Impact of Immediate Leadership Style on Employee Performance with Reference to Executive Level Bank Sector Employees in Kandy District

1. Impact of Immediate Leadership Style on Employee
Performance with Reference to Executive Level Bank
Sector Employees in Kandy District
By Madhubhadhini DKD
[ANDHRM/KA/121002]
Advance National Diploma on Human Resources Management ,
National Institute of Business Management
05/10/2014

2. 1
Acknowledgement
I’am using this opportunity to express my gratitude to everyone who supported me
throughout the course of this research. I am thankful for their aspiring guidance,
invaluably constructive criticism and friendly advice during the project work. I am
sincerely grateful to them for sharing their truthful and illuminating views on a number of
issues related to the project.
I express my warm thanks to Mr. P.Amarakoon, Mr. U. Gurunayake and Ms. S.Uduwella
for their support and guidance in the process of this research.
I would also like to thank my parents for the support they gave to complete this research
successfully.
Thank you,
D.K.D.Madhubhashini

3. 2
Abstract
This paper aims to determine the effect of leadership styles on employee job satisfaction
and the effect of employee job satisfaction on employee job performance. A survey was
conducted by administering questionnaires to respondents in the banking sector in Kandy,
Sri Lanka. The results show that most of the bank employees, most of them females
between 20 and 39 years old, are neither satisfied nor dissatisfied. There are unclear.
Transformational leadership style was seen to have a positive effect on various facets of
employee job satisfaction. Transactional leadership also turned out to be perceived as
having a positive effect on different facets of employee job satisfaction. So did laissez-faire
leadership. In here Employee job performance analysed by the research with
reference to leadership style. It was found that leaders and managers combine the various
leadership styles identified in the research paper in proportions that produce a positive
result when administering their leadership duties. The proportions at which these
leadership styles are combined depend on the nature of the situation they encounter in the
workplace.
Keywords: Transactional leadership, Transaction leadership, Performance

4. 3
Table of Content
Acknowledgement ............................................................................................................... 1
Abstract ................................................................................................................................ 2
Table of Content................................................................................................................... 3
1 Introduction .................................................................................................................. 7
1.1 Impact of Immediate Leadership Style on Employee Performance with
Reference to Executive Level Bank Sector Employees in Kandy District. ..................... 7
1.2 Background of the Study....................................................................................... 7
1.3 Research Problem.................................................................................................. 8
1.4 Objective of the Study ........................................................................................... 9
1.5 Methodology ......................................................................................................... 9
1.5.1 Population ...................................................................................................... 9
1.5.2 Sample.......................................................................................................... 10
1.5.3 Sampling Technique .................................................................................... 10
1.5.4 Data Collection ............................................................................................ 10
1.5.5 Data Analysis an Presentation...................................................................... 11
1.5.6 Conceptual Framework ................................................................................ 12
1.6 Importance of the Study ...................................................................................... 13
1.7 Limitation. ........................................................................................................... 14
1.8 Chapter organization ........................................................................................... 15
2 Literature review ........................................................................................................ 17
2.1 Leadership ........................................................................................................... 17
2.2 Theories of Leadership ........................................................................................ 17
2.2.1 Transformational leadership ........................................................................ 19
2.2.2 Transactional Leadership ............................................................................. 20
2.2.3 Laissez-Faire Leadership ............................................................................. 21
2.3 Performance ........................................................................................................ 21

5. 2.3.1 Organizational Performance ........................................................................ 21
2.3.2 Individuals Performance .............................................................................. 22
2.4 Relationship between the leadership style and the organizational
performance ................................................................................................................... 22
3 Introduction to organization....................................................................................... 26
3.1 Introduction ......................................................................................................... 26
3.2 Organizational Profile ......................................................................................... 27
3.2.1 Pan Asia ....................................................................................................... 27
3.2.2 DFCC ........................................................................................................... 30
3.2.3 NDB ............................................................................................................. 33
3.2.4 HNB ............................................................................................................. 37
3.2.5 BOC ............................................................................................................. 40
4 Data analysis and Presentation................................................................................... 45
4.1 Tools of data collection ....................................................................................... 45
4.2 Population............................................................................................................ 45
4.3 Sampling Procedure ............................................................................................ 45
4.4 Sampling Technique............................................................................................ 45
4.5 Sample ................................................................................................................. 46
4.6 Measures.............................................................................................................. 46
4.7 Methodology: ...................................................................................................... 47
4.8 Results ................................................................................................................. 47
4.8.1 ANOVA partitions ....................................................................................... 48
4.8.2 P value.......................................................................................................... 48
5 Finding, Conclusion and Recommendation ............................................................... 51
5.1 Findings ............................................................................................................... 51
5.2 Effects of Transactional Leadership.................................................................... 51
5.3 Effects of Transformational Leadership.............................................................. 52
4

6. 5.4 Combined Effects of Transformational and Transactional Leadership Styles .... 52
5.5 Conclusion........................................................................................................... 53
5.6 Recommendation................................................................................................. 53
6 References .................................................................................................................. 56
Annexes.............................................................................................................................. 57
Figure 1-Conceptual Framework ....................................................................................... 12
Figure 2-Logo Pan Asia ..................................................................................................... 27
Figure 3-Distribution Number of employees in PanAsia .................................................. 28
Figure 4-Organizational Structure Pan Asia ...................................................................... 30
Figure 5-Logo DFCC ......................................................................................................... 30
Figure 6-Employee Age Analysis ...................................................................................... 31
Figure 7-Organizational structure DFCC........................................................................... 33
Figure 8-Logo NDB ........................................................................................................... 33
Figure 9-Work Growth in NDB ......................................................................................... 34
Figure 10-Workforce by Gender in NDB .......................................................................... 35
Figure 11-Employee Age Analysis in NDB ...................................................................... 35
Figure 12-Environmental CSR in NDB ............................................................................. 37
Figure 13-Logo HNB ......................................................................................................... 37
Figure 14-CSR in HNB...................................................................................................... 39
Figure 15-Organizational Structure HNB .......................................................................... 40
Figure 16-Logo BOC ......................................................................................................... 40
Figure 17-Performance of six capital in BOC ................................................................... 41
Figure 18-Organizational Structure BOC .......................................................................... 43
Figure 19- Correlation between Leadership and Performance in data Analysis ............... 46
Table 1-Authorized Banks and Financial Institutions of SriLanka ................................... 57
5

7. 6
Chapter I

8. 7
1 Introduction
1.1 Impact of Immediate Leadership Style on Employee
Performance with Reference to Executive Level Bank Sector
Employees in Kandy District.
1.2 Background of the Study
An organizations primary objective is to achieve organizational objectives. To attain that
an organization recruit and retain employees. Those employees are to align their own
personal goals with organizational objectives through performance. To accomplish
desired objectives, there must be an interaction between the owner or owners of the
organization and employees. In this scenario employer assigned manager to lead, interact
and keep the organizational objective alignment. Here the leadership style plays important
role on employee satisfaction and achievement of individual and collective performance.
This research was based on that ideology and conducted to find ‘Impact of Immediate
Leadership Style on Employee Performance with Reference to Executive Level Bank
Sector Employees in Kandy District’
Khurana and Hill-Popper (2002;159) observed that “for at least the past thirty years, the
concept of leadership had been subject to criticism and marginalization by the dominant
organizational paradigms and perspectives”. Hence the leadership stylenot only effect
Employee Performance independently but also effect organization as a whole.
And when explaining concept of performance it has been expressed by Brumbrach
(1988;43) as follows “Performance means both behaviours and results. Behaviours
emanate from theperformer and transform performance from abstraction to action. Not
just the instruments for results, behaviours are also outcomes in their own right – the
product of mental and physical effort applied to tasks – and can be judged apart from
results”
The style of leadership adopted is considered by some researchers (e.g. Awamleh, 1999;
Conger, 1999; Dubinsky, 1995; Yammarino,1993) to be particularly important in

