Introduction:

1.1 Background of the study

Leaders are key persons of an organization, who are responsible for the success or failure. That is
why the role of leadership is best put as: “An organization is the effect for which leadership is
the cause”. The role of leadership depends on leadership style which itself depends on the given
context. Concept of leadership is as old as humanity (Binfor, 2013). Effectiveness in leading
appears with know-how and action at the workplace. A good leader can be developed by way of
education, training, and the amassing of significant experience. Leadership style can be defined
as the modus operandi and move towards providing a path, implementing plans and means of
stirring the group. Over a period, many researchers have projected different styles of leadership
as there is no single style of leadership that can be measured perfectly (Rose, 2015). Despite the
various different leading ways prevailing, an effective leadership is one which inspires,
motivates and directs the followers in accomplishment of organizational vision. Leadership is an
inner aspect of organizational performance (Binfor, 2013). Leadership has a great impact on
employee commitment towards his organization, many studies revealed.

Kumar (2014) proposed leadership as an influence to accomplish an objective and direct the
organization in a way that makes it more cohesive and coherent. Thus, leadership is nothing
more than a power of persuasion with a postulation in the precise means to meet up the
predictable goals. Leadership styles are nothing more than a practice of leading a team in a
convinced means. There is no predetermined technique of doing; certain characteristics are
regular in the process of leading, which have been characterized as a range of leadership styles.
No style is fixed for a particular company; it’s a matter of circumstances and intent towards
goals.

Currently in Ethiopia, Insurance and other service providing companies, including government
and private are growing in different aspects of social activities. These social activities need
effective leadership practice in every sector and organizational levels. Therefore, this study was
designed to assess the Practices of organizational leadership in the case of Nib Insurance
Company (S.Co). Nowadays there are seventeen Insurance Companies in Ethiopia, one
Government owned and sixteen Private Insurance Companies. Nib Insurance company (S.C) is

1
one of the most exemplary quality service providing companies in Ethiopia. But this company
has many opportunities and ineffective leadership practices simultaneously. The company plays
a great role in increasing GDP and thereby economic development positively. Besides that, Nib
Insurance Company provides service in stabilizing the economy, mobilizing national resources,
enabling risks to be managed and it also increases employment in the economy. These factors
also accelerate economic growth. For these reasons insurance's role in a country's economy is
undeniable, and it is considered a reliable field of the service sector. Nib Insurance company is
one of the services providing organization in stimulating business activities to operate in a cost-
effective manner, by managing risks which associated with business activities are assumed by
third parties, safeguards the assets of its policyholders by transferring risk from an individual or
business to an insurance company, act as financial intermediaries in that they invest the
premiums they collect for providing this service.

1.2 Background of the Organization

Nib Insurance Company (NIC) is a private insurance company which was established in May 2, 2002
as a sister company to Nib International Bank registering its memorandum and article of association
with the document Authentication and Registration Office and getting its legal personality on March
15, 2002. NIC commenced its operation in May 2, 2002 as a General Insurance Company after getting
its license No. 010/10 from the National Bank of Ethiopia, the controlling authority for insurance
operation in Ethiopia. It has so far accomplished to have well organized and accessible 29 Branches
and 5 Contact offices in Addis Ababa and 14 Outline branches (NIC Company Profile, 2021/2022).

1.3 Objective of the study

The study is an attempt to identify the role of leaders, the source of power in leadership and the
style that is utilized in the Nib insurance Company. Another purpose of the study is to identify
the weakness and strength of leadership and to suggest possible recommendation to the problems
for the Nib insurance company on the basis of literature and our observation.

2
2. REVIEW OF RELATED LITERATURE

2.1 Leadership

Leadership is a dynamic relationship based on mutual influence and common purpose between
leaders and collaborations in which both are moved to higher level of motivation and moral
development as they affect real intended change (Stogdill ,1974). Leadership is an influence
relationship among leaders and followers who intend real changes that reflect their mutual
purposes (Joseph, 1993). Leadership is a complex process that results from the interaction among
a leader, followers, and the situation. Leadership involves Vision, motivation, setting a direction
and inspiring people and driving change within the organization. Companies have a high rate of
success when leadership skills complement each other (Bennis & Nanus, 1985). Leadership
revolves around vision, ideas, direction, and has more to do with inspiring people as to direction
and goals than with day-to-day implementation. Leaders must be capable of inspiring other
people to do things without actually sitting on top of them with a checklist.

Leadership and its role are the most concerning issues for business and organizations nowadays.
The “Leaders are individuals who establish direction for a working group of individuals and who
gain Commitment from this group of members to establish direction and who then motivate
members to achieve the direction’s outcomes” (Conger, 1992). Leaders are those who
consistently make effective contributions to social order, and who are expected and perceived to
do so. Leader’s words, actions, decisions, interactions and styles affect the beliefs, values,
feelings and behaviors of people they work with and are critical in determining how others
respond in a team. On the other hand, poor leaders try to impose responsibilities and
accountabilities to subordinates for any shortcoming executions (Taylor, 2005). These workers
lack belonging and try to secure themselves regardless of the organizational goals. This indicates
workers under poor leadership practice will have less confidence, no creativity, low motivation
& initiation and lead to low performance.

