This document defines leadership and discusses different theories and styles of leadership. It addresses leadership at different levels in an organization from strategic to team levels. It also distinguishes between leadership and management, noting that most management roles involve elements of leadership. The document highlights that there is no single model of leadership and it depends on factors like the organization and individual personalities.

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Prepared by Alexa Michael and Technical Information Service May 2007
Leadership
Topic Gateway Series No. 30

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Leadership
Definition
‘The process through which leaders influence the attitudes, behaviours and
values of others.’
Hagen et al, 1998
‘Lead’ is an Anglo-Saxon word meaning path. The leader is therefore ‘the one
who provides the path.’ Leadership may be defined as the process of providing
the path that others follow.
Context
CIMA students are unlikely to study leadership for their professional
examinations, but they may well take on leadership responsibilities at all stages of
their working life. Research has shown that all noted business leaders were given
the opportunity to develop leadership skills very early on in their careers.
Related concepts
Authority; charisma; control; management; moral authority.
Overview
Business leadership occurs at all levels of an organisation, namely at team,
operational and strategic levels.
There are some universally recognised leadership qualities:
• vision
• enthusiasm
• integrity
• toughness
• confidence.

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There are three main theories about leadership:
1. The personal characteristics approach – some people are born to be leaders,
while others are not.
2. The leader-follower situation approach – the leader achieves a purpose while
building an effective team and developing each individual.
3. The contextual (or contingency) approach – considers leadership style, not
behaviour.
There are also different styles of leadership. These may be governed by an
individual leader’s personality but also by the organisation in which he or she
operates.
• Transactional leadership – optimises performance through incremental
changes to existing organisational policy and structure.
• Transformational leadership – aims to change the organisation’s core beliefs
and methods of working in order to improve it for the better.
Leaders are not the same as managers, although managerial roles increasingly
contain leadership elements.
Application
There is no one model of what business leadership should be. Leadership roles
and styles vary, depending on organisational structure, methods of operation and
individual personalities.
The leadership role is not confined to the executive ‘head’ of an organisation.
Business leadership occurs on different levels:
Strategic leader
Leads the whole organisation, with overall accountability for the leadership levels
below him or her.
Operational leader
Leads a unit within the organisation comprising a number of teams. The
individual team leaders report to the operational leader.
Team leader
Leads a team of 15-20 people.

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Project leader
Leads for a limited time for a specific purpose.
It can be argued that any employee within an organisation is a leader if he or she
shows leadership qualities in his or her work.
Leaders versus managers
Leaders – produce vision, inspire motivation and tackle change. The role is
generally seen as creative and exciting.
Managers – deal with structure, organise staff and other resources. The role is
seen by some as functional and mundane.
There are differences between the two roles. However, making too great a
distinction between leaders and managers is almost like expecting the latter to be
mediocre. Management is also about leading a team and having a vision. Most
management roles involve leadership, especially in organisations with flattened
hierarchies.
At any level, there are always three elements involved in leadership.
1. The leader – personality and character.
2. The situation – partly constant, partly variable.
3. The group – followers, individual and organisational needs and values.
Leadership theories and models
There are three main leadership theories.
The personal characteristics approach
This theory states that some individuals are born to lead because they have a set
of innate skills and abilities. There are individual qualities or traits which make
somebody a natural leader. This seems valid up to a point because leadership is
often described as an art and not a science, but studies have not shown any
consistent patterns of leadership traits. No one pattern of behaviour that
characterises good leadership has been identified.

