Does leadership impact organizational effectiveness? We asked ourselves a few profound questions:
- Does the level of leadership, or rather, what style of leadership correlates with performance and engagement?
- Does culture matter? Is there a link between establishing a positive culture and organizational performance?
Have these issues been studied at all? We decided to make an effort to roundup the research on this topic.
Why we care
In studies made on organizational ability to make use of Agile and Lean, one factor repeatedly emerges at the top—Leadership.
Here’s one example—The "State of Agile Report 2022":
|On barriers to adopting Agile||Case of unsuccessful delivery with Agile|
|1. Not enough leadership participation (42%)||1. Company culture (41%)|
|2. Not enough knowledge about Agile (40%)||2. General organizational resistance to change (40%)|
|3. General resistance to change (40%)||3. Lack of management support (38%)|
Our hypotheses at Active Agile is that all organizations already have leadership in some shape or form (we are not starting from scratch) and that all organizations have people capable of leading. Case in point: Well-working Agile teams do acts of leadership every day!
What is missing is leading at the right level. If leaders fail to adapt their behavior to match organizational maturity, improvement stagnates and performance levels off. This is infamously dubbed "the law of the lid".
What do we mean by leveling up?
You can lead in many difference ways. Let’s illustrate a few ways you can go about it.
As a competent individual, you display self-leadership and you are capable of leading by example. The flip side of this approach is putting yourself in the center of things (“nothing good happens without me being there”) and becoming addicted to a sense of control. People around you get used to you being the problem solver and turn into passive underlings. You know you are there when you are always “the answer man”.
When leading through others, you recognize the value of teamwork and of shifting information to where the decision is. This requires you to adapt your leadership style to the phases of development of the teams around you. This carries a few huge benefits: less stress (not everything is dependent on you), better resilience to unknowns and faster decision cycles. Not to mention an improved atmosphere, more laughs regardless of the variation of pressure.
When building the system that delivers the result, you are learning to lead teams of teams towards purposeful goals. You are capable of growing Competence, Culture, Clarity of direction, Architecture & tooling and Organization – an interconnected system that delivers the result. This requires both strategic thinking and the ability to lead long term.
The good news: Level up leadership is the craft of achieving better value, with more laughs and less stress. You free up time and energy for strategic stuff.
The key is to see leadership as an investment in elevating your craft. All leaders can do this. What the leader needs to bring to the table is to instill the will to grow and to improve their game.
Does leadership matter?
The answer is a resounding Yes.
A study from Cambridge (Cooke, Klein, & Wallis 2013) confirms that
- Leadership does impact organizational commitment
- Leadership styles impact organizational effectiveness (measured through quality of service)
- A positive, constructive culture pays off (culture norms do impact organizational effectiveness)
What is interesting about the study is that is it has an unusually large sample size for this type of question.
"The results generally support the hypotheses that organizational effectiveness is related to type of culture and that cultural norms are related to type of leadership styles."
"Firms with constructive cultures can engage the entire organization to build a cohesive focus and collective commitment to delivering high-quality products and services"
The leadership styles measured in this study correlate with the leadership behaviors we ask for as a result of leveling up:
"Interaction facilitation (conditions for successful interaction, at both the team and organizational levels), task facilitation (providing the necessary support and resources to help individuals and teams achieve their goals) and goal emphasis (clarity of direction) – were found to be significantly related to constructive cultures where members are expected to both support their co-workers and take on challenging and significant assignments."
Answering the question: Does leadership style impact engagement and innovation?
The answer to this question is yes again.
In the academic domain, studies differentiate between "transformational leadership", "transactional leadership", and "laissez-faire leadership”.
Let’s explain these leadership styles.
Transformational leaders serve as change agents who articulate the vision of the organization, create awareness of the problems within the organization to the employees, challenge the status quo, inspire and motivate followers to be innovative in achieving their greatest potential.
According to Bass and Riggio (2006), the transformational leadership style achieves high leadership performance and can exceed expectations because it focuses not only on leadership performance but also on the human factors and the development of employees. This is considered the main motivation for leaders to create employee engagement with the organization.
