1 The Role of Transformational Leadership Behaviors in Affective Employee
Engagement: An empirical study in the two industries of retail and financial
services in Ho Chi Minh City

ABSTRACT

According to many previous studies, the effective leaders are one of the most
important factors in engaging the employees to the organization; leveraging the
human capital to create sustainable competitive advantage for the organization
efficacy and leading to organizational benefits. The purpose of this study was to
investigate the relationship between transformational leadership behaviors and
affective employee engagement and to examine their impact on employees’ level of
affective engagement in private and foreign-owned companies in Ho Chi Minh
City. Total participants in the research were 320 full-time employees from the
industry of retailing and financial services in Ho Chi Minh City. The majority of
employees have worked in private organizations (55.3%) and followed by foreign-
owned companies (44.7%); in financial services (53.4%) and in retail industry
(46.6%) respectively.

The findings of the study indicated that transformational leadership behaviors
including intellectual stimulation, idealized influence behaviors and individual
consideration have significant and positive correlations with affective employee
engagement. Among the independent variables, individual consideration is found to
be the most important factor in driving affective employee engagement.

The research results have contributed to the literature and provided more evidences
for the managers in their decisions of their workforce planning. However, the
sample for the research is still limited due to the application of convenient sampling

4 TABLE OF CONTENTS

ABSTRACT 1
ACKNOWLEDGEMENTS 3
TABLE OF CONTENTS 4
CHAPTER ONE: INTRODUCTION 8
1.1 BACKGROUND OF THE STUDY 8
1.2 STATEMENT OF THE PROBLEM 10
1.3 OBJECTIVES OF THE STUDY 11
1.4 RESEARCH QUESTIONS 12
1.5 SIGNIFICANCE OF THE STUDY 12
1.6 SCOPE OF THE STUDY 13
1.7 STRUCTURE OF THE STUDY 13
CHAPTER TWO: LITERATURE REVIEW 14
2.1 INTRODUCTION 14
2.2 THE CONCEPT OF LEADERSHIP 15
2.3 THE EVOLUTION OF LEADERSHIP THEORIES 15
2.4 LEADERSHIP MODEL 17

3.2.3 Data gathering instruments 30
3.2.3.1 Multifactor leadership questionnaire 30
3.2.3.2 Affective employee engagement questionnaire 31
3.2.4 Independent and dependent variables of the study 32
3.2.5 Data analysis and presentation procedures 33
CHAPTER FOUR: RESULTS AND FINDINGS 34
4.1 DEMOGRAPHIC CHARACTERISTICS OF THE PARTICIPANTS 34
4.2 DESCRIPTIVE STATISTICS FOR TRANSFORMATIONAL
LEADERSHIP BEHAVIORS AND AFFECTIVE EMPLOYEE
ENGAGEMENT 36
4.2.1 Employees perception to Transformational leadership behaviors 37
4.2.2 Employees perception to their organizational engagement 37
4.3 THE RELATIONSHIP BETWEEN TRANSFORMATIONAL
LEADERSHIP BEHAVIORS AND AFFECTIVE EMPLOYEE
ENGAGEMENT 38
4.4 SCALE ASSESSMENT 40
4.4.1 Cronbach Alpha 40
4.4.2 Exploratory Factor Analysis (EFA) 42
4.4.2.1 Independent variables 43
4.4.2.2 Dependent variables 44
4.5 CORRELATION AND REGRESSION ANALYSIS 44
4.5.1 Correlation analysis 44
4.5.2 Regression analysis 45
4.5.2.1 Assessment of the model 45
4.5.2.2 Testing of the hypotheses 49
4.6 RESULTS AND DISCUSSION 51
4.6.1 Regression analysis 51
4.6.1.1 Intellectual stimulation 51
4.6.1.2 Idealized influence behaviors 52
4.6.1.3 Idealized influence attributes and inspirational motivation 52

