IRJC

International Journal of Social Science & Interdisciplinary Research

Vol.1 Issue 8, August 2012, ISSN 2277 3630

IMPACT OF JOB SATISFACTION AND ORGANIZATIONAL

COMMITMENT ON EMPLOYEE LOYALTY

MS. CHETNA PANDEY*; MRS. RAJNI KHARE**

*Assistant Professor,
Aditya College,
Gwalior.
**Assistant Professor,
BVM College of Management Education,
Gwalior.

ABSTRACT

Employee loyalty can be defined as employees being committed to the success of the
organization and believing that working for this organization is their best option. The aim of the
study was to find the impact of job satisfaction and organizational commitment on employee
loyalty. This study also finds out the relationship between job satisfaction and organizational
commitment. Further the study will also find the comparison of employee loyalty in
manufacturing and service industry. At last the factors affecting employee loyalty was also
determined. To achieve the aim of the study questionnaire survey was used. The results show
that there is an impact of job satisfaction and organizational commitment on employee loyalty.

KEYWORDS: Job Satisfaction, Organizational Commitment, Employee Loyalty.

______________________________________________________________________________

INTRODUCTION

Employees are a vital resource for nearly all organizations, especially since they represent a
significant investment in terms of locating, recruiting, and training let alone salaries, healthcare
plans, bonuses, etc. The management of many organizations develops their training programmes,
benefit packages, performance appraisal and work system based on their company policy.
Usually these policies are aimed at developing loyal employees because this leads to a more

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lengthy tenure. The longer an employee works for a company the more valuable they become.

DEFINITIONS

EMPLOYEE LOYALTY

"Loyalty, as a general term, signifies a person's devotion or sentiment of attachment to a

particular object, which may be another person or group of persons, an ideal, a duty, or a cause.
It expresses itself in both thought and action and strives for the identification of the interests of
the loyal person with those of the object" (Encyclopedia Britannica, 1998).

Employee loyalty (typically synonymous with commitment) to the organization has sometimes
been viewed as an attitude. However, it is not so much an attitude (or thought component) that is
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important in organizations, but rather it is the bottom-line action component (Meyer & Allen,
1991). Employee loyalty is the willingness to remain with the organization (Solomon, 1992).
Employee loyalty can be defined as employees being committed to the success of the
organization and believing that working for this organization is their best option. Not only do
they plan to remain with the organization, but they do not actively search for alternative
employment and are not responsive to offers (The Loyalty Research Center, 1990). Employee
loyalty is an organizational citizenship behavior that reflects the allegiance to the organization to
the promotion of its interests and image to the outsiders. (Bentten Court, Gwinner and Meuter,
2001). Employee loyalty is a manifestation of organizational commitment, the relative strength
of an individual‟s identification with and involvement in a particular organization (Mowday,
Porter and Steers 1982), Based on internalization and identification (O‟Reilly and Chatman
1986). This behavior‟s can be characterized by three related factors. They are strong belief and
acceptance of the organization‟s goals and values, a willingness to exert considerable effort on
behalf of the organization and a strong desire to maintain membership in the organization.
(Mowday, Porter and Steers 1979)

JOB SATISFACTION

Job satisfaction is a term used to describe how content an individual is with their job. It is a
relatively recent term since in previous centuries the jobs available to a particular person were
often predetermined by their parent‟s occupation.

Job Satisfaction also refers to the employee‟s general attitude towards his job. It refers to the
contentment experience by an employee when his wants are satisfied. Job satisfaction is defined
as positive affect of employees towards their job or job situations (Locke, 1976). Job satisfaction
is considered as the most important and frequently studied attitude in the field of Organizational
Behavior (Mitchel & Larsel Hoppock (1935) stated that job satisfaction is “any combinations of
psychological, physiological and environmental circumstances that cause a person truthfully say
„I am satisfied with my job‟. The term job satisfaction can be defined as a positive feeling about
one‟s job (Robbins, 2007) Job satisfaction is a set of favorable or unfavorable feelings and
emotions with which employees‟ view their work (Newstrom, 2007). Consequently they
advocated reform of management practices to reflect a humanistic concern for employees and to
enhance employee work satisfaction. Job satisfaction was subsequently linked to increases in

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productivity, though the nature of causality has continued to be strongly debated (Katzell et al.,
1975).

