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Emotional intelligence - the moderator of

leadership styles and performance


Dhruv Desai
Manjari Srivastava

Abstract
By applying emotional intelligence (EI), a manager can techniques like exploratory factor analysis,
make a positive impact on the performance of the confirmatory factor analysis and structural equation
organization. The leader or manager should modelling. Results of the study show that attributes
understand EI and the need of the employees. The such as passive defensive leadership style negatively
objective of the study is to predict whether the impact the organization's performance and attributes
leadership style and emotional intelligence assists in of emotional intelligence positively moderate the
predicting the performance of an organization. relationship between leadership style and the
Quantitative methodology was applied in the study. organization's performance.
Primary data was collected through an online survey
among 222 branch managers working in a large Keywords: Leadership style, Emotional Intelligence,
banking and financial sector company. Data collected Performance
was analysed through the application of statistical

ISSN: 0971-1023 | NMIMS Management Review Emotional intelligence - the moderator of leadership styles and performance
Volume XXXIII January 2017 35
Introduction that of others. As a result, it would assist the leader in
The present-world organizations have unanimously developing a relationship with employees and
recognized and appreciated the undefeatable subordinates, which in turn, will make an impact on
importance of the ability and performance of their organizational performance (Ovans, 2015).
human resources, as an addition to essential
technology and tools, for the overall progress of the Why this study?
entities (Butler & Chinowsky, 2006). In the present competitive corporate world,
organizations must endeavour to manage their
Leadership has been recognised in the distant past as resources. The concept of human capital as a factor in
playing an important role in human development and an organization's financial performance has recently
bringing about major changes throughout an become an area of interest in research. Human capital
organization and its membership, which significantly has been defined as the knowledge and proficiency
focused on pushing an organization towards its employees acquire over time with an organization;
common goals and objectives (Slack, 1997). The crucial researchers have highlighted the importance of the
position occupied by leaders in organizations has component of people in the firm's reputation and
resulted in the adoption of various styles of leadership performance (Abbott & Banerji, 2003; (Abbott, 2003;
in the organization, such as democratic, people or Bontis & Fitz-enz, 2002).
relationship-centred approach, or autocratic,
production-centred method, etc. for achieving The study serves as a valuable source of knowledge
organizational effectiveness (Cheong, 2008; Chiang & about the interplay between the most important and
Wang, 2012; Clark, Hartline, & Jones, 2009). influential variables related to the daily functioning of
the firm, involving leaders and employees. It can
The positive association between Emotional provide insights for the managers, leaders, or any
Intelligence and leadership, and its further impact on person in the firm who is in charge of a team of
the organizational culture, is claimed to eventually employees, to take rational decisions and adopt
result in enhancement of capability of the organization behaviour which is in favour of the organization's
to change. This is asserted to have positive performance. Also, according to Eeden, Cilliers, and
improvement prospects for the organization in terms Deventer (2008), understanding the framework of
of its competitiveness and performance leadership and the cultural impact of the various kinds
(organizational / financial) (Sin and Yazdanifard, 2013). of leadership in the organization, is of utmost
Thus, literature has rigorously reviewed the importance in the present competitive world. Such a
relationship between such organizational factors, study is specifically a good source of encouragement
which has significantly meant that there is a strong for public organizations where employee engagement
correlation between the leadership style and the and commitment is generally seen to be a
associated efficiency attained in mobilization, questionable area.
allocation, and utilization of the resources (Saasongu,
2015), which ultimately enhances the organizational The pool of research conducted so far, seems to focus
performance. on the inter-relationship between two variables and
their impact on a third variable. For instance,
Furthermore, there is a role of emotional intelligence, researchers such as Igbinovia and Popoola (2016) who
where a leader should manage his or her emotion and studied the organizational culture and emotional

