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RUNNING HEAD: THE IMPACT OF 1

THE IMPACT OF TRANSACTIONAL LEADERSHIP STYLE ON

EMPLOYEES’ JOB SATISFACTION AND

HOW TO SUSTAIN THE EMPLOYEES’ MOTIVATION

SYAMIM BINTI HASHIM

UPPER IOWA UNIVERSITY

SEGi UNIVERSITY

syamimhashim@hotmail.com

DR. RASHAD YAZDANIFARD

UPPER IOWA UNIVERSITY

SEGi UNIVERSITY

rashadyazdanifard@yahoo.com
RUNNING HEAD: THE IMPACT OF 2

ABSTRACT

This research was conducted with a purpose to investigate the impact of transactional leadership style on
the employees’ job satisfaction and determine on how to sustain the employees’ motivation. After analyzing the
data, I could say that transactional leadership style has positive relationship on the employees’ job satisfaction.
Rewards and benefits shows a huge impact on employees’ job satisfaction and performances as it helps to motivate
the employees to perform better. More than that, rewards and benefits also shows that these factors influences on
sustaining the employees’ motivation.

Keywords: Transactional leadership style, job satisfaction, employee, leadership styles, sustaining the employees’
motivation.
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1. INTRODUCTION

In the world of competitive business environment we live in today, many organizations expand their
business not only locally, but also globally in order to survive in the market industry. By doing so, companies can
widen their market not focus solely in 1 country, but also in other Europe or Asian countries. Not only that,
globalization can also increase the production market of the company as well as increase in employment and
technology advances. For instance in Japan, the technology has one of the most advanced technology in the world
and most of the developed countries looked up at Japan techologies for high quality production machines.

Apart from that, some countries expand their business not only because production but also because of
cheap labor and cheap manufacturing cost. Asian countries like Indonesia, China and India are the most popular
countries for organizations to based their production plants as these countries have one of the most cheapest labor in
the world. However, by expanding a corporation to become a multinational company, the business may encounter a
few barriers in the future in order to reach the objective of the company. For instance, different countries consists of
different market demands as well as cultures, hence, these factors may effect the product demands in some
countries. In order to overcome this barrier, an organization needs to alter their market products to the needs of the
customer in the country.

Nevertheless, to achieve that goal, every organization needs to have an effective leader as it is the heart in
every organization that could lead to success of a company. An effective leader not only has the power to lead the
organization but also to guide each of the employees and to improve to be better. It is one of the most important key
to achieve the objectives of the company. For instance, a quote that was taken from Bushra, Usman & Naveed
(2011), they stated that:

“The success of an organization depends on the hard working, loyal and involved managers and
employees. In this modern era where world has become a global village, firms are considered to be
competitive on the basis of competence of their human resources and somewhat a difficult task to handle
people who are physically, psychologically, culturally and ethically different from each other.” (Bushra,
Usman & Naveed, 2011)

More than that, an effective leadership is born to motivate and help the employees to be the best to achieve
the objective in a certain period of time. A leader should help to push the employees to generate ideas that are more
creative and sharpen employees’ ability to innovate. Thinking differently or most commonly goes by ‘thinking
outside the box’ may help the business to attract more customers as it is different compared to other business
companies. For an example, when Apple first launched their product, it is a different gadget compared to other
smartphones back then. It is the one of the first smartphones to use fully touch screen phone and built in batteries.
The founder of Apple wants the product to be different than others and the company managed to do that. Until now,
it is one of the most successful companies in the world. An organization that solely depends on knowledge-based
work tend to have a very fragile social system. Therefore, communication and relationship between a leader and the
employees are very important in the workplace.

