What Kind of Leader Are You? 7 Business Leadership Styles and How to Become a Better Leader

What does it mean to be a leader?

Truthfully, there are as many answers to that question as there are leaders worldwide. And, as an entrepreneur, manager, or supervisor, it’s incredibly valuable to know your leadership style- and to understand your strengths and weaknesses.  

The most successful leaders do share some common traits. For example, they avoid toxic behaviors that can destroy their teams. They’re good listeners. And they understand the difference between management and leadership.

Seth Godin, in his book Tribes, explains the difference:

Management is about manipulating resources to get a known job done … Managers manage a process they’ve seen before, and they react to the outside world, striving to make that process as fast and as cheap as possible. Leadership, on the other hand, is about creating a change that you believe in.

My thesaurus says the best synonym for leadership is management. Maybe that word used to fit, but no longer. Movements have leaders and movements make things happen.

Leaders have followers. Mananagers have employees.

Managers make widgets. Leaders make change.

Peter Drucker famously summarized this by stating there’s a difference between doing things right (management) and doing the right things (leadership).

Both management and leadership are important, but of the two, leadership has a bigger impact on the success or failure of an organization. A recent Gallup article reveals that the single most important factor in determining whether your business’s work culture is good, bad or great is leadership.

Remarkably, 70% of the variance between lousy, good and great cultures can be found in the knowledge, skills and talent of the team leader. Not the players, but the team leader. This is one of Gallup’s most profound workplace breakthroughs.

So, what kind of leader are you?

This is probably one of the toughest leadership interview questions you’d ever hear, but If you know the answer to this question, you can learn how to get the most out of your natural leadership style. Or maybe, you can even consider adopting a different style that better fits your personality, business, or employees.

Here are seven of the most common leadership styles for entrepreneurs and small business owners:

The Autocratic Leader

The autocratic (or authoritative) leader is the stereotypical “bossy” boss. They make decisions on their own and lay down the law. Employees’ opinions are not welcome, but their obedience is required.

The autocratic leadership style isn’t as cut-and-dried as the stereotype would suggest. While it may not be the most diplomatic approach, there are definite benefits to this leadership style.

Pros – Effective autocratic leaders set clear guidelines, so their employees know what is expected of them. This creates a framework for employees to succeed by working toward their assigned goals within those set guidelines. This is particularly useful when the leader is the most knowledgeable person in the group.

Autocratic leadership also allows for rapid decision-making and decisive action since there’s no need to consult or debate with others. It also establishes a consistent vision for the company- the autocrat’s vision.

While authoritarian leadership certainly is not the best choice for each and every situation, it can be effective and beneficial in cases where followers need a great deal of direction and where rules and standards must be followed to the letter.

Cons – The downside to autocratic leadership is that it can leave employees feeling unheard and disrespected. As a result, it’s been found to quash creative thinking in the workplace.  Kendra Cherry of Very Well says of autocratic leadership,

…it tends to create dysfunctional and even hostile environments, often pitting followers against the domineering leader.

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What Autocratic Leaders Can Do Better:

When occasions permit, give your employees a voice. Making your employees feel heard will make them feel valued and provide greater job satisfaction.

Mark Murphy of Leadership IQ shared this advice in Forbes:

While your inclination may be to yell some exhortations to ‘suck it up’ and ‘stop whining,’ that’s the wrong move. Instead, back off a little, break your project into smaller pieces so people aren’t so overwhelmed, and calm your voice… This will give employees a chance to regain their emotional footing, and once that happens, their performance will shoot back up.

The Transactional Leader

Transactional Leadership is based on the simple concept that work is a transaction. Essentially, “You do this for me, and I will give you that.” As a result, transactional leaders need not concern themselves with the nuance of managing each employee based on emotional needs. According to Leadership Central, transactional leadership theory assumes that all employees are motivated by the same rational reward system.

Pros – Transactional leadership establishes very clear roles in the workplace. The leader sets goals and controls the reward, while the employee earns their reward by meeting it. And while transactional leadership can sound very sterile, it can also be a great motivational tool.

For example, commission-based positions are transactional. The more the employee sells, the more they make. Having a perpetual carrot dangling ahead of you can produce great results.

Cons – Transactional leadership’s biggest pitfall is that it can be used to manipulate and exploit employees. Without an emotional connection, it’s easy for a transactional leader to view employees merely as the means to an end. When employees cease to be viewed as people, it’s easy to limit the reward and increase workload in the name of the bottom line.  

