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What is Leadership

Leadership is a process by which an executive can direct, guide and influence the behaviour
and work of others, towards accomplishment of specific goals in a given situation.
Leadership is the ability of a manager to induce the subordinates to work with confidence
and zeal. It is the potential to influence behaviour of others. It is also defined as the capacity
to influence a group towards the realization of a goal. Leaders are required to develop
future visions, and to motivate the organizational members to achieve the visions.

Definitions of Leadership

Leadership is the quality of behavior of individuals whereby they guide people or their
activities in organising efforts” — Chester I. Barnard
Leadership is the ability of a superior to induce subordinates to work with confidence and I
zeal” — Koontz and ‘Donnell
Leadership is the process by which an executive imaginatively directs, guides and influences
the work of others in attaining specified goals.” — Theo Haimann

“Leadership is the ability to persuade others to seek defined objectives enthusiastically. It is

the human factor which binds a group together and motivates it towards goals- Keith Davis.

Nature of Leadership

Leadership may be defined as a position of power held by an individual in a group, which

provides him with an opportunity to exercise interpersonal influence on the group members
for mobilising and directing their efforts towards certain goals. The leader is at the centre of
group’s power structure, keeps the group together, infuses life into it, moves it towards its
goals and maintains its momentum.

He may emerge in a group by virtue of his personality characteristics and qualities or by

virtue of common consent by group members. In the latter case, the leader derives his
power from the group members. He continues in the leadership position at the pleasure of

group members collectively. Leadership position exists in most group settings irrespective of
the size of the group.

For example, a leader of national or international standing commands widespread influence

over a large number of people while the influence of the leader of a small work group in an
organisation is very limited. Both are leaders in their own right and fulfill the definition of

Leadership is an influential process. The leader is in a position to shape, regulate, control

and change the attitudes, behaviour and performance of his group members. The latter are
supposed to comply with the former’s desires and directives and partially suspend their own
judgment and discretion. There exists a particular relationship between the leader and his
group members, which is characterised by interpersonal and social interaction.

In a group, the leader and his followers play the roles expected of them and thereby seek to
justify their respective positions. Some leaders may be able to play their role effectively
whereby they succeed in getting the willing cooperation and commitment of their followers.
In any group situation, the leader has a few bases of power by virtue of which he is in a
position to influence the behaviour of group members.

They are:

(i) Knowledge, information and experience

ii) Resources for dispensing favours, rewards and penalties

(iii) Formal authority

(iv) Charisma

(v) Distinct personality characteristics like for example will to dominate, ability to establish
rapport, skill to communicate, understanding of people, decisiveness and so on.

Importance of Leadership

Leadership is an important function of management which helps to maximize efficiency and

to achieve organizational goals. The following points justify the importance of leadership in
an organization

(i) Effective direction:

An organisation comes into existence with certain objectives. To attain the objectives, the
activities of the organisation must be directed. Direction of the activities is effected through
leadership. In short, effective leadership directs the activities of an organisation towards the
attainment of the specified organisational goals.

(ii) Initiates action

Leader is a person who starts the work by communicating the policies and plans to the
subordinates from where the work actually starts

(iii) Source of motivation:

Leadership is the motivating power to group efforts. Effective leadership motivates the
subordinates for higher productivity. A leader proves to be playing an incentive role in the
concern’s working. He motivates the employees with economic and non-economic rewards
and thereby gets the work from the subordinates.

(iv) Confidence:

Leadership creates confidence in-the subordinates by giving proper guidance and advice.
Confidence is an important factor which can be achieved through expressing the work
efforts to the subordinates, explaining them clearly their role and giving them guidelines to
achieve the goals effectively. It is also important to hear the employees with regards to their
complaints and problems.

(v) Building morale:

Good leadership increases the morale of the employees which, in turn, contributes to higher
productivity. Morale denotes willing co-operation of the employees towards their work and

getting them into confidence and winning their trust. A leader can be a morale booster by
achieving full co-operation so that they perform with best of their abilities as they work to
achieve goals.