The essential relationship between a leader and a follower needs to come with a respect, trust and honesty
from each other. In the business world nowadays, to be successsful, employees need to enjoy working and
comfortable interact with the leaders to have good communication in order to have positive workplace environment.
Therefore, if an organization is seeking a leader that encourages passion and innovative behavior in an individual
and organization, transactional leadership style is the most effective leadership style compared to other leadership
styles. A great influential leader comes from various types of leadership styles which are from, transformational
leadership, transactional leadership, participative leadership, autocratic leadership as well as laissez-faire leadership.
However in this research paper, transactional leadership is focused in this study. In this research paper, transactional
leadership style and employees’ job satisfaction are then will be explain in detail in the following section.
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2. LEADERSHIP STYLE

The theory of leadership attracts the attention of many researchers for many years. Researchers studied
leadership from different kinds of angles, which different angles consists of different meanings. Due to its complex
nature, the term leadership is too wide to define (Antonakis, Cianciolo & Sternberg, 2004 as cited in Tan Ai Wah,
2010). Different people have different definition to describe leadership, some words like “group” or “influence” is
some major words that often use to describe leadership (Bryman, 1992 as cited in Jeroen P.J. de Jong, Deanne N.
Den Hartog, 2007). However, leadership can best be defined as the process of using strategic ways to encourage
their followers to achieve positive outcomes or goals as one organization.

According to Yukl, 1994 (as cited in Erkutlu, 2008), leadership involves in such behavior like, encouraging
individuals and groups to accomplish the organization’s objectives, which can be best describe as a social influential
process. Leadership skills are various in different degrees, some are good and some are not. According to Northouse,
2009 (as cited in Tan Ai Wah, 2010), good leaders usually are inborn talents but on the other hand, leadership can
also be learned by observing between a leader and the followers.

A great influential leader consists of five characteristics which are flexible, communication, patience and
courage, humble as well as responsible. In order for a leader to be an effective one, the leader needs to be able to
know how to adjust and adapt with different kinds of situations as well as environments. There are two kinds of
situations which are natural disasters as well as human activities. A leader needs to know how to overcome such
natural disasters like hurricane, earthquake, tsunami and much more. However for human activities, such actions
like, a force change in rules and regulations of the government on business or even sudden discontinuation of the
flow of the product are common to happen in the business industry. These are the problems that an organization may
encounter and a leader needs to know how to handle professionally to save the company from being effected.

The second characteristics of an effective leader is communication. As mentioned earlier, communication


between a leader and the employees are very important as it is the basic essence to have a positive environment in
the workplace. A great leader not only need to know how to be an excellent speaker but also a great listener. This
could bee done by sharing ideas, listening to current problems regarding work as well as share objectives and how to
achieve the goals. A great bonding with the employees can build trust and understanding between each other and
this could help the performance of the company. This shows that the strength and empowerment of a leader.

The third characteristic is for a leader to have some patience as well as courage. A leader needs to have
courage to be brave to overcome obstacles that could effect the business. Not only that, a leader also need to have
the courage to try venturing on new and different opportunities as well as not to be afraid on taking some risks. As
mentioned earlier, be different helps the company to grow. This shows that company has variety in different kinds of
environments and automatically will increase the image of an organization. Besides that, patience is also important
as a company does not grow overnight, it takes time to develop. Hence, a leader needs to have high in patience to
acheve the best outcome and goal of the business.

The following characteristics of a great leadership is the combination between presence and humble. As
mentioned earlier, apart from being a great speaker, a leader also have to be able to listen to the ideas that generates
from the employees. There is a saying, “no one is perfect”, therefore what a leader suggeest is not always the best
idea. Therefore, a leader needs to listen to other people’s point of view as well. Presence of a leader by the
employees are important because this shows that the leader cares about what is happening in the workplace.
Automatically, there will be strong relationship exist between the leader and the employees. A leader is respected by
being more open, fair, honest as well as humble. Communicate with the employees by being open and humble to
them could change the workplace environment to be more positive and lively.

