The Impact of Leadership or Entrepreneurship - Literature review Example

? The Impact of Leadership in Organization - Literature Review Word Count: 2096 Table of contents Introduction 3 2. Impact of leadership in organizational performance – literature review 3 2.1 Can leadership impact organizational performance? 3 2.2 Areas of organization affected by leadership style 5 Leadership and innovation 5 Leadership and Organizational culture 6 Strategic thinking as affected by leadership 7 The effects of leadership on acquisitions 8 Leadership and employee motivation 8 Leadership and the changing style of managers 10 3. Conclusion 10 References 11 Bibliography 12 1. Introduction The successful performance of organizations in the global market has been related to a series of factors. Leadership has been found to have a critical role in organizational growth, affecting various aspects of organizational operations. A series of studies published in regard to this issue has been reviewed in order to identify the key aspects of the involvement of leadership in organization. It has been proved that leadership can highly impact modern organizations; still, the level at which leadership affects organizations is not standardized. Rather, differences seem to exist under the influence of internal and external organizational environment. In addition, the impact of leadership in organizations can have many aspects; reference can be made, as an example, to the influence of leadership on organizational strategy (Fairholm 2009). The literature review is presented in section 2 of this study. The particular section, which is the study’s main body, has been divided into two parts. The first one presents the literature that addresses the potentials of leadership to impact organizational performance. Then, in the second part of section 2, the various aspects of impact of leadership in organizations are analytically presented using relevant academic studies. 2. Impact of leadership in organizational performance – literature review 2.1 Can leadership impact organizational performance? Udoh and Agu (2012) have investigated the potential influence of two specific types of leadership, the transformational and the transactional leadership, in organizations operating in the manufacturing industry of Nigeria. The workers of three organizations operating in the particular industry have been asked to participate in the survey. A total of 286 workers have accepted to state their view in regard to the issues explored through the particular study. It should be noted that workers at different level of the organizational hierarchy have participated in the study, aiming to secure the study’s credibility. The responses of the participants indicated a close relationship between the two leadership styles, i.e. the transformational and the transactional leadership, and organizational performance (Udoh and Agu 2012). The importance of the above study can be identified at this point: the study of Udoh and Agu (2012) shows that, even if based on different approaches for enhancing employee performance, the transformational and the transactional leadership are equally powerful in securing high employee performance. On the other hand, for Boerner, Eisenbeiss and Griesser (2007) transformational leadership is more likely to boost organizational performance, compared to transactional leadership. The above researchers used both the literature review and the empirical research in order to check the impact of transformational leadership and organizational performance. The review of the literature related to this issue revealed that transformational leadership can enhance employee performance by focusing on the relationship between the leader and employees (Boerner, Eisenbeiss and Griesser 2007). Indeed, it seems that through transformational leadership ‘trust, agreement on values and self efficacy’ (Boerner, Eisenbeiss and Griesser 2007, p.15) help employees to keep their performance at high levels, a fact that positively affects organizational performance. When the effectiveness of transactional leadership in regard to the above aspects of leader-followers relationship was checked a different outcome appeared: transactional leadership is not able to enhance, at least not at the level of transformational leadership, the employees’ trust and self-efficacy; due to this fact, transactional leadership has proved to be unable to boost employee performance (Boerner, Eisenbeiss and Griesser 2007). The potential of transformational leadership to enhance organizational performance is also verified in the study of Ojokuku, Odetayo and Sajuyigbe (2012). In the above study the relationship between various types of leadership and organizational performance has been explored using a survey among ‘the managers of 20 banks in Oyo State, Nigeria’ (Ojokuku, Odetayo and Sajuyigbe 2012, p.205). The survey revealed that two types of leadership are more likely to enhance organizational performance: democratic leadership and transformational leadership. The fact that in the context of these leadership styles employees are encouraged to taken initiatives without being closely supervised and ‘are helped to achieve their visions’ (Ojokuku, Odetayo and Sajuyigbe 2012, p.207) seems to be the key reason for the high contribution of democratic leadership and transformational leadership ‘in the increase of organizational efficiency’ (Ojokuku, Odetayo and Sajuyigbe 2012, p.207). A different type of leadership, the authentic leadership, is set under examination in the study of Khan (2010). The above researcher focuses on ‘the impact of authentic leader in organization’ (Khan 2010, p.167). Khan (2010) used the literature that has been published in regard to authentic leadership in order to check whether an authentic leader is able to impact organization. The literature review developed by Khan (2010) verified the impact of authentic leadership on organizations. 