The Impact of Leadership and Management on Organizational Performance

Research Title:

The Impact of Leadership and Management on Organizational Performance: A Study of Manufacturing Companies in Lagos State

Abstract

 

Small and Medium-scale Enterprises (SMEs) are the mainstay of Nigeria’s economy. Despite the agelong dependence on proceeds from the oil and gas sector, SMEs provide a feasible alternative to the nation’s economic diversification objectives buoyed by continuous fluctuations in global oil prices. However, manufacturing industries in Nigeria contribute over 60% of total SME earnings per year—with huge untapped potentials—and GDP contributions that have been fairly consistent in the last decade. This study examines the impact of poor leadership on employees’ personal and professional development and how this relationship affects organizational performance among industries in the manufacturing sector in Nigeria (Jordan et al., 2019). Data used in this study will be collected via semi-structured questionnaires distributed among 670 research participants who are employees of 10 manufacturing companies, including BAGCO Group, Unilever Nigeria, Nampak Metals, Lafarge Cement WAPCO Nigeria Plc and Dangote Group, among others, located in Lagos State, Nigeria. Responses from the participants will be analysed using a mix of product moment correlation, descriptive statistics, regression analysis, and Z-test (with approximations from independent samples t-test). Results from the study show a statistically-proven relationship between leadership/management failure and neglect of employees’ personal and professional growth. Implication for this study include the need for regular training programs to improve employee productivity.

Introduction

The manufacturing sector in Nigeria is evolving as a crucial subsector that fosters economic growth (Bamidele., 2019). It is a key factor in the successful transformation of global economies (Afolabi., 2018). As a tool for modernization and economic development, it provides employment opportunities to Nigerians and foreign expats—with positive spill-over effects on different sectors of the economy—but there is scarcity of information on how industry managers view employee training and whether poor leadership is responsible for the failure of SMEs in the manufacturing sector (Audretsch et al., 2015a; Ham et al., 2019). This study therefore focuses on selected manufacturing firms in Lagos.

The Lagos State Chamber of Commerce and Industry has grown impressively since its formation with only 14 members in 1888. The non-profit making organization was established to promote and protect trade relations within Nigeria’s business environment as well as to provide a platform where matters affecting the business community (in Lagos metropolis, Lagos Port Complex and Lagos State) can be deliberated and opinions expressed (Alvarez & Barney., 2014).  According to a 2019 report from the Chamber, there are over 2,000 fully-registered members making significant contributions in the economic growth of Lagos State in particular and Nigeria in general. The organization’s vision is to provide a model that supports delivery of quality services and sound business ethics among players in the industry. But how companies in the manufacturing sector have adopted good corporate culture that promotes employee training—for personal and professional growth—is a matter of serious concern due to the implications of poor leadership to business management (Amirkhani & Reza., 2015).

According to a 2019 report from the Nigerian Bureau of Statistics (NBS), GDP contribution from the manufacturing sector increased to ₦1,616,584.66m in the third quarter (Q3) of 2019 from ₦1,537,522.17m in the second quarter (Q2) of 2019. The average GDP performance of manufacturing firms in Nigeria between 2010 and 2019 is ₦1,421,794.24m, with an all-time high of ₦1,718,985.30m documented in Q3 2014. The lowest GDP contribution totalling ₦875,408.17m in Q1 2010.

Figure 1: GDP Contributions from the Nigerian Manufacturing Sector

Source: NBS (2019)

Capacity utilization in the manufacturing sector currently stands above 55% and there is ample room for development. Unfortunately, oil and gas companies still get the bulk of foreign direct investment (FDI) and managers in the manufacturing sector attribute neglect of employee training to poor funding (Gnizy., 2019). Moreover, the Nigerian Investment Promotion Commission Act of 1995 allows foreign ownership of companies in every sector of the economy except oil and gas—a privilege which has been criticized for favouring foreign expats, with insufficient investment on training programs for indigenous workers. These factors will be analysed in this study using reliable analytical frameworks.

 

Justification (Academic and Applied)

The Nigerian government adopts limited interference in private sector business, for example, through company ownership. But there are regulations and incentives that encourage entrepreneurship such as tax havens which benefit companies producing for local consumption and exports. The Central Bank of Nigeria (CBN), thus, provides foreign companies with better exchange rate when the owners are injecting new equity into their production projects—particularly those sourcing for raw materials within the country, others implementing programs that support food production (Adeyemo et al., 2010), or the machine tools-producing companies which have multiplier effects Adepoju & Oyewole., 2013). Other incentives include agricultural credit schemes and free access to capital loans from the Bank of Industry (BOI), CBN etc. These efforts from the government aim at increasing productivity levels with direct influence on GDP growth. This objective, however, depends solely on employees’ level of competence, commitment to organizational goals, and inclusion in the decision-making process—and of which are considered “dependent variables” in this study (Aparicio., 2016). Unfortunately, most managers in the manufacturing sector are ignorant of the central role of employee training for personal and professional growth—as an independent variable—and this is a major reason for leadership failure among SMEs (Audretsch et al., 2015a).

