Researching about factors affact employee organization commitment at imexpharm company

Nguyen Thi Thanh Binh Page 1 of 71ABSTRACT Employee loyalty can be defined as employees being committed to the success of the organization and believing that working for this organizati

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Advisor’s Assessment

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Advisor’s signature

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Thanks to the board of managers and all employees of Imexpharm company for their precious comments and helps to collect data for this thesis

Thanks to the encouragement and support from family and close friends to help on their studies I wish to give my sincerest and deepest gratitude to them

With kindest regards, HCMC, March 2015

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CONTENTS

ABSTRACT 1

CHAPTER 1: INTRODUCTION 2

Imexpharm company introduction 2

Research problem statement 9

Research objective 10

Research scope 11

Limitations of the study 11

The Structure of the paper 12

CHAPTER 2: LITERATURE REVIEW 13

Definition of Constructs 13

Theory of organizational commitment 24

Hypothesis 32

Research model 33

CHAPTER 3: METHODOLOGY 33

Research design 33

Sample 33

Measures 34

Data Analysis 40

CHAPTER 4: RESULTS 41

Reliability statistic 41

Descriptive statistic 43

Correlation statistic 44

Hypotheses Testing Results 45

CHAPTER 5: DISCUSSION 49

CHAPTER 6: RECOMMENDATION 53

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Limitations of data collection approach 53

Future research directions 54

Implications for practitioners 55

REFERENCES 57

Appendix 1: Survey Questionnaires 60

Appendix 2: Presentation Slides 65

LIST OF TABLE Table 1: Time table for data collection progress 34

Table 2: Overall job satisfaction Scale 35

Table 3: Job over load Scale 35

Table 4: Job stress scale Scale 36

Table 5: Fairness in Skill-Based Pay Scale 37

Table 6: Person environment fit Scale 38

Table 7: Organizational commitment Scale 39

Table 8: Cronbach‟s Alpha - Internal Consistency 41

Table 9: Descriptive statistics 44

Table 10: Correlations 45

Table 11: Model Summary 46

Table 12: Coefficients 46

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LIST OF FIGURE

Figure 1: Imexpharm Head Office 3Figure 2: A four component model adapted from Cohen 2007 28Figure 3: Modified from Cohen‟s (2007) model of the development of organizational commitment 30Figure 4: Research model of organizational commitment 33

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Nguyen Thi Thanh Binh Page 1 of 71

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 organizational commitment on employee loyalty in Imexpharm company This study also finds out the relationship between overall job satisfaction (OJS) , job over load (JOL), job stress scale (JSS), fairness in skill-based pay (FSB) , person environment fit on employee organazition commitment (OC) in Imexpharm company Practical data were collected from 400 employees out

of 1,012 employees in the Imexpharm company by means of a questionnaire Statistical techniques such as descriptive statistics, correlation and linear regression were employed At last, the factors affecting employee organazition commitment was also determined The results of the study indicated a positive significant relationship between overall job satisfaction (OJS), fairness in skill-based pay (FSB) , person environment fit and employee organazition commitment Empirical results also indicated that the job over load (JOL) and job stress scale (JSS) were having negatively impact on employee organazition commitment I hope results of this research will help the CEO; managers of Imexpharm have some reference angle in human resource management to improve and increase our quality resource based on employee organazition commitment

Key words: overall job satisfaction (OJS) , job over load (JOL), job stress scale (JSS), fairness in skill-based pay (FSB) , person environment fit, employee organazition commitment (OC), Imexpharm

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CHAPTER 1: INTRODUCTION Imexpharm company introduction

Imexpharm Pharmaceutical Joint Stock Company is a leading pharmaceutical firm in Vietnam with its prestigious trade name and product quality meet national and regional standards The Company has specialized in pharmaceutical chemistry products and has been famous for its antibiotic groups of a new generation, which have found remarkable appreciation by experts As a pioneering venture over the past 30 years, continuous improvement and necessary changes have been made Up to now, Imexpharm is proud of being a firm which has created a sustainable development trend for local pharmaceutical industries Imexpharm is the first pharmaceutical firm in Vietnam, exporting to leading pharmaceutical groups in Europe such as Sandoz (Austria), Sanofi – Aventis; DP Pharma (France) and many others In 2008, the Company signed a contract on a production joint venture with PharmaScience – Canada Up to now, cooperation agreements on production have been carried out for

130 products From which 92 products come with registration number and 86 products were launched onto the market

The main business activities of Imexpharm are producing and trading pharmaceutical products, and importing and purchasing the packaging materials to serve the production

As of 31/12/2015, Imexpharm had a total of 1,012 employees Female labor accounted

by 39% due to specific characteristics of production that need more male labor to perform heavy work

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Figure 1: Imexpharm Head Office

Key product groups of Imexpharm:

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Market capitalization 289,426,460, 000 VND

Stock exchange HOSE (Ho Chi Minh Stock Exchange, Vietnam)

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GMP-2007:

