The Leadership – A Creative Item of the Organizational Culture. A Brief Focus on Banking System in Romania

Cosmin Dumitru Matis Babes-Bolyai University, Faculty of Economics and Business Administration, Cluj-Napoca, Romania

cosmin.matis@econ.ubbcluj.ro Abstract. The present research is positioned in the organizational culture area on the leadership perspective with a brief focus on banking system. Our purpose is to identify the essential features of the leaders and the defining elements of the participative leadership and the transformational leadership required for the implementation of changes. The study is challenging on the importance of the leadership, on the research paradigms and on the current forms of leadership – mainly, the comparative analysis between the participative leadership and the transformational one. The methodology used in developing our scientific research includes the quantitative, descriptive and explanatory analysis. The study case is based on a bank survey questionnaire. Our database includes 410 completed and valid questionnaires as follows: 150 for the employees carrying on manager positions and 260 for the normal employees not performing as managers. The responses received are distributed on a Likert scale with 5 levels (1- the minimum level, meaning total disagree and 5 – the maximum level, meaning total agreement). The conclusions of our research emphasis that in the banking structures with important and great changes as the case of Romanian banking system, is necessary a transformational leadership based on innovation. Innovations lead to employee development, contribute to the organization improvement, to the increase of the company profitability and to the development of new banking products and services. Innovations lead to changes, the leaders offer the information necessary for understanding changes and create confidence in changes. The transformational leadership integrates also elements of participative leadership but creates a higher degree of satisfaction and cohesion among the members of the groups, low level of conflicts/disputes, greater performances and influences the creative behaviour, is favoring the commitment to the brand and increases the satisfaction at work. The development of a strong organization is achieved only through inseparable connection between organizational culture and leadership. Keywords: leadership, organizational culture, change, innovation 1 Introduction More often, achieving high performances entails implementation of organizational changes, leaders who change their behavior and teach the others to follow suit. Changes in the organizations seem to constrain leaders to surpass themselves, to be able to analyze economic reality and not only and to develop the ability to express their ideas and values to the other members of the organization. Viewing the banking system from the leadership perspective, we can say that in theory any employee can be a leader, but in practice it is confirmed that the management position grants people a formal leader role, having the ability to influence the employees that are coordinating. However, there are cases when this does not happen, especially when managers coming from different cultures are appointed. They use some employees who are well seen and appreciated among their work peers and

315

who easily succeed in sending the messages favorable to implementation of organizational changes. This study aims to analyze to what extent transformational leadership, characterized by promoting innovation and encouraging positive thinking, is accepted by the employees from the banking system. The study is both opportune and relevant given the growing need for knowing the functioning of an efficient banking system in a world of permanent change. The main conclusions of this study reveal the fact that there is a need for transformational leadership in the banking organization facing big changes. Furthermore, we can prove that innovations lead to employees' development, contribute to the organization's development, to an increase in its profits and to the development of new banking products and services. Leaders are those who guide (lead) the employees and offer necessary information for understanding the changes, who build confidence in these. This study also proves that the result of the leadership style applied is determined by the motivation level, respect, trust, admiration, commitment, loyalty and performance among the employees. Transformational leadership integrates also elements of participative leadership but creates a bigger satisfaction level and cohesion within the groups. The first section of the paper includes a brief literature review on organizational leadership, reveals the importance of leadership in banking organizations and presents a comparative analysis between participative leadership and the transformational one. The second section represents an empirical research on the Romanian banking system. 2 Research Paradigm in Organizational Leadership Johns (1998, 296) in the work entitled “Organizational behavior” defines leadership as the influence that certain individuals have over reaching others objectives in an organizational context. Senge (2012, 409) also makes a relevant affirmation in his work “The Fifth Discipline” considering that for the leaders’ actions to be successful, the interaction of three leader types must be taken into account - executive leaders need local leaders to shift strategic targets from concept to possibility, along with network leaders to build wider learning and change networks. Based on these beliefs, we can assume that for radical changes to happen in banking organizations there is a need for three types of leaders, i.e:

• local leaders who are connected to the realities of the organization and without whom new initiatives couldn’t be put in practice, no matter how much they would benefit for the organization;

• network leaders are generally considered to be in the banking system, the regional managers connecting territorial units with the central management;

• executive leaders who can be the department directors or executive vice-presidents and who are the ones who develop new ideas and are in charge with the fulfillment of the stakeholders’ policies and strategies.

