Faizan Ahmed - 749 (HRM Thesis 1)

The Impact of Contingent Reward, Charismatic Leadership and Individualized Support on Commitment to Change

By

Faizan Ahmed

Thesis submitted in partial fulfillment

of the requirements for the degree of

Master in Business Administration

at Research Centre in Iqra University

North Nazimabad, Karachi

Iqra University

May, 2015


Contents

CHAPTER 1: INTRODUCTION....................................................................................................

1.1 Introduction.......................................................................................................................

1.2 Problem Statement.................................................................................................................

1.3 Research Objectives:............................................................................................................

1.4 Operational Definitions:.....................................................................................................

CHAPTER 2: LITERATURE REVIEW.......................................................................................

CHAPTER 3: RESEARCH METHOD.........................................................................................

3.2 Hypotheses......................................................................................................................

3.3 Research Design..............................................................................................................

3.3.1 Type and Nature of Study........................................................................................

3.3.4 Procedure of Data Collection...................................................................................

3.3.5 Statistical Techniques..............................................................................................


CHAPTER 1: INTRODUCTION

1.1 Introduction

The purpose of this study is to examine different factors that affect a company,

organization or even an individual’s commitment to change. These variables, when

carefully controlled can be the determining factors for success. First we will analyze the

effects of Charismatic Leadership on an organization’s level of commitment.

The effect of good leadership on initiatives taken for change have since long been

ignored by the Academia. At the same time, studies done on organizational behavior

during times of change within an organization have failed to link with more extensive

theories about leadership (Psychology Today, 2015) In order to understand the impact of

change and how successful employees can cope to said change initiative, we will look at

the employee’s behavior from two different angles; one is rooted in Leadership literature

and the other has its basis in Organizational literature. For now we shall only discuss the

former; what leadership style is best suited in a changing environment? How does it make

an organization better understand the change, imposed on it? According to Bass and

Regio (2006), Transformational leadership is heavily linked with an individual’s

charisma, his ability to sell an idea, his effectiveness in convincing his followers that

change is inevitable and is in fact necessary. In order to better understand the effect of

Charismatic leadership on individuals to fully commit to change, we must look at

leadership from a broader prospective. We must move on from organizations and larger

companies to a pool of followers which are even more diverse, we must examine the

effects of leadership at nation-wide level. Take the example of Martin Luther King Jr.


Through his intense rhetoric and charismatic personality, he was able to hold great

influence over the population of the USA, black and white. Take the example of Gandhi

and Mr. Jinnah from the sub-continent. Through their charismatic personalities; Gandhi

with his calm personality and Jinnah with his sharp and cunning tactics were able to end

almost a century of colonialism in India and more importantly, they were able to

influence and reason with an impulsive nation like the Indians. They were able to defeat

the British Empire through their very own constitution. History is filled with examples of

such leaders. Now, we take these examples, and shrink the pool of followers to an

organizational level. If these great leaders could change the mind of nations and make

them accept change, then there is no reason a certain boss/leader can make his employees

believe that yes, change is beneficial for them (Conger & Kanungo, 1988). A form of

leadership which is today considered synonymous with charismatic leadership is

‘transformational leadership’. The reason for this is quite simple, both type of leaders

inspire their followers while performing a task, both the types bring excitement and

enthusiasm into the group which creates an overall positive environment to work in,

hence producing better results. So now, in order to understand charismatic leadership we

must delve into the depths of transformational leadership too. The characteristics of a

transformational leader are one’s which truly inspire the employee to do better, a

transformational leader is a model of integrity and fairness, the one who is just and fair.

Such a leader sets clear goals and has very high expectations; he has a clear head and

expects the employees to have one too. He expects them to give a topnotch performance

because he too has fully invested himself to the task at hand. At the same time, a

transformational leader encourages his employees to do better, to excel at their work and


add real value to the task at hand, in order to further encourage his followers to excel by

providing them with recognition, this has the added benefit of encouraging the rest of the

employees, who do not have the will to excel. Another important quality of a

transformational leader is his ability to stir the emotions of his followers, to truly ignite

their emotions and motivate them to do the task at hand with great passion and

enthusiasm. While doing this he compels his followers to look beyond their self-interest

and look at the broader picture, to think of the benefit of people other than his own.

