The impact of transformational leadership on employee engagement in banking sector at Ho Chi Minh city of Vietnam

MINISTRY OF EDUCATION AND TRAINING
UNIVERSITY OF ECONOMICS HOCHIMINH CITY

DUONG THI THANH TAM
THE IMPACT OF

TRANSFORMATIONAL
LEADERSHIP ON

EMPLOYEE ENGAGEMENT IN BANKING SECTOR AT
HO CHI MINH CITY OF VIETNAM
MASTER OF BUSINESS ADMINISTRATION THESIS

HoChiMinh City - 2012


DUONG THI THANH TAM
THE IMPACT OF

TRANSFORMATIONAL LEADERSHIP ON
EMPLOYEE ENGAGEMENT IN BANKING SECTOR AT
HO CHI MINH CITY OF VIETNAM

Major:
Business Administration
Major Code:
60.34.05
MASTER OF BUSINESS ADMINISTRATION THESIS
Supervisor: DR. TRAN HA MINH QUAN

ACKNOWLEDGEMENT

I would like to express my heartfelt gratitude and deepest appreciation to my research
Supervisor, Dr. Tran Ha Minh Quan for his intensive support, valuable suggestions, guidance
and encouragement during the course of my study.

I would like to thank many of my colleagues at HSBC and friends from other banks located
in Ho Chi Minh City who helped me during the collection of the data.

I would like to express my sincere gratitude to all of my teachers at Faculty of Business
Administration and Postgraduate Faculty, University of Economics Ho Chi Minh City for their
teaching and guidance during my MBA course.

I would like to specially express my thanks to all of my classmates, my friends from for
their support and encouragement.

I would also like to avail this opportunity to express my appreciation to Professor Nguyen
Dong Phong, UEH Board of Directors for creating MBA program in English.

Finally, I heartily dedicate this study to my beloved parents and my husband, Hien who
have encouraged and supported me during my study and complete this thesis.
ABSTRACT

Employee engagement is important to any organization which wants to grow stably and increase
profitability. Leadership is one of important factor that can impact on the level engagement of
the followers. Transformational leadership, especially, is the most effective leadership behavior

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in each organization in this flat world. Exploring the relationship between transformational
leadership and employee engagement is really important for each organization. This will help
the leaders or the managers in the organization increase the level of engagement of their
subordinates by applying appropriate leadership behavior especially transformational leadership.

The purpose of this study was to explore the impact of four components of transformational
leadership on the level of employee engagement in banking sector at Ho Chi Minh City of
Vietnam. Then it tries to find out which level each component of transformational leadership
have influence on the level of employee engagement in banking sector in the context of Ho Chi
Minh City of Vietnam

This study used Bass and Avolio’s (2004) Multifactor Leadership Questionnaire (3rd
edition, Form5X) to measure the transformational leadership and the Utrecht Work Engagement
Scale (UWES; Schaufeli et al., 2002 to measure the level of employee engagement. The survey
was undertaken with a sample of 205 respondents who are working in banks at Ho Chi Minh
City of Vietnam.

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The results reveal that all dimensions of transformational leadership except Inspirational
Motivation have the positive influence on the level of employee engagement in banking sector
of Ho Chi Minh City of Vietnam. The component - Individualized Consideration of
transformational leadership behavior have the strongest influence of the level of employee
engagement.Based on the findings, it is recommended that the managers or leaders in banking
sector of Ho Chi Minh City of Vietnam should apply the transformational leadership in practice
to improve the level of engagement of their employees. Keywords:

transformational
leadership, employee engagement, banking,

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individualized consideration, intellectual stimulation, inspirational motivation, idealized
influenceCONTENTS

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Appendix 1
CHAPTER 1
INTRODUCTION

The introductory chapter discusses the research background and research objective.
Furthermore, the research scope and design and research structure are also outlined.

1.1.

Research background

Today’s business environment requires that companies maintain maximum flexibility
in order to adapt to the changing demands of the marketplace. In recent years,
multinational companies from around the world have eagerly embraced globalization and
try to develop and implement a worldwide competition. An aggressive campaign to boost
profitability, increase market share, and improve customer satisfaction has been launch by
a group of leaders. Besides, organizations have to face now with the challenges of human

resource development and management, in order to retain their best employees.

