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Leadership skills and its impact on organizational performance

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Leadership skills and its impact on organizational performance

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Introduction and definition of leadership, leadership styles, how to measure organizational performance, and also explained the relationship between leadership styles and organizational performance.

Introduction and definition of leadership, leadership styles, how to measure organizational performance, and also explained the relationship between leadership styles and organizational performance.

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Leadership skills and its impact on organizational performance

  1. 1. LEADERSHIP SKILLS AND ITS IMPACTS ON ORGANIZATIONAL CONTROL
  2. 2. CONTENT  Introduction  Definition of Leadership  Characteristics of Leadership  Leadership styles  What is Organizational Performance?  How to measure Organizational Performance?  Leadership in Organization  Relationship between leadership style and organizational performance  Conclusion
  3. 3. INTRODUCTION  The role of leadership in an organization is crucial in terms of creating a vision, mission, determination and establishment of objectives, designing strategies, policies, and methods to achieve the organizational objectives effectively and efficiently along with directing and coordinating the efforts and organizational activities.  In current time, many companies are facing problems related to unethical practices, high labor turnover, poor financial performance, etc. This may be due to the lack of effective leadership.  The leadership styles chosen for the study are charismatic, transformational, transactional, autocratic, bureaucratic, and democratic.  The reason behind choosing these leadership styles is the fact that they are the most practiced leadership styles throughout the globe, and if any new ideology is developed through the research, it can improve these leadership styles further and bring further success to organizations.
  4. 4. LEADERSHIP Definition of Leadership : Leadership is a process by which an executive can direct, guide and influence the behavior and work of others towards accomplishment of specific goals in a given situation. Leadership is the ability of a manager to induce the subordinates to work with confidence and zeal. Leadership is the potential to influence behaviour of others. It is also defined as the capacity to influence a group towards the realization of a goal. Leaders are required to develop future visions, and to motivate the organizational members to want to achieve the visions. According to Keith Davis, “Leadership is the ability to persuade others to seek defined objectives enthusiastically. It is the human factor which binds a group together and motivates it towards goals.”
  5. 5. CHARACTERISTICS OF LEADERSHIP • It is a inter-personal process in which a manager is into influencing and guiding workers towards attainment of goals. • It denotes a few qualities to be present in a person which includes intelligence, maturity and personality. • It is a group process. It involves two or more people interacting with each other. • A leader is involved in shaping and moulding the behaviour of the group towards accomplishment of organizational goals. • Leadership is situation bound. There is no best style of leadership. It all depends upon tackling with the situations.
  6. 6. LEADERSHIP STYLES Some of the important leadership styles are as follows: • Autocratic leadership style • The Laissez Faire Leadership Style • Democrative/Participative leadership style • Bureaucratic Style • Transactional Leadership • Transformational Leadership • Charismatic Leadership
  7. 7. AUTOCRATIC LEADERSHIP STYLE  In this style of leadership, a leader has complete command and hold over their employees/team.  The team cannot put forward their views even if they are best for the team’s or organizational interests.  They cannot criticize or question the leader’s way of getting things done.  The leader himself gets the things done. Cont…
  8. 8. Pro: Decisions are often made quickly and strategically, and teams are kept on track as a result. Con: Employees can feel ignored, restricted, and—in the absolute worst of cases—even abused.
  9. 9. THE LAISSEZ FAIRE LEADERSHIP STYLE  The leader totally trusts their employees/team to perform the job themselves.  He just concentrates on the intellectual/rational aspect of his work and does not focus on the management aspect of his work.  The team/employees are welcomed to share their views and provide suggestions which are best for organizational interests.  This leadership style works only when the employees are skilled, loyal, experienced and intellectual. Cont..
  10. 10. Pro: This level of trust and independence is empowering for teams that are creative and self-motivated. Con: Chaos and confusion can quickly ensue—especially if a team isn’t organized or self-directed.
