Leadership Theory and Styles Related to Employee Motivation

During the period between the years 2000 and 2008, the Zimmermann economy was on the decline. Political instability, bad corporate governance and corruption are cited as reasons for the dwindling economy during that period (The Zimmermann Herald, 2005). The result was a volatile economic environment characterized by high inflation of about 6. 00% which eliminated in mergers, acquisitions, retrenchments and a high level of brain drain in almost every sector of the economy. Most notably was the financial sector which suffered from under-capitalization, instability and bad corporate governance for most of the year 2004 (Zanzibar Business Watch, 2008). To cushion the banks from the economic meltdown, the government tasked the central bank to revive the declining financial sector. To this effect, in September 2004, a deadline for all financial institutions to declare their capital reserves and show that they had enough liquidity to continue operating was set.

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Some of the ankhs were found wanting in this regard. Seven troubled banks were placed under courtship while four others were liquidated. Such a strategic decision by the central bank created the conditions for the merging of the liquidated banks to form a completely new consolidated retail bank. Literature (You, 2009) argue that despite seemingly favorable strategic, financial and operational assessments made during pre-merger feasibility studies, mergers have less than a 50:50 chance of being successful.

When a merger takes place, it brings together different corporate cultures and different leadership styles (Lind and Stevens, 004). Thus, management often becomes concerned about which leadership style is best for the new organization, at the same time, also getting concerned about the economic performance of their business against rival competitors, resulting in the issues of employee commitment and motivation being put at the very bottom of its priority lists (Henna, 1989).

Yet, on the other hand, employees in the newly created organizations have been found to be concerned about perceived job loss, changes in responsibilities, performance and future transfer of authority (You, 2009). These concerns have a direct relationship with employees’ ointment and motivation in the workplace (Meyer et al. , 2007). With evidence of both employees and management concerned differently in the context of a merger, there is scope for studying the relationship between different leadership styles, employee commitment, and motivation in different economic contexts.

There is empirical evidence that when a merger, incorporation or acquisition takes place, there is a corresponding increase in employee uncertainty, decrease in satisfaction, and commitment, increase in intentions to quit the organization, and decrease in perceptions of the trustworthiness, honesty and caring (Covina et al. 1997). You (2009) and Helloing et al. (2001) point out that, any form of organizational change, whether intended or unintended, can be viewed as the greatest source of job uncertainty and stress in an employee’s life.

Concurring, Scabbard and Cooper (1998) found that, after organizational change, employees’ stress levels rise especially when positions are changed or altered. The result is a sense of uncertainty about the future. This uncertainty can affect employees’ attitudes such as commitment and job satisfaction. For example, Huh and Lee (2000) found that employees lose trust in the organization when they are affected y structural changes to the organization. Similarly, Jimmies et al. 2004) argue that when employees doubt whether they can adapt to any change or whether their positions, workload and workplace will be changed, their trust, commitment and relationships with their organization, management and peers will be affected. These findings are however not supported by You (2009) who found an inverse relationship between perceptions of job insecurity and employee commitment. Despite such contradiction, more revealing evidence seems to support the assertion that organizational change brings about different reactions ND attitudes among employees.

The question therefore is, after downsizing, to what extent does leadership influence these employees’ reactions and actions in the new order? Literature (e. G. , Chipping, 2009) seem to point to the importance of employees in post-merger success and how a more appropriate leadership style is critical in stimulating employees’ attitudes such as motivation and commitment so as to achieve organizational goals. Swanlike (2003) also argues that, although views on the success of mergers differ, the issue of leadership in terms of perspective and emphasis is critical.

What this entails is that, depending on the leadership style adopted, the value creation that can be attributed to a merger takes place at the post-merger phase while the possibility for a merger to fail is also greatest in the post merger phase (Brainwash et al. , 2000; Simpson, 2000). Research on motivation and other work related attitudes such as commitment after a merger has often been focusing on populations and organizations whose economic environments are stable, such as the United States and Australia (Nell et al. 2004; Herman and Herman, 2003). Other known researches on post-merger work-related attitudes have been aired out in nations under transition like South Africa (Windward and Kappa, 2004). In all these cases, the focus was in large multinational companies and samples. To our knowledge no study, if any, has examined behaviors of employees with regards to commitment and motivation as a function of different leadership styles in a post-merger phase in a financial institution operating in an unstable economic environment.

