The influence of reinforcing factors of conflicting interests on the
managerial time orientation
What is the effect of the relationship between a manager and his superior and the variance to targets of the manager on the managerial time orientation?
Name: Milou van Wieringen Student number: 10550453
Thesis supervisor: prof. dr. F. H. M. Verbeeten MBA Date: June 25, 2018
Word count: 14996
MSc Accountancy & Control, specialization Accountancy Amsterdam Business School
Statement of Originality
This document is written by student Milou van Wieringen who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
Abstract
Horizontal conflicting interests between managers can lead to a delay in the decision-making process. Factors that may reinforce these horizontal conflicting interests are the relationship between a manager and his superior and the variance to (non-)financial targets. Part of the decision-making process is the managerial time orientation. Therefore, this research examined the effects of the reinforcing factors of horizontal conflicting interests on the managerial time orientation. It uses survey data from a worldwide, logistics company, but the managers are all from Europe. The results suggest that managers who appreciate the relationship with their superior, are more long-term oriented. Contrary to the theory, this research does not show a direct effect of the variance to (non-)financial targets on the managerial time orientation. But there is a partial indirect effect, because the variance to non-financial targets affects the appreciation of the relationship.
Table of Contents 1 Introduction ...6 1.1 Background ... 6 1.2 Research question ... 7 1.3 Reading guide ... 8 2 Literature review ...9
2.1 Organizational conflicting interests ... 9
2.2 Relationship ... 12
2.3 Variance to targets ... 15
2.4 Managerial time orientation ... 17
2.5 Hypotheses development ... 19
3 Methodology ... 23
3.1 Sample ... 23
3.2 Measurement of variables ... 23
3.2.1 Dependent variable: Managerial time orientation ... 24
3.2.2 Independent variable: Relationship ... 25
3.2.3 Independent variable: Variance to targets ... 27
3.2.4 Control variables ... 28
3.3 Response analysis ... 29
3.4 Normality and multicollinearity test ... 29
4 Results ... 31
4.1 Descriptive statistics ... 31
4.2 Regressions ... 34
4.3 Additional regressions ... 37
5.1 Summary of conclusions ... 42
5.2 Discussion of the results ... 43
5.3 Limitations ... 44
5.4 Suggestions for practice ... 45
5.5 Suggestions for further research ... 45
References ... 47
Figures and tables Figure 1: Horizontal conflicting interests between superiors ... 12
Figure 2: An overview of the hypotheses ... 22
Table 1: Definitions of the variables ... 24
Table 2: Reliability tests RELATION ... 26
Table 3: Response analysis ... 29
Table 4: Normality and multicollinearity test ... 30
Table 5: Descriptive statistics variables ... 31
Table 6: Correlation table ... 33
Table 7: Regression results H1 + H2a / H2b ... 34
Table 8: Regression results H3a / H3b ... 36
Table 9: Robustness check RELATION_APPRECIATION ... 37
Table 10: Regression results CEO cluster ... 38
Table 11: Regression correlation FIN_TARGET and NONFIN_TARGET (MTO) ... 39
1 Introduction
1.1 Background
Having conflicts is a part of life. Everybody has to deal with it during their work, social life, family, etc. These conflicts may arise for different reasons: e.g. people have various opinions or want contrasting outcomes (Derr, 1978, p. 76). So conflicts also occur at work. Companies are dealing a lot with conflicts between managers (Peters, 1979). Peters (1979, p. 15) states that this can lead to a delay of the decision-making process. If managers of the same company all have different perspectives and each of them wants the best for his own division, it can cause a conflict.
A conflict is, according to Rahim (2002, p. 207), defined as “an interactive process manifested in incompatibility, disagreement, or dissonance within or between social entities (i.e., individual, group, organization, etc.)”. By reading the definition of a conflict, you might think that it is all negative. But do conflicting interests only have a dysfunctional effect? According to previous research, the existence of conflicting interests within a company can lead to positive effects. For example, Touval (1992, p. 151) states that conflicting interests may improve the learning process of making decisions and how to deal with obstacles. Besides that, it can provide a more critical evaluation of problems (Jehn, 1995, p. 275).
As stated before, conflicts may arise if there are different objectives and opinions. As a consequence, conflicting interests may have an effect on the decision-making process of managers. During this process, managers often tend to focus on either the short-term or the long-term orientation. With a short-term focus, managers concentrate on business matters that will have an impact on the performance of the current year, so within one year (Van der Stede, 2000, p 611). A manager within a more long-term orientation is more focused on the long-term economic growth of the company (Hofstede & Minkov, 2010, p. 501). There is some research about the managerial time orientation. De Aguiar, Pinheiro and Oyadomari (2014, p. 144) state that the implementation of nonfinancial metrics to measure the performance leads to more managerial focus on the long-term consequences of their sales tasks. Van der Stede (2000, p. 619) concludes that budgeting, as a type of control, does not have a direct influence on the short-term or long-term focus of a manager. But budgets may lead to conflicting interests, because two managers can set different targets for one subordinate. In that way, budgets may have an indirect effect on the time orientation. That part, the effects of conflicting interests, is
a gap in the literature. Therefore, in this research the effect of conflicting interests on the managerial time orientation will be examined.
In other words, the existence of the conflicts in a company may influence the managerial time orientation regarding the performance. But what are the causes of the strength of the conflict between managers?
1.2 Research question
The relationship between employees can create a tension. The characteristics of the relationship will partly determine the outcomes of discussions between employees. A lot of companies use a matrix to structure the company. It is an overlaying of two or more elementary structures. The elementary structures include for example worldwide functional divisions, international divisions, geographical regions, and worldwide product divisions (Stopford & Wells, 1972). It is a good solution in case of complex international strategies (Davis & Lawrence, 1977). So in a matrix structure, managers have two or more superiors. The manager may have different relationships with his superiors. Discussions between a manager and his superior who are both already for quite a long time in service will be different from discussions between a “new” subordinate and an “old” superior. Brett (1984, p. 673) states that the length of the relationship is a very important indicator of the results of a negotiation. If a manager has a good relationship with his subordinate, this may provide him an advantage, to the disadvantages of the other superior, in the conflict. Therefore, the type of relationship is the first variable for the strength of the conflicting interests.
The performance of an employee may also be a cause to strengthen the conflict. It is possible that employees who did not reach their target last year, are very motivated to pass their targets this year. It can lead to a more short-term focus. Besides that, the pressure of a superior on the subordinate who did not reach the target last year may be different than on a subordinate who did reach the target. If a subordinate did reach the financial targets but did not reach the non-financial targets, the financial superior may react in a different way than the non-financial superior. This can have an influence on the conflicting interests between both superiors. Therefore, the variance to the targets is the second variable for the strength of the conflicting interests.
