Human Resource Management - Organizational Culture & Organizational Leadership Effectiveness

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INTERNATIONAL JOURNAL OF BUSINESS STUDIES VOL 10, NO2, DEC 2002: pages 1-26

LEADERSHIP AND ITS IMPACT ON ORGANIZATIONAL CULTURE

James C. Sarros*, Judy Gray* and Iain L. Densten**

Our study of 1,918 members of the Australian Institute of Management revealed strong and positive relationships among leadership and organizational culture. Individualized consideration was the prominent leadership style of executives, and performance orientation the prominent organizational culture. Mean scores for all leadership factors were higher than the established norms for these factors. Culture was shown to be more responsive to leadership dimensions than leadership was to culture. Cultures with the emphasis on rewards were best predicted by a mixture of transactional (contingent reward) and transformational (inspirational motivation) leadership approaches. Cultures with a transformational focus (supportiveness, social responsibility) were best predicted by transformational (inspirational motivation) leadership styles. In many cases, more than double the variance in organizational culture was accounted for by leadership style, than was the reverse case.

Keywords: leadership,organizational culture, regression analysis, executives,organizational culture profile, full range leadership

I. INTRODUCTION

“I think good leaders are constantly learning from what they do, what they see, what they take in and process, and they recognise also that the status quo is not acceptable. Things have got to be better than what the status quo is and they are absolutely committed to changing things. The other side of that is of course, I think good leaders apart from just learning, are very reflective people too. As part of our processing and looking around and taking things in and chewing it over and thinking about it, I think they become quite reflective as well. Then finally, this does go back to the key issue of motivating people. I think they have to be students of human behaviour, they have to understand a little bit about human behaviour. I think they, one way or another, come to an understanding of how do you get results in spite of a whole bunch of difficulties and how do you leverage off a whole bunch of positives to get good results. That formula is always a one off. It's a mix between the leader and the followers. It's a lot to do with the contingent circumstances of the day and all of those sorts of things. So in terms of what we do in Australia, I think a study of leadership across the board from, if you like, the shop floor production level through to the

____________________________ * Monash University, Australia ** University of New South Wales, Australia

Leadership and its Impact on Organizational Culture

strategic leadership of issues of republics and governance and what sort of a country do we want to be, is absolutely vital.”

Admiral Chris Barrie Chief of the Defence Force

II. PURPOSE – THE LEADERSHIP-CULTURE CONUNDRUM

The observations of Admiral Barrie, Former Chief of the Australian Defence Force, indicate that leadership lies at the heart of what makes us human. Leadership consists of attributes and skills that determine not only the nature of enterprise, in all its manifestations, but the overall nature of society and the world. In this paper, we delimit the study of leadership to its manifestations in organizational settings, but acknowledge that the findings may have wider applications.

The purpose of this paper was to determine the extent to which specific dimensions of leadership predicted specific facets of organizational culture. This purpose addresses the ongoing debate regarding which comes first, leadership or culture. Schein’s (1983, 1985, 1992) seminal work proposes that the leader in large measure creates the corporate culture, a view shared by Daymon (2000) and Martin, Sitkin and Boehm (1985). However, if we accept Hatch’s (1993) critique of Schein’s (1985) culture model, then organizational culture can be both an antecedent and intervening variable simultaneously.

Whatever the relationship, there is irrefutable evidence that strong organizational cultures are associated with strong and competent leadership (e.g., Bass, 1998b; Kotter and Heskett, 1992; Sheridan, 1992). Specifically, Bass and Avolio (1993) claimed that within a transformational culture there exists a sense of purpose and a feeling of family. Leaders in these cultures are role models who espouse organizational goals and encourage employee commitment to the organization’s purpose and vision. Further, transformational leaders change their culture by realigning the organization’s culture with a new vision (Bass and Avolio, 1993). Transactional cultures in comparison focus on the here and now, where everything has a value, but where the long-term contributions of people and processes may not be fully harnessed or appreciated. Transactional leaders work within their organizational cultures following existing rules, procedures and norms (Bass and Avolio, 1993). Nonetheless, a mixture of transformational and transactional leadership is needed in order to maintain sustainable and competitive cultures (Bass, 1997, 1998a,b, 1999).

III. THE STUDY IN CONTEXT – ITS PLACE IN TIME

Our study began middle 2000-early 2001 as we surveyed the literature and previous studies to determine the issues most important to Australian business, and to the study of leadership generally. One of the key leadership studies of the 1990s, sponsored by the Federal Labour Government at the time, was conducted by former senior CRA executive David Karpin (1995). Karpin's (1995) report entitled the Industry Task Force on Leadership and Management Skills in Australia identified that the emerging forms of organizations (more dynamic, unpredictable, global, and competitive) required new forms of leadership. Karpin noted that Australian managers needed to

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improve their people, strategic, and entrepreneurial skills as part of the new leadership approach. In effect, the main finding by Karpin (1995) was that Australian managers had failed to make the transition to successful leadership of their companies. While not directly addressing how Australian corporations and their leaders have embraced Karpin's recommendations, our paper identifies the nature of leadership and organizational culture in Australian enterprises in the early 21st century. This profile may encourage further review of management and leadership in the near future beyond the confines of an Australian corporate workplace. The findings also reveal that Australian managers as examined in this study are making some inroads into developing more inclusive forms of leadership than previously thought possible by Karpin (1995), and that these leadership approaches have a direct and significant impact on organizational culture.

