The Significance Of Leadership Business Essay

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Rapid and significant changes in the world today have greatly impacted organisational development in many ways. The accelerating pace of evolution, especially in the field of technology, creates fundamental shifts and gaps in business operations. To address this pressing issue, organisations have to move forward in tandem with the pace of change in globalisation.

Organisations go through various cycles in its quest for development. Hence, organisational development has been a widely discussed topic in the business world at large. Organisational change involves a major shift in terms of its operations, strategies, long-term plans and resources. To lead a successful transformation, organisations require competent leaders to provide direction on how to move forward. Effective leadership will ensure that the task will be carried out in a systematic and organised manner so that the business operations of the company will not be negatively affected in the process. However, not all organisations have qualified leaders to lead them at the helm. Some organisations survive the journey, while others struggle and fail miserably. Business transformation needs capable leadership to steer the organisation towards success. A leader must find the best skills in order to provide directions, motivations and purposes.

In this context, leadership plays a significant role in the success of organisational change and development. Leaders consistently make efforts to accomplish their tasks in leading the change. Those in organisational leadership constantly review their strategic goals and objectives in order to meet the changing requirements in bringing their business to the next level.

Based on the above, we can deduce that leadership is a significant variable in today's organisations. The quality of leaders at the helm is an important determinant to gauge the success of the organisation. The key to an organisation's success lies with the top leaders who make decisions on the direction of the company. Some organisations may have spent millions in creating missions, plans and strategies. Howe, all of these strategies mean absolutely nothing if they do not have capable leaders to make it happen.

Another important factor which can determine the success of organisation is the capability of its people resources. It is the people that move the organisation. An organisation can have the best leader in the world but if the supporting structure is weak, the organisation will get nowhere. Hence, quality leaders have to be supported by capable followers in order for the organisation to thrive and achieve its goals and objectives.


Although there have been many topics of discussion on the subject of leadership in organizational science and thousands of literature written and published by leadership experts around the globe, there has been no single agreement on what leadership entails. The existence of various leadership theories and models based on research and observations that have been made for centuries also illustrate that leadership has been a topic of wide interest to experts in the field. Some assertions about leadership have been made based on consistencies in observations, but there are also those made on assumptions without proper understanding of the concept of leadership.

Definition of Leadership

There are many variations in the definition of leadership. Some define it as a general term while others define it in the context of business or organisation.

Despite all the differences, it can be concluded that the various definition point to one general idea. Leadership can be defined as "a process by which a person uses his influence on others towards accomplishing a common goal or purpose", which is similar to Northouse's (2007, p3) definition. Leaders require followers to achieve an inspired vision to create something new. In the context of an organisation, leadership is a process whereby an individual influences a group of people to attain an objective and provides direction to the organisation in a cohesive manner. Leaders also require adequate management skills to set the correct direction and guide the followers smoothly and efficiently.

However, certain points that can be emphasized when defining leadership are:

It is seen as a social influence because a leader needs to have at least one follower.

Followers voluntarily choose to follow the leader who may or may not have formal authority. Leaders have a natural influence on followers who may be attracted by his vision for a better life.

Leaders normally have a purpose to which his followers are directed to. A leader's role is basically to lead others with his/her drive and commitment. A leader motivates and encourages people to do things beyond their normal call of duty via effective communication.

In order to qualify as a leader, an individual must have the ability to lead. The are specific mandatory requirement which qualify people to be distinguished as leaders. Besides some basic criteria such as level of education and experience, leaders hold certain characters and traits which make them stand out against the rest of the crowd. Leaders also has the ability to create vision and inspire others to follow his direction towards achieving the vision.

Theories of Leadership

In the process of understanding the science of leadership, experts have stumbled across many theories which had been developed to explain the behaviour and characteristics of certain leadership styles. Full comprehension of the theories will provide insights on how leaders behave in particular ways and in what situations will the leaders be most effective in. By examining these theories, leaders can also anticipate the behaviour of followers in terms of how they respond to specific styles of leadership.

Some of the most widely known and popular leadership theories are :

Great Man and Trait Theories

The Great Man theory claims that some men are naturally born to be great leaders. This theory based its findings on leader characteristics by studying great leaders of the past. Meanwhile, the Trait theory observes general characteristics of great leaders and studies how these traits are significant contributing factors to effective leadership. This theory assumes that people with the right combination of traits are bound to be good leaders.

