Study of relationship among Leadership style, Employee Performance

and Job Satisfaction

Anam Rauf (Roll # 526)

GC University, FSD
(Email: daylight_526@yahoo.com)

Abstract:
The present study is conducted to determine the effect of leadership style on employee performance and job
satisfaction. The descriptive research method is used in this study for review past research and for data
gathering. The previous study shows that transformation leadership and transactional leadership style is
closely related to effective leadership style used in banking sector. The present study explores the effect of
both transformation leadership and transactional leadership style of bank manager on the employee
performance and job satisfaction. the finding of present study show that transformational leadership style is
positively related to employee performance as its charismatic style and inspiration behavior increase
employee productivity and job satisfaction. The study shows that transactional leadership style alone will
not provide positive result to organization. it should be used with transformational leadership style to yield
effective result. As a result of present study concluded that employee performance and job satisfaction is
closely depends on its leadership style.
Keywords:
Leadership, leadership style, transformational leadership, transactional leadership, Employee performance,
Job satisfaction.

Introduction
The present study is intended to investigate the relationship among leadership style, job satisfaction and
employee performance in the Banking Sector of Pakistan. Success or failure of any business in some extent
is credited to its leadership. However, the success of leadership itself depends on the degree and direction
of the response of followers to the leadership influence (Bodla & Hussain, 2009). The leadership style
plays an important role in job satisfaction and increase the performance of the organization. Scholars and
researchers suggest that effective leadership behaviors can facilitate the improvement of performance when
organizations face new challenges (McGrath and MacMillan, 2000).Effective leadership behavior is helpful
for attainment of the subordinate’s desires, which end results in the form of effective performance (Maritz,
1995; Ristow, et al., 1999).
As in the past few years, organization and their environments has altered quickly with the change in time
and technology, a new style of leadership, one that is least bureaucratic and extra democratic, is required in
order to make sure organizational survival and performance (Johnson, 1995).It is argued that effective
leadership has a positive influence on the performance of Organizations (Maritz, 1995; Bass, 1997;
Charlton, 2000).
The leader’s ability to adjust himself with changing environment internally or externally and lead a group
of subordinates to work together in the workplace is the key to success (Hsien & Chuang, 2004). Thus, this
research explores the relationship among these variables that is Leadership style, Job Satisfaction and
Employee’s Performance.
The aim of the present study is to discover relationship among Leadership Style, Job Satisfaction and
employee’s Performance. The present study urged to combine the personal and professional characteristics
of the leadership as the two sides of the same coin. Leadership Style, Job Satisfaction and employee
Performance has long been the focus of investigation and research in western countries, Researchers did
studies on these variables separately. However in Pakistan this topic is not extensively studied and a few
researches were conducted on these variables separately. Thus, there has been felt a need for a research
exploring the relationship among Leadership Style, Job Satisfaction and employee Performance in our
culture and how it could be related with various outcomes. The leadership style plays an important role in
job satisfaction and achievement performance of the organization. The research findings will be helpful to
address issues such as which leadership style has positive influence on Job Satisfaction and Employee’s
Performance. As Researcher give comments:
The success of any organization that is depending on employee performance and overall collective
performance of workers is in whole linked with leadership style.
(Kirkpatrick & Lock, 1995)
The problem for consideration in this research focuses on whether Leadership Style influences Job
Satisfaction and Employee’s Performance.
Research Questions
The research questions deal with in this study are:
1. What is the most common and effective leadership style in banking sector?
2. How and to what degree does the leadership style affect Job Satisfaction?
3. How and to what degree does the leadership style affect Employee’s Performance?
4. What are the benefits related to integrating leadership style, Job Satisfaction and Employee’s
Performance?
Definition of related terms
Leadership
In previous studies Leadership is defined as “the way in which vision is set to determine where we have to
move in future and achieve the goal” (Richards & Engle, 1985)
As previous studies give views that “leadership has been visualize as the focus of group activities, as a
subject of personality, as a topic of encouraging, as the use of power, as, a form of persuasion, as a power
relation, as an tool to achieve goals, as an effect of communication, as a distinguished role, as an start of
structure, and as many combinations of this definition”
Fry defined Leadership as “Such powerful strategy that set the direction to achieve goal and make progress
of organization”.
