A Case Study of the Impact of

Leadership Styles on Bank

Employees’ Job Satisfaction

Södertörn university | The Institute of Social Sciences

Bachelor Thesis 15 hp | Business administration C - Organisation |

Autumn 2015

Student: Somaye Bahmanabadi

Supervisor: Henrik Ferdfelt

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Abstract

Leadership always plays an important role in the growth and performance of an organization.

Changes in organizational structure, vision and leadership are inevitable in any institution.

Leadership style is a special characteristic that distinguishes a leader from another and this

powerful force is what pushes an employee or employees to complete a task that produces

maximum results; especially in the banking sector. Survey questionnaires were used in this study

as a main method for data collection. The data was analyzed by using the Structural Equation

Modeling (SEM) Method using Lisrel software. This research has been conducted to determine

the impact of using transformational, relation-oriented and transactional leadership styles and

their direct effect on job Satisfaction. A total of one hundred questionnaires were distributed

among SEB and Swede bank´s employees and seventy-one fully answered questionnaires were

used for statistical analysis. In other words, seventy-one percent of the questionnaires were

returned. The results clearly show that leadership style (Relation-oriented, Transactional, and

Transformational) have a significantly positive effect on both the employer and employee’s

satisfaction with the job. The results indicate that the Transformational approach ads the most

contribution toward job satisfaction compared to the Transactional and Relation-oriented styles

of leadership.

Keyword: Leadership Style, Job Satisfaction, Bank, Lisrel

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Contents Chapter1 4  1-1 Bakground 4  1-2 Problem 8  1-3 Research purpose 10  1-4 The Research Question 11  1-5 Delimitation and Limitation 12  Chapter 2 13 2-1 Theoretical Framework 13  2-1-1 Leadership 13  2-1-2 Transformational Leadership 14  2-1-3 Transactional leadership 17  2-1-4 Relationship-oriented leadership 18  2-1-5 Job satisfaction 19  Chapter 3 22  3-1 Method 22  3-1-1 Quantitative Method 22  3-1-2 Survey Methodology 23  3-1-3 Choice of the Case Study 23  3-1-4 Material Collection 23  3-1-5 Modeling 24  3-1-6 Research Approach 25  3-1-7 Implementation 26  3-1-8 Reliability and Validity 29  Chapter 4 30 4-1 Empirical findings 30  4-1-1 Descriptive Statistics 30  4-1-2 The frequency of respondents based on their gender 30  4-1-3 Distribution of respondents according to their age 31  Chapter 5 312 5-1 Analysis 32  5-1-1 Estimation model 32  5-1-2 Assessment of the measurement model 33  5-1-3 Estimation of the Structural Equation Model (SEM) 35  6-1 Conclusion 37  

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1-1 Bakground

Empirical studies in the field of leadership styles and job satisfaction are reviewed in this section.

In one research, Awamleh (2005) investigated the transformational leadership style and its direct

effect on job satisfaction and employees’ performance in UAE banking. The UAE banking

section has been selected in this study because of its importance in the economy and the

company’s remarkable contribution in UAE gross domestic product. Data analysis has been

implemented through the multivariate regression approach. The results of this study show that

leadership styles of Transactional and Transformational have a significantly positive effect on

employees’ job satisfaction and performance. In another study, Bushra et al (2011) investigated

the Transformational Leadership technique and its effect on employees’ job satisfaction. The

study was done on the banking section of Lahore, Pakistan—with a statistical population of 133

bank employees. The statistical approach of this study has used multi-variable regression. The

model applied in this study is as following:

Fig 1: Conceptual Model (source: Bushra et al, 2011)

Findings of the study showed that transactional leadership has a positive and significant effect on

the investigated bank employees and their job satisfaction, which in turn creates an organizational

commitment.

In another study, Cetin et al (2012) investigated the different leadership styles and

communicative skills of top Turkish bank employees and the effect their leadership has on the

lower-level employees’ work ethic and motivation. The empirical findings of this study show that

there is a strong relationship between transactional leadership style and communicative skills

Transformational

Leadership

Job Satisfaction

Organizational

Commitment

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with job satisfaction, but there is not a significant relationship between individualized and

transformational leadership styles with job satisfaction.

Sang Long et al (2014) investigated different aspects of transformational leadership on job

satisfaction in a governmental company in Malaysia. The sample of this study includes 225

individuals, and the model is as following:

Fig 2: Conceptual Model (source: Sang Long et al, 2014)

Findings of this study show that among the transformational leadership criteria only the

individualized consideration has a significant effect on job satisfaction. There was not a

significant relationship between idealized influence, inspirational motivation, intellectual

stimulation and job satisfaction. Baysaka and Yener (2015) studied leadership styles and job

satisfaction among hospital employees in Istanbul using correlation analysis by SPSS software.

Results of this study show that there is a weak relationship between leadership style and

perceived satisfaction. Saleem (2015) investigated the effect of leadership styles on job

satisfaction with the mediating variable of perceived organizational politics. The study shows

that transformational leadership has a positive effect on job satisfaction and transactional

leadership has a negative effect on it. Findings also show that perceived organizational politics

play the mediating role between leadership styles and job satisfaction. In another study,

Obuobisa-Darko (2015) investigated the relationship between leadership styles and job

satisfaction, specifically focusing on the banking section. The investigated sample included 150

individuals. Leadership styles investigated in this study included the transactional and

transformational techniques. The conceptual model of this study is as following:

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Fig 3: Conceptual Model (source: Obuobisa-Darko and Obuobisa-Darko, 2014)

Findings of the study show that there is a significantly positive relationship between the

leadership styles of transformational and transactional with job satisfaction. Also, according to

other results of this study, the effect of transactional leadership on job satisfaction has been more

successful than the transformational leadership method.

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1-2 Problem

Leadership in an organization has a strong effect on employees’ attitude about their job. The role

of leadership in today’s corporate organizations has changed. The success of any organization is

mostly dependent on an organization’s management team and the leadership style used (Saleem,

2015). Organizational leadership is a very important and complex issue; and a lot of researchers

and scholars have spent a great deal of effort to recognize and improve it. Although

administrative styles are very extensive and theoretical, many empirical studies have been

performed in order to investigate the different methods of leadership. Transformational,

transactional, and relationship-oriented leadership have been remarkably supported in different

studies (Cetin et al, 2012; Saleem, 2015). Leadership is one of the most important factors in

increasing the organizational efficiency of a company. The leader or boss of a company is

responsible for developing and implementing decisions on how to achieve the desirable resources

from their employees in order to produce the best products and services with the interest of the

shareholders in mind. This awareness and implementation of leadership styles gives a company

an advantage over their competitors (Riaz & Haider, 2010). Today’s organizations need a leader

with a high influence of power, and one with an extensive overall goal for the company in mind.

