LEADERSHIP STYLE AND ORGANIZATIONAL CULTURE - KEY FACTORS IN EMPLOYEE COMMITMENT IN PROFESSIONAL SERVICE COMPANIES IN BULGARIA
Bela Mihneva
Abstract
This study aims at investigating whether leadership style and organizational culture are key factors for employee commitment in the professional service companies in Bulgaria. To reach the objective a number of research questions had to answered – what are the different leadership styles and is there a most appropriate one for the companies for professional service, what are the different types of organizational culture and is there a most appropriate one for the professional service companies, and are leadership style and organizational culture key factors for employee commitment.
Introduction
Employee commitment is of great importance, especially in a time of economic and financial crisis. When a firm has employees who are committed this leads to higher performance. This is because a person who is committed is more motivated to work and adapts more easily to any new idea or change that the organization is going through (Cooper & Cooper, 2003; Gennard & Judge, 2005). Employee commitment builds shareholder value. It increases the commitment of clients and this leads to a better brand image and reputation. This makes the company more attractive for investors (Ulrich & Smallwood, 2003; Sims, 2003). When the organization has committed employees this also leads to lower personnel turnover. This is because the people feel a sense of belonging to the company and do not want to leave (Ulrih & Smallwood, 2003; Sims, 2003).
There is no doubt that employee commitment is important, but the main question that the management of each company asks its-self is how to create, develop and maintain high-level of commitment among the employees. Many studies have been carried out in order to find out the factors that influence the commitment of employees in a company.
The main objective of this study is to investigate whether leadership style and organizational culture are key factors in employee commitment in Bulgarian professional service companies. Another objective is to find the most appropriate leadership style and type of organizational culture that can create, develop and maintain high employee commitment.
Leadership Styles
The role of leadership is to establish direction, align people and motivate and inspire (Northouse, 2009). One of the main perspectives on leadership style is trait theory. It states that for a person to be a leader he must possess certain types of characteristics. These traits include intelligence, motivational skills, social skills, administrative skills, emotional control, dealing with people, and communication (French, Rayner, Rees, & Rumbles, 2011; Goyal, 2010; Williams, 2011).
There are a number of versions of trait theory, such as : great man theory and charismatic leadership theory. Great man theory, sometimes called heroic, proposes that a leader is born and not made. According to this theory a leader cannot be trained. If he does not possess certain traits and characteristics, he will never become a leader
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(Fairholm, 2011; Fairholm & Fairholm, 2008). Charismatic leadership theory states that charismatic leaders appear in a time of crisis. They are also born with certain characteristics and due to their charisma are able to make people emotionally involved in their cause.
Another concept of leadership is proposed by behavior theory. According to it, it is not enough for a leader just to have certain types of characteristics; actions are important as well. Three main type of leadership behavior have been identified: autocratic, democratic and laissez-faire.
The autocratic leader takes the decisions alone (Robbins & DeCenzo, 2005). The democratic leader plays the role of a coach, training and improving the skills of the group by providing feedback (Manning & Curtis, 2002). In the laissez-faire leadership style the leader plays very little part. The group is left to function on its own and the leader only intervenes when, for example, asked for help or additional information. Otherwise, the employees have the freedom to be creative and make decisions on their own (Manning & Curtis, 2002).
Some studies propose another distinction: transactional and transformational leadership. Transactional leaders are job-oriented, whereas transformational leadership are people-oriented (Martin, 2006).
In the words of Buchanan and Huczynski (2010) "leaders must adjust their style in a manner consistent with aspects of the context" (p.160). This idea gave rise to Fiedler's contingency theory, defining leadership as contingent on the style of the leader and the way that the employees would respond (Mullins, 2007; Martin & Fellenz, 2010; Betrocci & Bertocci, 2009).
Organizational Culture
Schein (2010, p.18) defines organizational culture as: ‘a pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration, that has worked well enough to be consider valid, and, therefore, to be taught to new members as the correct way to perceive, think and feel in relation to those problems’. Another definition of organizational culture is provided by French (2010, p.39), who states that it "represents the collective values, beliefs and principles of organizational members and is a product of such factors as history, product market, technology, strategy, type of employees, management style, national cultures, and so on". As can be seen from these definitions, organizational culture is complex and is composed of many elements. Also, it depends on a number of factors.
Different models of types of organizational culture have been created over the years. Well-known models have been proposed Charles Handy (see Senior & Swailes, 2010), Cameron and Quinn (see O’Connor & Netting, 2009; Hellriegel & Slocum, 2007); Hofstede, Hofstede, & Minkov (2010), Deal and Kennedy (see Redman & Wilkinson, 2009) and other authors.
