organizational performance: the effect of emotion recognition and personality on transformational ...

8/6/2019 organizational performance: the effect of emotion recognition and personality on transformational leadership behaviour

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Our focus is understanding of the interplay between transformational leadership andorganizational performance. It is an importantfactor for developing effective organizations.Finding ways to optimize the performance ofpeople and hence, the organization has been, andcontinues to be, a major concern for organizationalleaders.

The purpose of this study was twofold:

To examine the relationship betweentransformational leadership behaviors with the

contingent reward behavior, emotion,recognition and agreeable; and

To explore the relationship between theconstructs of transformational leadership andorganizational performance of twoorganizations chosen for this study.


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The problem in this study was to determine the

degree of relationship that exists between

transformational leadership behavior and

organizational performance as measured in the

two organizations, Allied Bank and Askari

General Insurance Company. The lack of current

knowledge on this subject and between thesevariables hinders our ability to place a value on

transformational leadership and its importance in

organizational performance.


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The purpose of this study was to determine therelationship of transformational leadership behavior toorganizational performance in two organization, AlliedBank and Askari General Insurance Company and to

compare the results of both the organizations. The study utilized the Multi-factor Leadership

Questionnaire developed by Robert S. Rubin, David C.Munz, William H. Bommer (Source: The Academy ofManagement Journal, Vol. 48, No. 5 (Oct., 2005), pp.

845-858) to measure the level of transformationalleadership in each company.

The overall strategy was to quantify the level oftransformational leadership using scores and to comparethose leadership scores as perceived by the leaders

followers and then compare these with the organizationsperformance.


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Transformational leadership

Transformational leadership contains theinterrelated components of charisma or idealizedinfluence (attributed or behavioral), inspirational

motivation, intellectual stimulation, andindividualized consideration.

Transformational leadership behaviour

Transformational leadership behaviors areinfluential in motivating follower change andtransforming followers to be more aware of taskoutcomes, activating their highest order needs, andextending beyond their own self-interest for the

benefit of the organization.


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Organizational Performance

Organizational performance was defined as comprises

the actual output or results of an organization as

measured against its intended outputs (or goals and

objectives). It is widely accepted that organizationalperformance depends at least partly on the behavior of

employees and that these behaviors can constitute a

source of sustainable competitive advantage.


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Attri tec aris a

I ealize

i fl e ce I s irati al

ti ati

I tellect alsti lati

I i i alizec si erati

Transformational Leadership

Be a i r

C ti ge t reware a i r

Agreea le ess Emotion

recognition

Employee Effects/Behaviors

performance interms ofpublicimage and goodwill

performance in

terms of growtrate of sales orre enues

performance interms ofproduct orser ice quality

performance in

terms of employeeproducti ity

OrganizationalEffects/ Contributing

Factors


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Individual

Construct

Employee Effect Organizational

Impact

Primary References

Idealized

Influence

(attributedcharisma and

Idealized

behaviors)

Extra effort,

Increased

commitment, jobsatisfaction, and

followers perceptions

of leader

effectiveness.

Firm

profitability,

increased salesor revenue,

stock measures

(possibly none in one

study)

Agle, 1993; Bass, 1985, 1990;

Burns, 1978; Gasper, 1992;

Hater and Bass, 1988;

Larmore, 1999; Podsakoff andMackenzie, 1994;

Ross and Offerman, 1997;

Waldman, Ramirez, House,

and

Puranam, 2001.

Intellectualstimulation Innovative ideas,problem-solving skills,

ability to deal with

change

More innovativeproducts and

solutions, better

quality, improved

business unit

performance,

performance at alllevels

Bass, 1985, 1990; Bass and

Avolio,

1993; Bolman and Deal, 1997;

Burns, 1978; Howell and

Avolio,

1993; Hsu, 2000;

Kelloway and Barling, 2000;

Seltzer

and Bass, 1990; Tichy and

Devana,

1986.

Individualized

consideration

Innovative ideas,

problem-solving

ability, extra

commitment/effort,

increasedperformance,

Better products,

higher quality,

innovation, leader

development

Bass, 1985, 1990; Bass and

Avolio,

1993; Burns, 1978; Keller,

1992,1995; Tichy and

Devanna,

1986; Seltzer and Bass, 1990.


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Allied Bank Limited was the first bank to be established in

Pakistan. It started out in Lahore by the name Australasia Bank before independence in 1942; was renamed Allied Bank ofPakistan Limited in1974 and then Allied Bank Limited in 2005.

