10.2 Theories of Leadership

Theory X and Theory Y Leaders

McGregor’s Theory X and Theory Y posits two different sets of attitudes about the individual as an organizational member (McGregor, 1957; McGregor, 1960). Theory X and Y thinking gives rise to two different styles of leadership. The Theory X leader assumes that the average individual dislikes work and is incapable of exercising adequate self-direction and self-control. As a consequence, they exert a highly controlling leadership style. In contrast, Theory Y leaders believe that people have creative capacities, as well as both the ability and desire to exercise self-direction and self-control. They typically allow organizational members significant amounts of discretion in their jobs and encourage them to participate in departmental and organizational decision-making. Theory Y leaders are much more likely to adopt involvement-oriented approaches to leadership and organically designed organizations for their leadership group.

Trait Approaches to Leadership

The earliest approach to the study of leadership sought to identify a set of traits that distinguished leaders from non-leaders. What were the personality characteristics and the physical and psychological attributes of people who are viewed as leaders? Because of the problems in measurement of personality traits at the time, different studies used different measures. By 1940, researchers concluded that the search for leadership-defining traits was futile. In recent years, though, after the advances in personality literature such as the development of the Big Five personality framework, researchers have had more success in identifying traits that predict leadership (House & Aditya, 1997). Most importantly, charismatic leadership, which is among the contemporary approaches to leadership, may be viewed as an example of a trait approach.

The traits that show relatively strong relations with leadership are discussed below (Judge et al., 2002).


General mental ability, which psychologists refer to as “g” and which is often called “IQ” in everyday language, has been related to a person’s emergence as a leader within a group. Specifically, people who have high mental abilities are more likely to be viewed as leaders in their environment (House & Aditya, 1997; Ilies et al., 2004; Lord et al., 1986; Taggar et al., 1999). We should caution, though, that intelligence is a positive but modest predictor of leadership, and when actual intelligence is measured with paper-and-pencil tests, its relationship to leadership is a bit weaker compared to when intelligence is defined as the perceived intelligence of a leader (Judge et al., 2004). In addition to having a high IQ, effective leaders tend to have high emotional intelligence (EQ). The psychologist who coined the term emotional intelligence, Daniel Goleman, believes that IQ is a threshold quality: It matters for entry to high-level management jobs, but once you get there, it no longer helps leaders because most leaders already have a high IQ. According to Goleman, what differentiates effective leaders from ineffective ones becomes their ability to control their own emotions and understand other people’s emotions, their internal motivation, and their social skills (Goleman, 2004).

Table 10.2 Big Five Personality Traits

Trait Descriptions
Openness Being curious, original, intellectual, creative, and open to new ideas.
Conscientiousness Being organized, systematic, punctual, achievement-oriented, and dependable.
Extraversion Being outgoing, talkative, sociable, and enjoying social situations.
Agreeableness Being affable, tolerant, sensitive, trusting, kind, and warm.
Neuroticism Being anxious, irritable, temperamental, and moody.
Source: Organizational Behaviour

Psychologists have proposed various systems for categorizing the characteristics that make up an individual’s unique personality; one of the most widely accepted is the “Big Five” model, which rates an individual according to Openness to experience, Conscientiousness, Extraversion, Agreeableness, and Neuroticism. Several of the Big Five personality traits have been related to leadership emergence (whether someone is viewed as a leader by others) and effectiveness (Judge et al., 2002). For example, extraversion is related to leadership. Extraverts are sociable, assertive, and energetic people. They enjoy interacting with others in their environment and demonstrate self-confidence. Because they are both dominant and sociable in their environment, they emerge as leaders in a wide variety of situations. Out of all personality traits, extraversion has the strongest relationship with both leader emergence and leader effectiveness. This is not to say that all effective leaders are extraverts, but you are more likely to find extraverts in leadership positions. Research shows that another personality trait related to leadership is conscientiousness. Conscientious people are organized, take initiative, and demonstrate persistence in their endeavors. Conscientious people are more likely to emerge as leaders and be effective in that role. Finally, people who have openness to experience—those who demonstrate originality, creativity, and are open to trying new things—tend to emerge as leaders and also be quite effective.


