Leadership Organisational Performance And Emotional Intelligence Management Essay

Introduction to the Problem

The difficulty in studying concepts such as leadership, organisational performance, emotional intelligence and the interrelations between the three constructs, is that these terms are hard to define, describe, and to measure systematically. The disagreement among theorists concerning the definitions of these variables has led to further controversy about research design and instrumentation and to exacerbate this situation, there appears to be few gains being made to improve our understanding of these important concepts. Leadership is a difficult concept to fully appreciate and understand. Burns (1978) comments that “Leadership is one of the most observed and least understood phenomena on earth” (p. 19). This statement appears to be just as true and accurate today as it was when Burns made it. Since Burns made this powerful statement, the interest in understanding leadership and its consequences has intensified. While the term leadership has existed for centuries and has been most commonly associated with the military, the emergence of manager, as a leader, is a relatively new phenomenon.

Because of the perceived and actual influence of managers and their importance to globalisation, prosperity, and economic growth, interest in this new leader has been and continues to be intense. There are hundreds of studies that tend to popularise and evaluate managers to a level that seems unattainable by most. Yet for all of the books, articles, and studies available on leadership and the managers, who lead, there is very little known about the attitudes, behaviours and characteristics that engender effective manager performance. Even sparser is the information that tries to tie the leadership style of the managers with their emotional intelligence on the performance of the organisation.

When the substantial body of leadership literature is reviewed there appears to be two clear distinctions made by the scholars. One body of work focuses on the internal dispositions or characteristics of the leaders while the second is concerned with the behaviours and activities of the same leaders. However, the connection between these two distinct views is not always clear or easy to understand. The current study was undertaken in an effort to address some of the gaps in empirical research and to apply the results of transformational leadership in one of public listed automotive manufacturing companies, EPMB in Malaysia where there is a dearth of such information available for manufacturing industry. The purpose of this study was threefold: (1) to examine the relationship between a manager’s score on transformational leadership with the performance of the organisation; (2) to explore the relationship between the constructs of transformational leadership and emotional intelligence; and (3) to find out if there is any positive relationship exists between organisational performance and transformational leadership with emotional intelligence presence. The current investigation extends prior empirical work in at least three ways. First, the study integrates trait and behavioural approaches to leadership effectiveness in a field that is relatively new one for the study of transformational leadership. Second, the total population consisted of practicing managers. Presently, there are very few empirical studies that examine the relationship among managers, transformational leadership behaviours, their emotional intelligence capabilities and organisational performance. Third, both objective (financial performance measures) and subjective evaluations (direct report responses) of leader effectiveness and emotional intelligence capabilities were utilised. This study adds value to the current leadership literature and plays a small role in bringing an old idea into the leadership light in Malaysia manufacturing industry.

One frequently discussed theory is that of transformational leadership, first introduced by Burns in 1978. Transformational leaders change their organisation’s culture by inspiring a sense of mission and purpose about the importance of the group’s work and stimulating new ways of thinking and problem solving (Bass & Avolio, 1993). Transformational leaders inspire individuals within an organisation to work harder and to strive for the highest levels of performance (Bass, 1985). While Bass, Burns and Avolio support the applicability of transformational leadership to all forms of organisation, which includes the largest public companies, other investigators find transformational leadership is not universally applicable to organisations (Inkson, Kerr and Moss, 1993). To exacerbate the situation, there is no evidence to say emotional intelligence is the moderating factor to transformational leadership towards improving organisational performance.

Background of the Study

An understanding of the interplay between transformational leadership and organisational performance is an important factor for developing effective organisations. Finding ways to optimise the performance of people and hence, the organisation has been, and continues to be, a major concern for organisational leaders. Thus exploration on emotional intelligence capabilities of leaders is essential too.

In today’s service-based, knowledge economy, many companies are beginning to shift away from traditional models of management, originally developed for production oriented firms, and now require a broader range of leadership skills and styles that are adaptive to diversity and to dramatic, often discontinuous changes in the work environment. As globalisation becomes more pronounced especially in automotive industry, the changes may become even more dramatic as firms struggle to meet competition that only a few decades ago did not even exist. Some of the promising paradigms of leadership are including people in them and tend to describe people, which include managers, as the organisation’s most important assets. A summary of some of these is as follows: concern for people (Blake & Mouton, 1964), the value of people (Sashkin, 1984), human concern (Kilman & Saxton, 1991), individualized consideration (Bass, 1985), and people orientation (Cooke & Lafferty, 1994). The importance of motivating people to complete tasks at a high level so that the organisation performs well is a key role of manager especially in Malaysia manufacturing industry and was one of the main reasons for this study. Transformational leaders motivate followers both to work for transcendental goals and to increase commitment and in doing so, perform beyond the expectations those followers have for themselves.

