CHAPTER 3

ORGANIZATIONAL DESIGN AND LEADERSHIP

1. Concept of Organization Design:

Organizational Design is the process of aligning the structure of an organization with its
objectives, with the ultimate aim of improving efficiency and effectiveness. Work can be triggered
by the need to improve service delivery or specific business processes, or as a result of a new
mandate.

Organizational Design is a process of developing and changing the organization’s structure by its
managers. It is a chart containing the reporting structure i.e. who reports to whom.

Organizational structure is thus a framework on which an organization is patterned for

coordinating and carrying out organizational tasks.

Organizational design involves decisions about the following six elements:

a. Work Specialization:

Work specialization describes to which the overall task of the organization is broken down
and divided into smaller component parts.

For example, one person would paint a wall and another person fixes a door. So by breaking
jobs up into small tasks, it could be performed over and over every 10 seconds while using
employees who had relatively limited skills.

The main thought of this process is that the entire job is not done by an individual and it is
broken down into steps, and a different person completes each step. The work will be done
efficiently and effectively. It saves time and also the employee skills of performing his job
successfully increase through repetition.

It also has some disadvantages as well. When specialization is overdone, jobs can become
more simplified. And when employees do one single task, they become bored and tired.
Also, the scope of the employee’s growth will be limited. Specialization in one task is good
but by getting the training for all other tasks too, is better to cop up with other activities in the
company.
b. Departmentalization:

Once jobs have been specified through work specialization process, now they will be grouped
in common tasks. There will be formed departments with common activities for effective
coordination of effort.

There are five common forms of departmentalization:

∙ Functional Departmentalization:

It is the most common forms of departmentalization in which similar tasks grouped together
into a common department, such as marketing, finance, human resources, etc .

The efficiencies from putting together similar specialties and people with common skills and
knowledge could be beneficial and also the coordination with functional areas will be
stronger. But cross-department coordination can be difficult and there will be limited views of
organizational goals.

∙ Product Departmentalization:

It is grouped on the basis of product line. Each manager will be responsible for an area within
the organization depending on his/her specialization.

As managers are specialized in that particular area, it will give a broader experience and it
will be easier for him to access the work-unit performance. The decision making here will be
quite faster than the functional departmentalization. On the other side, the duplication of
functions could increase the cost. It will be difficult to coordinate across departments and
also there will be limited views of organizational goals.
∙
Geographical Departmentalization:

Big organizations find beneficial in organizing this form of departmentalization so that all
activities performed in a region are managed together. It forms sections by the different
regions.

It will be more effective and efficient for the managers in handling specific regional issues that
arise. It could response and serve better to the demand of different markets. But there could
be duplication of functions and resources which will increase cost.
 ∙ Matrix Departmentalization:

It is a structure where two or more forms of departmentalization are used together; most
common forms combine functional and product in which employee reports two bosses, i.e.
the functional as well as the product. It will increase cross-functional interactions.

It will be beneficial to manage effectively and efficiently large and complex tasks. It will
require high levels of management skills and high levels of coordination as well. It will also
increase the level of conflicts.

∙ Customer Departmentalization:

This form of departmentalization groups organization’s activities according to its customers.

An organization finds it beneficial to organize according to the types of customers it serves .

It will be helpful to focus and meet the customers’ needs. But again there will be duplication
of resources and they may find difficulties to achieve coordination across departments.

c. Chain of Command:

Another element in an organizational design is defined an order which authority and power in
an organization is used and delegated from top management to the lower management. It
also ensures clear assignment of duties and responsibilities of every employee at every
level.
d. Span of Control:

The span of control in an organization is defined as the number of employees reporting

directly to one supervisor/manager. It is said, the wider the span, the more efficient the
organization. It determines the number of employees that a manager can effectively and
efficiently manage.

e. Centralization Vs Decentralization:

Decentralization can be defined as “the spread of power away from the centre to local
branches or governments.”
The environment is stable in centralization and complex, uncertain in decentralization. Also,
the lower-level managers are not as capable or experienced at making decisions as upper-
level managers in centralization and on the other side in decentralization, they are very
capable and experienced at making decisions. In centralization, the company is large and in
decentralization, companies are geographically dispersed.

f. Formalization:

Formalization is the extent to which employee behaviour is guided by rules and procedures.
The organizations with high formalization have strict rules and regulations. The low
formalization organizations have very few written rules and procedures and are less stable.

