Management Theories in Addressing Economic Changes


Every organisation requires better leadership and management theories that would reap profits in the organisation. Organisations employ the use of various management and leadership theories towards the realisation of the ultimate organisational goals. Some of these theories have assisted the organisations in maximising profits while others have not favoured the performance of the organisation. This means that an organisation selects the best theories of management, depending on the nature of the organisation.

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Application of the efficient theories in an organisation will determine the functions of the management in the organisation. The theories will make the management tackle the current contemporary challenges in the organisation. The paper demonstrates how the management and leadership theories have influenced the performance of the organisation in terms of dealing with the changes in the economy. In addition, the paper also discusses the functions, applications, characteristics, and limitations of managers.

  • Question one: Demonstrate understanding and the ability to critique the various theories of leadership and management and appreciate the contemporary issues facing leaders and managers.

Business organisations should scan the environments before venturing into any business opportunity. This will enable them to cope up with the changes in the environment. Some of the reasons why business organisations should scan the environment include determining the level of competition, the availability of raw materials, climatic factors and the level of technology in the environment. Secondly, globalisation is also a factor that affects the performance of the business in the environment. Some of the challenges that are associated with the environment are discussed below.

Challenges facing leaders and managers


Globalisation affects organisational management in various ways. Managers are facing challenges when it comes to the issue of dealing with globalisation. Globalisation hinders the expansion, supply chain management, and reduces the profit margin in the organisation (Givens 2008, P. 18). To curb the problems of globalisation, the managers need to set accurate visions and missions, ultimate targets of the organisation and well-defined culture of the organisation. The managers need to scan the environment and make decisions depending on the nature of the environment, for example, understanding the level of competition in the economy enables the managers to develop changes to match the competition.

Level of technology

The current business environment requires technology that would sell the products in the market. Managers face problems in the organisation due to the inappropriate technology in the organisation. For the organisation to increase its efficiency in the production of goods and services, managers should use advance technology in the production (Anwar 2013, p. 80). Advance technology ensures the production of high-quality products to attract more consumers. Many organisations lack advanced technology that poses a challenge in the management of the organisation. The level of technology in the environment determines the technology that the organisation will employ.

Inadequate skills

Many managers lack the skills required in the management of the organisations. When managers lack skills, there will be a problem in handling the firm’s resources (Dumdum, Lowe, & Avolio 2002, p. 12). For instance, it will be difficult to come up with appropriate methods of maximizing revenue in the organisation. Some of the leadership theories, like charismatic theory, lead to a lack of skills among the managers. Managers with low skills perform poorly in terms of managing the resources of the organisation. The business organisation should have employees with relevant skills that would compete in the environment.

Market changes in the economy

Many managers do not do well because of the market changes in the economy. The leaders are not able to foresee the changes in the market. Adapting to market changes is a major challenge to the managers since the market changes the demand and supply of the goods and services (Hitt, Black, & Porter 2005, P. 73). For instance, if there is a financial crisis in the economy, the sales volume reduces hence affecting the profit margin of the organisation. The price-changing trend in the environment may affect the performance of the business in the organisation.

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  • Question two: Demonstrate understanding of the key functions of leadership and management and their application.

Importance of motivation theory to a leader

Motivation refers to how the efforts of the workers are directed towards achieving the set goals of an organisation. Motivation can be in the form of many ways. Some of the ways include rewarding the employees on particular tasks, appreciating the efforts of the workers and the promotion of the workers. Motivation in the organisation acquaints the leaders with certain traits that make them successful in their leadership.

Some of these traits include persistent of the leaders on achieving the goals of the organisation, imparts the leaders with efforts, and makes the leaders have direction in the organisation. Maslow describes motivational theory by asserting that people have some wants that are arranged in a sequence starting with the most urgent wants. These wants include physiological needs, safety needs, relationship needs, esteem needs, and self-actualisation (Fisher 2009, p. 39). Motivation theory explains how organisations should assist the leaders in achieving their needs. This can be done in different ways. The following are ways that organisations can assist their leaders in meeting these needs.

Physiological needs

Physiological needs include acquiring food, water, housing, dress, and funds. The leaders must have these basic needs before moving to another step of progression. Motivation theory encourages the organisation to ensure that the leaders get these basic needs on time before giving the task to the leaders (Drucker, & Maciariello 2008, p. 52). For instance, the organisations set aside fee to take care of the basic need. In essence, this has motivated leaders in most of the organisations.