Employee turnover is a problem faced by all organizations. High turnover rates have
been associated with decreased customer satisfaction (Koys, 2001), productivity (Huselid,
1995), future revenue growth (Baron, Hannan, & Burton, 2001), and profitability
(Glebbeek & Bax, 2004).Therefore, now all organizations are highly concerned to keep
their valuable employees not only to reduce the turnover cost but to ensure the stability and
developing constantly. In order to be successful, each organization needs to minimize
turnover as well as maximize the effort each individual devotes to his or her organization.
Organizations expect their employees to be proactive and show initiative, collaborate
smoothly with others, take responsibility for their own professional development, and to be
committed to high quality performance standard. An important way of doing this is through
employee engagement. As noted by Schaufeli and Bakker (2004), engaged employees are
likely to have a greater attachment to their organization and a lower tendency to quit.

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Engagement becomes an emerging psychological construct that purports to measures
how much a person is into his job. The concept of work engagement has gained
momentum because of its predictive value for job performance (Bakker, 2009; Schaufeli &
Salanova, 2007). Employees who are engaged put much effort into their work because they
indentify with it. It is convinced that the people are the most important assets who form the
strength of the company and nothing can be achieved without their commitment.
Organizations need employees who feel energetic and dedicated, and who are absorbed by
their work. In other words, organizations need engaged workers. In order to achieve this
aim, employees should be encouraged to participate in organizational activities which are
expected to enhance their engagement. Managers have to build close work relations with
their subordinates to cope with the stressful and heavy working environment. The role of

leader behaviors is very important to engage their followers, especially the
transformational leadership. Researches showed that individualized consideration,
intellectual stimulation, inspirational motivation, and idealized influence — four
components of transformational leadership all result in extra effort from workers, higher
productivity, higher morale and satisfaction, higher organizational effectiveness, lower
turnover, lower absenteeism, and greater organizational adaptability (Robbins & Judge,
2007).

In banking sector, due to the nature of business, the more braches and offices banks
have, the more chances they have to get more business and market shares. Thus, banking
employees constitute the largest group of services providers. As banking is one of the vital
service industry for any country and plays an important role in developing the economy,
once banking industry develop constantly, the economy will go together. A healthy banking
system depends on the performance of sound personnel. In order to make sure that their
employees are good performers they have to know how to retain talented people and how
to engage those people.

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In the context of Vietnam, after we officially become a member of WTO, liberating
of financial industry is a commitment that we must to comply. This liberation gives many
chances not only for foreign banks to enter to Vietnamese market but also local banks to
expand their operation to compete with other ones. Together with the expanding in banking
network, the need of human resources in financial sector is increasing quickly. As a
consequence, banking sector always is facing the turnover problem. Therefore, to retain
talented employees, banks need to understand how to engage their employees. Results
from research organizations and corporate results have demonstrated there may be a strong
link between engagement, employee performance and business outcomes. However, how

to increase employee engagement level so that they can contribute with high performance
for banks in Vietnam is not much explored. So far, there has been no research on the effect
of leadership behavior on employee engagement level in banking sector in Vietnamese
context.

1.2.

Research objective

The present research investigates the impact four components of transformational
leadership behaviors on employee engagement level, particularly in banking sector in Ho
Chi Minh City of Vietnam. The purpose of this research is to check if those components of
transformational leadership had positive impact on employee engagement, then provide
some suggestions for leaders or managers in banking sector to improve their followers’
commitment to increase organizational performance and profitability.

The research will answer the following questions:

Question 1: Which components of transformational leadership have influence on employee
engagement level?

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Question 2: Which level do the four components of transformational leadership impact on
employee engagement?

Based on the above research questions, the objective of this study are outline to
examine the impact of transformational leadership on level of employee engagement.

Specifically, it explores the impact of each component of transformational leadership
behavior on the level of employee engagement.

1.3.

Research scope and design

The research focuses on banking sector in Ho Chi Minh City of Vietnam.

The survey instrument will be initially piloted by 10 employees by interview for content,
readability, and ambiguity. Based on the results of the pilot, some minor change will be
made to the questionnaire items. Subject of the research is employees who are working in
banks included local and foreign banks located in Ho Chi Minh City who are working for
the bank. Total valid answered questionnaire is 205.

