Leadership Style and Organisational Performance, Do They Relate?

Executive Summary

Researchers view leadership as a process of influencing people to facilitate the

movement of a group of people toward a common or shared goal. There are four main

schools of leadership: trait approach, behavioural approach, situational approach and

contemporary theories. These theories supplied a quantum of different leadership

styles that attempt to articulate what effective leadership is.

The paper aims at assessing the perception that management and leadership style can

impact positively on the performance of an organisation. The paper refers to

behavioural and situational theories because (1) they are the main sources of

leadership styles, and (2) situational theories are a development of behavioural

theories that criticised and addressed their limitations.

Behavioural theories focus on leaders’ behaviours. These theories provided four

leadership styles: Directive, consultative, Participative and Delegative leadership.

Behavioural theories gained acceptance over trait theories because they look at what

leaders actually do and suggest leaders are not born but can be made. But the evidence

is mixed on the relationship between leadership style and organisational performance.

They don’t guarantee leader’s success as it lacks factors of followers’ characteristics

and situational context.

Situational theories argue that there is no one best way effective across all situations,

and there are situational moderating variables that affect leaders’ behaviours. They

have been criticised for defining situational moderator variables ambiguously and for

their unrealistic assumptions of leaders’ ability to recognise followers and situation

characteristics.

The four frames of Bolman and Deal articulate a practical view of leadership

effectiveness. The structural, human resources, political, and symbolic frames

provide important possibilities for leadership, but each by itself is incomplete. Using

the four frames collectively allow leaders to reframe complexity by looking at it from

multiple lenses.

Main Findings

Both management and leadership are important to organisational success. There is no

one best way to leadership style across all situations. Leadership is a complicated

process in which variables of leader, follower, situation, communications, technology,

culture, structure, etc. interact. The four frames of Bolman and Deal offer a practical

solution to embrace a systemic view of organisational complexities.

Conclusion

The study and evidence supports the notion that leadership can impact positively on

organisational performance if practiced in a holistic way giving concern to all

variables of leaders, followers, situation, culture, environment, technology, structure,

organisational frames, organisational life-cycle, in addition to any other variables that

might be identified in future.

Leadership Style and Organisational Performance, Do They Relate?

he past decade has seen a significant interest in the leadership phenomenon

that took several directions. The interest in leadership is associated with the idea that

successful organisations require leadership. Researchers and practitioners debated on

this phenomenon and supplied different thoughts and viewpoints to the world of

management and organisational behaviour. Despite the general agreement about its

importance, there is still little agreement on what leadership actually is or how it

originates.

Research associate leadership with the process of influencing people, and common to

all leadership definitions is the notion that “leaders are individuals who, by their

actions, facilitate the movement of a group of people toward a common or shared

goal” (Robbins, 2000). Researchers also emphasise leadership as process, not

position, which distinguishes leadership from management. Such distinction between

leadership and management has similarly attracted much debate. Some argue that

leadership differs fundamentally from management where leaders and managers have

totally different personalities. Others argue that leadership and management are

closely related to each other in the sense that effective managers are effective leaders

and vise versa, and that leadership is one function of management.

However, many has drawn the distinction between leadership and management by

associating leadership with risk-taking, innovation, dynamic, creativity, change,

inspiration and vision, while associating management with efficiency, planning,

administering, paperwork, control, procedures, regulations and consistency. They also

think of leaders as “doing the right things” while think of managers as “doing things

right”. Despite the thought difference, leadership and management are both important

“since organisations typically need both functions performed well in order to be

successful” (Hughes et al, 2009).

Recognising the complexity and importance of leadership, researchers responded by

providing many perspectives, theories and paradigms that attempt to identify the types

T

of successful leaders and the factors that determine leadership effectiveness. These

schools of thought have evolved over the years, took several directions and enriched

the leadership literature. But the literature focuses around four schools of thought

namely the trait approach, behavioural approach, situational approach and

contemporary theories.

The trait approach assumes leaders are born not made and that a group of traits are

positively associated with leadership such as intelligence, self-confidence, initiative,

and persistence. However, further studies concluded that no combination of traits

would guarantee leadership effectiveness. The next generation is behavioural theories

which focus on leaders’ behaviours and assume that effective leaders are common in

their behaviour modes as they exhibit different leadership styles depending on their

dominant orientation towards tasks or relationships. This approach was mainly

criticised for the unclear relationship between leadership style and performance, as

well as ignoring situational context by praising the leader perspective (Bryman,

1992).

