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22,4 Influence of leadership
competency and organizational
culture on responsiveness and
performance of firms
Received 3 February 2009
Revised 22 April 2009,
Susita Asree
6 July 2009, Department of Management, Marketing and Business Administration,
10 August 2009 College of Business and Public Affairs, Murray State University, Murray,
Accepted 7 September 2009 Kentucky, USA
Mohamed Zain
College of Business and Economics, Qatar University, Doha, Qatar, and
Mohd Rizal Razalli
College of Business, Northern University of Malaysia, Kedah, Malaysia

Purpose – The purpose of this paper is to investigate the operations strategy of service firms (hotels)
in order to determine whether the infrastructural aspects of their operational practices, i.e. leadership
competency and organizational culture, would affect their responsiveness (as a cumulative capability)
to their employees and customers and eventually their performance (increase in revenue).
Design/methodology/approach – The approach takes the form of an empirical analysis of data
(using structural equation modeling) obtained via a questionnaire survey involving 88 hotels of
various ratings in Malaysia.
Findings – The findings indicate that leadership competency and organizational culture have
positive relationships with responsiveness. In addition, responsiveness has a positive relationship
with hotel revenue. These findings imply that leadership competency and organizational culture are
important factors for hotels to be responsive to their customers, and in turn responsiveness to
customers would improve hotel revenue
Research limitations/implications – Some limitations include those that come with cross-sectional
analysis, the use of perceptual measures, and low response rate.
Practical implications – Hotel managers need not only to improve their leadership competency but
also to instil an organizational culture that is supportive of their employees. These operations practices
would make their hotel more responsive to customer needs, which in turn would help to improve their
hotel performance.
Originality/value – There are differences between this study and prior studies. Leadership
competency was examined in the context of service operations practices where evidence was provided
that leadership competency would affect cumulative capability of responsiveness of service firms.
Organizational culture was viewed in the context of operations practices, where the finding implies
that organizational culture practices, such as attentive listening to staff, giving reward and recognition
International Journal of
Contemporary Hospitality
for their performance, and taking care of their welfare, would lead to a positive effect on the ability of a
Management hotel to be responsive toward their customer needs.
Vol. 22 No. 4, 2010
pp. 500-516 Keywords Leadership, Organizational culture, Organizational performance, Hospitality services,
q Emerald Group Publishing Limited Corporate strategy, Malaysia
DOI 10.1108/09596111011042712 Paper type Research paper
1. Introduction Influence of
Tourism is an important industry that has contributed to the growth of the economy of leadership
Malaysia (Mahendran et al, 2006). As an illustration, the tourism receipts have
increased steadily from RM8,580.5 million in 1998 to RM49,561.2 million in 2008 competency
(Table I). As shown in Table I, the tourist arrivals to Malaysia had also increased from
5.5 million in 1998 to 22 million in 2008.
Strategy plays a major role in global competition of a service industry. In order to 501
compete effectively, service organizations such as hotels that were investigated in this
research have to link and incorporate their operations strategy to their business
strategy (Skinner, 1969). Failing to do this may sacrifice their competitive advantage
(Dangayach and Deshmukh, 2001).
Just as in any industry, a service industry requires an effective operations strategy.
The primary purpose of the service operations strategy is to create value to customers
in terms of quality, price, and time (Haksever et al., 2000). Therefore, in order to provide
these values, a service operations strategy should consider the management process
within the firm across a broad range of practices as well as the outcomes of the process
(Meyer et al., 1999). A practice refers to established systems and behaviors in an
organization (Morita and Flynn, 1997). In other words, in order to understand the
service operations strategy, the current practices used by hotel management should be
examined since they reflect the operations strategy of the service firms. This approach
corresponds to that of Mintzberg and Waters (1985) who see strategy as “a pattern in a
stream of actions, not decisions.” In fact, in operational strategy there are two
approaches for framework development:
(1) based on actions (practice); and
(2) based on decisions.

