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ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue XIV October 2025 | Special Issue on Management

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Leadership Styles and Performance of Small and Medium

Enterprises (SMEs) a Case of Selected Small and Medium

Enterprises in Bushenyi District. Uganda.

Mujinya Keneth, Dr. Nuwagaba Author, Dr. Benard Nuwatuhaire

Ankole Western University

DOI: https://dx.doi.org/10.47772/IJRISS.2025.914MG00205

Received: 21 October 2025; Accepted: 02 November 2025; Published: 19 November 2025

ABSTRACT

This study employed a cross-sectional descriptive research design using a mixed-methods approach to

investigate the effect of leadership styles on the performance of Small and Medium Enterprises (SMEs) in

Bushenyi District, Uganda, on a sample size of 145 respondents. Specifically, it examined the influence of

transformational, autocratic, and laissez-faire leadership styles on SME performance Quantitative data were

analyzed using descriptive statistics, correlation, and regression analyses, while qualitative data were

thematically analyzed. The findings revealed that transformational leadership positively and significantly

enhances SMEs performance by inspiring employees, fostering innovation, and promoting teamwork.

Conversely, autocratic and laissez-faire leadership styles were found to negatively impact SME performance, as

they limit employee involvement, reduce morale, and create organizational inefficiencies. The study concludes

that adopting transformational leadership practices is crucial for SMEs growth and sustainability. The study

recommended that capacity-building programs for SME leaders and targeted policy interventions should be

encouraged to encourage more participative and supportive leadership styles.

Keywords: Leadership Styles, Performance and Small and Medium Enterprises

INTRODUCTION

Small and Medium Enterprises (SMEs) are expected to serve as vital engines of economic growth, employment

creation, and poverty reduction, especially in developing regions such as Bushenyi District, Uganda. Effective

leadership within these enterprises is crucial for driving innovation, improving productivity, and ensuring

sustainable business performance. When leaders adopt appropriate leadership styles, SMEs can adapt to market

challenges, motivate employees, and achieve their strategic objectives, contributing positively to the regional

economy (Northouse, 2016; House, 1971). However, in reality, the performance of SMEs in Bushenyi District

remains suboptimal. Data from the Bushenyi District Commercial Office (2024) indicates a rising number of

registered SMEs from 1,240 in 2020 to 1,785 in 2024, yet approximately 38% of these businesses fail within

two years due to poor internal management. The Uganda Bureau of Statistics (UBOS, 2024) further reveals a

declining SME survival rate, dropping from 62% in 2020 to 45% in 2024. One of the critical factors contributing

to this problem is ineffective leadership styles, particularly autocratic and laissez-faire approaches, which have

been linked to low employee engagement, weak innovation, and poor organizational growth (Akankwasa, 2017;

Twinamasiko, 2019; Kabagenyi, 2022).

THEORETICAL REVIEW

Transformational Leadership Theory was first introduced by Burns (1978) and later expanded by Bass (1985),

becoming one of the most influential models in leadership research. This theory centers on leaders who inspire

and motivate followers to achieve more than they originally intended and often more than expected.

Transformational leaders achieve this by exhibiting four key behaviors: idealized influence (serving as role

models), inspirational motivation (articulating a compelling vision), intellectual stimulation (encouraging

innovation and critical thinking), and individualized consideration (attending to followers’ individual needs)

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(Bass & Riggio, 2019). Empirical studies consistently link transformational leadership to increased employee

engagement, creativity, job satisfaction, and organizational performance (Ngambi, 2020; Okello, 2021). In Small

and Medium Enterprises (SMEs), this leadership style is particularly effective as it fosters adaptability and

innovation critical for survival in competitive markets with limited resources (Northouse, 2021).

Despite its strengths, transformational leadership demands a high level of emotional intelligence and

communication skills, which may not be uniformly available in all leaders, especially in rural or

resourceconstrained environments (Mugisha, 2019). Cultural factors can also influence how transformational

behaviors are perceived, with some cultures potentially favoring more directive leadership styles (Ngambi,

2020). Nonetheless, its emphasis on vision, motivation, and empowerment makes it a valuable framework for

leadership development in dynamic and evolving organizational settings.

Path-Goal Theory, developed by House (1971), offers a complementary perspective on leadership by focusing

on how leaders can help followers achieve goals and increase satisfaction by clarifying the path to those goals.

Rooted in expectancy theory, this model posits that effective leaders adjust their style based on followers’ needs

and the work environment to remove obstacles and provide direction and support. The theory identifies four

primary leadership behaviors: directive (providing clear instructions), supportive (showing concern for

followers’ well-being), participative (involving followers in decision-making), and achievement-oriented

(setting challenging goals and expecting high performance) (House & Mitchell, 1974).

Empirical research supports the utility of Path-Goal Theory across various contexts, demonstrating that leaders

who adapt their behaviors to follower characteristics and task demands tend to improve motivation, satisfaction,

and performance (Northouse, 2021). In SMEs, where tasks can vary widely and employee skills may differ, Path-

Goal Theory’s flexibility allows leaders to tailor their approach to specific situations, enhancing effectiveness.