Statement of the Problem

The problem in this study was to determine the degree of relationship that exists between transformational leadership, emotional intelligence and organisational performance as measured by return of capital employed (ROCE) in one of local public listed automotive manufacturing company in Malaysia. The lack of current knowledge on this subject and between these variables hinders our ability to place a value on transformational leadership and emotional intelligence capabilities and their importance in organisational performance.

By knowing such knowledge, it would help EPMB managers to employ effective transformational leadership effectively in the organisation, rather than transactional leadership which is primarily task-focused. Research indicated that transactional leadership was limited in terms of effectiveness (Vishalli & Kumar, 2004).

Purpose of the Study

The purpose of this quantitative descriptive correlational study was to determine the relationship of transformational leadership to organisational performance in one of the local public listed automotive manufacturing companies in Malaysia, EPMB. The study utilised the Multi-factor Leadership Questionnaire developed by Bass and Avolio in 1995 (MLQ-5X) and Emotional Competence Inventory (ECI) widely used by Boyatzis et al., 1999 in emotional intelligence research, to measure the level of transformational leadership and emotional intelligence capabilities respectively in each subsidiary companies of EPMB, i.e. PEPS-JV, EPP, FUNDWIN and EPMD. The overall strategy was to quantify the level of transformational leadership and emotional intelligence capabilities using scores on the MLQ and ECI respectively, and then correlate these with the organisation’s performance measured objectively by the organisation’s ROCE during the same period under these leaders.

The focus of correlational research is to describe the relationships among variables rather than determine a cause-and-effect relationship. Correlational studies are useful to describe how one observable fact is related to another in situations where there is no control over some of the research variables (Lappe, 2000). In the current study, the variables of emotional intelligence and transformational leadership were believed to influence the organisational performance.

Research Questions

The following research questions were addressed in this study for EPMB company.

Q1: Is there a significant relationship between transformational leadership and organisational performance?

Q2: Is there a significant relationship between transformational leadership and emotional intelligence?

Q3: Is there a significant relationship between transformational leadership with emotional intelligence and organisational performance?

This study answered these questions through the analysis of data gathered utilising the MLQ-5X (Bass & Avolio, 1995) and ECI (Boyatzis et al., 1999; Wolff, 2006). These questions were converted to hypotheses as below since this was a quantitative study and it is advisable that quantitative studies have either research questions or hypotheses, but not both (Creswell, 2003).

The following are statements of null and alternative hypotheses that correspond to the research questions:

H10: There is no statistically significant relationship between transformational leadership and organisational performance.

H1A: There is a statistically significant, positive relationship between transformational leadership and emotional intelligence

H20: There is no statistically relationship between transformational leadership and emotional intelligence.

H2A: There is a statistically significant, positive relationship between transformational leadership and emotional intelligence.

H30: There is no statistically significant relationship between transformational leadership with emotional intelligence and organisational performance.

H3A: There is a statistically significant, positive relationship between transformational leadership with emotional intelligence and organisational performance.

Significance of the Study

This research project yielded new information regarding the importance of transformational leadership style to the automotive manufacturing companies in Malaysia. For the organisations performing well, this information presented the opportunity to understand the importance of leader and follower development to continue performing well, and for those not performing to a similar level, the data is cause for reflection and an opportunity for improving development policies or changing leadership styles. Since the data gathered in this study does indicate a significant relationship between transformational leadership style and the performance of the organisation with and without emotional intelligence presence, further research should be undertaken to build on this finding and hopefully to improve on the understanding and meaning of the relationships.

