Effect of leadership on organizational commitment.
Lyndon, Shiji ; Rawat, Preeti S.
This paper focuses on the relationship between leadership and
organizational commitment in the Indian context. It traces the research
on leadership and commitment and arrives at a conceptual framework
establishing the linkages between the relevant variables. Data was
collected through questionnaires to measure leadership styles and
organizational commitment. A total of 239 responses was gathered from
employees working in banking, higher education, Information Technology
and manufacturing sectors. The research finds a positive linkage between
leadership style and organizational commitment. One important finding of
the study has been that, in the Indian context, contingent reward is
perceived more transformational than transactional factor. Implications
of this study on managerial practice are also discussed.
Introduction
In today's competitive environment organizations are trying to
outperform their competitors by producing better products and services.
To achieve this objective, an organization requires highly committed
employees. Organizational commitment refers to an employee's
psychological bond with the organization (Mowday, Steers & Porter,
1982). The concept of organizational commitment has received
considerable attention because of its impact on individual performance,
organizational effectiveness and its relationship with desirable work
outcomes (SjmOsi & Xenikou, 2010). Thus, the factors which influence
organizational commitment have become an important area of research in
the field of human resource development (Joo & Shim, 2010).
An increasing number of studies focus on identifying the
antecedents of organizational commitment (Chen & Francesco, 2000;
Lok & Crawford, 2001; Mathieu & Zajac, 1990; William &
Hazer, 1986). The influence of leaders on creating and maintaining
organizational culture is an accepted fact (Panda & Gupta, 2001).
The literature on leadership suggests that the ability to understand and
work within a culture is a prerequisite to leadership effectiveness
(Henessey, 1998). In this paper we study the influence of leadership
styles on organizational commitment. Transformational and transactional
leadership styles are studied to understand its influence on affective,
continuance and normative commitment.
Leadership
Leadership is one of the most widely and frequently studied topics
in the area of organizational behavior (Yammarino, 2013). There are
numerous definitions and approaches to leadership. Leadership can be
viewed from multiple perspectives. It can be represented as an act
(Bennis & Goldsmith, 1994), behavior (Hemphill & Coons, 1957;
Gerber, Nel & Van Dyk, 1996; Rowden, 2000) or process (Jacques &
Clement, 1991; Stogdill, 1974; Yukl, 1999; Northhouse, 2007).
Similar to the wide range of leadership definitions used by
different researchers and practitioners, there are also differences in
conceptualizing and'measuring leadership. Some of them have focused
solely on the leader to explain leadership, while there are others who
have used follower centered approach. Graen and Uhl Bien (1995)
classified leadership theories into three categories: the leader, the
follower and the leader follower relationship. Hernandez, Eberly, Avolio
and Johnson (2011) integrated the numerous theories of leadership on the
basis of two fundamental principles i.e. the locus and mechanism of
leadership. The locus of leadership refers to the source from which
leadership emerges. While the mechanism of leadership implies the means
by which leadership is enacted. Hernandez et. al. (2011) categorized
leadership theory into five loci: i.e. leader, follower, leader-follower
dyad, collective, and context. Hernandez et. al. (2011) also identified
four mechanisms of leadership i.e. traits, behaviors, cognition and
affect.
Transformational & Transactional Leadership Theories
Transformational and transactional theories of leadership are based
on the concepts given by McGregor Burns (1978) in his bestselling book
"Leadership". The concept of transformational leadership
emerged'from the interest in the concept of charismatic leadership.
Transformational leadership consists of four components: charisma or
idealized influence, inspirational motivation, intellectual stimulation
and individualized consideration (Bass, 1985). Charisma or idealized
influence is the degree to which the leaders can influence followers to
identify with the leader by arousing strong emotions. Inspirational
motivation is the degree to which the leader communicates an appealing
vision and inspires followers to pursue that. Intellectual stimulation
is the degree to which the leader articulates new ideas, encourages
followers to question conventional practices and fosters creativity
among the followers. Individualized consideration is the degree to which
the leader provides support, encouragement and coaching to followers.
