PART 5 Exercising Influence

12
Leadership and Trust
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LEARNING OBJECTIVES

After studying this chapter, you should be able to:

1. Contrast leadership and management.
2. Summarize the conclusions of trait theories of leadership.
3. Identify the central tenets and main limitations of behavioral theories.
4. Assess contingency theories of leadership by their level of support.
5. Contrast charismatic and transformational leadership.
6. Describe the roles of ethics and trust in authentic leadership.
7. Demonstrate the role mentoring plays in our understanding of leadership.
8. Address challenges to the effectiveness of leadership.
9. Describe how organizations can find or create effective leaders.

Chapter Warm-up
If your professor has chosen to assign this, go to www.mymanagementlab.com
to see what you should particularly focus on and to take the Chapter 12 warm up.

In this chapter, we look at what differentiates leaders from nonleaders. First, we’ll pres-
ent trait theories of leadership. Then, we’ll discuss challenges to the meaning and im-
portance of leadership. But before we review these approaches, let’s clarify what we
mean by the term leadership.
213
214 Part 5 • Exercising Influence

WHAT IS LEADERSHIP?
In today’s dynamic We define leadership as the ability to influence a group toward the achievement of a
world, leadership has vision or set of goals. The source of influence may be formal, such as that provided by
the ability to influence managerial rank in an organization. But not all managers are leaders, nor are all leaders
a group toward the
achievement of a
managers. Just because an organization provides its managers with certain formal rights
vision or set of goals. is no assurance they will lead effectively. Leaders can emerge from within a group as well
as by formal appointment. Nonsanctioned leadership—the ability to influence that arises
outside the formal structure of the organization—is often as important or more important
than formal positions of influence.
Organizations need strong leadership and strong management for optimal effective-
ness. We need leaders to challenge the status quo, create visions of the future, and inspire
organizational members to achieve these visions. We need managers to formulate de-
tailed plans, create efficient organizational structures, and oversee day-to-day operations.

WATCH IT
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video titled Leadership (TWZ Role Play) to learn more about this topic and respond
to questions.

TRAIT THEORIES
Throughout history, strong leaders have been described by their traits. Therefore, leader-
ship research has long sought to identify the personality, social, physical, or intellectual
attributes that differentiate leaders from non-leaders. In recent research, the trait theories
of leadership focus on personal qualities and characteristics, some of which have been
shown to be particularly predictive of leadership ability.
The trait approach using the Big Five framework offers insight into the relation-
ship between personality traits and leadership. A comprehensive review of the leadership
literature organized around the Big Five personality framework (see Chapter 5) has found
extraversion to be the most predictive trait of leadership.1 However, extraversion relates
more to the way leaders emerge than to their effectiveness. Sociable and dominant people
are more likely to assert themselves in group situations, which can help extraverts be
identified as leaders, but effective leaders are not domineering. One study found leaders
who scored very high on assertiveness were actually less effective than those who scored
moderately high.2 Unlike agreeableness and emotional stability, conscientiousness and
openness to experience also predict leadership, especially leader effectiveness. In general,
leaders who like being around people and are able to assert themselves (extraverted), who
are disciplined and able to keep commitments they make (conscientious), and who are
creative and flexible (open) do have an apparent advantage when it comes to leadership.
Based on the latest findings, we offer two conclusions. First, we can say that traits
can predict leadership. Second, traits do a better job predicting the emergence of leaders
and the appearance of leadership than distinguishing between effective and ineffective
leaders.3 The fact that an individual exhibits the right traits and that others consider him a
leader does not necessarily mean that he will be an effective leader, successful at getting
the group to achieve its goals.
 Chapter 12 • Leadership and Trust 215

Trait theories help us predict leadership, but they don’t help us explain leadership.
What do successful leaders do that makes them effective? Are there different types of
leader behaviors that are equally effective? Behavioral theories, discussed next, help us
define the parameters of leadership.

BEHAVIORAL THEORIES
Trait research provides a basis for selecting the right people for leadership. But you prob-
ably noticed trait theories don’t adequately explore the way leaders behave. Behavioral
theories of leadership imply that we can determine leadership effectiveness by leader
behavior, and perhaps train people to be leaders.
The most comprehensive behavioral theories in use today resulted from the Ohio
State Studies,4 which sought to identify independent dimensions of leader behavior.
Beginning with more than a thousand behaviors, the studies narrowed the list to two
dimensions that substantially accounted for most of the effective leadership behavior
described by employees: initiating structure and consideration.
Initiating structure is the extent to which a leader is likely to define and construct
her role and those of employees in the search for goal attainment. It includes behavior
that attempts to organize work, work relationships, and goals. A leader high in initiat-
ing structure is someone task-oriented who “assigns group members to particular tasks,”
“expects workers to maintain definite standards of performance,” and “emphasizes the
meeting of deadlines.”
Consideration is the extent to which a person’s job relationships are characterized
by mutual trust, respect for employees’ ideas, and regard for their feelings. A leader high
in consideration helps employees with personal problems, is friendly and approachable,
treats all employees as equals, and expresses appreciation and support (people-oriented).
Most of us want to work for considerate leaders—when asked to indicate what most mo-
tivated them at work, 66 percent of U.S. employees surveyed mentioned appreciation.5
Leadership studies at the University of Michigan’s Survey Research Center had
similar objectives to the Ohio State Studies: to locate behavioral characteristics of leaders
that related to performance effectiveness. The Michigan group identified two behavioral
types: the employee-oriented leader emphasized interpersonal relationships by taking
a personal interest in employees’ needs and accepting individual differences, and the
production-oriented leader emphasized technical or task aspects of jobs, focusing on
accomplishing the group’s tasks. These dimensions are closely related to the Ohio State
dimensions. Employee-oriented leadership is similar to consideration, and production-
oriented leadership is similar to initiating structure. In fact, most researchers use the terms
synonymously.6
The results of behavioral theory studies have been mixed. However, a review of
160 studies found the followers of leaders high in consideration were more satisfied with
their jobs, were more motivated, and had more respect for their leaders. Initiating struc-
ture was more strongly related to higher levels of group and organization productivity and
more positive performance evaluations.
The reason for some of the mixed results from behavioral theory tests may partly
lie in follower preferences, particularly cultural preferences. Research from the GLOBE
program—a study of 18,000 leaders from 825 organizations in 62 countries discussed in
Chapter 5—suggested there are international differences in the preference for initiating
216 Part 5 • Exercising Influence