In August 2004, because of capital reconstruction, the Banksownership was transferred to a consortium comprising IbrahimLeasing Limited and Ibrahim Group.

Today, with its existence of over 60 years, the Bank has builtitself a foundation with a strong equity, assets and deposit base. Itoffers universal banking services, while placing major emphasison retail banking. The Bank also has the largest network of over700 online branches in Pakistan and offers various technology-

based products and services to its diverse clientele.


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In November/ December 1990, the Governmentannounced its commitments to the rapid privatizationof the Banking sector. Allied Banks managementunder the leadership of Mr. Khalid Latif decided toreact positively to this challenge. In September 1991,ABL entered in a new era of its history as worldsfirst bank to be owned and managed by its

employees. The 850 executives and 7200 staffmembers spread over 800 branches throughout thePakistan established a high degree of cooperationand family feelings


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Objectives

Allied bank has following objectives:i) Main objective of Allied bank is to earn profit.

ii) To provide services to their customers and assistance inthe development of commerce and trade.Allied bank also have another responsibility to give serviceto their communities. It watches the growth anddevelopment of his community especially the commerceand business of the area.

VisionTo become a dynamic and efficient bank providingintegrated solutions in order to be the first choice bank forthe customers


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Mission To provide value added services to our customers To provide high tech innovative solutions to meet

customers requirements To create sustainable value through growth, efficiency and

diversity for all stakeholders To provide a challenging work environment and reward

dedicated team members according to their abilities andperformance

To play a proactive role in contributing towards the society

Core Values Integrity

Excellence in Service High Performance

Innovation and Growth


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Allied Bank boasts of a work culture, which displays respect forall walks of life and different ways of thinking. Everyone at AlliedBank has a common corporate vision and values. However, allemployees are encouraged to grow as individuals and collaboratein teams.

Increments, bonuses and promotions are based solely onindividual skills, qualities, abilities and attitude. It is ABL aim to

provide innumerable opportunities for all those employees whoshow aptitude and the will to keep learning.

Training programmes, both local and foreign, are also considered

important for employee growth. Organizations complex andrelatively changing environment teaches flexibility, providesopportunities to learn and offers many career opportunities. Weencourage people who like challenges, can take theirresponsibilities seriously and handle a constantly changing andhigh-pressure work environment, to come work with us.


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The company has earned itself a reputable place amongst topplayers of insurance industry. Agico's financial strength and rapidgrowth has been achieved through its policy of retaining andreinvesting a large part of the profit to strengthen the Paid upCapital and Reserves. The company's financial position providessecurity to the clients and ensures progressive return to thestakeholders.

Agico transacts all classes of non-life insurance business. It holdsa strong position in Health Insurance and is the leader in itsexpansion. The company has a large base of prestigious

Pakistani and multinational clients being served through anetwork of 16 Branches spread all over the country. Humanresource is the main stay of the company and is imposing for itshighly qualified and entrusted staff.

The company is committed to create insurance awareness andpromote insurance culture through its highly motivated and

dedicated team of professionals.


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Under the strong leadership and management of

Askari Insurance Company has achieved success in a

short period of time. During the last few years it hasassumed a brand new identity plied with a spurred

vision. The board and management of the Askari

insurance company have implemented strategies and

policies to carve a distinct position for the AskariInsurance Company in the market place. The Askari

Group, a paragon of strength has played a pivotal

role in helping the insurance company


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Vision

The Vision of Askari general insurance company is to be

amongst the leading insurance companies of the countrywith the clear perception of upholding the principles ofcorporate governance and making Agico a profitableand growth oriented insurance company while creatinginsurance awareness and culture

Mission

The Mission of Askari insurance Company is to become aleading company by providing client friendly servicesthrough highly motivated team of dedicated professionalsand ensuring progressive return to the stakeholders


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Objectives and mission

AGICO believes in the phrase customer comes first. AGICOobjective is to please their customers by fulfilling the insurance

needs as best as possible. They believe in placing the client atthe center of business and all of the products and services.

Service excellence is one of the objectives of AGICO.

AGICO strives continually on the development of new areas ofactivities to distinguish itself in the market place along withtraditional insurance Companies activities.

AGICO objective is the complete automation andcomputerization of all of its insurance activities.

AGICO Training and Development program of its employees isaimed at developing skills of its employees. It makes positivecontribution to the service culture of the insurance system as a

whole.


