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Leadership

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Business Studies

Great leaders do not tell you what to do, they show you how it's done.

- Dr. Ivan Misner

Have you ever wondered what makes good leaders stand out? Let's take a look at the various types of leadership style to find out.

Leadership is the ability to influence and guide others. In a business context, a person who has a managerial position needs leadership skills and qualities in order to manage others. Leadership skills and qualities include persuasion, charisma, and problem-solving.

What are the key leadership styles?

This section will cover the five main leadership styles in business. These are:

  • Democratic leadership

  • Authoritarian leadership

  • Laissez-faire leadership

  • Transactional leadership

  • Transformational leadership

Democratic leadership

The democratic leadership style is when a leader works collectively with employees to make decisions. All employees in the organisation or department are encouraged to participate in the decision-making process by sharing knowledge, views and opinions. This leadership style is also known as participative leadership.

An example of a democratic leadership style is when a leader holds group discussions to make decisions. For instance, a leader in the marketing department holds a meeting with team members to make decisions regarding a new marketing campaign strategy for the upcoming season.

Authoritarian leadership

The authoritarian leadership style is the opposite of the democratic leadership style. In authoritarian leadership, the leader makes all the decisions themselves without discussion with employees.

In a bureaucratic organisation, the CEO or board directors hold the authority and make decisions without discussion with employees.

When a large enterprise adopts an authoritarian leadership style, employees at the middle or bottom levels may not be aware of the decisions made in the organisation.

An authoritarian leadership style usually exists in organisations with rigid hierarchies.

Laissez-faire leadership

The laissez-faire leadership style is also known as delegative leadership. In this leadership style, group members are delegated to make decisions and take initiative. The leader's responsibility is to train employees to make sure they have the knowledge and skills to make the right decisions.

A good example is handling customer complaints in a cafe. Employees can make their own decisions about how to deal with customer complaints after they have been trained by the supervisor. This can help employers be more independent.

Mistakes may be unavoidable when following a laissez-faire leadership style, but it is seen as a learning process.

Transactional leadership

The transactional leadership style involves leaders using 'transactions' between themselves and their employees. The leader sets targets and goals that they want their employees to achieve. Reward or punishment systems are implemented based on how well employees achieve those targets.

The transactional leadership style occurs in less creative and hierarchical organisations in which employees have a set of written guidelines. Employee performance is then measured against these guidelines and employees are either given monetary or non-monetary rewards or punished with, for example, a warning or loss of bonus.

Transformational leadership

Transformational leadership is the opposite of transactional leadership. The goal of this leadership style is to provide employees with knowledge and training so that they can become future leaders. A leader is a role model for their employees.

The transformational leadership style occurs in organisations which concentrate on employee development and progression within the organisation. These organisations usually have a low staff turnover rate as employees will likely concentrate on the progression of their careers and stay loyal to the organisation.

Leadership style theories

There are a couple of leadership style theories. The key theories are the Tannenbaum Shmidt continuum and the Blake Mouton grid.

The Tannenbaum Shmidt continuum

The main idea of the Tannenbaum Shmidt continuum leadership theory is that leadership styles are influenced by a variety of factors. These factors include:

  • The characteristics of the leader,

  • The qualities of the followers,

  • Situational factors that can include urgency in the decision making etc.

Additionally, the Tannenbaum Shmidt continuum leadership style theory focuses on finding the middle ground between two extreme leadership styles: the authoritarian and delegative leadership styles.

On the left of the diagram are managers who exhibit authoritarian leadership qualities and on the right are managers who exhibit laissez-faire leadership qualities (see Figure 1 below).

Leadership, Tannenbaum Shmidt continuum leadership style theory, StudySmarterFigure 1. Tannenbaum Schmidt continuum leadership style theory, StudySmarter

The Blake Mouton grid

The Blake Mouton grid leadership theory acknowledges that there are two leadership style behaviours, either task-oriented or people-oriented.

The task-oriented manager's main concern is productivity and completing tasks, which means that these types of managers only focus on production, and spend a lot of time planning and communicating the work to employees with set deadlines.

On the other hand, the people-oriented manager's main concern is relationships, meaning that these managers focus on building trust and relationships with employees. They respect subordinates' ideas and encourage teamwork.

Blake and Mouton have implemented a 1 to 9 scoring system to measure the task-oriented and people-oriented behaviours of managers; 1 is low and 9 is high. Based on these scores, different management styles are identified.

