The effect of transformational leadership on organizational commitment: mediating role of empowerment Essay

Custom Student Mr. Teacher ENG 1001-04 18 May 2016

The effect of transformational leadership on organizational commitment: mediating role of empowerment

Globalization has brought much effect to the organization, fierce competition and dynamic customer preference, which force the organization to adapt with the changes in order to survive and succeed. Facing fierce competitions, the organization needs the leaders who can adapt with those dynamic competitions. In organizational context, leadership is one of the factors that determine the organizational competitiveness in global and local economy and leadership can be seen as the essential instrument in achieving the organization strategies and goals, the leaders must deal with the dynamic environment and also supported by follower who shows their commitment to the organizational.

In facing the fierce competition, the needs to change not only just the external environment like product, service, technology, but also in the internal environment like people mindset, values, attitude, and purpose.

Therefore there’s a need for the organization to rethink and re define their strategies and goals (Bijaya & Uday, 2010). Sustaining in global competition, organization needs support from the competent and loyal employee in order to compete with other companies. Besides that, the leadership style which implemented by the leader also becomes the important point for the organization.

The leaders often choose particular leadership styles that represent the wants and needs, the values and motivation, the aspiration and expectation of both leaders and followers (Ismail et al, 2010). Leadership style has three broad categories: transformational leadership, transactional leadership and non-transactional leadership. These categories describe leader behavior from different ranging, from the ideal category (active and effective) which is transformational leadership until the worst category (passive and ineffective) which is non-transactional (Rubin, Munz, and Boomer, 2005).

The most passive and ineffective leadership style category, laissez faire, is characterized by a complete abdication or avoidance of leadership. Transactional leadership approach emphasize on the exchange process with the follower, whereby the leader give the rewards or punishment based on the follower performance.

This exchange process can be both constructive and corrective. Corrective exchanges involve leader behavior whereby leaders always participate to correct mistakes before or after the mistake occur. Constructive exchanges emphasize on the contingent reward whereby leaders promise rewards to their followers for satisfactory performance and deliver the rewards when performance is achieved (Rubin, Munz and Boomer, 2005). Further, transactional leaders emphasize work standards, assignments, and task-oriented goals. If things go wrong, however, a transactional leader will take actions that often have a negative connotation (Barker et al., 2007).

This transactional leadership style is suitable to be implementing in the stable organizational environment (Robbins et al., 2005 in Ismail et al., 2011). In this globalization era, many organizations shift the paradigms of their leadership style from a transactional leadership to a transformational leadership as a way to achieve the organizational strategies and goals (Bass, 1999 in Ismail et al., 2011). Transformational leadership approach focuses more on quality of relationship with followers, such as building trust between leader and follower, democratic style, and concern about individuals (Avolio et al, 1999 in Ismail et al, 2010).

Transformational leadership represents the most active and effective leadership style. Podsakoff et al (1990) in Rubin, Munz, and Bommer (2005) reviewed the seven conceptualizations of transformational leadership behavior. The result of the research found that transformational leadership included articulating the vision in the future, fostering group oriented work, setting high expectations, challenging followers thinking, supporting followers individual needs, and acting as a role model.

As Avolio (1999) in Rubin, Munz, and Boomer (2005) noted, every leader shows behavior that can be characterized as transformational, transactional, and nontransactional; however, effective leaders more often shows transformational leadership behavior and contingent reward behavior and less frequently shows more passive and ineffective behaviors. This transformational leadership style is suitable to be practice in the dynamic organizational environments (Bartram & Casimir, 2007 in Ismail et al., 2010). Past studies have constantly reported that transformational leadership is more effective, productive, innovative and satisfying to followers, as both parties work towards the good of an organization propelled by shared visions and values as well as mutual trust and respect.

In sum, transformational leaders are able to get followers to perform at maximum levels. They achieve maximum performance because of their ability to inspire followers, to raise their followers’ criteria for success, and to have followers think “outside the box” and explore alternative methods for solving problems (Bass, 1985 in Barker et al., 2007).

