MINISTRY OF EDUCATION AND TRAINING HCMC UNIVERSITY OF ECONOMICS ---------------- TRAN MINH PHUONG THE IMPACT OF TRANSFORMATIONAL AND TRANSACTIONAL LEADERSHIP ON EMPLOYEE ENGAGEMENT MASTER OF BUSINESS ADMINISTRATION THESIS Ho Chi Minh City – 2011 TIEU LUAN MOI download : skknchat@gmail.com MINISTRY OF EDUCATION AND TRAINING HCMC UNIVERSITY OF ECONOMICS ---------------- TRAN MINH PHUONG THE IMPACT OF TRANSFORMATIONAL AND TRANSACTIONAL LEADERSHIP ON EMPLOYEE ENGAGEMENT Major: Business Administration Major Code: 60.05 MASTER OF BUSINESS ADMINISTRATION THESIS SUPERVISOR: DR. NGUYEN HUU LAM Ho Chi Minh City – 2011 TIEU LUAN MOI download : skknchat@gmail.com ACKNOWLEDGEMENT I would like to express my heartfelt thanks and appreciation to my research Supervisor, Dr. Nguyen Huu Lam for his valuable ideas, guidance and suggestions for my thesis. My sincere thanks to all lecturers of the eMBA class who have given us knowledge, and guidance during the course.
My special thanks to all commentators Dr. Nguyen Trong Hoai, Dr. Nguyen Huu Dung, Dr. Ho Viet Tien, and Dr.
Nguyen Van Ngai for valuable advice and suggestions. It is my pleasure to be an eMBA class member as we had a memorable time studying together although we faced many difficulties during our course. My sincere thanks to our class monitor Mr. Cuong for his contribution to our class, and Ms.
Hien my classmate for her support, encouragement and helping on data collection. I would like to thank all of my friends and colleagues who enthusiastically helped me during the data collection, and special thanks to my manager who encouraged and let me have necessary time for my thesis. Finally, I am deeply grateful to my parents, especially my mother who always care for me, do all best things and support for my studying until now. i TIEU LUAN MOI download : skknchat@gmail.com ABSTRACT The Vietnam economy continues to grow quickly, especially after Vietnam has become a member of WTO, and in fact this is driving a war on talent.
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 organizations in Vietnam is not much explored. The research investigates the impact of transformational and transactional leadership behaviours on employee engagement level, particularly in manufacturing industry in the south of Vietnam representative by HCMC, Dong Nai and Binh Duong provinces. Data analysis was done for valid 223 returned questionnaires collected from employees who are currently working at least one year for the companies in manufacturing sector.
The results showed that transformational leadership behaviour has significant and positive influence on employee engagement. On the other hand, transactional leadership has no influence on employee engagement. This result leads to the same finding with previous researches that transformational leadership would enhance employee engagement level, while transactional leadership behaviour does not significantly connect to employee engagement. For transformational leadership components, the results of research data analysis demonstrated that the first three components Idealized Influence (Attributes), Idealized Influence (Behaviour), Inspirational Motivation did not have impact on employee engagement; only did the last two components Intellectual Stimulation and Individualized Consideration have positive impact on employee engagement.
For transactional leadership components, research practical data showed that Contingent Reward; however, has positive relationship with employee engagement while Management by Exception: active did not have significant relationship with ii TIEU LUAN MOI download : skknchat@gmail.com employee engagement, and Management by Exception: passive and Laissez Faire leadership behaviour have week negative relationship with employee engagement. Keywords: transformational leadership, transactional leadership, employee engagement, the south of Vietnam iii TIEU LUAN MOI download : skknchat@gmail.com CONTENTS Acknowledgement .iv List of Tables .vi List of Figures. vii CHAPTER1: INTRODUCTION .3 Research scope and design .3 CHAPTER 2: LITERATURE REVIEW AND RESEARCH MODEL .3 Important of engagement .4 Leadership and employee engagement. 16 CHAPTER 3: RESEARCH METHOD .5 Sample and data collection .1 Leadership behavior questionnaire .2 Employee engagement questionnaire.
30 CHAPTER 4: ANALYSIS RESULT AND CONCLUSION. 37 iv TIEU LUAN MOI download : skknchat@gmail. 51 CHAPTER 5: IMPLICATION AND LIMITATION .1 Implications of the research .2 Limitation of the research and some suggestion for future research. 56 Appendix 1 Appendix 2 Appendix 3 Appendix 4 Appendix 5 Appendix 6 Appendix 7 Appendix 8 v TIEU LUAN MOI download : skknchat@gmail.com LIST OF TABLES Table 4.3: Descriptive analysis – Transformational leadership .4: Descriptive analysis – Transactional leadership.6: The factor loading .7: The final elements of measurement scale for employee engagement .9: Regression of transformational leadership on employee engagement .10: Regression of transformational leadership components on employee engagement.11: Regression of transactional leadership on employee engagement .12: Regression of transactional leadership components on employee engagement.13: Conclusion of research hypotheses.
