Leadership and employee performance in the petroleum industry of Saudi Arabia

Scientific Study, 2015

56 Pages


Table of Contents

List of tables


1 Introduction
1.1 Introduction
1.2 Context
1.3 Study Hypotheses
1.3.1 Hypothesis 1
1.3.2 Hypothesis 2
1.3.3 Hypothesis 3
1.3.4 Hypothesis 4
1.4 Aims & objectives
1.5 Study significance

2 Literature Review
2.1 Concept of leadership
2.2 Leadership process
2.3 Leadership theories
2.3.1 Trait theory
2.3.2 Behavioural theory
2.3.3 Likert Leadership theory
2.3.4 Situational theory
2.3.5 Fielder’s contingency theory
2.3.6 Fielder’s revised theory
2.3.7 Criticism on Fielder’s theory
2.4 Leadership in Saudi Arabia
2.5 Summary

3 Methodology
3.1 Methodology and research design
3.2 Data sources
3.3 Data collection instrument
3.4 Population and Sampling
3.5 Sample size determination
3.6 Data analysis

4 Data Presentation
4.1 Introduction
4.2 Gender
4.3 Age
4.4 Education
4.5 Longevity of workers in company
4.6 Business ownership
4.7 Involvement of directors
4.8 Reporting to managers
4.9 Relationship between heads and subordinates
4.10 Degree of freedom to the section heads
4.11 Working environment
4.12 Satisfaction with current salary
4.13 Recent promotion
4.14 Promotion factor
4.15 Motivation level of workers
4.16 Employees’ level of motivation
4.17 Job training facilities in companies
4.18 Types of training facilities
4.19 Delegation of subordinates
4.20 Delegation of duty backed up by the authority
4.21 Performance evaluation
4.22 Reasons for the level of performance
4.23 Leadership style
4.24 Motivation based on employees’ contribution
4.25 Performance measurement
4.26 Forms of performance measurement
4.27 Factors enhancing Organisational performance
4.28 Factors impacting organisational performance

5 Chapter: Data Analysis
5.1 Hypothesis 1
5.2 Hypothesis 2
5.3 Hypothesis 3
5.4 Hypothesis 4
5.5 Interpretation and meaning
5.5.1 Hypothesis 1
5.5.2 Hypothesis 2
5.5.3 Hypothesis 3
5.5.4 Hypothesis 4
5.6 Relevant theories

6 Discussion & Findings
6.1 Poor delegation of power and spread of managerial expertise
6.2 Leadership by one man

7 Conclusions & recommendations
7.1 Conclusions
7.2 Recommendations

8 References

9 Appendix A: Questionnaire

List of tables

Table 1: Workers’ gender

Table 2: Workers' age

Table 3: Workers' education

Table 4: Staffs’ tenure

Table 5: Nature of business ownership

Table 6: Director's involvement

Table 7: Reporting to managers

Table 8: Friendliness between managers and subordinates

Table 9: Degree of freedom

Table 10: Working environment

Table 11: Satisfaction based on current salary

Table 12: Promotion

Table 13: Promotional factors

Table 14: Motivation to work

Table 15: Motivation among staff

Table 16: Training facilities

Table 17: Training type

Table 18: Delegation of authority

Table 19: Performance evaluation

Table 20: Style of leadership

Table 21: Motivation based on employees' contribution

Table 22: Motivation level

Table 23: Performance measurement

Table 24: Enhancing organisational performance

Table 25: Factors impacting organisational performance

Table 26: Leadership style (Contingency table)

Table 27: Chi-Square calculation for H1

Table 28: Factors deciding promotion

Table 29: Chi-Square calculation for H2

Table 30: Leaders’ response to high performance (contingency table)

Table 31: Chi-Square calculation for H3

Table 32: Factors motivating staff promotion (Contingency table)

Table 33: Chi-Square calculation for H4


In earlier times, it was believed that organisational performance can never be affected by the role of leaders, but now it has realised that the leader’s role matter a lot in organisational performance. In promoting performance of the organisation: effective communication between superiors and workers, favourable working environment and motivation of employees are essentially required. It has seen in previous literature that only a few studies have conducted on leadership roles and motivation of employees in urban and rural areas of Saudi Arabia. Thus, it was crucial to assess organisational performance and leadership in the petroleum industry in Saudi Arabia. The assessment was carried out by using a questionnaire and questions were asked to determine: the leadership styles and their effects on performance of a company, the link between organisational performance and leadership, the factors which influence performance of the workers and how styles of leadership has influenced the productivity of selected 3 Saudi Arabia’s oil companies in this area of study. The gathered data was then analysed by using CHI-square formula, the results show that there was a need to focus on the requirements, expectations, attitudes, promotion and motivation of employees, and availability of adequate working environment to the workers in order to attain the goals of the company. Additionally, it was concluded that a leader has to adopt a participative style in order to encourage free flow of information among officers, directors, employers and workers.

