LEADERSHIP & PAY AS DETERMINANTS OF ORGANIZATIONAL C0MMITMENT: A STUDY ON THE OLD PRIVATE SECTOR BANKS

PROBLEM STATEMENT

Firms today are facing high employee turnover due to demographic changes in the workforce. Bennett & Durkin(2000) stated that negative effects associated with lack of employee commitment include absenteeism and turnover. Hence it is important to know what are the aspects that play an important role in boosting the organizational commitment of employees.

 TITLE
LEADERSHIP & PAY AS DETERMINANTS OF ORGANIZATIONAL COMMITMENT: A STUDY ON THE OLD PRIVATE SECTOR BANKS

SIGNIFICANCE OF THE STUDY

In order to retain employees, organizations are pursuing two kinds of strategies. First, organizations are focusing on transactional strategies and attempting to induce employees by material rewards. Spiraling salaries are evidence of the fact that companies are trying to outdo each other in enticing employees through generous paychecks. Second, organizations are focusing on transformational strategies, such as developing a positive culture through exemplary leadership. Companies following this strategy often invest large sums of money in leadership development, training, and cultural transformation. Hence it is important to study as to which strategy is more suitable to enhance organizational commitment and retention.

 OBJECTIVES
To study the impact of pay satisfaction on organizational commitment To study the impact of transformational leadership on organizational commitment.

DEPENDENT VARIABLE
Organizational Commitment

INDEPENDENT VARIABLE
Transformational Leadership Pay satisfaction

THEORETICAL DEFINITIONS
AFFECTIVE COMMITMENT The affective component of organizational commitment, proposed by the model, refers to employees' emotional attachment to, identification with, and involvement in, the organization (Allen and Meyer, 1990). CONTINUANCE COMMITMENT The continuance component refers to commitment based on the costs that employees associate with leaving the organization (Allen and Meyer, 1990). NORMATIVE COMMITMENT The normative component refers to employees' feelings of obligation to remain with the organization (Allen and Meyer, 1990).

 PAY SATISFACTION Pay satisfaction is a discrepancy between how much one feels one should receive and how much one feels is actually received (Lawler,1971) TRANSFORMATIONAL LEADERSHIP Transformational leaders are leaders who inspire followers to transcend their own self interest for the good of the organization and who are capable of having a profound and extraordinary effect on their followers. Transformational leadership embodies inspiration that leads to new heights of performance(French, Bell & Vohra)

OPERATIONAL DEFINITIONS
Affective commitment The affective component of organizational commitment, proposed by the model, refers to employees' emotional attachment to, identification with, and involvement in, the organization (Allen and Meyer, 1990) measured by six items. Continuance commiment The continuance component, proposed by the model, refers to commitment based on the costs that employees associate with leaving the organization (Allen and Meyer, 1990) which is measured by 6 items. Normative commiment The normative component, proposed by the model, refers to employees' feelings of obligation to remain with the organization (Allen and Meyer, 1990) which is measured using 6 items.

 Pay satisfacton In this study pay satisfaction is measured as a four dimensional construct, which are pay level satisfaction, pay raise satisfaction, pay benefits satisfaction and pay stucture satisfaction (Hebert G. Heneman III & Donald P. Schwab, 1987) Transformational leadership Transformational leadership is measured on the dimensions of Idealized Influence Attributed, Idealized Influence Behavior, Inspirational Motivation, Intellectual Stimulation, and Individualized Consideration (Venkat R. Krishnan, 2009)

HYPOTHESIS

H1a: Pay satisfaction leads to affective commitment. H1b: Pay satisfaction leads to continuance commitment. H1c: Pay satisfaction leads to normative commitment. H2a: Transformational leadership leads to affective commitment. H2b: Transformational leadership leads to continuance commitment. H2c: Transformational leadership leads to normative commitment.

 SCOPE OF THE STUDY

TIME: November 2011 December 2011 PLACE: Ernakulum District POPULATION: Employees of old private sector banks SOURCE: Primary Data: The responses of employees of old private sector banks

RESEARCH DESIGN
Explanatory study

SAMPLING DESIGN
Sample size: A sample of 123 respondents Sampling Technique: Convenience sampling Sampling Unit: employees of old private sector banks in Ernakulum district

DATA COLLECTION TOOLS

Standard questionnaires
x Organizational commitment questionnaire ( Allen & Meyer , 1990) x Pay satisfaction questionnaire (Hebert G. Heneman III & Donald P. Schwab, 1987) x Transformational Leadership questionnaire (Venkat R. Krishnan, 2009)

