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Several thought leaders have referred to 2020 as the year of great reset. But if you want to be really strict about it, most of the biggest business shifts started way back at the onset of the 21st century.
Traditional business leaders who are banking on traditional business leadership styles in this new century needlessly risk losing their businesses to unhealthy age-old leadership practices.
The pandemic just helped reiterate the need for business leaders to change the way they approach business problems primarily due to the following reasons:
- New technologies
- Pace of change
- Changing demographics and employee expectations
- Changing customer expectations
Simon Sinek, in his influential book Start with Why: How Great Leaders Inspire Everyone to Take Action, proposes a powerful framework that emphasizes the importance of a leader’s ‘why’. Sinek argues that leaders who start with why, with their purpose, cause, or belief, are able to inspire and motivate others in a way that transcends simply outlining tasks and goals. This focus on purpose aligns well with the idea that effective leadership is about more than just giving orders; it’s about creating a shared vision and inspiring a team to achieve it.
The chart below gives you a better glimpse of the reasons why there is a difference in the requirements for the kind of leaders we need to have in this era. The data depicted is from Deloitte’s Human Capital Trends Survey.
What are these particular requirements? According to the same study by Deloitte, business leaders need to have the following abilities:
- lead through more complexity and ambiguity
- lead through influence
- manage on a remote basis
- manage a workforce with a combination of humans and machines
- lead more quickly
See this second figure below.
According to Forbes, there are three notable leadership skill shifts for 2021 and these are the following:
- Communication to Empathy
- Emotional Intelligence to Emotional Agility
- Time Management to Context Management
Leaders are expected to be effective communicators, but the shift is now focused on empathy as a priority for business leaders this year. The Management Research Group found empathy to be the leading positive leadership competency and one of the biggest predictors of senior executive effectiveness. This makes a lot of sense especially now that the recent challenges brought about by the pandemic have highlighted the value of caring while communicating.
Emotional intelligence to emotional agility is another important shift. Susan David, a psychologist and the author of the book “Emotional Agility: Get Unstuck, Embrace Change, and Thrive in Work and Life” describes emotionally agile people be the type of people who are not only aware of their feelings but also know how to navigate through them.
Now the shift from time management to context management gives emphasis on how the change in the context of how and where we work requires realignment in managing our time and designing our days around how we work.
While there are several leadership styles and the specific strategies vary depending on the field or industry, the concepts are basically the same. Let’s take note of these leadership skill shifts mentioned earlier in studying how we can better tailor the different leadership styles to suit the changing times.
The following are six of the different leadership styles we will tackle further:
- Autocratic Leadership Style
- Democratic Leadership Style
- Laissez-Faire Leadership Style
- Situational leadership style
- Transactional Leadership Style
- Transformational Leadership Style
First off, let’s start with the traditional business leadership styles.
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1. Autocratic Leadership Style
Case Study: Howell Raines of The New York Times
The New York Times under Howell Raines as the Executive Editor decided at one point to only put resources on the stories that he deemed as worth covering. While this led to The New York Times winning a record-breaking seven Pulitzer awards in a single year, several staff members got demoralized.
There is no known theorist behind autocratic leadership so it is considered as an organic leadership style that has developed over the course of time that it has been used.
Basically, an autocratic leader is the type of leader who would make decisions without proper consultation. You may think that this leadership style is unacceptable for who decides on his own especially if the decision concerns an entire organization, right?
But, Cleverism articulates three situations where the autocratic leadership style can be used and these are the following:
- The situation requires fast and immediate decision-making
- There is no clarity in the process of the procedure and pushing ahead might only lead people to danger
- There are more inexperienced people in the group and most of them are demotivated
The tendency of most businesses with an autocratic leader is that the subordinates will become passive and mediocre, or conflicts may arise.
In these situations where a business leader must step up and use the autocratic leadership style, it is important to take note of communicating openly and regarding others with respect the entire time.
2. Democratic Leadership Style
Case Study: Sergey Brin and Larry Page of Google
Founders Sergey Brin and Larry Page hired Eric Schmidt to jump-start the Internet search engine. Blending autocratic, laissez-faire and democratic leadership styles, they allowed someone knowledgeable and experienced into Google which would then lead to more democratic teams composed of experienced talent.
Also known as the participative leadership style, the democratic leadership style in business management is often characterized as the style that encourages collaboration with fellow leaders and team members. In other words, everyone is allowed to participate in the decision-making process.
