1. Running head: SMALL BUSINESS LEADERSHIP 1
Small Business Leadership:
The Issues Regarding Leaderships Effectiveness
Robert Haskins
MGT 380: Leadership for Organizations
Bill Davis
18 February 2013

2. SMALL BUSINESS LEADERSHIP 2
Small Business Leadership:
The Issues Regarding Leaderships Effectiveness
Introduction
A large component to the U.S. economy is the result of successful small businesses.
Proof is found in the facts that small business make up 98.5 percent of all businesses, 75.8
percent of the nation’s newest jobs, and 52 percent of the private sector workforce (Howard,
2006, p. 73). Thus, the implications of poor leadership can, and does, have consequences on the
success rate of small business. This report will examine a few issues that leaders of small
business will need to consider that their counterpart from big business do not.
A leader will need to examine various theories to establish a style that fits with the
business and its employees. Examination of the characteristics and personality traits of an
effective team leader from a small business will be explored. Leadership theories can be
employed by any leader at any level, but advantages and disadvantageous exist between small
business and big business. Leaders will eventually use their power and influence “to involve and
mobilize…followers to accept and enact vision, mission, and strategies” (Weiss, 2011, p. 156).
An examination of how receptive the followers are to the power and influence of the leader will
illustrate the effectiveness and solutions to ineffectiveness. Leadership support for the vision,
mission, and the strategy to which to carry them out ought not to wavier no matter the size of the
business. However, this report will examine if there are different approaches between small and
big business in implementing the core values of the organization. Deliberation of the role and
effectiveness of transformational and transactional leadership in small business will be assessed
in the report. Another instance of the similarities between small and big business is the
management of change. Nevertheless, the implementation of change must be managed

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differently. A small business leader has greater impact on their organizations than do leaders in
big business.
Characteristics and Personality Traits of an Effective Team Leader
Effective team leadership has become a requirement with the emergence of global
competition and rapid changes to the external environment. Leaders will need to develop
personality traits and characteristics that nourish the team to recognize the qualities of effective
teams. To meet the “Performance goals and deadlines in an efficient manner” (Weiss, 2011, p.
193), leaders will instill key attributes of effective teams including, commitment to goals, a clear
group process, collaboration among the team, competence and satisfaction of the members, and
team viability (Weiss, 2011, pp. 193-194).
The leader that promotes the qualities of effective teams will need to hone their own
characteristics and personality traits because leaders in small business often will be at a
disadvantage from those in big business (Carland & Carland, 2012, p. 72). The leader from a
small business will realize that they may be the leader of many departments from the same room,
wearing a multitude of hats. These leaders will need to be comfortable at juggling multiple tasks
that may strain resources including time to attend to other things. Time constraints impact the
small business leader and restrict them from giving and taking feedback, an important task for
the small business leader (Carland & Carland, 2012, p. 76). Of course, the leader from big
business will need to be good at building teams and motivating the members of the team to work
collaboratively with cohesiveness, but the small business leader will often become more of a
team member than a leader or team builder. The characteristics and personality traits of leaders
from small and big business naturally have similar properties but the small business leader will
need to shape those attributes to accommodate the added pressures that come with the business.

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Moreover, small business leaders often are entrepreneurial leaders as they “Organize and initiate
new, innovative ventures and business practices, assuming much of the responsibility and risk in
hope of maximum reward” (Weiss, 2011, p. 25).
Leadership Theories
Leadership styles are developed when a person understands their own characteristics and
personality traits. It is interesting to think that the style of leadership should fundamentally fit
with the organization and, thus, the leader will develop their leadership characteristics according
to the optimal fit for the organization. Many small business leaders possess the entrepreneurial
leadership style because of their ability to assume responsibility with the hope to reap rewards
(Weiss, 2011, p. 25), a trait some big business leaders have but in a different context. Those
leaders in big business with the entrepreneurial spirit are called intrapreneurs because they take
“Risks to create new solutions to develop, extend, and change products and services for
competitive advantage” (Weiss, 2011, p. 25). However, the discussion of the leadership style that
benefits small business more will include a Hersey and Blanchard’s Situational Approach that
includes both task-oriented and people-oriented leaders.
It is only prudent to examine the behavior of leaders to understand the styles that exist to
improve the leader’s capabilities of managing people. The University of Michigan and Ohio
State University research into leaders behavior “Eventually pinpointed two types of behavior in
leaders: Leaders were either task oriented, focusing on achieving goals and organization, or
people oriented, focusing on followers and interpersonal relationships” (Weiss, 2011, p. 27).
Although scholars suggest that “Leaders are either more concerned with people or more
concerned with tasks; they cannot be both” (Weiss, 2011, p. 28), evidence proves that small
business leaders will need to perfect both behaviors to influence followers to achieve

