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AS Economics and Business Leadership styles and xy theory Unit 1 By Mrs Hilton for revisionstation.

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1 AS Economics and Business Leadership styles and xy theory Unit 1 By Mrs Hilton for revisionstation

2 From the spec

3 Lesson Objectives To be able to discuss paternalistic, democratic and autocratic leadership styles To be able to discuss McGregor's theory x and y leadership theory To be able to answer some past paper questions on leadership

4 Starter Name as many leaders as you can think of

5 Definition of leadership styles from Edexcel A leadership style is the way in which a person in authority exercises their responsibilities, such as decision-making

6 Examples of leaders School Family – Head of your family Country – David Cameron – Nick Clegg World – Barak Obama – Nelson Mandela

7 Leadership Definitions include: Exerting influence on others Motivating and inspiring people Helping people realise their potential Setting a good example Encouraging people to achieve their goals David Cameron

8 LEADERSHIP: Motivating and inspiring people Innovators – encourage others to accept change Natural abilities and instincts Respected and trusted by followers MANAGEMENT Directing and monitoring others Problem solver Official position of responsibility Accepts and conforms to the ‘norms’ of the business Difference between leadership and management

9 Internal: Skill level and experience of the team The work involved – routine or creative? Preferred natural style of the leader The time limit – i.e. quick decisions needed External: Economic environment rapid decision to secure business survival Nature and speed of change in the industry – technological change comes from workers who have scope for problem solving Legal changes – new laws such as Health & Safety, may need a directive approach There is no single right way to manage an organisation that suits all situations. A good manager can switch instinctively between styles. Factors that influence leadership styles

10 Clear and effective leadership is essential to the success of business especially during periods of rapid change including redundancies and downsizing In successful business workers look to their leaders for : Clear vision and a sense of direction Support and commitment to their welfare Confident and effective decision making Effective planning Full communication In organisation with poor management employees expect nothing positive. There is a climate of mistrust. Managers are not respected or trusted. The organisation will have to deal with de-motivated employees as well as the changes necessary Importance of leadership styles

11 Leadership types… Authoritarian Paternalistic Democratic

12 Your task In teams – hit the books, large paper – tell me about: Democratic Autocratic Paternalistic

13 Autocratic / Authoritarian Leaders take decisions own their own with no discussion Democratic Leaders discuss with workers before making decisions Paternalistic Leaders listen, explain issues and consult with the workforce but will not allow them to make the final decision How did you get on?

14 Authoritarian Authoritarian leaders provide clear expectations for what needs to be done, when it should be done, and how it should be done. There is also a clear division between the leader and the followers. Authoritarian leaders make decisions independently with little or no input from the rest of the group. Used in the armed forces! Anna Wintour Editor of Vogue

15 Autocratic Leadership Managers like to make all the important decisions and closely supervise and control workers. Managers do not trust workers and simply give orders that they expect to be obeyed. It can be effective in certain situations. For example, when quick decisions are needed in a company or when controlling large numbers of low skilled workers.

16 Advantages & Disadvantages of autocratic leadership Advantages: New, untrained employees who do not know which tasks to perform or which procedures to follow Effective supervision can be provided only through detailed orders and instructions There are high-volume production needs on a daily basis There is limited time in which to make a decision The area was poorly managed Work needs to be coordinated with another department or organization Disadvantages: Rely on threats and punishment to influence employees Do not trust employees Do not allow for employee input

17 Democratic Democratic leaders offer guidance to group members, but they also participate in the group and allow input from other group members. Employees have greater involvement in decision-making Emphasis on delegation and consultation

18 Democratic Leadership Will put trust in employees and encourage them to make decisions. They will delegate to them the authority to do this (empowerment) and listen to their advice. This requires good two-way communication and often involves democratic discussion groups, which can offer useful suggestions and ideas. Managers must be willing to encourage leadership skills in subordinates.

19 Advantages & Disadvantages of democratic leadership Advantages: Develops plans to help employees evaluate their own performance Allows employees to establish goals Encourages employees to grow on the job and be promoted Recognizes and encourages achievement. It is most successful when used with highly skilled or experienced employees or when implementing operational changes or resolving individual or group problems. Time consuming process of decision- making Disadvantages: In the case of uneducated/unskilled worker, it is not very effective. Evasive employees, who prefer not to be involved, may create problems. Passing the buck for failure may be common. Due to lack of communication-skill, some important suggestions may get unheard.

