Using contingent reward behavior to reduce resistance toward organizational change.
Using contingent reward behavior to reduce resistance toward organizational change. A research into resistance towards organizational change and how it can be influenced by using the resource exchange theory and contingent reward behavior.
Universiteit van Amsterdam
Executive Programme in Management Studies/Bedrijfskunde in deeltijd
Supervisor: Dhr. dr. M. (Merlijn) Venus M.Venus@uva.nl Dinxperlo, June 2015 Annemarie Jacobse 10499458 annemarie.jacobse@student.uva.nl
Hereby I present my master thesis, focusing on organizational change. During the lectures of mw. dr. A.E. Keegan about change management I got triggered and enthusiastic about the topic. Every company has to undergo change these changes can differ some are small other large. But to keep up with the market position companies must evolve themselves. Charles Darwin already recognized the importance of change, although his famous quote was not based on organizational changes it does fit: “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most responsive to change”.
Personally I see employees as most valuable resource of a company. By treating them in a right way people can work much faster and better. During organizational change the way people are threatened is also very important. This is not only the responsibility of the management but also of the leader. A leader can make or break organizational changes by the way he threats employees.
There is a lot of research done into organizational change, and leadership so the topic is not new. Although it is still hot, probable because there are so many factors important during organizational changes. The thesis is focusing on transformational and transactional leaders during organizational change. Although transformational leaders are seen as more effective in my opinion is that transactional leaders can also be successful. Perhaps it is my own preference, because I am rather attracted to a transactional leader than a transformational leader.
The survey in the thesis is done in one company, I want to thank the team leaders who allowed me to do the survey and the employees who were willing to fill in the survey. Also my thesis supervisor Merlijn Venus helped me, he gave useful feedback, and in the beginning he ‘pushed’ me in the right direction and responded very quickly on questions.
Annemarie Jacobse
Organizational change is an important topic because companies have to adapt to survive However a lot of organizational changes fail to meet their goals and most managers blame resistance for the failure. Leaders are important to reduce resistance, it is their task that employees embrace the change.
Most research into change and resistance focus on how a manager should behave and react during the change. This research has focused on the dimension contingent reward behaviour of transactional leadership. In the literature transformational leadership is seen as more effective than transactional leaders. But there is evidence that contingent reward behaviour can also be effective.
Contingent reward is based on the exchange of a reward, the employee gets in return of wanted behaviour valued outcomes. This reward can consist out of more things. In this research the “resource exchange theory” is used, whereby love status, service and information were used as exchange of good performance.
From the results was clear that the exchange of information as reward of good performance did decrease affective and behavioral resistance. The exchange of service did decrease the affective resistance. Contingent reward behavior however, did in one situation increase the behavioral resistance. This was not in line with the expectations. As result of this thesis leaders should use the exchange of information and service as reward for good performance to decrease resistance.
Key words: organizational change, resistance, contingent reward behavior, resource exchange theory, LMX, transactional leadership.
1. Introduction ... 6
2. Literature review ... 7
2.1. Organizational change ... 7
2.2. Resistance ... 8
2.3. Leadership ...10
2.4. Leader Member Exchange ...13
3. Method ...15
3.1. Sample and data acquisition ...16
3.2. Survey ...17
4. Results ...19
5. Discussion ...23
5.1. General discussion ...23
5.2. Theoretical Implementation ...24
5.3. Limitations and further research ...25
5.4. Practical implication...26
6. Conclusion ...26
Bibliography ...27
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1. Introduction
Organizations need to adapt, develop and change to get a better market position, or to keep the best market position. The competitive situation, technological trends, market position or financial performance can be reasons for a company to change. Especially in the last decades technological improvement was enormous what resulted in a lot of organizational changes. These reasons make change an important topic for all kind of businesses. Change is not only important for the management but also for the HRM department, and the employees. Not only the organization but also the employees have to change during organizational change. This is because tasks change, the way things are done in the company change and different skills are needed. Al these changes can lead to employees who are worried about their own future in the company. Questions rise like: “am I able to learn the new skills?”, “does the company need me in the future?”, “will I be replaced by a robot” and so on. As a result some employees show resistance to the change. The leaders of these employees should recognize the resistance and respond to it, or even better take away the negative feelings that could end in resistance. This is why leaders are during organizational change important, they need to recognize the resistance and overcome it. But, not every leader is the same, there are several kinds of leadership styles. It is assumable that some kind of leadership style fits more to change than others. In leadership research most studies have focused on transactional and transformational leaders. You could assume that leaders, who are very clear about what is going to happen and what they except from the employees take away the resistance. In that point of view transactional leader, especially the contingent reward types could be successful during organizational change.
As mentioned above organizational change is an important issue, most companies have to go through more change processes over time. Lewis et al., (2001) even argued that businesses that do not change will disappear. Unfortunately one out of two organizational changes fails (Ford & Ford, 2010). Most managers receive resistance as negative (Watson, 1982), and managers involved in a failed change process blame resistance for the failure (Ford & Ford, 2010); (Bovey & Hede, 2001). Because of the importance of the topic there is a lot of research done into organizational change. Some research focus on the effects of procedural fairness and change (Brockner, et al., 1994), or the characteristics of the employees like openness that influences the change acceptance (Vakola, et al., 2004). Also management and leaders are seen as important during organizational change, Beer (1980) found that the way employees are threatened and involved by leaders influence the reaction of the employees toward the change. As a result there is a lot written about leadership and change. Most research is based on how leaders should act and behave during organizational change, these change behaviours
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are not linked to the different leadership styles (Herold, et al., 2008). Only a few researchers combined organizational change and one of the leadership styles namely transformational leadership. The reason that transformational leadership was compared to “change management” (or the way leaders should behave during organizational change) was that transformational leaders are seen as more effective (Bass, 1991) (Herold, et al., 2008). Researchers expected that “change management” and transformational leaders would have some characteristics in common. Herold, et al., (2008) did research into whether transformational leaders have the same or dissimilar effect as change management on shaping commitment to change, they found that the characteristics seem to be familiar but where not positively related. Unfortunately no research is done into transactional leaders and organizational change. The question whether transformational or transactional leaders are more efficient during organizational change by reducing resistance is not answered jet.
