Social Responsibilities of Management

The term social responsibilities can be defined as the obligation of management towards the society and others concerned.

Reason for Social Responsibilities: Business enterprises are creatures of society and should respond to the demands of society. If the management does not react to changes in social demands, the society will either force them to do so through laws or will not permit the enterprise to survive. Therefore the longterm interests of business are best served when management assume social responsibilities. The image of business organization liked with the quality of its products and customer service and the extent to which it fulfills the expectations of owners, employees, consumers, government and the community at large. For longterm success it matters a great deal if the firm has a favourable image in the public mind. Every business enterprise is a organ of society and its activities have impact on the social scene. Therefore, it is important for management to consider whether their policies and actions are likely to promote the public good, advances the basic values of society, and constitute to its stability, strength and harmony.

Increasing concern for the social responsibility of management, it is now recognized that besides taking care of the financial interest of owners, managers of business firms must also take into account the interest of various other groups such as employees, consumers, the government and the community as a whole. These interested groups are directly or indirectly affected by the pursuit of business activities and they are the stake-holders of the business enterprise.

Responsibility towards owners: The primary responsibilities of management is to assure a fair and reasonable rate of return on capital and fair return on investment can be determined on the basis of difference in the risks of business in different fields of activity. With the growth of business the shareholders can also expect appreciation in the value of their capital.

Responsibility towards employees: Management responsibility towards employees relate to the fair wages and salaries, satisfactory work environment, labour management relations and employee welfare. Fair wages should be fixed in the light of labor productivity, the prevailing wage rates in the same or neighbouring areas and relative importance of jobs. Managers salaries and allowances are expected to be linked with their responsibility, initiative and skill. But the spread between minimum wages and highest salaries should be reasonable. Employees are expected to build up and maintain harmonious relationships between superior and subordinates. Another aspect of responsibility towards employees is the provision of welfare amenities like safety and security of working conditions, medical facilities, housing, canteen, leave and retirement benefits.

Responsibility towards consumers: In a competitive market, serving consumers is supposed to be a prime concern of management. But in reality perfect competition does not prevail in all product markets. In the event of shortage of supply there is no automatic correction. Besides consumers are often victims of unfair trade practices and unethical conduct of business. Consumer interests are thus protected to some extent with laws and pressure of organized consumer groups. Management should anticipate these developments, satisfy consumer needs and protect consumer interests. Goods must be of appropriate standard and quality and be available in adequate quantities at reasonable prices. Management should avoid resorting to hoarding or creating artificial scarcity as well as false and misleading advertisements.

Responsibility towards the Governments: As a part of their social responsibility, management must conduct business affair in lawful manner, honestly pay all the taxes and dues, and should not corrupt public officials for selfish ends. Business activities must also confirm to the economic and social policies of the government.

Responsibility towards the community and society: The socially responsible role of management in relation to the community are expected to be revealed by its policies with respect to the employment of handicapped persons, and weaker sections of the community, environmental protection, pollution control, setting up industries in backward areas, and providing relief to the victims of natural calamities etc.

Management and Functions of Management

Management has been described as a social process involving responsibility for economical and effective planning & regulation of operation of an enterprise in the fulfillment of given purposes. It is a dynamic process consisting of various elements and activities. These activities are different from operative functions like marketing, finance, purchase etc. Rather these activities are common to each and every manger irrespective of his level or status.

Different experts have classified functions of management. According to George & Jerry, “There are four fundamental functions of management i.e. planning, organizing, actuating and controlling”. According to Henry Fayol, “To manage is to forecast and plan, to organize, to command, & to control”. Whereas Luther Gullick has given a keyword ’POSDCORB’ where P stands for Planning, O for Organizing, S for Staffing, D for Directing, Co for Co-ordination, R for reporting & B for Budgeting. But the most widely accepted are functions of management given by KOONTZ and O’DONNEL i.e. Planning, Organizing, Staffing, Directing and Controlling.

For theoretical purposes, it may be convenient to separate the function of management but practically these functions are overlapping in nature i.e. they are highly inseparable. Each function blends into the other & each affects the performance of others.

1. Planning

It is the basic function of management. It deals with chalking out a future course of action & deciding in advance the most appropriate course of actions for achievement of pre-determined goals. According to KOONTZ, “Planning is deciding in advance - what to do, when to do & how to do. It bridges the gap from where we are & where we want to be”. A plan is a future course of actions. It is an exercise in problem solving & decision making. Planning is determination of courses of action to achieve desired goals. Thus, planning is a systematic thinking about ways & means for accomplishment of pre-determined goals. Planning is necessary to ensure proper utilization of human & non-human resources. It is all pervasive, it is an intellectual activity and it also helps in avoiding confusion, uncertainties, risks, wastages etc.