The companies for professional service have a very complex structure. They have a hierarchy, which is well defined - managing partners, followed by directors, senior managers, managers, advisors, and so on. A lot of rules and regulations exist. Also, the companies are very diverse. With globalization and the fact that usually the professional service companies (the Big Four) are divided in clusters, the nationalities of the employees are many. This means that every employee brings with him part of the national culture. That is why the appropriate organizational culture for the professional service companies is a mixture. From one side it is hierarchical because there is a structure which is clear and the management is outlined. There are rules and procedures that need to be followed. Major decisions are taken by the leaders and if the employees
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need to make a decision, it first has to be approved. These companies also show traits from adhocracy culture. Innovation and entrepreneurship are tolerated and risk taking is part of the everyday work, since the financial market is a risky field. The professional service companies are also people-oriented as they constantly develop the skills and knowledge of their employees. Teamwork, tolerance, collaboration, and communication style are also part of the culture (Kennedy, 2010).
Leadership Style and Organizational Culture as Key Factors for Employee Commitment
There have been many definitions that appeared over the years of employee commitment. Following are some of the most commonly used.
Employee commitment, or organizational commitment, as it is sometimes called, is defined as the degree to which an employee identifies and gets involved with a certain organization. Also, it is believed that this is an ongoing process, in which the employees demonstrate their concern and willingness for the long-term success of the company (Stroh & Neale, 2002). Commitment is sometimes defined as a psychological bond of the employee with the organization because of shared beliefs and values. As that psychological bond happens, then the goals of the individual become the same as the ones of the company.
Commitment is characterized by a strong belief in and acceptance of the organization’s goals and values, a willingness to exert considerable effort on behalf of the organization, and a strong desire to maintain membership in the organization(Connors, 2011). Some studies have shown that employee commitment is composed of two factors: cognitive identity and discretionary energy. The first factor means that the employees feel connected and part of the organization. They understand and share the values and beliefs of the company and accept its practices. They want to be part of it and are proud of that fact. The second factor means that the people working in the company give their maximum effort to reach the goals of the company. They are even ready to work extra time for the sake and long-term success of the organization (Ulrih & Smallwood, 2003).
Theoretical Analyses of Employee Commitment and Its Correlates
There are many theoretical reasons for which employee commitment can be viewed as important for an organization.
First of all, employee commitment can be expected to boost performance. This is because when the employees are committed they are more satisfied, produce more than is asked from them and are ready to adapt to any change made in the company. With job satisfaction comes the will to put more effort in what you do. That is why for the human resource departments a top priority is to develop employee commitment (Cooper & Cooper, 2003; Gennard & Judge, 2005). Another reason for which it is important to have committed employees is the fact that this has a social outcome. The company becomes a better and more preferred place to work as the people are more friendly, helpful, cooperative and collaborative. The third reason is the fact that employee commitment leads to customer commitment. This is due to the fact that when an employee believes in the company and is loyal to it, he can transfer that feeling to the customer. If a customer communicates with a committed employee, then the client will be satisfied of the service and be convinced that this is the right company. In such a way, the customer commitment is increased. Another motive for the company to develop employee commitment is the fact that it builds shareholder value. This is because it reduces costs as people are more motivated and produce higher volume with the same number of workers. The fifth reason
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is the fact that commitment leads to employee retention and less turnover in the organization. When employees become committed to the company they work for they feel a kind of belonging and do not want to leave. For the management of the firm this is good for a number of reasons. The company is going to have highly trained and professional employees who are already aware with the processes and procedures, as well as all the customers and contractors. Also, little turnover in a company saves costs, especially for training and development as there will be no need of constant training of newcomers who have to be introduced to the way things are done in the organization. This not only saves money, but also time, as there will be no need to spend time on searching for new employees, making interviews and selecting the right candidates (Ulrih & Smallwood, 2003; Sims, 2003).
A number of analysts claim that one of the main reasons for loosing talents in a company is the employee/manager relationship. No matter how well paid a person is, if the leadership style of the manager is not appropriate and the relationship between the two is bad, the employee will leave the company. Also, if the management and leadership are poor, this will also encourage employees to seek other opportunities as the leader would have failed to develop commitment (Kreisman, 2002).
An effective leadership style can create employee commitment. The leader is a person who inspires and motivates the people to give their maximum. So, if the leadership style is appropriate, if the manager communicates with honesty and sets the right direction, then the employees will feel engaged and part of the organization (Johnson, 2004; Verma, 2011).
When an organization has a strong and identifiable culture this leads to employee commitment. When an employee understands the culture of the organization and has clearly set values to follow, this makes him have the feeling of belonging (Fayolle, Kyro, & Ulijn, 2005; Gill, 2006). The values of the employees start to shape as the values of the company and they become more devoted and inspired to work and contribute to the long-term profitability and success of the firm. The organizational culture of a company creates the feeling of unity and being part of a group as the values and beliefs are the same for everyone. This is why when the organizational culture is strong, employees become so attached to the group and company that they do not consider leaving. This is how organizational culture develops employee commitment (Sosik, 2004).