The limitations found in previous studies resulted in the situational approach which

assumes there is no best one way across all situations and leaders make their

behaviours contingent to variables concerned with followers, task and situation. The

assumption that leaders can identify the characteristics of followers and situation is

challenged in the sense that different leaders may hold different assumptions

regarding the followers and the situation, which affect the accuracy of the leader

actions.

More recent studies provided the leadership literature with contemporary theories.

These theories reject the idea that followers are unchanged or part of a situation, but

view followers as counterpart to the leader and seek positive transformation, dynamic

relationships, and relational association with followers. However, it is criticised for

retrieving the “one best way” leadership behaviours or traits that ignores the context

situation, as well as for the ambiguity surrounding the process of establishing and

maintaining good relationships with followers (Beyer, 1999).

The important outcome of these theories is the quantum of different leadership styles

that attempt to articulate what effective leadership is. Real life provides many

examples of leaders who lead their organisations with a certain leadership style. In the

world of computer, Bill Gates of Microsoft employs a participative style involving

employees in decision making. His motivating attitude and openness to new ideas

drives Microsoft’s success. On the other hand, Steve Jobs of APPLE with his

autocratic style centralises authority and never involve employees in decision making.

His arrogance and failure in motivating employees hinder APPLE’s success. Such

examples raise an important question: can leadership styles positively impact

organisational performance?

This paper attempts to answer the question above. The purpose is to critically assess

the perception that management and leadership style can impact positively on the

performance of an organisation. In doing so, the paper examines different leadership

styles and their impact on organisational performance. The paper refers to behavioural

and situational theories because (1) they are the main sources of different leadership

styles, and (2) situational theories are a development of behavioural theories that

criticised and addressed their limitations.

In the following paragraphs, the paper briefly explains the behavioural approach to

leadership and investigates its associated leadership styles’ impact on organisational

performance. The paper next analyses situational theories and their implications on

the notion of leadership style. Towards the end, the paper briefly refers to Bolman and

Deal four organisational frames in an attempt to articulate a comprehensive approach

to effective leadership. Finally, the paper concludes with findings and results.

Early developments of leadership styles originated from different studies

related to behavioural theories. These theories focus on leaders’ behaviours and

assume effective leaders exhibit common behavioural modes and leadership styles

according to their predominant orientation towards tasks or relationships. Started with

Hawthorne studies, a close link between management style and employee attitudes

was found. Likert and Michigan studies later suggested that employee-centred leaders

are generally perceived as better than task-centred leaders.

An important development in the leadership domain is the results of Ohio State

leadership studies which concluded that there are two distinctive dimensions of

leadership: initiating structure emphasising job and task, and consideration

concerning people and interpersonal relationships. This two-factor model provided the

basis for later researches on leadership, and the outcome was a famous matrix that

provided four leadership styles: Directive, consultative, Participative and Delegative

leadership.

As the name suggests, directive leaders set goals and identify problems for which they

find solutions and decide who does what work. They give specific directions,

announce decisions, and closely supervise and evaluate employees’ performance.

Alternatively, in addition to setting goals and identifying problems, consultative

leaders develop plans and announce decisions but only implement them after

consulting employees, hearing their opinions and ideas, and how they feel about them.

Praising employees’ efforts, continuous direction and evaluation also characterise

consultative leaders.

Participative leaders involve employees in problem-solving, goal-setting, and

decision-making process. They provide support, ideas and resources whenever needed

and share responsibility for decision-making with employees. They listen to and guide

employees as they make decisions and evaluate their performance with them. On the

other hand, delegative leaders identify problems and set goals with employees, make

suggestions and decisions, but leave employees to decide their own course of action.

They accept employees’ decisions but monitor their performance, allow them to

evaluate their own work, and to take responsibility and credit for their work.

Further developments of behavioural theories resulted in many new insights such as

the managerial grid which created eighty-one different positions in which leadership

style may fall – refer to appendix I. Updated studies also found that there is a third style

that effective leaders exhibit in addition to task and people dimensions. This is

development-oriented behaviour “characterized by experimentation, originating new

approaches to problems, pushing new ways of doing things, and encouraging

change.” (Robbins, 2000).

Behavioural theories gained acceptance over trait theories because they look at what

leaders actually do and suggest leaders are not born but can be made. They also

suggest that successful leadership is based on definable, learnable behaviour. Thus

behavioural theory can be easily developed via correlating performance outcomes,

whether success or failure, with certain leadership behaviours. Therefore, a key

research issue is the effect of the two behavioural dimensions on organisational

performance.

