Optimization of Operations in Small Business through Leadership

Most scholarly articles on leadership and the applicability of models focus on large organizations, many of which are multi-national companies. A number of books and articles can be found to tell stories of CEOs of large multi-million dollar companies who have transformed an organization be either taking it to the next level or dramatically saving it from the clutches of near extinction. Textbooks make mention of the great accomplishments of leaders such as Sam Walton (founder of Wal-Mart), Tom Watson (known in the 1980’s for developing the IBM image of success), and Jack Welch (who’s innovative leadership broke the confines of beaurocracy and transformed GE) (Tichy & Cohen, 2003), but fail to discuss the importance of leadership in small business. A void in literature exists in this area.

The purpose of this essay is to develop a working leadership model that adopts and integrates existing theories to optimize operations in the present-day small business operational environment. First, the need for such a model is discussed. Second, the model itself is presented, and the existing leadership models that serve as the basis for it are identified. Finally, advantages and limitations of the model are presented.

Small business owners concerned with optimizing operations

Few scholarly articles exist concerning small business management, and none could be found tackling the issue of optimizing operations. An informal survey was conducted among ten small business owners in the Wilkes-Barre/Scranton area of Pennsylvania, each with fewer than 25 employees. Each business owner was asked to rate the operations of his/her business either as overall outstanding, satisfactory or in need of improvement and explain his/her answer. Data was tape recorded and transcribed. None of the business owners admitted to having outstanding operations, 60% stated that their operations were satisfactory, and 40% stated that operations were in need of improvement. Even those business owners who stated that their operations were satisfactory admitted that there was some room for improvement, and three common themes prevailed:

50% of the business owners surveyed indicated that they have difficulty getting employees to do more work when demand increased or when turnover occurs.

40% stated that they had difficulty finding ways to become more efficient.

20% indicated that employees were reluctant to learn new tasks.

Further conversations with these business owners indicated that employees did not have any specific job titles, but were hired and arranged to handle specific tasks. No formal hierarchy, policies or procedures were in place either. Nine of the businesses are structured with an autocratic style of leadership, “involv[ing] the use of commands and expected compliance” (Weiskittel, 1995, par. 2). All employees report to the business owner(s) and have little or no autonomy. The other business was structured under the team concept.

Small business optimization model

The autocratic model “is becoming obsolete in today’s world” (Weiskittel, 1995, par. 2). In small organizations, it is assumed that the owner really is the leader and that he/she requires others to follow. To a certain extent, the organization must grow according to the direction the owner wants to head in, and the subordinates are required to perform whatever functions are asked of them. Eventually, the owner must begin to trust his/her employees and empower them if the company is to move forward and implement changes. Hence, the business owners must move from the autocratic model to one that requires more post-modern application of transformational leadership.

The first step in the small business optimization model is to have the owner change first by transitioning from a manager role to that of a leader. While no solid definition of leadership exists (Weiskittel, 1999), a variety of characteristics set leaders apart from management. Managers plan, organize, staff, control, and solve problems, whereas leaders set directions, align people, motivate and inspire (Kotter, 2003). The transition may also require the business owner from transitioning his/her mindset from Theory X to Theory Y. Theory X

“assumes that most people dislike work and will try to avoid it if they can. Workers are seen as being inclined to restrict work output, having little ambition, and avoiding responsibility if at all possible. They are believed to be relatively self-centered, indifferent to organizational needs, and resistant to change. Common rewards cannot overcome this natural dislike for work, so management is almost forced (under Theory X assumptions and subsequent logic) to coerce, control, and threaten employees to obtain satisfactory performance" (Newstromm & Davis, 2002, p. 31).

Theory Y is in contradiction to Theory X and

"assumes that people are not inherently lazy. Any appearance they have of being that way is the result of their experiences with less-enlightened organizations, and if management will provide the proper environment to release their potential, work will become as natural to them as recreational play or rest and relaxation... [M]anagement believes that employees are capable of exercising selfdirection and self-control in the service of objectives to which they are committed. [Therefore] [m]anagement’s role is to provide an environment in which the potential of people can be released at work" (Newstromm & Davis, 2002, p. 32).

The purpose of the transition is to begin building trust between the owner(s) and the employees for the purposes of restructuring the organization as a team. This transition will require that the owner(s) shift gradually to a collegial role, which

“depends on management’s building a feeling of partnership with employees. The result is that employees feel needed and useful. They feel that managers are contributing also, so it is easy to accept and respect their roles in the organization. Managers are seen as joint contributors rather than as bosses" (Newstromm & Davis, 2002, p. 38).

The move to adopting the collegial paradigm from the autocratic style of leadership requires that the ownership move first adopt and transition through the custodial and supportive models. The custodial model involves the use of benefits and employee welfare programs to provide for employees' security needs (based on Maslow's theory of needs). The focus is on providing economic satisfaction in exchange for dependence on the employer (Newstromm & Davis, 2002). The supportive model is based on Linkert's principle of supportive relationships, the organization uses the concept of leadership to increase participation and unlock employees' individual potential, so that job performance and profits increase. Motivation is also a product of the supportive model (Newstromm & Davis, 2002).

Once ownership moves to the collegial paradigm, the company reorganizes as a team. Team members realize that working together as a team rather than relying on one particular individual makes the entity stronger. Members have a better sense of belonging and commitment to the organization. Ideas can be brought to the table and implemented. Cross training can also occur. The team leadership model still leaves room for the owners to maintain some control over the organization, as a team leader is required.

Once the team is established the small business owner(s) communicate a vision to remainder of the team while learning to balance control and autonomy. A business owner cannot grow an organization by him/herself. Rather, the need to trust in one’s staff and empower the right people becomes an important issue. What may not always be apparent is the importance of maintaining an open relationship with employees. This results in lower training costs, less turnover, and an employee base that will often support the right management decisions of the organization (Toney & Oster, 1998).

Benefits and limitations of the model

By transitioning from an autocratic form of organization to a team design, the small business can use the team leadership concept to solve problems with efficiency and get employees motivated. However, the model is limited to small businesses, as transforming the design of a larger entity in this manner is impractical. The model is also limited by the actions of the small business owner. The company cannot change if management refuses to commit to it.

Summary

The purpose of this essay was to develop a working leadership model that adopts and integrates existing leadership theories to optimize operations in the present-day small business operational environment. First, the need for such a model was presented. After conducting an in formal survey of small business owners, it was noted that the need to optimize operations was present. However, the outdated autocratic design was not practical for allowing the organization to change. Before the organization can optimize operations, ownership must commit to changing its design.

The small business optimization model requires that the organization transition from an autocratic to a team design. The gradual transition in leadership styles is necessary to avoid culture shock within the organization. Once management and employees embrace the collegial model, the organization can be redesigned to take exploit the advantages of team leadership. The model can be used for existing small businesses, but is not intended for larger organizations.

References

Kotter, J. P. (2003) What leaders really do. In Jossey-Bass (Series Ed.) Business Leadership (1^stSan Francisco: Jossey-Bass. ed., pp. 29-43).

Newstrom, J. W., & Davis, K. (2002). Organizational behavior (11th ed.). New York: McGraw-Hill Higher Education.

Tichy, N. M. & Cohen, E. (2003). Why are leaders important? In Jossey-Bass (Series Ed.) Business Leadership (1^st ed., pp. 4-28). San Francisco: Jossey-Bass.

Toney, F. & Oster, M. (1998, Winter). The leader and religious faith. Journal of Leadership Studies, 5(1), 135.

Weiskittel, P. (1999, October). The concept of leadership. ANNA Journal, 26(5), 467.