ISSN: 0971-1023 | NMIMS Management Review Emotional intelligence - the moderator of leadership styles and performance
36 Volume XXXIII January 2017
intelligence as predictors of job performance among companies globally pursue. "Organizational
the library personnel in Nigeria, and research by performance is the outcome of the organizational
Akhtar et al. (2015) which involved a study of the context, interaction of strategy, and individual
impact of organizational culture and emotional behavior" (Myers, 1996, p. 2). From a social
intelligence on educational sector performance in perspective, when people collaborate to execute a
Pakistan, etc. involved a study of one or two variables strategy at work, organizational performance is
and their impact on the job culture or performance. A achieved. Organizations define valuable actions as the
latest study by Chatterjee and Kulakli (2015) argues ones used to achieve their goal of making money that
that leadership theory and empirical findings fail to is sought by them.
adequately substantiate how leaders' emotions
influence their effectiveness. They argue that even In general, organizational performance has found its
though there exists a considerable body of research as definition among financial terms. For example, it can
regards leadership and leadership styles, literature is be the much-desired profits that are the excess
rather scarce as regards the relationship between revenue on the balance sheet after deduction of
leadership style and emotional intelligence. expenses. Successful financial performance is a
concern for both researchers and organizational
Given the significance of leadership style and leaders, including boards of directors, chief executive
emotional intelligence, this study aims to offer a more officers, and financial managers of organizations,
comprehensive view of the organizational scenario. It regardless of industry. For instance, economists and
provides an overview of the inter-relationships operating managers alike continually assess the
between three variables; leadership styles, emotional variables impacting profitability (e.g., Gumbus,
intelligence, and financial performance of an Bellhouse & Lyons, 2003; Yavas & ShemwelL, 2001). As
organization. McGahan & Porter (2002) succinctly noted,
"Researchers in the economics and strategy fields have
The research concern is to understand the relationship long been interested in understanding the
between various styles of leadership, the emotional determinants of firm profitability" (p. 834).
intelligence of managers and the precise manner in
which these factors influence the performance of an Literature highlights that successful financial
organisation. Therefore, the following research performance is a concern for both researchers and
questions were raised: organizational leaders, including boards of directors,
1. Do the leaders' styles of management impact the chief executive officers, and financial managers of
financial performance of an organization? organizations, regardless of industry. In the present
2. Given the leadership style, does emotional study, the financial performance of the organization
intelligence of leaders enhance the organization's was considered as an important dependent variable.
performance?
The organizational performance was construed in
Literature Review terms of revenue, productivity and operating margin.
Organizational Performance Revenue is understood as the value received in
Also referred to as organizational success or exchange of goods or services. It is a key component
organizational effectiveness, organizational for calculating profit margin.
performance is central to what capitalistic for-profit

ISSN: 0971-1023 | NMIMS Management Review Emotional intelligence - the moderator of leadership styles and performance
Volume XXXIII January 2017 37
For the purpose of this study, revenue is considered as expectation-fit and when the social exchange between
one of the differentiators of performance of the Branch managers and employees is fair and equal. Further, the
Unit. The measure 'productivity calculation' is contingency theories of leadership enlighten that
achieved by dividing the total sales by the total cost. there is no best way to predict the organization's
Operating margin was calculated by dividing the performance. The best organizational form or
company's operating income (also called the leadership style is contingent upon its appropriateness
"Operating Profit") for a given time period by its net to a situation or environment (Fiedler, 1978; Lawrence
sales during the same period. and Lorshe, 1969).

For any organization to achieve its set objectives and


Leadership style and Organization
goals, there must be a 'high' relationship between the
Performance (management) leaders and employees. However, for
The relationship between leadership and performance productivity to be a reality in an organization, there
has received considerable scholarly attention. should be superior employee performance which
Behavioural scientists, psychologists, and others have solely depends on the leadership style (Babatunde &
been studying and writing about leaders and Ikenga, 2015). Unfortunately, workplace surveys
leadership for many years. Their studies have evolved suggest that satisfied employees are becoming
from a focus on leadership traits to a desire to better increasingly rare; this reflects on the issue of job
understand "the experiences, the contexts, and the satisfaction, which has a moderate and positive impact
circumstances within which leadership emerges and on job performance. People who experience higher
performs with productive effect" (Clark & Clark, 1990). levels of job satisfaction tend to have higher levels of
task performance, higher levels of citizenship
In the past few decades, most studies about the behaviour and lower levels of counterproductive
relationship between transactional leadership and behaviour (Jason et al., 2015, p. 116).
organizational performance have yielded
disappointing findings. However, when Bass (1985) Leadership style is a suitable behavioural pattern
Multifactor Leadership Questionnaire (MLQ) was applied to the process of guidance of and influence on
used, a high correlation was found between the employees (Rezaeian, 2007). In fact, in the work
leader's transformational style and the organizational culture and according to the characteristics of people
performance level. Wang, Law, Hackett, Wang, and in the organization, the role of leadership and
Chen (2005) suggested the leader member exchange management can be effective in promoting and
(LMX) theory (Graen, & Uhl-Bien, 1995) as a good improving the level of productivity of people and
explanation for a mediating role between leadership organizations.
styles (especially transformational leadership) and
organizational performance as well as organizational Kukandeh and Del (2015) undertook a study to
citizenship behaviour (OCB). In many respects, the evaluate the relationship that transformational
LMX theory is in line with Vroom's (1964) expectancy leadership exercised on organizational performance.
theory and Blau's (1964) exchange theory that call for a The research methodology employed was a
stronger balance between managers and employees. descriptive correlation study sample, consisting of 164
According to these theories, better performance can staff, experts in the field and health centres. The survey
be achieved only when there is a reasonable level of conclusively established the existence of a positive

