Labour flexibility in SMEs: the impact of leadership

Abstract

Purpose – The purpose of this paper is to investigate the relationship between transformational and transactional leadership, and labour flexibility within small to medium-sized enterprises (SMEs). Using a sample comprising 755 employees, rating 121 supervisors within 50 Dutch small and medium-sized companies, the authors examined the relationship between transformational and transactional leadership on the one hand, and temporal and functional flexibility on the other. Further, to test whether the expected associations could be perceived as a social exchange between supervisor and employees, this study investigated the mediating role of affective organisational commitment. Design/methodology/approach – Because data were nested, the authors used multilevel analysis for hypothesis testing. Findings – Both dimensions of transformational leadership, visionary leadership and coaching, were positively related to temporal flexibility; also two dimensions of transactional leadership, contingent reward and active management by exception, were also positively associated with temporal flexibility. All of these associations were mediated by affective organisational commitment, indicating social exchange relationships. As opposed to expectations, passive management by exception, representing poor transactional leadership, was positively related to temporal and functional flexibility. Affective commitment did not mediate these relationships. Practical implications – SMEs are therefore advised to improve visionary leadership, coaching skills, contingent reward, and active management by exception. Originality/value – The paper shows that, remarkably, labour flexibility can be increased by both effective and poor leadership. On the one hand, effective leadership seems to promote temporal flexibility by creating employees’ commitment to the organisation. Poor leadership, on the other hand, does not call for people's affective commitment and thus seems to be forcing employees into demonstrating flexible behaviours, as a way of compensating for bad management