Further, on the academic justification for this study, employee training is every manager’s job and an obligation that should not be neglected (Bell et al., 2017). This research will therefore explore to an extent the leadership failure in promoting employees personal and professional development (Appiah-Adu & Amoako., 2016). In essence, the training needs analysis of manufacturing companies in Lagos State, Nigeria will be investigated, with focus on how managers handle internal business processes, communication channels with customers and stakeholders, as well as maximize opportunities from the external environment such as governmental business support (Asante & Affum-Osei., 2019). This will add to the existing pool of academic knowledge and enhance understanding of the factors responsible for leadership failures and neglect of employee training among manufacturing companies in Nigeria. Practically, the research will expose areas of interest in the external environment where managers should look for help in order to understand constraining factors to innovative leadership (Audretsch et al., 2015a). Findings from the research will examine whether formal training is the most reliable learning method for developing new skills required in professional and personal development—in contrast to the traditional culture of profit-making embraced by SME owners as the only approach to business sustainability (Anthony., 2019).

Aim of the Research

The aim of this study is to investigate leadership/management failure within manufacturing companies in Lagos State, Nigeria.

 

Objectives of the Research

The objectives of this research are:

  1. To review existing literature on the effects of leadership and management in organizational growth.
  2. To ascertain the current business environment in Lagos State manufacturing sector.
  3. To examine the achievements and challenges of leadership in Lagos State manufacturing sector.
  4. To analyse contributions of the manufacturing sector to Nigeria’s economic development.
  5. What are the opportunities for growth are available to Nigeria’s manufacturing sector?
  6. To proffer effective solutions to problems hampering growth of the manufacturing sector in Lagos State.

 

Research Questions

Based on the aim and objectives outlined above, the main research question is: “How does leadership influence organizational performance?”

Having stated the main research question, other sub-questioned linked to the study are:

  1. How does management/leadership influence organizational performance?
  2. What is the current situation of Lagos State manufacturing sector?
  • What are the achievements and challenges of leadership in Lagos State manufacturing sector?
  1. What is the role of manufacturing industries in economic development?
  2. What are the opportunities in local and international manufacturing business?
  3. What are the strategic solutions to transform business in the manufacturing sector?

Delimitation of the Study

This research concentrates on the correlation between poor leadership performance and neglect of employee training among manufacturing firms located in the southwest part of Nigeria, specifically Lagos State. The manufacturing sector was chosen because of its potential, relevance and strategic position in Nigeria’s actualization of the 2030 economic diversification objectives. The study sample is randomly selected from manufacturing companies located in Lagos metropolis only—because, as the commercial hub of Nigeria, Lagos city is saturated with the highest number of top-performing industries. Additionally, over 60 percent of manufacturing companies in Nigeria have their headquarters located in Lagos State. These factors therefore make Lagos the most suitable place for this research.

 

Literature review

Innovative managers understand the consequences of neglecting employee training. Thus, forward-looking organizations always involve workers in the decision-making process, especially on important matters that affect welfare, job security, and effective performance of duties. This new approach to organizational management is in contrast with the traditional “Command and Control” idea which views workers as a tool for creating profits. According to Kingir and Mesci (2010) and Harvey et al (2018), employers must encourage creativity in staff members in order to enforce change of attitude at work and good citizenship behaviours. Conlon (2014) adds that this objective is best achieved with new, improved managerial approaches that encourage investments in human capital development.

Further, Muhumuza and Nangoli (2019) described innovative and successful managers are those who provide the needed direction for their employees to improve productivity levels. Elaborating on the effectiveness of leadership and organizational performance, Asante and Affum-Osei (2019) argued that a lot depends on managers’ ability to engage in the painstaking-but-rewarding challenge of identifying and developing talents. Audretsch et al (2015) agreed on this managerial task of personnel development.