Lastly, but most importantly, it is imperative for a transformational leader to set unreal

goals for his followers, this may sound weird but this is as a matter of fact the only way

for one’s employee’s to actually improve and build his/her skills.

From this we conclude that in order to commit one’s employees to change, one

must become a charismatic leader and in order to become a charismatic leader one must

hone the skills of a transformational leader. However like all theories there are certain

downsides; if we an organization is dependent on a leader’s ability to lead then so will the

employees ability to work be dependent on said leader. If for some unforeseen reason the

leader decides to leave the organization or is absent from work for a few days then the

organization and the workers will become handicapped and their productivity will

drastically decrease, the workers will get demotivated and the organization in turn will

suffer.

Another factor which determines an individual’s commitment to change is the

reward he will get from it. It is natural for human beings to be selfish, whenever an

employee does something for the organization he does so expecting some reward in some


form, it can either be material or something as simple as a pat on the back but a reward

must be there for the taking (Wilson, 2003)

Now, each company strives to develop a culture and it is in the company’s best

interest to develop such a culture which will increase the output of said company, if such

a culture is to be developed then a proper rewards and recognition system is a

compulsion. Why is it important to tailor a company’s culture as such? The answer to that

lies in the fact that in today’s extremely competitive environment it is becoming

increasingly necessary to have employees who can asses and manage risk, they

organizations need their workers to be proactive and work-centric and be able to produce

results that show. Or if we consider a broader example, like that of a political party then

in this case a party needs its employees to be motivated and dedicated to the cause, then

they must give their worker some reward in any form, something he/she can cherish and

value. Thus it is imperative for any organization, not matter how big or small to reward

its employees, to show them that their work is valued and they as a dedicated member of

the organization add value to the company and help in enhancing the output. If a certain

company wants its employees to embrace change and welcome it with open arms then

they must offer some incentives, these offerings on behalf of the company can help the

can help said company enforce its changes at a more faster pace.

However, with this too there are certain pitfalls and drawbacks. For example, if

we offer cash bonuses to hard-working employees then this is the only a temporary short

term solution, this will not buy his long term loyalty and will only make his work

dependent on that reward. Furthermore, if an organization rewards a selected few and not

the rest then this can create enmity or hatred amongst colleagues. Also one must take into


account the fact that in large organization this practice can become very tedious as

looking for say a dozen individuals in a thousand can prove to be a very tedious task

(McMahon, 2010).

The last factor or variable that shall be discussed is the effect of an individual’s

attention on the performance of an employee and his willingness to accept and commit to

change. As mentioned above, a charismatic/transformational leader is he who gives

individual attention to his follower, which in turn motivates him to strive for excellence

which indefinitely will help him to commit to a change. Furthermore, when an

organization is going through changes then it is imperative to engage the employees with

individual support. What this does basically is solve the issues of an organization from

the grass root level, which in turns strengthens the organization altogether providing a

more concrete platform for the employee to commit to change. This strategy helps us

implement the change from a bottom up approach. You change the individual, his

mindset, his thinking in order to change the organization and make it grow. To this too

there are certain drawbacks, individual support is not a very practical idea for large

organizations which employee thousands, one would have to establish a proper portfolio

for the cause which can prove to be a very costly venture.

We have discussed 3 key independent variables which determine a dependent

variable, namely Commitment change. What we’ve concluded is that in order for a

worker to fully embrace the idea of change, all three factors i.e. Charismatic Leadership,

Rewards and Individual support are very important. What we’ve concluded is that a

change can never be fully implemented in an organization if one of these key factors is

missing. Rewards will not be appreciated if the person who rewards you is not


charismatic, individual support is of no use if there are no rewards to boost morale and

the chain goes on and on (Steinhardt.nyu.edu, 2015).

Industry:

Now the question arises, how do these variables affect the automobile industry?

