AN ASSESSMENT OF LEADERSHIP STRATEGIES ON ORGANIZATIONAL PERFORMANCE
CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1 CONCEPTUAL FRAMEWORK
2.1.1 Concept of Leadership
According to Hollander (1978) leadership “is a term that can be referred to a variety of thing, a person, a position, or a process”. Cainer (1995) as cited in Mullins (2002) says there are over 400 definitions of leadership. Leadership being such a widely written about subject, has a variety of meanings by many scholars each trying to compare what the writer perceives to be leadership. As Burns (1978) rightly acknowledged, “Leadership is the most observed and least understood phenomenon on earth”. Therefore, few will be considered for this study.
Leadership to Mishane and Glinow (2000) is “the process of influencing people and providing an environment for them to achieve or organizational objectives”. To Mullins (2002) is “a relationship through which one person influence people”. Tack (2004) relates leadership to motivation, interpersonal behavior and the process of communication. To Weihrich and Knontz (2005) have proposed a fundamental principle of leadership that “since people tend to follow those who in their view, offer them a means of satisfying their personal goals, the more managers understand what motivates their subordinates, how they operate and the more they reflect this understanding in carrying out their management activities, the more effective they are likely to be as leaders”. Durbin (2004) in his attempt in defining leadership gave what he said were some representative definition of leadership a couple of which are:
i. Interpersonal influence directed through communication towards goal attainment.
ii. The art of influencing people by persuasion or example to follow a line of action.
What stands out with these two definitions is that goals are attained through influence. There is neither the mention of coercion or issuance of threats but rather, the portrayal of a sense of equality between the “influencer” and the “influenced”. The understanding placed is that the “influenced” has a choice and can either join in the venture or not. This understanding is further supported by Coleman (1996) when he stated the primary concern of leadership to be the influencing “... of a collective group of individual to work together to achieve a common objective, while alleviating any conflicts that may arise during the trek towards that objective”. Stagdill (2000) defines leadership as the individual behavior to guide a group to achieve a common target. According to Rachin, (2001) leadership is directly connected to the practices of which people are dedicated.
Therefore, leadership can be seen to be a prerequisite in every human endeavor and this is confirmed by Muijs, (2011) when he attributed the key factor in organizational effectiveness to leadership. Muijs (2011) states that the key elements that made private companies more effective compared to public ones, to be leadership. The conclusion that can therefore be arrived at is that leadership is the process of achieving goals by setting others to willingly join in. the most substantial of leaders in their influential personality that has positive relation with the follower’s job satisfaction and the performance.
2.1.2 Important Implication of the Definitions
Because of the importance of leadership in all kinds of action, there is a considerable volume of theory and research concerning it.
Indeed, definitions of leadership have four important implications, which are;
i. Other people: leadership involves other people i.e, followers (the led or employees). By their willingness to accept directions from the leader, the followers help define the leaders status thereby making the leadership process possible.
ii. Power: leadership involves unequal distribution of power between leader and group members. Power is the ability to influence others.
iii. Influence: leadership also involves influence i.e., it is regarded as the ability to use different forms of power to influence followers’ behaviour in a number of ways.
iv. Values: leadership combines the first three and also acknowledges that leadership is about values. Value is a thing worth doing i.e. ones conception of the desirable.
2.1.3 Principles of Leadership
Five (5) principles of leadership proposed in Wiwcharuck (1988);
i. People generally go only where their leaders lead or allow them to go. This is an awesome challenge for the leadership of the home, the community, organization, and the nation. Consider this carefully, “people generally go only where their leaders lead or allow them to go”. Your family will only generally go where you lead or allow them to go and a community, organization or nation will go in the direction their leaders lead allow them to go. We can look at the world and see this clearly demonstrated. In some nations the people are led and directed very
specifically, and reach certain goals in a given time. It can be said of Nigeria, African nations and some European countries that the people have not been “led” for less than the last twentyfive years, but have been allowed to go their own way, and today these great nations are tottering on the brink of economic, academic and political bankruptcy.
ii. Poor leaders will take their people only as far as they themselves are able and willing to go. This principle brings about two aspects of leadership which determine success or
failure.
iii. Good leadership ensures that people reach their maximum potential and go beyond the personal limitations of the leadership itself. Each of us has this special skills or gifts. These may be greater than those of others with whom we work.