Successfully demonstrated "bioequivalence" of Imeclor antibiotics 125 mg (containing Cefaclor) The charter capital was increased to VND 116,598,200,000 from the payment of dividends and issuing more dividends

2008:

Imexpharm signed the joint venture production contract with Pharma Science - Canada Both parties have agreed on the co-production of 113 products, including 102 with registration codes and 68 marketed products

2009:

Completed major restructuring of the entire organization in order to improve management efficiency, to meet expanding demand, and to relocate and reorganize factories for production in accordance with the strict requirements of big manufacturing partners

2010:

Cephalosporin factory at the industrial park Vietnam - Singapore II in Binh Duong was officially put into operation in September, 2010 with a total investment of 113

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billion This factory applies European technologies and standards to produce oral and injectable powder drugs - a new generation of cephalosporin

2011:

December 2011: Established Binh Tan Sales Branch in HCMC to implement direct distribution of Imexpharm in HCMC area without intermediary distributors

2012:

August 2012: SAP-ERP Project Imexpharm became the first pharmaceutical company

to deploy ERP projects across all 8 modules: Sales Distribution (SD), Purchasing and warehouse management (MM), Financial Accounting (FI), Managerial accounting(CO), Production Management (PP), Quality Management (QM), intelligence management report (BI), and Operating Report(BO)

2013:

2013 marked many important events of Imexpharm: the completion and opening of the Corporate Head Office Building; successful deployment of SAP-ERP Project; In particular, 2013 also marked a new step in the improvement of Imexpharm production

by using materials produced with fermentation technology (Enzymatic) of DSP Group

- Spain in the famous Imexpharm antibiotic product lines such as pms-CLAMINAT, pms-PHARMOX, pms-OPXIL and pms-IMEDROXIL

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Organization Structure:

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HR policies

Imexpharm always seeks a competitive salary policy and remuneration regimes for employees and their dependents, work and career development policies that make each employee feel appreciated in a friendly, open and cooperative working environment Imexpharm‟s labor policy also encourages employees to work hard, creating new values through innovation and work improvement

Salary, bonus and welfare policy ƒ

Transparent and full implementation of HR policies such as salary, bonus, allowance ; Social Insurance, Health Insurance, Personal Accident Insurance, and Labor Contract for all employees ƒ Sick and maternity leave are paid by Social Insurance ƒ Annual medical checks, fitted work uniforms

The Company‟s Salary ensures a basic living standards for employees with periodical wage raise, appropiate to each position, sales, production or office Implementing the Government‟s Decree of January 2016 on regional minimum wage adjustment, Imexpharm has raised wages for all employees with the total amount of 200 million VND per month ƒ On the occasion of national holidays, New Year , the Company also has an incentive policy rewarding employees from a half to one month„s salary, while organizing together with the Unions music programs, sports events … to ensure not only the material but also the spiritual life for the employees In addition, the Annual Review Celebration with various programs such as folk games, singing contests also created a joyful atmosphere for all ƒ In 2015, 37 employees were awarded with Commemorative medals in recognition of their 10 years of contributions Average Income of Employees in 2015 was VND 10,800,000/ person/ month

Enhancing employees‘ proficiency

2015 was the year of HR aiming to create more changes in HR quality through promoting actions and proofs of concrete results and figures, improving the ability of

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executing plans and solving problems The 11 BSC projects have brought the team together to achieve the strategic goals of the Company Imexpharm also focused on building new salary and bonus plans orienting towards 3Ps and based on BSC, building

an internal team of experts and a title dictionary for middle management staff, while preparing human resources for the future

In addition, the Company also carried out many other professional training programs for employees with a total of over 13,500 training hours in 2015 Besides, the Company also funded staff training programs to improve employees‟ skills and qualifications according to their work requirements

Research problem statement

Today, in the harsh conditions of the market, competition for human resources has always been a burning issue in the enterprise Many businesses have recognized the importance of human resources; they are the assets and the lifeblood of the organization An economic organization may have modern technology, good service quality, and robust infrastructure but without workforce working effectively, such organizations can hardly long survive and create competitive advantage How to exploit this resources to cater for the development of the organization as well as make

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the most of this resources for social development is a matter of urgency, set out to bring to the managers general and human resources managers in particular For effective management of important resources, the first thing to understand and know about people, the people are a central element of the development At the same time create conditions to promote all the potential in every human being There will not be such a waste of resources and motivation to promote personal fulfillment and development organization

Personnel is Imexpharm‟s most important business risk The risk is that the senior personnel may stop working for the Company and it is hard to find the qualified replacements Additionally, Imexpharm may also face a shortage of well-qualified personnel to meet the Company‟s developmental needs Finding new talent is difficult and risky

CEO at Imexpharm realized employee organazition commitment is important factor for Imexpharm develop sustainably their human resource to help organization to operate more efficient, produce quality of products and services, build brand awareness, customer trust and loyalty… But, some factors affect organization commitment such as overall job satisfaction , job over load, job stress scale, fairness in skill-based pay and person environment fit are problems for human resource management at Imexpharm