9. achieving organizational goals, and in evoking performance among subordinates
(Barling,1996; Berson,2001; Zacharatos., 2000:546)
This Leadership Style and Employee Performance are even more dynamic for service
organizations like Banking and finance institutions where the output is a result of a real
time process executed by the employee himself. In the banking industry, there is no
question that employing the best and the brightest can transform products from
commodities to value added services (Aldiesert2011). Taking that into regard leadership
style to the prevent inefficiency and to receive maximum output in banking sector has
done by this research.
According to Sri Lanka Banking Association’s Response to Recent Report by S&P on Sri
Lanka Banking Sector; ‘the banking sector plays a pivotal and responsible role in
channelling public deposits to investment and consumption lending that ultimately assists
in improving standard of living and quality of life of the citizens of this country. It should
be a source of significant comfort that despite the levels of credit growth recorded; asset
quality has improved significantly reflected in gross nonperforming assets level
improving to 3.8% in 2011.’.Thus it’s vital to identify all the influential factors, including
the effects of leadership that control overall industrial performance.
The banking sector in Sri Lanka in mainly represented by licensed commercial banks
(LCB) and licensed special banks (LSB).LSBs represent development banks, savings
banks and housing finance institutions.
8
1.3 Research Problem
How does immediate leader’s leadership style of banking sector ensure that employees
are fully engaged by their work? How do they enhance employee productivity and
optimize organizational performance?
In a hastily changing world of work, leaders face an increasingly complex challenge
understanding what motivates employees and drives job satisfaction, commitment, pride
and advocacy. When it comes to banking reason trends of E-banking, mobile banking and
such create more dynamic need of increasing employee performance in to an optimal
level so necessary right management required determining the factors most closely
associated with driving employee engagement. The results provide valuable insights into

10. the importance of leadership to engagement and the measures leaders can take to improve
the performance of their workforce and their organization. And this research finding
implement an opinion all this traditional leadership styles adopted in Sri Lanka influence
the outcome of an important service sector of Sri Lanka
9
1.4 Objective of the Study
This research proposed that leadership at one level may compensate for or undermine the
effects of leadership at another. Said differently, senior leaders' ability to implement an
executive initiatives may depend critically on the alignment of organizational leaders
across hierarchical levels. This suggests two hypotheses. First is the conventional
expectation that any focal leader can affect performance, or more formally
Objectives of this research are:
Objective 1:Determine the leadership style that leaders reflect
Objective 2: There is a significant positive relationship between employee performance
and immediate leader
Objective 3: The leadership style has a significantly positive effect on the organizational
performance.
1.5 Methodology
This whole study revolves around the importance of leadership style and its impact on
employee performance.
1.5.1 Population
A population is considered to be any group of people, events, or things that are of interest
to the researchers and that they wish to investigate (Sekaran, 2000). The data is collected
population was Executive level of banking sector in Kandy district. There are 373 Total
Branch & Banking Outlets in Kandy district.( Central bank survey data)

11. 10
1.5.2 Sample
A sample is a subset of the population in question and consists of a selection of members
from the particular population (Sekaran, 2000). Sampling is described as the selection of
a proportion of the total number of units of interest for the ultimate reason of being able
to draw general conclusions about the total number of units (Parasuraman, 1986).
For assessing the various leadership behaviours and employee performance measures
were distributed to a random sample of 150 respondents. The sample consisted of 10
middle level managers and 140 subordinates whom were under the direct control of the
middle level managers.
1.5.3 Sampling Technique
Use random sampling technique as sampling technique. Random sampling technique is a
subset of a statistical population in which each member of the subset has an equal
probability of being chosen. A simple random sample is meant to be an impartial
representation of a group.
1.5.4 Data Collection
Primary data collection methods
Primary data means, data which are collected for the first time and presented in a basic
way. These data has been gathered from the sources directly and are collected by the
researcher.
To measure the outcome of the above mentioned hypotheses a questionnaire as a primary
source was The leadership development and employee performance were measured
keeping in view the above mentioned hypothetical model. Therefore, ‘Multifactor
Leadership Questionnaire’ was used to identify leadership trait. And to identify
performance level of employees ‘Performance Appraisal Process’ is used.
Secondary data collection methods
Secondary data are Information that already processed from raw data for different use by
other researchers. Designed supportive material and research already performed from

12. international journals available online as a secondary source was used to support the
findings of the current study.
11
1.5.5 Data Analysis an Presentation
Correlation analysis
This analysis measure the relationship between two data that are sealed to be independent
of the unit of measurement. The value of the co-related rations calculated through the
following formula.
Σx- Sum Leadership.
Σy- Sum of the performance.
r- Correlation ratio
Regression Analysis
Linear regression analysis is a powerful technique used for predicting the unknown value
of a variable from the known value of another variable.
More precisely, if X and Y are two related variables, then linear regression analysis helps
us to predict the value of Y for a given value of X or vice-verse.
By linear regression, we mean models with just one independent and one dependent
variable. The variable whose value is to be predicted is known as the dependent variable
and the one whose known value is used for prediction is known as the independent
variable.

13. 12
X and Y are the variables.
b = The slope of the regression line
a = The intercept point of the regression line and the y axis.
N = Number of values or elements
X = First Score
Y = Second Score
ΣXY = Sum of the product of first and Second Scores
ΣX = Sum of First Scores
ΣY = Sum of Second Scores
1.5.6 Conceptual Framework
This research was intended to study the relationship between the variables of leadership
styles and employee performance. Each variable defines its own dimensions. And had
varied influence on employee performance. However the strength and direction of
relationship would be measured to identify the type and intensity of the relationship.
Therefore the research was investigative in nature.
Dependent variable: Employee Performance
Independent variables: Effect of Immediate Management’s Leadership Style
Leadership Style
Transactional
Transformational
Employee
Performance
Figure 1-Conceptual Framework

14. 13
1.6 Importance of the Study
Leadership is often seen as a key factor in coordinating and aligning organizational
processes (Lewis, Packard, & Lewis, 2007). So as researchers taking in to account what
performance of an individual or collective is necessary to facilitate knowledge on own the
future conduct related to human resource alignment. Also according to Packard.T (2009)
“Leadership can be observed at several levels:groups, teams, programs, agencies,
communities, societies/countries, and even worldwide (e.g international affairs). The
focus here will be on program/agency leadership: organizational leadership for
organizational performance.” Hence study of this research not only effect the researcher
but also several other levels. “Another important aspect of the leadership context in the
human services is the growing emphasis on evidence-based practice” (McNeece&Thyer,
2004). This study also revealed some important national differences in attitudes towards
engagement and leadership.
To the banking sector of Sri Lanka can use this research finding to createcompetition in
the banking sector has presented a change environmentby using competitive advantage
better performed worker through changers in leadership style. To maintain their
competitive advantage, the bank firms must be able to quickly adapt to changing
circumstances.
Normally, such changes are driven by economic, social, technological and environmental
factors as well as business trends. This therefore requires that bank firms are managed by
adopting corporate strategies, structures, procedures and technologies that can effectively
address changing circumstance. The role of leadership in such industry is very important.
This is because leadership is critical to any new organization design and instrumental in
getting the organization unified behind a common strategic direction and shared business
priorities. The problem of leadership leading change management has been a challenge
confronting most organizations in Sri Lanka. Some of these changes can be
uncomfortable, unsettling, intimidating and occasionally downright frightening; but
unfortunately leadership in most organizations does not appear to possess the requisite
skills and strategies to bring on board both human and non-human resources to overcome
the challenges posed by these changes. This study determine the factors driving changes

15. in the Sri Lankan bank industry and suggest recommendations the roles of leaders and
change managers in influencing such changes.
14
1.7 Limitation.
 No clear picture has emerged about the relationship between leadership and
organizational performance.
– Despite increased research into the leadership-performance relationship,
many problems and gaps remain in existing studies. There is a lack of
integration concerning the relationship between leadership and
performance, a narrow set of variables has been used in previous studies,
and context and levels have been ignored.
 Assumptions are used
– Part of the ambiguity in leadership research stems from the lack of clarity
in the many definitions of the construct itself (Alvesson & Sveningsson,
2003; Bedeian& Hunt, 2006).
– Thomas, 1988), from the attribution processes raters use to characterize
leaders to the specific activities that leaders engage in (Lord,1985;
Meindl& Ehrlich, 1987), and from the characteristics of people who
emerge as leaders to the effects of actual leaders themselves
 Different concepts of leadership have been employed in different studies, making
direct comparisons virtually impossible.
– Levels of leadership have not been distinguished. Gaps and unanswered
questions remain. There is a need to re-examine the proposed leadership-performance
relationship
– Previous scholars (e.g. Bass, 1985) have focused on a limited range of
leadership paradigms (transactional and visionary). Classical and organic
paradigms have been mislaid when researching the leadership-performance
relationship. This shortens leadership measurements. While
Bass has claimed that visionary leadership is almost always more effective
than transactional leadership, other researchers (e.g. Avery, 2004) argue
that there is no single leadership paradigm that is the most effective.

