Impact of Goal Setting and Team Building Competencies on Effectiveness

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1 Impact of Goal Setting and Team Building Competencies on Effectiveness Sunil Misra 1, Kailash B. L. Srivastava 2 1 Department of Humanities & Social Sciences, Indian Institute of Technology, Kharagpur, India 2 Department of Humanities & Social Sciences, Indian Institute of Technology, Kharagpur, India Abstract - This paper examined the relationship of certain specific managerial competencies of goal setting and team building with organizational effectiveness. The specific managerial competencies of goal setting and team building were taken as independent variables, leadership style as a moderating variable, and organizational effectiveness was treated as a dependent measure. The Data were collected from 307 executives belonging to banking sector from West Bengal, and analyzed using correlation, multiple regression, and analysis of variance (ANOVA) technique. The results showed that these managerial competencies had significantly predicted organizational effectiveness indicating their positive association with leadership style and organizational effectiveness. It was also found that the leadership style had significantly moderated the relationship between these competencies and organizational effectiveness. The findings have implications for management that they should closely examine their managerial competencies and leadership style to facilitate high performance among managers. Keywords Goal setting, team building, leadership style, organizational effectiveness I. INTRODUCTION What are the organizational activities that will ensure the most efficient and effective result and help an organization to gain and sustain competitive advantage? This question represents a pervasive issue in today s results-driven economy. However, despite massive capital outlays, investments in technology, restructuring, and reengineering have led to disappointing results for many organizations [1]. These efforts fail to meet desired results because they are misguided solutions to the problems inherent in today s rapidly changing workplace [2]. For an organization to meet the goal of performance improvement, it must think in broader terms to human improvement. Prior to the 1960s, organizational success was often contingent on specific managerial techniques or the traditional Tayloristic techniques. The internal and external pressures that emerged in subsequent years, however, created a need for new leadership and the specific managerial competencies of goal setting and team building. Thus, organizations began to appreciate the value of such competencies [3]. Competency represents the synthesis of a variety of skills, technologies, and knowledge streams. A competency-based approach helps and ensures to produce the desired results. Competencies can be developed to suit specific organizational needs. Thus, it is essential for managers to integrate their knowledge and skills with their organization s core business processes in order to provide a competitive advantage. Therefore, competencies help to define what was done, what is being done, and what needs to be done [4]. This paper examined the impact of certain managerial competencies on organizational effectiveness. Further, it also examined the moderating effect of leadership style. The managerial competencies included were goal setting and team building, which was considered as relevant and significant in today s changing business environment. Brief descriptions of these variables are as follows: A. Goal Setting Goal Setting involves setting specific, measurable, achievable, result oriented, and time targeted objectives. In organizational context, it may be an effective tool for making progress by ensuring that employees are aware of what is expected from them. At the individual level, goal setting allows people to specify their work to achieve the objectives. There has been a great deal of empirical research on the topic of goal-setting and its relationship with organizational performance. Earlier studies clearly indicate that setting specific, challenging, and obtainable goals tends to enhance performance [5], [6], [7], [8]. Literature also acknowledges the validity and utility of goal-setting theory [9], [10]. However, despite the quantum of research on goal setting, many questions are yet to be resolved. The problem, as pointed out by [11] is that the goals of an organization may differ depending on whom you ask. Thus, an individual goal aligned with organizational goals is considered appropriate for individual performance and effectiveness. The studies [9], [10], [12] show that difficult, and specific goals leads to higher performance, as opposed to easy goals. They also explored the relationship between factors of goal-setting and organizational performance and found a positive relationship. Further, they found a strong support for the proposition that goal-setting leads to higher performance. B. Team Building Team building has become a mainstream concept though approaches may vary from organization to organization [13]. Team consists of people who interact and work together toward a common goal or objective [14]. Success of organizations depends on the ability of /08/$ IEEE 222

2 individuals to work together as a team [15]. To be effective, the team as a whole needs to work collectively, as no one is expected to be equally competent in all the areas. Therefore, team building efforts facilitate employees to work in a team to be more productive and satisfied. It was noted that teamwork produces better decisions, better morale, greater self-actualization, efficiency, and effectiveness, and better employee development [16]. In general, teams are considered an important ingredient of organizational success. In a study it was found that groups consistently perform at or above the level of their best members [17]. Another study found that teams improved the performance of the plant as a whole, showing statistically significant reductions in defects and increases in labor productivity [18]. Thus, working in team has a positive impact on organizational performance. Researchers have also argued that leadership is an