But we all have certain physical, mental and spiritual limitations which, if improved upon those under our leadership, would have a limiting and constraining effect upon our organization. Good leadership must be aware of these personal limitations and apply sound principles to reduce their effect.
iv. Nothing moves or happens without some form of leadership behind it. Many people look around in wonderment as they hear of all that is taking place today. A familiar question is “what is making all this happen? Where human beings are involved the answer is simple and straightforward. “there is some form of leadership behind all that activity” some leadership is in the forefront; more often the real leaders are in the background planning the moves and directing the people and the environment to act or respond in some predetermined manner we have strongly implied that present condition in organizations and society in general are product of past and present leadership. If, it is so, we can logically conclude that if it was within its power to create these conditions, it should also be within its power to change these conditions.
v. The distance between the quality of leadership and the average in the group is constant. If leadership standard and performance are high, the average performance standard will also be high. But if the leadership standards and performance are low, the standard and performance of the group will be low proportionately. A good leader demands performance and not necessarily conformance to ensure high quality result.
2.2 THEORETICAL FRAMEWORK
2.2.1 Theories of Leadership Styles
Leadership theories within which context leadership styles are better understood, have been developed over the years with the aim of trying to understand why leaders behave the way they do. These theories to Remmy (2008) are as listed below;
Greatman theories, Trait theories, Behaviourist theories, Situational leadership theories and Contingency theories.
According to Coleman (1996), ideas about leadership in management range from the “idea” approaches of the scientific managers and the human relations school in the pragmatic or adaptive approaches of the contingency theories. Theories which have been put forward are generally classified under the three headings; “Trait theories, Leadership style theories and contingency theories.” These will be looked upon.
Traits Theories
In the view of Fielder (1967), the earliest theories of leadership were centered on finding personality traits that differentiate leaders from leaders. It was then that people could become leaders by the possession of certain traits. Traits theories aid traits in individuals with the aim of establishing guides for leadership selection. Hundred of traits were isolated while measurement of amount possessed could not be accurately done. It was also found that leader did not posses all the traits and non leaders also possessed traits found in leaders. Another important finding was that the traits did not operate alone but in combination with other traits. These researchers were fruitless as psychologists have proved that people don’t have such in born traits except for physical traits and a disposition of good health. A later change in focus that was to identify traits that usually accompany leadership revealed an impressive result that; intelligence, dominance, self confidence, high energy level and task relevant knowledge are five traits that show consistently positive correlation with leadership. The correlations have been in region of +2.25 to 0.35.These results are based on seventy years of traits research.
However, the conclusion drawn by scholar after a review of all the traits is that there is no evidence that universalized leadership trait. Accordingly, traits theory in its original form has been heavily criticized and largely discredited as a basis for a workable theory of leadership, though more modern studies are beginning to highlight once again the importance of the individual amongst many factors.
Leadership Style Theories
According to Coleman (1996), the interest in the human factor at which was stimulated by the research of human relation are taken up by the social psychologists that follow them, led logically to an interest in leadership as an aspect of behaviour at work, rather than of personal characteristics. Since the 1950s in particular several theories about leadership or management style have been put forward. These have tended to be expressed in terms of authoritarian versus democratic styles, or people-orientation. In some cases, despite acknowledged in consistencies in the theories themselves, style theories have led to quite useful devices for improving training for leadership.
Contingency Theory Approach
Functional or action- centered leadership: This concept of leadership was developed in the United Kingdom by Professor John Adair (1986). It is based on the theory that leadership is more a question of appropriate behaviour than of personality or of being in the right place at the right time. Adair’s models of leadership incorporate the task and concern for people that has featured in all the theories which we have just mentioned.
The functional model, however distinguishes the concern for individuals and the concern for groups, and stresses that effective leadership lies in what the leader does to meet the needs of task, group and individuals.
This takes the functional model nearer to the contingency approaches of modern theorists, whose concern is the variety of leaders-task, people and situation- which have a direct bearing on leadership and leadership styles. Another pioneer of contingency theory was Fredrick Fielder (2007), who considers that effectiveness depends on (is contingent upon) a range of factors in particular, the work group and the position of the leader within the work group. Fielder’s view was that group depends on the manager adapting a style appropriate to what he termed the “relative favourableness” of the situation. Here this model emphasis that favourableness style determines leadership effectiveness. It’s determined by leader- member relationship, degree of task structure, and leader position or power. Style is either authoritarian (task directed) or participative (democratic style). Jones (2008) describes this as a retirement of the situational leadership theories which dwells on identifying the situational variable that dictates the most appropriate leadership style.
