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THE EFFECT OF TRANSFORMATIONAL LEADERSHIP ON EMPLOYEE WORK ENGAGEMENT & TURNOVER INTENTION (Banking Sector of Pakistan) I. INTRODUCTION 1.1 BACKGROUND OF THE STUDY In the current economic recession, organizations are experiencing tremendous challenges to maintain a competitive advantage on the global front. Change has become a constant, as organizations need to reinvent themselves and become more innovative to deal with more competitive pricing structures and branding strategies to position themselves optimally in a cutthroat environment. Today more than ever, the "people component", and more specifically the ability to attract and retain the "knowledge worker", has become one of the most important predictors of organizational success (Kahumuza & Schlechter, 2008). This holds important implications for organizations that strive to be the best in their markets and to maintain a competitive advantage. They need to outsmart their competition in terms of attracting and retaining talented workforce. They need to find ways to understand and manage the psychological mechanisms that do not only deliver excellent performance, but also hinder their talent from further development (Alam & Mohammad, 2009).

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THE EFFECT OF TRANSFORMATIONAL LEADERSHIP ON EMPLOYEE WORK ENGAGEMENT &

TURNOVER INTENTION(Banking Sector of Pakistan)

I. INTRODUCTION

1.1 BACKGROUND OF THE STUDY

In the current economic recession, organizations are experiencing tremendous challenges

to maintain a competitive advantage on the global front. Change has become a constant, as

organizations need to reinvent themselves and become more innovative to deal with more

competitive pricing structures and branding strategies to position themselves optimally in a

cutthroat environment. Today more than ever, the "people component", and more specifically the

ability to attract and retain the "knowledge worker", has become one of the most important

predictors of organizational success (Kahumuza & Schlechter, 2008). This holds important

implications for organizations that strive to be the best in their markets and to maintain a

competitive advantage. They need to outsmart their competition in terms of attracting and

retaining talented workforce. They need to find ways to understand and manage the

psychological mechanisms that do not only deliver excellent performance, but also hinder their

talent from further development (Alam & Mohammad, 2009).

Employee turnover, or the lack of retention, as some refer to it, has become a contentious

issue in the current economic climate. Most employees are dissatisfied with the leadership since

they are not given the benefits, especially when companies lose critical talent in times when they

most need to retain their knowledge capital if they are to remain competitive during an economic

downturn. Besides the increase in skills demands brought by organizational change, reliance on

these skills and experience becomes illuminated in providing a sustainable competitive

advantage in times of such economic challenge. This makes employee turnover a sustainability

concern, especially in the light of the time and money invested in recruitment, training and

advancement of critical talent. Identifying critical organizational, job and individual factors that

contribute to the employee turnover process is therefore important in this respect (Armstrong,

2009).

A considerable volume of literature supports the fact that intention to quit is one of the

most important and immediate antecedents of turnover decisions (Elangovan, 2001). Whatever

approach is adopted to mitigate turnover behaviour within an organisation requires a good

understanding of what contributes to employees harbouring intentions to quit. The antecedents to

intention to quit, however, remain an area of exploration in the literature and, while job

satisfaction and commitment are the most explored factors, there is hardly any trace of the

influence of transformational leadership and engagement on the attitudinal or cognitive

manifestation of the behavioural decision to quit (Elangovan, 2001).

Buckingham holds the view that when employees decide to leave a company, they leave

their managers, not the company. This brings the assumption that leadership practices have

strong implications in the harboured intentions of employees to quit. In essence, this implies that

an engaged workforce is less likely to quit their jobs. Furthermore, managers essentially affect

the extent of such employee engagement at workplace (Buckingham & Coffman, 2005).

While barriers to engagement are well explored in the literature, the leadership practices

that could be deployed to foster engagement remain under-scrutinised (Shuck & Wollard, 2009).

The link between transformational leadership and engagement becomes more evident in the the

work of Burns (1978), Bass and Avolio (1992). Conceptualised by Burns, transformational

leadership style is considered an expansion of transactional leadership, focusing not only on the

transactional relationship between leader and follower, but also on the construction of an

inspirational vision that has a very compelling effect on its followers. Through the application of

various behavioural practices relating to influence, consideration, stimulation and inspiration,

these leaders manage to create an environment characterized by an innate sense of empowerment

to achieve a shared vision (Burns, 1978; Bass & Avolio,1992).

1.2 PROBLEM STATEMENT

The application of transformation leadership into organizational settings has borne fruitful results for followers in the last two decades. Nevertheless; transformational leaders provoking exceptional performance is a topic of further debate. The current study scrutinizes the effect of transformational leadership inflicted over employee work engagement and turnover intention.

