Discuss and critically evaluate the role of leadership in organizational culture.

Consider in
your answer at least two different types of leadership and their impact on managing
diversity in organizations. Critically discuss aspects of the ongoing debate over the value of
authentic and ethical leadership to performance outcomes and well-being at work
 Introduction

Leadership styles play a critical role in the ability of managers to deal with diversified
individuals and different knowledge throughout the organizations. Leadership is accepted as
the most powerful facilitator of competitive advantage and successful business
performance as well as long run sustainability. Globalized world expose leaders to
new challenges in terms of not only leading in a multicultural environment but also
with a more heterogeneous workforce. It is argued that a ‘tsunami of cultures’ requires
cross-cultural competencies and thus capable leaders having a multifaceted skills repertoire
that allows them to lead global (Solomon and Steyn, 2017). Since diverse cultural
backgrounds may make sense of and reason the organizational experiences differently,
leaders face with diverse behavioural patterns.

Organizational culture is a set of rules and standards which lead to the behavior of its member
through words, interpersonal relationships and gestures also the leadership is about predicting
the future and fostering follower to change. The relation between both concepts contributes to
either raising or minimizing the productivity of any company. Every employee impacts an
organization's direction, but leadership has by far the largest and most direct effect on
company culture, which revolves around employee engagement, environment, atmosphere
and the success of the company and its clients(Nangolo, 2016).

transformational leadership as a ‘process in which followers and leaders help each other to
get advanced to a higher level of achievement, motivation and moral’(Burns, 1978).
Transformational leadership is based on motivating and inspiring the individuals by
enabling them to put extra effort in order to achieve group mission. Transformational
leaders are passionate about change. They not only create change but also effectively
manage it. This type of leadership focuses not on the tasks like basic management
“transactions” – assigning work, making decisions, evaluating performance, but on the
improvement of those transactions by managing and leading a major change, such as
managing a merger, defining or redefining the organization culture or creating a new work
team (Attar et al., 2019)

Transactional leadership has formal authority, and positions of responsibility in an

organization and by then focuses on results, and measures success on rewards system of
organization and responsible for managing individual performance and facilitating group
performance in organization. The leader believes in motivating through a system of rewards
and punishment. If a subordinate does what is desired, a reward will follow, and if he does
not go as per the wishes of the leader, a punishment will follow. Here, the exchange between
leader and follower takes place to achieve routine performance goals. These exchanges
involve four dimensions: contingent reward, management by exception – active and
management by exception – passive (Brown, 1990)

Given that ethical scandals can occur in every organization, along with their destructive
consequences, it is obvious that the ethical dimension of leadership is very important. In
recent years, the topic of ethical leadership has become a hot topic to research due to
various reasons. First, there are so many corporate leaders who failed at implementing
ethical leadership in their workplaces, thus, ethical leadership issues are receiving a
considerable amount of interest (Brown and Trevino, 2006). while the authentic leaders are
those who strive to make a positive organization by being honest to colleagues, team
members, and the organization through self-awareness and self-regulation (Gardner et al.,
2005) According to the self-determination theory, authentic integration may have positive
effects on well-being (Yammarino et al., 2008).

 Presentation of views

An essential aspect of leadership is to influence the shared cognitions and behavioral norms
that organizational members hold, and therefore, effective leaders put a lot of effort into
culture formation, maintenance, and change. There are two different schools of thought with
regard to the connection between leadership and organizational culture. The functionalist
approach puts forward the proposition that leaders are key agents in the process of culture
management (Schein, 2010). There are various mechanisms that leaders can utilize in order to
manage organizational culture, such as communicating a clear and powerful vision, the
allocation of resources and rewards, organizational design and systems, and formal
statements of an organization’s philosophy (Schneider et al., 2013).