It was therefore imperative to examine the interface of these variables in an unstable economic environment as part of an ongoing continuum of research in the area of organizational change. THEORETICAL BACKGROUND This study was based on the Full-Range Leadership Theory (FRAT) proposed by Bass and Viola (1997). The constructs comprising the FRAT denote three typologies of leadership behavior: transformational, transactional, and Nan-transactional laissez-fairer leadership, which are represented by nine distinct factors.

Transformational leadership behaviors include inspirational motivation, intellectual stimulation, individualized consideration and idealized influence (attributes) or idealized influence (behavior) (Moral and Www, 2001; Jansen, 2000). Transactional leadership behaviors include contingent rewards, management by exception-active (M BE-A) and management by exception-passive (EMBER-P) (Bolster, 2002). These leadership behaviors have been described as having a direct effect on individual and organizational outcomes by Yuk (1999).

Within the context of a merger, the adoption and use of any of these leadership styles might be influenced by the phase of the merger itself. According to Reckless (2001) one can distinguish among three phases during a merger. These are the planning phase, the acquisition phase and lastly, the integration phase (post-merger phase). In all Hess phases, research has shown the importance of fostering a leadership style that will advance the new organizational goals. The concept of mergers According to Kidskin (1 999), the concept of mergers is prone to various interpretations.

This is because mergers take a number of different forms, varying from loose affiliations at one end of the spectrum to tightly integrated models at the other end. Kidskin argues that mergers can be classified in several different ways, the most common classification being the one that differentiates between the so- called forced mergers and voluntary mergers. A voluntary merger is when two r more institutions or organizations initiate a merger themselves, whereas, in a forced or involuntary merger, the impetus comes from some outside body.

The institution under study was an involuntary merger that came about as a result of the regulation by the central bank to liquidate all the financial institutions that could not meet financial adequacy to operate and were subsequently merged to form one entity. There is empirical evidence to suggest that involuntary mergers have an impact on a number of work – related variables, including commitment and motivation (Summer, 2008). Banking consolidation in other economies Mergers and acquisitions especially in the banking industry are now a global phenomenon.

In the United States of America, there had been over 7000 cases of bank mergers since 1980 (Sold, 2004) while the same trend occurred in the United Kingdom and other European countries. Specifically, in the period 19971998, 203 bank mergers and acquisitions took place in the Euro area, while in 1998, a merger in France resulted in a new bank with a capital base of US$billion (Sold, 2004). In Germany, the merger of two banks in 1 998 created the second largest bank in Germany with a capital base of US$541 billion.

Banking consolidation is not limited to developed economies only. In many emerging markets, including Argentina, Brazil, Korea and South Africa, consolidation has also become prominent, as banks strive to become more competitive and resilient to shocks as well as reposition their operations to cope with the challenges of the increasingly globalizes banking systems (Lang and Well, 1999). According to Sold (2004) the consolidation exercise in the Nigerian banking sector in 2006 reduced the number of deposit taking banks operating in the country from 89 to about 25.

In all these cases, the reasons or the merger and, or consolidation varied from one context to the next. In addition, most of these recorded mergers and consolidations are reported as successful, with the success factors mostly identified as financial and good economic environment. There has not been mention of leadership as a potential contributing factor. The concept of leadership According to Bass and Viola (1997) finding one specific definition of leadership is a very complex task as studies on this topic are varied and there is no single generally accepted definition.

Some definitions describe leadership as an act of influence, some s a process and yet others have looked at a person’s trait qualities (Lousier and ACH, 2001 The definition by Nell et al. (2004) will be used in this study. They define leadership as the process whereby one individual influences others to willingly and enthusiastically direct their efforts and abilities towards attaining defined group or organizational goals. There are various styles to leading such as transactional, leisurewear and transformational.

