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Leadership and its impact on organizational culture
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INTERNATIONAL JOURNAL OF BUSINESS STUDIES VOL 10, NO2, DEC 2002: pages 1-26
LEADERSHIP AND ITS IMPACT ON

ORGANIZATIONAL CULTURE
James C. Sarros * , Judy Gray* and Iain L. Densten**
Our study of 1,918 members of the Australian Institute of Management revealed

strong and positive relationships among leadership and organizational culture.
Individualized consideration was the prominent leadership style of executives, and
performance orientation the prominent organizational culture. Mean scores for all
leadership factors were higher than the established norms for these factors. Culture
was shown to be more responsive to leadership dimensions than leadership was to
culture. Cultures with the emphasis on rewards were best predicted by a mixture of
transactional (contingent reward) and transformational (inspirational motivation)
leadership approaches. Cultures with a transformational focus (supportiveness,
social responsibility) were best predicted by transformational (inspirational
motivation) leadership styles. In many cases, more than double the variance in
organizational culture was accounted for by leadership style, than was the reverse
case.
Keywords: leadership,organizational culture, regression analysis,

executives,organizational culture profile, full range leadership
I. INTRODUCTION
“I think good leaders are constantly learning from what they do, what they see, what
they take in and process, and they recognise also that the status quo is not acceptable.
Things have got to be better than what the status quo is and they are absolutely
committed to changing things. The other side of that is of course, I think good leaders
apart from just learning, are very reflective people too. As part of our processing and
looking around and taking things in and chewing it over and thinking about it, I think
they become quite reflective as well. Then finally, this does go back to the key issue
of motivating people. I think they have to be students of human behaviour, they have
to understand a little bit about human behaviour. I think they, one way or another,
come to an understanding of how do you get results in spite of a whole bunch of
difficulties and how do you leverage off a whole bunch of positives to get good
results. That formula is always a one off. It's a mix between the leader and the
followers. It's a lot to do with the contingent circumstances of the day and all of those
sorts of things. So in terms of what we do in Australia, I think a study of leadership
across the board from, if you like, the shop floor production level through to the
____________________________
* Monash University, Australia
** University of New South Wales, Australia
1
Leadership and its Impact on Organizational Culture
strategic leadership of issues of republics and governance and what sort of a country
do we want to be, is absolutely vital.”
Admiral Chris Barrie
Chief of the Defence Force
II. PURPOSE – THE LEADERSHIP-CULTURE CONUNDRUM
The observations of Admiral Barrie, Former Chief of the Australian Defence Force,
indicate that leadership lies at the heart of what makes us human. Leadership consists
of attributes and skills that determine not only the nature of enterprise, in all its
manifestations, but the overall nature of society and the world. In this paper, we
delimit the study of leadership to its manifestations in organizational settings, but
acknowledge that the findings may have wider applications.
The purpose of this paper was to determine the extent to which specific dimensions of
leadership predicted specific facets of organizational culture. This purpose addresses
the ongoing debate regarding which comes first, leadership or culture. Schein’s
(1983, 1985, 1992) seminal work proposes that the leader in large measure creates the
corporate culture, a view shared by Daymon (2000) and Martin, Sitkin and Boehm
(1985). However, if we accept Hatch’s (1993) critique of Schein’s (1985) culture
model, then organizational culture can be both an antecedent and intervening variable
simultaneously.
Whatever the relationship, there is irrefutable evidence that strong organizational

cultures are associated with strong and competent leadership (e.g., Bass, 1998b;
Kotter and Heskett, 1992; Sheridan, 1992). Specifically, Bass and Avolio (1993)
claimed that within a transformational culture there exists a sense of purpose and a
feeling of family. Leaders in these cultures are role models who espouse
organizational goals and encourage employee commitment to the organization’s
purpose and vision. Further, transformational leaders change their culture by
realigning the organization’s culture with a new vision (Bass and Avolio, 1993).
Transactional cultures in comparison focus on the here and now, where everything has
a value, but where the long-term contributions of people and processes may not be
fully harnessed or appreciated. Transactional leaders work within their organizational
cultures following existing rules, procedures and norms (Bass and Avolio, 1993).
Nonetheless, a mixture of transformational and transactional leadership is needed in
order to maintain sustainable and competitive cultures (Bass, 1997, 1998a,b, 1999).
III. THE STUDY IN CONTEXT – ITS PLACE IN TIME
Our study began middle 2000-early 2001 as we surveyed the literature and previous
studies to determine the issues most important to Australian business, and to the study
of leadership generally. One of the key leadership studies of the 1990s, sponsored by
the Federal Labour Government at the time, was conducted by former senior CRA
executive David Karpin (1995). Karpin's (1995) report entitled the Industry Task
Force on Leadership and Management Skills in Australia identified that the emerging
forms of organizations (more dynamic, unpredictable, global, and competitive)
required new forms of leadership. Karpin noted that Australian managers needed to
2
International Journal of Business Studies
improve their people, strategic, and entrepreneurial skills as part of the new leadership
approach. In effect, the main finding by Karpin (1995) was that Australian managers
had failed to make the transition to successful leadership of their companies. While
not directly addressing how Australian corporations and their leaders have embraced
Karpin's recommendations, our paper identifies the nature of leadership and
organizational culture in Australian enterprises in the early 21st century. This profile
may encourage further review of management and leadership in the near future
beyond the confines of an Australian corporate workplace. The findings also reveal
that Australian managers as examined in this study are making some inroads into
developing more inclusive forms of leadership than previously thought possible by
Karpin (1995), and that these leadership approaches have a direct and significant
impact on organizational culture.
Leadership
I regard leadership as part of good management because clearly strategy, as

