How Leadership Style Influence Organizational Performance?

Key Dimensions of Organizational Performance

What is an effective leadership style that fosters organizational performance? At first glance it may seem that the democratic style is the best, since it has a large number of attractive features. It contributes to the formation of a favorable psychological atmosphere for the work of the team and is perceived by its members as comfortable. However, practice shows that a democratic style is not always optimal. For example, if a team is poorly organized and developed, there is a shortage of time, but it is necessary to achieve the desired results as soon as possible. In such situations, strict discipline, responsibility and consistency of actions and, accordingly, an authoritarian approach is necessary. However, things have changed enormously. The demographic characteristics of the current employees is different from the demographic characteristics of the employees 50 years ago (Gaffney, 2017). The leadership styles that were appropriate 50 years ago may or may not be appropriate currently. Understanding how leadership style influence the organizational performance is therefore one of the crucial requirements for students who aspires to be leaders tomorrow. The essay intends to demonstrate how leadership style influence organizational performance. The essay is divided into three sections.  The first section will attempt to define some key dimension of organizational performance and the second section will describe some of the most common leadership styles. The third section will demonstrate the relationship between leadership style and organizational performance.

Save Time On Research and Writing
Hire a Pro to Write You a 100% Plagiarism-Free Paper.
Get My Paper

The first dimension of performance is that it is an evolutionary concept. Performance components evolve over time, with internal and environmental assessment criteria changing. Thus, factors that condition an organization’s success during an innovation phase may be incompatible with those required during a development phase. Admittedly, there are combinations of human, technical, financial, organizational factors that are effective in one context and no longer in others. These combinations are multiple and change over time (Sarin and Vijay 2001). Additionally, performance is a built-in support for judgments. It is often defined by criteria consistent with the representation that theorists and practitioners make of its measurement. It involves a judgment of values ??about the activities, results, products and effects of the organization on its environment. This concept has, as a social construct, as many meanings as there are individuals or groups that use it (Rebstock and Bradbury-Huang 2011). For a leader, the performance can be the profitability or competitiveness of his company; for an employee, it seems to reflect the best work climate in the company; and for a customer the quality of the services rendered. Performance remains a matter of perception. That’s why, in difficult times, individuals compete on who it is. Performance has become a concept all the more complex to understand that it seems today to be in a good position on all criteria. It is also important to note that the performance is piloting itself. Promoting a comprehensive approach to performance, many actors offer managers a reading grid of the company comprising indicators that complement and illuminate each other and are linked to multiple objectives (Rebstock and Bradbury-Huang 2011). The only financial criteria are no longer sufficient for managers, and, in practice, the non-financial indicators complement the first, they are the engine of future success, they provide pilots with an essential global vision of performance in several areas simultaneously. Subsequently, the performance has a retroactive effect on the organization. It acts on the behavior of the leaders: if the results are below the objectives. Lastly, the performance is rich with antinomic components. It presents itself as a set of complementary and sometimes contradictory parameters. This is true when the manager seeks to minimize costs, while ensuring the quality of products and the morale of employees. These criteria therefore require permanent arbitrations. Not all components have the same importance. If the economic dimension remains dominant, the company can, at a particular stage of its evolution, or according to the personality of its leader, give priority to such a dimension (human resources, satisfaction of external groups …).

Overview of Leadership Styles

A leader is who gets others to do with him or for him what he believes vital in favor of achieving team or organizational goals. This means that it is an active being that assumes positions among its peers, and, for this, it requires special abilities or competencies that allow it to adequately deal with the various conflicts, disputes or processes (Dutta, 2013). The leadership style constitutes the pattern of behavior seen by third parties, as well as the perception of oneself with respect to the leader’s position and performance, which mobilizes the followers to do what has been required of them (Zdaniuk and Ramona 2015).There are multiple ways to typify leadership styles; however, the dominant perspective distinguishes between transactional leadership, transformational leadership and laissez faire.

The transformational leader is one of the theoretical frameworks most analyzed today, which enables the design of challenging objectives for his followers, whom he motivates, empowers, thereby increasing morale (Zdaniuk and Ramona 2015). This style builds a value system that reveals the importance of the work that will be done; this stimulates a team or organization look over personal perspectives, from which it is possible to harmonize the work required with the needs of the followers.

