The impact of leadership styles on organizational effectiveness

Analytical study of selected organizations in IT sector in Karachi

Master's Thesis 2011 40 Pages

Business economics - Business Management, Corporate Governance


Table of Contents

Chapter 1. Introduction
1.1. Introduction
1.2. Background
1.3. Objectives
1.4. Significance
1.5. Problem Statement/Research Question

Chapter 2. Literature Review

Chapter 3. Conceptual/Theoretical Framework
3.1. Conceptual/Theoretical Framework
3.1.1. Inventory of variables
3.1.2. Schematic diagram
3.1.3. Direction of relationship
3.1.4. Explanation of established relationship among variables
3.1.5. Inventory of propositions in a sequential order
3.2. Hypotheses
3.3. Operationalization

Chapter 4. Research Methodology
4.1. Technical procedures
4.1.1. Research Design
4.1.2. Data Collection Methods
4.1.3. Sample Design
4.1.4. Data Collection Tools/Instruments
4.1.5. Fieldwork/Data Collection
4.1.6. Data Processing & Analysis
4.2. Scaling
4.3. Limitations of the Research

Chapter 5. Data Analysis and Interpretation
5.1. Variables and Measures
5.2. Validity and reliability of variables and measures
5.3. Results

Chapter 6. Conclusion and Recommendations

Chapter 7. Supplementary Parts
7.1. Glossary
7.2. References
7.3. Annexure(s)


I would like to acknowledge the help given to me by my teacher first; in his guidance I completed this dissertation in the best way. I must say some words for my colleagues, friends and others who help me in completing the dissertation. I also acknowledge my fiancées' efforts in data collection for the dissertation.


The purpose of the dissertation is to analyze the relationship between leadership styles and organizational effectiveness of IT firms in Karachi. After the survey sent in the IT firm in Karachi it has been come into notice that leadership style affects the effectiveness of IT organization.

Four different types of leaders are found which are listed as dictator, democratic, visionary and free rein leader. All these styles have an impact on organizational effectiveness.

Dictator and visionary styles influence positively, whereas others negatively. The visionary or transformational style yield most organizational effectiveness. So this is the best style to be used.

The different dimensions used to define organizational effectiveness in IT industry are employee morale, organizations competitive position, customer satisfaction, management satisfaction, ability to introduce organizational change, market share of the firm.

It is better to use transformational leadership style in most cases but sometimes autocratic style can also be used. Autocratic leadership style should be used when the employee is young/fresh in the industry. They actually need direct guidance and concrete explanation about task.

Specimen List of Illustrations

Figure 1: Relationship between Leadership styles and Organizational Effectiveness

Table 1: Reliability of the Variables

Table 2: Descriptive Statistics

Table 3: Correlations for Complete data

Table 4: Correlations according to Organizations

Table 5: Correlations according to kind of Employees

Table 6: Regression Model Summary

Table 7: Anova

Table 8: Coefficients


illustration not visible in this excerpt

Chapter 1. Introduction

1.1. Introduction

The concept of leadership is as old as the birth of human on the earth. Our prophet Hazrat Mohammed (S.A.W) leaded us towards our goal that's Jannat. When organizations became an entity and many people get together to achieve a goal, a leader is needed to lead them. Dwight D. Eisenhower, "Leadership: the art of getting someone else to do something you want done because he wants to do it."

In the light of history and the evaluation of organizations I can see that leadership is playing very important role in achieving goals and outputs. Looking into the quote of Ken I come to know why leadership is necessary for an organization to succeed. Ken Ogbonnia (2007), “Effective leadership is the ability to successfully integrate and maximize available resources within the internal and external environment for the attainment of organizational or societal goals."

As I see that leadership is an important part of our society and organizations but how to do leadership. To answer this question many management scientists and theorists defined some styles or taught to be followed.

Kurt Lewin a popular management scientist first introduced the below leadership styles, Autocratic or authoritarian leadership style; in this style of leadership all the decisions are completely taken by the leader himself. No input is taken by the team or group. The leader can be called as the dictator leader. The leader actually tells employee what to do and very closely supervises them. (Robert N. Lussier, Christopher F. Achua 2009).

Participative or democratic leadership style; in this style of leadership the leader involve the team in decision making process. He consults them and then gives instructions. He work with employees what to do, and does not closely supervise them. (Robert N. Lussier, Christopher F. Achua 2009).

