The relationship between culture, leadership, strategic planning and performance in small and medium sized enterprises.
PhD thesis, Middlesex University.
The importance of manufacturing Small and Medium Sized Enterprises (SMEs) to the economy is well documented. Most research on SMEs focuses on efficiency-related measures. The literature suggests that a significant amount of efficiency based initiatives have been directed at SMEs and that the time is now opportune to consider a more strategic approach. The literature survey indicates a dearth of empirical research on strategic planning in SMEs. In addition, the literature implies that strategic planning is influenced by a range of factors, which include culture, leadership and contingency factors such as the formality of planning, barriers to strategic development, the operating environment, size, ownership, perceived market share and industrial sector. Little is known about these factors in relation to SMEs and no attempt has been made to examine them in one integrated model in any firm size. Accordingly, the aim of this study was to empirically test the validity of a deductive model linking contingency factors: culture, leadership, strategic planning and organisational performance. This was attained by formulating a series of objectives and testing these objectives using a variety of methods. These included descriptive statistics, factor analysis, chi-square tests, canonical correlation analysis and the wilcoxon test.
The research utilises a hybrid positivist-phenomenological method. Exploratory research methods in conjunction with the literature review were-used Ho-develop an inductive model. The exploratory interviews were held with managing directors of SMEs in the engineering and electronics' sectors. A postal survey was used as it is the most reliable and effective means of data gathering in order to test the deductive model. The survey was based on the opinions or perceptions of managing directors - an approach extensively used by other researchers. The questionnaire achieved a satisfactory response rate (nearly 28%) and yielded strong factor structures during the data analysis stage. The main statistical techniques used in the analysis of the data included factor analysis and canonical correlation analysis - to derive clear associations between the main concepts and to link all the main factors in the deductive model.
The key findings indicate that there is no association between the contingency factors and the main concepts in the deductive model: culture, leadership, strategic planning and organisational performance. In addition, none of the contingency factors impact on the product type (mature, standard or customised), the proportion of total sales exported or the propensity to invest in research and development.
All the attributes of organisational culture are associated with the characteristics of strategic planning. The analysis also indicates that strategic planning is associated with the following dimensions of organisational performance: learning and growth, meeting customer demands and the provision of quality goods on time. This tends to suggest that strategic planning leads to an improvement in effectiveness. The results in relation to the main concepts of leadership, culture, strategic planning and organisational performance indicate that transactional - rewards, competence, creativity and employee focused leadership styles are associated with all five cultural types. The results indicate that these leadership styles are also likely to impact to a greater extent on strategic planning than laissez faire leadership styles. This finding broadens the Wilderom and van den Berg categorisation of leadership by the inclusion of transactional – rewards attributes.
The analysis of the data suggests that high success firms place a strong emphasis on each of the attributes of leadership and culture associated with strategic planning and on each of the characteristics of strategic planning associated with organisational performance. The main parts of the deductive model are therefore confirmed.
Finally, a comparison of the emphasis given to the attributes of culture, leadership and strategic planning by firms with 1-9 employees and those with 100-249 employees failed to detect any statistically significant differences. Accordingly, it can be concluded that size is not a key determinant of behaviour. The hypothesis that SMEs adhere to generic strategies such as the Miles and Snow typology was partially supported. These findings enable a greater understanding of the influences on strategic planning in SMEs and its role in relation to organisational performance. In particular, the findings are relevant to SME managing directors, policy makers, business advisers and researchers.
The research improves the understanding of strategic planning in SMEs. It fills a number of gaps identified in the literature review in relation to the relationship between contingency factors, culture, leadership, strategic planning and performance.
The main limitation of this study results from the use of a single respondent, although it should be noted that this approach has a strong base in the literature. Other possible limitations include the use of a lengthy questionnaire, the restriction of the sample to only two industrial sectors and the use of the strategic planning process as a surrogate measure of strategy. However, it is important to note that the latter is not unusual and other researchers have also adopted this approach.
The thesis comprises eleven chapters. Chapter 1 introduces the study by providing a brief critique of the literature and sets the study's aims and objectives. Chapters 2-6 provide the literature review in relation to: SMEs, strategic planning, leadership and culture. The methodology and research design are outlined in chapter 7. The remaining chapters involve the analysis of the data and the testing of the deductive model.
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