1 CHAPTER ONE: INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Leadership plays a vital role in our everyday life, be it in organizations, religious bodies,
schools, and governments. For any organization to prevail in present times, the leadership must
be solid and act decisively in running the organization's affairs. Research shows that many
leadership issues have been discussed around the world today; different governments and
organizations have failed as a result of bad leadership.
Leadership comes with followership; leadership can either discourage or motivate
followership. The style of leadership determines the overall performance of the followers,
especially in an organization. In other words, if the leadership style in an organization is good,
it can positively boost the performance of the employees in that organization. Research by
Schyns & Sanders (2007) posits that one of the major employee's job dissatisfaction is poor
leadership in that organization. To wax stronger and participate in today's competitive global
market and world politics, governments and organizations must seek good leaders and
leadership styles.
Organizational productivity is much improved when there is an effective leadership style in
place. Odetayo et al. (2012), while researching Nigerian banks, posits that the major
determinant of organizational success is a good leadership style, especially in Nigerian banking
sectors. Williams (2009) pointed out that the organization's performance and outputs are
closely associated with the organization's leaders' distinctive leadership style.
Globally, banking sectors are one of the key engines for economic development and growth.
Ebong's (2006) research on the banking sector's effect on economic growth posits that the
banking sector's role in mediating between different economics units with surplus funds and
the units that require such funds to boost their investment promotes economic growth in returns.
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Banks can achieve economies of scale that are beneficial for economic growth when they pool
savings from investors and help to borrow customers to promote their businesses.
The banking sector in Nigeria is one of the key drivers in the economic growth, development,
and sustainability in Nigeria; over the years, some banks have collapsed, and there have also
been mergers of different banks across the banking sectors in Nigeria. Many of the banking
problems experienced in Nigeria were attributed to the failure of effective management and
leadership of those banks (Okafor, 2010), of the recent acquisition of the then Diamond bank
of Nigeria by Access bank of Nigeria. Diamond bank, before its acquisition, was troubled with
a management crisis that was highly reported as a bad case of bank leadership when the then
CEO of the bank handled the affairs of the bank to his next of kin.
There are over 25 commercial banks in Nigeria, excluding micro-financial banks. However,
the focus of this research is the Guaranty Trust Bank PLC (GTBANK).
Guaranty Trust Bank is one of the leading financial institutions in Nigeria; in September 1990,
it was incorporated as a limited liability company with the license to provide commercial and
other banking services, though it was not until 1991 that it commenced operation and was
quoted publicly in 1996 (GTB, 2013). GTB has over 20,000 employees worldwide and several
branches dispersed in different countries across the globe in Nigeria, Ghana, Liberia, Gambia,
Cote d'Ivoire, Sierra Leone, and the United Kingdom (GTB, 2013). Despite all these employees
and branches worldwide, it is difficult to determine how leadership style affects the worker's
performance. GTB Abuja was chosen as the study area because Abuja is the capital of Nigeria,
the biggest economy of Africa, as one of Nigeria's economic hubs.
There are several leadership styles proposed by different scholars to be the best leadership style
suitable for enhancing employee performance in an organization. Different leaders have a
distinctive leadership style that has helped them improve their employee's performance in their
organization. Koopman et al. (1997) posited that transformational and transactional leadership
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styles had gained popularity over the years in some establishments. Their analysis argued that
organizations' outcomes like employee's performance, job satisfaction, and organizational
commitments are directly linked to transformational and transactional leadership styles adopted
by the managements of the organizations. A study by Wahab et al. (2012) also supported their
research position that posited that transformational and transactional leadership positively
affects employees' organizational commitments.
In explaining the transactional leadership style, Tremblay & Pare (2007) described it as a
systematic way to appreciate and praise their leaders because of the incentives and rewards the
leaders offer to them; this style improves their motivational level, which then advances
organizational productivity. Kline & Ivey (2010) describe the transactional leadership style as
"management-employees exchanges, whereby management exchanges things of value with the
employees this they believe will increase the employee's work ethics and overall performance.
For this study, it is vital to analyse how transactional and transformational leadership style
impacts employee's performance in the Nigerian banking system, most especially Guaranty
Trust Bank of Nigeria (GTB) Abuja.
1.2 STATEMENT OF THE PROBLEM
Most scholars emphasize the transformational leadership style while acknowledging the
importance of transactional leadership style. Paracha et al. (2010) argued that the
transformational leadership style plays a more vital role in influencing an organization's
performance than a transactional leadership style. In concurrence, (Bass, 1995) study stated
that transactional leadership style negatively affects the organizational outputs; researching the
relationship between leader-member exchanges, transformational and transactional leadership
in estimating employee's performance, the study by (Johnson, 2012) concluded that
transactional leadership style is an affirmative predictor of employee's performance. The
transactional leadership style positively increases performance among the military in research
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(Bass et al., 2012). Elenkov's (2010) investigation on the effect of the leadership style of
organizational performance found out that Russian managers that adopt a transactional
leadership style positively influence their employee's performance and organizational
commitments.
