A Study Of The Relationship Of Transformational, Transactional And Laissez Faire Leadership Styles With Four Job-Related Outcomes

Abstract

The objective of the study is to study the effect of transformational, transactional and laissez-faire leadership styles on four organizational outcomes, extra effort, satisfaction, effectiveness and trust in the banking industry of Pakistan. It is an empirical qualitative study. MLQ 5-X has been used to collect data on leadership styles and extra effort, effectiveness and satisfaction while a separate Trust scale was used to measure scores on levels of trust. Data was coded and analyzed using SPSS 15.0The statistical techniques employed include t-test for independent samples, Multiple regression and hierarchal regression. While the study found partial support for efficacy of transformational leadership, contingent reward, a component of transactional leadership was also found to be positively related to organizational outcomes. Laissez-faire, as expected in light of previous literature review, was found to be negatively related to organizational outcomes. It clearly means that leaders in banking industry should practice transformational and transactional styles of leadership and avoid laissez-faire style of leadership. The augmentation effect of transformational leadership over transactional leadership was studied by dividing the data into two subsets as a function of median score on transformational leadership. The results showed that transformational leadership “augments” transactional leadership , especially for the subset with higher than median scores on transformational leadership. However, Transactional Leadership was also found to “augment” transformational leadership. This is a new finding and very important. It allows us to conclude that both transformational leadership style and transactional leadership style are important to a leaders efficacy and can complement each other. It also means that transactional leadership style is an independent leadership style and not a subset of transformational leadership.