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Journal of Human Resources Management Research

http://ibimapublishing.com/articles/JHRMR/2018/687849/
Vol. 2018 (2018), Article ID 687849, 10 pages, ISSN : 2166-0018
DOI: 10.5171/2018.687849

Research Article

Impact of Leadership Styles on

Organizational Performance
Ebrahim Hasan Al Khajeh

Lincoln University College, UAE

[email protected]

Received date: 4 June 2018; Accepted date: 16 July 2018; Published date: 18 October 2018

Academic Editor: Muhammad Hasmi Abu Hassan Asaari

Copyright © 2018. Ebrahim Hasan Al Khajeh.Distributed under Creative Commons CC-BY 4.0

Abstract

Leadership is one of the key determinants associated with the success and failure of any
organization. Leadership style is the manner in which people are directed and motivated by a
leader to achieve organizational goals. This study examines the impact of leadership styles on
the organizational performance. The focus was on six major leadership styles -transformational,
transactional, autocratic, charismatic, bureaucratic and democratic. This study has provided
deep insights about the leadership styles; the democratic, transformational, bureaucratic and
autocratic leaderships have a positive impact on the organizational performance, however, the
charismatic and transactional leaderships have negative impact on the organizational
performance, as it does not provide opportunities and freedom to employees. In this study, both
primary and secondary research has been conducted. The primary research has been done
using the quantitative approach, with the help of survey instrument, based on a survey
questionnaire. The secondary research has been done through the review of previously
established literature for achieving the research objectives. The findings suggested that
charismatic, bureaucratic and transactional leadership styles have negative relationship with
organizational performance. Transformational, autocratic, and democratic leadership styles, on
the other hand, had a positive relationship with the organizational performance. It has been
recommended that organizations use the leadership style that enhances the capabilities and
abilities of the people.

Keywords: Organizational performance, Transformational, Transactional, Autocratic,

Bureaucratic, Charismatic, Democratic, Leadership Style.

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Cite this Article as: Ebrahim Hasan Al Khajeh (2018)," Impact of Leadership Styles on Organizational
Performance", Journal of Human Resources Management Research, Vol. 2018 (2018), Article ID 687849,
DOI: 10.5171/2018.687849
Journal of Human Resources Management Research 2
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Introduction transactional leadership style,

transformational leadership style,
The role of leadership in an organization is charismatic leadership style and
crucial in terms of creating a vision, mission, bureaucratic leadership style on the
determination and establishment of organizational performance”. In order to
objectives, designing strategies, policies, and determine the impact of the leadership style
methods to achieve the organizational on organizational performance, the research
objectives effectively and efficiently along hypothesis was formulated. The hypothesis
with directing and coordinating the efforts stated that:
and organizational activities (Xu & Wang,
2008).Top quality leadership is essential to Ho: Leadership style dimensions have a
achieve the mission and vision along with significant impact on the organizational
coping with the changes occurring in the performance.
external environment (Harris, et al., 2007).In
current time, many companies are facing Literature Review
problems related to unethical practices, high
labor turnover, poor financial performance, Leadership style
etc. This may be due to the lack of effective
leadership. The main aim of many companies Leadership style is viewed as a combination
is to accomplish its stated objectives; hence, of different characteristics, traits and
there is a need of effective leaders for behaviors that are used by leaders for
coordinating and motivating the employees interacting with their subordinates.
(Vigoda-Gadot, 2012). Unfortunately, some (Mitonga-Monga & Coetzee, 2012). Mitonga-
companies do not take account of the Monga and Coetzee (2012) consider
leadership style adopted by their managers. leadership as the pattern associated with
Based on this premise, the present study managerial behavior, which is designed to
aims to explore the relationship between integrate the organizational or personal
leadership style and organizational interest and effects for achieving particular
performance. There are several types of objectives.
leadership styles such as transformational
leadership, transactional leadership, Harris et al (2007) also postulated that
autocratic, democratic leadership, leadership style can be defined as the kind of
participative leadership style, etc. The relationship that is used by an individual so
leadership styles chosen for the study are as to make people work together for a
charismatic, transformational, transactional, common goal or objective. According to
autocratic, bureaucratic, and democratic. The modern leadership styles, leadership styles
reason behind choosing these leadership can be categorized as follows: (1)
styles is the fact that they are the most transformational leadership style, (2)
practiced leadership styles throughout the transactional leadership style, (3) culture-
globe, and if any new ideology is developed based leadership, (4) charismatic leadership,
through the research, it can improve these and (5) visionary leadership (Harris, et al.,
leadership styles further and bring further 2007).
success to organizations. Therefore, the
survey was designed to focus on these six
leadership styles only. Organizational Performance

