Leadership Styles and Conflict Management in Pakistani Banks: The Role of Conflict Behaviors

This study investigates the direct and mediating effects of transformational, transactional, and laissez-faire leadership styles on relationship conflict within the Pakistani banking sector. The objectives are twofold: to assess how these leadership styles directly influence relationship conflict and to analyze how problem-solving, dominating, and non-confronting conflict behaviors mediate these effects. Data were collected from non-managerial employees of the five largest private banks in Pakistan—Habib Bank Limited (HBL), United Bank Limited (UBL), Muslim Commercial Bank (MCB), Allied Bank Limited (ABL), and Askari Bank—via a self-administered survey. A convenience sampling technique was applied to ensure a representative sample of 384 respondents. The study utilized established instruments and employed SmartPLS 4 for data analysis. The results indicate that transformational and transactional leadership styles significantly reduce relationship conflict, whereas laissez-faire leadership has no significant impact. This underscores the effectiveness of proactive and reward-based leadership approaches in fostering a harmonious work environment. In the mediation analysis, problem-solving behavior and non-confronting conflict behavior were found to significantly mediate the relationship between transformational and transactional leadership and relationship conflict. This indicates that these leadership styles not only directly decrease conflict but also promote collaborative and accommodating behaviors among followers, further reducing conflict. On the other hand, dominating conflict behavior did not serve as a mediator, suggesting that aggressive conflict management is not fostered by these leadership styles. These findings highlight the crucial role of transformational and transactional leadership in managing relationship conflict both directly and through encouraging constructive follower behaviors. The study provides practical insights for the banking sector, recommending that leadership development programs should emphasize transformational and transactional qualities to effectively manage and reduce relationship conflict.