1 Introduction

1.1 Introduction

This chapter introduces the study starting with the background, and following with the research hypothesis, research aims and objectives, and research significance.

1.2 Context

Stanfield (2009) said that the word leadership has been used in many fields such as, educationists, business executives, political scientists and social workers. However, there is a large difference in the exact meaning of leadership.

McCleskey (2014) also supported this view, and also gave the different definitions of leadership as for example, leadership is preparing individuals to do things that they have never considered to do or they do not want to do. According to an organisation, leadership is the action of committing the employees to give their best to achieve the purpose of the organisation. He also says that leadership is known by its consequences that an individual or a group of people adopt to perform in a particular way as a result of the behaviour of someone else.

It is important to differentiate between leadership as a personal quality and as an organisational function. Northouse (2010) said that leadership means a special combination of personal characteristics, which brings to glow the abilities and qualities of individuals. Leadership refers to the distribution of work throughout an organisation and it focuses on the pattern of authority and work within the organisation.

It is very important to define leadership in its various reflections. However, it is essential to support the individual’s objectives and understand the definition of leadership under various conditions. Previous views about leadership say that it observes as a personal ability. But, Hegar (2011) define that the level to which an individual demonstrates leadership does not depend only on personal abilities and characteristics, but also depends on the environment and situation.

Kramer and Messick (2004) further explained that individuals could become part of an organisation in order to attain specific personal goals, the degree to which they are active members depends on how much they are satisfied that the organisation’s membership will enable them attain organisation’s predetermined objectives. Therefore, an employee will support the organisation if he is satisfied that his personal goals and objectives could be met here and that the organisation will not deny his interests.

Many studies perceive leadership as a personal quality. However, it is important to define leadership and differentiate it from being a personal quality to being an organisational function. A number of efficiency and leadership related issues lie in the petroleum sector that ultimately affect the stakeholders and result in a bad attitude towards work, poor employee performance and lack of productivity.

1.3 Study Hypotheses

The following hypotheses are posted to direct us in reaching the research objectives.

1.3.1 Hypothesis 1

Null hypothesis H0: Leadership method and function in Saudi Arabia's oil industry do not considerably influence the total performance of a company

Alternative hypothesis H1: Leadership method and function in Saudi Arabia’s oil industry considerably influence the total performance of a company

1.3.2 Hypothesis 2

Null hypothesis H0: Presence of a suitable working environment does not enhance employees’ performance in Saudi Arabia's oil industry

Alternative hypothesis H2: Presence of suitable working environment enhances employees’ performance in Saudi Arabia's oil industry

1.3.3 Hypothesis 3

Null hypothesis H0: Managers' encouraging responses to their employees in order to increase their individual performance do not play an important role in achieving organisational goals in Saudi Arabia's oil industry.

Alternative hypothesis H3: Managers' encouraging responses to their employees in order to increase their individual performance play an important role in achieving organisational goals in Saudi Arabia's oil industry.

1.3.4 Hypothesis 4

Null hypothesis H0: Promotion of staff members by considering their expertise and merit will not stimulate them to work more efficiently in order to take their companies at a higher level of performance.

Alternative hypothesis H4: Promotion of staff members by considering their expertise and merit will stimulate them to work more efficiently in order to take their companies at a higher level of performance.

