Literature on Relationship between Democratic Leadership and Business Success

Keywords: Leadership Theories, Leadership behaviour theory – McGregor Theory X and Y, Leadership contingency theory, Leadership style — Democratic leadership, Role of democratic leaders in an organisation, Empirical Literature — Leadership and organisation performance, Leadership and management assignment writing services


The literature starts with review of leadership theories from different school of thought to develop an understanding of leadership style and functionality. The aim of literature is to develop the knowledge of democratic leadership style and its impact on profitability, efficiency, control and success of the business.

The literature is organised into three sections. The first section reviews leadership concept and theories. The second section review democratic leadership style and functionality. The third review empirical literature on leadership style impact on success, efficiency and control in the organisation.

Section A – Leadership Theories

Concept of leadership

Leadership is a process to include others for actions towards the common goal of organisation. Leadership involves inducing, respect, compliance, and cooperation through exercising power over the subordinates. It involves personal influences to get group or individual to do what leaders want to do. Leaders cope with change through vision whereas management deals with complexities and develop the plan. Leaders set vision and strategy and implement control to achieve the objectives of organisation (Northouse, 2015).

Scott & Davis (2015)  stated that leadership involves an interaction between group members leading to structuring of situation and perception of the members. Leadership is a process in which one member of group modifies or influences the competencies and perception of other group members. Leadership theories elaborate how effective managers achieve and delegate tasks. Leadership behaviour approach focuses on the leadership style and leadership function in an organisation (Nohria and Khurana, 2016, p.67-68).

Leadership theories

Leadership behaviour theory – McGregor Theory X and Y

According to Gurbuz, Sahin and Koksal (2014), McGregor theory enclosed two important assumptions related to management practices, which are human behaviour and nature. Theory X elaborates the negative side of human nature through discussing that people are irresponsible, dislike work and require close supervision.

On the other hand, theory Y examines the positive side of human nature through assuming creativity and self-control for the job. The leadership style of managers is depending upon the belief and assumption of manager’s exhibit through theory X and Y (Sahin, 2014).

Theory X

Theory Y

·      Human nature is inherent dislike for work and avoids responsibility when possible.

·      Human characteristic makes most people coerced, thus punish, and reward allows directing and controlling to achieve organisation goals.

·      Human avoids responsibility and prefers to be directed to ensure security above all.

·      Human behaviour under normal condition seeks and accepts responsibility.

·      People are self-control as well as self-directed to achieve goals in organisation.

·      Human capacity to exercise creativity and imagination to resolve organisation problem is widely distributed in population and thus intellectual capabilities are underutilised in modern organisation life.

Lawter et al (2015) reviewed that the assumption of the theory X and Y affect the manager function of planning and control in an organisation. In relation to planning, theory X results in setting of comprehensive objectives as employees do not participate. On the other hand, theory Y assumption represents employee and managers set the shared objectives to achieve the objectives of the organisation.

In the theory X scenario, managers are likely to face resistance because of top-down communication approach. However, in Theory, Y, leadership style fosters the participative approach through empowering the employees and responsibility.

Theory X highlights the role of manager as performance judge and Theory Y offer control based on self-control of subordinate with upwards communication (Lawter, et al., 2015).

Leadership contingency theory – Action-centred leadership model

Adair’s (1973) presented ‘Action-centred leadership model’, which elaborates that leaders achieve the results and get the job done based on the relationship between employee and managers. The three important characteristics of action-centred leader are; 1) task structuring to get job done; 2) monitor and support the people performing the job, and 3) foster the relation among the team members.

The model developed by Adair highlights the interaction, simplification and variability of human behaviour. Leaders’ role is to exhibit the behaviours and carry the function as highlighted in figure 1 (Rickards, 2015).

Leaders Role in organization

Salehzadeh, et al (2015) added that the contingent and situational elements require managers to response accordingly and efforts for each circle vary.

In task context, the leadership role is to define task, develop plan, allocate resources, and check actual results (variance analysis) and feedback for corrective actions. Leader effort for the team building is to maintain discipline among the team, motivate team members, develop sense of purpose, facilitate communication and develop groups.

