7 Different Types of Business Leadership Styles
There is a dizzying number of ways you can lead your business. And over the years, people who have studied nothing but leadership theory have started putting handy labels on all of them.
While there are an infinite ways to approach leadership, here are the styles we’ll be looking at:
Charismatic
Transformational
Transactional
Laissez-faire
Autocratic
Pacesetting
Coaching
So, join me as I explore 7 different leadership styles from a business point of view, and what industries they work best in.
1. Charismatic Leadership
The charismatic leadership style is exactly what it says on the tin. You lead through the impossible to measure power of charisma. Essentially, charismatic leaders have exceptional communication skills, are incredibly persuasive, and can charm their followers into believing anything and everything they want.
The go-to examples of charismatic leaders are Martin Luther King Jr., John F. Kennedy and Barack Obama.
When Should Charismatic Leadership Be Used?
Charismatic leaders are best suited to businesses plagued by division and discord, or facing existential threats. Their ability to create a shared identity and vision that boosts motivation and produces results can fashion a perfect storm of innovation.
2. Transformational Leadership
Transformational leaders are all about bringing valuable and positive change to both individuals and teams. They are the very definition of benevolent leaders, as they treat their followers as collaborators, pushing them to reach their full potential and towards a mutual goal.
Examples of transformational leaders are Mahatma Gandhi, Shantanu Narayen (Adobe) and Steve Jobs.
When Should Transformational Leadership Be Used?
Transformational leaders are effective in organizations that are under siege from stagnation or lack of vision and are in dire need of fundamental change. They will spur employees to come together as a singular unit - all focussed on a greater good.
3. Transactional Leaders
Transactional leaders simply use a reward and punishment system to motivate their workers. For this style of leadership to work, workers must closely adhere to their leader’s instructions, and be closely scrutinised to ensure optimal performance.
There’s no shortage of examples with the most popular being Bill Gates, Charles de Gaulle, Norman Schwarzkopf, Vince Lombardi, and Howard Schultz. Sports coaches are also emblematic of transactional leadership as they motivate their athletes by promoting the reward of winning (on top of money, of course).
When Should Transactional Leadership Be Used?
A transactional leader can be the perfect solution for short-term goals such as increasing production and cutting down costs quickly and efficiently. It can provide much-needed order for projects that need to be carried out in a specific way. This is why it’s so well-suited for crisis and emergency situations.
4. Laissez-Faire Leadership
Laissez-faire literally translates from French to "allow to do". In other words: "let people do as they choose". This is especially true with laissez-faire leaders who place a lot of trust in their followers, allowing them complete autonomy to make their own decisions and get on with their work.
Examples of laissez-faire leaders include Queen Victoria, Warren Buffet, and Herbert Hoover.
When Should Laissez-Faire Leadership Be Used?
Organisations that require little change to their day-to-day operations can thrive with laissez-faire leadership. Industries such as retail, hospitality, and even IT departments can benefit as their staff are usually well versed in the work and can handle themselves.
It also greatly benefits organisations where creativity is a driving force. The entertainment industry (well, some of it anyway) is full of free-wheeling mavericks whose work would suffer greatly at the hands of a micromanaging dictator.
5. Autocratic Leadership
Autocratic leadership, AKA authoritarian leadership, is where a single person has complete control over an entire organisation with little to no input from others. The word “dictator” might spring to mind. But remember that while all dictators are autocratic leaders, not all autocratic leaders are dictators.
The fact that Adolf Hitler and Vladimir Putin are common examples show just how problematic autocratic leadership can be.
However, think of an experienced surgeon leading an intensive procedure. They would most certainly (I hope) be using an autocratic style of leadership to ensure the surgery was a success.
When Should Autocratic Leadership Be Used?
Autocratic leaders are more suited to scenarios where there is absolutely no room for error. They’re also completely necessary when it comes to making decisions that are incredibly time-sensitive or involve potential safety threats.
6. Pace-Setting Leadership
Pace-setting leaders are 110% committed to setting an example with how they work. They go above and beyond in every regard in the hopes that this mentality will trickle down to their followers. That’s where the name comes from. They set the pace, and you better damn well follow it – or else!
A fun example of a pace-setting leader is filmmaker James Cameron. To quote his frequent collaborator Sigourney Weaver: “He really does want us to risk our lives and limbs for the shot, but he doesn't mind risking his own.”
Even Walt Disney with the leaps and bounds he made in animation (and branding) can still be considered a pace-setting leader long after his death.
When Should Pace-Setting Leadership Be Used?
Pace-Setting leadership won’t work for a lot of scenarios. However, it can benefit companies and start-ups who are in the entrepreneurial phase of their life cycle. Essentially organisations where every action will have an impact on their future survival.
Having a leader who goes above and beyond to keep the business above water is guaranteed to motivate their followers to do the same.
7. Coaching Leadership
Coaching leadership is all about getting to know your follower’s individual strengths, weaknesses and motivations so you can push them to be better. It’s an approach that focuses heavily on developing talent and helping everyone reach their full potential – individually and as a team.
As a style, it’s fairly similar to transformational leadership. However, it puts more of a spotlight on your follower’s long-term potential and tying their personal goals into your organisation’s future.
Apologies to all you non-sports fans as I will be using another coach as an example. And that example is Phil Jackson, one of the most successful basketball coaches to have ever lived. Jackson famously led the Chicago Bulls during their golden years (1989 to 1998).
Mitch Mitchell, leadership expert and writer for Forbes, had this to say about Jackson: “He famously understood the human side of his individual players. From letting Jordan and others golf to relieve pre-game stress, to greenlighting a ‘quick trip’ to Vegas for Dennis Rodman, he recognized his athletes as more than just accumulators of points, rebounds, and assists.”
When Should Coaching Leadership Be Used?
Coaching leadership is one of the most effective styles of leadership in this entire list and can be deployed in just about any industry. The caveat being that it only really works when undertaken by an already highly talented leader.
The perfect coach will be able to:
Devote their time strategically to individual employees
Help employees open up about their limitations
Be able to pull everyone together towards one singular vision (sounds very charismatic, doesn’t it?)
Conclusion
Most effective leaders don’t just pick one style of leadership and call it a day.
They mix and match to create hybrid models that work for their individual strengths as well as the situations they find themselves in.
They even shift from one style to another if crisis situations.
Even past British PMs never stuck to just one leadership style (to varying degrees of success, of course).
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Written by Michael
Michael Mauro is the founder of a forward-thinking organisation specialising in leadership, HR and employee development. With over a decade of global experience, Michael has become a leading voice on topics such as culture, inclusion, wellbeing, and the future of leadership.