While this style of leadership is very motivating for most people as compared to the autocratic leadership style, it works best for businesses that employ experts in their departments so little supervision is required.
According to St. Thomas University, the following organizations can take advantage of this:
- Biotech R&D divisions
- Housing construction sites
- Universities
- Information technology companies
Furthermore, the university lists the following as the disadvantages of this leadership style:
- Business leaders may become too dependent on their subordinates
- Getting everyone’s input may take a lot of time
- Missed deadlines are possible
- Consulting with people who lack accurate data or sufficient knowledge
- Too much burden for business leaders to oversee collaboration
The democratic leadership style can bring forth massive business growth if business leaders are willing to take responsibility for the decisions made and provide support and expertise during collaborations.
Such requires highly productive leaders who know what they do and will take action.
3. Laissez-Faire Leadership Style
Case Study: Warren Buffett of Berkshire Hathaway
Warren Buffett is known for exemplifying the laissez-faire leadership style as he allows people he works with to do their jobs without his supervision or intervention. His great success over several years has been attributed to his style of leadership which allows a culture of motivation and confidence. He, however, sees to it that he only hires people he can trust to do their jobs.
The laissez-faire leadership style emerged from the French word laissez-faire which means “leave alone”. Also called the hands-off approach, this style is based on the concept that leaders can leave their employees or teams alone in coming up with ideas or decisions for the business departments they are part of.
This used to be a very popular style before the 19th century, but as modernization started, more and more business leaders find the disadvantages of leading teams with no supervision to be detrimental. This is particularly possible for companies that lack expert talent.
What business leaders who employ this leadership style should note is that assuming that subordinates must be free from accountability. This only encourages the company’s people to be complacent.
The business leader must ensure that teams are composed of highly-skilled individuals who can be reliable in achieving business goals under their responsibility.
At this point, we’ve already discussed the three leadership styles that can be highly traditional unless approached with a fresh perspective that takes into account the new leadership needs and skill shifts.
How these three business leadership styles work is illustrated below.
Which leadership style can you resonate with the most?
We now have what we call modern leadership styles or approaches. These styles have emerged as a response to the traditional styles that do not allow much room for innovation.
Although most of these new approaches are modified versions of the traditional leadership styles, they are identified mainly based on the following types of categories:
- Situational leadership
- Transactional leadership
- Transformational leadership
- Innovative leadership
4. Situational Leadership Style
This leadership style follows the contingency-based leadership model when responding to situations or making decisions. Business leaders who employ this style are flexible and would normally use varying leadership strategies depending on the situation.
Goleman believes that a situational leader must be able to incorporate the six specific leadership styles given the right circumstances.
5. Transactional Leadership Style
Also known as managerial leadership, transactional leadership is a style that focuses on supervision, organization, and group performance.
Business leaders under this style use rewards and punishments to motivate subordinates in a given task.
According to Verywell Mind, the basic assumptions of transactional leadership are the following:
- When the chain of command is clear, your workforce performs their best
- Rewards and punishments are effective agents of motivation
- Obeying the leader is the most important goal of the subordinates
- Careful monitoring is a must
When giving assignments, the business leader must be clear when it comes to the instructions, rewards and consequences, as well as giving feedback.
6. Transformational Leadership Style
Business leaders who subscribe to the transformational leadership style serve as inspirations to their subordinates.
They inspire as they lead by example and as they cultivate an environment that welcomes creativity and innovation. This suits employees who have entrepreneurial minds as transformational business leaders seek to inspire just the right amount of intellectual independence in the workplace.
In a roundup article, Harvard Business Review lists the following as the best examples of transformational leadership:
- Jeff Bezos, Amazon
- Reed Hastings, Netflix
- Jeff Boyd and Glenn Fogel, Priceline
- Steve Jobs and Tim Cook, Apple
- Mark Bertolini, Aetna
- Kent Thiry, DaVita
- Satya Nadella, Microsoft
- Emmanuel Faber, Danone
- Heinrich Hiesinger, ThyssenKrupp
The Harvard Business Review refers to this group as the Transformation 10 for exemplifying transformational leadership.
Sponsor-Backed Leadership: When Private Equity Changes the Equation
Everything discussed above applies whether you run a family business, a venture-backed startup, or a public company. But when private equity enters the picture, leadership dynamics shift in ways that catch many executives off guard. The fundamentals of good leadership remain constant, yet the context changes dramatically.
