Small and medium enterprises (SMEs) play an important role in the economic development of a country. On the other hand, one of the main factors that leads to organizational success is leadership effectiveness. In addition, many researchers argue that leadership effectiveness can improve organizational performance. Therefore, in order to contribute to economic growth, it is crucial to understand and evaluate the leadership effectiveness. Some researches carried out studies to introduce the dimensions of leadership effectiveness, although there is a lack of research to prioritize these dimensions to effectively guide leaders on how to improve their effectiveness. The chapter aims to prioritize dimensions of leadership effectiveness in SMEs, specifically Malaysia digital service SMEs. The applied research method in this chapter is a quantitative method using analytical hierarchy process (AHP) technique. Furthermore, in this chapter, leadership effectiveness dimensions have been evaluated by practitioner and academician experts in the Malaysia SME context.
TopIntroduction
Achieving business goals that sustain the high performance in organizations over time, have raised the challenges for leaders. According to Mumford, et al (2000), leadership becomes more vital when one has to develop and lead adaptive analysis to new or changing situations. Meanwhile, as leaders are responsible for the achievement of organizational goals to enhance organizational performance, leadership becomes a significant subject. Therefore, leaders are responsible to the stakeholders in their organizations for generating the best potential products and services over best operation of the available resources (Gul, et al. 2012a). According to Hashim, et al. (2012) leaders must focus on developing their effectiveness, to established them separately from their competitors. Effective leadership offers a strategic direction and inspires the motivation of employees (Madanchian, et al. 2017).
During the early of the twentieth century attention in leadership area increased (Madanchian, et al. 2015b). Leadership is considering as one of the greatest discussed and argued topics in the social sciences (Madanchian, et al. 2015b). As said by Bass and Stogdill (1990), after 40 years of researchers attempt to come out with the meaning of leadership, Bass (1985) recognized more than 3,500 definitions and concluded, ‘There are almost as many definitions of leadership as those who have attempted to define the concept’.
According to Harms and Credé (2010), leadership is defined as “a process whereby an individual influences a group of individuals to achieve a common goal” (p. 3). To enhance organizational performance, leadership plays a crucial role, therefore, to make the best possible products and services through the best utilization of the available resources, leaders are responsible to the stakeholders of their organizations (Gul, et al. 2012b; Madanchian & Taherdoost, 2017b).
The main aim of any organization and Digital service SMEs as well is to sustain competitive advantage and considered to be effective between the demands of various stakeholders and the needs of the employees (Madanchian, et al. 2016). Based on the previous studies in related field, it has been demonstrated that an appropriate leadership style can influence the success and the economic growth of both the organizations and employees (Madanchian, et al. 2016). Besides, Madanchian, et al. (2016c) concluded that a good leader moves their followers to action and help them realize their potential to accomplish a better objective. According to Arslan and Staub (2013) with the aim of meet the needs of the highly competitive markets, organizations should increase their performance. As said by earlier researchers such as Peterson, et al. (2003) the role of leadership is critically important for achieving the performance of organizations.
On the other hand, it is considered that a digital service company’s success is attributable to organizational performance, employee job satisfaction and employee affective commitment (Bass & Riggio, 2006; Drucker, 2007; Madanchian, et al. 2016).
Leadership is one of the vital factors for improving firm performance (Madanchian, et al. 2016). Leaders, as the key decision-makers, determine the acquisition, development, and deployment of organizational resources, the conversion of these resources into valuable products and services, and the delivery of value to organizational stakeholders (Madanchian, et al. 2016). Thus, they are strong sources of managerial and sustained competitive advantage (Avolio, et al. 1999; Madanchian, et al. 2016; Rowe, 2012; Rowe, 2001).