Small businesses: Leadership style for turbulent times
Many people are unaware that the small business sector in Nigeria can have a significant impact on both the environment and the economy. The sector could also provide the country with rapid industrialisation and non-oil industrial export gains. All that is required is more structure, framework, support and participation from government, entrepreneurs, politicians, policymakers, and academics. However, what is painful is that, despite this potential and opportunities, the country’s small businesses are failing at an alarming rate. Clearly, the COVID-19 pandemic consequences, fuel cost, inflation and incessant insecurity have continued to harm these businesses.
From my experience working with Small and Medium-sized Enterprises (SMEs), small business owners are multifunctional, and while they are often constrained by day-to-day operational demands, it is important to encourage them with ways to help their businesses to be more sustainable.
No matter how small or micro a business is, the owner-manager or operator adopts a certain leadership quality to lead or govern the business. As simple as it sounds, leadership style or qualities impact strongly on decision-making and the business outcomes in any scenario, it equally impacts employees significantly.
It is vital to note that true leadership in any business or organisation is informed via the combination and use of power and authority. While power is the capacity to influence people to accomplish goals, authority refers to the legal rights that follow a person who holds a certain position or office. What gives issues in small businesses majorly are the unethical behaviour around power and its dispensation.
Most small business operators and entrepreneurs exhibit absolute control over all business, workplace decisions and enjoy imposing commands on staff and the managements, if any. More so, in the majority of the businesses particularly in Lagos State, owner-managers, operators and entrepreneurs continue to instil fear in their staff by threatening them with consequences such as being fired, ignored or withholding salary, or even threat of assaults and so on. Many workers in these small businesses, although may not acknowledge it openly, carry some measure of worry with them into the workplace due to this issue. Which usually weighs them down and also affects their morale, motivation and performance in the short to long term in the business.
When operators/owner-managers lead or run a business they apply the combination of their personality, life experiences, communication style, decision-making preference, level of emotional intelligence, education and overall perspective to the way the business is run. These attributes are typically what inform the leadership style(power) available in the business, whether it is nano, micro, small, or medium-sized. So, the question is does leadership style affect small businesses? The answer is yes, leadership style does. Staff are never involved in the decision-making process; they are expected to follow the leader’s decisions, choices and orders because the leaders have a huge amount of influence over them. These business leaders bring all the decisions and commands to the subordinates; whose responsibilities are mainly to align.
So, it is fair to conclude based on context observations and obvious perception that small businesses around are typically run on autocratic leadership styles, characterised by the authoritative and forceful work environment, and imposing commands in the daily business operations. Note that with a large enterprise, there are several hierarchical levels, so the conduct of a CEO does not immediately affect the employees, however in small businesses the owner has a direct influence on their staff and decisions are only goal-oriented. Good relationships with the employees have been noted as one of the key factors for business success. Being flexible by displaying and combining a variety of leadership styles within a business by leaders can also improve the performance of small businesses, instead of sticking to the predominant autocratic leadership style that is widespread. Different leadership styles can be adapted for different scenarios in the business for outcomes and deliverables.
In some cases, leaders can adopt the democratic leadership style, which builds on consensus through the participation of staff and team members to achieve a goal or make a decision within the business. It is useful in a structured business entity where staff are educated and rational. Employees feel motivated to participate in decision-making and that can enhance their performance. Rather than extracting inputs from staff from a participative leadership style and then considering it when making a decision, a laissezfaire leader willingly submits to team members in making decisions. This form of leadership style is the extreme opposite of autocratic leadership and is equally useful.
A laissez-faire leadership style may be a very fruitful and effective method to manage staff or team made of a highly talented, highly specialised individuals within the business. It has been captured that initiative and creativity behaviour are achieved by staff with this form of leadership style in businesses be it small medium or even large firms.
For micro-entrepreneurs with a staff or two the coercive leadership style, which generally expects instant compliance with instruction and commands, may be suitable because of the lack of structure and that not too educated employees are engaged for duties. This method is especially effective in times of crisis. While it is similar to the autocratic leadership style, it differs somewhat but is oftentimes used interchangeably since both require the use of force.
Though there is no ideal leadership style for a business, the key is that there is a leadership style suitable for each scenario or situation in the business. Therefore, entrepreneurs must understand this and swap to apply the appropriate style to each situation. This is essential to obtain the best business outcomes, achieve best practices and promote ethical behaviour within the business. If this approach is adopted by many of the struggling businesses, they can still be hopeful. Good luck!
Olubiyi, an entrepreneurship and business management expert, can be reached via drtimiolubiyi@gmail.com