Effect of Leadership Styles on Organizational Performance in Private Commercial Banks of Dire Dawa Administration

This study sought to determine the effects of leadership style on organisational performance of private commercial banks in Dire Dawa Administration. The study adopted a descriptive research design. The target population of this study was the heads of finance/treasury, credit, operations, human resource/administration, customer service, marketing/ corporate communication, information and communications technology and internal audit departments and employees in the 6 private commercial banks, Dire Dawa Administration Branches. The study used purposive sampling to select 81 leaders and stratified random sampling to select 208 employees from the target population. This study made use of primary data, which was collected by use of structured questionnaires. Data collected was quantitative and analyzed by use of descriptive and inferential statistics through the help of Statistical Package for Social Sciences (SPSS) version 23. Descriptive statistics were given using percentages, mean and standard deviation while inferential statistics were carried out using independent sample T-test and multiple regression analysis. Research findings were presented using tables, chart and figures. The result showed that Idealized attribute, individual consideration and intellectual stimulation factors of the transformational leadership style; and contingent reward factor of the transactional leadership style exhibited positive and significant effect on organizational performance. On the other hand, Idealized behaviors and inspirational motivation of transformational leadership style; and management by exception both active and passive of transactional leadership styles are found to exhibit positive but insignificant effect on organizational performance. The study concluded that both transformational and transactional leadership styles were more appropriate in inducing performance in banks and, therefore, recommended to practice the combination of both transformational and transactional leadership styles according to the work situation.