The impact of emotional intelligence and transformational leadership on organizational culture and employee performance in the banking industry in Vietnam

Nhan Le Thi Kim Article The impact of emotional intelligence and transformational leadership on organizational culture and employee performance in the banking industry in Vietnam Global Business & Finance Review (GBFR) Provided in Cooperation with: People & Global Business Association (P&GBA), Seoul Suggested Citation: Nhan Le Thi Kim (2024) : The impact of emotional intelligence and transformational leadership on organizational culture and employee performance in the banking industry in Vietnam, Global Business & Finance Review (GBFR), ISSN 2384-1648, People & Global Business Association (P&GBA), Seoul, Vol. 29, Iss. 4, pp. 158-168, https://doi.org/10.17549/gbfr.2024.29.4.158 This Version is available at: https://hdl.handle.net/10419/305991 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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Introduction Emotional intelligence is currently a critical factor in determining an organization's success. Furthermore, there has been a growing emphasis in contemporary work environments on the significance of emotional intelligence (Lindebaum & Cartwright, 2010). Several researchers argue that emotional skills, such as empathy, awareness of others, and control of emotions, Received: Jan. 24, 2024; Revised: Mar. 15, 2024; Accepted: Mar. 25, 2024 † Corresponding author: Nhan Le Thi Kim E-mail: [email protected] are essential for the effectiveness of organizations (Danaeefard et al., 2012; Gabriel & Griffiths, 2002; Singh & Gujral, 2022). Moreover, the presence of effective leadership is crucial in guaranteeing the excellence of an organization's performance, as it directly impacts the decision-making and implementation processes that facilitate transformations within a professional setting (Bakri et al., 2023). The importance of leaders' emotional abilities arises from their role as fundamental members of organizations, tasked with communicating the organization's vision to their subordinates and ensuring its achievement. Therefore, the characteristics of a company's leaders are essential GLOBAL BUSINESS & FINANCE REVIEW, Volume. 29 Issue. 4 (MAY 2024), 158-168 pISSN 1088-6931 / eISSN 2384-1648 Https://doi.org/10.17549/gbfr.2024.29.4.∣158 ⓒ2024 People and Global Business Association GLOBAL BUSINESS & FINANCE REVIEW www.gbfrjournal.org for financial sustainability and people-centered global business1) The Impact of Emotional Intelligence and Transformational Leadershi p on Organizational Culture and Employee Performance in the Bankin g Industry in Vietnam Nhan Le Thi Kim † I ndustrial University of Ho Chi Minh City, Ho Chi Minh City, Vietnam A B S T R A C T Purpose: The objective of this research is to evaluate the influence of emotional intelligence and transformational leadership on organizational culture and employee performance. Design/methodology/approach: Data was gathered from a total of 291 employees currently employed at banks in Vietnam via the use of Google Forms. Using PLS-SEM, or partial least squares structural equation modeling, to analyze the data. Findings: The findings revealed that emotional intelligence had a beneficial effect on organizational culture. Besides, the results demonstrated that transformational leadership also had a positive impact on organizational culture. The findings also revealed that organizational culture had a beneficial effect on employee performance. Research limitations/implications: These findings have significant implications for banking managers seeking to enhance employee performance. Originality/value: This important research contributes to improving our comprehension of the impact that emotional intelligence and transformational leadership exert on organizational culture and employee performance. Keywords: Emotional intelligence, Transformational leadership, Organizational culture, Employee performance Copyright: The Author(s). This is an Open Access journal distributed under the terms of the Creative Commons Attribution ⓒ N on-Commercial License (https://creativecommons.org/licenses/by-nc/4.0/) which permits unrestricted non-commercial use, distribution , and reproduction in any medium, provided the original work is properly cited. Nhan Le Thi Kim 159 in establishing a culture that fosters the accomplishment of its goals and objectives (Alon & Higgins, 2005; Sin & Yazdanifard, 2013). Proficient leadership and capable leaders can aid employees in enhancing their allegiance, productivity, and contentment (Lee et al., 2016). For this investigation, the transformational leadership theory was