ORGANIZATIONAL COMMITMENT

Meyer and Allen (1994) state that organizational commitment is “a psychological state that a)
characterizes the employee‟s relationships with the organization, and b) has implications for the
decision to continue membership in the organization” “Organizational Commitment is typically
measured by items tapping respondents‟ willingness to work hard to improve their companies,
the fit between the firm‟s and the worker‟s values, reluctance to leave, and loyalty toward or
pride taken in working for their employers” (Maume, 2006). The concept of organizational
commitment has attracted considerable interest in an attempt to understand and clarify the
intensity and stability of an employee‟s dedication to the organization (Mester, Visser, Roodt &
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Kellerman, 2003) Allen & Meyer (1990), defined organizational commitment as “psychological
state that binds the individual to the organization (i.e. makes turnover less likely).

According to Northcraft and Neale (1996), commitment is an attitude reflecting an employee‟s

loyalty to the organization, and an ongoing process through which organization members express
their concern for the organization and its continued success and well being. Organisational
commitment is “the degree to which an employee identifies with a particular organisation and its
goals, and wishes to maintain membership in the organisation” (Robbins, 1998, p. 142). Bateman
and Strasser (1984) states organizational commitment as “multidimensional in nature, involving
an employee‟s loyalty to the organization, willingness to exert effort on behalf of the
organization, degree of goal and value congruency with the organization, and desire to maintain
membership” (p.95).

REVIEW OF LITERATURE

EMPLOYEE LOYALTY

Many researchers conducted research on employee loyalty in western context showed relation
between the various antecedents of employee loyalty Walker (2005) found that satisfied
employees will become loyal when they perceive their organization as offering the opportunities
to learn, grow and at the same time providing a clear established career path that they can pursue
in the organization. He also found that training and development to be one of the biggest factors
that lead to employee loyalty. According to the report, employees want the opportunity to grow,
and they want career path and opportunities that allow them to advance within the company. This
study found that the benefits package correlated with employee loyalty measures. Benefits
package take into account factors such as, the amount of vacation, sick leave policy, amount of
health care paid for by the organization. Florkowsi and Schuster, (1993), found a positive
relationship between profit sharing and job satisfaction and commitment. Meyer and Allen
(1997) recognize that in order for there to be continuance commitment between the employee
and organization, the employee must be able identify alternatives. This was supported Carlson
(2005), who concluded that in order for the employees to be committed, which is a broad
definition of loyalty, they look forward to the opportunities of continuous learning in order to
improve their skills and knowledge. Fosam et al (1998) suggested strongest correlation between
employee satisfaction and employee loyalty in their study comes from the following satisfaction
variables, namely, recognition and rewards, teamwork and cooperation, working conditions and www.indianresearchjournals.com
relationship with supervisor. The score for relationship with supervisor strongly correlates with
all three dimensions of employee loyalty. Taylor (1979) identified the essential components of
quality of work life as basic extrinsic job factors of wages, hours and working conditions, and the
intrinsic job notions of the nature of work itself which results in employee loyalty. Jawahar
(2006), found that Performance appraisal played a role in the relationship between employee
satisfaction and employee loyalty in this study. Performance appraisal is an important element of
satisfaction because it is positively related to job satisfaction, organizational commitment and
negatively related to turnover intentions. Job satisfaction and organizational commitment fall
into a broader definition of loyalty.
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JOB SATISFACTION AND ORGANIZATIONAL COMMITMENT

