Examining the relationship of leadership and physical distance with business unit performance

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Abstract

Measures of transformational and transactional contingent reward leadership and physical distance were used to predict the business unit performance of 101 managers. Results revealed that transformational leadership positively predicted unit performance, while contingent reward leadership was not related to performance. Physical distance between leaders and followers negatively moderated the relationship between transformational leadership and unit performance, and positively moderated the relationship between contingent reward leadership and performance. Implications for future work on leadership at a distance are discussed.

Introduction

Changes in organizational structure, size, complexity, and work arrangements make more leaders responsible for managing followers who are at a distance (Antonakis & Atwater, 2002, Avolio et al., 2000). Leaders in virtual organizations, multinational firms, or domestic companies with widely dispersed sites are faced with the challenges of motivating and evaluating followers who reside in different locations and/or countries. How a leader's behavior influences followers when spanning physical distances is largely unexplored.

Antonakis and Atwater (2002, p. 674) challenged the leadership field, stating that, “The dynamics of the influencing process differ[s] depending on how ‘close’ and how ‘distant’ followers are from their leader. In other words, the types of leader behaviors that can affect followers and how those behaviors are evaluated by followers depend on how ‘close’ and ‘distant’ followers are from their leaders.” The present study addressed this challenge by examining how physical distance moderated the effects of transformational and contingent reward leadership on unit performance.

We have uncovered only one empirical study that has examined how physical distance moderated the leader–performance relationship. Howell and Hall-Merenda (1999) investigated how the joint impact of leader–member exchange relationships and transformational and transactional leadership was moderated by physical distance in predicting individual-level follower performance. The current study, using different data from the Howell and Hall-Merenda (1999) sample mentioned above, extends that work in five important ways. First, the dependent variable in the present study is business unit financial performance measured over time, as opposed to perceptual ratings of individual follower performance reported in the earlier work. Second, the business unit financial performance measure used in the current study captured the assessment of performance beyond the expected targets set, in that leaders could (and some did) exceed 100% of their goals over the performance review period. Third, this study focused on examining group level effects of leadership rather than individual level effects. Fourth, additional control variables were included (i.e., leader–follower interaction frequency and leader job tenure) to reduce the possibility of alternative explanations of results and/or confounds in the study. Fifth, rather than testing moderation by generating and comparing multiple independent models, the moderating effects of physical distance in this study are tested within a single partial least squares (PLS) model.

Section snippets

Leadership and performance

Prior research and meta-analyses have all provided support for the proposition that transformational leadership, or its components (charisma, inspiration, intellectual stimulation, and individualized consideration), relate to higher individual, unit, and/or organizational performance (e.g., Dumdum et al., 2002, Dvir et al., 2002, Howell & Avolio, 1993). The majority of previous studies demonstrate that contingent reward leadership is positively related to individual and organizational

Distance and performance

Napier and Ferris (1993) identified three aspects of distance between leaders and followers: physical, structural, and psychological. A number of authors have argued that physical distance may negatively affect how well leaders are able to work with their followers due to a potential reduction in the quality of interactions between leaders and followers (Bass, 1998, Bass & Avolio, 1990, Howell & Hall-Merenda, 1999, Yagil, 1998). Their main argument is that leaders will have less opportunity to

Physical distance as a moderator of leadership impact

Howell and Hall-Merenda (1999) reported that transformational leadership was significantly and positively related to individual follower performance in close versus distant conditions. Physical proximity between transformational leaders and followers may provide greater opportunities to demonstrate support, consideration, and interest in followers' needs. Yagil (1998) noted that close leaders may be able to deliver individually tailored confidence building communications to followers and serve

Sample

The sample included 101 senior managers (“community banking managers”) and their 308 direct reports (“branch managers”) in a large Canadian financial services institution. On average, the 101 community banking managers were 48 years old, had an organizational tenure of 24 years, managed three to five direct reports each, and were predominantly male (97%). These senior leaders were responsible for commercial and personal financial service delivery to customers in designated geographic areas

Results

The measurement model was tested by examining individual item reliability, internal consistency, and convergent and discriminant validity. All items loaded at the .7 level or higher on their respective constructs, indicating acceptable item reliability (Chin, 1998). Scale reliabilities (internal consistencies) for the transformational and contingent reward leadership constructs examined in this study were .94 and .95, respectively, and Cronbach's alphas were .93 and .97, respectively.

Discussion

The current study contributes to our understanding of how physical distance influences the effects of transformational and contingent reward leadership on performance. First, the dependent variable, business unit financial performance measured over time, represents an objective assessment of performance, and answers calls for more longitudinal studies of leadership impact using objective measures (Judge & Piccolo, 2004). Furthermore, while performance measures are often plagued by ceiling

Acknowledgements

Funding for this research was provided by the Social Sciences and Humanities Research Council of Canada (grant 410-98-0373).

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