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Li-Yueh Chen, Nova Southeastern University
Organizations are facing major challenges, many of them resulting in restructuring, reengineering and downsizing. Work environments have become more complex and sophisticated. The need for effective leadership and organizational commitment has become more critical. (Earle, 1996) Previous research studies have found that specific types of behavior, found in the transformational and transactional leadership models, are positively related to organizational commitment. Other research studies have found no such relationship. Yet, no studies have examined all the variables found in these two leadership models. Therefore, this study will be unique in that it will help to fill this gap.
Three steel companies, which have recently undergone reengineering, restructuring, and downsizing, are the focus of this study. Of the 471 questionnaires distributed, 308 were considered valid for the data analyses for this study. Results show both transformational and transactional leadership behaviors have a slightly positive relationship with organizational commitment. In particular, idealized influence, inspirational motivation, and individual consideration leadership behaviors were found to be more correlated with organizational commitment than other leadership behaviors in both models. Overall, the study found that transformational leadership behaviors are more slightly correlated with organizational commitment than transactional leadership behaviors.
Organizations are facing major challenges, many of them resulting in restructuring, reengineering and downsizing. Work environments have become more complex and sophisticated. The need for leadership and personal commitments has become more critical. (Earle, 1996) Alan Deutschman (1993) suggests, "business in America has lost its way, adrift in a sea of managerial mediocrity, desperately needing leadership to face worldwide economic competition" (Deutschman, 1993, p. 99). Therefore, today's leaders are confronted with unpredictable challenges, which require a different degree of flexibility. For managers to lead their workers most effectively, they need a style of leadership behavior that is tailored specifically to the employees' level of commitment. (Niehouse, 1987) Unfortunately there has been a lack of research on this topic, until recently. Today many popular magazines are using terms like empowering, motivating, visioning, inspiring, rewarding, and committing. In summary, now appears to be an ideal time to study the impact of transformational and transactional leadership on organizational commitment, particularly in an international setting.
Purpose of the Study
As organizations face increasing challenges in a highly competitive environment, academic researchers and practitioners are focusing more on the importance of leadership style, behavior, and characteristics. Since the 1980's, both transformational and transactional leadership behaviors have been studied, and recently have become part of "the New Leadership" paradigm. (Bryman, 1992) According to Bass (1985), transformational and transactional leadership are distinct but not mutually exclusive processes.
Previous research has found that transactional leadership augments laissez faire leadership in enhancing sales representative job satisfaction, organizational commitment, and performance. Transformational leadership provides additional augmentation for organizational commitment. (Dubinsky, Yammario, & Spangler, 1995)
In an effort to clarify some of the consequences of these leadership styles and their impact on employee commitment, the purpose of this study will be threefold:
Justification of the Study
The research of cultural dimensions that Geert Hofstede (1980) developed has helped us to understand how and why people from various cultures behave as they do. Taiwan is considered a country with high power distance and collectivism. (Hofstede, 1991) In continuing the research of Hofstede (1980 & 1991), Triandis and Gelfand (1998) have found that vertical collectivism emphasizes the "headman" style of leadership, both for organizational and political leaders. While the headman, or national political leader, has much greater authority, power, and prestige than others, he or she is also responsible for ensuring that cultural values are upheld and that members of the group are provided for. The leaders of Asian organizations more closely resemble leaders in organizations with vertical collectivism. When a culture emphasizes horizontal individualism, its members make decisions by themselves without worrying about group considerations. In many organizations in Asia, however, decisions are still centralized at headquarters. This present study will contribute to the literature by studying the relationship between leadership behaviors that empower managers and employees, and organizational commitment within the organization.
