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The influence of leadership in retail

organizations

A quantitative study of the impact of leadership on employee engagement, customer satisfaction and financial store performance

University of Amsterdam

Track: MSc. in Business Studies - Leadership and Management Faculty: Economics and Business

Student name: Leon. F. Hattenberg Student number: 10607854

Student e-mail: leon.hattenberg@student.uva.nl First supervisor: Dr. Wendelien van Eerde Co-reader: Dr. Annebel de Hoogh

Date: August 2014

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Table of Content

Introduction 5

Field of Study 9

The Retail Industry 9

The organization Dirk van den Broek 9

Theoretical background 10

Leadership 10

Leadership in retail organizations 11

Employee Engagement 12

Perceived Organizational Support 13

Customer satisfaction and Financial store performance

13

Leadership/employee engagement and Customer satisfaction/Financial store performance

15

Perceived organizational support as a moderator

17

Store employee engagement, store customer satisfaction and financial store performance

19

Method 22

Sample and Procedure 22

Measures 23 Dependent variables 24 Analysis 25 Test of assumptions 26 Main effects 28 Moderation effect 30 Mediation effect 31 Discussion 35

Limitations and future research 36

Practical implications 37

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References 39

Appendix A- Quantitative Phase 45

Appendix B- Quantitative Phase 47

Appendix C- Quantitative Phase 49

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Abstract

This thesis adds to the leadership literature by examining the effect of transformational leadership, individual consideration, contingent reward and management by exception on employee engagement. Moreover, this thesis examines the effect of employee engagement on customer satisfaction and financial store performance and the effect of perceived

organizational support on the relation leadership and employee engagement. In total, 97 participants of different supermarket stores in the Netherlands completed the questionnaire. With a regression analysis it is found that transformational leadership, individual

consideration, contingent reward and management by exception influence employee

engagement. Employee engagement does not predict customer satisfaction nor financial store performance. Furthermore, perceived organizational support does not affects the relation between leadership and employee engagement.

Keywords: transformational leadership, transactional leadership, employee

engagement, perceived organizational support, customer satisfaction and financial store performance

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Introduction

Since recent years, the supermarket sector is characterized by increased competition (Gomez, McLaughlin & Wittink, 2004). The margins are thinner and the customer

requirements in terms of product freshness for food and the product assortment is growing (Blanc, Cruijssen & Koster, 2005). Moreover, customers can easily visit different

supermarkets due to high supermarket density in the Netherlands. Furthermore, supermarkets offer, in general, relatable products to one another. This makes it easy for customers,

especially unsatisfied customers, to switch to a different supermarket. It thus appears that the supermarket sector has to stand out in some way to survive in this highly competitive

environment (Salverda, Van Klaveren & Van der Meer, 2008). Companies in the supermarket industry thus have to perform in such a manner that their profits remain the same; it is thus valuable to measure performance to analyze how to remain these profits. Performance is measured with different measurement tactics in the supermarket industry (Gomez et al., 2004; Salverda et al., 2008). One such a performance measure is customer satisfaction whereas another is financial store performance. For customer satisfaction it applies that personnel is in daily contact with customers; it is after all the customers who influence the profit and

turnover of the organization (Hartline & Ferrel, 1996). Customer satisfaction is thus an important measure and outcome for companies in the supermarket industry (Gomez et al., 2004; Salverda et al., 2008). Moreover, if customers are satisfied with “their” supermarket, they are more likely to return to the same supermarket the next time (Hesket & Schlesinger, 1994).

According to Harter, Schmidt and Killham (2003) customer satisfaction is influenced by the employees who are in daily contact with customers. Employees can influence

customers with for example their service behavior. This has been argued by Simon, Gomez, McLaughlin and Wittink (2009), they found a significant effect of employee attitudes on customer satisfaction in the supermarket industry. Simon et al. (2009) were one of the first to find a causal link between employees’ attitude and customer satisfaction. However, their research did not link measures of financial store performance to employee attitudes and customer satisfaction. To my best knowledge, this link has never been made before in research.

Gomez et al. (2004, p. 265) argue, “managers in the retail sector undertake substantial efforts to conduct customer satisfaction surveys. Yet is appears that in most cases the data are used to simply monitor specific store attributes and overall satisfaction, over time”. They thus try to stress the importance of other measures of performance, which could be financial store

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performance. The link between customer satisfaction and sales performance or financial store performance has thus not been firmly established yet in the industry (Gomez et al., 2004; Simon et al., 2009) and deserves more attention. Moreover, due to the financial crises affecting profits and gains (Vuolo, Mortimer & Staff, 2012), it is of heightened interest for organizations to investigate what affects financial store performance. Financial store

performance concerns the financial data, profit and losses, from each retail store. It provides the organization with information about the well-being of the organization, the profits and how well the store is doing compared to other stores. Especially in turbulent times like the current (e.g., Vuolo, Mortimer & Staff, 2012) it is of heightened interest for organizations to be aware of this type of performance measure. Due to the increased importance of financial store performance and the little research on the topic, it will be of interest in the current research.

According to Simon et al. (2009), an antecedent of both employees’ attitude, e.g., employee engagement (Bakker & Bal, 2010), and customer satisfaction could be leadership. According to the extensive literature, leadership influences performance of employees and behavior of employees in multiple ways (Bass 1999, Den Hartog & Koopman, 2001), for instance through organizational commitment (Avolio, Zhu, Koh & Bhatia, 2004), business unit performance (Howell & Avolio, 1993), organizational citizenship behavior (Podsakoff, MacKenzie, Paine & Bachrach, 2000) and employee engagement (Breevaart, Bakker, Hetland, Demerouti, Olsen & Espevik, 2014). Simon et al. (2009, p. 29) moreover indicate that “stores with more effective leaders may have both highly satisfied employees and better customer service than stores with ineffective leaders”. Breevaart et al. (2014) found in their research that leadership appears to be related to employee engagement. Leadership thus appears to affect both employee engagement and customer satisfaction.

The past decade on leadership research can be characterized as a quest to whether leadership can lead to positive organizational outcomes (Bass, 1999; Den Hartog & Koopman, 2001). Not every effect of positive leadership has however been as extensively researched as others, for instance the relationship between leadership and employee engagement seems to be of heightened interest only since recent years (Tims, Bakker & Xanthopoulou, 2011). Tims et al. (2011) were one of the first to investigate this relationship, which they found to be positively related to one another, alike Breevaart et al. (2014). Next to this, recent research also indicates a different positive relationship between transformational- and transactional leadership and employee engagement (Breevaart et al., 2014). However, the relationship between transactional leadership and employee engagement has not yet been

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extensively researched, for example, the relationship between management by exception- active and passive and employee engagement (Breevaart, et al., 2014). Moreover, earlier research has mainly focused on jobs with a lot of variety, for example industrial consultants (Tims, et al., 2011) and cadets (Breevaart et al., 2014). Less extensively researched have been jobs with less or little variety, e.g., rather fixed tasks such as those of supermarket employees.

In sum, customer satisfaction seems to be one of the most important measures of performance in the supermarket industry (Gomez et al., 2004; Salverda et al., 2008). However, the link between employee engagement and customer satisfaction and financial store performance has not yet been extensively investigated and deserves more attention. Secondly, leadership influences the performance of employees, such as employee

engagement. More research is needed though to investigate the link between transactional leadership and employee engagement.

