6 Leadership Styles and How They Can Help (Or Harm) Your Business

Alexander the Great once said that he was not afraid of an army of lions led by a sheep – he was afraid of an army of sheep led by a lion. And it’s true – leadership is paramount. More often than not, a very successful entrepreneur is also a great leader of people.

As your own boss, you’re responsible for setting all the goals and leading the charge to achieve them. If you’re heading a team, you need to make sure every team member is aligned and motivated too.

Each person has their own character strengths and flaws, and not every leadership style is ideal for every situation – you might say there’s a Jekyll and Hyde dimension to it all. Sometimes the leader is the tyrant; sometimes he’s the soft touch.

What kind of leadership style do you use by default? Perhaps no single label defines it completely. Examining different approaches gives you a kind of mirror to evaluate your own approach, and can help you hone your skills.

This article reveals six leadership styles, shows you what defines each of them, and examines both their good and bad sides.

1. The Autocratic Leader

The autocratic leader is comfortable making all the decisions and accepting all the responsibility. Such a person will sometimes come across as distant – even aloof. There’s no question of who’s in charge, and every major decision is made by him.

The upside is that decisions can be made quickly. There’s no red tape, and no other opinions are necessary. Where a more democratic or bureaucratic arrangement can often stifle innovation, with the autocrat, things happen quickly.

There are obvious problems with this approach, though. Members of the team might easily feel that they have no reason to be inventive or resourceful, which can stifle their creativity. Plus, there’s always the chance that the boss becomes an egomaniac.

Steve Jobs has been called an autocrat, as has Martha Stewart.

2. The Transactional Leader

The principle that underpins this style is based on punishment and reward. It makes the fundamental assumption that people are motivated by extrinsic factors, not from within. A performance bonus is an example of a transactional approach.

Think of it in terms of Pavlov’s dog and conditioned responses. Transactional leaders create a strong hierarchy, a bulletproof structure, and very little room for negotiation – with almost militaristic discipline. It is still used in many corporate structures today, and can be very effective in the right situation, especially when it’s balanced by compassion and insight.

The style is successful when there’s little need for debate, and when the people at the bottom of the hierarchy are committed to the cause and convinced that the organization is basically a good one.

Unfortunately, this leaves little room for passion, personality, open discussion, or negotiation. It will often make strong-willed people resentful. Although transactional leadership can work, history is littered with examples of failed attempts at such systems.

Examples can be found in virtually every military dictator ever to come to power, although to be fair, this is the most extreme form.

3. The Charismatic Leader

This leadership style needs the kind of person who fills up a room and commands a powerful presence. The power of the individual’s personal charm and magnetism inspires and uplifts the people around him. It’s the driving force behind the company’s identity.

On the positive side, this style can really pull things together. The team feels unified, and there is a strong sense of direction and company culture – which is basically an extension of one dynamic personality.

There’s always a negative side though. Personality alone can’t solve every problem, and if the necessary skills aren’t in place, things can go wrong. For this leadership style to work it, needs to be backed up with something more substantial than just charm alone.

Sir Richard Branson definitely fits the bill, as does Lee Iacocca, famous for his roles at Ford and Chrysler during the 1970s. Iacocca had this to say about leadership and motivation:

Motivation is everything. You can do the work of two people, but you can’t be two people. Instead, you have to inspire the next guy down the line and get him to inspire his people.

4. The Participating Leader

This kind of leader believes every team member can offer valuable input. The basic framework is a democratic one. The philosophy that rules this style is: If team members have a say in what happens, they will naturally work harder to make it happen.

Subordinates feel empowered, and often experience more job satisfaction as a result. It can often lead to higher productivity and cost savings. Because people feel that they matter, they’re more inclined to treat the business as if it were their own.

There are complications, though. Decisions can take a long time because everyone wants to have their say, and rivalry can put a spanner in the works of progress. Also, if everyone has access, there can be security risks.

Google use a highly participative approach to hiring new staff and making certain decisions.

5. The “Hands Off” Leader

Sometimes leaders opt for the hands-off approach, where they remain little more than figureheads. The boss will leave most things up to the team, who he trusts to get things done. He might sign the papers at the end of the day, but only after it’s gone through the hands of someone he’s appointed to take care of the details.

This can work surprisingly well when the leader is surrounded by experts who know a lot more about the task at hand than he does, especially when they’re motivated and passionate about their jobs. A high level of intrinsic motivation is a must.

Some people are not very good at motivating or managing themselves, though. That’s the risk with this style. It’s hard to keep everyone working towards the same common aim, and discord can creep in. When someone needs training or guidance it’s often lacking.

Warren Buffett said in the 2010 Berkshire Hathaway annual report:

We tend to let our many subsidiaries operate on their own, without our supervising and monitoring them to any degree. Most managers use the independence we grant them magnificently, by maintaining an owner-oriented attitude.

6. The Transformational Leader

Leading by example can be the most effective strategy. The transformational leader will encourage, cajole, and inspire you to change. Someone who has mastered this art can take a company from the brink of disaster and turn it into a success again.

The benefit is that the team feels the leadership is in safe hands, and they feel enthusiastic about the task at hand – transformation.

As we know, however, old habits die hard – it takes just the right approach to transform the way things are done. Change is often feared, and it’s hard to strike a happy balance. It takes time.

Yahoo CEO Marissa Mayer caused some controversy when trying to transform her company’s culture.


Some teams are small, competent, and agile, and leadership can be as easy as telling people what to do, thanking them, and paying them afterwards. Usually it’s more complicated, however. The perfect leader doesn’t exist, and the most effective ones aren’t always the ones who are the most loved, or even liked.

Different times call for different leadership styles. It might all hinge on your own personal charisma, or it might be more important to show everyone how to do it by example. Perhaps it’s a little bit of each style, depending on the situation.

What kind of a leader are you, and do you think there’s one style that works best for the online entrepreneur in today’s business environment? Let us know what you think in the comments section below!