structure and consideration.7 The study found that leaders high in consideration suc-
ceeded best in countries where the cultural values did not favor unilateral decision mak-
ing, such as Brazil. As one Brazilian manager noted, “We do not prefer leaders who take
self-governing decisions and act alone without engaging the group. That’s part of who
we are.” A U.S. manager leading a team in Brazil would therefore need to be high in
consideration—team oriented, participative, and humane—to be effective. In contrast,
the French have a more bureaucratic view of leaders and are less likely to expect them to
be humane and considerate. A leader high in initiating structure (relatively task-oriented)
will do best and can make decisions in a relatively autocratic manner in this culture. On
the other hand, a manager who scores high on consideration (people-oriented) may find
his style backfires in France. In other cultures, both may be important—Chinese culture
emphasizes being polite, considerate, and unselfish, but it has a high performance orien-
tation. Thus, consideration and initiating structure may both be important for a manager
to be effective in China.

Summary of Trait Theories and Behavioral Theories

In general, research indicates there is validity for both the trait and behavioral theo-
ries. Parts of each theory can help explain facets of leadership emergence and effective-
ness. The first difficulty is in correctly identifying whether a trait or a behavior predicts
a certain outcome. The second difficulty is in exploring which combinations of traits
and behaviors yield certain outcomes. The third challenge is to determine the causal-
ity of traits to behaviors so that predictions toward desirable leadership outcomes can
be made. We’ve discussed some of these complex determinations as they are currently
understood. Leaders who have certain traits desirable to their positions and who display
culturally appropriate initiating structure and consideration behaviors do appear to be
more effective. Some of the other determinations are less clear. For example, perhaps
you’re wondering whether conscientious leaders (trait) are more likely to be structuring
(behavior), and extraverted leaders (trait) to be considerate (behavior). Unfortunately,
we are not sure there is a connection. Future research is needed to determine the exact
nature of these relationships.
As important as traits and behaviors are in identifying effective or ineffective
leaders, they do not guarantee success. Some leaders may have the right traits or display
the right behaviors and still fail. As we’ve mentioned, context matters, too, which has
given rise to the contingency theories we discuss next.

CONTINGENCY THEORIES
Some tough-minded leaders seem to gain a lot of admirers when they take over struggling
companies and lead them out of crises. However, predicting leadership success is more
complex than finding a few hero examples. Also, the leadership style that works in very
bad times doesn’t necessarily translate into long-term success. When researchers looked
at situational influences, it appeared that under condition a, leadership style x would be
appropriate, whereas style y was more suitable for condition b, and style z for condition c.
But what were conditions a, b, and c? We next consider the Fiedler model, one approach
to isolating situational variables.
 Chapter 12 • Leadership and Trust 217

The Fiedler Model

Fred Fiedler developed the first comprehensive contingency model for leadership, still in
use today.8 The Fiedler contingency model proposes that effective group performance
depends on the proper match between the leader’s style and the degree to which the situ-
ation gives the leader control.

IDENTIFYING LEADERSHIP STYLE With the Fiedler model, a key factor in leadership
success is the individual’s leadership style, which is assumed to be permanent. The model’s
least preferred co-worker (LPC) questionnaire identifies leadership style by measuring
whether a person is task-oriented or relationship-oriented. The LPC questionnaire asks
respondents to think of all the coworkers they have ever had and describe the one they
least enjoyed working with, on a scale of 1 to 8, for 16 sets of contrasting adjectives
(such as pleasant–unpleasant, efficient–inefficient, open–guarded, supportive–hostile).
If you describe the person you are least able to work with in favorable terms (a high
LPC score), you are relationship-oriented. If you rate your least-preferred coworker in
unfavorable terms (a low LPC score), you are primarily interested in productivity and are
task-oriented. About 16 percent of respondents score in the middle range9 and thus fall
outside the theory’s predictions. Our discussion thus pertains to the 84 percent who score
in the high or low range of the LPC questionnaire.

DEFINING THE SITUATION With the Fiedler model, a fit must be found between the
organizational situation and the leader’s style for there to be leadership effectiveness.
If a situation requires a task-oriented leader and the person in the leadership position
is relationship oriented, either the situation has to be modified or the leader has to be
replaced to achieve optimal effectiveness. We can assess the situation in terms of three
contingency or situational dimensions:
1. Leader–member relations is the degree of confidence, trust, and respect members
have in their leader.
2. Task structure is the degree to which the job assignments are procedurized (that
is, structured or unstructured).
3. Position power is the degree of influence a leader has over power variables such as
hiring, firing, discipline, promotions, and salary increases.
According to Fiedler’s model, the higher the task structure becomes, the more procedures
are added; and the stronger the position power, the more control the leader has. A very
favorable situation (in which the leader has a great deal of control) might include a payroll
manager who has the respect and confidence of his employees (good leader–member rela-
tions); activities that are clear and specific—such as wage computation, check writing, and
report filing (high task structure); and considerable freedom to reward and punish employ-
ees (strong position power). The favorable situations are on the left-hand side of the model
in Exhibit 12-1. An unfavorable situation, to the right in the model, might be that of the
disliked chairperson of a volunteer United Way fundraising team (low leader–member re-
lations, low task structure, low position power). In this job, the leader has very little control.

MATCHING LEADERS AND SITUATIONS Combining the three contingency dimensions

yields eight possible categories of leadership situations. The Fiedler model proposes
218 Part 5 • Exercising Influence

EXHIBIT 12-1 Task oriented

Findings from the Relationship oriented
Fiedler Model
Good

Performance

Poor
Favorable Moderate Unfavorable

Category I II III IV V VI VII VIII

Leader–member relations Good Good Good Good Poor Poor Poor Poor
Task structure High High Low Low High High Low Low

