Leadership Practice for Building Trust of Followers: Decisive Factors of Organizational Performance
Keywords:Transformational leadership, Organizational performance, Trust in leadership, Operational performance, Financial performance
Purpose - Leadership plays a decisive role in key organizational outcomes. To investigate the effects of leadership and its mechanism on organizational performance, this paper examined how transformational leadership impacts followers’ trust for improving operational and financial performance in the case of Vietnamese firms.
Design/Methodology - This study used the Structural Equation Modeling to assess the correlation among the constructs based on using survey data of 285 employees at 60 manufacturing and service companies.
Findings - The findings revealed that employees' trust in leadership acts as a mediating mechanism in the relationship between transformational leadership and organizational performance. The transformational leadership style of leaders has greater effects on financial performance, while employee’s trust has larger effects on operational performance. This study calls attention to the importance of raising employee trust to link transformational leadership and organizational performance.
Practical and theoretical implications - From a practical point of view, the paper brings more knowledge and insights for CEO/managers on the right pathway to enhance organizational performance. The paper also provides theoretical initiatives on the leadership theory and the new pathway to promote operational and financial performance.
Asencio, H. (2016). Leadership, Trust and Organizational Performance in the Public Sector. Transylvanian Review of Administrative Sciences, 12(SI), 5-22.
Bass, B. M. (1985). Leadership and performance beyond expectations: Free Press; Collier Macmillan.
Bass, B. M., & Avolio, B. J. (2000). MLQ: Multifactor leadership questionnaire: Mind Garden.
Bennis, W., Covey, S., Wheatley, M., & Bogle, J. (2002). Focus on leadership: Servant leadership for the 21st century: New York: John Wiley and Sons.
Bligh, M. C. (2017). Leadership and Trust Leadership Today (pp. 21-42): Springer.
Brown, S., Gray, D., McHardy, J., & Taylor, K. (2015). Employee trust and workplace performance. Journal of economic behavior & organization, 116, 361-378.
Chen, Y., Jermias, J., & Lee, G. (2013). The Performance Implication of Goal Achievability in Incentive Contracts and Feedback. Paper presented at the CAAA Annual Conference.
Cho, Y. J., & Poister, T. H. (2014). Managerial practices, trust in leadership, and performance: Case of the Georgia department of transportation. Public Personnel Management, 43(2), 179-196.
Cook, J., & Wall, T. (1980). New work attitude measures of trust, organizational commitment and personal need non‐fulfilment. Journal of occupational psychology, 53(1), 39-52.
Dietz, G., & Hartog, D. N. D. (2006). Measuring trust inside organisations. Personnel review, 35(5), 557-588.
Dirks, K. T., & Ferrin, D. L. (2002). Trust in leadership: meta-analytic findings and implications for research and practice: American Psychological Association.
Fornell, C., & Larcker, D. F. (1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of marketing research, 18(1), 39-50.
Garcia-Morales, V. J., Matias-Reche, F., & Hurtado-Torres, N. (2008). Influence of transformational leadership on organizational innovation and performance depending on the level of organizational learning in the pharmaceutical sector. Journal of Organizational Change Management, 21(2), 188-212.
Gillespie, N. (2003). Measuring trust in working relationships: the behavioral trust inventory. Paper presented at the Academy of Management Conference, Seattle, WA.
Ha, A. T. L., Phong, L. B., & Hui, L. (2019). Leadership and Organizational Learning: The Determinants of Innovation Speed and Innovation Quality in Vietnamese Firms. Journal of Management and Strategy, 10(1), 29-37.
Hair, J. F., Black, W. C., Babin, B. J., Anderson, R. E., & Tatham, R. L. (2006). Multivariate data analysis 6th Edition. New Jersey: Pearson Education.
Harms, P. D., & Credé, M. (2010). Emotional intelligence and transformational and transactional leadership: A meta-analysis. Journal of Leadership & Organizational Studies, 17(1), 5-17.
Hassan, S., & Hatmaker, D. M. (2015). Leadership and performance of public employees: Effects of the quality and characteristics of manager-employee relationships. Journal of Public Administration Research and Theory, 25(4), 1127-1155.
Holtz, B. C., & Harold, C. M. (2008). When your boss says no! The effects of leadership style and trust on employee reactions to managerial explanations. Journal of occupational and organizational psychology, 81(4), 777-802.
Hubbard, G. (2009). Measuring organizational performance: beyond the triple bottom line. Business strategy and the environment, 18(3), 177-191.
Hurduzeu, R.-E. (2015). The impact of leadership on organizational performance. SEA: Practical Application of Science, 3(1).
Joseph, E. E., & Winston, B. E. (2005). A correlation of servant leadership, leader trust, and organizational trust. Leadership & Organization Development Journal, 26(1), 6-22.
Judge, T. A., & Piccolo, R. F. (2004). Transformational and transactional leadership: a meta-analytic test of their relative validity. Journal of applied psychology, 89(5), 755.
Le, B. P., Lei, H., Phouvong, S., Than, T. S., Nguyen, T. M. A., & Gong, J. (2018). Self-efficacy and optimism mediate the relationship between transformational leadership and knowledge sharing. Social Behavior and Personality: an international journal, 46(11), 1833-1846.
Le, P. B., & Lei, H. (2017). How transformational leadership supports knowledge sharing: Evidence from Chinese manufacturing and service firms. Chinese Management Studies, 11(3), 479-497.
Le, P. B., & Lei, H. (2018a). The mediating role of trust in stimulating the relationship between transformational leadership and knowledge sharing processes. Journal of knowledge management, 22(3), 521-537.
Le, P. B., & Lei, H. (2018b). The mediating role of trust in stimulating the relationship between transformational leadership and knowledge sharing processes. Journal of Knowledge Management.
