Impact Of Leadership Styles

Leadership styles – Transactional leadership and transformational leadership have gained attention over a period of last few decades (Bass, 1988; 1990; Bass and Avolio, 1993; Hartog, et al., 1997). According to Kirkpatrick &Locke (1996), Transformational Leadership and Transactional Leadership both are directly related with numerous workplace outcomes such as job satisfaction, group performance, employee’s performance, and organizational commitment. These results have also been tested in different research settings (Al-Dmour & Awamleh, 2002).In spite of this, the effects of managerial leadership styles from transformational and transactional perspectives have not been validated in IT firms. A key objective of this study is to fill this knowledge gap. This study will assess the effects of transformational and transactional leadership styles on employees’ performance in IT firms in India. According to Lewis et al (1998), In the 21st century, managers and leaders are expected to cope with a rapidly changing world of work. Hooper & Potter (2000) suggests that managers will have to be competent leaders in order to transform their people to achieve the required company outcomes. Ryback (1998) describes a 21st century leader as having the ability to demonstrate a greater empathy and concern for people issues than his/her earlier counterparts. Managing projects in the information technology domain remains challenging, since various global trends contribute to rising complexities. Software development projects account for a very large portion of the overall IT outsourcing market. According to Dibbern et al. (2008), prior information technology research has provided a list of possible reasons why IT offshore outsourcing projects fail to meet the initial goals and expectations of both client and vendor. However, research is still limited dealing with leadership and management of Information technology projects (Lee 2008; Mao et al. 2008). Carson et al. (2007) states that one of the most important issues within project management is leadership. However, research about the crucial leadership styles focusing on IT projects is still limited. IT projects experience high failure rates since many years. The Standish Group reported significant time and cost overruns, add to by not fully meeting quality expectations of the project sponsors (Xia and Lee 2004). The primary reason, however, are not technological, but rather managerial issues (Scott and Vessey, 2002). Sumner et al. (2005) states that to successfully implement technical projects, strong project leaders with superior leadership skills are essential which will offers the potential to contribute to IT project success. Durham et al. (1997) states that research has proved the importance of leadership behaviour for team effectiveness, and for employees ‘performance. According to Sumner (2000), lack of leadership or ineffective leadership is among the top hindering factors for IT project success. IT leaders often lack interpersonal leadership skills, because technical employees get promoted to become project leaders due to their technical knowledge, not for their people management capabilities (Rosenbaum 1991).

The effect of transactional and transformational leadership style on employees performance have been validated on Health, Retail, Education and manufacturing sectors. There is a limited knowledge or research conducted on the leadership style of the project leader/team leader in the IT sector and how it affects the employees’ performance. This research aims to investigate the relationship between the effective team leader/Project manager leadership style and subordinates performance. The literature review discusses the link between Transformational leadership and employee performance and also the link between transactional leadership styles and employees performance.

Objective of the Research

This study investigates the impact of transformational leadership and transactional leadership style on employee’s performance. The objectives of this research are:

Evaluation of the employees’ performance in relation to the transformational and transactional leadership styles.

Assessing the employees’ preference over transformational and transactional leadership style.

Finding the recommendations to improve employees’ performance with the help of transformational and transactional leadership style.

Literature review

Leadership and performance

Yukl (1994) defined leadership as a social influence process whereby intentional influence is exerted by one person over other people to structure the activities and relationships in a group or organization.

Max Weber is one of the major contributor of leadership and theorists to observe the parallel between the industry mechanization and bureaucratic forms of organization (Morgan, 1998).According to (Bass, 1990 & Morgan, 1998) , the classical theorists such as Henri Fayol and F. W. Mooney, loyal advocates of bureaucratization in contrast to Weber, identified methods through which this kind of organizational structure could be achieved. These classical theorists set the basis for many modern management techniques. Weber’s concern about bureaucracy, however, did not affect theorists who set the stage for what is now known as “classical management theory” and “scientific management” (Stone et al., 2005).Scientific managers focused on the systematic management of individual jobs while the Classical theorists focused on the design of the total organization (Stone et al., 2005).Scientific management, an approach introduced by Frederick Taylor, was technological in nature (Hersey, Blanchard, & Johnson, 1996). Taylor initiated time-and-motion studies to analyse work tasks to improve worker productivity in an attempt to achieve the highest level of efficiency possible. He has also been accused of viewing people as instruments or machines to be manipulated by their leaders. Under scientific management theory the function of a leader was to establish and enforce performance criteria to meet organizational goals; therefore, the focus of a leader was not on the individual worker but was on the needs of the organization.

