Procedia - Social and Behavioral Sciences 99 ( 2013 ) 363 – 372
1877-0428 © 2013 The Authors. Published by Elsevier Ltd.
Selection and peer-review under responsibility of the International Strategic Management Conference.
doi: 10.1016/j.sbspro.2013.10.504
ScienceDirect
9th International Strategic Management Conference
The Effects of Leadership and Market Orientation on Organizational Commitment
a
, Cemal Zehir
b, A.Zafer Acar
c, Melike
d, a
a Gebze Institute of Technology, Kocaeli, 41400, Turkey
b
cOkan University, Istanbul, 34722, Turkey
d , Turkey
Abstract
High performing organizations achieving the sustainable growth have attracted attention of so many researchers in strategic management. The characteristics, structures, cultures and environments of those firms have been surveyed by many researchers.
Most of these researches have revealed the importance of organizational capabilities in achieving sustainable growth in those high performing organizations. In this context, this survey has emphasized the leadership, market orientation and organizational commitment as the sources of sustainable growth in high performing organizations.
The survey of this study is conducted on 343 middle and senior managers of 125 high performing firms operating in manufacturing industry in Turkey, between the years of 2008-
the years of 1997-2007, and (2) not being undergone a loss for those 10 years, are indexed as high performing firms. The obtained data from the questionnaires are analyzed through the SPSS statistical packaged software. Factor analysis, reliability analysis, correlation and regression analyses are used to evaluate the data. Analyses results revealed that two dimensions of market orientation (customer orientation and inter functional coordination) mediate the effects of the change oriented leadership behavior on organizational commitment.
Keywords: Change oriented leadership, Market orientation, Organizational commitment, High performing organizations, Sustainable growth.
2013 Published by Elsevier Ltd. Selection and/or peer-review under responsibility of the 9th International Strategic Management Conference
Introduction
From the business perspective, sustainable growth, in simple terms, can be defined as attainable growth that a company could maintain without running into problems. Achieving sustainable growth is a primary concern of small business owners and big corporate executives alike. However, it is no easy task, given rapidly changing political,
Corresponding author. Tel. + 90-262-605-1426 fax. +90-262-654-3224 Email address: m.ozsahin@gyte.edu.tr
© 2013 The Authors. Published by Elsevier Ltd.
Selection and peer-review under responsibility of the International Strategic Management Conference.
Open access under CC BY-NC-ND license.
Open access under CC BY-NC-ND license.
economic, competitive, and consumer trends. Customer expectations, for example, have changed considerably over the last few generations. Modern consumers have less disposable wealth than their parents, which makes them more discriminating buyers. So, companies must try to attract customers by redefining value and keep those customers by beating their competitors in enhancing value. Similarly, competition is keen in nearly all industries, which have seen unprecedented breakdowns in the barriers that formerly separated them.
Even though the growth challenge is articulated differently by different companies and within different industries, most companies along with ongoing efforts to rebuild organizational capabilities. Companies that manage to rebuild organizational capabilities in accordance with the changing trends and achieve sustainable growth have become high performing organizations. It is widely investigated which capabilities in those high performing organizations lead to sustainable growth.
We adopt a resource-based perspective to identify organizational capabilities that would help organizations to a
tangible and intangible factors that a business owns or controls, which enable a firm to produce, efficiently and/or effectively, market offerings that have value for some market segments
capabilities, change-oriented leadership, market orientation, and committed employees to the organization, were emphasized in this survey as factors inducing sustainable growth in high performing organizations.
ations.
Companies recognize that good human resources are as important as products in building a sustainable competitive advantage. Because qualified human resource has been seen the most important organizational capability as a source of the sustainable competitive advantage, maintaining that human resource become main concern of high performing organizations to perpetuate their success. So, increasing the organization commitment is being placed on top of the agenda of high performing organizations, and the factors inducing high organizational commitment were investigated.
In this context, this survey emphasis on the effects of the change-oriented leadership and market orientation on organizational commitment, in high performing organizations.
Jim Collins
maps out three stages, each with two key concepts as the heart of Good to Great. Leadership, which is called the performing organizations in literature
Besides leadership, cultural competitiveness is emphasized as another high performing factor in literature. Firms , have the et al.
which an organization is predisposed to detect and fill gaps between what the market desires and what is currently d argue that four culture-based factors entrepreneurial orientation, market orientation, learning orientation and innovativeness-
survey market orientat
the sustainable growth in high performing organizations. The study begins by a literature review of change-oriented leadership, market orientation and organizational commitment, then will go on to development of hypotheses.
