CONTINGENT REWARD LEADERSHIP AND EMPLOYEE JOB PERFORMANCE:
THE MODERATING EFFECT OF WORKLOAD
Master thesis, MSc Human Resource Management University of Groningen, Faculty of Economics and Business
June 14, 2015
ANNE-JAN DORHOUT Student number: 1902245
Akkerstraat 24-3 9717 KJ Groningen Tel.: +31 (0)6 11 56 32 88 E-mail: a.dorhout@student.rug.nl
Supervisor
R. Said
2 CONTINGENT REWARD LEADERSHIP AND EMPLOYEE JOB PERFORMANCE: THE
MODERATING EFFECT OF WORKLOAD
ABSTRACT
It is of great importance for managers, especially in times of heavy competition, to know under what conditions contingent reward leadership will increase employees’
performance. In this research we try to clarify previous heterogeneous results about this relationship, using workload as a moderator. We expect to find a positive relationship between contingent reward leadership and employee performance under low levels of
workload, and a weaker positive relationship under high levels of workload. We conducted a
large-scale field study among employees (N = 263) and their supervisors (N = 48) in various
industries in the Netherlands. In line with our expectations, the results showed a positive
relationship between contingent reward leadership and employee job performance. In contrast
to our reasoning, workload did not moderate this relationship. Theoretical and managerial
implications of these results are discussed.
3 INTRODUCTION
Since the beginning of the financial crisis in Europe, about 200.000 companies a year went bankrupt (Paris, Business and Finance, The Economist, 2014). To survive during such a financial crisis, it is of great importance for a company to be as efficient as possible. The success or failure of companies all depends upon how well employees within these companies perform. Hence, employee job performance is an important way of being a competitive player in the market. Employee job performance can be defined as the aggregated value of the
activities that employees contribute both directly and indirectly, and positively and negatively, to reach the organisational goals (Yiwen, Lepine, Buckman, & Feng, 2014).
Given the importance of well-performing employees, much research has examined the factors that may stimulate employee performance, and has found that leadership seems to be an important predictor of job performance. One way a leader can manage a company and its employees is by using transactional leadership. This leadership style is characterized by applying contingent rewards to the employees, and contingent reward leadership is seen as the most important part of transactional leadership (Judge & Piccolo, 2004). Contingent reward leadership can be defined as the clarification of expectations and offering recognition when organisational goals are achieved (Bass, Jung, Avolio, & Berson, 2003). Podsakoff and colleagues (Podsakoff, Todor, & Skov, 1982) stated in their work that there is a pronounced relationship between contingent reward leadership and subordinate performance, and in general this relationship has been found to be positive (Judge and Piccolo, 2004), although results have been heterogeneous (Howell and Avolio, 1993). Thus, from the current empirical evidence, it is not exactly clear under what circumstances this relationship is positive or maybe even negative (Bass et al., 2003). Due to these mixed results, is it likely that a
moderator influences the relationship between contingent reward leadership and employee job
performance.
4 Given the increasing pressure on companies in times of crises, the amount of work that needs to be done by the employees is growing. Karasek (1979) argued in his research that in high-strain jobs, high demands create arousal that cannot be turned into action, because employees do not have enough control on the job. Therefore, we propose that the amount of workload employees experience on the job can have an effect on the relationship between contingent reward leadership and employee job performance. We expect that under high levels of workload the relationship between contingent reward leadership and job
performance will be weaker positive than under low levels of workload, because under high levels of workload employees are (cognitively) unable to use the rewards they receive to perform better, and are thus less likely to have high job performance.
This research contributes to both research and practice. Given that the relationship between contingent reward leadership and employee job performance is not clear-cut and heterogeneous results have been found (Howell and Avolio, 1993), we examine whether workload can act as a moderator on this relationship. By doing this, we try to clarify this relationship and try to explain previous inconclusive findings. As mentioned earlier, it is important for the continuity and competitiveness of a company to have at least a sufficient level of employee performance. For managers, it is important to know when it is useful to use contingent reward leadership in directing employees. By conducting this research, we hope to give managers some insights into when contingent reward leadership will and will not work for stimulating performance.
