Operational and effective leadership is an important factor in success of any organization. It transforms probable into reality. Through leadership, people influence the minds of others and drive organizations forward  to realize pre-identified goals. Leaders recommend new models when old ones become ineffective. Leadership is a very important resource of all organizations and is demonstrated by persons through a wide range of personal abilities and talents (Yukl, 2013). For years, leadership has been the source of many studies. People have tried to find out what distinguishes authentic leader from the rest of the population. Consequently, researchers have studied and came up with various theories, and categories to define a leader. The current paper evaluates leadership as a fundamental element of organizational behavior, in regards to the leadership theory.

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Organizational behavior (OB) is the study and application of knowledge about the way groups and individuals act in an organization by using a system approach technique. That is interpreting the relationship of people-organization, entire group, organization, as well as the whole social system for the purpose of building better relationships and achieving organizational objectives. From the above, it is evident that OB encompasses several elements, including change, human behavior, teams, as well as leadership. Leadership is a very important element of OB, as there is an emphasis on leadership and decision-making for the realization of successful functional ‘groups’ or ‘teams’ in an organization.

The organization’s base is founded on the philosophy of management, and the organization’s values, vision and goals. This pushes the organizational culture, made of the formal and informal organization, as well as the social environment, which, in turn, determines the type of leadership and the dynamics of teams in an organization. The final results will be the improvement in performance, employee satisfaction, as well as individual growth and development. All the above mentioned elements, leadership included, work together to create an infrastructure that the organization operates from (Schermerhorn, 2010).

Being an important function of management, leadership helps to maximize efficiency, as well as the achievement of organizational objectives through several ways. First, it initiates action by communicating plans and policies to the employees, which are the basis for the beginning of work. Leadership motivates employees through economic or non-economic incentives, thus ensuring the continuity of work. It also provides guidance to the subordinates, thus ensuring that the work is done in an effective and efficient manner. Leadership provides co-ordination in an organization, which is realized by reconciling individual interests with the organizational objectives and goals. This reconciliation can be accomplished through an appropriate co-ordination which should be the main intention of every leader. Leadership plays a significant role in any organization, as those in leadership position create a framework in which a status quo is challenged (George & Jones, 2009).

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Transactional Leadership Theory

Transactional leadership theory is also referred to as managerial leadership, and sometimes as exchange theories of leadership. This theory focuses on the role of management, group, and organizational performance, and its leadership is founded on a system of rewards and punishment. It is defined by a transaction between the leader and the subjects, and the theory appreciates a positive relationship that benefits both. For this theory to be effective and motivational, the person in a leadership position must find a way of rewarding or punishing his/her followers for carrying out an assigned task. For transactional leadership to be successful, they should develop mutual reinforcing environment, whereby the individual and the organizational goals are at par.

Transactional theory states that human nature looks to increase the pleasurable experiences and to lessen the un-pleasurable ones. As a result, we tend to relate ourselves with the personalities that add to our strengths. The theory is also based on the assumptions that: i) people do their best when the chain of command is clearly defined, ii) employees are motivated by rewards and punishments, iii) obeying the directives of a leader is the primary responsibility of the followers, and iv) subordinates should be closely monitored to warrant the achievement of goals. Transactional theory of leadership is mainly used in business, whereby when the employees are rewarded, they are successful and reprimanded when they fail. This is why the theory has been effective in the current organization, which is a product distribution company.

In this leadership theory, pre-laid rules, procedures and standards are adhered to, and the subordinates are not encouraged to be creative or look for new solutions’ arising challenges. Transactional leaders mostly do not trust their employees, do not allow them to contribute ideas and rely on threats and punishments, in order to influence employees or followers. Lastly, this leadership theory is best applied in circumstances where there is less time for group decision-making and in cases where the leader is the most knowledgeable or experienced member of the group. Although it can be effective in some situations, it does not allow for the development of both the employees and the leaders (Burns, 2003).

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Effective leadership remains the most important aspect of success in an organization. There are several leadership theories that leaders can choose from. Different theories are applied in different situations. Hence, each manager needs to know when to apply which theory. At the same time, leaders should understand the significance of how a leadership theory influences employees` performances and satisfaction, hence their productivity and that of the organization in general. The Transactional leadership theory focuses on the role of management and organizational performance. Its leadership is based on a system of rewards and punishments, and the followers have a sole responsibility of following leader’s instructions. It can be effective but it is generally considered insufficient for the personal development of employees and leaders.

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