling and -attaining. There is broad knowledge about how to conduct and organize managerial decision-making [111] even in complex environments [112] and how to conduct and measure strategic goal-setting and -attaining [51, 113–115].

The third task of leaders is to strengthen the social integration and cooperation within the collective they lead. Leaders are responsible for building and maintaining solidarity and cohesiveness within the organized collective. This strengthens the social capital and the integrative structures of the collective they lead. Leaders can contribute to this by (1) a "consideration" leadership style which stresses the orientation toward good social relationships [116, 117]; (2) a transformational leadership style which combines having vision with creating a "we-feeling" among the followers [118] in such a way that they are willing to transfer the vision into practice; (3)

cohesive leadership [119], which promotes social cohesion within the followers; or (4) collaborative leadership [120–124], which "recognizes the need for appropriate balance—between power sharing and control, between process and results, between continuity and change, and between interpersonal trust and formalized procedures" [123] and which is most appropriate in professional organizations, knowledge work organizations and partnership networks [123, 125, 126]. Therefore, enhancing the social capital and cooperation within organizations is central for fulfilling the I-function and is one of the top tasks of leaders within organizations [76, 127].

The fourth task of leaders with regard to the infrastructure for collective agency is to build up the cultural structures within the collective they lead [128, 129]. Cultural structures comprise the value system, knowledge system, belief system and symbolic system. Leaders can shape the culture of an organization in many ways [59, 130–135]. They shape the culture of the collective by being a role model with regard to the common values of the collective [134, 136]. Additionally, they should be aware that their decisions send cultural signals to their followers with regard to the values the organized collective prefers [76, 133]. This is the case, for example, with job promotion (e.g., which person with which attitudes and values is the preferred one?) [76]. Additionally, leaders should organize the transfer of values, knowledge, beliefs and worldviews to their followers and the next generation. Organized collectives often try to establish a person-culture fit to reproduce their culture by employing individuals who fit into the organizational culture [82, 137]. However, if leaders want to change the culture of organized collectives, they should change the personnel selection team and the selection criteria in order to not reproduce the old culture by recruiting the same way the same sort of people as always.

The fifth function of leaders with regard to social infrastructure is to organize and manage the maintenance and modernization of these four structural elements: the maintenance and modernization of organizational culture [134, 138–140]; the maintenance, reproduction and modernization of the social structures which produce solidarity and integration [76, 141]; the maintenance and modernization of the adaptive structures like machines and technologies; [142] and the maintenance and modernization of the goal-attaining and decision-making structures [143, 144]. This guarantees the sustainability and adaptability of the collective system and its long-term survival.

#### **5.2 Leadership: managing resilience spirals**

Leadership plays a central role in the management of organizational spirals in general and resilience spirals in particular. The main task of resilience-oriented leaders is to manage the collective system they lead in such a way that the reciprocal mechanism (see **Figure 3**) stabilizes the system in a steady state where resource gains equal resource losses. In this scenario, there is a strong probability that organizational resilience can be maintained on a given level (either a low or a high level) [145]. If the level is low, one of the critical tasks of leaders and managers is to move the organization or organizational unit up the functional performance levels. They are able to accomplish this by using the causal pathway (see **Figure 3**) to higher resilience via fostering the social infrastructure of collective action by establishing adaptive structures, by investing in the social capital of the organization (integrative resources), by creating efficient decision-making structures and processes (political resources) and by working on common values, visions and knowledge (cultural resources). The second way is to manage the activities of the members in a goaloriented and motivating way. The third way is by building up systematic resilience management through the implementation of specific resilience measures, such as resilience engineering, resilience analysis and threat monitoring (e.g., [92, 94, 146]). *The Social Infrastructure of Organizational Resilience, Agency Capacity and Resilience Spirals… DOI: http://dx.doi.org/10.5772/intechopen.101786*

Another important point of resilient leadership is to heighten the capacity of the collective system to be ambidextrous. This enables an organization to do routine as well as innovation work in an efficient and robust way with enough room and energy to also cope with adverse events. Another important task of leaders is to build up an early warning system which signals to them that a downward resilience spiral is just beginning and which delivers evidence-based suggestions [147] about how to stop the downward spiral in a fast and efficient way.