There are many studies that confirmed a positive relationship between leadership style

and organisational performance. In general, these studies suggested that task-oriented

behaviour is linked to employee performance while relation-oriented behaviour is

linked to employee satisfaction. The argument is that relation-oriented behaviour

moderates the relationship between task-oriented behaviour and performance. It is

also argued that the two behavioural dimensions have additive effects on

performance, and leaders who concerns for both tasks and relations are more effective

(Liu & Liu, 2006).

Research provided several examples of how leadership style positively impact

organisational performance. For example, Sally Jewell, CEO of Recreational

Equipment, Inc., is an employee-oriented leader. During her tenure as CEO, Jewell

has turned a struggling company into one with record sales. But she credits REI’s

success to the work of employees, stating that she doesn’t believe in “hero CEOs”.

Jewell respects each employee’s contribution to the company and includes in her

leadership people who are very different from herself. Described as a leader high in

consideration, she listens to employees’ ideas and empowers them in performing their

jobs (Robbins and Judge, 2009).

Despite the popularity of behavioural theories, the evidence is mixed on the

relationship between leadership style and organisational performance. In general

terms, strong people-focus might result in high job satisfaction, but not always it is the

case. Likewise, strong task-focus often leads to high productivity, but it also leads to

greater amount of grievances, absenteeism, turnover, and lower job satisfaction. This

fact was supported by a study of Schriesheim and Murphy (1976) who suggested that

task-focus leadership without personal attention to employees might have negative

effects on satisfaction and performance (Liu & Liu, 2006). In essence, behavioural

theories don’t guarantee leader’s success as it lacks factors of followers’

characteristics and situational context.

An important driver of situational context is organisational culture that heavily

influences leadership style but ignored by behavioural theories. For instance, strong

people-focus leaders operating within an organisational culture that emphasises

aggressiveness, end results, and ignores the importance of people are rated negatively

by superiors and can’t survive the long-term. Some leaders may display the right

behaviour and still fail. For example, former Hewlett-Packard CEO Carly Fiorina

seemed to have “the right stuff” but still was ousted after HP failed to perform up to

expectations.

Robbins (2000) made an important observation that challenges behavioural theories

which is the fact that leaders do not necessarily have a fixed leadership style that can’t

be changed. Rather it depends on the leader’s level of self-monitoring. People differ

in their behavioural flexibility as some show considerable ability to adjust their

behaviour to external situational factors and are adaptable, while others are consistent

in their behaviour regardless of the situation.

The limitations of behavioural theories paved the way to the development of

situational theories which provided a more comprehensive picture of leadership

effectiveness. Situational theories argue that there is no one best way effective across

all situations, and there are situational moderating variables that affect leaders’

behaviours. The main representatives of situational theories are contingency theory

(Fiedler, 1967), path-goal theory (House and Mitchell, 1974), and situational theory

(Hersey and Blanchard, 1982).

Fiedler’s contingency model assumes that leaders’ behaviours are consistent and less

flexible, and that leadership effectiveness depends on selecting the right leader for the

right situation, or changing the situation to fit the particular leader’s style. The factors

influencing leader’s selection and/or situation modification are: leader-member

relations, task structure, and position power. Path-goal theory assumes that leadership

styles vary not only with different subordinates but also with the same subordinates in

different situations. The nature of the task -whether it is structured or unstructured-

and the extent of direction provided by the leader impact followers’ satisfaction and

motivation to achieve the desired goals.

Situational theory emphasise leadership flexibility where leaders should understand

employees’ job and psychological maturity, in addition to task characteristic, in order

to adapt and alter their styles accordingly. The outcome of the research on situational

theory provided four leadership styles: delegating, participating, selling, and telling.

These leadership styles share some common characteristics with the behavioural

theories’ leadership styles identified earlier as they are also contingent to the level of

task or people orientation of leaders. The difference is that situational theory added

the maturity of employees as a life-cycle component that seems logical.

There are many more studies on situational theories that provided the literature with

more insights on leadership. For example the Leader Decision Theory by Vroom &

Yetton (1973) - provides decision rules for leaders based upon three leadership styles:

autocratic, consultative, and participative, and the Leader Substitutes Theory by Kerr

(1977) - challenges the impact of leader behaviours on organisational outcomes where

leader substitutes or neutralisers may offset or enhance the leader’s influence on a

group according to subordinate, task and organisational characteristics.

