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Leadership and Performance

1.0 Introduction

According to Dionne, Yammarino, Atwater and Spangler (2004) the globalisation of the marketplace, the ever increasing competitive environment and the rapid speed and availability of information has changed the nature in which organizations of today now operate.  It is important for organizations of today to have the ability to respond to these factors and change to remain competitive and viable.

This paper will identify that leadership of an organization plays an important role in sustaining the performance of the organization.  Firstly leadership will be defined stating that it is a process of influence and development of trust amongst the leader and their employees.  Performance will be defined and a discussion on the importance of leadership and its relationship to performance.

The development of leadership will be discussed and more particularly the emphasis will be placed on transactional and transformational leadership and their relationship to the performance of an organization.  Examples of these two leadership approaches will be discussed by providing some real life corporate examples.

In summary this paper will propose that for an organization to achieve optimum performance, it is necessary to have both transactional and transformational leadership, however which one is more affective for an organization is dependant upon the environment within which the organization is operating.

2.0 Leadership Defined

2.1 Process of Influence

Politis (2002) defines leadership to broadly state that it is a process of influence, which affects the actions of the leaders followers and therefore the choices of objectives for the followers or the organization.  Sosik (2001) states that this process of influence is based on the leaders ability to influence the beliefs, values, behaviours and performance of others by leading by example.  Russell (2001) agrees and adds that a leaders values significantly affect followers and influence the performance of the organization.    Conger (1991) also adds that the leader must be skilful in implementing and communicating the organisational mission, which will appeal to their followers.  The leader also needs to be able to detect opportunities in the marketplace and facilitate changes in the organization to maximise the growth of the organization.         

2.2 Trust

Lester and Brower (2003) state that trust is a critical element in providing effective leadership.  Leaders are now required to provide their employees the trust to perform their work as well as the leader be trustworthy in their own right so that the followers will be inspired to do what the leader requires.  If the followers sense that the leader trusts them then this will positively affect the performance and attitude of the follower by providing them with an environment which will make them work harder, do more than is required of them and have an increased level of job satisfaction.   McKoll-Kennedy and Anderson (2002) also add that trust will empower and motivate the employees towards achieving the goals of the organization.  Sosik (2001) states that leaders gain trust from followers therefore gaining commitment to the organization.

2.3 Attributes – Leadership Style Task versus People Oriented

Adeyemi-Bello (2001) defines leadership to be not only task and people orientations but also the interaction between them.  Certain leader attributes may be used to distinguish high from low performance organizations.  There are many attributes of an effective leader however for the purpose of this discussion we will look to one of which is of significance being that of leadership style.  Adeyemi-Bello (2001) defines leadership style as the extent to which a leader is people oriented or task oriented.  Task oriented leaders are those with strong concerns about a group’s goals and the way in which to achieve them.  These leaders tend to be achievement oriented and distant from their followers.  People oriented leaders on the other hand have strong concerns as to the followers relations to them and the other group members.  They provide a supportive atmosphere, which is friendly.

3.0 Performance Defined

Jones (2005) describes performance as not just delivering on financial results but being made up of five key areas.  These being the vision, and being able to articulate it to the employees.  Achievement, being able to measure the performance against financial benchmarks.  Innovation, being able to ensure a competitive advantage for the organization can be maintained against an organizations competitor.  Adaptability, and the ability for the organization to respond to change quickly and with a minimum impact on the business.  The wellbeing of the employees and ensuring that they are valued and have a strong commitment to the organization.  

Chien (2004) believes that performance has many different meanings.  From a process view, performance means converting inputs to outputs in order to achieve certain outcomes.  Economy, efficiency and effectiveness are all key terms in regards to performance.  Performance is an indicator, which includes quality, productivity and consistency.  Performance can be measured by results, behaviours and normative measures, education including management and leadership training in order for individuals to build skills to ultimately enhance organisational performance.