  11. 11. DEMOCRATIVE/PARTICIPATIVE LEADERSHIP STYLE  The leaders invite and encourage the team members to play an important role in decision-making process, though the ultimate decision-making power rests with the leader.  The leader guides the employees on what to perform and how to perform, while the employees communicate to the leader their experience and the suggestions if any.  The advantages of this leadership style are that it leads to satisfied, motivated and more skilled employees.  It leads to an optimistic work environment and also encourages creativity.  This leadership style has the only drawback that it is time- consuming. Cont…
  12. 12. Pro: Creativity and innovation are encouraged, which also improves job satisfaction among employees and team members. Con: Constantly trying to achieve consensus among a group can be inefficient and, in some cases, costly.
  13. 13. BUREAUCRATIC STYLE  Here the leaders strictly adhere to the organizational rules and policies.  Also, they make sure that the employees/team also strictly follows the rules and procedures.  Promotions take place on the basis of employees’ ability to adhere to organizational rules.  This leadership style gradually develops over time.  This leadership style is more suitable when safe work conditions and quality are required.  But this leadership style discourages creativity and does not make employees self-contented. Cont…
  14. 14. Pro: There’s plenty of stability. Since this is a systematized approach to leadership, things remain constant even through personnel changes and other shifts that threaten to rock the boat. Con: It’s tempting to fall into the “we’ve always done it this way” trap. This approach can be inflexible and neglect to leave room for creativity or ideas from employees.
  15. 15. TRANSACTIONAL LEADERSHIP  The best way to understand transactional leadership is to think of a typical transaction: I give you this, and you do this in return.  That’s really the basis of this leadership style. Transactional leaders dish out instructions to their team members and then use different rewards and penalties to either recognize or punish what they do in response.  Think of a leader offering praise to applaud a job well done or mandating that a group member handles a despised department-wide task because they missed a deadline. Those are examples of rewards and punishments in a work setting. Conti..
  16. 16. Pro: Confusion and guesswork are eliminated, because tasks and expectations are clearly mapped out by the leader. Con: Due to the rigid environment and expectations, creativity and innovation may be stifled.
  17. 17. TRANSFORMATIONAL LEADERSHIP  Transformational leaders seek to change (ahem, transform) the businesses or groups in which they lead by inspiring their employees to innovate.  These leaders are all about making improvements and finding better ways to get things done. And as a result, they inspire and empower other people to own their work and chime in with their suggestions or observations about how things could be streamlined or upgraded.  Under transformational leaders, people have tons of autonomy, as well as plenty of breathing room to innovate and think outside the box. Conti…
  18. 18. Pro: Leaders are able to establish a high level of trust with employees and rally them around a shared vision or end goal. Con: In environments where existing processes are valued, this desire to change things up can ruffle some feathers.
  19. 19. CHARISMATIC LEADERSHIP  Charismatic leaders have magnetic personalities, as well as a lot of conviction to achieve their objectives.  Rather than encouraging behaviors through strict instructions, these leaders use eloquent communication and persuasion to unite a team around a cause.  They’re able to clearly lay out their vision and get others excited about that same goal. Conti…
  20. 20. Pro: Charismatic leaders are very inspirational and effective at getting an entire group invested in a shared objective. Con: Due to their intense focus, it’s easy for these leaders to develop “tunnel vision” and lose sight of other important issues or tasks that crop up.
  21. 21. WHAT IS ORGANIZATIONAL PERFORMANCE There are possibly as many interpretations of the term organizational performance as the studies that have used the construct. Luo et al. (2012) who conducted a meta-analysis of organizational performance suggested that it should be measured in economic and operational terms: The economic performance looks at financial and market outcomes which assess the profits, sales, return on investment for shareholders, and other financial metrices. The operational performance, on the other hand, focuses on the observable indices like customer satisfaction and loyalty, the firm’s social capital, and competitive edge derived from capabilities and resources.
