Transformational Leadership and Organizational Performance

This paper presents a relationship between transformational leadership and organizational performance. Through some findings, it has been concluded that transformational leadership has positive relationship with the overall performance of organization which could be measured in terms of effectiveness, efficiency, relevance and profitability of the organization. There are, basically, four components of a transformational leadership: idealized influence, inspirational motivation, intellectual stimulation, and individualized consideration.

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Transformational leadership is a far reach goal for a Naples organization. Introduction to the theme The theme of my study is ‘Link between transformational leadership and organizational performance’. There are mainly two different but very important factors in the theme. Those factors are transformational leadership and organizational performance which can be described as below: 1. Transformational leadership: The term transformational leadership was first coined by Downtown (1973).

Its importance came into light after a classic work provided by James MacGregor Burns in his researches about political leaders. According to Burns, transformational leadership is a process in which leaders and followers promote ACH other to higher levels of morality and motivation. Transformational leaders help their followers to look at old problems via a new perspective. In simple words, Burns attempted to link the roles of leadership and followers in which a leader tries to get connected with the followers which in turn raises the level of motivation and morality in both.

Further, he distinguished between transactional and transformational leadership on the grounds of relationship of leaders and followers. Transformational leaders are also known as visionary leaders. Also sometimes it is termed as charismatic leaders. The point to remember is that al transformational leaders are charismatic but not all charismatic leaders are transformational. One of the most suitable examples of a transformational leader is Mahatma Gandhi who transformed the whole country with the support of his followers.

Similarly, in 1996, Boss and Alive expanded the model of Burns, and defined the aspects of transactional and transformational leadership and even prepared it in questionnaire called “Multiracial Leadership Questionnaire (ML). ” In this model, the aspects of transformational leadership include idealized influence, intellectual stimulation, inspirational motivation and individualized incinerations. These aspects can be explained as below: a) Idealized influence: A leader is taken as a role model by the followers.

A leader behaves in a conviction and takes stand which make followers to idealize the leader and respect his/her decisions. B) Inspirational motivation: A leader communicates his/her vision in such a manner that inspires the followers to become a part of that vision. C) Intellectual stimulation: In his factor, a leader stimulates and encourages the followers to use their creativeness in solving any problems that comes in the way of achieving mission. D) Individualized consideration: The lowers get a supportive climate and personal attention from their leaders.

A leader also acts as a mentor and provides appreciation to the individual contribution to the team. 2. Organizational Performance: The organizational performance is defined in terms of effectiveness (mission fulfillment), efficiency (use of resources), ongoing relevance (the extent to which the organization adapts to changing conditions in its environment), and financial viability (long term profitability). Organizational performance is affected by organizational motivation, external environment and organizational capacity. Conceptual Review and Empirical Results The research, conducted by Hancock D. E. 2005) in “Relationship between transformational leadership and organization performance in the largest public companies of Canada”, examined the relationship between transformational leadership and organizational performance in the top 100 public companies in Canada as measured by total revenue. The primary hypothesis was that there is a significant positive relationship between transformational leadership and company performance. The leader and senior managers of the top 1 00 public companies in Canada were studied. There were 26 CEO survey responses turned out of the 100 sent for a response rate of 26%.

This research showed following results: i) transformational leadership is a common style practiced by leaders of the best performing public companies in Canada; ii) the survey ratings of transformational leadership was found to be lower in the poorer performing companies than leaders of other companies and (3) leader tenure in the organization correlated positively with ratings of transformational leadership. Furthermore, the paper on “Missing Links In Understanding The Relationship Between Leadership And Organizational Performance” by Fenwick Fend Jinn, Manchuria University, Australia Galley C.

Avery, Manchuria University has tried to clarify the relationship between leadership paradigms and organizational performance based on the existing literature. The literatures reviewed by these scholars are: Scholars and practitioners suggest that effective leadership behaviors can facilitate the improvement of performance when organizations face these new challenges (McGrath and MacMillan, 2000; Tech, Passion and Sheen, 1997). Effective leadership is seen as a potent source of management development and sustained competitive advantage for organizational reference improvement (Viola, 1999; Load et al. 1992; Rowe, 2001). For example, transactional leadership helps organizations achieve their current objectives more efficiently by linking job performance to valued rewards and by ensuring employees have the resources needed to get the job done (GHz et al. , 2005). 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 (Viola, 1999; Machines and Von Ogling, 2000). Some scholars (e. G. GHz et al. 005) suggest that visionary leadership will result in high levels of cohesion, commitment, trust, motivation, and hence performance in the new organizational environments. The major findings of this paper were that the existing research on the leadership- performance relationship is full of difficulties and has many unsolved problems, including methodological problems. This study actually has criticized the recent findings of relationship by stating that none of the researches has explained the nature of connection between leader and performance, and therefore, how and why leadership affects performance.