Moreover, the role of leader is to understand and attend the personal problems, reward and appraise individual, recognition of individual capabilities (Western, 2016, p.101).

Section B – Leadership style

According to Hackman & Johnson (2015), leadership style is leader’s behaviour exhibit during the employee supervision. In other words, leadership style defines the way leadership function carried out and the way manager behaves towards group members. Leadership style theory acknowledges the importance of leadership skills to achieve the objectives.

Leadership style enables the leader to perform the task through engaging individual to feel most contented. McGregor defines the leadership style as a method to deal with the organisation reality, which is deliberate adopted and recognised by the leader. Therefore, predicate way of coping with the reality of workplace environment known as ‘leadership style’ (Landis, et al., 2014).

Democratic leadership                                              

Hendriks & Karsten (2014) elaborated that democratic leadership involves collegial and open style of managing team in which team members discuss in free flowing. Democratic leadership also known as ‘participative leadership’ allows the team members to get involved in the discussion and take more active role in the decision-making.

Empirical data on democratic leadership highlights that this leadership style result in higher productivity, increase group morale and better contribution from the team member (Beerbohm, 2015; Chemers, 2014; Doh & Quigley, 2015; Bhatti, et al., 2016).

Daft (2014) discussed that in democratic or participative leadership style, the focus of power is within the group through greater interaction and coordination. Democratic leadership style fits best in situation where member of group are skills and competencies as well as willing to share knowledge.

Democratic leadership style is useful in dynamic and rapidly environment to keep group up to date and adapt to constant change. In democratic style, sub-ordinates participate in the problem solving and goal setting which encourage commitment to final decision (Fairhurst & Connaughton, 2014).

Van Wart (2015) analysed that democratic leadership create the situation, which enables the subordinates to learn and discuss the performance. Democratic leaders show the greater degree of reality, satisfaction and motivation for greater productivity.

Democratic leadership style offers encouragement for team member to share ideas and facilitate the conversation the conversation through consolidating the ideas and information for effective decision-making.

Democratic leadership style shows that it allows the leaders to achieve higher productivity and offers flexibility to adapt to the better way of doing things. Democratic leadership style allows consolidating professional and experiencing team and capitalising on skills and talents of team members (Hendriks & Karsten, 2014).

Wahab et al (2016) discussed that the advantages of democratic leadership include involvement, satisfaction, productivity and commitment. Democratic leadership style enables high-level participation and consultation in decision-making. The greater degree of involvement represents higher motivation and contribution of experiences from group members for effective decision-making.

Cox (2016) explained that the problem associated with democratic is that it involves lengthy debate and time-consuming activities associated with leadership productivity. Democratic leadership style is that decisions take longer and possibly limited experience of subordinates. In the matter of urgency, group decision making slow down the decision-making speed which makes lead to sub-optimal decisions.

To summarise, in democratic leadership style, team members participate in the decision-making process but leaders make the final decision. Democratic leadership style encourages setting more challenging goals, exploit opportunities to devise improved method of workflow, recognise achievement, job growth as well as enable the employee to learn from mistakes.

Leadership Style



Democratic leadership·      Ensure employee buy-in and they are part of decision-making process.

·      Empower employees and extend trust of the employee.

·      Encourage employee idea and recognise the achievement.


·      Develop teams and encourage participation

·      Employees are well informed of matters which affect their position

·      Employees satisfaction and opportunities to develop employee skills portfolio

·      Ineffective in time-constraint situation

·      Lower sense of interdependence in groups

·      Employees have lower degree skills and knowledge


Role of democratic leaders

Bitar & Lowenthal (2015) stated that a leader is a person who realises the need to get the task done through exploiting the opportunity. The leader is an encourager, set vision the future, and lead others as well as willing to take the risk for better tomorrow. An effective leader is a good listener, communicator and coordinator.

A democratic leader encourages group members to share ideas and opinion and thus creativity as well as engage in decision-making. The core characteristic of democratic leaders is friendliness and helpful through participation (Daft, 2014).

