The Relationship between Transformational Leadership Style and SMEs Growth in the Top 100 SMEs in Kenya

Abstract

Though leadership styles are recognized to influence Small and Medium Enterprise growth in the developed world, there exists scanty literature in developing countries such as Kenya. Therefore, to contribute to the body of growing literature, this study sought to establish the relationship between transformational leadership style and SMEs growth. This was a mixed method research that utilised both quantitative and qualitative data was collected. The study employed a causal research design with a target population of 553 owners and Managers of the top 100 KPMG SMEs of 2013. Through a Proportionate sampling technique, a sample of 227 staffs in the middle and lower level management groups were selected whereas purposive sampling was employed to select a sample of 25 top managers (CEOs). "The Top 100 SMEs” is based on a survey initiative by KPMG Kenya and Nation Media Group.  The study relied on primary data that was collected using closed-ended questionnaires as well as structured interview guides. The research instruments were pretested to examine the reliability of the questionnaire where by the constructs in the questionnaire that did not meet the threshold of 0.7 Cronbach's alpha, were reconstructed and subjected to a retest, the validated tool was then used for the main data collection. Inferential statistical methods that tested the relationship between the variables included the Pearson's correlation and chi-square test of significance. Findings illustrated that transformational leadership style had a positive and significant relationship with SMEs growth (c²=89.106; d.f. = 46; P= 0.011(P<0.05). The correlation results also showed a positive correlation between transformational leadership and SMEs growth (r= 0.715, P=0.025). Based on the study findings, it was recommended that SME Leaders should adopt a transformational leadership style in order to facilitate consensus and growth of employees and the organisation at large.