ANALYSIS DESIGN
Multiple regression

Data Analysis

PROFILE OF RESPONDENTS
Age
Frequency Valid 21 to 30yrs 31 to 40yrs 41 to 50yrs >50yrs Total 52 24 28 19 123 Percent 42.3 19.5 22.8 15.4 100.0 Valid Percent 42.3 19.5 22.8 15.4 100.0 Cumulative Percent 42.3 61.8 84.6 100.0

Gender
Gender

Cumulative Frequency Valid male female Total 68 55 123 Percent 55.3 44.7 100.0 Valid Percent 55.3 44.7 100.0 Percent 55.3 100.0

 Experience

rec_exp

Cumulative Frequency Valid 0 to 5 yrs 5 to 10yrs 10 to 15yrs >20yrs Total 55 9 21 38 123 Percent 44.7 7.3 17.1 30.9 100.0 Valid Percent 44.7 7.3 17.1 30.9 100.0 Percent 44.7 52.0 69.1 100.0

AFFECTIVE COMMITMENT
Model Summary Adjusted R Model 1 a. R .676a R Square .457 Square .434 Std. Error of the Estimate .53577

Predictors: (Constant), TL_TOTAL, Age, rec_gender, PS_TOTAL, Experience in months

ANOVAb

Model 1 Regression Residual Total

Sum of Squares df 28.271 33.585 61.855 5 117 122

Mean Square 5.654 .287

F 19.698

Sig. .000a

a. Predictors: (Constant), rec_gender, Experience in months, Transformational leadership, Pay satisfaction, Age b. Dependent Variable: Affective commitment

MULTIPLE REGRESSION
Coefficientsa

Standardized Unstandardized Coefficients Model 1 (Constant) Age Experience in months rec_gender PS_TOTAL TL_TOTAL a. Dependent Variable: AC_TOTAL B 1.149 .001 .002 -.019 .065 .522 Std. Error .574 .013 .001 .099 .071 .082 .019 .441 -.014 .062 .455 Coefficients Beta t 2.003 .092 2.141 -.194 .907 6.333 Sig. .047 .927 .034 .846 .366 .000

Affective commitment= 0.455 Transformational leadership+ 0.441 Experience in months

CONTINUANCE COMMITMENT
Model Summary

Std. Error of the Model 1 R .519a R Square .270 Adjusted R Square .239 Estimate .48536

a. Predictors: (Constant), TL_TOTAL, Age, rec_gender, PS_TOTAL, Experience in months

ANOVAb

Model 1 Regression Residual Total

Sum of Squares 10.180 27.563 37.743

df 5 117 122

Mean Square 2.036 .236

F 8.643

Sig. .000a

a. Predictors: (Constant), TL_TOTAL, Age, rec_gender, PS_TOTAL, Experience in months b. Dependent Variable: CC_TOTAL

MULTIPLE REGRESSION
Coefficientsa

Standardized Unstandardized Coefficients Model 1 (Constant) Age Experience in months rec_gender PS_TOTAL TL_TOTAL a. Dependent Variable: CC_TOTAL B 2.216 .009 .000 -.330 .331 -.017 Std. Error .520 .011 .001 .090 .065 .075 .181 -.164 -.297 .409 -.019 Coefficients Beta t 4.265 .757 -.686 -3.669 5.116 -.228 Sig. .000 .450 .494 .000 .000 .820

Continuance commitment= 0.409 Pay satisfaction -0.297 gender.

NORMATIVE COMMITMENT
Model Summary

Std. Error of the Model 1 R .512a R Square .262 Adjusted R Square .231 Estimate .57336

a. Predictors: (Constant), TL_TOTAL, Age, rec_gender, PS_TOTAL, Experience in months

ANOVAb

Model 1 Regression Residual Total

Sum of Squares 13.669 38.463 52.132

df 5 117 122

Mean Square 2.734 .329

F 8.316

Sig. .000a

a. Predictors: (Constant), TL_TOTAL, Age, rec_gender, PS_TOTAL, Experience in months b. Dependent Variable: NC_TOTAL

MULTIPLE REGRESSION
Coefficientsa

Standardized Unstandardized Coefficients Model 1 (Constant) Age Experience in months rec_gender PS_TOTAL TL_TOTAL a. Dependent Variable: NC_TOTAL B 2.667 -.001 .001 .106 .427 -.215 Std. Error .614 .014 .001 .106 .076 .088 -.022 .262 .081 .449 -.204 Coefficients Beta t 4.345 -.091 1.092 1.000 5.589 -2.442 Sig. .000 .928 .277 .319 .000 .016

