What is 'Leadership'

Leadership is the ability of a company's management to set and achieve challenging goals, take swift and decisive action, outperform the competition, and inspire others to perform well. It is tough to place a value on leadership or other qualitative aspects of a company, compared to quantitative metrics that 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 (Chief executive officer), COO (Chief operating officer), CFO (Chief financial officer), president and chairman.

BREAKING DOWN 'Leadership'

Leadership provides direction for a company. Employees need to know the direction in which they are headed and who to follow to reach the destination. Leadership involves showing workers how to effectively perform their responsibilities and regularly supervising the completion of their tasks. Leadership is also about setting a positive example for staff to follow, by being excited about the work, being motivated to learn new things, and helping out as needed in both individual and team activities.

Characteristics of Effective Leadership

Effective leadership includes strong character. Leaders exhibit honesty, integrity, trustworthiness and ethics. Leaders act in line with how they speak, and earn the right to be responsible for others’ success in the company.

Strong leadership involves clear communication skills. Leaders speak with and listen to staff members, respond to questions and concerns, and are empathetic. Leaders use effective communication skills for moving the company forward and achieving new levels of success.

True leadership sees where the company is headed and plans the steps needed to get there. Visualizing what is possible, following trends in the industry, and taking risks to grow the business are all required of leaders.

Productive leadership shows optimism and provides positive energy for staff. Leaders are helpful by nature and truly concerned about others’ well-being. Leaders find answers to challenges and are the first to reassure and inspire workers when things do not go according to plan. Leaders find ways for staff to work together and achieve maximum results in an efficient and effective manner.

Example of Leadership

Jack Welch exhibited leadership as chief executive officer (CEO) of General Electric Co. from 1981 to 2001. He played an integral part in 600 acquisitions in emerging markets and increased GE’s market value from $12 billion to $505 billion. Because things are constantly changing, Welch insisted everyone at GE embrace change. To continue evolving company operations and producing greater output, managers and employees had to continuously reinvent themselves and their work.

Welch hired managers who shared his vision of GE, had endless amounts of energy, and were able to encourage employees to stay engaged in their work. He sought managers who created, developed and refined ideas for the future, and found ways to make them a reality. He also insisted that managers work side-by-side with employees as a way of understanding what they were doing and why.

As a result of Welch’s leadership style, managers and employees were more empowered, products gained higher quality, and customer satisfaction and profits increased dramatically.

RELATED TERMS
  1. Leadership Grid

    The Leadership Grid is a behavioral model used by organizations ...
  2. Succession Planning

    Succession planning is the strategy for passing on leadership ...
  3. Hersey-Blanchard Model

    The Hersey-Blanchard Model is a leadership approach that suggests ...
  4. Chair of the Board (COB)

    The chair of the board (COB) is the most powerful member on the ...
  5. Market Leader

    A company with the largest market share in an industry that can ...
  6. Chief Executive Officer - CEO

    A CEO is the highest ranking executive in a company whose main ...
Related Articles
  1. Managing Wealth

    Management strategies from a top CEO

    Find out what legendary manager Jack Welch did to grow General Electric into one of the biggest companies in the world.
  2. Investing

    5 Characteristics of Good Growth Stocks

    Growth stocks can give investors good returns, but not all growth stocks are the same. From leadership to growth, there are traits good growth stocks share.
  3. Managing Wealth

    Preparing Your Kids to Take Over Your Business

    Most family businesses do not survive in successive generations, but these steps can help ensure that yours will.
  4. Insights

    E*Trade Poll Shows Active Traders Want Fed Leadership Change

    E*Trade commissioned a recent poll that shows the majority of active traders think a change in the Fed leadership will be good for the economy.
  5. Personal Finance

    Common Interview Questions for Controllers

    Learn more about the job description of a financial controller and questions that may be asked of applicants applying for this position.
  6. Managing Wealth

    The Top 10 Best TED Talks for Business Leaders

    Influential talks for 21st Century managers from TED are worth sharing.
  7. Small Business

    7 Ways You Are Preventing Employee Productivity

    Avoiding these seven employee productivity traps can help improve the performance of your business.
  8. Investing

    GE's Result: Cloudy With A Mix Of Uncertainity

    GE stock fell to its lowest price in almost 2 years after the company reported dismal Q2 earnings.
  9. Investing

    New Vanguard CEO Tim Buckley on Being a Leader

    As Vanguard's Chief Investment Officer, and soon-to-be CEO, Tim Buckley has had several mentors while developing his leadership style.
  10. Personal Finance

    A project manager's qualifications and career path

    Learn about a project manager's job, the qualifications necessary for the position, and the most common careers for these professionals.
RELATED FAQS
  1. What recognized CEO earned the moniker "Neutron Jack"?

    The story of Jack Welch, former CEO of GE, has become the stuff of management legend. Read Answer >>
  2. How do interpersonal skills influence a business culture?

    Interpersonal skills are vital to business culture because they determine not only how a person interacts with others, but ... Read Answer >>
Hot Definitions
  1. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  2. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
  3. Current Assets

    Current assets is a balance sheet item that represents the value of all assets that can reasonably expected to be converted ...
  4. Volatility

    Volatility measures how much the price of a security, derivative, or index fluctuates.
  5. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  6. Cost of Debt

    Cost of debt is the effective rate that a company pays on its current debt as part of its capital structure.
Trading Center