THE ROLE OF EFFECTIVE LEADERSHIP ON EMPLOYEE RETENTION (IN

CASE OF DASHEN BANK IN ARBAMINCH BRANCH)

A RESEARCH PAPER SUBMITTED TO THE DEPARTMENT OF

MANAGEMENT COLLEGE OF BUSINESS AND ECONOMICS, UNDER
GRADUTE STUDIES ARBA MINCH UNIVERSITY IN PARTIAL
FULFILLMENT OF THE REQUIREMENTS FOR THE BACHELOR OF ART
DEGREE IN MANAGEMENT

BY: BIZUYE YESHI

ADVISOR: MITIKU (MA)

ARBAMINCH UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF MANAGEMENT

JUNE , 2024

ARBA MINCH, Ethiopia

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 DECLARATIONS

I, BIZUYE YESHI , hereby declare that this thesis entitled “The Role Of Effective
Leadership On Employee Retention (In Case Of Dashen Bank In Arbaminch Branch) is my
original work, presented under the guidance of Mitiku A. . I would also confirm that any part
of this thesis has not previously been submitted for a degree or any other qualification at this
University or any other institution. All sources and materials used for this thesis have been
duly acknowledged.

Submitted by:

Full Name:- BIZUYE YESHI

Signature--------------------
Date--------------------
Arbaminch, Ethiopia

I
 ACKNOWLEDGEMENTS
Firstly, I would want to express my gratitude and thanks to the Almighty GOD for his
unwavering care and support throughout my life, which has aided me from the start of my
schooling to the finish of my profession.
Next, I want to express my gratitude to my advisor Mitiku A. . for his patience, enthusiasm,
and invaluable assistance throughout this project. His timely assistance, tolerance direction,
and constructive comments were especially helpful throughout the paper preparation process.
My sincere and deepest gratitude to the dashen bank arbaminch branch employees for their
generous assistance and cooperation in answering the inquiry.
My family deserves special recognition for their sacrifice.
Lastly, I'd like to convey my heartfelt gratitude to my friends who helped me tremendously
with my research and who were always there for me.

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Contents
DECLARATIONS......................................................................................................................I

ACKNOWLEDGEMENTS......................................................................................................II

List of tables.............................................................................................................................III

ABSTRACT.............................................................................................................................IV

CHAPTER ONE;-INTRODUCTION........................................................................................5

1.1. Background of the Study.................................................................................................5

1.2. Statement of the Problem................................................................................................6

1.3. Research Questions.........................................................................................................8

1.4. Objectives of the Study...................................................................................................8

1.4.1. General objectives.....................................................................................................8

1.4.2. Specific Objectives...................................................................................................8

1.5. Significance of the Study.................................................................................................8

1.6. Scope of the Study...........................................................................................................9

1.7 Operational Definition......................................................................................................9

1.8. Organization of the Study..............................................................................................10

CHAPTER TWO: REVIEW OF RELATED LITERATURE.................................................11

2.1 Theoretical Literature Review........................................................................................11

2.1.1 Basic concepts and Definitions................................................................................11

2.1.2. Leadership Theories................................................................................................12

2.1.3. Leadership Styles....................................................................................................16

2.2. Empirical Literature Review.........................................................................................20

2.2.1 leadership style and employee retention..................................................................20

2.2.2. Transformational Leadership and Employee retention...........................................21

2.2.3. Laissez- Faire Leadership Style and Employees’ retention....................................21

2.2.4. Democratic Leadership Style and Employees’ retention........................................22

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 2.3 Conceptual Frame Work.................................................................................................22

CHAPTER THRE;- RESEARCH METHODOLOGY............................................................22

3.1. Research Design............................................................................................................22

3.2 Research Approach.........................................................................................................23

3.3. Target Population and sampling technique...................................................................23

3.4 sample size......................................................................................................................23

3.5. Sources of Data and Type..............................................................................................23

3.5.1 Primary Data Source...................................................................................................24

3.6. Method of data collection..............................................................................................24

3.7. Method of Data Analysis...............................................................................................24

3.8 Ethical Consideration.....................................................................................................24

CHAPTER 4: DATA ANLYSIS AND DISCUSSION...........................................................25

4. Introduction......................................................................................................................25

4.1 Response Rate................................................................................................................25

4.2 Demographic Characteristics of the Respondents..........................................................25

4.2.1 Sex of the Respondents...............................................................................................25

4.2.2 Age of the Respondents...........................................................................................26

4.2.3 Educational Level of the Respondents.....................................................................26

4.2.4 Work experience of the Respondents......................................................................26

4.3 Reliability analysis test...................................................................................................26

4.4 Correlation between leadership style and employee retention.......................................27

4.3.1 multi-collinearity test...............................................................................................29

4.4 Multiple Regressions......................................................................................................29

4.4.1 Analysis of Regressions result.................................................................................31

CHAPTER FIVE:- CONCLUSION AND RECOMMENDATION........................................33

Introduction..........................................................................................................................33

5.1 Conclusions....................................................................................................................33

IV
 5.2 Recommendations............................................................................................................1

References..................................................................................................................................2

APPENDEX...............................................................................................................................4

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 List of tables
Table 4. 1: Frequency and %age of Respondents’ Demographic Characteristics...................25
Table 4. 2: Result of reliability analysis for the questionnaire................................................27
Table 4. 3 Correlation between Autocratic Leadership and Nurses’ Turnover intention........27
Table 4. 4 Multi-co linearity test..............................................................................................29
Table 4. 5: Model summery.....................................................................................................30
Table 4. 6 ANOVA..................................................................................................................30
Table 4. 7 Regression analysis on employee retention.............................................................30

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 ABSTRACT

The purpose of this study is to assessed the role of effective leadership on employee retention
(in case of dashen bank in arbaminch branch). Many researchers have found that in a service
rendering company like banks, there are strong relation between effective leadership and
employee retention. Thus, the study contains the introduction, problem statement and
research objectives. The specific objectives this research are identify the effect of effective
leadership style on employee retention in Dashen Bank arba minch branch. It also involved
looking through earlier research, documents, text books and journals on related literature
previous research works also looked. In addition, in order to conduct this study explanatory
research design and mixed research approach were employed. And also this study was
conducted by using primary source of data and census survey of sampling technique. The
primary data was collected using self-administered questionnaires with both open and close
ended questions. The collected data were put in appropriate tables and presented in tables
and graphs since it is a good way to look at the data and see what happens and make
interpretation .this study concludes that the relationship between democratic leadership,
transformational leadership style and employee retention. Whereas autocratic leadership
style had negative effect on employee retention in dashen bank arba minch branch. Finally
this study recommends leaders should prefer their leadership style on situational basis.

Key words: Employee retention, effective leadership, dashen Bank,arba minch branch

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 CHAPTER ONE;-INTRODUCTION
1.1. Background of the Study
Organizations, in this contemporary business world, are operating in a highly competitive
environment in which effective leadership plays crucial role for managing their missions
successfully. Organizations have functions that serve the community and is responsible for
carrying out economic development. It is necessary to have professional stewards and
employees to exert their optimal efforts to deliver outputs to the best interest of the
organization in line with its vision, mission and goals (Shirzad, 2014). According to Adzka
and Perdhana (2017), employee retention is the process of encouraging workers to stay with
the company until the end of the contract. The goal of employee retention is to preserve
and/or enhance workers' physical, mental, and attitude (Nantsupawat, 2017), encouraging
them to stay devoted and contribute effectively to the company's objectives (Aprilia & Mukti,
2018). Organizations utilize employee retention policies and practices to keep valuable
employees out of the workforce (Disa & Djastuti, 2019). It is required of the business to hold
onto its most valuable, resilient, effective, and productive workers for the competition. The
goal of employee retention is to keep high-potential and high-performing staff members
engaged in ways that will ensure their contributions consistently meet the organization's
expectations. As a result, keeping skilled workers on board is crucial to the business's ability
to provide high-quality services (Purnamasari & Netra, 2020).

