The Core Leadership Styles In The Business World

Leadership styles encompass the behavioral qualities of a leader. These qualities are commonly used to direct, motivate, or manage groups of people. Some of the most recognized leadership styles include Autocratic, Democratic, or Laissez-Faire leadership styles.

Understanding leadership styles

While there are many great leaders in the world, each leader could attribute their success to a somewhat unique blend of qualities.

Some of these qualities are expressions of a leader’s personality, while others are embodied by the organization itself.

As a result, little was known about leadership styles until a 1939 study led by psychologist Kurt Lewin. In the study, Lewin identified three distinct styles:

Authoritarian leadership (Autocratic)

Encompassing leaders who provide clear expectations on what needs to be done and how it should be performed.

Authoritarian leaders make decisions independently and exercise total control over subordinates. 

This form of leadership is suited to situations that call for rapid decision making or where the leader is the most knowledgeable person in a group.

However, these decisions tend to be lacking in creativity and can cause dysfunctional, hostile environments.

Participative leadership (Democratic)

Lewin found that participative leadership was the most effective.

Leaders exhibiting this style offer guidance to subordinates while encouraging member input – which tends to be of a higher quality.

Although the leader reserves the right to make the final decision, subordinates nonetheless feel engaged in the decision-making process.

As a result, they are more likely to work toward company goals with commitment and passion.

Delegative leadership (Laissez-Faire)

Developed by business consultants Kenneth Blanchard and Paul Hersey in the 1960s, delegative leadership is a leadership style where authority figures empower subordinates to exercise autonomy. For this reason, it is also called laissez-faire leadership. In some cases, this type of leadership can lead to increases in work quality and decision-making. In a few other cases, this type of leadership needs to be balanced out to prevent a lack of direction and cohesiveness of the team.

The least productive of Lewin’s three leadership styles.

Study participants tended to make unreasonable demands of the leader and did not display cooperation or the ability to work independently.

Indeed, delegative leaders mostly leave the decision-making process to group members.

While this style is commonly seen in start-ups, poorly defined roles usually lead to a lack of motivation and group consensus.

Without adequate leadership, subordinates lack accountability and make little progress in producing meaningful work.

Additional leadership styles

In the decades since the original Lewin study, several other leadership styles have been identified to reflect modern, dynamic businesses. 

Some may deliberately choose to adopt a mix of several different styles depending on the context.

Some of the more common include:

Transformational leadership

Transformational leadership is a style of leadership that motivates, encourages, and inspires employees to contribute to company growth. Leadership expert James McGregor Burns first described the concept of transformational leadership in a 1978 book entitled Leadership. Although Burns’ research was focused on political leaders, the term is also applicable for businesses and organizational psychology.

First developed during the late 1970s and seen as one of the most effective modern styles.

Leaders are typically passionate and emotionally intelligent.

Transformational leaders have a vested interest in their subordinates and the company as a whole.

They also tend to delegate important tasks and inspire others with infectious enthusiasm.

Bill Gates and the late Steve Jobs exemplify the transformational leadership style.

Transactional leadership

Transactional leadership is a theory of leadership first described by German sociologist Max Weber, who originally referred to it as rational-legal leadership. The style saw heavy use in the United States after World War II as the government rebuilt the country and used a high degree of structure to maintain national stability. Transactional leadership is a leadership style focusing on supervision, organization, and performance. Compliance in subordinates is attained through reward or punishment.

Where subordinates obey their leader on the proviso that they are compensated for doing so.

Job satisfaction is typically low under transactional leadership because compensation can be removed for non-compliance.

Many experts view this form of leadership as a management style because the focus is on short-term tasks.

Some military commanders and professional sports coaches use transactional leadership.

Pacesetter leadership

The most effective at delivering fast results.

Pacesetter leaders focus on setting high-performance standards and hold subordinates accountable for achieving goals.

Given the motivational nature of the style, it is better suited to fast-paced, high-pressure environments where employee energy needs to be high.

Former General Electric CEO Jack Welch is a great example of pacesetter leadership. Welch believes that leaders need to focus on setting a good example and be obsessed with efficiency. 

Key takeaways

  • Leadership styles encompass certain behavioral qualities that are used to motivate or manage subordinates. 
  • Leadership styles were first studied by psychologist Kurt Lewin in 1939. The results of his study found that leadership could either be authoritative, participative, or delegative in nature.
  • Leadership styles have evolved since the original study to encompass modern businesses that may need to exhibit more than one leadership style. Transformational leadership, embodied by Bill Gates and Steve Jobs, is widely regarded as one of the most effective.

