University of the Cordilleras
College of Business Administration
Module 1 in Organization and Management in Service Enterprises (THM 12)
Prepared by Gabriel R. De Guzman, MBA
Unit 4: Leadership, Motivation, and Communication Process (Part 1)
Part A. Leadership in the Organization
1. Nature of Leadership and Characteristics of effective leaders
2. Sources of Power
3. Leadership theories and styles
Learning Outcomes
• leadership and its importance to the organization;
• identify, classify, and evaluate personal characteristics associated with effective
leaders;
• enumerate and explain the sources of power;
• describe leadership theories and styles and its application to subordinate
participation.
The Nature of Leadership
In most situations, a team, military unit, department, or volunteer group is only as good
as its leader. Yet there are as many variations among leaders as there are among other
individuals, and many different styles of leadership can be effective.
So, what does it mean to be a leader? Among all the ideas and writings about
leadership, three aspects stand out—people, influence, and goals. Leadership occurs
among people, involves the use of influence, and is used to attain goals.
Influence means that the relationship among people is not passive. Moreover, influence
is designed to achieve some end or goal.
Thus, leadership, as defined here, is the ability to influence people toward the
attainment of goals. This definition captures the idea that leaders are involved with
other people in the achievement of goals. Leadership is reciprocal, occurring among
people.
Leadership is a “people” activity, distinct from administrative paperwork or problem-
solving activities. Throughout this text, we have looked at various organizations that are
experimenting with bosslessness. But every team and organization needs leadership. As
described in the “Manager’s Shoptalk,” being a “leader” can be more powerful than
being a “boss.”
Contemporary Leadership
The concept of leadership evolves as the needs of organizations change. That is, the
environmental context in which leadership is practiced influences which approach
might be most effective, as well as what kinds of leaders are most admired by society.
The technology, economic conditions, labor conditions, and social and cultural mores
of the times all play a role. A significant influence on leadership styles in recent years is
the turbulence and uncertainty of the environment. Ethical and economic difficulties,
corporate governance concerns, globalization, changes in technology, new ways of
working, shifting employee expectations, and significant social transitions have
contributed to a shift in how we think about and practice leadership. Three approaches
that are in tune with leadership for today’s turbulent times are Level 5 leadership,
servant leadership, authentic leadership, and interactive leadership, which has been
associated with women’s style of leading.
Level 5 Leadership
A study conducted by Jim Collins and his research associates identified the critical
importance of what Collins calls Level 5 leadership in transforming companies from
merely good to truly great organizations.
As reflected in the exhibit, a key characteristic of Level 5 leaders is an almost complete
lack of ego (humility) coupled with a fierce resolve to do what is best for the
organization (will). Humility means being unpretentious and modest rather than
arrogant and prideful. In contrast to the view of great leaders as larger-than-life
personalities with strong egos and big ambitions, Level 5 leaders often seem shy and
self-effacing. Although they accept full responsibility for mistakes, poor results, or failures,
Level 5 leaders give credit for successes to other people. Level 5 leaders build
organizations based on solid values that go far beyond just making money, with an
unwavering resolve to do whatever is needed to make the company successful over
the long term.
Three approaches
1. Servant Leadership - A servant leader transcends self-interest to serve others, the
organization, and society. In organizations, servant leaders operate on two
levels: for the fulfillment of their subordinates’ goals and needs and for the
realization of the larger purpose or mission of their organization. Servant leaders
give things away—power, ideas, information, recognition, credit for
accomplishments, even money. Servant leaders often work in the nonprofit world
because it offers a natural way to apply their leadership drive and skills to serve
others. But servant leaders also succeed in business.
2. Authentic Leadership - Another popular concept in leadership today is the idea
of authentic leadership, which refers to individuals who know and understand
themselves, who espouse and act consistent with higher-order ethical values,
and who empower and inspire others with their openness and authenticity. To be
authentic means being real, staying true to one’s values and beliefs, and acting
based on one’s true self rather than emulating what others do. Authentic leaders
inspire trust and commitment because they respect diverse viewpoints,
encourage collaboration, and help others learn, grow, and develop as leaders.