(vi) Development of team spirit:

Effective leadership promotes team-spirit and teamwork which is quite essential for the
success of any organisation.

(vii) Encouraging initiatives:

A progressive, forward and democratic minded leader always encourages initiatives on the
part of the followers.

(viii) Co-ordination

Co-ordination can be achieved through reconciling personal interests with organizational

goals. This synchronization can be achieved through proper and effective co-ordination
which should be primary motive of a leader.

(ix) Overcoming resistance to change:

A leader overcomes resistance to organisational changes, if any on the part of followers

through explaining to them the utility of such changes to both the enterprise and the

(x) Builds work environment

Management is getting things done from people. An efficient work environment helps in
sound and stable growth. Therefore, human relations should be kept into mind by a leader.
He should have personal contacts with employees and should listen to their problems and
solve them. He should treat employees on humanitarian terms

Traits and characteristics of leadership

Some of the most common traits in the characteristic of leadership:


 Empathy: Creating a legitimate rapport with your staff makes it less likely that
personal issues and resentment can creep in and derail the group. When your team
knows that you are empathetic to their concerns, they will be more likely to work
with you and share in your vision, rather than foster negative feelings.
 Consistency: Being a consistent leader will gain you respect and credibility, which is
essential to getting buy-in from the group. By setting an example of fairness and
credibility, the team will want to act the same way.
 Honesty: Another characteristic of leadership that lends itself to credibility. Those
who are honest, especially about concerns, make it far more likely that obstacles will
be addressed rather than avoided. Honesty also allows for better assessment and
 Direction: Having the vision to break out of the norm and aim for great things and to
set the steps necessary to get there, is an essential characteristic of good leadership.
By seeing what can be, and managing the goals on how to get there, a good leader
can create impressive change.
 Communication: Effective communication helps keep the team working on the right
projects with the right attitude. If you communicate effectively about expectations,
issues and advice, your staff will be more likely to react and meet your goals.
 Flexibility: Not every problem demands the same solution. By being flexible to new
ideas and open-minded enough to consider them, you increase the likelihood that
you will find the best possible answer. You will set a good example for your team and
reward good ideas.
 Conviction: A strong vision and the willingness to see it through is one of the most
important characterizes of leadership. The leader who believes in the mission and
works toward it will be an inspiration and a resource to their followers.
 Awareness: There is a difference between management and employees, bosses and
workers. Leaders understand the nature of this difference and accept it .They
conduct themselves in a way that sets them apart from their employees,not in a
manner that suggests they are better than others, but in a way that permits them to
retain an objective perspective on everything that's going on in their organization.
 Decisiveness: All leaders must make tough decisions. It goes with the job. They
understand that in certain situations, difficult and timely decisions must be made in

the best interests of the entire organization, decisions that require a firmness,
authority, and finality that will not please everyone. Extraordinary leaders don't
hesitate in such situations. They also know when not to act unilaterally but instead
foster collaborative decision making.
 Accountability: Extraordinary leaders take responsibility for everyone's
performance, including their own. They follow up on all outstanding issues, check in
on employees, and monitor the effectiveness of company policies and procedures.
When things are going well, they praise. When problems arise, they identify them
quickly, seek solutions, and get things back on track.
 Confidence: Not only are the best leaders confident, but their confidence is
contagious. Employees are naturally drawn to them, seek their advice, and feel more
confident as a result. When challenged, they don't give in too easily, because they
know their ideas, opinions, and strategies are well-informed and the result of much
hard work. But when proven wrong, they take responsibility and quickly act to
improve the situations within their authority.
 Optimism The very best leaders are a source of positive energy. They communicate
easily. They are intrinsically helpful and genuinely concerned for other people's
welfare. They always seem to have a solution, and always know what to say to
inspire and reassure. They avoid personal criticism and pessimistic thinking, and look
for ways to gain consensus and get people to work together efficiently and
effectively as a team.
 Focus: Extraordinary leaders plan ahead and they are supremely organized. They
think through multiple scenarios and the possible impacts of their decisions, while
considering viable alternatives and making plans and strategies. Once prepared, they
establish strategies, processes, and routines so that high performance is tangible,
easily defined, and monitored. They communicate their plans to key players and
have contingency plans in the event that last-minute changes require a new
direction (which they often do).
 Inspiration Put it all together, and what emerges is a picture of the truly inspiring
leader, someone who communicates clearly and concisely, and motivates everyone
to give his or her best all the time. They challenge their people by setting high but
attainable standards and expectations, and then giving them the support, tools,

