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Date: Monday, 15 April 2024, 5:44 PM

COBMA1-11 (2024)
14.1. Notes [ ± 60 min ]

Learning Outcomes
By the end of this lesson, you should be able to:

Analyse management functions and tasks and the application of these in a business
Analyse the main functional areas of business

Prescribed Reading
Engelbrecht, W. and Van Greunen, C. 2020. Business Management: Back to Basics. Cape
Town: Juta.

ISBN: 9781485130741

Chapter 6: pp. 123-134

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Introduction
Leadership is about leading a group of people or an organisation, or having the ability to do that. In an
organisation, leadership is a process of influencing the behaviour of employees to work toward the
achievement of organisational objectives. It is important to understand the relationship between the leader
and the follower in a specific situation.

Be able to list and describe each component.

A sense of responsibility
Absolute commitment
The have "skin in the game".
Initiative
Competence
Perseverance
An ability to learn.
Highly developed communication skills
An ability to distinguish right from wrong.
Leadership versus management
Managers and leaders differ in motivation, work experience and how they think and act. Managers are
people who do things right, while leaders are people who do the right thing. Managers tend to perform the
traditional management tasks of planning, organising, leading and controlling.

They assume three important managerial roles:

Interpersonal, where they become the symbolic figurehead, liaise with key people and supervise
employees.
Informational, where they monitor and disseminate information and become the spokesperson.
Decision making, where they become the innovator in their unit, the disturbance handler, resource
allocator, and negotiator.

Leaders are significantly different, and their tasks and challenges are to do the following:

Challenge the status quo to bring about change.

Develop the vision of the organisation and set its direction.
Develop strategies for producing changes toward the vision.
Communicate the new direction and get people involved.
Motivate and inspire others.

Leadership and power

Leadership does not exist without power. The influence of a leader over his followers is often referred to as
power. It is the ability of an individual to influence others to bring about the required results or outcomes. A
leader can have two types of power – personal and position power.

Position Power

This is based on the policies and procedures in the organisation. The person receives the power by being
appointed in a certain position in the organisation. Position power has three sources:

Legitimate power is the power that leaders have because their followers believe that their leaders
have a right to instruct them, and is supported by their rules, job descriptions, contracts or plans. The
authority of the leaders can increase depending on the acceptance of this authority.
Coercive power is based on the leaders having control over what happens if followers do not act as
required. This includes the leaders’ authority to punish or recommend punishment. Coercive power is
usually displayed and implemented by reprimanding an employee, issuing a fine or a demotion, or
facilitating a loss of privileges. This kind of power should be used with caution because it can increase
hostility and resentment.
Reward power is created when the leaders reward followers for completing tasks in a certain manner.
It is important that the reward should be in proportion to the task that the followers had to complete.
The leaders have the authority to grant and withhold different kinds of rewards. Formal rewards can be
salary increases or promotions where informal rewards can be things like recognition, praise and
attention.

Personal power
This comes from the characteristics of the leader and there are two types of personal power:

Expert power results when the followers believe the leader has “expert” knowledge or skills that are
relevant to the job or tasks that they have to complete. This can be one or a combination of
knowledge, technical skills and the successful completion of challenging tasks. Quite often it is the
most experienced person in a team or organisation who has this personal power, even if that person is
not a supervisor or manager.
Referent power results when the followers believe the leaders possess qualities that they admire, or
they aspire to have. They identify with those qualities and attempt to follow the leaders’ views and
behaviour. Success in developing and maintaining this power depends on interpersonal skills such as
tact, charm, empathy and humour.

Theories of leadership
This section will briefly highlight and identify a few leadership theories in two categories, historical leadership
and more recent or contemporary leadership. The earlier leadership theories focused on identifying qualities
that could differentiate leaders from followers. More recent theories focused more on factors such as
situational factors and skill levels of leaders.

Great Man Theory

That great leaders are born, not made, is the base of this theory. It suggests that the traits of leadership are
intrinsic. A born leader would naturally have qualities such as enthusiasm, the ability to communicate well,
confidence, determination, and dedication, and have the knowledge to make decisions, deal with setbacks or
failure, and strive towards excellence.

Behavioural Theories
This theory rejected the ‘Great Man’ and Trait theory and believed that leaders can be made or developed.
Behaviourists focused on two classes of leader behaviour, task-oriented behaviour, and relationship-oriented
behaviour. Having a task-oriented behavioural approach means that a person is focused on goal-setting,
completing tasks in an efficient and timely manner. Following a relationship-oriented behavioural approach
means that the person tends to energise workers, build rapport with them, make them feel appreciated, and
focus on group harmony. This theory proposes that people can develop into leaders through observing and
experience.