20 Paternalistic Leader decides what is best for employees Links with Mayo – addressing employee needs Akin to a parent/child relationship Still little delegation A softer form of authoritarian leadership John Cadbury

21 Paternalistic Leadership Managers give more attention to the social needs and views of their workers. Managers are interested in how happy workers feel and in many ways they act as a father figure. They consult employees over issues and listen to their feedback or opinions. The manager will however make the actual decisions (in the best interests of the workers) as they believe the staff still need direction. The style is closely linked with Mayo’s Human Relation view of motivation and also the social needs of Maslow.

22 Advantages & Disadvantages of paternalistic leadership Advantages: Manager involves employees in decision making manager provides feedback and answers Questions manager meets employees social needs These elements will keep the employees satisfied and motivated. Disadvantages: If wrong decision are made then the employees will become dissatisfied with the leader Employees rely on leader Team become competitive

23 Laissez-faire Style This involves the minimum of managerial direction. It probably works best in workplaces where creativity would be stifled by strict managerial control (e.g. designers) All rights to make decisions are given to the workers However, it does not mean that people can do what they like when they like! Relaxed leadership but the organisation can lack direction.

24

25 X Y Video starter http://vimeo.com/57860907 http://vimeo.com/57860907

26 Theory X and Theory Y Douglas McGregor thought there were 2 types of managers, he was a theory Y manager. He believed if he empowered his employees, ultimately this would allow them to be happier at work and more productive. Theory X is often said to describe a traditional view of direction and control. It can be argued that businesses will need a number of theory X and a number of theory Y managers to be effective, as some staff will need differing management styles to get the best out of them.

27 XY

28 characteristics of the x theory manager results-driven and deadline-driven, to the exclusion of everything else intolerant issues deadlines and ultimatums distant and detached aloof and arrogant elitist short temper shouts issues instructions, directions, edicts issues threats to make people follow instructions demands, never asks does not participate does not team-build unconcerned about staff welfare, or morale proud, sometimes to the point of self-destruction one-way communicator poor listener fundamentally insecure and possibly neurotic anti-social vengeful and recriminatory does not thank or praise withholds rewards, and suppresses pay and remunerations levels scrutinises expenditure to the point of false economy seeks culprits for failures or shortfalls seeks to apportion blame instead of focusing on learning from the experience and preventing recurrence does not invite or welcome suggestions takes criticism badly and likely to retaliate if from below or peer group poor at proper delegating - but believes they delegate well thinks giving orders is delegating holds on to responsibility but shifts accountability to subordinates relatively unconcerned with investing in anything to gain future improvements Unhappy

29 Theory X leaders believe: workers do not like work and will avoid it if possible, Need to be controlled and monitored, are motivated by money Theory Y leaders believe: workers do not dislike like work Will seek responsibility are motivated by other ways rather than control/threats Are capable of showing initiative Theory X and Y

30 McGregor Theory X managers “my employees are lazy and have no motivation. I constantly have to push them to work and threaten them if they don’t do what they are supposed to do, I make the decisions not them” Theory Y managers “my employees enjoy coming to work. This is because I have made a fulfilling environment, I give responsibility where possible and enjoy the contribution my employees make to the business”

31 X This is derived from Taylor’s scientific school of management. Theory X managers believe in technique such as piece-rate and close-supervision. It is likely Theory X is self-fulfilling i.e. if you fail to trust your workers, they will lose interest in their work, making the manager feel he/se was correct in their Theory X beliefs.

32 Y Stems from Mayo’s human relations and Maslow’s work in human needs. Theory Y focuses on social and psychological needs of the workers. A Theory Y manager is likely to believe that:  Workers seek satisfaction not just pay from employment.  Workers possess knowledge, creativity and imagination.  Workers are committed.  Poor worker performance is due to poor management.  Employees wish to contribute to decision making. If leaders adopt Theory Y, the business implications are:  Greater delegation.  Improved training and communication.  De-layering.

