The characteristics of transformational leaders, when used appropriately, represent effective leadership and this leadership model can be effective to increase a knowledge-based workplace based upon developing and managing intellectual capital within small and medium-sized enterprises (SMEs). Building on the transformational leadership model, SMEs can attempt to continuously innovate and create new and valuable services or products by applying new ideas and knowledge. This article adopts a holistic approach to address the following research question: How can transformational leaders meet the need for innovative products and services? The answer to this question lies in a leader’s demonstration to facilitate the generation of new knowledge and ideas through motivating employees to more innovatively solve organizational problems. Moreover, transformational leaders inspire followers to rethink problems and challenge their current personal attitudes and values. Most importantly, transformational leaders transform SMEs by attempting to change the basic values, beliefs, and attitudes of followers so that they are willing to perform beyond their previous or originally level specified by the small and medium-sized enterprise in their job description.
Transformational leaders have been posited to be visionary leaders that attempt to develop a shared and inspiring vision for the future. Transformational leaders play a critical role in shifting SMEs toward the creation of new services and products. These leaders contribute to new products and services to meet dynamic market needs, through higher expectations and stimulation for new and strategic opportunities to meet the needs of customers in the emerging marketplaces.
Unfortunately, while the characteristics of transformational leaders are positively associated with organizational innovation, it is somewhat underutilized in SMEs worldwide. This is suspect and alarming because numerous empirical studies have found that there is a direct correlation between transformational leadership and organizational innovation. Many scholars highlighted transformational leadership as an enabler of innovation. Therefore, business leaders that may not be utilizing the transformational leadership model which has been posited as a managerial-based competency for SMEs operating in today’s innovative business environment can now explore the virtues of using this leadership model to improve organizational performance.
This article suggests that the way for small- and medium-sized business owners to make effective changes that are posited in the transformational leadership model. Furthermore, the recommendations of effective leadership are to focus on developing a strategic vision for their future strategic initiatives and organizational innovation. By accepting the challenge of transformational leadership, leaders may be capable to overcome their deficiencies and lead better in our hypercompetitive environment of today.
Two important dimensions that Canadian small- and medium-sized business owners can learn from this article are that the characteristics of transformational leaders can help followers to accomplish tasks that they would not ordinarily consider part of their competency. The question posited for Canadian executives and leaders in any and all SMEs is to accept the challenge of transformational leadership in order to address the current gaps in leadership effectiveness and improve their competitiveness in global markets.