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The impact of Leadership styles on organization al performance In Oil & Gas sector in Egypt By XXXXXXXXXX Proposal for a DBA thesis Submitted to the “Business Administration Department” Faculty of Commerce Ain Shams University The Main Supervisor XXXXXXXX Date: Saturday, May 18, 2019 The Impact of leadership styles on organization al performance in Oil & Gas sector in Egypt 1. Introduction 1.1 . Background In the global economy of the 21st century, competition is compl ex, challenging and filled with competitive opportunities and threats. In order for any organization to survive, try to achieve its goals & gain high profits, it has to enhance its performance and became superior to it s competitors. Globally, there is an argument about the organization performance, measured from financial aspects & profitability indicators (ROI) , whether the successful performance is grea tly influenced by leadership especial ly in a firm’s senior positions or it is related to the organization environments. The collective research of the past two decades suggests that the successful leadership inspires enthusiasm and commitment, enhancing both employees and organization performance. On one hand , some theorists and many practition ers have argued that leadership especial ly in a firm’s senior positions has an important impact on firm 's perform ance and survival at all levels Based on the idea that chief executive officers (CEOs) wield the dominant power a nd enjoy an exposed position in the board, they have an impact on organizational outcomes depending on their decisions. On the other hand , many researchers refer the successful organization performance to the environment and the circumstances to achieve p redetermined organizational goals. From this consideration, this study is intended to determine whether or n ot the leadership styles (namely the laissez -faire , Transactional & Tra nsformational leadership styles) have an impact on the organization al perfor mance in oil & gas sector inside Egypt and to what extent , contribute to empirical studies on leadership style and business performance. 1.2 . Research importance and justification It's very obvious that Egyptian economy is suffering. One of the main income to egyptian economy is the oil & gas industry beside Suez Canal, tourism & foreign direct investment. There are many Oil & Gas companies in Egypt. Although Oil & Gas industry is booming in Egypt as a result of the new explorations in the Mediterranean sea & red sea, more than 70% of these companies are making loss while the balance 30% are performing either superior or medium performance (According to the data collected from CAPMA S). The aim of this research is to study the companies with superior performance , moderate performance & week performance in oil & gas sector in Egypt then to evaluate the impact of leadership styles (Laissez -faire, Transactional & Transformational leaders hip styles) in each of the three various performance s. If one of these three styles has a significant impact on companies with outstanding performance, then we will work in transferring the skills, traits & roles of this style to the other leaders with low companies performance & enhance their weak performance and enhance the overall oil & gas industry in Egypt & the Egyptian economy as a whole. 1.3 . Problem statement Widely celebrated cases of a direct leadership - performance link may be found in numerous anecdotal accounts of improvements of company performance in all industries attributed to changes in leadership (Nicholls, 1988; Simms, 1997). However, empirical studies into the links between leadership & performance have been lacking (Quick, 1992) . A num ber of researchers theorize that transformational leadership is linked to organizational performance (Howell & Avolio, 1993). Conceptually, it's argued that the visionary & inspirational skills of transformational leaders motivate followers to deliver sup erior performance (Nicholls. 1988; Quick, 1992). In summary, much of the above evidence presented as supporting the claim is either inconclusive or empirical suspect. The limited or inconclusive character of research finding in this area suggests the need to investigate further the nature of relationship between leadership & performance . This study is a step in this direction. I'll carry this study on one of the most important industry which Egyptian economy is counting on which is the oil & gas industry so that if we found significant impact of one of the three studied leadership styles (Laissez -Faire; Transactional & transformational leadership styles) on the organization with outstanding performance then we can use this result in transferring the traits & character of this style to other leaders with different style in order to enhance the performance of oil & gas industry & the overall Egyptian economy. 1.4 Research purpose This study investigated the main effects of leadership styles on organizational pe rformance in oil & gas sector in Egypt. It specifically sought to determine the impact of laissez -faire; transactional & transformational leadership styles on organizational performance in oil & gas sector in Egypt. 1.5 Research Questions The resear ch questions for this study are as follows: "What's the impact of Laissez -Faire leadership style on organizational performance in Oil & Gas sector In Egypt ?" "What's the impact of transactional leadership style on organizational performance in Oil & Gas sector In Egypt ?" "What's the impact of transformational leadership style on organizational performance in Oil & Gas sector In Egypt ?" 