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Charting Success; The influence of Leadership Styles on driving sustainable Employee Performance in the Sierra Leonean Banking Sector

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24 July 2024

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25 July 2024

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Abstract
The purpose of this paper is to assess the differential impacts of transformational and transactional leadership styles on employee performance during change initiatives within commercial banks in Sierra Leone. The research study utilised a cross-sectional survey design, and data was collected from 903 participants employed in the banking industry. The study used the structural equation model as the investigative instrument to examine the hypotheses. The findings reveal that transformational and transactional leadership styles demonstrate a strong bearing on employee performance, with the latter having a bigger influence. Organisational citizenship behaviour has a mediating effect between leadership styles and employee performance, while employee commitment does not act as a mediator between transformational leadership and employee performance, but it acts as a mediator between transactional leadership and employee performance. Commercial banks need to devise training programmes that will advance both leadership styles to arouse, energise, or inspire followers to display favourable behaviour and commitment to attain organisational. The paper makes an insightful contribution to the existing leadership literature by ascertaining the significance of leadership styles on performance and the role of commitment and organisational citizenship behaviour as mediators of the nexus between leadership styles and performance in the Sierra Leone banking industry.
Keywords: 
Subject: Business, Economics and Management  -   Human Resources and Organizations

1. Introduction

Organisational leadership has been explored intensively by scholars for a significant amount of time now [1,2], especially with a focus on the banking sector, a domain that is characterised by its dynamism and unpredictability [3].
Financial institutions are undergoing changes to adapt to the VUCA world, and to adjust to these changes, they need to create an environment that is conducive to implementing systemic and business-oriented management strategies [4]. Nonetheless, [5] contend that the task of implementing and overseeing successful organisational change has posed difficulties for numerous organisations and state that it takes effective leadership to initiate, manage, and sustain change efficiently being that it is a complicated and multifaceted process [6,7].
Change management programmes encompass several objectives and priorities that align with the overall success of an organisation [8] and leadership sits at the heart of organisational change initiatives and plays a key role in ensuring the success of change efforts among employees.
Transformational leadership style and transactional leadership styles are recognised as influential in driving project success and organisational change [9] and employee performance [10]. TRF is characterised by the ability to inspire and motivate individuals to adopt innovation, facilitate change, and attain desired goals for both individuals and the organisation [11], whereas TRS emphasises the interchange of defined duties and rewards, providing an alternative approach to managing the intricate process of organisational transformation [12]. Additionally, effective leaders can motivate staff to be committed; go beyond and contribute to performance that meets or surpasses objectives, and through these behaviours, highly motivated employees will support leaders in mobilising the workforce to achieve their goals [6], thus, dedicated employees are more proficient in completing tasks, enhance productivity, and demonstrate a strong commitment to achieving their goals [13].
The banking industry has indeed been compelled to evolve due to numerous causes, such as technological advancements, regulatory alterations, and changes in consumer behaviour [14]. In Sierra Leone, even though faced with numerous challenges, commercial banks play a decisive role in the nation's commercial stability and growth [14,15,16], and thus, banks must develop the capabilities to adapt and navigate change to their advantage. In addition, [14,16] further argue that much attention has not been given to leadership and its effect on employee outcomes during change initiatives within the Sierra Leonean context.
Despite extensive research on the impact of leadership styles, organisational citizenship behaviour, and employee commitment on employee performance, there is a lack of research exploring the potential combined effect of these factors on employee performance. It is crucial to comprehend how these dimensions can effectively facilitate sustainable organisational change in the context of Sierra Leone. Hence, this present investigation aims to bridge that gap by adding to the existing body of knowledge, offering valuable perspectives to banking professionals striving to achieve effective transformation in the banking industry.

