Spirituality Leadership Applications in Small and Medium Enterprises (SMEs)

Abstract

This chapter aims to explore the spirituality leadership applications in small and medium enterprises (SMEs). The essence of leadership is crucial in managing the SMEs to achieve effectiveness and efficiency, although the employees would be in small number. Spirituality is not new concept and would be implemented in the modern organizations including the SMEs. The theory of spiritual leadership is also discussed together with the antecedents of spirituality in organizational behavior and its application in modernity context. Spirituality gives an impact to the performance of the organization and improves employees’ motivation. An empirical study is required to see the contributions of spirituality in business operation in general.

1. Introduction

Small and medium enterprises (SMEs) are considered as the backbone of a country because they are related to every aspect of economic and community life. SMEs are also seen as growth engines for economic and social transformation in a country. Nevertheless, there are real limitations faced by SMEs including insufficient employees, lack of financial resources, lack of experience and educational background, and lack of managerial knowledge.

The contribution made by SMEs reaching the micro and macro levels cannot be separated from the successful management of SMEs by effective leaders [1]. The leadership behavior or style of SME leaders is a key element and has a direct influence on organizational performance, competitive advantage, and the success of SMEs [2]. According to Avolio et al. [3], leadership plays an important role in organizational development and growth. Organizational leaders generally consider all business plans and decisions in an effective and timely manner. Leadership becomes more important when faced with new or changing situations. Various micro, small and medium enterprise (MSME) literatures have shown that weak and insufficient leadership skills are a major factor in the failure of SMEs. Therefore, SMEs need to develop their leadership behavior to bring the company through all situations, both calm and crisis.

Over time, the concept of leadership has been discussed and studied in a variety of different theories, approaches, and styles [4, 5]. However, there are no universally accepted concepts and definitions due to differences in organizational forms and contexts [6]. It is also not easy to define the concept given the size of the subject and the general conventions about field analysis.

Earlier Bass [7] states that the definition of leadership is closely related to the efforts of various possibilities. While Hirtz et al. [8] stated that leadership is a process by which managers for the purpose of directing their subordinates in order to work toward the company. The concept of leadership is also with stimulants and motivations that motivate people to achieve together [9]. This is in line with the statement of Hersey et al. [10] that the essence of leadership involves purpose through people.

Meanwhile, there is one concept called spiritual leadership that is rarely implemented, but it is crucial to be applied by the small and medium enterprises, which usually have a limited number of employees. How this concept could be applied? This would be questioned, and thus, this study aims to explore the application of spirituality leadership in small business. Moreover, this chapter will discuss the essence of leadership, the spiritual leadership theory, antecedents of spirituality in organizational behavior, spiritualism in modernity content, and conclusion.

2. Literature review

2.1 The essence of leadership

Leadership can be seen as a group process, personality attribute, art of encouraging gratification, exercise of influence, certain types of actions or behaviors, forms of persuasion, power relations, and instruments for achieving goals [7, 11]. According to Kotter [12], without leadership, the possibility of mistakes will increase and decrease the chances of success. Leadership enables collaboration, reduces conflict, contributes to creativity, and plays a role in integrating people even if not physically. Alas et al. [13] also look at leadership in terms of individual traits, leader behavior, interaction patterns, role relationships, follower perceptions, influence on followers, influence on task goals, and influence on organizational culture. This view focuses on the relationship between leaders and followers, but not on what conditions must exist for an effective leader to emerge or develop [14].

Kouzes and Posner [15] emphasize leadership issues on leadership methods, how to build and articulate a vision and values, develop strategic awareness and approach to team building. Specifically, the five leadership practices highlighted by Kouzes and Posner [15] are as follows:

1. Model the way—lead by example;

2. Inspire a shared vision—paint a clear picture for everyone to see and understand in achieving the organization’s future visions and dreams; belief and ambition; and the importance of dialog;

3. Challenge the process—change from the status quo and innovation (finding and enhancing product and service innovation opportunities; creating the right climate; anticipating risks and uncertainties);

4. Enable others to act—the team effort required to achieve the vision by building trust and strong relationships and encouraging collaboration of all stakeholders;

5. Encourage the heart—the importance of acknowledging contributions, appreciation; a culture of celebrating values and victories; and its relation to performance.