The main objective of this research is “to Organizational Performance is a complex and
determine the impact of autocratic multidimensional phenomenon in the
leadership style, democratic leadership style, business literature. Organizational

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performance comprises of the results of an encourage the employees to look beyond

organization or the actual outputs of an their self-interest. The transformational
organization, which can be measured against leaders are effective because of several
intended outputs, goals and objectives. The reasons such as the leaders may be
organizational performance involves three charismatic in terms of inspiring the
areas associated with the organization – employees, the transformational leaders may
financial performance (return on meet the emotional need of the employees or
investments, profits etc.), shareholder return they may stimulate the employees
(economic value added, total shareholder intellectually (Bass & Avolio, 1994). Wang et
etc.) and the product/service market al (2011) found out that the transformational
performance (market share, sales etc.) leadership and individual-level follower
(Gavrea, et al., 2011). performance are positively linked. Further,
the study also indicated that
Relationship between Leadership Styles transformational leadership and
and Organizational Performance performance of teams at organizational level
are associated positively. Xu and Wang
There is a considerable impact of the (2010) stated that performance is the
leadership styles on organizational function of skills, abilities, knowledge and
performance. The leadership style influences motivation which is directed towards a
the culture of the organization which, in turn, prescribed behavior. The study conducted by
influences the organizational performance. the above mentioned authors indicated that
Klienet al (2013) proved this fact by using transformational leadership enhances the
four factor theory of leadership along with overall development of the followers. The
the data collected from 2,662 employees followers of transformational leadership
working in 311 organizations. The associate with a self-defining and satisfying
organizational culture and performance are relationship with an individual or group. The
related to the type of leadership style (Klein, idealized and behavioral charisma of the
et al., 2013). transformational leaders motivates the
followers to identify with the leader (Jyoti &
Transformational leadership style and Bhau, 2015). The personalized relationship
organizational performance developed by a transformational leader
develops an environment in which the
Transformational leadership style focuses on employees feel happy and hence, their
developing the followers and considering overall performance is improved. Hence, it
their needs. The managers that focus on can be said that transformational leadership
transformational leadership focus and organizational performance are
particularly on developing the overall value positively associated (Jyoti & Bhau, 2015).
system of the employees, development of Sofi and Devanadhen (2015) stated that the
moralities, skills and their motivation level. transformational leadership has a significant
The transformational leadership acts as a impact on the performance of the
strong bridge between the followers and organization. They conducted the research
leaders, to develop clear understanding on the banking organizations with the help of
associated with the motivational level, values statistical tools such as SEM and SPSS and
and interests. Bass and Avolio (1994) stated reached to the above conclusion that
that transformational leadership transformational leadership has a direct
demonstrates the superior leadership positive impact on the organization’s
performance. The transformational performance.
leadership, according to Bass and Avolio
(1994), occurs when the leaders broaden or Charismatic leadership style and
elevate the interest of the employees. The organizational performance
transformational leaders are the ones who

