How leadership styles affect performance and profitability

Have you ever worked for a lousy boss? If you have, you probably found the experience demoralizing and stressful to the point where you leave.  You know the feeling.

People leave managers not companies.

The fact that people leave managers not companies is very telling about the leadership style of those in leadership positions. A leaders style affects the overall culture and performance of an organization – if the culture is great look a the leader. If the culture is poor, look at the leader. Poor leadership destroys stakeholder value.

Some of the traits of poor leadership include:

• They are poor listeners
• They are full of their own importance (ego)
• They lack transparency
• They lack empathy
• They are overly bossy
• They employ yes people
• They allow gossip 
• They are wishy washy and can’t make decisions
• They are poor communicators
• They blame others when things go wrong
• They’re inconsistent

…. and so on.

But what if you are going into a leadership role without understanding the impact your leadership style on others.

Your leadership style will have a direct effect on the performance of your people. Research conducted by the consulting firm Hay/McBer found six very distinctive leadership styles. Each one of these styles permeates down through an organization, which ultimately has an impact on their financial performance and the success of the business.

Daniel Goleman in his book “The New Leaders” describes these six main styles of leadership as springing from different components of Emotional Intelligence. Emotional Intelligence as described by Daniel Goleman encompasses four fundamental capabilities; self-awareness, self-management, social awareness and social skill.

The six leadership styles

1. The Coercive (Do what I say now!)
2. The Pacesetter (Do what I do now!)
3. The Visionary (Come with me!)
4. The Democrat (What do you think?)
5. The Coach (Try this!)
6. The Affiliate (People come first!)

Few leaders have all six styles as part of their repertoire. Few leaders know how and when to use each of these styles.

Leadership styles are not something to be tried on like clothes to see which fits, rather, they should be adapted to the demands of the situation, the unique requirements of the people involved and the particular challenges facing you and your organization.

At times, it is appropriate to use all six styles depending on the situation and the people involved. The more styles a leader can master the better. However, research has identified that four of these styles result in a positive working environment whereas two lead to a negative working environment.

The Coercive

The autocratic or coercive leader says ‘do what I tell you now!’ This is a classic model of military style of being a commander! Coercive leaders have a drive to succeed and command absolute complicity. Although many leaders believe their job is to exert their authority over others, people don’t like being “told” what to do.

The coercive leader rarely praises others, is often negative and highly critical. At times, they may even be a bully by demeaning and humiliating the people around them. The coercive leader undercuts the morale of a team and lessens job satisfaction. At best, they get compliance, and they certainly don’t get buy in from their people. 

Of all the leadership styles, when used in isolation this is the least effective. Coming over the top of people stifles innovation and flexibility. People feel undermined, disrespected, withdraw and won’t engage. They become cynical adopting the attitude ‘why bother’ I can’t change anything. Good people leave and those that stay, do so reluctantly and only ever do the minimum. They totally lose motivation and the longer they stay, their resentment grows and eventually they sabotage the business.  Worse still, people become frightened to bring bad news for fear of being shot down in flames so they stop bringing bad news at all.

There is an assumption that people are motivated by money alone. High performing teams are motivated by a sense of a job well done. The coercive style of leadership erodes job satisfaction leaving people with a diminished sense of commitment towards an organization’s vision and goals.

There are however times when adopting a coercive leadership style can be appropriate. For example:

• A crisis or emergency where decisions need to be made quickly and people need to be directed.
• Where culture has to change quickly or decisions made that effect the financial viability of an organization.

Generally, this style of leadership should be used with caution.

Hitler and Stalin are examples of coercive leaders. People blindly followed them without question.

The Pacesetter

The pacesetter sets high standards for performance and says “Do as I do now!” They are conscientious, use their initiative and have a high drive to succeed.  They are obsessive about doing things faster and better, and puts pressure on others to do the same. But Mr. Goleman warns this style should be used sparingly in the business environment, because it can undercut morale and make people feel as if they are failing. “Our data shows that more often than not, pacesetting poisons the climate” he writes.

It is important to remember we are all different and not everyone has the capacity to perform to the same level at the same time. This style of leadership can be very effective getting results from a highly motivated team. Where it’s not effective, is trying to get results from perceived poor performers. If they don’t keep pace, then they are replaced. Imagine the fear this instills in others and what it does to morale.

It is important to note that just because a person doesn’t work at the same pace, it does not necessarily make them a poor performer. The pacesetter makes assumptions that people should know what to do and may even express this by saying “If I have to tell you what to do then you are the wrong person for the job” or alternatively “If you are any good at your job then you should know what to do.” These assumptions are dangerous for there may be mitigating factors. For example:

• A person is promoted to a new position and is not properly inducted and given no training which is a flaw in human resource management.
• A person is promoted to a role beyond their expertise and capability which is not their fault rather it’s a flaw in the recruitment process.
• A person is delegated a job and not given clear instructions which is a flaw in the delegation process.

Like the coercive leader, the pacesetter rarely stops to give feedback or if they do, it’s likely to be negative by pointing out everything that’s wrong and not what’s right. The pacesetter will come in over the top of others and take over when things aren’t going as they want which undermines confidence. They have a tendency to micromanage, which destroys trust and confidence.

People adopt the attitude; “Why bother trying, let the boss do it themselves” and as a result commitment dwindles. After a while, people will feel burned out, let down and end up with having no sense of how their efforts fit into the bigger picture. Motivation decreases. 

The Visionary

Authoritative in their style, the visionary leader says “Come with me.” They mobilize people towards a vision for the future just as Martin Luther King did on that August day in 1963 with his powerful “I have a dream” speech. They lead people through their confidence, enthusiasm and clarity of vision. They also have the ability and skill to effectively communicate the vision throughout the organization. 