It appears that leaders are important in organizations. However, the support from the organization appears to be important as well (Eisenberger, Huntington & Sowa, 1986). Shoss, Eisenberger, Restubog and Zagenczyk (2013) investigated the effect of low POS on counter productive work behavior. They posit that employees feel that bad leadership is dynamically related to organizational support as perceived by employees. The influence of perceived organizational support between the relation leadership and employee engagement is not extensively researched and therefore there is more researched needed though investigate the link.

The present study uses an empirical approach to investigate the above described relationships and seeks to expand the existing literature in four manners: (1) by the

investigation of the relationship between transactional leadership (management by exception) and employee engagement as will be discussed more elaborately in the theoretical background (2) by the investigation of the relationship between employee engagement and customer satisfaction in a different sector then earlier research, e.g., the supermarket sector (3) To investigate the relationship between employee engagement and measures of the financial store performance in the supermarket sector, and finally (4) to investigate the moderation effect of perceived organizational support on the relationship between leadership and employee engagement. This leads to the following research question:

1) To what extent does leadership behavior and employee engagement relate to customer satisfaction and financial store performance?

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The current research is organized in a disciplined manner. First, the current thesis provides a short introduction of the Dutch retail market and the organization where the data will be collected. Secondly, this thesis organizes the literature on leadership, employee engagement, perceived organizational support, customer satisfaction and financial store performance. Thirdly, the relationships and hypotheses between the different variables are explained. Fourthly, a description about the methods and the participants will be given. Finally, the results and the discussion are presented.

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Field of Study

In this section I will give a short overview of the Dutch retail market and the organization Dirk van den Broek. Dirk van den Broek is the organization where the data is collected. The Retail Industry

The Dutch retail industry contains a large part of the service sector in the Netherlands, in 2005, more than 714.000 people were employed in the retail industry (Salverda, et al., 2008). The retail industry contains 8.7% of the wages and salaries earned in the Netherlands (Salverda et al., 2008). It thus appears to be a large sector concerning employment. In the retail market time employment dominates, e.g., 58% in 2005 and 65% in 2006 were part-timers (Salverda et al., 2008). Furthermore, the supermarket sub-sector is by far the biggest employer in the retail sector, with over 200.000 supermarket employees in 2005 (Salverda et al., 2008) and over 300.000 in 2012 (CBS, 2012). Another interesting fact is the age of the workers. Dutch supermarkets employ relatively young workers; 53% in 2005 was aged between 15 and 29. Moreover, the Dutch supermarkets seem to operate in a more competitive environment than ever (Salverda et al., 2008). Production and employment structures have been moving to a low-wage model. Next to this, the strategies are focused on low costs and saving labor costs.

The organization Dirk van den Broek

Dirk van den Broek was the first supermarket in the Dutch market, founded by Mr. Dirk van den Broek in 1942 (Dirk van den Broek, 2014). After the take over of Bas van der Heijden and Digros, Dirk van den Broek currently owns more than 104 stores. In cooperation with Dekamarkt, Dirk van den Broek started Detailresult in 2009, in which they can operate together to be even more competitive on the market. After the merge, Dirk van den Broek invested in customer satisfaction programs and recruitment of new personnel. The latest customer satisfaction program is called “de klant op nummer 1” (i.e., customer on number one). This program is started to train the employees that the customer is of utmost importance in their shops. According to the HR manager from Dirk van den Broek, Mr. Sleeven,

employees are the most important asset in the supermarket and they can make a difference when it regards the customer satisfaction level or financial store performance. This study can therefore play an important role in further developing the customer satisfaction program. In collaboration with Dirk van den Broek, the data will be collected in 104 different

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Theoretical background Leadership

Since the early 1980s, the “new” leadership styles, e.g., charismatic- and transactional- transformational leadership, have raised more attention. Leadership has become a topic of high interest for many researchers (Piccolo & Colquitt, 2006). An extensive amount of research has paid attention to the relationship between leadership and performance (e.g., Den Hartog & Koopman, 2001; Breevaart et al., 2014). There are two main types of leadership styles, i.e., transactional leadership and transformational leadership (Den Hartog & Koopman, 2001).

Transactional leadership namely concerns the exchange relationship between the leader and the follower, or the employee; i.e., some form of cost-benefit exchange (Bass, 1985; cited in Den Hartog & Koopman, 2001). According to Judge and Piccolo (2004), transactional leadership has three dimensions, namely contingent reward, management by exception-active, and management by exception-passive. Judge and Piccolo (2004, p. 755) define contingent rewards as “the degree to which the leader sets up constructive transactions or exchanges with employees”. The difference between management by exception-active and management by exception-passive is that active leaders monitor follower behavior and anticipate problems, whereas passive leaders wait until the followers’ behavior causes problems (Barling, Kelloway & Frone. 2005; Howell & Avolio, 1993).

Next to a transactional leadership style, the transformational leadership style exists (Den Hartog & Koopman, 2001). According to Den Hartog and Koopman (2001)

transformational leadership consists of four dimensions, namely charisma, inspirational motivation, individual consideration and intellectual stimulation. A transformational leader who can, in the eyes of employees, show charisma, can also show inspirational motivation because “inspiration describes a leader’s capacity to act as a model for subordinates, the communication of a vision and the use of symbols to focus efforts” (Den Hartog & Koopman, 2001 p. 177). Individual consideration is used to stimulate subordinates to achieving their fullest potential (Den Hartog & Koopman, 2001). Leaders use intellectual stimulation to stimulate subordinates to rethink the old ways and provide new ideas. In their meta-analysis, Lowe, Kroeck and Sivasubramaniam (1996) indicate that transformational leadership predicts work unit effectiveness and organizational measures of effectiveness. An important note to make is that transformational leadership and charismatic leadership appear to have much in common (Judge & Piccolo, 2004). Due to the literature supporting this, in this thesis there

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will not be differentiated between the term charismatic leadership and transformational leadership, e.g., will thus be used interchangeably.

Transactional leadership and transformational leadership have both been investigated concerning their validity (Judge & Piccolo, 2004). Judge and Piccolo (2014) their results indicate that transformational leadership and contingent reward, as part of transactional leadership, were important predictors of employees’ satisfaction concerning the leader,

employees’ motivation, leader’s job performance and leader effectiveness. Thus, transactional and transformational leadership appear to both be effective. For organizations, effective leaders can be important to enhance business performance and possibly behavior of the employees.

Leadership in Retail Organizations

Leadership in general is identifiable, though slightly different from leadership in retail. In retail organizations, where the organization has different locations, there is often one leader per location. This store-leader as it is often called stands in daily contact with his or her employees (CBS, 2012). Lee, Cheng and Kee-hung Lai (2011) investigated leadership in the retail industry, more specifically in the retail banking industry. They found a positive impact of intellectual stimulation, a dimension of transformational leadership, on the quality of the service. Thus, intellectual stimulation appears to increase the service quality in the retail industry. Moreover, a study in a Dutch supermarket from Koene, Vogelaar and Soeters (2002) also show a clear relationship between leadership and organizational performance.