1.3 SIGNIFICANCE OF THE STUDY:

The present study highlights the prominent components of transformational leadership i.e., individualized consideration, idealized influence and inspirational motivation and appraises whether the very components affect work engagements of employees in Banking Sector of KPK, Pakistan.

The study further contributes an addition to the existing literature that could be further explored in future followed by enhancement of HR policies in the sampled organizations.

1.4 OBJECTIVES

To find out the effect of transformational leadership style on employee work behaviors.

To investigate the effect of transformational leadership on employee engagement.

To examine the employees turnover in the Banking sector.

1.5 HYPOTHESIS OF THE STUDY

H0: There is no effect of transformational leadership on employee engagement.

H1: There is a effect of transformational leadership on employee engagement.

H0: Transformational leadership is not related to employee turnover.

H2: Transformational leadership is related to employee turnover.

H0: Transformational leadership is not related to employee work behaviors.

H3: Transformational leadership is related to employee work behaviors.

II. LITERATURE REVIEW

2.1 Leadership Theories: An OutlineAccording to the leadership theories, several overarching trends can be distinguished.

Although there is no agreed upon classification among researchers, we can nonetheless draw up

a picture of the major trends: An early period, consisting of such well known theories as Traits

Theories, Behavior Theories, and Contingency/Situational Theories; followed by consisting of

Multilevel Approaches; the New Leadership period, which emerged in the 1980s and included

both Transformational and Charismatic theories; and finally, Post Charismatic and Post-

transformational Leadership, which emerged in reaction to New Leadership theories. Although

these approaches are presented chronologically, some approaches (for example, Leader-Member

exchange, one of the Multilevel Approaches) are still relevant to current empirical and

theoretical works.

2.2 Traits Theory

It can reasonably be argued that the first three groups of theories (Traits Theories,

Behavior Theories, and Contingency/Situational Theories) are uncontroversial in the scientific

literature. Essentially, the Traits Theory postulate that personal characteristics (e.g. personality

traits, cognitive skills, interpersonal skills) determine an individual’s potential for leadership

roles (Furham, 2005). Thus, according to the Traits Theory, leadership is something intrinsic to

the individual. As Parry and Bryman (2006) suitably put it, “nature is more important than

nurture” that is to say, an individual’s predisposition to leadership has a greater influence than

the context. (Avolio, Sosik, Jung, & Berson, 2003).

2.3 Behavior Theory

Behavioral Theories advances the idea that an effective leader is discernible by his or her

actions (Krumm, 2001). The Ohio State Studies have been especially influential for this

approach with works on consideration behaviors and initiating structure behaviors. After an

analysis of a list of behaviors, the researchers presented two categories: consideration (1)

behavior] denotes a leadership style in which leaders are concerned about their subordinates as

people, are trusted by subordinates, are progressive to them, and promote camaraderie. Initiating

structure, on other hand refers to a style in which the leader defines closely and clearly what

subordinates are supposed to do and how and actively timetable work for them.” (Avolio et al.,

2003).

Another influential model whose classification of leadership behavior is quite similar to

the categories proposed by Ohio State Studies is that of Black and Mouton (1964): their

managerial grid, now called Leadership Grid (Langton & Robbins, 2007), proposes two styles of

behavior: concern for people and concern for production. These behavior styles are similar to

consideration behaviors and Initiating structure presented by The Ohio State Studies, i.e.

behavior oriented toward individuals and behavior oriented toward task concern for production.

2.4 Contingency/Situational Theory

The Contingency/Situational Theory is more concerned with the context of applied

leadership, which is left unaccounted for in both the Traits and Behavioral theories. Here, the

focus is on situational variables: the leader modifies his or her leadership style according to the

context (Krumm, 2001). According to proponents of this theory, an effective leader knows how

to adapt his personal characteristics to the context. Many different models draw from this trend,

such as the Path-Goal Theory (1971), Fiedler’s Contingency Theory (1967), Hersey and

Blanchard’s Situational Leadership Theory (1984), and the Vroom and Yetton’s Decision-

Making Model (1973).

According to House (1971) discussed the Path-Goal Theory. According to this theory, an

effective leader guides his employees to help them attain shared goals: he or she supports

employees in order to ensure that employees’ goals and collective goals coincide. The Path-Goal

Theory is rather complex and House has modified it on several occasions. House and Mitchell

(1975) identified four leadership styles: directive, supportive, participative and results oriented.