Contingency Theory
This theory focuses on particular variables or a situation in the environment that may determine the style of
leadership. Success with this style is also dependent on the qualities and skills of the leader and his
evaluation of the situation. No leadership style is best in all situations.

Situational Theory
This theory suggests that no single leadership style is always appropriate or best. Instead, good leaders
respond to the situation they are facing with the style most appropriate at the moment. The most effective
leaders are thus those leaders able to adapt their style to a situation. They are able to do this because they
look for ways to get the job done including what needs to be done, the people and skills available, and the
time frame they have.

Participative Theory
Generally, this leadership theory invites input from employees on all company decisions. The participative
theory has various rules that determine the form and amount of employee participation that will be allowed in
different situations. Three leadership styles are identified as part of this theory.

Autocratic - leadership style characterised by individual control over all decisions and little input from
group members.
Democratic - everyone is given the opportunity to participate, ideas are exchanged freely, and discussion
is encouraged.
Laissez-faire - this is a style where leaders are hands-off and allow group members to make the
decisions. Researchers have found that this style leads to the lowest productivity among group members.

The participative theory encourages leaders to allow employees to participate in decision making so that
team members can feel more valued and be more committed.

Leader-Member Exchange Theory

This leadership theory emphasises the one-on-one relationships between leaders and individual
subordinates. It acknowledges the fact that relationships with all group members vary and relationships of
trust and mutual respect are built with only a few. Usually, these individuals are more involved in important
activities and decisions while some team members in the “out-group” can feel excluded.

Substitute Theory
This theory suggests that the characteristics of the organisation negates the effect of leadership and
becomes a substitute for leadership. Some critics believe that the value of leadership is overrated, and that
leadership is irrelevant in certain situations, e.g. the structure of the organisation in routine and repetitive
tasks can substitute leadership while characteristics of the employees such as experience, skills and
knowledge can be the substitute, i.e. no leadership control would be required.
 Leadership theory Date Major principles Main
proponents

Trait and ‘great man 1930s Individual characteristics of leaders are different Carlyle; Spencer
theories from those of non-leaders.

Behavioural theories 1940s The behaviours of effective leaders are different Ohio State
and from the behaviours of ineffective leaders. Two University;
1950s major classes of leader behaviour are task-
oriented behaviour and relationship-oriented University of
behaviour. Michigan;

Blake and
Mouton;
Tannenbaum and
Schmidt

Contingency, 1960s Factors unique to each situation determine Fiedler;

situational and and whether specific leader characteristics and
participative theories 1970s behaviours will be effective. House;

Vroom and Yetton

Leader-member 1970s Leaders form high-quality relationships with some Graen and Uhl-
exchange subordinates, but not others. The quality of the Bien
leader-subordinates relationship affects numerous
workplace outcomes.

Substitutes for 1970s The characteristics of the organisation, tasks and Kerr and Jermier
leadership subordinates may substitute for or negate the
effects of leadership behaviours. This theory offers
an intuitively appealing explanation why leader
behaviour affects subordinates in situations.

More recent and new leadership theories

Servant leadership 1970s Leadership reflects a philosophy that a leader Greenleaf
serves others rather than others serving the leader.

Authentic leadership 2000s To be successful in leading people and companies, Gardner; Avolio;
leaders need to be vulnerable, honest, and
trustworthy, while not trying to imitate others. Luthans
 Charismatic 1970s Effective leaders inspire subordinates to commit House;
leadership and themselves to goals by communicating a vision,
1980s displaying charismatic behaviour and setting a Conger and

powerful personal example. Canungo;

Yukl;

Bennis

Transformational 1980s Transformational leaders inspire subordinates to Burns;

leadership be high achievers and put the long-term interests
of the organisation ahead of their own short-term Bass;
interests.
Tichy and
Devanna;

Avolio

Table 1: Theories on leadership in organisations

Recent Developments and New Theory on Leadership in

Organisations
Since the 1970s several alternative theoretical frameworks for the study of leadership have been advanced.
The following are examples of the more important ones:

1. Servant leadership

This leadership style is about the leader serving others, rather than followers serving the leader. This style
focuses on fair and correct use of power, on creating a sense of community and joint ownership. The servant
leader has a responsibility towards the society and the disadvantaged followers. This leader displays
characteristics of empathy and commitment to personal, spiritual and professional growth of their followers.

2. Authentic leadership

This style is about guiding others with sincerity and openness. Authentic leaders are dedicated to continued
personal growth and committed to building lasting relationships and strong organizations. They do not blame
others or complain about their situation, but rather treat each experience as a learning opportunity (Kruze,
2017). They show initiative and lead by example and influence people and create a real and lasting change
in the organisation. They set direction and integrity determines the quality of the leader’s impact on the
organisation.