Research suggests that it is actions rather than decisions that should be included in the
operational strategy framework (as cited in Christiansen et al., 2003). By focusing on
the practices that are implemented in an organization, the operations strategy
framework represents a framework that can assist the organization in improving its

Year Arrivals (million) Receipts (million RMa)

2008 22.0 49,561.2

2007 20.9 46,070.0
2006 17.45 36,271.1
2005 16.4 31,954.1
2004 15.7 29,651.4
2003 10.5 21,291.1
2002 13.2 25,781.1
2001 12.7 24,221.5
2000 10.2 17,335.4
1999 7.9 12,321.2
1998 5.5 8,580.5
Note: a USD1.0 ¼ Ringgit Malaysia (RM) 3.62 (20 April 2009) Table I.
Source: (accessed 17 April 2009) Tourist arrivals and
q Tourism Malaysia receipts to Malaysia
IJCHM performance (Bozarth and McDermott, 1998). Examples of research in operations
22,4 management that used such practices include those that were carried out by Collins
and Cordon (1997) and Mills et al. (1998). Therefore, for the purpose of this study, the
terms operational strategy and operational practices will be used interchangeably.
Generally, less emphasis is given to people and organizational aspects of operations
practices (Skinner, 1969), which are very important to service companies. As a matter
502 of fact, this area is not included in most operational strategy studies. Fitzsimmons and
Fitzsimmons (2001) suggest that operations practices of a service organization need to
consider two main aspects of service, i.e. structural and managerial. In this paper, we
examined only the infrastructural aspects of operational practices, i.e. the influence of
leadership competency and organizational culture, on service organizations (hotels). In
other words, the main reason for conducting this study is to answer the question of
whether or not these two aspects of operational practice affect hotel responsiveness
and eventually its performance. Specifically, we use structural equation modeling
(SEM) to empirically investigate how organizational responsiveness and performance
are influenced by organizational leadership competency and culture. The next section
presents the literature review related to this study.

2. Theoretical background
2.1 Organizational performance
The concept of organizational performance is related to the survival and success of an
organization. The measurement of the organizational performance is critical in service
organizations as well as in manufacturing organizations (Brynjolfson, 1993; Atkinson
and Brown, 2001). Grönroos (1992) stressed that service firms must concentrate more
on building customer relationships rather than on short-term transactions (cited in
Paulin et al., 1999). Furthermore, in service organizations such as hotels, this is even
more critical because of the nature of their business which is more focused on human
skills and intangible assets (Bharadwaj et al., 1993).
There are two ways of measuring performance, i.e. using objective and subjective
measures. The objective measure uses real figures from organizations while the
subjective measure uses perception of respondents (Johannessen et al., 1999; Pizam and
Ellis, 1999). In this study, we decided to use a perceptual or subjective measure to
assess organizational performance (Ackelsberg and Arlow, 1985), because:
(1) it is a more consistent measure of performance and it does not vary broadly
from the objective measures in terms of accuracy; and
(2) asking respondents for specific financial measures may generate anxiety in
them over the confidentiality of the information they provide.

Also, the subjective measures may offer better perspective of organizational

effectiveness in the longer terms (Pizam and Ellis, 1999). Thus, we define hotel
performance as “the level of increase or decrease in hotel revenue”. A recent study by
Ozcelik et al. (2008) also assessed firms’ performance in terms of increase in revenue.

2.2 Leadership in operations practices

Barrow (1977) defines leadership as “the behavioral process of influencing individuals
or groups towards set goals”. In addition, he also revealed that past research on
leadership can be classified into four orientations:
(1) leader behavior investigation; Influence of
(2) situational and reciprocal causations; leadership
(3) leadership effectiveness theories; and competency
(4) normative leadership approach.

