Leading during a crisis: leadership styles, fear and psychological capital as antecedents of the organizational resilience of Small and Medium sized Enterprises in Kenya

Abstract

Leadership is critical for organizational resilience and can be especially important in a crisis. The present research examined how leaders within SMEs activate organizational resilience. This study aimed to evaluate the relationships between three distinct leadership styles—transformational, directive, and abusive (X)—and organizational resilience (Y). This relationship was examined through the mediating effect of employees' psychological capital (M), taking into account varying levels of employees' fear regarding COVID-19 (W). The final outcome was to develop a multilevel model that connects individual-level factors, such as leadership styles, psychological capital and fear, to organizational phenomena, specifically organizational resilience. This is based on the premise that individuals represent the acting entities in firms. This study used a quantitative cross-sectional survey research design to achieve its aim. Data were collected using structured questionnaires from a sample of 517 SMEs whose proportion was established through quota sampling technique. To enhance the accuracy of reliability estimates, the study included two employees from each SME, allowing for the simultaneous assessment by multiple raters. This approach resulted in a total sample size of 1,034 employees. These employees had a role in risk, crisis, emergency or business continuity and were selected purposively based on this knowledgeability criteria. Ethical considerations were followed throughout this study. Piloting, validation and verification was conducted to ensure data quality. 60 employees were involved in the pilot study to refine the research tool. A 58.22% response rate was achieved in the final study from 301 SMEs. Data were analyzed using descriptive statistics, correlation analysis and multilevel structural equation modeling. Internal validity was assessed using Cronbach’s alpha and composite reliability (CR) tests. Convergent reliability was determined using average variance extracted (AVE) and discriminant validity was ascertained using heterotrait-monotrait ratio of correlations (HTMT). Content validity was enforced by using validated measurement scales. Model fit statistics were assessed using standardized root mean squared residual (SRMR) and root mean square error of approximation (RMSEA). The results revealed that transformational leadership and directive leadership styles were significant positive predictors of organizational resilience. Abusive supervision on the other hand was a significant negative predictor of organizational resilience. Additionally, fear of COVID-19 moderated the relationship between the three leadership styles and employees’ psychological capital, such that the associations were stronger when fear of COVID was low versus high. Moreover, employees’ psychological capital mediated the relationship between the three leadership styles and organizational resilience. The joint moderated mediation model showed that the interactive effect of directive leadership and fear of COVID-19 via employees’ psychological capital had a significant positive relationship with organizational resilience. The same interactions for transformational leadership and abusive supervision were not significant. The finding underscores the significance of leadership style and highlights the crucial role of employees' psychological capital in mitigating the adverse effects of a crisis.