selected, even though there are several leadership theories accessible. The theory of transformational leadership is currently highly acclaimed and widely accepted in the field of leadership theory. Numerous studies have lauded transformational leadership for its superior and favorable interaction with subordinates, as well as for its contentment, efficiency, motivation, and devotion (Sokolović et al., 2022). Transformational leadership has piqued the interest of scholars due to its unique characteristics that set it apart from traditional leadership styles, such as authoritative or transactional leadership (Kark et al., 2018). Transformational leaders can serve as exemplary figures who are highly regarded, esteemed and relied upon. They allocate attention to the growth and development of their followers, foster innovation by challenging, abstaining, and resolving existing issues using novel approaches, and motivate individuals to prioritize the interests of the organization over their own (Bass, 1990; Chen et al., 2018). Additionally, transformational leadership has been acclaimed for its ability to evaluate the success of a leader through its process. The ability to adapt to the specific needs of subordinates, to empower them, and to connect the aims and goals of the person, the leader, the group, and the wider organization are all characteristics of transformational leaders, according to Bass & Riggio (2006). Furthermore, the topic of organizational culture was introduced into the field of management writing in the 1980s. An organization's culture plays a significant and primary function in the organization, and many academics feel that culture is not only a concept that can explain a wide range of organizational phenomena, but it is also a notion that managers of an organization utilize to construct an efficient organization (Danaeefard et al., 2012). In addition, studies undertaken by scholars like Danaeefard et al. (2012) and Singh & Gujral, (2022) suggest a relationship between emotional intelligence and organizational culture. Likewise, Rizki et al. (2019) and Ledimo (2014) discussed the influence of transformational leadership on organizational culture. Furthermore, according to Widayati et al. (2022) and Al Dhanhani & Abdullah (2020) have proposed that organizational culture has an impact on the performance of its employees. According to the existing body of research, there are not many studies that investigate the impact that emotional intelligence and transformational leadership have on organizational culture and employee performance. As a result, the objective of this research is to evaluate the influence of emotional intelligence and transformational leadership on organizational culture and employee performance. II. Literature Review A. Relationship between Emotional Intelligence and Organizational Culture Despite the passage two decades after the inception of the notion of emotional intelligence (EMI), no universally agreed definition has been introduced for this topic (Danaeefard et al., 2012). One way to think of emotions is as structured reactions to any kind of event, whether it be internal or external, that has affected the person. They are regarded to be a driving force that assists people in transforming an encounter into an experience that is beneficial for all of the folks who are actively participating. Intelligence may be defined as the capacity of a person to act sensibly and effectively in response to his surroundings (Salovey & Mayer, 1990). EMI involves the ability to identify and express emotions, incorporate emotions into cognitive processes, understand and evaluate emotions, and regulate feelings in yourself and others (Mayer et al., 2000). EMI also may be considered a sort of intelligence that includes understanding and analyzing emotional information to accomplish one's objectives (Cherniss et al., 2016). EMI also refers to an individual's capacity to effectively regulate their emotions, keep emotional GLOBAL BUSINESS & FINANCE REVIEW, Volume. 29 Issue. 