Scholars like Lievens et al. (2007) and Shamir et al. (2010) posits that the transformational
leadership style plays an important role in greater innovation implementation by the
organizations, especially during market competitions or organizational rivalries era.
Palanichamy & Raja (2011) believe that the transformational leader's style increases both the
organization's performance and the employee's performance without incurring extra burden in
return. Many scholars have proven transformational leadership style to be vital and useful for
many organizations, be it business organizations, the military, hospitals, engineering, and the
educational system (Masi & Cook, 2010).
There is also another form of leadership style called Participative leadership style; according
to (Somech, 2010) this type of leader uses a motivational mechanism to increase employee
performance and organizational commitments. They offer subordinates the opportunity to be
involved and contribute during the decision-making process of the organization. In supporting
this participant's leadership style, (Robbins et al., 2010) argues that when subordinates are
involved in an organization's decision-making process, they are more committed to making the
organizational goal a success. The study also shows that employees under participant
leadership style are somewhat more committed to organizational success and have greater job
satisfaction. Their performance level is always very high (Yousef, 2011). Ahmad & Yiing
(2009) believe that if management can correctly apply participant leadership style, it motivates
the employees to commit themselves to organizational success. The authors also add that
participant leadership style is very significant and positively related to organizational success
and employee commitments. Scholars like Safa & Dolatabadi (2010), Huang et al. (2010) all
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advocated for leaders to adopt participant leadership style. They argued that this type of
leadership style influences an employee's job performance, creates trust, and promotes
organizational commitments.
Even though scholars have promoted and recommended different leadership styles they feel
that promote employee's performance and commitments to the overall organizational goal, their
effect on the banking sectors have not been fully examined, especially in most Nigerian banks.
This research aims to examine and determine if leadership styles can influence bank employees
to perform exceedingly at any giving task as a result of leadership adopted by their managers—
this is one of the major concerns that prompted this research. The idea is to evaluate employees'
performance and examine if it is affected by employees' perceptions of the leadership style that
the manager adopts. It is the gap that this research hopes to fill. This research will assess the
impact of leadership style on employee's performance in Guaranty Trust Bank PLC, Abuja.
1.3 RESEARCH QUESTIONS
An effort has been made in the course of this research to gather available related data to be able
to find an answer to the following research questions:
1. What is the effect of leadership style on employees' performance in GTB Abuja?
2. What style of leadership style do the managers of Guaranty Trust Bank Abuja apply?
3. What is the effect of the leadership style adopted by the bank managers on employee
performance?
1.4 AIMS AND OBJECTIVES
The main aim of this research is to analyse different leadership styles and answer the research
questions "the impact of leadership style on employee's performance," as well as identify the
leadership style adopted by bank managers of GTB and its implication on employee's
performance.
1.5 RESEARCH HYPOTHESIS
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For the course of this study, the following hypothesis has been formulated as a guide for this
study.
H0: There is a significant relationship between leadership style and employee performance in
GTB Abuja.
H1: There is a correlation between the leadership style a bank manager applies and employee's
performance in GTB Abuja.
1.6 SIGNIFICANT OF THE STUDY
This research is important because of the different issues that affect society today due to
leadership style. As banks play an important economic role in the economy, it is paramount to
assess how different leadership styles affect the banking sector, especially GTB. The study
hopes that the findings of this research will act as a guideline for bank managers and
policymakers to improve their leadership style for the bank and employees' overall success.
The findings can also be useful in highlighting the impact of leadership style on employee's
performance in the banking sector and the society at large.
Thus, it is imperative to conduct this research for it to cover wider knowledge by bringing out
relevant facts for managers, social scientist, officials, and other relevant agencies in solving the
problem of leadership style in an organization and best leadership style that is suitable to
improve employee's performance in an organization.
After determining the correlation between leadership style and employee performance, the
bank will be able to utilize the research findings to develop leadership programs for bank
managers to acquire relevant leadership skills that will improve management and
organizational performance
Lastly, the findings of this research will be used by future researchers as a reference for similar
studies related to the research topic.
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1.7 SCOPE OF THE STUDY
The research scope covers the impact of leadership style on the employee's performance in
Nigeria's banking sector. This research will mainly focus on leadership style. It affects
employee performance, using Guaranty Trust Bank for sampling, the research area is in Abuja
because it is one of the major banking hubs in Nigeria.
