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CMA Foundation · Fundamentals of Business Economics and Management · Planning, Organizing, Staffing and Leading

Mr. Iyer, a plant head in Coimbatore, tells workers: 'Meet this month's output target and you get a bonus; miss it and you lose the incentive.' He relies on rewards and penalties linked to performance and monitors deviations closely. Which leadership approach is this?

This is transactional leadership, because the leader exchanges rewards for meeting targets and withholds incentives for failure, while monitoring deviations. Transformational leadership differs since it inspires followers through a shared vision and personal development rather than a simple reward-and-penalty bargain.

  1. ATransformational leadership
  2. BTransactional leadershipCorrect
  3. CLaissez-faire leadership
  4. DCharismatic leadership based on vision

Explanation

Transactional leadership rests on exchange: rewards for meeting targets and penalties for failure, with monitoring of deviations. Transformational leaders instead inspire followers through vision and change values, which is not described here.

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