THE IMPACT OF CULTURAL INTELLIGENCE (CQ) ON LEADER-MEMBER EXCHANGE (LMX)

THE IMPACT OF CULTURAL INTELLIGENCE (CQ) ON LEADER-MEMBER EXCHANGE (LMX) Hadis Javaheri (Corresponding author) M.A. Student of Marketing Management, Shahid Bahonar University of Kerman, Kerman, Iran, Hassan Safarnia Assistant professor, Shahid Bahonar University of Kerman, Kerman, Iran Ali Mollahosseini Associate professor, Shahid Bahonar University of Kerman, Kerman, Iran Abstract The purpose of the present study was to explore the role of cultural intelligence (CQ) and its effect on leadermember exchange. Role of cultural intelligence in organizational studies is developing these days. Nowadays because of globalization effects, many organizations tend to international activities and in such intercultural environments, adaptability to people of different cultures, plays an important role in organization success. In this paper, the effect of cultural intelligence on social exchanges between staffs and their supervisors in hotels, which are one of the most important service organizations, is studied. The result of analyzing data of 37 staffs of a 5-star hotel in Iran, shows that cultural intelligence has a significant positive effect on leadermember exchange. Also the results showed that as elements of cultural intelligence, motivational cultural intelligence and behavioral cultural intelligence have more effect on social exchange of staffs and supervisors. Keywords: Cultural Intelligence, Meta Cognitive CQ, Cognitive CQ, Motivational CQ, Behavioral CQ, Leader-member Exchange 1. INTRODUCTION Service quality is a measure of how well the service level delivered matches customer expectations, while a firm delivering quality service means conforming to customer expectations on a consistent basis (Joewono & Kubota, 2007; Lai & Chen, 2011). Although service quality has been identified as a key factor for firms success, delivering quality service is still one of the major challenges facing managers in the 21st century (Lazer & Layton, 1999). Unlike other industries, the hotel industry is unique in that its core product is intangible service. The importance of service quality to a hotel is as critical as the importance of product quality to a manufacturer, because providing high quality service is the starting point of creating satisfied customers (Bienstock et al., 2003). On the other hand Employees in any organization are important because their attitudes and behaviors play a vital role in the quality of service provided by them and the interaction between employees and manager in service delivery is essential to the satisfaction of customers (Schneider & Bowen, 1993). Based on the social exchange theory, social exchanges have a significant role in the behavior of staff in a working place. Leader-member exchange (LMX) is defined as the quality of the working relationship between an employee and his or her immediate supervisor. It represents a dyadic process that reflects different levels of the relationship to each employee. Considering the impact of staff behavior on the quality level of customer s perceived services, it can be expected that social exchanges in the organizations, has a great impact on the quality of services and the customer satisfaction. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 538

Results of the conducted studies show that employees with high level of cultural intelligence have a better perception of the goals and mission of the organization and do establish a good relationship with their colleagues, subordinates and customers. They have a better organizational performance, and it s likely that they show a high level of organizational citizenship behaviors and social exchanges. This research attempts to study the effect of cultural intelligence on social exchanges. 2. LITERATURE REVIEW 2.1 Cultural Intelligence Today, rapid advances in technology and communication have created a global economy (Friedman, 2006). In this global marketplace, people have many opportunities to choose employment in different firms. As such, the socio-demographic factors such as race, religion and sex that already make for a multi-faceted workforce in a given organization can be exacerbated by the factor of nationality. Employees can find themselves working in a newly diverse cultural environment. This phenomenon has required many organizations and individuals to meet the challenges of cultural diversity (Stiglitz, 2003; Chen et al., 2011). To lessen the uncertainty caused by cultural differences, people must be aware of cultural diversity and must develop the ability to build interconnections with people who are different from them. In other words, those who adapt successfully are more apt to accept differences. This kind of intelligence can be an index for the capability to effectively adapt to new cultural contexts (Lin et al., 2012). Earley & Ang (2003) introduced the "Cultural Intelligence" construction for the first time to explain the differences between individuals from various cultures, exchanging to each other, in effective adaptability and versatility. Cultural intelligence means the ability of gathering and processing the messages in order to adopt the required decisions and