Leadership practice is often associated with the applied leadership style. However, the rapid changes in the environment, communication technology, and the development of community paradigms require the application of a leadership style that is in accordance with these changes. One option in solving these problems is a transformational leadership approach. Transformational leadership is comprehensive and integrated leadership ability for individuals, groups, and organizations to produce transformations marked by changes at every stage of activity. Transformational leadership is developed to deal with change by transforming individual paradigms and values within the organization to achieve organizational goals and vision.

Transformational leadership was first proposed by Downton [16], which was later developed by a sociologist in the field of politics, Burns [17]. Burns [17] connects the role of leadership with followers. As a leader, the task of a leader is to encourage the enthusiasm of his followers to achieve common goals. Transformational leadership has characteristics that emphasize intrinsic motivation and the development of followers [18]. The aspects of transformational leadership are characterized as follows:

1. Transformational leadership arises when members in the organization (leaders and followers) want high motivation and morality. This condition can arise when the organization is facing competition or a lot of customer dissatisfaction.

2. Transformational leadership seeks to motivate and inspire those around them by explaining the urgency of work and challenges. How to motivate this can be done with various approaches such as the needs theory approach, namely the fulfillment of the main needs of followers such as physical, security, social, esteem, and self-actualization needs. In addition, the creation of justice in the permanent system contributes in advancing the organization. Meanwhile, in terms of generating inspiration, it can be done through evaluation of the failures and successes that have been achieved in order to encourage the learning process through discussions, literacy studies, comparative studies, and so on.

3. Transformational leadership is able to reduce the dependence of followers on their leaders. This can be seen through the delegation of authority, developing the ability and confidence of followers, as well as encouraging flexibility in the implementation of teamwork, providing direct access to information, eliminating unnecessary control functions, and creating and empowering a strong work culture.

4. Transformational leadership develops visionary thinking.

5. Transformational leadership develops a collaborative way of working rather than a hierarchical way of working through individual learning and organizational learning. The collaborative way of working results in greater performance than the performance that results from individual systems.

6. Transformational leadership encourages the empowerment of followers so that they are appropriate in dealing with developments in situations and environments that affect the organization.

In addition to transformational leadership, there are other leadership styles that can also be applied in organizations including MSMEs, namely transactional leadership. Transactional leadership is known as a leadership style that motivates and encourages obedience by followers or subordinates through rewards and punishments. With this system the leader can keep subordinates motivated at least in the short term. This leadership style often occurs when someone takes the initiative in making contact with others to exchange things of value [19]. Bass [7] also revealed that transactional leadership is characterized by the provision of assessment through rewards, recognition, salary increases, and career advancement for members who perform well and vice versa, namely the provision of punishment for poor performers. Therefore, transactional leadership is often considered effective in achieving organizational goals [20].

Literally, transactional means “a transaction or exchange.” Transactional leadership is concerned with exchanges or transactions between leaders for the desired result by fulfilling the desires of the leader and the expectations of followers, which involves a promise or commitment and trust. Transactional leaders also accommodate the interests of their subordinates by providing incentives, honors, and promises to subordinates who have successfully fulfilled the commitments of leaders or organizations. Transactional leadership is able to encourage followers to perform in accordance with the wishes of the leader in the hope of obtaining rewards and rewards. Transactional leadership also facilitates subordinates to recognize obligations for work and goals to be achieved [21].

Sedarmayanti [22] classifies transactional leadership into:

1. Contingent reward, namely the leader will influence the behavior of subordinates by providing details of the work to be done to subordinates, with incentives as motivation to subordinates to achieve the results of the implementation of tasks;

2. Management by exception, namely the leader will influence the behavior of subordinates by using correction or punishment efforts as a consequence of decreasing performance from predetermined standards. In addition, the leader also influences the behavior of subordinates by actively monitoring the work done by subordinates and by corrective efforts to ensure that work is carried out and completed according to standards.

2.2 Spiritual leadership theory

The spiritual dimension in leadership studies produces a concept referred to as spiritual leadership. For the first time, the phrase “spiritual leadership” was used in an article titled “Spiritual Leadership: Meeting Whole-Self Needs at Work.” Several studies have stated the importance of spiritual values in organizations. Spiritual values in leadership are able to motivate and inspire employees in building the vision and culture of the organization and create employee commitment to the organization, which in turn also has an impact on increasing job satisfaction and employee performance. Spiritual leadership theory represents a paradigm shift in the study, research, and practice of leadership that can expand transformational and charismatic theory through ethical and value-based perspectives. According to Fry [23], spiritual leadership includes the following tasks:

1. Developing a purpose that inspires members of the organization to feel called, find significance, and make a difference in their lives.

