TRANSFORMATIONAL, TRANSACTIONAL LEADERSHIP, AND PERCEPTIONS OF ORGANIZATIONAL PERFORMANCE: THE MODERATING ROLE OF RELATIONAL AUTHENTICITY AS A LEADER.

• Author: Kim, Min-Hyu

1. Introduction

   Nonprofits' board members and academic proponents of introducing transformational leadership into nonprofit service delivery have repeatedly claimed the importance of transformational leadership because of its significance in improving organizational performance (Jaskyte, 2004; Paarlberg and Lavigna, 2010). Transformational leadership is defined as a style of leadership that heightens one's consciousness of the collective interest of the organizational members and helps them achieve their collective goals (Garcia-Morales et al., 2012). In contrast, transactional leadership focuses on promoting leaders and their followers' individual interests and achieving the satisfaction of contractual obligations on behalf of both leaders and followers by establishing objectives and monitoring the results (Bass and Avolio, 2000).

   Scholars have questioned to what extent the transformational leadership techniques of public and private sectors can be applied to the nonprofit sector (Boerner and Gebert, 2012; Brimhall, 2019). Previous studies have also suggested that the differences among the nonprofit, public, and private sectors could play a role (Riggio et al., 2004). Moreover, several studies have suggested that nonprofit organizations' specific context may result in different consequences of transformational and transactional leadership (Rowold and Rohmann, 2009; Mayr, 2017; Boerner and Gebert, 2012); however, empirical evidence concerning this issue is limited. Methodologically, the previous literature on transformational leadership's effects on organizational performance in the nonprofit sector has depended heavily upon the case or observational studies in which supervisors' leadership style is likely to be endogenous for perceptions of organizational performance (Rowold and Rohmann, 2009; Brimhall, 2019).

   Recently, theories on relational authenticity have also drawn attention. Generally, achieving relational authenticity requires that followers accord leaders the legitimacy to promote a set of values on behalf of a community (Harter, 2002, p. 382). Although several scholars (e.g., Shamir and Eilam, 2005) have discussed repeatedly the possible positive effects of relational authenticity on organizational performance, an empirical evaluation of whether this holds true in nonprofit organizations is missing.

   A positive-negative asymmetry perspective can be applied to explain relational authenticity's potential to achieve a more active and effective leadership. The positive-negative asymmetry effect theory assumes that negative and positive events are not equally salient, although probably of equal magnitude or emotional valence (Baumeister et al., 2001; Peeters and Czapinski, 1990). Stated simply, negative behavior affects the outcomes of both transformational and transactional leaderships, although positive behavior influences only transformational leadership's effects. This present study extends and tests the theory of positive-negative asymmetry using a randomized experiment to investigate whether or not leaders' negative personal behavior has detrimental effects on perceptions of organizational performance.

   The remainder of the paper is organized as follows. Section 2 reviews the literature and develops the hypotheses. Section 3 describes the methodology, and Section 4 presents the results. Finally, Section 5 concludes the paper.

2. Literature review

   2.1. Transformational, transactional leadership, and organizational performance in nonprofit organizations

   The distinctive characteristics of nonprofit organizations present special challenges for nonprofit leadership. Given that nonprofit wages are so low and that many nonprofit employees seek assistance (Kim and Charbonneau, 2020), nonprofit leaders must motivate their followers to work hard despite low wages. Fortunately, nonprofits can overcome the challenge of limited payroll by devising alternative ways to appeal to employees. This is because the salary is not always the most important factor motivating an employee to accept a job offer, or to remain with a nonprofit organization, which is why transformational leaders must communicate nonprofit organizations' value and vision to their followers (Creative Business Resources, 2016). Executive directors who want to take nonprofit organizations to a higher level may consider the transformational leadership approach to inspire, create a better work environment, call employees and volunteers to take action, and keep donors to stay connected (University of Notre Dame, 2019).

