21 
            
                          CHAPTER 2 
                       LITERATURE REVIEW 
            
            
           2.1 Leadership Style 
            
              According to Northouse (2013), leadership is the process that happens when 
           an individual influences a group of individuals to attain a typical goal. Moreover, 
           leadership could also be defined as intensifying the human potential (Bijur, 2000). 
           There are a lot of ways to define leadership styles. Leadership style could logically 
           refer to the behaviour of a leader of more than one person. The behavior, personality 
           and the way of leading the group or team, is called leadership style. Although, there is 
           no persistence in defining a leadership performance (Yuki, 2006). 
            
              Leaders today are trying to conceive a more efficient, innovative, creative and 
           self-managing high engagement culture (Anderson & Adams, 2016). Leaders with the 
           perfect behaviour and personality to guide their subordinates will make a positive 
           impact and will help a company to gain its future benefit. Leadership could be defined 
           as a functional tool of getting to know yourself, having a well communicated vision, 
           to  build  your  colleague’s  trusts  and  effectively  take  action  to  acknowledge  your 
           potential of being a leader (Bennis, 2003).  It is also known that the role of leadership 
           is very crucial in developing an organization’s culture and enthusiasm (Alghazo & Al-
           Anazi, 2016). In the past few years, leadership does really make a great impact on 
           companies’ future well-being. 
            
              Several studies have found the simple way to study and define the styles of 
           leadership. Back in 1939, Kurt Lewin and his colleagues developed a theory to define 
           different styles of leadership and they are Autocratic, Democratic, and Laissez-Faire 
           (Lewin et al., 1939). Each of the leadership styles conducted, have made it easier for 
           people to study and identify the behavior of leaders. On the other hand, in the late 
           1990s, there’s a similar study about the behavior of a leader that also classify the 
           leadership styles into two parts. The study by Bernard Bass have shown another way 
           to classify leadership styles, they are Transactional and Transformational leadership 
           styles (Bass, 1998). 
            
                                               22 
            
            
           This study will focus on 5 main leadership styles. They are Autocratic and Democratic 
           from Lewin’s (1939), along with Transformational and Transactional by Bass’ (1998). 
            
           2.1.1 Autocratic Leadership Style 
            
              According to Khan, et al. (2015), an autocratic style of leadership means that 
           the manager is taking as much control as possible of the process in making decisions. 
           Likewise, autocratic leadership style explains that the leader is more involved in 
           making decisions in order to achieve the goal of the team or organization. Therefore, 
           the leader’s behavior in this type of leadership tends to be more dominant and powerful 
           in the process of decision making. Authoritarian leaders tend to be more centralized 
           and do not rarely comfort the subordinates’ personal opinions nor suggestions. The 
           hierarchy level is more bold between the leader and followers. The leaders of this type 
           almost never include the team members to participate in making decisions (Hayers, 
           2000). Hayers (2000) also found that most workers who often feel stress at work is 
           under the leadership of an autocratic leader. However, speaking of the productivity 
           and efficiency, autocratic leadership style is doing well for the organizational goal. 
           Autocratic style improves productivity and also faster when it comes to making a 
           decision. It saves more time because the leader doesn’t have to consider the workers’ 
           ideas and opinions that will usually spend more time in order to find the perfect one 
           among all. Locke and Latham (2000) stated that according to the goal-setting theory, 
           when the goal is set for the employees more specifically, higher level of performance 
           will most likely be reached. This type of leadership will be perfect if the leader knows 
           how to assess kinds of problem and is actually good at the job. Nevertheless, Smith 
           and Peterson (1988) thinks that the effective way of leadership still depends on the 
           criteria used when assessing leadership. 
            
            
            
            
            
            
            
            
                                               23 
            
            
           2.1.2 Democratic Style 
            
              The democratic style could be considered as a  more participative way of 
           leading the team members or subordinates. According to Gastil (1994) democratic 
           leaders tend to have more faith in group participation and the rule of majority in 
           making decisions. Despite the fact that democratic leaders will also make the final 
           decision, they will still allow their subordinates’ contributions into the process of 
           making the final decision. This type of leadership is giving more freedom to the 
           employees in order to develop their skills and ideas to actually make real decisions for 
           the organization. This kind of behaviour will increase the subordinates’ attention and 
           appreciation. Therefore, the subordinates will most likely be more content with how 
           the leader involves them in making such important decisions. From the point of view 
           of the subordinates, this type of leadership is likely to be most suitable for them. They 
           feel more appreciated and they know that their opinions matter in determining the 
           outcome of the company based on the decision made together. Another characteristic 
           of democratic leaders, they tend to believe and encourage their employees’ capabilities 
           and skills (Sharma & Singh, 2013). 
            
           In terms of outcomes, democratic leadership style has a lot positivity in its aftermath. 
           The democratic leadership style is related to the increase of productivity, satisfaction, 
           involvement and the commitment of the followers (Hackman & Johnson, 1996). Such 
           increase in a lot of aspects will be the competitive advantage for democratic leadership 
           styles compared to other leadership styles. Also, a study made by Ojokuku, et al (2012) 
           found that democratic leadership has a positive outcome for the performance that are 
           recommended to banks especially in these days’ competitive global environment. It 
           means that this kind of leadership is recommended for banks which is a financial 
           institution. Whereas, in this report FinTech is also considered as part of financial 
           services. 
            
           2.1.3 Transformational Leadership 
            
              First introduced by Burns (1978),  transformational leadership was introduced 
           as a concept in his descriptive research. The term transformational leadership is now 
            
                                               24 
            
           used in organizational psychology. Transformational leadership is a theory which 
           focus more on the motivation and value in the way of leaders approach and influence 
           their followers (Levine, 2000). Transformational leadership is the way of approaching 
           followers by making a change into the system and the individuals. More specifically, 
           transformational  leadership  will  create  positive  change  to  the  subordinates  and 
           influence them to become leaders as well. 
            
              Bernard  M.  Bass,  the  researcher  continues  Burns’  (1978)  work  of 
           transformational and transactional; Bass help developed Burns’ (1978) theory in order 
           to make the measurement of transformational leadership as well as the impact to its 
           employee’s motivation and performance. The employees under the leadership of a 
           transformational leadership will most likely sense more trust and loyalty, also tend to 
           admire the leader’s transformational qualities. Therefore, this type of leadership will 
           also help the followers to develop themselves into becoming a successful leader in the 
           future as well. Therefore it is the leader’s job to be great individuals since they will 
           play  a  big  role  in  their  followers’  point  of  view.  The  followers  tend  to  set 
           transformational leaders as their role model. The encouragement of transformational 
           leaders is going to make a great impact for their followers’ self-esteem in hoping that 
           they  could  become  better  in  the  future.  Anderson  and  Adams  (2016)  refer  that 
           transformational leaders are expected to have visions that can encourage people’s 
           imagination and gives inspiration through meaningful work when engaging with the 
           employees,  in  order  to  set  the  bar  for  the  way  to  treat  and  value  people. 
           Transformational leadership style main focus is to influence the subordinates to think 
           and act like the leaders, or even better. As a result, the employees are expected to grow 
           internally and externally. Therefore, as the employees develop, the company will gain 
           benefit  from  the  development  of  the  employees  as  well.  Nevertheless,  the  most 
           important part for leaders with this type is to stay committed. In order to have a 
           maximum outcome out of this leadership behavior, the leaders must be as committed 
           to  their  own  personal  development  before  transferring  the  knowledge  and 
           encouragement to the employees or subordinates.