2. Developing an altruistic love-based social/organizational culture in which leaders and followers truly care about, care for, and respect one another, resulting in a sense of belonging, being understood, and being appreciated.

There are several concepts about this spiritual leadership style [23], including:

1. A causal model of spiritual leadership in which an internal motivation model incorporates vision, belief, compassion for fellow human beings, application of spiritual theory at work, and spiritual endurance, as well as organizational results such as dedication and productivity.

2. Spiritual leadership as a collection of beliefs, attitudes, and behaviors that is inherently necessary to inspire one another in order for them to experience spiritual endurance via calling and membership.

3. Integrating Horton’s continuity of God as the supreme force with Smith’s perspective that all faiths embrace the vision and fundamental virtues such as humility, compassion, and honesty, the theory of spiritual leadership is able to explain how leaders and followers can be satisfied in their need for spiritual endurance.

Spiritual leadership style in building organizational culture can be done in four steps as follows:

1. The true intention is to build excellent inner qualities in leading, so that the organizational community will have full attention and istiqomah in serving their respective duties.

2. Developing a quality culture by building core beliefs and core values to the community that life and work are essentially worshiping God, so they must be done as well as possible.

3. Develop brotherhood among community members, so that synergistic cooperation between individuals and groups within the organization can be created to empower maximum potential.

4. Develop ethical behavior at work through the cultivation of gratitude and patience in carrying out the mandate.

Ubaydillah in Muajiz [24] defines spiritual intelligence with intelligence that elevates the function of the soul as an internal device that has the ability and concern to see the meaning behind the reality as it is. Spiritual intelligence is closer to the enlightenment of the soul. Heaton et al. [25] suggested a distinction between two constructs in spirituality, both pure and applied. Pure spirituality refers to an inner experience of pure self-awareness that is quiet and boundless, general praise of perceptions, thoughts, and feelings. An example of pure spirituality in Eastern culture is the technique of meditation. The term “applied spirituality” refers to the source of practical wisdom application and the result of which automatically arises from genuine spirituality’s experience (Figure 1; and Table 1).

Figure 1.

Spirituality representative schemes in management literature. Source: Pandey et al. [26].

	Subjective approach	Objective approach
Pure spirituality	Direct personal experience of silent awakening	Psychological relationship of personal experience on reality
Spirituality Applications	Personal reflection on the consequences articulation which considered conditions of the higher states of consciousness	Quantitative and qualitative research on physiological, psychological, organizational, and social variables before and after transcendental reality
Spiritual Development	Reflection on and articulation of one’s development process	Quantitative and qualitative research on psychological and social development

Table 1.

Methods of research on spirituality in organizations. Source: Heaton et al. [25].

The Spirituality Research by Pawar [27] draws from various literatures that can reflect various attentions on spirituality in the workplace, namely:

1. Spirituality in the workplace is a critical topic that has significant and prospective implications for the well-being of people, organizations, and society [28].

2. Scientific research has the potential to make major contributions to the field of organizational science [29].

3. De Klerk [30] observes about level of attention on spirituality in the workplace and clarifying the notion of the importance of motivation, which no longer necessary. He also places more emphasis on discussing toward spirituality more deeply. Pawar [27] also identified various recent studies on spirituality in the workplace that have different concerns, namely:

   • Focusing on the definition and operationalization of spirituality in the workplace [31, 32, 33, 34].

   • Provide a profile of the area of spirituality research in the workplace, and provide an outline guide to the direction and methodology of studies on spirituality [35, 36, 37, 38].

   • Describe the manifestation of spirituality at work in organizations [39].

   • Describe various organizational views that may facilitate spirituality in the workplace [40].

   • Identify different organizational characteristics, such as culture [41], leadership [23], and organizational practices [42], which may aid in the application of spirituality in the workplace.

   • Concentrating on the workplace effects of spirituality such as work attitudes [43], organizational productivity [44], and unit performance [45].