Leadership

I regard leadership as part of good management because clearly strategy, as indeed leadership, is not confined to the top of the organization. Indeed if you have an inclusive approach you would want to see that people at all levels . . . have the willingness to actually participate in the setting of strategy for the organization from their perception and overall for the organization. At the end of the day, of course, the people, who normally are in charge of organizations, can't abrogate their responsibilities. But they certainly can include and communicate, which means that at the end of the day, if people have participated, then they are more likely to be committed to the strategy and to the vision, that the so called leader has actually extolled.

Pat Barrett Auditor General of Australia

As shown in the comments by the Auditor General of Australia, leadership is as much about communication and involvement as it is about strategy and articulation of the corporate vision (Sarros, Gray, Densten, Luca, 2003). It is appropriate therefore to begin by defining leadership as fundamentally different to management as a prelude to further exploration of leadership in this study.

According to Kotter (1990:4-5), managers maintain the status quo through the processes and functions of planning and budgeting, organizing and staffing, and controlling and problem solving. These processes ensure a degree of consistency and order. In comparison, leaders produce constructive and adaptive change through the processes of establishing direction through a corporate vision, aligning people through communication, and motivating and inspiring workers. Leadership is proactive, provocative, and prescient; good leaders are expected to know what the future holds, or at least have the skills to determine what that future may be for their company. In comparison, good managers work hard at ensuring the company operates effectively and efficiently on a day to day basis; it is more hands-on and focused in the present.

A key concept of leadership underlying this study is the transformational-transactional model of leadership first developed by Burns (1978) and subsequently operationalized by Bass (1985). Bass and Avolio (1994) define transactional leadership as a transaction that occurs between leaders and followers. That is, followers are rewarded or disciplined on the basis of their work performance. In this study, there are three

Leadership and its Impact on Organizational Culture

dimensions of transactional leadership as measured by the MLQ (5X), namely Contingent Reward, Active Management-by-Exception, and Passive Management-by- Exception, a non-leadership factor (Laissez-faire Leadership), motivational factors (Extra Effort), and outcomes (Effectiveness, Satisfaction). Contingent Reward clarifies what is expected for what reward, and is a specific goal setting behavior. Active Management by Exception focuses on mistakes and exceptions and takes appropriate corrective action. Passive Management by Exception takes action only when things go wrong.

In comparison to transactional leadership, transformational leadership is a more positively affirming approach to leading people and corporations. Bass and Avolio (1994:3) described transformational leaders as able to "motivate others to do more than they originally intended and often more than they thought possible." Missions and visions are articulated by leaders that increase followers' sense of self-esteem and their beliefs about the value of their contributions to the job. Transformational leaders link organizational goals to the needs and beliefs of workers. Transformational leaders seek to raise the consciousness of followers by appealing to their higher ideals and values, such as liberty, justice, equality, peace, and humanitarianism (Bass, 1985). There are five dimensions of transformational leadership as measured by the MLQ (5X) used in this study: Idealized Attributes (formerly Attributed Charisma), Idealized Behaviors (previously Idealized Influence), Inspirational Motivation, Intellectual Stimulation, and Individualized Consideration. Idealized Attributes is behavior that encourages follower trust in the leader; Idealized Behaviors encourage followers to share common vision and goals; Inspirational Motivation is similar to Idealized Behaviors by raising workers' expectations and beliefs about the mission and vision through appeals to the emotions; Intellectual Stimulation questions assumptions and encourages creative problem solving; and Individualized Consideration treats individual needs through coaching, mentoring behavior.

Culture

Organizational culture and organizational climate are often used interchangeably, when in fact they are different constructs. According to Denison (1996:624), culture is “the deep structure of organizations, which is rooted in the values, beliefs and assumptions held by organizational members.” That is, when we speak of organizational culture, we refer to the meanings inherent in the actions and procedures of organizational commerce and discourse. In comparison, “climate is often considered as relatively temporary, subject to direct control, and largely limited to those aspects of the social environment that are consciously perceived by organizational members.” That is, climate is a more transient representation of what business is enacted and how it impacts on everyday relationships and transactions. Culture evolves and is sufficiently complex to not be manipulated easily, while climate is temporal and often subject to manipulation by people with power and influence (Denison, 1996:644). Some of the more prominent culture researchers include Alvesson (1993), O’Reilly, Chatman and Caldwell (1991), Schein (1985, 1990), Smircich and Calas (1987), and Trice and Beyer (1992). O’Reilly et al. (1991:494) developed a means of assessing culture on the basis of the aggregated value orientations of individuals in organizations. They developed the Organizational Culture Profile, modified with permission for use in this study, to determine the person-culture fit on the basis of extant values.

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Generally, cultural studies are conducted at different levels of analyses (for instance, organizational versus societal) using different methodological approaches (conceptual, quantitative, and qualitative) and a variety of associated constructs. For example, culture has been studied in association with leadership as proposed by Schein (1985), or values as examined by O’Reilly et al. (1991) and House et al. (2001, 2002). On the basis of these studies, the underlying focus for the present study is delimited to an examination of organizational culture from an individual perspective (e.g., Kristof, 1996; Van Vianen, 2000). This operationalization of individual values and preferences for organizational culture is consistent with the approach adopted by O’Reilly et al. (1991:491) in their development of the original version of the Organizational Culture Profile (OCP). This approach is also consistent with the proposition that only the top echelons of leaders are in a position to significantly influence cultural identity and change (Katz and Kahn, 1978). These foci are appropriate to our study which relies on senior executives as the data source.

