Path-Goal Leadership 1. Organizational Leadership, HRD and Employee and Customer Outcomes: The Case of. the U.S. Healthcare Sector

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1 Path-Goal Leadership 1 Organizational Leadership, HRD and Employee and Customer Outcomes: The Case of the U.S. Healthcare Sector Dr. Mesut Akdere, University of Wisconsin-Milwaukee Dr. Toby Egan, Indiana University-Purdue University Indianapolis Abstract Although long argued as a critical element for organizational success, few studies have demonstrated overt alignment between leadership behavior and Human Resource Development (HRD) practices. Employee and customer outcomes related to such alignment have been even more uncommon in HRD-related literature. The purpose of the exploratory study, reported herein, was to examine the role effective managerial practices on employee perceptions of support for organizational human resource development. Study participants included 922 employees and 652 customers/patients from 40 health care organizations in the United States. Study findings supported that effective leadership practices align with HRD and lead to positive employee and customer outcomes. Keywords: Leadership effectiveness, organizational HRD culture, organizational outcomes, employee satisfaction, customer satisfaction, performance

2 Path-Goal Leadership 2 Organizational Leadership, HRD and Employee and Customer Outcomes: The Case of the U.S. Healthcare Sector Leadership has become a significant process both for business and management as well as Human Resource Development (HRD). Despite acknowledgement of the importance that HRD be led from the top of organizations and be viewed from a systems perspective, there have been few empirical studies examining the role and impact of leadership behaviors on organizational HRD culture and related outcomes. Understanding and exploring the role of leadership within the HRD context will allow both researchers and practitioners design and develop HRD functions that are aligned with organizational vision and mission, which would ultimately contribute to leadership effectiveness and organizational outcomes. The purpose of this study is to elaborate on an exploratory study examining the impact of effective leadership behaviors on employees perceived leader, organizational support for HRDrelated functions and organizational HRD culture on employee and customer satisfaction. Our overarching research question is How are outcomes associated with employees and customers related to leadership behavior and leaders support for HRD and organizational HRD culture? Examining HRD-related organizational outcomes is even more critical in an era of leadership accountability and organizational effectiveness. Conceptual Framework The conceptual framework for this exploratory study (Figure 1) situates effective leadership behaviors as related to perceived leadership support for training and development and HRD. In forming this portion of the conceptual framework we turned to path-goal leadership theory (House & Mitchell 1974; House, 1996). Because of the transactional nature of the theory, we believed that it best informed our questions regarding how leadership behaviors and

3 Path-Goal Leadership 3 organizational support could influence HRD and organizational outcomes. The original version of path-goal leadership theory was influenced by Vroom (1964) and Evans (1970). Vroom built on the path-goal approach to productivity (Georgopoulos, Mahoney, & Jones, 1957) toward his elaboration of expectancy theory. Evans (1970) suggested that follower actions were strongly influenced by leader behavior (path) and led to a specific outcome (goal). Vroom s expectancy theory emphasizes individual decision-making regarding behavioral choices whereby individuals choose to act in a particular way based on the anticipated results of their actions. Figure 1. Conceptual Model Effective Leadership Behaviors Leadership Support for HRD Organizational HRD Culture Employee Satisfaction Customer Satisfaction According to Northouse (2013), path-goal leadership theory reminds leaders that a central purpose for them should be to support followers/employees to reach their goals in a proficient manner. An underlying assumption within path-goal theory is that leaders are able to change their behaviors to align with the perceived need or situation. The environment is emphasized as a moderator between the leader behavior, the environment and follower-related outcomes. The environment is viewed to be outside the control of the followers locus of control, but within the leaders potential sphere of influence. Follower behavior is viewed as a result of interpretation of leader behavior, whereby effective leaders clear and clarify the path, often providing assistance and removing barriers, to support their followers to achieve goals.

4 Path-Goal Leadership 4 In the context of HRD, we view path-goal leadership to inform the role of leaders in shaping both support for HRD and HRD-related practices (most commonly training and development). The HRD-related literature suggests that there is the potential for an organization s culture or subculture to be described in HRD-related terms (Egan, 2004; Egan, Yang & Bartlett, 2002; Watkins & Marsick, 2003). Literature Review This study involves effective leadership behaviors. Therefore, the overarching research question for this study is: What is the relationship between effective leadership and HRD practices, and how do these practices influence employee and customer outcomes? Effective Leadership Behaviors Effective leadership behaviors have been framed in a variety of ways in popular literature from the early days of leadership literature, which often focused on war and governmental settings and focused primarily on men, to more recent times when the organizational contexts for leadership and descriptions of leader characteristics have been broadened. In comparison to available popular literature on leadership, the research on leadership related behavior is small. Two leadership areas gaining the most attention are Transactional-Transformational Leadership (Bass & Avolio, 1990) and Leader-Member Exchange (Graen & Uhl-Bien, 1995). Results from studies in these leadership areas suggest that leader use of task focused and person focused behaviors are moderately related to follower productivity (Burke et al., 2006), and focus on team learning and positive organizational culture/subculture have positive impacts for employees. Leader behaviors associated with empowerment and organizational support were highly associated with team and organizational outcomes. Additionally, there are early indications that leader/manager support for learning has a positive effect on employee affect and performance