#### **6. Limitations and conclusions**

The main limitation of this article is its nonempirical foundation. The article presents theoretical thinking about the social foundations and social dynamics of organizational resilience. The hypotheses presented are not supported by empirical evidence. Thus, as long as these concepts and hypotheses have not been empirically tested and proven, it is necessary to be cautious with practical conclusions. However, it has to be stressed that the concept of the social infrastructure rests on the theoretically proven AGIL concept of Talcott Parsons [53] which has been used or discussed by several social theorists like Habermas [138, 141], Luhmann [148], Münch [149, 150] and Gerhardt [52, 151] and which has been tested empirically in part in some studies [56, 152].

With this limitation in mind, it is possible to draw some tentative practical conclusions from the concepts outlined. The first conclusion is that leaders should take care of followers by enhancing the integrating forces among them [76, 127]. The second conclusion is that leaders should be aware of the importance of effective and efficient decision-making structures and processes and goal-attaining structures (e.g., the controlling system) within the organizational unit they lead in order to enhance the unit's agency capacity. Third, leaders should foster the adaptive structures of their unit by building processes and structures to produce goods and services efficiently and by accumulating resources to obtain organizational slack which can be used in times of crisis. The fourth conclusion is that leaders should install knowledge and value management to stabilize and enhance the organization's cultural capital. The fifth practical conclusion is that leaders are better off if they install systematic resilience management which protects the organizational units in times of crisis [153, 154]. The sixth conclusion is that leaders should build up early warning systems to detect the beginning of downward spirals [155].

#### **7. Summary**

The aim of this paper was to describe the social foundations and dynamics of organizational resilience and the role of leadership in building and steering these social phenomena. The two main hypotheses were that organizational resilience depends on collective resilience management and the agency capacity of the organization. This capacity was conceptualized as a higher-order function combining the four AGIL functions. These functions are fulfilled if four AGIL-promoting structures are present, namely adaptive, goal-attaining, integrative and latent pattern structures. The reciprocal relationship between the social infrastructure of collective action and organizational resilience could lead to a resilience spiral going either upward or downward. In sum, the task of resilient leadership is to build and maintain the social infrastructure of collective action, foster the agency capacity of their own organization, execute resilience management and prevent downward spirals.

*Leadership - New Insights*

### **Author details**

Holger Pfaff University of Cologne, Cologne, Germany

\*Address all correspondence to: holger.pfaff@uk-koeln.de

© 2022 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

*The Social Infrastructure of Organizational Resilience, Agency Capacity and Resilience Spirals… DOI: http://dx.doi.org/10.5772/intechopen.101786*

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#### **Chapter 11**

## Green Transformational Leadership and Green Growth

*Natalia Aleksandrovna Zhuravleva and Milos Poliak*

#### **Abstract**

The ongoing global crisis of the world economy requires the search and substantiation of an alternative model for achieving sustainable development, taking into account environmental safety factors. The aim of the study is to substantiate a scientific hypothesis of the impact of transformational leadership on green growth. The methodology is based on the theory of transformational leadership as a new type of effective management activity, the concept of the digital platforms and ecosystems. Based on the concept of sustainable development and the theory of destabilization, which explains the changes in the business models of transport organizations, the authors substantiated the dependence of the effectiveness of these models on the activity of transformational leadership. The main results of the study are confirmation of the proposed scientific hypothesis. It has been proven that the current transactional leadership metrics (Key Performance Indicator and variance management) do not meet the requirements of effective management. A model for quantitative assessment of the conformity of the impact of transformational leadership on the goals of sustainable development and green growth of transport companies has been developed. It is proved that transformational leadership, intersectorality, is becoming a new type of management activity that ensures the growth of long-term profitability from green investments.

**Keywords:** transformational leadership, sustainable development, green growth, business model

#### **1. Introduction**

The global financial crisis has vividly demonstrated the instability of the modern financial and economic system and made it particularly urgent for the world community to find an alternative model for achieving economic growth based on digital technologies, taking into account the factors of social and environmental security.

The current stage of development of economic science requires a rethinking of the basic concepts of all transformations taking place in the world through the prism of scientific and technical changes, both general and specific, associated with changes in human behavior, competition, data, innovations, and values.

Before the theory of transformational leadership appeared in the literature [1–3], most researchers relied on transactional factors of effective leadership behavior. Rewards and recognition were explained as the most important factors in achieving goals in organizations [4]. The evolution of further research has shown significant changes in the understanding of leadership [5].