Several styles of and roles in leadership have been reviewed in the literature (Northouse,
2018) this study focuses on transformational leadership. A transformational leader is
charismatic, recognizes differences, puts the individual at the center, and increases employee
motivation, trust, and satisfaction by bringing people together and changing their thinking
(Burke et al., 2006). Transformational leadership fits in well with managing diverse groups
(Kim, 2017). Managers who practice this style of leadership are more willing to take risks to
solve problems and exploit opportunities proactively. As a result, they have a more forward-
looking vision. Due to the focus that a transformational manager places on motivating,
inspiring, and developing employees, this leadership style has been characterized as people-
oriented. Leadership style can also have a direct influence on the binding of employees.
Managers with a transformational leadership style have a sharper eye for individual
characteristics and will use those traits to encourage and motivate employees (Kim, 2017).
Moreover, the emphasis is on finding new ways of working and using different perspectives
to find solutions to problems (Bass et al., 2003). Because managers implement the day-to-
day practice of diversity policy and share the vision behind it, it is reasonable to expect that
the relationship between policy choices and outcomes is stronger in the context of a
transformational leadership style. The expectation is that the presence of a transformational
leadership style will lead to more employee engagement with the organization. It is also
supposed that a transformational leadership style will strengthen the relationship between
diversity interventions and employee engagement with the organization. Empirical research
on transformational/charismatic leadership and organizational culture has provided evidence
for the associations between specific cultural dimensions and transformational/charismatic
leadership (Box 2). Specifically, Block (2003) in examining the leadership-culture connection
found that employees who rated their immediate supervisor high intransformational
leadership were more likely to perceive the culture of their organization as involving,
integrating, adaptive, and mission-oriented.

Transactional leadership is an exchange process based on the fulfillment of

contractual obligations and it is typically applied by setting objectives, mentoring, and
controlling outcomes (Avolio & Bass, 2004). The key aspects of that include:

1. Contingent reward, which is the leadership behavior focused on clarifying role and
task requirements and providing followers with material or psychological
rewards contingent on fulfillment of contractual obligations.
2. Management by exception (active), which refers to the active vigilance of a
leader whose goal, is to ensure that standards are met.
3. Management by exception (passive), which refers to leaders that only intervene after
non-compliance, has occurred or when mistakes have already happened
(Gholamzadeh, 2012; Avolio & Bass, 2004; Antonakis et al., 2003).

Furthermore, Transactional leadership in the current study demonstrated a positive

effect on Organizational Culture. When managers over reliance on rewards and punishment
to exert influence and mainly focus on economic and instrumental transactions in treating
employees, as well as when they exert more control, actually they work within the culture
as it exists (Bass, 1985). They accept and use the rituals, stories, and role models
belonging to the organizational culture to communicate their values (Bass, 1985). This
concurs with the findings from previous studies that, although Transactional leadership
can be effective or even necessary but is less likely to generate and change the
organizational culture compared to Transformational leadership (Bass, 1985; Avolio &
Bass, 2004).

Value of authentic and ethical leadership to performance outcomes and well-being at

work

Since a leader is someone in a position who can affect the mental state of organizational
members [21], he or she may affect employees’ well-being. In the sense that authentic
leaders are those who strive to make a positive organization by being honest to colleagues,
team members, and the organization through self-awareness and self-regulation (Peterson et
al., 2012), authentic leadership will have positive effects on employees’ well-being and
health [23, 24]. Well-being is a cognitive representation, optimal function, and experience of
individuals regarding the nature and experience of well-being [13]. In particular, many
researchers thus far have conducted studies on well-being by classifying it into hedonic well-
being and eudaimonic well-being, referring to the former as subjective well-being and the
latter as psychological well-being [25]. According to the self-determination theory, authentic
integration may have positive effects on well-being. A leader’s authenticity decreases
employees’ worries and concerns, relieves depressive symptoms, and lowers excessive stress.
Moreover, authentic leaders form supportive relationships that increase employees’ life
satisfaction and lower negative effects [26]. These effects in turn positively influence hedonic
well-being, which enables team members to experience pleasure and avoid negative
experiences. The psychological support and empowerment provided by authentic leaders
make team members satisfied with present conditions. Ultimately, a team leader’s authentic
leadership has positive effects on well-being by developing the self-determination of
employees based on their absolute trust and positive emotions [22]