5 Path-Goal Leadership 5 (Egan et al., 2004; Egan, 2008). Therefore, the hypotheses related to effective leadership behaviors included the following: 1 There is a positive relationship between effective leadership behaviors and employee perceptions of leadership support for HRD. There is a positive relationship between effective leadership behaviors and employee 2 perceptions of organizational support for T&D. Although no studies exploring organizational HRD culture and employee job satisfaction were identified in the existing HRD literature, the relationship between organizational culture and job satisfaction (Lund, 2003), and organizational learning culture and job satisfaction (Egan, Yang & Bartlett, 2004) have been well established. For the purposes of this study, organizational HRD culture is described as the extent to which an organization is perceived by its employees to support HRD in such a manner that it can be assessed as a global characteristic regarding the way in which the organization is perceived to embrace HRD overall. For the purposes of this study HRD is defined as an organizational effort to support training and development, career development, and/or organizational development in the context of employees workplace learning and performance (Swanson & Holton, 2009). Organizational HRD culture is the extent to which HRD is perceived to be embodied within organizational values, beliefs, norms and actions. 3 There is a positive relationship between leadership support for HRD and organizational HRD culture. The nature of most modern organizations depends on services provided to customers by employees. Therefore, the intangible assets of most organizations reside in the skills and abilities of its employees. An organization s future is dependent upon employees and the quality of service-related interactions with customers and clients. Given the importance of employee satisfaction to their retention and service energy, employee satisfaction has continued to increase

6 Path-Goal Leadership 6 in importance (Edmans, 2011; Matzler & Renzl, 2007). Employees who are happy and satisfied with their work environment are more likely to stay with the company and companies who retain their employees perform more consistently and better (Edmans, 2011; Spinelli & Canovos, 2000). Along with identified connections between learning organization culture and employee satisfaction (Egan, Yang & Bartlett, 2004), Bartlett (2001) and Bartlett and Kang (2004) identified a positive relationship between HRD-related functions and employee affective responses. These findings led us to the following hypothesis: 4 There is a positive relationship between organizational HRD culture and employee satisfaction. Customer satisfaction research suggests that perceived service quality falls into three categories basic factors, performance factors and excitement factors (Anderson & Mittal, 2000). A customers experience of performance can be higher than expected, resulting in satisfaction, or lower than expected, resulting in dissatisfaction. A product or service outcome that is evaluated to have moderate results is reacted to with satisfaction or indifference. High service energy from employees to customers is important to high customer satisfaction. A satisfied employee is more likely to provide a higher, more satisfying level of service to customers (Akdere, 2007, 2009). H5 There is a positive relationship between employee satisfaction and customer satisfaction. Typically, HRD practices are considered a performance driver. It is hypothesized that this performance driver is related to, and enables, performance outcomes. Thus, in this study, organizational performance outcomes were measured by the level of employee and customer satisfaction (Akdere, 2007, 2009; Anderson & Mittal, 2000).

7 Path-Goal Leadership 7 Method The research questions and hypotheses were examined using a questionnaire. The survey method used in this study included two survey instruments, Organizational Quality Survey and Service Quality Resident Survey. First, Organizational Quality Survey instrument was conducted to measure employee perceptions on HRD and employee satisfaction in healthcare organizations. Second, Service Quality Customer Survey instrument was conducted among patients for measuring customer satisfaction. Third, to measure the quality of clinical services, the study utilized organizational reporting of industry standardized quality indicators. The main proposition of this study is that alignment between effective managerial practices and HRD practices are vital to increasing organizational outcomes particularly for employees and customers. Population and sample The population selected for this study was judged as appropriate within the context of HRD in which there are only a few empirical studies on the issue of assessing the relationship between effective managerial and HRD practices and organizational outcomes. The study population was composed of healthcare employees and their customers/patients.. The study was conducted in forty healthcare organizations belonging to two large parent healthcare corporations operating in the Midwestern, United States. The characteristics of these two corporations and their divisions were similar and both have been in operation for more than 75 years. The organizations involved in the study were nationally recognized as industry leaders in healthcare. The large portion of employee respondents consisted of the professionals from the nursing profession working in these two healthcare corporations (n= 922, 49.6% response rate). As far as the gender demographics are concerned, the majority of employee respondents were