ISSN: 0971-1023 | NMIMS Management Review Emotional intelligence - the moderator of leadership styles and performance
38 Volume XXXIII January 2017
relationship between transformational leadership and Emotional Intelligence and Organization
organizational performance.
performance
The term Emotional Intelligence (EI) was originally
Lo et al. (2013) conducted a study to explore the
introduced by Salovey and Mayer (1990), though
relationship between leadership practices and
questionably, forms of what would later become
organisational performance in the financial services
known as emotional intelligence date back to as early
sector. Data was collected from financial services
as (Gardner, 1983; Thorndike, 1920). Salovey and
companies comprising commercial banks, investment
Mayer (1990) formulated a distinct form of intelligence
banks, unit trust management companies and
that was related with mental abilities which focused
insurance companies. The study implemented
specifically on understanding and managing one's
SmartPLS 2.0 (M3) for hypothesis testing that
emotions, and being separate from other distinct
comprised both transformational and transactional
intelligence. Salovey and Mayer (1990) defined EI as
leadership styles. The study findings revealed the
“the ability to monitor one's own and others' feelings
importance of leadership in achieving better
and emotions, to discriminate among them and to use
organisational performance.
this information to guide one's thinking and actions”
(p. 186). Popular press also came out quoting the
As per the study by Carter (2015), CEOs and their
significance of emotional intelligence. Goleman
boards intuitively understand the important role
(1998), in his writings, mentioned that real leaders
leadership behaviour has on financial performance.
have a high degree of emotional intelligence which
Two recent studies by Boston Consulting Group (BCG)
includes self-awareness, self-regulation, motivation,
and McKinsey provide strong proof of the crucial link
empathy, and social skill. Emotional intelligence
between financial performance with leadership, talent
requires understanding your own and other people's
management and organizational health. BCG's study
emotional makeup well enough to move people in the
found that leadership and talent management
direction of accomplishing your company's goals. In his
capabilities had a surprisingly strong correlation with
study, Goleman (1998) found Emotional Intelligence to
financial performance, while McKinsey's study proved
be more than twice as predictive of business
that the healthiest companies are more than twice as
performance, than purely cognitive intelligence, and
likely to have an operating profit margin (based on
was more predictive of business performance than
earnings before interest, tax, depreciation and
employee skill, knowledge and expertise. The study
amortization) above their industry mean. In an
findings revealed that leaders scoring higher in key
another study by Dele et al. (2015) that examined the
aspects of emotional intelligence were expected to be
effect of leadership style on organizational
highly profitable.
performance of banks in Nigeria, leadership style was
found to be a positive contributor of organization
The study conducted by Lee (2015) states that work
performance. The study recommended that banks
teams with high emotional awareness and strong
should apply appropriate leadership style to achieve
management skills achieve more positive results
the desired organizational performance.
because of improved ability to exchange information,
problem-solve respectfully to make decisions and
engage in productive conflict negotiation. The
combination of exceptional emotional awareness and
management capability is what drives positive

ISSN: 0971-1023 | NMIMS Management Review Emotional intelligence - the moderator of leadership styles and performance
Volume XXXIII January 2017 39
business results. There is mounting evidence that For this study, the research hypotheses were as
emotional intelligence is a factor distinguishing the follows:
best business leaders from the rest of the pack. • The relationship between leadership style and
Examining effectiveness of management teams in organization revenue is affected by emotional
Fortune 500 companies, the late David McClelland intelligence of a leader.
found that when senior managers had high emotional • The relationship between leadership style and
intelligence capabilities, their divisions outperformed organization productivity is affected by emotional
consistently every year. intelligence of a leader.

Pryke et al. (2015) carried out a study to understand The operating margin of an organization is more a
the effect of emotional intelligence (EI) of a project matter of emotional intelligence of managers than
manager on the nature and quality of communications their leadership style.
with his or her subordinates. The fact is that the EI of a
project manager, with its related emotional Research Methodology
competencies, are accepted as crucial in establishing This study adopted quantitative methodology. The
and maintaining good relations with other members of primary data was collected through valid and reliable
a project team. The study findings demonstrated that a tools like Mayer Salovey Carusco (MSCEIT) and Life
project manager's emotional sensitivity and Style Inventory (LSI). Data was collected through
expressiveness may be indicative of the subtle online means within one organization in the BFSI
variations in the type of relations between leader and sector. 312 branches in this sector were selected as a
follower. Another study by Issa and Mahmood (2016) part of the data collection process. Among those, the
attempted to ascertain the relationship between managers involved in managing independent profit
emotional intelligence and transformational and loss (PnL) responsibilities of branch units having
leadership among academic leaders in eighteen one year of experience, were selected. Questionnaires
Malaysian public universities. The study finding were sent to them out of which 222 branch managers
inferred that emotional intelligence has the ability to responded.
predict transformational leadership behaviour and
thereby inculcate a suitable organizational culture. Tools for data collection - The framework of constructs
Again, an organization should have a suitable for this study include the thinking and behavioural
organizational culture for the relationship to develop. styles measured by the LSI. The LSI measures the
extent to which individuals perceive that they exhibit
From the literature, it is evident that studying the link these styles. The 12 different thinking styles are
between a manager's emotional intelligence, postulated to fall into three clusters: Constructive,
leadership styles and performance might be Passive/Defensive, or Aggressive/Defensive. It also
beneficial. Specifically, identification of increased identifies four areas of Concern: Task/Satisfaction,
performance is measured based on the degree of People/Satisfaction, Task/Security, and People/
contribution by each individual component of Security (Cooke & Lafferty, 1982).
leadership styles and emotional intelligence. The
current study defines and inspects these relationships Another tool - MSCEIT - by Mayer et al. (2002) contains
and their impact on Organizational Performance in the detailed information in the user's manual. Mayer
terms of revenue, productivity and operating margin. et al.'s (2000) definition of emotional intelligence is

