Contents Acknowledgment 2 Abstract 3 Scope and Purpose 4 Leadership in Organizations 5 Transformational Leadership 6 Servant Leadership 9 Organizational Learning 10 Organizational Performance 13 Analysis 14 Theoretical Framework 16 Hypothesis 16 Methodology 17 Data Analysis and research findings 19 Conclusion and Discussion 28 Bibliography 29 Bibliography 29
Acknowledgment
The process of research is a complex one and requires immense guidance at all stages. We are thankful to our respected advisor Mr. Muhammad Ali who guided us on every stage despite our shortcomings. We are also thankful to our respected advisory committee for their valuable feedback and suggestions. We would be thankful for further feedback from our Evaluation Committee.
Abstract
The purpose of this study is to examine the impact of two comparative leadership styles on organizational learning and performance of non-profit organizations. The leadership style undertaken is transformational leadership and servant leadership. A sample of 100 participants is taken from non-profit organizations based in Pakistan. Data was gathered through quantitative surveys on a five point likert scale. SPSS was used for analysis purpose. The results showed that the level of organization learning doesn’t affect organization performance. These results mean that organizations should focus on other factors rather than the type of leadership they are following if they want to improve their learning or performance
Scope and Purpose
Non Profit Organizations are working towards creating a public good. The role of leadership is of great importance in this sector as such organizations involve public engagement and participation from the society. They respond differently from a profit making organizations and in return they have a different approach in meeting their needs. As a result of this, leader and follower relation are of utmost importance to the organizations. Two types of leadership transformational and servant leadership are considered as the type of leadership in which the relation between leader and follower is directly influenced by each other. Due to this we see, a great amount of work has been done in the profit sector, while the non-profit sector in Pakistan lack this study. Hence, we have chosen these two types of leadership in order to study their impact on organizational learning and performance of not for profit organizations.
Literature Review
Leadership in Organizations
Leadership of an organization is the critical factor that may lead to the success or failure of an organization. Leading, which again is among the main four functions of an organization, is carried out by leaders. Appropriate leadership, which is aligned to the context or situation, can ensure the success and better working of an organization. According to Drucker (2001), knowledge is embedded in a person that is extracted by the knowledgeable workers and employees, which is further made productive by the leader or manager of the organization. In the same way, there are number of factors which are found to be innovative in an organization which is competing in a competitive business environment. Among these factors, the leadership style of the manager is pointed out as the most influential factor (Jung et al. 2004).
Most of the research of the leadership is carried out in regular profit making corporations in the business world. However, the research on leadership in non-profits or non-governmental organizations is scarce despite the fact that these organizations play a vital role in society and economy of a country. Usually, it is argued that leadership in non-profits is different from the profit making organizations due to the different pre-conditions that exist in the non-profit organization (Larrson and Storhannus 2008).
According to Suar & Sinha (2006), non-governmental organizations are usually run as one man show in which the main support comes from a few professionals and few staff functionaries. NGOs are usually lacking in any hierarchical structure. Usually, the founders of the NGOs present the vision, mission and give directions to their followers. They usually lack in any physical and financial resources and have very less to offer rewards to their employees. In such a situation, the role of the leader enhances and the leader is responsible to show the path, share and communicate the vision and develop a service oriented culture in the organization. An effective culture would lead to effective outcomes which would in return boost the performance of the employees which would later contribute to the effectiveness and performance of the NGO.
There are several other problems associated with non profit organizations. The vision and mission of a non-profit may be much broader and vague as compared to a profit organization. This makes it difficult to measure the progress of the non-profit towards the set goals. Moreover, this would affect the conditions and leadership styles within the organization. According to Lindberg (1999), one of the main differences between a profit organization and an NPO is the requirement of democracy within the members of the organization. Many managers who moved from a profit organization to non-profit organization have faced opposition from the colleagues when they tried to implement their own leadership style. At one place Jonnson (1995) emphasize on this phenomenon and believes that democratic feature is a fundamental characteristic of non profit organization.
According to Schimid (2006), a successful leader is required in a human and community service organization that could create a vision and could embed commitment for it among the employees. At another place, Hoffman (2006) states that the regular employees in the non-profit organizations have an aspect of loyalty towards the ideological goals of the organization and these must not be underestimated. Hence, the action of the leader and the leadership style in a non profit organization must be in line with the ideological goals and these must be reflected in the leadership style.
