The effects of leadership behaviors on employee satisfaction and loyalty in the hospitality industry

The Effects of Leadership Behaviors on EmployeeSatisfaction and Loyalty in the Hospitality Industry Mai Ngoc Khuong La Boi San Luu Kim Khanh International University, Vietnam National Un

The Effects of Leadership Behaviors on Employee

Satisfaction and Loyalty in the Hospitality Industry

Mai Ngoc Khuong

La Boi San Luu Kim Khanh

International University, Vietnam National University HCMC, Vietnam

leadership behaviors in order to maintain high employee loyalty

Keywords: hospitality industry, leadership behaviors, leadership styles, employee loyalty,

to achieve employee job satisfaction, physical and emotional engagement with their work(Bakker and Leiter, 2010; Agarwal, 2014), loyalty and commitment (Ibrahim and Al Falasi,2014)

Although there have been a lot of researches devoting to leadership behaviors and jobsatisfaction, employee loyalty, few of them concentrate in the hospitality industry Hospitality

is one of the fastest growing sectors within service industry It consists of different functions,

most notably is hotels, lodging, accommodation and restaurants, etc Hospitality ischaracterized by its intangibility, inseparability, perishability and variability In this field, firmscompete through intangible products, such as service quality and unique concepts When onenew play enters the game, they stir up the whole market with their creative strategy, therefore,this industry is becoming fiercer than ever The total revenue of hospitality and tourism

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altogether was 8.630 billion VND in June 2017, which yielded 14.7% increase compared to thesame period last year Numbers of tourists visiting Ho Chi Minh City during the first 6 months of

2017 was 16% higher than that of last year as well (Department of Tourism, Ho Chi Minh City).Tourism is one of the five industries with the highest foreign currency income in Vietnam, andaccommodation sector contributes 70% to the total revenue of tourism sector Plus, thisindustry alone directly and indirectly attracts approximately 3 billion personnels annually(Vietnam Hotel Association), thus, contributing greatly to the economic development of thecountry However, hospitality is well-known for its high turnover rate, with tthe estimatedemployee turnover rate as much as 300% annually (Milman, 2001) Therefore, retaining keyperformers is becoming one of the primary concerns of firms in this industry This researchaims to provide an empirical answer to the problem by measuring the impact of differentleadership styles on employee job satisfaction and loyalty, based on which researcher willdiscuss and give relevant recommendation to improve loyalty of personnels working inhospitality industry in Ho Chi Minh City

2 Literature review

2.1 Employee loyalty

As defined by many researchers, the concept of loyalty can be expressed as a ‘feeling’ such

as identification with identification with (Boroff and Lewin, 1997), attachment (Leck andSaunders, 1992) or commitment to (Johnson et al., 2009; Yee et al., 2009) the organization Itrepresents a strong desire to stay with an organization (Turkyilmaz et al., 2011)

Employee loyalty is a subject that has been receiving considerable interest from researchersrecently In such ever-changing and competitive environment, companies, more than ever,need to achieve employee loyalty towards the company (Ibrahim and Al Falasi, 2014) Loyalty

is an extremely important factor affecting organizational success, as it has been empiricallyconfirmed by different studies that high employee loyalty can maintain high customer loyalty

as well as corporate profitability (Reichheld, 1996) The more loyal the employees are, themore willing they are to provide higher efforts and contribution to the company, increasingprofits and loweing turnover rates and costs (Guillon and Cezanne, 2014) According to Chengand Chew (2004), leadership behaviors is one of the nine factors whose positive influence onemployee loyalty is confirmed through their studies Kleinmann (2004) stated that loyalty can

be directly improved through leadership styles Chen (2004) concluded that employees will bemore loyal to the organization if they are satisfied with their jobs and their leader, vice versa, ifthey are dissatisfied, they are less committed and look for other opportunities to quit (Pepe,2010)

