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Impact of Covid-19 on a Small-Medium Businesses
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Entrepreneurship & Organization Management

ISSN: 2169-026X

Open Access

Hypothesis - (2021) Volume 10, Issue 3

Impact of Covid-19 on a Small-Medium Businesses

Siddhi Bhagat1, Abbott J Haron2* and Hassan Shakil Bhatti3
*Correspondence: Abbott J Haron, Deputy Director of Research, Excelsia College, Australia, Tel: +6104824367568, Email:
1Master of Business Research Student, Excelsia College, Sydney, Australia
2Deputy Director of Research, Excelsia College, Sydney, Australia
3Master of Business Research Supervisor, Excelsia College, Sydney, Australia

Abstract

Change is essential for the survival of businesses. Change management professionals have underlined the need for organisational change and the need to involve employees in the decision-making process. Although change management is a relevant issue in today’s literature, the success or failure of change management processes depends on the choice of leadership style. The success rate of the change process has significantly been lower than expectations. This study focuses on studying communication withinSMEs (Small and Medium Enterprise), examining change readiness, and the choice of leadership style to justify the success or failure of change management. The main goal of this qualitative study is to explore change management strategies adopted by SMEs,because of the impact of COVID-19. The conceptual framework for this study is based on transformational leadership. This framework applied in the past would encourage and motivate employees towards achieving common organisational goals. Based on this notion, it is deemed that this framework can benefit change processes within SMEs. The target population consists of 15 participants. These participants will be interviewed using semi-structured questions through an online platform to maintain social distance. The data collected through the interviews will then aid data analysis process to derive a positive or a negative outcome of the study. The study also intended to make use of NVivo software for data analysis; however, a lack of experience in using the software can be a potential limitation of the course. The narrow scope of study focuses specifically on communications within SMEs to explore this phenomenon. As a result, the research only revolves around factors and themes affecting small and medium businesses.The findingsof this study will assist in identifying strategies that help SMEs survive and successfully implement organisational change. Furthermore, the study intends to explore areas of growth such as a change in leadership styles, structural changes in SMEs, technological improvement, and process developments.

Keywords

Change Management • Transformational Leadership • Covid-19 • Qualitative Study • Business Survival

Introduction

In the 21st century, competition is complex than ever before. According to an Australian government report (TPR, 2018), SMEs are facing increased competition from both international and domestic business environments. Also, very few SMEs are involved in international businesses [1]. It is a known reality that SMEsmake up about 98 per cent of all Australian companies that employ about 2.2 million people.The ABS [2] identify SMEs as an organisation with fewer than 200 employees and a turnover of less than $2 million. Considering the importance of SMEs to the Australian economy, it is vital to understand their future. Based on the performance of SMEs in 2019, it may prove to be the sector that is rapidly becoming complex compared to the yearbefore. One of the most common features inorganisations today is change, as it plays an essential role in the development of both the organisation itself and its leaders [3]. Organisations find themselves the need to adapt or alter their businesses operations to survive in a competitive market.

Change occurs in the form of advancement in technology, through mergers and acquisitions, modification of existing strategies, a shift in leadership style and much more [4]. Change is a critical factor for an organisation, and managing change is yet more challenging [5]. However, the three most communal areas of change are the structure of the business, technological development, and operational transformation [6]. Change readiness is a component of the change management process. Change readiness calls for a change of perspective,combined witha problem-solving approach [7]. However, Harvard Business Review stated that 70 per cent of change initiatives in large businesses fail, and little is done about it [8]. Without the necessary consideration and tools in place, the results will be unpredictable and harmful at worst. Moreover,the focus of change issolely on the leaders and the change of leadership, rather than understanding the change phenomena and its incorporation into daily life [9]. Due to the small structure of SMEs, the nature of leadership has a direct impact on its performance. This study, therefore, focuses on studying the existing leadership style and its effects on development strategies.