In conclusion, both leadership style and organizational culture are factors in the development and preservation of employee commitment. The leader is the person who inspires the employees and makes them attracted and captivated by the mission of the company. On the other hand, a strong organizational culture is what makes the employee feel part of a group and share the same values and beliefs with the rest of the group. Without these two factors, employee commitment will not be possible. And without employee commitment a company cannot be successful in the long-term as it will have high turnover and employees who are not motivated to reveal their full potential.
Empirical Studies on Employee Commitment and Its Correlates
Taylor, Levy, Boyacigiller and Beechler (2008) studied employee commitment in multinational corporations and the impact of organizational culture and management. The study involved 1,664 employees working in 39 companies around the globe from different industries such as financial and other services, telecommunication, it sector, pharmaceuticals and others. The data was gathered through a questionnaire. The study found that culture and human resource management are the main factors that influence employee commitment. This was because organizational culture gave a sense
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of belonging and made the employees feel part of something big. Human resource management practices made it easier for employees to understand the company's culture. After a more careful analysis of the data it was discovered that the role of the management was even more powerful when it came to employee commitment. The management orientation was what gave the employees a direction to look at. If the management had a global orientation, it gave the employees an understanding of the mission. It was discovered that the employees understood and accepted the culture and HRM practices through the management orientation (Taylor, Levy, Boyacigiller, & Beechler, 2008).
Lok (2003) studied the effect of organizational culture and leadership style on job satisfaction and organizational commitment. This study was a cross-national comparison, attempting to show whether there was a difference between leadership style and organizational culture in different countries. The sample consisted of 337 employees: 219 from Hong Kong and 118 from Australia. The industries from which the managers came were telecommunications, banking sector, professional service companies and retail. The data were gathered through a questionnaire. They revealed a number of findings:
-
Both leadership style and organizational culture affect employee commitment;
-
In Australia, employee commitment is higher when there is a consideration leadership style and innovative and supportive culture;
-
Surprisingly, the research found no correlation between bureaucratic leadership style, organizational culture and employee commitment in Hong Kong.
Another cross-cultural study of leadership style and employee commitment was carried out in by Huang, Chiu and Liu (2011). The sample consisted of 137 employees from the professional service companies in the United States and 247 employees from such companies in Taiwan. The data were gathered through a questionnaire.
The results showed that the American employees from the Big-Four companies prefer to have a supportive leadership style. This type of style produced a high correlation with the commitment dimensions of sense of belonging, promising future, and loyalty. On the other hand, the Taiwanese employees from the Big-Four prefer to have supportive and participative leadership style. This leadership style yielded a high correlation with the commitment dimensions of dedication, policy recognition and loyalty (Huang, Chiu, & Liu, 2011).
Broderick (2012) studied 100 companies for professional services and found that organizational culture is essential for employees to be committed. It was discovered that there are a number of values that all firms for professional service share. These are: integrity/ethics, collaboration/teamwork, dedication to clients, professionalism/excellence, respect, innovation/creativity, social responsibility, accountability, entrepreneurship and diversity.If the cultures of the organizations have these values, then the employees will be motivated to give their best and be committed to the firm (Broderick, 2012).
The Boston College Centre for Work and Family (2003) found another characteristic of organizational culture that contributes for employee commitment: flexibility. The Chartered Institute for Personnel and Development (2006) produced found that companies that have a more friendly leadership style and organizational culture have more committed employees opposed to organizations where the culture and style are more tense. A friendly culture is one where positive emotions are used in order to deliver information and the leader acts more like a mentor and friend rather than a boss. In a tense culture, everyone works under a lot of stress and pressure and the leader uses negative emotions in order to motivate the employees.
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Method
A questionnaire was designed for the purpose of this study. It contained questions with multiple-choice answers. It was distributed to 114 company employees from the audit, tax and advisory departments of one of the biggest professional service companies in Bulgaria.
The questionnaire was divided in three parts: Leadership style, Organizational culture and Commitment. Each part consisted of seven questions, which were meant to distinguish the style and organizational culture of the company and whether there is correlation between these two and employee commitment. All questions included five-point Likert scales, ranging from "strongly agree" to "strongly disagree".
The questions about leadership style ask the respondents if they agree with the following statements:
1. Your manager allows you to participate in the decision making process.
2: Your manager wants you to follow a strict set of procedures.
3: Your manager is part of the team.
4: Your manager is reachable (you can freely go to him/her and discuss an idea or a problem that you have).
5: Your manager is concerned with your personal problems and well-being.
