course: business management · contributions from henri fayol and henry mintzberg. henri fayol the...

Course: Business Management

The Internal Business Environment – Part 1

Level: Advanced Higher

March 2015

2 ADVANCED HIGHER BUSINESS MANAGEMENT

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ADVANCED HIGHER BUSINESS MANAGEMENT 3


Contents

Management theory 4

Leadership 38

Equal opportunities 67

Teams 80

Time and task management 102

Managing change 110

Suggested solutions 133



MANAGEMENT THEORY

Management theory

Management is a very important group within the business context,

determining the success or failure of that organisation. Without managers,

quite simply, it’s unlikely that things would get done. It is generally accepted

that they:

act on behalf of their owners, eg directors are responsible to their

shareholders

set organisational objectives, eg to move into a different market

manage others to ensure organisational objectives are achieved

ensure that the values of the organisation are maintained when dealing with

customers, employees and others.

Management theory attempts to explain how management works in

organisations. Contributions to its development have come from a range of

disciplines, such as:

sociology (behaviour)

social psychology (motivation and leadership)

behavioural psychology (motivation)

statistics (management of production).

These theories are useful in explaining management style. They include the

classical school and theories which followed later, such as human relations,

neo-human relations, systems theory and more recently contingency theory.



MANAGEMENT THEORY

The role of management

Before exploring management theories it is important to understand the crucial

part management plays in every organisation. Several writers have suggested

ways in which the role of managers can be explained. This section looks at the

contributions from Henri Fayol and Henry Mintzberg.

Henri Fayol

The Frenchman Henri Fayol (1841–1925) was one of

the first people to write about management. He

defined five functions of management which examine

the relationship between managers, the task and the

workers. He proposed that there are 14 principles of

management. Fayol’s theoretical framework is still

seen as relevant to modern-day organisations.



MANAGEMENT THEORY

Fayol’s five functions of management

Planning

This is the starting point. It creates a framework for

future decisions. It involves setting clear objectives and

devising strategies, policies, programmes and

procedures to achieve those objectives. For a senior

manager this might be writing a company strategy

document covering the next five years; for a supervisory

manager this might be planning detailed work for the

next working week.

Organising

Organising involves getting the right resources together

and creating an appropriate organisational structure to

divide up the tasks. Managers must train and recruit the

right people for the job to secure an efficient and

effective workforce. It also involves establishing

communication networks to achieve organisational

goals.

Commanding

Giving instructions in order that the necessary tasks are

carried out. Tasks could be carried out either individually

or by delegation to others.

Co-ordinating

This involves finding and training staff for the task to be

carried out and ensuring the staff are motivated to

perform the tasks and that all are working to the same

goals.

Controlling

This is essential to ensure that organisational goals

have been achieved. It involves maintaining

performance levels by monitoring and evaluating, ie

collecting and analysing key management information,

comparing actual vs planned performance and critically

reviewing plans. A senior manager might look at long-

term planned vs actual performance, whereas a

supervisory manager might be more concerned that

work is of the correct quality and that the work is done

on schedule.



MANAGEMENT THEORY

Fayol’s 14 principles of management

Division of labour

Employees should be trained in one area and build

expertise in that task. Specialisation results in increases

in efficiency and output levels.

Authority

Authority is correlated to responsibility. Managers must

be able to give instructions and exercise authority to

ensure these orders are carried out.

Discipline

Employees must comply with the rules and regulations

of the firm. Company policy must be adhered to and

consequences must be in place for those who would

disobey.

Unity of command

Each employee should have only one direct supervisor

from whom they receive their orders.

Unity of direction

To minimise confusion and conflict, teams with the same

task should be working for the same manager and

towards the same goals.

Subordination

The interests and intentions of one employee (or a

group) must not take control over the direction of the

entire team. Company objectives provide navigation for

steering the firm, not the personal agenda of an

employee or group.

Remuneration

Rewarding employees for their work through financial

and non-financial incentives. A fair salary should be

awarded as well as perks and bonuses if targets are

met.



MANAGEMENT THEORY

Centralisation

The involvement of employees in core decision making.

Involving employees through the use of quality circles

etc will minimise their resistance to change.

Scalar chain

The line of authority from top management to the lowest

ranks represents the scalar chain. Communications

should follow this chain. Employees should be aware of

their position in the chain of command.

Order

The systematic arrangement of resources: people,

machinery and finances. The workplace must be clean,

tidy, organised and efficient to achieve maximum

effectiveness.

Equity

Managers must be objective and fair at all times.

Kindness should be shown as well as discipline if

necessary.

Stability of

personnel

Retaining a core, trained and effective workforce is a

primary concern. High employee turnover should be

avoided. Workforce planning should be key to ensuring

flexibility and success.

Initiative

Permitting workers freedom to complete tasks and

execute plans in their way will result in increased effort.

Esprit de corps

Promotion of team spirit and unity amongst workers to

minimise conflict and increase productivity.



MANAGEMENT THEORY

In the 1970s Henry Mintzberg observed five chief executives at work in five

different American companies: a major consulting firm, a hospital, a school

system, a high-technology firm and a manufacturer of consumer goods. He

used a stop-watch to observe, in the course of one intensive week, the

activities of all the chief executives.

He claims that if you ask a manager what he does he describes it in Fayol’s

terms, ie planning, organising, commanding, co-ordinating and controlling.

However, if you watch him in practice it is quite different. For example, how

would you categorise presenting a retiring employee with a gold watch? From

his observations, Mintzberg identified ten roles that managers fulfil. He argued

that everything a manager does fits into one or more of these ten roles.

Henry Mintzberg

Canadian management expert Professor Henry

Mintzberg has argued that a manager’s work can

be described using ten generic roles. Mintzberg

argues these roles fall into three categories:

interpersonal (managing through people)

informational (managing by information)

decisional (managing through action).



MANAGEMENT THEORY

Mintzberg’s ten roles of management Example In

terp

ers

on

al

Figurehead

The figurehead’s role is to represent the

organisation to the outside world. This can help

others recognise the importance attached by the

firm to various activities and assist the firm in

gaining co-operation in pursuit of its objectives.

Greeting visitors

Speaking at

ceremonies

Hosting receptions

Leader

The leader’s role is to inspire and motivate

employees. Workers will want to work hard to

please their leader, thus meeting company

objectives more effectively. The leadership role

may require the manager to perform staff

training and set up teams.

Selecting the

appropriate

training and

leading the event

Core decision-

making

Chairing events

Liaison

The liaison role involves developing

relationships both within and outwith the

organisation. Managers can foster relationships

with those who could later provide favours and

important information to assist the running and

success of the firm.

Regular meetings

Lunching with

major clients

Frequent

correspondence

Info

rmati

on

al

Monitor

Monitoring checks progress at each stage. If

problems are identified, managers can take

corrective action to keep the organisation on

track to meet objectives.

Supervision

Budget control

Use of Gantt

charts

Reading reports

Progress updates

at meetings

Disseminator

Disseminating involves informing staff and

others of objectives so that everyone is clear

what is expected and less likely to go off course

in meeting objectives.

