1 CHAPTER ONE: INTRODUCTION 1.1 BACKGROUND TO THE STUDY Leadership plays a vital role in our everyday life, be it in organizations, religious bodies, schools, and governments. For any organization to prevail in present times, the leadership must be solid and act decisively in running the organization's affairs. Research shows that many leadership issues have been discussed around the world today; different governments and organizations have failed as a result of bad leadership. Leadership comes with followership; leadership can either discourage or motivate followership. The style of leadership determines the overall performance of the followers, especially in an organization. In other words, if the leadership style in an organization is good, it can positively boost the performance of the employees in that organization. Research by Schyns & Sanders (2007) posits that one of the major employee's job dissatisfaction is poor leadership in that organization. To wax stronger and participate in today's competitive global market and world politics, governments and organizations must seek good leaders and leadership styles. Organizational productivity is much improved when there is an effective leadership style in place. Odetayo et al. (2012), while researching Nigerian banks, posits that the major determinant of organizational success is a good leadership style, especially in Nigerian banking sectors. Williams (2009) pointed out that the organization's performance and outputs are closely associated with the organization's leaders' distinctive leadership style. Globally, banking sectors are one of the key engines for economic development and growth. Ebong's (2006) research on the banking sector's effect on economic growth posits that the banking sector's role in mediating between different economics units with surplus funds and the units that require such funds to boost their investment promotes economic growth in returns. 11 Banks can achieve economies of scale that are beneficial for economic growth when they pool savings from investors and help to borrow customers to promote their businesses. The banking sector in Nigeria is one of the key drivers in the economic growth, development, and sustainability in Nigeria; over the years, some banks have collapsed, and there have also been mergers of different banks across the banking sectors in Nigeria. Many of the banking problems experienced in Nigeria were attributed to the failure of effective management and leadership of those banks (Okafor, 2010), of the recent acquisition of the then Diamond bank of Nigeria by Access bank of Nigeria. Diamond bank, before its acquisition, was troubled with a management crisis that was highly reported as a bad case of bank leadership when the then CEO of the bank handled the affairs of the bank to his next of kin. There are over 25 commercial banks in Nigeria, excluding micro-financial banks. However, the focus of this research is the Guaranty Trust Bank PLC (GTBANK). Guaranty Trust Bank is one of the leading financial institutions in Nigeria; in September 1990, it was incorporated as a limited liability company with the license to provide commercial and other banking services, though it was not until 1991 that it commenced operation and was quoted publicly in 1996 (GTB, 2013). GTB has over 20,000 employees worldwide and several branches dispersed in different countries across the globe in Nigeria, Ghana, Liberia, Gambia, Cote d'Ivoire, Sierra Leone, and the United Kingdom (GTB, 2013). Despite all these employees and branches worldwide, it is difficult to determine how leadership style affects the worker's performance. GTB Abuja was chosen as the study area because Abuja is the capital of Nigeria, the biggest economy of Africa, as one of Nigeria's economic hubs. There are several leadership styles proposed by different scholars to be the best leadership style suitable for enhancing employee performance in an organization. Different leaders have a distinctive leadership style that has helped them improve their employee's performance in their organization. Koopman et al. (1997) posited that transformational and transactional leadership 12 styles had gained popularity over the years in some establishments. Their analysis argued that organizations' outcomes like employee's performance, job satisfaction, and organizational commitments are directly linked to transformational and transactional leadership styles adopted by the managements of the organizations. A study by Wahab et al. (2012) also supported their research position that posited that transformational and transactional leadership positively affects employees' organizational commitments. In explaining the transactional leadership style, Tremblay & Pare (2007) described it as a systematic way to appreciate and praise their leaders because of the incentives and rewards the leaders offer to them; this style improves their motivational level, which then advances organizational productivity. Kline & Ivey (2010) describe the transactional leadership style as "management-employees exchanges, whereby management exchanges things of value with the employees this they believe will increase the employee's work ethics and overall performance. For this study, it is vital to analyse how transactional and transformational leadership style impacts employee's performance in the Nigerian banking system, most especially Guaranty Trust Bank of Nigeria (GTB) Abuja. 