THE IMPACT OF LEADERSHIP STYLE ON WORKER’S PERFORMANCE: A CASE STUDY OF GUARANTEE TRUST BANK PLC

CHAPTER ONE

1.1 BACKGROUND TO THE STUDY

There is hardly any conversation today in Nigeria that doesn’t begin with the word “leadership”. Leadership in government, organization, mosque/churches and even in schools and family. There are also leadership issues being discuss in several parts of world today. Government has fallen and an organization has fail due to bad leadership and issue of failed banks in Nigeria. There cannot be leadership without followership.

Leadership styles can either motivate or discourage employees (workers), which in return can cause employee’s increase or decrease in their level of performance. That is, a particular style of leadership has a direct influence or effect on the productivity of an employee or employees. According to Schyns & Sanders (2007), the sources of employee job dissatisfaction include inadequate salary, conflicting job demands (from the leadership) and absence of promotion prospects.

For efficiency purposes, an effective leadership style, one that positively affects employees’ satisfaction and results in better performances, effectiveness and productivity is clearly desirable (Turner & Muller, 2005).

For every organization who wants to remain and wax stronger in a global market competitive environment must engage the service of good leaders. The effective leadership style certainly improves workers and organizational productivity. Ojokuku, Odetayo and Sajuiygbe (2012) confirmed that leadership style is the major determinant of any organization success especially in Nigerian

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banks. Williams (2009) pointed out that leadership creates understanding and recognition of a group’s undertaking, purpose and make the workers to know beyond their own wants and needs for the good of the cluster.

According to Jago (1982) “Leadership is expressed or displayed through interaction between people and necessarily implies its complement, followership. For one to influence, another must permit himself to be influenced” He pointed out that different leaders have their own distinctive leadership styles that have proved to be closely associated with their organizational performances and outputs.

Hartog, Muijen and Koopman, (1997) noted that transactional leadership and transformational leadership have gained currency and attention over a period of last few decades. They argued that transformational Leadership and Transactional Leadership both are directly related with numerous workplace outcomes such as job satisfaction, group performance, employee’s performance, and organizational commitment. Abdul, Ausnain and Munawar (2012) also agreed that both transformational and transactional leadership have positive significant effect on organizational commitment.

Researches (Luchak and Gellatly, 2007; and Paré and Tremblay, 2007) revealed that organizational commitment is positively associated with work efforts, organizational performance and negatively related to absenteeism and employees turnover. Bass (1985) described transformational leadership style as a systematic way by which subordinates or fellows praise and appreciate their leaders. Resultantly, this style enhances their motivational level, which leads to

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organizational productivity. While Ivey and Kline (2010) stated that, “Transactional leadership is characterized by leader-follower exchanges, whereby leaders exchange things of value with followers to advance both the leaders’ own and followers’ agendas”.

Banking sector is an engine of economic growth and development globally, Nigeria inclusive. Ebong (2006) observed that the banking sector promotes economic growth through its role of mediating between the economic units that have surplus funds and those that require such funds to support their investment. He pointed out that “By pooling together such savings, banks are able to achieve economies of scale with beneficial effects for their borrowing customers”. However, for the Nigerian banking sector to play its vital roles of development in the economy, the need for effective leadership that subscribes to proper business ethics is fundamental.

Guaranty Trust Bank Plc (GTBank) is a foremost Nigeria’s financial institution incorporated as a limited liability company licensed to provide commercial and other banking services to the Nigerian public in September 1990. The bank commenced operations in February 1991, and became a publicly quoted company in 1996 (GTB, 2013). Presently, the bank has employs over 5,000 people in Nigeria, Cote d’Ivoire, Gambia, Ghana, Liberia, Sierra Leone and the United Kingdom (GTB, 2013). Despite the high numbers of workers they have in GTBank plc, it’s not certain on how leadership style affect their worker’s performance.

It is therefore, indispensable to study transactional and transformational leadership styles and their impact on Nigerian banks worker’s performance.

1.2 STATEMENT OF THE PROBLEMS

Most of the researchers emphasized on transformational leadership but some also gave importance to transactional leadership. Egan, Sarros & Santore (1995) articulate, transformational style is more effective than transactional style, regardless of organizational type, method adopted by a leader is based on his personal ability, preferences and experiences. But organization’s output is negatively affected by the transactional leadership, (Bass, 1999). Howell & Merenda, (1999) conducted their research on association between leader-member exchange, transactional and transformational leadership in forecasting employees performance and concluded that transactional leadership style is a positive predictor of follower’s performance. (Bass, Avolio, Jung, & Berson, 2003) carry out their research for military platoon which was an organization, working in an unstable environment and it proves that transactional leadership increases performance among the soldiers. Transactional leadership style is relatively weakly associated with performance and is optimistically related to perception of organizational politics (Gadot, 2007). While investigating the effect of leadership on organizational performance in Russian companies, (Elenkov, 2002) observed that in Russia managers who adopt transactional leadership behaviour positively correlates with organizational Performance and innovation.

Lievens, Geit & Coetsier (1997) and Berson, Shamir, Avolio & Popper (2001) articulate that transformational leadership is helpful for innovation

implemented by the organization in the era of competition. Majority of the researchers had associated transformational leadership with employee’s performance and job satisfaction and argued that transformational leadership can be the best predictor of employee performance (Raja & Palanichamy, 2011). Transformational culture boosts both the organization and the employee’s performance (Bass & avolio 1993) without enforcing extra burden (Schlotz, 2009). Transformational leadership is proved to be more useful in variety of businesses, military, engineering, hospital, and educational conditions than transactional leadership (Bass 1998). Masi & cook (2000) also have the same thoughts and believed that transformational leadership style is only the factor of increasing employee productivity but transactional leadership is now useless.

Participative leaders increase employees’ performance by using the motivational mechanism of organisational commitment (Sashkin, 1976). The provide subordinates with an opportunity to be involved in and exert influence on the decision making process (Somech, 2005). Consequently, active participation promotes involvement and commitment, because subordinates develop a greater trust in and rise to a higher level of acceptance of information identified by them (Armenakis et al., 1993; Fullan, 1997). Some scholars argue that a decision is only as good as its implementation and those who participate in making it are usually highly committed to make it fruitful (Robbins et al., 2008). Those subordinates who perceive their leaders as adopting participative leadership behaviour are more committed to their organizations, more satisfied with their job and maintain high

performance levels (Yousef, 2000). Therefore, the ability of leaders to correctly use a participative leadership style motivates subordinates to commit themselves to the organization. Yiing and Ahmad (2009) also found that participative leadership style is significantly and positively related with organizational commitment. Other scholars also revealed that this leadership style has a positive effect on the commitment of subordinates to the quality of service, share values and the clarity of the employees’ functions (Dolatabadi and Safa, 2010). Furthermore, other scholars argue that this leadership behaviour influences the job performance of subordinates by creating high levels of trust (Huang et al., 2010).

In spite of this, the effects of managerial leadership styles have not been fully examined in most banks. This research intended to examine if other managerial styles of leadership are still applicable and effective in banks today apart from the most common democratic, transformational, and transactional leadership that are been practice or seen in most banks, which is a gap that this research attempts to fill. The researcher designed a study to assess the impact of leadership styles on worker’s performance in Guarantee Trust Bank Plc, Sokoto branch.

1.3 RESEARCH QUESTIONS

In the course of this research, effort was been made to gather available data to find answer to the following research questions:

1        What is the relationship between a leadership style of a bank managers and bank worker’s performance in Guarantee Trust Bank?

2        What style of leadership does the manager of Guarantee Trust Bank apply?