I EFFECTS OF LEADERSHIP STYLES ON EMPLOYEE

iEFFECTS OF LEADERSHIP STYLES ON EMPLOYEE PERFORMANCEAT BOA KENYA LIMITEDCELESTINE AWINO ANYANGOA DISSERTATION SUBMITTED IN PARTIAL FULFILLMENT OF THEREQUIREMENTS FOR THE DEGREE OF MASTERS OF HUMANRESOURCES MANAGEMENT OF THE OPEN UNIVERSITY OFTANZANIA2015

iiCERTIFICATIONI, the undersigned, certify that I have read the dissertation entitled: “The effect ofleadership styles on employees’ performance at Bank of Africa, Kenya” and found itto be in a form acceptable for examination. .Dr. Proches Ngatuni(Supervisor) . Date

iiiCOPYRIGHT"No part of this dissertation may be reproduced, stored in any retrieval system, ortransmitted in any form by any means, electronic, mechanical, photocopying,recording or otherwise without prior written permission of the author or the OpenUniversity of Tanzania in that behalf".

ivDECLARATIONI, Celestine Awino Anyango, do hereby declare that this dissertation is my ownoriginal work and that it has not been submitted for a similar degree in any otherUniversity. Signature .Date

vDEDICATIONI wish to dedicate this piece of work to my beloved Father the late Samuel Anyango, theman who gave away everything he had to see me go to school. I will forever cherish hiscandid love, care and all the good and the bad times we shared together. With lovealways; Celestine.

viACKNOWLEDGMENTSI am grateful to God for His mercy that made this possible. He gave me wisdom andstrength to always be courageous in accomplishing this thesis. I highly appreciate mysupervisor Dr. Proches Ngatuni for his time, advice, patience, encouragement,fatherly guidance and the supervisory role he offered me during the course of thisstudy. Dr. Ngatuni’s support helped me a lot in focusing on my topic, his criticalcomments also improved the quality of this research work. He reviewed mydissertation word-by-word, letter by letter and corrected every little mistake, MayGod bless you Dr. Proches Ngatuni.In a special way, I would like to also recognize my mother Madam BenedatteAnyango for her love, care and prayers, Abulu without you I couldn’t have come thisfar. I wish to thank my sisters and brothers: Polycarp, John Paul, Perpetua, Veronica,Felix and Bernard for always encouraging me to push on.I would like to express my greatest gratitude to my Husband Isaac Omondi for hispatience, understanding and financial support.A special thanks goes to the family of Mr. and Mrs. Jonathan Obel for the specialpart they played in my life may God reward you accordingly.Last but not least, I would like to express my heartfelt gratitude to all staff of BOAKenya especially those who took their time to fill the questionnaire in their congestedwork schedules. This project paper would not been done without your assistance andsupport.

viiABSTRACTThe study aimed at assessing the effect of leadership styles on employees’performance at Bank of Africa, Kenya. The main objective of this study was toinvestigate the effect of different leadership styles (transformational, transactional,autocratic, and laissez-faire leadership styles) on employees’ performance ofemployees. A cross section descriptive survey research strategy was adopted inwhich 80 usable structured questionnaires were collected from 300 questionnairesdistributed. The leadership styles were measured through the Multi factor LeadershipQuestionnaire developed by Avolio and Bass (1995), modified to fit the context ofthe study. Employee performance was measured by the scale of Yousef (2000).Descriptive and inferential statistical techniques were used for data analysis. Ininferential statistics, Pearson’s correlation and regression analysis were used toassess both relationships and effects as per the hypotheses of the study. The findingsshow that transformational leadership style is the most exhibited style at the bankfollowed by the transactional leadership style and laissez-faire. Employeeperformance is above average. Overall, scores in transformational leadership stylewere found to be strongly correlated with both measures of employee performanceand overall performance except for the intellectual simulation dimension, which hadinsignificant positive correlation with quality of performance. Transactionalleadership style was found to be positively correlated with both measures ofemployee performance as well as overall performance. However, contingent rewardshad a negative but insignificant correlation with performance while management byexception had insignificant positive correlations. Authoritative leadership style hadinsignificant relationship while laissez faire style had insignificant positive

viiicorrelation. The results suggest that supervisors in organizations need to use a lot oftransformational leadership behaviors or rather embrace transformational leadershipstyle, but not laissez-faire leadership. From the results, transformational leadershipcould have greater effects on employee productivity and quality of performance. It isrecommended therefore that Transformational and transactional leaderships are themost effective leadership styles.Key words: leadership style, transformational leadership, transactional leadership,authoritative leadership, laissez fare leadership, employee performance, jobperformance, banking, Kenya.

ixTABLE OF CONTENTSCERTIFICATION .iiCOPYRIGHT.iiiDEDICATION.vACKNOWLEDGMENTS .viABSTRACT.viiTABLE OF CONTENTS.ixLIST OF TABLES.xiiLIST OF FIGURES .xiiiCHAPTER ONE . 11.0 INTRODUCTION . 11.1Background to the Research Problem. 11.2 Profile of Bank of Africa Kenya . 41.3 Statement of the Research Problem . 51.4 Research Objective . 71.4.1 General Objective . 71.4.2 Specific Objectives . 71.5 Research Questions. 71.6 Relevance of the Research . 81.7Organization of the Dissertation . 8CHAPTER TWO . 92.0 LITERATURE REVIEW . 92.1 Overview. 92.2. Conceptual Defitions . 92.2.1 Leadership and Leadership Style . 9

