Leadership Styles in Business

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Topic: Business & Economics
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Good Leaders

The World’s history has seen a number of great leaders; Quaid-e-Azam Mohammad Ali Jinnah, Mahatma Gandhi, and Martin Luther King were a few of the impressive leaders. Each leader had his own style of leading and acquired loyal followers based on his qualities, both innate and acquired. Such were the leaders of countries.

However, the role of leaders is not restricted to countries and races; it applies just as well to businesses. According to Stimpson (2002, p.248), a good leader is one who gains not only respect from his staff but also positive responses to his directions.

Leadership position in the business

There are a number of leadership positions in businesses. Such positions include the Board of Directors of a company, managers, supervisors, workers’ representatives, and team leaders.

Hall, Jones & Raffo (1999, p.253) believe that each leader follows a specific leadership style based on the tradition of the organization, the personality of the leader, the skills of the workforce, and the task at hand. Business people and psychologists have developed descriptions for a number of leadership styles through observations of real-life leaders, four of which will be discussed below.

Leadership Styles

Autocratic Leadership

According to Essortment (2002), an autocratic leader believes that workers need to be controlled and directed by management and are motivated by threats and punishments as per Theory X derived by McGregor.

The leader exerts complete power over his staff, and all the decisions are taken by the leader without discussion and worker’s input. This style has been studied and criticized during the past 30 years as it induces fear within the workers, which gives rise to absenteeism, high labor turnover, and resentment.

On the other hand, there may be situations where the autocratic leadership style may be the only one suitable. Such situations arise where urgent decisions need to be taken, labor is untrained and unskilled and needs to be monitored and controlled through detailed instructions and orders, there is a need of coordination between a number of departments and there is a high volume of goods that need to be produced on a daily basis.

A number of businesses in these modern times make use of the autocratic style of leadership. Strawser (2004, p. 42) noted in his book that many US companies use this style when operating in underdeveloped countries as there is a need to manage the less experienced employees.

Moreover, US multinationals and franchises adopt an autocratic leadership style because the local labor working for them is used to making decisions that satisfy governments’ goals rather than the goals of the parent company.

Donald Trump is a business leader who follows the autocratic leadership style and has been successful in building his empire but not so in building support from his workers. Howell Raines, the executive editor of the New York Times, practiced the autocratic leadership styles, and he needed to meet the pressure of publishing a highly demanded newspaper.

Democratic Leadership

A democratic leader believes in his employees and perceives them to be skilled, responsible, and highly motivated as per McGregor’s Theory Y. Every decision involves employees, and their suggestions, opinions, and recommendations are valued and applied where needed, although the decision making power still remains with the leader.

This participative approach helps to enhance the skills of the employees and leads to job-related growth and promotions. The employees feel like an important part of the group, which increases satisfaction and boosts morale and team spirit.

Where the employees have been involved in the decision-making process and have themselves suggested an idea or a problem-solving solution, they are committed and motivated to support the decision.

Democratic or participative leadership style is not appropriate where urgent decisions are required because this leadership style involves the participation of the employees, leading to the slowing down of the decision-making process.

Moreover, when there isn’t sufficient time to take everyone’s input into account, the business cannot afford to make mistakes and strict rules need to be followed to ensure the safety of workers then this style is appropriate. Also, the leader is relying on the skill and knowledge of the workforce, and if they cannot contribute to the decision-making process by giving appropriate suggestions and solutions, then this style loses its benefits.

Leadership Expert (2008, p.1) believes that at present, many business leaders adopt the democratic style of leadership as the manufacturing industry and processes have become leaner, and the input of the workforce is valued; leaders have realized that the employees are not robots and need to be motivated.

The tertiary sector has become the most important and value-added sector. The service provided by this professional sector is highly differentiated and has flourished under Democratic leadership. Democratic leadership allows the workforce to give ideas and opinions, and this free flow of ideas has brought benefits to the creative advertising and entertainment industries.