The leader behavior investigation is related to the actual acts or behaviors of the leaders. 503
Meanwhile situational and reciprocal causations assess the influence of situational
factors on leader’s behavior and the causes of his/her behavior on subordinates’
activities. Further, leadership effectiveness theories are related to the effectiveness of a
certain leadership style in an appropriate situation. Finally, normative leadership
approach is described as an effective action in any given situation. Barrow (1977) also
indicates that the leadership framework should consist three variables: leader’s
characteristic, leader’s behavior and the environment. Also, Zaccaro (2007) defines
leadership practices as “the extent of leaders’ behavior in making decisions related to
operational systems” of the hotels under study. Interestingly, Church (1995) found that
managers’ leadership behaviors in an airline services organization were significantly
related to indicators of service quality and business unit performance.
In drawing the line between this study and other leadership research, this study
identifies leadership practices that are related to responsiveness, particularly in the
hotel industry. A study on behavior of lodging industry leaders by Chung-Herrera et al.
(2003) found eight types of competency factors of leaders in the lodging industry. In
their study they used 99 statements to assess the following eight leadership
competency factors:
(1) Self-management, which comprises ethics and integrity, time management,
flexibility and adaptability, and self-development dimensions.
(2) Strategic positioning, which comprises awareness of customer needs,
commitment to quality, managing stakeholders management, and concern for
community dimensions.
(3) Implementation, which includes the dimensions of planning, directing others,
and re-engineering.
(4) Critical thinking, which includes strategic orientation, decision making,
analysis, and risk taking and innovation dimensions.
(5) Communication, which includes the dimensions of speaking with impact,
facilitating open communication, active listening, and written communication.
(6) Interpersonal, which comprises the dimensions of building networks, managing
conflict, and embracing diversity.
(7) Leadership, which comprises the dimensions of teamwork orientation, fostering
motivation, fortitude, developing others, embracing change and leadership
(8) Industry knowledge, which is the business and industry expertise dimension.

2.3 Organizational culture in operations practices

Organizational culture is significantly related to service organizations effectiveness
(Paulin et al., 1999). In past research, organizational culture has been explored as the
IJCHM source of competitive advantage in post merger/acquisition integration, and as the
22,4 prime factor in the success or failure of a large-scale change effort (Trefry, 2006). A
study by Xenikou and Simosi (2006) has found that the achievement and adaptive
cultural orientations has a direct effect on performance of a large financial organization
in Greece. In line with these findings, this study investigated the effect of
organizational culture on organizational performance. As mentioned earlier, the
504 inclusion of organizational culture in the service operations practices still needs to be
further explored (Dangayach and Deshmukh, 2001; Fitzsimmons and Fitzsimmons,
2001; Ingram, 1997). This view is also supported by a more recent study by Fang and
Wang (2006), which argues that the effect of organizational culture on operations
practices studies has been neglected in the early years.
Organizational culture has been defined at two levels (Trefry, 2006):
(1) practice and behavior (how things are done here); and
(2) underlying practice (beliefs and values).

Furthermore, Trefry (2006) noted that among the researchers who defined
organizational culture at the level of underlying values include Davis et al. (2002),
Schein (1985) and Hofstede (1997). In similar thought, Paulin et al. (1999) categorized
these two levels as visible and invisible; the visible level includes the behavior patterns,
the physical and social environment, and the written and spoken language used by the
group while the invisible level relates to the group’s values or the group’s basic
assumptions. In line with this contention, Hofstede (1997) defines organizational
culture as a collective programming of the mind that distinguishes the members of one
organization from another. He also indicated that shared perceptions of daily practices
should be included in the organizational culture. Besides these two broad categories,
generally, organizational culture is defined as the set of common norms and values
shared by people in an organization (Deshpandé and Webster, 1989). Among the
examples of organization and culture practices include the way organization
communicate with, develops, empowers and involves its staff (Prabhu et al., 2002).
Following Deshpandé and Webster’s (1989) definition mentioned above, this study
defines organizational culture practices as “the extent of shared values and beliefs that
are related to operational systems practiced by a hotel”. Again, to draw the line
between this research and other organizational culture researches, this research only
considers organizational culture practices that are related to responsiveness, which is
discussed in the next section. The responsiveness-related organizational culture
practices were adapted from Coughlan and Harbison’s (1998) study that emphasizes
employee management, flexibility and performance standards and measurement,
leadership, process management, quality management, service culture, service design,
service recovery, understanding customers, and value creation in contributing to the
performance of Irish service firms. In their research, responses to 80 questions were
rated on a five-point Likert-type scale.