1.4 Aims & objectives

This research will focus on a critical assessment of leadership and employee performance in oil and gas sector of Saudi Arabia by taking into account three top petroleum companies including Saudi Aramco Mobil Refinery Co. Ltd., Saudi Basic Industries Corp. (SABIC), and Arabian Drilling Company. To achieve this aim, the following list of objectives are formed

- To evaluate the link between employee performance and leadership in selected organisations
- To discover how leadership patterns affect employees’ performance
- To explore the impact of leadership style on employees’ productivity
- To investigate the factors affecting the performance of employees in selected organisation

1.5 Study significance

Saudi Arabia as a nation is presently facing a quick increase in the number of entrepreneurs who establish business related to wholesales, maintenance and production industries in local areas. These businesses are increasing the expectations and interactions between the entrepreneur and employees on a daily basis. Due to this fact, the study will be of a huge importance in a number of ways:

1. It will help expose the relationship between organisational performance and leadership and how leadership techniques could be useful for petroleum industries to manage the environmental influences and differences.
2. It will be useful for students of business administration who may became entrepreneurs, managers and leaders in the future.
3. The study will also help the leaders and the managements of petroleum industry become aware of the factors that really motivate their workers in high and low productivity in their work.

Similarly, it is expected that when the implications are prepared and applied between employees and leaders in the organisation, it would enhance improvement and co-operation in individual’s performance and would also increase the interpersonal relationship and high productivity significantly. Other organisational issues such as aggression, fixation, stress, regression and friction between leaders and employees would also be reduced.

The study about petroleum industry in Saudi Arabia could reveal more features of the leadership and the employee’s performance, but due to limited logistics and time, the research is focused only on the three most popular companies including Aramco Mobil Refinery Co. Ltd., Saudi Basic Industries Corp. (SABIC), and Arabian Drilling Company

2 Literature Review

2.1 Concept of leadership

The researcher will focus on covering the problems of organisation and leadership in this chapter. Just like individuals, an organisation also has many needs. That is why, it is important for the organisation to efficiently manage the behaviour of individuals in order to attain their aims and objectives.

Lussier (2011) said that objectives help administration in performing leadership responsibilities by providing the base for bringing together the workers’ effort within an organisation. It can be further explained that the achievement level of objectives help to give individuality, status and recognition to an organisation.

Chennamaneni & Teng (2012) defines that there are different types of needs. These include: egoistic, physical and social needs. However, job satisfaction is always associated with individual conditions and needs. Leadership is related to management as it involves controlling and directing the level, extent, nature, changes and activities occurring within an organisation. Management is a process of directing individuals towards maximum efficiency level within limited resources such as information, raw material, machines and labour (Tsui et al., 2007).

Similarly, leadership of an organisation should give sufficient attention to its employees, if the organisation wants to achieve its objectives. The practice of leadership involves taking charge and reforming the activities of organisation’s employees to make sure that the required results are attained.

At the background of observable performances, leadership development can be observed as the training opportunities, planned experience and guided growth provided for the managers of an organisation. Through this the leaders of small scale organisations should recognise their responsibilities about performing management functions. According to Chennamaneni & Teng (2012), the management functions include organising, planning, controlling, directing and co-ordination of all the activities that relate to the organisation for it to attain its objectives.

Axson (2010) describes that planning is a process of looking forward to establish the course of action of an organisation to attain its objectives. Both the long and short term plans should be properly considered for the success of the organisation. The supporter further defends the organisation as a function which involves associating the basic components of the organisation such as task, material and people so that they follow and achieve a set of objectives.

In most of the organisations, directing includes face-to-face supervision of employees. In the daily organisational activities, directing is an important and major factor in attaining the success of an organisation. Another major duty of a leader is controlling, that provides the resources of inspection to make sure that the strategy of the work is properly implemented.

Mukherjee (2005) further explained that control involves the capacity to correct and guide activities, which do not help achieve the organisational goals. However, control generally consists of four basic steps:

1. Set the degree of performance (set up satisfactory levels of employee’s output)
2. Check performance of employees regularly: monthly, weekly, daily or hourly
3. Resolve the differences in the performance level
4. If there are variations, take remedial actions such as more retraining or training. If no variation exists, continue with the same activity

2.2 Leadership process

The main purpose of this research is establishing the relationship between an organisation and its employees effectively. The process of leadership is deeply affected by the reduction in labour and as well as the reduction in complaints. According to Chennamaneni & Teng (2012), effectiveness of leadership is determined by the level to which it facilitates employees sufficiently or results in high productivity.

Koontz (2010) defines that some studies shows that the effective managers focus on the needs of their loyal employees. But some other studies did not show clearly defined results on this issue and some studies show the reverse relationship to the following: manager’s power in the organisation, the feelings of subordinates, personalities of subordinates, the nature of production process and the size of the organisation.

