What Is the Impact of a Certain Leadership Style on Business? A Closer Look On a Business Unit

Bachelor Thesis, 2020

67 Pages, Grade: 10.00



List of tables

List of figures

List of abbreviations



2.1 Chronological definitions of leadership
2.2 The introduction of leadership style
2.3 Categorization of leadership styles
2.3.1 Transactional leadership
2.3.2 Transformational leadership
2.3.3 Servant leadership
2.3.4 Ethical leadership
2.3.5 Shared leadership
2.3.6 Lateral leadership
2.4 Conclusion and personal perspective

3.1 Sampling and Data Collection
3.2 Participants
3.3 Hypothesis development

4.1 Overview of the company
4.2 Information related to the hired personnel
4.3 Current situation of the leadership concept within the company
4.4 Multiple linear regression analysis
4.4.1 Testing of the assumptions
4.4.2 Interpretation of the results
4.5 Limitations
4.6 Recommendations




List of tables

Table 2.3.1 - Transformational versus Transactional leadership

Table 4.2.1 - Description of the NN’s Management Board

Table 4.4.1 - Durbin Watson test of independence of observations

Table 4.4.2 - Test of multicollinearity with respect to transformational leadership

Table 4.4.3 - Test of multicollinearity with respect to transactional leadership

Table 4.4.4 - Leader's profile

Table 4.4.5 - Model Summary

Table 4.4.6 - ANOVA

Table 4.4.7 - Correlations' coefficients

Appendix A - Leader's questionnaire

Appendix B - Followers' questionnaire

Appendix C - Data set

List of figures

Figure 3.2.1 - Participants’ gender

Figure 3.2.2 - Participants’ age

Figure 3.2.3 - Participants’ educational level

Figure 3.2.4 - Participants’ position in the company

Figure 3.2.5 - Participants’ seniority in the company

Figure 4.3.1 - The NN’s organizational structure

Figure 4.4.1 - Test of linearity between unit performance and leadership styles

Figure 4.4.2 - Test of linearity between unit performance and transformational leadership

Figure 4.4.3 - Test of linearity between unit performance and transactional leadership

Figure 4.4.4 - Test of Homoscedasticity

Figure 4.4.5 - Absence of outliers for unit performance

Figure 4.4.6 - Absence of outliers for transformational style

Figure 4.4.7 - Absence of outliers for transactional style

Figure 4.4.8 - Normal P-P Plot test of normality

Figure 4.4.9 - Histogram test of normality

Figure 4.4.10 - Normal Q-Q Plot test of normality

List of abbreviations

ASE – Bucharest University of Economic Studies

HR – Human Resources

HRM – Human Resources Management

SPSS – Statistical package for the social sciences

MBA – Master of Business Administration

MSc – Master of Science

BBA – Bachelor of Business Administration


This thesis is written as the completion of the Bachelor of Business Administration in Foreign Languages at ASE. This bachelor’s programme provides general business knowledge. Due to its specific requirements such as the writing and presentation of the thesis, detailed insights in a certain field of business are acquired. Personally, I chose to broaden my knowledge in the field of HRM by researching on leadership. I selected this subject as I developed a deep passion about leadership during my bachelor’s degree and working experience. My ultimate professional goal is to strategically lead people toward the fulfilment of visions. To this objective, I wish to further research the HR area in order to obtain expertise in the human capital management. In this respect, I will pursue a master’s programme of science in Strategic HR Leadership and I consider that the writing of this thesis is one of the most practical steps toward the achievement of my current professional objective.

The purpose of this thesis is to determine the impact of leadership styles on the business. Specifically, the paper is aimed at defining the relationship between the leadership style and a certain unit performance. To this objective, the first chapter introduces the reader to the leadership concept, shows its importance in the daily life and its correlations with the HR field. The theoretical insights into the leadership phenomena and its effects on the business are provided by the paper’s state of art. Subsequently, the chapter of methodology presents the objective of the research and briefly the chosen company that the study is conducted on. It also defines the variables and describes the process of data collection and the participants. The chosen company is NN Group Romania, specifically, the NN subsidiary in Brasov, from which one of its units was empirically analysed. The analysed leadership styles are transformational and transactional types as I consider them to be the fundamentals of the styles. They serve as independent variables in the study. The SPSS software tests these variables for a potential correlation with the dependent variable, which is unit performance. The data was provided by twelve participants, consisting of one leader and eleven followers, who answered an online survey constructed in Sosci Survey. Further, the chapter of practical approach starts with the explicit description of the company. Moreover, in order to generate numerical values for describing the relation between the variables, a linear regression model was implemented and interpreted. This chapter ends with recommendations to the company after proving that there are two positive correlations between the leadership styles and the unit performance in the chosen unit of NN Romania. Both transformational and transactional leadership influence the unit performance, and thus they have a positive impact on the business. Eventually, the conclusion of this paper summarizes the most significant concepts and findings as well as offers a personal perspective on the study.


In a time of constant change, in which globalization and digitalization have a fast and major effect on the business world, gaining a competitive advantage is a real challenge for the companies. While artificial intelligence takes over most of the human beings’ tasks and fulfils the primary operations, people are more interested in their self- actualization and self- fulfilment at all levels. They became barely dominated and controlled by people who formally have more power. Hence, more and more people seek for decentralized and altruistic environments, where they can achieve their full potential. Nowadays, it is the practice of self- upgrading and business constant reinvention that are fundamental for the success of the organizations. In this respect, effective self and organizational leadership is the key.

An evolutionary approach explains that leadership occurs at all levels of society, from families to communities and other social networks (Van Vugt and Von Rueden 2020).

At individual level, experts claim that people are facing opportunities to make difficult decisions and implement change daily, as they face threats every day concerning their self, family, career or acquisitions (Nevins 2020). Although the impact of such people is less quantified than of the leaders who hold high positions in the society or in the companies, the management of these complex and meaningful situations is also a form of leadership.