Behavioural Theories

In contrast to the Great Man theory, behavioural theories concentrate on the development of leadership skills in specific situations. For instance, the studies of role theory illustrate the effects of social learning on our roles and the role of other people in certain situations. Another behavioural theory called the Managerial Grid theory examines how the leader's concern for subordinates relates to efficiency and productivity.

Participative Leadership Theories

Participative leadership theories proclaim that the participation of team members when making decision is important. Based on these theories, participation of team members in decision making process results in greater understanding of issues and ownership of the decisions that have been made.

Situational Leadership and Contingency Theories

According to situational leadership theories, the style of leadership should suit particular situations. These theories analyse the structure of organisations as well as employees' capabilities, motivations and internal relationships with superiors. Similarly, contingency theories also study styles of leadership in specific situations but greater emphasis is placed on leadership capabilities and nature of organisations.

Transactional Leadership Theories

Transactional leadership theories study the effects of reward and punishment system on people's behaviour. These theories proclaim that leaders can psychologically control the performance of employees by rewarding those who complete their task and punishing those who do not finish their work without considering factors which hamper their performance. The target of the reward and punishment system is to correct areas which malfunction in an organisation.

Transformational Leadership Theories

Transformational leadership theories analyse how followers are inspired by leaders. These theories emphasize on building a team's passion and enthusiasm. They also take a closer look at how leaders manage to create a vision for an organisation, get the employees to accept the vision and then execute the vision as directed.

Leadership Styles and Approaches

As a result of different leadership theories, a variety of leadership styles have been observed and identified. Individuals practice leadership styles based on their own values and preferences, some of which depends largely on the culture and norms of the organisations that they are spearheading.

Some of the identified leadership styles are:


Visionary leaders are more far-sighted and have the capability to see beyond what is already happening. They have the capability to create visions for the future and get people to believe in and execute those visions. Visionary leaders are able to bring the organisation ahead of competitors as they think well ahead of their counterparts in rival companies.


Charismatic leaders have the natural ability to attract followers to fight for their cause. They use charm and grace to command influence over their followers and have the capability to inspire commitment from people.


Leaders who employ the autocratic style of leadership are generally more concerned about accomplishing the tasks at hand. More of a directive leadership style, their main objective is to get work done without much consideration about the feelings of their team members in making decisions.


Participative leaders normally prefer to get the consensus of his team before making a final decision. Each member of the team will have a sense of ownership in the final decision which they are involved in making, thus the commitment level towards accomplishing the task is higher.


Adaptive leaders are more flexible and have the ability to understand the complexity of the ever-changing modern business world and can quickly adapt to changes as required. In the present era where organizational change and development is the main agenda, adaptive leaders will be able to thrive and lead efficiently.  


Transformational leaders have the capability to encourage and inspire people to perform way beyond their job functions. Leaders in this category aspire to achieve change in their community or organisation. They plan well by analysing the current situation and find ways to make further improvements. They are also good at anticipating potential problems and outcomes.


Strategic leaders are often required by large organizations to steer the company through well-structured objectives and available resources. Organisations which are going through highly complex changes in their businesses will need strategic leaders to provide organisational direction towards accomplishing their vision and mission. Leaders in this category are able to lead change management well, and have the skills and knowledge to devise strategic mission and objectives in order to grow the business.


Transactional leaders use the reward and punishment system to achieve desired results from their followers. These leaders basically establish the performance standards for their followers and reward them accordingly based on their performance reviews. In many organisations, this approach to leadership is most likely in place.


In contrast to autocratic style of leadership, democratic leaders are more people oriented and promote the participation of team members when making decisions which affect the team. Also known as participative leaders, they usually command greater respect from team members.

In deciding which leadership style is most suited to a particular organisation, several factors have to be seriously considered. Of utmost priority will be the requirements of the organisation itself. The senior management of the organisation should be able to spell out the structure of the organisation in terms of its culture and norms, business strategy and organisational policies in order to determine what type of leadership the organisation actually need. This exercise is highly crucial if the organisation plans to forge ahead of its competitors and thrive in the challenging business environment that we are in today.

Leadership vs. Management

Leadership is often interchanged with management when both terms actually refer to different meanings conceptually.

Management involves several functions such as organising, planning, controlling and directing. People who perform these functions are called managers. Those who are highly skilled in performing these functions are excellent managers, and not leaders. By holding the title as managers, people in this position have formal authority over their subordinates. They are primarily responsible for tasks to be done in organisations which are guided by company policy and systems. Although the tasks are mainly delegated to their subordinates, they are required to manage the team performing those tasks and ensure that all tasks are successfully executed.