Transformational Leadership
NGOs usually have to go through more unpredictable external factors and limitation of resources in comparison to the for profit organizations (Goel and Kumar 2005). In order to tackle such complex realities at the very micro level, a leadership style which is appropriate with regard to showing a path and vision to employees is required. Transformational leadership style is one of them. A transformational leader is concerned about the vision of the organization as well as about the performance of the employees. Such a leader can be a source of attraction for followers who inspires his followers by the charisma of his personality. Moreover, such a leader could provide individual attention to each and every subordinate and inspire and motivate the follower to take up the challenge.
According to Bass & Avolio (2000) there are five components of transformational leadership. This includes idealized influence which refers to charismatic action leaders who focus on values, beliefs and sense of mission. Then comes attributive charisma, which is made up from the leader’s social charisma which constitutes as the perception of leader as being confident and powerful. The third one is inspirational motive. It comprises of the techniques used by the leader which are required to boost their followers by taking into view positive future and determined goal. Following this is intellectual stimulation which relates to the challenging of the followers by making them think creatively and find solutions to the difficult problems. Individualized Consideration is another attribute which refers to the behaviour which is shown up by the leader which contributes to the satisfaction of the followers.
Transformational leaders help their followers in various ways. They set the values and norms of their followers. Moreover, they encourage them to bring change in their personal as well as organizational life and help them in performing beyond their expectations (House and Shamir , 1993).
Side by side transformational leaders are the first one to take the initiative and thus are proactive. They change the organizational culture by putting in new ideas and by motivating and empowering employees in order to achieve the objectives of the company by attracting them to new ideas which are many superior and moral values (Bass and Avolio , 1990).
On the other hand, there is another main category into which leadership can be classified. Those types of leaders are termed as transactional leaders who are the people that over emphasize detailed, short term goals; and standard rules and procedures. They do not put in much effort to increase the follower’s sense and ability of to generate new ideas and make him innovative. They are usually responsive, works within the organizational culture and end up in making employee work in traditional method which is of rewards and punishments.
Transformational leadership is also defined primarily in terms of the “leader’s effect on followers, and the behaviour used to achieve this effect. The followers feel trust, admiration, loyalty, and respect toward the leader, and they are motivated to do more than they originally expected to do.” Transformational leadership is the act of bringing a positive change in the organization which will make others to follow the leader as he provides motives and goals for others. This type of leadership is also suited for organic structure. A decentralized, less formalized and flexible structure will be more suitable for this type of leadership (Garg and Krishnan 2003).
Transformational leadership is also sometimes mixed with charismatic leadership as both of them are suited to an organic structure of an organization. But the question arises that when both charismatic and transformational leadership are appropriate for organic form of structure then what is the difference between them. According to Yukl & Gary (1999), many of their features are overlapping and thus this conceptual ambiguity makes their comparison difficult. But even considering their overlapping factors still they are generally used as same. Many of the literature on leadership have used them interchangeably.
Another emerging concern of nowadays in corporate world is the relation between the leader and the followers. The leadership style which needs to be adopted must be ethical and moral and at the same time it should be able to ensure increased profitability. Two of the leadership styles which are frequently used are servant leadership and transformational leadership (Choudhry and Akhtar 2011).
Servant Leadership
Transformational leadership shares many common grounds with this ethical leadership style, which is an emerging field, that is, of servant leadership.
According to Bass & Avolio (2000), servant leadership style generates superior organization performance in comparison to transactional leadership. A servant leader sees himself as a servant first. Generally, servant leader motivate, guides, gives hope and provides a caring experience by establishing a quality relationship with the followers and subordinates. Ethical behaviour and concern for subordinates are the main components of servant leadership (Greenleaf and Spears 2002). The strength of the servant leader is the focus on his/her followers learning, growth and autonomy. The theory of servant leadership plays an important role in learning organization.
According to Carmeli & Waldman (2010) there are four characteristics of servant leadership which are associated with knowledge workers. These are work as calling, membership association, need for autonomy and serving others. Servant leadership style fits in all of these characteristics by awarding a purpose to work which is intrinsically satisfying, by encouraging the communal focus of knowledge workers, by sharing power in the process of decision making and in this way a servant leader could serve its main purpose. Moreover, people working in an organization tend to share knowledge in an environment where there is an atmosphere of individual trust. Hence, as it is the characteristic of servant leadership style that they value integrity and competence in order to foster interpersonal trust (Hinds and Pfeffer 2003).