33 Assumptions Theory X The average person dislikes work and will avoid it unless directly supervised. Employees must be coerced, controlled and directed to ensure that organisational objectives are met. The threat of punishment must exist within an organisation. In fact people prefer to be managed in this way so that they avoid responsibility. Theory X assumes that people are relatively un-ambitious and their prime driving force is the desire for money & security. Theory Y Employees are ambitious, keen to accept greater responsibility and exercise both self-control and direction. Employees will, in the right conditions, work toward organisational objectives and that commitment will in itself be a reward for so doing. Employees will exercise their imagination and creativity in their jobs if given the chance and this will give an opportunity for greater productivity. Theory Y assumes that the average human being will, under the right conditions, not only accept responsibility but also seek more. Lack of ambition and the qualities of Theory X are not inherent human characteristics but learned in working environments that suffocate or do not promote Theory Y behaviours.

34 Final theory Democratic (consultative) manger asks staff for their opinion and a decision that benefits everyone is reached as a group Democratic (paternalistic) staff asked for their opinion then manager makes the final decision Autocratic – staff given orders in a tall hierarchy, not consulted at all, workers not trusted to be part of the decision, orders are dictated Laissez faire – staff left alone to get on with tasks in a creative environment

35 Sample question 1 Andy Walker, General Manager at Virgin Active Ltd health club in Derby, organises monthly ‘Coffee and Chat’ meetings with his staff to discuss and agree new ideas with him. Which one of the following leadership styles does Andy seem to be using in this case? A Democratic B Theory X C Paternalistic D Autocratic

36 Answer question 1 DEFINITION USED: A leadership style is the way in which a person in authority exercises their responsibilities, such as decision-making (1 mark) -Democratic leaders are prepared to share decision-making by talking with employees (1 mark) -Which is what Andy is clearly doing by actually involving his staff at VA through these monthly meetings (1 mark) Alternatively, up to 2 marks may be gained by explaining a distracter/distracters: -B is incorrect because Theory X is a management view of worker behaviour which suggests that the workers cannot be trusted, in which case a democratic stance is unlikely to be taken (1 mark) -C is incorrect because although a paternalistic leader might discuss ideas, they would ultimately make the decisions rather than agree them with staff (1 mark) - D is incorrect because an autocratic leader would dictate rather than share the decision-making (1 mark)

37 Sample question 2 The Ikea Group, owned by Swedish entrepreneur Ingvar Kamrad, has a large workforce made up of employees ranging from full-time permanent to part-time seasonal staff. Ingvar’s management style has been described by his staff as restrictive and absolute. Which of the following management styles would most apply to Ingvar Kamprad? A Democratic – consultative B Democratic – paternalistic C Autocratic D Laissez Faire

38 Answer question 2 Defines autocratic/describes what is meant by management style or democratic or laissez faire (1 mark) - Ingvar Kamprad’s style is restrictive therefore suggests that Ikea workers are not allowed to make decisions (1 mark) and so they have to follow orders (1 mark) because they are not trusted to make the right decision at Ikea (1 mark) - Democratic and Laissez Faire managers implicitly trust their workers (1 mark) so they allow them a certain amount of freedom or flexibility to exercise their duties at Ikea (1 mark) which is not characteristic of an autocratic leader (1 mark) - Assumes that Ikea workers are theory-X type workers (1 mark) which my mean having to be closely monitored or controlled or dictated to (1 mark)

39 Sample question 3 Lee McQueen, the winner of the BBC’s The Apprentice (series 4), was described by one of the other contestants as a ‘passionate and determined team-player who was good at delegating tasks but he clearly failed to monitor our progress’. Which one of the following leadership styles least applies to Lee? A Autocratic B Theory Y C Democratic – consultative D Democratic – paternalistic

40 Answer question 3 Answer is A Autocratic Autocratic means to be oppressive (1) which Lee clearly is not, given his delegation and/or failure to monitor his team (1) - Democratic leaders will tend to delegate because they share decisions/tasks, whilst autocratic leaders will not (1)

41 Sample question 4 (appears on part 2 of the paper) Miranda’s leadership style has been described as ‘paternalistic’. Analyse one reason to explain why Miranda’s ‘paternalistic’ leadership might be important to the long term success of Muddy Boots Foods Ltd. [4] Jan 12

42 Answer question 4 Knowledge 1, Application 1, Analysis 2 Knowledge: 1 mark for describing any aspects of paternalistic leadership, e.g. the boss takes decisions/is in control/ takes the welfare of her staff into account Application: 1 mark for applying in context, e.g. this leadership style might mean that the burger production staff would be well motivated to work Analysis: up to 2 marks are available for explaining the above, e.g. by stating that if burger production staff were not looked after they might leave the company which can add to costs (1) which may result in poor profitability/bad image of the company (1)


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