Transactional leaders are seen as less effective leaders, they are known for giving something in exchange (Judge & Piccolo, 2004). If the employee shows the behaviour the leader wants to see, he or she gets a reward, on the other hand when he misbehaves the leader will punish the employee. By defining the wanted behaviour the leader is clear about what he expects from the employees. Being so clear, gives employees trust (Podsakoff, et al., 2005). Resistance is based on what employees think, feel and do (Piderit, 2000). A leader who is clear, in what he wants the employees to do, and reward this behaviour gives the employees a feeling of certainty. They know the tasks and what is in for them. It is assumable that if the rewards are wanted and fair the employees will act as the leaders wants them to. In the thesis the question will be answered if transactional leaders can be effective during organizational change by taking away the resistance through the use of contingent reward behavior.
2. Literature review
2.1. Organizational change
Organizational change is as mentioned before important for companies. Organizations start change to remake themselves to survive (Kotter, 1995). Reasons for organizational change can be technological trends, financial performance, market position (Kotter, 1995), growth, takeovers, mergers (Dunphy & Stace, 1988), or environmental changes (Chemers, 2001) like population growth, political shifts or new market opportunities (Piderit, 2000). Nowadays organizations have to deal with turbulent economic situations, this makes change in strategy, structure, process and culture very important (Armenakis, et al., 1993).
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In the literature of organizational change authors discuss that organizational change is per definition not the same. Change can be a reaction during a crisis and be unplanned or in contrast former planned actions or a result of ideas from employees to improve the company (Huy & Mintzberg, 2003). Dunphy and Stace (1988) developed a change matrix where they specially focus on the difference in change tempo and involvement of the employees. In some change process employees are not involved at all. The management create a change plan and expect the employees to support it without listening to the improvement suggestion of the employees. In other situations the employees start the change without being formally managed by the management (Huy & Mintzberg, 2003).
It makes however no difference what the involvement is of the employees, most companies rely on employees to adjust to the change (Armenakis, et al., 1993). According to Mabey and Salaman (1995) individuals can perceive organizational change as threatening. Some even argue that employees often resist change (Kotter & Schlesinger, 1979); (Strebel, 1996) or as Bovey and Hede (2001) claim employees resist accepting organizational change. Ford and Ford (1995) on the other hand found that the cooperation of employees during organizational change is important. Waddell and Sohal (1998) argue that one of the critical factors that influence the success of organizational change is whether employees accept the change or not. Maurer (1996) suggested that one-half to two-third of organizational change fail because of the resistance. To let change succeed management must foresee resistance and neutralize it before it arises (Kreitner, 1992). Companies often have problems to get the cooperation of all the employees, because of different interests, needs and motives (Furst & Cable, 2008). Companies try to get the cooperation of employees. In change management literature researchers searched for different ways to reduce resistance. Examples are: managers who used rewards or punishment to lead the behavior of the employees (Poole, et al., 1989), or involving employees to design the change (Nutt, 1986), or by explaining the importance of the change (Rousseau & Tijoriwala, 1999). To make the change successful management must neutralize resistance (Dent & Goldberg, 1999).
2.2. Resistance
Research into change resistance is important because resistance is an obstacle to organizational change (Conner, 1995). Ford and Ford (2010) recognized resistance as an important reason why organizations fail to meet their goal. In the literature there are different points of views on resistance. Resistance is summarized by Bovey and Hede (2001) as a natural response of employees, because it is going from the familiar situation to the unfamiliar. Employees who struggle with change will be seen as resistors because of their natural reaction
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to the change (Ford & Ford, 2010). Kotter (1995) describes that it can be enormous hard to drive people out of their comfort zone. In line with this Jaffe et al, (1994) made a model with four phases where employees go through during organizational change, these four phases are: “denial, resistance, exploration and commitment”. According to them resistance is a stage every employee has to go through. As mentioned in the introduction a lot of managers receive resistance as negative (Watson, 1982). However resistance is something employees over think, they know that their resistance can have negative effects for themselves in the future (Piderit, 2000). Oreg (2006) argues that resistance can also be positive when employees believe the change is not in the interest of the organization. They show resistance because of their concerns for the company. Piderit (2000) concluded that employees show resistance to get the attention of the management for issues what the employee see as important in the change process. Bovey and Hede (2001) argued that the resistance is based on the type of change, as an example they write that organizational change with low impact and high individual control will produce not as much resistance as what change will do with high impact and low individual control. If employees start the change themselves, they support it. But organizational change from above, with high impact can lead to resistance.
Dent and Goldberg (1999) did a literature review about the reasons why people show resistance to organizational change. Most of the reasons are based on the relationship between employees, leaders and the management. Like misunderstanding, emotional side effects, lack of trust, personal conflicts, threat to job status, work group break up and uncertainty. This is evidence for the importance of leaders during organizational change. Vakola and Nikolaou (2005) concluded that change can lead to stress, when the stress is based on bad work relations, overload or unfair pay and benefits the attitude of the employee can get negative towards the change process. Bad work relationships and a lack of socially supportive environment where found as strongest predictors of the negative attitude.
