A Case Study of the Impact of
Leadership Styles on Bank
Employees’ Job Satisfaction
Södertörn university | The Institute of Social Sciences
Bachelor Thesis 15 hp | Business administration C - Organisation |
Autumn 2015
Student: Somaye Bahmanabadi
Supervisor: Henrik Ferdfelt
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Abstract
Leadership always plays an important role in the growth and performance of an organization.
Changes in organizational structure, vision and leadership are inevitable in any institution.
Leadership style is a special characteristic that distinguishes a leader from another and this
powerful force is what pushes an employee or employees to complete a task that produces
maximum results; especially in the banking sector. Survey questionnaires were used in this study
as a main method for data collection. The data was analyzed by using the Structural Equation
Modeling (SEM) Method using Lisrel software. This research has been conducted to determine
the impact of using transformational, relation-oriented and transactional leadership styles and
their direct effect on job Satisfaction. A total of one hundred questionnaires were distributed
among SEB and Swede bank´s employees and seventy-one fully answered questionnaires were
used for statistical analysis. In other words, seventy-one percent of the questionnaires were
returned. The results clearly show that leadership style (Relation-oriented, Transactional, and
Transformational) have a significantly positive effect on both the employer and employee’s
satisfaction with the job. The results indicate that the Transformational approach ads the most
contribution toward job satisfaction compared to the Transactional and Relation-oriented styles
of leadership.
Keyword: Leadership Style, Job Satisfaction, Bank, Lisrel
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Contents Chapter1 4 1-1 Bakground 4 1-2 Problem 8 1-3 Research purpose 10 1-4 The Research Question 11 1-5 Delimitation and Limitation 12 Chapter 2 13 2-1 Theoretical Framework 13 2-1-1 Leadership 13 2-1-2 Transformational Leadership 14 2-1-3 Transactional leadership 17 2-1-4 Relationship-oriented leadership 18 2-1-5 Job satisfaction 19 Chapter 3 22 3-1 Method 22 3-1-1 Quantitative Method 22 3-1-2 Survey Methodology 23 3-1-3 Choice of the Case Study 23 3-1-4 Material Collection 23 3-1-5 Modeling 24 3-1-6 Research Approach 25 3-1-7 Implementation 26 3-1-8 Reliability and Validity 29 Chapter 4 30 4-1 Empirical findings 30 4-1-1 Descriptive Statistics 30 4-1-2 The frequency of respondents based on their gender 30 4-1-3 Distribution of respondents according to their age 31 Chapter 5 312 5-1 Analysis 32 5-1-1 Estimation model 32 5-1-2 Assessment of the measurement model 33 5-1-3 Estimation of the Structural Equation Model (SEM) 35 6-1 Conclusion 37
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1-1 Bakground
Empirical studies in the field of leadership styles and job satisfaction are reviewed in this section.
In one research, Awamleh (2005) investigated the transformational leadership style and its direct
effect on job satisfaction and employees’ performance in UAE banking. The UAE banking
section has been selected in this study because of its importance in the economy and the
company’s remarkable contribution in UAE gross domestic product. Data analysis has been
implemented through the multivariate regression approach. The results of this study show that
leadership styles of Transactional and Transformational have a significantly positive effect on
employees’ job satisfaction and performance. In another study, Bushra et al (2011) investigated
the Transformational Leadership technique and its effect on employees’ job satisfaction. The
study was done on the banking section of Lahore, Pakistan—with a statistical population of 133
bank employees. The statistical approach of this study has used multi-variable regression. The
model applied in this study is as following:
Fig 1: Conceptual Model (source: Bushra et al, 2011)
Findings of the study showed that transactional leadership has a positive and significant effect on
the investigated bank employees and their job satisfaction, which in turn creates an organizational
commitment.
In another study, Cetin et al (2012) investigated the different leadership styles and
communicative skills of top Turkish bank employees and the effect their leadership has on the
lower-level employees’ work ethic and motivation. The empirical findings of this study show that
there is a strong relationship between transactional leadership style and communicative skills
Transformational
Leadership
Job Satisfaction
Organizational
Commitment
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with job satisfaction, but there is not a significant relationship between individualized and
transformational leadership styles with job satisfaction.
Sang Long et al (2014) investigated different aspects of transformational leadership on job
satisfaction in a governmental company in Malaysia. The sample of this study includes 225
individuals, and the model is as following:
Fig 2: Conceptual Model (source: Sang Long et al, 2014)
Findings of this study show that among the transformational leadership criteria only the
individualized consideration has a significant effect on job satisfaction. There was not a
significant relationship between idealized influence, inspirational motivation, intellectual
stimulation and job satisfaction. Baysaka and Yener (2015) studied leadership styles and job
satisfaction among hospital employees in Istanbul using correlation analysis by SPSS software.
Results of this study show that there is a weak relationship between leadership style and
perceived satisfaction. Saleem (2015) investigated the effect of leadership styles on job
satisfaction with the mediating variable of perceived organizational politics. The study shows
that transformational leadership has a positive effect on job satisfaction and transactional
leadership has a negative effect on it. Findings also show that perceived organizational politics
play the mediating role between leadership styles and job satisfaction. In another study,
Obuobisa-Darko (2015) investigated the relationship between leadership styles and job
satisfaction, specifically focusing on the banking section. The investigated sample included 150
individuals. Leadership styles investigated in this study included the transactional and
transformational techniques. The conceptual model of this study is as following:
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Fig 3: Conceptual Model (source: Obuobisa-Darko and Obuobisa-Darko, 2014)
Findings of the study show that there is a significantly positive relationship between the
leadership styles of transformational and transactional with job satisfaction. Also, according to
other results of this study, the effect of transactional leadership on job satisfaction has been more
successful than the transformational leadership method.
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1-2 Problem
Leadership in an organization has a strong effect on employees’ attitude about their job. The role
of leadership in today’s corporate organizations has changed. The success of any organization is
mostly dependent on an organization’s management team and the leadership style used (Saleem,
2015). Organizational leadership is a very important and complex issue; and a lot of researchers
and scholars have spent a great deal of effort to recognize and improve it. Although
administrative styles are very extensive and theoretical, many empirical studies have been
performed in order to investigate the different methods of leadership. Transformational,
transactional, and relationship-oriented leadership have been remarkably supported in different
studies (Cetin et al, 2012; Saleem, 2015). Leadership is one of the most important factors in
increasing the organizational efficiency of a company. The leader or boss of a company is
responsible for developing and implementing decisions on how to achieve the desirable resources
from their employees in order to produce the best products and services with the interest of the
shareholders in mind. This awareness and implementation of leadership styles gives a company
an advantage over their competitors (Riaz & Haider, 2010). Today’s organizations need a leader
with a high influence of power, and one with an extensive overall goal for the company in mind.