It is not easy to find empirical research on spirituality. Most of the writings on spirituality still revolve around the concept and methodology of spirituality. Two empirical studies that discuss spirituality are identified. The first is the study of Kolodinsky et al. [46], and second is Muajiz’s research [24]. These two studies represent research abroad and research within the country. While Kolodinsky et al. [46] conducted an empirical test of the effects of spirituality in the workplace.

Muajiz’s research [24] examines the effect of auditor training, emotional intelligence, and spirituality on auditor performance at the Directorate General of Taxes. The results showed that training, emotional and spiritual intelligence had a significant positive effect on the performance of auditors either partially or simultaneously. Spiritual intelligence has the greatest influence compared with the other two independent variables. However, the three variables above only have an effect of 23% on auditor performance while 77% are influenced by other factors not examined.

Muajiz’s research [24] divides spiritual intelligence into three dimensions:

1. Dimensions of spiritual ± religious relations, with indicators/questions:

   1. Love of God

   2. Better life motivation

   3. Self-understanding as a spiritual being

   4. Be bold in the truth

   5. The feeling of always being watched by God

   6. Patience

2. Social±religious relations, with indicators/questions:

   1. Contribution to the welfare of others

   2. Family ties between people

   3. Love for living things

3. Ethics ± social, with indicators/questions:

   1. Adherence to ethics and morals

   2. Amanah (keep promises)

   3. Can be trusted

   4. Tolerant of difference

   5. Anti-violence

   6. Match between words and actions

2.3 Antecedents of spirituality in organizational behavior

Pawar [27] states that there are four concepts as the forerunners of the concept of spirituality in organizations that have a concern for transcendent self-interest as discussed in spirituality in the workplace. The four concepts that have preceded spirituality are transformational leadership, organizational citizenship conduct, organizational support, and procedural fairness, all play a role in the workplace. These four concepts have emerged a decade earlier than spirituality in the workplace. Workplace spirituality emerged in the 1990s, while the four concepts described above emerged in the 1980s. This demonstrates that these four ideas are pioneers of workplace spirituality, as well as providing different explanations for the research of spirituality in the workplace, and also assisting the discussion of spirituality at work in the broader study of organizational behavior. However, the four preceding concepts are not the cause of the emergence of spirituality in the workplace. Transformational leadership is the leader’s capacity to inspire and encourage subordinates to accomplish more than expected and for higher internal benefits. This kind of leadership encourages followers to strive for transcendental objectives rather than self-interest and toward self-actualization rather than just pursuing stability. Below are the elements of the concept of transformative leadership [47]. The five factors are:

1. Charisma, where the leader is able to gradually instill values, respect, take pride in yourself, and express a vision.

2. Individual attention, which prioritizes employee requirements and offers beneficial initiatives for subordinates’ personal development.

3. Intellectual stimulation, in which the leader assists his subordinates in reassessing the issue rationally (encouraging subordinates to be creative).

4. Conditional reward, in which the leader instructs subordinates on how to get the reward they want.

5. Management by exception, where it is possible to allow work to be done without intervening unless the task is not completed on time and at a reasonable cost.

The term “organizational citizenship behavior” (OCB) was coined in 1983 through a study conducted by Bateman and Organ and also by a Smith study in the same year. This is based on what Organ said that measuring employee performance may not cover the overall performance that he actually does [27]. In other words, it does more than what it is supposed to do. This is done because it is driven more by an internal motivation called self-transcendence, rather than personal gains. Five aspects of OCB exist: altruism, conscientiousness, civic virtue, sportsmanship, and politeness. These dimensions represent the many ways in which workers pursue profit is not just to collect values and direct rewards for themselves. This shows that the concept of spirituality in the workplace seems to share the concept of employee transcendence in the OCB concept.

According to Eisenberger et al. [48], the notion of perceived organizational support reflects that organizations are concerned with employee values, well-being, and contributions. If employees perceive organizational support for them, then they will also provide benefits for the organization. This is called the norm of reciprocity, one party will repay the kindness of the party who has given him kindness as well. To a certain extent, this is also related to self-transcendence as well as spirituality in the workplace. This is proven by empirical results, where perceived organizational support has a significant effect on lower absenteeism and employee innovation behavior. This perceived organizational support consists of operational items referring to such things as hearing employee concerns, providing assistance when employees experience problems, and will not be replaced by other employees because there are other people who can replace them with cheaper salaries. From these indicators it appears that the organization is trying to give a sense of being part of the organizational community. Being part of an organizational community is one aspect of spirituality in the workplace and reflects self-transcendence [27]. The concept of procedural justice (perceived fairness) and the procedures used to make this procedural justice are self-interest models and group-value models [27].