Leadership is one with the most energetic possessions during individual and organizational interaction. The
excellent leader not only inspires sub-ordinates potential to enhance efficiency and also meet their
requirements in the process of achieving organizational goals (Hsien & Chuang, 2004).
Leadership Style
Leadership style refers to degree of direction that leaders provide to subordinate in the effort to influence
their behavior toward the accomplishment of organizational objectives (Gibson & Marcoulides, 1993).
There are different theories on leadership style by different authors:
Blake and Robert (1985) describes leadership style as
Task-Oriented leadership Vs People-oriented leadership
People-oriented leadership or relations-oriented leadership: This is the opposite of task-oriented leadership.
Here leaders put their attention on managing, supporting, and developing the people so that they provide
good output in their job.
Task-Oriented leadership: Leaders put attention on getting the job done, and they can be some type
autocratic. They actively and clearly tell the work that have to perform and the roles that are necessary for
job, put structures in place, plan, organize, and monitor.
Bass & Avolio (1997) proposed Leadership Style as
i) Transactional Leadership encourages subordinates through incentive establishment.
ii) Transformational Leadership, people with this leadership style is true leaders who inspire
their teams constantly with a shared vision of the future.
Fry (2003) describes Charismatic Leaders as,
Charismatic Leadership style is like a transformational leadership in some extent, because these leaders
inspire lots of enthusiasm and encourage subordinates to achieve goal. However, charismatic leaders can
tend to believe more in themselves than in their teams, and this creates a risk that a project, or even an
entire organization, might collapse if the leader leaves.
Job Satisfaction
Job satisfaction has been defined as a pleasurable emotional state resulting from the appraisal of one’s job
an affective reaction to one’s job and attitude towards one’s job (Cyranny & Smith, 1992).
Employee performance
Employee performance means how efficiently employees are contributing to producing a high quality
product or service in the organization (Kirke, 1999).
Literature Review
The major organizational outcomes, such as satisfaction, organizational performance and commitment,
have been linked with the leadership styles (Kirkpatrick and Lock, 1996).
A key objective of this study is to fill this knowledge gap to find which leadership style is most impact on
employee performance and job satisfaction. Leadership has been altered over time, with the change in
employee requirements with the passage of time resulting in a demand for change in the relationship
between a leader and his subordinates. As employee performance is an important phenomenon in the
success of an organization. The relationship between leadership and performance was indirect as well as
direct (Gadot, 2007), which leads also job satisfaction in work place. This study will be conducted in
banking sectors of Pakistan. Therefore, this study will highlight the importance of leadership style and its
power to increase the performance and it influence on Pakistan’s business environment.
The literature review will be composed of four subject headings related to points that research questions
posed and focused.
(a) Leadership style that is most effective and common in Banking Sector of Pakistan.
(b) To explore the influence of Leadership style on employee performance.
(c) Effect of Leadership style on job satisfaction.
(d) Interconnection of these three variables: Is count more?
The problem of the study was to identify effect of Leadership style on employee performance and job
satisfaction. The type of method used in this study was descriptive research.
As descriptive research is defined as:
“…what is. It is linked and related with circumstances or relations that exist, judgment that are held,
procedures that are apparent, or trends that has developed. It is primarily
Concerned with the present, although it a lot considers past records and events
as they relate to current conditions” (Best &Kahn, 2006)
Effective Leadership style in Banking Sector.
The scholarly circles agree that leadership is really an important subject in the field of organizational
behavior. There is an increasing tendency of investments in the financial services particularly banking
sector, which has given rise to fierce competition in the market particularly in the consumer banking. In
daily routine actions, the employees in the banks particularly team leaders and managers have to go from
side to side many situations in the light of which they have to take different decisions, which may or may
not be vary from their ordinary personality styles and give rise to conflict within the departments. In the
other side, Chen (2005) suggests that in order to overcome obstacle and improve productivity, effective
leadership style is required. Literature is prosperous in determining the factors affecting the variety of
leadership style and their development. However, in the real world it has been noted that no single
leadership style is used by a manager; rather a combination of leadership styles is marked. There are many
factors which determine or affect the application of a leadership style (Randeree and Chauhdry, 2007).