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Charismatic leadership is considered to be which organizational and human capabilities

one of the most successful leadership styles, are maximized as the employees are always
where the charismatic leaders develop a able to achieve the tangible and intangible
vision and the followers are asked to follow rewards. This leadership style particularly
and execute the vision. The charismatic helps in creating an environment that is
leadership invites innovation and creativity optimal for performance and also articulates
and is considered to be motivational for the the compelling vision that enhances the
employees. But the major drawback of this overall organizational performance (Longe,
style of leadership is that the followers are 2014). According to the research conducted
totally dependent on the leader and once the by Sofi and Devanadhen (2015),
leader leaves the organization, they become transactional leadership was not found to
direction-less. The problem worsens as have a direct impact on the performance of
charismatic leaders do not train their the organization. This leadership style does
subordinates to act as their replacements in not encourage creativity and innovation
the future. This leadership style results in among the employees and hence, the
“happy followers, but few future leaders”. employees do not perform as per the
Thus, it can have a long -term negative effect expectations of the organization.
on the organizational performance
(Germano, 2010). Ojukuku et al (2012) also Democratic leadership and organizational
stated similar results through their research. performance
They conducted a quantitative research on
the employees of twenty banks based in Tannenbanum and Schmidt (2012) have
Nigeria through a survey questionnaire. The defined democratic leadership as the
findings of their research suggested that the leadership in which the decision- making is
charismatic leadership bears a negative decentralized and is shared by all the
relationship with the organizational subordinates. In the democratic leadership
leadership. It does not motivate and induce style, the potential for weak execution and
the employees enough to retrieve the poor decision- making is high. However, the
expected performances out of them democratic leadership is also known to
(Ojokuku, et al., 2012). motivate the employees to perform better, as
their views and opinions are valued. Another
Transactional leadership style and big problem associated with democratic
organizational performance leadership is the assumption that everyone
involved has an equal stake in the decision -
A leader is known as a transactional leader if making with a shared level of expertise
he/she is always willing to give something in (Rukmani, et al., 2010).
return (Uchenwamgbe, 2013). This can
include a number of things like promotion, The study by Elenkov (2002) indicated that
pay raise, performance reviews, new the democratic leadership has a positive
responsibilities etc. The major problem with impact on organizational performance. The
this type of leadership is the expectation. democratic leadership allows the employees
Hence, transactional leadership can be to make decisions along with sharing them
defined as the exchange of targets and with the group and the manager. In this type
rewards between the management and the of leadership style, praises and criticism are
employees (Ojokuku, et al., 2012). given objectively and a sense of
responsibility is also developed among the
The study by Longe (2014) revealed that employees (Elenkov, 2002). Bhargavi and
transactional leadership style has a positive Yaseen (2016) also analyzed the impact of
impact on the organizational performance. democratic leadership on organizational
The transactional leadership style helps in performance. As per their findings,
creating as well as sustaining the context in democratic leadership positively affects the