Emerging theorists encouraged leaders to recognize that humans were not machines and could not be treated as such. During mid-1940s, a post bureaucratic shift moved everyone taking responsibility for the organization’s success or failure (Heckscher&Donnellon, 1994). Researchers started to examine the relationship between the leader behaviour and the other outcomes such as follower satisfaction level, organizational productivity and profitability. According to Griffin and Moorhead (2011),two of the first behavioural approaches to leadership were the Michigan and Ohio state studies which were conducted during 1940’s and 1950’s.The results of the Michigan studies suggested that there are two fundamental types of leader behaviour, job -centered and employee-centered which were presumed to be at opposite ends of a single continuum. The Ohio State studies also found two similar kinds of leadership behaviour “consideration” and “initiating structure” but this research suggested that these two types of behaviour were actually independent dimensions. These characteristics could be either high or low and were independent of one another.

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A new theory of organizations and leadership began to emerge based on the idea that individuals operate most effectively when their needs are satisfied (Stone et al. 2005). Maslow’s (1959) Hierarchy of Needs says that once a worker’s physiological, security, and social (intrinsic) needs were met, productivity would only be possible if the employee’s ego and self-actualizing (extrinsic) needs were also met.

During 1950’s and 1960’s, the behavioural theories came into existence. According to Bass (1990), Theorists began to consider behavioural concepts in their analysis of organizational leadership and focused to understand the relationship between a leader’s actions and the follower’s satisfaction and productivity. Barnard was involved in including behavioural components and his work focused on the behavioural components analysis of organizational leadership.Barnard claimed that leadership involves accomplishing goals with and through people (Bass, 1990).

Subsequently, the goal of effective leadership was evolving and was moving away from classical and scientific management theories that treated workers as machines.

According to (Johnson et al, 1996, p. 100), “the real power centers within an organization were the interpersonal relationships that developed among working groups”. Based on the idea that individuals operate most effectively when their needs are satisfied, a new theory of leadership began to emerge. McGregor (1960) work was closely linked to behavioural theorists, providing a foundation for the future emergence of transformational leadership. McGregor Theory Y says that individuals do not essentially dislike work and, under certain conditions, work could actually be a source of great satisfaction (Pugh & Hickson, 1993). Theory Y assumed that individuals would employ self-direction and self-control, accepting and seeking responsibility (Pugh & Hickson, 1993).During 1960’s, researchers acknowledged that leaders did more than simply act they often had to react to specific situations, and thus, the situational/contingency theory of leadership evolved (Stone et al., 2005). However, in an apparent return to the ‘one best way of leadership’, recent studies on leadership have contrasted ‘transactional’ leadership with ‘transformational’ leadership.

According to Cummings and Schwab (1973), Leadership is perhaps the most investigated organisational variable that has a potential impact on employee performance. For the strength of an organization job satisfaction plays a vital role which has significant effect on employee performance.Walumba & Hartnell (2011) suggests that the word performance is used to pass on the individual aptitude to be inspired, stirring, pioneering and to determinant to achieving the goals on an organization. Bass (1990) and Burns (1978) suggest that strong leaders outperform weak leaders, and that transformational leadership generates higher performance than transactional leadership. The researcher aim is to discuss whether the transformational leadership does really stimulate the employees for higher performance. From this we can conclude that transformational leadership stimulate higher performance.