Transactional leadership refers to the exchange relationship
between the leader and the follower to fulfill their interests (Bass,
1999). Transactional leaders try to fulfill follower's needs in
exchange of their completing the job requirements. Transactional
leadership consists of three components: contingent reward, management
by exception-active and management by exception-passive. Contingent
reward refers to the degree to which leaders can establish transaction
with followers by rewarding the efforts of followers by communicating
with them as to what they must do to get rewards and punishing
undesirable actions. Management by exception is the degree to which the
leader takes action by intervening so that the decided standards are
achieved. The difference between active and passive
management-by-exception is made on the basis of the timing of the
leader's intervention (Bass & Avolio, 1993). Active leaders
intervene by anticipating mistakes and problems and taking preventive
action before the problem becomes grave while passive leader intervenes
only after the follower fails to meet the pre-determined standards.
Organizational Commitment
Organizational Commitment is the degree of identification and
participation in an organization. It is the mental contract which
connects the individual to the organization (Wallace, 1995). It helps in
developing voluntary cooperation within the organization. It shows the
strength of an individual's identification with the involvement in
an organization and also the willingness to remain in the organization
(Mowday, Steers, & Porter, 1979). Organizational commitment has
three characteristics: (a) belief in and acceptance of organizational
goals, (b) willingness to put effort and (c) desire to continue to be
the member of the organization (Porter, Steers, Mowday & Boulian,
1974).
Mathieu and Zajac (1990) conducted a meta-analysis to examine the
antecedents, correlates and consequences of organizational commitment.
They identified twenty six common antecedents of organizational
commitment. They classified those twenty six antecedents into five
categories: (a) personal and demographic variables (b) variables related
to job characteristics (c) variables related to group leader (d)
organizational characteristics related variables and (e) role related
variables. Another major study on the antecedents, correlates and
consequences of organizational commitment was the meta-analysis
conducted by Meyer, Stanley, Herscovitch and Topolnytsky (2002). They
investigated the correlation between the variables identified in the
three-component model of organizational commitment unlike Mathieu and
Zajac (1990) who had based their observations on attitudinal-behavioral
perspective of organizational commitment. They divided the antecedents
into four categories: (a) demographic variables such as age, gender,
education, organization tenure, position tenure and marital status, (b)
variables related to individual differences such as locus of control and
self-efficacy, (c) variables related to work experiences such as
organizational support, transformational leadership, role ambiguity,
role conflict, interactional justice, distributive justice and
procedural justice, (d) variables related to alternatives/investments
such as alternatives available, investments made, transferability of
education and transferability of skills.
Three Component Model
Meyer and Allen (1991) developed a three component model of
organizational commitment. They defined these three themes as components
of organizational commitment namely affective commitment, continuance
commitment, and normative commitment.
Affective commitment leads to continuing to work for an
organization because of the employee's emotional attachment,
involvement and identification with the organization (Wasti, 2003).
Employees with affective commitment remains in the organization because
they "want to". Continuance commitment refers to the
commitment that is based on the costs that are linked with leaving a
specific organization (Wasti, 2003). In the case of continuance
commitment, the employee primarily stays with their current organization
because they perceive that leaving the organization would cost too much
(Clugston, Howell & Dorfman, 2000). Normative commitment refers to
the employees' perceived obligation to remain with their
organization (Lee et al., 2001; Wasti, 2003). An employee with normative
commitment will stay with an organization because they feel that they
"ought to" (Clugston et al., 2000).
Transformational Leadership
Commitment is as a result of effective leadership style (Walumbwa,
Lawler, Avolio, Wang & Shi, 2005; Walumbwa & Lawler, 2003).
Transformational leaders motivate employees through emotionally
connecting with them and creating a compelling vision. They promote
values which are related to the goal accomplishment, by emphasizing the
link between the employee's efforts and goal achievement and by
creating a greater degree of personal commitment to the ultimate common
vision of the organization (Shamir, Zakay & Popper, 1998).
Transformational leaders are sensitive to the needs of the employees and
thus try to satisfy them by creating environment where employees desire
to continue with the organization (Jackson, Meyer & Wang, 2013).
They influence organizational commitment by encouraging employees to
think critically by involving followers in decision-making processes,
inspiring loyalty, while recognizing using innovative ways, and
appreciating the different needs of each follower to develop his or her
personal potential (Avolio, 1999). Walumbwa and Lawler (2003) found that
transformational leaders can motivate and increase follower's
motivation and organization commitment by getting them to solve problems
creatively and also understanding their needs. They may also create a
sense of obligation in employees which leads to normative commitment
(Bass & Riggio, 2005).
