2.

3 Leadership and management

IB Business Management
By the end of this chapter, you should be able to:
• Outline the key functions of management.
• Contrast management and leadership.
• Discuss some leadership styles.
• Explain how ethical considerations and cultural differences may
influence leadership and management styles in an organization.

2.3 Leadership and management

• Responsible for planning and overseeing the work of a group.
• Monitors the group’s progress.
• Ensures that the plan is put into effect.
• Deals with complexity.

• Management: the
organization and
coordination of the
activities of a business in
order to achieve defined
objectives.

Manager
• Management is made up of the people in organizations in charge of
making sure tasks are accomplished.
• They are not the people who do the work, they are the ones with a
special set of responsibilities who ensure that the work is
performed.
• Top management includes the CEO and the various people in charge
of each of the major business functions (HR, accounting and finance,
marketing, and operations management).
• Other levels of management
exist all the way down to the
floor supervisors.

Management
• Planning (set strategic, operational, and tactical objectives)
• Organizing (make sure the business has sufficient resources)
• Commanding (make sure all individuals know their duties)
• Coordinating (bring together the various resources)
• Controlling (test for quality)

Key functions of management

• The role is more emotional.
• Ability to inspire people to follow voluntarily.
• Spends deal of time and energy building relationships.

• Leadership: the art of

motivating a group of
people towards achieving a
common objective.

Leader
• Leadership is a key part of being a successful manager.
• It involves setting a clear direction and vision for an
organization that others will be prepared to follow.
• Employees will want to follow a good leader and will respond
positively to them.
• A poor leader will fail to win over staff and will have problems
communicating with and organizing workers effectively.
• Most good managers are also good leaders - but some
managers are not. Managers who focus on control of people
and allocation of resources can fail to provide a sense of focus
that others will understand and be prepared to follow.

Leadership and management

• Without clear and charismatic
leadership workers may very well
be managed.
• But will they be inspired to help
the leader and the business take
a fresh direction and achieve
new goals?

Leadership and management

• Autocratic
• Paternalistic
• Bureaucratic
• Democratic
• Laissez-faire
• Situational

Leadership styles
• Leaders hold on to as much power and decision making as
they possible can.
• There is likely to be minimal consultation and employee input
into decision making.
• Orders should be obeyed.
• Employees should welcome the structured environment and
the rewards they receive.
• Most likely to be used when subordinates are unskilled, not
trusted, and their ideas are not valued.
• The organization focuses on results and has to make urgent
decisions that depend highly on the manager.

Autocratic style
• Likely to be accompanied by very detailed instructions and
close supervision.
• Will probably be unsuccessful when employees have the
opposite characteristics.
• Highly skilled individuals who
have experienced democratic
systems and who like to do
things their own way are
unlikely to tolerate an
autocratic manager, and may
leave the organization.

Autocratic style
• Shares some features with autocratic leadership in that the
leader has considerable authority over employees.
• However, a paternalistic leader views the employees as
“family” – the leaders are like parents.
• Great concern for the employees of the business.
• Provide employees with a sense of safety.
• Employees come to believe that, no matter what, the
business will stand for them.
• As a result, leaders often get total loyalty, even blind trust,
from employees.

Paternalistic style
• Employees will probably remain at the business for a long
time and become totally committed to it, the leader, and the
leader’s aims.
• Employees take great pride in the organization and do
whatever is necessary to make it successful.
• They take some “ownership” of the business, in part because
they do not want to let the leader down.
• Leaders place great importance on loyalty, which may mean
that they do not have a fully objective, critical eye when
evaluating employees’ performance.
• Employees may take advantage of the leader and his or her
loyalty to them.

Paternalistic style
• The manager refers to the rule book when making decisions
since procedures or policy dictate what should be done.
• Can be effective when the operating environment is very
stable or very definite procedures need to be followed
because the consequences of a mistake may be very high.
• Likely to be counterproductive in a
situation when creativity and
rapid decision making is needed.

Bureaucratic style
• Probably the most popular style.
• Involves employees in decision making and informs them
about issues that affect them.
• Consultation is central.
• The leader is ultimately responsible for the decisions of the
team - the leader will have the final say.
• The word democracy is seen by most people as having
positive emotional connotations.
• The leader can produce results in terms of quantity;
employees like the trust, cooperation, and sense of
belonging that go with it.

Democratic style
• Likely to be most effective with skilled, free thinking, and
experienced subordinates who enjoy the relationships and
chaos that can result from belonging to a highly effective
team.
• May slow down decision making
and may prove too costly.
• Requires a positive chemistry in
the team.

Democratic style
• Means “to leave alone”.
• The manager gives employees considerable freedom in how
they do their work.
• Employees can set their goals, make their own decisions, and
resolve problems as they see fit.
• May be an appropriate style when employees can be trusted
to do their job because they are motivated, skilled, and
educated.
• May be appropriate when working with a culture based
around the individual, and where people can work
successfully on their own.

Laissez-faire style
• Leadership rests on the notion that different situations
require different styles of leadership.
• No style of leadership would ever be deemed “the best”.
• The nature of the employees or the circumstances will
determine which style fits the situation.
• The benefit is that leaders match their style to the
circumstances at hand.
• On the other hand, a leader may too frequently change
styles or may change styles when the circumstances of the
situation determining the switch are not clear to employees.

Situational style
The style of leadership is likely to be influenced by:
• The subordinates (skills, age, education, expectations, and
motivation).
• The decision (whether urgent, important, or the
consequences of an error).
• The leader (character, values, experience, and expectations).
• The environment (creative, standardized, repressive,
democratic, or complaint).

Effectiveness of leadership styles

• Leaders focus on “doing the right thing” with respect to their
people, whereas managers tend to do the right thing with
respect to their organizations.
• Leaders are focused on people, so they focus on building
relationships and on inspiring employees.
• Leaders have to do more than merely say that they care
about “their people”. They must actually demonstrate that
care when circumstances require.
• Leaders guide organizations toward ethical ends.
• Leaders are willing to take the blame for bad outcomes if it
means serving their employees by protecting them from
excessive or unwarranted criticism.

Ethical considerations
• A leader might intervene when a manager wants to sack a
young employee who made an error of judgement on the
ground that the employee was unexperienced.
• Managers see their ethical obligations more to the business
than the employees.
• The manager supervising a young employee who has made a
major error sees the employee as a liability to the business.
• The manager believes that the right thing to do is to sack the
employee to prevent further errors, which could cost the
business money.
• In summary, leaders centre ethical considerations on people,
whereas managers centre on the organization.

Ethical considerations
• Cultural differences can influence leadership and
management.
• According to Hofstede, cultural influences relevant to
business have five dimensions: power distance,
individualism, uncertainty avoidance, masculinity, long-
term orientation.
• Americans value individualism whereas Japanese people
value group cohesion.
• Employees from cultures with great power distance prefer
organizations with autocratic leaders.
• Employees from cultures with low power distance might
perform better under democratic leadership.

Cultural differences
• Lominé, L., Muchena, M., and Pierce, R. (2014). Business
Management. Oxford, United Kingdom: Oxford University
Press
• Clark, P. and Golden, P. (2009). Business and management
Course Companion. Oxford, United Kingdom: Oxford
University Press
• Gutteridge, L. (2009). Business and Management for the IB
Diploma. Oxford, United Kingdom: Oxford University Press
• Thompson, R. and Machin, D. (2003). AS Business Studies.
London, United Kingdom: Harper Collins Publishers

Sources