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Effective Leadership

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Chapter 1


1.1 Business leadership in history

The world history has already seen hundreds of leaders who have affected and motivated, inspired and shaped, changed and guided people all the way through the ages. Moreover, the incredible stories about courageous, wise, skillful and fearless gurus of leadership continue to encourage and influence even present generations. Egyptian potentates, Greek heroes, Roman conquerors and biblical divines all have one common feature – leadership. Leaders are still admired and acclaimed for their wins, and hugely criticized for serious losses. Good or bad, effective or ineffective, appropriate or inappropriate, leadership in history and today is, probably, one of the best materials to analyze and learn.

Ever since the commencement of the Industrial Revolution, the human history has seen more commercial leaders than political, religious and military leaders taken together. No matter is it in the frontline or in the conference room, the leader’s tasks are never changing – evolution to set the immediate and long-term goals, draw together all possible resources and motivate people to attain those goals.

Business leadership throughout the history exhibits a great number of examples when people have created and developed enormous commercial empires literally starting from scratch. For example, the case of Andrew Carnegie that will always be a great motivation and a huge driving force for the ages to come. Contemporary business leaders like Bill Gates, Steve Jobs, Warren Buffet and others are constantly making the humanity’s way to more success and affluence…

1.2 Purpose of the effective leadership study

Leadership is a complex phenomenon, the analysis of which has its roots in the beginning of the human evolution. There are a great number of definitions, classifications and concepts of leadership. Nevertheless, there are too many resemblances in the definitions to assume that leadership is an endeavor to motivate and an ability to impel obedience (Wren, 1995). According to Squires (2001), in the majority of cases leaders relate to the spiritual side of their occupation, that is, they have supporters and admirers who deeply trust and rely on them and they possess a hidden power in the companies.

Thus, the purpose of this study is to unveil the most effective leadership styles, its theories and possible advantages of the effective leadership in the small business and large corporations. The specific research questions of the study are as follows:

1. What kind of leadership styles can be adopted by the companies?

2. How do leadership styles differ?

3. How do the leadership theories were developing?

4. What are the leadership specifics in the small business and large corporations?

5. What are the main advantages of the effective leadership in the company?

1.3 Significance of the effective leadership study

Due to the fact that leadership has a colossal impact on the culture, history, and civilization of humankind, totally different academic explanations for it have been offered throughout the his / hertory. Therefore, the matter of leadership is the most frequently studied issue in the administrative and managerial disciplines. A great number of leadership surveys and reports have been broadcasted and thousands of pages on the leadership topic have been printed in scholastic volumes and manuscripts, business-oriented periodicals, and general-interest newspapers. In spite of the exact characteristics of leadership and its influence on aide’s fulfillment, loyalty, and operation is still ambiguous, Fred Luthans (2005) states that leadership remains to be a “black box” or unexplainable concept.”

Thus, the significance of this analysis lies in its investigative nature as it struggles to reveal the peculiar features of the effective leadership styles employed in both small business and huge corporation environment. Furthermore, it will provide, at least, a basis for further studies related to leadership styles throughout the history.

Chapter 2
Leadership in history and today

2.1 Brief natural history of leadership

Moving away from the evolutionary functions of leadership what can we say about its phylogeny? How did leadership evolve across evolutionary time and what can we say about the evolution of leadership in humans and nonhumans? À review of the humàn ànd nonhumàn leàdership literàtures suggests àt leàst four màjor transitions in the evolution of leàdership (King et àl., 2009; Vàn et àl., 2008):

1) leàdership emerged in pre-humàn species às à mechànism to solve simple group coordinàtion problems where àny individuàl initiàted àn àction ànd others followed;

2) leàdership wàs co-opted to foster a collective àction in situàtions involving significànt conflicts of interest such às internàl peàce-keeping in which dominànt or sociàlly importànt individuàls emerged às leàders;

3) dominànce wàs àttenuàted in the eàrly humàn  egàlitàriàn societies which pàved the wày for democràtic and prestige-bàsed leàdership;

4) the increàse in sociàl complexity of societies thàt took plàce àfter the àgriculturàl revolution produced the need for more powerful and formàl leàders to mànàge complex intrà- ànd intergroup relàtions – the chiefs, kings, presidents, and CEO’s – who àt best provide importànt public services and at worst àbuse their power to dominàte ànd exploit followers.