Nevertheless, the structure of modern commodity markets, the gravity of intersectoral balances of countries and territories are changing significantly. Most of the technologies and management decisions that were in demand until recently are of no interest to anyone today. The areas of knowledge and competencies of personnel are changing. Transformational leadership is emerging as a response to the rapid changes in society, economics, and politics. It offers a toolkit for promoting changes leading to a socially oriented, equitable green society, thereby contributing to the creation of new technologies, innovations, and some kind of a social progress. That is why every industry in our time requires, first of all, competent leadership and only then management.

The emergence of transformational leadership, used as a tool for the development of business and society, has spread to many areas of the world's leading countries, including nongovernmental organizations. Transformational leadership in the modern business world is positioning itself as a new type of management activity that has shifted the management paradigm from excellent task performance to leadership or the right choice of what to do.

The results of numerous studies have shown that green transformational leadership has a significant impact on the internal motivation and creativity that employees need to produce ecologically pure products and services [6, 7]. At the same time, research on the interaction of the areas of leadership and economics is not enough to present the completeness and diversity of the influence of leadership on business efficiency and the development of society. The study [8] that demonstrates the potential benefits of leadership research in achieving economic goals should be noted. In particular, the authors link the evolution of the concept of leadership with the corresponding tasks of economic development. The research [9] analyzing studies that combine economics and leadership argues that the behavior of a leader, his choices and actions determine the results of the organization and indicate new strategic objectives.

Special attention of researchers is focused on understanding the actions of corporate leaders. Predicting the behavior of a future leader emphasizes the importance of understanding the context (conditions, economic situation) in which a leader acts, how valuable capital is created, capital markets' conditions, as well as the general trend of society development [10].

We are careful in our research, because we take into account the reasoned opinion of [11] about the demystification of the impact of transformational leadership on the performance of an organization under conditions of environmental uncertainty.

These studies allowed us to support our statement about the impact of transformational leadership on the sustainable development of society and green growth. At the same time, we see a significant number of unexplored areas, in particular, (1) for many corporations, including with state participation, transactional leadership instruments being still dominant, while it is obvious that they are economically losing their meaning; (2) the effectiveness of green infrastructure development projects and "green financing" has not been proven; (3) the influence of transformational leadership on the sustainable environmental development of industries is practically absent. It was the latter circumstance that determined the choice of the transport industry, as the most significant in the context of the green growth of Russia, as an object of scientific research.

Under the influence of all the above circumstances, significant changes are taking place in the world transport systems. First, the intensification of the construction and launch of high-speed roads is based on fundamentally new green technologies, materials, and energy. Secondly, the inclusion of transport systems in sustainable development projects as an essential part of ensuring the development

#### *Green Transformational Leadership and Green Growth DOI: http://dx.doi.org/10.5772/intechopen.102653*

of new product markets and the growth of social mobility. Thirdly, the designed transport systems in the world strive to conform to the new consumption model.

The transport system is moving into the format of an environmentally friendly (safe), social (highly mobile), and economical ESG system. At the same time, the E-factor takes into account the reduction of CO2 emissions by the company, the volume of consumption of water resources and land, as well as the introduction of waste processing. The factor of social criteria (S-factor) reflects the level of observance of human rights, ensuring safety in the workplace and protection of customer information, the availability of training programs. The corporate governance paradigm (G-factor) is based on independence and efficiency of management, transparency and quality of financial reporting, as well as disclosure of nonfinancial information of the company.

The purpose of this study is to develop and test a scientific hypothesis that determines the role of transformational leadership in enhancing sustainable development processes, first of all, green growth. The scientific hypothesis is subject to quantitative assessment of this impact on the efficiency of the operating and business models of Russian transport organizations.

The object of the research is the largest transport companies in four transportation segments: rail, urban rail passenger transportation, road, and sea.

The subject of the research is the methodology for the development of transformational leadership in the new economic order, methods and models for assessing its impact on the effectiveness of green projects of transport organizations.

The research is based on the hypothesis of the positive impact of transformational leadership on the sustainable development of the transport and logistics business, first of all, its "green" growth. Two main results of the study that are directly related to the backbone organizations of the Russian transport system are highlighted: (1) the current metrics of transactional growth do not meet the requirements of sustainable development and "green" growth and do not stimulate the personnel of companies to work effectively; (2) the positive impact of transformational leadership on the transformation of transport companies in the direction of green growth has been quantitatively confirmed.

