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Transformational And Transactional Leadership Style Management Essay

Quantitative research methodology were applied in this study to identify leadership styles in current state Islamic Banking managers need to be successful in their position, This study also integrated quantitative methodology to explain current state Islamic Banking leaders in terms of their demographics and leadership styles.

The primary purpose of this study was to identify and describe the leadership styles of current managers or leaders in Islamic Banking, in terms of their leadership styles and their demographics (autocratic, democratic, and laissez faire),( gender, age, Tenure) in describing current managers.

Introduction

Managers are people who do things right, while leaders are people who do the right thing.

People who can influence the behaviors of others, Are able to influence without having to rely on force, are accepted by others as leaders, who exhibit the leadership practice Challenge the Process are not bound by the status quo, are open to innovation, and encourage risk-taking within the organization, Inspire a Shared Vision are able to look ahead and see what the organization can be while at the same time enlisting the efforts of others in the achieving the common goals of the organizational vision, By engaging in behaviors characteristic of the Enabling Others to Act practice transfer power to others in the culture of the organization, participate others in the decision making processes and ultimately build trust and mutual respect between each other.

Leaders also Model the Way set examples by adhering to the same rules and expectations of others within the organization, also utilize the Encourage the Heart practice recognize the contributions of individuals and celebrate the accomplishments of others.

This paper, therefore addressed the following specific objectives:

1. Does leadership styles matter?

2. To explain the influence of demographic variables (gender, age, Tenure) on the leadership styles.

History

In order to begin understanding the concept of leadership, we must be aware of the theories of leadership as a whole.

(Yukl 2002) classified practical research and leadership theories into five approaches: the trait approach, the behavioral approach, the power-influence approach, the situational approach, and the integrative approach. Studies that have been conducted within these approaches to leadership have made distinct contributions to our understanding of what leadership is, and each approach continues to influence our thinking about leadership as a process (Nahavandi).

Approaches

The Trait Approach: leadership mentioned specific attributes of leaders such as individuality, motives, values, and skills (Yukl 2002). The basic statement that guided the trait leadership studies was that leaders possessed certain traits that other people did not possess. In real meaning, the trait approach assumed that leaders were born, not made.

The Behavioral Approach: After the studies conducted using the trait approach failed to produce certain result, many researchers began using a behavioral approach to study leadership. Researchers began looking into what leaders actually did on the job (Yukl 2002). According to Yukl, research conducted under the behavioral approach falls into one of two subcategories: how leaders benefit from their time and the typical pattern of actions, tasks, and functions of their jobs, and identifying effective leadership behavior.

The Power-Influence Approach: According to (Yukl 2002), this type of approach to leadership involves the study the influence that takes place between leaders and other people. Studies that have been conducted with this approach generally focused on leadership in conditions of the total of power mad by a leader, the different types of power, and how power was exercised (Yukl 1989).

The Situational Approach: The situational approach mentioned the importance of appropriate factors in the study of leadership. (Yukl 1989, 2002) identified the following contextual factors: the leader’s authority and maturity, and the units who can perform leader tasks, the personality of the followers, the type of organization, and the nature of the exterior environment.

The Integrative Approach: Researchers using the integrative approach to leadership consist of more than one type of leadership variable, such as trait, behavior, influence processes, and situational variables (Yukl 2002). (Bass 1990: 52-76) stressed the importance of including more than one type of leadership variable in research involving leaders and leadership when he stated, ‘cognitive, behavioral, and interactional explanations are likely to be needed to account fully for leader-follower relations and outcomes from them’. He further stated that ‘leadership must be conceived in terms of the interaction of variables that are in constant flux’.

Leadership theories such as charismatic and transformational leadership are good examples of an integrative approach to leadership. These theories are ‘broader in scope: they simultaneously involve leader traits, power, behavior, and situational variables’ (Yukl 1989: 270).

Leadership Styles

(Bass 1990) He talked about leadership as a procedure of interaction, between individuals and groups that includes a structured or restructured situation.

Leadership can be explained as the ability of an individual to have power that focuses on how to establish directions by adapting forces (Go et al. 1996). From an organizational view, (Schermerhorn 1999) believed that most important is a process used to motivate and to influence others to work hard in order to achieve and Support organizational goals, while (Hersey et al. 2001) believed that leadership effect individuals’ behavior based on individuals’ and organizational goals. (Robbins 2001) defined leadership as the ability of an individual to affect the behavior of a group to achieve organizational goals. It is possible to conclude from these discussions that leadership is a group of phenomena, where by leaders are distinctive from their followers, and can influence individuals’ activities to achieve set goals in their organizations.