Creative thinking also tends to suffer. Management Study Guide explains:

They do not make an effort to enhance followers’ creativity and generation of new ideas…. Such leaders tend to not reward or ignore ideas that do not fit with existing plans and goals.

What Transactional Leaders Can Do Better:

Invest time in getting to know your employees as people. Hisham Sorour explains,

As an employer, you need to understand why your employees are emotionally connected to your business – and it’s generally much more than salaries, training, or benefits. Research shows that emotionally connected employees are the best employees because they are engaged and productive, and they feel validated and appreciated.

Also, find ways of encouraging creative thinking in your office. This is the lifeblood of innovation. Holding a contest (another form of transactional leadership) to reward the most useful creative ideas should be right in your wheelhouse.

The Visionary Leader

The visionary leader unifies their employees to work toward a common vision or goal. Rather than dictating or purchasing their employees’ efforts, the visionary inspires. By sharing an exciting vision- and emphasizing how their employees will play an important role in making that vision a reality- visionary leaders build loyalty and move everyone toward creating their shared goal. Visionary leaders do not usually outline specific expectations, instead encouraging their employees to find their own way of doing things.

Money-zine’s definition of a visionary leader states that,

The leader is inspiring in vision, and helps others to see how they can contribute to this vision; allowing the leader and followers to move together towards a shared view of the future.

Pros –  Visionary leadership inspires loyalty to both the leader and the goal. Loyal workers experience a sense of solidarity with their team and motivation to achieve their goals. Being part of something larger than themselves can create much worker satisfaction. And because visionary leaders tend to be pretty hands-off, employees are encouraged to think creatively and find their own solutions.

Cons – Visionaries generally focus on the big picture, not the details. This can make it tough for them to guide their employees through the minutiae of getting from point A to point B. Inexperienced employees in particular, may need more hand-holding than a visionary leader is used to providing. Martin Zwilling reminds us that

Visionaries typically don’t like running the day-to-day of the business on a long-term basis, and aren’t good at following through.

What Visionaries Can Do Better:

Learn more about the day-to-day details of your business so that you can be a resource for the “how” as well as the “why” and the “what”. And, know your strengths and acknowledge your weaknesses. If details aren’t your thing, hire someone excellent to manage the details for you. Zwilling recommends,

…the operational expert, who is very good at leading, managing, and holding people accountable…. When a major initiative is undertaken, they will anticipate the ripple of implications across the organization.

The Laissez-Faire Leader

Laissez-faire leadership is all about keeping your hands off and leaving your employees free to find their own way. It’s also known as “delegative” leadership in some circles because laissez-faire leaders often delegate tasks to subordinates rather than retain control.

This leadership style requires that you show your employees a lot of trust- if you need to be in control at all times, laissez-faire leadership is not the style for you. But, if you believe in allowing your employees to excel on their own terms, laissez-faire leadership could be right up your alley.

Pros – Laissez-faire leadership is well received in a corporate culture filled with highly skilled individuals who know what they need to do and how they want to get it done. Hands-off leadership gives these employees the space and autonomy they need to thrive. Creative employees who feel penned in by normal corporate environments also thrive under laissez-faire leadership because their creative solutions are allowed and appreciated- as long as they get the job done.

Joseph Chris, of Joseph Chris Recruiting Services, writes,

This autonomy can bring about the feeling of freedom among employees, which can help them feel more satisfied with their jobs.

Cons – Not all employees are good at setting their own deadlines, or managing their own tasks and time. If your employees need guidance, laissez-faire leadership can leave them feeling lost and frustrated. Not to mention that it can lead to missed deadlines and stalled projects. Chris also points out that laissez-faire leaders can appear withdrawn and uncaring, which can lead to employees withdrawing and caring less, too.

What Laissez-faire Leaders Can Do Better:

Get to know your employees. That way, you’ll know who might need extra guidance and who doesn’t. Of course, that also means that if you have an employee or two needing extra help, you ensure they receive it. You can spend extra time with them yourself or make sure that you establish a support structure that can help in your absence. Chris concurs, saying,

If staff members are unfamiliar with the process or task, leaders should take a more hands-on approach, and eventually, as followers gain more expertise, they may then switch back to a more delegative approach.

The Democratic Leader

Democratic leadership strikes a balance between the autocrat and the laissez-faire leader. Democratic leaders value the input of their employees but reserve ultimate decision-making rights for themselves. In democratic leadership, there is less of a distinct divide between the leader and the subordinates, as the leader is willing to participate with (and accept input from) their employees. Groundbreaking leadership researcher Kurt Lewin felt that the democratic leadership style was the most effective. Could this be you?