Leadership, Blake Mouton grid leadership theory, StudySmarterFigure 2 Blake Mouton grid leadership theory, StudySmarter

The different leadership styles are identified based on the scoring system, as shown in Figure 2. They include:

Impoverished management - This leadership style occurs when managers score low on both concern for people and concern for productivity. This leadership style shows that managers will not put a lot of effort into getting tasks done on time, nor on building relationships with subordinates.

Country club management - Managers implementing this leadership style score low on concern for productivity but score high regarding the concern for people. Managers mainly focus on people rather than on production as they believe that when managers prioritise employee well-being it increases their motivation, productivity and retention.

Authority compliance management - This management style is when managers put less emphasis on people but more emphasis on productivity. Managers following this leadership style usually ignore employees' feelings and focus on getting the job done within a set time. Monetary incentives may be used to increase employee efficiency and negative incentives such as punishment used to motivate employees to perform better.

Middle-of-the-road management - In this leadership style managers have medium concerns for productivity and subordinates. Managers try to keep relatively good relationships with their subordinates and get them to complete set tasks on time without putting too much pressure on employees.

Team management - managers are concerned with both productivity and people. The main focus is for managers to build good relationships with their subordinates as well as accomplish tasks beyond set targets. This leadership style is seen as the most effective.

McGregor's leadership style theory

McGregor's leadership style theory consists of two leadership style theories. These are:

Theory X

According to McGregor's theory, Theory X should be used in situations where managers believe that employees are unmotivated, need to be controlled, and do not want to take responsibility. This involves the implementation of an authoritarian leadership style. This means that the manager will be in control of employees by micromanaging them and making all the decisions without consultation with employees. This approach can be used to get the 'work done'.

Theory Y

On the other hand, if managers believe that employees are motivated to take on challenges, are self-motivated and interested in career progression, then McGreggor suggests using Theory Y. This includes the implementation of a democratic leadership style. Since managers will have trust in employees, they will involve them in decision making and take responsibility in the organisation.

Leadership, McGregor's leadership style theory, StudySmarterFigure 3 McGregor's leadership style theory, StudySmarter

Leadership skills

Previous sections have shown that there are very different leadership styles, but what they all have in common are leadership skills. Regardless of the leadership style, a good leader must have certain skills. This section identifies three main leadership skills.

Problem-solving

Every leader faces problems. Therefore, a leader must be able to identify the problem, understand its cause, and come up with possible solutions. After identifying a suitable solution, the leader must reflect on how to avoid this problem in the future.

For example, a restaurant has received complaints about the quality of its seafood. A leader with excellent problem-solving skills should identify the problem, and find its cause. This could be fridge temperature, suppliers, or the delivery method. After analysing the cause, the leader should identify possible solutions, such as regularly checking fridge temperatures, contacting suppliers, and changing the delivery method. They should monitor the changes made and continue to check the quality of the seafood. A solution for the customers who complained could be to apologise to them and offer them a free meal or a voucher for their next meal.

Empathy

Empathy is an important leadership skill as leaders need to give employees an example to follow. Leaders must be able to put themselves in someone else's shoes.

For example, the marketing managers of Company A chose to use a democratic leadership style as they have noticed that the marketing department employees enjoy discussion before making decisions. The authoritarian leadership style may not fit as employees can feel that they did not have a chance to state their opinion, which might make them feel disappointed and demotivated.

Empathy can help managers choose a leadership style that will fit with employees.

Persuasion

Persuasion is a skill that every leader should have. Every leader has to persuading others to believe in the company vision or be motivated to do certain tasks. To have good persuasion skills, a leader must master communication, emotional intelligence, negotiation and more. The leader must communicate ideas clearly and negotiate if there is any disagreement.

For example, a department manager believes that weekly collaboration between the marketing and IT departments will bring significant benefits to the organisation. The IT department can help with new technical innovations that digital marketers may want to implement. At first, followers may be skeptical. However, a leader can use their skills of persuasion to explain clearly how this idea will benefit the company and contribute to the organisation's vision. By using persuasion, leaders can influence employee behaviour and mindset.