Transformational leaders always have a clear mission orientation as well as support for employees to be aware of the urgency of the mission of the organization, so it is easy to create trust for employees (Gabris et al., 2001).
The transactional leadership style is considered to be an exchange of rewards based on completion, which has been likened to the carrot-and-stick method for employees to complete their leadership tasks (Bass, 1997). Contingency penalties are often given on a latent reward basis, with the leader waiting for problems to emerge instead of actively detecting them. Therefore, the transactional leadership style is adopted in favor of management.
Laissez-faire leaders do not interfere in the thoughts and actions of employees, even in difficult situations where the role of the leader is required, but they avoid it, the decision belongs to the employees (Giao & Hung, 2018; Goodnight, 2011). However, this seems to be suitable for employees with self-discipline and high responsibility. In contrast, this style would not be conducive to achieving leadership goals where employees have a low sense of discipline.
Laissez-faire leaders often hesitate, avoid making decisions instead of actively responding to the leadership situation needed (Piccolo et al., 2012). Laissez-faire leadership style is the most unsatisfactory and least effective leadership style. And non-interference in tasks, complete laissez-faire of engagement can lead to ineffective ways of working (Bass & Bass, 2008).
According to a study by Saks and Gruman (2014), transformational leadership is positively related to employee engagement, and this relationship is strongest for employees who have high levels of psychological empowerment.
A study of 168 Spanish firms (García et al, 2012) confirmed that transformational leadership is a driver for innovation and organizational performance:
- transformational leadership influences organizational performance positively through organizational learning and innovation;
- organizational learning influences organizational performance positively, both directly and indirectly through organizational innovation;
- organizational innovation influences organizational performance positively.
Of the three leadership styles, employees who are inspired by transformational leadership are more likely to immerse themselves in the work, and in turn, this is likely to result in better task performance and helpful behavior.
These studies seem to confirm that leadership does matter, that the style of leadership impacts both organizational effectiveness, innovation and engagement.
This should be inspiration and motivation to see leadership as an investment and that there is value in leveling up your leadership—both to the leader (higher impact with less stress) and to the organization (effectiveness, innovation and engagement).
Antonakis J., House R. J. (2002). The full-range leadership theory: The way forward. In Avolio B. J., Yammarino F. J. (Eds.), Transformational and charismatic leadership: The road ahead (pp. 3–33). Elsevier Science/JAI.
Bass B. M. (1985). Leadership and performance beyond expectations (1st ed.). Free Press.
Bass B. M., Bass R. (2008). The bass handbook of leadership: Theory, research, and managerial applications (4th ed.). Free Press.
Bass B. M., Riggio R. E. (2006). Transformational leadership. Psychology Press.
Burns J. M. (1978). Leadership. Harper & Row.
Goodnight R. (2011). Laissez-faire leadership. In Goethals G. R. (Ed.), Encyclopedia of leadership (Vol. 1, pp. 821–823). SAGE.
Gabris G. T., Golembiewski R. T., Ihrke D. M. (2001). Leadership credibility, board relations, and administrative innovation at the local government level. Journal of Public Administration Research and Theory, 11(1), 89–108. https://doi.org/10.1093/oxfordjournals.jpart.a003496
García-Morales Víctor Jesús, Jiménez-Barrionuevo María Magdalena, Gutiérrez-Gutiérrez Leopoldo,“ (2012), Transformational leadership influence on organizational performance through organizational learning and innovation”, Journal of Business Research
Hirotaka Takeuchi, Ikujiro Nonaka (1986), "New New Product Development Game", Harward Business Review
Saks, A. M., & Gruman, J. A. (2014)."What do we really know about employee engagement" Human Resource Development Quarterly
Klein, Andrew, Wallis Joseph & Cooke Robert (2013) “The impact of leadership styles on organizational culture and firm effectiveness: An empirical study”. Journal of Management & Organization, Cambridge University
"State of Agile Report 2022" (2022), Digital.ai
Thanh, N. H., & Quang, N. V. (2022). Transformational, Transactional, Laissez-faire Leadership Styles and Employee Engagement: Evidence From Vietnam’s Public Sector. SAGE Open, 12(2). https://doi.org/10.1177/21582440221094606