Leadership Style as an Important Ingredient for Organizational Success - Literature review Example

Leadership is a highly valued and sought-after commodity. People have relentlessly asked on what it makes to be a good leader. Since most people believe that through leadership they can improve their social, personal, and professional lives, they seek information on how to become effective leaders. Corporations employ those with leadership ability because they believe they are able to provide the vision for organizational success and ensure effective programs, which help in achieving the vision, are implemented and, ultimately, improving the bottom line. In examining how leadership style is an import ingredient for organizational success, this paper focuses on two leadership styles, transactional and transformational leadership styles. It then makes a comparison between transformational leaders, one from an Australian organization and the other from an Asian organization. According to Eagly and Johannesen-Schmidt (2001), the effectiveness of one’s leadership style is determined by his inspiration, motivation and directions that he gives to his followers. The topic of leadership has gained the attention of many researchers throughout the world. They have presented various views on transactional and transformational leadership styles. Northouse (2009) highlights that transformational leadership has been the current and most popular leadership style focused in much research since the early 1990s. As part of the “New Leadership” paradigm, transformational leadership has given more attention to the affective and charismatic elements of leadership. Bass and Riggio (2006) suggested that it emphasizes on follower development and intrinsic motivation. Northouse (2009) defines leadership as a process that helps followers in their growth and development. It is concerned with the assessing of the follower’s needs, satisfying them and treating them as human beings. This process incorporates visionary and charismatic leadership with an exceptional form of influence which make the followers to accomplish more than what is expected of them. According to Slack & Parent (2005), Burns’ work contrasts transformational leadership with what he refers to as transactional leadership. Northouse (2009) distinguishes transactional leadership from transformational leadership in that transactional leadership does not focus on the personal development of the followers or individualize their needs. Transactional leaders appeal to their self interest through the exchange of prestige or pay for subordinates’ compliance to their orders. These leaders are also influential because the subordinates do what they (leaders) want them to do. There exists a relationship between the leader and the followers, but there is no enduring bond between them. The followers and the leaders are not united in a mutual relationship aimed at the pursuit of a higher purpose. Transformational leadership contrasts to transactional leadership since the transformational leaders and the followers raise one another to high levels of morality and motivation. In fact, the transformational leaders are sensitive and pay attention to the needs of their followers as well as theirs. Slack & Parent (2005) argues that the transformational leaders “must appeal to the whole person and their total range of higher- level needs such as justice and equality” (p. 303). There is no place for lower-level motivations such greed and fear in transformational leadership. The characteristics of transformational leadership include the following. First is idealized influence, in which the transformational leaders behave in a manner that is admired, trusted and respected, such that the followers wish to emulate them. The transformational leaders are extraordinary persistent, capable, and determined. This encourages the followers to have trust in the leader as well as sharing common goals and visions (Egan, Sarros & Santora 2010; Eagly & Johannesen-Schmidt 2001; Northouse 2009). Inspirational Motivation is the second characteristic of transformational leadership. Transformational leaders have the ability to communicate to their followers about their expectations, and inspire them through motivation so as to become committed to the shared vision of the organization. They enhance team spirit, and use emotional appeals in focusing on the members’ efforts of achieving more than more than what they would have achieved in their own self-interest. Hacker & Roberts (2003) adds that they provide optimism, meaning and a vision for the organization. Characteristic 3 is intellectual stimulation. Transformational leaders stimulate their followers to be innovative and creative, and to challenge their values and beliefs as well as those of the leader and the organization. The leaders support followers as they develop new ways of dealing with various issues in the organization. Characteristic 4 is individualized consideration. Transformational leaders provide a supportive environment by listening carefully to the individual needs of the followers. According to Muenjohn & Armstrong (2007), they act as advisors and coaches while they assist their followers to become fully actualized. The leaders delegate duties and responsibilities to help the followers grow through various personal challenges. On the other hand, transactional leadership can be characterized by contingent reward and management by exception (Eagly & Johannesen-Schmidt 2001; Northouse 2009; Alimo & Alban 2001). Contingent reward involves the exchange process between the followers and the leaders whereby the effort of the followers are rewarded. There exist an agreement between the follower and the leader on what is expected of them as well as the payoffs for the tasks. Management by exception is characteristic 2 held by transactional leaders. These leaders use corrective criticism, negative reinforcement and negative feedback. This management takes two forms; it can either be active or passive. According to Muenjohn & Armstrong (2007), active management by exception concentrates on the deviations of the followers from the expected norms such as rule violations, mistakes and irregularities. Passive management by exception involve the interventions that are made when things go wrong. Slack & Parent (2005) analyses how Bass views transactional leadership as being separate from transformational leadership, unlike Burn who regards the both leadership styles as being ends of a continuum. According to Bass, the