Inone study Sosik et al.
, (1998),transformational leaders were found to be most operative at encouraging peopleto create original ideas and elaborate solutions further, rather thangenerating lots of ideas and solutions to problems. This indicates they valuedquality rather than quantity. Transformational behaviors are much more directand influential on creativity and innovativeness than simply having, forexample, a supportive climate, which may be too impersonal (Gumusluoglu &Ilsev 2009). Bass and Riggio (2006) summarized the way that transformationalleaders influence creativity. They first focus on increasing intrinsic motivationand then encourage followers to think “outside of the box”. This hasgained empirical support also in Finland.
In a qualitative case study, Hyypiäand Parjanen (2013) found that idealized influence and inspirational motivationwere used more in the beginning of the innovation process, while intellectualstimulation was practiced more in the later stages. Individualizedconsideration also fluctuated in different stages but should be used at alltimes, according to subordinates.Transformationalleaders need to expect their subordinates to be creative (Qu, Janssen, &Shi 2015). An MFI with stronggovernance is one which has a board with the independence and authority toensure that the institution operates soundly and effectively, that is, it iscommercially sustainable and it achieves its objectives. Independence meansthat the board is free of conflicts of interest (for example, directors who aresuppliers to the MFI or dependent on the favour of the chairman, or investorswho want quick returns) and is able to make its own judgments about what isbest for the business. Authority means that the board is composed ofindividuals who have the knowledge and commitment to oversee and guide theexecutive, to set policy and ensure that it is followed. An MFI with weakgovernance is likely to have directors who lack the independence and knowledgeto make their own judgments, or a board which is dominated by a small number ofindividuals who have special interests or which cannot control the executive. Astrong board is more likely to nurture a positive culture in an institution,just as a weak one will encourage poor practices and a disregard for policy andprocedures.
Finding good people to go on boards is not easy, even in the mostadvanced economies. Directors need to be knowledgeable, independent-minded,keen to challenge and explore, and undaunted by strong executives andcomplicated business models. They also need to have the success of theorganization at heart and be good ambassadors for it outside.Nevertheless,conflicting results have been presented on whether transformational leadershipis the style that should be applied to enhance staff or team creativity andinnovativeness (Basu & Green 1997; Gumusluoglu & Ilsev 2009; Jaussi& Dionne 2003; Jung, Chow, & Wu 2003b; Mumford, Scott, Gaddis, &Strange 2002b; Shin & Zhou 2003). This implies that certain conditions needto be fulfilled before transformational leadership can be effective (Wang &Rode 2010; Rosing et al.
, 2011).Jaussi and Dionne’s (2003) study suggested that there was no relationship, andthat transformational leadership might even have a negative impact oncreativity; the study suggested that unconventional, surprising behaviors onthe part of leaders are more helpful. Basu and Green (1997) suggested thattheir unexpected results might have occurred because a charismatic style may betoo intimidating and cause stress for subordinates. Poor innovative behaviormight have also resulted because the more transformational leaders are, themore negatively they will assess subordinates who do not meet the standardsthat they have because of their own innovativeness (Basu & Green 1997).