Abstract:
The main objective of the study was to establish the role of transformative leadership in organizational performance of state-owned banks in Kenya. Specifically the research sought to find out the extent to which the elements of transformational leadership which are individual consideration, intellectual stimulation, inspirational motivation and idealized influence affect organizational performance. Rules and regulations governing state owned banks in Kenya were also analyzed in respect to their effects on organizational performance. The study was conducted in 22 branches of Post Bank and National Bank within selected Rift Valley Region, Kenya. The study used both primary and secondary means of collecting data by employing quantitative approach with a target population of 137 employees. A questionnaire was used as an instrument for data collection. Analysis involved both descriptive and inferential statistics. A regression analysis was carried out and the obtained coefficient of determination of 0.6374 implied that 63.7% of the variations in the organizational performance in state-owned banks can be explained by the variations in independent variables; idealized influence, inspirational motivation, intellectual stimulation, individual consideration, and policies and regulations. Further, by quick standard error tests, the individual coefficients of the regression function were found to be significant in influencing organizational performance. The fairly high value of the coefficient of determination implied that the model can be used to generalize and to predict future outcomes in the banking industry which is a key driver in the economic development of a society. Furthermore, models that can be used for prediction would be helpful to these organizations for purposes of strategic planning and policy making. The study found out that idealized influence, inspirational motivation, intellectual stimulation and individual consideration positively influenced organizational performance. This showed that, the top management should use the research findings to increase employee productivity and thus organizational performance in state-owned banks. The study established that policies and regulations set by the bank influenced individual performance. Though they were regulated by the Banking Act of Kenya, the government shareholding interfered with the policies and regulations and thus they were not effective in enhancing employee performance and sometimes conflicted with the objectives of the bank. From the findings of the study, further research can be conducted to investigate how transformational leadership influences individual employee performance to help clarify the specific individual performance which can be linked to organizational performance. Further research can also be carried out in the entire banking sector and comparative analysis of private and state owned banks performance in relation to transformative leadership which would enhance the generalization of the findings.
