The Link Between Leadership, Strategy, and Performance in Manufacturing SMEs
AbstractSustainable competitive performance, in today's turbulent environment, is widely thought to depend on the quality of leadership and strategy. In this paper, we empirically examine the relationship between strategy, leadership and performance within a single study. Evidence is presented from 194 firms, outlining the association between strategy characteristics and the dimensions of leadership in a ranked order according to their degree of importance. The analysis indicates that a balanced transformational and transactional leadership style is likely to lead to better performance. The study also found that firms strongly emphasizing any of the leadership styles performed better than firms with uncertain or weak leadership styles. The findings provide practical guidelines to enable senior managers to consider leadership style in the formulation and deployment of their strategic plan. Finally, the analysis indicates the need to consider and align leadership and strategy in order to achieve sustainable competitive performance.
Barry, D. and Elmes, M. (1997). Strategy retold: Toward a narrative view of strategic discourse. Academy of Management Review, 22, 429-452.
Bass, B.M. 1998. Transformational leadership; industry, military, and educational impact' Free Press: New York.
Berkeley, Thomas, A. (1988). Does leadership make a difference to organizational performance? Administrative Science Quarterly, 33, 388-400.
Boyd, B.K. (1991). Strategic Planning and Financial Performance: A Meta-Analytic Review. Journal of Management Studies, 28(4), 353-74.
Brews, P.J. and Hunt, M.R. (1999). Learning to plan, and planning to learn: Resolving the planning school/learning school debate. Strategic Management Journal, 20, 889-913.
Cohen, W.M. and Levinthal, D.A. (1990). Absorptive capacity: a new perspective on learning and innovation. Administrative Science Quarterly, 35, 128-152
Gill, R. (2003). Change Management - or change leadership? Journal of Change Management, 3(4), 307-318.
Ireland, R.D. and Hitt, M.A. (1999). Achieving and maintaining strategic competitiveness in the 21s' century: The role of strategic leadership. Academy of Management Executive, 72(1), 43-57.
Kargar, J. and Parnell, J.A. (1996). Strategic planning emphasis and Planning satisfaction in small firms: an empirical investigation. Journal of Business Strategies, 13(1), 42-64.
Ketchen, D.J., Thomas, J.B., and McDaniel, R. (1996). Process, Content and Context: Synergistic Effects on Organizational Performance. Journal of Management, 22(2), 231-258.
Kotter, J.P. (2001). What leaders really do. Harvard Business Review, 77(11), 3-11
Laitinen, E.K. (2002). A dynamic performance measurement system: evidence from small Finnish technology companies. Scandinavian Journal of Management, 18, 65-99.
Miller, C.C. and Cardinal, L.B. (1994). Strategic planning and firm performance: A synthesis of more. Academy of Management Journal, 37, 1649-1665.
Mintzberg, H. (1979). The Structuring of Organization. Englewood Cliffs, NJ:Prentice Hall.
Mintzberg, H., Ahlstrand, B., and Lampel, J. (1998). Strategy Safari. New York:Free Press.
Perry, S.C. (2001). The relationship between written business plans and the failure of small businesses in the US. Journal of Small Business Management, 39(3), 201-208
Pett, T.L. and Wolff, J.A. (2003). Firm characteristics and managerial perceptions of NAFTA: An assessment of export implications for U.S. SMEs. Journal of Small Business Management, 41(2), 117-132.
Porter, M.E. (1996). What is strategy? Harvard Business Review (November-December), 6178.
Schwenk, C.R. and Shrader, C.B.(1993). The effects of formal strategic planning on financial performance in small firms : a mela analysis. Entrepreneurship in Theoiy and Practice, 17(3), 53-64.
Short, J.C., Ketchen, D.J., and Palmer, T.B. (2002). The role of sampling in strategic management research on performance; A Two-study analysis. Journal of Management, 28(3), 363-385.
Wilderom, C. and v. d. Berg, P. (1997). A Test of the Leadership-Cullure-Performance Model within a Large Dutch Financial Organization, Working Paper 103952 Tilburg University.