1.2 STATEMENT OF THE PROBLEM Most scholars emphasize the transformational leadership style while acknowledging the importance of transactional leadership style. Paracha et al. (2010) argued that the transformational leadership style plays a more vital role in influencing an organization's performance than a transactional leadership style. In concurrence, (Bass, 1995) study stated that transactional leadership style negatively affects the organizational outputs; researching the relationship between leader-member exchanges, transformational and transactional leadership in estimating employee's performance, the study by (Johnson, 2012) concluded that transactional leadership style is an affirmative predictor of employee's performance. The transactional leadership style positively increases performance among the military in research 13 (Bass et al., 2012). Elenkov's (2010) investigation on the effect of the leadership style of organizational performance found out that Russian managers that adopt a transactional leadership style positively influence their employee's performance and organizational commitments. Scholars like Lievens et al. (2007) and Shamir et al. (2010) posits that the transformational leadership style plays an important role in greater innovation implementation by the organizations, especially during market competitions or organizational rivalries era. Palanichamy & Raja (2011) believe that the transformational leader's style increases both the organization's performance and the employee's performance without incurring extra burden in return. Many scholars have proven transformational leadership style to be vital and useful for many organizations, be it business organizations, the military, hospitals, engineering, and the educational system (Masi & Cook, 2010). There is also another form of leadership style called Participative leadership style; according to (Somech, 2010) this type of leader uses a motivational mechanism to increase employee performance and organizational commitments. They offer subordinates the opportunity to be involved and contribute during the decision-making process of the organization. In supporting this participant's leadership style, (Robbins et al., 2010) argues that when subordinates are involved in an organization's decision-making process, they are more committed to making the organizational goal a success. The study also shows that employees under participant leadership style are somewhat more committed to organizational success and have greater job satisfaction. Their performance level is always very high (Yousef, 2011). Ahmad & Yiing (2009) believe that if management can correctly apply participant leadership style, it motivates the employees to commit themselves to organizational success. The authors also add that participant leadership style is very significant and positively related to organizational success and employee commitments. Scholars like Safa & Dolatabadi (2010), Huang et al. (2010) all 14 advocated for leaders to adopt participant leadership style. They argued that this type of leadership style influences an employee's job performance, creates trust, and promotes organizational commitments. Even though scholars have promoted and recommended different leadership styles they feel that promote employee's performance and commitments to the overall organizational goal, their effect on the banking sectors have not been fully examined, especially in most Nigerian banks. This research aims to examine and determine if leadership styles can influence bank employees to perform exceedingly at any giving task as a result of leadership adopted by their managers— this is one of the major concerns that prompted this research. The idea is to evaluate employees' performance and examine if it is affected by employees' perceptions of the leadership style that the manager adopts. It is the gap that this research hopes to fill. This research will assess the impact of leadership style on employee's performance in Guaranty Trust Bank PLC, Abuja. 1.3 RESEARCH QUESTIONS An effort has been made in the course of this research to gather available related data to be able to find an answer to the following research questions: 1. What is the effect of leadership style on employees' performance in GTB Abuja? 2. What style of leadership style do the managers of Guaranty Trust Bank Abuja apply? 3. What is the effect of the leadership style adopted by the bank managers on employee performance? 1.4 AIMS AND OBJECTIVES The main aim of this research is to analyse different leadership styles and answer the research questions "the impact of leadership style on employee's performance," as well as identify the leadership style adopted by bank managers of GTB and its implication on employee's performance. 1.5 RESEARCH HYPOTHESIS 15 For the course of this study, the following hypothesis has been formulated as a guide for this study. H0: There is a significant relationship between leadership style and employee performance in GTB Abuja. H1: There is a correlation between the leadership style a bank manager applies and employee's performance in GTB Abuja. 1.6 SIGNIFICANT OF THE STUDY This research is important because of the different issues that affect society today due to leadership style. As banks play an important economic role in the economy, it is paramount to assess how different leadership styles affect the banking sector, especially GTB. The study hopes that the findings of this research will act as a guideline for bank managers and policymakers to improve their leadership style for the bank and employees' overall success. The findings can also be useful in highlighting the impact of leadership style on employee's performance in the banking sector and the society at large. Thus, it is imperative to conduct this research for it to cover wider knowledge by bringing out relevant facts for managers, social scientist, officials, and other relevant agencies in solving the problem of leadership style in an organization and best leadership style that is suitable to improve employee's performance in an organization. After determining the correlation between leadership style and employee performance, the bank will be able to utilize the research findings to develop leadership programs for bank managers to acquire relevant leadership skills that will improve management and organizational performance Lastly, the findings of this research will be used by future researchers as a reference for similar studies related to the research topic. 16 1.7 SCOPE OF THE STUDY The research scope covers the impact of leadership style on the employee's performance in Nigeria's banking sector. This research will mainly focus on leadership style. It affects employee performance, using Guaranty Trust Bank for sampling, the research area is in Abuja because it is one of the major banking hubs in Nigeria.