Leadership Styles and Type of Organization
Sirous Tabrizi*
PhD Candidate, Sessional Instructor, Faculty of Education, University of Windsor, Windsor, Canada
PhD Candidate Hashtrood Branch, Hashtrood, Iran
PP: 547-558
Abstract
The role of leadership is well-known for its potentially beneficial effects on the functioning of an organization. Although there are various theories that describe different types of leadership styles, there are also differences in the structure of organizations that may complement or hamper the effectiveness of leadership. This paper will explore the relationship between two leadership styles -transactional and transformational leadership- and how these styles relate to two broadly defined organizational structures -vertical and horizontal structure. As will be clarified, the transformational leadership style tends to be superior for an organization and works better within a horizontal structure, but this style requires significantly more effort on the part of a leader than does the more common transactional style.
Keywords: Horizontal Structure, Structure of Organizations, Transactional Leadership, Transformational Leadership, Vertical Structure.
Introduction
One very important component of management is leadership, due to the way it contributes to the well-being of organizations and nations (Weihrich, Cannice, & Koontz, 2008). For instance, the success of countries such as the United States of America or India is often attributed to effective leadership (Weihrich, Cannice, & Koontz, 2008). Leadership can be defined as the process of influencing other groups for the purpose of achieving specific goals (Cole, 2006; Robbin & Coulter, 2007; Weihrich, Cannice, & Koontz, 2008). A leader is, thus, someone who can influence others. How to be a successful leader is still a debated topic though, and various theories have been proposed that attempt to describe and analyze effective leadership.
Two currently prominent theories of effective leadership are Transformational and Transactional leadership theories (Odumeru & Ogbonna, 2013). These two theories have been proposed by several researchers (e.g. Bass, 1996), but there is disagreement over how these theories are related. For instance, some argue that transformational leadership is an expanded and improved version of transactional leadership (Bass & Avolio, 1994; Lowe, Kroeck,,& Sivasubramaniam, 1996), while others argue that transactional leadership is simply one kind of transformational leadership (Weihrich, Cannice, & Koontz, 2008). This disagreement has been explored previously (e.g. see Odumeru & Ogbonna, 2013). However, there are also potential connections between the style of leadership used and the structure of an organization that have yet to be fully explored. For example, are transactional leaders more effective in organizations with a specific structure? If so, is this the same structure as what is effective for transformational leadership?
This paper will explore the relationships that exist between leadership styles (i.e. transactional vs. transformational) and the structure of an organization. In particular, a vertical or hierarchical structure will be compared to a horizontal or flat structure. As the literature is analyzed, the relationships between leadership style and organizational structure will become clear. This paper will end with some comments on the strength of the transformational leadership style with respect to both forms of structure.
Literature
These two leadership theories -transactional leadership and transformational leadership- have significantly different approaches towards how people should be motivated and the role a leader should perform within an organization. In this section, these two leadership theories will be briefly described and analyzed. Afterward, different structures of organizations will be described.
Transactional leadership
In transactional leadership, leadership is defined in terms of motivating people through reward and/or punishment depending on performance and desired behaviors (Lussier & Achua, 2015). For example, when an individual performs well, that person is rewarded so as to motivate the good performance and hopefully see him/her perform that well again. Likewise, when someone performs poorly, the person is punished as a way of discouraging that behavior. To reward or punish individuals, the transactional leader develops rules and procedures (Barman, 2009). It is these rules and procedures that are used to measure the performance and determine whether followers should be rewarded or punished and by how much. Hence, these rules are the means by which motivation occurs (Barman, 2009).
