A test of transformational and transactional leadership styles on employees' satisfaction and performance in the UAE banking sector.

This study tested the transformational leadership theory among managers at functional levels in United Arab Emirates (UAE) banks. The UAE banking sector was chosen due to its importance in the U.A.E. economy and its significant contribution to the Emirates GDP. The paper examines the effects

of both transformational and transactional leadership styles of bank managers/supervisors on employees' satisfaction and self-perceived performance. Self-esteem and leadership disposition (Romance of Leadership) of employees were hypothesized to act as moderators. Data was collected from employees working in national and international banks operating in the UAE. A multiple regression analysis indicated that transformational leadership style and self-esteem were related to job satisfaction. On the other hand, transformational leadership, Romance of Leadership (RLS), and self-esteem were all related to self-perceived performance. Results confirmed that to elicit higher levels of satisfaction and performance among bank employees, managers/supervisors need to demonstrate transformational leadership attributes.

Introduction

Charismatic and transformational leadership models have attracted considerable research attention (Bass, 1985; Conger & Kanungo, 1987; House, 1977; Kouzes & Posner, 2003). The charismatic (Awamleh & Gardner, 1999; Conger & Kanungo, 1994), transformational, and transactional (Bass & Avolio, 1993) are all dependent on perceptions. In all prominent transformational and transactional theories of leadership approaches, charisma remains a cornerstone. (Bass, 1985; Bryman, 1992; Paul, Costley, Howell & Dorfman, 2002).

Critical organizational outcomes, such as satisfaction, organizational performance, group performance, and commitment, have been associated with these leadership styles (Kirkpatrick and Locke, 1996). These results have also been validated across cultures and in different settings (Al-Dmour & Awamleh, 2002). This included the public sector with mixed results (Javidan & Waldman, 2003). Javidan and Waldman (2003) found that in the public sector, charismatic leadership was only modestly related to motivational consequences. The impact of charismatic/transformational leadership styles on followers' effectiveness and motivation has also been documented (Bass & Avolio, 1990; 1994). In spite of this, the effects of managerial leadership styles from transformational and transactional perspectives have not been validated in banks. A key objective of this study is to fill this knowledge gap. We have designed a study to assess the effects of transformational leadership styles, as opposed to transactional on bank employees' self-perceived performance and job satisfaction. Additionally, two possible moderating variables are considered: self-esteem (Rosenberg, 1979) and Romance of Leadership (Meindl, 1995).