70
Appendix H: Histogram Dependent Variable AC 70
Appendix I: Normal P-P Plot of Regression Standardized Residual Dependent
Variable AC 71
Appendix J: Scatterplot Dependent Variable AC 72
Appendix K: ANOVA
a
72
Appendix L: Histogram Dependent Variable SC 73
Appendix M: Normal P-P Plot of Regression Standardized Residual Dependent
Variable SC 74
Appendix N: Scatterplot Dependent Variable SC 75
Appendix O: Questionnaire (in English) 76
Appendix P: Questionnaire (in Vietnamese) 81

8 CHAPTER ONE: INTRODUCTION

1.1 BACKGROUND OF THE STUDY

In Vietnam News (2002), it showed that:

More than 43% of employees in Vietnam express high levels of commitment
to both their job and the company they work for. In its global employee
commitment report 2002 Taylor Nelson Sofre says the commitment
percentage in Vietnam is higher than the average in the Asia-Pacific region
and Europe, but slightly lower than in the United States and Latin America.”

And then in Thanhnien News (2008), it is suggested that:

Vietnam needs more skilled workers since its WTO accession. The survey by
Grant Thornton, a global accounting, tax and business advisory firm which
involved over 7,800 privately held businesses in 34 countries shows that 84
percent of Vietnamese companies focus on recruiting and retaining staff,
compared to a global average of only 59 percent. Vietnamese companies
focus more on attracting and retaining employees than do companies
elsewhere.


company. Based on that, the managers come up with strategic action plans to
engage their employees into the sustainability of the organization. These
requirements from the reality are really urgent for the managers in Vietnam to deal
with them in their daily managerial works.

10 1.2 STATEMENT OF THE PROBLEM

Nowadays, the workplace changes day by day and requires products and services to
keep in line with this demand. In order to remain competitive, employee
engagement is one of the most important factors in the face of these pressures.Since
employee engagement is strongly correlated to the leadership behaviors of direct
mangers and this concerns a focus on improving the quality of leadership in
achieving greater employees to engage to the organization and its sustainable
growth, and the profitability as well. Many researchers have revealed that employee
engagement and leadership behaviors are of crucial determinants in the
organizational success. However, leadership is one of the least understood concepts
in the corporate world and the term of employee engagement should also be
considered in many dimensions to result in a full picture of this relationship.

Beverly and John (2008) shows indisputable links between employee engagement
and various measurements of financial success in which a US survey of 24 publicly
listed traded companies with a total of over 250,000 employees over the last 5 years
recognized the stock prices of 11 companies with highest engagement increased an
average of 19.4% in comparison to only 8% of those in the same industries. Several
surveys also reveals that companies with high employee engagement levels
experienced a higher operating margin, net profit margin, revenue growth and
earnings per share than those with low employee engagement.

explore employees’ perceptions on these behaviors.

1.3 OBJECTIVES OF THE STUDY

The research is to explore the relationship between transformational leadership
behaviors and affective employee engagement in the industry of retail and financial
services in Ho Chi Minh City. To achieve the goal, the specific objectives of the
study are:
12  To examine the relationship between transformational leadership behaviors
and two dimensions of affective employee engagement.
 To identify the employees’ perceptions about the transformational leadership
behaviors and two dimensions of affective employee engagement.

1.4 RESEARCH QUESTIONS

Specific research questions are:

1) What are the perceptions of employees in the industry of retail and financial
services about transformational leadership behaviors and two dimensions of
affective employee engagement?
2) What is the relationship between transformational leadership behaviors and
two dimensions of affective employee engagement? 1.5 SIGNIFICANCE OF THE STUDY

Firstly, the result of the research is important to bring the awareness to the

 Chapter two: provides literature review.
 Chapter three: focuses on the research methodology, describes data
collection and analysis methods.
 Chapter four: analyses and presents the research findings by showing how
each of the questions has been answered and how the findings contribute to
the purpose of the study.
 Chapter five: provides the conclusions, limitations and recommendations.