After data collection, the measurement scale will be checked on reliability by
Cronbach alpha and Exploratory Factor Analysis (EFA) to be refined. And then, the
hypotheses will be tested using correlation analysis and regression analysis.

1.4.

Research structure

This research includes five chapters

Chapter 1: Introduction. This chapter includes a brief overview of the research
background, the purpose and scope of the research as well as the structure of the research.

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Chapter 2: Literature review. The chapter comprised a deep review of previous
researches on employee engagement and leadership theories and the relationship between
the two constructs. The research also review what previous researches had done with
limitation and suggestion for future researches. Based on that, a conceptual model was
constructed and hypotheses were proposed.

Chapter 3: Research Methodology. This chapter describes the research process
included the measurements, sample and data collection, and the data analysis method.

Chapter 4: Data analysis, results and conclusions: This chapter comprises the
official assessment of measures, data analysis to test the hypotheses as well as the research
findings and conclusion.

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Chapter 5: Limitations and Implications. This chapter points out the limitation of the research during it’s implementing
and propose managerial implication with specific recommendations and suggest for future research directions.
CHAPTER 2
LITERATURE REVIEW

This chapter is an overview of available researches on employee engagement, leadership behavior and the relationship
between the two constructs. Based on that, the conceptual model is constructed.

2.1.

Employee engagement

Engagement at work was first conceptualized by Kahn (1990) as the “harnessing of organizational members’
selves to their work roles; in engagement, people employ and express themselves physically, cognitively, and
emotionally during role performances”. The cognitive aspect of employee engagement concerns employees’ beliefs
about the organization, its leaders and working conditions. The second aspect — emotional concerns how employees
feel about each of those three factors and whether they have positive or negative attitudes toward the organization and
its leaders. The physical aspect concerns the physical energies exerted by individuals to accomplish their roles.
Therefore, Kahn (1990) suggested engagement means to be psychologically as well as physically present when
occupying and performing an organizational role. Alternatively, disengagement is view as the decoupling of the self
from the work role and involves people withdrawing and defending themselves during role performances. In his
research, Kahn (1990) found that three psychological conditions were associated with engagement and disengagement
at work: meaningfulness, safety and availability. Respondents were suggested to ask themselves three fundamental
questions in each role situation: (i) How meaningful is it for me to bring myself into this performance? ; (ii) How safe
is it to do so? ; And how available am I to do so? Based on the answer of respondents, he found that employees were
more likely to be engaged at work in situations where they felt there were high levels of psychological
meaningfulness, psychological safety and psychological availability.

May et al., (2004) completed an empirical researched to test Kahn’s (1990) model and found that
meaningfulness, safety, and availability were significantly related to engagement.

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Engagement was reintroduced in the research of Maslach et al (2001) about job burnout. They conceptualized
burnout as the result of chronic and interpersonal stressors experienced at work with burnout consisting of three
dimensions: exhaustion, cynicism and inefficacy. As individual experience burnout their energy is replaced by
exhaustion, involvement becomes cynicism and efficacy is turned into ineffectiveness. From their research, they
suggested engagement as the positive antithesis of burnout like energy, involvement and efficacy, the opposite poles of
burnout dimensions. According to Maslach et al (2001), six areas of work-life as control, workload, rewards and

recognitions, community and social support, perceived fairness and values may led to either burnout or engagement.
Where there is a high degree of match between a person and these areas engagement is established.

Engagement is most closely associated with the existing constructs of job involvement (Brown, 1996) and
“flow” (Csikszentmihalyi, 1990) in the social sciences literature. Job involvement is defined as “the degree to which
the job situation is central to the person and his or her identity” Lawler & Hall, 1970). Kanungo (1982) suggested that
job involvement is “a cognitive or belief state of psychological identification”. Job involvement is thought to depend
on both need saliency and the potential of a job satisfy to these needs.

Therefore, Job involvement results from a cognitive judgment about the need satisfying abilities of the job. Job in this
view is tired to one’s self-image. Engagement differs from job involvement in that it is concerned more with how the
individual employs his or her self during the performance of his or her job. Moreover, engagement entails the active
use of emotions and behaviors, in addition to cognitions. Finally, engagement may be thought of as an antecedent to
job involvement in that individuals who experience deep engagement in their roles should come to identify with their
jobs.