Research objective

The purpose of the current study is to investigate the impact of factors as overall job satisfaction , job over load, job stress scale, fairness in skill-based pay and person environment fit on Imexpharm employee organazition commitment A big part of commitment is how employees see the company and the differences what sets it apart from all the other possible employers Having committed employees is crucial for a successful company If the company uses a lot of resources to find the correct persons

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for the job, it is extremely important to be able to keep them in the long run Commitment comes into play in this process On the other hand, it is important to study commitment and know the factors affecting it because it has potential to influence organizational effectiveness and employees‟ well-being (Meyer & Herscovitch 2001, 299)

Research scope

The scope of research is for the entire employees at Imexpharm company, includes: Sales manager, product manager, product specialist, medical manager, tender, medical representative are working at Imexpharm;

The survey scope is within the territory of Vietnam, which includes 400 employees of Imexpharm

Contents of this research are only including factors influencing to affect organization commitment at Imexpharm company

This survey was conducted from 1Febuary to 25 Febuary 2017

Significances of research

Help CEO, Directors, managers understand and are more aware of the importance of employee organization commitment That is the most important factor to show the effectiveness of the policy, the organization operating concept in human matters Committed employees bring added value to the organisation, including through their determination, proactive support, relatively high productivity and an awareness of quality

Limitations of the study

Like many other studies, this paper has its own limitations as well The measurement

of the model variables is based on self-reports, which increases the possibility that the

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relationships between variables might be due to common method variance (Bakker, Demerouti & Schaufeli, 2010)

The translation of culturally: occurs when respondents did not understand the question

as the intention of the researchers that the other understands and replies go out their way

These contextual errors are factors related to the interview itself Quantitative research methods assume that the behavior and attitudes of people do not change according to the context However, the answer of the object may change depending on the context different

Small sample size.Samples are only on the employees of Inmexpharm in the Ho Chi Minh City Thus, it does not give us a detailed explanation of how our model variables occur in other regional countries

The Structure of the paper

This research consists of six logically and clearly structured chapters Firstly, this chapter comprises of an introduction to the research study The problem statement briefly outlines the constructs and reasons for this study The chapter two provides critical analysis based on existing literature on this research Furthermore, in order to provide evidence of what is discussed in chapter two, chapter three offers different approaches of research design undertaken Moreover, quantities methods, sample size reliability and validity consideration are discussed further in this chapter Additionally, chapter four provides statistical analysis of the findings established Nevertheless, chapter five discusses this further along with recommendations backed up with literature Eventually, chapter six consists of summary and conclusion based on the evidence found

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CHAPTER 2: LITERATURE REVIEW Definition of Constructs

Organazition commitment (OC)

Defining commitment

Commitment is a very multidimensional concept and therefore somewhat hard to define Commitment has been studied much, and it still “remains one of the most challenging and researched in the fields of management, organizational behavior and HRM [human resource management]” (Cohen 2007, 336) There has been numerous ways to define commitment in the past years and researchers from different fields like

to emphasize different aspects of it (Jokivuori 2001, 17) Often commitment is seen as

a force that binds individual to a course of action that is relevant to one or more targets (Cohen 2003, ix) Those targets can be directed to people, for example family or friends as well as to various institutions, like sports, community groups or work organization (Heery & Noon 2001, 91) Commitment in the workplace can further be divided into different aspects Employee may be committed to career, occupation, goals, teams, leaders or organization as such (see Meyer & Herscovitch 2001, 300; Fleishmann & Cleveland 2003, ix) Meyer and Herscovitch (2001, 299) conducted a review of the previous studies and conceptualizations on workplace commitment They argue that it is well recognized that employees develop more than one work-relevant commitment Even though all of these are to be seen in the workplace and affect employees total workplace commitment, they all have their own characteristics In this paper the focus will be in organizational commitment What is good to notice, is that these various commitments will exist at the same time and employees always have many commitments to different institutions and people, for example, family, friends,

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sports and community groups Therefore, it is unrealistic to expect total commitment to the organization (Heery & Noon 2001, 91.)

Challendes for organizational commitment

Like mentioned briefly in the introduction, today‟s world in general and furthermore the on-going economic situation brings various challenges for organizational commitment During economical hardships it is even more critical for companies to have committed employees It may only be one important factor saving the company during the crisis but also it has a crucial role in the long run for company to get better position in the market when the economic situation gets better Company having committed employees has a clear competitive advantage in talent strategy and business results that is difficult to copy (Shahid & Azhar 2013, 262.) However, to gain this kind

of advantage at the times like now is definitely not easy Economical hardships, global competition, quartile 19 economics and changes in technology and consumer preferences change the work less predictable All of these conditions can furthermore