2.2 Areas of organization affected by leadership style Leadership and innovation The impact of leadership in organization, as indicated in the studies presented above, should be further analyzed as of its elements. In other words, the potential of leadership to affect organizational performance has been verified but the areas of the organization that are most likely to be influenced by leadership should be identified. Such target is achieved through the study of Agbim (2013). The above researcher has developed a survey among the employees of 43 companies operating in the manufacturing industry of Nigeria; in total 626 questionnaires, sent to employees, were returned completed (Agbim 2013). The issue set under examination through the survey has been the following: can the impact of leadership style on innovation be changed according to organizational structure? The results of the survey developed by Agbim (2013) indicated that each of two leadership styles helps to promote different aspects of innovation: ‘transformational leadership helps in idea generation while transactional leadership helps in idea implementation’ (Agbim 2013, p.56). In this context, the leader that aims to secure the competitiveness of his organization should employ both the above leadership styles (Agbim 2013). Leadership and Organizational culture When exploring the impact of leadership in organization the following issue should be made clear: the level at which leadership affects an organization can be differentiated depended on the organizational culture. This fact is highlighted in the study of Ogbonna and Harris (2000). In the specific study the interaction between organizational performance, leadership and culture is explored (Ogbonna and Harris 2000). A survey among the executive officers of 322 UK firms registered in FAME database has been developed and the findings have been critically analyzed in combination with appropriate literature. It has been revealed that leadership can impact organizational performance but not at same level in all organizations; organizational culture can result to the increased or decreased involvement of leadership in organizational performance (Ogbonna and Harris 2000). Strategic thinking as affected by leadership Another aspect of the impact of leadership in organization is presented in the study of Fairholm (2009). The above researcher tries to identify the role of leadership style in the strategic thinking/ planning process. It was proved that leadership affects the first part of the above process, i.e. strategic thinking. The second part of the particular process is related rather to management than to leadership (Figure 1 below). Figure 1 – Interaction between leadership, management and strategic thinking/ planning (source: Fairholm 2009, p.11) The findings of the study of Fairholm (2009) denote that leadership is not involved in all parts of strategy formulation but it is likely to be related mainly to the strategic thinking process. Such view could be criticized as of the following point: successful leaders are expected to perform high both in regard to strategic thinking and strategic planning. Therefore, the graph presented in Figure 4 should be alternated by expanding the domain of leadership incorporating both strategic planning and strategic thinking; a possible explanation of the graph’s format would be the following: the graph shows the areas of strategy formulation in which leadership and management domains perform quite high. The effects of leadership on acquisitions In the study of Yildirim and Birinci (2013) an example of the role of leadership in organizational success is provided: it is noted that acquisitions can be considered as the best example for proving the potential of leadership and culture to be used as the basis for success of acquisitions in different industries (Yildirim and Birinci 2013). Reference is made to a Turkish company of the telecommunications industry. It is proved that firms that are based on transformational leadership culture have more chances to keep their competitiveness during a merger/ acquisition process’ (Yildirim and Birinci 2013, p.81). Leadership and employee motivation Apart from strategic thinking and culture, leadership can be also related to employees’ motivation. In fact, it seems that in organizations where leadership is quite effective employee motivation can reach high levels, depended on the style of leadership chosen (Chaudhry, Javed and Sabir 2012). However, not all leadership styles have been proved to enhance employee motivation; transformational and transactional leadership are more supportive towards employees’ needs; through such approach the above two examples of leadership style can be considered as most appropriate for promoted motivation, a fact that could enhance organizational performance. Through a similar approach Bello (2012) noted that within each organization the leadership style can be of decisive importance when having to support employee performance. In fact, it has been proved that a leadership style that emphasizes on ethics is more likely to boost employee performance than a leadership style where ethics, as a criterion of leadership decisions, is ignored (Bello 2012). The promotion of employee motivation within each organization can be achieved in different ways. Emphasizing to commitment can be another tool of employees for securing their rights. Gul et al. (2012) developed a survey in order to check whether the leadership style of an organization can affect the level of commitment across the organization. It has been proved that certain leadership styles, such as the servant leadership, are not able to influence organizational commitment while others, such as the transformational leadership, are able to support the increase of organizational commitment under the terms that the conditions in the organizational environment would welcome such initiatives (Gul et al. 2012, p.29). The critical role of leadership in the increase of employee performance is also verified through the study of Paracha et al. (2012). In that study emphasis is given to the involvement of two specific leadership styles, transformational leadership and transactional leadership, in