Safety needs

The leaders should be protected from dangers caused by the environment of the organisation. Equally, the leaders must be in an environment free from insecurity to create comfort in the workplace (Cole 2004, p. 22). Motivation theory ensures that the lives of leaders are protected. This will encourage the leaders to work towards achieving the set goals of an organisation.

Relationship needs

This involves the level of love, social interactions, and friendship that a leader should have with others. A leader requires companionship because it is not healthy to live without interaction while exercising his duties. Motivation theory allows for the construction of social clubs within the organisation to provide relationship needs to the leaders. This will make the leaders love their workplace.

Esteem needs

These needs involve the level of self-reliance and independence that a leader possesses. Despite the internal factors within a leader that leads to this, the organisation plays a vital role in the provision of these needs. Motivation theory encourages organisations to facilitate the recognition of the leaders. For example, giving the leaders titles can make the leaders be recognised in the organisation.

Self-Actualisation needs

Self-actualisation needs refer to the wealth that the leaders should have. These needs may be difficult to meet since people have different achievements in life. It is difficult to express what one fills to have. However, motivation theory encourages the organisation to support the leaders in achieving their wealth. For instance, an organisation may decide to provide capital to the leaders to start their own businesses.

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  • Question three: Demonstrate cognitive skills of critical thinking, analysis and synthesis, including the capability to identify and critically evaluate theoretical and practical assumptions, evaluate empirical evidence, define terms and subjects of enquiry adequately, generalize appropriately and analyse data.

Management and leadership

Management and leadership have been difficult to understand. However, these two disciplines are different on many platforms. By definition, management refers to the process of controlling, organizing, regulating, and coordinating the resources of the organisation to achieve the goals of the organisation. On the other hand, leadership refers to giving people directions towards the achievements of vision as set by the organisation. There are various differences between leadership and management, for example, the functions of management are different from that of leadership. Secondly, they also have different theories to explain their activities.

Leadership theories

The trait theory

In this theory of leadership, it is assumed that leadership is a trait that is inborn. The person has the passion of leading, controlling, and managing of the resources (Barney, & Hesterly 2005, p. 54). The person strives to become a leader by seeking glory through leadership. The person may exhibit certain traits of a good leader like collective responsibility, accuracy, sound decision making and team spirit. The theory suggests that leaders are born.

Behavioural theory

This theory contradicts the trait theory, where it emphasises that leaders are made but not born. According to this theory, leaders can only deliver on the specific tasks that match their skills or training. The person has the ability to make rational decisions according to the skills acquired from learning institutions (Certo, & Certo 2006, p. 32). In addition, the person must have the capabilities if following the directives in the organisation. In this type of leadership, there is the use of behavioural models where employees are hired for particular tasks in the organisation.

Transactional theory

In this type of management theory, the employees are remunerated for the motivational drives. However, the reward is only given when the task is completed as per the plan of the management. The theory is considered to be bureaucratic in the sense that no party benefits without adding a unit in the organisation. In case a team member fails to perform the task as per the agreement, he meets the punishment from the management. Most of the organisations have adopted this type of theory due to its bureaucracy.

Transformational theory

This theory is the reverse of transactional theory in that it does not follow the rules of bureaucracy, but the management depends on the physical appearance of the leader. This theory is based on the motivational of the in-authorities. For instance, a manager may come up with a task has a positive influence on the organisation and stimulates the team members to accomplish the task. For this reason, the transformational theory is all about meeting the self-interest of the manager.

Charismatic theory

This theory of management encourages the managers to use powers in the expedition of duties. The theories do not apply bureaucracy in the organisation. The leader under charismatic theory is always radical and restricts the employees to follow the orders of the leader. Under this theory, the employees are motivated by the charismatic presence and not by rewards as in the case of transactional theory.

Contingency theory

This theory explains that no style of leadership is better to arrest any situation in the organisation (Rollinson 2005, p. 99). the performance of any organisation depends on the situation and the efficiency of leadership in that company.

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Participative theories

According to these theories, the best leadership style is that one which considers the contribution of others in the organisation. Therefore, the theory encourages all the members in the organisation to feel that they are importance in the organisation (Dunning 2001, p. 96). They are involved in decision-making and other activities in the organisation. The employees do not tamper with the existing rules to allow the input of others.

Management theories

Bureaucratic management theory

Max Weber explained that organisations should be divided into departments starting from the top management to the subordinates. He recommended that all these sectors be directed by same guidelines.

