Introduction

Leadership is essentially the core and spirit of organizations. As the people in charge, they not
only manage the organization's affairs but also deal with the general employees face to face.
Entrusted with the task to communicate organizational goals, visions and ideas to employees,
leaders are responsible for maintaining and implementing organizational rules and systems and
even have the final say on promotion, retention and dismissal. Therefore, in a sense, leaders at all
levels are spokespersons of their own organizations, serving as the bridge and link connecting
employees
Leadership and organizational culture are widely believed to be linked in the process of change.
As Kotter (1998) stated, Only through leadership can one truly develop and nurture culture that
is adaptive to change (p. 166). Ostroff, Kinicki, and Tamkins (2003) identified leadership as an
emergent process that acts on both organizational climate and culture. Similarly, Denison (1990)
claimed that management behaviors reinforce principles of the culture. Organizational culture
has been conceptualized as a mediator of the relationship between transformational leadership
and organizational innovation (Prather & Turrell, 2002) and performance (Xenikou & Simosi,
2006). Nonetheless, although empirical research supports the proposition that transformational
leadership and organizational innovation are related (Waldman & Bass, 1991), the inclusion of
organizational culture as an intervening variable has yet to be examined comprehensively. And
although Ogbonna and Harris (2000, p. 780) found a link between participative leadership and
innovative culture as a predictor of organizational performance, this leadership approach was not
fully sympathetic with existing models of transformational leadership
Organizational leadership is concerned primarily with the immediate and day-to-day priorities of
dealing with the primary stakeholders. Leaders of organizations usually spend their time dealing
with issues affecting customers, employees, stockholders, vendors, government regulators, and
interest groups that interact with the firm through the market system. Those individuals who deal
effectively with these groups are considered successful leaders, managers, and administrators.
Their organizations usually get high ranking by those who examine their performance.
Banking Sector in Oman
The OMAN banking system is unique from other banking systems within the Arab and non-Arab
world. First, it is highly congested. For a relatively small population of approximately three
million, the OMAN tends to have a large number of banks as well as bank branches. Currently
the OMAN has 49 national and foreign banks.
The banking sector in many countries has undergone considerable development and is now a
mature industry with established styles of management and leadership. This is not the case with
banking in the OMAN, which is relatively young compared to other countries. Nonetheless, the
banking sector is well capitalized and profitable. The financial sector in the OMAN in general is
underlined by a solid legal framework and judicial system.
The government actively encouraged the growth in the banking sector after the discovery of oil.
Prior to the discovery of oil, in 1960, there was only one foreign and no local bank in the

OMAN. Despite attempts by the Muscat government to encourage other foreign banks, none
were willing to enter the market (Mahate et al., 2004). However, the discovery of oil changed
this and the main shift towards the growth of banking took place after the first OPEC price rise in
1967. The large oil revenues allowed the government of Muscat and some of the other emirates
to establish local banks in order to recycle surplus funds. Therefore, it is no surprise that except
for two, all local banks have direct or indirect government shareholdings. The governmental
shareholding of local banks has not hindered the entrance of foreign banks into the market, even
though the latter are limited to only eight branches. The main factor leading to the growth of
foreign banks has been the need to service the high number of expatriates as well as the ability to
earn high profits.

Bank Muscat Background

Bank Muscat is the leading financial services provider in the Sultanate of Oman. The Bank has
the largest network of 142 branches, 431 ATMs, 1667 CDMs and more than 9,273 PoS terminals.
The international operations consist of a branch each in Riyadh (Kingdom of Saudi Arabia),
Kuwait and a Representative Office each in Dubai (OMAN) and Singapore. Bank Muscat holds
the rare distinction of being voted the Best Bank in Oman for seven years by The Banker, FT
London; nine years in a row by Global Finance and Euro money. It is proud to have led the way
in contributing to sustainable development in Oman with various initiatives. The bank, through
its Human Resources Management department, has given the master craftsmans touch by taking
meticulous care that goes into molding the finest Omani talents. The banks achievements in the
development of human resources have been consistently recognized locally and internationally.
This bank was honored for national manpower initiatives and won 'Best Place to Work' Award in
the Middle East, continues to fulfill the national vision of employing Omanis in the private
sector. One of this Bank Mission is to equip Banks Human Resource with the competencies that
enable them to achieve the Banks business objectives by continuously improving customer
service and productivity.

