Why is leadership vital in SMEs?

This article was written by Dr. Charlotte Meierdirk, Principal Lecturer at the University of Brighton. 

Leading an SME (small to medium-sized enterprise) can differ in many ways from managing a large company. Generally, the owner of the business is also the leader, and they often multitask, taking on many different roles within the business. Leadership is just one of them. For example, the owner of a bakery might be baking at 5 am, handling suppliers at lunchtime, and training a new employee in the afternoon. 

Just because leadership is not a defined job, that does not make it any less important. In fact, research shows that good leadership is paramount to an SME’s survival. A competent leader increases productivity and improves the performance of the business. Strong SME leaders often have strong entrepreneurial skills, and entrepreneurial leadership is a concept which posits that these skills are crucial to growing an SME. The main skills are the ability to foster innovation and creativity, to motivate others, and to think analytically. For instance, the owner of a small independent bookshop who launches a subscription box, a children’s story hour, and an online ordering service is using entrepreneurial leadership to compete with larger retailers. 

An SME leader also needs to think and act strategically in order to grow. A small business will have fewer employees than a large corporation, but the “employee voice” is still important, if not more so. In fact, an SME will survive longer if its employees are listened to. A café assistant who notices that customers keep asking for oat milk, or that the queue builds up at 8.30am, often spots problems and opportunities long before the owner does. No business leader has all the answers, so decision-making can be shared and employees can be heard. 

The leader will set the overall vision of the business, but employees can contribute to that vision and to the strategic plan. Sharing the process in this way gets “buy-in” from employees, and they will take “ownership” of meeting the goals.  

1. Communicate and share your vision and goals for the business clearly.  

2. Empower your employees by allowing them to contribute their ideas and thoughts. You can ask for ideas in a weekly meeting. 

3. Motivate your employees by recognising their contributions and being supportive. You could thank an employee specifically for how they handled a difficult customer. 

4. Improve your emotional intelligence by monitoring your feelings and behaviour, and build trust so that your employees feel psychologically safe.  

5. Lead by example (“practise what you preach”). Speak to your employees, and behave around them, as you want them to behave. They will look to you for guidance, so your standards set what is acceptable and what is not.  

Many theorists, such as Stogdill, believed that great leaders were born with particular traits. Although there may be some truth in this, there is growing evidence that leadership skills can be learnt. So, although you may not instinctively want to listen to your employees, you can learn the techniques that make them feel listened to. Similarly, you may not know how to create a strategy and write goals, but you can learn how through courses like Help to Grow: Management.  

Reflection is an important part of running a business. As an SME leader, you can reflect on what you have done well and what could be developed further. You can also ask for feedback, both formally and informally. A formal approach might be a short anonymous employee survey once a year, while an informal one might be asking a trusted employee, “What’s one thing I could do differently?” Sometimes a chat with some of your employees at the local café will give you the feedback you need! 

If you’re looking to get honest feedback from other business leaders, or want to learn new leadership skills, the Help to Grow: Management Course can help. Find out more about the course here.