The Relationship between Leadership Style and ...

Interdisciplinary Journal of Research in Business

ISSN: 2046-7141 Vol. 2, Issue. 11 (pp.01- 07) | 2013

The Relationship between Leadership Style and Organizational Commitment: a survey in a Malaysian Contact Centre Betsabeh Aghashahi International Business School, Universiti Teknologi Malaysia, Kuala Lumpur, Malaysia e-mail: [email protected] Ashkan Davarpanah International Business School, Universiti Teknologi Malaysia, Kuala Lumpur, Malaysia Rosmini Omar International Business School, Universiti Teknologi Malaysia, Kuala Lumpur, Malaysia Majid Sarli Putra Business School, Universiti Putra Malaysia, Selangor, Malaysia

ABSTRACT This paper aims to investigate the relationship between different leadership styles, specifically transformational and transactional and the three components of organizational commitment, namely affective, continuance, and normative in a contact center setting. This topic merits examination because in the 21 st century, contact centers stand as a part of the service industry as they potentially eliminate the necessity of face-to-face customer contact. In line with the rise of contact centers, organizational commitment plays a significant role in ensuring firm success and securing customer satisfaction, while leadership critically determine organizational commitment. A cross-sectional survey was conducted among 300 employees in a contact center in Kuala Lumpur, Malaysia. Sample for this study consisted of full-time front liners working in various helpdesks of the center. The development of the questionnaire was based on a literature review and the questions for the instrument were obtained from B.M Bass and Avolio (1997) and Allen and Meyer (1997). All items were measured using a 5-point Likert-scale. Descriptive and inferential statistical analysis was performed, which showed that there were statistical correlation between organizational commitment and leadership styles. The analysis was done using SPSS version 20.0. This research supported the positive effects of transformational leadership style on two components of organizational commitment namely affective and normative, in context of service industry. The ﬁndings add to the body of literature on the study of contact centers by examining the relationship between leadership style and organizational commitment. One practical implication that could be gained from this study is that managers need to develop effective strategies that would beneﬁt the organization by reducing employee turnover while increasing customer retention. Keywords: Contact Center, Employee Commitment, Leadership Style.

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INTRODUCTION

In an era of substantial changes in business climate due to globalization and developments in communication, companies are trying to achieve competitive advantages by offering prominent services to the customers. In the 21st century, customer service contact centers are growing remarkably and companies are more concerned about the frontline employees. Many studies have shown that customers’ perception of the company is determined by the quality of their interaction with its frontline employees such as those in contact centers (Aksin, Armony, & Mehrotra, 2007; Cronin, Brady, & Hult, 2000). In the service industry, successful firms recognize the dominant factors which derive firm’s profitability such as quality of service which significantly depends on employee commitment (Brightman, 2000; Little & Dean, 2006). Organizational commitment has long been discussed in literature as an aspect of survival in all industries. Accordingly, employee commitment plays a significant role in customer retention and satisfaction (Gustafsson, Johnson, & Roos, 2005; Johnson, 1996); thus, the concept of organizational commitment is still attracting considerable attention in both theory and practice.

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ISSN: 2046-7141 Vol. 2, Issue. 11 (pp.01- 07) | 2013

Leadership styles have been linked to many organizational issues such as job satisfaction, organizational effectiveness, culture and commitment. The existing literature suggest that leadership critically determine organizational commitment (Avolio, Zhu, Koh, & Bhatia, 2004; Chiok Foong Loke, 2001). Having committed employees who are dedicated and motivated towards organizational goals is essential for companies in order to enhance their core competencies and gain competitive advantages which can guarantee a company's success. One of the human resource issues identified in contact centers is high turnover (Barnes, 2001). This could be the result of high levels of stress in the working environment since a job in a contact center has become one of the ten most stressful jobs in today’s modern economy (De Ruyter, Wetzels, & Feinberg, 2007). High turnover and low commitment will affect delivering superior service and customer satisfaction (Boshoff & Tait, 1996). Hence one of the biggest challenges in this industry is to instigate a sense of commitment in the employees which in parallel could increase customer retention which is vital in the industry. In this study we posit that leadership style has links with organizational commitment. 2.

