The Effects of Transformational Leadership onthe Employees Change Readiness: the Moderating Role of the Incentive Schemes

Abstract:
Nowadays, the dynamic and turbulent environment creates new business strategies and consequently thousands – if not millions – of change projects have been launched all over the world which aim to reform and catch the new modern world. The main corner stone for a successful change is the human being. Actually, human nature always tends for stability and resists change. But the question is; is it an option? The answer is quite clear, “It is not”. Change is inevitable and key factors that affect human readiness for change are important to be investigated and studied. Transformational leadership is one of these factors that may cause change in individuals and social systems, helping in growing and shaping the future success of the company. Also, incentive schemes which describe a system of rewarding success and effort in the workplace may influence the relationship between the transformational leadership and the employees' readiness for change. Therefore, the objective of this research work is to study the effect of transformational leadership on employees’ readiness for change and how the incentive scheme within organizations impacts the employees’ readiness for change. The Egyptian Oil & Gas sector was selected to be the case study for this research due to the fact that there are massive change projects covering such sector in Egypt. Mixed methods research - quantitative and qualitative methods- is the applied methodology for conducting this research as it provides a better understanding of the research problem than either of each alone. The hypotheses test showed that transformational leadership and all of its components; individualized consideration, intellectual simulation, inspirational motivation and idealized influence have a positive linear relationship with employee readiness for change. However, financial schemes only act as a moderator between transformational leadership and employee readiness for change but in a negative way, while the moral ones have no moderating effect on such relationship. The interviews explained this matter by clarifying that the financial incentives in the Oil and Gas sector follow a strict quota system due to budget limitations and in turn, influence negatively the employees' perceptions of unfairness concerning financial incentives distribution policy. Such perceptions impact significantly on their confidence in their managers and consequently affect negatively their readiness for change. Along with the unfair financial incentive schemes, there is no clear scheme of moral incentives in their organizations and that is why it has no impact on the employees' readiness for change. Finally, a well-structured and more efficient financial and moral incentives scheme is recommended to be applied in order to strengthen the impact of the transformational leadership on the employees' readiness for change.