2.2.2 Leadership Factors
Bass et al (2003) found evidence to support and recommend the further use of Multifactor Leadership Questionnaire (MLQ) survey for assessing the six leadership factors that includes:
(a) Charisma/Inspirational: This factor provides followers with a clear sense of purpose that is emerging is a role model for ethical conduct and builds identification with the leader and his/her articulated version.
(b) Intellectual stimulation: This induces followers to questions to question tried and true ways of solving problems and encourages them to question the method they use to improve upon them.
(c) Individualized Consideration: This factor focuses on understanding the needs of each follower and works
continuously to urge them to develop their full potentials.
(d) Contigent Reward: This aims to clarify what is expected from followers and what they will receive if they meet the expected levels of performance.
(e) Active Management-By-Exception: This focuses on monitoring the execution of tasks to any problems that might arise and correcting those problems to maintain current performance levels.
(f) Passive-Avoidant Leadership: A passive avoidant leader tends to react only after problems have become serious to take corrective action and often avoids making decisions at all.
2.3LEADERSHIP STYLES
The concept and definition of leadership and style may differ from one person, or situation, to the other, leadership style in an organization is one of the factors that play significant role in enhancing or retarding the interest and commitment of the individuals in the organization. Thus, Jones (2008) emphasizes the need for a manager to find his leadership style. The Website Encyclopedia.com defines leadership styles as “the traits, behavioural tendencies, and characteristic methods of a person in leadership position”.
Since the characteristics mentioned in the above definition of leadership styles vary from one individual to another, it stands to reason that their way of going about things will definitely vary no matter how small the difference. They also affect to a very large extent, the way these leaders perceive and react to issues and situations. The leadership styles considered under the research study falls directly under the behavioural leadership theories which includes, the Transformational Style of Leadership, Transactional Style of Leadership and Laissez-faire Style of Leadership.
As a result of empirical findings, the theory of transformation, transactional and laissez-faire leadership has been expanded over the past decades. In its current form, the” full range leadership theory” represents nine factors that consist of five transformational leadership factors, three transactional leadership factors and one non-leadership or laissez-faire leadership factors. (Bass and Avolio, 2003).
2.3.1 Transformational Leadership Style
Past studies have constantly reported that transformational leadership is more effective, productive, innovative and satisfying to followers as both parties work towards the good of organization propelled by shared visions and values as well as mutual trust and respect (Avolio and Bass, 2003). This implies that transformational leaders believed in sharing of formalized power and more often practice the use of personal power. A transformational leadership as a leader behaviour originates in the personal values and believes of the leader and motivates subordinates to do more than expected Bass (1995) also proposed four behaviour or component of transformational leadership to include charisma, inspirational motivation, intellectual stimulation and individual consideration. Burns (1978), identified transformational leadership as a process where “one or more persons engage with others in such a way that leaders and followers raise one another to higher levels of motivation and morality”. In the same vein, other study has drawn a distinction between authentic transformational leadership and pseudo transformational leadership (Bass, 1985). It was found that pseudo leaders would seek power and position even at the expense of their followers’ achievement. Thus their behavior is inconsistent and unreliable. Transformational leader focuses on what the leader accomplishes rather than on his characteristics and his ability to motivate his follower towards change.
There are four (4) elements of transformational leadership, to Meshane and Glinow (2000) are:
1. Creating strategic vision
2. Communicating the vision
3. Modelling the vision
4. Building commitment towards the vision.
The transformational leadership style articulates the vision in a clear and appealing manner, explains how to attain the visions, acts confidently and optimistically expresses confidence in the followers, emphasizes value with symbolic actions, lead by example, and empowers followers to achieve the vision (Stone, Russell and Patterson, 2003). That transformational leadership is successful. It has been demonstrated by studies in a diverse range of professional and cultural settings including military, schools and corporations (Bryant, 2003). However, in their recent study of “traditionalistic” in Taiwan and the United States, Spreitzer, Porttula and Xin (2005) make it clear that while transformational leadership is effective regardless of culture, the level of effectiveness depends to some extent on cultural value. People with traditional cultural values see weaker links between transformational leadership and leader effectiveness that those with less traditional values. Transformational leadership has also been demonstrated to result in a “high level of followers’ motivation and commitment and well-above average organizational performance, especially under conditions of crisis or uncertainty” (Bryant, 2003). Within military and government contexts, General Colin Powell overcame entrenched racism (particularly in the US military) and low institutional expectation of African American to become chairman of the US Joint Chiefs of Staff in 1989. He went further, becoming in 1991 the first African American to become US secretary of state, a position some said he filled with vision as the quality of a transformational leader (Chekwa, 2001).
