The Relationship Between Emotioal Intelligence And Leadership Effectiveness Among Kenyan Indigeneous Banks 2015

Abstract

The banking industry is one of the greatest agencies of commerce in the world industrial development (Nager, Masih & Badugu, 2011). However, it is notable that many economists blame banks’ behaviour and practices as the main causes of financial crisis (Brunnermerier, 2009). The consequence of such behaviour and practice has been numerous financial crises in the last six decades resulting to dismal performances of most world economies (Grant Thornton, 2013).

In Africa, the bank systems are highly concentrated and characterised by small size national markets, low income levels, weak creditor rights, low deposit, low intermediation, few barriers to entry, dominant foreign banks and weak judicial mechanisms (Mlachila, Park & Yaraba, 2013; Van Ballekom, 2013). This makes Africa the lowest performer in the world in terms of financial access. Like its counterparts in Africa, Kenya has had its share of financial crisis between especially between 1970 and 2000 making over 20 banks and other financial institutions to go bankruptcy and close down (Ambutsi, 2005; Mwangi, 2012; Sokpor, 2006). The failed banks were locally privately owned banks commonly known as indigenous banks. The cause of failures was attributed to ineffective leadership (Mwangi, 2012; Njuguna, 2013).

Accordingly to numerous studies, the overall bank effectiveness results from the leadership exercised (Kubicek, 2011; Donnelly, 1994; Grant Thornton, 2013). Such leadership effectiveness is attributed to leadership competencies (Al-Zoubi, 2012). Al-Zoubi (2012) observes that leaders with the right competencies are able to integrate required tasks and provide direction for effectiveness. A major leadership competency is emotional intelligence (IE), an essential component for leadership effectiveness which has received much attention in leadership research (Higgs & Dulewicz 1999; Sadeghi & Pihie, 2012; Tang, Yin & Nelson, 2010; Trabun, 2002). Goleman (1998) argues that good management of emotional competency leads to effectiveness and outstanding performance. Numerous studies have supported the relationship between emotional intelligence and leadership effectiveness as major determinant between effective and ineffective leaders (Goleman, 2001; Kerr, Garvin, Heaton & Boyle, 2006; Reilly & Karounos, 2009; Weisinger, 1998).

Given the importance of EI as a leadership competency, the aim of this study was to assess the relationship between emotional intelligence competency and leadership effectiveness within the indigenous banking industry in Kenya. Whilst there is evidence that leadership effectiveness impacts organisational effectiveness (Cooper, Fenimore & Nirenberg, 2012; Hawkins, 2012; Hesselbein Goldsmith & Beckford, 1996; Jones, 2008; Nyabadza, 2008), the empirical findings in this regard will not be presented in this paper. Furthermore, the lack of research on emotional intelligence competency among Kenyan bank leaders further motivated a need to investigate the level of competency and its effect on bank leadership effectiveness.

In this paper the following will be discussed: Firstly a brief synthesis of the literature on EI and LE will be given. This will be followed by the problem statement, purpose, objectives and hypotheses. Next, the methodology used in this study will be described. Thereafter the findings of the study are presented and discussed. Lastly, the paper concludes with limitations and managerial implications.