SEA - Practical Application of Science

Volume III, Issue 1 (7) / 2015

Raluca-Elena HURDUZEU
Faculty of International Business and Economics,
The Bucharest University of Economic Studies

THE IMPACT OF LEADERSHIP Literature
reviews
ON ORGANIZATIONAL
PERFORMANCE

Keywords
Leadership
Transformational leadership
Organizational performance

JEL Classification
L 20, L 25, M 10

Abstract

An organization is considered to be effective if it finds the balance between the demands of
various stakeholders (owners, employees, customers, community) and the needs of the
employees. We believe that an appropriate leadership style can influence and ensure the
prosperity and the economic growth of both the organization and employees. Therefore, the
aim of the paper is to explore the impact of leadership styles on the organizational
performance. Our main focus is on transformational leadership and its role in facilitating the
increase in organizational performance. Transformational leaders inspire individuals within
the organizations to work harder and to strive for the highest levels of performance. We
begin by underlining the connection between transformational leadership and organizational
performance, we provide examples on transformational leadership practices’ impact the
organizations and we conclude by making some future research propositions.

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Ebrahimpour. use the following situational leadership styles: organizational effectiveness (cost and quality) and 1. 2006. inspiration. performance. They stimulate their goals. leadership have a positive impact on the According to Richard and Clifford (2008). 2007). the leader’s use of Intellectual stimulation. on asset). the maturity level of the subordinate performance was measured by some researchers determines the leadership style to be used (Hersey. mutually beneficial explorative thinking process. Leaders give the effective leadership styles is due to promote subordinates the opportunity to perform their work standards of excellence in the professional autonomously. articulate an important vision and mission for promote innovations. Scott and Peter (2009) mention that by providing Bass. optimistic their organisation. mentoring and coaching. positive effect of leadership on organizational Therefore. emotional bond. The according to the maturity of the subordinates. (Sila.SEA . development of the members of the organization creativity and innovation to achieve their tasks. The leaders pay Effective leadership also involves attention to subordinate’s needs and delegate tasks motivation. 2004). ways and encourage them to challenge their own transformational leadership is made up of four values. stimulate the subordinates to challenge 3. Thus. Leaders inspire by communicating the and help their employees to be competitive by values of the organization with fluency and using effective leadership styles (Bass. innovation. subordinates to think about old problems in new According to Bass and Rigio (2006). thus increasing the and trustful leaders who are emotionally intelligent.Practical Application of Science Volume III. intellectual stimulation and individual consideration. Kass. They inspire the individuals transcend their self interests in the name of the within the organization to achieve high collective entity. It satisfaction and employee affective commitment involves gaining trust. employee job and subordinates and the shared mission. transformational leaders consider that transformational leadership involves encourage subordinates to adopt generative and the concept of motivation. the leader may resources (turnover rate and job performance). The Riggio. traditions. raise the performance expectations of group’s work and stimulating new ways of thinking subordinates’ so increasing their willingness to and problem solving. subordinates’ identities to the collective identity of 1978) and it is characterized by positive. Luftman. Johnson. main parts: charisma. Individualized consideration. respect and confidence of (Bass. and analytical skills. (La Rue. Larson. Therefore. remuneration with guidance. Drucker. Some others. the organisation. subordinates’’ intrinsic motivation to perform their encourage teamwork. participating – the leader is supportive and their own value systems and improve their works with the subordinates. transformational leaders in order to achieve the desired performance: actively engage the Transformational leadership subordinates’ personal value systems and provide Transformational leadership originated ideological explanations which connect with James MacGregor Burns in 1978 (Burns. return way communication. 2. 2004). 2006. The latter use their experience. from the part of the leader. Lawler. Shamir (2004) intellectual stimulation. delegating – there is little involvement A number of studies on leadership styles (Bass. Avolio. Wang and Shi organizations record increased employee (2005) state that leaders use a situational approach satisfaction that positively that positively to practicing different leadership patterns and styles influences the productivity and the profits. inspiration. and beliefs. 2005) through human Blanchard. Both leaders and must have the ability to promote creativity and subordinates agree on what to do. the As Walumbswa. Riggio (2006) and Dvir. organizational performance. Kouzes. telling or directing – the leader uses one- financial performance (market share. individual performance. Childs. 2006. selling and coaching – the leader uses two- To increase the organizational performance a leader way communication. Yukl. 290 . researchers have suggested that leaders motivate Inspiration. 4. common values and vision. 2009) subordinates work on their own and are suggest that the practices of the transformational independent. Rigio. When all these are present. Issue 1 (7) / 2015 Introduction Charisma is central to the transformational process It is considered that a company’s success because it develops a connection between leaders is due to organizational performance. 2001). profit. Rigio. Posner. so increasing subordinates’ Transformational leaders change their understanding of the importance and values organization’s culture by inspiring a sense of associated with desired organizational mission and purpose about the importance of the performance. confidence in a positive manner. set high expectations and job. 2007. management.