Organizational performance in this study is defined as financial store performance and the climate of the organizational. They also indicate that charismatic or transformational leaders cause better performance of their employees, or as they explain, “charismatic leaders seem to enhance the quality of work resulting in a strong impact on the net results of the stores” (Koene et al., 2002). Especially the last study seems interesting since there does not appear to be an extensive amount of research done in the supermarket industry between leadership and financial store performance in particular. However, in the supermarket industry a lot of different factors are also important for the financial store performance. For example, prices and quality of the products. The research of Koene et al. (2002) suggest that 56,6% of the variance is explained by leadership. This indicate that leadership is an important factor in the financial store performance of the supermarket.

These studies have several implications for research and the practical world; the topics however need further investigation. Moreover, as Koene et al. (2002) already bring to the

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attention, other factors influence financial store performance as well, or other measurements of performance (e.g., customer satisfaction) for that matter. As Tims et al. (2012) and Breevaart et al. (2014) have tried to stress in their studies, employee engagement has

increased in interest since recent years and this may play its part in the relationship between leadership and performance measures.

Employee engagement

As discussed, employee engagement seems to be of particular interest since recent years, for instance related to leadership (Tims et al., 2012) and measures of performance as indicated by Koene et al (2012), moreover the 2 million hits on the internet verify this (Bakker & Schaufeli, 2008). “Engaged employees have a sense of energetic and effective connection with their work activities and they see themselves as able to deal completely with the demands of their job” (Schaufeli, Salanova, González-romá & Bakker, 2002, p. 73). Also, more multinationals and consultancy firms use assessments to test employee engagement in job candidates, stressing the importance and more widely utilization of employee

engagement.

There are various definitions of employee engagement in the existing literature. However, the definition of Schaufeli and Bakker (2003) appears to be the most extensively, most consistent, and well-validated one used (Bakker et al., 2010; Breevaart, Bakker,

Demerouti & Hetland, 2012; Breevaart, et al., 2014). Schaufeli, González-Romá and Bakker (2002, p. 295), employee engagement can be defined as a “positive, fulfilling, work-related state of mind that is characterized by vigor, dedication and absorption”. Vigor indicates the high level of positive energy of employees, or “the willingness to invest effort in one’s work, and persistence also in the face of difficulties” (Schaufeli et al., 2002, p. 295). Dedication means to be enthusiastic about work, whereas absorption refers to being concentrated or focused at work (Breevaart et al., 2012; Schaufeli & Bakker, 2004).

Thus, engaged employees appear to have a strong connection with their work, which could affect their performance. Moreover, it would be likely that leaders could enhance employee engagement since leaders also appear to enhance employees’ performance, as also indicated by Breevaart et al. (2014).

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Perceived organizational support

The extensive amount of literature on perceived organizational support (POS) seems to agree that POS is associated with the social exchange theory (Eisenberger, Huntington, Huntchison & Sowa, 1986). “The social exchange as here conceived is limited to actions that are contingent on rewarding reactions from others”(Blau, 1964). The definition of Blau, (1964) indicated a two-sided rewarded system involving transactions or exchange. The exchange relation is also important for transactional leaders who are mainly based on the exchange relation with the subordinate (Den Hartog & Koopman, 2001).

POS refers to the perception of the employee and the extent to which the organization cares about the well-being of the employee (Eisenberger et al, 1986; Rhoades and

Eisenberger, 2002; Epitropaki and Martin 2013). POS can have several positive effects. For instance Newman, Thanacoody and Hui (2012) and Smith (2005) found that, when POS is high, this can positively affect employees’ attitudes, such as their commitment. Thus, when organizations care about their well-being of the employee and about the exchange

relationship, perceived organizational support could be high and can have positive effects.

Customer satisfaction and Financial Store Performance

As discussed in the introduction a performance measure in the supermarket industry is customer satisfaction, this because if customers are satisfied with “their” supermarket, they are more likely to return to the same supermarket the next time (Hesket & Schlesinger, 1994).

Most service management literature seems to agree that there is a relationship between customer loyalty and satisfaction, which in turn affects profitability (Anderson & Fornell, 1994; Hesket & Schlesinger, 1994; Reicheld & Sasser, 1989; Rust, Zahorik & Keiningham, 1995; Storbacka, Strandvik & Grönroos, 1994; Zeithaml, Parasuraman & Berry, 1990). Anderson and Sullivan (1993) investigated the antecedents and consequences of customer satisfaction in organizations. Their main finding was that customer satisfaction is related to customer retention and customer loyalty, thus providing evidence for the importance of investigating customer satisfaction. It is specifically important to manage customer

satisfaction when customers are familiar with the product or when the product is not complex (Anderson & Sullivan, 1993). Fornell, Johnson, Anderson and Bryant (1996) also

investigated the antecedents of customer satisfaction. They posit that there are three antecedents: perceived quality, perceived value and customer expectations respectively. Perceived quality is defined as the market’s evaluation of customers’ recent consumption experience, whereas perceived value refers to the ratio between price and quality. Customer

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expectation refers to the expectations of the customer concerning the product or service. Fornell et al. (1996) thus indicate with their results that one should differentiate between financial and non-financial results, which in the current thesis are addressed as customer satisfaction and financial store performance. Moreover, customer satisfaction and financial store performance appear to be related to one another (Heskett & Schlesinger, 1994).

Due to the competiveness in the supermarket industry the financial store performance of the different stores is next to customer satisfaction one of the most important measures for the supermarket organizations (Koene et al., 2002). If there is not enough performance in financial aspect the organization could not invest to increase the customer satisfaction. Moreover, store management and store employees can influence the financial store

performance (Koene et al, 2002). The discussed literature thus stresses the importance of both customer satisfaction and financial store performance, namely in the supermarket industry.

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Leadership/Employee Engagement and Customer Satisfaction/Financial Store Performance

In the theoretical background, all the variables of interest have been discussed separately. However, as also discussed, it appears that many of the variables relate to one another in specific manners. In this section I will discuss the relationships between the variables in more detail.

How do leaders affect their employees? As discussed, transformational leaders affect their employees in four ways (by means of charisma, inspirational motivation, individual consideration and intellectual stimulation), whereas transactional leaders affect their employees in three ways (contingent reward, management by exception-active and management by exception-passive) (e.g., Bass, 1999; Den Hartog & Koopman, 2001). According to Bass (1999), charisma and inspirational motivation mean that the leader sets high standard of performance for the employees, sets examples to be followed, articulates how it can be reached and shows determination and confidence. Thus, according to the literature, a transformational leader affects performance of the employees (Judge & Piccolo, 2004; Den Hartog & Koopman, 2001). When a transformational leader stimulates employees to become more innovative and creative, e.g., through intellectual stimulation (Bass, 1999; Den Hartog & Koopman, 2001), this could lead to employees being more energetic at work, vigor and absorption (Breevaart, et al., 2012; Schaufeli & Bakker, 2004). This is in line with the goal setting theory (Locke & Latham, 1988), which posits that the more difficult the goal is, the higher the feeling of achievement will be. This feeling of achievement, so I argue, is stimulated through the energy, e.g., vigor, and absorption as discussed by Breevaart et al. (2012). Furthermore, Locke and Latham (1988, p. 225) posit that “feedback moderates the effect of goals on performance”. Thus for example, when a transformational leader helps the employees to set up their own innovative project, the employee will almost automatically be stimulated to do his best because it is his own project. It can thus be expected that one of the dimensions of a transformational leader, intellectual stimulation, could lead to vigor and dedication, inducing the following hypothesis:

Hypothesis 1a: Transformational leadership (intellectual stimulation) will positively influence vigor.