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Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18

ASKARI GENERAL INSURANCE COMPANY LTD

Strongly Agree Agree Somewhat Agree Neutral Somewhat Disagree Disagree Strongly Disagree


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ALLIED BANK LIMITED

Strongly Agree Agree Somewhat Agree Neutral Somewhat Disagree Disagree Strongly Disagree


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Askari General Insurance Co. Allied Bank Ltd


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stock Data: Current Price

(5/27/2011)

10.95

stock Data: Current Price

(5/27/2011):

62.06

Recent StockPerformance:

Recent StockPerformance:

1 Week 1.5% 1 Week 0.3%

4 Weeks 10.1% 4 Weeks 10.1%

13 Weeks 9.0% 13 Weeks -0.7%

52 Weeks -2.8% 52 Weeks 19.8%


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Ticker: AGICO Ticker: ABL

Exchanges: KAR Exchanges: KAR

2010 Sales 690,997,081

(Year EndingJan 2011).

2010 Sales 47,219,068,000

(Year EndingJan 2011).

Fiscal Yr Ends: December Fiscal Yr Ends: December

Maj r Ind str : Financial Maj r Ind str : Financial

SubInd

ustr : InsuranceCompanies

SubInd

ustr : CommercialBanks

Market Capital: 306,808,619 Market Capital: 48,537,177,758

Shares

Outstanding:

28,019,052 SharesOutstanding:

782,100,834


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The performance charts are taken from internet which shows thecurrent rating of both the organizations. These charts show thecurrent market position, shares outstanding, sales and marketcapital of both the companies. Firstly the AGICO and ABL

comparison charts are give which indicates that AGICO has highstock prices in mid of year 2007 but ABL has high stock pricesin the beginning of year 2008. AGICO and ABL have crash

prices in the beginning of year 2009 which shows down market.Both the companies recovered the market value of theircompanies stock in the mid of year 2009 but AGICO is unable

to retain it whereas ABL has increase in the value of companystock. Today if we compare the current prices of both thecompanies so we came to know that ABL has current price of62.06 and AGICO has 10.95.


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This study focused on the relationship between transformationalleadership of two organizations in Pakistan and the change in the

stock price of these companies between 2006 and 2011.

The purpose of this research was to empirically examine the

relationship between transformational leadership and stock price

change as a measure of organizational performance. The results of

this research provide some valuable insights into this complex and

exciting relationship.

The study had mixed results with no significant relationship found

between the total transformational leadership score andorganizational performance measured by 5-year stock price change.

There were significant relationships found between two of the

individual subscales of transformational leadership (contingent

reward behavior, emotion recorganization and personality trait) and

organizational performance measured by stock price change.


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The goal of the present study was to examine the

influence of emotional intelligence, recorganization

and personality traits on transformational leadershipbehavior. Broadly speaking, the results showed that

personality traits and emotional recognition were

positively linked to transformational leadership

behavior. With respect to personality traits, this studyreplicated previous findings, added new data, and ex

tended research by including contingent reward

behavior.


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A primary role of the transformational leader is to create a vivid andcompelling vision for the future, one that is aligned with the values of theorganizations. The inspirational part of the vision is the part that excitesconstituents. Leaders create a sense of purpose and excitement bycommunicating the vision in such a way that others can touch and feel it.Leaders make followers feel that the vision is hard work but also that it iswithin grasp.

We have seen from the analysis that AGICO is better in dealing their

employees. They have special consideration for employeeemotion, recognization and personality. Whereas ABL has just normalbehavior in dealing their employees so ABL has to adopt special strategiesto provide workplace facilities to their employees so that they can performbetter.

Both the organizations have excellent leadership style which is followedexcellently by the followers. This transformational leadership style is takingboth the organizations to face the competition and penetrate in market.

ABL has remarkable organizational performance in market and hascurrent stock price of $62.06 in 2011. Its market capital is increased up to40,537,177,758 and shares outstanding are 777,931,996 but on the otherhand AGICO has comparatively lower current stock price of $10.95. Itsmarket capital is also less to 306,808,619 and shares outstanding are28,019,052.

AGICO has a strong need of making the organizational performancestrong and capable of penetrating in market.


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This study added important pieces of empirical evidenceto the sparse body of literature on the relationship

between transformational leadership and organizationalperformance. Even though the association between thesevariables was shown, there were dimensions of

transformational leadership that were significant and doimpact organizational performance as measured by stockprice change.

This research shows that the relationship between someof the dimensions of transformational leadership and

organizational performance is significant and positive. Asmall, new piece of relevance can be added to theliterature regarding this relationship:emotion, recognization and personality positivelycorrelated and can improve organizational performance.

organizational performance: the effect of emotion recognition and personality on transformational ...

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