Position power Strong Weak Strong Weak Strong Weak Strong Weak

matching an individual’s LPC score and these eight situations to achieve maximum
leadership effectiveness.10 Let’s walk through an example. By the model, task-oriented
leaders (represented by the dotted line) perform better in situations that are either very
favorable to them and or are very unfavorable, but not as well in moderately favorable
situations. So, when faced with a category I, II, III, VII, or VIII situation, task-oriented
leaders perform better. Relationship-oriented leaders (represented by the solid line),
however, perform better in moderately favorable situations—categories IV and V
especially.
Note that each of the categories shows us what creates a favorable or unfavorable
situation for each leadership style. Fiedler later condensed these eight situations down to
three, with the same general findings:11 Task-oriented leaders perform best in situations
of high and low control, while relationship-oriented leaders perform best in moderate
control situations.
How would you apply Fiedler’s findings? You would match leaders—in terms of
their LPC scores—with situations—in terms of leader–member relationships, task struc-
ture, and position power. But remember that the model considers an individual’s leader-
ship style as fixed. Therefore, there are only two ways to improve leader effectiveness.
First, you can change the leader to fit the situation—in the same way a baseball
manager puts a right- or left-handed pitcher into the game depending on whether the
hitter is right- or left-handed. If a group situation rates as highly unfavorable but is
currently led by a relationship-oriented manager, for example, the group’s perfor-
mance could be improved under a manager who is task-oriented. The second alterna-
tive is to change the situation to fit the leader by restructuring tasks, or increasing or
 Chapter 12 • Leadership and Trust 219

decreasing the leader’s power to control factors such as salary increases, promotions,
and disciplinary actions.

EVALUATION Studies testing the overall validity of the Fiedler model find considerable
evidence to support substantial parts of it.12 If we use Fiedler’s later three situation
categories rather than the original eight, ample evidence supports his conclusions.13 But
the logic underlying the LPC questionnaire is not well understood, and respondents’ scores
are not stable.14 The contingency variables are also complex and difficult for practitio-
ners to assess.15 Therefore, while the Fiedler model is widely known and referenced, and
its concepts should be understood in organizations, its practical application is sometimes
problematic.

Other Contingency Theories

Although the Fiedler model is the most researched contingency theory, two others de-
serve discussion: situational leadership theory and path–goal theory.

SITUATIONAL LEADERSHIP THEORY Situational leadership theory (SLT) focuses on

the followers. It says successful leadership depends on selecting the right leadership style
contingent on the followers’ readiness, the extent to which followers are willing and able
to accomplish a specific task. A leader should choose one of four behaviors depending
on follower readiness.
If followers are unable and unwilling to do a task, the leader needs to give clear
and specific directions. If followers are unable but willing, the leader needs to display
high task orientation to compensate for followers’ lack of ability, and high relationship
orientation to get them to “buy into” the leader’s desires. If followers are able but unwilling,
the leader needs to use a supportive and participative style; if they are both able and
willing, the leader doesn’t need to do much.
SLT has intuitive appeal. It acknowledges the importance of followers and builds
on the logic that leaders can compensate for followers’ limited ability and motivation.
Yet research efforts to test and support the theory have generally been disappointing.16
Why? Possible explanations include internal ambiguities and inconsistencies in the model
itself as well as problems with research methodology. So, despite its intuitive appeal and
wide popularity, any endorsement must be cautious for now.

PATH–GOAL THEORY Developed by Robert House, path–goal theory extracts elements

from the Ohio State leadership research on initiating structure and consideration, and
the expectancy theory of motivation.17 Path–goal theory suggests it’s the leader’s job
to provide followers with information, support, or other resources necessary to achieve
goals. (The term path–goal implies that effective leaders clarify followers’ paths to their
work goals and make the journey easier by reducing roadblocks.) The theory predicts:
• Directive leadership yields greater satisfaction when tasks are ambiguous or stress-
ful than when they are highly structured and well laid out.
• Supportive leadership results in high performance and satisfaction when employees
are performing structured tasks.
• Directive leadership is likely to be perceived as redundant by employees with high
ability or considerable experience.
220 Part 5 • Exercising Influence

Of course, this is a simplification. The match between leadership style and situa-
tion can be individualistic and mercurial. Some tasks may be both stressful and highly
structured, and employees may have high ability or experience in some tasks and not oth-
ers. Studies indicate that leaders who set goals enable conscientious followers to achieve
higher performance but may cause stress for workers who are low in conscientiousness.
Altogether, the foundation of path-goal theory has merit. Directive or supportive
leadership does matter to followers’ performance, and leaders need to be aware of their
important facilitating role. Additionally, path–goal theory, like SLT and other contin-
gency theories, reminds us that the effectiveness of leaders depends to a large degree on
their followers.

CHARISMATIC LEADERSHIP AND

TRANSFORMATIONAL LEADERSHIP
Do you think that leaders are born not made, or do you think they are made not born?
True, an individual may be literally born into a leadership position (think family heirs
with surnames like Ford and Hilton), be endowed with a leadership position due to past
accomplishments (like CEOs who worked their way up the organizational ranks), or be
informally acknowledged as a leader (like a Microsoft employee who knows everything
because he was “there at the start”). But here we are talking not about the inputs into
leadership role attainment; rather, we are focused on what makes great leaders extraor-
dinary. Two contemporary leadership theories—charismatic leadership and transforma-
tional leadership—share a common theme in the great leader debate: They view leaders
as individuals who inspire followers through words, ideas, and behaviors.

Charismatic Leadership
Martin Luther King Jr., Ronald Reagan, Mary Kay Ash (founder of Mary Kay Cosmetics),
and Steve Jobs (co-founder of Apple Computer) are frequently cited as charismatic leaders.
What do they have in common?

WHAT IS CHARISMATIC LEADERSHIP? Sociologist Max Weber defined charisma (from

the Greek for “gift”) more than a century ago as “a certain quality of an individual person-
ality, by virtue of which he or she is set apart from ordinary people and treated as endowed
with supernatural, superhuman, or at least specifically exceptional powers or qualities.
These are not accessible to the ordinary person and are regarded as of divine origin or as
exemplary, and on the basis of them the individual concerned is treated as a leader.”18
The first researcher to consider charismatic leadership in terms of OB was Robert
House. According to House’s charismatic leadership theory, followers attribute heroic
or extraordinary leadership abilities when they observe certain behaviors and tend to give
these leaders power.19 A number of studies have attempted to identify the characteristics
of charismatic leaders: They have a vision, are willing to take personal risks to achieve
that vision, are sensitive to follower needs, and exhibit extraordinary behaviors20 (see
Exhibit 12-2).