Taking this all together, the next research question will be answered in this research: What is the effect of the relationship between a manager and his superior and the variance to targets of the manager on the managerial time orientation?
1.3 Reading guide
In the next section, the main variables of this research are explained. In addition, the hypotheses are developed. Section 3 discusses the methodology, in which the sample and variables are explained. After that, section 4 shows the results of this study. Finally, the discussion, conclusion and limitations of this research are provided.
2 Literature review
In the theoretical part, the key concepts of the research will be discussed. To get a good understanding of the research question, the meaning of all concepts will be examined. This will be done by using and combining other research.
2.1 Organizational conflicting interests
In this section, a detailed explanation of organizational conflicting interests will be provided. This will show what conflicting interests in an organization are, how they may arise and how such conflicts can be managed. In addition, the advantages and disadvantages of these conflicting interests will be discussed.
As mentioned before, a conflict is an interactive process manifested in incompatibility, disagreement, or dissonance within or between social entities (Rahim, 2002, p. 207). Disagreement sounds like something negative, but according to Hoffman, Harburg and Maier (1962, p. 206), it can also lead to a more creative way of problem solving, especially in a matrix organization. Pondy (1967, p. 299) states that it is better to describe a conflict as a dynamic process. It all starts with potential threats of a conflict between two or more employees. It is possible that these threats remain unnoticed, so it does not escalate to a conflict. Different objectives are an example of such conflicting interests. In other words, the existence of different objectives are conflicting interests. If these conflicting interests escalate, it may lead to a conflict. According to Kilmann and Thomas (1978, p. 61), there are two different types of conditions that are causes for a conflict: conditions within and outside the parties. Conditions within the parties is about the characteristics or personalities of the employees involved. These conditions determine the natural behavior of the employees. Conditions outside the parties are circumstances, conflicting interests, which shape the behavior of the employees. So these conditions have an impact on the behavior and decisions. For example, the existence of scarcity of resources is a circumstance that can be described as a conflicting interest. It depends on these conditions, both within and outside, whether the threats become conflicts or not.
There has been done a lot of research about conflicts in organizations. According to Rahim (2002, p. 207), these conflicts within organizations arise if employees participate in activities that are contradictory with the activities of colleagues within the business unit, or
common part of the firm. Other factors that Rahim (2002, p. 207) thinks that can influence the occurrence of these conflicting interests are: different values, attitudes, objectives and the interdependence of functions or departments. He also states that the threshold of the power has to be exceeded before you can talk about a conflict.
Conflicts in an organization have also something to do with power and dependence (Emerson, 1962, p. 32). Emerson explains this in his power-dependence theory1: both parties want an outcome, but they are dependent of the other, because he/she cannot easily attain it in a different way. This is the case when two superiors need each other or the same thing to achieve their objectives. For example, if both superiors need the outcomes from a specific manager. So there is a triangular relationship. According to the power-dependence theory, one of the superiors will achieve what he needs, at the expense of the other superior. The first manager has the power, because he got what he wanted, and the other is the dependent party. Such a circumstance may arise when both superiors have a different objective. In that case, conflicting interests occur.
Pondy (1967, pp. 297-298) describes three categories of organizational conflicts: 1. The bargaining model: This model states that conflicts arise because of a lack of
resources. Different groups within the organization compete with each other to get the resources they need. This conflict generally exists during the planning or budgeting period.
2. The bureaucratic model: This model describes conflicts in the vertical hierarchy of an organization. So when a superior and the corresponding manager are in a conflict, it can be categorized into the bureaucratic model. Most of the time, it has to do with the superior who wants to have control over the corresponding manager’s behavior.
3. The systems model: Conflicts in this model take place in the horizontal hierarchy of an organization. It is the conflict because of the interdependence of functions or departments. Thus, when two managers of different divisions are in a conflict, for example when they both have different objectives, the conflict can be categorized in the systems model. As mentioned before, the different objectives can be seen as conflicting interests, which may lead to a conflict.
1 The assumptions of the power-dependence theory are: (1) the dependency of a party is determined by the value of an outcome, and (2) all parties are reward-seeking.
The research question is about horizontal conflicting interests; interactions and conflicting interests between two departments/managers of the same hierarchical level, are not investigated as much as these in the vertical hierarchy. But according to Walton and Dutton (1969, p. 73), horizontal hierarchy is not less important than vertical hierarchy. So the focus in this research is on horizontal conflicting interests, therefore the systems model is representative for this research.
Horizontal conflicting interests mostly occur in goal-oriented organizations (Pondy, 1967, p. 318). He states that in such an organization, the different departments have their own objectives. When two of these departments are interdependent, and they do not share the same goals, conflicting interests exist. According to Pondy (1967, p. 318), departments are interdependent when they:
- Both use the same facilities or services.
- Are both in the cycle of the information flow or in the work cycle, which is established in the hierarchy or by the task.
- Together made rules about the process or activity in which they are both involved.
Disadvantages of conflicting interests
It is often said that conflicting interests in an organization do not improve the organization as a whole. When conflicting interests occur, it often happens that the decision-making process is delayed. The managers, who are in conflict with each other and have to make the decision, waste their time and energy to negotiate with each other (Wolf & Egelhoff, 2013, p. 592). They also state that it is possible that a conflict between managers arise, and that the top management has to interfere with the problem, for example when this conflicting interest jeopardizes the objectives of the whole company.
How can you manage these conflicting interests, to avoid that it will cause the problems of conflicting interests? Brett (1984, p. 667) suggests two possibilities to deal with it: structural channeling and negotiation skills. With structural channeling, companies structure the part where the problem exists. It is possible to structure the problem area from unstructured, to partially structured, to fully structured, where the behavior of the managers/employees is fully specified (Brett, 1984, p. 668). The other option she mentions, negotiation skills, is about comparing the costs and the benefits. In theory, with rationality it will become clear what the best option is: the option with the highest net value (benefits – costs). But in practice, it is more
subjective; the one who has the best negotiation skills, who is the most convincing, “wins”. So it has nothing to do with rational thinking.
Pondy (1967, p. 318) suggests two different possibilities to deal with conflicting interests. The first one is reducing objective differentiation. This can be done by good selection and training of personnel or by modified incentive systems. The second option he mentions, is reducing the functional interdependence of divisions. This can be done by putting less focus on the consensus or more separation of the common resources.
