Different Leadership Theories:
What Works Best in Small Business?

There are many different leadership theories that have been put forward by academics to describe effective leaders and since all successful businesses need effective leadership, which theories are the most relevant and useful to small businesses? 

Business Coaching Insight:

The key to becoming a good leader in business is often to make the shift from seeing staff as commodities to seeing them as 'partners'

A Basic Overview

Most of the different leadership theories can be placed on a spectrum.

At the two ends of the spectrum you have:

  1. Autocratic Leadership - this is where the leader has full control and makes all the decisions with little input from the team
  2. Laissez-Faire Leadership - this is the opposite extreme where the leader is very hands-off and let's the team make their own decisions with little guidance

Neither one of these is particularly effective for small business.

Autocratic business owners who don't involve their team in any decision making struggle with staff motivation and engagement. By not being open to ideas from other people they also smother creativity and innovation in the business.

Perhaps even worse, is the fact that an autocratic style tends to create dependent employees who can't make decisions without you, which is setting the business up for failure if you're away for some reason.

At the opposite extreme is Laissez-Faire Leadership.

There are probably very few business owners who would adopt this style of leadership where they are completely hands-off but if they did they would find that this approach is very unproductive.

This would only really work if you had a team of very well qualified individuals who didn't need supervision, but even they might struggle with motivation without any real leadership.

Middle Ground: Democratic Leadership

In a small business context, the most effective approach is somewhere along the middle of the spectrum.

Democratic, or Participative, leadership describes a style of leadership where the leader provides guidance but also encourages input from the team.

The best way to build a really strong foundation for your business is to develop a team of leaders around you and allowing them to be involved and contribute to the decision-making.

This does mean relinquishing some control but ultimately the business will be stronger and your employees far more motivated.

What About Servant Leadership?

Servant Leadership is another one of the different leadership theories that exist and is a term that was coined by Robert Greenleaf in the early 1970’s.

In a nutshell, it describes a leadership philosophy whereby a leader seeks to achieve results by focusing on the needs of others.

“The highest type of ruler is one of whose existence the people are barely aware”. Lao Tzu

It doesn't mean being a slave to your staff. It simply means putting 'people first, results second' (which will hopefully achieve better results).

Mario Calanna is an example of a businessman who's put servant leadership into action.

He has a network of 8 pharmacies across two major cities with plans for further expansion and he says the most significant benefit he has found with applying servant leadership in his business is the impact it has had on his team.

Putting the focus on 'people first' means that everyone is focused on being responsible to each other and the team by being on time, staying until work is completed, finding a replacement if you are sick etc. In other words, looking out for others above yourself.

As Mario says, “people are always a work in progress but over the years our model has attracted wonderful people who have stayed for many years. Of course we’ve had our disagreements and people have left not understanding the dynamics, but overall it has enabled us to create a very strong, committed and loyal team.”

Business Coaching Questions:

  • What are the values in your business?
  • Which of these different leadership styles do you most closely relate to and is it working for your business?
  • What do you want people to say about you as a leader?

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