Research on the relationship between transformational leadership
and the different components of commitment have resulted in different
findings. The meta-analytic studies suggest that employees working with
transformational leaders demonstrate fewer withdrawal behaviors and are
more committed to their organizations (Walumbwa et al., 2004; Walumbwa
& Lawler, 2003). Heinitz and Rowold (2007) and Rafferty and Griffin
(2004) reported positive relation of transformational leadership with
affective commitment. Meyer, Stanley, Herscovitch & Topolnytsky
(2002) identified four studies that examine the relationship between
transformational leadership and affective commitment and continuance
commitment and three studies investigating the relation with normative
commitment. They found positive relation with affective commitment and
normative commitment and a negative relation with continuance
commitment. The meta analytic study of Jackson et al. (2013) also found
transformational leadership is positively related to affective and
normative commitment.
Based on the literature, following hypotheses are proposed:
Hypothesis 1: Leadership is positively related to organizational
commitment.
Hypothesis 2: Transformational leadership is positively related to
affective commitment.
Hypothesis 3: Transformational leadership is positively related to
normative commitment.
The links between transformational/charismatic leadership and
continuance commitment is relatively complex because it is a
multidimensional concept (Powell & Meyer, 2004) which includes the
perceived cost of leaving because of lack of alternatives and also
tendency to stay back because of investments made in the organization
(Jackson et al., 2013). At a conceptual level, it is expected that there
might be a positive correlation between transformational/charismatic
leadership and continuance commitment because the positive conditions
created by transformational leaders would be perceived as a loss if
employees decided to leave the organization (Connel, Ferres &
Travagilone, 2003). Felfe, Yan & Six (2008) found weak positive
correlation between transformational leadership and continuance
commitment. However, Rafferty & Griffin (2004) and Meyer, Stanley,
Herscovitch & Topolnytsky (2002) found that several dimensions of
transformational leadership correlated negatively with continuance
commitment. Therefore, because of the lack of conclusive literature on
relation between transformational leadership and continuance commitment,
no specific hypothesis was formulated and analysis was considered
exploratory.
Transactional Leadership
There are two aspects of transactional leadership i.e. contingent
reward leadership and management by exception leadership. Contingent
reward relationship is rewarding employees when they achieve the desired
objective. Management by exception is involving with the employees only
to correct the mistakes. Management by exception can be active or
passive. Judge and Piccolo (2004) found that contingent reward
leadership had strong positive correlation with job satisfaction and
performance which has been linked to commitment (Meyer et al., 2002).
The meta analysis by Jackson et al., (2013) also found a strong positive
relation between contingent reward leadership and affective commitment.
They found that management by exception (active) also had positive but
weak correlation with affective commitment. While, management by
exception (passive) had negative correlation with affective commitment.
Therefore, based on the literature, following hypotheses are
proposed:
Hypothesis 4: Leadership style following contingent reward relates
positively to affective commitment.
Hypothesis 5: Leadership style following the dimension of
management by exception (active) relates positively to affective
commitment.
Literature does not give any strong theoretical rationale for the
relations of transactional leadership with normative and continuance
commitment, therefore. no specific hypothesis was formulated and
analysis was considered exploratory.
Transformational vs. Transactional Leadership
Transformational and transactional leaders differ in terms what the
leaders and followers have to offer one another (Conger & Kanungo,
1998). Transformational leaders offer purpose to the follower which is
beyond the short term goals and also aims to fulfill their higher order
intrinsic needs while transactional leaders focus on proper exchange of
resources. Transformational leadership helps the followers to identify
with the needs of the leaders, whereas, transactional leader provides
the followers with something which they want in exchange from the leader
for their contribution (Kuhnert & Lewis, 1987). Therefore,
conceptually transformational leadership leads to more commitment than
transactional leadership style.
Research also shows similar findings. Limsila and Ogunlana (2007)
found that transformational leadership style is likely to generate
commitment from subordinates while transactional is not. Therefore,
based on the literature, following hypothesis is proposed:
Hypothesis 6: Transformational leadership style leads to higher
organizational commitment than transactional leadership style.
Research Design
Data was collected through questionnaires to measure leadership
styles and organizational commitment. A total of 239 responses was
gathered from employees working in banking, higher education,
information technology and manufacturing sectors. There were 137 males
and 101 females. The sample consists of 133 employees with graduation,
while 106 employees had post-graduation or professional degree. 129
employees had less than 5 years of experience while 54 of them had more
than 6 but less than 10 years of experience and 56 had more than 11
years of experience in their present organization. The sample comprised
83 employees from banking sector, 50 from higher education, 65 from
information technology and 41 from manufacturing industry.