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The leader-follower situation approach
This is an action focused approach which looks at three core leadership
functions:
1. Achieving the desired result (the task).
2. Building an effective team.
3. Developing each individual.
Each activity depends on the others, but the key objective is to achieve the task. It
is true that achieving a purpose is a key part of leadership. However, this
situational approach does not explain why effective leaders behave in a certain
way. It ignores how leadership behaviour affects the behaviour of others.
Additionally, this theory presupposes that leaders need to excel in technical
matters; for example, knowledge of how everything works in a factory. In
practice, a leader needs more than ‘hard’ technical skills to take people with him
or her.
The contextual (or contingency) approach
This approach recognises that a leader’s effectiveness is dependent on the nature
of the organisation in which he or she operates, as well as the personality of the
individual leader. The contextual approach considers leadership style, not
behaviour.
In turn, the contextual approach states that leadership style depends on
personality traits, behaviour and individual situations. It understands that one
leadership style does not suit every situation and that leaders will alter their
behaviour to meet changing demands.
John MacGregor Burns (1978) identified two key organisational states,
convergent and divergent, along with two leadership styles, transactional and
transformational.
Transactional leader
In a convergent state, the organisation is operating under stable conditions. This
gives rise to a transactional style of leadership which aims to optimise
performance through incremental changes to existing organisational policy and
structure.
• Contingent reward – good performance rewarded, achievement recognised.
• Active management by exception – searches for deviations from rules or
standards, corrects behaviour.

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• Passive management by exception – corrects only where standards are
unmet.
• Laissez-faire – decision making avoided.
Example
An example of a transactional business leader is Sir Alan Sugar, who tends to
make gradual changes to his business over time, rather than attempting radical
change. He will not attempt to intervene unless the situation demands it.
Transformational leader
In contrast, a divergent state occurs where environmental changes pose a
challenge to the organisation’s established goals and methods of working. Here,
transformational leaders are needed to change the company’s core beliefs and
methods of working. Transformational leaders must unite their followers behind
a new vision of their company’s future (Burns, 2000).
• Charismatic – provides vision, has mission, is respected and trusted.
• Inspires – communicates high expectations, explains purpose but in simple
ways.
• Intellectual stimulation – values intelligence, rational thinking, problem
solving.
• Individual attention – personal attention, coaches and advises employees.
Example
An example of a transformational leader is Colin Marshall, who transformed
British Airways (BA) from a failing company into ‘the world’s favourite airline’ in
the 1980s. He did this by listening to the ideas and concerns of individuals inside
and outside of BA to find out what company values, beliefs, attitudes and
behaviour needed to change for BA to become successful. He then acted on his
findings to make far reaching changes (Heifetz and Laurie, The work of
leadership in Harvard Business School Review, 1998).
Effect of personality on leadership
The personality of an individual will also influence his or her style of leadership,
whether the leadership is transactional, transformational or any other style. For
example, some leaders will insist on implementing their strategy themselves while
others will be content to let other people carry out the actual implementation
process. Some leaders will be more inclined to consult with people and to seek
input, while others will be far more autocratic.

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Inspiration
Business leaders can inspire others by:
• imagination – the ability to bring about the new
• thinking beyond themselves and considering others
• giving a sense of meaning and purpose to others in the organisation
• developing the vision and building a consensus
• gaining commitment and engaging others.
Leadership qualities
Below are some of the qualities that are commonly seen in leaders.
Vision
Vision is discussed here from a strategic leadership perspective, although it is also
relevant to leadership at other levels. This includes leading a team or department
within an organisation.
Vision is arguably the defining characteristic of leadership. A leader most often
has an unwavering – but not inflexible – belief about the where the organisation
is going and what must be done to get there. Leadership generally means having
the ability to see the ‘big picture’ before anybody else.
Leadership involves setting a direction. To do this, a leader needs to gather a
wide range of information, formally and informally. He or she observes patterns,
relationships and connections that explain the organisation’s current state.
From here, the leader can set a direction and produce a vision which sets out
what the organisation should become over the longer term. An accompanying
strategy gives practical ways of achieving the goal.
Business visions do not have to be highly innovative. Many successful ones are
not. They may contain ideas or combinations of ideas that are already known.
Three factors are crucial for an effective vision:
1. The vision must serve the interests of all stakeholders, including customers,
shareholders and employees.
2. The vision must be conveyed throughout the company, so that everybody
feels involved.
3. The vision can be easily translated into a feasible strategy.