This leader requires commitment and their goal should be to fuel enthusiasm in their employees
in order to cultivate the full potential of their talent so that they may obtain the organization’s
objectives (Colvin, 2004; Steidlmeier, 1999). Leadership style is an approach in which the leader
uses his or her influence to achieve the company’s goals. Many researchers believe that the
leadership style of a company is mainly affected by the attitude of the leader and he or she plays
an important role in the productiveness of the employees (e.g.: see Gadot, 2007; Furkan et al,
2010; Saleem, 2015). Leadership style can affect the satisfaction of the employees of a company
both directly and indirectly. Job satisfaction has been defined as an enjoyable and positive
experience felt by an employee, mostly because of a leader giving them a sense of appreciation
for their work (Locke, 1976). These feelings are the direct result of a strong relationship between
the employees and their leaders. The employees’ expectations from a work place tend to involve
a strong bond with their colleagues and their boss. All positive performances and success in any
organization are achieved while using this method. (Avolio and Bass, 2004; Madlock, 2008;
Belias et al, 2013). Reitner (1996) believes that the transformational leaders are the only ones
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able to draw out the essential tools needed for any new organization’s success. These kinds of
leaders are the main source of fundamental success in any company and dominate over all other
organizations, easily riding over them. Such leaders can present a better and clearer image of the
future, explaining their insight to the employees effectively, by challenging them to do their jobs
exceptionally, and by integrating positive leadership, which in turn makes for more satisfied
employees. Freis et al (2003) states that transactional leaders decrease the individual’s likelihood
of moving on to another company, and simultaneously increases the production of the employees.
This also gives the employees a greater sense of appreciation.
Among the most successful organizations, this use of leadership style is crucial in the
productiveness of these banks and financial institutions. Financial institutes and banks play a
mediating role between investors and depositors, and present financial services to entrepreneurs
in order to give them a loan so that they may start their new business (Lawson, 2012). In regards
to the financial crisis currently effecting the world, particularly in Europe, the interest of studying
these relationships between employer and employee has become much more important. While
studying the productivity of a company, many factors come to mind. These banks and financial
institutes have shifted their focus on their employees’ performance, which in turn has been
extremely effective in increasing the institution’s revenue (Awamleh et al, 2008; Bushra, 2011;
Cetin, et all, 2012; Belias, 2013). Also, during the last two decades, companies have shifted their
focus on leadership in order to provide excellent service to their customers. By upholding these
tactics, increases in profits have created significant changes in the banking industry. These
changes have directly affected the banking world. By adopting these new strategies, particularly
relationship marketing, there has been a huge increase in company yields (Durkin & Bennett,
1999). Berry (1984) has defined relationship marketing as increasing the bank’s income by
establishing a positive relationship between customers and employees. Thus, with the use of this
approach, the focus on employees and customers’ satisfaction is highly important for the success
of the bank. Berry (1984) argues that bank employees should be considered by managers as
internal customers. According to his belief, achieving a desirable level of customer satisfaction in
the banking industry is not possible without concurrently focusing on their employees. The
banking field has been a vital pillar in the global economy for many decades. Although the
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bank’s goal is generally to make profits, their performance is also based on public interest.
Regarding this fact, banks create a stable framework of receipts and payments both for
individuals and public services. With there being so many daily transactions within a bank,
between major and minor businesses, as well as individual banking in modern western countries,
it is vital that banks secure an acceptable means of payment in order to fuel the economy
(Lawson, 2012; Belias et al, 2013). Leadership is key in creating structure within an organization
and has attracted a great deal of studies during the recent years. Moreover, the training of these
organization’s leaders and managers has become the main target of development. With respect to
the mentioned issues, this study aims to investigate the relationship between leadership styles
(Transactional, Relationship-oriented and Transformational) and employee’s satisfaction;
specifically focusing on the employees of Swedish Banks while applying the Structural Equations
Modeling (SEM) system.
1-3 Research purpose
The main purpose of our dissertation is to evaluate the relationship between leadership styles, and
Job Satisfaction. Therefore, studying previous research done in the area of leadership style
theories is important, because it reflects the differences in transformational, transactional and
relationship-oriented leadership. Among the materials found by Bass and Avolio (1988), these
three theories can be used. They brought forth three different hypotheses based on these theories.
Furthermore, we developed our own model and attempted to make it generalized. Based on
literature review and the implementation of theoretical and empirical models, the following
model was suggested to investigate the effects of management styles on job satisfaction. ( For
example, Shahmohammadi, 2015; Fransis et al, 2006; Saleem, 2015). Figure (1) is a simple
representation of the relationship between latent variables and their corresponding observed
indicators.
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Fig 4: Conceptual Model (Bass and Avolio, 1988)
According to figure (1), hypotheses tested in this study are as follows:
𝐻!: There is a significant relationship between the transformational leadership and job
satisfaction
𝐻!: There is a significant relationship between the transactional leadership and job
satisfaction
𝐻!: There is a significant relationship between the relation-oriented leadership and job
satisfaction.
Hypotheses based on figure 4 are equivalent to a set of regression equations that must be
estimated simultaneously. To make this so that it can be followed practically and effectively in a
LISREL modeling environment, we need to have the required data. The data is collected
through questionnaires, (including a 5-points questionnaire) which are completed by
correspondents.
1-4 The Research Question
Is there any relationship between leadership styles (Transformational, Transactional and
Relationship-oriented) and employees` job satisfaction?
Transactional Leadership
Relationship-oriented Leadership
Transformational Leadership
Job satisfaction H2
H3
H1
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1-5 Delimitation and Limitation
Due to limitations in time, cost and human resource this study is limited only to the SEB
employees in Stockholm and not the other city of Sweden. Furthermore, the study will examine
the employees who work permanently and not those who are substituted temporarily. On the
other hand, this study only examines the impact of leadership styles (transformational,
transactional and relationship-oriented) on job satisfaction and leadership styles are not the
subject of this study.
In this study no randomization was possible, and the participants were chosen based on
convenience sampling. Also, individual differences at educational background could not be
controlled and there was a possibility that the participants might not have answered the
questionnaires seriously.
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2-1 Theoretical Framework
2-1-1 Leadership
The “Great Man” theory of leadership states that historically, a civilization’s leader has an affect
on the organization’s success (Shaukat et al., 2012). Leadership is one of the most extensively
discussed topics of research around the world (Kuchler, 2008); and all groups and teams need a
leader (Jones, George, & Hill, 2002). A lot of definitions have been presented in the field of
leadership and leadership styles (De Simone, 2006). Traditionally, leadership has been defined in
recent years as individual skills that are applied directly to the organizations (Nivala & Hujala,
2002). Cole (2002) has defined leadership as a dynamic process by which, during a specific
period of time, and in a specific organizational field, one individual affects the group in order to
achieve the overall objective. Locke and Crawford (2004) argue that leadership plays a crucial
role in a company’s ultimate success or failure. Laue (2004) knows that leadership starts with an
individual that has a vision and then takes the required actions in order to achieve the goal. This
leader also must treat others as their equals while pursuing these changes. Gill (2006) sees
leadership to help stimulate, motivate, and encourage the followers so that the company may
achieve satisfactory results for the organization. De Simone (2006) has defined leadership as
using a non-coercive influence to direct and coordinate a group’s activities towards a certain
objective. Jong and Hartog (2007) have defined leadership as the process of influencing people
in order to achieve desirable results.