This leader requires commitment and their goal should be to fuel enthusiasm in their employees

in order to cultivate the full potential of their talent so that they may obtain the organization’s

objectives (Colvin, 2004; Steidlmeier, 1999). Leadership style is an approach in which the leader

uses his or her influence to achieve the company’s goals. Many researchers believe that the

leadership style of a company is mainly affected by the attitude of the leader and he or she plays

an important role in the productiveness of the employees (e.g.: see Gadot, 2007; Furkan et al,

2010; Saleem, 2015). Leadership style can affect the satisfaction of the employees of a company

both directly and indirectly. Job satisfaction has been defined as an enjoyable and positive

experience felt by an employee, mostly because of a leader giving them a sense of appreciation

for their work (Locke, 1976). These feelings are the direct result of a strong relationship between

the employees and their leaders. The employees’ expectations from a work place tend to involve

a strong bond with their colleagues and their boss. All positive performances and success in any

organization are achieved while using this method. (Avolio and Bass, 2004; Madlock, 2008;

Belias et al, 2013). Reitner (1996) believes that the transformational leaders are the only ones

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able to draw out the essential tools needed for any new organization’s success. These kinds of

leaders are the main source of fundamental success in any company and dominate over all other

organizations, easily riding over them. Such leaders can present a better and clearer image of the

future, explaining their insight to the employees effectively, by challenging them to do their jobs

exceptionally, and by integrating positive leadership, which in turn makes for more satisfied

employees. Freis et al (2003) states that transactional leaders decrease the individual’s likelihood

of moving on to another company, and simultaneously increases the production of the employees.

This also gives the employees a greater sense of appreciation.

Among the most successful organizations, this use of leadership style is crucial in the

productiveness of these banks and financial institutions. Financial institutes and banks play a

mediating role between investors and depositors, and present financial services to entrepreneurs

in order to give them a loan so that they may start their new business (Lawson, 2012). In regards

to the financial crisis currently effecting the world, particularly in Europe, the interest of studying

these relationships between employer and employee has become much more important. While

studying the productivity of a company, many factors come to mind. These banks and financial

institutes have shifted their focus on their employees’ performance, which in turn has been

extremely effective in increasing the institution’s revenue (Awamleh et al, 2008; Bushra, 2011;

Cetin, et all, 2012; Belias, 2013). Also, during the last two decades, companies have shifted their

focus on leadership in order to provide excellent service to their customers. By upholding these

tactics, increases in profits have created significant changes in the banking industry. These

changes have directly affected the banking world. By adopting these new strategies, particularly

relationship marketing, there has been a huge increase in company yields (Durkin & Bennett,

1999). Berry (1984) has defined relationship marketing as increasing the bank’s income by

establishing a positive relationship between customers and employees. Thus, with the use of this

approach, the focus on employees and customers’ satisfaction is highly important for the success

of the bank. Berry (1984) argues that bank employees should be considered by managers as

internal customers. According to his belief, achieving a desirable level of customer satisfaction in

the banking industry is not possible without concurrently focusing on their employees. The

banking field has been a vital pillar in the global economy for many decades. Although the

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bank’s goal is generally to make profits, their performance is also based on public interest.

Regarding this fact, banks create a stable framework of receipts and payments both for

individuals and public services. With there being so many daily transactions within a bank,

between major and minor businesses, as well as individual banking in modern western countries,

it is vital that banks secure an acceptable means of payment in order to fuel the economy

(Lawson, 2012; Belias et al, 2013). Leadership is key in creating structure within an organization

and has attracted a great deal of studies during the recent years. Moreover, the training of these

organization’s leaders and managers has become the main target of development. With respect to

the mentioned issues, this study aims to investigate the relationship between leadership styles

(Transactional, Relationship-oriented and Transformational) and employee’s satisfaction;

specifically focusing on the employees of Swedish Banks while applying the Structural Equations

Modeling (SEM) system.

1-3 Research purpose

The main purpose of our dissertation is to evaluate the relationship between leadership styles, and

Job Satisfaction. Therefore, studying previous research done in the area of leadership style

theories is important, because it reflects the differences in transformational, transactional and

relationship-oriented leadership. Among the materials found by Bass and Avolio (1988), these

three theories can be used. They brought forth three different hypotheses based on these theories.

Furthermore, we developed our own model and attempted to make it generalized. Based on

literature review and the implementation of theoretical and empirical models, the following

model was suggested to investigate the effects of management styles on job satisfaction. ( For

example, Shahmohammadi, 2015; Fransis et al, 2006; Saleem, 2015). Figure (1) is a simple

representation of the relationship between latent variables and their corresponding observed

indicators.

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Fig 4: Conceptual Model (Bass and Avolio, 1988)

According to figure (1), hypotheses tested in this study are as follows:

𝐻!: There is a significant relationship between the transformational leadership and job

satisfaction

𝐻!: There is a significant relationship between the transactional leadership and job

satisfaction

𝐻!: There is a significant relationship between the relation-oriented leadership and job

satisfaction.

Hypotheses based on figure 4 are equivalent to a set of regression equations that must be

estimated simultaneously. To make this so that it can be followed practically and effectively in a

LISREL modeling environment, we need to have the required data. The data is collected

through questionnaires, (including a 5-points questionnaire) which are completed by

correspondents.

1-4 The Research Question

Is there any relationship between leadership styles (Transformational, Transactional and

Relationship-oriented) and employees` job satisfaction?

Transactional Leadership

Relationship-oriented Leadership

Transformational Leadership

Job satisfaction H2

H3

H1

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1-5 Delimitation and Limitation

Due to limitations in time, cost and human resource this study is limited only to the SEB

employees in Stockholm and not the other city of Sweden. Furthermore, the study will examine

the employees who work permanently and not those who are substituted temporarily. On the

other hand, this study only examines the impact of leadership styles (transformational,

transactional and relationship-oriented) on job satisfaction and leadership styles are not the

subject of this study.

In this study no randomization was possible, and the participants were chosen based on

convenience sampling. Also, individual differences at educational background could not be

controlled and there was a possibility that the participants might not have answered the

questionnaires seriously.

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2-1 Theoretical Framework

2-1-1 Leadership

The “Great Man” theory of leadership states that historically, a civilization’s leader has an affect

on the organization’s success (Shaukat et al., 2012). Leadership is one of the most extensively

discussed topics of research around the world (Kuchler, 2008); and all groups and teams need a

leader (Jones, George, & Hill, 2002). A lot of definitions have been presented in the field of

leadership and leadership styles (De Simone, 2006). Traditionally, leadership has been defined in

recent years as individual skills that are applied directly to the organizations (Nivala & Hujala,

2002). Cole (2002) has defined leadership as a dynamic process by which, during a specific

period of time, and in a specific organizational field, one individual affects the group in order to

achieve the overall objective. Locke and Crawford (2004) argue that leadership plays a crucial

role in a company’s ultimate success or failure. Laue (2004) knows that leadership starts with an

individual that has a vision and then takes the required actions in order to achieve the goal. This

leader also must treat others as their equals while pursuing these changes. Gill (2006) sees

leadership to help stimulate, motivate, and encourage the followers so that the company may

achieve satisfactory results for the organization. De Simone (2006) has defined leadership as

using a non-coercive influence to direct and coordinate a group’s activities towards a certain

objective. Jong and Hartog (2007) have defined leadership as the process of influencing people

in order to achieve desirable results.