Advantages of conflicting interests
Conflicting interests do not only have negative aspects. For example, Eisenhardt, Kahwajy and Borgeois (1998, p. 43) state that conflicting interests of managers are necessary for an effective strategic choice. Conflicting interests are also essential for organizational learning (Rahim, 2002, p. 212). With organizational learning, companies are detecting and correcting types of errors. It arises when individuals (within the company) learned from each other, and this knowledge has been retained.
In short, the systems model describes the horizontal conflicting interests: it is a conflict because of the interdependence of functions or departments. These conflicting interests arise if both departments have different objectives. The delay of the decision-making process is a downside of conflicting interests. But it can also lead to more effective strategic choices.
2.2 Relationship
The first variable selected that may have an impact on conflicting interests within a company, is the relationship between the manager and his superior. In this
research, the variable ‘relationship’ stands for the time that the manager and the superior are working “together” in the organization. In addition, the years of experience within the
current company of the manager plays a role in the variable ‘relationship’. Besides that the appreciation of the relationship can have an effect. In this
paragraph, the Leader-Member Exchange Theory is used to
Figure 1: Horizontal conflicting interests between superiors
describe the types of relationships and some consequences of these relationships. This theory is used, because of the horizontal conflicting interests. Two managers at the same level have conflicting interests with each other. They both want something else of their subordinate.
The Leader-Member Exchange Theory2 was developed as the Vertical Dyad Linkage theory (Liden & Graen, 1980, p. 451). They investigated that leaders does not use only one type of leadership. The behavior depends on the relationship the superior has with his subordinate. During the research to the Vertical Dyad Linkage theory, the name of the theory changed to the Leader-Member Exchange Theory (Graen, Novak & Sommerkamp, 1982, p. 111). The Leader-Member Exchange Theory states that superiors can have two different types of relationships with their subordinates (Kassing, 2000, p. 59). The first one is a forma l superior-manager relationship (supervisory). This relationship is specified with formal expectations, the superior behaves authoritatively and all tasks are very specific. According to Liden and Graen (1980, p. 452), these subordinates fulfil the routine jobs. Kassing (2000, p. 59) states that the second relationship is more interpersonal (leadership). In this relationship, the superior and subordinate communicate more about the expectations, and these expectations are more based on the norms of both. The subordinates in this relationship are chosen by the superior to perform the tasks that are important for the superior (Liden & Graen, 1980, p. 452). Therefore, the superior pays more attention to these subordinates.
According to Vidyarthi, Erdogan, Anand, Liden and Chaudhry (2014, p. 468), superiors can have influence on their subordinates by improving the trust- and affect-based relationship. This is because trust is necessary for a good relationship (Ruiz, Ruiz & Martínez, 2011, p. 587). Vidyarthi et al. (2014, p. 468) state that the most important factor of the Leader-Member Exchange Theory is the quality of the relationship between a superior and his subordinate. High-quality relationships are described with the words “a high degree of mutual respect, trust and obligations” (Graen & Uhl-Bien, 1995, p. 227). Therefore, the leadership/interpersonal relationship is seen as high-quality. They state that low-quality relationships are the opposite; “a low degree of mutual respect, trust and obligations”. Consequently, a supervisory relationship is qualified as low-quality.
The communication between a superior and his subordinate is an important factor that differs between high- and low quality relationships. For example, Kacmar, Witt, Zivnuska and
2 The assumptions of the Leader-Member Exchange Theory are: (1) superiors have a limited amount of time, therefore relationships of high quality are only developed with a few selected subordinates, and (2) the effort exercised by the parties of the relationship determines the exchange.
Gully (2003, p. 765) state that communication on a frequent basis in a high-quality relationship reinforces the feelings of a good relationship. On the other hand, they say that more communication in a low-quality relationship leads to more negative reactions of both parties.
According to Kassing (2000, p. 59), subordinates in high-quality relationships tend to agree more with their superiors than subordinates in a low-quality relationship. Therefore, the support is higher and the decisions of superiors are more supported; subordinates follow the direction of their superiors. In addition to agreement, the low employee turnover for subordinates in a high-quality relationship is another positive effect of this type of relationship (Vidyarthi et al., 2014, p. 479). They conclude that subordinates in a low-quality relationship with their superiors are more tend to leave the firm than their colleagues in a high-quality relationship. In other words, these subordinates who can deal with their superiors in a good way, are generally longer in service. As a consequence, these subordinates have a higher job satisfaction (Tourangeau, Cranley, Laschinger & Pachis, 2010, p. 1060).
As mentioned before, trustworthiness is important for a high-quality relationship. When there is trust from both sides (the manager and his subordinate), managers are more tend to involve their subordinates in the decision-making process (Whitener, Brodt, Korsgaard & Werner, 1998, p. 517). They state that participation in the decision-making process contributes to the employees’ appreciation of the job.
The communication, which reinforces the high-quality relationship, also has an influence on the participation in decision making (Gajendran and Joshi, 2012, p. 1254). When the communication frequency between a manager and his subordinate is high, subordinates have more opportunities to get involved in the decision-making process.
In conclusion, a high-quality relationship between a superior and subordinate consists of mutual trust. The trust increases employees involvement in the decision-making process. A high frequency of communication also results in more influence on the decisions. Because of the good relationship, subordinates tend to follow the decisions of their superior.
2.3 Variance to targets
The second variable for organizational conflicting interests is the variance to the targets. It describes whether a manager was below or above his target. Managers who were above the target, may have other priorities than managers who were below.
Locke and Latham (2002, p. 705) define a goal3 as: “A goal is the object or aim of an action, for example, to attain a specific standard of proficiency, usually within a specified time limit”. In the literature, goals are often used as a synonym for targets. For example, Bol, Keune, Matsumura and Shin (2010, p. 1862) use the theory of goals to investigate targets. Both concepts are interrelated.
Targets are very important for a company. For example, they are used to evaluate the performance of employees (Bol et al., 2010, p. 1862). Van der Stede (2000, p. 609) states that a lot of companies use an evaluation style in which the performance of employees are only measured based on their achievement of targets. According to Locke and Latham (2002, p. 706), setting targets is also a way to increase the effort and performance of employees. They conclude that target-setting is better than only telling people to do their best. But they add to this conclusion that not all targets that are specified, automatically improve the performance. By analyzing target-setting by the Goal Setting Theory, they state that targets need to be high to get a higher task and job performance. In addition, they mention that the target difficulty and the performance are in an inverse function; tasks that are too hard or too easy lead to the lowest level of effort and moderately difficult tasks provide the most effort.
Bol et al. (2010, p. 1882) have a little different perspective; they state that some managers use their discretion to set the targets. These lower targets are used to decrease the change of confrontation.