#### **2. Scientific hypothesis**

There is some (but limited) support for the impact of transformational leadership on green growth. So, many modern management theories, in terms of style and management methods, are based on the understanding of "leadership" [12]. The most commonly considered types of leaders are authoritarian, democratic, laissezfaire, transactional, and transformational. The systems theory of leadership, exploring many options for the behavior of leaders, is basic in understanding the evolution of this concept [13]. In our study, we rely on the concept of transformational leadership as the most appropriate to the new economic order [14, 15]. At the same time, we understand that the previous model of transactional leadership, when the goals and objectives of the business are predetermined, and the leader uses reward and punishment to motivate the entire staff of the company, becomes ineffective in some cases. We studied the impact of Key Performance Indicator (KPI) on the efficiency of business models of the largest Russian transport and logistics companies and came to the conclusion that there should be other metrics for team and personal efficiency.

In this regard, on the basis of the provisions of the situational leadership theory, namely the study of the dependence of the leadership style on the situation in the team and the leader's clear orientation toward solving the problem, we have

established the positive influence of situational leadership (from the development of monofunctional products or services that satisfy a certain need) for the growth of the value of the product or service itself [16–18].

The third step of our research was based on the modern interpretation of the systems theory of leadership [13]. Within the framework of this theory, leadership and the leader are considered from the point of view of group dynamics. The group is viewed as a system, leadership is the organization of relations in the group, the leader is the subject of managing this process. We applied these provisions to the concept of the evolution of digital platforms and ecosystems, which today maximally reflects the level of development of the object of our research—transport and logistics systems [19]. The introduction of digital technologies in the supply chain of goods and services satisfies the demand of society and the economy in the growth of mobility, speed, flexibility, and the ability to compress space. At the same time, the threshold between reality and virtuality loses its clear outline. Today, most services can exist in the format of digital products, and their set forms an entire ecosystem.

Digitization embodies the model of the development of consciousness. Its processes reflect our thinking and the way we interact with the world. Developers of digital systems are repeating the path of development of the human mind—from adaptability to creativity. This, in its essence, is transformational leadership—it is a type of leadership that causes transformation (change) in subordinates, which leads to an understanding of changes in business [20]. Our conclusions are confirmed by the following logic of the development of the theory of transformational leadership.

It is a known fact that the term "transformational leadership" was first introduced by James V. Downton (1973). However, this concept was developed by James MacGregor Burns in his book "Leadership" published in 1978 [1, 21]. He expanded this concept, moving away from a simple interpretation of transformational leadership as a set of certain personal qualities to a process in which a leader and a follower, interacting in a certain way, raise each other to a higher level of motivation and personal, moral development. In our study, this is an important understanding of how leadership can contribute to the implementation of the goals of sustainable development, green growth. It substantiates the position that the activities of transport and logistics organizations within the framework of the ESG (Environmental, Social, Governance) concept and compliance with the principles of responsible investment (PRI—Principles for Responsible Investment) contribute to the growth of transport infrastructure development projects and the improvement of business models of transport organizations [22].

The tasks of transformational leadership in ensuring green growth are extremely important, since they raise awareness of the company's personnel about the importance and value of the intended results and how to achieve them and, in turn, motivate them to go beyond their immediate selfish interests for the sake of the mission and vision of the organization, its involvement in sustainable development of society. Charismatic and inspiring qualities are observed at all levels of organization management [23].

Transformational leadership implements an individual approach to building teamwork, which is extremely important in the context of the COVID-19 pandemic, when business has switched to the work of "hybrid teams", i.e., partly on-line, partly off-line [24, 25]. We consider individualization of work with personnel as a method of timely transfer of information to subordinates. It provides ongoing observation and feedback and, more importantly, links the individual's current needs with the organization's mission and enhances those needs when appropriate.

The most important component of transformational leadership is intellectual stimulation [26, 27]. An intellectually stimulating leader awakens in subordinates an awareness of problems, awareness of their own thoughts, as well as recognition

#### *Green Transformational Leadership and Green Growth DOI: http://dx.doi.org/10.5772/intechopen.102653*

of their beliefs and values. It is through the intellectual stimulation of subordinates that new methods of fulfilling the organization's mission are explored. Following this statement, we have developed a methodology for assessing the impact of transformational leadership on the transformation of transport and logistics systems in a green growth economy in the context of global economic destabilization.

