Leadership
is a process whereby an individual influences a group of individuals to achieve
a common goal. –Northhouse P
Organizations
that realize the importance of their employees have come out with various
strategies and policies to ensure that their well-being is taken care of and
they become engaged in their work. Leadership style is also expected to play a
significant role in affecting employees’ attitudes.
1. Transformational Leadership
Transformational leadership is among the most discussed leadership style in the modern literature. Burns (1978) described transformational leaders as individuals who inspire and challenge subordinates to go beyond their personal interests in order to achieve goals or benefits to the wider group or organization.
Transformational leadership style is measured using 4 factors (Bass and Avolio, 2000):
a. Idealized
Influence - The degree to which the leader acts as a role model for their
followers.
b. Inspirational
Motivation - Challenge followers to leave their comfort zones, communicate
optimism about future goals, and provide meaning for the task at hand.
c. Intellectual
Stimulation - Deals with encouraging the followers to be innovative &
creative and never criticize the followers publicly for the mistakes committed
by them.
d. Individual Consideration - The degree to which the leader attends to each follower's needs, acts as a mentor or coach to the follower and listens to the follower's concerns and need.
Thus
it can be said that, it is a process where a leader engages followers by
motivating them through empowerment, learning, trust, and communication.
Transformational leader encourages collaborative approach by which the leader
and followers work together on a shared vision for the present and the future
of the organization (Burns 1978).
2. Transactional Leadership
Transactional leadership explains the relationship between leader and follower as an exchange of well-defined transactions (Burns 1978).Transactional Leadership focuses on the role of supervision, organization, and group performance; it is a style of leadership in which the leader promotes conformity of his followers through both rewards and punishments (Devi and Narayanamma 2016).
Transactional leadership has three components:
a. Contingent reward - links the goal to rewards, elucidate expectations, provide necessary resources, lay down mutually agreed goals, and provide various kinds of rewards for successful performance.
b. Active management by exception - Actively monitor the work of their subordinates; observe for deviations from rules and standards and take corrective measures to prevent mistakes.
c. Passive management by exception - Transactional leaders interfere only when standards are not complied with or when the performance is not as per the expectations.
Leadership
can have a great impact of employees and so as on engaging employees within the
organization. However, as per Batista et
al (2013), transactional leadership limits the leader to using reward based
behaviors in order to achieve higher performance from employees, which only
have short-term effects. On the other hand, transformational leadership emerges
as a style that fosters the development of employee engagement. Transformational
leadership changes the way followers see themselves-from isolated individuals
to members of a larger group and when followers see themselves as members of a
collective, they tend to endure group values and goals, and this enhances their
motivation to contribute to the greater good.
Transformational
leaders provide an inspiring vision of goals that can help overcome
self-interest and narrow factionalism in organizations. They summon new and
broader energies among followers. Bakker and Schaufeli (2008) found that
employees who have positive interactions with their managers have increased
levels of engagement. Additionally, Lawler et al (2005) found that using a
transformational leadership style leads to increased organizational commitment
and job satisfaction, and still Cartwright and Holmes (2006) found that leaders
who focus on relationship building and trust development increase engagement
levels. Transformational leaders are not viewed as a power figure but as mutual
support for a common purpose, the collective good of an organization. From this
perspective, transformational leaders have the capacity to directly impact the
engagement levels of their employees (Nohria, Groysberg, & Lee, 2008) and
are able to meet the human and work needs of their employees, a dividend of a
very unique and empowering style.
The
findings of the study done by Tuffour, Abubakari
and Mercy (2019) has indicated that transactional leadership is the most
dominant leadership style practiced within the banking sector. Although
transactional leadership style found to be dominant, it contributes only 4.8
per cent to employee commitment as compared to 51 per cent by transformational
leadership style in eliciting employee commitment.