3. Charismatic leadership

Charismatic leaders are driven by their convictions and commitment to their cause. They have several
competencies, for example, they have a powerful vision and can communicate that well to their followers,
they are consistent in their focus to achieve their vision, and they know and use their own strengths.
They communicate their vision and inspire and encourage others to do their best, to get things done or to
improve the way things are done. They create an atmosphere of change and present visionary ideas that
excite, stimulate and drive other people to work hard. They rely on the charm and persuasiveness of the
leader.

4. Transformational leadership

This leadership style indicates that leaders manage to motivate their followers to go beyond what is normally
expected of them. They lead by example and their style uses rapport, inspiration or empathy to engage
followers. They have courage and confidence and are willing to make sacrifices for the greater good.

Transformational leaders are sometimes called quiet leaders. They are the ones that lead by example. Their
style tends to use rapport, inspiration, or empathy to engage followers. They are known to possess courage,
confidence, and the willingness to make sacrifices for the greater good. They understand their followers and
know how to maximise their teams’ capability and capacity (St Thomas University Online, 2018).

Transformational leaders work to build the motivation and engagement of followers by focusing while
developing mutual trust, fostering followers’ leadership abilities and directing their behaviour towards a
shared vision.

Transformational leadership theory differentiates between the transactional and transformational leader.
Transactional leadership focuses on the role and task requirements of supervision and group performance.
Transactional leaders value order and structure. They usually lead in bigger organisations where they can
apply rules and regulation to accomplish certain tasks. They manage people and activities on time and in a
structured way. Transactional leadership is not suitable in an environment where innovation and creativity are
valued. It can work well in situations where crisis situations must be dealt with, and where the focus will be
required to achieve a specific outcome.

The difference between transactional and transformational leadership styles is that transformational
leadership motivates and inspires employees while transactional leadership relies on self-motivated
employees who work well in a structured and directed environment (Small business chron, 2018).
Transactional leaders view the relationship between leaders and workers as an exchange where the leader
will give something for something else in return. If workers perform well, they will be rewarded, and if they do
not perform, they will be punished (Cherry, 2017).

Leadership: The Way Ahead

Everyday leadership is becoming more challenging in part because societies in which businesses operate
have become more diverse. Social, economic and political change is part of the current business
environment and the complications of globalisation, technological development and the quest for
entrepreneurship become more clear. Leaders must be able to manage and guide organisations in these
challenging times and show respect for the individual and human and social relationships. A mix of different
leadership abilities are required, and organisations need to help to develop this new type of leader.
Some Characteristics of Current Leaders
Some characteristics of successful leaders can be identified. Although it is assumed that no individual leader
will necessarily have all these, each will have their own unique combination of these characteristics.

1. Personal qualities

Contemporary leaders should be brave, motivated, energetic, resilient and humble. They must be able to
handle personal challenges and manage the balance between social or family life and corporate life.

2. Personal philosophy

If leaders have some of the above-mentioned personal qualities, it is assumed that the leaders will pursue
clear morals and values and should not consider any unethical behaviour. Followers must be able to know
what their leaders believe and stand for.

3. Management capabilities

Leaders must be motivated, productive, creative, independent and strategic. They must realise that the job is
the responsibility of a team or network of people and that cooperation is required. The leaders must create
social networks and teams while maintaining the strategic focus and working together towards achieving the
goals of the organisation.

4. Working with colleagues and other employees

Both employees and colleagues must experience that their leaders are creating an enabling environment for
learning and development. They must address social issues such as paternalism, sexism and unequal
gender relations, which have disadvantaged many women in subordinate and leadership positions. Leaders
must understand the changing business environment to be able to seize opportunities for the business.

5. Relationship skills

The role of emotional intelligence has become more important over the past few years. Emotional
intelligence (EQ) refers to your ability to use your emotions in a positive and constructive way in relationships
with others. Understanding people in the organisation is the most important part of leadership and
management. Employees need to be empowered to find solutions and to take decisions in the organisation.
Good communication plays a major role in relationship building.

6. Ability to plan, organise and create a vision

Good leaders will not be satisfied with the status quo. They will therefore not only fulfil the roles of a
manager, but they will participate in creating the vision and mission of the organisation. They will plan,
organise and control, but most importantly, they will be motivating and inspiring employees to work together
towards excellence and achieving the vision of the organisation.