Each particular question of business and society how to survive and sustainably realize itself in an unstable world has a generalized abstract or demarcation answer. This answer requires an assessment of the processes of destabilization in the context of asymmetric competition in the business models of organizations that follow the trend of sustainable development [28, 29]. For the reliability of the study, we rely on the provisions of the theory of destabilization, which distinguishes ordinary competition from destabilization, the process of assessing potentially destabilizing threats, as well as the methodology that allows forming methods of countering destabilization, taking into account the sustainable development of organizations based on green technologies.

We relied on two approaches to methodological research: specific scientific and technological. It is these two levels of our research methodology that are of particular interest for describing the impact of transformational leadership on digital technological change, which is essentially a set of theoretical and experimental studies conducted in order to obtain substantiated baseline data for the successful implementation of green business models of transport organizations.

The concept of sustainable development, influencing the consciousness of the manufacturer and the consumer, first of all, significantly changes the views on value for the consumer (Environmental, Social, Governance), offers new methods of creating added value. Moreover, in order to methodologically reliably describe the impact of transformational leadership on the sustainable development of business models of organizations, it is necessary to assess the business through the prism of a new quality of value of a service or product and also why digital technologies, intangible assets (data), and customer networks are so important in this context.

Specific scientific methodology made it possible to generalize the signs of the influence of transformational leadership on the behavior of economic agents, which is used in the development of social, economic, and environmental policies [30]. In fact, the "demand economy" and "supply economy" are being transformed into a new digital entity that changes both the behavior of the consumer and producer and the scientific apparatus that describes these processes. Above all, digital transformation addresses fundamental constraints in each of the areas in which business strategy operates, proposing new methods of connecting with consumers and new methods of creating added value and competition, where the role of a transformational leader is growing.

Analyzing information on the adherence of transport and logistics systems to the requirements of sustainable development, we applied a logical-conceptual approach to identifying the relationship between transformational leadership and sustainable growth of organizations [31].

Mathematical calculations made it possible to assess the fundamental changes in the supply chains of goods and services associated with the growing importance of the category of time or the emergence of the concept of "mobility of supply chains" [32].

The resources-processes-values (RPV) theory explains why established transport companies have such a hard time adopting disruptive green technologies [33, 34].

It is the resources (what is at the disposal of transport companies today, primarily the energy that provides traffic), processes (the existing patterns of the company's work), and values (what the company strives for) in general determine the advantages, disadvantages, as well as "blind zones" of its strategic development. A company can successfully take advantage of disruptive green technologies only when it has the necessary resources (for example, sources and generation of maglev

energy), when processes facilitate, rather than impede, the necessary actions, and when corporate values allow making a promising project a priority.

Using the theory of rational behavior, it can be stated that in the current situation, the model of human behavior is shifting toward maximizing utility (including previously unknown values) under conditions of limited resources. This means that the choice of a product or service is solely caused by its value (utility) and becomes a purely "economic choice." Thus, passengers strive to ensure the monetization of their mobility, transport companies—to optimize costs and stay in their market segment, the state pursues various, often contradictory, goals related to ensuring stability, economic efficiency, socioeconomic equality of society members, etc. Obviously, the rationality of behavior will lead to a change in the value of transport services: there are obvious examples of violation of the rationality of behavior during the period of isolation and the uncertainty of getting out of it, which directed attention to the search for an assessment of new psychological factors that change the behavior of consumers of transport services and transport organizations [35, 36].

#### **3. Data**

First of all, we examined the basic documents that define the Sustainable Development Goals (SDGs), in particular, the concept of sustainable development adopted by the United Nations (UN) in 2015, the UN Resolution, data from the International Energy Agency. The documents confirming the national adaptation of the SDGs in Russia have been analyzed, on the basis of which a table has been formed showing the relationship between the SDGs and national goals, projects, and state programs for the green development of the transport industry. The data are grouped in **Table 1** [39–41].

The data in **Table 1** show that green infrastructure (transport) projects are being launched in response to numerous environmental challenges. At the same time, they can solve other—social and economic problems.

