Module 3: Leadership

Leadership is the art of influencing others to their maximum performance to accomplish

any task, objective or project.” – William Alan Cohen
Leadership is the process of influencing the activities of an individual or a group in efforts
toward goal achievement in a given situation. – Hersey, P., Blanchard, K., Dewey.
Importance of Leadership
Leadership is very important in a firm as it leads to higher performance by the team members, it
improves motivation and morale within the members, and helps to respond to change.

Leadership facilitates organizational success by creating responsibility and accountability

among the members of the organization. In short, it increases value in an organization.

Leader Vs Manager
A leader is someone whom people follow or someone who guides or directs others. A manager
is someone who is responsible for directing and controlling the work and staff in an
organization, or of a department within it.

The main difference between the two is that a leader works by example, while a manager
dictates expectations. If a manager goes against the rules, that will tarnish his position as a
manager. If a leader goes against the example he or she is trying to set, that will be seen as a
setback. Following are a few subtle differences between the two −

 A leader is an innovator and creator whereas a manager is a commander.

 A leader can’t be a manager but the opposite is possible, a manager is more than a leader.

 A leader does what is right, while the manager makes things right.

 A leader deals with change whereas a manager plans for a change.

 A leader gives direction to do something whereas the manager plans for everything that
is to be done.

 A leader encourages people whereas the manager controls people.

  A leader handles communication, credibility, and empowerment whereas a manager
deals with organizing and staffing.

Leadership Styles
Different leadership styles exist in work environments. The culture and goal of an organization
determine which leadership style fits best. Some organizations offer different leadership styles
within an organization, depending on the necessary tasks to complete and departmental needs.

We find five different leadership styles in the corporate world. They are as follows −

Laissez-Faire
A laissez-faire leader does not directly supervise employees and fails to provide regular updates
to those under his supervision. Highly experienced and trained employees with minimal
requirement of supervision fall under the laissez-faire leadership style.

But, not all employees possess these features. This leadership style blocks the production of
employees needing supervision. The laissez-faire style implements no leadership or supervision
efforts from managers, which can lead to poor production, lack of control and increasing costs.

Autocratic
The autocratic leadership style permits managers to make decisions alone without the input of
others. Managers access total authority and impose their will on employees. No one opposes the
decisions of autocratic leaders. Countries like Cuba and North Korea operate under the
autocratic leadership style.

This leadership style benefits those who require direct supervision. Creative employees who
participate in group functions detest this leadership style.

Participative
This is also known as the democratic leadership style. It values the input of team members and
peers, but the responsibility of making the final decision rests with the participative leader.
Participative leadership motivates employee morale because employees make contributions to
the decision-making process. It accounts to a feeling that their opinions matter.

When an organization needs to make changes within itself, that is internally, the participative
leadership style helps employees accept changes easily as they play a role in the process. This
leadership style meets challenges when companies need to make a decision in a short period of
time.

Transactional
Transactional leadership style is formed by the concept of reward and punishment.
Transactional leaders believe that the employee's performance is completely dependent on these
two factors. When there is an encouragement, the workers put in their best effort and the bonus
is in monetary terms in most of the cases. In case they fail to achieve the set target they are
given a negative appraisal.

Transactional leaders pay more attention to physical and security requirements of the
employees.

Transformational
Transformational leadership has the ability to affect employee's perceptions through the returns
that organization gets in the form of human capital benefits. These leaders have the ability to
reap higher benefits by introducing knowledge management processes, encouraging
interpersonal communication among employees and creating healthy organizational culture.

It helps in flourishing organizational innovation by creating a participative environment or

culture. It promotes a culture where the employees have autonomy to speak about their
experiences and share knowledge.

It has been seen that transformational leaders are more innovative than transactional and laisse-
faire leaders.

Traditional Theory
Traditional theory is a theory based on different traits of a human beings. It assumes that leaders
are born and not made. According to this theory, leadership behavior is the sum total of all traits
that a leader possess.

Thus this theory gives the profile of a successful and complete leader. According to this theory,
there are five human traits. They are −

 Physical trait − it includes energy, activity, appearance, and height.

 Ability trait − it includes judgement, knowledge, and fluency in speech.

  Personal trait − it includes self-confidence, creativity, and enthusiasm.

 Work trait − it includes organization and achievement.

 Social trait − it includes interpersonal skill, cooperativeness, popularity and prestige.

Trait Theories

Great Man Theory of Leadership

Are some people born to lead? If we look at the great leaders of the past such as Alexander the
Great, Julius Caesar, Napoleon, Queen Elizabeth I, and Abraham Lincoln, we will find that they
do seem to differ from ordinary human beings in several aspects. The same applies to the
contemporary leaders like George W. Bush and Mahatma Gandhi. They definitely possess high
levels of ambition coupled with clear visions of precisely where they want to go. These leaders
are cited as naturally great leaders, born with a set of personal qualities that made them effective
leaders. Even today, the belief that truly great leaders are born is common.

