Effect of Leadership Styles on Organizational Performance in Private Commercial Banks of Dire Dawa Administration

- The main objective of this study was to determine the effects of leadership style on organisational performance with specific reference to private commercial banks operate in Dire Dawa Administration. The study adapted a cross - sectional survey quantitative designs. The target population of this study was the leaders in different level and employees in the 6 private commercial banks, Dire Dawa Administration. The study used purposive sampling to select 81 leaders and proportional stratified random sampling to select 208 employees from the target population. This study was used primary and secondary data. Collected data was analyzed by use of descriptive and inferential statistics through the help of Statistical Package for Social Sciences (SPSS) version 23. Descriptive statistics were given using percentages, mean and standard deviation while inferential statistics were carried out using independent sample T-test and multiple regression analysis. The result showed that both transformational leadership style and transactional leadership style exhibited positive and significant effect on organisational performance in private commercial banks of Dire Dawa Administration. The study concluded that transformational leadership is more effective than transactional leadership in inducing organizational performance in private commercial banks of Dire Dawa Administration and, therefore, recommended to practice transformational leadership style according to the work


I. INTRODUCTION
1.1. Background of the Study eadership style is to provide ways and methods to lead, implement plans and motivate employees (Ng'ethe, Namusonge, & Iravo, 2012). A leader is man or woman who influences, directs, and motivates others to carry out particular duties and additionally encourage his subordinates for green overall performance in the direction of the accomplishment of the company objectives. Performance is the accomplishment and execution of tasks. Performance is the extent to which an organization achieves a set of pre-defined targets that are unique to its mission (Albrecht & Andreetta, 2011). Leadership style is one of the factors that influence the performance of any organization. Thus, ensuring the effective leadership in an organization is very important for continued prosperity and becoming a critical issue for the success of modern business organization. The pilot study has indicated that the two leadership styles namely Transformational and Transactional have been practiced in Private Commercial Banks of Dire Dawa Administration. Transactional leadership style can sub divide into contingent reward, management by exception (active and passive) (Bono and Judge, 2014). These authors further show that a transactional leader motivates subordinates by giving rewards for successful services provided. Transactional leadership is therefore a style of leadership based on the provision to subordinates of resources they need to complete their tasks. Further as stated by Bass & Riggio (2006) transformational leadership is one of the best methods to enhance the individuals and group's performance. A transformational leadership style motivates the subordinates and guides them accomplish their tasks. According to  the major components of transformational leadership style are Idealized influence (Attribute/Behavior), Inspirational Motivation, Intellectual Stimulation and Individual Consideration. Financial system in Ethiopia is determined by banks where total capital of the banking industry increased by more than 11 percent and reached Birr 112.9 billion by the end of June 2020 (National Bank of Ethiopia, 2020). Regarding to the share of capital, private banks jointly accounted for 49.2 percent of the total capital and the share of private banks in total branch network was 70.5 percent in 2019/20 (NBE, 2020) which is 4,593 total number of private branch operating across the country. This shows that the overall performance of banks in Ethiopia in the last years has been improving. However, despite the improvement in the performance of banks, it is not clear how different leadership styles influence organizational performance. Knowing that commercial banks particularly private commercial www.ijsrp.org banks have played and continue to play significant roles in the growth, development and industrialization of many economies, the effect of leadership style on organizational performance must be examined so that innovative recommendations can be suggested to help strengthen these banks. This study therefore sought to determine the effects of leadership style on organizational performance of private commercial banks in Dire Dawa Administration.
1.2 Statement of the Problem Leadership style plays an important role in shaping the behavior and attitude of the members of an organization. The empirical studies at the direct dating among management and overall performance are inadequate and uncertain. A number of studies have been conducted on bank performance, and on leadership styles in commercial bank of Ethiopia. To date, there have been no detailed studies of the leadership style and performance of private commercial banks. Study areas of most researches are undertaken in Addis Ababa and few researches were undertaken outside Addis Ababa (Tariku, 2021). Moreover, previous studies have examined the effect of leadership styles on organizational performance in various settings such as public commercial bank, healthcare, military, education and business organizations (Armstrong, 2012; and Bass, 2011 as cited in (Kala'lembang , Soetjipto, & Sutrisno,  2015). Similarly, job satisfaction, employee performance, efficiency, effectiveness, organizational satisfaction, motivation, extra effort, peace keeping, technology usage and risk management were the concerns of the above researchers to study the outcomes of leadership. Moreover, Job satisfaction and employee performance were the most focused topic of researchers followed by employee satisfaction and motivation as a dependent variable (Tariku, 2021). Due to limited research on relationship between leadership and performance of private commercial banks suggests the need to investigate further the nature of the relationship between leadership and performance of private commercial banks. This research aimed to identify the leadership styles applied by the managers, and to investigate its influence on organizational performance.

