The Impact of Transformational Leadership on Organisational Citizenship Behaviour in Nigeria

Leadership and Its Impact on Organisational Behaviour in Small and Medium Scale Enterprises in Nigeria

The purpose of this research is to examine the impact of leadership on organisational behaviour in small and medium scale enterprises in Nigeria. Among various constructs of organisational behaviour, the research specifically examines the organisational citizenship behaviour (OCB) to measure the behavioural performance of the employees. The main goal of this study was to examine the effect of three leadership styles on reported OCB performance. The study used a quantitative cross-sectional survey research design approach. Survey instruments were used to collect data through self-administered questionnaires. This study collected data from employees working in the commercial, financial, educational, manufacturing, and services industries of the Nigerian economy. The researcher contacted SMEs in Nigeria from these specific industries and asked their consent for participant. Those Nigerian SMEs who replied back to researcher with consent for questionnaire survey were shortlisted for the online questionnaire survey. Specifically, participants from these SMEs were randomly selected and were sent the link of questionnaire survey on Survey Monkey. This study showed that when faced with a Transformational leader in Nigerian SMEs, individuals report willingness to perform more OCBs in the workplace than those faced with a Transactional or Laissez-faire leader in Nigerian SMEs. Additionally, individuals who perceive their leader to be more Transformational in Nigerian SMEs have higher tendency to recognise with the leader and this in turn increases the likelihood of these individuals performing more OCBs in Nigerian SMEs.

Chapter 1: Introduction

Background of the Study

An organisation’s effectiveness is one of the single most critical outcomes determining its existence. From a competitive standpoint, effective organisations outperform the competition, thus increasing revenue and success. Organisations that fail often attribute their lack of success to poor leadership (Boga & Ensari, 2009; Garavan, O’Brien, & Watson, 2015). This results in turnover, as organisations bring in new employees with the aim of creating organisational change and ultimately success within the company. Thus, selection and employee-environmental fit are often of paramount importance to human resources and hiring teams. Leaders are saddled to meet or exceed the demands of their stakeholders which companies need to fulfil with the three times performance outcomes (Carter & Greer, 2013). There is a gap in the current literature related to the influence of leadership SMEs (small and medium enterprises) survival (Carter & Greer, 2013; Latham, 2013). A modest empirical research studies existed on the influence of leadership on SMEs survival (Finkelstein, Hambrick, & Cannella, 2009; Carter & Greer, 2013). The shortage of empirical work might largely result from inappropriate leadership practices, besides the difficulty of obtaining information from SME owners/managers, particularly in developing countries. Given the global turbulent environment, the quality of leadership and performance could result in an SME survival (O’Regan, Ghobadian, & Sims, 2004). Prior research on leadership supported that the SMEs following more detailed attention towards leadership practices are more likely to perform better compared to SMEs following weaker or uncertain leadership practices as well as ethics or values (Li et al., 2016). SMEs have tendency to contribute to rapid advancements of an economy and play an important part in any country’s economic development (Anastasia, 2015; Liu & Saleh, 2009; Nelson, 2015; Ng, Kee, & Mui, 2012).

The significance of SMEs supports the rationale to explore the influence of leadership on SMEs OCBs. This could assist in solving the problem of unemployment and reducing poverty levels in many developing nations including Nigeria. SME development contributes to increasing the employment level and reducing the poverty level of a nation (Cant & Wiid, 2013; Liu & Saleh, 2009; Villarreal &Cid, 2008). SME development plays an important role in almost all countries, but it is more relevant to emerging and developing countries. Their major challenges remain the high unemployment as well as an inequitable income distribution, like Nigeria. The success of SMEs is crucial to the economic propensity of a nation, or else it risks an economic stagnation (Cant & Wiid, 2013).

