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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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