1.6 Research Hypothesis H01 : There is no significant impact ofLaissez -Faire leaders hip style on the performance of Oil & Gas sector inEgypt. H11: There is significant impact of Laissez -Faire leadership s tyle on the performance of Oil& Gas sector inside Egypt. H02 : There is no signif icant impact of Transactional leaders hip style on the performance of Oil & Gas sector inEgypt. H1 2: There is significant impact of Transactional leadership s tyle on the performance of Oil& Gas sector inside Egypt H03 : There is no sig nificant impact of Transformational leaders hip style on the performance of Oil & Gas sector inEgypt. H1 3: There is significant impact of Transformational leadership s tyle on the performance of Oil& Gas sector inside Egypt 1.7 Limitations of the study  The study utilized voluntary survey completion and as such a given risk of the study is the part icipation level.  The issue of potential misunderstandings by the population being surveyed. It is possible that the types of questions asked might be interpreted differently by the reader and cause an insufficient analysis of their responses.  The reader may be self biased & would have chosen answers affected by this bias  The survey instruments themselves, the short number of questions, and the time frame utilized might also limit participation a nd potentially even make the studyvulnerable to statistical e rror (Bryman, 2008).  Selection of participants may create predisposition towards certain outcomes (Creswell, 2009)  associates participating in the study may communicate between themselves having a potential impact on the answers and statistical analysis (Creswell, 2009).  The study is not including the Joint venture/ Foreign petroleum companies working in Egypt due to unavailability of the records of these companies at CAPMAS 2. Literature Review 2.1 Introduction In this chapter a literature review of leadership styles is presented. The chapter is focusing on definition of Laissez -faire, Transactional & Transformational leadership styles , Different leadership theories The factors used to measure them according to t his study & the link between leadership styles & organization performance as stated by some researchers in addition to impor tant information about Oil & Gas sector in Egypt 2.2 Leadership in general 2.2.1 Types of leaders 2.1.1.1 . Laissez -Faire Lea ders This type of leaders used to escape from responsibilities and have a fear from taking decisions. they've low communication with their subordinates and never interfere in any problem solving 2.1.1.2 . Transactional Leaders This type of leaders are mainly focu sed on monitoring daily tasks, used to use his power of position to reward or punish his subordinates. Characterized by using the concept of carrot or stick 2.1.1.3 . Transformational Leaders This type of leaders are truly inspirational, used to arouse others to se ek extraordinary performance accomplishments, they are f ocus ing o n the shared vision and used to encourage innovati on & team work 2.2.2 Leadership factors used in this study (From Multifactor Leadership Questionnaire)(Developed by Bass &Avolio) 2.2.2.1 Laissez -Faire Factor Escape from responsibilities & fear of taking decisions 2.2.2.2 Transactional leadership factors Contingent reward: Leader has to inform his subordinates with the roles and results expected from them and then to reward or punish them according to their accomplishments Management by exception (active): Leader is monitoring his subordinates during carrying out their tasks and interfere early if anything is going wrong Management by exception (Passive): Leader didn't identify to his subordinates what he needs from them however he interfere once the problem become serious 2.2.2.3 Tra nsformational leadership factors: Charisma: The leader become role model to his subordinates, he is always guiding them from the front side in additions h e is always showing high concern regarding ethics & used to put the needs of his subordinates over his needs . Inspirational Motivation: The leader used to inspire his subordinates in order to achieve extraordinary results, He is motivating & supporting the m in order to be committed to the organization's goals & shared vision. Intellectual stimulation: The leader is stimulating his subordinates to be creative and to think out of the box 2.2.3 Leadership & organizational performance Many researchers talk abo ut the relationship between leadership & organizational performance and prove the direct link between them . For example Fiedler (1996) stated that effectiveness & capabilities of leaders considered the main reasons for the success of any organizations and vice -versa.( Hennessey, 1998) stated that the only way to withstand the ambiguity and continuous change in the environment is by training the leaders and improving their skills & capabilities. (Nicholls, 1998; Simms, 1997)related the success of any organi zation to the effectiveness of their leaders. Although all of these opinions, still the empirical studies into the link between leadership & performance have been lacking (Quick, 1992) in addition the study of the impact of leadership styles on organizatio n performance in oil & gas companies in Egypt is very rare and needed to be investigated. This study is a step toward this direction. 2.3 Managing Organizational Performance 2.3.1 The Essence of Performance Organizational performance is defined as “the ability to acquire resources necess ary for organizational survival and it is dependent on many variables, including the nature of the leader’s strategic choices, and the nature of the strategy implementation process. there was an inherent traditional practice a mongst firms to interchange the term “organizational performance” with “financial performance”. “financial performance” also refers to the “profitability” of an organization . Marx et al.