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

Despite the fact that all variables showed positive correlation with employee loyalty, only five factors, namely task oriented leadership, relations oriented leadership, change oriented

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

Abstract

This study was designed to investigate the effects of leadership behaviors on employee loyalty through the mediation of employee satisfaction in the hospitality industry Quantitative methodogy was applied with questionnaires directly distributed and answered by 352 targeted respondents working in hospitality industry

in Ho Chi Minh City, specifically those who are employees of luxury hotels and restaurants Despite the fact that all variables showed positive correlation with employee loyalty, only five factors, namely task oriented leadership, relations oriented leadership, change oriented leadership, charismatic leadership and autocratic leadership had significant influences on employee satisfaction and loyalty Recommendations were provided for hospitality companies accordingly, with an emphasis on how to improve the five significant factors, including task oriented leadership, relation oriented leadership, change oriented leadership, and charismatic leadership behaviors in order to maintain high employee loyalty

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

1 Introduction

Human resources are considered the most important factor affecting organizational efficiency and effectiveness A good plan without a handful team of personnels to execute is no different from useless Hence, companies nowadays need effective leaders and employees to achieve operational and strategic objectives as well as foster high-performing teams As Schwandt and Marquardt (2000) declared, ‘no other role in organizations has received more interest than that of the leader’ Leadership, according to Kumar and Meenakshi (2009), is ‘a complex, multifaceted capability, with myriad nuances and substleties’ However, just excellent leader alone is not enough to build substainable success Companies nowadays are in greater need than ever for a strong skillful workforce that can help companies determine their future achievement Turkyilmaz and colleagues (2011) expressed that it is important for organizations 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 job satisfaction, 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 is characterized by its intangibility, inseparability, perishability and variability In this field, firms compete through intangible products, such as service quality and unique concepts When one new 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

altogether was 8.630 billion VND in June 2017, which yielded 14.7% increase compared to the same 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, and accommodation sector contributes 70% to the total revenue of tourism sector Plus, this industry alone directly and indirectly attracts approximately 3 billion personnels annually (Vietnam Hotel Association), thus, contributing greatly to the economic development of the country However, hospitality is well-known for its high turnover rate, with tthe estimated employee turnover rate as much as 300% annually (Milman, 2001) Therefore, retaining key performers is becoming one

of the primary concerns of firms in this industry This research aims to provide an empirical answer to the problem by measuring the impact of different leadership styles on employee job satisfaction and loyalty, based

on which researcher will discuss and give relevant recommendation to improve loyalty of personnels working

in hospitality 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 and Saunders, 1992) or commitment to (Johnson et al., 2009; Yee et al., 2009) the organization It represents a strong desire to stay with an organization (Turkyilmaz et al., 2011)

Employee loyalty is a subject that has been receiving considerable interest from researchers recently 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 empirically confirmed 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, the more willing they are to provide higher efforts and contribution to the company, increasing profits and loweing turnover rates and costs (Guillon and Cezanne, 2014) According to Cheng and Chew (2004), leadership behaviors is one of the nine factors whose positive influence on employee loyalty is confirmed through their studies Kleinmann (2004) stated that loyalty can be directly improved through leadership styles Chen (2004) concluded that employees will be more loyal to the organization if they are satisfied with their jobs and their leader, vice versa, if they 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 or different 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 employee morale, job performance, productivity and lower absenteenism (Turkyilmaz et al., 2011) Employee loyalty can be positively influced by satisfaction (Abraham, 2012) In fact, empirical evidences from previous studies have demonstrated a strong positive correlation between these two factors (Silvestro, 2002), some even claimed that job satisfaction is actually the antecedent of employee loyalty (Jun et al., 2006; Chang et al., 2010) In this research, employee satisfaction both acts as independent variable influencing loyalty and mediating factor affecting to loyalty

Wu (2009) stated that job satisfaction can be affected by the relationship between subordinates 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

satisfaction, and their positive correlation has been confirmed by via different studies (Seo et al., 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 through behaviors such as assigning tasks, setting rules and instruction, controlling and providing feedback 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 task oriented leadership on performance Brown and Dodd (1999) claimed that contingent reward leadership behaviors can lead to higher satisfaction with supervisors and greater productivity