   Several recent critical reviews of the transformational and transactional leadership construct include the work of Van Knippenberg and Sitkin (2013), who suggested that management scholarship should more clearly define the distinct aspects of leadership through empirical studies to overcome the following three problems in the previous literature. First, a clear, conceptual definition of transformational and transactional leadership is lacking. Second, theories do not sufficiently explain the causal model explaining how the outcome is contingent on moderating influences. Lastly, the most frequently used measurement tools are invalid because they do not capture the dimensional structure specified by Bass and Avolio's (1994) full-range theory. As a result, a mismatch between what the previous literature has shown and what a future workforce should know about transformational and transactional leadership remains.

   Previous studies have suggested the need to examine the effect of leadership style on organizational performance within the nonprofit context (e.g., Van Slyke and Johnson, 2006; Geer, Maher and Cole, 2008), whereas transformational leadership has been associated with a number of positive outcomes across samples and cultures in the public and for-profit sectors (Wang et al., 2011; Whittington, Goodwin and Murray, 2004; Belle, 2014). For example, Rowold and Rohmann (2009) used data from German nonprofit orchestras and found that transformational leaders contribute to organizational performance by motivating and inspiring their followers. Rowold et al. (2014) also found that transformational leaders increased organizational performance by painting an optimistic future that provided both meaning and challenges for followers in fire departments and Protestant church offices in Germany.

   Although these studies provide insightful contributions to the literature and help us understand transformational leadership's effect on organizational performance, empirical evidence in nonprofit organizations remains limited. Given that boards in the nonprofit sector look for executive directors who demonstrate transformational leadership, studying whether transformational leadership subsequently leads to better organizational performance is proper and timely. Therefore, this study hypothesizes the following:

   Hypothesis 1: Nonprofit executives are more likely to evaluate organizational performance positively when the organization's leader is a transformational leader (vs. transactional leader).

   2.2. The moderating role of relational authenticity as a leader

   In this study, relational authenticity as a leader is considered a facilitator of organizational performance, rather than a direct determining force. Eagly (2005) defined relational authenticity as 'advocating goals that are grounded in shared values, and authentic leaders' actions promote goals that benefit the large communities' (p. 460). Given that authentic leaders contribute to the community other than fulfilling their organizational mission because followers accord legitimacy to relational authenticity in leadership, leaders' inappropriate behavior can undermine an organization's performance (Avolio et al., 2004). Hence, transformational leaders can be perceived as inauthentic when their behavior outside the workplace is inappropriate. The moderation argument of authentic leadership suggests that the positive relationship between transformational leadership and organizational performance can be strengthened in nonprofits when the community perceives that leaders' personal behavior is positive. Specifically, compared to the performance of organizations with inauthentic leaders, the performance of nonprofits with more authentic leaders tends to be better, as their followers accept and support them because of their relational authenticity (e.g., Chen et al., 2018).

   Cumulatively, these findings help explain relational authenticity as a moderating factor in the relationship between transformational leadership and organizational performance. Transformational leadership can be a direct determining force, but its effect can be conditioned by leaders' relational authenticity, such as exemplary behavior they show, public values that they believe in, or their personal leadership styles. Based on the moderation argument on relational authenticity and perceptions of organizational performance described in the previous literature (Kotze and Nel, 2017; George etal., 2007), there is good reason to propose that relational authenticity moderates the relationship between transformational, transactional leadership, and perceptions of organizational performance, particularly in the nonprofit context.

   2.3. The positive--negative asymmetry effect

   In social psychology, the positive-negative asymmetry effects have been repeatedly identified (Peeters and Czapinski, 1990; Skowronski and Carlston, 1989). For instance, Peeters and Czapinski (1990) defined the positive-negative asymmetry effects as biases according to which respondents tend to respond more strongly to negative stimuli than to positive ones. A positive-negative asymmetry effect is a phenomenon in which negative information about a new acquaintance has a greater impact on impressions than positive information (Baumeister et al., 2001). For example, when nonprofit leaders evaluate managers in other organizations, the negative information about...