Hello readers and welcome to our Project Management series. Today, we will be discussing the effect of management and leadership styles on organizational performance. Most importantly, we will focus on how leaders can improve organizational performance by using suitable leadership/management style(s) in different situations.

The Concept of Management and Leadership

A management style can be defined as an overall method of leadership used by a manager. It is the manner and approach of providing direction, implementing plans, and motivating people.

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The leadership/management style is a key determinant of the success or failure of any organization. Although there are clear differences between management and leadership, the two constructs overlap. According to Northouse; Management is directed toward activities such as planning, organizing, staffing and controlling in order to get a job done while Leadership is a process whereby an individual influences a group of individuals to achieve a common goal. We would realize that both processes involve influencing a group of individuals toward goal attainment. For the purpose of our discussion here, the terms Leadership, Management, leaders and managers will be used loosely.

Since it is the management’s responsibility to establish the organizational vision, develop the corporate strategy and motivate the employees in achieving the organizational goals, a large part of the success/performance of the organization is dependent on the leadership/management style(s) used by managers.

Scholarly research has shown that leadership/management has a direct cause-and-effect relationship on organizational performance. This brings to mind the popular saying that ‘an organization is only as good as the person running it’. In other words, if a leader/manager employs the best style, the organization will surely record high performance from all its resources and vice versa.

When is an organization performing?

In general, when an organization achieves its intended goals and objectives, it is performing. When an organization is unable to achieve its intended goals and objectives, it is underperforming. There are three specific performance areas in an organization:

  1. Financial performance (profits, return on investments, return on assets, etc.)
  2. Product market performance (sales, market, share, etc.)
  3. Shareholder return (economic value added, total shareholder return, etc.)

Management Styles

Generally, three broad management styles have been acknowledged. They are: Autocratic, Paternalistic, and Democratic styles.

Autocratic managers supervise subordinates very closely. They like to make all the decisions and they are very controlling. This leadership style derives from the work of Taylor on work motivation.

Paternalistic managers act as a father figure to employees. They are very concerned about the social needs of their subordinates. They consult employees over organizational issues and then they make decisions based on the best interests of the employees. This management style is closely linked with Maslow’s social theory.

Democratic managers trust their subordinates and they encourage them to make decisions. Managers who embrace this management style delegate authority to their subordinates and they listen to the advice given by subordinates. This style requires good two-way communication and it suggests that managers are willing to encourage leadership skills in subordinates. The ultimate democratic system occurs when actual decisions are made based on the majority view of all the employees.

All three management styles described above have their advantages and disadvantages. No management style is better than the other but it all depends on the situation they are applied. The extent to which they are successful in each situation is contingent on several factors such as number of employees, their level of education/development, how fast the decision needs to be made, organizational culture, type of organization, etc.

The table below summarizes the advantages and disadvantages of the three management styles.

Description Advantages Disadvantages
Autocratic Senior managers make all the important decisions with no involvement from workers.
  1. Quick decision making
  2. Effective when employing many low skilled workers
  1. No two-way communication, which can be de-motivating
  2. Creates “them and us” attitude between managers and workers
Paternalistic Managers make decisions based on best interests of workers after consultation.
  1. More two-way communication, which is motivating
  2. Workers feel their social needs are being met
  1. Slows down decision making
  2. Still quite a dictatorial or autocratic style of management
Democratic Workers are allowed to make own decisions.Some businesses run on the basis of majority decisions.
  1. Authority is delegated to workers, which is motivating
  2. Useful when complex decisions are required that need specialists’ skills
  1. Mistakes or errors can be made if workers are not skilled or experienced enough

Summary of management styles (Riley, 2012)

Clearly, the question that appears to beg a response now is: How does a manager decipher what style to use in a particular situation?

The Concept of Situational Leadership

As the name implies, situational leadership focuses on leadership in situations. This leadership style is based on the premise that different situations demand different kinds of leadership. From this perspective, for one to be an effective leader, a manager must adapt their style to the demands of different situations.

Situational leadership emphasizes the fact that leadership is composed of directive and supportive dimensions, and that each has to be applied suitably in a given situation. To determine the dimension that is needed in a particular situation, a leader must evaluate their employees and assess how competent and committed they are to perform a given task.

Given that the employees’ skills and motivation vary over time, this model suggests that leaders should change the degree to which they are directive or supportive to meet the changing needs of the employees. Subsequently, leaders who are considered effective are those who can recognize what employees need and then adapt their own style to meet those needs.