In contrast, leadership deals more with relationship with followers via the amount of influence they have in motivating the followers to be energised and work towards achieving the organisation's goals and objectives. It is only one aspect of management that has a high impact on the direction of an organisation. Leaders' ability to influence is generally based on many factors which may not include formal authority on the followers. Leaders are driven by their passion, vision and enthusiasm and they influence followers by evoking their emotions towards achieving a shared dream or vision. Leaders required at least one follower.

In an organisational setting, leaders are vital in instituting organisational values in employees. Based on these values, they set the direction of the organisation and devise ways on how to get there. In doing so, leaders shape the culture and behaviour of the organization as a whole.

Characteristics of Effective Leadership

David M. Traversi, after studying leadership patterns and thousands of leaders over two decades, identified 8 personal drivers of effective leaders. The following drivers provide positive energies to drive the person's capability to function as an effective leader:

Presence - a fundamental energy which forms the basis of the traits and functions of an effective leader. This baseline energy drives the other seven drivers. According to Traversi, "when you live in the present moment, you understand that everything is connected. You become, among other things, considerably more creative, highly focused, think more clearly and efficiently, prioritise better, organised and responsive. And most importantly, produce better results for the organisations."

Openness - when we open up our thoughts and feelings, we become more liberated and energized. By doing that, we expose ourselves to more opportunities and possibilities in a rapidly changing world. It allows us to be more forward thinking, hence the capability to generate future vision and ideas.

Clarity - in behaviour, emotions and thoughts. People with clarity of thoughts and emotions exhibit positive energy which allows them to behave in the affirmative. They are able to acknowledge past fear and rage and manage them to the level that these negative thoughts and emotions do not hinder their current performance. Thus, the ability to display effectiveness as leaders.

Intention - being consciously aware of your intentions and positively believe that you can achieve a desired result help you to reinforce your intentions. By practicing your intentions, time and again, you are actually realising your intentions into becoming a reality. The power of intention allows leaders to stay focused on their vision and plan to produce desired results.

Personal Responsibility - helps individuals to be accountable for their decisions and actions. By accepting ownership for all the positive as well as the negative elements in life, they will improve the ability to be more credible and courageous in building effective plans for the future.

Intuition - a powerful source of inspiration that exist in all of us. Individuals who take advantage of the power of active intuition will display greater ability to inspire and build visions that helps organisations to forge ahead in a rapidly changing business environment.

Creativity - the critical ingredient on which organisations thrive. Leaders who possess a high level of creativity when leading organisations have the capacity to generate better ideas, inspire the employees to achieve visions they have established and build success.

Connected communication - a high-impact leader displays excellent communication skills which enable him or her to connect to surrounding people. It is a powerful driver which allows followers to sense the credibility and integrity of the leader, to feel inspired by his or her presence and voluntarily support the leader's visions.

In essence, leadership begins with self-assessment and recognising oneself from within. If individuals realise the true potential of their inner beings and build on these positive drivers, they can reinforce those traits and characters of being effective leaders. Only by being strong on the inside can a leader display an inspiring front outside. The leader will then be able to make effective decision which will lead organisations to be more organised and successful.

When we talk about the quality of leadership, we evaluate the outcome of leadership as good or bad depending on how it affects the overall outcome of the situation. This type of evaluation is highly subjective and is based on individual perception. Apparently, leadership decisions which do not yield positive outcomes are considered to be bad leadership. But leadership decisions which produce favourable outcomes may not necessarily be good leadership if the impact of the decision may be good for the organisation but do not yield any satisfaction to its followers.

Generally, effective leadership is a more preferred. Effective leaders are able to influence followers to do what they want, and when achieved, the followers will of course be happy with the outcome.


The looming leadership crisis will have a grave impact on organisations if the matter is not addressed now. Shortage of qualified leaders in organisations around the world has shown that it is a pressing issue which will take some time to be corrected.

Organisations need to seriously reassess their workforce in order to ensure that the crisis will not burden them with uncertainties in the direction of their business. They have to start generating strategies to overcome the shortage of capable leaders to take over the helm of their organisations whenever people or current leaders at the top leave the company or retire.