4 (MAY 2024) 158-168 160 balance, and demonstrate their emotions appropriately. This is achieved through the development of awareness of one's emotions, self-control, motivation for oneself, empathy, and relationships with others (Goleman, 2005). Individuals who possess self-awareness of their own emotions and have proficiency in perceiving and interpreting the emotions of others tend to exhibit enhanced effectiveness in their professional endeavors (Prabhawa et al., 2020). EMI refers to an individual's ability to understand and manage their own emotions, as well as the emotions of others. It involves using these emotions to make informed decisions and effectively control one's thoughts and actions (Danaeefard et al., 2012). Furthermore, according to Danaeefard et al. (2012), it is primarily anticipated that the emergence of EMI would open doors for the establishment of organizational culture (ORC) inside the company. Prior studies like those of Singh & Gujral (2022) and Nursanti & Lendeng (2022) debated that EMI is a predictor of ORC. Based on that, we propose the hypothesis as follows: H1: EMI has a positive relationship with ORC. B. Relationship between Transformational Leadership and Organizational Culture The notion of transformational leadership (TRL), established by Burns (1978), has been a very significant subject of study in recent decades (Ng, 2017). TRL fosters the members' consciousness of the significance and principles of a particular ideal objective (Koo et al., 2017). Within the body of academic research, the concept of TRL has been characterized as being different from transactional or monitoring styles of leadership. TRL has been conceptualized through its impact, specifically, converting what is expected, desires, and beliefs of followers and motivating them to carry out far and wide what they might performed in earlier times. While the notion of transactional and monitoring leadership revolves around an exchange procedure, where cooperation is rewarded and disobedience is punished (Kark et al., 2018). Transformational leaders can turn the personal values and self-concepts of their workers into a higher level of organizational demands and ambitions within their workforce (Avolio et al., 1999). Transformative leadership consists of four distinct components. The initial type of consideration is referred to as personalized consideration, which pertains to the degree to which a leader fosters close relationships with employees, takes into account the needs and individualities of followers, acts as a mentor or coach to followers, and attentively listens to their concerns. Intellectual stimulation refers to the extent to which a leader challenges assumptions, takes risks, and encourages individuals to approach familiar problems from fresh perspectives. Inspirational motivation refers to the extent to which a leader can articulate a compelling and captivating vision that appeals to followers with high expectations, instills optimism about future goals, and enhances the importance of the current task. The concept of idealized influence emphasizes the importance of a shared sense of purpose and suggests that leaders should not only be revered, respected, and trusted, but also admired. In a context characterized by change and transformation, certain actions are deemed to be more efficacious (Avolio & Bass, 1995). According to Bass (1977), TRL is effective across all cultures because it can offer the vision and empowerment that is necessary for employees of this era, who are both educated and varied. To be effective in a global setting, leadership requires valid international concepts and values that are independent of cultural norms. Whether or not transformational leaders perform an important part in defining a vision and supporting new paths has been the subject of controversy in the literature. This is because transformational leaders give the impression that they behave separately from staff members by setting more priority on their demands (Ledimo, 2014; Yukl, 1999). There is a close connection between leadership and organizational culture. This is because leadership can either bring about cultural change or merely reinforce the norms that are already in place (Reinke, 2004). Researchers specializing in the correlation between culture and management have recognized leadership as a crucial determinant capable of shaping the attributes of an organization's culture. Nhan Le Thi Kim 161 Over time, it has become evident that CEOs have the ability to shape or modify the culture of a company (Wallace & Weese, 1995). This is because both of these factors (TRL and ORC) are incredibly important in comprehending organizations and ensuring that they are successful (Block, 2003). Previous research has investigated whether or not there is a connection between TRL and ORC. According to the findings of certain studies, a strong TRL has a beneficial effect on ORC (Ledimo, 2014; Li, 2021). Given the information provided, the hypothesis may be formulated as follows: H2: TRL has a positive relationship with ORC. C. Relationship between Organizational Culture and Employee Performance Employee performance (EMP) refers to the ability of employees to fulfill their jobs and achieve the objectives set by the business. Their work is evaluated based on how well they meet the performance criteria