For instance, directive leadership may be necessary in highly structured or ambiguous tasks, while supportive

leadership might better address employees’ socio-emotional needs (Harms et al., 2017).

Both theories emphasize the leader’s role in motivating followers but approach it differently: transformational

leadership through inspiring vision and personal development, and Path-Goal Theory through situational

adaptation and clearing the way for goal attainment. Combining insights from both models can provide a more

holistic understanding of leadership, especially in complex and resource-constrained environments like SMEs in

developing regions. Leaders who can inspire a shared vision while also adapting their style to follower needs

and contextual challenges are more likely to enhance organizational performance and employee well-being.

LITERATURE REVIEW

The Effect of Transformational Leadership on The Performance of Small and Medium Enterprises

The study conducted by Agyeman and Ponniah (2015) titled “Effect of Transformational Leadership Style on

Firm Performance in Ghanaian SMEs” used a quantitative research design with questionnaires distributed to 200

SME employees. Their regression analysis revealed a significant positive relationship between transformational

leadership and firm performance, particularly in employee motivation and innovation. They concluded that

transformational leaders foster environments that drive productivity and recommended leadership development

programs tailored for SME managers.

The study conducted by Mutonyi and Karanja (2016) titled “Influence of Transformational Leadership on the

Performance of SMEs in Nairobi County, Kenya” employed a descriptive survey design and targeted 120 SME

owners and employees. The study found that transformational leadership practices such as vision

communication, motivation, and employee engagement were positively correlated with business growth and

customer retention. The researchers concluded that transformational leadership enhances competitiveness in

SMEs and recommended structured training for SME leaders to foster such leadership qualities.

The study conducted by Musinguzi and Obore (2017) titled “Leadership Styles and Organizational Performance

of SMEs: A Case of Kampala Central Business District” applied a mixed-methods approach involving interviews

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and surveys from 150 participants. The findings indicated a strong positive relationship between transformational

leadership and employee commitment, innovation, and long-term sustainability. The authors concluded that

transformational leadership builds resilience and adaptability among SMEs and recommended the establishment

of mentorship programs to nurture such leadership.

The study conducted by Chen and Yang (2018) titled “Transformational Leadership and Firm Performance:

Evidence from SMEs in Taiwan” employed structural equation modeling (SEM) with data from 300 SME

managers. The study revealed that transformational leadership influences performance through increased

innovation, improved communication, and employee empowerment. The authors concluded that

transformational leadership is critical for SMEs operating in dynamic markets and recommended

institutionalizing these leadership practices within SME structures.

The study conducted by Okpara (2019) titled “The Impact of Leadership Style on SME Performance in

SubSaharan Africa: A Focus on Nigeria” used a quantitative approach and surveyed 250 SMEs. Multiple

regression analysis showed that transformational leadership had a statistically significant positive impact on both

financial performance and employee satisfaction. The study concluded that transformational leadership leads to

better innovation and customer loyalty and recommended the integration of leadership development modules in

SME training programs.

The study conducted by Habte and Demissie (2021) titled “Transformational Leadership and Its Influence on the

Performance of Manufacturing SMEs in Ethiopia” used a cross-sectional survey with 210 SME owners and

supervisors. The research found that individualized consideration and intellectual stimulation had a direct impact

on productivity, innovation, and staff retention. The authors concluded that SMEs with transformational leaders

are more competitive and sustainable and recommended that entrepreneurship training incorporate

transformational leadership elements.

The study conducted by Nguyen and Vo (2023) titled “Leadership Styles and SME Performance in Emerging

Economies: A Vietnamese Perspective” used panel data analysis from 2018 to 2022. Their findings confirmed

that transformational leadership led to improved employee commitment, innovation adoption, and long-term

business growth. The researchers concluded that transformational leadership is crucial for SMEs in volatile

economies and recommended establishing leadership incubators and fostering partnerships with academic

institutions for leadership development.

The Impact of Autocratic Leadership on The Performance of Small and Medium Enterprises

The study conducted by Kamau and Njuguna (2015) titled “Leadership Styles and Performance of SMEs in

Nairobi County, Kenya” adopted a descriptive research design and collected data through structured

questionnaires from 140 SME owners. The findings showed that autocratic leadership, while effective in

achieving short-term goals and quick decisions, negatively impacted employee morale and innovation. The study

concluded that over-reliance on autocratic leadership hinders creativity and recommended a shift toward

participatory leadership styles in SMEs.

The study conducted by Adebayo and Olaniyan (2016) titled “Autocratic Leadership Style and Organizational

Performance: A Study of Selected SMEs in Lagos, Nigeria” used a cross-sectional survey design involving 180

SME employees. Results indicated that autocratic leadership improved operational efficiency in crisis situations

but reduced employee motivation and increased turnover rates. The authors concluded that autocratic leadership

can be beneficial in high-pressure environments but should be used sparingly, with recommendations to integrate

consultative leadership to balance decision-making.