However, in the context of mergers, transformational leadership style is considered more appropriate as it allows for leaders to rally people behind clearly defined oils (Lind and Stevens, 2004). The concept of commitment Organizational commitment is defined as the degree of identification and involvement that individuals have with their organization’s mission, values and goals (Monday et al. , 1999). Organizational commitment is a multidimensional construct that comprises affective commitment, normative commitment and continuance commitment.

Allen and Meyer (1997) define affective commitment as the employee’s emotional attachment to, identification with, and involvement in the organization. Continuance component is defined as commitment that is eased on the costs that the employee associates with leaving the organization, while normative component is defined as the employee’s feelings of obligation to remain with the organization. Stalwarts (2003) considers the three types of commitment to be psychological states in which employees experience in differing degrees and varying strengths.

Streetwise (2005) indicates that a number of researchers use the level of commitment as a key reflection of organizational success from a people management view. Thus, Pierce and Dunham (2001 ) found that individuals identify with their work at a variety of levels such as their bob, profession or organization. Without commitment, employees are not be prepared to develop their skills and competencies, take on board the enhanced responsibilities for quality, work organization and problem solving, and ‘go the extra mile’ to come up with improvements and innovations.

Leadership and commitment in the context of mergers Caffeine (2003: 979) states that “the answer to the question of employee commitment, morale, loyalty and attachment may consist not only in providing motivators, but also to remove denominators such as styles of management not suited to their context and to intemperate employee aspirations”. Thus, a leadership or management style that encourages employee involvement can help to satisfy employees’ desire for empowerment and demand for a commitment to organizational goals.

Similarly, Gardener (2000: 487) argues that “more flexible and participatory management styles can strongly and positively enhance organizational commitment”. Organizations need to ensure that leadership strategies are aimed at improving employee commitment rather than compliance as with autocratic leadership style. Canter (1999) for example, suggests that, in order to build commitment o change, managers should: allow employees to participate; provide a clear picture or vision of the future; share information; demonstrate commitment to the change; tell employees exactly what is expected of them; and offer positive reinforcement.

This removes uncertainty in members of the organization in terms of what their roles are and the future direction of the organization. Stump (1999) argues that employee commitment reflects the quality of the leadership in the organization. Therefore it is logical to assume that leadership behavior has a significant relationship with the development of organizational ointment, and that the relationship is quite unpredictable in a post merger phase given that any organizational change is associated with uncertainty, doubt and fear for the unknown.

The concept of motivation The imperative need to discover, comprehend and implement employee motivation has become a principal concern for organizations, managers and even first line supervisors because employee motivation has been, and will be the deciding factor in work performance, success or failure of an organization (Samuel and Chipping, 2009). Wiley (1997) suggests that, ensuring the SUccess of an organization squires employers who understand the importance of employee motivation. Such understanding is essential to improving productivity.

Thus, motivating employees is one of the most important managerial functions. Heeling et al. (2001) define employee motivation as “the force acting on or within a person that causes the person to behave in a specific, goal-directed manner”. Success in this endeavourer is essential in the quest to utilize the full potential of employees so as to ensure quality products and services and consequently the success of the new organization as a whole. Leadership and motivation in the post-merger phase In their study on leadership style, motivation and performance in international marketing channels, Meta et al. 2003) found that different leadership styles influence motivation. Specifically, participative, supportive and directive leadership styles were found effective in eliciting employees to exert higher levels of motivation, which, in turn, was associated with higher levels of performance. A transformational leadership behavior called inspirational motivation has been empirically linked to a range of outcomes such as extra effort, ethical behavior, learning orientation, and project success by Banners and Krishna (2000).

In addition, Denotes (2002) argues that extra effort has important significance for the validity of inspirational motivation because this outcome has been used to confirm the “augmentation effect” of inspirational motivation. This effect represents the unique variance in the ratings of performance, which is above and beyond that accounted for by transactional leadership. In other words, transformational leadership accounts for high performance through its inspirational motivation behavior unlike transactional leadership.