Kane & Patapan (2012, p.30-31) elaborted the distinctiveness of democratic leadership involves motivation, influence, cooperation, logical consequences, self-determination as well as situation-centred. Democratic leaders empower the group members, distribute responsibilities and facilitate group decision making.

The role of the democratic leader is to provide information as well as knowledge to group members. The two main characteristic of democratic leaders is participation and control. The function of democratic leadership is top-down management style and directive control. Democratic leaders share decision-making with group members and associated with high morale (Faiz, 2016).

Section C – Empirical Literature — Leadership and Performance

Performance management defined as the process to translate organisation objectives into the individual objective of an employee for goal congruence. Performance management is important in terms of both individual and organisation in terms of productivity and motivation.

The two important aspects of performance management are operational factor and thus control system of organisation. The second aspect is to build a positive relationship with employees through linking organisation objectives and required output from the employee to achieve these objectives. Moreover, performance monitoring involves the mechanism to measure the results achieve by the employee and desire level (Varma et al., 2016).

The impact of democratic leadership to the success of business

Helms (2016) analysed that organisation environment has experienced rapid and radical changes due to globalisation and technology and greater competition has forced the organisations to streamline operations. The internal challenges such as efficiency and productivity as well as external challenges such as economic, political and regulatory issues have affected the competitiveness of organisation.

Hence, Success of organisation measured as how it has placed itself in marketplace to tackle the competition. To tackle the challenges and obstacles, organisation leadership plays critical role. Human capital is an important asset of organisation and vital source of competitive advantage through contributing to the performance of organisation.

As a result, leaders accomplish the goal of organisation through organising and managing the planning and control (Helms, 2016).

Terzi (2016) stated that democratic leadership effect the performance of organisation through developing quality workforce and defining the degree to which employee accomplish the task. Leadership performance reflects in the efficiency of organisation and democratic leaders enable the cooperation and coordination of people in organisation and impact upon the success of the organisation.

Gaikwad (2016) added that effectiveness of leadership marked by execution of strategy and democratic leadership is useful to link the organisation objective with individual through participation and achieve success for organisation through goal congruence. Democratic leadership enable group members to perform and reward for it through facilitation, accommodation and cultivation.

Evidences show that democratic leaders build employee morale and develop environment, which enhance group member’s involvement to make contribution towards the success of organisation (Schultz & Schultz, 2015; Puni, et al., 2016; Kelly & MacDonald, 2016).

Lee & Hee (2016) reviewed that success of organisation is dependent on the ability of leader to optimise the human capital of organisation. Democratic leader understand the value of employee to achieve the goals of organisation. Participative leadership style involves spending time in getting employee idea, build trust, commitment and employee buy-in.

Leaders set the goals and strive for the collective performance to contribute towards the success of organisation. Employees contribute towards decision-making and role of democratic leaders to support employee how to perform the task that drives responsibility and flexibility (Doh & Quigley, 2014).

Nguyen, et al (2016) discussed that participative style enables to keep employee morale high and promote positive climate in the organisation. Democratic leaders contribute towards the success of organisation through consensus and employee participation. Employee idea and input are value for collective decision-making and problem resolution. Moreover, democratic leadership foster positive climate for building team, developing individuals and performing task and contribute towards organisation success.

Andrews (2016) evaluated that leadership role is paramount in today’s competitive world to manage the employees and technology to make difference and ultimately mark the success or failure of organisation. Democratic leaders act as change agent to ensure organisation achieve its objectives. The importance of effective leadership has increased due to shift in the business environment to answer the competitive intensity and ensure the participation of workforce.

Democratic leadership contribute towards the success of organisation through evaluating the strength and weakness of employee, motivation and analysing the impact of actions, decisions and relationships.

Fernando (2016) added that leadership is a critical factor in the success of organisation as good organisation start with good leaders and organisation success reflects the ability of the leader. Democratic leadership influence the action and motivation of employee to improve the performance of the organisation in competitive global market.