Employees can show resistance for several reasons: fear, uncertainty, lack of trust misunderstanding. Bovey and Hede (2001) claimed that the influence people have on the change increases or decreases the resistance. Employees should be involved during organizational change. Ford and Ford (2010) recognized that resistance is a way in which engaged and committed employees show that they want to be a part of the issues that are important to them. Leaders should start a dialoged with the employees on how to implement the change. The organizational change can be implemented faster, smarter and cheaper when the management listens to the feedback of the resisters. Similar one of the first authors who wrote about resistance, Coch and Franch (1948) conclude that it is important to involve employees into the change. They advised management to hold meetings to communicate with
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employees about the need and to involve them into the planning. Dent and Goldberg (1999) summarized that the actions for the organizational change which are needed differ. As an example: if employees have loss of status the management should develop a strategy to deal with the loss of status. Or if employees will lose their job, management should deal with that issue. Kotter and Schlesinger (1979) mention several strategies to deal with resistance, which are: “education and communication, facilitation and support, participation and involvement, negotiation and agreement”.
Quinn (2004) argues that change often fails because of poor leadership. In line with this Larkin and Larkin (1994) argued that the team leader is important for employees to embrace the organizational change. The way employees are threatened during the change is a powerful factor how employees react on the change. An example is communication and the involvement of employees. When the employees are involved and told what is going to happen it is more likely that the employees accept the change (Herold, et al., 2008).
The success of organizational change is influenced by the acceptance of the employees. This acceptance is the responsibility of leaders (Oreg & Berson, 2011). Not only the acceptance but also work relations, group meetings, employee involvement and the other above mentioned ways to reduce resistance are the tasks of leaders. Vakola and Nikolaou (2005) claimed that the negative attitude (towards change) is influenced by bad work relations between employee and leader. All above mentioned reasons is why leaders are important during organizational change, and more specific to overcome resistance.
2.3. Leadership
Huy (2001) argues that leaders are very important during organizational change. Sidra et al., (2012) argued that without the participation of leaders change cannot succeed. Especially middle managers know what the employee feel and think and can anticipate on this. Leaders have also a key function in the motivation of employees (Kotter, 1995), to find a direction, inspire and encourage (Mills, 2005). In the literature of organizational change a lot of researchers focus on “change management”. This means what kind of behavior and actions leaders should undertake in case of an organizational change process (Herold, et al., 2008). One often citied framework is Kotter’s eight steps of transformation (Kotter, 1995) another example is Lewin’s (1947) concept of: “unfreezing, moving and refreezing”. However the different researchers do not speak about a certain leadership styles and what kind of leaderships would be more effective or less effective. They only mention different kind of characteristics what successful change leaders should have.
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In contrast in the leadership literature there are different types of leadership styles. The differences are based on the: “abilities, personal traits and influence relationships etc.” (Den Hartog & Koopman, 2001). Burns introduced in 1987 transformational and transactional leadership styles. This thesis focuses on transformational and transactional leaders.
Transformational leaders
Bass (1991) describes transformational leaders as leaders who: “create awareness and acceptance” and “stimulate to work together without self-interest to achieve a common goal” (Brown & Treviño, 2006). Transformational leaders “get trust and confidence from the followers, care about others and have moral principles” (Bass, 1985). Bass (1991) mentioned four characteristics that transformational leaders have: “charismatic, inspirational, intellectual stimulation and individualized consideration”. A leader is seen as inspirational if they have “high expectations” and talks about “important purposes in straightforward way” (Bass, 1991). Intellectual stimulation does a leader by pointing out problems and solving them in a rational way. And the leader communicates his/her vision of the future (Nguni, et al., 2007). Individualised consideration refers to leaders who understand that the followers are not all the same and the extent he/she gives individual attention to every follower. Besides individualised consideration leaders act as mentor, coach or give advice to the ones who need that (Bass, 1991). Den Hartog, et al., (1997) mentioned that transformational leaders stimulate their followers to perform beyond expectation.
As mentioned in the introduction transformational leaders are seen as most effective. One explanation is that more than thirty-five studies found a relationship between follower performance and transformational leadership (Krikpatrick & Lock, 1996). Furthermore during organizational change the literature describes them also as the most effective leadership style (Herold, et al., 2008). Tichy and Devanna (1990) argue that transformational leaders “recognize the need for change, create a new vision and institutionalize the change”. Another reason why this leadership style is seen as effective is that transformational leaders and employee commitment are linked to each other (Bass & Riggio, 2006). And commitment is seen as important during organizational change (Fedor, et al., 2006).
Herold, et al., (2008) did research into whether transformational leaders have the same or dissimilar effect as change management on shaping commitment to change. They found that the characteristics of transformational leaders and change management, seem to be familiar but where not positively related. Herold, et al., (2008) argued that an explanation can be that
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transformational leaders have a vision for the future, but this vision is not specified for what comes after the change.
Transactional leaders
In contrast to a transformational leader a transactional leader gives something in exchange (Judge & Piccolo, 2004), the follower gets in return of wanted behaviour valued outcomes like prestige or wages (Burns, 1978). Transactional leaders motivate their followers by making clear expectations and name the reward the employee will get in return (Podsakoff, et al., 2005). When leaders are constantly rewarding some behavior and punish other behavior it becomes clear for employees what the leader wants them to do (Podsakoff, et al., 2005). Bass (1991) defines that transactional leadership has two dimensions: “contingent reward” and “management by exception”. The differences are based on the level of engagement and activity level. In contingent reward the leader and employee negotiate about the reward or recognition. In contrast management by exception is focussing on the mistakes (Howell & Hall-Merenda, 1999).
