Keywords

1 Introduction

Over the last two decades, studies on transformational and transactional leadership in different organizational settings have gone through significant changes and evolutions in terms of concept development as well as empirical investigations. As a result, our knowledge about the leadership styles and models have evolved, and there are several dominant theories and instruments that are now established in the leadership field. Despite the development there is still a number of leadership forms for various field that need further research and discussion.

Leaders play the primary role in establishing and motivating employees’ performance, which in sales is essential. Sales managers are the persons most responsible for influencing the perceptions and behaviors of their sales force as such their leadership style is essential in motivating their people (Smith et al. 2012). Transformational leadership has been regarded as behaviors, approaches and methods used by leaders to transform and inspire their followers to perform beyond expectations for the good of their organization, going beyond their self-interests (Avolio et al. 2009). However, little research has examined how the transformational leadership in sales results in high-performance workforce exceeding organizational expectations.

The paper is an attempt to distinguish between transactional and transformational leadership in sales. More precisely, it discusses the advantages and disadvantages of transformational leadership in sales based on recent researches and their impact on followers’ performance. By using an adapted version of MLQ-Form 5X tool for sales executives and their team, the paper analyzes the most dominant leadership style for executives and agents in sales. The paper starts with a review of transformational leadership in sales, by explaining the advantages and disadvantages of this leadership style in sales. Then it describes the methodology used to assess the type of leadership. Finally, lessons are drawn for sales executives based on results regarding applying transformational leadership in their leadership style.

2 Transformational Leadership in Sales

Researches on transformational leadership in any organizational settings has gone through a significant evolution in terms of theory development as well as empirical investigations (Choudhary et al. 2013; Stevens 2011; Traml et al. 2015; Yi-Feng 2014). Prior leadership research had concentrated on identifying and measuring behaviors and attitudes that fell into all ranges of leadership styles, namely, transactional, passive-avoidant (laissez-faire) and transformational (MacKenzie et al. 2001).

Transactional leadership has been defined, in its passive form, as leader behaviors that involve waiting for mistakes to occur before taking action and applying corrective actions lately. In its active form, behaviors that involve a close monitoring, actively setting standards and applying contingent rewards. Passive-avoidant leadership is regarded as leader behaviors that avoid involvement. It is passive, avoidant and ineffective. On the reverse side, transformational leadership has been defined as leader behaviors that transform and inspire followers to perform beyond expectations while transcending self-interest for the good of the organization that they are being employed by (Avolio et al. 2009). Transformational leadership encompasses much more than rewarding for efforts made to change behaviors and adopt a preventive orientation. Transformational leadership is inspirational, intellectually stimulating, challenging, visionary, development oriented (Stevens 2011). It is regarded as the most active and effective form of leadership.

In an organization, leaders play the primary role in establishing and motivating employees’ performance. Creating high-performance workforce has become increasingly vital for companies. In this respect, business leaders must be able to motivate organizational members to go beyond their task requirements and targets settled for them. Transformational leaders do so by stimulating intellectual curiosity, initiative and achievement. Additionally, transformational leaders empower team members to develop their own leadership skills by paying attention to individual needs for development and growth (Traml et al. 2015).

Although the impact of companies’ success through transformational leadership in comparison to transactional leadership has been researched very well over the last decades (MacKenzie et al. 2001), recent research has only very limited analyzed the impact of transformational leadership exclusively on the success of salespersons. Most sales executives use a transactional leadership style to manage their sales force as the components of a transactional leadership are easier to apply on a sales strategy (e.g. commission or management by objective). Transformational leadership influences behaviors associated with leadership effectiveness in driving change and transforming organization to success (Traml et al. 2015).

3 Methodology

The Multifactor Leadership Questionnaire (MLQ), also known as MLQ-5X, is a standard tool used to measure a broad range of leadership types and styles in different organization settings. This extends from passive or laissez-faire leaders, to leaders who give contingent rewards to their followers, and further to leaders who transform their followers into becoming leaders themselves (Avolio and Bass 2004; Bass and Avolio 1990). The MLQ helps an individual to self-assess himself in their own eyes and in the eyes of his co-workers, by identifying the characteristics of a transformational or transactional leader or non-leadership skills.