We analyzed the current and planned expenditures of Russia on the ecology in the context of the state program "Environmental Protection" for 2015–2024, the indicators of national projects: "Comprehensive plan for the modernization and expansion of the main infrastructure," "Safe and high-quality highways," and "Digital economy of the Russian Federation" [42–46]. We confirm the trend of significant growth in the volume of budgetary funds under these programs.

We used data on the global green finance market and found that green bonds account for the largest share in its structure. In substantiating our hypothesis, we relied on data from the World Bank Group on green bonds, since Russian transport companies (in particular, Russian Railways) use this very tool in the development of railway infrastructure projects. Green bonds are issued for new and existing transport projects that comply with the International Capital Market Association (ICMA) Green Bond Principles (GBP).

By examining the forecast data of the Global Infrastructure Hub [47] for the next decade, we have estimated the growth of the world needs for financing infrastructure to support sustainable development by 2030 at about 0.3% of world GDP. PwC data indicate that the amount of capital for responsible investment has grown by one-third every 2 years from 2014 to 2018, and at the beginning of 2021, about half of all managed assets in Europe are attributed to responsible investment assets [48].

According to a 2018 World Bank Group study, Russia's transition to the best available technologies as part of the "greening" and "decarbonization" of the economy will require financing in the amount of about 4–8 trillion rubles, of which 13% for urban and mainline transport.


*Parameters of compliance of the development strategy of transport organizations of the Russian Federation with the goals of sustainable growth. Compiled by: [37, 38].*

#### *Green Transformational Leadership and Green Growth DOI: http://dx.doi.org/10.5772/intechopen.102653*

#### *Leadership - New Insights*

Important for our study is the conclusion of the World Bank analysts that the transition to a green economy in Russia is possible through the development of green public procurement, especially taking into account that the state as a customer is a significant segment of consumption in a country with a market accounting for about a third of GDP. This confirms our hypothesis that in Russia, the transformational leadership of public authorities will be critical to green growth.

For an empirical assessment of the obtained scientific results, we conducted a survey of four Russian transport companies in relation to the detection of signs of transformational leadership and the determination of their weight value in making sustainable development decisions. The sample is determined by the importance of these organizations in the transport services market. The survey involved managers and specialists of the following companies:


### **4. Methods**

Using the method of grouping data obtained as a result of questioning top-level managers (self-assessment and assessment by colleagues, management, subordinates) of four transport companies in the field of rail freight transport, road transport, land rail transport, and sea transport, we have formed a scale of the main features of transactional and transformational leadership. We used the Multifactor Leadership Questionnaire (MLQ) [49, 50]. At the same time, we have updated the questions, in particular:


*Green Transformational Leadership and Green Growth DOI: http://dx.doi.org/10.5772/intechopen.102653*

Each answer was assigned a value for the weight of the indicator corresponding to the rating scale. The final assessment was used in the correlation analysis of the hypothesis substantiation: a) the dependence of the presence and increase of green growth projects on the obvious signs of transformational leadership in the company; b) dependence of the growth of efficiency of business models of organizations on green transport projects.

We applied the methods of mathematical description of the value of transport services (speed of transportation, development of transport networks, and availability of a set of necessary digital services), formed under the influence of intellectual stimulation of transformational leadership, which made it possible to form a set of indicators of sustainable development and green growth, applicable to all types of transport: the effect of growth in the profitability of green projects (E-factor), caused by green investments, an increase in network density (S-factor), and the speed of movement or compression of space (G-factor).

On their basis, it is possible to generate a complex indicator—*a unit of value* for the impact of transformational leadership on green growth projects.

#### **5. Results**

The research results presented below confirm the main provisions of our scientific hypothesis:


Below is a sequence of evidentiary actions in confirming these provisions of the scientific hypothesis.

1.Based on the survey, an analytical scale was developed for the correspondence of indicators of transformational leadership of the leading companies in the main sectors of the Russian transport market (**Table 2**).

As follows from the survey, organizations make the most of transactional leadership indicators (KPIs and deviation management), while everyone notes the low utility of these indicators. Moreover, in the largest transport companies, the costs of periodic calculations and the formation of these indicators in complex hierarchical structures with overlapping business processes exceed the effect of their application.

Analysis of the aggregate weights of the assessment of indicators of transformational leadership in Russian transport companies allows us to conclude about the presence and development of its processes in the following sequence:

First step (from 0 to 10): realizing the organization's need for changes associated with increased competition in the transportation markets, the decrease in the effectiveness of existing business models, and the achievement of the maximum level of labor productivity while maintaining existing technologies in the supply chains.