Thus, for an organization to remain successful, having the right leader is crucial. The best

employers know how they can participate with their employees in order to achieve the

organization’s objectives (Cho & Tseng, 2009). There are a lot of different leadership styles

(Mosadeghard, 2003); among which are the autocratic, administrative, free economy,

charismatic, democratic, cooperative, situational, functional, transformational, transactional, and

relationship-oriented styles. According to the literature, the most important leadership styles that

had a positive and significant effect on job satisfaction were transformational leadership,

transactional leadership and relationship-oriented leadership, respectively. Almost in all studies,

transformational, transactional and relationship-oriented leadership styles had significant positive

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effects job satisfaction and no study was found in which the mentioned styles have no effect on

job satisfaction. On the other hand, based on empirical studies transformational leaders are more

comprehensive, more effective and more successful in comparison with transactional leaders

(Nivala & Hujala, 2002; Awamleh et al , 2008; Bushra, 2011; Cetin, et all, 2012; Belias, 2013).

Accordingly, a manager can choose one of these different leadership styles for different

situations. It simply depends on the culture of the organization and the maturity of the

employees. Today, employees are highly educated and jobs are mostly specialized; therefore, the

employees have more power than they have ever had before (see Bass, 1997; Shahmohammadi,

2015 Fransis et al., Saleem, 2006). This power makes it even more important that the right

leadership style, such as transformational, transactional or relationship-oriented are investigated

properly.

2-1-2 Transformational Leadership

Transformational leadership was used for the first time by Danton (1973), although it was not

reputable until it was being used by the classics. Recent expansions in leadership theories have

transferred from leadership theories with a charismatic ideal in which the assumed leader is an

unusual creature and his or her disciples are dependent on leadership. This expansion works

toward neo-charismatic and transformational theories, which note development and empowering

disciples in order to have independent functions (Kark et al, 2003). Transformational leadership

has originated from charismatic leadership. Charisma is a Greek word, which means gift of

grace. Power is charismatic which has been derived from faith towards a leader with a symbolic

character. Specifically, Yammarino (1994) believes that the individual characteristics of

charismatic leaders include a high degree of self-confidence, strong moral convictions, and the

ability to influence others. This also is involved in management behaviors, with the purpose of

affecting others in order to increase the trust of the leader. Moreover, expressing a mission,

challenging the objective, and motivating others are also important aspects. Bass and Avail,

(1991) believe that transformational leadership is formed when the leader promotes his or her

employees’ interests, by creating awareness and the acceptance for the mission at hand and the

end destination of the group. Thus motivating the employees to see beyond just their own

interests to seeing the group’s interests. Mark (2004) knows transformational leadership is

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transcendental and ultimately moral with a motivational background in which human behavior

levels and moral tendencies of both leaders and disciples are increased. He defines

transformational leadership as one who empowers disciples and motivates them in order to act

beyond their expectations and see the group’s objectives instead of personal interests. Daft (2001)

states that transformational leaders imagine a future picture and encourage individuals to realize

this vision. The transformational view is looking for potential motivations in disciples and its

objective is to attract the attention of disciples towards the superior, overall needs of the group

(see: Riaz & haider, 2010; Brausn, 2013). Thus, transformational leadership is the process of

creating a conscious influence on individuals or groups to create continuous change in the current

condition and organization’s functions as a whole. Through its words and acts, transformational

leadership transforms the whole organization and has a lot of influence on its followers. This

type of leadership is realized when leaders increase their employees’ interest towards working,

informing them about the company or group’s objectives and missions, and then encouraging

them to think beyond their individual interests (e.g.: see Kent et al, 2001: Stone et al, 2003; Cetin

et al, 2012; Saleem, 2015). Using organizational mechanisms such as rewards, communication,

and organizational policies, this method of transformational leadership creates a dynamic

empowerment culture with active and innovative features. This culture causes transformational

leadership to be more successful by working in dynamic settings which makes this style of

leadership an appropriate one for crisis periods (Kent et al, 2001; Russell et al, 2002; Stone et al,

2003, 2004; Cetin et al, 2012). Figure 5 displays Transformational leadership components:

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Fig 5: Transformational leadership Components (Bass, B & Avilio, 1990: Kent et al, 2001; Stone et al,

2003; Cetin et al, 2012; Saleem, 2015)

Idealized influence: explains the leaders who act as strong models for their disciples. If a leader

is transformational, he or she creates an environment with the feeling of respect, admiration, and

loyalty among his or her disciples and emphasizes the importance of strong commitment to

achieve the organization`s mission (Gumuslouglu & Ilsev, 2008; Jung et al, 2003; Saleem, 2015).

Inspiration motivation: describes the leaders who increase disciples' commitment and create

motivation through their participation in future prospect drawing (Piccolo et al 2010; Purvanova

et al, 2006; Ergenelia et al., 2007; Saleem, 2015).

Intellectual stimulation: is resulted when the leader helps them achieve initiatives and construct

creativities (Gumusluoglu and Ilsev, 2008; Cetin et al, 2012).

Development-oriented support: comes to fruition when the leader pays enough attention to the

disciples' needs hierarchy in order to obtain growth and to avoid any hesitation about receiving

guidance and support. Accordingly, the leader puts some responsibilities on the shoulders of the

disciples in order to guarantee their growth from many different angles (Piccolo et al 2010;

Purvanova et al, 2006; Ergenelia et al., 2007; Cetin et al, 2012; Saleem, 2015).

Transformational Leadership

Intellectual stimulation

Motivation Development-oriented support

Idealized influence

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2-1-3 Transactional leadership

In transactional leadership all things are seen with the overall amount of benefits the individuals

get and the relationship between the leader and disciples is speculative based on exchanging one

thing for another. (Bass, 1985; Bysio et al, 1995; Avoilio, 1999; Yuki, 2002). Bass and Avoilio

(1992) believe that transformational leaders are more successful than transactional ones.

Empirical results also indicate that this approach gives transformational leaders more success,

making their leading more comprehensive, and effective than transactional leaders (Hater &

Bass, 1988). Bass and Avoilio (1992) state that the transformational leader, compared to

transactional ones, are more likely to reduce individuals’ displacement. Transformational leaders

also increase production, returns, and employees’ job satisfaction. Generally speaking, results of

most empirical research show that transformational leadership is much more effective than

transactional leadership on organizational variables such as job satisfaction (Podsakoff et al,

1990; Cetin et al, 2015).

Transactional leadership, also known as managerial leadership, pays attention to the social

interactions and transactions between leaders and followers. It focuses on supervision,

organization, and group performance. Transactional leadership can be described as a style of

leadership in which the leader champions compliance of the followers through both reward and

punishment. Opposing transformational leadership, transactional leaders would rather keep their

current situation because they are not optimistic about change in the future. They are

faultfinders, since they always find a way to track faults in the employees. Transactional

leadership is better adopted in crisis and emergency situations, as well as when work is needed to

be carried out in a specific mode. Transactional leaders conduct their business by identifying the

needs of their followers and donating rewards satisfying these needs for positive performances

(Arnold, 1998). The leader’s freedom to act is constrained by the followers’ perception of the

leader. Followers will only show the demanded behaviors when they experience a certain

authority over them and when there are possibilities for rewards (Bass, 1985). Leaders motivate

their subordinates through observing their performances and reacting to errors and failures. A

transactional leader is aware of the needs of his or her followers and facilitates negotiation with

them so as to meet the overall need of the company or group. A transactional leader will do all

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the tasks with his followers to meet the final target (Bogler, 2009; Deichmann and Stam2015).