Leadership also defined as the influence that particular individual (leaders) exert up on the
goal achievement of other subordinate in an organization context. Leaders have an ability to
see how different aspect of a situation fit together and influence each other. Leadership plays
a central part in understanding group behavior for it’s the leaders who usually provides the
direction towards goal attainment. Therefore, more accurate capability of who makes a goal
leader, or what condition affect leadership ability should be valuable in improving group
performance (Gary rukl 2006).

In achieving a goal, the role of the leader is very important to run a plan smoothly by
facilitating cooperation between the leader and followers. Leadership is an influential aspect
that leads to change and tangible results that reflect the common goals. (Busro, 2018).
Therefore, the success of an organization in achieving its goals is largely determined by its
employees’ work performance. Taking of leadership as a relationship suggest that leaders
must include followers and their interests in the process of leadership. A leaders need to be

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fully aware of the followers, interests, ideas, position attitudes and motivations (Peter, 2009).
An effective leader connects with people and understand the task to be done those skill
required to perform them and the environment in which people work. A leader to effective
with people requires a host of abilities such as helping employees to work as a term,
motivating them to do their best, promoting satisfying relationship among employee and
responding to their request (Peter, 2009).

According to Wells and Pearchey (2011) There is positive relationship between

transformational leader ship and employee retention. The positive relationship comes from
employees were highly satisfied by their leader the reason is that it depends on promotional
focused followers (Hamstra et al.,2011). The relationship between Laissez- Faire Leadership
Style and Employees’ retention were elaborated by (Nwokocha & Iheriohanma, 2015 and
Gill, 2014). The result of their finding revealed that there is inverse relationship between
Laissez- Faire Leadership Style and Employees’ retention in banking sectors which requires
that both the leader and subordinates have an input in the decision making process and
completion of tasks to ensure the success of the organization. And also the relationship
between Democratic Leadership Style and Employees’ retention were elaborated by Sekhara
et.al(2018) and (Nwokocha & Iheriohanma, 2015) the result of the study revealed that there is
significant and positive relationship between democratic leadership style and employee
retention.

According to Puni, Ofei and Okoe (2014) Strong leadership is a basis for better leadership
that will lead to employee retained . Among several factors that affect employee retention:
leadership style and organizational culture are the foci of this study for the reason that
different organizations have different leadership style. So the aim of this study is to assess the
role of effective leadership on employee retention (in case of dashen bank in arbaminch
branch)

1.2. Statement of the Problem

International leadership knowledge and experience of multinational companies in
multicultural nations play a pivotal role in expanding abroad (Robert, 2016). As a universal
activity, leadership is fundamental for effective organizational and social functioning. The
very nature of leadership is its influencing process and its resultant outcomes which can be
achieved by applying the right leadership style compatible with the culture (attitude and
values) of its staff. Such process is determined by the leaders and follower characteristics,
dispositions, behavior perceptions, attributions and the context wherein the process of

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influencing occurs (Chen and Cheng, 2018). The moral purpose of leadership is to create an
empowered follower that leads to the attainment of the organizational goals that are achieved
through dedicated workforces (Hersey, 2017). In order to persuade staff to seek the highest
level of dedication, each leader can use a variety of leadership styles, according to several
academic studies (Oladipo, 2016; Bogler, 2015). These studies therefore highlight the
significance of leadership approaches that motivate staff to retained and to work freely
toward the organization's defined goals and objectives.

The organization for economic cooperation and development (OECD) describes governance
as the way in which the underlying values of a nation are institutionalized. This may include
formal aspects such as separate powers, checks and balance, transparency, accountability and
responsiveness (Hersey, 2017). However, for those values to be realized in actual practice,
they must quire the action of public officials thought the system. That is why effective
leadership is considered as the flesh on the bone of employees’ retaining in the organization.
Over a period of time, techniques of management have evolved enlarge measures to ensures
organizational stability, operational efficiency and predictable performance that leads to
employee retaining, (Getie et al. 2015). According to Ruth (2018) there are three types of
leadership style that affect employee retention in banking sector. Those are democratic
leadership style, Laissez- Faire Leadership Style and transformational leadership style.

Asegid et al. (2014) define leadership as a process by which a person influences others to
accomplish an objective and directs the organization in a way that makes it more cohesive
and coherent. According to Engeda et al. (2014) and Tefera & Ebrahim. (2014) positions
of leadership are established in work settings to help organizational subunits to achieve the
purposes for which they exist within the larger system in public sector. Organizational
purpose is operationalized as a direction for collective action. Leadership processes are
directed at defining, establishing, identifying, or translating this direction for their followers
and facilitating or enabling the organizational processes that should result in the achievement
of this purpose. However most of previous studies conducted on non-bank institution. Since
leadership is an important vehicle to helping organizations reaches their intended goals,
retaining employees being one of them since organizations cannot survive and sustain
without the human resources. So this study was conducted to assess the role of effective
leadership on employee retention in case of dashen bank in arbaminch Branch.

1.3. Research Questions

The research questions of this study are;

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 1. What does the leadership styles and employee retention status of the bank look
like?

2. How Democratic leadership style affect employee retention in the selected bank?

3. What looks like the effect of Transformational leadership style on employee retention
in the selected bank?

4. What is the effect Laissez-faire leadership style on employee retention in the selected
bank?
1.4. Objectives of the Study
1.4.1. General objectives
The main objective of this study is to assess the role of effective leadership on employee
retention in Dashen bank in case of Arba Minch branch.

1.4.2. Specific Objectives

The specific objectives of this study are the following:

1. To identify the effect of autocratic styles and employee retention in dashen bank arba
minch branch.
2. To investigate the effect of Democratic leadership style on employee retention in
dashen bank arba minch branch.
3. To find out the effect Transformational leadership style on employee retention in
dashen bank arba minch branch.
4. To investigate the effect of Laissez-faire leadership style on employee retention in
dashen bank arba minch branch

1.5. Significance of the Study

Findings from the study can help leaders as they learn the best type of leadership to use to
keep the employee retained. As a result, leadership development programs will be created,
and training and seminars can be useful in raising awareness among managers and other
leaders. As a result, worker will be satisfied and retained for long time. It is important to
examine the strategies that experienced multinational executives used for expansion plans to
understand how the international business strategy, affect a company's long-term success and
growth.

This study provided deep understanding of successful company tactics could pave the way
for the development of vital global leadership abilities that was help to spur sustainable
corporate growth. The study's findings may provide insightful information on successful
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leadership tactics that might aid company executives in accelerating their worldwide
expansion and raising profitability.

1.6. Scope of the Study

The scope of this study was investigated the effect of leadership style on employee retention
in dashen bank arbaminch branch. Its conceptual scope is the effect of leadership styles
including transformational leadership, autocratic, democratic, and transactional, employee
retention. With respect to location and branch this study was limited to dashen bank arba
minch branch. With respect to conceptual scope this study was used three leadership style
these are democratic, transformational and Laissez-faire leadership style as independent
variable and employee retention as dependent variable.

1.7 Operational Definition

Employee retention;- According to Wylie (2006) the process of employee retention simply
involves the activities, which help in encouraging and uplifting the individuals and teams to
stay in the company engaged in the organizational activities, as it proves advantageous for
both the employer and the employee. On the other hand, the retention of employees mainly
depends on several factors on which, the employee motivation is based. These factors help in
retaining employees to a great extent. First of them is Remuneration and Rewards, this factor
plays a significant role in the procedure of encouraging staff, which results in retention of
employees (Wylie 2006).

Transformational Leadership;- According to the authors, Connell and Ryan (1989) in this
leadership style, the person is a true leader who helps in motivating his team with a clear
vision concerned about future. The transformational leaders give a good time for proper
communication and they are highly visible and assign the responsibilities among their team
members. Both the transactional and transformational leaders are important and required for
the organization, in order to make sure that the routine work is done in a reliable manner for
adding value to the organization (Connell and Ryan 1989)..