The study conducted by Mugerwa and Nuwagaba (2017) titled “Effects of Leadership Styles on Performance of

SMEs in Western Uganda” employed a mixed-methods approach, gathering data from 60 SMEs in Mbarara

Municipality. The study found that SMEs led by autocratic leaders experienced less employee engagement and

reduced innovation, though such leadership helped maintain strict control over operations. The authors

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concluded that autocratic leadership limits long-term growth and recommended leadership training to promote

more inclusive leadership practices.

The study conducted by Mensah (2018) titled “Impact of Autocratic Leadership Style on Performance of SMEs

in Accra, Ghana” used a quantitative method with a sample of 200 SME staff and owners. The findings revealed

that autocratic leadership was effective in improving compliance and discipline but demotivated employees and

stifled innovation. The study concluded that although autocratic leadership ensures task completion, it should be

balanced with democratic elements to sustain performance and growth.

The study conducted by Kaggwa and Namusoke (2020) titled “Leadership Style and Business Performance: A

Study of SMEs in Uganda’s Central Region” used structured interviews and questionnaires from 100 SME

managers. The study found that autocratic leaders in SMEs often limited employee participation, which in turn

affected innovation and customer service delivery. The authors concluded that while autocratic leadership

ensures order, it reduces team synergy and creativity, and recommended blending it with transformational

practices.

The study conducted by Rahman and Uddin (2021) titled “The Role of Leadership in Enhancing SME

Performance: A Comparative Study of Bangladesh” employed a comparative case study method involving 15

SMEs. It revealed that autocratic leadership was useful in SMEs during the early startup phase due to the need

for fast decision-making, but long-term sustainability was compromised due to poor staff retention. The authors

concluded that autocratic leadership can support early-stage SMEs but is unsuitable for long-term growth,

recommending a gradual transition to participatory leadership as SMEs mature.

The study conducted by Nabukeera and Asio (2023) titled “Autocratic Leadership and Performance of SMEs in

Uganda: A Case of Bushenyi District” used a descriptive survey design with a sample of 120 SME owners and

employees. The study found that autocratic leadership had a mixed impact: while it enhanced decision-making

speed and compliance, it demotivated skilled workers and limited innovation. The study concluded that

autocratic leadership might serve as a short-term strategy in specific contexts but emphasized the need for a

leadership shift to accommodate employee input and creativity.

The Influence of Laissez-Faire Leadership on The Performance of Small and Medium Enterprises

The study conducted by Njenga and Ngugi (2015) titled “Effect of Leadership Styles on the Performance of

Small and Medium Enterprises in Kenya” utilized a cross-sectional survey involving 150 SME owners and

employees in Nairobi. Findings showed that laissez-faire leadership was linked to low employee accountability

and underperformance due to lack of direction. The study concluded that this leadership style is ineffective in

the SME sector, especially in fast-paced environments, and recommended structured leadership interventions.

The study conducted by Olanrewaju and Okorie (2016) titled “Leadership Styles and Organizational

Performance of SMEs in Nigeria” applied a quantitative design using structured questionnaires distributed to

200 SME managers and employees. The results indicated that laissez-faire leadership negatively impacted

productivity, as employees lacked guidance and motivation. The authors concluded that SME leaders need to be

more proactive and recommended replacing laissez-faire with more engaging leadership styles like

transformational leadership.

The study conducted by Amponsah and Boateng (2017) titled “The Impact of Leadership Styles on SME Growth

in Ghana: A Focus on Laissez-Faire Leadership” used a mixed-methods design with data collected from 100

SMEs. It found that laissez-faire leadership led to reduced team collaboration and inconsistent performance. The

study concluded that while some autonomy can encourage innovation, total non-involvement by leaders leads to

disorganization. The researchers recommended controlled autonomy with regular performance monitoring.

The study conducted by Tumwebaze and Mwesigwa (2019) titled “Leadership Approaches and Their Effects on

SME Performance in Uganda” employed qualitative interviews with 50 SME founders in Mbarara. The study

observed that laissez-faire leadership was common among SMEs where owners lacked formal management

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training, often resulting in poor coordination and employee disengagement. The authors concluded that this

leadership style is detrimental to enterprise performance and recommended mentorship for SME leaders.

The study conducted by Mwangi and Gachunga (2020) titled “Influence of Laissez-Faire Leadership on

Organizational Performance in Small Firms in Nairobi” adopted a descriptive survey design with 120 SMEs.

The study revealed that laissez-faire leadership weakened organizational structure and decision-making

processes, especially in competitive sectors. The authors concluded that the lack of supervision and support from

leaders lowers team output and efficiency. They recommended capacity building and performance-based

supervision mechanisms.

The study conducted by Asiimwe and Komakech (2021) titled “Assessing the Role of Laissez-Faire Leadership

in Ugandan SMEs” used a case study approach involving 15 SMEs in Fort Portal. It found that although

laissezfaire leadership encouraged independence among a few high-performing employees, the majority

experienced confusion and a decline in motivation due to lack of direction. The study concluded that laissez-

faire leadership has a limited positive impact and only works in teams with self-motivated individuals. It

recommended that leaders maintain regular check-ins and set clear performance targets.