2.3.2 Transformational Leadership Critics
As Yuki (1989) point out, transformational leadership is not without its dark side and other flaws.
The morality of transformational leadership has been questioned, especially by libertarians and organizational development consultants. A key criticism is that within it transformational leadership has potential for the abuse of power (Griffin, 2003). Transformational leaders motivate followers by appealing to strong emotions regardless of the ultimate effect on followers and do not necessarily attend to positive moral values. As Stone, Russell and Patterson (2003) observe, transformational leadership can exert a very powerful influence over followers, who offer them trust and respect. Some leaders may have narcissistic tendencies, thriving on power and manipulation. Moreover, some followers may have dependent characters and from strong and unfortunate bonds with their leaders (Stone, Russell and Patterson, 2003).
Further, as Bass (1997) notes, transformational leadership lacks the check and balances of countervailing interests, influences and power that might help to avoid dictatorship and oppression of a minority by a majority. In the absence of more, rectitude it is self- evidence then that transformational leadership might be applied for less than desirable social ends. Yuki (1989) describes this as the “dark side of charisma” and goes on to note that for every example of a positive transformational leader demonstrating charismatic qualities (example Mohandas [mahatma] Ghandi), there is an equally negative example (e.g. Charles Manson). The Rev Jim Jones, who led the massive Jonestown suicide, is an example of a transformational leader from the dark side.
These criticisms about the morality of transformational leadership have been addressed by the argument that to be truly transformational leadership must have moral foundations. Thus; “To bring about change, authentic transformational leadership foster the moral values of honesty, loyalty and fairness, as well as the end values of justice, equality and human rights” (Griffin, 2003).
There is an argument that transformational leadership is facilitative of change because it contributes to organizational improvement, effectiveness and institutional culture (Lee and Chuang, 2009). As such, it is appropriate in environment of turbulence and change such as those that prevail in many organizations in the mid- 2005.
2.3.3 Transactional Leadership Style
Jung (2001) defines transformational leadership as an exchange between followers and leaders desired outcomes by fulfilling the leader’s interest and expectations which involves promises or commitments embedded by respect and trust. He also sees
transformational leadership as leader’s attitude toward identification of follower’s needs and aspirations and clearly demonstrating the ways to fulfill these needs in exchange of performance for followers. It is a positive predictor of follower’s performance. Transformational leadership in contrast to transactional, display constructive and corrective behaviors. It involves an exchange process that results in follower compliance with leader request but not likely to generate enthusiasm and commitment to task objective.
The leader focuses on having internal factors perform the task required for the organization to reach its desired goals. The objective of the transformational leader is to ensure that the path to goal attainment is clearly understood by the internal actor, to remove potential barrier within the system and to motivate the actors to achieve the predetermined goals (House & Aditya, 1997). It is focused on the mutually beneficial existence that exists between the leader and the follower. It can be described as a ‘hand-go-handcome’ leadership styles.
2.3.4 Abraham Maslow’s Context
Within the context of Maslow’s hierarchy of needs, transactional leadership work at the basic levels of need satisfaction, where transactional leaders focus on the lower levels of the hierarchy.
Transactional leaders use an exchange model, with rewards being given for good work or positive outcomes. Conversely, people with this leadership style also can punish poor work or negative outcomes until the problem is corrected. One way that transactional leadership focuses on lower level needs is by stressing specific task performance. Transactional leaders are effective in getting specific task completed by managing each portion individually. Transactional leaders are concerned with process rather than forward thinking ideas. These type of leaders focus on contingent reward (also known as contingent positive reinforcement) or contingent penalization (also known as contingent negative reinforcement). Contingent rewards (such as praise) are given the set goals are accomplished on time, ahead of time, or to keep subordinates working at a good place at different times throughout completion (Abraham, 1970).