Pros – Democratic leadership takes advantage of the full potential of your employees. By utilizing their input, you stand to gain a wider perspective and learn things you may have otherwise missed. Respecting employees’ input also helps them to feel valued and appreciated- and thus happier in their work roles. Kendra Cherry points out,

Group members feel engaged in the process and are more motivated and creative. Democratic leaders tend to make followers feel like they are an important part of the team, which helps foster commitment to the goals of the group.

Cons – Democratic leadership is not the most efficient style when quick decisions and decisive action are called for. And, if you regularly err too far on the side of decision-making by committee, it can slow your business down.

What Democratic Leaders Can Do Better:

Know when to make the tough calls by yourself. In situations calling for speedy action, you’ve got to be willing to make your own decisions. Former Navy Seal Brent Gleeson calls this command decision-making.

Command decision-making… where leaders make decisions without consulting their teams… is an effective style, especially when things are moving quickly and the team is looking for immediate guidance. In a business setting, leaders use this style the most effectively on large financial decisions and in crisis situations.

The Coaching Leader

Coaching leaders are all about helping each ” team ” member reach their full potential. Coaches believe that their company is at its strongest when each employee’s goals are aligned with the company’s goals. So, they take the one-on-one time to get to know their employees- their passions, long-term goals, strengths, and weaknesses. Then they invest in real conversation time to encourage employees and develop them for future success.

Pros – Knowing your employees well means that you know who is best suited for tasks as they come up. And the rapport and trust established in coaching relationships lead employees to feel valued and appreciated in the workplace. Forbes contributor The Muse asserts,

The real benefit of this approach is that you’re not just helping individual employees, you’re increasing the quality and capacity of the entire organization.

Cons – Not everyone wants to be coached. Whether an employee resents authority or is uncomfortable with intense one-on-one interactions with their boss, not everyone responds well to this approach. Successful coaching also relies on the ability to establish genuine rapport. If a coach’s social skills aren’t as well-developed as they think, coaching sessions may make employees uncomfortable.  And finally, too much coaching can feel like the dreaded “micro-managing”.

What Coaches Can Do Better:

Brush up on your body language skills. Few employees will tell you when your conversation is making them uncomfortable. But chances are their non-verbal language is shouting it loud and clear. In their article Body Language: Understanding Non-Verbal Communication the Mind Tools editorial team explains,

By developing your awareness of the signs and signals of body language, you can more easily understand other people, and more effectively communicate with them.

Understanding body language can help identify when an employee feels intimidated, resentful, or distracted. If you recognize discomfort in your employees, you’ll know when you’re not getting through, and you can modify your approach accordingly.

The Servant Leader

The Servant Leader puts their employees first, believing that it is better to lead by example; and, that by investing in your employee that they will, in turn, invest in you. A servant leader prioritizes the well-being and growth of their employees. The Greenleaf Center for Servant Leadership defines the practice this way,

Servant leadership is a philosophy and set of practices that enriches the lives of individuals, builds better organizations and ultimately creates a more just and caring world.

If you lead by example, put your employees’ needs first, and prioritize collaboration, empathy, ethics and trust within your organization, there’s a good chance that you might be a servant leader.

Pros – Putting your employees first can lead to happy employees. And happy employees are more creative, more productive and more likely to be retained. David Burkus, the best-selling author of Under New Management, explains,

The assumption is that if leaders focus on the needs and desires of followers, followers will reciprocate through increased teamwork, deeper engagement, and better performance.

But not only that, the servant-as-leader philosophy espouses a pay-it forward mentality. Meaning that followers are encouraged to grow as people so that they may become servant leaders seeking to improve their world.

Cons – Altruism can conflict with the day-to-day decisions of running a business. Servant leaders may regularly be asked to choose between prioritizing the needs of their employees and the most profitable direction for their business. Burkus points out,

Many researchers and theorists argue that servant leaders can become so focused on the needs of their followers that the needs of the organization suffer as a result.

What Servant Leaders Can Do Better:

Remember to keep an eye on the big picture. Always putting the needs of your employees first is a noble pursuit. But, if you let the business go under because the salaries you offer are too generous for your business to afford, you’re not helping anyone in the long term. So, do what you can to look out for your employees- including being business-savvy enough the keep the enterprise afloat.

What’s next?

With a clear idea of your leadership style, it is up to you to either improve upon your natural style or adopt the traits of a different style. There is no one right way to be a leader (and often, you must mix the leadership styles depending on the situation or the people you are leading). Still, it is always important to consider and understand how your leadership style affects both your employees and your customers.

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