Therefore,
it could be said that transformational leadership style can influence positively
in engaging employees. Asrar-ul-haq and Kuchinke (2016), state
that transformational leadership style and contingent reward have positive
impact on employee turnover in banking industry. Sareen and Agarwal (2016)
state that employee retention of middle or operational level employees can be
done through transformational leadership.
This
was showcased in year 2019 when Hatton National Bank commenced its transformational
journey named as “Project Everest”, towards achieving its vision 2020 of being
the leading private sector bank in Sri Lanka.
Figure 1.0 – Vision 2020 of Hatton National Bank under Project Everest
Project
Everest has commenced to succeed excellence in customer service, operational
standards and happy employees. The quest - a collaborative one with consultancy
by team Inter-brand and team Deloitte defined the bank’s ethos with special
emphasis on digitization and customer experience. Specific working groups have
been convened to lead the transformation on ground, through focus group
discussions, data requests, operational studies, employee engagement surveys,
that showed tremendous commitment thus embracing new changes. Among the handpicked
teams were Change Agents, who carried the message across the entire network of
250 plus branches ,fully engaged in the transformational journey. The corporate
management team embarked on a leadership development programmes as part the
‘Everest’ quest, to facilitate and equip the Bank’s leadership with required
skills to achieve Vision 2020.
Figure
2.0 – Key Elements in Transformational Leadership to the Bank
(Source – Everest News Letter, Issue 5, 2020)
The top team and working groups have deliberated in order to guarantee that the optimal and most practical operating model is implemented with the right people in the right place. People identification was based on the recent talent mapping/ fitment exercise spearheaded by the Human Capital team. Many fruitful discussions with several engaged groups of employees which were created to ensure the success of project Everest under the transformational leadership of Mr. Jonathan Alles-CEO/MD of Hatton National Bank.
“Project
Everest is a passion, a dream of the entire Team HNB and requires collaboration
and contribution of all its members. There is no audience - there are no
spectators - we are all actors and actresses on the big stage.” – Jonathan
Alles (CEO/MD –Hatton National Bank)
(Source : Kalki News)
References
Bakker, A. B., & Schaufeli, W. B. (2008). Positive
organizational behavior: Engaged employees in flourishing organizations.
Journal of Organizational Behavior, 29, 147-154.
Bass, B. M., & Avolio, B. J., 1990. “The
Implications of transactional and transformational leadership for individua l,
t e am, and organi za tiona l development”, Research in Organizational Change and Development, Volume 4,
pp.231-272.
Bass, B.M. and
Avolio, B.J., 2000. MLQ Multifactor Leadership Questionnaire. Second Edition,
Redwood City, CA: Mind Garden.
Batista-Taran,
L.C., Shuck, M.B., Gutierrez, C.C., & Baralt, S.T. (2013). The Role of
Leadership Style in Employee Engagement.
Burns, J. M., 1978.
Leadership. Harper and Row. New York, USA.
Cartwright, S., &
Holmes, N. (2006). The meaning of work: The challenge of regaining employee
engagement and reducing cynicism. Human Resource Management Review, 16,
199-208.
Devi and Narayanamma,
2016. Impact of Leadership Style on Employee Engagement. Pp. 92.
Everest News Letter, Issue 3, 2019,Hatton National
Bank.
Everest News Letter, Issue 5, 2020,Hatton National
Bank.
Gill, R., 2011. Theory and practice of leadership.
SAGE Publications, California, USA.
Nohria, N., Groysberg, B., & Lee, L. (2008).
Employee motivation: A powerful new model. Harvard Business Review, 86, 78-84.
Northhouse, P. G. (2015), Leadership: theory and practice.7th ed.
London, Sage.
Tuffour,
J. K., Abubakari, M. Gali, Mercy., J. K., 2019. Managerial Leadership
Style and Employee Commitment: Evidence from the Financial Sector
Walumbwa, F. O., Orwa, B., Wang, P., & Lawler, J.