Transformational leadership has four important dimensions: Intellectual stimulation, idealized influence, inspirational motivation, individualized consideration (Bass and Avolio, 1989 in Lawler et al., 2005). Intellectual stimulation is often viewed as the leader who always challenge follower to think critically. Idealized influence is viewed as a leader who gains respect, pride, trust and confidence of their followers by delivering a strong sense of mission and visions. Inspirational motivation is related to the leader who concerns with setting high standard and become a role model for followers.

Hence individualized consideration is seen as a leader who develops followers by teaching and coaching. Within the transformational leadership framework, the ability of the leaders to properly implement transformational leadership dimension may lead to an increase of organizational commitment (Dubinsky et al., 1995). According to organizational behavior literature, organizational commitment defined as component of work related attitudes. According to Porter et al. (1974) in Nguni et al. (2006) defined organizational commitment as the strength of the individual identification involve in the organization.

The concept of organizational commitment has three major components: a strong belief in and acceptance of the organization’s goals and values; willingness to exert considerable effort; and a strong desire to remain in the organization (Mathieu et al., 1990). Therefore, research on these processes is needed in order to gain better understanding of transformational leadership and why followers of transformational leaders demonstrate high level of commitment.

Surprisingly, a careful observation by Bhatia et al., (1994) reveals the effect of transformational leadership to the organizational commitment indirectly affected by empowerment. According to Lee and Kohn (2001), empowerment consists of two behaviors: first is behavior of a supervisor, the meaning is the supervisor who empowers the subordinate and the second is a psychological state of subordinate means as the result of their supervisor empowering.

Behavioral empowerment developed based on the relation approach which focus on delegation of power and decision making authority. Based on this approach, empowerment is the movement power from the upper to the lower in organization hierarchy (Menon, 2011 in Ismail et al., 2011). According to Lee and Koh (2001) empowerment consists of four component: first is meaningfulness (the value of task goal or purpose), second is competence (individual beliefs in their capability to do their job), third is self-determination (individual beliefs in having autonomy to manage their work) and the last is impact (individual beliefs to influence the decision at work).

This behavioral empowerment can create a situation that provides a freedom for follower to accomplish their job. In the context of transformational leadership model, empowerment is viewed as a proactive and strategic management practice that exists in organization that creates high commitment in HR practice.

In the other word, empowerment is the ability of leader to delegate the power and responsibility of controlling, give the opportunity to the follower in expressing the idea and participating in making decision in order to encourage their intellectual and potential to overcome job obstacle, understanding the targeted goals and supporting organizational interest (Hanold, 1997 in Ismail et al., 2011) Although this study is interesting but only a few of past research discuss about the mediating role of empowerment in transformational leadership. This research can be classified as the new research through using empowerment as the mediating effect between transformational leadership and organizational commitment.

Because of that it motivates the researchers to further explore the issue In this research, I conduct the research in PT Samudera Indonesia Ship Management, the holding company of Samudera Indonesia Group, was established in 1964 to fill the needs of inter-island sea transportation as declared by the government at the time. From this, ships began to be purchased. For more than a half century, Samudera has grown and expanded its business from shipping agency into ocean going shipping and become an integrated cargo transportation to serve both domestic and international customers. Samudera Indonesia Ship Management is a leading cargo transportation and logistics company in Indonesia and Asia region. In addition to its regional shipping, Samudera Indonesia Ship Management has the widest cargo transportation and logistics network in Indonesia today.

Seasoned management are dedicated in offering both Indonesian and international customers a comprehensive range of transportation services including regional container shipping, domestic container services, tanker and break-bulk shipping, land transportation for both containers and oversize heavy equipment, storage and maintenance of containers, warehousing and distribution centers, terminal operations, stevedoring and forwarding services. Samudera also represents many well-known global shipping companies, through which Samudera seamlessly accesses the world. As a company, Samudra has more than half century of experience, strong IT system, modern equipment to support the operation in all shapes and sizes, combined with skilled and competent human capital.

