THE EFFECT OF LEADERSHIP STYLE ON EMPLOYEE SATISFACTION AND

PERFORMANCE OF BANK EMPLOYEES IN BANGKOK

Rochelle Joy Belonio1

Abstract: This paper aims to determine the effect of leadership styles on employee job satisfaction
and the effect of employee job satisfaction on employee job performance. A survey was conducted by
administering questionnaires to 400 respondents in the banking sector in Bangkok. The results show
that most of the bank employees, most of them females between 20 and 39 years old, are neither
satisfied nor dissatisfied. They are ambivalent. Transformational leadership style was seen to have a
positive effect on various facets of employee job satisfaction. Transactional leadership also turned out
to be perceived as having a positive effect on different facets of employee job satisfaction. So did
laissez-faire leadership. Employee job satisfaction was seen to have a positive effect on the various
aspects of employee job performance analyzed. It was found that leaders and managers combine the
various leadership styles identified in the research paper in proportions that produce a positive result
when administering their leadership duties. The proportions at which these leadership styles are
combined depend on the nature of the situation they encounter in the workplace.

Keywords: Leadership, Transformational, Transactional, Laissez-faire, Satisfaction, Performance

1. Introduction
Most firms and businesses consist of employers and employees or, put differently, management and
staff or leaders and followers. Most of them are goal oriented. In order to achieve the desired
objectives, there must be an interaction between employers and employees (or management and staff
or leaders and followers).
The leadership style that characterizes the interaction between leaders (or managers) and their
followers (or staff members) is most important in terms of employees efficiency and productivity.
Employees are the workforce of any businesses and they carry out the duties required to achieve the
desired objective of any firm. As Eskildsen & Nussler (2000) stated, employee satisfaction is
impacted by the employees perception of their job and the organization for which they work for.
Employees perception of leadership behavior is an important predictor of employee job satisfaction
and commitment (Jaskyte, 2004). Individual perception of the organization is related to job attitudes
(Morris & Bloom, 2002).
Leadership styles can either motivate or discourage employees, which in return can cause employees
increase or decrease in their level of performance. According to Schyns &

Sanders (2007), the sources of employee job dissatisfaction include inadequate salary, conflicting job
demands (from the leadership) and absence of promotion prospects.

For efficiency purposes, an effective leadership style, one that positively affects employees
satisfaction and results in better performances, effectiveness and productivity is clearly desirable
(Turner & Muller, 2005).

This paper aims to determine the effect of leadership styles on employee job satisfaction and the effect
of employee job satisfaction on employee job performance in the banking sector in Bangkok
Metropolitan Area.

The various schools of thought about leadership and leadership styles will be fully documented in the
literature review part of this article. The conceptual framework and methodology will then be
considered. Next, the findings will be discussed and recommendations made.

2. Literature Review

- Leadership

Yukl (1994) defined leadership as the process of influence on the subordinate, in which the
subordinate is inspired to achieve the target, the group maintains cooperation, and the
established mission is accomplished, with support from external groups obtained. Also, Fry
(2003) pointed out leadership means the use of a leading strategy to offer inspiring motives
and to enhance the staffs potential for growth and development. Northouse (2004) again
described leadership as a process whereby an individual influences a group of people to
achieve a common goal.

- Theories of Leadership

Several schools are considered in chronological order in this part..

(i) The Trait School: Turner and Muller (2005) stated that this school of thought was popular
before 1940s. It assumes that leaders are born, not made and that they possess certain
features that are not in non-leaders.
(ii) The Behavioral or Style School: As Turner and Muller (2005) mentioned, this school of
thought was popular from the 1940s to the 1960s. It assumes that effective leaders can be
made. Anyone can be trained to be a leader.

(iii) The Contingency School: The contingency theory suggests that what makes an effective
leader depends on the situation. House (1971) made mention of the Path-goal theory which is
a contingency theory that identifies four leadership behaviors, namely, directive leaders,
supportive leaders, participative leaders and achievement-oriented leaders.

