Leadership and Organizational Effectiveness

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Leadership remains an effective organizational tool that helps companies, institutions, and corporations thrive and prosper. It is often associated with high job performance, employee satisfaction, and financial profits (Ngaithe, K’Aol, Lewa, & Ndwiga, 2016). Successful leaders can help their teams achieve professional and personal goals by providing support and motivation. Leadership serves as “an adaptive tool for individual and group survival” (Hogan & Kaiser, 2005, p. 170), which can affect employees and citizens. It solves the issue of coordinating the collective effort to pursue a common goal. There are five major leadership theories, including ‘Great Man,’ trait, behavioral, contingency, charismatic, transactional, and transformational theories. The focus of this paper is going to be transformational leadership as an integral instrument for organizational effectiveness. Transformational leaders encourage employees to create changes and develop new ideas within a company to foster a strong corporate culture and gain a competitive advantage in innovation (Bass, 1999). This theory refers to “the leader moving the follower beyond immediate self-interests through idealized influence (charisma), inspiration, intellectual stimulation, or individualized consideration” (Bass, 1999, p. 11). Idealized influence and inspirational motivation, in particular, can be immensely beneficial to an organization’s performance.


The purpose of this paper is to explore the role of leadership in business operations and staff performance. Based on empirical data and scholarly resources, the paper seeks an explanation as to why the transformational model is one of the most effective leadership theories. It further explores the main components of the model, including the benefits of idealized influence and inspirational motivation.


Leadership as an Integral Part of an Organization

Leadership serves the purpose of building and maintaining teams with the goal of ensuring positive results and efficiency. Originally, the literature on leadership contained nothing but generalizations about who leaders are (Hogan & Kaiser, 2005). There was no persuasive account of how leadership functions in an organization because studies failed to acknowledge the fact that personality had an impact on it (Ngaithe et al., 2016). Recent studies show that leadership affects group performance since it “involves persuading people to set aside, for a time, their selfish pursuits and work in support of the communal interest” (Hogan & Kaiser, 2005, p. 172). In order to be a successful leader, a person needs to possess core competencies, including business, leadership, intra-, and interpersonal skills (Hogan & Kaiser, 2005). In addition, leading a team involves problem solving, effective communication, and crisis management. Companies also often use senior managers and team leads as ‘ambassadors’ who project the general vision (Hogan & Kaiser, 2005). In turn, such clarification of roles, mission, and values (facilitated by leaders) positively affects performance.

Leadership is, in fact, an integral part of an organization because it affects both its day-to-day operations and long-term business outcomes. Relevant scientific data proves the economic utility of effective leaders (Ngaithe et al., 2016). Statistics show that “high performers provide an additional $25 million in value to an organization during their tenure” (Hogan & Kaiser, 2005, p. 175). Moreover, according to Hogan & Kaiser, effective leadership correlates with positive business outcomes, including income growth, return on investment, and overall financial performance (2005). It also affects employee attitudes and influences the dynamics of the work environment (Hogan & Kaiser, 2005). Employee satisfaction, in turn, can lead to increased loyalty and turnover. Managerial incompetence, on the other hand, negatively affects organizational effectiveness since business failures are often associated with dysfunctional leaders (Hogan & Kaiser, 2005). Therefore, leadership is crucial in determining whether a company is going to be relevant and profitable. Incompetent leaders can impact employee engagement, financial performance, and corporate culture just as much as successful ones.

Transformational Leadership

Transformational leadership is a managerial style, where leaders encourage their subordinates to create change and come up with new ideas. It has developed mainly as a result of economic changes and emerging market tendencies at the end of the twentieth century (Bass, 1999). Job satisfaction did not longer depend on steady pay and benefits, but on independence and autonomy in the workplace (Bass, 1999). Since the transformational model implies creativity and professional challenges, it is now a preferred organizational approach. Transformational leadership fosters the spirit of teamwork by “clarifying the vision, mission and strategic goals of the organization and creating a strong sense of determination among the employees” (Ngaithe et al., 2016, p. 7). Facilitating changes in the organization allows team members to use work tasks as opportunities for growth and further development. Bernard M. Bass argues that transformational leadership is associated with shared goals, creative flexibility, and employee empowerment (1999). This plays an integral role in shifting the company towards the creation of a better workplace.