In the case of this study, data were collected from executives operating in an Australian organizational culture. For instance, a study by Ashkanasy and Trevor- Roberts (2001/2002) of Australian executives’ attitudes to nine discrete cultural dimensions as part of the international 62-nation GLOBE (Global Leadership and Organizational Behaviour Effectiveness program) project (House, Hanges, Ruiz- Quintanilla, Dorfman, Javidan, Dickson, Gupta, and GLOBE, 1999; House, Javidan and Dorfman, 2001) identified considerable idiosyncrasies of Australian leader behavior. In brief, Australian manager-leaders reported higher levels of egalitarianism compared to their Anglo-American and European counterparts. The findings of the present study need to be interpreted in light of these delimitations, and the subsequent generalizability of the findings to other countries, organizations, and business executives. In this study, data from individual managers and executives in organizations were aggregated to provide a picture of organizational culture as an indication of the perceptions of the organizational citizens who “make” the environment (Schneider, Goldstein and Smith, 1995, p.751). Further, Subramaniam and Ashkanasy (2001) have called for research using large samples to provide a more comprehensive understanding of culture. In this study, we have collected data from a large sample in order to better examine the nature of organizational culture using the Organizational Culture Profile (OCP).

Leadership and its Impact on Organizational Culture

IV. METHOD

The Study Sample

A stratified random sample of 5000 members was selected from the population of 21,461 members of the AIM in Australia at the time of data collection. A number of mail-outs to the sample were conducted from July 2000 through to February 2001, with a final total sample of 1,918 useable responses (13 arrived too late for data analysis). This final sample size represents an impressive 39% return rate from a final sample of 4,962 (38 uncompleted surveys from retired AIM members), which is exceptional for a study of this type. Table 1 illustrates the sample compared with the AIM population and categorized by a number of demographic variables (for all tables there is a variable n because of missing data).

TABLE 1: STRATIFIED STUDY SAMPLE CATEGORIZED BY STATE MEMBERSHIP, GENDER, AGE, AND COMPANY SIZE COMPARED WITH AUSTRALIAN

INSTITUTE OF MANAGEMENT (AIM) POPULATION (1999 DATA)

AIM Achieved Population Sample

f % f % 1999 Personal Membership State NSW 7031 33 588 31 VIC 5395 25 513 27 QLD/NT 5034 24 409 22 WA 2063 9 157 8 SA 976 4 91 4 ACT 546 3 121 6 TAS 415 2 23 1 No State Mentioned 16 1 Totals 21461 100 1918 100 Gender Male 16954 79 1436 76 Female 4507 21 457 24 Totals 21461 100 1893 100 Age <49 12662 59 1176 61 50+ 8799 41 733 39 Totals 21461 100 1909 100 Company Size <500 19315 90 1178 62 501-1000 858 4 146 8 1000+ 1288 6 576 30

Totals 21461 100 1314 100

Table I shows a close similarity between the sample and the AIM membership when classified by State, gender, and age. The one anomaly is in terms of company size. The sample is over-represented for large-sized organizations, and under-represented for smaller-sized companies.

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V. THE RESEARCH INSTRUMENTS

Multifactor Leadership Questionnaire

The study used the Multifactor Leadership Questionnaire (MLQ) Form 5X to measure transformational and transactional leadership styles. The forerunner of the MLQ (5X) is the MLQ (5R) which has been used extensively in international leadership research. Reliabilities for the MLQ (5X) established by Bass and Avolio (1997:72) are as follows, with reliabilities (self-scored) for the same leadership factors established by this study shown in the accompanying sets of parentheses (note that in this study Attributed Charisma is referred to as Idealized Attributes, and Idealized Influence is referred to as Idealized Behaviors): Idealized Attributes, 0.86 (0.67); Idealized Behaviors, 0.85 (0.68); Inspirational Motivation, 0.88 (0.78); Individualized Consideration, 0.86 (0.75); Intellectual Stimulation, 0.89 (0.74); Management by Exception (Active), 0.76 (0.73); Management by Exception (Passive), 0.85 (0.72); Contingent Reward, 0.85 (0.61); and Laissez Faire, 0.81 (0.77).

Organizational Culture Profile

The Organizational Culture Profile (OCP) developed by O’Reilly, Chatman and Caldwell (1991) and since revised by Cable and Judge (1997) and Judge and Cable (1997) was used to measure organizational and personal culture orientations. Recent research by Vandenberghe (1999) has applied the OCP in a European context (Belgium) and a different occupational setting (health care industry) compared to the original US study. Vandenberghe (1999:183) has recommended that more cross- cultural analysis of the OCP is warranted: “additional work is needed on the structure of the OCP across nations and industries.” Howard (1998) asserted that "the reliability of all OCP value dimensions remains in need of examination." In personal correspondence to the researchers, both Cable (1999) and Vandenberghe (1999) have confirmed the need to examine the structure of the OCP in more detail.