Laissez-faire or free rein leadership style, in this style the leader does not lead, but leaves the group entirely to itself; the leader gives the maximum independence to subordinates, actually they are free to make their own policies and methods. The leader plays a passive role in group affairs, and usually takes part in decision when things are initiated by the team. (Philip Sadler 2003)

Another popular style which I have taken in consideration was first introduced by James MacGregor Burns in 1978; he called it as the Transformational style. It was then extended by Bernard M. Bass in 1885. According to Burns, transformational leadership can be seen when “leaders and followers make each other to advance to a higher level of moral and motivation." Through the strength of their vision and personality, transformational leaders are able to inspire followers to change expectations, perceptions and motivations to work towards common goals. Bass also divided the transformational style into four components which are, Individualized Consideration, Intellectual Stimulation, Inspirational Motivation, and Idealized Influence.

The characteristics which differentiate styles with each other are a leader who is dictator is autocratic leader, he takes hold of everything. The democratic leader keeps his team with himself.

He doesn't take hold of everything. The laissez free leader leave his team independent, he is a passive leader. The transformational leader is the visionary leader. He tries to impress his followers and then impose his things on them.

The leader should follow some specific style. That's why the leadership's style is very important.

These styles are different according to situation, location, people and environment. The specific style can be good in a particular industry but can be a straight failure in other industry. There are different factor in different industries. As an example I can see leadership styles in Wall Mart, Pepsi Co, General Motors etc.

Organizational effectiveness is a very broad concept. It exists from the evaluation of organizations. People also try to define and measure effectiveness of the organization. In early days, Barnard (1938) said, the action is effective, if and only if it has accomplished its specific objective. Price (1972) defined it as, “the degree of achievement of multiple goals", and Hannan and Freeman (1977) told, “The degree of congruence between organizational goals and observable outcomes" is the organizational effectiveness.

As I said above the organizational effectiveness is a broad concept, the operational form was first given by Campbell et al. (1974). It was the list of around 30 items for an organization. I have selected a few of them here is the list which I select from it. Employee morale, organizations competitive position, customer satisfaction, management satisfaction, ability to introduce organizational change, market share of the firm, level of impact on strategic outcomes. These are supposed to the dimensions of organizational effectiveness in IT industry locally.

Over the past 30 years, with the popularity of internet the evolution of IT organizations started and another industry is evolved some are now very big and renowned organizations such as Apple, Microsoft, IBM and Google. But with these companies the revolution of IT actually started and nowadays many companies are there which are working in same, Facebook is a social website and getting very popular these days. In my opinion the leadership style in IT is different from all other industries. As I see with passage of time many companies came and destroy like Netscape first time introduced a Web browser but now the company has been vanished from scene.

1.2. Background

I started thinking about the impact of leadership as my professional career started. What I actually analyze that the leadership behavior has great impact on its follower. I was looking into the progress of giant companies such as Apple. I read about this in an article of Harvard Business Publishing written by William C. Taylor he said, “How many corporate executives can make a legitimate claim to have reshaped not just one industry but four: computing (the Mac), music (the iPod), mobile communications (the iPhone), and movies (Pixar)."

This means that the leadership of Steve making Apple more effective as whole. Steve is coming with some steps or things like that that is why the company is progressing robustly.

The effectiveness of organization can be termed as how much the customer of organization trusts on it, how big the market share of organization in products and services and people are willing to use and work with the organization. The example of Apple fits here that when person wants a classy thing he must buy Apple product. This shows the effectiveness of Apple.

According to previous research leadership style is very important factor which affects the organizational effectiveness (Min-Huei, Chien).

This tells us that the leadership style is related to the effectiveness of organization in IT industry as well. This urges me to study the leadership style or mixture of styles which are followed by them. Modify them according to our local industry and environment so that I also progress like them.

I am working in local IT sector, also worked with different companies, but when I compare them with big companies they are far away from them. So the rationale of my study is to decide a comprehensive style of leadership which progress the organizations in our local IT industry.

According to definition of leadership the leadership style basically motivate people. Motivated people are more creative and productive and this makes the organization more effective as whole entity.

I think my work will be useful for new and old IT organizations in local sector.