Of equally important significance due to the dearth of information available on the relationships between the three constructs in Malaysia, the results of this study will be made available to all companies that participated. This study is a small start in the right direction for companies that need leaders to continue to attract the right people for sustainable performance. Bass and Avolio (1992) have concluded that transformational leadership is important and that leadership training of managers at all levels should become an integral component of organisational education. A final component of this study is its potential impact on the selection and hiring of managers. Managers typically have an enormous impact on their organisations, constituents, and communities. Therefore, the compounded costs of making a mistake in the selection, hiring, or promotion of managers can be financially and operationally staggering. If transformational leadership is the correct and upcoming style for automotive manufacturing companies in Malaysia, then the selection teams could begin to narrow the focus and save time, money, and maybe companies by selecting the most effective leaders to lead their companies. In addition, since there are relationships between the variables, additional predictors of manager success can now be developed and shared with other organisations in Malaysia, thereby aiding in industry development and expansion and possibly enhancing Malaysia’s competitive position.

Definition and Terms

For the purposes of this research study, there are several terms that are necessary to address and they are as follows.

Correlation. A correlation exists when the measurements of one variable either increases or decreases as the other variable increases or decreases (Leedy & Ormrod, 2005).

Correlational study. Correlational research study designs involve either the identification of characteristics in an observed phenomenon or exploring possible correlations regarding two or more variables (Leedy & Ormrod, 2005).

Descriptive research design. A means for providing a systemic manner by which facts and/or characteristics of an existing occurrence, or occurrences, are described (Leedy & Ormrod, 2005).

Emotional intelligence. The ability to recognise one’s own feelings and the feelings of others for the purpose of motivating ourselves and for effectively managing the emotions in ourselves and in others (Wolff, 2006).

Organisational performance. In this study, it was defined as return on capital employed (ROCE) over 2005-2009.

Quantitative research approach. A method by which researchers use post positivist acclamations in creating facts and predetermined inquiries such as experiments, surveys, and data collection tools to measure statistical data (Creswell, 2003).

Transformational leadership. This is the basis for the study and the researcher’s primary interest. It could mean different things to different readers unless properly defined. For Bass and Avolio (1993), transformational leadership contains the interrelated components of charisma or idealised influence (attributed or behavioural), inspirational motivation, intellectual stimulation, and individualised consideration. Transformational leadership behaviours are influential in motivating follower change and transforming followers to be more aware of task outcomes, activating their highest order needs, and extending beyond their own self-interest for the benefit of the organisation.

Assumptions

The first assumption in this study was that transformational leadership is an effective leadership style based on previous studies even though none have been related to the automotive manufacturing companies in Malaysia. Most previous studies were related to the military, non-profits institutions, or educational institutions. A second assumption was that there are similarities between the subsidiary companies of EPMB being researched even though they operate in different ways due to their products, customers and locations. It is possible that organisational performance is impacted by business climate to a similar degree as that by transformational leadership. A third and final assumption was that the managers/leaders (self reports) more truthfully answer the MLQ-5X and ECI even though this may not be the case in all completed surveys. This has been reported in other studies regarding leadership and emotional intelligence, and may have affected data and perceived relationships between the variables studied. The researcher was cognizant of these findings and tried to ensure that steps were taken to minimize such influences.

Limitations

Bias within a study can be minimized by not exposing the purpose or desired outcome to participants. The population for the current study was limited to 20 managers within EPMB who participated by taking the MLQ-5X (Bass & Avolio, 1995) and ECI (Boyatzis et al., 1999; Wolff, 2006). Although the participants were informed of the study, no specifics were given as to the purpose or desired outcome.

The population for the current study was limited because of availability, EPMB permission, and the amount of time available to conduct the study. The study was limited to managers who identify themselves as having worked a company in one of the subsidiary companies during the fiscal year of 2005.

The population studied was quantitatively small, but it was an accurate representation of all managerial skill levels. This was because the sample population accounted 42.6% of all managers in EPMB. In addition, the sample group exemplified the various mix and types of operations throughout the organisation. The validity of the study was limited to the reliability of the structured testing instrument along with the participants’ perception of their leadership behaviours.

A relatively new, self-reporting instrument (see Appendix A) was used to measure the levels of transformational leadership and emotional intelligence within managers using MLQ-5X and ECI respectively. The instrument for the current research study was considered cross-sectional since data were collected during one particular timeframe and not over a period of years (Creswell, 2003; Leedy & Ormrod, 2005). Cross-sectional and self-reporting instruments are necessary for the assessment of self and others, but they have limitations.

Nevertheless, Emmerling and Goleman (2003) stated that the limitations of such tests produced an insignificant amount of discrepancy. Most of the self-reporting instruments are primarily concerned with the connection between detailed behaviors and explicit personas. Self-reporting instruments are better indicators of organisational performance than self-assessment tools (Emmerling & Goleman, 2003).