Especially contingent reward is in this paper interesting. Contingent reward is also called: “leader reward and punishment behaviour” (Burns, 1978), or “give and take” (Podsakoff, et al., 2005). Judge and Piccolo (2004) argued that contingent reward is the most effective dimension of transactional leaders. Reason why contingent reward is seen as the more effective transactional style is that this dimension is positive correlated with the attitude of the followers, the performance (Avolio, et al., 1988), satisfaction (Podsakoff, et al., 1984), commitment (Bass, 1990) and behavior of the employees (Podsakoff, et al., 2005).
Although Bass (1991) claims that transformational leaders are mostly seen as effective leaders in comparison to transactional leaders who are likely seen as less satisfying. Judge and Piccolo (2004) found that contingent reward behavior was stronger correlated than transformational leaders with: follower job satisfaction, motivation and leader performance. Walumbwa, et al., (2008) found in their research that transactional leaders using contingent reward are positively associated with “procedural justice climate perception” and the strength of the climate. And procedural justice and the strength are associated with the satisfaction of the supervisor, organizational citizenship behavior and organizational commitment. Commitment is as mentioned before, important during organizational change. But in contrast to all these positive relations some studies also found a negative relationship between transactional leaders and performance (Howell & Hall-Merenda, 1999).
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An explanation that some research found a positive correlation and other a negative could be that not all the leaders are consequent with the rewards. Podsakoff, et al., (2005) argued that there is evidence that the attitude and behavior of an employee is influenced by the internal cognitive process that is affected by the way a leader administer rewards and punishment. One example is the perceived fairness of a leader (Ball, et al., 1992), if employees agree that the punishment is in line with what is important to the company, he or she will receive the punishment as fair. Leaders who administer rewards contingently are seen as more fair. There are several reasons why it is important for a leader to be seen as fair, it increases employee commitment to the organization, trust in the leader, employee satisfaction, withdrawal behaviors, task performance and organizational citizenship behaviors (Cohen-Charas & Spector, 2001).
Summarized contingent reward is associated with the satisfaction of the supervisor, organizational commitment (Walumbwa, et al., 2008), the attitude of the followers, the performance (Avolio, et al., 1988), satisfaction (Podsakoff, et al., 1984), commitment (Bass, 1990) and behavior of the employees (Podsakoff, et al., 2005). These characteristics are also found in the literature to reduce resistance, like commitment (Fedor, et al., 2006), the relationship with the leader (Vakola & Nikolaou, 2005) and the attitude and behavior (Piderit, 2000). From these theoretical evidence it is expected that:
H1: Leaders using contingent reward are effective during organizational change by reduce the resistance because of the exchange of resources.
Contingent reward behavior is about giving something in exchange when an employee shows the wanted behavior (Podsakoff, et al., 2005). These exchanges can be political, economic or psychological (Burns, 1978). Bass (1985) argues that transactional leaders are focussing on the lower order needs and short term goals. There are different types of rewards what can be exchanged. In the literature a lot of research is done into leader member exchange called LMX. Graen and Cashman (1975) argued that between every leader and follower there is a leader-member exchange called LMX.
2.4. Leader Member Exchange
LMX involves the interpersonal relationship between leader and follower (Lee, 2005). The exchange relationship varies with every follower (Howell & Hall-Merenda, 1999). The definition in the literature is mostly described as:
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“Leader-member exchange is a system of components and their relationship involving both members of a dyad involving interdependent patterns if behavior and sharing mutual outcome instrumentalities and producing conceptions of environments, cause maps, and value” (Scandura, et al., 1986, p. 580).
LMX has positive impact on job satisfaction, organizational commitment but also leader satisfaction and commitment to the leader (Wilson, et al., 2010). As mentioned above, between every leader there is a social exchange, there were more researchers who did research into LMX. One of them are Graen and Uhl-Bien (1995) who argued that LMX mostly starts as transactional social exchange and it can evolve into transformational social exchange. They wrote that there is low-quality LMX which is based on economic exchange, meaning unidirectional downward influence and loosely coupled goals. Leaders using low quality LMX maintain often a certain distance between them and the employees (Dunegan, et al., 1992). In contrast in high-quality LMX relationships the leader and employee interact and have the trust of the leader, confidence, and encouragement. In high-quality LMX there is mutual trust, respect, influence and obligation. Low-quality LMX is analogous to transactional leadership and high-quality LMX comparable with transformational leadership according to Graen and Uhl-bien (1995). In contrast Howell and Hall-Merenda (1999) found that LMX, transformational leadership and contingent reward behavior are positively related. They confirm that high-quality LMX can be positively associated with transformational leadership. But the difference between transactional leaders and contingent reward leadership and LMX was not significant. Howell and Hall-Merenda did not confirm that low-quality LMX is comparable with transactional leaders.
In contrast Furst and Cable (2008) linked sanctions to LMX. The definition of sanctions Furst and Cable used was based on research of Schriesheim and Hinkin (1990) who wrote as example for sanctions: “the punishment of employees for non-cooperation through warning or not giving the reward”. This definition is comparable with transactional leadership. In the research Furst and Cable separated LMX in high- and low-quality, they found that employees in a high-quality LMX relations were not affected by the use of sanctions. In contrast in low-quality relationships the employees showed less resistance when the leader used sanctions. Translating this to transformational and transactional leaders and resistance, the results assume that transformational leaders, using contingent reward have no influence on the resistance. However transactional leaders who have according to Graen and Uhl-Bien a low-quality LMX, can use sanctions or contingent reward behavior to reduce resistance. This suggests that transactional leaders can be successful during organizational change by reducing the resistance by sanctions.