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organizational goals. This report illustrates the behavior of the leader and, eventually, the
development of the leadership grid based on a leader’s behavior because of the evolution of
leadership style that conforms to the situation, the Hersey and Blanchard’s Situational Approach.
The Hersey and Blanchard’s Situational Approach is ideal for small business because
of its emphasis on follower and task characteristics (Weiss, 2011, p. 32). The closeness that
leaders in small business have with their followers will naturally compel leaders to manage them
according to their capabilities and their commitment to the tasks (Weiss, 2011, p. 32). The leader
will use the style that best fits the development level of the follower with a directive style, or
task-oriented, and a supportive style, or people-oriented (Weiss, 2011, p. 34). These two styles
(directive and supportive) have varying qualities that are then broken down into four elements
that best match the needs of the follower and the task. These four elements are; directing,
coaching, supporting, and delegating.
An example of how Hersey and Blanchard’s Situational Approach and the four elements
that a leader chooses to fit the follower and the task is relevant in either a small or big business.
However, the impact a leader has in the small business is greater because of the intimacy the
leader and follower share. For instance, the directing style will be necessary when the follower is
unwilling, confused, or lack the skills to complete the task (Weiss, 2011, p. 34). This style will
be task-oriented without concern of the leader to the follower and appropriate for entry-level
work. The coaching style works well with followers that are willing and enthusiastic about the
task but lack the skills to complete the task (Lanier, 2012). Followers that receive the coaching
style from the leader will often be interns or legitimately excited about a new task. The
supportive style “Offers support by praising, encouraging, and giving and receiving feedback as
needed” (Weiss, 2011, p. 34). These followers are skilled in the task but lack the instruction or

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need guidance on the task. Leaders will use this style on skilled manufacturers that are asked to
produce something they are not familiar with. The last style, delegating, is often employed on
people that are highly skilled and willing to complete the task. “The leader empowers followers
and teams to take responsibility for tasks depending on their judgment and initiative” (Weiss,
2011, p. 34). The delegating style is effective on skilled workers that know the requirements of
the task and have the freedom to create different outcomes. “Situational approach attributes more
control to both leaders and followers, empowering them to respond to different situations rather
than locking them into specific roles or styles” (Weiss, 2011, p. 35). Thus, situational approach
conforms to the leaders and followers necessity for more closeness.
Power and Influence of Leaders in Small Businesses
The definition of power and influence is interchangeable, but it is noted that influence
is changing an individual’s or group’s behavior and power is the potential to influence (Weiss,
2011, p. 156). Small business leaders influence over their subordinates simply by spending time
and energy with them. However, to fully understand the how leaders influence their followers,
they will need to learn the sources of power.
The source of power could come from anyone, it does not necessarily need to be from an
authority figure, and the difference is the type of power from the source. It could be “Hard
power”; using coercion or inducement, or “Soft power”; using personal or relational power to
influence followers (Weiss, 2011, p. 158). “The sources of soft power are a leader’s values,
culture, policies, and institutions” (Weiss, 2011, p. 158). As it shows, hard power is often
rejected without the coercion by the source of the power. Soft power is easily accepted because
this type of power plays to the emotions of the follower. For instance, a leader using soft power

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using the tools of power like reward power could influence the follower to complete the task in
return for a reward.
“Two basic principles apply to gaining power through politics: collecting resources and
controlling access points” (Weiss, 2011, p. 161). The collection of resources is an effective tool
at gaining and controlling power because if you’re the only one with all of the cans of beans and
the only can opener on a deserted island, you will have power. However, someone that can
control the access points will have power because they are the only one that knows how to use
the can opener on the same deserted island. “The methods of gaining power can be described by
the acronym NEAR: Individuals can gain power using a network, expertise, access, and
reciprocity” (Weiss, 2011, p. 161).
The acronym NEAR (Network, expertise, access, and reciprocity) lays out the elements
of gaining power for individuals and groups. Networks are powerful tools that use allies to
propel new initiatives and external validation (Weiss, 2011, p. 161). Expertise is a form of power
that an individual will acquire through academia, experience, or correspondence with others that
already have expertise. “Controlling who can access certain people and certain information also
lends power because it produces a dependent relationship” (Weiss, 2011, p. 162). A relationship
built upon the exchange of goods, information, or favors is another form of power and the
consolidation of power (Weiss, 2011, p. 162).
Effectiveness of Transformational and Transactional Leadership in Small Businesses
A primary function of a leader is the ability to influence followers “To achieve common
goals through shared purposes” (Weiss, 2011, p. 2). The evolution of leadership styles and
theories have brought us to new theories that examine the behaviors of the leader and their
capability to influence followers to “Inspire, move, and literally transform followers to achieve

