Abstract :This study examined the relationship between contingency reward, Management by exception, passive avoidance and performance of SMEs and provided further proof of research conclusion that transformational leadership could predict follower performance beyond the effects of transactional leadership. Having delineated hypotheses to draw these relationships, questionnaire survey was employed to collect data from owners/managers of SMEs in Nigeria. The results of the study show that there are positive significant relationships between charisma, inspirational motivation, intellectual stimulation & individualized consideration, management by exception and firm performance. While there is no significant relationship between contingency reward, passive avoidance and firm performance. Conclusion is drawn and recommendations are made.