Journal of

Management
Development
15,1
62
Relationshipsbetweenemployee
attitudes, customer satisfaction
and departmental performance
Dennis J. Adsit
Rath &Strong Inc., Massachusetts, USA
Manuel London
State University of New York at Stony Brook, New York, USA, and
Steven Crom and Dana Jones
Rath &Strong, Inc., Massachusetts, USA
An important assumption in management is that employee attitudes and
reactions to organizational change are associated with departmental
performance. In a service business, customer satisfaction is a critical
performance indicator along with measures of unit productivity and
administrative effectiveness. This study examines the relationships between
productivity, administrative effectiveness, customer satisfaction, and employee
attitudes over time. Three streams of research are relevant to the study: survey
feedback as an organization development tool, upward and customer ratings as
a guide to manager development, and relationships between employee
attitudes, departmental performance and customer satisfaction with service
quality.
Survey feedback
Survey feedback refers to reporting attitude survey results to employees[1-3].
Survey feedback results may be calculated to determine the average responses
within a work group and then reported to the manager of the group. Topics
include boss/subordinate relationships as well as a variety of facets such as pay,
working conditions, career opportunities and job challenge.
Summaries of survey results may be reported to all employees in special
company bulletins. Work groups might meet with their supervisors to discuss
the meaning of the results for the organization as a whole and the work group
in particular[4]. According to Lawler[2], possible positive outcomes from survey
feedback include improvements in work methods and procedures, attraction
and retention of employees, higher quantity and quality of output, enhanced
decision making (resulting from better communication), and smoother group
processes and problem solving (from enhanced attention to group dynamics).
Potential negative effects include costs to communicate and facilitate
interpretation of results, need for support personnel to run the survey
programme, unrealistic expectations for organizational change based on the
Journal of Management
Development, Vol. 15No. 1, 1996,
pp. 62-75. MCBUniversity Press,
0262-1711
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results or based on making issues salient by merely asking the questions,
middle management resistance to being evaluated, and time lost from group
meetings in completing the survey and later discussing the results.
The effects of the survey feedback process rely on principles of participative
management. Employees supposedly feel more involved in the organization
when their input is requested[1]. The process also increases the salience of
managerial behaviour towards subordinates to organizational effectiveness and
productivity. Employee participation throughout the survey feedback process
is important for acceptance of the results.
Upward and customer feedback
Another body of related research focuses on upward feedback (subordinates
rating their managers) and 360 feedback (ratings from subordinates, peers,
supervisors, and internal or external customers/clients). The survey results are
fed back to managers as a means of suggesting directions for development. The
results may also be used to evaluate managers performances and make pay or
placement decisions about the managers. Ratings capture multiple dimensions
of the managers jobs dimensions that are not available from any one source
alone[5,6]. The results are provided in confidence, thereby avoiding
inaccuracies that may result from low interpersonal trust or the desire to avoid
negative situations. Such problems are typical of supervisor ratings[7]. This is
not to say, however, that upward ratings or customer satisfaction ratings are
free from bias. Raters may try to create impressions of themselves through their
ratings, or they may be biased by non-performance-related factors such as
gender[8]. Alternatively, they use their ratings to defend themselves against
negative feedback or blame the supervisor for unrealistic expectations[9].
Information from multiple sources when aggregated within source (e.g. the
average of all subordinate ratings or the average of all customer ratings) should
provide reliable information. Data on the range or variance within source
should provide an indication of agreement among raters and the extent to
which the manager is consistent in his/her behaviour in relation to each source.
Furthermore, the ratings reflect elements of unit performance. As such, these
feedback techniques should contribute to enhancing unit performance over
time if they are used by managers as a guide to development and behavioural
change. Therefore, the ratings should enhance both individual and
organizational development[10-15].
Several studies have investigated the effects of upward feedback and
reactions to the feedback on changes in managerial performance. Hegarty[16]
found that upward feedback leads to subordinates perceiving positive changes
in the bosss subsequent behaviour. In another study, Bernardin et al.[17] asked
first-line managers for their reactions to subordinate ratings one week after
receiving feedback. They discovered that the managers were generally
supportive of the subordinate appraisal. London et al.[12] found that managers
reported positive reactions to the process six months after receiving feedback.
