Examining the Effect of Organization Culture and Leadership Behaviors on Organizational Commitment, Job Satisfaction, And Job Performance

Examining the Effect of Organization Culture and Leadership Behaviors on Organizational Commitment, Job Satisfaction, and

Job Performance at Small and Middle-sized Firms of Taiwan

Dr. Li Yueh Chen, Chungchou Institute of Technology, Taiwan

ABSTRACT

Organization culture has a significant effect on how employees view their organizational responsibilities and their commitment. Leaders affect their subordinates both directly through their interactions and also through the organizations culture. A case can be made that the combination of these influences can create effective organizations with a conscience or organizations where employees have limited commitment and share fewer values leading to reduced success. With increasing globalization, greater knowledge of the interaction of these factors in non-western cultures can be beneficial for assessing the effectiveness of current theory as well as benefiting practicing leaders and decision makers.

This study examines specific employee behaviors associated with transformational and transactional

leadership and how they both moderate and mediate effects of organizational culture and commitment. Surveys were distributed to 84 Taiwanese manufacturing and service organizations with a total of 1,451 employees. Significant findings are: (1) idealized influence leadership with innovative culture is positively related to organizational commitment, (2) the mediating effort of organizational commitment in the relationship between transformational leadership behaviors and job satisfaction is not influenced by the organizational culture, and (3) the organizational commitment mediates the relationship between transformational leadership behaviors and job performance in supportive and bureaucratic culture.

INTRODUCTION

A survey of most admired companies conducted by Fortune has indicated that the CEO respondents believed that corporate culture was their most important lever in enhancing this key capability (Anonymous, 1998). Given the importance of organizational culture and its affect on organizational outcomes, it is currently one of the hottest business topics in both academic research and the popular business press. Todays business leaders are confronted with frequent unpredictable challenges, which require a high degree of flexibility on their part. Recent organizational crises have emphasized the need for leadership and personal commitment from organizational decision makers which, then, become more critical for organizational success (Earle, 1996).

According to a recent survey conducted by the Economic Ministry of Taiwan the number of small and

middle-sized businesses in Taiwan was reduced about 5% in 2001 due in some part to economic recession and global competition. In addition, the size of the workforce, of sales, and of imports and exports have shown negative growth. Debt ratio has increased to 65.43% in 2000 from 55.64% in 1999. About 32% of small and middle-sized businesses are in a deficit condition. Furthermore due to financial shortages, banks have reduced their loan quota to small and middle-sized businesses, and firms have had to reduce spending on research and development impacting both product and service quality. On the other hand, many small and middle-sized firms have followed larger firms to Mainland China where they get the benefits of lower labor and land costs. As a result, the unemployment rate in these firms in Taiwan has increased to about 5%. This is an uncertain time for both leaders and their followers in small and middle-sized Taiwanese firms (Small and middle-sized businesses nightmare, 2002). Given the current conditions facing small and middle-sized businesses in Taiwan and the importance of leadership and organizational culture in influencing employee behavior, the purpose of this study is to consider how the relationships among leadership behaviors, organizational commitment, and job satisfaction vary in different organizational cultures in these firms in Taiwan.

DEFINITIONS

Wallach (1983) has identified three separate organizational cultures he labels as bureaucratic, innovative, and supportive cultures. Bureaucratic culture is hierarchical and compartmentalized. There are clear lines of responsibility and authority. Innovativeness refers to a creative, results-oriented, challenging work environment. A

The Journal of American Academy of Business, Cambridge * September 2004 432

supportive culture exhibits teamwork and a people-oriented, friendly, encouraging, trusting work environment. All three types of culture are considered in this study. Two types of leadership behaviors are addressed in this study. These are transformational and transactional leadership behaviors. Generally, transformational leadership is defined in terms of the leaders effect on followers; employees feel trust, admiration, loyalty, and respect toward the leader, and are motivated to do more than they originally expected to do (Yukl, 1997). Transactional leadership, on the other hand, emphasizes on the transaction or exchange that takes place among leaders, colleagues, and followers. This exchange is based on the leader discussing with others what is required and specifying the conditions and rewards these others will rewards these others will receive if they fulfill those requirement (Bass & Avolio, 1994, p. 3).

