Transformational leadership and economic efficiency - Can a charismatic leader in an administration for care motivate the subordinates to improve the economic performance?

Abstract: Title: Transformational leadership and economic efficiency – Can a charismatic leader in an administration for care motivate the subordinates to improve the economic performance? Author: Tony Pehrson Supervisor: Thomas Danborg and Anders Hederstierna Department: School of Management, Blekinge Institute of Technology Course: Masters’s thesis in business administration, 10 credits. Background and Problem Discussion: Skövde Kommun is a public organization and one of many tasks is to provide help and service to the aged and handicapped in the city. This is done through the administration for care. After many years with poor economic performance the politicians in Skövde decided 2002 to restructure the elderly care in Skövde. In January 2004 a new chief administrator was recruited and one of the most important issues was to improve the activities within the administration for care and department for elderly. Something, which was strongly emphasized, was the goal to increase the economic performance and having a budget in balance, i.e. achieve economic efficiency. The interest for this study was to see if the new chief administrator had the competence, leadership skills and charisma enough to restructure the organization and improve the economic efficiency, i.e. make sure the budget show a surplus. During 2004 and 2005 the chief administrator focused on the restructuring of the organization and strongly emphasized respect for the economic resources. Purpose: Through a pilot study describe and analyse the concept of Transformational leadership and its impact on economic results? Method: A quantitative method and the thesis could be viewed as a pilot study, which means that I try my method in one organization and hopefully develop a concept for further research. The measure instrument is a questionnaire, which was worked through with statistical methods to define charisma as a part of the phenomenon. The result from the questionnaire was then compared to the organization’s economic performance. Theory: Studies on leadership are a large research field and new theories on management and leadership constantly evolve. An interesting leadership style, which has had a lot of attention the last decades, is transformational leadership. A transformational leader can create a vision, can engage and motivate the employees in a way so they do their best to achieve the goals of the organization, both quantitative and qualitative. A central part in transformational leadership is charisma. Charisma is a leaders ability to practice a diffuse but strong influence over other people’s opinions, values and performance. Findings: The managers in the administration for care answered a questionnaire with 17 statements about charisma and the result of these statements gave an average score, which indicate that the chief administrator is above-average charismatic. In the findings I also present the organization’s economic performance. 2005 was the first year since 1996, the administration had a budget surplus, i.e. the costs were lower than the budget frame. Analysis: The respondents, in the same questionnaire, also scored the experienced charisma previous years compared to today. The results from the questionnaire were then compared to the economical development and the findings indicate there are some relationship between the charismatic chief administrator and improved economic performance Conclusion: In the study I found some empirical evidence or indicators, which support the idea that a charismatic leadership can improve the performance, the productivity and the efficiency. However, other factors can also have impact on economic performance besides transformational leadership.