Trevino et al., (2000) state that ethical leadership has two pillars, which are the moral
person and moral manager. An ethical leader, as a moral person, shows concern for people
and treats them with respect and dignity. By providing developmental activities for
their employees, they will increase their skills and competency at doing their jobs. Given
that ethical scandals can occur in every organization, along with their destructive
consequences, it is obvious that the ethical dimension of leadership is very important
(Brown & Treviño, 2006). In recent years, the topic of ethical leadership has become a hot
topic to research due to various reasons. First, there are so many corporate leaders who
failed at implementing ethical leadership in their workplaces, thus, ethical leadership issues
are receiving a considerable amount of interest (Brown & Treviño, 2006). They explain
that ethical scandals have led us to pay greater attention to ethical leadership and to
conduct research that examines the antecedents of ethical leadership and its outcomes.
Second, ethical leadership is crucial in providing direction to an organization for achieving
its organizational goals. Every organization certainly wants to have, as well as retain,
ethical leaders who can improve the job performance of the employees and enhance the
job outcomes. Research into ethical leadership is expected to give more information to
organizations regarding ethical leadership, to help them to meet their goals and objectives.

Ethical leadership is expected to have positive impacts on an organization. The

perceptions of followers regarding ethical leadership results in various outcomes, such as
the followers' ethical behavior, psychological well-being, work-related outcomes (job
satis-faction, job engagement, organizational commit-ment, etc), their perceptions of self-
efficacy, Previous research from Chughtai et al., (2015) specifically examined the link
between ethical leadership and two kinds of employee well-being, which are their
work engagement and emotional exhaustion. Their research provides evidence that the
existence of ethical leadership can give positive effects to employees’ well-being.
Although previous research has examined the link between ethical leadership and
employees’ well-being, the processes through which a leader can foster employee well-
being are still not very well known (Tuckey et al., 2012; Chughtai et al., 2015).

 Critical analysis

The culture of an organization consists of a set of assumptions, beliefs, and values that the
organization shares (Northouse, 2016). The business environment continues to emphasize
the need for agencies to conduct their affairs with the right leadership in place so as to attract
the loyalty and confidence of the environment and their followers. The type of leadership in
place will determine how far the organization can go. The leadership has a critical role
to play in shaping the culture of an organization. Diversity can bring a variety of new
perspectives and experiences to the leadership team. That fresh input can help companies
thrive by boosting innovation and revenue, attracting and retaining talent and appealing to
inclusion-focused customers. Diversity in leadership can deliver real benefits.

Transformational leadership theory

Organizational founders and their teams often exhibit transformational/charismatic

leadership qualities in their efforts to shape their organization’s policies, behavioral norms,
and values that dominate its culture. The personality and the core values of the founders are
reflected in the organization as it develops. The set of values the founders articulate and
reinforce, their personal assumptions and vision of the future, become embedded in the
emerging organizational culture. But it is also quite common that the transformational leader
who firmly establishes and improves the organization’s culture is far removed in time from
the founding team.

This form of leadership creates a vision for change that can turn a company around. It is
high in relationship and influence. It inspires others to follow and achieve great things. The
thought was first put together by Downton (1973) and later Burns (1978). Leaders that utilize
a transformational approach may see increased success in promoting diversity and shifting
the culture of their organization. With this leadership approach, leaders are working toward
increasing the ethics and standards within themselves and their followers (Northouse, 2016).
Goals are clearly outlined and leaders demonstrate the morals/values that they want to see
promoted within the company. These leaders are often charismatic and able to inspire their
followers to change and find their place within the new culture (Northouse, 2016).
Transformational leaders not only inspire their followers, they provide support and guidance,
which is important during culture shifts.

