In Australia and globally, leadership plays a significant role in the success or failure of any organisation. Great leadership directly impacts employee experience and profitability — engaged employees can generate 23% greater revenue. Impactful employee engagement falls on leadership and the way they direct teams and individuals. And each successful leader develops a style based on their own personality, goals, and business culture based on one of these three leadership styles: autocratic, democratic, and laissez-faire.
Take a moment and consider your own leadership approach. Do you prefer to issue commands, or would you rather nurture and guide? Do others have an equal say in the direction of your team or organisation? Or do you set the goal and expect the team to follow? Self-awareness is the first step in figuring out what type of leader you are or want to be.
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What are the three types of leadership styles in business?
In 1939, Kurt Lewin identified three types of leadership styles in business: autocratic, democratic, and laissez-faire. Each, of course, comes with its own advantages and disadvantages.
1. The autocratic business leader
The autocratic leader understands the strength of authority. Autocratic leaders are not interested in opening up the decision-making process to the entire group. Instead, they choose to bear the leadership completely alone. They expect those who fall under their authority to follow orders.
Advantages of an autocratic business leader
The main advantage of an autocratic leader is streamlined work that improves efficiency and productivity. They create firm deadlines and have a very clear set of expectations. This is ideal in a time of crisis or when last-minute decisions are needed. This leadership style allows for fewer misunderstandings as directions are passed down.
The disadvantages of an autocratic business leader
They often have a limited perspective. Given they only draw from their own ideas and experience, any input from other members of the team will likely go overlooked. Those who work under this leadership style sometimes end up resenting their manager. They feel undervalued due to limited recognition of their contributions. Additionally, this leader is more likely to micromanage their team. Autocratic leaders tend to find themselves at the centre of low work morale and high employee turnover.
When to use this style
The autocratic style is best used during a crisis when a leader is most valuable. You need someone who takes control to make quick and difficult decisions to potentially reduce damage. During times of emergency, teams appreciate a strong and decisive leader. Autocratic leadership may also come in handy when team correction is necessary. After the crisis has passed, it is generally beneficial to switch styles.
Autocratic leadership style examples
The political authoritarian leader is a classic example of an autocratic leader. But this type of leader exists in the business world, sometimes all too often. Henry Ford, the founder of Ford Motor Company, led his company this way. Same for Elon Musk. Even Martha Stewart, the head of a global lifestyle brand, has been called an autocratic leader. Think of any industry that needs a quick-thinking decision maker — an advertising agency CEO, a global sales team leader, a movie studio producer — and an autocratic leader can often be found. These leaders set the pace and tone for their company or team and set high standards for performance.
2. The democratic business leader
A democratic leader encourages the free exchange of ideas throughout the team. All members have a valued voice and the leader acts as a spokesperson or facilitator. Democratic leaders rely on the participation of every member of the group. They emphasise the value and expertise each member brings to the table. Every team member shares the freedoms and responsibilities of leadership.
Advantages of a democratic business leader
An advantage of democratic leadership is the boundless creativity of the entire group that allows for open discussion of issues and solutions. Team unity generally grows as a result of democratic leadership. This environment can make an employee feel appreciated, accomplished, and important to the success of the organisation. Common office politics such as gossiping, cliques, and manipulation become much less prevalent. The end result is an improved work environment and lower employee turnover: 63% of employees who are recognised for their work are less likely to job hunt.
The disadvantages of a democratic business leader
Under democratic leadership, deliberation can be an unaffordable luxury. If decisions need to be made quickly, a democratic team may be unable to adapt and function under the stress. Democratic leadership can result in a lack of clarity around team members’ roles and responsibilities, and difficulty identifying employees who aren’t carrying their weight.
When to use this style
This is the most effective method for day-to-day work as it allows the group to take part in decision-making. This gives teams a feeling of ownership over projects, deliverables, and results. Many business leaders identify the democratic leadership style as their go-to style, but this technique can be less effective during times of crisis.
Democratic leadership style examples
When you want to lead a team cohesively and allow for different voices and perspectives to be heard, but still make the ultimate call, adopt the democratic leadership style. Think about the head of a creative organisation, such as marketing, gaming, or graphic design. These are areas where collaboration and discussion help propel a product or brand ahead. Corporations like Google, Apple, and Coca-Cola are known for democratic leadership styles where people at all levels get valued for their input and have a say in day-to-day work. Executives engage with lower-level employees, embrace challenging discourse, and distribute power across groups.
3. The laissez-faire business leader
Laissez-faire leaders are the hands-off type. They assign tasks and give general direction, but they’re usually uninvolved in day-to-day tasks. Employees decide on the best approach to fulfill their responsibilities. Laissez-faire leaders put a great amount of faith in the individual. They trust them to remain self-motivated, on-task, and accountable. If issues arise, these leaders are available to offer direction, but only upon request. Laissez-faire leaders allow each member of their team to succeed or fail based on their own abilities.
Advantages of laissez-faire business leaders
An advantage of laissez-faire leadership is the freedom to operate without restrictions or interference from management. This gives skilled and self-motivated employees a chance to reach their fullest potential.
The disadvantages of laissez-faire business leaders
A disadvantage can be the loss of productivity without a strong leadership hand to keep it on track. This can result in missed deadlines, omissions in the process, and low-quality work. With each team member pursuing goals in their own way, team unity may suffer. Some may start to lose interest in work due to distant and seemingly uninterested leaders. This can lead to significant losses for the organisation. Disengaged employees can cost American businesses an estimated $450 billion to $550 billion per year.
When to use this style
Laissez-faire leadership is best when individuals are able to function without supervision. Before using this style, make sure each team member has the right skill level and self-direction capability. They must be able to motivate themselves to keep the work going. Otherwise, this approach could backfire and cause more harm than good.
Laissez-faire leadership style examples
Someone who enjoys macro-management would excel as a laissez-faire leader. The head of a successful sales team filled with self starters and closers can be hands off, giving team members the leeway to get their work done. This also goes for reporters in a news organisation, who likely work well on their own. Laissez-faire leaders have strong belief and trust in their teams and allow them to meet goals on their own. Steve Jobs is one of the most famous laissez-faire leaders, hiring smart, motivated, creative people and letting them loose to succeed.
What is the best leadership style?
The best leadership style depends on the situation and the needs of the team and the company overall. The best style for you also depends on your personality. Are you naturally more comfortable taking control, giving out marching orders, and making all the decisions? Then move into an autocratic leadership role. If you want input from a wide swath of employees to gain diverse ideas, a democratic leadership style makes sense. And if you want to “set it and forget it,” go for a hands-off, laissez-faire approach.
Review your current team dynamic. Are they excelling or disengaged? If it’s the latter, you might want to review your methods. Figure out what needs to stay the same and what needs to change. A leader sets the tone for the entire team. By changing the way you lead, you may find your team will adapt, evolve, and improve.
Which business leadership style is right for you? You may find that you don’t fit neatly into any one category. The most successful leaders are those who jump between leadership styles. Pick and choose techniques that best fit the team or task at hand and adapt them along the way as needed. Effective leadership is and always has been about knowing what techniques to use and when.
The most important leadership skill you can develop is self-awareness; know what works and what doesn’t. By understanding these most common business leadership styles, you’ll be able to move between them as needed, and set yourself and your team up for success.
Former Salesforce SEO Manager Rosy Callejas contributed to this article.