Thus, for an organization to remain successful, having the right leader is crucial. The best
employers know how they can participate with their employees in order to achieve the
organization’s objectives (Cho & Tseng, 2009). There are a lot of different leadership styles
(Mosadeghard, 2003); among which are the autocratic, administrative, free economy,
charismatic, democratic, cooperative, situational, functional, transformational, transactional, and
relationship-oriented styles. According to the literature, the most important leadership styles that
had a positive and significant effect on job satisfaction were transformational leadership,
transactional leadership and relationship-oriented leadership, respectively. Almost in all studies,
transformational, transactional and relationship-oriented leadership styles had significant positive
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effects job satisfaction and no study was found in which the mentioned styles have no effect on
job satisfaction. On the other hand, based on empirical studies transformational leaders are more
comprehensive, more effective and more successful in comparison with transactional leaders
(Nivala & Hujala, 2002; Awamleh et al , 2008; Bushra, 2011; Cetin, et all, 2012; Belias, 2013).
Accordingly, a manager can choose one of these different leadership styles for different
situations. It simply depends on the culture of the organization and the maturity of the
employees. Today, employees are highly educated and jobs are mostly specialized; therefore, the
employees have more power than they have ever had before (see Bass, 1997; Shahmohammadi,
2015 Fransis et al., Saleem, 2006). This power makes it even more important that the right
leadership style, such as transformational, transactional or relationship-oriented are investigated
properly.
2-1-2 Transformational Leadership
Transformational leadership was used for the first time by Danton (1973), although it was not
reputable until it was being used by the classics. Recent expansions in leadership theories have
transferred from leadership theories with a charismatic ideal in which the assumed leader is an
unusual creature and his or her disciples are dependent on leadership. This expansion works
toward neo-charismatic and transformational theories, which note development and empowering
disciples in order to have independent functions (Kark et al, 2003). Transformational leadership
has originated from charismatic leadership. Charisma is a Greek word, which means gift of
grace. Power is charismatic which has been derived from faith towards a leader with a symbolic
character. Specifically, Yammarino (1994) believes that the individual characteristics of
charismatic leaders include a high degree of self-confidence, strong moral convictions, and the
ability to influence others. This also is involved in management behaviors, with the purpose of
affecting others in order to increase the trust of the leader. Moreover, expressing a mission,
challenging the objective, and motivating others are also important aspects. Bass and Avail,
(1991) believe that transformational leadership is formed when the leader promotes his or her
employees’ interests, by creating awareness and the acceptance for the mission at hand and the
end destination of the group. Thus motivating the employees to see beyond just their own
interests to seeing the group’s interests. Mark (2004) knows transformational leadership is
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transcendental and ultimately moral with a motivational background in which human behavior
levels and moral tendencies of both leaders and disciples are increased. He defines
transformational leadership as one who empowers disciples and motivates them in order to act
beyond their expectations and see the group’s objectives instead of personal interests. Daft (2001)
states that transformational leaders imagine a future picture and encourage individuals to realize
this vision. The transformational view is looking for potential motivations in disciples and its
objective is to attract the attention of disciples towards the superior, overall needs of the group
(see: Riaz & haider, 2010; Brausn, 2013). Thus, transformational leadership is the process of
creating a conscious influence on individuals or groups to create continuous change in the current
condition and organization’s functions as a whole. Through its words and acts, transformational
leadership transforms the whole organization and has a lot of influence on its followers. This
type of leadership is realized when leaders increase their employees’ interest towards working,
informing them about the company or group’s objectives and missions, and then encouraging
them to think beyond their individual interests (e.g.: see Kent et al, 2001: Stone et al, 2003; Cetin
et al, 2012; Saleem, 2015). Using organizational mechanisms such as rewards, communication,
and organizational policies, this method of transformational leadership creates a dynamic
empowerment culture with active and innovative features. This culture causes transformational
leadership to be more successful by working in dynamic settings which makes this style of
leadership an appropriate one for crisis periods (Kent et al, 2001; Russell et al, 2002; Stone et al,
2003, 2004; Cetin et al, 2012). Figure 5 displays Transformational leadership components:
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Fig 5: Transformational leadership Components (Bass, B & Avilio, 1990: Kent et al, 2001; Stone et al,
2003; Cetin et al, 2012; Saleem, 2015)
Idealized influence: explains the leaders who act as strong models for their disciples. If a leader
is transformational, he or she creates an environment with the feeling of respect, admiration, and
loyalty among his or her disciples and emphasizes the importance of strong commitment to
achieve the organization`s mission (Gumuslouglu & Ilsev, 2008; Jung et al, 2003; Saleem, 2015).
Inspiration motivation: describes the leaders who increase disciples' commitment and create
motivation through their participation in future prospect drawing (Piccolo et al 2010; Purvanova
et al, 2006; Ergenelia et al., 2007; Saleem, 2015).
Intellectual stimulation: is resulted when the leader helps them achieve initiatives and construct
creativities (Gumusluoglu and Ilsev, 2008; Cetin et al, 2012).
Development-oriented support: comes to fruition when the leader pays enough attention to the
disciples' needs hierarchy in order to obtain growth and to avoid any hesitation about receiving
guidance and support. Accordingly, the leader puts some responsibilities on the shoulders of the
disciples in order to guarantee their growth from many different angles (Piccolo et al 2010;
Purvanova et al, 2006; Ergenelia et al., 2007; Cetin et al, 2012; Saleem, 2015).
Transformational Leadership
Intellectual stimulation
Motivation Development-oriented support
Idealized influence
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2-1-3 Transactional leadership
In transactional leadership all things are seen with the overall amount of benefits the individuals
get and the relationship between the leader and disciples is speculative based on exchanging one
thing for another. (Bass, 1985; Bysio et al, 1995; Avoilio, 1999; Yuki, 2002). Bass and Avoilio
(1992) believe that transformational leaders are more successful than transactional ones.
Empirical results also indicate that this approach gives transformational leaders more success,
making their leading more comprehensive, and effective than transactional leaders (Hater &
Bass, 1988). Bass and Avoilio (1992) state that the transformational leader, compared to
transactional ones, are more likely to reduce individuals’ displacement. Transformational leaders
also increase production, returns, and employees’ job satisfaction. Generally speaking, results of
most empirical research show that transformational leadership is much more effective than
transactional leadership on organizational variables such as job satisfaction (Podsakoff et al,
1990; Cetin et al, 2015).
Transactional leadership, also known as managerial leadership, pays attention to the social
interactions and transactions between leaders and followers. It focuses on supervision,
organization, and group performance. Transactional leadership can be described as a style of
leadership in which the leader champions compliance of the followers through both reward and
punishment. Opposing transformational leadership, transactional leaders would rather keep their
current situation because they are not optimistic about change in the future. They are
faultfinders, since they always find a way to track faults in the employees. Transactional
leadership is better adopted in crisis and emergency situations, as well as when work is needed to
be carried out in a specific mode. Transactional leaders conduct their business by identifying the
needs of their followers and donating rewards satisfying these needs for positive performances
(Arnold, 1998). The leader’s freedom to act is constrained by the followers’ perception of the
leader. Followers will only show the demanded behaviors when they experience a certain
authority over them and when there are possibilities for rewards (Bass, 1985). Leaders motivate
their subordinates through observing their performances and reacting to errors and failures. A
transactional leader is aware of the needs of his or her followers and facilitates negotiation with
them so as to meet the overall need of the company or group. A transactional leader will do all
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the tasks with his followers to meet the final target (Bogler, 2009; Deichmann and Stam2015).