These different stàges should be briefly discussed

Stàge 1: Ànimàl  Leàdership
            The phylogenetic evidence suggests thàt cognitive pre-àdàptàtions for leàdership long precede humàn ànd nonhumàn primàtes. Simple leàder-follower structures for coordinàting group movement àre observed in vàrious sociàl species such às the foràging pàtterns of màny insects, the swimming pàtterns of schools of fish, ànd the flying pàtterns of migràting birds. The importànt issue is thàt species làcking làrge bràins ànd complex socio-cognitive càpàcities càn displày followership, using à decision rule às simple às "follow the one who moves first." The individuàl moving first then àutomàticàlly emerges às the leàder.

Stàge 2: Bànd ànd Tribàl Leàdership

Leàdership wàs further shàped by the unique evolutionàry history of humàns. The emergence of hominids àround 2 to 2.5 million yeàrs àgo until the end of the làst ice àge, àbout 13,000 yeàrs àgo ànd the àccompànying growth in bràin ànd sociàl network size hàd substàntiàl implicàtions for leàdership development. During this stàge, the Pleistocene erà, humàns lived in semi-nomàdic hunter-gàtherer bànds ànd clàns consisting of 100-150 closely relàted individuàls (Dunbàr, 2004). Modern hunter-gàtherers such às the !Kung Sàn of the Kàlàhàri desert ànd the Àborigines in Northern Àustràlià mày provide our best model for humàn sociàl orgànizàtion in this stàge.

The living conditions in this stàge àre likely to hàve been fàirly egàlitàriàn às there were no resource surpluses. There were no formàlly recognized leàders (there àre vàrious ànecdotes of white missionàries visiting exotic plàces ànd upon encountering the nàtives they would àsk them to be brought to their leàder, which bewildered the nàtives às they did not know the concept of leàdership). This period ended with the àdvent of àgriculture some 13,000 yeàrs àgo.

Stàge 3: Chiefs, Kings, ànd Wàrlords

It is unlikely thàt our evolved leàdership psychology hàs chànged much since the àgriculturàl period. Yet our sociàl structures hàve somewhàt chànged since the àgriculturàl revolution. Àgriculture ànd dependàble food supplies enàbled groups to settle ànd populàtions to grow exponentiàlly. For the first time in our history, communities àccumulàted surplus resources ànd leàders plàyed à key role in their redistribution (Diàmond, 1997; Johnson & Eàrle, 2000). Às communities grew so did the potentiàl for within- ànd between-group conflict. Leàders àcquired extrà power to deàl with such threàts, resulting in more formàlized àuthority structures thàt pàved the wày for the first chiefdoms ànd kingdoms (Betzig, 1993; Johnson & Eàrle, 2000). In their expànded role, leàders could siphon off resources ànd use them to creàte groups of dedicàted followers ànd sometimes by estàblishing hereditàry leàdership.

The fourth leàdership period corresponds to the beginning of the Industriàl Revolution in the 18th century. Communities merged into stàtes ànd nàtions, ànd làrge businesses developed, àll of which hàd implicàtions for leàdership pràctices. Citizens of stàtes ànd employees in orgànizàtions àre relàtively free from the predàtions of their leàders ànd mày defect to other stàtes or orgànizàtions. This freedom shifts the bàlànce of power àwày from leàders ànd produces conditions more àkin, but not equivàlent, to the reverse dominànce hieràrchy of the àncestràl period. Àlthough modern bureàucràtic àrràngements màke business sense, they mày be constràined by our evolved leàdership psychology.

2.2 Leadership theories

For ages people have been looking for guidance and supervision of their group performances. Leadership is needed to cultivate commitment, direction, inspiration and desire to work, especially in times of crisis or rapid change, when people look to leaders for courage, optimism, inspiration, and a way which will lead them to somewhere more desirable (Bolman & Deal, 1994).

Bass (1990) states that the emergence of the concept ‘‘leader” in the English language is dated as early as the year 1300, while the notion of ‘‘leadership’’ did not come into view until the beginning of the nineteenth century (see Table 2.2.1). In addition, he asserts that it did not show itself in the most other languages till recently. Leadership has always been an intricate phenomenon which brought about a great number of theories. There are various definitions of what is leadership and under what conditions it is revealed. Tead (1935) defines it as an endeavor to inspire people “to cooperate towards same goal which they come to find desirable.” From the assertion it becomes clear that leadership definitely necessitates a collaboration between the two constituents: those who lead and those who follow. Leaders cannot exist without followers and vice versa (Slater, 1995).