Portfolio company leadership operates under a different set of pressures than corporate leadership in traditional settings. You have a defined investment horizon. You have board members whose incentives are tied directly to exit multiples. And you have a management team that may or may not have been part of the original ownership group. Understanding how to lead effectively within these constraints separates executives who thrive under sponsor ownership from those who struggle.
The Ownership Transition: More Than a Change in Cap Table
When a private equity firm acquires a company, the transaction marks more than a financial event. It represents a fundamental shift in how decisions get made, how performance gets measured, and how quickly results are expected.
Many leadership teams underestimate this transition. They assume that because the PE firm liked what they saw during due diligence, the expectation is to keep doing exactly what got them there. This assumption leads to friction within the first 100 days after acquisition, when sponsors typically want to see momentum on value creation initiatives rather than business as usual.
The ownership transition requires leaders to recalibrate on several dimensions:
- Reporting cadence accelerates. Monthly board packages become standard. Some sponsors want weekly flash reports on key metrics. Leaders accustomed to quarterly reviews find themselves in a continuous performance dialogue.
- Strategic decisions require external alignment. Major capital expenditures, new hires above certain thresholds, and strategic pivots typically need board approval. This is not micromanagement; it is governance appropriate to the risk profile.
- Time horizons compress. A five-year strategic plan matters less than a 100-day action plan. Sponsors think in investment periods, and every quarter counts toward the eventual exit narrative.
Leaders who navigate this transition well embrace the accountability rather than resenting it. They view the sponsor as a resource with operational expertise, capital relationships, and pattern recognition from dozens of similar situations.
Board Governance Under Sponsor Ownership
Board governance in a PE-backed company differs substantially from both public company boards and the advisory boards common in founder-led businesses. Understanding these differences helps leaders prepare for productive board relationships rather than adversarial ones.
PE boards tend to be smaller, more operationally focused, and more involved in execution than traditional boards. Board members often have functional expertise in areas like sales, operations, or technology. They ask detailed questions because they have context for what good looks like across their portfolio.
Effective board governance requires leaders to master several skills:
- Anticipate questions before they are asked. Board members review materials in advance. If the numbers show a miss, address it proactively with root cause analysis and corrective actions. Surprises damage trust.
- Distinguish between information and insight. Boards do not need exhaustive data dumps. They need curated information that supports decision-making, presented with your interpretation of what it means.
- Manage the meeting outside the meeting. Experienced leaders have preliminary conversations with key board members before formal sessions. This allows for candid discussion of sensitive topics and builds alignment in advance.
The goal is not to avoid scrutiny but to channel it productively. Board members who trust management spend their time on strategic questions rather than operational details. That trust gets built through consistent delivery on commitments and transparent communication when things go sideways.
Speed Versus Consensus: The PE Leadership Tension
Private equity operates on the assumption that there is significant value to create within a compressed timeframe. This creates an inherent tension between the speed sponsors expect and the consensus-building many leaders have relied on in previous roles.
Consider the difference in decision-making environments:
In a corporate setting, major initiatives might go through multiple approval layers over several months. Stakeholder alignment is valued. Dissent is processed through committees. The organization moves at a pace that allows for broad buy-in.
In a sponsor-backed company, that same initiative might need to launch within weeks. The expectation is that management has the authority and capability to execute without extensive socialization. Deliberation is seen as delay.
Neither approach is inherently right or wrong. The skill lies in knowing when each is appropriate. Some decisions genuinely require broad input because execution depends on organizational commitment. Others are judgment calls that simply need to be made.
Leaders who succeed in sponsor-backed environments develop a framework for categorizing decisions:
- Reversible decisions with limited blast radius should be made quickly, often by the team closest to the issue.
- Irreversible decisions with significant financial impact warrant deeper analysis and board input, but still within compressed timelines.
- Decisions requiring cultural change need more communication and buy-in, but the change itself should proceed regardless of universal consensus.
The mistake many leaders make is applying the same decision-making process to all categories. This either slows down routine decisions or rushes transformational ones.
Management Team Alignment in Sponsor-Backed Companies
Perhaps no leadership challenge in private equity matters more than management team alignment. The team that built the company to the point of acquisition may not be the team that can scale it to exit. Recognizing this reality early prevents painful situations later.
