Effect of Leadership Styles on the Performance of Microfinance Institutions in Nairobi, Kenya

Abstract

The leadership behavior, traits and styles have been of topical importance in many organizations due to the ever changing nature of technologies as well as the growth of globalization which has transformed the expectations and behaviors of people within an organization. This study sought to investigate the effects of leadership styles on the performance of microfinance institutions in Nairobi County, Kenya. The objectives of this study were to identify the leadership styles adopted by managers within microfinance institutions, to examine the effects of leadership styles on the performance of microfinance institutions and to identify the relationship between leadership styles and performance of microfinance institutions. A descriptive research design was used where samples were obtained using random sampling technique. Data was collected using questionnaires. The study found that, the democratic leader was the most preferred leadership style. The style did not increase employee turnover and but it increased employee productivity. Transformational leadership also did not increase employee turnover but Laissez-faire leadership increased employee turnover. Transactional leadership affected employee productivity. A majority of the respondents believed that leadership style played a role performance of the organization. Democratic leadership stood out as the dominant style, followed by transformational leadership then autocratic leadership. The study, therefore, concluded that leadership styles have an effect on performance at microfinance institution. This study recommends that most managers in the micro-finance institutions should adopt transformational leadership in order to ensure staff retention, enhanced employee satisfaction and increased productivity.

The leadership behavior, traits and styles have been of topical importance in many organizations due to the ever changing nature of technologies as well as the growth of globalization which has transformed the expectations and behaviors of people within an organization. This study sought to investigate the effects of leadership styles on the performance of microfinance institutions in Nairobi County, Kenya. The objectives of this study were to identify the leadership styles adopted by managers within microfinance institutions, to examine the effects of leadership styles on the performance of microfinance institutions and to identify the relationship between leadership styles and performance of microfinance institutions. A descriptive research design was used where samples were obtained using random sampling technique. Data was collected using questionnaires. The study found that, the democratic leader was the most preferred leadership style. The style did not increase employee turnover and but it increased employee productivity. Transformational leadership also did not increase employee turnover but Laissez-faire leadership increased employee turnover. Transactional leadership affected employee productivity. A majority of the respondents believed that leadership style played a role performance of the organization. Democratic leadership stood out as the dominant style, followed by transformational leadership then autocratic leadership. The study, therefore, concluded that leadership styles have an effect on performance at microfinance institution. This study recommends that most managers in the micro-finance institutions should adopt transformational leadership in order to ensure staff retention, enhanced employee satisfaction and increased productivity.