16.  Methodological problems limit most existing studies. Multiple performance
15
measurement criteria should be used.
– When selecting the measurements of performance, previous researchers
have employed financial measurements or non-financial measurements,
rather than employing both kinds of measures in order to enhance the
validity of the research.
 Financial institutions reluctant to give performance data.
– To get overall performance data organizational are reluctant hence it takes
time to finish the research itself to get authorized by upper-management.
1.8 Chapter organization
Chapter 1 explains the background of the study, followed by a research problem,
objective of the study, methodology, importance of the study, limitations, and chapter
organization.
Chapter 2 will review the relevant literature review on Leadership style and banking as
the background of the hypothesis and as the basis to develop research variables and
measures understanding previous studies regarding the subject matter
Chapter 3 will conclude with introduction to organization include with organizational
profile, establishment, Vision statements to goal set up, structure of the organization,
social and economic importance and present functioning of the organization.
Chapter 4 will describe the data analysis and presentation procedures including
population and sample, research instruments and variables, data collection and statistical
tools used in data analysis and present the statistical analysis of the collected data as well
as the interpretation of the data.
Chapter 5 will include the findings, any conclusion of the research, and provides any
recommendation for future research.

17. 16
Chapter II

18. 17
2 Literature review
In here Employee job performance analysed by the research with reference to leadership
style. It was found that leaders and managers combine the various leadership styles
identified in the research paper in proportions that produce a positive result when
administering their leadership duties. The proportions at which these leadership styles are
combined depend on the nature of the situation they encounter in the workplace.
2.1 Leadership
Yukl (1994) defined leadership as the process of influence on the subordinate, in which
the subordinate is inspired to achieve the target, the group maintains cooperation, and the
established mission is accomplished, with support from external groups obtained.
Northouse (2004) concluded that “there are almost as many different definitions of
leadership as there are people who have tried to define it” (p. 2). Northouse’s definition
will be used here: Leadership is defined as “a process by which an individual influences a
group of individuals to achieve common goals” (p. 4). The term followers will be used to
describe those whom the leader is attempting to influence. The term subordinates is often
used in organizational settings, but the term followers suggests that leaders can be in any
role or position, and a bureaucratic hierarchy is not necessarily implied. Additionally, the
concept of shared leadership contradicts the notion of “solo” or unilateral leadership.
Also, Fry (2003) pointed out leadership means the use of a leading strategy to offer
inspiring motives and to enhance the staff’s potential for growth and development.
Northouse (2004) again described leadership as a process whereby an individual
influences a group of people to achieve a common goal.
2.2 Theories of Leadership
Several schools are considered in consecutive order in this part.
I. The Trait School: Turner and Muller (2005) stated that this school of thought was
popular before 1940’s. It assumes that leaders are born, not made and that they
possess certain features that are not in non-leaders.

19. II. The Behavioural or Style School: As Turner and Muller (2005) mentioned; this
school of thought was popular from the 1940’s to the 1960’s. It assumes that
effective leaders can be made. Anyone can be trained to be a leader.
III. The Contingency School: The contingency theory suggests that what makes an
effective leader depends on the situation. House (1971) made mention of the Path-goal
theory which is a contingency theory that identifies four leadership
behaviours, namely, directive leaders, supportive leaders, participative leaders and
achievement oriented leaders.
IV. The Visionary or Charismatic School: The visionary or charismatic school of
thought was popular during the 1980’s and 1990’s (Turner & Muller, 2005).
Under this school of thought, Burns (1979) mentioned the transactional and
transformational leadership styles.
V. The Emotional Intelligence School: Goleman, et al (2002) identified six
leadership styles under the emotional intelligence school of thought: visionary,
coaching, democratic, pace-setting and commanding. This school of thought was
popular in the late 1990’s.
VI. The Competency School: This school of thought is similar to the trait school in
that the emphasis has been to identify the competencies of effective leaders.
Dulewicz & Higgs (2003) suggested that three types of competence explain most
managerial performance: intellectual and managerial skills and emotional
competencies which can be translated into leadership styles.
While early leadership theories concentrated on the characteristics of successful leaders,
their traits, behaviour, power, influence and situational approaches (e.g. Likert 1967;
Mintzberg 1973; McClelland & Burnham 1976), recent ones have focused on the role of
followers and the correlated nature of leadership.
His is the model used in this research in-order to evaluate the relationship between
leadership style and performance in banking sector of Kandy.
18

20. 19
2.2.1 Transformational leadership
Transformational leaders do more with followers and colleagues than transactional
leaders do (Avolio et al. 1991). Instead of a simple exchange and agreement,
transformational leaders provide a vision and a sense of mission, inspire pride, and gain
respect and trust through charisma (Bass et al. 1990). Bass (1985) identified four
components of transformational leadership:
Idealized Influence
Leaders are admired, respected, and trusted. Followers identify with and want to emulate
their leaders. Among the things the leader does to earn credit with followers is to consider
followers’ needs over his or her own needs. The leader acts as a role model, shares risks
with followers and behaves in a manner consistent to articulated ethics, principles and
values.
Inspirational Motivation
By providing meaning and challenge to their followers’ work, leaders motivate their
followers. Furthermore, leaders encourage followers to envision attractive future states.
Individual and team spirit is aroused, since leaders display enthusiasm and optimism.
Intellectual Stimulation
Leaders stimulate followers by questioning assumptions, reframing problems, and
approaching old situations in new ways. There is no ridicule or public criticism of
follower’ mistakes (Bass &Avolio, 1994).
A transformational leader provides meaning, and thereby makes followers identify with
the respective goals and problems (Shamir, House, & Arthur,1993). If the team leader
communicates and continually reiterates the team objectives in an inspiring way, these
objectives may become the basis of a shared social identity (Tajfel, 1981). Previous
research suggests that transformational leadership strengthens the common identity of
work groups (Dionne, Yammarino, Atwater, & Spangler, 2004; Kark, Shamir, & Chen,
2003). A common identity may stimulate followers’ team spirit and helpfulness (helping

21. behaviour). Moreover, by identifying with both organizational goals and their team
followers may engage in higher levels of sportsmanship, i.e., generously overlook
obstacles at work in the interest of reaching the common long-term goal. For the same
reason, followers’ conscientiousness is likely to increase.
In a similar study of Piccolo and Colquitt (2006) the authors found Leadership
Transformational behaviours had a significantly positive relationship with task
performance. They also found intrinsic motivation and goal commitment to significantly
mediate the relationship between Transformational Leadership behaviours and task
performance. The authors suggested for training and manager development plans for
Transformational Leadership.
20
2.2.2 Transactional Leadership
A Transaction or exchange process is the basis of the commonly employed transactional
leadership paradigm (Evans and Dermer, 1974; House and Mitchell, 1974). The
transactional leader recognises subordinates’ needs and desires, and then clarifies how
those needs and desires will be met in exchange for subordinates’ work. By clarifying
what is required of subordinates and the consequences of their behaviours, transactional
leaders are able to build confidence in subordinates to exert the necessary effort to
achieve expected levels of performance.
Avery suggests that there are situations in which transactional leadership is the
appropriate form of leadership, such as when followers are unwilling or unable to commit
to the leader’s vision.Transactional leaders communicate with their subordinates to
explain how a task must be done and let them know that there will be rewards for a job
done well (Avolio.,1991). Transactional leadership helps organizations achieve their
current objectives more efficiently by linking job performance to valued rewards and by
ensuring employees have the resources needed to get the job done (Zhu., 2005). Different
types of behaviour inherent to transactional leadership have been identified:
- Contingent Reward: subordinates receive rewards for good performance.
- Management by Exception (Active): subordinates are monitored and then corrected if
necessary in order for them to perform effectively.