At social level, Mark Nevins argues that there is no “playbook” (Nevins 2020, p. 1) which explains to the leaders particular strategies or action plans to be taken against the 21st century’s crisis, currently caused by the pandemic. Therefore, leaders must adapt to the current circumstances and create new effective ways of managing problems and shape the new society.

Furthermore, at the organizational level, current literature on leadership emphasizes on the idea of reinvention. For example, the underlying theme of Hillen and Nevins’s book about leadership is an urge to constant change for leaders in order to avoid being outrun by their businesses (Hillen and Nevins 2018).

At the same level, Eleanor Roosevelt stated that “Human resources are the most valuable assets the world has.” (Roosevelt 1963, p. 71). Nevertheless, these resources are the most complex to be effectively managed by traditional leadership approaches as the business environment is changing (Guna 2018). In such times of novelty, executives need to create new strategies in order to make the organizations generate social and economic value.

Nevertheless, according to scholars, there is a major difference between leadership and management. The management regards short-term issues, whereas the leadership adopts a wider perspective (Amadi 2018). Although the fundamental factor of effective management is leadership, Kurt Uhlir explains that the distinction lies in the influence which is a lacking element in management and a core component of leadership (Guerrero 2018). More explicitly, managers need to use effective leadership skills in order to improve their ability to coordinate, motivate and influence the followers toward the attainment of organizational goals.

Researchers confirm that human resource management entails increasing the human capital, its productivity and the organizational performance by leading the employees efficiently and effectively (Delaney and Huselid 1996). Likewise, today’s practitioners claim that the HR department plays a key role in the efficiency of the organizational leadership (Hoek 2014). The different leadership style of each executive might either divide departments and teams or strengthen them. In order to ensure organizational harmony, one of the HR’s functions is to monitor the synergy between the organizational prevailing leadership style and individual styles. Moreover, it is crucial for the HR managers to align the organizational leadership styles with the desired organizational culture. However, the effective HR leaders must also consider the different needs and requirements that each team has in terms of its leadership style.

Furthermore, some experts argue that the organizational leadership attracts managers who have the essential traits and behaviours, while the HR department attracts the necessary skills and efficiency of a manager (Bradley 2013). Nonetheless, the combination between the HR’s compliance and the visionary perspective on leadership helps the organization offset its legal requirements and policy with the goal of maintaining the employees’ motivation and engagement. Subsequently, motivated and productive employees lead to increasing job satisfaction, happy customers and high organizational performance (Amadi 2018).

In terms of the new era’s technological trends and their impact on leadership, researchers argue that the increasing digitalization of leadership in the workplace leads to social distancing (Antonakis and Atwater 2002). Leaders and followers start to lack the direct physical contact as the technology allows them to work from different places or different time zones (Dunbar 2008). Moreover, the artificial intelligence is replacing HR functions such as selection or promotion. Li and his colleagues suggest that although the employees will hardly accept decisions made by machines, some of them might embrace the new technology as the decisions are likely to be less prone to individual’s biases (Li, Van Vugt and Colarelli 2017).

Finally, new leadership styles might be a solution to the concerns that nowadays’ changes have brought. They propose a less structured environment than traditional leadership styles, where the use of control is replaced by the use of influence toward a positive impact. They strongly encourage a shared understanding and suggest an effective combination of ideas among societies and departments in organizations.


Management scholars and practitioners have come out with plenty of leadership definitions. In fact, Stogdill noted that “there are almost as many different definitions of leadership as there are persons who have attempted to define the concept” (Stogdill 1974, p. 7) in his review of leadership research. Not only are there a large amount of definitions but Northouse argues that leadership is an easy concept to be defined. He compared the ease of defining leadership to the simplicity of defining “democracy, love and peace” (Northouse 2016, p. 2). He sustains that anyone could intuitively define these words, although their meaning changes from person to person. He insists that its relative meaning might be the reason why scholars and practitioners have not reached a “universal consensus” (Northouse 2016, p. 2) on the topic. Similarly, Gandolfi and Stone pointed out in one of their scientific pieces of work that despite of a large amount of literature on leadership, it is “one of the most misunderstood business phenomena” (Gandolfi and Stone 2017, p. 18). Nevertheless, researchers studied, understood, developed and clarified the vast body of literature on leadership.

2.1 Chronological definitions of leadership

In one of his research papers, Jackson provides evidence that people’s insight into leadership “has little changed in overall concept” (Jackson 2019, p. 5). Moreover, he suggests that leadership has roots from Ancient Rome and was transmitted to British Imperialism therefore, it has dated since “more than 2000 years” (Jackson 2019, p. 1). Likewise, he argues that a Roman citizen was required to fulfil a set of desirable personality traits to aspire to leadership. One of the most significant traits was called Gravitas and it described as “weight, importance and power in comparison to conventional Roman values (mos maiorum)” (Jackson 2019, p. 1). Similarly, Mason identifies that gravitas was defined by the morality of the English men (Mason 1982) and it is believed that it ensured the superiority of leaders (Churchill 1899, Hingley 1996).

From the concept of gravitas to the 20th century, plenty of theories have arisen. Buchanan characterizes this period as a movement in the world of leadership as a result of different phases it went through. The first phase of leadership, identified in 1980s, concerns the notion of “command- and- control” (Buchanan 2013). The concept is proven by one of the first definitions that appeared in the first three decades of the 20th century at a conference in 1927. It states that the leadership is “the ability to impress the will of the leader on those led and induce obedience, respect, loyalty, and cooperation” (Moore 1927, p. 124). Northouse comments on the definition, emphasizing on the leader’s domination conveyed through “control and centralization of power” (Northouse 2016, p. 2).

