4 Types of Leadership in a Business

Leaders are the backbone of every organization. Without proper leadership, the success of a team is always questionable. It takes more than seniority to become a leader. Leaders are formed when an individual has the skills to motivate their team and drive them towards the achievement of their goals. The impact of a leader on their team can be measured by the leadership style they follow. There are various leadership styles available depending on the organizational structure and external factors such as business models and environmental trends. In this article, we shall look into the four types of leadership that exist in a business.

Leadership and Management in a Business

Every business requires a leader to drive the individuals toward their end goals and achieve the pre-defined success benchmarks. Often, leadership is compared to management in a business model. While both concepts are similar, there is a difference between being a manager and being a leader. Managers are responsible for providing direction to the organization. Leaders are individuals who motivate their teams and inspire them to perform better at every step. While managers can be leaders and vice versa, it is important to have leadership in every business for its optimal performance.

4 Leadership Types in a Business

The idea of leadership styles dates back to 1939 when German-American psychologist Kurt Lewin was examining a project with schoolchildren. Back in the day, Kurt Lewin assigned the children to an arts and crafts project and observed each team’s leadership behavior. The purpose of his research was to understand the suitable leadership type for businesses.

Based on his research, Kurt Lewin derived three leadership styles that can be used in businesses based on their organizational model. Over the years, he added a fourth leadership type that is widely used in present times. The four types of leadership that we can see in business today include −

1. Autocratic Leadership

Autocratic leadership is a commanding leadership style where a single authoritative figure is in charge of leading and delegating tasks to their team. Under this leadership style, directions and commands are generated from the topmost executive figure in the organizational hierarchy. Some features of their leadership style are −

  • Authoritarian leaders have complete control over their teams and wield the most power.

  • All objectives, policies, procedures, and task deliverables are determined by such leaders and dictated to their team members.

  • The dictation of tasks is done one at a time; hence, teams under autocratic leadership are uncertain of the next actionable item in a project.

  • Autocratic leaders only participate in group discussions when they are demonstrating their work to their team.

  • Authoritarian leaders are not open to feedback and often stay aloof from their team members.

  • Leaders under such a system are often filled with self-confidence and decisiveness, which makes them role models for their teams.

Autocratic leadership is an ideal leadership style for chaotic and urgent situations that require quick decision-making and prompt action. One of the downfalls of this leadership style is micromanagement. Individuals rely on their team elders for every decision made during the project's journey. Hence, in the absence of their leader, team members often fail to make business decisions.

2. Democratic Leadership

Democratic leadership brings the entire team into action at every decision-making step. It involves input from every individual on the team and comes to a common conclusion for every problem. Some characteristics of democratic leadership include −

  • Democratic leadership sparks creativity amongst the team members and encourages them to share their thoughts on business problems.

  • Subordinates under this leadership style often feel engaged and acknowledged as their ideas are heard by their team leader.

  • Group discussions are a major part of this leadership style. The leader is the final figure who makes the decisions. However, they involve the team in sharing their thoughts and possible alternatives for the problems at hand.

  • Work companions are not fixed under democratic leadership. Individuals have the liberty to choose their partners as per their strengths.

  • Democratic leaders are communicative in their style, which makes them approachable figures for their subordinates.

Teams under democratic leadership are often motivated and show creativity in the projects they undertake. One of the major benefits of this leadership style is the driven attitude of the team leader and project teams. However, placing confidence in the team also poses certain threats to the organization, as unskilled individuals can make the wrong business decisions, leading to losses. Team members also feel unacknowledged sometimes when their ideas are not accepted by their leader.

3. Laissez-Faire Leadership

Laissez-faire leadership is a new-age approach to the democratic leadership style where the leaders are not the decision-making authorities. Under this style, the individuals in a project team are responsible for making decisions about the bottlenecks they encounter. Leaders are approachable figures for any feedback required at any given point. Some characteristics of this type of leadership are −

  • Teams have complete freedom of action and decision-making.

  • There is no micromanagement in this leadership style. The leader is only responsible for passing on information and feedback when asked by the team.

  • Leaders do not attempt to interfere in the proceedings of the team under any circumstances.

  • Individuals in the team are assigned project responsibilities and are often trusted by their team leader to make decisions that are in the best interest of the team.

  • Laissez-faire leaders are extremely skilled at delegating work and boosting the confidence of their teams.

Laissez-faire leadership is an ideal leadership style for a team of trained employees. It leads to faster decision-making as the subordinates do not have to wait for approval from the higher authorities. Subordinates also feel acknowledged under this system, as they can utilize their expertise to make business decisions. On the downside, this leadership system can lead to the underperformance of the project team. In the absence of a leader’s supervision, subordinates may end up achieving results below standards.

4. Transformational Leadership

Transformational leadership involves constant growth in the leader’s and subordinate’s professional attitudes. This leadership style unites the project team and evolves them at every step for better results. A few qualities of transformational leadership can be listed as follows −

  • The leader always looks for areas that can be modified for better performance.

  • Transformational leadership always encourages participation from the team in the evolution of their skills.

  • This leadership style focuses on the bigger picture.

  • Transformational leaders establish transparent communication between their subordinates to stimulate the intellect for growth.

Transformational leadership creates a warm working environment with the team leader and subordinates working in harmony. It drives individuals to stay focused on their goals and improve their productivity as per requirements. At the same time, this leadership style can be overwhelming as it pushes the team to achieve its goals throughout. It drives individuals to stay focused on their goals and improve their productivity as per requirements. A lack of communication can hamper the system and lead to misinformation.


While leaders are born, one can acquire the desired leadership skills by embracing their behaviors. Leadership styles can differ based on the organization’s working model and goals. It is vital to gain and follow the leadership pattern that is in the best interest of the organization.

Updated on: 17-Jan-2023


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