The following dimensions of transactional leadership have been identified as contingent reward,

management by exception—active, and management by exception—passive, and laissez-faire in

line with Bass (1995). Leadership style has a few different theoretical components: contingent

rewards and active management by exception. Contingent reward is the degree to which a leader

arranges constructive transactions with followers. The leader is very clear about his or her

expectations and he or she establishes rewards in order to promote better performance. The

leader clarifies what is expected from his or her followers by showing them what they might

receive if they perform as desired. Active management by exception is another theoretical

concept used. This type of concept is shown when a leader takes corrective action against his or

her employees based off of their poor performance. As noted by Howell and Avolio (1993), the

difference between management by exception—active and management by exception—passive

lies in the timing of the leader’s intervention. Before creating any serious problems, active

leaders control follower behavior, predict problems, and make corrective adjustments along the

way. Passive leaders, however, wait until the behavior has already created problems before

taking any action. These leaders implement their adjustments after problems have occurred.

Their ultimate goal is simply to maintain current performance levels. Transactional leaders using

the Passive Management by Exception method intervene only when performance is not in

accordance with expectations. Punishment is used simply as a reaction to unacceptable

performance. Passive management-by-exception leaders tend to react only after problems have

become serious and then take the corrective action. The leaders often avoid having to make any

decisions at all (Bass, 1995).

2-1-4 Relationship-oriented leadership

While the relationship-oriented leadership concept has been discussed for many years (Stogdill &

Coons, 1957), but the aspects of this type of leadership are still relatively new and somewhat

vague (Brower et al., 2000; Death, 2001; Murrell, 1997). In a traditional management discourse,

the term of relational means, “an individual that likes people and thrives on relationships.” In

relationship-oriented leadership, the human resources department and employees are more

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important than the management staff. Relationship-oriented leaders focus more on their

employees’ human needs and cultivating a positive relationship with them. In this style of

leadership, the first priority is establishing a human relationship between the leaders and

employees and keeping it. This type of leadership cares about the physical and mental needs of

their employees. Thus, this style works to create a commitment in their employees and in

learning about their needs. Ultimately this commitment is also used to achieve the organization’s

success (Tabernero, 2009). In relationship-oriented management the focus is less on completing

duties and work, and more on the relationship with the individual employee. This behavioral

style is very effective. The manager is also considered as an individual—whose main goal is to

stimulate growth in his or her employees. However, if the manager performs in an inappropriate

way, then the manager is called an obedient or preacher-like individual (Bass, 2008; Hersey &

Blanchard, 1996).

In this relationship-oriented type of leadership, the individual is described as having a high

tendency towards focusing on tasks and also towards relationships with others. A manager who

applies this style is often called the executive manager, and if he or she applies this style in

inappropriate situations, he or she is called the compromising manager. These types of managers

want to integrate employees’ objectives with the overall objective of the company by using

methods of collaboration, cooperation, and participation in their work field. These managers

often care about participation in public objectives and responsibilities. They are also interested in

motivating individuals by increasing team spirit in their employees (Bryman, Collinson, 2011).

2-1-5 Job satisfaction

A review on job satisfaction shows that it has been studied in many different fields including:

nursery, psychology, sociology, and management. From the time of Herzberg et al (1957), the

concept of job satisfaction has been challenged and revived numerous times. However, this

concept has continues to remain ambiguous. Job satisfaction includes three individual but related

structures, which are: job evaluation, job belief, and emotional experience. Lunderen et al (2005)

defines job satisfaction as one’s emotional reaction to his or her job. Locke (1976) states that job

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satisfaction is a positive or desirable emotional state resulted from the employee’s job experience.

Hegney et al (2006) believe that job satisfaction is a type of feeling of security in the job and the

relationships inside the organization. Also, in their research, Smith (2001) and Easom (2000)

have emphasized that the salary and income are important factors in job satisfaction. Siegel et al

(2005) have considered these variables of observing justice, non-discrimination, and job

satisfaction as being more effective. Cam (2001) and Wild (2006) referred to this as job

independence. Cain (2001) and Palepu (1998) have pointed to the importance of constructive

communication between colleagues and group members. In Thompson’s study, the authorities’

observation has been recognized as important. Flanagan (2002) has established an emphasis on

employment condition, which effects job satisfaction. In their research, Desantis and Durst

(1996) have shown that employees, who have worked with the company for the longest, have

higher levels of job satisfaction. Carayon (2004) showed that job security has a significant effect

on employees’ level of job satisfaction. Table (1) shows the different approaches towards

obtaining this job satisfaction.

Table 1: Shows different definition towards job satisfaction. Job satisfaction concept Researcher

A desirable feeling Wild et al (2006); Lu, et al (2007); Yang and Chang

(2008)

A positive attitude towards the job Weiss (2002), Lunderen et al (2005)

Judging the job Jiang (2008); Liu LF (2007); Daehlen (2008); Head

and Myers (2012)

Job valuation Hegney et al (2006); Mertler (2002); Verplanken

(2004)

Job security Lu, et al (2007); Griffeth et al (2000); Aydin et al

(2012)

Extensive definitions in the field of job satisfaction show that there is not a united framework on

this field (Lunderen, 2005). Thus, researchers try to identify main effective components on job

satisfaction in order to measure this more precisely. Studying the many different published pieces

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of literature, and the implemented studies done on leadership and satisfaction in the workplace,

have shown that salary, benefits, and job security have been identified as the most important

components in regards to job satisfaction (e.g.: Madlock, 2008; Voon et al, 2011; Cetin et al,

2012; Bateh and Heyliger, 2014; Belias et all, 2013).

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3-1 Method

3-1-1 Quantitative Method

Data collection is a very important and crucial process. Any defect in its implementation results

in false data, which leads to incorrect conclusions. To prevent this, it is essential to collect data

by using a logical definition. The correct way of collecting data is by doing so in an appropriate

place at an appropriate time all while in a standard situation. It is very important to use the

proper scientific method when analyzing a specific individual, organization, or group. The data

collection process may include a variety of activities. For example: social, cultural, political,

economic, survey, or even historic investigations. After an objective is selected, and there has

been recognition of the problem, the next step is to recognize data collection resources (Kerlinger

and Lee, 2000). Generally, data resources can be divided into primary (direct) and secondary

(indirect) resources.