22. - Management by Exception (Passive): subordinates receive contingent punishment in
response to obvious discrepancies from the standard performance
According to Judge and Piccolo (2004), three dimensions of transactional leadership are
contingent reward, management by exception-active, and management by exception-passive.
Contingent reward is the degree to which the leader sets up constructive
transactions or exchanges with followers. The leader clarifies expectations and
establishes the rewards for meeting these expectations. In general, management by
exception is the degree to which the leader takes corrective action on the basis of results
of leader-follower transactions (Judge and Piccolo, 2004).
21
2.2.3 Laissez-Faire Leadership
Laissez-faire leadership is a passive kind of leadership style. There is no relationship
exchange between the leader and the followers. It represents a non-transactional kind of
leadership style in which necessary decisions are not made, actions are delayed,
leadership responsibilities ignored, and authority unused. A leader displaying this form of
non-leadership is perceived as not caring at all about others’ issues.
2.3 Performance
2.3.1 Organizational Performance
The correct interpretation of the word performance is important and must never be
misread in the context of its use. Often performance is identified or equated with
effectiveness and efficiency (Neely, Gregory and Platts, 1995). Performance is a relative
concept defined in terms of some referent employing a complex set of time-based
measurements of generating future results (Corvellec, 1995).
Many organisations feel that their people can provide a competitive advantage, and
therefore their people contribute to the organisation’s performance. Employees play a
pivotal role in organisational success (Collis and Montgomery, 1995). Employee
performance has been shown to have a significant positive effect on organisational
performance (Collis and Montgomery, 1995).

23. 22
2.3.2 Individuals Performance
Amos (2004:63) stated that “the effective management of individual performance is
critical to the execution of strategy and the organisation achieving its strategic
objectives”. Performance cannot be left in anticipation that it will develop naturally,
despite the employee’s natural desire to perform and be rewarded for it. This desire needs
to be accommodated, facilitated and cultivated (Amos, et al., 2004). In return for this
performance, organisations extend themselves in various forms of acknowledgement
(Foot and Hook, 1999). Individual performance has become a topical issue in today’s
business environment, so much so that organisations go to great lengths to appraise and
manage it (Armstrong and Baron, 1998)
2.4 Relationship between the leadership style and the
organizational performance
Relationship between leadership style and organizational performance has been discussed
often. Most research results showed that the leadership style has a significant relation
with the organizational performance, and different leadership styles may have a
positive correlation or negative correlation with the organizational performance,
depending on the variables used by researchers. Sun (2002) compared the leadership
style with the leadership performance in schools and enterprises, and showed that the
leadership style has a significantly positive correlation withthe organizational
performance in both schools and enterprises. Broadly speaking, the
leadershipperformance is identical with the organizational performance.
The transformational leadership has a positive correlation with the organizational
performance, higher than the exchange leadership (Huang, 2006).
Business management attributes their successes to the leadership efficiency, that is, the
leadership style of administrative supervisors has a considerable effect on the
organizational performance (Terry, 1960). The leadership style of a leader has a
considerable influence on the work performance of employees. It further indicates that
the leadership style also affects the organizational performance. The leadership style
determines the organizational performance that subordinates need realize, and gives
suggestions and feedback to execution. In this course, subordinates can know the

24. requirements of their role and executives can know demands of subordinates at the same
time. Thus under the leadership style of executives, subordinates can make
organizational requested performance and get their rewards. Research results showed
that the leadership style has a significantly positive correlation with the
organizational performance. Therefore, the leadership style should be properly and
carefully used to guide and motivate subordinates (Elenkov, 2002). Campbell (1977)
thought that when executives use their leadership style to concern, care and respect
for employees, it would increase self-interests of employees in work as well as
organizational promises, enable them to make better performance in work place and
affect their job satisfaction. Howell and Frost (1989) and Bryman(1992) also presented
that there is a positive relation between the leadership style and the organizational
performance.
Leadership is often seen as a key factor in coordinating and aligning organizational
processes (Lewis, Packard, & Lewis, 2007). As with any aspect of organizational
functioning, it should focus on organizational performance, and most
important,effectiveness in achieving desired out-comes. Leadership traits, styles, and
approaches are a starting point. Leadership can, to a large extent, affect management
capacity through the design of organizational systems. A leader must assess contingency
factors in the environment and in staff and the situation, considering staff characteristics
and using leader-member processes to shape organizational climate and culture. Other
factors, including program capacity and client characteristics, will affect ultimate
outcomes. Leaders can impact program capacity through the use of evidence-based
practice in program design. In this model, job satisfaction is seen as an intermediate
outcome that can also affect an organization’s effectiveness.
23

25. 24

26. 25
Chapter III

27. 26
3 Introduction to organization
3.1 Introduction
The banking sector in Sri Lanka is administered by the Bank Supervision Department of
the Central Bank of Sri Lanka under the Banking Act, Monetary Law Act,and the
Exchange Control Act.Although the basic business model of the Sri Lankan banking
system has remained more or less unchanged for a decade, there has been significant
change regarding prudential norms and guidelines, in particular minimum capital and
provisioning guidelines. Fitch notes that the sector continues to be resilient in the face of
a weak macro‐economic environment and a prolonged internal conflict. The sector has
previously had little direct exposure to the conflict and its complications, as it did to the
tsunami in 2004. However, the Government’s recent fiscal weaknesses, its resulting effect
on monetary policy stability and overall policy consistency have been and will be the
sector’s primary concerns in the short to medium term.
Under Banking Act and the Finance Companies Act to operate in Sri Lanka by the
Central Bank of Sri Lanka there are three categories of financial institutions are allowed
– Licensed Commercial Banks
– Registered Finance Companies
– Licensed Specialized Banks
These institutions can accept deposits from the public. List of the financial institutions are
mentioned in Annexes 01.
For a relatively small nation of 20 million, Sri Lanka has a high number of 37 different
banks, although there is significant concentration: the three large state banks account for
44.5% of the banking system assets, and the four largest private banks account for a
further 31.0%.
Banking Sector Performance Asset Growth The banking sector performed moderately
well during the year, recording a growth of 16.6% in assets, the total assets nearing the
LKR 6 tn mark. Credit growth saw moderation during the year mainly due to
improvements in the fiscal consolidation, reforms in the state owned enterprises and the
unexpected reduction in gold prices. The majority of the growth was generated by the

28. Licensed Commercial Banks. Main contributor towards the overall increase in the asset
portfolio was the increase in investments, which recorded a 39% growth in 2013,
compared to 15% in 2012.
National Vision and the Banking Sector Growth in 2012 19.9% 21.1% 15.2% 17.2%
18.0% 26.7% 17.5% 19.5% 25.9% Sri Lanka aspires to be a South Asian economic hub,
focused on f ive hubs - maritime, aviation, commerce and tourism, knowledge and
energy. Underpinned by this vision, the Sri Lankan economy is targeted to grow at 6 to
7% annually and reach a per capita income of USD 4,000 by 2016. Realization of this
vision will, inter alia, require a paradigm change in the local banking sector. We see
immense prospects for direct loans and syndications, project financing, SME
development as well as roles in FDIs, mergers and acquisitions (M&A) and initial public
offerings (IPO) in a growth focused economy. At the same time a few issues regarding
the financial services sector and the banking sector in particular, need to be addressed.
27
3.2 Organizational Profile
3.2.1 Pan Asia
Figure 2-Logo Pan Asia
Branch Location used in the research:Kandy City Centre
Vision
To become the most customer preferred commercial bank in Sri Lanka.
Mission
We will create the largest satisfied customer base by providing professional, personalized,
secure, quality banking and financial services, using modern technology & innovative
products. We will delight our customers, create a better future for employees and enhance
stakeholder value.
Description
A Public Limited Liability Company incorporated in Sri Lanka on 6th March 1995under
the Companies Act No.17 of 1982 and re-registered under the Companies