Self-esteem is not one of the Big Five personality traits, but it is an important aspect of one’s personality. The degree to which a person is at peace with oneself and has an overall positive assessment of one’s self worth and capabilities seem to be relevant to whether someone is viewed as a leader. Leaders with high self-esteem support their subordinates more and, when punishment is administered, they punish more effectively (Atwater et al., 1998; Niebuhr, 1984). It is possible that those with high self-esteem have greater levels of self-confidence and this affects their image in the eyes of their followers. Self-esteem may also explain the relationship between some physical attributes and leader emergence. For example, research shows a strong relationship between being tall and being viewed as a leader (as well as one’s career success over life). It is proposed that self-esteem may be the key mechanism linking height to being viewed as a leader because people who are taller are also found to have higher self-esteem and therefore may project greater levels of charisma as well as confidence to their followers (Judge & Cable, 2004).


Research also shows that people who are effective as leaders tend to have a moral compass and demonstrate honesty and integrity (Reave, 2005). Leaders whose integrity is questioned lose their trustworthiness, and they hurt their company’s business along the way. There are also some traits that are negatively related to leader emergence and being successful in that position. For example, agreeable people who are modest, good natured, and avoid conflict are less likely to be perceived as leaders (Judge et al., 2002).

Despite problems in trait approaches, these findings can still be useful to managers and companies. For example, knowing about leadership traits helps organizations select the right people into positions of responsibility. The key to benefiting from the findings of trait researchers is to be aware that not all traits are equally effective in predicting leadership potential across all circumstances. Some organizational situations allow leader traits to make a greater difference (House & Aditya, 1997). For example, in small, entrepreneurial organizations where leaders have a lot of leeway to determine their own behaviour, the type of traits leaders have may make a difference in leadership potential. In large, bureaucratic, and rule-bound organizations such as the government and the military, a leader’s traits may have less to do with how the person behaves and whether the person is a successful leader (Judge et al., 2002). Moreover, some traits become relevant in specific circumstances. For example, bravery is likely to be a key characteristic in military leaders, but not necessarily in business leaders. Scholars now conclude that instead of trying to identify a few traits that distinguish leaders from non-leaders, it is important to identify the conditions under which different traits affect a leader’s performance, as well as whether a person emerges as a leader (Hackman & Wageman, 2007).

Behavioural Approaches to Leadership

When trait researchers became disillusioned in the 1940s, their attention turned to studying leader behaviours. What did effective leaders actually do? Which behaviours made them perceived as leaders? Which behaviours increased their success? To answer these questions, researchers at Ohio State University and the University of Michigan used many different techniques, such as observing leaders in laboratory settings as well as surveying them. This research stream led to the discovery of two broad categories of behaviours  – task vs people-oriented behaviours. That is to say the extent to which a leader is focussed on the task at hand compared to the relationships. At the time, researchers thought that these two categories of behaviours were the keys to the puzzle of leadership (House & Aditya, 1997).

When we look at the overall findings regarding these leadership behaviours, it seems that both types of behaviours, in the aggregate, are beneficial to organizations, but for different purposes. For example, when leaders demonstrate people-oriented behaviours, employees tend to be more satisfied and react more positively. However, when leaders are task oriented, productivity tends to be a bit higher (Judge et al., 2004). Moreover, the situation in which these behaviours are demonstrated seems to matter. In small companies, task-oriented behaviours were found to be more effective than in large companies (Miles & Petty, 1977). There is also some evidence that very high levels of leader task-oriented behaviours may cause burnout with employees (Seltzer & Numerof, 1988).

Contingency Approaches to Leadership

What is the best leadership style? By now, you must have realized that this may not be the right question to ask. Instead, a better question might be: under which conditions are certain leadership styles more effective? After the disappointing results of trait and behavioural approaches, several scholars developed leadership theories that specifically incorporated the role of the environment. Specifically, researchers started following a contingency approach to leadership—rather than trying to identify traits or behaviours that would be effective under all conditions, the attention moved toward specifying the situations under which different styles would be effective.

One of the earliest, best-known, and most controversial situation-contingent leadership theories was set forth by Fred E. Fiedler from the University of Washington. This theory is known as the contingency theory of leadership. According to Fiedler, organizations attempting to achieve group effectiveness through leadership must assess the leader according to an underlying trait, assess the situation faced by the leader, and construct a proper match between the two.

In this section, we will discuss two alternate contingency theories: Situational Leadership and Path-goal Theory.

Situational Leadership

Kenneth Blanchard and Paul Hersey’s Situational Leadership Theory (SLT) which argues that leaders must use different leadership styles depending on their followers’ development level (Hersey et al., 2007). According to this model, employee readiness (defined as a combination of their competence and commitment levels) is the key factor determining the proper leadership style. This approach has been highly popular with 14 million managers across 42 countries undergoing SLT training and 70% of Fortune 500 companies employ its use.