Organisations seek to hire individuals who are committed to ensuring organisational success (e.g., profit, productivity, cooperation, etc.) An employee’s voluntary commitment to an organisation, then, is key to an organisation being able to achieve its goals. Researchers often seek to identify individuals with high commitment and the factors that affect organisational commitment. Organisational Citizenship Behaviours (OCBs) are behaviours acted by organisational employees that go beyond their required duties that benefit the organisation by promoting excellence (Organ, 1988). OCBs are extra role behaviours that are essential for maintaining a well-functioning organisation. These behaviours are not required by the organisation, however, the organisation is in a better situation if the employees choose to engage in these behaviours. OCBs have a long history within the organisational behaviour stream of research, dating to the early seminal work from Organ (Organ, 1988). OCBs can be defined as the behaviours of an individual which are discretionary by the nature, and thus not explicitly or directly acknowledged by the formal reward system (Organ, 1998). According to Organ (1998), these individual behaviours, when in the combination, are likely to lead to effective working and operations of a company. The discretionary nature of OCB behaviours implies that these behaviours are not an imposable demand of the job description or role or function which is apparently identifiable terms regarding the employment contract of an employee with the organisation (Organ, 1998). Organ (1998) further suggested that these behaviours are naturally the concern of personal choice of a person to the degree that exclusion of these behaviours are not normally acknowledged as punishment. The main premise of this notion is that voluntary behaviours and are not financially rewarded by the organisation. If an employee chooses not to engage in behaviour, it is posited that they should not be punished for the lack of engagement (Organ, 1998).

There are several key takeaways that need to be noted about the history of OCBs within the organisational behaviour field. First, while there has been much debate on the structure of OCBs, it is generally accepted that these are behaviours meant to help the organisation in some shape or form (for example: []; Podsakoff et al., 2000; Williams & Anderson, 1991; []; Organ, 1988). Second, OCBs have exhibited positive and moderate relationships with several key organisational behaviour variables, including work satisfaction, organisational commitment, as well as fairness (for example: Hoffman et al., 2007; LePine et al., 2002). Furthermore, OCBs demonstrate a strong and positive correlation with performance (Hoffman, 2007). Third, OCBs have exhibited the strongest relationship with conscientiousness amongst personality traits, with mixed findings regarding agreeableness (e.g., Podsakoff et al., 2000; Organ & Ryan, 1995). Finally, while there are many positive items associated with OCBs, it is crucial to not overlook potential pitfalls of engaging in OCBs, such as fatigue or lower career success (i.e., Bergeron et al., 2013; Bolino et al., 2015). All together, these findings tap into some of the critical areas within the robust OCB literature and provide an understanding of how the construct works.

Most commonly, researchers have studied OCBs as a function of individual differences. For example, Shaffer et al. (2015) indicated that personality characteristics like agreeableness and conscientiousness are recognised to be the powerful determinants of OCB performance. Effective leadership is important because it builds employee confidence while encouraging a positive, professional work environment. This inspires people to do their jobs effectively, often leading to greater degree job satisfaction and productivity (Bateman & Organ, 1983). Given the importance of effective leadership, identifying characteristics of a leader that elicit employees’ OCBs is one possible way to promote organisational success through increased OCBs without relying solely on selecting employees with specific personality traits.

Statement of the Problem

The main problem of this is whether there is any association between leadership and organisational behaviour in Nigerian SMEs. For measuring organisational behaviours, the research employs the concept of organisational citizenship behaviour as the construct to measure the behavioural performance of the employees and whether leadership has any role in it. Organisational citizenship behaviours are work place behaviours that go above and beyond what is formally expected of an employee and is not rewarded (Organ. 1997). Examples of this behaviour consist of offering to stay late to help a co-worker or taking on an additional project that is not assigned. These behaviours have benefit to the organisation through improved organisational performance (Podsakoff, Blume, Whiting, & Podsakoff, 2009). Therefore, organisations want to increase organisational citizenship behaviours to enhance organisational performance. Leaders can influence the performance of OCBs both directly and indirectly in work-related settings.