2. Factors Affecting Organizational Design

Although many things can affect the choice of an appropriate structure for an organization,
the following five factors are the most common: size, life cycle, strategy, environment, and
technology.

a. Organizational size

The larger an organization becomes, the more complicated its structure. When an
organization is small — such as a single retail store, a two‐person consulting firm, or a
restaurant — its structure can be simple.
In reality, if the organization is very small, it may not even have a formal structure. Instead of
following an organizational chart or specified job functions, individuals simply perform tasks
based on their likes, dislikes, ability, and/or need. Rules and guidelines are not prevalent and
may exist only to provide the parameters within which organizational members can make
decisions. Small organizations are very often organic systems.

As an organization grows, however, it becomes increasingly difficult to manage without more

formal work assignments and some delegation of authority. Therefore, large organizations
develop formal structures. Tasks are highly specialized and detailed rules and guidelines
dictate work procedures. Inter-organizational communication flows primarily from superior to
subordinate, and hierarchical relationships serve as the foundation for authority,
responsibility, and control. The type of structure that develops will be one that provides the
organization with the ability to operate effectively. That's one reason larger organizations are
often mechanistic— mechanistic systems are usually designed to maximize specialization
and improve efficiency.
b. Organization life cycle

Organizations, like humans, tend to progress through stages known as a life cycle. Like
humans, most organizations go through the following four stages: birth, youth, midlife, and
maturity. Each stage has characteristics that have implications for the structure of the firm.

∙ Birth: In the birth state, a firm is just beginning. An organization in the birth stage does
not yet have a formal structure. In a young organization, there is not much delegation
of authority. The founder usually “calls the shots.”
∙ Youth: In this phase, the organization is trying to grow. The emphasis in this stage is on
becoming larger. The company shifts its attention from the wishes of the founder to
the wishes of the customer. The organization becomes more organic in structure
during this phase. It is during this phase that the formal structure is designed, and
some delegation of authority occurs.
∙ Midlife: This phase occurs when the organization has achieved a high level of success.
An organization in midlife is larger, with a more complex and increasingly formal
structure. More levels appear in the chain of command, and the founder may have
difficulty remaining in control. As the organization becomes older, it may also become
more mechanistic in structure.
∙ Maturity: Once a firm has reached the maturity phase, it tends to become less
innovative, less interested in expanding, and more interested in maintaining itself in a
stable, secure environment. The emphasis is on improving efficiency and profitability.
However, in an attempt to improve efficiency and profitability, the firm often tends to
become less innovative. Stale products result in sales declines and reduced
profitability. Organizations in this stage are slowly dying. However, maturity is not an
inevitable stage. Firms experiencing the decline of maturity may institute the changes
necessary to revitalize.

Although an organization may proceed sequentially through all four stages, it does not
have to.

c. Strategy

How an organization is going to position itself in the market in terms of its product is
considered its strategy. A company may decide to be always the first on the market
 with the newest and best product (differentiation strategy), or it may decide that it will
produce a product already on the market more efficiently and more cost effectively
(cost‐leadership strategy). Each of these strategies requires a structure that helps the
organization reach its objectives. In other words, the structure must fit the strategy.

Companies that want to be the first on the market with the newest and best product
probably are organic, because organic structures permit organizations to respond
quickly to changes. Companies that elect to produce the same products more
efficiently and effectively will probably be mechanistic.

d. Environment

The environment is the world in which the organization operates, and includes
conditions that influence the organization such as economic, social‐cultural,
legal‐political, technological, and natural environment conditions. Environments are
often described as either stable or dynamic.
∙ In a stable environment, the customers' desires are well understood and probably will
remain consistent for a relatively long time. Examples of organizations that face
relatively stable environments include manufacturers of staple items such as
detergent, cleaning supplies, and paper products.
∙ In a dynamic environment, the customers' desires are continuously changing—the
opposite of a stable environment. This condition is often thought of as turbulent. In
addition, the technology that a company uses while in this environment may need to
be continuously improved and updated. An example of an industry functioning in a
dynamic environment is electronics. Technology changes create competitive
pressures for all electronics industries, because as technology changes, so do the
desires of consumers.