While the central view of leadership in 1920s was the dominant, controlled and authoritative management, 1930s revealed the influent characteristics of leadership. Thus, the concept of traits started to be emphasized in defining leadership. It was noted that not only might a dominant leader change the attitudes and activities of a group, but also the opposite direction is relevant. A leader may be influenced by a group due to individuals’ specific personality traits. Early theories support leadership as based on traits (Tahir, et al. 2014) related to “personality, charisma or physical features such as appearance” (Gandolfi and Stone 2017, p. 21).

In 1940s the focus changed from traits to skills and behaviour. The skills theory argues that leaders can be formed intentionally by educating known and accepted leadership skills in themselves (Northouse 2007). These leadership specific skills and subsequently behaviour started to be perceived in group activities. (Hemphill and Coons 1957).

In 1950s, Northouse identified three more characteristics of leadership, concerning firstly about strengthening the group theory developed previously. Secondly, shared goals development enriched the theory of leadership. Ultimately, the theory of effectiveness argues that leadership is the ability to impact the overall group effectiveness (Northouse 2016, p. 3).

Despite the historical intensity of 1960s, scholars found harmony amongst leadership theories. The previous definition related to influence was accentuated by Seeman. He expresses leadership as “acts by persons which influence other persons in a shared direction” (Seeman 1960, p. 53).

The approach of the next decade developed from the focus on the individuals’ behaviour to organizational behaviour. Leadership was described as the process of forming sustainable groups, who serve at accomplishing organizational goals (Rost 1991). Burns’s goals - related definition was the foundation of a complex concept. He described the leadership as the process of preparing people, “with certain motives and values, various economic, political, and other resources” (Burns 1978, p. 425), in a competitive and conflictual context in order to achieve objectives individually or with the aid of leaders and other followers.

The next decade exploded in terms of research and scientific work on leadership. The central themes are related to influence and their message argues that leaders are getting followers to do what a leader wants (Northouse 2016). Several other topics bring leader’s traits theory back in the spotlight (Waterman and Peters 1982) and reveal a new movement. Burns is again credited for introducing and defining the leadership as a transformational process, stating that it occurs when people engage with each other to the extent that the leaders and subordinates reach a stronger motivation and higher morality level (Burns 1978). Subsequently, according to Buchanan, this phase of leadership determined the approach of ” empower- and- track” (Buchanan 2013) through the mid of 2000s. Ultimately, the concept of “connect-and-nurture" (Buchanan 2013) is currently emphasized.

2.2 The introduction of leadership style

In order to criticize why there are plenty of feasible leadership styles in existence, one should first understand what a leadership style is.

One of the first definitions of leadership styles belongs to Newstrom who conceptualizes the leadership style as the manner and approach of providing direction, implementing plans, and motivating people. From the employees’ point of view, it includes the total pattern of attitudes and explicit or implicit behaviours exhibited by their leader (Newstrom and Davis 1993). Similarly, Gandolfi and Stone define leadership style, in one of their studies, as an intentional way by which a leader influences a group of people in an organization toward a clear future state which is different from the present situation (Gandolfi and Stone 2018).

Andersen recalls a fundamental definition of leadership in one of her articles, stating that the main characteristics of a leadership style are related to traits and skills (Andersen 2012). Due to this theory, the dilemma of whether leaders are born or made has been debated. Lewin and his team answered this dilemma since 1939. They claim that leaders are not necessarily born but they can be made (Lewin, Lippitt and White 1939). Subsequently, some other scholars stress out this dilemma, delivering one ironic and comprehensive answer to it: “What came first, the chicken or the egg ?” (Gandolfi and Stone 2017, p. 22).

Nevertheless, Gandolfi and Stone explain that scholars agreed that influence is the vital element of leadership regardless of the chosen or innate style (Gandolfi and Stone 2017).

2.3 Categorization of leadership styles

Not only does the 21st century debate the topic of transformational leadership and its relationship with empowerment and connection, but it also emphasizes emerging leadership approaches by categorizing them in different styles.

Situational leadership or “situational favourability” (Horner 1997, p. 271) determines the relation between a particular organizational situation and the required set of leadership skills. Its characteristics relate to the leader’s flexible style which changes based on the circumstances. Gandolfi describes these styles as “the right person for the right moment in time and little else” (Gandolfi and Stone 2017, p. 23). Its limitation is the fact that it induces a short- term sustainability of followers.

The contingency style suggests that only the organizational context can predict whether a leader’s style will be effective or ineffective (Northouse 2007). The followers influence the current context of the organization and alike situational leadership, there is a lack of consideration for followers’ needs toward organization mission (Gandolfi and Stone 2017).

Transactional leadership is the first mission style of leadership according to Gandolfi and Stone (Gandolfi and Stone 2017). Tung describes that it seeks out a mutual benefit between leader and follower (Tung 2016). Nevertheless, despite the fact that this style focuses more on the interaction between leader and follower, the real concern is the benefit of the organization, including the output and production process (Gandolfi and Stone 2017). In other words, transactional leaders centre attention to a set of goals rather than care for people executing the goal (Yahaya and Ebrahim 2016).

Transformational leadership is described as highly people centric. It assumes that influence on followers comes from leader’s satisfaction of their ideas. A transformational leader inspires the employees by stimulating their intellect and motivates them to fulfil the organization’s vision. It is also a mission style of leadership in which leaders care about individuals (Gandolfi and Stone 2017).

Servant leadership is similar to transformational leadership as it assumes that leaders must be servants to people who they lead (Spears 2004). A servant leader’s main driving force is to help others with no ulterior motivation. According to scholars it is the only style that places people ahead an organization’s mission and thus, their priorities become secondary (Gandolfi and Stone 2017).