Over the last three decades the MLQ-5X has been developed, evolved and validated by various scholars and in a number of settings (Avolio and Bass 2004). The effectiveness of transformational leadership has been proven for various fields and in many countries around the world (Judge and Piccolo 2004). However, the application of transformational leadership in German-speaking countries had been limited in a number of ways. As such, for the purpose of this paper we use a German-translation version of the MLQ-5X that was applied to a number of sales executives and sales agents in German companies. The data was collected in the period 10th of December 2016 to 24th of December 2016 by using a Survey Monkey posted questionnaire. A number of 36 valid answers have been collected, which are further interpreted in the paper.

The paper provides empirical evidence regarding transformational leadership in sales. The MLQ includes 45 questions, covering the “full range” leadership model, from transactional leadership, passive-avoidant leadership, non-leadership scales and up to transformational leadership. The current research is developed to expand the dimensions of leadership measured by previous leadership surveys and to provide a concise results for sales. To assess the leadership outcomes which are relevant for sales. Nine items of the standard questionnaire have been adapted, to better reflect the leadership performance in sales. These questions are listed in Table 1.

Table 1 MLQ 5 X items to measure leadership outcomes in sales
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The quantitative research aims to identify positive correlations between the five categories of the MLQ-5X that are related to transformational leadership and the outcomes focused on sales. Additionally, in the paper we also compare our findings for sales executives with one of the MLQ international normative samples published by Avolio and Bass (2004) that covers the findings for cross-functional executives in Europe. The MLQ-5X identifies in addition to transformational leadership also other leadership behaviors (Avolio and Bass 2004).

In the following paragraph you will find a brief description about these points. Additionally, we added our hypotheses below the descriptions of the five transformational leadership categories. All 45 questions in MLQ-5X can be attributed to one of the following four principal leadership categories: transformational leadership, transactional leadership, laissez-faire or outcome. The objective of MLQ-5X is to determine the value of these four principle categories for a test person or—as in this case—a test group. MLQ-5X also permits the four principle categories to be broken down into subcategories that can also be individually evaluated (Avolio and Bass 2004).

According to Bass and Avolio (1990), the questions relating to transformational leadership, the first of the principal categories can be attributed to one of the “4 I’s” (Bass and Avolio 1990). The “4 I’s” are subsequently briefly elucidated, in order to make the evaluation easier to understand.

  • Idealized influence: The demeanor and actions of an executive are perceived as exemplary by employees (Bass and Avolio 1990; Bass 1997). In MLQ-5X, Idealized Influence is further subcategorized into behavior and attributed (Avolio and Bass 2004). Building on this theory, we make the following assumptions:

    • H1a: Idealized influence attributed correlates positively with extra effort in sales.

    • H1b: Idealized influence attributed correlates positively with effectiveness in sales.

    • H1c: Idealized influence attributed correlates positively with satisfaction in sales.

    • H2a: Idealized influence behavior correlates positively with extra effort in sales.

    • H2b: Idealized influence behavior correlates positively with effectiveness in sales.

    • H2c: Idealized influence behavior correlates positively with satisfaction in sales.

  • Inspirational motivation: A manager can convey the significance of necessary tasks so well to employees that they become intrinsically motivated and are committed to accomplishing these tasks (Bass and Avolio 1990; Bass 1997). Building on this theory, we assume that:

    • H3a: Inspirational motivation correlates positively with extra effort in sales.

    • H3b: Inspirational motivation correlates positively with effectiveness in sales.

    • H3c: Inspirational motivation correlates positively with satisfaction in sales.

  • Intellectual stimulation: Employees are encouraged to think independently, creatively and innovatively by a manager, in order to question and optimize the current situation (Bass and Avolio 1990; Bass 1997). Building on this theory, we hypothesize:

    • H4a: Intellectual stimulation correlates positively with extra effort in sales.

    • H4b: Intellectual stimulation correlates positively with effectiveness in sales.

