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International Journal of Accounting & Business Management

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Vol. 5 (No.1), April, 2017 ISSN: 2289-4519

DOI:24924/ijabm/2017.04/v5.iss1/1.13

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Research Paper

A STUDY ON THE IMPACT OF ORGANISATIONAL CLIMATE ON

EMPLOYEE PERFORMANCE IN A MALAYSIAN CONSLTANCY

Yee Poh Li

MBA Graudate

Ashcroft International Business School

Anglia Ruskin University, UK

epohli91@yahoo.com

Ananthalakshmi Mahadevan Senior Lecturer

School of Accounting and Business Management

FTMS College, Malaysia

Lakshmi@ftms.edu.my

ABSTRACT

This study is aimed to analyze the impact of organisational climate on employee performance in a

Malaysian Consultancy firm. A questionnaire was developed based on previous literature and

analysis was done to determine the normality, reliability and validity of the scale. The independent

variables in organisational climate in this research include role clarity, communication, career and

development, reward system, relationship, teamwork and support and direction, while the dependent

factor is the employee performance. The research design adopted in this study was combination of

explanatory and descriptive with the method of cross sectional survey by distributing survey

questionnaires, consisting 48 questions with Likert Scale (Strongly Agree -1 and 7 for Strongly

Disgree). The sample size of the study was 45 which were collected using Random Probability

sampling method. SPSS 2.O was used in analyzing the collected data by using descriptive means and

regression. This study found that all the selected organisational climate dimensions in this research

have a positive and significant impact on employee performance from the regression test in SPSS 2.0.

The beta coefficients for all the dimensions of organisational climate in this study are positive and

high indicating the strong impact on employee performance.

Key Terms: Organisational Climate, Role clarity, Rewards, Direction, Career development

1. INTRODUCTION

In the 21st century, organisations in are confronting more difficulties than ever before.

These obstacles are not one of a kind to a particular industry or organisation, but rather

influence all organisations, regardless of their structure or size. Organisational climate

specifically is always challenged by the increasing number of changes affecting organisations

nowadays (Nair, 2006). To survive and compete their rivals, organisations are continually

looking to enhance their execution. Brown and Leigh (1996) believe that organisational

climate is ending up more imperative than ever before due to organisations need to guarantee

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that those people who increase the value to the standard will need to remain in the

organisation and will need to keep pouring their exertion into their work to the advantage of

the organisation.

Researchers have been keen on seeing how employees’ view of the work environment

impact their level of employment fulfilment in the studies of Mayo’s (1933) at Western

Electric. These studies found that environmental elements impact worker efficiency and

confidence. Bisconti and Solomon (2003) stated that an organisational climate that permits a

high level of autonomy and supports relationships among companions, supervisors and

subordinates brings about more fulfilled workers.

Organisations that can create environments that employees see as benign and in which they

can accomplish their maximum capacity are viewed as a key source of competitive advantage

(Brown & Leigh, 1996). Organisational climate can accordingly be viewed as a key variable

in effective organisations.

Organisational climate can be viewed as an illustrative idea that mirrors the regular

view and understanding of all individuals with respect to the different components of the

organisation, for example, structure, frameworks and practices (McMurray, 2003). Hence,

organisational climate essentially basically alludes to the experience of employees in the

organisation. The idea of organisational climate centers bases on discernment. Brown and

Brooks (2002, p. 330) describe climate as the “feeling in the air” and the “atmosphere that

employees perceive is created in their organisations due to practices, procedures and

rewards.” Based on these clauses, obviously the individual view of employees in the

organisation affects the climate. Despite the fact that people contrast in the method they

perceive, analyze and interpret information, the climate introduce in the organisation is an

aggregate view or recognition (Dormeyer, 2003) as climate is the individual’s perceptual or

psychological description (Al-Shammari, 1992).

The conceptual gap is found in those theories where is lacking of studies on

organisational climate in Malaysia consultancy industries. By conducting this study, the

selected variables of organisational climate will be analysed due to further understanding is

needed on the causal relationship between organisational climate and employee performance

as till now it is not clearly proven (Ruchi & Surinder,2014).

This study benefits many organisations by providing an appropriate framework to

identify the variables in organisational climates. Therefore, these help the organisation to

strategies effectively using the suitable variables in the organisation to boost up the

performance of employees.