ISSN: 0971-1023 | NMIMS Management Review Emotional intelligence - the moderator of leadership styles and performance
40 Volume XXXIII January 2017
“the ability to perceive and express emotion, Another method was to explore a set of interrelated
assimilate emotion in thought, understand and reason variables without imposing any preconceived
with emotion, and regulate emotion in self and others” structure on the outcome. Similarly, confirmatory
(p. 396). In other words, a better understanding of factor analysis was conducted to test the correlation
emotion leads to better problem solving in an between observed variables and latent factors. In
individual's emotional life. Their definition is further addition, this analysis was done to determine the
defined in a four-branch model (Salovey & Sluyter, model fit to the data. Structural equation modelling
1997, p. 11). The first branch, Perceiving Emotions, analysis technique was applied to evaluate the validity
represents the perception, appraisal, and expression of the substantive model with empirical data.
of emotion. The second branch, Facilitating Thought, Moderation test and analysis technique was
represents the emotional facilitation of thinking. The implemented to test and compare invariance of the
third branch, Understanding Emotion, represents model.
understanding and analyzing emotions as well as
employing emotional knowledge. The fourth branch, The data was collected from different demographic
Managing Emotion, represents the regulation of profiles of the respondents, where they were from
emotion. different age groups, geography/zones, tenures, and
management levels. However, the data related to
The data gathered was subjected to various types of select demographic variables is presented as 'Sample
analyses. Exploratory factor analysis was done to Demographics' in Table 1.
optimize and evaluate a number of latent factors.

Table 1: Sample Demographics


East East North North South South West West Grand
Total Total Total Total Total

Tenure Vertical Male Male Male Female Male


Labels (years)
1 B 2 2 21 21 4 4 2 39 41 68
M 6 6 2 2 2 8 10 18
S 7 7 1 6 7 14
2 B 12 12 6 6 12 12 30
M 8 8 5 5 15 15 28
S 3 3 3 3 10 10 16
3 B 1 1 8 8 10 10 29 29 48
M 2 2 12 12 8 8 20 20 42
S 2 2 2 2 2 2 5 5 11
Grand Total 7 7 79 79 40 40 5 144 149 275

Note: M – Management, S - Sales and B - Branch current study. Only 5 participants in the said role were
Managers women.

It may be inferred from the table that the western The following statistical techniques were used in the
region constituted 149 participants, North 70, East 7 analysis of the data. Table 2 indicates the techniques
and South 40; the group from the west dominated the used along with their purpose.

ISSN: 0971-1023 | NMIMS Management Review Emotional intelligence - the moderator of leadership styles and performance
Volume XXXIII January 2017 41
Table 2: Data Analysis Techniques used in the Study

Sr.No. Type of Analysis Purpose

1 Exploratory Factor To optimize and evaluate a number of latent factors


Analysis To explore a set of interrelated variables without imposing any
preconceived structure on the outcome

2 Confirmatory Factor To test the correlation between observed variables and latent fact ors.
Analysis To determine the model fit to the data

3 Structural Equation To evaluate the validity of substantive model with empirical data
Modelling

4 Moderator analysis To determine whether the relationship between two variables depends
on (is moderated by) the value of a third variable

Rationale for the Technique Organizational Performance


Exploratory factor analysis has been used to reduce The organization's performance was reviewed in terms
large factors in the tools to an optimized level; this was of all accounting and financial measures for the
done to explore distinct constructs in LSI and EI from a financial year including Revenue, Productivity and
series of factors. This can explain the maximum Operating Margin. Revenue was considered as total
variance from the data and will help to generate the sales in the branch unit in a financial year. Productivity
model. To study the model fit and inter-relationship was calculated by dividing total sales by total cost.
between the constructs post EFA, CFA was examined; Operating margin was computed by dividing operating
after confirming the CFA, the conceptual framework income by net sales.
as recommended by the researchers and its structural
model was validated. CFA verified the researchers' Leadership Style Inventory
conceptual framework, factors and the pattern of An EFA for constructs within Leadership Styles and
factor loadings. CFA evaluated the convergent and (Tool 1) LSI involved 240 items, 12 individual scales
discriminant validity of the constructs. CFA was used organized by the LSI Leadership Behaviour Style
as a precursor to Structural Equation Model (SEM) that subscale (Constructive, Passive/Defensive and
specifies the structural relationship among the Aggressive/Defensive). The LSI 12 thinking styles were
independent and dependent variables and factors on a circumplex comprising: Humanistic-Encouraging,
(latent variables). A f f i l i a t i v e , A c h i e v e m e n t , S e l f- A c t u a l i z i n g
(Constructive), Approval, Conventional, Dependent,
SEM explains the entire set of relationships among Avoidance (Passive/Defensive), Oppositional, Power,
Emotional intelligence of leaders and their leadership Competitive, Perfectionistic (Aggressive/Defensive).
styles. It estimates multiple and interrelated
dependence relationships. Again, it tests the model fit, The factor loading of each item was greater than 0.5.
i.e. researchers' model, compare regression The Kaiser-Meio-Olkin (KMO) measure of sampling
coefficients, means, and variances simultaneously, adequacy was 0.845 which was well above the
and moderation analysis can be done simultaneously. recommended 0.6 or higher (Sharma, 1996), indicating
good factorability. Bartlett's test for sphericity was