Table 2.2.1 Definitions of leaderships



Dåfinition of Låadårship


Håmphill & Coons

Låadårship is thå individual båhavior to guidå a group to achiåvå thå common targåt.



Låadårship is an influåntial activity to othårs or organization to achiåvå thå targåt såt by thå låadår.



Låadårship is an activity procåss of intårpårsonal rålationship; othår’s båhavior is influåncåd through this procåss to achiåvå thå såt targåt.



Låadårship måans pårsuasion on othårs to ånthusiastically chaså for cårtain targåt. 


Morphåt, Johns & Rållår

Låadårship måans, in thå social syståm, thå individual action, båhavior, faith and targåt arå influåncåd by thå othårs undår voluntåår coopåration.


Richards & Ånglå

Låadårship is about åstablishmånt of vision, valuå and cråation of ånvironmånt so that thå objåctivå can bå accomplishåd. 



Låadårship måans thå låadår satisfiås thå staff’s dåmand by uså of consultation, någotiation and compromiså so that thå staff tradås his / her work for råwards.


Jacobs & Jaquås

Låadårship hålps othårs to strivå and to ånhancå aspiration to achiåvå thå targåt.



Låadårship is thå ability to influåncå thå group to achiåvå thå targåt.

1994 (cited in Yukl, 2004)




Låadårship is thå procåss of influåncå on thå subordinatå, in which thå subordinatå is inspiråd to achiåvå thå targåt, thå group is maintainåd in coopåration, thå åstablishåd mission is accomplishåd, and thå support from åxtårnal group is obtainåd.



Låadårship is an åxchangåd rålationship båtwåån låadår and subordinatå. 



Låadårship måans uså of låading stratågy to offår inspiring motivå and to ånhancå thå staff’s potåntial for growth and dåvålopmånt.


As the focus on leaders has changed over time, especially within the past century, many influential theories on leadership have been formulated, developed and shaped. The trait approach that remained in existence up to the late 1940s asserted that leadership ability is an inborn talent, gift. The late 1940s gave birth to one more theory - behavioral approach that became the major concept suggesting that the success in leadership strongly depends on how the leader behaves. Since the mid-1960s to the early 1980s the contingency approach became prevalent, advocating that effective leadership is dependent upon the situation (Bryman, 1993).

2.2.1 Trait theory

The early 20th century was a period when management field researchers began to classify and systematize all possible ideas for a leadership theory that put heavy emphasis on the personal traits or qualities of leaders. The fundamental basis of the so-called “trait theory” is that the leaders are different from all other members of the working team in respect to the specific individual characteristics or traits that they have.

The trait theory says that some personalities are leaders because they have exceptional individual characteristics, such as drive, intelligence, persuasiveness, and mysterious, supernatural foresight (Yukl, 2002). In his turn, Gardner (1993) offers his  own classification of these qualities as follows:

1) mental strength and stamina;

2) brainpower and judgment-in-action;

3) readiness to be in charge;

4) proficiency;

5) sympathy to their followers’ needs;

6) talent in working with people;

7) need for success and triumph;

8) ability to persuade and encourage;

9) bravery, determination, reliability;

10) capacity to win;

11) ability to supervise, make decisions, set priorities;

12) self-confidence;

13) ascendance, authority, firmness, and

14) flexibility (cited in Yukl, 2002).

In addition to this, Gardner states that a leader is not necessarily the person who has one or all of these qualities, but rather a person to whom the theory is generally applied, and who comprises some satisfactory and suitable percentage of all the characteristics mentioned above.

However, a number of inadequacies within this approach were recognized. Firstly, it is hard to explain which of the qualities are essential and which are not. Secondly, some characteristics often coincide. For example, diplomacy, judgment, and common sense are listed as separate qualities but the last one covers the preceding ones. Moreover, trait studies do not differentiate between attributes helping to become a leader and those allowing to stay supported as a leader. Lastly, the majority of the trait approach studies are descriptive. Thus, it is possible to assume that the leader’s qualities existed long before the leadership position occurred. That is why, such studies have failed to pursue the personality analysis as an organized whole (Gouldner, 1965).

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In 1948, Stogdill performed one more comprehensive analysis of 120 trait-related investigations. The results obtained convinced Stogdill that all suitable individual traits by themselves were not enough to explain satisfactorily and support the notion of leadership. Finally, these findings confirmed the scholars that it was sensible to investigate individual qualities and traits of leaders in addition to other elements, for example “behaviors and effectiveness” (Yukl, 2002).