Democratic Leadership;- The democratic leadership makes the final decision in any
process, but he also gives invitation to his team members for contributing in decision making.
This type of leadership leads to job satisfaction among the employees and the team members
and they are motivated to do hard work. This is a comparatively slow process but in long
term it provides a better result. It is the most appropriate in team work and the emphasis is
given more to quality than productivity (Harter and Hayes 2002).

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Laissez-Faire Leadership;- In this type of leadership, the leaders leaves the staff to get on
with their work accordingly, though he keeps a regular check on his staff and team members.
This type of leadership is mainly concerned with heavily experienced staff or very skilled
employees, but the level of control over the staff is not sufficient (Efinger et al. 2004).

1.8. Organization of the Study

This study was organized into five chapters, the first chapter included introduction,
background of the study, statement of problem, research question, objectives, significance
and scope of the study. The second chapter deals with review of related literature in terms of
theoretical, empirical and conceptual framework. The third chapter comprises the research
methodology while the fourth chapter dealt with data analysis and interpretation. Finally, the
fifth chapter concerned of the findings, conclusions and recommendation.

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 CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.1 Theoretical Literature Review
2.1.1 Basic concepts and Definitions
2.1.1.1 Concept of Leadership
Leadership is one of the critical and important factors in enhancing an organizational
performance (Riaz, 2010). Lambert et al. (2003) suggests “that leadership is the cumulative
process of learning through which we achieve the purposes of the school”. According to
Kotter (1999), leadership is about setting a direction or developing a vision of the future
together with the necessary strategies for producing the changes needed to achieve this
vision. Bennis and Nanus (1985) explain that “Leadership is an influence relationship among
leaders and followers to perform in such a way to reach a defined goal or goals”. Leadership
therefore, is an important element for the success of an organization, regardless of its nature
of activities, profit or charity orientated, private or government linked organizations.

According to Yukl (2006) defines leadership as the process influence others to understand
and agree about what needs to be done and how to do it, and the process of facilitating
individual and collective efforts to accomplish shared objectives. Besides that, leadership is
the process by which shared objectives can be achieved through facilitating individual and
collective efforts, it is also a process of what and how things can be done effectively by
influencing others. Northouse (2010) defines leadership as a process whereby an individual
influences a group of individual to achieve a common goal.

2.1.1.2. Leadership style

Leadership style is defined as the pattern of behaviors that leaders display during their work
with and through others (Hersey and Blanchard, 1993). Miller et al. (2002) view leadership
style as the pattern of interactions between leaders and subordinates. According to Hersey et
al. (2000), the term “leadership style” can be interpreted as leadership behavior with two
obviously independent dimensions: task and interpersonal relationships. According to
Kavanaugh and Ninemeier (2001), there are three factors that determine the type of
leadership style which is leaders‟ characteristics, subordinates‟ characteristics and the
organization environment. More specifically, the personal background of leaders such as
personality, knowledge, values, and experiences shapes their feelings about appropriate
leadership that determine their specific leadership style. Employees also have different
personalities, backgrounds, expectations and experiences, for example, employees who are

XIV
more knowledgeable and experienced may work well under a democratic leadership style,
while employees with different experiences and expectations require an autocratic leadership
style. Some factors in the organization environment such as organizational climate,
organization values, composition of work group and type of work can also influence
leadership style. However, leaders can adapt their leadership style to the perceived
preferences of their subordinates (Wood, 1994).

2.1.2. Leadership Theories

2.1.2.1. Great-Man Theory
The effort toward explorations for common traits of leadership is protracted over centuries as
most cultures need heroes to define their successes and to justify their failures. In 1847,
Thomas Carlyle stated in the best interests of the heroes that “universal history, the history of
what man has accomplished in this world, is at the bottom of the history of the great men who
have worked here”. Carlyle claimed in his “great man theory” that leaders are born and that
only those men who are endowed with heroic potentials could ever become the leaders.
Heopined that great men were born not made. An American philosopher, Sidney Hook,
further expanded Carlyle perspective highlighting the impact which could be made by the
eventful man vs. the event-making man (Dobbins & Platz, (1986).

He proposed that the eventful man remained complex in a historic situation, but did not really
determine its course. On the other hand, he maintained that the actions of the event- making
man influenced the course of events, which could have been much different, had he not been
involved in the process. The event making man‟s role based on “the consequences of
outstanding capacities of intelligence, will and character rather than the actions of
distinction”. However, subsequent events unfolded that this concept of leadership was
morally flawed, as was the case with Hitler, Napoleon, and the like, thereby challenging the
credibility of the Great Man theory. These great men became irrelevant and consequently
growth of the organizations stifled (Macgregor, 2003).

2.1.2.2. Trait Theory

The early theorists opined that born leaders were endowed with certain physical traits and
personality characteristics which distinguished them from non-leaders. Trait theories ignored
the assumptions about whether leadership traits were genetic or acquired. Jenkins identified
two traits; emergent traits (those which are heavily dependent upon heredity) as height,
intelligence, attractiveness, and self-confidence and effectiveness straits (based on experience

XV
or learning), including charisma, as fundamental component of leadership (Ekvall& Arvonen,
1991).

Max Weber termed charisma as “the greatest revolutionary force, capable of producing a
completely new orientation through followers and complete personal devotion to leaders they
perceived as endowed with almost magical supernatural, superhuman qualities and powers”.
This initial focus on intellectual, physical and personality traits that distinguished non-leaders
from leaders portended a research that maintained that only minor variances exist between
followers and leaders (Burns, 2003). The failure in detecting the traits which every single
effective leader had in common, resulted in development of trait theory, as an inaccessible
component, falling into disfavor. In the late 1940s, scholars studied the traits of military and
non-military leaders respectively and exposed the significance of certain traits developing at
certain times.

2.1.2.3. Contingency Theories (Situational)

The theories of contingency recommends that no leadership style is precise as a stand-alone
as the leadership style used is reliant upon the factors such as the quality, situation of the
followers or a number of other variables. “According to this theory, there is no single right
way to lead because the internal and external dimensions of the environment require the
leader to adapt to that particular situation”. In most cases, leaders do not change only the
dynamics and environment, employees within the organization change. In a common sense,
the theories of contingency are a category of behavioral theory that challenges that there is no
one finest way of leading/organizing and that the style of leadership that is operative in some
circumstances may not be effective in others (Greenleaf, 1977).

Contingency theorists assumed that the leader was the focus of leader-subordinate
relationship; situational theorists opined that the subordinates played a pivotal role in defining
the relationship. Though, the situational leadership stays to emphasis mostly upon the leader,
it creates the significance of the focus into group dynamic. “These studies of the relationships
between groups and their leaders have led to some of our modern theories of group dynamics
and leadership”. The theory of situational leadership proposes that style of leadership should
be accorded with the maturity of the subordinates (Bass & Avolio, 1997). “The situational
leadership model, first introduced in 1969, theorized that there was no unsurpassed way to
lead and those leaders, to be effective, must be able to adapt to the situation and transform
their leadership style between task-oriented and relationship- oriented”.

XVI
2.1.2.4. Style and Behavior Theory
The style theory acknowledges the significance of certain necessary leadership skills that
serve as enabler for a leader who performs an act while drawing its parallel with previous
capacity of the leader, prior to that particular act while suggesting that each individual has a
distinct style of leadership with which he/she feels most contented. Like one that does not fit
all heads, similarly one style cannot be effective in all situations. Yukl (1989) introduced
three different leadership styles. The employees serving with democratic leaders displayed
high degree of satisfaction, creativity, and motivation; working with great enthusiasm and
energy irrespective of the presence or absence of the leader; maintaining better connections
with the leader, in terms of productivity whereas, autocratic leaders mainly focused on
greater quantity of output. Laissez faire leadership was only considered relevant while
leading a team of highly skilled and motivated people who excellent track-record, in the past.

