Leadership Styles and Impact on Organizational Performance

This report delves into the concepts of leadership and organizational performance, examining their interconnectedness within a business context. It explores how different leadership styles, including transactional and transformational leadership, influence various aspects of organizational performance such as financial results, market performance, and shareholder returns. The report critically evaluates the perspectives of various authors on the relationship between leadership and organizational outcomes, highlighting the significance of good leadership in driving success and growth. It further identifies and analyzes the challenges leaders face in managing organizational performance, including handling diverse teams, communication issues, and maintaining employee motivation, and it suggests strategies to overcome these obstacles. The report also discusses the importance of factors beyond leadership, such as work environment and employee goals, in contributing to overall organizational effectiveness, and it concludes by emphasizing the importance of leadership skills in maintaining balance in organization performance.

STRM042 CRITICAL
ISSUES IN BUSINESS

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
REFERENCES................................................................................................................................9

INTRODUCTION
This project shall highlight the concepts of leadership and organizational performance in
a company. It shall be discussing the relationship between various leadership styles and the
impacted organizational performance accordingly. The relation shared shall be critically
evaluated in the views of various authors who have contributed on this topic. Further the study
shall also show the various challenges that are faced in the business regarding the leadership and
organizational performance as generated.
MAIN BODY
Concepts of organization and Leadership
As per the views Schultz and et.al., (2019) organization performance encompasses three
specific areas of business outcome which are financial performance, product market performance
and shareholders return. But specialist in many areas refer organization performance as strategic
planning, legal and organization development. This performance is measured in many ways like
customer service, social responsibility, organizational engineering and employee stewardship.
There are many authors that have defined organization leadership in many ways but __
described it in such way that it's that performance which should be measured in economic and
operational performance. It is also, measured for different levels of hierarchy and can be used for
individuals, group and for whole firm. In organization research it can be analysed that it can be
used for various levels of organization.
On the other side Rahmadani and et.al., (2020) argued that while discussing organization
performance it is critically stated that, 'Standing tallest is far from straight forward, but it
depends on which tool for measuring you are using.' Along with organization performance team
performance is also broad concept. Team can be defined as two or more people who are working,
cooperating with each other for common goal. Regarding individual performance, it also
becomes clear that several authors define it differently. For trapping individual performance, in
against of this van der Lippe and Lippényi., (2020) developed that 'Role based performance
scale' and some other authors use different scale for measuring individual performance.
Similarly, there are others ways also to measure Performance like contextual performance, task
performance, general performance and creative performance. For measuring performance

knowledge of task, quality and quantity of work, commitment from team and individual and
interpersonal skill is required.
Furthermore, with the analysis of Arshad and et.al., (2020) there are many other ways
also which helps the organization to measure their firm's performance in survival and growth
context, how well an organization can fit environment also measures company's performance,
measuring performance in relevancy also helps organization to find its effective, efficient and
relevant areas of organization. Comparing organization's performance across organizations acts
as an important factor which helps them to identify competition prevailing among organization
and identifying advantages and drawbacks for improvements of firm's performance. Another key
variable is that it can be measured in the terms of market orientation like winning market with
effective decision-making, collecting information of market.
Moreover, as per the analysis of the Vanharanta and Markopoulos., (2019) leadership is
powerful term which is conceptualized very weakly. Various authors have defined leadership in
many other ways but common in those definitions is that it's a process of influencing others to
achieve a common goal. There are different types of leadership empowering leadership,
transactional leadership, transformational leadership and leader member exchange. In other
words, leadership is magic concept which is inspiring for others. Transactional and
transformational leadership is broad concept, in which leader offers a purpose. These types of
leaders motivate employees to focus on their moral values. In contrast, transactional leaders
encourage followers by offering them exchange appeal.
Relationship between leadership and organisation performance
Bratton, (2020) stated that, leadership and the organizational performance go hand in
hand which means they share a direct cause and effect relationship. Leadership traits in the
members of an organization defines the values generated, competitive advantage, strategies
designed, execution of plans, adaptation to changes, level of motivation and initiation,
organization structure, tolerance capacity and based on all this the organizational performance.
Good leaders in an organization are the determinants of its success and the growth prospects in
the market. They have the capacity to influence the people around them and so are able to reap
the maximum results from the available organization's resources. They take initiative and designs
the strategies for the achievement of organizational objectives like profitability and growth. Such
strategies are than executed by the workforce in their operations, and leaders motivate them over

this shared vision of the company. Buil, Martínez and Matute, (2019) contradicted, if the
organization has poor leadership qualities at all levels it shall suffer in the generation of
performance as compared to its competitors. Poor leaders in a company can affect the
productivity level, motivation and morale of the employee, employee retention, training and
development, execution of operation etc. in a negative way. Leaders are the guides for their
subordinates, and if they lack proper efforts it shall lead to mismanagement of resources
ultimately shooting up the cost and kicking down the profitability.
Ebrahimi, Moosavi and Chirani, (2016) believes that the organizational performance is
correlated to the leadership qualities as shared by the members in the organization. Leaders are
the influencers who direct the activities in the direction of shared vision of the company. They
effectively communicate with their team members and hence motivate them to perform to their
fullest capacity so that the goals of the company could be fulfilled. Sethibe, (2018) argued that
the leadership traits depends on the situation entirely. Leaders are willing to perform only when
they are satisfied that their personal objectives are also fulfilled within the shared vision of the
company. They can provide with effective guidance only when their own morale stands boosted
with the awards and appreciations received thereto. The degree to which leader exhibits
performance depends not completely on the personal traits but also on the work environment and
culture in the company.
Shanker and et.al. (2017) conveyes that good leaders are the most important asset of the
company who are the soul governors of the performance generation within the company. They
are said to be the social influencers who are responsible to influence the team towards the
objectives and its fulfilment. The idea is that the efficiency of the leader is sufficient for the
development of the company and improving its productivity. Solaja, Idowu and James, (2016) is
against the idea it is mentioned that only good leaders are not enough to bring the positive results
but various other factors also play the key role within an organization. The subordinates and their
behaviour shall be identified based on the personal goals and expectations and how much are
they fulfilled in the common goal and harmony between them and the leader. And also the work
culture form huge part in the desire to work in an organisation by the employee. If the
environment is positive it shall prove to be result oriented.
Subramony and et.al. (2018) states that leaders are defined under a particular
circumstance or situation. In a particular assignment one whose taking initiatives in building the