DeClerk. With regard to its content. This approach In their study on the connection between explores the relation between the organization and the transformational leadership style and the environment. performance. organizational performance. 2008. Kieu (2010) on 151 groups. he analysed the Goal Approach. Therefore. Davis.Practical Application of Science Volume III. through increased commitment. Issue 1 (7) / 2015 Organizational performance corporate goals by inspiring a sense of importance Organizational performance may be defined as the of the team’s mission. The ability of the organization to take advantage of its study used a Multifactor Leadership Questionnaire environment in the acquisition of internal and (5X) and it revealed that transformational external resources are indicators of performance. there are four main dominant organizational performance. The analysis specific purpose which is determined by the underlined a strong correlation between stakeholders. long-term income growth and transformational Competing Values Approach was developed by leadership was depicted in a study on 94 companies Cameron and Quinn (2006) and it states that investigating the impact of transformational organizational goals are created in different leadership practices on the financial performance of directions by the various expectations of multiple the organization in terms of profitability. leadership practices in Russian companies. stable female transformational leaders and the revenue and effective. They also demonstrated that effective Constituency Approach. Leadership and Organizational Performance Taking into account that the organizations today The transformational leader wants to achieve have to be performant and to meet the competing results beyond what is normal and sets higher expectations of the stakeholders in a manner which 291 . higher motivation The organizations with more control over resources and intellectual motivation. performance. 2006). Elenkow (2002) examined the former impact on 2007). Using a Multifactor approaches: Leadership Questionnaire. A performant and effective element of organizational effectiveness. are likely to have the most influence on the Moreover. 2007). increased constituencies. and certain outcomes. 2004. 2005). its leadership is a stronger predictor for the value being measured by the stock market and it is performance. As Boman and Deal (2003) state organizational performance. motivation were found to improve the organizational performance (Hancott. People create organizations for a leadership behaviour of 253 leaders. However. SEA . Chew and an organization is performant and effective when it Spanger (2005) identified within 170 companies takes advantage of its environment in the from Singapore. the criteria to be used in assessing the In his study on the transformational organizational performance (Bolman. team projects and management (Cohen and companies from IT industries underlined that Bradford. Moore (2007) in his research within the According to Cameron and Quinn (2006) United Way of America organization found out that stakeholders support the adaptability of their there is a significant positive relationship between organizations. Zhu. between Transformational leaders’ behaviours are effective cost and realized output (efficiency) and influential in motivating the employees. organizations may have sales or revenue and stock measures (Roi. Davis (2007). a positive relation between the performance (Scott. a positive relationship between the acquisition of high value and scarce resources to transformational leadership and the organizational endorse its operations. Scott. The organizational performance is the transformational leadership practices and ability of the organization to achieve its goals. transformational leadership relates positively and For Scott. empowerment and demanding a higher degree of Other means to increase organizational efficiency respect and trust for the leader. Davis. and effectiveness include strategic initiatives Intellectual stimulation and inspirational focused on organizational performance. places the group goals over personal self-interest performance informs about the relation between (James. stimulate their order needs and develop their self – There is no general agreement in the literature on interest for the organization’s performance. 2005). According to Agle et all human resources management arbitrates the (2006) an organization is effective when multiple relationship between leadership and performance stakeholders perceive the organization as effective. different criteria to measure performance. satisfaction and commitment within the key metric to measuring organizational organizations by building commitment. stimulates employees to transformation of inputs into outputs for achieving think innovatively about a problem or task. organization has a high degree of collaboration and In another study on leadership styles and commitment among stakeholders through work organizational performance. La Rue et al. Deal 2003. the flexibility and the significantly to organizational performance. minimal and effective cost (economy). they (effectiveness) (Chen. 2005). Barnes. to make between output and achieved outcome them more aware of the task outcomes. 2006). The System Resource Approach. they want them to be flexible.

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