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Full Project – AN INVESTIGATION INTO THE RELATIONSHIP BETWEEN LEADERSHIP STYLES AND ORGANISATIONAL PERFORMANCE

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CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

The role of leadership in an organization is crucial in terms of creating a vision, mission, determination and establishment of objectives, designing strategies, policies, and methods to achieve the organizational objectives effectively and efficiently along with directing and coordinating the efforts and organizational activities (Xu & Wang, 2008).Top quality leadership is essential to achieve the mission and vision along with coping with the changes occurring in the external environment (Harris, et al., 2007).In current time, many companies are facing problems related to unethical practices, high labor turnover, poor financial performance, etc. This may be due to the lack of effective leadership. The main aim of many companies is to accomplish its stated objectives; hence, there is a need of effective leaders for coordinating and motivating the employees (Vigoda-Gadot, 2012). Unfortunately, some companies do not take account of the leadership style adopted by their managers. Based on this premise, the present study aims to explore the relationship between leadership style and organizational performance. There are several types of leadership styles such as transformational leadership, transactional leadership, autocratic, democratic leadership, participative leadership style, etc. The leadership styles chosen for the study are charismatic, transformational, transactional, autocratic, bureaucratic, and democratic. The reason behind choosing these leadership styles is the fact that they are the most practiced leadership styles throughout the globe, and if any new ideology is developed through the research, it can improve these leadership styles further and bring further success to organizations.

Firm’s development has certain factors that improve sustainability on the basis of effectiveness and efficiency. The improvement in productivity leads to employee’s better behaviour and commitment as norms, values and objectives helps in improving culture of an organization. Organization look for managers who can manage effectively and efficiently. But each manager is unique with his or her style depending on the situation and inclined paradigm. Managerial style is the pattern of thinking, feeling and behaviour that a manager uses to deal with people and situation. A manager has several managerial styles such as autocratic, bureaucratic, charismatic, democratic and laissez faire (nwachwukwu, 1998). According to Basse (1982), there are managers with only one managerial style. However, most managers have a combination of those five managerial styles, although they can only be classified in various ways. Managerial style have a great impact on the organization’s operation. Effective managerial style can increase productivity, bring about empowerment, boost up employees morale, motivation and contributes positively to organization and so on. Leadership happen to be the core and of course the Nervous system in organizational solvency. (Hogan & Curphy, 1994; House Aditya, 1997; Judge & piccolo, 2004). Leadership leads to more productivity and profitability, but the extent of success depends on the style of the leader and the systematic environment created for staff functionality.

1.2 Statement of Research Problem

The role of organisational leaders in facilitating optimum or high performance in work organisations cannot be over emphasised. A number of studies that have examined the relationship between leadership styles and organisational performance had indicated that leadership behaviour and organisational performance are significantly related (Bass, 1990; Collins and Porras, 1996; Manz and Sims, 1991; Sarros and Woodman, 1993). But some studies have also provided evidence that leadership styles may have a positive correlation or negative correlation with organisational performance, depending on the variables used by various researchers (Goleman, 2000; Vigoda-Gadot, 2007, Wang, Chich-Jen, Shieh, and Mei-Ling, 2010). For instance, certain studies have focused on what is generally called the Full Range Leadership Development theoretical model. This model includes: laissez-faire or no leadership style; transactional leadership style which is based on passive and active aspects; and transformational leadership style which is based on personal relationships, intellectual challenge, inspirational motivation and behavioural charisma. These three styles have been commonly applied by researchers to the study of leadership and organisational performance (Avolio and Bass, 1991; Bass, 1985; Bass and Avolio, 1993; Geyer and Styrer, 1998; Lowe, Kroeck, and Sivasubramaniam, 1996; Mackenzie, Podssakoff, and Rich, 2001; Parry, 2003; Pillai, Schrieshim, and Williams 1999). These three categories create a hierarchical sequence of leadership styles according to the extent of activity that the leader expresses in his/her actions and according to the extent of its effectiveness. In this model, transformational leadership ranks as the most effective style, followed by transactional leadership and then the laissez-faire style in descending order of effectiveness. The basic assumption of the Full Range Leadership Development model is that in every leader all styles can be found. Other studies on the link between leadership and organisational performance indicate that a stronger relationship exist between transformational leadership and performance than between transactional leadership and performance. Transactional leadership and performance was found to have a lower correlation than transformational leadership and performance (Den Hertog, Van Muijen and Koopman, 1997; Vigoda-Gadot, 2007). On the other hand, the relationship between transformational leadership and organisation performance is positive and strong. However, the question arises as to whether or not these research outcomes on the relationship between various leadership styles and organisational performance is universally valid. As such, there is the need to test these research results in the Nigerian work environment. In a nutshell the research problem is: What is the actual relationship between the various leadership styles and organisational performance in the Nigerian work context.