29. Act No.07 of 2007.A licensed commercial Bank under the Banking Act No.30 of 1988
and listing in the Colombo Stock Exchange.
Considering today’s economic pace and the demands placed on the Bank by the modern
consumer it is empirical that the Bank has learning and fostering culture. Their employees
are the ones that produce, refine, protect, deliver and manage the Bank's products and
services every day, year in, year out. With the rapid pace and international reach of the
21st century marketplace, continual learning is critical to Bank's success.
One of the most significant programs launched during the year 2013 was the Management
Trainee program. This program was branded as ‘Aspire’ Management Trainee Program,
projecting their belief of ‘where potential meets opportunity’ through the ‘Aspire’
program.The Bank placed an emphasis on the development of staff and launched their
first ever Speech Craft program conducted by the Colombo Toast Masters Club. Two
successful batches of employees were taken through the successful speech craft program
which result an immersive development of the respective employees.
Talent Acquisition in Pan Asia having expanded rapidly during the past 2 years the Bank
concentrated on consolidating its presence in 2013. Thereby expanding Branch network
by 4 strategically located Branches while the staff strength grew by 16 employees and
remained at 1,169 employees as at the end of 2013.
28
Figure 3-Distribution Number of employees in PanAsia

30. 29
Performance Management
The overall performances of the employees were done utilising the Performance
Management system implemented in 2010. As per the practice of the Bank the objectives
of the Chief Executive Officer were set at the beginning of the year and cascaded down to
all other grades of employees ensuring that they understand and deliver their expectations
in terms of performance and results generation.
Human Resource Management System
Modern business practice requires an integrated human resource system to replace
manual processes of business operations, resulting in reduced administrative procedures
and processes. The corresponding increase in productivity due to centralised and
automated systems assists us to focus on more mission critical aspects as well as achieve
operational efficiencies. Although paperwork hasn’t been totally reduced at present
Their main aim is for our Human Resource Management System to take us closer towards
a paper-less environment.
CSR Programmes
1. Health & Welfare
 Pan Asia Bank introduced an innovate product call “Suwasavi Fixed Deposit”
which provides a free medical insurance cover for the depositor and his/her
family.
 Awareness campaign in several districts for “RanaviruHarasara” Loan Scheme
which aims to enhance the living standards of the disabled soldiers and immediate
family members of the killed in action, missing and action soldiers.
 Community service project “Sammana”, a personal loan scheme targeted at the
retired government servants which is a segment that has been largely ignored by
credit providers in Sri Lanka.
2. Art and Culture
 Internationally featured film “Midnight’s Children” which was filmed in
several locations around Sri Lanka.

31.  “New Year Festival” held in Japan organised by the Sri Lankan community in
Japan to create awareness about the Sri Lankan culture among the citizens of
Japan.
30
3. Sports
 Initiative to sponsor the Sri Lanka schools under 19 Girls & Boys - “A”
Division All Island Basketball Championship in 2013 which was
organised by the Sri Lanka Schools Basketball Association (SLSBA)
 Sponsor the Sunshine Games 2013 a sports meet organised by the Rotary
Club of Colombo Metropolitan.
 Sponsor the Navy Cap 2013, a sporting event organised jointly by the Sri
Lanka Navy and the Municipal Council of NuwaraEliya, in April 2013.
Organisation structure
Figure 4-Organizational S tructure Pan Asia
3.2.2 DFCC
Branch Location used in the research:Deva Veediya Kandy
: Katugasthotata
Vision
To be Sri Lanka's premier financial services group.
Figure 5-Logo DFCC

32. 31
Mission
To provide superior financial solutions and nurture business enterprises, adding value to
our customers, shareholders, employees and the nation.
Description
DFCC belongs to a category of institutions known as Development Financial Institutions
or DFIs. Many of these organizations were created to assist rebuilding initiatives in war
affected economies. These institutions were sponsored by governments or donors to
provide term finance for developmental projects.
Around 60% of Development Financial Institutions around the world were owned by the
governments of their respective countries. Another 25 %were privately owned, while the
balance had a mixed ownership.
The proposal to set up DFCC was first presented by the first World Bank mission, which
visited the country in 1952. The unique structure that was created at the incorporation of
DFCC was designed through a collaborative effort between the Government of Sri Lanka
and the World Bank.
Employee Age Analysis
Figure 6-Employee Age Analysis

33. 32
CSR
The concept of sustainable development is gaining in both global importance and
significance. Increasingly, corporate entities around the world are perceptive to enhancing
shareholder value while being environmentally, socially and economically sustainable.
These efforts are expected to benefit not only present generations that are battling
pressing issues, but also will help future generations by providing a secure future to thrive
and prosper.
The ‘6S Implementation in Schools Project’ for Schools project initiated by DFCC Bank
in collaboration with the Ministry of Education is a holistic programme to introduce,
educate and train primary school students and teachers in the use and application of the
Japanese Principles of ‘5S’ and Safety (‘6S’) and 3R(Reduce-Reuse- Recycle) concepts.
Since its inception in 2009, One hundred schools from around the country have benefited
from the project.To effect such change, initially and on an on-going basis, seminars and
workshops related to positive thinking, change management, leadership development,
teamwork and creative thinking were conducted using experts in the respective fields.
In 2010, the International Business Awards (IBA) recognized and rewarded DFCC Bank
for its Corporate Social Responsibility efforts. The Bank was highlighted as a
Distinguished Honoree at the IBA ceremony and was presented with a ‘Stevie’ Award.
Additionally the Ceylon Chamber of Commerce recognized the project as the best CSR
project in the ‘Education and Training’ category at the Best Corporate Citizens Awards
2010.
Organizational Structure

34. 33
Figure 7-Organizational structure DFCC
3.2.3 NDB
Branch Location used in the research: Kandy City Centre
Vision
To be a world-class Sri Lankan Bank.
Mission
Figure 8-Logo NDB
To be dominant in the financial services sector, creating superior long-term shareholder
value and contributing to economic development in Sri Lanka by exploiting regional
opportunities and delivering innovative solutions with ‘best in industry’ service
excellence through an inspired team.
Values
Integrity
– We believe in truth, justice and fair play, above all else.
Care
– We will never lose the human touch. We will care for our colleagues, our
customers, our community and our environment.
Passion
– We will embrace challenges with passion and aggressively pursue our goals.

35. 34
Teamwork
– We will work together as a team, supporting each other, respecting every
individual and drawing strength from our diversity.
Service
We will always strive for excellence in serving, our internal and external customers,
through professionalism, innovation and creativity.
Description
Tracing its origins to 1979 as a state-owned development bank set up under the National
Development Bank of Sri Lanka Act No. 02 of 1979, National Development Bank PLC
('Bank') today operates as a Licensed Commercial Bank under Section 5 of the Banking
Act No. 30 of 1988 (Refer Corporate Information on pages 296 and 297 for further
details). The Bank is listed on the Colombo Stock Exchange, and comprises 19%
individual and 81% corporate shareholders, both Resident (70%) and Non-Resident
(30%).The Bank's Registered Office and principal place of business are situated at No.
40, NavamMawatha, Colombo 2, Sri Lanka.
Employees
The number of staff, both permanent and contractual, employed at the Bank was 1,583 as
at 31 December 2013. Though a relatively small number, it's one that delivers big results.
Our lean and agile team comprises some of the finest professionals in their chosen fields,
working in harmony and sharply aligned with our strategic direction.
The banking industry in Sri Lanka is moving towards consolidation and change, and the
Bank together with its subsidiaries sees an important role in shaping it.
Work force Growth
Figure 9-Work Growth in NDB

36. 35
Figure 10-Workforce by Gender in NDB
Employee Age Analysis
Figure 11-Employee Age Analysis in NDB
Group Structure
The main activities of the Bank, its subsidiaries and associate companies ('Group')
encompass retail banking, Small and Medium Enterprises (SME) banking, corporate
banking, project & infrastructure financing, investment banking, leasing, housing finance,
investments advisory and securities trading, wealth management, property management
and bankassurance. They are delivered through the core banking activities of the Bank
and the Group companies of which, the principal activities are listed below.