training, and latitude to pursue those goals and become the best employees they
can possibly be.
 Results Orientated. At the end of the day a leader is responsible for delivering
results however they are defined. In the end, it is not about effort, which is no doubt
good and very much needed, but what really counts is what is accomplished. Leaders
have to keep this in the forefront of his mind as a guide to his activity. Great leaders
spend their energy on the most effective activities to achieve the greatest outcomes.
Remember, action orientation is good, but be oriented on the right actions. Don’t
just be busy, be a busy leader who gets results.
 Effectively Get Work Done Through Others. Getting things done yourself is great,
but it doesn’t scale very well. If you want to do big things, it requires effectively
getting work done through others. One needs to become very good at delegating.
You need to become better at delegating and having things done through others.
Each week, look at what you have to do and make sure you are delegating
effectively. Figure out who is the right person to tackle specific tasks or projects.
 Be Good at Dealing with Conflict. A cornerstone of working effectively with people
is being very good at dealing with conflict. The reality is that conflict is going to
happen. People think things should be done in different ways. No surprise. You
should even expect it. The trick is not to have conflict be counterproductive. Learn
how to successfully resolve conflict and harness the best ideas from your staff.
 Make High-Quality Decisions. Making decisions is one of the fundamental actions of
an executive. And, the great ones make really good decisions. Making decisions is
easy,you can flip a coin to pick between two things. However, making quality
decisions is much harder. Understand, reflect, and learn about your decision making
process. Leaders need to make both quality and timely decisions.
 Be a Trusted Leader. People do want to follow and accomplish great things. All else
being equal, a trusted leader will get more from his people and have a stronger
following. Be someone your people can trust. It is important to remember that it
takes a long time to earn trust, it builds over time. The flipside is that you can lose it
 Be an Incredible Communicator. Communication is one of the fundamental
leadership capabilities. So much is done through communication,it is how initiatives

are launched, results are reported, and a plethora of things are done in between.
Remember, too, communication is a two-way street with listening as important as
speaking. Great leaders listen incredibly well as part of their communication skills.


Components of leadership

The primary components of leadership are:

The Leader: Without the leader, there is no leadership. There is no denying that leaders play
an essential role in leadership. They often provide the energy and vision that guide
followers actions. Leaders, however, come in many different forms. While we often look at
the formal roles leaders play (positional power), leaders also emerge from unexpected
circumstances. Martin Luther King, Jr., had limited positional power in the United States in
the 1960s, yet, through his actions and organizational skills, he emerged as a major informal
leader in the country’s civil rights movement.

Followers: Similarly, without followers, there is no leadership. It makes little sense to talk
about leaders without considering their followers. We often paint the picture of the leader
charging ahead while followers are simply foot soldiers blindly carrying out the leader
vision. In reality, we live in a very different environment. The 21 st century has witnessed the
rise of followership as a major consideration in our understanding of leadership. Followers
are now empowered by education, technology, and new means of communication, which
allows them to play an active role in negotiating their space in the leadership process.
Leaders disregard followers wishes at their own peril.

Goal: Regardless of the nature of the relationship between leaders and followers, they
work together because they have a goal in mind. So, the first challenge of a leader is making
sure the goal is worthy. Some leaders have a vision for something they want to create.
Others can craft goals from the consensus of people around them. In either case, it’s
important to have a clear picture of the goal, a belief that the goal is achievable and a belief
that, once achieved, the goal will provide significant value.