Transformational Leadership
The original formulation of transformational leadership theory comes from Burns (1978). At the
core of transformational leadership is the concept of transformation, or change of the

organization. Tichy and Devanna (1986) noted that companies were being asked to make
fundamental changes. Transformational leadership best reflects this change (Bass, 1985). Burns
(1978) defined transformational leadership as a process in which "leaders and followers raise one
another to higher levels of morality and motivation". A chief element of transformation is the
ability to cultivate the needs of the follower in a follower centered (person-centered) manner.
According to Burns, focusing on needs makes leaders accountable to the follower. First, Burns
contended that followers are driven by a moral need, the need to champion a cause, or the need
to take a higher moral stance on an issue. People like to feel that a higher organizational spiritual
mission guides their motives. The second need is a paradoxical drive for consistency and
conflict. Transforming leaders must help followers make sense out of inconsistency. Conflict is
necessary to create alternatives and to make change possible. The process of transformation is
founded on empathy, understanding, insight, and consideration; not manipulation, power
wielding, or coercion. Tichy and Devanna (1986) defined transformation best, "Transformational
leadership is about change, innovation, and entrepreneurship"
Burns (1978) described the transformational leader as one who encourages subordinates to put in
extra effort and to go beyond what they (subordinates) expected before. The subordinates of
transformational leaders feel trust, admire, loyal and respect towards leaders and are motivated to
perform extra-role behaviors (Conger et al., 2000). Barling et al. (1996) asserted that
transformational leadership styles affect higher task performance. While Conger et al. (2000)
claimed that transformational leadership behaviors are associated with subordinates' satisfaction.
Transformational leaders achieve the greatest performance from subordinates since they are able
to inspire their subordinates to raise their capabilities towards success and develop subordinates
innovative problemsolving skills (Bass, 1985; Yammarino and Bass, 1990). Jung et al. (2003)
found significant relationships between this style and innovative-supporting organisational
climate. Moreover, Shin and Zhou (2003) also reported positive relationship with followers level
of creativity.

Transformational Leadership Organization

Organizational leadership research has evolved from the trait, behavioral, and contingency
approaches to neocharismatic theories of leadership (House & Aditya, 1997). Three most widely

recognized neocharismatic theories are the theory of charismatic leadership (House, 1977), the
strategic theory of charismatic leadership (Conger & Kanungo, 1987), and the full range theory
of leadership (Bass, 1985). The full range theory of leadership identifies two styles of
leadership: transformational and transactional. Transactional leaders are seen as ones who use
either contingent rewards as positive reinforcement when the standards reached or managementby-exception as punishment or negative feedback after problems occur. Transformational
leaders, in turn, are able to influence their followers to transcend self-interest and release their
full potential for performance toward the goals of their organization (Bass, 1985).
As stated above, the leaders of organizations help define and shape work contexts that contribute
to organizational innovation (Amabile, 1998), and there is evidence that individual leadership
style is an important determinant of innovation (Dess & Picken, 2000). In particular,
transformational leadership has been shown to support and promote innovation, which in turn
can ensure the long-term survival of an organization (Ancona & Caldwell, 1987). Zahra (1999)
stated that participation in the emerging global economy requiresin fact, demands
innovation and entrepreneurial risk taking (p. 38). Participative leadership is associated with
cultures of innovation and high-performing companies (Ogbonna & Harris, 2000).
Transformational leadership refers to behaviors of leaders who motivate followers to perform
and identify with organizational goals and interests and who have the capacity to motivate
employees beyond expected levels of work performance. As a result, employees feel engaged
and personally rewarded through work, and work outcomes such as satisfaction and extra effort
are enhanced (Sosik, Kahai, & Avolio, 1998).
Transformational leadership, as examined in this article, uses the six factors proposed by
Podsakoff, MacKenzie, Moorman, and Fetter (1990): articulating a vision for the future,
providing an appropriate role model, fostering the acceptance of goals, setting high performance
expectations, providing individual support, and providing intellectual stimulation. In this study
we were interested in the effects of the six transformational factors on organizational culture and
climate for organizational innovation. Consequently, the six transformational leadership factors
were treated as a set of distinct but related dimensions rather than as a single construct (Edwards,
2001). This approach is consistent with research that indicates some individual leadership styles,
such as inspiring others and creating and communicating a vision, takes prominence when
dealing with organizational culture and change imperatives (Avolio & Bass, 2002).