6: Your manager encourages you to be creative in your work.
7: Your manager encourages you to constantly develop your skills.
The questions about organizational culture ask the respondents if they agree with the following statements:
1: There are strict rules and regulations in your organization that you have to follow.
2: Your company sets clear goals for you.
3: You are allowed to express your opinion on an idea.
4: You are given the chance to develop in the company.
5: You are encouraged to work in teams.
6: Your organization recognizes the success of teams.
7: Your organization has a strict hierarchy.
The questions about commitment ask the respondents if they agree with the following statements:
1: You understand the vision and mission of the company.
2: You feel as a part of the company.
3: You are satisfied with the management of the company.
4: Your company and the manager motivate you to show your full potential.
5: You enjoy starting a new day at work.
6: You feel encouraged to make a difference in your organization.
7: You are considering leaving the company in the next 3-5 years.
Results
All questions from the leadership section of the questionnaire, except question 2 (Your manager wants you to follow a strict set of procedures), correlate with each other. They form a single dimension that can be called "leadership style". Question two - about strict rules and procedures - does not correlate highly with any other question from that part of the questionnaire.
Questions 1 (There are strict rules and regulations in your organization that you have to follow) one and 7 (Your organization has a strict hierarchy) in the organizational culture section correlate highly with one another but not with the other five. They form a single dimension: "organizational strictness-hierarchy". The other five questions are also highly correlated and form another dimension: "organizational attitude toward individuals".
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All of the seven questions on commitment are highly correlated with each other and form a fourth dimension: "commitment".
Table 1 provides correlations between the four dimensions. As we see, commitment correlates very strongly with leadership style (0.896) and organizational attitude toward individuals (0.909). Also, there is a strong correlation between leadership style and organizational attitude toward individual (0.937). There is no correlation between commitment and organizational strictness-hierarchy (-0.023).
Table 1: Correlations Between the Four Dimensions
|
|||||
|
|
Commitment |
Leadership Style |
Organizational attitude toward individual |
Organizational strictness-hierarchy |
Commitment |
Pearson Correlation |
1 |
,896** |
,909** |
-,023 |
Sig. (2-tailed) |
|
,000 |
,000 |
,810 |
|
N |
114 |
114 |
114 |
114 |
|
Leadership Style |
Pearson Correlation |
,896** |
1 |
,937** |
,134 |
Sig. (2-tailed) |
,000 |
|
,000 |
,156 |
|
N |
114 |
114 |
114 |
114 |
|
Organizational attitude toward individual |
Pearson Correlation |
,909** |
,937** |
1 |
,000 |
Sig. (2-tailed) |
,000 |
,000 |
|
1,000 |
|
N |
114 |
114 |
114 |
114 |
|
Organizational strictness-hierarchy |
Pearson Correlation |
-,023 |
,134 |
,000 |
1 |
Sig. (2-tailed) |
,810 |
,156 |
1,000 |
|
|
N |
114 |
114 |
114 |
114 |
|
**. Correlation is significant at the 0.01 level (2-tailed). |
|||||
Discussion
The very high correlation between leadership style, organizational culture, and commitment, means that the first two factors are essential for having committed employees. These results are not surprising as they have analogs in the literature. Taylor, Levy, Boycigiller and Beechler (2008) indicated that leadership style and culture were two of the three factors that influence commitment, HR practices being the third. Lok (2004) also found no correlation between bureaucratic and hierarchical leadership style, and culture and commitment, at professional service companies. Because the leader is a person who inspires and motivates people to show their full potential, an effective leadership style can create commitment (Verma, 2011; Johnson, 2004). Further, if the employees understand the culture of the company, and its vision and the mission, they will be committed (Fayolle, Kyro, & Ulijn, 2005; Gill, 2006).
Based on this study, the following recommendations can be made to companies in the professional service sector who wish to have committed employees:
-
The leadership style in such a company should be democratic, supportive and participative;
-
The management of the company should be part of the team, easily reachable and concerned with the personal problems and well-being of the employees;
-
The leader should encourage the employees to constantly develop their skills;
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-
The type of organizational culture of the company should be hierarchical, people oriented, democratic, innovative, supportive, flexible, coaching, and friendly;
-
Even if there is a hierarchy and strict rules and regulations, the culture of the firm should encourage the employees to express their opinion and ideas;
-
The organizational culture should support training and development;
-
The organizational culture should motivate employees through recognition and rewards, not through punishment and stress;
-
In order to be committed, the employees should fully understand the culture of the organization, its vision, mission and values. Management should make sure that everybody is well informed about these issues.
The present study has its limitations. Only one large company for professional service in Bulgaria took part in it. Still, although there are no data from other companies, it is likely that the associations found in the present study are valid also in other contexts.
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