Tichy and Cohen (2000, 29) in the work “The Leader or the Art of Leadership” argue the need for leaders in the conversion of a company into a successful organization, showing that:

• leaders must cope with changes; they must give up old ideas, concepts and methods and determine new development directions for the company and reshape the employees through successive changes so that the targeted objectives are reached;

• leaders are those who make things happen; they are those who change the organizational culture based on current realities and needs, who promote team spirit in implementing any project;

316

• leaders are revolutionaries; they are those who perceive reality, grow awareness among the employees concerning the need for change and determine the actions that need to be taken.

Following these views, we can state that leadership represents the influence that leaders have over the employees to reach their objectives in an organizational context. Thus, leadership means the need for a managing influence in steering the effort for performance management. 3 The Importance of Leadership in Banking Organizations. Participative Leadership and

Transformational Leadership The majority of studies focused on defining the attributes of a leader show that there are some traits associated with leadership, of which we mention the followings: intelligence, fairness, vision, courage, integrity, accountability, honesty and integrity, tenacity, self-confidence, loyalty, motivation to lead, emotional stability, desire for accomplishment, modesty, prediction, cooperation, etc. These attributes must be analyzed from the perspective of what concerns the leaders in an organization, what responsibilities they have in order to be efficient and how they succeed in influencing employees for reaching organizational objectives. It is very important to highlight the main responsibilities of a leader in fulfilling his/her mission within a banking organization. Further on, we shall try to summarize these responsibilities, based on the research carried out by Tracy (2010, 9-13) in the work “How the Best Leaders Lead”, as follows: Figure 1: Leader’s main tasks in banking organizations Establishing objectives that can determine necessary changes in the organization to be in line with its competition, starts with existing cultural values. Through innovation and promotion there is an attempt to adapt the organization to the requirements of the new strategy by means of successive actions that avoid radical changes and non-constructive conflicts. For the changes to be effective, the leader needs to have the right skills in order to understand that there is a need for change and that he/she stands out through attitude, personality, habits and behavior, to act as every member of the organization is

Establishing objectives

Innovation and promotion

Action prioritization

Setting an example for others in the organization

Convince, inspire and motivate

them

Obtain the expected results for members of the organization

Source: The author’s projection based on Tracy (2010)

317

watching him/her. The leader must earn the employees’ respect and trust and must motivate those who support the organizational culture, its vision, objectives and mission. In banking organizations, the amount of information is constantly growing, which determines that a greater number of employees are becoming involved in decision-making, gradually converting to organizational structures with vertical management and functional-level specialization. The leaders’ roles are changing, so that they have to develop a credible vision regarding the organization’s values, strategies and objectives. Leaders are those who help to create a managerial culture able to competently lead the members of the organizations to the targeted and assumed performance. Talking about leadership in banking organizations, we have to start from participative leadership in order to get to transformational leadership. However, we cannot ignore the fact that leadership styles vary from one culture to the other. For example, transformational leadership is present in organizational cultures in Europe and the United States where power differences are encouraged, while in the Japanese culture, which has grown apart from individualism, participative leadership is more common. Based on the research conducted by Zlate (2004, 182-185) in the book “Leadership and Management”, we try to determine a few characteristics of leadership from the above-mentioned cultures. Table 1: Leadership characteristics Leadership Characteristics

American and European banking organizations

Japanese banking organizations

Period of employment Short term employment Life-long employment Decision type Individual decisions Mutual decisions Degree of responsibility Individual responsibility Collective responsibility Frequency of evaluations and promotions