Contingent punishment (such as suspensions) is given when performance quality or quantity falls below production standards or goals and task are not met at all often, contingent punishments are handed down on a management-by-exception basis, in which the exception is something going wrong. Within management-byexception, there are active and passive routes. Active managementby-exception means that the leaders continually looks at each subordinates performance and make corrections throughout the process. Passive management-by-exception waits for issues to come up before fixing the problem. With transactional leadership being applied to the lower level needs and being more managerial in style. It is a foundation for transformational leadership which applies to higher-level needs. Transactional leadership, also known as managerial leadership, it focuses on the role of supervision, organization and group performance, it is a style of leadership in which the leader promotes compliance of his followers through both rewards and punishments unlike transformation.
They are not looking to change the future; they are looking to merely keep things the same. This leader pays attention to followers’ work in order to find faults and deviations. This type of leadership is effective in crisis and emergency situation, as well as when projects need to be carried out in a specific fashion. (Abraham, 1970).
An example of transactional leadership style is coaches of athletic teams. These leaders motivate their followers by promoting the reward of winning the game. They instill such a high level of commitment that their followers are willing to risk pain and injury to obtain the results that the leader is asking for. Another example of this leadership style is former Wisconsin state senator, Joseph McCarthy. His ruthless style of accusing people of being soviet spies during the cold war, by punishing for deviation from the rules and rewarding followers for bringing him accused communist infiltrators, McCarthy promoted results among followers. Because this leadership style is especially effective in crisis situation, another example was Charles de Gaule. Through this type of reward and punishment, he was able to become the leader of the free French in a crisis situation.
2.3.5 Qualities of Transactional Leadership Style
Transactional leaders use reward and punishments to gain compliance from their followers. They are extrinsic motivators that bring minimal compliance from followers. They accept goals, structure, and the culture of the existing organization. Transactional leaders tends to be directive and action oriented. Transactional leaders are willing to work within existing system and negotiate to attain goal of the organization. They tend to think inside the box when solving problems.
Transactional leadership is primarily passive. The behaviours most associated with this type of leadership are establishing the criteria for rewarding followers and maintaining the status quo. Within transactional leadership, there are two factors, contingent reward and management by exception.
Contingent reward provides reward for effort and recognizes good performance. Management-by-exception maintains that status quo, intervenes when subordinates do not meet acceptable performance levels, and initiates corrective action to improve performance.
2.3.6 Laissez-Faire Leadership Style
Laissez-faire leadership also known as delegative leadership is a type of leadership style in which leaders are hand –off and allow group members to make the decisions. Researchers have found that this is generally the leadership style that leads to the lowest productivity among group members. Leaders practicing this style allow people under them to make most of the suggestions. The people are left to themselves and have the liberty to enjoy their own policies. With a capable and motivated leader, this style works well. However, with a lazy leader, this style can fail. Laissez-faire is an absolutely passive leadership style, which is basically defined as the absence of leadership, thus, laissez-faire is the contrast to the active leadership styles of transformational and transactional leadership.
This leadership style is characterized by;
i. Very little guidance from leaders.
ii. Complete freedom for followers to make decisions
iii. Leaders provide the tools and resources needed iv. Group members are expected to solve problem on their own.
The benefits attached this leadership style is that laissez-faire leadership style can be effective in situations where group members are highly skilled, motivated and capable of working on their own, while the conventional term for this style is laissez-faire and implies a completely hands-off approach, many leaders still remain open and available to group members for consultation and feedback. The downsides of laissez-faire leadership are not ideal in situations where group members lack the knowledge or experience they need to complete tasks and make decisions.
Some people are not good at setting their own deadlines, managing their own projects can go off-track and deadlines can be missed when team members do not get enough guidance or feedback from leaders.
2.3.7 Transformational versus Transactional leadership
In 1985, Bass devised the multifactor leadership questionnaire (MLQ), an instrument intended to measure transformational and transactional leader behaviours. Over the past two decade, the following application in scores of research studies involving military, educational and commercial organizations, the MLQ has emerge as the primary means of quantitatively assessing transformational leadership (Bryant, 2003, Griffin, 2003). An outcome of this work is the isolation of four factors now accepted as being exhibited by effective transformational leaders. Their additive effect includes; Idealized influence (attributes and behaviours) is about building confidence and trust and providing a role model that followers seek to emulate (Bono & Judge, 2004; Stone et al, 2003). Leaders are admired, respected and trusted.