Primary data is a type of data that is obtained without mediation through measuring, direct survey

or experimentation (Sounders et al, 2007). While collecting this type of data, proper use of

instruments and the validity of the surveys taken are highly important. Secondary data is type of

data that has already been produced or is in the process of being produced. In historic and

retrospective studies, data sources are usually secondary. After determining data resources, the

next step is to investigate all possible methods of data collection. It is also very important to

select the appropriate instrument. After selecting the appropriate instrument and its design,

confirming its validity is the next step. An example question explaining this more clearly might

be a question like this, “Is the data obtained from applying this instrument reliable?” The

opposite of qualitative data is quantitative data, which will be used in this research. Quantitative

data consists of numerical data, which has been quantified. For example, a survey based on a

questionnaire (Sounders et al, 2007). This method is characterized by the diligent use of statistics

and mathematics (Andersen, 1998). We selected the quantitative approach in order to make our

results more reliable and scientific.

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3-1-2 Survey Methodology

Questionnaire is a form of method in which the respondents themselves respond to a set of

questions. An advantage of the use of a questionnaire instead of an interview is that the former

reaches a larger number of respondents in a shorter time. Further, it is possible to avoid the so-

called interviewer effect, which researchers effect on the respondent in an interview. Another

advantage is that the respondents themselves can choose when, how and where they want to

answer the questionnaire. A disadvantage of the use of questionnaires, particularly postal

questionnaires, is the imminent risk of loss also missing the opportunity to follow up issues and

the difficulty in determining that it is the right person who responded (Bryman, 2005). The

method chosen by a questionnaire was considered the most appropriate for the purpose of this

study and issues. The choice was based upon capturing as many respondents as possible, which

would not be feasible with the interviews.

3-1-3 Choice of the Case Study

The banking sector was chosen as the industry of focus since they have a central role in the

economy. The choice of a banking enterprise has been based on corporate outputs from the

recent financial crisis. SEB and Sewed Bank are two major Swedish banks that incurred major

losses during the financial crisis, largely due to issuing loans that are given in Euros

(Ekonomi, 24).

3-1-4 Material Collection

As the human sciences are based on the theory and empirical evidence, this study supports the

theoretical results, which have been used in the modeling behavior of bank employees. To gather

the empirical findings, first I contacted the main SEB office in Rissne but they unfortunately

refused to participate in the survey. Afterwards I decided to go to other SEB´s branches to

distribute the questionnaires personally. Right from the start of the study, I had the intention to

write down the name of all SEB´ branches that were selected for the study. In contrast, while

collecting the answered questionnaires, I received a request from the chiefs to additionally

anonymous the branches. Thus, with respect to this, all SEB´ branches that were selected for this

24

case study will be referred to SEB. Therefore, the following study based on empirical data

gathered through questionnaires that were distributed among sex different SEB branches´ staffs.

The non-random sampling has been used in this study. A total number of hundered

questionnaires were distributed among employees of different branches of SEB on November

19th and seventy-one questionnaires were collected on November 30th, in other words there was

twenty-nine questionnaires loss therefore, seventy-one precent of the questionnaires were

returned.

3-1-5 Modeling

According to this theoretical framework and early studies, we are using the conceptual model

in Figure (6) to investigate the relationship between leadership styles (Transformational,

Transactional and Relationship-oriented) and employee’s satisfaction while working in SEB,

the Swedish bank.

Fig 6: Conceptual Model

According to Fig6, hypotheses tested in this study are as follows:

𝐻!: There is a significant relationship between the transformational leadership and job

satisfaction

𝐻!: There is a significant relationship between the transactional leadership and job

satisfaction

𝐻!: There is a significant relationship between the relation-oriented leadership and job

satisfaction.

Transactional Leadership

Relationship-oriented Leadership

Transformational Leadership

Job satisfaction

H1

H2

H3

25

3-1-6 Research Approach

According to the objective, scientific research can be divided into two groups: fundamental and

applied research (Andersen, 1998). The main purpose of fundamental research is to test

hypotheses, and to explain the relationships between phenomena by adding to the existing

knowledge of a specific field. Fundamental research investigates pre-existing theories, by

confirming or rejecting them. The objective of applied research is to test these theories in real

situations. By taking these methods they can then improve their efficiency. In other words,

applied research is directed towards practical application. According to the way of data

collection, scientific research is divided into two groups of descriptive research: non-

experimental and experimental. The purpose of descriptive research is to explain in detail the

findings of the research. In these types of studies, the researcher tries to investigate the

individual or society’s characteristics, and detect the relationships between them. Descriptive

research can be divided into five groups: survey, action, case study, correlational, and after event.

In a case study the researcher selects a ‘case’ and then investigates it from numerous angles. The

relationship between variables according to the objective of the research is analyzed in

correlation research. Correlation research can be divided into three groups based on the

objective: a) bivariate correlation study, b) regression analysis, and c) analysis of covariance of

correlation matrix. In bivariate correlation studies, the purpose is to investigate the existing

variables as of a relationship. In regression analysis, the purpose is to predict the changes of one

or more dependent variables, or criterion, regarding the changes of independent variable, also

known as the predictor. In some investigations, a great deal of bivariate correlations are

investigated and analyzed in a table called the correlation matrix or covariance. The most

important ones are factorial analysis and structural equation modeling (SEM). In factorial

analysis the purpose is to summarize a set of data or latent structure variables. However, in

structural equations the main purpose is to test the structural relationships based on the existing

theories and research. Causal-comparative approaches are also types of research in which the

researcher, regarding the dependent variable, investigates the problem cause of its occurrence.

Experimental research is a type of research in which the value of one or more independent

26

variables change and their effect on one or more dependent variables is evaluated. Since the aim

of this study is to investigate how different leadership styles effect job satisfaction, the best

method of analyzing this data is by using applied research. Applied research is the best method

since the goal of this study is to define the different relationships with many variables at play,

specifically structural relationships. Based on existing theories and research findings, it can be

concluded that the data collection of this study is done by using the descriptive-correlation

method.

3-1-7 Implementation

The general strategy of data analysis in this study was used by applying the two-step approach of

Anderson and Gerbing (1988). In this approach, the confirmatory factor analysis (CFA) is used.

The first step in using the CFA is to evaluate the measurement model. After that, the structural

equation modeling is used in order to evaluate the numerological confirmatory. This type of

modeling is also used to confirm the validity of the structural model. The sample used is

compared to the substitute (rival) models and then the hypotheses are tested. When investigating

the structural model, the proposed hypotheses indicate the relationships between the latent

variables. Here, the purpose is to investigate this issue of whether or not the data supports the

suggested concepts (Vieira, 2009). Some questions investigated in this step are as follows: (1) is

the direction of relationships between structures correct, according to the hypotheses? (This issue

can be investigated through signs of relevant parameters.) (2) Are the relationships between

variables strong enough? (This strength is investigated through the significance.) Finally, (3) Is

the variance of endogenous variables measured by square multiple correlation coefficient (R2) of

structural equations, explained clearly using the relevant variables?

After asking those questions, there are two main variables in structural modeling, observational

and latent variables. Latent variables are not directly observable or measurable. Also, these

variables are deducted structures based on observational variables that must be selected and

measured. Observational variables are types of variables directly observed and measured. In this

study, leadership styles (transformational, transactional, & relationship-oriented) and job

27

satisfaction are latent variables, and the questionnaire questions used are essentially latent

variables because they are observed variables (Vieira, 2009).

