Investigation of Causal Relationship between Leadership Styles and Staff/ Employee Retention - Essay Example

?Investigation of Causal Relationship between Leadership Styles and Staff/ Employee Retention Introduction It is a common notion that employees are more concerned about their salary, job security, working environment etc., but when it is asked that who controls all these, then the answer is very evident; The Boss. Majority of people agree that career growth, salary, job fit, benefits are primary reasons behind the retention or loss of employees. However, when employees are asked what would it take to enhance employee retention, then they refer it to manager-related behavior. Employees want more appreciation, more involvement in decision-making, more team building, better communications, more autonomy, flexible working hours and better training and coaching. Nevertheless, very few organizations list leadership as top priority in their employee retention programs. Mostly, they focus on stock options, bonuses, salaries, benefits, life/work initiatives etc. Certainly, these factors are important, yet many organizations fail to address the problem that better leadership can noticeably enhance employee retention and thus, performance. Therefore, this paper highlights this important issue that is, relationship between leadership styles and employee retention. 2. Research sub-questions Q1: Is there a causal relationship between leadership styles of managers and employee retention/ commitment? Q2: What is the impact of leadership styles of managers on employee retention/ commitment? Q3: What is the relationship between employee retention as measured in terms of pay and different leadership styles? 2.1 Hypotheses H01: There is no causal relationship between leadership styles of managers and employee retention/ commitment H02: There is no impact of leadership styles of managers on employee retention/ commitment. H03: There is no relationship between leadership styles and employee retention in terms of pay. 2.2 Usefulness of Research Questions and Hypotheses Earlier mentioned hypotheses and research questions emphasize upon exploring the relationship that exist between Leadership Styles (Independent Variable) and Employee Retention (Dependent Variable). In the first Hypothesis, it is aimed to find out a causal relationship between the two variables, which means to explore whether Leadership Styles cause any changes in Employees’ Retention. Second hypothesis intends to identify what type of relationship exists between the two variables, either it is positive or negative. The third hypothesis emphasizes on exploring relationship between the two variables by increasing or decreasing the amount of pay. This research will be useful for organizations in order to set an appropriate style of leadership for their company. It is expected to have profound impact on retaining employees. Some previous researches on the same subject have been quoted in subsequent section of this paper, which highlights that what type of leadership style can be useful for companies. Employee retention is the biggest issue that HR managers and recruiters are facing these days therefore; the earlier mentioned research hypotheses are worth exploring since they will aid to resolve these issues. 3. Literature Review Many researches have been conducted in order to determine the relationship between employee retention and leadership styles. This proposal highlights some academic and non-academic sources pertaining to this problem. 3.1 Academic Sources Wu, Tsai, Fey and Wu (2006) analyzed the relationship and cognition between leadership styles of managers and its impact on employee commitment/ retention in tourists’ hotel industry. In order to conduct the study, situational leadership and organizational commitment serve the basis for the study. In certain cases, Wu, Tsai, Fey and Wu (2006) found a direct relationship between organization commitment and leadership styles of managers. Yu (2010) performed a study to determine relationship between employee loyalty and leadership styles. The author stated that low level of commitment has been found between unsatisfied employees and their employers due to the leadership behavior of their supervisor. Yu (2010) conducted a research by taking a sample of employees and employers at XYZ Company in China. Yu (2010) found out that leadership styles such as transformation leadership and transactional leadership have strong correlation with employee loyalty however; passive leadership has negative correlation with employee loyalty. Dolatabadi and Safa (2010) conducted a study in banking industry of Iran. The purpose of the study was to determine the affect of participative and directive leadership styles on employee’s commitment towards service quality. Data comprised of 87 Iranian banks. For acquiring data, questionnaires were distributed to employees and managers that had direct contact with customers. Managers were asked about their leadership styles and employees were asked about their commitment to service quality as well as role, shared value and clarity. The results of the survey revealed that leadership styles have direct impact on employee’s response. The results revealed that directive leadership has negative impact on the employee’s commitment to service quality whereas it can have positive influence on the clarity of employee’s role. Another study was conducted in Iran pertaining to the similar subject. Hamidifar (2009) explored how leadership styles (independent variable) influence job satisfaction of employees’ (dependent variable). Using random sampling method, researcher distributed questionnaires to respondents. Around 400 questionnaires were distributed out of which 386 were completed. Researcher’s study revealed that transactional and transformational styles of leadership were the most dominant leadership styles and employees were largely satisfied with their jobs. Moreover, the author concluded that different styles of leadership have different impact on employees. Bushra, Usman and Naveed (2011) conducted a study with a purpose of examining association between transformational leadership and organizational commitment or job satisfaction of employees. The authors conducted this study for the banking sector of Lahore, Pakistan. 200 questionnaires were distributed, out of which 133 were completed. Results of the research clearly revealed a positive relationship between job satisfaction and transformational style of leadership. Chipunz, Samuel and Mariri (2011) conducted a research in order to investigate the relationship between employee commitment and motivation and different styles of leadership after a merger of a retail bank in a volatile economy. Closed-ended questionnaires were circulated and data was gathered from 121 employees. Using measures of correlation and central tendency, results revealed a weak but substantial positive relationship between employee motivation and commitment and different styles of leadership. Voon, Lo, Ngui and Ayob (2011) conducted a research were 200 Malaysian executives voluntarily participated in the study. The results revealed that two major types of leadership that are transactional and transformational leadership possess direct impact of employees’ job satisfaction. The results further clarified that transformational leadership style found to have stronger association with employee job satisfaction. Chiang and Wang (2012) performed a study in order to find a causal relationship among transaction leadership, transformational leadership and organizational commitment of employees. Results of the study revealed that transformational leadership possess positive influence on affective and cognitive trust of employees. 