Top executives, sports personalities, and even politicians often seem to possess an aura that sets
them apart from others. According to the contemporary theorists, leaders are not like other
people. They do not need to be intellectually genius or omniscient prophets to succeed, but they
definitely should have the right stuff which is not equally present in all people. This orientation
expresses an approach to the study of leadership known as the great man theory.

Assumptions

The leaders are born and not made and posses certain traits which were inherited

Great leaders can arise when there is a great need.

Theory

Much of the work on this theory was done in the 19th century and is often linked to the work of
the historian Thomas Carlyle who commented on the great men or heroes of the history saying
that “the history of the world is but the biography of great men”. According to him, a leader is
the one gifted with unique qualities that capture the imagination of the masses.
Earlier leadership was considered as a quality associated mostly with the males, and therefore the
theory was named as the great man theory. But later with the emergence of many great women
leaders as well, the theory was recognized as the great person theory.

The great man theory of leadership states that some people are born with the necessary attributes
that set them apart from others and that these traits are responsible for their assuming positions of
power and authority. A leader is a hero who accomplishes goals against all odds for his
followers. The theory implies that those in power deserve to be there because of their special
endowment. Furthermore, the theory contends that these traits remain stable over time and across
different groups. Thus, it suggests that all great leaders share these characteristic regardless of
when and where they lived or the precise role in the history they fulfilled.

Criticism

Many of the traits cited as being important to be an effective leader are typical masculine traits.
In contemporary research, there is a significant shift in such a mentality.

Trait Theory of Leadership

The trait model of leadership is based on the characteristics of many leaders - both successful
and unsuccessful - and is used to predict leadership effectiveness. The resulting lists of traits are
then compared to those of potential leaders to assess their likelihood of success or failure.

Scholars taking the trait approach attempted to identify physiological (appearance, height, and
weight), demographic (age, education and socioeconomic background), personality, self-
confidence, and aggressiveness), intellective (intelligence, decisiveness, judgment, and
knowledge), task-related (achievement drive, initiative, and persistence), and social
characteristics (sociability and cooperativeness) with leader emergence and leader effectiveness.

Successful leaders definitely have interests, abilities, and personality traits that are different from
those of the less effective leaders. Through many researches conducted in the last three decades
of the 20th century, a set of core traits of successful leaders have been identified. These traits are
not responsible solely to identify whether a person will be a successful leader or not, but they are
essentially seen as preconditions that endow people with leadership potential.
Among the core traits identified are:

Achievement drive: High level of effort, high levels of ambition, energy and initiative

Leadership motivation: an intense desire to lead others to reach shared goals

Honesty and integrity: trustworthy, reliable, and open

Self-confidence: Belief in one’s self, ideas, and ability

Cognitive ability: Capable of exercising good judgment, strong analytical abilities, and
conceptually skilled

Knowledge of business: Knowledge of industry and other technical matters

Emotional Maturity: well adjusted, does not suffer from severe psychological disorders.

Others: charisma, creativity and flexibility

Strengths/Advantages of Trait Theory

It is naturally pleasing theory.

It is valid as lot of research has validated the foundation and basis of the theory.

It serves as a yardstick against which the leadership traits of an individual can be assessed.

It gives a detailed knowledge and understanding of the leader element in the leadership process.

Limitations of the Trait Theory

There is bound to be some subjective judgment in determining who is regarded as a ‘good’ or

‘successful’ leader

The list of possible traits tends to be very long. More than 100 different traits of successful
leaders in various leadership positions have been identified. These descriptions are simply
generalities.

There is also a disagreement over which traits are the most important for an effective leader
The model attempts to relate physical traits such as, height and weight, to effective leadership.
Most of these factors relate to situational factors. For example, a minimum weight and height
might be necessary to perform the tasks efficiently in a military leadership position. In business
organizations, these are not the requirements to be an effective leader.

The theory is very complex

Implications of Trait Theory

The trait theory gives constructive information about leadership. It can be applied by people at
all levels in all types of organizations. Managers can utilize the information from the theory to
evaluate their position in the organization and to assess how their position can be made stronger
in the organization. They can get an in-depth understanding of their identity and the way they
will affect others in the organization. This theory makes the manager aware of their strengths and
weaknesses and thus they get an understanding of how they can develop their leadership
qualities.

Conclusion

The traits approach gives rise to questions: whether leaders are born or made; and whether
leadership is an art or science. However, these are not mutually exclusive alternatives.
Leadership may be something of an art; it still requires the application of special skills and
techniques. Even if there are certain inborn qualities that make one a good leader, these natural
talents need encouragement and development. A person is not born with self-confidence. Self-
confidence is developed, honesty and integrity are a matter of personal choice, motivation to lead
comes from within the individual, and the knowledge of business can be acquired. While
cognitive ability has its origin partly in genes, it still needs to be developed. None of these
ingredients are acquired overnight.