2.2 Employee satisfaction

Employee job satisfaction refers to an employee’s attitude or feelings about his or her job ordifferent aspects of the job (Pool, 1997) It is the extend to which people like or dislike their job(Allen and Spector, 2002) Higher job satisfaction is acknowledged to increase employeemorale, job performance, productivity and lower absenteenism (Turkyilmaz et al., 2011).Employee loyalty can be positively influced by satisfaction (Abraham, 2012) In fact, empiricalevidences from previous studies have demonstrated a strong positive correlation betweenthese two factors (Silvestro, 2002), some even claimed that job satisfaction is actually theantecedent of employee loyalty (Jun et al., 2006; Chang et al., 2010) In this research,employee satisfaction both acts as independent variable influencing loyalty and mediatingfactor affecting to loyalty

Wu (2009) stated that job satisfaction can be affected by the relationship betweensubordinates and managers, working environment, or degree of fulfillment in their work.Among determinants of employee job satisfaction, leadership behaviors can be viewed as one

of the important key drivers of employee job

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satisfaction, and their positive correlation has been confirmed by via different studies (Seo etal., 2004; Vance and Larson, 2002).

2.3 Task oriented leadership

Task oriented leadership refers to someone whose emphasis is to complete a task perfectly.Task-oriented leadership is primarily concerned with achieving organizational goals throughbehaviors such as assigning tasks, setting rules and instruction, controlling and providingfeedback Task oriented leaders are more adaptive to difficult situations (Higgins and Endler,1995), therefore, they can adjust better and yield higher productivity (Causey and Dubow,1993) Patchen (1963), Larson, Hunt and Osborn (1974) confirmed the effectiveness of taskoriented leadership on performance Brown and Dodd (1999) claimed that contingent rewardleadership behaviors can lead to higher satisfaction with supervisors and greater productivity

2.4 Relations oriented leadership

Conversely, relations oriented leadership emphasizes on maintaining harmoniousrelationship with followers, creating a friendly and supportive working environment Since theconcentration of relations oriented leadership is followers’ welfare and interests, leaders of thisstyle mainly use informal communication methods (Yukl, 1989), which in turn facilitatessubordinates’ participation in decision making process, misunderstanding avoidance and fastermistake recognition (Shamir, 1995) Such leaders also put a lot of efforts into encouraging andgiving praises to their subordinates (Lewin and Lippitt, 1938), hence, significantly improve jobsatisfaction (House et al., 1971)

2.5 Change oriented leadership

Change oriented leadership style was identified by Ekvall (1988) in late 20th century Thisbehavior mainly concerns with the aptitude to adapt to changes Change oriented leader, according

to Ekvall and Arvonen (1994), displays four characteristics, including ‘being a promoter of changeand growth, having a creative attitude, being a risktaker, and having visionary qualities’ Anotherprimary theoriest of this behavior, Yulk, in his research with Gordon and Taber (2002), confirmedfour components in this theory: ‘visioning, intellectual stimulation, risk-taking, and externalmonitoring’, aligning with the behaviors identified by Yulk (2012) Change oriented leadersdemonstrate great persuasive ability to influence people during change process They focus onunderstanding the environment, seeking solutions, strategies, products or processes to adapt tosuch surroundings and centering innovation and creativity for better performance They build anddevelop a vision for change, encourage innovative thinking, and are willing to take risk (Derue et al.,2011)

2.6 Participative leadership

Leaders of participative style tend to encourage and motivate their subordinates to takepart in the decision making process or discussion Their final decision is based on groupmembers’ ideas instead of their own (Koopman and Wierdsma, 1998) This style of leadershipallows greater autonomy by creating interactive and interdepent environment where followersare free to share their opinions with the leader According to Boisot and McKelvey (2010), thisadaptive management practices take advantage of opportunities and avoid negativity ofchanges Participative leadership also improves performance through intrinsic motivation andpsychological empowerment, making employees feel needed and valued, thereby putting moreefforts into completing the job (Huang, 2012; Huang et al., 2010)

2.7 Charismatic leadership

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Charismatic leaders are those who have high charismatic effects on followers, and followersare spiritually inspired enough to offer their commitment, loyalty and obedience to leaders.According to Shamir and colleagues (House and Shamir, 1993; Shamir et al., 1993) charismaticleadership affects followers’ motivation at self-concept level Subordinates under charismaticleadership are more confident in themselves and willing to accept new challenges Houseclaimed that charismatic leaders display certain traits, such as ‘role modeling, goal articulation,high expectations, confident in followers and motive arousal leader behaviors’ Howell andCostley reported that employees under charismatic leadership have higher satisfaction andcommitment towards their job, leaders and organization.