Leadership qualities

Leadership qualities can overlap with skills. This means that certain qualities can be defined as skills and vice versa. The main difference between those two terms is that leadership skills are abilities that leaders are able to develop through learning and practice. On the other hand, qualities are certain character qualities that are usually natural features but can also be developed over time. The key leadership qualities include:

Self-confidence and self-belief

Good leaders must have confidence when making decisions and setting business goals. They must be able to believe in themselves that they can achieve their goals and bring success to the business.

Intelligence

Good leaders must be intelligent as this allows them to:

  • Determine a direction that is realistic and achievable for a business to succeed.

  • Distinguish between unrealistic, impossible and achievable ideas.

  • Have the ability to solve problems of high complexity.

  • Set priorities.

Creativity

A good leader must be creative and come up with innovative ideas for the business. As the business environment becomes more competitive, the business that has the most innovative ideas will be the one leading the competition.

Charisma

A good leader must have a personality that makes others believe in them and follow them. A charismatic leader can motivate others to work along with them towards the business vision by achieving set goals and objectives.

Leadership - Key takeaways

  • Leadership is a person's ability to influence and guide others. In business, leadership is usually undertaken by a manager or someone who is in charge of a team, project or department.
  • There are quite a few leadership styles. The five main ones are Authoritarian leadership, Participative leadership, Delegative leadership, Transformational and Transactional leadership styles.
  • There are three key leadership style theories. They are the Tannenbaum Shmidt continuum, the Blake Mouton grid, and McGregor's leadership style theory.
  • Leadership skills are what makes a leader skilful and knowledgeable to lead others. For example, empathy allows leaders to understand their followers and problem-solving skills helps leaders solve problems that occur in daily organisational operations effectively.
  • The key leadership qualities include 1) Self-confidence and self-belief 2) Intelligence 3) Creativity 4) Charisma.

Leadership

Leadership is the ability of the individual to influence and guide others. 

The key leadership skills are problem-solving, empathy and persuasion.

There are quite a few types of leadership styles but the main ones are:


  • Democratic leadership
  • Authoritarian leadership
  • Laissez-faire leadership
  • Transactional leadership
  • Transformational leadership

Transformational leadership is when a leader performs as a 'teacher' or a 'role model'. The leader provides their followers with training and knowledge so that they can become the future leaders of the organization.

Final Leadership Quiz

Question

What are the main leadership styles?

Show answer

Answer

The five main leadership styles are:

  • Democratic leadership
  • Authoritarian leadership
  • Laissez-faire leadership 
  • Transactional leadership
  • Transformational leadership

Show question

Question

What are the key differences between Transactional and Transformational leadership styles?

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Answer

Transactional leadership focuses on controlling and supervising employees to follow certain rules in the organisation. Transactional leaders focus on setting specific goals and targets that employees must aim to achieve which leaves no room for employees to be creative. On the other hand, Transformational leadership means that a leader creates a vision for employees and focuses on developing their skills, encouraging and motivating them to become future leaders. Rather than directing Transformational leaders will work with their followers together to achieve a common goal and strive towards creating a vision for the company.

Show question

Question

What is the meaning of Laissez-faire leadership?

Show answer

Answer

Laissez-faire leadership style is when group members are making the decisions - not the leader. The leader's responsibility is to train employees to make sure they have the knowledge and skills to make the right decisions. 

Show question

Question

What is Laissez-faire leadership also known as?

Show answer

Answer

Delegative leadership.

Show question

Question

What style of leadership involves collective decision-making?

Show answer

Answer

The Democratic leadership.

Show question

Question

What is Democratic leadership also known as?


Show answer

Answer

The Participative leadership.

Show question

Question

In what leadership style there is only one decision-maker? 

Show answer

Answer

In the Authoritarian leadership style.

Show question

Question

What are the differences between the Democratic and Laissez-faire leadership styles?

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Answer

The key difference between these two leadership styles is that the Democratic leadership style involves collective decision-making that includes all employees including managers or departments making decisions based on joint agreement. While in the Laissez-faire leadership style the individual makes decisions after they receive training and knowledge transfers from the managers.

Show question

Question

What are the key leadership style theories?

Show answer

Answer

The key leadership style theories include the Tannenbaum Shmidt continuum, the Blake Mouton grid and McGregor’s leadership style theory.

Show question

Question

What are the key factors of Tannenbaum Shmidt continuum theory?

Show answer

Answer

There are three key factors that include: 

  • The characteristics of the leader 
  • Qualities of the followers'
  • Situational factors, such as urgency in the decision making   

Show question

Question

What are the different leadership styles that are identified by the Blake Mouton grid theory?