Transactional leaders tend to accept the existing goals, structure, and culture (Odumeru & Ogbonna, 2013). As such, they are willing to work within existing systems, negotiate the rules so as to reach the current goals, and tend to think inside the box when solving problems (Odumeru & Ogbonna, 2013). Thus, transactional leadership works best in environments with clear goals and well-defined problems, and circumstances where the goals involve optimizing efficiency (Lussier & Achua, 2015). However, these leaders also tend to be very passive; their main actions are to set the rules, procedures, and criteria for others to follow, monitor the progress, and then maintain status quo (Odumeru & Ogbonna, 2013). Typically, a leader will look at contingent rewards, which recognize good performance and reward accordingly, and what is called “management-by-exception” -where the leader intervenes when performance levels are not met, and applies appropriate corrections (Odumeru & Ogbonna, 2013). As such, transactional leadership is poor at adapting to or creating change, or for problems that are ill-defined or require creative solutions (Lussier & Achua, 2015).
Transformational leadership
In transformational leadership, the goal of the leader is to identify the changes required to achieve the desired state of the organization and then do what is necessary to bring about that change (Bass & Riggio, 2006). The primary means by which transformational leaders operate is through creating a vision that leads to or requires the necessary changes and then guides the execution of that vision (Lussier & Achua, 2015). By accomplishing the vision, the changes necessary to reach the desired state of the organization occur. For example, an organization could be suffering from lack of innovation. Several changes may be required, such as a culture open to new ideas, programs to help people create new ideas, and processes or structures to enable sharing and analyzing these ideas. In this circumstance, the transformational leader would identify these necessary changes, create a vision that includes these changes, and then motivate people to follow this vision.
Motivating people to follow the vision can be done through several ways, two of which will be described here. First, the transformational leader may be highly charismatic; this charisma can be expressed through inspirational speeches, admirable behavior, conviction and being firm with values with which others in the organization agree, and providing meaning and purpose behind the work done in an organization (Warrilow, 2012). Second, the leader could use self-empowerment strategies, such that people are willing to make the necessary changes in themselves to bring about the vision (Lussier & Achua, 2015). This could be done through helping people connect their identity to the organization or group, and have the desire to improve this identity and thus the organization. Using a self-empowerment strategy requires regular and consistent personal attention to individuals in the organization, and the effectiveness of self-empowerment depends on the degree to which this personal and individual attention is given (Warrilow, 2012).
Since the change transformational leadership tries to bring about can be drastic, such leaders often need to be “out-of-the-box” thinkers; transformational leaders can also be defined by the degree to which they are creative, challenge existing assumptions and intellectual frameworks, and offer alternatives or opportunities to explore alternatives (Warrilow, 2012). Hence, transformational leadership can be effective for problems that are complex, poorly-defined, or that require creativity (Nongard, 2014). However, transformational leadership often emphasizes such large change that problems which can be addressed through minor optimizations may be overlooked; in other words, transformational leadership may be less effective than transactional leadership at optimizing the existing situation without creating massive change (Nongard, 2014).
Structure of organizations
The ‘structure’ of an organization can refer to the policies and rules developed for managing membership and member behaviors, but it can also include the means of communication, roles, responsibilities, and authority of its members. Thus, we can say that the structure of an organization can influence the manner in which, and degree to which, leadership affects an organization’s members (Donaldson, 1996). There are two main structures that will be examined in this section: vertical (or hierarchical) and horizontal (or flat). These structures differ in the relationships that exist between members with different responsibilities and authority, such as the relationship between a manager and those whom he/she manages.
A vertical structure has a hierarchy of roles, or roles that are placed on different levels, such that each level supervises the one below it (except the bottom) and has a supervisor on the level above (except the top) (Cruz-Cunha, 2010). The main advantage of this structure is that authority and responsibilities are clearly defined, and embedded within the structure itself (Nowozin, 2013). Any member of the organization knows to whom he/she is responsible simply by knowing what level he/she is part of. It also creates a form of external motivation, in that people can be motivated to work harder so as to be promoted to a higher level in the organization. Furthermore, various roles and responsibilities can be divided up and placed in specific levels or parts of the organization; this makes it easy for members to become specialists (Cruz-Cunha, 2010).
