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MINISTRY OF EDUCATION AND TRAINING HCMC UNIVERSITY OF ECONOMICS ---------------- TRAN MINH PHUONG THE IMPACT OF TRANSFORMATIONAL AND TRANSACTIONAL LEADERSHIP ON EMPLOYEE ENGAGEMENT MASTER OF BUSINESS ADMINISTRATION THESIS Ho Chi Minh City – 2011 MINISTRY OF EDUCATION AND TRAINING HCMC UNIVERSITY OF ECONOMICS ---------------- TRAN MINH PHUONG THE IMPACT OF TRANSFORMATIONAL AND TRANSACTIONAL LEADERSHIP ON EMPLOYEE ENGAGEMENT Major: Business Administration Major Code: 60.34.05 MASTER OF BUSINESS ADMINISTRATION THESIS SUPERVISOR: DR. NGUYEN HUU LAM Ho Chi Minh City – 2011 i ACKNOWLEDGEMENT I would like to express my heartfelt thanks and appreciation to my research Supervisor, Dr. Nguyen Huu Lam for his valuable ideas, guidance and suggestions for my thesis. My sincere thanks to all lecturers of the eMBA class who have given us knowledge, and guidance during the course. My special thanks to all commentators Dr. Nguyen Trong Hoai, Dr. Nguyen Huu Dung, Dr. Ho Viet Tien, and Dr. Nguyen Van Ngai for valuable advice and suggestions. It is my pleasure to be an eMBA class member as we had a memorable time studying together although we faced many difficulties during our course. My sincere thanks to our class monitor Mr. Cuong for his contribution to our class, and Ms. Hien my classmate for her support, encouragement and helping on data collection. I would like to thank all of my friends and colleagues who enthusiastically helped me during the data collection, and special thanks to my manager who encouraged and let me have necessary time for my thesis. Finally, I am deeply grateful to my parents, especially my mother who always care for me, do all best things and support for my studying until now. ii ABSTRACT The Vietnam economy continues to grow quickly, especially after Vietnam has become a member of WTO, and in fact this is driving a war on talent. Results from research organizations and corporate results have demonstrated there may be a strong link between engagement, employee performance and business outcomes. However, how to increase employee engagement level so that they can contribute with high performance for organizations in Vietnam is not much explored. The research investigates the impact of transformational and transactional leadership behaviours on employee engagement level, particularly in manufacturing industry in the south of Vietnam representative by HCMC, Dong Nai and Binh Duong provinces. Data analysis was done for valid 223 returned questionnaires collected from employees who are currently working at least one year for the companies in manufacturing sector. The results showed that transformational leadership behaviour has significant and positive influence on employee engagement. On the other hand, transactional leadership has no influence on employee engagement. This result leads to the same finding with previous researches that transformational leadership would enhance employee engagement level, while transactional leadership behaviour does not significantly connect to employee engagement. For transformational leadership components, the results of research data analysis demonstrated that the first three components Idealized Influence (Attributes), Idealized Influence (Behaviour), Inspirational Motivation did not have impact on employee engagement; only did the last two components Intellectual Stimulation and Individualized Consideration have positive impact on employee engagement. For transactional leadership components, research practical data showed that Contingent Reward; however, has positive relationship with employee engagement while Management by Exception: active did not have significant relationship with iii employee engagement, and Management by Exception: passive and Laissez Faire leadership behaviour have week negative relationship with employee engagement. Keywords: transformational leadership, transactional leadership, employee engagement, the south of Vietnam iv CONTENTS Acknowledgement . i Abstract ii Contents iv List of Tables vi List of Figures . vii CHAPTER1: INTRODUCTION 1 1.1 Research background . 1 1.2 Research objective . 2 1.3 Research scope and design . 3 1.4 Research structure 3 CHAPTER 2: LITERATURE REVIEW AND RESEARCH MODEL 5 2.1 Leadership behavior . 5 2.2 Employee engagement . 