Send emails and

memos

Hold meetings

Train staff

Demonstrations

Set policy

Spokesman

The spokesman’s role is to let members of the

wider community know what the company is

doing. If a manager has displayed effective

presentation skills this may win support for the

firm’s objectives.

Set the mission

statement

Hold press and

media conferences

Attend interviews

with journalists

and reporters



MANAGEMENT THEORY

D

ecis

ion

al

Entrepreneur

The entrepreneur’s role is to come up with ideas

and decisions. Good-quality decisions are

essential to meeting company objectives. An

entrepreneur should have the ability to take

necessary risks in return for associated rewards.

Brainstorming and

innovation

implantation

Planning

strategies

Design and idea

development

Disturbance handler

The disturbance handler deals with any

problems that arise; failure to do so may lead to

delays in achieving objectives. This may involve

dealing with disciplinary, industrial action,

grievance and conflict management issues. The

disturbance handler role aims to minimise

inefficiency to ensure tasks are on track and

deadlines are being met.

Takes disciplinary

action

Follows policy for

grievance

Settles disputes

within teams

Resource allocator

The resource allocator’s role is to decide how

the company’s resources should be used; if a

company does not have the right resources in

the right place at the right time it cannot meet its

objectives. Providing budgets and financial

control is central to this role along with

allocation of staffing and machinery.

Oversee work/shift

rota

Set up teams of

staff

Purchase

resources and

machinery

Assign budgets

Negotiator

The negotiator acts as an intermediary; he/she

may act as a go-between when different

stakeholders are setting objectives. The

relationship between staff, trades unions and

other stakeholders must be maintained. Both

compromise and persuasion are necessary

tools in this role.

Communicates

with trades unions

Set up works

councils

Appoint a worker

director



MANAGEMENT THEORY

The classical school

This is called the classical approach because it was taken by the first people

to write on management in the early years of the 20th century. They

emphasised the formal hierarchical organisation with clearly defined tasks and

a common purpose. Their view was that it was possible to find the one best

way of doing things.

The classical school was concerned with increasing productivity. The most

important work in this area was by Frederick Taylor, the founder of the

movement known as scientific management. He suggested that there was a

best way to perform tasks and that all workers wanted was a fair day’s pay for

a fair day’s work.

‘The principal objective of management should be to secure the maximum

prosperity for the employer, coupled with the maximum prosperity for the

employee.’

F. W. Taylor

Taylor’s scientific management aimed to achieve:

To do this, he proposed the following:



MANAGEMENT THEORY

Classical school theorists

Frederick W. Taylor

American mechanical engineer who sought to

improve industrial efficiency.

The ‘father’ of scientific management.

A fair day’s pay for a fair day’s work.

Introduced a piece rate system.

Introduced specialisation and division of labour.

Examined the way the workers did the job in order

to maximise efficiency through motion studies.

Max Weber

German sociologist, politician and economist who

studied the processes and features of

bureaucracy.

‘Weberian’ bureaucracy theory emphasised an

impersonal approach to running a firm, where

rules, authority and power were central to effective

management.

Characterised organisations by hierarchical

structures, where workers needed expert training

and their career advancement was judged on

technical qualifications.

Henri Fayol

French mining engineer who studied and theorised

the process and role of management.

Suggested that structure is needed to ensure tasks

are achieved and that employees require clear

definition.

He believed a manager’s role was to:

1. forecast and plan

2. organise

3. command and direct

4. coordinate

5. control.



MANAGEMENT THEORY

Frank B. Gilbreth

An early advocate of scientific management and a

pioneer of motion study.

Reorganised the way of working for maximum

efficiency.

Eliminated unnecessary steps in any process and

unessential movements, eg less lifting or travelling.

Quality improvements should be continuously

made.

Used photography to capture the best way of

working.

Invested in training workers in the ‘one best way’.

Lillian Gilbreth

American psychologist and industrial engineer.

She and her husband, Frank Gilbreth (above),

were efficiency experts who contributed to the

study of industrial engineering in fields such as

motion study and human factors.

Both Lillian and Frank Gilbreth believed that

scientific management, as formulated by Taylor,

fell short when it came to managing the human

element on the shop floor.

Mary Parker Follett

An American social worker, management

consultant and pioneer in the fields of organisation

theory and behaviour.

Stressed the importance of common objectives for

workers within a firm.

She examined not just the study of productivity but

also how power is constructed and how disputes

are resolved.

She considered people greater than processes

and introduced the concept of ethics into business

administration.



MANAGEMENT THEORY

Summary

‘Hardly a competent workman can be found who does not devote a

considerable amount of time to studying just how slowly he can work and still

convince his employer that he is going at a good pace.’

F. W. Taylor

Based on scientific management which emphasises efficiency above all

else.

Extensive use of division of labour: splitting workers into groups so they can

specialise on one job (division by product) or by a task within a job (division

by process) to maximise resources, improve quality and increase the speed

of production.

Training and development of workers was given to ensure they could

complete their task proficiently and with little error and therefore reduced

wastage.

Research was done on jobs to discover the most efficient way of doing

tasks before setting standard rates of pay.

Mechanistic view of workers where they were treated like functional

machines and given little trust.

Belief that workers are only motivated by earning money.

Paying workers on results/output is known as piece rate payment.

The ideal organisation is a tall structure hierarchy (bureaucracy) with many

layers of management and clearly defined rules and procedures.

Initiative and upward communication from workers was discouraged.

Managers are responsible for thinking whereas workers should follow

instructions.

High level of supervision to ensure instructions were being followed and

procedures obeyed.



MANAGEMENT THEORY

Advantages Disadvantages

Money will always have some

positive effect on workers’

motivation, eg underpaid workers

will not work hard enough.

Piecemeal incentive rewards

workers who produce quickly and

accurately.

Hierarchical structures often

provide many promotion routes

for employees within them.

High level of supervision reduces

the chance of slacking within the

firm.

Decision-making tends to be

quick as the leadership style is

often autocratic in nature.

A clear organisation structure can

improve the flow of

communication.

Clearly defined remits of

responsibility within the firm

reduce internal conflict.

Divisions of labour produce a

high output and specialisation

can increase the quality of work.

Demotivating for workers as it

treats them like machines who

often never see an end product.

Division of labour can result in

boring and repetitive work.

Workers become inflexible as they

do not have an opportunity to

multi-skill as job rotation is

discouraged.

Workers can feel alienated and

undervalued as they are seen as

labour and not part of a team.

Assumes workers are only

interested in financial rewards and

that is the only source of their

motivation.

Authoritarian work environment

and management style can be

intimidating and stressful for

workers.

Upward communication, initiative

and worker input is discouraged

and therefore valuable ideas and

opportunities may be missed.

Lack of flexibility may result in high

turnover and absenteeism in

modern-day work.



MANAGEMENT THEORY

Limitations of the classical school approach

Relevance today

Classical school ideas are still very much in effect today in some

organisations, such as manufacturing industries, which have routine

processes and require a standardised output.

Manufacturing techniques such as lean production, which originated in Japan,

aim to eliminate any resource that is not directly associated with creating value

for the end customer. As waste is eliminated quality improves while production

time and cost are reduced.