An exciting study stated that leaders tend to misread change or correctly anticipate their employees’response to change [10]. In an ideal scenario, senior managers initiate the change processes,and employeesimplement them. There is evidence that Employee Involvement and Participation (EIP) in SMEs have a significant impact onorganisations longevity and success [11]. Despite its significance, EIP is absent in academic studies [12], and businessesrarelyinvolve employees in change processes [10]. Thus, employees prefer the status quo. According to Murphy’s study, 37 per cent people liked their current status quo, demonstrating a gap betweensenior managementleadership and the view of their employees. Employees today seek to work in environments where they feel confident and canmake meaningful contributions. Hence, businesses undergoing change management that better understand their employees have a competitive advantage over their rivals.

Background and Context

The business environment is associated with an enormous amount of change, and strategies that are relevant today may not work tomorrow [13]. Change in leadership is necessary for businesses to survive and prosper [5]. In comparison, large and multinational organisationsdeal with leadership switch more swiftly than SMEs [13]. The success of change is highly influenced by leadership behaviours [14], and there is evidence that transformational leaders in the past have implemented change successfully [15]. Such leaders embrace strong connections and intellectual stimulations throughout their organisations to achieve success.

In assessing change management practices in SMEs, Done, Voss and Rytter [16] underlined that resource limitations restrict the ability of SMEs to achieve long term goals. Despite their importance to our economy, SMEs fail at the rate of 22 per cent (“New study reveals why Australian SMEs fail”, 2018). The main reasons why SMEs fail to achieve success is because ofthe lack of leadership, poor management skills, insufficient finances, lower job satisfaction amongst employees and the misinterpretation of the impact of change [17]. Researchers have discovered that employees often resist innovative performance because they lack skills and fear ofunpredictable outcomes [3].

Change management can be labelled a critical challenge for SMEs, which must design strategies to overcome said challenges and implement change successfully. Moreover, leaders should adopt an effective transformational leadership style to create a culture of growth and developmentwithin their employees [18].

Transformational leaders act as change drivers that help businesses implement change, and an effective leader can empower employees to embrace change [18] with minimal resistance.

SMEs are facing additional problems such as new government policies in response to the economic meltdown due to COVID-19,which sparked public health emergencies worldwide, causing commercial businesses to shut down and most people working from home. This means that SMEs had to operate below capacity or close entirely, leading to their collapse. The shutdown of SMEs is catastrophic for the Australian economy and resulted in several jobsloses, mental health issues and no source of income. This study looks at businesses that have avoided, managed, or mitigated such outcomes and continued operations despite COVID-19.

Problem statement

SMEs have struggled to perform better in comparison with large organisations. It also is a colossal task. To support the flow of credit into the market, the Australian government offered ‘The Coronavirus Small and Medium Enterprises (SME) Guarantee Scheme,’ along with the‘JobKeeper' payments to aid businesses to keep employees staffed [18]. However, from 28th September 2020, only eligible businesses were able to claim support from the 'Job Keeper 2.0' scheme. Thus, certain insecurity in the revenue gaps can be anticipated. In addition, only employees that were Australian citizens or residents were eligible for support payments from their respective employers. According to the records published by ABS, [2] 70 per cent of the companies in the hospitality sector experienced reduced employee hours,while 43 per cent ofcompanies experienced redundancies [20]. This resulted in a significant drop in the Australian labour market. Hence, organisations that survive uncertain times are likely to be more flexible, receptive,and dynamic in nature [21].

Research study has emphasised that change within SMEs help decrease operating costs and provide a competitive advantage [22]. However, given that the current economic crisis has an unprecedented shock on Australian SMEs and potential impact on its revenues. The focus of this paper is to study the performance of SMEs during the pandemic and strategies executed. The overall business problem in SMEs is that leaders are unaware of how to embrace and manage change properly to achieve success. Hence,the primary purpose of this study is to examine businesses that are surviving the current economic crisis brought about by COVID-19 by applying positive change management strategies and by supporting their employees.