  22. 22. HOW TO MEASURE ORGANIZATIONAL PERFORMANCE ? There are various way how organizational performance can be measured. We have a look at some of the most prominent and effective ones.  As a measure of survival and growth  As a measure of good fit with environment  As a measure of relevancy
  23. 23. As a measure of survival and growth  One of the clearest definitions of Organizational performance describes it in terms of growth and survival of the firm (Etzioni, 1960; Chandler and Hanks, 1993).  In this definition, a firm may consider its performance to be effective if it is able to meet its prescribed goals and continue to improve.  The weakness in this approach is that it fails to account for the external and internal environment of the firm.
  24. 24. As a measure of good fit with environment  This limitation has been provided for by Lorsch (1970) who believed that firms who are able to find the right fit between their environmental demands and internal capabilities and resources are able to perform better.  A similar position was adopted by Lupton, Gribbin and Warmington (1977) who defined good organizational performances to be those which were able to achieve high productivity and employee satisfaction with low turnover rates and costs.
  25. 25. As a measure of relevancy  Though this definition addresses the systems view of organizations, it still fails to consider the volatility of modern markets and how they pressurize firms to evolve continuously.  This critical aspect, termed relevancy by Jenatabadi (2015), is found in studies from the twenty-first century.  Modern organizations are no longer required to only fulfill the demands of their investors and employees, but an entire gamut of stakeholders (Adam Jr, 1994; Harrison and Freeman, 1999).
  26. 26. LEADERSHIP IN ORGANIZATIONS
  27. 27. QUALITY AND ROLES OF A GOOD LEADER IN AN ORGANISATION PERFORMANCE  The role of a leader in an organization is to help identify worthless goal, help devise appropriate strategies to achieve such goals and provide direction and motivation for the group so that agreed upon goals can be attained.  The leader must recognize the value system that operates in a variety of work group and situation.  They must listen to questions as well as provide answers. He must comprehend the difficulty of being a subordinate so as to understand the fear. There are some qualities that a good leader must possess in order to enhance the affairs of an organization; some of such qualities are as follows:
  28. 28.  Ability to be objective: Leaders should examine each situation before making decisions. Objectivity is the ability to look at issues and problems rationally or impersonally without bias.  Ability to be perceptive: This entails the ability to observe or discover the realities of one’s environment. Leaders in organization need to know the objectives and goals of the entire organization so that they can work to support these goals.  Ability to establish proper priorities: The ability to recognize what is important and what is not. A leader is to know which alternatives are worthy of consideration or not
  29. 29.  Human relations: This is otherwise called interpersonal relationship. A leader should be strong in his human relations attitude, especially when his job is done through the subordinates. Developing and understanding the appropriate human relations skills will earn the leader healthy respect. Ojo (1998) believes that based on the human relations theory, jobs should be designed and work scheduled to ensure that jobs provide workers with meaningful work sense of responsibility as well as opportunity to participate in decisions affecting their job.  Crises manager: A leader should be able to settle disputes or differences among his employees as well as issues which impairs employees output.
  30. 30.  Effective decision: The ability of a manager to plan strategically depends on his effective decision making. Effective decision making in a contemporary management involves defensive avoidance, collecting more and more information about the cost and utility of each alternative and comparing them systematically in order to choose the most effective costs.
  31. 31. RELATIONSHIP BETWEEN LEADERSHIP STYLES AND ORGANIZATIONAL PERFORMANCE There is a considerable impact of the leadership styles on organizational performance. The leadership style influences the culture of the organization which, in turn, influences the organizational performance. The organizational culture and performance are related to the type of leadership style (Klein, et al., 2013).
