The Relationship Between Leadership and Organisational Performance
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This article explores the relationship between leadership and organisational performance, including the impact of leadership on employee performance, financial performance, innovation performance, and sustainability and responsibility of enterprises.
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Running head: LEADERSHIP AND ORGANISATIONAL PERFORMANCE THE RELATIONSHIP BETWEEN LEADERSHIP AND ORGANISATIONAL PERFORMANCE Name of the Student: Name of the University: Author’s Note:
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1LEADERSHIP AND ORGANISATIONAL PERFORMANCE Table of Contents 1.0Introduction...........................................................................................................................2 2.0 Overview of the concept of Leadership.....................................................................................3 3.0 Leadership Styles.......................................................................................................................4 4.0 Overview of the concept of Organizational Performance.........................................................6 5.0 Impact of Leadership on Organizational Performance..............................................................6 5.1 Leadership and Employee Performance................................................................................6 5.2 Leadership and Financial Performance of the enterprises.....................................................7 5.3 Leadership and Innovation Performance of the enterprises..................................................7 5.4 Leadership and Sustainability and Responsibility of the enterprises....................................8 6.0 Conclusion.................................................................................................................................8 7.0 References................................................................................................................................10
2LEADERSHIP AND ORGANISATIONAL PERFORMANCE 1.0Introduction As opined by Boehm et al. (2015), the ever-changing dynamics of the modern-day business world as well as the present day complexities of the business world had made the role played by the leaders within the organizational framework an important one. Asrar-ul-Haq and Kuchinke (2016) have noted that the in lieu of the change which had taken place within the business world, the role or the key responsibilities that the leaders are required to play have itself undergone a significant change. More importantly, unlike the earlier times when the leaders took the help of the Great Man Theory, Trait Theory and others for dispensing their job roles and also for the adequate management of the power balance between the followers and themselves in the present times it had been seen that the leaders are taking the help of the transformational leadership theory, transactional leadership theory, authentic leadership theory, situational leadership theory and others (Katou 2015). As discussed by Engelen et al. (2015), the major objective of the contemporary leaders behind the usage of these theories of leadership is to positively influence the aspect of employee performance and thereby help the business corporations to attain the business or the strategic goals that they have formulated. This paper had been completed following the structure of Literature Review and the researcher had taken the help of the past literature for the explaining of important concepts related to the relationship between leadership and organizational performance. The paper thus begins by firstly introducing the concept of leadership and the different leadership styles which are being followed by the leaders within the business corporations. The paper next discusses the concept of organizational performance and also the relationship of leadership with the same. This relationship had been analyzed by focusing on employee performance, financial performance,
3LEADERSHIP AND ORGANISATIONAL PERFORMANCE sustainability and responsibility and finally innovative performance of the enterprises. Finally, the paper concludes by highlighting the literature gap related to the selected topic. 