This article introduces a new and dynamic perspective of transformational leadership within organizations. Particularly, I feel that transformational leaders enable corporate culture and organizational performance. Without a grasp on these two tenets executives are bound to fail.
How transformational leaders influence organizational performance
One tool for executives to use when considering on lessoning the gaps between success and possible failure, is to use transformational leadership and become a social architect. Executives can contribute to organizational performance through developing relationships with subordinates that link follower’s individual interests to the organization’s collective-interests. Transformational leadership focuses on developing relationships to create valuable resources for companies.
Transformational leaders increase organizational performance and help close the gap between success and possible failure. Transformational leadership is a leadership style that aggregates human capital into social capital and develops organizational communications aimed at providing valuable resources for all organizational members. Thus, transformational leaders apply intellectual stimulation to enhance knowledge sharing among human capital and stipulate knowledge to be shared around the organization. Sharing the best practices and experiences could positively impact some non-financial aspects of firm performance such as innovation, providing learning and growth opportunities for employees. Empowered employees can enable an organization to actively respond to environmental changes and collective-interests.
The key to take into consideration individual consideration is to identify employee’s needs and show concern for both organizational needs and follower’s interests concurrently. When transformational leaders show concern for the employee’s individual needs, individuals begin to contribute more commitment and they become more inspired them to put extra effort into their work. This extra effort improves the quality of products, customer satisfaction, and impacts the return on assets, sales, shareholder value, and improves operational risk management.
Transformational leadership style highlights the vital importance of employee’s attitudes in accomplishing commercial objectives. For example, inspirational motivation can inspire human capital through setting highly desired expectations. The higher level of follower expectation enhances productivity and perhaps decreases organizational costs. Executives agree that the transformational leadership enhances financial and non-financial performance. Transformational leaders positively affect financial and non-financial performance through improving the price of stock, decreasing costs, increasing sales, improving innovation, increasing the rate of responses to environmental changes, improving the quality of products and services, along with a stronger customer focus and developing learning opportunities for followers. Thus, transformational leadership is positively associated with financial and non-financial performance. Executives can now see how transformational leadership can directly support performance through enabling organizational processes within companies. Therefore, I suggest that executives embrace transformational leadership. This leadership style influences some of the spans of control of the executive responsibility.
Designing a powerful corporate culture to improve organizational performance
Transformational leaders have been posited to impact an organization’s culture. These types of leaders manifest themselves as change agents who manipulate corporate culture with the aim of improving organizational performance. Transformational leaders facilitate collaboration by using the idealized influence dimension which develops relationships in organizations. A transformational leader contributes to the cultural aspect of trust, through considering both employee’s individual interests and company’s essential needs. Also, transformational leaders identify individual needs of their employees and develop a learning culture by intellectually stimulating them to generate new knowledge and share it with others. Thus, transformational leaders can highly manipulate a firm’s culture to conform to the needs and expectations of strategic goals and objectives.
These three cultural aspects (collaboration, trust and learning) positively contribute to companies to effectively and actively respond to environmental changes and customer needs and employee growth needs through developing effective learning workplaces within these companies. This also helps companies to improve performance in terms of the quality of products and services. Learning culture as another cultural aspect sheds light on organizational capabilities to develop learning. It is quite understandable that this cultural aspect can particularly firm facilitate performance, by developing suitable workplaces for experts to effectively share their knowledge with others. People in fact recognize how old resources can address new and problematic situations by sharing their knowledge within companies, and this can help to create more innovative ideas for organizational problems. David Maister in his book, Managing the Professional Service Firm, says that innovative ideas generation can improve profitability for companies. Therefore, leaders can reshape, and in some cases, manipulate organizational culture to improve firm performance. The following figure provides a snapshot of how corporate culture mediates the relationship between transformational leadership and organizational performance.
I present executives with a new idea in that, when change becomes increasingly valuable, transformational leadership manifests as a catalyst to implement effective changes and leverage positive effects on corporate culture. Beyond illustrating that transformational leaders manifest themselves as change agents within organizations, the nature of the interactions between transformational leadership and organizational performance can also suggest several complementary insights for the existing literature. However, the focus of this article is based upon the critical role of transformational leadership which allows a rich basis to understanding the mechanisms by which firm performance is influenced. Scholar’s repeatedly uncovered transformational leadership’s direct impacts on organizational performance. This article articulates a different approach. I simply extended the academic literature by showing how executives can also contribute to organizational performance by fostering an effective corporate culture. This organizational factor coupled with transformational leadership is presented as a new approach for executive implementation.
Maister, DH 1993, Managing the professional service firm, Free Press, New York, NY.
Mostafa Sayyadi is a Senior Management Consultant and Former Leadership Team Member of San Diego-based The Change Leader Consulting Inc. He is an| Associate Fellow of the Australian Institute of Management, a Book Author and Business and Technology Journalist.