The aim of this research is to investigate the impact of organizational climate on

employee performance in Malaysia consultancy firm. Besides, the objective of the study is to

determine the relationships between organisational climate and employee performance based

on the chosen variables will be determined in this study. This study will also clarify the

impact of each variables of organisational climate to employees in the organizations.

Research Objectives:

To examine the impact of role clarity on employee performance

To examine the impact of communication on employee performance

To examine the impact of reward system on employee performance

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To examine the impact of team work on employee performance

To examine the impact of career development on employee performance

To examine the impact of direction on employee performance

To examine the impact of relationship on employee performance

Organisational climate has an essential role in the organisations and impacts on the

perceptions of employees’, which influences their practices and behaviours, thus, it is

important for more research to be done on such areas to improve the working environment of

individual in the organisation. The conceptual gap is found in those theories where is lacking

of studies on organisational climate in Malaysia consultancy industries. By conducting this

study, the selected variables of organisational climate will be analysed resulting in further

understanding on the causal relationship between organisational climate and employee

performance as it is not clearly proven (Ruchi & Surinder,2014)

2. LITERATURE REVIEW

Over the decades, a range of wide researches has been developed and published on

organisational climate. Two concepts exist in the organisational climate which is perceptual

and descriptive. McMurray (2003) claimed that the opinions and agreement of employees on

different organisation elements such as system, structure and practices show the descriptive

concept in it. While, climate is defined as the ‘’feeling in the air” and the “atmosphere that

employees perceive is formed in their organisations based on procedures, practices and

rewards’’ in the study of Brown and Brooks (2002,p.330) and this shows the perceptions

concept in organisational climate which affected by the individual perceptions. The

organisational climate can be seen as the collective perception of employees although it

subject to change anytime (Dormeyer, 2003, Al-Shammari, 1992)

The climate in an organisation is influenced by occasions and attributes significant to

the organisation, which thus apply a strong impact on the members of organisation behaviour.

Organisational climate and the route in which people react to it consistently associate. After

some time, the organisational climate has the ability to bring out the general psychological

atmosphere of an organisation, and subsequently, may influence the behaviour, fulfillment

and inspiration of people in the work environment (Lawler, 1992).

Organisational climate is the generally persisting characteristic in an organisation

which recognizes it from different organisations: and (1) typifies members collective

perceptions about their organisaitons as for such measurements as self-sufficiency, confide

in, cohesiveness, innovation, acknowledgment, fairness and support; (b) collaboration among

the members; (c) fills in as a reason for interpreting the circumstance; (d) reflects the culture

for predominant standards, qualities and attitudes of the organisation; and (e) serves as an

impact for molding behavior ( Forehard & Gilmer ,1964., Pritchard & Karasick ,1973)

According to Wallace, Hunt and Richards (1999), collective perceptions of

organisational individuals and characterize climate as the outline view of how an organisation

manages its individuals and condition. West, Smith, Lu Feng and Lawthom (1998) also

indicated the shared perceptions of the basic components of people's specific organisation are

viewed as the organisational climate. Gerber (2003) hypothesizes that organisational climate

is illustrative of organisational individuals' collective perceptions as well as emotions about

the organisation. McMurray (2003) refers the organisational climate as an affective event that

the emotions where lead to information-processing behaviors of employees and interaction

among themselves or with outsiders.

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In the study of Ahmed (1998), the expression “climate” generally begins from the

theorists of organisational for example Douglas McGregor and Kurt Lewin, who utilized the

term to allude to climate of social and organisational separately. The climate of the

organisation depends on its employees’ sentiments and view of the organisation’s practices,

methods and reward frameworks. Organisational climate can be characterized in various

ways. Definitions of Litwin and Stringer (1968) which is the most broadly accepted

characteristic of organisational climate as an arrangement of the work environment

quantifiable properties that is perceived by the general population who live and work in a

specific situation and is expected to impact their behaviour and performance.

A few studies have been conducted to analyze the theoretical relationship between

climate and performance. The outcomes show that where view of employees was positive as

expanded interest in basic leadership, more prominent data sharing and and management

support, there was expanded corporate viability (Kangis & Williams, 2000). Based on the

empirical studies carried out in the past, from the wide ranges of industries, the outcomes

demonstrated that there is factual connection between organisational climate and

performance.

In a review of studies investigating organisational climate and employees’

performance, the study of Ozge (2016) found that organisational climates exhibit the clear

role clarity dimensions result in a higher satisfaction and performance of employees. Peek

(2003) explained the characteristics of organisational climate, for instances having a high

level of self-governance, giving opportunities for employees, sustaining connections among

employees, concerning and demonstrating enthusiasm for employees, perceiving workers'

achievements also, holding them in high respect result in more fulfilled employees.