strategies, defining the roles and responsibilities, motivating to bring an innovative idea etc. can
be called a leader. Leader must be finding such project beneficial and so is contributing in
achievement of goals and directing the resources in generating better performance for the
company. Knies, Jacobsen and Tummers, (2016) argues against the notion and says that as per
the Great Man Theory of Leadership, leaders are born and not made. The qualities of leadership
in an individual are inborn and cannot be developed in a particular situation to get to the results.
Leaders cannot be formed on the willingness of the person to perform, instead they lead and
outperform because they are meant to do this since birth. So a company shall focus on hiring
such personnels who possess these qualities determined by the knowledge, skills and the
capabilities.
Yahaya and Ebrahim, (2016) is in favour of the opinion that leaders shall be present at all
levels in an organization. Not only the top order managers should be good leaders but also at
lower level the managers, heads or employees should also possess leadership qualities. This shall
help in operational efficiency at all levels and in all the departments. It shall also contribute to
reducing employee turnover rate in a company.
Nawaz and Khan_ PhD, (2016) defending the view that leaders are not required at all
levels in an organization. It is because leaders at all levels applying different leadership styles
shall dilute the main objective of the company. The influences by various leaders shall be
personally biased and the common goal shall move from organization to leaders personal benefit.
It states that the leaders with various leadership styles also pose different impacts on the
organizational performance. There are various styles that various leaders follows and some lead
to the growth of the company and the others damages the performance guiding the subordinates
in the wrong direction. The autocratic style of leadership belongs to the second category as they
destroy organization's common goal and lead by saying “do as I say”. On the contrary
bureaucratic style follows the policies of the company which is best for generating organizational
performance. The other is democratic in which there is group leading together which develops
harmony ultimately contributing to the increased productivity.
Challenges in Managing Organization Performance and Leadership
According to Figueroa and et.al., (2019) there are various challenges that a leader faces
while managing leadership of an organization which are pressure of handling different kind of
people, communicating regarding bad performance and bad news, managing different culture

issues among employees, motivating employees and being respected with being linked with
employees. There are other authors also that contradicts this meaning and says that dealing with
stress and anxiety, keeping yourself motivated, avoiding burnout, being vulnerable, developing
your own skills and making hard decision is more important.
According to thoughts of Holmes, (2017) keeping everyone on same page, dealing with
conflicts, being clear and honest, projecting calm and keeping it human is the biggest challenge
of leadership. Some authors have given ways to overcome these challenges with the help of
developing decision frame, stop operating out to frame, prioritizing efforts, creating
psychologically safe environment and keeping growth mind- set.
With references to the opinion of Jackson, Nicoll and Roy, (2018) some leaders also face
challenges like lack of support and lack of development. Challenges in managing organization
performance and leadership skill has become important part of organization growth as these are
factors which decides success and failure of any business. Overcoming these challenges is also
important as these challenges may lead to adverse effect on employee’s performance.
In contrary to this Burnes, Hughes and By (2018) criticized that management of
organization performance is considered to be important factor which decides its success. It is
shared understanding of what is to be achieved at organization level. It involves alignment of
employee’s skills, competency requirement and delivering of results. The biggest challenge is to
identifying task and responsibility, defining competencies to be successful in position, ensuring
employees have required skills, providing timely feedbacks to employees, rewarding and
motivating effective performance and ensuring integration.
According to Samson, Donnet and Daft, (2020) articulated that there are other challenges
that can create obstacle in performance management like making poorly structured strategy,
failure to communicate strategies to team, not able to measure performance in better terms, not
celebrating success and defining success, not adapting changing circumstances and identifying
appropriate tools to accomplish common objective. These challenges can overcome through
clarify and transparent vision and strategy, adequate tools and properly managing millennials.
Conclusion
The findings show importance of leadership in managing organization performance in
general and has reviewed the research finding that leadership skill is important for maintaining
balance in organization performance. There are various ways through both the term has been

defined and many challenges are also mentioned according to different authors. In many
discussion and management literature leaders are often mentioned as reason for success and
failure of an organization performance. It is difficult to measure how leadership can affect
organization's performance. We have primarily focused on transactional and transformational
leadership because these are most studied leadership styles in management literature. Existing
study mainly focus on self-assessed measure of performance. The challenge is to analyse when,
where, and how leadership affect the organization performance.

REFERENCES
Books And Journals
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Leadership Style and Organizational Impact. 2019. [Online]. Available through: <https://ala-
apa.org/newsletter/2010/06/08/spotlight/>