According to Mowday et al. (1979), organizational commitment entails three factors: (1) a strong belief in

and acceptance of the organizations goals and values, (2) a willingness to exert considerable effort on behalf of the organization, and (3) a strong desire to maintain membership in the organization. Job satisfaction emphasizes the specific task environment in which an employee performs his or her duties (Mowday, Porter, & Steers, 1982). Satisfaction has been conceptualized in three ways: intrinsic, extrinsic, and total satisfaction (Weiss, Dawis, England, & Lofquist, 1967).

Motowidlo and Van Scotter (1994) proposed two dimensions of job performance, which are task

performance and contextual performance. Task performance (or technical job performance) is the behavior associated with maintaining and servicing an organizations technical core. By contrast, contextual performance (or interpersonal job performance) is a function of ones interpersonal skill knowledge that supports the broader social environment in which the technical core must function. Contextual performance tends to promote desirable organizational behavior. These two dimensions task and contextual comprise the conceptual definition of performance for this study.

LITERATURE REVIEW

Leadership Behavior and Organizational Commitment

Research has been conducted using parts of transformational and transactional leadership theories. Some studies have found that transactional leadership augments laissez faire leadership in enhancing organizational commitment, job satisfaction, and performance of sales representatives. Others have found that transformational leadership helps to augment the organizational commitment of employees (Dubinsky, Yammario, & Spangler, 1995). As no studies have examined all the variables found in both transformational and transactional leadership behaviors in relation to organizational commitment, Chens (2002) study helped fill that gap. His study found that both transformational and transactional leadership behaviors have a slightly positive relationship with organizational commitment.

Organizational Culture, Leadership Behaviors, and Organizational Commitment

According to Bass (1985) transactional leaders work within their organizational cultures and maintain consistent rules, procedures, and norms. A pure transactional culture focuses on everything in terms of explicit and implicit contractual relationships. All job assignments are explicitly spelled out along with conditions of employment, disciplinary codes and benefit structures. Commitments are as deep as the organizations ability to reward its members.

On the other hand, Bass (1985) tells us transformational leaders frequently change their organizations

culture with a new vision and revision of its shared assumptions values and norms. In a transformational culture, there is generally a sense of purpose and a feeling of family. Superiors feel a personal obligation to help new members assimilate into the culture. Assumptions, norms, and values do not preclude individuals from pursuing their own goals and rewards. Commitments are long-term. Leaders and followers share mutual interests and a sense of shared fates and interdependence (Bass & Avolio, 1993 & 1994). Many researchers have supported the importance of culture for organizational commitment. Brewer (1993) suggested that a bureaucratic working environment often results in negative employee commitment, whereas, a supportive working environment results in greater employee commitment and involvement. Furthermore, Bass and Avolio (1993) point out that levels of innovation and risk-taking may be severely curtailed in transactional leaders while transformational leaders may build highly innovative and satisfying organizational cultures. Transformational leaders may be able to infuse staff members with stronger levels of organizational commitment while, at the same time, avoiding the negative reactions that usually are generated by bureaucratic management approaches (Nystrom, 1993).


Organizational Commitment, Job Satisfaction, and Job Performance Price and Mueller (1981), Bateman and Strasser (1984), and Vandenberg and Lance (1992) have found

commitment to be causally antecedent to satisfaction. Thus, employees will generally be satisfied with their jobs and committed to their organizations if they are content with the nature of the work itself, are satisfied with their supervisor and co-workers, and perceive current pay policies and future opportunities for promotion, within their firm, to be adequate (Reed, Kratchman, & Strawser, 1994). Job performance as an outcome of organizational commitment has also received substantial attention from researchers. Meyer, Paunonen, Gellatly, Goffin, and Jackson (1989) have found affective commitment and emotional attachment to, and identification and involvement with the organization, to be positively correlated with job performance. Continuance commitment and the perceived costs associated with leaving the firm were found to be negatively correlated with job performance. Organizational Culture, Job Satisfaction, and Job Performance

Harris and Mossholder (1996) point out that organizational culture stands as the center from which all other factors of human resource management derive. It is believed to influence individuals attitudes concerning outcomes, such as commitment, motivation, morale, and satisfaction. Wallach (1983) has suggested that individual job performance and favorable job outcomes, including job satisfaction, propensity to remain with the organization, and job involvement, depend upon the match between an individuals characteristics and the organizations culture.