2. Literature Review

2.1. Transformational Leadership

First proposed by [12] and enriched by [17], Transformational leadership (TRF) is a distinguished leadership style that has been studied for its impact on organisational outcomes. Transformational leaders inspire their teams with a captivating vision and intellectual progress while considering members’ needs [18]. According to [2], TRF occurs when an individual successfully interacts with another, creating a connection that boosts energy and confidence for the leader and the follower and it necessitates change at the individual and group levels [6,19]. Transformational leaders express four core features; idealized influence; inspirational motivation; intellectual stimulation; and individualised consideration, as suggested by [17].
i.
Idealized Influence:
According to [20], an idealised leader inspires admiration from their supporters by outlining a strong vision for the organisation's long-term aspirations and acting as an exemplary role model. Leaders with charisma inspire their teams by painting a picture of a prosperous future for their companies through symbolic communication.
ii.
Inspirational motivation
Inspirational motivation pertains to a leader who formulates a captivating vision and adeptly communicates it to followers, resulting in mutual benefits for both sides [21]. According to [20], inspirational motivation involves the capacity of leaders to inspire and encourage their staff towards the accomplishment of challenging, yet attainable objectives.
iii.
Intellectual stimulation
According to [22], intellectual stimulation occurs when a leader proposes several novel ideas to their followers to spark creative problem-solving within the organisation. However, by modelling this style of leadership, leaders can influence their followers to reframe challenges and issues in a more positive light [20].
iv.
Individualized consideration
Individualised consideration is the ongoing provision of feedback to followers, which connects their current requirements to the mission of the organisation [17,20]. Furthermore, [18] added that the goal of individualised attention is to help followers reach their potential by building on their strengths rather than dwelling on their weaknesses.

2.2. Transactional Leadership

According to [23], transactional leadership (TRS) motivate their followers to complete tasks by instituting a system of rewards and punishments and the followers are compensated for attaining performance criteria [24]. TRS involves providing contingent reinforcement to employees based on their performance [25] and it inspires followers by appealing to their individual or collective aspirations, employing instrumental economic exchanges [26]. According to [22], TRS is characterized by three crucial dimensions; contingent reward, management-by-exception active, and management-by-exception passive.
i.
Contingent reward
As stated by [27,28], contingent reward is a method that enables leaders to motivate their followers to accomplish a particular objective by providing commensurate rewards to them when they meet specific criteria.
ii.
Management-by-exception active
The practice of closely monitoring workers to ensure their productivity and compliance with performance objectives is referred to as management by exception-active [29]. The leader monitors followers' actions to guarantee that the rules are strictly followed and to issue corrective actions in the event of deviations.
iii.
Management-by-exception passive.
According to [28], management-by-exception passive refers to leaders that allow their follower's autonomy to do their jobs but step in when concerns arise or performance expectations aren't being fulfilled. Furthermore, [18], pointed out that a reactive organisational culture in which problems are only addressed when they reach a critical stage is one possible outcome of passive management by exception.

2.3. Organisational Citizenship Behaviour (OCB)

Although [30] were the pioneers in noticing employees' extra-role behaviour in the workplace, the term "organisational citizenship behaviour" was first used by [31]. According to [32], it describes actions taken by workers outside of the scope of their normal work responsibilities. However, [33,34], stated that it is the voluntary acts taken by individuals that contribute to the overall efficiency of an organisation, even if these actions are not officially acknowledged or rewarded. However, [34] posited that these behaviours are a requirement for effective modern-day organisations and regular behaviour alone is not enough for organisations to compete. Additionally, these behaviours enhance performance and productivity by fostering teamwork and reducing conflict [35] and engaging in it allows employees to develop skills, enhance capabilities and overall well-being. OCB is classified into five dimensions [32]:
i.
Altruism (assisting others); This involves the selfless behaviour of employees, where they show concern for the welfare of others. It is a way of helping others who get into trouble.
ii.
Conscientiousness (discipline); The concern that employees have for the organisation's policies and procedures, to serve the organisation's best interests without compromise.
iii.
Sportsmanship (positive attitude); This involves employees demonstrating behaviours that are mutually supportive and positive to execute tasks and avoid unnecessary complaints.
iv.
Courtesy (goodness): In this context, it refers to the actions of employees that enable them to avoid conflicts and problems related to their interpersonal relationships at work.
v.
Civic virtue (as an organisation member awareness): This involves encouraging habits that are not obligatory but are deemed significant and enable them to keep well-informed about changes in the working environment of the organisation.