indeed leadership, is not confined to the top of the organization. Indeed if
you have an inclusive approach you would want to see that people at all
levels . . . have the willingness to actually participate in the setting of
strategy for the organization from their perception and overall for the
organization. At the end of the day, of course, the people, who normally are
in charge of organizations, can't abrogate their responsibilities. But they
certainly can include and communicate, which means that at the end of the
day, if people have participated, then they are more likely to be committed to
the strategy and to the vision, that the so called leader has actually extolled.
Pat Barrett
Auditor General of Australia
As shown in the comments by the Auditor General of Australia, leadership is as much

about communication and involvement as it is about strategy and articulation of the
corporate vision (Sarros, Gray, Densten, Luca, 2003). It is appropriate therefore to
begin by defining leadership as fundamentally different to management as a prelude to
further exploration of leadership in this study.
According to Kotter (1990:4-5), managers maintain the status quo through the
processes and functions of planning and budgeting, organizing and staffing, and
controlling and problem solving. These processes ensure a degree of consistency and
order. In comparison, leaders produce constructive and adaptive change through the
processes of establishing direction through a corporate vision, aligning people through
communication, and motivating and inspiring workers. Leadership is proactive,
provocative, and prescient; good leaders are expected to know what the future holds,
or at least have the skills to determine what that future may be for their company. In
comparison, good managers work hard at ensuring the company operates effectively
and efficiently on a day to day basis; it is more hands-on and focused in the present.
A key concept of leadership underlying this study is the transformational-transactional

model of leadership first developed by Burns (1978) and subsequently operationalized
by Bass (1985). Bass and Avolio (1994) define transactional leadership as a
transaction that occurs between leaders and followers. That is, followers are rewarded
or disciplined on the basis of their work performance. In this study, there are three
3
dimensions of transactional leadership as measured by the MLQ (5X), namely

Contingent Reward, Active Management-by-Exception, and Passive Management-by-
Exception, a non-leadership factor (Laissez-faire Leadership), motivational factors
(Extra Effort), and outcomes (Effectiveness, Satisfaction). Contingent Reward
clarifies what is expected for what reward, and is a specific goal setting behavior.
Active Management by Exception focuses on mistakes and exceptions and takes
appropriate corrective action. Passive Management by Exception takes action only
when things go wrong.
In comparison to transactional leadership, transformational leadership is a more

positively affirming approach to leading people and corporations. Bass and Avolio
(1994:3) described transformational leaders as able to "motivate others to do more
than they originally intended and often more than they thought possible." Missions
and visions are articulated by leaders that increase followers' sense of self-esteem and
their beliefs about the value of their contributions to the job. Transformational leaders
link organizational goals to the needs and beliefs of workers. Transformational leaders
seek to raise the consciousness of followers by appealing to their higher ideals and
values, such as liberty, justice, equality, peace, and humanitarianism (Bass, 1985).
There are five dimensions of transformational leadership as measured by the MLQ
(5X) used in this study: Idealized Attributes (formerly Attributed Charisma), Idealized
Behaviors (previously Idealized Influence), Inspirational Motivation, Intellectual
Stimulation, and Individualized Consideration. Idealized Attributes is behavior that
encourages follower trust in the leader; Idealized Behaviors encourage followers to
share common vision and goals; Inspirational Motivation is similar to Idealized
Behaviors by raising workers' expectations and beliefs about the mission and vision
through appeals to the emotions; Intellectual Stimulation questions assumptions and
encourages creative problem solving; and Individualized Consideration treats
individual needs through coaching, mentoring behavior.
Culture
Organizational culture and organizational climate are often used interchangeably,