ISSN: 0971-1023 | NMIMS Management Review Emotional intelligence - the moderator of leadership styles and performance
42 Volume XXXIII January 2017
significant, which indicated that the variables These four made up the four MSCEIT branches. The
correlated with each other. The high factor loadings factor loading of each item was greater than 0.358. The
indicate that the measures describe the same factor Kaiser-Meio-Olkin (KMO) measure of sampling
(convergent validity), whereas high Cronbach's alpha adequacy was 0.862 again above the recommended
shows high inter-correlations among these items, 0.6 or higher. Bartlett's test for sphericity was
which was 0.824. This indicates that optimized items significant, which indicated that the variables
used in this study were suitable to describe two correlated with each other. The two distinct factors
constructs, namely (a) LSI Constructive and (b) were obtained through factor analysis. The high
Moderately Defensive. EFA revealed (Table 3) the two Cronbach's alpha shows high inter-correlations among
factors having Eigenvalues greater than 1 explaining these items, which was 0.860. This indicates that
74.64 % of variance in the data. optimized items used in this study were suitable to
describe two constructs based on EFA, namely (a)
Mayer-Salovey-Caruso Emotional Perceived facilitation; (b) Managed reasoning. EFA
Intelligence Test (MSCEIT) revealed (Table 3) the two factors having Eigenvalues
The Mayer-Salovey-Caruso Emotional Intelligence Test greater than 1 explaining 46% of the variance for
(Tool 3) has 141 items and employs 8 task level scores, MSCEIT.
based on factor analysis, clustered around four
branches namely: Emotional Perception, Emotional
Facilitation, Emotional Understanding, and Emotional
Management.

Table 3: Exploratory Factor Analyses (EFA)

ISSN: 0971-1023 | NMIMS Management Review Emotional intelligence - the moderator of leadership styles and performance
Volume XXXIII January 2017 43
Conceptual Model tested by using the goodness of fit index. The basic
The conceptual model was tested in order to establish SEM model was further refined by trimming the
nomological validity. The LSI Constructive, Moderately measured items that had high modification index both
Defensive and Perceived facilitation and Managed in covariance and regression weights, and insignificant
Reasoning of EI were all exogenous constructs. paths. Faces (.263), had squared multiple correlation
(SMC) below the cut-off 0.5, but was retained as at
The structural model provided the causal relationship least two variables were needed in a construct
between the constructs. This structural model was (Perceived facilitations), which is shown in Figure 1.

Figure 1: Conceptual Map

Leadership Styles

Performance

Emotional Intelligence

Following are the fit indices (Table 4) of the structural model. Table 4: SEM Model Fit Values

Chi Df Chi- GFI AGFI NFI CFI RFI IFI TLI


Square sq/df

320.752 132 2.430 .878 .824 .886 .929 .853 .930 .908

Standardised RMSEA=.080, p=0.000, RMR=7.162 LO 90=0.069, HI 90 =0.092, PCLOSE=0.000


Most of the fit measures met the recommended values indicating that the model was acceptable.

Reliability and Validity of the Instrument


Reliability and validity of the measurement was established and confirmed for the trimmed measurement model.
Table 6 shows Cronbach's alpha Composite Reliability and Average Variance Extracted (AVE) for the constructs in
the study.

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44 Volume XXXIII January 2017
Table 5: Summary of the Reliability and Validity Measures

Construct Cronbach's alpha AVE Composite Reliability

Managed Reasoning 0.868 0.696 0.873

LSI Constructive 0.892 0.811 0.895

LSI Moderately Defensive 0.915 0.791 0.919

Perceived Facilitation 0.665 0.600 0.734

All constructs satisfied the conditions stated above in Convergent Validity of the trimmed measurement
the trimmed measurement model. In this study, model was established by using three criteria.
construct validity was examined by finding convergent ü Factor Loading
and discriminant validity. ü Average Variance Extracted (AVE)
ü Construct Reliability / Composite Reliability
Convergent Validity
Convergent validity was examined to find whether the To calculate Construct Reliability, Average Variance
items of the same construct are correlated and Extracted, Maximum Share Variance and Average
discriminant validity was used to find whether items of Shared Variance, the James Gaskin Tool package was
a construct do not correlate on other constructs. Table used. By substituting Correlation and Standardised
6 shows the factor loadings and Squared Multiple Regression Weights, the desired values were obtained
Correlation (SMC) for the items used in the trimmed which are shown in Table 7
measurement model.