The remainder of this paper is organized as follows. In the theory section, we give an
overview of the proposed relationships, and state the hypotheses. Subsequently, in the method
section, we describe how we conducted the research and we describe the sample. Then, in the
results section, we will present our findings. We conclude with a discussion, and the
5 implications and limitations of our work. To test our hypotheses, we conducted a large-scale field study among employees and supervisors from different companies in the Netherlands.
THEORY
The relationship between contingent reward leadership and employee job performance It is, and has always been, an important question for managers which leadership style to apply. While there are many leadership styles, a distinction is often made between
transformational leadership and transactional leadership. Podsakoff and colleagues (1982) defined the latter as followers agreeing with, accepting or complying with the leader in
exchange for praise, rewards and resources or the avoidance of disciplinary action. Contingent reward leadership - seen as the most important and effective part of transactional leadership (Judge & Piccolo, 2004) - can be defined as the clarification of expectations and offering recognition when organisational goals are achieved (Bass, Jung, Avolio, & Berson, 2003).
As Campbell (1990) argued in his research, a broad distinction can be made within performance, with on the one hand individual task performance, on the other hand behaviours that create and maintain the social and organizational context that allows others to carry out their individual tasks. Individual task performance involves learning the task and the context in which it performed as well as being able and motivated to perform the task (Murphy &
Shiarella, 1997). The definitions of Campbell (1990) and Murphy & Shiarella (1997) are both covered in recent work of Yiwen et al. (2014). Yiwen and colleagues define employee job performance as the aggregated value of the activities that employees contribute both directly and indirectly, and positively and negatively, to reach the organisational goals. In other words, the main purpose of employee job performance is the achievement of organizational goals.
In general, research has shown that there is a positive relationship between contingent
reward leadership and employee job performance. Bass (1985) argued that the clarification of
goals and objectives and providing recognition once goals are achieved should result in
6 individuals and groups achieving expected levels of performance. In a similar vein, Bycio, Hackett and Allen (1995) argued and found that contingent reward leadership to be positively related to employees’ commitment, satisfaction and performance. They argued that contingent reward leadership is positively related to employee job performance, due to the fact that rewarding employees for the work they completed, leads employees to more likely finish their work in the right manner. Another reason Bycio and colleagues (1995) found support for the relationship between contingent reward leadership and employee job performance, is that employees exactly know what they should do to get rewarded for their efforts. A meta- analytic test from Judge and Piccolo (2004) underlines the results of Bycio and colleagues.
Judge and Piccolo found in their research that contingent reward leadership showed positive relationships with several outcomes, such as group and organizational performance.
Therefore, our first hypothesis is:
Hypothesis 1: Contingent reward leadership is positively related to employee job performance.
The moderating role of workload
As noted earlier, in general the relationship between contingent reward leadership and employee job performance has been found to be positive. However, results have been
heterogeneous and effect sizes were small. Indeed, work from Yammarino and Bass (1990)
showed that the relationship between transactional leadership and performance outcome was
not very strong and varied across studies. Some research even found this relationship to be
negative or not significant. For example, a study from Howell and Avolio (1993) found that
the relationship between contingent reward leadership and unit performance was significant
and negative. Howell and Hall-Merenda (1999) found in their study that contingent reward
leadership was not significantly related to follower performance. These heterogeneous results
7 imply that it is not exactly clear under what circumstances the relationship between contingent reward leadership and employee performance is positive, negative, or not significant. Given this discrepancy, it is possible that another variable influences the relationship between contingent reward leadership and employee job performance. We propose that workload may be a viable moderator.
In a study on workload and job demands, Karasek (1979) argued that in high-strain jobs, high demands create arousal that cannot be turned into action, because employees do not have enough control over the job. Given this uncontrolled arousal, employees can get
exhausted and fatigue. According to Richer and Vallerand (1995), employees can cope with this uncontrolled arousal, by giving them a certain amount of job control and autonomy to make choices and decisions about their work. The work from Richer and Vallerand is confirmed by van Yperen and Hagedoorn (2003), in the sense that if job demands rise, high job control is needed to limit fatigue, whereas either high job control or high job social support is needed to enhance intrinsic work motivation. Thus, we can state that the
distribution of workload over employees and the perceived workload of the employees are of great importance for a manager and a company as a whole, in the sense that the effects of workload can have a negative impact on the employees well-being and motivation.