Feidler & House (1994) identified two additional leadership styles focusing effectiveness of
the leadership. These researchers opined that consideration (concern for people and
relationship behaviors) and commencing structure (concern for production and task
behaviors) were very vital variables. The consideration is referred to the amount of
confidence and rapport, a leader engenders in his subordinates. Whereas, initiating structure,
on the other hand, reflects the extent, to which the leader structures, directs and defines
his/her own and the subordinates‟ roles as they have the participatory role toward
organizational performance, profit and accomplishment of the mission. Different researchers
proposed that three types of leaders, they were; autocratic, democratic and laissez-faire.
Without involving subordinates, the autocratic leader makes decisions, laissez- faire leader
lets subordinates make the decision and hence takes no real leadership role other than
assuming the position and the democratic leader accesses his subordinates then takes

his decision.

2.1.2.5. Process Leadership Theory

Additional leadership theories with a process focus include servant leadership, leaving
organizations, principal centered leadership and charismatic leadership, with others emerging
every year. Greenleaf introduced servant leadership in the early 1970s. A resurgence of the
discussion of servant leadership was noted in the early1990s. Servant leaders were
encouraged to be focused to the anxieties of the followers and the leader should sympathize
with them take-care of and nurture them. The leadership was imparted on a person who was

XVII
by nature a servant. “The servant leader focuses on the needs of the follower and helps them
to become more autonomous freer and knowledgeable”. The servant leader is also more
concerned with the “have-nots” and recognizes them as equal (Greenleaf, 1996).

2.1.2.6. Transactional Theory

The leadership theories, by the late 1970s and early 1980s, activated to diverge from the
specific perspectives of the leader, leadership context and the follower and toward practices
that concentrated further on the exchanges between the followers and leaders. The
transactional leadership was described as that in which leader-follower associations were
grounded upon a series of agreements between followers and leaders (House & Shamir,
1993). The transactional theory was “based on reciprocity where leaders not only influence
followers but are under their influence as well”. Some studies revealed that transactional
leadership show a discrepancy with regard to the level of leaders‟ action and the nature of the
relations with the followers.

Bass and Avolio (1997) observed transactional leadership “as a type of contingent-reward
leadership that had active and positive exchange between leaders and followers whereby
followers were rewarded or recognized for accomplishing agreed upon objectives”. From the
leader, these rewards might implicate gratitude for merit increases, bonuses and work
achievement. For good work, positive support could be exchanged, merit pay for promotions,
increased performance and cooperation for collegiality. The leaders could instead focus on
errors, avoid responses and delay decisions. This attitude is stated as the “management by
exception” and could be categorized as passive or active transactions. The difference between
these two types of transactions is predicated on the timing of the leaders involvement. In the
active form, the leader continuously monitors performance and attempts to intervene
proactively (Avolio & Bass, 1997).

2.1.2.7. Transformational Theory

Transformational leadership distinguishes itself from the rest of the previous and
contemporary theories, on the basis of its alignment to a greater good as it entails
involvement of the followers in processes or activities related to personal factor towards the
organization and a course that will yield certain superior social dividend. The
transformational leaders raise the motivation and morality of both the follower and the leader
(House &Shamir, 1993). It is considered that the transformational leaders “engage in
interactions with followers based on common values, beliefs and goals”. This impacts the

XVIII
performance leading to the attainment of goal. As per Bass, transformational leader,
“attempts to induce followers to reorder their needs by transcending self-interests and strive
for higher order needs". This theory conform the Maslow (1954) higher order needs theory.
Transformational leadership is a course that changes and approach targets on beliefs, values
and attitudes that enlighten leaders‟ practices and the capacity to lead change.

The literature suggests that followers and leaders set aside personal interests for the benefit of
the group. The leader is then asked to focus on followers‟ needs and input in order to
transform everyone into a leader by empowering and motivating them (House & Aditya,
1997). Emphasis from the previously defined leadership theories, the ethical extents of
leadership further differentiates the transformational leadership. The transformational leaders
are considered by their capability to identify the need for change, gain the agreement and
commitment of others, create a vision that guides change and embed the change (Macgregor,
2003).

2.1.3. Leadership Styles

2.1.3.1. Autocratic Leadership Style
Hoel and Salin (2003) stressed that autocratic leadership is a leadership style where all of the
decisions originate from the top level of the management while the lower-level management
are the followers and doers of the responsibilities/tasks. Mainly, the tasks are assigned from
the top managements for the subordinates to perform. Leaders make the decisions without
consultation with the subordinates. It works with the organization who adopted the top-
bottom management style.

According to the experiments by Probst and Raisch, 2005), autocratic leadership can cause
leaders to possess too much power which can resort to negative implications to the
performance of organization. Moreover, the employees are not involved in making decisions
and whatever the top management wanted to impose, it was carried whether the lower
management agree to it or not. However, autocratic leadership has advantages and
disadvantages. Its main advantage is that decisions are made quickly and it makes sure that
the decisions are distributed and followed by the subordinates from the top to the bottom of
the hierarchy. On the other hand, it also offers many disadvantages. For one, organizations
that rely to the leadership of one person can be dangerous and too much power can increase
the chances of corruption by leaders (Probst and Raisch, 2005). Autocratic leadership also

XIX
limits the potentials of other members to excel and thus, discourages employee participation
and contributes to low level of job satisfaction and trust in the organization.

Nwankwo (2001) and Enoch (1999) described autocratic style as a leadership style in which
production is emphasized at the expense of any human consideration, and where decision are
made exclusively by the leader. The leader believes that human beings are evil, weak,
unwilling to work, incapable of self- determination, and have limited reasoning. An
autocratic style according to Page wise (2002) is effective and should be used when new
untrained employees who do not know which tasks to perform or which procedures to follow,
effective supervision can be provided only through detailed orders and instruction and
employees do not respond to any other leadership style. The Canadian Association of Student
Activity Advisers (2004) also opined that autocratic leadership is effective and should be
used when time is limited.

2.1.3.2. Transformational Leadership

Transformational leadership is the ability to motivate and to encourage intellectual
stimulation through inspiration. It is also defined transformational leadership style as
guidance through individualized consideration, intellectual stimulation, inspirational
motivation, and idealized influence. Transformational leaders fundamentally change the
values, goals, and aspirations of followers who adopt the leader’s values and, in the end,
perform their work because it is consistent with their values and not because they expect to be
rewarded (Avolio et al., 2004).

Transformational leadership is an appropriate leadership style for dealing with organizational

change. It facilitates how followers cope with change and bolsters followers‟ commitment,
self-efficacy, and empowerment during change (Bommer et al., 2005). Transformational and
transactional leadership styles are separate yet complementary (Bass, 1985). According to the
augmentation effect theory, transformational leadership is at the base of and adds to the effect
of transactional leadership (Callan, 1993)

Furthermore, the transformational leadership styles seem to enhance performance without

increasing stressor load on the subordinates. Specifically, subordinates of leaders with higher
levels of individualized consideration reported lower levels of dissatisfaction. According to
studies that demonstrated reduced stress symptoms in subordinates in relation to
transformational leadership (Seltzer et al., 1989), this leadership style overall seems to be the
most beneficial leadership style in terms of stress and productivity. Yukl (1999) identified

XX
seven major weaknesses of transformational leadership. First, it is the ambiguity underlying
its influences and processes. Secondly is the overemphasis of the theory on leadership
processes at the dyadic level. Thirdly, the theoretical rationale for differentiating among the
behaviors is not clearly explained. Fourth identified omission of several transformational
behaviors from the original transformational leadership theory which empirical evidence has
shown to be relevant. Fifth is the insufficient specification of situational variables in
transformational leadership. Sixthly, the theory does not explicitly identify any situation
where transformational leadership is detrimental. Lastly, like most leadership theories,
transformational leadership theory assumes the heroic leadership stereotype.

