Leading Change

In Chapter 1, we defined management to include the functions of leading, planning, orga- nizing, and controlling. But recent work on leadership has begun to distinguish leadership as something more: a quality that inspires and motivates people beyond their normal levels of performance. We are living in an era

when leadership is needed  more than ever. The environment  today is turbu- lent, and organizations need to shift di- rection quickly to keep pace.37  Leaders in many organizations  have had to re- conceptualize  almost every aspect  of how they do business to meet the needs of increasingly demanding customers, keep employees motivated and satisfied, and remain competitive in  a  rapidly changing global environment.

Research  finds that some leadership approaches are more effective than others for bringing about  change in organiza- tions. Two types  of leadership  with a substantial  impact are  charismatic   and transformational.  These types of leader- ship are best understood  in comparison to transactional leadership.38  Transac- tional leaders clarify  the role and task requirements of subordinates, initiate structure,  provide appropriate  rewards, and try to be considerate to and meet the social needs of subordinates. The trans- actional leader’s ability  to satisfy subordi- nates may improve productivity.  Trans- actional leaders excel at management functions. They are hardworking,  toler- ant, and fair minded. They take pride in keeping things running smoothly and efficiently. Transactional   leaders  often Image not available due to copyright restrictions stress the impersonal  aspects of performance,  such as plans, schedules, and budgets. They have a sense of commitment to the organization and conform to organizational norms and values. Transactional leadership is important  to all organizations,  but leading change requires a different  approach.


Charismatic  leadership goes beyond transactional  leadership techniques. Charisma  has been referred to as “a fire that ignites followers’ energy and commitment, producing results above and beyond the call of duty.”39 The charismatic leader has the ability to inspire and motivate people to do more than they would normally do, despite obstacles and per- sonal sacrifice. Followers transcend their own self-interests for the sake of the team, de- partment, or organization. The impact of charismatic leaders is normally from (1) stating a lofty vision of an imagined future that employees identify with, (2) shaping a corporate value system for which everyone stands, and (3) trusting subordinates and earning their complete trust in return.40 Charismatic leaders tend to be less predictable than transactional leaders. They create an atmosphere of change, and they may be obsessed by visionary ideas that excite, stimulate, and drive other people to work hard.

Charismatic leaders are often skilled in the art of visionary  leadership. A vision is an at-tractive, ideal future that is credible yet not readily attainable. Vision is an important com- ponent of both charismatic and transformational leadership. Visionary leaders speak to the hearts of employees, letting them be part of something bigger than themselves. Where others  see obstacles or failures, they see possibility and hope.

Charismatic  leaders typically  have a strong vision for the future, almost an obsession, and they can motivate others to help realize it.41 These leaders have an emotional  impact on subordinates  because they strongly  believe in the vision and can communicate it to others in a way that makes the vision real, personal, and meaningful.  Charismatic  and transformational leaders are passionate about a vision.  This chapter’s Spotlight  on Skills segment provides a short quiz to help you determine whether you have the potential to be a charismatic  leader.

Charismatic leaders include Mother Theresa, Adolf Hitler, Sam Walton, Alexander the Great, Ronald Reagan, David Koresh, Martin Luther King Jr., and Osama bin Laden. Charisma  can be used for positive outcomes that benefit the group, but it can also be used for self-serving purposes that lead to deception, manipulation, and exploitation of others. When charismatic  leaders respond to organizational problems in terms of the needs of the entire group rather than their own emotional  needs, they can have a powerful, positive influence on organizational  performance.42   Visionary  leaders who don’t develop enough infrastructure, or who spread themselves too thin, can run into serious problems, as shown in the Business Blooper.


Transformational  leaders are similar to charismatic  leaders but are distinguished  by their special ability to bring about innovation  and change by recognizing followers’ needs and concerns, helping them look at old problems in new ways, and encouraging them to question the status quo. Transformational leaders inspire followers  not just to believe in the leader personally but to believe in their own potential to imagine and create a better future for the organization. Transformational leaders create significant  change in both followers and the organization.43  They have the ability to lead changes in the organization’s mission, strategy, structure, and culture, as well  as to promote innovation in products and technolo- gies. Transformational leaders do not rely solely on tangible rules and incentives to control specific transactions with followers. They focus on intangible  qualities  such as vision, shared values, and ideas to build relationships, give larger meaning to diverse activities, and find common ground to enlist followers in the change process.44

A recent study confirmed that transformational leadership has a positive impact on fol- lower development and follower performance. Moreover, transformational leadership skills can be learned and are not ingrained personality characteristics.45 However, some personal- ity traits may make it easier for a leader to display transformational  leadership behaviors. For example, studies of transformational leadership have found that the trait of agreeable- ness, as discussed  in the previous chapter, is positively  associated with transformational leaders.46  In addition,  transformational  leaders are typically  emotionally  stable and posi- tively engaged with the world around them, and they have a strong ability  to recognize and understand others’ emotions.47    These characteristics are not surprising considering that these leaders accomplish change by building networks of positive relationships.

Richard Kovacevich, who steered midsized Norwest  Corp. (now Wells Fargo & Co.) through numerous acquisitions to make it one of the largest and most powerful banking companies in the United  States, is an excellent example of a transformational leader.

Kovacevich’s leadership style puts accountability  for success in the hands of each and every employee. He leads with slogans such as, “Mind share plus heart share equals market share.” Although some people might think it sounds hokey, Kovacevich and his employees don’t care. It is the substance behind the slogans that matters. Kovacevich believes it’s not what employees know that is important but whether they care. Employees are rewarded for putting both their hearts and minds into their work. Kovacevich spends a lot of time out in the field, meeting employees, patting  backs, and giving pep talks. He likes to personally re- mind people on the front lines that they are the heart and soul of Wells Fargo, and that only through their efforts can the company succeed.48

Source: Daft Richard L., Marcic Dorothy (2009), Understanding Management, South-Western College Pub; 8th edition.

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