There are numerous investigations that have studied the relationship between organizational
commitment and job satisfaction (Currivan, 1999). Predominant view is that job satisfaction is
an antecedent to organizational commitmen (Lincoln & Kalleberg, 1990; Mowday; Porter, &
Steers, 1982; Mueller, Boyer, Price, & Iverson, 1994; Williams & Hazer, 1986). There is also
some support for the reverse causal ordering, organizational commitment as an antecedent to job
satisfaction (Vandenberg & Lance, 1992). LaLopa (1997) effectively used the Organizational
Commitment Questionnaire to evaluate 300 non-supervisory resort employees' levels of
commitment. Further, LaLopa developed a "Resort Job Satisfaction" scale by adopting items
from previous studies. Findings provide further evidence that job satisfaction is a significant
predictor of organizational commitment. Many studies use different facets of satisfaction to
predict employee attributes such as performance, organizational commitment, and service quality
(Dienhart & Gregoire, 1993; Oshagbemi, 2000a, 2000b; Yousef, 1998). It‟s a debatable issue
whether job satisfaction is the predictor of organizational commitment or vice versa. Several
researchers have made the case that job satisfaction is a predictor of organizational commitment
(Porter, Steers, Mowday, & Boulian, 1974; Price, 1977; Rose, 1991). Andrew Hale Feinstein did
a study on the relationships between job satisfaction and organizational commitment of
employees at two locations of a national restaurant chain in Southern Nevada. They also worked
on revealing homogeneous demographic characteristics these employees exhibit that affect their
satisfaction level. Research was conducted through a survey instrument consisting of
demographic, job-satisfaction, and organizational commitment questions adopted from the
validated Minnesota Job Satisfaction and Organizational Commitment Questionnaires. Results of
the study indicate satisfaction with policies; compensation, work conditions, and advancement
have a significant relationship to organizational commitment. Slattery & Selvarajan (2005)
examined the associations between job satisfaction, organizational commitment, and turnover
intention among temporary employees. The results, based on structural equation modeling,
provide support for nearly all of the hypothesized associations in the model. They found positive
associations between job satisfaction and organization commitment.

JOB SATISFACTION, ORGANIZATIONAL COMMITMENT AND EMPLOYEE

LOYALTY

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The following review shows the relationship between job satisfaction, organizational
commitment and employee loyalty. Abdullah et al (2009) in their study among the service
employees found that increase of employee satisfaction could actually result in increased in
employee participation and has the potential of making both the employee and employer equally
loyal to the company. Basically employee satisfaction is dependent on benefits package, training
and development, relationship with supervisor, working conditions, teamwork and cooperation,
recognition and rewards, empowerment and communication. Whereas, employee loyalty is a
result of the satisfaction that stems from satisfaction variables such as, recognition and rewards,
working conditions, teamwork and cooperation, and relationship with supervisor. Price 1977 and
Mobley et al. (1979) stated that, employees with a low job satisfaction level have a high
likelihood to quit their job. This is supported by Shaw (1999) study which looks at the
relationships between job satisfaction and the inclination to quit. The study found that there is a
high inclination for an individual to quit job if his or her level of job satisfaction is low.
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Additionally, employees in such a situation are also likely to be absent from work (MacShane et
al. 1984, Hackett and Guinon 1985, Scot and Taylor 1985). Jawahar (2006) found that
Performance appraisal played a role in the relationship between employee satisfaction and
employee loyalty in this study. Performance appraisal is an important element of satisfaction
because it is positively related to job satisfaction, organizational commitment and negatively
related to turnover intentions. Job satisfaction and organizational commitment fall into a broader
definition of loyalty. Walker (2005) also found that satisfied employees will become loyal when
they perceive their organization as offering the opportunities to learn, grow and at the same time
providing a clear established career path that they can pursue in the organization. Aizzat et al
(2003), found that organizational commitment has a direct relationship with employees‟
satisfaction level towards pay, promotion system, work, supervision and co-workers. The study
concludes that promotion system is the most important factor influencing an employee‟s
commitment level. Donna (1996), found a significant positive correlation between each of the
employee loyalty, and the three follower outcome variables, both job satisfaction and
organizational commitment. Landsman‟s (2001), found that in a multivariate causal model, a
relatively small number of key variables affect job satisfaction and commitment. Specifically,
commitment was enhanced by three factors: stronger perceived support from both the supervisor
and the agency; opportunities for advancement.

RESEARCH METHODOLOGY

OBJECTIVES

To develop standardize and measures to evaluate job satisfaction, organizational

commitment and employee loyalty.

To study the impact of job satisfaction and organizational commitment on employee

loyalty in manufacturing and service industry.

