LEADERSHIP, TRUST AND ORGANIZATIONAL PERFORMANCE IN THE PUBLIC SECTOR.

• Author: Asencio, Hugo

1. Introduction

   Improving performance within government organizations is a key concern of public administration (Brewer and Selden, 2000), and it has become a very important issue in the last few decades (Vermeeren, Kuipers and Steijn, 2013). After all, if government is to make a difference in people's lives and public trust is to be restored, it is important that public agencies perform well. In an effort to contribute to our understanding of the factors that influence performance within government organizations, public administration scholars have developed and tested different conceptual models of performance (e.g., Brewer and Selden, 2000; Chun and Rainey, 2005; Hassan and Hatmaker, 2015; Kim, 2005; Meier and O'Toole Jr, 2002; Rainey and Steinbauer, 1999; Pitts, 2005).

   Leaders are commonly regarded as key drivers of performance within public organizations (Brewer and Selden, 2000). Leaders engage in behaviors that contribute to the achievement of goals within organizations (Van Wart, 2011). They engage in transactional leadership behaviors--e.g., they clarify roles (Van Wart, 2011) and reward improved performance (Bass and Avolio, 1990); they also engage in transformational leadership behaviors--e.g., they provide '... an overarching sense of direction and vision ...' (Van Wart, 2003, p. 214). These leadership behaviors can help increase employee job satisfaction (Trottier, Van Wart and Wang, 2008), which in turn results in more motivated and productive employees (e.g., Bass and Riggio, 2006). Scholars have found both transactional (Bass et al., 2003; Fernandez, 2008) and transformational leadership behaviors (Bass et al., 2003; Belle, 2014; Caillier, 2014; Fernandez, 2008; Park and Rainey, 2008) to be positively related to performance within government agencies.

   While the public administration theory developments in the last twenty years have significantly contributed to our understanding of the factors--including leadership --that affect performance within public organizations, empirical research on the relationship between leadership and performance needs further development (Hassan and Hatmaker, 2015). Specifically, large-scale empirical studies are needed on the direct and indirect effects of different leadership behaviors on performance within public agencies.

   In an effort to contribute to the public administration literature on leadership, this study uses data from the 2010 Federal Employee Viewpoint Survey (FedView survey) conducted by the United States (U.S.) Office of Personnel Management (OPM) to answer the following research question: do employee perceptions of trust in leaders mediate the relationship between employee perceptions of transactional and transformational leadership behaviors, and employee perceptions of organizational performance? Answering this question is important for a few reasons.

   On the one hand, there is a need for empirical evidence on the effectiveness of different leadership behaviors in increasing performance within government organizations. This is important given the difficulties that public leaders face when motivating employees (Cho and Lee, 2011) as a result of the constraining environment in which they operate (Rainey, 2014), particularly when it comes to the use of extrinsic rewards (Rainey and Bozeman, 2000). This without forgetting that the key differences between public and private organizations (see, Perry and Rainey, 1988; Rainey and Bozeman, 2000, for reviews) require that public leaders emphasize certain leadership behaviors over others (Hansen and Villadsen, 2010) as they seek to increase performance within their organizations.

   On the other hand, there is a need for empirical research on the role that employee trust in leaders plays in mediating the relationship between different leadership behaviors and performance within public agencies. After all, leaders play a fundamental role in building trust among employees (Carnevale, 1995; Shaw, 1997), and followers who trust in their leaders are more comfortable acting in ways that may put them at risk in the relationship with their leaders--by sharing sensitive information or admitting mistakes--(Dirk and Ferrin, 2002; Mayer, Davis and Schoorman, 1995); employees also tend to reciprocate with their leaders by working hard on required tasks and going above and beyond in their performance (Dirks and Ferrin, 2002; Konovsky and Pugh, 1994). Despite the aforementioned, to the author's knowledge, no recent study in the public administration literature has investigated whether trust makes a difference in the relationship between leadership and organizational performance within public organizations [1].

   The paper proceeds as follows. The first section reviews the literature on transactional and transformational leadership, employee trust in leaders, and organizational performance. The next section describes the data and methods employed. Then, the results of the statistical analyses are presented. The paper concludes by discussing the implications of the findings, limitations of the study, and suggestions for future research.