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force companies to downsize, outsource and reengineer jobs to stay efficient and alive (Meyer 2009, 37) Under these circumstances it is challenging for companies to show commitment to their employees Consequently, this all leads to the fact, that it is not easy for employees to stay committed to their organizations (Ruokolainen 2011, 11–12.) These days when the economy faces crises and, therefore, many organizations are having hard time in this turbulent environment, it is interesting to see how it affects commitment Cohen (2003, 4) reminds that in changing organizational environments it

is crucial to ask if employees still identify with organizations, how they are attached and what factors affect it In their recent paper Markovits, Boer and van Dick (2013) studied the effects of Greece‟s economical crisis to employees‟ work-related attitudes including commitment They conducted longitudinal survey; the first sample was collected before the crisis in between 2004 and 2007 and the second one in the middle

of the crisis during 2011-2012 They found out that these conditions truly have an impact on employees‟ organizational commitment Using Meyer and Allan‟s three-component conceptualization of organizational commitment they found out that the affective commitment was significantly lower in the second sample This is expected since the affective feelings at work are negatively influenced during crisis Somewhat against the expectations, there wasn‟t any significant change on continuance commitment In other words, even though there are very limited employment opportunities because of the economical crisis, people still felt that personal costs of leaving the current position are similar to those before the recession Lastly, there was also a decrease on normative commitment Markovits et al (2013) argue that “this form of commitment is deeply rooted in and influenced by the socialization process, and the values and beliefs stemming from family, school and community environment” and therefore was quite surprising to see the change on this as quickly as just two years after the recession in Greece started In conclusion, it can be seen that the external environment has profound impact on person‟s commitment On the other hand, it has

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been argued whether organizational commitment is any longer relevant concept at all Enache, Sallan, Simo and Fernandez (2013, 881) point out that, 20 since companies can no longer promise life-time employment and individuals are more and more wanting to change work organizations during their career, for individuals it is more about career orientations these days rather than organizational commitment Employees are seeking more emotionally satisfying lives by discovering the full potential of their career regardless of the organization boundaries Enache et al (2013, 882) studied the effects of contemporary career context on commitment Employees have taken more active role shaping their own careers and professional development seeking opportunities for continuous learning, future marketability and psychologically meaningful work In this sense they “rather than their employing organizations become the architects of their own careers, development and vocational destiny” (Enache et al

2013, 882) Since this concept is still very important for companies, it is a challenge for human resource organizations to try to find ways to tackle these challenges

Benefits of organizational commitment

When the employee is committed to an organization, there can be seen many positive outcomes for individual as well as for the organization itself One benefit that it has for the employee is that it has potential to influence employee‟s well-being (Meyer & Herscovitch 2001, 299) In addition, it has shown to increase employee‟s job satisfaction (Vandenberg and Lance 1992 in Shahid & Azhar 2013, 253) Organization can benefit of committed employees in variety of ways In a wide scale they have the potential to influence organization‟s effectiveness (Meyer & Herscovitch 2001, 299) Employees are less likely to leave the organization reducing the turnover (Allen & Meyer 1990, 1) Equally important, Shahid and Azhar (2013, 253) state that committed employees can often make things work even without very good systems and are key for higher productivity in the organizations Organizational commitment should result in improved relationships and performance of the organization (Rylander 2003, 142)

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Especially affective organizational commitment has been shown to correlate positively with the measures of organizational performance (Wright, Gardner, Moynihan & Allen

2005, 431) In their study Wright et al used six 21 measures of performance Those were workers compensation, quality, shrinkage, productivity, operating expenses and profitability There was strong correlation between all of these measures of organizational performance and affective organizational commitment (Wright et al

2005, 426–431.) However, there has to be more research conducted to be certain about the causality of these two In other words, there are some doubts about which one is causing the other one to happen (Mayer 2007, 47.) After conducting meta-analysis of the studies conducted on organizational commitment Mathieu and Zajac (1990) found consequences of organizational commitment to be related to job performance and withdrawal behavior, such as intention to search for alternatives, intention to leave and turnover (Mathieu & Zajac 1990, 174) Therefore, not only employees will manage their work better but also they are less likely to leave the organization

Overall job satisfaction (OJS)

Job satisfaction has been an important focal point for organizational and industrial psychology In defining job satisfaction the reference is often made to Locke‟s (1976) description of job satisfaction as a “pleasurable or positive emotional state resulting from the appraisal of one‟s job or job experiences” (Jex 2002 p.116) The appraisal involves various elements related to the job such as salary, working conditions, colleagues and boss, career prospects and, of course, the intrinsic aspects of the job itself (Arnold et al

1998 p 204)

Job satisfaction is the most widely researched job attitude and among the most extensively researched subjects in Industrial/Organizational Psychology (Judge & Church, 2000) Several work motivation theories have corroborated the implied role of job satisfaction Work satisfaction theories, such as Maslow‟s (1943) Hierarchy of

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Needs, Hertzberg‟s (1968) Two-Factor (Motivator-Hygiene) Theory, Adam‟s (1965) Equity Theory, Porter and Lawler‟s (1968) modified version of Vroom‟s (1964) VIE Model, Locke‟s (1969) Discrepancy Theory, Hackman and Oldham‟s (1976) Job Characteristics Model, Locke‟s (1976) Range of Affect Theory, Bandura‟s (1977) Social Learning Theory, and Landy‟s (1978) Opponent Process Theory, have tried to explain job satisfaction and its influence,