Workload creates certain pressures under which employees are not able to turn motivation into performance. We expect employees under high levels of workload to experience more (uncontrolled) arousal, which might negatively affect their capability of performing their work in the right manner. Thus, while employees might be willing to
perform their job as a result of contingent reward leadership, they are (mentally) unable to do
so because of the high workload and cognitive strain they experience. So, we expect that high
levels of workload influence the relationship between contingent reward leadership and
employee job performance in the sense that this relationship is weaker positive. On the other
8 hand, we expect that if there are low levels of workload, employees might experience less arousal and less cognitive strain, which might not impede their capability of performing their work in the right manner as a consequence of contingent reward leadership. So, we expect that low levels of workload influence the relationship between contingent reward leadership and employee job performance in the sense that this relationship will be stronger positive.
Concluding, we propose that the amount of workload employees experience on the job can have an effect on the relationship between contingent reward leadership and employee job performance. Our second hypothesis is:
Hypothesis 2: Workload will moderate the positive relationship between contingent reward leadership and employee job performance, such that this relationship will be weaker positive under levels of high workload, and stronger positive under low levels of workload.
METHODS Sample and procedures
To test our hypotheses, we collected data from multiple organizations in the Netherlands, such as non-profit schools and banking. Both employees and their direct
supervisor participated in our research, and both filled in an online questionnaire. Employees answered questions about perceived leadership and workload, whereas supervisors were asked to rate their employees on job performance.
In total, 263 employees and 48 supervisors completely filled in their questionnaire.
From the 263 employees, 98 were male and 164 were female (1 person did not report gender).
The average age of the employees was 40.91 (SD = 11.84), ranging from 19 to 64. In terms of education level, most employees finished a MBO (64) or HBO (150) degree. The average organizational tenure was 9.59 years (SD = 9.42), ranging from 0 to 40. From the 48
supervisors, 29 were male and 19 were female. The average age of the supervisors was 44.56
9 (SD = 10.69), ranging from 26 to 70. In terms of education level, most supervisors finished a HBO (25) or university (12) degree. The average organizational tenure was 12.02 years (SD = 7.42), ranging from 2 to 31.
Measures
The online questionnaire was administered in Dutch. The measurement instruments were originally in English, but were translated in Dutch by means of a back-translation procedure (Brislin, 1970). All of the items could be answered on a 5-point Likert scale, ranging from strongly disagree (1) to strongly agree (5).
Contingent reward leadership. To measure contingent reward leadership, we used four items from Avolio, Bass & Jung (1999). Examples of the items are: “My supervisor clarifies rewards” and “My supervisor assists based on effort”. Cronbach’s alpha was .86.
Workload. Workload was measured using five items from the job demands item scale of van Yperen and Hagedoorn (2003), which itself is based on work from Ganster and Fusilier (1989). Example items are: “I have to work too fast”, “I work under time pressure” and “I have to rush my work”. Cronbach’s alpha was .89.
Employee job performance. To measure employee job performance, we used 3 items based on the scale of Wayne, Shore & Liden (1997). The items are: “… performs his/her duties as I like to see them performed”, “…performs his/her duties in an effective manner”
and “… generally provides good performance in his/her work”. Cronbach’s alpha was .89.
Data analysis
The data from the questionnaires were analysed with multiple tests. First of all, we
examined the correlations between the variables. In this way, we could evaluate the strength
of the relations between our variables contingent reward leadership, employee job
10 performance and workload. Then, to test our hypotheses, we performed regression analyses.
To test the effect of workload as a moderator on the relationship between contingent reward leadership and employee job performance, we made an interaction with the standardized variables of contingent reward leadership and workload (Aiken & West, 1991).
