Abstract:
The main objective of this study was to identify the effect of leadership styles (transformational,
transactional, and laissez-faire) on employee performance in Economic Sectors of Oromia
National Regional State. To achieve the purpose, quantitative research approach was used in
which 186 closed ended questionnaire distributed and 159 (86%) were collected. The leadership
styles were measured through the Multifactor Leadership Questionnaire developed by Avolio
and Bass (2004) and modified to fit the context of the study. The data was analyzed by using
SPSS (Version-20). Descriptive and inferential statistical techniques were used for data analysis.
In descriptive by using frequencies, percentages, mean scores, Standard Deviations and in
inferential statistics, Pearson’s correlation and regression analysis were used to assess both
relationships and effects between the leadership styles and Employee Performance. The findings
show that transformational leadership style is the most exhibited style in Economic Sectors
followed by the transactional and laissez-faire leadership styles respectively. Overall, scores in
transformational and transactional leadership styles were found to be strongly correlated with
employee performance. However, laissez-faire had a weak correlation with employee
performance. The correlation between overall leadership styles and employee performance was
strong with a coefficient of r=0.673 and based on the regression analysis 48.8% of the employee
performance can be explained by leadership styles jointly. Employee Performance can be
predicted more by transformational followed by transactional leadership style. However, laissezfaire leadership was found to be negatively accounted to predict employee performance. Thus, it
has been recommended that, for those economic sector leaders to encourage transformational
leadership specially the intellectual stimulation by motivating creativity and innovative,
individual considerations via paying special attention to each individual follower, to formulate
and implement effective reward and recognition systems and to avoid laissez-faire leadership
styles so as to improve organizational performance.