Despite the fact that there is not a full agreement on the appropriate indexes that are used, it is

still important to evaluate the general idea of a fit-model (Ping, 2004). Chi-square statistics are

widely used as one of the fit indexes. Chi-square tests the difference between the hypothetic

model and the existing data that is, “the estimated variance-covariance matrix deviation from

sample variance-covariance matrix is because of sampling error.” Significant values of chi-

square mean that there is an intense divergence between the data and model—therefore the model

should then be rejected. In testing fit goodness, however, the chi-square statistic is increased by

increasing the sample volume. Therefore the results from the model can be rejected even with

little divergence. This feature limits the practical usefulness of this index. It is better to report

more additional criteria in this field (Bagozzi & Heatherton, 1994; Baumgartner & Humburg,

1996). Following fit indexes selected for this analysis are based on former studies (Baumgartner

& Humburg, 1996; Ping, 2004). Four of these indexes are counted as the fitness absolute

indexes, which evaluate the general data fitness, compared to the conceptual model for the

structural models and measurement models (Bollen, 1989; Hier et al, 1998). These indexes are:

(1) testing the fit goodness of chi-square (x2) which is the ratio of to the degree of freedom (x2/df);

(2) root mean squared error of approximation (RMSEA); (3) goodness of fit index (GFI); and (4)

adjusted goodness of fit index. Other than these indexes, there are two other indexes used to

compare the fit model to the base model, which are hypothesized in these tests so that all of the

observed variables are not correlated (Baumgartner & Humburg, 1996). These indexes include

comparative fit index (CFI), and non-normed fit index (NNFI). Table (2) presents a description

of these indices and suggested cut-offs.

28

Tabel 2: Descriptions and thresholds of goodness-of-fit index Description Cut-offs

𝓍!/df

Because the chi-square test is sensitive to sample size and is only

meaningful if the degrees of freedom are taken into account, its value

is divided by the number of degrees of freedom

1-2 or 1-3

RMSEA Shows how well the model fits the population covariance matrix, taken

the number of degrees of freedom into consideration 0.08 >

GFI Comparison of the squared residuals from prediction with the

actual data, not adjusted for the degrees of freedom > 0.90

CFI Shows how much better the model fits, compared to a baseline model,

normally the null model, adjusted for the degrees of freedom > 0.90

Source: Baumgartner and Homburg (1996), Cote et al. (2001), MacCallum et al. (1996), Ping (2004);

Vieira (2009).

Our data was analyzed by the statistical analysis software SPSS and Lisrel.

In this study SPSS and LISREL software are being used to estimate the conceptual model.

LISREL stands for ‘Linear Structural Relations’. LISREL is a computer program that is used

for the estimation structural equation models. Although there are other statistical packages that

are used in the analysis of structural equation modeling, most researchers have accepted

LISREL as the best statistical software to estimate structural equation models. Indeed, there is

a very clear distinction between SEM and LISREL. Often the term LISREL models reffers to

the structural equation models regardless of the type of software used for estimation. In

contrast, the term SEM structural equation is methodology that researchers consider it as one

of the most sophisticated statistical tools (Vieira, 2008). SEM methods will be presented in

detail in the next chapter.

29

3-1-8 Reliability and Validity

Validity and reliability are two fundamental elements in the evaluation of a measurement

instrument. Reliability refers to the consistency, stability, or repeatability of results (Christiansen,

2004). In other words, the reliability of the data is the extent in which the measures yield the

same results on other settings. Likewise, if similar results have been found by other researches.

That is, the reliability is high if the results are the same each time they are tested (Saunder et al,

1998).

Table 3: The Cronbach’s alpha(s)

Factor Cronbach’s alpha

Transactional 0.731 Transformational 0.763 Relation-oriented 0.780

Satisfaction 0.746 Total 0.773

In Table 3 Cronbach’s alphas are above Nunnally´s (1978) 0.70 threshold, suggesting adequate

reliability. In addition, as can be read from Table 2, composite reliability for each of the

components exceed Bagozzi and Yi´s (1988) .60 cut-off, thus providing additional support for the

constructs’ acceptable reliability.

Validity is achieved when the methodology and research data that is shown in the survey is

accurate and true. Wainer and Braun (1998) describe the validity in quantitative research as

“construct validity”. The construct is the initial concept, notion, question or hypothesis that

determines which data is to be gathered and how it is to be gathered. They also assert that

quantitative researchers actively cause or affect the interplay between construct and data in order

to validate their investigation, usually by the application of a test or other process. In this sense,

the involvement of the researchers in the research process would greatly reduce the validity of a

test.

30

4-1 Empirical findings

4-1-1 Descriptive Statistics

Descriptive statistics help describe, summarize and illustrate data in a more effective way.

Descriptive statistics summarize the patterns that emerge from the responses observed in a

sample. Therefore, in this section, the tables and graphs were used to illustrate descriptive

statistics so that there is transparency in our data. Tables are considered as one of the most

important tools in the representation of research data. On the other hand, when the distribution of

a variable is important, it is best to describe it in terms of graphs. A total of hundred

questionnaires were distributed among SEB’s employees and seventy-one fully answered

questionnaires were used for statistical analysis. In other words, seventy-one percent of the

questionnaires were returned.

4-1-2 The frequency of respondents based on their gender

Table (4) represents the frequency percentage of respondents based on their gender. The data

indicated that about 43.6 percent of the respondents were male and the rest were female.

Tabel 4: Frequency of Respondents based on their Gender

Frequency percentage Frequency Gender 43.6 31 31 Male 56.4 40 40 Female 100 71 71 Total

31

4-1-3 Distribution of respondents according to their age

Table (5) represents the frequency and the percentage of respondents by each age group,

respectively. As in can be seen in the Table (5) and Figure (8) the majority of respondents were

between 27 and 35 years old, meaning most of them were young.

Table 5: Distribution of respondents according to their age Age Frequency Frequency percentage

Under 26 11 15.4

27 to 35 37 52.11

36 to 45 16 22.53

46 to 55 7 9.96

56 t0 65 0 0.00

66 ot older 0 0.00 Total 71 100

32

5-1 Analysis

5-1-1 Estimation model

In this part of the analysis, the structural equation modeling (SEM) approach was used to test the

hypotheses of the research. This two-stage approach, suggested by Anderson and Gerbing

(1988), is a common method for assessing the measurement model of the research. Based on this

approach, at the first stage, the confirmatory factor analysis (CFA) is estimated for the

assessment of the measurement models. In confirmatory factor analysis (CFA) the validity and

reliability of the model is measured under the assumptions of the structural equation modeling

(SEM) system. At the second stage, the validity and the goodness-of-fit are assessed based on

data structure. Thus, using a two-step approach, we check the accuracy of the measurement

models and then with the use of the SEM, estimated the proposed model and by testing the

hypotheses. The results of the process are presented in the following chapter.

This chapter addresses the assessment of the measurement and structural model. As mentioned

before, the two-stage approach suggested by Anderson and Gerbing (1988), is used for testing the

hypotheses. In this regard, at the first stage the measurement model, called the confirmatory

factor analysis, was analyzed and the structural equation model was estimated.