Odom, Boxx, and Dunn (1990), found that the bureaucratic nature of the work environment neither

improves nor distracts from an employee's commitment and satisfaction. They also found that employee attitudes and behaviors are enhanced by an organizational culture that exhibits innovative characteristics. Additionally, they found that employees who work in a supportive environment are more satisfied and have a greater degree of organizational commitment. The also suggest that removing bureaucratic barriers may contribute somewhat to creating commitment and satisfaction; significant improvement, however, will occur only when positive action is taken to increase supportive and innovative dimensions.

HYPOTHESES The large body of existing research lends support to the following hypotheses of this research study.

H1: Leaders transformational behaviors are positively correlated with organizational commitment in innovative,

supportive, and bureaucratic organizational culture. H2: Leaders transactional behaviors are positively correlated with organizational commitment in innovative,

supportive, and bureaucratic organizational culture. H3: Organizational commitment mediates the relationship between transformational leadership behaviors and job

satisfaction in the innovative, supportive, and bureaucratic organizational culture. H4: Organizational commitment mediates the relationship between transactional leadership behaviors or job satisfaction

in the innovative, supportive, and bureaucratic organizational culture. H5: Organizational commitment mediates the relationship between transformational leadership behaviors and job

performance in the innovative, supportive, and bureaucratic organizational culture. H6: Organizational commitment mediates the relationship between transactional leadership behaviors or job

performance in the innovative, supportive, and bureaucratic organizational culture.

MEASURES

An integrated questionnaire combining instruments and demographic questions has been developed specifically for this study. This integrated questionnaire has been translated into Chinese to accommodate the respondents who are citizens of the Republic of China. It consists of six parts which are geared to the research questions.

Part 1: Organizational culture

Wallachs (1983) organizational culture index has been used to determine the culture profile of the organization. Wallach (1983) classified organizational culture as bureaucratic, innovative, and supportive cultures. A five-point Likert scale was used, ranging from does not describe my organization valued as a 1 to describes my organization most of the time valued as a 5. The internal consistency reliabilities (Chronbachs alpha) for organizational culture in bureaucratic, innovative, and supportive cultures in this study are 0.86, 0.70, and 0.97 respectively.

Part 2: Leadership behavior

The multifactor leadership questionnaire developed by Bass and Avolio (2000) has been used to determine the managers management style. Respondents have been asked to measure the leadership behaviors of managers with the next highest position to their own. A five-point Likert scale, ranging from not at all valued as a 1 to frequently if not always


valued as a 5, was used to measure the leadership behaviors. The internal consistency reliability (Chronbachs alpha) for leadership behaviors of charisma, idealized influence, inspirational motivation, intellectual stimulation, individual consideration, contingent reward, active management by exception, passive management by exception, and laissez-faire in this study are 0.68, 0.77, 0.80, 0.78, 0.89, 0.77, 0.58, 0.76, and 0.42 respectively.

Part 3: Organizational commitment

The organizational commitment questionnaire developed by Mowday et al. (1979) has been used to measure respondents organizational commitment. A five-point Likert scale, ranging from strongly disagree valued as a 1 to strongly agree valued as a 5, was used. The internal consistency reliability (Chronbachs alpha) for organizational commitment in this study is 0.90.

Part 4: Job satisfaction

The minnesota satisfaction questionnaire developed by Weiss, et al. (1967) has been used to measure employees level of job satisfaction. This questionnaire consists of 20 items classfied as either intrinsic or extrinsic satisfaction. A five-point Likert scale, ranging from very dissatisfied valued as a 1 to very satisfied valued as a 5, was used. The internal consistency reliability (Chronbachs alpha) for intrinsic and extrinsic job satisfaction in this study are 0.88 and 0.84 respectively.

Part 5: Job performance

To measure the employees job performance, the overall performance definition developed by Motowidlo and Van Scotter (1994) has been used. Respondents have been asked to determine: (1) their standard of job performance as measured by self that ranged from does not meet standard valued as a 1 to exceeds standard valued as a 5, (2) performance as compared with other of the same rank that ranged from low level valued as a 1 to high level valued as a 5, and (3) job contribution to the organization as compared to other members of the work unit that ranged from less contribution valued as a 1 to more contribution valued as a 5. The internal consistency reliability (Chronbachs alpha) for job performance in this study is 0.83.