Setting for the Study
Recently, Yieh United Group a Taiwanese conglomerate has rescinded its centralized management style (vertical collectivism). (Wu & Lio, 2001) At the beginning of 2001, Yieh United Group announced an organizational reengineering to empower its professional managers by decentralizing group headquarters. Before this announcement, decisions for each company within the Yieh United Group were mostly made at executive meetings held at the company headquarters. Normally, the general managers from each company were required to attend monthly executive meetings with the president of the group to discuss and make key decisions. By decentralizing the group headquarters, each company in Yieh United Group now is really led by the professional manager who makes decisions individually. (Wu & Lio, 2001)
Yieh United Steel Corp. (YUSCO), Yieh Loong Enterprise Company (YLCO), and Yieh Hsing Enterprise Company (YHCO), which have been the most important companies in the Yieh United Group, will be the focus of this study. YUSCO is the largest integrated stainless steel mill in Southeast Asia. The company engages in the production, hot rolling and cold rolling of stainless steel. Since Mainland China has become the most important market for YUSCO, YUSCO has established an office in Shanghai. (Human Resource Office, 2001)
Rather than build individually, YLCO found a partner, China Steel Corporation (CSC) and built a strategic alliance. CSC is currently the only integrated steel manufacturer in Taiwan. It is the largest steel manufacturer in Taiwan, and actually one of the largest steel manufacturers in the world. In order to launch a strategic alliance, CSC bought stocks from YLCO to become the largest stockholder in YLCO. Its organizational reengineering involved sending some of its professional managers to work at YLCO in key positions, including that of general manager. (Ma, 1999, Yan, 1999)
Due to worldwide economic recession, Taiwan steel industry sales have declined. From January 2001 to June 2001, sales declined 31% over this time last year. As a result, YHCO has temporarily closed the production lines that do not have economic value (no profit). Almost 140 employees have been dismissed with severance payment. ("Organization reengineering at YH," 2001)
Historical Overview of Leadership
Leadership has been studied in different ways, depending on the researchers' methodological preferences and definition of leadership. Much of the leadership research covers leader traits, behavior, power, influence, and situational approaches. (Mcclelland, 1985; Mcclelland & Burnham, 1976; Miner, 1986; Bray, Compball, & Grant, 1974; Kirkpatrick and Locke, 1991; Mahoney, Jerdee, & Carroll, 1965; Page & Tornow, 1987; Mintzberg, 1973; Hemphill & Coons, 1957; & Likert, 1961; 1967) In recent years, academic researchers have attempted to streamline and integrate these approaches, and many studies are focusing on identifying the characteristics and value of transformational and transactional leadership styles. (Podsakoff, MacKenzie, Moorman, Fetter, 1990; Yammarino, Spangler, Bass, 1993; Dubinsky, Yammarino, Jolson, Spangler, 1995; Ross, Offermann, 1997; Bass, 1997; Hult, Ferrell, Hurley, Giunipero, 2000)
According to Burns (1978), the leadership process can occur in one of two ways, either transformational or transactional. The transformational leadership concept was originally proposed by Burns (1978) and House (1977), and then expanded by Bass (1985 & 1990). Transformational leadership is defined in terms of the leader's effect on followers: they feel trust, admiration, loyalty, and respect toward the leader, and they are motivated to do more than they originally expected to do. (Yukl, 1997) The characteristics of transformational leadership are:
According to Bass (1985; 1990), transactional leadership is characterized by two factors of contingent reward, management-by-exception, and laissez-faire. Transactional leadership motivates followers by appealing to their self-interest, whether it be subsidies, lucrative government contracts, campaign contributions, bonuses, or status. However, Howell and Avolio (1993) suggest both leader and follower reach an agreement concerning what the follower will receive for achieving the negotiated level of performance. Bass summarizes several different types of behavior inherent in transactional leadership (Bass, 1990, 1985; Yammarino, Spangler, & Bass, 1993):
In the last 30 years, numerous academic researchers and practitioners have contributed to the studies of organizational commitment. Organizational commitment, together with job satisfaction and job involvement, are three of the most widely studied employee attitudes. The foundation has thus been laid for studies such as this current one.
Becker (1960) who was the earliest researcher of organizational commitment proposed that commitment is primarily a function of individual behavior; individuals become committed to the organization through their actions and choices over time. (Becker, 1960) Kanter (1968), another often cited researcher, defined commitment as "the willingness of social actors to give their energy and loyalty to social systems, the attachment of personality systems to social relationship, which are seen as self-expressive" (Kanter, 1968, p. 499). Another contributor to organizational commitment is Etzioni (1961). He suggested that organizational commitment focuses on employee compliance with organizational objectives. When employees have higher levels of commitment to organizational objectives, the organization will have more authority or power over these same employees.
