Management/Leadership Styles

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Date: 2014
Encyclopedia of Business and Finance
From: Encyclopedia of Business and Finance(Vol. 2. 3rd ed.)
Publisher: Gale, a Cengage Company
Document Type: Topic overview
Pages: 7
Content Level: (Level 4)

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Management/Leadership Styles

Much debate occurs on whether leadership and management are the same or different. Leading and managing have similarities and some key differences. The debate can lead some business leaders to not fully understand Page 501  |  Top of Articlethe difference between the functions/roles of leading and managing and then misinterpret how they should carry out their duties to meet organizational goals. Leadership is one of the four primary activities that are used to influence others. As such, it is a subcategory of the management concept that focuses mainly on behavioral issues, influence, and engaging opportunities. Generally speaking, not all managers are necessarily leaders, yet many of the most effective managers, over the long term, emerge into leaders.

Leadership is the process of guiding the behavior of others toward an organization's goals. Guiding, in this context, can be described as causing individuals to behave in a particular manner or to follow a specific set of instructions. Ideally, the behavior exhibited is perfectly aligned with such factors as organizational goals, culture, policies, procedures, and job specifications. The main goal of leadership is to accomplish organizational goals by inspiring other people, making it one of the main activities that can enhance the organizational system. Effective communication is an important feature of leadership. Warren Bennis (2003) identifies three reasons why leadership is important: leaders being responsible for the effectiveness of the organization, leaders serving as anchors and guides, and leaders being accountable for the integrity of their institutions.

Because leadership is a prerequisite for business success, to be a successful business manager one must have a solid understanding of what leadership includes. Indeed, such issues as the increased capabilities afforded by enhanced communication technology and the rise of international business have made leadership even more important in today's business environment. Given the global landscape, diversity efforts, and entrepreneurial activities and innovation practices in today's organizations, management and leadership skills are increasingly needed for organizations to remain competitive and relevant. The following sections describe many of the major theories underlying the most commonly accepted management/leadership practices and the concepts on which they are based.


The trait theory of leadership is based on research that implies that the abilities and dispositions necessary to make a good leader are inborn, not capable of being developed over time (Certo & Certo, 2014). The central thrust of this research is to describe leadership as accurately and analytically as possible. The reasoning is that a description of the full spectrum of managerial leadership traits would make it possible to easily identify individuals who possess them. An organization could then hire only those individuals who possess these traits and thus be assured of always having high-quality leaders.

Current management thoughts, however, suggests that leadership ability cannot be explained by an individual's inherited characteristics. To the contrary, many organizations believe that individuals can learn to be good or even exceptional leaders. Thousands of employees each year complete training programs to improve their leadership skills. Corporations and nonprofit organizations continue to do this as an investment, which pays dividends.


Researchers have analyzed other angles beyond traits to explain leadership success or failure. Rather than looking at the traits successful leaders supposedly should possess, researchers began to investigate what good leaders really do (Sashkin & Sashkin, 2003). This behavioral approach was concerned with analyzing how a manager completed a task and whether the manager focused on such interpersonal skills as providing moral support and recognizing employees for their successes. Based on these research efforts, leaders can be accurately described by either their job-centered behavior or their employee-centered behavior, as this research indicated two primary dimensions of leader behavior: a work dimension (structure behavior/job-centered behavior) and a people dimension (consideration behavior/employee-centered behavior).

In addition, effective leaders are skilled coaches and mentor those around them. They build team thinking and behavior, as well as communicate formative developmental feedback. They also illustrate the visible meaning of the organization's vision and mission, including shared values, as well as being a boundaryless thinker. Successful leaders build networks within and outside their organizations, searching for solutions, opportunities, and synergies. In their day-to-day work, they exemplify diplomacy while being an interpreter and spokesperson of the organization's vision.

From a different standpoint, what perspectives and behaviors typically align with poor or ineffective leaders? Behaviors and patterns of thinking that contribute to ineffective leadership include lacking knowledge and skill related to the main activities of the organization and leadership. Negative attributes such as ethical issues will hinder not only an individual's success but also organizational success (Kellerman, 2004).

Which leadership styles are most effective? Caution should be exercised when considering what style of leadership is best. Research suggests that no single leadership style can be generalized as being most effective. Leaders are considered to come in different forms with many styles and qualities (Gardner, 1990). There are typically two schools of thought regarding effective leadership. One is that organizations believe that leadership is about behavior and in order to succeed, an employee must follow the key behaviors and competencies valued by the organization. Another perspective is that leadership is all about character, values, and authenticity and companies should Page 502  |  Top of Articlefocus on transmitting values and orienting employees to the way the organization accomplishes its work (Dotlich, Noel, & Walker, 2004). Organizational situations are so complex that one particular leadership style may be successful in one situation but totally ineffective in another.