LITERATURE REVIEW

Leadership is about influencing, motivating, and enabling others to contribute toward the effectiveness and success of the organization of which they are members (McShane & Glinow, 2006). Studies in the last decade have focused on transactional and transformational leadership styles which were initially developed by B.M. Bass (1985) . Transformational leadership Burns (1978) defines transformational leadership as a style in which leaders encourage and motivate their subordinates to step beyond self-interests to build commitment for the organizational mission and objectives. Transformational leaders are willing to sacrifice their own interest over the shared goals and values of the organization (Bernard M Bass & Avolio, 1990). Such leaders rely on the greater pool of knowledge and motivate problem-solving rather than constantly providing solutions (Buhler, 1995). This style of leadership emphasizes on inspiring followers by promoting the vision that followers would be able to achieve more than their own expectation with extra effort and they seek to arouse and satisfy higher needs. There are five factors which represent the components of transformational leadership as defined by (B.M. Bass, 1985) and (Avolio, Bass, & Jung, 1999): 1) idealized influence (attributes); 2) idealized influence (behavior); 3) inspirational motivation; 4) intellectual stimulation and 5) individualized consideration. Idealized influence refers to leader behavior which results in followers identifying high level of respect and trust that leads to develop a strong sense of loyalty and emotional attachment. These leaders rely more on subordinates’ faith and trust rather than rules, position or tradition and they have achievable vision. Inspirational motivation reflects leaders’ inspiration by giving meaningful challenges and tasks that make followers feel valued. Leaders of this type have high communication skills by which subordinates fully understand the organizational vision and feel that they are engaged and empowered to reach the vision (B.M. Bass & Avolio, 1994). Intellectual stimulation occurs when followers are encouraged by leaders to view problems and challenges as new opportunities for innovation. Leaders prompt subordinates to question assumptions and approach them from creative perspectives. Individualized consideration occurs when leaders attend to each follower as an individual and consider one-to-one capabilities and needs. In this perspective, leader will respect individual contribution and development (B.M. Bass & Avolio, 1994). Transactional leadership In contrast with transformational leadership, transactional leaders concentrate on followers' performance and satisfaction linked to both rewards and punishments to achieve current organizational objectives more efficiently. Contingent rewards and management by exception are the two characteristics of transactional leadership introduced by (B.M. Bass, 1985). Contingent reward is the reward that the follower will be granted if agreed goals are achieved. Contingent reward will inspire loyalty, commitment and higher performance by the followers. In management by exception, leaders will closely monitor followers to investigate the level of deviation of subordinates’ performance from predetermined standards (B.M Bass & Avolio, 1997).

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Organizational commitment Meyer and Allen (1991) defined organizational commitment as a psychological link between the employee and the organization that makes it less likely that the employee will voluntarily leave the organization. Meyer, Allen, and Gellatly (1990) described a three-component model of organizational commitment which incorporates affective, continuance and normative. Affective commitment refers to the emotional attachment of the employee to the organization. Therefore, employees with high level of affective commitment willingly remain with the organization because they feel attached and working in the organization is enjoyable for them. Continuance commitment refers to commitment that is based on the costs that employees associate with leaving the organization; thus employees remain with the organization because leaving would be costly. The third component, normative commitment, refers to employee feeling of moral obligation. Employees with strong normative commitment remain because they feel they ought to do so. Leadership and organizational commitment Extensive literature exists on the relationship between organizational commitment organizational culture, job satisfaction, and organizational effectiveness. Leadership is also known to be one of the determinants of organizational commitment and employee commitment. Such a relationship reflects the leadership quality of the organization (Stum, 1999). The study by Kent and Chelladurai (2001) demonstrated that individualized consideration and intellectual stimulation, the two sub-constructs of transformational leadership, have a positive correlation with both affective commitment and normative commitment. Hayward, Goss, and Tolmay (2004) found a moderate positive correlation between transformational leadership and three components of the organizational commitment while no correlation was found between transactional leadership and affective, normative and continuance commitment. In another study, Lee (2004) discovered that transformational leadership correlates significantly with organizational commitment between research and development professionals in Singapore. Lo, Ramayah, and Min (2009)) tested the leadership styles and organizational commitment in Malaysian manufacturing industry and they found that several dimensions of transactional and transformational leadership have positive relationship with organizational commitment. However, the impacts were stronger for transformational leadership. Based on the existing literature, the following hypotheses are formulated to be tested in a contact center setting in Malaysia. Hypothesis 1: There is a significant relationship between transformational leadership and the affective, continuance and normative components of organizational commitment. Hypothesis 2: There is a significant relationship between transactional leadership and the affective, continuance and normative components of organizational commitment 3.