It should be noted that transformational leadership exhibits a set of elements that characterize it. First, the idealized influence is highlighted, which refers to the fact that transformational leaders are charismatic, admired, respected, through which they gain the trust of followers, who wish to imitate them (Zdaniuk and Ramona 2015). In second place, is the inspirational motivation. Transformational leaders achieve high levels of motivation in the members of their team, giving intrinsic value to the work done; with this, a climate of commitment is created in the construction of a desirable and possible future through joint efforts (Zdaniuk and Ramona 2015). Third, intellectual stimulation should be mentioned, as transformational leaders favor creativity and innovation, permanently seeking to overcome the traditional way of doing things. Finally, individual consideration is found, since transformational leaders guide, stimulate and support their followers individually, acting as a mentor. In this way, they strengthen interpersonal relationships and promote their personal and work development (Sun, Ang and Yufan 2014)

Save Time On Research and Writing
Hire a Pro to Write You a 100% Plagiarism-Free Paper.
Get My Paper

On the other hand, transactional leadership bases its influence on the construction of an agreement with its followers regarding the objectives or goals, and the expectations of reward. Its focus is on the design of the transactional framework, and on the measurement and control of what has been achieved. For each level of achievement, there are specific rewards, that is, contingent to the different states of nature or possible outcomes (Lee, 2012). The terms of exchange are usually short-term and achieving significant changes in the organizational culture is not a concern of the leader, but their effort is to achieve the team’s purposes (Mittal and Rajib 2015).

Transactional Leadership

Similarly, it should be noted that transactional leadership has a set of distinctive elements. The first corresponds to the contingent reward, which implies that these are associated with the level of achievement of the team; Thus, the leader defines what to do, how to do it, clarifies expectations and agrees on the reward associated with each acceptable performance. The second consists in management by exception, logic under which the leader focuses efforts on those processes or results that deviate from what was expected, and adopts the pertinent corrective measures (Zdaniuk and Ramona 2015).

Finally, the laissez faire style emerges when those who must act as leaders avoid making decisions, perform minimal management or control actions, and do not assume their responsibilities, thereby granting freedom for followers to decide and act according to their own criteria. that by the guidelines or influence of the leader (Lee, 2012).

There are two main distinguishing elements of this style of leadership: (i) avoids actions and decisions, and leaves space for followers to act and resolve the challenges of the institution or team (Lee, 2012), and (ii) the control is by passive exception, that is to say, that it only operates or acts when situations are overflowing or are serious (Chaudhry and Javed, 2012).

Each type of leadership style is designed to meet certain goal with ultimate objective of improving organizational performance. Some thinkers may claim that transformational leadership is superior leadership style. However, this is not true. All leadership works towards fostering organizational performance.

Leadership improves organizational performance in many ways. Leaders create a vision of the future, set goals, set new directions for development, challenging the status quo and being agents of change. Managers, on the contrary, are interested in stability, in preservation of the existing state of affairs (Ruckdäschel, 2014). They organize subordinates and direct them to achieve the tasks set in accordance with the standards, manage people and teams in the conditions of specified constraints. Management usually focuses on the production process. This activity, as a rule, is associated with the resources: human, temporary, monetary, technical and other, necessary for the fulfillment of production tasks. Management is responsible for managing these resources within the constraints of systemic factors, providing planning, organization, time management, control, and problem solving.

Leaders focus on the achievement of goals by their subordinates by creating an environment that inspires people to make the vision a reality and supports their motivation to achieve their goals. This requires the ability to lead people, inspire their own example, build relationships, empower, encourage efforts and commitment, create team spirit and a favorable environment conducive to the success of the team, give people freedom to develop and grow, manage their productivity and expectations (Rebstock and Bradbury-Huang 2011). That is why it is important for any organization to have strong leaders and strong managers at all levels as a guarantee of achieving strategic and operational goals, where effective strategic leadership ensures the success of management processes that fall within the scope of management.

Transformational Leadership

Leadership encourage creativity. In modern business, the foundation of not only prosperity, but simply the survival of an organization is rightly considered to be the creativity of staff, and especially leaders (Masters & Uhr, 2017). By definition, creativity is a person’s creative abilities (abilities) that can manifest themselves in thinking, feelings, communication, certain types of activity, characterize the whole person and / or its individual sides, products of activity, the process of their creation. Creative solutions can be obtained not only as a result of the findings of individual talented employees, but also with skillful use of collective creative potential (Zareen, Kiran and Bahaudin 2015). The organization and implementation of such activities are the prerogative of the leaders of individual groups and the business as a whole.

The general increase in the attention of business leaders to the human factor is observed after World War II, when the costs associated with living labor became very high, and strong trade unions did not allow them to reduce them (Cameron, 2012). Receiving from this costly factor of production greater returns required a deeper understanding of the motives and factors of the labor behavior of workers, considering the personal characteristics of the individual and the group. The motivation of business interest in leadership is based on the expectation of increased returns, labor productivity, and the creativity of decisions made if the leader manages to create a highly productive team (Wang, David and Zhen 2014).