x2.2.2Employee Performance . 132.3 Theoretical Literature Review . 142.3.1 Traits and Behavioral Theory . 142.3.2 Situational and Contingency Theory. 152.3.3 Transformational and Transactional Theory. 152.3.4 Transactional Leadership and Employee Performance. 162.3.5 Transformational Leadership and Employee Performance. 172.3.6 Laissez Faire Leadership and Employee Performance . 182.3.7 Autocratic Leadership and Employee Performance. 192.4 Empirical Analysis. 192.4.1 General Studies . 192.4.2 Empirical Analysis in Africa and Locally. 242.5 Research Gaps. 262.6 Conceptual Framework. 272.8 Statement of Hypothesis . 29CHAPTER THREE . 303.0 RESEARCH METHODOLOGY. 303.1 Introduction. 303.2 Research Design. 303.2.1 Study Population. 303.3 Area of Research. 313.4 Sample Size and Sampling Technique. 313.5. Variables and Measurement Procedures . 323.6 Methods of Data Collection . 323.8 Data processing and Analysis . 34CHAPTER FOUR. 35

xi4.0 FINDINGS AND DISCUSSION. 354.1Introduction. 354.2Description of the Sample. 354.3 Findings. 374.3.1 Research objective One: Analysis of Leadership Style . 374.3.2 Research Objective Two: Analysis of Employee Performance . 414.3.3 Research Objective Three: The Effect of Leadership Style on EmployeePerformance . 434.4Discussion of the Results . 49CHAPTER FIVE . 525.0 CONCLUSIONS, IMPLICATIONS AND RECOMMENDATIONS . 525.1 Overview. 525.2 Summary of Key Findings . 535.3 Conclusions and Implications . 545.4 Recommendations. 545.5 Limitations and Suggestions for Future Research . 56REFERENCES . 59APPENDICES . 73QUESTIONAIRE . 73

xiiLIST OF TABLESTable 3.1 Reliability Statistics . 33Table 4.1: Age Distribution . 35Table 4.2 Gender Distribution . 36Table 4.3 Education Distribution . 37Table 4.4 Descriptive Statistics on Transformational Leadership . 38Table 4.5 Descriptive Statistics on Transactional Leadership . 39Table 4.6 Descriptive Statistics on Authoritative Leadership. 39Table 4.7 Descriptive Statistics on Laissez Faire Leadership. 40Table 4.8 Descriptive Statistics on Employee Performance . 42Table 4.9 Correlation between Leadership styles and employee performance. 44Table 4.10 Model summary . 47Table 4.11 Model fit results . 48Table 4.12 Regression coefficients . 49

xiiiLIST OF FIGURESFigure 2.1 Leadership Definition’s Key Elements. 11Figure 2.2 Conceptual Framework. 28

1CHAPTER ONE1.0 INTRODUCTION1.1Background to the Research ProblemIn society today, thousands of individuals are appointed or elected to shoulder the roleand responsibilities of leadership. Leadership is practiced in schools and colleges,factories and farms, business enterprises, dispensaries and hospitals, in the civil andmilitary organizations of a country and public life, at all levels, in short in every walkof life. These leaders should promote unity, harmony, strength, prosperity andhappiness in society.The challenges of coping with today’s uncertain business environment have put manyorganizations on their toes to struggle for survival in the heat of competition. Thedriver of such strategic move towards surviving the competition is the leadershipprovided by managers who are expected to influence others in achievingorganizational goals and also boost employee’s performance. Shafie et al. (2013)explains the importance of leadership in organizations and especially on humanbeings who are apparently the biggest asset of any firm; “The main drivers oforganizations are usually employees, they give life to the organizations and providegoals" (Shafie et al., 2013). It is very paramount to provide workers with direction andpsychological satisfaction to get the best from them, this direction can only comefrom leaders. In fact, leadership is very critical for all organizations in realizing theirset objectives. Since leadership is a key factor for improving the performance of manyif not all organizations and the success or failure of an organization depends on theeffectiveness of leadership at all levels. Paracha et al (2012) is in support of this

2“Leaders play essential role in accomplishment of goals and boost employee’sperformance by satisfying them with their jobs” (p.55) Leadership is perhaps the mostthoroughly investigated organizational variable that has a potential impact onemployee performance (Cummings and Schwab, 1973). “It is a vital issue in everyorganization primarily because the decisions made by the leaders could lead tosuccess or business failure”. Notably, it has been widely accepted that effectiveorganizations require effective leadership and that employee performance togetherwith organizational performance will suffer in direct proportion to the neglect of this,Fiedler and House (1988). Furthermore, it is generally accepted that the effectivenessof any set of people is largely dependent on the quality of its leadership – effectiveleader behavior facilitates the attainment of the follower’s desires, which then resultsin effective performance (Fiedler & House, 1988; Maritz, 1995; Ristow, et al., 1999).A number of recent studies examined the effect of leadership styles on employees’performance. Se for example, Rasool, et al. (2015), Pradeep and Prabhu (2011),Aboshaqah et al. (2015), Ipas (2012), Kahinde and Bajo (2014), Tsigu ad Rao (2015),Gimuguni, et al (2014), Raja and Palanichamy (2015) etc.Rasool et al (2015)examined the health sector in Pakistani and report that both transformational andtransactional leadership styles affect employee performance but the effect oftransformation leadership style is higher than that of transactional leadership Rajaand Palanichamy (2015) report positive relationship between both transformationaland transactional leadership styles but negative relationship between laissez-faireleadership style and employee performance from a sample of employees in public andprivate sector enterprises in India.