Investigating the role of Leadership Style on the Organizational Performance: A Comparative study between Transformational and Transactional Leadership Approaches in Pakistan

Abstract

This dissertation 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. 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. I have taken only two factors i.e. Transformational and traditional and the relevant ten characteristics of the leadership. Once the Characteristics of Leaderships are determined, then effect of Leadership on Organizational Performance has estimated via saving the factor score of each factor i.e. Transformational and Transactional.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. The study concludes about the Transactional Leadership that the Pay for performance and Performance Rating based act of Transactional Leadership has significant negative effect on the Organizational Performance. Interestingly, the Active Management by Exception act of Transactional Leadership has significant positive effect on the Organizational Performance. The study also concludes that thePassive Management by Exception act of Leadership, Encouragement for Recognition act of Leadership does not have significant effect on 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. Key Words: Pay for performance (P), Intellectual Stimulation (IS), Active Management by Exception (AME), Charismatic Action (CA), Perform Rating, (PR), Individual Consideration, (IC), Inspiration Motivation (IM.