The choice of style depends upon a combination of subordinates’ personal goals, subordinates’

personal characteristics, and the work situation (Krumm, 2001). According to the situation (hazy

work instructions with an unmotivated subordinate, the leader will choose which leadership style

to favour (e.g. directive, supportive, participative, or results oriented).

According to Fiedler’s Contingency Theory (1973), group performance is the result of

the combination of its leader’s characteristics and the leader’s degree of control over the

situation. Thus, the leader is either task-focused or relational focused. An effective leader,

according to Krumm (2001), tries to incorporate both orientations according to the work

situation. The leader’s orientation to either the task or the person is measured by the Least

Preferred Co-Worker (LPC) Scale, which measures the leader’s degree of orientation to one or

the other. A good leader tries to combine these two orientations to different degrees according to

the work situation. Fiedler’s work outlines three “contingency dimensions” that serve to define

the situation the leader faces: The leader-member relations, the task structure, and the position of

power. Thus, according to Fiedler, elements of context determine the leadership style (Krumm,

2001).

Hersey Situational Leadership Theory (1984) claims that an effective leader adapts his or

her leadership style to subordinates’ capacity to accomplish tasks. That degree corresponds to the

maturity of the subordinates. Thus, the leader will choose a type of leadership according to the

subordinates’ maturity.

Vroom Decision-Making Model (1973) focuses on the decision-making process. As

mentioned by Krumm, usually is classified as a prescriptive theory, meaning that it provides

leaders with a way to choose the best decision-making method before going ahead”. A series of

questions allows the leader to choose from among five methods of decision-making, ranging

from entirely authoritative to completely participatory (Krumm, 2001).

2.5 New Leadership Approaches

Beginning around the 1980s, the concept of leadership changed direction with what is

referred to as the New Leadership. Instead of considering leadership as an influence process, the

New Leadership views leaders as “managers of meaning”, i.e. the individual who create the

meaning, who make sense of events. Researchers have most often tended to include

Transactional Leadership, Transformational Leadership, Charismatic Leadership and Visionary

Leadership in this trend (Parry & Bryman, 2006).

2.6 Transactional and Transformational Leadership

Essentially, transactional leadership is distinct from transformational leadership in its use

of a reward system, while Transformational Leadership, implies the transformation of

subordinates. Although both approaches are different, according to Bass, they are not mutually

exclusive. Thus, both types can be used by the same leader at different times for different

situations (Yukl, 1998).

2.7 Charismatic Leadership

Charismatic Leadership is also very closely related to Transformational Leadership; this

approach is differentiated mainly by the fact that the charismatic leader transforms the

subordinates’ interests to match those of the leader, while the transformational leader transforms

the subordinate’s interests toward group interests (Parry & Bryman, 2006).

2.8 Levels Analysis of Transformational Leadership

Transformational Leadership is a dyadic process (i.e., between manager and subordinate),

and must therefore be examined differently according to the nature of each specific dyad. Since

the relationship between a manager and each different subordinate is unique, an analysis of these

different relationships could reveal both striking similarities and salient differences. Furthermore,

relationships can vary both within a group or between groups. If one accounts for all this, it

becomes clear that a subordinate’s individual perception of a transformational leader may differ

from that of his or her colleague according to each specific context. In order to frame their

analysis of this phenomenon, Yammarino and Bass (1990) utilized four distinct categories:

Average Leader Style (ALS)

Leader-Member Exchange (LMX)

Information-Processing Approach

Relationships involving the leader and all of his or her subordinates (within the group)

are homogeneous in this case; the interaction style is consistent within the group. However, the

style can be different from one leader to the next. According to the LMX perspective, the various

relationships between a leader and each of his or her individual subordinates (within the group)

can be different the leader’s style will thus vary to accommodate each individual subordinate.

Here, interaction styles are multiple within the group. The information-processing category

focuses on the subordinate’s cognitive interpretation of the leader’s behavior “There are

differences within and between groups and leaders so that leader-follower interactions are

individualized and not group-based. For example, a nature of a relationship with a

transformational leader can be perceived as unique by each follower and not dependant on the

other follower of that leader” (Yammarino & Bass, 1990). In other words, the same leader

behavior can elicit different interpretations and emotions from each individual follower.

Yammarino and Bass’s fourth category of analysis refers to the “inexplicable” aspect. As their

research results show, each individual relationship between leader and follower is different

therefore, it would appear as though the concept of adaptation is central for the leader. Also, the

participation of the follower ─ at least for the information-processing approach seems to be

essential in the construction of the relationship (Yammarino & Bass, 1990).

Building on this transactional base, leadership which is individually considerate,

intellectually stimulating, and generates confidence and the inspiration in the individual follower,

rather than in a group of followers, may result in even more heightened outcomes (Yammarino &

Bass, 1990).

