Strictness or flexibility: what is needed for successful digitalisation?

The researchers examined almost 100 Hungarian manufacturing companies in a questionnaire survey, with a representative sample by size and industry. The results show that a task-oriented management style improves business performance when companies introduce new digitalisation techniques. The positive leadership effect is seen in supporting the digital strategy and also slightly reinforcing the digital organisational and technological aspects. The performance gains from digitalisation are mainly reflected in cost reductions and more flexible services that are better adapted to customer needs. 

However, the data suggest that a relationship-oriented management style should be used with caution at the beginning of the digital transformation because it weakens the business performance of organisations, especially quality, delivery and costs. 

“Our research highlights the importance of goal-setting, process efficiency and monitoring in the early stages of digitalisation, and that digital strategy is a key element of firms’ digitalisation,” says Associate Professor Dávid Losonci, Head of the Corvinus Institute for Operations and Decision, and one of the study’s authors. 

Leadership paradox in digitalising companies 

The study suggests that task-oriented leadership will achieve the goal by using the data-driven decision-making tools that have become newly available with digitalisation to improve processes and resource management in the organisation effectively. This is done by setting clear goals, using top-down communication and close monitoring, and allocating resources efficiently. 

In the long term, however, the organisation can be caught in a bite trap because managers can achieve better results by applying a relationship-oriented leadership style, characterised by, for example, people orientation, a focus on collaboration, emotional support or mentoring. Therefore, if management becomes bogged down in task-orientation, it can be to the detriment of the long-term success of digitalisation. Thus, success in the longer term depends on the extent to which the leadership style is adapted to the current context. 

In other words, at a later stage of digitisation, it may be necessary to bring the management approach closer to a relationship-oriented management approach in order to improve performance further. This way, adaptability, proactivity and long-term orientation can be developed, supporting organisational effectiveness through quality orientation and more cost-effective operations. 

The specificity of the research is that it only examined domestic companies, so the results may reflect the Hungarian socio-cultural context, the national and therefore the domestic business culture. 

The study by the research team of Corvinus University of Budapest was published in the Journal of Manufacturing Technology Management in January this year, by authors Kitti Dióssy, Dávid Losonci, Márta Aranyossy and Krisztina Demeter.