2.0 Overview of the concept of Leadership As discussed by Barrick et al. (2015), leadership is the process through which the individuals positively influence the behavior of the followers so that they give their maximum effort for the attainment of the collective goals of the teams. Patiar and Wang (2016) are of the viewpoint that the idea of leadership is an integral one within the modern-day business world since the enterprises within the construct of their organizational structure have different teams and the entire organizational performance depends on the achievement of the collective goals or the targets that had been given to the individuals teams. More importantly, the leaders take the help of various kinds of tools or constructs like motivation, rewards, effective task delegation, coaching, mentoring and others so as to help their followers for the attainment of the desired goals (Pradhan and Pradhan 2015). Furthermore, it is seen that the leaders are required to use these tools both at the team or the departmental levels and also at the overall organizational level for the purpose of helping the business corporations to attain the strategic or the business objectives that they have outlined for themselves. Eisenbeiss, Van Knippenberg and Fahrbach (2015) are of the viewpoint that the leaders for the purpose of effectively dispensing the job roles that they are required to perform need to have certain basic character or personality traits which facilitates the completion of the job roles that they perform. The most important traits or skills in this relation are motivational skills, effective communication, critical decision making skills, time management skills, emotional intelligence and others (Valmohammadi and Roshanzamir 2015). It is the conglomerate usage of
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4LEADERSHIP AND ORGANISATIONAL PERFORMANCE all these skills or abilities which renders effectiveness to the leadership style which is being followed by the leaders and also helps them to effectively help the followers to achieve the targets that they have been given. 3.0 Leadership Styles According to Singh et al. (2016), an important aspect which had directed contributed towards the change that had taken place within the cauldron of leadership is the changing power dynamics between the leaders and their followers. For example, earlier it was seen that the leaders used to treat the followers as merely subordinates who were required to follow the instructions given by the leaders and no credit was being given to them for the success attained by the leaders (D’Innocenzo, Mathieu and Kukenberger 2016). However, presently it is seen that the followers are considered to play an equally important role like the leaders and are considered to be equal to the leaders in terms of the job roles that they perform (Boies, Fiset and Gill 2015). This in turn had brought about the much needed change within the spectrum of the leadership styles which are being followed by the contemporary business leaders. The Great Man theory of leadership which stated that the leaders are not created but born with special qualities was once popular and extensively used (Shanker et al. 2017). Furthermore, the trait theory of leadership, on other hand, stated that the leaders are required to have certain important character or personality traits which in turn differentiated them from the followers who were linked to them (Masa'deh, Obeidat and Tarhini 2016). More importantly, the autocratic leadership style placed all the power in the hands of the leaders and the followers were merely required to follow the orders or the instructions given by the leaders (Dubey, Gunasekaran and Ali 2015). However, presently because of the changed job roles of the leaders and also the
5LEADERSHIP AND ORGANISATIONAL PERFORMANCE changing nature of the business world itself it is seen that these leadership theories or styles are no longer being used by the leaders. This is the reason why the transformational leadership theory, transactional leadership theory, authentic leadership theory, situational leadership theory and others are being extensively used by the leaders in the present times (Hartnell et al. 2016). As stated by Boehm et al. (2015), the usage of the transformational leadership requires the leaders to lead by example and take active initiatives for the improvement of the performance of the followers. In this relation, it is seen that Howard Schultz, the ex-CEO of Starbucks is one of the prime example of the users of this leadership style (Singh et al. 2016). In contrast to this, the usage of the transactional leadership style requires the leaders to take the help of the process of ‘reward and punishment’ for the improvement of the performance of the followers (Barrick et al. 2015). Bill Gates, the ex-CEO of the enterprise Microsoft is an important example of leaders who take the help of this leadership style (Katou 2015). Furthermore, the construct of situational leadership states that the usage of one particular leadership style is not adequate and the leaders need to amend or modify the leadership style that they use on the basis of the merit or the importance of the different situations that they face (Asrar-ul-Haq and Kuchinke 2016). This had emerged as one of the most commonly used leadership styles by the business leaders and Indra Nooyi, the ex-CEO of PepsiCo is an important example of this (Engelen et al. 2015). As discussed by Pradhan and Pradhan (2015), an integral aspect of all these leadership styles is that theyareprimarilyintendedfortheimprovementofemployeeperformanceandthereby organizational performance.