Contingency theory, as applied to management/leadership, focuses on what managers do in practice, because this theory suggests that how a manager operates and makes decisions depends on, or is contingent on, a set of circumstances. It is centered on situational analysis. Using contingency theory, managers read situations with an “if-then” mentality: If this situational attribute is present, then there is an appropriate response that a manager should make. This theory takes into consideration human resources and their interaction with business operations. Managers may take different courses of action to get the same result based on differences in situational characteristics.

In general, contingency theory suggests that a business leader needs to outline the conditions or situations in which various management methods have the best chance of success. This theory thus runs directly counter to trait theory. Some of the challenges to successfully using contingency theory are the need to accurately analyze an actual situation, then to choose the appropriate strategies and tactics, and finally to implement these strategies and tactics.

Managers encounter a variety of leadership situations during the course of their daily activities, each of which may require them to use leadership styles that vary considerably, depending on the situation. In using the contingency model, factors of major concern are leader-member relations, task structure, and the position power of the leader. The leader has to analyze these factors to determine the most appropriate style of response for meeting overall work-unit and organizational goals.

Definitions. Leader-member relations refers to the ongoing degree to which subordinates accept an individual leader or group of leaders. Task structure refers to the degree to which tasks are clearly or poorly defined. Position power is the extent to which a leader or group of leaders has control over the work process, rewards, and punishment. Taking these factors into consideration, leaders can adjust their style to best match the context of their decision making and leadership. For leaders who have a breadth of leadership styles, knowing when to change styles gives them the tools to successfully deal with the varying nature of business decision making. For leaders who have a limited repertoire of leadership styles, they and their superiors can use this information to better match work situations with the styles that a specific leader possesses.

Within this continuum, or range, of leadership behaviors, each type of behavior also relates to the degree of authority the manager can display, and inversely, to the level of freedom that is made available to workers. On one end of this continuum, business leaders exert a high level of control and allow little employee autonomy. On the opposite end, leaders exert very little control, instead allowing workers considerable autonomy and self-direction. Thus, leadership behavior as it progresses across the continuum reflects a gradual change from autocratic to democratic leadership.

In today's business environment there are more complicated contexts and relationships within which managers and subordinates must work than existed in previous eras. And, as contexts and relationships become increasingly complicated, it becomes significantly more difficult for leaders to determine how to lead. In addition, there are major societal and organizational forces that add complexity about how to approach leadership.


Based on the work of psychologists, organizational theorists, and human relations specialists in the 1960s and 1970s, two distinct assumptions, called Theory X and Theory Y, evolved about why and how people work for others.

Theory X. Theory X posits that people do not like to work and will avoid doing so if the opportunity presents itself. Because of this, most people need to be coerced into completing their required job duties and punished if they do not complete the quantity of work assigned at the level of quality required. Again, because of their dislike for work, most people do not want responsibility, prefer to be directed by others, and have little ambition. All they want is job security.

Theory Y. In comparison, Theory Y posits that people like to work and see it as a natural event in their lives. Therefore, consequences are not the only means of motivating them to complete work assignments. People are willing to work hard for an organization. Indeed, they will use selfdirection and control to work toward goals that are understandable and communicated clearly. In this theory of human behavior and motivation, people are seen as seekers of learning and responsibility who are capable of and willing to be engaged with creative problem-solving activities that will help the organization reach its goals. According to Theory Y, leaders need to develop ways to expand the capabilities of their workers so that the organization can benefit from this significant potential resource. Theory Y looks at both concern for production and concern for people.

Although Theory Y has much to offer and is widely followed, many organizations still use a variety of policies and practices that are based on Theory X principles. A further development in explaining human work behavior and then adjusting management/leadership practices to it is Theory Z.

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Theory Z. Probably the most prominent of the theories and practices coming from Japan is the Theory Z approach, which combines typical practices from the United States and Japan into a comprehensive system of management/leadership. This system includes the following principles of best management/leadership practice:

  • Seek to establish a long-term employment culture within the organization
  • Use collective decision making as much as possible
  • Increase and reinforce the importance of individual responsibility
  • Establish a slow and long-term process for evaluation and promotion
  • Employ implicit, informal control that uses explicit, formal measures/tools of performance
  • Institute and use moderately specialized job descriptions and career paths
  • Develop policies and practices that support a holistic concern for and support of the individual both at work and at home (as regards family issues)

Theory Z has had a marked impact on the manner in which companies are led today. Theory Z strategies have been instrumental in building stronger working relationships between subordinates and their leaders because of the increased level of worker participation in decision making, as well as leaders' higher level of concern for their subordinates.

Path-goal leadership theory. In path-goal leadership theory, the key strategy of the leader is to make desirable and achievable rewards available to employees. These rewards are directly related to achieving organizational goals. The manager articulates the objectives (the goal) to be accomplished and how these can and should be completed (the path) to earn rewards. This theory encourages managers to facilitate job performance by showing employees how their work behaviors directly affect their receiving desired rewards.


