1 The Finance-Leadership-Decision Loop Effective leadership is essential in ensuring the financial adaptability and success of organizations. Good leaders usually have a deep understanding of the financial aspect of their organization, and make decisions that promote its wellbeing, prosperity and longevity. Essentially, leadership is the ability to influence people to work towards collectively attaining the same objectives. The three cornerstones of leadership according to Irwin are competence, character and commitment. One of the features of a competent leader is their ability to comprehend the financial aspect of the business, making them more adept at the role and inspiring confidence in their followers. Character, under this definition, is having ample knowledge of the financial environment such that making sound financial decisions comes naturally. Commitment comes from the deep understanding of the financial dynamics of the organization.
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2 Finance, decision and leadership are interconnected in that, the more a leader understands the financial aspect of the organization, the better his decision-making ability will be. As the leader’s decision making ability increases, he becomes more credible among his followers, thus making it easy to influence them without coercion. The more the organization trusts the leader, the higher his leadership rank rises. As the leader grows in rank and responsibility, his decisions will affect finance, and finance will affect his actions and decisions (Puaschunder, 2020). The finance leadership loop begins with acquiring financial information. This information guides decision making, which in turn leads to financial consequences. At the core of the loop is the objective of facilitating decision that lead to the organization’s financial wellbeing and growth. Leaders who understand the connection between leadership, finance and decision making are able to make better choices and demonstrate stronger leadership.
Reference Puaschunder, J. (2020). Behavioral Economics and Finance Leadership: Nudging and Winking to Make Better Choices. Springer Nature