when in fact they are different constructs. According to Denison (1996:624), culture
is “the deep structure of organizations, which is rooted in the values, beliefs and
assumptions held by organizational members.” That is, when we speak of
organizational culture, we refer to the meanings inherent in the actions and procedures
of organizational commerce and discourse. In comparison, “climate is often
considered as relatively temporary, subject to direct control, and largely limited to
those aspects of the social environment that are consciously perceived by
organizational members.” That is, climate is a more transient representation of what
business is enacted and how it impacts on everyday relationships and transactions.
Culture evolves and is sufficiently complex to not be manipulated easily, while
climate is temporal and often subject to manipulation by people with power and
influence (Denison, 1996:644). Some of the more prominent culture researchers
include Alvesson (1993), O’Reilly, Chatman and Caldwell (1991), Schein (1985,
1990), Smircich and Calas (1987), and Trice and Beyer (1992). O’Reilly et al.
(1991:494) developed a means of assessing culture on the basis of the aggregated
value orientations of individuals in organizations. They developed the Organizational
Culture Profile, modified with permission for use in this study, to determine the
person-culture fit on the basis of extant values.
4
Generally, cultural studies are conducted at different levels of analyses (for instance,
organizational versus societal) using different methodological approaches (conceptual,
quantitative, and qualitative) and a variety of associated constructs. For example,
culture has been studied in association with leadership as proposed by Schein (1985),
or values as examined by O’Reilly et al. (1991) and House et al. (2001, 2002). On the
basis of these studies, the underlying focus for the present study is delimited to an
examination of organizational culture from an individual perspective (e.g., Kristof,
1996; Van Vianen, 2000). This operationalization of individual values and
preferences for organizational culture is consistent with the approach adopted by
O’Reilly et al. (1991:491) in their development of the original version of the
Organizational Culture Profile (OCP). This approach is also consistent with the
proposition that only the top echelons of leaders are in a position to significantly
influence cultural identity and change (Katz and Kahn, 1978). These foci are
appropriate to our study which relies on senior executives as the data source.
In the case of this study, data were collected from executives operating in an
Australian organizational culture. For instance, a study by Ashkanasy and Trevor-
Roberts (2001/2002) of Australian executives’ attitudes to nine discrete cultural
dimensions as part of the international 62-nation GLOBE (Global Leadership and
Organizational Behaviour Effectiveness program) project (House, Hanges, Ruiz-
Quintanilla, Dorfman, Javidan, Dickson, Gupta, and GLOBE, 1999; House, Javidan
and Dorfman, 2001) identified considerable idiosyncrasies of Australian leader
behavior. In brief, Australian manager-leaders reported higher levels of egalitarianism
compared to their Anglo-American and European counterparts. The findings of the
present study need to be interpreted in light of these delimitations, and the subsequent
generalizability of the findings to other countries, organizations, and business
executives. In this study, data from individual managers and executives in
organizations were aggregated to provide a picture of organizational culture as an
indication of the perceptions of the organizational citizens who “make” the
environment (Schneider, Goldstein and Smith, 1995, p.751). Further, Subramaniam
and Ashkanasy (2001) have called for research using large samples to provide a more
comprehensive understanding of culture. In this study, we have collected data from a
large sample in order to better examine the nature of organizational culture using the
Organizational Culture Profile (OCP).
5
IV. METHOD
The Study Sample
A stratified random sample of 5000 members was selected from the population of
21,461 members of the AIM in Australia at the time of data collection. A number of
mail-outs to the sample were conducted from July 2000 through to February 2001,
with a final total sample of 1,918 useable responses (13 arrived too late for data
analysis). This final sample size represents an impressive 39% return rate from a final
sample of 4,962 (38 uncompleted surveys from retired AIM members), which is
exceptional for a study of this type. Table 1 illustrates the sample compared with the
AIM population and categorized by a number of demographic variables (for all tables
there is a variable n because of missing data).
TABLE 1:
STRATIFIED STUDY SAMPLE CATEGORIZED BY STATE MEMBERSHIP,
GENDER, AGE, AND COMPANY SIZE COMPARED WITH AUSTRALIAN
INSTITUTE OF MANAGEMENT (AIM) POPULATION (1999 DATA)
AIM Achieved
Population Sample
f % f %
1999 Personal Membership
State
NSW 7031 33 588 31
VIC 5395 25 513 27
QLD/NT 5034 24 409 22
WA 2063 9 157 8
SA 976 4 91 4
ACT 546 3 121 6
TAS 415 2 23 1
No State Mentioned 16 1
Totals 21461 100 1918 100
Gender
Male 16954 79 1436 76
Female 4507 21 457 24
Totals 21461 100 1893 100
Age
<49 12662 59 1176 61
50+ 8799 41 733 39
Totals 21461 100 1909 100
Company Size
<500 19315 90 1178 62
501-1000 858 4 146 8
1000+ 1288 6 576 30
Totals 21461 100 1314 100
Table I shows a close similarity between the sample and the AIM membership when
classified by State, gender, and age. The one anomaly is in terms of company size.
The sample is over-represented for large-sized organizations, and under-represented
for smaller-sized companies.
6
V. THE RESEARCH INSTRUMENTS
Multifactor Leadership Questionnaire
The study used the Multifactor Leadership Questionnaire (MLQ) Form 5X to measure
transformational and transactional leadership styles. The forerunner of the MLQ (5X)
is the MLQ (5R) which has been used extensively in international leadership research.
Reliabilities for the MLQ (5X) established by Bass and Avolio (1997:72) are as
follows, with reliabilities (self-scored) for the same leadership factors established by
this study shown in the accompanying sets of parentheses (note that in this study
Attributed Charisma is referred to as Idealized Attributes, and Idealized Influence is
referred to as Idealized Behaviors): Idealized Attributes, 0.86 (0.67); Idealized
Behaviors, 0.85 (0.68); Inspirational Motivation, 0.88 (0.78); Individualized
Consideration, 0.86 (0.75); Intellectual Stimulation, 0.89 (0.74); Management by
Exception (Active), 0.76 (0.73); Management by Exception (Passive), 0.85 (0.72);
Contingent Reward, 0.85 (0.61); and Laissez Faire, 0.81 (0.77).
Organizational Culture Profile
The Organizational Culture Profile (OCP) developed by O’Reilly, Chatman and