The emphasis of servant leadership is on service to others and in creating the role of organizations to create people who can build a better tomorrow.
Both transformational leadership and servant leadership are positively related to organizational learning. This enhances the productivity of the organization in terms of profitability. But this is true for only profitable organizations. The research of this phenomenon in non-profit organizations is yet to be explored.
As over the time, servant leadership is gaining importance, authors and researchers have suggested the servant leadership is best suited to a knowledge based organization or organizations where organizational learning takes place.
Organizational Learning
Organizational learning is one of the main sources of sustainable competitive advantage. It acts as an important driver of corporate performance. In an ever changing environment in which organizations work, continuous learning acts as a key driver of the ability to remain adaptive and flexible in order to survive and compete effectively (Burke 2006). Studies have shown that organizational learning acts as a competitive advantage in terms of financial and non-financial performance. The importance of leadership in organizational learning is important and has been emphasized by the authors. For instance, transformational leadership acts as a main driver in making a learning organization.
According to Zagorsek et al. (2008) organizational learning as a process consists of four constructs. These four constructs are information acquisition, the distribution of information, information interpretation and resulting behavioural and cognitive changes. The organizational members collect information from within the company which are the internal sources, outside the company which is external source and through employee training. This organizational learning is reflected from the changes and improvements in terms of performance which company adopts. According to Spector (2006), if no behavioural change or cognitive changes occur, then the organizational change is in reality not taking place and the potential for improvement of company with respect to enhanced performance is unused and wasted.
Here comes the role of the leader who acts as an information centre within the company for his subordinates and teams. Leaders have a strong influence on acquiring and distributing the information within the company. Both transformational leaders and servant leaders encourage open, honest and timely communication and build a culture of information flow within the organization which in return enhances the process of organizational learning. Side by side, such leaders facilitate the process of cognitive and behavioural changes within the organization. Leadership influences the behavioural and cognitive changes in two ways. First of all, it enhances the previous information processing phases of the organizational learning process by facilitating the information processing in an organization; leaders gradually encourage the mentality of the organization members in order to address changes in internal and external business environments.
Moreover, in the process of organizational learning, the knowledge sharing among employees is of utmost importance. The knowledge workers in a learning organization must collaborate and share the knowledge, hence creating communities of practices. The servant leadership style helps in developing the communities of practise. The servant leader allows the knowledge workers to focus and concentrate on their work by removing the unnecessary hurdles and overheads, thus providing an opportunity for training and development which is tailored to the specific needs of knowledge workers (Sial, et al. 2014).
Organizational learning could also be stated as the act of acquiring and spreading the knowledge attained in the pursuit of organizational outcomes. Once learned it becomes an asset for the organization giving it a competitive edge. This knowledge can be used to improve functions, product development which would add greater value in the firm’s business model (Choudhry and Akhtar 2011).
According to Singh (2011), the CEOs and managers of organizations must learn new ways of inspiring their followers. This inspiration is required to learn new things and bring in innovativeness in organization. The job of today’s leader is to create space and for other people to generate new and different ideas. As stated by Lietaer (2002), the critical success factor for a firm in the knowledge economy which is working towards a competitive advantage is that it must have the ability to learn and exploit its existing knowledge. With the changing environment, the importance of organizational learning becomes even more. Success in today’s dynamic environment requires more from the managers. They are not just required to know different cultures and norms and management theories, but it also requires putting this knowledge into leadership practise (Carey, Newman and McDonough 2004). Studies have found that transformational leadership have significant positive effect on encouraging and emphasizing teamwork spirits and involvement at workplace. A leader who possesses knowledge has more responsibilities. He is responsible to provide strategic visions, motivate others, effectively communicate and act as change agent. Side by side, he must also coach others, implement good practices and carry out the knowledge agenda (Debowski 2006).
A knowledge leader set the organization on the path of a learning organization which further leads to competitive advantage. Organizational learning could be considered as long term activity which builds up competitive advantage over the time. The role of leadership is crucial in building the learning organization. A learning organization is an organization which involves creating, acquiring and transferring knowledge and insights (Garvin 1993).
According to Lam (2002), leadership has been found to improve the process and organizational learning activities. Moreover, he also identified that transformational leadership has significant impact on encouraging and emphasizing teamwork spirits and involvement at workplace.