transformational leaders increase the awareness and confidence of the subordinates in obtaining their selected goals. These leaders seek to empower the subordinates by providing personal attention to their needs as well as a constant flow of new ideas and knowledge on how to operate. On the other hand, transactional leadership seem to be transitory. As a transaction between the leader and the followers is completed, the relationship between them ends or may be redefined. Transactional leadership promote stability in organizations. Lussier & Achua (2009) argue that this leadership style is more effective when leaders wish to exploit knowledge at the organizational level. The transactional leaders focus more in defining the task requirements and roles as well as offering rewards that are contingent on the fulfilment of tasks and this is the reason as to why it is referred to as contingent reward leadership. Transformational leadership creates significant changes in both the organizations and the followers. Lussie & Achua (2009) argue that this leadership style is more effective when leaders want to create and share knowledge at group or individual levels. Transformational leaders inspire their followers by focusing on collective interests and emphasizes on the importance of the group values. Transformational leadership process incorporates both the leaders’ needs and the followers’ needs. In this case, leadership serve as the interplay between leaders and followers and not the sole responsibility of a leader. The needs of the followers are central to the transformational leader and this makes them to gain a more prominent position in leadership since their ascriptions are influential in the evolving transformational process (Hacker & Roberts 2003). The transactional leadership produces the expected results in the organization. An example of a successful transformational leader in Australia is David Morgan, the former Managing Director and CEO of Westpac Banking Corporation. He joined Westpac in 1991 as a Chief General Manager and in 1999, he became the CEO. As the CEO, he made Westpac join the global impact. In previous years, Westpac had suffered from a financial and reputational crisis. Through his leadership, Westpac was able to regain financial health. Morgan provided a top line leadership by encouraging the worker’s values as well as empowering them to implement change. In addition, he had a beneficial influence on the society. He acknowledged that lack of mistakes among workers was not a good thing for the organization (United Nations Inc. 2007). An example of a successful transformational leader in an Asian organization is Mr. Ning, the chairman of COFCO Limited and 2009 Asia Business Leader of the Year. He has been recognized as an influential business leader in China. COFCO has grown as a largest diversified service and product supplier in the food and agribusiness industries of China under the leadership of Ning. In fact, it has expanded into other businesses and markets. Currently, COFCO is a “$26 billion conglomerate with over 100000 employees and a spot on the Fortune Global 500.” Ning won a prestigious award as Asia’s business leader at CNBC’s 8th ABLA ceremony in 2009 (Bob 2010). These two leaders have similar characteristics in their transformational leadership. In separate interviews, they both explained that they devoted a great deal of attention, time and financial resources in supporting talent management. They spent most of their time in the field coaching and developing managers around their businesses. They tracked their employee’s business performance while recognizing their personal strengths and weaknesses. They have both carried a strong value driven culture. They were committed in creating a positive, pleasant and transparent work atmosphere for employees while avoiding complicated interpersonal relationship and bureaucracies that commonly exist in large organizations. They also provide staff training and continuous improvement on the quality of the employees’ expertise. Besides, they offered career development plans for the employees (Bob 2010; United Nations Inc. 2007). Transformational leadership provides a broader view of leadership process that supplements other leadership models. These leadership models focuses basically focus on how leaders exchange rewards for the achieved goals i.e. in transactional leadership (Sashkin & Molly 2003). The transformational approach gives an enlarged picture of leadership which not only involve the exchange of rewards but also the attention of the leader towards the growth and needs of the followers. In addition, it emphasizes on the follower’s values, needs, and morals. Here, the leaders assist their followers in moving to higher levels of moral responsibility. They motivate the followers to transcend their interests for the group, organization or even the community. It regards leadership as having a moral dimension and results in performance which is higher than the expected. Despite of the differences between transformational and transactional leadership, it is worthy mentioning that effective leaders exhibit both leadership skills and apply them in appropriate situations. The determination of the extent to which a leader exhibits the characteristics of transactional and transformational leadership lies on the description of his behaviour by focusing on the seven areas discussed above. The first four measures the behaviours of a transformational leader, while management by exception and contingent rewards assess transactional leadership. These MLQ scores are related to the measures of organizational outcomes such as subordinate satisfaction, subordinate motivation and leader effectiveness. References Alimo, B & Alban R 2001, “The development of a new transformational leadership questionnaire, Journal of Occupational and Organizational Psychology, 74 (1), 1-27 Bass, B & Riggio, B 2006, Transformational leadership, Routledge, USA Bob, R Fall 2010, “DDI Talent Management intelligence,” Go 7 (2), 28-30 Eagly A & Johannesen-Schmidt M 2001, “The Leadership Styles of Women and Men,” Journal of Social Issues, vol 57, no 4, pp 781-797, Doi: 10.1111/0022-4537.00241 Egan, R., Sarros, J & Santora, J 2010, “Putting transactional and transformational leadership into practice,” Journal of Leadership and Organizational Studies, 17(4), 46-54 Hacker, S & Roberts, T 2003, Transformational leadership: creating organizations of meaning, ASQ Quality Press, Ohio. 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