Research Questions

Based on the theory stated above the research focuses on finding the following questions:

1. Whatstrategies are leaders adopting in SMEs in the face of COVID-19?

2. To what extent their change managementobjectives are met?

Relevance and importance of the research

The findings of this study aim to provide value to future business leaders to help recognise when to embrace change and develop survival business strategies. Leaders can develop strategies to mitigate any further risks. Also, the study will providemore evidence to encourage leaders to adopt transformational leadership to motivate their employees to follow and share in the organisation's vision [23]. Transformational leaders can change the expectation of their followers and motivate them towards a common goal. Leaders of SMEs can achieve success in change initiatives by adopting a transformational leadership style [24]. There exists a link between transformational leadership and organisational innovation [25]. SMEs form a large part of the Australian economy, and a healthy SMEs is a criterion for a growing economy and a high employment rate. SMEs leaders play a significant role in the daily operation of the business. So, to prosper, SMEs require knowledge and skills amongst the leaders to take appropriate actions. Due to the small structure of SMEs, leaders have a direct impact on business performance. Thus, studying the survival of SMEs in uncertain time will be beneficial.

Literature Review

The research question is appropriate for this study because SMEs are experiencing constant challenges and improving a leader's ability to understand and manage change is crucial. Change processes ideally involve engagement in the initiatives, resistance to change and successful change execution [26].

With the influence of transformational leaders, significant changes in the attitudes and assumptions of employees can build commitment towards achieving common goals [26]. Hence, effective leadership is vital to the success of SMEs and employee commitment.

This study's primary focus is to identify strategies leaders use to achieve success in addressing change. To address the research question associated with business practises, the use of qualitative research method proves advantageous [27]. Furthermore, qualitative research answers questions about experiences and perspectives [28]. In contrast, quantitative methods are appropriate when the statistical data is collected to answer the research question [29]. Therefore, the qualitative method is the most appropriate because it addresses the social phenomena, work culture, employees' attitude and learning processes [30].

Transformational leaders

The literature on transformational leadership has positively influenced the well-being of employees, transformed their beliefs, and improved their performance [17]. Transformational leaders are known to influence employees to participate in decision-making processes, motivate them to think independently and develop a problem-solving mindset [31]. Transformational leadership is defined as "a leadership style in which leaders encourage, inspire and motivate employees to innovate and create change that will help grow and shape the future success of the company" [32]. On the contrary, burns [33] defined transformational leaders as one who "engages with others in such a way that the leader and the follower raise one another to a higher level of motivation and morality". Bass defined a four-dimensional transformational leadership consisting of idealised influence, individualised consideration, inspirational motivation, and intellectual stimulation [34]. Bass's theory was later termed as a theory of managerial leadership [35].

Hence, Bass's definition is the most appropriate for this study. Researchsuggests that transformational leaders have a significant and positive role in organisational innovation, and some studies suggest that transformational leaders are risk-takers and succeed in achieving long term goals through new processes and systems [36]. Furthermore, scholars found that transformational leaders possess charismatic qualities and are mindful of what they say and how they say it [37]. Charismatic leaders demonstrate high self-confidence, achieve realistic goals, and increase employee morale. Hence, transformational leaders, along with charismatic traits, are likely to create emotional attachment, appreciation, sense of trust and respect from fellow workers [38].

Steve Jobs, the founder of Apple, was a transformational leader amongst the many existing leaders today. Steve Job's tactic was to create a culture of passion, enthusiasm,and empowerment by engaging employees in the decision-making processes [39]. This approach is reflected in Apple's competence to develop innovative products to adapt to a changing and competitive landscape, making it a successful business.

Leadership theories have evolved over the years and created new areas of research. In today's world, leaders must adhere to teamwork, communication, performance, job satisfaction and motivation. All the qualities mentioned above are terms used to describe transformational leadership back in 1978 by James Burns. There is evidence that transformational leaders can guide members to achieve vision, values, and beliefs to attain long term goals [40]. Research proves that any meaningful change in leadership styles has a direct impact on SMEs to survive the transition [40]. Centred on the ideathis research paper tries to identify a shift in leadership style because of the ongoing pandemic to study survival or failures of SMEs.