2.8 Ethical leadership

Brown and his colleagues defined ethical leadership as ‘the demonstration of normativelyappropriate conduct through personal actions and interpersonal relationships, and thepromotion of such conduct to followers through two ways communication, reinforcement, anddecision making’ Dalla Costa (1999) believed that ethical leadership style prevents legal andmoral impropriety and contributes to the organizational success Ethical leaders areresponsible for the consequences of their actions and demonstrate empathy as well aspossessing higher tolerance for stress and ambiguity Ethical leadership is important for thesole reason that employees will take the leader and leader’s actions as role model to follow.Hence, if the leaders are unethical, such wrong behavior is assumed to be sanctioned as well(Calabrese & Roberts, 2001) Ethical leadership has been proven to have direct positiveimprovement on work outcome, job involvement and commitment of leaders (Khuntia andSuar, 2004)

2.9 Autocratic leadership

Autocratic leadership is described as dominant and can result in significant negative impact onemployees’ motivation It emphasizes performance and leader’s authority rather than people,hence, leaders decide policies, procedures, task allocation, relationships, reward and punishment(Van Vugt et al 2004) without taking into account subordinates’ suggestions (Jung et al., 2014).Autocratic leaders assume that people’s nature is lazy, irresponsible and unreliable, as such, theemployees would cause job fuctions to be unfinished and disrupted if the leaders are leftuninvolved Likert (1961) confirmed that autocratic leadership style uses top downwardscommunication, where authority and instruction come from leaders, teamwork is non existent andinteraction is limited Autocratic leaders rely mostly on authority, control, manipulation and hardwork to complete their job (Puni et al., 2016) Autocratic style is now the least popular amongleadership behaviors, probably due to farily low levels of job satisfaction of employees workingunder this style (Kerfoot, 2013)

2.10 Model hypotheses

In order to obtain all the objectives and further analyses, this study hypothesized that:

H1: Task oriented, relation oriented, change oriented, charismatic, participative, ethical andautocratic leadership directly affect employee job satisfaction

H2: Task oriented, relation oriented, change oriented, charismatic, participative, ethical,autocratic leadership, and job satisfaction directly affect employee loyalty

H3: The effects of task oriented, relation oriented, change oriented, charismatic,participative, ethical, and autocratic leadership on employee loyalty are mediated by employeejob satisfaction

3 Methodology

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Quantitative approach was employed with survey questionnairs conveniently and directlysent to front-line employees who are working in luxury hotels and restaurants in Ho Chi Minhcity to collect data with clear guidance for them to answer correctly The list of four and fivestars hotel was be based on the approval of Vietnam Tourism Ministry In this research,questionnaire was be used to collect the statistics data The main purpose of the survey was tofind out the relationship between leadership and employee loyalty through the mediation ofemployee satisfaction There were two parts in the questionnaire The first part’s questions wasmainly for testing the hypotheses or the influence of independent variables on dependentvariables Respondent were asked to give their opinion by following the 5-point Likert Scalefrom 1 - Strongly Disagree to 5 - Strongly Agree The second part focused on personalinformation of respondents to have a clearer picture of the sampling pool’s demographics.EFA was applied for both groups of dependent and independent variables KMO was greaterthan 0.6 and Barlett’s Test equaled p = .000 Thus, this factor analysis was acceptable.Cronbach’s Alpha was used to measure the reliability, or internal consistency, of the variables.Factor 1 had Cronbach’s Alpha greater than

.7, proving its reliability, factor 2 has Cronbach’s Alpha within 6 and 69, indicating that thisvariable was also acceptable