Leadership style is defined as the pattern of behaviors that leaders display during their work with and through others (Hersey and Blanchard 1993). (Miller et al. 2002) view leadership style as the way of interactions between leaders and followers. It includes controlling, directing, definitely all techniques and methods used by leaders to motivate followers to follow their directions. According to (Kavanaugh and Ninemeier 2001), there are three factors that determine the type of leadership style: leaders’ characteristics, subordinates’ characteristics and the organization environment. More specifically, the personal background of leaders such as personality, knowledge, values, and experiences shapes their feelings about appropriate leadership that determine their specific leadership style; employees also have different personalities, backgrounds, expectations and experiences, for example, employees who are more knowledgeable and experienced may work well under a democratic leadership style, while employees with different experiences and expectations require a autocratic leadership style. Some factors in the organization environment such as organizational climate, organization values, composition of work group and type of work can also influence leadership style. However, leaders can adapt their leadership style to the perceived preferences of their subordinates (Wood 1994).

Leadership styles can be classified depend on leaders’ power and behavior as autocratic, democratic, and laissez-faire, where styles are distinguished by the influence leaders have on subordinates (Mullins 1998) (Rollinson 2005). More specifically, power has been considered as: the potential of a process to influence people (Hersey et al. 2001); a part of the influence process at the middle of leadership (Northouse 2004); and the rights that allow individuals to take decisions about specific matters (Rollinson 2005). The influence of leadership will change depending on types of power used by a leader over their followers (Mullins 1998). Therefore, leaders will be more effective when they know and understand the appropriate usage of power (Hersey et al. 2001). According to (Kavanaugh and Ninemeier 2001) an autocratic style is embedded in leaders who have authority for decision making without sharing it with their subordinates, while a democratic style implies that leaders share their authority of decision making with employees, and finally a laissez-faire style exists where leaders give their employees least authority over decision making.

Transformational and Transactional Leadership Styles

(Burns 1978) talked about leadership styles as transactional and transformational leadership, these styles are at the opposite ends of the same scale. He mentioned that transactional leadership is a way on interactions between leaders and followers in which something of value was exchanged, such as rewards for performance, however, transformational leadership occurring when leaders and followers interacted in such a way to achieve a high level of motivation in both the leader and the follower are in the same road.

(Bass 1985) mentioned that the leader should involve in both transactional and transformational leadership behaviors. Transformational leadership is not an alternative for transactional leadership, but rather tends to add to its effectiveness (Bass 1997).

Bass mentioned that the transactional leader as individual who worked within the organizational culture of the group to know and explain the duties and tasks of followers to achieve the targeted objectives and outcomes.

These outcomes were achieved when the leader negotiate with followers (Bass 1985). In other words, transactional leaders explain to followers what is required of them and then negotiate with them to see if they understood the requirements, either the promise of reward for good performance or the threat of punishment for bad performance (Bass 1990). (Bass 1985,1990) identified four characteristics of transactional leaders: contingent reward: This means when the followers stick to the order and achieved the requirements set by the leader, then the leader give the followers a bonus or reward for their performance.

Active management by exception: In which the leaders monitor and control mistakes of followers and take actions to correct it.

Passive management by exception: In which the leader only intervenes in a follower’s work if the requirements are not met. Finally, laissez-faire leadership in which the leader avoids responsibility and decision-making when performance and goals are not met. Laissez-faire leadership can actually be considered a non-leadership factor as it represents the absence of leadership (Northouse 2001).

Bass characterized transformational leaders as persons who encourage followers to do more than they originally expected to maximize their original level of confidence towards accomplishing desired outcomes.

Transformational leadership occurs when a leader: increase the level of understanding about the importance and value of desired outcomes, expands the wants and needs of followers, and gets followers to exceed their own self-interest for the sake of the group (Bass 1985). (Bass 1990) identified four characteristics of transformational leaders: charisma in which the leader is able to provide followers with a mental picture, send out a logic mission, gain respect and trust, and inspire belief in followers, inspiration in which the leader provides examples and patterns for the follower through symbols and images, emotional appeals, and communicating high expectations, intellectual stimulation in which the leader stimulates followers to think in new ways, increase intelligence and wisdom, and encourage problem solving.

Individualized consideration in which the leader provides a helpful and coaching environment such that each follower is treated as a valued individual.

Relationship between Leadership Style and Leadership / Management Theory

Some studies have mentioned the differences between management and leadership to the difference between transactional and transformational leadership.

(Bennis and Nanus 1997) noted that management normally consists of a set of exchanges whereas the end result of leadership is empowerment, this results of exchange leads to a clear success of any individuals. From this standpoint, management can be viewed from tow perspectives; one is performed by transactional leaders while the other can be seen as those activities performed by transformational leaders.

Management and leadership are different in functions, however, we can’t separate management from leadership because we have an amount of overlap exists between the two. Any organizations need both effective management and leadership to reach the desired outcomes. The role of management can be compared to transactional leadership in which followers must meet the expectations of their leaders based on contracts and performance requirements. Under most situations, this may be an effective way.