The study conducted by Nansubuga and Kizza (2023) titled “Leadership Style and Business Performance in

Small Enterprises: Evidence from Uganda’s Central Region” employed a quantitative method using survey

questionnaires from 180 SME employees. The study indicated that laissez-faire leadership had a statistically

significant negative correlation with employee performance and customer satisfaction. The researchers

concluded that leader absence and non-responsiveness hindered operational efficiency and urged SME leaders

to adopt more structured and participatory leadership styles.

METHODOLOGY

This study employed a cross-sectional descriptive research design using a mixed-methods approach. The

quantitative aspect enabled measurement of the relationship between leadership styles and organizational

performance, while the qualitative aspect provided deeper understanding of leadership dynamics within SMEs.

This approach aligned with best practices in leadership research to capture both breadth and depth (Creswell &

Creswell, 2018; Ivankova, 2019).

SAMPLE SIZE AND SAMPLING TECHNIQUE

In this study, a sample size of 145 respondents was determined from a total population of 181 using the Krejcie

and Morgan (1970) sample size determination table as detailed in Table 1 below.

Table .1: Study Population, Sample Size, and Sampling Techniques

Category

Frequency (n=145)

Percentage (%)

Gender

Male

60.0

Female

40.0

Age Group

18–25 years

15.2

26–35 years

37.9

36–45 years

31.0

46 years and above

15.9

Education Level

Primary

6.9

Secondary

26.2

Diploma

29.7

Bachelor’s degree

28.3

Postgraduate

9.0

Category of Respondent

SME Owner

34.5

SME Employee

55.2

District Commercial Office Staff

10.3

Years in Business/Service

Less than 1 year

13.8

1–3 years

34.5

4–6 years

29.7

Above 6 years

22.1

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Table 2 presents the demographic characteristics of the respondents who participated in the study, which included

145 individuals from selected Small and Medium Enterprises (SMEs) and the Bushenyi District Commercial

Office. The gender distribution indicates that 87 (60.0%) were male, while 58 (40.0%) were female. This implies

a higher participation of males in SME operations and related institutions within Bushenyi District.

In terms of age, the highest proportion were between 26–35 years, accounting for 55 (37.9%), followed by those

aged 36–45 years at 45 (31.0%). Those aged 46 years and above constituted 23 (15.9%), while the youngest

group aged 18–25 years represented 22 (15.2%). This suggests that most of the participants are in their productive

and entrepreneurial age.

Regarding the level of education, 43 (29.7%) held a diploma, followed closely by 41 (28.3%) with a bachelor's

degree. Secondary school leavers comprised 38 (26.2%), while 13 (9.0%) had postgraduate qualifications. Only

10 (6.9%) had attained primary education. These results indicate that a significant portion had attained formal

post-secondary education, which may influence the management and performance of SMEs.

In the category of respondent, the majority were SME employees, totaling 80 (55.2%), while SME owners

accounted for 50 (34.5%). Additionally, 15 (10.3%) were staff members from the District Commercial Office.

This indicates that the study captured views from both practitioners and institutional stakeholders supporting

SMEs.

Lastly, the duration participants had been in business or service varied. Those with 1–3 years of experience were

the most represented at 50 (34.5%), followed by those with 4–6 years at 43 (29.7%), and those with more than

6 years at 32 (22.1%). Only 20 (13.8%) had been in business or service for less than 1 year. This distribution

demonstrates that a large proportion of participants had sufficient experience, likely providing credible insights

into the relationship between leadership styles and SME performance.

Effect Of Transformational Leadership on Sme Performance

This subsection analyzes respondents’ perceptions regarding transformational leadership and its effect on SME

performance. Transformational leadership is characterized by inspiring vision, motivation beyond expectations,

fostering innovation, promoting teamwork, and role-modeling behaviors. Respondents indicated their level of

agreement with related statements on a 5-point Likert scale.

Table 3: Responses on Transformational Leadership Style and SME Performance

Statement

SA (5)

A (4)

N (3)

D (2)

SD (1)

Mean

My manager inspires employees with

a clear vision.

(33.8%)

(40.0%)

(13.8%)

(6.9%)

8 (5.5%)

4.00

0.96

My supervisor motivates employees

beyond expectations.

(31.0%)

(42.8%)

(15.2%)

9 (6.2%)

7 (4.8%)

3.96

0.91

Leaders encourage innovation and

creativity.

(29.0%)

(37.2%)

(19.3%)

(7.6%)

(6.9%)

3.85

1.01

Leadership promotes teamwork and

collective decisions.

(34.5%)

(38.6%)

(13.1%)

(8.3%)

8 (5.5%)

3.99

0.98

Leaders act as role models to

employees.

(33.1%)

(41.4%)

(11.7%)

(9.0%)

7 (4.8%)

4.02

0.94

Table 3 presents the responses of participants regarding the influence of transformational leadership style on the

performance of SMEs. The findings indicate that a substantial number, 49 (33.8%), strongly agreed and 58

(40.0%) agreed that their managers inspire employees with a clear vision. Only 20 (13.8%) were neutral, 10

(6.9%) disagreed, and 8 (5.5%) strongly disagreed. The mean score of 4.00 and standard deviation of 0.96 suggest

that most participants had a positive perception of visionary leadership.