According to Locke and Latham (2002, p. 706), targets have an influence on the performance in four different ways. The first way is that goals provide a direction; it helps to gain the overall objective. The second one is that goals stimulate the energy of employees; higher goals increase the effort. Thirdly, goals have an influence on the persistence of employees; high targets lead to employees who work more intensely and faster. Finally, targets
3 The main assumption of the goal-setting theory is: the behavior of employees is a reflection of the intentions and conscious goals.
have an influence in an indirect way on the actions of employees; it stimulates developing and using task-relevant knowledge.
Thus, targets stimulate employees to work hard and increase their effort. But, according to Indjejikian, Matějka and Schloetzer (2014, p. 1259), targets also have an adverse effect on the effort. If employees already achieved their target during the year, they will decrease their effort for the rest of the period. By doing so, they avoid that the targets will be higher in the next years. In other words, they build up some reserves.
If managers do not achieve their targets, it can have negative consequences for them. Merchant & Manzoni (1989, p. 544) state that these managers do not receive their bonuses and in worse scenarios, they will lose their job. According to Van der Stede (2000, pp. 609-610), managers who want to protect themselves from these negative consequences, have two possibilities. The first one is to negotiate with the superior to set targets that are (easily) achievable. The second option is to only concentrate on activities that have a positive effect on the current performance.
Negotiating to set targets that are achievable, can create a budgetary slack (Merchant, 1985, p. 202). In companies where the evaluation is only based on the achievement of targets, managers tend to create a budgetary slack. In that case, managers try to adjust their targets to a lower level. Merchant (1985, p. 207) states that this can be avoided by involving the managers in the budget setting process.
The top management of a firm does not always set (too) high targets. According to Merchant and Manzoni (1989, p. 548), the target setters have different incentives to reduce the pressure of higher targets. For example, the top management has to intervene less; they can focus on the main problems in the company. Another incentive is that highly achievable targets lead to less earnings management practices.
In summary, targets are used to measure the performance of employees. It can help to get all the employees in the same direction to gain the overall objective. When employees perform below their target, they can negotiate about the target or they can focus on the short-term performance.
2.4 Managerial time orientation
The last key concept of this research is the determination of the time orientation regarding the performance. During the decision-making process, managers often tend to have a short-term or long-term orientation. As the time orientation is part of this decision-making process, this paragraph will start with an explanation of this process. After that, the two options of time orientation are described.
The decision-making process helps people to increase the quality of their decision. It all starts with describing the problem someone has (Saaty, 2008, p. 85). According to Rausch and Anderson (2011, p. 723), the decision-making process is about determining the outcome someone wants, searching for and evaluating all the alternatives, choosing and applying the best alternative and evaluating whether the chosen alternative is successful or not. They state that there are a couple of guidelines that need to be taken into consideration when applying the steps of the decision-making process. Rausch and Anderson (2011, p. 727) conclude that goal setting is an important one.
During the goal setting process, managers often have to deal with the intertemporal-choice problem (Abernethy, Bouwens & van Lent, 2013, p. 925). They state that some actions/goals are good for the short-term, but may have a negative effect on the long-term (or the other way around). According to them, most managers choose for the short-term actions, because most companies want to maximize the current profit and therefore, set short-term goals.
The choice for the short-term or long-term focus partially depends on the model the management choose to make the decisions. According to Eisenhardt and Zbaracki (1992, p. 17), the decisions are mostly based on the garbage can4, rational5 or political6 model. The rational model is about the optimal alternative to achieve the objective. They state that the political model is used when there are different objectives within the management (or team) and they have to come to one common objective. The last one, the garbage can model, is used in more complex and ambiguous situations. In these situations, the problems, and the solutions,
4 The main assumption of the garbage can model is: there are four parts of this model (problems, solutions, decision makers and choice opportunities), and they are all independent.
5 The main assumption of the rational model is: the behavior of people always has a purpose.
6 The main assumption of the political model is: people are able to integrate all the desires of the participants into one strategy that will help to achieve the overall objective.
are disconnected. They conclude that rational and political models are more focused on short-term decisions, while the garbage can model is more long-short-term oriented.
So by taking decisions, people often tend to focus on the short-term or long-term. When someone evaluates the alternatives, he makes a distinguish between possibilities which are good for the short-term or for the long-term performance. It is possible that this happens unconsciously.
With a short-term focus, managers concentrate on business matters that will have an impact on the performance of the current year, so within one year (Van der Stede, 2000, p 611). These managers are mostly interested in achieving their budget/target for the current year. Listed companies tend to have more focus on the short-term orientation (Laverty, 1996, p. 826). Managers of these companies feel pressure to increase the profit every year, because of the shareholders.
A manager with a more long-term orientation, is more focused on the economic growth of the company (Hofstede & Minkov, 2010, p. 501). Van der Stede (2000, p. 613) states that managers with a long-term orientation are more interested in the development or innovation of, for example, new products. Developing a new product does not lead directly to profit, but in the future it will. So for the long-term, it is profitable. He also mentions that managers who are long-term oriented, have more flexibility in comparison to managers who are short-term oriented.
There are two views of someone’s long-term orientation:
- Hofstede’s fifth dimension about culture: Long-term versus short-term orientation. This dimension states that someone’s time orientation is innate (Hofstede & Minkov, 2010, p. 496). It depends on the country where you live, whether you have a long-term orientation or not. Countries with a long-term orientation have a culture in which the focus is on the learning process. Countries with a short-term orientation have a culture in which the focus is on immediate results.
- Abernethy, Bouwens and van Lent (2013, p. 925) state that someone’s time orientation can be managed. The use of performance measures helps to influence the time orientation. If managers focus too much on the short-term performance, an organization can use more accounting return measures to lead the managers to a more long-term orientation.
The approach of Abernethy, Bouwens and van Lent (2013), which states that the managerial time orientation can be influenced, is used for this research. As mentioned before, targets also may affect the time orientation. So there is more research that time orientation can be influenced by different things and it is not (only) innate.
Concluding, the decision-making process is about evaluating the alternatives for a problem. The targets, that are already determined, have an impact on the final decision. These targets can be short-term or long-term oriented. A short-term focus affects the performance within one year and a long-term focus affect the performance for the future (> 1 year).
2.5 Hypotheses development
A lot of companies have to deal with (horizontal) organizational conflicts. Two factors that may reinforce these conflicting interests are the relationship between a manager and his superior and the variance to the targets of the manager. This study will analyze whether these two factors have an influence on the managerial time orientation.