Key characteristics of authentic leaders, and each is discussed below.
• Authentic leaders pursue their purpose with passion. Leaders who lead
without a purpose can fall prey to greed and the desires of the ego.
When leaders demonstrate a high level of passion and commitment to a
purpose, they inspire commitment from followers.
• Authentic leaders practice solid values. Authentic leaders have values
that are shaped by their personal beliefs, and they stay true to them even
under pressure. People come to know what the leader stands for, which
inspires trust.
• Authentic leaders lead with their hearts as well as their heads. All leaders
sometimes have to make tough choices, but authentic leaders maintain a
compassion for others as well as the courage to make difficult decisions.
• Authentic leaders establish connected relationships. Authentic leaders
build positive and enduring relationships, which makes followers want to
do their best. In addition, authentic leaders surround themselves with
good people and work to help others grow and develop.
• Authentic leaders demonstrate self-discipline. A high degree of self-
control and self-discipline keeps leaders from taking excessive or unethical
risks that could harm others and the organization. When authentic leaders
make mistakes, they openly admit them.
3. Interactive leadership - Interactive leadership means that the leader favors a
consensual and collaborative process, and influence derives from relationships
rather than position power and formal authority. Some of the general
characteristics associated with Level 5 leaders and authentic leaders are also
hallmarks of interactive leadership, which has been found to be associated with
female leaders.
Although both men and women can practice interactive leadership, research
indicates that women’s style of leadership is typically different from that of most
men and is particularly suited to today’s organizations.
Power and Influence
Both followers and leaders use power and influence to get things done in organizations.
Sometimes the terms power and influence are used synonymously, but there are
distinctions between the two. Power is the potential ability to influence the behavior of
others. Influence is the effect that a person’s actions have on the attitudes, values,
beliefs, or behavior of others. Whereas power is the capacity to cause a change in a
person, influence may be thought of as the degree of actual change.
Most discussions of power include five types that are available to leaders,7 and these
can be categorized as either hard power or soft power.
Hard power is power that stems largely from a person’s position of authority and
includes legitimate, reward, and coercive power. Soft power includes expert power
and referent power, which are based on personal characteristics and interpersonal
relationships more than on a position of authority.
Hard Position Power
The traditional manager’s power comes from the organization (hard power). The
manager’s position gives him or her the ability to reward or punish subordinates to
influence their behavior. Legitimate power, reward power, and coercive power are all
forms of position power used by managers to change employee behavior.
Legitimate Power
Power coming from a formal management position in an organization and the authority
granted to it is called legitimate power. Once a person has been selected as a
supervisor, most employees understand that they are obligated to follow his or her
direction with respect to work activities. Subordinates accept this source of power as
legitimate, which is why they comply.
Reward Power
Another kind of power, reward power, stems from the authority to bestow rewards on
other people. Managers may have access to formal rewards, such as pay increases or
promotions. They also have at their disposal rewards such as praise, attention, and
recognition. Managers can use rewards to influence subordinates’ behavior.
Coercive Power
The opposite of reward power is coercive power. It refers to the authority to punish or
recommend punishment. Managers have coercive power when they have the right to
fire or demote employees, criticize them, or withhold pay increases. If an employee
does not perform as expected, the manager has the coercive power to reprimand him,
put a negative letter in his file, deny him a raise, and hurt his chances for a promotion.
Personal Soft Power
Effective leaders don’t rely solely on the hard power of their formal position to influence
others. Jeffrey Immelt, CEO of GE, considers himself a failure if he exercises his formal
authority more than seven or eight times a year. The rest of the time, he is using softer
means to persuade and influence others and to resolve conflicting ideas and opinions.
Expert Power
Power resulting from a person’s special knowledge or skill regarding the tasks being
performed is referred to as expert power. When someone is a true expert, others go
along with recommendations because of his or her superior knowledge. Both followers
and leaders can possess expert power. For example, some managers lead teams in
which members have expertise that the leader lacks. Some leaders at top
management levels may lack expert power because subordinates know more about
technical details than they do.
