How leadership styles impact retail employee and customer engagement
Explore the effects of leadership styles on retail employees and customers, using real examples from UK retailers to give you an insight into how they work in practice.
In retail, where employees need to provide great customer service, the leadership style of managers can significantly affect workforce morale and the customer experience.
We’ll look into four primary leadership styles—transformational, laissez-faire, transactional, and democratic—and see how they relate to the retail world.
Never Miss a Retail Update!All of these management styles have their merits; however, we will argue that transformational leadership is particularly well-suited for success in today’s modern retail.
Transformational leaders inspire new ways of thought, get employees involved, and take customer satisfaction to the next level. In a market where both technology and, as a consequence, the market is going through rapid shifts, transformational leadership can make retailers gain a much-needed competitive edge.
So, let’s take a deep dive into what the nuances of the different leadership styles in retail are and how the right kind of leadership can change your team and your customer experience for the better.
Role of leadership in retail employee engagement and customer service
For retail managers, there are unique challenges such as high employee turnover, consistent customer service, reducing inventory shrinkage, and improving profit margins. This is where leadership will become key.
Research repeatedly demonstrates the connection between competent leadership, employee engagement and customer satisfaction.
For instance, the 10% of managers with the lowest scores on leadership had employee engagement in the 24th percentile and customer satisfaction in the 36th percentile. By contrast, the top 10% scored 77% for engaged employees and 69% for engaged customers.
Because their employees are engaged, companies experience a 10% spike in customer loyalty and a 23% increase in profitability.
These numbers underscore the direct impact of leadership on retail success. This leads to better service and satisfied customers, as engaged and happy employees are more willing to go the extra mile to help customers.
Too many frameworks: Which leadership style works best for retail?
There are so many theories and models covering leadership in retail that it becomes a daunting task to choose the right one. It is like stepping into a super-sized department store for management styles? Although these frameworks provide great insights, not every one is purpose-built to address the challenges within the retail.
Let’s take a brief stroll through a few classic leadership theories:
- It was Lewin’s Leadership Styles (1939), for example, that offered us the authoritarian, democratic, and laissez-faire approaches. These are considered to be the true-blue classics of leadership — oldies but goodies, and maybe not exactly utility players today in the speed-of-retail treadmill.
- The focus on motivation and rewards is being modelled by Burns Transformational & Transactional Leadership (1978). If so, then this one is like a well-tailored suit: it still fits many retail scenarios just fine.
- The Managerial Grid Model (1964) by Blake & Mouton focused on bringing your concern for people and production into balance. It’s like striking the right balance between customer service and sales targets — easier said than done!
But within the vibrant realm of retail, four leadership styles have emerged as the trendsetters:
- Transformational leadership: This style is like a dynamic and charismatic store manager who mobilises the team to reimagine what great customer service is like.
- Laissez-faire leadership: Imagine a boutique owner who entrusts their veteran staff to operate without micromanagement.
- Transactional leadership: Imagine the department store manager establishing clear targets and rewards for achieving sales targets.
- Democratic leadership: Think of a team leader who involves all staff members in the decision-making of the store layout or new product lines.
All these styles do well or poorly in various retail atmospheres. In the sections that follow, we will consider how these leadership approaches manifest in actual UK retail situations. From high street chains to local mom-and-pop stores, we will discover how different leadership styles can either make or break the employee experience and the overall customer satisfaction.
Impact of retail leadership styles on employee engagement and customer service
It is impossible to overstate the effect of leadership styles on employee engagement and customer service in retail. Each approach can be broken into the four main avenues — transformational, laissez-faire, transactional, and democratic.
Transformational Leadership: Inspiring Retail Revolution
Transformational leadership is not just about executing tasks; it’s about inspiring teams to think differently about what is possible in retail.