And when we talk about change in the automobile industry, what is it exactly that we’re

talking about? In the past 30 years the automobile industry has transformed rapidly, with

the demand rising one must rethink the entire business modal on which the industry

operates, although the old tried and tested methods have their significance but it is those

companies who think out of the box, who persist and stand the test of times. Here is

where true leaders come in, charismatic leaders who believe in transformation and who

can make their workers believe, so are the ones who can truly commit to the success of a

company. For example, in the 20th century, cars were built as high performance machines

with high torque and acceleration, the demand for such vehicles was high. But now in the

modern age, the 21st century people want fuel efficient cars which are also environment

friendly. Now if some manager of some big manufacturer would’ve caved in to the

demands of his employees and not changed the way the company worked, if the company

did not provide individual support to each employee and rewards to those who did change

then that company would not have made it to the 21st century. And this has happened,

there were hundreds of car manufacturers and now there are merely a few left (Plunkett,

2003)


1.2 Problem Statement

Organizational changes are planned and organized to ensure the growth and

development of organizations. Changes are meant to happen, which will help in bringing

positivity in the organizations (Klein & Knight, 2005). Commitment to change refers to

the desire to provide support to the organizational changes, which can promote growth,

development, and success of the organization. Innovation and creativity are the two key

factors that influence changes in an organization (Teare & Rayner, 2002). It is not

necessary that changes always lead to success, at times, the implementation of plans

result in failure, but that does not mean that changes are avoided at different stages.

Changes are important part of the organization, which play an important role in preparing

the organization to achieve the strategic goals and targets (Choi & Price, 2005).

According to commitment theory which was developed by Richard Walton; employees

perform best when they are given broader responsibilities, encourage contributing and

helped to take satisfaction in their work. Guest (1997) in support of commitment theory

describe the significance of binding of employees to the organization and obtain their

behavior outcome of increased efforts and cooperation.

Organizational undergo different processes to bring changes in their functions,

operations, systems, hierarchy, culture, and policies (Meyer & Allen, 1991). The process

of change includes the steps that help in converting an organization from the current state

to the desired state (Sinclair et al., 2005). There are some prominent organizational

change models that are used by the managers and leaders to achieve the desirable changes

and developments in the organization. Commitment towards change can help in bringing


relevant changes, and it is the responsibility of the leaders and managers to bring

effective changes in the organization (Garvin, 2000). (Herscovitch and Meyer 2002);

present a practical solution that affective commitment to change refers to a desire to

support a change, continuance commitment to change is based on a recognition that there

are costs associated with resisting change, and normative commitment to change reflects

a sense of obligation to be supportive. Contingent reward offer tangible and intangible

support to their followers, set directions, and determine the reward for goal achievement

(Walumbwa et al., 2008) and it impact will directly influence employees to perform his

best effort to achieve organizational goals and organizational commitment level. Most of

employee are not commitment to their job and the reason behind is lack of Leadership

and reward whereas there are various studies which consider that the leaders emphasize

on providing employees with a satisfactory and challenging environment, which helps

motivating employees and motivated employees will perform better as compared to

others, which results in better performance and organizational commitment

The individual’s perspective towards change might differ from the organization’s

point of view. Employees are important part of the organization, and it is essential that

they accept the changes and show their commitment towards it (Henning-Thurauet.al,

2002). The leaders use different leadership styles to motivate individuals to focus towards

bringing changes. The process of change is highly affected and influenced by the

leadership style and planning process, which depends on the goals and objectives of the

organization. Charismatic leadership is one of the commonly used leadership style, which

helps the leaders in influencing their own beliefs, ideas, values, thoughts, and perceptions

on others (Paton & McCalman, 2000). Today, leaders are trying new models and


innovative styles to lead their organizations, unlike implementing the traditional

leadership styles and models. The charismatic leaders transform the needs and desires of

their team members and employees, and make them understand the importance of

change, innovation, creativity, and development (Lehesvirta, 2004).

Effects of commitment to change vary across career stages. The importance of

attention for commitment towards change is represented by its relation to contingent

reward and Leadership (Becker, 1996). Contingent reward offer intrinsic and extrinsic

support to their followers, set direction and describe the reward for goal achievement

whereas individualized support plays a vital role in coop up the people from the stressful

situation by individual. By adopting individualized support, leaders respect their

supporters while offering support and guidance, show honesty and take personal needs

into account (Base & Riggo, 2006).