    • H4c: Intellectual stimulation correlates positively with satisfaction in sales.

  • Individualized consideration: A manager supports his employees by developing their strengths and minimizing their weaknesses, while bearing in mind the targets of individual employees (Bass and Avolio 1990; Bass 1997). Building on this theory, we hypothesize:

    • H5a: Individualized consideration correlates positively with extra effort in sales.

    • H5b: Individualized consideration correlates positively with effectiveness in sales.

    • H5c: Individualized consideration correlates positively with satisfaction in sales.

Transactional leadership—the second principle category—describes a style of management in which a mutual exchange relationship is developed between a manager and employees (Burns 1978). Bass (1985) divided this management style into contingent reward and management by exception (Bass 1985). These behavior patterns are also taken into account when evaluating this management style in MLQ-5X, where Management by Exception is subdivided into active and passive (Avolio and Bass 2004).

  • Contingent reward: When employees successfully complete tasks assigned by a manager, they are rewarded by the manager. The manager makes the nature of these rewards clear to employees in advance. The tasks themselves are explained to employees in detail by the manager (Burns 1978).

  • Management by exception—active: A manager puts strong emphasis on close adherence to rules and working procedure, in order to avoid potential employee errors before it is possible for them to occur (Bass 1985; Burns 1978).

  • Management by exception—passive: When this style of management is adopted, the manager only takes action when errors have already occurred or standard performance levels have not been achieved. As long as operating procedure is carried out without any errors, the manager pays no attention and remains passive (Burns 1978; Bass 1985).

The third principle category that is called laissez-faire is not divided into subcategories in MLQ-5X (Avolio and Bass 2004).

  • Laissez-faire: The questions pertaining to this category evaluate a manager’s lack of leadership behavior. The higher this score is, the less difference it makes to employees whether the manager is present or absent. The employees feel neither controlled nor inspired by their superiors (Avolio and Bass 2004; Jones and Rudd 2007). Managers who avoid making decisions exhibit behavior that is very typical for this category (Bass 2000).

The final principle category of MLQ-5X relates to the outcome created by a manager and his/her behavior. The first three principle categories thus define the management style, while outcomes serve to evaluate the impact of the applied leadership style. In MLQ-5X, outcomes are divided into extra effort, effectiveness and satisfaction (Avolio and Bass 2004).

As explained above, we have adjusted these outcomes to suit the area of sales. Although our approach evaluates new and thus unexplored effects of management behavior, it nevertheless allows us to quantify the impact of leadership behavior by means of tried and tested methods, and to compare the results of our group with those of another group that has also been tested by means of MLQ-5X.

In order to allow us to compare correlations of leadership style and impact on sales with the results of a cross-functional study group, we adopted Mind Garden’s normative sample for Europe. This control group includes data from a study in which 1143 managers evaluated themselves and 3061 employees evaluated their superiors and the related outcomes (Avolio and Bass 2004).

To determine the correlations, we first evaluated each questionnaire individually, allowing us to perform a correct evaluation of each anonymous person on the basis of the aforementioned behavior patterns and related effects. We applied the official scoring key supplied by Mind Garden. We used Excel to perform the required calculations and SPSS to determine the correlations.

4 Results and Discussion

The data that we collected—36 valid answers—allows the following demographic values to be determined. The respondents come from different sectors of activity as follows: services (22.2%), other industries (11.1%), business services (11.1%), other commercial ventures (8.3%), finance, real estate and insurance (8.3%), furnishings (5.6%), textiles (5.6%), transportation (5.6%), clothing and accessories (5.6%), social and medical services and pharmaceutical industry (5.6%), agriculture (2.8%), associations and leisure activities (2.8%), construction (2.8%) and food (2.8%).

All of the participants are working in sales, out of which 20 participants are executives who answered the questions with their self-evaluation and 16 participants are agents without managerial responsibility who evaluated their executives. Seventy-five percent of the executives are male and 25% are female, whereas 50% of the agents are male and 50% are female.