Last but not least, the final characteristic of an effective leadership is to be responsible. Thus, no matter
how bad the situation is, a leader needs to take the responsibility of overcoming the problem that is occuring as well
as to take the blame of whatever is happening to the organization. For instance, if there is negative feedbacks from
other organization or customers, a leader needs to take in charge by accepting the consequences and adapting from
it. Not only that, a leader needs to take action to improve from the mistakes that the company has done. Likewise,
not only negative feedbacks that a leader needs to be responsible, but also positive feedbacks. When there is a
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compliment obtain, the leader should spread out among all of the followers. When this occur, a great leader is born.
These are the characteristics that something a leader need to develop to become a great and a successful leader.

Leader plays one of the most important roles in building the unity of an organization as the leaders holds
the key of trust that are obtained from the employees as well as the customers. As mentioned by Raelin (2011), what
leaders preach is interconnected with the performance of the employees. A great leader with positive influential
personality will give positive effect on the job satisfaction and the performances of the employees (Lian et al, 2011).
Hence, a positive environment will lead to a better performance made by each of the employees and this will
enhance the innovation and production rate of the business.

There are many types of leadership styles, the major types are including, transformational leadership,
transactional leadership, participative leadership, autocratic leadership as well as laissez-faire leadership. However,
transactional leadership style is focused in this study for further research. As shown in the following section,
transactional leadership style is described in detail. Transactional leaders are direct by specifically tells the
employees the tasks that are needed to be done and will receive a reward when the tasks are achieved and
punishments are given to bad performers. Compared to other leadership styles for instance like transformational
leadership, the leader will give a mission to the employees and will guide the workers each of the way to be better.
This kind of leadership requires good communication between the leader and the workers and gain respect as well as
trust to achieve the objective of the company.

According to Mintzberg, 2010 (as cited in Paracha, Qamar, Mirza, Inam-ul-Hassan, Waqas, 2012), the core
of leadership comes with respect and trust from others. In the business world today, leaders are expected to be more
attached and interactive with the followers in order to promote, improve and inspire them individually, in teams as
well as organizations (Avolio et al., 1991 as cited in Tan Ai Wah, 2010). Therefore, if an organization is seeking a
leader that encourages passion and innovative behavior in an individual and organization, transactional leadership
style is the most effective leadership style among others.

3. TRANSACTIONAL LEADERSHIP

As mentioned before, in order to have a successful organization, it is very important to have a suitable
leadership style to guide the company. Motivating, praising and examining the employees are not enough to
influence the workers to be better. Hence, in this case, transactional leadership is one of the most effective
leadership styles as it rewards the employees for the good performances and punish for bad performances. This
could encourage the workers to be better and to be more aware of their work. There are many advantages in having
transactional leadership style as a leader because with this healthy competition between coworkers brings out the
confidence of each employee to gain the reward. Not only that, employees also could sharpen their skills and
increase in knowledge as well as motivate themselves to perform better. Automatically, this could increase the
performance of the organization, hence, to achieve the objective of the company much faster.

The term transactional leadership is defined as exchange between the leader and the followers. Hence, a
transactional leadership style is one of the leadership styles that generates positive changes and builds valuable in
each of the followers. As mentioned in Kuhnert & Lewis 1987 (as cited in Paracha, Qamar, Mirza, Inam-ul-Hassan
& Waqas 2012), transactional leadership is defined as the exchange between the leaders preferred outcomes and the
employees by satisfying the interest of the leader as well as the expectations of the followers. This includes the
employees’ commitments and promises to the leaders by trust as well as respect. Such a great leader raises both
leader and followers to gain higher levels of motivation, morals, beliefs, perceptions and coalition in achieving the
goals of the organization. According to Jung (2010), transactional leadership is when the skills of the leader in
manipulating and encouraging the followers into fulfilling the needs and aspirations by exchanging for performance
of employees.
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As mentioned by few researchers, leaders with transactional leadership style guides the followers to attain
pre-determined objectives based on rewards methods, contingent reward and management. Likewise, as stated by
Burns, 1978 (as cited in Dai, Dai, Chen & Wu, 2013), managers who are practicing transactional leadership style
uses such rewards methods to increase the corporate performance, which are given to whom excel in their
performances and punishment to who does otherwise. There are many researchers agreed that transactional
leadership style has a positive impact on each of the followers to be better, however, there are some stated
otherwise.