related approaches for finding compatibility with a new environment. Cultural intelligence represents the capability to be effective across and within cultures (Earley et al., 2006) and people can be taught these skills (MacNab & Worthley, 2012; Ng & Earley, 2006). Cultural intelligence consists of these four dimensions: 1. Meta-Cognitive CQ 2. Cognitive CQ 3. Motivational CQ 4. Behavioral CQ The first dimension Meta-Cognitive CQ is a high level mental process based on the capability of recognition and understanding the cultural preferences of the others. People with meta-cognitive CQ have mental processes that allow them to know when and how to acquire cultural knowledge (Earley & Ang, 2003). Meta-cognitive CQ or cultural intelligence strategy contains the mental interactions of an individual in the acquisition of knowledge and understanding appropriate communication methods among different cultures. People with high cultural strategy always question and examine the cultural assumptions, and adjust their mental models to find the best assumptions and attitudes. Cognitive CQ is defined as an individual s cultural knowledge about economic, legal, and social aspects of different cultures and can be acquired from educational and personal experience. People with a higher cognitive CQ have better cognitive processing capabilities in a new cultural setting and are able to incorporate new information in order to understand and interpret their new experiences. Hence, they could have better adaptability (Chen et al., 2011). Cognitive CQ or Cultural intelligence knowledge influences a person s thoughts and behaviors. People with higher Cognitive CQ are better able to interact with those from a different culture (Ang et al., 2007). People with high cognitive CQ have higher cognitive processing capabilities in a new cultural context, and are able to use new information to understand other people therefore these people show more versatility and adaptability. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 539

The third dimension, motivational CQ is based on the amount of one s desire and interest to interact with an unfamiliar and strange environment (Bandura. 2002). This component shows the ability of individuals in directing their attention to understanding cultural differences, preserving their energy for learning, and having motivation to work in cross-cultural situations. Thus, people with high motivational cultural intelligence, have a high tendency to meet challenges of a new environment, and a high ability to fight the frustrations caused by social and cultural differences which affects their adaptation to the new environment. Behavioral CQ is defined as the capability to perform culturally preferential verbal and non-verbal actions when interacting with people from a different culture. A person with a higher behavioral cultural intelligence gains easier acceptance by the associated group, which helps them develop better interpersonal relationships (Chen et al., 2011). With appropriate interactions, displayed by words, tone, gestures, facial expressions, and body language, individuals may develop better interpersonal relationships (Ang et al., 2007). An example would be adjusting one s specific manner of communicating to more effectively interact with host nationals. In this component of cultural intelligence, a person might adapt the different scripts of the host culture in order to socially interact more effectively (MacNab & Worthley, 2012). 2.2 Leader-Member Exchange Manifestation of leader-member exchange theory is based on this truth that leaders treat their followers in different ways. Researchers believe that, leaders behave with some of their subordinates as in-group members and trusted assistants, while treating others as the out-group members. According to liden & Graen (1980) leader-member exchange theory is an alternative for Average Leader Style (ALS) as it considers the relationship between leaders and subordinates as a paired, vertical and unique relation. In the average leader style, which is based on traditional leadership theories, it is assumed that the leader treats his subordinates as a group in a collective way, and imposes an average style of leadership on them. But the social exchange theory has challenged this assumption and has drawn the attention to the existing differences of leaders relationship with each of their subordinates. Social exchanges show a two-way process which reflects various levels of relationship with each employee. This process is based on the principle of different interactions of supervisors, leaders or managers with their staff. Based on LMX theory, supervisors have different kinds of behavior with the members due to the limited time and ability they have which does not let them to interact with their subordinates in a same way (Bowler et al., 2010). The assumption of LMX theory is that the effectiveness of leader-member relations is possible only through analyzing the mutual influence of employee and supervisor s behavior on each other. The social exchange theory grew out of the disciplines of economics, psychology and sociology (Homans, 1958). In his seminal writing on social exchange, Homans noted that: Social behavior is an exchange of goods, material goods but also non-material ones, such as the symbols of approval or prestige. Persons that give much to others try to get much from them, and persons that get much from others are under pressure to give much to them. Blau (1986) further defined social exchange as voluntary actions of individuals that are motivated by the returns they are expected to bring from others, as well as social exchanges form relationships. Similar to economic exchange, social exchange generates an expectation of some future return for contributions; however, unlike economic exchange, the exact nature of that return is unspecified. Furthermore, social exchange does not occur on a quid pro quo or calculated basis, but based on individuals trusting that the other side of the exchanges will fairly fulfill their obligations in the long run (Ma & Qu, 2011). The social exchange theory explains that whenever an individual receives something precious from others, he or she goes under a pressure to reply their kindness, and in fact it is incumbent upon recipient to reciprocate. As Liden et al. (1980) explain about the direct usage of social exchange theory in LMX theory, formation of leader-member s mutual relations are series of steps beginning with initial interactions between members. Initial interaction forms after a series of exchanges in which, people find about the others to decide whether COPY RIGHT 2013 Institute of Interdisciplinary Business Research 540

they are able to provide mutual trust, respect and loyalty to form high quality exchanges, or not. If the response to an interaction is positive, people continue that interaction; but if the response is not positive or one side does not do any exchange for a positive exchange from the other side, then opportunities to form high quality interactions become limited, and relations stay at a low level. Driving mechanism of social exchange is the norm of reciprocity and is based on this principle that people mostly help those who have helped them, because reciprocating an altruistic behavior by others is essential to maintain an interpersonal relationship. The range of social exchanges between leaders and members expands from only employment contracts to relationships by mutual trust, respect, love and influence. In high quality LMX, staffs get the attention of supervisors or leaders, due to their high competence and motivation, and performing intra-role or extra-role duties. The leader supports the members of the group because of having positive experiences with them, and helps them physically and mentally. Positive expectations and experiences of a leader are relevant with behaviors like assigning challenging tasks, distributing rewards, and giving useful feedbacks. Usually, difficult and challenging objectives are given to the staff inside the group, and this leads to increase in their level of performance. Members of the group choose their role according to their preferences; leaders also tend to accept those requests of staff which are in connection with the business activities. Members with low quality LMX only tend to perform daily tasks and activities, and their relationships are evaluated by formal economic exchanges. So, the leader relies on formal rules and policies to ensure proper operation of these out-group members. These members have little access to supervisors, and receive fewer resources and limited information, which all leads to job dissatisfaction, low organizational commitment, and turnover. A high-quality exchange relationship requires both parties accept their mutual-interests and agree to pursue superordinate goals. High-quality relationships have been described as a partnering of colleagues, where individuals step beyond formal organizational roles to achieve desired goals (Graen & Uhl-Bien, 1995). In contrast, leaders and followers in low-quality relationships closely adhere to their respective organizational roles and do not step beyond those bounds. Self-interest dictates individual behavior in these types of relationships and the follower is motivated to comply not out of trust, respect, or a sense of devotion, but rather by the formally vested economic control and position power the leader wields (Duchon et al., 1986; Fisk & Friesen, 2011). Liden and Maslyn (1998) introduced four dimensions for LMX including, cooperation and assistance, affection, loyalty and professional respect. Liden (2000) shows that all the dimensions of LMX would be considered as two dimensions: respect and cooperation. The respect is about informal relationships outside of work (Employee-oriented relationships), and the cooperation is about formal working relationships (workoriented relationships). In many studies social exchange has been considered as one-dimensional structure. LMX-7 scale which has been designed by Graen and Uhl-Bien (1995) to assess the level of leader-member social exchanges, measures this structure as a one-dimensional structure with the help of seven items. 