4.0 Connection between leadership and performance

4.1 Leadership and enhancement of performance

Novicevic and Harvey (2004) state that organizations now face increased pressure to improve the link between their human resources and the performance of the organization.  They propose that effective competent leadership and the development of the human capital within the organization will enable the firm to differentiate itself against competitors.    Jones (2004) adds that those leaders who can deal with the fast changing environment and are responsive to change, provide direction, commitment and intellectual capital to individuals, create an organization whereby the performance enables the organization to adapt and innovate.   This will ultimately lead to the sustainment of competitive advantage for the organization. 

Peterson, Smith, Martorana and Owens (2003) disagree and believe that leadership plays a very small role in the overall performance of an organization.  However they do add that leadership may account for some influence in the way that firms perform for example the culture, strategy and structure of the organization.  Hoogh, Hartog, Koopman, Thierry , Van den Berg, Van der Weide and Wilderom (2004) add that although leadership facilitates a positive attitude from its workers that leads to organisational profitability, leadership is unrelated to the liquidity and solvency of the organization.

4.2 Commitment of Employees

Yousef (2000) found that there was a positive relationship between leadership behaviour, job satisfaction and also that of commitment from the employee led to greater job performance.  Those employees who perceive their leaders as adopting, consultative and participative leadership behaviour were more committed to the organization; more satisfied in their jobs and displayed a higher level of performance.
 McKoll-Kennedy and Anderson (2002) adds that workers who feel that they have little or no control over the organisational objectives will unlikely commit to the work that is required.  Mastrangelo, Eddy & Lorenzet (2004) believe that the willing cooperation of employees is an important link between leader actions and organisational outcomes such as return on investment and profitability.

4.3 Leadership at higher and lower levels

Smith and Sharma (2002) state that to optimise performance and longevity of an organization, the organization must engage the employees to undertake responsibility and leadership at the individual level as well as at the higher levels.  Chien (2004) agrees and adds that leadership skills are necessary at every level of the organization from CEO right through to the line worker which will overall effect the performance of the organization. 

Novicevic and Harvey (2004) state that organizations now face increased pressure to improve the link between their human resources and the performance of the organization.  They propose that effective competent leadership and the development of the human capital within the organization will enable the firm to differentiate itself against competitors.  Gardner and Schermerhorn (2004) add that the support for human capital and talent in a high performance situation is the leaders primary role within the organization.

4.4 Empowerment and Motivation of Workers

Kim (2002) states that by enhancing the perceptions of empowerment and by being treated fairly by leaders employee will display greater performance.  Employees produce the most creative outcomes when they work on complex and challenging jobs and are supervised in a supportive and non-controlling way.  The leader in this case needs to create an atmosphere, which empowers self-development of its followers. Chien (2004) states that effective communication skills in organizations lead to less deficiencies in work and overall productivity.  A strong foundation of self-esteem, empowerment, motivation, goal setting and career development influences the behaviours, desires and attitudes of the workers.  These factors ultimately contribute to the organization in being able to carry out their vision and strategies and overall performance.
5.0 Development of leadership

Harris (1997) states that the industrial age was dictated by control and power.  Individuals were not trusted to perform work without direct supervision.  Ahn, Adamson and Dornbusch (2004) state that due to the increasing pace of globalisation, communications, competition, technology and the flattening of organisational structures, this has created a fundamental shift in the way that business operations are performed today and an increased difference between leadership and management.  According to Harris (1997) the information age is seeing the emergence of the entrepreneur and an increased power of the customer as well as increased information. These trends have led to the necessity for the organization to have the ability to adapt to these forces, therefore necessitating a new form of leadership.