8. SMALL BUSINESS LEADERSHIP 8
organizational goals beyond their self-interests, thus initiating and bringing about positive
change” (Weiss, 2011, pp. 51-52). The transformational leadership style is a relationship
between leaders and followers playing important roles for the organization to realize its goals.
The premise of the transformational style is that it will transform and influence the
follower towards results the followers could not achieve on their own, but the leader will
transform the follower in the process (Weiss, 2011, p. 52). Transformational leaders will need to
have strong moral values that enable them to motivate followers (Weiss, 2011, p. 52); actions
and ideals that can be emulated by the followers. The behaviors that transformational leaders will
need to possess to effectively motivate the followers are idealized influence – also called
charisma – inspirational motivation, intellectual stimulation, and individualized consideration
(Weiss, 2011, p. 54).
The relationship between leader and follower is more intimate in small business and the
behaviors of transformational leadership are more amplified. The leader’s charisma will be on
display because of the intimacy with the follower. Idealized influence is based on trust and the
leader will need to exhibit high moral and ethical standards the follower can relate to (Kendrick,
2011, p. 14). If the example the leader gives has a high moral standard, it creates the drive for
shared goals and visions, it creates the inspirational motivation. For a small business leader,
encouraging the followers to take risks and find ways to quickly improve processes is essential to
stay competitive. Intellectually stimulating the follower will motivate them to become creative
with the limited resources that exist in small business. When a leader recognizes the needs of
their team members, acting as a coach by listening and addressing concerns that they may have,
they are showing individualized consideration (Valdiserri & Wilson, 2010, p. 51). Effective

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small business owners use transformational leadership skills to recognize individual
contributions that enable the small business’s success.
Transactional leadership style has more tangible elements and is satisfied with the
status quo. Weiss (2011) explains how leaders that employ the transactional style “Plan,
schedule, control, and work with subordinates on detailed tasks” (p. 58). Weiss (2011) continues,
“Transactional leadership seeks to maintain stability rather than promoting change within an
organization through regular economic and social exchanges that achieve specific goals for both
the leaders and their followers” (p. 58). This statement broadens the understanding that
transactional leadership is a necessary function that even enhances the transformational style.
When the transactional leadership style is used in conjunction with transformational leadership,
it can complement a leader that is ineffective in some areas of either style. For instance, if the
small business leader is ineffective in improving production numbers, the leader can use
transformational leadership style to motivate the workers. Conversely, the effective transactional
leader could use the transformational style to motivate their workers even further through the
characteristics of a transformational leader.
Leadership Support for Vision, Mission, and Strategy
The small business leader has many advantages when it comes to the development,
support, and sustaining the vision, mission, and strategy. The first step in creating the
mechanisms of obtaining positive organizational outcomes is the development of a vision, or an
organizational goal, the mission of the organization, or what the company stands for, and the
creation of the strategy to implement the plan to achieve the vision. “A strategy is a
comprehensive plan for how an organization will fulfill its purpose and realize its vision”
(Weiss, 2011, p. 141). In small business, strategy creation can be effectively actualized quite

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simply because of the size and scope of the company. The familiarity small business share with
its counterpart is how the associates grasp the strategy.
The role of the leader in the small business’s vision is to help the employees make the
connection with the vision. “The vision statement supports team building by establishing a
common goal and engages individuals at an emotional level” (Weiss, 2011, p. 145). The leader
can help promote the organization’s mission statement by upholding the morality, philosophies,
and principles of the small business to act as the example.
Change Management in Small Businesses
Organizational change occurs when the company attempts to make intentional changes to
the business process, or activities “Including corporate acquisitions, downsizing, expansion, new
strategies, and new infrastructure” (Weiss, 2011, p. 211). These changes are made to help the
organization evolve and counteract on the internal and external forces in the environment. This
report will demonstrate two examples of change in a small business, more specifically, a small
carrier company.
The first example is an attempt to intentionally change a technical issue the small carrier
needs to address. The competitors of the small carrier have found the benefits of the use of GPS
in tracking of loads. The benefits include customers satisfied with knowing exactly the location
of the ordered goods and location of the truck in case of emergency, to name a few. The changes
to the small carrier are minimal as far as installation and maintaining the equipment. However,
the initial cost is a major roadblock.
The second example of intentional changes to the small carrier, which just recently
occurred, is the use of smartphones to deliver the shipping documents to the people responsible
for them. In the past, the professional driver would have to use a very expensive fax machine at

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truck stops to deliver the shipping documents. Collaboration with the contracted brokers the
small carrier developed the idea to take photos of the documents and simply e-mail the copies of
the documents to the shipper, consignee, the brokers, and the small carrier’s administrative
personnel (our wives).
Conclusion
The small business leader has a larger role in the company and because of the closeness
they have with the subordinates, are more effective than leaders in big business. This report has
proven this premise with the assortment of examples in the leadership styles these leaders have
chosen. The Hersey and Blanchard’s Situational Approach is a style that many small business
leaders could use because of its emphasis on the relationship with followers. Knowing the
sources of power and influence and the techniques that compel people to achieve organizational
and personal goals is beneficial for any leader at any level. Transformational and transactional
leadership styles complement each other but still maintain each owns functionality. Leadership
support for the vision, mission, and strategy to implement the vision is important for the
organization to achieve its goals. Change management is essential for any size company; this
report gives two examples of the effectiveness of proper change management. Whatever the size
of the company, the effectiveness of the leader will initially depend on the ability of the leader to
influence and motivate their follows to share a common goal for the success of the organization.

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