METHODOLOGY

This study was carried out in September 2012 in Kuala Lumpur, Malaysia. A total number of 300 questionnaires were distributed among a contact center's employees working in various sections of helpdesks. Participation was voluntary and unpaid. Among the collected survey responses (N=173), only 162 responses were completed. In order to determine the leadership style, the study adapted the Multifactor Leadership Questionnaire (B.M Bass & Avolio, 1997). The adapted MLQ consisted of 32 questions which measured transformational and transactional leadership styles. This study also adopted Meyer and Allen’s (1997) Organizational Commitment Measurement that consists of the three-component view of commitment questionnaire. The set of 12 questions measured the three components of organizational commitment namely, affective commitment (AC), continuance commitment (CC) and normative commitment (NC). Both of the instruments comprised a 5 point Likert scale. Data analyses were conducted in two major phases. First, we investigated the reliability of all scales using Alpha model (Cronbach’s alpha) which is one of the most commonly used indicators of internal consistency (Pallant, 2010). Then, we used standard multiple regression analyses to explore the predictive ability of leadership styles as independent variables on organizational commitment components as dependent variables. Demographic characteristics include gender, age, educational background and job tenure which is presented in Table I. Of the 162 questionnaire completed by front-liners in the contact center, male accounted for 65% of the respondents and female accounted for 35% of the respondents. Majority of the respondents were under 33 years old. The largest number of respondents are (43%) holding bachelor degree as their academic qualification. The results also demonstrated that approximately 94% of the respondents were working in the organization for less than three years.

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FINDINGS

Alpha reliability test was done to determine the internal consistency of the result measurements. It was used to evaluate the internal homogeneity among the items scale in this research. Satisfactory values which were all above the recommended cut-off value of 0.70 showed that all components are reliable for measuring each construct (Transformational Leadership = 0.79, Transactional Leadership = 0.81, Affective Commitment = 0.73, Continuance Commitment = 0.77, Normative Commitment = 0.74). Pearson Correlation analysis was used to measure the degree of relationship between the variables. Table II explains the extent of relationship by means of correlation for the study constructs, however, it does not imply cause and effect. Preliminary analyses were performed to ensure there is no violation of the assumptions of normality, linearity and homoscedasticity. Both transformational and transactional leadership were correlated with all components of organizational commitment at a confidence level of 99%. Transformational leadership had medium positive relationship with affective and normative commitment and small positive relationship with continuance commitment. Transactional leadership had medium positive relationship with affective and continuance commitment and small positive relationship with normative commitment. Results showed that correlation coefficient score was not more than 0.9 and no multicollinearity problem existed among variables (Pallant, 2010). Standard multiple regression has been used to explore how much of the variance in organizational commitment components can be explained by leadership styles. The results demonstrated the direct effects of the predictors and explained 20%, 9% and 13% of the variability in affective, continuance and normative commitment respectively. Equation showed that sign of the coefficients of all independent variables are positive. Results indicated that only transformational leadership had a significant contribution to the prediction of affective and normative commitment but no significant contribution to the prediction of continuance commitment; this result supports hypothesis one. However transactional leadership was not significantly related to any of the commitment components, thus hypothesis two is rejected accordingly. The greatest value of standardized coefficient in this column has the greatest effect on the dependent variable. Thus the highest impact of transactional leadership is on affective commitment (β =.439, ρ =.000). The regression results are presented in Table III. 5.