Key Debates on organisational change

Change is a constant process, and businesses must change to sustain themselves in a competing environment [15]. Researchers in the past have suggested that leadership theory that supports organisational change processes is the theory of transformational leadership [41]. However, several internal and external factors impacting change has increased the complexity of change. Hence, there are high failure rates to change initiatives (Phill,2018). Literature state that at the most 60 to 70 per cent of the change procedures fail [42]. Halmaddresses change as a quick process whilst, transition is a chaotic and a gradual process. The difference between the two can provide an understanding of why employees are unable to give up certain accustoms.

Scholars have exhibited evidence that change is continuous, and it requires employees to change customs and social practices continuously [14]. Furthermore, employees are unable to cope with new change practices and at the same time, deliver their best performance.A review of the literature suggests that failure to change processes is a result of a lack of integration between change efforts and leadership [14]. Integrated change strategies can help enterprises respond to both internal and external influences. It also helps the leader understand areas of challenge and take necessary measures. Furthermore, scholars stated that change brings improvement in the current dealings of a business to its desired future. Initial change readiness is crucial to gain success in change attempts [43]. Change readiness is the willingness of members to value change and attempts involved to implement it. Change readiness requires a commitment that can be achieved through transformational leadership to improve employee job satisfaction [44]. Hence, when change initiatives directly align withemployees' interests, employees start to support the change [44].

Survival of SMEs

Leadership in SMEs is frequently centralised. Also, a high number of SMEs have two or more owners [45]. Scholars highlighted that within an owner owned SME (Small and Medium Enterprise), an owner had a primary role in the decision-making process [46]. Hence, the development of leadership in SMEs is a critical challenge, as most SMEs lack leadership practices. Additionally, owners of SMEs have limited knowledge and time for leadership development [47]. The absence of leadership practices impacts the long-term sustainability of Australian SMEs. SMEs are considered as the mainstay of the Australian economy as it generates 98 per cent of the revenue. Despite this, the SMEs are more vulnerable than large businesses [48]. Having provided the importance of SMEs the Australian economy, its survival is a challenge. Hence, leaders in SMEs must adopt strategies to work collectively to achieve business success.

Relevance of Literature

The main aim of this qualitative study is to explore the success of SMEs under challenging economic conditions and a review of leadership approach. The literature review is developed based on the critical understanding developed from the journal, scholarly articles, and book reviews. Based on the literature stated above, SMEs undergoing crucial change must embrace change and adopt transformational leadership skills to sustain businesses soon. This will help SMEs develop leadership strategies, and practices to achieve long term goals.

Research design and methods

The target of this qualitative study is to examine the GoGet car share. The business was found in 2003 and is known for its car-sharing services in Australia [49]. GoGetcomprises of a team of 50 employees. There are 150,000 members all over Australia using GoGet services. GoGet operates in over 20 local governments spots in New South Whales (NSW). The business generates incomes from the trip's member make by opting for GoGet. The pricing begins from $6.50/hr to a maximum of $10.90/hr. Additionally,GoGet was awarded in 2004 for 'Australia Post Small Business Awards'. The business meets the requirements of employees and revenue to classify as a SMEs. The main aim of studying GoGet is to identify any strategies implemented because of the pandemic to ease business operations and survive the change. Additionally, with the social distancing rules in effect, the study will help us understand the challenges GoGet has conquered over the past couple of months.

Research method

Researcher's choice of the method determines the quality of research outcomes [50]. There are three types of research methods, qualitative, quantitive, and mixed methods. Researchadopts a quantitative methodology to provide statistical evidence and quantify a problem [29]. A mixed method, on the contrary, allows the researcher allows to explore a research problem by using both qualitative and quantitive methods [51]. Qualitative researcher examines behaviours, discovers the evidence, interviews participants, and analyses the data collected to add value to the information collected [52]. Therefore, a qualitative method addresses research phenomena, involves understanding peoples feeling, attitudes and learning experiences. Additionally, the qualitative research analysis is anticipated to answer the research question concerning leadership skills in SMEs.