The following dimensions of transactional leadership have been identified as contingent reward,
management by exception—active, and management by exception—passive, and laissez-faire in
line with Bass (1995). Leadership style has a few different theoretical components: contingent
rewards and active management by exception. Contingent reward is the degree to which a leader
arranges constructive transactions with followers. The leader is very clear about his or her
expectations and he or she establishes rewards in order to promote better performance. The
leader clarifies what is expected from his or her followers by showing them what they might
receive if they perform as desired. Active management by exception is another theoretical
concept used. This type of concept is shown when a leader takes corrective action against his or
her employees based off of their poor performance. As noted by Howell and Avolio (1993), the
difference between management by exception—active and management by exception—passive
lies in the timing of the leader’s intervention. Before creating any serious problems, active
leaders control follower behavior, predict problems, and make corrective adjustments along the
way. Passive leaders, however, wait until the behavior has already created problems before
taking any action. These leaders implement their adjustments after problems have occurred.
Their ultimate goal is simply to maintain current performance levels. Transactional leaders using
the Passive Management by Exception method intervene only when performance is not in
accordance with expectations. Punishment is used simply as a reaction to unacceptable
performance. Passive management-by-exception leaders tend to react only after problems have
become serious and then take the corrective action. The leaders often avoid having to make any
decisions at all (Bass, 1995).
2-1-4 Relationship-oriented leadership
While the relationship-oriented leadership concept has been discussed for many years (Stogdill &
Coons, 1957), but the aspects of this type of leadership are still relatively new and somewhat
vague (Brower et al., 2000; Death, 2001; Murrell, 1997). In a traditional management discourse,
the term of relational means, “an individual that likes people and thrives on relationships.” In
relationship-oriented leadership, the human resources department and employees are more
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important than the management staff. Relationship-oriented leaders focus more on their
employees’ human needs and cultivating a positive relationship with them. In this style of
leadership, the first priority is establishing a human relationship between the leaders and
employees and keeping it. This type of leadership cares about the physical and mental needs of
their employees. Thus, this style works to create a commitment in their employees and in
learning about their needs. Ultimately this commitment is also used to achieve the organization’s
success (Tabernero, 2009). In relationship-oriented management the focus is less on completing
duties and work, and more on the relationship with the individual employee. This behavioral
style is very effective. The manager is also considered as an individual—whose main goal is to
stimulate growth in his or her employees. However, if the manager performs in an inappropriate
way, then the manager is called an obedient or preacher-like individual (Bass, 2008; Hersey &
Blanchard, 1996).
In this relationship-oriented type of leadership, the individual is described as having a high
tendency towards focusing on tasks and also towards relationships with others. A manager who
applies this style is often called the executive manager, and if he or she applies this style in
inappropriate situations, he or she is called the compromising manager. These types of managers
want to integrate employees’ objectives with the overall objective of the company by using
methods of collaboration, cooperation, and participation in their work field. These managers
often care about participation in public objectives and responsibilities. They are also interested in
motivating individuals by increasing team spirit in their employees (Bryman, Collinson, 2011).
2-1-5 Job satisfaction
A review on job satisfaction shows that it has been studied in many different fields including:
nursery, psychology, sociology, and management. From the time of Herzberg et al (1957), the
concept of job satisfaction has been challenged and revived numerous times. However, this
concept has continues to remain ambiguous. Job satisfaction includes three individual but related
structures, which are: job evaluation, job belief, and emotional experience. Lunderen et al (2005)
defines job satisfaction as one’s emotional reaction to his or her job. Locke (1976) states that job
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satisfaction is a positive or desirable emotional state resulted from the employee’s job experience.
Hegney et al (2006) believe that job satisfaction is a type of feeling of security in the job and the
relationships inside the organization. Also, in their research, Smith (2001) and Easom (2000)
have emphasized that the salary and income are important factors in job satisfaction. Siegel et al
(2005) have considered these variables of observing justice, non-discrimination, and job
satisfaction as being more effective. Cam (2001) and Wild (2006) referred to this as job
independence. Cain (2001) and Palepu (1998) have pointed to the importance of constructive
communication between colleagues and group members. In Thompson’s study, the authorities’
observation has been recognized as important. Flanagan (2002) has established an emphasis on
employment condition, which effects job satisfaction. In their research, Desantis and Durst
(1996) have shown that employees, who have worked with the company for the longest, have
higher levels of job satisfaction. Carayon (2004) showed that job security has a significant effect
on employees’ level of job satisfaction. Table (1) shows the different approaches towards
obtaining this job satisfaction.
Table 1: Shows different definition towards job satisfaction. Job satisfaction concept Researcher
A desirable feeling Wild et al (2006); Lu, et al (2007); Yang and Chang
(2008)
A positive attitude towards the job Weiss (2002), Lunderen et al (2005)
Judging the job Jiang (2008); Liu LF (2007); Daehlen (2008); Head
and Myers (2012)
Job valuation Hegney et al (2006); Mertler (2002); Verplanken
(2004)
Job security Lu, et al (2007); Griffeth et al (2000); Aydin et al
(2012)
Extensive definitions in the field of job satisfaction show that there is not a united framework on
this field (Lunderen, 2005). Thus, researchers try to identify main effective components on job
satisfaction in order to measure this more precisely. Studying the many different published pieces
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of literature, and the implemented studies done on leadership and satisfaction in the workplace,
have shown that salary, benefits, and job security have been identified as the most important
components in regards to job satisfaction (e.g.: Madlock, 2008; Voon et al, 2011; Cetin et al,
2012; Bateh and Heyliger, 2014; Belias et all, 2013).
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3-1 Method
3-1-1 Quantitative Method
Data collection is a very important and crucial process. Any defect in its implementation results
in false data, which leads to incorrect conclusions. To prevent this, it is essential to collect data
by using a logical definition. The correct way of collecting data is by doing so in an appropriate
place at an appropriate time all while in a standard situation. It is very important to use the
proper scientific method when analyzing a specific individual, organization, or group. The data
collection process may include a variety of activities. For example: social, cultural, political,
economic, survey, or even historic investigations. After an objective is selected, and there has
been recognition of the problem, the next step is to recognize data collection resources (Kerlinger
and Lee, 2000). Generally, data resources can be divided into primary (direct) and secondary
(indirect) resources.
