Leadership

What are the key leadership styles?

This section will cover the five main leadership styles in business. These are:

• Democratic leadership

• Authoritarian leadership

• Laissez-faire leadership

• Transactional leadership

• Transformational leadership

Democratic leadership

The democratic leadership style is when a leader works collectively with employees to make decisions. All employees in the organisation or department are encouraged to participate in the decision-making process by sharing knowledge, views and opinions. This leadership style is also known as participative leadership.

Authoritarian leadership

The authoritarian leadership style is the opposite of the democratic leadership style. In authoritarian leadership, the leader makes all the decisions themselves without discussion with employees.

When a large enterprise adopts an authoritarian leadership style, employees at the middle or bottom levels may not be aware of the decisions made in the organisation.

Laissez-faire leadership

The laissez-faire leadership style is also known as delegative leadership. In this leadership style, group members are delegated to make decisions and take initiative. The leader's responsibility is to train employees to make sure they have the knowledge and skills to make the right decisions.

Transactional leadership

The transactional leadership style occurs in less creative and hierarchical organisations in which employees have a set of written guidelines. Employee performance is then measured against these guidelines and employees are either given monetary or non-monetary rewards or punished with, for example, a warning or loss of bonus.

Transformational leadership

The transformational leadership style occurs in organisations which concentrate on employee development and progression within the organisation. These organisations usually have a low staff turnover rate as employees will likely concentrate on the progression of their careers and stay loyal to the organisation.

Leadership style theories

There are a couple of leadership style theories. The key theories are the Tannenbaum Shmidt continuum and the Blake Mouton grid.

The Tannenbaum Shmidt continuum

The main idea of the Tannenbaum Shmidt continuum leadership theory is that leadership styles are influenced by a variety of factors. These factors include:

• The characteristics of the leader,

• The qualities of the followers,

• Situational factors that can include urgency in the decision making etc.

Additionally, the Tannenbaum Shmidt continuum leadership style theory focuses on finding the middle ground between two extreme leadership styles: the authoritarian and delegative leadership styles.

On the left of the diagram are managers who exhibit authoritarian leadership qualities and on the right are managers who exhibit laissez-faire leadership qualities (see Figure 1 below).

Figure 1. Tannenbaum Schmidt continuum leadership style theory, StudySmarter

The Blake Mouton grid

The Blake Mouton grid leadership theory acknowledges that there are two leadership style behaviours, either task-oriented or people-oriented.

The task-oriented manager's main concern is productivity and completing tasks, which means that these types of managers only focus on production, and spend a lot of time planning and communicating the work to employees with set deadlines.

On the other hand, the people-oriented manager's main concern is relationships, meaning that these managers focus on building trust and relationships with employees. They respect subordinates' ideas and encourage teamwork.

Blake and Mouton have implemented a 1 to 9 scoring system to measure the task-oriented and people-oriented behaviours of managers; 1 is low and 9 is high. Based on these scores, different management styles are identified.

Figure 2 Blake Mouton grid leadership theory, StudySmarter

The different leadership styles are identified based on the scoring system, as shown in Figure 2. They include:

Impoverished management - This leadership style occurs when managers score low on both concern for people and concern for productivity. This leadership style shows that managers will not put a lot of effort into getting tasks done on time, nor on building relationships with subordinates.

Country club management - Managers implementing this leadership style score low on concern for productivity but score high regarding the concern for people. Managers mainly focus on people rather than on production as they believe that when managers prioritise employee well-being it increases their motivation, productivity and retention.

Authority compliance management - This management style is when managers put less emphasis on people but more emphasis on productivity. Managers following this leadership style usually ignore employees' feelings and focus on getting the job done within a set time. Monetary incentives may be used to increase employee efficiency and negative incentives such as punishment used to motivate employees to perform better.

Middle-of-the-road management - In this leadership style managers have medium concerns for productivity and subordinates. Managers try to keep relatively good relationships with their subordinates and get them to complete set tasks on time without putting too much pressure on employees.

Team management - managers are concerned with both productivity and people. The main focus is for managers to build good relationships with their subordinates as well as accomplish tasks beyond set targets. This leadership style is seen as the most effective.

McGregor's leadership style theory

McGregor's leadership style theory consists of two leadership style theories. These are:

Theory X

According to McGregor's theory, Theory X should be used in situations where managers believe that employees are unmotivated, need to be controlled, and do not want to take responsibility. This involves the implementation of an authoritarian leadership style. This means that the manager will be in control of employees by micromanaging them and making all the decisions without consultation with employees. This approach can be used to get the 'work done'.

Theory Y

On the other hand, if managers believe that employees are motivated to take on challenges, are self-motivated and interested in career progression, then McGreggor suggests using Theory Y. This includes the implementation of a democratic leadership style. Since managers will have trust in employees, they will involve them in decision making and take responsibility in the organisation.

Figure 3 McGregor's leadership style theory, StudySmarter

Leadership skills

Previous sections have shown that there are very different leadership styles, but what they all have in common are leadership skills. Regardless of the leadership style, a good leader must have certain skills. This section identifies three main leadership skills.

Problem-solving

Every leader faces problems. Therefore, a leader must be able to identify the problem, understand its cause, and come up with possible solutions. After identifying a suitable solution, the leader must reflect on how to avoid this problem in the future.

Empathy

Empathy is an important leadership skill as leaders need to give employees an example to follow. Leaders must be able to put themselves in someone else's shoes.

Persuasion

Persuasion is a skill that every leader should have. Every leader has to persuading others to believe in the company vision or be motivated to do certain tasks. To have good persuasion skills, a leader must master communication, emotional intelligence, negotiation and more. The leader must communicate ideas clearly and negotiate if there is any disagreement.

Leadership qualities

Leadership qualities can overlap with skills. This means that certain qualities can be defined as skills and vice versa. The main difference between those two terms is that leadership skills are abilities that leaders are able to develop through learning and practice. On the other hand, qualities are certain character qualities that are usually natural features but can also be developed over time. The key leadership qualities include:

Self-confidence and self-belief

Good leaders must have confidence when making decisions and setting business goals. They must be able to believe in themselves that they can achieve their goals and bring success to the business.

Intelligence

Good leaders must be intelligent as this allows them to:

• Determine a direction that is realistic and achievable for a business to succeed.

• Distinguish between unrealistic, impossible and achievable ideas.

• Have the ability to solve problems of high complexity.

• Set priorities.

Creativity

A good leader must be creative and come up with innovative ideas for the business. As the business environment becomes more competitive, the business that has the most innovative ideas will be the one leading the competition.

Charisma

A good leader must have a personality that makes others believe in them and follow them. A charismatic leader can motivate others to work along with them towards the business vision by achieving set goals and objectives.