Being a small-business owner is a difficult role to undertake. Not only do you have to establish a business model and strategy, learn everything about your prospects, develop unique products and services and create compelling marketing campaigns to engage your audience: You also have to lead a team of employees. The kind of leadership style you choose will have an effect on the success of your employees and your business. Transformational leadership, used by many successful business owners, entrepreneurs and CEOs, may be the right choice for you.
What Is Transformational Leadership?
Transformational leadership is a leadership style that is focused on encouraging and motivating team members to achieve a shared vision for the company. The leader acts as a role model for the team, inspiring them to take ownership of their actions and shape the future of the company.
This style of leadership was first developed by James V. Downton in 1973 and then further researched by James Burns in 1978. Bernard M. Bass, another researcher, established ways to measure the success of transformational leadership later in 1985. Although the concept of transformational leadership is decades old today, it is widely used throughout the private sector in several different industries and businesses of all sizes.
Transformational leadership is comprised of four main elements. Successful leaders utilize these components to inspire their team to action:
- Individualized consideration: It is important for a transformational leader to focus on the individual needs of each employee, acting as a mentor or guide. By learning about team members' experience, expertise, unique talents and special interests, the leader can further support them and help them develop their skills. As a result, employees are more committed to the business and aspire to improve their performance.
- Intellectual stimulation: Taking risks, asking employees for suggestions and challenging the status quo are aspects of a good transformational leader. It’s important to collaborate with employees in order to solve problems and develop innovative solutions that improve the business. By doing so, a transformational leader teaches team members to think outside the box and establish their autonomy.
- Inspirational motivation: In this leadership theory, one of the most important elements is inspiring and motivating employees to reach a desired vision. The transformational leader needs to paint a picture that gives team members a strong sense of purpose and the drive to succeed. As a result, employees are heavily invested in the goals of the business and are optimistic about the future of the company.
- Idealized influence: A transformational leader is an ideal role model and displays high standards of ethical behavior. Because employees of transformational leaders are motivated by them, they feel a need to emulate their behavior as well. There is a sense of mutual trust between transformational leaders and their team members. Plus, they share the same vision, mission and core values.
When Is Transformational Leadership Needed?
The concept of transformational leadership is most common in the fast-paced technology industry. In this sector, businesses need to pivot quickly or else face being taken over by the competition. Plus, it’s critical in the tech industry to be agile and fast paced, which is enabled by transformational leadership. However, this leadership style can also be applied to any other industry where innovation is important.
Transformational leadership can help businesses to:
- Build a deep connection with employees: The transformational leadership style is particularly useful in organizations that are lacking mutual trust between management and team members. This style of leadership can help both sides understand each other and work toward a shared aspirational vision together.
- Improve financial performance: This kind of positive change is a goal every business shares regardless of industry. Several studies show a clear link between transformational leadership and financial success in business. If your business is struggling to increase revenue or improve profitability, using a transformational leadership style may help you achieve your goals.
- Unite employees: A transformational leader articulates a vision that the whole company wants to reach. If your various departments or employees often bicker about their priorities, then transformational leadership may be able to help get everyone on the same page and working toward the same goals.
- Improve employee behavior: By displaying moral and ethical behavior themselves, transformational leaders can help employees to emulate the behavior too. In businesses where employees have trouble making difficult decisions or don’t know the right actions, transformational leadership can help make the change.
Keep in mind that transformational leadership is not a switch that can be flipped to solve a particular problem or improve a specific situation. It takes a lot of time and effort to build the kind of trust required in this style of leadership. In addition, transformational leadership needs to be in every aspect of the organization, working from the top down and trickling to each department and work group.
What Qualities Does a Transformational Leader Need?
To attain leadership and performance beyond expectations as a transformational leader, you need to have a specific set of skills. Not all business owners have what it takes to be a transformational leader. If you don’t like ceding full control or interacting with employees all day, transformational leadership may not be right for you.
In order to make the transformational leadership theory a reality, small-business owners need to:
- Be charismatic: This is one of the most important elements of a transformational leader, and it’s one that is difficult to learn or teach. Often, people are either charismatic or they’re not. Transformational leaders need this skill because their behavior and character are integral to their position in the company. In order to trust, emulate and be motivated by a leader, employees need to feel inspired by them and connected with them.
- Communicate well: Transformational leaders have to be incredibly articulate. They have to clearly share the aspirational vision they have created for the business and get employees excited about working toward it. If they lack written and verbal communication skills, they will not be able to motivate employees to improve their performance.
