Abstract
The effectiveness of an organization’s leadership is among the most crucial variables determining its success or failure. Organizational goals are achieved by the leadership style of the person in charge. This report explores the influence and impact of leadership styles on a company’s success. Transformational, transactional, authoritarian, charismatic, bureaucratic, and democratic leadership styles are examined. The outcomes of this report have shed light on the various styles of leadership and their effects. A company’s performance is enhanced by the employment of effective styles. A detrimental effect on the organization’s performance is caused by charismatic and transactional leadership styles, which deny employees some opportunities and independence. According to studies, transformational, authoritarian, and democratic leadership styles have a positive impact on organizational performance. Leadership styles that help people develop their skills and abilities have been recommended for use by organizations.
Background
An organization’s leadership plays a critical role in establishing a clear direction and guiding the organization’s efforts and activities. It also guides the organization toward a set direction and goal and formulates successful strategies, policies, and techniques to get there (French et al., 2020). High-quality leadership is crucial for achieving the goal and vision and adapting to the shifting external environment (Hussain et al., 2018). Many businesses are increasingly being plagued by unethical business practices, significant employee turnover, and dismal financial results. Ineffective leadership in the workplace is the main cause of these plagues.
The primary goal of many businesses is to achieve their stated goals. There is a need for strong leaders who can coordinate and motivate the workforce (Bilcan, 2019). The problem is that some firms do not pay attention to the leadership style of their employees. This presumption guides the current investigation on the connection between leadership style and company performance. Transformational leadership, transactional leadership, authoritarian leadership, democratic leadership, and participative leadership styles are the leadership styles discussed in this report.
Charismatic, transformational, transactional, authoritarian, bureaucratic, and democratic leadership styles are the leadership styles that mostly affect the performance of an organization, as discussed in this study. If new ideas can be discovered via any study, these leadership styles can be improved further and bring more success to businesses. Therefore, these leadership styles have been chosen as a starting point. The major aim of this report is to evaluate the impact of various leadership styles on an organization’s performance over time.
Critical Review
Performance of an Organization
The business literature describes organizational performance as a complicated and multifaceted process. Organizational performance is defined as the actual output of an organization, which may be compared to the organization’s stated goals, objectives, and planned results (Gupta, 2018). The return on investment (ROI), shareholder return (economic value-added and total shareholder), and product/service market performance are all factors in an organization’s success. These factors are mainly dependent on the current market status and the leadership of the organization.
Relationship Between Leadership Styles and Organizational Performance
This kind of governance has a big impact on how well a company runs. As a result of the leadership style, an organization’s culture and performance are either positively or negatively influenced. According to Beier, Niehoff, and Hoffman (2021), 2,662 workers working in 311 firms were surveyed, and 2,662 of them were found to agree with this conclusion. The kind of leadership style directly impacts the performance and cultural aspects of organizations.
Transformational Leadership Style and Organizational Performance
Leadership in a transformative manner revolves around helping one’s subordinates flourish. Employees’ values, morality, abilities, and motivation levels are the primary emphasis of transformational leadership. As a result of a strong connection between followers and leaders, transformational leadership helps to build an explicit knowledge of followers’ motivation, values, and interests. Good leadership, as defined by Anderson (2017), demonstrates exceptional leadership qualities. Effective leadership refers to a leader’s ability to inspire and motivate their team members. The most transformative leaders inspire and challenge their followers to see beyond their self-interests. For transformational leaders to be effective, several things must be in play. Charismatic leaders are who can inspire their workers; leaders who can provide emotional support; and leaders who can excite employees’ minds (Banks et al., 2017). In the perspective of Görgens-Ekermans and Roux (2021), transformational leadership and the effectiveness of its followers are interrelated. In addition, the study found a strong correlation between transformational leadership and the performance of organizational teams. As stated by Mansaray (2019), performance is the result of a person’s talents, knowledge, and motivation. When it comes to the growth of followers, transformational leadership has a good influence. Relationships with individuals or groups that are mutually fulfilling, and self-defining are related to transformational leadership practices. To identify with the leader, followers are drawn to their idealized and behavioral charisma. An overall organizational efficiency increases because its workers feel more personally connected to the company when it has a transformative leader in charge. As a result, it is safe to say that effective transformational leadership correlates well with improved business results (Sun, Chen, and Zhang, 2017). According to Usman (2020), transformative leadership significantly influences an organization’s success. Using statistical methods like SEM and SPSS, they studied banking businesses and concluded that transformational leadership directly affects the enterprises’ efficiency.
Charismatic leadership style and organizational performance
The followers of leaders who have charisma are encouraged to adhere to and execute the concepts that the charismatic leader has created. One of the best ways to lead a team is to use this type of leadership style. People are encouraged to be creative and imaginative by a charismatic CEO, which is seen as a motivational element in the workplace. This kind of leadership has its drawbacks since staff are fully dependent on their boss and have no direction when he or she quits (Digirolamo and Tkach, 2019). As charismatic leaders fail to educate their people on how to be successful in the future, the situation continues to deteriorate. This management approach will have happy followers, but few potential leaders. As a result, it might have a prolonged detrimental impact on the company’s efficiency (Paais and Pattiruhu, 2020). They used a questionnaire to perform a quantitative study of twenty bank workers in Nigeria. According to their findings, charismatic leadership has a negative influence on the effectiveness of organizations’ leadership. Employees are not enthused or motivated enough to provide the results they are supposed to.