established by the organization. Each employee must contribute positively via exemplary performance since the overall success of the business relies on the individual performances of its employees (Chen et al., 2018). EMP has a direct impact on the advancement or hindrance of a company or agency (Sudarso et al., 2022). EMP is a widely used evaluation method in enterprises to assess the competence and effectiveness of personnel. EMP also alludes to the evaluation of job outcomes concerning the predetermined criteria imposed by the business (Tianingrum, 2021). Performance is the outcome attained by people in their work based on certain criteria that are relevant to a job (Sudiardhita et al., 2018). EMP is considered the cornerstone of every organization as it drives its efficient development. To meet the goals of the organization, it is common for organizations to have high expectations for EMP. If workers exhibit subpar performance, the overall performance and efficiency of the organization will also be compromised. Companies may encounter a vulnerability when they become aware of a decline in EMP. In such cases, it is crucial for management to promptly address the issue to restore performance levels and prevent any negative impact on the company's development (Weerarathna & Geeganage, 2014). According to Schein (2010), organizational culture (ORC) is defined as a collection of values, norms, and beliefs that are shared by the members of an organization and serve to specify the rules that govern their conduct. ORC is defined by O’Reilly et al. (1991) as the values that determine acceptable social behaviors and the normative beliefs that are institutionalized and control behaviors inside an organization. Similarly, Divyarajaram (2014) argues that the notion of ORC includes the following elements: advantages, opinions, something of importance, beliefs, ethical principles of behavior, activities, procedures, and traditions within a company. Consequently, this is reflected in the organization's vision and objective, as well as the attitudes and behaviors of its personnel and the way it operates. It serves as the adhesive that may bring together individuals of the company, which ultimately results in high performance and performance that is successful. Organizational culture serves as the cohesive force that can bring together individuals within an organization, resulting in enhanced performance and efficiency. The strength or weakness of a culture can be determined by the extent to which employees endorse and adhere to organizational values, norms, and practices. A culture's strength is directly proportional to the number of members who share similar beliefs, exhibit broad divisions, and demonstrate unwavering dedication to establishing objectives (Nursanti & Lendeng, 2022). The culture will be stronger if it has a greater number of individuals who share similar beliefs, generally disagree with one another, and continue to be dedicated to establishing goals. Likewise, ORC is considered a crucial element in influencing and controlling organizational behavior to accomplish organizational goals (Hien & Tuan, 2023). Practitioners and scholars in the discipline of leadership widely agree that the significance of ORC in a company can't be exaggerated. Individuals, particular cohorts, or the entire institution may experience a modification in their effectiveness and productivity due to this. (Nursanti & Lendeng, 2022). Prior studies have examined GLOBAL BUSINESS & FINANCE REVIEW, Volume. 29 Issue. 4 (MAY 2024) 158-168 162 the correlation between ORC and EMP. Studies suggest that a robust ORC has a positive impact on EMP (Al Dhanhani & Abdullah, 2020; Ozcan & Ozturk, 2020; Tianingrum, 2021). Based on that, we propose the hypothesis as follows: H3: ORC has a positive relationship with EMP. The formulation of hypotheses serves as the foundation for the presentation of the research model, which may be seen in Figure 1. III. Methodology A. Data Analysis The data was examined utilizing the partial least squares structural equation modeling (PLS-SEM) method via SmartPLS software 4.0.9.2 since it is nonnormal data, with a minimal number of samples, and formative measures (J. F. Hair, Sarstedt, et al., 2014). According to the recommendations of Hair et al. (2021), the study will be divided into two phases: measurements model and modeling of structures. B. Sampling and Data Gathering By using Google Forms, data was collected from employees who were working at banks in Vietnam from September 13, 2023, to October 5, 2023. For this particular piece of study, the non-probability technique was used. According to Hair et al. (2014), the research requires a minimum