The model summarizes the level of directive and supportive behaviours that leaders may exhibit. The model argues that to be effective, leaders must use the right style of behaviours at the right time in each employee’s development. It is recognized that followers are key to a leader’s success. Employees who are at the earliest stages of development are seen as being highly committed but with low competence for the tasks. Thus, leaders should be highly directive and less supportive. As the employee becomes more competent, the leader should engage in more coaching behaviours. Supportive behaviours are recommended once the employee is at moderate to high levels of competence. And finally, delegating is the recommended approach for leaders dealing with employees who are both highly committed and highly competent.

While the SLT is popular with managers, relatively easy to understand and use, and has endured for decades, it received mixed support from research on the basic assumptions of the model (Blank et al., 1990; Graeff, 1983; Fernandez & Vecchio, 2002). Therefore, while it can be a useful way to think about matching behaviours to situations, overreliance on this model, at the exclusion of other models, is premature.

Table 10.3: Situational Leadership

Follower Readiness Level Competence (Low) Competence (Low) Competence (Moderate to High)) Competence (High)
Commitment (High) Commitment (Low) Commitment (Variable) Commitment (High)
Recommended Leader Style Directing Behaviour Coaching Behaviour Supporting Behaviour Delegating Behaviour

Situational Leadership Theory helps leaders match their style to follower readiness levels.

Path-Goal Theory of Leadership

Robert House’s path-goal theory of leadership is based on the expectancy theory of motivation (House, 1971). The expectancy theory of motivation suggests that employees are motivated when they believe—or expect—that (a) their effort will lead to high performance, (b) their high performance will be rewarded, and (c) the rewards they will receive are valuable to them. According to the path-goal theory of leadership, the leader’s main job is to make sure that all three of these conditions exist. Thus, leaders will create satisfied and high-performing employees by making sure that employee effort leads to performance, and their performance is rewarded by desired rewards. The leader removes roadblocks along the way and creates an environment that subordinates find motivational.

The theory also makes specific predictions about what type of leader behaviour will be effective under which circumstances (House, 1996; House & Mitchell, 1974). The theory identifies four leadership styles. Each of these styles can be effective, depending on the characteristics of employees (such as their ability level, preferences, locus of control, and achievement motivation) and characteristics of the work environment (such as the level of role ambiguity, the degree of stress present in the environment, and the degree to which the tasks are unpleasant).

Four Leadership Styles

Directive leaders provide specific directions to their employees. They lead employees by clarifying role expectations, setting schedules, and making sure that employees know what to do on a given work day. The theory predicts that the directive style will work well when employees are experiencing role ambiguity on the job. If people are unclear about how to do their jobs, giving them specific directions will motivate them. On the other hand, if employees already have role clarity, and if they are performing boring, routine, and highly structured jobs, giving them direction does not help. In fact, it may hurt them by creating an even more restricting atmosphere. Directive leadership is also thought to be less effective when employees have high levels of ability. When managing professional employees with high levels of expertise and job-specific knowledge, telling them what to do may create a low-empowerment environment, which impairs motivation.

Supportive leaders provide emotional support to employees. They treat employees well, care about them on a personal level, and they are encouraging. Supportive leadership is predicted to be effective when employees are under a lot of stress or performing boring, repetitive jobs. When employees know exactly how to perform their jobs but their jobs are unpleasant, supportive leadership may be more effective.

Participative leaders make sure that employees are involved in the making of important decisions. Participative leadership may be more effective when employees have high levels of ability, and when the decisions to be made are personally relevant to them. For employees with a high internal locus of control (those who believe that they control their own destiny), participative leadership is a way of indirectly controlling organizational decisions, which is likely to be appreciated.

Achievement-oriented leaders set goals for employees and encourage them to reach their goals. Their style challenges employees and focuses their attention on work-related goals. This style is likely to be effective when employees have both high levels of ability and high levels of achievement motivation.

The path-goal theory of leadership has received partial but encouraging levels of support from researchers. The theory’s biggest contribution may be that it highlights the importance of a leader’s ability to change styles depending on the circumstances. Unlike Fiedler’s contingency theory, in which the leader’s style is assumed to be fixed and only the environment can be changed, House’s path-goal theory underlines the importance of varying one’s style depending on the situation.