Directive behaviors clarify what is to be done, how it is to be done, and who is responsible for doing it. Examples include setting deadlines, defining roles, giving directions and showing how the goals are to be achieved. This is often done with one-way communication.

Supportive behaviors on the other hand involve two-way communication and responses that show social and emotional support to employees. Praising, listening, asking for input and solving problems are examples of supportive behaviors.

According to this model, leadership styles can be classified into four distinct categories of directive and supportive behaviors.

  1. Directing (High directive −Low supportive)
    In this context, a leader focuses communication on goal achievement. The leader gives instructions about what is to be achieved and then supervises the employees carefully.
  2. Coaching (High directive −High supportive)
    Here, a leader focuses communication on achieving goals as well as meeting the socio-emotional needs of the employees. The leader encourages employees and asks for their input. However, the final decision on what is to be done and how it should be done is the sole prerogative of the leader.
  3. Supporting (Low directive – High supportive)
    In this approach, the leader basically uses supportive behaviours such as listening, praising and giving feedback to bring out the employees’ skills to the task to be accomplished. While leaders who use this style give employees control of day-to-day decisions, they are always available to facilitate problem solving.
  4. Delegating (Low directive style – Low supporting)
    In this approach, the leader offers less task input and social support, facilitating employees’ confidence and motivation in reference to the task. This kind of leader gives control to subordinates and refrains from intervening with unnecessary social support.

The situational leadership model is presented below, showing the development levels of employees and the required leadership style.\

Source: Northouse, 2013

Development Levels

The second major part of the situational leadership model focuses on the development levels of subordinates. Development level is the degree to which employees have the competence and commitment necessary to accomplish a given task or activity. In other words, it indicates whether an employee has mastered the skills to do a specific task and whether the employee has developed a positive attitude regarding the task.

Employees with high development levels show keen interest and confidence in their work and the way they implement a task. Employees are at a low development level if they have little skill for the task at hand but they have the motivation or confidence to accomplish the task.

On a particular task, employees can be classified into four categories:

Development Levels Employee Description Leadership style required
D1 Employees are low in competence but high in commitment. Directing (S1)
D2 Employees have some competence but low commitment. Coaching (S2)
D3 Employees have moderate to high competence but may lack commitment. Supporting (S3)
D4 Highest degree of competence and commitment. Delegating (S4)

The situational approach is constructed around the idea that employees move back and forth along the developmental range. This represents the relative competence and commitment of employees. For leaders to be effective, it is essential that they determine where their employees are on the developmental range and then adapt their leadership styles to match the development levels of the employees.\

In order to do this, follow the steps below:

  1. Determine the nature of the situation:
    1. What tasks are to be accomplished by the employees?
    2. How complex is the task?
    3. Are the employees sufficiently skilled to accomplish the task?
    4. Do the employees have the desire to complete the job once they start it?

    Answers obtained from the questions above will help the leader identify the development levels of the employees.

  2. Having identified the correct developmental level, adapt leadership style to the prescribed leadership style represented in the model. For example, employees at D1 require S1 and employees at D2 require S2 leadership style. For each level of development, there is a specific style of leadership that the leader should adopt.

Conclusion

Leaders/managers are very instrumental towards achieving high organizational performance. They do this through their approach to effectively lead and manage employees. Interestingly, the task of managing effectively is contingent on the ability of a manager to adapt their leadership styles to different situations.

Situational leadership reminds leaders to treat each employee differently based on the task at hand and to seek opportunities to help subordinates learn new skills and become more confident in their work. Overall, this approach stresses that employees have unique needs and they deserve the leader’s help in trying to become better at doing their work. The more leaders endeavour to help employees get better at doing their work, the better employees perform at their work and the greater the performance of the organization.

That is all we have for today. Do not forget to leave your questions and comments in the comments section below.

References

http://en.wikipedia.org/wiki/Organizational_performance

Northouse (2013) Leadership: Theory and practice 6th Ed. Sage Publications

Ojokuku, Odetayo and Sajuyigbe (2012) Impact of Leadership Style on Organizational Performance: A case Study of Nigerian Banks. American Journal of Business and Management Vol. 1, No 4, 2012, 202-207

Riley, J. (2012). Management Styles. Available on http://tutor2u.net/business/gcse/people_management_styles.htm