Consequently, the paper ‘Comparing Transformational Leadership in Successful and Unsuccessful Companies’ by Cassock. Proof. Dry. Agglomerate Gandhi, Cassock. Proof. Dry. Hosannas Career Mating, and All Firma has come up with the fact that there is more transformational leadership in successful companies than unsuccessful ones. The samples taken under this study are the statistical community which includes the managers and employees of manufacturing private companies in Sumo’s molding industry.

To select successful and less successful companies, the suggestions and ideas of Industries and Mines Organization’s experts who have complete information about the performance of these companies were utilized. Various hypotheses were created in order to come to the final findings. The results from the paper showed that managers and employees of well established companies have good mean in inspirational motivation to other aspects.

The leaders of these companies are highly involved in stimulating and increasing employees’ motivation and they are giving equal attention in fulfilling these activities. This, overall, shows that a good leader knows the motivational needs of his/her employees and try to fulfill those needs by using various motivational quenches. Similarly, another paper on “Enhancing SEEM Performance Through Vision-based Leadership: An Empirical Study” by Isakson Sunbather, College of Management, Manhood University, Bangkok and Galley C.

Avery the Manchuria Graduate School of Management, Sydney has tested the research model in retail SEEM (Small and Medium-sized Enterprises) to investigate relationships between seven literature-derived vision attributes (of brevity, clarity, future orientation, stability, challenge, abstractness, and desirability or ability to inspire) and content (of customer and staff satisfaction images), and performance, s measured by customer and staff satisfaction, in Sydney, Australia.

In testing the model, literature-derived Store Manager, Staff and Organizational Factors were simultaneously taken into account, making the measurement model comprehensive. Also, the population from which samples were drawn was apparel stores in Sydney, Australia. One hundred and eleven store managers (100%), 148 staff members (44%), and 214 customers (64%) participated in this study. The researchers concluded that a vision characterized by the seven attributes were found to be very important in Seems, while vision content was not found to be significant.

The store manager and staff factors were also found to significantly impact retail Seems performance. The organizational factors were not found to have any significant relationship with retail SEEM performance. Research done in relation between transformational leadership and performance by Judge and Piccolo (2004) found that both transformational and transactional (contingent reward) leadership have strong positive relationships to follower job satisfaction, satisfaction with the leader, and follower motivation (correlations ranging from . 53 to . 71 ) but weaker relationships with group or organizational reference (. 6 for transformational leadership; . 16 for contingent reward). As expected, relationship between management-by-exception and laissez- fairer leadership and follower satisfaction and performance ranged from slightly positive to negative. This finding concluded that that transformational leadership positively affects performance, regardless of whether performance is conceptualized as what others in the unit or organization (i. E. Subordinates, superiors) perceive as performance or whether performance relates to more objective, bottom-line sorts of variables.

The critical element is to understand the recess of how transformational leaders affect follower and unit performance. From all these studies and findings what I have come to know is that there exists a positive relationship between a transformational leadership and organizational performance. The degree of relationship might vary with the size of organization; the individual or group performance; and successful or unsuccessful organization. Even more, the visionary leaders try to improve the organizational performance by communicating a vision to the followers, model the vision, and construct a commitment to the vision.

Similarly, in a successful companies, managers use inspirational motivation to increase the work performance of employees. So in most of the cases inspirational motivation rather than other four aspects of transformational leadership was found to be most prominent in explaining the relationship between the transformational leadership and organizational performance. Also, transformational leaders seem to have more influence on successful companies than in unsuccessful companies. Further, a visionary leader has a great role in the well being of Seems.

It is, however, necessary that a visionary leader must know their organization as well as their employees well to increase the organizational performance. Organizational performance is measured by the factors that include both organization and employees well being. Some of the examples of transformational leaders of world Whenever there is discussion about the great transformational leaders of world, the first name that comes in our mind is Mahatma Gandhi. He grew up in India when the country was under the British rule.