2. Organizing

It is the process of bringing together physical, financial and human resources and developing productive relationship amongst them for achievement of organizational goals. According to Henry Fayol, “To organize a business is to provide it with everything useful or its functioning i.e. raw material, tools, capital and personnel’s”. To organize a business involves determining & providing human and non-human resources to the organizational structure. Organizing as a process involves:

• Identification of activities.
• Classification of grouping of activities.
• Assignment of duties.
• Delegation of authority and creation of responsibility.
• Coordinating authority and responsibility relationships.

3. Staffing

It is the function of manning the organization structure and keeping it manned. Staffing has assumed greater importance in the recent years due to advancement of technology, increase in size of business, complexity of human behavior etc. The main purpose o staffing is to put right man on right job i.e. square pegs in square holes and round pegs in round holes. According to Kootz & O’Donell, “Managerial function of staffing involves manning the organization structure through proper and effective selection, appraisal & development of personnel to fill the roles designed un the structure”. Staffing involves:

• Manpower Planning (estimating man power in terms of searching, choose the person and giving the right place).
• Recruitment, selection & placement.
• Training & development.
• Remuneration.
• Performance appraisal.
• Promotions & transfer.

4. Directing

It is that part of managerial function which actuates the organizational methods to work efficiently for achievement of organizational purposes. It is considered life-spark of the enterprise which sets it in motion the action of people because planning, organizing and staffing are the mere preparations for doing the work. Direction is that inert-personnel aspect of management which deals directly with influencing, guiding, supervising, motivating sub-ordinate for the achievement of organizational goals. Direction has following elements:

• Supervision
• Motivation
• Leadership
• Communication

Supervision- implies overseeing the work of subordinates by their superiors. It is the act of watching & directing work & workers.

Motivation- means inspiring, stimulating or encouraging the sub-ordinates with zeal to work. Positive, negative, monetary, non-monetary incentives may be used for this purpose.

Leadership- may be defined as a process by which manager guides and influences the work of subordinates in desired direction.

Communications- is the process of passing information, experience, opinion etc from one person to another. It is a bridge of understanding.

5. Controlling

It implies measurement of accomplishment against the standards and correction of deviation if any to ensure achievement of organizational goals. The purpose of controlling is to ensure that everything occurs in conformities with the standards. An efficient system of control helps to predict deviations before they actually occur. According to Theo Haimann, “Controlling is the process of checking whether or not proper progress is being made towards the objectives and goals and acting if necessary, to correct any deviation”. According to Koontz & O’Donell “Controlling is the measurement & correction of performance activities of subordinates in order to make sure that the enterprise objectives and plans desired to obtain them as being accomplished”. Therefore controlling has following steps:

a. Establishment of standard performance.

b. Measurement of actual performance.

c. Comparison of actual performance with the standards and finding out deviation if any.

d. Corrective action.

Leadership Styles

The four styles of leadership summarized here are Autocratic, Democratic, Bureaucratic, and “Laissez-Faire.” Each has its strengths and challenges.

1) AUTOCRATIC

An autocratic leader dictates tasks and timelines to a group and imparts a strong focus on an objective. At best, the autocratic leader leads a team to success under tight timelines and can be especially functional for a team with inexperienced and/or unskilled members. At worst, the autocratic leader denies input from all others and can dominate both task strategy and credit for success.

• The classical approach

• Manager retains as much power and decision-making authority as possible

• Does not consult staff, nor allowed to give any input.

• Staff expected to obey orders without receiving any explanations

• Structured set of rewards and punishment

• Greatly criticized during the past 30 years

• Gen X staff highly resistant

Autocratic leaders:

• Rely on threats and punishment to influence staff
• Do not trust staff
• Do not allow for employee input

Not all bad

• Sometimes the most effective style to use when:

• New, untrained staffs do not know which tasks to perform or which procedures to follow
• Effective supervision provided only through detailed orders and instructions
• Staffs do not respond to any other leadership style
• Limited time in which to make a decision
• A manager’s power challenged by staff
• Work needs to be coordinated with another department or organization

Should not be used when:

• Staff become tense, fearful, or resentful
• Staff expect their opinions heard
• Staff depend on their manager to make all their decisions
• Low staff morale, high turnover, absenteeism, and work stoppage

2) Bureaucratic

The Bureaucratic Leadership Style was one of three leadership styles described by Max Weber (1947) along with charismatic leadership and traditional leadership styles. The bureaucratic leadership style is based on following normative rules and adhering to lines of authority.