Behavioural Theories of Leadership

Ohio State University (1940s)

As leadership studies that were aimed at identifying the appropriate traits didn't yield any
conclusive results, a group of people from Ohio State University developed a list of 150
statements from their generated responses that included 1,800 hundred statements. The list was
designed to measure nine different behavioral leadership dimensions. The resulting questionnaire
is now well-known as the LBDQ or the Leaders Behavior Description Questionnaire.

As part of the study, the LBDQ was administered to various groups of individuals ranging from
college students and their administrators, private companies including military personnel. One of
the primary purposes of the study was to identify common leadership behaviors. After compiling
and analyzing the results, the study led to the conclusion that there were two groups of behaviors
that were strongly correlated. These were defined as Consideration (People Oriented behavioral
Leaders) and Initiating Structure (Task Oriented Leaders).

Task oriented leaders

The task concerned leaders are focusing their behaviors on the organizational structure, the
operating procedures (S.O.P.) and they like to keep control. Task-oriented leaders are still
concern with their staff motivation; however it's not their main concern. They will favor
behaviors that are in line with:

 Initiating
 Organizing
 Clarifying
 Information Gathering

People oriented leaders

The people oriented leaders are focusing their behaviors on ensuring that the inner needs of the
people are satisfied. Thus they will seek to motivate their staff through emphasizing the human
relation. People oriented leaders still focus on the task and the results; they just achieve them
through different means. Leaders with a people focus will have behaviors that are in line with:

 Encouraging
 Observing
 Listening
 Coaching and Mentoring

The University of Michigan Studies

A series of studies on leadership were done in Michigan University, starting in the 1950s. Under
the general direction of Rensis Likert, the focus of the Michigan studies was to determine the
principles and methods of leadership that led to productivity and job satisfaction. Two types of
leadership behaviours were identified:
Employee orientation (stress the human-relations aspect, employees are viewed as human beings
with personal needs)

Production orientation (stress on the technical and production aspects of the job, employees
viewed as the means of getting the work done).

Leaders with an employee orientation showed genuine concern for interpersonal relations. Those
with a production orientation focused on the task or technical aspects of the job.

Renis Likert

The conclusion of the Michigan studies was that an employee orientation and general instead of
close supervision yielded better results. Likert eventually developed four "systems" of
management based on these studies; he advocated System 4 (the participative-group system,
which was the most participatory set of leader behaviors) as resulting in the most positive
outcomes (Encyclopedia of Management, 2009).

Blake and Mouton’s Managerial Grid

The treatment of task orientation and people orientation as two independent dimensions was a
major step in leadership studies. Many of the leadership studies conducted in the 1950s at the
University of Michigan and the Ohio State University focused on these two dimensions.

Building on the work of the researchers at these Universities, Robert Blake and Jane Mouton
(1960s) proposed a graphic portrayal of leadership styles through a managerial grid (sometimes
called leadership grid). The grid depicted two dimensions of leader behavior, concern for people
(accommodating people’s needs and giving them priority) on y-axis and concern for production
(keeping tight schedules) on x-axis, with each dimension ranging from low (1) to high (9), thus
creating 81 different positions in which the leader’s style may fall. (See figure 1).
 Blake and Moutons Managerial Grid

The five resulting leadership styles are as follows:

Impoverished Management (1, 1): Managers with this approach are low on both the dimensions
and exercise minimum effort to get the work done from subordinates. The leader has low
concern for employee satisfaction and work deadlines and as a result disharmony and
disorganization prevail within the organization. The leaders are termed ineffective wherein their
action is merely aimed at preserving job and seniority.

Task management (9, 1): Also called dictatorial or perish style. Here leaders are more concerned
about production and have less concern for people. The style is based on theory X of McGregor.
The employees’ needs are not taken care of and they are simply a means to an end. The leader
believes that efficiency can result only through proper organization of work systems and through
elimination of people wherever possible. Such a style can definitely increase the output of
organization in short run but due to the strict policies and procedures, high labour turnover is
inevitable.

Middle-of-the-Road (5, 5): This is basically a compromising style wherein the leader tries to
maintain a balance between goals of company and the needs of people. The leader does not push
the boundaries of achievement resulting in average performance for organization. Here neither
employee nor production needs are fully met.

Country Club (1, 9): This is a collegial style characterized by low task and high people
orientation where the leader gives thoughtful attention to the needs of people thus providing
them with a friendly and comfortable environment. The leader feels that such a treatment with
employees will lead to self-motivation and will find people working hard on their own. However,
a low focus on tasks can hamper production and lead to questionable results.

Team Management (9, 9): Characterized by high people and task focus, the style is based on the
theory Y of McGregor and has been termed as most effective style according to Blake and
Mouton. The leader feels that empowerment, commitment, trust, and respect are the key
elements in creating a team atmosphere which will automatically result in high employee
satisfaction and production.