Bank Muscat Structure

The BANK MUSCAT Group has a significant presence in each of the world's major financial
markets, with the Americas, Asia Pacific and Europe each representing around one third of the
business. With around 8,000 offices in 87 countries and territories, 210,000shareholders, 300,000
staff and 128 million customers worldwide, BANK MUSCAT arguably has the most
international presence among the world's multinational banking giants.
The BANK MUSCAT Group operates as a number of local banks around the world, which
explains its advertising tagline "The World's Local Bank." In response to ongoing discussions
about the survival strategies for banks, and the suggestion of "Living Wills" BANK MUSCAT
explains its structure as "separately incorporated and capitalized" the structure is based on a lead
bank in each region, which has responsibility for the group's operations in that area.
BANK MUSCAT is a universal bank and is organized within four business groups:
a) Commercial Banking;
b) Global Banking and Markets (investment banking);
c) Personal Financial Services (retail banking); and
d) Private Banking.
BANK MUSCAT is primary listing is on the Muscat Securities Market (MSM) and it is a
constituent of the FTSE 100 Index with a market capitalization of 115.8 billion.
BANK MUSCATs organizational structure can be considered as liberal as every country
branches reports directly to the executive committee. This structure provides for a more efficient

management not only within localities but more so on the whole BANK MUSCAT organization.
BANK MUSCAT in Azaiba is considered as one of the main branch in BANK MUSCAT
organizational structure.
BANK MUSCAT maintains a typical structure for transformational organizations: it has a central
committee that oversees all its branches and is also subdivided on national or domestic markets.
The local players are given their own autonomy in the structure. Being under the skin and hair
care division, it had been a tradition that zonal presidents handle the local operations of BANK
MUSCAT. In this way, management decisions within the company are more flexible
Each of the members of the organizational structure of BANK MUSCAT has their own functions
to contribute to the organizational performance of the company. Through the organization
structure of BANK MUSCAT, the strategy imposed by the company has become more effective
because it enables the management the ability to plan, coordinate, and control all activities
(2004). Likewise, formalization is thought to lead to greater efficiency because the predefined
rules and procedures serve to routines repetitive activities and transactions (2001).
Organizational structure institutionalizes how people interact with each other, how
communication flows, and how power relationships are defined (1999). The structure of an
organization reflects the value-based choices made by the company (1992); it refers to how job
tasks are formally divided, grouped, and coordinated.
Moreover, company effectiveness necessitates changes in organizational structure and design
(1994). This is true for transnational organizations such as BANK MUSCAT. Under the
organizational structure of BANK MUSCAT in its brand, the management has been able
synchronies the parts of the organization. In addition, through it structure the company has been
able to ensure productivity. In addition, as part of its strategic management, BANK MUSCAT
has also been able to constantly stock of its workforce and assess their performance in existing
jobs.
Through its organizational structure, the BANK MUSCAT has been able to improve
organizational performance via improving the performance of individual contributors, within the
structure. Further, the company has also recognizes existing talent which is use to fill vacancies
higher in the organization or to transfer individuals into jobs where better use can be made of
their abilities or developing skills (2002).
Managers have the primary role to make specific identifications of all the possible sources of
evaluation information which includes observable employee behaviors. This is because aside
from the observations of the immediate supervisor, performance evaluation information can still
come from a variety of other sources, including the employees, subordinates, and work products
Key feature of Bank Muscat

A core competence or distinctive capability is an attribute, or collection of attributes, specific to a

