Leadership is, as is defined, the act of directing and motivating people toward a common goal. A leader takes charge, makes decisions, and influences others to follow. However, absolute authority is complemented by inspiration, proper and effective communication, and adequate problem-solving. Leaders can be found in any field: business, politics, education, social movements, etc.
Various types of leadership are called for by many different situations. Some leaders keep strict rules, while others have more collaborative methods. Leadership theories provide organizations and individuals with insight into selecting the best path to success. I believe that there is some inherent quality to leadership; however, that isn’t to say itthat it can’t be taught, and cultivated, wherever people are willing to learn.
Leadership Theories
While leadership theories have been the primary way to inculcate the reasons for an emergence of leaders, how they become effective leaders and how their leadership can be improved. The categories defined by the theories all fall into styles of leadership that apply to a specific set of circumstances. Here are some of the most influential theories that still have a hold on how leadership is practiced today.
Grand Man Theory of Leadership
The grand man theory suggests that social leaders are not made but born people. These leaders have an intrinsic innate intelligence, charisma, and confidence about them, that sets them apart. Traditionally, this principle has been relevant to generals and kings thought to have been born to rule.
Critics of the great-man theory disagree, arguing that leadership is something that can be cultivated rather than simply rooted in innate traits. It should still be noted, however, that a certain quality can be inherent in a person that will allow them to become a great leader, but training and experience will help make an effective leader.
Leadership Theory of Traits
This is an extension of the great man theory, where the traits of the personality were specified and highlighted for optimum leadership. Most leaders seem to share certain traits — honesty, self-assurance, smarts, intentionality, (as just a few examples) — in common.
As discussed above, trait theory does not take into account situational factors that account for effective leadership, other than having a rock-solid personality. Another factor that leads to effective leadership is a trait plus how a leader responds to changes in environmental or situation challenge – how they connect with followers.
Behavioral Leadership Theory
Unlike trait leadership theory, which focuses on the innate traits of a leader, behaviourial leadership theory is concerned with a leader’s actions. These were further classified into three different types of leadership:
- Task-oriented particular leadership– These leaders are used to getting the job done.
- People-Not Production Leadership — Seeing how members are human beings and not just mules.
- Balanced leadership − Here a mix is created of task-oriented and people-oriented.
In contrast to the trait theory, the model suggests that abilities regarding leadership can be acquired from experience by training.
Contingent Leadership Theory
Learn about the contingency theory of leadership — the theory that there is no one best way to lead. Instead, effectiveness is context dependent on factors like team dynamic, organisational structure and external drivers.
A leader’s style depended on the circumstances. For example, an autocratic style may be appropriate in a crisis, and democratic style may be best in a creative environment.
Situational Leadership Model
This situational leadership model is wider than contingency theory as well. The overall premise is that you should adapt your leadership style based on their level of competence and involvement. It outlines four leadership styles:
- Directing: Everything is clear, contained, and boring.
- Mentoring: You guide and motivate others to get involved.
- High direction, low support from the leader.
- Delegate: the team member takes the entirety.
- The model defined above can be better adapted to defined roles depending on the needs of a team.
Charismatic Leadership Theory
In this theory, a charismatic leader captivates the love of people because of his behaviour and personality. They inspire and break the emotional set-up for their team.
Theory of Transformational Leadership
Transformational leadership theory describes a leadership approach that causes change in individuals and social systems, in our case our followers, followers that we inspire and motivate to go beyond what they thought they were capable of. Their topics are vision, change and innovation. These leaders help their teams grow as individual and professional teams.
Transactional Leadership Theory
The transactional leadership theory is much more complex and reward-based. Within this paradigm leaders set goals and expectations and reward people for achieving those goals. This model is most beneficial in relatively stable environments where efficiencies and production line replicas are of utmost importance.
| Aspect | Transformational Leadership | Transactional Leadership |
| Focus | Inspiring and motivating | Managing and controlling |
| Change | Encourages innovation | Maintains status quo |
| Motivation | Intrinsic rewards | Extrinsic rewards |
Each of these two has its good sides. Transformational leadership best facilitates change as it tends to drive change, while transactional leadership can provide stability and order.