Systems theory

This theory has influenced management science. According to this theory, a system is used in the management of organisation. Management system must remain the same at all time. If the one part of the system in interfered with, a change will be made on the other parts of the management. In organisation, all the inputs are passed through the channels that are organised and planned. Changes in the inputs would influence the output of an organisation.

Contingency theory

According to this theory, the directors should make judgements after considering the existing circumstances. For this reason, the best theory is that which considers the situation at hand. The quality of any management theory is determined when there is a new situation in the organisation (Mullins, & Christy 2011, p. 31). For example, the best style of leading people in the Persian Gulf is autocratic style.

Critical analysis of leadership theories

Critically, leadership and management theories help the organisation to realise their ultimate goals. This is because there is one person to manage the resources of the organisation hence adopting ways that can generate profit in the organisation. Some of these theories have advantages like creation of team spirit, development, and motivation of the employees. These advantages are geared towards the achievements of goals in the organisation. However, these theories have more short comings than benefits. Many organisations that use these theories face various challenges that undermine the performance of the organisation (Perron, Cote, & Duffy 2006, p. 93). These theories may lead to lack of clarity in the organisation, overreliance on one leader and lack of vision in the organisations.

Functions of management in the organisation


Planning involves the formulation of goals in an organisation and selection of techniques needed to achieve these goals. Leaders should come up with objectives that the employees should achieve in the company (Fulop, Linstead, & Lilley 2006, p. 49). Equally, the leaders should provide the sources of finance required to achieve to the objectives. For instance, if the objective of an organisation is expansion of the organisation, the leaders should prepare a budget for the expansion. Planning is widely used in the management of various projects like construction of roads.


After planning and organizing of the resources in the organisation, the employees are then motivated to work towards the achievement of the set goals (Pellegrini, & Scandura 2007 p. 79). Managers who are not able to influence the employees to work towards realisation of the set goals will find it difficult to reach the target.


The managers regulate the workers and their activities to ensure that they reach the set target. Without controlling in the organisation, all the tasks will remain unchecked hence causing a challenge in realisation of the set objectives (Lussier 2006, p. 40). One advantage of controlling is that the manager is able to make necessary corrections in the process of achieving the goals.


Anwar, H 2013,Impact of paternalistic leadership on employees’ outcome: A study on the banking sector of Pakistan,’ Journal of Business and Management, vol. 7, no. 6, pp. 109-115.

Barney, J. & Hesterly, W 2005, Strategic Management and Competitive Advantage: Concepts and Cases, Prentice Hall, London.

Certo, C. S. & Certo, T 2006, Modern Management (10th ed.), Prentice Hall, London.

Cole, G. A 2004, Management theory and practice (6th ed.), South-Western Cengage Learning, London.

Dumdum, U. R., Lowe, K. B. & Avolio, B. J 2002, ‘Transactional leadership correlates of effectiveness and satisfaction: An update and extension’, Journal of applied psychology, vol. 2, no. 4, pp. 35-66.

Dunning, J 2001, Multinational Enterprises and the Global Economy, Addison-Wesley, Harlow.

Drucker, P. F., & Maciariello, J. A. 2008, Management, Collins, New York, NY.

Fisher, E. A 2009, ‘Motivation and leadership in social work management: A review of theories and related studies,’ Administration in Social Work, vol. 33, no. 9, pp. 347-367.

Fulop, L., Linstead, S. & Lilley, S 2006, Management and Organisation: A Critical Text, Palgrave, New York.

Givens, R. J 2008, ‘Transformational leadership: The impact on organisational and personal Outcomes’, Emerging Leadership Journeys, vol. 1, no. 1, pp. 4-24.

Hitt, M., Black, J. S. & Porter, L. W 2005, Management, Prentice Hall, London.

King, D., & Lawley, S 2013, Organisational behaviour, Oxford University Press, Oxford.

Lussier, R 2006, Management Fundamentals: Concepts, Applications, and Skill Development (3rd ed.), Thomson/South-Western.Mason, Ohio.

Mullins, L. J. & Christy, G 2011, Essentials of Organisational Behaviour, FT Prentice Hall, London.

Pellegrini, E. K., & Scandura, T. A 2007, ‘Paternalistic leadership: A review and agenda for future research’, Journal of Management, vol. 34, no. 3, pp. 566-593.

Perron, G., Cote, R., & Duffy, J 2006, ‘Improving environmental awareness training in business’, Journal of Cleaner Production, vol. 14, no. 6, pp. 551-562.

Rollinson, D 2005, Organisational Behaviour and Analysis (3rd ed.), FT/Prentice-Hall. New York.

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