Effects of Leadership Styles on Employee Performance Case in Economic Sectors of Oromia, Ethiopia

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 OromiaNational Regional State. To achieve the purpose, quantitative research approach was used inwhich 186 closed ended questionnaires were distributed and 159 (86%) were collected. Theleadership styles were measured through the Multifactor Leadership Questionnaire developed byAvolio and Bass (2004) and modified to fit the context of the study. Descriptive and inferentialstatistical techniques were used for data analysis. The findings show that transformationalleadership style is the most exhibited style in Economic Sectors followed by the transactional andlaissez-faire leadership styles respectively. Scores in transformational and transactionalleadership styles were found to be strongly correlated with employee performance. However,laissez-faire had a weak correlation with employee performance. The correlation betweenoverall leadership styles and employee performance was strong with a coefficient of r=0.673.The regression analysis shows that the three leadership styles explain 48.8% of employeeperformance. In relative terms, employee performance is predicted more by transformationalleadership style and followed by transactional leadership style. However, laissez-faireleadership was found to be negatively accounted to predict employee performance. It has beenrecommended that, for those economic sectors, leaders to encourage transformationalleadership specially the intellectual stimulation by motivating creativity and innovative,individual considerations via paying special attention to each individual follower, to formulateand implement effective reward and recognition systems and to avoid laissez-faire leadershipstyles so as to improve organizational performance