Leadership styles and their impact on employee motivation

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Nov 29, 2023

Gallup’s State of the Global Workplace: 2023 Report shares some revealing insights into how employees the world over are feeling about their jobs. While employee engagement rose to a record high of 23% – indicating that more respondents have ‘found their work meaningful and felt connected to their teams, managers and employers’ – there were also trends of ‘quiet quitting’, increased employee stress, and active and passive job seeking.

While it’s difficult to draw direct parallels from the data, in many instances where employees have lost motivation, ineffective leadership is a contributing factor. Data shared by the World Economic Forum indicates that, in 2022, 34% of employees cited uncaring or uninspiring leaders as the top reasons for quitting a previous job.

It’s a big problem – and one with far-reaching consequences. What can be done at leadership-level to increase employee happiness and motivation? Are there different leadership styles that can tackle this?

How does leadership impact employee motivation?

Happy employees – who feel fulfilled, valued, sufficiently challenged, invested in, listened to, and motivated – make money for the businesses they work for. When motivation is high, employee performance, organisational productivity, and GDP growth tend to increase in kind. Employees are a huge factor in what keeps businesses competitive, allowing them to grow, make money, and boost their odds of long-term success.

Leaders and managers should not underestimate the role they play in ensuring team members are engaged with their roles and motivated to deliver their best work. All actions and behaviours – whether minor or major, conscious or unconscious – have the potential to positively or negatively impact a workplace and, as a result, how employees feel about their jobs.

Leadership affects, for example:

·   job performance and wider organisational performance

·   recruitment and retention

·   work environment and organisational culture

·   job satisfaction and organisational commitment

·   mental health and wellbeing

·   progression and development programmes

·   decision-making processes

·   workplace demographics

·   rewards and incentives.

All of these aspects – and many more besides – contribute to the level of motivation and empowerment an employee feels. Effective leadership creates an atmosphere of trust and develops positive relationships; employees are supported, celebrated, valued, and developed. However, these positive atmospheres do not exist in all workplaces and, in part, will likely depend on the leadership styles in operation.

What different types of leadership style are there?

The Full Range Leadership Model (FRLM), developed by Avolio and Bass, is a framework that explains how leadership and management styles can impact employee engagement and efficiency.

The FLRM covers three key leadership styles – and the advantages and disadvantages of each:

Laissez-faire leadership – leading to lower levels of engagement and efficiency. The laissez-faire leadership style is, as its name suggests, innately ‘hands-off’ – and all employees are free to make decisions. This type of democratic leadership often results in low productivity and the perception of absent leadership. Its advantages include plenty of freedom and autonomy, and the fact it can work well with experienced, motivated and skilled teams. Its disadvantages include increased confusion, low productivity, and teams lacking in vision, drive, purpose and productivity.

Transactional leadership – leading to medium levels of engagement and efficiency. Transactional leaders focus on achieving results via a system of rewards and punishments that are linked to specific levels of performance. The transactional leadership style is a more authoritarian, autocratic leadership style, placing performance and efficiency ahead of relationships; in many ways, it’s the opposite of transformational leadership. Three components sit at its core: passive management by exception, active management by exception, and contingent reward. Its advantages include short-term productivity, order, structure and rules, swift onboarding processes, and a clear performance-reward connection. Its disadvantages include the performance focus having a demotivating effect on employees, the limited impact of rewards, and the stifling of innovation and creativity.

Transformational leadership – leading to higher levels of engagement and efficiency. Transformational leadership styles are rooted in empathy, authenticity, listening and being present, fostering trust, owning mistakes, and following through on actions. They are founded on change, development, transformation, and developing employees. Transformational leaders operate on the grounds of individual consideration, intellectual stimulation, inspirational motivation, and idealised influence. It’s a form of participative leadership – of which Likert, a well-known social psychologist, was a huge proponent.

Its advantages include easier growth and change management, stronger, more significant relationships with employees, and a shared vision leading to increased motivation and engagement. Its disadvantages include a higher degree of risk, and lack of short-term vision and results.

Often, leadership styles can depend on – or even be dictated by – the situation, context and business requirements at a given moment in time. However, leaders must recognise that each can have different impacts on the motivation of employees, and be aware of the positives and negatives of their leadership choices. For example, taking transactional leadership as an example: ‘whilst it’s useful for making rapid decisions, it is a short-term “here and now” measure for businesses who need to take immediate action for ensuring survival. [Its focus on] contingent reward and punishment may overlook, and have an inconsistent relationship with, employee engagement and wellbeing.’

Of course, there are leadership types beyond laissez-faire, transactional and transformational – including pacesetting leadership, affiliative leadership, servant leadership, and commanding leadership – and each has its own pros and cons. Charismatic leadership, for example, relies on eliciting emotional responses from employees to inspire, engage, motivate and show commitment. Its downside, however, can be unquestioning approval from employees and a lack of rational thought.

Is there a case study of FLRM in practice?

Numerous case studies and research articles have examined the three FLRM leadership types in real-world settings.

In the article ‘Review of Empirical Research on Leadership and Firm Performance’, a literature review is conducted as the main methodology to explore how FLRM approaches drive all aspects of firm performance (FP) – including employee engagement and motivation. The purpose of this study was to answer research questions including ‘what leadership approaches have been recognised as drivers of FP?’ Insights from data collection indicate that workplaces and leadership styles that encourage organisational learning, organisational innovation, organisational culture, and cross-department interaction all boost FP.

More specifically, in each empirical study, transformational leadership was found to be the most-used approach. While there were mixed findings across the three approaches, some data showed no direct relationship between transactional leadership and FP, but ‘significant, positive and direct effects’ were found between laissez-faire and transformational leadership and financial and non-financial performance.

More information related to leadership styles and behaviours can be found in leading business and management journals and other sources. These include the Journal of Business Research, the International Journal of Business and Social Science, and websites such as Leadership Coefficient.

What leadership behaviours can be adopted to increase employee motivation?

It’s important to note that leadership styles are not fixed. Business leaders can facilitate changes related to leadership styles, behaviours and competencies, but they often require conscious thought and action.

Leaders must seek to understand more about employee needs, commit to helping employees to succeed, proactively invest in enhancing the employee experience, and evaluate the effect of leadership styles on how employees are feeling – and seek to make improvements if required. Each action will only serve to increase employee job satisfaction – in turn, boosting employee motivation.

McKinsey’s Organizational Health Index found that, of 20 leadership behaviours, only four accounted for 89% of leadership effectiveness – which, as we know, can positively impact employee engagement and motivation:

·   Be supportive

·   Operate with strong results orientation

·   Seek different perspectives

·   Solve problems effectively.

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