Table 6: Factor Loadings and Item Reliability

Constructs Factor Item


Loadings Reliability (SMC)

EI Facilitation <--- Perceived 0.961 0.924


Facilitation

Emotional_relation <--- Managed 0.841 0.708


Reasoning

Emotion_mgmt <--- Managed 0.874 0.765


Reasoning

Blends <--- Managed 0.786 0.617


Reasoning

Faces <--- Perceived 0.526 0.277


Facilitation

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Volume XXXIII January 2017 45
Table 7: Construct Reliability, Average Variance Extracted,
Maximum Share Variance and Average Shared Variance

CR AVE MSV ASV Managed LSI LSI Perceived


Reasoning Constructive Moderately Facilitation
Defensive
Managed 0.873 0.696 0.303 0.145 0.834
Reasoning
LSI Constructive 0.895 0.811 0.181 0.098 0.191 0.901

LSI Moderately 0.919 0.791 0.239 0.149 -0.489 -0.339 0.889


Defensive
Perceived 0.734 0.600 0.303 0.153 0.550 0.307 -0.440 0.775
Facilitation

As shown in Table 7, values of Construct Reliability Discriminant Validity


(CR), Average Variance Extracted (AVE), Maximum Discriminant validity of the model was established by
Shared Variance (MSV) and Average Shared Variance using the criteria that the AVE estimated for the
(ASV), were found to be within specified limits, except construct should be larger than the square of the inter-
AVE of Perceived Facilitation. construct correlation estimates. In this model, the AVE
is greater than the square of the inter-construct
correlation in all cases and hence, the discriminant
validity was established.

Table 8: Correlations among Constructs, AVE, Squared Inter-constructs Correlations (SIC)

LSI Constructive LSI Moderately Perceived Facilitation Managed


Defensive Reasoning

LSI Constructive 0.8109 0.1149 0.0942 0.0365

LSI Moderately -0.3390 0.7912 0.1936 0.2391


Defensive

Perceived Facilitation 0.3070 -0.4400 0.8990 0.3025

Managed 0.1910 -0.4890 0.5500 0.6963


Reasoning

Results
As the main objective of the study was to confirm the role of emotional intelligence of a leader between leadership
style and revenue, and productivity of the organization, hypotheses were tested using structure equation
modelling as an analysis technique. The following results were found.

Hypothesis 1: The relationship between leadership style and revenue is affected by emotional intelligence of a
leader.

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46 Volume XXXIII January 2017
Table 9: Association between LSI and Revenue when moderating on EI

Model Unstandardized Adjusted t-value p-value


Coefficients R-square

Beta SE

1 (Constant) 555342.130 247455.160 0.098 2.244 0.026

LSIconc -24553.744 6045.022 -3.978 0.001**

LSIpasdef -17202.025 4363.295 -3.942 0.000**

2 (Constant) -4858.123 244166.011 0.242 -0.020 0.984

LSIconc 6129.101 5583.388 1.098 0.274

LSIpasdef -10413.478 4161.179 -2.503 0.013**

Perfac 165.630 2370.648 0.070 0.944

Reaarea 16528.926 2590.712 6.380 0.000**

Dependent Variable: Revenue, **p<0.01, *p<0.05

Code expansion (ReaArea=Managed Reasoning, independent variables. LSIpasdef (β=-10413.478, t=-


PerFac = Perceived Facilitation, LSModdef=LSI 2.503, p=0.013<0.01) has a negative significant impact
Moderately Aggressive, LSIconc = Constructive) on revenue. While moderator variable Reaarea
( β =16528.926, t=6.380, p<0.01) has a positive
Table 9 presents the association between LSI on significant impact on revenue. Independent and
revenue when moderating on EI. The variable revenue moderator variables together accounted for 24
is considered as a dependent variable. The variables percent variation on revenue. Hence, we conclude that
LSIconc and LSIpasdef are considered as independent passive defensive leadership style has an impact on the
variables, while EI constructs 'perfac and Reaarea' are revenue of an organization and the emotional
moderated variables. In Block 1, only independent intelligence construct of managed reasoning
variables are entered in which LSIpasdef ( β =- moderates the relationship between leadership style
17202.025, t=-3.942, p<0.01) is found to have a and revenue.
negatively significant impact on revenue. Independent
variables together accounted for 10 percent variation Hypothesis 2: The relationship between leadership
on revenue. In Block 2, the moderator variable perfac style and productivity is affected by emotional
and Reaarea are added; there is no change in intelligence of a leader.