influential factor for the improvement of team effectiveness [19], [20], [21]. It has been found that transformational leadership had a high positive correlation with subordinates' perceived team effectiveness [22]. Whereas, others found that transformational leadership had a positive impact on team performance and organizational effectiveness [23], [24]. C. Leadership Style Many leadership researchers have argued in support of effective leadership having a positive impact on behaviors within organizations, more especially transformational leadership's role in improving organizational performance [25]. Several studies have supported Bass s argument on the significance of transformational leadership [26]. However, a few studies have demonstrated a direct link between the practice of particular type of leadership and organizational effectiveness. But, other studies recognized the fact that transformational leadership and organizational effectiveness are indirectly related with each other [27], [28]. Undoubtedly, leadership is one of the key driving forces for achieving organizational effectiveness. The competency of transformational leadership provides leaders and managers with a whole new way to energize and enliven individual contributors to deliver their best effort and ideas to organizational objectives as a matter of personal expression and effectiveness. Moreover, substantial evidence exists indicating that transformational leadership factors will positively influence organizational performance [29], [30], [31], [32], [33]. It was found that transformational leaders have a positive impact on employee satisfaction, productivity, and organizational effectiveness [25], [34]. Whereas, transactional measures of leadership, including contingent reward and management by exception (active and passive), were each negatively related to organizational performance. It was also found that transformational leadership positively predicted organizational performance over and beyond the impact of transactional leadership [35]. Thus, transformational behaviors proved to be more effective for enhancing organizational performance. In addition, the research also indicated that leaders who displayed more charisma, individualized consideration, and intellectual stimulation positively contributed to the achievement of organizational goals. Whereas, Individuals with effective leadership achieve superior goal performance as leaders facilitate the goal setting [36]. Further, the positive impact of transformational leadership upon organizational outcomes in the team environment has been established [37]. D. Organizational Effectiveness The concept of organizational effectiveness is always a matter of comparison, is multidimensional, and will never be reduced to a single measure [38]. Organizational effectiveness has been defined as the extent to which an organization accomplishes its goals or mission [39]. In assessing organizational effectiveness, the construct of effectiveness must be bounded by the context of the organization being assessed and viewed from the perspective of the organizations goals and processes [39], [40]. It was found that organizational effectiveness was associated with different dimensions of leadership [41]. In order to compete in a changing and unpredictable business environment, it is the skill and competencies of the human resources, which may provide a competitive edge to the organization. Organizations have to make sure that people have these competencies to perform effectively. This calls for an integrated approach to examine whether these competencies are related with performance. Thus, the major objective of this study was to examine the strength of association between the specific managerial competencies of goal setting and team building and organizational effectiveness, and also examine the role of leadership style that how it moderated the relationship between them. Accordingly, the following hypotheses were developed: Hypothesis 1: Specific managerial competencies of goal setting and team building would be positively associated with organizational effectiveness. Hypothesis 2: Leadership style would be positively associated with organizational effectiveness. Hypothesis 3: Leadership style would moderate the relationship between specific managerial competencies and organizational effectiveness. Hypothesis 4: Leadership style and organizational effectiveness would differ across hierarchy. II. METHODOLOGY Sample: The Data were collected from 307 participants from banking organizations across West Bengal, India. Selection of organization was based on convenience and availability. However, respondents were selected across functional departments using random selection method. Out of 307 participants, 55 belonged to top management, 122 to middle management, and 130 to junior level 223

3 management. Out of total sample, 52 percent were graduates, 38 percent post graduates, and 19 percent has professional or higher qualification. The average age of the participants was 38.7 years. The average duration of the service of the participants with present employer was 9.4 years, whereas the average duration in the current position was 12.6 years. Measures: The survey instruments consisted of four scales to measure the different variables. The items were selected from standardized scales and few of them were slightly changed according to the conceptualization of the variables and the requirement of the study. The total numbers of items in the instrument were 83 excluding the demographic items. A five point Likert scale was used to maintain uniformity. Item analysis was done and item total was correlated to see the relationship of the item with the total. It was decide to drop those items which were having < 0.30 correlation coefficient. A brief description of these measures is given below. Goal Setting: It was measured using 20-item scale [42]. It was used to measure different aspects of goal setting process. It measured the dimension like goal clarity, goal accomplishment, goal commitment, goal specificity etc. at the individual and the organizational level. The Cronbach s alpha of the scale is Team Building: It was measured using 18-item scale [43]. The dimension of team building