Democratic leaders perform well in continuously growing markets through effectively managing the resources allocation, respond to the fierce market competition, and achieve business success (Kelly & MacDonald, 2016).

Jones, et al (2016) analysed that democratic leadership achieves success of organisation by ensuring that individual and team in organisation embrace vision of organisation. Participative style ensures employee development, team productivity, enforce accountability, employees’ empowerment and job satisfaction to achieve success for the organisation through human capital.

Democratic leadership recognise the contribution of individual and team and i.e. develop employees through training required to perform their job effectively.

Qadri (2016) highlighted that democratic leaders achieve goal congruence and deliver product and service, which meet the expectation of customers. The availability of information for internal and external stakeholders communicates values of organisation and performs timely decision-making. Employee share ideas and knowledge through involvement and teamwork and they held accountable for achieve positive results.

Democratic leadership ensures organisation success by eliminating unnecessary rules and regulations for timely completion of the task (Cronin & Genovese, 2015).

Cox (2016) studied the role of democratic leaders in terms of contribution towards the success or organisation through promoting a positive working environment to resolve conflict and disputes. The ability to address the issues of miscommunication and power struggle, which influence the employee morale and climate, participative style communicate vision promote the positive working environment to overcome the uncertainties and inconsistencies.

Democratic leader contributes towards the success of the organisation through promoting the positive working environment for employees to perform a job in an effective manner.

Solomon, et al (2016) added that democratic leadership effective allocate resources to ensure both employee and organisation function effectively. Leaders promote growth and personal development to motivate employee and thus, employee sharing idea and knowledge spur innovation. Democratic leadership facilitate team and individual development through knowledge sharing and collaborative decision-making to achieve success of organisation.

Hilton & Wageman (2016) evaluated the provision of positive working environment facilitates team working and organisation functionality. Democratic leaders ensure that employee feels valued through promoting culture of respect and trust. A positive working environment encourages employees to share ideas, increase commitment, and thus motivate employees to become part of decision-making process in an organisation. The goal congruence enables to align the organisation and individual goal to achieve success for organisation.

Castro (2016) added that democratic leadership promote team building through collaboration and leverage the opportunities from group member knowledge and experience.

Leadership set achieves goals, the target for the employee, and improve resources effectiveness. Democratic leadership style drives the success of the organisation through the foster positive working environment in which employee feel valued and part of organisation.

Hypothesis – 1: There will be significant positive relationship between democratic leadership and success of business organizations

Effect of democratic leadership on efficiency and profitability of business organizations

Puni, et al (2016) analysed that resource effectiveness of organisation depends upon ability of its members in harnessing resources. Leadership plays critical role in allocation and distribution of resources and thus leadership style have significant role in performing roles and tasks.

Democratic leadership role in achieving efficiency and profitability is important and efficiency is achieved resource mobilisation, enhancement and utilisation to improve performance of organisation. The two important factors, which allow elaborating the performance of both employee and organisation, are profitability and employee efficiency (Higgs & Dulewicz, 2016).

Solomon, et al (2016) studied that business efficiency and profitability attributed to leadership style linked to execution of strategy. Democratic leadership increase the organisation efficiency through employee accountability and ownership to overcome ambiguity among group members and resolve conflict.

Employee involvement increases the ownership of the task and increases the employee commitment. Democratic leadership evaluates the expectation for group members that reduce the ambiguity and increase the efficiency of business.

Salman, et al (2016) examined that participative leadership style encourages setting more challenging goal, exploit opportunities to devise improved method of workflow, recognise achievement and job growth. Employee efficiency measured as the degree to which employee achieves its target and goals in relation to proportionally of resources. The employee efficiency elaborated through quality and quantity of output, timeliness and cost-effectiveness.

Democratic leadership enable the involvement of employee that allows to clearly defining the task, initiatives and responsibility. The clear communication for deliverable for each task enables to overcome the expectation gaps and accountabilities are clearly defined required to achieve goals (Salman, et al., 2016).

Gowtham & Sheriff (2016) reviewed the participative style effectiveness and contribution towards the profitability of organisation through higher throughput, reducing the scrap, timeliness of manufacturing and cost effectiveness to increase the profitability of business. This increases the throughput and process efficiency to improve the profitability of company.