Part 6: Demographic questions

The demographic questions for this study consist of job level in organization, tenure, gender, and educational level. To facilitate the data analysis of job level in the organization, this study divided the workforce into four levels that entry level, middle level, middle upper level, and upper level. Respondents have been asked to identify their position in the organization as they perceive it to be, and also as the organization considers their position.

SAMPLE AND DATA COLLECTION

Surveys were distributed to 84 small and middle-sized service and manufacturing firms in Taiwan (Republic of China) with a total of 1,451 employees. Questionnaires from 929 respondents across 57 organizations were returned. Of the 929 questionnaires 749 were found to be valid, for a useable response rate of 51.6%. Of the 57 organizations, 34 organizations are in the manufacturing industry and 23 are in the service industry.

RESULTS

Descriptive and Correlation Analyses

Significant demographic findings include the following: (1) most workers who responded are entry level employees, (2) approximately 38.7% and 24.3% of respondents have worked for their company anywhere from 0 to 5 years and 6 to 10 years respectively, (3) male and female respondents numbered 58.7% and 39.7% respectively, and (4) the bachelor and associate degrees were the highest educational degree received for approximately 38.5% and 31.4% of respondents respectively. Overall, respondents perception of their managers leadership behavior tended to be transformational in nature. Respondents generally perceived their organizations culture as bureaucratic. They were also generally committed to their organizations and satisfied with their jobs.

Correlation results indicate: (1) significant positive correlations between transformational leadership behaviors and

organizational commitment and culture, (2) significant positive correlations between organizational commitment and organizational culture and job satisfaction, but no significant correlation with job performance, and (3) significant positive correlations with organizational culture and job satisfaction, but not significantly correlated with job performance.

Hypotheses Testing

The first two hypothesis measures whether the leaders transformational and transactional behaviors are positively correlated with organizational commitment in innovative, supportive, and bureaucratic organizational culture. The cluster analysis has determined the type of culture that exists in each organization. Results indicate that 21 organizations possess the innovative culture and 36 organizations possess both bureaucratic and supportive culture, as perceived by respondents. Table 2 summarizes the regression results for testing the hypothesis one and two, which states that transformational and transactional behaviors with innovative organizational culture are positively related to organizational commitment. Results also indicated that


only idealized influence behavior (IIB), contingent reward (CR), and management by exception passive (MBEP) leadership behaviors were the significant predictors of organizational commitment in innovative organizational culture.

Table 1: Means, Standard Deviation, and Correlation for All Variables

Variables 01 02 03 04 05 06 07 08 M SD 01 Transformational

Leadership 1.00 0.34* 0.21* 0.46* 0.58* 0.48* 0.54* -0.80 3.22 0.64

02 Transactional Leadership 1.00 0.10* 0.21* 0.18* 0.09 0.16* 0.03 2.92 0.3903 Bureaucratic Culture 1.00 0.40* 0.36* 0.26* 0.28* 0.16* 3.37 0.5004 Innovative Culture 1.00 0.73* 0.49* 0.53* -0.01 3.29 0.5905 Supportive Culture 1.00 0.59* 0.67* -0.08 3.21 0.6706 Organizational

Commitment 1.00 0.73* 0.08 3.60 0.64

07 Job Satisfaction

1.00 0.07 3.43 0.52

08 Job Performance

1.00 3.30 0.57

Note: * Correlation is significant at the 0.01 level

Additionally, Table 3 summarizes the regression results for testing the hypothesis one and two, which states that transformational and transactional behaviors with supportive and bureaucratic organizational culture are positively related to organizational commitment. Results also indicated that only idealized influence attributed (IIA), individual consideration (IC), contingent reward (CR), and laissez-faire (LF) leadership behaviors were the significant predictors of organizational commitment in supportive and bureaucratic organizational culture. Transformational leadership behaviors, especially idealized influence attributed leadership with innovative organizational culture were found to be most correlated with employee organizational commitment (See Table 2 and 3).