ARE CHARISMATIC LEADERS BORN OR MADE? Are charismatic leaders born with
their qualities? Or can people actually learn to be charismatic leaders? Yes, and yes.
 Chapter 12 • Leadership and Trust 221

1. Vision and articulation. Has a vision—expressed as an idealized goal—that proposes a

future better than the status quo; and is able to clarify the importance of the vision in terms
that are understandable to others.
2. Personal risk. Willing to take on high personal risk, incur high costs, and engage in self-
sacrifice to achieve the vision.
3. Sensitivity to follower needs. Perceptive of others’ abilities and responsive to their needs
and feelings.
4. Unconventional behavior. Engages in behaviors that are perceived as novel and counter
to norms.

EXHIBIT 12-2
Key Characteristics of a Charismatic Leader
Source: Based on J. A. Conger and R. N. Kanungo, Charismatic Leadership in Organizations
(Thousand Oaks, CA: Sage, 1998), p. 94.

Individuals are born with traits that make them charismatic. In fact, studies of iden-
tical twins found that twins scored similarly on charismatic leadership measures, even
if they were raised in different households and never met. Personality is also related to
charismatic leadership; charismatic leaders are likely to be extraverted, self-confident,
and achievement-oriented.21 Consider Presidents Barack Obama, Bill Clinton, and Ronald
Reagan, and Prime Minister Margaret Thatcher: Like them or not, they are often compared
because they all possess the qualities of charismatic leaders.
Recent research indicates that charismatic leadership is not only the province of
world leaders—all of us can develop, within our own limitations, a more charismatic
leadership style. If you stay active and central in your leadership roles, you will natu-
rally communicate your vision for achieving goals to your followers, which increases the
likelihood that you will be seen as charismatic.22 To further develop an aura of charisma,
use your passion as a catalyst for generating enthusiasm. Speak in an animated voice,
reinforce your message with eye contact and facial expression, and gesture for emphasis.
Bring out the potential in followers by tapping into their emotions, and create a bond that
inspires them. Remember, enthusiasm is contagious!

HOW CHARISMATIC LEADERS INFLUENCE FOLLOWERS How do charismatic leaders

actually influence followers? By articulating an appealing vision, a long-term strategy for
attaining a goal by linking the present with a better future for the organization. Desirable
visions fit the times and circumstances and reflect the uniqueness of the organization.
Thus, followers are inspired not only by how passionately the leader communicates—
there must be an underlying vision that appeals to followers as well.
A vision needs an accompanying vision statement, a formal articulation of an or-
ganization’s vision or mission. Charismatic leaders may use vision statements to imprint
on followers an overarching goal and purpose. These leaders also set a tone of coopera-
tion and mutual support. They build followers’ self-esteem and confidence with high per-
formance expectations and the belief that followers can attain them. Through words and
actions, the leader conveys values and sets an example for followers to imitate. Finally,
the charismatic leader engages in emotion-inducing and often unconventional behavior to
demonstrate courage and conviction about the vision.
222 Part 5 • Exercising Influence

Research indicates that charismatic leadership strategies work as followers “catch”

the emotions and values their leader is conveying.23 A study of 115 U.S. government
employees found they had a stronger sense of personal belonging at work when they had
charismatic leaders, increasing their willingness to engage in helping and compliance-
oriented behavior.24 When followers mirror the desirable behaviors, the effectiveness of
these leaders is heightened. One study of Israeli bank employees also showed charismatic
leaders were more effective because their employees personally identified with them.

DOES EFFECTIVE CHARISMATIC LEADERSHIP DEPEND ON THE PERSON AND THE

SITUATION? Charismatic leadership has positive effects across many contexts. There
are, however, characteristics of followers, and of the situation, that enhance or somewhat
limit its effects.
One factor that enhances charismatic leadership is stress. People are especially re-
ceptive to charismatic leadership when they sense a crisis, when they are under stress, or
when they fear for their lives. We may be more receptive to charismatic leadership under
crises because we think bold leadership is needed. Some of it, however, may be more
primal. When people are psychologically aroused, even in laboratory studies, they are
more likely to respond to charismatic leaders.25 This may explain why, when charismatic
leaders surface, it’s likely to be in politics or religion, during wartime, or when a business
is in its infancy or facing a life-threatening crisis. Charismatic leaders are able to reduce
stress for their followers, perhaps because they help make work seem more meaningful
and interesting.26
You may wonder whether a situational factor limiting charisma is the level in the
organization. Top executives create vision. It is more difficult to utilize a person’s charis-
matic leadership qualities in lower-level management jobs or to align her vision with the
specific top-management goals of the organization. While charismatic leadership may be
more important in the upper echelons of organizations, it is also clear that its effects are not
confined to high-level leaders, as it can be effective from a distance, or from close range.
Some personalities are especially susceptible to charismatic leadership.27 For in-
stance, an individual who lacks self-esteem and questions his self-worth is more likely
to absorb a leader’s direction rather than establish his own way of leading or thinking.
For these people, the situation may matter much less than the charismatic qualities of the
leader.

THE DARK SIDE OF CHARISMATIC LEADERSHIP Unfortunately, charismatic leaders

who are larger than life don’t necessarily act in the best interests of their organizations.28
Research has shown that individuals who are narcissistic are also higher in some behav-
iors associated with charismatic leadership.29 Many charismatic—but corrupt—leaders
have allowed their personal goals to override the goals of the organization. Leaders at
Enron, Tyco, WorldCom, and HealthSouth recklessly used organizational resources for
their personal benefit and violated laws and ethics to inflate stock prices, and then cashed
in millions of dollars in personal stock options. Some charismatic leaders—Hitler, for
example—are all too successful at convincing their followers to pursue a vision that can
be disastrous. If charisma is power, then that power can be used for good—and for ill.
It’s not that charismatic leadership isn’t effective; overall, it is. But a charismatic leader
isn’t always the answer. Success depends, to some extent, on the situation, on the leader’s
vision, and on the organizational checks and balances in place to monitor the outcomes.
 Chapter 12 • Leadership and Trust 223

Transformational Leadership
Charismatic leadership theory relies on leaders’ ability to inspire followers to believe in
them. In contrast, Fiedler’s model, situational leadership theory, and path–goal theory
describe transactional leaders, who guide their followers toward established goals by
clarifying role and task requirements. A stream of research has focused on differentiat-
ing transactional from transformational leaders,30 who inspire followers to transcend
their self-interests for the good of the organization. Transformational leaders can have
an extraordinary effect on their followers. Recent research suggests that transformational
leaders are most effective when their followers are able to see the positive impact of
their work through direct interaction with customers or other beneficiaries.31 Exhibit 12-3
briefly identifies and defines characteristics that differentiate transactional from transfor-
mational leaders.
Transactional and transformational leadership complement each other; they aren’t
opposing approaches to leadership effectiveness.32 The best leaders are transactional and
transformational. Transformational leadership builds on transactional leadership and pro-
duces levels of follower effort and performance beyond what transactional leadership
alone can do. But the reverse isn’t true. If you are a good transactional leader but do
not have transformational qualities, you’ll likely be only a mediocre leader. A model of
leader behaviors indicates increasing effectiveness as a leader moves from passive, trans-
actional behaviors to active, transformational behaviors (see Exhibit 12-4).