Such expansive research has resulted in job satisfaction being linked to productivity, motivation, absenteeism/tardiness, accidents, mental/physical health, and general life satisfaction (Landy, 1978) A common theory within the research has been that, to an extent, the emotional state of an individual is affected by interactions with their work environment People identify themselves by their profession, such as a doctor, lawyer,

or teacher Hence, an individual's personal well-being at work is a significant aspect of research (Judge & Klinger, 2007)

The most widely accepted theory of job satisfaction was proposed by Locke (1976), who defined job satisfaction as “a pleasurable or positive emotional state resulting from the appraisal of one‟s job or job experiences” (Locke, 1975, p.1304) Job satisfaction has emotional, cognitive, and behavioral components (Bernstein & Nash, 2008) The emotional component refers to job-related feelings such as boredom, anxiety, acknowledgement and excitement The cognitive component of job satisfaction pertains to beliefs regarding one's job whether it is respectable, mentally demanding / challenging and rewarding Finally, the behavioral component includes people's actions in relation to their work such as tardiness, working late, faking illness

in order to avoid work (Bernstein & Nash, 2008)

Job satisfaction refers to the positive attitudes or emotional dispositions people may gain from work or through aspects of work Employees‟ job satisfaction becomes a central attention in the researches and discussions in work and organizational psychology because it is believed to have relationship with the job performance

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There are essentially two types of job satisfaction based on the level of employees' feelings regarding their jobs The first, and most analysed, is global job satisfaction, which refers to employees' overall feelings about their jobs (e.g., "Overall, I love my job.") (Mueller & Kim, 2008) The second is job facet satisfaction, which refers to feelings regarding specific job aspects, such as salary, benefits, work hierarchy (reporting structure), growth opportunities, work environment and the quality of relationships with one's co-workers (e.g., "Overall, I love my job, but my schedule is difficult to manage.") (Mueller & Kim, 2008) According to Kerber and Campbell (1987), measurements of job facet satisfaction helps identify specific aspects of a job that require improvement The findings may aid organizations in improving overall job satisfaction or in understanding organizational issues such as high turnover (Kerber & Campbell, 1987)

There are several myths regarding job satisfaction One such myth is that a happy employee is a productive employee (Syptak et al., 1999) Research has offered little to support that a happy employee is productive, on the contrary, some research has suggested that casualness may creep in, shifting from productivity to satisfaction (Bassett, 1994) Hence, if there is a correlation, it is a weak one Knowing that research does not support the idea that happiness and employee satisfaction creates higher production, why do I/O psychologists and organizations still attempt to keep employees happy? Many have pointed out that I/O psychologists research perspective moves beyond increasing the bottom line of an organization Happy employees do not negatively affect productivity and can have a positive effect

at workplace and on society at large It also positively impacts the organization's brand image Therefore, it still benefits all parties to have happy and satisfied employees Another fallacy is that the pay is the most important factor in job satisfaction In reality, employees are more satisfied when they enjoy the environment in which they work (Berry, 1997) An individual can have a high paying job and not be satisfied

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because it is boring and lacks sufficient stimulation In fact, a low-paying job can be seen as satisfying if it is adequately challenging or stimulating There are numerous factors that must be taken into consideration when determining how satisfied an employee is with his or her job, and it is not always easy to determine which factors are most important to each employee Job satisfaction is very subjective for each employee and each situation being assessed

Job over load (JOL)

Job over load has been researched and found in relation with work-family conflict (Bolino & Turnley, 2005; Coverman, 1989; Razak, Yunus, & Nasurdin, 2011) Similarly, job overload also results in role conflit (Coverman, 1989; Home, 1998) Most of the research on JOL has been conducted by psychologists and social scientests has linked JOL with job stress According to published studies JOL increases level of stress in an employee and results in turnover (Bakker, Demerouti, & Verbeke, 2004; Coverman, 1989; Madu, Okoro, & Onuibe, 2014; Maslach, 2003) Furthermore, some studies also associated JOL with justice (Andrews, Wilmington, & Kacmar, 2014; Lambert, Hogan, & Griffin, 2007) Moreover, it has also been negatively associated with employees‟ performance and ultimately with organization performance (Choi, Cheong, & Feinberg, 2012; Jamal, 2011; Karatepe., 2013) Job over load has been positively related with working hours, absenteeism and competitiveness, size of the firm, turnover etc and has been negatively associated with satisfaction and commitment (Dwyer & Ganster, 1991) It has negative effect on employees attitude and satisfaction( Sargent & Terry, 1998)

Job stress scale (JSS)

The Health and Safety Executive (HSE) defines stress as „the adverse reaction people have to excessive pressures or other types of demands placed on them‟ The word

„stress‟ is neutral However, it often has negative connotations and is used as a

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synonym for overstress It must be emphasized that some stress can be positive and beneficial and is actually necessary to make us effective in the tasks we set ourselves

It is the amount of stress that causes problems

- Over (hyperstress): where there is too high a workload and the demands of the job are greater than the individual officer is likely to manage