Transformational and transactional are the two style of leadership that tends to be compared the most. James Macgregor Burns distinguish between transformational leader and transactional leader by explaining that; transactional leader are leaders who exchange tangible rewards for the work and loyalty of followers, while transformational leader are leaders who engage with followers, focus on higher order intrinsic needs and raise consciousness about the significance of specific outcomes and new ways in which those outcomes might be achieved. Transactional leaders tend to be more passive as transformational leaders demonstrate active behaviours that include providing a sense of mission. Transactional leader works within the organizational culture, while a transformational leader works to change the organizational culture by implementing new ideas.
Douglas McGregor theory Y and theory X can also be compared with these two leadership style. Theory X can be compared with transactional leadership where managers need to rule by fear and consequences. In this style and theory, negative behaviour is punished and employees are motivated through incentives. Theory Y and transformational leadership are found to be similar, because the theory and style support the idea that managers work to encourage their workers. Leaders assume the best of their employees, they believe them to be trusting, respectful and selfmotivated. The leaders help to supply the followers with the tool they need to excel.
2.3.8 Determinants of Leadership Style
As already pointed out, there are very many studies on leadership.
No one study has been declared as possessing the answer to the leadership question. Each study attempts to make contribution by breaking new grounds or refining existing studies. The question of what determines effective leadership in any organization towards productivity is not completely answered, Tannenebaum and Schmidt have attempted this question and come up with the following factors:
i. Size of business organization: as an organization grows larger and get more complex, there is a tendency for decision making to be centralized, leading to very limited participation or no participation at all. The leader (manager) may only present ideas and invites questions. It is different where the organization is small and consultation is very easy. Large organizations have a tendency to follow the line of authority very rigidly, leading to a strict adherence to the principles of unity of command.
ii. Degree of interaction: the degree of interaction in business organization influences the style of management. Where employees must co-operate in order to accomplish a task, there is bound to be an open channel to communication since members must interact; but where there is functional specialization and managers tends to have the expertise,
autocratic style is likely to be practiced.
iii. Personality of employees: some people react to more certain styles of leadership than others. Individuals who like to depend on others do not like to participate since their needs for security and direction are answered by rigid organizational structure. Individuals, who have a clear sense of direction and wish to get ahead, love to participate in decision making. A leader in this situation must adapt to the situation by providing opportunity for participation for those who need it and leading those who cannot benefit from participation.
iv. Goal congruency: goal congruency exists as the goals of the individual and the goal of the organization are perceived to be the same. In this situation there is a unity of direction and purpose as everybody works towards the attainment of a common goal. Participative decision making is ideal. If the goals are no identical, leadership will tend to be more autocratic
and there will be the adherence to rigid organizational structure, rules and regulation governing behaviour.
v. Level of decision making: in a centralized organization, there is little or no provision for decisions to be made by the people at the lower levels of the organization. Directives are handed down and strict compliance is expected. The style of leadership tends to be directive rather than participative or laissez-faire. vi. The state of the style: when the productivity of an organization is high and company profit target are being met, there is a tendency for the organization to be more democratic. When the situation is different, the leadership style to be adopted will be such as to encourage high productivity. Leadership becomes authoritative. Unproductive employees will have to be dismissed and some company expense items may have to be cut in order to improve the profit picture. In many of these issues, the leader makes the decision and announces it. The state of the system plays a very important part in determining the leadership style.
2.4 ORGANIZATIONAL PERFORMANCE
This comprises the actual output or results of an organization as measured against its intended outputs (or goals) and objectives.
According to Richard (2009), organizational performance covers three specific areas of firm outcomes;
a) Financial performance (profits, return on assets, return on investment, etc).
b) Product market performance (sales, market share, etc), and
c) Shareholder return (total shareholder return, economic value added, etc).
Specialists in many fields are concerned with organizational performance including strategic planners, operations, finance, legal and organizational development.
In recent years, many organizations have attempted to manage organizational performance using balanced scorecard methodology where performance is tracked and measured in multiple dimensions such as:
- Financial performance (e.g. shared holder return)
- Customer service
- Social responsibility (e.g. corporate citizenship, community outreach)
- Employee stewardship.
2.4.1 Importance of Organizational Performance
The relationship between leadership and performance has been a subject that has caught the attention of many a scholar in the field of psychology and management. This is hardly surprising considering the importance that organizational performance has in the growth of any nation.
It is therefore, an undeniable fact that every nation’s organizational performance is dependent on the total productivity of firms in that nation and the more productive the firms are the more productive the country becomes.
i. Productivity in organization determines the level of organizational performance and outcomes that shows and tells how much profit is accruing to the organization.
ii. Performance measures the successes and failures of an
organization.
iii. It compares an organization with others and indicates its area of deficiency to improve.