The end of the thesis includes references, appendices and questionnaires of the
survey form to collect primary data for the work.

14 CHAPTER TWO: LITERATURE REVIEW

2.1 INTRODUCTION

Leadership refers to the tools, behaviors and capability that a person needs in order
to be successful at motivating and directing others. While employee engagement
(Kahn, cited in Jessica and Helena, 2011) concerns the degree to which individuals
make full use of their cognitive, emotional, and physical resources to perform role-
related work.

When people talk about high-performing employee retention, they often focus on
financial and non-financial incentives. However, researches from all over the world
show that there is another mutual link of leadership behaviors in keeping the staff
engaged at work. All organizations expect to have engaged employees and willingly
to spend their resources to improve employee engagement. And one of the
antecedents of employee engagement is leadership behaviors.

that focus resources to create opportunities (Richard, Robert, and Gordon, 2009).

2.3 THE EVOLUTION OF LEADERSHIP THEORIES

Leadership traits

The theory considers leaders to possess some abnormal abilities to set them apart,
make them different from others and bring them to success. It also supports the
leaders might obtain some universal characteristics that the others cannot. The study
of leadership is to attend to the traits of the person, also called Great Man theory
and assumes leaders are born rather than are made (Sharon, 2003).The
shortcomings of this theory are that they cannot measure the leader’s performance
and attend to different circumstances.
16
Leadership behaviors

The approach focuses on what the leaders do rather than what are their qualities. It
also considers the correlation of leaders’ behaviors, effectiveness, and task.
If the leaders can show these behaviors, they will satisfy the members, enhance the
relationship and social stability of the group.

Situational leadership

The approach considers the effectiveness of a leader to depend on some specific
situations, the nature of the work, the nature of environment, and subordinates. So it
proposes the styles of leadership might be different in different levels in the
organization.

Transformational leadership

The concept of transformational leadership was firstly introduced by Burns with the
definition of transformational leadership as a process both the leaders and the
followers promote each other to motivation, rationality, problem solving and
morality.
Transformational leaders enhance the followers’ capability by creating new
demands and values so that they can grow their performance. Moreover,
transformational leaders often challenge others for changes, extraordinary works
and drive the organization effectively. They have an important role in influencing
the organization changes; designing a very clear picture for the organization and
share the vision so that the employees can be inspired of it (Burns, 1978, as cited in
Gholamreza, Hasan, and Ali, 2009).

Transformational leaders always encourage the followers to think of new
perspectives in solving problems; help the followers to try harder their capability
and inspire them to focus on the organizational objectives. They also influence the
18 followers to attempt higher results by providing new perspectives and higher efforts
in attaining the goals. “The transformational leader asks followers to transcend their
own self-interests for the good of the group, organization, or society; to consider
their longer-term needs to develop themselves, rather than their needs of the
moment; and to become more aware of what is really important. Hence, followers
are converted into leaders” (Bass, 1990, as cited in John, 2006).

Evidences from researchers show that transformational leaders focus on the task,
value and vision (Bass, 1985, as cited in Gholamreza et al, 2009). Transformational
leaders treat each employee individually, provide them personal attention and tend

and provide discretionary effort to accomplishing their tasks for the achievement of
organizational goals.

According to Nitin (2005), employee engagement is the level of commitment and
involvement that an employee has towards their organization and its value. An
engaged employee can be aware of business context and works to improve
performance for the benefit of the organization. Kahn (as cited in Sandeep, Mark,
Chris, Emma, and Katie, 2008) defines “employee engagement is the harnessing of
organization members’ selves to their work roles.”In addition, engagement also
relates to the degree of discretionary effort that the employees willingly apply in
their work; choose whether to contribute at minimum level of their performance or
to go beyond the minimum to offer outstanding effort (Beverly and John, 2008).