RESULTS Correlations
Table 1 shows the means, standard deviations and correlations. As can be seen in the table, we found contingent reward leadership and employee job performance to be positively and significantly correlated (r = 0.13, p < .05). We also found contingent reward leadership and workload to be negatively and significantly correlated (r = -.20, p < .01). There was an insignificant correlation of -.09 between workload and employee job performance.
Furthermore, age and employee job performance are negatively and significantly correlated (r
= -.26, p < .01).
--- Insert Table 1 about here.
--- Hierarchical regressions
Table 2 shows the hierarchical regression analyses. In every model, we controlled for gender and age. As can be seen in the table, the first step showed a positive relationship between contingent reward leadership and employee job performance (B = .10, SE = .05, p <
.05). Therefore, we confirm hypothesis 1. In the second step of the regression analysis we
included workload. Table 2 shows a small non-significant negative effect of workload on
employee job performance (B = -.03, SE = .05). In the third and final step of the regression
analysis we included the interaction between contingent reward leadership and workload. In
contrast to our reasoning, results showed that workload did not moderate the relationship
11 between contingent reward leadership and employee job performance (B = .01, SE = .04).
Therefore, we reject hypothesis 2. Meaning the relationship between contingent reward leadership and employee job performance does not seem dependent upon workload.
--- Insert Table 2 about here.
---
DISCUSSION AND CONCLUSION Summary of results
We found a positive relationship between contingent reward leadership and employee job performance. In line with our reasoning, this confirmed hypothesis 1. However, results did not show an effect of workload on the relationship between contingent reward leadership and employee job performance. We conclude that workload is not acting as a moderator in our sample. Therefore, in contrast to our reasoning, we rejected hypothesis 2.
Theoretical and managerial implications
In our research, we examined and found the positive relationship between contingent reward leadership and employee job performance. These results imply that an increase in employee job performance is expected if a manager is using reward style leadership. For instance, a supervisor clarifying rewards results in a better performing employee, because it is clear for the employee which tasks he will be judged on and rewarded for. Another example when an employee is performing better, is when the supervisor rewards the employee based on his achievement. In this way, the employee is assured that his effort and performance is recognized and rewarded by his supervisor.
Our results about the main effect follow the line of previous research in the field. Bass
(1985) and Bycio et al. (1995) also found this relationship to be positive. Judge and Piccolo
12 (2004) tested the relationship more recently and found it to be weak positive, similar to the results found in our work. Hence, we expand the literature by giving additional empirical evidence for the positive relationship between contingent reward leadership and employee job performance. However, in the literature there is also a stream of research claiming that the relationship between contingent reward leadership and employee job performance is negative.
Contrary to Howell and Avolio (1993) and also later work from Howell and Hall-Merenda (1999), we did not find the relationship between contingent reward leadership and employee job performance to be significantly negative.
Unfortunately, the inconsistency in the results between our work and the work of Howell and Hall-Merenda (1999) could not be explained by workload acting as a moderator.
Therefore, we were not able to fill this gap in research. There are several reasons why we did not find workload to act as a moderator. First, employees are triggered by the fact that they get rewarded if they perform the task in the right manner. How to perform the task in the right manner is thoroughly described by their supervisor. Due to the fact that employees choose to perform this task to get rewarded, they might not experience the amount of workload as weighty when carrying out their task. Therefore, workload might not act as a moderator on this relationship. Second, we found in our research that the average amount of workload employees experience is not very high (M = 2.96). This can be explained by the fact that our sample contained a diversity of companies and therefore a diversity of tasks. Due to this broad range of tasks, there might also be differences between the levels of workload in each task.
Combining all these different tasks, and thus combining all the different levels of workload of
each task, will result in the total package of workload experienced by the employees. Hence,
the tasks requiring low levels of workload might leverage the tasks requiring high levels of
workload. As a consequence workload is not acting as a moderator, because workload might
be less or more present and therefore less or more important in certain work and how
13 employees complete their work. Third, because workload itself is not acting as a moderator, it might be the case that the stress levels arising from workload can have a moderating effect.