However, findings show that nearly 50% of SME owners in Nigeria neglect the crucial nature of staff development whereas more than 60% survey participants feel that their bosses do not care about their personal and professional growth (Jordan et al., 2019). According to Taiwo and Falohun (2016), this is more so because top management often consider investments in human capital development as a waste of scarce resources (Muhumuza & Nangoli., 2019). This negligence of managerial responsibility leads to loss of motivation and absenteeism which, in turn, decreases workers’ productivity levels (Na-Nan & Sanamthong., 2019). It is, thus, a truism that “employees don’t quit their jobs, they quit their managers” (Audretsch et al., 2015b). Withorn et al (2019) opined that proper on-the-job training attracts and retains talents. Korthagen (2017), however, delved further into employee retention and found that workers’ resignation or low performance hinges on the following:

  • Managers don’t encourage creativity.
  • Manage don’t provide an enabling environment that allows workers to pursue their passions.
  • Jobs are monotonous, with no intellectual challenges that lead to personal development (Jordan et al., 2019).

Accordingly, the researcher suggested that employees must be respected as the most vital part of an organization, noting that those reasons for which they were initially hired should not be taken for granted. Increasing investment on human capacity development therefore motivates workers—and more so when they understand the management’s interest in employees’ personal and professional growth (Parker et al., 2017). Imoughele and Ismaila (2018) agreed that the time and cost of training workers exceed the financial consequence of neglecting developmental training, which is a major managerial responsibility recognized by innovative organizations (Jordan et al., 2019).

Boso et al (2012) noted that professional development is relevant for the workers themselves, for the organizations, and, in a more macro view, also for the countries. Research in the field shows that professional development is directly related to the day-to-day activities of workers and should be part of a broader process of continuous learning, which results both from formal and informal learning actions (Parker et al, 2017; Korthangen, 2017). The debate proposed for this chapter considers that professional development is more directly related to the combination of cognitive, affective, and behavioural processes that involve learning than the specific results of certain formal or informal learning actions (Larsson & Eid., 2012). Thus, the research will utilize the conceptual model and discuss how the relations established with the leadership in the work environment can influence the professional development of the subordinates besides the type of learning provided to the workers. This discussion can shift the focus of research which currently orbit learning modes to leadership practices for skills development and the consequent career progression of subordinates (Bayraktar et al., 2017).

Additionally, beyond understanding what leadership style can be most effective for the professional development of subordinates (Anthony., 2019), it is also important to know how leaders can contribute to improve this development process (Boohene & Agyapong., 2017). Considering that professional development depends essentially on formal and informal actions of learning at work, it is important that the concept of learning and its models and employed, according to Conlon (2014).

Finally, and in addition to formal workplace education, the leaders also can stimulate the informal learning with actions that are non-systematized, spontaneous, and natural (Larsson & Eid., 2012; Muhumuza & Nangoli., 2019)). Literature in the area of learning in organizations supports the theoretical premise that the psychosocial support of peers and bosses to the use of new skills and innovation in individuals’ work routines is an important variable to support natural learning in organizations (Boso et al., 2012; Gentilviso & Aikat., 2019). In this sense, leaders can foster a learning culture as a gradual, cumulative, and ongoing process with structured learning experiences (Parker et al., 2017)

Methodology

A thorough analysis of the relationship between leadership/management failure and organizational growth in Nigeria’s manufacturing sector requires a cross-sectional survey design which entails collating of data from a defined sample population (Bruton et al., 2008). The primary data will be examined using a qualitative approach. According to Bordens and Abbott (2002), use of this survey method is considered appropriate due to its conformity with correlational research approach that enables fail-proof prediction of human behaviour. In addition, this research method is necessary while analysing the relationship between variables (Ham et al., 2019). Responses sought from employees in the manufacturing sector include: leadership styles adopted by managers; benefits of employee training and support; consequences of poor leadership; managerial strategies that improve workers’ performance; the impact of workers’ involvement in the decision-making process etc (Bayraktar et al., 2017).

The population sample for this study comprised of 670 employees in Lagos-based manufacturing companies. Considering that over 45% of about 5,000 manufacturing firms in Nigeria are located in Lagos State, the metropolis is considered a near-perfect representation of manufacturing companies within Nigeria. This is the researcher’s justification for choosing Lagos State.

A semi-structured questionnaire will be distributed to research participants with the help of field research assistants or via email. Manufacturing companies in Lagos city make up the sample frame, which is subset representative of the total participants from where a sample population is drawn. Research correspondents will therefore include senior management executives of all selected companies who may approached and persuaded to provide answers to questions on the questionnaire. On this premise, the researcher is obligated to enlighten potential or interested participants on the purpose of this study. Manufacturing firms and employees who are concerned about their security and/or are apathetic to the research objectives, will have their decisions respected.

A random sampling technique will be adopted to eliminate bias among research participants (Wang & Rezazadeh Azar., 2019).

According to Cowton (1998), the researcher’s use of primary data is justified because it is the quickest, simplest and most reliable of all analytical tools—especially when results are deemed valid and testable and are to be published.

 

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