The participative approach ensures that resources effectively distributed to maximise the resource efficiency. Empirical evidences show that business profitability and efficiency linked with leader ability to develop long-term relationship customers, business knowledge; attain higher productivity and dependability, which increase the profitability of organisation and thus important towards the success of organisation (Lee, 2010; Van Wart, 2013; Rustin & Armstrong, 2012; Reidel & Salinas, 2011).

Doh & Quigley (2014) analysed that democratic leadership provide strong support for the employees to improve their skills and knowledge that is important to perform the job. This increases the performance of the employee and consequently affects the process efficiency of business and deliver better results. The development of employee skill portfolio increases the satisfaction of employee and improves the business climate, which enables specific actions required to achieve the results.

Democratic leadership influence efficiency through building positive working climate through motivation and inspiring the employee to ensure business objectives met. Participative style increases the business efficiency through an overcoming range of factors such as low morale, absenteeism and high turnover. This reduces the cost for business and increase efficiency that deliver better profitability for business (Kane & Patapan, 2014).

Raelin (2012) highlighted that leadership encourage ideas from employee to improve product and processes that allow re-inventing the products and service and contributing towards the profitability of the organisation. Democratic leaders engage the employee through team building and recognising the completion of milestones, which engage employees and increase staff morale and i.e. better results for the organisation.  Participative style encourages open communication and shared decision making which increases the trust among the group members.

Shapiro (2014) added that the strong relationship between the employees and leaders increase trust and employee feel valued which enable quick resolution of the problem. Participative leadership develop positive working climate and motivate employees through feedback and involvement, which increase the sense of self-esteem and positively impact on the efficiency and profitability of business.

Jenlink, et al (2012) stated that leaders provide positive working climate through quality of work, timeliness and discipline to increase the efficiency of business. The success of organisation is recognised for both individual and team performance. The sharing of information and ideas compensate for weaknesses and strength support for group members towards the common goal.

The practice of participative style facilitates communication to effectively resolve conflict and develop group, which promote self-directing, self-governing and problem solving with groups. The two-way communication allows improving the process through feedback as well as increasing the efficiency of business (Peters, 2015).

Steven Altman (2013) examined that participative style exhibits cohesion, initiative, task-orientated behaviours and cooperation to increase the processes efficiency and increased throughput. The optimum use of human capital improves the relationship between productivity and employee.

Leader confidence in the employees allows collaboratively setting the company goals at all levels, which result in cooperative work environment. Profitability of business is by-product of business efficiency that achieves through employee alignment and involvement (Fernando, 2016).

Keohane (2016) stated that democratic leadership deploys fiscal measure as well as overhead control and achieve objectives of the organisation. Participative leadership style increases business efficiency through people accountability and develop behaviour, which delivers result for the business.

Leaders’ implicitly links the climate of organisation and employee engagement to increase efficiency and productivity of business. Shared working models and expand capabilities through clarifying vision and understanding business complexities. The involvement of individual, reward awareness, empathy and acceptance build positive climate at the workplace and increase the resource efficiency of business (Beerbohm, 2015).

Doh & Quigley (2014) added that democratic leader engages employee and positive climate facilitates the employee and customers to achieve results. The effective use of human capital through empowerment as well as supporting employees enables profitability of business.

Democratic leadership develop an environment where employees have positive work experience and influence their work and customer experience. The business efficiency translates into profitability through people-centred approach.

Hypothesis – 2: There will be significant positive relationship between democratic leadership and efficiency and profitability of business

Democratic leadership and control of business owner and management

Egeberg et al (2016) stated that democratic leadership in an organisation increases the quality of decision through involving the idea of group members. Hierarchies in organisation help groups to solve the problem through collaborative decision-making. Nevertheless, this unbalanced control in an organisation and few or single member control decisions and actions of others. The concentration of control allows the few people to make decisions and possible source of conflict.

