Leadership in Organizations: Concepts and Theories

April 23, 2012

Larry Coutts, Ph.D. and Director, Research and Development at EPSI Inc. shares with you the highlights of his findings on some of the numerous concepts and theories pertaining to leadership.

Participative TheoriesParticipative leadership is a style of leadership that involves all members of a team in identifying essential goals and developing procedures or strategies for reaching those goals. From this perspective, participative leadership can be seen as a leadership style that relies heavily on the leader functioning as a facilitator rather than simply issuing orders or making assignments. One of the main benefits of participative leadership is that the process allows for the development of additional leaders who can serve the organization at a later date. Because leaders who favor this style encourage active involvement on the part of everyone on the team, people often are able to express their creativity and demonstrate abilities and talents that would not be made apparent otherwise.

Thus, participative leadership theories suggest that the ideal leadership style is one that takes the input of others into account. These leaders encourage participation and contributions from group members and help group members feel more relevant and committed to the decision-making process. In participative theories, however, the leader retains the right to allow the input of others. Figure 3 depicts the various leadership styles with respect to participation.

Figure 3: Leadership Styles With Respect to Participation

According to participative management theory, the involvement of subordinates in decision-making improves the understanding of the issues by those who must carry out the decisions.

It is assumed that employees are more committed to actions where they have been involved in the relevant decision-making and that they are less competitive and more collaborative when working on joint goals. That is, when people make decisions together, the social commitment to one another is greater and thus increases their commitment to the decision.

Transactional Theories: Transactional theories, also known as management theories, focus on the role of supervision, organization, and group performance. Transactional leadership is a style of leadership in which subordinates seek motivation from their leaders via a combination of punishments and rewards in the workplace. For example, subordinates might receive a punishment if they do a task incorrectly. In contrast, a reward might be given to subordinates who accomplish their tasks correctly and in a timely manner.

The assumptions underlying transactional leadership theories are as follows: People are motivated by reward and punishment and social systems work best with a clear chain of command. When people have agreed to do a job, a part of the deal is that they cede all authority to their manager. The prime purpose of a subordinate is to do what their manager tells them to do. The transactional leader works through creating structures whereby it is clear what is required of their subordinates and the rewards they will get for following orders. Punishments are not always mentioned, but they are also well-understood and formal systems of discipline are usually in place.

The early stage of transactional leadership is in negotiating the contract whereby the subordinate is given a salary and other benefits, and the organization (and by implication the subordinate’s manager) gets authority over the subordinate. When the transactional leader allocates work to a subordinate, they are considered to be fully responsible for it, whether or not they have the resources or capability to carry it out. When things go wrong, then the subordinate is considered to be personally at fault, and is punished for their failure (just as they are rewarded for succeeding).

The transactional leader often uses management by exception, working on the principle that if something is operating to defined (and hence expected) performance then it does not need attention. Exceptions to expectation require praise and reward for exceeding expectation and some kind of corrective action is applied for performance below expectation. Whereas transformational leadership (see below) has more of a “selling” style, transactional leadership, once the contract is in place, takes a “telling” style.

Transformational Theories: Transformational leadership (sometimes referred to as charismatic leadership; see Kanungo, 1998) refers to the process of influencing major changes in the attitudes and assumptions of organization members and building commitment for major changes in the organization’s objectives and strategies. Transformational leadership involves influence by a leader over subordinates, but the effect of the influence is to empower subordinates who also become leaders in the process of transforming the organization. Thus, transformational leadership is usually viewed as a shared process, involving the actions of leaders at different levels and in different subunits.

Bass (1998) defines transformational leadership in terms of the leader’s effect on followers. Leaders transform followers by making them more aware of the importance and value of task outcomes and by inducing them to transcend self-interest for the sake of the organization. As a result of this influence, subordinates feel trust and respect toward the leader and they are motivated to do more than they originally expected to do.

Transformational leaders do more with colleagues and subordinates than set up simple exchanges or agreements. They behave in ways to achieve superior results by employing one or more of the four components of transformational leadership outlined by Lowe, Kroeck, and Sivasubramaniam (1996).

Four Components of Transformational Leadership
Behaviour Description
Idealized influence Transformational leaders behave in ways that make them role models for their followers. The leaders are admired, respected, and trusted.
Inspirational motivation Transformational leaders behave in ways that motivate and inspire those around them by providing meaning and challenge to their followers’ work. Leaders get followers involved in envisioning attractive future states; they create clearly communicated expectations that followers want to meet.
Intellectual stimulation Transformational leaders stimulate their followers’ efforts to be innovative and creative by questioning assumptions, reframing problems, and approaching old situations in new ways. New ideas and creative problem solutions are solicited from followers, who are included in the process of addressing problems and finding solutions.
Individualized consideration Transformational leaders pay special attention to each individual follower’s needs for advancement and growth by acting as a coach or mentor. Individual differences of needs and desires are recognized, and the leader’s own behaviour demonstrates acceptance of these differences.

In a similar vein, Conger and Kanungo (1998) provided the following set of five comprehensive (and validated) character dimensions of transformational leaders.

Key Characteristics of Transformational Leaders
Characteristic Description
Vision and articulation Has a vision—expressed as an idealized goal—that proposes a future better than the status quo; and is able to clarify the importance of the vision in terms that are understandable to others.
Personal risk Willing to take on high personal risk, incur high costs, and engage in self-sacrifice to achieve the vision.
Environmental sensitivity Able to make realistic assessments of the environmental constraints and resources needed to bring about change.
Sensitivity to follower needs Perceptive of others’ abilities and responsive to their needs and feelings.
Unconventional behaviour Engages in behaviours that are perceived as novel and counter to norms.

In summary, transformational leadership starts with the development of a vision, a view of the future that will excite and convert potential followers. This vision may be developed by the leader, by the senior team, or may emerge from a broad series of discussions. The important factor is the leader buys into it. The next step is to constantly sell the vision. This takes energy and commitment, as few people will immediately buy into a radical vision, and some will come on board much more slowly than others. The transformational leader thus takes every opportunity and will use whatever works to convince others to support the vision. In order to create followers, transformational leaders have to be very careful in creating trust, and their personal integrity is a critical part of the package that they are selling. In effect, they are selling themselves as well as the vision.

This wraps up the theoretical review on the matter… If you have any questions that you’d like answered, don’t hesitate to get in touch!

Larry Coutts, Ph.D.



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