The characteristics of the bureaucratic style include:

• Leaders impose strict and systematic discipline on the followers and demand business-like conduct in the workplace
• Leaders are empowered via the office they hold - position power

• Followers are promoted based on their ability to conform to the rules of the office

• Follower should obey leaders because authority is bestowed upon the leader as part of their position in the company

• Manages “by the book¨
• Everything done according to procedure or policy
• If not covered by the book, referred to the next level above
• A police officer not a leader
• Enforces the rules

Most effective when:

• Staff performing routine tasks over and over
• Staff needs to understand certain standards or procedures.
• Safety or security training conducted
• Staff performing tasks that require handling cash

Ineffective when:

• Work habits form that is hard to break, especially if they are no longer useful
• Staffs lose their interest in their jobs and in their co-workers
• Staff do only what is expected of them and no more

3) DEMOCRATIC

The democratic leader involves team members in planning and decision-making, often through a formal information gathering and/or voting process. At best, the democratic leader encourages ideas, input from all team members, and motivates teams toward success. At worst, the democratic leader can leave out input from less aggressive team members and override feedback from members once a decision is made. Democratic leaders should be skilled in conflict resolution techniques to illicit the optimum performance of a team.

• Encourages staff to be a part of the decision-making
• Keeps staff informed about everything that affects their work and shares decision-making and problem solving responsibilities

The leader

A coach who has the final say, but gathers information from staff before making a decision

• Produce high quality and high quantity work for long periods
• Staff likes the trust they receive and respond with cooperation, team spirit, and high morale

The democratic leader

Develops plans to help staff evaluate their own performance

• Allows staff to establish goals
• Encourages staff to grow on the job and be promoted
• Recognizes and encourages achievement

Not always appropriate

• Most successful when used with highly skilled or experienced staff or when implementing operational changes or resolving individual or group problems

Most effective when:

• Wants to keep staff informed about matters that affect them.
• Wants staff to share in decision-making and problem-solving duties.
• Wants to provide opportunities for staff to develop a high sense of personal growth and job satisfaction.
• A large or complex problem that requires lots of input to solve
• Changes must be made or problems solved that affect staff
• Want to encourage team building and participation

Democratic leadership should not be used when:

• Not enough time to get everyone’s input
• Easier and more cost-effective for the manager to make the decision
• Can’t afford mistakes
• Manager feels threatened by this type of leadership
• Staff safety is a critical concern

4) “LAISSEZ-FAIRE”

A “Laissez-Faire” leader gives little or no direction while providing feedback when prompted by team members. At best, the laissez-faire leader promotes an acute sense of competence and expertise in team members and allows others to rise to their performance potential. At worst, this style can lack accountability for team failures and not adequately coach members to success who may be uncomfortable in a self-directed environment by appearing to not care or be too busy to properly lead.

• Also known as the “hands-off¨ style
• The manager provides little or no direction and gives staff as much freedom as possible

• All authority or power given to the staff and they determine goals, make decisions, and resolve problems on their own

An effective style to use:

• Staff highly skilled, experienced, and educated
• Staff have pride in their work and the drive to do it successfully on their own
• Outside experts, such as staff specialists or consultants used
• Staff trustworthy and experience

Should not be used …

• Staff feel insecure at the unavailability of a manager
• The manager cannot provide regular feedback to they are doing staff on how well
• Managers unable to thank staff for their good work
• The manager doesn’t understand his or her responsibilities and hoping the staff cover for him or her

Leadership Styles

The four styles of leadership summarized here are Autocratic, Democratic, Bureaucratic, and “Laissez-Faire.” Each has its strengths and challenges.

1) AUTOCRATIC

An autocratic leader dictates tasks and timelines to a group and imparts a strong focus on an objective. At best, the autocratic leader leads a team to success under tight timelines and can be especially functional for a team with inexperienced and/or unskilled members. At worst, the autocratic leader denies input from all others and can dominate both task strategy and credit for success.

• The classical approach

• Manager retains as much power and decision-making authority as possible

• Does not consult staff, nor allowed to give any input.