Advantages of Blake and Mouton’s Managerial Grid

The Managerial or Leadership Grid is used to help managers analyze their own leadership styles
through a technique known as grid training. This is done by administering a questionnaire that
helps managers identify how they stand with respect to their concern for production and people.
The training is aimed at basically helping leaders reach to the ideal state of 9, 9.

Limitations of Blake and Mouton’s Managerial Grid

The model ignores the importance of internal and external limits, matter and scenario. Also,
there are some more aspects of leadership that can be covered but are not.

Contingency Theories of Leadership

Fiedler's Contingency Model

Matching Leadership Style to a Situation

Leadership Style
Identifying leadership style is the first step in using the model. Fiedler believed that leadership
style is fixed, and it can be measured using a scale he developed called Least-Preferred Co-
Worker (LPC) Scale (see Figure 1).

The scale asks you to think about the person who you've least enjoyed working with. This can be
a person who you've worked with in your job, or in education or training.

You then rate how you feel about this person for each factor, and add up your scores. If your
total score is high, you're likely to be a relationship-orientated leader. If your total score is low,
you're more likely to be task-orientated leader.

Situational Favorableness

Next, you determine the "situational favorableness" of your particular situation. This depends on
three distinct factors:

 Leader-Member Relations – This is the level of trust and confidence that your team has
in you. A leader who is more trusted and has more influence with the group is in a more
favorable situation than a leader who is not trusted.
 Task Structure – This refers to the type of task you're doing: clear and structured, or
vague and unstructured. Unstructured tasks, or tasks where the team and leader have little
knowledge of how to achieve them, are viewed unfavorably.
 Leader's Position Power – This is the amount of power you have to direct the group,
and provide reward or punishment. The more power you have, the more favorable your
situation. Fiedler identifies power as being either strong or weak.

Applying the Fiedler Contingency Model

Step 1: Identify your leadership style

Think about the person who you've least enjoyed working with, either now or in the past.

Rate your experience with this person using the scale in Figure 1, above. According to this
model, a higher score means that you're naturally relationship-focused, and a lower score means
that you're naturally task-focused.

Step 2: Identify your situation

Answer the questions:

 Are leader-member relations good or poor?

 Is the task you're doing structured, or is it more unstructured, or do you have little
experience of solving similar problems?

 Do you have strong or weak power over your team?

Step 3: Determine the most effective leadership style

Figure 2 shows a breakdown of all of the factors we've covered: Leader-Member Relations, Task
Structure, and Leader's Position Power. The final column identifies the type of leader that Fiedler
believed would be most effective in each situation.

For instance, imagine that you've just started working at a new company, replacing a much-loved
leader who recently retired. You're leading a team who views you with distrust (so your Leader-
Member Relations are poor). The task you're all doing together is well defined (structured), and
your position of power is high because you're the boss, and you're able to offer reward or
punishment to the group.

The most effective leader in this situation would be high LPC – that is, a leader who can focus on
building relationships first.

Or, imagine that you're leading a team who likes and respects you (so your Leader-Member
relations are good). The project you're working on together is highly creative (unstructured) and
your position of power is high since, again, you're in a management position of strength. In this
situation a task-focused leadership style would be most effective.

Criticisms of the Model

There are some criticisms of the Fiedler Contingency Model. One of the biggest is lack of
flexibility. Fiedler believed that because our natural leadership style is fixed, the most effective
way to handle situations is to change the leader. He didn't allow for flexibility in leaders.

For instance, if a low-LPC leader is in charge of a group with good relations and doing
unstructured tasks, and she has a weak position (the fourth situation), then, according to the
model, the best solution is to replace her with a high-LPC leader – instead of asking her to use a
different leadership style.

There is also an issue with the Least-Preferred Co-Worker Scale – if you fall near the middle of
the scoring range, then it could be unclear which style of leader you are.
Hersey-Blanchard Situational Leadership Theory

This theory has to do with the maturity of those who are being led. To those who have worked as
leaders in the past, it is no surprise that maturity should be considered when working on finding the
right leadership style. For example, someone who is inexperienced in their field will likely lack the
skills or confidence to take on tasks that would be comfortable for a more experienced employee.

The Situational Leadership Theory offers up four potential leadership styles, and then four maturity
levels that define the members of a team. Let's quickly look at each of the four styles and levels that
can then be paired up for optimal performance.

The four leadership styles that are presented in this theory are Telling, Selling, Participating, and
Delegating.

To go along with those four leadership styles, the

Hersey Blanchard Situational Leadership Theory also
provides four maturity levels that describe those who
are making up the team.

At a maturity level of M1, team members need to be

instructed on how to do just about everything that
makes up the task they are responsible for.

At a maturity level of M2, team members are those

who are more eager to work on a job, even if they aren't
yet ready to do it correctly without the help of the
leader of the group.