DISCUSSION

This research highlighted the importance of leadership styles and its relation to organizational commitment components by examining the statistical relationship between the two. Our results supported a positive direct relationship of transformational leadership style with affective and normative commitment in context of service industry. The outcome of this study is consistent with the result of Lo et al. (2009) who concluded that transformational leaders are more able to inspire commitment in employees than transactional leaders in Malaysian manufacturing industry. It is also supported by study of Walumbwa, Orwa, Wang, and Lawler (2005) as their results showed that transformational leadership has a strong and positive effect on organizational commitment. Muchiri, Cooksey, and Walumbwa (2012) also investigated the same relationship in local government councils in Australia and they found that transformational leadership predicted affective-normative commitment. The result of the analysis provided that transformational leadership had the strongest and most positive correlations with affective commitment. Affective commitment develops when the employees become more involved and recognize the value of their identity from association with the organization. Affective commitment relies on an emotional attachment to the organization and it is likely that the affectively attached employee will be motivated to make a greater contribution to shape the organization’s vision. The statistical result of this study suggests that in contact centers where employees are under high pressure and stress, the leaders who encourage the followers to look to problems and challenges and approach them from creative perspectives will enhance the willingness of the employees to stay loyal to the organization. The outcome also indicated that transformational leadership has a positive effect on the employee moral obligations underlying in normative commitment to stay in the organization. This result suggests that transformational leadership in which the leader create, communicate and model a shared vision for the

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subordinates will positively affect the belief of employees to remain in the organization because that’s the right and moral thing to do. Neither transactional, nor transformational styles were found to be significant predictors of continuance commitment; this result suggests that there might be other influencing factors which imply employees’ calculative attachment to the organization, whereby an employee is motivated to stay because leaving would be costly. Generally, transformational leaders can inspire subordinates by modelling a vision that enhances employee’s confidence, motivation and expectations (Epitropaki & Martin, 2005). Additionally, transformational leaders promote cooperation among employees and engage them to achieve objectives they didn’t think of. Given these transformational behaviors, followers become more attached and committed to the organization. Numerous literature suggest that commitment and involvement of all the organization’s members is crucial in the achievement of continuous excellence in services (Peccei & Rosenthal, 1997). On the other hand leader’s behavior is found to have a moderating influence on the frontline service employee's commitment to service quality (Elmadağ, Ellinger, & Franke, 2008). Committed employees are less likely to quit their job or be absent from work. Their motivation and citizenship will lead to higher job performance. Moreover committed employees are more likely to have long tenure and consequently gain more knowledge and experience to improve service quality which will result in higher customer satisfaction (Malhotra & Mukherjee, 2004). 6.

CONCLUSION

The aim of this study is to investigate leadership styles affecting organizational commitment in a contact center setting in Kuala Lumpur, Malaysia. The results showed that transformational leadership has a significant role in predicting organizational commitment components namely, affective and normative. This study has also contributed to the growing body of research on antecedents to leadership styles and organizational commitment by examining the two important leadership styles and its impact on the three components of organizational commitment. Theoretically, this study supports previous studies on the positive relation between transformational leadership and organizational commitment in the context of service industry. However, additional analysis is required for testing impact of sub-constructs of transformational leadership which is beyond the scope of this paper. Finally, results of this study present useful information for organizations involved in service industry to promote leadership behaviors which could impact the organizational commitment as significant role player of securing customer satisfaction and ensuring firm success. REFERENCES 1.

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Table I: Demographic Characteristic of Respondents Demographic statistics Gender

Age

Education background

Job Tenure

Frequency 106 56 25 78 48 9 2 63 69 26 4 43 49 60 4 6

Male Female 18-22 23-27 28-32 33-37 above 38 Diploma Degree Postgraduate PhD < 6 month 6 months to 1 year 1 to 3 years 3 to 5 years Over 5 years

Percentage 65% 35% 15% 48% 30% 6% 1% 39% 43% 16% 2% 27% 30% 37% 2% 4%

Table II: Pearson-Correlation among Variables Mean

SD

Correlation

Variables

1

2

3

4

Affective Commitment

2.67

1.041

1.000

Continuance Commitment

2.62

1.039

.590**

1.000

Normative Commitment

2.68

1.068

.731**

.610**

1.000

Transformational

3.37

.836

.447**

.283**

.368**

1.000

Transactional

3.15

.790

.321**

.300**

.274**

.706**

5

1.000

**. Correlation is significant at the 0.01 level (2-tailed). Table III: Regression results between leadership styles and organizational commitment types Dependent variable

Independent variable

Affective commitment

Transformational leadership Transactional Leadership

Continuance commitment

Transformational leadership Transactional Leadership

Transformational Normative leadership commitment Transactional leadership ***p