2.9 Dimensions of Transformational Leadership

The most popular measure of Transformational Leadership is the Multifactor Leadership

Questionnaire (MLQ), written by Bass and Avolio (1990). This questionnaire measures

Transactional, Transformational, and Laissez-Faire Leadership. Essentially, the questionnaire is

completed by followers, who must rate the frequency of each leader behavior (Yukl, 1999). In

sum, this questionnaire measures the follower’s perceptions of leader behaviors. As mentioned

by Yukl (1999), the MLQ has changed over time, as the authors have added behaviors in some

versions of the questionnaire.

According to Yukl, (1999) the individualized consideration dimension is composed of

supporting and developing behaviors. “Supporting behaviors” refer to such interpersonal acts as

“being friendly, helpful, considerate, and appreciative of individual subordinates”, while

“developing behaviors” refer to actions of a more pedagogical nature, such as coaching and

mentoring. Yukl (1999) claims that it is preferable not to consider these behaviors as central to

Transformational Leadership, in light of research which has showed a weak effect of supporting

behaviors on subordinate outcomes.

Transformational leaders are theorized to influence their followers by heightening

followers self-awareness, instilling a sense of purpose and mission in followers, and influencing

them to transcend lower-order needs and goals for the sake of the long-term benefit of the group

to which they belong (Bass, 1995).

2.10 TRANSFORMATIONAL LEADERSHIP

Burns (1978) was the first who gave the concept of transformational leadership. He

claimed that transformational leadership is observed when leaders encouraged followers to boost

up the level of their moral, motivation, beliefs, perceptions, and coalition with the objectives of

the organization. Bass and Avolio (1995) forwarded the work of Burns and divided

transformational leadership into four components; charismatic role modeling, individualized

consideration, inspirational motivation, and intellectual stimulation. Yukl, G. (1999) claimed that

transformational leaders allowed employees to think creatively, analyzed the problem from

numerous angles and explored new and better solutions of the problem by using technology. Gill

et al. (2006) claimed that organizations can reduce job stress and burn out by applying

transformational leadership.

Transformational leadership is “the process through which leaders and followers help

each other to advance to a higher level of morality and motivation”, and transformational leaders

“raise the level of human conduct and ethical aspiration of both the leader and led, and thus it

has transforming effect on both” (Burns 1978). The transformational leadership theory has

evolved as a process of motivational effect. Such motivational effect appears when leaders create

changes and develop followers’ personal and professional characteristics by exhibiting four types

of behaviours (Yukl 2006). First is Idealized Influence, which is the degree of leaders’ ability to

build loyalty and devotion without any consideration for their own self interests which helps

followers to identify with the leaders. Second, Inspirational Motivation involves leaders’ ability

to create a vision in a way that appeals to followers and makes them a significant part of the

organization (Bass & Avolio 1990). Third, Intellectual Stimulation involves leaders’ ability to

stimulate followers’ efforts to be innovative and creative through questioning assumptions,

taking calculated risks, and seeking the input of followers. Finally, Individualized Consideration

is the extent to which leaders act as mentor or coach and pay special attention towards followers’

differences. These characteristics allow followers to have the basis to change, to unleash their

potential, and diminish their negative behaviors that foster followers into more successful and

productive individuals (Bass 1985).

2.11 Dimensions

In order to shed light on a leader’s vision, all leadership activities should be assessed

based on three independent dimensions: motives and intentions, means and methods, and

outcomes and results (SanFalcon & Spears, 2008). The first dimension answers the question,

“Why?” In order to grow and develop their leadership abilities, leaders must be willing and able

to understand their own reasons for wanting to lead in the first place. What do they hope to

accomplish on both a personal and an organizational level? The second dimension answers the

question, “How?” because it focuses on how the leadership is accomplished or expressed in

terms of the leader as a person and the structures, processes and procedures that are used by the

leader. “In this dimension, the two-fold process of transformation self and system” is what makes

leadership work. The third dimension answers the question, “What?” because it evaluates what is

actually achieved (SanFalcon & Spears, 2008).

In a comprehensive review of leadership theories, identifies several different categories

were identified that capture the essence of the study of leadership in the twentieth century. The

first trend correlated leadership with the attributes of great leaders. Leadership was attributed to

the supposedly innate qualities with which a person is born. It was believed that if the traits that

differentiated leaders from followers could be identified, successful leaders could be quickly

assessed and put into positions of leadership. The studies were based on the idea that leaders

were born, not made, and the key to success was simply in identifying those people who were

born to be great leaders. Though much research was done to identify the traits, researchers were

unable to find traits that were consistently associated with great leadership (Stogdill, 1948).

