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American Journal of Economics 2013, 3(5C): 171-176

DOI: 10.5923/c.economics.201301.29

Leadership and Organizational Commitment in the


Islamic Banking Context: The Role of Organizational
Culture as a Mediator
Siti Zaleha Abdul Rasid* , Mohd. Aizat Abdull Manaf, Farzana Quoquab

International Business School, Universiti Teknologi M alaysia, Jalan Semarak, Kuala Lumpur, 54100, M alaysia

Abstract The purpose of this study is to examine the effect of leadership and organizational cu lture on organizat ional
commit ment in the context of Malaysian Islamic banking service sector. A questionnaire survey was conducted among 250
emp loyees of an Islamic bank to collect the data which yielded 200 valid responses. The data were analyzed using
statistical package for social science (SPSS) software version 19.0. Linear and Multiple Regression and SOBEL test were
used in testing the research hypotheses. The results reveal that leadership and organizational culture significantly affect
organizational co mmit ment. Moreover, leadership plays a significant ro le in enhancing organizational cu lture. On the other
hand, organizational culture med iates the relationship between leadership and organizational co mmit ment. It imp lies that,
leadership style, organizational culture and organizat ional co mmit ment all play vital role in the context of Malaysian Islamic
banking industry.
Keywords Leadership, Organizational Cu lture, Organizat ional Co mmit ment, Malaysian Islamic Ban king Industry

environment at workplace. Moreover, this study will benefit


1. Introduction the banking industry and business practitioners in providing
relevant informat ion on human resources management,
Leadership, organizational culture and organizational
objectives, and strategies to create a better culture in an
commit ment have been the topics of interest among
organization.
behaviourists. However, only a handful of studies have
In the following section a brief literature review is
examined the effect o f leadership and organizational cu lture
presented. Next, a concise description of the methodology
towards organizational co mmit ment. There were few
and findings are discussed. This study ends by providing the
studies focusing on the basic organizational culture scopes
managerial imp lications and future research directions.
that connect with people oriented aspects such as clan
culture, mission culture and bureaucratic culture[1].
Moreover, previous studies focused mostly on non-financial 2. Literature Review and Hypotheses
firms in developed countries. Studies on financial firms
especially on firms that offer Islamic banking services are
Development
still limited. Considering this, the present study aims to 2.1. Leadershi p and Its Influence in Organization
examine the effect of leadership style and organizational
Leadership is a co mplex process which sets the standards,
culture on organizational co mmit ment in Malaysian Islamic
qualities or co mpetencies which differentiate the successful
banking context. It is also sought to test the mediation effect
fro m the unsuccessful ones[2]. Leadership explains that
of organizat ional culture between leadership style and
leaders can influence their subordinates in order to achieve
organizational co mmit ment.
organizational goals; therefore the capability of a leader to
By examining leadership styles, organizat ional culture and
lead and motivate the employees at the same t ime can never
organizational co mmit ment in the Islamic banking context,
be overlooked. Leaders and emp loyees are dependent. The
this study contributes to the literature and to the practice.
success of the organization in achiev ing its goals depends on
Th e fin d ings o f th is st udy can be used b y th e to p
how the leaders lead their organization and which leadership
management as a gu ideline in pro mot ing good wo rking
styles they use. The suitable leadership styles can affect the
* Corresponding author: commit ment, productivity and even job satisfaction of
szaleha@ibs.utm.my (Siti Zaleha Abdul Rasid) emp loyees[3].
Published online at http://journal.sapub.org/economics
Copyright © 2013 Scientific & Academic Publishing. All Rights Reserved 2.2. Organizati onal Culture
172 Siti Zaleha Abdul Rasid et al.: Leadership and Organizational Commitment in the
Islamic Banking Context: The Role of Organizational Culture as a M ediator