particular organization which enables it to produce above industry average performance. It arises
from the way in which the organization has employed its competences and resources more
effectively than its competitors. The result of a distinctive capability is an output that customers
value more highly than those of competitors. It is based upon one or more of superior
organizational knowledge, information, skills, technology, structure, relationships, networks and
reputation (Thompson and Strickland, 2002)
Today, managers in Bank Muscat are working hard to match the competitive advantages of their
new global rivals. Creating a sense of reciprocal responsibility is crucial because competitiveness
ultimately depends on the pace at which a company embeds new advantages deep within its
organization. The essence of strategy lies in creating tomorrow's competitive advantages faster
than competitors can mimic the ones in possession today. The key is not to anticipate the future
but to create the future (Hamel & Prahalad 1989). The competence- or resource-based model
emphasizes that competitive edge stems from attributes of an organization known as
competences or capabilities which distinguish it from its competitors, allowing it to outperform
them. Core competences tend to be both complex and intangible so that it is necessary to explore
the nature of the resources and competences that underpin them. The purpose of such analysis is
to allow managers to identify which resources and competences act as the foundation of existing
or potential core competences. It is extremely important to note that not all the competitors in an
industry will possess core competences or distinctive capabilities (Kay, 1995). It is only those
players that are producing above average performance that can be considered as possessing core
competences. Those with only average or below average performance possess competences and
resources (without which they could not compete in the industry at all) but not core competences
Idealized influence charisma: This factor consists of (1) idealized influence attributed,
and (2) idealised influence behavioural. They are the charismatic elements of
transformational leadership as Managers of Bank Muscat become role models who are
admired, respected, emulated and trusted by subordinates (Avolio and Bass, 2002). It also
involves integrity in the form of ethical and moral conduct (Tracey and Hinkin, 1998).
The Managers of Bank Muscat show great persistence and determination in the pursuit of
objectives, show high standards of ethical, principles and moral conduct, sacrifice selfgain for the gain of others, consider subordinates' needs over their own needs and share
successes and risks with subordinates.
Inspirational motivation: Managers of Bank Muscat behave in ways that motivate
subordinates by providing meaning and challenge to their work (Avolio and Bass, 2002).
The spirit of the team is aroused while enthusiasm and optimism are displayed (Bass,
1998). The Managers within Bank Muscat encourage their subordinates to envision
attractive future states while communicating expectations and demonstrating a
commitment to goals and a shared vision.
Intellectual stimulation: Managers of Bank Muscat stimulate their subordinates' efforts to
be innovative and creative by questioning assumptions, reframing problems, and
approaching old situations in new ways (Avolio and Bass, 2002). No ridicule or public

criticism of individual members' mistakes are made. The intellectually stimulating leader
encourages subordinates to try new approaches but emphasises rationality (Bass, 1990).
Therefore, new ideas and creative solutions to problems are solicited from followers, who
are included in the process of addressing problems and finding solutions.
Individualized consideration: Managers of Bank Muscat build a considerate relationship
with each individual, pay attention to each individual's need for achievement and growth
by acting as a coach or mentor, developing subordinates in a supportive climate to higher
levels of potential (Bass, 1998; Avolio and Bass, 2002). Followers are successively
developed to higher levels of potential. New learning opportunities are created along with
a supportive climate in which to grow. Individual differences in terms of needs and
desires are recognized.

Leadership Outcomes
The outcomes from leadership quality consist of three measurable factors: (1) effectiveness
(reflects the leader's efficacy in achieving organizational outcomes, objectives, goals and
subordinates' needs in their job); (2) satisfaction (reflects the degrees to which subordinates are
satisfied with their leaders behavior and the leader works with others in a satisfactory way); and
(3) extra effort (reflects the degrees to which the leader can increase subordinates' desire to
succeed and subordinates exert effort higher than their normal rate) (Bass and Avolio, 2004).
Personalized Transformational
Transformational Leadership The initial concept of transformational leadership was provided by
Burns in his researches about political leaders. According to Burns, transformational leadership
is a process in which leaders and followers promote each other to higher levels of morality and
motivation. Transformational leaders help their followers to look at old problems via a new
perspective. They stimulate their followers to attempt higher than usual levels. Transformational
leaders inspire their followers to think more than their own aims and interests and to focus on
greater team, organizational, national and global objectives. By providing future perspective,
such leaders influence over their followers in a manner that they assume that perspective as their
own aim and show high efforts to achieve it. These leaders are able to move the organization
toward the ideal perspective by coordinating the employees and integrating all system
components (Cacioppe, 2000, p. 336).
Transformational leaders are referred to those ones who try to show the organizations a new
route for improvement and progress by generating new ideas and perspectives. They also