2.4 Organizational responsiveness

Flynn and Flynn (2004) suggest the term “capability” to refer to the “actual strength” of
an organization instead of the goal or plan it wants to achieve. Similarly, this study
uses the term “capability” to reflect the strategic capability of the operations
management function. Examples of these capabilities are costs, time, quality, and
flexibility (Gaither and Frazier, 2002). Specifically, this study views responsiveness as Influence of
the competitive capability of the operations management function in a hotel. leadership
Responsiveness is chosen as the competitive capability because: it has the elements of
combined goals such as time, quality and flexibility; the term is suitable for service competency
operations of a hotel, and more importantly; the term is used to differentiate it from the
term “flexibility”.
In the literature (e.g. Palmer, 2001; Parasuraman et al., 1988; Stalk, 1988; Tsang and 505
Qu, 2000) the term “responsiveness” has been viewed from two separate functional
perspectives: service marketing and operations management. From the
service-marketing viewpoint, it is related to the willingness to help customers and to
the speed of the service rendered and from the operations management viewpoint, it is
more related to the speed and variety of product/service offered. In this study we
combined together the two perspectives of responsiveness. Hence, the responsiveness
here refers to “the ability of a hotel to provide speedy services and a variety of services
as well as the willingness to help customers within service delivery processes”. Thus,
in this definition, responsiveness represents the cumulative capabilities in terms of
multiple performance measures such as quality, speed (flexibility), and service. The
multidimensionality of the responsiveness assessment was also demonstrated in other
studies (e.g. Holweg, 2005; and Hoyt et al., 2007).

2.5 Framework of the study and hypotheses

Based on our literature review, we developed the research’s framework as shown in
Figure 1. As shown in this Figure, in general, we predicted that leadership practices (in
terms of leadership competency) and organizational culture would affect responsiveness
and eventually hotel performance (revenue change). The development of the hypotheses
of the study is discussed next.
2.5.1 Relationship between leadership and responsiveness. Past studies have found
that leadership practices are directly related to organizational performance
(e.g. Castanias and Helfat, 1991; Church, 1995; Coughlan and Harbison, 1998; Fahy,
2000; Heskett et al., 1994; Ozcelik et al., 2008; Prabhu et al., 2002). For example,
leadership in the service-profit chain anchors the chain success (Heskett et al., 1994),
while in the service management model, leadership is found to be the key driver for
excellence performance (Coughlan and Harbison, 1998; Prabhu et al., 2002). These
studies have found the significant role of leaders in achieving high performance. The
resource-based view also places an essential role of leaders in achieving competitive
advantage (Fahy, 2000). Furthermore, it has been found that good top management