The second related construction to engagement is the notion of “flow” defined by Csikszentmihalyi (1990) as
the “holistic sensation that people feel when they act with total involvement”. Flow is the state in which there is little
distinction between the self and environment. When individuals are in a “flow” state, little conscious control is
necessary for their actions. Individuals narrow their attention to specific stimuli. They lose a sense of consciousness
about their selves as they melt with the activity itself. Flow also experience provide feedback that is automatically take
into account by the individual. Finally, individual in a flow experience need no external rewards or goals to motivate

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them as the activity itself present constant challenges. May et al (2004) also agreed that engagement is most closely
associated with the constructs of job involvement and flow.

Engagement also was conceptualized as “a persistent, positive, affective-motivational state of fulfillment in
employees characterized by vigor, dedication, and absorption.” (Schaufeli & Salanova, et al., 2002). According to
them, vigor is seen as high level of energy and resilience, a willingness to invest effort in the job, ability to not be
easily fatigued, and persistence in the face of difficulties. Dedication is characterized by strong involvement in work,
enthusiasm, and a sense of pride and inspiration.

Absorption is defined as a pleasant state of being immersed in one’s work, time passing quickly, and being unable to
detach from the job.

Recently, employee engagement has been often defined as emotional and intellectual commitment to the
organization (Baumruk, 2004; Shaw, 2005; and Richman, 2006) or the amount of discretionary effort exhibited by
employees in their job (Frank et al., 2004); that is when employees have many choices, they will act in a way that
furthers their organization’s interest. An engaged employee is a person who is fully involved in and enthusiastic about
his or her job. Employee engagement was also defined by Trust et al (2006) simply as “passion for work’, a
psychological state which is seen to encompass the three dimensions of engagement discussed by Kahn(1990), and
captures the common theme running through all these definitions (Kular, 2008).

Whilst it is acknowledged that employee engagement has been defined in many different ways, it is also
argued that the definitions often sound similar to other better known and established constructs such as “organizational
commitment” and “organizational citizenship behavior” (OCB) (Robinson et al., 2004). Therefore, they defined
engagement as “one step up from commitment”. However, Saks (2006) argued that organizational commitment also
differs from engagement in that it refers to a person’s attitude and attachment towards their organization, whilst it
could be argues that engagement is not merely an attitude; it is the degree to which and individual is attentive to their
work and absorbed in the performance of their role.

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In addition, while OCB involves voluntary and informal behaviors that can help co-workers and the

organization, the focus of engagement is one’s formal role performance rather than purely extra and voluntary
behavior.

The existence of different definitions about employee engagement makes it is difficult to determine the state
of knowledge of it due to each study examines employee engagement under s different protocol. In addition, unless
employee engagement can be universally defined and measured, it cannot be managed, nor can it be known if efforts
to improve it are working (Ferguson, 2007). This highlights the problems of comparability cause by differences in
definition. So far none of the definitions has come to dominate the field either as a definition or as a methodology
(Wefald, 2008).

2.2.

Important of employee engagement

It is important for managers to cultivate engagement given that disengagement or alienation is central to the
problem of workers’ lack of commitment and motivation (Aktouf, 1992). Meaningless work is often associated with
apathy and detachment from ones’ work (Thomas & Velthouse, 1990). In such conditions, individuals are thought to
be estranged from their selves (Seeman, 1972) and restoration of meaning in work is seen as a method to foster an
employee’s motivation and attachment to work. These views demonstrate both the humanistic and practical reasons for
providing meaningful work to individuals — personal fulfillment and motivational qualities of such work.

Practitioners and academics tend to agree that the consequences of employee engagement are positive (Saks,
2006). There is a general belief that there is a connection between employee engagement and business results; a metaanalysis of Harter et al (2002) had confirmed this connection. They concluded that “employee satisfaction and
engagement are related to meaningful business outcomes at a magnitude that is important to many organizations”.
Other researches using a different resource of engagement (involvement and enthusiasm) has linked it to such
variables as employee turnover, customer satisfaction — loyalty, safety and to a lesser degree, productivity and
profitability criteria (Harter, Schnitdt & Hayes, 2002).

A highly engaged employee will consistently deliver beyond expectation. In the workplace research on

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employee engagement (Harter, Schmidt & Hayes, 2002) have repeatedly asked employees “whether they have the
opportunity to do what they do best everyday”. One in five employees strongly agrees with this statement. Those work
units scoring higher on this perception have substantially higher performance.