Le, P. B., & Lei, H. (2019). Determinants of innovation capability: the roles of transformational leadership, knowledge sharing and perceived organizational support. Journal of knowledge management, 23(3), 527-547.
Le, P. B., Lei, H., & Than, T. S. (2018). How leadership and trust in leaders forster employees' behavior toward knowledge sharing. Social Behavior and Personality: an international journal, 46(5), 705-720.
Lee, I. A. (2008). Relationship between the use of information technology (it) and performances of human resources management (hrm): Alliant International University, San Diego.
Lee, P., Gillespie, N., Mann, L., & Wearing, A. (2010). Leadership and trust: Their effect on knowledge sharing and team performance. Management learning, 41(4), 473-491.
Lei, H., Do, N. K., & Le, P. B. (2019). Arousing a positive climate for knowledge sharing through moral lens: the mediating roles of knowledge-centered and collaborative culture. Journal of knowledge management, 23(8), 1586-1604.
Lei, H., Le, P. B., & Nguyen, H. T. H. (2017). How Collaborative Culture Supports for Competitive Advantage: The Mediating Role of Organizational Learning. International Journal of Business Administration, 8(2), 73-85.
Lei, H., Nguyen, T. T., & Le, P. B. (2019). How knowledge sharing connects interpersonal trust and innovation capability: The moderating effect of leadership support. Chinese Management Studies, 13(2), 276-298.
Lei, H., Phouvong, S., & Le, P. B. (2019). How to foster innovative culture and capable champions for chinese firms: an empirical research. Chinese Management Studies, 13(1), 51-69.
MacKenzie, S. B., Podsakoff, P. M., & Rich, G. A. (2001). Transformational and transactional leadership and salesperson performance. Journal of the Academy of Marketing Science, 29(2), 115-134.
Madella, A., Bayle, E., & Tome, J. (2005). The organisational performance of national swimming federations in Mediterranean countries: A comparative approach. European Journal of Sport Science, 5(4), 207-220.
Mayer, R. C., & Gavin, M. B. (2005). Trust in management and performance: Who minds the shop while the employees watch the boss? Academy of management journal, 48(5), 874-888.
Nguyen, D. K., Phong, L. B., & Hui, L. (2019). Creating Competitive Advantage for Vietnamese Manufacturing and Service Firms: The Role of Collaborative Culture and Innovation Capability. International Journal of Business Administration, 10(2), 32-42.
Nguyen, T. T., Mia, L., Winata, L., & Chong, V. K. (2017). Effect of transformational-leadership style and management control system on managerial performance. Journal of Business Research, 70, 202-213.
Nunnally, J. C., & Bernstein, I. (1994). Elements of statistical description and estimation. Psychometric Theory 3 Edition, McGraw-Hill , New York.
Nyhan, R. C. (2000). Changing the paradigm: Trust and its role in public sector organizations. The American Review of Public Administration, 30(1), 87-109.
Pearce, C. L., Sims Jr, H. P., Cox, J. F., Ball, G., Schnell, E., Smith, K. A., & Trevino, L. (2003). Transactors, transformers and beyond: A multi-method development of a theoretical typology of leadership. Journal of Management development, 22(4), 273-307.
Podsakoff, P. M., MacKenzie, S. B., Moorman, R. H., & Fetter, R. (1990). Transformational leader behaviors and their effects on followers' trust in leader, satisfaction, and organizational citizenship behaviors. The Leadership Quarterly, 1(2), 107-142.
Preacher, K. J., & Hayes, A. F. (2008). Asymptotic and resampling strategies for assessing and comparing indirect effects in multiple mediator models. Behavior research methods, 40(3), 879-891.
Ramezan, M., Sanjaghi, M. E., & Rahimian Kalateh, H. (2013). Organizational change capacity and organizational performance: An empirical analysis on an innovative industry. Journal of Knowledge-based Innovation in China, 5(3), 188-212.
Schoorman, F. D., Mayer, R. C., & Davis, J. H. (2007). An integrative model of organizational trust: Past, present, and future. Academy of Management Review, 32(2), 344-354.
Thomson, N. B., Rawson, J. V., Slade, C. P., & Bledsoe, M. (2016). Transformation and Transformational Leadership:: A Review of the Current and Relevant Literature for Academic Radiologists. Academic radiology, 23(5), 592-599.
Tsai, C. F., & Yen, Y. F. (2008). A model to explore the mystery between organizations' downsizing strategies and firm performance. Journal of Organizational Change Management.
Tushman, M., & Nadler, D. (1986). Organizing for innovation. California management review, 28(3), 74-92.
Van Wart, M. (2011). Dynamics of Leadership in Public Service: Theory and Practice . New York: ME Sharpe: Inc.
Wang, G., Oh, I.-S., Courtright, S. H., & Colbert, A. E. (2011). Transformational leadership and performance across criteria and levels: A meta-analytic review of 25 years of research. Group & Organization Management, 36(2), 223-270.
Wang, Z., Sharma, P. N., & Cao, J. (2016). From knowledge sharing to firm performance: A predictive model comparison. Journal of Business Research, 69(10), 4650-4658.
Wang, Z., Wang, N., & Liang, H. (2014). Knowledge sharing, intellectual capital and firm performance. Management Decision, 52(2), 230-258.
Yang, Z., Nguyen, V. T., & Le, P. B. (2018). Knowledge sharing serves as a mediator between collaborative culture and innovation capability: an empirical research. Journal of Business & Industrial Marketing, 33(7), 958-969.
Yasir, M., Imran, R., Irshad, M. K., Mohamad, N. A., & Khan, M. M. (2016). Leadership styles in relation to employees’ trust and organizational change capacity: evidence from non-profit organizations. Sage Open, 6(4), 2158244016675396.