Organizational culture is a powerfu l and observable force support by their employer[13]. Tharenou expressed that
in any organization. It affects the company’s well-being as it support fro m one’s direct leader can lead to fewer absentees
is made up of its members’ shared values, beliefs, symbols amongst employees[14]. In a similar study, it is found that
and behaviours. Culture directs employees’ decisions and there is a positive relationship between organizational
actions at any level[4]. Robbins and Coulter described commit ment with the outcome measures of supervisory trust,
organizational cu lture as the shared values, beliefs or job involvement, and job satisfaction which u ltimately
perceptions held by employees in an organization[5]. It can increase trust in the leaders[15]. In this regard, leadership
influence attitudes and behaviour of the employees because style plays an important role in influencing organizat ional
organizational culture reflects the values, beliefs and effectiveness and efficiencies that affect the emp loyees’
behavioural norms of an employee. Tsai stated that the main organizational co mmit ment. Therefore, it is likely that
reason that internal conflict arises are cultural issues[6]. That leadership style may have its own significant effect on
is why it is very crucial to understand the organization’s core organizational co mmit ment. Leaders carry an important
values in order to prevent the occurrence of this conflict. function in an organizat ion on assisting the employees’
commit ment in co mpleting their daily tasks in the
2.3. Organizati onal Commitment organization. Thus, it is crucial for leaders to understand
Organizational co mmit ment has been defined as their emp loyees’ needs as they will affect the organizat ional
mu ltid imensional in nature. It reflects the degree of goal and commit ment directly or indirect ly.
value congruency with the organizat ion, emp loyees’ loyalty
to the organization, willingness to exert effort on behalf of 2.6. Organizati onal Culture and Org anizational
the organization and maintain the membership in the Commi tment
organization[7]. It is a positive way to evaluate the Organizational culture acts as an important predictor in
organization and the goals itself. For many scholars, generating commit ments and enhancing performances.
commit ment is a two-way relationship that links employees When employees are not happy at work, they are less
to their employer[8]. committed and tend to look for other opportunities outside. If
the opportunities are unavailable or far reaching, they will
2.4. Leadershi p and Org anizational Cul ture stray themselves away fro m the organizat ion emotionally.
A large part o f an organization's culture develops fro m its This will affect one’s organizational co mmit ment[16].
leadership while on the other hand, a culture of an Organizational culture can be assumed as the mediator
organization can also affect the develop ment of its leadership. towards organizational co mmit ment. Organizational cu lture
For instance, it was found that the role expectations of a that can be accepted and committed by employees full
supervisor have a positive influence on subordinates’ heartedly will help them ach ieve superior performances over
innovative behaviour[9]. The relationship of leader and the long run. Brewer has conducted a research about the
follower is based on leader member exchange theory and effects of organizational culture on organizat ional
positively related with employees’ performance. Emp loyees commit ment[17]. He found that bureaucratic nature in a
can produce more creative and h igh quality work when they culture always has a negative relationship with emp loyees’
were supervised in a supportive manner[10]. commit ment. Bureaucratic culture in an organization can
It was also found that organizational culture and hinder an emp loyee’s job effectiveness. There will be a
leadership are united[11]. The interconnection of the positive outcome when the cu lture is supportive which
relationship between those two can be clarified in the eventually result in increased commit ment and involvement
organizational life cycle. Leadership styles and of employees. Furthermo re, Odo m and h is colleagues found
organizational culture itself can create a positive and that employees who worked in an environment that is
significant relationship. There are various research findings supportive can increase the level of co mmit ment[18].
in the literature examin ing the relations between certain It is believed that in order for the employees to be more
leadership styles such as transformational leadership and committed and supportive of an organization’s aims and
organization’s innovative orientation. objectives, an achievement-based culture or a mission
culture should be created[19]. Emp loyees’ commit ment
2.5. Leadershi p Style and Organizati onal Commitment would result in the active agreement and also the support
The task of a supervisor is not to only command but to towards organization’s objectives. It is proven from
persuade emp loyees. The effectiveness of leaders to lead an bureaucratic work practices that often result in less
organization depends on how they deal with the employees commit ment of emp loyees while supportive work
as it affects their motivation[12]. Therefore, it is crucial for environment would result in greater co mmit ment.
managers to influence, assist and support the employees’ Based on above discussions, the following hypotheses are
plans, proposals and even motivate them to execute their developed:
own decision and ideas. H1: There is a positive relationship between leadership
Emp loyees may show signs of commit ment to their styles and organizational culture.
emp loyer as an expression of contentment prior in receiving H2: There is a positive relationship between leadership
American Journal of Economics 2013, 3(5C): 171-176 173

styles and organizational co mmit ment. headquarters. The targeted respondents to participate in the
H3: There is a positive relat ionship between survey were among mid-level managers that comprises of
organizational culture and organizational co mmit ment. junior and senior executives. Each branch and department
H4: Organizat ional culture med iates the relationship received 5 questionnaires and was given about two weeks to
between leadership styles and organizational co mmit ment. respond to the questionnaire. Every assistant manager at all
branches and departments in the headquarters had assisted in
2.7. Conceptual Framework distributing and collecting the survey forms fro m their
Figure 1 depicts the proposed relationships among the emp loyees. Finally, 200 co mpleted questionnaires were
variables. returned which generated 80% response rate.