37. 36
 NDB Capital Holdings PLC- Sri Lanka
 NDB Investment Bank Ltd.- Sri Lanka
 NDB Securities (Pvt) Ltd. -Sri Lanka
 NDB Wealth Management Ltd.- Sri Lanka
 NDB Capital Ltd. -Bangladesh
 Development Holdings (Pvt) Ltd.- Sri Lanka
 Maldives Finance Leasing Company (Pvt) Ltd- Maldives
 Ayojana Fund (Pvt) Ltd. (Under liquidation) -Sri Lanka
 NDB Venture Investments (Pvt) Ltd. (Under liquidation) -Sri Lanka
CSR
 At NCAP, we strive to inculcate a culture of social responsibility in our daily
operations. Engaged in diverse capital market transactions - investment banking,
securities trading, and wealth management of both institutions and individuals, we
are well aware of the necessity to be a responsible corporate citizen. To this end,
we give precedence for creating sustainable value within the Group, focusing on
managing our businesses with professionalism and due diligence, empowering our
employees, advocating sustainable business ethics and practices among clients and
suppliers, creating awareness on investing in capital markets and engaging in
selected philanthropic activities with a ripple effect on the society.
Empowering the Youth
 As a prelude to our graduate employment initiatives and further demonstrating our
commitment to education, we in the year sought to set up a scholarship scheme for
deserving undergraduates - “NDB Capital Scholarship Trust”. The Scholarship
Trust scheduled to take off in 2014 is funded by NCAP and covers a period of
four years o an undergraduate academic program at government universities. The
Scholarship Trust will award grants, scholarships and other forms of financial
assistance to the needy undergraduates to continue their university studies.
Environment
 As an investment banking group, the impact on the environment from operations
is rather minimal. However, we are conscious of doing our part to care for the
environment. We seek and have adopted simple carbon friendly practices in our

38. 37
daily operations which we believe will make a significant impact on the
environment. As with the trends of the modern world, we rely greatly on
technology to complement our efforts towards a “less-paper” and resource
efficient office. Our employees fully understand and support these initiatives.
 Tabulated below are some of the key measures taken by us to be an environmental
friendly organization :
Figure 12-Environmental CSR in NDB
3.2.4 HNB
Vision
Your Partner in Progress.
Mission
Combining entrepreneurial spirit with empowered people and leading edge technology to
constantly exceed stakeholder expectations.
Values
• Treasure professional and personal integrity at all times
• Demonstrate mutual respect in all our interactions
• Passionate about everything we do
• Committed to being customer centric
Figure 13-Logo HNB

39. 38
• Courage to change, challenge and be different
• Demonstrate unity in diversity
Description
Today, HNB has risen to the zenith in banking. We have been acknowledged globally by
The Banker as the Bank of the Year twice over and won numerous local and global
awards. We have now centralised administrative operations at our landmark HNB Tower,
used cutting edge technology to automate our network, equipped our team with skills
befitting a futuristic bank and worked with stakeholders and the environment to ensure
that we manage social and environmental impacts sustainably and with accountability.
In this light, HNB is no longer simply a bank; it is a financial conglomerate. The HNB
umbrella of today has two local subsidiaries - HNB Assurance, our insurance arm and the
first insurance company to achieve the one billion rupee landmark in turnover only 5
years after inception, and Sithma Development, a real estate development company. The
epoch making joint venture between two financial power houses, HNB and DFCC Bank,
saw the emergence of Acuity Partners. Province Central Customer Centres 25 ATMs35
CSR
The Bank also recognises the importance of making a positive contribution to society by
promoting corporate social responsibility (CSR) through ethical banking practices,
environmental awareness and a commitment to the local community.
In 2013, the Bank’s Corporate Social Responsibility (CSR) budget allocation was
concentrated in the areas of Assistance to Cancer Patients (39%) and Health & Related
Assistance (30%).

40. 39
Figure 14-CSR in HNB
Employee of Choice
Our human resource philosophy is recognised by the many awards and accolades we have
won locally and internationally, as an employer of choice. It has led to our relentless
pursuit of greater excellence in developing the potential of our people who in turn
contribute to the national goals of resurgent Sri Lanka. We stay committed to our values
and ideals that have been handed down over 125 years to face the challenges of our times,
in sharing our knowledge and experience with our people and the banking and finance
industry in Sri Lanka. We consciously and actively drive the dignity of labour concept in
our day to day dealings, which creates a conducive and equal opportunity work
environment.
Organization structure

41. 40
Figure 15-Organizational S tructure HNB
3.2.5 BOC
Vision
Bankers to the Nation
Mission
Customers
– Foster mutually rewarding customer relationships with all our customers,
exceeding their expectations.
Staff
– Give all our staff the recognition and rewards to be the best team of achievers in
service excellence.
Owners
– Be a profitable catalyst for equitable development covering urban and rural areas.
Society
– Provide world-class banking services across the nation as a beacon for progress
and growth
Figure 16-Logo BOC

42. 41
Corporate Governance
The Board of Directors has set in place a suitable governance structure that comprises
Board Subcommittees that are responsible for determining policy frameworks and
governance structures for the executive functions of the Bank. The executive governance
structure comprises the office of the General Manager, Executive Committees and
operational and support departments headed by Key Management Personnel who are
experienced professionals and leaders in their respective fields.
Performance of Their Six Capitals
Figure 17-Performance of six capital in BOC

43. 42
CSR
1. Education
 The Bank conducts seminars island wide to assist Grade 5 children who sit
for the scholarship exam through the Hapana Programme. Theirr annual
target is to provide 2000 Ran Kekulu scholarships of LKR 10,000 each for
students who have maintained a minimum balance of LKR 2,500 during
the year in their Ran Kekulu account. In 2013, 1,412 students have been
eligible to receive Ran Kekulu scholarships by passing the cutoff mark of
173. Further 3,100 dictionaries have been distributed among the balance
Ran kekulu account holders who have been unable to pass the cut-off
mark.
 BOC have also awarded scholarships of LKR 35,000 to 20 undergraduates
who obtain the highest grades in the science, mathematics, commerce and
arts streams. Additionally, 73 scholarships were awarded to students who
maintained a minimum balance of LKR 5,000 for one year prior to sitting
the Advanced Level examination
2. Sports
 The Bank sponsored several national athletic events at national level to
support a healthy society as these events which provide national
recognition for high achievers require large corporate sponsors for
funding.
3. Reconstruction of conflict affected area
 The Bank has been involved in the reconstruction of conflict affected areas
and is the first bank to move into these areas to provide banking services.
In recognition of the need to provide reliable transportation and access to
markets, the Bank has provided in total financial assistance for the
reconstruction of Jaffna Railway Station for the revival of what was once a
busy location, vital for the rebuilding and reconciliation process.
4. Entrepreneurship
 The Bank conducted several Micro Finance workshops to educate rural
entrepreneurs to provide skills and knowledge required to succeed in their
respective ventures.
5. National Heritage

44. The Bank sponsored a number of large scale cultural pageants including Kandy
EsalaPerahera and NawamPerehera in Colombo and facilitated the maintenance of
Temple of the Tooth Relic in Kandy which is a world heritage site.
43
6. Healthcare
The Bank donated funds for building and maintenance of healthcare facilities to
several hospitals and ayurvedic hospitals to ensure that free healthcare is
supported and sustained for the community.
Figure 18-Organizational S tructure BOC