Second step (from 10 to 15): creating a new vision of sustainable development and, above all, green growth. The vision is not the product of a single leader, but is


*Legend: IS – Intellectual Stimulation; IC – Individualized Consideration; IM - Inspirational Motivation; II – Idealized Influence.*

*Weighted assessments: 2 – Not at all; 3 – Sometimes; 4 – Often; 5 - Almost always.*

#### **Table 2.**

*Indicators of transformational leadership of the leading Russian transport companies. Note: 1. Calculated taking into account the weights of the scale of compliance of indicators of transformational leadership in the company, the presence of active green projects (funded by Green Bond), compliance of green bonds with ICMA standards. 2. Calculated according to information on the Internal Rate of Return (IRR) and the value of the Green Bond coupon.*

formed as a result of team discussion and decision-making during the development and implementation of the project.

Third step (over 15): institutionalization of changes. It involves changes in the organization of business processes, project teams, operational and financial business models of the organization.

As can be seen from the table, transformational leadership focused on green growth is just beginning to develop in Russian transport organizations. Therefore, it is extremely important to show the dependence of the effectiveness of sustainable development and green growth projects on the understanding and formation of transformational leadership.

Based on the representations of [51], we examined how eco-friendly human resource management interacts with the interrelationships between green transformational leadership, green innovation, and environmental indicators.

2.The assessment of the conformity of the influence of transformational leadership on the transformation of transport companies in the area of green growth and the goals of sustainable development is made (**Table 3**).

The following designations are used in the table:


*Green Transformational Leadership and Green Growth DOI: http://dx.doi.org/10.5772/intechopen.102653*


#### **Table 3.**

*Assessment of the impact of transformational leadership on the transformation of transport companies toward green growth and sustainable development goals. Compiled by: [37, 52, 53].*


The results show that indicators of transformational leadership are highly correlated between green growth projects and the growth of project performance in companies that are strategically targeting and implementing environmental development programs for their businesses. These strategies provide companies that are realigning their business models for sustainable development, the growth of competitiveness, and efficiency [54, 55].

With regard to seaports, it is extremely difficult to assess the economic effect of investments in green technologies in specific numbers, and most often only indirect results can be seen. For example, the Solvo.TOS automated management system for ports and terminals can reduce the operating costs of a cargo terminal by 5–35%. The spread is large enough to predict a return on investment. However, at the same time, the system at least allows increasing the level of service provided to the terminal's clients, which is one of the indicators of its sustainable development. Likewise, it is difficult to assess fragments of Avtodor's projects.

3.Transformational leadership, open to the publicity and social responsibility of business, helps to attract cheaper investments than the financial market offers. The market evolution of finance has formed a set of green finance: bonds,

#### *Leadership - New Insights*

loans, stock investments, and green insurance [56]. The use of these tools involves the implementation of projects with clear environmental benefits that are assessed, including quantitatively, by issuers, investors, credit institutions, and insurance companies. In other words, they require disclosure of information and absolute openness of the company's management in confirming the necessity for assessing the impact of investments on the environment.

For Russian transport companies, more than ever, there is a problem of attracting investment in projects for the development of urban and mainline transport infrastructure. Moreover, these projects have special features: long payback periods and a low rate of return, generate efficiency mainly with a high density of passenger traffic, and active supply chains. The COVID-19 pandemic has reduced global passenger traffic by 50–60% for various types of transportation, changed the gravity of supply chains and the structure of goods, which led to a decrease in the profits of transport companies. At the same time, the deficit of investments in financial markets has increased with a simultaneous increase in their value. Thus, the estimated supply potential in the investment market of infrastructure projects in the world is \$10.2 trillion, while the required investments are estimated at \$11.3 trillion—an investment gap of \$1.1 trillion.

For Russia, attracting green, cheaper financing is the most important economic and social task of ensuring sustainable development, including transport infrastructure. The global financial market recognizes that the format of sustainable development of railway transport in Russia on the basis of green projects is not only useful in terms of protecting and restoring the environment, but also relatively profitable, since it generates the idea of environmentally friendly transport as financially attractive. It is quite obvious that transformational leadership as the ability of management to transform its worldview to solve social and environmental problems can activate Russian business, government bodies, and political forces to move to a new world of sustainable development.