Visionary leaders are effective change agents who are not only demonstrating self-confidence, they are also empathetic. This style of leadership is appropriate to use when an organization needs direction to move people towards a shared vision. “Visionary leaders articulate where a group is going, but not how it will get there, setting people free to innovate, experiment, take calculated risks,” writes Mr. Goleman and his co-authors.

Visionary leaders empower others, which fosters innovation and flexibility without the fear of failure. They not only articulate a vision, they also define the parameters that revolve around the execution of strategy. Each person in the organization understands how they fit into the vision and know what they are doing is an important contribution. The visionary leader also sets boundaries and keeps people accountable along the way. Visionary leaders help resolve conflict that will inevitably appear when people are allowed to innovate. As a result, the visionary leader gains commitment towards achieving organizational goals and objectives.

This style of leadership has a positive effect on people and works well in almost any circumstances. 

The Democrat 

Democratic leaders build consensus in their team through participation and forges an emotional bond with its members by saying “What do you think?” This style of leadership brings people together and draws on their collective skills and knowledge. Exercised well, it creates a group commitment to achieving the goals and objectives of an organization. It works best when it’s unclear what direction the organization should take and the leader needs to tap into the collective wisdom of the group.

The democratic leader spends times with people asking their opinions with the view of getting a consensus and their buy in. They gain respect and commitment by letting others have a say in the decision making process. By being inclusive, an organization gains a greater commitment from their people when they have a say in the goals and objectives that are set. The goal of the democratic leader is to listen to the concerns of their people and to keep morale high.

In theory this can work, however, the down side to being a democratic leader requires people to attend endless meetings. Often consensus is not reached resulting in more endless meetings. This can lead to high levels of frustrations when a decision is not reached. Taken too far, the organization can become leaderless.

The democratic style of leadership works best when the leader is not an expert and uncertain of what direction to take. They can then draw on the expertise of the people around them to help guide direction for the future. The danger of course, is the overuse of a democratic style of leadership. It is particularly ineffective as a leadership style where the group does not have the skills or competence to offer sound advice.

The consensus style of leadership therefore, should be used with caution. The consensus-building approach can be disastrous in times of crisis, when urgent events demand quick decisions. Overuse of this style of leadership can cause paralysis by analysis. 

The Coach

The coaching leadership style develops people for the future by saying, “Try this” and by showing empathy and developing self-awareness. This is a one-on-one style of leadership that focuses on developing people as individuals, guiding them how to improve their performance, and helping them connect their personal goals with that of the organization.

This type of leader also looks to align an individual’s personal goals and career aspirations to that of the organization. Adept at giving feedback, people feel comfortable about trying something new even if they make mistakes because they can do so without fear of reprisals.

Coaching by its very nature focuses on personal development and works best when individuals are aware of their weaknesses and wish to improve performance. People feel comfortable that they will receive constructive feedback, not criticism thus building their self-confidence in the workplace. This leadership style sends a message that says “I believe in you” which fosters a commitment to organizational goals.

Of all of the leadership styles writes Mr. Goleman, the coaching style of leadership works best “with employees who show initiative and want more professional development.” But it can backfire if it’s perceived as “micromanaging” an employee, therefore undermining their self-confidence.

What about the people who don’t want to be coached or who are resistant to learning? In this case the coaching style of leadership is not appropriate as it simply won’t work. It also won’t work where the “coach” lacks experience and the expertise to develop others. Used effectively the coaching style of leadership indirectly contributes to the bottom line.

The Affiliate

The affiliate leader believes that “People come first” and will strive to keep people happy. Affiliate leaders believe that people are more important than tasks and goals. Generally, this style of leadership has a positive impact on people due to receiving constant recognition and reward for work well done.

This style of leadership also emphasizes the importance of teamwork. Mr. Goleman argues this approach is particularly valuable “when trying to heighten team harmony, increase morale, improve communication or repair broken trust in an organization.”

The affiliate leader creates loyalty among team members by building strong emotional ties with one another. This leadership style encourages open and honest communication, which in turn leads to the sharing of ideas. As a result, people operate in a trusting environment where they feel free to experiment and innovate again without fear or reprisals. Without the constraints of hard and fast rules, teams enjoy the flexibility and freedom to carry out their roles in ways they think is most effective.

Unlike the coercive or pacesetter leadership styles, affiliate leaders give plenty of positive feedback to their people. This makes them more motivated and inspired creating a strong sense of commitment.

As a single style of leadership, poor performance can go uncorrected since its emphasis is on group praise. “Employees may perceive,” Mr. Goleman writes, “that mediocrity is tolerated.” It can also backfire when team members perceive themselves to be doing more than another in which case they can become resentful others aren’t pulling their weight.

Incorporating the six styles

Effective leaders shouldn’t rely on one style of leadership.

Imagine you are playing a game of golf; you take out the club that suits the shot you need to play. This will depend on the lie of the ball, the distance needed to travel, and any other obstacles along the way. You could be driving off the tee, putting on the green or caught in the rough or the sand. A professional golfer will use the club most appropriate for him to get the results he needs. It is the same with leadership. Effective leaders can move among these styles adopting the one that meets the needs of the moment.

The more styles a leader can incorporate into their personal leadership style, the more effective they will become as a leader. Focusing on developing the visionary, coaching, affiliate and democratic leadership styles will yield the best results. The most effective leaders switch styles as the situation warrants. This means an effective leader has to be sensitive to the needs of the organization and the people who work within it.

Goleman, D, Boyatzis, R and Mckee, (2002) A: The New Leaders Transforming the art of leadership into the science of results. Little, Brown Book Group.