Influence of Demographics on Leadership Styles

Numerous studies have been conducted in the field of leadership that has addressed the influence of selected demographic characteristics of individuals on their leadership style. Some studies have focused on the influence of the characteristics on the self-perceived leadership style of the individual, others have focused on the perceptions of followers related to an individual’s leadership style and the influence of these characteristics, and still others have involved the perceptions of both the leaders and their followers. (Krishnan and Park 1998) noted that demographic characteristics do exert considerable influence on the leadership styles of top managers. (Hambrick and Mason 1984) proposed that demographic traits such as age, tenure in an organization, functional area background, educational background, and degree of formal management training are all important aspects of leadership that influence organizational success.

Gender: Differences in leadership styles between men and women are one of the most well researched aspects of leadership. There are two major schools of thinking on gender differences and leadership, one that says there are distinct differences and the other that says there are no differences in the preferred leadership styles of men and women, several studies have been conducted to determine if male or female leaders are more transformational.

(Eagly and Johnson 1990) found that women tend to use a more participative and comprehensive style while men tend to use a more order and controlling style.

This result indicates that women use more transformational styles while men use more transactional styles. This conclusion is supported by other studies that found women more likely to use transformational leadership than men and that men were more likely to use transactional leadership as their primary style (Druskat 1994) ( Rosener 1990).

Age: Several studies examining the relationship between age and leadership style have been conducted organizations other than Extension. (Vroom and Pahl 1971) Talked about the older and younger managers, the older managers tend to be more commitment than the younger managers, more careful about things and decision, not been acceptable of risks and challenges, otherwise, younger managers had less commitment and prefers to take risks on their actions.

Tenure: Studies have been conducted that evaluate the relationship between an individual’s leadership style and their tenure within an organization as well as their tenure in leadership positions. (Bantel and Jackson 1989) found that the more tenure of the top management team within the independent financial institutions they studied had; the more likely they were to resist innovation and organizational change.

In real meaning, if managers had more tenure with in any organization, he tried to resist all Improvements can affects the whole company.

Lebanese case

The job of Islamic Banking:

Islamic banking was created to concern and develop on the communities that it serves.

Islamic banking requires promoting the ideal of successful society and secure economy, based on the Islamic ideas of social equality, ethics and empathy.

Islamic banking challenges the concept of disparity in offering banking services to people of various social standings and endeavor for social tuning between different classes.

Yet, Islamic banking is a commercially applicable way of banking, which shows an alternative financial architecture on economic base.

Recent Islamic banking practices can be tracked hundreds of years back to the days of Prophet Mohamad. At that time, the Prophet performed as a mudarib or agent for his wife Khadiga who contingent him with a certain capital or goods for trade. Afterwards, the Prophet (PBUH) reimbursed the capital and the profit was shared between the two parties.

Throughout the years, Muslim bankers and religious scholars struggled to devise financial instruments that integrate Islamic values with banking activities. Though profit was important, nevertheless, said instruments were needed to promote ethical and transparent financing, equitable distribution of wealth, and equity participation in the economy.

In the late 50s, the first efforts to create an Islamic financing environment emerged in Pakistan.

Nevertheless, modern Islamic banking first appeared, on a small scale, in Egypt early in the 60s. Following the oil boom in the 70s, Islamic banking flourished in the Arab world, and then spread out into the Middle East, Iran, and Southeast Asia. In the mid 70s, the world's first full-fledged Islamic bank was established in UAE.

Because of its ethical and moral principles, Islamic banking has gradually succeeded in achieving universal acceptance and attracted funds from both Muslims and non-Muslims alike.

Currently, more than 300 Islamic banks are present on the five continents of the world, operating in more than 60 different countries such as the UK, the US, France, Germany, Denmark, Luxembourg, Switzerland, the Bahamas, Cyprus, Pakistan, India, and of course the Arab world.

With an annual growth rate of 15% to 20%, Islamic banks assets exceeded $ 500 billion by end of 2007. Islamic banking is maintaining its impressive growth worldwide, yet at a faster pace than conventional banking, to become an actual globalization phenomenon.

Islamic banking was introduced to the Lebanese market in the early 90s under a commercial banking license. All transactions strived to offer conventional banking products and services in compliance with Sharia based on two regulations.

Fiduciary contracts law.

Investment banking general directives.

Data collection

The targeted area contains all managers who worked at Islamic banking; This study used one mechanism to collect data from one matched sampling frames in Islamic banking. Using leadership styles mechanism for managers.

The leadership styles questionnaire was adapted from the leadership styles survey originally consisting of 18 statements This questionnaire is designed to measure three common styles of leadership: authoritarian, democratic, and laissez-faire, A five points scale was used in the instruments, where (1) equals strongly disagree, and (5) equals strongly agree.