Types of Leadership Style
Leadership styles are the specific methods of leading, inspiring, and empowering groups. All have their strengths and weaknesses and their optimal use case. This explanation of said leadership styles will prepare the leader to use the various modes correctly for usage with their respective team. With this background of understanding, lets move onto a overview of ten different leadership styles and how these work and impact. Here are some of the types of leadership styles:-
Servant Leadership
As per servant leadership theory, helping others should be the priority of a leader. They are servant leaders before anything else, and they make sure team is served and empowered first. This creates super healthy relationships and long-standing, positive outcomes.
Path-Goal Leadership
The path-goal theory of leadership states that a leader should help define and achieve the goals of employees. Leaders act more as facilitators: instead of pushing, they remove blockers and maximise motivation.
Adaptive Leadership
This is for the leaders who can handle the complexities of a dynamic environment. These are leaders who embrace and solicit feedback as they try new solutions.
Authentic Leadership
What embodies authentic leadership theory are honesty, transparency, and ethical motivations. Authentic leaders are true to their ideals and people trust them.
Democratic Leadership
Some decision-making processes comprise participation and collaboration in Democratic leadership. The leader gains participation from their followers or team members to make decisions, while implementing the idea that every voice is heard.
Laissez-Faire Leadership Style
A laissez-faire leadership style would not involve supervision. Decisions were free, with no leader supervision in controlling how team members did their jobs.
Autocratic Leadership
This is the definition of an autocratic leader: one who would decide without consulting anyone else. And then there’s this case of its usefulness: in stress-cooking situations where quick decisions are a must.
Relevance to ACCA Syllabus
Leadership theories form a key part of the ACCA syllabus, especially in strategic business leadership and management accounting. Theoretical research on achievements in leadership prepares ACCA candidates for operational necessity through strategic strategy formulation, corporate governance, and ethical performance in decision-making. As professionals likely to occupy managerial positions, familiarity with leadership styles enables ACCA professionals to better lead teams, influence decision-making, and encourage ethical business practices.
Leadership Theories ACCQ Questions
Q1: Which is the leadership theory that proposes that to be effective, leaders should vary their behavior based on the demands of specific situations?
A) Trait Theory
B) Contingency Theory
C) Theory Of Transactional Leadership
D) Great Man Theory
Ans: B) Contingency Theory
Q2: What do transformational leaders concentrate on?
A) Protection for established frameworks and systems
B) Inspiring followers to perform at a level of greatness
C) In exchange for rewards and punishment for performance
D) Prioritizing only on short term objectives
Ans: B) Inspiring followers to perform extraordinary things
Q3: What leadership theory is most associated with ethical leadership?
A) Theory of Autocratic Leadership
B) Servant Leadership Theory
C) Laissez-Faire Leadership Theory
D) Theory of Charismatic Leadership
Ans: B) Servant Leadership Theory
Q4: What is NOT a characteristic of transactional leadership?
A) Set clear structures and expectations
B) Incentivizing them to perform
C) Fostering innovation and creativity
D) Outweighing short-term performance
Ans: C) Fostering respective innovation and creativeness
Q5:Which leadership theory claims that leaders are born rather than made?
A) Behavioral Theory
B) Great Man Theory
C) Path-Goal Theory
D) Path-Goal Theory
Ans: B) Great Man Theory
Relevance to US CMA Syllabus
Discuss leadership theories and their importance in the context of the US CMA syllabus, especially their applicability in strategic planning and making informed business decisions. CMA candidates are expected to know how effective leadership contributes to corporate performance, financial strategy and organisational behaviour. By mastering leadership concepts, CMAs do their bits in financial planning and control while ensuring their teams are effective executors.
Leadership Theories US CMA Questions
Q1: What leadership theory focuses on leaders developing unique relationships with each subordinate?
A) Path-Goal Theory
B) The Leader-Member Exchange (LMX) Theory
C) Contingency Theory
D) Situational Leadership Theory
Ans: B) Leader-Member Exchange (LMX) Theory
Q2: The main goal of a transformational leader is:
A) Continue to provide stability and order within the organisation
B — Encourage and drive employees to a vision
C) Supervise and track every movements of employees
D) Follow a strict format with no margins
Ans: B) Inspire and motivate employees towards a vision
Q3: In contingency theory, which factor does NOT influence effective leadership?