Caldwell (1991) and since revised by Cable and Judge (1997) and Judge and Cable
(1997) was used to measure organizational and personal culture orientations. Recent
research by Vandenberghe (1999) has applied the OCP in a European context
(Belgium) and a different occupational setting (health care industry) compared to the
original US study. Vandenberghe (1999:183) has recommended that more cross-
cultural analysis of the OCP is warranted: “additional work is needed on the structure
of the OCP across nations and industries.” Howard (1998) asserted that "the reliability
of all OCP value dimensions remains in need of examination." In personal
correspondence to the researchers, both Cable (1999) and Vandenberghe (1999) have
confirmed the need to examine the structure of the OCP in more detail.
The OCP measures organizational culture along eight factors, namely innovation,
attention to detail, outcome orientation, aggressiveness, supportiveness, emphasis on
rewards, team orientation, and decisiveness. The instrument uses the Q-sort method
of data collection (Block, 1978) to identify values that characterize a target
organization and an individual’s preference for that particular configuration of values.
O’Reilly et al. (1991) reported an average reliability coefficient for the OCP of 0.88,
while Vandenberghe’s (1999) study established an average reliability of 0.86.
For the purpose of the present study, an abbreviated version of the OCP (Cable and
Judge, 1997) was used. This version has a test-retest reliability of .87. The shorter
version of the OCP has been modified for this study to allow respondents to indicate
the organization’s characteristic cultural values orientation along a five-point Likert
scale where 1=Not At All, 2=Minimally, 3=Moderately, 4=Considerably, and 5=Very
Much (amending the original Q-sort procedure to a normative scale). Representative
items of organizational culture measured by the OCP are “Adaptability,” “Taking
individual responsibility,” and “Not being constrained by many rules.” Permission to
7
use an amended and revised version was received from the American Psychological
Association (27 September 1999) and Professor Charles O’Reilly (21 December
1999).
Numerous samples consisting of graduate students and practising executives attending

graduate management classes in two universities and four campuses throughout
Australia were used in the development of our version of the OCP. A total sample of
200 respondents established the following factors for the OCP and their associated
Cronbach reliabilities (shown in parentheses): Competitiveness (formerly Outcome
Orientation)(.79); Social Responsibility (combination of Outcome Orientation and
Innovation) (.80); Supportiveness (.81); Autonomy (formerly Innovation) (.65);
Emphasis on Rewards (.62); Performance Orientation (Outcome Orientation and
Innovation) (.60); Stability (new factor) (.61); Detail Orientation (.56).
Subsequent to this pilot test, we have revised the OCP on the basis of the data
collected from the present study. The new, shortened version of the OCP now consists
of a 28-item, seven factor structure as follows (reliabilities are shown in parentheses):
Competitiveness (.75), social responsibility (.74), supportiveness (.87), emphasis on
rewards (.80), innovation (.80), performance orientation (.74), stability (.66).
VI. FINDINGS
Leadership Factors and Norms
Table 2 illustrates the factor mean scores, standard deviations, and reliabilities for all
transformational, transactional, and non leadership factors.
TABLE 2:
CORRELATIONS, MEANS, STANDARD DEVIATIONS, AND
RELIABILITIES FOR MLQ FACTORS
1 2 3 4 5 6 7 8 9 Mean SD
1 IA .67 a 3.00 .52
2 IB .46*** .68 3.13 .56
3 IM .49*** .60*** .78 3.27 .54
4 IS .33*** .41*** .43*** .74 3.19 .48
5 IC .39*** .41*** .41*** .49*** .75 3.32 .47
6 CR .41*** .46*** .49*** .39*** .51*** .75 3.21 .51
7 MBE (A) .10*** .07** -.01 .08** .01 .11*** .73 1.78 .79
8 MBE (P) -.03 -.09** -.12** -.11*** -.11*** -.07*** -.19*** .72 1.08 .61
9 LF -.13*** -.10*** -.18*** -.13*** -.12*** -.18*** .14 -.13** .77 0.56 .52
___________________________________________________________________________________
1 (IA – Idealised Attributes); 2 (IB – Idealized Behavior); 3 (IM – Inspirational Motivation); 4 (IS –
Intellectual Stimulation); 5 (IC – Individualized Consideration); 6 (CR – Contingent Reward); 7
(MBEA – Management by Exception Active); 8 (MBEP – Management by Exception Passive); 9 (LF-
Laissez Faire).
*p<.05; **p<.01; ***p<.001.
a
Reliabilities on the diagonal
8
As indicated in Table 2, individualized consideration (mean=3.32) was the prominent

leadership style of Australian executives, followed by inspirational motivation
(m=3.27), contingent reward (m=3.21), intellectual stimulation (m=3.19), and
idealized behavior (m=3.13). Idealized attributes (m=3.00) registered the lowest score
for transformational leadership. In other words, executives in the study sample
considered that they used all transformational leadership styles as well as the
transactional style of contingent reward fairly often. The findings show that Australian
executives were more likely to use coaching (IC), reward (CR), visionary (IM), and
role modelling (IB) leadership behaviors that challenge workers (IS) ahead of appeals
to charismatic leadership approaches (IA). In contrast, the transactional leadership
styles of MBE (active) and MBE (passive) were perceived as being used less
frequently while laissez faire was considered to be hardly used at all.
Table 3 shows that executives in the current study recorded higher levels of leadership
across the board compared with existing Australian norms, apart from MBE (Passive)
and Laissez Faire. Similar to the existing norms (self-raters), the study sample
recorded the highest mean score for individualized consideration. Idealized attributes
was the least used transformational leadership behavior by executives in this sample,
similar to the established norms for self-raters. In comparison, inspirational
motivation was the prominent style as measured by aggregated norms.
TABLE 3:
COMPARISON OF AIM SAMPLE WITH AUSTRALIAN MLQ NORMS
____________________________________________________________________
Leadership Factors Sample Norms a
Self-ratings Self-ratings Aggregate
(n=1895-1907) (n=448) (n=4513)
Mean SD Mean SD Mean SD