Managers who are in a high-quality relationship with their superior experience mutual trust. As a result, managers are more involved in the decision-making process of their superior. More communication in such relationships reinforces the idea of the manager that he is involved in the decision-making process. In other words, the manager and his subordinate collaborate to make the best decision.
The superior in this high-quality relationship has more power than the superior in a low-quality relationship. He has more power, because his subordinates follow his direction. As a consequence, the manager tends to agree more with his “high-quality” superior. Therefore, the managers will pay more attention to the tasks of their high-quality superior. This leads to more power of the high-quality superior. Managers in these relationships have a high job satisfaction, what results in managers who are longer in service. The longer time of service reinforces the quality of the relationship with their superior. This leads to more collaboration. So actually, it is a vicious circle.
But a long time in service may also have a downside. Dechow and Sloan (1991, p. 52) conclude that in the final years of tenure, CEOs focus more on the short-term performance. These managers make less investments, because they will not enjoy the benefits of these investments. This conclusion only applies to CEOs at the end of their tenure. But there are
more managers who are at the beginning or in the middle of their tenure, than managers at the end of their tenure. Therefore, the expectation is that employees who are longer in service focus more on the long-term.
Long-term oriented managers are more focused on the future performance of the organization. These managers are more flexible in their job than short-term oriented managers. If a manager has to achieve a target in a short period, all his activities will be focused on that specific target. In case the manager has a long-term target, he has some space to organize the tasks according to his own insight. This flexibility is essential for collaboration (Bronstein, 2003, p. 301). She states that flexibility is possible in relationships with less authority/hierarchy. This corresponds to the definition of leadership and high-quality relationships.
Thomas (1992, p. 271) investigated and concluded that collaboration within a company provides a long-term focus. Collaboration leads to the possibility to change the organizational strategies, procedures, etc.
In other words, high-quality relationships are reinforced by the time a manager is in service, because of the high job satisfaction. The high-quality relationships consist of flexibility and involving in the decision-making process. The flexibility is necessary for collaboration. Employees who collaborate more, are more long-term oriented. Therefore, the first hypothesis of this research is:
H1: Managers with a high-quality relationship with their superior, are more long-term oriented.
Besides the relationship between a manager and his superior, the variance to the targets may also reinforce the conflicting interests.
A lot of companies evaluate the performance of their employees on the achievement of targets. Whether the employees receive a reward or not, depends on the variance to the targets. They set the target to increase the effort of the employees. But if employees do not achieve the targets, it is possible that they do not get their bonus or they will be fired. A solution to this problem is that the manager negotiates with his superior to set more achievable targets. That is not always possible. If that is the case, managers focus on the tasks that have a direct effect on the targets for the current period. Therefore, Van der Stede (2000, p. 614) investigated whether the past business unit performance is related to the managerial time orientation. Managers often
have different types of targets. For example their financial target, but also a marketing or quality target. If the manager did not achieve his financial target last year, the superior of the financial targets may increase his pressure to achieve the target this year. The manager will carry out the tasks the financial oriented superior tells him to do. As a result, he will decrease his effort on the other targets (marketing, quality, etc.). Another option is that the manager shifts his costs and benefits. For example, he may decrease the amount of investments to decrease costs and increase the current profit.
Van der Stede (2000, p. 617) found that when performance of last year was poor, the manager is more focused on the short-term results than on the long-term. Finally, he states that a better past performance indirectly leads to less pressure on the short-term results. This is because good past performance creates a budgetary slack.
As mentioned before, the targets can be divided into financial and non-financial targets. But most of the firms only specify financial targets. This is because the target setters fail in identifying and analyzing the non-financial targets (Ittner & Larcker, 2003, p. 88). Therefore, managers choose the easy way and only measure the business performance based on the financial targets. As a consequence, financial targets are often seen as key performance indicator and the non-financial targets are less important. But, managers who focus more on non-financial targets, e.g. innovation of products, are seen as long-term oriented (Van der Stede, 2000, p. 613). Based on this, the second hypothesis of this research is divided into two sub-hypotheses, where the effect of H2b is greater than the effect of H2a.
H2a: Managers who had a positive variance to their financial target of last year are more long-term oriented.
H2b: Managers who had a positive variance to their non-financial target of last year are more long-term oriented.
Hypothesis 1 and hypothesis 2 investigate whether the two variables, relationship and variance to targets, have an effect on the managerial time orientation. Hypothesis 3 is about the effect of the variance to the targets on hypothesis 1. In other words, does the variance to targets have an influence on the relationship between a manager and his superior?
The quality of the relationship depends on the degree of mutual trust, respect and obligations. If a manager meets his obligations, he shows that he can perform his tasks in a good way, and the superior will increase his trust in the manager. As a consequence, the quality
MTO
Variance to
targets
Relationship
Figure 2: An overview of the hypotheses
of the relationship will increase. So in case a manager achieves all his targets, the relationship will be improved. As opposed to this, when a manager has a negative variance to his target, the superior might think that the manager is not capable enough. As a result, his trust, and so the quality of the relationship, will decrease. Because financial targets are seen as key performance indicator, and non-financials are usually less important, the effect of H3a is greater than the effect of H3b.
H3a: A positive variance to financial targets increases the quality of the relationship between a manager and his superior.
H3b: A positive variance to non-financial targets increases the quality of the relationship between a manager and his superior.
H1 (+) H2a (+) / H2b (+)
3 Methodology
3.1 Sample
This study is based on a survey. The data is collected from managers in a worldwide, logistics organization. The participating managers are all located in Europe. They have received the survey with an introductory letter of the chief financial officer of the organization. This letter increases the response rate. A total of 44 useable responses are used for this research. This is a response rate of 55.7%. In addition to the introductory letter of the CFO, a cover letter with the general objective of the research has been added to the survey.
Horizontal conflicting interests play a key role in this research. Therefore, the selected organization has a matrix structure. The organization is structured through geographical regions and markets. Because of the matrix structure, every subordinate has two superiors. These superiors may have conflicting interests, which may affect the subordinate. The subordinates in the organization are the participating managers of this research. These participating managers are from different business units and regions to make sure that the results are not based on only two superiors.
3.2 Measurement of variables
The survey provides information about factors which may influence the managerial time orientation. These factors are the relationship between a superior and his subordinate and the variance to the targets. These factors have been measured by using multiple questions. In addition, some questions about the control variables have been included.
To determine the managerial time orientation, the questions of Merchant (1990, p. 303) are used. The questions about the control variables have been used in many research. The questions about the variance to the targets are derived from the survey of Van der Stede (2000, p. 616). The other questions, about the appreciation and the length of the relationship, have been prepared by myself with the comments of two managers of the used organization. So not all questions are from previous research, which may criticize a part of the reliability.