2.4. Employee Commitment

Employee commitment (EC) is the extent to which an individual feels a sense of belonging and actively engages in the activities of a particular organisation. Recently, [36], found that individuals who are extremely devoted to an organisation's intentions and willing to work more are more likely to stay. In addition, [37], view it as the emotional reactions exhibited by individuals, encompassing psychological conditions such as attachment and loyalty. [38] introduced a model of OC that comprises three components: continuous, normative, and emotional commitment. Continuous commitment is the persistent dedication of an employee to stay with the company, along with their understanding of the potential drawbacks and expenses of quitting, as described by [38,39]. Normative commitment denotes the consciousness of duty felt by a worker to stay with an organisation. It represents the employee's allegiance and obligation to continue with the business [38]. Affective commitment refers to the emotional and attitudinal connection that employees have with an organisation, leading to a strong desire to stay with the organisation and actively contribute to its goals [38].

2.5. Employee Performance

Employee performance (EP) is the extent of an individual's capability to complete a certain activity based on their knowledge, skills, and work requirements and expectations [40,41]. However, [42], argues that EP has a substantial impact on the overall organisational effectiveness. Meanwhile [43] assert that the competence and efficacy of an organisation's workforce directly contribute to its level of growth, success and sustainability Nonetheless, [44] argue that performance can be assessed for an individual, a team, or the company as a whole and companies that execute at a high level tend to have more satisfied employees.

2.6. Hypothesis Development and Research Model

2.6.1. Transformational Leadership

Employees led by transformational leaders can surpass expectations and achieve outstanding performance, reaching maximum potential [17], embrace change, [8,45], exhibit innovative behaviours [46] and go beyond transactions and compensation [24,47]. TRF is considered a critical factor that influences various individual outcomes, like followers’ behaviour [48], embracing organisational transformation [49], innovative thinking [50], organisational commitment and trust [51], OCB [6] and EP. A study by [52], found that TRF positively and significantly impacts EP. Hence, this hypothesis is proposed:
Hypothesis 1. 
TRF positively impacts EP.

2.6.2. Transactional Leadership

Transactional leadership (TRS) involves providing contingent reinforcement to employees based on their performance [25] and it inspires followers by appealing to their individual or collective aspirations, employing instrumental economic exchanges. Various research has presented evidence that TRS significantly improves organisational effectiveness, employee job satisfaction, OCB, and organisational deviance behaviours [23,53]. Therefore, the subsequent hypothesis is put forth:
Hypothesis 2. 
TRS has a positive impact on EP.

2.6.3. Transformational-Transactional Leadership Style Relationship

In leadership literature, TRF and TRS have been thoroughly examined in diverse settings [28]. They have been revealed to be connected with several work-related outcomes, like commitment followers' behaviour and performance outcomes [54]. However, [22,28], posit that TRF augments transactional leadership to bolster positive work practices but [55], contended that effective leaders should have a blend of TRF and TRS qualities and this viewpoint is corroborated by [22]. Conversely, the relationship between these two notions in forecasting work habits remains unresolved despite their high reputation for predicting organisational efficiency [24]. Thus, the study hypothesizes that:
Hypothesis 3. 
A significant correlation exists between the TRF and TRS styles.

2.6.4. The Mediating Role of Organisational Citizenship Behaviour

Prior findings have examined the consequence of various leadership styles on OCB and have acknowledged that leadership is crucial to OCB [56], however, [57], suggest that OCB can intercede between the association between leadership and EP. This premise was established in a recent study by [58]. A comparable and valuable insight into the connection between OCB and EP in the setting of education 4.0 was also found by [59]. Consequently, previous research has demonstrated that TRS influences OCB [60,61]. However, [62], assert that both leadership styles have a bearing on OCB, with the TRF approach being more profound. Therefore, the following hypothesis is proposed:
Hypothesis 4. 
OCB impacts the connection between TRF and EP.
Hypothesis 5. 
OCB impacts the connection between TRS and EP.

2.6.5. The Mediating Role of Employee Commitment

Studies have looked at how different types of leadership styles influence EC [54]. According to [63], adopting effective leadership styles is crucial for boosting EC, facilitating the formulation and execution of company plans, and attaining predetermined objectives. However, [63], discovered a robust significant relationship between leadership style and OC. Therefore, the study proposes the following hypotheses:
Hypothesis 6. 
EC significantly enhance the relationship between TRF and EP.
Hypothesis 7. 
EC significantly enhance the relationship between TRS and EP.