(1999) advise that “profitability” is determined when a firm uses its productive assets to generate revenue that eventually exceeds its costs. organizational performance outcomes, which could either be stated quantitatively (namely: sales; profitability; return oninvestment [ROI], and other financial indicators) or describe d qualitatively(namely: efficiency; labor productivity; response times; customer satisfaction;innovation; employee satisfaction; and organizational culture). 2.3.2 Return on investment( ROI ) Simply it is the amount of cents gain for each dollar invested .ROI is defined as operating income divided by average operating assets At present, ROI has been widely recognized and accepted in business and financial management in the private and public sectors as a performance indicator 2.4 Petroleum Sector in Egypt Egypt is the largest non -OPEC oil producer in Africa and the second -largest dry natural gas producer on the continent. The country also serves as a major transit route for oil shipped from the Gulf to Europe and the United States. Egypt is the largest oil producer in Africa outside of the Organization of the Petroleum Exporting Countries (OPEC), and the second -largest natural gas producer on the continent, behind Algeria . Egypt plays a vital role in international energy markets through the operation of the Suez Canal and Suez - Mediterranean (SUMED) Pipeline. The Suez Canal is an important transit route for oil and liquefied natural gas (LNG) sh ipments traveling northbound from the Persian Gulf to Europe and North America and southbound shipments from North Africa and countries along the Mediterranean Sea to Asia. The SUMED Pipeline is the only alternative route nearby to transport crude oil from the Red Sea to the Mediterranean Sea if ships were unable to navigate through the Suez Canal. Fees collected from the operation of these two transit points are significant sources of revenue for the Egyptian government. In Africa, Egypt has the third -larg est population, after Nigeria and Ethiopia, and the second -highest gross national income (GNI), after Nigeria, according to the World Bank. Egypt’s economy suffered d uring and after the 2011 revolution as the country experienced a sharp decline in tourism revenue and foreign direct investment, according to the International Monetary Fund (IMF). Annual gross domestic product (GDP) growth in Egypt dropped from 5.1% in 20 10 to 1.8% in 2011 and still remains below the pre - revolution level, averaging 2.1% in 2013. According to the IMF, financial support, particularly in the form of oil and LNG shipments, from some Persian Gulf countries has helped Egypt to meet its domestic energy demand. Egypt’s economy has not fully recovered since the 2011 revolution. The government continues to fund energy subsidies, which cost the government $26 billion in 2012, and this has contributed to the country’s high budget deficit and the inabil ity of the Egyptian General Petroleum Corporation (EGPC), the country’s national oil company, to pay off its debt to foreign operators. EGPC owes foreign oil and gas operators billions of dollars, which has led foreign operators to delay their investments in existing and new oil and natural gas projects. EGPC accumulated $6.3 billion in outstanding arrears to foreign oil and gas companies, of which $1.5 billion was paid back in December 2013. The debt has since increased back to $7.5 billion as of June 2014 and continues to grow. In 2000 The ministry of petroleum adopted an integrated strategy, the most important mechanism to implement it is to develop and amend the structure of the Egyptian petroleum sector through separating the activities of the natural gas and petrochemicals from the activities of the Egyptian General Petroleum Corporation, and establishing a strong entity for each of them, in addition to focusing the attention on Upper Egypt through establishing an independent entity. After adding the activities of the mineral resources to the duties of the ministry of petroleum and establishing the Mineral Resources Authority on the 14th of October 2004, the petroleum sector now consists of five strong entities cooperating and integrating to make the be st use of petroleum and mineral resources wealth. They are:  The Egyptian General Petroleum Corporation “EGPC”  The Egyptian Natural Gas Holding Company “EGAS”  The Egyptian Petrochemicals Holding Company “ECHAM”  Ganoub El -Wadi Holding Company “GANOPE”  The Egyptian Mineral Resources Authority. “EMRA” 3. Research Methodology This chapter included a discussion on the appropriateness of the research design, based on the hypothesis sel ected. In addition it'll discuss the data collection and the a nalysis procedures used , a review of the instruments selected as well as potential limita tions of this study. 