Table 1 contains an overview of the definitions of all variables that have been used in this research.
TABLE 1 – Definitions of the variables
Variable Definition
RELATION_LENGTH The number of years of a relationship between a manager and his superior. It also depends on the time a manager works at the company.
RELATION_APPRECIATION The quality of the relationship, based on the appreciation of the manager.
FIN_TARGET The achievement (or not) of the financial targets. NONFIN_TARGET The achievement (or not) of the non-financial targets. MTO The managerial time orientation, this can be a short-term or
a long-term focus.
AGE The age of the managers.
GENDER The gender of the managers.
NATIONALITY The nationality of the managers.
Notes: This table contains the definitions of all variables that have been used in this research.
3.2.1 Dependent variable: Managerial time orientation
The managerial time orientation is measured by using an instrument of Merchant (1990, p. 303), which tests whether the managers have a short-term or long-term orientation. The participants have to fill in an indication of the percentage of the time they are working on elements which have an influence on the profit and loss statement within:
(a) 1 month or less (b) 1 month to 1 quarter (c) 1 quarter to 1 year (d) 1 year to 5 years
Based on the theory, the last option, 1 year to 5 years, is an indication of a long-term orientation. The other three options indicate a short-term orientation.
The ordinary least squares regression is performed in two different ways. Firstly, by using the option 1 year to 5 years as the managerial time orientation. The percentage that the managers filled in, has been used as the variable for the long-term orientation. The second
ordinary least squares regression is performed by using the instrument of Abernethy, Bouwens and Van Lent (2013). They take the logarithm of the long-term/short-term activities. This second ordinary least squares regression is performed as a robustness check to make the results more powerful.
Besides that, a binary logistic regression is performed. The mean of the percentages of option 4 (1 year to 5 years) is calculated. As a result, 21.25% of the time is spent on average on the long term. Respondents with a higher percentage scored 1 point, respondents with a lower percentage scored 0 points. This method has been used because only one company is used for this research. It is possible that this company is very short-term oriented and, e.g. 30% long-term orientation is relatively high. But for other companies, which are long-term oriented, 30% may be relatively low. Therefore, managers who score above average are seen as long-term oriented managers.
The dependent variable managerial time orientation has been labelled as MTO.
3.2.2 Independent variable: Relationship
The independent variable “relationship” consists of two separate factors. These two are the length of the relationship and the appreciation of the relationship. A factor analysis has been performed to test whether there are indeed two separate factors that determine the relationship. As the results show, see Table 2, there are indeed two factors for the relationship. The variable RELATION_LENGTH consists of multiple questions. Therefore, the reliability of this variable has been measured using the Cronbach’s Alpha. The results of the factory analysis and Cronbach’s Alpha are all satisfactory.
TABLE 2 – Reliability tests RELATION
Component Factor
loading
Factor loading For how many years have you been working at this
company?
0.776 (0.136)
How long have you worked in this position? 0.852 (0.074) How long have you worked in this position in a matrix
organization?
0.813 0.205
For how long do you know the head of product? 0.651 0.111 Cronbach’s Alpha 0.768
The relationship between me and my head of product is good.
0.025 0.984
Notes: This table includes all questions that have been used to measure the relation variables. For each question,
the table shows the factor loadings. The results make clear that RELATION_LENGTH consists of four questions and RELATION_APPRECIATION of only one question. The Cronbach’s Alpha for RELATION_LENGTH is satisfactory, because it is above 0.7 All factor loadings are also accepted. ( ) is a negative score.
The length of the relationship is measured by using multiple questions. The determinants included in this measurement are:
- For how many years have you been working at this company? The more years, the higher the allocated score.
- How long have you worked in this position? The more years, the higher the allocated score.
- How long have you worked in this position in a matrix organization? The more years, the higher the allocated score.
- For how long do you know the head of product? The longer the participant knows his superior, the higher the allocated score.
Besides the length of the relationship, the appreciation of the relationship is a factor. The appreciation is measured using the next question:
- The relationship between me and my head of product is good. The higher the score, the higher the appreciation of the relationship.
The length and the appreciation of the relationship both have been used in this research. The length of the relationship is about a longer term of the relationship, it is not only representative for the current year. It contains all previous years. The quality of the relationship is the opinion at the moment the manager filled in the survey. Therefore, RELATION_APPRECIATION is about the short-term of the relationship. To test the long-term and short-term aspects of the relationship, both variables have been included in this research.
Because of the matrix structure of the company that is used for the survey, all managers have two superiors: a head of product and a CEO of the geographical cluster. In the survey, a distinction has been made between these two superiors. Questions about the relationship between the subordinate and both superiors have been included. To test the hypotheses, the relationship with the head of product has been taken for both relation factors. This is because, as mentioned in the theoretical section, a subordinate in a high quality relationship follows the direction/decisions of that superior. The results of the survey show that the head of product is more long-term oriented. The hypotheses has been formulated in the long-term direction, therefore the head of product has been selected as the superior. To test whether the relationship with the CEO cluster indeed has no effect on the managerial time orientation, a regression has been performed. This is discussed in the additional regressions section.
The independent variable relationship has been labelled as RELATION_LENGTH and RELATION_APPRECIATION.
3.2.3 Independent variable: Variance to targets
The variance to targets has been split into two types of targets: the financial and non-financial targets. For both type of targets, the measurement has been determined based on the following determinants:
- Whether the manager achieved his (non-)financial target last year or not. For the financial targets, this can be 0 (no) or 1 (yes). For the non-financial targets, this can be 0 (no), 1 (some, yet not all) or 2 (yes).
- Whether the manager is on track to achieve his current year (non-)financial target or not. For both type of targets, this can be 0 (no), 1 (not completely) or 2 (yes).
The independent variable variance to targets has been labelled as NONFIN_TARGET or FIN_TARGET.
3.2.4 Control variables Age
The first control variable is age (labelled as AGE). It is likely that older managers have more experience, so they negatively deviate less from their target than young, unexperienced managers. Besides that, young managers probably focus more on the short-term performance, because they want to show what they can. On the other hand, old managers who are about to retire, will also focus on the short-term, because they will not enjoy the long-term benefits. Finally, the relationship between a manager and a superior of the same age, may have a higher quality than the relationship between a young manager and an old superior. The ages of the respondents have been divided into age categories with a width of 5 years.