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Volume XXXIII January 2017 47
Table 10: Association between LSI and Productivity when moderating on EI

Model Unstandardized Adjusted t-value p-value


Coefficients R-square

Beta SE

1 (Constant) 1.763 0.459 0.004 3.841 0.000

LSIconc -0.005 0.011 -0.432 0.666

LSIpasdef -0.009 0.008 -1.161 0.247

2 (Constant) 1.615 0.491 0.015 3.288 0.001

LSIconc -0.007 0.011 -0.645 0.520

LSIpasdef -0.007 0.008 -0.839 0.403

perfac 0.010 0.005 2.117 0.035*

Reaarea -0.002 0.005 -0.408 0.684

Dependent Variable: Productivity, *p<0.05

Code expansion (ReaArea=Managed Reasoning, and Reaarea are added; moderator variable perfac
PerFac = Perceived Facilitation, LSModdef=LSI (β=0.010, t=2.117, p=0.04<0.05) has positive impact
Moderately Aggressive, LSIconc = Constructive) on productivity. Independent and moderator variables
together accounted for 2 percent variation on
Table 10 presents the association between LSI on productivity with 'perfac' having the minimal impact
productivity when moderating on EI. The variable (p=.035). Hence we conclude that the hypothesis, EI
productivity is considered as a dependent variable. moderates the relationship between L S I and
The variables LSIconc and LSIpasdef are considered as productivity is rejected. There is a similar finding from
independent variables, while emotional intelligence the study by (Azadehdel & Avakh, 2015).
constructs 'perfac and Reaarea' are moderated
variables. In Block 1, only independent variables are Hypothesis 3: The operating margin of an organization
entered which shows there is no significant impact on is more a matter of emotional intelligence of managers
productivity. In Block 2, the moderator variables perfac than their leadership style.

Table 11: Association between LSI, and Operating Margin(OPM) when moderating on EI

Model Unstandardized Adjusted t-value p-value


Coefficients R-square

Beta SE

1 (Constant) 0.817 0.301 -0.015 2.717 0.007

LSIconc -0.003 0.007 -0.363 0.717

LSIpasdef -0.003 0.005 -0.475 0.635

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48 Volume XXXIII January 2017
Model Unstandardized Adjusted t-value p-value
Coefficients R-square

Beta SE

2 (Constant) 0.784 0.318 0.018 2.463 0.015

LSIconc -0.001 0.007 -0.194 0.846

LSIpasdef -0.003 0.005 -0.482 0.631

perfac -0.008 0.003 -2.734 0.007**

Reaarea 0.006 0.003 1.902 0.059

Dependent Variable: OPM, **p<0.01

Code expansion (Rea Area=Managed Reasoning, purpose was to understand the connections between
PerFac = Perceived Facilitation, LSModdef=LSI the constituents of Emotional Intelligence, Leadership
Moderately Aggressive, LSIconc = Constructive) Styles, and Performance. Further, performance was
selected because Unit Managers are involved in
Table 11 presents the association between leadership managing independent profit and loss (PnL)
style and operating margin when moderating on responsibilities of branch units, and can affect the
emotional intelligence. The variable O P M is overall organization's overall performance in the Retail
considered as dependent variable. In Block 1 none of Financial services industry.
the independent variables were significant. In Block 2
the moderator variable perfac and Reaarea were Moderation test was conducted among the attributes
added, in which perfac (β=-0.008, t=-2.734, like leadership styles, emotional intelligence, and
p=0.01<0.05) is negatively impact on OPM. Moderator organization financial performance. First assessment
variable accounted 2 percent variation on OPM. was to find out aassociation between LSI and Revenue
Hence, we conclude that the impact of perceived when moderating on EI. Second assessment was to
facilitation (EI construct) as a moderator is negatively find out relation between LSI and Productivity
significant on the relationship between independent including EI as moderator. Third assessment was to
and dependent variables. The variability being very identify how attributes like LSI and operating margin
low, the relationship between LSI and organizational get moderated through EI. In this regard, three
performance is affected by EI is partially accepted and hypotheis were tested.
the finding is also supported by the research from
Ahuja (2015). It could be concluded from the hypothesis test that
moderately defensive style of a leader which is found
Discussion of results in individuals characterized by self-promoting thinking

The leadership style adopted by the leader is said to and behaviour that promotes the fulfilment of security

have a significant impact on the relationship between needs through interaction with people, have a

leader, employee and the organization performance. negative influence on the revenue as a performance

Studies have shown that the emotional intelligence of measure. It may reflect that the more the leaders

a leader is important too. In the present study the reflect self interests the poorer it shows on the

