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04/09/2012

Thesis Chapter 2 - To investigate the impact of leaders’ power to the job performance of employees in selected companies in Malaysia


CHAPTER TWO. LITERATURE REVIEW

 

2.1 Introduction

            The wide range of literatures related to leadership, employee job performance, leader’s power as well as business management, marketing plus various phenomena affecting its totality are extensive. Given with this fact, this chapter goes over the related literatures conducted on the area of study. By embarking on such pursuit, the research may be guided accordingly by firstly discovering where the research is coming from, what and how much have been studied regarding the topic and what it is yet to tackle. Besides providing background to the study, this section provides the necessary backbone and support in order for the research to stand credible.

            By surveying the past publications and researches related to the study, a historical perspective may take place. The researcher also gained an idea on how such venture has been explored in the past.  In this manner, this study may be able to reflect, compare itself, learn from setbacks, and produce a stronger and more efficient study. The related literatures also provide the research a rich source of data, both new and old, that will enhance and enrich the study (and the direction it will plan to undertake) even more. References from this segment of the paper are a product of broad traditional and modern researching and information retrieval.

2.2 Definition of Leadership

For decades, the issue on leadership has been undertaken in various studies and related discussion (Bennis & Nanus 1985 and Kotter 1988). In fact, the study on leadership dates back in 1921 (Hughes et al. 1999, p. 8). Basically, the term leadership comprises the capacity and talent to inspire and influence the thinking, attitudes, and behaviour of other people. Among the many definition of leadership provided in worldwide publications, Chemers (1997) is seemingly acceptable in the global setting. But then again, it is always recognized that the dynamic changes of the modern times influences almost all areas of living. So, the said definition may no longer appropriate in the line of thinking and in relation to the existing trends that continuously proliferates in the global marketplace. Yukl (2002) defined leadership as the process of inspiring other people to comprehend and agree on what needs to be done and how to accomplish them effectively. In addition, leadership is also defined as the process of facilitating collective and individual efforts to fulfil shared objectives.

            Alternatively, Schein (1992) stated the creation of culture is the main essence of leadership and that both culture and leadership are two sides of a single coin. Relating leadership to management, Schein believed that leaders tend to establish and change culture, while administrators and managers live within the culture. While related definitions differ from one another, the particular attributes speak of the essential role the leaders have to play in leading people and most importantly managing cultural diversity regardless of place and manner of application. Although this specification seems relatively simple, the reality of leadership and its related aspects is very complex. To coincide with the complexity of leadership process, an assortment of leadership styles is used by leaders in different settings and line of objectives. The leadership styles sometimes can make an organizational change be successful or be a total failure.

            Leadership is an important aspect of management. As stated by a few authors (e.g. Cohen & Brand 1993 and Hyde 1992), management requires full leader participation and involvement instead of designating individual groups who will shoulder all the responsibilities. The involvement of leaders serves a number of purposes. For instance, this helps in preventing the resistance of employees to changes brought about by the implementation of quality systems. The enthusiasm and determination of the leaders to make the project work can positively influence other company staff. Leadership as administration is based on the ways that the cultures of the people are made and the ideas on how the companies are able to manage their human resources have helped with the ways that they can continue to improve not only with their services to their employers but also their services to the company (Jung & Yammarino 2001). Furthermore, this also helps in creating a sense of commitment and loyalty (Hill 1991).

            The ever-changing trends in the business communities worldwide permit every organization to use the most suited leadership styles. In organizational setting, there are several leadership styles that are utilized by the every corporate personnel or authority (e.g. supervisor, manager, etc.). Leadership style is the pattern of behaviour used by a leader in attempting to influence group members and make decision regarding the mission, strategy, and operations of group activities (Scholl 2000). The presence of leadership in management is also one effective factor in addressing technical and non-technical issues regarding the workplace. It is important however that the appropriate leadership style is used. Truly, there are many types of leadership styles that can be utilized within an organization; however such styles are dependent to the strategic implementations of the organization’s mission and vision.

2.3 Types of Leadership Styles

            The presence of leadership in management is also one effective factor in addressing organizational technical and non-technical issues (Baruch 1998). It is important however that the appropriate leadership style is used. The following discussion is the styles in leadership that managers implement in the organization.