Detailed Dissertation Framework and Study Variables

Figure 1.1 is a more detailed representation of the relationship between transformational leadership (TL) and emotional intelligence and their impact can have on the performance of the organisation as a whole. The underlying premise is that transformational leadership does influence individuals who in turn impact the organisation with emotional intelligence as a moderating factor. The question that this study tried to answer was: What are the relationships and how do the relationships impact ROCE in the organisation over time? The elements in Figure 1.1 marked with the asterisks are those that were identified in the literature as being the most prevalent especially in studies that cited the work of Bass (1985), and Bass and Avolio (1990, 1995). The overall flow of the diagram suggests that the leader impacts the follower, and as the leader’s behaviors impact more and more followers and as the range of impact increases, the organisation’s performance is improved. As the organisation improves with respect to many of the measures highlighted in Figure 1.1, it affects the ROCE of the firm and that is what this study tried to determine.

Transformational Leadership

Employee Effects/ Behaviours

Organisational Effects/ Contributing Factors

Attributed charisma

Idealised influence

Inspirational motivation

Individualised

consideration

Managing change

Increased productivity

Achieving goals

Coordinating teamwork

Job satisfaction

Increased self-confidence

Increased performance

(at all levels)***

Increased follower motivation***

Willingness to put forth extra effort***

Increased optimism

Increase in learning activities

Increase in innovative thinking

Performance of ROCE

Lower overall costs

Increased sales

Proactive change management

Better communication

Higher corporate goals

Better quality products

Increased customer service

Increased educational opportunities

More R&D activities

Emotional Intelligence

Organisational Performance (measured by ROCE)

Self-awareness

Self-management

Self-awareness

Social awareness

Social skills

Figure 1.1: Detailed framework with study variables and contributing factors

Table 1.1 identifies the major research questions in the study that were translated into hypotheses since the study is a quantitative one. It identifies the independent and dependent variables, as well as the statistical tests chosen to appropriately analyse the potential relationship between the dependent, independent and moderating variables. As outlined below, there were three research questions that were translated into three hypotheses (Hypothesis 1, Hypothesis 2 and Hypothesis 3), the independent variable (transformational leadership score), the dependent variable (ROCE), the moderating variable (level of emotional intelligence) and the applicable statistical tests.

Figure 1.1: Research Questions, Hypotheses, Variables, and Statistical Tests

Question

Hypotheses

Independent /Moderator Variable

Independent/ Dependent Variable

Statistical Test

What is the relationship between TL and ROCE performance?

H1: There is no statistically significant relationship between transformational leadership and organisational performance

TL score on MLQ measured by questionnaires

(Independent variable)

ROCE performance

(Dependent variable)

Homogeneity of Variance test, ANOVA analysis, Pearson’s correlation coefficient,

What is the relationship between TL and EI?

H2: There is no statistically relationship between transformational leadership and emotional intelligence

EI score on ECI measured by questionnaires

(Section B)

(Moderator variable)

TL score on MLQ-5X measured by questionnaires

(Section A)

(Independent variable)

Homogeneity of Variance test, ANOVA analysis, Pearson’s correlation coefficient

Figure 1.1: (Continued)

Question

Hypotheses

Independent /Moderator Variable

Independent/ Dependent Variable

Statistical Test

What is the relationship between TL, EI and ROCE performance?

H3: There is no statistically significant relationship between transformational leadership with emotional intelligence and organisational performance

TL score on MLQ-5X measured by questionnaires

(Section A)

(Independent variable)

EI score on ECI measured by questionnaires

(Section B)

(Moderator variable)

ROCE performance

(Dependent variable)

Partial correlation, Pearson correlation coefficient, and multiple regression analysis

Organisation of the Remainder of the Study

The remainder of the study is devoted to the discussion of transformational leadership and emotional intelligence and their relationships to organisational performance based on several earlier studies. Chapter 2 is the literature review for the key variable in the study. Chapter 3 describes the methodology for the research study. Chapter 4 discusses the results of the questionnaire survey (MLQ-5X and ECI) in addition to the objective performance measure (ROCE) of the companies based on press releases, annual reports, and analysts’ reports. Chapter 5 is a discussion of the results including: limitations of the measures and procedures, conclusions, and implications for future research.