Smither et al.[18] discovered that favourability towards the upward feedback
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process was not related to supervisors later reactions. London and Wohlers[19]
found that self/subordinate agreement increased for one year after the first
upward feedback process was administered, suggesting that managers learn
about how others see them. Hazucha et al.[20] reported that 360 feedback
resulted in skill increases and higher self/other agreement two years later.
Smither et al.[21] found that managers who received feedback following an
initial administration of an upward feedback survey improved their
performance six months later, whereas managers who did not receive feedback
initially did not improve their performance over time. Also, the managers who
received feedback had agreed more highly with subordinate ratings on the
second administration than had managers who did not receive feedback
initially. Adsit et al.[22] studied relationships between subordinate ratings and
managers supervisor ratings. They found that managers who supported
subordinates career development (and subordinates agreed on this) tended to
be those who were viewed by their supervisors as excellent performers. On the
other hand, managers who provided less support for subordinates career
development (and subordinates disagreed on this) were viewed by their
supervisors as poorer performers.
Studies of upward and customer feedback have not related the survey results
to objective performance measures to determine whether perceptions of
managerial performance are associated with other indexes of unit performance.
This is a major goal of the present study.
Relationships between attitudes, performance and customer
satisfaction with service quality
Past research has found positive but weak relationships between employees
job-related attitudes and performance (for reviews see [23,24]). Recent research
has included customer satisfaction as a correlate of employee attitudes and
performance, stressing the importance of quality service to organizational
achievement[25,26]. Providing quality service energizes employees because it
requires building an organizational culture in which people are challenged
to perform to their potential and are recognized and rewarded when they
do[27, p. 32]. In todays competitive marketplace, organization effectiveness
depends on understanding what customers value and communicating this
understanding to employees in the form of employee-performance goals and
expectations[28,29]. In research on bank branches, employee and customer
attitudes about service quality were highly related[30-33]. Specifically,
significant positive relationships occurred between employee attitudes about
the organizations human-resource practices and customer attitudes about the
service they received. This implies that the same kind of organizational
practices which affect service quality to customers also affect how employees
are treated.
Subsequent research supported and extended the above finding. In a study of
147 branch offices of a credit corporation, Ryan and Schmit[34] found that
customer satisfaction was positively related to employee perceptions of a
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manageable workload, lower stress, and opportunities for training and
development. Branch morale was positively related to performance measures
(higher market share, lower delinquent loan rates, and higher volume of
activity). Furthermore there was a significant negative relationship between
customer satisfaction and employee turnover.
Tornow and Wiley[35] studied relationships between customer satisfaction,
employee attitudes, and organizational performance in a large, multinational
computer organization. They found that employees perceptions of their
organizations culture for success consistently showed positive relationships
with organizational performance measures. Interestingly, employee satisfaction
with pay and benefits consistently showed negative relationships with
organizational performance indicators, suggesting that these elements of job
satisfaction were less reflective of management practices that deal with
organizational success. This finding replicated Schneider et al.s[33] failure to
find a significant relationship between employees general feelings of job
satisfaction and customer perceptions of service. Another finding in the
Tornow and Wiley[35] study was that employee perceptions of an
organizations culture for success showed substantial relationships to
customer satisfaction. Culture for success was measured by such items as:
adequate resources are provided for developing the technology of my business
units future products, My business unit plans future product and service
offerings based on customer needs, and My business units products and
services are competitive in the marketplace. Another employee attitude
dimension highly related to measures of customer satisfaction was personal
responsibility, which included such items as Commitment to helping my
business unit succeed and I protect the companys property and business
information as if it were my own.
In another study of relationships between organizational performance,
customer satisfaction, and employee attitudes, Wiley[25] studied data from over
200 retail stores. He found that, overall, those stores most favourably described
by employees were those most favourably described by customers. In
particular, customer satisfaction ratings were strongly and positively related to
employees descriptions of key aspects of their working environment, especially
working conditions, minimum obstacles to accomplishing their work, and a
strong sense that supervisors and co-workers stress customer service. A
number of employee attitude dimensions were related to customer satisfaction.
One such employee attitudinal dimension was effective communication, which
included items such as my work group is told about upcoming changes in time
to prepare for them and I get enough information about how well my work
group is meeting its goals. Another attitudinal dimension was supervisory
practices, which included items such as My supervisor/manager makes it clear
what I am expected to do.
