Impact of Leadership Styles on Organizational Performance

Performance of organizations is related to the profitability of the organizations in terms of its growth and profit both in long and short term. In business organizations, investors and businessmen desire and endeavor to ensure that their organizations perform well to earn more profit, grow fast and achieve competitive edge in the industry. For organizations to perform well, apart from tangible and intangible resources, effective and dynamic leadership is a pre requisite. Leadership style of the leader of an organization has a strong impact on the performance of the organization. Though most of the researchers in the past agreed that leadership style has relationship with organizational performance but there are some who did not support this view, hence, an ambiguity exists. To address this confusion, the researchers studied the types/styles of leadership and the leadership styles of different leaders of various organizations in Pakistan and examined their impact on organizational performance. There are three main leadership styles; transformational, transactional and laissez faire leadership styles. While the first two have a positive but different level of impact, the third one has a negative impact on organizational performance. A quantitative study was conducted by using a questionnaire filled from various leaders of manufacturing and service organizations. Results of the study were studied through SPSS and the researchers found that though the most suited style of leadership is transformational one but in new and growing organizations transactional leadership style may be more productive, while in certain circumstances though limited and for a short period, laissez faire style may be required. Hence, the leader might have to adopt a hybrid style of leadership style. Leadership style has a significant impact on the organizational performance.