Lean production, as with re-engineering processes, is based on the principles

of scientific management as it attempts to measure the time it takes to get an

order to a customer and to reduce the time spent on each of the steps in the

process involved.

Scientific management can also be seen in tertiary (service) sector industries,

such as food outlets, so that a uniform service is provided throughout all

branches. For example, McDonald’s aimed during their international

expansion to create a standardised set of food items, a core menu, which

tastes the same whether in Singapore, Spain or South Africa. McDonalds also

set specific timings on how to carry out cooking tasks or assemble burgers to

maximise efficiency and output.

In Taylor’s day people had little money therefore they were very motivated to

increase their pay and money worked as a motivator. Today, with the

increasingly difficult economic conditions, money may work well for motivating

staff.

When Taylor’s ideas are fully implemented, tasks become monotonous and

repetitive, and in the long run staff become bored and demotivated so money

loses its place as the strongest motivator.



MANAGEMENT THEORY

The human relations school

The classical school, particularly scientific

management, was criticised for treating people like

machines and ignoring the influence that social

factors can have at work. This led to a new way of

looking at management, known as the human

relations school.

Elton Mayo, an Australian industrial psychologist, is

one founder of the human relations movement.

Mayo and his team, in conjunction with the

management and employees, conducted research

at the Western Electric Company in Hawthorne,

Chicago from 1927 to 1932. They were asked to investigate the reason for low

productivity at the factory.

One place in which Mayo and his colleagues conducted experiments was the

relay test assembly room. The work consisted of assembling telephone relay

units, which involved putting together a small number of components on a jig

and fastening them with four screws. It was essentially a routine, repetitive

task that took about a minute to complete. All the workers were women and

were paid on a piece basis (their pay was determined by the amount that each

individual produced).

During the study five assemblers and a layout operator, all women, were

segregated away from the main production area. All the materials needed for

work were brought to them. An observer supervised the workers and

maintained a friendly atmosphere, consulted with the workers and listened to



MANAGEMENT THEORY

their complaints. The observer was, in fact, a social scientist and member of

the research team.

During the experiments the following changes in working conditions were

introduced:

1. all six workers were treated as a single group for the purposes of

calculating piecework

2. standardised rest periods of 15 minutes in the morning and 10 minutes

in the afternoon were introduced and a snack was provided by the

company

3. working hours were reduced, either by stopping earlier in the afternoon

or by not coming in on a Saturday morning.

The researchers compared the output of the workers before and after

becoming part of the group. Output was higher when they were part of the

group and did not seem to be influenced by the physical conditions at work.

Mayo and his team found the same thing when they altered other aspects of

working conditions, such as the lighting. Productivity rose but this was not

apparently due to changes in physical working conditions. The factors that did

affect productivity were:

the social interaction and group norms established by the female

workers in the group

the friendly atmosphere where the views of the female workers were

listened to

the group felt important as the observer and others were paying attention.

Mayo and his colleagues concluded that work satisfaction depended to a large

extent on the informal social pattern of the work group where norms of co-

operation and high output were established because of a feeling of

importance. Physical conditions, or financial incentives to motivate workers,

had little impact. People will form workgroups and this can be used by

management to benefit the organisation.

Workers, Mayo argued, were activated by a logic of sentiment, and

management by a logic of cost and efficiency. Conflict was inevitable unless

the difference was understood and allowed for.

This enabled the researchers to make certain deductions about how

managers should behave.



MANAGEMENT THEORY

‘Management succeeds or fails in proportion as it is accepted by the group as

authority and leader.’

Elton Mayo

The basis of the human relations movement is the use of social sciences to

secure the commitment of individuals to the aims and activities of the

organisation. While this is seen as too simplistic today, it did establish the

importance of social factors in the organisational context.

Limitations of the Hawthorn experiments

All the workers were female – in the social context of the 1930s, this may

have made them more willing to participate in the experiment and to try to

make it work.

The experiment concentrated on a small segregated area and thus had a

very narrow approach (several other experiments were conducted in other

areas of the factory but each was done in isolation).

Factory-based experiments are limited in their transferability to other

sectors of work.

Summary

A reaction to the classical school approach, human relations focused on the

value of social factors and human interaction.

Mayo discovered that people are more motivated by the context in which

they work and by the relationships which evolve in work, rather than

money.

Stresses the importance of workers’ needs in order to increase output.

The ‘Hawthorne effect’ refers to a phenomenon whereby workers improve

and adapt their behaviour in response to a change in the working

conditions set by management.

The importance of groups and team working was discovered in the

workplace – workers may be influenced more by informal than official group

leaders.

Workers’ motivation increased from the social interaction and when

managers took an interest in them, leading to an improved work rate.



MANAGEMENT THEORY

Employees have more individual freedom over how jobs are performed and

feel valued as they are involved in decision-making.

Emphasised non-financial motivators, good working conditions, the

importance of teams and staff welfare.

Emphasised the importance of communication between management and

employees in promoting high levels of output.

Relevance today



MANAGEMENT THEORY

The neo-human relations school

While the Hawthorne experiments were significant in highlighting the

importance of the social aspects within an organisation, Mayo’s work still did

not show how work practices and organisational structure should be modified

in order to improve worker satisfaction and improve productivity.

During the late 1940s it was realised that the links between organisational

design, motivation and productivity were a lot more complex than first thought.

These new ideas were known as the neo-human relations school. Writers in

this school took a more psychological orientation and looked at issues of

motivation to work, group membership and leadership style.

Neo-human school theorists

Abraham Maslow

American psychologist best known for creating

the hierarchy of needs claiming people have five

innate needs that can be placed in a

hierarchy/pyramid.

The model is used to determine the progression

of psychological health predicated on fulfilling

innate human needs.

Maslow suggests management methods need to

be appropriate to the level on which workers are

currently operating.



MANAGEMENT THEORY

Frederick Herzberg

American psychologist famous for introducing job

enrichment and the motivator-hygiene theory.

Job enrichment involves allocating more

interesting, challenging and complex duties to

stimulate a sense of purpose in achieving

objectives.

Herzberg’s ideas, such as empowerment of workers and job enrichment,

suggest that employees respond to being given greater responsibility and

having their contribution recognised.

Managers need to provide satisfiers, such as greater responsibility, and

ensure that hygiene factors are in place.



MANAGEMENT THEORY

Douglas McGregor

An American management professor whose work

is closely related to that of Maslow and Herzberg.

He devised the Theory X and Theory Y theories

of management thought towards workers’

motivation.

Theory X Theory Y

Assumes workers enjoy their duties

Similar to a classical approach, as they are self-motivated and

management assumes employees exercise self-control.

are inherently lazy, lack ambition Assumes workers will prove eager

and shy from responsibility. to respond to increased

Assumes workers are indifferent responsibilities and empowerment

to the organisation and will resist becoming more productive as a

change. consequence.

Managers need to lead and Management believe workers are

control; a high level of not naturally passive and resistant

supervision, policy and controls is to change but active agents at

developed. work.

Emphasis on incentivising, Management should provide the

forcing, threatening and coercing right environment for employees to

employees to work, with a strict achieve their own objectives whilst

disciplinary procedure in place if striving for organisational

they fail to do so. objectives.