Business researchers at the University of Texas developed a two-dimensional grid theory to explain a leadership style based on a person's (1) concern for production and (2) concern for people. Each axis on the grid is a 9-point scale, with 1 meaning low concern and 9 meaning high concern (Blake & Mouton, 1994). Grid analysis can be quite useful in helping to determine managers' strengths, weak points, areas where they might best be used, and types of staff development they might need to progress.

In the managerial grid theory, “team” managers, often considered the most effective leaders, have strong concern both for the people who work for them and for the output of the group/unit. “Country club” managers are significantly more concerned about their subordinates than about production output. “Authority-compliance” managers, in contrast, are singularly focused on meeting production goals. “Middle-of-the-road” managers attempt to balance people and production concerns in a moderate fashion. Finally, “impoverished” managers tend to be virtually bankrupt in both categories, usually not knowing much or caring much about either.


A system is a group of interrelated and dependent components that function holistically to meet common goals. Systems theory suggests that organizations operate much like the human biological system, having to deal with entropy, support synergy, and subsystem interdependence. The law of entropy states that there are limited resources available and that as they are used/consumed, their beneficial features are dispersed and are not available to the same degree as they were originally. The other two considerations in a systems approach are the achievement of synergy, or the creation of a total value greater than the value of separate parts, and of subsystem interdependence or the linkage of components in such a way that synergy can take place.

In the effort to enhance system performance, managers/leaders must consider the openness and responsiveness of their business organization and the external environment in which it operates. In this environment, leaders must consider the four major features of business system theory: inputs, organizational features, outputs, and feedback. The input factors for most systems include human labor, information, hard goods, and financing. Organizational features include the work process, management functions, and production or service technology. Output results include employee satisfaction, products or services, customer and supplier relationships, and profits/losses. In guiding a unit or the whole organization, business leaders need to consider features of their organization's system as it interacts with and responds to customers, suppliers, competitors, and government agencies.


Transformational leadership inspires organizational success by dramatically affecting workers' attitudes about what an organization should be as well as their basic values, such as trust, fairness, and reliability. Transformational leadership, which is similar to charismatic or inspirational leadership, creates in workers a sense of ownership Page 504  |  Top of Articleof the organization, encourages new ways of solving problems, and promotes lifelong learning for all members of the organization (Burns, 1978). Although the topic of transformational leadership is both appealing and exciting, more research is needed to develop insights regarding how one becomes a successful transformational leader.

Transactional leadership refers to the transactions that play out between the leader and the follower. This mind-set supports leaders in motivating followers by appealing to their own self-interest. Its principles are to motivate by the exchange process. Transactional behavior focuses on the accomplishment of tasks and good worker relationships in exchange for desirable rewards (Burns, 1978). Leaders using transactional processes are most likely to adapt their style and behavior to that of their followers. Some researchers suggest that transactional leadership encompasses four types of behavior.

  1. Contingent reward—The leader uses rewards or incentives to achieve results when expectations are met
  2. Passive management by exception—The leader uses correction or punishment as a response to unacceptable performance
  3. Active management by exception—The leader actively monitors work and uses corrective methods
  4. Laissez-faire leadership—The leader is indifferent and has a “hands-off” approach, often ignoring the needs of others.

Transactional leadership behavior is used to one degree or another by most leaders. Using transactional leadership behavior as a singular tool to motivate others can create a few common problems. For instance, it can place too much emphasis on the “bottom line” and by its very nature is short-term oriented, with the goal of simply maximizing efficiency and profits. The leader can pressure others to engage in unethical or amoral practices by offering strong rewards or punishments. Transactional leaders seek to influence others by exchanging work for wages, but this does not build on the worker's need for meaningful work. In addition, transactional leadership may lead to an environment permeated by position, power, and politics. This is why transformational leadership is seen as a more productive way to long-term success (Kuhnert & Lewis, 1987).


Of all the skills that a manager/leader needs, none is more important than managing the conflicts that inevitably arise in any organization. Conflicts can arise between members in the same work unit, between the work group and its leader, between group leaders, and between different work groups. Some of the most common causes of conflict are communications breakdowns, personality clashes, power and status differences, goal discrepancies, disputed authority boundaries, and allocation of resources.