2. Conceptual framework and hypotheses

   2.1. Organizational performance

   In the public sector, organizational performance can be said to refer to 'whether the agency does well in discharging the administrative and operational functions pursuant to the mission and whether the agency actually produces the actions and outputs pursuant to the mission or the institutional mandate' (Kim, 2005, pp. 250251).

   Also, although difficult to measure as a construct (Kim, 2005), in the absence of objective data, organizational performance can be estimated based on employees' perceptions of a public organization's internal and external performance in terms of efficiency, effectiveness, and fairness (Brewer and Selden, 2000).

   2.2. Transactional and transformational leadership

   As a concept, transactional leadership originated in the 1960s as researchers at the University of Michigan and Ohio State University started to challenge the assumptions of early management and trait theories of leadership (Van Wart, 2011). With the publication of 'Leadership' by James MacGregor Burns in 1978, transformational leadership emerged as an important approach to leadership (Northouse, 2015). Burns considered leaders to be either transactional or transformational--not both. In 1985, building on Burns' work, Bernard Bass argued that, depending on the situation, leaders could be transactional or transformational. To achieve the best results, Bass (1985) believed that leaders needed to possess both types of leadership.

   Transactional leadership is a process of exchange between leaders and subordinates in which leaders recognize subordinates' needs and provide them with financial incentives and organizational recognition to motivate them (Bass, 1990, 1998). It also involves clarifying expectations and required tasks to obtain rewards. Transactional leadership emphasizes task and people-oriented behaviors (Van Wart, 2011). Transactional leaders engage in (1) contingent reward--they reward subordinates for acceptable behavior, such as improved performance (Bass and Avolio, 1990), and penalize them for unacceptable behavior (Bass, 1998)--and (2) management by exception (Bass, 1985; Bass and Avolio, 1990)--they actively or passively monitor performance and take corrective action when there is a problem or when standards are not met (Avolio, Bass and Jung, 1999; Bass, 1985; Hater and Bass, 1988).

   Transformational leadership takes place 'when leaders broaden and elevate the interests of their employees, when they generate awareness and acceptance of the purposes and mission of the group and when they stir their employees to look beyond their own self-interest for the good of the group' (Bass, 1990, p. 21). Although transformational leaders also emphasize people-oriented behaviors, they do not rely on financial incentives to motivate employees (Van Wart, 2011). Instead, they motivate subordinates to do more than the expected by raising their levels of consciousness about the importance and value of stipulated and idealized goals; getting them to transcend their own self-interest for the sake of the group; and moving them to address higher-level intrinsic needs (Bass, 1985).

   Transformational leaders engage in different leadership behaviors. They employ idealized influence--they act as role models and display ethical behavior; they are admired, respected; and subordinates identify with them, want to be like them (Bass, 1996; Northouse, 2015; Tracey and Hinkin, 1998). They also utilize inspirational motivation --they communicate and demonstrate commitment to organizational goals (Stone, Russell and Patterson, 2004), and communicate an inspiring, shared vision of the future (Hater and Bass, 1988; Stone, Russell and Patterson, 2004). Further, transformational leaders engage in intellectual stimulation--they ask for employees' ideas and encourage them to view issues from new perspectives (Avolio and Bass, 2002; Bass, 1985; Judge and Piccolo, 2004). Last, they display individualized consideration --they show concerns for employees' welfare and development and empower them (Bass, 1990; Avolio and Bass, 2002).

   2.3. Organizational performance as an outcome of leadership

   Leaders play a key role in building performance within public organizations (Brewer and Selden, 2000). From a transactional leadership perspective, when leaders engage in contingent reward, organizational performance will rise as a result of employees being clear on what they need to do and being motivated by the rewards they receive (Bass, 1985; Bass et al., 2003). Similarly, when leaders engage in active management by exception, they are able to anticipate deviations from standards and take corrective action (Hater and Bass, 1988), which ultimately results in increased performance. The empirical evidence lends support to these propositions as several scholars find that...