Gender
The second control variable is gender (labelled as GENDER). It is possible that the relationship between two women or two men is better in a specific time than the relationship between a man and a woman (or the other way around). In addition, men are often more competitive oriented, while women are more co-operative. Fenwick and Neal (2001, p. 217) state that, because of the characteristics of women, they are better in making decisions for the future strategy. Therefore, women may focus more on the long-term performance, while men focus more on the short-term performance. Focusing on the short-term performance will increase the possibility to achieve the targets. This control variable has been coded as a dummy variable, where 0 is male and 1 is female.
Nationality
The third control variable is nationality (labelled as NATIONALITY). The variables (relationship and variance to targets) are individual matters, while nationality is a matter of groups. Therefore, this last control variable has been included. Tung (1982, p. 64) states that Western people pay more attention to relational aspects than Eastern people. In Eastern Europe, the power distance is larger than in Western Europe. So the quality may differ. According to Gupta, Hanges and Dorfman (2002, p. 14), Western European countries are more future oriented than Eastern European countries. This may affect the results of this research. The results show that there are respondents of fifteen different countries. These different countries have been categorized into Western European and Eastern European countries.
3.3 Response analysis
The responses have been tested based on the response analysis. Both independent variables and the dependent variable have been checked for non-response bias. The early and late responses have been compared by using the mean date of response. Each response received after the mean date is coded as 0, each response received before the mean date is coded as 1. The independent T-test has been used to measure whether there is a difference between early and late responses. Table 3 provides the results of this test. The table shows that all results are satisfactory.
TABLE 3 – Response analysis
Tests RELATION_ LENGTH RELATION_ APPRECIAT ION FIN_TAR GET NONFIN_ TARGET MTO Step 1: Levene’s test (Sig.) 0.648 0.628 0.360 0.390 0.298 Step 2: Difference early/late (Sig. 2-tailed) 0.634 0.227 0.313 0.459 0.188
Notes: The Levene’s test shows whether there is an equality between early and late responses. All results are
>0.05, which suggests that there is an equality in variance between both for all variables. Step 2 shows that there is no significant difference between early and late response, because all results are >0.05.
3.4 Normality and multicollinearity test
To test the assumptions for the regressions, the normality and the multicollinearity has been assessed. Based on the skewness and kurtosis of all variables, the corresponding z-values have been calculated. All results for the normality are satisfactory, except for the skewness of the RELATION_APPRECIATION. Most respondents scored high on this variable; that is the reason for the high skewness value. It has nothing to do with outliers. But it makes the answers
of the survey less suitable for statistical testing. Therefore, a binomial logistic regression has been performed as a robustness check. All respondents who scored above the average of 4.16 for the appreciation, score 1 point and all respondents below the average, score 0 points. The results of this test are discussed in the additional regressions section. The multicollinearity test has been performed to assess the correlations between the independent variables. All tolerance and VIF values are accepted, so multicollinearity is not a problem. All results are listed in Table 4.
TABLE 4 – Normality and multicollinearity test
Tests RELATION_ LENGTH RELATION_ APPRECIAT ION FIN_TAR GET NONFIN_ TARGET MTO Skewness (0.014) (0.976) (0.303) (0.250) 0.576 Std. Error of skewness 0.357 0.357 0.357 0.369 0.357 Z-value skewness (0.038) (2.729) (0.847) (0.678) 1.642 Kurtosis (0.527) 1.622 (0.747) (0.624) (1.736) Std. Error of kurtosis 0.702 0.702 0.702 0.724 0.702 Z-value kurtosis 0.867 1.521 1.032 0.928 1.573 Tolerance 0.960 0.949 0.900 0.842 - VIF 1.041 1.054 1.111 1.188 -
Notes: This table shows the results of the tests performed to assess the assumptions for the regression. The
normality test consists of the skewness and kurtosis values. Z-values >1.96 or <-1.96 are significant. Therefore, the skewness of RELATION_APPRECIATION is significant. For the multicollinearity, the tolerance values should be higher than 0.2 and the VIF value lower than 10. Therefore, all scores are satisfactory. ( ) is a negative score.
4 Results
4.1 Descriptive statistics
The sample of this research consists of 44 useable surveys. All participants work at the same company, in different divisions, spread throughout Europe. Table 5 provides an overview of the mean and standard deviation of the variables.
TABLE 5 – Descriptive statistics variables
Variable Mean Std. Dev.
RELATION_LENGTH 9.82 3.578 RELATION_APPRECIATION 4.16 0.745 FIN_TARGET 1.93 0.873 NONFIN_TARGET 3.22 0.652 MTO 21.25 16.570 Control variables AGE 3.55 1.247 GENDER 0.14 0.347 NATIONALITY 0.84 0.370
Notes: This table includes all variables that have been used in this research. For each variable, the table shows the
mean and standard deviation.
The table shows an average length of the relationship of 9.82. The answers of the questions related to the RELATION_LENGTH have been divided into time periods. The longer the period, the more points the manager gets. The highest possible score is 20 points. So an average of 9.82 points suggests that most of the managers work relatively short in this function within this company and therefore know their superior for a relatively short time. The standard deviation of 3.578 indicates that mangers with a RELATION_LENGTH between 2.664 and 16.976 are not exceptional. A score of 20 means that the manager works for more than 20 years in the current function within the company and know his superior for the same time. Usually, this does not happen that much, so the standard deviation is sufficient.
The average appreciation of the managers for the relationship with their superior is relatively high, namely 4.16. In addition, the standard deviation is only 0.745, which is not very high, because a score between 1 and 5 is possible. As mentioned before, this results in a high skewness value. The means of the targets suggest that most of the managers achieved their targets last year and are on track to achieve their target this year, or at least achieve part of it. Finally, the mean of the managerial time orientation is 21.25. So the managers spend, on average, 21.25% of their time on long-term performance.
The control variables have been coded in categories. The age of the participants is divided into age scales. The mean of 3.55 states that the average age of the participants is between 45 and 50 years. The standard deviation of 1.247 suggests that none of the age scales is exceptional. Gender is coded as a dummy variable. The mean of 0.14 indicates that 14% (6 out of 44) of the participants is a female. The nationality of all respondents is divided into two parts: Western Europe and Eastern Europe. The mean of 0.84 states that 84% (37 out of 44) of the managers comes from Western Europe.
