Do leadership behaviors matter? Examining the effects of leadership styles on financial performance
An article regarding the relationship between leadership style and financial performance.
The behavioral theory of leadership holds that organizational performance and leader effectiveness are contingent upon leadership behaviors. Leadership style is the communicative, inspirational, and motivational disposition of the leader, manifested in leader behaviors. This inquiry sought to determine if leader behaviors matter through reviewing the connection between behaviors and leadership style, and studying how leadership style relates to financial performance. The sample population of the research study consisted of 102 general managers of rural electric cooperative located in the southern United States. Rural electric cooperatives are consumer-owned, nonprofit distributors of electricity to the rural regions of the United States and numerous other countries. The findings indicated: (a) a significant and positive relationship between transactional leadership and financial performance; (b) a significant and inverse relationship between laissez-faire leadership and financial performance; and (c) no significant relationship between transformational leadership and financial performance. The findings indicated that when leaders rank lower in laissez-faire behaviors, stronger financial performance ensues. Recognizing that leadership style affects financial and organizational performance, employing an ineffective leadership style can result in increased operating costs, substandard performance, and a lack of success in fulfilling the organizational mission. Organizational leaders must be operationally efficient and financially competent to ensure the focus remains on providing a benefit to the stakeholders. The availability of affordable, reliable electricity affects the lifestyles of consumers and influences operational and strategic decisions of business leaders. Consumers, businesses, institutions, and society benefit if organizational leaders behave in a constructive, ethical, responsible manner and embrace effective leadership styles.
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