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. Nevertheless, 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. My focus is to continue to target the sector with knowledge of best practices in my own space. Therefore, this piece is primarily to address leadership deficiencies and stress that leadership is critical and can be a great indicator of an organisation’s success or failure in the country. 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. This is what is referred to as the leadership style that the business leader has, even though effective leadership is lacking in many of these businesses. 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.

To mention, 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 behaviours 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 management if any. More so, in the majority of the businesses particularly in Lagos state, owner-managers, operators and entrepreneurs continue to instill 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, they 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 style, 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. Other forms of leadership styles are available but are underutilized for a variety of reasons, the most imperative is the environment, characterized by labour issues, where individuals must be pushed to do the correct thing. While this is a valid reason, largely most of these businesses are unaware of the impact an autocratic leadership style can have on business performance and staff morale. 

Good relationships with the employees have been noted as one of the key factors for business success. Consequently, 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. For instance, 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, also sometimes known as participative, 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 moderately the opposite of the autocratic leadership style and 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 laissez-faire 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 specialized individuals within the business. It has been captured that initiative and creativity behaviours are achieved by staff with this form of leadership style in businesses be it small medium or even large firms. Because with sufficient job experience, a person learns a variety of things that eventually reflects in behaviour and character. Furthermore, it is believed that the more experience one has, the smarter and wiser one becomes. The Laissez-faire leadership style gives this platform, it does not have to be an autocratic style predominantly.

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, in other businesses like during a major emergency or rowdy session. While it is similar to the autocratic leadership style, it differs somewhat but is oftentimes used interchangeably since both require the use of force. Other forms of leadership available that entrepreneurs can use to support the autocratic leadership style if the business is structured and formal businesses are the transactional leadership style transformational leadership. Transactional leadership style is set up, for rewards and incentives for specific outcomes from employees, simply agreement basis. Next, is the leadership style that transforms called the transformational leadership where the collective, collaborative, or participative approaches to leadership are all taken at the same time. 

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 behaviours within the business. If this approach is adopted by many of the struggling businesses, they can still be hopeful. Good luck!

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Dr. Timi Olubiyi, an entrepreneurship & business management expert with a Ph.D. in Business Administration from Babcock University Nigeria. A prolific investment coach, seasoned scholar, chartered member of the Chartered Institute for Securities & Investment (CISI), and Securities & Exchange Commission (SEC) registered capital market operator. He can be reached on the Twitter handle @drtimiolubiyi and via email: [email protected], for any questions, reactions, and comments.