Show answer

Answer

The different leadership styles that are based on the Blake Mouton grid scores include: 

  • Impoverished management (low concern for people and productivity)
  • Country club management (high concern for people and low concern for productivity)
  • Authority compliance management (low concern for people and high concern for productivity) 
  • Middle-of-the-road-management (middle concern for people and productivity)
  • Team management (high concern for people and productivity)

Show question

Question

What is the best leadership style suggested by the Blake Mouton grid theory?

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Answer

The best leadership style is identified as Team management which scores high for both concerns for people and productivity.

Show question

Question

What does the grid represent in the Blake Mouton grid theory?

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Answer

The grid represents a scoring system regarding two leadership behaviours that includes concern for people and concern for productivity. The highest score that can be achieved by each behaviour is 9 and the lowest is 1. Based on these scores different leadership styles are created.

Show question

Question

What are the key elements of McGregor’s leadership style theory?

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Answer

Theory X and Theory Y. 

Show question

Question

In McGregor’s leadership style theory what leadership styles are recommended to use for Theory X and Theory Y?

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Answer

  • In Theory X, the Authoritarian leadership style is recommended.
  • In Theory Y, the Democratic leadership style is recommended. 

Show question

Question

In McGregor’s leadership style theory, in what situations Theory X is used?

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Answer

Theory X is used in situations where managers believe that employees are unmotivated, need to be controlled, and do not want to take responsibility. The leadership style applied to this theory is Authoritarian. 

Show question

Question

What are the key leadership skills?

Show answer

Answer

The key leadership skills are:

  • Problem-solving
  • Empathy
  • Persuasion 

Show question

Question

What are the key leadership qualities?

Show answer

Answer

The key leadership qualities include:

  • Self-confidence and self-belief 
  • Intelligence 
  • Creativity 
  • Charisma

Show question

Question

What are the key differences between leadership skills and qualities?

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Answer

The key difference between leadership skills and qualities are that leadership skills are something that is developed through learning and practice. For example, skills such as problem-solving require time and effort to be developed through consistent practising and learning. On the other hand, leadership qualities are something that leaders can have naturally such as intelligence. Someone can be an intelligent person because of their personal characteristics.

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Question

Why are leadership skills important?

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Answer

Leadership skills are crucial for any leader to attain. Skills such as problem-solving are needed as leaders will face problems in everyday situations, and good leaders must have the skills to solve the problem effectively.

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Question

What is an example of problem-solving skills?

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Answer

For example, if the restaurant faced a problem of constantly receiving many customers’ complaints, a leader who has good problem skills will not ignore this problem and try to solve it. First, they will try to find its cause, by listening to customers and handling their complaints, the problem could be waiting time, food, customer service etc. Once the cause is found a good manager will try to find solutions to it and most importantly leave customers satisfied by offering them compensations in form of vouchers or free meal options. Additionally, good problem-solvers will learn from this experience and will try to avoid similar problems occurrences in the future. 

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Question

What is meant by the charismatic leader?

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Answer

A charismatic leader can make others believe and follow their ideas. A charismatic leader can motivate others to work along with them towards the business vision by achieving set goals and objectives.

Show question

Question

This leadership style is when a leader works collectively with employees to make decisions. What style is it?

Show answer

Answer

Democratic leadership

Show question

Question

The opposite of authoritarian leadership is...

Show answer

Answer

democratic leadership.

Show question

Question

In ___ leadership, the leader makes all the decisions themselves without discussion with employees.


Show answer

Answer

authoritarian 

Show question

Question

In this leadership style, group members are delegated to make decisions and take initiative. The leader's responsibility is to train employees to make sure they have the knowledge and skills to make the right decisions. What leadership style is it?


Show answer

Answer

both answers are correct

Show question

Question

This leadership style involves leaders using 'transactions' between themselves and their employees. What style of leadership is it?


Show answer

Answer

transactional 

Show question

Question

This leadership style is the opposite of transactional leadership. What leadership style is it?


Show answer

Answer

transformational leadership

Show question

Question

What leadership theory does the graphic present?


Show answer

Answer

The Tannenbaum Shmidt continuum

Show question

Question

What leadership theory does the graphic present? 


Show answer

Answer

The Blake Mouton grid

Show question

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