Research methodology, analyses results and research model will take place at second section. The results of the analyses will be discussed and recommendation will be provided for managers and academician at the last section.
1. Literature Review And Hypotheses 1.1. Change-Oriented Leadership
In 1980s, companies have begun to operate in a rapidly changing business environment. In order to survive in the new environment, organizations realized that they should change. So to managing change and to lead organizations in that direction become main concern of executives. Also managing the change become the main concern of executives, and most critical responsibility of leadership (Kotter, 1990). In this context, transformational, charismatic and change
oriented leadership theories have been revealed (Bass, 1990; Conger and Kanungo, 1988; Yukl, 2002; Gil et al., c and transformational Change-oriented leadership behavior is primarily concerned with improving strategic decisions; adapting to change in the environment; increasing flexibility and innovation; making major changes in processes, products, or services;
and gaining commitment to the changes (Yukl, 2002: 65). Specific types of change-oriented behaviors can be classified as (1) influencing organizational culture, (2), developing a vision, (3) implementing change, (4) increasing innovation and learning (Yukl, 2002).
1.2. Market Orientation
Market orientation, as the source of the competitive advantage and a key to future organizational success, has been conceptualized from two basic and complementary perspectives: behavioral and cultural (Homburg and Pflesser, 2000; Langerak, 2003). Behavioral approach defines market orientation in terms of specific behaviours related to the organization-wide generation of market intelligence pertaining to current and future customer needs, dissemination of this intelligence across departments and organization-wide responsiveness to it (Kohli and Jaworski, 1990). On the other hand cultural stream describes market orientation as a culture that produces outstanding performance through its commitment to creating superior value for current and potential customers (Despande et al., 1993; Slater and Narver, 1994; 2000; Hult et al., 2003; Langerak, 2003). The values and beliefs implicit in this culture encourage: (1) continuous cross-func
and strategies; and (2) cross-fucntionally coordinated action to create and exploit the learning (Slater and Narver, 2000:69).
Even though so many viable market orientation frameworks exist in literature, we adopt the conceptualization of Narver and Slater because of its focus on organizational culture, which builds sustainable growth as a part of organizational capability. From the cultural perspective, market orientation exhibits three focuses: customer orientation, competitor orientation and inter-functional coordination (Narver and Slater, 1990).
those of
evolves over time (Slater and Narver, 1994). Customer focus is accepted as the heart of the market orientation and employees of market oriented business spend considerable time with their customers. Moreover, market driven business also continuously monitor their customer commitment by making improved customer satisfaction an ongoing objective. To maintain the relationships that are critical to delivering superior customer value, they pay close attention to services. Because of the importance of employees in this effort, these business take a great care to recruit and retain the best people available (Slater and Narver, 1994:23).
Creating superior customer value requires more than just focusing on customers. Superior value requires that the seller identify and understand the principal competitor short-term strengths and weakness and long-term capabilities and strategies. A seller should adopt a chess game perspective of its current and principal potential competitors.
Moreover, it should continuously examine the competitive threats they pose, inferring these threats from intent and value creation capabilities (Slater and Narver, 1994: 23). Slater and Narver (1994) argue that the success of Japanese
competitive threats. Using this information market driven businesses often target opportunities for competitive Interfunctional coordination is another component of market orientation that helps to capture competitive dividual in any function in a seller firm can potentially contributes to value creation as Porter indicates:
Every department, facility, branch office and other organizational unit has a role that must be defined and understood. All employees, regardless of their distance from strategy formulation process, must recognize their role in helping a firm achieve and sustain competitive advantage (1985: 16-17).
To accomplish this, effective companies have developed horizontal structures that focus on building value (Slater and Narver, 1994). For example, engineering becomes involved during preliminary market research to help marketers understand what is feasible; production is involved during product design to ensure that the product can be
manufactured at a reasonable cost. When all functions contribute to creating buyer value this way, more creativity is brought to bear or increasing effectiveness and efficiency for customers (Slater and Narver, 1994: 24).
1.3. Organizational Commitment
Organizational commit
commitment may emerge as a strong desire to remain a member of a particular organization; a willingness to exert high levels of effort on behalf of the organization; or a definet belief in, and acceptance of, the values and the goals of the organization (Mowday et al., 1982). Luthans also defined the organizational commitment as an attitude about the their concern for the organization and its continued success and well being (Luthans, 1992: 124).