The questionnaires were handed over to the HR departments who in turn distributed 160 leadership styles questionnaires to the managers.

From the respondents returned 110 out of 160, usable survey in this study was 110 questionnaires for data analysis.

Also examine the Demographic characteristics of the participants on leader ship styles:

One hundred and ten managers participated in this study. One hundred were males and the others were females. Most participants (n=78) were aged between 26- 35 years. The majority of participants (n=96) were degree holders. The highest number of participants (n=40) had 2-4 years of service. The majority of participants (62) were middle managers

Analysis & discussion

Internal consistency tests were conducted on instrument. The results indicated an overall percentage of leadership styles. The details of these results are shown in Table:

Internal consistency of the instrument

%

Autocratic style

36

Democratic style

63

Laissez –faire style

11

According to (White and Lippitt), democratic leader possesses low goals and means control, and utilizes high motivation of group procedures.

Leadership style refers to a way of behavior used by managers and leaders across a wide range of managerial situations.

These styles that are largely responsible for creating the organizational environment in which team members are expected to perform.

Islamic Banking shows that the most effective leaders use a wide range of styles, adapting readily to the needs of particular situations and accurately choosing the right styles for the moment.

I did find that a democratic leadership style was the most popular and successful of the three types. However, there was little suggestion with democratic leaders achieved that increases productivity or superior behavior among their members. I do caution with laissez-faire leaders to remain aware of the risk that require of structure can actually be troublemaking.

Demographic characteristics of the participants:

Gender: All participant numbers were 110, male gets the high numbers of participants and were 100 out of 110 and females number were 10 out of 110.

Age: focused on ages 25 years or less, also, between 26-35 years, 36-45 years, and 46-55 years.

Age 25 or less the number of managers were 2 ,between 26 years and 35 years number of managers were 78 ,36 years and 45 years number of managers were 27,finally between 46 years and 55 years the number of managers were 3 .

Tenure: concerned with 1 year or less, between 2to4 years, and 5to7 years, finally 8 years or more.

In order, 1 year or less the number of managers’ were11, between 2to4 year’s number of manager’s were 40, and between 5to7 years number of managers were21, finally 8 years or more number of managers were 38.

Education: consist of degree holders and non degree holders.

96 managers were from degree holders and 14 managers from non degree holders.

Organizational Staff position: we have 3 kinds First-line manager, Middle manager, and Top manager.

36 managers were first line manager, 62 managers were middle manager, and 12 managers were top managers.

In this study, managers showed different leadership styles preferences based on their demographic profiles (age, gender, and education), tenure and organizational position. This study showed that males, older managers, degree holders, experienced managers, and middle managers had a higher preference toward democratic leadership styles than other styles based on leadership styles questioner above. These findings are consistent with some previous findings such as those by Yousef (1998) who found that managers’ age, education, and experience had a relationship with their leadership style. Oshagbemi and Gill (2004) indicated differences among leadership styles based on hierarchal level. On the other hand, this study also disagrees with previous work such as Yousef (1998) who showed that managers’ gender and tenure did not have a relationship with their leadership style. Rad and Yarmohammadin (2006) found no link with demographic profiles other than experience. The current study, therefore, concludes that all leadership styles exist in Islamic banking, but that the democratic style was the prevalent leadership styles.

Recommendations & Conclusion

As with any academic study, there are limitations that limit the generalizability of this study. The first limitation that must be considered is related to the nature of the Bank being studied. Because this study will be conducted within the Islamic Bank State Research, Education, which is a unique Bank in terms of its structure and function, the findings, will not be generalizable to other organizations.

The study will even so contribute useful information and recommendations for researchers.

Based upon the findings and conclusions of this study, the following recommendations were made:

Understanding leadership style helps to classify strengths and weaknesses. You can be positive and more successful as a leader by strategically using strengths and focusing on weaker points. Leadership style defines standards and perspective, and being aware of it will support your communication with other followers. As the saying goes, knowledge is a strong weapon and power tool. You can give power to yourself and move forward in job or importance by increase this knowledge.

In this study, gender had no effect on overall leadership styles, perceived proficiency in the leadership styles areas. Based on this finding, gender should not be a basis of discrimination when hiring Islamic bank leaders.

The study found that there were also significant differences in leadership style due to managers’ demographic characteristics, and that the democratic leadership style was preferred among managers, I suggest that most successful leaders are able to adjust their behavior as circumstances dictate to effect positive outcomes.

Finally, I recommend that Islamic bank leaders remain focused on addressing concerns within their control, such as implementing best practices, promoting , organized and unified team, determining specific roles and responsibilities for members, adhering to the agreed upon decision-making process, and regularly assessing fees.

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