include, team development, trust, team motivation, commitment, role clarity etc. The Cronbach s alpha of the scale is Organizational Effectiveness: Organizational effectiveness was assessed by using a scale, which included 8-items [44]. The dimensions measured include productivity, flexibility and adaptability. The Cronbach s alpha of the scale is Leadership Style: Multifactor Leadership Questionnaire (MLQ) having 37-item was utilized to assess the leadership style of participating managers [45]. It was found that eight out of 37 items had a very low item total correlation. Those items were accordingly excluded from the research instrument. The Cronbach s alpha of the scale is Procedure: The Data were collected from banking sector, due to the fact that this sector employs a large number of employees with diverse backgrounds at multiple levels in both developed and emerging markets as well as public and private sector. Human resource managers and in some instances, chief executive officers (CEO s) were contacted for getting the permission for Data collection. The responses were obtained by structured interview schedule administered to the employees selected randomly from different departments/functional areas during working as well off hours. The purpose of the research was explained to the head of the functional areas. In this process, out of 600 questionnaires, 360 questionnaires (60 percent) were collected from the participants. Out of these 53 had to be rejected because of high number of missing data or showed high response bias leaving an overall sample size of 307. The employees were assured anonymity and confidentiality. III. RESULTS & DISCUSSION The major objective of this study was to examine the strength of association between certain specific managerial competencies of goal setting and team building and organizational effectiveness. The study was conducted in an exploratory framework. The Data were subjected to factor analysis in order to establish the construct validity. A principal component analysis with varimax rotation was used to choose significant factor loadings. It was decided to include only those factors which had a loading of > 0.50 and above. The exploratory factor analysis resulted into six factors for Goal Setting which was goal commitment, goal specificity, self perceived ability, goal difficulty, self efficacy, and goal acceptance and together they explained percent of variance. Factor analysis of Team Building resulted in four factors namely; goal clarity, role clarity, goal accomplishment, and team motivation and together they explained the variance of percent. Factor analysis for Organizational Effectiveness resulted with a single factor and explained the variance of percent. For Leadership style, factor analysis resulted in five factors which included management of attention, task oriented, management of trust, people oriented, and management of risk, and together they explained percent of variance. Table I depicts the descriptive statistics and the reliability indices of the scales used to measure various constructs. The correlations between all the variables were positive, which indicate that all these variables are highly correlated with each other and shows that if goals are well set, employee work in team, and the leader is transformational, it will results in increased organizational effective. (see Table I) TABLE I CORRELATION STATISTICS Mean SD Goal Setting (0.83) 2 Team Building ** (0.81) Leadership 3 Style **.26** (0.95) Organizational 4 Effectiveness *.15**.22** (0.82) ** SIGNIFICANT AT 0.01; * SIGNIFICANT AT 0.05 Further analyses of Data were carried out with those factors which were found in factor analysis results. Statistical Package for Social Sciences (v16.0) was used for the purpose of Data analysis. Multiple regression analysis was done to see the strength of association between factors of goal setting and team building related to organizational effectiveness. The findings indicated that goal clarity and team motivation significantly predicted organizational effectiveness (R 2 = 224

4 0.08; F=2.73; p<0.01) and accounted for 8 percent of variance. It has been found that goal clarity was positively related to organizational performance [46]. Thus, the hypothesis one was accepted and it is also in line with the other researchers [10], [12], [17], [18]. (see Table II) TABLE II ASSOCIATION BETWEEN MANAGERIAL COMPETENCIES AND ORGANIZATIONAL EFFECTIVENESS Predictor Variables (GS & TB) Goal setting has produced positive effects in 90 percent of the studies. All meaningful action begins by a clear identification of goal or goals to be attained. Therefore, clearly defined goals can enhance performance, which in turn can increase organizational effectiveness. Team building could possibly enhance team performance resulting in higher organizational effectiveness. Training can improve the ways different teams work together. Thus, banking organization could achieve significant gains and improve their performance. Another multiple regression equation was estimated to see the strength of association between factors of leadership style related to organizational effectiveness. The findings indicated that management of trust and management of risk significantly predicted organizational effectiveness (R 2 =0.07; F=4.74; p<0.001) and accounted for 7 percent of variance. Thus, the hypothesis two was also accepted, which also get support from other researchers [23], [24], [25], [27], [28], [29], [32], [33], [34], [35]. (see Table III) TABLE III ASSOCIATION BETWEEN LEADERSHIP STYLES AND ORGANIZATIONAL EFFECTIVENESS Predictor Variables (Leadership Style) Criterion Variables Organizational Effectiveness Goal Clarity.21** Team Motivation -.16** R.29 R 2.08 R 2.05 F 2.73** Criterion Variables Organizational Effectiveness Management of Risk.15* Management of Trust.15* R.27 R 2.07 R 2.06 F 4.74*** *** SIGNIFICANT AT 0.001; * SIGNIFICANT AT 0.05 In order to examine the third hypothesis, a multiple regression analysis was carried out to see the moderating effect of leadership style factors upon the factors of goal setting and team building related to organizational effectiveness. (see Table IV) The findings indicated that goal clarity, team motivation, and