The relationship between leaders and followers in pursuit of a goal (or goals) does not take
place in a vacuum. Leadership is essentially situational and that is what complicates
things. What works in one situation does not ensure success in another. Otherwise, we
would be able to develop a leadership field manual with the formula for success. Leaders
who seem so effective in one situation find themselves trounced in another. In studying
leadership as a process, we must understand the organizational and historic forces that are
shaping decision-making. Leaders and followers must know how to read an environment to
become effective. If old decisions are adopted to address new contexts, the implications can
be potentially disastrous.



Leadership theories

Trait Theory

The trait leadership theory believes that people are either born or are made with certain
qualities that will make them excel in leadership roles. That is, certain qualities such as
intelligence, sense of responsibility, creativity and other values puts anyone in the shoes of
a good leader.

Traits are external behaviours that emerge from the things going on within our minds and
it's these internal beliefs and processes that are important for effective leadership .Trait
theory argue that effective leaders share a number of common personality characteristics,
or "traits" and identifies traits and qualities (for example, integrity, empathy, assertiveness,
good decision-making skills, and likability) that are helpful when leading others. The trait
model of leadership is based on the characteristics of many leaders, both successful and
unsuccessful. The resulting lists of traits are then compared to those of potential leaders to
assess their likelihood of success or failure. However, none of these traits, nor any specific
combination of them, will guarantee success as a leader.

Successful leaders have interests, abilities, and personality traits that are different from
those of the less effective leaders. Through many research 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
 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
 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 on how to
develop their leadership qualities.


Skills Theory

The skills theory grew from the obvious flaw in the trait approach, that the traits are
relatively fixed. This meant that trait theory was not particularly useful for developing new
leaders who lacked those traits. Skills theorists sought to discover the skills and abilities that
made leaders effective. Like trait theory, skills theories are leader-centric, and focused on
what characteristics about leaders make them effective. The two primary theories to
develop from a skills approach were Katz’s three-skill approach and Mumford’s skills model
of leadership.

The three-skill approach argued that effective leadership required three skills: technical,
human, and conceptual skills. Technical skill refers to proficiency in a specific activity or type
of work. Human skill refers to being able to work with people and conceptual skill refers to
the ability to work with broad concepts and ideas. The three-skill approach asserts that,
while all skills were important for leaders, their level of importance varies depending on the
organizational level of leaders. As leaders move through the levels of the organization (from
lower to upper), skill importance moves from technical to human to conceptual.

The skills model of leadership outlined five components of effective leadership:

competencies, individual attributes, leadership outcomes, career experiences, and
environmental influences. Effective leadership is dependent on how leader competencies
are affected by the leader’s attributes, experiences, and the environment.


Skills theory states that learned knowledge and acquired skills/abilities are significant
factors in the practice of effective leadership. It doesn’t deny the usefulness of inherent
traits but argues that developing skills are essential to leadership. It is of course the belief
that skills theory is true that warrants all the effort and resources devoted to leadership
training and development. According to the theory a leader can learn certain skills and turn
himself into a remarkable one. Perhaps the most useful strength of skill theory is that it

places effective leadership performance on learned (and learnable) skills rather than on
traits. In this way, leadership is available to anyone.


Skills theories are also weak in their predictive ability, failing to explain how a person’s
competencies lead to effective leadership. Finally, most of the data used to construct the
skills model was taken from the military, meaning its applicability to general organizations is


Style theory

Style theory differs drastically from trait or skill theories. Instead of focusing on who leaders
are, style theories consider what leaders do. At the core of all style theories is the idea that
leaders engage in two distinct types of behavior-task behaviors and relationship behaviors.
How leaders combine these two behaviors determines their leadership effectiveness. Style
theory refers to three main theories or lines of research, which are, the Ohio State
University studies, the Michigan University studies, and the Blake and Mouton Managerial

Both the Ohio State and Michigan studies sought to identify the best combination of the
leadership behaviors (although each used differing terms). Their research leads to a myriad
of research attempting to define leadership behaviors that worked in every situation.
However, the results of this research are inconclusive, suggesting that there is not one best
style of effective leadership.

Blake and Mouton developed a model for training leaders that describes leadership
behaviors as plots on a grid with two axes- concern for results (task behaviors) and concern
for people (relationship behavior).