Transactional leadership style and organizational performance
A transactional manager is always on the lookout for ways to exchange one thing for another. This might include a variety of things, such as an increase in salary, a promotion, or a new position. Transactional leadership may be described by this interchange of goals and incentives. It has a favorable effect on organizational performance, according to research by Tran and Choi (2019). If the company’s employees can reap both material and intangible benefits, a transactional leadership style may help create and maintain the necessary conditions to realize organizational and human potential. The implementation of this leadership style may result in the creation of a positive work environment and the development of a compelling vision for the future of the company (Coetzer, Bussin, and Geldenhuys, 2017). Transactional leadership, as discussed by AI Derei and Musa (2022), has a positive effect on the company’s performance. When workers are allowed to share their greatest ideas, the firm’s aspirations are reached.
Democratic leadership and organizational performance
Democracies are distinguished by a decentralized decision-making process in which all members of the organization are actively participating. Poor execution and decision-making are significant risks associated with the democratic leadership style, which must be taken into consideration. Under democratic leadership, employees are considered to perform better than under authoritarian leadership because their thoughts and opinions are valued. The fact that everyone involved in decision-making has an equal stake and a shared level of expertise is another significant difficulty associated with democratic leadership that must be addressed (Wenner and Campbell, 2017). Xie (2018) found that participatory leadership has a significant on the functioning of organizations. Through democratic leadership, employees are empowered to make their own choices and share them with their teammates and managers. The personnel are instilled with a sense of responsibility via the use of this leadership style, which allows them to give and receive objective compliments and criticism (Galli, 2017). Since workers can voice and execute their innovative ideas, and contribute to the decision-making process at all levels, democratic leadership has a beneficial influence on a company’s performance according to their results. In the end, this sort of leadership helps the company as a whole and creates the next leaders of tomorrow.
A democratic leader emphasizes group discussion and involvement, which benefits the effectiveness of people following him or her. By employing a democratic leadership style, a company’s efficacy and efficiency may be enhanced because of increased productivity (Kesse Appiah, 2020). Resulting from this, it is possible to conclude that democratic leadership increases the performance of an enterprise.
Autocratic Leadership and Organizational Performance
Autocratic employers expect their subordinates to follow their directions exactly as they want, regardless of what the circumstances are. Authority figures frequently retain complete control over all decision-making (Frieden, 2017). Those who follow authoritarian leaders are obligated to carry out services and plans in a particular manner. According to the findings of recent research by Sandybayev (2019), different leadership methods have different effects on an organization’s success. This kind of leadership was referred to as autocratic leadership in the study, which was conducted in the United Kingdom. Autocratic leaders tend to be less innovative and prefer one-way dialogue. This harms the morale and happiness of the workforce. On the other hand, autocratic leadership has been shown beneficial in the short run.
A lack of workplace socializing, and communication is detrimental to an organization’s ability to execute at a high level. Conflicts inside the company are exacerbated under autocratic rule, which damages the organization’s overall effectiveness. As Sihika, Andike, and Prasetya (2020) point out, when an organization is led by an authoritarian style, the effectiveness of the organization might increase. When duties must be completed by a specified date, this form of leadership is more suited for the situation. Research by Udovita (2020), looked at the effect of leadership styles on an organization’s success. The author claims that authoritarian leaders dictate to their subordinates what should be done, how it should be done, and what regulations they should follow to maintain their position of power. These leaders have little faith in the people over whom they have authority to rule.
Bureaucratic leadership style and organizational performance
Managers in the bureaucracy have the authority to compel their subordinates to follow the rules and procedures that they have established. Only their methods and techniques are held in high regard by the leaders, and this explains their seeming disinterest. This method is unsuccessful since it does not promote the growth and motivation of the employees. These people in positions of authority are only concerned with getting the job done methodically. Bureaucratic leadership reduces output, as explained by Bishu and Kennedy, (2020). As a result of the lack of motivation provided by bureaucratic executives, they fear that their organization’s performance would suffer (Belrhiti et al., 2020). According to Purwanto, Kusumanin, and Prasetya (2020), a bureaucratic leadership style does not affect the productivity of workers or the performance of businesses in any significant way. This is the best method for long-term projects that need a lot of effort.
Problem Statement
This study had depicted the impact of various leadership styles on organizational success. Only three leadership styles (transformational, authoritarian, and participatory) have proved to have positive effects on an organization’s performance. A positive or negative relationship has been found between an organization’s success and the leadership style used. Employees must be provided opportunities and a sense of belonging as part of a successful management style, and participation in decision-making operations must be enabled. If one wants to enhance the total performance of a company, one should use transformational and democratic leadership strategies.
Organizational success may be influenced by various factors, including the leadership style a leader adopts. As a result, the study’s scope and usefulness have been severely constrained. To further understand the link between management style and organizational success, future studies should use acceptable methods and methodologies, such as quantitative and qualitative research.
Many companies lack a well-defined channel for developing their executives and this is an outstanding knowledge gap. When it comes to leadership and financial success, firms that hire more of their staff outperform those that don’t by a factor of more than three to one. Some businesses may not use succession planning at all, while others do so to protect themselves from outside scrutiny.
Today’s corporate climate is ever-changing and dynamic. Executives are most concerned about the complexity of the business environment, according to an IBM poll of more than 1,500 CEOs. Executives are also worried that their firms are not ready to handle the ever-increasingly complicated nature of the competitive field, despite this belief.
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