This literature review examines how research on boardroom dynamics at large publicly traded corporations — specifically the role of faultlines and heterogeneity in boards of directors — can be cross-purposed to inform leadership theory and practice in small and medium enterprises (SMEs). Drawing primarily on Tuggle et al. (2010), the paper summarizes findings on how diversity, weak faultlines, and entrepreneurial discussion patterns relate to organizational adaptability. It then situates those findings within broader SME leadership research, offering practical recommendations around collaboration, age diversity, knowledge management, and human resources strategy. Finally, the paper identifies key organizational contingencies — including leadership attitudes and employee knowledge bases — that may facilitate or impede successful implementation of these leadership approaches.
The paper demonstrates effective integrative synthesis: rather than reviewing multiple studies in parallel, it anchors the entire argument in one focal study (Tuggle et al., 2010) and uses additional sources to corroborate, extend, and qualify that study's findings. This focal-anchor technique is a disciplined way to construct a thematically coherent literature review rather than a loosely connected summary of sources.
The paper follows a four-part structure: (1) an introduction that frames the problem and the review's novel approach; (2) a summary and analysis of the central study on boardroom faultlines and heterogeneity; (3) a practical applications section that translates findings into SME-level recommendations supported by secondary research; and (4) an organizational contingencies section that critically examines barriers to implementation, followed by a brief conclusion. This progression from theory to application to limitation is characteristic of applied management literature reviews at the graduate level.
Leadership and management theories and strategies have proliferated at a rapid rate in the twentieth and twenty-first centuries, as organizations have grown larger and more complex and have faced pressures of a much faster pace of business. The demands made on leaders of business organizations — and the need for strong leadership in navigating the ever-more changeable waters of modern business — have grown along with businesses themselves, both in the degree to which leadership can affect operations and overall success and in the number of tasks and knowledge areas that leaders are expected to handle. Much of the diversification and increased scrutiny of leadership theories, processes, and practices can be attributed to the increased importance and complexity of leadership positions.
In something of an irony, however, the many different leadership theories and perspectives put forth in the modern era can make the task of leadership more complex and burdensome by offering too much information, some of which is mutually exclusive. Selecting a leadership theory — or a combination of leadership theories — with which to helm a company can be an onerous task in and of itself given the number to choose from, and different organizations and situations often call for different strategies and overarching theoretical frameworks. Grounding this task in relevant research does not necessarily make it easier, but it is the only way to ensure it is carried out properly and objectively.
The following literature review is constructed around the somewhat novel concept of cross-purposing leadership theories and research, attempting to see how an understanding of leadership at a large publicly traded corporation might inform leadership theories and practices for small and medium enterprises (SMEs). A summary of one specific piece of research detailing boardroom decision-making and leadership is provided, then contextualized and further examined through the support of other research focusing on specific leadership styles and SME success. This analysis allows for practical recommendations to be made as to how leadership theories and practices might be properly implemented in small and medium enterprises, and for an identification of organizational contingencies that may either promote or inhibit the implementation of the identified leadership skills, traits, and practices. Through this, it is hoped that this review contributes to the efficacy of leadership and the clarity of leadership research available today.
The research article selected for close inspection in this review examined the existence of faultlines in boards of directors and their relationship to entrepreneurial thinking, as well as evidence of other leadership qualities and practices in the organization in relation to these faultlines. Heterogeneity — more simply put, diversity — amongst these groups of organizational leaders is also explored in its effects on the actions, discussions, and decisions of the boards. This leads to some conclusions regarding overall leadership theories and strategies.
Tuggle et al. (2010) set out to study how faultlines — the existence of clear divisions within groups, which are often the result of a low level of diversity that creates distinct and then typically competing homogenous subgroups — affect other elements of decision-making and discussion amongst boards of directors. Specifically, the researchers focused on the level of entrepreneurial-type discussions and decision-making patterns, which can be seen as a measure of broader organizational and leadership innovation and flexibility (Tuggle et al., 2010). Their findings suggest that entrepreneurial discussions and decision-making patterns were increased by weak faultlines — generally caused by the existence of a great deal of diversity and thus many divisions that become less significant due to their number — and by other more specific factors of the groups' heterogeneity (Tuggle et al., 2010).
A variety of backgrounds, ages, and tenures on the boards in question was seen to increase the level of entrepreneurial discussion and decision-making, and the proportion of directors with output-oriented backgrounds increased such patterns overall, regardless of diversity patterns (Tuggle et al., 2010). All of this suggests that variegated leadership perspectives lead to greater levels of innovation, and also that collaboration in leadership can be an effective way of contributing to organizational growth and adaptability so long as proper measures to control for conflict are taken (Tuggle et al., 2010). The corporate boardroom, of course, is very different from the singular cluttered office of the small business owner or manager, as are the leadership demands of the organization, yet these findings may still be applicable.
The article summarized above is appealing from a small and medium enterprise management or leadership perspective because it provides a unique approach to the study of corporate leadership, which fits well with this review's goal of a novel approach to understanding SME leadership. Practical applications of the lessons of this research to smaller organizations might not be immediately obvious, given the lack of an extensive leadership team analogous to a board of directors, but careful examination of certain details in Tuggle et al.'s (2010) findings can yield relevant practical recommendations. These recommendations are further supported and made more comprehensive by additional research more directly focused on small and medium enterprises.
Knowledge creation and generation has always been tied to innovation, and though the research does not specifically address this, it is reasonable to assume that the knowledge diversity of boards of directors with weak faultlines contributed to their success. Small business managers can apply this lesson by recognizing and nurturing the knowledge assets in their organization — something they are much better positioned to do than managers and leaders in larger corporations — which can spark creativity and innovation from the bottom up (Von Krogh et al., 2012; Gong et al., 2009; Demmer et al., 2011). Studies have also shown that age diversity in small organizations is conducive to greater levels of overall productivity when age discrimination is controlled, directly applying the age and faultline lessons of Tuggle et al. (2010) to SME contexts (Kunze et al., 2011).
In order to apply these lessons in a practical manner, leadership individuals and managers at small and medium enterprises need to implement policies that promote diversity and the tolerance of that diversity, establishing projects, arranging shifts, and otherwise organizing operations to encourage or require direct and conscious collaboration. Encouraging a diversity of opinions in leadership discussions, as suggested by Tuggle et al. (2010), can also be applied to smaller organizations even without a group of leaders; in fact, employee input and collaboration on change initiatives is seen as essential for true success in such endeavors (Kotter & Schlesinger, 2008; Weber et al., 2009). As collaboration amongst employees has been directly linked to innovation and thus to organizational success for small and medium enterprises, and is suggested at least amongst leaders in larger enterprises, it would make sense to implement policies that mandated such collaboration at the operational level and in decision-making — even if there is a single final decision-maker (Rubio & Aragon, 2009; Tuggle et al., 2010; Kunze et al., 2011).
Means for achieving this level of collaboration can be as simple as holding regular meetings that involve all levels of staff, seeking input not just from department heads but from others as well. One-on-one meetings with lower-level employees on a regular basis might also be beneficial, reducing the pressure to give what are perceived as "desirable" responses in open meetings held in front of superiors. This would enable a small- to medium-sized organization to remain well integrated and collaborative, helping to generate greater levels of success.
Leadership at large organizations differs significantly in operation and in perspective from leadership at small and medium enterprises. Many of the same themes and recommendations still apply, however, and research into leadership at large corporations can be broken down and applied to smaller businesses. The fact that collaboration and diversity lead to innovation and success may not be surprising in itself; however, the fact that these dynamics yield such direct results in large leadership teams offers interesting insights into the leadership potential of smaller organizations.
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