Figure 1.
Framework of the study
IJCHM quality is a potential source of sustainable competitive advantage (Castanias and
Helfat, 1991) and for effective service (Armistead and Kiely, 2003). These studies,
22,4 however, only examined the link between leadership practices and organizational
performance. Thus, the link between leadership practices and responsiveness still
needs to be explored. This is because, for a firm to become a responsive competitor, it
requires a clear and an attractive vision from its leaders (Stalk and Hout, 1990). In other
506 words, leadership is important for responsiveness to occur. Other studies also suggest
a significant positive relationship between leadership and responsiveness (in terms of
quality, speed and flexibility) (e.g. Crocitto and Youssef, 2003; Crosby, 2002; Jabnoun
and Rasasi, 2005). Hence, based on the above findings, this study posits that:
H1. The leadership competency is positively related to the level of responsiveness.
2.5.2 Relationship between organizational culture and responsiveness. As pointed out
earlier, organizational culture practices refer to the shared values and beliefs that are
related to operational systems practiced by an organization. A prior research has found
a direct relationship between organizational factors and culture and organizational
performance (Coughlan and Harbison, 1998). Meanwhile, relationships between
organizational culture and responsiveness (in terms of quality, speed and flexibility)
are suggested by a variety of studies. Organizational culture is important for providing
consistency and flexibility in order to be responsive to customer demands (Crocitto and
Youssef, 2003). In order to be responsive and to achieve sustainable competitive
advantage, the culture of learning is found to be an important organizational capability
(Smith et al., 1996). Furthermore, for an organization to be effective, an organizational
culture that is compatible with client-orientation (responsiveness) is essential (Paulin
et al., 1999). More recent studies also suggest some relationship between organization
and culture and responsiveness. For example, Theoharakis and Hooley (2003) found
that the organizational resources such as commitment to learning and planning
flexibility are positively related to responsiveness. In another study, Kritchanchai
(2004) found that organizational structure would influence the responsiveness of firms.
Finally, a more recent study by Fang and Wang (2006) found a positive relationship
between organizational culture and operations performance such as quality and
flexibility. Thus, based on these findings, this study hypothesizes that:
H2. The organizational culture is positively related to the level of responsiveness.
2.5.3 Relationship between responsiveness and performance. As mentioned above,
responsiveness refers to the ability of an organization to respond to its customer needs
in terms of quality, speed, and flexibility. Stalk (1988) proposed that a responsive
organization would achieve competitive advantage in terms of business performance,
customer satisfaction, innovation, and financial performance. In relation to this,
responsiveness (in terms of quality) has been found to have positive associations with
costs, financial performance, customer satisfaction, and customer retention
(Sureshchandar et al., 2002). In addition, another study found that market-oriented
organizations achieved better performance in terms of sales growth (Gray et al., 2000).
More recent studies also uncovered positive relationships between responsiveness and
financial as well as non-financial performances (Chen et al., 2004; Kritchanchai, 2004;
Theoharakis and Hooley, 2003). Therefore, this study hypothesizes that:
H3. Responsiveness is positively related to performance (revenue).
3. Methodology Influence of
3.1 Survey instrument leadership
The factors investigated in this study were measured on a five-point Likert scale with
anchors ranging from strongly disagree (1) to strongly agree (5) for the independent competency
variables of leadership, organizational culture, and responsiveness (mediating
variable). The respondents were asked to rate their hotel’s current practices in
relation to leadership practices, organizational culture practices and level of 507
responsiveness. The eight factors used to measure leadership competency were
adapted from Chung-Herrera et al. (2003), while the organizational culture variable was
adapted from Coughlan and Harbison (1998). As for the dependent variable, hotel
revenue, the Likert-type scale with anchors ranging from decreased significantly (1) to
increased significantly (5) was also used. The respondents were asked to indicate the
changes in their hotel revenue over the past three years. The items used for assessing
revenue change were adapted from Evans (2005). Finally, our conceptualization and
operationalization of the responsiveness variable was based on studies by
Parasuraman et al. (1988) and Stalk and Hout (1990). Owing to the limitations of the
measurement of responsiveness in prior studies a new measurement scale called the
Responsiveness Index (RI) was designed for this study.
In designing the RI, we followed the guidelines suggested by Phillips and Moutinho
(1999). The responsiveness was assessed at each of the five service encounters (a point
where customers meet a service provider) which are common in the process of service
delivery in a hotel:
(1) before check-in;
(2) at check-in;
(3) after check-in;
(4) at check-out; and
(5) after check-out.

In order to assess the validity of the instrument, a within-scale factor analysis was
carried out separately for each encounter. The justification for this was that the five
encounters represent a process, hence they were distinct dimensions. Furthermore, if
factor analyses were done simultaneously for all the encounters, responsiveness could
not be assessed according to the process mentioned above. Besides that, this within
scale factor analysis also provided the convergent validity for responsiveness. The test
showed that all variables had Cronbach alphas that exceeded the cut-off point of 0.7
(Nunnally, 1978).
In assessing the level of responsiveness, the studies by Parasuraman et al. (1988)
and Stalk and Hout (1990) were used as the main guidance. The responsiveness
variable in this study was measured by three constructs, i.e. speed, variety, and
willingness. Then, responsiveness of the hotel was assessed according to the process
encountered by customers. This categorization of service encounters was offered by
Danaher and Mattsson (1994), i.e. the encounters at check-in, room, restaurant,
breakfast, and checkout. This study added two additional dimensions (before check-in
and after check-out) to depict the entire process of customer encounter. The
respondents were asked to rate their current hotel’s responsiveness on the scale of 1 to
5 (strongly disagree to strongly agree). The RI was developed from the data. Basically,
IJCHM the index was obtained through the assessment of 25 indicator variables (statements)
22,4 of responsiveness by the respondents at the five service encounters mentioned above.
Two main steps were involved in calculating the RI: calculating the weighting of each
of the items at each service encounter; and calculating the RI.The values obtained at
the five encounters were converted into a single index ranging from 0 (low
responsiveness) to 1 (high responsiveness). Detailed descriptions of how the RI is
508 calculated can be found in Razalli et al. (2007).

