As you move towards financial freedom, it’s helpful to know what kind of leader you are. That would depend on the leadership style you use. This is necessary to becoming the CEO of your life.
At some point, you will eventually hire a team to help you achieve your goals. These people would be your stock fiduciaries and real estate managers. They can be your business advisers and certified public accountants. You may even have the desire to start your own business. In this case, you’ll be leading a group of people to help you achieve your financial and life’s goals.
Even if you don’t have any desires to run a business, you’re still the leader of your own life. No one but you will care about your life’s works and accomplishments. This is the body of work for which you want the world to remember you. The term “work” here refers to a great treatise, like Sun Tzu’s Art of War. Or it could be Michelangelo’s Sistine Chapel. You may have a secret desire to write a great musical composition to rival Beethoven’s Ninth Symphony.
Below, we present many different leadership styles. It could look like one style is preferable and even superior to others. The fact is you will need to use a blend of styles. For example, sometimes you have to put aside your teammates’ feelings in the interest of shipping products on time. Afterwards, when everyone gets some breathing room, go back and employ another leadership style. Consider using the coaching leadership to help them learn lessons about why a process failed. This helps to avoid needing to work another 60-hour week again.
1. Autocratic Leadership Style
Effectiveness: Rarely to sometimes effective
In an autocratic leadership style, you make decisions without input or feedback from your team members. An autocratic leader almost always acts on their own ideas. They never listen to the opinions of their teammates.
As you can imagine, it’s hard to get anyone without buy-in to do what you want in the long run. The best persuasive device is one where your teammates believe the idea was theirs’ to start.
This type of leadership can work in certain situations. For example, it works where employees prefer to follow rather than lead.
In other jobs that require creativity or innovation, this style of leadership can fail.
Here’s an example of autocratic leadership. CEO Tim Cook of Apple Computers requested his employees to return to the office full time. He did not ask for feedback on what his employees wanted. This is after more than 18 months of working from home because of COVID-19. They found a new way of doing things during this time where they didn’t have to be in the office. Understandably, some employees are upset with Tim Cook. The “request” was an edict. A group of about 100 employees sent a formal letter to Cook, asking for continued working from home. Otherwise, they will quit. Other employees are walking away from their jobs.
If you work in the creativity or innovation field, then autocratic can fail. The reason is you will feel stifled.
2. Democratic Leadership Style
Effectiveness: Typically effective
You constantly ask teammates for their opinions and feedback before making a decision. You make decisions only after consulting with the affected people. This is how democratic leadership works.
Democratic leadership is effective because every one of your teammates feels heard. They feel that you’ve taken their suggestions and concerns into consideration. You demonstrate a willingness to listen and learn. As a result, they also give more valuable, thoughtful feedback. It is a win-win. You also get more buy-in from the team. You build up the “know, like, and trust” factors.
3. Transactional/Pacesetter Leadership Style
Effectivness: Sometimes effective
In a transactional or pacesetter leadership, you set expectations or goals. Your teammates do their best to meet these goals. It is clear when they meet these goals. If they meet your goals, then they receive incentives.
This can be effective, but up to a certain point. For example, your teammates realize there’s no penalties for failing to meet a goal. They may not try as hard the next time. Likewise, goals are out in the open. The worth of each person is there for everyone to see. This can lead to hostility between teammates. For example, some members of the team always get the juicy projects. The rest get the mediocre projects they’d rather not do. This just encourages them to do the bare minimum.
4. Laissez-Faire Leadership
Effectiveness: Sometimes effective
In a laissez-faire leadership, you give most of the authority to your teammates. This is the most “hands-off” of all leadership styles. You trust your teammates to work on things that need attention. It also means they can work on whatever way they want. For example, laissez-faire is useful in small startups where employees perform more than one job function.
If your company needs legal compliance, then this is the wrong leadership style. Everyone needs to follow the same workflow and format. Otherwise, it can be confusing later. Or downright illegal.
There is a lack of formal training or oversight here. Management is busy focusing their attention on the “big picture” of building up the company. Employees can feel under-appreciated. They may also feel like they are missing out on career growth opportunities.
Unfortunately, teammates may perceive a lack of leadership. There’s rarely any guidance or feedback from up top. In essence, some people want their leaders to tell them what to do most of the time.