Primary data is a type of data that is obtained without mediation through measuring, direct survey
or experimentation (Sounders et al, 2007). While collecting this type of data, proper use of
instruments and the validity of the surveys taken are highly important. Secondary data is type of
data that has already been produced or is in the process of being produced. In historic and
retrospective studies, data sources are usually secondary. After determining data resources, the
next step is to investigate all possible methods of data collection. It is also very important to
select the appropriate instrument. After selecting the appropriate instrument and its design,
confirming its validity is the next step. An example question explaining this more clearly might
be a question like this, “Is the data obtained from applying this instrument reliable?” The
opposite of qualitative data is quantitative data, which will be used in this research. Quantitative
data consists of numerical data, which has been quantified. For example, a survey based on a
questionnaire (Sounders et al, 2007). This method is characterized by the diligent use of statistics
and mathematics (Andersen, 1998). We selected the quantitative approach in order to make our
results more reliable and scientific.
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3-1-2 Survey Methodology
Questionnaire is a form of method in which the respondents themselves respond to a set of
questions. An advantage of the use of a questionnaire instead of an interview is that the former
reaches a larger number of respondents in a shorter time. Further, it is possible to avoid the so-
called interviewer effect, which researchers effect on the respondent in an interview. Another
advantage is that the respondents themselves can choose when, how and where they want to
answer the questionnaire. A disadvantage of the use of questionnaires, particularly postal
questionnaires, is the imminent risk of loss also missing the opportunity to follow up issues and
the difficulty in determining that it is the right person who responded (Bryman, 2005). The
method chosen by a questionnaire was considered the most appropriate for the purpose of this
study and issues. The choice was based upon capturing as many respondents as possible, which
would not be feasible with the interviews.
3-1-3 Choice of the Case Study
The banking sector was chosen as the industry of focus since they have a central role in the
economy. The choice of a banking enterprise has been based on corporate outputs from the
recent financial crisis. SEB and Sewed Bank are two major Swedish banks that incurred major
losses during the financial crisis, largely due to issuing loans that are given in Euros
(Ekonomi, 24).
3-1-4 Material Collection
As the human sciences are based on the theory and empirical evidence, this study supports the
theoretical results, which have been used in the modeling behavior of bank employees. To gather
the empirical findings, first I contacted the main SEB office in Rissne but they unfortunately
refused to participate in the survey. Afterwards I decided to go to other SEB´s branches to
distribute the questionnaires personally. Right from the start of the study, I had the intention to
write down the name of all SEB´ branches that were selected for the study. In contrast, while
collecting the answered questionnaires, I received a request from the chiefs to additionally
anonymous the branches. Thus, with respect to this, all SEB´ branches that were selected for this
24
case study will be referred to SEB. Therefore, the following study based on empirical data
gathered through questionnaires that were distributed among sex different SEB branches´ staffs.
The non-random sampling has been used in this study. A total number of hundered
questionnaires were distributed among employees of different branches of SEB on November
19th and seventy-one questionnaires were collected on November 30th, in other words there was
twenty-nine questionnaires loss therefore, seventy-one precent of the questionnaires were
returned.
3-1-5 Modeling
According to this theoretical framework and early studies, we are using the conceptual model
in Figure (6) to investigate the relationship between leadership styles (Transformational,
Transactional and Relationship-oriented) and employee’s satisfaction while working in SEB,
the Swedish bank.
Fig 6: Conceptual Model
According to Fig6, hypotheses tested in this study are as follows:
𝐻!: There is a significant relationship between the transformational leadership and job
satisfaction
𝐻!: There is a significant relationship between the transactional leadership and job
satisfaction
𝐻!: There is a significant relationship between the relation-oriented leadership and job
satisfaction.
Transactional Leadership
Relationship-oriented Leadership
Transformational Leadership
Job satisfaction
H1
H2
H3
25
3-1-6 Research Approach
According to the objective, scientific research can be divided into two groups: fundamental and
applied research (Andersen, 1998). The main purpose of fundamental research is to test
hypotheses, and to explain the relationships between phenomena by adding to the existing
knowledge of a specific field. Fundamental research investigates pre-existing theories, by
confirming or rejecting them. The objective of applied research is to test these theories in real
situations. By taking these methods they can then improve their efficiency. In other words,
applied research is directed towards practical application. According to the way of data
collection, scientific research is divided into two groups of descriptive research: non-
experimental and experimental. The purpose of descriptive research is to explain in detail the
findings of the research. In these types of studies, the researcher tries to investigate the
individual or society’s characteristics, and detect the relationships between them. Descriptive
research can be divided into five groups: survey, action, case study, correlational, and after event.
In a case study the researcher selects a ‘case’ and then investigates it from numerous angles. The
relationship between variables according to the objective of the research is analyzed in
correlation research. Correlation research can be divided into three groups based on the
objective: a) bivariate correlation study, b) regression analysis, and c) analysis of covariance of
correlation matrix. In bivariate correlation studies, the purpose is to investigate the existing
variables as of a relationship. In regression analysis, the purpose is to predict the changes of one
or more dependent variables, or criterion, regarding the changes of independent variable, also
known as the predictor. In some investigations, a great deal of bivariate correlations are
investigated and analyzed in a table called the correlation matrix or covariance. The most
important ones are factorial analysis and structural equation modeling (SEM). In factorial
analysis the purpose is to summarize a set of data or latent structure variables. However, in
structural equations the main purpose is to test the structural relationships based on the existing
theories and research. Causal-comparative approaches are also types of research in which the
researcher, regarding the dependent variable, investigates the problem cause of its occurrence.
Experimental research is a type of research in which the value of one or more independent
26
variables change and their effect on one or more dependent variables is evaluated. Since the aim
of this study is to investigate how different leadership styles effect job satisfaction, the best
method of analyzing this data is by using applied research. Applied research is the best method
since the goal of this study is to define the different relationships with many variables at play,
specifically structural relationships. Based on existing theories and research findings, it can be
concluded that the data collection of this study is done by using the descriptive-correlation
method.
3-1-7 Implementation
The general strategy of data analysis in this study was used by applying the two-step approach of
Anderson and Gerbing (1988). In this approach, the confirmatory factor analysis (CFA) is used.
The first step in using the CFA is to evaluate the measurement model. After that, the structural
equation modeling is used in order to evaluate the numerological confirmatory. This type of
modeling is also used to confirm the validity of the structural model. The sample used is
compared to the substitute (rival) models and then the hypotheses are tested. When investigating
the structural model, the proposed hypotheses indicate the relationships between the latent
variables. Here, the purpose is to investigate this issue of whether or not the data supports the
suggested concepts (Vieira, 2009). Some questions investigated in this step are as follows: (1) is
the direction of relationships between structures correct, according to the hypotheses? (This issue
can be investigated through signs of relevant parameters.) (2) Are the relationships between
variables strong enough? (This strength is investigated through the significance.) Finally, (3) Is
the variance of endogenous variables measured by square multiple correlation coefficient (R2) of
structural equations, explained clearly using the relevant variables?
After asking those questions, there are two main variables in structural modeling, observational
and latent variables. Latent variables are not directly observable or measurable. Also, these
variables are deducted structures based on observational variables that must be selected and
measured. Observational variables are types of variables directly observed and measured. In this
study, leadership styles (transformational, transactional, & relationship-oriented) and job
27
satisfaction are latent variables, and the questionnaire questions used are essentially latent
variables because they are observed variables (Vieira, 2009).