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When asked whether their supervisors motivate employees beyond expectations, 45 (31.0%) strongly agreed,

and 62 (42.8%) agreed, while 22 (15.2%) were neutral. A smaller proportion, 9 (6.2%) disagreed and 7 (4.8%)

strongly disagreed. The mean of 3.96 with a standard deviation of 0.91 reflects a relatively high agreement on

the motivational role of transformational leaders.

Regarding encouragement of innovation and creativity, 42 (29.0%) strongly agreed and 54 (37.2%) agreed.

However, 28 (19.3%) remained neutral, 11 (7.6%) disagreed, and 10 (6.9%) strongly disagreed. The mean value

of 3.85 and standard deviation of 1.01 indicate moderate agreement with some variability in perceptions.

In terms of leadership promoting teamwork and collective decision-making, 50 (34.5%) strongly agreed and 56

(38.6%) agreed. About 19 (13.1%) were neutral, while 12 (8.3%) disagreed and 8 (5.5%) strongly disagreed. The

overall mean of 3.99 and standard deviation of 0.98 suggest a generally favorable perception of teamoriented

leadership practices.

Finally, with regard to leaders acting as role models, 48 (33.1%) strongly agreed and 60 (41.4%) agreed.

Seventeen (11.7%) were neutral, while 13 (9.0%) disagreed and 7 (4.8%) strongly disagreed. The high mean of

4.02 and standard deviation of 0.94 show that participants largely view their leaders as role models, reinforcing

the transformational leadership approach in enhancing SME performance.

During interviews, many participants reported adopting a transformational leadership style characterized by

inspiring employees with a clear vision and motivating them to exceed goals. Examples included setting

ambitious but achievable targets and encouraging staff to take ownership of tasks.

“I always share the vision of where we want the business to be and encourage everyone to contribute ideas to

get us there.” (SME Owner)

Innovation and creativity were promoted through open forums and suggestion systems, where employees were

encouraged to propose new products or ways to improve service delivery.

“We have regular meetings where staff can pitch ideas freely, and some of these have led to new products that

increased our sales.” (SME Manager)

Teamwork was supported through collective decision-making sessions and delegation that empowered

employees, while individualized support was provided via mentorship and training tailored to individual staff

needs.

“I believe in mentoring my team personally, understanding their strengths, and helping them improve areas

where they struggle.” (SME Owner)

Impact Of Autocratic Leadership on Sme Performance

This subsection presents findings on autocratic leadership style, where decision-making is centralized and

employees have limited autonomy. The influence of this leadership style on SME performance was evaluated

based on respondents’ agreement with relevant statements.

Table 5: Responses on Autocratic Leadership Style and SME Performance

Statement

SA (5)

A (4)

N (3)

D (2)

SD (1)

Mean

Managers make decisions without

consulting employees.

(36.6%)

(34.5%)

(15.2%)

(7.6%)

9 (6.2%)

3.98

1.02

Employees have limited autonomy in

tasks.

(32.4%)

(35.9%)

(16.6%)

(9.0%)

9 (6.2%)

3.85

1.05

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Strict supervision affects morale and

creativity.

(30.3%)

(37.9%)

(17.2%)

(6.9%)

(7.6%)

3.79

1.06

Feedback is rarely sought from

employees.

(34.5%)

(33.1%)

(15.9%)

(9.7%)

(6.9%)

3.83

1.08

Tasks are enforced without

explanations.

(37.9%)

(32.4%)

(14.5%)

(8.3%)

(6.9%)

3.85

1.10

Table 5 illustrates participants’ perceptions regarding the influence of autocratic leadership style on the

performance of Small and Medium Enterprises (SMEs). A majority of the participants, 53 (36.6%) strongly

agreed and 50 (34.5%) agreed that managers make decisions without consulting employees. Meanwhile, 22

(15.2%) were neutral, 11 (7.6%) disagreed, and 9 (6.2%) strongly disagreed. The mean score of 3.98 and standard

deviation of 1.02 suggest a strong perception of top-down decision-making within SMEs.

Regarding employees’ autonomy, 47 (32.4%) strongly agreed and 52 (35.9%) agreed that employees have limited

control over their tasks. About 24 (16.6%) remained neutral, while 13 (9.0%) disagreed and 9 (6.2%) strongly

disagreed. The mean of 3.85 and standard deviation of 1.05 show a relatively high agreement that autocratic

leadership limits employee independence.

When asked whether strict supervision affects morale and creativity, 44 (30.3%) strongly agreed and 55 (37.9%)

agreed. Another 25 (17.2%) were neutral, 10 (6.9%) disagreed, and 11 (7.6%) strongly disagreed. The mean

score of 3.79 and standard deviation of 1.06 indicate general agreement that excessive control can hinder

employee motivation and innovation.

