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THE EFFECT OF LEADERSHIP STYLE ON EMPLOYEE PERFORMANCE IN AN ORGANIZATION

CHAPTER ONE

INTRODUCTION

1.1     Background to the Study

In society today, thousands of individuals are appointed or elected to shoulder the role and responsibilities of leadership. Leadership is practiced in schools and colleges, factories and farms, business enterprises, dispensaries and hospitals, in the civil and military organizations of a country and public life, at all levels, in short in every walk of life. These leaders should promote unity, harmony, strength, prosperity and happiness in society. The challenges of coping with today’s uncertain business environment have put many organizations on their toes to struggle for survival in the heat of competition. The driver of such strategic move towards surviving the competition is the leadership provided by managers who are expected to influence others in achieving organizational goals and also boost employee’s performance.

Shafie et al. (2013) explains the importance of leadership in organizations and especially on human beings who are apparently the biggest asset of any firm; “The main drivers of organizations are usually employees, they give life to the organizations and provide goals" (Shafie et al., 2013). It is very paramount to provide workers with direction and psychological satisfaction to get the best from them, this direction can only come from leaders. In fact, leadership is very critical for all organizations in realizing their set objectives. Since leadership is a key factor for improving the performance of many if not all organizations and the success or failure of an organization depends on the effectiveness of leadership at all levels. Paracha et al (2012) is in support of this “Leaders play essential role in accomplishment of goals and boost employee’s performance by satisfying them with their jobs” (p.55) Leadership is perhaps the most thoroughly investigated organizational variable that has a potential impact on employee performance (Cummings and Schwab, 1973). “It is a vital issue in every organization primarily because the decisions made by the leaders could lead to success or business failure”. Notably, it has been widely accepted that effective organizations require effective leadership and that employee performance together with organizational performance will suffer in direct proportion to the neglect of this, Fiedler and House (1988). Furthermore, it is generally accepted that the effectiveness of any set of people is largely dependent on the quality of its leadership – effective leader behavior facilitates the attainment of the follower’s desires, which then results in effective performance (Fiedler & House, 1988; Maritz, 1995; Ristow, et al., 1999).

A number of recent studies examined the effect of leadership styles on employees’ performance.  Se for example, Rasool, et al. (2015), Pradeep and Prabhu (2011), Aboshaqah et al. (2015), Ipas (2012), Kahinde and Bajo (2014), Tsigu ad Rao (2015), Gimuguni, et al (2014), Raja and Palanichamy (2015) etc. Rasool et al (2015) examined the health sector in Pakistani and report that both transformational and transactional leadership styles affect employee performance but the effect of transformation leadership style is higher than that of transactional leadership Raja and Palanichamy (2015) report positive relationship between both transformational and transactional leadership styles but negative relationship between laissez-faire leadership style and employee performance from a sample of employees in public and private sector enterprises in India.

Ipas (2012) reports that autocratic leadership to be the most used style by managers in the hotel industry arguing that it is perceived as a style that yields the most results. Aboshaiqah et al (2015) also looked at the link between leadership and employee performance among hospital nurses and report that the transformational and transactional leadership styles are significantly positively related to employee performance while laissez-faire is significantly negatively correlated to employee performance. Significant positive relationship between bot transformational and transactional leadership styles and employee performance is also reported in Pradeep and Prabhu (2011) in India, and in Kehinde and Banjo (2014) and Ejere and Abasilim (2013), both in Nigeria. Other studies in Africa are Tsigu and Rao (2012) and Gimuguni et al (2014) in Ehtiopian banking industry and Ugandan local government authorities respectively. While Tsigu and Rao finds that the transformation leadership explained the variation is employee performance better than transaction leadership style, Gimuguni et al report significantly positive relationship between autocratic, laissez-faire and democratic and performance.

Therefore, although the literature on leadership and employee performance is scattered across countries and across industry, the evidence of the effect of leadership style on employee performance is also varied.  While most of the literature reviewed is somehow consistent in suggesting that both transformational and transactional leadership styles are significantly positively related to employee performance and that transformational style’s effect is more pronounced than that of the transactional leadership style (Rasool, et al., 2015; Kehinde and Bajo, 2014; Tsigu and Rao, 2015), the evidence on the relationship between laissez-faire and performance is not that straight forward.  For example while, some are reporting negative relationship, e.g. Aboushaqah et al (2015), others like Gimuguni, et al (2014) have reported a positive relationship. This suggests that the evidence on this leadership style is inconsistent. In addition, neither all industries nor countries are covered in the literature. Of those reviewed, the medical field is represented (Rassol et al, 2015; Aboushaqah, et al 2015), local government authorities (Gimuguni, et al., 2014), hotel (Ipas, 2012), Petroleum (Kehinde and Bajo, 2014).  Of more interest to this study is the paucity of researches in this area from Africa and East Africa in particular. A few reviewed here are Tsigu and Rao (2015), Ejere and Abasalim (2013) and Gimuguni (2015), Nuhu, (2010), but there are also those from South Africa (Howard, et al., 2003). While several industries are repreets in the growing body of evidence few are coming from the banking sector, see for example Tsigu and Rao (2015) from Ethiopian banking industry.

Therefore, from the preview of literature it is evident that the research evidence on the effect of leadership style on employee performance that leadership style can explain significant number of performance outcomes at individual and organizational level. But the evidence is not evenly distributed across economies at large or even within African economies. It is also evident that evidence from the banking sector is lagging behind. It is these facts that have motivated this study in order to contribute evidence from the Kenyan banking industry.

1.3     Objectives of the Study

The general objective of the study is to examine the overall effect of leadership style on workers’ performance of organization. The following are the objective of the study.

To determine the relationship between leadership style and the organizational performance.

To examine the importance and relevance of leadership style in an organization.

To make recommendation to the leadership and organization base on research finding.

To ascertain how leaders can satisfy the need of it workers.

To evaluate whether the worker are productive or not.

1.4       Research Questions

The following research question would be examined in the study.

Is there any relationship between leadership style and the organizational performance?

What are the important and relevance of leadership style in an organization?

What recommendation can be made to the leaders and organization based on research findings?

How Can leadership satisfy the need of it workers?

Does leadership style has effect on organizational performance?

What does worker motivation got to do with the organizational performance?

What are those leadership styles that affect the organizational performance?

Does leadership styles contribute positively to the growth and development of any organization?

1.5    Research Hypothesis

The following hypotheses were drawn to guide my research work.

We have Null Hypothesis (Ho) and the Alternative Hypothesis (H1).

Hypothesis One

Ho: Leadership style has no relationship with

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