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The Rise of Modern Leadership Theories
Business Essentials · Chapter 6: Leadership Theories and StylesSection 6.3 · lesson 33 of 10513 min · free with a free account
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In this lesson
Commitment beyond the exchange, and the part followers play.
- Describe transactional and transformational leadership
- Explain the augmentation claim
- Describe charismatic, servant, authentic, and shared models
- Assess the evidence and risks of each
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Leadership Theories and Styles
The Rise of Modern Leadership Theories
A leader can get exactly what she pays for, and still lose her best people. This section explains why, through the modern theories of leadership. We'll start with transactional leadership, the exchange at the heart of most jobs. Then transformational leadership, which tries to go beyond that exchange, and the evidence and risks that come with it. We'll look at charismatic, servant, authentic, and shared leadership. And we'll see that these models answer different problems, rather than competing to be the single best one. The classical theories describe a leader adjusting direction and support. The modern ones ask how leaders win commitment, and what followers themselves contribute.
Beyond The Classical Theories
A Different Question
The theories of sections six point one and six point two, largely describe a leader who acts on followers. That leader adjusts how much direction and support to give. The modern theories ask a different question. How do leaders obtain commitment and effort beyond what an exchange of work for reward can secure? And what part do followers themselves play in that process? They also bring in concerns the classical theories neglected. Purpose. Ethics. And the way leadership can be distributed across a group, rather than held by one person. Each model here comes with its evidence, and with the risks it carries. Both matter.
Transactional Leadership
Leadership as an Exchange
Transactional leadership is based on an exchange. The leader clarifies what's required of followers, and what they'll receive for meeting the requirement, or failing to. It has three components. In contingent reward, the leader agrees what's to be done, and provides recognition, pay, or other rewards when it's done. In active management by exception, the leader monitors for deviations from standards, and corrects them before they cause harm. In passive management by exception, the leader waits until problems are brought forward, and only then intervenes. The first two are constructive when used well. The third is a weak form that shades into the laissez-faire behavior of section six point one. It would be a mistake to treat the transactional approach as lesser. It's the necessary foundation of leadership. People need to know what's expected, whether their work will be recognized, and that problems will be dealt with. A leader who can't deliver these loses credibility, however inspiring the message. Its weakness isn't that it's transactional. It's that, alone, it obtains only what the exchange specifies.
Transformational Leadership
Beyond the Terms of the Exchange
Transformational leadership raises followers' motivation and capability beyond the terms of the exchange. It does that by engaging their values, and their sense of purpose. It has four components. Idealized influence is the leader modeling conduct that followers admire and want to emulate, so the leader is trusted and respected. Inspirational motivation is articulating a compelling purpose, along with confidence that it can be reached. Intellectual stimulation is encouraging followers to question assumptions, see problems in new ways, and propose their own solutions. Individualized consideration is attention to each follower's needs and development. It means treating people as individuals, and acting as a coach or mentor. Notice that none of these is about rewards. They work on why people do the work, not just what they get for it.
Table 6.3.1
Each Component Builds on an Exchange
Each transformational component has an observable behavior, and each extends a transactional behavior it builds on. Idealized influence looks like keeping commitments, admitting errors openly, and acting in line with stated values. It augments active management by exception. Standards are still enforced, but now backed by the leader's own example. Inspirational motivation means explaining why the work matters, and describing a future worth reaching. It augments contingent reward. What's required and what follows are now tied to a purpose. Intellectual stimulation asks the team to challenge how things are done. It extends checking for deviations, to questioning the standard itself. Individualized consideration means meeting each person about growth. It turns recognition into something tailored to what each person values. This pairing explains the augmentation claim. Transformational effects add to transactional ones. They don't replace them. A leader must first deliver the exchange reliably, by being clear, fair, and dependable. The transformational behaviors then increase the commitment and effort obtained. Put simply, a leader who is inspiring and disorganized will disappoint.
The Evidence
Consistently Positive, With 3 Cautions
Now the evidence, characterized honestly. Studies have consistently found positive associations between transformational behavior, as rated by followers, and follower satisfaction. The same holds for rated performance, and the pattern appears in many settings. But three cautions apply. First, the components overlap substantially in measurement. Ratings on one tend to move with the others, so it's hard to say which does the work. Second, causal direction is hard to establish. Leaders of successful teams may be rated as more transformational because the team is succeeding, and not the reverse. Third, much of the evidence relies on the same people rating both the leader and the outcomes. That inflates the associations. So the honest summary is a consistent positive pattern, with real limits on what it can prove.