There may be no management technique that could be helpful or successful in every situation. Therefore, it has many definitions according to the situation. Armstrong (2006) explained it as different techniques used in different work situations to perform them successfully. Most of the time, manager’s skills are defined as diagnostic skills. The managers assess all related factors that are affecting work. According to Koontz (2010), sometimes, managers may not follow the proper technique because they may find it difficult to change their method.

2.3 Leadership theories

2.3.1 Trait theory

In the past, theorists and researchers said that leadership focused on the characteristics of leaders. It can be said due to the belief that the individual who has leadership capability does this job effectively. The leadership capability includes personality characteristics, which can be inborn or obtained.

During the first part of this century, people did not use reasoning method. Personality theory and “great men” theory explained the reasoning. According to Bass & Bass (2009), Great men’s theory was supported by some people who had the opinion that reasoning is the impact of history that was defined by heroes or great men. It was said that the great men influence people through their personality, political skills, intellect and kindness. It was further explained that an individual could attain progress by his efforts and that great men used their particular personal skills and efforts to become effective leaders.

Most studies about leadership were conducted by researchers between World War I and World War II. But mostly researches produced incompatible results. In 1948, Skogdill considered 124 studies of leadership qualities and discovered that leaders were more famous, confident and also knew how to do their work. Other characteristics exposed that the conclusions of these studies were not understandable and were doubtful. According to this, six studies exposed that the trait theory was supported by younger leaders. Prieto & Phipps (2009) explained that it would be essential to view different types of leadership, one of them is a leader between people in a social setting and the other one is the leader of an organisation. Both leaders have different qualities of leadership. It was further explained that the degree of the personal skills of a leader should be linked to the goals, activities and characteristics of the followers. Leadership was considered to have a relation with variables and changes.

Lussier (2008) published a study that was fully against the universal trait theory. The study was conducted within high school students who were the members of particular group. They were assigned three activities on the ground, which were mechanical, clerical and intellectual. It was found that the student who came out as a leader on the floor of intellectual test was also the leader in clerical test. But in the mechanical task, the leaders were changed.

These results were not according to the expectations of trait theory because the same tasks should be assigned to the each member. In early years, researchers properly neglected the trait theory and explained the changed approaches and framework of leadership researches and theories. Unfortunately it can be said that universal leadership traits do not exist in this age. Researchers suggest that different traits are helpful for effective leadership in different conditions (Daft, 2006).

2.3.2 Behavioural theory

When the trait theory was disgraced, interest of researchers focused on discovering the relationship between employees’ group performance and leaders’ behaviour as well as satisfaction of employees. A number of researches contributed to the understanding of the relationship of employees’ performance and leaders’ behaviour. The most important study about this issue was carried out by the Ohio state university that was mainly focused on the impact of leader’s behaviour on the work of employees.

In the publication by Adeniyi & Adeniyi (2010), a large number of researches were conducted on the topic of leadership and management style. This was done through questionnaires, observations and interviews. The main purpose of the research was to examine the hypothesis related to the structural determination of a leader’s behaviour. The researcher further identified the different types of behaviour presented by the leaders and the effect of leadership method on group satisfaction as well as performance.

According to Nippenberg et al. (2005), managerial behaviour can be statistically evaluated by nine different dimensions. There are two main factors in which leadership styles can be described:

1. According to an observation, leadership behaviour could be defined as a conclusion of warmth, respect, friendship and mutual trust. It is focused on respect and mutual trust between the managers and the subordinates of an organisation.
2. The other important factor was the making of a structure in which a leader organised and defined the different kinds of relationships that they had with their employees.

Adeniyi & Adeniyi (2010) explained two factors that are useful for research in management techniques:

1. Production Emphasis: this factor was not as essential as the first two factors mentioned above. In this category behaviour is used to motivate the employees for better performance and improving focus on their task.
2. Sensitivity: It is also known as social awareness. It is the most important factor. It describes the sensitivity of behaviour and social relation inside and outside an organisation.