Organizational commitment was measured using organizational
commitment scale (Allen & Meyer, 1990). It consists of three scales
reflecting the three component conceptualization of organizational
commitment namely affective commitment scale (ACS), the continuance
commitment scale (CCS) and the normative commitment scale (NCS). Each of
the scales consists of eight statements that comprise the 24 statements
and all statements were linked to a five point Likert type interval
scale. Cronbach's Alpha was 0.87 for affective, 0.75 for
continuance and 0.79 for normative commitment (Allen & Meyer, 1990).
[ILLUSTRATION OMITTED]
Leadership was measured using 32 items from Avolio and Bass'
(2004) Multifactor Leadership Questionnaire (MLQ-Form 5X). It consists
of eight factors i.e. idealized influence, inspirational motivation,
intellectual stimulation, individualized consideration, contingent
reward, management by exception(active) and management by
exception(passive). Cronbach's Alpha was 0.73 for eight idealized
influence items, 0.83 for four inspirational motivation items, 0.75 for
five intellectual stimulation items, and 0.77 for three individualized
consideration items, 0.69 for four contingent reward items, 0.75 for
four active management by exception items, and 0.70 for four passive
management by exception items (Avolio & Bass, 2004).
Results & Analysis
The results were analyzed using the statistical package for social
sciences (SPSS). All the results are given in tables 1-4. Tables 1-2
show factor analysis of organizational commitment and leadership scales
using principal component analyses with varimax rotation. Table 1 shows
the rotated factor structure of organizational commitment scale. The
dimension of affective commitment was divided into two factors while
normative and* continuance commitment showed distinct factor loadings.
It explained 52 percent of cumulative variance.
Table 2 shows the rotated factor structure of leadership style
scale. The scale did not cleanly load into seven factors as given in the
original scale (Bass & Avolio, 2004). In the present study three
factors emerge: transformation leadership including contingent reward,
management by exception (active) and management by exception (passive).
It explained 42 percent of cumulative variance.
Table 3 shows the reliability of organizational commitment and
leadership scale. All the Alpha values are high (.0.80) in all the
scales (Nunnally, 1978). Table 4 shows correlation between all the
variables. It shows that transformational leadership is positively
correlated with management by exception (active), emotional, affective,
normative and continuance commitment. While, management by exception
(passive) does not have correlation with any component of commitment.
Table 5 shows the regression analysis. The results show that
leadership style significantly influences organizational commitment
([R.sup.2] = 0.13, p<0.001). Among the various styles of leadership,
transformational leadership best explains organizational commitment
([R.sup.2] = 0.13, p<0.001) compared to management by exception
(active) ([R.sup.2] = 0.02, p<0.01). While, management by exception
(passive) does not have a significant influence on organizational
commitment.
Discussion
The primary purpose of this study was to examine the influence of
transformational/transactional leadership styles on the three components
of organizational commitment. The expected positive linkage between
leadership style and organizational commitment was supported. These
findings are in line with those of other researchers (Jackson et. al.,
2013; Judge & Piccolo, 2004).
One important finding of the study is that in the Indian context,
contingent reward is perceived more transformational than transactional
factor. Contingent reward is the degree to which leaders can establish
transaction with followers by rewarding their efforts by communicating
with them as to what they must do to get rewards and punishing
undesirable actions.
The hypothesis related to the relationship of transformational
leadership and affective and normative commitment was supported. This
relationship which has been established in the Western context has found
support in the Indian context too. There was so specific hypothesis
formulated with regards to transformational leadership and continuance
commitment. But, the results show a positive correlation between the
two. As noted earlier, the positive environment created by the
transformational leader must be perceived as a loss arid thus leads to a
higher continuance commitment.
The hypothesis related to the relationship of management by
exception (active) and affective, normative and continuance commitment
had positive but weak correlation. This finding is similar to the
findings of Judge and Piccolo (2004) and Jackson et al. (2013).
Implications
The findings of the present study have implications on the training
and development of managers. Training programs should be designed and
delivered to hone behavior and skills that lead to transformational
leadership style. The findings also have an impact on the recruitment,
selection and the promotion policies of the managers in organizations.