Antecedents of organizational commitment have also been topics of study. Generally, antecedents of organizational commitment consist of:
The organizational commitment studies also have addressed employee attitudes. The attitudinal approach views organizational commitment as an attitude, which reflects the nature and quality of the linkage between an employee and an organization. (Porter, Steers, & Mowday, & Boulian 1974; Mowday, Steers, & Porter, 1979; Oilver, 1990) According to, Mowday, Steers, & Porters (1979), organizational commitment entails three factors: (1) a strong belief in and acceptance of the organization's goals and values, (2) a willingness to exert considerable effort on behalf of the organization, and (3) a strong desire to maintain membership in the organization.
As organizations continue to face complex challenges from their internal and external environments, academic researchers and practitioners are now turning their attentions to the relationship between leadership behavior and organizational commitment both domestically and internationally. Several major studies have found a positive relationship between these two variables. (Kraut, 1970; Newman, 1974; Alley & Gould, 1975; Porter, Campon, & Smith, 1976; Gilsson & Durick, 1988; Mathieu & Zajac, 1990; Zeffane, 1994; & Wilson, 1995) Others studies, although small in number, have been unable to demonstrate a relationship between leadership behavior and organizational commitment. (O'Reilly & Roberts, 1978; Hampton & Dubinsky, & Skinner, 1986; & Savery, 1991) Therefore, more research is needed.
Some previous research has been conducted using parts of transformational and transactional leadership theories. For example, some studies have found that transactional leadership augments laissez faire leadership in enhancing sales representative job satisfaction, organizational commitment, and performance. Others have found that transformational leadership helps to augment organizational commitment. (Dubinsky, Yammario, & Spangler, 1995) Perhaps most noteworthy are studies focusing on the consequences of charismatic leadership, especially the high level of commitment on the part of the leader and the followers to a common vision, mission, or transcendent goal. (Bennis & Nannus, 1985; House, Spangler, & Woyke, 1991; Savery, 1991) Researchers have found that the charismatic leader behaves in such a manner as to create an appealing ideological goal to which subordinates become committed through their trust and respect for the leader. (Bass, 1985; House, 1977)
This study's research question is threefold: (1) Do subordinates display commitment to their company? (2) Do subordinates' perception of their managers' leadership behavior have an effect on their level of commitment to the company? (3) Which leadership behavior, transformational or transactional, has a more positive influence on organizational commitment?
The three research questions stated above lead us to the following hypotheses.
|H10:||Transformational leadership is negatively correlated or not correlated with organizational commitment.|
|H11:||Transformational leadership is positively correlated with organizational commitment.|
|H11a:||Charismatic leadership is positively correlated with organizational commitment.|
|H11b:||Idealized influence leadership is positively correlated with organizational commitment.|
|H11c:||Inspirational motivation leadership is positively correlated with organizational commitment.|
|H11d:||Intellectual stimulation leadership is positively correlated with organizational commitment.|
|H11e:||Individualized consideration leadership is positively correlated with organizational commitment.|
|h30:||Transactional leadership is negatively correlated or not correlated with organizational commitment.|
|h31:||Transactional leadership is positively correlated with organizational commitment.|
|h31a:||Contingent reward is positively correlated with organizational commitment.|
|h31b:||Active management by exception is positively correlated with organizational commitment.|
|h31c:||Passive management by exception is positively correlated with organizational commitment.|
|h31d:||Laissez-faire leadership is positively correlated with organizational commitment.|
|H30:||Transformational leadership will not have a stronger positive correlation than transactional leadership on organizational commitment.|
|H31:||Transformational leadership will have a stronger positive correlation than transactional leadership on organizational commitment.|
To answer the research question, two instruments – the Multifactor Leadership Questionnaire (MLQ-5X SHORT FORM) (Bass & Avolio, 1995) – and Organizational Commitment Questionnaire (OCQ) (Mowday, Steers, & Porter, 1979) were applied. Note that this study integrates these questionnaires by combining part I of MLQ and part II of OCQ together with the demographic questions required for data collection. Since the survey respondents are citizens of Republic of China, the integrated questionnaire has been translated into Chinese.
