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The effects of employee satisfaction, organizational citizenship behavior, and turnover on organizational effectiveness: A unit‐level, longitudinal study

The effects of employee satisfaction, organizational citizenship behavior, and turnover on organizational effectiveness: A unit‐level, longitudinal study
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  PERSONNEL PSYCHOLOGY zyxwvut 1,54 zyxwvutsr THE EFFECTS OF EMPLOYEE SATISFACTION, ORGANIZATIONAL CITIZENSHIP BEHAVIOR, AND TURNOVER ON ORGANIZATIONAL EFFECTIVENESS: A UNIT-LEVEL, LONGITUDINAL STUDY DANIEL J KOYS Department of Management DePaul University zyxw This study addresses the issue of whether positive employee attitudes and behaviors influence business outcomes or whether positive busi- ness outcomes influence positive employee attitudes and behaviors. We hypothesize that employee satisfaction organizational citizenship behavior and employee turnover influence profitability and customer satisfaction. Data were gathered from the units of a regional restau- rant chain via employee surveys manager surveys customer surveys and organizational records. Cross-lagged regression analyses show that employee attitudes and behaviors at Time 1 are related to organiza- tional effectiveness at Time 2. Additional cross-lagged regression anal- yses show no significant relationship between organizational effective- ness at Time 1 and the employee attitudes and behaviors at Time 2. These results add to the evidence that HR outcomes influence busi- ness outcomes rather than the other way around. The management literature has been accumulating evidence that hu- man resource outcomes are related to business outcomes. However, most of the empirical studies have been conducted in the manufactur- ing sector and most of them have used cross-sectional designs. This ar- ticle presents evidence from the service sector and uses a longitudinal design. The link between Human Resource (HR) outcomes and busi- ness outcomes discovered in previous cross-sectional studies may have occurred either because (a) good firm performance allowed companies to engage in progressive HR strategies or (b) progressive HR strategies encouraged good firm performance. A longitudinal design can help us better understand the relationship between human resource outcomes and business outcomes. Human resource management and organizational behavior theories suggest that the proper use of people enhances organizational effec- tiveness. Most of the empirical studies testing this proposition have as- Correspondence and requests for reprints should be addressed to Daniel J Koys, De- partment of Management, DePauI University, 1 E. Jackson Blvd., Chicago, L z 0604; COPYRIGHT zyxwvuts   001 PERSONNEL PSYCHOLOGY, INC. 101  102 PERSONNEL PSYCHOLOGY zyx sumed a causal chain that says management practices (e.g., effective se- lection) influence HR outcomes (e.g., employee performance and em- ployee retention), which in turn influence organizational outcomes (e.g., customer satisfaction). Some of the studies have related HR activities to organizational outcomes, leaving the intermediate step as a “black box.” For example, some studies have shown significant relationships be- tween HR strategies (e.g., high performance and high commitment work systems) and organizational performance (Arthur, 1994; Huselid, 1995; nui, Pearce, Porter, zyxw   Tripoli, 1997). Other studies have shown rela- tionships between specific HR activities (e.g., training, competitive pay, advancement opportunities) and organizational effectiveness (Delaney & Huselid, 1996; Ulrich, Halbrook, Meder, Stuchlik, & Thorpe, 1991). Most of these studies used cross-sectional designs. Longitudinal designs can provide better evidence of causality. Ryan, Schmit, and Johnson (1996) performed a longitudinal study in multiple branches of a financial service organization. In each of 2 suc- cessive years, their regression analyses showed that unit-level employee satisfaction was related to unit-level customer satisfaction, employee turnover, and a 60-day delinquency rate. This was as they expected. Un- expectedly, their structural equation model showed that customer satis- faction at Time 1 was related to employee satisfaction at Time z   but employee satisfaction at Time 1 was not related to customer satisfaction at Time 2. Thus, they suggested that customer satisfaction causes em- ployee satisfaction. zyxwv Employee Attitudes Why should there be a relationship between unit-level employee job satisfaction and organizational effectiveness? After all, the empirical ev- idence