Cummings and Schwab (1973) suggest that in order for an organisation to perform an individual must set aside his personal goals, at least in part, to strive for the collective goals of the organisation. Employees are of paramount importance to the achievement of any organisation and hence effective leadership enables greater participation of the entire workforce, and can also influence both individual and organisational performance (Bass, 1997; Mullins, 1999). For an effective organisation, there must be effective and stimulating relations between the people involved in the organisation (Paulus et al. 1996). It is generally accepted that the effectiveness of people is largely dependent on the quality of its leadership and hence effective leader behaviour facilitates the attainment of the follower’s desires, which results in effective performance (Fiedler and House, 1988).Previous study results shows that there is a positive relation between satisfied employees and organization, as the performance of the satisfied employees are more productive for the organization then less satisfied employees (Ostroff,1992).Leadership is connected with employee performance (Ogbonna & Harris 2000). The main idea of every organization is to enhance employee performance. Howell, Merenda (1999) & Goodwin (2001) suggested that transformational leadership plays an imperative role in increasing job satisfaction as well as role play to achieve organization’s goal and employees acts.

Transformational leadership correlated with subordinate skills with work worth to assess employees’ performance as stated by Walumbwa, Avolio & Zhu (2008). According to Ozaralli (2002), Organisations increase employee’s performance by giving empowerment to their team members. Researchers have studied that the employee performance is increased under the extraverted leadership when employees are passive and the result will be opposite if employees are proactive (Grant, Gino & Hofmann, 2011). Researchers have also studied the employees’ performance with variety of variables. Opren (1986) observed that, satisfied employees not only be the cause of increasing employee performance but also they don’t think to leave organization. Su, Baird and Blair (2009) feels, the level of productivity will be high when the employees are satisfied. According to Biswas (2009), the supporting style of manager also plays incredible role for increasing employee’s performance.

Transformational leadership originated from charismatic leadership. House (1977) suggests that the personal characteristics of the charismatic leader include a high degree of self-confidence, strong moral convictions, and a tendency to influence others as well as engaging in impression management behaviours to boost trust and confidence in the leader. Furthermore, the articulation of a mission, setting challenging goals, and arousing motives are also important. Burns (1978) was the first person who identified the concept of transformational leadership. He suggested that transformational leadership is observed when leaders encourage followers to boost up the level of their motivation, morals, beliefs, perceptions, and coalition with the objectives of the organization. Bass (1985) proposed a new theory of transformational leadership and outlined its components. Transformational leadership engages followers by appealing to their upper level needs and ideas that yield higher levels of follower satisfaction and performance (Bass, 1985; Bryman, 1992).According to Schepers et al. (2005), transformational leaders allow employees to think creatively and analyse the problem from numerous angles and explore new and better solutions of the problem. Gill et al. (2006) suggested that organizations can reduce job stress and burn out by applying transformational leadership.

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Transformational leadership focuses on more sensitive side of organizational interactions like vision, culture, values, development, teamwork, and service (Fairholm, 2001).Bass (1998) claims that by emphasizing the symbolic and expressive aspects of task goal efforts and the important values involved, the transformational leader makes the difference. There are three mechanisms in Transformational Leadership: Leaders give values to their subordinates, motivate their subordinates and persuade in mounting or varying followers’ needs (William, Richards, Steers & James, 1995).Transformational leadership is comprised of four central components. Bass (1985) suggests that Charisma is the key component of transformational leadership and it generates profound emotional connection between the leader and follower. According to Bass & Avolio (1990) Charisma is operational through vision where the charismatic leader earns the respect and trust of followers, which leads to the acceptance of challenging goals. The second transformational component is inspiration where leaders provides followers with challenges and meaning for engaging in shared goals and undertakings (Bass & Avolio, 1990).Another major component of transformational leadership is individualized consideration, the leader first identifies the individual needs and abilities of followers and then mentors and coaches them, and also uses delegation (Bass & Avolio, 1990). The final transformational component is intellectual stimulation, the leader helps followers to think on their own and analyse problems from their personal perspectives, encourages creativity, innovation, and challenge conventional wisdom (Bass & Avolio, 1990).

Most of the researchers had associated transformational leadership with employee’s performance and job satisfaction and argued that transformational leadership can be the best predictor of employee performance (Raja & Palanichamy,2011).Transformational culture boosts both the organization and the employee’s performance without enforcing extra burden (Schlotz, 2009). Prior researcher has demonstrated that followers who work under transformational leaders are motivated and committed which facilitates their satisfaction with jobs (Givens, 2008). Masi& cook (2000) believed that transformational leadership style is only the factor of increasing employee productivity.However,Parry & Thomson ( 2002) claimed that it is important to adopt the appropriate leadership style for the success of an organization and examining, praising and assessing a leader do not truly assures the followers’ honesty in this case transformational leadership becomes inapplicable.