According to Adams et al (2012), organisational politics have a direct effect on the performance and control of organisation in both formal and informal context. Leadership has direct effect and cause the performance of business through setting vision and implementing strategy through influencing people around them. The employee autonomy and decentralisation of decision making in democratic style result in weak execution and control issue in organisation.

Lian & Tui (2012) analysed that participative leadership style in an organisation affects the performance, employee and manager. In the context of organisational politics, the focus is to maximise the self-interest and i.e. conflict with goals and interest of other individuals in an organisation.

Consequently, the impact of organisation politics is to achieve the best result through games and influence tactics. Leaders in organisation pose powers that have implication for management and business owners. In the context of democratic leadership and control, participative style enables to manipulate the behaviours of other.

Higgs & Dulewicz (2016) Leader’s expertise and specialised knowledge for technical matter and activities within an organisation influence the management ability to influence the decision. Leadership style marks the method and ways in which individual and group work towards the common goal.

The technical knowledge and skills portfolio of person is likely to influence the business owner to ensure smooth operations of business. The authority and power of democratic leadership result in high power and affect the management influence on the business (Evans & Qureshi, 2013).

Edwards, et al (2015) evaluted that democratic leadership give access to wide information pool in relation to the environment and working of the organisation. The access to information that might not relevant to actor level in the organisation gives power to the leader and minimising the management ability to make decisions. The unique information and group control give democratic leader power vital to make decision of organisation.

Participative style offers various power bases for leaders, which include normative, coercive and knowledge. Democratic leaders have the capacity to manipulate symbol as well as internalised commitments to norms (Puni, et al., 2016).

Hogg, et al (2014) added that the control of specialised information gives democratic leadership power to influence the business decision when compared with management or business owner. The power democratic leaders give the opportunity to make better decision based on information and thus limit the ability of business owner to make independent decision. Democratic leader influences unidirectional power and affect the relationship between the employee and management.

Lunenburg (2012) examined that democratic leaders have authority and power based on coercion, normative and knowledge. This gives democratic leader power to take decision and strong control of the business. The negative element associated with organisation politics are self-interest and self-serving behaviour of individual to achieve own advantage.

The legitimacy of democratic leaders is right in terms of value and this tantamount to authority. The participative style gives democratic leaders active power through mobilising power for their ends (Cronin & Genovese, 2015).

Faiz (2013) added that monopolising of position rise power, conflict, reconciliation and influence and create politicised situation. Empirical evidence shows that political structure of organisation provides platform to express motives and interests which managerial positions accumulate power through influence and activities.

Democratic leaders have strong social and economic stance and economy scarcity rise political pyramid. Human being makes comparison for self-esteem and interest and this reflects the attrition in the power base. Therefore, democratic leaders have more power to influence control and affect decision making, which limits the business owners and management less influential over the affairs of the business (Efferin, et al., 2015; Dunleavy, 2014; Harris, 2013; Watson, 2013).

According to Peters (2012) the connection power of democratic leaders has a significant influence on the leadership power and thus, the role of leader in control of the organisation. The connection power gives information and builds strong coalition in sense of acceptance and approval.

The power and authority of individual are made of three elements and define the control system in the organisation. The foremost element is quantity of authority, expertise and reputation as well as personality of leader (Lee, 2016).

Democratic leadership reflects the capitalisation of power and leader internalise source of power. The realities of experience in organisation show the conflict among the members, particularly in less rationalistic situation (Cronin & Genovese, 2015).

Moos, et al (2013) elaborated that in organisation, conflict of interest rise below there is no measure for course of action for events such as promotion, succession, mergers and new executives. Participative leaders have high influence on team and individual in organisation to implement strategy and achieve objectives of organisation.

Democratic leadership authority based on right of control and involvement of group members impose concomitant obligation to obey. Leader ability to influence other creates referent power for the organisation.

Democratic leaders match competence and authority to maintain the coalition. The ability and power postures have substantive impact on the decision-making and limit the business owners and management less influential over the affairs of the business (Salman, et al., 2016).

Hypothesis – 3: There will be significant positive impact between of democratic leadership and control of business owner and management



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