IN any business, leadership is important, but the form which it takes depends interestingly on a firm's stage of growth.
For small and medium-sized enterprises (SMEs) this involves playing an active role in the management of the company and to establish a vision in order for the employees to know where they are heading.
'Although it sounds like an obvious truism, the key to understanding the man-agement/leadership needs of SMEs is quite simply to recognise the straightforward fact that they are neither a new start-up venture nor a mature large company,' said Patrick Turner in a recent interview.
For start-ups, the INSEAD lecturer explained, what is required is a hands-on, sleeves-rolled-up management, where 'there aren't many people involved, and everybody gets mixed up in just getting things done. Leadership isn't thought about very much'.
'Large companies, on the other hand, have managers that are much less involved in the day-to-day managing of the company; theirs is much more a leadership role, establishing the goals that the company wishes to reach, and determining the strategy to be followed in order to achieve them.'
And SMEs occupy a middle position between the two extremes, where leaders need to manage the company actively and set directions for the firm.
This is certainly not an easy task and, indeed, it is a relatively well-known phenomenon that not all start-up entrepreneurs have the inclination and skills necessary to manage their creation once it grows beyond the start-up stage.
'Many of these entrepreneurs have difficulty accepting that they cannot possibly always be involved in 100 per cent of the company's activities, and neither do they greatly relish the fact that as the company grows, people issues occupy more and more of their time.'
For this reason, the transition between start-up and SME is a difficult hurdle that not all entrepreneurs successfully negotiate. Realising this, some entrepreneurs hire a 'professional CEO' to take charge of their company, while they start up another company - a phenomenon which is now known as 'the serial entrepreneur'.
Others, if they have venture capital funding, may find themselves removed from the top spot in what is usually a painful process.
Some, lacking the leadership skills that become more and more necessary as a company grows, find that their company stagnates at the same level for years. A few manage to make the transition successfully.
Company vision
To nurture leadership in a company, Prof Turner shared that management needs to establish a vision for the company at some future point, and a strategy designed to achieve that vision.
'This then becomes a sort of beacon, or lighthouse, clearly visible to and well-understood by all the company's employees, who thus know on the one hand what the overall goal is, and on the other how their particular duties and responsibilities are contributing to the overall effort, and fit in with all the other parts of the jigsaw puzzle.'
However, nurturing such a leadership culture does not come easy in an SME as most entrepreneurs often have certain misconceptions about managing businesses.
For example, as a new venture is typically due to the determination and hard work of the entrepreneur, it does not always occur to him that 'at some point he is going to need help'.
'This applies especially to the thick-skinned, obstinate style of entrepreneurs, who quite frequently do things despite all the advice they get to the contrary. Transitioning into a context in which they actively seek advice is very difficult for them, and this, of course, is linked to the transition from start-up into SME mentioned above.'
Failures and successes
Indeed, this misconception applies equally to seeking advice both internally and externally.
Many SME leaders, having reached the position they occupy thanks to following their own instincts and going their own way even though they might well have had failures as well as successes, have tremendous difficulty opening up to ideas other than their own.
In contrast, more large firms increasingly realise that there is a huge fund of knowledge and experience in their employees which, if tapped into, can be of immense value to the company in terms of innovative ideas, or simply ways of doing things better, Prof Turner added.
In this connection, he suggests that CEOs of small and medium-sized businesses seek counsel from external mentors, especially when the company starts to outgrow their span of control.
It is at this point that the CEO should think about appointing a board of directors, not simply for governance reasons but, above all, to provide a regular sounding board and to introduce a higher level of business expertise.
'These directors, if well chosen, can be of inestimable value to the CEO as advisers, supporters, networkers, facilitators, salesmen, and a host of other useful roles.'
This article was first published in The Business Times on October 28, 2008.