1.3. Objectives

As I think that leadership style has impact on organizational effectiveness. But I specifically don't know what leadership styles are being used in IT industry so the aim and purpose of this study is to determine the leadership style or mixture of styles are used in IT industry globally and advice a leadership style for local IT industry.

The main objectives of the study are,

- To study the different leaderships styles and identify key characteristics which create difference between these styles in IT industry locally
- To determine the impact of leadership style on organizational effectiveness in IT industry locally
- To determine the different dimensions used to define organizational effectiveness in IT industry locally
- To identify which leadership styles yield more organizational effectiveness in IT industry locally

1.4. Significance

The significance of the study is to filter out the styles which are followed by big companies in the world in IT sector. As I see that Pakistan is one of big IT market due outsourcing of IT work. So the dissertation will provide a guide line for the people who owns as well as are starting an IT company in local market. In the study, I tried to innovate the thinking of current IT head. They will get an idea about better way of leading. The traits of good leadership in the field of software development will be explored with this study.

The result of this study will be some good things done by good leaders. The study will tell that how companies become so big that people are keen to work with the company.

1.5. Problem Statement/Research Question

Q: Determine the impact of leadership styles on organizational effectiveness?

This question can further be sub divided in following sub questions?

Q1: Is different leadership styles influence differently on organizational effectiveness? If they influence differently then what is the direction of influence (relationship) for each leadership style?

Q2: How organizational effectiveness of IT organizations can be defined and measured?

Q3: What are the common parameters on the basis of which one leadership style can be considered differently?

The researcher examines these research questions in this study.

Chapter 2. Literature Review

The purpose of study was to determine the impact of leadership styles on organizational effectiveness in IT industry. Leadership style was measured using different leadership styles including Autocratic, Participative, Laissez-faire and Transformational styles .The organizational effectiveness was measured by factors of Employee Morale, Organizations Competitive Position, Customer Satisfaction,

Management Satisfaction, Ability to Introduce Organizational Change, Market share of the Firm.

This chapter Literature Review provides the vital procedure of placing the study in its proper historic context.

Introduction to Literature

Just to fit study in its historical context, the literature review will start from the detail analysis of leadership theory and styles including Autocratic, Participative, Laissez-faire and Transformational. Following the detailed discussion of leadership styles .Literature review will further proceed with analysis of organizational effectiveness.

Theoretical concepts of Leadership styles

In 1939, psychologist Kurt Lewin gathered a group of people to identify different styles of leadership that were authoritarian, democratic and laissez-fair leadership. School children were assigned with each type of leader and researchers then noted the response of children against each style of leadership.

From his perspective Authoritarian leaders, also known as autocratic leaders, provide clear expectations for what should be done, when it should be done, and how it should be done. Children responded with more productivity and less creativity manner against this leadership.

Furthermore Lewin's found that Participative leadership (also known as Democratic leadership) was generally an effective leadership style. This kind of leader offered guidance to group members and also took input from other group members. Participative leaders involved group members in decision making ideas but sustain the final words over decision making process. This process kept group members motivated. Children in this group were less productive then authoritarian group but their contribution was of much higher quality.

On further proceeding with the study, Lewin investigated that children under delegation (Laissez-Faire) were the least productive of all three groups. Children in this group also made more demands on leader and showed little co-operation and were not independent as well. Laissez-Faire Leaders did not provide guidance to group members and leave decision making on team .This leadership is only suitable when team is very expert.

Burns (1978) first highlighted the Transformational leadership. From his point of view, Transformational leadership occurred when leader addressed team to shift their values and needs. They are concerned with followers' inspiration to achieve efficient performance.

In 1985, Bass extended the work of Burns and explained transformational leadership and its impact on organization effectiveness. Bass focused on key leadership building factors such as Task orientation and relationship orientation and leadership functions like initiating structure and promoting change.

In 1987, Kuhnert and Lewis supported the work of Bass by their study of leader development and motivation. According to them, transformational leaders were focused to take actions that were in plan with their personal standards and value systems. This study elaborates the shift in leader focus social exchanges to valuable action and leaders were able to move to transformational leadership style.