Thus employee engagement is critical to any organization that seeks to retain valued employees. An
organization’s capacity to manage employee engagement is closely related to its ability to achieve high performance
levels and superior business results. The Gallup Organization (2004) found a critical links between employee
engagement, customer loyalty, business growth and profitability. They compared the scores of these variables among a
sample of stores scoring in the top 25 per cent on employee engagement and customer loyalty with those in the bottom
of 25 per cent. The results show that stores in the bottom 25 per cent significantly under-performed across three
productivity measures: sales, customer complaints and turnover. Gallup research consistently confirms that engaged
work places compared with least engaged are much more likely to have lower employee turnover, higher than average
customer loyalty, above average productivity and earnings. The findings from the International Survey Research (ISR,
2005) team showed

evidence that organizations can only reach their full potential through emotionally engaging employees and customers.

In an extension of the Gallup findings, Ott (2007) cites Gallup research, which found that higher workplace
engagement predicts higher earnings per share (EPS) among publicly-traded businesses. When compared with
industry competitors at the company level, organizations with more than four engaged employees for every one
actively disengaged, experienced 2.6 times more growth in EPS than did organizations with a ratio of slightly less than
one engaged worker for every one actively disengaged employee. The findings can be considered as reliable as the
variability in differing industries was control by comparing each company to its completion, and the patterns across
time for EPS were explored due to a “bouncing” increase or decrease which is common in EPS (Ott, 2007). The
Watson Wyatt consulting companies has also been proved that there is an intrinsic link between employee
engagement, customer loyalty, and profitability.

There are many researches prove that engaging and involving employees make good business sense and

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building shareholders’ value. Negative workplace relationships may be a big part of why so many employees are not
engaged with their jobs. In the research of Robinson et al. (2004), they emphasized that “The organization must work
to nurture, maintain and grow engagement, which requires a two-way relationship between employer and employee”.
In their research, they are much more explicit in highlighting the importance of managers and management style in the
two-way process between the organization and employee. Therefore, leadership is one of factors that organization
striving for employee engagement can not afford to ignore.
2.3.
Leadership theories

Leadership is an important function of management which helps to maximize efficiency and to achieve
organizational goals. The excellent leader not only inspires subordinate’s potential to enhance efficiency but also
meets their requirements in the process of achieving organizational goals. Leadership was earlier defined by Stogdill
(1957) as the individual behavior to guide a group to achieve the common target. According to Richards & Engle
(1986,) leadership is about establishment of vision, value and creation of environment so that the objective can be
accomplished. Robbins and Judge (2007) define leadership as the ability to influence a group toward the achievement
of a vision or set of goals. The sour e of this influence may be formal, such as that provided by the possession of
managerial rank in an organization. Kouzes and Posner (2007) suggested that leadership is about the mobilization of
others to get things done.

The theories about leadership had been developed since the 1900’s. At the beginning, leadership was
considered as an innate ability. According to Great Man theory, leadership is considered an art, for which some
fortunate people had an inbuilt genius and the rest of us could only engage in admiring post-game analyses. Next is the
Trait theory where leadership differentiates leaders from non-leaders by focusing on personal qualities and

characteristics (Robbins and Judge, 2007). However, research efforts at isolating leadership traits resulted in a number
of dead due to a numerous of leadership traits were identified. Although some of them are common, these particular
traits that were isolated varied a great deal from review to review.

The failures of early Trait studies led researchers go to another direction in the late 1040s through 1960s that
looked at the behaviors exhibited by specific leaders. Beginning with over a thousand dimensions of leadership
behaviors, they had narrowed leadership into task-oriented and people-oriented styles. Based on the specific behaviors

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identified leaders, the Behavioral theories suggested that leadership could be created by training or learning those
behaviors.

Although behavior theory may help to develop specific leadership behavior, the prediction of effective
leadership is more complex due to different situations. Indeed, most researchers confirm that there is no right
leadership style for all situations. Therefore, contingency theories arose to with an attempt to match the leadership
behaviors that worked best in specific situations. The first comprehensive contingency model for leadership was
developed by Fred Fiedler. This model proposes that effective group performance depends on the proper match
between leader’s style and the degree to which the situation gives control to the leader. According to Fiedler, the better
the leader-member relations, the more highly structured the job, and the stronger the position power, the more control
the leader has (Robbins and Jugde, 2007).