__________________________________________________________________________________
Idealized Attributes(.67)* 3.00 .52 2.82 .54 2.88 .80
Idealized Behaviors(.68) 3.13 .56 3.06 .60 2.80 .79
Inspirational Motivation(.78) 3.27 .54 3.07 .58 2.90 .80
Intellectual Stimulation(.74) 3.19 .48 3.07 .52 2.77 .77
Individualized Consideration(.75) 3.32 .47 3.21 .51 2.74 .85
Contingent Reward(.75) 3.21 .51 2.87 .51 2.78 .80
MBE (Active)(.73) 1.78 .79 1.65 .82 1.73 .98
MBE (Passive)(.72) 1.08 .61 1.12 .64 1.12 .83
Laissez Faire(.77) 0.56 .52 0.74 .57 0.75 .75
_____________________________________________________________________
a
MLQ norm data copyright??MLQ Pty Ltd, Melbourne, 2001.Australian norms database contains 4513 cases, of which 448 are
self-ratings (information remains property of Mind Garden Inc (USA) and OE Consultancy, PO Box 199, Hawthorn, Vic,
Australia - permission granted 30 April 2001)
Original response categories for MLQ factors: 0 = Not at all; 1 = Once in a while; 2 = Sometimes; 3 = Fairly often; 4 =
Frequently, if not always.
*Reliability coefficients
9
As shown in Table 3, mean scores on all leadership factors apart from Laissez Faire
for this sample were greater than those recorded by studies where leaders are rated by
other organization members. Atwater and Yammarino (1992), Bass and Avolio
(1997), Sosik and Megerian (1999), and Yammarino and Atwater (1997) have found
that self-ratings tend to be more inflated than either superior or subordinate ratings as
self-raters tend to have a healthy sense of self-esteem.
VII. ORGANIZATIONAL CULTURE FACTORS
Table 4 shows the mean factor scores for each of the seven dimensions of
organizational culture as measured by the revised Organizational Culture Profile
(Cable and Judge, 1997; O’Reilly et al., 1991).
TABLE 4:
MEANS, STANDARD DEVIATIONS, AND RELIABILITIES FOR OCP
FACTORS
OCP Factors N Mean SD Reliabilities
Supportiveness 1918 3.70 .90 .87
Social Responsibility 1918 3.93 .74 .74
Competitiveness 1918 3.37 .65 .75
Emphasis on Rewards 1918 3.61 .90 .80
Stability 1918 3.46 .72 .66
Performance Orientation 1918 4.02 .71 .74
Innovation 1918 3.37 .65 .80
As indicated in Table 4, performance orientation (mean=4.02) was the prominent