TRANSACTIONAL LEADER
Contingent Reward. Contracts exchange of rewards for effort, promises rewards for good
performance, recognizes accomplishments.
Management by Exception (active). Watches and searches for deviations from rules and
standards, takes correct action.
Management by Exception (passive). Intervenes only if standards are not met.
Laissez-Faire. Abdicates responsibilities, avoids making decisions.

TRANSFORMATIONAL LEADER
Idealized Influence. Provides vision and sense of mission, instills pride, gains respect and trust.
Inspirational Motivation. Communicates high expectations, uses symbols to focus efforts, ex-
presses important purposes in simple ways.
Intellectual Stimulation. Promotes intelligence, rationality, and careful problem solving.
Individualized Consideration. Gives personal attention, treats each employee individually,
coaches, advises.

EXHIBIT 12-3
Characteristics of Transactional and Transformational Leaders
Sources: Based on A. H. Eagly, M. C. Johannesen-Schmidt, and M. L. Van Engen, “Transforma-
tional, Transactional, and Laissez-faire Leadership Styles: A Meta-Analysis Comparing Women
and Men,” Psychological Bulletin 129, no. 4 (2003), pp. 569–591; and T. A. Judge and J. E. Bono,
“Five Factor Model of Personality and Transformational Leadership,” Journal of Applied
Psychology 85, no. 5 (2000), pp. 751–765.
224 Part 5 • Exercising Influence

EXHIBIT 12-4 Effective

Full Range
of Leadership
Idealized
Model Influence

Inspirational
Motivation

l
na
io
Intellectual

at
rm
Stimulation

fo
a ns
Individualized

Tr
Consideration

Contingent
Passive Active
Reward

Management

al
on
by Exception

c ti
sa
an

Laissez-Faire
Tr

Ineffective

FULL RANGE OF LEADERSHIP MODEL Exhibit 12-4 shows the full range of leadership
model. Laissez-faire, which literally means “let it be” (do nothing), is the most passive
and therefore least effective of leader behaviors.33 Management-by-exception, where
leaders primarily “put out fires” when there are crisis exceptions to normal operating
procedures, means they are often too late to be effective. Contingent reward leadership,
where predetermined rewards are given for employee efforts, can be an effective style of
leadership but will not get employees to go above and beyond the call of duty.
Only with the four remaining styles—all aspects of transformational leadership—
are leaders able to motivate followers to perform above expectations and transcend their
self-interest for the sake of the organization. Individualized consideration, intellectual
stimulation, inspirational motivation, and idealized influence (known as the “four I’s”)
all result in extra effort from workers, higher productivity, higher morale and satisfaction,
higher organizational effectiveness, lower turnover, lower absenteeism, and greater or-
ganizational adaptability. Based on this model, leaders are generally most effective when
they regularly use the four I’s.

EVALUATION OF TRANSFORMATIONAL LEADERSHIP Transformational leadership has

been supported at diverse job levels and occupations (school principals, teachers, marine
commanders, ministers, presidents of MBA associations, military cadets, union shop stewards,
sales reps). In general, organizations perform better when they have transformational leaders.
 Chapter 12 • Leadership and Trust 225

Companies with transformational leaders show greater agreement among top managers
about the organization’s goals, which yields superior organizational performance.34
The effect of transformational leadership on performance can vary by the situa-
tion. In general, transformational leadership has a greater impact on the bottom line in
smaller, privately held firms than in more complex organizations,35 which decentral-
ization and corporate entrepreneurship can mediate. Transformational leadership can
also vary depending on whether work is evaluated at the team or individual level.36
Individual-focused transformational leadership is behavior that empowers individual
followers to develop, enhance their abilities, and increase self-efficacy. Team-focused
transformational leadership emphasizes group goals, shared values and beliefs, and uni-
fied efforts.
Just as vision helps explain how charismatic leadership works, it also explains part
of the effectiveness of transformational leadership. One study found vision was even
more important than a charismatic (effusive, dynamic, lively) communication style in
explaining the success of entrepreneurial firms.37 Vision is the most important element of
transformational leadership in any culture, according to the GLOBE study.38 The GLOBE
team concluded that “effective business leaders in any country are expected by their sub-
ordinates to provide a powerful and proactive vision to guide the company into the future,
strong motivational skills to stimulate all employees to fulfill the vision, and excellent
planning skills to assist in implementing the vision.”39
Although vision is important in any culture, the way it is formed and communicated
may need to be adapted. Transformational leadership may be more effective when leaders
can directly interact with the workforce to make decisions than when they report to an ex-
ternal board of directors or deal with a complex bureaucratic structure. One study showed
transformational leaders were more effective in improving group potency in teams higher
in power distance and collectivism.40 Other research using a sample of employees both
in China and the United States found that transformational leadership had a more posi-
tive relationship with perceived procedural justice among individuals who were lower in
power-distance orientation, which suggests that transformational leadership may work in
many cultures as long as the leaders interact directly with followers.41
Transformational leaders are more effective because they are creative, but also be-
cause they encourage those who follow them to be creative, too.42 Creativity and empow-
erment are key to organizational success, and transformational leaders are able to increase
follower self-efficacy, giving the group a “can do” spirit.43 Empowered followers are more
likely to pursue ambitious goals, agree on the strategic objectives of the organization, and
believe the goals they are pursuing are personally important.44
Like charisma, transformational leadership can be learned. One study of Canadian
bank managers found branches managed by those who underwent transformational lead-
ership training performed significantly better than branches whose managers did not re-
ceive training.

