Organizational culture and transformational leadership as predictors of business unit performance

Purpose – The aim of the study was to examine the relationship between transformational leadership and organizational cultural orientations, as well as the joint effect of transformational leadership and organizational culture on business unit performance. Design/methodology/approach – About 300 employees of a large financial organization in Greece filled in a number of questionnaires measuring organizational culture orientations and transformational leadership. The measurement of business unit performance was obtained by the organization under study. Findings – A path analysis showed that the achievement and adaptive cultural orientations had a direct effect on performance. Moreover, transformational leadership and humanistic orientation had an indirect positive impact on performance via achievement orientation. Research limitations/implications – A research limitation is that the causal direction of the relations between the predictors and the criteria has been partially established by controlling for the effect of past performance on the perceptions of organizational culture and leadership. Practical implications – On a practical level the findings suggest that constructive and positive social relations at work need to be accompanied by goal setting and task accomplishment if high organizational performance is to be achieved. Originality/value – The originality of this study concerns the finding that organizational culture mediates the effect of transformational leadership on business unit performance.