2.4 Relations oriented leadership

Conversely, relations oriented leadership emphasizes on maintaining harmonious relationship with followers, creating a friendly and supportive working environment Since the concentration of relations oriented leadership is followers’ welfare and interests, leaders of this style mainly use informal communication methods (Yukl, 1989), which in turn facilitates subordinates’ participation in decision making process, misunderstanding avoidance and faster mistake recognition (Shamir, 1995) Such leaders also put a lot of efforts into encouraging and giving praises to their subordinates (Lewin and Lippitt, 1938), hence, significantly improve job satisfaction (House et al., 1971)

2.5 Change oriented leadership

Change oriented leadership style was identified by Ekvall (1988) in late 20th century This behavior 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 change and growth, having a creative attitude, being a risktaker, and having visionary qualities’ Another primary theoriest of this behavior, Yulk,

in his research with Gordon and Taber (2002), confirmed four components in this theory: ‘visioning, intellectual stimulation, risk-taking, and external monitoring’, aligning with the behaviors identified by Yulk (2012) Change oriented leaders demonstrate great persuasive ability to influence people during change process They focus on understanding the environment, seeking solutions, strategies, products or processes to adapt to such surroundings and centering innovation and creativity for better performance They build and develop 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 take part in the decision making process or discussion Their final decision is based on group members’ ideas instead of their own (Koopman and Wierdsma, 1998) This style of leadership allows greater autonomy by creating interactive and interdepent environment where followers are free to share their opinions with the leader According to Boisot and McKelvey (2010), this adaptive management practices take advantage of opportunities and avoid negativity of changes Participative leadership also improves performance through intrinsic motivation and psychological empowerment, making employees feel needed and valued, thereby putting more efforts into completing the job (Huang, 2012; Huang et al., 2010)

2.7 Charismatic leadership

Charismatic leaders are those who have high charismatic effects on followers, and followers are 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) charismatic leadership affects followers’ motivation

at self-concept level Subordinates under charismatic leadership are more confident in themselves and willing

to accept new challenges House claimed that charismatic leaders display certain traits, such as ‘role modeling, goal articulation, high expectations, confident in followers and motive arousal leader behaviors’ Howell and Costley reported that employees under charismatic leadership have higher satisfaction and commitment towards their job, leaders and organization

2.8 Ethical leadership

Brown and his colleagues defined ethical leadership as ‘the demonstration of normatively appropriate conduct through personal actions and interpersonal relationships, and the promotion of such conduct to followers through two ways communication, reinforcement, and decision making’ Dalla Costa (1999) believed that ethical leadership style prevents legal and moral impropriety and contributes to the organizational success Ethical leaders are responsible for the consequences of their actions and demonstrate empathy as well

as possessing higher tolerance for stress and ambiguity Ethical leadership is important for the sole 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 positive improvement on work outcome, job involvement and commitment of leaders (Khuntia and Suar, 2004)

2.9 Autocratic leadership

Autocratic leadership is described as dominant and can result in significant negative impact on employees’ 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, the employees would cause job fuctions to be unfinished and disrupted if the leaders are left uninvolved Likert (1961) confirmed that autocratic leadership style uses top downwards communication, where authority and instruction come from leaders, teamwork is non existent and interaction is limited Autocratic leaders rely mostly on authority, control, manipulation and hard work

to complete their job (Puni et al., 2016) Autocratic style is now the least popular among leadership behaviors, probably due to farily low levels of job satisfaction of employees working under 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 and autocratic 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 employee job satisfaction

3 Methodology

Quantitative approach was employed with survey questionnairs conveniently and directly sent to front-line employees who are working in luxury hotels and restaurants in Ho Chi Minh city to collect data with clear guidance for them to answer correctly The list of four and five stars 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 to find out the relationship between leadership and employee loyalty through the mediation of employee satisfaction There were two parts in the questionnaire The first part’s questions was mainly for testing the hypotheses or the influence of independent variables on dependent variables Respondent were asked to give their opinion by following the 5-point Likert Scale from 1 - Strongly Disagree

to 5 - Strongly Agree The second part focused on personal information 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 greater than 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 this variable was also acceptable

Table1: Summary of Dependent Variables with Reliability Coefficients

(N=352)

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 were highly reliable for further analysis

Table 2: Summary of Independent Variables with Reliability Coefficients

(N=352)

All items from the two tests had factor loadings greater than the cut point of 5 so they were all included The Eigenvalues of the extracted factors were greater than one and the total variance explained was 54.4% for the dependent variables and 67.88% for independent variables, 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 (%)