The following processes are among those usually suggested to eliminate, reduce, and prevent conflict:

Focus on the facts of the matter; avoid unsupported assertions and issues of personality

Develop a list of all possible resolutions to the conflict that will allow the adversarial parties to view the issue from a different perspective

Maintain a balance of power and accessibility while addressing the conflict

Seek a realistic resolution; never force a consensus, but do not get bogged down in a never-ending debate to achieve one

Focus on the larger goals/mission of the organization

Engage in bargaining/negotiating to identify options to address the conflict

If needed, use a third party to mediate the differences; bringing in an outside person can add objectivity and reduce personality issues

Facilitate accurate communications to reduce rumors and to increase the common understanding of the facts and issues

A two-dimensional model for understanding how individuals approach situations involving conflict resolution is widely accepted. On one axis is the dimension of cooperativeness; on the other, the dimension of assertiveness. As discussed earlier, effective leaders vary their style to meet the needs of a specific situation. Hence, during a conflict situation in which time is a critical concern, an assertive style is needed to resolve the conflict so that time is not lost during a drawn-out negotiation process. In contrast, when harmony is critical, especially when relationships are new or in their early stages, a collaborative and cooperative approach to conflict resolution is needed. This model for conflict resolution fits well with and supports the notion of contingency and situational leadership.


When the Japanese economy recovered after World War II, business leaders around the world marveled at the ability of Japanese managers to motivate and successfully lead their subordinates to levels of outstanding performance in terms of both the quantity and quality of production. Therefore, Japanese approaches to management and leadership have been studied intensely. Among the Page 505  |  Top of Articleapproaches that have been cited as contributing to Japanese success are:

  1. Japanese corporations make the effort to hire employees for a lifetime, rather than a shorter period. This helps workers to feel a close relationship with the organization and helps build employee ownership of the organization's success.
  2. Employees are elevated to a level of organizational status equivalent to that of management by leveling the playing field with regard to such items as dress, benefit packages, support services/amenities, restrooms, and stock ownership plans.
  3. Employees are shown that they are valued and a critical part of the company. This is accomplished by having ceremonies to honor employees, providing housing at nominal cost to employees, having facilities for social activities that are sponsored by the organization, offering competitive salaries, and so forth.
  4. A significant effort is made to build positive and strong working relationships between leaders and their subordinates. This includes making sure that leaders take time to get to know their employees and become cognizant of their main concerns. Such a relationship can have a marked impact on the extent to which employees value the organization and their leaders.
  5. Collective responsibility is looked to for the success of the organization. Individual accountability is played down, in contrast to the climate that prevails in U.S. organizations.
  6. Implied control mechanisms are based on cultural values and responsibility.
  7. Nonspecialized career pathways are typical. Employees work in a number of job categories over the course of their tenure so that they can gain a broader sense of the nature of all the work that is done in the organization.
  8. There is a holistic concern for the welfare of every employee. Organizations and their leaders take the time to assist employees with personal issues and work opportunities.
  9. The Japanese are generally concerned with how the company performs and how individual work groups perform, rather than how an individual performs. Therefore, incentives for individuals are less likely to be effective than incentives associated with the performance of a work group or of a whole unit. In addition, Japanese leaders and workers focus much less on monetary rewards than on esteem and social rewards.

Another major practice used in the manufacturing and handling of goods was developed in Japan, kanban, or what in the United States is known as the just-in-time inventory and materials handling system. In this system, managers/leaders locate high-quality suppliers within a short distance of their operations. They also establish specific quality standards and delivery requirements, as well as materials handling procedures, that these suppliers are contractually obligated to adhere to.

The importance of cultural mores cannot be underestimated. What may work in Japan, France, or the United States may not work anywhere else simply because of cultural factors. Yet Japanese management/leadership principles have taught managers around the world to consider new approaches in order to achieve the higher standards of organizational effectiveness necessary in today's global economy. Business leaders around the world have examined their practices in light of the success that the Japanese and others have had in the areas of strategy building, organizational development, group/team cooperation, and establishing competitive advantage.


Another country that employs unique business practices is Israel. Israel has an entrepreneurial and innovative attitude toward business and management. The burgeoning high-tech industry is a result of a need to have companies become international right from the start-up process. Israel has been described by researchers as having an unusual climate for entrepreneurship and innovation.

Given Israel's history as a country that started out with an underdeveloped and new economy in 1948, it has quickly grown into one of the world's centers for economic development. With its defense industry, development of technology transfer offices in universities, and government resources geared toward knowledge development, Israel has developed innovative approaches to organizational management and leadership, resulting in a technically educated human resource base.

Israeli culture has been defined as one that values collectivism, in which organizations have a culture of being informal and non-hierarchical. This culture, coupled with the strong relationships built from its military experience, results in a community-focused organizational approach (de Haan, 2011). With its strong entrepreneurial capital, Israel is one of the leaders in innovation in the world.


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Blake, R. R., & Mouton, J. S. (1994). The Managerial Grid. Houston, TX: Gulf Publishing.

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Burns, J. M. (1978). Leadership. New York, NY: Harper & Row.

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Thomas Haynes
Paula H. Steisel Goldfarb

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Gale Document Number: GALE|CX3727500212