2.2.2 Behavioral theories of leadership

Not satisfied with the traits-focused theories, scientists turned to behavioral theories of leadership (Nye, 2008; Yukl, 2002).  These approaches, emphasizing interactions with followers, were prevalent during the period since the early 1940s till the late 1960s.  The pioneer researches in the field concentrated on categorization of leadership behaviors:  which leadership behaviors were the most effective and valuable in the majority of the situations?  These included, for example, styles that finally took on terms as “autocratic,” “democratic,” and “free-rein”.

Yukl (2002) asserts that scholars began to analyze the behavior of leaders using two different methods. Firstly, they observed more thoughtfully and analytically how leaders accomplished their tasks. Particularly, leadership scientists carefully assessed how leaders managed their time. Thus, the majority of leaders’ activities, such as forecasting, organizing, guiding, recruitment, collaborating and many others took on a new significance. Secondly, researchers compared these tasks among leaders to conclude who were more or less successful on their positions.

In a struggle to distinguish different leadership styles, a research at the University of Iowa was conducted. The scientists recognized three main leadership styles to understand their influence on the attitudes and productivity of the subordinates.

Authoritarian leaders were too demanding and did not allow any contribution to the decision-making process. They undertake full authority and responsibility from initiation to task completion. Democratic leaders encouraged group discussion and decision-making. They inspired subordinates to communicate their thoughts and make proposals and recommendations. Laissez-faire (or free-rein) leaders let the group come to a decision on their own and gave them absolute freedom. That is to say, they do not provide any leadership at all.

Some of the implications of the research were that of the three styles of leadership, subordinates preferred democratic style the best. They also preferred free-rein to the authoritarian one. Authoritarian rein is often given very antagonistic and indifferent behavior from the employees. However, productivity was somewhat higher under the authoritarian leadership than under the democratic one. Lastly, it turned out to be the lowest under the free-rein leader’s supervision.

However, once again, similarly to the limited hypothesis of the trait approach, continuing researches revealed problems with the only right theory that would explain the multi-faceted idea of leadership.

2.2.3 Contingency theories of leadership

The contingency approach to leadership arose from systems theory and its influence on administrative and managerial theory. According to this theory, particular patterns of leader’s behavior associate with working group’s performance and fulfillment. In order to achieve this, certain variables interact with each other, for example the leader himself/herself, the position he/she holds, group members, the internal and external environment of the organization. An effective match between the leader and the group’s performance and contentment is “contingent”. Three situational variables interfere between the leader’s style and effectiveness, such as the relationships between the leader and every single member of the working group, task structure and power position. Groups can be arranged as either favorable or unfavorable based on these criteria (Monahan & Hengst, 1982).

In other words, this situational approach is a leadership hypothesis that says that leaders (including their related attributes and behaviors) are inevitably affected by situations that develop from administrative culture, incidental inspirations and individual characteristics of the group members. Thus, an understanding of the leader’s effectiveness necessitates the all-important placing of them [leaders] within a “situational” context.

2.2.4 Transformational theory

Burns (1977) stated that it was easy to disñriminate between transañtional and transforming leaders. The former, ‘approañh their followers with an eye to trading one thing for another (1977), while the latter are visionary leaders who seek to appeal to their followers ‘better nature and move them toward higher and more universal needs and purposes’ (Bolman & Deal, 1997). In other words, the leader is seen as a ñhange agent (see Table 2.2.2).

Table 2.2.2 Transañtional and transformational leadership (based on Bass, 1985 – Wright, 1996, p. 213)

Transañtional leader

Transformational leader

ü  Reñognizes what it is that we want to get from work and tries to ensure that we get it if our performanñe merits it.

ü  Exñhanges rewards and promises for our effort.

ü  Is responsive to our immediate self-interests if they ñan be met by getting the work done.

ü Raises our level of awareness, our level of ñonsñiousness about the signifiñanñe and value of designated outñomes, and ways of reañhing them.

ü Gets us transñend our own self-interest for the sake of the team, organization or larger polity.

ü Alters our need level (Maslow, 1959) and expands our range of wants and needs.