Key Highlights

  • Authoritarian Leadership (Autocratic):
    • Description: In this style, leaders make decisions independently and provide clear directions to subordinates. They maintain strict control over the decision-making process and expect subordinates to follow instructions without question.
    • Suitability: Effective in situations requiring quick decisions, especially when the leader possesses specialized knowledge.
    • Advantages: Quick decision-making, clear direction, efficiency in execution.
    • Disadvantages: Lack of creativity, limited input from team members, potential for creating a hostile environment.
  • Participative Leadership (Democratic):
    • Description: Participative leaders seek input and opinions from team members before making decisions. While they retain the final say, they actively involve employees in the decision-making process.
    • Suitability: Ideal for situations where diverse perspectives are valuable and decisions require collective insight.
    • Advantages: Higher-quality decisions, increased engagement, improved team morale, commitment from team members.
    • Disadvantages: Slower decision-making process, potential for conflicts among team members.
  • Delegative Leadership (Laissez-Faire):
    • Description: Delegative leaders empower team members to make decisions and exercise autonomy. They provide minimal guidance and allow employees to take ownership of their tasks.
    • Suitability: Works well when team members are skilled, self-motivated, and require independence to perform effectively.
    • Advantages: Encourages autonomy and innovation, can lead to improved decision-making and work quality.
    • Disadvantages: Lack of clear direction, potential for lack of cohesion among team members, and low accountability.
  • Transformational Leadership:
    • Description: Transformational leaders inspire and motivate their team by fostering a sense of purpose and shared vision. They encourage personal growth and development among team members.
    • Suitability: Effective in creating positive organizational culture and driving significant change.
    • Advantages: High levels of employee engagement, increased motivation, innovation, and a strong sense of purpose.
    • Disadvantages: Requires strong interpersonal skills, can be exhausting for leaders if not balanced.
  • Transactional Leadership:
    • Description: Transactional leaders focus on tasks, organization, and performance. They use rewards and punishments to motivate employees to achieve specific goals.
    • Suitability: Suitable for routine tasks and situations that require compliance and structure.
    • Advantages: Clear expectations, well-defined roles, efficient execution of tasks.
    • Disadvantages: Limited focus on long-term development and innovation, potential for low job satisfaction.
  • Pacesetter Leadership:
    • Description: Pacesetter leaders set high-performance standards and lead by example. They hold team members accountable for achieving goals and aim for fast results.
    • Suitability: Effective in fast-paced, results-driven environments where quick accomplishments are crucial.
    • Advantages: Drives rapid progress, encourages a competitive spirit among team members.
    • Disadvantages: Can lead to burnout, potential for neglecting long-term development and collaboration.
  • Servant Leadership:
    • Description: Servant leaders prioritize the needs of their team members above their own. They focus on supporting and enabling their team’s growth, well-being, and success.
    • Suitability: Effective in building strong relationships, fostering a positive culture, and promoting employee satisfaction.
    • Advantages: High employee engagement, loyalty, and trust, creates a positive work environment.
    • Disadvantages: Can be perceived as weak or ineffective in certain environments, requires a strong foundation of empathy and selflessness.
  • Charismatic Leadership:
    • Description: Charismatic leaders use their personal charm and appeal to inspire and influence their team. They often have a strong vision that they communicate persuasively.
    • Suitability: Effective in situations where inspiration and enthusiasm are crucial, such as rallying teams around a vision.
    • Advantages: Inspires passion and commitment, can create a strong following.
    • Disadvantages: Relies heavily on the leader’s personality, potential for over-reliance on one individual.
  • Situational Leadership:
    • Description: Situational leaders adapt their leadership style based on the specific situation, context, and the maturity level of their team members.
    • Suitability: Effective in dynamic environments where different tasks and team members require varying approaches.
    • Advantages: Flexibility and adaptability, better alignment with the needs of the situation and team.
    • Disadvantages: Requires a deep understanding of various leadership styles and when to apply them.
  • Coaching Leadership:
    • Description: Coaching leaders focus on the development and growth of their team members. They provide guidance, feedback, and opportunities for skill enhancement.
    • Suitability: Effective for cultivating talent, fostering learning, and promoting career development.
    • Advantages: Enhances skill development, builds strong relationships, promotes long-term growth.
    • Disadvantages: Requires time and effort to provide individualized coaching, may not be suitable for all situations.

Types of Organizational Structures

Organizational Structures

Siloed Organizational Structures


In a functional organizational structure, groups and teams are organized based on function. Therefore, this organization follows a top-down structure, where most decision flows from top management to bottom. Thus, the bottom of the organization mostly follows the strategy detailed by the top of the organization.



Open Organizational Structures




In a flat organizational structure, there is little to no middle management between employees and executives. Therefore it reduces the space between employees and executives to enable an effective communication flow within the organization, thus being faster and leaner.

Connected Business Frameworks

Portfolio Management

Project portfolio management (PPM) is a systematic approach to selecting and managing a collection of projects aligned with organizational objectives. That is a business process of managing multiple projects which can be identified, prioritized, and managed within the organization. PPM helps organizations optimize their investments by allocating resources efficiently across all initiatives.