Frequent evaluations and fast promotions according to performance

Rare evaluations and slow promotions

Mobility rate High mobility Extremely low mobility Control expressing type Formal control Informal control Interest towards the members of the organization

Focus on the individuals Holistic interest for the members of the organization

Interest towards the national and cultural specificity

Low interest High interest

Leadership effects Extremely numerous effects Reduced effects Source: The author’s projection, based on Zlate (2004) As can be seen from the data presented, the leadership style from European and American banking organizations focuses on the individuals and on their specialization, which facilitates mobility from one bank to the other. Furthermore, we meet frequent evaluations and assessments based on individually assigned tasks, which allow fast promotion within the organization. The accountability degree and the decision-making one are considerate on an individual level, according to competences attributed on functional lines. Leadership exists at any organizational level and establishes objectives and action plans for engaging human resources in the process of change. Japanese leadership is characterized by a bigger interest devoted to the national specificity, with low inter-organizational employee mobility, employment being on a long-term. Leaders act in a culture marked by collectivism, in which employees are universally trained and work in teams, decisions are

318

made in agreement with the interested parties and there is harmony and loyalty towards the organization. Banking organizations are seen as communities belonging to employees, with an advanced work culture, strong ties among the employees, organization and the nation itself. Johns (1998, 305) in the work “Organizational behavior” thinks that participative leadership means engaging subordinates in work related decision-making processes, their participation varying according to the leadership orientation towards superiors or subordinates. First of all, participation increases motivation. In the banking system, establishing objectives and making decisions engage human resources from different organizational levels, based on which targets are set and their motivation is activated. Secondly, participation leads to an increase in quality. In the banking system, the employee organization and grouping structure based on the front-office and back-office compartments, leads decision-making processes to diminish operational risks, the non-compliances to be met in real time in the whole unit network, all of these driving to a continuous improvement of product quality. Last, but not least, participation helps to raise the degree of decision acceptance by the subordinates. If we take into account that for launching new banking products or services or for implementing new projects there is a collective consultation of the employees to be involved in the selling and implementation processes. It is very clear that the bigger their involvement in decision-making is, the bigger the degree of their acceptance and promotion of those items becomes. Participative leadership presumes that leaders must dedicate more time and energy for requesting opinions and must accept a decrease of their power by promoting team work. Taking into account that in the banking system reaching strategic objectives presumes a big number of employees participating in decision-making processes, we can state that the organization’s success is guaranteed only by means of the participative leadership. Therefore, we can conclude that participative leadership means engaging subordinates in work related decision-making processes. Participation means getting the subordinates' opinions before the leader’s decision, as well as allowing subordinates to make their own decisions in the matters concerning them, within mutually agreed upon limits. Participation can engage either individual subordinates, or the entire group of subordinates who report to the same leader. Individually based participation works best in the following circumstances:

establishing individual professional objectives; planning subordinates’ development; handling employees' problems.

Analyzing the Romanian banking organizations which are permanently subject to changes determined by the requests of the foreign stakeholders, by the regulations of the Basel Committee and by the transnational organizational culture, we consider that there is a need for a new type of leadership that can transform the organization by means of shaping people, i.e. transformational leadership. Johns (1998, 311) in the work “Organizational behavior” shows that such a leader drastically changes the beliefs and attitudes of the subordinates in order to correspond to the new vision, and to be successful he/she needs at least three qualities: intellectual stimulation, individual consideration and charisma. Taking into discussion the organizational cultures from the banking system in which a series of projects bringing great changes are implemented, we consider that there is a need for a leader who stimulates employees to think in a new manner, to be creative and open to novelty, to offer a new vision concerning the need for change. However, for the changes to be successful, the employees' emotional attachment is not sufficient, since there is also need for personal motivation, interest for personal development and plenty of charisma.

