6 Leadership Styles Available For Use When Managing an SME – Updated 2024

6 Leadership Styles Available For Use When Managing an SME


Are you the greatest leader of your ship? Can you lead your business, no matter how small it is, to the safe shore in a well-designed, operative way?

With the right use of leadership styles and leadership programs, it is guaranteed that you, your team and your SME will reach a pioneering position in the world of business. Many managers or SME owners undervalue the importance of the style of leadership they practice on their team. They even falsely assume that leadership style is a function of personality rather than strategic choice. Consequently, we advise you to ask yourself which style best fits your company culture, situation, and goals.

Leadership style affects organizational climate, the way managers motivates their employees, make decisions, encourage initiatives and handle the crisis. On the other hand, it is also true that there is no best way to lead a group of people; the ultimate model is to combine all styles according to every situation. The best leaders don’t know just one style of leadership. ‘They are skilled at several and have the ability to shift between styles fitting all circumstances’.

Hear from leaders who changed the world:

  • Mary Kay Ash: Mary Kay believed in the power of recognition, giving prizes and praise at every level to motivate success. She also advised that criticism should be constructive and should be sandwiched between two thick layers of praise. This approach ensures that the employee receives feedback without feeling discouraged.
  • Bill Wilson: Bill Wilson believed that as people climb up the corporate ladder and become successful, there is a risk that they start believing they are always right. Their egos start to dominate the organization, and employees become hesitant to speak their minds. So he wanted to promote individual initiative and prevent egos and hierarchies from taking over the company.

  • Steve Jobs: Steve Jobs was known to be a demanding and tough boss as he believed there is a risk of becoming complacent when trying to cater to everyone in every market. So, while everyone wants a happy and polite work environment, performance expectations must be met. If you fail to motivate your team to do their very best, your business will eventually be overtaken by someone who can, according to Jobs.


The 6 leadership styles:

Here is a brief about proven SME leadership styles. It is now your chance to reevaluate your style and to reveal your weaknesses in order to start fresh, with a promising way of leadership:

  • The Laissez-Faire style:

    This style of leadership applies to highly skilled, educated and trained employees. The Laissez-Faire leader follows an “ employees come first” attitude. He rarely offers advice and he allows the team freely to make any decision that suits the tasks to be accomplished. The role of the leader consists more of delegation. But be careful, not all employees possess the characteristics adequate to this style of leadership. This can result in leaving languid or hard to motivate employees needing supervision in a predicament. This also can lead to some undesirable consequences such as lack of control and increasing costs.
    Advice: Do an assessment of your employees, and apply this style only on those who match the requirements; the highly skilled, educated, motivated and trained ones. And apply another style to the rest of your team.

  • The democratic style:

    We also could call this style also participative leadership style. As the title indicates, in a democratic style, the manager gives the employees a voice in decisions; thus, he shares the decision-making process among workers. This will build an organizational flexibility and responsibilities rising fresh ideas that are highly needed in SME’s. Nevertheless, as a leader, you always have the final say.
    This leadership style makes the employees feel important and that their opinions matter. But be aware, this will need debates, discussions and sometimes endless meetings, which will confuse the employees who feel leaderless.
    Advice: This style’s impact on organizational climate is not as high as you might imagine.
    Apply this leadership style when you need to make changes within the organization because it helps easily the employees to accept them since they were already playing a role in the process.

  • The coercive style:

    This “I am the boss” style creates a highly hierarchical system. Almost all employees have no say and they are fully committed to the leader. The manager makes decisions alone without the input of the others. This will limit the creativity of some employees and transform them into followers lacking initiation and motivation. They become robots, doing exactly what their managers informed them to do. Only employees who require close supervision will be fine with this style of leadership. Otherwise, in most situations, coercive leadership constrains the company’s flexibility and diminishes employee’s incentive.
    Advice: Don’t apply this leadership style in your SME, as one of the keys to the success of SME’s is creativity. This style imprisons your employees inside the box.
    This style might be effective only in a turn-around situation, a natural disaster, or when working with problem employees.

  • The authoritative style:

    An authoritative leader uses the “take my hand approach”. The manager will set the overall goals but gives the employees the freedom to choose their strategies and tactics to reach them.
    Advice: As an SME manager, use this style only when your business is directionless and your team is less experienced than you. Else, this leadership style is unproductive.

  • The transactional style:

    Managers using the transactional leadership style base their managing on providing rewards or punishments to team members based on the result of their performance.
    Together, the managers and team members will predetermine goals. The leader sets extremely high standards and exemplifies them himself. He is determinant about doing things faster and better. The mission starts, the leader can interfere at any moment and pinpoints poor performance and demands more from them. At the end, managers will reward succeed, such as bonuses, but if they fail managers will punish them, such as replacing them with people who can.
    Hence, this style is a military operation where the workers have to follow the leader’s instructions and do things as planned and requested.
    Advice: This style will avoid your employees to think outside the box. Employees will focus on finishing the task the way you want it to be done. They will lack any enthusiasm or self-motivation to come with new ideas or maybe more efficient ways to reach the goals. It can destroy the climate of the company.

  • The coaching style:

    Instead of focusing on immediate work-related tasks and goals, the coaching leader emphases personal development. This style works the most when employees are open to learning new ways and skills realizing how cultivating new abilities can help them advance.
    Advice: As a manager, we recommend to apply this leadership style to employees who are already aware of their weaknesses and want to improve. But not when they are resistant to changing their ways.


So what type of leader are you? And how many leadership styles can you master to create the best climate for your company and the best performance among your employees?

Many studies have shown that among the above styles, the authoritative, democratic, laissez-faire and coaching styles have an ultimate and great effect. As a conclusion, remember that the most effective leaders are the ones who can switch flexibly among the leadership styles. So, don’t change the direction of the wind but adjust the sails to always reach your destination.

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