Referent Power
Referent power comes from an individual’s personal characteristics that command
others’ identification, respect, and admiration so that they wish to emulate that
individual. Referent power does not depend on a formal title or position. When
employees admire a supervisor because of the way that she deals with them, the
influence is based on referent power. Referent power is most visible in the area of
charismatic leadership. In social and religious movements, we often see charismatic
leaders who emerge and gain a tremendous following based solely on their personal
power.
Leadership Traits
Early efforts to understand leadership success focused on the leader’s traits. Traits are
the distinguishing personal characteristics of a leader, such as intelligence, honesty, self-
confidence, and even appearance.
Personal Characteristics of Leaders
Therefore, rather than just understanding their traits, the best leaders recognize and
hone their strengths. Strengths are natural talents and abilities that have been
supported and reinforced with learned knowledge and skills and provide each
individual with his or her best tools for accomplishment and satisfaction. Every manager
has a limited capacity; those who become good leaders are the ones who tap into
their key strengths that can make a difference. Effective leadership isn’t about having
the “right” traits, but rather about finding the strengths that one can best exemplify and
apply as a leader.
Leadership Theories and Styles
Leadership Theories
1. Great-Man Theory - In 1847, Thomas Carlyle stated in the best interests of the
heroes that “universal history, the history of what man has accomplished in this
world, is at the bottom of the history of the great men who have worked here”.
Carlyle claimed in his “great man theory” that leaders are born and that only
those men who are endowed with heroic potentials could ever become the
leaders. Leadership theory then progressed from dogma that leaders are
born or are destined by nature to be in their role at a particular time to a
reflection of certain traits that envisage a potential for leadership.
2. Trait Theory - The early theorists opined that born leaders were endowed
with certain physical traits and personality characteristics which distinguished
them from non-leaders. Trait theories ignored the assumptions about whether
leadership traits were genetic or acquired. Jenkins identified two traits;
emergent traits (those which are heavily dependent upon heredity) as height,
intelligence, attractiveness, and self-confidence and effectiveness traits
(based on experience or learning), including charisma, as fundamental
component of leadership (Ekvall & Arvonen, 1991).
Max Weber termed charisma as “the greatest revolutionary force, capable of
producing a completely new orientation through followers and complete
personal devotion to leaders they perceived as endowed with almost
magical supernatural, superhuman qualities and powers”. This initial focus on
intellectual, physical and personality traits that distinguished non-leaders
from leaders portended a research that maintained that only minor
variances exist between followers and leaders (Burns, 2003).
3. Contingency Theories (Situational) - The theories of contingency recommends
that no leadership style is precise as a stand-alone as the leadership style
used is reliant upon the factors such as the quality, situation of the followers or a
number of other variables. “According to this theory, there is no single right way
to lead because the internal and external dimensions of the environment require
the leader to adapt to that particular situation”. Contingency theorists assumed
that the leader was the focus of leader-subordinate relationship; situational
theorists opined that the subordinates played a pivotal role in defining the
relationship. Though, the situational leadership stays to emphasis mostly upon the
leader, it creates the significance of the focus into group dynamic.
4. Style and Behavior Theory - The style theory acknowledges the significance of
certain necessary leadership skills that serve as enabler for a leader who
performs an act while drawing its parallel with previous capacity of the leader,
prior to that particular act while suggesting that each individual has a
distinct style of leadership with which he/she feels most contented. Like one
that does not fit all heads, similarly one style cannot be effective in all situations.
5. Process Leadership Theory - Additional leadership theories with a process focus
include servant leadership, learning organizations, principal centered leadership
and charismatic leadership, with others emerging every year. These process
leadership theories and others that have emerged often suggest that the work of
leaders is to contribute to the well-being of others with a focus on some form of
social responsibility. There appears to be a clear evolution in the study of
leadership.
6. Transactional Theory - Bass and Avolio (1994) observed transactional
leadership “as a type of contingent-reward leadership that had active and
positive exchange between leaders and followers whereby followers were
rewarded or recognized for accomplishing agreed upon objectives”. From the
leader, these rewards might implicate gratitude for merit increases, bonuses and
work achievement. For good work, positive support could be exchanged, merit
pay for promotions, increased performance and cooperation for collegiality.