Literature is full of the researches examining the personal (age, sex, occupationtenure in organization etc.) and organizational (such like leadership style, organizational culture, job design, job satisfaction) determinants of organizational commitment (see Luthans, Baack and Taylor, 1987). In this survey change oriented leadership style and market orientation (as a part of organizational culture) are examined as organizational factors affecting the organization commitment.
1.4. Development of Hypotheses
means commitment to top
organizational commitment. In literature, some researches have explored that organizational commitment was affected by participative, considering and task oriented leadership behaviors (Glisson and Durick, 1988; Jermier and Berkes, 1979; Sarvey, 1991; Zaffane, 1994), while some researches have found no relationship between organizational commitment and leadership behavior (Hampton, Dubsinsky, and Skinner, 1986; Johnston, Parasuraman, Futrell, and behavior have explored the positive relationship between those factors and organizational behavior (Avolio, Zhu, Koh, and Bhatia, 2004; Bono and Judge, 2003; Walumbwa, Orwa, Wang and Lawler, 2005).
On the other hand market orientation, as a part of organizational culture, is depicted another organizational factor determining the organizational commitment. In literature the relationship between market orientation and commitment Park, Kim and Moon, 2008). However, in this survey this relation is handled as
organizations. We argue that market oriented organizations lead to more committed employees to the organization.
Interfunctional coordination, as a component of market orientation, helps to increase the communication among employees. Employees coommunicating to people at all hierarchical level and suggesting their ideas began to feel that they are valuable and they make important contributions to the organization. So they will be willing to make more contributions to the organization because the organization provides them such an environment where employees communicate freely and even they decide what to do when it is required. That will also increase their commitment to the organization.
Moreover, customer oriented organization will be also more sensitive to the demands of not only their customers but also their employees, because employees represent the organization in front. When employees are dissatisfied with the organization, they will reflect this satisfaction in their behavior and attitudes. So, to prevent this undesirable considered by the organization, employees will be more committed to their organization.
It should be kept in mind that, in that kind of market oriented organizations top management play an important role in establishing customer oriented culture and interfunctional coordination. Leaders can directly decide to introduce new ideas in to organization, set specific goals, encourage subordinates for innovation and learning (Harbone and Johne, 2003; McDonough, 2000; Aragon-Corea et al., 2007). Especially change oriented leadership by focusing on lective decisions and activities, provide teams with direction, energy, and support for process of change (Aragon-Corea et al., 2007). Steyrer et al. (2008) also indicates that
charismatic/value based leaders, which shares more common characteristics with change ori
al., 2011), have affect organizational commitment positively by motivating followers. So leadership style, especially change oriented leadership behavior, captured our attention in handling the relationship between market orientation and organizational commitment. In this sense we assert that:
H1: Customer orientation mediates the effect of change-oriented leadership on organizational commitment.
H2: Competitor orientation mediates the effect of change-oriented leadership on organizational commitment H3: Interfunctional coordination mediates the effect of change-oriented leadership on organizational commitment
2. Methodology 2.1. Research Goal
In this survey we aim to identify the mediating effect of market orientation on the relationship between leadership style and organizational commitment. To test the propositions, a field survey using questionnaires was conducted.
2.2. Sample and Data Collection
The survey of this study is conducted on 343 middle and senior managers of 125 high performing firms operating in manufacturing industry in Turkey, between the years of 2008-2010. Firms fulfilling the criteria that (1) being -2007, and (2) not being undergone a loss for those 10 years, are indexed as high performing firms.
435 firms that meet those two requirements were contacted via email or phone and informed about the research.
However 127 firms accepted to participate in and fill out the research questionnaire. Questionnaires obtained from two - Data obtained from those 343 questionnaires were analyzed through the SPSS statistical packet program and three proposed relations were tested through regression analyses.
2.3. Measures
Change-oriented leadership scale is adopted from Yukl (2002), which uses 13 items to measure change oriented leadership behavior. To measure market orientation 17 items scale consisting of three sub-dimensions (customer orientation, competitor orientation and interfunctional coordination) was used.
However 2 items which do not load on to any extracted factor were removed. So, 3 items for competitor orientation, 6 items for customer orientation and 6 items for inter-functional coordination were used to measure market orientation.
Organizational commitment scale adopted from Mowday, Steers & Porter (1979), and Wood, Chonko & Hunt (1986).
weak factor loadings were eliminated. Remaining 36 items were loaded on four different factors (change oriented leadership, customer orientation, competitor orientation, inter-functional coordination, organization commitment) without any cross-loadings.