In what regards education, 10% of the executives have a doctoral degree or equivalent, 55% stated to hold a master degree or equivalent and 25% have only a bachelor degree or equivalent. Only 5% of those interviewed have only a high school diploma or equivalent or any other degree (5%). Also, the majority of the agents have a bachelor degree or equivalent (31.3%). Twenty-five percent of the interviewed agents stated to have a master degree or equivalent. The same number of the agents indicated to have a high school diploma or equivalent. The remaining 18.8% stated to have any other degree.

The executives that participated in our survey have more work experience than the agents: 1–3 years (executives: 12.5%; agents: 15%), 3–6 years (executives: 20%; agents: 43.8%), 6–10 years (executives: 10%; agents: 25%) and >10 years (executives: 55%; agents: 18.8%). Before we get to the evaluations of the correlations, we would like to take a brief look at the average values reported by the sales executives that we surveyed and their self-assessments (Table 2). We will then compare these findings with the normative sample of Avolio and Bass (2004).

Table 2 Self-evaluation by sales executives
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Aside from the mean values, which reflect a rather more cautious leadership style (management by exception—passive and laissez-faire), the normative sample, which is based on the self-evaluations of executives in Europe, shows only very small and insignificant deviations from the results of our survey (Avolio and Bass 2004). The sales executives that we interviewed believe that they practice a leadership style that is more than one third passive. It is also worth mentioning the approximate 25% deviation with respect to idealized influence (behavior). Sales executives to a lesser extent lead their employees by the example of their behavior.

Our survey of sales agents yielded a similar result (Table 3). The sales agents rated their superiors and assessed their extra effort, effectiveness and satisfaction in sales. We compared the resulting averages with the normative sample, which is based on how the employees evaluated their executives in Europe (Avolio and Bass 2004). Again, we found that the mean values, which indicate a rather more cautious leadership style (35% reported making recourse to management by exception—passive, and 51% reported a laissez-faire style), differed markedly from the comparison group. Furthermore, we found that satisfaction in sales with −74% was rated significantly lower than in the cross-functional comparison group. The remaining averages have very small deviations.

Table 3 Evaluation by sales agents (lower level)
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Thus, we have established the extent of the impact that the five characteristics of transformational leadership—Idealized influence (attributed) = II(a), Idealized influence (behavior) = II(b), Inspirational motivation = IM, Intellectual stimulation = IS, Individualized consideration = IC—have on the three outcomes—Extra effort = EE, Effectiveness = EFF, Satisfaction = SAT. Two correlation analyzes have been conducted. The first correlation analysis, which is based on the self-assessments of the sales executives, yielded the following results (Table 4).

Table 4 Intercorrelations among MLQ factor scores (self-evaluation by sales executives)
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All five characteristics of transformational leadership have a positive correlation with all three sales outcomes. At first this did not seem surprising, because in our normative sample the five characteristics of transformational leadership had a positive correlation with all three outcomes, as well. On closer inspection, however, we discovered an interesting and important difference between the correlations in sales and the cross-functional comparison group: the five characteristics of transformational leadership influenced the outcomes in sales to a different extent than in the general comparison group.

These findings should be considered by sales executives, if they would like to improve certain outcomes of their sales force in particular by adapting their transformational leadership style. According to the results of the cross-functional correlation analysis, the two characteristics of idealized influence (attributed) as well as inspirational motivation had the greatest impact on the extra effort outcome with positive correlations of 0.54 and 0.55, respectively (Avolio and Bass 2004). Even when our correlation analysis showed the same correlation value (0.55) for inspirational motivation and extra effort in sales, the correlation matrix showed that this is only the fourth most powerful factor influencing sales. With 0.77, idealized influence (behavior) had the strongest impact on extra effort in sales. This correlation is followed closely by idealized influence (attributed) (0.74) and intellectual stimulation (0.72).