The model outlines five main plots on the managerial grid: authority-compliance , country
club management , impoverished management , middle-of-the-road management , and
team management .

The style approach will remind leaders that their actions towards others occur on a task
level and a relationship level. In some situations, a leader must be more concerned with
task, and in others process. How a leader strikes the best balance is what make that person
a good or bad leader. Timing, understanding of other’s needs, knowledge, etc, are all
aspects of a leader he or she has access to in formulating his or her leadership

behaviours. The style approach is allowing a leader to examine the objective and then
subdivide his or her behaviours accordingly. The style approach can provide a road map for
a leader to chart a course depending on the objective. The style approach may also help
leaders solicit feedback from his or her followers on how they are doing. They can ask very
different questions about task and process, and see if they are behaving as they think they

Pros of style theory

 Expanded research to include what leaders did and how they acted
 Research has been validated by several studies and researchers
 Task and relationship behaviors work together to form the core of the
leadership process
 Leaders can learn a lot about themselves by looking at their behaviors in
the light of task and relationship dimensions

Cons of style theory

 Research has not shown the connection from leader’s styles to

performance outcomes
 Theory fails to find a universal style of leadership that could be
effective in almost every situation


Situational Theory

Situational Leadership Theory is really the short form for "Hersey-Blanchard Situational
Leadership Theory" and draws major views from contingency thinking. As the name implies,
leadership depends upon each individual situation, and no single leadership style can be
considered the best. For Hershey and Blanchard, tasks are different and each type of task

requires a different leadership style. A good leader will be able to adapt her or his
leadership to the goals or objectives to be accomplished. Goal setting, capacity to assume
responsibility, education, and experience are main factors that make a leader successful.
Not only is the leadership style important for a successful leader-led situation but the ability
or maturity of those being led is a critical factor, as well. Leadership techniques fall out of
the leader pairing her or his leadership style to the maturity level of the group.

The Hersey-Blanchard Situational Leadership Theory has two pillars- leadership style and the
maturity level of those being led. To Hersey and Blanchard, there leadership styles stem
from four basic behaviours, designated with a letter-number combination:

 S-1 Telling
 S-2 Selling
 S-3 Participating
 S-4 Delegating.

The leadership style, manifests itself as behaviour related to the task."Telling" behaviour
simply is a unidirectional flow of information from the leader to the group. Do this task in
this manner because of [whatever] at this location, and get it finished by [whenever].
Transactional leadership techniques operate here. In the "selling" behaviour, the leader
attempts to convince the group of that the leader should lead by providing social and
emotional support to the individual being convinced. There is two-way communication, but
it is clear that the leader is leading. With "participating" behaviour, the leader shares
decision making with the group, making the system more democratic. There is less of an
emphasis on accomplishing an objective than building human relations. The fourth type of
behaviour in leadership style, "delegating" is reflected by parcelling out tasks to group
members. The leader still is in charge ,but there is more of an emphasis on monitoring the
ones delegated with the tasks.

Four maturity levels of the group are posited by Hersey and Blanchard with letter

 M-1: basic incompetence or unwillingness in doing the task

 M-2: inability to do the task but willing to do so

 M-3: competent to do the task but do not think they can

 M-4: the group is ready, willing, and able to do the task.

Each type of task may involve a different maturity level, so a person with an overall maturity
level of M-3 might be only an M-1 with respect to specific work.

According to Hersey, ability level and willingness to do work can be cultivated by a good
leader by raising the level of expectations. Blanchard overlays four permutations of
competency-commitment, again, with a letter designation:

 D1 - Low competence and low commitment

 D2 - Low competence and high commitment
 D3 - High competence and low/variable commitment
 D4 - High competence and high commitment

Effective leadership is a matter of assessing the development level of a follower and acting
in the correlating leadership style to elicit the best response from followers


In the time since its inception, situational leadership has become a standard model for use
in training managers and leaders. The situational approach is effective and provides
a prescription for leadership success rather than merely describing why certain leaders work
in certain situations. In this way, situational leadership theory further eroded the notion of,
“one best way” of leadership.


