The Importance of Leadership Style

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Management & Development

April 26, 2024

The Importance of Leadership style: Make or break your organisation’s culture with a conscious approach.

The importance of leadership style cannot be understated. It’s a no-brainer that leadership styles positively affect organisational commitment and work satisfaction. Moreover, work satisfaction can then affect work performance positively. Your leadership style can literally make or break an employee’s performance, which can in turn affect the organisation’s productivity and profitability. Leaders set the standards for how people and teams act, respond, and communicate with customers. If there is a poor relationship between the leader and their people, there will be unclear expectations, decreased team motivation, and increased team frustration, which can lead to disappointed customers. If your customers are disappointed, they are less likely to come back. Leadership behaviour can drive customer loyalty through effective management styles.  

What leadership styles exist, and where are they most appropriate?  

Democratic/Participatory  

The critical characteristic of this style is the shared decision-making process. Whilst the leader still has the final say on all decisions, as expected, they would base their decision on each team member’s input. Giving everyone an equal say prepares the lower-level employees on how to exercise authority which they may need to do in future positions they hold. Moreover, it stimulates the decision-making process in company board meetings, as rarely does one person ultimately have the power to decide.  

This opposes the traditional top-down approach and is becoming increasingly influential due to the younger generation’s preference for flatter organisational styles. This style acknowledges the employees as stakeholders in the organisation who are entitled to their voice, and by doing so, employees arguably become more engaged as they are more involved. A practical example of this style was James F Parker, former CEO of Southwest Airlines. Parker chose to embody this style after the 9/11 attacks. Rather than cutting back staff like most other airlines, he initiated a profit-sharing program. The airline is arguably still one of America’s most successful low-cost airlines.  

Autocratic Leadership  

This style is almost the complete opposite of democratic. Autocratic operates on a strict hierarchical system where the ‘boss’ or leader decides without any input from staff. Historically, this approach was often adopted and viewed as a requirement for success. Employees are neither considered nor consulted before a change in direction and are expected to adhere to the leaders’ decisions at the stipulated time and place, regardless of their opinions. This style can lead to employees feeling as though they are not trusted by their leader and discourages innovation/creativity.   

For this reason, among others, this style has become less and less popular. The workforce is knowledgeable, capable, and educated in the modern world, meaning they often react negatively to this style. Moreover, the ever-changing, highly competitive environments that business takes place in today require constant innovation, and this style fails to foster creativity, making it inappropriate.  

There are some positives to note. It relieves pressure on employees. If the organisation is in a highly stressful situation, it may relieve employees that the decision-making burden does not fall on them. Moreover, this style can benefit manufacturing and construction environments by ensuring safety and preventing accidents and injuries.   

Transformational Leadership  

The core premise of this style is continuous improvement and transformation. Employees are set a basic number of tasks and goals that they should complete every week, but the leader is constantly pushing them outside their comfort zone. Transformational leadership theory is deemed to improve the subordinate’s performance by changing the motives and values of employees. The characteristics of this style include individual influence, spiritual encouragement, and intellectual stimulation. Leaders embodying transformational leadership consider individuals, establish a vision, and aim to create an open culture and build trust with employees to reach their own goals and the employee’s potential.  

This form of leadership works exceptionally well in growth-minded companies as it motivates employees to see their capabilities. A transformative leader is a visionary who inspires others and encourages critical thinking/innovation. Steve Jobs is an excellent example of this. The core aim of these leaders is to transform 'people and organisations inside a literal sense – to alter them in mind and heart enlarge vision, insight, and understanding.’  

This style is crucial in the modern business environment. These leaders encourage followers to view problems from new perspectives, provide support and encouragement, and share their vision for the organisation as a goal to work towards whilst self-improving.  

Transactional Leadership  

This style rewards employees for precisely the work they complete. Effectively employees are rewarded for their efforts and performance. It focuses on the staff’s basic and external demands, with the relationship between leaders and subordinates based on contract. Max Weber first developed this framework with the premise being ‘the exercise of control based on knowledge.’  

For example, a marketing team may receive a bonus if they manage to nurture ten leads – this helps to establish roles and responsibilities for each employee, but on the flip side, it can encourage bare minimum work. So when an employee reaches their target, they may be less motivated to continue as they have already achieved their maximum reward. This style assumes that all employees value external rewards and are not self-motivated, primarily focusing on results. However, this is not always the case. 65% of millennials want their employer to support their development through training wanting their higher-level needs addressed, e.g. belonging, esteem, and self-actualisation.   

Having said this, there are benefits to this style as it often results in running a tight smooth-sailing ship where everyone is crystal clear on the goal and objective of leadership. Bill Gates is a successful practical example of this style.  

What do you think are the most effective leadership styles? 

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