4 Types of Leadership in Business

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One of the most important tasks of a business leader is to persuade their team to believe in a project, to keep them motivated, and to bring out the best in each member in pursuit of corporate goals. The issue is that there is no magic formula, so we have diverse leadership styles.

The real question is not why every organization needs leaders but what type of leadership is required in each case. In the case of a company, this will be determined by various factors, including its market position, internal organization, business model, corporate objectives, and trends in the environment in which it operates. Regardless, the leadership style chosen will be critical to an organization’s success or failure.

What Are the 4 Types of Business Leadership?

Leadership is how an individual influences a group to work toward a common goal. Since ancient times, people have studied the concept of leadership. Leadership theories have evolved, but the fundamental premise remains: good leaders understand how to inspire and motivate others to work toward a common goal.

Different situations may necessitate different types of leadership. A leader in a large corporation, for example, may be expected to make quick decisions and delegate tasks efficiently. On the other hand, a leader of a small team may be expected to be more hands-on and develop strong relationships with team members. Leading effectively is a valuable skill that can benefit many organizations.

Four primary leadership styles have been identified:

  • Autocratic
  • Democratic
  • Laissez-Faire
  • Transformational

Each of these styles has distinct benefits and drawbacks. The following sections will provide examples of these four types of leadership styles.

Autocratic Leadership

Also called: Authoritarian, Coercive, or Commanding Leadership

Authoritarian leaders, also known as autocratic leaders, set clear expectations for what must be done when it must be done, and how it must be done. This leadership style emphasizes both commands by the leader and control of the followers. There is also a distinct separation between the leader and the members. Authoritarian leaders make decisions independently, with little or no input from others.

Researchers discovered that under authoritarian leadership, decision-making was less creative. Kurt Lewin also concluded that transitioning from an authoritarian to a democratic style is more complicated than vice versa. Abuse of this method is often perceived as controlling, bossy, and dictatorial.

Authoritarian leadership is most effective when there is little time for group decision-making or when the leader is the most knowledgeable member. The autocratic approach can be advantageous when the situation necessitates quick decisions and decisive action. However, it creates dysfunctional and hostile environments, frequently pitting followers against the authoritative leader.

Why this leadership style works for businesses

Autocratic leaders execute strategies and directives with complete dedication. This motivation and clarity can lead to improved performance.

Employees are not consulted before a change in direction, so it is efficient. Instead, they are expected to follow the decision at the time and pace specified by the leader.

Why this leadership style is good for the team

When a company must make difficult decisions, this type of leadership is most effective. This type of leadership provides employees with a clear sense of direction and can also compensate for a team’s lack of experience.

Potential challenges for leaders with an Autocratic style

Most organizations today can only maintain such a hegemonic culture by losing employees, which can hurt morale and creative problem-solving.

A manager changing the hours of work shifts for employees without consulting anyone is an example of this.

Other difficulties associated with autocratic leaders include:

  • Intimidation
  • Micromanagement
  • Putting too much faith in a single leader

Democratic Leadership

Also called: Participative or Facilitative Leadership

When making decisions, democratic leaders consult with their subordinates and consider their suggestions and input. This management style is commonly used in organizations requiring collective decision-making and all team members’ input. Democratic leaders typically regard their subordinates highly and believe everyone should have a say in decision-making.

Democratic leaders involve their team members in decision-making. While they are ultimately responsible for making final decisions, they frequently ask team members what they think and try to consider their ideas and opinions. This can help increase team member engagement, but there are better styles for leaders who need to make quick decisions.

According to Lewin’s research, participative leadership, also known as democratic leadership, is the most effective leadership style. Democratic leaders guide group members while also participating in the group and allowing input from other group members. People in this group were less productive than those in the authoritarian group in Lewin’s study, but their contributions were of higher quality.

Why this leadership style works for businesses

It is similar to how leaders make decisions in company board meetings.

In a company board meeting, for example, a democratic leader might present the team with a few decision-related options, and they could start debating each option. Following a discussion, this leader may take the board’s thoughts and feedback into account, or they may put the decision to a vote.

Why this leadership style is good for the team

Democratic leadership is one of the most effective styles of leadership. This is because it allows lower-level employees to exercise the authority they will need to use wisely in future positions.