2.1.3.3. Laissez-faire leadership style

A leader who avoids or does not interfere with the work assignments or may entirely avoid
responsibilities and does not guide or support the followers can be considered as a laissez-
faire style of leader. This leader's style is compared with dissatisfaction, unproductiveness,
and ineffectiveness (Morreale, 2002). The leader fails to lead the team, does not fulfill the
responsibilities as a leader, overall, effective leadership is not attempted. Laissez-faire style
leaders maintain a hands-off approach and are rarely involved in decision-making and
contributing any guidance and direction. This leadership style enables the subordinates to
make their own decisions, as the leader exhibits no real authority. The leader only responds to
questions and provides information or gives support to the group. The subordinates of laissez-
faire leaders have to seek other sources to assist them in making final decisions (Liphadzi,
Aigbavboa, & Thwala, 2015).

Laissez-faire leadership may be the best or the worst of leadership styles (Goodnight, 2011).
Laissez-faire, this French phrase for “let it be,” when applied to leadership describes leaders
who allow people to work on their own. Laissez-faire leaders abdicate responsibilities and
avoid making decisions, they may give teams complete freedom to do their work and set
their own deadlines. Laissez-faire leaders usually allow their subordinate the power to make
decisions about their work (Chaudhry & Javed, 2012). They provide teams with resources
and advice, if needed, but otherwise do not get involved. This leadership style can be
effective if the leader monitors performance and gives feedback to team members regularly.
The main advantage of laissez-faire leadership is that allowing team members so much
autonomy can lead to high job satisfaction and increased productivity. It can be damaging if
team members do not manage their time well or do not have the knowledge, skills, or

XXI
motivation to do their work effectively. This type of leadership can also occur when
managers do not have sufficient control over their staff (Ololube, 2013).

2.1.3.4. Democratic Leadership Style

Democratic leadership involves consulting with subordinates and the evaluation of their
opinions and suggestions before the manager makes the decision (Mullins, 2005). Democratic
leadership is associated with consensus, consultation, delegation, and involvement (Bass
1981).This implies that employees who perceive their managers as adopting consultative or
participative leadership behavior are more committed to their organizations, more satisfied
with their jobs and higher in their performance. Because, of the consultative nature of
participative leadership, it has the potential to enhance the dissemination of organizational
and managerial values to employees (Ibid).

Democratic leaders make the final decisions, but include team members in the decision-
making process. They encourage creativity, and team members are often highly engaged in
projects and decisions. There are many benefits of democratic leadership. Team members
tend to have high job satisfaction and are productive because they are more involved. This
style also helps develop employees‟ skills. Team members feel a part of something larger and
meaningful and so are motivated to by more than just a financial reward. The danger of
democratic leadership is that it can falter in situations where speed or efficiency is essential.
During a crisis, for instance, a team can waste valuable time gathering input. Another
potential danger is team members without the knowledge or expertise to provide high quality
input.

According to Bass (1990), employees who work for a participative leader tend to exhibit
greater involvement, commitment, and loyalty than employees who work under a directive
leader. Consequently, employees who are allowed to participate in the decision-making
process are likely to be more committed to those decisions implementation and probably
better outcome is expected to achieve. However; the challenge that lies in this aspect is that
only giving power to the subordinates may not be wise enough since delegation,
empowerment and specialization are calculated risks.

The democratic leadership style is also called the participative style as it encourages
employees to be a part of the decision making. The democratic manager keeps his or her
employees informed about everything that affects their work and shares decision making and

XXII
problem solving responsibilities. This style requires the leader to be a coach who has the final
say, but gathers information from staff members before making a decision(Celattia, 2011).

2.2. Empirical Literature Review

2.2.1 leadership style and employee retention
Ng’ethe, Namusonge and Iravo (2012) attempted to measure the influence of relationship of
leadership style on academic staff retention in Public Universities in Kenya. The study found
that the relationship between the two variables was significant. This implies that the
perceived quality of a leadership style may influence employees either to stay or leave. The
findings are supported by the study done by Nwokocha and Iheriohanma (2015) in Nigeria
that aimed at examining nexus between leadership styles, employee retention and employee
retntion the study concluded that effective leadership style is crucial for achieving
organizational goals by retaining their employees for long period of time. The study found
that when management styles are considered repugnant by the subordinates, they undermine
employees’ performance and instigate their propensity to quit the organization, and vice
versa. It further argued that employees’ retention and performance can be achieved
through the adoption of appropriate leadership styles that will align business strategies with
employees’ motivation and morale. Contrary to the above findings the study of Long et
al (2012) in Malaysia to academic staff found that there is no significant relationship
between leadership styles and employees turnover intention. This also means that leadership
styles do not influence employee retention. This result signifies that the relationship between
leadership and employee retention has to be examined in various types of industries and
organisations since working situations vary as well.

The study by Khalid, Pahi, and Ahmed (2016) which was done in banking sector in Pakistan
found a strong and positive relationship between leadership style and employee retention. In
this study, job satisfaction and organisational commitment mediate the relationship between
leadership style and employees retention. Surprisingly, in the study of Enu-Kwesi, Koomson,
Segbenya and Annan-Prah (2014) which aimed at examining the determinants of employee
retention in Ghana commercial banks it was found that there was low level of agreement that
leadership is one of factors that influence employee retention. This implies that employees’
perception on determinants of employee retention varies.

XXIII
2.2.2. Transformational Leadership and Employee retention
Hamstra et al. (2011), in a quantitative study on how a fit between leadership styles and
followers regulatory focus will mitigate followers retention, found that transformational
leadership was posetivley related to employee retention for highly promotion-focused
followers, but not for those low in promotion focus. Similarly, Pieterse- Landman (2012) in a
non-experimental quantitative study examined the relationship between leadership and
employee retention. Using a data from a sample of 185 managers in local JSE-listed
manufacturing companies in South Africa, the author found a significant posetive relationship
between transformational leadership and employee retained in the company. Wells and
Pearchey (2011) undertook a study to investigate the relationship between leadership
behaviors (transformational and transactional), satisfaction with the leaders on 200
participants from National Collegiate Athletic Association Division I softball and volleyball
assistant coaches in the USA. The outcome of their study showed significant positive
correlation between transformational leadership style and satisfaction with leader as well as
the relationship between transactional leadership behavior and employee retaining in the
company. Based on the foregoing review, it was conjectured that transformational leadership
behavior would have a significant inverse relationship with employees turnover intention.

2.2.3. Laissez- Faire Leadership Style and Employees’ retention

Laissez faire is a French phrase which means “let it be” and it is also known as the “hands off
style” (Nwokocha & Iheriohanma, 2015). According to Gill (2014) it means leaving
subordinates to complete tasks and jobs in the way they choose without adherence to any
strict policies or procedures. Bass (2008) describes the laissez faire leadership style as one in
which the leader has no belief in their own ability to supervise. He further stated that the
leader has no clear set goals towards how they may work, do not help the group in making
decisions and so leave too much responsibility with their subordinates.

According to Puni, Ofei and Okoe (2014), the laissez-faire leader avoids controlling his
employees and so only relies on the few available employees who are loyal to get a task done.
A laissez faire leader does not believe in employee development as they believe that
employees can take care of themselves (Puni et al, 2014). This leadership style cannot be said
to be operational in the banking sector which requires that both the leader and subordinates
have an input in the decision making process and completion of tasks to ensure the success of
the organization.

XXIV
2.2.4. Democratic Leadership Style and Employees’ retention
The democratic leadership style is also referred to as the participative leadership style. The
focus of this leadership style is on performance and people (Puni et al.,, 2014). It encourages
employees to participate in the decision making process of the organization (Nwokocha &
Iheriohanma, 2015). Daft (1999) describes the democratic leader as one who delegates
authority to subordinates or employees, encourages contributions from employees and
depends on the knowledge of the subordinates to complete tasks as well as on their respect
for influence. According to Puni et al (2014) decision making in a democratic system is not
centralized and high performance is recognized and rewarded this leads to employees to
retain for long period of time. Nwokocha and Iheriohanma (2015) on the other hand suggest
that there is potential for poor decisions to be made by the subordinates as a result of the
leader depending on the contributions made by the employees or subordinates. This can be
said to have a negative impact on the organization and employees retention. The democratic
leadership sounds good in theory but it is often bogged down in its slow decision making
process and the results which could seem workable would always require a lot of time and
effort (Nwokocha & Iheriohanma, 2015).

