Transformational leaders focus on motivating their employees, inspiring them, and living them intellectually challenging tasks based on their needs (Belias and Koustelios, 2014).
One benefit of transformational leadership is its positive effect on the employees’ job satisfaction, as demonstrated by quantitative studies by Belias and Koustelios (2014), while Malik et al. (2017) report an enhanced organizational commitment as well based on their study of banking employees in Pakistan. Similarly, Mozammel and Haan (2016) found that this leadership style increases the commitment of employees who work in banking branches in Bangladesh, but the authors note the financial industry in this state is underdeveloped and unstable.
The advantages of transformational leadership in the banking sector are linked to its effect on employees’ perception of their work, organization, and contribution. Abouraia and Mohammed (2017) report that transformational leadership in Saudi Arabia’s banking sector is linked to higher commitment, job satisfaction, and lesser turnover intentions. Finally, Jyoti and Dev (2015) found a correlation between this leadership style and employee creativity. However, the latter can be limited by learning orientation, and similar results are reported by Suifan and Al-Janini (2017).
Practical examples that illustrate the advantages of transformational leadership in banking from the studies by Abouraia and Mohammed (2017), Suifan and Al-Janini (2017), Belias and Koustelios (2014), Mozammel and Haan (2016), and Malik et al. (2017) show that this approach affects motivation, satisfaction, retention, and creativity because these leaders focus on their followers’ needs. However, one limitation of transformational leadership is that studies of this method limit the “critical exploration of power and ethical dimensions” of the leader-follower relationship (Schedlitzki and Edwards, 2018, p. 5)
In comparison between transactional and transformational leadership, Brahim et al. (2015) note that the former is effective for the banking industry since the authors found that it enhances the motivation of employees based on their study of five Algerian banks. These types of leaders identify followers’ expectations and create a link between rewards and the employees’ efforts (Brahim et al., 2015).
Abouraia, M K. and Othman, S. M. (2017) ‘Transformational leadership, job satisfaction, organizational commitment, and turnover intentions: The direct effects among bank representatives’ American Journal of Industrial and Business Management, 7(4), pp. 1-20.
Belias, D. and Koustelios, A. (2014) ‘Transformational leadership and job satisfaction in the banking sector: A review, International Review of Management and Marketing, 4(3), pp.187-200.
Brahim, A., Ridic, O. and Jukic, T. (2015) ‘The effect of transactional leadership on employees performance – case study of 5 Algerian banking institutions’, Economic Review: Journal of Economics and Business, 13(2), pp. 7-20.
Jyoti, J. and Dev, M. (2015), ‘The impact of transformational leadership on employee creativity: the role of learning orientation’, Journal of Asia Business Studies, 9(1), pp. 78-98.
Malik, W., Javed, M. and Hassan, S. (2017) ‘Influence of transformational leadership components on job satisfaction and organizational commitment, Pakistan Journal of Commerce and Social Sciences (PJCSS), 11(1), pp. 147-166.
Mozammel S. and Haan P. (2016) ‘Transformational leadership and employee engagement in the banking sector in Bangladesh’, The Journal of Developing Areas, 50(6), pp. 43-55.
Schedlitzki, D. and Edwards, G. (2018) Studying leadership. 2nd edn. London: Routledge.
Suifan, T. S. and Al-Janini, M. (2017) ‘The relationship between transformational leadership and employees’ creativity in the Jordanian banking sector,’ International Review of Management and Marketing, Econjournals, 7(2), pp. 284-292.