Hypothesis 1b: Transformational leadership (intellectual stimulation) will positively influence dedication.

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The second aspect of transformational leadership, inspirational motivation, so I argue, can lead to all aspects of employee engagement (vigor, dedication and absorption). If the leader facilitates employee motivation at work, especially when the employee already is intrinsically motivated (Avolio & Yammarino, 2002), the employee will be more energized, more dedicated and absorbed in their work (Bass, 1999; Den Hartog & Koopman, 2001), if the leader sets an example by showing confidence and determination. According to Avolio and Yammarino (2002), transformational leaders contribute to employees’ intrinsic

motivation because they provide a meaningful rationale for their employees. Moreover, the study of Bolkan, Goodboy and Griffin (2011) indicates that when teachers use

transformational leadership behavior to stimulate students, the students will be more intrinsically motivated. Moreover, the teachers in the study use an interactive way to teach. They created an environment that engaged the student. This induces the following hypothesis:

Hypothesis 1c: Transformational leadership (inspirational motivation) will positively influence employee engagement (vigor, dedication and absorption).

Furthermore, individual consideration stimulates subordinates to achieving their fullest potential (Bass, 1999; Den Hartog & Koopman, 2001). This can, so I argue, also cause absorption. This because when a transformational leader stimulates the employee up to his or her fullest potential, the employee will be fully concentrated at work (Bass, 1999; Den Hartog & Koopman, 2001) and thus likely be absorbed completely by his or her work, also in line with the intrinsic motivation theory (Avolio & Yammarino, 2002). Based on recent research on daily transformational leadership and employee engagement, e.g., that a transformational leader contributes to the employees work engagement (Breevaart et al, 2014). I hypothesize:

Hypothesis 1d: Individual consideration will positively influence employee engagement.

Opposed to transformational leaders, transactional leader will not use the inspirational approach for their employees (Bass, 1999; Den Hartog & Koopman, 2001). Transactional leaders tend to set clear goals and communicate what employees can expect (Den Hartog & Koopman, 2001). This does not however mean that transactional leaders have no influence on employee engagement whatsoever (Breevaart et al., 2014; Judge & Piccolo, 2004). Judge and

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Piccolo (2004) posit in their meta-analysis that contingent reward, a dimension of

transactional leadership, contributes to employees’ motivation and engagement (e.g., vigor, dedication and absorption). In the same meta-analysis, Judge and Piccolo (2004) indicate that management by exception- active is positively related to followers work motivation.

However, this relationship was not as strong as the relationship between transformational leadership and contingent reward. As mentioned, active leaders will anticipate on problems and monitor follower behavior. Moreover, as indicated by Howell and Avolio (1993) the difference between active and passive lies in the timing of the leader’s intervention. In the supermarket industry it seems to be important to have active leaders who can anticipate on the behavior of employees. For example, when an employee has a serious conflict with a

customer, it is important that the leader acts fast and solves the problem before it turns into a conflict rather than waiting for the problem to be solved or escalate, as a passive leader would do. It is thus plausible that the former would have a positive affect on employee engagement, whereas the latter would affect employee engagement negatively. Moreover, it appears that especially in jobs with fixed tasks, such as low-skilled employees’ in the retail sector, clear goals and communication are important (Jones, Kalmi & Kauhanen, 2010). Fixed tasks refer to a structured set of tasks that remain stable throughout the job. Moreover, Jones et al. (2010) indicate that even in settings where employees perform simple tasks and are low-skilled, just as in the retail sector and in supermarkets, these employees can enhance business

performance. This is interesting because these “low-skilled” employees are in daily contact with customers and are therefore central in determining customer satisfaction (Bitner, 1990; Hartline & Ferrell, 1996). Therefore, I expect that contingent rewards and management by exception, as a dimension of transactional leadership, will positively affect employee engagement. These arguments thus induce the following hypothesis:

Hypothesis 2a: Contingent rewards, will positively influence employee engagement.

Hypothesis 2b: Management by exception-active-passive will positively influence employee engagement.

Perceived organizational support as a moderator

Clearly it appears that leaders are important in organizations (Bass 1999; Den Hartog & Koopman; Breevaart et al, 2014). However, the support from the organization appears to be important as well (Eisenberger et al, 1985). If employees feel that they will not be supported this can create a negative effect on the performance (Shanock & Eisenberger 2006). Shanock

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& Eisenberger (2006) indicates also that perceived organizational support is related to performance. Moreover, other studies found a positive relationship between perceived organizational support, commitment and employee suggestions for organizational change (Eisenberger, Fasolo & Davis-Lamastro, 1990). This thus indicates that when the organization supports its employees well, employees are more willing to perform better on several

performance measures. The study of Shanock and Eisenberger (2006) indicates also that the POS of supervisors is positively related to subordinates. This study indicates that if

supervisors of the organization will be well supported by the organization self, the subordinates also score high on POS.

Thus, the support of the organization to the supervisors affect the subordinates of the organization and subsequently the performance of the employees. The study of Duke, Treadway, Goodman and Breland (2009) tested the moderation effect of POS on the relationship between emotional labor, job satisfaction and performance. POS appears to positively affect job satisfaction and performance, also when there are negative consequences of emotional labor. This research thus indirectly suggests that the organization has an effect on the job satisfaction and performance of the employee. Shoss, Eisenberger, Restubog and Zagenczyk (2013) moreover investigated the effect of low POS on counter productive work behavior (e.g., stealing from the company), negative employee performance. They posit that employees feel that bad leadership (e.g., abusive supervision) is dynamically related to organizational support as perceived by employees. Though not extensively researched, there thus likely appears to be an interaction effect between leadership and POS and its effects. In the supermarket industry this seems to be important because the employees are in daily contact with the customers and POS can help to improve their performance. These arguments leads to the following hypothesis:

Hypothesis 3a: Perceived organizational support will positively moderate the relationship between transformational leadership and employee engagement.

Hypothesis 3b: Perceived organizational support will positively moderate the relationship between individual consideration and employee engagement.

Hypothesis 3c: Perceived organizational support will positively moderate the relationship between contingent reward and employee engagement.

Hypothesis 3a: Perceived organizational support will positively moderate the relationship between management by exception and employee engagement.

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Store Employee engagement, store customer satisfaction and financial store performance

Bakker et al. (2008), mentioned four reasons why engaged employees perform better. As they posit, “(1) They often experience positive emotions, including happiness, joy and enthusiasm, (2) experience better psychological and physical health; (3) create their own job and personal resources and (4) transfer their engagement to others” (Bakker et al., 2008, p. 193). Research indicates that engaged employees score higher on performance, such as job performance, customer satisfaction and profitability (Gierveld & Bakker, 2005;

Xanthopoulou, Bakker, Demerouti & Schaufeli, 2007; Bakker & Demerouti, 2008). Moreover, earlier research on customer satisfaction indicates that retail sales staff will be central in determining customer satisfaction (Bitner, 1990; Hartline & Ferrel, 1996). In line with this, Harter, Schmidt and Killham (2003) conducted a meta-analysis concerning the relationship between employee engagement and customer service. They found the strongest positive link between employee engagement and employee turnover, safety of employees and above all, customer satisfaction.