sample size of 100 responses or 5 times the number of items being analyzed for each variable. The minimum sample size required to assess 16 items is 80, calculated by multiplying 16 by 5. After excluding respondents who used the same point scales in their questionnaire responses, a sample size of 291 respondents was selected to ensure the credibility of the research. Table 1 provides a concise overview of the sample characteristics. The sample presented in Table 1 consisted of 149 males (51.2%) and 142 females (48.8%) in terms of gender. In terms of age, there were 247 replies Figure 1. Research model Group Frequency % Gender Male 149 51.2 Female 142 48.8 Age 22 - 34 247 84.9 35 - 47 40 13.7 > 47 4 1.4 Education University 227 78 Postgraduate 64 22 Working seniority < 3 years 65 22.3 3 - < 5 years 68 23.4 5 - < 10 years 92 31.6 10 - < 15 years 46 15.8 > 15 years 20 6.9 Table 1. Sample characteristics Nhan Le Thi Kim 163 from the 22-34 age group (84.9%), 40 responses from the 35-47 age group (13.7%), and 4 responses from the age group above 47 (1.4%). Regarding education, 227 participants reported having completed their studies at the university level, accounting for 78% of the total replies. Additionally, 64 participants reported having completed their studies at the postgraduate level, representing 22% of the total responses. The distribution of working seniority is as follows: 65 replies from groups with less than 3 years of experience (22.3%), 68 responses from groups with 3 to less than 5 years of experience (23.4%), 92 responses from groups with 5 to less than 10 years of experience (31.6%), 46 responses from groups with 10 to less than 15 years of experience (15.8%), and 20 responses from groups with more than 15 years of experience (6.9%). C. Measures The measurement scales of the variables used in previous research were assessed to ensure they were suitable for the current study context. In this work, we made alterations to four EMI items sourced from Singh & Gujral (2022), four TRL items and four EMP items adjusted from Manzoor et al. (2019), and four ORC items adopted from Nguyen et al. (2019). The scoring of each question was done using a Likert scale, where a rating of 1 indicated the highest level of disagreement and a rating of 5 indicated the highest level of agreement. IV. Results and Discussion A. Results 1. Measurement Model An assessment is conducted on the measuring model to examine the reliability, converging validity, and discriminant validity of the variables. Table 2 displays the outcomes of the evaluation of the reliability and convergence validity. The assessment of reliability is conducted through the utilization of Cronbach's alpha ( ) and composite α reliability (CR). Reliability is established when the combined and CR indexes exceed 0.7. The evaluation α of converging validity is performed by outer loading (OL) and average variance extracted (AVE). Converging validity is confirmed if either OL or AVE surpasses a value of 0.5, as demonstrated by Hair et al. (2021). Constructs and items OL αCR AVE Emotional Intelligence (EMI) 0.909 0.909 0.785 1. I consistently maintain an optimistic attitude while addressing challenges in the professional setting. 0.870 2. I am aware of my current emotional condition. 0.887 3. I remain impartial and unaffected by personal emotions while making judgments in the workplace. 0.896 4. I possess the ability to discern the emotions of the other individual during interpersonal exchanges, such as communication and work-related interactions. 0.890 Transformational Leadership (TRL) 0.911 0.914 0.790 1. My manager encourages me to establish ambitious objectives for myself (expectations of exceptional performance). 0.871 2. My manager motivates people with his visionary aspirations. 0.892 3. My manager serves as a commendable example. 0.909 4. My manager demonstrates a high level of empathy and attentiveness towards my individual needs and emotions. 0.884 Table 2. Reliability and validity summaries GLOBAL BUSINESS & FINANCE REVIEW, Volume. 29 Issue. 4 (MAY 2024) 158-168 164 The results revealed that the reliability and convergent validity were confirmed. In addition, the discriminant validity is evaluated by calculating the Heterotrait-Monotrait (HTMT) ratio. Discriminant validity is confirmed when the HTMT value is less than 0.90, as specified by Henseler et al. (2009). Table 3 shows that the values of the HTMT for every single variable were below 0.90. Thus, the discriminant validity of the variables (EMI, TRL, ORC, and EMP) has been verified. 