Despite a broad base of support from trainers and consultants, situational leadership theory
lacks a significant body of research-based support. While situational leadership considers
the followers in determining leadership style, it does so on a one-on-one basis and does not
provide guidelines on how to use the model when leading group.


Transformational Leadership Theory

Creating high-performance workforce has become increasingly important and to do so

business leaders must be able to inspire organizational members to go beyond their task
requirements. As a result, new concepts of leadership have emerged - transformational
leadership being one of them.

The concept of transformational leadership was initially introduced by leadership expert and
presidential biographer James MacGregor Burns. According to Burns, transformational
leadership can be seen when "leaders and followers make each other to advance to a higher
level of moral and motivation." Through the strength of their vision and personality,
transformational leaders are able to inspire followers to change expectations, perceptions,
and motivations to work towards common goals. Later, researcher Bernard M. Bass
expanded upon Burns' original ideas to develop what is today referred to as Bass’
Transformational Leadership Theory.

According to Bass, transformational leadership can be defined based on the impact that it
has on followers. Transformational leaders, Bass suggested, garner trust, respect, and
admiration from their followers.

The Components of Transformational Leadership

Bass also suggested that there are four different components of transformational

1. Intellectual Stimulation – Transformational leaders not only challenge the status

quo, they also encourage creativity among followers. The leader encourages
followers to explore new ways of doing things and new opportunities to learn.
2. Individualized Consideration – Transformational leadership also involves offering
support and encouragement to individual followers. In order to foster supportive
relationships, transformational leaders keep lines of communication open so that

followers feel free to share ideas so that, leaders can offer direct recognition of the
unique contributions of each follower.
3. Inspirational Motivation – Transformational leaders have a clear vision that they can
articulate to followers. These leaders are also able to help followers experience the
same passion and motivation to fulfil these goals.
4. Idealized Influence – The transformational leader serve as a role model for
followers. Because followers trust and respect the leader, they emulate this
individual and internalize his or her ideals.

Transformational leadership theories believe that people are motivated by the task that
must be performed. The more structured an organization is, the greater the success. People
give their all to the organization which can be their primary need and they will place their
individual interests second. There is an emphasis on cooperation and collective action and
stress is included in the long-range goals of an organization. Individuals exist within the
context of the community, rather than competing with each other. Accordingly, tasks are
designed to be challenging and desirous. The whole system adjusts to place the community
above individual egos.

Advantages of transformational leadership theories

 Transformational leadership theories emphasize the task and organizational integrity

and this helps focus one's attention to more appropriately defining a task.
 The transformational theories emphasize cooperation, ethics and community in
addition to the higher human values.
 Long-range goals are emphasized which leads to increasing the survivability of a
 It has been showed in studies, such as in gaming theory, that cooperation, as
opposed to competition, is more successful in achieving goals. Transformational
leadership theories are adaptive and can be tailored to support the fulfilment of the
most pressing needs of people.
 There is greater stability of a leader's position, as there is greater support by those
who are being led.

 Transformational leadership theories can bring harmony to a situation that could

otherwise be exacerbated by a quarrelsome organization.
 If one has an educated population, transformational leadership theories are more
likely to work.


 Even if everyone is motivated to do a task it does not assure a successful completion

of that task. Over-enthusiasm for the leader may cloud the group's judgment as to
whether the objectives of an organization are realistic.
 There can be over-dependence upon the leader.
 Members of the organization may resent that their ability to act as individuals has
been restricted.
 People have different personalities, and some may be more ambitious than others
may, with the latter feeling as if they are being pushed beyond their capacities.
 Some individuals may work better as individuals as opposed to collaborating in a
team environment.
 There may be cases when it is difficult to assess whether there is cooperation or
mere conformity. People may want simply to "go along to get along".
 There is the danger of the presence of personality cults, where a leader is so revered
that s/he is only the personality that drives activity.
 The enormity of a task and a fractious or highly competitive environment may
compromise the ability of a leader, applying the concepts of transformational
leadership theories, to gain consensus.


