Influence of Transformational Leadership on Organizational Performance of State Corporations in Kenya

Abstract

Globalization and capital markets over the past two decades have changed business landscape. Most firms have expanded operations overseas and even strictly domestic firms are facing competition from abroad. To respond to global competition and meet the requirements of Kenyan Vision 2030 it is necessary than ever to implement the right HR strategies in order to improve organizational performance in State Corporations in Kenya. In Kenya reforms and transformations mostly depend on high levels of motivation and commitment on the part of leaders to solve complex problems associated with implementation and restructuring initiatives. While transformational leaders have been advocated as productive during reforms and transformations and evidence suggests that transformational practices do contribute to organizational performance, past research has been predominantly on overall transformational leadership rather than its dimensions and even fewer studies have focused on the possible mediators between transformational leadership and organizational performance. This study addressed this shortcoming by establishing the influence of transformational leader behaviors on organizational performance with an interest on the mediating effect of employee engagement between these relationships in the state corporations in Kenya. A survey data from 90 sampled State Corporations in Kenya was used to explore the existing relationships. Stratified random sampling technique was employed to select the respondents for the study. Both primary and secondary data was used in this study. Primary data collected using structured questionnaires was prepared and analyzed with the help of the Statistical Package for Social Sciences (SPSS) version 22. Descriptive statistics such as means, standard deviations as well as inferential statistics; correlations and regressions analyses were conducted to establish the relationships between the study variables. A Sobel test was used to establish the mediating effect of employee engagement between transformational leadership and organizational performance. The findings indicate that both transformational leadership and employee engagement are significantly related to organizational performance in State Corporations in Kenya. Three out of the four of transformational leader dimensions in this study; inspirational motivation (though weak), intellectual stimulation and individualized consideration were found to be significantly related to both employee engagement and organizational performance. Idealized influence of leader was however found to be negatively related to both. Employee engagement was found to partially mediate the relationship between transformational leadership and organizational performance. The study thus recommended that HR managers should develop HR policies and practices for leaders around the three dimensions of transformational leadership dimensions if they are to influence, their subordinates’ engagement and subsequent organizational performance.