According to Kuhnert & Lewis (1987), transactional leadership is an exchange between followers and leaders desired outcomes by fulfilling the leader’s interest and followers’ expectations, which involves promises or commitments embedded by respect and trust. Bass (2000) suggested that effective leaders accommodate the interests of their subordinates by giving contingent incentives, honour and promises for those who auspiciously succeeded in fulfilling the commitments of the leaders or the organization. On the other hand, Bryman (1992) argues that transactional leadership behaviours do not even qualify for a “true” leadership label because of the fact that the leader and follower agree, explicitly or implicitly, that desired follower behaviours will be rewarded, while undesirable behaviours will draw out punishment. He states that since it is based on exchange, transactional leadership does not seek to motivate followers. Bass (1985) and Burns (1978) suggest that total reliance on this leadership style may cause performance and satisfaction to suffer. As modelled by Bass, transactional leadership is comprised of two fundamental dimensions: contingent reward and management-by-exception. Contingent reward takes place when the leader provides rewards if followers perform in accordance with the contractor expend the necessary effort. In Management-by-Exception, the leader takes action only when major deviations from plans are evident.

Unlike Burns (1978), Bass (1985) insists that, to be effective, leaders need to demonstrate features of both transactional and transformational leadership. Howell&Merenda (1999) conducted their research on transactional and leadership in forecasting employees’ performance and concluded that transactional leadership style is a positive predictor of follower’s performance. Gadot (2007) claimed that the transactional leadership style is weakly associated with performance. Ponce et al. (2006) Indicated that there is a dominance of the transactional leadership style over transformational style. Halpin et al (2006) suggested that leadership behaviours and team performance outcomes revealed that transactional leadership behaviour is significantly related to team performance. According to Jung et al. (1999), to make transactional leadership more effective, appropriate usage of contingent reward is an important feedback to assemble expectations with followers in term of their performance.

Janssen & Yperen (2004) acknowledged that transactional leadership assists the efficiency by enhancing innovative job performance and job satisfaction. From this we can conclude that some authors believe that transactional leadership stimulates higher performance and some believe that it is weakly associated with performance.

Empirical evidence tends to support the view that leaders will maximize their effectiveness when they exhibit both transformational and transactional behaviours (Avolio et al, 1988; Bass& Yammarino, 1989).Bass and Avolio (1994) and Ristow (1998) conducted research in different environments and found that transformational leadership has a positive influence on employee performance, and therefore organisational performance. Research conducted by Pruijn and Boucher (1994) showed that transformational leadership is an extension of transactional leadership (Bass, 1997).Bass and Avolio (1994) stated that the difference between these two models is that followers of transformational leadership exhibit performance which is beyond expectations, while transactional leadership, at best, leads to expected performance .Ristow (1998) suggested that transactional leaders were effective in markets which were continually growing and where there was little or no competition, but this is not the case in the markets of today, where competition is fierce and resources are scarce. Brand et al. (2000) has clearly shown that transformational leaders are more effective than transactional leaders. Brand et al. (2000) showed the evidence gathered in South African retail and manufacturing sectors, and also in the armed forces of the United States, Canada and Germany, points towards the marginal impact transactional leaders have on the performance of their followers in contrast to the strong, positive effects of transformational leaders .This research has been further supported by research conducted by Ristow, et al. (1999), according to which there was a positive relationship between certain styles of leadership and organisational effectiveness within the administration of South Africa cricket. Bass and Avolio (1997) conducted research on the topic of transformational and transactional leadership, an appropriate instrument was identified, called the MLQ(Multi factor leadership questionnaire).The questionnaire contains statements that identify and measure the key aspects of leadership behaviour, and each statement in the questionnaire relates to either transactional, transformational or non-transactional leadership factors.

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RESEARCH METHODOLOGY

Type of Research Design

The type of research design that will be used in this study is quantitative research design, survey method. The present study is quantitative in nature because I will use quantitative data which is collected through questionnaire. Then the first step of my study will be to make worth by the validity by as its focus using positivism approach. Positivism paradigm will be used in this study is on understanding the ideology of multiple participants in their locations and work place. The survey design is chosen because it provides a quantitative description of trends, attitudes, or opinions of a population by studying a sample of that population. So that, it can best show the level of relation between leadership styles and employees performance.