mobilize the organization by motivating managers, employees and members of the organizations
to radical changes, transforming organizational pillars to achieve necessary readiness and
capabilities to move in this new route as well as achieving higher levels of idealized performance
(Sanjaghi, 2000, p. 44). Transformational leaders increase their followers' creativity, motivation
and spirituality while transactional leaders address to personal and future interests of their
followers. Transformational leaders emphasize on what you can do for your country while
transactional leaders focus on what the country can do for you (Ozgoly, 2004, p. 206).
Transformational leaders change their followers, empower them to develop and create new
needs, tendencies and values because that their requirements are met. Therefore, the followers
may grow, develop and change to leaders (Barker, 1992, p. 42).
Transformational leaders are facing with values, ethics, standards and long-term aims and focus
on their followers' performance and development in order to increase their capabilities. Often,
transformational leaders have strong internal ideals and values (Northhouse, 2001, p. 131).
Paul Hersey, Kenneth Blanchard and Johnson Dewey defines transformational leadership as an
informed influence process in individuals or groups to create discontinuous changes in current
conditions and organizational performance as a whole.

Transformational leaders have been suggested to have an impact on innovation. Transformational

leaders enhance innovation within the organizational context; in other words, the tendency of
organizations to innovate. Transformational leaders use inspirational motivation and intellectual
stimulation which are critical for organizational innovation (Elkins and Keller, 2003).
Transformational leaders promote creative ideas within their organizations and their behaviors
are suggested to act as creativity-enhancing forces; individualized consideration serves as a
reward for the followers, intellectual stimulation enhances exploratory thinking, and
inspirational motivation provides encouragement into the idea generation process (Sosik,
Kahai, and Avolio, 1998). Howell and Higgins (1990) state that this behavior reflects the
championing role of the transformational leaders. This leader develops his or her followers
self-confidence, self-efficacy, and self-esteem (Bass, 1990). Furthermore, this leader motivates
his or her followers by his or her vision, increases their willingness to perform beyond
expectations, and challenges them to adopt innovative approaches in their work. The resulting
heightened levels of motivation and self-esteem in the followers are likely to enhance
organizational innovation (Mumford et al., 2002).
Such a leaders positive impact on innovation was supported by a number of empirical studies
(e.g., Keller, 1992; Waldman and Atwater, 1994). These studies focused on innovation mostly in
R&D units and at the project level. The proposed effect of transformational leadership on
innovation at the organizational level has become a topic of empirical research only recently. For
example, Jung et al. (2003) found that transformational leadership was significantly and
positively related to organizational innovation as measured by R&D expenditures and number of
patents obtained over the previous three years.

In addition to its effect on the tendency of organizations to innovate, transformational leadership

may also have a positive impact on the market success of the innovations. The transformational
leader may mobilize his or her followers to ensure the innovations success (Jung et al., 2003).
By articulating a strong vision of innovation and displaying a sense of power and confidence,
this leader will strive for ensuring the market success of the innovation. As Keller (1992)
suggests, leading professional employees might require more than traditional leader behaviors
especially in R&D settings where quality rather than quantity is the primary performance criteria.
Furthermore, in addition to the internal roles, transformational leadership has been suggested to
be effective in playing external roles such as boundary spanning and
entrepreneuring/championing (Howell and Higgins, 1990) which might be important both for
understanding the needs of the market and marketing of the innovation successfully. Based on
the above, we expect a positive impact of transformational leadership on organizational
innovation which is conceptualized in this article as including both the tendency of the
organization to innovate and the success of innovations in the market.

Burns emphasizes that transformational leaders have a vision and challenge others to do
extraordinary works. He believes that transformational leaders are able to draw new necessary
routes for modern organizations because that they are the source of changes. In other word,
transformational leaders have complete influence over organizational changes. This kind of
leadership can draw a clearer and better picture for future, define its vision for employees more
effectively and the employees will accept their vision as a fact interestingly
Analysis of Transformational Leadership
Charisma (idealized influence)
Charismatic leadership is a component of transformational leadership and idealized influence
includes idealized traits and idealized behaviors. Inspiring the honor and proud to followers and
their contribution to group interests are, inter alia, most obvious idealized characteristics of a
leader. Followers' exaltation, dignity, respect and unquestioned obedience transmit an idealized
feeling. Talking about the most important values and a strong feeling to aims as well as spiritual
and moral results of decisions is among idealized behaviors indicators. Idealized influence
causes that leader be a behavioral model for followers.
Idealized influence shows the capability of trust making and understanding the leadership by
followers. It is a radical factor in accepting changes in the organization. Without such trust and
braveness, any effort to conduct the organization in order to achieve its aims will be fruitless. A
man can lead others when they are ready to be led by him/her. Others will believe and appreciate
such person if he/she performs his/her duties well (potential followers). In other words, a man is
a leader when he has idealized influence and has expressed it to their own followers. Basically,
the followers will try to obey the leaders because of their idealized influence. However, the most
successful leaders are achieving to a high level of trust and understanding because that followers