According to Lewin and his team there are three major styles of leadership: autocratic (authoritarian), democratic (participative) and laissez- faire (Lewin, Lippitt and White 1939). Autocratic leadership assumes that leaders take responsibility and set clear and specific expectations for the way the tasks are getting done in an organization. Autocratic leaders do not promote or ask for input from followers in an organization and their communication style is one way according to Cherry (Cherry 2018). Subsequently, Lewin believed that democratic leadership was the most effective style (Lewin, Lippitt and White 1939) as it encourages a spirit of collaboration in the pursuit of tasks and the goals of organization. As opposed to autocratic style, the communication is two-way between leaders and followers (Cherry 2018). Laissez- faire style translates to “leave well alone” (Gandolfi and Stone 2017, p. 26) and it assumes that leaders do not interfere in the method chosen by the followers to complete tasks (Gandolfi and Stone 2017). Moreover, they are significantly empowered with decision - making authority. Practitioners noted that besides of the fact that it can be effective if followers are motivated enough and have a high degree of expertise, it can also create confusion about roles when clarity and vision from a leader lack (Cherry 2018).

Mc Gregor classifies leaders in two categories: as of Theory X and Theory Y (McGregor 1960), which have roots in Lewin’s theory according to scholars. Theory X can be associated with autocratic leadership and describes leaders as people who do not consider the needs of followers and give orders. Theory Y can be associated with democratic or laissez- faire style. The leaders’ major impact on the followers is getting them passionate about their work (Gandolfi and Stone 2017).

Goleman, Mckee and Boyatzis identified six types of leadership (Goleman, McKee and Boyatzis 2002), some of which also have roots in Lewin’s theory: coercive, authoritative which present a command and control approach as autocratic. Moreover, he distinguished among affiliative, democratic and coach style which according to Gandolfi and Stone might be associated with Lewin’s democratic and follower-centric theory (Gandolfi and Stone 2017). Finally, he also identified the existence of pacesetter leadership style, characterized by leaders who set high performance standards.

Masslenikova argues that leadership can be classified as either leader – centric with its various styles such as: authoritarian, transactional and charismatic; either follower centric which include participative, servant and transformational (Maslennikova 2007).

Some of the aforementioned styles will be particularly reviewed in the next chapters.

2.3.1 Transactional leadership

Bass’s conceptualization of transactional leadership is a traditional view toward the methods of motivation and animation of a group (Bass 1985).

The name of this leadership style finds its roots in an economic transaction described by Bass as the relationship between leader and worker (Bass 1985). Gandolfi and Stone emphasize that in other words, explaining that the leaders clarify their expectations and assumes that if the followers give them X, they will receive Y. Precisely, transactional leadership suggests that the settlement of goals is carried out more to the interest of the organization than to employees’ advantage (Gandolfi and Stone 2017). However, Tung argues that the relationship between leader and follower is built on a set of mutual benefits (Tung 2016). This notion finds its explanation in Bass’s model of transactional leadership which consists of 3 dimensions.

The first one refers to contingent reward, followed by two forms of management by exception (Bass 1985). Judge and Piccolo defines the contingent reward as the extent to which the leader “sets up constructive transactions or exchanges with followers” (Judge and Piccolo 2004, p. 755). Specifically, he sets up the exchanges by clarifying expectations and standards for performance and establishing the rewards for meeting the criteria.

Moreover, Bass describes the primary features by which the performance is encouraged in a transactional style (Bass 1985). Firstly, transactional leaders develop with their team members clear and specific goals and they promise the employees that they will get a certain reward for meeting the goals. Secondly, the rewards and promises of rewards are discussed. Finally, transactional leaders are receptive to the self-interests of employees if their needs can be fulfilled within the time the employees get their work done.

Similarly, one of the Longe’s studies confirms that transactional leadership has a positive impact on the organizational performance (Longe 2014). Contrary, Sofi and Devanadhen, found out that transactional leadership does not have a direct impact on the organizational performance. They explain it as due to the lack of creativity’s and innovation’s encouragement in the transactional style. This fact leads to a decrease in the subordinates’ level of motivation and thus, they fail to perform for meeting the organization’s expectations (Sofi and Devanadhen 2015). Additionally, Anderson and Sun accentuate the disadvantage of this approach. Apart from the lack of motivation that might occur among employees, a limitation of their competencies' exploitation is also likely. In other words, the employees are encouraged to offer only as much as it is specified in their contract. Nevertheless, there are knowledge workers who seek for more challenging opportunities. Therefore, they might leave for the use of their excessive capacity in a settlement of their own business. By so doing, they are more likely to be rewarded for the extra effort they put in their activity (Anderson and Sun 2017).

Subsequently, management by exception is described as the extent to which the leaders correct the follower’s actions based on the agreed upon standards and exchanges (Judge and Piccolo 2004). Successively, the two forms of management by exception conceptualized by Bass are the active and passive forms. Scholars distinguish the active leaders from the passive through the following characteristics. Active leaders are prone to correct the subordinate’s actions before they create serious problems due to the fact that they monitor followers’ behaviour. Contrary, passive leaders do not anticipate problems and solve them after they caused difficulties (Judge and Piccolo 2004).

Furthermore, Burns point out some examples of social exchanges emphasizing transactional leadership such as politicians who are leading by "exchanging one thing for another: jobs for votes, or subsidies for campaign contributions” (Burns 1978, p. 4). In the same way, transactional business managers offer financial rewards for productivity or suppress rewards for lack of productivity. Similarly, researchers suggest that sales roles fit in the description of transactional style as these roles are merely in the best benefit of the company (Gandolfi and Stone 2017).

2.3.2 Transformational leadership

Scholars argue that transformational leadership is the extension of transactional leadership. While transactional leadership empowers the exchanges executed among leaders and followers, transformational leadership is the style that raises leadership to the next phase (Bass 1985).

Transformational leadership was introduced by Burns forty years ago (Burns 1978). However, Bass and his associates intensively researched it (Bass 1985).

In Burn’s point of view, great leaders are transformational as they “serve as an independent force in changing the makeup of the followers’ motive base” (Burns 1978, p. 20). Subsequently, Bass describes transformational leadership as a process that develops followers’ capacity and inspires them to become innovative problem solvers by committing the subordinates to a shared vision and goals of the organization (Bass 1985). In other words, the nature of the relationship between transformational leaders and followers is created on leader’s motivation of followers to go beyond their intention and interests, while challenging their limits. Therefore, the followers are willing to give extra effort to fulfil the organizational mission and they are likely to develop their own leadership potential. The theoretical result of these actions is the enhancement of followers’ performance, and subsequently, organizational performance, beyond expectations (Bass, 1985; Yukl, 1998).