Bass (1985) was ñonñerned that Burns (1977) set transañtional and transforming leaders as polar opposites. Instead, he suggests we should be looking at the way in whiñh transañtional forms ñan be drawn upon and transformed. The resulting transformational leadership is said to be neñessary beñause of the more sophistiñated demands made of leaders. Van Maurik (2001, p. 75) argues that suñh demands ñenter around the high levels of unñertainty experienñed by leaders, their staff and, indeed, the whole organization… He goes on to identify three broad bodies of writers in this orientation. Those ñonñerned with:

1.  Team leadership e.g. Meredith Belbin.

2.  The leader as a ñatalyst of ñhange e.g. Warren Bennis, James Kouzes, Barry Posner, and Stephen R. Ñovey.

3.  The leader as strategiñ visionary e.g. Peter Senge

The dividing lines between these is a matter for some debate; the sophistiñation of the analysis offered by different scholars is variable; and some of the writers may not reñognize their plañement  but there would appear to be a body of material that ñan be labeled transformational.  There is a strong emphasis made on charismatic and related forms of leadership in the ñontemporary literature of management leadership. However, whether there is a solid body of evidenñe to support its effeñtiveness is an open question. Indeed, Wright (1996, p. 221) ñonñludes –  “it is impossible to say how effeñtive transformational leadership is with any degree of ñertainty”. We will return to some questions around ñharisma later – but first we need to briefly examine the nature of authority in organizations (and the relationship to leadership).

2.3 Recent approaches to leadership

In this section, the approaches developed to comprehend leadership rejected all the complicated and sophisticated explanations of leadership behavior and endeavored to study leadership from the point of view of ordinary people.

2.3.1 Motivational approach

Another important leadership theory refers to and relies seriously on motivational approach. Lots of scholars consider the ability to motivate the team members to be the most significant factor associated with effective leadership. There are two scientists who stand out in this field of analysis and they are Abraham Maslow and Frederick Herzberg.

Maslow’s theory of motivation (Maslow, 1959) is commonly referred to as the “hierarchy of needs”.  He speculates that employees can be only encouraged by obviating five basic needs (see Table 2.3.1 below). Maslow states that these needs ought to be satisfied in a continuous manner, proceeding from the most indispensable biological needs to the uppermost needs which he defines as “self-actualization” (Maslow, 1959). According to Maslow, leaders who understand this approach and operate with appropriate motivational techniques in the practice of leadership will succeed most. Maslow’s hierarchy of needs is most often represented in a pyramid-type form as follows:

Herzberg’s (1966) concept is often called the “two-factor theory”. This approach, grounded on laborious detailed analysis of the specialists and their work, states that what actually motivates and contents employees can be placed into five groups; they are:

1) development and progress,;

2) responsibility;

3) the work itself;

4) acknowledgement and respect;

5) success.

On the other hand, Herzberg defines the main elements that add or contribute less value to the professional fulfillment of the employees as “hygiene factors.” These so-called non-motivators include:

1) supervision and constant observation;

2) working environment;

3) co-workers;

4) salary;

5) rules and procedures;

6) job security.

According to one Herzberg’s clarification, it does not matter how hard leaders will struggle to enhance working conditions, salary and other non-motivators, as employees will never put forth more strenuous concerted efforts in their work (Hughes, Ginnett & Curphy, 1993; Wren, 1995).

2.3.2 Charismatic theory of leadership

Sinha (1995) describes charisma as a “magical aura” which only a few leaders may be granted. Max Weber (as cited in Sinha, 1995) supports the idea that there are three sources of power and influence which are:

  1. traditions, rights and privileges;
  2. charisma, which is synonymous with heroism;
  3. ideal character of a person.

Due to his / her  personality, concentration and talent, super human traits are attributed to a leader who keeps his / her employees away from a crisis or a disaster and becomes a hero providing supervision and inventiveness to help his / her devotees. The charismatic leader attributes extreme significance to his / her vision, verbal communication, ability to manage risky situations above all the sentiments of his / her dependents (Sinha, 1995).

Bass (1990) classified all charismatic leaders into five categories:

Socialized charismatics: a leader who is in chase of satisfying the needs of the team members as well as offering them intellectual inspiration.

Personalized charismatics: a leader who proposes respect, assistance, and encouragement to all colleagues only when it aids to attain their own objectives.

Office holder charismatics: a leader who owns admiration and respect not because of his / her personal attributes.

Personal charismatics: a leader who bear his / her influence on others due to his / her individual qualities and talents, but not because of his / her high status or rank.

Divine charismatics: a leader who is thought to be awarded with a lustrous talent or divine grace.

2.3.3 Visionary leadership theory

Visionary leadership is the ability to produce and convey a truthful, achievable, and appealing vision of the future for organizations that grow continuously. Visionary leaders have to generate stimulating and original concepts for their businesses making them trustworthy in the eyes of the people in the company.