Interestingly, Wiley[25] found that conditions conducive to effective financial
performance, such as size and volume of business, were less likely to be related
to dimensions of customer satisfaction, such as friendliness. This suggests that
performance relationships to employee and customer attitudes depend on the
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nature of the organization and the measures used. Measuring financial
performance as an aggregate accounting index of the profitability of
transactions (e.g. sales during a period of time) may not adequately reflect the
profitability of an organizations relationships with its customers.
In a sample of 30 banks, Paradise-Tornow[36] examined relationships
between employee perceptions of management leadership and measures of
financial performance and efficiency. The measures of managerial behaviour
were tied to a leadership/management model which focused on behaviours
believed to be important in establishing a competitive sales and service-oriented
culture. Such a culture should be a foundation for maintaining high
organizational performance[37]. Managers (bank presidents in this case) were
responsible for the management culture in the organization. The management
role included setting standards and expectations and providing feedback,
evaluation and coaching. Effective communication was part of the management
culture. Employee-attitude items reflecting communication included: manager
effectively communicates rationale for our goals, manager regularly requests
input when making decisions/solving problems; and manager provides clear
expectations/standards regarding quality service. Communication was
strongly positively related to productivity (the ratio of revenue divided by
personnel expense). Overall, the study found that leadership factors of
communication downwards, sales goals and teamwork showed the strongest
relationships to organizational efficiency measures. The research suggested
that leaders have control over achieving objectives because they take customer
requirements into consideration.
The current study extends previous research by examining relationships
between employee attitudes, performance, and customer satisfaction over time.
The goal is to determine the extent to which employee attitudes distinguish
between departments and the extent to which these differences are associated
with productivity, administrative effectiveness, and customer satisfaction. In
general, we hypothesize that work groups differ in employee attitudes and that
these differences relate to recently achieved performance and customer
satisfaction and also predict future performance and customer satisfaction.
Method
Respondents
Data were collected from the US customer-service division of a large European-
headquartered computer hardware firm. Employee attitude surveys were
analysed for 281 employees in 92 groups in February 1992. The response rate
was 68 per cent. Comparisons were made for the same managers at both points
in time, although the composition of their departments changed over time.
Group performance, customer satisfaction and administrative effectiveness
were available at the time of the initial attitude survey and one year later.
Measures
Employee attitudes. There were 48 employee attitude items. The items
concentrated on employee attitudes towards their immediate manager, their
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managers manager, and top leadership (with emphasis on confidence in
leadership), support for employee development, and directions for
organizational and departmental change. The items also reflected general areas
of satisfaction (e.g. satisfaction with pay and benefits).
Customer satisfaction. The customer satisfaction measure consisted of
attitudinal and objective components. Specifically, it was a weighted sum of the
following five components in order of weight (with weights determined by
maximum scores for each component): the average satisfaction with service
score from the firms customer satisfaction survey (36 per cent of score);
percentage of service calls met within response time specified in the clients
contract (21 per cent); percentage of service calls completed the same day of
contractual response date (20 per cent), percentage of repeat calls (inversely
coded, 16 per cent), and percentage of service calls falling within the estimated
time of arrival (7 per cent). Total scores could range from 0-70.
Department productivity. This was the sum of two equally weighted
components: site labour utilization (an index of deployment of service
employees in the district); and maintenance work load (the work hours used for
equipment maintenance, inversely scored). Total scores could range from 0-30.
Administrative effectiveness. This was the weighted sum of five components,
(with higher negative numbers equalling lower effectiveness): database
accuracy based on monthly audit results (17 per cent of score), customer survey
list accuracy (20 per cent), repairable parts returned (30 per cent), receivable
balance under 60 days (13 per cent), and installation report timeliness (20 per
cent). Total scores could range from 0 to 30.
These achievement measures (customer satisfaction, district productivity,
and administrative effectiveness) were designed to recognize departmental
personnel for superior contribution towards the overall performance of
customer-service operations. The goal was to provide a fair and equitable
measurement of performance which could be used to identify top-performing
departments. The programme produced financial and customer satisfaction
pay-offs by promoting competition among the work groups that would sustain
and improve performance to achieve the desired results. Therefore, employees
were aware of the programme and its components, and they had a chance to
track their results over time in comparison with other departments.