In context of Pakistan, researcher have conducted many surveys and studies to

identify the impact of leadership on commitment to change but there is a need of more in-

depth research to find the significance of Charismatic Leadership, Reward and

individualized support and its impact on commitment to change. Hence the study

identifies the gap that failure of commitment to change creates a factor of employee

demotivation which results in less productive and unable in achievement of goal. This

study would help the organization to understand the impact of Leadership, Reward and

Support on commitment to change and to be design it in such a way that organization

achieves its goal effectively and efficiently.

1.2 Research Objectives:


Thus the objectives are established as:

1. To examine the relationship among Charismatic leadership, Reward,

Individualized support and Commitment to Change

2. To analyze the impact of Charismatic leadership, Reward, Individualized

support on Commitment to Change

Research Questions:

So as to accomplish previous research objectives, this study will answer the

question stated below:

1. Is there any relationship among Charismatic leadership, Reward, Individualized

support and Commitment to Change?

2. Does Charismatic leadership, Reward, Individualized support have a significant

impact on Commitment to Change?

1.4 Operational Definitions:

Now we will try to define the above stated variable in terms of Pakistan and how

they affect the local demographic.

A charismatic leader in the Pakistani society is one who truly believes in his

workers / followers / employees, who will look onto him without biasness, irrespective of

his caste, color, creed and religion. Adding to that our society accepts one to be a man of

charisma if he possesses high morals and has excellent work ethic. A manager at an


automobile factory should be highly motivated, positive and down to earth, in order to

connect to his employees, most of which are from decent backgrounds (Hairston, 1965)

When we talk about rewards, Pakistan as a nation is not as materialistic as the

West, yet, as mentioned earlier, most of the local labor belongs to the poor backgrounds.

For them, money is motivation. Thus, the most effective way to reward an employee,

especially in the automobile factory is to give him a cash bonus, this may include an extra

Eid bonus or anything appropriate.

Now about individual support, this I believe is the key factor when considering

the Pakistani demographic. It is an intrinsic property of human nature to yearn for

personal attention, to be felt special. If an employer in Pakistan can do that, say an

automobile factory really wants his employees to commit to a change then this is the only

way to go about it.

Let’s conclude with the last most important variable, ‘commitment to change’.

People in Pakistan are not very receptive to anything out of the norm; they like to stick to

their conservative traditions and lifestyles. Same is the case with an employee. For

example if an automobile upgrades, an employee might feel his skills have become

irrelevant. In order to overcome this reluctance of the employee, the factors above are of

critical importance.


CHAPTER 2: LITERATURE REVIEW


CHAPTER 3: RESEARCH METHOD

3.1 Proposed Theoretical Framework

Richard Walton (1985) Theory of commitment is considered as a

relevant tool to model the commitment towards change by providing

workers broader responsibilities, encourage contributing and helped to

take satisfaction in their work. The theory contends with high evidence

that employee attitude and behavior towards organizational change

shows a most important factor for success (Armenakis, 1993).

Transformational leadership behavior (Herold, 2008&Seo, 2012; Yu

et.al, 2002) and Individualized Support (Armenakis and Harris, 2009,

Fedor, 2006; Smollan et,al, 2006) has been found to positively affect

employees’ commitment to change moreover the leader sets rewards

in result for best performance for which contingent reward plays a

main role in offering tangible and intangible support to their followers,

set rules, and determine the reward for goal achievement (Bass, 1998

& Walumbwa, 2008). Commitment to change has attracted many

researchers in the past, giving rise to various definitions and models of

change. Coetsee (1999) describes commitment to change as the final

phase of acceptance of change. He believes it to be a product of


knowledge about change, information about change, empowerment,

rewards and recognition for changing and shared visions.

The theory of commitment to change (CTC) proposes three

conceptually independent variables, these variables includes

charismatic leadership, contingent reward & individualized support. As

a general rule, the more transformational leadership style and support,

the more perceived outcomes of an individual in a shape of reward

which as a result directs an individual intention to understand the

importance of change (Lehesvirta, 2004). See Fig 3.1

Figure 3.1

Proposed Theoretical Framework

3.2 Hypotheses

Ha1: Contingent Reward has a significance relationship with

commitment to change.

