How Different Leadership Styles Impact Employee Performance

Business leaders have a substantial impact on the performance of their employees. But their responsibilities can make it hard to effectively drive high-quality performance.

Managers are responsible for ensuring team success, creating a positive atmosphere, and solving complex problems, among others. These varied responsibilities can quickly become unbalanced, and a sudden shift in the market could take leaders’ attention away from their teams. This can then lead to a drop in productivity.

Leaders can stabilize their own resources by adopting various leadership styles, including:

• Autocratic leadership: Creating a clear separation between leaders and employees. This style centralizes decision-making powers in a single person. Decisions are made quickly and employees are expected to follow their instructions.
• Democratic leadership: This style uses a consultative approach in which leaders solicit feedback from individual team members. Decisions are made more slowly, with leaders considering the input of relevant stakeholders.
• Participative leadership: In this approach, leaders leave most of the decision-making process to trusted team members. Leaders provide guidance as necessary and delegate tasks to individuals based on their skills.

Orgs may use a combination of these leadership styles. Enterprises might take an autocratic approach to their investment strategies, but use a more democratic style when developing products, for example.

When evaluating different types of leadership, managers must also consider how well their team members trust their decisions.

Evaluating leadership styles’ effects on employee performance

A study of leadership styles found that each has a unique impact on employee performance. Likewise, researchers identified various business scenarios that naturally lend themselves to specific styles.

• The autocratic approach was found to be useful for driving short-term performance. Researchers revealed that in situations where teams are made of new employees, authoritarian leaders are better at defining solutions to difficult business challenges.
• The democratic approach was shown to be effective in both the short and long term. Specifically, researchers indicated that the feedback loop created by soliciting opinions from team members led not only to higher productivity but also higher morale.
• The participative approach proved less effective in the short term, but very useful in the long term, with a positive impact on employee performance. Researchers found that the style led to a positive work environment where creativity was encouraged.

These findings indicate that there is no single best style of leadership. Rather, leaders need to assess their goals and determine which style – or combination of styles – is right for the current situation.

The role of trust on improving employee performance over time

Trust in leadership is a critical factor in employee performance, regardless of what style leaders adopt. A 2017 study found a strong correlation between trust and employee behaviors that stimulate performance, including the willingness to stay with the organization long term.

Building trust with employees may be one of the best ways to boost performance. In fact, only 37% of employees say they trust their leaders. Leaders can win the trust of their employees by:

• Always telling the truth
• Following through on commitments
• Listening to employees’ concerns and opinions
• Promoting a positive work environment

Trust has to be built up over time. But the more leaders strive to gain employee trust – and demonstrate their trustworthiness – the better gains they can see from employee performance. Leadership styles have a direct impact on employee performance, and trust is a vital factor.

Managers should ultimately understand that:

• An authoritative approach can be effective in the short term when decisions need to be made quickly
• A consultative approach can be useful when creative problem-solving skills are needed to make progress
• A participative approach can be useful when leading a group of experts and competent team members
• Trust and employee engagement go hand-in-hand; empowered workers are more likely to take initiative