Relationship of transformational leadership competencies to financial performance: As applied to the hospitality industry

by Mwendia, Kiriinya M., Ph.D., CAPELLA UNIVERSITY, 2006, 191 pages; 3297923


In the last decade or so, there have been many leadership studies focusing on the relationship between leadership competencies or practices and performance. But, hardly any studies have specifically measured performance using profitability. The problem for the leaders of Swara Hotels and Lodges (SHL) was whether the level of leadership competencies might be improved so as to enhance the level of financial performance, measured by profitability on rooms (POR). Hence, the purpose of this study was to determine whether there is a relationship, and if so, how strong it is, between the level of leadership competencies under the transformational model (independent variables), and the level of POR (dependent variable) in 13 business units of SHL. Successful leadership, in terms of achieving a vision is characterized by certain key competencies, in three categories related to: strategy, people, and personal role model. This was a quantitative, cross-sectional study. Leadership variables were measured through a questionnaire called the Leadership Practices Inventory (LPI), developed by Kouzes and Posner. POR was computed using data provided by SHL from its financial records for the year ending 31 December 2004. The study revealed the level of leadership competencies in SHL, and also showed that there is a moderate positive relationship between leadership competencies and profitability (POR). Thus, the leaders of SHL could use this knowledge to partially improve POR. The knowledge also provides important benchmarks in SHL's industry. Furthermore, this outcome makes a contribution to the existing sparse business research on such relationships. The study also revealed possible exogenous variables that also affect profitability in SHL's industry. Regarding future research, it is suggested that it might be in four categories exploring the relationship of leadership competencies to the active components of profitability in the POR formula; or exploring similar relationship to return on investment (ROI) as a measure of profitability; or in a longitudinal study, explore how leadership competencies relate to profitability over several time periods; or in an investigative study try to discover the underlying reasons for some unusual outputs revealed in the data analysis of the current study.

AdviserJohn Latham
Source TypeDissertation
Publication Number3297923

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