The third and fourth hypotheses determine whether organizational commitment mediates the relationships of

transformational and transactional leadership behaviors with job satisfaction in innovative, supportive, and bureaucratic organizational culture. Following the guidelines of Baron and Kenny (1986) in mediation regression analysis, the current results show that: (1) organizational commitment mediates the relationship between transformational leadership behaviors and job satisfaction in innovative culture, (2) organizational commitment was found to be no mediating effort in the relationship between transactional leadership behaviors and job satisfaction in innovative culture, (3) organizational commitment mediates the relationship between transformational leadership behaviors and job satisfaction in supportive and bureaucratic culture, and (4) organizational commitment mediates the relationship between transactional leadership behaviors and job satisfaction in supportive and bureaucratic culture (See Table 4 and 5).

Table 2: Results of Regression Analysis of Organizational Commitment on Transformational and Transactional Behaviors in Innovative

Culture ANOVA Coefficients

Independent Variables

R R2 F Sig. B Beta t Sig.

(Constant) IIA, IIB, IM, IS, & IC

.558

.311

22.379

.000

1.647 .154 .228

-.033 .123 .101

.162 .237

-.037 .125 .126

8.638 1.773 2.227 -.367 1.238 1.146

.000

.077

.027

.714

.217

.253 (Constant) CR, MBEA, MBEP, & LF

.552

.305

27.768

.000

2.681 .396 .029

-.192 -.010

.417 .024

-.208 -.007

8.364 6.405

.402 -2.884

-.108

.000

.000

.688

.004

.914 Note: Idealized influence attributed (IIA), Idealized influence behavior (IIB), Inspirational motivation (IM), Intellectual stimulation (IS),

Individual consideration (IC), Contingent reward (CR), Management by exception active (MBEA), Management by exception passive (MBEP), Laissez-faire (LF)

The fifth and sixth hypotheses determine whether organizational commitment mediates the relationships of

transformational and transactional leadership behaviors with job performance in innovative, supportive, and bureaucratic organizational culture. Again, following the guidelines of Baron and Kenny (1986) in mediation regression analysis, the current results show that: (1) organizational commitment was found to be no mediating effort in the relationships between transformational and transactional leadership behaviors and job performance in innovative culture, (2) organizational commitment mediates the relationship between transformational leadership behaviors and job performance in supportive and bureaucratic culture, and (3) organizational commitment was found to be no mediating effort in the relationships between transactional leadership behaviors and job performance in supportive and bureaucratic culture (See Table 6 and 7).


Table 3: Results of Regression Analysis of Organizational Commitment on Transformational and Transactional Behaviors in Supportive and Bureaucratic Culture

ANOVA Coefficients Independent

Variables R R2 F Sig. B Beta t Sig.

(Constant) IIA, IIB, IM, IS, & IC

.450

.202

23.402

.000

2.559 .157 .114

-.085 -.098 .259

.172 .130

-.100 -.103 .352

17.046 2.570 1.551

-1.428 -1.397 4.348

.000

.010

.122

.154

.163

.000 (Constant) CR, MBEA, MBEP, & LF

.420

.176

24.968

.000

2.821 .322 .065

-.001 -.134

.363 .062

-.002 -.126

15.101 7.188 1.213 -.039

-2.258

.000

.000

.226

.969

.024

Table 4: Results of Regression Analysis for Mediating Variable of Organizational Commitment between Transformational and Transactional Leadership Behaviors and Job Satisfaction in Innovative Culture

ANOVA Coefficients Steps R R2 F Sig. B Beta t Sig.

Step 1: TF JS .551 .304 109.830 .000 .435 .551 10.480 .000 Step 2: TF OC .551 .303 109.681 .000 .563 .551 10.473 .000 Step 3: TF OC JS .781 .609 194.168 .000 .510 .659 13.885 .000 Step 4: OC TF JS .781 .609 194.168 .000 .152 .192 4.041 .000 Step 1: TA JS .091 .008 2.158 .143 .146 .091 1.469 .143 Step 2: TA OC .049 .002 .608 .436 .100 .049 .780 .436 Step 3: TA OC JS .771 .595 185.531 .000 .598 .766 19.122 .000 Step 4: OC TA JS .771 .595 185.531 .000 .088 .055 1.377 .170 Note: Transformational leadership (TF), Transactional leadership (TA), Organizational commitment (OC), Job satisfaction (JS)

Table 5: Results of Regression Analysis for Mediating Variable of Organizational Commitment between Transformational and

Transactional Leadership Behaviors and Job Satisfaction in Supportive and Bureaucratic Culture ANOVA Coefficients