The leaders could instead focus on errors, avoid responses and delay decisions.
7. Transformational Theory - Transformational leadership distinguishes itself from the
rest of the previous and contemporary theories, on the basis of its alignment to
a greater good as it entails involvement of the followers in processes or activities
related to personal factor towards the organization and a course that will
yield certain superior social dividend. The transformational leaders raise the
motivation and morality of both the follower and the leader (House & Shamir,
1993). It is considered that the transformational leaders “engage in interactions
with followers based on common values, beliefs and goals”.
Leadership Styles
1. Transactional Leadership Style - comprises three components; contingent
reward, management-by-exception (active) and management-by-exception
(passive). A transactional leader follows the scheme of contingent rewards to
explain performance expectation to the followers and appreciates good
performance. Transactional leaders believe in contractual agreements as
principal motivators (Bass, 1985) and use extrinsic rewards toward enhancing
followers' motivation.
a. Contingent Reward. Contingent reward leadership focuses on achieving
results. As humans appreciate concrete, tangible, material rewards in
exchange of their efforts, thus, this behavior surfaced. “Where
transformational leadership acknowledges individual talents and builds
enthusiasm through emotional appeals, values, and belief systems,
transactional leadership engenders compliance by appealing to the
wants and needs of individuals”.
b. Management by Exception (Active). Management by exception (active)
is not the relinquishment of leadership, characterized by a laissez-faire
leadership. Leaders who follow management by exception (active) have
an inherent trust in their workers to end the job to a satisfactory standard
and avoid rocking the boat. “This type of leadership does not inspire
workers to achieve beyond expected outcomes, however, if target is
achieved, that means the system has worked, everyone is satisfied, and
the business continues as usual,”
c. Management by Exception (Passive). “It is the style of transactional
Leadership in which the leaders avoid specifying agreement and fail to
provide goals and standards to be achieved by staff. Sometimes, a
leader waits for things to go wrong before taking action”.
2. Transformational Leadership Style - links with positive outcomes on individual as
well as organizational levels. Transformational leaders emboldens followers to
attain higher-order needs like self-actualization, self-esteem and are influential in
surging followers' motivation in the direction of “self-sacrifice and achievement
of organizational goals over personal interests.
Other Types of Leadership
1. Autocratic Leadership Style
Greek word Auto means SELF
Cratic means RULE
= rulling alone
Also referred to as directive leadership style
Tends to be unilateral in the process of decision making, where methods are
dictated by the leader and limits workers knowledge.
When is it effective When should it not be used
• Untrained employees which do • Members or employees
not know which task to perform. become too tensed, fearful or
• Supervision can be provided resentful of authority
only through detailed or strict • People expect to have their
implementation of orders . opinions heard
(detonating a bomb , Hostage • Employees dependent on their
situation)quick decision making. manager
2. Democratic Leadership Style
Greek words “demos” meaning THE PEOPLE
“ Kratos” meaning RULE
Involve group or members in decision making process.
When is it effective When should it not be used
• Leaders want to provide • No time to get everyone’s
opportunity for employees input
to develop high sense of • If business cannot afford to
personal growth and job make mistakes
satisfaction
• Large or complex problems
requires varied inputs for
solution
• When changes must be
made or problems solved
would affect employees or
group of employees
3. Laissez – Fair Leadership Style
French origin “allow to do” or “hands off”
Leader allows the employee to make the decisions giving the group complete
freedom by just providing the necessary materials.
Leader participates only to answer questions and avoid getting feedbacks
DELEGATIVE leadership
When is it effective When should it not be used
• Team or group has highly • When employees feel insecure
skilled, experienced and at the unavailability of the
educated members. manager
• Employees are trust worthy • When managers cannot
and experienced provide regular feedbacks to
let employee knows what they
are doing
• When managers does not
understand his/her
responsibility and hope that
employees can cover for him
or her
Difference of Leader and Manager related to the Function of Management
