Purpose: Leadership style is one of the most crucial human resource-related outcomes and one of the most studied topics in management. The study assessed the role of effective leadership on the employees of small and medium scale enterprises (SMEs) in the Cape Coast Metropolis in Ghana.

Study design/methodology/approach: A descriptive research design was adopted for the study and 205 participants responded to the questionnaire. Statistical Package for Social Science (SPSS) was used to analyze and present the data in tables for easy interpretation.

Findings: The findings from study demonstrate that, transformational, transactional, democratic, laissez-faire and autocratic are some of the leadership styles exhibited by the SME operators in the Metropolis. Secondly, planning and controlling ability, role model, self-confidence, age, rewarding achievement and influence by subordinatesare the factors that motivate employee’s behaviour at the workplace. Lastly, the study found out that, the benefits employees derive from effective leadership are; employees liked their job, received regular job performance feedback and also believed there is fairness in the way their performance is assessed, had an annual set of performance standards, felt secured and also had opportunities to advance in their line of function.

Originality/value: This study is useful to the SMEs operators and the National Board for Small Scale Industries (NBSSI) in Ghana to create policies on the leadership styles that will increase employee engagement and motivation, which will improve the economy growth in the country.