The correlations between all variables are provided in Table 6. The Pearson correlations are reported below the diagonal, while the Spearman correlation are reported above the diagonal. As the table shows, there is a strong correlation between the dependent variable MTO and the independent variable RELATION_APPRECIATION. Both the Pearson and the Spearman correlation show this conclusion. Therefore, it is expected that hypothesis H1 will be supported. The control variable AGE is correlated with the RELATION_LENGTH. This is not remarkable. The correlation between NATIONALITY and GENDER means that most Eastern European managers are women and most Western European managers are men. Finally, there is a positive correlation between FIN_TARGET and NONFIN_TARGET. It leads to an expectation that managers who positively deviate from their financial target, also deviate positively from their non-financial targets (or the other way around). This correlation may have an impact on the regression, because both variables (FIN_TARGET and NONFIN_TARGET) are part of the regression. Therefore, additional regressions have been performed to determine whether the results change if only one of the targets is part of the regression. So first the regression has been performed with the variance to the financial targets. After that, the regression has been performed with the variance to the non-financial targets. The results are discussed in the additional regressions section.
TABLE 6 – Correlation table AGE GEND ER NATIO NALIT Y RELATION_ APPRECIAT ION RELATIO N_LENGT H FIN_TA RGET NONFIN_ TARGET MTO AGE (0.089) 0.565 0.122 0.431 (0.146) 0.344 0.376* 0.012 0.297 0.050 0.275 0.082 0.005 0.975 GENDER (0.122) 0.430 (0.370) 0.013 (0.012) 0.940 0.076 0.623 0.182 0.238 (0.029) 0.856 0.068 0.660 NATION ALITY 0.142 0.358 (0.370)* 0.013 0.036 0.817 (0.079) 0.611 (0.176) 0.254 0.137 0.392 (0.182) 0.236 RELATI ON_APP RECIATI ON (0.096) 0.537 0.004 0.979 0.010 0.951 0.048 0.757 0.031 0.842 0.259 0.103 0.403** 0.007 RELATI ON_LEN GTH 0.393** 0.008 0.077 0.621 (0.040) 0.797 0.046 0.767 0.142 0.357 0.131 0.414 0.096 0.534 FIN_TA RGET 0.291 0.055 0.185 0.230 (0.178) 0.247 0.089 0.568 0.160 0.301 0.354* 0.023 0.048 0.756 NONFIN _TARGE T 0.269 0.089 (0.034) 0.833 0.155 0.335 0.222 0.164 0.195 0.222 0.312* 0.047 (0.227) 0.153 MTO (0.141) 0.363 0.172 0.265 (0.251) 0.100 0.459** 0.002 0.039 0.800 (0.018) 0.907 (0.246) 0.120
Notes: Pearson correlations appear below the diagonal, non-parametric Spearman correlations appear above the
diagonal. ( ) is a negative correlation.
* Correlation is significant at the 0.05 level (2-tailed) ** Correlation is significant at the 0.01 level (2-tailed)
4.2 Regressions
The correlation table (Table 6) shows that some variables correlate with each other. But there is no clear independent variable. In other words, the correlation table does not include causation (Foster, Barkus & Yavorsky, 2005). This regression analysis shows whether the independent variable predicts the dependent variable.
The results of the regression analysis for hypothesis 1 and 2a/2b are reported in Table 7. The first type of regression is the binary logistic regression. In this case, the managerial time orientation has been based on the average time spend on the long-term performance in relation to the average of the company. The second type of regression is the ordinary least squares regression 1. In that case, the managerial time orientation has been based on the percentage of time they spend on the long-term performance. The third type of regression is the ordinary least squares regression 2. The managerial time orientation has been based on LOG(long-term / short-term).
TABLE 7 – Regression results H1 + H2a/H2b
Dependent variable: MTO
BL regression OLS regression 1 OLS regression 2
Coefficient Prob. Coefficient Prob. Coefficient Prob.
AGE (0.064) 0.338 (2.849) 0.222 (0.039) 0.511 GENDER (0.035) 0.824 3.569 0.637 (0.205) 0.294 NATIONALITY (0.363) 0.086* (7.850) 0.282 (0.369) 0.054* RELATION_AP PRECIATION 0.239 0.013** 10.288 0.004*** 0.305 0.001*** RELATION_LE NGTH 0.044 0.044** 0.592 0.394 0.021 0.289 FIN_TARGET 0.039 0.692 (0.472) 0.894 0.062 0.453 NONFIN_TARG ET (0.143) 0.272 (4.765) 0.302 0.046 0.677 N
Cox & Snell R square
Nagelkerke R square 44 0.301 0.417 N R square Adjusted R square 44 0.329 0.187 N R square Adjusted R square 44 0.369 0.235
Notes: The binary logistic regression is performed with the dependent variable MTO as a dummy variable, where
1 = above average long-term orientation and 0 = below average long-term orientation. The ordinary least squares regression 1 is performed with the dependent variable MTO as the percentage of the time a manager spend on the long-term performance. The ordinary least squares regression 2 is performed with the dependent variable MTO as the logarithm of long-term / short-term. The ***, **, * indicate a significance of 1%, 5% and 10%. ( ) is a negative correlation.
The binary logistic regression shows a significant direct effect of the appreciation of the relationship (p = 0.013) and the length of the relationship (p = 0.044) on the managerial time orientation. This supports the first hypothesis and is in accordance with the Leader-Member Exchange Theory. So the higher the quality of the relationship, the more long-term oriented a manager is. This regression shows no effect of the variance to the financial targets (p = 0.692) and non-financial targets (p = 0.272) on the managerial time orientation. In other words, whether a manager achieved his target last year or not, does not affect his time orientation. This rejects the second hypothesis. Therefore, this is not in accordance with the theory. A (possible) explanation for this will be discussed in the conclusions and discussion paragraph. NATIONALITY (p = 0.086) is the only control variable that has an effect on the managerial time orientation. This suggests that managers from Western Europe are more long-term oriented than Eastern European managers. The model explains 41.7% of the managerial time orientation (Nagelkerke R square = 0.417).
The ordinary least squares regression 1 only shows a significant direct effect of the appreciation of the relationship (p = 0.004) on the managerial time orientation. So if the manager appreciates the relationship, he will focus more on the long-term. The length of the relationship does not have a direct effect using this regression. As a result, the first hypothesis is only partially supported. In accordance with the binary logistic regression, the ordinary least squares regression 1 does not show a direct effect of the variance to the financial targets (p = 0.894) and the non-financial targets (p = 0.302) on the managerial time orientation. This is not what the theory predicts and therefore, this will be discussed in the conclusions and discussion paragraph. The model explains 18.7% of the managerial time orientation (Adjusted R square = 0.187).
The last regression, the ordinary least squares regression 2, shows the same result regarding the appreciation of the relationship. There is a significant direct effect of the appreciation of the relationship (p = 0.001) on the managerial time orientation. In accordance with the ordinary least squares regression 1, there is no direct effect of the length of the