Kotter’s 8-Step Change Model

Harvard Business School professor Dr. John Kotter has been a thought-leader on organizational change, and he developed Kotter’s 8-step change model, which helps business managers deal with organizational change. Kotter created the 8-step model to drive organizational transformation.

Nadler-Tushman Congruence Model

The Nadler-Tushman Congruence Model was created by David Nadler and Michael Tushman at Columbia University. The Nadler-Tushman Congruence Model is a diagnostic tool that identifies problem areas within a company. In the context of business, congruence occurs when the goals of different people or interest groups coincide.

McKinsey’s Seven Degrees of Freedom

McKinsey’s Seven Degrees of Freedom for Growth is a strategy tool. Developed by partners at McKinsey and Company, the tool helps businesses understand which opportunities will contribute to expansion, and therefore it helps to prioritize those initiatives.

Mintzberg’s 5Ps

Mintzberg’s 5Ps of Strategy is a strategy development model that examines five different perspectives (plan, ploy, pattern, position, perspective) to develop a successful business strategy. A sixth perspective has been developed over the years, called Practice, which was created to help businesses execute their strategies.

COSO Framework

The COSO framework is a means of designing, implementing, and evaluating control within an organization. The COSO framework’s five components are control environment, risk assessment, control activities, information and communication, and monitoring activities. As a fraud risk management tool, businesses can design, implement, and evaluate internal control procedures.

TOWS Matrix

The TOWS Matrix is an acronym for Threats, Opportunities, Weaknesses, and Strengths. The matrix is a variation on the SWOT Analysis, and it seeks to address criticisms of the SWOT Analysis regarding its inability to show relationships between the various categories.

Lewin’s Change Management

Lewin’s change management model helps businesses manage the uncertainty and resistance associated with change. Kurt Lewin, one of the first academics to focus his research on group dynamics, developed a three-stage model. He proposed that the behavior of individuals happened as a function of group behavior.

Organizational Structure Case Studies

Airbnb Organizational Structure

Airbnb follows a holacracy model, or a sort of flat organizational structure, where teams are organized for projects, to move quickly and iterate fast, thus keeping a lean and flexible approach. Airbnb also moved to a hybrid model where employees can work from anywhere and meet on a quarterly basis to plan ahead, and connect to each other.

eBay Organizational Structure

eBay was until recently a multi-divisional (M-form) organization with semi-autonomous units grouped according to the services they provided. Today, eBay has a single division called Marketplace, which includes eBay and its international iterations.

IBM Organizational Structure

IBM has an organizational structure characterized by product-based divisions, enabling its strategy to develop innovative and competitive products in multiple markets. IBM is also characterized by function-based segments that support product development and innovation for each product-based division, which include Global Markets, Integrated Supply Chain, Research, Development, and Intellectual Property.

Sony Organizational Structure

Sony has a matrix organizational structure primarily based on function-based groups and product/business divisions. The structure also incorporates geographical divisions. In 2021, Sony announced the overhauling of its organizational structure, changing its name from Sony Corporation to Sony Group Corporation to better identify itself as the headquarters of the Sony group of companies skewing the company toward product divisions.

Facebook Organizational Structure

Facebook is characterized by a multi-faceted matrix organizational structure. The company utilizes a flat organizational structure in combination with corporate function-based teams and product-based or geographic divisions. The flat organization structure is organized around the leadership of Mark Zuckerberg, and the key executives around him. On the other hand, the function-based teams based on the main corporate functions (like HR, product management, investor relations, and so on).

Google Organizational Structure

Google (Alphabet) has a cross-functional (team-based) organizational structure known as a matrix structure with some degree of flatness. Over the years, as the company scaled and it became a tech giant, its organizational structure is morphing more into a centralized organization.

Tesla Organizational Structure

Tesla is characterized by a functional organizational structure with aspects of a hierarchical structure. Tesla does employ functional centers that cover all business activities, including finance, sales, marketing, technology, engineering, design, and the offices of the CEO and chairperson. Tesla’s headquarters in Austin, Texas, decide the strategic direction of the company, with international operations given little autonomy.

McDonald’s Organizational Structure

McDonald’s has a divisional organizational structure where each division – based on geographical location – is assigned operational responsibilities and strategic objectives. The main geographical divisions are the US, internationally operated markets, and international developmental licensed markets. And on the other hand, the hierarchical leadership structure is organized around regional and functional divisions.

Walmart Organizational Structure

Walmart has a hybrid hierarchical-functional organizational structure, otherwise referred to as a matrix structure that combines multiple approaches. On the one hand, Walmart follows a hierarchical structure, where the current CEO Doug McMillon is the only employee without a direct superior, and directives are sent from top-level management. On the other hand, the function-based structure of Walmart is used to categorize employees according to their particular skills and experience.

Microsoft Organizational Structure

Microsoft has a product-type divisional organizational structure based on functions and engineering groups. As the company scaled over time it also became more hierarchical, however still keeping its hybrid approach between functions, engineering groups, and management.

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