Evaluation of employee performance

CHAPTER NO. 1 Introduction


Employee performance is a set of behavior, outcomes, actions and practices that contribute towards organizational goals. The effectiveness of employee performance depends upon the relationship between the performance measures. The principal objective an employee performance is classified into three categories. (a)Unsatisfactory (Below the standard) for which the non-monetary punishment is imposed.(b)Acceptable (Satisfactory) for which neither rewards nor punishment is invoked.(c)Outstanding, for which the company rewarded on profit sharing.

Employee performance is examined in terms of its resources to enhance outcomes such as productivity & quality organization such as communication, decision making, Innovation, Labor management relations & Intrapsychic states such as employee satisfaction & commitment.

Employee Involvement increases the employee performance because it is a broad strategy to increase employee performance by influencing how their work is organized & carried out. There is a strong effect of employee involvement on employee performance as it increases their Job satisfaction & little Consistency effects on productivity. Two types of metrics are used for the evaluation of employee performance, (a) Financial (b) Non Financial.

Financial evaluation consists of the earnings & Return on Investment. Non Financial type evaluates efficiency, productivity, customer satisfaction, market share, employee satisfaction and product quality.

In today's corporate world, Transformational leadership holds significance importance. Ordinary supervisors and managers are not better than the necessity of any organizations. Organizations are looking towards leaders who can affect the community to work efficiently rather than to force them to do work.

Different researches have shown the strength of transformation leadership. These researches have concluded that transformational leadership has a valuable effect on transformational leadership style in determining employee performance and job satisfaction. Further it has favorable effects on employee citizenship behavior, employee motivation etc.

Transformational leadership is a type of leadership that occurs when leaders broaden the interests of their employees. The leaders create acceptance of the mission of the group and help the members to look beyond their self-interest for the benefit of their group.

Transformational leaders demonstrate a real vision and most importantly they communicate effectively with employees to motivate them in employee engagement activities. By acting as role models, they support their employees to evaluate the level of the whole organization. They take huge risks and are find out new ways in order to achieve the shared vision which leads to innovation in problem solving skills.

This kind of power goes beyond traditional forms of transactional leadership that emphasized corrective action, mutual exchanges and rewards only when performance expectations were met. Transactional leadership relied mainly on centralized control. Managers controlled most activities, telling each person what, when and how to accomplish each task. On the other hand, transformational leaders trust their subordinates and give them a space to grow. In the respect, transformational is a more developmental and valuable form of governance for both individual employees and the organization as a whole.

Numerous studies have shown that transformational leadership increases organizational performance. It is positively linked with extended run market share and customer satisfaction that helps in producing higher commitment to the organization from their employees. Transformational leadership also helps in increasing employee trust in organizational citizenship behaviors such as conscientiousness and sportsmanship that are discretionary, which are not completely related to the reward structure of the organization.

Transformational leaders articulate a strong vision of the future. It helps them with the importance of stories and symbols to communicate the message that helps them to create a great sense of responsibility and a shared mission. Transformational leaders talk optimistically and complete confidence that objectives will be achieved, talk about their core values, consider the true consequences of decisions, seeks different views when solving problems, get employees to challenge traditional assumptions and to think about problems in uncertain ways, spend time teaching and coaching, consider employees individual needs, abilities and aspirations and are appreciative and responsive to each employee and recognize and celebrate each employee's achievements.

Rationale of the Study

Employee can be motivated towards their work in different ways whether it may be salary, allowances, nature of the work, working environment or supervisor's attitude. Employee is directly linked with supervisors so he learns and gets motivation directly from his working attitude.

According to the past researches, supervisor's attitude has much more influence than others because they guide their sub-ordinates how to perform well or how to achieve their objectives effectively and efficiently.

This study describes whether leader's characteristics influence the employee performance. The leader can influence the employee in many ways. I have described only five characteristics of the leader which can have an influence on employee's performance. Those five characteristics are Individual consideration, Idealized influence, Intellectual stimulation, Inspirational Motivation and Charismatic personality.

Problem Identification

Transformational leadership is now a day's very popular perception in the corporate world. Ordinary supervisors and managers are no better than the necessity of any organizations. Organizations are looking towards leaders who can affect the community to work efficiently rather that to force them to do work. With the passage of time many researchers tried to find out the relationship between Transformational leadership and employees performance. The problem is to reach elsewhere the greatest impact that affects the transformational leadership on employee's performance whether it might be negative or positive in the banking sector. To see the original independent variable of transformational leadership this influences the worker's performance.