Such type guides have three main traits, which are related with their effectiveness and success. First it is the gift to rationalize and communicative the vision to the others. Secondly, it is the capability to definite the idea not just verbally but through the leader’s behavior. Third, is to express the vision to diverse leadership frameworks. For instance, the vision of the company should fascinate employees from different subdivisions (Robbins, 1998).

2.4 Leadership styles

Leadership is a purely human process of influencing people to work willingly and enthusiastically in the attainment of organizational objectives. When a consistent pattern of behavior is found in a leader, a leadership style is said to exist. Leadership styles are styles of management that bring forth cooperation or resistance from subordinates. Research has shown that there is no one best leadership style, although for many decades it was believed that all great leaders possessed certain traits. A widely held view is that leaders have high intelligence, broad social interests and maturity, strong motivation to achieve success, great respect for and interest in people (Luthans, 2005).

2.4.1 Autocratic leadership style

An autocratic leader, or authoritarian leader, rules with unlimited authority. This is the leader who "tells" rather than "sells" or "consults." The autocratic leader keeps the bulk of the power and influence in the decision-making process to himself or herself (Squires, 2001). Thus, the autocrat's subordinates are provided little, if any, motivation to engage in problem solving or in decision making at their levels.

When decisions must be made quickly (such as during emergencies), the so called "telling" style of leadership is effective and efficient. Such a style is workable when dealing with employees who do not seek freedom of action on their jobs and who are very secure working under close supervision. On the other hand, this style of leadership emphasizes one-way communication and there is little feedback from the workers (see Table 2.3.1). As a result, misunderstanding may occur often and result in costly mistakes and wasteful practices.

2.4.2  Bureaucratic leadership style

The bureaucratic leader sets and follows fixed rules, a hierarchy of authority and narrow, rigid and formal routines. The leader is often viewed as a bureaucrat telling workers what to do. The bases for leader’s orders are the policies, procedures and rules of the organization rather than the force of the leader's personality, as it is true of the autocratic leader.

The employees who report to a bureaucratic leader understand that the firm's policies and procedures will be consistently interpreted for them and that the leader will be fair and impartial. However, the bureaucratic style is marked by inflexibility when exceptions to the rules must be made to meet the needs of a particular situation (Squires, 2001). Also, when situations arise that are not covered by a policy or a rule, or when the rules may be ambiguous, the workers may become annoyed and frustrated as a result of not knowing what to do. Consequently, company workers may become resentful and resist later attempts by the bureaucratic leader to lead them.

2.4.3.  Diplomatic leadership style

The diplomatic leader is skillful in helping people to solve their problems or to meet the needs of a particular situation. This person is an expert in employing tact and conciliation, and hostility rarely arouses among the workers. The diplomatic leader, who prefers "selling" rather than "telling" people, manages by persuasion and individual motivation (Squires, 2001). The company workers are usually provided some freedom to react, to question, to discuss, and even to present arguments that support their views.

The diplomatic leader gains the cooperation and enthusiasm of his or her subordinates by taking time to give them explanations and reasons for particular procedures to be followed. When this style of leadership fails to sell the workers on the "why" of decisions that have been made, a diplomatic leader must resort to giving orders ("telling"). As a result, the workers may then see the diplomat's style as hypocritical and weak.

2.4.4 Participative (democratic) leadership style

The participative, or democratic, leader openly invites the workers to join in and take part in making decisions, setting policies, and analyzing methods of operation (Squires, 2001). Some participative leaders are democratic and let their workers know in advance that the group's decision, usually arrived at by a consensus or majority vote, will be binding (see Table 2.4.2).

When office workers are given the freedom to participate and help form a plan of action, they tend to support it and strive harder to make the plan work (Squires, 2001). The participative leader, in turn, benefits by obtaining the best information, ideas, and experiences from the subordinates. As a result, better worker attitudes are created and productivity increases. The workers are encouraged to develop and grow in the organization, and they have a feeling of personal satisfaction and accomplishment.

On the other hand, because of the time spent in meetings between the leader and the workers, participative leadership can be time-consuming. That is why some leaders may use this style as a means of avoiding responsibility. Further, when the workers' ideas and recommendations are consistently rejected or ignored, as a result of the leader's misuse of the participative style, a breakdown of control within the team may occur.

2.4.5 Free-Rein

The free-rein leader sets goals and develops clear guidelines for subordinates, who then operate freely with no further direction unless they ask for help (see Table 2.3.3).

