Global Business Today, 5e


McGraw-Hill/Irwin Principles of Management



Effective Leadership

© 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.

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Learning Objectives






Explain why good leadership is critical for success as a manager.

Summarize the main theoretical approaches to leadership.

Identify the behaviors and skills that are commonly associated with effective leadership.

Explain how the right approach to leadership might be influenced by important contingencies.

Discuss the differences between transformational and transactional leadership.

Managing & Leading


“Doing the right things”


“Doing things right”

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Focus on vision, mission, and goals Focuses on preserving the status quo



annual CEO pay is $10.5 million, 369 times average worker pay of $28,310. In 1970, before the big run-up, the multiple was 28:1, a ratio that would make today’s average worker pay $374,800.

• Put another way: If CEO pay were frozen now, it would take workers 66 years of 4% annual raises to get back to 1/28 th of what the boss makes.

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Source: Business Week, October 30, 2006

Question All manager are leaders and all leaders are managers. Do you agree? Explain.

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Organizational Challenges 16 - 7

The challenges facing organizations and leaders are becoming increasingly complex. An internet survey by the

Center for Creative Leadership

revealed the following:

Type of Challenge

Technical Challenge Adaptive Challenge Critical Challenge Source: Changing Nature of Leadership Research Report, The Center for Creative Leadership

Frequency Percentage

43% 37% 10%

Perspectives on Leadership

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Power influence perspective

Effective Leadership

Contingency perspective Transformational perspective Trait (competency) perspective Behavior perspective

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Perspectives of Leadership

Power-influence approach

– attempts to explain leadership effectiveness in terms of the amount of power possessed by a leader.

Trait/competency perspective

– identifies the traits and competencies of effective leaders •

Behavior approach

– asserts that certain behaviors are related to leadership effectiveness

Perspectives of Leadership

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Contingency perspective

– argues that the appropriate behaviors for a leader to adopt depend on context, and that will work in some situations will not work in others •

Transformational perspective

– suggests that effective leaders “transform” organizations through their vision

The Power-Influence Perspective

Effective leaders rely on:

the personal power that flows from expertise a network of allies individual attributes power flowing from their position

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What Makes Leaders Great?


Self-awareness 2.

Personal conviction 3.

Courage 4.

Creativity 5.

Curiosity 6.

Ability to inspire 7.

Ability to listen 8.

Ability to innovate 9.

Eagerness to experience 10.

Willingness to reflect

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Source: Biz Ed, September/October, 2005

16 - 13 Skill Sets Required by Academic Leaders Skill set % of Respondents indicating

Selling, marketing, and public relations

as Important 69%

Global business understanding Human resource and staffing Risk, cost, and financial management Project management E-business and IT knowledge Negotiation and employment law Source: Biz Ed, March/April, 2002

67% 57% 51% 48% 42% 27%

Competency Perspective

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Traits that can be acquired through learning

Emotional Intelligence Charisma Strategic Thinking Achievement Motivation Power Motivation

Emotional Intelligence

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Self-awareness Self-regulation Empathy Motivation Social skills

Limitations & Implications of Competency Perspective 16 - 16

• Not all of the traits are equally important • Not all great leaders demonstrate all traits • Importance of traits is context dependent

Behavior Perspective

Assumption: Certain leadership behaviors result in greater

commitment on the part of subordinates and hence higher performance in pursuit of organization goals

People-oriented behavior

– A leadership style that includes showing mutual trust and respect for subordinates, demonstrating genuine concern for their needs •

Task-oriented behavior

– The style of leaders who assign employees to specific tasks, clarify their work duties and procedures, ensure that they follow company rules, and push them to reach their performance capacity

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Fiedler’s Leadership Theory

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*Leader-member relations *Task structure *Position power

Leadership style

*People-oriented *Task-oriented


*Team, unit, or organization performance


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Predictions of Fiedler’s Theory

Task-oriented leaders People-oriented leaders Poor Favorable Moderately favorable Unfavorable Situation Situation Situation

Weaknesses of Fiedler’s Theory

• Simplistic • Classification into two broad types seems an unwarranted generalization • Division into people-oriented and task oriented ignores the fact that some leaders can exhibit both • Unrealistic to “reward” an effective leader by removing him • Assumes that leaders cannot change their style

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Path-Goal Theory

Personal characteristics of subordinates *Skills *Needs *Motivations Leadership styles *Directive *Supportive *Participative *Achievement-oriented Nature of work environment *Task structure *Team dynamics *Formal power Clarify path Clear path Offer rewards Employee goals Path to goal attainment Outcomes (goal attainment)






As a manager, Caitlyn always sets high goals for her subordinates, has high expectations for their performance, and displays confidence in them, encouraging and helping them to take on greater responsibilities. According to the Path-Goal theory, Caitlyn exhibits which of these leadership styles?

Achievement-oriented leadership Supportive leadership Directive leadership Participative

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Path-Goal Predictions

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• If followers lack confidence, supportive leadership will increase subordinates’ confidence that they can achieve goals, which raises performance • If the task of subordinates is ambiguous, directive leadership may be preferred because it helps clarify the path subordinates must follow, which again increases performance

Path-Goal Predictions

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• If the task of subordinates is standardized and dull, achievement-oriented leadership can motivate subordinates by setting high goals and expressing confidence in their abilities • If the rewards offered to the employees are inappropriate, participative leadership may allow the leader to clarify the needs of subordinates and change rewards to improve performance

Limitations of Path-Goal Theory

• The implicit assumption that a leader can adopt only one style at a time seems simplistic • There is still no strong empirical consensus that path goal theory does a good job of explaining what is required for effective leadership • It has a narrow definition of leadership effectiveness • Other potentially important factors of the leadership process are ignored • It provides only a partial definition

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Behaviors of Transformational Leaders

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Envisioning a new future Communicating persistently Creating an enduring organization Leading with integrity

Transformational Leadership

Meaningful changes in strategy and organization Modeling desired behaviors Empowering employees

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Gender Differences in Leadership


have more people-oriented, participative leadership are more relationship-oriented, cooperative, nurturing, and emotional in their leadership roles •

Generally, studies have shown that men and women do not differ in either task-oriented or people-oriented leadership

However, women do adopt a participative style more readily

Overall, subordinates have expectations from their leaders as to how they should act, and if the leader deviates from this belief negative evaluations may occur

Glass Ceiling

Proportion of Female CEO’s, 2000 to 2016:

16 - 28 2000 0.06% 2006 2% 2010 (est.) 2016 (est.) 4.90% 6.20%

Source: Business Week, December 4, 2006