3.2 Data collection

A self-administered questionnaire was designed to collect the data needed for the
study. Before sending the questionnaires to hotels, a pilot test was conducted using
in-depth interviews with experts (managers) in hotel management and operations in
order to increase the content validity of the measurements in the questionnaire. The
feedbacks from the interviews were used to revise the final questionnaire before
sending it to the respondents.
The respondents of this study included all hotels in Malaysia that received a rating
(1 to 5 stars) from the Malaysian government. The list of these hotels was available in
the Accommodation Directory published by the Ministry of Tourism (Tourism
Malaysia, 2007). Customer service, number of employees, responsiveness, etc. will vary
between one-star and five-star hotels, but our purpose was to investigate these issues
for the whole of the hotel industry in the country rather than to examine their
differences in term of those issues. Future study can examine the differences in these
issues among the hotels of various ratings.
In addition, the questionnaires were sent in two waves of mailing in our efforts to
reach the minimum sample size requirement for this study. Questionnaires were sent to
senior managers of the hotels. For each hotel, only one top or senior Operations
Manager was asked to participate in the study. We surveyed only the senior managers
of the hotels because we believe that they are the ones who would be knowledgeable
about the subject matter being investigated. In the first wave, a total of 245 hotels were
randomly selected from the list provided by the Ministry of Tourism. Out of those 245
hotels, 52 (21 percent) hotels responded. This amount was not sufficient for further
analysis. Hence, a second wave of questionnaire mailing was carried out. In the second
wave, 229 questionnaires were distributed, and 41 of them were returned. However, out
of these 41, only 36 (16 percent) questionnaires were useful for further analysis. The
overall number of responses from the two waves of mailing was 88 hotels or 19 percent.
This amount was sufficient for analysis. Even though the response rate was low, the
number of responses used for analysis was similar or even better as compared to
previous research in operations strategies/practices such as those by Swink et al.
(2005) – 57 plants, Morita and Flynn (1997) – 46 plants, and Espino-Rodriguez and
Padron-Robaina (2004) – 50 hotels.
To test for non-response bias, the first and the second waves of returned
questionnaires were compared (Armstrong and Overton, 1977). The results of
independent t-test revealed that there was no statistical significant difference between
the first wave and the second wave in all the variables of the study.
The final sample consisted of 77.3 percent male and 22.7 percent female respondents
who were between 36 to 45 years old. All the respondents held a managerial position in
their hotels. In terms of the hotel profile, there were 6.8 percent one-star hotels, 14.8
percent two-star hotels, 31.8 percent three-star hotels, 26.1 percent four-star hotels, and Influence of
20.5 percent five-star hotels. Most of these hotels had more than 50 rooms and were leadership
located in city areas.
3.3 Validity and reliability
The current study assessed the content validity subjectively using the extensive
literature review and panel of experts in the hospitality industry. These experts 509
consisted of managers of hotels and academics who had experiences working in the
hotel industry. The second assessment was related to criterion related validity.
Criterion related validity refers to the extent to which the factors measured are related
to pre-specified criteria (Saraph et al., 1989). In this study, leadership and
organizational culture practices had a medium to large correlation value to hotel
revenue (r ¼ 0.50 and 0.42, p , 0.01) (Cohen, 1988). Hence, the variables of the study
exhibited the criterion related validity.
In addition, the exploratory factor analysis with Varimax rotation was used to assess
the construct validity of the research instrument. Exploratory principal factor analysis
also provides “ad hoc” evidence of convergent and discriminant validity (Davis et al.,
2002). The results of the factor analysis showed that two factors emerged for the
independent variables (leadership competency and organizational culture) and 1 factor
(hotel revenue) for the dependent variable. The hotel revenue included items that pertain
to total operating revenue, RevPAR, ROI, occupancy rate, labor productivity, market
growth, market share, and returning guest. What constituted the leadership competency
and the organizational culture variables have already been discussed above.
In the case of the mediating variable, responsiveness, we designed an index to
assess the level of hotel responsiveness. Since these encounters represent a process, a
within-scale factor analysis was carried out. The results of the reliability test are
shown in Table II. As can be noted in Table II all values exceeded the cut-off point of
0.7 (Nunnally, 1978). Also, as can be seen in Table II, all the Average Variance
Extracted (AVE) values obtained exceeded the minimum level of 0.50 (Fornell and
Larcker, 1981; cited in Kassim and Abdullah, 2008) demonstrating adequate
discriminant validity of the constructs.