Often used in a hierarchical There should be more self-

structure with a narrow span of management and upward

control. communications along with

Managers believe that employees participation in the decision-making

only work for financial reasons process.

and nothing else. Effective use of teams and

A blame culture may be prevalent interdisciplinary groups are

in the workplace. encouraged.

Can result in diseconomies of Emphasis on recognition,

scale, which is costly to a firm. achievement and empowering

workers.



MANAGEMENT THEORY

McGregor in action

Theory X Theory Y

Motivation

Financial incentive

Money/salary

Fear of job security

Achievement/recognition

Reaching potential

Social interaction

Empowerment

Communication

Little or no

involvement in

decision making

Hierarchical

communication

lines

Stifles creativity

Participative in decision

making

Upward communication

Quality circles encouraged

Allows initiative

Tasks

Requires direction

Shy away from

extra work

Avoids

responsibility

Blame culture

Relishes challenges

Thrives on extra tasks

Seeks development

Accepts accountability

Management

Authoritarian and

controlling

leadership

Gives high level of

supervision

Forces or coerces

Threatens

disciplinary action

Employees are self-

managed

Laissez-faire and

participative leadership

Use of empowered teams

Target setting

Attitude

Dislikes work

Skiving and

goldbricking

Work is boring

Needs to be forced

Wants to work in the right

conditions

Less resistant to change

Ambitions and drive

McGregor believed that Theory Y would lead to higher motivation. He

considered conventional assumptions (Theory X) to be both limited and

unrealistic because they relied on authority as the primary means of control,

which he saw as likely to generate resistance, restriction of output,

indifference to organisational objectives and a refusal to accept personal

responsibility. McGregor recognised that much of the behaviour in

organisations did reflect the Theory X view.



MANAGEMENT THEORY

However, he believed that this type of behaviour was not a consequence of

the inherent nature of staff but a product of the way in which staff were being

treated by organisations.

McGregor has highlighted that if managers believe that all their workers want

is more money and/or greater social satisfaction, they will therefore only

provide for these basic needs to be met. If managers do not accept that staff

have more complex needs, they will not be providing opportunities at work for

the staff to satisfy them. The result may well be frustration and a lack of

commitment on the part of the staff.

McGregor’s theory has been applied successfully through the modern

Japanese approach of total quality management (TQM), which is based on his

Theory Y and is widely implemented throughout the world. The neo-human

relations approach as a whole drew attention to issues such as job

satisfaction, participation and leadership style, all of which remain important in

management today.

Limitations of the neo-human relations approach



MANAGEMENT THEORY

Systems theory

The classical school approach to management looked at the structure and

processes of an organisation and how it could operate more efficiently while

achieving maximum productivity but rather ignored the attitudes of those

working in the organisation. On the other hand, the human relations school

focused on the people in organisations but neglected the technical aspects.

The neo-human relations school addressed some of the problems of

reconciling people and organisations but tended to do so from an individual,

psychological perspective rather than a holistic view.

All these approaches are rather narrow and do not look at the

organisation as a whole and all the various factors that may influence

how it operates.

Systems theory is an attempt to address this problem. Systems theory argues

that in any organisation the multitude of parts and processes are so

interrelated and so interdependent that a small change in one part

necessitates changes and adaptations in other parts. Often called the open-

systems approach, it views any one organisation as an interdependent piece

of a much larger whole, looking outside to the environment in which the

organisation operates. This wider environment can include suppliers,

customers and the government as well as peer/rival organisations and other

factors such as the state of the economy, demand, fashion, technology and

geographical conditions etc. The environment then impacts on organisational

design and the functioning of the organisation itself.



MANAGEMENT THEORY

The approach seeks to find the best fit from three elements:

As an open system it draws in resources from the environment, eg raw

materials, converting them into goods and services which are then fed back

into the environment, so it is a cyclical process. For example, Ford makes cars

which it sells to its customers for money. The money is recycled in the form of

wages, tax and the purchase of more raw materials.

This socio-technical approach to an organisation recognises that it is

necessary to incorporate both the social and technical aspects of work if an

effective system is to be created. This concept was developed by the

Tavistock Institute of Human Relations in the study of coal mining in the north-

east of England.

Prior to the introduction of new technology to coal mining, teams of men

worked closely together, with each member of the team being highly

dependent on the others to work effectively and earn a decent wage. With new

technology such as mechanical equipment, the teams were broken up,

resulting in deterioration in many areas, eg industrial disputes, numbers of

accidents, absence levels etc. The problem was solved by building teams back

into the work to encourage interdependence among workers.



MANAGEMENT THEORY

Systems theory relies on a number of factors to be considered by

management for the model to be effective.

Factor Suggestion for management

Interdependence

Reliance on others within the firm is essential in a

systems approach, eg employees depend on each

other as well as the managers and the companies

they work for to provide guidance, training and

assistance on the job.

Establish a positive corporate culture.

Use a company-wide open-door policy.

Synergy

The system dynamics must work in harmony to

create an efficient and quality output.

Inter-group conflicts are counter-productive in a

system approach so rotate members across various

teams.

Interdisciplinary working and matrix structures are

key.

Clear and well-publicised procedures to ensure

everyone within the firm understands the end goal

and the ways to achieve it.

Employee

relations

Encourage collaborative working with management.

Empower workers to take responsibility for their

actions.

Give positive praise and recognition of achievement.

Upward communication through quality circles and

regular meetings.

Invest in training and development.

Control

mechanisms

Frequent supervision and quality assurance to

review the system and its components.

Set targets and allocate budgets to provide

accountability.

Information

Use employee focus groups and quality circles.

Obtain feedback from staff appraisal and meetings.

Analyse financial information to assess

effectiveness.

Use PESTEC analysis to be aware of the impact of

the ever-changing external business environment.

Conduct market research to improve the firm’s

systems.

Use informal communication channels, eg

grapevine.



MANAGEMENT THEORY

Summary

System theory is a holistic approach, classical approach was considered

‘organisations without people’ and the human relations approach was

considered ‘people without organisations’.

Less of a management theory and more of a way to analyse and design the

workflow of the organisation and its many elements.

Views the organisation as a complex system of people, tasks and

technology with each interlinking and impacting on one another, known as

the ‘system dynamics’.

Systems are made of many sub-systems (components) which work in

harmony. This encourages interdisciplinary relationships, matrix structures

and team working if necessary.

Acknowledges that the human/social factors alone are not the most

important consideration in achieving the company goals and that the

business environment and the external influences must also be considered.

A business is viewed as an open socio-technical system that interacts with

its environment and combines inputs, processes and outputs.

Systems approach argues no single theory can guarantee success and

does not provide a ready-made solution for managers – each ‘system’ is

tailored to suit the organisation’s objectives.

A change in one part of the system has a subsequent impact throughout as

the system dynamics are interdependent and therefore this requires

effective forward planning by management.

The systems approach suits organisations which face constant change and

therefore it has become more relevant in recent years because of

increased change in the external environment and the trend toward

globalisation.

The systems approach focuses on the process, ie what is going on, rather

than the scientific method of doing the job.