Leadership 3.3. Data Analysis


H2
The data gathered fro m the survey were analy zed via
Statistical Package for Social Sciences (SPSS) version 19.0.
H1 Organizational
Commitment
First, frequency analysis on respondents profile was
conducted to assess the demographic characteristics of the
Organizationa respondents. Next, the reliability test of the variables was
l H3
done through Cronbach’s Alpha. According to Sekaran,
reliability coefficient with less than 0.60 is considered poor;
reliability coefficient in the range of 0.70 is acceptable and
Leadershi Organizational those above 0.80 is considered as good[23]. For the present
H4
Commitment
Organizational study Cronbach’s alpha coefficient for all variab les ranges
Culture fro m 0.88 to 0.94 which satisfy the benchmark value.
The Pearson Correlation analysis was conducted to
Figure 1. Proposed relationships among the variables
determine the relationships between independent and
dependent variables. Multiple regression analysis was
3. Methodology conducted to test the hypotheses. The last analysis conducted
is the SOBEL test which is to verify the presence of
3.1. Variables Measurement med iating variable in the relationship between independent
and dependent variable.
This study borrowed the nine-item leadership scale fro m
Chang and Lee[20]. A mong the items, the first five items
measured transformational leadership whereas the 4. Results and Discussions
remain ing items measured transactional leadership style.
Organizational co mmit ment scale was taken fro m Selma 4.1. Profile of the Res pondents
which had been modified to suit the research objectives[21]. Among the 200 respondents, 61.5% are male and 38.5%
This scale consisted of 18 items. On the other hand, are female. Majority of the respondents (51%) fall between
organizational culture scale was borrowed fro m Chang and 22 to 29 age group. On the other hand, 34.5% of
Lee which consisted of 12 items[22]. All variables were respondents’ age fall in the range of 30 to 39 years, and the
measured with mult i items scale method based on a five rest are above 39 years old. About 55% o f the respondents
point Likert format ranges from 1= “strongly disagree” to have 3 to 10 years of working experience, while the others
5= “strongly agree”. have more than 11 years of work experience. Majority of
the respondents have bachelor degree (77%), followed by
3.2. Sample and Sampling Procedure master degree (12%) and 22 of respondents have diploma. In
Total emp loyees of this bank were 3500 appro ximately. regards to the salary, majo rity of respondent’s salary is in
There are three levels of sub categories in the bank between RM1100 to RM 3000 per month (45.5%), followed
hierarchy. The first group is top level management, by 22% or 44 respondents salary is in a range of RM 3100 to
followed by the mid-level management and the last group is RM4000 per month.
the supporting group. This study focused on mid -level
4.2. Test of Hypotheses
managers who work in Kuala Lu mpur and Selangor. The
total employees of mid-level management within Kuala The correlat ion test between leadership, organizational
Lu mpur and Selangor b ranches and headquarters operation culture and organizational co mmit ment are shown in the
are appro ximately 600 emp loyees. Table 1 below.
In this study, a structured questionnaire which consisted of Linear regression analysis was carried out to test H1
39 items was distributed to 250 respondents in 40 branches in whereas; mult iple regression analysis was used to test H2
Selangor and Kuala Lu mpur and 10 depart ments in the and H3. The test results are illustrated in Table 2 and Table 3.
174 Siti Zaleha Abdul Rasid et al.: Leadership and Organizational Commitment in the
Islamic Banking Context: The Role of Organizational Culture as a M ediator