- Under (hypostress): where there is too little work to do and this leads to stimulation, boredom, depression and possibly lack of motivation

under Desired (eustress): when there is something really challenging and motivating to

 Lack of clear communication

 Conflicting or ambiguous goals

 A centralized and formal organizational structur

 Micromanagement by line managers and supervisors

 Pressure to work constantly at optimum levels

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 Peer pressure

 Lack of training or promotional opportunities

 The monotonous nature of work

Job stress can be defined as an individual‟s reactions to characteristics of the work environment that seem emotionally and physically threatening (Jamal, 2005) It points

to a poor fit between the individual‟s capabilities and his or her work environment, in which excessive demands are made of the individual or the individual is not fully prepared to handle a particular situation (Jamal, 1997) According to Parker and Decotiis (1983), there were two dimensions related to job stress One dimension is time stress (feelings of being under constant pressure) and the second dimension is anxiety (job – related feelings of anxiety)

Fairness in skill-based pay (FSB)

Gerhart & Milkovich (1992) classify compensation decisions that any organization makes into four broad categories: pay level, pay structures, individual differences in pay, and benefits Our interest here is focused on pay structure since it represents the main difference between a traditional job-based pay system and a skill-based pay (SBP) system Pay structure refers to the nature of pay differentials between different positions and individuals within an organization or a work unit (see Gerhart & Milkovich, 1992; Fossum & McCall, 1997; Gerhart, Minkoff, & Olsen, 1995) It determines what is known as the 'base pay' component of the employee total compensation In the traditional job-based compensation system, pay structure consists

of job families defined for pay purposes and a number of grades or steps in the structure and pay differentials between them In a skill-based pay structure, differences

in pay are associated with predefined skill-blocks required within a specific work unit Differences in base pay between individuals under the SBP system depend on the

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breadth, type, and depth of skills they are able to acquire and use rather than the jobs or positions they are assigned or promoted to

Under job-based pay, when individuals are promoted or offered higher-paying jobs they automatically are rewarded for taking these jobs before they demonstrate their ability to perform the required work In skill-based payor knowledge-based pay (KBP), people are paid according to their worth to the organization and not the job they hold Lawler (1996) argues that these person-based pay systems are on the way to replacing the traditional job-based pay 6 systems While the main thrust of the skill-based pay system is to base compensation on the number, variety, and depth of skills a person can perform given the relevance of these skills for the organization, the actual details of the skill-based pay plans may vary considerably depending on the nature of tasks at the work units, the objectives of the plan, and the characteristics of the workers and the organization Organizations applying SBP have to provide training and skill acquisition resources in order to enable employees to advance to higher skill levels

Skill-based pay can co-exist in a compensation system along with a performance or a merit-pay plan Skill-based pay plans that are most commonly used affect pay structures while other elements of the pay system including variable pay and benefits can also be applied in the same way as in the case of job based pay systems

pay-for-Person environment fit (PEF)

Person-enviroment Fit (PEF) is another aspect of HR that has been widely researched

It has been said that it is very important for both employee and enviroment organization that they suite each other and if not, then it will be hard for both in the long run as well as short run Person-enviroment and Person-Job fit has been strongly associated with HR practices Perceived HR practices can influence person and enviromnet fit (Boon, Den Hartog, Boselie, & Paauwe, 2011) Liu, Liu, and Hu (2010) found a relationship with satisfaction and turnover intention Another prominent

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variable found in research is commitment (Meyer, Hecht, Gill, & Toplonytsky, 2010)

If PEF is not appropriate then the researchers indicated that its effects will be on the attitudes and behavior of employees (Tepeci, 2011; Yen & Ok, 2011) In addition, some studies linked PEF with job characteristics and employee engagement (Hamid & Yahya, 2011) Similarly, it has been linked with outcome (performance) of an employee as well as having a positive effect on organization performance (Silva, Hutcheson, & Wahl, 2010) These relationships have been shown in direct relation as well as having mediating effect on the relationships with other variables PEF has been found having positive relation with job satisfaction, organizational commitment, willingness to job and person-job fit, job demand, and negatively correlated with stress and fatigue (Cable & Judge, 1996)

Theory of organizational commitment

Next I will introduce different models used to conceptualize organizational commitment

O’Reilly and Chatman’s model

O‟Reilly and Chatman (1986) see organizational commitment as a psychological attachment to an organization According to Ruokolainen (2011, 15) it reflects “the degree to which employee internalizes or adopts the characteristics or perspectives of the organization” Commitment can be formed by three independent mechanisms: compliance, identification and internalization Compliance is shallowest of them all and is connected to rewards Person adopts certain attitudes and behaviors in order to gain specific awards Identification is step further into deeper commitment Employee feels proud to be part of that specific organization and thus accepts and respects its‟ values and accomplishments He or she wants to establish or maintain good relationship with that specific group However, what separates that from the