Problem statement

This study investigates the impact of transformational leadership on employee's performance. The major problem of the study is to reach elsewhere the impact of transformational leadership on employee's performance. For this purpose five dimensions of transformational leadership are taken into consideration.

Research Question

What is the effect of transformational leadership on the employee's performance in the Pakistani context?

Objective of the Research

This study investigates the impact of transformational leadership on employee's performance. The objectives of this research are:

  • To evaluate the employees performance output from the transformational leadership style.
  • To identify the factors that influences the employee's performance.
  • To find solutions and recommendations to improve employees performance with the help of transformational leadership.

Scope of the Research

This research deals with the effects of transformational leadership on employee's performance in the banking sector of Pakistan. It also analyzes and describes which factors effect and influence the employee's performance in Pakistan.

The title of research shows that whether the transformational leadership style affects the employee's performance positively or negatively. This research has been carried out in the banks of Islamabad and Rawalpindi.


The research is done to examine the effect of transformational leadership components (Socially skillful, Bold and Change seeking, Knowledgeable and experienced) on the motivation, satisfaction and performance of the employees in the Healthcare centers. Researchers concluded that social skillfulness consisting of Social / interpersonal skills greatly effect the employee motivation level, Job satisfaction and Job Performance up to that extent, where social skillfulness and bold and seeking affects, (khatri and Felber) (1999).

Research concluded that healthcare managers re highly skillful and knowledge but they lack in other two dimensions.

The effect of transformational leadership (Individual Consideration, Intellectual Stimulation, Charismatic Personality & transactional leadership) is focused on the employee Commitment Job satisfaction and organizational citizenship behavior. Research concludes that transformational leadership not only has strong affect on Job Satisfaction, organizational Citizenship Behavior but also it has positive add on effects on transactional leadership I determining Job Satisfaction, Organizational Commitment and organization Citizenship behavior. While two transactional leadership components (Passive management by exception & Laissez-faire Leadership behavior) has negative effect on employees commitment and performance effectiveness, Nguni, Sleegers & Denessen (2006).

It examined the relation between transformational leadership (Individual consideration, Intellectual Stimulation, Charismatic Personality & Inspirational Motivation), Dvir, Eden, Avolio, & Shamir (2002).

A research done by Conger, Kanungo & Menor (2000) examined the relationship between charisma and its effect on followers. They checked whether charisma in personality of leaders effect the followers or not. And if so, than what direction? Positive or negative? This study is focus on two variables; Leaders focus variables (2) Followers focused variables. The result found that charisma positively effected on all the dependent variables.

The different performances of schools have different leadership styles. They used T-test transformational leadership at different levels that are managerial levels etc. They conducted that not one approach to leadership is enough for an organization, it is the blend of almost all the approaches further more there is a bit emphasis on moral leadership, Inger & Suhomlinova (2005).

Study conducted by KOH (1995) examined the effects of transformational leadership on the follower's attitude and performance. This study discussed three components of Transformational leadership as independent variable i.e. charisma, individual Consideration, and intellectual stimulation. Effect of these variables on student performance and teachers attitude was being examined. (Researcher) they examined 89 schools and takes information from 846 teachers using split sample techniques they classified the attitude into different components like Organizational Citizenship Behavior (OCB). Organizational Commitment, Satisfaction with leader.

The result found that transformational leadership have positive effect on organizational commitment and satisfaction with leader. The result found that transformational leadership have positive effect on organizational commitment and satisfaction with leader, but it had partial positive effect on OCB and had no effect on Student performance in Singapore.

The study conducted by Sivnathan & bairlng (2005). They wanted to check the effect of transformational leadership training on employee safety performance, for this they conducted a pretest/ posttest Qausi experiment. Their independent variable was transformational leadership training and their dependent variable was employee performance.

For the research study they took a sample of 18 swimming pool supervisors as their leaders and 39 swimming instructors as their subordinates and they compare the experimental group of 10 supervisors and 26 instructors with the controlled group of 8 supervisors and 13 instructors. They found that the intervention significantly improved transformational leadership behavior and perception of their supervisor's safety Compliance. They found a change in instructor's behavior by using pretest/ posttest experiments and found a improvement in safety behavior (FELFE & Luther, 2006).