  32. 32. TRANSFORMATIONAL LEADERSHIP STYLE AND ORGANIZATIONAL PERFORMANCE Transformational leadership style focuses on developing the followers and considering their needs. The managers that focus on transformational leadership focus particularly on developing the overall value system of the employees, development of moralities, skills and their motivation level. The transformational leadership acts as a strong bridge between the followers and leaders, to develop clear understanding associated with the motivational level, values and interests. Bass and Avolio (1994) stated that transformational leadership demonstrates the superior leadership performance.
  33. 33. CHARISMATIC LEADERSHIP STYLE AND ORGANIZATIONAL PERFORMANCE Charismatic leadership is considered to be one of the most successful leadership styles, where the charismatic leaders develop a vision and the followers are asked to follow and execute the vision. The charismatic leadership invites innovation and creativity and is considered to be motivational for the employees. But the major drawback of this style of leadership is that the followers are totally dependent on the leader and once the leader leaves the organization, they become direction-less. The problem worsens as charismatic leaders do not train their subordinates to act as their replacements in the future. This leadership style results in “happy followers, but few future leaders”.
  34. 34. TRANSACTIONAL LEADERSHIP STYLE AND ORGANIZATIONAL PERFORMANCE A leader is known as a transactional leader if he/she is always willing to give something in return . This can include a number of things like promotion, pay raise, performance reviews, new responsibilities etc. The major problem with this type of leadership is the expectation. Hence, transactional leadership can be defined as the exchange of targets and rewards between the management and the employees (Ojokuku, et al., 2012). The study by Longe (2014) revealed that transactional leadership style has a positive impact on the organizational performance. This leadership style particularly helps in creating an environment that is optimal for performance and also articulates the compelling vision that enhances the overall organizational performance
  35. 35. DEMOCRATIC LEADERSHIP AND ORGANIZATIONAL PERFORMANCE Democratic leadership as the leadership in which the decision- making is decentralized and is shared by all the subordinates. In the democratic leadership style, the potential for weak execution and poor decision- making is high. However, the democratic leadership is also known to motivate the employees to perform better, as their views and opinions are valued. The study by Elenkov (2002) indicated that the democratic leadership has a positive impact on organizational performance. The democratic leadership allows the employees to make decisions along with sharing them with the group and the manager.
  36. 36. AUTOCRATIC LEADERSHIP AND ORGANIZATIONAL PERFORMANCE Autocratic leaders are classic and bossy in nature. The autocratic leaders want their subordinates to work according to them. Typically, autocratic leaders retain the decision -making rights with them (Obiwuru, et al., 2011). The autocratic leaders force their followers to execute the services and strategies according to the narrow way The author stated that an autocratic leader is the one who determines the activities, techniques and policies to the employees and expects the employees to follow the same. In addition such leaders do not have much faith on their followers. Bhargavi and Yaseen (2016) suggested that the autocratic leadership style has a positive impact on the organizational performance.
  37. 37. BUREAUCRATIC LEADERSHIP STYLE AND ORGANIZATIONAL PERFORMANCE Bureaucratic leaders influence the people under them to follow the policies and procedures designed by them. The leaders are strongly committed to their processes and procedures but not to their people. This is the reason why they appear to be aloof. This method is not very effective as it does not lead to the development and motivation of the employees. The bureaucratic leadership style does not impact the employee as well as organizational performance significantly.
  38. 38. CONCLUSION This study has focused on the impact of leadership styles on organizational performance. The focus was on only six types of leadership styles- transformational, transactional, democratic, charismatic, bureaucratic, and autocratic. The transformational, autocratic and democratic leadership styles were found to have a positive influence on organizational performance, whereas, the transactional, charismatic and bureaucratic leadership styles were found to have a negative impact on the organizational performance in the organizations taken for study.
  39. 39. This study reveals that organizational performance is associated with the leadership style and they have both a positive and a negative impact on the performance. It is important for a leadership style to offer opportunities to employees, offer a sense of belonging along with allowing them to participate in the decision -making. In this context, it is recommended that organizations should focus on using the transformational and democratic leadership styles in the organizations so as to improve the organizational performance.

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