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internalization is that he or she does not adapt those values as his or her own Therefore, internalization occurs finally when there is value congruence between the person and the organization Employee accepts organization‟s values because those are very similar to his or her own (O‟Reilly & Chatman 1986, 493.) The fact that this model was first one to make clear distinction between the instrumental exchange and psychological attachment as forms of commitment has been noted as benefit for this model Instrumental refers to commitment based on rewarding, while psychological attachment is the deeper form (Weibo, Kaur & Jun 2010, 14.) However, there have been few matters that have received critique in this model Internalization and identification correlate positively with intend to stay with an organization, while compliance acts in the opposite way actually correlating positively with turnover This

is further shown in the results implicating that the longer the tenure, the less likely it is that commitment is based on compliance (O‟Reilly & Chatman 1986, 495.) Since it is often thought that organizational commitment reduces the likelihood of turnover, there has been questioning whether compliance can be thought as a form of organizational commitment at all (Meyer & Herscovitch 2001, 306) Another point that has received critique in this model is that internalization and identification come very close to each other as concepts, and even include some of the same elements (see Meyer & Herscovitch 2001, 305–306) In the studies conducted later it has actually been proved that internalization and identification can be merged together forming one dimension The measures correlate very highly with one another 8 and other variables show quite similar patterns of correlations with these two dimensions (Caldwell, Chatman & O‟Reilly 1990, 257.) For these reasons, this model never has been that largely used and Allen and Mayer‟s model became dominantly used in the studies of commitment (Weibo, Kaur & Jun 2010, 14.)

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Three-component model of commitment

One of the most widely used theories in organizational commitment is Allen and Meyer‟s (1990) three-component model (see Markovits, Boer & van Dick 2013; GarciaGabrera & Garcia-Soto 2012, 3151) It has been the leading approach in studying organizational commitment for more than 20 years (Cohen 2007, 337) Lately, it has been the most widely accepted conceptualization of organizational commitment (Herrbach 2006, 631) It sees commitment as having three separable forms: affective commitment, continuance commitment and normative commitment Next I will introduce all three components and make differentiation between one another Affective commitment is employees‟ emotional attachment to organization, identification with organization and involvement in organization Employees, who have strong affective commitment, stay in the organization because they want to (Allen & Meyer 1990, 1–3.) Therefore, this form of commitment is based on desire However, there has not been a uniform conclusion on what are the mechanisms involved creating it, but Meyer and Herscovitch (2001, 316) propose that any variable that will increase the probability of the following three matters will help individual to become affectively committed First, an individual becomes involved, meaning motivated by his or her own will or absorbed in the flow, in a course of action Second,

an individual recognizes the value or relevance of the entity or the course of action to him or herself Last, association with the entity or a course of action will shape an individual‟s identity (Meyer & Herscovitch 2001, 316.) Out of the three forms, affective commitment has been studied the most (see Meyer, Stanley, Herscovitch, & Topolnytsky 2002; Bergman 2006) Continuance commitment is commitment based on the costs that would occur if the person left the organization Therefore, people having high continuance commitment stay in the organization because they need to In other words, it would cost too much to 9 leave This would be the case, for example, if employee has used a lot of time and resources to learn something that can only be used

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in that particular company or at the time there are no similar or better employment opportunities available than the current position (Allen & Meyer 1990, 1–3; Meyer & Herscovitch 2001, 316; Garcia-Gabrera & Garcia-Soto 2012, 3155–3156.) Finally, normative commitment refers to person‟s feelings of obligation to stay with the organization In other words, employees remain in the organization because they ought

to do so It is proposed that normative commitment is influenced by person‟s experiences both before and after entering the organization This means that not only organizational socialization but also socialization that occurs in the families and society

at large also affects how employee‟s normative commitment develops (Allen & Meyer

1990, 1–4; Markovits, Boer & van Dick 2013.) Until today, this is the one that has been studied the least out of these three (Bergman 2006, 647) Despite the popularity and support of the model, there is still quite large dispute whether normative commitment can be differentiated from affective commitment (see Bergman 2006) Even thought there have been factor analyses, which result better fit when those are separated, the question arises from the fact that correlations between affective and normative commitment are found to be very high (Meyer & Herscovitch 2001, 305) In

a large meta-analysis it was found that the correlation between these two was 0.63 (Meyer, Stanley, Herscovitch, & Topolnytsky 2002, 28) Therefore, almost 40 % of the variance in one is explained by the other (Bergman 2006, 646) Bergman (2006) reviewed theoretical and empirical literature to found out whether these two dimensions can truly be separated She states that theoretically these two are different

in describing the ways in which individual can bond with an organization (Bergman

2006, 647–659.) However, there is not that strong empirical evidence for it Meyer et

al (2002, 41) found out that there is much bigger correlation between these concepts in the studies conducted outside of North America than within On one hand, this might reflect that there are cultural differences on how individuals see these concepts or on the other hand, there could have been difficulties in the translation process leaving the

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constructs unclear The conclusion is that it still remains unclear if there should be both

of these constructs (Bergman 2006, 647–659)