2. Traditional and Contemporary Organizational Designs:

a. Traditional Organizational Structure Elements

If a traditional organizational structure were depicted with a chart, it would look like a
pyramid. At the top of that pyramid are the CEO, president and senior management. In the
middle of the pyramid are middle managers and lower-level managers, and at the broad base
are employees. In this structure, the top level of the chart makes all the major decisions,
which are communicated to mid-level and low-level management. These managers must
then implement the decisions among the rank-and-file workers. Little to no input is required
or solicited from employees, and ultimate authority rests in the hands of those at the top of
the chart.

b. Contemporary Organizational Structure Elements

In a contemporary organizational structure, the rigid top-down model of the traditional

structure is removed in favor of teams that work on projects together. Instead of relying on
senior management to drive the work process, the contemporary organizational design is all
about empowering employees to make decisions and implement changes without needing
the approval of supervisors. In this type of structure, employees are given the requirements,
milestones and productivity goals of major projects, and must determine the most efficient
way
to meet those goals. This structure eliminates the vertical design of a traditional company and
gives employees ownership of the work they perform.

c. Traditional Organizational Structure Advantages and Disadvantages

The primary advantage of a traditional organizational structure is that it keeps decision-

making and authority in the hands of a few people within a business. In doing so it eliminates
confusion among employees about who is in charge and provides a clear message about
what workers are expected to accomplish in the performance of their duties. The top-down
structure can be likened to a machine. Every part has a specialized purpose, and those parts
are coordinated to efficiently create a predictable and consistent result.

The major disadvantage of this structure is that it’s often an authoritarian system that doesn’t
give employees on the bottom-rung input into major decisions. Employees are expected to
carry out orders, and their ideas for better ways to do things are often disregarded.

d. Contemporary Organizational Structure Advantages and Disadvantages

The main advantage of a contemporary organizational design is that employees have the
freedom to implement their own decisions, make changes and take ownership of their work
without interference from middle management and senior management. This freedom can
lead to increased productivity, greater work quality and a significant uptick in employee
satisfaction. Under this structure, employees form stronger bonds, because they must rely on
each other's expertise and talent to accomplish their goals. There is often also a greater level
of communication among workers, because every employee is dependent on the success of
another employee.

The primary disadvantage of a contemporary organizational structure is that the absence of

supervisory authority can lead to disorganization and inefficiency if employees fail to hold
each other accountable for mistakes. Another disadvantage is that because the structure is
no longer top-down or bottom-up, the opportunities for advancement or upward mobility are
limited, since the organization now works as a “flatter” structure in which workers are on an
equal footing.
3. Types of Organizational Structure:

A. Hierarchical organizational structure

The pyramid-shaped organizational chart we referred to earlier is known as a hierarchical org

chart. It’s the most common type of organizational structure—the chain of command goes
from the top (e.g., the CEO or manager) down (e.g., entry-level and low-level employees),
and each employee has a supervisor.

Pros:

 ∙ Better defines levels of authority and responsibility

 ∙ Shows who each person reports to or who to talk to about
specific projects ∙

 Motivates employees with clear career paths and chances for

promotion ∙

 Gives each employee a specialty

 ∙ Creates camaraderie between employees within the same department
Cons:
 ∙ Can slow down innovation or important changes due to increased bureaucracy ∙
 Can cause employees to act in interest of the department instead of the company
as a whole ∙
 Can make lower-level employees feel like they have less ownership and can’t
express their ideas for the company

B. Functional organizational structure

Similar to a hierarchical organizational structure, a functional org structure starts with

positions with the highest levels of responsibility at the top and goes down from there.
Primarily, though, employees are organized according to their specific skills and their
corresponding function in the company. Each separate department is managed
independently.
Pros:

 ∙ Allows employees to focus on their role

 ∙ Encourages specialization
 ∙ Help teams and departments feel self-determined
 ∙ Is easily scalable in any sized company

Cons:

 Can create silos within an organization

 ∙ Hampers interdepartmental communication
 ∙ Obscures processes and strategies for different markets or products in a company

C. Horizontal or flat organizational structure

A horizontal or flat organizational structure fits companies with few levels between upper
management and staff-level employees. Many start-up businesses use a horizontal org
structure before they grow large enough to build out different departments, but some
organizations maintain this structure since it encourages less supervision and more
involvement from all employees.