(iv) The Visionary or Charismatic School: The visionary or charismatic school of thought was
popular during the 1980s and 1990s (Turner & Muller, 2005). Under this school of thought,
Burns (1979) mentioned the transactional and transformational leadership styles.

(v) The Emotional Intelligence School: Goleman, et al (2002) identifed six leadership styles
under the emotional intelligence school of thought: visionary, coaching, affiliative,
democratic, pace-setting and commanding. This school of thought was popular in the late
1990s.

(vi) The Competency School: This school of thought is similar to the trait school in that the
emphasis has been to identify the competencies of effective leaders. Dulewicz & Higgs
(2003) suggested that three types of competence explain most managerial performance:
intellectual and managerial skills and emotional competencies which can be translated into
leadership styles.

This article will focus on three leadership styles: transformational leadership, transactional
leadership and laissez-faire leadership styles:

(i) Transformational Leadership Style: This is a leadership style that motivates followers by
appealing to higher ideals and moral values which can inspire employees to perform beyond
expectations and transform both individuals and organizations (Bass, 1985).

(ii) Transactional Leadership Style: This leadership style is based on bureaucratic authority
and legitimacy within the organization. It emphasizes work standards, assignments and task-
oriented goals. It focuses on task completion and employee compliance and relies on
organizational rewards and punishments to influence employee performance (Burns, 1979).

(iii) Laissez-Faire Leadership Style: This leadership style is characterized by a total or

general failure to take responsibilities for managing (Bass, 1999).
- Employee Satisfaction

Employee Satisfaction is the way people feel about their jobs and the different aspects of their
jobs (Spector, 1997). Spector added that employee or job satisfaction is an important concern
in every organization since it focuses on both humanitarian and utilitarian perspectives.
According to the humanitarian perspective, people deserve to be treated fairly and with
respect. The utilitarian perspective proposes that employee or job satisfaction can lead to
employee behaviors that affect organizational functioning and performance.

Herzberg (1959) stated that hygiene factors which include supervision, salary, company
policy and administration, relationship with peers, working conditions, personal life and
security as well as motivation factors which include recognition, responsibility, achievement
and the work itself affect job satisfaction.

- Employee Performance

Employees require the proper working conditions to perform better. A proper working
condition will encourage employees to put up the right attitudes or behavior to their job.
Employee commitment which consists of organizational and job commitment is positively
related to job satisfaction, supervisory support and organizational career support (Allen,
Drevs & Ruhe, 1999). Employees who find their organizations image attractive and/or
positively evaluate their job performance in the organization are likely to exhibit a high level
of both internal job satisfaction and organizational commitment (Yurchisin & Park, 2010).

3. Conceptual Framework and Research Methodology

As the conceptual framework shown below indicates, the independent variables are the
leadership styles and employee satisfaction the dependent variable. However, employee
satisfaction is also an independent variable with employee performance the dependent
variable in this case.

Source: Created by the author for this study

On the basis of the conceptual framework, the following four hypotheses were
developed:
- Hypothesis 1: According to the null hypothesis (Ho), the effect of Transformational
leadership style on employee satisfaction is insignificant while according to the alternative
hypothesis (H1), the effect of Transformational leadership style on employee satisfaction is
significant.

- Hypothesis 2: According to the null hypothesis (Ho), the effect of Transactional leadership
style on employee satisfaction is insignificant while according to the alternative hypothesis
(H1), the effect of Transactional leadership style on employee satisfaction is significant.

- Hypothesis 3: According to the null hypothesis (Ho), the effect of Laissez-faire leadership
style on employee satisfaction is insignificant while according to the alternative hypothesis
(H1), the effect of Laissez-faire leadership style on employee satisfaction is significant.

- Hypothesis 4: According to the null hypothesis (Ho), the effect of employee satisfaction on
employee performance is insignificant while according to the alternative hypothesis (H1), the
effect of employee satisfaction on employee performance is significant.