Hersey and Blanchard have developed a leadership model which called — situational leadership theory.
Situational leadership is a contingency theory that focuses on followers. Regardless of what the leader does,
effectiveness depends on the actions of the followers. This is an important dimension that had been overlooked or
underemphasized in most leadership theories. The theory is based on the amount of direction (task behavior) and
socioemotional support (relationship behavior) a leader must provide given the situation and the readiness of the
followers. The term readiness refers to the extent to which people have the ability and willingness to accomplish a

specific task (Robbins and Jugde, 2007).

The transactional-transformational leadership model has been a large and important part of leadership research
and theory recently. The terms of transactional-transformational leadership were original developed by Burns (1978)
and then cleared up by Bass (1985). In broader terms, the model explains the characteristics of effective leadership.

Transactional leadership theory is founded on the idea that leadersubordinate relations are based on a series of
exchanges or implicit bargains between leaders and followers (Den Hartog & Koopman, 2002). The exchange may be
economic, political or psychological (Burn, 1978). For example, politicians lead by “exchanging one thing for another:
jobs for votes, or subsidies for campaign contribution”.

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On the other hand, Transformational leadership theory suggested that employees function most effectively
when led in a way that is beyond simple transactions. Transformational leaders inspire followers to transcend their
own self-interests for the good of organization and are capable of having profound and extraordinary effect on their
followers. Transformational leaders helps followers grow and develop their own leadership capacity by responding to
individual follower’s needs, empowering them and by aligning the objectives and goals of individual followers, the
leader, the group , and the larger organization.

There was a numerous researches show that transformational leadership is the most effective leadership which
can move followers to exceed expected performance, as well as lead to high levels of follower satisfaction and
commitment to the group and organization (Bass, 1985, 1998). One of evidences for the above statement is the
experimental research of van Vugt, Jepson, Hart and de Cremer (2004). Participants were randomly assigned to one of
three groups and took part in three investment task trials. The authors manipulated the content of the messages sent by
the leader to the group members to simulate either transactional, transformational, or laissez- faire (non-leadership)
leadership style. After the task trials, individuals were asked whether they wanted to stay in the same group or join a
different group for a subsequent task. The results suggested that participants were more likely to leave the group when

they were in the condition with the transactional or the laissez-faire leader, in contrast with the transformational leader.
When confronted with a transactional leader, group members were unhappy with the limited amount of control they
had over the decision processes, while when confronted with a laissez-faire leader participants did have control, but
they were not motivated to invest additional effort. In summarize, previous researches support our decision to focus on
transformational leadership in relation to employee engagement.

2.4.

Transformational leadership

Transformational leadership is defined as leadership behavior that transforms the norms and values of the
employees, whereby the leader motivates the workers to perform beyond their own expectations (Yuki, 1989).
According to Bass (1985), transformational leaders motivate their followers by inspiring them, offering challenges,
and encouraging individual development. Transformational leadership stresses achievement of higher collective
purpose, of common mission and vision. Bass had conducted interviews with 70 senior executives, defining
transformational leadership and asking respondents to describe a transformational leader with whom they had worked

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with. Respondents reported that the leader encouraged them to work above and beyond what was expected of them.
Their leader increased their awareness of and promoted higher levels of performance and greater innovativeness in
their teams. As a result, the followers trusted in the leader and heightened self-confidence, and total commitment to the
organization. The subordinates of transformational leaders feel trust, admiration, loyalty, and respect toward leaders
and are motivated to perform extra-role behaviors (Bass, 1985; Katz and Kahn, 1978).

The transformational leadership is comprised of four components with descriptions are presented in the
following section:

Idealized influence: transformational leaders show great persistence and determination in the pursuit of
objectives, show high standards of ethical, principles and moral conduct, sacrifice self-gain for the gain of other,
consider subordinates’ needs over their own needs and share successes and risks with subordinates (Kedsuda &
Stephen, 2007). The leaders become a role model for their followers. The followers trust, admire, respect the leaders
and strive to emulate them. Subordinates are encouraged to develop in an attempt to reach their full potential. There
are two aspects of Idealized influence: idealized influence attributed and idealized influence behavioral. For Idealized
influence (attributes), leaders are perceived as confident, powerful and focused on higher order ideals and ethics. In
the other hand, leaders with Idealized influence (behaviors) manifest actions centered on values, beliefs and a sense of
mission. These two aspects, measured by separate sub-factors of the Multifactor Leadership Questionnaire (MLQ),
represent the interactional nature of idealized influence. It is both embodied in the leaders’ behavior and in attributions
that are made concerning the leaders by followers. For instance, from MLQ, the item “The leader emphasizes the
importance of having a collective sense of mission” represent idealized influence behaviors while the item “The leader
goes beyond selfinterest for the good of the group” represent idealized influence attributed.