2.6.6. The link between Employee Commitment and Organisational Citizenship Behaviour

EC and OCB have been the subject of multiple studies. The literature suggests a favourable and significant relationship between these two constructs [64,65]. However, devoted employees are more prone to engage in OCB. This is because their strong emotional connection to the organisation pushes them to go beyond their official job duties [58,66]. Thus, the following hypothesis is formulated:
Hypothesis 8. 
There is a significant relationship between EC and OCB.
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Figure 1. Conceptual framework.
Figure 1. Conceptual framework.
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3. Methodology

The methodology employed entailed gathering quantitative data via questionnaires. The data gathering instrument was established by means of a five-point Likert scale, which ranged from "strongly disagree" to "strongly agree." The research primarily focused on the commercial banks in Sierra Leone, which consist of fourteen banks. They frequently undertake organisational transformation projects and play a vital role in fostering the financial stability and progress of the nation [15,16]. The Cochran technique was employed to define the appropriate sample size [67] and as a consequence, a total of 903 participants were included in the final sample.

3.1. Measurement section

To measure the effects of leadership styles on EP, the study utilized validated survey instruments and objective performance metrics. TRF and TRS were assessed by [68] Multifactor Leadership Questionnaire (MLQ), because of its broad use and adaptation to numerous cultures. The dimensions of TRF (idealized influence, inspirational motivation, intellectual stimulation and individualized consideration) and three dimensions of TRS (contingent reward and management-by-exception (active and passive) were assessed using a five-point Likert scale ranging from "strongly disagree" to "strongly agree." EP was assessed based on individual work performance adopted from [69] using a five-point Likert scale ranging from "strongly disagree" to "strongly agree." Mediating variables, EC were measured using [70] scale and adopted a five-point Likert scale going from "strongly disagree" to "strongly agree." OCB was examined using [35] scale, and a five-point Likert scale was used ranging from "strongly disagree" to "strongly agree."

3.2. Demographics

Table 1 illustrates the participants' demographics. Gender distribution reveals that males constitute 53%, while females comprise 47%. Age distribution, 9.1% are aged 18-25 years, 55.8% are aged 26-35 years, 28.0% are aged 36-45 years, 6.0% are aged 46-55 years, and 1.0% are aged 56 years and above. For education, (41.2%) hold bachelor's degrees, (31.9%) diplomas, (18.5%) master's degrees and (0.3%) doctorate degrees. The work experience distribution shows 1.0% have less than a year of experience, 9.3% have 1-3 years, 44.4% have 4-6 years, 35.3% have 7-10 years, and 10.0% have over 10 years of experience within the banking sector.

4. Results and Discussion

4.1. Introduction

The study utilised the structural equation modelling (SEM) approach to adopt the partial least squares (PLS) approach. The methodological characteristics of PLS-SEM set it apart from other SEM approaches and it has been generally recognised in management and social sciences research for its methodological prowess [71,72]. PLS-SEM was utilised to examine the model and hypothesis and it is suitable for this setting since it can simultaneously estimate hypothesised connections, hence, to assess the measurement model, it is necessary to calculate the constructs' discriminant validity, convergent validity, internal consistency, and reliability [71].