Limitations
The sample size of the present study is small. Therefore, the
conclusions can be seen as indicators to the larger trend. The study
should be carried out on a larger sample to get more reliable
conclusions. Further, the survey comprised employees from banking,
education, IT and manufacturing sectors. Inclusion of employees from
other sectors would make the study more comprehensive.
Future Directions
Future research can include paternalistic leadership style and its
influence on organizational commitment. Comparison of transformational,
transactional and paternalistic leadership style can help find out which
style of leadership leads to higher commitment in the Indian context.
Further, future research can also study the moderating influence of
organizational culture on this relationship.
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Shiji Lyndon (Email: shiji@somaiya.edu) is Assistant Professor
& Preeti S. Rawat (Email: preetirawat@somaiya.edu) is Professor, K.
J. Somaiya Institute of Management Studies and Research, Vidyavihar (E),
Mumbai 400077.
Table 1 Rotated Factor Analysis of the Organizational Commitment Scale
Dimensions
Item Emotional Affective Normative Continuance
Commitment Commitment Commitment Commitment
Eigen Value 5.7 2.8 2.1 1.9
% of Variance 23.75 11.67 8.89 7.98
explained
Cumulative % 23.75 35.42 44.32 52.31
of variance
explained
Extraction Method: Principal Component Analysis
Rotation Method: Varimax With Kaiser Normalization
Rotation converged in 6 iterations
Table 2 Rotated Factor Analysis of the Leadership Scale
Dimensions
Item Transformational Management Management
Leadership by Exception by Exception
Active Passive
Eigen Value 9.954 31.108 31.108
% of Variance 1.995 6.233 37.341
explained
Cumulative % of 1.716 5.362 42.703
variance explained
Extraction Method: Principal Component Analysis
Rotation Method: Varimax With Kaiser Normalization
Rotation converged in 6 iterations
Table 3 Reliability of the Scales Used
Scale No. of Items Cron Bach Alpha
1 Leadership Scale 32 0.898
2 Organizational Commitment Scale 24 0.835
Table 4 Correlation between the Variables
TF MBE(A) MBE(P) EC
TF 1
MBE(A) 0.399 ** 1
MBE(P) -0.018 0.069 1
EC .466 ** .156 * 0.001 1
AC 0.099 0.123 0.099 0.318 **
NC .202 ** 0.038 -0.052 .388 **
CC .464 ** .255 ** -0.061 .383 **
AC NC CC
TF
MBE(A)
MBE(P)
EC
AC 1
NC .336 ** 1
CC 0.062 0.167 ** 1
*** p<0.001, ** p<0.01, * p<0.05
TF: Transformational Leadership
MBE(A): Management by Exception (Active)
MBE(P): Management by Exception (Passive)
EC: Emotional Commitment
AC: Affective Commitment
NC: Normative Commitment
CC: Continuance Commitment
Table 5 Regression Analysis
Criterion Variable Predictor Variables
Beta t values [R.sup.2]
Leadership
Organizational Commitment 0.366 6.46 0.13 ***
Transformational leadership
Organizational Commitment 0.369 6.117 0.13 ***
MBE(Active)
Organizational Commitment 0.155 2.412 0.02 ***
MBE(Passive)
Organizational Commitment 0.064 0.983 0 ***
Leadership
Emotional Commitment 0.435 7.415 0.186 ***
Transformational leadership
Emotional Commitment 0.461 8.003 0.209 ***
MBE(Active)
Emotional Commitment 0.156 2.418 0.02 ***
MBE(Passive)
Emotional Commitment 0.001 0.015 -0.04
Leadership
Affective Commitment 0.13 2.015 0.013 ***
Transformational leadership
Affective Commitment 0.099 1.526 0.006 ***
MBE(Active)
Affective Commitment 0.123 1.905 0.011 ***
MBE(Passive)
Affective Commitment 0.099 1.529 0.006 ***
Leadership
Normative Commitment 0.172 2.675 0.025 ***
Transformational leadership
Normative Commitment 0.202 3.181 0.037 ***
MBE(Active)
Normative Commitment 0.038 0.582 -0.003
MBE(Passive)
Normative Commitment -0.052 -0.795 -0.02
Leadership
Continuance Commitment 0.45 7.718 0.199 ***
Transformational leadership
Continuance Commitment 0.464 8.037 0.212 ***
MBE(Active)
Continuance Commitment 0.255 4.051 0.061 ***
MBE(Passive)
Continuance Commitment -0.061 -0.937 0
*** p<0.001, ** p<0.01, * p<0.05