Pros:

 ∙ Gives employees more responsibility

 ∙ Fosters more open communication
 ∙ Improves coordination and speed of implementing new ideas

Cons:
 ∙ Can create confusion since employees do not have a clear supervisor to report to ∙
 Can produce employees with more generalized skills and knowledge
 ∙ Can be difficult to maintain once the company grows beyond start-up status

D. Divisional organizational structure

In divisional organizational structures, a company’s divisions have control over their own
resources, essentially operating like their own company within the larger organization. Each
division can have its own marketing team, sales team, IT team, etc. This structure works well
for large companies as it empowers the various divisions to make decisions without everyone
having to report to just a few executives.

Depending on your organization’s focus, there are a few variations to consider.

a. Market-based divisional organizational structure

Divisions are separated by market, industry, or customer type. A large consumer

goods company, like Target or Walmart, might separate its durable goods (clothing,
electronics, furniture, etc.) from its food or logistics divisions.

b. Product-based divisional organizational structure

Divisions are separated by product line. For example, a tech company might have a
division dedicated to its cloud offerings, while the rest of the divisions focus on the
different software offerings—e.g., Adobe and its creative suite of Illustrator, Photoshop,
In Design, etc.
 c. Geographic divisional organizational structure

Divisions are separated by region, territories, or districts, offering more effective localization
and logistics. Companies might establish satellite offices across the country or the globe in
order to stay close to their customers.

Pros :

 ∙ Helps large companies stay flexible

 ∙ Allows for a quicker response to industry changes or customer needs
 ∙ Promotes independence, autonomy, and a customized approach

Cons :

 ∙ Can easily lead to duplicate resources

 ∙ Can mean muddled or insufficient communication between the headquarters and
its divisions ∙

 Can result in a company competing with itself

E. Matrix organizational structure:

A matrix organizational chart looks like a grid, and it shows cross-functional teams that form
for special projects. For example, an engineer may regularly belong to the engineering
department (led by an engineering director) but work on a temporary project (led by a
project manager). The matrix org chart accounts for both of these roles and reporting
relationships.

Pros :
 Allows supervisors to easily choose individuals by the needs of a project ∙
 Gives a more dynamic view of the organization
 ∙ Encourages employees to use their skills in various capacities aside from their original

roles

Cons :
  Presents a conflict between department managers and project managers ∙

 Can change more frequently than other organizational chart types

F. Team-based organizational structure:

It’ll come as no surprise that a team-based organizational structure groups employees

according to (what else?) teams—think Scrum teams or tiger teams. A team organizational
structure is meant to disrupt the traditional hierarchy, focusing more on problem-solving,
cooperation, and giving employees more control.

Pros :
 ∙ Increases productivity, performance, and transparency by breaking down silo

mentality ∙

 Promotes a growth mindset

 ∙ Changes the traditional career models by getting people to

move laterally ∙

 Values experience rather than seniority

 ∙ Requires minimal management

 ∙ Fits well with agile companies with Scrum or tiger teams

Cons :
 ∙ Goes against many companies’ natural inclination of a purely hierarchical

structure ∙

 Might make promotional paths less clear for employees.

G. Network organizational structure

These days, few businesses have all their services under one roof, and juggling the
multitudes of vendors, subcontractors, freelancers, offsite locations, and satellite offices can
get confusing. A network organizational structure makes sense of the spread of resources.
It can also describe an internal structure that focuses more on open communication and
relationships rather than hierarchy.

Pros :
 ∙ Visualizes the complex web of onsite and offsite relationships in companies ∙

 Allows companies to be more flexible and agile

 ∙ Give more power to all employees to collaborate, take initiative, and make decisions ∙

 Helps employees and stakeholders understand workflows and processes

Cons :

 ∙ Can quickly become overly complex when dealing with lots of offsite processes ∙

 Can make it more difficult for employees to know who has final say

H. Project-based organizational structure

A project-based organizational structure is an organizational structure in which a company

organizes its organization around specialized teams working on specific projects. In a simple
model, the company takes staff from each department, appoints them, and assigns them to
the project team.

Pros :

 ∙Highly complex product systems.

 Best means of getting the right things done right.
 Preferable for planning, implementing and control of costs projects.
 Diverse interests are consolidated to the above problems.
 Creativity is developed through interaction with various specialists.
 It leads to the development of strong team-work and teams

Cons :

∙ A deliberate conflict is established because of the overlapping of authority delegation.

∙ At the close of the project, there is every likelihood of insecurity of employment. ∙ There
 always lurks and danger of over-specialization in the course of project involvement.
∙ Rotation from project to project reduces employees’ loyalty to the parent
functional department.

