The Impact of Leadership Style on Organizational Performance in Pakistan’s Service Sector

Abstract

The thesis paper’s aim is to asses and study the impact on organizational outcome or performance of the three comparative leadership styles identified by Bass & Alveoli in 1981. The research purpose is to find out how a manager’s leadership style impacts his subordinates’ performance. The leadership styles studied in this research are Passive-Avoidant leadership, Transformational Leadership and Transactional Leadership. This relation has been theoretically explored through literature review and empirically tested in the Pakistani service sector through survey questionnaire. The paper measured Organizational performance through leadership outcome and subordinates job performance and leadership through Multifactor Leadership Questionnaire (MLQ). Organizational performance can be measured by efficiency and effectiveness of the firm’s operations in terms of profit, net growth rate, return on asset, NPV and return on equity, etc. A comparative analysis of the three main types of leadership styles is done in its relation to organizational performance with job performance as its proxy in an organization in this paper. This research study was conducted to examine the relationships between Bass’s leadership styles and organisational performance in service sector of Pakistan. The findings of the research showed consistent results across all types of employees irrespective of their gender, level in firm or the type of service industry that they belong to at a holistic level. Transformational Leadership and Transactional Leadership were found to have significant positive correlation with organizational performance in Pakistan’s service sector. The negative effect of Passive-Avoidant leaders was found to be insignificant in the service sector In Pakistan a combination of leadership style is used while reward based team leading is found to be more effective in most of the sectors like banking and sales while mentorship based is found to be more effective in academic settings.