• Staff expected to obey orders without receiving any explanations

• Structured set of rewards and punishment

• Greatly criticized during the past 30 years

• Gen X staff highly resistant

Autocratic leaders:

• Rely on threats and punishment to influence staff
• Do not trust staff
• Do not allow for employee input

Not all bad

• Sometimes the most effective style to use when:

• New, untrained staffs do not know which tasks to perform or which procedures to follow
• Effective supervision provided only through detailed orders and instructions
• Staffs do not respond to any other leadership style
• Limited time in which to make a decision
• A manager’s power challenged by staff
• Work needs to be coordinated with another department or organization

Should not be used when:

• Staff become tense, fearful, or resentful
• Staff expect their opinions heard
• Staff depend on their manager to make all their decisions
• Low staff morale, high turnover, absenteeism, and work stoppage

2) Bureaucratic

The Bureaucratic Leadership Style was one of three leadership styles described by Max Weber (1947) along with charismatic leadership and traditional leadership styles. The bureaucratic leadership style is based on following normative rules and adhering to lines of authority.

The characteristics of the bureaucratic style include:

• Leaders impose strict and systematic discipline on the followers and demand business-like conduct in the workplace
• Leaders are empowered via the office they hold - position power

• Followers are promoted based on their ability to conform to the rules of the office

• Follower should obey leaders because authority is bestowed upon the leader as part of their position in the company

• Manages “by the book¨
• Everything done according to procedure or policy
• If not covered by the book, referred to the next level above
• A police officer not a leader
• Enforces the rules

Most effective when:

• Staff performing routine tasks over and over
• Staff needs to understand certain standards or procedures.
• Safety or security training conducted
• Staff performing tasks that require handling cash

Ineffective when:

• Work habits form that is hard to break, especially if they are no longer useful
• Staffs lose their interest in their jobs and in their co-workers
• Staff do only what is expected of them and no more

3) DEMOCRATIC

The democratic leader involves team members in planning and decision-making, often through a formal information gathering and/or voting process. At best, the democratic leader encourages ideas, input from all team members, and motivates teams toward success. At worst, the democratic leader can leave out input from less aggressive team members and override feedback from members once a decision is made. Democratic leaders should be skilled in conflict resolution techniques to illicit the optimum performance of a team.

• Encourages staff to be a part of the decision-making
• Keeps staff informed about everything that affects their work and shares decision-making and problem solving responsibilities

The leader

A coach who has the final say, but gathers information from staff before making a decision

• Produce high quality and high quantity work for long periods
• Staff likes the trust they receive and respond with cooperation, team spirit, and high morale

The democratic leader

Develops plans to help staff evaluate their own performance

• Allows staff to establish goals
• Encourages staff to grow on the job and be promoted
• Recognizes and encourages achievement

Not always appropriate

• Most successful when used with highly skilled or experienced staff or when implementing operational changes or resolving individual or group problems

Most effective when:

• Wants to keep staff informed about matters that affect them.
• Wants staff to share in decision-making and problem-solving duties.
• Wants to provide opportunities for staff to develop a high sense of personal growth and job satisfaction.
• A large or complex problem that requires lots of input to solve
• Changes must be made or problems solved that affect staff
• Want to encourage team building and participation

Democratic leadership should not be used when:

• Not enough time to get everyone’s input
• Easier and more cost-effective for the manager to make the decision
• Can’t afford mistakes
• Manager feels threatened by this type of leadership
• Staff safety is a critical concern

4) “LAISSEZ-FAIRE”

A “Laissez-Faire” leader gives little or no direction while providing feedback when prompted by team members. At best, the laissez-faire leader promotes an acute sense of competence and expertise in team members and allows others to rise to their performance potential. At worst, this style can lack accountability for team failures and not adequately coach members to success who may be uncomfortable in a self-directed environment by appearing to not care or be too busy to properly lead.

• Also known as the “hands-off¨ style
• The manager provides little or no direction and gives staff as much freedom as possible

• All authority or power given to the staff and they determine goals, make decisions, and resolve problems on their own

An effective style to use:

• Staff highly skilled, experienced, and educated
• Staff have pride in their work and the drive to do it successfully on their own
• Outside experts, such as staff specialists or consultants used
• Staff trustworthy and experience

Should not be used …

• Staff feel insecure at the unavailability of a manager
• The manager cannot provide regular feedback to they are doing staff on how well
• Managers unable to thank staff for their good work
• The manager doesn’t understand his or her responsibilities and hoping the staff cover for him or her

Systems approach to management

Systems approach to management developed after 1950. Many pioneers during as E.L Trist, AK Ria, F.E. Kast, and R.A Johnsm have made significant contributions to this approach.

