Theory and Evidence on the Relationship between Leadership Style and Organizational Performance: A Case in Small Medium Enterprises in East Malaysia

Abstract

This research intends to provide the theoretical evidence on the relationship between leadership style and organizational performance of small medium enterprises (SMEs) in East Malaysia.  The growth organizational performances among SMEs in East Malaysia have been at stagnant stage, as they are not able to respond to unforeseen issues due to weak leadership. The SMEs in East Malaysia are losing their competitive advantages as compared to West Malaysia. There is lack of motivation among the followers working in SMEs in East Malaysia as employees do not put extra effort in their tasks. There is absence of creativity in workplace as employees have not been giving any productive output from a long time. Previous research have documented that there are relationships between leadership style and organizational performance in SMEs in East Malaysia. The current study steps forward to contribute to gaps in body of knowledge by looking at the effects that occur due to different leadership style and its influence on the organizational performance in SMEs in East Malaysia. The nature of this study add to the existing literature by integrating the theory and evidence that could enhance organizational performance.

Comparative Study on Workforce Transformation Strategy and SME Policies in Indonesia and Malaysia

“…A study by Madanchian and Taherdoost (2019) shows a leadership effectiveness dimension consisting of the ability to inspire, facilitate and motivate an accountable and positive attitude, contributing to Malaysian SME performance improvement. Recent research also stated that the unpreparedness for facing IR 4.0 indicates that the leadership capability of Malaysian SMEs still needs improvement (Hamdan, 2020). The lack of understanding of leadership for business performance sustainability can lead to the lack of motivation of all SME members to produce optimal performance in their tasks.…”