DEFINITION of 'Leadership'

The ability of a company's management to make sound decisions and inspire others to perform well. Effective leaders are able to set and achieve challenging goals, to take swift and decisive action even in difficult situations, to outperform their competition, to take calculated risks and to persevere in the face of failure. Strong communication skills, self-confidence, the ability to manage others and a willingness to embrace change also characterize good leaders.

BREAKING DOWN 'Leadership'

Leadership is often overlooked by investors. This may be because it is tough to place a value on qualitative aspects of a company (leadership being one), compared to quantitative metrics, which are commonly tracked and much easier to compare between companies. Individuals with strong leadership skills in the business world often rise to executive positions such as CEO, COO, CFO, president and chairman.

A successful businessman who has frequently been admired for his leadership skills is Jack Welch, former CEO of General Electric. He eliminated inefficiencies, dramatically increased the value of the company and routinely fired underperforming managers while rewarding the best.

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