Transformational Leadership : The Relationship Between Transformational Leadership and Organizational Performance

Abstract: In the current economic climate the circumstances and the environment for companies constantly change and organizations which in the future want to be competitive have to adapt to these new conditions and market requirement else they are forced to be out of business. Seeing the rapid change in telecom sector with flat sales in many countries during 2008, 2009 and 2010 Ericsson decided to do a major re organization in 2010. Ericsson management set out to restructure the company to trim off fat and to help the company function as a leaner and more productive entity by assigning transformational leaders that can help company cope with the changing market conditions with focus on business performance, growth, new market segments and getting more close to customer. As a result of that change Ericsson Saudi Arabia that was known as Market Unit Kingdom of Saudi Arabia (MU KSA) part of 23 Market Units across the globe transformed to Customer Unit Kingdom of Saudi Arabia (CU KSA) part of Region Middle East (RMEA) with new Head and management team. By 2009-2010 Ericsson CU KSA was facing issues like flat sales, operators were cautious to spend more money since revenues were declining, emergence of Chinese players in the marker resulted in dramatic culture shift in industry where business models and ways of working changed and Ericsson in Saudi Arabia was having direct impact on revenue and market share. During 2008, 2009 and 2010 Ericsson in Saudi Arabia lost local market share from 60% to 50% and a complete overhaul was inevitable. One of the primary objectives of this study will be to determine the relationship of transformational leadership to organizational performance by analyzing data collected from Ericsson Saudi Arabia. It will be analyzed if new management in Ericsson Saudi Arabia has the capabilities of transformational leadership. Later I’ll try to establish correlation of transformational leadership towards strategic management, Organizational culture and Employee Motivation & Commitment to see if there is any significant impact of these that will help overcome existing market challenges explore new opportunities and redefine strategies while resulting in positive business growth and performance. For the purpose of research a study a mix of qualitative and quantitative approach was chosen. Questionnaire surveys were used as part of quantitative research. Interview surveys together with Sales reports and balanced score cards were used as part of qualitative research. A total of 48 questionnaire surveys along with 8 interviews form different members of management in CU KSA were conducted. Data analysis tool function in Excel was used to figure out mean, median and standard deviation for Transformational leadership attributes. Data analysis tool was also used to calculate correlation coefficient factor between transformational leadership with strategic management, organizational culture and business performance. It was discovered after analysis conducted using interview and survey results that Ericsson CU KSA Head and Management fulfill the criterion of transformational leadership having strong presence of transformational leadership attributes namely vision, Inspirational, role model, support for personal growth, trust and consideration for followers needs. It was also discovered that transformational leadership has a strong correlation towards strategic management, organizational culture, employee Motivation and business performance. Data collected from Interviews, Sales reports and Balanced Score Card supported the data analysis of questionnaire. This means that if companies want to experience growth in their business especially in these days of tough competition, there should be focus on making sure the leadership is transformational with strong emphasis on process of Strategic Management, fostering organization culture and boosting employee motivation & commitment that will lead towards positive Business Performance.