Table 10.4: The Path-Goal Theory Approach

Situation Appropriate Leadership Style
When employees have high role ambiguity
When employees have low abilities
When employees have external locus of control
When tasks are boring or repetitive
When tasks are stressful
When employees have high abilities
When the decision is relative to employees
When employees have high abilities
When employees have high achievement motivation

Source: Predictions of the Path-Goal Theory Approach to Leadership Sources: Based on information presented in House, R. J. (1996) and House, R. J., & Mitchell, T. R. (1974).

Transformational and Transactional Theories of Leadership Leadership

Transformational leadership theory is a recent addition to the literature, but more research has been conducted on this theory than all the contingency theories combined. The theory distinguishes transformational and transactional leaders. Transformational leaders lead employees by aligning employee goals with the leader’s goals. Thus, employees working for transformational leaders start focusing on the company’s well-being rather than on what is best for them as individual employees. On the other hand, transactional leaders ensure that employees demonstrate the right behaviours and provide resources in exchange (Bass, 1985; Burns, 1978).

Transformational leaders have four tools in their possession, which they use to influence employees and create commitment to the company goals (Bass, 1985; Burns, 1978; Bycio et al., 1995; Judge & Piccolo, 2004). First, transformational leaders are charismatic. Charisma refers to behaviours leaders demonstrate that create confidence in, commitment to, and admiration for the leader (Shamir et al., 1993). Charismatic individuals have a “magnetic” personality that is appealing to followers. Second, transformational leaders use inspirational motivation, or come up with a vision that is inspiring to others. Third is the use of intellectual stimulation, which means that they challenge organizational norms and status quo, and they encourage employees to think creatively and work harder. Finally, they use individualized consideration, which means that they show personal care and concern for the well-being of their followers.

While transformational leaders rely on their charisma, persuasiveness, and personal appeal to change and inspire their companies, transactional leaders use three different methods. Contingent rewards mean rewarding employees for their accomplishments. Active management by exception involves leaving employees to do their jobs without interference, but at the same time proactively predicting potential problems and preventing them from occurring. Passive management by exception is similar in that it involves leaving employees alone, but in this method the manager waits until something goes wrong before coming to the rescue.

Which leadership style do you think is more effective, transformational or transactional?

Research shows that transformational leadership has a very powerful influence over leader effectiveness as well as employee satisfaction (Judge & Piccolo, 2004). In fact, transformational leaders increase the intrinsic motivation of their followers, build more effective relationships with employees, increase performance and creativity of their followers, increase team performance, and create higher levels of commitment to organizational change efforts (Herold et al., 2008; Piccolo & Colquitt, 2006; Schaubroeck et al., 2007; Shin & Zhou, 2003; Wang et al., 2005).

However, except for passive management by exception, the transactional leadership styles are also effective, and they also have positive influences over leader performance as well as employee attitudes (Judge & Piccolo, 2004). To maximize their effectiveness, leaders are encouraged to demonstrate both transformational and transactional styles. They should also monitor themselves to avoid demonstrating passive management by exception or leaving employees to their own devices until problems arise.

Why is transformational leadership effective? 

The key factor may be trust. Trust is the belief that the leader will show integrity, fairness, and predictability in his or her dealings with others. Research shows that when leaders demonstrate transformational leadership behaviours, followers are more likely to trust the leader. The tendency to trust in transactional leaders is substantially lower. Because transformational leaders express greater levels of concern for people’s well-being and appeal to people’s values, followers are more likely to believe that the leader has a trustworthy character (Dirks & Ferrin, 2002).

Servant Leadership

The early 21st century was marked by a series of highly publicized corporate ethics scandals: between 2000 and 2003 we witnessed the scandals of Enron, WorldCom, Arthur Andersen LLP, Qwest Communications International Inc., and Global Crossing Ltd. As corporate ethics scandals shake investor confidence in corporations and leaders, the importance of ethical leadership and keeping long-term interests of stakeholders in mind is becoming more widely acknowledged.

Servant leadership is a leadership approach that defines the leader’s role as serving the needs of others. According to this approach, the primary mission of the leader is to develop employees and help them reach their goals. Servant leaders put their employees first, understand their personal needs and desires, empower them, and help them develop in their careers. Unlike mainstream management approaches, the overriding objective in servant leadership is not limited to getting employees to contribute to organizational goals. Instead, servant leaders feel an obligation to their employees, customers, and the external community. Employee happiness is seen as an end in itself, and servant leaders sometimes sacrifice their own well-being to help employees succeed. In addition to a clear focus on having a moral compass, servant leaders are also interested in serving the community. In other words, their efforts to help others are not restricted to company insiders, and they are genuinely concerned about the broader community surrounding their organization (Greenleaf, 1977; Liden et al., 2008).