2.3.1 Transformational Leadership Style

Historically, the concept of transformational leadership was introduced by James MacGregor Burns way back 1978 particularly on his treatment of political leadership (Bass 1998). At present, this leadership theory was used in various applications such as organizational psychology. Bass noted that transformational leadership is an expansion of transactional leadership. Transactional leadership emphasizes the transaction or exchange that takes place among leaders, colleagues, and followers (Bass 1998). This exchange is based on the leader discussing with others what is required and specifying the conditions and rewards these others will receive if they fulfil those requirements. In transformational leadership, strong personal identification of the leader is involved. Furthermore, the relationship in this leadership style is more than the fulfilment of self-interest or provision of rewards (Hater and Bass 1988). The transformational leadership approach consist four dimensions that serves as prime features: Charismatic Leadership (Idealized Influence, CL or IL), Inspirational Motivation (IL), Intellectual Stimulation (IS), and Individualized Consideration (IC) (Bass 1998). These are the components that bring out all potential applications and results of the approach when used.

            In general, transformational leadership consists of a leader who inspires followers to share a communal vision, encourages people to achieve the vision, and provides necessary resources for the development of personal potential. A leader who uses this leadership paradigm serves as a role model, supports optimism, musters commitment, and focuses on the followers’ call for eventual growth (Bass 1996).

2.3.2 Transactional Leadership Style

            Transactional leadership, the counterpart of the transformational style, is more on controlling people and giving out orders. This style has two main categories. One is called the management-by-exception where leaders tend to make use of their authority to reward or penalize people under them. Managers or leaders who use this category of transactional leadership tend to focus on asserting power, pointing out errors and disciplining subordinates with poor performance (Bass 1985). Contingent reward leadership is the other category of this leadership style. In this style, the focus is on the communication of work standards and the provision of rewards if these standards are followed. Leaders applying this style ensure that the subordinates know what is expected of them and the consequences should they fail to meet these expectations. Naturally, rewards are given for good performance while punishments are given for poor performance (Avolio 1999). In general, the qualities of transformational leadership style are opposite to transactional style of leadership.

2.3.3 Servant Leadership Style

Servant leadership is among the most popular leadership approach that was coined and defined by Robert Greenleaf (Greenleaf 1970). Originally, the attributes of servant leadership was rooted in the history thousand years ago, at least during the time of Jesus. The servant leadership most distinguished feature is the leader’s role as steward of the organization’s resources from human, finance, and others. It supports leaders to serve others while staying focused on achieving results in line with the values and integrity of the organization. Servant leadership possess six components namely valuing people, developing people, building community, displaying authenticity, providing leadership, and sharing leadership (Laub 1999, p. 83). These elements of servant leadership indicate specific behaviours in terms of applicability.

Generally, leaders who use the servant leadership approach are servants of its followers. Particular interests of followers are given attention before his/her self. Also, a servant leader centres personal progress and empowerment of supporters as well as facilitates the achievement of shared vision among people (Spears & Lawrence 2002; Laub 1999; and Greenleaf 1970). Today, various critics of this leadership paradigm judge it as ‘yet another fad to line consultant’s pockets’ but its proponents justify such argument with the timeless applications and principles used by several successful organizations (e.g. businesses).

2.3.4 Other Types of Leadership Styles

Aside from the three aforementioned leadership styles, there are other styles that are rooted on various political and social principles. Among them are: aristocratic (monarchy), autocratic/paternalistic (dictatorial), democratic or participative, laissez-faire, and/or combination of both (Smith & Peterson 1988). From the viewpoint of systems theory, leadership might be considered as a subsystem of systems administration. It could also be considered as a concept which becomes a part of the conceptual framework of administration theory. Leadership styles are definitely an important part of administrative theory.

Traditionally, the dimensions of leadership theory have been two in number, authoritarian and democratic. A third has been called laissez-faire. Authoritarian leadership is that which is associated with the bureaucratic organizational structure. Authority comes downward from the leader. He initiates decisions. He is the super-ordinate and does not consult with the subordinates. The exact opposite dimension is the laissez-faire, or free-rein, type. This type is one in which the individual member is independent of the group and the leader. He makes his own decisions. He acts outside of the organizational structure.