Transformational leaders are the visionaries of the retail world. They are not just selling products; they are selling dreams and possibilities to retail employees and customers alike. They tap into their innate ability to spark innovation, cultivate personal growth, and energise execution with an unprecedented purpose across the entire organisation. In retail, facing ongoing changes – digital transformation, shifting consumer behaviours, a world post-AI – this style of leadership is honestly a breath of fresh air.
Impact on Employees:
Picture going to work not only feeling valued but actually inspired. That’s the magic of transformational leadership in the retail store. It’s like espresso for retail employees’ morale, energising the entire work environment. These leaders seem to motivate each team member to feel like an important contributor to a higher purpose. They inspire creativity and encourage employees to think outside the box. By tying individual wants into the broader plan, transformational leaders create employees who aren’t just going in for a pay cheque; they are going in to actually make change.
Impact on Customers:
In this situation, customers can see that retail employees are fired up and engaged. It’s a wave of positive effects on customer service and the overall retail experience. We’re talking about a service that transforms first-time buyers into lifetime brand advocates. One of the greatest benefits of this leadership style is that employees are more likely to do what customers need to go that extra mile, creating those “wow” moments that customers rave about.
A Real-World Retail Revolution:
Nigel Oddy from American Golf is the prime example for transformational leadership in UK retail.
“This isn’t just a golf shop,” said Oddy. “This is a really evil genius opportunity to change the game for people who want to come to it.” His vision? Making golf a game that all can enjoy, as opposed to the stereotypical retiree set.
The way Oddy has adapted has been truly a game-changer. He has his team thinking differently about what a golfer can be. As he puts it, “We don’t want it to just be retired guys — it should be for everyone. We’re trying to get as many juniors out there to play as possible.” And this isn’t just talk; it’s a mission that has energised his entire workforce.
His campaigns centred on inclusivity, not only on bringing in new customers; they also created an atmosphere where the staff felt truly connected to the mission of the company. It’s as if they’re not just selling a new set of golf clubs but often introducing an entirely new world to individuals who would have never considered walking on the green.
Not only has his innovative leadership brought American Golf back to life, but it has also received acclaim in the retail world. In 2024, Nigel was honoured with the Executive Leader of the Year award at the People in Retail Awards. He currently serves as a judge for the highly regarded People in Retail Awards (PiRa). This is another piece of evidence that his approach to leadership, which focuses on bringing about positive change in the retail industry, is working.
Want to learn more about how transformational leadership is defining retail in the new normal? Read this great article. A fascinating insight into how this leadership is not only adapting but actually steering the digital transformation in retail.
In today’s world of retail that is continuously evolving and reinventing itself, it is transformational leaders like Oddy who are setting the course for an exciting future ahead. They’re not just keeping up with change; they’re making change happen.
Laissez-faire Leadership
Laissez-faire leaders adopt a hands-off approach, trusting their employees to make their own decisions. According to research, a leadership style literally called “let it happen” is positively linked to conflict avoidance. This means that managers may not step in even if they need to. In retail settings, this can lead to lasting tensions, misaligned staff, and gaps in teamwork, all of which hurt the performance of the store.
Impact on employees:
Given that this style relies on self-sufficiency, it’s best for experienced teams but can demotivate less secure staff who need guidance. In retail settings, where customer touchpoints are fundamental, this absence of managerial supervision can lead to different levels of product knowledge, delayed response times, and inconsistent service experience. People who do well with a structure often need to be pointed in the right direction to meet what customers want.
Impact on customers:
Service performance can be inconsistent as it relies on the abilities of individual employees.
Example:
Warren Buffett’s decentralised management at Berkshire Hathaway spurs innovation but means that the company’s retail leaders rely on employees to take the initiative in maintaining a high level of customer service.
Autonomy allows store managers and employees to make localised decisions but can puts tremendous pressure on individuals to uphold service standards while not being directly managed. This can cause inconsistency in employee motivation or unclear expectations, which can then translate into inconsistency in customer experience.
