Effect of Leadership Change on Organizational Performance: A Case Study of X ltd in the Garment Industry of Sri Lanka

Abstract

The study mainly focuses on the X ltd of XYZ group; a Strategic Business Unit of a well reputed and global level garment manufacturer in Textile and Garment industry of Sri Lanka. Within the financial year of 2015-2016 X ltd started to face radical and frequent changes in their leadership hierarchy, which eventually resulted in a drastic drop in the overall Organizational performance; specially in terms of increased garment airfreight which continuously happened for several seasons to meet the committed delivery dates. This overall scenario became the core reason for the researcher to carry out this case study. Thus the study sought to ascertain the effect of leadership change on Organizational Performance using X ltd. as the study case. Data was collected using standardized questionnaires from 60 executive employees of X ltd who were selected using the simple random sampling. The study employed a multiple regression to analyze the association between the Organizational performance and the explanatory factors which could affect the level of employee job satisfaction in a situation of leadership change and it also tries to order each factor based on its level of importance. Accordingly, the study finds that there is a significant positive relationship between the level of employee job satisfaction and overall Organizational performance during a leadership change where the industry specific fundamentals applied in effective change management has the most variance in the employee satisfaction. Furthermore, the study also perused whether there was a difference in the level of Organizational performance due to the effects of gender, age and the educational background of employees where it was ascertained using the one way ANOVA test. The findings of the study revealed that the higher the number of years of industry experience, higher the resistance and negative response towards a leadership change whereas in contrast the gender effect and the educational background proved to have no any significant impact. The study recommended that the Organizations to develop an effective change management programmes throughout the time of significant leadership change while incorporating proper mechanisms of advance communication of the change, proper discussion and justification with the existing senior management about the leadership change and also selection of  new leaders who have considerable years of experience in the same business model .