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In the LMX literature there are more different kind of social psychological relations, there is a difference in what the leaders and members can exchange. One LMX theory is from Foa and Foa (1974) called the resource exchange theory. According to Foa and Foa (1974) relationships exist out of the exchange of six resources, love, money, status, goods, information and service. With love is meant an expression of affection like warmth. Money is the exchange, like a coin, of something that has a standard value. Status is about respect, esteem and prestige. Goods are about the exchange of objects or products. Information is about an advice, opinion or instructions. And service is about helping or making work more easy (Donnenworth & Foa, 1974). Foa and Foa arranged these resources in the dimensions ‘concreteness’ vs. ‘abstract’ and whether the resource is ‘particular’ or ‘universal’. Particular is specified by “the extent to which the value of a given resource is influenced by the persons involved in the exchange" (Foa & Foa, 1974, p. 80). Love is seen as particularistic (Brinberg & Wood, 1983). In contrast universal is meant that the identity of the member is irrelevant, money is seen as universal (Wilson, et al., 2010). The dimension concreteness is specified as a tangible activity or product (Foa, et al., 1993). Goods and service are seen as concrete (Brinberg & Wood, 1983). Abstract resources are symbolic, or as Foa and Foa wrote: “verbal and paralinguistic behavior”. Status and information are seen as abstract (Wilson, et al., 2010). The six resources can be arranged in a circumplex ordering of orthogonal dimension, thereby are love and money, status and goods, and information and service each other opposite. Foa and Foa found that, most of the time, the six items are exchanged by the item itself. In the relationship more than one resource can be exchanged, but according to Foa and Foa one tends to be predominate (Haslam & Fiske, 1992). There is no (or not jet known) research done into which kind of resource that is exchange has more influence on reducing resistance. Communication is seen as an important factor during organizational change (Coch & French, 1948) therefor it is assumable that information is effective dimension to reduce resistance. But also the other dimensions can contribute to resistance. It is interesting to see if there is a difference between the dimensions so that leaders can use the exchange of these resources.
H2: The exchange of the four dimensions (love, service, status and information) of the resource exchange theory decreases the resistance of employees.
3. Method
To answer the hypothesis data had to be collected, therefore a survey must be conducted and respondents need to be asked to contribute to the study.
16 3.1. Sample and data acquisition
The respondents were all working in the same company, the selected company facilitates customer care of other companies. The company is American, but has a settling in the Netherlands. The respondents were all working in the Dutch settling. In the company the employees where working in different teams, every team has one team leader, the team leader is their only ‘supervisor’. The company has undergone some major changes in the last eight months, these changes differ per department, but in general the changes were made to make the work easier for the employees and to reduce costs. The changes are indicated from above, and the employees were not involved during the implementation.
Not all teams in the Dutch settling where part of the survey, there were two requirements. First not all the teams had undergone a change in the last eight months. And second the team leaders had to decide whether he or she wanted to participate with his/her team. In total there where twelve teams involved in the study. The number of team members is between eight and twelve employees. There was only one team bigger, it consisted out of twenty team members.
In total twelve teams were asked to fill in the survey, the teams together had a total number of 123 employees. From one team none of the employees responded, as a result from eleven teams was data gathered. In total 79 employees responded to the survey, this is 64% of the send surveys.
From the 79 employees were 30 respondents man (38%) and 49 respondents woman (62%). In contrast there were more male team leaders, 64% was male and 36% was female. In general there are in the company more male team leaders than female, an explanation is that team leaders have to work at least 32 hours a week. And most women in the company work part time. Most respondents (56%) where working between 32-40 hours, this are 27 men (90% of the men) and 17 women (35% of the women). Almost a quarter (24%) of the respondents worked between 24-32 hours, this are 3 men (10% of the men) and 16 women (33% of the women). Between 20-24 hours worked 14% this are 11 women (22% of the women) and 6% worked between 16-20 hours what are 5 women (10% of the women).
The youngest employee in the survey was 22 and the oldest 53 years old. Most employees (60%) in the study were younger than 35 years. An explanation of the age could be that most employees in the company working there for a short period, after 3,5 year of work the organization has to give the employee a permanent contract. Only a few employees get a permanent contract. This is also visible in the data set, 22% of the respondents where working less than 1 year in the organization, 28% of the respondents where working between one-two
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years, and 19% where working two-three-and-a-half years, 9% between 3, 5-5 years and 7% between 5-8 years. 10% between 8-12 years and 5% between 12-15 year.
3.2. Survey
To gather data for the study a questionnaire was conducted. The questionnaire was send by e-mail to the teams who participated. The mailing instructions where short and addressed to every single one by using their first name. In the invitation was also mentioned that the team leader gave permission to fill in the survey and that the results will be used anonymous. The survey was sent on Monday, in the hope that everyone would read the e-mail carefully. After one week a reminder of the survey was send and at the end of week two a second reminder was send. In total the employees had sixteen days to fill in the survey.
The questionnaire was developed based on the items that needed to be measured to answer the research questions. Because there was already a lot of researches done into organizational change, leadership, LMX and resistance the questions were based on previous studies. The used studies where in English and the respondents Dutch. As a result the questions had to be translated into Dutch. To ensure that the questions were correctly translated the technique parallel translation was used. This means that two independent persons translated the questions, the two options were compared to look at the differences and choose for the best translation.
Resistance or change acceptance according to the employee
The resistance was measured with ten questions based on the survey of Oreg (2006). Two different change attitudes were measured, affective and behavioral attitude. The affective attitude had a cronbach’s alpha of .755, measuring what employees felt about the change. And behavioral attitude had a cronbach’s alpha of .870, measuring what employees did because of the change. Two questions where reverse coded, the resistance was measured on a seven point liker scale. Employees ranking high where resisting against the change and employees scoring low were supporting the change.