To study the difference between employee loyalty in manufacturing and service industry.

To study the relationship between job satisfaction and organizational commitment.

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To find out the factors affecting loyalty of employees.

To identify new areas for further research

HYPOTHESIS FRAMED

Ho(1): There is no impact job satisfaction and organizational commitment employee loyalty in
manufacturing industry.

Ho(2): There is no impact job satisfaction and organizational commitment employee loyalty in
service industry.
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Ho(3): There is no significant difference between loyalty in manufacturing and service

organization

Ho(4):There is no significant relationship between job satisfaction and organizational

commitment.

RESEARCH METHODOLOGY

The research is based on primary data. Data was collected through self-designed questionnaire,
administered to the teams of employees manufacturing and service industry of Gwalior Region
to generate views on job satisfaction, organizational commitment and employee loyalty. The
questionnaires on 5-point (Likert) scale were prepared to evaluate job satisfaction, organizational
commitment and employee loyalty consisting 31, 14 and 19 items respectively. In this study,
Judgmental (non probability) sampling technique was used. A sample of 200 employees was
selected for the purpose of this study, which included 100 employees of both manufacturing and
service industry respectively.

In this study, statistical tools such as item to total correlation to establish the internal consistency
of the questionnaire, Cronbach‟s alpha to check reliability and Regression Analysis to find out
the effect of job satisfaction and organizational commitment (independent variable) on employee
loyalty (dependent variable) and correlation analysis was used to find out relationship between
job satisfaction and organizational commitment were applied. Further T-test was applied to make
comparison between loyalty of employees in manufacturing and service employees. At last
factor analysis was to find out the factors affecting employee loyalty.

RESULTS

After studying the data of 200 employees by applying the statistical tools following results were
found:

CONSISTENCY MEASURE

Consistency of all the factors in the questionnaire was checked through item to total correlation.
In this correlation of every item with the total was measured and the computed value was

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compared with standard value of (0.137). Only those factors/statements were accepted whose
value was more than the standard value.

RELIABILITY MEASURE

JOB SATISFACTION: Reliability of the measure was tested using SPSS software and the
Cronbach‟s Alpha value was found to be 0.951 and the Split half value was found to be 0.894.
The face validity was checked and found to be high.
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ORGANIZATIONAL COMMITMENT

Reliability of the measure was tested using SPSS software and the Cronbach‟s Alpha value was
found to be 0.891 and the Split half value was found to be 0.886. The face validity was checked
and found to be high.

EMPLOYEE LOYALTY: Reliability of the measure was tested using SPSS software and the
Cronbach‟s Alpha value was found to be 0.836 and the Split half value was found to be 0.755.
The face validity was checked and found to be high.

Ho(1): There is no impact job satisfaction and organizational commitment employee loyalty in
manufacturing industry.

JOB
SATISFACTION
(Manufacturing)
EMPLOYEE
LOYALTY
(Manufacturing)
ORGANISATIONAL
COMMITMENT
(Manufacturing)

TABLE 1: SHOWING REGRESSION COEFFICIENT VALUES

Unstandardized Standardized
Coefficients Coefficients

Model B Std. Error Beta t Sig.

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1 (Constant) 26.788 4.222 6.345 .000

Job sat .279 .077 .567 3.637 .000

Orga.
.131 .155 .132 .844 .401
comm
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A. DEPENDENT VARIABLE: EMPLOYEE LOYALTY

Regression analysis was applied between Job satisfaction, organizational commitment

(independent variables) and Employee Loyalty (dependent variable) in manufacturing
organizations. The results of regression indicate that independent variables (Job Satisfaction and
Organizational Commitment) has significant relationship with dependent variable (employee
loyalty) signified by the coefficient of Beta factor of job satisfaction is 0.567 and T value is
3.367 is significant at 0.0 significant level hence it can be said that job satisfaction is having
significant impact on employee loyalty. The other independent variable organizational
commitment is having beta coefficient of beta factor 0.132 and T value 0.844 the significance
level of this value is 0.401 which again signifies impact of organizational commitment on
employee loyalty.