Transformational leadership lends itself to increasing diversity and inclusion within an

organization as this often requires individuals to re-evaluate how they view people who are
different, which often means identifying their own prejudices and faults. Having a leader who
embodies the change and values while also providing a supportive, judgement-free
environment to change and grow allows followers to emulate someone they respect and make
mistakes along the path to change. Transformational leaders recognize the need to be lifelong
learners which is necessary when dealing with diversity and cultural competency as these
concepts are dynamic and not a set of skills that can be singularly mastered.
The results revealed that Transformational leadership positively influences
Organizational Culture. Leaders shape culture by sharing corporate vision, policy
deployment, influencing information flow, and stimulating involvement and teamwork
(Peters & Waterman, 1982). The findings are in line with previous literature on the positive
relationship between Transformational leadership and Organizational Culture (Bass &
Avolio, 1994; Bennis & Nanus, 1985; Kramer, 1990; McClure et al., 1983; Bass, 1985;
Coeling & Wilcox, 1988; Dunham, 2000).

Transactional leadership constantly focused on their relationship with their employees on

transactions (Bass & Avolio, 1993). Then the transactional leadership is essentially
comforting both organizations’ and employees’ satisfaction for short-term. Transactional
Leaders influence the level of commitment for the organizational cultures based on the
contingent reward that is expected by followers, transactional leaders always clarify the roles
and the tasks of their followers that also lead to higher productivity. Transactional leadership
style accepts the order and routine that is agreed upon by the leaders and followers by
giving highest priority to the norms and rules that are found to be efficient in the past
(Schermerhorn, et al, 2011: 324). This type of leadership is also called managerial leadership
and the leader takes it authority from the hierarchical level. The focus of this leadership
process is on the organization, supervision and group performance. The followers are given
rewards or punishments based on the extent of achieving organizational goals (Bass and
Steidlmeier, 1999: 183). Transactional leaders tend to keep things the same as is in the past
and not in the favour of changing them. They usually let things continue as usual and
ordinary. They only act when there are mistakes or irregularities (Herminingsih and Supardi,
2017: 252). Furthermore, transactional leaders handle the relationship with followers as a
nonreactive and passive process by minimizing their interactions with them. They mostly pay
attention to the performance of the followers to detect the deviations and faults. This
leadership style focuses on transactions and the traditional way of doing things (Bach and
Ellis 2011).

Transactional includes leaders defining objectives and goals, communicating to organize

activities and tasks with the co-operation of the employees to ensure that wider goals of
organizations are met (Tavanti, 2008: 1). Transactional leadership also involves leader-
follower that exchanges necessary for achieving the routine performance that leaders and
followers agree upon. Transactional is like the other leadership approaches as
mentioned earlier (Schermerhorn, et al, 2011: 324). Transactional leadership may work
efficiently in emergency and crisis situations when projects must be carried out in a specified
fashion (James and Ogbonna, 2013: 358). The three dimensions of transactional leadership
are contingent reward, management by exception – active and management by exception –
passive (Bass, 1990: 22; Robbins, 2001):

4. Contingent reward: Leaders emphasize the exchange of rewards for effort and
promise rewards for good performance by realizing accomplishment. Everything is
settled and organized so that followers know what they will encounter with in case of
a success or failure.
5. Management by exception (active): Leader watches and searches for deviations from
standards and rules. S/he takes precautions to prevent or fix problems.
6. Management by exception (passive): Leader intervenes only if standards are not met.
Only after the goals are not reached, leaders give negative feedback to followers
(Attar, 2015).

Value of authentic and ethical leadership to performance outcomes and well-being at