Research design

The research design is envisaged to revolve around ethnographic, narrative, and case study design. The ethnographic approach helps research study social behaviours and beliefs of participants while the narrative approach transforms the stories of participants into subjective experiences [53]. A case study approach is suitable for this research study because it involves inquiring events in a real-world setting [54]. Case study method also uses interviews to collect subjective experiences.

Sample

The sample for this study will comprise of people from different departments within GoGet. The main reason was to get information from people from various levels of hierarchy within the business. This will help achieve a clear understanding of the impact of change on all employee levels. The participants for this study will consist of managers, account manager, operations manager, and member service team from Goget. Participants who worked with GoGet for at least one year and had been a part of the change process will form a part of the sample. Purposive sampling helps in selecting participants using predetermined criteria relevant to the study [55]. Additionally, the snowballing technique helps in creating referral chains. Snowball sample involves asking participants to refer acquaintances for the research study [55]. Hence, the use of both purposive and snowballing sampling technique serves the purpose of this study. Appropriate sample size to conduct qualitative research was 15 to 20 participants. Baskarada S [56] implies that a sample size of fewer than 15 interviewees is inadequate.

Also, Robinson [55] stated that anapproximate sample size with minimum and maximum is enough for a research study. Hence, the sample size for this study is dependent on the study mentioned above. The sample size, therefore, is established as 15 participants.

Data Collection and Analysis

The primary source for collecting data is through interviews. The interview questions are semi-structured open-ended questions to gather as much information possible. Recordings of the interview will be maintained for auditing reasons. Furthermore, the interview will only be recorded with the consent of the participants. Researchers suggested data saturation method helps derive information to the point [57]. Data collected by this method is rich in quality. Another form of data collection is through triangulation, using multiple sources [57]. However, studies have proven that the quality of data matters rather than the volume of data collected [52]. Hence, this study aims at adopting data saturation to gather precise information.

The interview will be performed following social distancing guidelines via online platforms. The interview is likely to be undertaken with a limit of one person at a time for privacy. Participants permits will take in advance for recording interview.The consent form for this research can be found in Appendix A. Participants will be sent the interview questions before the meeting to allow enough time for them to prepare their answers. A list of interview questionnaire also forms part of Appendix B. The interview questions are open to modifications for participants to understand them clearly. A pilot study is proposed to ensure that the interview questions suit the area of study [58].

Rowley [59] recommended a transcript review method to improve the reliability of the research study. The process of transcript review involves listening to interview recordings upon completing the interview process to transcribe the interview. In case of any follow-up question, the researchers can take notes and clarify them with the participants. This method is beneficial for the area of study as critical questions can be simplified by the members.

NVivo software helps research by coding the research data collected [60]. The use of the software does not support the researcher to analyse data. Instead, it codes the data drawing implications from the information gathered. NVivo software contains character-based coding, rich text capabilities and multimedia function for data management. Hence, the rationale for using software for coding data is greater efficiency in the research process and accuracy in data, thereby saving time and effort.

Implications and Contributions to Knowledge

It is anticipated that this study should finish by July 2021. As a part of the research, participants will be asked to sign a consent form, that clearly states voluntary participation upon being offered to be a part of the study. The information collected as a part of the research study is aimed to be recorded for college audit purposes. The data will be stored in the college's record until the duration of this study. The information gathered, and participants to the survey will remain confidential. Disclosure of such information can put the applicants and the company's image at risk. Participants will be sent a consent form along with interview questions through email. This will provide members with a brief understanding of the study. To improve the quality of data collected is it determined that the note-taking process must be included during the interview process.

The primary purpose of this study is to explore strategies adopted by SMEs to survive the pandemic. Organisational change is a necessity for businesses to thrive. Organisational change has been ongoing for many years; however, the main question here, whether small and medium businesses could survive such a transition. The answer to this question is still is not clear. An in-depth study in this area will help develop unified theories and provide solutions to resolve existing resistance in both small and medium enterprises.

References

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