According to Patiar and Mia, 2009 (as cited in Dai, Dai, Chen & Wu, 2013), there are a few disadvantages
of having transactional leadership as a leader because the leader only offers a limited or none involvement in any
decisions making in any tasks given. Therefore, there is not much exposure given to the followers in how to manage
and overcome such situations. However, the voluntary actions made by the employees are highly encouraged as the
actions may turn into rewards. Effective leaders built the interest of the employees by providing contingent
incentives, promises and trusts that had succeed in achieving the goals of the organization (Bass, 2000).

Many researchers have been studied the way of transactional leadership for many years and different ways
with different variable. However, there are none of the researchers knows exactly and how to define the term
transactional leadership style. There is a study made by Howell & Merenda (1999) stated that the researchers have
been studied the relationship of leader-member exchange between transformational and transactional leadership
style in workers’ performances and found that compared to transformational leadership, transactional leadership has
more influence on employees’ performance and job satisfaction.

4. JOB SATISFACTION

Job is defined as a paid position of an individual of consistent employment. Whereas satisfaction can be
describe as one’s needs are fulfilled. Hence, job satisfaction is best described as how an individual feel towards their
job. The happier the individual is, the more satisfied the individual feels towards their job. Attitude plays an
important role in determining the job satisfaction, for instance, a satisfied and happy follower will give positive
feedback and shows progressive in job performance to their leader, whereas an unsatisfied follower will do the
opposite work, which shows negative feedbacks and not willing to help the leader in achieving any of the objectives
of the organization.

As stated by Spector, 2003 (as cited in Bushra, Usman& Naveed, 2011), job satisfaction leads to
organizational success when the job satisfaction effects positively on the organizational commitment and job
performance. In addition to that, as mentioned by McNamara 1999 (as cited in Paracha, Qamar, Mirza, Inam-ul-
Hassan & Waqas 2012), job satisfaction is defined as what an individual feels emotionally and mentally towards
their work. There are some factors that may influence job satisfaction which are; the amount of satisfaction on their
job, the working environment as well as the quality of relationship between a follower and the leader. According to
some studies, a positive relationship between an employees with other co-workers will leads to an increase level of
job satisfaction. Especially in the competitive business world today, it is impossible for the organization to be
successful without a strong relationship between the leader and the followers as well as the followers’ satisfaction of
working. With these factors in place, the followers are inspired to be more innovative and hardworking in helping to
develop the business of the organization.

Job satisfaction includes few components which are pay, promotion, nature of work, fringe benefits,
contingent rewards, communication, coworkers, supervision as well as operating conditions. Pay is when the amount
of payment depends on fairness and equity of the workload that they have done, whereas promotion is based on the
opportunities that the followers gain after their hard work. Nature of work is included as a basic interest of the
follower and the opportunity of learning the chances to be successful. More than that, there is the contingent rewards
which can be best described as recognition. Recognition is also important due to hard work, credits for work done
needed to be raise as a sign of achievement. In addition to that, fringe benefits also play an important role in job
satisfaction.
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Examples of benefits are pension, vacation and annual leave as well as medical. Furthermore, a good
relationship between an employee with the coworkers and the supervisor impacts the most in a workplace. Bad
relationship may cause depression due to lack of communication and confidence. Not only that, good relationship
may prevent any communication barrier between the employee and other coworkers. Therefore, this could affect the
job performance as well. The stronger the relationship, the stronger the team performance gets. Moreover,
helpfulness and competence can help each other to improve on job performance. Operating conditions can be
described as the rules and procedures of the workplace. Rules that are too strict or too loose may effect environment
of the workplace. Positive energy may bring positive attitudes to individuals.

