Dimensions of transformational leadership and organizational performance: The mediating effect of job satisfaction

Abstract

Purpose Poor corporate governance was reported to significantly contribute to the 2017/2018 financial crisis in Ghana. As leadership is a vital concept in the corporate governance system, this study aims to examine the effect of transformational leadership on organizational performance and hypothesizes that job satisfaction mediates such a relationship. Design/methodology/approach This study adopted a quantitative research approach where a cross-sectional survey design was used to collect the data from 300 purposively sampled employees of five selected commercial banks. The data was analysed using PROCESS version 3.4.1. Findings The results show that individualized consideration is the dominant transformational leadership dimension being practiced by supervisors and managers in the selected commercial banks. Again, the four dimensions of transformational leadership have a positive effect on organizational performance, and such effect is significantly mediated by job satisfaction. Practical implications The findings suggest that the dimensions of transformational leadership should be continuously improved alongside strategically motivating employees to increase their satisfaction level to enhance organizational performance. Originality/value This study provides evidence that bank managers need to be cognizant that job satisfaction is vital in the industry and must be a focal point of corporate governance practices. The mere initiating of transformational leadership behaviours without a clear link to employee satisfaction may result in employee disengagement, consequently affecting the banks’ performance and survival.