TRANSFORMATIONAL LEADERSHIP AND TRANSACTIONAL LEADERSHIP We have

seen that transformational leadership yields many desirable organizational outcomes. When
comparing transformational leadership with transactional leadership, research indicates
transformational leadership is more strongly correlated than transactional leadership
with lower turnover rates, higher productivity, lower employee stress and burnout, and
higher employee satisfaction. However, transformational leadership theory is not perfect.
226 Part 5 • Exercising Influence

The full range of leadership model shows a clear division between transactional and
transformational leadership that may not fully exist in effective leadership. And contrary
to the model, research suggests the four I’s of transformational leadership are not always
superior in effectiveness to transactional leadership.45 Specifically, contingent reward
leadership sometimes works as well as transformational leadership. More research is
needed, but the general supportable conclusion is that transformational leadership is
desirable and effective, given the right application.

TRANSFORMATIONAL LEADERSHIP AND CHARISMATIC LEADERSHIP In considering

transformational and charismatic leadership, you will have noticed some commonalities.
And indeed there are. Yet there are differences, too. Charismatic leadership places somewhat
more emphasis on how leaders communicate (are they passionate and dynamic) while
transformational leadership focuses more on what is communicated (especially a compelling
vision); the theories are more alike than different. At their heart, both theories focus on the
ability of leaders to inspire followers, and some of the ways they do this are the same in
both theories. Because of this, some researchers believe the concepts are interchangeable.

AUTHENTIC LEADERSHIP: ETHICS AND TRUST

If we’re looking for Although theories have increased our understanding of effective leadership, they do not
the best possible explicitly deal with the role of ethics and trust, which are essential to complete the pic-
leader, it is not enough ture. Here, we consider these two concepts under the rubric of authentic leadership.46
to be charismatic or
visionary—one must
What Is Authentic Leadership?
also be ethical and
authentic. Authentic leadership focuses on the moral aspects of being a leader. Authentic leaders
know who they are, know what they believe in, and act on those values and beliefs openly
and candidly. Their followers consider them ethical people. The primary quality produced
by authentic leadership is trust. Authentic leaders share information, encourage open com-
munication, and stick to their ideals. The result: People have faith in them.
There has been limited research on authentic leadership. However, recent research
indicated that authentic leadership, especially when shared among top management
team members, created a positive energizing effect that heightened firm performance.47
Transformational or charismatic leaders can have a vision and communicate it persua-
sively, but sometimes the vision is wrong (as in the case of Hitler), or the leaders are
more concerned with their own needs or pleasures, as were Dennis Kozlowski (ex-CEO
of Tyco), Jeff Skilling (ex-CEO of Enron), and Raj Rajaratnam (founder of the Galleon
Group).48

Ethical Leadership
For better or worse, leadership is not value-free. In assessing leadership effectiveness,
we need to address the means a leader uses to achieve goals as well as the content of
those goals. The role of the leader in creating the ethical expectations for all members is
crucial.49 Therefore, although every member of an organization is responsible for ethical
behavior, many initiatives aimed at increasing organizational ethical behavior are fo-
cused on the leaders. A recent study of 2,572 U.S. Army soldiers underscored that ethical
leadership among the top brass influences not only their direct followers, but all the way
 Chapter 12 • Leadership and Trust 227

down the command structure as well, because top leaders create an ethical culture and
expect lower-level leaders to behave along ethical guidelines.50
Ethics and authentic leadership intersect at a number of junctures. Leaders who
treat their followers with fairness, especially by providing honest, frequent, and accurate
information, are seen as more effective.51 Related to this is the concept of humbleness,
another characteristic ethical leaders often exhibit as part of being authentic. Research in-
dicates that leaders who model humility help followers to understand the growth process
for their own development.52 Leaders rated as highly ethical also tend to have followers
who engage in more organizational citizenship behaviors and who are more willing to
bring problems to the leaders’ attention.53 Recent research also found that ethical leader-
ship reduced interpersonal conflicts.54
Ethical considerations are inherent to transformational and charismatic leader-
ship. Transformational leadership has ethical implications since these leaders change
the way followers think. Charisma, too, has an ethical component. Unethical leaders
use their charisma to enhance power over followers, directed toward self-serving ends.
To integrate ethical and charismatic leadership, scholars have advanced the idea of
socialized charismatic leadership—leadership that conveys other-centered (not self-
centered) values by leaders who model ethical conduct.55 Socialized charismatic leaders
are able to bring employee values in line with their own values through their words and
actions.56
Leaders can build on a foundation of trust to show their character, enhance a sense
of unity, and create buy-in from followers. Research findings suggest that organizations
should invest in ethical leadership training programs, especially in industries with few
regulations. Ethical leadership training programs to teach cultural values should espe-
cially be mandated for leaders who take foreign assignments or manage multicultural
work teams.57

Servant Leadership
Scholars have recently considered ethical leadership from a new angle by examining
servant leadership.58 Servant leaders go beyond their self-interest and focus on oppor-
tunities to help followers grow and develop. They don’t use power to achieve ends; they
emphasize persuasion. Characteristic behaviors include listening, empathizing, persuading,
accepting stewardship, and actively developing followers’ potential. Because servant lead-
ership emphasizes serving the needs of others, research has focused on its outcomes for the
well-being of followers. Perhaps not surprisingly, a recent study of 126 CEOs found that
servant leadership is negatively correlated with the trait of narcissism.59
What are the effects of servant leadership? One study of 123 supervisors found ser-
vant leadership resulted in higher levels of commitment to the supervisor, self-efficacy,
and perceptions of justice, which all were related to organizational citizenship behavior
(OCB).60 This relationship between servant leadership and follower OCB appears to be
stronger when followers are focused on being dutiful and responsible.61 Second, servant
leadership increases team potency (a belief that one’s team has above-average skills and
abilities), which in turn leads to higher levels of group performance.62 Third, a study with
a nationally representative sample found a higher level of OCB was associated with a
focus on growth and advancement, which in turn was associated with a higher level of
creative performance.63
228 Part 5 • Exercising Influence

Servant leadership may be more prevalent and more effective in certain cultures.64
When asked to draw images of leaders, for example, U.S. subjects tended to draw them in
front of the group, giving orders to followers. Singaporeans tended to draw leaders at the
back of the group, acting more to gather a group’s opinions together and then unify them
from the rear. This suggests the East Asian prototype is more like a servant leader, which
might mean servant leadership is more effective in these cultures.