The most favoured dimension for some administrators is democratic leadership. This type is seen in a participative type of organization. Authority stems from the group. Group members participate in the decision-making process. According to Stogdill (1974), there are numerous types of leadership styles which have been implemented in various organizations. These leadership styles are summarizes as follows: (1) "authoritative (dominator)," (2) "persuasive (crowd arouser)," (3) "democratic (group developer)," (4) "intellectual (eminent man)," (5) "executive (administrator)," and (6) "representative (spokesman)." The first three styles are extreme in nature, the more modern type of leadership style being that of situational leadership contingency management. These styles of leadership are most likely applied in the known forms of governments around the world. Thus, discussion further may mislead the concept of leadership this research undertaking is trying to pursue.

            The above discussions prove the variety of possible fields in the organization that each technique works. Individual level of significance, although, is defined. But with the presentation of facts and argument, it is safe to claim that the universality of the models is their common denominator. Several literatures probed the issue of universal application (Avolio & Yammarino 2002; Spears & Lawrence 2002; and Antonakis & House 2002). Similarly, the call for exceptional standards on ethics is common to both. In this aspect, the leadership strategies, styles and model that are successful apply in respective organizations are replicated and applied by other firms. In effect, the influence of the leader in global leadership transformation is included in the extensive responsibility they share to the international business setting. As leaders, they make international changes to which broad and multi-cultural entities respond to.

2.4 Leadership in Action and Leader’s Power

            In Malaysian setting, most scholars have been able to define the context of leadership by determining the function of leaders in a company and classifying leadership into various styles. For instance, the definition of Yukl (2002) describes leadership as the process of assisting the subordinates and facilitating cumulative efforts to achieve a common goal. In most Malaysian businesses, the leadership style that has been commonly described by most scholars is the participative type of leadership. Accordingly, business leaders are able to use this style, specifically in making decisions.  Seibold & Shea (2001) emphasise 5 types of participation approaches, including the so-called quality circle, self-directed work teams, quality of work life program, scaled gain sharing plans and quality circle.

Apparently, in the paper of Lee (2007), the issues concerning the role of leadership and leader-member exchange on innovativeness are discussed.  Based on her findings, she argued that transformational leadership has positive association with the dimensions of leader-member exchange as well as innovativeness. In contrast, she also found out that transactional leadership has negative association with innovativeness.  These results justify that the type of leadership as well as the type of leader’s power imposed to guide the employees are crucial in innovation in businesses.  In addition, the paper of Rotenberry & Moberg (2007) revealed that employees’ self-reported job involvement significantly predicted certain supervisor performance ratings above and beyond work centrality. This justifies that job involvement of both employees and supervisors are crucial for business success since it depicts the status or level of job performance given. One common theme that underlies most if not all of the issues discussed is that knowledge of one’s style of leadership and type of leader’s power imposed is essential to functioning successfully as a leader. Self-understanding is an anchor for leaders in the change maelstrom.

From the book of Montana, & Charnov (2008), leader’s power can be classified to different types such as Reward Power, Coercive Power, Legitimate Power, Referent Power, Expert Power, and Information Power. Despite of this classification Crossman & Abou-Zaki (2003) noted that styles seem to be very similar on the surface. There are major groupings with regard to both task and human relations, however that is where the similarities end.  As an example, one might assume that a leadership style and type of leader’s power stressing human relations would be compatible with one focusing on participative decision making, yet some researchers contend that a leader with “democratic” style must also be skilled at task orientation.

Actually, the reexamination of leadership and what makes it effective is constantly in flux and far from over.  Of the numerous models and theories proposed, one has yet to produce a generally accepted paradigm for effective leadership. The challenge now before leadership scholars is perhaps best summed up by Rost (1993) who writes that they:

“must experiment with different research designs and methodologies.  They must invent new research strategies that enable them to explain what leadership is and how it operates at all levels of organizations and societies...with this new kind of thinking, leadership scholars must critically analyze one another’s theories and models and engage in dialogic conversations about conceptual frameworks (p. 224).”

