SECTION A $[30$ MARKS$]$

Read the case study below and answer ALL the questions in this section.

The Effect of Leadership Behaviour on High Employee Turnover Rate in the Internal Audit Department of a Public

Listed Company

Author$($s$)$: Rozlano bin Muhamad Tobat

Introduction

Each organisation is distinct in terms of the work culture that has evolved since the company's beginnings. There are

various types of leadership styles in the organisation that shape the employee's working approaches and interactions

with each other. The leadership style plays a vital role in employees and ensures they can work in harmony and high

productivity. Numerous studies have found a link between high turnover rates and a negative relationship between upper

management and other employees. The leadership style is not always the reason for employees resignations, but it does

carry a high weight. The impact of leadership style is more prominent and has a greater effect than previously assumed.

That is because the leader is authorized to have the power to change what needs to be changed, unlike followers that are

limited in their power and authority $($Alkhawaja$,1970).$

The information on the case study is gathered for five $(5)$ years from $2018,2019,2020,2021,$ and $2022$ from the Internal

Audit Department $($IAD$)$ of a construction company listed in the Bursa Malaysia. Data on IAD employees includes

employee resignation, appointment, and duration of working months before the employee resignation.

Case Scenario

As a department leader, the Head of Department $($HOD$)$ is given authority to shape the departments work culture and

behaviours. Communication of instructions and chain of command within the department are based on the organisation

chart to ensure every employee is aware of their roles and responsibilities in the department. Different employees have

exclusive personalities along with divergent strengths and weaknesses. Thus, it is significant to understand the distinct

personality types that employees may have and how to get the most out of them. Personality is the dynamic organisation

within the individual of those psychophysical systems that determine his characteristic behaviour and thought $($Allport$,$

$1937).$ However, employees hired for the IAD are from diverse backgrounds with educational backgrounds from prominent

education institutions with at least degree holders. Despite being a part of a departmental hierarchy, the reporting flow

does not always adhere to the chart as the HOD occasionally tells the other employee directly without telling the

immediate superior in the unit, i$.$e$.,$ the Senior Manager of the IAD unit. This sloppy chain of command produces

additional complications and labour for the people who are directed.

The following Table $1$ shows the data observation of the turnover rate at IAD for $5$ years from $2018$ to $2022.$

Table $1$: Number and breakdown of employee movement in IAD for $5$ years

Year Number of IAD employee Average

Employee

$/$Year

Turnover

Rate $(\%)$ Required Existing Resigned Recruited Balance

A B C D E

$2018863366\mathrm{.}050\%$

$201986-287\mathrm{.}00\mathrm{.}0\%$

$2020881-77\mathrm{.}513\%$

$2021876677\mathrm{.}086\%$

$202210758108\mathrm{.}559\%$

According to the $5-$year data observation in Table $1,$ the average number of employees per year ranges from $6\mathrm{.}0$ to $8\mathrm{.}5,$

compared to the required number of employees, which is around $8$ to $10$ per year. The highest number of employeeresignations is for the years $2021$ and $2022,$ with a turnover rate of $86\%$ and $59\%.$ Recruitment of new employees in IAD

will take approximately $3$ to $6$ months. Once recruited, the probationary period is six $(6)$ months and evaluated before the

employee is hired as a confirmed permanent employee. Employee turnover is costly to any organisation, regardless of

size or sort of business. Product or service quality will always suffer from diminished efficiency and productivity, causing a

high turnover rate. A company with a high turnover rate will face high direct costs about expenditures incurred for

recruitment such as advertisement, selection of candidates, induction and training of new employees as well as the non$-$

monetary impact such as reduced morale of existing employees, missing good talent, retraining of specific set of skills,

etc.

It is discovered in this case study that the HOD's leadership style is crucial to keeping good individuals in IAD. It was

revealed that after employee confirmation, there is a high possibility that employees will immediately begin seeking

another job or file a letter of resignation. As stated in Table $1,$ fifteen $(15)$ resignations have been documented in IAD over

the last five $(5)$ years. According to multiple witnesses, the primary cause for this repeating occurrence is the pressure

applied by the HOD to the newly confirmed employee. The HOD's attitude as department leader has produced job

dissatisfaction among his employees. His dedication to the task, without compromising on any mistake, and the

constantly unfavourable perception of whatever was presented to him for review produced uneasy working conditions

among IAD staff. Furthermore, his unprofessional and negative behaviour while communicating with employees by

shouting and using invective words causes employees to distance themselves from him. The circumstances are related

to the HODs personality traits based on his attitudes, motives, interests, past experiences, and expectations.

The perceptions of the HOD are consistent with attribution theory, which is concerned with how people understand events

and how this affects their thinking and behaviour. Weiner $(1986)$ defined attribution theory as a theoretical framework that

has evolved into a key research paradigm. According to research, certain impressions of others are formed based on

assumptions we form about them. According to the theory of attribution, when we see behaviour, we determine whether it

is affected internally or externally by how we interpret others.

Consequently, the indirect impact of HOD negative behaviour is as follows:

a$)$ The HODs negative behaviour acts as a barrier that prevents him from further enhancing the departments

performance due to the high turnover rate in IAD. Most of the time spent is on new employee recruitment, which

requires time and energy to train and familiarise themselves with the company culture and people.

b$)$ Recruitment of new employees has grown harder, with fewer individuals interested in working in this IAD, which is

tied to the information circulated by resigned employees about how tough it is to deal with the HOD in this

organisation.

c$)$ The cost of hiring human resource specialists or third$-$party recruiters will continue to climb as the needs and

complexity of locating eligible employees increase. This process includes salary and benefit conversations, training,

and other incentives to persuade a potential employee.

To support the above view can be linked to Fiedlers Contingency Theory which puts forth the idea that effective

leadership hinges not only on the style used by the leader but also on the control held over the situation. Strong leader$-$

member relationships are required for success. Leaders must also clearly communicate tasks with goals and methods

established. They must also be able to administer both penalties and rewards.

This contingency leadership model, like the Vroom$-$Yetton$-$Jago Decision$-$Making Model of Leadership, proposes that

successful leaders size up situations, assess them, and then determine how much support the group will give to the

effort, adjusting their preferred leadership style to fit. Hence, it is concluded that there is a strong correlation between

negative leadership behaviour and a high employee turnover rate in the IAD of the company.

Conclusion

The HOD's negative behaviour should address immediately if the management places an essential target to achieve high

human resources standards and enhance the efficiencies of the IAD. Training related to attitude and behaviour is of the

utmost importance to provide to HOD and other relevant employees having attitude problems and negative perceptions

towards other employees. It is also a consideration for sending them to attend anger management, motivational talk, and

psychology therapy session with a psychiatrist based on a further assessment by Human Resources Department.QUESTION $1$

$1\mathrm{.}1$ Based on the case study's findings, discuss the TWO $(2)$ types of leadership styles, and how they

influence employee job satisfaction.