- Have high ethical standards: Making decisions in business is not easy because not everything is in black and white. Often, leaders have to make difficult choices. Transformational leaders have high standards for moral and ethical behavior, which helps their teams trust and follow them.
- Emphasize authenticity: Being genuine is important when practicing transformational leadership because your team looks up to you. If you preach one thing but behave another way, it could be devastating for your employees who value your opinion and trust you.
Other Effective Types of Leadership
Transformational leadership is one style of leadership, but it’s certainly not the only one. There are several different ways to be an effective leader. Many times, the right kind of leadership for your business will depend on your personality type, the kind of business you have, your industry and the number of employees you have.
Other types of leadership you may consider include:
- Strategic leadership: This kind of leader is focused on growth opportunities for the business while ensuring that the team has everything it needs to succeed. A strategic leader communicates the big picture and shares a clear vision for the organization while always looking for ways to innovate and improve the business.
- Democratic leadership: Democratic leaders value the opinions and thoughts of their team members. Before making a big decision, leaders listen to what their board members, executives and other staff have to say. This is a good way for employees to feel like they have authority in the business. It also provides them with a way to be part of the organization in a meaningful way.
- Coaching leadership: As the name suggests, this kind of charismatic leadership is about mentoring and guiding employees. Individual consideration is given to each employee's strengths and skills, and the leader works on helping the employee to develop them instead of forcing all employees to develop the same skills.
- Laissez-faire leadership: Laissez-faire is French for “let them be.” This is a style of leadership where a lot of control is given to the employees. The boss still oversees the business but leaves the major decision making to the employees. This style can only be effective if the employees understand their role and make good decisions.
- Transactional leadership: Transactional leadership styles are the counterpart to transformational leadership. Instead of inspiring employees and focusing on core values, this style is about offering employees rewards and punishments for their behavior. This style can be effective in businesses where quantitative results are the focus, such as how many marketing emails are sent or how many customer phone calls are made.
In addition, there are two other leadership styles that are not advisable: autocratic leadership and bureaucratic leadership. Autocratic leaders make all of the decisions for the business without considering their employees or their knowledge. Similarly, bureaucratic leaders make all decisions based on company policy or past practices. As a result of both of these leadership styles, innovation is limited, and employees are not satisfied in their roles.
Transformational Leadership in Action
One of the best ways to learn about transformational leadership is to look at it in the real world. There are many examples today where great leaders have changed the trajectory of their business by inspiring, motivating and encouraging their employees to succeed. These types of leaders have inspired unparalleled innovation and high moral and ethical standards while working toward a shared goal and developing new skills.
Examples of the transformational leadership model in the real world include:
- Jeff Bezos and Amazon: There is no doubt that Amazon is a leader in the business world. Much of that success can be attributed to Jeff Bezos, who used his transformational leadership skills to inspire employees to think outside the box. Bezos moved into e-commerce from the finance world, bringing outside perspectives on how to innovate and stand out from the competition.
- Steve Jobs, Tim Cook and Apple: Steve Jobs and Tim Cook took brand loyalty to another level by creating innovative products and focusing on design and aesthetics. This was completely new in the tech industry at the time, resulting in a consumer base that is emphatically loyal to the brand.
- Emmanuel Faber and Danone: After he moved from architect to CEO, Emmanuel Faber established a new vision for the company as a health and nutrition expert. His transformational leadership style inspired employees to work together to get there.
- Reed Hastings and Netflix: One of the reasons Hastings succeeded in changing the course of Netflix is because he came from the software industry, not the television industry. Having an outsider’s perspective provided him with new innovative ideas that inspired the employees.
- Barack Obama: Transformational leadership doesn’t just occur in business but can also be found in politics. Obama inspired millions of people all over the world to focus on peace, respect and compassion.
It can be difficult to compare your small business to a giant like Netflix or Amazon, but keep in mind that all businesses have to start somewhere. It’s the leadership of the management team that motivates the employees to innovate, to create and to develop products and services that outshine the competition.
- CIO: What is Transformational Leadership? A Model for Motivating Innovation
- CQ Net C: The Qualities of Transformational Leaders And What Distinguishes Them From Transactional Leaders
- HubSpot: The 8 Most Common Leadership Styles & How to Find Your Own
- Marketing91: Transformational Leadership Explained with Examples