2. Structural Model: Testing Hypotheses The bootstrapping approach was used to assess the structural model. A total of 5,000 subsamples were collected to verify the hypothesis. Figure 2 illustrates the outcomes of the PLS-SEM, and Table 4 shows the path coefficients, t values, and p values of the hypotheses in the suggested model. The results revealed that EMI (H1: = 0.232, p = 0.007 < 0.05) β and TRL (H2: = 0.595, p = 0.000 < 0.05) had β a significant favourable effect on ORC. Therefore, H1 and H2 were affirmed. Similarly, the ORC (H3: = 0.233, p = 0.000 < 0.05) showed a favorable β impact on EMP. Therefore, H3 was confirmed. See Table 4. B. Discussion Findings unveiled that EMI had a positive impact on the ORC. Singh & Gujral (2022) and Nursanti & Lendeng (2022) have verified this conclusion. This implies that employees who possess the capacity and intellect to regulate their emotions are more likely to foster a positive ORC. Research indicates that an individual's EMI is a crucial determinant in maintaining the integrity of ORC. Moreover, EMI empowers individuals to proficiently handle and uphold their ORC. This suggests that implementing training programs aimed at enhancing employees' EMI would be advantageous for organizations (Singh & Gujral, 2022). Therefore, to enhance and maintain the integrity of ORC, leaders in the banking industry should focus on training initiatives aimed at improving employees' EMI to prioritize certain aspects. These include ensuring that employees consistently uphold a positive mindset when tackling professional challenges, staying attuned to the emotional well-being of colleagues, Constructs and items OL αCR AVE Organizational Culture (ORC) 0.921 0.922 0.808 1. The organization demonstrates adaptability to changes and new conditions, including the evolving business environment. 0.894 2. The organization encourages employees to suggest ideas and provide comments on work and perks. 0.934 3. The organization fosters a sense of collaboration among its members. 0.851 4. The organization permits the evaluation of novel solutions in alignment with its development objectives. 0.915 Employee Performance (EMP) 0.965 0.986 0.904 1. I consistently fulfill the responsibilities outlined in the job description with proficiency. 0.950 2. I consistently fulfill the expectations for my professional performance. 0.948 3. I consistently meet my responsibilities to finish my tasks. 0.964 4. I fulfill all the duties and obligations associated with the employment. 0.941 Table 2. Continued EMI EMP ORC TRL EMI EMP 0.289 ORC 0.701 0.244 TRL 0.762 0.087 0.820 Table 3. Discriminant validit y Nhan Le Thi Kim 165 maintaining objectivity and avoiding personal emotions when making workplace judgments, and possessing the skill to accurately perceive others' emotions during interpersonal engagements like communication and work-related interactions. Likewise, the findings also revealed that TRL had a positive affected on the ORC, as confirmed by Ledimo (2014) and Li (2021). This means it is contended that transformational leaders can shape the characteristics of the ORC. The use of TRL approaches, namely challenging procedures, inspiring a shared vision, enabling others to act, demonstrating the way, and stimulating the heart, seems to have an impact on both the organizational objectives and the individual goals of workers. So, they have an impact on all the standard values and qualities of a positive culture, such as accomplishment, selffulfillment, promoting human welfare, and social connection (Ledimo, 2014). Consequently, to develop TRL with the capacity to impact the ORC, leaders in the banking sector attention should be directed towards the following aspects: the leader motivates individuals to set ambitious personal goals, fostering expectations of outstanding performance; the leader inspires people with their visionary aspirations; the leader acts as a noteworthy role model; and the leader exhibits a keen sense of empathy and attentiveness to individual needs and emotions. Moreover, effective strategies for cultivating TRL should involve creating an organizational climate that encourages the pursuit of challenging objectives, fostering a culture where employees are motivated by the leader's forwardthinking vision, and promoting an atmosphere of mutual support and understanding. Finally, the results also argued that ORC had a good impact on the EMP, as corroborated by Tianingrum (2021) and Ozcan & Ozturk (2020). This implies that an increase in ORC results in a corresponding elevation in EMP. This discovery suggests that employees exhibit superior performance Figure 2. PLS-SEM results Path βT values P values Results H1: EMI ORC→ 0.232 2.684 0.007 Verified H2: TRL ORC→ 0.595 7.254 0.000 Verified H3: ORC EMP→ 0.233 4.211 0.000 Verified Table 4. Path, T values, and P values