5. THE IMPACT OF TRANSACTIONAL LEADERSHIP ON EMPLOYEES’ JOB SATISFACTION

In the business world today, job satisfaction of an employee is one of the most important key in successful
of every organization (Cook et al., 1989; Bass, 1990, as cited in Desa, 2010). For many years, numerous researches
are attracted by the development of transactional leadership and the influence towards job satisfaction. Even though
there are several leadership styles that could give an influence on job satisfaction, transactional leadership seems to
attract more attention compared to other leadership styles. According some studies, leadership plays a vital role in
job satisfaction as transactional leadership style effects job satisfaction the most.

A transactional leadership style not only give rewards and benefits to the employees, but also can reduce
the work pressure and increases the morale ethical behavior. By so, employees are more satisfied with their job and
this could also improve the productivity. When the employees are more productive, this would benefit the
organization as it contributes to internal business advantages. As stated by Cumming et. al (2010), when the leader
are more focus on the outcomes of the workers, rather than their emotions, the leader tend to failed to achieve the
best efforts of the workers. In addition to that, a transactional leader moves the followers to be the best and achieve
more than expected, hence, this could boost their spirit to go beyond with their own self-interest for the sake of the
organization. The study proclaimed that transactional leadership style should be practice in order to improve the job
satisfaction, work environment, selection as well as to avoid from employees turnover.

The influence of the employees’ job satisfaction is highly dependable on the leadership style of the
organization. Some leadership styles give different kinds of influence on the employees. Higher performance is
achieved by the focus of the organization on the comfortable and supportive working environment. Nevertheless,
transactional leadership style influenced on job satisfaction by a range of few factors which can boost the positive
vibe of an employee instantly. Besides that, the ability of the leader to demonstrate the trust and confidence towards
the followers may also influence higher job satisfaction. This is because; private one-to-one talk could help in
generating personal interest in others and their job performance. Higher level of supportive and consideration
behavior will give an influence of higher level of job satisfaction with their leader. The research had been proven
that the importance of interaction between the leader and the employees will give powerful effect on the job
satisfaction. The leader’s abilities as stated above, clearly shown that a transactional leadership style may easily
encourage the followers to improve. Some studies stated that, compared to other leadership styles, transactional
leadership style has been proven to be positively related to job satisfaction in various ways.

6. HOW TO SUSTAIN THE EMPLOYEES’ MOTIVATION

There are many ways of describing the term sustainability, however, the simplest term to define is, capacity or
ability to maintain itself. According to DETR, 1999 (as cited in White, 2009), sustainability is defined as to
guarantee a good quality of life, not only now but also in the future ahead. The idea of sustainability is to take as
much to survive now without affecting the potential benefits in the future. However, in an organization, most of the
companies in the world are practicing this method to compete by trying to maximize the business profit with a
minimum negative impact on the company. As mentioned by Garrido (2009), sustainability means that to
perseverance in time of that specific thing. Take for an example, if there is a building abandoned without any
maintenance done, the materials will age by it. Not only that, with the environment weather takes place, this will
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cause the building to aged where it cannot be sustain and soon it will collapse. Same goes to an organization,
sustainability of a company defines that the company needs to be re-producing at a specific period of time. It is
important for the company to keep changing and developing to keep up with the industry. In order to achieve both
gains, employees’ motivations are the key to the problem.

The term motivation comes from the word move in Latin word which is “movere”. This may be because that
from motivation, it helps an individual to take action to be more interested. Motivation helps to drives an individual
to thrive to achieve something. According to Bartol and Martin, 1998 (as cited in Islam and Ismail, 2008),
motivation is when there is a force that stimulates to perform a behavior and inspire to keep continue. Before
achieving the objectives, an individual firstly needs to have a clear focus on what the target is, then the individual
needs to willingly give full focus and commitment to the aim for long period of time. Motivation in each of an
employee is important as it is the tool to driven the work spirit in employees to perform better. Therefore, if a leader
wants to work in the direction of achieving company objectives, a leader needs to understand and know how to
motivate the followers. For instance, transactional leadership style practices on giving rewards for motivation as
well punishment for bad performances. Therefore, this would be the most suitable leadership style to motivate an
employee to perform better in the workplace.