319

Owen et al. (2006, 348) in the paper entitled “Leadership Manual” shows that the essence of transformational leadership is that it radically changes the relationship between the leader and the adherents. Transformational leaders have a positive impact on people, determining them to give the best they can give and motivating them more through their success and development than through the obligation to do work in exchange for a monthly wage. Zlate (2004, 199-202) in the work “Leadership and Management” points out that transformational leadership means growing emotional attachment of the subordinates towards the organizations, an increase in their motivational resources and sharing the leaders' vision. Transformational leaders push the need for change for the organization’s members and motivate those who can overcome their own interests. They aim to transform both employees and organizations, reflected in a growth in efficiency and creativity. In order to understand why transformational leadership is necessary, a comparative analysis between participative leadership and transformational leadership is relevant. Figure 2: A comparative analysis between participative and transformational leadership

Source: The author’s projection based on Zlate (2004) In the banking system and not only there, the two types of leadership do not exclude each other, but work in a complementary way. We meet them in various organizational cultures, to a greater or lesser extent, according to the degree of various projects implementation and the ways in which the leadership unfolds. In banking organizations with bigger changes as the case of the Romanian banking system there is a need for transformational leadership, while in banking organizations with domestic capital, the organizational efficiency is given by participative leadership. The result of the leadership style is given by the level of motivation, respect, trust, admiration, commitment, loyalty and performance of the employees. Transformational leadership means a lower level of conflicts, higher performance etc. Transformational leadership influences creative behavior, encourages commitment towards the brand and creates satisfaction at the workplace.

Levels of leadership

Transformational leadership Participative leadership

Idealized influence

Creative behavior

Professional satisfaction

Motivation

Intellectual stimulation Acceptance

Increase in quality

Leadership through participation

320

4 Research Methodology, Data Analysis and Results – A Brief Focus on Banking System in Romania

This paper aims to study the impact that transformational leadership has on the organizations’ members. For this purpose, the bank survey questionnaire was used to collect and manage data by means of interpersonal interaction with representatives of banks from the Romanian banking system, including the top 15 entities. The values recorded for these variables were distributed on a five-level Likert scale, where 1 (strongly disagree) represents the minimum level, while 5 (strongly agree) represents the maximum one. This empirical analysis contains the evaluation of a database with 410 filled in and validated questionnaires, divided into 2 categories of respondents - 150 questionnaires were addressed to employees in management positions (directors, department coordinators, managers in the headquarters of the banks, etc.) and 260 questionnaires were addressed to non-management employees (bank clerks, financial analysts, advisors, auditors, assessors, etc.) from banks part of the Romanian banking system. The registered results were manually processed, stored and structured, without the use of specialized software. From the questionnaires for both non-management employees and managers, the following research questions were analyzed:

a) the managers’ perspective: Q1: What keeps the organization where I act as manager united is our commitment for innovation and development; Q2: In the organization where I act as manager, initiative and innovation are welcome. b) the non-management employees’ perspective: Q1: What keeps my organization united is our commitment for innovation and development; Q2: In my organization, initiative and innovation are welcome. The values registered for these variables were distributed on a 5-level Likert scale in which 1 (strongly disagree) represents the minimum level, while 5 (strongly agree) represents the maximum one, as was previously mentioned. The data was collected, processed and interpreted at the level of the following subjects: a) managers; b) non-management employees; c) the whole banking system. a) The results obtained following the analysis of managers' opinion for question Q1 indicated that: 20% - strongly agreed; 36.67% - agreed; 31.33% - neither agreed nor disagreed; 10.67% - disagreed; 1.33% - strongly disagreed.

Concerning managers and question Q2, the responses were: 32.67% - strongly agreed; 39.33% - agreed; 20.67% - neither agreed nor disagreed; 6.67% - disagreed and 0.67% - strongly disagreed. These answers reflect a normal aspect since any attitude of leaders promoting change determines various opinions and reactions, even among managers. However, as the following graph illustrates, over 50% of subjects think that banking organizations need transformational leadership, innovation and initiative for achieving the targeted objectives and strategies.