I. Virtual Organizational Structure

A virtual organizational structure is an opportunistic alliance of core competencies

distributed among a number of distinct operating entities within a single large
company or
among independent companies. The underlying idea is almost trivially obvious and far from
new.

Pros:

 It saves time, travel expenses and eliminates lack of access to experts.

 Virtual teams can be organized whether or not members are in reasonable

proximity to each other.
 Use of outside experts without incurring expenses for travel, logging
and downtime.
 Dynamic team membership allows people to move from one project to
another.

 Employee can be assigned to multiple, concurrent teams.

 Teams’ communication and work reports are available online to facilitate swift responses
to the demands of the (global) market.
 Employees can accommodate both personal and professional lives.

 Virtual teams allow firms to expand their potential labour markets enabling them
to hire and retain the best people regardless of their physical locations.

Cons :

 The lack of physical interactions with its associated verbal and non-verbal
cues and also the synergies that often accompany face-to-face interaction
  Non-availability of para-verbal and non-verbal cues such as voice, eye
movement, facial expression and body language which help in better
communication.
 Ability to work even if the virtual teams are miles apart and the members have
never or rarely met each other face-to-face.

4. Process of Organizational Development:

Organizational development is a planned, systematic change in the values or operations of

employees to create overall growth in a company or organization. It differs from everyday
operations and workflow
improvements in that it follows a specific protocol that management communicates clearly to
all employees.

The organizational development process is a systematic, research-based series of

steps.

Common implementation steps include the following:

∙ Identifying an area of improvement. Organizational change begins with identifying a need

that aligns with business goals. Companies often know that need right away, but they may
consider a data-driven approach to identify problems through formal surveys and feedback.
This approach allows for a more thorough understanding of the area for improvement.
Companies should ask themselves what they want to change, and why that change is
necessary.
∙ Investigating the problem. Once the area for improvement is identified, companies conduct an
investigation to learn why the problem exists, what the barriers to improvement are, and what
solutions have previously been attempted. This step can also include surveys or focus groups
and individual consultations.
∙ Creating an action plan. The company then creates a plan with allocated resources and
clearly defined employee roles. This plan will include specific support for individuals involved
and identify a measurable goal. During this step, companies should think about how they’ll
communicate changes to staff and manage feedback.
∙ Creating motivation and a vision. Once the company has clearly defined and communicated
a plan, its leaders must motivate their employees to share in a vision. This step involves
 leaders acting as enthusiastic role models while helping employees understand the plan’s
big-picture goals and desired impact.
∙ Implementing. While stability is necessary during implementation, supporting employees
during the transition with mentoring, training, and coaching is equally important. When
thinking about such support, management should consider what new skills employees will
need and what delivery methods will be most effective. Ongoing feedback and
communication can help make the change process easier.
∙ Evaluating initial results. Once the company has implemented a plan, its leaders may create
space for shared reflection, asking themselves and their employees if the change effectively
met the business goals. They’ll also evaluate the change management process and consider
what
could be done differently. This step can’t be overlooked; if the company doesn’t evaluate the
changes, it won’t know whether interventions have been effective.
∙ Adapting or continuing. Depending on the evaluation of the initial results, the company may
choose to adapt its plan. If the results show success, it may continue with the current plan to
keep improving.

Organizational Culture

Organizational culture refers to the shared values, attitudes and practices that characterize an
organization. It’s the personality of your company and plays a large part in your employees’ overall
satisfaction.
Organizational culture — often called company culture — is defined as the shared values, attitudes
and practices that characterize an organization. It’s the personality of your company, and it plays a
large part in your employees’ overall satisfaction.

The four main organizational culture types:-

TYPE 1: CLAN CULTURE

Primary Focus: Mentorship and teamwork.

Motto: “We’re all in this together.”
About Clan Culture: A clan culture is people-focused in the sense that the company feels family-
like. This is a highly collaborative work environment where every individual is valued and
communication is a top priority. Clan culture is often paired with a horizontal structure, which helps to
break down barriers between the C-suite and employees, and it encourages mentorship
opportunities. These companies are action-oriented and embrace change, a testament to their highly
flexible nature.
Benefits: Clan cultures boast high rates of employee engagement, and happy employees make for
happy customers. Because of its highly adaptable environment, there’s a great possibility for market
growth within a clan culture.
Drawbacks: A family-style corporate culture is difficult to maintain as the company grows. Plus, with
a horizontal leadership structure, day-to-day operations can seem cluttered and lacking direction.
Where you’ll find Clan Culture: Clan cultures are often seen in startups and smaller companies.
Young organizations that are just starting out put a heavy emphasis on collaboration and
communication, leadership looks to employees for feedback and ideas and companies
prioritize team-building.
.
TYPE 2: ADHOCRACY CULTURE

Primary Focus: Risk-taking and innovation.