While leadership is defined through different leadership styles (the most popular among these are Transactional, Transformational and the Laissez-faire leadership styles), the current investigation explores mainly the effect of these three leadership styles on organisational behaviour particularly organisational citizenship behaviours in Nigerian SMEs. Transformational Leadership is widely recognised to be a successful leadership style that focuses on empowering employees and instilling values through the implementation of positive relationships between leaders and their subordinates or followers (Bass, 2000). Transformational Leadership is defined by the following qualities: “idealised influence, inspired motivation, intellectual stimulation, and individual consideration” (Bass, 2000, p.9). Because Transformational Leaders instil values in their followers, it is plausible that these types of leaders would be effective at eliciting OCBs. By aligning individual ideals with those of the company, Transformational Leaders are likely to encourage OCBs. Thus, the present study shifts the focus of OCBs away from individual differences towards the impact of leadership styles on OCB performance.

Given the importance of leadership in organisational effectiveness and success, investigating the association between different leadership styles and OCBs will benefit both employees and organisations. If researchers can determine the types of leaders that elicit OCBs and the benefits associated with them, they can then implement these findings rather than using personality characteristics as a solitary screening tool. Further investigation into this relationship will also aid in selection of leaders for various organisational domains.

The current research intended to explore the impact of leadership styles on organisational citizenship behaviour in SMEs in Nigeria. The failure rates of SMEs in developing countries have been very high, with many of them closing down within the first three to five years of operation (Cant & Wiid, 2013; Obiwuru et al., 2011; Valdiserri & Wilson, 2010). This study might assist leaders of new SMEs during their first five years in operation and help existing ones to achieve their survival. Barbeschi (2002) posited that in any organisation, like countries, there are cultural and political realities that affect the way diverse workforces function. Thus, in the face of a dearth of research that examines Anglo-centric leadership theories in the context of sub-Saharan Africa and the assumptions of implicit leadership theory regarding the attributes, traits, and skills required for effective leadership in organisations (Javidan et al., 2006), any research exploring various leadership styles and leadership theories and their practical application in societies other than where they were developed would make an important implications and reasoning to the existing body of literature available in this area of leadership and organisational behaviour in the organisations.

Therefore, there remains a need for deliberate investigation and meaningful understanding that finds answers to the question of whether any one of the leadership styles developed in developed countries like U.S. and U.K. has any influence on leadership effectiveness in sub-Saharan Africa in general. The current study contributes to what little knowledge is available by answering the research question of whether Nigerian employees’ preference for either transactional or transformational leadership styles results in increased organisational behaviour.

Purpose of the Study

The purpose of the study is to the effect of leadership styles on organisational citizenship behaviour in SMEs in Nigeria. Among various constructs of organisational behaviour, the research specifically examines the organisational citizenship behaviour (OCB) to measure the behavioural performance of the employees. The study intends to examines the following objectives/decision problems.

Objectives/Decision Problems

Examining whether leadership styles impact performance of SMEs in Nigeria, and how can these be used to improve leadership skills related to SMEs sector

Exploring the common traits of successful SMEs’ leaders, and how can these universal characteristics be used to assist the growth of SMEs

Research Questions/Hypotheses

The current study intends to examines two main research questions and their corresponding hypotheses to examine the impact of leadership on organisational behaviour in SMEs in Nigeria

RQ1: How do leadership styles impact performance of SMEs in Nigeria, and how can these be used to improve leadership skills related to SMEs?

Hypothesis 1: The leader described as Transformational will score higher on the Global Transformational Leadership (GTL) scale than both the leader described as Transactional and the Laissez-faire leader

Hypothesis 2: Participants receiving the Transformational Leadership vignette will report a higher likelihood of engaging in OCBs than those receiving the Transactional Leadership vignette and the Laissez-faire leadership vignette.

Hypothesis 3: Participants who rate their leader as more Transformational will report a higher likelihood of engaging in OCBs.

RQ2: What are the common traits of successful SMEs’ leaders, and how can these universal characteristics be used to assist the growth of SMEs?

Hypothesis 4: The association between Global Transformational Leadership and reported OCB performance are mediated by Identification with the leader.