According to Goleman, Boyatzis & McKee (2002, p.67), when Louis Gerstner Jr. became the chairman of IBM in 1993, the company was nearing its end. He used the democratic leadership style to take advantage of the experience and skill of the more experienced computer professionals and led a turnaround.

Laissez-Faire Leadership

Laissez-Faire is a French phrase which means ‘leave it be’ or ‘let them do it.’ Under this leadership style, the leader leaves the workforce be; such teams are highly skilled and professional and work on their own initiatives.

According to Rungepadiachy (1999, p.181), the leader defines the guidelines and directions, and the workforce carries out their activities and tasks freely, while still remaining within the broad limits set. Such leaders believe that employees excel when they are allowed to set their own goals, solve their own problems respond to responsibilities in the way which suits them the best. Therefore, Laissez-Faire leaders impose minimum restrictions on the workforce.

This style of leadership is most suitable where the employees are highly educated and skilled and a drive to do their work to the best of their abilities. Where outside experts are being used, such as consultants, they need to be provided with a free run of the business.

On the other hand, this may result in a demotivated workforce as, without regular feedback from the managers, there is little incentive to put in the maximum effort. Such workers may also take advantage of being allowed a free run. Also, this leadership style makes the employees feel insecure as they don’t have the opportunity to discuss complicated work issues with the managers.

Modern-day businesses, such as those involved in advertisement, media, and entertainment, as well as those in research or design fields, follow the Laissez-Faire leadership style to allow the workforce to take initiatives without restriction from senior managers.

Bureaucratic Leadership

Bureaucratic leaders follow the rules ‘by the book.’ ‘What’ is to be done is not as important as the ‘way’ it is to be done. Everything is done according to the set procedures, rules, and guidelines, and if an issue is not covered in the rule book, the leader is not permitted to use his initiative to make a decision.

The issue will be referred to the next level in the hierarchy so that it can be resolved. Bureaucratic leadership is a characteristic of large companies with tall hierarchies.

According to Gray (2004, p.58), this style is effective in a number of situations, where the work environment is dangerous, and the work needs to be done in a very accurate manner to ensure safety, where work is routine and the environment, stable.

Such leaders believe that the external environment is stable when it is not, and hence, no allowances are made for changing external factors. The status quo must be maintained at all costs.

At present, government agencies, public sector firms, and multinational companies follow this style of leadership because of their large scale of operations. It is necessary to follow the rules and standards to maintain cohesiveness between the units.

Due to globalization, companies have increased in size, operations have crossed international boundaries, and bureaucratic leadership style is needed for smooth functioning. Pakistan State Oil Company Limited (PSO) is Pakistan’s largest firm operating bureaucratic style. However, the company’s general manager training, Mr. Viqar Ahmed, sees it as an internal constraint.

The best Leadership Style

Each of the four leadership styles has its advantages and disadvantages. The key to success is to apply the style most suitable to the company, its products, its structure, its people, the organizational environment, and the natural style of the leader.

References

Essortment, 2002, Types of Leadership. (internet)

Gray, D., 2004, BTEC National in Public Service. Heinemann. P.58.

Goleman, D., Boyatzis, R. & McKee, A., 2002, Primal Leadership: realizing power of emotional intelligence. Harvard Business Press, p.67.

Hall, D., Jones, R. & Raffo, C., 1999, Business studies. 2nd Ed. Glasgow: Causeway Press Limited, p. 253.

Leadership Expert, 2008, Leadership style- Autocratic vs. Democratic & more. (internet)

Rungepadiachy, D., 1999, Interpersonal Communication and Psychology for Health Care Professionals. Elsevier Health Sciences. p.181.

Stimpson, P.,2002, AS Level and A Level Business Studies. Cambridge University Press, p. 248.

Stralser, S., (2004), MBA in a day. John Wiley and Sons, p. 42.