45. 44
Chapter IV

46. 45
4 Data analysis and Presentation
4.1 Tools of data collection
In order to find data on performance of employees and their performance, researchers
collected data on two variables: Performance of employees, leadership style. For that the
present study is quantitative in nature because researcher has used quantitative data which
is collected through questionnaire.
4.2 Population
A population is considered to be any group of people, events, or things that are of interest
to the researchers and that they wish to investigate (Sekaran, 2000). The data is collected
population was Executive level of banking sector in Kandy district. There are 373 Total
Branch & Banking Outlets in Kandy district.( Central bank survey data)
4.3 Sampling Procedure
The largest part of discussions concerning sampling comes from researchers who use a
quantitative research approach throughout their study. Their major aim is to get a
representative sample from a much larger population in order to study the smaller sample
not only appropriately, but also to provide accurate generalizations about the larger
population to this end, Ghauri&Gronhaug describe sampling as a procedure that saves
time and money by examining a sample instead of the whole population.
4.4 Sampling Technique
Sampling techniques can be divided into two broad categories. Probability samples, on
the one hand, enable researchers to collect data in which each unit has a known, non-zero
and equal chance of being included in the sample. Furthermore, this procedure allows for
assessment of the amount of sampling-error and the extent to which the sample is
representative of the population. On the other hand, non-probability samples are based on
subjective judgements. In other words, the sample size is rarely determined in advance
and the knowledge about the group from which the sample is taken is limited.
The different samples taken in this thesis can be considered as non-probability judgement
samples. This type of samples allows the researcher to use judgement to select cases or

47. samples that answer the research question and meet the objective of the study in the best
way.
46
4.5 Sample
A sample is a subset of the population in question and consists of a selection of members
from the particular population (Sekaran, 2000). Sampling is described as the selection of
a proportion of the total number of units of interest for the ultimate reason of being able
to draw general conclusions about the total number of units (Parasuraman, 1986).
For assessing the various leadership behaviours and employee performance measures
were distributed to a random sample of 150 respondents. The sample consisted of 10
middle level managers and 140 subordinates whom were under the direct control of the
middle level managers.
4
3.5
3
2.5
2
1.5
1
0.5
0
Mean of Perfromance Rate
-10 -5 0 5 10 15 20
Value of the leasership
Average of Performance of
employees under the
leadership
Linear (Average of
Performance of employees
under the leadership )
Figure 19- Correlation between Leadership and Performance in data Analysis
4.6 Measures
The Multifactor Leadership Questionnaire (Bass&Avolio, 1995) was used to measure
subjects’ perceptions of transformational and transactional leadership styles. As the four
single components of transformational leadership usually show high intercorrelations (r =
.83 on average; Bass &Avolio, 2000)In case of measuring Performance, and their
supervisors Leadership styles (Transformational style, transformational style ) only
Multifactor Leadership Questionnaire is used. Participant data was obtained through in
one survey with 5-point scale. Participant will ask a few questions. The survey contained
a total of 36 questions and took approximately 10 to 15 minutes to complete.

48. 47
4.7 Methodology:
When, researcher collected the data from the participants then researcher used the
analysis of the data. In this analysis.
In the table of descriptive statistic, the value shows of mean, Standard deviation and also
the maximum and minimum values. These values define the response rate of the
respondent. Then to get the graphical information about the variables, researcher used the
histogram with normal curve. Next, researcher use the scatter plots to check the
relationship of dependent variable independent variable is significant or not. After this for
checking that the relationship is weak, moderate or strong between dependent variable
and independent variable. In the last to check the value that how much change comes in
dependent variable due to independent variable, researcher used the Regress analysis and
Correlation analysis with ANOVA.
4.8 Results
In simple regression, this number is the absolute value of Pearson’s coefficient of
correlation. Its sign will be the same as that of the b1 coefficient. In this research
Multiple R/ coefficient of correlation is 0.601253951.
This number is the coefficient of determination r2. It expresses the proportion of the
variation in Y which is explained by variation in X which is 0.361506314 hence there is a
36% is Y which is explained by variation in X Significance of the regression analyses is
the low value of 0.065971468 meaning this regression analysis is reliable.
Performance is explained by,
Overall Performance=2.428099036+0.054255703*X
Transformational Leadership Performance= 2.561166512+ 0.039366883*X
Transactional Leadership Performance=2.397959184+ 0.06122449*X
a=Intercept
b=Gradient
Y=Performance
X=Value of leadership

49. 48
4.8.1 ANOVA partitions
The variability among all the values into one component that is due to variability among
group means (due to the treatment) and another component that is due to variability
within the groups (also called residual variation). Variability within groups (within the
columns) is quantified as the sum of squares of the differences between each value and its
group mean. This is the residual sum-of-squares. Variation among groups (due to
treatment) is quantified as the sum of the squares of the differences between the group
means and the grand mean (the mean of all values in all groups). Adjusted for the size of
each group, this becomes the treatment sum-of-squares.
Each sum-of-squares is associated with a certain number of degrees of freedom (df,
computed from number of subjects and number of groups), and the mean square (MS) is
computed by dividing the sum-of-squares by the appropriate number of degrees of
freedom. These can be thought of as variances. The square root of the mean square
residual can be thought of as the pooled standard deviation.
4.8.2 P value
The P value is determined from the F ratio and the two values for degrees of freedom
shown in the ANOVA table. The P value tests the unacceptable assumptions that data
from all groups are drawn from populations with identical means. Therefore, the P value
answers the question is, if all the populations really have the same mean (the treatments
are ineffective), what is the chance that random sampling would result in means as far
apart (or more so) as observed in this experiment.
Transformational leadership have low P value of 0.002804577 intercept is 99% is true
and Transactional leadership have low P value of 0.01381118 intercept is 98% is true and
the overall P value was large, the data do not give you any reason to conclude that the
means differ. This was not the same as saying that the true means are the same.
Researcher doesn’t have compelling evidence that they differ. Lower the P value better
the sample represent whole population if the overall P value is small, then it was unlikely
that the differences you observed are due to random sampling. Researcher can reject the
idea.

50. 49

51. 50
Chapter V

52. 51
5 Finding, Conclusion and Recommendation
5.1 Findings
Among individual survey items pertaining specifically to immediate leaders, those
showing the highest correlation with performance are:
1. Immediate manager gives the support he/she needs to do their job well
2. Immediate manager facilitates effective discussions about their career development
3. Immediate manager explains the link between the work he/she do and my
organization’s strategy
4. Immediate manager is good at developing people
The immediate manager leadership style that correlated most highly with performance of
employees with the support they need to perform well and advance their skills and career.
If employees look to senior managers to value their contribution, they look to immediate
managers to help them enhance their contribution. Once again, strategy also plays a role.
While employees expect senior leaders to communicate the organization’s strategy, they
expect immediate managers to explain how their work helps realize this strategy. In short,
they want to be valued for their contribution, enhance their contribution and understand
how their contribution helps to advance the success of the organization.
Interestingly, the immediate manager item with the lowest correlation with performance
is, “when only setting performance goal setting without supporting to achieve his or her
performance.” For engaged employees, it’s their own needs and the needs of the
organization that count, not the needs of the manager.
5.2 Effects of Transactional Leadership
The findings in our study show that transactional leadership style does not positively
relate to employee performance. They seem to respond more positively to a work system
that defines their tasks and clearly spells out performance targets and expectations,
thereby making performance-reward linkages. Moreover, a transactional leadership style
may be disused or irrelevant in the banking environment where the majority of tasks are