Humpreys and Einstein (2003) state that the early management thought of scientific management conceptualised by Frederick Taylor provided a way of managing physical and human resources in the technical world however the workers were not seen as individuals and merely extensions of the machines and tools that they used.  Hence the emergence on theories based on the focus of the human aspect of the person – machine relationship.  These theories have been described by Politis (2002) as being, trait, behaviour and situational.  However by the early 80’s there was considerable disappointment with the situational theories and a new leadership approach emerged, transactional and transformational leadership.  These theories placed emphasis on the influence that leaders have to enable followers to have meaning to their work, which is consistent with Humphreys and Einstein (2003) in focusing on the human aspect of the person.

McKoll-Kennedy and Anderson (2002)  state that although transactional and transformational leadership share common elements such as providing clarification of desired results, recognition to employees and rewarding high performance.  There are however differences in process and behaviour. 

5.1 Transactional leadership and performance

Politis (2002) states that studies by the Ohio State University and Fiedlers path goal theory address the concept of transactional leadership.   Humphreys and Einstein(2003) add that this style of leadership is most often exhibited throughout organizations today. 

Politis (2002) proposes that these leaders motivate their followers through having established goals and by giving the followers clarification as to their role and task requirements.  Bass (1990) adds that managers enter into a transaction with their employees and rewards will be received if the requirements of the job are met.  Howell and Avolio (1993) add that as long as the leader and follower find this arrangement rewarding the relationship will continue to be positive and fulfilling to both parties.  Humphreys and Einstein (2003) add that the behaviours of the transactional leader and the concept of contingent reward have a positive correlation to the attitudes and performance of the followers.

Parry and Protor-Thomson (2003) argue that due to the employees not being able to identify with a mission and vision for the organization, the commitment from the leaders followers is short lived and the relationship only exists as far as the rewards provided by the organization are in existence.  Bass (1990) adds that this style of leadership has its weakness particularly if the leader only communicates with their followers when the procedures and standards of the job are not being met.  Parry and Proctor-Thomson (2003) also add that transactional leadership does not provide the flexibility and adaptability that organizations of today need to consider in this fast changing environment.

5.2 Transformational leadership and performance

Politis (2002) states that transformational leadership inspires the followers to exceed their own self-interests for the good of the organization.  Bass (1990) also adds that the leader also generates an awareness and acceptance of the overall vision of the organization to its followers.  Pillai and Willaims (2004) add that the ability to influence their followers to higher levels of commitment and performance by communicating the organisational vision enables the individual followers to reach their highest potential.   Politis (2002) states that this style of leadership in terms of Maslow’s Hierarchy of Needs elevates the followers to higher self-esteem and self-actualisation.   This is positively related to employee satisfaction and job performance. 

Bass (1990) states that when there is a high level of trust and confidence from the followers towards their leader this will ultimately lead to higher organisational performance.  Pillai and Willaims (2004) add that transformational leaders influence their followers by enhancing the self-efficacy and worth of the follower.   It is suggested that when self efficacy is achieved, the followers trust the leader and their overall commitment to the leader and organization will increase, which in turn increases organisational performance.  Humphreys and Einstein (2003) outlines four behaviours that they believe are associated with transformational leadership.  These being charisma, inspiration, intellectual stimulation and individual consideration. 

Parry and Proctor-Thomson (2003) propose that an essential factor that contributes to transformational leadership is the degree to which there in the endorsement of innovation and entrepreneurship.  Within the changing environment innovation is crucial to the long term survival of an organization.  By showing concern for the employees and their well being, this will enhance innovation within an organization.
In contrast to transactional leadership Humphreys and Einstein (2003) state that there is not an exchange of monetary based rewards between the leader and their followers.

6.0 Corporate Examples of Leadership

Bass (1990) describes the shift in management style at Xerox as a good example of transactional leadership.  Xerox took the management approach of leaders taking the initiative in organising and accomplishing the work that needs to be performed and having consideration for the employees and rewarding them for desirable behaviour. Xerox identified these two principles as key factors for effective leadership.  For Xerox the organization believes that this exchange between employer and employee whereby the promise of reward is based on performance of the employee is effective leadership.