2.3 Conceptual Frame Work

The conceptual framework indicates the crucial process, which is useful to show the direction
of the study. This study will shows the relationship between the three leadership style
dimensions (democratic leadership style, Transformational Leadership and Laissez- Faire
Leadership Style) and employee retention in dashen bank arbaminch branch. The following
conceptual model will be used in this study.

.
Independent variables

 Autocratic leadership style Dependent variable

 democratic leadership style
 Transformational Leadership Employee retention
 Laissez- Faire Leadership
Style

Figure 2.1 conceptual frame work

CHAPTER THRE;- RESEARCH METHODOLOGY

3.1. Research Design

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A research design is the arrangement of conditions for collection and analysis of data in a
manner that aims to combine relevance to the research purpose with economy in procedure.
In fact, the research design is the conceptual structure within which research is conducted; it
constitutes the blueprint for the collection, measurement and analysis of data. As such the
design includes an outline of what the researcher will do from writing the hypothesis and its
operational implications to the final analysis of data (C.R Kothari, 2004). Explanatory studies
are according to Saunders et al., (2003) studies with the emphasis to study a situation or
problem in order to explain the cause and effect relationship between given variables. In
order to accomplish that, well defined research problem has to be done and hypotheses need
to be stated. Explanatory research is mostly used within areas where extensive research has
already been done. In line with this reasoning and purpose of the research. So the current
study was conducted by using both explanatory and descriptive type of research design.

3.2 Research Approach

According to Creswell (2009), there are three basic approaches to business and social
investigations, one of which will be employed for this study: the quantitative approach.
Quantitative research focuses on the measurement and interpretation of statistical data to
arrive at measurable results. One technique to evaluate objective theories, according to
Creswell (2009), is to look at the relationship between variables. The problem is best
addressed via quantitative research by determining the factors' influence on the outcome,
because it is made using scientific procedures. This includes creating models, theories, and
hypotheses, as well as developing measuring tools and methods, manipulating variables,
collecting and modeling empirical data, and analyzing data. As a result, this study was relied
on quantitative research approach.

3.3. Target Population and sampling technique

The target populations of the study was employees working in dashen bank arba minch
branch. This study was used census survey method that means including all target population
in the data gathering.

3.4 sample size

The researcher used census because the employee of dashen bank arba minch small that are
28 in number in short this study were includes all employee of the bank.

3.5. Sources of Data and Type

With regard to the sources of data, the study used primary source of data. Based on the
nature, scope, objectives and availability of time and resource, the researcher used

XXVI
questionnaires.

3.5.1 Primary Data Source

To gather primary data structured questionnaires were prepared in English and distributed to
the employee of the bank. The questionnaires had three parts: The first part of the
questionnaire is about the personal information of respondents. The second section that was
be designed is to measure the leadership style of the bank. The third part of the questioner
will be about employee retention.

3.6. Method of data collection

For the proper achievement of the objectives of the study; among different primary data
collection method, questionnaire was used. The respondents who are the employee of the
bank were asked for cooperation and given the questionnaire. Structured questionnaires was
developed containing closed ended and the respondents can easily understand. The variable
were measured using Likert scale with five response categories (Karali, 2020). (Strongly
disagree, disagree, neither agree nor disagree, and agree strongly agree). “The Likert scale
method was Preferred to make questions interesting to respondents and thereby enhance their
cooperation (Robson Colin, 2002).

3.7. Method of Data Analysis

The collected data has to be changed and interpreted in to meaningful information, figure and
statement. So it was analyzed, processed and interpreted according to the nature of data.
Statistical Package for Social Science (SPSS) software was employed to analyze and present
the data through the statistical tools that used for this study. Descriptive analysis, the
descriptive statistical results werepresented by tables, frequency distributions and Percentages
to give a condensed picture of the data.

3.8 Ethical Consideration

In the process of the study, the following ethical issues was considered: The first is the
researcher was taken formal letter from management Department. The researcher submited
the letter to the selected Sectors’ dashen bank arba minch branch to encourage respondents’
voluntary participation. The researcher explained the objectives and significance of the study
to the respondents, and they allowed to exercise their right to voluntary participation.

XXVII
 CHAPTER 4: DATA ANLYSIS AND DISCUSSION

4. Introduction
This chapter was devoted to present and discusses the results of the study. The study aimed at
analyzing the effect of leadership styles on employee retention in dashen bank arba minch
branch. The chapter has two sections, the first section of the chapter presented findings about
the demographics of study participants, and second section of this presented statistical
analyzes used to answer the key Research questions and understand the results.

4.1 Response Rate

28 questionnaires were distributed to the target populations, out of which 5 questionnaires
were not returned. Therefore, 23 questionnaires were considered for study.

4.2 Demographic Characteristics of the Respondents

Table 4. 1: Frequency and %age of Respondents’ Demographic Characteristics

N Demograph Categories No. of Percenta

o. ic Respondents ge
Factors (%)
(Frequency)
(Variabl
es)
1 Sex 1. Male 15 60%
2. Female 10 40%
Total 315 100%
2 Age 25 and below years 3 12%
26-30 years 7 28%
31-40 years 8 32%
41- 50 years 7 28%
51 and above years 0 0
Total 100%
4 Level of Diploma 0 0
Education Degree 14 56%
Masters and above 11 44%

Total 25 100%
5 Work experience <5 years 3 12%
6-10 years 10 40%
11-15 years 7 28%
16 and above years 5 20%
Total 25 100%

Source: own questionnaires, 2024

XXVIII
4.2.1 Sex of the Respondents
The questionnaire surveys collected from the respondents are showing their gender
information on the composition of the respondents in terms of sex. The reason that the
researcher included this part is for example, to make sure that respondents are in appropriate
mix in terms of gender. Therefore, the result indicated in table 4.1.Show that, Out of the 25
respondents 60% were males and the remaining 40% were females. This explains that the
proportion of males and females were not higher gap.

4.2.2 Age of the Respondents

According to the table 4.2, regarding age profile 12% of the respondents are at the age of
25 and below years and 28% are between the age of 26-30 years and also 32%are between
31-40 years, 28% are between the age of 41- 50 years. This indicated that majority of the
respondents are in the productive age groups.

4.2.3 Educational Level of the Respondents

As indicated in Table 4.1, the result shows that there were no respondents with educational
level of diploma. Furthermore, 56% of the respondents were degree and the remaining 44%
were maters and above holders. This show the selected bank for this study have qualified
employees.

4.2.4 Work experience of the Respondents

Table 4.1 illustrates the years of work experience of the respondents in their facilities. The
results highlight that 12% of the respondents had 5 and below 5 years of experience and the
majority 40% of the respondents had work experience between 6-10 years. Whereas,
28%and 20% of the respondents had 11-15 years and 16 and above years‟ work experience
respectively. The result implies that the bank employees had sufficient work experience.

4.3 Reliability analysis test

Reliability is the degree to which the measure of a construct is consistent or dependable.
There are many ways of estimating reliability, of which internal consistency reliability is one.
Internal consistency reliability is a measure of consistency between different items of the
same construct. If a multiple-item construct measure is administered to respondents, the
extent to which respondents rate those items in a similar manner is a reflection of internal
consistency. This reliability measure can be estimated more commonly in terms of
Cronbach’s alpha (Anol, 2012).