Despite the fact that there is not a full agreement on the appropriate indexes that are used, it is
still important to evaluate the general idea of a fit-model (Ping, 2004). Chi-square statistics are
widely used as one of the fit indexes. Chi-square tests the difference between the hypothetic
model and the existing data that is, “the estimated variance-covariance matrix deviation from
sample variance-covariance matrix is because of sampling error.” Significant values of chi-
square mean that there is an intense divergence between the data and model—therefore the model
should then be rejected. In testing fit goodness, however, the chi-square statistic is increased by
increasing the sample volume. Therefore the results from the model can be rejected even with
little divergence. This feature limits the practical usefulness of this index. It is better to report
more additional criteria in this field (Bagozzi & Heatherton, 1994; Baumgartner & Humburg,
1996). Following fit indexes selected for this analysis are based on former studies (Baumgartner
& Humburg, 1996; Ping, 2004). Four of these indexes are counted as the fitness absolute
indexes, which evaluate the general data fitness, compared to the conceptual model for the
structural models and measurement models (Bollen, 1989; Hier et al, 1998). These indexes are:
(1) testing the fit goodness of chi-square (x2) which is the ratio of to the degree of freedom (x2/df);
(2) root mean squared error of approximation (RMSEA); (3) goodness of fit index (GFI); and (4)
adjusted goodness of fit index. Other than these indexes, there are two other indexes used to
compare the fit model to the base model, which are hypothesized in these tests so that all of the
observed variables are not correlated (Baumgartner & Humburg, 1996). These indexes include
comparative fit index (CFI), and non-normed fit index (NNFI). Table (2) presents a description
of these indices and suggested cut-offs.
28
Tabel 2: Descriptions and thresholds of goodness-of-fit index Description Cut-offs
𝓍!/df
Because the chi-square test is sensitive to sample size and is only
meaningful if the degrees of freedom are taken into account, its value
is divided by the number of degrees of freedom
1-2 or 1-3
RMSEA Shows how well the model fits the population covariance matrix, taken
the number of degrees of freedom into consideration 0.08 >
GFI Comparison of the squared residuals from prediction with the
actual data, not adjusted for the degrees of freedom > 0.90
CFI Shows how much better the model fits, compared to a baseline model,
normally the null model, adjusted for the degrees of freedom > 0.90
Source: Baumgartner and Homburg (1996), Cote et al. (2001), MacCallum et al. (1996), Ping (2004);
Vieira (2009).
Our data was analyzed by the statistical analysis software SPSS and Lisrel.
In this study SPSS and LISREL software are being used to estimate the conceptual model.
LISREL stands for ‘Linear Structural Relations’. LISREL is a computer program that is used
for the estimation structural equation models. Although there are other statistical packages that
are used in the analysis of structural equation modeling, most researchers have accepted
LISREL as the best statistical software to estimate structural equation models. Indeed, there is
a very clear distinction between SEM and LISREL. Often the term LISREL models reffers to
the structural equation models regardless of the type of software used for estimation. In
contrast, the term SEM structural equation is methodology that researchers consider it as one
of the most sophisticated statistical tools (Vieira, 2008). SEM methods will be presented in
detail in the next chapter.
29
3-1-8 Reliability and Validity
Validity and reliability are two fundamental elements in the evaluation of a measurement
instrument. Reliability refers to the consistency, stability, or repeatability of results (Christiansen,
2004). In other words, the reliability of the data is the extent in which the measures yield the
same results on other settings. Likewise, if similar results have been found by other researches.
That is, the reliability is high if the results are the same each time they are tested (Saunder et al,
1998).
Table 3: The Cronbach’s alpha(s)
Factor Cronbach’s alpha
Transactional 0.731 Transformational 0.763 Relation-oriented 0.780
Satisfaction 0.746 Total 0.773
In Table 3 Cronbach’s alphas are above Nunnally´s (1978) 0.70 threshold, suggesting adequate
reliability. In addition, as can be read from Table 2, composite reliability for each of the
components exceed Bagozzi and Yi´s (1988) .60 cut-off, thus providing additional support for the
constructs’ acceptable reliability.
Validity is achieved when the methodology and research data that is shown in the survey is
accurate and true. Wainer and Braun (1998) describe the validity in quantitative research as
“construct validity”. The construct is the initial concept, notion, question or hypothesis that
determines which data is to be gathered and how it is to be gathered. They also assert that
quantitative researchers actively cause or affect the interplay between construct and data in order
to validate their investigation, usually by the application of a test or other process. In this sense,
the involvement of the researchers in the research process would greatly reduce the validity of a
test.
30
4-1 Empirical findings
4-1-1 Descriptive Statistics
Descriptive statistics help describe, summarize and illustrate data in a more effective way.
Descriptive statistics summarize the patterns that emerge from the responses observed in a
sample. Therefore, in this section, the tables and graphs were used to illustrate descriptive
statistics so that there is transparency in our data. Tables are considered as one of the most
important tools in the representation of research data. On the other hand, when the distribution of
a variable is important, it is best to describe it in terms of graphs. A total of hundred
questionnaires were distributed among SEB’s employees and seventy-one fully answered
questionnaires were used for statistical analysis. In other words, seventy-one percent of the
questionnaires were returned.
4-1-2 The frequency of respondents based on their gender
Table (4) represents the frequency percentage of respondents based on their gender. The data
indicated that about 43.6 percent of the respondents were male and the rest were female.
Tabel 4: Frequency of Respondents based on their Gender
Frequency percentage Frequency Gender 43.6 31 31 Male 56.4 40 40 Female 100 71 71 Total
31
4-1-3 Distribution of respondents according to their age
Table (5) represents the frequency and the percentage of respondents by each age group,
respectively. As in can be seen in the Table (5) and Figure (8) the majority of respondents were
between 27 and 35 years old, meaning most of them were young.
Table 5: Distribution of respondents according to their age Age Frequency Frequency percentage
Under 26 11 15.4
27 to 35 37 52.11
36 to 45 16 22.53
46 to 55 7 9.96
56 t0 65 0 0.00
66 ot older 0 0.00 Total 71 100
32
5-1 Analysis
5-1-1 Estimation model
In this part of the analysis, the structural equation modeling (SEM) approach was used to test the
hypotheses of the research. This two-stage approach, suggested by Anderson and Gerbing
(1988), is a common method for assessing the measurement model of the research. Based on this
approach, at the first stage, the confirmatory factor analysis (CFA) is estimated for the
assessment of the measurement models. In confirmatory factor analysis (CFA) the validity and
reliability of the model is measured under the assumptions of the structural equation modeling
(SEM) system. At the second stage, the validity and the goodness-of-fit are assessed based on
data structure. Thus, using a two-step approach, we check the accuracy of the measurement
models and then with the use of the SEM, estimated the proposed model and by testing the
hypotheses. The results of the process are presented in the following chapter.
This chapter addresses the assessment of the measurement and structural model. As mentioned
before, the two-stage approach suggested by Anderson and Gerbing (1988), is used for testing the
hypotheses. In this regard, at the first stage the measurement model, called the confirmatory
factor analysis, was analyzed and the structural equation model was estimated.