work

Authentic leaders do not pretend to like something when they do not. Rather, they clearly
understand their motives and desires in life. They are positive role models who can overcome
stress in an organization where anxiety and mistrust are rampant because they do not feel
uncomfortable about objectively examining their flaws and limitations. Accordingly,
employees experience hedonic well-being, whereby they consider their stress-free conditions
satisfactory and think that they have achieved the things that they wanted. Further, employees
feel satisfied with their present lives because they see socialized authentic leaders who
sacrifice themselves to achieve the goals of employees and the organization. Discovering the
meaning of work and helping team members find their callings are important roles of a leader
[30]. In this sense, authentic leadership may bring psychological well-being through the
positive process of making team members’ lives more meaningful [31]. Authentic leadership
focuses on self-development for employees in order to display their true potential beyond
hedonic well-being, which makes them satisfied with their present lives, and enjoy a pleasant
experience without stress. It may also have positive effects on eudaimonic well-being,
through which employees intend to live a life that helps others. These positive effects occur
because meaning is what builds a crucial dimension of eudaimonic well-being. Authentic
leaders make efforts to reduce the gap between realistic egos and ideal egos through self-
regulation of behaviors based on self-awareness. Thus, their efforts to overcome limitations
and become closer to ideal egos promote eudaimonic well-being, which represents
employees’ search for true self. This situation arises because a leader’s authenticity
stimulates team members’ individual growth and helps them set self-consistent goals [19].

People have typically associated ethical leadership with personal characteristics such as
honesty, trustworthiness, fairness, principledness, and altruistic motivation (Trevino et al.,
2003), and regard it as a leadership style closely related to employees’ positive organizational
behaviors and attitudes (Brown and Trevino, 2006). Brown and Trevino (2006) believe that
social learning theory (Bandura, 1977) and social exchange theory (Homans, 1958) can
explain the personal characteristics of ethical leadership and its positive impact on employees
in an organizational context. They found that ethical leadership has managerial authority, can
motivate employees to pay attention, can provide a trusted and pertinent role model
associated with the traits of caring and treating others fairly, and finally, provide values,
attitudes, and behaviors that employees can learn and imitate. The meta-analysis conducted
by Bedi et al. (2016) showed that employees working under ethical leadership demonstrate
positive behaviors, willingness toward organizational citizenship, and achieving higher work
satisfaction.

Researchers have also found that employees who work under ethical leadership tend to
perceive the importance of their work tasks in achieving organizational goals and their own
value, and they also have greater autonomy (Piccolo et al., 2010). Therefore, most studies
have focused on the positive effects of ethical leadership on employees’ performance
(Walumbwa et al., 2011; Zhu et al., 2015; Byun et al., 2018), with findings supporting the
conclusion that ethical leadership will result only in positive effects. Thus, ethical leadership
is generally believed to always bring positive effects to the organization and employees, and
not have any negative impacts.

 Conclusion

 Reflection
Transformational leaders need
to develop the skills that enable
them to alter aspects of their
Organizational Culture (Brown,
1992). For changing and
improving the Agreement and
Coordination
and Integration indexes of the
Consistency trait they can:
 Share goals and objectives
throughout the organization so
that employees at every level
understand the key areas,
 Conduct a decision-making
workshop to explore the types
of decisions made and how
they
will be addressed,
 Identify the behaviors and
practices that will guide team
interactions,
 Select employees who fit in
with the cultural ideals and
assumptions,
 Use a variety of
interpersonal communication
and personality assessment
tools to highlight
differences among individual
styles and how to leverage those
differences in the workplace,
 Conduct a fast feedback
workshop to assess how well
they are meeting their needs
and how
well they are meeting other’s
needs,
 Identify the behaviors and
practices that will guide
organizational cross-functional
team
interactions,
 Create an interactive forum
for employees to share ideas
and discuss how their work
impacts
the organizational processes,
 Conduct annual 360
assessments that provide
feedback to leaders and
managers from their
direct reports, peers and boss
Transformational leaders need to develop the skills that enable them to alter aspects of their

Organizational Culture (Brown, 1992).

 Share goals and objectives throughout the organization so that employees at every level

understand the key areas,

 Conduct a decision-making workshop to explore the types of decisions made and how they

will be addressed,

 Identify the behaviors and practices that will guide team interactions,

 Select employees who fit in with the cultural ideals and assumptions,

 Use a variety of interpersonal communication and personality assessment tools to highlight

differences among individual styles and how to leverage those differences in the workplace,

 Conduct a fast feedback workshop to assess how well they are meeting their needs and how

well they are meeting other’s needs,

 Identify the behaviors and practices that will guide organizational cross-functional team

interactions,

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