In contrast according to Bass (1990) Boeing’s CEO TA Wilson displayed transformational leadership whereby he initiated structure and showed consideration to the employees, however Wilson also displayed transformational leadership characteristics such as charisma, optimism and the willingness to provide intellectual stimulation to the employees which ultimately engages the employees to share in the vision of the organization.  Rather than the employees maintaining the status quo they are challenged to change the culture of the organization.  Bass (1990) also identifies that General Motors and their CEO Roger Smith also display this type of leadership practice.

Gardner and Schermerhorn (2004) describe the leadership practices at Southwest Airlines whereby the founding CEO Herb Kelleher focuses on employees and developing their strengths and psychological capacity, which are measurable and can be developed to effectively manage the performance of the organization.  At Southwest the management encourage the display of creativity and imagination within the way their employees perform their work and moves managers away from focusing on employees weaknesses and the ability to develop the employees strengths.

Johnson (2004) describes the Stoner Ink Co’s employee’s satisfaction levels as being exceptional.  The CEO founder Paul Stoner places particular emphasis on ensuring that his employees are happy and are provided with the necessary training to perform their work.  The company does this through providing a policy of open communication within the organization.  Training is also provided based on the skills that the employees already possess and then compared with the skills necessary to implement the strategic objectives of the organization.  Their results indicate in 2002 that they experienced no terminations, zero reprimands of employees and on average more than ten identified process improvements by each employee.  Although performance is based on rewards, the rewards are not always monetary in nature

7.0 Conclusion

Jones (2004) outlines that in today’s highly competitive environment leaders are more visible and relevant stakeholders demand high performance from their leaders.  Parry and Protor-Thomson (2003) also add that there is a significant need for flexibility, adaptability and ability to change in today’s global environment.  Harris (1997) adds that as the industrial age is being replaced with the information age, more effective leadership models must emerge.  Ahn, Adamson and Dornbusch (2004) agree and propose that while many leadership models may assist in solving business problems, they are ultimately insufficient to deal with the rapid changing environment.  Managing change and its impact on the organisational structure, culture and individual management styles has now become the fundamental aspects of leadership.

Ahn, Adamson and Dornbusch (2004) state that despite the differences between management and leadership and the nature of their functions and attributes, they are complementary.  The authors propose that an organization needs both the skill sets of each in order for an organization to achieve successful performance and move forward in the competitive environment.  Adeyemi-Bello (2001) agree and add that there may be situations where a high task oriented leader would be more effective than one who is people oriented and vice versa.  One orientation does not negate the relevance and importance of the other in achieving high performance.  The relationship between both task oriented and people oriented leadership reinforces the overall effectiveness of the organization.

Ahn, Adamson and Dornbusch (2004) state that the ideal organisational management integrates both leadership and management.  Organizations desire strong leadership whereby the leader coordinates strategies and provides long term flexible thinking, however organizations also want autonomy for their subordinates, accountability, the ability to respond to opportunities, short term results and tight controls which is achieved via management.

Transactional and transformational leadership and their relationship to performance were discussed earlier.  McColl Kennedy and Anderson (2002) state that organizations should seek to attract transformational leaders.  These types of leaders increase optimism and reduce frustration among followers, which in turn leads to greater performance for the organization.  Bass (1990) disagrees and states that transformational leadership is not a panacea.  In some situations it is inappropriate and transactional processes are identified to be adequate.  This would be particularly the case where the organization is in a stable environment.  Those organizations, which are facing an ever changing marketplace whereby they need to be flexible and respond quickly to change, would benefit more from a transformational leadership approach.

In summary as proposed by Ahn, Adamson and Dornbusch (2004) an organization needs both the skill sets of transactional (management) and transformational leadership in order for an organization to respond to the environment in which they are operating.  The leaders need to identify their particular environment and adjust the nature of their leadership practices accordingly in order to achieve successful performance for the organization.
 

References

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2009-07-28 12:55:05