Analyses
The attitude items were collected from each employee, and the performance and
customer satisfaction measures were derived for departments. Our goal was to
determine the extent to which the set of items distinguished departments and
then determine whether the departmental differences on the items were
associated with customer satisfaction and performance. This was
accomplished by discriminant analysis on the time-1 employee-attitude items.
The results identified discriminant functions that maximally distinguished
between departments. Function group means derived from the attitude items
were then correlated with the customer satisfaction and performance measures
across departments. Regression analyses determined the extent to which the set
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of group means on the discriminant functions derived from the attitude items
predicted customer satisfaction and the two performance measures.
Correlations and regression analyses examined relationships between attitudes
at time 1 and customer satisfaction and performance at time 2.
Results
Table I presents the means, standard deviations and intercorrelations for the
three performance indices at each point in time and between times. Customer
satisfaction and productivity decreased over time while administrative
effectiveness increased. At time 1, the three performance measures were
independent of one another. At time 2, customer satisfaction increased with
administrative effectiveness (r = 0.36; recall that administrative effectiveness
was an inverse scale). Time 2 measures of productivity and administrative
effectiveness were higher when customer satisfaction was higher at time 1.
Productivity at time 1 was positively related to productivity at time 2 (r = 0.40).
The discriminant function coefficients for the attitude items are provided in
Table II for both points in time. Two significant ( p< 0.05) discriminant
functions with eigenvalues greater than 1 emerged from the analyses of the
time-1 data, accounting for 15 per cent of the common variance. Coefficients
greater than or equal to 0.50 and equal to or less than 0.50 were used to define
each function. Positive coefficients on function 1 dealt with encouragement to
participate. Items focused on the change in the firm to a team-oriented approach
and the managers explanation of the nature of the change and encouragement
Performance Standard Intercorrelations
measures Means deviations 1 2 3 4 5
Time1
1. Customer
Satisfaction -44.92 13.16
2. Productivity -16.89 4.85 -0.14
3. Administrative
effectiveness
a
6.06 4.92 0.14 0.04
Time2
4. Customer
satisfaction -39.20 9.39 -0.09 0.00 0.15
5. Productivity -12.59 3.18 -0.32* 0.40* 0.06 0.04*
6. Administrative
effectiveness
a
2.85 2.52 -0.39* 0.09 0.12 0.36* 0.18
Notes:
a
Administrative effectiveness is an inverse scale
* p< 0.01
Table I.
Means, standard
deviations and
intercorrelations among
performance measures
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Functions
1 2
Attention
Team performance
Attitude items participation evaluation
1. The companys overall business strategy will be effective 0.27 0.08
2. I can clearly define the companys mission and strategy 0.01 0.28
3.There is a low level of co-operation between the various countries
in the company 0.24 0.33
4. I have confidence in the companys executive leadership 0.10 0.49
5. I understand the companys financial picture 0.34 0.09
6. In the USA, we are making progress, shifting away from a hierarchy,
towards a team-oriented approach to business 0.53 0.39
7. I have confidence in the leadership of the firms US management
team 0.03 0.32
8. I understand why we are focusing on accounts and customers 0.07 0.04
9. I understand the companys financial picture 0.36 0.18
10. It is important that the firm has a clearly articulated set of values
by which we live 0.03 0.02
11. I understand the importance of system integration, multi-vendor
open systems, services and maintenance to the future 0.31 0.51
12. I am satisfied with my pay 0.05 0.33
13. I am satisfied with the benefits programme 0.33 0.06
14. The company provides the kind of training experiences I need 0.47 0.12
15. I am satisfied with my career progress in the company to date 0.23 0.31
16. The people with whom I work have the appropriate skill set to
contribute to the firms success 0.19 0.33
17. Opportunities for training, development and advancement are
provided to all employees, regardless of age 0.09 0.05
18. Individual differences such as race, gender and handicap status are
valued in the firm 0.36 0.41
19. Key assignments, which contribute to visibility and promotions, are
similarly provided to men and women 0.60 0.01
20. Key assignments, which contribute to visibility and promotions, are
similarly provided to minorities as to others 0.03 0.26
21. Cultural differences within the company are managed effectively 0.10 0.35
22. Relative to other high-tech companies, this company is an enjoyable
place to work 0.07 0.14
23. I believe that my service to the company and the contributions that I
have made are appreciated 0.01 0.06
24. The company communicates internal information in a timely and
honest fashion 0.32 0.28
25. My manager takes into consideration the needs of the customer
(internal or external) when planning 0.10 0.07
26. My manager seeks other peoples input to evaluate our work
groups level of service 0.79 0.56
27. My manager demonstrates a sense of urgency without creating
undue stress 0.03 0.24
28. My manager encourages my work group to simplify and streamline
work processes 0.06 0.16
(Continued)
Table II.