The earliest theories of leadership focused on the deeds of great men. For example,

“without Moses, the Jews would have remained in Egypt and without Winston Churchill the

British would have given up in 1940”. Scrutiny of such heroic accolades gave rise to the ‘Great

Man’ theory of leadership, which contends that leaders are born, not made. This theory proposed

that certain individuals are endowed with leadership traits that cannot be learned (Bass, 1995).

Characteristics of great men included intelligence, energy, power, and influence. Early

theorists such as Galton (1869) contended that great men were naturally endowed with

characteristics obtained by virtue of inheritance. These characteristics naturally allowed them to

lead others.

Great men were also considered biologically superior. Their lineage supposedly

paralleled the “survival of the fittest” concept and they extended from the upper classes of

society. The contention was that every society had individuals who possessed the superior traits

required to lead the masses, and these individuals would rise to the occasion when necessary

(Dowd, 1936).

A second major thrust looked at leadership behaviors in an attempt to determine what

successful leaders do, not how they look to others. These studies began to look at leaders in the

context of the organization, identifying the behaviors leaders exhibit that increase the

effectiveness of the company. More specifically, researchers wanted to describe “individuals’

behaviors while they acted as leaders of groups or organizations” (Bass, 1990). Bass is credited

with being the first to investigate such behaviors.

2.12 EMPLOYEE ENGAGEMENT

The competition in the marketplace is getting more hyper turbulent nowadays due to

globalization. Furthermore, the global financial crisis that occurred in the period 2007-2008 has

forced companies to increase their competitiveness for business survival. Consequently,

employee engagement has emerged one of the most discussed topic among top management over

the globe in this decade and it is an important element for business survival and success.

According to Kahn (1990), engagement refers to the harnessing of organization members’ selves

to their work roles; in engagement, people employ and express themselves physically,

cognitively, and emotionally during role performances, it is the simultaneous employment and

expression of a person’s „preferred self’ in task behaviors that promote connections to work and

to others, personal presence (physical, cognitive, and emotional), and active, full role

performance”.

According to Gonzalez-Roma and Bakker (2001), the feeling of engagement manifests

when employees experience a more persistent and pervasive affective-cognitive state that is not

focused on any particular object, event, individual, or behavior. According to Schaufeli et al.

(2001: 74), work engagement is characterized by vigor, dedication, and absorption. Vigor is

characterized by high levels of energy and mental resilience while working, the willingness to

invest effort in one’s work, and persistence even in the face of difficulties. Dedication refers to

being strongly involved in one's work and experiencing a sense of significance, enthusiasm,

inspiration, pride, and challenge. Absorption is characterized by being fully concentrated and

happily engrossed in one’s work, whereby time passes quickly and one has difficulties with

detaching oneself from work.

Engaged employees often display a deep, positive emotional connection with their

work, are likely to exert extra effort and are willing to go the extra mile to achieve organizational

accomplishments (Schaufeli et al. 2001). The term workplace engagement has been identified as

one of strongest predictors of organizational success because when it is understood and assessed

well, it gives organizations a remarkable ability to influence various operational areas in the

organization. Although there is consensus that better engaged employees move organizations

forward, global consultancy firm reports show that only one fifth of employees are engaged in

their work, and that the engagement levels are steadily declining. Although there is an increasing

desire to measure employee engagement, most companies are not measuring it. Thus due to this

lack of knowledge about employee engagement, organizations are unaware of the critical

strategies necessary to promote employee engagement (Schaufeli et al. 2001).

Reports have estimated that the percentage of engaged employees are declining and

costing countries greatly in productivity losses. For instance, in Australia, figures show that

disengaged employees1 have increased to reach more than 82%, costing the Australian economy

between A$36.1- A$45.4 billion annually in productivity losses (Gallup 2009). Studies estimate

that these losses will increase to more than A$100 billion annually (Smith 2009: 59). The

negative impacts from disengaged employees are still evolving, a survey by Tower Perrin (2009)

indicates that 80% of losses in any company are generated from disengaged employees. Due to

the negative impacts of disengaged employees, halting and reducing the increase in the

disengagement levels should become a key research focus of work engagement scholars

(Attridge 2009). Although several studies in organizational behaviour literature provide a better

understanding of some of the key components of workplace engagement (Saks 2006),

organizations need to constantly look for fresh ways to create and then sustain higher employee

engagement levels.