He saw that the rights of Indian people were overruled by the British because of the presence of colonial rule. For this, he went for the reformation of the social-political order in the hope hat India will get rid of the British rule sooner. He started a peaceful protest against British rule which motivated all the people of India to go with his idea and finally free country from those white rulers. Sandhog’s initiation to transform his country and to change the thinking of other world leaders made him an ideal for transformational leaders. The other example of a transformational leader of world is Dry.

Martin Luther King, Jar. Martin was a leader with a vision to transform civil rights movement in the United States and he initiated this action through his speech on ‘l have a dream’. He spoke out fearlessly in front of whole America and became the most powerful black man of his country. Like Gandhi, he also used non-violence protest to provide justice to the black people of US and even succeeded in this motive to transform the morals of US. Practical implications in Naples organization Leadership has not been defined well in the Naples organization.

Transformational leadership is a really new subject in our country. In Nepal, the leaders refer only to political leaders who lead the country though in a negative way. In conducting research on my topic, I got an opportunity have a mall conversation with one of the Board of Directors of a reputed commercial bank, Proof. Dry. Raja Buddha Padded. According to him, there exists Laissez- Fairer Leadership Style especially in the private enterprises in which leaders have no any kind of connection with the followers. Though there seems to be some development towards transactional leadership especially in banking sectors, Mr..

Padded states that transformational leadership is beyond the reach of Naples leaders and organization in present context. I also agree with Mr.. Padded views to some extent because during my research in the transformational leadership n Naples context in was rather difficult to find any journals or article in the related topic. But with my findings about the topic through conceptual review, what I have come to know is that the inspirational motivation is the most important factors in transformational leaders to increase the organizational performance.

This fact can be applied in our Naples organization as well. Naples business houses come up with various techniques in motivating their employees which basically are contingent rewards such as bonuses, promotions, appraisal, etc. And this type of tactics works really well in our country. But the inspirational motivation can be applied to reward employees intrinsically. The manager or CEO could generate a vision in such a manner that inspires their employees with optimism with future goals as well in the current tasks.

Through inspirational motivation, the staff turnover rate can be decreased to large extent. When one appeals to a vision, there is less chance to switch to other jobs. With the decrease in employees’ turnover, the resources can be utilized properly and organizational performance can be achieved. Similarly, found that transformational leadership is found more in studied companies. This implies that in Nepal as well the successful companies such as Chuddar Group, Standard Chartered Bank, Cheetah Group, SPIRAL Trainings, Battening Supermarket, etc might have an influence of a transformational leader.

The leaders of these companies might have some kind of vision that encourages followers to go along that vision and help company achieve that level of success. For example, Min Buddha Grunt, owner and CEO of Battening had a vision to change the buying habit of Naples people by providing all the necessary things in one spot at low price. With this visualization, he became an ideal for is followers and stimulated them to achieve that goal. His action helped the organization get high organizational performance in every aspect.

Battening has achieved high effectiveness because of the fulfillment of mission of Min Buddha to provide quality products at low price. Similarly, the organization is using its resources efficiently. The organization has provided employment opportunity to large number of people especially migrants from Shooting, birth place of Grunt. Grunt makes sure that all his employees are getting needed trainings to handle organizational work (e. G. Training needed to use bar code deader). Similarly, he makes sure that his suppliers are paid in time.

As per an article, during 1993, when the store was burnt, Grunt compensated all his suppliers and showed his credibility and trustworthiness. Furthermore, the organization is also changing according to the need of the customers. Grunt makes sure that he gets updated with the latest technology required for the smooth functioning of business. He started using a printed bill and a bar code reader according to the need of the business. Also, the high organizational performance in terms of financial viability can be seen from opening of a branch t Maharajah’s with the similar facilities of head office. The information about Min Buddha is obtained from his interaction with ‘Entrepreneurs in Nepal’: A network of over 3000 young, creative people, who have ideas and who want to implement them in Nepal). A transformational leadership can be applied, most probably, in the industrial relations of Naples firms. The industrial relations or union problems are one of the burning topics in recent time. Examples can be the trade union problems in Usury Nepal Private Limited, Nepal Oil Corporations, etc.