The null hypothesis that there is no significant impact of job satisfaction and organizational
commitment on employee loyalty is not accepted which means that there is significant impact of
job satisfaction and organizational commitment on employee loyalty in manufacturing industry.

Ho(2): There is no impact job satisfaction and organizational commitment employee loyalty in
service industry

JOB
SATISFACTION
(Service) EMPLOYEE
LOYALTY
(Service)

ORGANISATIONAL
COMMITMENT
(Service)

TABLE 2: SHOWING REGRESSION COEFFICIENT VALUES

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Unstandardized Standardized
Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) 23.313 4.497 5.184 .000

Jobsat .367 .043 .731 8.426 .000

Orga comm .053 .108 .043 .492 .624

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International Journal of Social Science & Interdisciplinary Research
Vol.1 Issue 8, August 2012, ISSN 2277 3630

A. DEPENDENT VARIABLE: EMPLOYEE LOYALTY

Regression analysis was applied between Job satisfaction, organizational commitment

(independent variables) and Employee Loyalty (dependent variable) in manufacturing
organizations. The results of regression indicate that independent variables (Job Satisfaction and
Organizational Commitment) has significant relationship with dependent variable (employee
loyalty) signified by the coefficient of Beta factor of job satisfaction is 0.731 and T value is
8.426 is significant at 0.0 significant level hence it can be said that job satisfaction is having
significant impact on employee loyalty. The other independent variable organizational
commitment is having beta coefficient of beta factor 0.43 and T value 0.492 the significance
level of this value is 0.624 which again signifies no impact of organizational commitment on
employee loyalty.

The null hypothesis that there is no significant impact of job satisfaction on employee loyalty is
not accepted which means that there is significant impact of job satisfaction and on employee
loyalty on service industry and the hypothesis stating that there is no impact of organizational
commitment on employee loyalty is accepted. This shows that employee loyalty is not affected
by organizational commitment in service industry.

Ho(3): There is no significant difference between employee loyalty in manufacturing and service
organization

TABLE 3: SHOWING INDEPENDENT SAMPLES TEST VALUES

Levene's
Test for
Equality
of
Variances t-test for Equality of Means

95% Confidence

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Interval of the
Sig. (2- Std. Difference
taile Mean Error
F Sig. t df d) Difference Difference Lower Upper

VAR00001 Equal
-
variances .738 .391 198 .995 -.01000 1.51767 -3.00287 2.98287
.007
assumed
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TABLE 3: SHOWING INDEPENDENT SAMPLES TEST VALUES

Levene's
Test for
Equality
of
Variances t-test for Equality of Means

95% Confidence
Interval of the
Sig. (2- Std. Difference
taile Mean Error
F Sig. t df d) Difference Difference Lower Upper

VAR00001 Equal
-
variances .738 .391 198 .995 -.01000 1.51767 -3.00287 2.98287
.007
assumed

Equal
variances -
197.979 .995 -.01000 1.51767 -3.00287 2.98287
not .007
assumed

The Levene‟s test value 0.738 at 0.391% significance level shows that the two samples are
having unequal variance and the T value -0.020 at 0.995% significant level suggest that the null
hypothesis that there is no significant difference between employee loyalty in manufacturing and
service organizations is not accepted. This means that the employee loyalty differs in
manufacturing and service organizations.

Ho(4):There is no significant relationship between job satisfaction and organizational

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commitment.

To determine strength of linear relationship between variables correlation coefficients are

calculated. These correlation analyses were interpreted on the scale offered by Guilford (1956)
(i) r< 0.20 indicates slight, almost negligible relationship (ii) r= 0.20 to 0.40 indicates low
correlation, definite but small relationship (iii) r= 0.40 to 0.70 indicates moderate correlation,
substantial relationship (iv) r= 0.70 to 0.90 shows high correlation and (v) r> 0.90 is indicative of
very high correlation, very dependable relationship
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JOB SATISFACTION ORGANISATIONAL

COMMITMENT

TABLE 4: SHOWING CORRELATIONS COEFFICIENT VALUES

Job Satisfaction Organizational Commitment

JS Pearson Correlation 1 .771**

Sig. (2-tailed) .000

N 200 200

OC Pearson Correlation .771** 1

Sig. (2-tailed) .000

N 200 200

**. Correlation is significant at the 0.01 level (2-tailed).

The correlation between job satisfaction and organizational commitment is r=0.771 which shows
that there is high relationship between job satisfaction and organizational commitment as per
Guilford (1956) which suggests that the null hypothesis that there is no relationship between job
satisfaction and organizational commitment is not accepted, suggesting that there is a
relationship between jobs satisfaction and organizational commitment in both manufacturing and
service organization.

