This research sought to examine the relationship of transformational/ transactional leadership and organizational performance, as well as analyze how these relationships can be moderated by characteristics of leader-members relationship. Specifically,...
This research sought to examine the relationship of transformational/ transactional leadership and organizational performance, as well as analyze how these relationships can be moderated by characteristics of leader-members relationship. Specifically, an empirical study of bank industry managers was conducted. The characteristics of leader-members relationship were classified into leader-members exchange-based relationship and leader-members trust-based relationship. In terms of the subjective and objective aspects of leadership effectiveness, organizational performance was broken down into two constructs, i.e., organizational satisfaction and financial performance.
This research generated several hypotheses by examining the relationship among the variables. To test these hypotheses, data were collected from high-ranking managers of 230 National Agricultural Cooperative Federation (NACF) offices supporting farmers, rural communities, and agriculture through various businesses such as marketing and supply, banking and credit, etc.
The major findings of this research were as follows:
(1) Transformational and transactional leadership had a positive effect on organizational performance. In particular, transformational leadership was closely related to organizational satisfaction. On the other hand, transactional leadership was closely related to financial performance.
(2) The incremental effect of transformational leadership compared to transactional leadership was closely related to organizational satisfaction rather than financial performance.
(3) The characteristics of leader-members relationship such as leader-members exchange-based relationship and leader-members trust-based relationship had a significant positive effect on organizational satisfaction and financial performance.
(4) In terms of the level of leader-members exchange-based relationship, transformational leadership had a more significant effect on organizational satisfaction and financial performance. On the other hand, transactional leadership had a more significant effect on financial performance only.
(5) In terms of the level of leader-members trust-based relationship, transformational leadership had a more significant effect on organizational satisfaction and financial performance. However, transactional leadership had a more significant effect on financial performance only.
Based on the results of the study, several implications can be drawn. For one, transformational and transactional leadership are important factors in explaining organizational performance. In particular, transformational leadership style is ideal for NACF managers who want to improve organizational quality such as organizational satisfaction. On the other hand, transactional leadership style is helpful for those who want to improve objective performance such as financial performance.
In addition, leader-members relationship is a critical factor in explaining organizational performance. More importantly, organizational performance is positively moderated by characteristics of leader-members relationship vis-a`-vis transformational and transactional leadership.
Moreover, transformational leaderships effect on organizational performance with leader-members relationship as intervening variable suggests that a good relationship between transformational leaders and members improves organizational performance. Thus, the perception of leaders on their members and their relationships are critical to leadership effectiveness.
This study has several limitations. For one, the variables proposed and tested in this study were not comprehensive. While there may be other variables that explain organizational performance in organizations such as NACF and other industries, they were not considered in this study. In addition, the measurements were derived from the questionnaire-based self-report. Thus, statistical problems such as common method bias may exist. Addressing these limitations may form the basis for future research.