Despite the differences in the emphases of their basic arguments, situational theories

share some common points. They all contain situational moderating variables and

assume leaders’ ability to assess key follower and situational factors. They also

assume that leaders make their behaviours contingent on the followers and the

situation. The important achievement of situational theories is their conceptualisation

of leadership as an interpersonal process, concerned with followers, task, and

situational variables rather than the leader’s perspective only. Therefore, from a

situational point of view, it is difficult to predict the success of a leader based on traits

or behaviours; rather it is a more complex process.

There are many examples of leaders who succeeded in specific situations but not

survived the long-term. For example, Home Depot hired Robert Nardelli as a CEO

when the company believed that he is the “right person” to improve the company’s

performance. Under his leadership, Home Depot’s profits, sales, and number of stores

doubled. But shareholders criticized his leadership because he failed to improve the

company’s stock price. After leaving Home Depot, Nardelli was hired as the “right

person” to revitalize Chrysler based on his turnaround expertise. Similarly, the former

CEO of Warnaco, Linda Wachner, gained a lot of admire when she took over the

struggling company and lead it out of the gloom, but she was ousted after she had

successfully transformed Warnaco. Predicting the effectiveness of those though-

minded leaders as CEOs illustrates the premise of situational theories that leadership

effectiveness is dependent on situational influences (Robbins and Judge, 2009).

Situational theories gained a lot of success, but also face some challenging

weaknesses that limit their implications. The core of these theories is the situational

moderator variables, but these variables are defined ambiguously. It is unclear how

subordinates’ maturity develops through combining commitment with competence as

argued by Hersey and Blanchard situational theory. For example, if directive

managers give unwilling and unable subordinates high direction and low support,

what would cause their motivation to improve? Furthermore, task structure and task

complexity have been also defined and measured ambiguously and in different ways.

Consequently, generating specific and testable hypotheses are hard to achieve (Liu &

Liu, 2006).

Situational theories assume leaders’ ability to recognise followers’ and situation

characteristics but such an assumption is unrealistic. Different leaders in the same

situation may conclude distinctively towards followers’ knowledge, maturity, leader-

follower relationships, and the degree of task structure or role ambiguity experienced

by followers. Therefore, leader’s reactions towards followers are not necessarily

accurate and leaders might exhibit different actions in response to the same situation.

Situational theories also treat leadership as a passive process that should “fit” the

followers and the situation (Liu & Liu, 2006). Another important limitation of

situational theories, as well as other theories, is they ignore the followers’ personal

disparity and assume leaders use a homogeneous style with all their subordinates, i.e.

treat all followers in the same way.

Reviewing the theories mentioned in this paper will uncover an astonishing limitation

common to all. Non of the theories considered how levels of stress, organisational

culture and climate, working conditions, technology, economic conditions, or types of

organizational design affect the leadership process (Huges et al, 2009). Furthermore,

none has linked leadership to organisational life-cycle, or articulated a leadership life-

cycle perspective. However, a study of Bolman and Deal (1984) made an important

contribution in understanding the relationship between management, leadership and

organisational culture and structure, for which the paper examines next.

Bolman and Deal researched organisational behaviour and provided

a comprehensive framework of four perspectives which they named

“organisational frames”. These frames can be thought of as

approaches towards a better understanding of organisations and

how they behave combining theory with practice. Bolman and Deal

focus on both management and leadership. The framework is deeply

rooted to organizational culture and structure. The four frames are

structural, human resources, political, and symbolic – refer to

appendix II. The four frames implication on leadership is a distinct

leadership style associated with each frame .

Structural leadership is associated with defining clear goals,

assigning specific roles for subordinates, and coordinating specific

activities with specific policies, procedures, and chains of command.

This frame can be used to organise and structure groups and teams

to get results and fit an organisation’s environment and technology.

Human resources leadership focuses on employees’ feelings and relationships, and

views organisation as a catalyst to meet human needs via facilitation and

empowerment. This frame is used to align organizational and human needs to build

positive interpersonal and group dynamics.

Political leadership emphasise individual and group interests where

leaders advocate and negotiate between different interest groups

for scarce resources, and build power centres by networking and

negotiating compromises. This frame can be used to cope with

power and conflict, build suitable coalitions and hone political

connections, and deal with both internal and external politics.

Symbolic leadership uses symbols, culture, stories and history to influence behaviour

and inspire a shared organisational mission. The goal of this frame is to shape a

culture that gives a purpose and meaning to employees, provides organisational drama

for internal and external audiences, and build team spirit through ceremony and story.