Leadership Styles:
Transformational leadership: it helps to create an environment in which employees are encouraged, motivated and energized. Motivated personnel working in supportive neighborhood weather provide larger excellent client service, reinforcing organizational performance and aim to monetary wonderful factors for shareholders (Giroux, 2014). According to  the major components of transformational leadership style are Idealized influence, Inspirational Motivation, Intellectual Stimulation and Individual Consideration. Idealized influence: It is a part in which being a function version of a leader may be perceived with the aid of using followers so because it evokes them (Moss & Ritossa, 2007). The followers can become aware of their function version without problems and attempt to imitate as they admire, respect, and agree with them (Bass, Avolio, Jung, & Berson, 2003). This is carried out with the aid of using the fact that they proportion risks with their followers and, importantly, they are consistent, instead of arbitrary. Again, the transformational leader with an idealized influence are tremendously disciplined who do now no longer use strength for his or her very own private gain; they show excessive requirements of ethical and moral conduct. The idealized affect additionally pertains to charisma which, for lengthy has been held as a magical present that human beings possess. Inspirational motivation: Inspirational Motivation is a part of transformational leadership style that describes the extent that the leader states appealing and inspiring imaginative and prescient to followers. Transformational leaders encourage and inspire the ones round them with the aid of using presenting that means and mission to their followers' work. They additionally show dedication to desires and the shared imaginative and prescient. www.ijsrp.org others to expand their strengths and sell self-improvement by acting as mentors and mentors. In line with the above literature it hypothesized that: H1: Transformational leadership style has significant positive effect on organizational performance in private commercial banks of Dire Dawa Administration.
Transactional leadership: Transactional leadership can be defined as the exchange of targets and rewards between the management and the employees (Ojokuku, Odetayo, & Sajuyigbe, 2012). This leadership style helps create an optimal work environment for employees. and articulating a compelling vision that enhances the overall organizational performance (Longe, 2014).  identifies two leadership factors; contingent reward and management-by-exception. Active management-by-exception: refers to interfering with the work of people when they are not making the effort as expected. Bass & Avolio (1994) points out that although management by exclusion is necessary in some situations, it is generally ineffective because it is a recipe for mediocrity. Managers who rely heavily on passive management as an exception often try to fix problems only when they become chronic, and in many cases too late. People who use proactive exceptional management often tend to focus too much on shortcomings and thus reduce staff motivation. Contingent reward: Refers to situations in which managers offer compensation to employees when they fulfill a contract or expectations. The leader then promises to reward or actually reward others in exchange for doing the task well. Bass & Avolio, (1994) argues that casual reward has proven to be quite effective as a leadership style. It is, however, not as effective as the transformational leadership factors in motivating others to achieve higher levels of development and performance. Passive management-by-exceptions: Passive management-byexceptions are used by leaders who only interfere in the employees work if they do not meet the desired goals. The passive leader waits for deviations, errors and mistakes and then takes corrective action Piccolo, 2004 andAvolio, 1994). Leader avoids explaining agreements, expectations and standards to be achieved by subordinates, but will intervene after particular problems become apparent (Sadeghi & Pihie, 2012). In line with the above literature it hypothesized that: H2: Transactional leadership style has significant positive effect on organizational performance in private commercial banks of Dire Dawa Administration.