Karasek (1979) found in his work that high levels of workload can lead to increasing stress levels for the employee. Hence, if this stress level is creating too much uncontrolled arousal, the employee is not capable of converting this arousal into action and consequently
performance declines. Therefore, it might be the case that not workload, but stress levels resulting from workload is the real moderator. Maybe therefore we did not find workload itself to be acting as a moderator.
Despite the fact that this gap in research is not explained by our work, this research does have strong managerial implications. An advice to managers is to concretize rewards and make them contingent upon performance. This also implies that managers should make clear which targets employees should attain. Hence, we advise managers to set up a list of specific targets, and to clearly communicate what the rewards will be for attaining these targets.
Another advice to managers is that they need to make sure they assist and reward employees based on their efforts. For instance, a manager is not supposed to support an employee who is free-riding during a group task, but the manager should be supportive to the employee who is carrying out his tasks in a right manner. In this way, employee job performance might
increase. Despite the lack of support that workload acts as a moderator on the relationship
between contingent reward leadership and employee job performance, workload itself is an
important factor for managers in decision-making. Van Yperen and Hagedoorn (2003)
discovered in their research that high levels of workload might have negative impact on
employees well-being and motivation. Hence, it is important for managers to pay attention to
the amount of work they divide amongst their employees. It is best to have moderate amounts
of workload. In this way there will not be too much workload, so that as a result well-being
and motivation declines, but still enough workload to stimulate concentration and effort.
14 Limitations and future directions
This research has theoretical as well as methodical limitations. Our research did not enable us to come up with a solution explaining the inconclusive findings in the relationship between contingent reward leadership and employee job performance. This might have multiple reasons. One methodical limitation lies in the fact that the results are gathered at once instead of using a longitudinal design. Therefore, results are based on one particular moment. In future research it might be interesting to use a longitudinal design to investigate causality too.
There is also room for improvement on the theoretical side of our work. First, there is a stream in research claiming that workload is not related to employee job performance.
Hockey (1997) found in his research that under high levels of workload and stress, the
primary performance of employees is still maintained. The fact that in the work from Hockey (1997) workload was not related to performance, may strengthen our results of workload not acting as a moderator. Second, a possibility to explain the insignificant results we found is the influence of another moderator on the relationship between contingent reward leadership and employee job performance. One particular moderator of interest is the stress levels arising from workload. As mentioned before, rising stress levels resulting from a high amount of workload lead to uncontrolled arousal. Hence, the uncontrolled arousal might decrease employees’ ability to turn contingent rewards into employee job performance. Thus, the employee is not able to perform his task anymore to get rewarded. An avenue for future research may be to examine the stress levels arising from workload as moderating effect.
Conclusion
Stimulating employee job performance is more important than ever because of heavy
competition in the market. Managers nowadays should be aware of the fact that rewarding
15 employees based on their effort and achievement is important for job performance. However, workload did not influence this relationship between contingent reward leadership and employee job performance. Hence, employees’ performance will increase when experiencing contingent reward leadership, regardless the amount of workload.
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18 TABLE 1: CORRELATION TABLE
M SD 1 2 3 4 5
1. Gender
11.63 .49
2. Age 40.91 11.84 .02
3. Contingent reward leadership 3.47 .77 .04 -.06 (0.86)
4. Workload 2.96 .87 -.08 .01* -.20*** (0.89)
5. Employee job performance 4.18 .73 -.00 -.26*** .13** -.09 (0.89)
1
Dummy coded, 1 = male, 2 = female * p < .10
** p < .05 *** p < .01
Note: Cronbach’s alpha is in parentheses along the diagonal
19 TABLE 2: HIERARCHICAL REGRESSION TABLE
DV: Employee job performance Predictors
1 Control variables
Gender
1.01 (.09) .01 (.09) .01 (.09)
Age -.02 (.00)*** -.02 (.00)*** -.02 (.00)***
2 Main effects
Contingent reward leadership (Z-
scored) .10 (.05)** .09 (.05)** .09 (.05)**
Workload (Z-scored) -.03 (.05) -.03 (.05)
3 Interaction
Contingent reward leadership (Z-
scored) * Workload (Z-scored) .01 (.04)
R
2.08 .08 .08
1