It encourages a customer service focus from managers because it

emphasises the relationship between the organisation and its environment.



MANAGEMENT THEORY

Contingency theory

This approach to management theory is a product of more recent times and

can be seen as a development of the systems approach. Similar to systems

theory, it is based on the assumption that there is no single approach to

organisational structure that will suit all organisations at any point in

time.

Both the classical management theories and those based on human relations

sought to offer this panacea. Contingency means ‘it depends’. Organisations

consist not only of tasks to be performed but also of people to perform them,

both in the same environment. The tasks need to be carried out while people

try to grow and develop.

Contingency theory tries to get the best fit between task, people and

environment. It draws on earlier approaches and stresses three factors:



MANAGEMENT THEORY

The challenge for managers is to develop an approach that best suits a

particular situation. For example, with respect to structure it would be to

design an organisational structure that best suits the environment in which the

organisation operates. In this case, contingency implies that within the same

organisation there may be units of bureaucracy, units operating in a matrix

structure and units which are divisionalised. The only criteria for good design

are task performance and individual/group satisfaction. The contingency

theory of management can be applied to all aspects of management, eg

leadership or choosing a company structure.

Factors which impact approach



MANAGEMENT THEORY

Summary

Building on the ideas of systems theory, a contingency approach focuses

on interrelationships and reliance between the external environment, the

organisational structure, the task and the employees in synergy.

A contingency approach argues that no single ideal method of

management exists – the best approach will depend on the variables that

must be considered.

The variables to be considered can include the size and type of the

organisation, the technology available, its history and corporate culture, the

nature of the work, the skill of staff, the experience of management, the

demands of the market, the finance available etc.

Each situation and organisation is unique and management must be

tailored accordingly to achieve maximum organisational effectiveness.

Organisations cannot exist in isolation, they must take into account all

factors of the internal and external business environment to adapt and

survive.

Management must be flexible – business finds itself in changing

environments so managers should be able to adapt to all circumstances;

some situations will call for a more authoritarian approach, eg in a crisis.

A contingency approach helps managers adjust to changes in social and

economic circumstances, eg by making changes to accommodate flexible

working practices.

Modern organisations are more likely to use a contingency approach,

choosing the best mix of different ideas about management to suit the

particular situation in which they find themselves.



MANAGEMENT THEORY

Relevance today

An organisation will face a variety of choices when determining how it should

be structured, how it should organise the work and how it should be managed.

Effective organisations use structures that take account of a number of

variables (contingencies) that directly impact on how it achieves its objectives.

Leadership

style

Organisations need to ensure they match suitable

managers to relevant areas of work. For example,

relationship-orientated managers are better suited to

working in informal situations whereas a formal approach

requires a task-orientated manager.

Organisation

structure

Organisational structure can have a direct and significant

impact on employee relations, making contingency theory

highly relevant in modern day business. No single

organisational structure is inherently better than another.

For example, a flatter organisational structure with less

supervision is likely to enhance an organisation’s

relationship with employees in highly creative roles

whereas a taller, hierarchical structure is often suited to

large organisations as it gives greater control.

Many modern multinationals use a combination of

structures, eg RBS keeps functions such as finance and

HR centralised while allowing managers in different

businesses in the corporate market and retail market

divisions to respond to the characteristics of the markets in

which they operate.

Staff skill

Inexperienced or new workers may require a more directed

approach than experienced ones.

A bureaucratic (mechanistic) structure where roles and

expectations are clearly spelled out will be more

appropriate than an organic one where individuals are

given freedom of action to respond to different

circumstances.



MANAGEMENT THEORY

Nature of the

work

Manufacturing firms and factory work will be suited to

elements from scientific management and using classical

approaches to planning workflow, where tasks are routine

and repetitive and productivity is the driving factor.

Service sector firms may use a more decentralised

approach to work planning, empowering employees or

using autonomous teams. Delegated decision-making is

useful in work where there is direct contact with customers

as it gives flexibility to deal with non-routine situations.

Organisations which combine production and service may

need to adopt different approaches in each area, eg a

restaurant might have a kitchen where everyone does

what they are told to by the head chef but are allowed

flexibility to welcome diners and respond to customers’

requests for specific seating as they see fit.

External

environment

Economic conditions, such as a recession, may result in

downsizing or cost cutting, which impacts on the structure

of the firm as fewer layers of management may be used.

The increase of global online competition from the rise of

e-commerce sales in retailing means firms need to develop

flexible structures that can respond rapidly to changing

market demands.

Mechanistic structures may still be appropriate to firms in

slow-growing markets with little competition, although

privatisation of most state-owned monopolies in the UK

over recent years means there are very few such markets

left.



MANAGEMENT THEORY

Case study 1: Management theory

Are there too many managers?

There are five million managers in the UK today, ten times as many as there

were 100 years ago. Even if you don't actually manage anyone, your title

pretends you do: a conductor is a train manager, an administrator is an office

manager, a technician is an IT manager and so on. We've all become

obsessed with management despite being able to get through the industrial

revolution without any ‘masters of business administration’ at all.

In the UK, we mostly distrust our managers, sometimes with good cause. We

are suspicious of them not just because we don't know what they do – we fear

they don't know either. By the end of the 19th century an engineer from

Philadelphia came along with a very clear idea of what management was all

about – efficiency.

Frederick Taylor was the world's first management consultant and his fad

became known as scientific management. He believed that for any given

process, there was one best way to do it. The average worker, he thought,

was pretty dim and hopeless so the answer was a rigid system with a

manager in charge of making it happen.

‘It is only through enforced standardisation of methods, enforced adoption of

the best implements and working conditions, and enforced co-operation that

this faster work can be assured’, he said.

‘And the duty of enforcing the adoption of standards and enforcing this co-

operation rests with management alone.’

Taylor's beloved time-and-motion studies were initially used in factories, but it

wasn't long before they reached the office. In the UK, however, scientific

management was never taken up with much enthusiasm, which was mainly

because, at least until the second half of the 20th century, British managers

were pretty much amateurs.

After World War II most of the major firms were run not by people who had the

first clue about business but by generals. There was one apiece at British

Railways, British Airways, at Vickers and even at the BBC. They believed in

one thing only – hierarchy. These managers didn't think they had anything to

learn, which was partly why the first proper business school in the UK didn't

open until 1965, more than a century behind the USA and Europe.



MANAGEMENT THEORY

With the growth of corporations in the first half of the 20th century, the march

of management wasn't to be stopped and with so many more managers, some

of them need to be managed themselves – hence the middle manager. Being

effective in this new role required a whole new set of skills.

According to the American sociologist C. Wright Mills, a successful manager

had to ‘…speak like the quiet competent man of affairs and never personally

say no. Hire the no-man as well as the yes-man. Be the tolerant maybe-man

and they will cluster around you filled with hopefulness. And never let your

brains show.’

Excellent advice all round. The maybe-man still fares pretty well in offices

some 60 years later, although brains have possibly staged something of a

come back.

But back then there was no talk of diversity, let alone authenticity. It was all

about conformity and hard work. Today, however, the executive must appear

to enjoy listening sympathetically to subordinates and team-playing around the

conference table.