Leadership also foster organizational performance by forming and managing teams. Forming a group, managing its development and achieving the level of a productive team is a function of a leader. Not every group can turn into a productive team, but the role of the leader in this transformation is decisive (Cameron, 2012). There is reason to believe that leadership management is a relatively new management paradigm, characteristic of the new century with its announced innovation and modernization trends. And representatives of business and the education system of the country understand this.

On the topic of leadership, there is an extensive literature analyzing the qualities of leaders, the life path and the reasons for the success of recognized state and corporate leaders, giving advice on how to become a successful leader, how to create a productive team, to rule over people (Lim, 2016). The ideal image of the leader of the “national scale” was depicted in his “Commandments” by the English poet R. Kipling. Each author, due to the uniqueness of his personality, offers his own image of a leader, gives recommendations on what and how to do to get closer to this image, singles out certain qualities of a leader, ways and methods of managing different groups of people in different situations as achieve success (Cameron, 2012). Well-known leadership theories link the success of a leader with his personal characteristics, leadership style, and behavior. There are theories determinants of success for a leader based on many factors. But it is not yet open, and it is unlikely that a universal and comprehensive leadership model and leadership qualities will be discovered that contribute to success in any situation, since the uniqueness, diversity of workers and their leaders, work teams, business situations, organizations is so great that it is not fully amenable to unification.

Laissez-Faire Leadership


For each leadership style there is a time and place, each of them can be effective in different circumstances. Just as golfers use a whole set of clubs, so managers must take different approaches and be able to adapt them, taking into account the personal characteristics of the staff or the requirements of the situation. The more successful leaders adapt their approach and the wider the range of leadership styles they use, the higher the likelihood that they will succeed in creating a positive climate conducive to high employee efficiency.


Cameron, K (2012) Positive Leadership: Strategies for Extraordinary Performance. San Francisco: Berrett-Koehler Publishers.

Chaudhry, A and Javed, H H (2012) Impact of Transactional and Laissez Faire Leadership Style on Motivation. International Journal of Business and Social Science, 3 (7), pp.258-264.

Dutta, D (2013) Path Dependence, VRIN Resource Endowments, and Managers: Towards an Integration of Resource-Based Theory and Upper Echelons Theory. Journal of Business Theory and Practice, 1 (1): pp. 109-118.

Eisenhardt, K (2013) Top Management Teams and the Performance of Entrepreneurial Firms. Small Business Economics, 40 (4), pp. 805-816.

Gaffney, J (2017) Leadership and the Labour Party: Narrative and performance. London : Palgrave Macmillan

Lee, S (2012) A Study of the Form of Organizations: Toward an Integrative Framework of Population Ecology and Institutionalism. International Journal of Business and Management, 7 (10), pp.108-115.

Lim, R E (2016) Mindfulness for Better Leadership and Business Performance: An Integration of Heart-Ware Into Business Practices. Pennsauken: BookBaby.

Masters, AB, & Uhr, J (2017) Leadership performance and rhetoric. Cham: Palgrave Macmillan.

Mittal, S and Rajib D (2015) Transformational Leadership and Employee Creativity: Mediating Roleof Creative Self-Efficacy and Moderating Role of Knowledge Sharing. Management Decision , 53 (5), pp. 894-910.

Rebstock, J G and Bradbury-Huang H (2011) Chapter 6. Managing Sustainability: The Port of Los Angeles Among an Ecology of Organizations. In: Susan Albers Mohrman and Abraham B. (RAMI) Shani (eds.). Organizing for Sustainability (Organizing for Sustainable Effectiveness, Volume 1. London: Emerald Group Publishing Limited, 155-185.

Ruckdäschel, S. (2014). Leadership of networks and performance: A qualitative and quantitative analysis, Wiesbaden : Springer Gabler

Sarin, S and Vijay M (2001) The Effect of Reward Structures on the Performance of Cross-Functional Product Development Teams. Journal of Marketing, 65 (2), pp. 35-53.

Sun W, Ang X and Yufan S (2014) Transformational Leadership, Team Climate, and Team Performance within the NPD Team: Evidence from China. Asia Pacific Journal of Management, 31 (1), PP. 127-147.

Wang, D, David W and Zhen Z (2014) A Meta-Analysis of Shared Leadership and Team Effectiveness. Journal of Applied Psychology , 99 (2), pp.181-198.

Zareen, M, Kiran R and Bahaudin M (2015) Impact of Transactional, Transformational and Laissez-Faire Leadership Styles on Motivation: A Quantitative Study of Banking Employees in Pakistan. Public Organization Review , 15 (4), pp.531-549.

Zdaniuk, A and Ramona B (2015) The Role of Idealized Influence Leadership in Promoting Workplace Forgiveness, The Leadership Quarterly , 26 (5), pp.863-877.