Pilot Test & Sampling
The population for this study is the employees of Yieh United Steel Corporation (YUSCO), Yieh Loong Enterprise Company (YLCO), and Yieh Hsing Enterprise Company (YHCO). The Chinese language version of the integrated questionnaire was modified following a pilot study. The modifications were the outcome of the meetings held with the general managers and senior employees with ten or more years of service with the companies. Chronbach's alpha was applied to measure the reliability of this revised questionnaire. Chronbach's alpha is used to measure internal consistency. Scores range from 0 to 1, with values of 0.60 to 0.70 considered to be a low level of acceptability. For this pilot study, 60 items and 20 cases were measured, resulting in an alpha of 0.8821. This 0.8821 alpha denotes a good level of reliability.
The statistical method of stratified percentage random sampling was utilized for this study. With stratified random sampling, the population will first be divided into subgroups, called strata, and a sample will be selected from each stratum randomly. (Mason & Lind, 1993) In this study each company is denoted as a stratum. Therefore, the stratum for this study will consist of three companies, which are YUSCO, YLCO, and YHCO. Surveys were distributed to 417 employees, 365 were returned, and 308 were found to be valid for a useable response rate of 73.86%. In using the stratified random sampling method, the departments of each company were denoted as the substratum for data collection purposes. Employees of each department were randomly selected to serve as respondents to the questionnaires.
The breakdown of the sample size was as follows:
Data collection involved a series of meetings, over a two-months period. Invalid responses were defined as those questionnaires with questions left unanswered or those with identical responses to every question. Of the 417 returned questionnaires, 308 were found to be valid. Statistical analyses were performed on the data using SPSS and Excel software. Again Chronbach's alpha reliability was applied to measure the of the survey questionnaire items. For this study, 60 items and 308 cases were measured, resulting in an alpha of 0.8773. This 0.8773 alpha denotes a good level of reliability.
Demographics of Participating Organizations
Table 2 in Appendix reveals the number of valid responses. Included are respondents' job level, department, tenure, gender, and educational level. Demographic classifications were identified as follows:
The Descriptive Statistics Analysis
As discussed in previous section, the survey instruments utilized are the Multifactor Leadership Questionnaire that was developed by Bass and Avolio (1995), and the Organizational Commitment Questionnaire that was developed by Mowday, Steers and Porter (1979). The Multifactor Leadership Questionnaire has been divided into nine categories to better define the type of leadership behaviors being perceived by subordinates. The five-point Likert scale ranged from "not at all" valued as a "0" to "frequently if not always" valued as a "4". Organizational Commitment Questionnaire (OCQ) has contained 15 items with a seven-point Likert scale. The seven-point Likert scale ranged from "strongly disagree" valued as a "1" to "strongly agree" valued as a "7". For scoring purposes, it should be noted that six statements in this part (number 3, 7, 9, 11, 12, and 15) are negatively phased items. Thus, reverse scoring is needed for these six items.
Overall, respondents' perception of their managers' leadership behavior tended to be one of the following: (1) charismatic, (2) idealized influence, or (3) intellectual stimulation (See Table 3 in Appendix). Generally, employees were willing to put in a great deal of effort, beyond that normally expected, to help their company be successful. They appear to care about the future of their companies (See Table 4 in Appendix). However, respondents displayed slightly low commitments to their organizations (See Table 5 in Appendix).
Multiple correlation analysis was conducted, with a 0.05 significance level, to test the hypotheses. Table 6 in Appendix shows the results of the hypotheses testing. The first hypothesis measures whether transformational leadership is positively correlated with organizational commitment. Five dimensions of transformational leadership were included, which were charismatic, idealized influence, inspirational motivation, intellectual stimulation, and individual consideration leadership within the first hypothesis. Results show these behaviors to be slightly positively correlated with the organizational commitment. The idealized influence leadership behavior was correlated most strongly with employee organizational commitment.