At a maturity level of M3, team members might not be able to quite get all of the job done
without some help, but they can get most of the way their on their own.
At a maturity level of M4, team members are completely capable of handling a task and they
know that they can get the job done without the help of the leader.

The Hersey Blanchard Situational Leadership Theory promotes flexible leaders that are able to
match their style to the experience and ability of those they are leading.

Path Goal Theory

The Path-Goal model is a theory based on specifying a leader's style or behavior that best fits the
employee and work environment in order to achieve a goal (House, Mitchell, 1974). The goal is
to increase your employees' motivation, empowerment, and satisfaction so they become
productive members of the organization.

Path-Goal is based on Vroom's (1964) expectancy

theory in which an individual will act in a certain
way based on the expectation that the act will be
followed by a given outcome and on the
attractiveness of that outcome to the individual.
The path-goal theory was first introduced by
Martin Evans (1970) and then further developed
by House (1971).

The path-goal theory can best be thought of as a

process in which leaders select specific behaviors
that are best suited to the employees' needs and the
working environment so that they may best guide the employees through their path in the
obtainment of their daily work activities (goals) (Northouse, 2013).

While Path-Goal Theory is not a detailed process, it generally follows these basic steps as shown
in the graphic below:

 Determine the employee and environmental characteristics

 Select a leadership style
 Focus on motivational factors that will help the employee succeed
The Leader-Member Exchange Theory - Getting the Best From all Team Members (Also
known as LMX or Vertical Dyad Linkage Theory)

Do you refuse some team members access to your time and attention?

As a manager, it's not always right to treat everyone on your team in the same way.

For instance, you probably have team members that you've developed a great relationship with:
you trust them, they work hard, and they've never let you down. To you, these team members are
invaluable, and you make an extra effort to send challenging projects their way.

It's also likely that you have others on your team who you think less well of. They may not have
far-reaching career goals, they're less competent, and you simply don't trust them to the same
extent. These team members get everyday responsibilities, and are not considered for promotions
or challenging assignments.

However, have you ever stopped to analyze why you don't trust certain team members? Rightly
or wrongly, do you let that distrust, or the belief that they're unreliable, influence how you relate
to them? Do you, even subconsciously, withhold opportunities that might help them grow and
succeed?

This situation is at the heart of the Leader-Member Exchange Theory. This theory, also known as
LMX or the Vertical Dyad Linkage Theory, explores how leaders and managers develop
relationships with team members; and it explains how those relationships can either contribute to
growth or hold people back.

Understanding the Theory

The Leader-Member Exchange Theory first emerged in the 1970s. It focuses on the relationship
that develops between managers and members of their teams.

The theory states that all relationships between managers and subordinates go through three
stages. These are:

Role-Taking.

Role-Making.

Routinization

Let's look at each stage in greater detail.

1. Role-Taking

Role-taking occurs when team members first join the group. Managers use this time to assess
new members' skills and abilities.
2. Role-Making

New team members then begin to work on projects and tasks as part of the team. In this stage,
managers generally expect that new team members will work hard, be loyal and prove
trustworthy as they get used to their new role.

The theory says that, during this stage, managers sort new team members (often subconsciously)
into one of two groups.

In-Group - if team members prove themselves loyal, trustworthy and skilled, they're put into the
In-Group. This group is made up of the team members that the manager trusts the most.
Managers give this group most of their attention, providing challenging and interesting work,
and offering opportunities for additional training and advancement. This group also gets more
one-to-one time with the manager. Often, people in this group have a similar personality and
work-ethic to their manager.

Out-Group - if team members betray the trust of the manager, or prove that they're unmotivated
or incompetent, they're put into the Out-Group. This group's work is often restricted and
unchallenging. Out-Group members tend to have less access to the manager, and often don't
receive opportunities for growth or advancement.

3. Routinization

During this last phase, routines between team members and their managers are established.

In-Group team members work hard to maintain the good opinion of their managers, by showing
trust, respect, empathy, patience, and persistence.

Out-Group members may start to dislike or distrust their managers. Because it's so hard to move
out of the Out-Group once the perception has been established, Out-Group members may have to
change departments or organizations in order to "start over."

Once team members have been classified, even subconsciously, as In-Group or Out-Group, that
classification affects how their managers relate to them from then on, and it can become self-
fulfilling.

For instance, In-Group team members are often seen as rising stars and the manager trusts them
to work and perform at a high level. This is also the group that the manager talks to most,
offering support and advice, and they're given the best opportunities to test their skills and grow.
So, of course, they're more likely to develop in their roles.

This also holds true for the Out-Group. The manager spends little, if any, time trying to support
and develop this group. They receive few challenging assignments or opportunities for training
and advancement. And, because they're never tested, they have little chance to change the
manager's opinion.
Typically, during the Role-Making phase, group members are classified into one of two groups:
In-Group, and Out-Group. In-Group team members often receive more attention and support,
and more opportunities, from their managers. Out-Group members get very little face time, and
few opportunities.