2.3 The role of Cultural Intelligence on Leader-Member Exchanges The consideration of one leader and employee social relationship in work environment, as a high quality or low quality category, depends on the level of mutual trust, mutual respect, and mutual understanding of each other s duties and responsibilities. A high quality social relationship requires both sides to recognize their common interests, and agree on following the objectives of their superior. High quality LMX is also defined as the partnership between staff to step beyond formal roles and achieve organizational goals. As a contrast, leaders and employees with low quality social exchanges stick only to their formal and organizational roles, and do not move beyond these borders. Personal interests in such relationships lead to intra-role behaviors; as a result, employees obey the orders of their superior, not due to respect, trust and sense of intimacy, but because of power of position, leader s official control, and financial incentives. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 541

When working in a cross-cultural environment, staffs should learn what is expected in their new role and how to execute those expectations. Stone-Romero and et al. (2003) found that employees perform poorly in a different Cultural environment when they do not understand the cultural differences required in playing their roles as expected, and, hence, do not conform to their role expectations and they can t establish a good relationship with their supervisors. Individuals with high meta-cognitive CQ are consciously aware of the cultural preferences of other people before and during interactions (Ang et al., 2007) and they question cultural assumptions in order to adjust their mental model during and after interactions and they can establish good relationships with their supervisors and customers (Triandis, 2006). On the other hand individuals must increase their cognitive understanding in order to fulfill role expectations. people who have a high cognitive CQ would perform well when working in a different culture because of their knowledge of the norms, practices, and conventions of that culture (Chen et al., 2011). It is obvious that during the execution of job duties, motivation increases insistence on doing things and is the driving force to continue individual and group efforts. Motivation affects the sense of self-esteem which stimulates an individual to establish better relationships with colleagues, supervisors and managers. Therefore, people with high motivational CQ have likely better relationships than those with low motivational CQ. On the other side, people with high behavioral CQ use their linguistic and non-linguistic actions to meet the expectations of those around. These people also try to meet the expectations from their role by creating a positive image of themselves in the others minds. They are able to behave properly in multi-cultural work environments; so that the possibility of their success in these environments seems more than those with low cultural intelligence. Based on the review of the literature the research hypothesis is stated as follow: H: Cultural Intelligence has a positive effect on leader-member exchange. 3. Research Methodology 3.1 Participants The data used for this study were collected in 2012 from Front-line employees (i.e., food and beverage, front desk, and housekeeping employees) in a 5-star hotel in Tehran, Iran. Thirty four of employees participated in current study. This amount of employees is determined by the below formula: 2 2 pqt 1.96 0.5 0.5 n0 96.04 2 2 d (0.1) n0 96.04 n 34 n0 1 95.04 1 1 N 52 In terms of gender distribution, from 34 respondents to the questionnaire 15 employees are female (44.1%), and 19 are male (55.9%). The majority of the respondents are between 30 and 40 years old (52%). 5 employees (14.7%) are part-time hotel employees and 29 (85.3%) are full-time employees. 17 employees (50%) are working in the housekeeping department, followed by food & beverage (11: 32.3%) and front desk (6: 17.7%). Education ranged from high school through graduate school, with the majority of the participants holding Associates or Bachelor degrees. 3.2 Measures The questionnaire was developed based on previously identified measurements, which was comprised of two sections. Section I was designed to collect hotel employees work-related information. Section II was designed to collect hotel employees perception of leader-member exchange and their cultural intelligence. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 542

Cultural Intelligence The CQ scale was adopted from Ang et al. (2007). There were a total of 20 items of CQ that were incorporated in four dimensions of this scale: (1) meta cognitive CQ: the items described included I am conscious of the cultural knowledge I use when interacting with people of different cultural backgrounds; (2) cognitive CQ: the items asked included I know the legal and economics systems of other cultures; (3) motivational CQ: items included I enjoy interacting with people from different cultures; and, (4) behavioral CQ: items included I change my non-verbal behavior when a cross cultural situation requires it. All items were rated on a 5-point Likert scale (1 = strongly disagree; 5 = strongly agree). A high score indicated that a person has higher CQ and can better adjust to new cultures and can behave appropriately and