Table1: Summary of Dependent Variables with Reliability Coefficients

Cronbach’s Alpha(N=352)

Factor 1: Employee Satisfaction (EMSATIS) 9 886

Similarly, with KMO index greater than 6 and Barlett’s test result proved to be significant (p

= 000), it can be firmly concluded that these independent factors were considered appropriate.Cronbach’s Alphas were greater than 7, indicating that the data was good and these variables werehighly reliable for further analysis

Table 2: Summary of Independent Variables with Reliability Coefficients

Factors

No of Items Cronbach’sAlpha

(N=352)Factor 1: Autocratic Leadership (AUTOLEAD) 7 928

Factor 2: Task Oriented Leadership (TASOLEAD) 5 837

Factor 3: Ethical Leadership (ETHILEAD) 5 861

Factor 4: Participative Leadership (PARTLEAD) 5 893

Factor 5: Relation Oriented Leadership (RELALEAD) 4 891

Factor 6: Charismatic Leadership (CHARILEAD) 4 806

Factor 7: Change Oriented Leadership (CHANLEAD) 4 740

All items from the two tests had factor loadings greater than the cut point of 5 so they wereall included The Eigenvalues of the extracted factors were greater than one and the totalvariance explained was 54.4% for the dependent variables and 67.88% for independentvariables, both deemed satisfactory for the requirement of being greater than 50%

4 Research findings

4.1 Profile of Participants in the Research

Table 3: Demographics of participants

Frequency (N) Valid (%)

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1 year, 48.3% have worked for 1-4 years, 8.2% for 4-7 years, 1.1% for 7-10 years, and only 0.6%have been with the same place for more than 10 years The common educational level of thispopulation were college (28.7%), university (28.4%) and vocational training (23.3%) graduates Only

a small percentage of participants graduated from high school (19.3%) or post university (0.3%).The demographics suggested that the sampling population is young and well-educated

4.2 Correlations between variables

Table 4: Descriptions and Variables’ Correlations

.554* 563* 562* 472* 541* 1.008

.566* 598* 597* .714* 615* 495*

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EMLOY 1 2 3 4 5 6 7

Note: * Significant level at p < 05

Table 4 illustrated the correlation coefficients between independent variables, mediatingvariable and dependent variables Except for autocratic leadership whose influence wasnegative on loyalty and satisfaction, all other factors were confirmed to be positively correlatedwith employee loyalty and the mediating factor employee satisfaction Change leadership andtask oriented leadership had the strongest correlation with EMLOY, implying that the more taskand change oriented leadership os used, the more loyal employees will be Furthermore,relation oriented and charismatic leadership displayed strong bond with EMSATIS, implying that

an increase in the application frequency of these two factors will lead to a rise in satisfaction, inturn increase employee loyalty

5 Testing hypotheses

5.1 Direct effects of leadership behaviors on Employee Job Satisfaction

Table 5: Effect Coefficients between IVs and EMSATIS

- Dependent Variable: EMSATIS: Employee Satisfaction

- Predictors: AUTOLEAD, TASOLEAD, ETHILEAD, PARTLEAD, RELALEAD, CHARLEAD, CHANLEAD

- ANOVA: F (7, 344) = 73.053, Sig =000, p < 05

- Model summary: R 2 = 598

Based on the Coefficient analysis, there are only three independent variables that havedirect effects on EMSATIS, including TASOLEAD (β=.119, p<.05), RELALEAD (β=.374, p<.05),and CHARLEAD (β=.181, p<.05), with relations oriented leadership was the strongestcontributor to explaining the mediating variable The other examined factors, namelyAUTOLEAD, ETHILEAD, PARTLEAD, CHANLEAD, with p>.05, had no impact on EMSATIS TheANOVA table demonstrated that the model was significant at 95% confidence level (Sig =000,

p < 05), with F = 73.053 R square equals 598, which implied that the model explained 59.8%

of the variance in employee satisfaction

5.2 Direct effects of leadership behaviors on Employee Loyalty

Table 6: Effect Coefficients between IVs and EMPLOY

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