3. Analyses and Results
Overall, 36 items using 5 likert-type scale are used to measure change-oriented leadership, market orientation and organizational commitment. Those items with factor loadings were depicted on the Table 1. Also as it has been seen used in that survey.
Table 1 Factor Analysis Results
Change-Oriented Leadership Customer Orientation Inter-functional Coordination Competitor Orientation Organizational Commitment CHANGE ORIENTED LEADERSHIP
Empower people to implement new strategies ,810
Encourage and facilitate innovation and entrepreneurship by others 787 Encourage people to view problems or opportunities in a different way ,771
Announce and celebrate progress in implementing change ,766
Develop innovative new strategies linked to core competencies ,757
Experiment with new approaches ,754
Make symbolic changes that are consistent with a new vision or strategy ,751
Envision exciting new possibilities for the organization ,749
Build a coalition of key people to get change approved ,748
Form task forces to guide implementation of change ,728
Encourage and facilitate learning by individuals and teams ,724
Interpret events to explain the urgent need for change ,643
Study competitor and outsiders to get ideas for improvements ,529
MARKET ORIENTATION
Our business objectives are driven primarily by customer satisfaction ,781 Our strategies are driven by beliefs about how we can create greater value for Customers ,747 ,723 Our strategy for competitive advantage is based on our understanding of customer needs ,722
We give close attention to after-sale service ,607
We measure customer satisfaction systematically and frequently ,600
Our sales people communicate the information about the market, competitors and customers across the all functions
,726
We communicate information about customer experiences across all business functions ,722 We communicate information concerning customer satisfaction across all business functions ,691 All of our business functions are integrated in serving the needs of our target markets ,659 Our top managers from every functions regularly visit current and prospective customers ,652 ,583
,806
We rapidly respond to competitive actions that threaten us ,775
,728 ORGANIZATIONAL COMMITMENT
I am loyal to our company ,816
I am willing to put in a great deal of effort beyond normally expected in order to help our company to achieve its aims
,811
I care about the future prospects of our company ,810
I am willing to stay with the company in good times or bad times ,789
I am willing to work hard for success of our company ,774
I am totally dedicated to my job in this company ,761
I am satisfied with my job in this company ,668
I am satisfied with my colleagues in this company ,631
Total Explained Variance %66,502
Table 2. Cronbach Alpha Values and Source of Scales
Concepts Number of
Items
Scale Format
Cronbach Alpha
Scale Sources
Change-Oriented Leadership 13 LRF 0,950 Yukl (2002)
Customer Orientation 6 LRF 0,893 Narver and Slater (1990)
Competitor Orientation 3 LRF 0,803 Narver and Slater (1990)
Inter-functional Coordination 6 LRF 0,900 Narver and Slater (1990)
Organizational Commitment 8 LRF 0,924
Adopted from:
Mowday, Steers and Porter (1979) Wood, Chonko and Hunt (1986) Notes: a LRF - Likert Response Format (Five point: 1=strongly disagree to 5=strongly agree)
In this study, regression analysis is also conducted to test the hypotheses and to define the direction of relations.
When we examined the Table 3, it can be seen that change-oriented leadership has significant effect on all dimensions of market orientation (customer orientation, customer orientation, interfunctional coordination) and organizational commitment.
Table 3. Regression Analysis Results on the Mediator Effect of Customer Orientation and Interfunctional Coordination on Change Oriented Leadership Organizational Commitment Relationship
Regression Model
Independent Variables
Depended Variables
Standardized Sig. Adjusted R2
F Value Model Sig.
1 Change-Oriented
Leadership
Organizational
Commitment ,471*** ,000 ,220 97,456 ,000
Customer
Orientation ,575*** ,000 ,329 168,531 ,000
Competitor
Orientation ,433*** ,000 ,185 78,566 ,000
Inter-Functional
Coordination ,613*** ,000 ,375 205,809 ,000
2
Customer Orientation
Organizational Commitment
,318*** ,000
,369 67,728 ,000
Competitor
Orientation -,068 ,190
Inter-Functional
Coordination ,393*** ,000
3
Customer Orientation
Organizational Commitment
,280*** ,000
,378 52,935 ,000
Competitor
Orientation -,081 ,119
Inter-Functional
Coordination ,342*** ,000
Change-Oriented
Leadership ,136 ,017
According to the Table 3, change oriented leadership has significant relationship to commitment to customer orientation ( =,575; p= ,000), competitor orientation ( =,433; p= ,000), inter-functional coordination ( =,613; p=
,000) and organizational commitment ( =,471; p= ,000). Moreover, customer orientation ( =,318; p= ,000), and inter- functional coordination ( =,393; p= ,000) have significant effects to the organizational commitment although the the relationship of competitor orientation to organizational commitment is not statistically significant ( =-,081; p= ,119).