J. (2005). Transformational leadership, organizational commitment, and job
satisfaction: A comparative study of Kenyan and U.S. financial firms. Human
Resource Development Quarterly, 16, 235-256
Agree that transformational leadership certainly and positively influence employees both for their professional and personal growth. Then again in a banking field, the ongoing work environment circumstances makes managers exhibit a particular leadership behavior and these circumstances could not necessarily be the same in all areas, regions or countries, hence a combination of both transactional and transformational leadership could be practiced (Lagesse, T, Lemi, K & Alemu, D 2020). Therefore, a single determinant factor is insufficient in substantiating banking performance (Emmanuel, T et al, 2014).
ReplyDeleteHi Asitha, Voon et al. (2011) showed that transformational leadership style has a stronger and positive relationship with job satisfaction and employee engagement. Leaders can affect employee engagement, satisfaction, commitment, performance and productivity by adopting the suitable leadership styles with employees. Furthermore, leadership is a process that influences employees and leaders where a leader attempts to influence the behavior of subordinates to achieve the organizational goals. By achieving the organizational goals and objectives, the organization success depends on the leader and its leadership styles.
DeleteLeadership: Employees need to feel that the core values for which their companies stand are unambiguous and clear. Successful organizations show respect for each employee’s qualities and contribution regardless of their job level. A company’s ethical standards also lead to engagement of an individual(Patro, 2013).
ReplyDeleteHi Janaka, employee engagement is fully influenced by leadership, workplace culture, company reputation and reward practices. Engaged workers work very hard and loyal to their organization. Thus, to raise the values and principles of engagement, HR must design programs and practices for the employees in whom they connect in their work and feel committed to their organization and its goals and objectives. So the employees perform well in the organization ( Iqbal, 2015).
DeleteOrganizations must always bear in mind that employee engagement cannot be accomplished by a mechanical strategy that seeks to exploit employee engagement and emotions to obtain discretion. Employees have seen these efforts quickly and can become cynical and frustrated (Finnegan, 2017).
ReplyDeleteYes Malinga, employee engagement is usually understood as an inner state of mind, that is, physically, emotionally, and mentally, that binds together the commitment, satisfaction, and work effort in an employee. Engaged employees support the organization to attain its mission, execute its strategy, and generate significant business results. Employee engagement can be enhanced by different HR practices comprising job design, recruitment, selection, compensation, training, and performance management (Vance, 2006).
DeleteTransformational leadership can grow independents and empower the followers (Dvir et. al, 2002).But in the banking sector with more risk, regulations and with high liability to capital ratio can banks gives that independence to the employees ?
ReplyDeleteThis comment has been removed by the author.
DeleteHi Rumesh , Men (2010) examined the links between the leadership styles, employee empowerment on
Deleteorganizational leadership on public relations effectiveness from an external perception of organizational reputation. Through empowering employees in organization it showed that leadership positively influence not directly but also indirectly employee’s perception of organizational reputation. In transformational leadership, management delegate power to employees and involve them in decision making than transactional leadership. In a more favorable and encouraging evaluation of organizational reputation employees feel more convenient and empowered in terms of competence and performance. Without doubt HNB has shown over the couple of years that transformational leadership is current and applicable to the modern technological era with the ongoing changes.
Importance leadership and their qualities enhance employees behavior, attitude and satisfaction further, gaining employee confidence is an important factor in becoming an effective leader. These factors lead to create highly engaged employees (Wang and Hsieh, 2013).
ReplyDeleteHi Supun , high levels of employee engagement with in a company promote retention of talent, foster customer loyalty and improve organizational performance. It is also a key link to customer satisfaction, company reputation and overall stakeholder value (Lockwood, 2007). Seigts et al. (2006) summarized the literature on employee engagement stating that engagement factors deal with connection, career advancement, clarity in communication, conveyance of expectations, congratulations or recognition, contributions, control over own job, collaboration between employees, credibility in leaders, and confidence in the company.