In the next decades after Burns introduced this style, leadership authors strove to enlarge and validate the theory of transformational leadership. As a result, it has become “the most widely researched leadership paradigm” (Siangchokyoo, Klinger and Campion 2020, p. 2).

However, the research of Bass and his colleagues on the topic remains the most notable piece of work in terms of the evolution of transformational leadership. Scholars frequently synonymize Bass and Avolio with transformational leadership. Their model explains the ways in which the leaders transform the subordinates. Not only does the method clarify behaviours that leaders exhibit in order to induce the followers’ transformation, but it also highlights the links between specific outcomes resulted from interactions between leaders and followers (Avolio and Bass 1995, Bass 1985, Bass and Riggio 2006, Bass and Steidlmeier 1999).

Specifically, Bass built on Burns’ conceptualization of transforming leadership and developed a model with Avolio consisting of four dimensions. The model suggests a dependency between these dimensions and the degree to which the leaders are considered transformational (Avolio and Bass 1995). Other scholars term the dimensions as the four I’s. They are said to be a mean through which followers are stimulated to get committed (Avolio, Waldman and Yammarino 1991).

The first dimension is charisma, whose notions overlap with the charismatic leadership’s. The first model of charismatic leadership appeared in the late 1970s being developed by Weber (Weber 1978). Charismatic leadership is denoted by leaders who convey an inspirational vison of a preferable future to the extent that motivates followers to sacrifice their self-interests and allocate exceptional focus and effort to the leaders’ causes.

Bass and Avolio refer to the charisma dimension of transformational leadership as idealized influence. According to them, it represents the extent to which the leader behaves in admirable ways (Avolio and Bass 1995). Alike in charismatic leadership theory, the follower starts to identify with the leader. (Judge and Piccolo 2004). Furthermore, Jackson points out the similarities between transformational leadership and gravitas through charisma. He argues that idealized influence overlaps with gravitas in the theory. Both are emphasizing the socialized charisma of the leaders and the perception of his power, confidence and important ideals. Thus, he claims that transformational leadership finds its roots in gravitas (Jackson 2019).

The second dimension is the inspirational motivation. It represents the extent to which a leader articulates an appealing and inspiring vison, setting high standards and challenging the followers, conveys optimism about the goals and provides sense of the tasks (Judge and Piccolo 2004).

Intellectual stimulation is the third dimension and it represents the extent to which the leaders challenge suppositions, take risks, request for followers’ ideas and empower creativity in their subordinates (Judge and Piccolo 2004).

The fourth dimension regards the individualized consideration. It is the degree to which leaders listen and attend to followers’ needs in the role of mentor, couch (Judge and Piccolo 2004).

Nevertheless, several leadership practitioners have argued that Bass’s model is incomplete because it does not take into account the organizational context factors which significantly influence the effectiveness of the transformational leader (Conger and Kanungo 1998, Conger 1999). They have insisted that the limitation comes from the charismatic dimension perspective. Specifically, charismatic leaders are astute at changing plans to their advantage after they evaluated the climate of the team and the organization.

From a psychological point of view, Conger and Kanungo studied the social psychology theories of persuasion in order to clarify the psychological dynamics of the transformational leadership (Conger and Kanungo 1998). Their theory suggests that the follower’s compliance is the consequence of internalization of the leader’s vision in them, rather than the result of a position hold by the leader. (Bass 1985).

With respect to the organizational performance, Wang and some colleagues found out that the transformational leadership and the subordinate’s performance are positively associated both at the individual and team level. (Wang, et al. 2011). To explain these findings, researchers rely on Xu and Wang’s statement who indicate that the performance is dependent on the employee’s skills, abilities, knowledge and motivation (Xu and Wang 2008). Specifically, the transformational leader develops the perfect environment for the employees to improve their skills, abilities, obtain deeper insights and feel motivated both at the individual and team level and hence, the overall performance increases.

As far as transformational style is an extension of transactional style, Bass points out that there is an interdependency between the transactional and transformational leadership styles (Bass 1985). According to him, the effects of transformational leadership are generally more powerful than the consequences of transactional leadership. However, a study of military officers and industrial managers proved differently. It showed that people who exhibit both styles’ characteristics are more successful than those who have only one (Waldman, Bass and Einstein 1986). To get a better insight of the distinction between these styles, Table 2.3.1 outlines the main similarities and differences.

Table 2.3 . 1 - Transformational versus Transactional leadership

Source: Author’s own contribution based on literature review

Abbildung in dieser Leseprobe nicht enthalten

Nevertheless, academic extensions and comparisons of transformational leadership style to other leadership approaches such as transactional, charismatic, servant, ethical and authentic leadership suggest a strong sustainability of this style. (Hoch, Bommer, et al. 2016, Judge and Piccolo 2004, Wang, et al. 2011).

2.3.3 Servant leadership

The origin of servant leadership phenomena stands in Robert Greenleaf’s conceptualization of this style. In his opinion, the servant leadership assumes that a leader serves before the leader aspires to lead (Greenleaf 1977). In other words, one would get the natural feeling of serving people prior to becoming a leader.

Nevertheless, the first form of servant leading finds its origin in the historical behaviour of Jesus Christ more than two thousand years ago. Jesus synonymized servant with greatness. From his point of view, a truly leader’s greatness comes from the leader’s commitment to serve fellows. Jesus offers numerous examples of servant behaviour, which highlight the principle of servant leaders. Rachmawatia and Lantub point out that Jesus’s principle suggests a power that is transferred to fellows rather than the traditional exhibited power, which is used over the followers (Rachmawatia and Lantub 2014). Greenleaf confirms this point claiming that a servant leader serves the followers’ needs and thus, persuades them to get things done without the need of using leader’s power or authority (Greenleaf 1977). Luthan and Avolio also strengthen the underlying idea of servant leaders being merely motivated to serve others instead of making use of power (Luthans and Avolio 2003).