The OCP measures organizational culture along eight factors, namely innovation, attention to detail, outcome orientation, aggressiveness, supportiveness, emphasis on rewards, team orientation, and decisiveness. The instrument uses the Q-sort method of data collection (Block, 1978) to identify values that characterize a target organization and an individual’s preference for that particular configuration of values. O’Reilly et al. (1991) reported an average reliability coefficient for the OCP of 0.88, while Vandenberghe’s (1999) study established an average reliability of 0.86.

For the purpose of the present study, an abbreviated version of the OCP (Cable and Judge, 1997) was used. This version has a test-retest reliability of .87. The shorter version of the OCP has been modified for this study to allow respondents to indicate the organization’s characteristic cultural values orientation along a five-point Likert scale where 1=Not At All, 2=Minimally, 3=Moderately, 4=Considerably, and 5=Very Much (amending the original Q-sort procedure to a normative scale). Representative items of organizational culture measured by the OCP are “Adaptability,” “Taking individual responsibility,” and “Not being constrained by many rules.” Permission to

Leadership and its Impact on Organizational Culture

use an amended and revised version was received from the American Psychological Association (27 September 1999) and Professor Charles O’Reilly (21 December 1999).

Numerous samples consisting of graduate students and practising executives attending graduate management classes in two universities and four campuses throughout Australia were used in the development of our version of the OCP. A total sample of 200 respondents established the following factors for the OCP and their associated Cronbach reliabilities (shown in parentheses): Competitiveness (formerly Outcome Orientation)(.79); Social Responsibility (combination of Outcome Orientation and Innovation) (.80); Supportiveness (.81); Autonomy (formerly Innovation) (.65); Emphasis on Rewards (.62); Performance Orientation (Outcome Orientation and Innovation) (.60); Stability (new factor) (.61); Detail Orientation (.56).

Subsequent to this pilot test, we have revised the OCP on the basis of the data collected from the present study. The new, shortened version of the OCP now consists of a 28-item, seven factor structure as follows (reliabilities are shown in parentheses): Competitiveness (.75), social responsibility (.74), supportiveness (.87), emphasis on rewards (.80), innovation (.80), performance orientation (.74), stability (.66).

VI. FINDINGS Leadership Factors and Norms

Table 2 illustrates the factor mean scores, standard deviations, and reliabilities for all transformational, transactional, and non leadership factors.

TABLE 2: CORRELATIONS, MEANS, STANDARD DEVIATIONS, AND

RELIABILITIES FOR MLQ FACTORS

1 2 3 4 5 6 7 8 9 Mean SD

1 IA .67a 3.00 .52

2 IB .46*** .68 3.13 .56

3 IM .49*** .60*** .78 3.27 .54

4 IS .33*** .41*** .43*** .74 3.19 .48

5 IC .39*** .41*** .41*** .49*** .75 3.32 .47

6 C R .41*** .46*** .49*** .39*** .51*** .75 3.21 .51

7 M B E ( A ) .10*** .07** -.01 .08** .01 .11*** .73 1.78 .79

8 MBE (P) -.03 -.09** -.12** -.11*** -.11*** -.07*** -.19*** .72 1.08 .61

9 LF -.13*** -.10*** -.18*** -.13*** -.12*** -.18*** .14 -.13** .77 0.56 .52 ___________________________________________________________________________________ 1 (IA – Idealised Attributes); 2 (IB – Idealized Behavior); 3 (IM – Inspirational Motivation); 4 (IS – Intellectual Stimulation); 5 (IC – Individualized Consideration); 6 (CR – Contingent Reward); 7 (MBEA – Management by Exception Active); 8 (MBEP – Management by Exception Passive); 9 (LF- Laissez Faire). *p<.05; **p<.01; ***p<.001. aReliabilities on the diagonal

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As indicated in Table 2, individualized consideration (mean=3.32) was the prominent leadership style of Australian executives, followed by inspirational motivation (m=3.27), contingent reward (m=3.21), intellectual stimulation (m=3.19), and idealized behavior (m=3.13). Idealized attributes (m=3.00) registered the lowest score for transformational leadership. In other words, executives in the study sample considered that they used all transformational leadership styles as well as the transactional style of contingent reward fairly often. The findings show that Australian executives were more likely to use coaching (IC), reward (CR), visionary (IM), and role modelling (IB) leadership behaviors that challenge workers (IS) ahead of appeals to charismatic leadership approaches (IA). In contrast, the transactional leadership styles of MBE (active) and MBE (passive) were perceived as being used less frequently while laissez faire was considered to be hardly used at all.

Table 3 shows that executives in the current study recorded higher levels of leadership across the board compared with existing Australian norms, apart from MBE (Passive) and Laissez Faire. Similar to the existing norms (self-raters), the study sample recorded the highest mean score for individualized consideration. Idealized attributes was the least used transformational leadership behavior by executives in this sample, similar to the established norms for self-raters. In comparison, inspirational motivation was the prominent style as measured by aggregated norms.