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Example
When Jan Carlzon produced a vision to make Scandinavian Airline Systems (SAS)
the best airline in the world, he said nothing original. However, he noticed that
business travellers fly more consistently than other groups, and are also willing to
pay higher fares. He therefore focused SAS on business travel, with a view to
high margins, steady business and consistent growth. No other airline had ever
followed this strategy before. SAS did, and it worked. Jan Carlzon had shown
leadership by putting his visionary thinking about SAS into practice. As a result,
SAS became one of the world’s most successful airlines.
Values
A focus on values can improve relationships within an organisation and increase
its effectiveness. The addition of values will be most effective when there is
synergy between the leader’s and the organisation’s values.
Examples of good business values include the will to make a difference, or to
challenge and innovate.
Trust and communication
Some leadership styles involve actively listening to others’ points of view. This act
of listening allows leaders to build trust with their followers.
However, it is by no means impossible to lead without building trust. Many
people are accidental leaders who gained followers because they actually took a
direction while others prevaricated. For example, Rupert Murdoch was definitely
a leader but not a listener.
Enthusiasm and motivation
Leaders bring enthusiasm to their work. Exceptional leaders make others want to
work harder and more effectively because they are enthusiastic and have a sense
of purpose. An example of a creative and enthusiastic leader was Walt Disney.
Effective leadership should make individual employees realise how individual
effort adds value. It should inspire all staff to strive for the very best of which they
are capable of achieving.

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Confidence
This seems to be common to all leadership styles. Followers appear to need a
leader to have self-confidence and confidence in their vision of the future.
Toughness
A leader usually commands respect, although he or she is not necessarily always
popular.
Intuition
Good leadership involves the use of intuition to select the right time and course
of action. A leader’s ability to collect and interpret ‘soft’ information allows him
or her to know when and how to act.
Barriers to successful leadership
Barriers to good leadership include:
Personal barriers. Some people think and feel in such a way which prevents
them from becoming good leaders. Low self-esteem is often the root cause. Such
individuals are usually either the office tyrants or sycophants. They gain little
respect because they are inconsistent and do not hold themselves or their team
accountable. This creates a climate of distrust and dislike.
Organisational barriers. The ‘company way of doing things’ can have a
negative impact on leadership. Organisations with rigid hierarchies are unlikely to
produce successful leaders if employees feel powerless and have no opportunities
to develop.
Leadership training
Anthony Jay argued that the only training for leadership is leadership.
Organisations should aim to create the kind of environment which encourages
leadership at all levels and as early as possible. Employees should be encouraged
to show creativity and to make mistakes as part of their learning process.
In this way, a leadership friendly culture is allowed to develop at all levels of the
organisation. The relevant training can help to develop effective leadership in
people, although it is no substitute for real experience.

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Case studies
There are any number of examples of different leaders and leadership styles. The
following are just two of them:
Crown Point Cabinetry
In 1993, Brian Stowell, Chief Executive of family owned cabinet manufacturer
Crown Point, produced a vision for his 85 employees. It focused on high quality
products with less rework and wasted material. Production line management was
abolished and replaced with a team based management approach. This was a
high risk strategy, but it paid off with increased sales and profits.
Nucor Steel Corporation
Nucor Chief Executive Ken Iverson decentralised Nucor’s structure, leaving just
four management layers. Only 22 employees worked at the corporate
headquarters, while the steel plants were located in rural areas across the USA.
Each plant general manager had considerable autonomy and was encouraged to
take reasonable risks. Employee relations focused on pay for productivity and
there was an egalitarian approach toward employee benefits. Under Iverson's
leadership, Nucor pioneered the mini-mill concept, built new plants, promoted
staff internally and remained a domestic company.
References
Adair, J. (1999). Leadership skills. London: Chartered Institute of Personnel and
Development. (Management Shapers Series)
Kotter, J. P. ‘What leaders really do’ in Notes on Harvard Business School Review
on Leadership. (1998). Harvard: Harvard Business School Press
Shaw, P. (2006). The four Vs of leadership: vision, values, value added, vitality.
Hoboken, NJ: John Wiley and Sons
W. F. Achtmeyer
Center for Global Leadership, Tuck School of Business at Dartmouth
Leadership skills – an overview. (PDF 74 KB). CIMA Technical Briefing, May 2001.
Available from: www.cimaglobal.com/technicalreports
[Accessed 5 March 2008]

