By Timi Olubiyi, PhD
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 bring the country rapid industrialization and non-oil industrial export gains. All that is needed is more structure, framework, support and participation from government, entrepreneurs, politicians, policy makers and academics.
However, what is painful is that despite this potential and opportunity, small businesses across the country are failing at an alarming rate. Clearly, the consequences of the COVID-19 pandemic, the cost of fuel, inflation and relentless insecurity have continued to hurt these businesses.
In my experience working with small and medium-sized enterprises (SMEs), small business owners are multifunctional, and although they are often limited by day-to-day operational demands, it is important to encourage them with ways to help their businesses be more sustainable.
My goal is to continue to target the sector with knowledge of best practices in my own space. Therefore, this article is primarily aimed at addressing the leadership shortcomings and emphasizing that leadership is essential and can be a great indicator of the success or failure of an organization in the country.
Regardless of the size of a small or micro business, the owner-manager or operator adopts a certain quality of leadership to direct or govern the business. This is known as the entrepreneur’s style of leadership, although effective leadership is lacking in many of these businesses.
As simple as it sounds, leadership style or qualities have a big impact on decision-making and business results in any scenario, they also have a significant impact on employees.
To mention, it is essential to note that true leadership in any business or organization is informed by the combination and use of power and authority. While power is the ability to influence people to achieve goals, authority refers to the legal rights that flow from someone holding a certain position or function. The main problem in small businesses is the unethical behavior around power and its distribution.
Most small business operators and entrepreneurs have absolute control over the entire business and workplace decisions and enjoy imposing orders on staff and management when appropriate.
More so, in majority of businesses especially in Lagos State, owner-managers, operators and contractors continue to instill fear in their staff by threatening them with consequences such as dismissal, ignorance or the withholding of wages, even the threat of aggression, etc. on.
Many workers in these small businesses, even if they do not openly admit it, carry some anxiety in their workplace because of this problem. Which usually weighs them down and also affects their morale, motivation, and short- and long-term performance in the company.
When operators/owner-managers run or manage a business, they apply the combination of their personality, life experiences, communication style, decision-making preferences, level of emotional intelligence , their education and their global perspective to how the business is run. These attributes are generally those that inform the style of leadership (power) available in the company, whether it is nano, micro, small or medium. So the question is, does leadership style affect small businesses? The answer is yes, the leadership style yes. Staff are never involved in the decision-making process; they are expected to follow the decisions, choices and orders of the leader because the leaders have enormous influence over them. These business leaders bring all decisions and orders to subordinates; whose responsibilities are primarily to align.
It is therefore fair to conclude based on contextual observations and an obvious perception that surrounding small businesses generally have an autocratic leadership style, characterized by an authoritarian and forceful work environment, and imposing commands in business operations. daily.
Note that in a large company there are several hierarchical levels, so the conduct of a CEO does not immediately affect the employees, but in small companies the owner has direct influence over his 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 being the environment, characterized by work issues, where individuals need to be pushed to do the right thing. While this is a valid reason, most of these companies are unaware of the impact an autocratic leadership style can have on company performance and staff morale.
Good employee relations have been noted as one of the key success factors for the company. Therefore, being flexible in displaying and combining a variety of leadership styles within a company by managers can also improve small business performance, instead of sticking to the prevalent autocratic leadership style that is prevalent. . For example, different leadership styles can be adapted to different scenarios in the business for results and deliverables.
In some cases, leaders may adopt the democratic leadership style, also sometimes called participatory, which relies on consensus through the participation of staff and team members to achieve a goal or make a decision within the company. It is moderately the opposite of the autocratic and helpful leadership style in a structured business entity where the staff are educated and rational. Employees feel motivated to participate in decision-making and this can improve their performance.
Rather than extracting staff contributions from a participatory leadership style and factoring them into decision-making, a laissez-faire leader willingly submits to team members in decision-making. This form of leadership style is the opposite extreme of autocratic leadership and is equally useful. A laissez-faire style of leadership can be a very successful and effective method of managing staff or teams of very talented and highly specialized people within the company. Initiative and creativity behaviors have been shown to be achieved by staff with this form of leadership style in companies, whether small, medium or even large companies. Because with sufficient professional experience, a person learns a variety of things that eventually reflect in behavior and character. Also, it is believed that the more experience one has, the smarter and wiser one becomes. The laissez-faire style of leadership gives that platform, it doesn’t have to be a predominantly autocratic style.
For micro-entrepreneurs with a staff or two, the coercive leadership style that typically expects instant compliance with instructions and orders may be appropriate due to the lack of structure and the fact that uneducated employees are hired for tasks. This method is particularly effective in times of crisis, in other companies such as during a major emergency or a rowdy session.
Although similar to the autocratic leadership style, it differs somewhat but is often used interchangeably as 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 transactional leadership style transformational leadership. A transactional style of leadership is implemented, for rewards and incentives for specific employee results, simply on the basis of agreement. Next comes the style of leadership that transforms called transformational leadership where collective, collaborative or participatory approaches to leadership are all taken at once.
While there is no ideal leadership style for any business, the key is that there is a leadership style that is suitable for every business scenario or situation. Therefore, entrepreneurs need to understand this and trade in to apply the appropriate style to each situation. This is essential to achieve the best business results, achieve best practices and promote ethical behaviors within the company. If this approach is adopted by many companies in difficulty, they can still have hope. Good luck!
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Dr. Timi Olubiyi is an expert in entrepreneurship and business management, holding a PhD in Business Administration from Babcock University in Nigeria. He is a prolific investment coach, a seasoned academic, a Chartered Fellow of the Chartered Institute for Securities and Investment (CISI), and a registered capital market trader with the Securities and Exchange Commission (SEC). He can be contacted on the Twitter account @drtimiolubiyi and by e-mail: [email protected], for all questions, reactions and comments