According to Schaufeli and Bakker‟s (2004), engagement is a “positive, fulfilling, work

related state of mind that is characterized by vigor, dedication, and absorption”. There are some

definitions of employee engagement that provide more stress on identification with either

organization or a job. Employee willingness and ability to contribute to company success,

through putting extra time, brainpower and energy to their work. Employee engagement is “an

individual employee‟s cognitive, emotional, and behavioral state directed toward desired

organizational; outcomes”. “The Engagement Equation” defined engagement as “full employee

engagement represents an alignment of maximum satisfaction for the individual with maximum

contribution for the organization” i.e. EE= MS + MC (p.4). Kahn (1990) identified three

psychological conditions for engagement.

a) Psychological meaningfulness: feeling worthwhile and valuable when work is challenging

and creative

b) Safety: employing oneself without fear of negative consequences to self-image, career.

c) Availability: possessing the physical, emotional and psychological resources re-quired to

employ oneself in the role performance.

According to Gonzalez-Roma and Bakker (2001), the feeling of engagement manifests

when employees experience a more persistent and pervasive affective-cognitive state that is not

focused on any particular object, event, individual, or behaviour. According to Schaufeli et al.

(2001), work engagement is characterized by vigor, dedication, and absorption. Vigor is

characterized by high levels of energy and mental resilience while working, the willingness to

invest effort in one’s work, and persistence even in the face of difficulties. Dedication refers to

being strongly involved in one's work and experiencing a sense of significance, enthusiasm,

inspiration, pride, and challenge. Absorption is characterized by being fully concentrated and

happily engrossed in one’s work, whereby time passes quickly and one has difficulties with

detaching oneself from work. (2001: 7 Engaged employees often display a deep, positive

emotional connection with their work, are likely to exert extra effort and are willing to go the

extra mile to achieve organizational accomplishments (Schaufeli et al. 2001; Saks 2006). The

term workplace engagement has been identified as one of strongest predictors of organizational

success because when it is understood and assessed well, it gives organizations a remarkable

ability to influence various operational areas in the organization. Although there is consensus

that better engaged employees move organizations forward, global consultancy firm reports

show that only one fifth of employees are engaged in their work, and that the engagement levels

are steadily declining (Saks 2006).

2.13 Transformational leadership and Work engagement

Employees’ levels of engagement increase when there is a positive relationship between

employees and their direct supervisors. Engagement at work tends to be based on factors such as

the relationship they have with their managers. Despite this assertion, employees claim that their

direct supervisors do not have the essential skills or behaviours to make them better engaging

leaders (Gagnon & Michael 2004).

Leaders, who exercise the above four behaviours, increase followers’ appealing of self-

interests and emotional response by increasing their maturity, ideals, and personal identification

(Bass 1995). Furthermore, by questioning followers’ beliefs, supervisors who engage in

Intellectual Stimulating and Individualized Consideration behaviours are able to encourage

followers to be more creative thinkers and innovators which will heighten their need to make

significant contributions towards work. These contributions are likely to increase the intrinsic

motivation of followers and involvement in the work.

In order to be engaged in work, employees must be involved, energetic and efficient in

the face of difficulties, which might be created by transformational leaders intellectually

stimulating and individually considerate behaviour. By showing humbleness, values, and

concern for the well-being of others; followers are keen to show higher and new energies and

enthusiasm in their work, i.e. vigor and dedication according to Schaufeli & Bakker (2004).

In further support of this claim, Schaufeli and Bakker (2004) suggest a positive link

between supervisory coaching and feedback, which are key attributes of individualized

consideration, and the components of workplace engagement (vigor, dedication and absorption).

They agreed that when leaders act effectively as coaches, the leader-follower relationship affects

employees positively as they feel empowered and proud. On the other hand, by supporting

employees with effective feedback, transformational leaders generate positive leader-follower

relations to satisfy employee needs, thus generating positive life outcomes such as higher

wellbeing.

Transformational leaders are more successful in motivating their followers to move

beyond “Maslow’s (1954) need hierarchy from needs for safety and security to needs for

achievement and self-actualization” (Bass 1995). Transformational leaders do this through

improving followers’ self-efficacy, self-esteem, sense of belonging to the organization and

optimism. These in turn will help employees to give extra effort in achieving work results. This

aspect is similarly the scholarly views expressed in the extant literature on employees’ levels of

vigor, dedication and absorption at work (Bakker & Demerouti 2008).

