While there are many discussions about the nature of leadership, it is crucial to correctly define the word “leadership” for the concrete audience: commercial banks.
First and foremost, the definition of leadership has many possible explanations when turning to commercial banking due to the variety of departments in the system (Northouse, 2018). Generally, in bureaucratic departments requiring strict rules, such as risk, audit, and compliance departments, there should be an “authoritative” leadership (Barling, 2014). The “leadership” in such departments may be described as the process of paying strict attention to workers’ performance and forcing them to increase their effectiveness and accuracy when doing routine jobs (Goleman, 2017). On the other hand, when it comes to departments that have a “respective” scale of key performance indicators (KPI), the workers should be driven by a “democratic leader,” and they totally conform to the classical statements about leadership in commercial banks (Anon, 2021). This is because working in the retail banking, technology, service, and finance departments requires interaction with clients and creative thinking (Nagendra & Farooqui, 2016). When it comes to increasing the bank’s gross profit, only those financiers who are driven by a flexible leader may perform the most effective.
To be more specific, it is important to provide a concrete example. To begin with, there is a risk department that makes the overall estimation of the client’s solvency. While examining the different facets of the client’s financial situation, strict requirements should be provided for key indexes and ratios. In this case, when the client has a debt/EBITDA ratio of 4, and the risk analyst tries to influence the risk department executive to give the loan, only the authoritative leader would deny the analyst’s proposal (Anon, 2020). This is because of the concrete rules of estimation, which will help to avoid problems with the client’s solvency in the future. In a typical financial institution, usually, the executive is the smartest “analyst” in the department so that when it comes to estimation, he or she knows what a possible deviation from prerequisites and some rules may be neglected with no influence on loan’s return.
Consequently, all leaders should be driving the department that relates to their style of leadership. In this case, they will manage human capital in the most effective way for the company because different departments require various styles of management.
Anon, 2020. What is EBITDA – Formula, Definition and Explanation. Corporate Finance Institute. Web.
Anon, 2021. 27 Examples of Key Performance Indicators: OnStrategy Resources. OnStrategy. Web.
Barling, J., 2014. The science of leadership: lessons from research for organizational leaders 1st ed., Oxford: Oxford University Press.
Goleman, D., 2017. Leadership that gets results, Boston, MA: Harvard Business Review Press.
Nagendra, A. & Farooqui, S., 2016. Role of Leadership Style on Organizational Performance. CLEAR International Journal of Research in Commerce & Management, 7(4), pp.65–67. Web.
Northouse, P.G., 2018. Leadership. Theory and practice 8th ed., London: SAGE Publications.