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Chapter One of The Effect Of Leadership Style On Organizational Performance
1.1 Background To The Study
Leadership is the process of influence on the subordinate, in which the subordinate is inspired to achieve the target, the group maintains cooperation, and the established mission is accomplished, with support from external groups obtained. Also, Fry (2003) pointed out that leadership means the use of a leading strategy to offer inspiring motives and to enhance the staff‟s potential for growth and development. Northouse (2004) again described leadership as a process whereby an individual influences a group of people to achieve a common goal.
Heinz (2001) described Leadership as the act or process of influencing people so they will share willing in achieving Organisational goals. Cole (2005) define Leadership as a dynamic process whereby one man influences other to contribute voluntarily to the realization and attainment of the goals and objectives, aspiration of values of the group that is representing the essence of leadership which is to help a group or an Organisation to attain sustainable development and growth. Peretomode and Peretomode (2005) from his review of the literature identified some aspects of the definition of Leadership to include:the ability to persuade others to work towards defined objectives enthusiastically, the human factor that keeps a group cohesive and motivate towards goals; Interpersonal influence directed through the communication process, toward the attainment of goals; Initiation of a new structure or procedure for accomplishing or changing Organisation goals; Influencing the actions, behaviour, beliefs and goals of one being influenced.
From these, some element of Leadership can be identified for one thing; Leadership is not an isolated activity but one that involves others, followers or the leader. Leadership involves the use of influence as the distinct from forcible domination or coercions. Leadership is a process, which means that it is a continuous, ongoing activity directed toward the accomplishment of goals as its ultimate outcome. Tannebaum and Koiny defined Leadership as ―interpersonal influence exercise in a situation and directed through the communication process, towards the attainment of a specialized goal or goals. Heresy and Blanchard (2001), after an extensive review of the literature on Leadership offered their own definition thus: Leadership is the process of influencing the activities of an individual or a group in efforts toward goals, achievement in a given situation.
The essence of leadership is followership. It is the willingness of people to follow that makes a person a leader, moreover, people tend to follow whom they see as providing means of achieving their own desires, wants and needs. Leadership transformed potentials into reality, it is the alternative act that brings to success all the potentials that is in an organization and its people. It is that people have concerned about it since the beginning of history. By focusing on leadership, we do not mean to suggest that leadership in organization is a compartmentalized phenomenon. Indeed, leadership is a pervasive in every act of management. The person who can mesh divergent and conflicting forces, recognize and create opportunities, use the influence and moral basis of his or her position, and employ the minimal amount of resources to maximally achieve publicly desired ends is in great demand everywhere. Despite the obvious importance of leadership, the concept has been difficult to understand and the skill even harder to develop.
Organizational success or failure is largely dependent on the leadership style. Many studies on leadership and organization performance posited that leadership traits and behavioural paradigm of the top management affects organizational performance (Argyris, 1995: Mahoney et al 1960). Leadership method or style and systemic behaviour shifted away from the characteristic of the leader to the style the leader adopted (Hemphills, Coons, 1957; Likert 1961). Records from the style approach suggested that leaders who are addicted to democratic or participatory leadership style appeared more successful compared with managers that adopted autocratic or laissez faire leadership style of management (Bowsers and seashore, 1966)
On the other hand, organizational performance refers to ability of an enterprise to achieve such objectives as high profit, quality product, large market share, good financial results, and survival at pre-determined time using relevant strategy for action (Koontz and Donnell, 1993). Organizational performance can also be used to view how an enterprise is doing in terms of level of profit, market share and product quality in relation to other enterprises in the same industry. Consequently, it is a reflection of productivity of members of an enterprise measured in terms of revenue, profit, growth, development and expansion of the organization.