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

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 must obey the orders of the superior.
 The subordinates are not self-motivated. They should be closely monitored and
controlled to get the work done from them.


 Transactional leadership theories are simplistic and easy to administer.

 The central idea is relatively straightforward to convey to subordinates: obey or else.
 There is minimal need in the short run to train leaders; tell people to obey or else.
 It is much more effortless to parcel out rewards and punishments, in as much as the
criterion for doing so is how well a person obeys.
 Complexity endemic to hierarchies is minimized, as in the simplicity of rules and
defining human relationships.
 The transactional leadership theories take advantage of well-known and tested ideas
(Pavlov and Skinner for example) of human responses, especially in times of need.
 Transactional leadership theories are not hindered with the complexity of
differences in intelligence, emotions, or task complexity.
 When the ideas being imposed on a group are beneficial, the technique may be
 When time is the essence, the transactional method can be very expeditious.


 The theory assumes everyone is rational; it disregards emotions and social values.
 It presumes people are always motivated by rewards and punishments. It ignores
altruism or will to power.
 It may be used to exploit people.

 When the demand for workers exceeds the supply, the leader does not have as
much control, being that the subordinate has the ability to simply walk away from
the situation when s/he is well off.
 It has not been demonstrated to be the most effective leadership method in lesser
stressful situations.
 It is an undignified form of leadership and an insult to human capabilities.
 Transactional leadership theories do not cultivate people; it does not bring out the
best in people, but subjugates them.
 The theories encourage destructive competition and in the long-run can impair an
organization, especially from the inside.
 An organization can become dependent upon one or a few leaders; if the leadership
disappears, it will be more difficult to replace it.

Implications of Transactional Theory

The transactional leaders over emphasize 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 employees to achieve company’s objectives by
through rewards and punishment appealing to higher ideals and moral values

Motivates followers by appealing to Motivates followers by encouraging them to

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


Path Goal Theory

The theory was developed by Robert House and has its roots in the expectancy theory of
motivation. The theory is based on the premise that an employee’s perception of
expectancies between his effort and performance is greatly affected by a leader’s
behaviour. The leaders help group members in attaining rewards by clarifying the paths to
goals and removing obstacles to performance. They do so by providing the information,
support, and other resources which are required by employees to complete the task.

House’s theory advocates servant leadership. As per servant leadership theory, leadership is
not viewed as a position of power. Rather, leaders act as coaches and facilitators to their
subordinates. According to House’s path-goal theory, a leader’s effectiveness depends on

several employee and environmental contingent factors and certain leadership styles. All
these are explained in the figure 1 below:

The four leadership styles are:

 Directive: Here the leader provides guidelines, lets subordinates know what is
expected of them, sets performance standards for them, and controls behaviour
when performance standards are not met. He makes judicious use of rewards and
disciplinary action. The style is the same as task-oriented one.
 Supportive: The leader is friendly towards subordinates and displays personal
concern for their needs, welfare, and well-being. This style is the same as people-
oriented leadership.
 Participative: The leader believes in group decision-making and shares information
with subordinates. He consults his subordinates on important decisions related to
work, task goals, and paths to resolve goals.
 Achievement-oriented: The leader sets challenging goals and encourages employees
to reach their peak performance. The leader believes that employees are responsible
enough to accomplish challenging goals. This is the same as goal-setting theory.

According to the theory, these leadership styles are not mutually excusive and leaders are
capable of selecting more than one kind of a style suited for a particular situation.


The theory states that each of these styles will be effective in some situations but not in
others. It further states that the relationship between a leader’s style and effectiveness is
dependent on the following variables:

 Employee characteristics: These include factors such as employees’ needs, locus of

control, experience, perceived ability, satisfaction, willingness to leave the
organization, and anxiety. For example, if followers are of high inability, a directive
style of leadership may be unnecessary, instead a supportive approach may be
 Characteristics of work environment: These include factors such as task structure
and team dynamics that are outside the control of the employee. For example, for
employees performing simple and routine tasks, a supportive style is much effective
than a directive one. Similarly, the participative style works much better for non-
routine tasks than routine ones.
When team cohesiveness is low, a supportive leadership style must be used whereas
in a situation where performance-oriented team norms exist, a directive style or
possibly an achievement-oriented style works better. Leaders should apply directive
style to counteract team norms that oppose the team’s formal objectives.