The second hypothesis measured whether transactional leadership was positively correlated with organizational commitment. Four dimensions were included: (1) contingent reward, (2) active management by exception, (3) passive management by exception, and (4) laissez-faire leadership. However, a very weak positive correlation to organizational commitment was found with active management by exception and passive management by exception. Contingent reward and laissez-faire leadership behaviors were found to be slightly positively correlated with the organizational commitment.
Table 6 in Appendix shows the results of multiple regression analysis performed on the data. Both transformational or transactional leadership behaviors were found to have weak positive correlation with organizational commitment. However transformational leadership behavior was more positively correlated.
Implications of this Study
The three companies, who participated in this study, were companies who had recently undergone organizational reengineering. The results of this study primarily are useful to these three companies but may also be generalizable to other Asian companies. However, three problems arise which may have influenced the research results.
The first problem is allocation of workforces. Some employees recently have shifted from one company to another, as part of the organizational reengineering. As operations were decentralized, some employees working at group headquarters were moved to other companies within the Yieh United Group. Therefore, three questions arise: (1) Were employees' areas of expertise considered in the move so that tasks could be assigned appropriately? (2) Have some transferred employees become idle human resources? and (3) Do employees understand the importance of the organizational reengineering, and do they feel empowered by it?
The second problem is uncertainty concerning the effectiveness of the new management team established by the strategic alliance between Yieh Loong Enterprise Company and China Steel Corporation. The third and last problem concerns the possible affects on employees of the lay-off caused by economic recession.
The results of this study show that all three companies have been facing rather low levels of organizational commitment. One significant finding for managers is that employees are finding it difficult to agree with their company's policies on matters relating to them. This may mean that employees do not fully understand the rationale for the decisions being made and/or the importance of these decisions. For example, the need for survival in a highly competitive environment is something that may not have been addressed. Therefore, managers should consider practicing transformational leadership behaviors that enable employees to support the decisions being made by management. Employees should feel trust, admiration, loyalty, and respect toward the leader. Employees, then, will be motivated to do more than they originally expected to do. (Yukl, 1997)
As mentioned earlier, employees expressed a willingness to exert more effort than normally expected of them in order to help their company be successful. Nevertheless, this study finds a weak positive correlation between organizational commitment, and transformational and transactional leadership behaviors. As shown in Table 3, managers in the three companies apparently are practicing more transformational leadership behaviors than their employees perceive. Yet, with regard to organizational commitment, employees only moderately agree on the issue of putting in extra effort in order to help their company be successful. Furthermore, employees only slightly agree that it is difficult to identify with this organization's policies on important matters relating to them. This difference in correlation between the independent variables and dependent variable is the reason for the lack of a strong positive correlation. Furthermore, the more transformational leadership behaviors being practiced, the higher would be the coefficient of multiple correlation. These research findings are similar to the findings of other studies conducted on organizations that have recently undergone organizational reengineering.
Previous studies have found that elements of transformational and transactional leadership have a positive impact on organizational commitment, while other studies have found no such relationship. Yet, no research has examined all the variables found in these two leadership models. Therefore, this study will be useful in helping to fill this gap.
Four hundred and seventy- one questionnaires were sent for the purpose of this study. A total of 308 valid returned surveys data were analyzed in this study. The findings show that both transformational and transactional leadership behaviors have a slightly positive relationship to organizational commitment. Idealized influence, inspirational motivation, and individual consideration leadership behaviors have slightly more correlation with organizational commitment than other transformational and transactional leadership behaviors. Furthermore, the transformational leadership behaviors were slightly more correlated with organizational commitment than transactional leadership behaviors.