Normative Commitment= 0.449 Pay satisfaction 0.204 transformational leadership

SUB GROUP ANALYSIS FOR PAY SATISFACTION

Group Statistics Gender PS_TOTAL male female N 68 55 Mean 3.6186 3.7382 Std. Deviation .79633 .52019 Std. Error Mean .09657 .07014

Independent Samples Test Levene's Test for Equality of Variances t-test for Equality of Means 95% Confidence Interval of the Difference Mean Sig. (2-tailed) Difference .339 -.11955 Std. Error Difference .12458 Up pe r .1 27 08 .1 16 84

F Pay satisfaction Equal variances assumed Equal variances not assumed 18.159

Sig. .000

t -.960

df 121

Lower -.36619

-1.002

116.211

.319

-.11955

.11935

-.35595

PAY SATISFACTION WITH AGE

1. Pay satisfaction with age

PS_TOTAL rec_age 21 to 30yrs 31 to 40yrs 41 to 50yrs >50yrs Total Mean 3.6231 3.9750 3.6571 3.4456 3.6721 N 52 24 28 19 123 Std. Deviation .63161 .85484 .46462 .79039 .68673

ANOVA Table

Sum of Squares PS_TOTAL * rec_age Between Groups Within Groups Total (Combined) 3.308 54.226 57.534

df 3 119 122

Mean Square 1.103 .456

F 2.420

Sig. .070

PAY SATISFACTION WITH EXPERIENCE

PS_TOTAL rec_exp 0 to 5 yrs 5 to 10yrs 10 to 15yrs >20yrs Total Mean 3.5600 4.1778 4.1143 3.4702 3.6721 N 55 9 21 38 123 Std. Deviation .73205 .16667 .47476 .64131 .68673

ANOVA Table Sum of Squares PS_TOTAL * rec_exp Between Groups (Combined) Within Groups Total 8.648 48.886 57.534 df 3 119 122 Mean Square 2.883 .411 F 7.017 Sig. .000

Measures of Association

Eta PS_TOTAL * rec_exp .388

Eta Squared .150

POST-HOC
Multiple Comparisons PS_TOTAL Tukey HSD 95% Confidence Interval Upper (I) rec_exp 0 to 5 yrs (J) rec_exp 5 to 10yrs 10 to 15yrs >20yrs 5 to 10yrs 0 to 5 yrs Mean Difference (I-J) -.61778* -.55429* .08982 .61778* Std. Error .23047 .16441 .13520 .23047 Sig. .041 .006 .910 .041 Lower Bound -1.2183 -.9827 -.2625 Bound -.0173 -.1259 .4421

.0173 1.2183

10 to 15yrs >20yrs

.06349 .70760*

.25536 .23760

.995 .018

-.6019

.7289

.0885 1.3267

10 to 15yrs

0 to 5 yrs 5 to 10yrs >20yrs

.55429* -.06349 .64411*

.16441 .25536 .17428

.006 .995 .002

.1259 -.7289

.9827 .6019

.1900 1.0982

>20yrs

0 to 5 yrs 5 to 10yrs 10 to 15yrs

-.08982 -.70760* -.64411*

.13520 .23760 .17428

.910 .018 .002

-.4421 -1.3267 -1.0982

.2625 -.0885 -.1900

*. The mean difference is significant at the 0.05 level.

FINDINGS
Objective 1: To study the impact of pay satisfaction on organizational commitment oPay satisfaction does not lead to affective commitment. oPay satisfaction relates positively to continuance and normative commitment. Objective 2: To study the impact of transformational leadership on organizational commitment. oTransformational leaderhip relates positively to affective commitment. oTransformational leadership does not relate to continuance commitment. oTransformational leadership relates negatively to normative commitment.

 Affective commitment increases with experience Continuance commitment varies with continuance commitment than females. gender. Males have lower

Pay satisfaction varies with experience. It is seen that employees with experience less than 5 years and those with more than 20 years have the same attitude towards pay satisfaction whereas the employees with an experience of 6 to 15 years experience have the same attitude towards pay satisfaction.

 LIMITATIONS
The geographic location (Ernakulum district) which would influence the findings. There may be other variables affecting commitment towards the organization. The present study has focused on few key variables of pay satisfaction, transformational leadership and other demographic factors such as gender, age and total experience.

SUGGESTIONS
significance of mentorship programs and leadership development programs which can follow transformational leadership model to enhance commitment of the employees towards the organization