They wanted to see the influence of follower's personal characteristics on their perception of leadership. For their study he took 175 students with different personality traits including Self-efficacy at time. After two weeks they divide the participants into two groups and were told about transformational and non transformational leadership style.

They use multifactor questionnaire for their study. They found that the persons who are extraversion tended to perceive more transformational leadership and were more positive evaluation in transformational leadership then the followers with low extraversion.

The relationship between leadership style as operationalised by transactional and transformational leadership style (Bass 1985) and feed back seeking behavior. Their independent variable was leadership styles and the dependent variable was feed back seeking intentions of the participants. For their study they took 132 participants who were presented to either style of leadership. Cober & Miller (2002)

They found that transformational leadership style is more feed back seeking intention. They also found that manipulated leadership style is also more feed back seeking interventions. They found that the perception of the leader is also very important in seeking feedback interventions these results shows that transformational leaders can affects their subordinates to raise interesting implications.

According to above discussion and opinions of different researchers it is concluded that transformational leadership has five dimensions that are.

  1. Individual consideration.
  2. Idealized influence
  3. Intellectual stimulation
  4. Inspirational Motivation
  5. Charismatic personality.

Individual consideration says that leader must have such quality to consider every individual separately. He must know about every individual, his/her problems his/her requirements etc. And leader must give attention and respect to each individual.

Intellectual stimulation says that leader must have the capability and competence to look and solve the problems in a different and innovative way. Transformational leaders are unaccustomed to living with the status-quo. (Bass 1985).

Intellectual stimulation leads towards that thinking of leader those results in a rethinking of the old patterns of behaviors (KOH 1995).

Inspirational Motivation suggests that a leader must have strong ability to motivate followers in a way that inspires the followers to do the desired work.

Leader must have superior communication skills, technical expertise and persuasive skills. Leaders having charismatic personality have clear vision before them, they are having excellent debating and convincing skills. They inspire and influence their followers by giving them pride, respect and by showing faith in them. Such leaders have greater influence on their followers. (William L.KOH, Richard M. Steers & James Turburg 1995)

Idealized Influence is a characteristic of a person to treat and influence according to his desire by knowing his psyche. Leader treated his follower just like follower wish to be directed by Leader rather than by coercive power or other.(Purvanova & Bono, 2006)

The validity of the measurement model factor is structure of Bass and Avolio's multifactor leadership Questioners. They hypothesized the evaluations of leadership and he psychometric properties of leadership instruments. They divided their research into two parts, Antonakis, Avolio & Sivasubramaniam (2003).

In the first study they used homogenous Business sample consisting of 2279 male and 1089 female raters. In the second study they used factor level data of 18 independently gathered samples (N= 6525 raters) clustered into homogenous Context. They test the nine factor model and found it was stable indicated strong an consistent evidence. The results also suggest that context should be explicitly considered when formulating theories and the impact of contextual factors should be considered in the design stage of research (Instrumentation, data gathering, data analysis). They recommended that leadership researchers consider theorizing and testing for contractual boundaries that may affect the variability of data.

The leader's perceptions of different strategic variables related to the knowledge (knowledge slack, absorption capacity, tackiness, organizational learning) and innovation that influence the relation between transformational leadership and organizational performance, Morales, Montes & Jover (2001).

Transformational leadership stimulates innovation and knowledge and generates advantages for organizational performance. Howell & Avolio, (1993). Transformational leader have charisma, inspiration, intellectual stimulation and individualized consideration of employees. (Bass, 1999; Bass and Avolio, 2000) leadership enables improvement of individual absorption, design of organizational structure to fit the organizational characteristics, increased investment in research and development and intense effort to strengthen organizational absorptive capacity (Cohen & Levinthal, 1990; Van den Bosch, Volberda and de Boer, 1999).

Finally transformational leadership usually affects innovation behavior positively through intellectual stimulation and individualized consideration, transformational leaders generate different ways of thinking, seeking new opportunities and adopting generative, exploratory thought process.

The purpose of this research is to analyze the effect of relevant factor on the relation between transformational leadership and organizational performance. This research also confirms that transformational leadership affects the dynamic capabilities of organizational learning and innovation, Senge (1994).

Transformational leadership affects all the strategic variable analyzed intensely and shows the greatest relation to absorption capacity. And this confirms that tacitness, organizational learning and innovation affect performance. Tacit knowledge enables improvement in organizational performance, both directly and indirectly by improving other strategic organizational capacity. Lastly the result shows that size influences knowledge slack but not significant for the other variables.