According to the self-interest model, the presence of fair processes guarantees that people’s personal interests and desired outcomes are safeguarded. While the group-value model argues that individuals will follow the interests of their groups in order to accept the group toward themselves so as to have a psychological impact on their identification as part of the group. This can be seen as meeting the needs of the employee community with a sense of being part of the community. Therefore, procedural fairness may be seen as a means of ensuring a sense of belonging to the community. So that procedural justice can facilitate the self-interest of employees’ transcendence. Therefore, the concept of procedural justice in the study of organizational behavior is connected to workplace spirituality [27].

2.4 Spiritualism in modernity context

Spiritualism is not synonymous with religion, but has views and doctrines similar to or close to religion. It is said that spiritualism is a philosophy, doctrine, or (sort of) religion that emphasizes the spiritual aspects of everything. So the basis of spiritualism is the view that spirit is the essence of life and that the spirit is (eternal) and not destroyed by the death of the body or by body. Spiritualism is a religion for people who do not embrace it as religion formally, but at the same time emphasized that belief (spirituality) is based on belief religion.

Now when modern humans want spirituality and meanings of deeper life, they separate it from the things that are underlying spirituality, namely religious rules. Freeing spirituality of religion and science is an act of which both will lead to emptiness and inequality. Because spirituality without the ultimate goal of the Creator has only become a psychological spirituality that will arrive at a state of emptiness, calm, peaceful but no relative and practical things, which benefit others.

According to Comte [49], in the modern society, the religion becomes abandoned. But in reality this opinion is not entirely true. The modern society actually makes people are looking for spiritual values for themselves. Spirituality in fact is not only always related to religion and God, but spirituality also functions as a psychological solutions, obsession, or temporary spiritual need for some of them. Their curiosity about what spirituality is, they only use as a solution to a problem that they cannot deal with only with a ratio but requires their knowledge of their spirituality.

The high passion for the world of spirituality cannot be separated from the construction of modernity. Modernity offers a life of luxury and ease of living for humans, but this kind of life makes people seem to have lost direction and purpose of spirituality in their lives. Modernity makes them finally looking for a spirituality within themselves. This is due to a lack of knowledge about spirituality. They do not seem to find satisfaction in themselves because of their lack of spirituality even though they have a good life with an abundance of luxury and seem to have an easy life.

Spirituality does not only refer to the meaning of religion and God, but spirituality also refers to several aspects, such as referring to nature. Human awareness to restore a natural beauty, which is increasingly being eroded due to the rapid development of modern times. Human awareness of spirituality with nature will make the nature become beautiful again as in previous times. The awakening of spirituality is very much needed in this modern era in order to be able to rebuild what has been damaged and what has been lost due to the development of modern times.

3. Conclusion

The spirituality gives another view in the process of decision-making. Spiritual leadership’s goal is to instill the beliefs, attitudes, and behaviors necessary to inspire oneself (intrinsic motivation) and others in order to attain a feeling of spiritual survival as well as to create vision and harmony of values through individuals, empowered teams, organizational levels and assist development in terms of psychological welfare and organizational commitment. While a spiritual leadership style refers to a person who occupies a leadership position must be able to increase the effectiveness of his leadership with high ability to use a situational style, which means a different style in different situations and conditions.

The SMEs will receive benefits on the leaders’ role in their organization. Leaders could have 2–3 followers as it exists in the small business, but leaders could manage more than three followers. However, leading few people is easier than many people. In other words, the leaders in small business must be able to influence others to achieve the business goals easily and faster. The essence of leadership in SMEs is shown obviously, and it is would be an important factor to control the SMEs to obtain stability or continuity in their business operations. Leaders are not managers, thus their contributions are helpful to have better performance.

This study expectedly will add literature on leadership context as well as the spiritual leadership. Practically, the application of the spirituality leadership is real and adaptable. It is not always to be associated with the religion teachings but beyond that, it is applicable in various types of organizations particularly the small business. However, a real case in an organization and empirical study is needed to be conducted to see all elements of spiritual leadership play their respective roles.