There are different leadership styles that are used in banking sector. All have some advantages and
disadvantages in its own place. But transformational leadership and transactional leadership are more
related to leadership style placed in organization (Jadwinski, 2006).
As research conduct by Bass, transactional leadership is comprised of two dimensions: contingent rewards
and management-by-exception, while transformational leadership is consist of of four central components:
charisma, inspiration, individualized consideration, and intellectual stimulation (Awamleh, 2005).
As, Transactional leadership is based on the exchange process where the leader administers rewards. In
that style the leader and follower are willing that desired follower behaviors will be rewarded, while
undesirable behaviors will draw out punishment. The possible rewards consist of increase in salary,
promotions, and other more benefits to employee. Punishment can be in the form of pay reduction, no
promotion, and terminations and leave of job forever. It is observed that this type of leadership is not
acceptable for many conditions. Indeed, it is observed that transactional leadership behaviors are not
reliable leadership label (Bryman, 1992). Since it is based on previous research, transactional leadership
does is not seek to motivate followers beyond the level that is required to avoid punishment or gain
extrinsic rewards. Moreover, fully use of this leadership style may decrease employee capacity and
satisfaction to suffer (Bass, 1985; Burns; 1978; Peters & Austin, 1985).
Transformational leadership is considering achieving high levels of performance of employees. It
encourage followers by appealing to their upper level needs that is self-actualization and their ideals that
yield higher levels of follower satisfaction, performance, and organizational commitment in individuals
(Bass, 2000).On other hand, researcher viewed them as opposite ends of a field at the same time as(Bass ,
1978). Bass (1985) views that the transformational and transactional leadership are closely related for
effective result. An effective leader will reveal aspects of both transactional and transformational
leadership. According to Bass, transformational leadership is concerned with developing followers to their
entire potential (Bass & Avolio, 1990). Thomsen and Hoest (2001) consider 'rewards' as ''the most
influential and observable management device that can sustain changes". Therefore, many banks have
developed fixed salary structures coupled with bonuses on achieving sales targets in order to keep
employees motivated in constantly changing environment.
Empirical study agree with Bass research that leader should be composed of transformational and
transactional leadership style (Avolio, Waldman, & Einstein, 1988). In other words, transformational
leaders also have the qualities of transactional leadership behavior. These banks require leaders who can
initiate a process of transformation by conveying transformative change in the state of mind and develop
viewpoint and perception of their followers with their visionary appeal (Ahanger, 2009).In previous studies
leadership literature give importance to transactional leadership. Today, transformational leadership is
viewed as the most prominent topic in the current research and theories of leadership (Bass, 1998).
As a result, many leadership theories have been proposed in the last fifty years which are claimed to have
influenced the overall effectiveness of the organizations where they have been employed. In the
competitive world business environment it is vital that organizations utilize leadership styles that enable
organizations to survive in a dynamic environment (Maritz, 1995; Bass, 1997).
Influence of Leadership style on employee performance.
The style of leadership adopted is considered by some researchers (e.g. Awamleh, 1999; Conger, 1999) to
be particularly important in achieving organizational goals, and in inducing performance among
subordinates (Barling et al., 1996; Berson et al., 2001).Employee performance is an important building
block of an organization and factors which set the foundation for high performance in the organizations
(Abbas & Yaqoob, 2009).
Behling and McFilen (1996) confirmed the link between high performance and leadership in the United
States by developing a model of charismatic/transformational leadership where the leaders’ behavior is said
to give rise to inspiration, high regard and empowerment in his Subordinates, resulting in exceptionally
high effort, exceptionally high commitment and willingness to take risks. It has been widely accepted that
effective organizations require effective leadership, and organizational performance will suffer in direct
proportion to the neglect of this (Maritz, 1995; Ristow; Staude, 1999).
Understanding the effects of leadership on performance is essential because leadership is viewed by some
researchers (e.g. Zhu et al., 2005) as a critical success factors that impact subordinates performance. Leader
should increase the level of satisfaction and employee productivity by inspiring and motivating them.
