Introduction
1.1 Background of the study
The formula for good management of Small and Medium Scale Enterprises (SMEs) is simple enough to develop a sound plan, design appropriate organizational structure, to implement the plans and monitoring the performance of the business. But these activities are easier said than done. According to Lawal, Kio and Adebayo (2000), good leadership is a pre-requisite for effective accomplishment of these tasks. However, they opined that an entrepreneur has different leadership roles to play; he is the chief risk bearer, chief administrator and strategy implementer, crises solver, figure head, spokes person, policy maker.
Stoner and Gilbert (2001), stressed that an understanding of leadership is important to small and medium scale enterprises (SMEs) because leadership binds subordinates to work together and stimulate employees motivation. Also, leadership assists in management development and training, effective leadership provides the building block for organizational performance. It is absolutely essential to the survival and growth of every organization.
Baumback (1992) cited in Lawal, et al (2000:97-120) pointed out that sometimes, an entrepreneur in most cases who is the leader in SMEs needs to be authoritarian in style, for example takes all his decisions, issues instructions and expects others to carry them out without question or debate, and sometimes, a participative style, (where the entrepreneur makes decision on the basis of consensus or agreement) works best. However, leadership roles of small and medium scale enterprises (SMEs) may be highly visible and extensive, time committed, while at times, the leadership roles may be less demanding and require a brief ceremonial performance with the details delegated to subordinates.
Leadership styles have diverse effects on variables such as flexibility, standards, rewards, clarity and commitment and in some cases on organizational climates as the behaviour of the leader produce motivation mechanisms which have effect on the conduct of individual’s performance in the organization, (Shamir, et al. 2006). Thus, the essence of leadership is followership. Effective leadership is the extent to which a leader constantly and progressively leads and directs his or her followers, towards organizational performance.
However, swift changes in the business environment, organizational structures, technology and life styles are introducing a considerable rethinking of leadership development. Leadership concerns the ability to influence the behaviour of others to move accord with the desire of the leader and pursuit of goals (Low and Jiang, 2004). Modern businesses face bigger challenges due to rapidly changing world. These challenges comprise socio- cultural, economic, technological legal and regulatory, environmental and ethical issues (Toor, et al. 2007).
In several instances, people use the term “manager” and “leader” in the same context. Therefore, a clear difference should be recognized between leadership and management and more specifically leaders and
managers. Mowson (2001) believes that leaders may not excel at management and what is more often the case, managers do not necessarily make great leaders.
Leadership, as Kotler (1990) argues, is more about establishing direction, aligning people, motivating and inspiring others. Leadership is concerned with long-term outcomes and future goals of the organization. Leadership is more about people and less about tasks. Leaders often put many of the same skills and interest to good use but often to better effect because they focus on areas such as discovering solutions (not problems) managing changing conditions, excelling in spite of organizational structures, and inspiring personnel to achieve their goals.
As Nwachukwu (1988) put it, a leader is the most influential person in an organization who provides direction, guides group activities and ensures that group objectives are attained. Leaders act to help a group achieve objectives with the maximum application of its capabilities. They do not stand behind group to push and to produce; they place themselves before the group as they facilitate progress and inspire the group to accomplish organizational goals (Koontz et al, 1980).
The importance of a leader in an organization then cannot be undermined. As Iyoha and Ailoje (1996) pointed out, without leadership, an organization is but a module of men than machines. It is the human factors which binds a group together and motivate it towards goals. Therefore, the efficacy of any organization thus lies on the leader.
Leadership style plays an important role in shaping the behaviour and attitude of the members of an organization. In recent years, the study of leadership has drawn more attention due to its role in the failure or success of an organization. Over the years, scholars and researchers have not been unanimous on the most appropriate style of leadership in organization and these has led to the formulation of several theories that could bring about organizational efficiency and effectiveness.
Though some scholars have argued that no particular leadership style is the best, the level of participation of workers in the decisions that affect them or the organization as a whole will spur them to better commitment to the realization of set goals. Comparatively, participation provides outstanding long term results which are by no means far better than effective short term results.
1.2 Statement of the Problem
Leadership style of management is a pre-requisite for effective accomplishment in organizations. The leadership styles determine the level of subordinate participation in decision making and the way an organization is run administratively. Organizations which are low in efficiency tend to have leaders who are highly bossy. Decision making is centered on them alone. Participation in decision making creates an individual’s mental and emotional involvement in a group situation which encourages him or her to contribute to group goals and share responsibility for them (Chruden and Sherman, 1975).
The problem with most small and medium scale enterprises (SMEs) is that the leaders are not democratic in their relationship with their subordinate. In fact, leaders in most small and medium enterprises are usually authoritarian in style. They dictate the tune and have the administration of the organization centered on them. The need for subordinate to participate in decision making is not a passing fancy. It is rooted deep in the culture of free men around the world and it is no doubt the basic drive in men.
Another problem affecting leadership style in small and medium scale enterprises is the competence of the leaders so appointed. In most cases, some of their appointments lack merit. What becomes of such organization is having competent leaders who lack the abilities or capacities to use the appropriate leadership style to lead the members to attain set goals or objectives. Thus, what are usually found in some of these organizations are “round pegs in a square hole” rather than “round pegs in round holes”. Once this situation arises, there will be utterances in the way such leaders behave or administers the organization and these will in-turn affect the goals of the organization.
1.3 Research Questions
The following research questions were asked in this study:
- To what extent is the effects of leadership style and performance of employees in SMEs?
- To what extent is the relationship between leadership style and employees’ morale in SMEs?
- To what extent does leadership style enhance employees’ efficiency in SMEs?
- Is there a relationship between the managerial leadership style and employees’ commitment in small and medium enterprises in Nigeria?
- To what extent does autocratic style of leadership affect Small and Medium Enterprises in Nigeria?
1.4 Research Hypotheses
The study will geared towards testing the following hypotheses.
- There is no a significant relationship between leadership style and organizational performance.
- There is no significant relationship between Good leadership style determinant, efficiency and performance in SMEs.
- There is no significant relationship between Leadership style and motivation of employees in SMEs.
- There is no significant relationship between autocratic style of leadership on Small and Medium Enterprises in Nigeria.
- There is no significant relationship between the managerial leadership style and employees’ commitment in small and medium enterprises in Nigeria
1.5 Objectives of the Study
The main objective is to examine the effect of leadership style on the performance of small medium scale enterprises; other specific objectives include:
- To examine the effect of leadership style on employees morale in small medium enterprises in Nigeria.
- To examine the effect of leadership style on employees efficiency in small medium enterprises in Nigeria.
- To examine the impact of autocratic leadership style on small and medium enterprises in Nigeria.
- To examine the relationship between the managers’ leadership style and employees commitment in small and medium enterprises in Nigeria.