In concurrence, Bass and Viola (1999) point out that several studies have also identified a high correlation between inspirational motivation and extra effort. In a merger, leaders who adopt transformational leadership style successfully motivate their employees to expend extra effort in carrying out their duties thereby ensuring the success of the new organization. However, just in the case with organizational commitment, there is strong empirical evidence to support a negative correlation between organizational change (change of any type) and motivation.

In one study by Store (2004), a negative relationship between perceived organizational change and work motivation was identified. Specifically, he level of work motivation was lower among employees facing organizational changes, compared to employees not experiencing changes. A leadership style involving a “people-orientation” was identified as a key predictor for work motivation Despite these contradictions, one is able to conclude that leadership and motivation can be related irrespective of the context of organizational change.

In light of the discussion above, the objectives of the study were: 1. To determine the leadership styles managers were using after the merger 2. To determine the level of employee motivation and commitment after the merger, ND 3. To investigate the relationship between leadership styles and employee motivation and commitment after the merger. METHODOLOGY: Hypotheses The following hypotheses were tested: 1 . There is a significant relationship between styles (transformational, transactional and employee commitment 2.

There is a significant relationship between styles (transformational, transactional and employee motivation different leadership laissez-fairer) and different leadership laissez-fairer) and Non-managerial employees included bank tellers, customer care consultants, secretaries, clerks and supervisors. Managerial employees comprised of managers from various departments such as marketing, human resources, accounting, information technology, transport, branch managers, auditing and investment. Measures Three questionnaires were used to collect data from respondents.

The Multiracial Leadership Questionnaire (ML) (Form XX) by Bass and Viola (1997:122) comprising of 45 items was used to measure leadership styles used by managers in the bank. The Multiracial Leadership Questionnaire measures a broad range of leadership types from passive leaders, to leaders who give contingent rewards to followers, to leaders who transform their followers onto becoming leaders themselves. The ML identifies the characteristics of a transformational leader and helps individuals discover how they measure up in their own eyes and in the eyes of those with whom they work.

Items were measured on a five-point liker scale ranging from (1) “not at all” to (5) “frequently if not always”. The Organizational Commitment Questionnaire (COCO) by Baggage (2004) constituting 12 items was used to measure employees’ commitment to the organization. The items were measured on a five-point liker scale ranging from (1) “strongly disagree” to (5) “strongly agree”. The Employee Motivation Questionnaire (MEG) developed from Herbage’s Two-Factor Theory and from the Job Design Theory by Hickman and Lolled (Robbins, 2005) measured employees’ motivation.

It had 17 items which were measured on a five-point liker scale ranging from (l)”strongly disagree to (5)”strongly agree”. The revised ML, COCO and the MEG instruments had Cockroach alpha coefficients of 0. 74, 0. 77 and 0. 67 respectively, which were regarded as satisfactory. As indicated in the literature review, mergers can have a negative or positive effect on the attitudes of employees, depending on the leadership style adopted. The stated hypotheses are drawn from such literature and the researchers sought to explore the extent of the relationships in an economically unstable environment.

Research paradigm and approach The study followed the positivist paradigm and was descriptive in nature. A quantitative research approach was used to analyses the hypothesized relationships. Dependent and independent variables The independent variable in the study was leadership style, at the levels of transformational, transactional, and laissez-fairer. The dependent variables were employee motivation and commitment, with levels of ointment being normative, continuance and affective. RESEARCH METHOD A case study method of a consolidated retail bank formed after a merger of a number of banks facing liquidation was used.

Research procedure Stratified random sampling was used in selecting respondents for this study. Departments in the organization were taken as strata. The following departments were used: Human Resources, Accounting, Auditing, Investment, Marketing, Information Technology and Transport. The distribution of the questionnaires was done by the researcher in all the six branches of the bank in the region where the study took place. Questionnaires ere distributed to respondents randomly within each Department. The distribution was done during the lunch hour so as not to disturb the smooth flow of work.