Although laissez-faire leadership encourages autonomy and has its benefits, participative managers should be available to help when required.
Transactional Leadership
Transactional leadership describes a focus on structure and rewards and that employees hit specific performance targets.
Impact on employees:
This leadership style can provide clarity and consistency, but it can stifle creativity and long-term engagement. High-performance bonuses and staff discounts can boost motivation in the short term, but a strict focus on goals may make employees less satisfied with their jobs in the long run and lessen their sense of independence.
Impact on customers:
Customers get assured service quality but may lack personalised experiences. In a store, this type of leadership sets strict sales goals and standard procedures, which makes sure that operations run smoothly but doesn’t leave much room for change. Because workers want to be efficient and meet sales goals, interactions may feel more like transactions than personal ones.
Example:
Transactional leadership is used well by B&M European Value Retail, where a clear target is set with respect to sales and frameworks to reward achievement are in place (e.g., performance bonuses in the retail sector, staff discounts such as a 10% in-store discount).
Additionally, some staff members have reported that they promptly address underperformance, which aligns with the principles of transactional leadership.
Though this methodology guarantees efficiency, it could suppress innovation in interacting with customers.
Democratic leadership
Democratic leaders engage their peers in decision-making, which builds collaboration and trust.
Impact on employees:
Employees feel valued and empowered, resulting in greater engagement levels. When workers have a say in how the company is run, they feel more connected to its success, which makes them more motivated and fulfilled at work.
Impact on customers:
Employees who are engaged will often go above and beyond in delivering stellar service because they feel a sense of ownership for company policies. Employees who feel like they own their work are more likely to take the initiative, solve problems before they happen, and give customers a more personalised experience.
Example:
The John Lewis Partnership has long stood out as a model of democratic leadership style in UK retail. As an employee-owned business, John Lewis enables its staff — or “partners,” as they are referred to — to consult on governance matters. When workers have a say in decisions that affect the company, they are more committed to providing excellent service and keeping customers happy.
The people-centric nature of this model has led to high levels of employee satisfaction and excellent standards of customer service care. On the other hand, democratic leadership can take a lot of time, complicate decision-making in times of trouble, and not work very well when team members lack the right skills or don’t want to be involved in decision-making.
Why transformational leadership stands out
Despite the pros and cons of each of the four styles, transformational leadership is best suited as a choice for modern challenges in retail, such as digital transformation and new customer requirements.
Transformational leaders are:
- Creative and inspire creativity in others. Employees think outside the box in whatever they do.
- Quick learners. They are prone to change. This is one of the best qualities for a retail leader, especially in a constantly evolving retail market.
- Developers or gurus. They focus on the employee’s potential growth.
This type of leader will motivate employees to surprise consumers and do their best. An example of this type of leader is Ann Steer at Freemans. She did the job of digitally transforming offers; through the introduction of a new customer loyalty programme, Freemans has increased its customer base by 65% during the pandemic.
Final thoughts
Leadership style has a significant impact on employee engagement and customer satisfaction in the people-focused retail environment.
Although transactional or laissez-faire leadership may be appropriate for particular situations, transformational leadership was the most effective in the pursuit of innovation and change, which are essential to successful competition in the retail market.
In this light, retailers must realise that great leaders don’t follow a set script but rather adapt their actions to meet the needs of their teams and the goals of their organisations.
Retail can manage an engaged workforce and provide outstanding customer service when it promotes transformational techniques and flexibility.
Considering that retailers are increasingly utilising AI-driven solutions to improve their customer service and employee management, transformational leaders are in the best position to handle these changes.
Such leaders are capable of motivating people to create, adapting them to any innovation, and properly utilising technology without abusing the necessity for human skill, which is still crucial in retail.
By assuring AI is an instrument for improvement rather than a replacement, a transformational leader can lead an organisation towards a future where the technology and human minds are optimally aligned to supply their customers with outstanding experiences.
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