Finally, according to Schaufeli et al. (2001), engaged employees have higher levels of

dedication and absorption in one’s work. Leaders who engage in Inspirational Motivation

behaviour impart a sense of self significance to their followers. Transformational leaders have a

positive influence on followers’ effort and performance levels, both of which could indicate high

levels of absorption in one’s work. Supervisors who apply verbal persuasion, and clearly

communicate the value of the organization’s mission to develop a sense of followers’

identification with their work unit and enjoyment in their task or role, which in turn, act as a

powerful source for motivating followers’ effort. This is likely to enhance the feelings of

dedication and absorption (two of the components of engagement).

2.14 TURNOVER

Many organizations have this problem in retaining their good employees. Many methods

have also been used to overcome this problem but this issue can never go away easily. In this

current competitive corporate environment, staff turnover has been always a key issue that needs

to be surmounted. Chan et al (2010) also quoted staff turnover as a serious issue especially in the

field of human resources management. Ali (2009) also commented that high turnover brings

destruction to the organization in the form of both direct and indirect cost. Studies have also been

carried out regionally and globally to explore and to study the relationship between various

variable(s) with staff turnover.

Staff turnover is costly to all level of organizations regardless of its nature and usually the

productivity and quality of the products or services are always negatively affected. Direct costs

are referring to costs such as expenditures incurred on the selection, recruitment, induction and

training of new employees (Staw 1980). Indirect costs are referring to cost of learning, reduced

morale, pressure on the existing employees and the loss of social capital (Des and Shaw 2001).

Turnover intention is defined as an employee’s personal estimated probability that he or

she has a deliberate intent to leaving the organization permanently in near future (Horn and

Griffeth 1995). ‘Employee turnover’ as per Lucy, et al. (2004) is refers to an employee who are

considering and thinking to quit a job. The word ‘intention’, according to Ajzen and Fishbein

(1980) and Igbaria and Greenhaus (1992), is the main determinants of actual quitting from the

job behavior (cited in Salahudin et al. 2009). Turnover intention also cited as one’s propensity to

leave by Lyons (1971). Turnover are classified and categorized into voluntary or involuntary, as

well as functional or dysfunctional, each will have varying degree of impact on the organization

(Wells et al. 2010). As cited in Wells et al. (2010), voluntary turnover is defined as a process in

which an employee makes decision whether to stay on or leave the organization (McPherson

1976). Mobley (1982) further commented that this type of turnover is usually dysfunctional and

can be mosdetrimental to the organization. It is also warned by Abbasi and Hollman (2000) that

those that most likely to leave the organization are those most talented and smartest employee

within the group. Their valuable experiences, talent, skills and knowledge will leave with them

and resulted in deteriorating efficiency (Abbasi and Hollman 2000).

In contrast, involuntary turnover is referred to the situation in which the organization

undertaken the control over the employee’s decision to stay or leave the organization

(McPherson 1976). The reason why it is classified as functional turnover is due to the often

removal of under-performing employees (Wells et al. 2010). Push factors are those issues that

may repel people from their current employer, including unfair treatment, poor job fit and so

forth. Pull factors are those that may entice employees to other organizations including better

employment conditions or better market image. According to The Chartered Institute of

Personnel and Development (CIPD, 2004), employees resign for many reasons. Sometimes it

may be the attraction of a new job or the prospect of a period outside the workforce, which

„pulls‟ them, on the other occasions they are „pushed‟ due to dissatisfaction in their present jobs

to seek alternative employment. They continue that sometimes it may be a mixture of both pull

and push factors.

2.15 Transformational leadership and Turnover:

Base on a review of the literature, majority of the studies had identified a negative

relationship between leadership style and employees’ turnover intention in various fields of

industries. Transformational and transactional leadership styles might be one of the effective

solutions for organizations who has high employees’ turnover.

Transformational leaderships are defined as a leader who able to stimulate, inspire and

transform his or her subordinates to strive harder in order to achieve extraordinary outcomes

(Robbins et al., 2010). Daft (2010), states that this type of leadership inspires followers to

believe in their own potential, so as to create a better prospect and future for the organization

while believing in the leader personally. Transformational leader is expected to be able to

provide a clear vision and mission, inspire self-esteem and gain trust and respect through

charisma (Bass, 1990). Bass (1990) highlights the fact that a transformational leader will asks his

or her subordinates to go beyond self-interest for the benefit of the team, the organization as well

as society. The followers of such a leader feel trust, admiration, loyalty and respect for the leader

and because of the qualities of the transformational leader are willing to work harder than

originally expected.

Bass (1988) shown that transformational leadership is the key factor in reducing turnover

intentions. Transformational leadership was contrary related to turnover intentions among

employees for several commercial and profit-oriented based businesses. In another study carried

by Bycio et al. (1995) in the nursing profession, it was found that higher degrees of

transformational leadership were associated with lower intention to leave. This supports the

outcome of the earlier study by Bass (1990).