As for work–life balance, there wasn't any back then. A sales manager could

be heard saying: ‘I sort of look forward to the day my kids are grown up. Then I

won't have to have such a guilty conscience about neglecting them.’ These

days, however, modern managers can supervise workloads whilst making a

hot chocolate in their pyjamas at home with the use of audio-conferencing and

the increase of ICT, such is the evolution of management.

Adapted from: bbc.co.uk/news

You should note that although the following questions are based on the case

study above, you will need to make use of knowledge and understanding you

have gained whilst studying the course.

Marks

1 With reference to scientific management, discuss the relevance of

financial incentives in modern day. 6

2 Describe the ways a manager could use Maslow’s hierarchy of needs to

improve the productivity of employees. 6

3 Examine the use of contingency management theory in modern

practice. 8

Total 20

LEADERSHIP



Leadership

‘A leader is best when people barely know he exists, when his work is done,

his aim fulfilled, they will say: we did it ourselves.’

Lao Tzu

Leadership is the ability to influence the thoughts and behaviour of others. In

the case of the business environment, this is to achieve organisational goals.

Leadership is a necessity in today’s organisations, in order to lead them

through changing circumstances such as competition, legislation etc. It is a

key element of any manager’s job.

Managers and leaders

The terms ‘management’ and ‘leadership’ are often used interchangeably.

Often today the ‘term leader’ replaces ‘manager’, which historically was the

norm.

LEADERSHIP



Nevertheless the work of leaders and managers may be complementary. It

could be argued that managers must carry out Fayol’s functions but must also

deal with change. Similarly, leaders manage an organisation through periods

of change but may also have to make plans and control events to ensure that

the new situation functions in the way that is intended.

Leadership theories

Many leadership theories try to explain why some people are more successful

than others in getting others to follow them. These include the following:

Dr John Paul Kotter

American professor and author specialising in the

study of corporate leadership.

He argues that good management is bringing

order and consistency to key dimensions such as

the quality and profitability of products, while

leadership is about coping with change.

In Fayol’s terms, managers are involved in

planning, organising, controlling etc whereas

leaders are involved in setting direction and

aligning people to achieve goals.

LEADERSHIP



Trait theory

The first theories of leadership can be described as trait theory. This approach

states that the ability to lead a group of people is something you are born with,

not something that you learn, therefore people should be selected as leaders

rather than trained.

Trait theory suggests that leadership is unique to only a select number of

individuals and that these individuals possess certain immutable traits that

cannot be developed. Traits are personal characteristics that leaders may

have, for example:

It has even been said that people’s physical appearance, dress code and

stature can affect their ability to lead.

Most of the early work on the trait approach investigated the difference

between leaders and followers to ascertain any discrepancies in personality

and physicality. Many early theorists would argue that regardless of the

situation, there is a set of traits which would result in a successful leader.

LEADERSHIP



Trait theory is criticised on a number of fronts:

These criticisms led to the development of a different approach, called style

theory.

LEADERSHIP



Style theory

Style theories highlight what successful leaders do rather than what they are.

The underlying principle behind this approach is that, if leaders behave in a

certain way, they will be successful.

Most style theories argue that leaders have two main issues to tackle:

There are many possible leadership styles. One way to think of them is to see

them as a spectrum with total task orientation at one end and complete people

orientation at the other. Between these two extremes, a number of

combinations of task and people orientation are possible.

LEADERSHIP



Autocratic/authoritarian leadership

Autocratic leaders define the tasks that have to be carried out, state who is to

carry out the tasks and ensure that tasks are closely supervised. Comment or

discussion from employees is not encouraged. This style is at the task

orientation end of the spectrum, often associated with McGregor’s Theory X

approach.

Leader has absolute authority.

Leader has no consultation with subordinates on decisions.

Leader discourages upward communication.

Leader does not trust employees.

Leader motivates through threat and punishment.

Leader dictates to employees on which task and how to do it.

Leader expects subordinates to obey orders without receiving any

explanation.

Often viewed as controlling, bossy and tyrannical.

Advantages

Decision-making is normally quick,

with management at the centre.

Tasks and relationships are clearly

defined, which avoids confusion.

Employees receive direct

assistance towards achieving their

goals.

Effective supervision can be

provided through detailed orders

and instructions.

May reduce stress as work orders

are clearly set out.

Inexperienced staff may be more

motivated by an experienced

leader.

Disadvantages

Lack of input from employees

means their experience or skills

are not utilised – creativity and

initiative are suppressed.

Encourages a blame culture and

resistance to management

decisions.

Employees cannot develop to their

full potential.

Dependency on the leader – if

they are absent, productivity

lowers.

A high level of supervision is

required – lack of trust prevalent.

Motivation is likely to be poor.

LEADERSHIP



Democratic/participative leadership

Democratic leaders set objectives but leave employees to achieve these in a

manner that suits them. A democratic approach involves much communication

between the leader and the group, with employees participating in the leader’s

decisions. This style falls at the people orientation end of the spectrum, often

associated with McGregor’s Theory Y approach.

Leader shares problem-solving responsibilities by setting up teams.

Employees are involved in decision-making but the leader has ultimate

responsibility.

Leader makes decisions but takes time to explain why (persuasive style).

Leader discusses before making a decision (consultative style).

Leader relies on the specialised knowledge of the team members.

Leader encourages upward communication through quality circles.

Leader offers guidance to team members but also participates in the group.

Leader recognises and encourages achievement.

Advantages

Group members feel engaged in

the process and are more

motivated.

Utilises employees’ knowledge and

experience in achieving objectives,

which can make the firm more

competitive.

Ensures reasonable targets are set

as employees are involved in

setting them, which can improve

productivity and make them less

resistant to change.

Increases employees’ job

satisfaction by providing greater

responsibilities/empowerment.

Prepares employees for promotion

opportunities by expanding their

role and responsibilities.

May require less supervision if

employees are self-controlled and

take pride in their work.

Disadvantages

Problematic when there is a wide

range of opinions and there is no

clear way of reaching an equitable

final decision.

Employees may be unable to work

without close supervision.

Encouraging employees’

involvement in minor operational

issues but not major decisions may

lead to dissatisfaction.

Due to discussion the decision-

making process could be lengthy.

Some employees will not be

interested in helping to make

decisions and could feel pressured,

leading to increased stress.

Requires an effective leader to

communicate and coordinate

autonomous teams to avoid conflict

within the firm.

LEADERSHIP



Laissez-faire (free rein)/delegative

Laissez-faire is a French term that means leave it be. This type of leadership

style allows employees to carry out activities freely within broad limits. For this

style to work there has to be good team work and good interpersonal relations.

Employees need to be competent to handle free-rein responsibility and allowed

the autonomy to make decisions independently.

Leader does not interfere in group activities.

Leader delegates authority and power to employees, giving them a high

degree of freedom.

Leader provides little or no direction for the team.

The team is largely self-governing.

The team may be expected to set own goals, resolve their own problems

and make their own decisions without consulting senior management.

Ironically requires a highly competent leader to set up teams initially, select

the best employees for the tasks and maintain motivation throughout.