Potential challenges for leaders with a Democratic style

Reaching an agreement requires significant time, resources, and communication. It can also impact decision-making because some team members may need more expertise to make critical decisions.

The dynamic adaptability of leaders like leadership expert Kurt Uhlir is worth noting within the spectrum of leadership styles. With a history of steering startups to over $500M in annual revenue, holding 16 patents across five industries, and championing both servant and transformational leadership, Uhlir exemplifies how effective leaders fluidly transition between styles to meet varied challenges.

Laissez-Faire Leadership

Also called: Delegative or Hands-off Leadership

Leaders who use this style are known for granting their team members a great deal of autonomy. They provide team members with support and resources as needed, but they do not constantly micromanage employees. This can be an effective leadership style if you have a lot of trust in your team members and know they do good work and manage their time well. However, it may not be as effective if you’re working with newer team members or those who require more guidance or time management assistance.

Lewin discovered that people subjected to delegative leadership, also known as laissez-faire leadership, were the least productive of all groups. This group also placed more demands on the leader, demonstrated little cooperation, and needed help to work independently.

Delegative leaders give group members little or no guidance and delegate decision-making to them. While this approach can be beneficial in situations involving highly qualified experts, it frequently results in poorly defined roles and a lack of motivation.

Lewin observed that laissez-faire leadership produced disorganized groups with members who blamed each other for mistakes, refused to accept personal responsibility, made less progress, and produced less work.

Why this leadership style works for businesses

Employees are held accountable for their work by laissez-faire leaders. Many employees will be motivated to do their best work due to this.

This type of leader frequently fosters a more relaxed corporate culture. As a result, it is a good model for creative businesses such as podcast ad agencies or product design. It’s also a good fit for a company with a highly skilled workforce.

Why this leadership style is good for the team

A young startup, for example, may have a laissez-faire founder with no significant office policies regarding work hours or deadlines. They may place complete trust in their employees while focusing on the company’s overall operations.

Employees working for laissez-faire leaders feel valued due to this high level of trust. They gather the necessary information and apply their resources and experience to achieve business objectives.

Potential challenges for leaders with a Laissez-Faire style

Although trusting employees to work however they want can empower them, there are some drawbacks to laissez-faire leadership. This leadership style can stifle team development and be an issue for new or inexperienced employees.

This can lead to missed opportunities for critical company growth. As a result, it’s critical to keep this leadership style in check.

Transformational Leadership

Transformational leadership is one type of effective leadership style. Transformational leaders work to continuously improve their teams and organizations by transforming them. They develop a future vision that they share with their teams so that everyone can work together toward a common goal and vision. Transformational leaders are frequently perceived as genuine, self-aware, and empathetic. Furthermore, they effectively manage team conflict and hold themselves and their team members accountable.

Transformational leadership is constantly “transforming” and improving the company’s norms. Employees may have a basic set of tasks and goals they must complete every week or month, but the leader is constantly pushing them to push themselves outside their comfort zone.

Why this leadership style works for businesses

Transformational leaders can motivate their teams to think differently. This can assist businesses in updating business processes to increase productivity and profitability. Employee satisfaction, morale, and motivation can all benefit from it.

Why this leadership style is good for the team

When starting a job with this type of leader, all employees may be given a list of goals to meet and deadlines for doing so.

At first glance, the objectives may appear straightforward. However, as you progress with the company, this manager may increase the pace of deadlines or assign you more challenging goals.

This is a highly encouraging leadership style in companies that want to grow and encourages employees to discover their true potential.

Potential challenges for leaders with a Transformational style

Transformational leaders risk losing sight of each individual’s learning curve. It is critical to ensure that direct reports receive appropriate coaching to help them navigate new responsibilities. Employee burnout can also be a problem, so it’s critical to collaborate with your team to update benchmarks.


You can become more effective by selecting the leadership philosophies that suit you. Project management courses can help any leader to make the best of their own approach. Your management style significantly impacts how your direct reports view you, regardless of the size of your team. It determines how well your team collaborates to accomplish the objectives of your business.

You must continue to develop and accept change to be a leader who has an impact. Are you prepared to begin?

I'm Allison Dunn,

Your Business Executive Coach

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