The theory has been subjected to empirical testing in several studies and has received
considerable research support. This theory consistently reminds the leaders that their main
role as a leader is to assist the subordinates in defining their goals and then to assist them in
accomplishing those goals in the most efficient and effective manner. This theory gives a
guide map to the leaders about how to increase subordinate’s satisfaction and performance

Leadership-Member Exchange (LMX) Theory

Informal observation of leadership behaviour suggests that leader’s action is not the same
towards all subordinates. The importance of potential differences in this respect is brought
into sharp focus by Graen’s leader-member exchange model, also known as the vertical
dyad linkage theory. The theory views leadership as consisting of several dyadic
relationships linking the leader with a follower. The quality of the relationship is reflected by
the degree of mutual trust, loyalty, support, respect, and obligation.

According to the theory, leaders form different kinds of relationships with various groups of
subordinates. One group, referred to as the in-group, is favoured by the leader. Members of
in-group receive considerably more attention from the leader and have more access to the
organizational resources. By contrast, other subordinates fall into the out-group. These
individuals are disfavoured by the leader. As such, they receive fewer valued resources from
their leaders.

Leaders distinguish between the in-group and out-group members based on the perceived
similarity with respect to personal characteristics, such as age, gender, or personality. A
follower may also be granted an in-group status if the leader believes that person to be
especially competent at performing his or her job. The relationship between leaders and
followers follows three stages:

 Role taking: When a new member joins the organization, the leader assesses the
talent and abilities of the member and offers them opportunities to demonstrate
their capabilities.
 Role making: An informal and unstructured negotiation on work-related factors
takes place between the leader and the member. A member who is similar to the
leader is more likely to succeed. A betrayal by the member at this stage may result in
him being relegated to the out-group

The LMX 7 scale assesses the degree to which leaders and followers have mutual respect for
each other’s capabilities, feel a deepening sense of mutual trust, and have a sense of strong
obligation to one another. Taken together, these dimensions determine the extent to which
followers will be part of the leader’s in-group or out-group.

In-group followers tend to function as assistants or advisers and to have higher quality
personalized exchanges with the leader than do out-group followers. These exchanges
typically involve a leader’s emphasis on assignments to interesting tasks, delegation of
important responsibilities, information sharing, and participation in the leader’s decisions,
as well as special benefits, such as personal support and support and favourable work

Strengths of LMX Theory

 LMX theory is an exceptional theory of leadership as unlike the other theories, it

concentrates and talks about specific relationships between the leader and each

 LMX Theory is a robust explanatory theory.

 LMX Theory focuses our attention to the significance of communication in

leadership. Communication is a medium through which leaders and subordinates
develop, grow and maintain beneficial exchanges. When this communication is
accompanied by features such as mutual trust, respect and devotion, it leads to
effective leadership.

 LMX Theory is very much valid and practical in its approach.

Criticisms of LMX Theory

 LMX Theory fails to explain the particulars of how high-quality exchanges are

 LMX Theory is objected on grounds of fairness and justice as some followers


receive special attention of leaders at workplace and other followers do not.


According to many studies conducted in this area, it has been found that leaders definitely
do support the members of the in-group and may go to the extent of inflating their ratings
on poor performance as well. This kind of a treatment is not given to the members of the
out-group. Due to the favouritism that the in-group members receive from their leaders,
they are found to perform their jobs better and develop positive attitude towards their jobs
in comparison to the members of the out-group. The job satisfaction of in-group members is
high and they perform effectively on their jobs. They tend to receive more mentoring from
their superiors which helps them in their careers. For these reasons, low attrition rate,
increased salaries, and promotion rates are associated with the in-group members in
comparison to that of the out-group members.