Four recommendations for future research are as follows:
Table 2: Demographics of All Valid Participating Organizations
|Yieh United Steel Corp.||195||63.3%|
|Yieh Loong Enterprise Co.||63||20.5%|
|Yieh Hsing Enterprise Co.||50||16.2%|
|Total Valid Responses||308||100%|
|Job Level in Organization|
|Middle Upper Level||18||5.8%|
|Total Valid Responses||308||100%|
|Tenure in Years|
|0 ~ 5 Years||103||33.4%|
|6 ~ 10 Years||140||45.5%|
|11 ~ 15 Years||45||14.6%|
|16 ~ 20 Years||19||6.2%|
|21 Years Upper||1||0.3%|
|Total Valid Responses||308||100%|
|Total Valid Responses||308||100%|
|High School Diploma||48||15.6%|
|Master or Doctor||10||3.2%|
|Total Valid Responses||308||100%|
Table 3: Descriptive Statistics of Leadership Behavior for All Valid Participating Organizations
|Idealized Influence (Behavior)||2.4075||0.6668||2|
|Management by Exception (Active)||2.3198||0.5972||5|
|Management by Exception (Passive)||1.3571||0.6836||9|
Table 4: Descriptive Statistics of Organizational Commitment for All Valid Participating Organizations
|1.||I am willing to put in a great deal of effort beyond that normally expected in order to help this organization be successful.||5.2078||1.3730|
|2.||I talk up this organization to my friends as a great organization to work for.||4.4091||1.4216|
|3.||I feel very little loyalty to this organization. (R)||3.0649||1.5637|
|4.||I would accept almost any type of job assignment in order to keep working for this organization.||4.5942||1.4374|
|5.||I find that my values and the organization's value are very similar.||4.9708||1.5783|
|6.||I am proud to tell others that I am part of this organization.||4.4773||1.4244|
|7.||I could just as well be working for a different organization as long as the type of work was similar. (R)||4.0552||1.4371|
|8.||This organization really inspires the very best in me in the way of job performance.||4.7597||1.2110|
|9.||It would take very little change in my present circumstances to cause me to leave this organization. (R)||3.5584||1.4188|
|10.||I am extremely glad that I chose this organization to work for over others I was considering at the time I joined.||4.3149||1.3821|
|11.||There is not too much to be gained by sticking with this organization indefinitely. (R)||3.8214||1.5026|
|12.||Often, I find it difficult to agree with this organization's policies on important matters relating to its employees. (R)||4.5032||1.3614|
|13.||I really care about the fate of this organization.||5.7500||1.1382|
|14.||For me, this is the best of all possible organizations for which to work.||4.0487||1.4554|
|15.||Deciding to work for this organization was a definite mistake on my part. (R)||3.2175||1.4008|
Table 5: t Test for Three Participating Companies
Table 6: Correlations Found between Leadership Behaviors & Organizational Commitment for All Valid Participating Organizations
|Organizational Commitment||R||R Square||Sig.||Result for Hypotheses
|Transformational Leadership||0.472||0.223||0.000||Reject the Null Hypothesis|
|Charisma (Attributed)||0.359||0.129||0.00||Reject the Null Hypothesis|
|Idealized Influence (Behavior)||0.395||0.129||0.00||Reject the Null Hypothesis|
|Inspirational Motivation||0.378||0.143||0.00||Reject the Null Hypothesis|
|Intellectual Stimulation||0.338||0.114||0.00||Reject the Null Hypothesis|
|Individual Consideration||0.377||0.142||0.00||Reject the Null Hypothesis|
|Transactional Leadership||0.461||0.213||0.000||Reject the Null Hypothesis|
|Contingent Reward||0.355||0.126||0.00||Reject the Null Hypothesis|
|Management by Exception (Active)||0.296||0.088||0.00||Reject the Null Hypothesis|
|Management by Exception (Passive)||0.284||0.080||0.00||Reject the Null Hypothesis|
|Laissez-faire||0.354||0.126||0.00||Reject the Null Hypothesis|
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Li-Yueh Chen is a doctoral candidate at Nova Southeastern University, Wayne Huizenga Graduate School of Business and Entrepreneurship. He is a lecturer and the Head of Department of Business Administration at Chungchou Institute of Technology, Taiwan. He teaches the courses of Marketing Management, Marketing Research, Management, and Statistics at undergraduate level. His research interests include the areas of Relationship Marketing, Employee Job Satisfaction, Leadership Behavior, and Organizational Development.