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Volume XXXIII January 2017 49
revenue of the organization. The constructive 8. Conclusion
l e a d e rs h i p s t y l e w h i c h e n t a i l s i n d i v i d u a l s It is well accepted that understanding leadership is
characterized by self-enhancing thinking and important. The phenomena of leadership are
behaviour that contributes to an individual's level of manifested in organizations in different forms and
satisfaction ability to develop healthy relationships, different contexts. Mitchell et al (1970) opined that
working effectively with people and proficiency at outcome is contingent upon the leadership styles and
accomplishing tasks did not emerge significant enough the situations that are favourable to the leaders.
to make contribution towards organization's revenue. Drawing on contingency theories of leadership that
There could be other important factors other than a emphasize the significance of situational variables in
particular leadership style that needs to be studied. altering the effectiveness of a particular leader's
behaviour and leadership style (Trimizi, 2002), the
Another outcome of the result is that emotional current research emphasizes the importance of
intelligence understood as 'perceived facilitation' of emotional intelligence between leadership style and
managers has a little but significant negative impact on o rga n i zat i o n p e r fo r m a n c e . T h e p re m i s e o f
p ro d u c t i v i t y a s a m e a s u re o f o rga n i zat i o n contingency theory in the present study is that it
performance. That means if leaders are not seen in represents a change in leadership research by firstly,
positive light it may impact productivity negatively. A by focusing on passive defensive style of leadership
study on the impact on organization performance is that may contribute to organizational performance
evidenced by Sharma et al (2016). However, 'managed negatively, secondly, it is rather more important to
reasoning' of leaders seems to be a stronger predictor say that leadership style matters in the situations
than leadership style in impacting the revenue of the when the leaders show the attributes of emotional
organization. (Pfeffer & Sutton, 2006). Moderately intelligence. The study thus makes an academic
defensive leadership style has a significant impact on contribution by creating a model that highlights the
performance. Managed reasoning of Managers has a importance of not only passive defensive style of
significant impact on performance. A clear indication leadership but more of the aspects of emotional
that if mangers are good at emotion management and intelligence for an organization. The way leader or
emotional relations it could be beneficial for the manager uses emotional intelligence has relevance to
organization. The constructive leadership style has organizational performance. Hence, it could be
not emerged as a contributor to organization inferred that emotional intelligence makes impact on
performance . performance especially in the banking and financial
industry (Ahuja 2015). Managers in the organizations
The study overall discussed about leadership style and are required to be cognizant of their role as a leader.
leader's emotional intelligence, how these impacts Further, the emotional intelligence of managers assists
organization's performance. Leaders do require in influencing other employees, i.e. leadership styles
understanding the emotions of followers or thereby combined emotional intelligence compels to
subordinates. Leaders should use emotion as a tool to contribute towards organization goals. This is how
diagnose whether followers appreciate the work organizational performance gets boosted. The study
assigned to them or not. Thus, it reflects about the by Boyatzis (2006),has also emphasized the
relationship between leaders and emotional importance of emotional intelligence and other
intelligence (Ugoani, 2015) cognitive competencies in predicting financial
performance of an organization.

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50 Volume XXXIII January 2017
Contribution through Human Capital Based Study limitations and Scope for further
Performance (HCBP) Model:
research
The focus of human capital is on individual and
The limitation of the study is that the research study
organization. Key attributes of this model are
was carried out only in single banking and financial
leadership skill, organizational culture, and emotional
company including its 222 branch units. This can also
intelligence. Thus, leader understands on emotional
be considered as strength as the entire data came from
intelligence of employees maters. Moreover, leader
a specific context. Having said so, there are so many
must have the potential to read the EI prevail among
industries apart from these that require researchers'
the employees, which in turn would help in leading the
attention. Moreover, the survey was conducted
team in better way. Hence, leader's investment on
online. Otherwise, face-to-face interviews might have
tracking the employees as per their requirement
come up with some other findings. Thus, the study
would in turn lead to more productivity.
findings can't be applicable to other industries. Hence,
there is ample scope for further research to be carried
out in other industries. The study recommends that
organizations into service industry should focus on
Emotional Intelligence, where the role of leader or
manager becomes pivotal to understand the
emotional needs of employees. As a result, it would
lead to better financial growth.

ISSN: 0971-1023 | NMIMS Management Review Emotional intelligence - the moderator of leadership styles and performance
Volume XXXIII January 2017 51
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Dhruv Desai is a Ph.D. scholar whose background spans many industries and cultures, including
Technology, Aviation, Telecom, and BFSI & IT/ES consulting. Dhruv is a strategic thinker and a proven
problem solver with a thorough understanding of the dynamic role that talent management must play in
the 21st Century workforce. He is a versatalist with expertise and laurels in the fields of HRD, Leadership,
Team building, Strategic planning, Change management, Executive coaching, Business consulting,
Performance management, CRM and Quality management. He has constantly maintained his
grounding in academics as a Research scholar at NMIMS University where he has worked on his Ph.D.
thesis in areas including Leadership, Competencies, empowerment and Operational excellence. Dhruv
has been honoured with many Awards and Accolades such as HR Leadership Award in February 2015 by
Global HR Excellence Conference, HR Achiever of the Year Award in February 2014 by Dream Companies
to Work For, HR Leadership Award in February 2013 by ET NOW News Channel, etc. He can be reached at
[email protected]

Manjari Srivastava is a Professor in Human Resource Management and Behavioural Sciences at School
of Business Management, NMIMS University, Mumbai. She has Masters in Psychology and holds Ph.D.
in the area of Organizational Behaviour. With work experience of 18 years, Manjari is deeply involved
with teaching, training, mentoring and research activities. Manjari has published vastly both in national
and international journals, and has participated in various conferences both nationally and
internationally. She has also published cases with Ivey publishers Canada, one of the world's leading
business case publishers. She can be reached at [email protected]

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56 Volume XXXIII January 2017

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