Leadership in organizations. A study to explore the relationship between leadership styles and employee engagement in a financial organization that goes through frequent changes and transformational exercises.

Abstract

The on-going changing demands of the modern business world drive leaders into further exploring skilled practices to increase employee engagement for retaining employees and improving financial results within their organization. The goal of this study is to determine whether leaders of a constantly changing organizational environment are perceived to exhibit specific leadership behaviours and whether leadership styles practiced by a leader relate to a positive or negative outcome on employee engagement. A descriptive quantitative research methodology was used and a two section survey was utilized to collect responses from the 40 employees of a financial institution located in Cyprus. Survey instruments included the Multifactor Leadership Questionnaire (MLQ 5X-short) for determining the perceived leadership behaviours and the Utrecht Work Engagement Scale (UWES-9) for measuring the level of employee engagement. Furthermore, 20% of the employees were interviewed for understanding the change frequency levels of the organization from the employees’ perception and memory. The findings revealed that employees working in a constantly changing organizational environment perceived all their leaders to practice more frequently two of the transformational behaviours, Idealized Influence(II) and Inspirational Motivation(IM), despite the fact that half of the leaders were perceived to exhibit overall more transformational leadership style behaviours and the other half more transactional. Furthermore, the leadership style and employee engagement relationship analysis revealed only one significant association; the positive influence of transformational leadership style on overall employee engagement whereas no significant association was found for either transactional or passive-avoidant leadership styles. Another important outcome of the study is that only certain transformational behaviours were found to have an influence on the overall employee engagement and on specific -not all- characteristics of engagement. The leadership behaviours identified to influence employee engagement are Individual Consideration(IC) and Intellectual Stimulation (IS). Individual Consideration(IC) was found to have a positive influence on both dedication and absorption employee engagement characteristics while Intellectual Stimulation (IS) only on dedication. None of the 3 leadership styles were found to have an influence on vigor employee engagement characteristic.