Organizational Performance
There are subjective and objective methods of measuring organizational performance. Subjective measures are nonfinancial bases of measuring performance like income growth, marketplace proportion, satisfaction, retention and so on. Objective Assessment is financial bases of measuring performance through the use of financial records like profit, revenue, return on investment, liquidity, operational efficiency and so on. Subjective measures are primarily based totally at the opinion of the respondent to evaluate performance (Narver & Slater, 1990). There became an inconsistent measurement of organizational performance despite the fact that maximum researchers measured organizational performance through the use of quantitative records (Sorenson, 2002 www.ijsrp.org prevalence of a situation by taking a cross-section of the population at one time (Amin, 2005).

Sources of Data
This study employed both primary and secondary sources of data collection. The primary data was collected through a survey by structured questionnaire from respondents. For secondary source of data annual reports, books, appropriate journals/articles and other similar studies conducted in the field were gathered, reviewed and used to make the study fruitful.

Comparison between Leader and Employee response towards Leadership Styles
Here, the perception of both employees and leaders for the specific prevailing leadership style has been compared in order to see if any difference is existed between the two groups. According to the result shown in the table 4.3, the mean scores for employees' responses on each of the transformational leadership subscales are ranged from 2.10 to 2.86 whereas for those of leaders has mean scores ranged from 2.35 to 2.85. If we consider the mean and standard deviation scores of the transformational leadership scales taken as a whole for both groups, employees' group has 2.45 and 0.252 respectively whereas leaders' group has 2.56 and 0.331 respectively which is lower than the recommended mean of 3.0 or that of Bass & Avolio, (1997) suggested one for the most effective leaders (m>=3.0). On the other hand, the mean and standard deviation scores for each of transactional leadership subscales ranges from 2.34 to 3.22 mean and standard deviation of 0.640 to 0.793 for employees' responses while it ranges from 1.63 to 2.95 mean and 0.513 to 0.975 standard deviation values for leaders' responses. When taken as a whole, the mean and standard deviation scores of the transactional leadership scales taken as a whole for both groups, employees' group has 2.43 and 0.372 respectively whereas leaders' group has 2.38 and 0.497 respectively. This study has indicated that the respondents perceive leadership style as slightly more transformational than transactional leadership style. The analysis results of the T-test for equality of mean scores and test to measure whether the difference is significant or not between the mean scores of the two samples (employees and leaders) for Multifactor Leadership Questionnaire (MLQ) are presented in the Table 4.4 below. Confidence Interval of the Difference is 95% (i.e., p ≤ 0.05). The finding points out significant differences between the two samples on all subscales of transformational leadership. The finding also points out insignificant differences between the two samples on transactional leadership as a whole. These significant differences implies as there are major differences between leadership behaviors which are being practically exercised and behaviors which are being perceived by the employees of the organization.  (Amegayibor, 2018) who state the existence of significant positive relationship between transformational leadership style and banks performance. Moreover, the result also supported with the findings of (Koech & Namusonge, 2012) who state that all variables of transformational leadership style has a positive correlation with organizational performance. Additionally, the study findings also supported with study of (Arham & Muenjohn, 2012) which stated as the existence of positive and strong relation between transactional leadership styles organizational performances. Hence, it can be concluded that transformational leadership is more effective than transactional leadership in affecting organizational performance in private commercial banks of Dire Dawa Administration. V. CONCLUSION AND RECOMMENDATION The main objective of this study was to investigate the effect of leadership styles on organizational performance in private commercial banks of Dire Dawa Administration. To carry out this study; descriptive, independent sample T-test and regression analysis was employed. Finally, this study concludes that both transformational and transactional leadership styles have positive and significant effect on organizational performance in private commercial banks of Dire Dawa Administration. Based on the findings of the study, the researchers forwarded the following recommendations for the bank leaders. They should encourage participation in decision making, leave much room for the employees say and delegate and make to feel full responsible. In order to cope up with ongoing and upcoming changes in the banking environment, the leaders in banks should a quire predictable ability and prepare in advance by giving more focus for research and development, making the working environment suit for creativity and innovation, and appreciating and entertaining of different ideas arises from employees. The leader should also tell clearly what is expected from the employee and attached rewards and recognition for the achievement to induce the improvement of the performance of employee and then bank as a whole. ISSN