Organizational Performance
The main objective of any organization is to sustain the competitive advantage and perform best in its field. Organizational Performance is a measure of how well an organization is performing based on different factors. These can be based on tangible e.g. cost reduction, sales and annual turnover are used. While intangible is based on customer satisfaction and product development is used. Most commonly used are tangible indicators (Choudhry and Akhtar 2011). Organization learning is like a tool for an organization which can lead it to greater performance.
According to Hernaus et al. (2010), the organizations which have developed their learning process would lead to greater performance. Moreover, these researchers also state that the financial measures alone are not good predictors of the organizational performance. The measure of employees learning capability is strongly correlated with the performance of the organization. In addition to this, the researchers are also of the view that organizational performance is a broader concept than just making up of profits and showing good financial performance.
According to Larrson & Kinnunen (2008), performance measurement is a tool which shows the efficiency of any organization which later leads to enhanced performance. The concept of performance measurement is old and has been developed since the industrial revolution. However, the term productivity was replaced with performance in 1980s. Businesses and profit making organizations realized that financial performance alone is not a measure of an organization. One such performance measurement tool is Balance Scorecard which was introduced by Kaplan and Norton. Initially, the performance measurement was intended for the business sector but since the past two decades, the gap between business sector and non profit sector has narrowed, the interest of researchers in the non profit sector have also increased. The managers of non profits are also under pressure to show performance by the stakeholders. This pressure is the result of continued criticism on business world that have exploited the resources and have ignored environmental and human right factor. This has resulted in increased attention to the non profit organization. The non profit organizations have less emphasis on financial measures since they are not looking for profits, instead, they have more focus on other aspects such as showing their performance in order to show their capability for grants and donations.
Analysis
Based upon our previous discussion, we have pointed out that in context of non profit organization, transformational leadership and servant leadership play a vital role. Since Larrson & Storhannus (2008) have also argued that leadership style in NPOs is still an unexplored area and needs more study. Both these leadership styles match with the goal and vision of non profit organizations and leads to enhanced organizational performance. Side by side, we have also identified that organizational learning is vital in achieving organizational performance. Both transformational leadership style and servant leadership style has positive relation with the organizational learning and organizational learning leads to organizational performance. This has also been emphasized by a research conducted by Choudhry & Akhtar (2011), in which the research was primarily done for profit organizations. The gap was found to be in non profit organizations and public sector and manufacturing organizations. Based upon this, we decided to focus on impact of two different types of leadership in non profit organizations and test which of these two leadership style support superior organizational performance.
Figure 1. Leadership Styles Impact on Organizational Performance with mediating effect of Organizational Learning
Hypothesis
Hypothesis 1
Servant leadership is positively related to Organizational Learning
Hypothesis 2
Transformational Leadership is positively related to Organizational Learning
Hypothesis 3
Organizational Learning is positively related to Organizational Performance
Methodology
Our research methodology was based on a deductive research. First we collected data from different Non-profit organizations across Pakistan. Then it was analyzed using SPSS to come to our results. The data collection tool was survey questionnaire administered personally in those organizations we have visited. While some of the survey questionnaires are filled online.
Transformational Leadership
Scale is taken from Pierce & Newstrom (2011) who used a 7 factor model to measure transformational leadership. These factors are: 1. Articulate Vision 2. Role Model 3. Foster goal acceptance 4. Performance expectations 5. Individual Support 6. Intellectual Stimulation 7. Transactional leader behavior
In our survey questionnaire five point Likert scale was used to measure transformational leadership. The score of all questions was added and divided by the number of questions. These scores were then used in regression analysis.
Servant Leadership
Scale is taken John & Daniel(2006) who uses a 5 point scale to measure servant leadership. The initial scale was based on 11 factors but it was later reduced to 5 point using data reduction methods. The final 5 factors were: 1. Altruistic Calling (deep-rooted desire to make a positive difference) 2. Emotional Healing (fostering spiritual recovery from hardship or trauma) 3. Wisdom (awareness of surrounding and anticipation of consequences) 4. Persuasive Mapping (Use of sound reasoning and mental frameworks) 5. Organizational Development (making a collective positive contribution to society)
To measure servant leadership we used one or two questions to measure each factor. A five point Likert scale was used for each question. There were total 7 questions in our survey to measure servant leadership. The scores for each these question was added and the total was divided with the number of questions. Then final score was used in the regression analysis to check relationships in our hypothesis.