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Further information
Articles
Full text articles available from Business Source Corporate through My CIMA
www.cimaglobal.com/mycima
[Accessed 5 March 2008]
Daniel, M. Leadership for the battlefield of business. T & D, Volume 60, Issue 3,
pp 42-45
Hopkins, M. Why leadership is the most dangerous idea in American business.
Inc., June 2003, Volume 25, Issue 6, p. 86
Leck, C. and Wang, B. Five core ideas for developing leadership capacity to drive
business results. Employment Relations Today, Spring 2004, Volume 31, Issue 1,
pp 61-70
Malski, J. Leadership creates a winning team for your business. Fairfield County
Business Journal, 22/1/2007, Volume 46, Issue 4, p. 18
Books
Adair, J. (2005). How to grow leaders: the seven key principles of effective
leadership management. London: Kogan Page
Buckingham, M. (2006). The one thing you need to know … about great
managing, great leading and sustained individual success. London: Pocket Books
Charan, R., Drotter, S. and Noel, J. (2001). The leadership principle: how to build
the leadership-powered company. San Francisco: Jossey Bass Wiley
Coffee, R. and Jones, G. (2006). Why should anyone be led by you?: what it
takes to be an authentic leader. Boston: Harvard Business School Press
Gillen, T. (2002). Leadership skills for boosting performance. London: Chartered
Institute of Personnel and Development
Horne, M. and Stedman Jones, D. (2001). Leadership: the challenge for all.
London: Institute of Management
James, K. and Burgoyne, J. (2000). Leadership development: best practice guide
for organisations. London: Council for Excellence in Management and Leadership
Kouzes, J. (introduction). (2003). Business leadership: a Jossey-Bass reader. San
Francisco: Jossey-Bass. (Jossey-Bass Business & Management Series)

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Little, G. (2000). Five steps to successful business leadership. Chalford:
Management Books
Martlew, C. (2004). Leadership recharged: business leadership & organisational
architecture. Leicester: Troubador
Mayo, A., Nohria, N. and Singleton, L. (2007). Paths to power: how insiders and
outsiders shaped American business leadership. Boston: Harvard Business School
Ulrich, D., Smallwood, N. and Zenger, J. (1999). Results-based leadership. Boston:
Harvard Business School Press
Williams, M. (1998). Mastering leadership: key techniques for managing a
winning team. London: Thorogood
Zenger, J. and Folkman, J. (2002). The extraordinary leader: turning good
managers into great leaders. New York: McGraw-Hill
Harvard Business Review on Leadership. (1998). Boston: Harvard Business School
Press
CIMA Mastercourses
Liberating leadership: help, coach, counsel, teach, empower and ultimately
inspire your people. To book via www.cimamastercourses.com please go to
Find and key in the course code LIBL.

14. Topic Gateway Series Leadership
Websites
BetterManagement.com
BetterManagement provides articles, web casts and conferences addressing
performance management, financial management, business intelligence, IT
management and other critical business management issues to improve
leadership and decision making. www.bettermanagement.com
[Accessed 5 March 2008]
The Leadership Forum™
The Leadership Forum™ improves business performance through better thinking.
It is designed to ensure fresh perspectives, new thinking, and challenging ideas
from the world's best business thinkers. www.learnleadership.com
[Accessed 5 March 2008]
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