33
5-1-2 Assessment of the measurement model
The results of the confirmatory factor analysis were presented in Table (6).
Tabel 6: Confirmatory factor analysis of independent variables Variable Question coefficient T-Value
Transformational
Leadership
TF1 0.59 3.65
TF2 0.47 2.76
TF3 0.69 6.10
TF4 0.55 6.43
TF5 0.49 5.56
TF6 0.49 4.21
TF7 0.60 5.02
TF8 0.83 4.24
TF9 0.55 3.23
TF10 0.61 3.80
Relationship-oriented
Leadership
RO1 0.31 7.23
RO2 0.46 3.40
RO3 0.26 3.34
RO4 0.59 3.89
RO5 0.55 4.05
RO6 0.58 4.59
RO7 0.48 4.67
RO8 0.58 5.58
RO9 0.65 3.63
Transactional
Leadership
T1 0.49 2.08
T2 0.71 2.97
T3 0.64 3.64
T4 0.96 2.45
T5 0.86 2.88
34
Tabel7: Confirmatory factor analysis of independent variables variable Question coefficient T-Value
SATISFACTION
SF1 0.41 3.81
SF2 0.59 5.03
SF3 0.66 3.56
SF4 0.36 4.76
SF5 0.52 3.12
SF6 0.74 2.20
SF7 0.32 3.76
SF8 0.28 2.47
SF9 0.42 2.67
SF10 0.56 3.45
SF11 0.69 2.19
SF12 0.30 4.56
SF13 0.24 3.08
SF14 0.77 4.56
SF15 0.71 3.16
SF16 0.63 2.65
SF17 0.85 4.23
SF18 0.58 3.78
SF19 0.70 3.56
SF20 0.54 3.34
SF21 0.51 1.98
35
It is recommended that factors with regression weights (using the coefficient) that are close to
0.30 are significant and acceptable (Viera, 2009). The commonly reported indices for assessing
the goodness-of-fit were as follows:
NFI=0.89: CFI=0.90; GFI= 0.88; X2 /df= 2.62
According to the obtained results for the goodness-of-fit in various studies (Baumgartner and
Homburg (1996); Cote et al. (2001); MacCallum et al. (1996); Ping (2004); Vieira (2009) the
estimation of an acceptable cut-off was satisfied.
5-1-3 Estimation of the Structural Equation Model (SEM)
After the first stage of the model estimation, the second stage is assessing the validity of the
goodness-of-fit according to the data structure using SEM. In other words, after making sure the
measurement model is correct, we start to analyze the structural model using confirmatory factor
analysis (CFA). Table (8) presents the results of the estimation using the structural model to test
the hypotheses.
Tabel8 : Results of Structural Equation Model and hypothesis testing Support Or rejected T-Value Coefficient Hypothesis
Support 3.83 0.83 Job Satisfaction Transformational
Support 2.57 0.57 Job Satisfaction
Transactional
Support 2.21 0.21 Job Satisfaction Relationship-oriented
36
Based on the results presented in Table(8) the results of research are as follows:
𝐻!: There is a significant relationship between the transformational leadership and job
satisfaction.
As it can be seen in Table(8) the estimated value for the regression coefficient was equal to
0.83 and it was positive. The value of t-ststistic was equal to 3.83 and it was greater than
the critical value of t-statistic at the 95% level of confidence (1.96). Therefore, it can be
concluded that the transformational leadership has a positive significant effect on the job
satisfaction.
𝐻!: There is a significant relationship between the transactional leadership and job
satisfaction.
As it can be seen in Table(8) the estimated value for the regression coefficient was equal to
0.57 and it was positive. The value of t-ststistic was equal to 2.57 and it was greater than
the critical value of t-statistic at the 95% level of confidence (1.96). Therefore, it can be
concluded that the transactional leadership has a positive significant effect on the job
satisfaction.
𝐻!: There is a significant relationship between the relation-oriented leadership and job
satisfaction.
As it can be seen in Table(8) the estimated value for the regression coefficient was equal to
0.21 and it was positive. The value of t-ststistic was equal to 2.21 and it was greater than
the critical value of t-statistic at the 95% level of confidence (1.96). Therefore, it can be
concluded that the relation-oriented leadership has a positive significant effect on the job
satisfaction.
37
6-1 Conclusion
Leadership in an organization has a strong effect on the attitudes of the employed staff and their
work ethic while on the job. Today, most modern organizations know that the leaders and
managers they hire can either lead to the ultimate success or failure of their organization. The
success of a company depends on the leadership style of their management team (Saleem, 2015).
In the 1940’s there was a ‘personal-characteristic theory’ that was very popular and was used for
hiring leading staff members; but after thorough research was done, it showed negative results
and contradictory findings. Today, researchers that focus on studying different management
styles have found that the key to success in hiring the right leader is to acknowledge the
differences in leadership styles, and choose accordingly. In other words, in determining the
characteristics of leaders, they attempted to understand their style of leadership by examining the
tactics they used when dealing with their staff members (Avolio and Bass, 2004; Locke, 1976;
Madlock, 2008 Bushra, 2011; Cetin, et all, 2012; Belias, 2013). Most researchers believe that the
type of leadership style the management uses affects his or her staff (for example see Gadot,
2007; Furkan, 2010; and Saleem, 2015). The attitude of the manager and how he or she
approaches his staff affects the team. The leadership style always directly or indirectly affects
the job satisfaction of the employees in their organization. The labor force in any company is the
most important resource because they play a considerable role in achieving the organization’s
goals. The employees are the backbone and main motivational force of any organization.
Therefore, their perceptions and attitudes toward their jobs affect the life, efficiency and
effectiveness of the organization. The general attitude of people towards their job is a behavioral
phenomenon that is part of their identity and is considered their “job satisfaction.” This
satisfaction is rooted in positive and negative views that the individuals have toward their work.
The management team easily affects this attitude. All human resources are considered as the most
vital part of any organization and the only means of survival. Therefore, understanding the
requirements, motivations and desires of employees is not only necessary, but also essential in
the success of any professional organization (Awamleh et al, 2008; Bushra, 2011; Cetin, et all,
2012; Belias, 2015;).
38
Growth and prosperity in economic structures have a close relationship with the way that banking
institutions operate. The banking system in any country provides services without which the
economic system remains incomplete. Banks are the main source of buying goods, giving out
concessional loans, opening businesses, corporations and governments. Nowadays, banks are the
most important element in money market play and they have the most important role in
economics all over the world. Banks are the main providers of financial resources in sectors of
economy like the oil industry, agricultural industry, and service industry. In addition to its
original function, the main motivation that banks have is to mobilize and allocate resources by
providing various services to customers. Thus, simultaneously making profit for the bank as well
as the economy (Lawson, 2012; Belias et all, 2015; Belias et all, 2014). The recent financial
crisis made the role of the management in banks much more important. Since the crisis, the
importance of these experimental studies on management in the work place and its effects on job
production has increased.