TABLE 3: COMPARISON OF AIM SAMPLE WITH AUSTRALIAN MLQ NORMS

____________________________________________________________________

Leadership Factors Sample Norms a Self-ratings Self-ratings Aggregate

(n=1895-1907) (n=448) (n=4513)

Mean SD Mean SD Mean SD __________________________________________________________________________________

Idealized Attributes(.67)* 3.00 .52 2.82 .54 2.88 .80

Idealized Behaviors(.68) 3.13 .56 3.06 .60 2.80 .79

Inspirational Motivation(.78) 3.27 .54 3.07 .58 2.90 .80

Intellectual Stimulation(.74) 3.19 .48 3.07 .52 2.77 .77

Individualized Consideration(.75) 3.32 .47 3.21 .51 2.74 .85

Contingent Reward(.75) 3.21 .51 2.87 .51 2.78 .80

MBE (Active)(.73) 1.78 .79 1.65 .82 1.73 .98

MBE (Passive)(.72) 1.08 .61 1.12 .64 1.12 .83

Laissez Faire(.77) 0.56 .52 0.74 .57 0.75 .75

_____________________________________________________________________ a MLQ norm data copyright??MLQ Pty Ltd, Melbourne, 2001.Australian norms database contains 4513 cases, of which 448 are

self-ratings (information remains property of Mind Garden Inc (USA) and OE Consultancy, PO Box 199, Hawthorn, Vic, Australia - permission granted 30 April 2001) Original response categories for MLQ factors: 0 = Not at all; 1 = Once in a while; 2 = Sometimes; 3 = Fairly often; 4 = Frequently, if not always. *Reliability coefficients

Leadership and its Impact on Organizational Culture

As shown in Table 3, mean scores on all leadership factors apart from Laissez Faire for this sample were greater than those recorded by studies where leaders are rated by other organization members. Atwater and Yammarino (1992), Bass and Avolio (1997), Sosik and Megerian (1999), and Yammarino and Atwater (1997) have found that self-ratings tend to be more inflated than either superior or subordinate ratings as self-raters tend to have a healthy sense of self-esteem.

VII. ORGANIZATIONAL CULTURE FACTORS

Table 4 shows the mean factor scores for each of the seven dimensions of organizational culture as measured by the revised Organizational Culture Profile (Cable and Judge, 1997; O’Reilly et al., 1991).

TABLE 4: MEANS, STANDARD DEVIATIONS, AND RELIABILITIES FOR OCP

FACTORS

As indicated in Table 4, performance orientation (mean=4.02) was the prominent dimension of organizational culture for this sample of Australian executives, followed by social responsibility (m=3.93), supportiveness (m=3.70), and emphasis on rewards (m=3.61). These results reflect the trend reported by Sarros and Santora (2001)which found among the 181 executives surveyed an emphasis on achievement, benevolence, self-direction, and security as core values. The performance orientation and social responsibility cultural dimensions of the current study are reflected in the values of achievement and benevolence reported by Sarros and Santora (2001). Table 4 also reports strong reliabilities for the revised OCP.

VIII. REGRESSIONS

As shown in Tables 5 and 6, results indicate that organizational culture was more responsive to leadership as a predictor than was the reverse case. Generally, cultures with a transactional orientation (emphasis on rewards) were best predicted by a mixture of transactional and transformational leadership styles. In comparison, transformational cultures (supportiveness) were best predicted by transformational leadership styles.

OCP Factors N Mean SD Reliabilities

Supportiveness 1918 3.70 .90 .87

Social Responsibility 1918 3.93 .74 .74

Competitiveness 1918 3.37 .65 .75

Emphasis on Rewards 1918 3.61 .90 .80

Stability 1918 3.46 .72 .66

Performance Orientation 1918 4.02 .71 .74

Innovation 1918 3.37 .65 .80

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TABLE 5: STEPWISE MULTIPLE LINEAR REGRESSION ANALYSIS FOR

PREDICTION OF LEADERSHIP BY ORGANIZATIONAL CULTURE FACTORS AND BACKGROUND VARIABLES

L e a d e r s h i p - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - -

P r e d i c t o r s R 2

B e t a SE _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

I d e a l i z e d A t t r i b u t e s ( R 2 = 7 % )

B a c k g r o u n d v a r i a b l e s a

. 0 3 . 1 5 * * * . 0 2 P e r f o r m a n c e o r i e n t a t i o n . 0 7 . 2 1 * * * . 0 2 S u p p o r t i v e n e s s . 0 7 . 0 8 * * . 0 2 F = 2 9 . 2 0 , p < . 0 0 1 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

I d e a l i z e d B e h a v i o r ( R 2 = 8 % )

B a c k g r o u n d v a r i a b l e s . 0 5 . 1 5 * * * . 0 2 P e r f o r m a n c e o r i e n t a t i o n . 0 8 . 1 6 * * * . 0 2 E m p h a s i s o n r e w a r d s . 0 8 . 0 9 * * . 0 3 F = 2 3 . 1 5 , p < . 0 0 1 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

I n s p i r a t i o n a l M o t i v a t i o n ( R 2 = 1 3 % )

B a c k g r o u n d v a r i a b l e s . 0 7 . 1 8 * * * . 0 1 P e r f o r m a n c e o r i e n t a t i o n . 1 2 . 2 3 * * * . 0 2 S u p p o r t i v e n e s s . 1 3 . 1 2 * * * . 0 2 F = 4 5 . 3 1 , p < . 0 0 1 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

I n d i v i d u a l i z e d C o n s i d e r a t i o n ( R 2 = 8 % )

B a c k g r o u n d v a r i a b l e s . 0 4 . 0 6 * . 0 2 P e r f o r m a n c e o r i e n t a t i o n . 07 . 1 7 * * * . 0 3 E m p h a s i s o n r e w a r d s . 0 8 . 1 0 * * . 0 2 F = 2 6 . 3 2 , p < . 0 0 1 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