Several studies seem to agree that there is a link between employee engagement and customer satisfaction. For example, the meta-analysis of Harter, Schmidt and Hayes (2002) indicates that employee engagement is amongst others positively related to customer loyalty, customer satisfaction and financial store performance. Employees in a retail store can thus affect customer satisfaction and the financial store performance with service (Simon et al., 2009). Simon et al. (2009) moreover conclude that employee attitudes/ employee engagement, positively affect customer satisfaction. Another interesting finding is that customer

satisfaction through service has a positive and significant effect on financial store

performance. Simon et al. (2009) were one of the first to examine the causal link between employee attitudes and customer satisfaction in retail. However, Simon et al. (2009) did not relate employee attitudes and customer satisfaction to measures of financial store performance in their research, which thus still deservers further investigation. Moreover, the research of Simon et al. (2009) does not observe the leadership styles that might underlie differences in employee attitudes across stores. The several leadership styles; transformational and

transactional, could be one such a factor that explains the changes of employee

engagement/employee attitudes within stores. Since these are the most extensively researched and well-understood leadership styles (Den Hartog & Koopman, 2001). As already indicated by Simon et al. (2009), “stores with more effective leaders may both highly satisfy employees and better customer service as stores with ineffective leaders” (p. 29). Thus, this thesis will

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contribute the literature to link employee engagement and customer satisfaction to measures of financial store performance and to link transformational and transactional leadership to employee engagement. Moreover, Schaufeli and Bakker (2003) indicates a mediating role between job resources, one of the job resources is leadership, and work behaviors such as customer satisfaction. Further, Breevaart et al., (2014) already mentioned the link between transformational/transactional leadership and employee engagement. And as also discussed Harter, Schmidt and Hayes (2002) found a positive relation between employee engagement and customer satisfaction/financial store performance. I therefore expect employee

engagement to mediate the relationship between transformational leadership, individual consideration, contingent reward, management by exception and customer satisfaction and financial store performance. Inducing the following hypothesis:

Hypothesis 4a-1: The relationship between transformational leadership and customer satisfaction will be positively mediated by employee engagement.

Hypothesis 4a-2: The relationship between transformational leadership and financial store performance will be positively mediated by employee engagement.

Hypothesis 4b-1: The relationship between individual consideration and customer satisfaction will be positively mediated by employee engagement.

Hypothesis 4b-2: The relationship between individual consideration and financial store performance will be positively mediated by employee engagement.

Hypothesis 4c-1: The relationship between contingent reward and customer satisfaction will be positively mediated by employee engagement.

Hypothesis 4c-2: The relationship between contingent reward and financial store performance will be positively mediated by employee engagement.

Hypothesis 4d-1: The relationship between management by exception and customer satisfaction will be positively mediated by employee engagement.

Hypothesis 4d-2: The relationship between management by exception and financial store performance will be positively mediated by employee engagement.

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Method

Sample and Procedure

Data for this study on the effects of leadership on different performance measures, such as customer satisfaction and financial store performance, were collected as part of research for a master thesis. In cooperation with Dirk van der Broek, I contacted 104 stores, with in total 369 employees, operating in different cities in the Netherlands. Of the 369 employees, 104 were supermarket managers and 270 were employees. Two different surveys were spread. One survey was developed for the supermarket managers and one survey was developed for the employees. Both surveys were identical but distributed to employees with different function types. The supermarket managers completed the survey about his or her commercial manager and the employee completed the survey about his or her supermarket manager. This was done to get a broad overview of the different leadership styles in different hierarchical levels in the company.

Initial contact with the employees was made via the newsletter of the company. The contact with the organization was initiated by the HR manager and the education manager. After several meetings with the representatives of the supermarket and agreeing on the procedure and timeline, information on the research was given in the newsletter.

After the newsletter, all stores received an e-mail with an invitation to participate in the survey. The survey started with a short introduction with the aim of the study and a short explanation about it. Moreover, the participants needed to sign an informed consent, which included a statement ensuring their anonymity and voluntary participation. In general, it took participants about 10-15 minutes to complete the survey. The survey had 6 pages: the first page started with an introduction and demographic questions such as age, gender and store location. The first page was followed by the different scales of transformational leadership, transactional leadership, employee engagement and perceived organization support (see appendix B). Finally, the participants were able to make remarks and leave their e-mail address, in case they were interested in receiving the results of the study. One week after the initial request to the participants, a reminder was send to increase the response rate. Out of the approached supermarket employees, 55 supermarket managers and 65 employees completed the respective questionnaires.

After finishing the data collection and running statistical analyses, profiles for each store were created. Additionally, all stores were able to see the results of the data collection.

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Measures

Two questionnaires (one supermarket manager questionnaire and one employee questionnaire) were created by using all scales of interest. Appendix A and B provide more information about the instructions given to respondents and outline the scales that were used in this thesis. Each scale is discussed below.

Transformational Leadership. Transformational leadership was assessed by the

Charismatic Leadership in Organization scale (CLIO) as developed by De Hoogh, den Hartog and Koopman (2004), and the Leadership Behavior Description Questionnaire as developed by Stogdill (1963) was used. In this thesis these two questionnaires were used to measure transformational leadership because the Leadership Behavior Description Questionnaire is developed to measure merely one dimensions of transformational leadership, individual consideration, whereas the CLIO is used to measure all the dimensions of transformational leadership. Of the CLIO scale, 11 items were used. The participants responded to the items on a 7-point Likert scale, ranging from 1 (completely disagree) to 7 (completely agree). Example items are “My leader has a clear vision about the future” and “My leader is always looking for new possibilities for the organization”. The psychometric qualities of the questionnaire appeared to be very good, with a Crohnbach’s alpha of α = .95. Transformational leadership is also assessed with the Leadership Behavior Description Questionnaire developed by Stogdill (1963). Of this questionnaire, 10 items were used. The participants responded to the items on a 7-point Likert scale, ranging from 1 (completely disagree) to 7 (completely agree). Example items are “My leader is able to change things” or “My leader does not explain his or her behavior”. The psychometric qualities of the questionnaire appeared to be good as well, with a Crohnbach’s alpha of approximately α = .79.

Transactional leadership. Transactional leadership is assessed with the Manual for the Multifactor Leadership Questionnaire (MLQ), developed by Bass and Avolio (1989). Of the MLQ scale, 7 items were used. Participants responded to the items on a 7-point Likert scale, ranging from 1 (completely disagree) to 7 (completely agree). Example items are “My leader tells others what to do if they want to be rewarded for their work” or “My leader provides recognition/rewards when others reach their goals”. The psychometric qualities of the questionnaire appeared to be good, with a Crohnbach’s alpha of α = .84.

Work Engagement. Work engagement is measured with the Utrecht Work

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consisted of 9 items, e.g., “At my work, I feel bursting with energy” or “I am enthusiastic about my job”. The short version of the questionnaire was used because Schaufeli and Bakker (2003) argue that with the short scale all important issues are measured as should be.