Employee performance depends on directions which are given by their leader. Enhance the level of
employee output is considered most important factor to get the progress of organization.
It is argued that effective leadership has a positive influence on the performance of Organizations (Maritz,
1995; Bass, 1997; Charlton, 2000). Ultimately it is the Performance of many individuals that attached with
the performance of the Organization, or in the achievement of organizational goals. Effective leadership is
Instrumental in ensuring organizational performance (Cuming and Schwab, 1973). Bank employees give
the impression to react much more positively in terms of performance. Perhaps banking and multicultural
environments employees feel more comfortable with a work system that defines their tasks and clearly
spells out performance targets and way to perform in job (Awamleh, 2007).
Leadership style and job satisfaction:
Workers at every level of their job make feelings regarding whether they are appreciated and honored from
important way that come from their work environment, especially those that come from the leaders directly
over them (Gmelch & Miskin, 1993). These impressions are interpreted into feelings, either positive or
negative, that become the key element of a worker’s morale. Morale is a key factor in shaping an
employee’s commitment to work and the degree of job satisfaction to which he or she agrees (Fryer &
Lovas, 1991).Working with a leader who does not provide support, show kindness, or keep aggressive
behaviors can be stressful for employees (Wikinson & Wagner, 1993). Negative leader-employee relations
can result in decreased pleasure with work, puzzled one’s skill on the job, reacting harshly to the leader,
and leaving the organization (Chen & Spector, 1991). The quality of the leader-employee relationship has
an effect on the employee’s self-esteem (DeCremer, 2003) and job happiness and job commitment (Chen &
Spector, 1991). The costs of employee dissatisfaction in job can be reasonably high in conditions of worker
stress, reduced productivity, increased absenteeism, and turnover (Keashley, Trot, & MacLean, 1994;
Ribeline, 2003).
As previous studies present that transformational leadership style, transactional leadership style and
charismatic leadership style are closely related to leadership style that used in banking sector. The present
study will present the effect of these leadership styles on job satisfaction of employee.
Fernandes and Awamleh (2004) found that transformational leadership had a powerful outcome on job
satisfaction. According to Bass, transformational leadership is more related to developing followers to their
fullest potential (Bass & Avolio, 1990), whereas the focal point of transactional leadership is on satisfying
basic follower needs that lead to job satisfaction. Many scholars argue that leadership creates the vital link
between organizational effectiveness and people’s performance at an organizational level. Many writers
declare that leadership behaviors can facilitate the improvement of both leaders’ leadership potential and
encourage employees to work better improves their satisfaction. This will finally lead the outcome to
increasing organizational performance (Avery & Jing, 2008).

Conclusion:
This study has investigated that leadership is most critical factor in the success of any organization. Many
writers declare that leadership behaviors can facilitate the improvement of both leaders’ leadership
competency and persuade or promote employees to work better improves their performance and
satisfaction. This ultimately contributes to enhancing organizational performance (Macquire, 2008). From
the supported material and results of the study it is concluded that manager must have effective leadership
skills to perform well and inspire employees to do well. The finding of present research has investigated
that transformational and transactional leadership style are more relevant to used in the banking sector. It is
observed that a transformational leadership style of bank manager will increase employee productivity and
will enhance employee level of job satisfaction. It is also concluded that transactional leadership style alone
does not positively related to employee performance and job satisfaction. Moreover a transactional
leadership style is irrelevant to banking sector. However previous research finding that if transactional
leadership style is used with transformational leadership then it yield high productivity and good result.
With regard to this evidence, organization such as banks will get benefit by actively training their managers
to acquire transformational leadership qualities and skills. Ultimately, the research explores that there is
positive relationship among leadership style, employee performance and job satisfaction.
The present study has some limitation as are following:
1. The study o leadership style in organization is very important issue; however study was restricted to only
banking sector. And limited numbers of variables are used o conduct study.
2. Another limitation is that no comparison was made between banking sector and other industries such that
telecommunication industry and textile industry etc.
There is some suggestion for the further perspective regarding the present study is that the empirical study
can be conducted by taking comparative sample of employees from different organizations regarding
leadership styles.
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