Cohen’s four component commitment model

Previously mentioned critique has led to development of newer models Cohen‟s four component commitment model is one of these (Cohen 2007) Regardless of similarities

in the name with previously introduced Allen and Meyer‟s model, this one sees commitment in a different way One of the biggest differences is that this model includes timeframe It makes distinction between organizational commitment that develops before entering the organization and commitment developed after the entry The other two dimensions are bases of commitment, whether it is instrumental or psychological attachment (Cohen 2007, 337.) When comparing these two, instrumental commitment is attachment based on more tangible exchange relationship, like rewards and salary while psychological attachment is perceptions of justice, perceptions of organizational support and transformational leadership (Cohen 2007,

343, 349) Figure 1 describes how these four dimensions are connected Next I will introduce all of these dimensions briefly

Figure 2: A four component model adapted from Cohen 2007

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Therefore, before entering the organization, person develops the following types of commitment – instrumental commitment propensity and normative commitment propensity Propensity can be thought as tendency The first is derived form person‟s general expectations about the quality of the exchange with the organization about the Before entry After entry Instrumental attachment Psychological attachment Instrumental commitment propensity Instrumental commitment Normative commitment propensity Affective commitment Timing Bases of commitment 11 expected benefits and rewards person might receive from it in return of the contribution given The second is defined by general moral obligations toward the organization (Cohen 2007, 337.) Accordingly, after entering the organization employee develops instrumental commitment and affective commitment Instrumental commitment is a reflection of the instrumental commitment propensity, and therefore person reflects how well one‟s expectations about the benefits and rewards are met While affective commitment is a psychological attachment to the organization, which can be seen as identification with it, emotional involvement and a sense of belonging (Cohen 2007, 337.) This is basically the very same as the one on Allen and Meyer‟s model Another difference between this and „three-component model‟ (Allen & Meyer 1990) is the way

in which focus is shifted from the costs associated with leaving the company, previously called continuance commitment, to benefits of staying, which is called instrumental commitment (Cohen 2007, 336.) In other words, these two concepts are measuring the same matter but viewing it from the opposite sides There are a couple

of reasons to choose this type of point of view First is to avoid any potential overlap with outcomes of commitment, such as turnover intentions Second, continuance commitment has received criticism about the construct and predictive validity (Cohen

2007, 343.) Like mentioned before, there are remarkable correlations between normative and affective commitment in Allen and Meyer‟s model (Meyer, Stanley, Herscovitch, & Topolnytsky 2002, 28) Cohen tackles this issue in this model with the

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time dimension He argues that normative commitment is rather a propensity to be committed and therefore when studying it, the focus should be on the time before entering the organization, not after (Cohen 2007, 338.) Like Allen and Meyer (1990, 14) themselves note that normative commitment is mostly affected by early socialization and cultural factors, Cohen argues that measuring it gives very little information about organizational commitment of current employees For this reason, normative commitment gives information about individual differences regarding their propensity to become morally committed to the organization (Cohen 2007, 343.)

Figure 3: Modified from Cohen’s (2007) model of the development of organizational

commitment

Based on previous studies the model also makes propositions about what factors affect different parts of commitment and those can be seen above on Figure 2 Organizational socialization means how employees learn the values, beliefs, behaviors and skills

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needed to perform well in their new job and new organization (Van Maanen 1976 see Cohen 2007, 349) In other words, organizational socialization is the process of onboarding Lower order exchange factors refer to lower order needs that will affect person‟s commitment Like mentioned in the figure and already previously in this paper those are factors like salary and rewards The idea behind the division between higher and lower order factors is partially based on Hertzberg motivation theory (see for example Hertzberg 1987) Main thought behind his theory of motivation is that first one has to satisfy the hygiene factors, which are extrinsic and only after those are good one can start to develop intrinsic motivation factors Thus hygiene factors serve as a base and precondition that have to be met first The same idea is for lower and higher order After entering organization Before entering organization Organizational commitment Personal characteristics, Values, Beliefs, Personality Expectations about job Characteristics of choosing the job, Prior work experience Instrumental commitment Affective commitment Instrumental commitment propensity Normative commitment propensity Higher order exchange factors (leadership, justice) Lower order exchange factors (benefits, salary) Organizational socialization 13 exchange factors, but one can start to develop those simultaneously (see Cohen 2007, 344.) Higher order exchange factors refer to transformational leadership, perceptions of justice and organizational support (Cohen 2007, 349) Cohen argues that after entering the organization, instrumental commitment starts to develop faster than affective commitment, which will take more time and information to develop (Cohen 2007, 346) Instrumental commitment is seen as somewhat shallow commitment, because it is based on very tangible exchange Therefore, companies who invest in this kind of exchange have to keep in mind that people might very easily change company if they get better offer regarding rewards from some other company On the comparison, affective commitment is seen as the highest and deepest level of commitment and instrumental commitment also affects how this is formed Higher order needs play a

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key role in heightening the levels of employee commitment (Cohen 2007, 352.) This is why companies should pay more attention to those in the long run What should also be kept in mind is that person‟s previous work experiences and experiences from commitment will always affect the propensity when moving into new employment (Cohen 2007, 349) Therefore, the matters affecting person‟s propensity are somewhat impossible to affect

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