has shown only a weak relationship zyx T = .17) between individual- level employee satisfaction and individual-level performance (Iaffal- dano & Muchinsky, 1985). Ryan et al. (1996) argued that organizational performance is not simply a sum of individuals’ performances; therefore it may be influenced by factors other than those affecting individual-level performance. One of these factors may be “shared values.” If a unit’s employees share positive attitudes, they should have norms of coopera- tion and collaboration, which in turn enhance unit productivity (Ryan et al., 1996). Schneider’s work has supported this proposition. His attraction- selection-attrition model (Schneider, Goldstein, Smith, 1995) said that over time, employees in an organization become more homoge- neous in disposition and develop shared attitudes. He argued that aggre- gated employee satisfaction should be correlated with aggregated cus-  DANIEL J. KOYS 103 tomer satisfaction because employees in boundary-spanning roles are in positions to be aware of and responsive to organizational and cus- tomer goals (Schneider zyxw   Bowen, 1985). More recently, he conducted a longitudinal study about the relationship of employee attitudes and customer attitudes (Schneider, White, & Paul, 1998). Using structural equation modeling, he found that employee perceptions of a “climate for service” lead to subsequent customer perceptions of service quality. However, his cross-lagged analysis indicated that there was a recipro- cal effect between employee perceptions of a “climate for service” and customer quality perceptions. zyx   more practitioner-oriented rationale for the influence of aggre- gated employee attitudes on organizational effectiveness was presented in the “service profit chain” (Heskett, Sasser, & Schlesinger, 1997). The model proposed that work force capability, satisfaction, and loy- alty would lead to customers’ perceptions of value. That value percep- tion would lead to customer satisfaction and loyalty, which would lead to profits and growth. Heskett et al. (1997) presented cross-sectional evi- dence that employees’ perceptions of their capabilities, satisfaction, and length-of-service were correlated with customer satisfaction. Using an “employee-customer-profit” chain, researchers at Sears analyzed ag- gregated data from 800 stores. They found that employees’ attitudes towards their company and their jobs lead to positive employee behav- iors towards customers (Rucci, Kirn, & Quinn, 1998). Such a chain was also apparent in an industry-wide study of restaurants that concluded that restaurant managers need to do a better job of being an “employer of choice” if they are to satisfy customers and produce financial results (Foodservice Research Forum, 1997). zyx Employee Behaviors Employee attitudes cannot influence organizational effectiveness on their own; employees must also behave appropriately. Two employee behaviors that are important to many managers are job performance and retention. This study addresses that aspect of performance behavior known as organizational citizenship and it addresses employee turnover. We use Organ’s (1988) five categories of organizational citizenship behavior (OCB). Conscientiousness means that employees carry out in- role behaviors (i.e., individual task performance) well beyond the mini- mum required levels. Altruism implies that they give help to others. z ivic virtue suggests that employees responsibly participate in the political life of the organization. Sportsmanship indicates that people do not com- plain, but have positive attitudes. Courtesy means that they treat others with respect.  104 PERSONNEL SYCHOLOGY There are several reasons why these behaviors can influence orga- nizational performance. Based on social exchange theory (Blau, 1964), aggregate citizenship behaviors would improve group performance be- cause they help people work together (Organ, 1988; Podsakoff, Ahearne, z   MacKensie, 1997). Employees who help each other would not have to go to supervisors for help, leaving the supervisors free to do more impor- tant things. Organizational citizenship behavior would also help coordi- nate activities among team members and across groups (Podsakoff et al., 1997). For example, courteous people would inform each other about nonroutine demands, allowing them to take steps to mitigate problems. The empirical evidence supports this theory. In one cross-sectional study, civicvirtue and sportsmanship were positively correlated with unit performance (Podsakoff & MacKenzie, 1994). zyx   meta-analysis showed that citizenship behaviors correlated with job