Moreover, since the company stressed the importance of creating a questionnaire taking no longer than 15 minutes to fill in, this decision was made. Participants could answer on a 7-point Likert scale ranging from 0 (Never) to 6 (Daily). The psychometric qualities appeared to be very good, with a Crohnbach’s alpha of α = .90.

Perceived Organizational support. Perceived organizational support is measured with the Perceived organizational support survey developed by Rhoades and Eisenberger (2002. The questionnaire consisted of 8 items, e.g., “The organization cares about my wellbeing” and “The organization cares about my opinion”. Participants responded to the items on a 7-point Likert scale, ranging from 1 (completely disagree) to 7 (completely agree). After deleting two items, the psychometric qualities of the questionnaire appeared to be good, with a

Crohnbach’s alpha of approximately α = .88. All the items together had a Cronbach alpha of α = .59. Field (2009) indicates that a Cronbach alpha of .70 is the minimum value. Therefore, I deleted two items.

Dependent Variables

Customers satisfaction. Customer satisfaction was measured by 7 questions, derived from the company records. The company holds an annual satisfaction survey for every store among its customers. This questionnaire consist of 7 items e.g. “How friendly is the staff?”. Customers responded to the items on a 10-point scale, ranging from 1 (very poor) to 10 (very good).

Financial Store Performance. Financial performance is also derived from company records. Due to the confidentiality about the turnover data, I could not present much

information about the financial performance data. The organization provided merely the mean scores of financial store performance, including the deviations of the mean.

Control variables

In the analysis, I controlled for the effects of age, education, tenure, type of contract and store location. Age was measured as a continuous variable with a range from 21 to 58 (M = 39.67, SD = 9.50). Moreover, 86.6% of the participants were of the male gender.

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On average the employees worked 16.32 years for the organization with a range from 1 to 38 (SD = 8.47). Of the employees, 49.5% completed a Higher Vocational Education (HBO), 29.9% a Middle Vocational Education (MBO), 12.4% a high school degree and the remaining 4.1% completed their education on university level.

Analysis

6.4 Planned data analysis

All data was analyzed using a regression analysis with SPSS, the 20th edition. After that all the respondents completed the survey, the data was checked on missing values and normality. Furthermore, the data was cleaned and impossible values and outliers were checked for. According to Myers (2011), listwise and pairwise deletion deal with several problems, such as a loss of power by listwise, and hinder the conclusion by pairwise deletion. Therefore, Myers (2011) developed the hotdeck imputation. “The HOTDECK macro creates a new command for SPPS users that will allow them to easily perform hot deck imputation on missing data”(Myers, 2011, p.13). These variables must have little or no missing data and not be of substantive interest for the research question (Myers, 2011). Furthermore, Hotdeck is appropriate to use if there is less than 10% missing data in the file.

After dealing with the missing data the outliers were detected. The raw data will be transformed into z-scores and compared to the rules of thumb of the normal distribution (e.g. the data will be checked for the normal distribution).

Since multiple regression analyses were used, all control variables were entered in the first step e.g., age, gender, tenure, store location, function and contract, named as Model 1. To test for moderation and mediation, the PROCESS command as advised by Field (2013) was used. Moderation, in statistical terms, is called an interaction effect (Field, 2013, p. 396) and the moderator is a variable “that affects the relationship between two others”.

Preliminary Analysis

After closing the questionnaire on the 20th of June, the response rate of the

supermarket managers was 45 of 104 (43.3%) and the response rate of the employees was 52 of 270 (19.3%). Respondents from 66 of the 104 stores completed the questionnaire.

Since the two datasets were identical (slightly differed in their introduction) the first step of data cleaning was merging the datasets into one. The merged dataset included 117

participants; 20 participants had to be deleted due to missing values. Therefore, the final cleaned dataset consisted of 97 participants. Furthermore, four cases appear to be outliers

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within the variables customer satisfaction (CSAT), employee engagement (ENG) and perceived organization support (POS). Due to this reason the variables were checked for the normal distribution, the values of the mahalanobis, cook’s distance and the leverage values. All these values were low, thus the outliers will not influence the regression analysis. Therefore, there was no reason to delete these four cases from the dataset.

As a second step, a factor analysis was needed to determine if the items belong to their respective concepts of Transformational Leadership, Transactional Leadership, Employee engagement and Perceived Organizational Support. According to Field (2009) there are two different factor analyses, confirmatory factor analysis and the exploratory factor analysis. The confirmatory factor analysis requires a specific expectation about the number of factors, e.g., which variables reflect the given factors and whether the factors are correlated. When there are no specific expectations regarding the number or the nature of the underlying constructs, the exploratory factor analysis must be used, as is the case in the current research. According to the factor analysis, transactional leadership consists of two different concepts; contingent reward and management by exception. This structure is also expected by Bass and Avolio (1995). Moreover, transformational leadership loads on one factor, which is also indicated by de Hoogh et al. (2004).

As already indicated by Schaufeli and Bakker (2003), employee engagement consists of three different concepts; absorption, vigor and dedication, which has been found in the current factor analysis as well. Furthermore, perceived organizational support consist of one underlying factor according to the factor analysis.

In the third step, the subscales were created to prepare them for the analyses.

Test of Assumptions and Procedure

According to the Central Limit Theory, large samples (30 or more) are expected to have a normal distribution. However, not all the variables are normally distributed, the Kolmogorov Smirnov test and a normally plot was conducted, concluding that this assumption was violated. Furthermore, to draw conclusions about a regression analysis several assumptions must be tested (Field, 2009). According to Field (2009) these

assumptions are the following nine: (1) Variable types; all the variables should be measured at interval ratio and quantitative or categorical. Moreover the outcome variable has to be

continues and unbounded. (2) Non-zero variance; all the predictors should have some variation in the value. (3) No perfect multi-collinearity; the predictor values (two or more of the predictors) should not correlate too highly. (4) Predictors are uncorrelated with ‘external

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variables’. (5) Homoscedasticity,” the variance of the residuals most be constant. This thus means that the residuals at each level of the predictors should have the same variance” (Field, 2009, p.220), (6) Independent errors, (7) normally distributed errors, (8) independence of all values of the outcome variables and (9) linearity of the relationships between the variables (Field, 2009; 2013). Finally, Field (2009) indicates that none of the scales should exceed an inter-correlation of .90 or higher, as can be seen in Table 1.

The assumptions have been tested and it appears that concerning the assumption of multi-collinearity (3), the variables vigor (r = .831), dedication (r = .943) and absorption (r = .874) correlate high with employee engagement. Employee engagement consists of the three concepts, vigor, dedication and absorption, thus explaining their high inter-correlation. Furthermore, assumption (5), the homoscedasticity of the variable FPER (financial

performance), is violated, not all the predictors have the same variance. This could be due to the reason that the company could not provide true scores of financial performance. Rather, the company provided deviations scores of the mean with the mean recoded as zero. All data is transformed into standardized z-scores, therefore it does not matter that the financial performance data are deviations scores of the mean, since the same would happen if the true scores were transformed into z-scores (e.g. the mean has been transformed to zero. One standard deviation means 10% higher than the mean, two standard deviations means 20% higher than the mean and so forth). Moreover, Field (2009) indicates that values for the Durbin Watson test, which are greater than 1 and less than 3, are not a cause of concern. Since, the values of the Durbin Watson test were between 1 and 3 there is no reason for concern. The remaining assumptions all appeared to be met.