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iv. It comprises of both the length and breadth of an organization and further finds the distinction among them.
v. It enhances the growth of living standard of the people in the economy.
Furthermore, when organizational performance is viewed from the angle of a determinant of a healthy economy, then it can also be said to be a determinant of unemployment as well as inflation and thus, the standard of living in a country. With regards to individual firms or organization, productivity can be said to be one of the factors. An increase in organizational performance invariably results in the growth of a company with the company being more able to offer employment and expand its area of operation not to mention a possible increase in its market share. The company’s profitability also increases and though productivity might not automatically transcend into profitability, the chances of profitability being more of an outcome of productivity cannot be completely ruled out (Richard, 2009).
2.4.2 Leadership Style and Organizational Performance
In the literature, leadership has been identified as an important subject in the field of organizational behaviour. Leadership is one with the most dynamic effects during individual and organizational interaction. In other words, ability of management to execute “collaborated effort” depends on leadership capability. Lee and Chuang (2009), explains that the excellent leader not only inspires subordinates potential to enhance efficiency but also meets their requirements in the process of achieving organizational goals. Bass et al (2008) defines leadership as the individual behaviour to guide a group to achieve the common target. Fry (2003), explains leadership as use of leading strategy to offer inspiring motive and to enhance the staffs potential for growth and development. Several reasons indicate that there should be a relationship between leadership style and organizational performance. The first is that today’s intensive and dynamic markets feature innovation-based competition, price/ performance rivalry, decreasing returns, and the creative destruction of existing competencies (Koontz and Donnell, 1996).
On the other hand, organizational performance refers to ability of an enterprise to achieve such objectives as high profit, quality product, large market share, good financial results, and survival at predetermined time using relevant strategy for action (Koontz and Donnell, 1996). Organizational performance can also be used to view how an enterprise is doing in terms of level of profit, market share and product quality in relation to other enterprises in the same industry. Consequently, it is a reflection of productivity of members of an enterprise measured in terms of revenue, profit, growth, development and expansion of the organization.
Understanding the effects of leadership on performance is also important because leadership is viewed by some researchers as one of the key driving forces for improving a firm’s performance. Effective leadership is seen as a potent source of management development and sustained competitive advantage for organizational performance improvement (Bass and Avolio, 2003). For instance, transactional leadership helps organizations achieve their current objectives more efficiently by linking job performance to valued rewards and by ensuring that employees have the resources needed to get the job done (Woods, 2010). Visionary leaders create a strategic vision of some future state, communicate that vision through framing and use of metaphor, model the vision by acting consistently, and build commitment towards the vision (Bass and Avolio, 2003; Mishane and Glinow, 2000). Some scholars like Woods (2010) suggest that visionary leadership will result in high levels of cohesion, commitment, trust, motivation, and hence performance in the new organizational environments.
Mehra, Smith, Dixon and Robertson (2006) argue that when some organizations seek efficient ways to enable them outperform others, a long-standing approach is to focus on the effects of leadership. Team leaders are believed to play a pivotal role in shaping collective norms, helping teams cope with their environments, and coordinating collective action. This leader-centred perspective has provided valuable insights into the relationship between leadership and team performance. Some studies have explored the strategic role of leadership to investigate how to employ leadership paradigms and use leadership behaviour to improve organizational performance. This is because intangible assets such as leadership styles, culture, skill and competence, and motivation are seen increasingly as key sources of strength in those firms that can combine people and processes and organizational performance (Bono and Judge, 2004).
Previous studies led the expectation that leadership paradigms will have direct effects on customer satisfaction, staff satisfaction, and financial performance. In general, however, the effects of leadership on organizational performance have not been well studied, according to House and Aditya’s review (1997), who criticized leadership studies for focusing excessively on superior-subordinate relationships to the exclusion of several other functions that leaders perform, and to the exclusion of organizational and environmental variables that are crucial to mediate the leadership-performance relationship. Another problem with existing studies on leadership is that the results depend on the level of analysis. House and Aditya (1997), distinguished between micro-level research that focuses on the leader in relation to the subordinates and immediate superiors, and macro-level research that focuses on the total organization and its environment. Other scholars have also suggested that leaders and their leadership style influence both their subordinates and organizational outcomes (Yates and Genghis, 2002).