There are three components of employee engagement: cognitive engagement refers
to ‘thinking’, affective or emotional engagement refers to ‘feeling’, and behavioral
engagement refers to ‘doing’. The cognitive aspect concerns the employees’ belief
about the organization; their managers and working conditions. The emotional or
affective aspect refers to how employees feel whether they have positive or negative
20 attitudes. And the physical or behavioral aspect implies the physical energies of the
employees to accomplish their roles.

2.7 THE EVOLUTION OF EMPLOYEE ENGAGEMENT

Wave 1 (1990-1999)

This wave begins with the concept of personal engagement by Kahn (as cited in
Mary, 2011) as “the harnessing of organizational members’ selves to their work

engagement (being willing to go the extra mile for your employer).”This wave also
draws the interest of many researchers such as: Macey and Schneider, Kular, Shuck
and Wollard, Attridge, Albrecht to contribute to the diversifications of the literature
review of employee engagement.

2.8 TWO DIMENSIONS OF AFFECTIVE EMPLOYEE ENGAGEMENT

Affective employee engagement comprises two components: affective commitment
and supervisory commitment.

Affective engagement is a multi-dimensional construct focusing on the individuals’
relationships with their roles, organizational commitment, job involvement and job
satisfaction. Researches from academicians and practitioners have showed a strong
correlation between the work outcomes and the line manager, leadership and
follower thinking and behavior. Therefore, affective engagement is measured by the
employee’s feelings of commitment to their immediate supervisor in particular and
the organization in general.

According to Allen and Mayer (1990, as cited in Dilys, Sarah, and Sue, 2004),
affective commitment is the most important form of commitment because it
indicates the most potential benefits for the organizations. Employees with high
affective commitment will go beyond their role and duty for the good of the
22 organization. Moreover, affective engagement is a positive feeling about doing a
good job (Kerstin, Catherine, Emma, Chris, and Mark, 2010).

Supervisory commitment engagement is also a multi-dimensional construct to
attend to the relationships between the direct supervisor and the subordinates. The

Hussein, and Ayat, 2011).

Report from Lowe et al (as cited in Caroline, 2007) shows meta-analytical evidence
to support the findings that transformational leadership is effective, productive,
innovative, and satisfying to followers. Transformational leadership uses soft
influence tactics, such as inspirational appeals and ingratiation to motivate
followers (Charbonneau, 2004, as cited in Caroline, 2007).

Individuals exhibiting transformational leadership are considered to be more
effective leaders. It is also true for higher and lower level leaders in public and
private settings (Lowe et al, 1996, as cited in Sulieman et al, 2011). The ability of
the transformational leaders has an important influence on individual outcome and
perceptions of justice (Greenberg, 2003, as cited in Azman, Mohd, Hassan,
Nurhana, and Karen, 2010); serves the function to engage followers into their work
and generates task performance (Tsang-lang, Li-chu, Chih-wei, and Yi-li, 2011).

From the above-mentioned evidences, the transformational leadership behaviors
provide clear links with engagement constructs. Transformational leaders move
followers beyond their self-interest for the great good of the organization by
creating a blame-free environment and building trust in leader to enable employee
engagement (Kahn, as cited in Jessica and Helena, 2011); to engage the followers’
higher needs (Hunt, 1996, as cited in Robert and Beverly, 2000); to positively
correlate with how effective subordinates perceive leaders, how much effort they
will expend, how satisfied they are and how well subordinates perform as rated by
the leader (Hater and Bass, 1988, as cited in Cheryl, Delene, and Gert, 2003).

24 2.10 RESEARCH MODEL AND HYPOTHESES

H3b+
H2a+
H2b+
H1b+
H4a+
H5a+
H3a+
H1a+
Idealized influence
attributes (IIA)
Idealized influence
behaviors (IIB)
Inspirational
motivation
(IM)
Intellectual
stimulation
(IS)
Individual
consideration
(IC)
Affective
commitment
(AC)
Supervisory
commitment
(SC)
25