4 Types of Business Leadership

A business needs leaders to make and implement policies and decisions if it is to run smoothly. These leaders are fundamentally different from managers, and many good managers can fail at leadership as they only provide direction while leaders provide vision and inspiration. Effective leadership depends upon a situation’s needs, so you must determine what kind of leader your organization needs to ensure it functions smoothly.

  • 1. Autocratic Leadership

An autocratic leader takes little, if any, input from employees and instead commands them to do as they are told. Autocratic leaders are uninterested in feedback, and they rarely share power. 

According to Lewin, autocratic leadership results in the employees losing the initiative, becoming aggressive and discontent, and failing to work as a team. Employees feel micromanaged, become entirely dependent on the leader, and lose their decision-making abilities. Autocratic leadership can lead to tension, disappointment, and chaos in the team. It generally only works in urgent situations that require prompt action. 

  • 2. Democratic Leadership

Democratic leadership or participative leadership involves gathering input from your team before making a decision. Here, the final decision rests with the leader, but the employees feel heard and engaged. As democratic leaders listen to several points of view, they often get multiple perspectives on dealing with issues. 

As a democratic leader, you require good communication and the desire to seek ways to increase your employee engagement. This leadership style is practiced in most modern companies and yields positive results as it increases employee retention and satisfaction. However, it’s important to note that democratic leadership is not the right choice when working with an untrained group. It is also impossible to take input from every individual if you work with a large group; some people will always feel left out. And democratic leadership also hinders prompt responses, so it can be unsuitable during situations that demand urgency. 

  • 3. Laissez-Faire Leadership

The leader can sometimes lead best by empowering the employees to make decisions. Laissez-faire leaders employ a hands-off approach, guiding and mentoring their subordinates but trusting them to complete their tasks without micromanaging them. Laissez-faire leaders interfere significantly less with the course of events. Still, they are not neglectful or absent: they provide information and direction to their subordinates but give them the freedom to work their way. 

As employees don’t need a higher-up for approval, laissez-faire leadership is ideal for situations that require prompt action. This leadership style works best when working with trained and qualified individuals, but it should be avoided if you have subordinates you aren’t entirely confident about. 

  • 4. Transformational Leadership

Transformational leaders rally employees around a grand vision: the team evolves and transforms itself according to the vision set out by the leader. Such teams have cohesion and fully commit themselves to the organization. Transformational leaders must communicate well, understand the bigger picture, and inspire subordinates. 

The transformational leadership approach is ideal when there are open lines of communication between the employees and the leader. However, it can contribute to burnout as committed employees dedicate themselves to the organization’s goals. Employees can also be left out of the bigger picture if communication is severed.


Effective leadership can transform an organization. However, leadership styles are not rigid: you must know what kind of leader you should be in every situation. The four primary leadership styles are autocratic leadership, democratic or participative leadership, laissez-faire leadership, and transformational leadership. Choose the ideal style according to the required promptness, employee skill, and engagement with the subordinates.