Each frame provides important possibilities for leadership, but each by itself is

incomplete. The frames provide aspects for both management and leadership. Using

the four frames collectively allow leaders to reframe complexity by looking at it from

multiple lenses to gain clarity, balanced view, new options and make a difference.

This allows a systemic view to complexities. They reinforce the notion that both

management and leadership are important to organisational success. Wise leaders

understand their strengths and weaknesses and build on their strengths to expand them

by combining multiple frames into a comprehensive approach to leadership in order to

provide effective leadership to their organisations in all four modes: structural, human

resources, political, and symbolic (Bolman and Deal, 2008).

Throughout the paper, an investigation of the relationship between leadership

styles and organizational performance was conducted. The purpose of the paper was

to critically assess the perception that management and leadership style can impact

positively on the performance of an organisation. The paper briefly explained the

behavioural approach to leadership and investigated its associated leadership styles’

impact on organisational performance. The paper analysed situational theories and

their implications on the notion of leadership style. Finally, the paper referred to

Bolman and Deal four organisational frames in an attempt to articulate a

comprehensive approach to effective leadership.

The paper found that despite the thought differences, management and leadership are

both important to organisational success as Bolman and Deal argue. Reviewing all

leadership theories and models, there is no one comprehensive theory without

limitations. Different leadership styles have evolved with the evolution of theories but

much evidence proves that there is no one best way to leadership style across all

situations. Rather it is a complicated process in which variables of leader, follower,

situation, communications, technology, culture, structure, etc. interact to provide a

challenge to leadership.

The paper also found that the four frames of Bolman and Deal offer a practical

solution to embrace a systemic view of organisational complexities. They provide

ample possibilities for managers and leaders to gain comprehensive insights towards

effective leadership by using multiple lenses that amplifies clarity and understanding

of issues. Reframing leadership approach cover the limitations found in leadership

theories and close the gabs identified.

The outcome of such observations is the reassurance that leadership can impact

positively on organisational performance provided that it is practiced in a holistic way

giving concern to all variables of leaders, followers, situation, culture, environment,

technology, structure, organisational frames, organisational life-cycle, in addition to

any other variables that might be identified in future.

A closing note, theories of leadership evolved and still evolving challenging the old

and promising the future. There are many challenges facing managers and leaders in

an extremely competitive environment that requires distinctive qualities in order to

survive the game. Flexibility and adaptability are key success factors in today’s

business environment giving the growing number of cross-culture activities. Future

entails many surprises and it is the right time to think of how e-leaders might behave.

References

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3. Bolman, L. J. & Deal, T. E., (2008), Reframing Organizations. ISBN:

4. (2010), Managing People in Organisations. ISBN:

5. Bryman, A., (1992), Charisma and Leadership in Organizations. London: SAGE.

6. Hughes, R. L., Ginnett, R. C., Curphy, G. J., (2009), Leadership. ISBN: 9780071263597. New York: McGraw-Hill.

7. Jing, F. F., & Avery, G. C., (2008), Missing Links In Understanding The Relationship Between Leadership And Organizational Performance [online] Available from: http://www.cluteinstitute-onlinejournals.com/PDFs/956.pdf. [Accessed: 21st May 2010]

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Appendixes

Managerial grid

Bolman and Deal four frames

Bolman and Deal researched organisational behaviour and provided a comprehensive

framework of four perspectives which they named “organisational frames”. The first

frame is structural approach to organisations which emphasise the architecture of

organisation such as the design of units and subunits, rules and roles, goals and

policies. The second frame is human resources approach which focuses on

understanding people, their strengths and weaknesses, reason and emotion, desires

and fears. The third frame is political approach that views organizations as a

competing field for scarce resources, conflicting interests, and battles for power and

gain. The forth frame is symbolic approach that emphasis issues of meaning and faith,

and at the heart of it are ritual, ceremony, play, story, and culture (Bolman and Deal,

2008).

The four frames serves as “filters for sorting essence from trivia, maps that aid

navigation, and tools for solving problems and getting things done” (Bolman and

Deal, 2008). Using frames is actually matching situational clues with a well-learned

mental framework in order to sense and find out the way from the complexity

surrounding everyday life. According to Bolman and Deal (2008), leaders do not act

independently; they both influence and are influenced by their constituents. Using the

four frames collectively allow leaders to reframe complexity by looking at it from

multiple lenses to gain clarity, balanced view, new options and make a difference.

Reflection