Various methods such as questionnaire, interviews and observation etc, were used by earlier studies for investigating the effect of transformational leadership on employee's performance. For this study, a questionnaire based survey design is chosen as it allowed relatively large population easily and economically. The sample size for the study was 300. The sample population for this study was the banking sector of various branches in Islamabad and Rawalpindi. The locations of Rawalpindi and Islamabad were chosen because both these places have the branches of many different banks.

Instrument and Measures

The research for this study was done using a questionnaire-based survey. Questionnaire was used for the data collection. This questionnaire was designed to measure the effect of transformational leadership on employee's performance. 300 questionnaires were distributed in the nearest possible banks of Rawalpindi and Islamabad. In this study, main focus was unit analysis by considering individuals. Two types of questionnaires sections were designed i.e. one for measuring Transformational Leadership traits and other for measuring employee performance.

For Transformational leadership the Multifactor Leadership questionnaire (MLQ) was used. This questionnaire was developed by (B.M.Bass, 1985). In this study, 5 variables were used that are Idealized Influence, Individual consideration, Intellectual stimulation, charismatic personality, Inspirational Motivation. Questionnaire contains 4 questions for each variable. The 5 point Likert scale was used where 1= never, 2= seldom, 3= sometimes, 4= often & 5= always. For employee Performance again 5 point Likert scale was used where 1= strongly disagree, 2= disagree, 3= Indifferent, 4= agree & 5= strongly agree.

For employee performance 9 questions were selected, which were taken from different research studies. These questionnaires were modified in the context in order to measure the employee performance correctly.


The descriptive research method was used for this research. Data was retrieved from both the secondary sources as well as primary sources. For the purpose of secondary data sources online journals containing previously published researches were discussed. Whereas in order to retrieve the primary data sources questionnaires were distributed among the employees in various banks of Islamabad and Rawalpindi. Their feedback was then added to SPSS sheet and accordingly their frequency distribution was analyzed. Finally a conclusion based upon this feedback was derived and suggestions were recommended.

CHAPTER NO.5 Conclusion and Recommendation


From the above mention findings it indicates that the majority of the bank employees are satisfied with most of the aspects pointed out in the questionnaire. It can be seen that the respondents regardless of the age, gender and educational level expressed satisfaction with most aspects of the questionnaire.

Majority of the respondents agree that their managers specify the importance of having a strong sense of the purpose and consider the moral and ethical consequences of the decisions they made and also emphasize the importance of having a collective sense of mission. Their manager is not pessimistic and always optimistic about the future.

Most of the respondents agree that their manager's express confidence that goals will be achieved and their managers reexamines critical assumptions to questions whether they are appropriate and listen to different perspectives while solving problems. Their managers also encourage others to look at problems from many different angles.

A large amount of the respondents agree that they make more suggestions to improve work procedures as they are encouraged by their supervisors highly motivated and encouraged to participate. And they express their opinions honestly.

Majority of the employees also indicate that whenever they see dysfunctional activities, they often call their management about it. The respondents agree that they make innovative suggestions for the improvement of the department.

Some of the respondents indicate that the quantity of their work is higher then the average which is greatly encouraged by their supervisors.

A large amount of the respondents said that the efficiency is higher than the average. This means that the quality of work is much higher than the formal standards of the job. The respondents agree that they uphold the highest professional standards.


The findings indicate that there are some areas of major concern for the banks in Pakistan. The future researchers are required to focus on the following areas.

  • From the above research it is recommended that the managers should have a strong sense of their purposes and they must specify that. While making decisions, they should consider its ethical consequences and should emphasize on the collective sense of the achievements of the purposes.
  • leader must have such quality to consider every individual separately. He must know about every individual, his/her problems his/her requirements etc. And leader must give attention and respect to each individual.
  • leader must have the capability and competence to look and solve the problems in a different and innovative way.
  • leader must have strong ability to motivate followers in a way that inspires the followers to do the desired work.
  • Leader must have superior communication skills, technical expertise and persuasive skills. Leaders having charismatic personality have clear vision before them, they are having excellent debating and convincing skills.
  • The managers should be confident enough that the goals will be achieved and they should listen to the suggestions being made by their sub ordinates. The managers must solve the problems in broad aspects.
  • The sub ordinates should also participate in the decision making process and they should give suggestions honestly.
  • Whenever the employees see any sort of dysfunctional activities, they should inform the top management about it. They employees always should give innovative and creative suggestions and should avoid themselves from being engaged in irrelevant activities in their work place.
  • The employee's efficiency should be higher then the average and if not then they should improve their skills through getting more and more training or some study courses to avoid the obsolescence.