Fenwick and Gayle (2008), in their study of the missing links in understanding the relationship between leadership and organizational performance conclude that despite a hypothesized leadership-performance relationship suggested by some researchers, current
findings are inconclusive and difficult to interpret.
From this review of related literature, it is evident that although some scholars believe that leadership enhances organizational performance while others contradict this, different concepts of leadership have been employed in different studies, making direct comparisons virtually impossible. Gaps and unanswered questions remain. Consequently, the current study is intended to re-examine the proposed leadership-performance relationship and, thus, contribute meaningfully to the body of growing literature and knowledge in this area of study.
Understanding the impact of leadership style on organizational performance is so important because leadership is viewed by some researcher as one of the key driving forces for improving a firm’s performance that leads to organizational growth. These leadership styles are reflections of the perception that the leaders have on their workers. These perceptions are better explained by McGregor’s motivational theory X and theory Y which have been elaborated earlier. Leaders with an inclination toward theory X, perceiving workers as been averse to work will be autocratic, giving orders and not tolerating any suggestion or initiative. Those with theory Y perception will lean towards the more democratic styles of leadership based on their perception of their workers as being capable of not only accepting responsibility but also seeking for it.
Herzberg’s theory highlights the earlier statement that motivation goes beyond monetary considerations. The factors listed under the motivational aspect of the theory do not include money. However, those factors that are considered under the hygiene aspect and not considered motivational but rather only help to prevent dissatisfaction has money in it. This therefore points to the fact that any leader who intends to motivate his workers must focus his or her rewards. This sort of decision depends largely on the perception and attitude that the leader has of the workers which said perceptions are best explained in the light of McGregor’s X and Y theory. Managers adopting the X approach tend to treat workers with “indifference if not disdain” seeing them as “a pair of hands to be disciplined and controlled”. Tapin & Winterton (2007) they were seen by workers as the “uncaring bosses” who are “…harsh with most workers…” Such leaders viewed their roles as “one of control and coordination of work” and viewed workers as entrust worthy an expendable. (Tapin & Winterton (2007). Tapin & Winterton (2007) see those who adopted the Y approach as leaders who consider workers as resources to be developed than as disposable factors of production. Such leaders adopt styles that are considerate of work/ family issues and provided open communication with workers. Such leaders constantly encourage those workers who are not up to par when they seem to flag instead of threatening or disciplining them. (Tapin & Winterton, 2007) They are about what happens to workers and respond to their perceived needs in the positive manner.
The literature so far reviewed highlights that performance is dependent on the effort of the workers. Getting workers to go extra mile and to achieve results depend on how well motivated they are. The motivation of worker depends on the sought of leaders they have and the perception that the leaders have of the workers. Thus, Tapin & Winterton (2007) conclude that “commitment rather than control are often associated with low turnover and higher performance”. Performance is therefore affected either positively or negatively depending on the style of leadership in operation. 2.4.3 The Role of Leadership in Organizational Performance
Over the years, there have been a considerable interest and discussion on the subject of improving organizational performance in Nigeria economy. There appears to be a general agreement that the level of organizational performance in the economy is low and needs to be improved substantially, that low performance contribute to the high cost of production in the economy because the high cost of production in the economy is because the high wages usually paid are not matched by commensurate output that low output also contributes to the phenomenon of “too much money chasing too few goods and services” an ingredient of inflation, and that if performance can be improved, we can obtain more goods and services from the available human and material resources of the economy.
2.4.4 Management and Organizational Performance
To achieve better understood perspective of management on organizational performance, it is here interpreted to imply management practices and techniques on the one decision making class in organizations. Whether in private or public sector organization, this class undertakes the key management functions of planning, organizing, staffing, budgeting, coordinating, directing and controlling. These functions involve setting objectives and work, solving problems making decision and reviewing performance which is what management is all about. In this regard, management as a process is described as the employment of materials, capital, equipment and manpower.
The practice and techniques which have come to be described as management science which its objective is to assist managers and supervisors to be more efficient and effective include work study, organization and methods, operational research, economies network analysis, motion time management (MTM), value analysis among others.
The value of bringing some or all of the above into one management function, perhaps under a department, example management science department, is the gain of a unified approach to the issue of increasing performance in organization. A commitment to management productivity ethic implies the encouragement and applications of management practices and techniques as already enumerated all of which aid organizational efficiency andeffectiveness as well as performance.