However when change oriented leadership has been included in regression analysis with the dimensions of market orientations (customer orientation, competitor orientation and inter functional coordination) as independent variables, the significant effect of change oriented leadership at p<,001 on organizational commitment has disappeared ( =,136;
p= ,017) while others maintain their significant effects at p<,001 on organizational commitment ( =,280; p= ,000 for customer orientation and =,342; p= ,000 for inter-functional coordination). So, regression analysis results support H1 and H3 hypotheses. However H2 hypothesis is not supported.
In accordance with the regression analyses results, research model is being shaped as it has been shown at Figure 1 below:
Figure 1. Final Research Model
4. Conclusion
This survey, which is conducted on high performing firms of Turkey achieving the sustainable growth, highlighted the relationship among the leadership style, market orientation and organizational commitment. The most striking result to emerge from data is that customer orientation and interfunctional coordination mediate the effects of change- oriented leadership behavior on organizational commitment. So, H1 (Customer orientation mediates the effect of change-oriented leadership on organizational commitment) and H3 (Interfunctional coordination mediates the effect of change-oriented leadership on organizational commitment) are supported. Surprisingly, H2 (Competitor orientation mediates the effect of change-oriented leadership on organizational commitment) is not supported.
These findings are consistent with the literature. Harris and Ogbonna (2001), indicates that non directive role clarification and consideration fosters all facets of market orientation. No single individual can achieve organizational goals without the help of others. Interfunctional coordination, as a component of market orientation, helps to increase the communication among employees. At this point, change-oriented leaders, primarily concerned with improving strategic decisions, developing a vision, adapting to change in the environment, increasing flexibility and innovation, influencing organizational culture, (Yukl, 2002: 65) play and important role in establishing communication, coordination and integrity among the organization by providing sense of direction and vision which contributes to increased follower self efficacy; by encouraging pride in belonging to a group; and by linking work values to those of followers thus increasing the extent to which followers view their work as self-expressive (Steyrer et al., 2008:366).
So, change oriented leadership behavior, focusing on influencing organizational culture, developing a vision, implementing change, will increase the sense of belonging to the organization, namely organizational commitment, among employees by establishing coordination and integration between all functions and hierarchies to make them move in same direction. Employees communicating to people at all hierarchical level and suggesting their ideas began to feel that they are valuable and they make important contributions to the organization. So they will be willing to make more contributions to the organization because the organization provides them such an environment where employees communicate freely and even they decide what to do when it is required.
Moreover, customer oriented organization will be also more sensitive to the demands of not only their customers but also their employees, because employees are internal customers of the organization and represent the organization
Change-Oriented Leadership
Organizational Commitment H1
H2 H3
Accepted Not Accepted
Inter-Functional Coordination
Competitor Orientation Customer
Orientation H1
H3 H2
in front. So, change oriented leadership behavior, focusing on influencing organizational culture, developing a vision, - n making major changes in processes, products, or services. When their demands and needs are taken in to consideration by the managers, employees will be more committed to their managers, so to their organization as commitment to top management means commitment to organization (see Meyer and Allen 1997:17).
Although there are so many studies examining the leadership style-organizational commitment relation (Avolio et al., 2004; Bono and Judge, 2003; Walumbwa et al., 2005; Hampton, Dubinsky and Skinner, 1986) and few studies on leadership behavior-market orientation relation (e.g. Harris and Ogbonna, 2001) in literature; the mediator effect of market orientation on the relationship between leadership behavior and organizational is examined and revealed for the first time through that survey, which differentiates this survey from others.
However, this survey is conducted on high performing firms of Turkey; findings might not be transferable to all types of organizations. Thus, it is recommended that further researches can be conducted on small-scale organizations and, also in different countries for the generalizability of findings. In the direction of the findings, for achieving sustainable growth in organization, executives of the firms can be recommended to empower customer oriented culture and interfunctional coordination and encourage change-oriented leadership behavior in their organization.
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