Motto: “Risk it to get the biscuit.”
About Adhocracy Culture: Adhocracy cultures are rooted in innovation and adaptability. These are
the companies that are on the cutting-edge of their industry — they’re looking to develop the next big
thing before anyone else has even started asking the right questions. To do so, they need to take
risks. Adhocracy cultures value individuality in the sense that employees are encouraged to think
creatively and bring their ideas to the table. Because this type of organizational culture falls within the
external focus and differentiation category, new ideas need to be tied to market growth and company
success.
Benefits: An adhocracy culture contributes to high profit margins and notoriety. Employees stay
motivated with the goal of breaking the mold. Plus, with a focus on creativity and new ideas,
professional development opportunities are easy to justify.
Drawbacks: Risk is risk, so there’s always a chance that a new venture won’t pan out and may even
hurt your business. Adhocracy cultures can also foster competition between employees as the
pressure to come up with new ideas mounts.
Where you’ll find Adhocracy Culture: Think of Google or Apple — these are companies that
embody the external focus and risk-taking nature of adhocracy culture. They run on creative energy
and doing what hasn’t been done before. Adhocracy cultures are commonplace within the ever-
changing tech industry where new products are being developed and released on a regular basis.

TYPE 3: MARKET CULTURE

Primary Focus: Competition and growth.

Motto: “We’re in it to win it.”
About Market Culture: Market culture prioritizes profitability. Everything is evaluated with the bottom
line in mind; each position has an objective that aligns with the company’s larger goal, and there are
often several degrees of separation between employees and leadership roles. These are results-
oriented organizations that focus on external success rather than internal satisfaction. A market
culture stresses the importance of meeting quotas, reaching targets and getting results.
Benefits: Companies that boast market cultures are profitable and successful. Because the entire
organization is externally focused, there’s a key objective employees can get behind and work
toward.
Drawbacks: On the other hand, because there’s a number tied to every decision, project and
position within the company, it can be difficult for employees to meaningfully engage with their work
and live out their professional purpose. There is also risk for burnout in this aggressive and fast-
paced environment.
Where you’ll find Market Culture: The goal of a market culture company is to be the best in its
industry. Because of that, these are often larger companies that are already leaders of the pack.
They’re looking to compete and beat out anyone else that may compare.
TYPE 4: HIERARCHY CULTURE

Primary Focus: Structure and stability.

Motto: “Get it done right.”
About Hierarchy Culture: Companies with hierarchy cultures adhere to the traditional corporate
structure. These are companies focused on internal organization by way of a clear chain of command
and multiple management tiers that separate employees and leadership. In addition to a rigid
structure, there’s often a dress code for employees to follow. Hierarchy cultures have a set way of
doing things, which makes them stable and risk-averse.
Benefits: With internal organization as a priority, hierarchy cultures have clear direction. There are
well-defined processes that cater to the company’s main objectives.
Drawbacks: The rigidity of hierarchy cultures leaves little room for creativity, making these
companies relatively slow to adapt to the changing marketplace. The company takes precedence
over the individual, which doesn’t necessarily encourage employee feedback.
Where you’ll find Hierarchy Culture: Hierarchy cultures can be found at both ends of the corporate
spectrum, from old-school organizations to those of the customer service industry, such as fast food
restaurants. These are companies that are hyper-focused on how day-to-day operations are carried
out and aren’t interested in changing things up anytime soon.

6 .Leadership :

What is Leadership

Leadership is a process by which an executive can direct, guide and influence the behavior
and work of others towards accomplishment of specific goals in a given situation. Leadership
is the ability of a manager to induce the subordinates to work with confidence and zeal.

Leadership is the potential to influence behaviour of others. It is also defined as the capacity
to influence a group towards the realization of a goal. Leaders are required to develop future
visions, and to motivate the organizational members to want to achieve the visions.
According to Keith Davis, “Leadership is the ability to persuade others to seek defined
 objectives enthusiastically. It is the human factor which binds a group together and motivates
it towards goals.”