33

5-1-2 Assessment of the measurement model

The results of the confirmatory factor analysis were presented in Table (6).

Tabel 6: Confirmatory factor analysis of independent variables Variable Question coefficient T-Value

Transformational

Leadership

TF1 0.59 3.65

TF2 0.47 2.76

TF3 0.69 6.10

TF4 0.55 6.43

TF5 0.49 5.56

TF6 0.49 4.21

TF7 0.60 5.02

TF8 0.83 4.24

TF9 0.55 3.23

TF10 0.61 3.80

Relationship-oriented

Leadership

RO1 0.31 7.23

RO2 0.46 3.40

RO3 0.26 3.34

RO4 0.59 3.89

RO5 0.55 4.05

RO6 0.58 4.59

RO7 0.48 4.67

RO8 0.58 5.58

RO9 0.65 3.63

Transactional

Leadership

T1 0.49 2.08

T2 0.71 2.97

T3 0.64 3.64

T4 0.96 2.45

T5 0.86 2.88

34

Tabel7: Confirmatory factor analysis of independent variables variable Question coefficient T-Value

SATISFACTION

SF1 0.41 3.81

SF2 0.59 5.03

SF3 0.66 3.56

SF4 0.36 4.76

SF5 0.52 3.12

SF6 0.74 2.20

SF7 0.32 3.76

SF8 0.28 2.47

SF9 0.42 2.67

SF10 0.56 3.45

SF11 0.69 2.19

SF12 0.30 4.56

SF13 0.24 3.08

SF14 0.77 4.56

SF15 0.71 3.16

SF16 0.63 2.65

SF17 0.85 4.23

SF18 0.58 3.78

SF19 0.70 3.56

SF20 0.54 3.34

SF21 0.51 1.98

35

It is recommended that factors with regression weights (using the coefficient) that are close to

0.30 are significant and acceptable (Viera, 2009). The commonly reported indices for assessing

the goodness-of-fit were as follows:

NFI=0.89: CFI=0.90; GFI= 0.88; X2 /df= 2.62

According to the obtained results for the goodness-of-fit in various studies (Baumgartner and

Homburg (1996); Cote et al. (2001); MacCallum et al. (1996); Ping (2004); Vieira (2009) the

estimation of an acceptable cut-off was satisfied.

5-1-3 Estimation of the Structural Equation Model (SEM)

After the first stage of the model estimation, the second stage is assessing the validity of the

goodness-of-fit according to the data structure using SEM. In other words, after making sure the

measurement model is correct, we start to analyze the structural model using confirmatory factor

analysis (CFA). Table (8) presents the results of the estimation using the structural model to test

the hypotheses.

Tabel8 : Results of Structural Equation Model and hypothesis testing Support Or rejected T-Value Coefficient Hypothesis

Support 3.83 0.83 Job Satisfaction Transformational

Support 2.57 0.57 Job Satisfaction

Transactional

Support 2.21 0.21 Job Satisfaction Relationship-oriented

36

Based on the results presented in Table(8) the results of research are as follows:

𝐻!: There is a significant relationship between the transformational leadership and job

satisfaction.

As it can be seen in Table(8) the estimated value for the regression coefficient was equal to

0.83 and it was positive. The value of t-ststistic was equal to 3.83 and it was greater than

the critical value of t-statistic at the 95% level of confidence (1.96). Therefore, it can be

concluded that the transformational leadership has a positive significant effect on the job

satisfaction.

𝐻!: There is a significant relationship between the transactional leadership and job

satisfaction.

As it can be seen in Table(8) the estimated value for the regression coefficient was equal to

0.57 and it was positive. The value of t-ststistic was equal to 2.57 and it was greater than

the critical value of t-statistic at the 95% level of confidence (1.96). Therefore, it can be

concluded that the transactional leadership has a positive significant effect on the job

satisfaction.

𝐻!: There is a significant relationship between the relation-oriented leadership and job

satisfaction.

As it can be seen in Table(8) the estimated value for the regression coefficient was equal to

0.21 and it was positive. The value of t-ststistic was equal to 2.21 and it was greater than

the critical value of t-statistic at the 95% level of confidence (1.96). Therefore, it can be

concluded that the relation-oriented leadership has a positive significant effect on the job

satisfaction.

37

6-1 Conclusion

Leadership in an organization has a strong effect on the attitudes of the employed staff and their

work ethic while on the job. Today, most modern organizations know that the leaders and

managers they hire can either lead to the ultimate success or failure of their organization. The

success of a company depends on the leadership style of their management team (Saleem, 2015).

In the 1940’s there was a ‘personal-characteristic theory’ that was very popular and was used for

hiring leading staff members; but after thorough research was done, it showed negative results

and contradictory findings. Today, researchers that focus on studying different management

styles have found that the key to success in hiring the right leader is to acknowledge the

differences in leadership styles, and choose accordingly. In other words, in determining the

characteristics of leaders, they attempted to understand their style of leadership by examining the

tactics they used when dealing with their staff members (Avolio and Bass, 2004; Locke, 1976;

Madlock, 2008 Bushra, 2011; Cetin, et all, 2012; Belias, 2013). Most researchers believe that the

type of leadership style the management uses affects his or her staff (for example see Gadot,

2007; Furkan, 2010; and Saleem, 2015). The attitude of the manager and how he or she

approaches his staff affects the team. The leadership style always directly or indirectly affects

the job satisfaction of the employees in their organization. The labor force in any company is the

most important resource because they play a considerable role in achieving the organization’s

goals. The employees are the backbone and main motivational force of any organization.

Therefore, their perceptions and attitudes toward their jobs affect the life, efficiency and

effectiveness of the organization. The general attitude of people towards their job is a behavioral

phenomenon that is part of their identity and is considered their “job satisfaction.” This

satisfaction is rooted in positive and negative views that the individuals have toward their work.

The management team easily affects this attitude. All human resources are considered as the most

vital part of any organization and the only means of survival. Therefore, understanding the

requirements, motivations and desires of employees is not only necessary, but also essential in

the success of any professional organization (Awamleh et al, 2008; Bushra, 2011; Cetin, et all,

2012; Belias, 2015;).

38

Growth and prosperity in economic structures have a close relationship with the way that banking

institutions operate. The banking system in any country provides services without which the

economic system remains incomplete. Banks are the main source of buying goods, giving out

concessional loans, opening businesses, corporations and governments. Nowadays, banks are the

most important element in money market play and they have the most important role in

economics all over the world. Banks are the main providers of financial resources in sectors of

economy like the oil industry, agricultural industry, and service industry. In addition to its

original function, the main motivation that banks have is to mobilize and allocate resources by

providing various services to customers. Thus, simultaneously making profit for the bank as well

as the economy (Lawson, 2012; Belias et all, 2015; Belias et all, 2014). The recent financial

crisis made the role of the management in banks much more important. Since the crisis, the

importance of these experimental studies on management in the work place and its effects on job

production has increased.