Role clarity was considered as one of the dimension of organisational climate in the

study of Podsakoff et al (1996) and stated that there is a positive relationship between the

clear vision and tasks in the future with the outcome of employee’s performance. Nair (2006)

defined clarity as the feelings of the organisation members concerning the fact that

employees should exactly know what the expectations from their work and them are. Without

having clear role clarity, conflict in organisational goals and objectives and ambiguity of

organisational structure and roles, would happen which may lead to poor communication

from management and lack of interdepartmental cooperation (Jones & James, 1979).

Communication in an organisation is defined as accessibility of the supervisor for

listening and guidance, effective communication, and clear expectations and feedback that

was needed for better work performance. It also refers to the evoking of a shared or common

meaning in another person. There is sometimes communication issues occur in the

organisation, where the ability of manager in listening to the staff, share information and sort

out misunderstandings play an important role. Rewards system and team work

under organisational system dimensions are positively related to the performance of

employees as mentioned in the study of Campbell, et.al,(1970).

Jianwei (2010) agreed that the organisational climate in career development of the

employees is important for the employee to perform better in work as providing necessary

and related trainings are required. Good communication among the employees and upper

management form a good organisational climate to boost up the satisfaction of employees in

work (Sanad, 2016). Amin Bahrami et al, (2015) emphasize the relationships between the

employee and organisational such as the employee wellness, priority for minority people etc.

have directly affected the perception of employee as well as their performance.

Organisational climates creates a clear direction of the organisation to the employees

in term of the future objectives and goals. The employees are always being in the cognitive

stage of understanding the structure of organisation and in the state of readiness for change

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based on the planning of the organisation (Campbell et al., 1970). The leadership of upper

management is playing a role in how good they deliver the aims of organisation and manage

the employees to the reach the goals. By having a clear directions and objectives, the

organisation will eventually become an employer of choice and well known in the market

with high rating

In short, studies investigating the relationship between organisational climate and

employee performance are less frequent in the literature today, especially in Malaysia. This is

probably explained as the studies tend to emphasize more on the organisational culture and

job satisfaction of employees. In this study, a number of dimensions of organisational climate

will be utilized in a consultancy company in Malaysia based on the surveys.

3. RESEARCH DESIGN AND METHODOLOGY

Positivism paradigm will be adopted in this research as by using this enables to

experiment the phenomena, apply a correlation study and rectify the causal relationship that

leads to the methods to produce quantitative data (Scotland, 2012). In this study, the

positivism is suitable to be chosen and determined by external working environment due to

the concept of positivism. The quantitative method is usually conducted to gather the

information for this research as the common practice of the positivist.

The adopted method of investigation in this study is the combination of explanatory

and descriptive approach. Explanatory research was used due to two variables are covered in

this study which are the independent and dependent variable. Investigation and clarification

of the nature of the causal relationship between these two variables can be done through this

method. Thus, the relationship between the working environment and employee performance

can be identified.

In order to gather the numerical data, the quantitative approach was used in this

research by distributing questionnaire to a number of participants. Wyse (2011) suggested

that this method is more reliable to measure and establish the relationship among the

variables by interpreting the collected data into related usable results which to be discussed in

this research. The assumptions of quantitative approach are consistent with the positivist

paradigm that the social perceptions are taken as entities.

The reason of using the primary data is that the researcher has the choice to

investigate via survey or questionnaire directly and indirectly, which are different with

secondary data that gathered from published or unpublished materials, thus the primary data

makes more accurate and reliable (Imna & Hassan, 2015). Based on the past findings,

primary research enables to provide satisfactory and adequate results for further

investigations by adopting the proper strategy of research design and data collection for the

specific problems. Essentially, as this research is done in Malaysia consultancy industry, this

collection is an entire new obtained data.

50 questionnaires through Google form were distributed and a total of 48

questionnaires were received (response rate 96%). However, there are few returned

questionnaires are excluded due to not fully completed by the respondents, thus a total of 45

completed questionnaires are used in this research. The respondents were the employees

currently working in the consulting firm in Malaysia. In this study, random probability

sampling is decided to use in the survey among the respondents due to randomization

diminishes biases enabling the outcomes to extend based on the sampling population. Besides

in non-probability sampling technique, informants are especially selected out of convenience

or from the suggested knowledgeable individuals that diminish the validity of the results.