Steps R R2 F Sig. B Beta t Sig. Step 1: TF JS .512 .262 164.527 .000 .414 .512 12.827 .000 Step 2: TF OC .409 .167 93.183 .000 .395 .409 9.653 .000 Step 3: TF OC JS .742 .550 279.548 .000 .492 .591 17.219 .000 Step 4: OC TF JS .742 .550 279.548 .000 .215 .269 7.834 .000 Step 1: TA JS .192 .037 17.960 .000 .228 .192 4.238 .000 Step 2: TA OC .117 .014 6.548 .011 .167 .117 2.559 .011 Step 3: TA OC JS .704 .495 226.054 .000 .569 .684 20.510 .000 Step 4: OC TA JS .704 .495 226.054 .000 .121 .102 3.066 .002


Transactional Leadership Behaviors and Job Performance in Innovative Culture ANOVA Coefficients

Steps R R2 F Sig. B Beta t Sig. Step 1: TF JP .062 .004 .989 .321 -.056 -.062 -.995 .321 Step 2: TF OC .551 .303 109.681 .000 .563 .551 10.473 .000 Step 3: TF OC JP .163 .026 3.407 .035 .155 .178 2.388 .018 Step 4: OC TF JP .163 .026 3.407 .035 -.146 -.164 -2.195 .029 Step 1: TA JP .005 .000 .006 .940 .008 .005 .076 .940 Step 2: TA OC .049 .002 .608 .436 .100 .049 .780 .436 Step 3: TA OC JP .080 .006 .831 .437 .068 .080 1.274 .204 Step 4: OC TA JP .080 .006 .831 .437 .015 .008 .135 .893 Note: Transformational leadership (TF), Transactional leadership (TA), Organizational commitment (OC), Job performance (JP)


Transactional Leadership Behaviors and Job Performance in Supportive and Bureaucratic Culture ANOVA Coefficients

Steps R R2 F Sig. B Beta t Sig. Step 1: TF JP .093 .009 4.129 .043 -.084 -.093 -2.032 .043 Step 2: TF OC .409 .167 93.183 .000 .395 .409 9.653 .000 Step 3: TF OC JP .158 .025 5.961 .003 .121 .131 2.604 .010 Step 4: OC TF JP .158 .025 5.961 .003 -.140 -.157 -3.133 .002 Step 1: TA JP .047 .002 1.055 .305 .061 .047 1.027 .305 Step 2: TA OC .117 .014 6.548 .011 .167 .117 2.559 .011 Step 3: TA OC JP .084 .007 1.669 .190 .072 .079 1.698 .090 Step 4: OC TA JP .084 .007 1.669 .190 .028 .022 .470 .639


CONCLUSIONS

The literature review discussed several studies that found correlations among leadership behaviors, organizational culture, and human resource behaviors, and other studies that found no such relationship. Prior research has looked at specific human resource behaviors associated with the transformational and transactional leadership models as both moderating and mediating effects of organizational culture and commitment respectively. Yet none has examined these relationships in an Asian setting. This study, therefore, is unique in that it has helped to fill this gap in an effort to improve our understanding of the role of leadership in the global environment. With increasing globalization, greater knowledge of the interaction of these factors in non-western cultures can be beneficial for assessing the effectiveness of current theory as well as benefiting practicing leaders and decision makers. Findings from this study can help all leaders and scholars, especially those concerned with Asian companies. First, these current results confirm the effect of leadership behaviors on organizational commitment is to be differed by organizational culture. Leaders must recognize this as they seek to influence employees and achieve their organizational goals. Second, this research lends credibility to the notion that idealized influence leaders with innovative culture will result in more committed employees. Regardless of conditions in the labor market, committed employees are always a necessary and valuable organizational resource. Third, the mediating effort of organizational commitment in the relationship between transformational leadership behaviors and job satisfaction is found to be not influenced by the organizational culture. Finally, the organizational commitment mediates the relationship between transformational leadership behaviors and job performance in supportive and bureaucratic culture is found. Therefore, by training supervisors to exert transformational leadership, employees commitment, job satisfaction and performance may be enhanced.

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Examining the Effect of Organization Culture and Leadership Behaviors on Organizational Commitment, Job Satisfaction, And Job Performance