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Leadership & Organization Development Journal Leadership & Organization Development Journal Page 5 of 43 Leadership & Organization Development Journal 1 1 2 3 4 5 6 7 8 9 Title: Inherited organisational performance? The perceptions of generation Y on 10 11 the influence of leadership styles. 12 13 14 15 Abstract 16 17 Leadership has a major impact on organizational performance (Agle et al., 2006; Felfe 18 19 20 and Schyns, 2004; Peterson et al., 2003). However, results are still conflicting regarding 21 22 these effects and research has yet to focus on the expectations and perceived impact 23 24 from the point of view of young professionals (the future senior employees and 25 26 managers). Following this, this study has focused particularly on the role of leadership 27 28 29 styles and their impact on performance focusing on a sample of 177 young professionals 30 31 in Germany. A quantitative research strategy was implemented by using a self- 32 33 completion online questionnaire and the data was analysed using multivariate statistical 34 35 analysis to demonstrate the impact of each leadership style on organizational 36 37 performance. The Multifactor Leadership Questionnaire (Avolio and Bass, 1995) was 38 39 40 used to measure leadership styles (passive/avoidant, transactional and transformational 41 42 leadership) and organizational performance was measured based on the Balanced 43 44 Scorecard performance dimensions (financial, learning and growth, customer 45 46 orientation and organizational effectiveness) (Kaplan and Norton, 2005). Main findings 47 48 49 supported the literature suggesting a statistically significant positive impact of both 50 51 transactional and transformational leadership on organizational performance. 52 53 54 55 56 57 58 59 60 Leadership & Organization Development Journal Leadership & Organization Development Journal Page 6 of 43 2 1 2 3 4 5 6 7 8 9 Conversely, the relationship between the passive/avoidant leadership style and 10 11 organizational performance was statistically significant but negative. This suggests that 12 13 leaders in organisations driven by German culture should reconsider their approaches 14 15 and practices. 16 17 18 Keywords 19 20 Leadership styles, organisational performance, generation Y, organisational size, 21 22 multivariate analysis. 23 24 25 26 1. Introduction 27 28 29 Rapidly changing and more competitive environments have increased the significance 30 31 of developing competitive advantage through leadership to improve organisational 32 33 effectiveness (Jaramilo et al., 2005). Rather than financial efficiency, companies focus 34 35 on leadership and intangible resources to sustain their competitive advantages (Wang et 36 37 al., 2010). Leadership is one of the most explored concepts in business and industry 38 39 40 during the last decades and it is defined not only by leaders’ actual behaviours but also 41 42 by the perception of this behaviour (Tourish, 2014). It has become an essential element 43 44 for organizations (Schein, 2010; Bryman, 2007; Brymer and Gray, 2006). As such, the 45 46 impact of leadership styles on organisational performance is well documented and 47 48 49 research has shown that different leadership styles would generate different outcomes 50 51 (Ogbanna and Harris, 2000). Therefore, leadership styles not only have generally an 52 53 54 55 56 57 58 59 60 Leadership & Organization Development Journal Page 7 of 43 Leadership & Organization Development Journal 3 1 2 3 4 5 6 7 8 9 influence on the employees’ performance but also on the organizational performance in 10 11 particular (Windsor, 2009; Wang et al., 2010). Lost sales or market share, staff turnover 12 13 and, in the worst case scenarios, bankruptcy, are the typical outcomes associated with 14 15 leaders and leadership styles, steering practitioners towards the use of effective or 16 17 ineffective leaders terminology. Unfortunately sometimes organizations do not 18 19 20 recognize the difference between being an effective or an ineffective leader until it is 21 22 too late. 23 24 After doing a review of the literature on leadership and performance topics it became 25 26 clear that most studies focused on overall performance in terms of financial 27 28 29 achievement (privileging financial measures) and using managers as respondents in 30 31 their samples (Peterson et al., 2003; Huang, 2015). Thus, there is a gap in the literature 32 33 referring to how leadership is perceived and how leadership styles influence 34 35 performance from the perspective of young professionals (Ladkin, 2013). Thus, various 36 37 studies showed conflicting results suggesting that further research is needed to clarify 38 39 40 the role of leadership styles on organisational performance from this perspective (Koech 41 42 and Namusonge, 2012). To address these gaps, the present study has focused on the 43 44 responses from young German professionals who represent future organizational 45 46 success. Consequently, it is of major importance to know how these groups assess the 47 48 49 leadership style of their leaders and how this has an influence on organizational 50 51 performance. 