the increase of job satisfaction, as such increase can directly influence employee performance (Paracha et al. 2012). A survey has been developed across schools in Pakistan; in total 124 questionnaires have been gathered so that assumptions to be made in regard to the intervention between leadership and employee performance (Paracha et al. 2012). The findings of the above survey clearly show the sequence of processes leading from leadership style to employee performance. On the other hand, Gill, Flaschner and Bhutani (2010) have supported that leadership style can negatively affect employee performance by increasing the stress of employees (Gill, Flaschner and Bhutani 2010). A survey has been developed among the employees of Indian hospitals; 266 questionnaires have been used as the basis for testing the above study’s hypotheses (Gill, Flaschner and Bhutani 2010). It has been made clear that the stress of employees can be significantly reduced in organizations where efforts are made for ‘improving existing transformational leadership style’ (Gill, Flaschner and Bhutani 2010, p.1). Leadership and the changing style of managers Of particular value is the study of Alkahtani, Abu-Jarad and Sulaiman (2011). In the particular study an important aspect of the impact of leadership in organization is presented: leadership style can ‘affect the changing capability of managers’ (Alkahtani, Abu-Jarad and Sulaiman 2011, p.70). A survey has been developed among 105 managers of Malaysian hospitals (Alkahtani, Abu-Jarad and Sulaiman 2011, p.70). The survey revealed that certain leadership styles, such as the involvement leadership style, can help to the gradual increase of a manager’s changing capability (Alkahtani, Abu-Jarad and Sulaiman 2011, p.70). 3. Conclusion The impact of leadership in organizations cannot be doubted. In fact, the literature presented above proves that leadership can highly affect various aspects of each organization, such as innovation, employee performance, managers’ capabilities and so on. At the same time it has been proved that leadership can often interact with other elements of the organization, such as culture, under the terms that such cooperation is not opposed with the values of the organization. The literature related to this study’s subject seems to have an important gap: the power of leadership to impact organization is highlighted but the implications of this impact are not analyzed. In regard to this issue further research would be required so that the role of leadership in modern organizations is fully explained References Agbim, K. (2013) “The Impact of Organizational Structure and Leadership Styles on Innovation.” IOSR Journal of Business and Management (IOSR-JBM), Vol 6, Issue 6, pp.56-63 Alkahtani, A., Abu-Jarad, I. and Sulaiman, M. (2011). “THE IMPACT OF PERSONALITY AND LEADERSHIP STYLES ON LEADING CHANGE CAPABILITY OF MALAYSIAN MANAGERS.” Australian Journal of Business and Management Research Vol.1 No.2, pp.70-99 Bello, S. (2012) Impact of Ethical Leadership on Employee Job Performance. International Journal of Business and Social Science, Vol 3, pp.228-236 Boerner, S., Eisenbeiss, S. and Griesser, D. (2007). “Follower Behavior and Organizational Performance: The Impact of Transformational Leaders.” Journal of Leadership and Organizational Studies, Vol 13, Issue 3, pp.15-26 Chaudhry, Q., Javed, H. and Sabir, M. (2012) THE IMPACT OF TRANSFORMATIONAL AND TRANSACTIONAL LEADERSHIP STYLES ON THE MOTIVATION OF EMPLOYEES IN PAKISTAN. Pakistan Economic and Social Review, Vol 50, No 2, pp.223-231 Fairholm, M. (2009). “Leadership and Organizational Strategy.” The Innovation Journal: The Public Sector Innovation Journal, Volume 14, Issue 1, article 3, pp.1-16 Gill, A., Flaschner, A. and Bhutani, S. (2010). “The Impact of Transformational Leadership and Empowerment on Employee Job Stress.” Business and Economics Journal, Volume 2010, BEJ-3, pp.1-11 Gul, S., Rehman, S., Razzaq, N., Ahmad, B. and Saif, N. (2012). “Impact of Leadership Styles on Organizational Commitment in Pharmaceutical Companies of Pakistan.” Information and Knowledge Management, Vol 2, No 7, pp.29-36 Khan, S. (2010). “Impact of Authentic Leaders on Organization Performance.” International Journal of Business and Management, Vol 5, No 12, pp.167-172 Ogbonna, E. and Harris, L. (2000). “Leadership style, organizational culture and performance: empirical evidence from UK companies.” International Journal of Human Resource Management, Vol 11, Issue 4, pp.766-788 Ojokuku, R., Odetayo, T. and Sajuyigbe, A. (2012). “Impact of Leadership Style on Organizational Performance: A Case Study of Nigerian Banks.” American Journal of Business and Management, Vol 1, No 4, pp.202-207 Paracha, U., Qamar, A., Mirza, A. and Waqas, I. (2012). “Impact of Leadership Style (Transformational & Transactional Leadership) On Employee Performance & Mediating Role of Job Satisfaction” Study of Private School (Educator) In Pakistan. Global Journal of Management and Business Research, Vol 12, Issue 4, pp.55-63 Udoh, B. and Agu, A. (2012). “Impact of Transformational and Transactional Leadership on Organizational Performance.” International Journal of Current Research, Vol 4, Issue 11, pp.142-147 Yildirim, N. and Birinci, S. (2013). “Impacts of organizational culture and leadership on business performance: A case study on acquisitions.” Procedia - Social and Behavioral Sciences, Vol 75, pp.71 – 82 Bibliography Abiodun, R., 2010. Leadership Behavior Impact on Employee's Loyalty, Engagement and Organizational Performance: Leadership Behavior and Employee Perception of the Organization. Bloomington: AuthorHouse. Bryman, A., 2013. Leadership and organizations. London: Routledge. Hannum, K. and Martineau, J., 2008. Evaluating the Impact of Leadership Development. Hoboken: John Wiley & Sons. Iqbal, T., 2011. The Impact of Leadership Styles on Organizational Effectiveness. Norderstedt: GRIN Verlag. Sornum, K., 2010. Poor Leadership Leading to Organizational Failures. Norderstedt: GRIN Verlag. Storey, J., 2013. Leadership in Organizations. London: Routledge. Read More