As mentioned earlier, transactional leadership is a leadership style that emphasis on giving rewards and benefits
to the employees. Hence, it is easier for transactional leadership style in sustaining the employees’ job satisfaction
that could boost the motivation. Rewarding an employee could encourage the workers to perform better in the tasks
given. This not only could have a healthy competition between the co-workers but also could increase the
organizational performance in the future. Rewards and benefits are one of the most common motivational tools used
by every leader and studies shows that by using this method, it shows positive impact to the employees. Such
common rewards are like, promoted, increase wages, personal or company loyalties and many more. Therefore,
above all, for a company to make profit, it should firstly prioritize the employees by giving the fundamental human
needs. This could help to sustain the employees’ motivation in the future.

7. DISCUSSION

An effective leadership is born to encourage and guide the employees to perform better in the work to achieve
the objective of an individual as well as the company. Leader helps the followers to sharpen their minds and skills to
think differently by thinking outside the box. Not only that, a leader also needs to create a positive and enjoyable
working environment as this creates positive vibes in the workplace. There is a saying; a happy workplace runs like
a happy family. Hence, communication between the leader and the followers are very important in this matter. Not
only that, a great influential leader consists of five characteristics which are flexible, communication, patience and
courage, humble as well as responsible. These are the essentials that play an effective leader. Therefore, if an
organization is seeking an effective leadership that motivates and creates innovative behavior, transactional
leadership style is the most effective leadership style compared to other leadership styles.

There are a few types of leadership styles which are transformational leadership, transactional leadership,
participative leadership, autocratic leadership as well as laissez-faire leadership. However in this research paper,
transactional leadership is focused in detail. Transactional leaders are leaders that emphasizes on completing a task.
In order for the leader to motivate the followers, the followers are then been awarded with rewards and benefits if
there is good performance, but punishment if there is bad performances. For that reason, a leader needs to focus
more on employee’s job satisfaction of the company. Job satisfaction is described on how an individual feels
towards their job. The happier the employee is, the more satisfied the individual feel towards their job. Job
satisfaction includes few components which are pay, promotion, nature of work, fringe benefits, contingent rewards,
communication, coworkers, supervision as well as operating conditions. Based on some studies, leadership plays an
important role in employees’ job satisfaction as for that; transactional leadership style effects job satisfaction the
most.
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By having a leader that practices transactional leadership style, this could increase the job satisfaction of an
employee as the leadership style provides rewards and benefits to the followers as a prize. Hence, this could also
improve the productivity of an employee to be a better worker. Apart from that, a leader also can sustain the
motivation of the employees by giving the benefits. It is a motivational tool to encourage the employees to have
extra income or benefits, which in return, a good performance that could boost the company.

8. CONCLUSION

This purpose of this study is to determine to what extent that the transactional leadership style impacts on
the employees’ job satisfaction. This paper has gathered few studies regarding the transactional leadership style as
well as job satisfaction. After analyzing the data, I could say that the transactional leadership style have positive
relationship on the employees’ job satisfaction. Rewards and benefits have big impact on the employees’
performances and job satisfaction because these factors influenced the workers to work hard and be positive at the
end of the day. More than that, transactional leadership style also helps to sustain the employees’ motivation as
benefits obtain, this could help the employees to be more focus in the future. Apart from that, every country
practices different leadership style, however, every employee in this world is tempting to work harder for such
rewards and benefits. Automatically, this could increase the performance of the objective easily and within a fast
pace. Hence, I could say that practicing transactional leadership style is the safest leadership style compared to other
styles.
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