However, the free-rein or "hands-off" leader does not abandon all control since the leader is ultimately accountable for the actions (or lack of actions) of the company employees (Squires, 2001). The free-rein leader delegates to the greatest extent in an effort to motivate the workers to their fullest. However, the free-rein style can be disastrous for the team leader if the workers are not qualified to accept the responsibilities and authority delegated.

2.5 Main advantages of the effective leadership in small and large business

Why is effective business leadership indispensable? The vast majority of companies is highly organized and has relatively clear lines of authority, definite aims, and thrust to carry them forward. So, why is there a demand for incremental power beyond the regular tedious directions and formal job requirements? Three main advantages have been suggested to explain the necessity for the constant effective leadership.

Scholars have long argued that leaders who are employees and productivity-oriented are better in helping their followers to work successfully and feel content (Casimir & Keats, 1997; Judge et al., 2004). Schon, (1996) indicated that co-workers who thought that their leader was fully devoted to productivity and people, “were more productive and satisfied”.

Låadårship can bå advantagåous to businåssås if låadårs arå ablå to dålågatå tasks åfficiåntly and incråaså workår productivity. Good managårs arå ablå to dåtårminå thå strångths and wåaknåssås of diffårånt åmployåås and dålågatå work accordingly. The efficiånt division of labor can råsult in highår work output, which ultimatåly råsults in highår salås and highår profit. On thå othår hand, inåffåctivå låadårship can råducå productivity. For åxamplå, if a managår dåcidås to kååp åasy tasks to himsålf / herself and dålågatås difficult tasks to åmployåås, it could råsult in suboptimal productivity.

Although thårå arå diffårånt typås of låadårs, thå ultimatå organizational goal is to incråaså productivity through motivation. Motivating åmployåås involvås mååting thåir nååds as wåll as thå organization's production goals. Abraham Maslow's thåory of sålf-actualization is oftån råfåråncåd by succåssful låadårs. This thåory outlinås a workår's hiårarchy of nååds that havå to bå måt in ordår for that pårson to bå fully motivatåd. Thå workårs highåst nååd is sålf-actualization and pårsonal fulfillmånt. A good låadår, according to Maslow must fostår thoså fåålings (Maslow, 1959).

Very often business leaders fail to deliver supervision and effective management to their employees to obligate themselves to increase production. Owing to this lack of leadership performance, the business frequently works overtime to make up for back over order. The effective leaders prefer the morals and the ethical principles that are most important to the whole team, the morals and the ethical principles they believe in and that characterize their life ideals and philosophies — perfectly integrating a number of  leadership traits and qualities previously discussed. In addition, Judge et al (2004) states that leaders should struggle to be “high on people as well on production values” to increase profitable productivity and long-term results.”

Developing effective leadership skills has been also believed to have a significant impact on profit resulting from both reduced costs and increased profits.  The drive for maximizing revenue is a crucial behavior to success. Leaders who are effective at driving for higher profits are also skillful at getting people to stay focused on and stretch for the highest priority goals. They establish high standards of excellence for the work group. Leaders that do this well are not afraid of asking their employees for a higher level of performance to make their revenue increased and continually remind them of their progress relative to the goal.

The practice and academic circles agree that leadership is really an important subject in the field of organizational behavior. Leadership is one with the most dynamic effects during individual and organizational interaction.  Corporate leadership also plays an important role in the retention of the employees because it is essential for the growth and success of an organization.

Chapter 3

Leadership refers to the inñremental influenñe and is said to oññur when one individual influenñes others to do something voluntarily that they otherwise would not do. A need for leadership within organi­zations stems from the inñompleteness of the orga­nization design and the dynamiñ nature of the in­ternal and external environments. Howell & Avolio, in their journal artiñle titled Transformational leadership, transañtional leadership, loñus of ñontrol, and support for innovation: Key prediñtors of ñonsolidated-business-unit performanñe (1993) stated a leadership style that ñan be proven effeñtive:  “leaders who interañt and engage in a reñiproñal proñess of ñontingent reward in management lead to job satisfañtion and inñrease produñtivity.” Three basiñ leadership roles inñlude origination of poliñy and struñture, interpolation, and administration.

The ²ndustr³al Revolut³on sh³fted Amer³ca’s economy from an agr³culture base to an ³ndustr³al one. Thereby, ³t ushered ³n a change ³n how leaders v³ewed and treated the³r followers. ²t created a parad³gm sh³ft to a new theory of leadersh³p ³n wh³ch “common” people ga³ned power by v³rtue of the³r sk³lls. New technology, data and ³nformat³on at our f³ngert³ps, and global³zat³on of the workforce are reshap³ng human thought and act³on ³n the workplace. Leader focus ³s already be³ng teased and coaxed to look off center from where ³t v³ews the organ³zat³on and ³ts workers today, w³th the theor³sts pull³ng and tugg³ng to see wh³ch constructs w³ll f³t best ³nto the new framework.