DeleteAgree with you. Leadership style of the organization directly effect the employee engagement. According to Popli and Rizvi (2017) research, has proven the direct relationship with employee engagement and the leadership style of an organization. They further emphasis the fact that if an organization is to be achieved the desired outcomes, leadership should develop systems and processes that are being focused on employee engagement.
ReplyDeleteYes Sohan , Stanislavov and Inavov (2014), revealed that the impact of leadership styles on employee’s engagement and organizational performance. That leadership styles led to significant changes on employees and organization culture. The results showed that the visionary style creates the highest level of engagement while commanding and pacesetting styles create the lowest. It was also proposed that the leader must consider the maturity level of the followers and undertake the
Deleteappropriate leadership style that fits this level.
Yes Thilini, the focus here is on job design, leadership, coaching, supervisor support, and training in order to assist employees and facilitate the development of engagement and the influence of Leadership should also involves in the development of psychological capital, a higher-order construct that can promote employee engagement (Sweetman & Luthans, 2010).
ReplyDeleteYes Kelum , reward systems too should be aligned with the company’s goals and objectives, employee development, company’s strategies and team performance. In order to create a competitive edge organization should maintain the reward system within the organization so that employees work hard and efficiently perform in their work. In the company these programs usually train and inspire associates to become more productive, efficient and respected individuals ( Iqbal, 2015).
DeleteAdding to your statement on leadership style that transformational leadership makes employees to willing to make an extra effort to achieve their goals and move beyond immediate self-interest and to work towards the improvement of the service and development the organization (Nielsen et al., 2008).
ReplyDeleteHi Isuru, In transformational leadership, management delegate power to employees and involve them in decision making than transactional leadership. In a more favorable and encouraging evaluation of organizational reputation employees feel more convenient and empowered in terms of competence and performance ( Iqbal,2015).
DeleteBoth transactional and transformational leadership influence to increase unit performance of employee engaged with, transactional leaders needed to set structure where transformational leaders built on the existing structure and developed a friendlier unit to meet the challenges of a turbulent global market (Bass et al, 2003).
ReplyDeleteHi Eranga, transactional leadership is primarily passive, and the behaviors most associated with this type of leadership are establishing the criteria for rewarding followers and maintaining status quo (Odumeru & Ifeanyi, 2013).Transformational leaders pay attention to concern and developmental needs of individual followers, they change followers awareness of issues by helping them to look at old problems in a new way and they are able to arouse, excite and inspire followers to put out extra effort to achieve group goals (Odumeru & Ifeanyi, 2013).
DeleteArmstrong (2009) discusses the very important role played by line managers (the front-line leaders of an organization) in increasing employee engagement levels. The author also emphasizes on the training of line managers as well as prospective managers to equip them with the skills and knowledge required to play this vital role.
ReplyDeleteThe purpose of the training is for employees to arrive as quickly as possible in phase of effectiveness and quality of the work and revealing human potential and directing the employee in an appropriate manner. Duration of induction depends on the complexity of the job and the company's regulated standards therefore can last from a week or two, up to a year. Activities of organized induction must have a ritual character to strengthen the feeling of belonging to that company. Content ritual should focus on developing attitudes and values that are of interest to the company (Dragomiroiu & Hurloiu , 2014).
DeleteJohn Storey et al (2009) discusses, Leaders lead by doing, but also by getting others to do. Leaders recognize that their ultimate responsibility is to help others nurture and growth their talents.The participation and learning opportunities for employees should be a constant leadership action item.As decisions are made, leaders can ask questions such as:Who should be involved in this decision? Who are the next generation of talented employees and how do we give them learning opportunities? What is our workforce plan and how do we make sure we have employees prepared for what is coming? As leaders open their decision processes to more employees, these employees will be more engaged.
ReplyDeleteWhen leaders build purpose-driven organizations, employees are more engaged. Employees in these organizations act like volunteers because they believe in the cause or purpose of the organization. Leaders can see the beginning of the processes to the end. As they open these processes to employees, employees become equally engaged ( Storey et al ,2009).
Delete