Likert believed that the key to good leadership is to establish a climate and system of management that creates an effective organisation. He examined different types of organizations and leadership styles, and he asserted that to achieve maximum profitability, good labour relations and high productivity, every organization must make optimum use of their human assets.
Through research carried out over a number of years, he identified four systems of management:
- System 1 - Exploitive Authoritative
- System 2 - Benevolent Authoritative
- System 3 - Consultative
- System 4 - Participative
System 1 - Exploitive Authoritative
Decisions are imposed on subordinates, where motivation is characterized by threats, where high levels of management have great responsibilities but lower levels have virtually none, where there is very little communication and no joint teamwork.
System 2 - Benevolent Authoritative
Leadership is by a condescending form of master-servant trust, where motivation is mainly by rewards, where managerial personnel feel responsibility but lower levels do not, where there is little communication and relatively little teamwork.
System 3 - Consultative
Leadership is by superiors who have substantial but not complete trust in their subordinates, where motivation is by rewards and some involvement, where a high proportion of personnel, especially those at the higher levels feel responsibility for achieving organization goals, where there is some communication (both vertical and horizontal) and a moderate amount of teamwork.
System 4 - Participative
The optimum solution, where leadership is by superiors who have; complete confidence in their subordinates, where motivation is by economic rewards based on goals which have been set in participation, where personnel at all levels feel real responsibility for the organizational goals, where there is much communication, and a substantial amount of cooperative teamwork.
Likert claimed that the system of management found in high producing units can be clearly identified with System 4, whose characteristics include:
- highly effective work groups linked together in an overlapping pattern by other similarly effective groups.
- complete confidence and trust in subordinates displayed by constructive use of them.
- superior always tries to tap ideas of subordinates and make constructive use of them
- personnel at all levels feel responsibility for organisations goals
- good communications with individual and groups aimed at achieving organisationís objectives
- subordinates fully involved in all decisions related to their work.
- goals usually established by means of group participation
An American company, Weldom which adopted Likerts ideas, showed dramatic improvements in terms of increased profits and productivity and lower rates of labour turnover, two years after changing from System 2 to System 4.