3.1 Conceptual Framework and hypotheses development When data is collected, it will be used to test the following hypothesis. Hypotheses H01 : There is no significant impact of Laissez -Faire leaders hip styles on the performance of Oil & Gas sector inEgypt. H11: There is significant impact of Laissez -Faire leadership s tyles on the performance of Oil& Gas sector inside Egypt. Egyptian Ministry of Petroleum EGPC EGAS ECHAM GANOPE EMRA H02 : There is no signif icant impact of Transactional leaders hip styles on the performance of Oil & Gas sector inEgypt. H1 2: There is significant impact of Transactional leadership s tyles on the performance of Oil& Gas sector inside Egypt H03 : There is no sig nificant impact of Transfo rmational leaders hip styles on the performance of Oil & Gas sector inEgypt. H1 3: There is sig nificant impact of Transformational leadership styles on the performance of Oil& Gas sector inside Egypt 3.2 Instruments Selected for This Study The instrument used in this study was the Multifactor Leadership Questionnaire (MLQ). The MLQ was originally developed by Bass (1985) as a seven factor model for transactional and transformational leadership the short form is a validated instrument with 45 items commonly used to gather leader feedback in identifying their leadership behaviors which provides a confirmatory factor on the presence of transfo rmational leadership. The instrumen t utilized in this study is a 45 item s survey utilizing a 5 -point Likert scale, rang ing from 5 (frequently) to 1 (not at all). Because of its longevity of use, it is a proven instrument in successful assessment of transformational leadership (Waggoner, 2009).The instrument has proven both reliable and valid as a leadership assessment instrument for leader -managers in widely diverse settings, measuring the components of transformational leadership in nearly 300 research projects (Bass &Avolio, 2000). Reliability scores for the total items and for each leadership factor scale ranged from .74 to .94. Bass and Avolio (2000) have defined a full range of leadership behaviors and leadership outcomes measured by the MLQ. The scales across all leadership dimensions have reliabilities that are generally high, exceeding cut offs recommended in lite rature(Bass &Avolio, 2000). There are two forms of the MLQ, a rater form and a leader form. This research will use the leader form to assess their own leadership style. The MLQ Form 5X is a self -reporting questionnaire consisting of 45 questions which addre sses how often the leader displays a spectrum of leadership behaviors(Gardner & Stough, 2002). Five sub -scales consisting of four items each assess thecharacteristics of transformational leadership including idealized influence attributes,idealized influen ce behaviors, inspirational motivation, intellectual stimulation, and individual consideration. Three sub -scales of four items each measure the transactionalleadership components of contingent rewards, active management by exception, and passive management by exception (Avolio& Bass , 1995: Howell &Avolio, 1993). TheMLQ 5X also measures laissez -faire leadership with four items. The rest of the items rated are extra effort, perceived leader effectiveness, and employee satisfaction with the leader . 3.2 Research Design We use the multifactor leadership questionnaire to measure t he practical impact of Laissez -Faire, Transactional & Transformational leadership styles on various oil & gas companies performance. Every question must have a meaning related to the hypothesis . The questionnaire will cover 45 questions will help us to analyze the impact of the three leaders hip styles on organization performance 3.3 Population and Sampling A stratified random sample will be considered for collecting the data. The study w ill be applied on Oil & Gas sector. Three strata will be considered according to the level of financial performance in Oil & Gas sector which are listed as high, moderate & l ow financial performance according to the formal data received from CAPMAS 3.4 Data C ollection Primary data will be collected through answering a questionnaire that will be spread among 9 Oil & Gas companies with different performance according to the data collected from CAPMAS (3 companies with high financial performance, 3 companies wit h moderate financial performance & finally 3 companies with low financial performance). The questionnaire will be answered by middle & senior managers in each of these companies order to evaluat e their organization's leadership style an d the degree this st yle impacted the organization performance 3.5 Research Variables Dependent Variable: Organizational performance Independent variable: Laissez -faire Leadership style; Transactional leadership style & Transformational leadership style ( see below figure ) 3.6 Data Analysis We'll analyze the collected data using Statistical package for social science (SPSS) . SPSS provided the descriptive and inferential statistical analysis applications. This analysis included data conversion and descriptive statistical analysis including maximums, minimums, means, and standard deviation for each group of data. The focus of the research hypothesis was the correlation between the listed variables of interest where the independent variables will be the 3 leader ship styles while the dependent variable will be the organizational performance. W e'll check whether the proposed model which indicate the impact of the independent variable (The three leadership styles ) on the dependent variable (Organization performance) will be significant or not using the following 3 measures: a. ANOVA test b. T-test c. Coefficient of determination Preliminary References  Avolio, B.J. and Bass, B.M.(2004),Multifactor Leadership Questionnaire: Manual & Sampler set, 3rd Ed., Mind Garden, Redwood City, CA.  Bass, B.M. (1985) Leadership & performance beyond expectation. New York: The free press  Fiedler, F.E.(1996). Research on leadership selection & training: One view of future, administrati ve science quarterly  Hennessey, J.T .(1998). Reinvent ing government: Does leadership make the difference?, Public administration review  Vroom,V.and Yetton,P.(1974). Leadership & Decision making. Pittsburgh, PA: University of Pittsburgh Press