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performance of the organization as it style is more suitable when the projects are
provides opportunities to the employees to to be completed within provided deadlines
express and implement their creative ideas (Bhargavi & Yaseen, 2016). Igbaekemen and
and take part in the decision- making Odivwri (2015) also conducted a study on
process. This leadership style also prepares the impact of leadership styles on the
future leaders and helps the organization in performance of the organizations. The author
the long run. Choi (2007) also stated that a stated that an autocratic leader is the one
democratic leader is the one who focuses on who determines the activities, techniques
the group discussion and group participation and policies to the employees and expects
and as a result it positively influences the the employees to follow the same. In addition
performance of the followers. such leaders do not have much faith on their
followers.
Therefore, the democratic leadership style
can be used for improving the organizational Bureaucratic leadership style and
performance as well as the efficiency. Hence, organizational performance
it can be stated that democratic leadership
has a positive impact on the organizational Bureaucratic leaders influence the people
performance. (Elenkov, 2002). under them to follow the policies and
procedures designed by them. The leaders
Autocratic Leadership and Organizational are strongly committed to their processes
Performance and procedures but not to their people. This
is the reason why they appear to be aloof.
Autocratic leaders are classic and bossy in This method is not very effective as it does
nature. The autocratic leaders want their not lead to the development and motivation
subordinates to work according to them. of the employees. These leaders just focus on
Typically, autocratic leaders retain the their tasks being completed in a systematic
decision -making rights with them (Obiwuru, manner (Germano, 2010). Ojukuku et al
et al., 2011). The autocratic leaders force (2012) also stated that bureaucratic
their followers to execute the services and leadership has a negative impact on the
strategies according to the narrow way. organizational performance. According to
Iqbal, Anwar, and Haider (2015) conducted a them, bureaucratic leaders do not induce the
study to determine the impact of leadership employees of their organization to work in
styles on the organizational performance. the expected manner which can lead to
The study stated that autocratic leadership is improved organizational performance
also known as the authoritarian leadership (Ojokuku, et al., 2012). Sougui et al (2015)
style. The autocratic leaders are less creative also presented similar results which stated
and only promote one- sided conversation. that the bureaucratic leadership style does
This severely affects the motivation and not impact the employee as well as
satisfaction level of the employees. The organizational performance significantly.
autocratic leadership style is however, This method is beneficial only when the tasks
known to be effective in the short term. are to be done in longer time following a
Autocratic leadership restricts the workplace mentioned procedure (Sougui, et al., 2015).
socialization and communication which is
cordial for effective organizational Methodology
performance. The autocratic leadership also
leads to organizational conflicts which In order to answer the research question,
negatively affect the overall performance quantitative approach has been utilized in
(Iqbal, et al., 2015). Bhargavi and Yaseen this study. There are 3 types of research
(2016) suggested that the autocratic approaches namely; qualitative, quantitative,
leadership style has a positive impact on the and mixed approach (Creswell, 2014).
organizational performance. This leadership According to Kumar (2005), when the goal of
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study is to find the relationship among performance scale. The scale compares the
variables, quantitative approach is usually performance of the banks with their
utilized. This study utilizes quantitative competitors. The reliability and credibility of
approach as the objective is to determine the scale was checked using the item analysis
relationship between dependent variable and it yielded a reliability alpha value of 0.76,
organizational performance and independent which is considered to be fairly reliable.
variable leadership styles.
Results and Discussion
Sampling and Data Collection
This section of the research has discussed the
Leadership scale for this research work was major findings that have been obtained from
adopted from Zhu (2002). Organizational the secondary research. The results in the
performance was measured using table show that there is both a positive and a
respondents’ perception of their negative relationship between the selected
organization’s performance in comparison to dimensions of leadership and organizational
their competitors. The study was conducted performance. Transactional leadership,
on the employees of twenty randomly Charismatic leadership, and bureaucratic
selected organizations. The data were leadership were found to have a negative
collected using the survey questionnaires. All relationship with the organizational
the required permissions were taken from performance with (r= -0.174, -0.432, -0.292;
the bank authorities for conducting the P<0.001) respectively. This shows that these
survey. After all the procedures, the leadership styles do not induce the
questionnaires were distributed and the employees to perform better and stimulate
respondents had to fill them out. The high turnover intention. The leadership
responses of the respondents were measured styles such as charismatic and bureaucratic
using a five point Likert scale where the leadership are good styles of leadership for
frequency performance was distributed into short- term or small projects but as far as the
5 levels “never”, “little”, “occasionally”, long- term and future prospects are
“often” and “always”. considered, they are not beneficial as they do
not lead to employee development, and this
Data Analysis does not bring out the expected
performances from the employees. However,
The reliability of the data was measured the democratic leadership, transformational
using Cronbach’s Alpha reliability coefficient. leadership and autocratic leadership style
The Cronbach’s alpha coefficient values for have a positive relationship with the
charismatic leadership, bureaucratic organizational performance with (r = 0.156,
leadership, transformational leadership, 0.265, 0.064; P<0.001) respectively. This
transactional leadership, democratic indicates that these three styles of leadership
leadership and autocratic leadership were induce the employees to perform better and
found to be 0.813, 0.780, 0.087, 0.790, 0.753, as per the level of expectations. These
and 0.650 respectively. The impact of the leadership styles must be promoted in the
leadership styles on their performances was organizations.
measured using the organizational

