Page 503 - Encyclopedia of Business and Finance

eobf_M 7/5/06 3:15 PM Page 480

Management/Leadership Styles

the increased level of worker participation in decision linkage of components in such a way that synergy can take
making as well as leaders’ higher level of concern for their place.
subordinates. In the effort to enhance system performance, man-
agers/leaders must consider the openness and responsive-
MANAGERIAL GRID ness of their business organization and the external
Business researchers at the University of Texas developed a environment in which it operates. In this environment,
two-dimensional grid theory to explain a leadership style leaders must consider the four major features of business
based on a person’s (1) concern for production and (2) system theory: inputs, organizational features, outputs,
concern for people. Each axis on the grid is a 9-point and feedback. The input factors for most systems include
scale, with 1 meaning low concern and 9 meaning high human labor, information, hard goods, and financing.
concern. “Team” managers, often considered the most Organizational features include the work process, man-
effective leaders, have strong concern both for the people agement functions, and production or service technology.
who work for them and for the output of the group/unit. Output results include employee satisfaction, products or
“Country club” managers are significantly more con- services, customer and supplier relationships, and
cerned about their subordinates than about production profits/losses. In guiding a unit or the whole organization,
output. “Authority-compliance” managers, in contrast, are business leaders need to consider features of their organi-
singularly focused on meeting production goals. “Middle- zation’s system as it interacts with and responds to cus-
of-the-road” managers attempt to balance people and pro- tomers, suppliers, competitors, and government agencies.
duction concerns in a moderate fashion. Finally,
“impoverished” managers tend to be virtually bankrupt in
TRANSFORMATIONAL AND
both categories, usually not knowing much or caring
much about either. Grid analysis can be quite useful in TRANSACTIONAL LEADERSHIP
helping to determine managers’ strengths, weak points, Transformational leadership inspires organizational suc-
areas where they might best be used, and types of staff cess by dramatically affecting workers’ attitudes about
development they might need to progress. what an organization should be as well as their basic val-
ues, such as trust, fairness, and reliability. Transforma-
tional leadership, which is similar to charismatic or
PATH-GOAL LEADERSHIP THEORY
inspirational leadership, creates in workers a sense of own-
In path-goal leadership theory, the key strategy of the
ership of the organization, encourages new ways of solv-
leader is to make desirable and achievable rewards avail-
able to employees. These rewards are directly related to ing problems, and promotes lifelong learning for all
achieving organizational goals. The manager articulates members of the organization. Although the topic of trans-
formational leadership is both appealing and exciting,
the objectives (the goal) to be accomplished and how
these can and should be completed (the path) to earn more research is needed to develop insights regarding how
rewards. This theory encourages managers to facilitate job one becomes a successful transformational leader.
performance by showing employees how their work Transactional leadership refers to the transactions
behaviors directly affect their receiving desired rewards. that play out between the leader and the follower. This
mindset supports leaders in motivating followers by
SYSTEMS THEORY AND THE appealing to their own self-interest. Its principles are to
LEADERSHIP/MANAGEMENT motivate by the exchange process. Transactional behavior
FUNCTION focuses on the accomplishment of tasks and good worker
relationships in exchange for desirable rewards. Leaders
A system is a group of interrelated and dependent compo-
nents that function holistically to meet common goals. using transactional processes are most likely to adapt their
Systems theory suggests that organizations operate much style and behavior to that of their followers. Some
like the human biological system, having to deal with researchers suggest that transactional leadership encom-
entropy, support synergy, and subsystem interdependence. passes four types of behavior.
The law of entropy states that there are limited resources
1. Contingent reward—The leader uses rewards or
available and that as they are used/consumed, their bene-
incentives to achieve results when expectations are
ficial features are dispersed and are not available to the
same degree as they were originally. The other two consid- met
erations in a systems approach are the achievement of syn- 2. Passive management by exception—The leader uses
ergy, or the creation of a total value greater than the value correction or punishment as a response to unaccept-
of separate parts, and of subsystem interdependence or the able performance

480 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION