Habtegebreal P.

‘
The Effect of Leadership style Practiced on Employees’ Turnover

Intention (The Case of Commercial Bank of Ethiopia)
_______________________________________________________________________
By: By: -HABTEGEBREAL DEMMSIE

Advisor: Dr.Asefa
MBA PROGRAM
April/2022
ADDIS ABABA, ETHIOPIA
HATEGEREAL DEMMSIA Page 1

Contents
1. INTRODUCTION...................................................................................................................................4
1.1 Background of the study..............................................................................................................4
1.2 Statement of the problem.............................................................................................................5
1.3 Research Question.......................................................................................................................7
1.4 Objectives of the study................................................................................................................7
1.4.1General Objective............................................................................................................................7
1.4.2Specific objectives...........................................................................................................................8
1.5 Significance of the Study.............................................................................................................8
1.6 Scope of the study........................................................................................................................8
1.7 Limitations of the study...............................................................................................................8
1.8 Operational definition of key terms..............................................................................................9
1.9 Organization of Study..................................................................................................................9
2. REVIEW OF LITERATURE................................................................................................................10
2.1 Theoretical Related Literature Review......................................................................................10
2.1.1The Concept of Leadership...........................................................................................................10
2.1.2Dimensions of Leadership.............................................................................................................11
2.1.3Effects of employee turnover........................................................................................................11
2.1.4MEANS AND METHODS...........................................................................................................12
2.1.5Transformational leadership Dimensions......................................................................................15
2.1.6Different Types of Leadership Styles............................................................................................16
2.1.7Determinants of Turnover Intention..............................................................................................19
2.1.8Theoretical Framework.................................................................................................................20

2.2 Empirical related literature review.............................................................................................20
2.2.1The effect of transformational Leadership and Turnover Intention...............................................21
2.2.2The Effect of Transactional Leadership Style and Employees’ Turnover Intention......................22
2.2.3The effect of laissez-faire leadership style and employees’ turnover intention..............................22
2.2.4Transformational and Transactional Theory..................................................................................23
2.2.5Conceptual frame work.................................................................................................................24
3. METHODOLOGY OF STUDY............................................................................................................24
3.1 The Study Setting......................................................................................................................24
3.2 Study Design.............................................................................................................................24
3.3 Population and Sampling Design...............................................................................................25
3.3.1Population of the Study.................................................................................................................25
3.3.2Sample selection Technique..........................................................................................................25
3.3.3Sample size...................................................................................................................................25
3.4 Source and methods of Data collections....................................................................................26
3.5 Methods of Data Collection.......................................................................................................27
3.6 Data Collection Tools................................................................................................................27
3.7 Data Analysis Techniques..........................................................................................................27
3.8 Ethical Considerations...............................................................................................................27
References.....................................................................................................................................................28

1. INTRODUCTION
1.1 Background of the study
The banking sector plays an important role in the economy of a country. Banks play key roles in
the savings and capital accumulation processes, which are the basis for achieving a sustained high
economic growth of nations. It is established that well developed banking system with
diversified products and services and accessible to the population of a country is key to the
achievements of high economic growth and reducing poverty (Koivu, 2002). Of course, the
relationship is not one way. High economic growth in turn is also necessary for a sustained
development of the banking system itself (Koivu, 2002).
The history of the Commercial Bank of Ethiopia (CBE) dates back to the founding of the State
Bank of Ethiopia in 1942 1 million mariatreza capital. CBE was legally established as a share
company in 1963. In 1974, CBE merged with the privately owned Addis Ababa Bank. Since then,
it has been playing signiﬁcant roles in the development of the country. Pioneer to introduce modern
banking to the country. It has more than 1800 branches stretched across the country. The leading
Ethiopian bank with excess assets of 1.1trillion Birr as on December 31th 2021 quarter report. CBE
has strong correspondent relationship with more than 50 renowned foreign banks like Royal Bank
of Canada, City Bank, HSBC Bank; CBE has a SWIFT bilateral arrangement with more than 700
others banks across the world. CBE combines a wide capital base with more than 60,000 talented
and committed employees. Pioneer to introduce Western Union Money Transfer Services in
Ethiopia early 1990s and currently working with other 20 money transfer agents like Money Gram,
Atlantic International (Bole), Xpress Money... CBE has opened four branches in South Sudan and
has been in the business since June 2009. CBE has reliable and long-standing dealings with many
worldwide banks throughout the world an organization is focused and run by the people working
there. Today people engaged and working in a firm are no longer considered as just the staff. They
are the most dynamic, potent and significant funds possessed by the company. They are the
resources that step out of the company every day and hence organizations have been putting the
maximum effort to retain the human resources. Since every operation, function or task to be
executed depends upon the potential of human intellect, HR directly influence the growth and
development of a company .Human resources can be referred to the staff, workers and managers
operating an organization. It can also be defined as the total knowledge, talents, creative abilities,
skills and aptitude of an organizations workforce. The beliefs, attitude, values and approach of the
people are some other important aspects of it. Human resource management is the function, which
deals in the affairs, issues, and planning related to the people employed in a firm. It is concerned
with the maintenance of interpersonal relationships within the organization to optimize the
efficiency and effectiveness of workforce in favors of the realization of organizational goals.
The current Competition forces highly labor market environment, staff turnover cost sent is
certainly and expected to reduce and weaken the competitiveness of CBE. Therefore, the objective
of this study is look at the effect of leadership styles on employee turnover intention. study I will be
focus on tried to focus on two basic issues effect of leadership style and employees‘ intention to
turnover. To examine the existing status of employees regarding their turnover intention, examine
effect of leadership style and investigate the relationship between turnover intention and effect of
leadership style and try to determine if any specific leadership style is to be emphasized so that the
organization can attempt for excellence in future.
1.2 Statement of the problem
Many studies authorized that employees need an atmosphere which is encouraging to work. However,
providing this kind of work environment is not an easy task from the management side as
organizational resources are so limited. Hence, it calls for commitment and loyalty along with the
deployment of available resource in the premises of the organization. If the personal and impersonal
factors that could easily disrupt the normal working procedures and employees’ morale are in order, the
organization could earn the dedication and loyalty of its employees. Besides, there will be no way to
look other organizations in search of better opportunities (Bayissa, 2012). The same is true of CBE.
However, CBE has several difficulties in such area as compensation, learning and development,
communication, turnover intention evaluation and rewards, career opportunities, participation and job
design.
Consequently, according to some empirical studies, employees of CBE are de-motivated with the jobs
they undertake and continuously leaving their jobs (Bayissa, 2012). When valuable employees

voluntarily leave organizations, it is generally considered detrimental in terms of replacement costs and
work disruption (Addae, 2006). With the current moderately competitive banking services environment
in Ethiopia, voluntary turnover negatively affects the turnover intention of the bank as experienced and
highly valued employees are leaving the institution. This has resulted in deteriorated quality of banking
service and dissatisfied customers.
To alleviate the voluntary turnover which is dysfunctional to the bank, identifying the factors that can
be attributed to their intention to leave (a strong precursor of turnover) such as transformational
leadership is vitally important. But what does turnover intention mean?
According to Tett and Meyer (1993), turnover intention is defined as “the conscious and deliberate
willingness to leave the organization.”
Strong pressure from emerging new competitors and other private bank, new markets and more
demanding Employee were additional elements attract talented employee. Furthermore, the leadership
style recognition the quality talented Employee is sustainable competitive advantage.
The recent five years statistical data trend reflects that the number of employee turnover of CBE has
been in continuous increase and CBE is facing frequent employees turnover problem. As indicated in
the Table 1, below from the total employees’ 6,986 employee were terminated from the bank due to
different reasons. Besides, human resources management of the bank is not able to retain its
experienced and skilled employee.
Table 1: Employee Turnover in CBE (2016/20)
Year (G.C) Total No. of Employees Total No. Turnover Turnover in percentage
(%)
2016 28,467 1,106 3.89
2017 33,706 1,097 3.25
2018 32,739 1,218 3.72
2019 37,000 1,386 3.75
2020 63,000 2,179 3.45
Average Total 194,912 6,986 3.58
Source: CBE's Annual Progress Report
Recently it is observed that senior and professional employees of CBE have been leaving the bank in an
increasing number. This problem looks significant and worth studying so as to assess employee

turnover practice in CBE.
In view of this, study I will be focus on especially the Commercial Bank of Ethiopia, to examine the
existing status of employees regarding their turnover intention, examine effect of leadership style and
investigate the relationship between turnover intention and effect of leadership style. As there is
previous study in this area undertaken in CBE in Ethiopia, the only transformation leader ship style.
This study will make important contribution to this field of research.
1.3 Research Question
Based on the problems discussed above, the central issue for this study would be what factors are
considered critical in influencing individual’s turnover intention. Specifically, the study answered
the following questions:-
 What is the effect of transformational leadership style on employee turnover intention in
commercial bank of Ethiopia?
 What is the effect of Autocratic leadership style on employee turnover in CBE?
 What is the effect of laissez-faire leadership style on employee turnover in CBE?
 What is a level measurement effect of leadership style of employees with their
Transformational Leadership dimensions?
 What is the effect of transactional leadership style on employee turnover in CBE?
1.4 Objectives of the study
The research studies have two parts called general and specific objectives part. The general
Objective part presented the overall objective of the study and the specific objective part outlines
the list of simpler objectives through which the general objectives have attained.
1.4.1 General Objective

The general objectives of the study have to investigate the effect of leadership style and
turnover intention of employees of the CBE.

1.4.2 Specific objectives
The specific objectives of the study are thus as follows:
 To determine the effects of transformational leadership style on employee turnover in CBE.
 To determine the effect of autocratic leadership on employee turnover in CBE.
 To determine the effect of laissez- faire leadership style on employee turnover in CBE.
 To examine the level measurement effect of leadership style of employees with their
transformational leadership dimensions.
 To examine the effect of transactional leadership on employee turnover in CBE.
1.5 Significance of the Study

The study will contributes to the bank by providing important information of the turnover intention
and effect of leadership style in CBE. The findings will also be vital to give an insight to the
bank`s officials on how to develop the effect of leadership style and the different factors that
contributes to employees’ turnover intension and the resulting turnover by designing and
implementing appropriate human resource policies. Besides, it will serve as a moving stone for
others researchers in order to make further study.
1.6 Scope of the study

The conceptual and geographical scope of the study is explained as follows. Commercial Bank of
Ethiopia has more than 60,000 employees as shown on CBE Annual report, and December
31th 2021 quarter report and has branches. Because of time and financial limitations, it is
impossible to cover all bank branches. Hence the researcher would like to focus on the bank
branches found in Addis Ababa specifically Kirkose district five branches. The study will be focuses
on investigation of the current condition of turnover intention and the effect of leadership styles.
Specifically focus on the following leader ship styles transformational, transactional,
autocratic, and laissez-faire leadership styles.
1.7 Limitations of the study

The studies have been excluded outlying branches of CBE, private and other government banks in
Ethiopia; this could challenge the generalizability of the research findings. The other limitation of
this study has inaccessibility of previous related literatures in the context of Ethiopia, especially
CBE on the issue under investigation.
1.8 Operational definition of key terms
1.9 Organization of Study
This proposal has been organized in three chapters. Chapter one deals with introduction part
include: Statement the problem, objective of the study, Background of the Study, Significance of
the study, scope of the study. Chapter two deals with literature review. Chapter three deal with
methodology of the study.

2. REVIEW OF LITERATURE
This section highlights review articles about The Effect of Leadership style on Employees’
Turnover Intention that were published in different international journals. This report also
compares the findings of the articles since these studies were conducted in disparate situations
according to the environment. The literature review part of this study has theoretical literature
review and empirical literature review parts. The theoretical part presents the summary of theories
forwarded by different scholars pertaining to the subject under study at different times. Whereas
the empirical part contains summary of similar or related research findings obtained from other
earlier researches.
2.1 Theoretical Related Literature Review
2.1.1 The Concept of Leadership
Leadership defined in the early days of study in the field of leadership was placed on the
individual leader. Today, the focus in the field of leadership has shifted from considering the
leader alone to incorporating followers, peers, context and culture, representing a much wider
array of individuals from public, private and not-for-profit organizations in nations around the
globe. Accordingly, leadership is no longer merely described and defined as an individual
characteristic but is also described in various models as being dyadic, shared, relational,
strategic, global, and a complex social dynamic (Avolio,2007; Yukl, 2010).
Proposing a definition of leadership that would be recognized by most researchers is difficult

since there are so many different approaches to understanding and studying leadership. A simple
definition may be that leadership is the directing of the activities of a group towards a shared
goal. Many people often use the terms management and leadership interchangeably, but they are
really two completely different concepts. Unlike management, leadership is a talent rather
than a position. While management can be assigned or chosen, leadership is something to which
someone must be called. A person who takes a leadership position so they may assume a
particular status or control within an organization is a manager - not a leader. While management
and leadership have many similar characteristics, the motivations of practitioners are very

different.
According to Daft (2008:14), Leaders provide a vision for the future of the organization and
often question the way things are done because they want to move the organization and its
people forward instead of merely maintaining a stable environment. The motivation for
leadership is people and progress “by building networks of positive relationships” (Daft,
2008:357).
2.1.2 Dimensions of Leadership
In order to shed light on a leader’s philosophy, as well as his or her leadership abilities and
practices, all leadership activities should be assessed based three independent dimensions:
motives and intentions, means and methods, and outcomes and results (SanFalcon & Spears,
2008). The first dimension answers the question, “Why?” In order to grow and develop their
leadership abilities, leaders must be willing and able to understand their own reasons for wanting
to lead in the first place. What do they hope to accomplish on both a personal and an
organizational level? The second dimension answers the question, “How?” because it focuses on
how the leadership is accomplished or expressed in terms of the leader as a person and the
structures, processes and procedures that are used by the leader (SanFalcon & Spears, 2008:6-7).
“In this dimension, the two-fold process of transformation-self and system” is what makes
leadership work. The third dimension answers the question, “What?” because it evaluates what is
actually achieved. A leader’s particular leadership philosophy is evident in the way in which
each of these questions is answered. The results stem from the methods which are based on the
leader’s motives; it’s a chain reaction. If a leader’s motives are negative or self-serving, then his
or her methods will be skewed, the end result of which will be disadvantageous for both
followers and the organization.
2.1.3 Effects of employee turnover

Employee turnover is expensive from the view of the organization. Voluntary quits which
represents an migration of human capital investment from organizations and the following
replacement process involves various costs to the organizations. These replacement costs include
For example, search of the external labor market for a possible substitute, selection between
Competing substitutes, induction of the chosen substitute, and formal and informal training of the
Substitute until he or she attains turnover intention levels equivalen]
t to the individual who quit John(2000). Addition to these replacement costs, output would be
affected to some extend or output would be maintained at the cost of overtime payment. The reason
so much attention has been paid to the issue of turnover is because turnover has some significant
effects on organizations
(DeMicco and Giridharan, 1987; Dyke and Strick, 1990; Cantrell and Saranakhsh, 1991; Denvir
And Mcmahon, 1992).Many researchers argue that high turnover rates might have negative
Effects on the profitability of organizations if not managed properly (Hogan, 1992; Wasmuth and
Davis, 1993; Barrows, 1990). Hogan 1992, nearly twenty years ago the direct and indirect cost of
a single line employee quitting was between $ 1400 and $4000. Turnover has many hidden or
invisible costs Philips (1990) and these invisible costs are result of incoming employees, coworkers
closely associated with incoming employees, co-workers closely associated with departing
employees and position being filled while vacant. And all these affect the profitability of the
organization. On the other hand turnover effects on customer service and satisfaction Kemal et al.
(2002). Catherine (2002) argue that turnover include other costs, such as lost productivity, lost
sales, and management’s time, estimate the turnover costs of an hourly employee to be $3,000
to$10,000 each. This clearly demonstrates that turnover affects the profitability of the organization
and if it’s not managed properly it would have the negative effect on the profit. However, voluntary
turnover incurs significant cost, both in terms of direct Costs (replacement, recruitment and
selection, temporary staff, management time), and also (and perhaps more significantly) in terms
of indirect costs (morale, pressure on remaining staff, Costs of learning, product/service quality,
organizational memory) and the loss of social capital Desset al (2001).
2.1.4 MEANS AND METHODS
During economic recessions, such as the United States has been facing for the past several years,
organizational leaders should be transformational in nature in order to “provide new solutions,
stimulate rapid response, develop subordinates, and provide reasons for take in engage in
inspirational leadership to mobilize volunteers’ time and energy” (Bass, 1985, p. 157). Three
methods which are used by transformational leaders are inspiration through charisma, displaying

consideration for followers as individuals, and providing intellectual stimulation (Bass).
Transformational leadership is more likely to appear in organizations where “the task requires
cooperative efforts among subordinates” because the leader needs to “clarify the larger objectives
and to develop… the motivation to achieve” (Bass, p. 166).
Transformational leaders encourage followers to think beyond themselves to higher-order
considerations through clear articulation of expectations and justification of those expectations
and by serving as role models of what they expect from followers and subordinates (Bass, 1985).
Transformational leaders also accomplish this task is by sharing “power with organizational
members to achieve” mutual goals, rather than operating through a hierarchical, top-down
leadership model (Daft, p. 242). According to Ballou (2011), “Effective leadership inspires
effective work from those whom you lead. The output of the team is in direct proportion to the
clarity of their vision about roles, responsibilities, and functions as a team”.
2.1.4.1 Outcomes and Results
According to Daft (2008:9), “an emphasis on control and rigidity serves to suck motivation,
innovation and morale rather than produce desired results”. This means that the transformational
leadership characteristic of sharing power rather than clinging to it can be more effective in
today’s global organizational climate. The use of intimidation and manipulation are obsolete as
means of driving the competitive spirit. For organizational leaders to be successful, they must
work with their team members in a cooperative environment instead of using command and
control methods.
“Employees like to have leaders who care about their work and who care about them” (Winston,
2002, p. 18). Subordinates who believe their leader truly cares about them and "has their interests
at heart are willing to commit themselves to corporate tasks" (Winston, p. 29). When followers
fervently support the organization’s goals and objectives, they try harder, strive to please their
leaders, and, in the end, are more effectual in their work. “Transformational leadership may
result ultimately in a higher level of satisfaction and effectiveness among the led” (Bass,
1985:32). Since most organizations, truly desire effective and successful employees for the
overall success of the organization, the use of transformational leadership methods provide a win
for both the organization and the individual leader and followers.

2.1.4.2 Transformational leadership Defined
Transformational leadership is a style of leadership where a leader works with subordinates to

identify needed change, creating a vision to guide the change through inspiration, and executing the
change in cycle with committed members of a group. Transformational leadership serves to
enhance the motivation, morale, and job turnover intention of followers through a variety of
mechanisms; these include connecting the follower's sense of identity and self to a project and to
the collective identity of the organization; being a role model for followers in order to inspire them
and to raise their interest in the project; challenging followers to take greater ownership for their
work, and understanding the strengths and weaknesses of followers, allowing the leader to align
followers with tasks that enhance their turnover intention .
The concept of transformational leadership was initially introduced by James V. Downton, the first
to coin the term "Transformational leadership", a concept further developed by leadership expert
and presidential biographer James MacGregor Burns. According to Burns, transformational
leadership can be seen when "leaders and followers make each other advance to a higher level of
morality and motivation." Through the strength of their vision and personality, transformational
leaders are able to inspire followers to change expectations, perceptions, and motivations to work
towards common goals. Unlike in the transactional approach, it is not based on a "give and take"
relationship, but on the leader's personality, traits and ability to make a change through example,
articulation of an energizing vision and challenging goals. Transforming leaders are idealized in the
sense that they are a moral exemplar of working towards the benefit of the team, organization
and/or community. Burns theorized that transforming and transactional leadership were mutually
exclusive styles. Later, researcher Bernard M. Bass expanded upon Burns' original ideas to develop
what is today referred to as Bass’ Transformational Leadership Theory. According to Bass,
transformational leadership can be defined based on the impact that it has on followers.
Transformational leaders, Bass suggested, garner trust, respect, and admiration from their
followers.In addition, this leader encourages followers to come up with new and unique ways to
challenge the status quo and to alter the environment to support being successful. Finally, in

contrast to Burns, Bass suggested that leadership can simultaneously display both transformational
and transactional leadership.
2.1.5 Transformational leadership Dimensions
Transformational leaders are described to hold positive expectations for followers, believing that
they can do their best. As a result, they inspire, empower, and stimulate followers to exceed normal
levels of turnover intention. Transformational leaders also focus on and care about followers and
their personal needs and development [ Riggio, Ronald E]. Transformational leaders fit well in
leading and working with complex work groups and organizations, where beyond seeking an
inspirational leader to help guide them through an uncertain environment, followers are also
challenged and feel empowered; this nurtures them into becoming loyal, high performers.
Leadership is the critical factor in the initiation and implementation of such a change process, and
the transformational style of leadership engenders a positive impact on individuals, teams, and
organizations during the change process.
There are 4 components to transformational leadership, sometimes referred to as the 4 I's:
Idealized Influence; Inspirational Motivation; Intellectual Stimulation; Individual consideration
Idealized influence describes managers who are exemplary role models for associates. Managers
with idealized influence can be trusted and respected by associates to make good decisions for the
organization.
Inspirational motivation describes managers who motivate associates to commit to the vision of
the organization. Managers with inspirational motivation encourage team spirit to reach goals of
increased revenue and market growth for the organization.
Intellectual stimulation describes managers who encourage innovation and creativity through
challenging the normal beliefs or views of a group. Managers with intellectual stimulation promote
critical thinking and problem solving in an effort to make the organization better.
Individual consideration describes managers who act as coaches and advisors to the associates.
Managers with individual consideration encourage associates to reach goals that help both the
associates and the organization.

The major characteristics of transformational leadership include engendering trust, admiration,
loyalty, and respect amongst followers through application of charismatic vision and behavior
Leaders who apply idealized influence on their followers gain the trust and confidence of the
followers.
The followers admire the leader as a role model and respect the decisions made by him or her.
Transformational leaders strive towards creating such a state of idealized influence example acting
confidently and optimistically sharing risks with followers emphasizing values and reinforcing
them by symbolic actions displaying a high level of ethical and moral conduct Transformational
leadership is a process that changes and transforms individuals (Northouse 2001). In other words,
transformational leadership is the ability to get people to want to change, to improve, and to be led.
It involves assessing associates' motives, satisfying their needs, and valuing them (Northouse
2001). Therefore, a transformational leader could make the company more successful by valuing its
associates.
2.1.6 Different Types of Leadership Styles
There are three main types of leadership style globally recognized in the workplace. These are all
reviewed below covering both ends of the task management spectrum.
There are now four new types of leadership identified for the modern office environment. All work
in the right circumstances to get work done quickly or to motivate staff over a longer period of
time.
The Three Classic Styles of Leadership
There are three leadership styles developed by psychologist Kurt Lewin that are considered to be
among the "classic" methodologies used by business leaders. Each has its strengths and drawbacks
- here are more details on each of them:
1. Laissez-Faire Leadership
This type is the largely hands-off with slight direction and supervision from the manager to the
staff. The key to using this method is having well trained and efficient directors who can work as
intermediaries between you and your employees.

2. Autocratic Leadership
This is a leadership style that has become something of a relic in today's business environment. The
reason is that most employees work better without the overbearing presence of their boss around at
all times. However, there are some who would argue that the Autocratic methods are still as
effective as they were in Feudal Europe - but only if properly balanced with feedback and face
time.
3. Participative Leadership
The third approach is to find a happy medium between the above two methods. These managers
back-off more to allow people to tap their creativity and think independently using their own
initiative, while still maintaining enough control to guide the overall vision of teams without
imposing their own vision on their decisions. In short, you're giving them a much greater lead and
will need to be more trusting of decisions made by your directors.
These three leadership types form the foundation of most styles used by corporate leaders today.
However, they do not necessarily encompass every philosophy on the nature of a business and how
leadership skills should be developed.
Other Leadership Styles
Other leadership styles that are popular in a number of fields, or that have been popular in the past
include:
4. Situational Leadership
This has leaders using their leadership skills in different methods depending on if the situation calls
for task or relationship oriented decisions.
5. Transactional Leadership
This technique has you getting things done within the current methods accepted by the industry.
Many people refer to this method as a "by the book" management style.
6. Transformational Leadership

The opposite of Transactional, Transformational Leadership revolves around breeding change in as
many ways as possible.
7. Strategic Leadership
Many large corporations, as well as the armed forces, use this leadership style - essentially working
to outwit an opponent at every step.
About Leadership
Leadership is a management area that's critical to improve staff morale and productivity. Everyone
needs to find the leadership style that works best for themselves and their subordinates. What
works for your superiors may not work for you and your team. However, if you take some time and
analyses different leadership styles and how they work for different personality types, you stand a
much better chance of success as a leader.
Leadership is not something to be stepped into lightly, and if it does not come to you naturally, as
is the case for many new managers or business owners, it's important to spend some time
determining which method of leadership will work best as part of your personal development
plan.If you know the culture of your particular business well, this may be easier, as you only need
to adjust to the needs of your employees. However, if you're moving into a new industry or an
established corporation, making the right leadership decisions can be hard when you're unaware of
current practices.
2.1.7 The concept of Turnover Intention
Turnover intension is defined as an Employees’ personal estimated probability that he or she has
a deliberate intent (interest) to leaving the organization permanently in near future. Turnover
intention also cited as one’s propensity to leave. Turnover are classified and categorized into
voluntary or involuntary, as well as functional or dysfunctional, each will have varying degree
of impact on the organization. Voluntary turnover is defined as a process in which an
employee makes decision whether to stay on or leave the organization. Mobley further
commented that this type of turnover is usually dysfunctional and can be most detrimental to the
organization. It is also warned by Abbasi and Hollman (2000) that those that most likely to leave
the organization are those most talented and smartest employee within the group. Their valuable
experiences, talent, skills and knowledge will leave with them and resulted in deteriorating
efficiency. In contrast, involuntary turnover is referred to the situation in which the organization
undertaken the control over the employee’s decision to stay or leave the organization
(McPherson 1976). The reason why it is classified as functional turnover is due to the often
removal of under-performing employees (Wells et al. 2010).
2.1.7 Determinants of Turnover Intention
Employee turnover may be understood as the employee leaving the organization or profession
voluntarily. It has been observed that voluntary turnover is an interdisciplinary and
multidimensional construct. The problem of voluntary turnover stretches beyond the range of
employee and organization. The concept of voluntary turnover can be explicated only when it is
accepted as a combination of social, economic, and psychological processes (Udechukwu et al.,
2007). Further, studies indicate that voluntary turnover is consequence of employee initiating the
termination of their employee-organization relationship (see Lambert, 2001, for example).
Additionally, various models on turnover behavior indicate the multistage nature of the term and
suggest that it Electronic copy available at:http://ssrn.com/abstract includes attitudinal,
decisional, and behavioral components (Parasuraman, 1989; Price and Muller, 1981; Weisman et
al., 1980). Academics have been interested in turnover intention of employees as precursor of
turnover behavior for the last six decades. Early literature on turnover behavior indicated that the
employees would initiate the process of termination of their relationship with their employee/
organization/profession only when there is perceived desirability to do so and there is a
perceived possibility of such ease of movement (March and Simon, 1958). This perceived
desirability of termination of employee-employer relation is known as turnover intention.
Turnover intention may be defined as the individual’s intention to voluntary quit the organization
or profession. Intentions are important to study as they predict an individual’s perception and
judgment (Mobley et al., 1979).

2.1.8 Theoretical Framework
There are many types of leadership styles discussed in the literature. Visionary leadership,
integration leadership, fulfillment leadership, transactional leadership, charismatic leadership,
authentic leadership, and transformational leadership are just to mention a few. Trying to
uncover these types of leadership styles in a single study is next to impossible. Hence, the
researcher decided to limit the conceptual scope of this study to the interplay between the effect
of leadership style and employs yes’ turnover intention.
2.2 Empirical related literature review
A number of researchers have explored the relationship between the effect of leadership and
turnover intention. The effect of leadership was contrary related to turnover intentions among
employees for several commercial and profit oriented based business. In another study carried
by (Bycio, Hackett & Allen, 1995) in the nursing profession, it was found the higher degrees of
the effect of leadership were achievement of their objectives, associated with lower intention to
leave. This supports the effect of leadership pulls and directs followers intrinsically towards
achievement of long run organizational objectives. This style of leadership changes the
perception and beliefs of their followers to enhance follower’s involvement and commitment in
the organization (Shamir, House & Arthu 1993). It’s the sort of engagement between followers
and leadership that enhance morality and motivational level of each other. According to Bass
(1985) transformational leadership affect followers in such a way that they develop trust,
admiration towards leadership and exhibit loyalty to the organization (Gul 2012). According to
Bass (1998) it is indicated in the literature that in order to reduce intentions of voluntary
turnover, the effect of leadership is a key factor. Martin and Epitropaki (2001) that an intention of
voluntary turnover decreases with the increase of t the effect of leadership found it in a study.
Empirical studies have also been done to see the relation between leadership and turnover
intention. For example, Wells and Peachey (2010) have conducted a separate study to investigate
the relationship between leadership behaviors, satisfaction with the leaders and voluntary
turnover intentions. The study result revealed significant negative associations between
transformational leadership behavior and voluntary organizational turnover intentions as well

as the correlation between transactional leadership behavior and voluntary organizational
turnover intentions. Walls’s study further explained on why transactional leadership
behavior was related to reduce voluntary organizational turnover intentions by quoting
justice theory of Cobb et al. Another study conducted by Sellgren on exploring the relationship
between leadership behavior of nurse managers and staff turnover has revealed a weak
correlation between leadership behavior and staff turnover.Therefore, in line with the
hypothesis formulated in chapter one and the objectives of the study, the following conceptual
Model is developed to be tested.
2.2.1 The effect of transformational Leadership and Turnover Intention
The relationship between transformational leadership and turnover intention has been explored
by a number of researchers. Their studies have generally shown that transformational leadership
is the key factor (Epitropaki 2001). Transformational leadership was contrary related to turnover
intentions among employees for several commercial and profit oriented based business. In
another study carried by (Bycio, Hackett & Allen, 1995) in the nursing profession, it was found
the higher degrees of transformational leadership were achievement of their objectives, associated
with lower intention to leave. This supports transformational leadership pulls and directs
followers intrinsically towards achievement of long run organizational objectives. This style of
leadership changes the perception and beliefs of their followers to enhance follower’s
involvement and commitment in the organization (Shamir, House & Arthu 1993). It’s the sort of
engagement between followers and leadership that enhance morality and motivational level of
each other. According to Bass (1985) transformational leadership affect followers in such a way
that they develop trust, admiration towards leadership and exhibit loyalty to the organization
(Gul 2012). According to Bass (1998) it is indicated in the literature that in order to reduce
intentions of voluntary turnover, transformational leadership is a key factor. It was found in a
study by Martin and Epitropaki (2001) that an intention of voluntary turnover decreases with
the increase of transformational leadership.

2.2.2 The Effect of Transactional Leadership Style and Employees’ Turnover Intention
Transactional leadership style relies on the leader’s ability to bargain the suitable behavior of
followers on the basis of rewards or punishment (Rees & French (2013). Nwokocha and
Iheriohanma (2015) define transactional leadership as an exchange process that ensures that the
follower is in compliance with the leader’s request but very unlikely to produce commitment and
zeal to the task objectives. According to Bass and Bass (2008), the transactional leadership style is
composed of, or is subject to two factors. They identified the factors as contingent rewards and
management by exception. For contingent rewards, the leader assigns a task to a follower and
provides a psychological or material reward in exchange for a satisfactory execution of the task.
Management by exception is referred to as “a corrective transaction” (Bass & Bass, 2008). It could
be either passive or active. If active, the leader monitors the mistakes, errors and then employs
some corrective measures; if passive, the leader takes no corrective action.
Ojokuku (2012) suggest that the transactional leader can be a problem with expectations. This
suggests that if the expectation of one person is not met, the exchange process may be interrupted.
Although Nwokocha and Iheriohanma (2015) identify that the inability of team members and
followers to improve their job satisfaction level could result in turnover in the organization, they
point out that the transactional leadership style can help to clarify the employees’ roles and
responsibilities and that employees who are motivated by rewards often perform and succeed in
such organizations. This suggests that the transactional leadership style could bring about a positive
or negative effect in the organization. Employees who are motivated by the external rewards could
work towards better performance which could have a positive impact on the organization and the
employee.
2.2.3 The effect of laissez-faire leadership style and employees’ turnover intention
Laissez faire is a French phrase which means “let it be” and it is also known as the “hands off
style” (Nwokocha & Iheriohanma, 2015). According to Gill (2014) it means leaving subordinates
to complete tasks and jobs in the way they choose without adherence to any strict policies or

procedures. Bass (2008) describes the laissez faire leadership style as one in which the leader has
no belief in their own ability to supervise. He further stated that the leader has no clear set goals
towards how they may work, do not help the group in making decisions and so leave too much
responsibility with their subordinates.
According to Puni, Ofei and Okoe (2014), the laissez-faire leader avoids controlling his employees
and so only relies on the few available employees who are loyal to get a task done. A laissez faire
leader does not believe in employee development as they believe that employees can take care of
themselves (Puni et al, 2014). This leadership style cannot be said to be operational in the banking
sector which requires that both the leader and subordinates have an input in the decision making
process and completion of tasks to ensure the success of the organization.
The laissez-faire style of leadership is often dismissed as one that leads to poor group outcomes,
but it can be appropriate and effective in a variety of situations. In setting where group members
are highly skilled and motivated, it can actually produce excellent results.
2.2.4 Transformational and Transactional Theory
Over the past twenty five years, a large body of research has emerged around transformational–
transactional leadership theory. Transactional theories focus on the role of supervision,
organization and group turnover intention and they base leadership on a system of rewards and
punishments for meeting particular objectives. Bass (1985) as cited by Chan (2005) theorized the
transactional leaders appeal to the subordinates’ self-interests. Transactional leaders attempt to
meet the current needs of their subordinates through bargaining and exchanging. Both leaders and
followers focus on achieving the negotiated turnover intention level.

2.2.5 Conceptual frame work
Laissez-Faire Leadership style
Transformation Leadership
style
Employees’ Turnover
j Independent
Transactional Leadershipvari dependent variable
style
In dependent variable
3. METHODOLOGY OF STUDY
3.1 The Study Setting
This study will behavior on the effect of leadership style on employees’ turnover Intention the case
of commercial bank of Ethiopia.
3.2 Study Design

The study has using a quantitative methodology. Hence, a cross-sectional survey method is
engaged. It also used both descriptive and explanatory study designs to examine data collected
from employees. A descriptive research design have been used to conduct the study because the
researcher is interested in describing the existing situation under study. This study will also used
explanatory study design, to explaining, understanding, and predicting the relationship between
variables.
3.3 Population and Sampling Design
The sampling design process which was used during the study includes the following sub-
elements:-
3.3.1 Population of the Study
The population of this study will be all permanent employees of commercial bank of Ethiopia. It
including in Addis Ababa kirkos distinct branches will be the study.
3.3.2 Sample selection Technique

For the purpose of this study, sampling technique is used Probability Samples selection technique:
- every unit in the population has a chance (greater than zero) of being selected in the sample, and
this probability can be accurately determined. Simple random sampling Applicable once population
is small & readily available.
All subsets of the frame are given an equal probability. Each element of the frame thus has an equal
probability of selection. It provides for greatest number of possible samples. This is done by
assigning a number to each unit in the sampling frame. A table of random number or lottery system
is used to determine which units are to be selected.
3.3.3 Sample size
Studying the whole of the population impossible. For this reason, the researcher be taken picked a
representative sample of the whole population from staff inventory. To achieve a representative
sample for a research study, the people who were studied were carefully selected using simple

random sampling methods through outlook or by collation raw data. The researcher used a sample
of 225 respondents drawn from the population 516 commercial bank of Ethiopia kirkos district
Staff in the sample branch of commercial bank of Ethiopia. A sample of 225 respondents was
chosen since it represents the permanent employees in the district and also these respondents have
worked for the bank for more than two years leading to reliable assessment of both perceptions of
leadership and employees. From 225 respondents who are tellers, banking officers and customer
service staff.
The sample size of the employees have determined by using simple random sampling method.
After the sample frame will be obtained from the human resource department of the bank, the
researcher used the following sample size determination formula to determine the sample size of
the population.
Given these in to account, the study utilized the following sample size determining formula to set
the actual sample size scientifically Slovin 1960.
N
The actual sample size formula n= 2
1+ N ( e)
Wheren- actual size

N-total population
N
e -degree of accuracy depend on wide range of population set as n= 2
1+ N ( e)
516
n= 2
1+516 (0.05)
Sample size = 225 Employees
3.4 Source and methods of Data collections
As part of the research strategy quantitative data will generated from primary sources of data to be
used as an input for the finding of this research. Primary data was obtained through questionnaire
from the selected two year and above experience after getting permission from the concerned

authority in commercial bank of Ethiopia. Also, the data use from journals, internet, books, the
bank’s quarter and annual report were examined as a secondary data.
3.5 Methods of Data Collection
Main instruments of data collection questionnaire The questionnaires were filled by employees of
CBE, kirkos district regarding The Effect of Leadership style Practiced on Employees’ Turnover
Intention in the CBE.
3.6 Data Collection Tools
To get the information researcher has design and will distribute a set of questionnaire. a
questionnaire consisting the independent variable and dependent variables will be conducted by
extracting source from few established questionnaire.as the researcher will interest to collect
original data from a population ,the take a sample to observed or interviewed. Thus ,a survey by a
questionnaire is consider the most appropriate method for measuring the perceptions of the workers
,while minimizing the possibility of researcher bias and providing a greater degree of subjectivity
because of the direct response and feedback from the respondent that can be collected in short
period of time and in an easier manner
3.7 Data Analysis Techniques
An array of the descriptive and inferential analyses will conduct to the five research questions
presented in the first chapter .once data will collect ,it will be necessary to employ statistical
techniques to analyze the information .the data will analyze using SPSS software.
3.8 Ethical Considerations
Ethical clearance and permission obtained from the institutional review board of Maryland
International Collage Ethiopia. Participation in the study is on the voluntary basis and participants
will be asked for willingness before they are provided the questionnaire .the subjects are also
assured that their responses used only for the purpose of the study.an attempt will be made first to
explain the objectives and significance of the study to the respondents. Name and other identifying
information are not used in the study .the researcher safe guarded all information related to the
participants. Their privacy, identity and confidentiality are maintained by assigning them code
numbers instead of names.
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managerial applications. Simon and Schuster.
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.Mahwah,NJ:Etlbaum Associate

MARYLAND INTERNATIONAL COLLEGE
SCHOOL OF GRADUATE STUDIES
DEPARTMENT OF MASTERS OF BUSINESS ADMINISTRATION
Structured Questionnaire
Dear respondent
My name is Habtegebreal Demmssie I am postgraduate student in Maryland
International Collage. Currently I am doing my thesis entitled “The effect of
Leadership style practiced on Employees ‘Turnover Intention: The case of
Commercial Bank of Ethiopia. “The purpose of these questionnaires to collect data
successfully accomplishes this study.
Your responses will be used only for the research and hence will be kept
confidential. Therefore, you are kindly requested to answer each question honestly
and accurately. You are not expected to write your name.
Thank you for your welling cooperation in advance!

Part I: Background Information of Respondents
1. Sex:
Male Female
2. Age
18-25 26-35 36-45 37-54 Over 55years
3. Educational level
High school Certificate Diploma First Degree Masters and above
4. Number of years you have worked in the Bank
2-5 6-10 11-15 16andabove1
5. Your current position (Specify) -----------------------------------------------------

Part II. Effect of Leadership Styles Questionnaires
Instruction: Please put a cross (X) mark for each item the number that you feel most
appropriate, using the scale from 1to5 (where1=Strongly Disagree (SD), 2=Disagree (D),
3=Neutral (N), 4=Agree (A),5=Strongly Agree (SA).
No Questions 1 2 3 4 5
TRANSFORMATIONAL LEADERSHIP
Idealized
1 Your Manager/Leader goes beyond self-interest for the good of the group.
2 I have complete faith in my supervisor.
3 I am proud to be associated with my supervisor
Inspirational Motivation (IM)

1 My supervisor expresses in a few simple words what we could and should do
2 My supervisor provides appealing images about what we can do
3 My supervisor helps me find meaning in my work
Intellectual Simulation (IS)
1 My supervisor enables others to think about old problems in new ways

2 My supervisor provides others with new ways of looking at puzzling things.
3 My supervisor gets others to rethink ideas that they had never questioned before
TRANSACTIONAL LEADERSHIP
1 My supervisor Monitors my performance and keeps track of mistake
2 My supervisor Makes clear expectation
3 My supervisor Tells us standards to carry out work
P LAISSEZ FAIRE LEADERSHIP
1 In complex situations my supervisor allows me to work my problems out
On my own way
2 My supervisor stays out of the way as I do my work
3 As a rule, my supervisor allows me to appraise my own work.

4 My supervisor gives me complete freedom to solve problems on my own.
5 In most situations, I prefer little input from my supervisor.

6 In general, my supervisor feels it is best to leave subordinates alone.
Turnover intention Very Likely( Unlikely(1 Very

likely(3) 2) ) (0)
1 I am planning to search for new jobs during the next 12 months.
2 If I have my own way, I will not be working for this
Organization one year from now.
3 There are other comparable jobs available.
4 I am attracted to opportunities somewhere else.

5 I believe that I could easily find an equal or better job.
6 I feel that I might lose valuable experience if I leave this
Organization.
7 I feel that I owe the organization because it has supported me.
8 I feel obligated to stay in this organization.

‘
The Effect of Leadership style Practiced on Employees’ Turnover

Intention (The Case of Commercial Bank of Ethiopia)
_______________________________________________________________________
By: By: -HABTEGEBREAL DEMMSIE

Advisor: Dr.Asefa
MBA PROGRAM
April/2022
ADDIS ABABA, ETHIOPIA

Contents
1. INTRODUCTION...................................................................................................................................4
1.1 Background of the study..............................................................................................................4
1.2 Statement of the problem.............................................................................................................5
1.3 Research Question.......................................................................................................................7
1.4 Objectives of the study................................................................................................................7
1.4.1General Objective............................................................................................................................7
1.4.2Specific objectives...........................................................................................................................8
1.5 Significance of the Study.............................................................................................................8
1.6 Scope of the study........................................................................................................................8
1.7 Limitations of the study...............................................................................................................8
1.8 Operational definition of key terms..............................................................................................9
1.9 Organization of Study..................................................................................................................9
2. REVIEW OF LITERATURE................................................................................................................10
2.1 Theoretical Related Literature Review......................................................................................10
2.1.1The Concept of Leadership...........................................................................................................10
2.1.2Dimensions of Leadership.............................................................................................................11
2.1.3Effects of employee turnover........................................................................................................11
2.1.4MEANS AND METHODS...........................................................................................................12
2.1.5Transformational leadership Dimensions......................................................................................15
2.1.6Different Types of Leadership Styles............................................................................................16
2.1.7Determinants of Turnover Intention..............................................................................................19
2.1.8Theoretical Framework.................................................................................................................20

2.2 Empirical related literature review.............................................................................................20
2.2.1The effect of transformational Leadership and Turnover Intention...............................................21
2.2.2The Effect of Transactional Leadership Style and Employees’ Turnover Intention......................22
2.2.3The effect of laissez-faire leadership style and employees’ turnover intention..............................22
2.2.4Transformational and Transactional Theory..................................................................................23
2.2.5Conceptual frame work.................................................................................................................24
3. METHODOLOGY OF STUDY............................................................................................................24
3.1 The Study Setting......................................................................................................................24
3.2 Study Design.............................................................................................................................24
3.3 Population and Sampling Design...............................................................................................25
3.3.1Population of the Study.................................................................................................................25
3.3.2Sample selection Technique..........................................................................................................25
3.3.3Sample size...................................................................................................................................25
3.4 Source and methods of Data collections....................................................................................26
3.5 Methods of Data Collection.......................................................................................................27
3.6 Data Collection Tools................................................................................................................27
3.7 Data Analysis Techniques..........................................................................................................27
3.8 Ethical Considerations...............................................................................................................27
References.....................................................................................................................................................28

4. INTRODUCTION
4.1 Background of the study
The banking sector plays an important role in the economy of a country. Banks play key roles in
the savings and capital accumulation processes, which are the basis for achieving a sustained high
economic growth of nations. It is established that well developed banking system with
diversified products and services and accessible to the population of a country is key to the
achievements of high economic growth and reducing poverty (Koivu, 2002). Of course, the
relationship is not one way. High economic growth in turn is also necessary for a sustained
development of the banking system itself (Koivu, 2002).
The history of the Commercial Bank of Ethiopia (CBE) dates back to the founding of the State
Bank of Ethiopia in 1942 1 million mariatreza capital. CBE was legally established as a share
company in 1963. In 1974, CBE merged with the privately owned Addis Ababa Bank. Since then,
it has been playing signiﬁcant roles in the development of the country. Pioneer to introduce modern
banking to the country. It has more than 1800 branches stretched across the country. The leading
Ethiopian bank with excess assets of 1.1trillion Birr as on December 31th 2021 quarter report. CBE
has strong correspondent relationship with more than 50 renowned foreign banks like Royal Bank
of Canada, City Bank, HSBC Bank; CBE has a SWIFT bilateral arrangement with more than 700
others banks across the world. CBE combines a wide capital base with more than 60,000 talented
and committed employees. Pioneer to introduce Western Union Money Transfer Services in
Ethiopia early 1990s and currently working with other 20 money transfer agents like Money Gram,
Atlantic International (Bole), Xpress Money... CBE has opened four branches in South Sudan and
has been in the business since June 2009. CBE has reliable and long-standing dealings with many
worldwide banks throughout the world an organization is focused and run by the people working
there. Today people engaged and working in a firm are no longer considered as just the staff. They
are the most dynamic, potent and significant funds possessed by the company. They are the
resources that step out of the company every day and hence organizations have been putting the
maximum effort to retain the human resources. Since every operation, function or task to be
executed depends upon the potential of human intellect, HR directly influence the growth and
development of a company .Human resources can be referred to the staff, workers and managers
operating an organization. It can also be defined as the total knowledge, talents, creative abilities,
skills and aptitude of an organizations workforce. The beliefs, attitude, values and approach of the
people are some other important aspects of it. Human resource management is the function, which
deals in the affairs, issues, and planning related to the people employed in a firm. It is concerned
with the maintenance of interpersonal relationships within the organization to optimize the
efficiency and effectiveness of workforce in favors of the realization of organizational goals.
The current Competition forces highly labor market environment, staff turnover cost sent is
certainly and expected to reduce and weaken the competitiveness of CBE. Therefore, the objective
of this study is look at the effect of leadership styles on employee turnover intention. study I will be
focus on tried to focus on two basic issues effect of leadership style and employees‘ intention to
turnover. To examine the existing status of employees regarding their turnover intention, examine
effect of leadership style and investigate the relationship between turnover intention and effect of
leadership style and try to determine if any specific leadership style is to be emphasized so that the
organization can attempt for excellence in future.
4.2 Statement of the problem
Many studies authorized that employees need an atmosphere which is encouraging to work. However,
providing this kind of work environment is not an easy task from the management side as
organizational resources are so limited. Hence, it calls for commitment and loyalty along with the
deployment of available resource in the premises of the organization. If the personal and impersonal
factors that could easily disrupt the normal working procedures and employees’ morale are in order, the
organization could earn the dedication and loyalty of its employees. Besides, there will be no way to
look other organizations in search of better opportunities (Bayissa, 2012). The same is true of CBE.
However, CBE has several difficulties in such area as compensation, learning and development,
communication, turnover intention evaluation and rewards, career opportunities, participation and job
design.
Consequently, according to some empirical studies, employees of CBE are de-motivated with the jobs
they undertake and continuously leaving their jobs (Bayissa, 2012). When valuable employees

voluntarily leave organizations, it is generally considered detrimental in terms of replacement costs and
work disruption (Addae, 2006). With the current moderately competitive banking services environment
in Ethiopia, voluntary turnover negatively affects the turnover intention of the bank as experienced and
highly valued employees are leaving the institution. This has resulted in deteriorated quality of banking
service and dissatisfied customers.
To alleviate the voluntary turnover which is dysfunctional to the bank, identifying the factors that can
be attributed to their intention to leave (a strong precursor of turnover) such as transformational
leadership is vitally important. But what does turnover intention mean?
According to Tett and Meyer (1993), turnover intention is defined as “the conscious and deliberate
willingness to leave the organization.”
Strong pressure from emerging new competitors and other private bank, new markets and more
demanding Employee were additional elements attract talented employee. Furthermore, the leadership
style recognition the quality talented Employee is sustainable competitive advantage.
The recent five years statistical data trend reflects that the number of employee turnover of CBE has
been in continuous increase and CBE is facing frequent employees turnover problem. As indicated in
the Table 1, below from the total employees’ 6,986 employee were terminated from the bank due to
different reasons. Besides, human resources management of the bank is not able to retain its
experienced and skilled employee.
Table 1: Employee Turnover in CBE (2016/20)
Year (G.C) Total No. of Employees Total No. Turnover Turnover in percentage
(%)
2016 28,467 1,106 3.89
2017 33,706 1,097 3.25
2018 32,739 1,218 3.72
2019 37,000 1,386 3.75
2020 63,000 2,179 3.45
Average Total 194,912 6,986 3.58
Source: CBE's Annual Progress Report
Recently it is observed that senior and professional employees of CBE have been leaving the bank in an
increasing number. This problem looks significant and worth studying so as to assess employee

turnover practice in CBE.
In view of this, study I will be focus on especially the Commercial Bank of Ethiopia, to examine the
existing status of employees regarding their turnover intention, examine effect of leadership style and
investigate the relationship between turnover intention and effect of leadership style. As there is
previous study in this area undertaken in CBE in Ethiopia, the only transformation leader ship style.
This study will make important contribution to this field of research.
4.3 Research Question
Based on the problems discussed above, the central issue for this study would be what factors are
considered critical in influencing individual’s turnover intention. Specifically, the study answered
the following questions:-
 What is the effect of transformational leadership style on employee turnover intention in
commercial bank of Ethiopia?
 What is the effect of Autocratic leadership style on employee turnover in CBE?
 What is the effect of laissez-faire leadership style on employee turnover in CBE?
 What is a level measurement effect of leadership style of employees with their
Transformational Leadership dimensions?
 What is the effect of transactional leadership style on employee turnover in CBE?
4.4 Objectives of the study
The research studies have two parts called general and specific objectives part. The general
Objective part presented the overall objective of the study and the specific objective part outlines
the list of simpler objectives through which the general objectives have attained.
4.4.1 General Objective

The general objectives of the study have to investigate the effect of leadership style and
turnover intention of employees of the CBE.

4.4.2 Specific objectives
The specific objectives of the study are thus as follows:
 To determine the effects of transformational leadership style on employee turnover in CBE.
 To determine the effect of autocratic leadership on employee turnover in CBE.
 To determine the effect of laissez- faire leadership style on employee turnover in CBE.
 To examine the level measurement effect of leadership style of employees with their
transformational leadership dimensions.
 To examine the effect of transactional leadership on employee turnover in CBE.
4.5 Significance of the Study

The study will contributes to the bank by providing important information of the turnover intention
and effect of leadership style in CBE. The findings will also be vital to give an insight to the
bank`s officials on how to develop the effect of leadership style and the different factors that
contributes to employees’ turnover intension and the resulting turnover by designing and
implementing appropriate human resource policies. Besides, it will serve as a moving stone for
others researchers in order to make further study.
4.6 Scope of the study

The conceptual and geographical scope of the study is explained as follows. Commercial Bank of
Ethiopia has more than 60,000 employees as shown on CBE Annual report, and December
31th 2021 quarter report and has branches. Because of time and financial limitations, it is
impossible to cover all bank branches. Hence the researcher would like to focus on the bank
branches found in Addis Ababa specifically Kirkose district five branches. The study will be focuses
on investigation of the current condition of turnover intention and the effect of leadership styles.
Specifically focus on the following leader ship styles transformational, transactional,
autocratic, and laissez-faire leadership styles.
4.7 Limitations of the study

The studies have been excluded outlying branches of CBE, private and other government banks in
Ethiopia; this could challenge the generalizability of the research findings. The other limitation of
this study has inaccessibility of previous related literatures in the context of Ethiopia, especially
CBE on the issue under investigation.
4.8 Operational definition of key terms
4.9 Organization of Study
This proposal has been organized in three chapters. Chapter one deals with introduction part
include: Statement the problem, objective of the study, Background of the Study, Significance of
the study, scope of the study. Chapter two deals with literature review. Chapter three deal with
methodology of the study.

5. REVIEW OF LITERATURE
This section highlights review articles about The Effect of Leadership style on Employees’
Turnover Intention that were published in different international journals. This report also
compares the findings of the articles since these studies were conducted in disparate situations
according to the environment. The literature review part of this study has theoretical literature
review and empirical literature review parts. The theoretical part presents the summary of theories
forwarded by different scholars pertaining to the subject under study at different times. Whereas
the empirical part contains summary of similar or related research findings obtained from other
earlier researches.
5.1 Theoretical Related Literature Review
5.1.1 The Concept of Leadership
Leadership defined in the early days of study in the field of leadership was placed on the
individual leader. Today, the focus in the field of leadership has shifted from considering the
leader alone to incorporating followers, peers, context and culture, representing a much wider
array of individuals from public, private and not-for-profit organizations in nations around the
globe. Accordingly, leadership is no longer merely described and defined as an individual
characteristic but is also described in various models as being dyadic, shared, relational,
strategic, global, and a complex social dynamic (Avolio,2007; Yukl, 2010).
Proposing a definition of leadership that would be recognized by most researchers is difficult

since there are so many different approaches to understanding and studying leadership. A simple
definition may be that leadership is the directing of the activities of a group towards a shared
goal. Many people often use the terms management and leadership interchangeably, but they are
really two completely different concepts. Unlike management, leadership is a talent rather
than a position. While management can be assigned or chosen, leadership is something to which
someone must be called. A person who takes a leadership position so they may assume a
particular status or control within an organization is a manager - not a leader. While management
and leadership have many similar characteristics, the motivations of practitioners are very

different.
According to Daft (2008:14), Leaders provide a vision for the future of the organization and
often question the way things are done because they want to move the organization and its
people forward instead of merely maintaining a stable environment. The motivation for
leadership is people and progress “by building networks of positive relationships” (Daft,
2008:357).
5.1.2 Dimensions of Leadership
In order to shed light on a leader’s philosophy, as well as his or her leadership abilities and
practices, all leadership activities should be assessed based three independent dimensions:
motives and intentions, means and methods, and outcomes and results (SanFalcon & Spears,
2008). The first dimension answers the question, “Why?” In order to grow and develop their
leadership abilities, leaders must be willing and able to understand their own reasons for wanting
to lead in the first place. What do they hope to accomplish on both a personal and an
organizational level? The second dimension answers the question, “How?” because it focuses on
how the leadership is accomplished or expressed in terms of the leader as a person and the
structures, processes and procedures that are used by the leader (SanFalcon & Spears, 2008:6-7).
“In this dimension, the two-fold process of transformation-self and system” is what makes
leadership work. The third dimension answers the question, “What?” because it evaluates what is
actually achieved. A leader’s particular leadership philosophy is evident in the way in which
each of these questions is answered. The results stem from the methods which are based on the
leader’s motives; it’s a chain reaction. If a leader’s motives are negative or self-serving, then his
or her methods will be skewed, the end result of which will be disadvantageous for both
followers and the organization.
5.1.3 Effects of employee turnover

Employee turnover is expensive from the view of the organization. Voluntary quits which
represents an migration of human capital investment from organizations and the following
replacement process involves various costs to the organizations. These replacement costs include
For example, search of the external labor market for a possible substitute, selection between
Competing substitutes, induction of the chosen substitute, and formal and informal training of the
Substitute until he or she attains turnover intention levels equivalent.
t to the individual who quit John(2000). Addition to these replacement costs, output would be
affected to some extend or output would be maintained at the cost of overtime payment. The reason
so much attention has been paid to the issue of turnover is because turnover has some significant
effects on organizations
(DeMicco and Giridharan, 1987; Dyke and Strick, 1990; Cantrell and Saranakhsh, 1991; Denvir
And Mcmahon, 1992).Many researchers argue that high turnover rates might have negative
Effects on the profitability of organizations if not managed properly (Hogan, 1992; Wasmuth and
Davis, 1993; Barrows, 1990). Hogan 1992, nearly twenty years ago the direct and indirect cost of
a single line employee quitting was between $ 1400 and $4000. Turnover has many hidden or
invisible costs Philips (1990) and these invisible costs are result of incoming employees, coworkers
closely associated with incoming employees, co-workers closely associated with departing
employees and position being filled while vacant. And all these affect the profitability of the
organization. On the other hand turnover effects on customer service and satisfaction Kemal et al.
(2002). Catherine (2002) argue that turnover include other costs, such as lost productivity, lost
sales, and management’s time, estimate the turnover costs of an hourly employee to be $3,000
to$10,000 each. This clearly demonstrates that turnover affects the profitability of the organization
and if it’s not managed properly it would have the negative effect on the profit. However, voluntary
turnover incurs significant cost, both in terms of direct Costs (replacement, recruitment and
selection, temporary staff, management time), and also (and perhaps more significantly) in terms
of indirect costs (morale, pressure on remaining staff, Costs of learning, product/service quality,
organizational memory) and the loss of social capital Desset al (2001).
5.1.4 MEANS AND METHODS
During economic recessions, such as the United States has been facing for the past several years,
organizational leaders should be transformational in nature in order to “provide new solutions,
stimulate rapid response, develop subordinates, and provide reasons for take in engage in
inspirational leadership to mobilize volunteers’ time and energy” (Bass, 1985, p. 157). Three
methods which are used by transformational leaders are inspiration through charisma, displaying

consideration for followers as individuals, and providing intellectual stimulation (Bass).
Transformational leadership is more likely to appear in organizations where “the task requires
cooperative efforts among subordinates” because the leader needs to “clarify the larger objectives
and to develop… the motivation to achieve” (Bass, p. 166).
Transformational leaders encourage followers to think beyond themselves to higher-order
considerations through clear articulation of expectations and justification of those expectations
and by serving as role models of what they expect from followers and subordinates (Bass, 1985).
Transformational leaders also accomplish this task is by sharing “power with organizational
members to achieve” mutual goals, rather than operating through a hierarchical, top-down
leadership model (Daft, p. 242). According to Ballou (2011), “Effective leadership inspires
effective work from those whom you lead. The output of the team is in direct proportion to the
clarity of their vision about roles, responsibilities, and functions as a team”.
5.1.4.1 Outcomes and Results
According to Daft (2008:9), “an emphasis on control and rigidity serves to suck motivation,
innovation and morale rather than produce desired results”. This means that the transformational
leadership characteristic of sharing power rather than clinging to it can be more effective in
today’s global organizational climate. The use of intimidation and manipulation are obsolete as
means of driving the competitive spirit. For organizational leaders to be successful, they must
work with their team members in a cooperative environment instead of using command and
control methods.
“Employees like to have leaders who care about their work and who care about them” (Winston,
2002, p. 18). Subordinates who believe their leader truly cares about them and "has their interests
at heart are willing to commit themselves to corporate tasks" (Winston, p. 29). When followers
fervently support the organization’s goals and objectives, they try harder, strive to please their
leaders, and, in the end, are more effectual in their work. “Transformational leadership may
result ultimately in a higher level of satisfaction and effectiveness among the led” (Bass,
1985:32). Since most organizations, truly desire effective and successful employees for the
overall success of the organization, the use of transformational leadership methods provide a win
for both the organization and the individual leader and followers.

5.1.4.2 Transformational leadership Defined
Transformational leadership is a style of leadership where a leader works with subordinates to

identify needed change, creating a vision to guide the change through inspiration, and executing the
change in cycle with committed members of a group. Transformational leadership serves to
enhance the motivation, morale, and job turnover intention of followers through a variety of
mechanisms; these include connecting the follower's sense of identity and self to a project and to
the collective identity of the organization; being a role model for followers in order to inspire them
and to raise their interest in the project; challenging followers to take greater ownership for their
work, and understanding the strengths and weaknesses of followers, allowing the leader to align
followers with tasks that enhance their turnover intention .
The concept of transformational leadership was initially introduced by James V. Downton, the first
to coin the term "Transformational leadership", a concept further developed by leadership expert
and presidential biographer James MacGregor Burns. According to Burns, transformational
leadership can be seen when "leaders and followers make each other advance to a higher level of
morality and motivation." Through the strength of their vision and personality, transformational
leaders are able to inspire followers to change expectations, perceptions, and motivations to work
towards common goals. Unlike in the transactional approach, it is not based on a "give and take"
relationship, but on the leader's personality, traits and ability to make a change through example,
articulation of an energizing vision and challenging goals. Transforming leaders are idealized in the
sense that they are a moral exemplar of working towards the benefit of the team, organization
and/or community. Burns theorized that transforming and transactional leadership were mutually
exclusive styles. Later, researcher Bernard M. Bass expanded upon Burns' original ideas to develop
what is today referred to as Bass’ Transformational Leadership Theory. According to Bass,
transformational leadership can be defined based on the impact that it has on followers.
Transformational leaders, Bass suggested, garner trust, respect, and admiration from their
followers.In addition, this leader encourages followers to come up with new and unique ways to
challenge the status quo and to alter the environment to support being successful. Finally, in

contrast to Burns, Bass suggested that leadership can simultaneously display both transformational
and transactional leadership.
5.1.5 Transformational leadership Dimensions
Transformational leaders are described to hold positive expectations for followers, believing that
they can do their best. As a result, they inspire, empower, and stimulate followers to exceed normal
levels of turnover intention. Transformational leaders also focus on and care about followers and
their personal needs and development [ Riggio, Ronald E]. Transformational leaders fit well in
leading and working with complex work groups and organizations, where beyond seeking an
inspirational leader to help guide them through an uncertain environment, followers are also
challenged and feel empowered; this nurtures them into becoming loyal, high performers.
Leadership is the critical factor in the initiation and implementation of such a change process, and
the transformational style of leadership engenders a positive impact on individuals, teams, and
organizations during the change process.
There are 4 components to transformational leadership, sometimes referred to as the 4 I's:
Idealized Influence; Inspirational Motivation; Intellectual Stimulation; Individual consideration
organization.

The major characteristics of transformational leadership include engendering trust, admiration,
loyalty, and respect amongst followers through application of charismatic vision and behavior
Leaders who apply idealized influence on their followers gain the trust and confidence of the
followers.
The followers admire the leader as a role model and respect the decisions made by him or her.
Transformational leaders strive towards creating such a state of idealized influence example acting
confidently and optimistically sharing risks with followers emphasizing values and reinforcing
them by symbolic actions displaying a high level of ethical and moral conduct Transformational
leadership is a process that changes and transforms individuals (Northouse 2001). In other words,
transformational leadership is the ability to get people to want to change, to improve, and to be led.
It involves assessing associates' motives, satisfying their needs, and valuing them (Northouse
2001). Therefore, a transformational leader could make the company more successful by valuing its
associates.
5.1.6 Different Types of Leadership Styles
There are three main types of leadership style globally recognized in the workplace. These are all
reviewed below covering both ends of the task management spectrum.
There are now four new types of leadership identified for the modern office environment. All work
in the right circumstances to get work done quickly or to motivate staff over a longer period of
time.
The Three Classic Styles of Leadership
There are three leadership styles developed by psychologist Kurt Lewin that are considered to be
among the "classic" methodologies used by business leaders. Each has its strengths and drawbacks
- here are more details on each of them:
1. Laissez-Faire Leadership
This type is the largely hands-off with slight direction and supervision from the manager to the
staff. The key to using this method is having well trained and efficient directors who can work as
intermediaries between you and your employees.

2. Autocratic Leadership
This is a leadership style that has become something of a relic in today's business environment. The
reason is that most employees work better without the overbearing presence of their boss around at
all times. However, there are some who would argue that the Autocratic methods are still as
effective as they were in Feudal Europe - but only if properly balanced with feedback and face
time.
3. Participative Leadership
The third approach is to find a happy medium between the above two methods. These managers
back-off more to allow people to tap their creativity and think independently using their own
initiative, while still maintaining enough control to guide the overall vision of teams without
imposing their own vision on their decisions. In short, you're giving them a much greater lead and
will need to be more trusting of decisions made by your directors.
These three leadership types form the foundation of most styles used by corporate leaders today.
However, they do not necessarily encompass every philosophy on the nature of a business and how
leadership skills should be developed.
Other Leadership Styles
Other leadership styles that are popular in a number of fields, or that have been popular in the past
include:
4. Situational Leadership
This has leaders using their leadership skills in different methods depending on if the situation calls
for task or relationship oriented decisions.
5. Transactional Leadership
This technique has you getting things done within the current methods accepted by the industry.
Many people refer to this method as a "by the book" management style.
6. Transformational Leadership

The opposite of Transactional, Transformational Leadership revolves around breeding change in as
many ways as possible.
7. Strategic Leadership
Many large corporations, as well as the armed forces, use this leadership style - essentially working
to outwit an opponent at every step.
About Leadership
Leadership is a management area that's critical to improve staff morale and productivity. Everyone
needs to find the leadership style that works best for themselves and their subordinates. What
works for your superiors may not work for you and your team. However, if you take some time and
analyses different leadership styles and how they work for different personality types, you stand a
much better chance of success as a leader.
Leadership is not something to be stepped into lightly, and if it does not come to you naturally, as
is the case for many new managers or business owners, it's important to spend some time
determining which method of leadership will work best as part of your personal development
plan.If you know the culture of your particular business well, this may be easier, as you only need
to adjust to the needs of your employees. However, if you're moving into a new industry or an
established corporation, making the right leadership decisions can be hard when you're unaware of
current practices.
2.1.7 The concept of Turnover Intention
Turnover intension is defined as an Employees’ personal estimated probability that he or she has
a deliberate intent (interest) to leaving the organization permanently in near future. Turnover
intention also cited as one’s propensity to leave. Turnover are classified and categorized into
voluntary or involuntary, as well as functional or dysfunctional, each will have varying degree
of impact on the organization. Voluntary turnover is defined as a process in which an
employee makes decision whether to stay on or leave the organization. Mobley further
commented that this type of turnover is usually dysfunctional and can be most detrimental to the
organization. It is also warned by Abbasi and Hollman (2000) that those that most likely to leave
the organization are those most talented and smartest employee within the group. Their valuable
experiences, talent, skills and knowledge will leave with them and resulted in deteriorating
efficiency. In contrast, involuntary turnover is referred to the situation in which the organization
undertaken the control over the employee’s decision to stay or leave the organization
(McPherson 1976). The reason why it is classified as functional turnover is due to the often
removal of under-performing employees (Wells et al. 2010).
5.1.7 Determinants of Turnover Intention
Employee turnover may be understood as the employee leaving the organization or profession
voluntarily. It has been observed that voluntary turnover is an interdisciplinary and
multidimensional construct. The problem of voluntary turnover stretches beyond the range of
employee and organization. The concept of voluntary turnover can be explicated only when it is
accepted as a combination of social, economic, and psychological processes (Udechukwu et al.,
2007). Further, studies indicate that voluntary turnover is consequence of employee initiating the
termination of their employee-organization relationship (see Lambert, 2001, for example).
Additionally, various models on turnover behavior indicate the multistage nature of the term and
suggest that it Electronic copy available at:http://ssrn.com/abstract includes attitudinal,
decisional, and behavioral components (Parasuraman, 1989; Price and Muller, 1981; Weisman et
al., 1980). Academics have been interested in turnover intention of employees as precursor of
turnover behavior for the last six decades. Early literature on turnover behavior indicated that the
employees would initiate the process of termination of their relationship with their employee/
organization/profession only when there is perceived desirability to do so and there is a
perceived possibility of such ease of movement (March and Simon, 1958). This perceived
desirability of termination of employee-employer relation is known as turnover intention.
Turnover intention may be defined as the individual’s intention to voluntary quit the organization
or profession. Intentions are important to study as they predict an individual’s perception and
judgment (Mobley et al., 1979).

5.1.8 Theoretical Framework
There are many types of leadership styles discussed in the literature. Visionary leadership,
integration leadership, fulfillment leadership, transactional leadership, charismatic leadership,
authentic leadership, and transformational leadership are just to mention a few. Trying to
uncover these types of leadership styles in a single study is next to impossible. Hence, the
researcher decided to limit the conceptual scope of this study to the interplay between the effect
of leadership style and employs yes’ turnover intention.
5.2 Empirical related literature review
A number of researchers have explored the relationship between the effect of leadership and
turnover intention. The effect of leadership was contrary related to turnover intentions among
employees for several commercial and profit oriented based business. In another study carried
by (Bycio, Hackett & Allen, 1995) in the nursing profession, it was found the higher degrees of
the effect of leadership were achievement of their objectives, associated with lower intention to
leave. This supports the effect of leadership pulls and directs followers intrinsically towards
achievement of long run organizational objectives. This style of leadership changes the
perception and beliefs of their followers to enhance follower’s involvement and commitment in
the organization (Shamir, House & Arthu 1993). It’s the sort of engagement between followers
and leadership that enhance morality and motivational level of each other. According to Bass
(1985) transformational leadership affect followers in such a way that they develop trust,
admiration towards leadership and exhibit loyalty to the organization (Gul 2012). According to
Bass (1998) it is indicated in the literature that in order to reduce intentions of voluntary
turnover, the effect of leadership is a key factor. Martin and Epitropaki (2001) that an intention of
voluntary turnover decreases with the increase of t the effect of leadership found it in a study.
Empirical studies have also been done to see the relation between leadership and turnover
intention. For example, Wells and Peachey (2010) have conducted a separate study to investigate
the relationship between leadership behaviors, satisfaction with the leaders and voluntary
turnover intentions. The study result revealed significant negative associations between
transformational leadership behavior and voluntary organizational turnover intentions as well

as the correlation between transactional leadership behavior and voluntary organizational
turnover intentions. Walls’s study further explained on why transactional leadership
behavior was related to reduce voluntary organizational turnover intentions by quoting
justice theory of Cobb et al. Another study conducted by Sellgren on exploring the relationship
between leadership behavior of nurse managers and staff turnover has revealed a weak
correlation between leadership behavior and staff turnover.Therefore, in line with the
hypothesis formulated in chapter one and the objectives of the study, the following conceptual
Model is developed to be tested.
5.2.1 The effect of transformational Leadership and Turnover Intention
The relationship between transformational leadership and turnover intention has been explored
by a number of researchers. Their studies have generally shown that transformational leadership
is the key factor (Epitropaki 2001). Transformational leadership was contrary related to turnover
intentions among employees for several commercial and profit oriented based business. In
another study carried by (Bycio, Hackett & Allen, 1995) in the nursing profession, it was found
the higher degrees of transformational leadership were achievement of their objectives, associated
with lower intention to leave. This supports transformational leadership pulls and directs
followers intrinsically towards achievement of long run organizational objectives. This style of
leadership changes the perception and beliefs of their followers to enhance follower’s
involvement and commitment in the organization (Shamir, House & Arthu 1993). It’s the sort of
engagement between followers and leadership that enhance morality and motivational level of
each other. According to Bass (1985) transformational leadership affect followers in such a way
that they develop trust, admiration towards leadership and exhibit loyalty to the organization
(Gul 2012). According to Bass (1998) it is indicated in the literature that in order to reduce
intentions of voluntary turnover, transformational leadership is a key factor. It was found in a
study by Martin and Epitropaki (2001) that an intention of voluntary turnover decreases with
the increase of transformational leadership.

5.2.2 The Effect of Transactional Leadership Style and Employees’ Turnover Intention
Transactional leadership style relies on the leader’s ability to bargain the suitable behavior of
followers on the basis of rewards or punishment (Rees & French (2013). Nwokocha and
Iheriohanma (2015) define transactional leadership as an exchange process that ensures that the
follower is in compliance with the leader’s request but very unlikely to produce commitment and
zeal to the task objectives. According to Bass and Bass (2008), the transactional leadership style is
composed of, or is subject to two factors. They identified the factors as contingent rewards and
management by exception. For contingent rewards, the leader assigns a task to a follower and
provides a psychological or material reward in exchange for a satisfactory execution of the task.
Management by exception is referred to as “a corrective transaction” (Bass & Bass, 2008). It could
be either passive or active. If active, the leader monitors the mistakes, errors and then employs
some corrective measures; if passive, the leader takes no corrective action.
Ojokuku (2012) suggest that the transactional leader can be a problem with expectations. This
suggests that if the expectation of one person is not met, the exchange process may be interrupted.
Although Nwokocha and Iheriohanma (2015) identify that the inability of team members and
followers to improve their job satisfaction level could result in turnover in the organization, they
point out that the transactional leadership style can help to clarify the employees’ roles and
responsibilities and that employees who are motivated by rewards often perform and succeed in
such organizations. This suggests that the transactional leadership style could bring about a positive
or negative effect in the organization. Employees who are motivated by the external rewards could
work towards better performance which could have a positive impact on the organization and the
employee.
5.2.3 The effect of laissez-faire leadership style and employees’ turnover intention
Laissez faire is a French phrase which means “let it be” and it is also known as the “hands off
style” (Nwokocha & Iheriohanma, 2015). According to Gill (2014) it means leaving subordinates
to complete tasks and jobs in the way they choose without adherence to any strict policies or

procedures. Bass (2008) describes the laissez faire leadership style as one in which the leader has
no belief in their own ability to supervise. He further stated that the leader has no clear set goals
towards how they may work, do not help the group in making decisions and so leave too much
responsibility with their subordinates.
According to Puni, Ofei and Okoe (2014), the laissez-faire leader avoids controlling his employees
and so only relies on the few available employees who are loyal to get a task done. A laissez faire
leader does not believe in employee development as they believe that employees can take care of
themselves (Puni et al, 2014). This leadership style cannot be said to be operational in the banking
sector which requires that both the leader and subordinates have an input in the decision making
process and completion of tasks to ensure the success of the organization.
The laissez-faire style of leadership is often dismissed as one that leads to poor group outcomes,
but it can be appropriate and effective in a variety of situations. In setting where group members
are highly skilled and motivated, it can actually produce excellent results.
5.2.4 Transformational and Transactional Theory
Over the past twenty five years, a large body of research has emerged around transformational–
transactional leadership theory. Transactional theories focus on the role of supervision,
organization and group turnover intention and they base leadership on a system of rewards and
punishments for meeting particular objectives. Bass (1985) as cited by Chan (2005) theorized the
transactional leaders appeal to the subordinates’ self-interests. Transactional leaders attempt to
meet the current needs of their subordinates through bargaining and exchanging. Both leaders and
followers focus on achieving the negotiated turnover intention level.

5.2.5 Conceptual frame work
Laissez-Faire Leadership style
Transformation Leadership
style
Employees’ Turnover
j Independent
Transactional Leadershipvari dependent variable
style
In dependent variable
6. METHODOLOGY OF STUDY
6.1 The Study Setting
These studies will behavior on the effect of leadership style on employees’ turnover Intention the
case of commercial bank of Ethiopia topics included in this section are research approach and
design, data type and sources, target population and sample design, data collection instrument and
methods, data analysis.

6.2 Study Design
The study has using a quantitative methodology. Hence, a cross-sectional survey method is
engaged. It also used both descriptive and explanatory study designs to examine data collected
from employees. A descriptive research design have been used to conduct the study because the
researcher is interested in describing the existing situation under study. This study will also used
explanatory study design, to explaining, understanding, and predicting the relationship between
variables.
6.3 Population and Sampling Design
The sampling design process which was used during the study includes the following sub-
elements:-
6.3.1 Population of the Study
The population of this study will be all permanent employees of commercial bank of Ethiopia. It
including in Addis Ababa kirkos distinct branches will be the study.
6.3.2 Sample selection Technique

For the purpose of this study, sampling technique is used Probability Samples selection technique:
- every unit in the population has a chance (greater than zero) of being selected in the sample, and
this probability can be accurately determined. Simple random sampling Applicable once population
is small & readily available.
All subsets of the frame are given an equal probability. Each element of the frame thus has an equal
probability of selection. It provides for greatest number of possible samples. This is done by
assigning a number to each unit in the sampling frame. A table of random number or lottery system
is used to determine which units are to be selected.
6.3.3 Sample size

Studying the whole of the population impossible. For this reason, the researcher be taken picked a
representative sample of the whole population from staff inventory. To achieve a representative
sample for a research study, the people who were studied were carefully selected using simple
random sampling methods through outlook or by collation raw data. The researcher used a sample
of 225 respondents drawn from the population 516 commercial bank of Ethiopia kirkos district
Staff in the sample branch of commercial bank of Ethiopia. A sample of 225 respondents was
chosen since it represents the permanent employees in the district and also these respondents have
worked for the bank for more than two years leading to reliable assessment of both perceptions of
leadership and employees. From 225 respondents who are tellers, banking officers and customer
service staff.
The sample size of the employees have determined by using simple random sampling method.
After the sample frame will be obtained from the human resource department of the bank, the
researcher used the following sample size determination formula to determine the sample size of
the population.
Given these in to account, the study utilized the following sample size determining formula to set
the actual sample size scientifically Slovin 1960.
N
The actual sample size formula n=
1+ N ( e)2
Wheren- actual size

N-total population
N
e -degree of accuracy depend on wide range of population set as n=
1+ N ( e)2
516
n=
1+516 (0.05)2
Sample size = 225 Employees
6.4 Source and methods of Data collections

As part of the research strategy quantitative data will generated from primary sources of data to be
used as an input for the finding of this research. Primary data was obtained through questionnaire
from the selected two year and above experience after getting permission from the concerned
authority in commercial bank of Ethiopia. Also, the data use from journals, internet, books, the
bank’s quarter and annual report were examined as a secondary data.
6.5 Methods of Data Collection
Main instruments of data collection questionnaire The questionnaires were filled by employees of
CBE, kirkos district regarding The Effect of Leadership style Practiced on Employees’ Turnover
Intention in the CBE.
6.6 Data Collection Tools
To get the information researcher has design and will distribute a set of questionnaire. a
questionnaire consisting the independent variable and dependent variables will be conducted by
extracting source from few established questionnaire.as the researcher will interest to collect
original data from a population ,the take a sample to observed or interviewed. Thus ,a survey by a
questionnaire is consider the most appropriate method for measuring the perceptions of the workers
,while minimizing the possibility of researcher bias and providing a greater degree of subjectivity
because of the direct response and feedback from the respondent that can be collected in short
period of time and in an easier manner
6.7 Data Analysis Techniques
An array of the descriptive and inferential analyses will conduct to the five research questions
presented in the first chapter .once data will collect ,it will be necessary to employ statistical
techniques to analyze the information .the data will analyze using SPSS software.

6.8 Ethical Considerations
Ethical clearance and permission obtained from the institutional review board of Maryland
International Collage Ethiopia. Participation in the study is on the voluntary basis and participants
will be asked for willingness before they are provided the questionnaire .the subjects are also
assured that their responses used only for the purpose of the study.an attempt will be made first to
explain the objectives and significance of the study to the respondents. Name and other identifying
information are not used in the study .the researcher safe guarded all information related to the
participants. Their privacy, identity and confidentiality are maintained by assigning them code
numbers instead of names.
References
 Avelio,B.J.,& Bass,B.M (2002)Developing Potential across a full range of
leadership: cases on transactional and Transformational Leadership Hallinger, P.; Heck, R.H.
Reassessing the principal’s role in school effectiveness: A review of empirical research. Educ.
Adm. Q. 1996, 32, 5–44.
 Avolio,B.and Bass,B.(1991),The full-Range of Leadership Development, Center for
Leadership studies, Binghamton,NY
 Barker,A.M.(1990)Transformational Nursing Leadership: Avision for the future
 Bass, B. M. (1998). Transformational Leadership: Industrial, Military, and Educational Impact.

Mahwah, NJ: Lawrence Erlbaum Associates.
 Bass, B. M., & Avolio, B. J. (1989). The Multifactor Leadership Questionnaire. PaloAlto,
 Bass, B. M., & Bass, R. (2009). The Bass handbook of leadership: Theory, research, and
managerial applications. Simon and Schuster.
 Gill, E. (2014) What is laissez-faire leadership? How autonomy can drive success.

 Goddard, R.D.; Tschannen-Moran, M.; Hoy, W.K. A multilevelexamination of the distributionand
effects of teacher trust in students and parents in urban elementary schools. Elem. Sch. J. 2001,
102, 3–17.
 Hallinger, P.; Heck, R.H. Exploring the Principal’s Contribution to School Effectiveness:
 Heck R.; Hallinger, P. Modeling the longitudinal effects of school leadership on teaching and
learning. J. Educ. Adm. 2014, 52, 653–681.
 Heck, R.H.; Hallinger, P. Assessing the Contribution of Distributed Leadership to School
Improvement and Growth in Math Achievement. Am. Educ. Res. J. 2009, 46, 659–689.
 Kramer, R., Tyler, T., Eds.; Sage: Thousand Oaks, CA, USA, 1996; pp. 261–287. Goddard, R.D.
Relational networks, social trust, and norms: A social capital perspective on students’ chances of
academic success. Educ. Eval. Policy Anal. 2003, 25, 59–74.
 Leithwood, K.; Beatty, B. Leading with Teacher Emotions in Mind; Corwin: Thousand Oaks, CA,
USA, 2008.
 Leithwood, K.; Louis, K.S. Linking Leadership to Student Learning; Joyssey Bass: San Francisco,
CA, USA, 2011.
 Leithwood, K.; Patten, S.; Jantzi, D. Testing a conception of how leadership influences student
learning. Educ. Adm. Q. 2010, 46, 671–706.
 Marzano, R.J.; Waters, T.; McNulty, B. School Leadership that Works: From Research to Results;
ASCD and McREL: Aurora, CO, USA, 2005.
 Mishra, A.K. Organizational responses to crisis: The centrality of trust. In Trust in Organizations;
 Northouse, P.G. 2001. Leadership Theory and Practice, second edition. Thousand Oaks, CA: Sage
Publications, Inc.
 Nwokocha, I. and Iheriohanma E.B.J. (2015) ‘Nexus between Leadership styles, employee
retention and performance in organizations’. European Scientific Journal, 11(13): pp. 186-209.
 Ojokuku, R. M., Odetayo, T. A. and Sajuyigbe, A. S. (2012) ‘Impact of leadership style on
organizational performance: A case study of Nigerian banks’. American Journal of Business and
Management, 1(4): pp.202-207.
 Robinson, V.M.J.; Lloyd, C.A.; Lloyd, K.J. The Impact of Leadership on Student Outcomes: An
Analysis of the Differential Effects of Leadership Types. Educ. Adm. Q. 2008, 44, 635–674.
 Sun, J.P.; Leithwood, K. Direction-setting school leadership practices: A meta-analytical review of
evidence about their influence. Sch. Eff. Sch. Improv. 2015, doi:10.1080/09243453.2015.1005106.

 Tschannen-Moran, M.; Hoy, W.K. Trust in schools: A conceptual and empirical analysis. J. Educ.
Adm. 1998, 36, 334–352.
 Bass, B. M. (1998). Transformational Leadership: Industrial, Military, and Educational
Impact. Mahwah, NJ: Lawrence Erlbaum Associates.
 Bass, B. M., & Avolio, B. J. (1989). The Multifactor Leadership Questionnaire. Pal Alto,
 Leithwood, K., & Sun, J.-P. (2009). Transformational school leadership effects on schools,
teacher, and students. In: W. Hoy & M. DiPaola (Eds), Studies in school improvement
(pp. 1–22). Charlotte, NC: Information Age Publishing.
 Maertz, C. P., & Campion, M. A. (2004). Profiles in quitting integrating process and content
turnover theory. Academy of Management Journal, Ribbins, P., & Zhang, J. (2006). Culture,
societal culture and school leadership – A study of selected head teachers in rural China.
International Studies in Educational Administration, 34(2), 71–88.
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Charismatic Leadership. Organizational Science, 4, 577-594.
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.Mahwah,NJ:Etlbaum Associate

MARYLAND INTERNATIONAL COLLEGE
SCHOOL OF GRADUATE STUDIES
DEPARTMENT OF MASTERS OF BUSINESS ADMINISTRATION
Structured Questionnaire
Dear respondent
My name is Habtegebreal Demmssie I am postgraduate student in Maryland
International Collage. Currently I am doing my thesis entitled “The effect of
Leadership style practiced on Employees ‘Turnover Intention: The case of
Commercial Bank of Ethiopia. “The purpose of these questionnaires to collect data
successfully accomplishes this study.
Your responses will be used only for the research and hence will be kept
confidential. Therefore, you are kindly requested to answer each question honestly
and accurately. You are not expected to write your name.
Thank you for your welling cooperation in advance!

Part I: Background Information of Respondents
1. Sex:
Male Female
2. Age
18-25 26-35 36-45 37-54 Over 55years
3. Educational level
High school Certificate Diploma First Degree Masters and above
4. Number of years you have worked in the Bank
2-5 6-10 11-15 16andabove1
5. Your current position (Specify) -----------------------------------------------------

appropriate, using the scale from 1to5 (where1=Strongly Disagree (SD), 2=Disagree (D),
3=Neutral (N), 4=Agree (A),5=Strongly Agree (SA).
TRANSFORMATIONAL LEADERSHIP
Idealized Influence (II)
1 Your Manager/Leader goes beyond self-interest for the good of the group.
2 I have complete faith in my supervisor.
3 I am proud to be associated with my supervisor
Inspirational Motivation (IM)

1 My supervisor expresses in a few simple words what we could and should do
2 My supervisor provides appealing images about what we can do
3 My supervisor helps me find meaning in my work
Intellectual Simulation (IS)
1 My supervisor enables others to think about old problems in new ways

2 My supervisor provides others with new ways of looking at puzzling things.
3 My supervisor gets others to rethink ideas that they had never questioned before
TRANSACTIONAL LEADERSHIP
P LAISSEZ FAIRE LEADERSHIP
On my own way
HATEGEREAL DEMMSIA

Turnover intention Very Likely( Unlikely(1 Very

likely(3) 2) ) (0)
Organization one year from now.

6 I feel that I might lose valuable experience if I leave this
Organization.
8 I feel obligated to stay in this organization.
HATEGEREAL DEMMSIA
appropriate, using the scale from 0 to4 (where0= Not at all, 1 = Once in a while, 2=Sometimes,
3= fairly often (N), 4=frequently, if not always
I TRANSFORMATIONAL LEADERSHIP
1 My supervisor Instills pride in me

2 My supervisor Spends time teaching and coaching
3 My supervisor Considers moral and ethical consequences
4 My supervisor Views me as having different needs, abilities, and aspirations
5 My supervisor Listens to my concerns
6 My supervisor Encourages me to perform
7 My supervisor Increases my motivation
8 My supervisor Encourages me to think more creatively
9 My supervisor Sets challenging standards
10
2
II TRANSACTIONAL LEADERSHIP
4 My supervisor Works out agreements with me
5 My supervisor Will take action before problems are chronic
III LAISSEZ FAIRE LEADERSHIP
On my own way
HATEGEREAL DEMMSIA


IV Turnover intention Very Likely( Unlikely(1 Very

likely(3) 2) ) (0)
CBE one year from now.
6 I feel that I might lose valuable experience if I leave CBE.
8 I feel obligated to stay in CBE.
9 I believe that lack of clear job expectation is one of the factor or cause
for employees to leave CBE
V. Employee’s turnover Perception
HATEGEREAL DEMMSIA
1. Do you believe that there is high turnover in CBE?
i. Yes ii. No
2. What is the reason/s for this turnover? (Multiple chooses are possible)
a. Salary
b. Benefit packages
c. Opportunity for advancement
d. Unfavorable working condition
e. Unfavorable working condition
f. Others
3. Do you think the bank gives a lot importance to and take care of its employee?
i. Yes ii. No iii. Indifferent
organization.
HATEGEREAL DEMMSIA
HATEGEREAL DEMMSIA

Habtegebreal P.

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‘

The Effect of Leadership style Practiced on Employees’ Turnover

By: By: -HABTEGEBREAL DEMMSIE

ADDIS ABABA, ETHIOPIA

HATEGEREAL DEMMSIA Page 1

1.1 Background of the study..............................................................................................................4

1.2 Statement of the problem.............................................................................................................5

1.3 Research Question.......................................................................................................................7

1.4 Objectives of the study................................................................................................................7

1.5 Significance of the Study.............................................................................................................8

1.6 Scope of the study........................................................................................................................8

1.7 Limitations of the study...............................................................................................................8

1.8 Operational definition of key terms..............................................................................................9

1.9 Organization of Study..................................................................................................................9

2.1 Theoretical Related Literature Review......................................................................................10

2.1.1The Concept of Leadership...........................................................................................................10

2.1.3Effects of employee turnover........................................................................................................11

2.1.4MEANS AND METHODS...........................................................................................................12

2.1.5Transformational leadership Dimensions......................................................................................15

2.1.6Different Types of Leadership Styles............................................................................................16

2.1.7Determinants of Turnover Intention..............................................................................................19

HATEGEREAL DEMMSIA Page 2

2.2.1The effect of transformational Leadership and Turnover Intention...............................................21

2.2.2The Effect of Transactional Leadership Style and Employees’ Turnover Intention......................22

2.2.3The effect of laissez-faire leadership style and employees’ turnover intention..............................22

2.2.4Transformational and Transactional Theory..................................................................................23

2.2.5Conceptual frame work.................................................................................................................24

3.1 The Study Setting......................................................................................................................24

3.2 Study Design.............................................................................................................................24

3.3 Population and Sampling Design...............................................................................................25

3.3.1Population of the Study.................................................................................................................25

3.3.2Sample selection Technique..........................................................................................................25

3.4 Source and methods of Data collections....................................................................................26

3.5 Methods of Data Collection.......................................................................................................27

3.6 Data Collection Tools................................................................................................................27

3.7 Data Analysis Techniques..........................................................................................................27

3.8 Ethical Considerations...............................................................................................................27

HATEGEREAL DEMMSIA Page 3

1.1 Background of the study

1.2 Statement of the problem

HATEGEREAL DEMMSIA Page 5

HATEGEREAL DEMMSIA Page 6

1.3 Research Question

1.4 Objectives of the study

1.4.1 General Objective

HATEGEREAL DEMMSIA Page 7

1.5 Significance of the Study

1.6 Scope of the study

1.7 Limitations of the study

1.9 Organization of Study

HATEGEREAL DEMMSIA Page 9

2.1 Theoretical Related Literature Review

2.1.1 The Concept of Leadership

Proposing a definition of leadership that would be recognized by most researchers is difficult

HATEGEREAL DEMMSIA Page 10

2.1.2 Dimensions of Leadership

2.1.3 Effects of employee turnover

2.1.4 MEANS AND METHODS

HATEGEREAL DEMMSIA Page 12

2.1.4.1 Outcomes and Results

HATEGEREAL DEMMSIA Page 13

Transformational leadership is a style of leadership where a leader works with subordinates to

HATEGEREAL DEMMSIA Page 14