Frequency (N) Valid (%)

It can be concluded that the sampling population’s gender was relatively balanced, with 46.9% participants were male compared to 53.1% of females Approximately 95% of the population is young, aging from 18 to 35 years old Similarly, the majority of participants were single (82.7%) Only 17.3% of them were married They mostly hold employee positions (74.1%), some are junior managers (21.9%), few are middle managers (4%) 41.8% of respondents have worked for less than 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 this population 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

EMLOY 1 2 3 4 5 6 7

Note: * Significant level at p < 05

Table 4 illustrated the correlation coefficients between independent variables, mediating variable and dependent variables Except for autocratic leadership whose influence was negative on loyalty and satisfaction, all other factors were confirmed to be positively correlated with employee loyalty and the mediating factor employee satisfaction Change leadership and task oriented leadership had the strongest correlation with EMLOY, implying that the more task and 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, in turn 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

Note:

- 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 have direct 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 strongest contributor to explaining the mediating variable The other examined factors, namely AUTOLEAD, ETHILEAD, PARTLEAD, CHANLEAD, with p>.05, had no impact on EMSATIS The ANOVA 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

Variables Unstandardized

Note:

- Dependent Variable: EMPLOY: Employee Loyalty

- Predictors: AUTOLEAD, TASOLEAD, ETHILEAD, PARTLEAD, RELALEAD, CHARILEAD, CHANLEAD, EMSATIS

- ANOVA: F (8, 342) = 18.706, Sig =000, p < 05

- Model summary: R 2 = 304

Table 6 examined whether the independent variables and mediating variable directly affect employee satisfaction or not With p < 05, three variables AUTOLEAD, TASOLEAD and CHANLEAD showed good correlation with EMLOY, corresponding standardized coefficients were 080, 270 and 225 respectively Task oriented leadership was the most significant factor interpreting employee loyalty Other factors, namely ETHILEAD, PARTLEAD, RELALEAD and CHARILEAD were excluded due to high p-values Mediating factor EMSATIS and dependent variable EMLOY show strong positive relationship with β=.135, p<.05 The more satisfied the employees feel, the more loyal they are to the company R-square equaled 304, implying that the seven independent variables and mediating variable EMSATIS explained 30.4% of the variance in employee loyalty

5.3 Path Diagram of Employee Lo y alty

From the analysis above, a path diagram to generalized the findings of effects of leadership behavior on employee loyalty is established as follows The indirect effect of an independent variable on another dependent through the mediation of a third variable was the total of independent variable’s effect on the intervening variable and intervening variable’s effect on the dependent variable (Preacher and Hayes, 2008)

As can be observed, EMSATIS was the intervening variable standing between the leadership styles and EMLOY Three variables whose effects were significant on EMSATIS, including TASOLEAD, RELALEAD, CHARLEAD also had indirect effects on EMLOY AUTOLEAD and CHANLEAD only displayed direct significance on EMLOY

Employee Satisfaction

Relation Oriented

Leadership

Change Oriented

Leadership

Autocratic Leadership

Employee Loyalty

.374

Task Oriented

Leadership

Charismatic

Leadership

.181

.225

.270

.135

.080 119

5.4 Total causal effects on employee loyalty

The table of total causal effects on employee loyalty clearly included the coefficients of all dimentions having indirect and direct effects on loyalty According to the result and testing all the hypotheses, the factors with highest total effect on employee loyalty was the task oriented leadership (.286), followed by change oriented leadership (.225), employee satisfaction (.135), autocratic leadership (.080), relation oriented leadership (.050) and the least influencial one was the charismatic leadership (.024) However, this effect was considered very small

Table 7: Direct, Indirect, and Total Casual Effects

6 Discussions and recommendations

6.1 Discussions of findings

The main concentration of the research lied in the effects of leadership styles on loyalty, with employee job satisfaction acted as a mediating variable Seven leadership behaviors were taken into account, including: autocratic leadership, task oriented leadership, ethical leadership, relation oriented leadership, participative leadership, charismatic leadership and change oriented leadership After conducting all necessary testings, it has been concluded that task oriented, relation oriented and charismatic leadership had direct affect on employee job satisfaction An increase in either one of these three elements will lead to a rise in employee satisfaction, esperically relations oriented leadership style, whose effect yielded the highest correlation with EMSATIS