7. Making decisions formulating strategy

In the changing business environment, it is important to be able to take decisions, know how to respond and
take advantage of opportunities, and how to make adjustments to minimise threats in pursuit of the
organisation’s goals.

8. Motivating employees
Leaders must be able to understand what motivates employees. They must know how to inspire employees
to take ownership of their responsibilities to work towards the overall vision of the organisation

9. Communicating like a leader

Interpersonal communication and relationship building are very important to facilitate improved productivity
and efficiency. Creating a cooperative work environment and providing feedback to employees is crucial.

10. Balancing skills

Interpersonal skills refer to your people skills. They represent your personal attributes, personality traits, and
communication abilities. You must develop these people skills. Technical skills are vital for your ability to get
the job done and can easily be learned with time and effort. The challenge is to balance these two sets of
skills to get the best out of your employees and at the same time also achieve the best interest of the
organisation

12. Developing emotional intelligence

Emotional intelligence is about understanding yourself and others. It can be developed through coaching and
training. Leaders must develop their self-awareness, self-management, social awareness and relationship
management. That will help them to better relate to others and the workplace and will assist in making them
more successful.

1. Optimism
2. Self-confidence
3. Honesty
4. Integrity
5. Drive

1. Abuse of power
2. Arrogance
3. Betrayal of trust
4. Being too ambitious and selfish
5. Incompetence
6. Inability to delegate

Leading and Technology

Leaders are not expected to know about every new type of technology, but they must be aware that
technology could be important in achieving competitive advantage. Companies take advantage of technology
to improve productivity and increase profits.

Summary
Managers are people who do things right while leaders are people who do the right thing and both of
them are required in the workplace.
Managers focus on the traditional tasks such as planning, organising, leading and controlling to ensure
that the organisation’s objectives are met. They accept three key roles, i.e. interpersonal, where they act
as the figurehead, liaise with people and supervise employees. They also have an informational role in
informing people, disseminate information and acting as the spokesperson and then they assume the
decision-making role, handling issues, act as a negotiator and allocate resources.
Leaders fulfil a very different role in comparison to managers. They challenge the status quo and help to
bring about change, help develop the vision and set direction, develop strategies to work towards the new
vision, communicate the direction with employees, coach and develop them, motivate and inspire them to
work together to achieve the goals of the organisation.
Power is the ability of an individual or people to influence others and leaders influence employees on the
basis of two types of power, i.e. personal power and position power.
Personal power comes from the characteristics of leaders and position power is based on the policies and
procedures in the organisation that are associated with the specific positions held.
Position power is based on three sources which include coercive power, reward power and legitimate
power.
Coercive power indicates the leaders’ authority to punish or to reprimand or punish, e.g. to issue fines, to
demote someone if they do not perform or to take away privileges.
Reward power is based on leaders’ authority to grant or withhold various kinds of rewards, e.g. praise or
recognition for exceptional performance, etc.
Legitimate power is created by the organisation and is directly related to the position of the leaders in the
formal hierarchy. This power is inherently included by the job description and written rules, contracts and
plans.
Personal power comes with referent power and expert power.
Expert power is based on the possession of knowledge and a level of expertise of the leaders relative to
that of the subordinates. This form of knowledge can include a combination of expert knowledge,
technical skills and success in completing challenging tasks.
Referent power refers to a form of power that is derived from being liked or admired or personally
identified with by others, e.g. employees may admire the leaders and wish to become as powerful and
charismatic like their leaders.
There are various historical theories of leadership and more recent theories of leadership. Organisations
quite often use a combination of the older and more recent theories to apply in their businesses,
depending on their specific situation and needs.
In the challenging and changing business environment, current leaders require very specific
characteristics, such as, specific personal qualities, e.g. ambition, social awareness, resilience, etc.; they
need to understand their own personal values and morals and should display value-driven behaviour to
influence the organisation in a positive manner. They should have management capabilities, strategically
and operationally, being able to work with colleagues and employees, have relationship skills and be
emotionally intelligent and overall, they should be able to create a vision, plan, organise, lead and control
 while developing themselves and their employees so that they can achieve the goals and objectives of
their organisations.

References
Alsemgeest, L., Booysen, K. and Bosch, A. (2017). Introduction to Business Management: Fresh
Perspectives. 2nd ed. Cape Town: Pearson Education Southern Africa.

Cherry, K. (2017). What is transactional leadership? https://www.verywellmind.com/what-is-transactional-

leadership-2795317 [Accessed 11 October 2018].

St Thomas University Online. (2018). What is Transformational Leadership? How New Ideas Produce
Impressive Results. https://online.stu.edu/articles/education/what-is-transformational-leadership.aspx
[Accessed 8 July 2018]