Leadership is defined as “the ability to influence through communication the activities of others,
individually or as a group, toward the accomplishment of worthwhile, meaningful, and

3
challenging goals (Ramasamy , 1999). The greatest importance is the relationship between the
leader and the follower. (Northouse, 2013) Many of us have at some point in our lives been
placed either in the position of the leader or the position of the follower. The leader for most
situations is seen as the person who gives direction, and leads a follower to grow and develop.
When the relationship is close between the two, success has been achieved, the follower feels a
sense of satisfaction, turnover in an organization is low, productivity is high, higher productivity,
attitudes and positive and followers are more likely to work harder resulting in increased levels
of promotions.

2. Type of leadership style

Autocratic leadership: This is an extreme way of leading the followers by powering them. This
type of leadership is usually carried by a person who wants to impose their will and perspectives,
and look forward to quick solutions in every decision. North Korean Dictator Kim Jong-un is a
perfect example for this style. Some of the conditions to use the style appropriately may be the
situations of emergencies where decisions need to be made quickly or staff is not well trained to
do the allotted task.

Bureaucratic Leadership: The leadership style is based on a set of rules, fixed by higher
authorities and goes strictly by the book to apply rules. The style is usually found in the
organizations where high risk routine tasks are involved. Banking systems, government agencies
etc. are examples, which depict creativity and flexibility in their routine tasks. Sometimes staffs
really do not know what is expected of them.

Laissez-Faire/ delegation leadership: This leadership style is also known as the “hands-off¨
style. The style is based on trust, where a leader provides his guidance and delegates the
responsibility to accomplish the task. Mahatma Gandhi was a laissez-faire leader. Binfor
identified a similar style practiced in CSIR-Oil Palm Research Institute, Ghana. But the style is
also not benefited as appropriate administration, monitoring and directions could not be provided
all time.

Participative Leadership: A leader offers importance to the opinion of the team members and
connects them in the decision making course of action but maintains the concluding decision

4
making authority. Participative leaders have a high degree of consultation with their followers
(Geogrge, 2016).
Effectiveness of styles ensures more with highly trained and self motivated team (Moorhead &
Griffin, 2012).

Transactional Leadership: Transactional leaders are more anxious with processes rather than
future growth. Odumeru (2013) argued that these leaders disburse more awareness to followers'
work in order to locate faults and deviations. Waldman proposed the style as maintenance
leadership that may be an important ingredient of organizational /effectiveness. This task
oriented style may be suitable in emergency situations, where work has to be carried out in a
specific pattern. Triumphant execution of the style depends upon the relationship of leader-
follower with acceptance of hierarchical differences and the ability to work through this mode of
exchange (Marco, 2008).
The effect of Leadership style on Organization

The leadership style influences the culture of the organization which, in turn, influences the
organizational performance. The role of leadership in an organization is crucial in terms of
creating a vision, mission, determination and establishment of objectives, designing strategies,
policies, and methods to achieve the organizational objectives effectively and efficiently along
with directing and coordinating the efforts and organizational activities (Xu & Wang, 2008). Top
quality leadership is essential to achieve the mission and vision along with coping with the
changes occurring in the external environment (Harris A. et al, 2007). In current time, many
companies are facing problems related to unethical practices, high labor turnover, poor financial
performance, etc. This may be due to the lack of effective leadership. The main aim of many
companies is to accomplish its stated objectives; hence, there is a need of effective leaders for
coordinating and motivating the employees (Vigoda-Gadot, 2012). Perceived organizational
politics has also an important influence on outcomes because it often interferes with the normal
processes of organizations like rewards, decision-making and promotions, which damage the
performance and productivity at both organizational and individual level (Dhar, 2009). Effective
leaders who possess good leadership styles have the ability to moderate or minimize the
organizational politics perceptions hence increasing job satisfaction. The leadership style
influences the culture of the organization which, in turn, influences the organizational

5
performance. The managers that focus on Democratic, transformational and transactional
leadership focus particularly on developing the overall value system of the employees,
development of moralities, skills and their motivation level.

Effective leadership
Effective leadership is one of most essential parts of the overall method for an organization to
sustain their business in the face of problems caused by the rapid growth of the economic
environment. (Cabeza-Erikson, Edwards & Van Brabant T 2008),, 2008).Other than that, good
leaders can also influence their employees and motivate them by strengthening a positive
organization culture and through generous employee benefits, for instance health care insurance,
worker compensation, leave benefits and others.

Factors Affecting Leadership

Studies have revealed several negative personal traits that lead to ineffectiveness of leadership.
According to (McCall W. and Lombardo M,, 1983) some personal behaviors of leaders that lead
to ineffectiveness and “derailment” in general include both anti-subordinate behaviors such as
intimidating and bullying subordinates, and anti-organizational behaviors such as laziness, lack
of appropriate management skills, failing to build teams, being unable to think strategically and
spending more time occupied with matters other than their work assignments. In a later study,
(Lombardo, Ruderman and McCauley, 1988) noted the following characteristics as contributing
to the incompetence of managers: Inability to build a cohesive team (team spirit); Over- and
under-managing;
● Ineffective communication & Decision making process;
● Not supportive and demanding of subordinates;
● Lack of effective Training and Development;
● Being insensitive, cold, and arrogant;
● Maintaining poor relations with staff; and
● Overriding personality defects & poor mentoring relationships.
So, Leaders should be proactive toward taking time to plan, improve how their team works and
putting measures in place to prevent problems before they happen. And also proactively
Identifying areas of risk for their team, and working on measures that will reduce their impact, or
stop the problems happening altogether.

6
7