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This paper investigates the ways managing directors (MDs) in small and medium-sized enterprises (SMEs) involve employees in strategic conversations. The paper examines how managers interact with employees in strategic conversations, and why the managers do so (or do not), to generate empirically grounded knowledge about the nature of internal openness in SMEs.

This study employs a general inductive approach and is based on in-depth interviews with 60 Swedish MDs with development and growth ambitions.

The paper develops a model of employee involvement in strategic conversations based on the nature and intensity of the MD–employee interaction. A key finding is that SMEs exhibit wide variation in terms of employee involvement, from virtually no employee involvement to, in some cases, far-reaching company democracy. The reasons for this variation are complex, but personal preferences and company size are shown to have an impact, as does, to some degree, ownership structure. In contrast to existing research, the limitations and drawbacks of involving employees in strategic conversations are outlined.

The study provides important insight into MDs' views and practices of internal openness in strategic conversations in SMEs. A model of employee involvement in strategic processes is outlined, and potential limitations of internal openness are highlighted.

Drawing on the literature on pastoral power, a term introduced by Foucault that denotes a specific form of authority based on the subordinate's open communication regarding aspirations, interests and personal concerns, having the full faith in the leader's care of the subordinate's welfare, this article report empirical material from a study of Swedish construction industry.

Leadership practices are contingent on context and situation, and over time, authoritative leadership practices have been complemented by relational leadership that increasingly emphasizes the bilateral communication between manager and subordinate. The more communicative and “soft” leadership idiom may have both benefits and incur unanticipated consequences and conditions that need to be studied on basis of empirical materials.

Managers in the construction industry emphasize how subordinates increasingly turn to their closest managers to address a variety of concerns. Even though managers recognizes the value of providing personalized support, there is a risk that such a leadership idiom distract both managers and subordinates, i.e. counseling activities consume too much resources, making agents less prone to fully attend to proper project goals.

To consider contemporary leadership practices as partially premised on pastoral power provides new analytical possibilities that shed light on how leadership practice needs to correspond with new demands in the corporate setting.