You can use the Leader-Member Exchange Theory to identify and validate any perceptions that
you might have of people on your team.

Transactional Leadership Theory

The transactional style of leadership was first described by Max Weber in 1947 and then by
Bernard Bass in 1981. This style is most often used by the managers. It focuses on the basic
management process of controlling, organizing, and short-term planning. The famous examples
of leaders who have used transactional technique include McCarthy and de Gaulle.

Transactional leadership involves motivating and directing followers primarily through

appealing to their own self-interest. The power of transactional leaders comes from their formal
authority and responsibility in the organization. The main goal of the follower is to obey the
instructions of the leader. The style can also be mentioned as a ‘telling style’.

The leader believes in motivating through a system of rewards and punishment. If a subordinate
does what is desired, a reward will follow, and if he does not go as per the wishes of the leader, a
punishment will follow. Here, the exchange between leader and follower takes place to achieve
routine performance goals.

These exchanges involve four dimensions:

Contingent Rewards: Transactional leaders link the goal to rewards, clarify expectations, provide
necessary resources, set mutually agreed upon goals, and provide various kinds of rewards for
successful performance. They set SMART (specific, measurable, attainable, realistic, and timely)
goals for their subordinates.

Active Management by Exception: Transactional leaders actively monitor the work of

their subordinates, watch for deviations from rules and standards and taking corrective action to
prevent mistakes.

Passive Management by Exception: Transactional leaders intervene only when standards

are not met or when the performance is not as per the expectations. They may even use
punishment as a response to unacceptable performance.

Laissez-faire: The leader provides an environment where the subordinates get many
opportunities to make decisions. The leader himself abdicates responsibilities and avoids making
decisions and therefore the group often lacks direction.
Assumptions of Transactional Theory

Employees are motivated by reward and punishment.

The subordinates have to obey the orders of the superior.

The subordinates are not self-motivated. They have to be closely monitored and controlled to get
the work done from them.

Implications of Transactional Theory

The transactional leaders overemphasize detailed and short-term goals, and standard rules and
procedures. They do not make an effort to enhance followers’ creativity and generation of new
ideas. This kind of a leadership style may work well where the organizational problems are
simple and clearly defined. Such leaders tend to not reward or ignore ideas that do not fit with
existing plans and goals.

The transactional leaders are found to be quite effective in guiding efficiency decisions which are
aimed at cutting costs and improving productivity. The transactional leaders tend to be highly
directive and action oriented and their relationship with the followers tends to be transitory and
not based on emotional bonds.

The theory assumes that subordinates can be motivated by simple rewards. The only
‘transaction’ between the leader and the followers is the money which the followers receive for
their compliance and effort.

Difference between Transactional and Transformational Leaders

Transactional leadership Transformational Leadership

Leadership is responsive Leadership is proactive

Works within the organizational culture Work to change the organizational culture by
implementing new ideas

Transactional leaders make employees Transformational leaders motivate and empower

achieve organizational objectives through employees to achieve company’s objectives by
rewards and punishment appealing to higher ideals and moral values

Motivates followers by appealing to their Motivates followers by encouraging them to transcend

own self-interest their own interests for those of the group or unit
Conclusion

The transactional style of leadership is viewed as insufficient, but not bad, in developing the
maximum leadership potential. It forms as the basis for more mature interactions but care should
be taken by leaders not to practice it exclusively, otherwise it will lead to the creation of an
environment permeated by position, power, perks, and politics.

Contemporary Leadership theories

Charismatic leadership
Charismatic leadership is a leadership style that is recognizable but may be perceived with less
tangibility than other leadership styles,” writes Mar Bell

Charismatic leadership is similar to other styles. Both it and transformational leadership rely on
the ability of the leader to influence and inspire followers. Transformational and charismatic
leaders motivate the individual or those around them to be better and to work for the greater
good of an organization or society. Other similarities include:

 Leaders rally those around them in service of a common goal

 Initiative and boldness are encouraged

The differences between charismatic and transformational leadership styles lie primarily in how
the individual is viewed.

 The personal vision of a charismatic leader has a great deal of influence over his or her
audience
 Charismatic leaders speak about their moral compass or passion rather than an existing
method of doing business

Advantages and disadvantages of charismatic leadership

There are many advantages to this leadership style. Charismatic leaders are often a catalyst for
social change. They are, however, not a fit for organizations that depend on rigid structures and
processes to function.