With the presence of transformational leaders, who can influence followers o greater extent with his/her charisma can be a solution for the concerned problem in the organization. Due to labor strikes, organizational performance gets deteriorated. The works cannot be performed efficiently and effectively which will in turn affect the firm’s profitability. Since Small and Medium Enterprises (Seems) are the dominant sector in the Naples trade and promotion, these sectors should be developed so as to compete in the international market place with the entrance to Nepal in WTFO.

From my findings, a visionary leader with various attributes was found to be trivial to improve the performance of Seems. So this could be applied in the Seems of Nepal as well. One of the reasons for low performance of Seems in Nepal is business handled by family members where no one has any such influence in each other. So if the leaders of such organization could have some kind of knowledge of a transformational leader either by training them or proving them with an example of exemplary leaders, the firm can flourish in domestic as well as international market to greater extent.

Recommendations There could be many recommendations for Naples organization in the context of transformational leadership. Though there are very successful entrepreneurs in Nepal, they are not being recognized as transformational leaders. In actuality, the organizations in Nepal thrive for a leader who can transform his/her followers and organization as a whole. Even if there are leaders with great visions, they are not provided chance to perform their actions in an appropriate way.

The employees are so much habituated to perform their daily works and get their regular salary that there is no any possible way to get inspired by their leaders or the effort made by their managers. Have worked as an intern in two owned banks of Nepal; NABOB Bank Ltd. And Standard Charted Bank. In both the banks, employees valued their Branch Manager immensely. The staffs liked the way their manager treated them with equality and high concern. Also, the branch manager in both the banks visited their employees and evaluated their performance, appreciated their work and also provided suggestions if required.

These things mattered a lot to the employees. From this what I opined is that there are such leaders in the organization who can inspire his/her employees but the influence can be increased by providing platform to such leaders to place heir vision in a more appropriate way. To encourage these types of leaders, the top level management should grant them authority to execute their vision which will in turn influence the staffs of that branch to achieve that vision and gradually will result in higher organizational performance.

Similarly, there are many organizations in Nepal in which Laissez-Fairer style of leadership exist. The managers do not have any kind of connection with the employees. This practice especially is prevalent in private enterprises and these organizations are satisfied with the lower level of performance. So in these organizations, these traders should be made more responsible to at least know about the employees’ performance. According to Bass and Viola (1990) transformational leadership can be taught to the people at all levels in an organization and it can positively affect a firm’s performance.

So why not the leaders in Nepal could be provided with various advanced trainings on leadership? It is not that these trainings will make them a transformational leader but it can, to some extent, help them get familiar with characteristics of a good leader and they can, eventually, adopt some of the leadership quality to influence their followers. Furthermore, in most f the reputed organization of Nepal, transactional leadership style is present. It is not that transactional leadership has any bad influence on followers. The staffs are satisfied with what they are doing and getting in return.

But the presence of transformational leaders in such organization might provide both the leaders and followers to expand their thinking horizon, steadily transform the working environment of such organization, and consequently increase the overall organizational performance. Leaders in these organizations could be trained in the process of building a concrete vision and communicating that vision to heir staffs. The initiation to work on vision statement could help to enhance the transformational leadership behavior in organization.

Now-a-days, there has been a concept on a two way influence of leaders and followers i. E. Not only leaders but the followers also influence the leaders. It is believed that this type of system is possible only in the great companies of the world such as Microsoft or NASA but why not we in Nepal adopt this system as well. In Nepal, leaders are considered as respected figures; whose decisions are taken as an order and no any follower dare to go against it. This structure could be made more lenient by encouraging a participative environment in the organization.

Above all, the leaders who are interested to do something new and creative must be provided a chance to show their creativeness to enhance the performance of a business firm. The competent people in Nepal are not allowed to move ahead. In most of the cases, they are taken aback from fulfilling their mission. One of the most important constraints is the presence of ego in the people not to let others move ahead and outperform them. To actually bring about transformational leadership n Naples organization, the behavior of the people must be changed either through proper guidance or through factual information.

Likewise, tools such as ML (Bass and Viola, 1990) or any such other questionnaire could be used to let the leaders know their strengths and weakness. From these tools, the leaders can know in which factors they need to improve. For example, leaders in Naples organization might be really good in communicating their goals but they might have to work on setting prominent vision to foster their employees. This might help in nurturing the leaders’ ability and help in improving work performance. Most of all, there must be paradigm shift in the way leadership is performed and visualized in Nepal.