Trust and Leadership

Trust is a psychological state that exists when you agree to make yourself vulnerable
to another person because you have positive expectations about how things are going to
turn out.65 Although you aren’t completely in control of the situation, you are willing to
take a chance that the other person will come through for you. Trust is a primary attribute
associated with leadership; breaking it can have serious adverse effects on a group’s
performance.66
Followers who trust a leader are confident their rights and interests will not be
abused.67 Transformational leaders create support for their ideas in part by arguing that
their direction will be in everyone’s best interests. People are unlikely to look up to or
follow someone they perceive as dishonest or may take advantage of them. Thus, as you
might expect, transformational leaders generate higher levels of trust from their follow-
ers, which relate to higher levels of team confidence and, ultimately, higher levels of team
performance.68
In a simple contractual exchange of goods and services, your employer is legally
bound to pay you for fulfilling your job description. But today’s rapid reorganizations,
diffusion of responsibility, and collaborative team-based work style mean employment
relationships are not stable long-term contracts with explicit terms. Rather, they are based
more on trusting relationships than ever before. You have to trust that if you show your
supervisor a creative project you’ve been working on, she won’t steal the credit behind
your back. You have to trust that the extra work you’ve been doing will be recognized in
your performance appraisal. In contemporary organizations, where work is less closely
documented and specified, voluntary employee contribution based on trust is absolutely
necessary. Only a trusted leader will be able to encourage employees to reach beyond
themselves to a transformational goal.

What Are the Consequences of Trust?

Trust between supervisors and employees has a number of advantages. Here are just a
few that research has shown:
• Trust encourages taking risks. Whenever employees decide to deviate from the
usual way of doing things, or to take their supervisors’ word on a new direction,
they are taking a risk. In both cases, a trusting relationship can facilitate that leap.
• Trust facilitates information sharing. One big reason employees fail to express
concerns at work is that they don’t feel psychologically safe revealing their views.
When managers demonstrate they will give employees’ ideas a fair hearing and
actively make changes, employees are more willing to speak out.69
• Trusting groups are more effective. When a leader sets a trusting tone in a group,
members are more willing to help each other and exert extra effort, which increases
 Chapter 12 • Leadership and Trust 229

trust. Members of mistrusting groups tend to be suspicious of each other, constantly

guard against exploitation, and restrict communication with others in the group.
These actions tend to undermine and eventually destroy the group.
• Trust enhances productivity. The bottom-line interest of companies appears to be
positively influenced by trust. Employees who trust their supervisors tend to re-
ceive higher performance ratings.70 People respond to mistrust by concealing infor-
mation and secretly pursuing their own interests.
One potentially significant opportunity for building trust within an organization
is to encourage positive relationships between leaders and would-be leaders. Mentoring
programs, discussed next, allow individuals from different organizational levels to get to
know one another and create bonds of trust.

LEADING FOR THE FUTURE: MENTORING

Leaders often take responsibility for developing future leaders. Let’s consider what
makes mentoring valuable as well as its potential pitfalls.

Mentoring
A mentor is a senior employee who sponsors and supports a less experienced employee,
a protégé. Successful mentors are good teachers. They present ideas clearly, listen well,
and empathize with protégés’ problems. Mentoring relationships, whether formal or in-
formal, serve career functions and psychosocial functions.71
In formal mentoring relationships, protégé candidates are identified according to
assessments of leadership potential, and then they are matched with leaders in corre-
sponding organizational functions. Informal mentoring relationships happen much the
same, but organically: first, a less experienced, lower-level employee who appears to have
potential for future development is identified.72 The protégé is often then tested with a
particularly challenging assignment. If performance is acceptable, the leader will develop
the mentoring relationship. In both formal and informal mentoring, the goal is to show the
protégé how the organization really works outside its formal structures and procedures.
Are all employees in an organization likely to participate in a mentoring relation-
ship? Unfortunately, no.73 However, research indicates that employers should establish
mentoring programs because they benefit both mentors and protégés. A recent study in
Korea, for instance, found that mentors achieved higher levels of transformational leader-
ship abilities as a result of the process, while organizational commitment and well-being
increased for both mentors and protégés.74
Although begun with the best intentions, formal mentoring relationships are not as
effective as informal ones,75 perhaps due to poor planning, design, and communication.
Mentors must see the relationship as beneficial to themselves and the protégé, and the
protégé must feel he has input into the relationship.76 Formal mentoring programs are
also most likely to succeed if they appropriately match the work style, needs, and skills
of protégé and mentor.77
You might assume mentoring is valuable for objective outcomes like compensa-
tion and job performance, but research suggests the gains are primarily psychological.
Research further indicates that while mentoring can have an impact on career success, it is not
230 Part 5 • Exercising Influence

as much of a contributing factor as ability and personality. It may feel nice to have a
mentor, but it doesn’t appear that having a good mentor, or any mentor, is critical to your
career. Mentors may be effective not because of the functions they provide, but because
of the resources they can obtain; a mentor connected to a powerful network can build
relationships that will help the protégé advance. Network ties, whether built through a
mentor or not, are a significant predictor of career success.78 If a mentor is not well con-
nected or not a very strong performer, the best mentoring advice in the world will not be
very beneficial.

CHALLENGES TO THE LEADERSHIP CONSTRUCT

“In the 1500s, people ascribed all events they didn’t understand to God. Why did the
crops fail? God. Why did someone die? God. Now our all-purpose explanation is leader-
ship.”79 This may be an astute observation from management consulting, but of course
much of an organization’s success or failure is due to factors outside the influence
of leadership. Sometimes it’s a matter of being in the right or wrong place at a given
time. In this section, we present challenges to the accepted beliefs about the value of
leadership.

Leadership as an Attribution
As you may remember from Chapter 6, attribution theory examines how people try to
make sense of cause-and-effect relationships. The attribution theory of leadership says
leadership is merely an attribution people make about other individuals.80 We attribute the
following to leaders: intelligence, outgoing personality, strong verbal skills, aggressive-
ness, understanding, and industriousness.81 At the organizational level, we tend, rightly or
wrongly, to see leaders as responsible for both extremely negative and extremely positive
performance.82
One study of 128 major U.S. corporations found that whereas perceptions of CEO
charisma did not lead to objectively better company performance, company perfor-
mance did lead to perceptions of charisma.83 Employee perceptions of leaders’ behav-
iors are significant predictors of whether they blame the leader for failure, regardless
of how the leader assesses himself.84 A study of more than 3,000 employees from
western Europe, the United States, and the Middle East found people who tended to
“romanticize” leadership in general were more likely to believe their own leaders were
transformational.85
Attribution theory suggests it is important to project the appearance of being a
leader rather than focusing on actual accomplishments. Leader-wannabes who can shape
the perception that they’re smart, personable, verbally adept, aggressive, hardworking,
and consistent in their style can increase the probability their bosses, colleagues, and
employees will view them as effective leaders.