The main disadvantage of this structure is that the cost and inflexibility of the structure increases with every level that is added (Nowozin, 2013). This is due to increasing need for middle management, or levels of management for the levels below, and difficulty of communicating between levels. For instance, a “tall” organization has many levels, and often so many that it becomes impossible for people at a level higher up to have any sense of what occurs at levels below them. Another major disadvantage is that lack of communication results in strong devotion to a particular department or level, and this breeds interdepartmental conflict and opposition to change out of fear of losing out to other areas of the organization (Cruz-Cunha, 2010).
A horizontal structure, by contrast, is one where the hierarchy has been ‘flattened’ to have as few levels as possible. In some cases, there are only one or two levels in the entire organization (Cruz-Cunha, 2010). Since the organization usually lacks supervisors at a higher level, the supervision becomes part of that same level; in other words, people often have no direct supervisor, and instead make decisions and report on their progress to each other in a team.
One advantage of the horizontal structure is that greater coordination, cooperation, and communication can occur, since it is easier for people to directly talk to each other (Nowozin, 2013). In other words, because the organization lacks intervening levels, individuals can share information directly with the person who needs to know. Since middle management tends to be eliminated, costs of the structure are reduced (Nowozin, 2013). Decision making can be easier, due to easier means of communication and fewer people involved in the groups. Lastly, because the roles of people are not embedded in the structure of the organization, change can occur quite readily (Cruz-Cunha, 2010).
The main disadvantage can be seen in how the organization functions when the roles and responsibilities of individuals are not explicitly clarified. Confusion and power struggles can occur between individuals because they all lack a direct supervisor (Cruz-Cunha, 2010). Likewise, most individuals have the same degree of responsibility, and this can prevent specialization and may lead to higher burnout rates (Cruz-Cunha, 2010). Lastly, long-term growth can be difficult for this structure to sustain because extra levels of management cannot be added without turning the structure into a vertical one.
Discussion
As can be seen from the previous section, there are some basic differences between the transactional and transformational leadership styles. In brief, transactional leaders gather loyalty and provoke motivation through tangible reward and punishment, while transformational leaders use internal motivation through identifying organizational needs, empowering individuals to satisfy those needs, and describing or creating new ways for this to be accomplished (Hay, 2012). A summary of other differences can be seen in Table 1 below.
Table 1. Summary of differences between Transactional and Transformational Leadership (Odumeru & Ogbonna, 2013)
Transactional Leadership | Transformational Leadership |
Emphasizes efficiency | Emphasizes effectiveness |
Is responsive to problems | Proactively resolves problems |
Works within the organisation’s culture | Works to change the organization’s culture through new ideas |
Encourages accomplishment of objectives through reward and punishment | Encourages accomplish of objectives through appeal to higher ideals and moral values |
Motivates others through appeal to self interest | Motivates others through encouraging group interests |
Improves performance through corrective action when necessary, but maintains the status quo otherwise | Improve performance through considering the situation of each individual, and supporting their intellectual and creative capacities |
While it may be possible for both of these leadership styles to function regardless of the organizational structure, there are some benefits to pairing transactional leadership with a vertical structure and transformational leadership with a horizontal structure. Such benefits can be seen in four main areas: communication, feedback, goals, and morale.
In terms of communication, a hierarchical structure can delay and limit communication, particularly as there are increasing intervening levels. However, a transactional style can also delay communication, in that the leader may emphasize the need for communication to follow the rules and regulations of the company (Root, 2016). Furthermore, although the information needs to be accurate, it also needs to be gathered from others rather than presented solely from one perspective. A horizontal structure can facilitate gathering information from others more easily. In addition, the transformational leadership style encourages gathering information from multiple perspectives, because otherwise it is impossible to identify necessary changes and determine how best to empower individuals.
Related to communication is the gathering of feedback from others. Feedback can improve the productivity of an organization as well as create more efficient methods of work (Root, 2016). However, a leadership style and organizational structure that is resistant to change is unlikely to use feedback unless it is complementary to the status quo (Root, 2016). Both a transactional leadership style and a vertical organizational structure are susceptible to this weakness. A horizontal organizational structure better facilitates feedback but it still depends on what leaders want to do with this information. A transformational leadership style relies on feedback from others, but also requires the organization to change; hence it is willing to accept feedback that is contrary to the status quo because that helps the leader identify potential areas of improvement.