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4. Results and Discussion

The results of all the alpha coefficients in reliability test for the conducted

questionnaire are presented in table below. The last column indicates the internal consistency

for each dimension of organizational climates.

The overall Cronbach’s alpha coefficient obtained for the organisational climate

questionnaire was excellent with the value 0.947 as shown in Table. Total value being above

0.8, the variables are considered to have good internal consistency reliabilities for examining

the results such as reward system, career development, relationships and direction. The

dimensions of role clarity, communication, teamwork and support fall in the acceptable

category with the Cronbach’s alpha coefficients of between 0.7 and 0.8.

The climate of the organisation was determined by analysing the collected

questionnaire with the Likert scale of 1-7 indicating from ‘the strongly agree’ to ‘strongly

disagree’ respectively. Various dimensions of organizational climate are assessed by the

questionnaire were computed into the descriptive statistics as illustrated below.

From table above, role clarity appears to have the lowest mean of 2.10, means that

most of the respondents have the strong agreement on this variable compared to the other

dimensions of organizational climate. Reward system recorded the highest mean, which is

2.43. Overall, the total mean value for organizational climate is 2.27.

In this study, regression analysis is performed to identify the impact of organisational

climate on employee performance based on the seven independent factors and the employee

performance as the dependent factor.

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The table above summarizes the prediction for the employee performance with the R

value of 0.723, R square as 0.523 and adjusted R square as 0.447, indicating that 44.7% of

the variance of employee performance can be assumed by all the mentioned independent

variables. A minimum of 60% variation of the dependent variable would consider a good fit.

Thus, this is not a model with good fit, however the autocorrelation of this regression is

potentially high.

From the ANOVA table, F test conducted for this study and with the F statistic value

for this study show that the regression model is significant due to the p-value shown is less

than 0.01.

From the Beta reading above, basically all the dimensions stated have an impact on

employee performance such as there are 45.8% goes to role clarity, 18.6% of communication,

29.3% of reward system, 20 % of career development, 28% of relationships, teamwork and

support are 39.1% and 24.7% of direction. The result indicates that the role clarity (45.8%)

has significant impact on employee performance in the organization based on the analysis.

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The following assumptions were made before the analysis of this table:

Dependent factor: Employee Performance

Y = EP (Employee Performance)

Therefore, the model should be:

= + + + + + 6 6+ 7 7+

=0.458 ( ) +0.186 ( 2) +0.293 ( 3) +0.200 ( 4) +0.280 ( ) +0.391 ( 6)

+0.247 ( 7) +

This empirical model (original) indicated that changing 1 unit of X1 = RC, X2 = C,

X3 = RS, X4 = CD, X5 = R, X6 = TS and X7 = D while other things remain same with C=0,

Y (EP) will change by 2.055 units.

Therefore, all the dimensions of organizational climates such as role clarity, communication,

reward system, career development, relationships, teamwork and support and direction are

important on positively influencing the employee performance.

The analysis found that the discussed dimensions of organizational climate in this

study have significant impact on the employee performance as the p-value shown in the table

are all less than 0.01 which within the confidence level at 95% and 99%.

Besides having good role clarity as the most significant factor, an efficient

communication in the organisation is an essential dimension of organizational climate to

enhance the employee performance. Strong team work and support is analyzed to be the third

high positive impact on the performance of employee among others followed by relationship.

Last but not least, the practice of career development and good reward system are believed to

bring impact on the performance of employee despite they have the least beta coefficient

among the other dimensions.

5. CONCLUSION

The main purpose of this research is to investigate the impact of organisational

climate on employee performance in Malaysia consultancy firm. An organisational climate

questionnaire was distributed to collect the information on the climate from the employees

and all the gathered data were analyzed in. The total organizational climate mean score and

the seven dimensions are below the cut-off point which is not more than 2.5 is recommended.

The results determined that organizational climate, as perceived by the employees in the

organizations, are generally positive and significant.

In general, this research reminds that each organization has its own unique climate

that viewed in the context of the specific organization. Besides, the influence and impact that

an organisational climate can bring on the employee performance should be always aware.

It is important to understand what the necessities of the employees are when creating

and implementing the goal of enhancing the organisational climate. Thus, the understanding

of the significance of organisational climate and employee performance cannot be ignored to

identify the success or failure of the company and execute the suitable programmes that boost

up the performance level in the organization in both long and short term.

ISSN: 2289-4519 Page 9

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