An Exploration of Leadership Effectiveness in Service-Sector SMEs: Qualitative Insights from Malaysian Leaders and Employees
List of Authors
Ahmad Fadhly Arham, Nur Hidayah Hud, Zulkefli Muhamad Hanapiyah
Keyword
SMEs; Transformational Leadership; Servant Leadership; Qualitative Research; Malaysia Service Sector
Abstract
This study examines the predominant leadership styles in Small and Medium Enterprises (SMEs) within Malaysia’s service sector, the largest and most economically significant segment of the country's SME landscape. Despite their vital roles in employment generation, innovation, and economic growth, leadership practices in Malaysian SMEs have not been thoroughly explored from a qualitative, context-sensitive perspective. This research aims to provide insights into how SME leaders enact leadership and how employees perceive these actions, expanding understanding beyond predominantly Western models. Data were gathered through semi-structured interviews with four SME leaders and eight employees across various service-based subsectors, using purposive sampling to select high-performing, sustainable SMEs. Thematic analysis with ATLAS.ti software revealed recurring patterns, highlighting the dynamic interplay between transformational and servant leadership in shaping organisational processes. Five key themes emerged, indicating that transformational leadership is characterised by leaders’ ability to articulate compelling visions, foster creativity, and guide strategic decision-making. Concurrently, servant leadership reflects a commitment to continuous development, employee empowerment, and ethical responsibility. The blending of these approaches enhances organisational resilience, stimulates innovation, and supports sustainable performance in service-oriented SMEs. By integrating perspectives from leaders and employees, this study offers a dual-level qualitative contribution. Theoretically, it contextualises established leadership frameworks within an emerging economy; practically, it provides implications for SME leaders, policymakers, and support agencies seeking to enhance leadership effectiveness and ensure long-term sustainability. In conclusion, the study advances theories of transformational and servant leadership by illustrating their hybrid, contextually adaptive application within Malaysian service-sector SMEs, rather than treating them as distinct styles.