Table 1.

Inter-Correlation Table of Variables and Control Variablesincluding Means(M) and Standard Deviations (SD)

M SD 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 STORELOCATION 60,32 29,431 TENURE 16,3 8,245 -0,13 CONTRACT 1,02 0,143 0,166 -0,16 GENDER 1,13 0,342 0,165 -0,14 0,156 AGE 39,67 9,499 -,256* ,557** -,256* -,351** EDUCATION 2,58 0,911 -0,078 -0,09 -0,01 -0,117 0,021 FUNTION 1,4 0,493 0,005 -,253* 0,177 ,418** -,423**-,290** TRANSFORMATIONAL 5,061 1,174 0,067 0,097 -0,2 -,214* 0,146 -0,042 -0,183 ENGAGEMENT 4,47 1,047 -0,074 0,056 -,243* -,348**,232* 0,136 -,223* ,450** POS 3,954 1,188 -0,078 -0,04 -,250* -,292**,203* -0,062 -,345**,488** ,581** ICONSIDERATION 3,427 0,455 0,146 0,058 -0,12 -0,104 0,147 -0,156 -0,058 ,725** ,409** ,416** CONTINGENTREWARD 4,147 1,326 0,008 0,015 -0,18 -0,193 0,131 -0,008 -,259* ,641** ,380** ,384** ,506** MANAGEMENTBYEXCEPTION 5,596 0,985 0,086 ,290** -0,14 -0,136 ,235* 0,089 -,390**,541** ,260* ,261** ,216* ,382** VIGOR 4,711 1,054 -0,048 0,112 -,260* -,421**,261** 0,078 -,209* ,268** ,831** ,497** ,279** ,279** 0,109 DEDICATION 4,608 1,263 -0,081 0,095 -,243* -,279**,230* 0,165 -0,185 ,470** ,943** ,538** ,416** ,369** ,305** ,723** ABSORPTION 4,086 1,231 -0,067 -0,05 -0,15 -,242* 0,133 0,11 -,201* ,437** ,874** ,506** ,379** ,355** ,258* ,523** ,763** * Correlation is significant at the 0.05 level (2-tailed).

** Correlation is significant at the 0.01 level (2-tailed). Note. N=97

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Main Effects

As mentioned, the current sample appeared not to be normally distributed and the assumption of homoscedasticity was violated. Therefore, the bootstrapping confidence interval method (BCa) in the multiple regression analysis was used (Field 2013; Russel & Dean 2000). In the regression analyses, all the standardized scores of the total scales are used, since not all the Likert ranges were equal to one another across the different scales.

Concerning the regression analysis, as a first step the demographic variables store location, tenure, gender, age, education and function are entered in Model 1. The predicting variables are added to Model 2. Both the interaction effect of moderation and mediation will be discussed in the next section.

In hypothesis 1a, I predicted that transformational leadership positively influences vigor. Rejecting hypothesis 1a, step 2 in Table 2 shows that transformational leadership does not significantly predict vigor (β = 0.180, p= 0.108).

In hypothesis 1b I predicted that transformational leadership will positively influence dedication. Step 3 in Table 2 shows that transformational leadership significantly predicted dedication (β = 0.425, p= 0.001).

Hypothesis 1c I predicted that transformational leadership influences employee engagement. Step 2 shows that transformational leadership significantly predicts employee engagement (β = .392, p= 0.005).

In hypothesis 1d I predicted that individual consideration positively predicts employee engagement. Supporting this hypothesis, Table 2 (step 3) shows that individual consideration significantly predicts employee engagement (β = .40, p = 0.01).

Hypothesis 2a predicted that contingent reward positively influences employee engagement. Supporting this hypothesis, Table 2 (step 4) shows that contingent reward significantly predicted employee engagement (β = 0.325, p = 0.006).

Lastly, hypothesis 2b predicted that management by exception positively influences employee engagement. Supporting this hypothesis, Table 2 (step 5) shows that management by

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Table 2 Linear model of predictors of Employee engagement, Customer satisfaction and Financial store performance, with p-values generated from 95% bias corrected and accelerated confidence interval based on 1000 bootstrap samples

Variables Vigor Dedication Absorption ENG CSAT FSP

Step 1 Step 2 Step 3 Step 1 Step 2 Step 3 Step 1 Step 2 Step 3 Step 1 Step 2 Step 3 Step 4 Step 5 Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Step 1 Step 2 Step 3 Step 4 Step 5 Step 6

β β β β β β β β β β β β β β β β β β β β β β β β β β

Control variables Constant 0,447 0,414 0,513 -0,301 -0,379 -0,189 0,285 0,210 0,388 0,141 0,069 0,248 0,437 0,104 1,454 1,444 1,440 1,412 1,456 1,453 -2,211 -2,191 -2,259 -2,195* -2,188* -2,174 Store location 0,002 0,001 0 0 -0,002 -0,002 0 -0,002 -0,003 0,001 -0,001 -0,002 -0,001 0 0,004 0,004 0,005 0,004 0,004 0,004 0,005 0,006 0,006 0,005 0,005 0,005 Tenure -0,002 -0,003 0,000 -0,002 -0,003 -0,001 -0,018 -0,019 -0,015 -0,009 -0,010 -0,006 -0,016 -0,005 -0,01 -0,005 -0,005 -0,004 -0,005 -0,005 0,035* 0,036* 0,034* 0,035* 0,033* 0,033* Gender -1,102* -0,981* -1,005* -0,700 -0,413 -0,535 -0,697 -0,419 -0,545 -0,924* 0,659 0,015 -0,867** -0,778* -0,42 -0,384 -0,440 -0,427 -0,426 -0,413 0,452 0,378 0,382 0,455 0,358 0,208 Age 0,016 0,014 0,011 0,019 0,014 0,009 0,016 0,011 0,007 0,019 0,015 0,01 0,017 0,015 -0,01 -0,013 -0,011 -0,120 -0,120 -0,013 0,012 0,013 0,016 0,012 0,015 0,017 Education 0,034 0,048 0,083 0,135 0,168 0,217* 0,062 0,094 0,138 0,090 0,121 0,169 0,061 0,102 0,257 -0,25 0,268 -0,253 -0,26 -0,26 0,134 0,125 0,099 0,132 0,126 0,157

Direct effect Transformational leadership 0,180 0,425** 0,411* 0,392** 0,052 -0,110

Individual consideration 0,245* 0,414** 0,381** 0,398** -0,053 -0,176 Management by exception 0,224* -0,032 0,012 Contingent reward 0,325** -0,160 -0,208* Employee engagement 0,006 -0,264* Vigor Dedication Absorption

Moderation effect Transformational * POS -0,019

Individual consideration* POS 0,072

Contingent reward * POS -0,021

Management by exception * POS -0,024

Mediation effect Transformational - Eng -0,028 -0,107

Individual consideration - Eng -0,009 -0,085

Contingent reward – Eng -0,006 -0,066

Management by exception – Eng 0

-0,073 Note. * p <.05. ** p < .01. *** p < .001

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Moderation Effect

In hypotheses 3a-d it was hypothesized that perceived organizational support would positively moderate the relationships between (a) transformational leadership and employee engagement, (b) individual consideration and employee engagement, (c) contingent reward and employee engagement, and (d) management by exception and employee engagement. In order to test these hypotheses the PROCESS COMMAND approach as developed and indicated by Hayes (cited in Field 2013) was used. The hypotheses are discussed per table below.