Conger and Kanungo (1987) clarified the confusion between charismatic and transformational leadership and described charismatic leaders having deep effect on followers by their personal abilities. According to them, charismatic leadership theory was viewed as attributed leader behavior and transformational leadership theory was viewed as perspective of follower outcomes (Conger and Kanungo, 1994)

Howell and Avolio (1995) provided further clarity to this issue and identified ethical and unethical charismatic leaders and differentiated them on the basis of use of power and behaviors with followers. Unethical charismatic leaders use their power to denominate teams members and pursue self interest while ethical charismatic user their power in constructive ways to help others and focus on follower's interest as well.

In (1997), Bass found that transformational leadership theory exceed organizational boundaries .Bass said that transformational leaders are not status conscious but they like to find out new ways of things. Bass said that leadership is righteous if it consider authentic needs and based upon an informed choice on the part of follower. These kinds of leaders suggest change in the organization to improve quality.

Bass and Steidlmeier (1999) explained the association between transformational leadership and charismatic leadership. They clarified that leadership can be defined as authentic transformational leadership it it includes charisma or idealized influence. They also elaborated that authentic transformational leadership should include the distinctive of individualized consideration and should also know about organizational and follower's needs.

In 2004, Avolio and Bass clarified that leaders who use idealized influence consider the needs of their team and followers before their own needs .They also share risks with team members and give them respect.

Organizational Impact of transformational Leadership/Organizational effectiveness of leadership

Transformational leadership animates followers to achieve higher performance through self motivation. (Bass, 1985).Bass found that the leadership can be applied on all levels of organization to increase performance.

In 2004, Avolio and Bass supported this performance impact and called it as Cascading effect. Furthermore Bass found that transformational leadership is more useful in rapid changing environment. They also concluded that use of transformational leadership can impact the organizational culture and in this way whole organization will get benefit from the increased performance made by transformational characteristics of idealized influence and motivation.

I also studied Mike Mears, founder of the CIA's Leadership Academy, describes how future organizations can improve organization effectiveness in his book, "Leadership Elements." Mears believes that leaders can produce organizational effectiveness through customer focus, leveraging knowledge throughout the organization, incremental process improvements, and frequent communication.

Fenwick Feng Jing and Gayle C. Avery also mentioned importance of leadership on organizational performance in their article; they said that people working in academics and practitioners of leadership are taking interest in studying the impact of leadership style on organizational performance since last four decades.

In a study “Leadership Styles and effectiveness: A study of small firms in chile" by Liliana Pedraja - Rejas,Emilio Rodriguez -Ponce Y Juan Rodriguez -Ponce; they concluded their research and found that the use supportive and participative leadership style in small organizations affecting the organizational effectiveness.

In another study named, “Effect of Leadership styles on Organizational Effectiveness" written by K.Rukmani,M.Ramesh and J.Jayakrishnan I read, transformational leadership is highly related to effectiveness of organization.

I also saw in Vadim Kotelnikov article that leadership actually molds a group of people into a team and shape them into a force for serving in business a competitive advantage.

Thus my literature review concluded that leadership style is affecting the organizational effectiveness.

On this I can make my variables and conduct my study.

Chapter 3. Conceptual/Theoretical Framework

3.1. Conceptual/Theoretical Framework

The framework signified the research model for this research study. The research study consisted of two major attributes, namely independent and dependent variables, which serves as guidelines for conducting the research study.

The independent and dependent variables that are included in this research study are listed below.

3.1.1. Inventory of variables

List of dependent variables

- Organizational effectiveness — Employee Morale

- Organizations Competitive Position — Customer Satisfaction — Management Satisfaction — Ability to Introduce Organizational Change — Market share of the Firm

List of Independent variables

- Leadership style — Autocratic — Participative — Laissez-faire

- Transformational
- Individualized Consideration
- Intellectual Stimulation
- Inspirational Motivation
- Idealized Influence

In this study, I investigated the style of leadership which is best suited in IT sector locally. I saw that organizations in world are progressing rapidly. Now I am advising the style for our local IT sector. For this, the classic styles defined by Kurt Lewin were taken and on the characteristics of style defined by Kurt Lewin the leader was jugged, those classic styles are differentiated according to the characteristics given by Lewin. Transformational Style has been divided into four components as told by Bass. Organizational Effectiveness has been measured by the factors as given above.

3.1.2. Schematic diagram

Schematic diagram

illustration not visible in this excerpt

Figure 1: Relationship between Leadership styles and Organizational Effectiveness



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Title: The impact of leadership styles on organizational effectiveness