The Relationship between Leadership and Performance in Enhancing the Sustainability of Social Enterprises

Abstract

As social enterprises are established for the purpose of solving local problems, the sustainability of social enterprises is also important for local development. In order to increase the sustainability of social enterprises, performance improvement is necessary, and research on finding leadership styles suitable for social enterprises continues to be an important method of performance improvement. However, despite considerable interest in social enterprises over the past few decades, no consistent conclusion has been reached about what leadership style is appropriate for social enterprises. The present study aimed to find a suitable leadership style for social enterprises within the major leadership styles recognized in commercial enterprises. This study investigated the impact of the three major leadership styles in commercial enterprises on satisfaction and performance in social enterprises. Based on prior research, transformational leadership, with its capacity to promote change and support the achievement of goals, was considered appropriate for social enterprises, and entrepreneurship was also considered as challenge is important for balancing economic and social purposes. Servant leadership also focused on the importance of providing support for employees on the basis that employees’ success is the success of social enterprises. In this study, in order to broadly understand the performance of different leadership styles, job satisfaction and leader satisfaction were considered at the individual level, and economic performance and social performance were considered at the firm level. To support the argument of this study, the researcher aimed to survey employees who perceive a leader as possessing leadership qualities in social enterprises. For this purpose, a survey on transaction leadership was conducted among employees who participated in a three-week training session related to social enterprises. And on the last day of training, three leadership and four outcome variables were surveyed. Analyzing data form 170 respondents in 52 social enterprises whose evaluation of their leader’s transactional leadership was higher than the average, the present study found that transformational leadership had a positive relationship with all four variables considered as leadership outcomes. And this study found evidence that entrepreneurship had a positive relationship with job and leader satisfactions, but the impact of entrepreneurship on economic and social performance was insignificant. However, servant leadership had a positive relationship with leader satisfaction and social performance, but the impact of servant leadership on job satisfaction and economic performance was insignificant. These results contribute to confirming that the emphasis on leadership styles in commercial enterprises can effectively operate in social enterprises as well, and that the effectiveness of leadership can vary depending on the desired outcomes.