mitigate them. Leaders with idealized influence are respected and trusted persons. Followers
recognize themselves via him/her and try to mitigate him/her. Such leaders "perform right
works" and possess high human and moral behaviors. Such leaders are not using their leadership
power and capacity to achieve personal aims. They try to achieve organizational objectives by
conducting and guiding their followers. Charisma explains those individuals who are special and
stimulates others to follow their own perspectives (Northhouse, 2001).

Inspirational Motivation
Inspirational motivation is one of the capabilities of transformational leadership that introduces
the leader as a figure who encourages the followers to suitable behaviors inspirationally. When
transformational changes should be posed in the organization, the leader shall encourage the
followers to accept new belief and idea (change) continuously. Therefore, transformational
leaders should behave in a special way and stimulate their followers. Implicitly, such behavior
shows the tendency and optimistic and encourages team working.
Peter Senge believes that inspiration is the basis of motivation. It is this kind of motivation that
stimulates the followers' commitment to perform organizational aims. Actually, in inspirational
motivation, leaders create a shared insight for followers. The individuals learn when there is a
factual vision not because the leaders tell them but because they themselves like to do that and
not because that the leaders command them but because that they themselves want to act in this
manner. This insight is higher than needs hierarchy levels and is inspired among followers by
stimulating a shared insight of organizational aims. Generally, inspirational motivation consists
of:
1. Optimistic speaking of future
2. Enthusiastic speaking about what needed to be done
3. Expressing an attractive perspective of future
4. Stating the confidence to the fact that the aims will be met
5. Drawing an excited picture of what should be considered
6. Taking up challenging problems (Moghali, 2002, p. 70)
Intellectual Stimulation
Intellectual stimulation is one of the capabilities of transformational leaders which play an
important role in diversifying process of the organizations (change). Transformational leaders try

to encourage their followers to creativity and innovation. Such leaders encourage changing in
thinking methods about problem solving and use metaphors and examples. Therefore, they may
use new and creative ideas to resolve the problems.
Boss believes that intellectual motivation is a driving force that stimulates the followers to think
about beliefs and values as well as being aware of problems and their resolutions. In this line,
transformational leadership promotes the followers' capabilities to understand the organizational
nature and difficulties. What is considered here more is paying further attention to creative and
developed ideas rather than rapid reactions. The leader creates a challenge for followers in order
that they think about what they are doing. Also, this factor is recognized as a tool to generate
learning organization. Overall, intellectual stimulation consists of:
1. Reinvestigating basic assumptions and questioning them
2. Looking for various perspectives when resolving the problems
3. Enforcing others to look at the problem from different views
4. Encouraging nontraditional thinking to address traditional problems
5. Encouraging revising the ideas that are not questioned yet (Moghali, 2002, p. 71).
Individualized Consideration
Individualized consideration is another characteristic of transformational leadership. Paying
attention to others is one of the most important aspects of transformational leadership.
Individuals are supported by leaders and leaders are concern about their personal feelings and
needs (Podsakoff, 1990). Transformational leaders help their subordinates in fulfilling their
potential talents and increasing their responsibilities in the organization. Transformational leaders
differ from transactional leaders in diagnosing the needs because that transactional leader tries to
meet lower needs than higher needs such as development and maturity.
Overall, individualized consideration consists of:
1. Spending time in teaching and coaching
2. Behaving others as persons not just group members
3. Paying attention to others as persons who are the owner of different needs, capabilities,
dreams and wishes
4. Helping others to develop and grow their own capabilities
5. Listening to others demands and interests
6. Developing individuality and facilitating individuals' growth (Moghali, 2002, p. 73).
Effective utilization of transformational leaders' skills will indicate following traits of these
leaders:
Creativity
Team-orientation
Appreciation of others
Teaching (learning)
Responsibility.