Characteristics of Leadership

1. It is a inter-personal process in which a manager is into influencing and guiding workers

towards attainment of goals.
2. It denotes a few qualities to be present in a person which includes intelligence, maturity
and personality.
3. It is a group process. It involves two or more people interacting with each other.
4. A leader is involved in shaping and moulding the behaviour of the group towards
accomplishment of organizational goals.
5. Leadership is situation bound. There is no best style of leadership. It all depends upon
tackling with the situations.
Leader and Manager
Basis Manager Leader

Origin A person becomes a manager by A person becomes a leader on basis of his

virtue of his position. personal qualities.

Formal Manager has got formal rights in an Rights are not available to a leader.
Rights organization because of his status.

Followers The subordinates are the The group of employees whom the leaders
followers of managers. leads are his followers.

Functions A manager performs all five Leader influences people to work willingly for
functions of management. group objectives.

Necessity A manager is very essential to a A leader is required to create cordial relation

concern. between person working in and for
organization.
Stability It is more stable. Leadership is temporary.

Mutual All managers are leaders. All leaders are not managers.
Relationship

Accountability Manager is accountable for self and Leaders have no well defined accountability.
subordinates behaviour and
performance.

Concern A manager’s concern is organizational A leader’s concern is group goals and

goals. member’s satisfaction.

Followers People follow manager by People follow them on voluntary basis.

virtue of job description.

Role A manager can continue in A leader can maintain his position only through
Continuation office till he performs his day to day wishes of followers.
duties satisfactorily in
congruence with organizational goals.

Sanctions Manager has command over A leader has command over different
allocation & distribution of These sanctions are essentially of
sanctions. informal nature.

Leadership and managership are two synonymous terms” is an incorrect statement.

Leadership doesn’t require any managerial position to act as a leader. On the other hand, a
manager can be a true manager only if he has got the traits of leader in him. By virtue of
his/her position, manager has to provide leadership to his group.

A manager has to perform all five functions to achieve goals, i.e., Planning, Organizing,
Staffing, Directing, and Controlling. Leadership is a part of these functions.

Leadership as a general term is not related to managership. A person can be a leader by

virtue of qualities in him. For example: leader of a club, class, welfare association, social
organization, etc. Therefore, it is true to say that, “All managers are leaders, but all leaders
are not managers.”

A leader is one who influences the behavior and work of others in group efforts towards
achievement of specified goals in a given situation. On the other hand, manager can be a
true manager only if he has got traits of leader in him. Manager at all levels are expected to
be the
leaders of work groups so that subordinates willingly carry instructions and accept their
guidance. A person can be a leader by virtue of all qualities in him.

Different Types of Leadership

1. Democratic Leadership

This is as clear as its name. In democratic leadership, the leaders make or break decisions
democratically, based on their team’s opinion and feedback. Although it is the leader who
makes the final call, every opinion counts. This is easily one of the most effective leadership
styles since it allows employees to have a voice.

2. Autocratic Leadership

This is exactly the opposite of democratic leadership wherein the opinions of employees are
not considered. Leaders with this style expect others to adhere to the decisions they take,
which is not a sustainable approach in the long term.

3. Laissez-faire Leadership

Laissez-fire means “let them do”. This style is the least intrusive and leaders with this
approach ensure that the authority lies with the employees. While this leadership style can
empower, it may also limit development, therefore, must be kept in check.

4. Strategic Leadership

Strategic leadership acts as a bridge between the senior team and the employees. Leaders
adopting this style ensure that both executive interests and working conditions for the team
are stable when a decision is made.

5. Transformational Leadership
This kind of leadership always aims at transforming and improving functions and capabilities.
There may be tasks and schedules assigned and leaders following this style may ask
employees
to push their boundaries constantly. Most growth-minded companies tend to adopt this kind of
a leadership style.

6. Transactional Leadership

This is a very common leadership style today based on the action-and-reward concept. For
instance, an employee or team may receive an incentive or bonus for achieving a target set
by the company.

7. Coach-Style Leadership

This leadership style focuses on larger growth while encouraging individual team members to
focus on their strengths and talent. Though this is similar to strategic and democratic
leadership styles, the focus here is more on the individual.

8. Bureaucratic Leadership

This kind of leadership style goes by the books. Although leaders with this approach do listen
to employees and their opinions, they may negate or reject it, in case they go against the
company’s ethos or policy.