I n t e l l e c t u a l S t i m u l a t i o n ( R 2 = 4 % )

B a c k g r o u n d v a r i a b l e s . 0 2 . 0 9 * * . 0 1 I n n o v a t i o n . 0 3 . 1 4 * * * . 0 2 S o c i a l r e s p o n s i b i l i t y . 0 4 . 0 7 * . 0 2 F = 8 . 7 8 , p < . 0 1 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

C o n t i n g e n t R e w a r d ( R 2 = 1 0 % )

B a c k g r o u n d v a r i a b l e s . 0 4 . 1 0 * * . 0 2 P e r f o r m a n c e o r i e n t a t i o n . 0 9 . 2 3 * * * . 0 3 E m p h a s i s o n r e w a r d s . 1 0 . 1 3 * * * . 0 2 F = 1 5 . 1 1 , p < . 0 0 1 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

M a n a g e m e n t b y E x c e p t i o n ( A c t i v e ) ( R 2 = 2 % )

B a c k g r o u n d v a r i a b l e s . 0 2 - . 0 8 * . 0 2 P e r f o r m a n c e o r i e n t a t i o n . 0 2 . 0 8 * * . 0 3 F = 5 . 7 7 , p < . 0 0 1 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

M a n a g e m e n t b y E x c e p t i o n ( P a s s i v e ) ( R 2 = 3 % )

B a c k g r o u n d v a r i a b l e s . 0 1 . 0 3 * . 0 2 S u p p o r t i v e n e s s . 0 3 - . 1 2 * * . 0 2 F = 1 0 . 4 9 , p < . 0 0 1 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

L a i s s e z F a i r e ( R 2 = 2 % )

B a c k g r o u n d v a r i a b l e s . 0 1 - . 0 5 . 0 2 P e r f o r m a n c e o r i e n t a t i o n . 0 2 - . 0 8 * * * . 0 2 F = 9 . 1 2 , p < . 0 0 1 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ * p < . 0 5 ; * * p < . 0 1 ; * * * p < . 0 0 1 . a B a c k g r o u n d v a r i a b l e s = L e v e l o f s e n i o r i t y , o r g a n i z a t i o n a l s i z e , e d u c a t i o n , s a l a r y , g e n d e r ,

y e a r s a s e x e c u t i v e , a g e , y e a r s i n c u r r e n t p o s i t i o n

Leadership and its Impact on Organizational Culture

TABLE 6: STEPWISE MULTIPLE LINEAR REGRESSION ANALYSIS FOR

PREDICTION OF ORGANIZATIONAL CULTURE BY LEADERSHIP FACTORS AND BACKGROUND VARIABLES

_____________________________________________________________________

Organizational Culture -----------------------------------------------------------

Predictors R 2 Beta S E ___________________________________________________________________________________

Competitiveness (R2=18%) Background variablesa .13 .27*** .02 Inspirational motivation .17 .19*** .03 Contingent reward .18 .12*** .03 MBE (A) .18 .05* .02 F=43.59, p<.01 ----------------------------------------------------------------------------------------------------------------------------

Social Responsibility (R2=17%) Background variables .13 .33*** .02 Inspirational motivation .16 .17*** .04 Individualized consideration .17 .07** .03 F=85.13, p<.01 ---------------------------------------------------------------------------------------------------------------------------

Supportiveness (R 2=23%) Background variables .18 .37*** .03 Inspirational motivation .22 .19*** .05 Contingent reward .22 .09*** .04 MBE (P) .23 -.07** .04 Idealized attributes .23 .07** .04 F=62.17, p<.01 ----------------------------------------------------------------------------------------------------------------------------

Innovation (R2=20%) Background variables .16 .24*** .03 Inspirational motivation .19 .18*** .05 Contingent reward .20 .09** .04 F=67.20, p<.01 ----------------------------------------------------------------------------------------------------------------------------

Emphasis on Rewards (R2 =24%) Background variables .19 .33*** .03 Contingent reward .23 .19*** .04 Inspirational motivation .24 .12*** .05 Idealized attributes .24 .06* .04 F=85.13, p<.01 ----------------------------------------------------------------------------------------------------------------------------

Performance Orientation (R2=14%) Background variables .07 .17*** .02 Inspirational motivation .12 .23*** .04 Contingent reward .14 .15** .03 Idealized attributes .14 .10*** .03 F=40.30, p<.01 ----------------------------------------------------------------------------------------------------------------------------

Stability (R2=17%) Background variables .15 .27*** .02 Inspirational motivation .16 .14*** .03 MBE (P) .17 -.06* .02 F=46.38, p<.01 __________________________________________________________________________________ *p<.05; **p<.01; ***p<.001. aBackground variables=Level of seniority, organizational size, education, salary, gender, years as executive, age, years in current position

Supportiveness (R2=23%)