Standardized canonical
discriminant function
coefficients
of subordinates to influence the department (e.g. in the USA, we are making
progress, shifting away from a hierarchy towards a team-oriented approach to
business; key assignments, which contribute to visibility and promotions, are
similarly provided to men and women, my manager helps the people in our
group to understand why things are changing, and my manager encourages
me to influence what goes on in my department). This function gives negative
weight to items that deal with attention to performance (e.g. my manager seeks
Table II.
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Functions
1 2
Attention
Team performance
Attitude items participation evaluation
29. My manager encourages me to come forward with ideas and
suggestions 0.31 0.01
30. My manager gives feedback honestly to me 0.51 0.14
31. My manager helps the people in our group to understand why
things are changing 0.50 0.91
32. My manager openly and effectively discusses employee career
development 0.46 0.71
33. My manager regularly recognizes and acknowledges the quality
of my work 0.38 0.15
34. My manager encourages me to influence what goes on in my
department 0.75 0.14
35. My manager encourages me to influence what goes on outside my
department 0.18 0.44
36. My manager communicates effectively upwards, downwards, and
laterally by the most effective media 0.45 0.20
37. My manager involves people from outside our department in cross-
functional teamwork 0.16 0.24
38. My managers manager creates an environment that supports
empowerment and risk taking 0.12 0.29
39. My managers manager is an effective leader 0.12 0.01
40. My managers manager recognizes his or her organization for
outstanding performance 0.07 0.56
41. My managers manager understands and communicates a vision
which encourages success 0.30 0.17
42. My managers manager is accessible and visible 0.25 0.28
43. My managers manager communicates effectively upwards,
downwards, and laterally 0.14 0.23
44. I understand the divisions overall strategy 0.07 0.44
45. I have a clear understanding of what I am expected to accomplish
during the coming year (goals, accountabilities, etc.) 0.14 0.37
46. I have confidence in the divisions management team 0.04 0.08
47. The division is recognized for its contributions to the company 0.04 0.09
48. I understand why the growth of the multivendor services business is
critical to our success 0.12 0.50
Note: Items with coefficients greater than 0.50 are italicized to denote variables which define
each function
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other peoples input to evaluate our work groups level of service and my
manager gives feedback honestly to me).
Time 1s function 2 encompassed a focus on performance and strategy (with
positive coefficients for items such as my manager seeks other peoples input
to evaluate our work groups level of service and I understand why the growth
of the multi-vendor services business is critical to our success). Negative
coefficients dealt with understanding directions for change, communication and
recognition (I understand the importance of system integration, multi-vendor
open systems, services, and maintenance to the future; my manager helps the
people in our group to understand why things are changing, and my
managers manager recognizes his or her organization for outstanding
performance). The correlation between the group means on these functions
was 0.00 (not significant), demonstrating that the discriminant analysis
produced independent ways of discriminating between the district groups. As a
consequence, the two functions may have independent effects on performance.
Table III provides the correlations between the group means on each function
and the performance measures. The results show that employee attitudes were
Performance measures
Customer Administrative
satisfaction Productivity effectiveness
Time1
Time 1 attitudes
Function 1: team participation 0.29* 0.28* 0.26*
(0.27*) (0.29**) (0.27**)
Function 2: attention to performance evaluation 0.28* 0.05 0.04
(0.27**) (0.06) (0.05)
R
2
0.15* 0.08** 0.07**
Time2
Time 1 attitudes
Function 1: team participation 0.22** 0.28* 0.21**
(0.24) (0.29**) (0.12)
Function 2: attention to performance evaluation 0.09 0.02 0.07
(0.19) (0.06) (0.01)
R
2
0.10 0.09 0.02
Notes:
Beta weights are in parentheses
Administrative effectiveness is an inverse scale
** p<0.05
** p<0.01
Table III.