More recent research defines the servant leadership as a new approach through which one prioritize followers’ needs and interests and reorient their self-concerns toward the community and organizational concerns (Nathan, et al. 2019).

Subsequently, scholars and practitioners have studied and delivered multiple characteristics of servant leadership which include: social and moral integrity, egalitarianism, visionary, listening to followers’ needs, empathy, humility, empowering, healing, awareness, influence, persuasion, conceptualization of the present, foresight, stewardship characterized by trust and serving the needs of others instead of controlling them, commitment to growth and building community (Laub 1999, Russell and Stone 2002, Patterson 2003).

A common characteristic is the stewardship. Servant leaders perceive themselves as stewards of the organization who seek to grow the available resources (van Dierendonck 2011). Although they focus on the personal development of the followers, they do not ignore the performance expectations. They focus on sustainable performance over the long run, unlike other leadership styles’ approaches which “sacrifice people on the altar of profit and growth” (Sendjaya 2015, p. 4).

Furthermore, Mittal and Dorfman empirically studied the core characteristics of servant leadership and their correlation with cultures. They identified that European Cultures exhibit more strongly features of egalitarianism and empowering than Asian Cultures. Contrary, South Asians countries endorse more characteristics of empathy and humility. However, both cultures endorse moral integrity in the use of servant leadership (Mittal and Dorfman 2012).

When it comes to the style’s association with other leadership styles, Graham argues that charismatic authority, transformational and servant leadership are constructed on a common foundation. Moreover, the author insists that transformational and servant leadership are both inspirational and moral (Graham 1991). However, Smith, Montagno and Kuzmenko found that servant leadership’s uniqueness is supported at a spiritual level. In other words, servant leaders’ motives arise from attitudes of egalitarianism. Simply expressed, the leader is not better than the follower (Smith, Montagno and Kuzmenko 2004). Although there is a common overlap between servant and transformational leadership since both focus on followers’ needs, when it comes to mission, the styles are significantly different. Specifically, servant leader’s motive is the multidimensional development of followers and the fulfilment of their psychological needs, whereas the transformational leader’s focus is on a better achievement of organizational goals (van Dierendonck, Stam, et al. 2014). Servant leadership assumes that the development of the organization occurs by the followers’ growth and maturity. Although the organization sustainability and stability might take a long time, the time factor is not the most important with respect to collaboration and integrity in the development of an organization (Smith, Montagno and Kuzmenko 2004). Stone confirms that organizational goals are fulfilled as a result of a conscious focus on the followers’ needs (Stone, Russell and Patterson 2004).

When it comes to the impact of servant style on the organization, the main level it influences is the relational level. Servant leadership empowers the trust in the leader (Schaubroeck, Lam and Peng 2011), integrity (Bobbio, Dierendonck D. and Manganelli 2012) and quality relationships between workers (Hanse, et al. 2016). Specifically, scholars found that servant leadership is positively linked to helping and proactive behaviour (Neubert, Hunter and Tolentino 2016), which influences, for example, the collaboration among nurses (Garber, et al. 2009). Moreover, it is associated with corporate social responsibility (Grisaffe, VanMeter and Chonko 2016).

At organizational performance level, there is a thriving literature which associates servant leadership to innovative outcomes (Panaccio, et al. 2015) and share of knowledge among employees (Luu 2016). Hence, servant leadership is linked to high team effectiveness (Hu and Liden 2011, Irving and Longbotham 2007). In return, servant leadership has a positive effect on customer service quality (Chen, Zhu and Zhou 2015), customer satisfaction (Yang, et al. 2018), and customer value co-creation (Hsiao, Lee and Chen 2015) through service climate.

The business environment suggests that organizations such as Starbucks, Southwest Airlines, Ritz- Carlton, ServiceMaster, TDIndustries, SAS, Zappos.com, Container Store, Intel, Marriott, Synovus Financial are growing due to the servant approach (Nathan, et al. 2019).

2.3.4 Ethical leadership

Literature on ethical leadership argues that leaders’ concern about profitability is prior to leading ethically (Wolfe 1988, Greenbaum, Mawritz and Eissa 2012), especially in an era of instant financial returns (Knights and O'Leary 2006).

Ethical leadership refers to the leader’s normative code of conduct which is exercised through leader’s personal actions and interpersonal relationships. The sum of these actions reflects the ethical leader’s behaviour which is promoted to employees through two- way communication, enforced attitudes and decision- making. (Brown, Treviño and Harrison 2005). Brown and his colleagues further argue that the style is an integrity-based and transactional approach. Specifically, it enforces an ethical accountability which leads to creation of ethical expectations and implementation of reward systems for ethical behaviour (Brown, Treviño and Harrison 2005). Furthermore, according to Brown and his team, the style finds its roots in two different theories (Brown, Treviño and Harrison 2005).

Firstly, the social learning theory emphasized by Bandura (Bandura 1986) assumes that followers tend to imitate the leader’s behaviour and seek for ethical guidance (Trevino 1986). Subsequently, the social exchange theory suggests reciprocal relations between leaders and followers (Kuvaas, et al. 2012). Specifically, the subordinates behave according to the manner the leader interacts with them. In other words, if the leader treats them with fairness and support, the followers will reciprocate with positive attitudes (Mayer, et al. 2009). Moreover, Trevino, Hartman, and Brown, in their qualitative research, explored the two dimensions of ethical leadership, termed as moral person and moral manager (Treviño, Brown and Hartman 2003).