This component can be mapped on Kahn’s (1990) conditions of engagement through relationship factors within
psychological meaningfulness and safety. It is also align with elements of vigor and dedication through developing a
willingness to invest in one’s work and building a sense of inspiration, significance and enthusiasm (Maslach et al,
2001).

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Inspirational motivation: leaders behave in ways that motivate subordinates by providing meaning and
challenge to their work. Team’s spirit is aroused together with the exhibition of enthusiasm and optimism. The leaders
articulate shared vision and goals in clear ways and how they are to be achieved. They also encourage the followers to
envision attractive future states and communicate with them about the expectations and demonstrate a commitment to
goals and shared vision. The inspirational motivation component aligned with the condition of meaningfulness of
Kahn (1990) in that the sense of being involved and valued helps instill feeling of meaningfulness. This also reflected
in facet of dedication of Maslach et al (2001).

Intellectual stimulation: Transformational leaders stimulate their subordinates’ effort to be innovative and
creative by questioning assumptions, reframing problems, and approaching old situations in new ways. Creativity is
encouraged. Followers are animated to try new approaches but emphasized rationality and their ideas are not criticized
if differ from the leaders’ ideas. The followers’ new ideas and creative problem solutions are counted while involving
in the process of addressing problems and finding solutions (Bass et al, 2003). Intellectual stimulation maps on to
engagement in that it allows followers to feel comfortable and safe in expressing their opinions, key factors of
psychological safety (Kahn, 1990). It is complied with requirement of engagement is employees being able to voice
their views. Intellectual stimulation also shows that leaders value their employees’ inputs, and this add to effective
reciprocal communication and helps build interpersonal relationships, factors highlighted as essential for engagement
(Robinson et al, 2004).

Individualized consideration: the leaders build a considerate relationship with each individual. They treat
their subordinates as unique individuals, and understand the followers’ needs for achievement and development by
adopting a coaching and mentoring approach. The subordinates are developed to successively higher level of potential
in a supportive climate. Individual differences in terms of needs and desires are recognized. The leaders’ behavior
displays acceptance of individual differences. A two-way exchange in communication is encouraged, and
“management by walking around” work spaces are practiced. Interactions between leader and followers are
personalized. The individually considerate leaders listen effectively. The leader delegates tasks as a means of
developing followers. Individualized consideration contributes to the levels of trust and support between leaders and
followers which is a key in creating psychological safety according to Kahn (1990).

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In summarized, idealized influence, inspirational motivation, intellectual stimulation, and individualized
consideration all result in extra effort from workers, higher productivity, higher morale and satisfaction, higher
organizational effectiveness and organizational commitment, lower turnover (Robbins & Judge, 2007).

2.5.

Relationship between employee engagement and transformational leadership

One of the essential drivers for employee engagement is leadership. This is not surprising as leadership is one
of the most researched topics within organizational and business setting with over 80,000 articles listed in Business
Source Complete and over 25,000 articles listed in PsychINFO databases (Julia & Ian, 2009).

There was a numerous researches show that transformational leadership is the most effective leadership which
can move followers to exceed expected performance, as well as lead to high levels of follower satisfaction and
commitment to the group and organization (Bass, 1985, 1998).
Can transformational leaders influence follower engagement?

Transformational leaders inspire followers with a vision that address their higher needs and engage followers
in the attainment of that vision. The transformational leadership style enhances employees’ feelings of involvement,
cohesiveness, commitment, potency, and performance (Shamir, House & Arthur, 1993). An employee who receives
support, inspiration and quality coaching from the supervisor, is likely to experience work as more challenging,
involving and satisfying, and consequently, to become highly engaged with the job tasks.