Table 1. Result of Pearson Correlation Coefficient Analysis III. Regression of organizational co mmit ment (Y) on
Variable Leadership
Organizational Organizational leadership (X) and organizational cu lture (M).
culture commitment As such, three regression equations were developed to test
Leadership 1 the statistical significance of the mediator. The first equation
Organizational
culture
0.453** 1 established the independent variable wh ich has a significant
Organizational correlation with med iator. The second equation exp lained
0.391** 0.438** 1 the independent variable which has a significant correlation
commitment
with dependent variable. The third equation included the
Note: **Correlation is significant at the 0.01 level (2-tailed)
independent and mediator variables entered concurrently
Table 2. Results of linear regression analysis with the dependent variable[29]. Mediating variable can be
Dependent Independent Std. seen when the effect of independent variable on dependent
t Sig.
variable variable Beta variable decrease with its addition and significant at P <
Leadership 0.001[30].
0.453 7.159 0.001
Organizational Style
Culture R2 0.206 Table 4. Result of SOBEL Analysis
Adjusted R2 0.202 Standard
Equation Coefficient t Significant
error
Fro m Table 2, it is obvious that, leadership style
b(YX) 0.236 0.039 5.98 .000
significantly affects organizational culture (β = 0.453, p<.05). b(MX) 0.282 0.039 7.15 .000
This result provides sufficient ev idence to accept H1. This b(YM.X) 0.319 0.067 3.47 .000
finding is consistent with the past studies in wh ich also found
support for this relationship in different contexts[24],[25]. Results indicate that there is a significant positive
In the next stage, mult iple regression analysis was utilized med iate between variables (r=0.319, n=200, p<0.0001).
to see the effect of leadership style and organizat ional cu lture This shows that organizational culture mediates the
on organizational commit ment. The results in Table 3 relationship between leadership and organizational
indicate that leadership style and organizational cu lture both commit ment. Therefore, H4 is supported. This verdict is
significantly and positively affect organizat ional consistent with earlier result by other researchers[31].
commit ment (β = 0.242, p<.05; β = 0.328, p<.001
respectively). Thus H2 and H3 are supported.
Table 3. Results of multiple regression analysis
5. Conclusions
Dependent Independent Std. This study explores thoroughly on the relationship
t Sig.
variable variable Beta between leadership, organizat ional cu lture and organization
Leadership
0.242 3.473 0.001 al co mmit ment based on one Islamic bank in Malaysia. As
Style stated above, all study hypotheses are supported. It imp lies
Organizational Organizational
0.328 4.707 0.000 that, leadership style, organizational culture and
Commitment Culture
R2 0.239 organizational co mmit ment all play vital ro le in the context
Adjusted R2 0.231 of Malaysian Islamic banking industry. The findings from
this research can help enhance the understanding of the
These findings are also in line with previous studies. For effect of leadership and organizational culture towards
example, Kent and Chelladurai contended that leadership organizational co mmit ment in Malaysian Islamic Banking
plays an important role in influencing organizat ional sector. As such, this study contributes significantly to
commit ment[26]. Furthermo re, Bourantas and Papalexandris practicing managers who plan to develop and improve their
found support for the positive association between existing working structures.
organizational culture and organizational co mmit ment[27]. In a nutshell, a good leader affects employees’ motivation
which in turn leads to organization g rowth productivity.
4.3. SOB EL Test Hence, with good, comfortable culture in an organizat ion,
The SOBEL test was utilized to test hypothesis four, i.e., emp loyees are most likely to perform better and develop
to test the mediator effect of organizat ional culture in the more co mmit ment towards their organizations in the long
relationship between leadership style and organizational run.
commit ment. The presence of organizational culture as the
med iator in relationship between leadership and
organizational co mmit ment can be assessed by estimating
6. Managerial Implications
the following equations[28]: These results propose a number of vital managerial
I. Regression of leadership (X) on organizational inferences. In order to create organizational co mmit ment; an
commit ment (Y); organization needs to have good quality leaders. Any big
II. Regression of organizat ional cu lture (M) on organizati organizations co mprise of great leaders and leadership which
onal Co mmit ment (Y); is one of the important skills needed to sustain superior
American Journal of Economics 2013, 3(5C): 171-176 175

performances. Good leadership and healthy organization relationship. It acts as an approach mediu m between parties
culture works in tandem in creating a full bar of co mmit ment and it also help to establish a strong and quality relationship
in an organization. How the leaders lead will in fluence on between them. Programs like team building that involves
how the organization culture will turn out to be and even the everyone in the organization should be emphasized. The
commit ment of the employees. The leaders live their mass media co mmun ication in an organization should be
organization's values and personify the practices they expect lessen and organization need to rely mo re on verbal
fro m their colleagues. By practicing what they want others to communicat ion as it is more detailed and direct. Leaders and
do, leaders can imp ly on which course their colleagues emp loyees should always go fo r one to one or even group
should pursue when making decisions. Organization cu lture discussion. It allows a leader to understand employees’
itself affects one’s commit ment because without a good and needs and issues and focus on how to further improve
healthy culture, it will lessen the commit ment of the performance.
emp loyees. The culture helps the organization to accomplish
what it desires on the basis of their emp loyees commit ment.
Organization culture has motivating impact for emp loyees to 7. Limitations and Future Research
improve their own and organizat ional performances. Directions
Next, imp lication of this study involves the leadership
This research examined the proposed relationships within
styles. Leaders should know what and when the styles should
the Islamic banking industry. Future studies can focus on
be used. In banking industry, through task explaining and job
other important industries in Malaysia such as healthcare and
request, transactional leadership promotes target orientations
oil and gas. Future researchers can also examine the
as it helps to achieve the highest level of overall team
differences among diverse industries field, thus producing
performance and also be able to lead and promote inferiors
the expansion of the findings.
throughout these conducts[32]. It is well documented that
transactional leaders make decisions with and for
stakeholders, taking into account their needs, and they see
the goals that needs to be achieved.
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