There was a previous research about the effect of personality to the transformational leadership in Samudera Indonesia Ship Management (Putri, 2007). The result of this research showed that this company implements transformational leadership practice. This time, I take the same company in order to research the different study of the previous research of transformational leadership which is the effect of transformational leadership to organizational commitment that is mediated by empowerment.

1.2 Problem Statement
Based on the background above, three problem statements are formulated as follows: 1. Does the transformational leadership positively influence followers’ empowerment? 2. Does transformational leadership positively influence organizational commitment? 3. Does empowerment mediates the effect of transformational leadership on the organizational commitment? 1.3 Research Objective

Based on the research problem formulated above, some objectives of the research are defined as follows: 1. To examine the effect of transformational leadership on empowerment. 2. To examine the effect of transformational leadership on organizational commitment. 3. To examine the mediating effect of empowerment in the effect of transformational leadership on organizational commitment. 1.4 Contribution of the Research

It is expected that result of the research can greatly contribute to the three parties as follows:

1. Theoretical contribution
a. To enrich knowledge in Human Resource Management and to provide alternative model to replicate by those very interested in similar topic of research in to Human Resource Management. b. This research is expected to give new understanding about the relationship between transformational leadership, empowerment and organizational commitment. c. To provide a useful reference for future researches, particularly on leadership practice in other shipping company and other regions. d. To encourage the leaders in the company to focus their intention on the effective leadership practice and empowerment that resulted in positive outcome to the employee. 2. Practical contributions

a. For academicians, it can be a consideration for further academic researches with a similar topic of transformational leadership in future. Moreover, it can be so useful for other comparative researches in Universitas Gadjah Mada. b. For companies, this research gives description of the effect of transformational leadership to the organizational commitment mediates by empowerment. This research will be useful to increase employee commitment in the organization.

1.5 Outline of Research
This Research consists of five chapters that will be organized as follow: I. Chapter 1– Introduction:
In this chapter, I briefly describe and explain the background of the research, the research question, the purpose of research, the contribution of the research, which will be the motivation of the research. II. Chapter 2 – Theoretical Framework and Literature Studies: In this chapter, the theories, which are used as the framework of the research and the literatures, which are used as guidance to conduct the research, are going to be described. The theories and literatures include the Transformational Leadership, Leadership, Empowerment, and also the Organizational Commitment itself. III. Chapter 3 – Research Methodology:

This chapter explains the research design, research object, the data
gathering, data processing and analysis. In addition, the data resources, the methods of the analysis are going to be described in this chapter. IV. Chapter 4 –Analysis and Discussion:

The data analysis is described and explained in this chapter, hypothesis testing, and discussion. V. Chapter 5- Conclusion and suggestion:
This chapter will be the last chapter; containing conclusions of the study and recommendations to particular company for improvement. Chapter II

2.1 Leadership
The word of leadership can have different meaning to some people, the researcher usually define the leadership based on their perception and phenomenon (Putri, 2008). According to Hamphill and Coons (Yukl, 1989) in Putri (2008), leadership is the behavior of each individual when he/she giving the direction of the task to the individual or group in doing certain task for one purpose. Leadership is the process in which one individual influences other group member toward to the organization goals (Greenberg & Baron, 2008). According to Kartono (2008) in Putri (2008) defined the meanings of leadership as “the process by which agent induces a subordinate to behave in a desired manner”.

It means that, the leader have the power to manage his/her subordinate to do his order. There’s one researcher also mentioned that leadership is getting things done by the other” means that the leader must have much have more criteria than his/her subordinate. According to Rubin et al. (2005) there are three categories of leadership behavior, the first is transformational leadership, second is transactional leadership style and the last is non transactional (laissez-faire).

The range for this leadership style starts with the ideal category (active and effective) which is transformational, and the worst category (passive and not effective) which is non-transactional (laissez-faire). Nontransactional Leadership considered as the worst leadership behavior. The nontransactional leadership is characterized by a complete abdication or avoidance of leadership (Avolio and Bass, 1998 in Rubin et al., 2005). 2.2 Transformational Leadership

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