dimension of organizational culture for this sample of Australian executives, followed
by social responsibility (m=3.93), supportiveness (m=3.70), and emphasis on rewards
(m=3.61). These results reflect the trend reported by Sarros and Santora (2001)which
found among the 181 executives surveyed an emphasis on achievement, benevolence,
self-direction, and security as core values. The performance orientation and social
responsibility cultural dimensions of the current study are reflected in the values of
achievement and benevolence reported by Sarros and Santora (2001). Table 4 also
reports strong reliabilities for the revised OCP.
VIII. REGRESSIONS
As shown in Tables 5 and 6, results indicate that organizational culture was more
responsive to leadership as a predictor than was the reverse case. Generally, cultures
with a transactional orientation (emphasis on rewards) were best predicted by a
mixture of transactional and transformational leadership styles. In comparison,
transformational cultures (supportiveness) were best predicted by transformational
leadership styles.
10
TABLE 5:
STEPWISE MULTIPLE LINEAR REGRESSION ANALYSIS FOR
PREDICTION OF LEADERSHIP BY ORGANIZATIONAL CULTURE
FACTORS AND BACKGROUND VARIABLES
Leadership
-------------------------------------------------
2
Predictors R Beta SE
____________________________________________________________________
2
Idealized Attributes (R = 7 % )
a
Background variables .03 .15*** .02
Performance orientation .07 .21*** .02
Supportiveness .07 .08** .02
F =29.20, p<.001
---------------------------------------------------------------------
2
Idealized Behavior (R = 8 % )
Emphasis on rewards .08 .09** .03
F =23.15, p<.001
---------------------------------------------------------------------
2
Inspirational Motivation (R = 1 3 % )
Supportiveness .13 .12*** .02
F =45.31, p<.001
---------------------------------------------------------------------
2
Individualized Consideration (R = 8 % )
Background variables .04 .06* .02
Performance orientation . 07 .17*** .03
Emphasis on rewards .08 .10** .02
F =26.32, p<.001
---------------------------------------------------------------------
2
Intellectual Stimulation (R = 4 % )
Background variables .02 .09** .01
Innovation .03 .14*** .02
Social responsibility .04 .07* .02
F =8.78, p<.01
---------------------------------------------------------------------
2
Contingent Reward (R = 1 0 % )
Background variables .04 .10** .02
Emphasis on rewards .10 .13*** .02
F =15.11, p<.001
---------------------------------------------------------------------
2
Management by Exception (Active) (R = 2 % )
Background variables .02 -.08* .02
Performance orientation .02 .08** .03
F =5.77, p<.001
---------------------------------------------------------------------
2
Management by Exception (Passive) (R = 3 % )
Background variables .01 .03* .02
Supportiveness .03 -.12** .02
F =10.49, p<.001
---------------------------------------------------------------------
2
Laissez Faire (R = 2 % )
Background variables .01 -.05 .02
Performance orientation .02 -.08*** .02
F =9.12, p<.001
___________________________________________________________________
*p<.05; **p<.01; ***p<.001.
a
Background variables=Level of seniority, organizational size, education, salary, gender,
years as executive, age, years in current position
11
TABLE 6:
STEPWISE MULTIPLE LINEAR REGRESSION ANALYSIS FOR
PREDICTION OF ORGANIZATIONAL CULTURE BY LEADERSHIP
FACTORS AND BACKGROUND VARIABLES
_____________________________________________________________________
Organizational Culture
-----------------------------------------------------------
Predictors R2 Beta SE
___________________________________________________________________________________
Competitiveness (R2=18%)
Background variables a .13 .27*** .02
Inspirational motivation .17 .19*** .03
Contingent reward .18 .12*** .03
MBE (A) .18 .05* .02
F=43.59, p<.01
----------------------------------------------------------------------------------------------------------------------------
Social Responsibility (R2=17%)
Individualized consideration .17 .07** .03
F=85.13, p<.01
---------------------------------------------------------------------------------------------------------------------------
Supportiveness (R2=23%)
Supportiveness (R 2=23%)
MBE (P) .23 -.07** .04
Idealized attributes .23 .07** .04
F=62.17, p<.01
----------------------------------------------------------------------------------------------------------------------------
Innovation (R 2=20%)
Contingent reward .20 .09** .04
F=67.20, p<.01
----------------------------------------------------------------------------------------------------------------------------
Emphasis on Rewards (R 2 =24%)
Idealized attributes .24 .06* .04
F=85.13, p<.01
----------------------------------------------------------------------------------------------------------------------------
Performance Orientation (R2=14%)
Contingent reward .14 .15** .03
Idealized attributes .14 .10*** .03
F=40.30, p<.01
----------------------------------------------------------------------------------------------------------------------------
Stability (R2=17%)
MBE (P) .17 -.06* .02
F=46.38, p<.01
__________________________________________________________________________________
*p<.05; **p<.01; ***p<.001.
a
Background variables=Level of seniority, organizational size, education, salary, gender, years as
executive, age, years in current position
12
Table 5 shows that organizational culture accounted for only a small amount of
variance in any one leadership approach. For instance, performance orientation
accounted for five percent of the variance only in the transformational leadership
behavior of inspirational motivation, after first entering background variables into the
regression equation. A total of 13 percent of the variance was accounted for in
inspirational motivation. This type of leadership approach raises workers'
expectations and beliefs about the mission and vision through appeals to the emotions,
and is the second most used leadership approach in this study (see Table 2). The only
other leadership behaviour with five percent or more of its variance accounted for by
organizational culture (after statistically controlling for background variables) was
contingent reward (overall variance 10 percent). Contingent reward clarifies what is
expected for what reward, and is a specific goal setting behavior. Although
contingent reward is classified as transactional leadership behavior, in many cases it is
a substitute for transformational leadership, and is highly correlated with all
transformational leadership factors (see Table 2). In order of variance accounted for,
the main leadership approaches that are associated with specific dimensions of
organizational culture are: inspirational motivation (13%, best predicted by
performance orientation); contingent reward (10%, performance orientation);
idealized behavior and individualized consideration (8% respectively, performance
orientation in both cases). The least amount of variance accounted for was for the
transactional and non-leadership factors of management by exception (active and
passive) and laissez faire respectively.
In comparison to the prediction of leadership by organizational culture, when

predicting culture by leadership as shown in Table 6, a considerably greater amount of
variance was identified. The greatest amount of variance accounted for was for the
cultural dimension of emphasis on rewards, with the transactional leadership style of
contingent reward contributing a further four percent to the variance after statistically
controlling for background variables. A total of 24 percent of the variance in
emphasis on rewards was accounted for in the regression equation. Emphasis on
rewards consists of fair behavior which rewards and praises good work performance,
and provides opportunities for professional growth.
In order of variance accounted for, organizational cultures (after statistically

controlling for background variables) associated with specific leadership predictors
were: emphasis on rewards (24%, best predicted by contingent reward, inspirational
motivation); supportiveness (23%, inspirational motivation); innovation (20%,
inspirational motivation and contingent reward); competitiveness (18%, inspirational
motivation and contingent reward); social responsibility (17%, inspirational
motivation and individualized consideration); stability (17%, inspirational
motivation); performance orientation (14%, inspirational motivation, contingent
reward). Key elements of these cultures are shown in Table 7.
13
TABLE 7:
DIMENSIONS OF ORGANIZATIONAL CULTURE AND THEIR
PROPERTIES
Organizational Culture Dimensions Properties

____________________________________________________________________________
• Competitiveness Achievement orientation

An emphasis on quality
Being distinctive - being different from others
Being competitive
• Social Responsibility Being reflective

Having a good reputation
Being socially responsible
Having a clear guiding philosophy
• Supportiveness Being team oriented

Sharing information freely
Being people oriented
Collaboration
• Innovation Being innovative

Quick to take advantage of opportunities
Risk taking
Taking individual responsibility
• Emphasis on Rewards Fairness

