This investigation examined the practices of transformational and transactional leadership in a management simulation game that spanned a 3-month period. Transformational and transactional leadership were measured by using Bass's (1985) Multifactor Leadership Questionnaire (Form 4). Participants were second-year, part- time and full-time MBA students who worked in teams, each composed of seven to nine members. Each team represented the senior management of a hypothetical manufacturing organization. Data were collected from 27 teams on the perceived leadership of team presidents and the financial performance of their respective teams. Financial performance was based on five traditional indicators of organi zational effectiveness,that is, market share, stock price, earnings per share, return on assets, and debt-to-equity ratio. Analyses of leadership data collected independently of financial performance demonstrated significant and positive relationships be tween active transactional leadership, transformational leadership, and organi zational effectiveness.
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