Based on observations and happenings in today's organisation, and even global politics, it is quite obvious that we are encountering a leadership crisis. We have been constantly bombarded with news of leadership failure in major oragnisations around the world, resulting in serious unemployment issues and financial as well as economic crises which plaqued population even in developed countries. Conflicts occuring in politics, military, government and even religion all boil down to ineffective leadership.

Organisational leaders seem to falter in many spectrums - from failing to strategise properly, getting involved in unethical business practices, corruptions, financial stability to poor justification of decisions - all lead exorbitant losses to organisational profits.

Many leaders struggle to provide a clear direction to the organisations that theu are steering, especially in complex changing situations. Mostly are not skilled enough to address the changing business environment and fail miserably to counter the effects on regulation and technological development. Even leaders who were once in their essence are caught in the rapid pace of technological changes. As a result, many encounter difficulties to adapt to the changing organisational requirements in the absence of creativity and innovation. Those who lack vision and inspiration will be left wondering what to do to steer the organisations out of the gloom.

Yes, we are now in a leadership crisis and we need to act fast in order to nip the problem in the bud. Organisations have to make serious efforts to replenish their talent pool and retain identified potential successors for the well-being of their business.


Leadership development training programs are normal means to increase leadership skills and capabilities in many organisations. It is a generally accepted idea that training programs and services can improve the skills and competencies of potential leaders. But what some organisations really need are leadership skills and capabilities which are tailored to suit the needs of their organisations, which may be different from others. In cases such as these, the leadership development strategies for the said organisations must be custom-made to their specific needs. Coming up with great leadership development strategies require a lot of time and effort, therefore many organisations simply decide to adopt a general plan and expect the leaders to be able to function well once they complete certain training programs.

Some existing leadership programs are already outdated as they no longer meet expectation of the business environment which has evolved over time. Some programs are not focused on enhancing the required skills while other simply emphasize on the management aspects of leadership. In the end, organisations who choose inappropriate leadership development programs may not benefit even though they have made major investments in churning out leaders from these programs.

To counter this problem of producing "generic" leaders, best practice companies usually run a thorough identification process within their organisation to recognise the actual needs that can enhance their current organisational structure. By doing so, they can detect areas of strengths and weaknesses; thus, they can develop further on their strengths and improve their weaknesses. Where leadership is concerned, best practice companies are able to strategise their leadership development plan after they have identified the common best practices that exist within the organisations. Their leadership development strategies can then be tailored to reinforce these practices and improve on them. In this way, the organisation will benefit in the long run as the quality of organisational leadership will be consistently upgraded.

It is very important for organisations to realize that well planned leadership development strategies will have a high impact on its future business growth. A comprehensive and customised leadership development plan can address gaps in leadership capabilities for future results. Organisations can successfully build a pipeline of capable leaders if they are able to address this pressing need.

Succession Management

Planning successors to take over critical positions is an important part in organisational planning. Organisations use this method to ensure able replacement for critical positions in order to ensure business continuity whenever people in critical positions leave the company. However, succession management has to be executed in an efficient manner in a way that guarantees maximum transfer of knowledge and expertise to the potential successors. Well-designed and effective succession management requires careful examination of business plans and strategies. If not, when the time come for the successor to take over the position, he/she will not be able to perform the task well.

Identifying potential successors for critical positions is also not an easy feat for HRD personnel. In large organisations, suitable individuals may be overlooked due to the absence of a systematic approach to talent identification. Some organisations only consider seniority of employees when looking for successor, thus ruling out really talented individuals from being selected. Best practice companies usually go through a detail selection process whereby all the requirement and dimensions of critical position are assessed before the actual identification of potential successors take place. By adopting this process, the companies are able to find right candidate which matches the requirements and competencies that are needed to execute the job well in the future.

In addition, key competencies that are required to fill in critical positions should also be carefully considered. When planning for succession of critical positions, organisations need to chart the key competencies required to match the organisational needs. A mismatch will create future problems and conflicts.


With all the above discussion on the significance of leadership, we can conclude that organisations at large need effective and high-impact leaders who can help steer the organisation to greater heights. Although there is a recognised and impending shortage of capable and qualified leaders in the world today, we have to find ways to develop true leaders who can help build greatness in their followers.

In essence, only through effective leadership can help organisations thrive and increase their performance. The rapidly changing business environment clearly shows that organisations which do not respond to changes will not be able to survive the competition. Organisational leaders who are visionary enough will be able to anticipate what the future holds for them and start devising ways to steer the organisations into the paths of success.