satisfaction, perceived fair- ness, organizational commitment, and leader supportiveness (Organ Ryan, 1995). Almost all of the studies in that meta-analysis used cross- sectional designs. Organizational citizenship behavior can also contribute to customer satisfaction (Morrison, 1995). Conscientious employees would go be- yond customer expectations. Altruistic workers would help internal and external customers. Those exhibiting civic virtue would make sugges- tions to improve quality and customer satisfaction. Sportsmanship and courtesy would create a positive climate among employees that spills over to customers. In another cross-sectional study, civic virtue, sports- manship, and altruism were positively correlated with financial results and customer satisfaction (Walz & Niehoff, 1996). Employee retention can influence organizational effectiveness be- cause more experienced employees would have greater knowledge of organizational and customer goals (Schneider & Bowen, 1985). Costs would be lower because a low turnover rate means less hiring and train- ing activities. Empirical studies have shown that employee turnover does have a negative correlation with organizational effectiveness. For exam- ple, a study at Sears showed that as voluntary turnover decreased, finan- cial performance (i.e., return on controllable assets) increased (Ulrich et al., 1991). Ostroff 1992) reported negative relationships between high school teacher turnover and student academic achievement, stu dents’ satisfaction, administrative performance, and the percent of stu- dents who dropped out of high school. Our study looks at three HR outcomes: employee satisfaction, orga- nizational citizenship behavior, and employee turnover. We investigate the relationship between unit-level measures of those HR outcomes in one year and unit-level measures profitability and customer satisfaction in the following year. Specifically, we test the following hypotheses:  DANIEL J. KOYS 105 z Hypothesis 1: There is a significant relationship between Year 1’s unit- level employee satisfaction (positive), organizational citizenship behavior (positive), and employee turnover (negative) and Year 2’s unit-level prof- itability. Hypothesis 2: There is a significant relationship between Year zy ’s unit- level employee satisfaction (positive), organizational citizenship behavior (positive), and employee turnover (negative) and Year 2’s unit-level cus- tomer satisfaction. The second hypothesis goes against the results reported by Ryan et al. (1996). We expect that our results will differ from Ryan et al.’s (1996) results because our investigation differs from theirs in three ways. First, their study focused on attitudes. Our study examines an attitude (em- ployee satisfaction) and two behaviors (OCB and turnover). We sus- pect that employee behaviors have a more direct impact on organiza- tional effectiveness han do employee attitudes, especially when the con- cept of organizational effectiveness includes profitability z s well as cus- tomer attitudes. Second, the Ryan et al. (1996) study used employee turnover as a measure of organizational effectiveness; we use turnover as an employee behavior and thus a predictor of organizational effec- tiveness. High turnover means that the workforce is inexperienced; that inexperience should have a negative effect on business outcomes. Third, Ryan et al. (1996) studied employees who handled all customer transac- tions by phone or mail; we study employees who meet customers face-to- face. This may enhance the effect of employee attitudes and behaviors on business outcomes. A longitudinal design can help us see whether HR outcomes influ- ence business outcomes or if business outcomes influence HR outcomes. Most of the literature on employee attitudes and behaviors implies the former. Thus, we propose that the relationship between Year 1’s HR outcomes and Year 2’s business outcomes will be stronger than the rela- tionship between Year 1’s business outcomes and Year 2’s HR outcomes. z Methods Our research was conducted in a regional restaurant chain. We col- lected useable data from 28 stores in that chain over a 2-year period. (This is a small sample size in comparison to most individual-level stud- ies. However, we suggest that our use of longitudinal, unit-level data will still contribute to the HR strategy literature.) To avoid common method bias, all variables were measured via different methods. We used cross- lagged correlation and regression analyses (using a l-year time lag, as did Ryan et al., 1996) to test our hypotheses.
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