These studies conducted of Ohio State University and other different places defined these four methods of employee’s satisfaction and performance. It can be said that a particular leadership style will not be suitable for all situations. Pre-planned structure and considerations are helpful to get high satisfaction and performance of individuals

2.3.3 Likert Leadership theory

Likert proposed this theory. Sadler (2003) explained basic styles that helped to categorise employee orientation and task orientation. It also developed the Likert’s model of management effectiveness. This model is based on the four possible leadership systems namely:
I. Exploitative and authoritative
II. Benevolent and authoritative
III. Consultative
IV. Participative

According to the exploitative and authoritative system, leader takes all the decisions related to the work and the subordinates follow the leader’s instructions and perform the task. Managers set the criteria or procedures for the subordinates to perform the task. When subordinates do not follow the criteria or procedure, they attract punishment and threat from the supervisor. The leader shows little confidence in his employees and in return, the employees tolerate his behaviour and think that he is different from other leaders.

In Benevolent and authoritative management style, leader controls the subordinates and issues orders, while the employees have some flexibility in selecting their work within a specific range or procedure.

Consultative style is the third important system. The leader sets targets and goals after discussing with the subordinates. According to this system, employees can take their own decision about how they want to do their task. However, the major decisions are handled by higher level managers. Rewards are given to motivate the employees instead of giving threats and punishment. In this style, the employees can easily discuss the issues of work with their managers. Managers trust their subordinates and employees do their work with minimum correction and supervision.

The fourth system is the participative style. It is the final and most supportive management style explained by Likert. Manager sets the standards and goals, while the other work related decision are taken by group. All the decisions are done after incorporating the suggestions and ideas of all group members. Therefore the set decisions and goals may not be in the favour of any one person. Organisation motivates the workers with financial reward and gives importance to self-worth. This style develops the friendly relation between the subordinates and the managers.

Finally, Likert’s study describes that managers in organisational sectors mostly used the first and the second styles of management with low productivity, whereas high producing organisational sectors used the consultative and participative styles of management.

After observing all these styles, Likert concluded that participative style of management is the best and the most helpful in all working conditions. However, some researchers are against this point, and they have the opinion that only one management style is not suitable in all the situations.

2.3.4 Situational theory

Mostly leadership theories were developed in 1950’s and 1960’s. Daft (2014) explained that these theories emphasised required behaviours and personality traits of leaders that are necessary for effective work, according to the situation. According to Patchian, the following factors affect the effectiveness of leadership:

I. Personality and behaviour of the leader
II. Required performance of work for both the leader and the employer
III. Expectations, needs and attitude of the employers
IV. Physical and organisational environment of the leader and the organisation

There are a number of situational theories expressed but in this study, the researcher will discuss only a few of them.

2.3.5 Fielder’s contingency theory

Sadler (2003) explained that Fielder had studied the relationship among productivity, morale, leader’s need and interaction with the employees. However, there is no clear method discovered in his studies, therefore Fielder presented his theory about “contingency mode of effective leadership”

Sadler (2003) further defined that Fielder proposed original model of a work group that was categorised into three main groups. The first category includes the interacting group. The indication of this group shows that the individuals interact with each other to perform their jobs or to complete the task successfully. One suitable example is the members of a football team. The second category depends on coaching group. This group also works together on the same assignment and therefore, its performance shows the collective performance of all the members in the group. Third category includes the contracting group. This group consists of members who work individually on different tasks and all of them try to achieve their task at the loss of others. For example, workers perform their task for more income and negotiation with the Union management.

According to Mcshane et al. (2003), initially, Fielder’s model was only applicable for interacting groups but additional evidence encouraged him to expand this model to the coaching group, while the counteracting group was neglected and was not included in this model.

Required model of a leader is the next most important element in Fielder’s original theory. It was measured by using Fielder’s LPC questionnaire. This questionnaire measures the degree to which a leader is associated with his least preferred employers (LPC). In the questionnaire, the questions from 16 to 20 are used to describe the level of leaders who are not doing their task well.

The items that are used in the questionnaire are as follow:

(Pleasant) 8:7:6:5:4:3:2:1

(Unpleasant) 8:7:6:5:4:3:2:1

(Friendly) 8:7:6:5:4:3:2:1

Favourable situation was the third important element in the theory. This focuses on the level, to which a leader controls the work group. This element includes the different sub elements such as the relationship between the leader and the members, task structure, leader’s position and power.


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Leadership and employee performance in the petroleum industry of Saudi Arabia
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Leadership and employees performance, petroleum industry, Saudi Arabia, case study, Saudi Aramco, SABIC, Arabian Drilling Company, Leadership theories
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Muhammad Sajid Saeed (Author), 2015, Leadership and employee performance in the petroleum industry of Saudi Arabia, Munich, GRIN Verlag, https://www.grin.com/document/320334


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