This systems approach looks upon the management as a ‘System’ of as an organized whole make up of sub-systems integrated into a unity or orderly totality. The attention should be given so overall effectiveness of the system rather than effectiveness of any sub-system if isolation. It took where management process school left off in attempting to unify management theory. It emphasizes the inter-relatedness and inter-dependence of all activities within an organisation. It is based on system analysis. It attempts to identify the nature of relationships of various parts of the system. A system is a set of inter-connected elements or component parts to achieve certain goals. An organisation is viewed by the modern authors as an op0en system. An organisation as a system has five basic parts:

1. Input,

2. Process,

3 Output,

4. Feedback and

5. Environment.

Systems approach to management provides a conceptual basis as well as guidelines for establishing a more efficient system for planning, organisation, directing and controlling. It forces the manager to look upon his business as an open adaptive system. Information is an important part of the system because an organisation must act and interact with its environment.

Features:

1. An organisation consists of many sub-systems.

2. All the sub-systems are mutually related to each other.

3. The sub-parts should be studied in their enter-relationships rather than in isolation from each other.

4. The organisation provides a boundary, which separates it from other systems. It determines which parts are internal and which parts are external.

5. The organisation is responsive to environmental effect. It is vulnerable is the changes in environment.

6. An organsiation is a system consisting of many interrelated and interdependent parts or sub-systems. These elements are arranged orderly according to some scheme such that the is more than the sum of the parts.

7. As a system an organisation draws inputs (energy. Information, materials, etc.). From its environment. It transforms these inputs and returns the output back into the environment in the form of goods and services.

8. Every system is a part of a super system.

9. Organisation is an open system and it interacts with its environment. It is also a dynamic system ass the equilibrium in it is always changing.

10. Management is expected to regulate and adjust the system to secure better performance.

11. Management is multidisciplinary as it draws and integrates knowledge from various disciplines.

Systems are of two types:

1. Closed system: if closed system has no interaction with the outside world.

2. Open system: continually interacts with its environment. All living systems are open system.

Importance of Management

1. It helps in Achieving Group Goals - It arranges the factors of production, assembles and organizes the resources, integrates the resources in effective manner to achieve goals. It directs group efforts towards achievement of pre-determined goals. By defining objective of organization, clearly there would be no wastage of time, money and effort. Management converts disorganized resources of men, machines, money etc. into useful enterprise. These resources are coordinated, directed and controlled in such a manner that enterprise work towards attainment of goals.
2. Optimum Utilization of Resources - Management utilizes all the physical & human resources productively. This leads to efficacy in management. Management provides maximum utilization of scarce resources by selecting its best possible alternate use in industry from out of various uses. It makes use of experts, professional and these services leads to use of their skills, knowledge, and proper utilization and avoids wastage. If employees and machines are producing its maximum there is no under employment of any resources.
3. Reduces Costs - It gets maximum results through minimum input by proper planning and by using minimum input & getting maximum output. Management uses physical, human and financial resources in such a manner that results in best combination. This helps in cost reduction.
4. Establishes Sound Organization - No overlapping of efforts (smooth and coordinated functions). To establish sound organizational structure is one of the objective of management which is in tune with objective of organization and for fulfillment of this, it establishes effective authority & responsibility relationship i.e. who is accountable to whom, who can give instructions to whom, who are superiors & who are subordinates. Management fills up various positions with right persons, having right skills, training and qualification. All jobs should be cleared to everyone.
5. Establishes Equilibrium - It enables the organization to survive in changing environment. It keeps in touch with the changing environment. With the change is external environment, the initial co-ordination of organization must be changed. So it adapts organization to changing demand of market / changing needs of societies. It is responsible for growth and survival of organization.
6. Essentials for Prosperity of Society - Efficient management leads to better economical production which helps in turn to increase the welfare of people. Good management makes a difficult task easier by avoiding wastage of scarce resource. It improves standard of living. It increases the profit, which is beneficial to business, and society will get maximum output at minimum cost by creating employment opportunities, which generate income in hands. Organization comes with new products and researches beneficial for society.

P r i n c i p l e s o f L e a d e r s h i p

P r i n c i p l e s o f L e a d e r s h i p

To help you be, know, and do, follow these eleven principles of leadership (U.S. Army,

1983). The later chapters in this Leadership guide expand on these principles and

provide tools for implementing them:

1. Know yourself and seek self-improvement - In order to know yourself, you

have to understand your be, know, and do, attributes. Seeking self-improvement

means continually strengthening your attributes. This can be accomplished

through self-study, formal classes, reflection, and interacting with others.