Significance of the Study

The current study intends to make implications by contributing to the available literature on leadership and organisational behaviour and also provide the evidence in Nigerian context. A search through the OneSource database provides evidence of the paucity of empirical research that focuses on establishing the relationship between leadership styles and organizational behaviour particularly within sub-Saharan Africa region and Nigeria. According to Emuwa (2015), research that tests and compares leadership theories developed in the U.S. and applied in countries such as Nigeria may help define existing leadership theories and aid leadership adaptation. Following from this statement, the current investigation intended to contribute to what little is known on the extent to which leadership and organizational behaviour developed in Western societies are applicable to sub-Saharan Africa, specifically Nigeria. This was done by exploring whether there is an impact of leadership on organisational behaviour in SMEs in Nigeria.

The current study contributes to what little is known on the extent to which leadership theories developed in western societies are applicable in sub-Saharan Africa as represented by Nigeria. Second, and more specifically, the relationship between dimensions of transactional leadership and transformational leadership and organisational citizenship behaviour is explored. The uniqueness of this study was that there were, but very few studies and no rigorous data to support an exploring the impact of leadership on SMEs’ organizational behaviour, specifically in Nigeria (Caldwell, et al., 2012; Fard et al., 2011; Gibson & van ver Vaart, 2008; Teng et al., 2011). Finally, the study serves to further clarify whether organisational behaviour has the link with different leadership styles within SMEs in Nigeria. Nigeria was selected within the sub-Saharan cultural cluster because, according to the World Economic Forum (2014) on Africa, Nigeria is the largest economy of Sub-Saharan Africa with also leading in terms of population with more than 160 million people living in the Nigeria. Also, Nigeria was selected for the purpose of investigation from Sub-Saharan Africa region because the official language of the communication of the country is English and hence it removes need for translation.

Structure of the Research

The current study was structured into six chapters. In this introductory chapter, the background along with problem and need of the study is discussed. The chapter also discussed the research purpose and objectives, research questions, and corresponding hypotheses for the investigation of the main purpose of study. It also discussed how this study could be significant and make contribution in Nigerian context. The second chapter discusses the available literature on leadership and organisational behaviour. The third chapter presents the discussion on research design which is adopted for addressing the research questions. The fourth chapter presents the analysis while fifth chapter presents the discussions. Lastly, the sixth chapter presents the conclusions and recommendations.

Chapter 2: Literature Review

This chapter presents the review of the studies in the available literature of SME, SMEs in Nigeria, leadership, leadership in SMEs, and relationship between leadership styles and OCBs.

Definition of a SME

No universally accepted the definition of a small business or SME exists, so different countries, including multilateral institutions, have SME definitions covering headcount, asset value, or turnover limits (Anastasia, 2015; Kaltwasser, 2010; Peterson, Albaum, & Kozmetsky, 1986). A Nigerian SME was defined as an enterprise with 10 and 199 employees (SMEDAN, 2008). Nigeria has one classification of a SME or small business, without differentiating the sectors and ignored the importance of revenue (Anastasia, 2015; Kaltwasser, 2010; Peterson, Albaum, & Kozmetsky, 1986). The US and China have sub categories, including, manufacturing, construction, food, retail trade, wholesaling, transportation, postal service, and hospitality (Kaltwasser, 2010; Lui & Saleh, 2009; SMEDAN, 2008). The Chinese SME classifications used subsectors (Lui & Saleh, 2009). The literature review disclosed that the SME classification in Nigeria does not capture turnover or revenue covenants, and microenterprises are not distinct from SMEs in Nigeria, as revealed by the various types of government support.