8 Path-Goal Leadership 8 women (89.9%) The results on the level of education of the respondents indicated that the majority of participating employees had completed a high school degree (39.5%). Analysis About 17% of employee respondents were nurses while 30% were nursing assistants. Fifteen percent of them held an administrative/ supervisory position. Thirty-seven percent of the participants worked two years or less in the same organization while the remaining 63% worked three or more years. Fifty-four percent of them worked 32 hours or more per week. The majority of the respondents were Caucasian (75%), about 4% were African American, and 2% were Hispanic. In terms of education, almost half of the respondents were high school graduates (49%), while 18% had an associate or a technical college degree and 16% had a bachelor s degree. In this study, employee perceptions of effective managerial practices (as framed by the Organizational Quality Survey instrument overall Cronbach s alpha [α] rating of.93) was the independent variable. The dependent variables were employee satisfaction and customer satisfaction mediator/moderator variables were associated with HRD-related practices including, employee perceptions of support for HRD, overall HRD practices and organization sponsored training and development. Employee satisfaction was measured using the employee satisfaction items in the Organizational Quality Survey. Customer satisfaction was measured using the items in the Service Quality Customer Survey instrument. The effective managerial practices construct included twelve items (α =.85) of 12 survey items were determined to adequately represent the construct. Example items include: Our leadership staff sets the direction for our facility and Our leadership staff has a clear set of priorities. Additional item sets including perception of organizational HRD support (α

9 Path-Goal Leadership 9 =.92); perception of overall HRD practices (α =.81); an example item is: Our leadership staff encourages employees to participate in improvement efforts. Both satisfaction measures, Employee satisfaction (α =.69) and Customer satisfaction (α =.81) were determined to have acceptable levels of reliability. Seven indices used to determine the fit of the model were utilized in the measures and the indicator used to determine fit include: goodness-of-fit-index (GFI) (best fit is above 0.9); adjusted goodness-of-fit-index (AGFI) (best fit above 0.9); non-normed fit index (NNFI) (best fit near 1; but may be above 1; Bentler & Bonett, 1980); comparative fit index (CFI) (best fit is above 0.9); root-mean-square error of approximation (RMSEA) (less than 0.08 desired); and the likelihood ratio (LR) test 2 (significance level of p <.01 or better indicates the models being compared are significantly different from one another). Model Testing Results The four fit measures mentioned above involving best fits close to 1 were as follows: GFI,.92; AGFI,.96; CFI,.98; and NNFI,.97. Identified residual (RMSEA) was small at.054. Using procedures outlined by Baron and Kenny (1986), several Sobel test statistics were used to analyze mediating effects. Sobel test statistics for model mediation effects were as follows: effective leadership behaviors leadership support for HRD organizational HRD culture employee satisfaction customer satisfaction (7.01, p <.05). Therefore, it can be concluded that the structural model represented fits the data reasonably well and supports the conceptual model (Figure 1) reasonably well. The squared multiple correlation for employee satisfaction was.33 and.20 for customer satisfaction; indicating the proposed model accounted for nearly one third of the variation in motivation to transfer and one sixth of the variation in performance (as measured by customer satisfaction).

10 Path-Goal Leadership 10 Test of the Hypothesized Model In order to ensure that the proposed model was the best possible model we tested the hypothesized model in relation to alternative models. The LR test 2 discussed above was used to examine differences between the hypothesized model and the alternative models identified. Three alternative models with LR test results included the following: 1) interaction model with mediation of HRD variables removed ( 2 = 52.02, p <.01); 2) interaction model with employee satisfaction removed ( 2 = 50.21, p <.01); and 3) interaction model customer satisfaction removed ( 2 = 55.11, p <.01). These results provide additional support for the hypothesized interaction conceptualized in the model by indicating that alternative models 1-3 were significantly different from the hypothesized model. Discussion This study examined the relationship between effective leadership and HRD practices, and how do these practices influence employee and customer outcomes. The findings indicate that effective leadership behaviors along with leadership support for HRD and organizational HRD culture are significantly related and they affect organizational outcomes of employee satisfaction and customer satisfaction. The findings of this study contribute to HRD s argument of making the contribution to organizational bottom-line through leadership. Hamlin argues that the nature of managerial leader effectiveness is both complex and contested (2005, p. 8). The findings also reinforce the notion that management and leadership support is necessary for HRD processes and success. Path-goal approach to leadership helps explain how leadership can be integrated into the organizational processes and HRD functions. The findings of this study also support for more integration of leadership practices into HRD functions and processes (Alagaraja, & Egan, 2013;

11 Path-Goal Leadership 11 Clarke, 2012, 2013; Hamlin, & Hatton, 2013; Rhea, 2013; Song, Kolb, Lee, Kim, 2012; Walumbwa, Orwa, Wang, & Lawler, 2005). The study findings also provide implications for organizational design change where leadership is considered the overarching business process supporting HRD functions and units within the organizations; thus, fostering continuous learning and performance improvement.

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