In order to effectively address the above problem, this study will seek to provide answers to the following research questions:

a. What is the relationship between various leadership styles and organisational performance?
b. What is the impact of various leadership styles on organisational performance?
c. How can higher organisational performance be achieved through the employment of appropriate leadership behaviour in work situations?

1.3 Objectives of the Study

The main objective is to investigate the relationship between various leadership styles and organisational performance.
Subsidiary Objectives.

(a) To assess the impact of various leadership styles on organisational performance.

(b) To examine the concepts of leadership and organisational performance.

(c) To make appropriate recommendations towards better organisational performance through the employment of appropriate leadership styles.

1.4 Hypotheses

Hypothesis 1

Transformational leadership style tends to have a positive relationship with organisational performance

Hypothesis 2:

Transactional leadership style is likely to be positively related to organisational performance.

Hypothesis 3:

Transformational leadership style tends to have a positive impact on organisational performance.

Hypothesis 4:

Transactional leadership style is likely to have a positive impact on organisational performance.

1.5 Theoretical Framework

The full range leadership development model (Bass and Avolio, 1997) was used as the theoretical guide for this study. This model focuses on tangible and observable leadership behaviours. In other words, it focuses on what leaders do, not on what they are. The full range leadership development model consists of five transformational, three transactional, and one non- transactional (Laissez faire) leadership factors. The five transformational factors are: idealised attribute, idealised influence, inspirational motivation, intellectual stimulation and individualised consideration. These are commonly known as the five (5) I’s of transformational leadership.

Idealised attribute which is evident where followers report that their leader is charismatic. Idealised influence enables a leader to instill pride, faith, and respect in followers causing the followers to identify and emulate their leaders. Inspirational motivation represents behaviour that provides symbols and simplified emotional appeals, thus raising expectations and optimism amongst followers. Intellectual stimulation arouses followers on new ways of problem solving through proactive thinking. Individualised consideration is present when a leader delegates assignments and stimulates and coaches followers on an individual basis.

In contrast, transactional leadership consists of three behavioural factors: contingent reward and management by exception (active/passive). Contingent reward is behaviour that provides rewards for contracts completed. Management-by-exception is the behaviour that avoids giving directions where current methods work and performance goals are met. The model further suggests that the behaviour can be divided further into active and passive components. Management-by-exception (active) refers to a leadership style where performance is actively monitored for errors; Management-by-exception (passive) describes the leader as waiting to learn of such errors. In both instances, the leader punishes individuals for their failure to reach an expected level of performance.

The last construct, non-transactional or laissez-faire leadership indicates an absence of leadership or the avoidance of intervention, or both. This type of leader avoids taking a stand on issues, does not emphasise results, refrains from intervening when issues arise and is unaware of employee performance. The full range leadership development model is useful to this work because the investigation is primarily concerned with examining the relationship between leadership behaviour and organisational performance as well as assessing the impact of various leadership styles on organisational performance using a Nigerian case study.

1.6 Significance of the Study

This study is significant in that it would investigate the relationship between various leadership styles and organisational performance in the Nigerian work environment. By so doing it is hoped that results in this study will serve as a seed for which further research can be developed in the following ways. Firstly, this research is extremely important to leaders/managers of Akwa Ibom Water Company Limited and it is not limited to the case study alone but to other organisations that desires optimal organisational performance, this is because it may help them to understand and implement appropriate leadership style to increase the performance of the employees/followers which will in turn enhance organisational performance. Secondly, this study’s contributions is not restricted only to leadership and human resource management theoretical literatures but also to the fields of Public Administration, Public Sector Management, New Public Management, Business Administration, Organisational Behaviour, Organisational Leadership and so on.

Research and experience have shown that leadership is a major challenge to optimum organisational performance. Provision of adequate funds and creation of enabling environment for an organisation may yield little or no result, without appropriate leadership style(s) that engenders optimum organisational performance. This study will therefore be of practical value to individual entrepreneurs and organisational leaders in various spheres of life.

To the government, the study will provide the focus for leadership development studies to be introduced as a course in our higher institutions and a training programme for government ministries, departments and agencies. Through the findings of the present study, the leaders and managers in the organisation under study will become more knowledgeable about the impact of various leadership styles on organisational performance and the appropriate leadership style(s) that will engender optimum organisational performance.

It is also crucial to undertake this study, since its finding will be useful for confirming, rejecting or modifying existing findings and studies on the relationship between leadership styles and organisational performance.

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