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Table 5 shows that organizational culture accounted for only a small amount of variance in any one leadership approach. For instance, performance orientation accounted for five percent of the variance only in the transformational leadership behavior of inspirational motivation, after first entering background variables into the regression equation. A total of 13 percent of the variance was accounted for in inspirational motivation. This type of leadership approach raises workers' expectations and beliefs about the mission and vision through appeals to the emotions, and is the second most used leadership approach in this study (see Table 2). The only other leadership behaviour with five percent or more of its variance accounted for by organizational culture (after statistically controlling for background variables) was contingent reward (overall variance 10 percent). Contingent reward clarifies what is expected for what reward, and is a specific goal setting behavior. Although contingent reward is classified as transactional leadership behavior, in many cases it is a substitute for transformational leadership, and is highly correlated with all transformational leadership factors (see Table 2). In order of variance accounted for, the main leadership approaches that are associated with specific dimensions of organizational culture are: inspirational motivation (13%, best predicted by performance orientation); contingent reward (10%, performance orientation); idealized behavior and individualized consideration (8% respectively, performance orientation in both cases). The least amount of variance accounted for was for the transactional and non-leadership factors of management by exception (active and passive) and laissez faire respectively.

In comparison to the prediction of leadership by organizational culture, when predicting culture by leadership as shown in Table 6, a considerably greater amount of variance was identified. The greatest amount of variance accounted for was for the cultural dimension of emphasis on rewards, with the transactional leadership style of contingent reward contributing a further four percent to the variance after statistically controlling for background variables. A total of 24 percent of the variance in emphasis on rewards was accounted for in the regression equation. Emphasis on rewards consists of fair behavior which rewards and praises good work performance, and provides opportunities for professional growth.

In order of variance accounted for, organizational cultures (after statistically controlling for background variables) associated with specific leadership predictors were: emphasis on rewards (24%, best predicted by contingent reward, inspirational motivation); supportiveness (23%, inspirational motivation); innovation (20%, inspirational motivation and contingent reward); competitiveness (18%, inspirational motivation and contingent reward); social responsibility (17%, inspirational motivation and individualized consideration); stability (17%, inspirational motivation); performance orientation (14%, inspirational motivation, contingent reward). Key elements of these cultures are shown in Table 7.

Leadership and its Impact on Organizational Culture

TABLE 7: DIMENSIONS OF ORGANIZATIONAL CULTURE AND THEIR

PROPERTIES

Cultures with the greatest amount of variance accounted for accentuated fairness, opportunities for growth, were both collaborative and opportunistic, and encouraged innovation and distinctiveness. Cultures with less variance accounted for tended to be reflective, were focused on developing a clear guiding principle under stable and secure conditions of employment, but still retained high expectations for performance and enthusiasm for the job. The results point to evolving organizational cultures that strive to balance the tension between stable and secure employment conditions with the need to constantly challenge and compete in an increasingly problematic market place.

Organizational Culture Dimensions Properties ____________________________________________________________________________

• Competitiveness Achievement orientation An emphasis on quality Being distinctive - being different from others Being competitive

• Social Responsibility Being reflective Having a good reputation Being socially responsible Having a clear guiding philosophy

• Supportiveness Being team oriented Sharing information freely Being people oriented Collaboration

• Innovation Being innovative Quick to take advantage of opportunities Risk taking Taking individual responsibility

• Emphasis on Rewards Fairness Opportunities for professional growth High pay for good performance Praise for good performance

• Performance Orientation Having high expectations for performance Enthusiasm for the job Being results oriented Being highly organized

• Stability Stability Being calm Security of employment Low conflict

_____________________________________________________________________

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IX. DISCUSSION

This study of 1,918 executives in Australian enterprises found that individualised consideration was the prominent leadership style of Australian executives, followed by inspirational motivation, contingent reward, intellectual stimulation, and idealised behavior. Idealised attributes registered the lowest mean score for transformational leadership. In other words, executives in the survey considered that they used all transformational leadership styles as well as the transactional style of contingent reward fairly often.

The findings revealed that Australian executives were more likely to use coaching, reward, visionary and role modelling leadership behaviours that challenge workers ahead of appeals to charismatic leadership approaches. These charismatic leadership behaviors are consistently ranked lower for Australian executives compared to their American counterparts (Conger and Kanungo, 1998; Palmer, Walls, Burgess, and Stough, 2001; Parry and Sarros, 1996; Shamir, Arthur and House, 1994; Shamir, House and Arthur, 1993). In contrast, the transactional leadership styles of MBE (active) and MBE (passive) were perceived as being used less frequently, while laissez faire was considered to be hardly used at all.

For all types of leadership in this study, mean scores were generally higher for transformational leadership than those recorded by studies where leaders were rated by other organisation members. Atwater and Yammarino (1992), Bass and Avolio (1989, 1993, 1994), and Sosik and Megerian (1999) found that self-ratings tend to be more inflated than either superior or subordinate ratings; it has been proposed that self-raters tend to have a healthy sense of self-esteem. It is recommended that more comprehensive and valid findings may be obtained through 360o feedback, although such data gathering is often tedious and fraught with different complexities (Howard, 1994).

Performance orientation was the prominent organisational culture for this sample of Australian executives, followed by social responsibility, supportiveness, and emphasis on rewards. Competitiveness and innovation were the lowest ranked cultures. The results suggest that organizational cultures in this study experience ongoing tension in balancing stable and secure employment conditions with the need to constantly challenge, compete and innovate.

The study showed that minimal amounts of leadership were accounted for by organisational culture. The greatest amount of variance was accounted for the transformational leadership factor of inspirational motivation (13%), which was best predicted by performance orientation and supportiveness. The transactional leadership factor of contingent reward was next best predicted by culture (10% of variance accounted for). Again, performance orientation was a main predictor of leadership and, in this case, emphasis on rewards also featured.

