Trait theory is less of a style of leadership as it is a way to predict leadership success or failure. It reviews behavioral competencies in a person to make educated guesses about whether that person will be an effective leader or not. Competencies are traits a person naturally exhibits; these are discovered via behavioral and situational questions such as, "What would you do if an employee was caught skimming money from the cash register?"

As a business owner, this theory is useful in two areas: adjusting your own leadership style when necessary, so that you can be more effective, and to recognize in your staff who has strong leadership capabilities.

Leadership-Member Exchange (LMX) Theory

As a business owner in today's highly regulated and litigation-happy society, it is important to understand LMX Theory and make sure you don't fall into some human resources trap it presents. This theory suggests that leaders favor some employees more than others; not everyone is treated the same. Often, there is an in-group and an out-group. Those situated within the in-group are given more resources and attention by the leader. whereas those on the outside must work to gain favor.

It is important that you and your internal leaders don't give preferential treatment to some employees. This could lead to poor morale among other employees, further reducing productivity, and it could lead to legal action, if someone feels that he is not being provided the same opportunities for growth and success that others in the company are. An example would be in which a man and a woman were hired at the same time and with the same skills, but the woman isn't getting invited to the golf club, and the man is. He finds it easier to network and lobby for promotion and advancement, whereas the woman can't. This could lead to discrimination complaints.

Good communication underpins every aspect of being an effective manager or leader.

Strengthen your communication skills to:

Check the way you give staff feedback. Make sure people are able to act on what you say, eg if someone has done something well, let them know what you liked so they can do it again. If somebody needs to improve, make sure you convey how.

Make sure you’re getting messages across clearly. That people understand what you’re trying to say, and you’re using the best tools.

And remember, different people may have different preferences, and you may tackle different situations in different ways, eg always try to deliver bad news and give complicated or urgent instructions face-to-face.

Quick tips