Understanding the effects of leadership on performance is also important because leadership is viewed by some researchers as one of the key driving forces for improving a firm‟s performance. Effective leadership is seen as a potent source of management development and sustained competitive advantage for organizational performance improvement (Avolio, 1999; Lado, Boyd and Wright, 1992; Rowe, 2001). For instance, transactional leadership helps organizations achieve their current objectives more efficiently by linking job performance to valued rewards and by ensuring that employees have the resources needed to get the job done (Zhu, Chew and Spengler, 2005). Visionary leaders create a strategic vision of some future state, communicate that vision through framing and use of metaphor, model the vision by acting consistently, and build commitment towards the vision (Avolio, 1999; McShane and Von Glinow, 2000). Some scholars like Zhu et al. (2005), suggest that visionary leadership will result in high levels of cohesion, commitment, trust, motivation, and hence performance in the new organizational environments.
Mehra, Smith, Dixon and Robertson (2006) argue that when some organizations seek efficient ways to enable them outperform others; a long standing approach is to focus on the effects of leadership. Team leaders are believed to play a pivotal role in shaping collective norms, helping teams cope with their environments, and coordinating collective action. This leader-centred perspective has provided valuable insights into the relationship between leadership and team performance (Guzzo and Dickson, 1996). Some studies have explored the strategic role of leadership to investigate how to employ leadership paradigms and use leadership behaviour to improve organizational performance (Judge, Bono, Ilies, and Gerhardt, 2002; Judge and Piccolo, 2004; Keller, 2006; McGrath and MacMillan, 2000; Meyer and Heppard, 2000; Purcell, Kinnie, Hutchinson and Dickson, 2004; Yukl, 2002). This is because intangible assets such as leadership styles, culture, skill and competence, and motivation are seen increasingly as key sources of strength in those firms that can combine people and processes and organizational performance (Purcell et al., 2004).
Nwachukwu (1988) believed that participative leadership is the best style of leadership in managing an organization system of any type. Nwachukwu maintained that people react favorably to it in organization by increased productivity, lower unit cost, and good morale and improved labour management relation. According to Nwachukwu (1988), the worst style of leadership is autocratic and authoritarian leadership style which gives rise to high labour management conflicts. Another leadership style which focuses on leader effectiveness is the contingency model or situational sensitive which is anchored on the leader‟s ability to analyze the situation at hand and appropriately adopting a suitable approach which best suites the circumstance.
In general, however, the effects of leadership on organizational performance have not been well studied, according to House and Aditya‟s review (1997), who criticised leadership studies for focusing excessively on superior-subordinate relationships to the exclusion of several other functions that leaders perform, and to the exclusion of organizational and environmental variables that are crucial to mediate the leadership-performance relationship.
1.2 Objectives Of The Study
The broad objective of this study was to examine the impact of leadership style on organizational performance, while the specific objectives were:
- to identify the kind of leadership style GTBank Iwo Road management apply.
- to identify the most preferred leadership style by employees
1.3 Statement Of The Problem
A large number of organizations spend considerable huge amount on solving managerial problems. Besides, research on management‟s leadership style and organizational performance are limited and personnel do not know enough about management‟s leadership style and the organizational productivity. Several organizations today have the problem of leadership and the style to be adopted in leading employees. Over the years, organizations have faced the bureaucratic leadership. Consequently many leadership ideas within the last century have affected the general effectiveness of organization‟s productivity (Heurieglet, 2004).
Leadership has characteristics that distinguish it as a dynamic symbolic movement where every employee look up to for adjustment when necessary. These characteristics explain the vital sensitive and proper positioning of leaders in organization. The absence of effective leadership is a serious problem endemic in many organizations. It is obvious that the resultant outcome is poor staff performance, absence of motivation, poor growth and development of the institutions. Hence, this would sort to investigate management leadership style and organizational performance.
1.4 Research Questions
- What kind of leadership style is adopted in GTBank Iwo Road?
- Which leadership style is the most preferred by employees?
1.5 Research Hypotheses
H0: There is no significant relationship between leadership style and organizational performance
H1: There is a significant relationship between leadership style and organizational performance
H0: There is no significant relationship between leadership style and employees‟ commitment
H2: There is a significant relationship between leadership style and employees‟ commitment
1.6 Scope Of The Study
The scope of this study is to cover the influence of leadership and leadership styles on the performance of employees/workers in an organization. The research work will focus mainly on the impact of leadership style and how it affects the performance of the workers. The study also aims at using T GTBank Iwo Road for the sampling of opinions. The field survey shall be conducted in the school because it is closer to access.
