Relationship Between Leadership & Organizational Effectiveness

Effective leaders can have a signigicant impact on organizational effectiveness, and the bottom line.

The relationship between leadership and organizational effectiveness has been a popular topic of conversation for management theorists in recent years. The Transactional-Transformational leadership model is commonly used to describe two distinct types of organizational leadership. Transactional leadership is simple, involving the exchange of rewards for performance. Transformational leadership, on the other hand, consists of a variety of factors such as performance management, ethical behavior by managers and the creation of a shared mission to inspire workers to follow their leaders.

Performance Management

Properly implemented performance management improves overall effectiveness and is essential for the creation and maintenance of a sustainable, long-term competitive advantage. Performance management, as opposed to performance measurement, is a leadership practice that has the potential to greatly improve organizational effectiveness. While performance measurement consists of simply measuring an employee's performance to justify rewards, performance management is a leadership tool that is used to develop workers and improve organizational effectiveness.

Ethical Leadership

Ethical leadership, or the lack of ethical leadership, has a major impact on organizational leadership. Alan Greenspan, former Federal Reserve Chairman, once said, "Fraud and falsification are highly destructive to market capitalism.... Our market system depends critically on trust. Trust in the word of our colleagues and trust in the word of those with whom we do business." Ethical leaders, and the quality workplace relationships they inspire, set the tone for workers at all levels.

Mission

The conscious effort to align the day-to-day activities of the business with its overall vision or mission statement is another element of leadership that affects organizational effectiveness. However, effective leaders do more than just implement policies and procedures to bring about this alignment. Effective leaders communicate with employees to ensure they understand the importance and support the achievement of this alignment. A lack of leadership in this area can hinder organizational effectiveness.

Retention

The relationship between leadership and organizational effectiveness is an essential aspect of management. Poor leadership can be the root cause of high turnover and a variety of other factors that affect organizational effectiveness. A 2004 report distributed by the National Bureau of Economic Research discusses the role of managers and leadership in the attitudes of employees. Managers have been proven to be to blame for attitudes, whether positive or negative, of workers in the workplace. These attitudes have a direct impact on organizational effectiveness and economic outcomes.

References

• Transformational Leadership and Organizational Effectiveness in Recreational Sports/Fitness Programs; Chin-Hsien Hsu, et al
• U.S. Office of Personnel Management; Performance Management
• Ethical Leadership: Right Relationships and the Emotional Bottom Line - The Gold Standard for Success; Desmond Berghofer and Geraldine Schwartz
• What's with the Attitude? Improving Employee-Manager Relations; Pam Bryan; 2009