4.2. Assessment of Measurement Model

Before data analysis, researchers should make sure the constructs are reliable and legitimate [73]. Table 2 revealed that all constructs meet the acceptable thresholds for reliability and validity [74]. For factor loadings (FL), the generally accepted minimum is 0.70, which is considered adequate for item reliability [72]; here, all items load significantly on their respective constructs, varying from 0.705 to 0.893. Cronbach's Alpha (CA) values exceed the 0.70 threshold for internal consistency [75], with values ranging from 0.833 to 0.873. Composite Reliability (CR) values also surpass the 0.70 benchmark, indicating high reliability [72], with scores between 0.882 and 0.908. There is sufficient convergent validity since the AVE for all constructs is greater than the 0.50 criterion [76], with values from 0.600 to 0.664. Therefore, all AVEs demonstrate strong construct validity and reliability, making the measurement model robust for further analysis.
The estimated SEM coefficients for our hypothesised model are shown in Table 3. Hypothesis 1, posits that TRF positively impacts EP. The results (β 0.172, t = 3.991, p < .001) imply strong support for this hypothesis [72]. Hypothesis 2 suggests that TRS positively affects EP, and the results (β 0.300, t = 6.965, p < .001) provide robust evidence for support [72]. Hypothesis 3 asserts that TRS positively influences TRF. This is confirmed by the results (β 0.774, t = 43.731, p < .001) and supporting the hypothesis [72]. These results indicate that both leadership styles significantly enhance employee performance, and TRS significantly boosts TRF, thereby aligning with the theoretical framework and empirical evidence in organisational behaviour research.
Table 4 presents the results of the indirect effects of leadership styles on EP through mediators such as OCB and EC. Hypothesis 4 posits that OCB mediates the relationship between TRF and EP. The results (β 0.045, t = 2.382, p = .017) indicate a significant support for this mediation effect [77]. Hypothesis 5 suggests that OCB mediates the relationship between TRS and EP and this is supported by the results (β 0.033, t = 2.262, p = .024). Conversely, Hypothesis 6, proposes that EC mediates the relationship between TRF and EP, conflicting with what was expected, the results (β 0.009, t = 0.571, p = .568) revealed an insignificant positive effect and the hypothesis is unsupported. Hypothesis 7 posits that EC mediates the relationship between TRS and EP. The results (β 0.059, t = 3.433, p = .001) support this assertion. Finally, Hypothesis 8 proposed a statistically significant relationship between EC and OCB. The results (β 0.647, t = 11.723, p < .001) indicate a significant and positive association between OCB and EC, thus, the hypothesis is supported.
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Figure 2. Structural Model Analysis of Constructs.
Figure 2. Structural Model Analysis of Constructs.
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5. Discussion

Conclusion and Recommendations
Leadership continues to play a critical role in influencing employee outcomes, and commercial banks need a blend of TRF and TRS to drive EP during change initiatives in this VUCA world. An effective blend of TRF and TRS can influence employees to demonstrate behaviours outside of their domain voluntarily without being officially acknowledged or compensated. The notion that committed employees are more likely to engage in OCB is reinforced in this study. However, as a mediator, EC was insignificant for TRF on EP but significant for TRS on EP, which lends credence to the fact that TRS is more effective within the context of banks since it underscores clear structures, performance targets, rewards, and penalties for employees, as it is deemed to be more effective in driving EP.

6.1. Theoretical Implications

This study enriches the existing theory of TRF and TRS and their influence on EP during organisational change in the VUCA world [2,78], especially in the banking sector [62]. The results support prior results that both styles can coexist in one organisation to achieve desirable results. The current study used OCB as a mediating variable to elucidate the connection between the two leadership styles and employee performance. This confirms previous results [6,33,58,59,62], and underscores the critical role leaders play in nurturing an atmosphere that encourages employees to exhibit citizenship practices. This study enhances leadership theory by highlighting the situational effectiveness of various styles and their intricate interactions with employee attitudes and behaviours throughout change.

6.2. Practical Implications

The findings offer valuable suggestions to top executives within the banking sector on the effect of adopting both TRF and TRS on driving desired results. The results might be used as a reference for business executives, administrators, and policymakers on the adoption of the transformational-transactional leader trait, which is regarded as a driver of performance. Commercial banks should devise training programmes that will advance both the ‘transformational’ and ‘transactional’ dimensions of leadership personality traits for those leaders who would arouse, energise, or inspire, followers with displays of OCB while also providing a clearer conceptualization of goal attainment and the rewards involved.

6.3. Limitations and Future Research Directions

The study's data was exclusively acquired from the banking industry, which raises concerns about the generalizability of the conclusions. Performance in various industry sectors may be influenced by factors such as sector-specific characteristics and cultural variations. Thus, future research could apply these findings to other industries to increase applicability. To better understand how contextual and cultural factors influence the bearing of leadership styles on employee performance, researchers could explore contrasting assessments of leadership styles in different contexts. Evaluating other mediating and moderating variables, like psychological capital employee engagement, and job autonomy to determine another dimension of the effect of leadership styles on employee performance. These potential areas can enhance the knowledge and understanding of the multifaceted relationship between leadership styles and performance.