The purpose of the current study is to evaluate the effects of leadership styles (transformational,
transactional and relationship-oriented) on job satisfaction in different branches of SEB. To do
so, the following hypotheses were tested according to the conceptual model and theoretical and
empirical studies:
𝐻!: There is a significant relationship between the transformational leadership and job
satisfaction.
𝐻!: There is a significant relationship between the relation-oriented leadership and job
satisfaction.
𝐻!: There is a significant relationship between the Subjective transactional leadership and
job satisfaction
39
Based on analysis of data from 71 questionnaires, the following results were obtained:
Table9: the results of the structural models and hypotheses testing
ü / × Hypothesis
ü Job Satisfaction Transformational
ü Job Satisfaction Transactional
ü Job Satisfaction Relationship-oriented
Due to the results preseneted in Table(9) the results of the study were as follows:
The results found while testing this hypothesis are consistent with Howell and Avolio (1998); Bass
(1998); Gadot (2007); Riaz and Haider (2010); Cetin et al (2012); Barun (2013); Furkan et al (2010);
Saleem (2015).
According to the results of the study, the effects of transformational leadership and job satisfaction are
much greater than the effect of transactional leadership on job satisfaction. As noted by Howell and
Avolio (1993), the difference between management by exception —active and management by
exception— passive lies in the timing of the leader’s intervention. Before creating any serious
problems, active leaders control follower behavior, predict problems, and take corrective actions.
Passive leaders, however, wait until the behavior has already created problems before taking any
corrective action. The leaders zoom in on controlling task implementation for any problems that might
happen and correcting those problems to maintain current performance levels. Passive management
by exception: transactional leaders intervene only when performance is not in accordance with
expectations. Punishment is used as a reaction to unacceptable performance. Passive management-
by-exception’s leaders tend to react only after problems have become serious before taking corrective
action, and often avoid making any decisions at all (Bass, 1995). In addition, the most prominent
leadership style appeared to be the transformational one, which can predict employees’ satisfaction
with their work itself. However, further investigation should be carried out in a larger sample, so that
the results can be generalized.
40
Results also indicate that there is a significantly more positive effect on employees’ job satisfaction
when using the relationship-oriented style. Employees mostly prefer relationship-oriented managers
and this style of leadership affects their spirit positively. Relationship-oriented style of management is
when a leader uses by open communication, delegates responsibilities, and gives opportunities to
subordinates to use their potential capabilities. These managers also tend to establish personal
relationships between him and the subordinates. This style also uses emotional-social support,
friendship, and mutual trust. Relationship-oriented leadership style is mostly dependent on the
manager’s attention to the organizations employees by providing them with prosperity and job
satisfaction. The leader cares about the subordinates’ feelings and respects their beliefs. The
relationship between the leader and subordinates is established on mutual trust, respect and
communication. In structuring behavior, the leader defines the relationships between him and
subordinates clearly and his followers know what they are expected to do. In addition, the leader
determines the communication channels and specifies the group’s tasks. The relationship-oriented
leadership style cares more about human relationships. Therefore, this study has found that caring
about human relationships in workplaces by creating intimacy and friendly communication is the most
effective in improving employee’s work. The manager encourages them to work, which usually
increases the employees’ efficiency and their attention to problems while on the job. The manager, by
using encouragement and positivity, directs the group of working individuals towards the
organization’s objectives by giving them the freedom and rewards to do so. Therefore establishing a
strong group of employees all working with one goal in mind: producing gains for both themselves
and the company.
41
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Appendix
Questionnaire
Section1
Demographic Questions
The following questions are concerned with your boss and your work position. Completion of this
questionnaire is voluntary and confidentiality of information is assured. No individual data will be
reported.
THANK YOU!
What is your gender?
Male
Female
Other
How long have you been working in this organization?
_______________ Years ____________ Months
What is your Age Group?
Under 26 46 to 55
26 to 35 56 to 65
36 to 45 66 or older
……………………………………………………………………………………………
Section2
50
Strongly Disagree1 Disagree2 Neither Agree nor Disagree3 Agree4 Strongly Agree5
Variable Item 1 2 3 4 5
Tran
sfor
mat
iona
l
Lead
ersh
ip
1. Instills pride in me
2. pends time teaching and coaching
3. Considers moral and ethical consequences
4. Views me as having different needs, abilities
5. Listens to my concerns
6. Encourages me to perform
7. Increases my motivation
8. Encourages me to think more creatively
9. Sets challenging standards
10. Gets me to rethink never-questioned ideas
Source: Adapted from Bass and Avolio’s (1991 ) multi factor leadership questionnaire.
Strongly Disagree1 Disagree2 Neither Agree nor Disagree3 Agree4 Strongly Agree5 Variable Item 1 2 3 4 5
Rel
atio
nshi
p-or
ient
ed
Lead
ersh
ip
1. Manager provides freedom to people under his control in doing their tasks
2. Manager allows people under his control to use their individual judgments for solving problems
3. Manager frees people to have job rotation and allow them to circulate in different occupations.
4. Manager hates to give freedom to members of the group.
5. Manager delegate the authority to the staff to do some of the tasks.
6. Manager is willing to make changes.
7. Manager himself sets the work schedule to be done.
8. Manager allows employees themselves adjust the speed of their works.
Source: Luthans, F (2001). Determined the leadership Style in Management
Transactional Leadership
Strongly Disagree1 Disagree2 Neither Agree nor Disagree3 Agree4 Strongly Agree5
51
Variable Item 1 2 3 4 5 T
rans
actio
nal
Lead
ersh
ip
1. Makes clear expectation
2. Will take action before problems are chronic
3. Tells us standards to carry out work
4. Works out agreements with me
5. Monitors my performance and keeps track of mistake
Source: Adapted from Bass and Avolio’s (1991 ) multi factor leadership questionnaire.
SATISFACTION
Strongly Disagree1 Disagree2 Neither Agree nor Disagree3 Agree4 Strongly Agree5
Variable Item 1 2 3 4 5
SATI
SFA
CTI
ON
I express my opinion freely without any fear in the presence of my
boss.
As far as I do my tasks properly, I’m not concerned about losing
my job.
I can plan about future decisions along with doing my profession.
I’m concerned about making sudden mistakes in my work
My boss is a skillful and worthy person.
My boss is completely aware of the value of my job and respects it.
I have enough access to information required to do my job.
The procedures and rules of my work were explained to me clearly.
My job is in accordance with my specialty.
I have enough opportunities for development and making progress
in my work.
52
My salary is fair with respect to the difficulty of my job.
I have appropriate income with respect to my other job
opportunities.
I have access to other benefits such as pensions and insurance and
they are fair.
I have access to appropriate sanitary facilities.
Amenities and appropriate working tools are provided to me.
My boss has an appropriate relationship with employees.
I find discrimination among staff in relationship with my boss.
I have a friendly relationship with others in my workplace.
I feel to be in a team when I work with other staff.
I am completely aware of the purpose of the organization.
I know my work is really effective in achieving the goals of the
organization
Source: Gupat and srivatsava (2000)
53
CFA for Transformational Leadership
CFA for Transactional Leadership
54
CFA for relation-oriented Leadership
CFA for Satisfaction
55
Structural Model
56
T-Value for Structural Model