Correlations and
regressions between
performance and
group attitudes
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positively related to the performance indices, reflecting the entire prior years
departmental performance. The results suggest that attitudes reflect current
levels of performance. Function 1 was significantly related to all three
performance indices. Function 2 was significantly related to customer
satisfaction. Both functions together accounted for 15 per cent of the variance in
customer satisfaction, 8 per cent of the variance in productivity, and 7 per cent
of the variance in administration.
Employee attitudes at time 1 not only reflected the prior years performance
but also predicted performance a year later. Correlations between the time-1
attitude functions and time-2 performance are included in Table III. Once again,
the first function was significantly related to all three levels of performance.
The second function was not significantly related to any performance measure.
Discussion
Taken together, the results indicate that being high in a given dimension of
performance does not mean the department will be high in the same dimension
at the next point in time. Departments initially high in customer satisfaction
tended to focus their attention on internal performance measures (productivity)
and may direct attention away from administrative effectiveness. This suggests
that managers who met customers needs may have lost focus on what is
required internally to be administratively effective while they emphasized
productivity. However, at the second point in time, departments able to
maintain or achieve high customer satisfaction also had high administrative
effectiveness. Managers who maintained customer satisfaction also maintained
administrative effectiveness.
The first function at time 1 captured encouragement for input that is
important to changing management strategies to a team-oriented, participative
environment. Function 2 focused on performance in terms of directions for the
growth of the business and the importance of the employees input to evaluating
performance. Function 1 reflected process while Function 2 reflected outcomes.
The relationships between employee-attitude functions and performance at
time 1 suggested that attitudes about new team management processes were
higher in units with higher overall performance. Relatively small changes in
employee attitudes (15 per cent of the variance in attitudes accounted for by the
discriminant analysis) accounted for significant and important changes in
performance (e.g. 15 per cent in customer satisfaction, 8 per cent in productivity,
and 7 per cent in administrative effectiveness). This suggests that investing in
improving employee attitudes about their work may yield important,
measurable dividends in performance. In highly competitive businesses, it may
account for the difference between an operating profit or loss. Not surprisingly,
attitudes about attention to performance outcomes (function 2) were higher
when customer satisfaction was higher.
The relationships between attitudes at time 1 and performance during the
subsequent ten months indicated that departments with initially high customer
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satisfaction may have focused attention on evaluating performance and away
from how performance is accomplished. Adopting new team-oriented
management methods served departments well in the long run in driving
higher performance in customer satisfaction, productivity and administration.
In summary, problems in customer satisfaction seemed to drive attention to
administrative effectiveness over time. At time 1, managers seen as
encouraging participation had higher departmental performance on all three
performance dimensions. Encouraging participation and attention to
performance evaluation were positively related to customer satisfaction.
Between times, managers who encouraged participation were able to maintain
higher levels of all three performance measures.
Tying customer values to organizational strategies and communicating these
strategies to employees in the form of goals and expectations is the foundation
for organizational performance in todays competitive marketplace.
Organizations should implement processes which identify what customers
value, align organizational responsibilities and effectiveness measures around
key value-added processes, and manage employees and work processes to
create customer value. This is known as customer value analysis[28]. The
manager is responsible for establishing this process and involving employees.
This may include collecting customer data and organization performance
indicators linked to customer values. The manager communicates
organizational strategies to employees and ensures that employees understand
that accomplishing their goals helps to meet customer expectations. The
current study showed that employee perceptions of managerial communication
and organizational strategies are important to customer satisfaction and
departmental performance.
A product and technology-oriented business strategy will probably not be
successful unless it inspires the confidence of employees. Of course, managers
want to help employees to be more productive. Managers should recognize their
role in facilitating linkages for their employees and removing organizational
barriers. Improving performance has a positive influence on employee morale.
Future research should investigate the importance of an organizations work
environment to outcome-oriented improvements, such as attaining productivity
or customer service targets. Upward feedback increases employee sensitivity to
managerial and unit performance and enhances managers attention to
behaviours which influences departmental performance and customer
satisfaction.
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