Development of SMEs in Nigeria

There is vast contribution of SMEs in the rapid advancements of a country’s economic development as well as stability; thus, high rates of survival are crucial (Anastasia, 2015; Liu & Saleh, 2009; Nelson, 2015; Ng, Kee, & Mui, 2012). The review disclosed a poor performance of Nigerian SMEs compared to the total number of enterprises in Nigeria (SMEDAN, 2008). For example, the number of SMEs in Nigeria was very small, estimated at 22,918 or 0.13% of an estimated 17,284,671 enterprises, with microenterprises constituting about 99.87% (SMEDAN, 2008). Meanwhile, the Nigerian government has pursued the development of more small and medium size enterprises in an effort to promote and use them as drivers for sustainable economic development, employment generation, rapid industrialization, and poverty alleviation (SMEDAN, 2008). The Nigerian government established various SME institutions for promotion and development of the SMEs in the country including National Directorate of Employment and the People’s Bank of Nigeria coupled with SME-based loan schemes. The institutions are products of a political regime and thus unsustainable, and most of them went into liquidation at the expiration of the tenor of the political regime.

Other countries including the US have made attempts to stimulate the growth of their micro enterprises and small businesses (Anastasia, 2015; Kaltwasser, 2010; Peterson, et al., 1986). After many years of neglect, some similar attempts were also made by Nigerian successive governments to promote the growth of Micro, Small, And Medium-Sized Enterprises (MSMEs) in Nigeria. The Nigerian government’s efforts became fruitful in year 2003 when the National Assembly enacted a law in the same year establishing a coordinating agency named the Small and Medium Industry Development Agency (SMIDA) for the MSME sub-sector. In 2004, the name SMIDA was changed through an act to the Small and Medium Enterprises Development Agency (SMEDAN). SMEDAN has the statutory responsibility to accelerate the conception, revitalisation, and enhancement of development and growth of the MSMEs (SMEDAN, 2008).

Leadership

In every group of people regardless of their social structure and culture, there is someone who is play the role of leader. Leadership existed in the isolated villages to nomads to settled civilizations (Smith & Krueger, 1933). Anthropological theory demonstrates that even in societies without an official leadership structure, there are people who emerge as leaders and act in central role within social order within the group (Bass, 2007). Leadership has almost always been of scholarly interest, as is evident by the mention of leadership in classic works like the Iliad and the Odyssey (Bass, 2007). There are stories and sayings about great leaders were a necessary component for the growth and development of human civilization (Bass, 2007). For example, classic theatrical pieces like Oedipus Rex include references to leadership (e.g., Oedipus failed in part because of his hubris or inflated self-confidence in his own abilities). Additionally, Bass (2007) argues, from its infancy, “the study of history has been the study of leaders—what they did and why they did it” (p. 3). Thus, in comparison to the rest of society, leaders seem to have an impact on how history is recorded. Famous leaders such as Gandhi, Mother Teresa, and Adolf Hitler are often viewed as critical figures that have influenced the functioning of society. More recently, leaders like Steve Jobs and Barack Obama have made an impact on history. These leaders are popular due to their ability to influence people and create atmospheres conducive to change. An interest in leadership is in no way a new concept, but the way scholars examine leadership has changed in recent years.

One important distinction that is noted in leadership research is differentiating between a leader and a manager. Buchholz (1978) found that attitudes about work in America reflect a lack of knowledge about the differences between leaders and managers. Buchholz (1978) also popularised that “not all managers are leaders, and not all leaders are managers” (p.5). However, these terms are often used interchangeably. All individuals cannot be strong leaders and managers simultaneously, yet successful organisations utilise both. Kotter (2007) argued that management and leadership are two distinct from each other however he also mentioned that both complements each other through their own common characteristics and functions. Zaleznik (1993) argues that many bureaucratic societies (including the U.S.) breed managers, but restrict the emergence of leaders. This finding parallels Kotter’s (2007) argument that most corporations in the United States are overmanaged and underled. Further, environmental factors such as emotional wellbeing/emotion regulation and mentorship are necessary to foster leaders, where managers are often a product of an attempt to create a strong leader (Zaleznik, 1993). However, both leaders and managers are integral parts of an organisational structure.