When considering goals, there are qualitative differences between the goals set by transactional and transformational leaders. Regardless of the style used though, clear goals can maximize productivity and improve both efficiency and effectiveness (Root, 2016). A vertical structure may help with setting clear goals, simply because roles and responsibilities are generally clearer than in a horizontal structure. However, setting more personal goals may be easier in a horizontal structure because of the ease of communication and the need for each person to be more heavily involved in decision making. Furthermore, setting personalized goals and supporting individuals to achieve those goals is something characteristic of the transformational leadership style. When a leader emphasizes self-empowerment, this can help create clear goals for individuals (Root, 2016).
Lastly, the morale of an organization is an important consideration given how it affects confidence in the overall vision of the organization and motivation to do a good job (Root, 2016). If members of an organization feel alienated or isolated, this can negatively affect their morale. Although a vertical structure can result in isolation, this need not be the case; individuals can still be very close to others in their team or department while being isolated from the rest of the organization. This does not necessarily lower morale, but it may lead to other problems such as interdepartmental conflict. A greater impact on morale is the leadership style, whereby leaders who do not request feedback from others or ignore the feedback given will alienate their subordinates (Root, 2016). Since transformational leaders give others personalized attention and support them and require feedback from them, transformational style is better able to improve morale than the transactional style. In return, the transformational leaders get support for their vision, which is necessary for major organizational change to occur. In addition, the involvement of others in decision making may increase their motivation, and this is something that the horizontal structure is better able to facilitate.
While it seems from this discussion that a horizontal structure with transformational leadership style is superior, there are a few important considerations. First, transactional leadership is often paired with a situational style, where the leader reacts to different circumstances in the organization. Transformational leadership also needs to consider different situational factors for it to be effective. Some of these factors include: the stability of the organization and surrounding environment, having a structure that is organic (i.e., flexible enough to change, and not bureaucratic), an organizational culture that is more entrepreneurial in attitude, and groups of individuals that span multiple departments or units within the organization (Yulk, 1999). Another important situational factor is the number of leaders, because having several leaders with conflicting visions can create confusion and removes clarity of goals (Odumeru & Ogbonna, 2013); thus, the transformational style may be better suited to a small number of individuals in the organization, such as whoever is at the top of the organization (Odumeru & Ogbonna, 2013). There may be other factors to consider, but further research will be required for that (Odumeru & Ogbonna, 2013).
Lastly, despite the need for feedback and acceptance of organizational vision for transformational leadership to be successful, many researchers still think about transformational leadership in terms of one-directional influence (Odumeru & Ogbonna, 2013). In other words, the leader’s role to influence others so that the desired changes occur; any influence that comes from others, regardless of whether such influence occurs in practice, tends to be ignored in theory. This is highly problematic, as theories about reciprocal influence and shared leadership may be quite relevant for effectively using the transformational leadership style and implementing a horizontal organizational structure. Further research then is still needed in terms of how influence actually operates in a horizontal organization with transformational leadership (Odumeru & Ogbonna, 2013).
Conclusion
Despite the interest in discussing both transactional and transformational leadership in recent years, there is increasing empirical evidence that transformational leadership is better correlated with higher productivity and satisfaction, and lower turnover rates (Eisenbeiß & Boerner, 2013; Garcı’a-Morales, Llorens-Montes, & Verdu Jover, 2008; Piccolo & Colquitt, 2006). As was discussed in this paper, transformational leadership is better paired with a horizontal structure, but it can be used within a vertical one provided that the limitations of a vertical structure are overcome. More research is still needed to understand how influence operates with transformational leadership, and the best organizational processes to optimize its use in an organization. Even though the culture of an organization can be difficult to resist, particularly when it is necessary for leaders in an organization to follow it, transformational leaders can successfully change and improve this culture through good communication and feedback, increased morale, and a strong vision with clearly defined goals.
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*E-mail: tabrizis@uwindsor.ca Corresponding Author: Sirous Tabrizi