Contingent reward
Sixteen questions were based on the study of Haslam (1995) about contingent reward behavior. Employees giving high numbers agreed that the leader used contingent reward, employees with ranking low numbers disagreed. The cronbach’s alpha was .723. The questions were based on a five point liker scale, whereby 1 means totally disagree and 5 totally agree.
18 Resource exchange theory
The first 23 questions measured the exchange of the four resources: love, status, service and information, based on a study of Haslam (1995). The cronbach’s alpha was .915. The resource exchange theory consist out of six items, in the survey however money and goods where not represented. This was because these two dimensions were not represented in the company. In the survey four different dimensions were used: service, love, status and information. The questions were measured on a five point liker scale, employees who gave high numbers agreed that their team leader exchanged the particular resource as reward for good performance, employees who gave low numbers disagreed and found that their team leader did not exchange resources. The questions about the resource exchange theory were separated into six questions about service, whether the employee felt that the leader tried to make the work more easy (α.755). Six questions about status (α.723), whether the leader gave compliments. Love was also one of the dimensions, measured with six different questions (α.902), which were about if the leader shows his respect and commitment to the employee. The last five questions were about information (α .807), whether the leader exchanged information to the employee.
Control variables
In the study two control variables were measured, transformational leadership and the strength of LMX.
Twelve questions were about leadership style, measuring whether the team leader was seen by the employees as transformational or not. These questions were based on the survey of Rafferty en Griffin (2004). The cronbach’s alpha was .803. The scale consisted out of five different kinds of leadership characteristics, these characteristics represented transformational leadership behaviors. The five dimensions are: vision, inspirational communication, intellectual stimulation, supportive leadership and personal recognition. The questions of leadership were based on a five point liker scale. One question was reveres coded, for the other questions applies that the high values (4-5) represented transformational leaders.
Seven questions were measuring the strength of LMX according to Furst and Cable (2008). The cronbach’s alpha was .884. The questions were measured on a seven point liker scale, the higher the outcome, the more the employee found that the LMX was strong.
19
4. Results
In table 1 the descriptive statistics as mean, standard deviation and correlation for each variable in the study are presented. As shown in the table the affective resistance, measured on a seven point scale of the employees (M = 4.07) is in average “neutral”. The behavioral resistance (M = 4.77) tends to “somewhat agree”. The two dimensions of resistance are strongly positively related (r = .629). The four dimensions of the resource exchange theory: love, service, status and information are also positive related with each other. They were measured on a five point scale. Remarkable is that the mean of love (M = 3.34), status (M = 3.04) and service (M = 3.28) lies between “neutral” to “agree”, in contrast to information (M = 2.63) what lies between “disagree” and “neutral”. Affective resistance and the four dimensions of the resource exchange theory are also related with each other. In contrast behavioral resistance is related with the dimension information (r = -.289). Affective resistance is also positive related with transformational leadership (r = .231). Contingent reward behavior (M = 2.83) correlates with transformational leadership (M = 3.26) (r = .256). From the measn of transformational leadership and contingent reward is visible that in the data set more leaders were seen as transformational than leaders using contingent reward behavior. Contingent reward behavior is also positive related with the strength of LMX (r = .494), and three dimensions of the resource exchange theory namely love (r = .502), status (r = .431) and service (r = .480). The results show a positive relation between transformational leadership and LMX strength (r = .380). And strength of LMX shows a positive relation with love (r = .511), service (r = .632) and status (r = .559).
Also the demographic control variables gender and working hours per week are correlating with affective and behavioral resistance. From the table is visible that employees who work more hours, show more affective (r = .274) and behavioral (r = .305) resistance. The other demographic control variables, like age, years of employment and years working together with the team leader are not significant correlating with resistance.
From this first analysis it is clear that affective resistance correlates with more dimensions than behavioral resistance.
To answer the hypothesis a hierarchical regression analysis is run, from the dataset there where two dependent variables, which are affective and behavioral resistance according to the employees. There were five predictor variables, which are contingent reward behavior and the four dimensions of the resource exchange theory. Transformational leadership and the strength of LMX are the two control variables.
20 Table 1 Means, Standard Deviations and correlations among the study variables.
+ Variables Mean SD 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.
1. Resistance Affective 4.066 1.046 .755
2. Resistance Behavioral 4.775 1.442 .629** .870
3. Contingent reward behavior 2.826 .452 -.001 .086 .723
4. LMX Love 3.339 .722 -.245* -.056 .502** .902 5. LMX Service 3.036 .556 -.350** -.182 .480** .687** .755 6. LMX Status 3.273 .515 -.268* -.153 .431** .655** .683** .723 7. LMX Information 2.627 .730 -.386** -.289** .176 .355** .426** .347** .807 8. LMX 4.801 .934 -.025 -.197 .494** .511** .632** .559** .160 .884 9. Transformational leadership 3.260 .521 .231* -.109 .256* -.056 .067 .145 -.017 .380** .803 10. Gender 1.620 .488 -221* -.280* -.107 .104 .122 .126 -.016 .145 .025 - 11. Age 33.455 8.858 .032 -.128 .277* .205 .149 -.001 .156 .107 .126 -.007 - 12. Years of employment 3.708 4.076 -.078 -.185 .057 .017 .002 -.091 .115 -.020 -.046 .072 .451** -
13. Years working with TL 1.642 1.341 -.166 -.084 .126 .219 .168 -.011 .059 .075 -.067 -.114 -.307** .376** - 14. Working hours 30.835 7.467 .274* .305** .051 -.245* -.173 -.149 -.063 -.230* -.050 -.673** -.080 -.174 .024
In bold the cronbach’s alpha
**. Correlation is significant at the 0.01 level (2-tailed). *. Correlation is significant at the 0.05 level (2-tailed).
Note that the resistance and LMX are measured in a seven point liker scale, whereby 4 is neutral, the other dimensions are measured in a five point liker scale whereby 3 is neutral.