Individualized Support

Charismatic Leadership

Commitment to Change

Contingent Reward


Ha2: Charismatic Leadership has a significance relationship with


Ha3: Individualized Support has significance relationship with


Ha4: Contingent Reward, Charismatic Leadership &

Individualized Support have a significant impact on commitment to

change.

3.3 Research Design

The research is explanatory research. Researchers focus on

identifying and examining factors that affect employee commitment

towards change by providing charismatic leadership, contingent

reward and support.

3.3.1 Type and Nature of Study

In this study quantitative method has been used to quantify the

relationship and to examine the impact of contingent reward,

individualized support and charismatic leadership on Commitment to

change.

3.3.2 Sampling and Design

For this study we will collect data through a field survey method

whereas all questionnaires will be self-administrated. The respondent


of this study will be the employees working in an automobile industry

in Karachi like previous researcher (Aslam et al., 2010; Ismail et al.,

2010). Since the nature of study is quantitative, so the large sample

size of employees to conclude findings. The reason for selecting

employees of automobile industry as a research population are as

follows:

Firstly, an automobile industry sector is one of the booming

industrial sector other than other sector (Economic Survey of Pakistan,

2006). In Pakistan, presently 32 assemblers including multinationals

with their equity participation engaged in progressive manufacturing /

assembling of different automobiles under the approved deletion

program of the Ministry of Industries and Production, Government of

Pakistan.(Maslehat, 2006).

Secondly, in the latest survey conducted in 2010 (Federal Bureau of

Statistics Pakistan, 2010), an automobile industry is presently

contributing 18.5 percent to GDP in the economy of Pakistan.

Finally, the most important factor for choosing this industry is

that usually the population of workers in such industries are high which

can help the organization in resistance to change. Therefore, it is

considered the most important population for this study.

3.3.3 Instrumentation


Self-administered survey questionnaire is used as an instrument

in this research. This is a sufficient data collection tool to ensure the

accuracy and relevancy of information gathered as the responses are

objective, standardized and comparable (Zikmund, Babin, Carr, &

Griffin, 2010; Sekaran & Bougie, 2010). This framework is an

appropriate tool to model the commitment towards changes through

leadership, reward and individualized support. Therefore Walton,

(1985) theory has been used in this study.

An adaption of commitment to change Questionnaire (CCQ) has

been utilized for the study taken by different sources as mentioned in

Fig 3.2. The questionnaire is divided into two sections A & B. Section A

consist of questions of three independent variables i.e. Charismatic

leadership, Individualized support & Contingent Rewards whereas

Section B consist of one dependent variable i.e. Commitment to

change. All scales in this study were measured by using five points

Likert scale ranging from 1 with strongly Agree to 7 strongly disagree

(Allen & Meyer, 1990).

The construct, sections, number of items and sources are listed in Fig 3.2

Figure 3.2

Variables Section

Scale Items Source


Leadership A 16 Walumbwa , 2008

Reward A 05 Sims and Szilagyi’s, 1975

Individualized

SupportA 08 Walumbwa , 2008

Commitment to

changeB 10 Allen & Meyer, 1990

3.3.4 Procedure of Data Collection

Initially, the questionnaire will distribute to 400 employees of

automobile industries in Karachi. During the data collection process,

self-administered questionnaire, including a covering letter will deliver

to respondent. Furthermore the instrument must be converting in a

soft copy by using Google Docs and then will be circulated to all

concern respondents. In addition to data collection hard copy of

questionnaires will be circulated to related organizations in Karachi

after getting permission by the respective manager in organizations.

The questionnaires includes questions about four factors; Charismatic

Leadership, Contingent Reward, Individualized Support and

Commitment to Change).

3.3.5 Statistical Techniques

All statistical analysis were performed by using SPSS 19.0.

Descriptive analysis of Mean & Standard deviation, Correlation analysis


& Multiple Regression analysis will be applied on data, overall 400 data

will be analyzed. Hypothesis 1, 2 and 3 will be analyze by using

correlation analysis and hypothesis 4 will be analyze by using

regression analysis, hence all data will be analyze on significance level

of 95%.


REFERENCES

Faizan Ahmed - 749 (HRM Thesis 1)

Documents

Transcript of Faizan Ahmed - 749 (HRM Thesis 1)