2. Be technically proficient - As a leader, you must know your job and have a

solid familiarity with your employees' tasks.

3. Seek responsibility and take responsibility for your actions - Search for

ways to guide your organization to new heights. And when things go wrong, they

always do sooner or later — do not blame others. Analyze the situation, take

corrective action, and move on to the next challenge.

4. Make sound and timely decisions - Use good problem solving, decision

making, and planning tools.

5. Set the example - Be a good role model for your employees. They must not only

hear what they are expected to do, but also see. We must become the change

we want to see - Mahatma Gandhi

6. Know your people and look out for their well-being - Know human nature and

the importance of sincerely caring for your workers.

7. Keep your workers informed - Know how to communicate with not only them,

but also seniors and other key people.

8. Develop a sense of responsibility in your workers - Help to develop good

character traits that will help them carry out their professional responsibilities.

9. Ensure that tasks are understood, supervised, and accomplished -

Communication is the key to this responsibility.

10. Train as a team - Although many so called leaders call their organization,

department, section, etc. a team; they are not really teams...they are just a group

of people doing their jobs.

11. Use the full capabilities of your organization - By developing a team spirit,

you will be able to employ your organization, department, section, etc. to its

fullest capabilities.

T h e P r o c e s s o f G r e a t L e a d e r s h i p

The road to great leadership (Kouzes & Posner, 1987) that is common to successful

leaders:

o Challenge the process - First, find a process that you believe needs to be

improved the most.

o Inspire a shared vision - Next, share your vision in words that can be

understood by your followers.

o Enable others to act - Give them the tools and methods to solve the problem.

o Model the way - When the process gets tough, get your hands dirty. A boss tells

others what to do, a leader shows that it can be done.

o Encourage the heart - Share the glory with your followers' hearts, while keeping

the pains within your own.

Leadership

D e f i n i t i o n o f L e a d e r s h i p

The meaning of a message is the change which it produces in the image. —

Kenneth Boulding in The Image: Knowledge in Life and Society

Before we get started, lets define leadership. Leadership is a process by which a person

influences others to accomplish an objective and directs the organization in a way that

makes it more cohesive and coherent. This definition is similar to Northouse's (2007, p3)

definition — Leadership is a process whereby an individual influences a group of

individuals to achieve a common goal. Leaders carry out this process by applying their

leadership knowledge and skills. This is called Process Leadership (Jago, 1982).

However, we know that we have traits that can influence our actions. This is called Trait

Leadership (Jago, 1982), in that it was once common to believe that leaders were born

rather than made. These two leadership types are shown in the chart below (Northouse,

2007, p5):

F o u r F a c t o r s o f L e a d e r s h i p

There are four major factors in leadership (U.S. Army, 1983):

L e a d e r : You must have an honest understanding of who you are, what you know, and what

you can do. Also, note that it is the followers, not the leader or someone else who determines if

the leader is successful.

F o l l o w e r s : Different people require different styles of leadership.

C o m m u n i c a t i o n : You lead through two-way communication. Much of it is nonverbal.

S i t u a t i o n : All situations are different.

B a s s ' T h e o r y o f L e a d e r s h i p

Bass' theory of leadership states that there are three basic ways to explain how people

become leaders (Stogdill, 1989; Bass, 1990). The first two explain the leadership

development for a small number of people. These theories are:

o Some personality traits may lead people naturally into leadership roles. This is

the Trait Theory.

o A crisis or important event may cause a person to rise to the occasion, which

brings out extraordinary leadership qualities in an ordinary person. This is the

Great Events Theory.

o People can choose to become leaders. People can learn leadership skills. This is

the Transformational or Process Leadership Theory. It is the most widely

accepted theory today and the premise on which this guide is based.

T h e T w o M o s t I m p o r t a n t K e y s t o E f f e c t i v e L e a d e r s h i p

According to a study by the Hay Group, a global management consultancy, there are 75

key components of employee satisfaction (Lamb, McKee, 2004). They found that:

o Trust and confidence in top leadership was the single most reliable predictor of

employee satisfaction in an organization.

o Effective communication by leadership in three critical areas was the key to

winning organizational trust and confidence:

1. Helping employees understand the company's overall business strategy.

2. Helping employees understand how they contribute to achieving key

business objectives.

3. Sharing information with employees on both how the company is doing

and how an employee's own division is doing — relative to strategic

business objectives.