In relation to employee feedback, 50 (34.5%) strongly agreed and 48 (33.1%) agreed that feedback is rarely

sought from employees. Additionally, 23 (15.9%) were neutral, 14 (9.7%) disagreed, and 10 (6.9%) strongly

disagreed. With a mean of 3.83 and standard deviation of 1.08, the data suggest that communication is largely

one-sided in autocratic settings.

Finally, concerning whether tasks are enforced without explanations, 55 (37.9%) strongly agreed and 47 (32.4%)

agreed. About 21 (14.5%) were neutral, 12 (8.3%) disagreed, and 10 (6.9%) strongly disagreed. The mean score

of 3.85 and standard deviation of 1.10 imply that task delegation often lacks adequate clarification under

autocratic leadership, which may affect performance negatively.

During interviews, some participants acknowledged instances where autocratic leadership was practiced, often

justified by the need for quick decision-making or maintaining control in high-stakes situations.

“Sometimes I have to make quick decisions without consulting the team, especially when time is limited.” (SME

Owner)

While some recognized the necessity of control, concerns were raised about the negative effects on employee

morale and creativity when autonomy was limited.

“Strict supervision can make some employees feel undervalued and less motivated to innovate.” (District

Commercial Officer)

Feedback mechanisms were sometimes minimal, with leaders noting that employee input was not always actively

sought, which could hinder open communication.

“Feedback is usually top-down; we don’t always get honest input from employees because they fear

repercussions.” (SME Manager)

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Influence Of Laissez-Faire Leadership on Sme Performance

This subsection reports on the laissez-faire leadership style, characterized by passive leadership and limited

guidance. The respondents’ views on how this leadership style affects SME performance are summarized below.

Table 6: Responses on Laissez-Faire Leadership Style and SME Performance

Statement

SA (5)

A (4)

N (3)

D (2)

SD (1)

Mean

Managers avoid making key

decisions.

(27.6%)

(33.1%)

(20.7%)

(10.3%)

(8.3%)

3.55

1.12

Lack of direction from leadership.

(31.0%)

(34.5%)

(19.3%)

12 (8.3%)

(6.9%)

3.64

1.07

Employees operate without proper

supervision.

(29.0%)

(31.7%)

(23.4%)

12 (8.3%)

(7.6%)

3.55

1.12

Leaders are passive and

unresponsive.

(29.7%)

(30.3%)

(20.7%)

(10.3%)

(9.0%)

3.52

1.15

Absence of leadership affects

productivity.

(32.4%)

(33.8%)

(17.2%)

14 (9.7%)

(6.9%)

3.62

1.09

Table 6 displays the views of participants concerning the impact of the laissez-faire leadership style on SME

performance. The results show that 40 (27.6%) strongly agreed and 48 (33.1%) agreed that managers avoid

making key decisions. Meanwhile, 30 (20.7%) were neutral, 15 (10.3%) disagreed, and 12 (8.3%) strongly

disagreed. The mean score of 3.55 and standard deviation of 1.12 reflect a moderate perception that key decision

making is often neglected.

Regarding lack of direction from leadership, 45 (31.0%) strongly agreed and 50 (34.5%) agreed. A total of 28

(19.3%) remained neutral, while 12 (8.3%) disagreed and 10 (6.9%) strongly disagreed. The mean value of 3.64

and standard deviation of 1.07 indicate a generally shared concern about inadequate leadership direction.

In response to whether employees operate without proper supervision, 42 (29.0%) strongly agreed and 46

(31.7%) agreed. Additionally, 34 (23.4%) were neutral, while 12 (8.3%) disagreed and 11 (7.6%) strongly

disagreed. With a mean of 3.55 and standard deviation of 1.12, the results suggest a moderate agreement with a

noticeable level of variability.

As for whether leaders are passive and unresponsive, 43 (29.7%) strongly agreed and 44 (30.3%) agreed. About

30 (20.7%) remained neutral, while 15 (10.3%) disagreed and 13 (9.0%) strongly disagreed. The mean score of

3.52 and standard deviation of 1.15 highlight concerns regarding leadership inaction.

Finally, on whether the absence of leadership affects productivity, 47 (32.4%) strongly agreed and 49 (33.8%)

agreed. Meanwhile, 25 (17.2%) were neutral, 14 (9.7%) disagreed, and 10 (6.9%) strongly disagreed. The mean

score of 3.62 and standard deviation of 1.09 suggest a consensus that lack of active leadership negatively

influences SME productivity.

During interviews, Participants described instances of hands-off management, typically during periods of high

trust in experienced employees or due to leaders’ workload constraints.

“There are times I delegate completely and let my managers run things, especially when I am busy with other

responsibilities.” (SME Owner)

However, challenges included lack of accountability, task delays, and unresolved conflicts due to minimal leader

intervention.

“When I step back too much, sometimes tasks get delayed because no one feels responsible.” (SME Manager)

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Respondents highlighted the importance of balancing supervision with autonomy to maintain performance and

promptly address issues.

“Even with hands-off leadership, there needs to be clear communication channels for reporting problems.”

