LEADERSHIP STYLE AND ORGANIZATIONAL PERFORMANCE: A COMPARATIVE STUDY BETWEEN TRANSFORMATIONAL AND TRANSACTIONAL LEADERSHIP STYLES

Abstract

Purpose: This study has been conducted with objective to investigate the various leadership characteristics of Transformational and Transactional Leadership and then to empirically analyze the effect of each type of leadership on the organizational performance. Methodology/Sampling: This study considers a sample of 800 respondents has been interviewed to collect the required information. The sample includes employees at tactical and operational management in corporate sector. Factor analysis which has been applied to determine the key characteristics of each type of leadership, thereafter the OLS estimation has been applied to test the hypotheses of the study. Findings: The study concludes that the Charismatic Action, Intellectual Stimulation, Inspiration Motivation, Encouragement for High Morale characteristics of Transformational Leadership has significant positive effect on the Organizational Performance. In regard of the Transformational Leadership the further concludes that the Individual Consideration act of Transformational Leadership does not has significant effect on the Organizational Performance. A final conclusion based on the empirical analysis is that Transformational Leadership has significant positive effect on Organizational Performance, whereas, the Transactional Leadership has significant negative effect on the organizational Leadership. Practical Implications: This study provides empirical evidences that the Transformational Leadership is the most effective leadership in organizational performance. The key success factors or characteristics for a transformational leadership are Charismatic Action, Intellectual Stimulation, Inspiration Motivation, and Encouragement for High Morale characteristics of Transformational Leadership.