Opportunities for professional growth
High pay for good performance
Praise for good performance
• Performance Orientation Having high expectations for

performance
Enthusiasm for the job
Being results oriented
Being highly organized
• Stability Stability
Being calm
Security of employment
Low conflict
_____________________________________________________________________
Cultures with the greatest amount of variance accounted for accentuated fairness,
opportunities for growth, were both collaborative and opportunistic, and encouraged
innovation and distinctiveness. Cultures with less variance accounted for tended to be
reflective, were focused on developing a clear guiding principle under stable and
secure conditions of employment, but still retained high expectations for performance
and enthusiasm for the job. The results point to evolving organizational cultures that
strive to balance the tension between stable and secure employment conditions with
the need to constantly challenge and compete in an increasingly problematic market
place.
14
IX. DISCUSSION
This study of 1,918 executives in Australian enterprises found that individualised

consideration was the prominent leadership style of Australian executives, followed
by inspirational motivation, contingent reward, intellectual stimulation, and idealised
behavior. Idealised attributes registered the lowest mean score for transformational
leadership. In other words, executives in the survey considered that they used all
transformational leadership styles as well as the transactional style of contingent
reward fairly often.
The findings revealed that Australian executives were more likely to use coaching,
reward, visionary and role modelling leadership behaviours that challenge workers
ahead of appeals to charismatic leadership approaches. These charismatic leadership
behaviors are consistently ranked lower for Australian executives compared to their
American counterparts (Conger and Kanungo, 1998; Palmer, Walls, Burgess, and
Stough, 2001; Parry and Sarros, 1996; Shamir, Arthur and House, 1994; Shamir,
House and Arthur, 1993). In contrast, the transactional leadership styles of MBE
(active) and MBE (passive) were perceived as being used less frequently, while
laissez faire was considered to be hardly used at all.
For all types of leadership in this study, mean scores were generally higher for
transformational leadership than those recorded by studies where leaders were rated
by other organisation members. Atwater and Yammarino (1992), Bass and Avolio
(1989, 1993, 1994), and Sosik and Megerian (1999) found that self-ratings tend to be
more inflated than either superior or subordinate ratings; it has been proposed that
self-raters tend to have a healthy sense of self-esteem. It is recommended that more
comprehensive and valid findings may be obtained through 360o feedback, although
such data gathering is often tedious and fraught with different complexities (Howard,
1994).
Performance orientation was the prominent organisational culture for this sample of
Australian executives, followed by social responsibility, supportiveness, and emphasis
on rewards. Competitiveness and innovation were the lowest ranked cultures. The
results suggest that organizational cultures in this study experience ongoing tension in
balancing stable and secure employment conditions with the need to constantly
challenge, compete and innovate.
The study showed that minimal amounts of leadership were accounted for by
organisational culture. The greatest amount of variance was accounted for the
transformational leadership factor of inspirational motivation (13%), which was best
predicted by performance orientation and supportiveness. The transactional leadership
factor of contingent reward was next best predicted by culture (10% of variance
accounted for). Again, performance orientation was a main predictor of leadership
and, in this case, emphasis on rewards also featured.
In comparison, our findings revealed that leadership was a far more prominent
predictor of culture than culture was of leadership. This is consistent with Schein’s
15
(1985, 1992) assertion that leaders determine the type of culture in organizations, or at
the very least the emotional climate of those organizations (Palmer et al., 2001:9).
Other studies indicate compelling linkages among strong personal and corporate
values and similarly powerful corporate cultures, particularly when these values are
nurtured and articulated by senior organizational leaders (Hambrick, 1987; Hinings,
Thibault, Slack and Kikulis, 1996; Rowsell and Berry, 1993; Russell, 2001).
On the basis of the findings in this study, we suggest that the process of building
competitive and cooperative organizational cultures can be achieved when leaders
raise workers’ expectations and beliefs about the overall goals, and coach and mentor
their staff in achieving these objectives. These innovative and high achieving cultures
rely on committed and supportive leaders for success (Amabile, Conti, Coon, Lazenby
and Herron, 1996).
The results of our study provide us with a view of business leaders on the cusp of
some major changes in the way they lead and work generally. For example, executives
appear to be more aware of and willing to use transformational leadership behaviours
to achieve results. In fact, the more transformational leadership used, the greater the
leadership outcomes and the more performance oriented, socially responsible and
supportive the organisational culture. These findings corroborate existing studies that
reveal the place that transformational leadership and leadership generally play in
building and sustaining strong corporate cultures (Bass, 1998b; Bass and Avolio,
1993; Daymon, 2000; Hatch, 1993; Kotter and Heskett, 1992; Martin, Sitkin and
Boehm, 1985; Schein, 1983, 1985, 1992). Bass (1999:16) also affirms the power of
leaders to build and sustain transformational corporate cultures:
For an organizational culture to become more transformational, top management

must articulate the changes that are required . . . The behaviors of top level
leaders become symbols of the organization’s new culture.
It is imperative therefore that in order to continually build upon and improve

organizational leadership, that companies begin programmes of identifying leadership
potential at an early career stage and implement training and development regimes to
nurture and promote this leadership in the company.
The ability to take a long-term systemic view of how leadership and culture feed into
and grow out of each other is imperative if these objectives and recommendations are
to be achieved. There is evidence that transformational leadership can be taught
(Barling, Weber and Kelloway, 1996; Kelloway, Barling and Helleur, 2000). Results
of a study conducted by Kelloway and Barling (2000) indicated that followers of
trained leaders became more committed (i.e. loyal) to the organization than followers
of untrained leaders. Further, follower attitudes changed in response to leaders’
enhanced transformational leadership skills. Research by Kelloway et al. (2000)
suggested that transformational leadership can be enhanced by both training
(participation in a workshop) and counselling (feedback of follower ratings), but that
combining the two approaches did not enhance leadership beyond that obtained from
either approach alone.
16
Leaders may be able to influence the strength of the relationship between person-
organization fit and individual outcomes. According to Kristof (1996), leaders could
emphasize particular values and goals in communicating with followers. However,
where a strong and consistent culture is promoted, leaders may encourage the attrition
of those who do not fit well with the organization.
These findings are critical in assisting leaders in the development of work place
cultures that both sustain competitive advantage while also satisfying the needs of
their workers. Our data show that leaders need to use both organisational type
behaviours that inspire workers to achieve a corporate vision (inspirational
motivation) as well as more personalised approaches that show workers they are
individually important in the overall scheme of things (individualised consideration.)
A more worrying aspect of our study is that competitiveness and innovation were the
lowest ranked cultures. It appears that leaders of Australian enterprises still have some
way to go in making their companies more competitive on a global stage. Adopting
the transformational leadership behaviours identified in this study may help these
executives in achieving these outcomes on a sustainable basis.
A gratifying outcome of our study is the development of a more robust measure of

