Effects of leadership styles on employee performance: case in economic sectors of oromia national regional state

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.