IMPACTS OF LEADERSHIP STYLE ON ORGANIZATIONAL PERFORMANCE – Term Paper

Abstract

The purpose of this research proposal is to assess the impact of leadership style on organizational performance, focusing on transformational and transactional leadership. The intended research would focus on the characteristics of transactional and transformational leadership and the effects that these characteristics have on the employees commitment, motivation, satisfaction and the consequential impact on an organizations performance. Various studies that have been previously conducted indicate mixed responses on the impacts of leadership style on organizational performance. However, there is a general idea that there exists a correlation between leadership style and organizational performance.

The proposed research would be based on a deductive philosophy while the research design would be both quantitative and descriptive. A survey technique using the Multifactor Leadership Questionnaire (MLQ) would be adopted for data collection. Data would be collected from organizations in West Midland in England, which would be sampled using a stratified sampling method. The respondents from these organizations would be sampled using random sampling method. A total of fifteen organizations would be selected to participate in the study while a total of 15o respondents from the organizations would be used in the study. The collected data would be analyzed using correlations and Ordinary Least Squares (OLS) through the aid of multiple regression. SPSS would be employed during the analysis. Maintain an ethical approach is important in every study, and therefore, the major ethical principles to be maintained include consent, privacy, and confidentiality.

Keywords: Employees commitment, Employees motivation, Leadership style, Organizational performance, Transactional leadership, Transformational leadership

Chapter I.

Introduction

General

This chapter entails the background of the research as well as the research question and research objectives. Additionally, the chapter features the significance of undertaking the proposed research.

Background

In every organization, profit oriented or otherwise, human factor plays a vital role in achieving its goals. Precisely, leadership style plays a vital role in shaping an organizations culture, which we all know is significant in any organization (Ogbonna & Harris, 2000). Employees motivation and commitment to their organizations as well as their work is a function of the manner in which they are handled. Each leadership style has different characteristics that determine how employees are handled and consequently the effect on the organizations performance. Controversial issues have been raised concerning transactional and transformational leadership in relation to organizations performance (Judge & Piccolo, 2004). While some studies have indicated that transformational leadership has a positive impact on organizations performance, others have indicated that the impact is insignificant to an organizations performance. John & Chattopadhyay (2015) indicated that both leadership styles have a positive impact on an organizations performance. Therefore, based on the controversial claims by various researchers, it is important to undertake a research to determine the impact of leadership styles on an organizations culture and performance, with a focus on transactional and transformational leadership styles. 

Research Question

• Which leadership style is effective in enhancing an organizations performance between transactional and transformational style?

Research Objectives

Leaders have direct impact on their followers commitment and motivation to meet the common goals, which means they influence the performance of their organizations. Committed and motivated followers or employees lead to improved performance. Therefore, different leaders elicit different impacts to the employees commitment and motivation, meaning that they influence the performance of their organizations.

Therefore, the main objective of the proposed research is to determine the impact that transformational and transactional leaders have o their employees, and the subsequent impact on the organizations performance. To determine this, the research would also assess the various characteristics of transformational and transactional leadership styles. Ultimately, the research aims at providing the contemporary organizations with the various leadership characteristics that are favorable to employees, and consequently, the favorable leadership style to enhance an organizations performance.

Significance of the study

The study results would be significant in helping clear the controversial issue concerning leadership style and organizational performance. Additionally, the study would be significant among the organizations by enabling them adopt a favorable and an effective leadership style. This would enable a favorable development and growth among organizations.

Chapter II

Literature Review

This chapter contains information on the previously undertaken researches relating to the proposed study subject. The information is based information collected in relation to leadership styles, transformational leadership, transactional leadership, relation between leadership style and organizational performance. It focuses on the studies that support and ones that contest the general study subject. Additionally, the chapter contains a review of the available literature, where the researcher identifies the gaps and limitations of the previously conducted research.

Leadership Definition

According to Daft (2015), leadership can be conceptualized as a process, an art of inducing compliance, attribute of personality, a type of behavior or action, an exercise of influence, a tool to achieve goals, a power relationship, or result of an interaction. Dvir, Eden, Avolio, & Shamir (2002) define leadership as an influential process of ensuring that the efforts of an individual are aimed towards goal attainment. Chiang & Wang (2012) define leadership as the process of ensuring and influencing the followers enthusiasm and will to attain the objectives. Kotter (2012) admits that without a leader, chances of mistakes are increased while the probability of success and goal attainment is lowered. Therefore, leadership can diminish conflicts, allow cooperation, unite people, and promote creativity. Leadership, incorporated with incentives and stimulants, determines the followers motivation and will towards meeting the common goals. In business organizations, the leader determines the will and motivation of the employees towards meeting the organizations goals (Simosi & Xenikou, 2013).

Leadership Approaches                

There are various approaches to leadership, each with unique characteristics and ideologies. The proposed study aims at assessing transactional and transformational leadership.