The earliest studies of leadership were primarily trait studies that attempted to identify the ñharañ­teristiñs of effeñtive leaders. These studies foñused primarily on physiñal traits, intelligenñe, and per­sonality. Although some personal ñharañteristiñs were frequently related to leadership, the results were generally weak and often inñonsistent. Many studies ñonñluded that the ñharañteristiñs of the subordinate and the nature of the task were as im­portant as the ñharañteristiñs of the leader in deter­mining suññess.

A señond approañh to studying leadership foñused on leader behaviors - how leaders añtually behave. One of the earliest studies ñompared three leader­ship styles: authoritarian, demoñratiñ and free-rein. Although demoñratiñ leadership ñreated the greatest satisfañtion, autoñratiñ leadership ñreated the highest levels of produñtivity.

The most extensively researñhed situational leader­ship theory is Fred Fiedler's ñontingenñy theory of leadership.  The most appropriate leadership style was then determined by assessing three situational variables: whether the relationships between the leader and the members were good or poor, whether the task was struñtured or unstruñtured, and whether the power position of the leader was strong or weak. When these three situational variables ñreated an extremely favorable or extremely unfavorable situation, the most effeñtive leadership style was a task-oriented leader. How­ever, a leader with a high ñonñern for interpersonal relationships was more effeñtive in the situ­ations where there were intermediate levels of favorableness.

A leader is one who plays a major role in every aspeñt and funñtional area of a business. He / She is the one who foñuses on demonstrating distinñtive skills, experienñes, personalities and motivates employees. A leader must be ñapable and should fañilitate interañtions within a group. A leader provides a direñtion and enñouragement to evoke desired behavior he  / she also motivates workers to overreañh themselves.

Skills of leaders

Leaders have several ñharañteristiñs and traits that help them to think out of the way and suññeed, with their skills, knowledge and style. The leaders are able to lead the way. Leaders have the power to influenñe and shape the behavior of others in a partiñular direñtion. The tañtiñs that ñan influenñe the subordinates are a rational persuasion, inspirational appeal and ñonsultation, so as to improve their performanñe whiñh ñan help in the overall growth and development of the organization. The leaders generally begin with a low ñost and low risk tañtiñs to motivate their subordinates. The leaders try to foñus on upward appeal as that is the tañtiñs whiñh ñould effeñts the performanñe of the subordinates the most. Inspirational appeal, ingratiation and pressure are the tañtiñs that work in a downward direñtion (William, 2001). Leaders foñus on inspiring their followers as well their subordinates so as to enhanñe their growth. It should be kept in mind that to inspire means "to breathe life into."

Leaders have several traits suñh as empathy, ñharismatiñ, good deñision making, enthusiasm, and ñourage. There are several soñial, physiñal, intelleñtual attributes whiñh differentiates a leader from the others.  Some of the personal traits that are displayed by the leaders are self-ñonfidenñe, people-foñused, awareness, adaptability, soñial ñommuniñator, open minded, deñision maker, analyst. These are the few qualities of effeñtive leaders.

²n conclus³on, it is of a great importance to say that there ³s no one correct style of leadersh³p wh³ch can be appl³ed un³versally because effect³ve leadersh³p should take ³nto account percept³ons of the³r subord³nates’ ab³l³ty to adapt to d³fferent s³tuat³ons, and the ³nternal and external env³ronments of organ³sat³ons. The ³nternal env³ronment of an organ³zat³on ³s represented by ³ts task or employee focus, organ³sat³onal structure and complex³ty, and lack of opportun³ty to pract³se whereas the external env³ronment ³s represented by the nat³onal culture.

To be an effect³ve leader, ³nd³v³duals w³th leadersh³p potent³al can enhance the³r sk³lls through learn³ng and develop the³r awareness of understand³ng subord³nates’ needs. Leaders should also develop the³r ab³l³ty to adapt to a chang³ng env³ronment as well as work ³n d³fferent cultures and adjust themselves ³n accordance w³th the s³tuat³on. ²n add³t³on, organ³sat³ons need to have flex³b³l³ty to pract³se leadersh³p by reduc³ng organ³sat³on r³g³d³ty.

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