6LEADERSHIP AND ORGANISATIONAL PERFORMANCE 4.0 Overview of the concept of Organizational Performance D’Innocenzo, Mathieu and Kukenberger (2016) are of the viewpoint that organizational performance denotes the actual performance attained by the business corporations as measured against the intended or the anticipated performance that they wanted to achieve. As discussed by Patiar and Wang (2016), the concept of organizational performance is important since it directly influences the revenue or the profitability earned by the business corporations and this is one of the most important reasons why the majority of the business corporations are focusing on the enhancement of their organizational performance. Furthermore, it had been seen that there are various factors or entities which directly affect the organizational performance of the business corporationslike leadership style, management style, employeesor the workforce of the corporation, organizational resources, nature or the kind of work performed by the employees of the corporation, its clientele and others (Eisenbeiss, Van Knippenberg and Fahrbach 2015). However, as suggested by Hartnell et al. (2016), the kind of leadership style which is being followed within a business corporation is perhaps the single-most important factor which directly affects the overall organizational performance of the business corporations. 5.0 Impact of Leadership on Organizational Performance 5.1 Leadership and Employee Performance According to Boies, Fiset and Gill (2015), the entities of employee performance and leadership are closely linked with each other and it is seen that the usage of adequate leadership style greatly enhances the employee performance. For example, the different tools used by the contemporary leaders like motivation, reward and punishment, coaching, mentoring and others positively affect the workplace behavior of the employees. More importantly, the leaders also
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7LEADERSHIP AND ORGANISATIONAL PERFORMANCE help the followers to acquire the kind of skills which are likely to help in the effective completion of their job role and also create the kind of organizational or workplace wherein the employees have the opportunity to maximize their productivity (Singh et al. 2016). Moreover, it had been seen that the business corporations which use effective leadership styles have been able enjoy a higher employee performance and vice versa (Katou 2015). In the particular context of these aspects, it can be said that the usage of effective leadership style enhances or positively influences the employee performance. 5.2 Leadership and Financial Performance of the enterprises As discussed by Dubey, Gunasekaran and Ali (2015), the enhancement of employee performance is directly tied up with the financial performance of the business corporations since the majority of the work or the job roles within the different business corporations are being performed by the workers. Furthermore, the profitability or the financial performance of a business corporation depends on the volume or the quality of the work which is being performed by the employees of the concerned corporation (Masa'deh, Obeidat and Tarhini 2016). In this relation, it had been seen that the leaders and the process of leadership by positively influencing the behavior of the followers or the employees helps in the enhancement of their performance or productivity and thereby the overall financial performance of the corporations as well. 5.3 Leadership and Innovation Performance of the enterprises As opined by Valmohammadi and Roshanzamir (2015), an important job role that the contemporary business leaders perform is to create an adequate or congenial workplace culture wherein the employees would be able to maximize their productivity. Furthermore, because of the constantly changing dynamics of the business world and also the needs of the customers, the business corporations are required to take the help of technological advancements for the
8LEADERSHIP AND ORGANISATIONAL PERFORMANCE purpose of offering innovative products or services (Patiar and Wang 2016). Thus, the leaders are required to encourage the employees to take the help of the processes of innovation and creativity for the creation of a continuous learning environment and thereby enhance the innovation performance of the corporations. 5.4 Leadership and Sustainability and Responsibility of the enterprises Boehm et al. (2015) have noted that the leaders are required to focus on the long-term growthofthecorporationsratherthanshort-termgrowthsoastohelpthemtoattain sustainability and competitive advantage within the business market of their operation. However, for the attainment of this goal the leaders are required to encourage the corporations to take responsibility for their actions or show greatly accountability. More importantly, the leaders are also required to play a pivotal role in the formulation of the corporate social responsibility (CSR) practicesusedbythecorporationsforthefulfillmentoftheirresponsibilityasbusiness corporations (Singh et al. 2016). Thus, it can be said that the leaders are required to take the help of different measures for the purpose of encouraging the business corporations to take greater responsibility for their business activities and also for the attainment of sustainability. 6.0 Conclusion There is no dearth of literature on the relationship between leadership and organizational performance however there are very few researches which have specifically focused on the relationship of leadership to financial performance, innovation performance and other specific kind of performances of the corporations. Thus, by effectively focusing on these aspects this research will be a unique one and therefore the future researchers conducting researches would have the opportunity to use this research as a basic framework for conducting their researches.
9LEADERSHIP AND ORGANISATIONAL PERFORMANCE The constructs of organizational performance and leaders are directly related to each other. For example, the leadership style used by the leaders and also the different tools like motivation, rewards and punishment, coaching and others that they use directly affect the employeeperformance.Theenhancementofemployeeperformanceisimportantsinceit positively affects the aspect of organizational performance and thereby the growth or the financial performance attained by the business corporations.