Advantages

Employees feel trusted,

respected and empowered,

increasing their commitment and

collaboration, resulting in high-

quality performance.

Reduces the need for

supervision, which can reduce

costs for the firm in managerial

wages.

Managers delegate control and

can focus on quality assurance

and feel less stressed and

pressured.

Employees feel liberated to be

more creative and can rapidly

develop their skillset.

Disadvantages

Can lead to poorly defined roles,

which results in confusion and time-

wasting.

Employees may feel pressure from

being given free rein and this can

lead to stress and demotivation.

Poor quality of work can occur

without being identified if employees

are not sufficiently qualified or

informed.

Competent employees may demand

higher wages from being effective in

an empowered position, or leave for

a promotion from a competing

organisation.

LEADERSHIP



Style Appropriate in the following situations

Autocratic/

authoritarian

leadership

Where work is repetitive and boring.

In a crisis or a situation of urgency when decisions need to

be taken quickly and a plan of action starts in the short

term.

When there is little time for collaborative working and

discussion.

When clear direction is needed.

When the leader is most knowledgeable.

Staff who are new, untrained or lack confidence, and who

do not know which tasks to perform or which procedures to

follow.

Employees do not respond to any other leadership style.

If a manager’s power is challenged by an employee.

In situations of conflict and confusion.

If the department/area/company was poorly managed

previously.

When there are high-volume production needs on a daily

basis.

Democratic/

participative

leadership

Where the leader wants to keep employees informed about

matters that affect them such as when changes must be

made or problems solved that affect employees or groups

of employees.

Leader wants employees to share in decision-making and

problem-solving duties.

Leader wants to provide opportunities for employees to

develop a high sense of personal growth and job

satisfaction.

When there is a large or complex problem that requires lots

of input to solve.

When the leader wants to encourage team-building and

participation.

When flexibility is required, ie allowing employees to make

decisions when with a client.

When the leader lacks the skills and knowledge, and

requires teams to be accountable for specialist support.

LEADERSHIP



Style Appropriate in the following situations

Laissez-faire (free

rein)/delegative

Employees are highly skilled, experienced, and educated.

Employees are trustworthy and loyal to the firm.

Employees are motivated in making their own decisions.

Employees have pride in their work and the drive to do it

successfully on their own.

Outside experts, such as staff specialists or consultants, are

being used.

Summary

The basis of style theory is that some employees will respond differently to

being led by people with different styles of leadership and that employees

will work harder for managers with particular styles of leadership.

Style theory looks at leaders in terms of the different ways in which they

behave and highlights what successful leaders do rather than what they

are.

Style theory suggests there is one best leadership style for each situation,

which is probably not the case, and a combination of styles are needed.

Managers often use an integration of styles to personalise their approach to

ensure effective working relationships are maintained and the company’s

objectives are being met.

Leadership style is a spectrum ranging from task-orientated autocratic,

where manager’s authority is paramount, to people-orientated laissez-faire,

where subordinates’ freedom is paramount.

LEADERSHIP



Contingency theory

Contingency theory seeks to take many more variables into the equation. It

suggests that the most suitable style of leadership will depend on a wide

range of variables. The underlying assumption is that a style of leadership that

works in one set of circumstances will not necessarily work in another, so the

best leader is not one with certain traits or a single style, but one who is able

to adopt different styles in different situations.

There are several versions of contingency theory:

LEADERSHIP



Fiedler contingency model

Fred E. Fiedler was an American researcher in

industrial psychology.

He tried to determine the most appropriate

leadership style when dealing with certain

situations or groups at work based on changing

factors (contingencies).

Fiedler identified three characteristics which determine the nature of

situations so that the most suitable leadership could be adopted.

LEADERSHIP



Fiedler argued that there are two categories of leadership:

Fiedler maintained leaders who are more task orientated are good leaders

in extreme situations, such as:

Leaders who are more relationship orientated are good leaders in situations

where there is average trust with subordinates, structured work and high

power.

LEADERSHIP



Fiedler found that it was difficult for people to change leadership styles. An

autocrat will always lead in an autocratic style whereas a leader who

encourages involvement will tend to be democratic. Fiedler’s contingency

model therefore suggests that improving effectiveness can often require a

change in the workplace, culture and environment to fit the leader. This

process is called job engineering or job restructuring.

Organisations need to ensure a ‘leadership fit’ by matching task-oriented

managers to situations requiring a formal approach to organisation and

relationship-oriented managers to more fluid ones.

LEADERSHIP


The ‘best fit’ approach

Charles Handy was an Irish author and

philosopher specialising in organisational

behaviour.

He suggested that any leader must take four

factors into consideration before an appropriate

and effective leadership style can be determined.

This approach suggests that there is no perfect style of leadership applicable

to all situations, so a leader must achieve the ‘best fit’.

For example, if a leader has a fairly structured style, works with a group that

likes to be dealt with fairly democratically, works on a loosely defined task,

then for ‘best fit’ there has to be some movement in attitude by at least one if

not all of the three elements involved, given the environment in which this is

carried out.


LEADERSHIP



Hersey and Blanchard’s situation

approach

Paul Hersey was an American

behavioural scientist and entrepreneur,

who, together with Kenneth H.

Blanchard, an American author and

management expert, engineered

situational leadership.

The situation approach argues that leadership behaviour should differ

depending on the situation and also the maturity of the employees. Here

maturity refers to the employee’s work experience, ability level and their

willingness to accept responsibility.

Maturity is defined in two separate ways:

For example, a new employee would relate more to a directive/autocratic

leadership style, moving to participative as they settle in the job and

eventually to laissez-faire as the employee works independently and without

close supervision. This approach is suitable not just for leading individuals

but also for teams, eg a new team that would need to be led in the initial

stages (during forming and storming).


LEADERSHIP

Hersey and Blanchard defined four styles of leadership that would be applicable depending on the situation and maturity:

Hersey and Blanchard’s approach has been criticised as the concept of maturity is more wide-ranging than they suggested, for example

employees can be very competent in their job yet lack self-confidence or indeed be very assertive but not very productive.




LEADERSHIP

John Adair: Action-centred leadership

John E. Adair is a British author who

specialises in business and military leadership.

He argues that in any situation where a group

of people are trying to achieve some goal, one

or more of those people will emerge and act as

a leader to the others.

He describes the role of a leader as involving three interlinking

responsibilities that must all be satisfied. These circles overlap because:

the task can only be actioned by the team and not by an individual

the team can only achieve task performance if all the individuals are fully

developed

the individuals need the task to be challenged and motivated.

He emphasises the importance of distinguishing between the individual and

the group because there will never be a perfect match between individual,

group and task. This too is a contingency theory since Adair argues that

leaders alter the mix of effort devoted to satisfying various needs according to

the requirements of the overall situation.

