CEO TRANSFORMATIONAL LEADERSHIP :...
CEO TRANSFORMATIONAL LEADERSHIP: THE ROLE OF GOAL IMPORTANCE CONGRUENCE IN TOP MANAGEMENT TEAMS AMY E. COLBERT AMY L. KRISTOF-BROWN BRET H. BRADLEY University of Iowa MURRAY R. BARRICK Texas A&M University Using data from 94 top management teams, we found that dyadic goal importance congruence between CEOs and vice presidents (VPs) partially mediated the relation- ship of CEO transformational leadership with individual VPs��� attitudes, but not their performance. However, finer-grained analyses suggested it may be higher VP percep- tions of goal importance, rather than the exact correspondence between CEO and VP goal importance ratings, that are associated with both CEO transformational leader- ship and VP attitudes. At the organizational level, CEO transformational leadership was positively related to within-team goal importance congruence, which in turn was positively related to organizational performance. In his seminal book Leadership, Pulitzer Prize��� winning author James McGregor Burns wrote, ���The function of leadership is to engage followers, not merely to activate them, to commingle needs and aspirations and goals in a common enterprise, and in the process to make better citizens of both lead- ers and followers��� (1978: 461). A large body of theoretical and empirical research emanating from Burns���s perspective has supported the relationship of such transformational leadership with follower attitudes, motivation, and individual, group, and organizational performance (Judge & Piccolo, 2004). Recently, empirical research has begun to identify intervening mechanisms that help explain the link between transformational leadership and these positive outcomes, especially at the individ- ual level. For example, followers of transforma- tional leaders have been found to have higher lev- els of trust in their leaders (Podsakoff, MacKenzie, Moorman, & Fetter, 1990) as well as higher levels of self-efficacy (Kirkpatrick & Locke, 1996). Yet, de- spite Burns���s emphasis on the ���commingling��� of aspirations and goals, there has been surprisingly little research on the relationship between transfor- mational leadership and shared perspectives about organizational goals. One study, however, provides preliminary evi- dence of a relationship between transformational leadership and shared perceptions about organiza- tional goals. Berson and Avolio (2004) found that transformational leaders were rated by followers as more effective at communicating organizational goals. Their exploratory analysis of 11 leader-fol- lower dyads also showed that leaders��� and follow- ers��� qualitative reports of organizational goals tended to be more similar when a leader was rated as more transformational. Thus, there is some evi- dence that transformational leadership and shared perceptions about organizational goals are posi- tively related. The purpose of the current research was to better understand this relationship between transforma- tional leadership and shared perceptions about or- ganizational goals, and its association with critical outcomes���including individual attitudes and per- formance, as well as organizational performance. By focusing on transformational leadership within top management teams (TMTs), we were able to examine CEO transformational leadership, the atti- tudes and performance of individual members of TMTs (typically vice presidents [VPs]), and organ- izational performance in the upper echelons of a multiorganization sample. Thus, this study contributes to existing research in three key ways. First, we examine dyadic goal importance congruence between CEOs and VPs as an intervening mechanism by which CEO transfor- mational leadership is related to VP attitudes and performance. We define dyadic goal importance congruence as the similarity between CEO and in- dividual VP perceptions about the importance of specific goals to the organization. Unlike Berson Academy of Management Journal 2008, Vol. 51, No. 1, 81���96. 81 Copyright of the Academy of Management, all rights reserved. Contents may not be copied, emailed, posted to a listserv, or otherwise transmitted without the copyright holder���s express written permission. Users may print, download or email articles for individual use only.