Hypothesis 3a is rejected, the interaction effect in Table 3 shows that the moderation is not significantly supported (t = -0.121, p = .904). However, POS did predict employee

engagement (t = 5.436, p < .001), i.e., a direct effect was found.

Hypothesis 3b is also rejected, the interaction effect in Table 4 shows that individual consideration is not significantly supported (t = 0.254, p = .779).

Hypothesis 3c is furthermore rejected, the interaction effect in Table 5 shows that the relationship between contingent reward and employee engagement is not moderated by POS (t = 0.146, p = .887).

T able 3

Moderation effect T RANSF* POS

b SE B t p

Constant -0,009 [-0,169; 0,187] 0,090 0,102 0,919

ZPerceived organizational support (POS) 0,470 [0,299; 0,641] 0,086 5,436 0,000 ZT ransformational leadership (T RANSF) 0,216 [-0,015; 0,416] 0,101 2,137 0,035

T RANF * POS -0,019 [-0,332; 0,294] 0,157 -0,121 0,904

Note. N= 97

T able 4

Moderation effect ICON* POS

b SE B t p

Constant -0,030 [-0,221; 0,163] 0,097 -0,305 0,762

ZPerceived organizational support (POS) 0,515 [0,353; 0,676] 0,081 6,336 0,000

ZIndividual consideration (ICON) 0,223 [-0,013; 0,460] 0,119 1,878 0,064

ICON * POS -0,072 [-0,432; 0,575] 0,254 0,282 0,779

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Lastly, hypothesis 3d is also rejected, the interaction effect in Table 6 shows that the relationship between management by exception and employee engagement is not moderated by POS (t = -0,267, p = .790).

Mediation Effect

In hypothesis 4a-d it was hypothesized that employee engagement mediates the relationship between (a) transformational leadership and customer satisfaction and financial store performance, (b) individual consideration and customer satisfaction and financial store performance, (c) contingent reward and customer satisfaction and financial store performance, and (d) management by exception and customer satisfaction/financial store performance. As indicated by Field (2013) the results of mediation should be reported in a figure rather than a table, therefore all the results of the mediation analyses are reported in figures.

Figure 2. Mediation Effect of Transformational leadership on Customer satisfaction through Employee Engagement. T able 5

Moderation effect CONT * POS

b SE B t p

Constant 0,008 [-0,151; 0,167] 0,080 0,099 0,921

ZPerceived organizational support (POS) 0,507 [0,327; 0,687] 0,091 5,591 0,000

ZContingent reward (CONT ) 0,178 [-0,002; 0,355] 0,089 2,010 0,048

CONT * POS -0,021 [-0,311; 0,269] 0,146 -0,143 0,887

Note. N= 97

T able 6

Moderation effect MBE* POS

b SE B t p

Constant 0,006 [-0,169; 0,181] 0,088 0,070 0,995

ZPerceived organizational support (POS) 0,551 [0,331; 0,770] 0,110 4,988 0,000

ZManagement by exception (MBE) 0,105 [-0,068; 0,277] 0,870 1,202 0,232

MBE * POS -0,024 [-0,201; 0,153] 0,089 -0,267 0,790

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Hypothesis 4a-I was rejected. Figure 2 shows that there is no significant indirect effect of transformational leadership on customer satisfaction through employee engagement, b = -0.028 [-0.162, 0.082].

Figure 3. Mediation Effect of Transformational leadership on Financial Store Performance through Employee Engagement.

Hypothesis 4a-II was rejected. Figure 3 shows that there is no significant indirect effect of transformational leadership on financial store performance through employee engagement (b = -0.107 [-0.279, 0.000]).

Figure 4. Mediation effect of Individual consideration on Customer satisfaction through Employee Engagement.

Hypothesis 4b-I was rejected. Figure 4 shows that there is no significant indirect effect of individual consideration on customer satisfaction through employee engagement, b = -0.009 [-0.105, 0.098].

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Hypothesis 4b-II was rejected. Figure 5 shows that there is no significant indirect effect of individual consideration on financial store performance through employee engagement, b = -0.085 [-0.247, 0.005].

Figure 6. Mediation Effect of Contingent reward on Customer satisfaction through Employee Engagement.

Hypothesis 4c-I was rejected. Figure 6 shows that there is no significant indirect effect of contingent reward on customer satisfaction through employee engagement, b = -0,006 [-0. 112, 0.079].

Figure 7. Mediation Effect of Contingent reward on Financial store performance through Employee Engagement.

Hypothesis 4c-II was rejected. Figure 7 shows that there is no significant indirect effect of contingent reward on financial store performance through employee engagement, b = -0,066 [-0. 204, 0.010].

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Hypothesis 4d-I was rejected. Figure 8 shows that there is no significant indirect effect of management by exception on customer satisfaction through employee engagement, b = -0,000 [-0. 073, 0.061].

Figure 9. Mediation effect of Management by Exception on Financial store performance through Employee Engagement.

Hypothesis 4d-2 was rejected. Figure 9 shows that there is no significant indirect effect of management by exception on financial store performance through employee engagement, b = -0,073 [-0. 202, 0.007].

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Discussion

The aim of this thesis was to investigate how leadership could influence employee engagement and customer satisfaction, financial store performance. Specially, we investigated the effects of transformational leadership, individual consideration, contingent reward and management by exception on employee engagement. Furthermore we investigated the

moderating effect of perceived organizational support between the relationship leadership and employee engagement. Lastly we investigated the mediating effect of employee engagement between leadership and customer satisfaction, financial store performance.

In hypothesis 1a-b we proposed that transformational leadership and individual consideration would positively influence vigor, dedication or absorption. The regression analysis showed that transformational leadership did not predict vigor. However,

transformational leadership did predict dedication, absorption and employee engagement as a whole concept. One explanation for this finding could be that these employees have less positive energy or are not willingness to invest effort in their work. However, the employees are enthusiastic about their work (dedication) and concentrated (absorption).

Hypothesis 2a-b proposed that contingent reward and management by exception would positively influence employee engagement. The analysis showed significantly that contingent reward and management by exception predicted employee engagement. Meaning that, leaders who are more focused about the exchange relationship also predicted employee engagement. Both leadership styles can influence employee engagement therefore

organizations could hire a transformational and a transactional leader if they are focused on employee engagement.

In hypothesis 3a-d, we proposed that perceived organization support, would positively moderate the relationships between (a) transformational leadership, (b) individual

consideration, (c) contingent reward, (d) management by exception and employee engagement. Results from the PROCESS analysis did not confirm the hypotheses, as we found no significant effect. This result suggests that only leaders can influence employee engagement. Furthermore this thesis suggests that the organization itself have little or no influence on the engagement of the employees. One possible explanation could be that the other forms of perceived organization support, e.g., fairness and job conditions are more important that the supervisor support (Eisenberger et al., 1986; Rhoades and Eisenberger, 2002). Another explanation could be that employees have less or no contact with the

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