LEADERSHIP



Adair’s eight functions of leadership

Defining the task

Setting clear objectives as in SMART goals

Providing direction and vision

Avoiding confusion

Planning

Looking at alternative ways to achieve the

task

Having contingency plans in case of

problems

Use of planning aids and brainstorming

Briefing

Creating the right team climate, fostering

synergy and making the most of each

individual through knowing them well

Regular meetings and use of the ‘grapevine’

Controlling

Being efficient in terms of getting maximum

results from minimum resources

Regular supervision and quality checks

Use of appropriate and effective delegation

Evaluating

Assessing consequences and identifying how

to improve performance

Reviewing individual and team performance

Use of staff appraisal and peer appraisal

Motivating

Setting realistic challenging targets

Providing fair rewards and bonuses

Giving recognition and praise

Organising

Organising self and others through good time

management, personal development and

delegation

Use of time and task management

techniques

Setting an example

The recognition that people observe their

leaders and copy what they do

Establishing trust and respect from

subordinates

Being prepared to make sacrifices as the

leader

LEADERSHIP



Six dimensions of leadership

Andrew Brown lectures at Cambridge

University's business school and has

published one of the most recent contingency

theories of leadership.

He claims that there are six (roles) dimensions

of leadership which all leaders use depending

upon the circumstances they find themselves

in.

LEADERSHIP



Factors which influence leadership

LEADERSHIP



Factor Influence

Time available

Less time means less discussion − a more

autocratic style may be appropriate in this case.

Respect and trust

More respect and trust (high maturity)

established with subordinates allows for a

democratic/free rein leadership style.

Information available

If employees do not have information or an

understanding then autocratic leadership is

suited to guide them.

Skills of staff

Highly competent staff will allow democratic

leadership and can be given free reign as there is

less need for supervision by management.

Internal conflicts

A more direct/dictatorial input will be needed if

there is internal strife between staff.

Nature of task

Complicated tasks require more direction.

Unstructured work could allow for all staff to be

involved using an approach of delegation. A

creative task needs ideas and imagination and

autocratic leadership may stifle this.

Leader’s personality

Leaders may naturally lead in one style because

of their personality traits, eg an assertive nature

lends itself to an autocratic style of leadership.

LEADERSHIP



Group/worker’s

personality

Some individuals prefer to be spoon-fed

instructions. Others prefer free rein to be creative.

Some may rebel against involvement in

decisions.

Group size

Democratic leadership style can lead to

confusion in a bigger group.

Organisation culture

The atmosphere in an organisation can persuade

managers to use specific styles. Some will be

informally more acceptable than others.

Traditional organisations with tall hierarchical

structures will likely use an autocratic style.

Financial constraints

Tight budgets could lead to autocratic styles in

order to control spending and regulate

expenditure decisions.

LEADERSHIP



Qualities of a leader

Quality Description

Honesty and

integrity

Leaders must display sincerity and truthfulness in their

actions. Deceptive and back-handed behaviour will not

inspire trust. These qualities will mean that employees

are more likely to trust what the leader says.

Risk taking

Ability to calculate the reward against the loss and

implement difficult decisions.

Administration

and organisation

Ability to manage resources and paperwork to ensure

the business runs smoothly. Deadlines should not be

missed and information should be filed appropriately.

These qualities save time and improve efficiency.

Fairness

Good leadership will value everyone equally. Lack of

fairness in giving rewards and penalties will break trust

and employees will dislike the leader. Inability to display

fairness can result in grievances, disputes and even

legal consequences.

Warmth and

caring

A good leader will have a warm character and a

genuine concern for others. They will be approachable

people. This will mean employees will value the leader

more and be able to work with them better.

Communication

and charisma

Must be able to communicate the strategic objectives of

the organisation, inform subordinates, explain tasks to

be completed and present information to investors or

persuade lenders to offer credit etc. Charisma can

avoid conflict and persuade employees to embrace

change.

LEADERSHIP



Toughness and

assertive

Good leaders will have a character that pushes people

positively. They will not be feeble or a ‘walk over’. If

they are such people they will not be able to lead

others; employees will be leading them.

Confidence and

self-reliance

Good leaders must have a character that employees

have confidence in. If they are weak or shy people,

employees will not have faith in their ability and will not

be committed to the leader’s decisions.

Clear vision and

innovation

Ability to clearly define targets and to look long-term at

the implications of the changing business environment.

Leaders need to be able to identify gaps in the market

and identify suitable business opportunities.

Negotiation

Needed to resolve disputes and conflict with

compromise and haste. Required for dealing with

external stakeholders, such as a supplier to discuss the

price of raw materials or trades unions to review

employee conditions and pay.

LEADERSHIP



Summary

A contingency approach believes that leadership effectiveness is based on

a combination of the leader’s personal characteristics, the nature of the

situation, the work, the organisation, the subordinates and the external

environment.

A leader’s style would be either relationship-motivated (people orientated)

or work-motivated (task orientated) based on the contingencies.

Leaders cannot easily change their personality therefore the type of leader

should be matched with the correct type of situation for leadership to be

effective.

– Fiedler argues that it is easier to change someone’s role of power, or to

modify the job they have to do, than to change his leadership style.

– The nature of the situation depends on the leader–member relationship,

task structure and position power.

– A forced change in the situation – culture, workplace and environment –

is called job engineering and is used to alter the situation to suit a

particular type of leader who is already appointed within the firm.

Different leadership styles may also be effective depending on the situation.

The best leader is one who is able to adopt different styles in different

situations.

– Contingency theory assumes that just because one style of leadership

works in one set of circumstances it will not necessarily work in another.

Handy suggests that there is no such thing as the ‘right’ style of leadership,

but that leadership will be most effective when the requirements of the

leader, the subordinates and the task fit together.

LEADERSHIP



Advantages of effective leadership

Disadvantages of poor leadership

LEADERSHIP



Case study 2: Leadership

Learning from the six dimensions of leadership

Being a consistently successful leader requires

excellence in most, if not all, of the six dimensions of

leadership.

Heroes like Walt Disney and Henry Ford are devoted

to their organisations and inspire others. They achieve

against all odds and become icons to be revered. The

best leaders are skilled actors – people like Richard

Branson who recognise the need to deliver authentic

leadership performances that convince others of their

right to command. Margaret Thatcher is a good

example of the self-confident immortalist: people who have high self-esteem

which has propelled them to achieve at the highest level. World historical

figures, such as Napoleon, were talented power-brokers who knew that to

accomplish their goals they needed to mobilise their followers. They have an

impressive ability to choose appropriate subordinates through whom they can

most easily exercise their power. The most able leaders are diplomatic

ambassadors, people such as Chung Ju Yung, founder of Hyundai. They use

their interpersonal abilities to build coherent organisations and develop

networks of external supporters. Finally, impressive leaders are willing to cast

themselves as victims when required.

To be fully effective, leaders need to be adept in all these dimensions of

leadership. To be successful in the long term, leaders need self-insight and

intuitive skills to modify their behaviour to fit changing circumstances.

Adapted from: Brown, A. (1999), The Six Dimensions of Leadership, Random

House Business Books.

LEADERSHIP



You should note that although the following questions are based on the case

study above, you will need to make use of knowledge and understanding you

have gained whilst studying the course.

Marks

1. Discuss the factors that influence the leadership style chosen. 8

2. Describe the characteristics of effective leadership. 6

3. Using Fiedler’s leadership theory, explain how the organisation can

ensure leadership is effective.

6

course: business management · contributions from henri fayol and henry mintzberg. henri fayol the...

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