  • Antonakis. J, Avolio J B, Sivasubramaniam. N(2003), Context & Leadership an Examination of the Nine Factor Full-range Leadership Theory Using MLQ. The Leadership Quarterly , 14 (2003) 261-295
  • Boyelt Ingeer C. R & Suhomlinova. (2005) "Transformational Leadership with Secondary Schools in England".Public Administration Vol. 83, No. 2, 2005 (265-296).Blackwell Publishing Ltd. 2005, 9600 Garsington Road, Oxford OX4 2DQ, UK & 350 main street, Malden, MA 02148, USA.
  • Barry M. Staw, Robert I. Sutton, Lisa H (Feb., 1994), Pelled Employee Positive Emotion and Favorable Outcomes at the Workplace, Vol. 5, No. 1, pp. 51-71.
  • Conger A. J, Kanungo N. R & Menor T. S.(2000) "Charismatic Leadership & follower's effect"Journal of Organizational Behavior,J. Organiz. Behav. 21 747-764 (2000).
  • Christopher D. Ittner, David F. Larcker, Madhav V. Rajan (Apr., 1997), The Choice of Performance Measures in Annual Bonus Vol. 72, No. 2, pp. 231-255
  • Charles Brown (1982). Estimating the Determinants of Employee Performance The Journal of Human Resources, Vol. 17, No. 2, (spring, 1982), pp. 178-194
  • Graeme Currie, Inger Boyett And Olga SuhomlinovaPublic (2005. Transformational leadership within secondary schools in england. Administration Vol. 83, No. 2, 2005 (265-296)
  • Jay A. Conger, Rabindra N. Kanungo, Sanjay T (Nov., 2000), Charismatic Leadership and Follower Effects. Menon Journal of Organizational Behavior, Vol. 21, No. 7, pp. 747-767
  • Khatri N, Felber Impact of transformational leadership on employee motivation, Satisfaction and performance in health care Organizations A. Abstract No. 1511.
  • KOH. L William (Jul. 1995) The effect of Transformational Leadership on Teacher attitudes 7 student performance in Singapore. Journal of organizational Behavior, Vol. 16, No. 4. Pp 319-333.
  • Samuel Nguni, Peter Sleegers, and Eddie Denessen, onine Publication date 01. June. 2006 School Effectiveness & School Improvement , Transformational and Transactional leadership effects on Teachers Job satisfaction, Organizational commitment and Organizational Citizenship Behavior in Primary School of Tanzania. Vol. 17, No. 2, June 2006, Pp 145-177.
  • Seok-Hwan Lee (Sep, 2002), Dorothy Olshfski Employee commitment & Firefighters, Vol. 62, September 11, 2001, Pp 108-114
  • Samuel Nguni (2006). Transformational and transactional leadership effects on teachers' job satisfaction, organizational commitment, and organizational citizenship behavior in primary schools, a; Peter Sleegers b; Eddie Denessen c Online Publication Date: 02 June 2006 Pp 145-177 Vol 17
  • Taly Dvir, Dor Eden, Bruce J. Avolio, and Boas Shamir (Aug 2002). Impact of Transformational Leadership on followers Development & performance. The Academy of Management Journal Vol 45, No. 4, Pp735-744.
  • Taly Dvir, Dov Eden, Bruce J.Avolio, Boas Shamir (Aug., 2002). Impact of transformational Leadership on follower's development & performance.. The Academy of Management Journal, Vol. 45, No. 4. pp. 735-744.
  • V.H. Winston & Son, Inc (2002). The Effect of Transformational & Transactional Leadership Perception on Feed back- Seeking intention. Journal of Applied Social Psychology, 2002, 32, 8, Pp. 1703-1720. Copyright 2002.
  • William L. Koh; Richard M. Steers; James R. Terborg (Jul., 1995), The Effects of Transformational Leadership on Teacher Attitudes and Student Performance in Singapore, , Journal of Organizational Behavior, Vol. 16, No. 4. pp. 319-333.

Please be aware that the free essay that you were just reading was not written by us. This essay, and all of the others available to view on the website, were provided to us by students in exchange for services that we offer. This relationship helps our students to get an even better deal while also contributing to the biggest free essay resource in the UK!