(District Commercial Officer)

Performance Of Small and Medium Enterprises

This subsection evaluates the overall performance of SMEs based on respondents’ ratings of profitability,

employee satisfaction, customer satisfaction, innovation, and employee turnover.

Table 6: Responses on Performance of Small and Medium Enterprises

Statement

SA (5)

A (4)

N (3)

D (2)

SD (1)

Mean

SME meets profit and sales targets.

(35.9%)

(37.2%)

(15.2%)

(6.9%)

(4.8%)

3.95

0.98

Employees are satisfied with work

environment.

(33.8%)

(38.6%)

(14.5%)

(7.6%)

(5.5%)

3.91

1.01

Customer satisfaction has improved.

(31.7%)

(37.9%)

(16.6%)

(8.3%)

(5.5%)

3.87

1.02

Innovation in products/services

offered.

(30.3%)

(36.6%)

(17.9%)

(9.7%)

(5.5%)

3.81

1.04

Employee turnover is low due to

good leadership.

(34.5%)

(35.9%)

(15.9%)

(7.6%)

(6.2%)

3.89

1.00

Table 6 presents data on how participants assessed the performance of Small and Medium Enterprises (SMEs).

A total of 52 (35.9%) strongly agreed and 54 (37.2%) agreed that their SMEs meet profit and sales targets.

Meanwhile, 22 (15.2%) were neutral, 10 (6.9%) disagreed, and 7 (4.8%) strongly disagreed. The mean score of

3.95 and standard deviation of 0.98 indicate a high level of agreement that SMEs achieve their financial

objectives.

In terms of employee satisfaction with the work environment, 49 (33.8%) strongly agreed and 56 (38.6%) agreed.

A further 21 (14.5%) were neutral, 11 (7.6%) disagreed, and 8 (5.5%) strongly disagreed. The mean of 3.91 and

standard deviation of 1.01 suggest that the majority believe employees are generally content with their work

conditions.

When asked whether customer satisfaction has improved, 46 (31.7%) strongly agreed and 55 (37.9%) agreed.

Another 24 (16.6%) were neutral, 12 (8.3%) disagreed, and 8 (5.5%) strongly disagreed. The mean score of 3.87

and standard deviation of 1.02 point to a positive perception of improved customer satisfaction levels.

Regarding innovation in products or services offered, 44 (30.3%) strongly agreed and 53 (36.6%) agreed.

Meanwhile, 26 (17.9%) were neutral, 14 (9.7%) disagreed, and 8 (5.5%) strongly disagreed. With a mean of 3.81

and a standard deviation of 1.04, the findings suggest that innovation is moderately recognized among SMEs.

Lastly, for employee turnover being low due to good leadership, 50 (34.5%) strongly agreed and 52 (35.9%)

agreed. About 23 (15.9%) were neutral, while 11 (7.6%) disagreed and 9 (6.2%) strongly disagreed. The mean

value of 3.89 and standard deviation of 1.00 reflect a general belief that effective leadership contributes to staff

retention in SMEs.

During interviews, Performance was commonly measured through sales growth, customer satisfaction, employee

retention, and innovation outcomes.

“We track monthly sales, customer feedback, and how well new product ideas are implemented.” (SME Owner)

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Leadership was viewed as a critical factor influencing motivation, productivity, and long-term sustainability.

“Good leadership drives employee commitment, which in turn leads to better business performance.” (SME

Manager)

During interviews, different leadership styles were seen to affect outcomes variably; transformational leadership

was favored for fostering motivation, whereas autocratic and laissez-faire styles were linked to challenges like

low morale and inefficiency.

“When leaders involve and inspire staff, performance improves; when they are either too controlling or absent,

things suffer.” (District Commercial Officer)

Common challenges included lack of leadership skills among SME owners, difficulty balancing control with

employee empowerment, and inadequate training opportunities.

“Many SME owners lack formal leadership training, which affects how they manage their businesses.” (District

Commercial Officer)

Recommendations focused on capacity-building through leadership development programs, promoting

transformational leadership practices, and encouraging participatory decision-making.

“We need more workshops to train SME leaders on effective leadership to help improve their business

outcomes.” (SME Manager)

Policy support from local government and business support agencies was also suggested to enhance leadership

quality and SME growth.

“District authorities should provide regular mentorship and resources to SMEs to strengthen leadership.”

(Commercial Officer)

Correlation Analysis

This section presents the correlation analysis conducted to examine the relationship between leadership styles

(transformational, autocratic, and laissez-faire) and the performance of Small and Medium Enterprises (SMEs)

in Bushenyi District. The Pearson Product-Moment Correlation Coefficient (r) was used to determine the

direction and strength of the relationship between the independent variables (leadership styles) and the dependent

variable (SME performance). Correlation values range from -1 to +1, where values closer to +1 indicate a strong

positive relationship, values closer to -1 indicate a strong negative relationship, and values around 0 indicate no

relationship.