Transformational leadership is the combination of four components: idealized influence or charisma, inspirational
motivation, intellectual stimulation, and individualized consideration. Charismatic leaders in the form of
unconventional behavior provide a worthy role model for followers to emulate and thereby directly enhance
innovation by followers. The leadership behavior of inspirational motivation enhances meaningfulness — followers
perceive their work in a context which is personally important to them.

Leaders with intellectual stimulation behavior enhance follower freedom and self-efficacy by allowing followers to

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question assumptions and work out their own solution to problems. These three psychological states of
meaningfulness, freedom, and self-efficacy lead to engagement which in turn leads to innovation. Finally,
individualized consideration by leaders triggers the norm of reciprocity in followers and they provide innovative
solutions to solve organizational problems. Putting all the above reasoning together, it is found numerous paths from
transformational leadership to employee engagement. Transformational leaders bring a positive change in those who
follow them. They are mostly vigorous, keen, ardent and paying attention on the success of every member of the
group.

However, in order to create a highly engaged environment, managers must be engaged, “if managers aren’t
engaged its unlikely employees will respond to any efforts to engage them” (Soltis, 2004). Research has demonstrated
that employee engagement tends to be based on factors such as relationship they have with their managers (Blizzard,
2003).

A study conducted by Schaufeli and Bakker (2004), indirectly measured aspects of transformational leadership
and its influence on job engagement. They found that two variables encompassed in the individual consideration
component of transformational leadership (coaching and feedback) were positively related to vigor, dedication, and
absorption.

May, Gilson, and Harter (2004) also found significant results relating job engagement and leadership in their
study. They found that employee job engagement was significantly correlated with supervisor relations, which they
defined as the leader’s display of concern for their employees’ needs and feelings, as well as positive feedback to
employees and encouragement from the leader to voice their concerns. They also found that job engagement was
significantly related to meaningfulness, which measures the degree of meaning an individual discovers in their work.

Metzler (2006) examined the relationship between transformational and transactional leadership and employee
engagement (vigor, dedication, and absorption), on a sample of 251 university students. Leadership style was assessed
using Bass and Avolio’s (2004) Multifactor Leadership Questionnaire (MLQ) (3rd edition, Form5X) which consisted
of 32 items, measures subordinate perceptions of their supervisors’ leadership style. Employee engagement was

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assessed using the Utrecht Work Engagement Scale (UWES; Schaufeli et al., 2002) which measures the extent to
which employees are engaged in their jobs over three dimensions: vigor, dedication, and absorption. Results showed
that both leadership styles would positive predict employee vigor, dedication, and absorption, but transformational
leadership would have greater power to predict the dimension of employee engagement.

Arnold, Turner, Barling, Kelloway, and McKee (2007) found a partial and a full mediation (in two studies) of
meaning ascribed to work between transformational leadership and psychological well-being. The correlation between
transformational leadership and psychological well-being was .57 (p < .01). Both studies indicated that
transformational leaders have a positive impact on the psychological well-being of their followers (Arnold et al.,
2007). Given the similarities between psychological well-being and engagement, it is likely that transformational
leadership will also have an impact on engagement.

A study looking at transformational leadership and engagement directly was done by Zhu, Avolio, and
Walumbwa (2007). This research operationalized engagement using an industry scale developed by the Gallup
Corporation (the Q12). Broadly, they found that leader-rated follower characteristics moderated the positive
relationship between transformational leadership and follower engagement such that as leaders rated their followers
more positively, the relationship between transformational leadership and engagement was stronger. They also found a
significant positive direct relationship between transformational leadership and engagement (r =.58, p < .01).

In the study of Wefald (2008) on examination of job engagement, transformational leadership and related
psychological constructs, hierarchical regressions were performed to test hypothesis six with control variables in the
first step (manager, gender, age group, education level, and job tenure), personality variables in the second step (big
five personality facets and positive affect), and follower’s reports of their leader’s level of transformational leadership
in the third step. Hypothesis six stated that after controlling for demographic variables and personality, followers’
reports of their direct report’s level of transformational leadership will significantly predict engagement. This
hypothesis was partially supported. The reports of transformational leadership predicted both measures of engagement

(Schaufeli and Britt), but not Shirom’s vigor. Transformational leadership was measured using a short measure of
transformational leadership called the Global Transformational Leadership scale (GTL) (Carless, Wearing, & Mann,

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