11 2.3 Important of engagement . 15 2.4 Leadership and employee engagement . 16 CHAPTER 3: RESEARCH METHOD 25 3.1 Research model 25 3.2 Research question . 25 3.3 Research hypotheses . 26 3.4 Research variables . 26 3.5 Sample and data collection . 27 3.6 Questionnaire . 27 3.6.1 Leadership behavior questionnaire . 27 3.6.2 Employee engagement questionnaire 30 CHAPTER 4: ANALYSIS RESULT AND CONCLUSION 35 4.1 Data analysis 35 4.1.1 Sample profile . 35 4.1.2 Statistical analysis . 37 v 4.2 Conclusion . 49 4.2.1 Question 1 . 49 4.2.2 Question 2 . 49 4.2.3 Question 3 . 51 CHAPTER 5: IMPLICATION AND LIMITATION 53 5.1 Implications of the research . 53 5.2 Limitation of the research and some suggestion for future research 54 References 56 Appendix 1 Appendix 2 Appendix 3 Appendix 4 Appendix 5 Appendix 6 Appendix 7 Appendix 8 vi LIST OF TABLES Table 4.1: Demographic analysis . 37 Table 4.2: Descriptive analysis 38 Table 4.3: Descriptive analysis – Transformational leadership . 39 Table 4.4: Descriptive analysis – Transactional leadership . 40 Table 4.5: Reliability analysis 40 Table 4.6: The factor loading . 42 Table 4.7: The final elements of measurement scale for employee engagement . 43 Table 4.8: Correlation analysis . 44 Table 4.9: Regression of transformational leadership on employee engagement 45 Table 4.10: Regression of transformational leadership components on employee engagement 46 Table 4.11: Regression of transactional leadership on employee engagement 47 Table 4.12: Regression of transactional leadership components on employee engagement 47 Table 4.13: Conclusion of research hypotheses 48 vii LIST OF FIGURES Figure 3.1: Research model 25 Figure 4.1: Respondents – company categories 35 Figure 4.2: Respondents – job categories . 36 Figure 4.3: The result of regression analysis of transformational leadership on employee engagement 49 Figure 4.4: The result of regression analysis of transformation leadership component on employee engagement . 51 Figure 4.5: The result of regression analysis of transactional leadership component on employee engagement . 52 1 CHAPTER 1 INTRODUCTION 1.1 Research background Engagement is an emerging psychological construct that purports to measure how much a person is into his job. The concept of work engagement has gained momentum because of its predictive value for job performance (Bakker, 2009; Schaufeli & Salanova, 2007, cited in Tims, Bakker & Xanthopoulou, 2011). Instead of traditional organizational structures that heavily rely on management control and economic principles of cost reduction, efficiency, and cash flow, the focus in modern organizations is on the management of human capital. Currently, organizations expect their employees to be proactive and show initiative, collaborate smoothly with others, take responsibility for their own professional development, and to be committed to high quality performance standards. It is convinced that the people who form the strength of the company and that nothing can be achieved without their commitment and their energy, which makes people the most important asset. Thus employees are needed who feel energetic and dedicated, and who are absorbed by their work. In other words, organizations need engaged workers. Therefore, employee engagement has become a hot topic in recent years. Although there is a great deal of interest in engagement, there is also a good deal of confusion as many different definitions make the knowledge of employee engagement difficult to determine. So far none of the definitions has come to dominate the field either as a definition or as a methodology (Wefald, 2008). There are many predictors lead to engagement; however, one of the most concerned factors is leadership behaviors, especially the contemporary concept transformational and transactional leadership. It is found numerous paths from transformational leadership to employee engagement. The leadership behavior of inspirational motivation, intellectual stimulation, and individualized consideration . non-leaders, then concentrates on behavior and later considers the role of followers and the contextual nature of the leadership. The concept of leadership. organization. Leadership theory has been developed since the beginning of the twentieth century, which starts from the early leadership theories focused on the attributes