1.7 Significance Of Study
The study findings will serve as guidelines for management of organizations to improve on their leadership style as a means to have a stable and long firm with a good leader who can inspire its followers. It can also be useful in shedding more lights on the impact of leadership style on worker‟s performance in our education sector and our society at large. It is therefore, so imperative to conduct this study for it to extend the frontier of knowledge by bringing out facts for social scientist, managers, officials and any other agency so as to get solution to the problems of leadership in terms of their leadership style they adapted. Finally, future researcher can use the end product of this work as a reference for future studies of related subject matter.
1.8 Operational Definition Of Terms
- Leader: An individual who influences a group of people to achieve a common goal.
- Leadership: the use of a leading strategy to offer inspiring motives and to enhance
the staff‟s potential for growth and development. Also, Leadership is a process whereby an individual influences a group of people to achieve a common goal.
- Leadership Style: the combination of traits, characteristics, skills and behaviours that leaders use when interacting with their subordinates.
- Organization: A group of people or other legal entities with an explicit purpose and written rules.
- Performance: The act of carrying into execution or action.
- Autocracy: A form of leadership or government in which unlimited power is held by a single individual.
- Bureaucracy: A leadership style or administration characterized by excessive red tape and routine.
- Democracy: A leadership or government under the direct or representative rule of people of its jurisdiction.
- Discipline: A punishment to train or maintain control.
- Principle: A moral rule or aspect
- Manager: somebody who is responsible for directing and controlling work and staff of a business, or of a department within it.
- Motivation: The act of providing with a reason to act in a certain way.
- Worker’s/Employee’s Performance: Is the job related activities expected of a worker and how well those activities were executed.
1.9 Historical Background of Guaranty Trust Bank
Guaranty Trust Bank plc also known as GTBank or simply GTB is a Nigerian multinational financial institution, that offers Online/Internet Banking, Retail
Banking, Corporate Banking, Investment Banking and Asset Management services, with its head office in Victoria Island, Lagos. The bank was formed in 1988 by over 35 young Nigerians in their thirties, spearheaded mostly by Tayo Aderinokun and Fola Adeola, but also included Femi Pedro, Gbolahan Osibodu, Femi Akingbe, Akin Opeodu and others.
Guaranty Trust Bank plc was incorporated as a limited liability company licensed to provide commercial and other banking services to the Nigerian public in 1990 and commenced operations in February 1991. In September 1996, Guaranty Trust Bank plc became a publicly quoted company and won the Nigerian Stock Exchange President‟s Merit award. In February 2002, the Bank was granted a universal banking license and later appointed a settlement bank by the Central Bank of Nigeria (CBN) in 2003. Guaranty Trust Bank undertook its second share offering in 2004 and raised over N11 billion from Nigerian Investors to expand its operations. On 26 July 2007 GTBank became the very first subsaharan bank and first Nigerian joint stock company to be listed on London Stock Exchange and Deutsche Börse. The IPO raised US$750,000,000. In the same year, they successfully placed Nigeria’s first private Eurobond issue on the international capital markets.
The GTBank USD 500,000,000 Eurobond was the first ever Benchmark Eurobond issue by a Nigerian corporate and the second Eurobond programme by GTBank in the last 5 years. The long-term debts of Guaranty Trust Bank plc are rated BB- by Standard & Poor’s and AA- by Fitch Ratings, which are the highest ratings for a Nigerian bank. They introduced online banking and SMS banking in Nigeria and a naira denominated MasterCard as well as the Platinum and World Signia cards and with GTB-on-wheels, mobile branches. On 12 March 2008, GTBank was given a banking licence for the United Kingdom by the Financial Services Authority. In 2011, the bank became the biggest bank in Nigeria by market capitalisation. In 2013, the bank acquired 70 percent shareholding in the Fina Bank Group for a cash payment of US$100 million. The Bank currently has over 10,000 employees.
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