3.4 Findings
The hypotheses of the structural equations model were tested using VisualPLS. This
particular tool was chosen to analyze SEM because of its applicability to our small
sample size (88 respondents).
The significance of the hypothesized relationships was determined by t-statistic. As
shown in Figure 2 and Table III, all relationships were found to be significant.
Specifically, H1, which tested the relationship between leadership competency and
responsiveness was found to be positively significant (b ¼ 0.47, p , 0.01). Furthermore,

Construct Composite reliability AVE

Table II.
Leadership competency 0.94 0.65 Composite reliability and
Organizational culture 0.90 0.69 average variance
Responsiveness 0.98 0.78 extracted (AVE) for the
Performance 0.87 0.54 model
IJCHM H2 that posited the positive relationship between organizational culture and
22,4 responsiveness was also found to be significant in the expected direction (b ¼ 0.23,
p , 0.10). Finally, the relationship between responsiveness and hotel revenue, H3, was
also found to be positively significant (b ¼ 0.56, p , 0.01). Following Cohen et al.’s
(2003) recommendations, standardized path coefficient (b) with an absolute value of less
than 0.10 may indicate a “small” effect; a value of around 0.30 a “medium” effect; and a
510 value of 0.50 or more a “large” effect. Thus, the influences of leadership competency on
responsiveness and responsiveness on performance can be considered as large whereas
the influence of culture on responsiveness can be considered as medium.

4. Discussion, implications, and conclusion

This study is about an investigation of the effects of the operational practices of the
hotels in terms of their leadership competency and organizational culture on their
responsiveness that would then lead to their performance improvement. In other
words, we argue that hotel performance in terms of its revenue can be improved
through operations practices of leadership competency and organizational culture. The
findings of this study would add further knowledge in the area of service operations
practices, especially in the “soft” issues (Fang and Wang, 2006) related to management
in the hotel industry. Specifically, we examined the relationships among the soft issues,
namely leadership competency and organizational culture practices, responsiveness,
and hotel revenue. In turn, using the structural equation modeling, we found that both
practices, i.e. leadership competency and organizational culture, have positive
relationships with responsiveness. In addition, we also found that responsiveness has a
positive relationship with hotel revenue. These findings imply that:
leadership competency and organizational culture practices are important
factors for hotels in order to be responsive to their customer needs; and
being responsive to customer needs would improve hotel revenue.

Figure 2.
A causal model of
leadership and
organizational culture
practices on
responsiveness and