This is confirmed by the experience of green growth of the Russian Railways company, which has already invested more than 4 billion rubles in green projects. The general director of the company, Oleg Belozerov, annually increases the costs of sustainable development projects, primarily green growth projects, despite the fact that the load on the environment of railway transport is the lowest of all modes of transport.

The leader of the company not only declares the importance of high environmental friendliness of transportation as the main vector of development, but also initiates projects in the field of ecology, clean transport, and social responsibility of the transport business. At the same time, the company fully complies with the principles of "green" financing, placing the third tranche of green bonds.

#### **5.1 Implications for theory**

This study has theoretical implications for the leading infrastructure industries in Russia, the effectiveness of which is associated with sustainable development and "green" growth. It expands the possibilities of studying potential internal drivers of transport and logistics organizations and complements the growing body of knowledge in the study of environmental and digital leadership.

#### **5.2 Implications for practice**

This study also has a number of practical implications that stem from the increased global interest in sustainable growth and ecological responsibility. It enables transport and logistics organizations to evaluate the effectiveness of their operational and business models in green growth projects.

#### **5.3 Limitations and suggestions for future research**

It is important to recognize that this study, despite the results obtained, has a number of limitations. Firstly, it was limited by a relatively small sample size consisting of four basic, mainly state-owned, transport companies that occupy more than 50% of the market for the corresponding modes of transport. Undoubtedly, the work that will expand the sample taking into account the market operators of transportation will be useful. We understand that it is necessary to increase the number of variables in the factor analysis of the impact of transformational leadership indicators on the effectiveness of business models of organizations.

#### **6. Conclusion**

The scientific hypothesis presented in this study confirms the direct impact of transformational leadership on the activation of sustainable development processes, first of all, green growth. Our evidence shows the impact of these processes on the growth of the operational and business models of Russian transport companies.

We found that intellectual stimulation, as a critical sign of transformational leadership, is shaping a new digital approach to transport infrastructure development projects, supply chains, and population mobility, which is reflected in the green growth of the national economy.

Our analysis has shown that the inspiring motivation of a transformational leader can spur complex green growth processes in such complex systems as rail transport. The concept of sustainable growth and the environmental goals of Russian Railways under the Long-term Development Program until 2025 confirms this conclusion.

A survey of the management of the largest Russian transport companies showed that the idealized influence and individualization of decision-making inherent in transformational leadership are supported by the choice of people and reflect the views of a society that is willing to pay 15–30% more for products and services produced with ESG in mind, and 80% of millennials choose to work for companies with strong sustainability practices.

We can quantify another transformational leadership trend—ethical choice. More and more top managers of Russian transport companies are beginning to think about what value their company brings to the world, what problems it solves, and whom it helps. This allows them to cope with burnout and gain moral satisfaction from their work.

#### **6.1 Next steps**

Expanding on this study, we will be able to calculate indices of the impact of transformational leadership on the efficiency of supply chain mobility. Mathematically, they reflect the weighted average sum of three subindices: the impact of green transport projects on society (mobility), the environment, and the ability of businesses to grow in innovation (efficiency).

#### **Conflict of interest**

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

*Leadership - New Insights*

#### **Author details**

Natalia Aleksandrovna Zhuravleva1 \* and Milos Poliak<sup>2</sup>

1 Emperor Alexander I St. Petersburg State Transport University, Saint Petersburg, Russia

2 University of Žilina, Žilina, Slovak Republic

\*Address all correspondence to: zhuravleva\_na@mail.ru

© 2022 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

*Green Transformational Leadership and Green Growth DOI: http://dx.doi.org/10.5772/intechopen.102653*

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### *Edited by Mário Franco*

Leadership is viewed as a phenomenon allowing advantages for organizations and their success. Although much research has been done on the concept of leadership, many studies do not include the different styles, perspectives, and contexts of leadership. As such, this book aims to fill this gap by combining several studies on leadership from different perspectives. The various chapters address such topics as millennial leaders, Theory X style leadership, leadership in the turbulent environment, emotional intelligence, and much more. This volume shows how new insights about leadership can stimulate organizational development in various countries and regions worldwide.

Published in London, UK © 2022 IntechOpen © abdulkadir hasanoğlu / iStock

Leadership - New Insights

Leadership

New Insights

*Edited by Mário Franco*