The Impact of Transformational Leadership on Organizational Performance and Employee Retention
Doctor of Business Administration Prospectus- Leadership Specialization
Submitted in Partial Fulfillment of the Requirements for the Degree
Doctor of Business Administration
Prospectus: The Impact of Transformational Leadership on Organizational Performance and Employee Retention
Employee retention continues to remain a complex challenge in small and medium-sized enterprises (Park et al., 2019). In 2018, employee turnover was estimated to be 19%, where 77% of the rate was preventable by leaders through a change of their leadership styles (Anitha & Farida, 2016). According to Mcfeely and Wigert (2019), the cost associated with the replacement of an employee can be as low as half and as high as twice the annual salary of the employee. The general business problem is the high rate of turnover in organizations and its subsequent impact on organizational performance (Boamah et al., 2018; Tian et al., 2020). The specific business problem is the need to examine the relationship between idealized influence, inspirational motivation, individualized consideration, organizational performance, and employee retention.
The purpose of this quantitative correlational study is to examine the relationship between idealized influence, inspirational motivation, individualized consideration, organizational performance, and employee retention. The predictor variables of the study consist of idealized influence, inspirational motivation, and individualized consideration. The dependent variables consist of organizational performance and employee retention. The findings may help improve employee retention and performance at small and medium-sized enterprises to create employment in the region under study, reducing the negative social and individual economic and relational consequences of unemployment.
Nature of the Study
To conduct the current study, qualitative, quantitative, and mixed research approaches were considered. Qualitative research is characterized by an inductive approach, where perceptions and subjective experiences of individuals are used to develop themes on a research phenomenon (Östlund et al., 2011). In contrast, the quantitative method involves measuring constructs through quantitative variables and statistical tools to test hypotheses to address research questions (O’Dwyer & Bernauer, 2013). The mixed approach, which involves aspects from both the quantitative and the qualitative approaches, is useful in studies specifically suited for that purpose, as such the combination involves limitations inherent in both approaches (Bryman, 1984). As the elements of the qualitative method are not applicable in this context, this study will be conducted using the quantitative approach.
Quantitative research designs fall within two broad categories, namely experimental and non-experimental. Experimental research designs consist of variables that are manipulated within an environment controlled by the researcher, in order to obtain causal conclusions through the intervention about the dependent variable (Oldham, 1994). As this study is not focused on causal conclusions, the experimental method was not chosen for this study. In contrast, no causal conclusions are sought in non-experimental research designs (Johnson, 2001). Given the focus of examining relations in this study, the non-experimental research design was found more appropriate. As suggested by Crawford (2014), correlational research design entails the measurement of two or more relevant variables, as well as assessing the relationship between variables. As such, the approach will be appropriate to this study, as it will aid the examination of relationship among variables.
What is the relationship between idealized influence, inspirational motivation, individualized consideration, organizational performance, and employee retention?
There is no statistically significant relationship between idealized influence, inspirational motivation, individualized consideration, organizational performance, and employee retention.
There is a statistically significant relationship between idealized influence, inspirational motivation, individualized consideration, organizational performance, and employee retention.
The theoretical framework of the current study will be formed by the transformational leadership theory. Initially introduced by Downton, the transformational leadership theory was further developed by Burns (1978). According to Avolio et al. (1991), transformational leadership consists of five components, namely idealized influence attributed, idealized influence behaviors, inspirational motivation, intellectual stimulation, and individualized consideration. Idealized influence attributed, also known as charisma attributed, refers to a leaders’ self-confidence, consistency, trust in followers, ideals, and influence that others seek to imitate. As a result, transformational leaders are viewed by others with admiration, optimism, confidence, and respect (Avolio & Bass, 2002). Idealized influence, is also known as charisma behaviors, concern the moral behavior, selfless acts, beliefs, and values of a leader (Avolio & Bass, 2002). According to Givens (2008), inspirational motivation concerns a leader motivating others through the communication of visions and goals., and helping them align their values with those of the organization. A transformational leader shows personal concern regarding the achievement and growth of the followers (Avolio & Bass, 2002). The transformational leadership theory is applicable to this study because the focus in this study is on examining the relationship between the intellectual stimulations of transformational leadership theory on organizational performance and employee retention. Susilo (2018) defined intellectual stimulations as a way through which a leader motivates others to be innovative, creative, and gain critical thinking and problem-solving skills.
Significance of the Study
Value to Business
By examining the relationship between idealized influence, inspirational motivation, individualized consideration, organizational performance, and employee retention, this study will reveal the effectiveness of leadership in increasing employee performance and retention. Notably, previous research how that positive experiences with leadership increases employee engagement in the organization while decreasing the intention to leave the organization (Jiang et al., 2017). In this regard, the present study will contribute value to businesses through the provision of indicators for improvements in organizational performance and turnover rate through the adoption of transformational leadership components. Through the adoption of transformational leadership components by senior leaders at small and medium-sized enterprises, business practices could be made more effective. The employees of transformational leaders tend to exhibit a higher rate of job satisfaction and higher commitment to the organization (Anitha & Farida, 2016; Boamah et al., 2018). By addressing the need for leaders to motivate employees to have high-performance standards and be creative when finding solutions for various problems, the findings of the study could help improve business practice through better organizational performance and employee retention and through helping reduce the cost of employee replacement.
Contribution to Positive Social Change
Additionally, the significance of the study may also extend to positive social change. Researchers have noted the negative consequences of unemployment and job insecurity, both social and individual (Cylus & Avendano, 2017; Norström et al., 2019; Voßemer et al., 2017). The results from a study by (Norström et al., 2019) indicate that unemployed individuals have a 10% decreased health as compared to those in employment. High rate of crime is another social consequence associated with unemployment (Fallesenet al., 2018). Through higher employee retention and better performing small and medium-sized enterprises, the local unemployment rate may be reduced. The findings of the study are significant as they may make a contribution in the reduction of the negative social and individual consequences of unemployment such as health and lower crime rates.
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