Leadership effects on organizational climate and financial performance: Local leadership effect in chain organizations

Abstract

Leadership research to date has mainly focused on leaders' subjective effects. In this study, we examine the effect of different leadership styles on two financial measures of organizational performance and three measures of organizational climate in 50 supermarket stores of a large supermarket chain in the Netherlands. Our findings show a clear relationship of local leadership with the financial performance and organizational climate in the stores. The findings also show that the leadership styles have differential effects. Charismatic leadership and consideration have a substantial effect on climate and financial performance in the small stores, suggesting the relevance of personal leadership of the store manager in these small stores. Initiating structure leadership had no effect on financial results or organizational climate, either in the small stores or in the large stores. Based on these findings, we have formulated some avenues for further research.