Charismatic leadership pros

Charismatic leaders inspire people to work together for a common cause

Organizations are committed to a central mission

Management prioritizes learning from mistakes in an effort to succeed in their mission

Charismatic-led companies tend to be cohesive because their workers have a clear purpose

Charismatic leadership cons

Leaders may develop tunnel vision or arrogance, undoing their previous good deeds

Organizations can become dependent on charismatic leaders and may suffer if he or she retires,
leaves the company, or dies suddenly

Charismatic leaders sometimes become unresponsive to their subordinates or constituents

These leaders may not learn from their mistakes, compounding them

Charismatic leaders may believe they are above the law, committing financial or ethical
violations

Benefits of charismatic leadership

The world needs charismatic leaders because they fight for quality of life and a better world.
Charismatic leaders have the courage of their convictions. They are willing to stand up to people
who have a differing view of society or the organization.

Charismatic leaders tend to be able to see the gaps between what an organization delivers to its
workers and what the workers need from the organization. They create visions that their
supporters can readily see, and in return the supporters are motivated to contribute to a common
goal.

Transformational leadership defined

Transformational leaders are sometimes call quiet leaders. They are the ones that lead by
example. Their style tends to use rapport, inspiration, or empathy to engage followers. They are
known to possess courage, confidence, and the willingness to make sacrifices for the greater
good.

They possess a single-minded need to streamline or change things that no longer work. The
transformational leader motivates workers and understands how to form them into integral units
that work well with others.

Transformational leadership pros:

  Excellent at communicating new ideas
 Good at balancing short-term vision and long-term goals
 Experience building strong coalitions and establishing mutual trust
 They have integrity and high emotional intelligence (empathy with others)

Transformational leadership cons:

 Ineffective in initial stage or ad-hoc situations

 Require an existing structure to fix
 Bad fit in bureaucratic structures

Benefits of transformational leadership

One of the best uses of this leadership style is in an organization that is outdated and requires
serious retooling. It is also a perfect match for a small company that has big dreams and wants to
change and adapt to get there. In both of these examples, the board of directors can bring in a
transformational leader who will change the structure of the organization and also motivate the
current workers to buy into the new direction.
Definition of Power

1. Definition: Power refers to a capacity that A has to influence the behavior of B, so that B
acts in accordance with A’s wishes.

• Power may exist but not be used. It is, therefore, a capacity or potential.

2. Probably the most important aspect of power is that it is a function of dependency.

• The greater B’s dependence on A, the greater is A’s power in the relationship.

• Dependence, in turn, is based on alternatives that B perceives and the importance that B
places on the alternative(s) that A controls.

• A person can have power over you only if he or she controls something you desire.

Contrasting Leadership and Power

1. Leaders use power as a means of attaining group goals. Leaders achieve goals, and power is a
means of facilitating their achievement.

2. Differences between Leadership and Power:

• Goal compatibility:

a. Power does not require goal compatibility, merely dependence.

b. Leadership, on the other hand, requires some congruence between the

goals of the leader and those being led.

• The direction of influence:

a. Leadership focuses on the downward influence on one’s followers.

b. Leadership research, for the most part, emphasizes style.

c. Power does not minimize the importance of lateral and upward influence patterns.

d. The research on power has tended to encompass a broader area and focus on tactics for
gaining compliance.

Bases of Power

Having power and using power are two different things. For example, imagine a manager who
has the power to reward or punish employees. When the manager makes a request, he or she will
probably be obeyed even though the manager does not actually reward the employee. The fact
that the manager has the ability to give rewards and punishments will be enough for employees
to follow the request. What are the sources of one’s power over others? Researchers identified
six sources of power, which include legitimate, reward, coercive, expert, information, and
referent (French & Raven, 1960). You might earn power from one source or all six depending on
the situation. Let us take a look at each of these in turn, and continue with Steve Jobs from the
opening case as our example.

People who have legitimate power should be aware of how their

choices and behaviors affect others.

Segagman – Steve Jobs 1955-2011 – CC BY 2.0.

Legitimate Power

Legitimate power is power that comes from one’s organizational

role or position. For example, a boss can assign projects, a
policeman can arrest a citizen, and a teacher assigns grades.
Others comply with the requests these individuals make because they accept the legitimacy of
the position, whether they like or agree with the request or not. Steve Jobs has enjoyed legitimate
power as the CEO of Apple. He could set deadlines and employees comply even if they think the
deadlines were overly ambitious. Start-up organizations often have founders who use their
legitimate power to influence individuals to work long hours week after week in order to help the
company survive.

Reward Power

Reward power is the ability to grant a reward, such as an increase in pay, a perk, or an attractive
job assignment. Reward power tends to accompany legitimate power and is highest when the
reward is scarce. Anyone can wield reward power, however, in the form of public praise or
giving someone something in exchange for their compliance. When Steve Jobs ran Apple, he had
reward power in the form of raises and promotions. Another example of reward power comes
from Bill Gross, founder of Idealab, who has the power to launch new companies or not. He
created his company with the idea of launching other new companies as soon as they could
develop viable ideas. If members could convince him that their ideas were viable, he gave the
company a maximum of $250,000 in seed money, and gave the management team and
employees a 30% stake in the company and the CEO 10% of the company. That way, everyone
had a stake in the company. The CEO’s salary was capped at $75,000 to maintain the sense of
equity. When one of the companies, Citysearch, went public, all employees benefited from the
$270 million valuation.