The moral person refers to the followers’ perceptions of the leader’s personal traits and altruistic motivation. Scholar suggest that an ethical leader is guided by internal ethical principles; thus, he presents high moral values such as trustworthiness, honesty, motivation, integrity and justice (Hansen, et al. 2013, Xiaojun and Guy 2014). Subsequently, the moral manager aspect refers to the leader’s ethical or unethical behaviour that is perceived by the followers (Treviño and Brown 2004).

In order to be perceived as an ethical leader, both dimensions are crucial and relevant. Current literature suggests that leaders who are strong moral mangers, but weak moral persons fail to do what they preach, thus followers see them as hypocrites. Similarly, a leader who is a strong moral person, but a weak moral manager is perceived as an ethically neutral leader. In other words, followers doubt the ethical inclination of such a leader (Jatinder and Manjari 2019).

In terms of communication, moral managers are described by scholars as people who communicate ethical standards. Thus, ethical leaders encourage the open communication in an organization to the extent that it becomes a norm (Jatinder and Manjari 2019). Moreover, ethical leaders listen to employees’ concerns and offer them constructive and fair feedback (Treviño, Brown and Hartman 2003). Piccolo and his colleagues confirm this characteristic of ethical leaders arguing that they shape the employees’ work experiences through continuous dialogue and interactions (Piccolo, et al. 2010). Likewise, subordinates’ voice behaviour gets reinforced through rewards (Walumbwa and Schaubroeck 2009, Walumbwa, Morrison and Christensen 2012). Thus, followers of ethical leaders get comfortable to voice their concerns (Avey, Wernsing and Palanski 2012).

In terms of the style’s overlapping with other types, Brown and his colleagues suggest that the moral manager dimension of ethical leadership represents the key difference between this style of leadership and other forms (Brown and Treviño 2006). However, Burns suggests that transformational leadership is moral (Burns 1978), whereas Brown and colleagues found that idealized influence dimension of transformational leadership is positively associated with ethical style (Brown, Treviño and Harrison 2005). Although the correlation between ethical and transformational leadership remains generally debatable, empirical research suggests that transformational leadership describes a leader with ethical orientation (Brown and Treviño 2006). Nevertheless, transactional elements of ethical leadership distinguish it from transformational style. Explicitly, ethical leaders hold followers accountable to the moral standards by using rewards and discipline alike transactional leaders (Treviño, Brown and Hartman 2003).

When it comes to the general impact on organization, ethical leadership provides employees with the necessary resources that facilitate the performance of their job. The ethical leader intrinsically motivates the employees to deliver outstanding performance (Piccolo, et al. 2010). It was found that ethical leadership and its effectiveness negatively affects turnover intention of the employees (Elci, et al. 2012). Similarly, researchers reveal that due to a great engagement level of ethical followers, social responsibility is achieved in a company (Sehrish, Ghulam and Fouzia 2020).

2.3.5 Shared leadership

Current literature provides evidence that scholars have studied the idea of leadership being distributed among several individuals for at least fifty years (Mehra, et al. 2006). However, shared leadership or distributed leadership is a modern phenomenon which attracted significant attention from researchers in the past few years (Sivasubramaniam, et al. 2002, Carson, Tesluk and Marr 2007).

Early research on leadership presents a typology of an ordinary leaders’ behaviour (Pearce and Sims 2002). Nonetheless, the nature of the projects has become more complex and knowledge- intensive (Xia and Lee 2005). Likewise, a rapidly changing business environment is reshaping the teams, while flatness and agility are becoming significant characteristics of them. Therefore, the need of a shared leadership style is crucial as it brings out a brand- new form of management (Jack, Yuzhu and Hua 2017). Specifically, the traditional appointed team leader gets replaced by multiple different members of a team in the performance of leadership functions (Gibb 1954, Carson, Tesluk and Marrone 2007). Researchers confirm that effective leadership approaches in the modern workplace are more likely to be follow centric than top-down processes (Uhl-Bien, Marion and Mckelvey 2007).

One of the main criticisms of research on shared leadership refers to the lack of agreement on its definition (Carson, Tesluk and Marrone 2007). Nevertheless, Pearce and Conger have published the most cited definition. They describe shared leadership as “a dynamic, interactive influence process among individuals in groups” (Pearce and Conger 2003, p. 1), whose objective is to guide each other toward the fulfilment of team’s or/and organizational goals. In other words, the leadership functions are voluntarily spread among the team members, rather than being concentrated on one individual in the pursuit of a common goal.

Copland strengthens this point arguing that team members switch between leading and following according to the requirements of the current situation (Copland 2003). Other scholars point out that although a specific leader has been officially designated for a certain project, team members may take a leadership role in specific stages of development (Pearce and Sims 2002). Subsequently, Bolden supports these characteristics arguing that power and authority are distributed among numerous organizational actors (Bolden 2011). Thus, shared style provides individuals with a stronger sense of autonomy, self- determination and control over their work (Houghton, Neck and Manz 2003). Moreover, shared leadership offers employees a high sense of meaning, social support and belongingness (Houghton, et al. 2015) which leads to the achievement of shared goals (Ellemers, De Gilder and Haslam 2004).

On the other hand, a potential limitation of this style is its lack of regulations and guidelines. Thus, it may impede from knowledge sharing among employees and affect trust (Luo 2002). High presence of value diversity might also be risky and disadvantageous. It refers to divergent understandings of the goals, tasks and mission which can negatively affect the teamwork (Mathieu, et al. 2008). To this regard, a critical prerequisite of shared leadership is shared values and consistent understanding of priority of their task (Carson, Tesluk and Marrone 2007). In other words, individuals should have a common understanding of team’s objectives and let their colleagues take on leadership functions and influence them (Yukl 2002).