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10LEADERSHIP AND ORGANISATIONAL PERFORMANCE 7.0 References Asrar-ul-Haq, M. and Kuchinke, K.P., 2016. Impact of leadership styles on employees’ attitude towards their leader and performance: Empirical evidence from Pakistani banks.Future Business Journal,2(1), pp.54-64. Barrick,M.R.,Thurgood,G.R.,Smith,T.A.andCourtright,S.H.,2015.Collective organizational engagement: Linking motivational antecedents, strategic implementation, and firm performance.Academy of Management journal,58(1), pp.111-135. Boehm, S.A., Dwertmann, D.J., Bruch, H. and Shamir, B., 2015. The missing link? Investigating organizational identity strength and transformational leadership climate as mechanisms that connect CEO charisma with firm performance.The Leadership Quarterly,26(2), pp.156-171. Boies, K., Fiset, J. and Gill, H., 2015. Communication and trust are key: Unlocking the relationshipbetweenleadershipandteamperformanceandcreativity.TheLeadership Quarterly,26(6), pp.1080-1094. D’Innocenzo, L., Mathieu, J.E. and Kukenberger, M.R., 2016. A meta-analysis of different forms of shared leadership–team performance relations.Journal of Management,42(7), pp.1964-1991. Dubey, R., Gunasekaran, A. and Ali, S.S., 2015. Exploring the relationship between leadership, operational practices, institutional pressures and environmental performance: A framework for green supply chain.International Journal of Production Economics,160, pp.120-132.
11LEADERSHIP AND ORGANISATIONAL PERFORMANCE Eisenbeiss, S.A., Van Knippenberg, D. and Fahrbach, C.M., 2015. Doing well by doing good? Analyzing the relationship between CEO ethical leadership and firm performance.Journal of Business Ethics,128(3), pp.635-651. Engelen, A., Gupta, V., Strenger, L. and Brettel, M., 2015. Entrepreneurial orientation, firm performance, and the moderating role of transformational leadership behaviors.Journal of Management,41(4), pp.1069-1097. Hartnell, C.A., Kinicki, A.J., Lambert, L.S., Fugate, M. and Doyle Corner, P., 2016. Do similarities or differences between CEO leadership and organizational culture have a more positive effect on firm performance? A test of competing predictions.Journal of Applied Psychology,101(6), p.846. Katou, A.A., 2015. Transformational leadership and organisational performance: Three serially mediating mechanisms.Employee Relations,37(3), pp.329-353. Masa'deh, R.E., Obeidat, B.Y. and Tarhini, A., 2016. A Jordanian empirical study of the associations among transformational leadership, transactional leadership, knowledge sharing, job performance, and firm performance: A structural equation modelling approach.Journal of Management Development,35(5), pp.681-705. Patiar, A. and Wang, Y., 2016. The effects of transformational leadership and organizational commitmentonhoteldepartmentalperformance.InternationalJournalofContemporary Hospitality Management,28(3), pp.586-608.
12LEADERSHIP AND ORGANISATIONAL PERFORMANCE Petrenko, O.V., Aime, F., Ridge, J. and Hill, A., 2016. Corporate social responsibility or CEO narcissism?CSRmotivationsandorganizationalperformance.StrategicManagement Journal,37(2), pp.262-279. Pradhan,S.andPradhan,R.K.,2015.Anempiricalinvestigationofrelationshipamong transformationalleadership,affectiveorganizationalcommitmentandcontextual performance.Vision,19(3), pp.227-235. Shanker, R., Bhanugopan, R., Van der Heijden, B.I. and Farrell, M., 2017. Organizational climate for innovation and organizational performance: The mediating effect of innovative work behavior.Journal of vocational behavior,100, pp.67-77. Singh, S.K., Burgess, T.F., Heap, J., Almatrooshi, B. and Farouk, S., 2016. Determinants of organizational performance: a proposed framework.International Journal of Productivity and Performance Management. Valmohammadi, C. and Roshanzamir, S., 2015. The guidelines of improvement: Relations among organizational culture, TQM and performance.International Journal of Production Economics,164, pp.167-178.