4 Types of Leadership Styles in Business

23 Aug, 2022 | Read in 6 minutes

There are four types of leadership styles in business. Which one is your favourite?


We all need a leader, which can come from themselves or another being. It's the same with business. No business can work without leadership, but you (all of us) need more than just an executive title or seniority to be a leader.

According to Forbes, technically, leaders hold a dominant position in a field and can exercise control or influence over others. But this is only technically speaking.

Effectively, leaders provide guidance, motivation, clarity, and inspire others. How they influence people, and how their actions affect the success of their company or team. Every leader has a unique and distinctive leadership style.

Some people say that leadership is an inborn talent but we believe that every individual can be a leader. Willingness and determination to accept the lessons taught by our predecessors and see how they impact those around us are essential. Good leaders learn what they can do and keep improving it.

But before diving into leadership styles, let's clear up the tangled threads between boss and leaders.

Leader vs Boss

We all understand that one of the key factors behind a team's success is the quality of leadership. Every boss could be a leader, but not all bosses are leaders. There is a line of demarcation between the characteristics of these two figures.

Simply put, a leader is a priest for his followers, motivating, inspiring and guiding in every way. On the other hand, bosses are the owners of a business. The responsibilities of these two roles are undoubtedly different.

In certain situations, being a boss is more needed than being a leader. For example, when the job requires a dictating process, such as serving orders at a restaurant. But in some work environments, leaders are superior. Leaders make communication clearer and more respectful. Proactive leaders will empower collaboration among team subprocesses so that they can solve problems together.

4 types of leadership style

A German-American psychologist, Kurt Lewin, divided leadership styles into three. There are Autocratic, Democratic, and Laissez-faire. Over time, more leadership styles have emerged called Transformational. Let's dive deeper into each type of leader in business below.

1. Democratic

Leadership Democratic is also known as Participative. Democratic involves each member providing input to the leader, so each individual contributes to the decision-making process. The leader is still the primary decision maker, but the democratic leadership style takes an approach that allows others to be involved.

The benefit is that it triggers individual creativity so that positive contributions come from all parties. In addition, the Democrats have high curiosity, thus encouraging the desire to get input from all parties. They are great communicators, and team members love them.

Lewin also revealed the characteristics of the democratic style, such as:

  • All policies are a matter of group discussion and decision, driven and assisted by the leader.
  • The activity perspective was obtained during the first discussion period.
  • Members are free to work with anyone, and each PO/head of the group is responsible for the division of tasks.
  • The leader is objective or fact-minded in his praise and criticism, trying to improve things.

Examples of great leaders who apply this leadership style are Bill Gates, Nelson Mandela, and Walt Disney.

2. Autocratic

This leadership style is also known as Authoritarian. The command “do as I told!” summarises this leadership style.

The centre of this leadership style comes from above, a figure who leads the company or team. Autocracy decides the strategy, policies, procedures and direction of the organisation. This leadership style focuses not on team collaboration but on the process of dictation and responsibility between individuals.

The hallmarks of an Autocratic leader are strong self-confidence, decisiveness, unwavering commitment and always focus on the goal. While Autocratic doesn't sound like much fun, sometimes this leadership style can be precise and effective in urgent, chaotic and fast-paced situations.

Lewin has four characteristics of the Autocratic:

  • The leader is the maker of all policies.
  • Autocracy also determines techniques and actionable steps.
  • The leader dictates each work assignment of each member.
  • The dominator is “personal” in his praise and criticism of each team member's work but is aloof from active group participation, except when demonstrating. He is friendly or impersonal rather than openly hostile.

Examples of leaders who have implemented Autocratic are Martha Stewart and Bill Belichick, and New England Patriots Head.

3. Laissez-faire

This style eliminates the micro-management that exists within the team. The team is trusted to complete their duties and responsibilities correctly without questions and a continuous checking process. However, this does not mean leaving employees without direction and feedback. A Laissez-faire character drives decisions for employees while available to deliver feedback when needed.

The most prominent component of laissez-faire is delegation. The whole trust instilled in members makes them free to express themselves. Laissez-faires can provide constructive criticism when needed and voluntarily place responsibility in the hands of employees.

Some problems that arise from Laissez-faires are when the team does not understand the vision and mission of the project. When the project's goals are unclear, the team will not achieve anything.

The four characteristics of Laissez-faire, according to Lewin, are as follows:

  • Full non-participation by the leader
  • The leader will provide the material. He will explain the information unless questioned but does not attempt to participate in discussions.
  • The complete freedom of decision rests with the team.
  • Infrequent comments on member activity unless questioned.

The renowned leaders with this leadership style are James Buchanan (former US President), Ronald Reagan (former US President), and Warren Buffet.

4. Transformational

According to Lewis, the last type of leader in business is Transformational. This leadership involves developing a big vision and rallying employees around it. It's not only the leader who needs to upgrade the skills, but each member personally wants to grow to be more professional to achieve common goals.

With aligned team members, the Transformational leadership style makes the team willing to put effort, time and energy toward team goals. Forbes mentions eight qualities of Transformational type leaders:

  • Understanding what needs to change
  • The ability to stimulate the intellect
  • A knack for encouraging participation
  • Talent for genuine communication
  • Sense of the bigger picture
  • Loyalty
  • Personal integrity
  • An inspiring bearing

The implementation of the Transformational style is not always smooth. The leader must constantly communicate with team members and deliver constant feedback. When the lines of communication are severed in any way, it's more likely that team members will feel left out.

The qualities of leadership

You must understand that leadership is not just a role or a title but a personal quality and behaviour. And today, leadership is an increasingly important skill due to the diversity of businesses.

Why is leadership important? Because only a handful of people succeed in achieving their team's goals and what they need to do to achieve them. And now many workers are working from home and working in different locations. So the process of understanding the vision and mission of the business becomes more difficult.

Besides the leadership style you take, there are four essential qualities that a leader must possess.

1. Clarity and vision
Leaders understand the problems or opportunities that are in front of them. They can visualise the concept clearly and convince the solution to every problem.

2. Ability to engage people's realisation and achievement
Leaders cannot only motivate or inspire people to perform but also break goals down into actions and then train and hold team members accountable for each step.

3. Heightened awareness of change in the environment
Every leader must be aware of continuous change around them. They are adept at reimagining solutions based on emerging problems and changing environments.

4. Ability to influence and bring changes
When a leader succeeds in creating a clear vision, and the ability to execute every step, then every word that comes out of his mouth will have an impact and change.

Wrapping Up

Leadership is about serving others, not only bossing. Leaders cannot stand alone and always need their “supporters.” Therefore, being a leader is the art of getting other people to do something you want to do because they want to do it. A leader consists of attitudes and intuitions that are built over time. Whatever your leadership style, make sure it fits your personality and environment. And again, there are no exact guidelines for being a perfect leader. Practice what you preach.

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