Final answer:
The Situational leadership theory posits that effective leadership requires varying styles depending on the situation, with transactional and transformational leadership being two examples of different approaches.
Step-by-step explanation:
The leadership theory that is characterized by the belief that managers must use different leadership styles depending on the circumstances is known as Situational leadership theory. This theory suggests that no single leadership style is the best, and effective leadership is about adapting the style based on the maturity level of the followers, the details of the task, and the situation at hand. Relevant styles under this approach range from transactional to transformational leadership, each with its distinct characteristics such as rewards and punishments in transactional leadership, or charisma and inspiration in transformational leadership.
Transactional leaders focus on supervision and organizational goals through a system of rewards and punishments and are often more effective in highly regulated environments, while transformational leaders are charismatic role models, inspirational, intellectually stimulating, and considerate, generally thriving in environments where innovation and change are needed. Whether one prefers a democratic, laissez-faire, or authoritarian leadership style can vary depending on the context, such as in a classroom, workplace, or sports team, and on personal characteristics and the nature of the group being led.