Nonetheless, scholars argue that shared leadership does not exclude the role of a formally authorized leader (Coun, Gelderman and Pérez 2015). Contrary, the formal leader’s role is to support and develop individuals by coaching, mentoring and by stimulating informal collaboration among followers (Hoch 2013). According to literature these characteristics overlap with transformational leadership’s. Hoch provides evidence that transformational leadership encourages the development of shared leadership (Hoch 2013). Similarly, researchers have demonstrated that transformational style is a predictor of knowledge sharing (Xiao, Zhang and Ordóñez de Pablos 2017), which refers to an exchange of information between parties (Staples and Webster 2008). The exchange of knowledge becomes extremely relevant in contemporary work environment where employees must work in homogenous teams in which technological tools play a significant role and they have to split their work between multiple projects simultaneously (Wageman, Gardner and Mortensen 2012).

When it comes to the style’s impact on organization, it is significant to point out that shared leadership was successfully performed in an emergency trauma centre. Specifically, the senior medical staff delegated leadership responsibilities to medical junior members, being demonstrated that the leadership did not compromise the quality of patient care (Klein, et al. 2006).

Moreover, shared leadership plays an important role in software and hardware companies (Jack, Yuzhu and Hua 2017). Stakeholders such as systems analysts, programmers, specialists and vendors seek to influence each other during technical meetings. Shared leadership takes over to share responsibility among these team members by leading each other to the achievement of their goals (Wang, Waldman and Zhang 2014). Furthermore, considering that shared responsibility aspect of shared leadership, it has been found particularly suitable in managing knowledge workers (Hoch 2014). As shared leadership is characterised by a trustful climate in which employees cooperate and share knowledge, mutual inspiration and members’ encouragement are built, and knowledge workers become willing to share knowledge (Han, et al. 2018). Scholars argue that the importance of shared leadership is extremely high when it comes to any sort of team (Hoch and Kozlowski 2014). Alternatively, the relationship between shared leadership and team performance becomes even stronger when it comes to complex tasks (Wang, Waldman and Zhang 2014).

2.3.6 Lateral leadership

Nowadays, scholars claim that the organizational structures are in times of change. Specifically, they are taking more and more the character of networks in which hierarchies are flattening increasingly. Thus, the classical way of leading has reached its limit and new leadership styles are emerging (Scholten 2013). Researchers argue that these new leadership styles are likely to grasp the lacking elements of the former ways of leading (Anderson and Sun 2017).

Current literature points out that the phenomena of lateral leadership is likely to take place in those organizations where unstructured power patterns exist. Similarly, lateral leadership is likely to be performed when predominant patterns of power or existing power struggles are existing within an organization (Kühl, Thomas and Franz 2005). Likewise, lateral influence might be applied when people share their leadership position. This point is supported amongst scholars by the research of Harris and Townsend who point out that sharing a leadership position leads to a maximization of the lateral leadership capacity within an organization (Harris and Townsend 2007).

Kühl, Schnelle and Tillman particularly describe the concept of lateral leadership as a form of management that “entails a strategy to reach a shared understanding for cases where no well-defined power-structure exists.” (Kühl, Thomas and Franz 2005, p. 178). Furthermore, they conceptualize the integral components of lateral leadership which are referring to shared understanding, change of power games and trust generation (Kühl, Thomas and Franz 2005).

Shared understanding in a lateral leadership style refers to the leader’s main role of awaking or inciting people to overcome narrow- mindedness and rigid thinking. Thus, new collective point of views can arise, which allows a change in behaviour (Kühl, Thomas and Franz 2005). Similarly, Cohen and Bradford argued that it is crucial to see one individual as an ally because it is a prerequisite for creating fields of joint advantages (Cohen and Bradford 1989). Contrary, D’Orsie did not point out mutual benefits in the creation of shared understanding but she emphasized the attributes of being persistent, convincing, honest and making use of hard facts (D'Orsie 2004).

In terms of the power component, Kühl and his colleagues suggest that the analysis of the power structures within an organization leads to the discovery of followers’ interests and to change of behaviours (Kühl, Thomas and Franz 2005). The topic of power creation was also investigated by Cohen and Bradford. They found out that people can influence others through the law of reciprocity. In other words, the law suggests that power can be created if approximately equivalent exchanges between people occur (Cohen and Bradford 1989). Specifically, influence comes out from the satisfaction of the others’ needs. Subsequently, Mittal and Elias found out that the subordinates’ ease of accepting an elected power base is dependent on the similarity between the manger’s culture and subordinate’s (Mittal and Elias 2016).

By analysing the trust component of lateral leadership, researchers suggested that trust gives the employees the hope that their investments will be successful in the future (Kühl, Thomas and Franz 2005). Additionally, Cohen and Bradford detected that a trustful relationship facilitates influencing. They argued that mutual benefits enhance probability of being an influencer. However, the risk of not being successful remains present (Cohen and Bradford 1989). In this regard, practitioners such as Scholten added properties like cross-functional collaborations, flat hierarchies and teamwork (Scholten 2013). These points are also underlined by the research of Stöwe and Keromosemito who described in their book the challenges people are facing when they are in charge of managing a team which has no authorized supervisor (Stöwe and Keromosemito 2013).

Furthermore, transformational leadership shows some similar characteristics to lateral leadership, including trust, respect and loyalty. Researchers found out that an increasing number of people having a transformational leader is willing to be in accordance with soft power bases (Pierro, et al. 2013). Brown, Birnstihl and Wheeler did also focus on the transformational leadership style. They stated that in absence of authority, the source of influence is coming from a person and not the organization. They further describe that the unique personnel character traits produce additional engagement towards the organizations goal achievement (Brown, Birnstihl and Wheeler 1996).

Nevertheless, by today there is limited academic literature examining the phenomena of lateral leadership style. However, many books for practitioners are recently published, what might call the attention of researchers to further investigate this important topic.


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What Is the Impact of a Certain Leadership Style on Business? A Closer Look On a Business Unit
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Alexandra Vacaretiu (Author), 2020, What Is the Impact of a Certain Leadership Style on Business? A Closer Look On a Business Unit, Munich, GRIN Verlag, https://www.grin.com/document/920258


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