321

Graph 1: Illustration of the management perspective concerning the commitment for innovation, initiative and development

Question 1 Question 2

Source: The author’s projection b) The non-management employees' opinion was also evaluated. Therefore, the answers received at question Q1 can be summarized as follows: 17.7% - strongly agreed; 40.4% - agreed; 30.4% - neither agreed nor disagreed; 10.4% - disagreed and 1.1% - strongly disagreed. Concerning question Q2, the answers were: 34.2% - strongly agreed; 37.7% - agreed; 21.2% - neither agreed nor disagreed; 4.6% - disagreed and 2.3% - strongly disagreed. The opinions of those who were interviewed regarding the commitment for innovation and development are assessed as over 60%, which confirms their acceptance for transformational leadership. The graphic representation looks as follows:

322

Graph 2: Illustration of the non-management employees' perspective on the commitment for innovation, initiative and development

Question 1 Question 2

Source: The author’s projection c) On the global banking system level, those who consider that organization's future depends on the commitment for innovation and development were 18.6% - strongly agreed; 39% - agreed; 30.7% - neither agreed, nor disagreed; 10.5% - disagreed and only 1.2 % - strongly disagreed The results of the analysis show an acceptable level of change implementation, through the promotion of innovation and initiative, i.e.: 33.7% - strongly agreed; 38.3% - agreed; 21% - neither agreed, nor disagreed; 5.3% - disagreed and 1.7 % - strongly disagreed. The main responses were summarized in the following graph:

323

Graph 3. Illustration of all respondents' perspective regarding the commitment for innovation, initiative and development

Question 1 Question 2

Source: The author's projection 5 Conclusions and Future Research Perspectives This research aimed to what extend the transformational leadership characterized by promoting innovation and encouraging positive thinking is accepted by employees from the Romanian banking system. Thus, the leaders of an organization are those who promote new principles leading to necessary changes, supporting the values, vision, employees’ behavior systems and beliefs. This is only possible through employees' acceptance and understanding of transformational leadership, through the fact that banking organizations need innovation, initiative and development for reaching the targeted objectives and strategies. We can conclude that:

• innovation leads to the employees’ and the organization's development and to an increase concerning its profit;

• initiative and innovation lead to the development of new banking products and services; • innovation leads to changes, the leaders being those who guide the employees and give

necessary information for the changes to be understood and they also build confidence in those changes;

• innovations are determined by the work of every individual and must therefore be welcome and understood, which is possible with the help of the leaders;

• organizational culture and leadership are deeply integrated and interconnected within the organization.

This study also offers answers regarding the relationship between the organizational culture and the efficiency of leadership, regarding the fact that there is a relationship as strong as that between the organizational culture and management efficiency.

324

A short taxonomy is also carried out regarding transformational leadership, being based on creative behavior, intellectual stimulation, professional satisfaction, while participative leadership is based on participation, an increase in quality and accepting current situations. As future premises for research, it can be analyze by using empirical studies the way in which an organizational culture oriented towards flexibility and based on support and innovation can add value to the company. Furthermore, the leadership role can be analyzed in further researches, especially that role that can mediate between the guidance direction of the organizational culture and work satisfaction of employees. 6 References Johns, G. 1998. Organizational Behavior. Bucharest: Economica Publisher. Owen, H., Hodgson, V., Gazzard, N. 2006. The Leadership Manual. Bucharest: CODECS Publisher. Senge, P. M. 2012. The Fifth Discipline. Bucharest: Business Tech International Publisher. Tichy, N. M., and Cohen E. 2000. The Leader or the Art of Leadership. Bucharest: Teora Publisher. Tracy, B. 2010. How the Best Leaders Lead. Bucharest: Curtea Veche Publisher. Zlate, M. 2004. Leadership and Management. Bucharest: Polirom Publisher. Other sources: www.arb.ro www.bcr.ro www.bnr.ro www.brd.ro www.raiffaisen.ro www.bancatransilvania.ro www.marfinbank.ro www.leumi.ro www.otpbank.ro Acknowledgement This work was co-financed from the European Social Fund through Sectoral Operational Programme Human Resources Development 2007-2013, project number POSDRU/159/1.5/S/134197 “Performance and excellence in doctoral and postdoctoral research in Romanian economic science domain”.

325