Transformational leaders are visionaries who enhance organizational effectiveness by enabling change and creating collective objectives for the company’s future. They manage to address employees’ concerns for achievement and self-fulfillment, which “elevates the followers’ level of maturity” (Bass, 1999, p. 11). According to Bass, the teams are usually high-performing because organizational practices “enhance commitment, involvement, and loyalty” (1999, p. 11). Therefore, transformational leaders hold an emphasis on common values, positive development, and open communication. They foster team spirit, coordination, and enthusiasm by inspiring and motivating their followers.

Transformational leadership consists of four main components, including idealized influence, intellectual stimulation, inspirational motivation, and individualized consideration. Idealized influence is expressed through the leaders’ willingness to be a role model to demonstrate organizational values and core ethical principles (Ngaithe et al., 2016). It also helps them clarify the common vision and goals, which fosters team spirit and commitment. Individual consideration is crucial in employee empowerment team coordination (Bass, 1999). According to Bass, the leaders have to pay attention to the followers’ needs and find the appropriate ways to satisfy them in order to mobilize their support (1999). Intellectual stimulation facilitates innovation, knowledge sharing, and the creation of new ideas among the team members. Inspirational motivation is the leaders’ ability to inspire confidence and a sense of purpose. It requires enthusiasm, optimism, and effective communication strategies to convey the right message (Ngaithe et al., 2016). It focuses on setting a higher level of expectations, thereby improving team performance (Bass, 1999). All of the characteristics are immensely important, even though inspirational motivation and idealized influence might have the most influence on staff performance, according to the latest research.

The Impact of Idealized Influence and Inspirational Motivation on Performance

The main benefit of idealized influence and inspirational motivation is improved staff performance. They also affect team spirit, networking, and objective transparency within an organization (Ngaithe et al., 2016). Idealized influence can be described as the ability of leaders to inspire change by being a role model. An influential leader “turns out to be admired, respected, and trusted by the followers who in turn want to emulate the leader” (Ngaithe et al., 2016, p. 7). Followers, therefore, adopt the moral principles of their leaders in order to achieve personal and professional goals. Idealized influence creates larger social collective networks that are vital to organizational success (Ngaithe et al., 2016). Regression results from a study conducted in Kenya by Ngaithe et al. demonstrate that individualized influence has a positive impact on staff performance (2016). As for inspirational motivation, the study argues that performance is significantly affected by it as well (Ngaithe et al., 2016). Ngaithe et al. argue that inspirational leaders challenge employees to meet higher expectations, which results in them developing a shared vision and similar professional goals (2016). They create a sense of determination among team members in order to promote enthusiasm and optimism.


Leadership is an effective instrument in coordinating individual efforts to reach common personal goals and professional objectives. It plays an integral part in facilitating positive outcomes for an organization, including performance, financial gains, and employee engagement. Successful leaders provide support and motivation in order to create a shared vision. Transformational leadership, however, focuses on inspiring changes and motivating employees to develop new business ideas. The components of this managerial model include idealized influence, inspirational motivation, individualized consideration, and intellectual stimulation. The first two characteristics are crucial to improving staff performance, according to multiple studies (Bass, 1999; Ngaithe et al., 2016). Influential leaders act as role models who manage to develop shared goals and moral principles. Inspirational motivation, in turn, creates high expectations for employees in order to improve performance. Therefore, successful transformational leaders need to be able to inspire, influence and motivate their followers.


  1. Bass, B. M. (1999). Two decades of research and development in transformational leadership. European Journal of Work and Organizational Psychology, 8(1), 9–32. doi: 10.1080/135943299398410
  2. Hogan, R., & Kaiser, R. B. (2005). What we know about leadership. Review of General Psychology, 9(2), 169–180. doi: 10.1037/1089-2680.9.2.169
  3. Ngaithe, L., K’Aol, G., Lewa, P., & Ndwiga, M. (2016). Effect of idealized influence and inspirational motivation on staff performance in state owned enterprises in Kenya. European Journal of Business and Management, 8(30), 6–13.

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BusinessEssay. "Leadership and Organizational Effectiveness." January 21, 2022. https://business-essay.com/leadership-and-organizational-effectiveness/.