Wells et al. (2010) has conducted a separate study to investigate the relationship between

leadership behaviors (transformational and transactional), satisfaction with the leaders, and

voluntary turnover intentions on 200 participants from National Collegiate Athletic Association

Division I softball and volleyball assistant coaches in the USA. The study result revealed

significant negative associations between transformational leadership behavior and voluntary

organizational turnover intentions as well as the correlation between transactional leadership

behavior and voluntary organizational turnover intentions. Wells’s study further explained on

why transactional leadership behavior was related to reducel turnover intentions by quoting

justice theory of Cobb et al. (1995). Justice theory can be applied to explain on the rationale as to

why direct negative relationship also observed for transactional leadership. The theory said that

if the followers or staff are satisfied and felt that the organizational processes are fair with clear

work instructions and task objectives given with systematic comprehensive reward and incentive

policies in place, then the followers or staff are less likely to search or look for other employment

opportunities elsewhere (Wells et al. 2010).

Similarly will be the case for transformational leadership, the higher the four types of

behaviors shown by the leader i.e Idealized influence, Inspirational motivation, Intellectual

stimulation and Individualized consideration the lower will be the turnover shown by the

employees. It means that transformational leadership is negatively associated with turnover .The

transformational leader acts as a magnet by retaining the employees with the help of giving them

confidence, self efficacy, self esteem and caring for them on individual basis. When the

employees observe a self of belongingness to the organization which is given to them by the

transformation leader, the intention to leave the organization is reduced. Sometimes however

other external factors do interfere like conditions of economy, desire to work in home station,

desire to work in other cities or countries.

III. RESEARCH METHODOLOGY:

3.1 PopulationThe Sample population for my study was taken from various Banks of Khyber

Pakhtunkhwa (KPK) Pakistan. Questionnaires will be distributed among the Administrative staff,

supervisory staff and clerical staff of these organizations

3.2 SampleIt is very difficult to collect data from all the banks in Peshawar. Randomly 300

employees were selected from 5 banks for the data collection. Different branches were approach

for the data collection. These 300 employees were given questionnaire for the data collection.

S.no Name of Bank

1. Habib Bank Limited

2. United Bank Limited

3. Allied Bank Limited

4. Faysal Bank

5. Bank Al Falah Bank

3.3 Procedure The data of the current research study is primary in nature because the data will be

collected for the first time. Structured and closed ended questionnaire were distributed to the

among the sampled employees. Multi pre-determined questions were asked about different

variables in the questionnaire. The questionnaires were distributed to the entire sample in

personal and were administered.

3.4 INSTRUMENTS3.4.1 DEPENDENT VARIABLE

3.4.1.1 Employee Engagement

“Employee engagement as the amount of discretionary effort exhibited by employees in

their job”. Employee engagement will be measured using 18-item scale developed by Kahn’s

(1990) which is a valid and commonly used measure for employee engagement. Responses were

anchored using a 5-point Likert Scale (1- Strongly disagree, 2- Disagree, 3- Neutral, 4- Agree, 5-

Strongly agree).

3.4.1.2 Turnover Intention

Turnover intention is defined as “an employee’s personal estimated probability that he or

she has a deliberate intent to leaving the organization permanently in near future” (Horn and

Griffeth 1995). Responses were anchored using a 5-point Likert Scale (1- Strongly disagree, 2-

Disagree, 3- Neutral, 4- Agree, 5- Strongly agree).

3.4.2 INDEPENDENT VARIABLE

3.4.2.1 Transformational leadership

Transformational leadership is “the process through which leaders and followers help

each other to advance to a higher level of morality and motivation”, and transformational leaders

“raise the level of human conduct and ethical aspiration of both the leader and led, and thus it has

transforming effect on both” (Burns 1978). Responses were anchored using a 5-point Likert

Scale (1- Strongly disagree, 2- Disagree, 3- Neutral, 4- Agree, 5- Strongly agree).

3.5 THEORETICAL FRAMEWORK This study has one independent variable and two dependant variables and one mediating

variable. Transformational leadership is the independent variable, the employees work

engagements and turnover are the dependant variables. The theoretical link between independent

variable (transformational leadership) and dependant variables (work engagement and turnover)

is illustrated in the following figure.

3.6 MODEL Hypothesis will be tested using Simple Linear Regression Model which is one of most

common analysis technique for studying the relationship between quantitative variables. This

technique helps to identify any existing relationship between two variables (Sharma.2009).

Reliability statistics

Correlation analysis

Regression analysis

Transformational leadership

Engagement

Turnover

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