Hypothesis b p-value

Table III. H1 0.47 , 0.001

Results of hypotheses H2 0.23 , 0.05
testing H3 0.56 , 0.001
More detailed interpretations of our finding are discussed next. Influence of
Based on the mean score obtained, hotel managers perceived that their organization leadership
have good leadership practices (M ¼ 4.18). In addition, the SEM analysis showed that
leadership competency is positively related to responsiveness. This finding is competency
consistent with the resource-based view and other studies that highlight the significant
role of leaders in achieving high performances (Castanias and Helfat, 1991; Coughlan
and Harbison, 1998; Fahy, 2000; Heskett et al., 1994; Prabhu et al., 2002). These 511
previous studies also found significant relationships between leadership practices and
performance. For example, Coughlan and Harbison (1998) found leadership practices to
be the key driver in achieving high performance. Their finding is also supported by
another study carried out by Prabhu et al. (2002) who found leadership as the key
enabler of business excellence in public sector organizations. Meanwhile, Heskett et al.
(1994) argue that leadership in the service profit chain anchors the chain success. In
relation to the resource-based view, this study support Castanias and Helfat’s (1991)
and Fahy’s (2000) contentions on the role of leaders in achieving competitive
advantage. This finding is also in concordance with previous researchers who have
also found significant role of leaders in achieving higher or excellent performances by
their organization (Crocitto and Youssef, 2003; Crosby, 2002; Jabnoun and Rasasi,
2005). In the context of this study, good leadership competency such as self-managing,
strategic positioning knowledge, critical thinking, communication skill, interpersonal
skill, leadership skill, and industry knowledge and experience would improve the level
of hotel’s responsiveness towards its customer needs. The main difference between this
study and the prior studies is that leadership is looked in the context of service
operations practices. We provide evidence that leadership competency would affect
cumulative capability or responsiveness of service firms.
Second, organizational culture reflects the extent of shared values such as listening,
giving rewards and recognitions, and caring for employees’ welfare. The mean score
showed that the hotels were practicing organizational culture that is conducive to their
employees’ work (M ¼ 4.23). Further, the finding shows that organizational culture is
positively related to the responsiveness of the service firms. This particular finding
supports prior studies which found the relationship between organizational culture
and operations practices (Crocitto and Youssef, 2003; Fang and Wang, 2006; Paulin
et al., 1999; Smith et al., 1996; Theoharakis and Hooley, 2003). Similarly, the main
difference between this study and the prior studies is that we have viewed
organizational culture in the context of operations practices. Our finding implies that
organizational culture practices such as listening to staff, giving reward and
recognition for their performance, and taking care of their welfare would lead to
positive effect on the ability of a hotel to be responsive toward their customers.
Finally, we found that the ability of hotels to be responsive to their customer needs
would improve their revenue. In other words, by providing customers with speedy
services, variety of services, and having employees with good attitudes would enhance
hotel revenue. This result supports the proposition that responsive organizations
would achieve competitive advantage in their organizational performance (Stalk and
Hout, 1990). Additionally, the finding provides additional support for studies related to
responsiveness and organizational performance (Chen et al., 2004; Kritchanchai, 2004;
Sureshchandar et al., 2002; Theoharakis and Hooley, 2003). Other main differences
between this study and the prior research are in terms of the methodology used to
IJCHM assess responsiveness and the conceptualization of responsiveness as a cumulative
22,4 capability.
Based on our results, a number of practical and managerial implications can be
derived. First, in order to improve their hotel’s responsiveness to their customer needs,
hotels managers need to possess good leadership competency by upgrading their skills
and knowledge in terms of self-managing, strategic positioning, implementation,
512 critical thinking, communication, interpersonal relationship, and being well-versed
with the industry. Second, in order to improve their hotel’s responsiveness to their
customer needs, hotels managers also need to instill an organizational culture that is
conducive to listening to their staff, giving rewards and recognition for their
performance and caring for their welfare. Last but not least, with their ability to
increase the hotels’ responsiveness via these two operational practices the managers
can expect the revenue of their hotel to improve.
This study examined two types of operations practices – leadership competency
and organizational culture – that could affect organizational performance. Future
research should attempt to examine other operations practices or strategies that may
affect responsiveness.
In conclusion, after being inspired by Fang and Wang’s (2006) study, we have
investigated the effect of “soft issues” such as leadership competency and
organizational culture on operations practices and organizational performance in
service companies. Additionally, we have also viewed operations practices in terms of
cumulative capability (responsiveness) as suggested by Flynn and Flynn (2004). The
results support all the hypotheses and confirm the impact of leadership practices and
organizational culture on responsiveness and eventually on performance. In other
words, these findings imply that performance of service companies not only depend on
structural issues but also on soft or infrastructural issues such as leadership
competency and organizational culture. However, these findings must be further tested
due to some limitations of our study such as its cross-sectional nature, the use of
perceptual measures, and the low response rate. Another weakness of this study is our
use of a single measure with a purely subjective perception, i.e. increase or decrease in
revenue rather than multiple measures to assess hotel performance. It is hoped that
future research could overcome these limitations so that a better generalization could
me made. Despite these limitations, this study offers new knowledge to researchers and
practitioners regarding the effect of leadership behaviors and organizational culture on
operations practices and on overall organizational performance of service firms.

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