Table 7: Pearson Correlation Matrix

Variables

SME

Performance

Transformational

Leadership

Autocratic

Leadership

Laissez-Faire

Leadership

SME Performance

1.000

Transformational Leadership

0.713**

1.000

Autocratic Leadership

-0.536**

-0.342*

1.000

Laissez-Faire Leadership

-0.612**

-0.401**

0.521**

1.000

Note: Correlation is significant at the 0.01 level (2-tailed)

Correlation is significant at the 0.05 level (2-tailed)

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The correlation results reveal significant relationships between leadership styles and SME performance.

Transformational leadership demonstrates a strong positive and statistically significant relationship with SME

performance (r = 0.713, p < 0.01), indicating that the more transformational the leadership style employed, the

better the performance of SMEs. In contrast, autocratic leadership exhibits a moderate negative and significant

relationship with SME performance (r = -0.536, p < 0.01), suggesting that such a leadership approach adversely

affects business outcomes. Similarly, laissez-faire leadership shows a strong negative and significant correlation

with SME performance (r = -0.612, p < 0.01), implying that a hands-off approach significantly undermines SME

effectiveness. Furthermore, inter-correlations among leadership styles reveal that transformational leadership

negatively correlates with both autocratic and laissez-faire styles, whereas autocratic and laissez-faire leadership

styles are moderately positively correlated with each other.

Regression Analysis

This section presents a multiple linear regression analysis to determine the extent to which leadership styles

(transformational, autocratic, and laissez-faire) predict the performance of Small and Medium Enterprises

(SMEs) in Bushenyi District. The regression model helps to establish the contribution of each leadership style

in explaining variations in SME performance.

Table 8: Model Summary

Model

R Square

Adjusted R Square

Std. Error of the Estimate

.791

.626

.614

0.552

The R Square value of 0.626 indicates that 62.6% of the variance in SME performance is explained by the three

leadership styles (transformational, autocratic, and laissez-faire). The remaining 37.4% could be attributed to

other factors not included in the model.

Table 9: ANOVA (Analysis of Variance)

Model

Sum of Squares

Mean Square

Sig.

Regression

49.827

16.609

54.58

.000***

Residual

29.734

141

0.211

Total

79.561

144

The ANOVA table shows that the regression model is statistically significant (p < 0.001), indicating that the

leadership styles collectively have a significant effect on SME performance.

Table 10 Regression Coefficients

Leadership Style

Unstandardized Coefficients (B)

Std. Error

Beta (β)

Sig.

(Constant)

1.218

0.274

—

4.447

.000

Transformational

0.612

0.076

0.596

8.053

.000***

Autocratic

-0.308

0.083

-0.256

-3.711

.000***

Laissez-Faire

-0.354

0.078

-0.338

-4.538

.000***

The regression analysis indicates that different leadership styles significantly impact SME performance.

Transformational leadership has a strong positive and significant effect on performance (β = 0.596, p < .001),

suggesting that increased use of transformational behaviors enhances SME outcomes. Conversely, autocratic

leadership negatively and significantly influences SME performance (β = -0.256, p < .001), indicating that its

increased application leads to a decline in performance. Similarly, laissez-faire leadership also shows a negative

and significant effect (β = -0.338, p < .001), implying that its non-interventionist approach is detrimental to the

effectiveness and success of SMEs.

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CONCLUSION

The study concluded that transformational leadership is the most effective style for enhancing the performance

of Small and Medium Enterprises (SMEs), as leaders who communicate a clear vision, support innovation, and

actively engage employees contribute significantly to improved productivity and business success. In contrast,

autocratic leadership negatively impacts SME performance by limiting employee autonomy, reducing morale,

and discouraging participation in decision-making, which hampers creativity and operational effectiveness.

Similarly, laissez-faire leadership was found to have a detrimental effect due to its passive nature, resulting in

poor supervision, lack of direction, weak accountability, and decreased productivity. Overall, the study

emphasized that leadership styles are significantly related to SME performance, highlighting the need for a shift

toward more engaging, supportive, and participatory leadership approaches—especially transformational

leadership—to foster motivation, innovation, and sustainability within SMEs in Bushenyi District.

RECOMMENDATIONS

The study recommended that SME owners and managers should adopt transformational leadership practices.

This includes effective communication, empowering employees, encouraging innovation, and providing

visiondriven leadership to enhance overall business performance and employee engagement.

The study recommended that training and leadership development programs be introduced to build the capacity

of SME leaders in transformational leadership skills. Such programs will equip leaders with the necessary tools

to motivate their teams and foster a culture of continuous improvement.

The study recommended that autocratic leadership practices be minimized, particularly those that exclude

employees from decision-making and stifle their creativity and motivation. Reducing autocratic tendencies will

help improve employee morale and promote a more inclusive work environment.

The study recommended that laissez-faire leadership be avoided in SMEs, as it often results in disorganization

and inefficiency. Instead, leaders should maintain active involvement in planning, supervision, and staff

development to ensure clear direction and accountability.

The study recommended that policymakers and business support agencies in Bushenyi District organize targeted

workshops and seminars for SME leaders. These initiatives should focus on effective leadership and business

management skills to strengthen the overall capacity of SMEs and promote sustainable growth.

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