53. highly standardized and routinized. As a result, employees look for space and flexibility
in the process of performing tasks which is more balanced and complemented by
transformational style rather than a transactional style.
52
5.3 Effects of Transformational Leadership
Findings of this study confirm that transformational leadership style of bank managers
will enhance employees’ performance. When managers operational charisma and utilize
inspiration, individualized consideration and intellectual stimulate, they draw out positive
reactions from employees. Such transformational qualities do stimulate higher level needs
of followers and result in feelings of satisfaction. This finding is supported by other
leadership researchers (e.g., Bass &Avolio, 1990). The attention that managers give to
employees will be reflected in their general positive attitude toward work and work
conditions, which in turn, increases job satisfaction and facilitates performance.
5.4 Combined Effects of Transformational and Transactional
Leadership Styles
To comprehend the results, it is crucial that turning attention to the entire model. Based
on theory and earlier empirical studies, we predicted both independent variables to be
significantly related to performance. Researcher viewed both leadership styles to be
complementary as shown in a number of studies (Bass (1985) Al-Dmour &Awamleh,
2002). However, results clearly show that only transformational and not transactional
style is positively and drastically related to performance. This is a result that requires
rationalization. One interpretation of this result is that the functional operations of a bank
are highly specialized and standardized at the processing level. The setting is inhibited
and tasks are structured, such that, there is little scope for transactional leadership.
Individual performance, is for the most part, determined by the flow of work, more than
the immediate demands and expectations of their managers.
Vice-versa transformational leadership style supplies consider-ably to Performance.
whereas bank employees perceived their performance to be unaffected by the
transactional skills of their manager, they endorsed a big part of their performance to
his/her transformational skills. In a routine and programmed environment, self assessed
performance is a result of alluring to higher needs which helps overcome the routine. It is
also a result of recognizing when to oversee different types of rewards. What does this

54. finding do to Bass’s(1985) view that both leadership styles are closely related and are, in
result orienting, complimentary. Clearly, not so in this case.In fact, the current findings
give support to Burns’s (1978) position that these two styles are at opposite ends of the
scale. Perhaps the findings represent only an exception to Bass’s conceptualization and
are situation specificly.
53
5.5 Conclusion
Meindl (1995) disagree with the attributions of leadership often emerge from social
contagion processes, whereby influential followers give word of mouth to persons who
lack direct contact with the leader. While most transformational/transactional leadership
models presume that followers attribute leadership qualities based on face-to-face
exchanges with the leader, the majority of studies in this area result in computing distant
as opposed to close leadership relationship. Transformational and transactional effects in
a real organizational setting, where followers were consider the leader they know and deal
with on a daily basis.
In this study, our preliminary position was that both leadership styles are necessary
conditions for leadership to be operationalized. Both act as components of the same
construct, and are neither exchangeable nor competing (Bass, 1985). However, the
findings do not hold up that view. To maximize the performance levels of their followers,
leaders must possess charisma, provide individualized consideration, and be intellectually
stimulating and inspiring to followers. It is not clear if leaders must display the attributes
of both leadership styles in order to be effective. It would be reasonable to
5.6 Recommendation
Issue Recommendations
1. In so far as perceptions of
leadership performance are
important, leaders at both senior
and immediate levels are advised
to tie employee success to
organizational success
 providing employees with a work area
where they can concentrate or as
complex as providing them with the
means to balance work and career
development with personal interests

55.  Leaders must create the conditions that
54
make engagement possible.
 Immediate managers, key engagement
drivers should include showing
employees how their work contributes
to strategy and giving them the support
they need to do their job well
 Help employees them to make
meaningful contributions to that
success both at present and in the
future.
2. To maximize the performance
levels of their followers, leaders
must possess charisma, provide
individualized consideration, and
be intellectually stimulating and
inspiring to followers.
 Take leadership initiative and leadership talent
pool should be created within organization
3. Can’t measure sole leadership
impact on performance
 Keep continuous initiatives to measure
leadership and performance relationship.(Have
referencing index )
4. Innovative ideas of followers
won’t come to surface under
transactional leadership
 Encourage followers empowerment and give
freedom to present their ideas
 Give systematic rewards for innovations
5. Generalisation creates unavoidable
gaps between leaders and
followers.
 Create environment without glass ceilings as
well as create social events( Trips, team dinner
outs) to take awkwardness due to gender
difference and their impact on leader-follower
relationship as well as performance.

56. 55
Chapter VI

57. 56
6 References
Campbell JP (1977). On the natural of organizational effectiveness, In Goodman PS ,
Pennings JM (Eds.), New Perspectives on Organizational Effectiveness, Jossey-Bass,
San Francisco, CA., 2:13-55
Sun RY (2002). The relationship among the leadership style, organizational culture
and organizational effectiveness based on competing value framework: An empirical
study for the institute of technology in Taiwan. Unpublished doctoral dissertation,
National Taipei University, Taipei, Taiwan.
Huang LS (2006). Transformational leadership has effect on organizational
performance: the organizational culture as an intermediary variable. Unpublished
master's thesis, National Taipei University, Taipei, Taiwan
Terry GR (1960). Principles of Management (3th ed.). Homewood, Ill.: Richard, D. I.
Elenkov DS (2002).Effects of leadership on organizational performance in Russian
companies. J. Bus. Res., 55(6): 467-480.
Bryman A (1992). Charisma and Leadership in Organizations. Sage, London.
Howell JM, Frost PJ (1989). A laboratory study of charismatic leadership.
Organizational Behaviour and Human Decision Processes, 43(2): 243-269.
Handbook of Leadership Theory and Practice Khurana and Hill-Popper 2002Strategic
Reward: Making It Happen By Michael Armstrong, Duncan Brow

58. 57
Annexes
Table 1-Authorized Banks and Financial Institutions of SriLanka
Licensed Commercial Banks Registered Finance
Companies
Licensed Specialised Banks
1. Bank of Ceylon 1. Alliance Finance Co.
Ltd.
1. Ceylinco Savings
Bank Ltd.
2. Citibank, N.A. 2. Arpico Finance Co.
Ltd.
2. DFCC Bank
3. Commercial Bank of
Ceylon Ltd.
3. Asia Asset Finance
Ltd.
3. Housing Development
Finance Corporation
4. Deutsche Bank AG 4. Asian Finance Ltd. 4. Bank of Sri Lanka
5. DFCC Vardhana
Bank Ltd.
5. Associated Motor
Finance Co. Ltd.
5. Kandurata
Development Bank
6. Habib Bank Ltd. 6. Bartleet Finance Ltd. 6. Lankaputhra
Development Bank
Ltd.
7. Hatton National
Bank Ltd.
7. Capital Reach Leasing
Ltd.
7. National Savings Bank
8. ICICI Bank Ltd. 8. Central Finance Co.
Ltd.
8. Rajarata Development
Bank
9. Indian Bank 9. Central Investments &
Finance Ltd.
9. Ruhuna Development
Bank
10. . Indian Overseas
Bank
10. Ceylinco Investments
& Realty Ltd.
10. Sabaragamuwa
Development Bank
11. MCB Bank Ltd. 11. Chilaw Finance Ltd. 11. Sanasa Development
Bank Ltd.
12. . National
Development Bank
Ltd.
12. Commercial Credit
Ltd.
12. S M E Bank Ltd.

59. 58
13. . Nations Trust Bank
Ltd.
13. Edirisinghe Trust
Investments Ltd.
13. State Mortgage and
Investment Bank
14. . Pan Asia Banking
Corporation Ltd.
14. Industrial Finance Ltd. 14. Uva Development
Bank
15. . Pe ople ’s Bank 15. Janashakthi Finance &
Investments Ltd.
15. Wayamba
Development Bank
16. . Public Bank
Berhad
16. L B Finance Ltd.
17. . Sampath Bank Ltd. 17. Lanka ORIX Finance
Co. Ltd.
18. . Seylan Bank Ltd. 18. Mercantile
Investments Ltd.
19. . Standard
Chartered Bank
19. Merchant Credit of Sri
Lanka Ltd.
20. . Standard
Chartered Bank
(Pakistan) Ltd.
20. Nanda Investments
Ltd.
21. . State Bank of India 21. Senkadagala Finance
Co. Ltd.
22. . The Hongkong&
Shanghai Banking
22. Seylan Merchant
Leasing Ltd.
23. Corporation Ltd. 23. Silvereen Finance Co.
Ltd.
24. . Union Bank of
Colombo Ltd.
24. Singer Finance
(Lanka) Ltd.
25. Sinhaputra Finance
Ltd.
26. Swarnamahal
Financial Services

60. 59
Ltd.
27. The Finance &
Guarantee Co. Ltd.
28. The Finance Co. Ltd.
29. The Multi Finance Co.
Ltd.
30. . Trade Finance &
Investments Ltd.
31. Vallibel Finance Ltd.