Organizational Learning
The scale was taken from Tomislav Hernaus who used a four factor scale to measure organistaional learning. These factors include: 1. Information Acquisition 2. Information Distribution 3. Information Interpretation 4. Behavioural And Cognitive Changes
Organizational Performance
The scale was taken from Tomislav Hernaus who measured orgnanisational performance through measuring segregating his scale between financai and non-financial factors. Our survey consisted 9 questions to measure organisational performance, most of them measuring non-financial performance as we are focused on non-profit organisations.
Data Analysis and research findings
All the data collected through online and field surveys was entered into SPSS for analysis. All the questions were Likert scale so we used ordinal scale. A total of 35 questions were measuring transformation leadership, servant leadership, organizational learning and performance. In SPSS the data was sorted and questions were arranged according to the respective variable they were measuring. Then the scores of all the questions measuring a variable were added and divided by the number of questions of that particular variable. In this way we got an average score for each variable per survey.
Regression analysis is used to measure the link between variables in our hypothesis. According to our hypothesis were measuring * Link between transformational leadership and Servant leadership with Organizational learning * Link between Organizational learning and organizational performance
To measure these two we have to run two spate regressions to check the link between these variables. But before that assumptions for regression analysis were checked.
Assumptions for regression analysis 1. Variable type
The dependent variable was continuous as was the case with our dependent variables. Both organizational learning (Dependent variable in first regression) and Organizational performance (Dependent variable in second regression) were continuous as they were calculated using the sums of individual questions measuring them using Likert scale
The Independent variables which were Transformational leadership and Servant leadership (For first regression) and Organizational learning (for second regression) were also continuous as they were calculated the same way, from the sum of questions measuring these variables on Likert scale. 2. Linearity
The second assumption was to check the linearity of our model which can be seen in this graph
Figure [ 2 ] Organizational learning as independent variable and organizational performance as dependent variable
Figure 1 Transformational leadership and Servant leadership as independent variable and Organizational performance as dependent variable.
3. Independence of responses
All of the responses are given by different individuals 4. Residual Errors
These errors plots should be scattered across and should not show any structure for the regression to be valid. Our results show
Figure 3 Organizational learning as dependent variable
Figure 4 Organization performance as dependent variable
These graphs show that our plots are not very scattered and showing a structure of plots which shows that linear regression may not be appropriate
5. Correlation between independent variables
The correlation between independent variables, transformational leadership and servant leadership, should be less for the results of the regression to be appropriate
| TL | SL | OL | TL | Pearson Correlation | 1 | .541** | .405** | | Sig. (2-tailed) | | .000 | .000 | | N | 94 | 94 | 94 | SL | Pearson Correlation | .541** | 1 | .615** | | Sig. (2-tailed) | .000 | | .000 | | N | 94 | 94 | 94 | OL | Pearson Correlation | .405** | .615** | 1 | | Sig. (2-tailed) | .000 | .000 | | | N | 94 | 94 | 94 | **. Correlation is significant at the 0.01 level (2-tailed). |
* Correlation between Independent variables is 0.541 * Correlation between Transformational Leadership and Organizational learning is 0.405 * Correlation between Organizational Learning and Organizational Performance is 0.521
6. Variance Inflation Factor (VIF) and Tolerance
For the regression to be valid * VIF should not be greater than 10 while Tolerance should be greater than 0.2
* As can be seen the VIF is 1.414 * While the tolerance is .707
7. Normally distributed errors
The errors must be normally distributed for the regression to be valid
Conclusion of assumptions
Based on these assumptions it was concluded that most of the assumptions are fulfilled except one so we decided to go forward with linear regression analysis of our variables.
Regression analysis * H1: Transformational Leadership is positively related to organizational learning. (Disapproved) * H2: Servant Leadership is positively related to Organizational Learning (Disapproved)
Disapproved as(Adjusted R Square values is 0.372)
* H3: Organizational learning is positively related to Organizational Performance. (Disapproved as adjusted R square value is 0.263)
Conclusion and Discussion
The results show that hypothesis are not proved which means that according to our results if a non-profit organization follows transformational leadership or servant leadership it will have no effect on organizational learning.
Moreover the level of organization learning doesn’t affect organization performance. These results mean that organizations should focus on other factors rather than the type of leadership they are following if they want to improve their learning or performance
But there are some questions that still make way for future researches. We have researched on only two types of leaderships. Perhaps other types of leadership do have a significant effect on organization learning or performance.
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