In comparison, our findings revealed that leadership was a far more prominent predictor of culture than culture was of leadership. This is consistent with Schein’s

Leadership and its Impact on Organizational Culture

(1985, 1992) assertion that leaders determine the type of culture in organizations, or at the very least the emotional climate of those organizations (Palmer et al., 2001:9). Other studies indicate compelling linkages among strong personal and corporate values and similarly powerful corporate cultures, particularly when these values are nurtured and articulated by senior organizational leaders (Hambrick, 1987; Hinings, Thibault, Slack and Kikulis, 1996; Rowsell and Berry, 1993; Russell, 2001).

On the basis of the findings in this study, we suggest that the process of building competitive and cooperative organizational cultures can be achieved when leaders raise workers’ expectations and beliefs about the overall goals, and coach and mentor their staff in achieving these objectives. These innovative and high achieving cultures rely on committed and supportive leaders for success (Amabile, Conti, Coon, Lazenby and Herron, 1996).

The results of our study provide us with a view of business leaders on the cusp of some major changes in the way they lead and work generally. For example, executives appear to be more aware of and willing to use transformational leadership behaviours to achieve results. In fact, the more transformational leadership used, the greater the leadership outcomes and the more performance oriented, socially responsible and supportive the organisational culture. These findings corroborate existing studies that reveal the place that transformational leadership and leadership generally play in building and sustaining strong corporate cultures (Bass, 1998b; Bass and Avolio, 1993; Daymon, 2000; Hatch, 1993; Kotter and Heskett, 1992; Martin, Sitkin and Boehm, 1985; Schein, 1983, 1985, 1992). Bass (1999:16) also affirms the power of leaders to build and sustain transformational corporate cultures:

For an organizational culture to become more transformational, top management must articulate the changes that are required . . . The behaviors of top level leaders become symbols of the organization’s new culture.

It is imperative therefore that in order to continually build upon and improve organizational leadership, that companies begin programmes of identifying leadership potential at an early career stage and implement training and development regimes to nurture and promote this leadership in the company.

The ability to take a long-term systemic view of how leadership and culture feed into and grow out of each other is imperative if these objectives and recommendations are to be achieved. There is evidence that transformational leadership can be taught (Barling, Weber and Kelloway, 1996; Kelloway, Barling and Helleur, 2000). Results of a study conducted by Kelloway and Barling (2000) indicated that followers of trained leaders became more committed (i.e. loyal) to the organization than followers of untrained leaders. Further, follower attitudes changed in response to leaders’ enhanced transformational leadership skills. Research by Kelloway et al. (2000) suggested that transformational leadership can be enhanced by both training (participation in a workshop) and counselling (feedback of follower ratings), but that combining the two approaches did not enhance leadership beyond that obtained from either approach alone.

International Journal of Business Studies

Leaders may be able to influence the strength of the relationship between person- organization fit and individual outcomes. According to Kristof (1996), leaders could emphasize particular values and goals in communicating with followers. However, where a strong and consistent culture is promoted, leaders may encourage the attrition of those who do not fit well with the organization.

These findings are critical in assisting leaders in the development of work place cultures that both sustain competitive advantage while also satisfying the needs of their workers. Our data show that leaders need to use both organisational type behaviours that inspire workers to achieve a corporate vision (inspirational motivation) as well as more personalised approaches that show workers they are individually important in the overall scheme of things (individualised consideration.)

A more worrying aspect of our study is that competitiveness and innovation were the lowest ranked cultures. It appears that leaders of Australian enterprises still have some way to go in making their companies more competitive on a global stage. Adopting the transformational leadership behaviours identified in this study may help these executives in achieving these outcomes on a sustainable basis.

A gratifying outcome of our study is the development of a more robust measure of organizational culture which will have a range of applications. For instance, the restructured version of the OCP developed in this study provides a detailed evaluation of organizational culture according to seven dimensions. Having a representative sample of organizational members complete the OCP would assist in identifying different perspectives of organizational culture. Such activities should stimulate worthwhile discussion among organizational members and build understanding of the values that underpin the organizational culture profile. In addition, the cultural profiles of divisions, departments and teams within organizations should be evaluated and compared with the ratings for the cultural profile of the organization as a whole. The OCP could also provide insight into similarities and differences concerning cultural profiles, particularly when organizational mergers or takeovers are proposed.

Additionally, the OCP could be used to assess person-organization fit. Originally, the OCP was developed to examine the congruence between individual and organizational values (O’Reilly at al., 1991). The application of the modified instrument should be extended to evaluate person-organization fit. The use of the OCP could provide operational data to aid in the recruitment and selection of new employees. A study of 171 entry-level auditors working in eight US public accounting firms concluded that recruits whose values upon entry match those of the firm adjust to the organizational culture more quickly, and recruits whose values most closely match the firms feel most satisfied and remain longer with the firm (Chatman, 1991). According to Cable and Parsons (2001), job applicants self-select into organizations based on subjective person-organization fit and interviewers use an estimation of person-organization fit when evaluating and hiring job applicants.

The development of the OCP may enable more accurate information to be provided on person-organization fit which could lead to improved recruitment, selection, and socialization practices.

Leadership and its Impact on Organizational Culture

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