52 53 54 55 56 57 58 59 60 Leadership & Organization Development Journal Leadership & Organization Development Journal Page 8 of 43 4 1 2 3 4 5 6 7 8 9 10 11 2. Literature Review 12 13 2.1 Leadership styles 14 15 Leadership has been defined taking into consideration various theoretical approaches 16 17 (Block 2003; Kouzes and Posner, 2007). For example, Yammarino and Dubinsky 18 19 20 (1994) defined leadership as the influence of people for performing tasks by using 21 22 mainly motivational methods. According to Boseman (2008) and Toor and Ofori 23 24 (2009), leadership is the ability to guide individuals to a specified outcome based on 25 26 stimulation and satisfaction of personal motives. Mitonga-Monga et al. (2012) stated 27 28 29 that leadership is a procedure for influencing others commitment by identifying their 30 31 full potential for reaching objectives. Although slightly different, all these definitions of 32 33 leadership share a common element acknowledging that organizations and their 34 35 workforce are influenced by leaders (Bohn and Grafton 2002). In addition to this, it is 36 37 also commonly accepted that the nature of the leadership style is the crucial factor for 38 39 40 the success or failure of any unit, organization or nation (Oladipo et al., 2013). 41 42 The historical development of leadership has an extended past and can be classified 43 44 into five main evolutionary stages that then lead to five main areas of current research 45 46 interests. Early studies were focused on investigating individual traits associated with 47 48 49 leadership. This was referred to as ‘trait’ theories which identified certain personal traits 50 51 to differentiate between leaders and non-leaders and suggested that leaders were born 52 53 54 55 56 57 58 59 60 Leadership & Organization Development Journal Page 9 of 43 Leadership & Organization Development Journal 5 1 2 3 4 5 6 7 8 9 with some traits rather than trained (Mahoney et al., 1960). Due to issues with 10 11 validating these traits and the search for types of traits that distinguish leaders from 12 13 followers, the focus shifted then to the ‘behaviour’ and ‘style’ of leaders (Likert, 1961). 14 15 Lewin and Lippitt (1938) for example referred to autocratic, democratic and laissez- 16 17 faire leaders, describing the types of behaviours common to each style which 18 19 20 determined the leader-follower relationship as well as group success, risk-taking, 21 22 problem-solving strategies, morale and relations. These three leadership styles have 23 24 usually been distinguished as: 1) autocratic – where the leader exhibits tight control 25 26 over the group and its activities; 2) democratic – where participation and the majority 27 28 29 rules and 3) laissez-faire, where limited leadership activities are present. 30 31 The Ohio State University and University of Michigan identified two dimensions 32 33 related to the consideration behaviour and initiating structure behaviour (Lowe and 34 35 Gardner, 2000). They concluded that both dimensions were separate elements, but that a 36 37 leader with dedication in both could achieve higher outcomes (Murphy, 2005). From 38 39 40 this point of view, according to Sybil (2000), the success of leaders is dependent on the 41 42 group tasks as well as how the leader’s personality fits the group. 43 44 Nevertheless, contradictory findings in behavioural approaches shifted the trend in 45 46 research towards the style of leading. A critical factor in these theories was the non- 47 48 49 observance of situational aspects which characterize the effectiveness of leaders 50 51 (Mullins, 1999). Therefore, researchers began to emphasize on ‘situational’ and 52 53 54 55 56 57 58 59 60 Leadership & Organization Development Journal Leadership & Organization Development Journal Page 10 of 43 6 1 2 3 4 5 6 7 8 9 ‘contingency’ theories of leadership credited to Fiedler (1967). According to this 10 11 approach, the ability for leading depends on the present situational factors. The leaders’ 12 13 position power, the task structure as well as the leader-follower relations are crucial 14 15 factors for the effectiveness of leadership (Fiedler, 1967; 1996). Consequently, 16 17 leadership is mainly influenced by a given situation and its effectiveness is dependent 18 19 20 on the understanding of situational factors as well as the choice of a suitable style to 21 22 manage different situations (Hersey, Blanchard and Johnson, 2007). 23 24 In order to overcome the former drawbacks of the traits, behavioural and contingency 25 26 situational theories, a new paradigm of leadership has come to the forefront of research 27 28 29 called transactional/transformational theory (Tourish, 2013). This theory was originally 30 31 suggested by Burns (1978) and later developed by Avolio and Bass (2004).
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