21
In table 2 the hierarchical regression analysis is shown of affective resistance and the independent and control variables. Model 1 shows that the R Square is .226 and the R Square adjusted .173. This test is significant (p >.002), the affective resistance is for 17,3% explained by the four dimensions of the resource exchange theory and contingent reward behavior. The individual coefficients of the regression model of affective resistance showed that only the dimension information was significant (p >.019). If employees feel that the exchange of information increases with one unit the resistance will grow with -.395. This means that the resistance will decrease. The standardized ß shows -.275, meaning that if the exchange of information increases with one standard deviation (.730), the resistance will decrease with .275 standard deviations.
Table 2 Hierarchical Regression Model for Affective resistance
Variables R R2 R2 Change B SE ß T
Model 1. .476 .226 .173*
Contingent reward behavior .512 .284 .221 1.804
RET Love -.040 .226 -.028 -.179
RET Service -.525 .307 -.278 -1.712
RET Status -.191 .307 -.059 -.388
RET Information -.395 .164 -.275* -2.400
Model 2. .532 .283 .212
Contingent reward behavior .290 .292 .125 .993
RET Love .055 .231 .038 .239 RET Service -.663 .324 -.352* -2.045 RET Status -.282 .308 -.138 -.915 RET Information -.353 .163 -.247* -2.166 Transformational leadership .358 .239 .178 1.499 Strength of LMX .185 .171 .165 1.081
*. Statistical significant at the 0.05 level (2-tailed). RET is the resource exchange theory dimension
In model 2 transformational leadership and the strength of LMX were added, but the test was not significant (p>.067). The differences of the R Square change (.173 and .212) are also not really high. Because the test is not significant it means that transformational leadership and LMX strength do not have an effect above and beyond the effects of contingent reward behavior and the four dimensions of the resource exchange theory. From the individual coefficients the dimensions information (p<.034) and service (p<.045) were significant. When the service increases with one unit the resistance will decrease with .663. The standardized ß show that if the exchange of service increases with one standard deviation (.556), the resistance will decrease with .352 standard deviations. When the exchange of information increases with one unit the resistance will decrease with .353. The standardized ß shows -.275, meaning that if the exchange of information increases with one standard deviation (.730), the resistance will decrease with .247 standard deviations.
22
In table 3 the hierarchical regression analysis is presented of behavioral resistance and the independent and control variables. Model 1 showed that the R Square is .134 and the R Square adjusted .075. This test is not significant (p>.057). Also model 2, where transformational leadership and the strength of LMX was added is not significant (p>.156).
Table 3 Hierarchical Regression Model for Behavioral resistance
*. Statistical significant at the 0.05 level (2-tailed). RET is the resource exchange theory dimension
The individual coefficients of the regression model of behavioral resistance shows in model 1 that only the dimension information was significant (p <.040). If the employees feel that the exchange of information increases with one unit the resistance will decrease with .502. The standardized ß shows -.254, meaning that if the exchange of information increases with one standard deviation (.730), the resistance will decrease with .254 standard deviations. This is quite similar as the results of affective resistance.
In model 2 the two control variables were added, the dimensions information (p<.020) and contingent reward (p<.044) were significant. When the contingent reward behavior increases with one unit the resistance will grow with .883. The standardized ß show that if contingent reward increases with one standard deviation (.452), the resistance will increase with .277 standard deviations. When the exchange of information increases with one unit the resistance will decrease with .573. The standardized ß shows -.290, meaning that if the exchange of information increases with one standard deviation (.730), the resistance will decrease with .290 standard deviations.
Variables R R2 R2 Change B SE ß T
Model 1. .366 .134 .075
Contingent reward behavior .639 .413 .20 1.546
RET Love .269 .330 .135 .817
RET Service -.476 .447 -.184 -1.064
RET Status -.321 .448 -.115 -.717
RET Information -.502 .240 -254* -2.093
Model 2. .442 .178 .097
Contingent reward behavior .883 .431 .277* 2.047
RET Love .221 .341 .110 .646 RET Service -.204 .478 -.079 -.427 RET Status -.129 .454 -.046 -.285 RET Information -.573 .241 -.290* -2.381 Transformational leadership -.210 .352 -.076 -.597 Strength of LMX -.369 .252 -.239 -1.463
23
5. Discussion
5.1. General discussion
The present study sought besides theoretical support also practical evidence that transactional leaders, using contingent reward are effective during organizational change because of the exchange of resources.
In the literature there are more different kinds of leader member exchanges theories, in this study the resource exchange theory from Foa and Foa (1974) based on the exchange of love, status, service, information, money and goods was used. The dimensions money and good were excluded, because in the corporate culture these resources cannot be exchange by the team leader. The studies second aim was to look which resource of the resource exchange theory had the most effect on decreasing resistance. Or to see whether there was a differences between the resources. In the analysis affective resistance, how employees felt, and behavioral resistance, what employees did, during the organizational change were used as outcome variable. The hierarchical regression model of affective resistance showed that the exchange of information had influence on the affective resistance. Employees who ranked the exchange of information higher, ranked lower on the questions about resistance. This means that they were more supportive of the change. When the control variables transformational leadership and the strength of LMX were added to the hierarchical regression model not only information but also the dimension service influenced the affective resistance. When employees ranked the amount of service higher the affective resistance was ranked lower. This means that the exchange of information and service decreased resistance. Hypothesis 2 was partly confirmed, the exchange of information and service lead to less resistance. The exchange of love and status did not decrease the resistance.