Even though servant leadership has some overlap with other leadership approaches such as transformational leadership, its explicit focus on ethics, community development, and self-sacrifice are distinct characteristics of this leadership style. Research shows that servant leadership has a positive impact on employee commitment, employee citizenship behaviours toward the community (such as participating in community volunteering), and job performance (Liden et al., 2008). Leaders who follow the servant leadership approach create a climate of fairness in their departments, which leads to higher levels of interpersonal helping behaviour (Ehrhart, 2004).

Authentic Leadership

Starbucks Chairman Howard Schultz talks to the media at the Vancouver Waterfront Station location, celebrating 20 years of Starbucks in British Columbia.
An example of an authentic leader is Howard Schultz, the founder of Starbucks coffeehouses. Witnessing his father losing jobs because of medical problems, he became passionate about a company’s need to care for its employees. Image: Sillygwailo. Howard-Schultz Starbucks, Wikimedia Commons, CC BY 2.5. [click to enlarge]

Leaders have to be a lot of things to a lot of people. They operate within different structures, work with different types of people, and they have to be adaptable. At times, it may seem that a leader’s smartest strategy would be to act as a social chameleon, changing his or her style whenever doing so seems advantageous. But this would lose sight of the fact that effective leaders have to stay true to themselves. The authentic leadership approach embraces this value: Its key advice is “be yourself.” Think about it: we all have different backgrounds, different life experiences, and different role models. These trigger events over the course of our lifetime that shape our values, preferences, and priorities. Instead of trying to fit into societal expectations about what a leader should be, act like, or look like, authentic leaders derive their strength from their own past experiences. Thus, one key characteristic of authentic leaders is that they are self-aware. They are introspective, understand where they are coming from, and have a thorough understanding of their own values and priorities. Secondly, they are not afraid to act the way they are. In other words, they have high levels of personal integrity. They say what they think. They behave in a way consistent with their values. As a result, they remain true to themselves. Instead of trying to imitate other great leaders, they find their own style in their personality and life experiences (Avolio & Gardner, 2005; Gardner et al., 2005; George, 2007; Ilies et al., 2005; Sparrowe, 2005).
One example of an authentic leader is Howard Schultz, the founder of Starbucks Corporation coffeehouses. As a child, Schultz witnessed the job-related difficulties his father experienced as a result of medical problems. Even though he had no idea he would have his own business one day, the desire to protect people was shaped in those years and became one of his foremost values. When he founded Starbucks, he became an industry pioneer by providing health insurance and retirement coverage to part-time as well as full-time employees (Shamir & Eilam, 2005).
Authentic leadership requires understanding oneself. Therefore, in addition to self-reflection, feedback from others is needed to gain a true understanding of one’s behaviour and its impact on others. Authentic leadership is viewed as a potentially influential style, because employees are more likely to trust such a leader. Moreover, working for an authentic leader is likely to lead to greater levels of satisfaction, performance, and overall well-being on the part of employees (Walumbwa et al., 2008).


  1. Which best describes your leadership approach: Theory X or Theory Y?
  2. Think of a leader you admire. What traits does this persona have? Are they consistent with the traits discussed in this chapter? If not, why is this person effective despite the presence of different traits?

Let’s Review

In this section, we reviewed several influential leadership theories. 

  • Theory X and Theory Y leaders hold different fundamental assumptions about the nature of employees and their motivations at work.
  • Trait approaches identify the characteristics required to be perceived as a leader and to be successful in the role.
  • Intelligence, extraversion, conscientiousness, openness to experience, and integrity seem to be leadership traits.
  • Behavioural approaches identify the types of behaviours leaders demonstrate.
  • Both trait and behavioural approaches suffered from a failure to pay attention to the context in which leadership occurs, which led to the development of contingency approaches.
  • Recently, ethics became an explicit focus of leadership theories such as servant leadership and authentic leadership. It seems that being conscious of one’s style and making sure that leaders demonstrate the behaviours that address employee, organizational, and stakeholder needs are important and require flexibility on the part of leaders.


This section was adapted from:

13.3 Leader Emergence  and 13.6 Situational (Contingency Approaches) to Leadership in Principles of Management OpenStax, Rice University and licensed under a Creative Commons Attribution 4.0 International License.

Chapter 12: Leading People within Organizations in Organizational Behaviour for Senecca College Organizational Behaviour by Seneca College is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License, except where otherwise noted.

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