Substitutes for and Neutralizers of Leadership

One theory of leadership suggests that in many situations, leaders’ actions are irrele-
vant.86 Experience and training are among the substitutes that can replace the need for
a leader’s support or ability to create structure. Recently, companies such as video game
producer Valve Corporation, Gore-Tex maker W. L. Gore, and collaboration-software
 Chapter 12 • Leadership and Trust 231

Relationship-Oriented Task-Oriented
Defining Characteristics Leadership Leadership
Individual
Experience/training No effect on Substitutes for
Professionalism Substitutes for Substitutes for
Indifference to rewards Neutralizes Neutralizes
Job
Highly structured task No effect on Substitutes for
Provides its own feedback No effect on Substitutes for
Intrinsically satisfying Substitutes for No effect on
Organization
Explicit formalized goals No effect on Substitutes for
Rigid rules and procedures No effect on Substitutes for
Cohesive work groups Substitutes for Substitutes for

EXHIBIT 12-5
Substitutes for and Neutralizers of Leadership
Source: Based on S. Kerr and J. M. Jermier, “Substitutes for Leadership: Their Meaning and
Measurement,” Organizational Behavior and Human Performance (December 1978), p. 378.

firm GitHub have experimented with eliminating leaders and management. Governance
in the “bossless” work environment is achieved through accountability to coworkers, who
determine team composition and even sometimes pay.87 Organizational characteristics
such as explicit formalized goals, rigid rules and procedures, and cohesive work groups
can replace formal leadership, while indifference to organizational rewards can neutralize
its effects. Neutralizers make it impossible for leader behavior to make any difference to
follower outcomes (see Exhibit 12-5).
Sometimes the difference between substitutes and neutralizers is fuzzy. If I’m
working on a task that’s intrinsically enjoyable, theory predicts leadership will be less
important because the task provides motivation. But does that mean intrinsically enjoy-
able tasks neutralize leadership effects, or substitute for them, or both? Another problem
is that while substitutes for leadership (such as employee characteristics, the nature of the
task, etc.) matter to performance, we can’t infer that leadership doesn’t matter.88

FINDING AND CREATING EFFECTIVE LEADERS

How can organizations find or create effective leaders? Let’s try to answer that question.

Selecting Leaders
The process organizations go through to fill management positions is an exercise in the
identification of effective leaders. You might begin by reviewing the knowledge, skills,
and abilities needed to do the job effectively. Personality tests can identify traits associ-
ated with leadership—extraversion, conscientiousness, and openness to experience. High
232 Part 5 • Exercising Influence

self-monitors are better at reading situations and adjusting their behavior accordingly.
Candidates with high emotional intelligence should have an advantage, especially in situ-
ations requiring transformational leadership.89 Experience is a poor predictor of leader
effectiveness, but situation-specific experience is relevant.

Training Leaders
Organizations spend billions of dollars on leadership training and development.90 These take
many forms, including $50,000 executive leadership programs offered by universities such
as Harvard, to sailing experiences offered by the Outward Bound program. Business schools
and companies are placing renewed emphasis on leadership development.
How can managers get the most from their leadership-training budgets? First, lead-
ership training is likely to be more successful with high self-monitors. Such individuals
have the flexibility to change their behavior. Second, organizations can teach implemen-
tation skills. Third, we can teach skills such as trust building and mentoring. Leaders can
be taught situational-analysis skills. They can learn how to evaluate situations, modify
them to better fit their style, and assess which leader behaviors might be most effective
in given situations.
Fourth, behavioral training through modeling exercises can increase an individ-
ual’s ability to exhibit charismatic leadership qualities. Fifth, leaders should engage in
regularly reviewing their leadership after key organizational events. These after-event re-
views are especially effective for leaders who are high in conscientiousness and openness
to experience, and who are emotionally stable (low in neuroticism).91 Finally, leaders can
be trained in transformational leadership skills that have bottom-line results.

SUMMARY
Leadership plays a central part in understanding group behavior because it’s the leader
who usually directs us toward our goals. Knowing what makes a good leader should
thus be valuable in improving group performance. The early search for a set of universal
leadership traits failed. However, recent efforts using the Big Five personality framework
show strong and consistent relationships between leadership and extraversion, conscien-
tiousness, and openness to experience. The behavioral approach’s major contribution was
narrowing leadership into task-oriented (initiating structure) and people-oriented (con-
sideration) styles. By considering the situation in which the leader operates, contingency
theories promised to improve on the behavioral approach. Research on charismatic and
transformational leadership has made major contributions to our understanding of lead-
ership effectiveness. The concept of authentic leadership encompasses the dimensions
of ethics and trust that characterize the best leadership practices, although the need for
leadership to increase performance is not always certain.

IMPLICATIONS FOR MANAGERS

• For maximum leadership effectiveness, ensure that your preferences on the initiat-
ing structure and consideration dimensions are a match for your work dynamics
and culture.
 Chapter 12 • Leadership and Trust 233

• Hire candidates who exhibit transformational leadership qualities and who have
demonstrated success in working through others to meet a long-term vision. Per-
sonality tests can reveal candidates higher in extraversion, conscientiousness, and
openness, which may indicate leadership readiness.
• For management roles, hire candidates whom you believe are ethical and trustwor-
thy, and train current managers in your organization’s ethical standards in order to
increase leadership effectiveness.
• Seek to develop trusting relationships with followers because, as organizations
have become less stable and predictable, strong bonds of trust are replacing bu-
reaucratic rules in defining expectations and relationships.
• Consider investing in leadership training such as formal courses, workshops, rotat-
ing job responsibilities, coaching, and mentoring.

P I A
PERSONAL INVENTORY ASSESSMENT

In Personal Inventory Assessment found in MyManagementLab take assessment: Ethical

Leadership Assessment

WRITING SPACE
If your professor assigned this, sign in to mymanagementlab.com for the following Assisted-
graded writing question:
12-1. What are your suggestions for creating ethical leadership in organizations?