How Should Entrepreneurs Lead?

What kind of leader are you?

Leadership has been studied and debated for about as long as business has been around. What characteristics should a leader possess? Where does that indefinable, magnetic quality come from? Are leaders born that way or can they be developed?

Despite the endless essays, articles, books and trainings about how to become a better leader, two things are abundantly clear: Leadership is an invaluable skill for entrepreneurs, and the majority of them don’t know how to become good leaders.

I’ve spoken with and counseled thousands of entrepreneurs, and before going out on their own, most of them had the experience of working under someone they despised and someone they admired. Unfortunately, few have ever taken the time to find out what it is about these people that makes them good or bad leaders.

It’s not always easy in the moment to ask: what’s different about these people? Why do I feel drained when working with one, and empowered working with the other? And how can I learn from this to improve my own ability as a leader?

I view leadership through the lens of entrepreneurship and business because that’s my world. But I think the most important concepts of leadership can be applied anywhere in life. And when I coach entrepreneurs and evaluate their leadership abilities, I typically start with the same question:

Are you acting as a transactional leader or a transformational leader?

As a consultant to the Fortune 500 and global 100, I saw both. Transactional leaders could get the job done, but they were also the most stressed, unsatisfied and limited by the teams they were supposed to be leading. The transformational leaders were the ones expanding their businesses, building brand loyalty and getting the most out of their teams.

What is Transactional Leadership?

Many people think of being a leader in a transactional sense. These types of leaders often juggle too many responsibilities at once. And because of this, they’re distant, they have a million things on their mind and are unable to be fully present to focus on the project at hand. Transactional leaders take all the responsibilities on themselves, so they’re forced to delegate and track everything themselves. They’re typically stretched thin, distracted and too busy running around to develop a solid relationship with their team.

In this leadership style, discussions with team members tend to become one-way conversations (“Here’s what you need to do and how I need you to do it for me”). When these are the only communications, team members tend to dread interacting with authority and have less of a desire to work hard to achieve the goals of the company.

The transactional leader has to constantly be on the lookout for what their team is doing or doing wrong – often walking around to team members’ desks throughout the day for “check-ins” (this is even taught to entrepreneurs as methodologies like Management By Walking Around). They also frequently use rewards and punishments in order to achieve compliance from their employees. And although this can effective, it only forces team members to maintain the status quo. This ultimately limits the team’s capabilities because it stunts the personal growth of individual team members.

What is Transformational Leadership?

Transformational leaders, on the other hand, place an emphasis on the personal development of their team. They focus on engaging and supporting the people around them, rather than requiring the reverse. And they trust their team to own important parts of the business, effectively sharing responsibilities and credit for success. This allows the leader to work in their strengths, giving them the ability to stay present and in the moment when interacting with their team. It also provides team members with a sense of purpose. They understand their role is critical, and they’re motivated to give their best effort so that they don’t let the team down.

Intentional transparency is also a key attribute of transformational leaders. When they need support, they’re quick to communicate to the team so that everyone can share responsibility for the outcome. This means their conversations with team members are true dialogues (“Here’s what needs to be done; how do we do it?”). This shift in conversation ensures the leader isn’t seen as a overly controlling or micromanaging, and it shows the team they’re committed to making sure everyone has the resources to accomplish what they need to get done.

The transformational leaders I’ve worked with viewed it as their job to make sure their team had the support they needed. These leaders understood that by growing the people around them, they could create results far beyond what they could have accomplished on their own.

So ask yourself: Are you trusting your team enough? Are you giving them the support they need to move forward?

These questions can show you what kind of leader you are. And if you tend to be more transactional, it may be time to reexamine your leadership role.

If you’re interested in learning more about leadership, or would like proven methods on how to grow and scale your small business, see what’s possible in my Constructive Company Online course.