In addition, when we measure correlations with effectiveness, the cross-functional correlation analysis has made it apparent that idealized influence (attributed) (with a positive correlation of 0.51) and inspirational motivation (with a correlation of 0.49) had the strongest influence on this outcome (Avolio and Bass 2004). According to the results of our survey of sales executives, we found intellectual stimulation (0.68) had the strongest correlation with effectiveness in sales. Idealized influence (attributed) has the second highest correlation value for sales executives with 0.67. According to the findings, inspirational motivation and individualized consideration have a weaker impact on effectiveness in sales than in the cross-functional peer group. At this point, however, we would like to point out that the level of significance for these correlations is 0.11 for inspirational motivation and 0.56 for individualized consideration.

The satisfaction outcome is usually most strongly correlated with idealized influence (attributed) and inspirational motivation. The correlational coefficient for both characteristics is 0.49 (Avolio and Bass 2004). For sales executives, we observed that the characteristics idealized influence (behavior) and intellectual stimulation have the two strongest correlations with satisfaction in sales. They each had a value of 0.70. The values of the correlation of idealized influence (attributed) and inspirational motivation with satisfaction in sales were much smaller than the other two characteristics as measured by the magnitude of their effect. However, the correlation values themselves (0.67 and 0.53) were higher than the ones observed for the cross-functional executives.

When we consider more carefully the overall picture of the correlation analyses, which are based on the self-assessments of the sales executives, then it can clearly be seen that all of the characteristics that are related to transformational leadership that have a significance level of p < 0.01 have a stronger correlation with outcomes in sales than they do with the cross-functional executives. This means that the use of the transformational leadership style has become more effective for increasing sales than it was in the past.

The second correlation analysis is based on a survey of sales agents and their assessments of their superiors. The analysis yielded the following correlation values (Table 5).

Table 5 Intercorrelations among MLQ factor scores (evaluation by sales agents—lower level)
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The correlation matrix that is based on surveys of sales agents shows that all five characteristics of transformational leadership also have a positive correlation with all three outcomes in sales, which is also true for the cross-functional comparison group. According to the cross-functional comparison group, idealized influence (attributed) has the strongest influence on all three outcomes: extra effort (0.68), effectiveness (0.70), and satisfaction (0.73). All correlation values that are related to these factors are greater than 0.50 (Avolio and Bass 2004). From this it can easily be seen that a transformational leadership style not only has a positive effect on outcomes: it has a tremendously positive effect.

Based on the data provided by sales agents, we have shown that for the values that have a significance level of p < 0.01 transformational leadership has a similar strong influence on outcomes in sales. Idealized influence (behavior) with a correlation coefficient of 0.71 closely followed by idealized influence (attributed) with a value of 0.65 have the strongest impact on extra effort in sales. Effectiveness in sales correlates most strongly with the following three characteristics: inspirational motivation (0.82), idealized influence (behavior) (0.79), and idealized influence (attributed) (0.66). The highest correlation values with respect to satisfaction in sales were achieved by idealized influence (attributed) and idealized influence (behavior), which each had 0.54. Here it should be noted that the level of significance for this two correlation values was p < 0.05.

Our research results are consistent with other existing researches done in the field that are based on data from other countries. Thus, Shannahan et al. (2013) proved that the sales performance is highest when salespeople are under transformational leadership (Shannahan et al. 2013). Also, Schwepker and Good (2010) demonstrated that transformational leadership has direct effects on the trust of the salesperson in the manager and his/her overall performance (Schwepker and Good 2010). Based on all these interpretations of the correlation values that relate to our hypotheses from the perspectives of both sales executives as well as sales agents, we conclude that all of the hypotheses stated initially have been proved (Table 6).

Table 6 Overview of the hypotheses
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5 Conclusion

The paper brings new insights in the better understanding of the preferences, attitudes, and behaviors characteristics for sales executives and agents in key dimensions of his/her leadership style. Our research results prove that the application of a transformational leadership style has a positive effect on the performance of the sales force. According to the self-assessments of sales executives, the application of transformational leadership techniques has an even greater effect on the performance of the sales force than what is commonly observed in other areas. The rating results provided by sales agents showed that transformational leadership techniques had a comparatively strong effect on the sales force. In some cases the effect was quite massive. We would recommend on the basis of the results of this paper that sales executives should incorporate transformational leadership techniques into their current leadership style, since these will allow for improving the performance of their sales force.