A)Leader’ss personality
B)Followers’’ characteristics
C) Organizational culture
D)dcompany information, including financial statements
Ans: D)Company’ss financial statements
Q4: What does servant leadership theory propose is the primary role of a leader?
A) Cops and robbers—command and control employees
B) SERVE AND DEVELOPE FOLLOWERS
C) Only explore financial performance
D) Keep a tight chain of command
Ans: B) Serving and developing followers
Q5: The reward system is one of the main components of transactional leadership.
A) Focus on rewards and punishments
B)Innovation and creative thinking within their workforce
C) A long-term strategic vision
D) Advocating an absolutely hands-off attitude
Ans: A) Focus on incentives and enforcement
Relevance to US CPA Syllabus
Leadership theories are important for US CPA candidates, particularly in the business environment, concepts (BEC) and ethics. CPAs are often found in management roles where leadership styles can influence corporate governance, ethical decision-making, and financial management. Theories of Leadership: Importance for CPAs in Moral Standards and Corporate Compliance
Leadership Theories US CPA Questions
Q1: What approach to leadership emphasize that a leader must be flexible in their application of leadership styles?
A) Contingency Theory
B) Trait Theory
C) Bureaucratic Leadership Theory
D) Theory of Transformational Leadership
Ans: A) Contingency Theory
Q2: What is the leadership approach most similar to ethical leadership?
A) Transactional Leadership
B) Laissez-Faire Leadership
C) Servant Leadership
D) Autocratic Leadership
Ans: C) Servant Leadership
Q3: What is a leadership style that is commonly associated with compliance and adherence to established rules?
A) Leadership that is Transformational
B) Bureaucratic Leadership
C) Charismatic Leadership
D) Situational Leadership
A: B) Bureaucratic Leadership
Q4: Which type of leadership theory focuses on precise regulations and formal power?
A)Charismatic Leadership Theory
B) THE Bureaucratic leadership theory
C) Trait Theory
D) Path-Goal Theory
Ans: Bureaucratic Leadership Theory
Q5: A leader who incentivizes employees according to performance standards is demonstrating what leadership style?
A) Autocratic Leadership
B) Transactional Leadership
C) Servant Leadership
D) Transformational Leadership
Ans: B) Transactional Leadership
Relevance to CFA Syllabus
CFA candidates need to be familiar with leadership theories, ethical frameworks, corporate finance, and governance concepts. Good leadership affects the corporate policies of organizations; risk management and ethical practices. Leadership theories are key drivers in building effective investment management and corporate finance skills for CFA practitioners.
Leadership Theories CFA Questions
Q1: Relevance of Leadership Theory in Corporate Governance and Ethical Decision Making
A) Theory of Transactional Leadership
B) Servant Leadership Theory
C Laissez-Faire Leadership Theory
D) Trait Theory
Ans: B). Servant Leadership Theory
Q2: What is the leadership style that emphasizes vision-setting and motivating followers?
A) Transformational Leadership
B) Bureaucratic Leadership
C) Laissez-Faire Leadership
D) Transactional Leadership
Ans: A) Transformational Leadership
Q3: What is the term for the theory that leaders are born, not made, that provides that leaders emerge based on inborn traits rather than training?
A) Theory of Situational Leadership
B) Trait Leadership Theory
C) Contingency Theory
D) Path-Goal Theory
Ans: B) Trait Leadership Theory
Q4: This theory of leadership states that the role of aleader is:
A) Make all employee decisions yourself
B) Establish transparent expectations and support employees in meeting them
C) Consider only surface level financial results
D) Give staff members free rein
Ans. B) To help employees set clear goals and achieve them
Q5: What type of leadership style permits autonomy with minimal supervision?
A) Laissez-Faire Leadership
B) Transactional Leadership
C) Leadership that is Transformational
D) Bureaucratic Leadership
Ans: A) Laissez-Faire Leadership