2.5 Role of Leader’s Power in Enhancing Employee Job Performance

            In the previous discussion, it focuses on underlying body of knowledge about the different leadership styles employed in different organisations. Leadership is among the most popular areas of research activity in the past decades, which Hughes and colleagues (1999) considers to start in 1921. From these issues, the type of power employed by leaders in handling their subordinates became crucial.  Actually, Montana, & Charnov (2008) argued that the Leader’s Power play significant role in enhancing Employee Job Performance. As seen in the previous and current research studies on this subject and its fundamental elements, they mainly explore to the effectiveness and application of specific leadership styles and type of leader’s power to particular field of practice or specialization, type of industry or organization, and business strategy or operations. Contemporary theories of leadership incessantly offer new avenues or opportunities for policy argumentation and further empirical examination among leadership researchers and experts alike (e.g. Garger & Jacques 2008; Gupta 2005; Myers 2008; and Chen & Silverthorne 2008). Also, various conditions (i.e. globalization, technological innovations, and internationalization of industries) emerge worldwide and significantly affect modern societies. These trends induce leadership experts to come up with relevant and up to date information that serve the idea of current leadership practice as well as its needs. Leadership styles, similar to leadership theories, continuously changes and adapt to the conditions and demands of the modern society and its people.

According to Kousez & Posner (2002), credibility is the core basis of leadership and leader’s power, which means every leader must be credible or trustworthy in order for him/her to lead. In addition to this characteristic, a leader should possess honesty, competence, aspiration, and a forward-looking approach. Chen & Silverthorne (2008) sees leaders as the basic resource for an organization as well as the key factor for a healthy growing economy and supply, which is critical to the survival and further development of any organizations. In the business point of view, the function of good leadership is seen on its beneficial impact in effectively aiding and meeting job-related demands; optimizing teams that are driven towards higher-performance; fostering improved loyalty and commitment; increasing motivational level; and reducing absenteeism and turnover of employees. Unfortunately, it is not easy to attain a good and effective leadership that caters to the mentioned functions. Hard work, dedication, and many other attitudinal factors are required. For Kousez & Posner (2002), good leadership is a challenge rather than a burden.

Leadership, according to Yousef (1997), is a powerful factor in performing identified functions provided the considerations of willingness and outlook towards superior standards and quality above the customary. There are many aspects that make leadership as part of social interaction. It is mainly characterised by a complex action relating to an influential progression among participants of the process – both leaders and followers, and a scope of probable results like achieving deliberate goals. It also includes other attributes like building individual commitment to these goals; developing teamwork; and reinforcing change in culture of organization. Leadership has an established relationship and cannot be detached from other organizational issues based on power and politics. Issues in power and politics within the organization result to conflicts particularly in cases where influential corporate individual prioritizes self-interest over overall organization welfare. Mostly, big organizations hold a strong political influence that they can use in decision-making and taking. For example, the political power that they have in terms of economic decisions may create significant changes not only within the organizational setting but also on the industry niche. Or simply, the scope or reach of their power may induce changes or create significant degree of effects. The mismanagement of corporate power and influence usually result to scandals that end a giant organization. As such, the role of the heart in manoeuvring an organization towards the best direction is highly and always important.   

According to Bohn (2002), leaders have the ability to view the future. The sense of the future is evident that they have the innate abilities to envisage good or bad results and even future consequences. Unlike other people, individuals with leadership abilities see things that are not noticeable or obvious to others. In addition, leaders have the ability to build and establish confidence to others. Hence, in order to be a good leader, there is a need for a person to develop a sense of efficacy and confidence within his/her self (Bohn, 2002). Each of these aspects brings complexity to the leadership process. Within the dimension of a general personality feature and a specific behaviour lies what is called as the leadership style. Styles reflect relatively stable patterns of response to social situations. To quote Gibson & Marcoulides (1995, p. 45), “Leadership style refers to the degree of direction that the leader provides to subordinates in attempting to influence their behaviour toward the accomplishment of organizational objectives.”