To make this work style of leadership work, it’s important to keep things in check. Consider combining laissez-faire with other leadership styles.
5. Transformational Leadership
Effectiveness: Sometimes effective
A transformational leader strives to transform the team. They do this by assigning tasks or projects to team members which are outside their comfort levels. The leader may also tighten deadlines to push teammates. This type of leadership is good for a company seeking a growth-oriented mindset. Employees reinvent themselves constantly.
This approach can be stressful to teammates who need the familiarity and predictability of routine. Pushing them to be outside their comfort zone will be stressful for them. As such, it is helpful to combine this style of leadership with coaching. Your teammates will feel more comfortable with taking on additional responsibilities.
6. Coaching Leadership
Effectiveness: Typically effective
Typical training takes a one-size-fits-all approach. Everyone gets training to build up a similar set of skills. Then they accomplish a similar set of goals. In a coaching leadership, the leader focuses on the strengths of each individual contributor. She encourages growth in these areas.
Fostering better communications between team members is another goal. This helps achieve effective collaboration. The leader may also help improve each teammate’s skills by giving them more challenging tasks to work on. This includes guiding them through the workflow process. It also means providing additional training. Each teammates focuses their unique strengths and skills to complete the project.
7. Procedural/Bureaucratic Leadership
Effectiveness: Rarely Effective
Organizations which employ the procedural leadership strictly want “by the books” leaders. They may listen to feedback and suggestions from teammates. The suggestion mustn’t clash with company policy. If it does, then the leader will follow company policy.
This leadership style is typical of traditional companies. The rationale is doing things “a certain way” has always worked for the company. So why change? Leaders will typically reject ideas and suggestions which conflict with these old ways.
This way is the wrong approach when starting a new company that is disruptive to the current industry. Kodak was resistant in embracing digital photography when the technology first came out. After all, it took them almost a hundred years to become a billion-dollar company. Instagam, on the other, took about 6 years to reach a billion dollars in valuation. Kodak filed for bankruptcy. The old ways cannot be used when disrupting established industries.
8. Authorative Leadership
Effectiveness: Sometimes Effective
In an authorative leadership, teammates follow a leader who is presumed to be an authority. That is to say, an authority is an expert on a particular subject. Teammates believe the leader knows what’s best for the collective group. This type of leadership can work in situations where teammates needs to defer expertise to a leader.
Authorative leaderships are different than autocratic. In autocratic leaderships, the leader may not necessarily know anything about the subject. They still expect teammates to follow with blind obedience.
This type of leadership works insofar that teammates continue to perceive the leader to be a subject matter expert. Group cohesion starts to unbind when the teammates start sensing a lack of authority. They may even start questioning the leader’s decisions.
Summary
Which type of leader are you? Do you predominantly use one type? Or do you use a blend of the different types? It’s helpful to know what kind of leader you are. That way, you also understand the strengths and weaknesses of each. For example, you may not know you’ve been an autocratic leader. You can stop wondering now why things haven’t been working out for you.
One of the most important lessons you can ever learn as a leader is accepting full accountability. There is no one to blame but yourself. This is the greatest failings of most so-called leaders of billion-dollar companies and even heads of states. They always blame others for their failures.
For example, your employee isn’t doing what you expected. Your fiduciary isn’t doing their job. Even your real estate manager is failing to take care of your investment properties. Whose fault is it?
The ultimate fault lays not with these people.
It is in your failure to lead. After all, you can’t change other people or the situation. You can only change what is within the locus of your control.
Being a good leader is also knowing when to walk away from a job or situation which no longer serves you. The example with Cook sending a unilateral order is a good example of a toxic relationship you should abandon.
Likewise, learning to lead is a requirement if you want to have ultimate freedom.
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The best financial advice in the world will fail you if you have bad mindsets around money. What are some examples of bad money mindsets? Investing is only for the rich. I can never afford that. Money is the root of all evil.
I had many of the same money mindsets that you may now have. Through a concentrated effort, I was able to change most of these around. In the process, I transformed from a clueless guy–feeling like he’s barely making it–to someone who’s achieved a measure of financial freedom.
I invite you to get your free gift, 7 Money Mindsets Preventing You From a Positive Cashflow, today.
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