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How Employee Retention is Impacted by Various Leadership Styles As a business leader, how often do you ask yourself the question, ''What is my leadership style?' Chances are that your leadership style is more important to the success of the company than you think.

By Lilia Stoyanov

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While so many factors affect recruitment and employee retention, the leadership style of the senior management is the one that can "make it or break it," especially in turbulent times. Social media is flooded by "People leave bad leaders, not bad jobs" memes and that is not too far from the truth.

Various leadership styles have a direct impact on company culture, employee engagement, workforce motivation and inspiration. All of these have a significant impact on how employees feel about an organization, which has a strong influence in attracting the right people and retaining the existing employees longer in the company.

Understanding how different leadership styles affect recruitment and attrition is crucial to designing a hiring process that attracts the right candidates who will appreciate the leadership style and thrive once onboard. Let's dive in.

Democratic/Participative Leadership Style

In democratic leadership, the leaders actively encourage all members of the team to participate and share their opinions in the decision-making process. However, the final decision remains with the leadership; employees openly share ideas but leaders provide guidance and support in the process. This explains why democratic leadership is also known as shared or participative leadership. Democratic leaders demonstrate a great deal of honesty, courage, fairness, intelligence, creativity and more, which help them cultivate trust and respect from the team. Implementing this type of leadership can help attract the best talents and achieve a lower turnover rate in the following ways:

Enhances job satisfaction: When employees are included in the decision-making process of an organization, they feel valued as an important part of the company. In addition, democratic leaders sometimes use incentives and rewards to encourage participation. They are also committed to the growth and development of the members. This increases their job satisfaction and happiness, which leads to highly engaged individuals who commit to their roles longer

Fosters a positive company culture: Democratic leadership creates a psychologically safe environment where everyone is free to share their ideas without the fear of being intimidated. Additionally, bringing everyone together to brainstorm and collaborate builds a stronger team. Ultimately, a culture of mutual respect, trust, meaningful relationships and teamwork is achieved. Moreover, this helps attract the best talents, especially Millennials who are inclined towards working with a company that demonstrates a positive company culture.

Transformational Leadership

Transformational leaders understand that human capital plays an important role in the success of the organization. Thus, transformative leaders primarily focus on inspiring positive changes that bring individual success, and hence team success. They focus on developing individual talents by serving as role models, inspiring motivation, offering encouragement and support and encouraging creativity. They do this with the aim of helping each employee reach his or her maximum potential. When each member performs at his or her best, the team and the organization succeed as a whole.

Transformational leaders recruit with the concept of transformation in mind. This means that they focus more on future development and less on past accomplishments. However, the focus remains on building a workforce that aligns with the organization's needs. Rather than focusing on past achievements, they recognize an applicant's potential and devise a plan to help the applicant develop the potential as the company grows. For this reason, this type of leader may tolerate some traits in candidates such as criminal history or lack of prior experience when recruiting employees. This gives a chance to marginalized applicants, individuals working on a career transition and younger individuals who are starting their careers, which can lead to a larger talent pool

In addition, employees value working in an organization where their career development is supported. Giving employees a chance to transform and grow with the company can lead to a decreased employee turnover rate.

Delegative Leadership

Delegative leaders prefer to leave decision-making to the team, only offering their input and expertise when needed. This type of leader ensures that the team has the resources and tools needed to make decisions and solve their own problems, and then take a back seat. However, the responsibility for the outcome of these decisions remains with the leader.

A delegative leader is likely to be more inclined toward building a workforce that requires minimal guidance and supervision. They focus on finding individuals who can work independently and achieve results. That makes delegative leadership ideal for cross-border employee hiring especially where new hires are required to work remotely.

Delegative leaders don't dictate their ideal way of work to the team. Instead, they allow individuals to make decisions regarding their work including creating routines and implementing approaches that work best and suit individual strengths. These leaders are also not overbearing – micromanaging rarely sits well with employees. When employees are left to make their own decisions, they achieve a better work-life balance and are more satisfied with their work. This makes them more committed and engaged with the organization, which reduces the turnover rate.

Visionary Leadership

Visionary leaders dare to dream of big ideas and a successful future, regardless of the present challenges and ambiguities. They are risk takers, enthusiastic, highly creative, highly adaptive, and confident. In addition, they understand that achieving their visions takes the contribution of the entire team. They inspire and motivate employees to find the best ways to achieve the vision, while exercising empathy for employees' feelings.

Visionary leaders seek to build a team of individuals who can help them carry the vision to fruition. Hence, they attract highly passionate individuals who take pride in what they do. They look for bold, optimistic, resilient and open-minded individuals on top of technical qualifications and other experiences.

Visionary leadership builds a collaborative culture as it pulls everyone together towards a common goal through effective communication and empathy. In addition, it emphasizes the importance of individual contribution towards achieving the common goal. This gives employees a sense of meaning and purpose, which enhances job satisfaction. However, visionary leaders are authoritative and can sometimes appear overbearing. This can be a negative for individuals who value their freedom in completing tasks.

Coercive Leadership

Coercive leaders are aggressive in ensuring that employees follow the organization's rules, policies and directions. This type of leadership calls for strict compliance to guidelines and leaves no room for error in completing tasks. The good thing is that coercive leaders equip their teams with all the information, guidance and tools necessary for success. Coercive leadership rewards compliance and punishes those who fail to comply. Thus, coercive leaders incline more on building a workforce of individuals who are keen on detail and respect higher authority. This can be a put-off for the younger generation who prefer working in an environment that allows freedom and autonomy.

While coercive leadership can be controlling, it creates a safe environment in the workplace. The strict adherence to rules and policies helps eliminate discrimination, harassment and injuries. This can contribute to a happy workforce to an extent. However, coercive leadership inhibits innovation and creativity, which can lead to unhappiness and lack of inspiration and motivation. This can work against attracting top talents and retaining employees.

Different leadership styles have a diverse impact on recruitment and employee retention. However, each has its positive contributions when applied to the right setup. For instance, coercive leadership can work well in manufacturing and construction where strict guidelines are a necessity for employee safety. The secret is knowing which type of leadership style works for your organization. Moreover, a mix of various leadership styles can bring about robust cultures that can enhance the recruitment strategy and lead to a balanced, positive corporate culture.

Lilia Stoyanov

Entrepreneur Leadership Network® VIP

CEO and Angel Investor at Transformify. Fintech Expert.Professor.

Lilia Stoyanov is a chief executive officer and angel investor at Transformify. A fintech and digital transformation expert, she is also a professor at Zigurat Business School and expert evaluator Horizon 2020 at the European Commission.
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