The Risks
3 Ways Transformation Goes Wrong
There are also three risks to state. The first is charisma without substance. A leader who inspires but delivers little will mislead followers about what's actually being achieved. The second is dependence on the leader. Followers come to rely on the leader's presence and judgment, and the organization is weakened when the leader leaves. The third is that the components are value-neutral. Modeling admired conduct, articulating a compelling purpose, and stimulating thought can serve constructive or destructive ends. So the transformational label says nothing about whether the purpose is good. A leader may be highly transformational in pursuit of a harmful aim. That's worth remembering whenever someone is praised as inspiring.
Charismatic Leadership
Charisma Is an Attribution
Charismatic leadership is best understood through the attributions followers make. In this view, charisma isn't a quality a leader possesses. It's a judgment followers form, that the leader has extraordinary gifts. So it depends as much on the followers and the circumstances, as on the leader. Charisma tends to be attributed in crisis and uncertainty, when people feel a need for someone who can show the way. The same behavior that seems ordinary in calm conditions may be seen as visionary in a crisis. This creates a succession problem. An organization that depends on one person's perceived exceptional qualities has no easy way to replace him. Those qualities belong to the attribution, so they can't be transferred. When such a leader departs, the organization may be left with neither the leader, nor the systems that would have carried it forward.
Servant And Authentic
Serving Others, Knowing Yourself
Servant leadership places the needs of followers before the interests of the leader. On this view, the leader's primary purpose is to serve those led, and to help them grow and become more capable. Its characteristics include listening, empathy, stewardship, commitment to people's growth, and building a sense of community. It fits mission-driven organizations especially well, such as charities and services, where the purpose is itself serving others. It differs from transformational leadership in direction. Transformational leadership develops followers toward the organization's objectives. Servant leadership treats the followers' own growth as the aim. Its risk is tension with organizational objectives. A leader who puts followers first may hesitate over decisions that disadvantage them, however needed. Authentic leadership emphasizes the leader's self-awareness, and consistency between values and action. Its four components are self-awareness, relational transparency, balanced processing, and an internalized moral perspective. Balanced processing means objectively weighing all relevant information, including what challenges your views. It draws attention to trust and integrity. Its main difficulty is that authenticity is hard to measure independently of a leader's reputation.
Shared And Distributed
Leadership Spread Across a Group
In shared and distributed leadership, leadership is spread across the members of a group. Different people lead at different times, according to who has the relevant knowledge or skill. It isn't concentrated in one designated leader. These approaches fit team-based work, where tasks are complex and no one person holds all the expertise. They connect with the team structures described in chapter seven. The risks are diffuse accountability, since it may be unclear who's responsible, and coordination costs, since the group must agree who leads on what. Step back, and the modern theories share several features. They give more attention to purpose and values than the classical theories did. They treat followers as active participants, not as recipients of a leader's style. And they're concerned with commitment more than compliance, in the sense of section five point six.
Comparing The Models
Different Answers to Different Problems
Here are the models side by side. They differ on three important points. First, whether leadership is centered on one person, or spread across a group. Second, whether its aim is the organization's objectives, or the growth of followers. Third, how far a leader's inner qualities, such as authenticity, matter compared with observable behavior. Read the last column, and each model's risk follows from its own emphasis. A model built on one person risks dependence. A model built on the group risks diffuse accountability. That's why these models respond to different problems, rather than competing to be the single best one. They also share a limitation. Much of their evidence comes from ratings. And those ratings are hard to separate from the success of the organization the leader happens to lead.
Case Vignette (Composite)
Targets Met, People Leaving
Here's a composite case, built for instruction. Hana is a regional sales manager, and her approach is thoroughly transactional. She sets clear quarterly targets for each representative, pays a commission for meeting them, and checks the figures every week. She speaks to anyone who falls behind. And her region has met its targets three years running. Over the same period, turnover among her representatives has risen, and several of the best have left for other firms. The transactional approach delivered what it promised. Clarity, fair reward for results, and early correction of shortfalls. It didn't deliver what the exchange doesn't contain. Representatives said the work felt like a series of numbers, and that no one talked about their development. When a competitor offered a similar commission, they saw no reason to stay. The approach obtained compliance, and little more. The trade-off was between reliability and the extra effort of engaging people. The constraint was Hana's time. Her reasoning is to keep the transactional basics people value, and add to them. A conversation with each representative about growth. An account of why the region's work matters to customers. And an invitation to propose changes to how the region sells. Those are transformational components, added to what already works, not replacing it.
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