Similarly, task oriented, change oriented and autocratic leadership were the three factors having significant influence on employee loyalty Loyalty was indirectly influenced by task oriented, relation oriented and charismatic leadership through mediating factor employee satisfaction The result showed relative consistency with the theories used to build the conceptual model, while some of the findings were different from previous studies The overall result showed that task oriented leadership had the highest significant impact on loyalty, both directly and indirectly through EMSATIS, therefore, leaders should pay more attention to this factor in order to improve the level of commitment the employees hold towards the organizations While the rest of the mentioned leadership behaviors can be commonly observed and applied in many organizations, autocratic leadership, interestingly, also demonstrated positive relationship with loyalty It is one particular characteristic of hospitality industry, whose main workforce is young, inexperienced and often in need of special guidance and instruction from leadership team, thus, this special aspect that may not be found in other fields The leaders should also take note of this finding to adjust their behaviors accordingly More detailed discussion for improvement will be presented in the recommendation section below

6.2 Limitations and Implications for Future Research

Although the research successfully captured the significant correlations of leadership behaviors on employee satisfaction and employee loyalty, as well as confirming the specific aspects where organizations must concentrate on improving, there are still limitations and suggestions that future researchers can further develop First of all, the study examined employee satisfaction only through the effects of leadership behaviors and did not take into account other factors whereas these factors can greatly affect to employee satisfaction R square was 304, which meant that the independent factors used in this research could only explain 30.4% of employee loyalty, therefore, there can still be many other factors affecting loyalty whose significance this research failed to test Eldred and Madden (2011) confirmed that pleasant working environment with proper monitoring is positive towards achieving employee loyalty, while Malinchak (2010) further proved that employee education as a significant factor Therefore, in order to capture the full picture of employee loyalty, aside from the seven leadership styles, it is recommended that the mentioned factors (i.e., working environment, employee training program) be considered and added to model

Furthermore, this research only applied quantitative method Data was collected via a questionnaire that had been built based on hypotheses and scales from previous studies, hence, the questionnaire failed to capture open-ended questions that could otherwise suggest more aspects and practical comments to the problem

Finally, the scope of this research focused only on employees in the hospitality industry Thus, the significantly effective leadership behaviors in this research may not be applicable in other fields where the job characteristics and nature are different The sampling was purely collected in Ho Chi Minh City, data was collected after interviewing 352 respondents working only in luxury hotels and restaurants, implying that the sample size was limited, therefore increasing the possibility of the results being partially or fully inapplicable

in other regions or workers in less luxurious environment Additionally, employees working in luxury hotels

in other regions may not find these findings appropriate since each specific place has their own different cultures and lifestyles In the future, it is suggested that researchers organize repeated tests with bigger sampling pool, enlarge the geographic scale and revise the hypotheses, adding more elements to the issue in order to generalize the whole industry

6.3 Recommendations

The empirical result proved in this study showed that employee loyalty can directly and indirectly be most significantly improved through task oriented leadership One obvious weakness of task oriented leadership style is lack of creativity and low morale in employees because they do not want to take risk of breaking the rules set by leaders Hence, creative employees may feel discouraged and demoralized, resulting in higher turnover rate (Bass, 1990) The daily tactical workload pressure can prevent innovation as well (Berglund and Renstrom, 2012), causing the subordinates to feel bored and tired of repeating the same tasks daily Kanaga (2007) suggested that leaders can try to develop employees in an innovative context, which includes dealing with complicated issues and delegating routine tasks to the team Through such difficulties, employees can improve their individual skills, gain more self-confidence and increase morale It is important that the leaders know how to interfere and make employees understand that problems are possibilities, not obstacles, and there are chances of promotion and individual development for everyone in his team Task oriented leaders can also develop and share their vision with employees while encouraging them to overcome obstables, in turn establishing firmer employee loyalty (Robbins, 2003) For example, it is common practice of reception team in luxurious hotel to let the morning shift supervisors or guest relations officers assign rooms for arriving guests and receptionists just perform the check-in procedures Leaders can try to give more authority by allowing receptionists to assign rooms and they can review the performance and make necessary changes The department can also organize competition to shorten daily procedures and encourage innovative ideas Similarly, as suggested by Antoncic and Antoncic (2011), employee loyalty can be developed when they