Sampling technique and measures

The level of leadership qualities possessed by project managers/team leaders and the subordinates in XXXXX Company will be determined by the questionnaires distributed to a random sample of employees. Hence project managers/team leaders as well as their subordinates will be the participants of the study. Questionnaires will be distributed to a sample population of 50.All the questions are close-ended and are measured using Likert’s Five Point scaling ranging from “1” (Never) to “5” (Always). The advantage of using close ended questions is that the results can be presented in the form of statistics and answers can be pre-coded so that the responses can be fed into a computer. Pilot survey has been conducted to check if there any problem in the questionnaire before the real investigation and the final version of the questionnaire has been set up. The transformational leadership is measured by the following components – Idealized attributes, idealized behaviour, intellectual simulation, confidence, individual consideration and inspirational motivation. The transactional leadership is measured by the following components – contingent reward and management by exception (active).

The performances measured that are included in this study are extra effort, effectiveness and satisfaction.

Data Collection Instruments, Variables and Materials

As a primary data collection instrument questionnaires will be distributed to a random sample of employees. The questionnaire is adapted from Multi factor Leadership Questionnaire; commonly called MLQ, developed by Bass & Avolio (1990). The study will also make use of secondary sources of data such as relevant books in leadership and related areas. The data will be analysed with the help of descriptive statistics and multiple regression analysis to find out the most relevant leadership styles and relationship of these leadership styles with the selected outcomes such as extra effort, effectiveness and satisfaction.

According to my opinion, the MLQ holds well in studying leadership behaviour. Previous research shows that to study the leadership behaviours most of the researchers have adopted MLQ.The MLQ is valid and reliable and has been used extensively worldwide (Bass and Avolio, 1997; Whitelaw, 2001). It has proven to be a strong predictor of leader performance across a broad range of organisations (Bass and Avolio, 1997).The Multifactor Leadership Questionnaire (self-rated) is used to get evaluation of leadership behaviour and organizational effectiveness (Bass and Avolio, 2000). The MLQ is a questionnaire describing behaviour and employees performance outcomes, each rated on 5 point scale. It measure transformational, transactional leadership and employees performance outcomes like satisfaction, effectiveness and extra effort. The previous researchers have used MLQ which consists of two versions, one for the leader to complete, and one for the raters of the leaders to complete. The leaders complete a questionnaire describing their own leadership style, whilst the raters complete a questionnaire regarding the leadership style of their specific leader. These two versions consist of exactly the same statements, except that they are written from different perspectives. These two versions are known as the ‘leader version’ and ‘rater version’ respectively. I would be following the same approach.

Reliability and validity are the statistical criteria used to assess whether the research provides a good measure (Whitelaw, 2001).The MLQ has been tested for reliability and validity in a number of settings (Pruijnand Boucher, 1994). The MLQ (Bass &Avolio 2000) is one of the widely primary instruments used and accepted to measure transformational and transactional leadership styles.MLQ has gone through many revisions to strengthen its reliability and validity. Also more than 200 doctoral dissertations and master thesis have used the MLQ (Bass &Avolio 2000).

After collecting the data from the participants then SPSS software will be used for the data analysis. After recording the data into SPSS software, Descriptive statistic will be used to get the overall summary of the variables. In the table of descriptive statistic, the values of mean, Standard deviation and also the maximum and minimum values are obtained for leadership and performance variables which would define the response rate of the respondent. Descriptive statistical analyses will be performed to measure general demographic characteristics of the sample including age, gender, and years of tenure with the company. These analyses are unrelated to research questions or hypotheses but they are discretionary and exploratory in nature. The researcher believes that some of this demographic information may be useful and if any of the data proves interesting or significant in any way it may be an area for future research but it is not the focus of this study. Secondly, total scores will be analyzed. Finally to test the hypotheses framed for the relationship between dependent and independent variables and to check the value that how much change comes in dependent variable due to independent variable, multiple regression analysis will be used.


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