3.2 Non-academic Sources Dearnest (2012) has presented her own experience to describe the impact of leadership styles of employee turnover. Her work environment was not flexible, due to which she had to leave her job. Soon after her resignation, she got news that two more employees had also resigned from the job due to inadequate behavior of their manager, Chris. The case of Tiffany Dearnest also proves that, definitely, leadership styles have substantial impact on employee retention. Zidle (n.d.) has mentioned five leadership fundamentals, which can be helpful for better employers-employee relationship. They are: i. Providing employees a clear sense of direction ii. Ensuring that they have all the necessary sources required for their job iii. Adjusting their professional needs and assigning them tasks, which are not always easy but are attainable iv. Setting up meetings on a regular basis and getting feedback about what is going on v. Getting out of the way of their subordinates, yet being available whenever needed Managers usually reinforce that the primary reason due to which people are committed to their job is not financial but it is the basic feeling of success. The employee who accomplishes goals, who achieves objectives and maintains a feeling of personal value and worth, will more likely remain committed to the organization. Gomez (n.d.) wrote an article in which, the author emphasized on taking on a middle-way approach for managers as well as subordinates. According to Gomez (n.d.), a middle way approach is the one where employees are given a proper direction to move on yet, at the same time are also empowered to utilize their own judgments in carrying out the assigned tasks. The author further stated that an authoritarian style of leadership could make employees feel more worthwhile and valuable rather than fungible automaton. Gomez (n.d.) further stated that increased employee retention means less costs of hiring, recruiting and replacing employees. Moreover, those employees who feel valuable and share vision of managers are more likely to roll up their sleeves when asked to take on additional tasks and duties, thus it increases productivity. Gallagher (n.d.), in his article, stated that leadership development is a vital determinant upon which the future of the organization is based. Therefore, investments must be carefully made at this level, ensuring that leaders are furnished with abilities and skills to meet the changing environment of workplace. Moreover, it also helps in retaining and motivating employees. Ernsberger (2003) stated that most companies do not acknowledge the power of leadership in organizations. They do measure the high turnover costs, but they rarely believe that managers or top leadership can make a difference. Therefore, they rarely make managers responsible for employee retention. Organizations usually emphasize on revenues, productivity, products, market share instead of the processes. The author stated his personal experience by saying that; “Our experience at Farr, working with organizations of all sizes across industries over the past 46 years, is that the manager's leadership style is the most important influence on employee retention.” Duggan (n.d.) stated few responses of employees when a certain style of leadership is followed. Duggan (n.d.) stated that when leaders use command style of leadership, they develop a clear distinction between superiors and subordinates. Autocratic leaders usually take decision without taking feedback from their subordinates. This type of behavior usually leads to low level of employee morale. It also results in increased employee absenteeism and reduced level of employee retention. However, using this style of leadership can be useful in certain situations such as natural disasters, or in army; where quick decision-making is required yet using this style of leadership for long-term purpose can produce in poor results. Duggan (n.d.) further stated that using coaching style of leadership makes employee feel encouraged and safe in focusing on their own development, which eventually leads to betterment of the company by increasing employee retention, morale and satisfaction. Nayab (2011) has mentioned 10 strategies, which can be helpful for employee retention. They include: i. Clarity regarding job ii. Effective utilization of Skills iii. Growth opportunities iv. Ownership and involvement v. Autonomy vi. Social bonding vii. Shared values viii. Flexibility ix. Identifying relevant motivators x. Recognition At concluding, Nayab (2011) stated that the best techniques for employee retention depend upon the nature of workforce and company. Most companies apply such interventions only for retaining those employees whose’ competencies and skills are hard to replace and for those workers who have made themselves indispensible by their commitment, attitude or dedications. 4. Conclusion Reviewing the above stated information, it became evident that employee retention is a key determinant for the success of the organizations. Those organizations who experience high employee turnover often encounter obstacles in the trajectory of success since it is difficult and time-consuming to hire, train and develop new employees. It not only increases hiring and recruiting cost, but also becomes troublesome for the growth of the company. Many researchers have conducted research in order to identify relationship between employee retention and leadership styles. Most of the above-mentioned researches indicate a positive and strong relationship between the two variables. It reveals that relation of employees with their bosses is a serious point of concern for employees. Behaviors and attitudes of managers have profound impact upon the performance of employees. Some of the researches also indicated that authoritarian style of leadership is effective as far as employee’s performance and retention is concerned. Employees are reluctant to work under autocratic style of leaders. Therefore, it is recommended to utilize authoritarian style of leadership. Some of the non-academic sources also depict the importance of leadership style for retaining employees. It is essential to have good communication between employee and managers since it furnishes good relations and reduces hesitation and reluctance. It is advisable to follow a neutral approach when dealing with employees. A middle way approach must be followed so that employees do not feel invaluable or insecure. It has been reviewed from the earlier mentioned information that employees are motivated not through financial as much as they are motivated by being felt worthwhile therefore, a good leader must take into account the feedback and suggestions of employees while taking any decision, which increases the morale of employees. References Brandau, K., (n.d.). Retention Leadership: Three Key Drivers for Retaining the "Best of the Best" in Your Organization, Available at: http://www.themanager.org/hr/Retention_Leadership.htm [Accessed: Dec 03, 2012] Bushra, F. Usman, A. Naveed, A, (2011), "Effect of Transformational Leadership on Employees’ Job Satisfaction and Organizational Commitment in Banking Sector of Lahore (Pakistan)", International Journal of Business and Social Science, vol. 2. 18, pp.261-267. Chiang, C. F and Wang, Y. 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