XXIX
Thus, the Cronbach’s alpha coefficients were used to assess the scale reliability of this
research. This study used cronbach‟s alpha to test the reliability of questioner. The findings
show that Cronbach‟s alpha for all dimensions of Leadership Styles are above 0.70 which
indicates a high level of internal consistency for all items.
Table 4. 2: Result of reliability analysis for the questionnaire

Reliability Statistics

Variables Cronbach's Alpha

democratic leadership style .753

Transformational Leadership .733

Laissez- Faire Leadership .708

Style

Employee retention .803

Source; SPSS reliability test result output of, 2024
According to Julie Pallant (2007), ideally Cronbach’s alpha coefficients should be greater
than 0.7. Cronbach’s alpha values are, however, quite sensitive to the number of items in the
scale. With short scales it is common to find quite low Cronbach values e.g. 0.5. Thus, based
on the result of table 4.2 supported by this argument it can be inferred that all measures are
internally consistent.

4.4 Correlation between leadership style and employee retention

The Pearson correlation was performed to assess the association between the leadership
behavior and e m p l o y e e r e tention. In this regard, participants responses to five key
questions or statements from the questionnaire considered very crucial to employee
retention described under the main variable of r e tention were matched against responses
to five key questions from the questionnaire under the main variable each leadership style,
which were considered to be directly related to this style the result revealed
Table 4. 3 Correlation between Autocratic Leadership and Nurses’ Turnover intention

Variables Employee retention

Pearson .049
Autocratic Correlation
Leadership Sig. (2-tailed) .038
N 25
Democratic Pearson 0.212
Leadership Correlation
Sig. (2-tailed) 0.000

XXX
 N 25
Transformati Pearson 0.040
onal Correlation
Leadership Sig. (2-tailed) 0.040
N 25
Laissez faire Pearson 0.045
Leadership Correlation
Sig. (2-tailed) 0.004
N 25
Employee retention Pearson 1
Correlation
Sig. (2-tailed) 0.0000
N 315
Source: SPSS Persian correlation result output of, 2024
As clearly indicated Table 4.3 above, the correlation between the autocratic leadership style
and employee retention produced a value of-0.049 which means there is a negative and
significant correlation between the two variables of independent variable (autocratic
leadership style) with the dependent variable (retention).
The information presented in the above Table 4.3 indicated that the correlation between the
democratic leadership and employee retention produced value of .212** this implied that the
democratic leadership style has significant positive relationship with employee retention.
Furthermore, the above result indicated that the aspects of democratic leadership was
important for employee to stay on their current job. Because these types of leaders are
mainly focused on employee centered. They work through consultation and open discussion
with their employee before making decisions. Eventually, employee job satisfaction and
their commitment to successfully implement the given role and responsibility was
significantly enhanced.

As can be seen from the above Table 4.3, the correlations between transformational
leadership style and employee retention produced a value of 0.040 which implies that there
are positive relationship between transformational leaders and employee retention in the
dashen bank arbaminch branch. The result above indicated that the transformational
leadership style has relatively significant and moderate for employee in their work place.
These leaders go beyond self-interest and attempt to optimize development that helps the
employee to stable and satisfy in their current work.

The above table 4.3 showed that the correlation between the Laissez faire Leadership style
with the employee retention. Based on the result or the value indicated that 0.045***, it
implied that there is a positive and significant relationship between the two variables.
So the employee retention increase as the leaders are exercising this way of leadership style.

XXXI
4.3.1 multi-collinearity test
A common problem that arises in multiple regression analysis is also multi-co linearity. This
basically means that two or more of the independent variables being used are highly
correlated with each other and in effect measure the same thing. This makes it difficult to
identify the unique relation between each predictor variable and the dependent variable
(Urdan, 2005). The co linearity statistics for this study revealed that none of the Variance
Inflation Factors were above 10 for each independent variable. In research this is said to be
an acceptable number to test for multi-co linearity as any number above 10 would be cause
for concern. The tolerances are all above 0.2. If a variable has co linearity tolerance below
0.2, it implies that 80% of its variance is shared with some other independent variables (Table
4.4).
Table 4. 4 Multi-co linearity test

Co linearity Statistics
Independent variables Tolerance VIF
(Constant)

Autocratic leadership style .716 1.396

democratic leadership style .908 1.102

Transformational Leadership .405 2.466

Laissez- Faire Leadership .397 2.519

Source:- own questionnaires, 2024

Dependent variable:- employee retention

4.4 Multiple Regressions

Multiple regression analysis was conducted by using SPSS in order to examine the effects of
leadership style on employee retention. There are different types of multiple regression
analyses that one can use depending on the question he/she want to address. Standard
multiple regression is one of such types where all the independent (Predicators) variables are
entered in to the question simultaneously. Each independent variable is evaluated in terms of
its predictive power, over and above that offered by all the other independent variables.
According to Julie P. (2007) this is the most commonly used type of multiple regression and

XXXII
is applied when there are a set of independent variables and one wants to know how much
variance in a dependent variable each of these independent variables are able to explain as a
group or block. Hence, based on this argument the current study employed the standard type
of multiple regressions in this study multiple regression analysis was employed to examine
the leadership style on employee retention. The following table presents the results of
multiple regressions analysis. Here the squared multiple correlation coefficients (R 2) which
tells the level of variance in the dependent variable that is explained by the model.
Table 4. 5: Model summery

Model R R Square Adjusted R Std. Error of the

Square Estimate
1 .725a .601 .595 .47760
a. Predictors: (Constant), Autocratic leadership style, democratic leadership style,
Transformational Leadership and Laissez- Faire Leadership
b. Dependent Variable: employee retention
Source: SPSS Regression results output, 2024
Regression results in table 4.5 indicate the goodness of fit for the regression between
employee retention and independent variable was good. The adjusted R squared of 0.595
indicates that 59.5% of the variances in employees’ retention can be explained by the
leadership style . The remaining variances on the dependent variable could be explained by
other explanatory variables not included in this study.
Table 4. 6 ANOVA

Model Sum of Squares Df Mean Square F Sig.

1 Regression 126.264 4 17.132 75.65 .000b

Residual 50.120024 21 .168

Total 176.484024 25
Source: SPSS Regression results output, 2024
From table 4.6, it is apparent that the regression model was significant using ‘between the
leadership style and employees’ retention. An F statistic of 75.65 and a probability value of
0.000 clearly indicate that the model was significant.
Table 4. 7 Regression analysis on employee retention

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 Variables Unstandardized Standardized Sig.
Coefficients coefficients T-value

B Std. Error Beta

(Constant) -.689 .244 .162 -2.819 .005

Autocratic -.292 .040 -.299 -7.358 .000*

leadership
Democratic .185 .071 .094 2.591 .010*
leadership style
Transformational .472 .063 .404 7.468 .000*
leadership style
Laissez faire .184 .059 .171 3.126 .002*
leadership style
*Indicates significance (p-value<0.05)
Source:- SPSS Regression results output, 2024

4.4.1 Analysis of Regressions result

In this study, four explanatory variables were identifying to determine a significant difference
on employees’ commitment at 5% level of significance. Hence, the coefficient explains the
average amount of change in dependent variable that is caused by a unit of change in the
independent variable. Accordingly, the unstandardized beta coefficients (β) tell us the unique
contribution of each factor to the model. A small p-value (<0.05) indicate the predictor
variable has made a statistically significance contribution to the model. On the other hand, a
high p-value (p >0.05) indicate the predictor variable has no significant contribution to the
model (George and Mallery, 2003). Table 4.7 shows all the p-value for independent variables
is less than 0.05 and all the β values are positive except Autocratic leadership. Whereas the
relationship between Democratic leadership style, Transformational leadership style and
Laissez faire leadership style and employee retention shows positive in dashen bank arba
minch branch.

The results of Multiple Regression, as presented on table 4.7 above, revealed that Autocratic
leadership has a negative and significant effect on employees retention with β= -0.299, at
95% confidence level (p<0.05). The Beta value (β) i.e. 0.299 shows that if there is one unit
increase in Autocratic leadership, there will be 29.9% decrease on employees retention.
Therefore, Autocratic leadership has a negative effect on employees retention in dashen bank
Arba Minch branch.