48 vi TIEU LUAN MOI download : skknchat@gmail.com LIST OF FIGURES Figure 3.1: Respondents – company categories .2: Respondents – job categories .3: The result of regression analysis of transformational leadership on employee engagement.4: The result of regression analysis of transformation leadership component on employee engagement.5: The result of regression analysis of transactional leadership component on employee engagement. 52 vii TIEU LUAN MOI download : skknchat@gmail.com CHAPTER 1 INTRODUCTION 1.1 Research background Engagement is an emerging psychological construct that purports to measure 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, cited in Tims, Bakker & Xanthopoulou, 2011). Instead of traditional organizational structures that heavily rely on management control and economic principles of cost reduction, efficiency, and cash flow, the focus in modern organizations is on the management of human capital.
Currently, 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 standards. It is convinced that the people who form the strength of the company and that nothing can be achieved without their commitment and their energy, which makes people the most important asset. Thus employees are needed who feel energetic and dedicated, and who are absorbed by their work. In other words, organizations need engaged workers.
Therefore, employee engagement has become a hot topic in recent years. Although there is a great deal of interest in engagement, there is also a good deal of confusion as many different definitions make the knowledge of employee engagement difficult to determine. So far none of the definitions has come to dominate the field either as a definition or as a methodology (Wefald, 2008). There are many predictors lead to engagement; however, one of the most concerned factors is leadership behaviors, especially the contemporary concept transformational and transactional leadership.
It is found numerous paths from transformational leadership to employee engagement. The leadership behavior of inspirational motivation, intellectual stimulation, and individualized consideration 1 TIEU LUAN MOI download : skknchat@gmail.com enhances meaningfulness - followers perceive their work in a context which is personally important to them, independent and confident by allowing followers to question assumptions and work out their own solutions to problems as well as provide innovative solutions to solve organizational problems. In summary, transformational leadership enhances employees’ feelings of involvement, cohesiveness, commitment, potency, and performance and so would enhance the employee engagement level. In the other hand, transactional leaders motivate only to get the work done and reward employees accordingly (Bass & Riggio, 2008), but external rewards have been consistently found to have a negative effect on intrinsic motivation.
Moreover, laissez-faire leadership style was found positively associated with job stressors such as role ambiguity and conflict. Thus transactional leadership does not have positive impact on engagement. The Vietnam economy continues to grow quickly, especially after Vietnam has become a member of WTO, and in fact this is driving a war on talent. 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 commitment and engagement level so that they can contribute with high performance for organizations in Vietnam is not much explored. There is also much of research on job satisfaction and performance, but engagement, and the effect of leadership behaviors on engagement level is still a new concept that needs more practical study in a Vietnamese context.2 Research objective This research investigates the impact of transformational and transactional leadership behaviours on employee engagement level, particularly in manufacturing industry in the south of Vietnam representative by HCMC, Dong Nai and Binh Duong provinces. The purpose of this research is to check if transformational leadership has positive impact on employee engagement and confirm if transactional leadership really has negative or no impact on employee engagement 2 TIEU LUAN MOI download : skknchat@gmail.com level, then provide some suggestions for leader or manager to improve their followers’ commitment to increase performance and profitability. The research will answer the following questions Question 1: How do transformational leadership and transactional leadership affect the level of employee engagement? Question 2: Which components of transformational leadership have positive influence on employee engagement level? Question 3: Which components of transactional leadership have negative influence on employee engagement level? 1.3 Research scope and design The research focuses on manufacturing industry in HCMC, Dong Nai and Binh Duong provinces in the south of Vietnam.
The survey instrument will be initially tested by 10 employees by interview for content, readability, and ambiguity. Based on results of the pre-test, some minor changes will be made to the questionnaire items. The subject of the research is employees who are working for the company at least one year. Total valid answered questionnaire is 223.
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.4 Research structure The research includes five chapters Chapter 1: introduction that will provide information on research background, the purpose and scope of the research, how the research is designed and organized. Chapter 2: literature review encompasses the construct definitions that are leadership behaviour, employee engagement and the relationship between the two constructs. The research also review what previous researches have done with limitation and suggestion for future researches.
3 TIEU LUAN MOI download : skknchat@gmail.com Chapter 3: research method that covers research model, research question, research hypotheses, sample and data collection, and research questionnaire. Chapter 4: result of data analysis including descriptive analysis, reliability analysis, factor analysis with EFA, correlation analysis, and regression analysis; and conclusion based on results of data analysis. Chapter 5: implication of the research with some ideas for applying into practice, limitation of the research and suggestion for future research. 4 TIEU LUAN MOI download : skknchat@gmail.com CHAPTER 2 LITERATURE REVIEW 2.1 Leadership behaviour The practice and academic circles agree that leadership is really an important subject in the field of organizational behavior.
Leadership is one with the most dynamic effects during individual and organizational interaction. In other words, whether a management is able to execute “collaborated effort” depends on leadership capability. The excellent leader not only inspires subordinate’s potential to enhance efficiency and also meets their requirements in the process of achieving organizational goals. Stogdill (1957, cited in Hsien & Tsai) defined leadership as the individual behavior to guide a group to achieve the common target.
In latter days, Richards & Engle (1986, cited in Hsien & Tsai) defined leadership as about establishment of vision, value and creation of environment so that the objective can be accomplished. According to Robbin and Judge (2007), leadership is the ability to influence a group toward the achievement of a vision or set of goals. The source of this influence may be formal, such as that provided by the possession of managerial rank in an organization.