- Data Collection

Primary data was obtained by issuing questionnaires to respondents in the Bangkok

Metropolis Area (BMA). The respondents are banks employees who are working in different
branches of different banks in Bangkok. The sample size consists of 400 respondents who
represent the banking sector of the Thai economy.

- Analysis of Variance (ANOVA)

Given the presence of multiple dependent variables, this research uses MANOVA to analyze
the effect of leadership styles on employee satisfaction and employee performance. The data
to be analyzed with regard to the effect of leadership styles on employee job satisfaction
involves 10 dependent variables. As to the effect of employee job satisfaction on employee
performance, it involves 5 dependent variables.

4. Results and Discussion

Table 1: Transformational Leadership

As indicated in Table 1, Idealized Influence has a significant effect on Pay, Supervision,
Fringe benefits and Operating rewards since the P-value is less than 0.05 confidence
level. Inspirational motivation has a significant effect on fringe benefits and Intellectual
Stimulation a significant effect on Supervision. Individual Consideration, on the other
hand, has no significant effect.

As shown in Table 2, Contingent Reward has a significant effect on Supervision, Fringe

benefits, Contingent rewards and Communication since its P-value is less than 0.05
confidence level. Management by exception has a significant effect on Supervision,
Coworkers and Communication since its P-value is less than 0.05 confidence level.

Laissez-faire has a significant effect on Promotion, Supervision, Contingent rewards,

Coworkers, Communication and Total satisfaction since its P-value is less than 0.05
confidence level.

Table 4: Effect of Employee Job Satisfaction on Employee Performance

As can be seen in Table 4, Pay has a significant effect on the relevance of Job Satisfaction to
Job Performance and also on Job performance measurement. On the other hand, Supervision
has a significant effect on the importance of job standards and Job performance measurement.
Their P-values are less than 0.05 confidence level.

Contingent reward has a significant effect on the relevance of Job satisfaction to Job
performance as well as on the importance of motivation to job performance and retention
policy. Operating reward has a significant effect on the relevance of Job satisfaction to Job
performance and on the importance of job standards. Their P-values are less than 0.05
confidence level.

Coworkers have a significant effect on the importance of motivation to job performance.

Likewise, the Nature of work has a significant effect on the relevance of Job satisfaction to
Job performance as well as on the importance of motivation to job performance and on the
importance of job standards. Total satisfaction has a significant effect on the relevance of Job
satisfaction to Job performance and on the importance of Motivation to Job performance.
Their P-values are less than 0.05 confidence level.
5. Conclusion and Recommendations

The findings in this study show that managers (leaders) in the banking sector in Bangkok
combine various aspects or factors of leadership styles which depends on the working
environment in which they operate. As seen in the tables above, using various leadership
styles produces various effects on job satisfaction and job satisfaction on the other hand
affects employee performance.

Transformational leadership was seen to have a positive effect on the significant subscales of
job satisfaction. Transactional leadership also had a positive effect on the significant
subscales of job satisfaction and laissez-faire leadership had a positive effect as well on the
significant subscales of job satisfaction. The subscales of Job satisfaction that were
significant to Job performance were seen to have a positive effect on job performance.

Since various factors of leadership styles affect various aspects of employee job satisfaction,
which in turn affect job performance, managers, supervisors, leaders and organizational heads
should not stick to only one form of leadership style. A combination of the various leadership
styles will bring more satisfaction and enhance employee performance. They should therefore
find the appropriate combinations of the leadership styles that would achieve the
organizational goals together with the individual targets or objectives of the employees.

- Limitations of the Study

Some of the respondents failure to fill the questionnaires without making sure that the
information was correct on the one hand and time constraints on the other were the two main
limitations encountered in conducting this research paper.

- Further Research

Further research could be conducted on the effect of leadership styles on employee job
satisfaction and performance in other sectors of the Thai economy. Research could also be
conducted on the same sector but outside of the Bangkok Metropolitan Area.