and Avolio (2004), who collected qualitative ac- counts of the goals of a small sample of leaders and followers, we quantitatively assessed dyadic goal importance congruence in multiple organizations. Specifically, we calculated dyadic goal importance congruence by comparing CEO and VP ratings of the importance of seven specific organizational goals, identified from a presurvey of CEOs as rele- vant for their industry. This approach is consistent with previous research on goal congruence (e.g., Vancouver & Schmitt, 1991 Witt, 1998), which has been described as an important type of person- organization fit (Kristof-Brown, Zimmerman, & Johnson, 2005). Thus, a second contribution of our research comes from investigating transformational leadership as a possible antecedent to goal congru- ence. As Kristof-Brown et al. (2005) noted, little is known about antecedents of person-organization fit in general. Our study is an attempt to fill this gap. Finally, we extend previous research on transfor- mational leadership to the organizational level of analysis. Although research has begun to examine a transformational leadership���organizational perfor- mance link (e.g., Waldman, Ramirez, House, & Puranam, 2001), little is known about the interven- ing mechanisms that help explain this relationship. To fill this gap, research must move beyond the dyadic leader-follower relationship to examine how transformational CEOs relate to their top man- agement teams as collectives (Dess, 1987 Katzen- bach, 1997). As such, in this study, we examine within-team goal importance congruence as a pos- sible link between CEO transformational leader- ship and firm performance. We define within-team goal importance congruence as the similarity of perceptions about the importance of specific organ- izational goals among all members of a TMT (in- cluding the CEO). A combination of detailed survey data from upper echelon leaders and objective fi- nancial indicators of performance allowed us to better understand the relationship between trans- formational CEOs and firm performance. TRANSFORMATIONAL LEADERSHIP AND INDIVIDUAL OUTCOMES A key role of all business leaders is defining strategic goals for their organizations and aligning the efforts of all organization members with these goals (e.g., Messick, 2005). Strategic leadership the- ory suggests that the values, experiences, and knowledge of leaders in the upper echelons of or- ganizations impact the strategic decisions made by these leaders, ultimately influencing organizational performance (Finkelstein & Hambrick, 1996). Re- cent reviews of the strategic leadership literature suggest that theories of transformational leadership should be integrated with strategic leadership per- spectives to increase understanding of the pro- cesses by which leaders communicate and imple- ment organizational strategies (Boal & Hooijberg, 2001 Cannella & Monroe, 1997). According to Bass (1985), transformational lead- ership comprises four primary behaviors. First, transformational leaders exhibit idealized influ- ence, behaving consistently with their promises and gaining the trust of others. Second, transforma- tional leaders communicate compelling visions of the future and emphasize to others how their work contributes to the achievement of the vision, a be- havior referred to as inspirational motivation. Third, through the behavior of intellectual stimula- tion, transformational leaders provide a safe envi- ronment in which others can think creatively and challenge the status quo. Finally, transformational leaders exhibit the behavior of individualized con- sideration by recognizing the developmental needs of others and providing support to their followers. We propose that CEO transformational leader- ship is associated with higher levels of dyadic goal importance congruence between CEOs and individ- ual VPs. Several of the behaviors characteristic of transformational leaders support this association. First, as noted previously, a transformational leader communicates a vision of the future of an organi- zation that may serve as the beginning of the goal- setting process, with the vision describing ���a clear strategic direction in overarching terms for the or- ganization��� (Conger & Kanungo, 1998: 158). Thus, the transformational leader has a clear understand- ing of what goals are important to the organization, which he or she communicates through a vision for the organization���s future. Second, in communicating organizations��� vi- sions, transformational leaders use rhetorical strat- egies and modeling to ensure that followers attend to, understand, and remember the strategic direc- tions embodied in the visions (Emrich, Brower, Feldman, & Garland, 2001). For example, transfor- mational leaders��� use of image-based rhetoric may be associated with higher levels of dyadic goal im- portance congruence because the images capture followers��� attention and increase their comprehen- sion of a leader���s message (Emrich et al., 2001). Additionally, transformational leaders model be- haviors that are consistent with organizational goals in their day-to-day activities (Bass, 1985 Shamir, House, & Arthur, 1993). Through the be- havior of idealized influence, transformational leaders serve as influential role models, making decisions and exhibiting behaviors that support their words (Bass, 1985). Thus, goals communi- 82 February Academy of Management Journal