While experts agree that there is a global shortage of qualified leaders, especially in helming major organisations which result in mediocre performance of the organisations over time, there is still time to rectify the situation. Leaders can be developed by nurturing their skills and knowledge. We can start the ball rolling by identifying individuals with suitable characters and traits to become effective leaders and building on their potentials. Correct and sufficient grooming can help produce a pool of talented and high calibre leaders for the future.

However, although leaders can be developed and nurtured, there is still the issue of determining how to ensure that the leaders produced have enough skills to perform effectively. There are situations where great, potential individuals are not given sufficient exposure to leadership development that they just turn out to be "managing" and not truly leading the organisation. These types of leaders fall into the organisational traps where they are just going with the flow to ensure that the company stays afloat instead of taking the organisation one level up and steering it in the direction which will lead to greater success. In such cases, organisations have to take a closer look at their leadership development plan and identify areas which need further improvement and enhancement. This is crucial so that talented potentials will not go to waste.

Organisations have to ascertain the leader competencies required based on their own set up such as structure of the existing management, culture of the company and employees as well as the systems and policies that are already in place. Some leaders do not have the competencies which required for the job that they are doing; some acquire competencies which are not suitable or compatible with the organisations that they are leading, thus creating conflicts in leadership. All these attributes are determinants in the strategically devising plans which will match the organisation's development. For instance, organisations which are undergoing rapid business environment changes require strategic leaders to steer them into the right direction. Strategic leaders generally have the skills and capabilities to understand complex business environment and are highly flexible and adaptable to rapid changes. Hence they will be able to navigate the organisation strategically. Mismatch of leadership competencies and organisational requirements may result in disastrous performance of the bottom line and result in massive loss of profits. In some cases, the cost of poor leadership is unimaginable.

The existence of various leadership styles and approaches can also be a determining factor in ensuring the success of organisations. Organisations have to identify which type of leadership style is suitable for their operations before they can find someone to lead the business. A perfect match will ensure success, and vice versa.

In addition to the dearth of qualified and mature individuals to assume critical positions, there are those who are already at the top of the management pyramid but lack leadership skills. There are many organisations who appoint individuals who cannot lead. Such people are either "thrown" into the situation because of poor succession issue or are there because they are expected to take on the position, for instance, in case of a family business. Due to lack of skills and experience to perform leadership tasks, these individuals normally perform managerial functions and not really leading the organisation. Those who do well just turn out to be excellent managers, not leaders. Some people do not even understand the difference of managing and leading that they are easily satisfied with the outcome.

To ensure that a continuous flow of talented potential leaders is always available, organisations have act fast and start building theur own pool of potential successors. Leadership development should be given priority when planning their human capital. Since developing and nurturing leadrrship skills and capabilities required long-term investment and planning, organisations must start early and be willing to set aside their training budget for the purpose. Leadership development takes time, and organisations are sometimes not willing to invest in initiatives which do not immediately affect their bottom line. This issue set basically sets apart normal companies and best practice companies. Best practice companies such as GE and McDonald's recognise the importance of leadership growth and treat it as their top most priority. At MsDonald's, the CEO of the company personally selects potential candidates to be groomed as their future leadership team. Such companies lay out their well thought-out plans in strategically so that they will not face any leadership crisis in the near future, and if they still do, the impact on the company's operations will be minimised.

Some organisations implement succession planning to tackle leadership replacement issue. Succession planning can yield positive results if implemented correctly. Organisations have to ensure that the identified potential successor is capable of taking over the responsibilities once he/she assumes the position. In addition, the organisations must be certain that during apprenticeship, the current superior is willing to educate and nurture the skills and capabilities of the potential successor accordingly. Succession planning is bound to fail if the current superior does not wholeheartedly share and impart his/her skills and experience to the potential successor.

Undoubtedly, it is the responsibility of the Human Resource Department (HRD) in any organisation to ascertain that the impact of leadership crisis will not hamper their day-to-day operations. Being the department which has access to organisational and employee structure, the HRD should alert the senior management of the company should the need arises for development of future talent pool. They should be proactive in identifying candidates to be groomed as potential leaders and successors, and come up with retention programmes to make sure that this group of high-potentials will not leave the company at critical points. Besides that, HRD can clearly identify the severity of any leadership crisis based on available records. They should be prepared to minimise the impact of leadership shortage on the workforce. Careful planning of human resources is vital to ensure that the growth of the company is not impeded in any way and that the company is prepared to take on challenges at all times.