Investment in leadership development across your management team becomes essential, not optional. The capabilities required to run a company with 50 employees differ from those needed at 200 employees. Some leaders grow into expanded roles. Others reach their ceiling and need to be transitioned respectfully.
Sponsors typically assess the management team within the first 90 to 180 days post-close. They are evaluating not just current performance but capacity for the journey ahead. Leaders who proactively address team gaps earn credibility. Leaders who defend underperforming team members out of loyalty create doubt about their own judgment.
Alignment also means ensuring the team operates with shared understanding of priorities. In sponsor-backed companies, this often requires more explicit communication than leaders are accustomed to providing. Assumptions that seemed obvious before the transaction may no longer hold.
Management Team Alignment Diagnostic
The following framework helps leaders assess and address alignment gaps within their management teams under sponsor ownership. Use it quarterly or whenever you sense friction between sponsor expectations and team execution.
| Alignment Dimension | Strong Alignment Indicators | Warning Signs | Corrective Actions |
|---|---|---|---|
| Value Creation Understanding | Each leader can articulate the investment thesis and their role in it | Functional leaders focus only on their domain without connection to overall value drivers | Conduct working sessions to connect functional priorities to investment thesis; revisit quarterly |
| Reporting and Accountability | Leaders deliver accurate forecasts and flag issues proactively | Consistent misses between projections and actuals; surprises at board meetings | Implement rigorous forecasting processes; create consequence for persistent inaccuracy |
| Decision Velocity | Decisions appropriate to the risk level are made within expected timeframes | Analysis paralysis on routine matters; major decisions made without appropriate input | Establish decision rights framework; train team on when to escalate versus execute |
| Cross-Functional Collaboration | Leaders resolve conflicts horizontally before escalation | Functional silos persist; issues require CEO mediation repeatedly | Create shared metrics that require collaboration; address leaders who consistently create friction |
| Capacity for Scale | Leaders actively build teams and delegate; develop successors | Leaders become bottlenecks; resist hiring or developing talent | Provide coaching and development resources; establish timeline for capability demonstration |
Making Sponsor Ownership Work for You
The leaders who thrive in sponsor-backed environments share certain characteristics. They are comfortable with accountability. They communicate directly. They move quickly without sacrificing quality. And they view the sponsor relationship as a partnership rather than a burden.
None of this means abandoning the leadership principles that built your reputation. Portfolio company leadership still requires vision, integrity, and the ability to develop people. What changes is the context in which those qualities operate. The timeline is shorter. The metrics are more precise. The stakes are higher.
Approached correctly, sponsor backing provides resources, expertise, and focus that many companies lack. Approached incorrectly, it creates friction that undermines both performance and job satisfaction. The difference lies in understanding the game you are now playing and adapting your leadership style accordingly.
Strengthening Your Leadership Mindset
About 60% of the executives who participated in the 2021 Deloitte Global Human Capital Trends said that what prepared them for the unknown is leadership. This is the kind of leadership that takes into account the unpredictable and incorporates strategies surrounding that through coaching, teaming, and fostering.
But did you know that based on the research of the Corporate Executive Board, about 50%-70% of the new business executives or leaders fail within the first 18 months? Unless you have the right leadership mindset and you solidify that mindset, you will become part of this figure.
Whenever a major business problem happens, you can either succumb to the pressure and give up, or find a solution to the problem. The most successful business leaders try their hardest to never give up.
Most business leaders would rather grind than get back to their regular jobs of 9-to-5.
In 1519, a Spanish explorer and conquistador Hernán Cortés pursued the treasures of the Aztecs with 11 ships and a crew of 100 sailors and 500 soldiers. His army was vastly outnumbered and some soldiers tried to escape. Cortés gave the order to burn the ships and left no choice but to fight until their last breath.
That wasn’t the end for everyone. Part of the army survived and they got a hold of the treasure.
At first, calmness is a myth. People are emotional by nature and react to any deviations from their plans. With time, those who choose to be in the captain’s spot until the end see problems that have to be solved and suppress the emotional part that is dragging them down.
The role of a business leader isn’t easy in the first place. Constant changes and surprises are not abnormal and at some point, they become a daily routine.
Plenty of problems appear to be critical, but in the end, they should be solved. You don’t run away from them. You step up as a business leader and inspire your teams to follow through.
The most effective leadership style for business is the leadership that inspires.
If being a business leader of a successful company is among your highest priorities, work on your leadership know-how, develop your management soft skills, and make it work for your people.