cated and modeled by transformational leaders should be attended to, understood, and remem- bered more fully. Therefore, we hypothesize: Hypothesis 1. CEO transformational leader- ship is positively related to dyadic goal impor- tance congruence. One reason that dyadic goal importance congru- ence is important is its relationship with follower attitudes, such as job satisfaction, organizational commitment, and satisfaction with one���s leader. Extensive research has supported the positive rela- tionship between demographic similarity within leader-follower dyads and follower attitudes (e.g., Tsui, Xin, & Egan, 1996) however, Harrison, Price, and Bell (1998) emphasized the importance of ���deep-level��� similarity, including similarity in at- titudes, beliefs, and values. Although judgments about similarity on surface-level demographic vari- ables may be made more quickly, similarity on deep-level variables is argued to have a stronger impact over time. Similarly, in the TMT literature, Priem, Lyon, and Dess (1999) questioned the use of demographic variables as proxies for underlying attitudes and beliefs. Thus, research on deep-level similarity within leader-follower dyads is needed to supplement the current literature on demo- graphic similarity. Because of the central impor- tance of goals in organizations, and especially among members of TMTs, we suggest dyadic goal importance congruence as a key example of deep- level similarity between CEOs and their VPs. Dyadic goal importance congruence may be asso- ciated with follower attitudes for at least two rea- sons. First, when leaders and followers have simi- lar perceptions about the importance of specific organizational goals, the followers are likely to re- ceive higher levels of positive reinforcement for their work (Boswell, 2000), because their efforts are directed toward organizationally endorsed goals, which may, in turn, be positively associated with their job satisfaction. Additionally, leaders may have higher-quality relationships with followers who share their perceptions about the importance of specific organizational goals (Vancouver & Schmitt, 1991). Research on leader-member ex- change has shown that high-quality exchange rela- tionships are positively associated with follower job satisfaction, organizational commitment, and satisfaction with one���s leader (Gerstner & Day, 1997). Past empirical research has supported the posi- tive relationship of dyadic goal importance congru- ence with follower attitudes (Vancouver & Schmitt, 1991 Witt, 1998). For example, in their study of school principals and teachers, Vancouver and Schmitt found that principal-teacher goal impor- tance congruence was positively related to teach- ers��� job satisfaction and organizational commit- ment and negatively related to their intent to quit their jobs. Similarly, in their meta-analysis of the person-environment fit literature, Kristof-Brown et al. (2005) found a corrected correlation between goal congruence and job satisfaction of .31 (k 3). None of these studies investigated leadership style as an antecedent to goal congruence, however, or predicted follower performance as a possible outcome. Given past research findings and the importance of goals within TMTs, we hypothesize: Hypothesis 2. Dyadic goal importance congru- ence is positively related to individual VP atti- tudes (job satisfaction, organizational commit- ment, and satisfaction with leader). Finally, we expect dyadic goal importance con- gruence to be positively associated with individual VPs��� job performance. Goals are an important mo- tivational construct that help employees choose the activities on which they should expend effort (Locke & Latham, 2002). As Jauch, Osborn, and Terpening noted, dyadic goal importance congru- ence improves the likelihood that employees ���will direct their efforts toward those goals most highly prized by top management��� (1980: 544). A shared understanding of the importance of specific goals by CEOs and their VPs reduces ambiguity about effort allocation and helps ensure that VPs��� activi- ties in their own divisions directly contribute to their organizations��� overarching goals. These ef- forts, in turn, should be viewed positively by the CEOs and be associated with higher performance ratings for the VPs. Therefore, we hypothesize: Hypothesis 3. Dyadic goal importance congru- ence is positively related to CEOs��� ratings of individual VP performance. As noted earlier, past research has demonstrated the relationship of transformational leadership with follower attitudes and performance (Judge & Piccolo, 2004). Given these findings and the pre- ceding hypotheses, we propose that dyadic goal importance congruence provides one explanation for the relationship between CEO transformational leadership and VP attitudes and performance. However, other processes have also been shown to mediate the relationship of transformational leadership with follower attitudes and performance (e.g., trust in a leader [Podsakoff et al., 1990] follower self-efficacy [Kirkpatrick & Locke, 1996]). Thus, we propose two partial mediation hypotheses: 2008 83 Colbert, Kristof-Brown, Bradley, and Barrick