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The effect of Democratic leadership style has a positive statistically significant effect on
employee’s retention with β= 0.185, at 95% confidence level (p <0.05). The Beta value
(β=0.185) shows that if there is one unit increase in democratic leadership style, there will be
18.5% increase on employees retention. This indicates that democratic leadership has a
positive statistically significant effect on employees retention.

Likewise, the Transformational leadership style has a positive and significant effect on
employees retention with β = 0.472, at 95% confidence level (p <0.05). The Beta value
(β=0.472) shows that if there is one unit increase in Transformational leadership, there will
be 47.2% increase on employees retention. Therefore, Transformational leadership has a
positive effect on employees retention in dashen bank Arba Minch branch.

Laissez faire leadership style is also the other variable, it has a positive and significant effect
on employees retention with β= 0.184, at 95% confidence level (p <0.05). The Beta value
(β=0.184) shows that if there is a one unit increase in Laissez faire leadership style, there
will be 18.4% increase on employees retention. Therefore, Laissez faire leadership style has
statistically significant effect on employees retention dashen bank in Arba Minch branch.

XXXV
CHAPTER FIVE:- CONCLUSION AND RECOMMENDATION

Introduction
The main purpose of this research was to examine the relationship between leadership styles
and employee retentions in dashen bank arba minch branch. Data gathered through
questionnaire from the respondents have been analyzed and discussed so far to show the
relationship between leadership styles and employee retention. The result of the study
revealed that autocratic leadership style impacted negatively on employee retention while
democratic, laissez fair leadership style and transformational styles affected positively on
the employee retention. Hence this chapter is about to draw notable conclusions and
recommendations on the basis of the result analysis and discussions of the study presented in
the previous chapter.

5.1 Conclusions
The result of the study concludes that different leadership styles practiced in dashen bank
arba minch branch impacted employee retention both positively as well as negatively. In
connection to this autocratic leadership style is realized to effect negatively on the expected
employee retention in the context of dashen bank arbaminch. This is because, majority of the
participants argued that their leaders are not creating conducive work environment due to
lack of employee empowerment, centralized decision making, power abuse, in effective
employee reward system, unilateral communication and mainly task focused behavior of the
most leaders. As a result of this leadership style majority of the employee are not meeting
work standards in general.

The study was also concluded that employee motivation, participation in decision making
process, grow and development, instilling vision and mission of the bank, team work and
effective problem solving mechanisms are not well considered. Leaders do not yet realized
that they have great responsibility to establish attractive and encouraging work environment
by exercising democratic or transformational leadership qualities as an instrument to enhance
employee level of motivation and commitment to perform even beyond target objectives. In
other words employee who are not empowered and motivated to participate in the decision-
making process are likely to be less committed to those decisions implementation and
probably higher outcome retention is expected to achieve.

XXXVI
It was also concluded that leaders of the banks prefer to adopt democratic leadership style
more than autocratic leadership styles. Many of them believe that this is best way to deal
employee since threat and strict commend imposed on the employees is the means to ensure
that subordinates are performing on the basis of leaders individual interest without setting
their own priorities in line with the bank objectives. This inclination of the leaders to ward
autocratic leadership style undermined the opportunities and positive impact of other

5.2 Recommendations

Effective Leaders are the only comparative advantage for any institution to win the fierce
competition of the globalized world. Therefore, the following points are considered to help
the bank and their leaders to ensure effective leadership style so that to maximize employee
retention. They are:

The result of the study suggested that the leaders of the bank should have a clear strategy to
identify various leadership styles that are needed to apply different circumstances in order to
be effective in dealing with different situations so that to lead employees to ward successful
implementation of the individual as well as organizational objectives.

The result also suggested that hospital leaders or managers should reduce the extent of
exercising autocratic leadership style to deal their subordinates unless situations demanded to
do so. Because, this leadership style undermines nurses inherent quality and skills of
implementing the assigned task successfully.

The result of the study also suggested that the leaders of the bank should pay more attention
to develop efficient team work and express warm concern and trust to co- workers through
democratic or transformational leadership behaviors. This is because these leadership styles
can play a role in enhancing employee retention. Both transformational and democratic
leadership styles has been found to have a significant and positive relationship with employee
retention.

From practical point of view leaders should prefer their leadership style on situational basis
because different situations and environment demand specific and appropriate style from
the leaders to be effective and role model to their followers. Situational leaders are always
successful in dealing complex and difficult situations more than those that depend mostly
on one leadership style.

30
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 APPENDEX
ARBAMINCH UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF MANAGEMENT

Consent Form
Dear Respondents: -Dear respondent, my name is Bizuye Yeshi. I am studying BA degree of
management in arba minch University. Now I’m going to conduct my study on the "role of
leadership styles on employee retention in dashen bank arba minch branch. Dear respondent,
I would like to express my deep appreciation for your generous time, honest and prompt
responses.

Objective: -This questionnaire is designed to collect data about the "Effects of leadership
styles on employees retention in dashen bank arba minch branch. The information that you
offer me with this questionnaire will be used as a primary data in my study which I am
conducting as a partial fulfillment of the requirements for the bachelor of art in degree in
management. Therefore, this research is to be evaluated in terms of its contribution to our
understanding of effects of leadership styles on employees retention

General Instructions

 No need of writing your name.

 In all cases where answer options are available please tick (√) in the appropriate box.
SECTION I: Demographic Profile
1. Sex A. Male [ ] B. Female [ ]
2. Which of the following age groups do you belong to?
A. 25 and below years [ ] B. 26-30 years [ ]
C. 31-40 years [ ] D. 41- 50 years [ ] E. 51 and above years [ ]
3. Marital status: A. Married [ ] B. Single [ ] C. Divorced [ ] E. Widowed [ ]
4. Level of Education A. Certificate [ ] B. Diploma [ ] C. BA DEGREE [ ]
D. Master degree and above [ ]
5. Work experience: A.5 and below 5 years [ ] B. 6-10 years [ ]
C. 11-15 years [ ] D. 16 and above years [ ]
SECTION II: Leadership Style related Questionnaires for nurses
Directions: Think about how often your leader/ immediate supervisor engages in the
described behavior. For each item, select the number that best represents the behavior that

33
 explain your manager

Please indicate with a tick (√) in the appropriate box the extent to which you agree with the
following statements concerning the leadership style adopted by your Bank. 1 = strongly
disagree 2 = Disagree 3 = neither disagree nor agree , 4 = Agree 5 = strongly agree
Statement 1 2 3 4 5
Retains the final decision making authority
Includes me in decision making, but retains the final
decision making authority
Never give time to consider my Suggestions
Seeks input from me for the upcoming Projects
Tells me what to do and how to do it
When things go wrong my supervisor ask me advice
on how to stay on the schedule
Whenever I make a mistake my supervisor makes a
note on it and tells me strictly not to do it again
Creates an environment where I take ownership of my
Projects
I am not allowed to make decisions that my supervisor
did not approve first
When there are differences in expectations my
supervisor work with me to resolve them
Provides directions or threats to get me achieve my
Objectives
Provides an opportunity to exercise self-direction if I
am committed to my objectives
Specifies the importance of having a strong sense of
Purpose
solve organizational problems creatively and with
ingenuity
Seeks differing perspectives when solving problems
Spends time teaching and coaching

SECTION III: employee retention related questionnaire.

34
Please indicate your level of agreement about retaining in your company. Encircle your
choice from the given points.

1 = strongly disagree 2 = Disagree 3 = neither disagree nor agree, 4 = Agree 5 =

strongly agree

No. Statement 1 2 3 4 5
1 I would plan my further career in this
organization?
2 I will suggest to my friends/relatives to join this
organization?
3 If I had to do it all over again, I will apply in this
company again

4 While working in the company, I always feel

learning, growing and competitive comparing to
other similar organizations
5 If I wont to change my work I will look for
opportunities within the organization first

35