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FACTOR ANALYSIS: The raw scores of 19 items were subjected to factor analysis to find out
the factors that contributed towards Employee Loyalty. After factor analysis, four factors are
identified. The factors were commitment, motivation, belongingness and career development.

1. COMMITMENT (5.364): This factor has emerged as the most important determinant of
employee loyalty with 28.2295% of variance. The major elements constituting this factor
include; speak positively about the company (0.799), if got a offer would not change
organization (0.739), enjoy discussing my organization to others (0.719), will work indefinitely
(0.705), emotional attachment (0.678), organization is of great personal meaning (0.527).

2. MOTIVATION (2.225): This factor has emerged as an important determinant of employee

loyalty with 11.180% of variance. The major elements constituting this factor include; growing
with this company (0.694), Recommend Company to friend (0.656.), recommends my employer
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to other employees (0.630), clearly defined roles and responsibility (0.506), part of the
organization (0.538).

3. BELONGINGNESS (1.382): This factor has emerged as an important determinant of

employee loyalty with 7.274% of variance. The major elements constituting this factor includes;
organizational problems are my own (0.713), strong belonging to my organization (0.628), loyal
to my organization (0.552), committed to company‟s success (0.516).

4. CAREER DEVELOPMENT (1.322): This factor has emerged as an important determinant

of employee loyalty with 6.957% of variance. The major elements constituting this factor
includes; take pride in my work (0.668), fulfill my career goals (0.663), look ways to improve
my organizational efficiency (0.649), would stay with company in the future (0.513).

CONCLUSION

The objectives of the study were to find out the impact of job satisfaction and organizational
commitment on employee loyalty in manufacturing and service industry, to compare between the
loyalty of employees in manufacturing and service industry, to study the relationship between
job satisfaction and organizational commitment and to explore the underlying factors affecting
employee loyalty. The findings of the research conclude that there is a significant impact of job
satisfaction and organizational commitment on employee loyalty in manufacturing industry and
in case of service industry job satisfaction has an impact on employee loyalty but organizational
commitment has no impact on employee loyalty. Also there is significant difference in loyalty
exist between the employees of manufacturing and service industry. Further there is a
relationship between job satisfaction and organization commitment. At last the underlying
factors of loyalty emerged from this study are commitment, motivation, belongingness and
career development

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ANN EXURES

TABLE 1: SHOWING RESULTS OF FACTOR ANALYSIS OF EMPLOYEE

LOYALTY

Factor Eigen value Variable/ Convergence Statement Loadings

Total %
variance

15. I speak positively about the company to .799

friends

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17. would not change company if got a offer .734
5.364 28.229
14. I enjoy discussing my organization to .719
Commitment others

19. I will work for this company indefinitely .705

9. I am not emotionally attached to company .678

11. organization is of great personal

meaning to me .527
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IRJC
International Journal of Social Science & Interdisciplinary Research
Vol.1 Issue 8, August 2012, ISSN 2277 3630

3. in 5 years I‟ll still be growing with this .694

company

4. I would recommend this company to .656

2.125 11.186 friend

Motivation 8. I‟ll recommend my employer to other .630

employees

6. Clear definition of roles and responsibility .506

13. I am part of family at this organization .463

12. organization‟s problems are my own .713

10. strong belonging to my organization .628

1.382 7.274
Belongingness 18. I am loyal to my organization .552

1. I am committed to company‟s success .524

5. I take pride in my work .668

Career 2. I can further fulfill my career goals .663

Development
1.322 6.957 7. look ways to improve organizational .649
efficiency

16. like to stay with this company in the .510

future

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