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Table 1: Pearson correlation: Relationship between leadership style dimensions and

organizational performance

Variables Mean SD 1 2 3 4 5 6
Organizational
20.054 1.894 1.000
performance
Transactional
3.123 1.143 -0.174** 1.000
leadership
Transformational
3.998 0.398 0.265** 0.123* 1.000
leadership
Autocratic
2.005 1.542 0.064** -0.343 -0.165 1.000
leadership
Democratic
4.598 6.545 0.156** -0.121 0.123 -0.092 1.000
leadership
Charismatic
3.732 1.285 -0.432** 0.234 -0.321 -0.031 -0.276 1.000
leadership
Bureaucratic
2.454 0.756 -0.292* 0.265* -0.299 0.312 -0.093 -0.171
leadership

Hypothesis Testing performance. The transformational

leadership style (β = 0.032; t= 0.276; P),
Ho: Leadership style dimensions have a democratic leadership style (β = 0.003; t=
significant effect on the organizational 0.09; P< 0.05) were independent predictors
performance. of organizational performance. The results
show that the organizational performance is
influenced by the leadership styles. There are
The results show that transformational
three leadership styles which were found to
leadership, transactional leadership,
have a positive relationship with
democratic leadership and autocratic
organizational performance- democratic
leadership styles predicted the
leadership, transformational leadership and
organizational performance in a joint manner
autocratic leadership style. The other three
(F (5, 42) = 2.542; R2 = 0.252; P <0.05). The
leadership styles namely democratic,
charismatic leadership (β = -0.354; t = -
transformational and autocratic, were found
2.432; P< 0.05), transactional leadership (β=
to have positive relationship with the
-0.076; t = -0.272; P>0.05) and bureaucratic
organizational performance.
leadership (β = -0.453; t = -2.143; P < 0.05)
have a negative effect on organizational

Table 2: Model summaryb

Model R R Adjusted R Std. Error of the Durbin

square square Estimate Watson
1 0.493a 0.252 0.173 1.46543 1.031

a. Predictors: (Constant), democratic, autocratic, transactional, transformational, charismatic, bureaucratic

b. Dependent variable: orgp stands for organization performance

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Table 3: ANOVA

Model Sum of squares Df Mean square F Sig.

Regression 32.765 5 5.123 2.542 0.54a
Residual 109.876 59 2.152
Total 142.987 64
a. Predictors: (Constant), democratic, autocratic, transactional, transformational, charismatic, bureaucratic
b. Dependent variable: orgp stands for organization performance

Table 4: Coefficientsa

Model Unstandardized Std. Standardized t Sig.

coefficients Error coefficients
B Beta
Constant 23.042 3.132 6.544 0.000
Transactional -0.076 0.432 -0.421 -0.272 0.021
Transformational 0.123 0.465 0.032 0.276 0.041

Autocratic 0.076 0.191 0.041 0.581 0.521

Democratic 0.000 0.065 0.003 0.09 0.018
Charismatic -0.354 0.174 -.391 -2.432 0.023
Bureaucratic -.453 0.321 -.352 -2.143 0.029

The results prove that the leadership styles similar to the results indicated by the
contribute effectively in determining the literature review. However, the literature
organizational performance. Therefore, the review suggests that the transactional
hypothesis was tested to be true. leadership also has a positive impact on
organizational performance, which
The finds of this study are in line with contradicts the results of the survey. This
previous research studies (Wang, et al., 2010; space can be further researched in the future
Obiwuru, et al., 2011). As per the literature by gathering more evidence.
review, transformational leadership helps in
establishing a value system along with Conclusion
providing the employees an opportunity to
develop their skills and abilities. The This study has focused on the impact of
democratic leadership helps in improving the leadership styles on organizational
creativity and decision making skills of the performance. The focus was on only six
employees. In the autocratic leadership, types of leadership styles- transformational,
employees have to work or follow the orders transactional, democratic, charismatic,
given by the leader and this works in favor of bureaucratic, and autocratic. The
the organization as per the survey. The transformational, autocratic and democratic
charismatic leadership and bureaucratic leadership styles were found to have a
leadership styles, on the other hand, were positive influence on organizational
found to have a negative relationship with performance, whereas, the transactional,
the organizational performance, which is charismatic and bureaucratic leadership

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