The hierarchical regression model of the behavioral resistance was not significant. In this test the exchange of information also decreased the behavioral resistance. By testing the model with the two control variables (transformational leadership and the strength of LMX) the exchange of information again decreased the behavioral resistance. Remarkable was that also contingent reward behavior was influencing the resistance, but not as expected from the theory in decreasing it, but by increasing the behavioral resistance. Hypothesis 1 was rejected. From the result of the regression analysis, there is proof that the exchange of information is very important during organizational change.
24
The goal was evidence to find evidence that resistance can be decreased by leaders who use contingent reward behavior. But in one setting, the behavioral resistance increased by the contingent reward behavior of the team leader.
5.2. Theoretical Implementation
There is a lot of research done into organizational change, most of these researches reflect to “change management”. Change management is focusing on how leaders should behave and act during organizational change (Herold, et al., 2008). One of the often used frame work is Kotter’s eight steps to transform the organization (Kotter, 1995). Or the six silent killers of Beer and Eisenstat (2000). In the above mentioned approaches is recognized the importance of communication and leadership. In the research is found that the exchange of information and service contribute to reduce resistance. The difference in change management and this research is that change management indentifies communication as important in contrast this research gives information as reward for good performance. In change management service is not seen as factor that decreases resistance. Service is based on helping the employees with their tasks, this helping can be by making the work more easy (Donnenworth & Foa, 1974). There was no research found jet that combined the exchange of resources to increase resistance. These findings can be an opening for more research.
Research into organizational change and resistance did not jet focus on the different leadership styles. Even though most researchers agree that transformational leadership is the most effective leadership style in general and during organizational change (Herold, et al., 2008). Bass (1985) argued that transformational and transactional leadership are strongly related, successful leaders have often both leadership styles. An example is that contingent reward behavior correlates to transformational leadership (Avolio, et al., 1999). This research could not find evidence that contingent reward behavior is effective during organizational change, contrary in one situation contingent reward behavior did increase the (behavioral) resistance, these findings does not make contingent reward effective. However the exchange of resources information and service did decrease resistance. The literature suggests that between every leader there is a kind of LMX (Graen & Cashman, 1975). Exchanging service and information makes a leader more effective during organizational change. Transformational leaders and transactional leaders could try to focus more on the exchange of these resources during organizational change to decrease resistance.
25 5.3. Limitations and further research
The research has some limitations starting with the respondents, the research is done in one company, but the changes and tasks of the teams differ. A research done with respondents who are fulfilling the same task and undergone the same change could give a different result. At the same time is the research done within one kind of business, the result could also be different in other kind of organizations. The corporate culture could influence the results. The research could be repeated in a different kind of industry, other culture and with employees undergoing exactly the same change and if possible with more respondents. Because another limitation of the sample is that only 79 respondents were involved and eleven different team leaders.
There were in the organization the last few years several organizational changes. The most of these changes failed, and after a few months the management reversed the change. The results could be influenced by employees who had the feeling that the management was again trying to do something what in the end would not work. Ford and Ford (2010) argue that failed change decreases the credibility and trust in management, what increases resistance. This suggests that if the research was done by employees who had not undergone a few failed changes in the last three years their response to the change could be different.
The resource exchange theory of Foa and Foa consist out of six resources that can be exchanged. Because the team leaders in the company could not exchange money or goods these two dimensions were excluded. Money, information and goods are seen as universal, this means that only information from the universal dimension was measured. The exchange of information decreased resistance. In the future it is interesting of the other two universal dimensions are also successful in decreasing resistance.
There are several factors that influence the employees reaction towards organizational change. Not all of these factors could be measured in this study, in future research it could be interesting to look at the type of change, also described as the nature of change. This because Quinn (1980) argued that resistance of employees is affected by the different kind of organizational change. But also the impact of the change like workload (Herold, et al., 2008) is not measured, perhaps if the workload increased through the change employees have more interest in the resource service. As mentioned in the literature review the perceived fairness of a leader (Ball, et al., 1992) is also important. Leaders who administer rewards contingently are seen as more fair. And fair leaders can also increase resistance.
26
This should be considered in another study. Another factor can be that the research was measuring the resistance after the change was completed. Perlman and Takacs (1990) argued that employees experiences very different emotions during an organizational change process. Which are “equilibrium, denial, anger, bargaining, chaos, depression, resignation, openness, readiness and re-emergence”. It is possible that the resistance is different during these stages of change, or that employees need other resources during each different stage of the change. Besides the emotions also the character of employees are related to the employees success in handle change Judge et al (1999). Wanberg and Banas (2000) looked of the employees’ resilience influenced their readiness to accept change. Vakola, et al., (2004) found that the personal traits affect the way employees react on organizational change. These personal traits could also involve the way in which employees react on the resource exchange model and to contingent reward behavior. Future research could look if the characteristics of employees influence the reaction on the exchange of resources and their resistance.
5.4. Practical implication
Change management recognizes what leaders should do during organizational change. In this research is found that if employees who perform well are rewarded with information and service the resistance decreases.
For managers, supervisors, leaders, middle managers, change agents and every other person who has to deal with resistance of his or her employees can try to reduce the resistance by exchanging information and service in exchange of good performance.
6. Conclusion
Transactional leaders are seen as the less effective leadership style, there is theoretical support that contingent reward behaviour, one of the transactional leadership dimensions, can be effective too. This research was trying to find practical support that contingent reward behaviour reduces resistance by the exchange of resources. Unfortunately the practical evidence is not found that contingent reward behaviour decreases resistance. What is found is that the exchange of information and service decrease resistance.
During organizational change leaders should besides the already well known change management behaviours also try to exchange information and service with employees. This could lead to less resistance.
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