The purpose of the current study is to evaluate the effects of leadership styles (transformational,

transactional and relationship-oriented) on job satisfaction in different branches of SEB. To do

so, the following hypotheses were tested according to the conceptual model and theoretical and

empirical studies:

𝐻!: There is a significant relationship between the transformational leadership and job

satisfaction.

𝐻!: There is a significant relationship between the relation-oriented leadership and job

satisfaction.

𝐻!: There is a significant relationship between the Subjective transactional leadership and

job satisfaction

39

Based on analysis of data from 71 questionnaires, the following results were obtained:

Table9: the results of the structural models and hypotheses testing

ü / × Hypothesis

ü Job Satisfaction Transformational

ü Job Satisfaction Transactional

ü Job Satisfaction Relationship-oriented

Due to the results preseneted in Table(9) the results of the study were as follows:

The results found while testing this hypothesis are consistent with Howell and Avolio (1998); Bass

(1998); Gadot (2007); Riaz and Haider (2010); Cetin et al (2012); Barun (2013); Furkan et al (2010);

Saleem (2015).

According to the results of the study, the effects of transformational leadership and job satisfaction are

much greater than the effect of transactional leadership on job satisfaction. As noted by Howell and

Avolio (1993), the difference between management by exception —active and management by

exception— passive lies in the timing of the leader’s intervention. Before creating any serious

problems, active leaders control follower behavior, predict problems, and take corrective actions.

Passive leaders, however, wait until the behavior has already created problems before taking any

corrective action. The leaders zoom in on controlling task implementation for any problems that might

happen and correcting those problems to maintain current performance levels. Passive management

by exception: transactional leaders intervene only when performance is not in accordance with

expectations. Punishment is used as a reaction to unacceptable performance. Passive management-

by-exception’s leaders tend to react only after problems have become serious before taking corrective

action, and often avoid making any decisions at all (Bass, 1995). In addition, the most prominent

leadership style appeared to be the transformational one, which can predict employees’ satisfaction

with their work itself. However, further investigation should be carried out in a larger sample, so that

the results can be generalized.

40

Results also indicate that there is a significantly more positive effect on employees’ job satisfaction

when using the relationship-oriented style. Employees mostly prefer relationship-oriented managers

and this style of leadership affects their spirit positively. Relationship-oriented style of management is

when a leader uses by open communication, delegates responsibilities, and gives opportunities to

subordinates to use their potential capabilities. These managers also tend to establish personal

relationships between him and the subordinates. This style also uses emotional-social support,

friendship, and mutual trust. Relationship-oriented leadership style is mostly dependent on the

manager’s attention to the organizations employees by providing them with prosperity and job

satisfaction. The leader cares about the subordinates’ feelings and respects their beliefs. The

relationship between the leader and subordinates is established on mutual trust, respect and

communication. In structuring behavior, the leader defines the relationships between him and

subordinates clearly and his followers know what they are expected to do. In addition, the leader

determines the communication channels and specifies the group’s tasks. The relationship-oriented

leadership style cares more about human relationships. Therefore, this study has found that caring

about human relationships in workplaces by creating intimacy and friendly communication is the most

effective in improving employee’s work. The manager encourages them to work, which usually

increases the employees’ efficiency and their attention to problems while on the job. The manager, by

using encouragement and positivity, directs the group of working individuals towards the

organization’s objectives by giving them the freedom and rewards to do so. Therefore establishing a

strong group of employees all working with one goal in mind: producing gains for both themselves

and the company.

41

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Appendix

Questionnaire

Section1

Demographic Questions

The following questions are concerned with your boss and your work position. Completion of this

questionnaire is voluntary and confidentiality of information is assured. No individual data will be

reported.

THANK YOU!

What is your gender?

Male

Female

Other

How long have you been working in this organization?

_______________ Years ____________ Months

What is your Age Group?

Under 26 46 to 55

26 to 35 56 to 65

36 to 45 66 or older

……………………………………………………………………………………………

Section2

50

Strongly Disagree1 Disagree2 Neither Agree nor Disagree3 Agree4 Strongly Agree5

Variable Item 1 2 3 4 5

Tran

sfor

mat

iona

l

Lead

ersh

ip

1. Instills pride in me

2. pends time teaching and coaching

3. Considers moral and ethical consequences

4. Views me as having different needs, abilities

5. Listens to my concerns

6. Encourages me to perform

7. Increases my motivation

8. Encourages me to think more creatively

9. Sets challenging standards

10. Gets me to rethink never-questioned ideas

Source: Adapted from Bass and Avolio’s (1991 ) multi factor leadership questionnaire.

Strongly Disagree1 Disagree2 Neither Agree nor Disagree3 Agree4 Strongly Agree5 Variable Item 1 2 3 4 5

Rel

atio

nshi

p-or

ient

ed

Lead

ersh

ip

1. Manager provides freedom to people under his control in doing their tasks

2. Manager allows people under his control to use their individual judgments for solving problems

3. Manager frees people to have job rotation and allow them to circulate in different occupations.

4. Manager hates to give freedom to members of the group.

5. Manager delegate the authority to the staff to do some of the tasks.

6. Manager is willing to make changes.

7. Manager himself sets the work schedule to be done.

8. Manager allows employees themselves adjust the speed of their works.

Source: Luthans, F (2001). Determined the leadership Style in Management

Transactional Leadership

Strongly Disagree1 Disagree2 Neither Agree nor Disagree3 Agree4 Strongly Agree5

51

Variable Item 1 2 3 4 5 T

rans

actio

nal

Lead

ersh

ip

1. Makes clear expectation

2. Will take action before problems are chronic

3. Tells us standards to carry out work

4. Works out agreements with me

5. Monitors my performance and keeps track of mistake

Source: Adapted from Bass and Avolio’s (1991 ) multi factor leadership questionnaire.

SATISFACTION

Strongly Disagree1 Disagree2 Neither Agree nor Disagree3 Agree4 Strongly Agree5

Variable Item 1 2 3 4 5

SATI

SFA

CTI

ON

I express my opinion freely without any fear in the presence of my

boss.

As far as I do my tasks properly, I’m not concerned about losing

my job.

I can plan about future decisions along with doing my profession.

I’m concerned about making sudden mistakes in my work

My boss is a skillful and worthy person.

My boss is completely aware of the value of my job and respects it.

I have enough access to information required to do my job.

The procedures and rules of my work were explained to me clearly.

My job is in accordance with my specialty.

I have enough opportunities for development and making progress

in my work.

52

My salary is fair with respect to the difficulty of my job.

I have appropriate income with respect to my other job

opportunities.

I have access to other benefits such as pensions and insurance and

they are fair.

I have access to appropriate sanitary facilities.

Amenities and appropriate working tools are provided to me.

My boss has an appropriate relationship with employees.

I find discrimination among staff in relationship with my boss.

I have a friendly relationship with others in my workplace.

I feel to be in a team when I work with other staff.

I am completely aware of the purpose of the organization.

I know my work is really effective in achieving the goals of the

organization

Source: Gupat and srivatsava (2000)

53

CFA for Transformational Leadership

CFA for Transactional Leadership

54

CFA for relation-oriented Leadership

CFA for Satisfaction

55

Structural Model

56

T-Value for Structural Model