Author Contributions

Conceptualization, Ibrahim Alusine Kebe and Christian Kahl.; methodology, Ibrahim Alusine Kebe; software, Ibrahim Alusine Kebe.; validation, Ibrahim Alusine Kebe.; formal analysis.; Ibrahim Alusine Kebe; investigation, Ibrahim Alusine Kebe.; resources, Ibrahim Alusine Kebe.; data curation, Ibrahim Alusine Kebe.; writing—original draft preparation, Ibrahim Alusine Kebe and Christian Kahl.; writing—review and editing, Ibrahim Alusine Kebe and Christian Kahl.; visualization, Ibrahim Alusine Kebe.; supervision, Christian Kahl and Liu Yingqi.; project administration, Ibrahim Alusine Kebe, Christian Kahl and Liu Yingqi.; funding acquisition, Ibrahim Alusine Kebe, Christian Kahl and Liu Yingqi. All authors have read and agreed to the published version of the manuscript.

Funding

This research received no external funding.

Data Availability Statement

The data that support the findings of this study are available from the corresponding authors upon reasonable request.

Acknowledgments

The authors are grateful to the employees and managers at the commercial banks for their participation in this research. The following author affiliations are duly acknowledged, Beijing Jiaotong University and the Institute of Public Administration and Management (University of Sierra Leone), and all the anonymous reviewers are duly acknowledged.

Conflicts of Interest

The authors declare no conflict of interest.

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Table 1. Demographics of Respondents.
Table 1. Demographics of Respondents.
Variable Item Frequency %
Gender Male 482 53%
Female 421 47%
Total 903 100%
Age (in years) 18-25 82 9.1%
26-35 504 55.8%
36-45 252 28%
46-55 53 6%
56+ 12 1%
Total 903 100%
Education Certificate 73 8.1%
Diploma 288 31.9%
Bachelors 372 41.2%
Masters 167 18.5%
PhD 3 0.3%
Total 903 100%
Years of Experience Below a year 9 1%
1-3 84 9.3%
4-6 401 44.4%
7-10 319 35.3%
10+ 90 10%
Total 903 100%
Source: Researcher’s field survey 2024.
Table 2. Reliability and Validity of Constructs (TRF, TRS, OCB, EC and EP).
Table 2. Reliability and Validity of Constructs (TRF, TRS, OCB, EC and EP).
Construct FL CA CR AVE
Transformational Leadership Style (TRF) 0.873 0.908 0.664
TRF1 0.827
TRF2 0.812
TRF3 0.828
TRF4 0.814
TRF5 0.792
Transactional Leadership Style (TRS) 0.833 0.882 0.600
TRS1 0.772
TRS2 0.826
TRS3 0.775
TRS4 0.772
TRS5 0.723
Employee Commitment (EC) 0.861 0.901 0.646
EC1 0.743
EC2 0.722
EC3 0.893
EC4 0.853
EC5 0.795
Organisational Citizenship Behaviours (OCB) 0.834 0.883 0.603
OCB1 0.705
OCB2 0.840
OCB3 0.846
OCB4 0.724
OCB5 0.756
Employee Performance (EP) 0.845 0.889 0.617
EP1 0.839
EP2 0.815
EP3 0.733
EP4 0.796
EP5 0.737
Source: Researcher’s computation 2024.
Table 3. Hypothesis testing results.
Table 3. Hypothesis testing results.
Hypothesis Structural relationship β T statistics P values Decision
H1 TRF -> EP 0.172 3.991 0.000 Supported
H2 TRS -> EP 0.300 6.965 0.000 Supported
H3 TRS -> TRF 0.774 41.731 0.000 Supported
Source: Researcher’s computation 2024.
Table 4. Results of the Mediation Analysis.
Table 4. Results of the Mediation Analysis.
Hypothesis Structural relationship β T statistics P values Decision
H4 TRF -> OCB -> EP 0.045 2.382 0.017 Supported
H5 TRS -> OCB -> EP 0.033 2.262 0.024 Supported
H6 TRF -> EC -> EP 0.009 0.571 0.568 Unsupported
H7 TRS -> EC -> EP 0.059 3.433 0.001 Supported
H8 OCB -> EC 0.647 11.723 0.000 Supported
Source: Researcher’s computation 2024.
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