Leadership Styles, SME Size and Organizational Performance of Small and Medium Sized Enterprises in Mombasa County, Kenya

Abstract

Performance is a reflection of productivity of members of an enterprise measured in terms of revenue, profit, growth, development and expansion of an organization. The main objective of this study was to evaluate the effects of leadership styles on organizational performance in small and medium enterprises in Mombasa County, Kenya. The study was guided by the following objectives; to investigate the effects of autocratic leadership style, transactional leadership style, bureaucratic leadership style and laissez-faire leadership style on organizational performance in small and medium enterprises in Mombasa County, Kenya. This study used the contingency leadership theory, transformational leadership theory, behavioural theory and chasm theory of growth. Explanatory research design was most appropriate for its ability in developing an explanation of a causal relationship between independent and dependent variables. The target population of this study was 374 entrepreneurs operating within in Mombasa County, which included Catering and accommodation, General trade, Wholesalers and retailers, Professionals, financial and Technical services. Yamane’s formula was applied to generate a sample size of 193 SMEs. Primary data was collected by using structured questionnaires. The structured questionnaire had two parts. Part one covered the general information of the respondents while part two covered objective variables and dependent variables questions. The questions in part two were designed using a 5 point Likert scale ranging (1 to 5). The research instrument was pilot tested in 25 SMEs across the county. Content validity was tested by the expert judgment of the supervisors. This study used Cronbach’s coefficient alpha to test the internal consistency of the data measurement instrument. The data collected was analyzed using Statistical Package for the Social Sciences (SPSS) version 21. Correlation results revealed that Autocratic Leadership Style (r=.446, p=.001), Transaction Leadership Style (r=.692, p=.000), Bureaucratic Leadership Style (r=.320, p=.000), and Laissez faire Leadership Style (r=.566, p=.000) had positive significant correlation with organizational Performance. Regression results revealed that autocratic leadership style (β =.236, p=.051), transaction leadership style (β=.255, p=.011), laissez-faire leadership style (β =.267, p=.019) had positive significant influence on organizational performance while bureaucratic (β =.272, p=.001) had a positive but insignificant relationship in organizational performance. Autocratic (β=.318, p=.001), Laissez faire (β=.153, p=.043) interaction term is positive and significant, whereas Transaction (β=.115, p=.355) Bureaucratic (β=.025, p=.743) relation terms is positive but insignificant, insignificant suggesting that SME size does not significantly moderate the positive relationship between Autocratic, Transaction ,Bureaucratic leadership style and organizational Performance. R 2 was 61.5 % and ANOVA (F 34.060 p=.000) was significant. The study concluded that autocratic leadership style, transaction leadership Style, bureaucratic leadership style and laissez-faire leadership style influences organizational performance. The study recommended that managers should implement autocratic leadership style, transaction leadership style, bureaucratic leadership style and laissez-faire leadership style to improve on Organizational Performance.