management of risk significantly predicted organizational effectiveness (R 2 =0.14; F=3.06; p<0.001) and 14 percent of variance in organizational effectiveness was explained by the combination of specific managerial competencies of goal setting and team building and leadership style in the organization. Therefore, one can see that the variance in organizational effectiveness was better explained by the combination of these specific managerial competencies and leadership style than the variance explained individually. Hence, it can be concluded that leadership style has moderated the relationship of goal setting and team building factors with organizational effectiveness. Thus, the hypothesis three was accepted, which also get support from other researchers [22], [36], [37], [41]. In order to be credible and effective, leaders must demonstrate the competency. Since competency proves crucial in building the leaders power, effective leaders should continuously develop new skills while sharpening the old ones. Also, leaders in the changing competitive environment need to be transformational, who can project their vision powerfully and create support for it, and maintain a momentum and empower others to take responsibility for realizing those visions. The transformational power of a leader impacts employees levels of competencies to strive for even greater goals. Thus, the success belongs to leaders who can link these competencies with those required to meet strategic business goals. TABLE IV MODERATING EFFECT OF LEADERSHIP STYLE Predictor Variables (GS & TB through LS) Criterion Variables Organizational Effectiveness Goal Clarity.16* Team Motivation -.18** Management of Risk.16** R.37 R 2.14 R 2.10 F 3.06*** In order to examine the fourth hypothesis analysis of variance (ANOVA) was done. (see Table V) TABLE V THE DIFFERENCE AMONG VARIABLE ACROSS HIERARCHY Variables SS MS F P Leadership Style Organizational Effectiveness SS = SUM OF SQUARES; MS = MEAN SQUARE The result indicated that leadership style (F=6.32, p=0.002) and organizational effectiveness (F=21.116, p=0.001) differed across hierarchy. Thus, the hypothesis four was also accepted. It was found that top management used more transformational leadership style and perceived organization more effective. IV. CONCLUSION To sum up it can be said that an effective team can better achieve a goal by pooling, capitalizing and utilizing experience and expertise, and resources. A well set goal will facilitate individuals to focus their efforts in a specified direction to achieve the expected outcomes. It is also acknowledged that a goal setting process helps 225

5 individual to achieve desired performance [47]. Further, these results suggest that managers need to develop transformational leadership behaviors for achieving a higher level of organizational performance. In addition, the research showed that leadership style significantly moderated the relationship between these managerial competencies and organizational performance. Goal setting and team building factors proved, in turn, to be positively related to transformational leadership. Thus, it appears that team building approaches that provide strong support for team work and which enhance team performances may contribute to improving organizational performance. Finally, it may be concluded that these managerial competencies increases organizational effectiveness and leadership can further facilitate it. These competencies contribute to the smooth functioning and overall effectiveness of organizations. Thus, the organization should ensure that people have these competencies, which can be examined during the selection process itself and conduct competency mapping to identify the competency required for the job, as to train and develop them to increase their performance level. This is eminent for the Indian banking industry due to the breathtaking changes foreseen in the business and political environment. Research Implications To achieve high performance, organizations must closely examine their, these managerial competencies and leadership style. This can help in achieving individual and organizational objectives. The results can be used to develop management and leadership competencies. This research has certain implications. Firstly, the competency based approaches to management and leadership developments are considered to be the best practice today. However, many organizations are yet to adopt such an approach. It is believed that many do not know how to do it, or it looks too hard to do. Thus, this research report could enable organizations to move their management development programs to best practices level by examining the competencies of their mangers. Secondly, the strong managerial and leadership competency are essential for organizations to perform well. There is intense pressure for government and private businesses at all levels to reform the way they conduct their business. In particular, the pressure is for increased accountability and improved performance. This research suggests developing a competency model, which would help them to increase their organizational performance. Limitations There are certain limitations of this study. One of the limitations of the study is the self-selection of geographical regions of the Eastern part of the country into a purposive sample. Secondly, the population consisted of employees only from banking organizations, which limited the generalizations of this study. Another limitation was that the Data were self-reported. The participants did complete the survey to the best of their ability and knowledge, but gave a chance for responses bias. The results of the study might also be influenced by the followers' reports concerning their perceptions of their leaders' behaviors. It is a common knowledge that individual perceptions can be greatly affected by a host of variables at industry, organizational, and individual levels, but data concerning those variables were not collected. Future Efforts The concept of competency focuses on what is expected from an employee at the workplace, and embodies the ability to transfer and apply them in new situations and environments. 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