organizational culture which will have a range of applications. For instance, the
restructured version of the OCP developed in this study provides a detailed evaluation
of organizational culture according to seven dimensions. Having a representative
sample of organizational members complete the OCP would assist in identifying
different perspectives of organizational culture. Such activities should stimulate
worthwhile discussion among organizational members and build understanding of the
values that underpin the organizational culture profile. In addition, the cultural
profiles of divisions, departments and teams within organizations should be evaluated
and compared with the ratings for the cultural profile of the organization as a whole.
The OCP could also provide insight into similarities and differences concerning
cultural profiles, particularly when organizational mergers or takeovers are proposed.
Additionally, the OCP could be used to assess person-organization fit. Originally, the
OCP was developed to examine the congruence between individual and organizational
values (O’Reilly at al., 1991). The application of the modified instrument should be
extended to evaluate person-organization fit. The use of the OCP could provide
operational data to aid in the recruitment and selection of new employees. A study of
171 entry-level auditors working in eight US public accounting firms concluded that
recruits whose values upon entry match those of the firm adjust to the organizational
culture more quickly, and recruits whose values most closely match the firms feel
most satisfied and remain longer with the firm (Chatman, 1991). According to Cable
and Parsons (2001), job applicants self-select into organizations based on subjective
person-organization fit and interviewers use an estimation of person-organization fit
when evaluating and hiring job applicants.
The development of the OCP may enable more accurate information to be provided on
person-organization fit which could lead to improved recruitment, selection, and
socialization practices.
17
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Leadership and its impact on organizational culture

Article in Journal of International Business Studies · January 2002

Executive leadership research View project

The user has requested enhancement of the downloaded file.

LEADERSHIP AND ITS IMPACT ON

Our study of 1,918 members of the Australian Institute of Management revealed

Keywords: leadership,organizational culture, regression analysis,

II. PURPOSE – THE LEADERSHIP-CULTURE CONUNDRUM

Whatever the relationship, there is irrefutable evidence that strong organizational

III. THE STUDY IN CONTEXT – ITS PLACE IN TIME

I regard leadership as part of good management because clearly strategy, as

As shown in the comments by the Auditor General of Australia, leadership is as much

A key concept of leadership underlying this study is the transformational-transactional

dimensions of transactional leadership as measured by the MLQ (5X), namely

In comparison to transactional leadership, transformational leadership is a more

Organizational culture and organizational climate are often used interchangeably,

The Study Sample

Totals 21461 100 1314 100

V. THE RESEARCH INSTRUMENTS

Multifactor Leadership Questionnaire

Organizational Culture Profile

The Organizational Culture Profile (OCP) developed by O’Reilly, Chatman and

Numerous samples consisting of graduate students and practising executives attending

1 IA .67 a 3.00 .52

2 IB .46*** .68 3.13 .56

3 IM .49*** .60*** .78 3.27 .54

4 IS .33*** .41*** .43*** .74 3.19 .48

5 IC .39*** .41*** .41*** .49*** .75 3.32 .47

6 CR .41*** .46*** .49*** .39*** .51*** .75 3.21 .51

As indicated in Table 2, individualized consideration (mean=3.32) was the prominent

Mean SD Mean SD Mean SD

VII. ORGANIZATIONAL CULTURE FACTORS

OCP Factors N Mean SD Reliabilities

Supportiveness 1918 3.70 .90 .87

Social Responsibility 1918 3.93 .74 .74

Competitiveness 1918 3.37 .65 .75

Emphasis on Rewards 1918 3.61 .90 .80

Stability 1918 3.46 .72 .66

Performance Orientation 1918 4.02 .71 .74

Innovation 1918 3.37 .65 .80

As indicated in Table 4, performance orientation (mean=4.02) was the prominent

In comparison to the prediction of leadership by organizational culture, when

In order of variance accounted for, organizational cultures (after statistically

Organizational Culture Dimensions Properties

• Competitiveness Achievement orientation

• Social Responsibility Being reflective

• Supportiveness Being team oriented

• Innovation Being innovative

• Emphasis on Rewards Fairness

• Performance Orientation Having high expectations for

This study of 1,918 executives in Australian enterprises found that individualised

For an organizational culture to become more transformational, top management

It is imperative therefore that in order to continually build upon and improve

A gratifying outcome of our study is the development of a more robust measure of

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3 IM .49* .60* .78 3.27 .54

4 IS .33* .41* .43*** .74 3.19 .48

5 IC .39* .41* .41* .49* .75 3.32 .47

6 CR .41* .46* .49* .39* .51*** .75 3.21 .51