From the argument of Gibson & Marcoulides (1995), we may say that for employees to exert high effort, they must see that it makes a difference in their performance. Employees must sense that effort will pay off in terms of performance which is highly correlated with performance and that higher effort will yield better performance. The stronger the perceived correlation, the stronger the motivation. But how do employees exert great effort? Great effort of employees conforms not only to the motivation but also to the efforts of their leaders (Rotenberry & Moberg 2007). It is more on how their leader imposed their power, the power to lead.  Basically, employee-job performance is a function of ability, job design, and motivation that are normally guided by the leader’s power. If the employee has adequate ability and the job is designed well, then performance is solely dependent on the level of motivation. Assuming ability and job design are in order, high motivation becomes a necessary and sufficient condition for high performance. If employees know their ability is high and the design of their job is "top notch," then high performance is perceived as indeed possible and perceived to depend on their efforts. On the other hand, low ability and faulty job design limit the effect of effort on performance (Myers J. 2008). They reduce the perceived correlation between effort and performance and, thus, the slope of the effort-reward function. When the slope of the reward curve decreases, motivation decreases.

To sense a strong effort-performance correlation, one must sense that other variables are not interfering with effort--constraining or negating the results of effort (Addison & Belfield 2004). Ability is a key determining variable of employee-job performance, as mentioned before. This moderating variable affects to what degree effort results in performance. If ability is high, the employee perceives that effort has a good chance to yield success. If ability is low, the employee senses that no matter how hard he or she tries, accomplishment will not result (Rotenberry & Moberg 2007). Deficient ability constrains performance, making good performance seem unlikely if not impossible. Perceived high ability is a necessary condition for one to perceive a strong correlation between effort and performance--that effort will definitely lead to performance. You may be thinking that ability is important in its direct effect on employee-job performance. You are right. Obviously employees cannot perform without it. But it is the indirect effect of perceived ability on employee-job performance, and its effect on motivation in accordance to leader’s power.

The classical view is that ability and leader’s power both affect job performance but that these two determining variables are essentially independent of one another. The fact is, however, that perceived ability (note, perceived not actual) has a lot to do with one's motivation and vice versa, to some degree.

2.6 Literature Review Conclusion

From the reviews, anybody has to take pride in what they do, since this is a way for them to be happy and be motivated in their work and whatever they are doing. This rule applies to the employees too since a motivated person helps increase productivity in an organisation that would benefit the organisation to its success. Managers have an important role for since how they manage the organisation would reflect on the company or organization's performance as well as the relationship and atmosphere of the people within the organisation. It is essential for them to make sure that employees know their respective jobs and its importance. There must be some ulterior reason, some higher-level purpose for work rather than just earning a paycheck. They need a sense of purpose and rewards for a job well done. Equally important, they must have the power to influence what is done and how it is done –the leader’s power.

Any successful organisation may have different strategies for retaining employees and reduce the number of turnover rates, however one point is universal. If a company or an organisation wishes to keep their employees and stay loyal to them especially those who are considered an asset to the company and have contributed much to the company’s success. Managers must think comprehensively on how those people will fit in and how to keep them involved so that they don’t want to leave the company.

The need to empower employees and give them a sense of ownership and pride in their work is essential in an organisation. Options have included flattening organisational pyramids and using team management. Profit sharing and employee stock option plans (ESOPs) have all been used with varying degrees of success. The common denominator, which many companies are seeking and a few achieve, is the need to create an entrepreneurial spirit within the company. Such a spirit is a sense that one is working for oneself rather than just for someone else. Those with an entrepreneurial spirit feel they have a stake in the business and can directly affect the success of that business.

Doubtless, some people within just about every organisation have this entrepreneurial spirit. Certain CEOs, vice presidents, and other "critical" players often get a sense that the business is theirs. The trouble is that not enough people have this sense of ownership. While a few can lead, all must participate if organisations are to run effectively. If it were possible somehow to empower all of the work force with this entrepreneurial spirit, think what could be possible! We would have everyone who thought like managers and acted like owners; we would have organisations that could compete with anyone. There would be less strife, more cooperation. If everyone cared as much as we do, or cared more, then work would be a more enjoyable activity. Leaders can innovate, but people must act. Large organisations have a great deal of inertia, and it takes greater efforts to make course corrections.

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