Leadership Practice for Building Trust of Followers: Decisive Factors of Organizational Performance
Authors
Article Sidebar
Main Article Content
Abstract
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.
Article Details
Copyright (c) 2020 Ba Phong Le, Quang Thang Tran
This work is licensed under a Creative Commons Attribution 4.0 International License.
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. DOI: https://doi.org/10.1016/j.jebo.2015.05.001
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. DOI: https://doi.org/10.2139/ssrn.2200275
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. DOI: https://doi.org/10.1177/0091026014523136
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. DOI: https://doi.org/10.1111/j.2044-8325.1980.tb00005.x
Dietz, G., & Hartog, D. N. D. (2006). Measuring trust inside organisations. Personnel review, 35(5), 557-588. DOI: https://doi.org/10.1108/00483480610682299
Dirks, K. T., & Ferrin, D. L. (2002). Trust in leadership: meta-analytic findings and implications for research and practice: American Psychological Association. DOI: https://doi.org/10.1037/0021-9010.87.4.611
Fornell, C., & Larcker, D. F. (1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of marketing research, 18(1), 39-50. DOI: https://doi.org/10.1177/002224378101800104
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. DOI: https://doi.org/10.1108/09534810810856435
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. DOI: https://doi.org/10.5430/jms.v10n1p29
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. DOI: https://doi.org/10.1177/1548051809350894
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. DOI: https://doi.org/10.1093/jopart/muu002
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. DOI: https://doi.org/10.1348/096317907X251569
Hubbard, G. (2009). Measuring organizational performance: beyond the triple bottom line. Business strategy and the environment, 18(3), 177-191. DOI: https://doi.org/10.1002/bse.564
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. DOI: https://doi.org/10.1108/01437730510575552
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. DOI: https://doi.org/10.1037/0021-9010.89.5.755
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. DOI: https://doi.org/10.2224/sbp.7242
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. DOI: https://doi.org/10.1108/CMS-02-2017-0039
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. DOI: https://doi.org/10.1108/JKM-10-2016-0463
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. DOI: https://doi.org/10.1108/JKM-10-2016-0463
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. DOI: https://doi.org/10.1108/JKM-09-2018-0568
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. DOI: https://doi.org/10.2224/sbp.6711
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. DOI: https://doi.org/10.1177/1350507610362036
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. DOI: https://doi.org/10.1108/JKM-04-2019-0201
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. DOI: https://doi.org/10.5430/ijba.v8n2p73
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. DOI: https://doi.org/10.1108/CMS-06-2018-0554
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. DOI: https://doi.org/10.1108/CMS-05-2018-0502
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. DOI: https://doi.org/10.1177/03079459994506
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. DOI: https://doi.org/10.1080/17461390500344644
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. DOI: https://doi.org/10.5465/amj.2005.18803928
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. DOI: https://doi.org/10.5430/ijba.v10n2p32
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. DOI: https://doi.org/10.1016/j.jbusres.2016.08.018
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. DOI: https://doi.org/10.1177/02750740022064560
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. DOI: https://doi.org/10.1108/02621710310467587
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. DOI: https://doi.org/10.1016/1048-9843(90)90009-7
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. DOI: https://doi.org/10.3758/BRM.40.3.879
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. DOI: https://doi.org/10.1108/JKIC-07-2013-0012
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. DOI: https://doi.org/10.5465/amr.2007.24348410
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. DOI: https://doi.org/10.1016/j.acra.2016.01.010
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. DOI: https://doi.org/10.1108/09534810810874831
Tushman, M., & Nadler, D. (1986). Organizing for innovation. California management review, 28(3), 74-92. DOI: https://doi.org/10.2307/41165203
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. DOI: https://doi.org/10.1177/1059601111401017
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. DOI: https://doi.org/10.1016/j.jbusres.2016.03.055
Wang, Z., Wang, N., & Liang, H. (2014). Knowledge sharing, intellectual capital and firm performance. Management Decision, 52(2), 230-258. DOI: https://doi.org/10.1108/MD-02-2013-0064
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. DOI: https://doi.org/10.1108/JBIM-10-2017-0245
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. DOI: https://doi.org/10.1177/2158244016675396