Leaders and managers differ in their interactions with others, behaviour, background, and goals. Generally, managers have subordinates, tend to have a Transactional Leadership style, and focus on work (e.g., they are paid to accomplish tasks). Conversely, leaders have followers, inspire others, and focus on people rather than work (Zaleznik, 1993). In a study on occupational goal values of trade union workers, union leaders rated protecting the interests of followers as their primary goal; however, industrial managers perceived and rated union leaders to be more interested in promoting their own interests (Singh, 1981). These findings highlight the discrepancies between reality and perception of leaders and managers.

Perhaps the most interesting difference between leaders and managers is their differing views on risk and comfort. Managers tend to seek comfort in work-related settings. Many managers come from stable home backgrounds and live comfortable lives (Shackleton & Wale, 2000). This makes most managers unlikely to take risks and likely to avoid conflict when possible. Leaders, however, are more likely to consider taking risks (Borgelt & Falk, 2007). A surprising number of leaders have overcome some sort of obstacle or handicap in their lives (e.g., traumatic childhood, dyslexia, etc.) (Shackleton & Wale, 2000) and this may lead to willingness of a leader to take risks and think independently with the possibility of failure. When working towards a goal, leaders naturally encounter adversity and take risks to overcome obstacles (Borgelt & Falk, 2007). In qualitative interviews with 60 leaders and managers of large corporations, Borgelt and Faulk (2007) discovered an interaction between leadership and management where leaders were becoming too task-focused rather than seeing the big picture. This in turn stifled innovation at the cost of risk management. Specifically, managers were less likely to think outside the box, especially in the face of adversity, for fear of making mistakes. Thus, leaders are comfortable taking risks and taking advantage of opportunities for growth and development.

Most leadership research focuses either on personality characteristics of the leader, what is the relationship of leaders with their subordinates or followers, or the environmental factors present in the workplace (Yukl, 2012). The nineteenth century great man (or trait-based) theory of leadership supported the idea that historic events can be explained almost entirely by great leaders, or highly influential men (Borgatta, Bales, & Couch, 1954). These great leaders have been described as using charisma and intelligence to make an impact on history. Similarly, specific personality traits separated leaders from non-leaders as well as effective versus ineffective leaders. For instance, characteristics like dominance as well as IQ were considered strong predictors of successful leadership (Mann, 1959). However, at the turn of the twentieth century, many leadership scholars began to criticise the widely studied trait-based approach, arguing for the relevance of the environment and situation in the success of a leader (Zaccaro, 2007). For instance, cultural settings have been acknowledged to have significant influence on the effectiveness of the authoritarian leadership style. Specifically, in collectivist cultures, Authoritarian Leadership can have a positive impact on attitudes towards a leader because support and care for the overall group are key values. However, in cultures that are more individualistic and value egalitarianism, attitudes towards authoritarian leaders are more negative, and these leaders are less likely to be successful in an organisation (Chou, Cheng, & Lien, 2014).

While this debate continued over a span of 30 years, Lord et al. (1986) examined a meta-analysis on Mann’s 1959 data, and provided a stronger argument for trait-based leadership research. The results showed a high positive correlation between intelligence and success as a leader. Current theories continue to draw upon personality traits as a factor in effective leadership. For example, research on the Dark Triad of leadership shows that leaders with specific dark personality traits (e.g., psychopathy) can be detrimental to organisational success (Chou et al., 2014). While competing theories continue to exist currently, research shifted in the 1950s to a more behaviour-focused approach.

Leadership style was studied following Lewin and Lippitt’s (1938) publication of autocratic versus democratic leaders. The authors note that autocratic leaders dictate policy and procedures and define clear roles between followers and leaders. Conversely, democratic leaders are more open and collegial, accepting ideas from followers and fostering a team-like environment (Lewin & Lippit, 1938). The famous Ohio State University leadership research identified Consideration and Initiating Structure as two main factors that make up leadership (Stogdill & Coons, 1957). Consideration refers to amount to which a leader can support subordinates while acting in a friendly manner. Initiating Structure describes how much a leader clearly determines as well as creates structure and hierarchy in the roles and functions of both leaders and followers (e.g., goal attainment and working as a group are two facets of this construct) (Stogdill & Coons, 1957).