effectively in other cultures outside their own. The Cronbach s alpha reliability of the CQ is 0.91 and the four dimensions of CQ in the present study ranged from 0.86 to 0.92. LMX The LMX-7 (Graen & Uhl-Bien, 1995) was included in the current survey administration. Sample items include: Do you know where you stand with your leader do you usually know how satisfied your leader is with what you do? and I have enough confidence in my leader that I would defend and justify his/her decision if he/she were not present to do so. Responses were anchored on a 5-point scale and varied across the seven items (e.g., Rarely (1) to Very often (5) and Strongly disagree (1) to Strongly agree (7)). The Cronbach s alpha reliability of the LMX is 0.81.Since reliability values between 0.60 and 0.80 are considered adequate for most research purpose the measurement scales used in this study can be considered reliable. 4. Data analysis and Hypothesis testing Data were analyzed through applying bivariate regression analysis. The means, standard deviations and correlations among all of the variables are presented in Table 1. Table 1: Means, standard deviations, and correlations (N=34) variable Mean SD 1 2 3 4 5 6 1.MetaCQ 2.81 0.87 1 2.CogCQ 2.85 0.74 0.76 1 3.MotCQ 2.92 0.78 0.85 0.72 1 4.BehCQ 2.91 0.84 0.88 0.76 0.77 1 5.CQ 2.87 0.74 0.95 0.87 0.91 0.93 1 6.LMX 2.90 0.94 0.90 0.79 0.90 0.88 0.94 1 Note: All Correlations are significant at the 0.01 level (2-tailed). Hypothesis H postulates that employees with a higher Cultural intelligence would also have a higher level of leader-member exchanges with supervisors. The output given in Table 2 depicts that this hypothesis is supported. The regression Standardized coefficient between CQ and LMX is 0.948 (p <0.01). This means that LMX is positively associated with CQ. As such when the CQ increases, it is expected that LMX will also increase. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 543

Table2: results of bivariate regression analysis for LMX Model Un standardized Coefficients Standardized Coefficients t Sig. B Std. Error Beta 1 (Constant) -.532.212-2.511.017 CQ 1.195.071.948 16.768.000 Independent variable: Cultural intelligence Dependent variable: Leader-member exchange Also stepwise regression analysis was used in order to explain the variance of LMX by four components of cultural intelligence namely Meta-Cognitive CQ, Cognitive CQ, Motivational CQ and Behavioral CQ. The results showed a significant regression model (R 2 = 0.902, F = 142.50, p < 0.01). Table 3: summary of spontaneous regression for LMX by Motivational CQ and Behavioral CQ Un standardized B Standardized Beta t Sig. VIF Constant -0.523-2.488 0.018 Motivational CQ 0.679 0.566 6.324 0.000 2.530 Behavioral CQ 0.495 0.440 4.923 0.000 2.530 Predictors: (Constant), Motivational CQ, Behavioral CQ Dependent Variable: LMX Table 3 shows that among all variables mentioned, Motivational CQ (P<0/01, Standardized Beta = 0.56) and Behavioral CQ (P<0/01, Standardized Beta = 0.44) explain 0/902 variance of LMX. 5. Conclusion and Suggestions This study examined the effect of employees Cultural intelligence on leader-member exchange. Cultural intelligence is categorized into four areas: Meta cognitive CQ, Cognitive CQ, Motivational CQ, and Behavioral CQ. As the results of correlation analysis show, cultural intelligence has a positive impact on LMX. It also showed that among different dimensions of cultural intelligence, Motivational CQ and Behavioral CQ have more positive effect on social interactions between staff and supervisors. The empirical findings show that all the dimensions of cultural intelligence can be improved through training of staff in the organization. By holding cultural intelligence classes, also publication of magazines and training brochures in cultural intelligence the ground would be prepared for increasing the level of cultural intelligence in the employees of the organizations. This modifies the relationships among employees themselves and also employees with their supervisors, and can create a suitable institutional environment, and affect employees job satisfaction, efficient management and organization profitability in a positive way. The increase of social interactions between employees and supervisors in service organizations causes the improvement of employees performance and their understanding and recognition of the duties they have, which leads to provide better services for customers. Results of similar studies demonstrate that employees with higher cultural intelligence show more beyond the task behaviors toward their colleagues and customers. Generally, it is suggested to the managers of the organizations and service agencies such as universities, banks, hotels, hospital, etc. in which customers understanding of their services highly depends on the behaviors and attitudes of employees, to provide the necessary background for developing cultural intelligence in their staff. Correct practices to identify, treat and cope with people with different cultures and nationalities should be taught in cultural intelligence training courses. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 544

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