Coercive Power

In contrast, coercive power is the ability to take something away or punish someone for
noncompliance. Coercive power often works through fear, and it forces people to do something
that ordinarily they would not choose to do. The most extreme example of coercion is
government dictators who threaten physical harm for noncompliance. Parents may also use
coercion such as grounding their child as punishment for noncompliance. Steve Jobs has been
known to use coercion—yelling at employees and threatening to fire them. When John Wiley &
Sons Inc. published an unauthorized biography of Jobs, Jobs’s response was to prohibit sales of
all books from that publisher in any Apple retail store (Hafner, 2005). In other examples, John D.
Rockefeller was ruthless when running Standard Oil Company. He not only undercut his
competitors through pricing, but he used his coercive power to get railroads to refuse to transport
his competitor’s products. American presidents have been known to use coercion power.
President Lyndon Baines Johnson once told a White House staffer, “Just you remember this.
There’s only two kinds at the White house. There’s elephants and there’s ants. And I’m the only
elephant” (Hughes, Ginnet, & Curphy, 1995).

Expert Power

Expert power comes from knowledge and skill. Steve Jobs has expert power from his ability to
know what customers want—even before they can articulate it. Others who have expert power in
an organization include long-time employees, such as a steelworker who knows the temperature
combinations and length of time to get the best yields. Technology companies are often
characterized by expert, rather than legitimate power. Many of these firms utilize a flat or matrix
structure in which clear lines of legitimate power become blurred as everyone communicates
with everyone else regardless of position.

Information Power

Information power is similar to expert power but differs in its source. Experts tend to have a vast
amount of knowledge or skill, whereas information power is distinguished by access to specific
information. For example, knowing price information gives a person information power during
negotiations. Within organizations, a person’s social network can either isolate them from
information power or serve to create it. As we will see later in this chapter, those who are able to
span boundaries and serve to connect different parts of the organizations often have a great deal
of information power. In the TV show Mad Men, which is set in the 1960s, it is clear that the
switchboard operators have a great deal of information power as they place all calls and are able
to listen in on all the phone conversations within the advertising firm.

Referent Power

As the 44th elected president of the United States, Barack Obama has
legitimate power. As commander-in-chief of the U.S. Armed Forces, he also
has coercive power. His ability to appoint individuals to cabinet positions
affords him reward power. Individuals differ on the degree to which they feel
he has expert and referent power, as he received 52% of the popular vote in
the 2008 election. Shortly after the election, he began to be briefed on national
security issues, providing him with substantial information power as well.

Wikimedia Commons – CC BY 2.0.

Referent power stems from the personal characteristics of the person such as the degree to which
we like, respect, and want to be like them. Referent power is often called charisma—the ability
to attract others, win their admiration, and hold them spellbound. Steve Jobs’s influence as
described in the opening case is an example of this charisma.

What Is Influence?
Starting at infancy, we all try to get others to do what we want. We learn early what works in
getting us to our goals. Instead of crying and throwing a tantrum, we may figure out that smiling
and using language causes everyone less stress and brings us the rewards we seek.

By the time you hit the workplace, you have had vast experience with influence techniques. You
have probably picked out a few that you use most often. To be effective in a wide number of
situations, however, it’s best to expand your repertoire of skills and become competent in several
techniques, knowing how and when to use them as well as understanding when they are being
used on you. If you watch someone who is good at influencing others, you will most probably
observe that person switching tactics depending on the context. The more tactics you have at
your disposal, the more likely it is that you will achieve your influence goals.

Al Gore and many others have spent years trying to influence us to think about the changes in the
environment and the implications of global warming. They speak, write, network, and lobby to
get others to pay attention. But Gore, for example, does not stop there. He also works to persuade
us with direct, action-based suggestions such as asking everyone to switch the kind of light bulbs
they use, turn off appliances when not in use, drive vehicles with better fuel economy, and even
take shorter showers. Ironically, Gore has more influence now as a private citizen regarding
these issues than he was able to exert as a congressman, senator, and vice president of the United
States.

Contingencies

Contingencies limit the extent to

which power bases can be used.
Substitutability refers to the
availability of alternatives.

Centrality is the degree of inter-

dependence between the power
holder and others. Actions of a
person with high centrality affect
a great deal of people –
sometimes at alarming speed.
Centrality is associated with
mission-critical jobs and jobs
that involve significant
responsibilities.

Discretion in the context of leadership theory is the freedom to make decisions and exercise
judgment without permission from others and without referring to rulebooks.

McShane and Von Glinow wrote, “Power does not flow to unknown people in the organization.”
Even those with legitimate power are effectively neutered by lack of visibility. It’s easy to see
why “unsung heroes” and “worker bees” have no power.