Transactional Leadership Style

Transactional leadership style is based on the notion of physical as well as security needs of the followers. The relationship between the leader and the subordinates is based on the reward system or the bargaining exchange. Transactional leadership contains three components, which include contingent reward, active management by exception, and passive management by exception (Judge & Piccolo, (2004). Contingent reward component means that the followers motivation and will of goal achievement is based on the nature and size of the reward. Active management by exception component means that the leaders monitor the performance of the followers and take the relevant actions in case of any deviations to ensure that goals are attained. Passive management by exception component means that the leaders do not intervene in the actions of the followers until when the problems become transparent and serious. Leaders focus on the reward system and also on punishment as a way of instilling motivation to the followers, with the aim of ensuring that they meet the goals (Lowe, Kroeck, & Sivasubramaniam, 1996).

Transformational Leadership

Transformational leadership style focuses on the needs and development of followers as a way of enabling them meet the common goals (Dvir, Eden, Avolio, & Shamir, 2002). The leaders with this style aim at identifying the followers needs and weaknesses to help them meet the goals of the organizations. The leaders objective is to alter the minds and the hearts of the followers to enlarge their insights, understanding, and vision to ensure that their behavior is congruent with their values and concepts. Bass and Avolio (2003) state that transformational leadership occurs when the leaders concern is focused on the interests of the followers, so that they shape the interests of the organization beyond their own interests (Bass et al., 2003). Bodla & Nawaz (2014) claim that transformational leadership is characterized by a number of features which include idealized influence, intellectual stimulation, inspirational motivation, and individualized consideration. These leaders aim at approaching old circumstances in new techniques. The leaders also encourage innovation and creativity among the subordinates by reframing problems and questioning assumptions (Daft, 2015).

Leadership and Organizational Performance

Ibrar (2016) claims that there exists a significant relationship between leadership and organizational performance. An effective leadership style gives an organization a competitive advantage as well as management development. A study by Igbaekemen & Odivwri (2015) that aimed at assessing the impact of leadership style in school performance, indicated a positive correlation between the two. According to Igbaekemen and Oddivwri, enterprises attribute their performance to management; that is, the administrative supervisors and officials determine the organizations performance. When the leaders of an organization show care, concern, and respect for the employees, it boosts the employees motivation and will to achieve the objectives. Additionally, employees can be motivated to achieve the objectives based on the rewards they gain after achieving these objectives (Awamleh & Gardner, 1999).

A study by Ojokuku, Odetayo, and Sabuyigbe (2012) indicated that leadership style has both positive and negative impact on an organizations performance. Specifically, the study indicated that bureaucratic, complex, and leaders who do not encourage a close relationship with the followers report poor performance in their duties. On the other hand, a study by Eslami and Gharakhani (2014) indicated that autocratic and leaders who tend to support their followers towards achieving the common goal report a high performance. These studies adds to the proposed research by indicating the various attributes that can contribute to high or low performance among the leaders. The proposed research would focus on the attributes that the leaders within the selected organizations encourage among their employees.

According to Randeree and Chaudhry (2013), rewarding employees according to their performance is the key factor in improving an organizations performance. In many organizations today, employees do not share equal rewards and benefits, even if they dwell on the same job group or have similar qualifications and skills, simply because of their difference in performance (Eslami & Gharakhani, 2014). However, developing and supporting employees too has proved to increase their performance. Giving an employee the necessary resources and expertise can also improve their performance (Itegi, 2015).

In terms of organizational performance, most of the past researches consider financial indices as the only tools for assessing an organizations performance (Simosi & Xenikou, 2013). However, in the current world of business, financial indices are only a part of the tools for assessing an organizations performance. Non-financial instruments should also be considered while assessing an organizations performance. Such non-financial factors include employee morale and product quality. Meyer et al. (2002) claims that one of the key determinants of organizational performance is job satisfaction and organizational commitment. Job satisfaction refer to the responses that an employee has towards any job while organizational commitment refer to the thoughts and feelings that an employee has towards their organization as well as their work. Meyer postulates that these factors can be affected by leadership style adopted within the organization. Therefore, this information would help in developing the literature of the proposed research by focusing on the job satisfaction and organizational commitment among the employees of the selected organizations.

The available literature presents a cascade of limitations that the current literature aims at addressing. Most of the literature undertaken in relation to the field of leadership and organizational performance is general. The studies undertaken within the field do focus on only transactional and transformational leadership styles, but put much of the attention on the general leadership styles. This makes analysis difficult while the validity and reliability of the results are compromised. Therefore, the proposed research aims at assessing the controversial claim on the impact of transactional and transformational leadership styles on organizational performance. Additionally, most of the available literature is based on theoretical data, which makes it difficult to generalize the study results. The proposed research aims at filling the gap by undertaking an empirical study among employees within organizations of various organizations.