Leadership is an important function in small business. Leadership and management represent two completely different business concepts. Leadership is commonly defined as establishing a clear vision, communicating the vision with others and resolving the conflicts between various individuals who are responsible for completing the company’s vision. Management is the organization and coordination of various economic resources in a business. Leadership can have a significant impact on an organization’s performance.
Setting the Tone
Small business owners usually set the leadership tone for their organization. Owners accomplish this by developing a mission or set of values by which they operate their company. This creates a minimum level of acceptance for employee behavior. Business owners often create company policies or guidelines from the company’s mission or values. Policies and guidelines also give business owners the ability to remove under-performing employees from the company.
Three types of leadership are common in business: authoritarian, democratic and laissez-faire. Each type of leadership impacts organizational performance differently. Authoritarian leadership is commanding and sets clear expectations for employees in the organizational. Democratic leadership encourages feedback and input from managers or employees regarding organizational performance. Laissez-faire is a hands-off approach, where managers and employees work according to their own preference and schedule. This leadership style can lead to poor motivation and work practices.
Successful organizational performance relies on the proper behavior from managers and employees. Leadership can be an evolutionary process in companies. Business owners who provide leadership can transform an employee from a worker completing tasks to a valuable team member. Leadership skills can help change an employee’s mentality by instilling an ownership mindset. Employees who believe they have a direct owner-style relationship with the organization often find ways to improve their attitude and productivity.
Leadership can help a business maintain singular focus on its operations. Larger business organizations can suffer from too many individuals attempting to make business decisions. Business owners can use leadership skills to get managers and employees on the same page and refocus on the original goal. Leadership skills can also help correct poor business practices or internal conflicts between employees.
Leadership can have a negative impact on organizational performance. Leaders who are overly dominant or become obsessed with achieving goals can overlook various details in the business organization. Managers and employees may also be less willing to help dominant or extremely critical leaders with accomplishing goals and objectives. Dominating leadership creates difficult business relationships. Other companies and business owners avoid dominant leaders who consistently request financial benefits.