www.emeraldinsight.com/0142-5455.htm
ER
29,6 Psychological climate and
individual performance in India:
test of a mediated model
664
Soumendu Biswas
Department of Personnel Management, Xavier Institute of Social Service,
Ranchi, India, and
Arup Varma
Institute of Human Resources & Employee Relations, Loyola University Chicago,
Chicago, Illinois, USA
Abstract
Purpose – The purpose of this study is to investigate the relationship between psychological climate
and employee performance, in the Indian environment, in order to understand better the conditions
that foster high levels of in-role and extra-role performance.
Design/methodology/approach – Based on a literature review, the paper includes organizational
citizenship behaviour (OCB) and job satisfaction as mediating variables. Further, it uses data obtained
from 357 managerial employees in the manufacturing and service sectors in India to analyze the
relationships.
Findings – The results support the hypotheses that an individual’s perception of the psychological
climate in the organization has a significant positive impact on his/her willingness to engage in OCBs,
as well as on his/her job satisfaction levels. Further, OCB and job satisfaction levels have a significant
impact on individuals’ performance.
Research limitations/implications – The present study relies exclusively on cross-sectional data,
limiting the ability to generalize beyond a point. Further, a significant majority of the respondents
were male, again limiting generalizability.
Practical implications – The findings suggest that Indian organizations need to pay attention to
employee perceptions of the work environment, and that human resource strategies should go beyond
establishing policies and procedures to fostering a employee-friendly work environment that promotes
both in-role and extra-role performance.
Originality/value – This study emphasizes the importance of both in-role and extra-role
performance in the Indian context. Further, given India’s rise on the world economic scene, the
findings suggest that organizations wishing to sustain their competitiveness and growth levels need to
pay attention to their employees’ perceptions and beliefs.
Keywords Organizational culture, Employee behaviour, Job satisfaction
Paper type Research paper
Introduction
Over the last few years, several authors have noted the increasing importance of India
on the world economic front (e.g. Kapur and Ramamurti, 2001). Indeed, the economic
reforms in India, started in the early 1990s, have resulted in numerous changes in the
Employee Relations way Indian businesses operate. Further, economic liberalization has seen a substantial
Vol. 29 No. 6, 2007
pp. 664-676 increase in foreign direct investment, and an influx of multinational corporations
q Emerald Group Publishing Limited (MNCs) setting up operations in India (Budhwar and Debrah, 2004). This has posed
0142-5455
DOI 10.1108/01425450710826131 some interesting challenges to domestic Indian companies that were hitherto used to
doing business in the traditional manner, given that they were operating in a “closed Psychological
economy”. The competition presented by MNCs (for market share and both qualified climate in India
employees), has resulted in a gradual but definite move from a rigid and bureaucratic
model to one that is more flexible and adaptive.
In this connection, it should be noted that India is a large country comprising
numerous cultural norms and beliefs. Consequently, there are strong influences of
national and socio-cultural norms and beliefs on organizational policies, practices, and 665
design (Budhwar and Sparrow, 1997). Further, managers in India believe that like other
upcoming economies, such as China, the Indian economy should also be marked with
an “image” that is considered unique and different from traditional ways of performing
business (Varma et al., 2006). In many ways, this feeling of uniqueness arises from the
fact that managerial philosophies have always represented the national diversity and
cultural norms of India (Chatterjee and Hueur, 2006). Organizational structures and
designs, for example, have always reflected the power-distance and collectivistic
nature of the Indian national culture (Hofstede, 2001).
However, the thriving economy and the arrival of the MNCs have begun to change
the Indian workplace dramatically. For example, the availability of new jobs and the
stress introduced by the competitive environment are resulting in a higher turnover
and absenteeism rates in many organizations (Budhwar et al., 2006).
Clearly, it is critical that Indian organizations review their HR policies and practices
and go beyond simply establishing rules and regulations to create a positive
psychological climate where employees feel that they are valued and treated with
respect. In this connection, in a study of the relationship between fairness and
performance in the Indian context, Aryee et al. (2004) reported that procedural justice
was significantly related to individual performance.
In this study, we investigate the relationship between psychological climate and
employee performance through an examination of two critical mediating variables:
(1) job satisfaction; and
(2) organizational citizenship behaviour (OCB).
As the Indian economy continues to grow, it is critical that employers make efforts to
better understand the attitudes and behaviours of individuals in order to help improve
employee performance. Further, as Aryee et al. (2002) note, examining “social exchange
processes” in collectivist cultures such as India will help us better understand the
factors that motivate and drive individuals in cultures that are different from the West,
since individuals in such cultures hold different values. We now turn our attention to a
discussion of the key variables in our study.
Employee performance
According to the literature, there are two dimensions of employees performance at the
workplace – in-role and extra-role (Brief and Motowidlo, 1986; Williams and
Anderson, 1991; Wolfe Morrison, 1994). While in-role performance is defined as an
employee’s action to fulfil the formal requirements of his/her job, extra-role
performances refers to those activities performed by an employee that are outside the
boundaries of formal job descriptions and are performed by employees under their own
discretion (Williams and Anderson, 1991). Historically, in-role performance has been
paid the most attention, as is evident from the substantial literature on performance
appraisal (see Murphy and Cleveland, 1995). Not surprisingly, extra-role performance
is rarely rewarded, and almost never included in evaluations. We believe this is a
rather narrow view of performance, as the impact of extra-role performance on
organizational efficiency is well documented, as we note above. Accordingly, for
purposes of this study, we operationalized performance as being made up of two
distinct constructs – in-role and extra-role performance.
Based on the above discussion, we tested the following hypotheses (Figure 1
presents the hypothesized model):
H1. An individual’s perception of the PC will have a significant and positive
influence on his/her displayed OCB.
H2. An individual’s perceived PC will significantly and positively affect his/her Psychological
level of job satisfaction. climate in India
H3. The level of an individual’s OCB will have a significant positive impact on
his/her performance.
H4. The level of job satisfaction of an employee will have a significant and
positive impact on his/her performance. 669
Method
Sample
The respondents in our study were executives/managerial cadre employees from
public as well as private sector manufacturing and service organizations in India. Data
were collected from 357 participants, through contacts in the HR departments of these
organizations. A cover note describing the purpose of the study was attached to each
survey, and it also explained the voluntary and anonymous nature of the study.
Further, participants were assured that the responses would be aggregated for
purposes of analysis. Completed survey instruments were returned to the researcher(s)
via mail, in pre-stamped envelopes provided along with the surveys.
Of the 357 participants, 180 (i.e. 50.42 percent) belonged to the manufacturing sector
companies, while 177 (i.e. 49.58 percent) belonged to service sector organizations.
Further, 83.9 percent were males, while 16.1 percent were females, and the average age
of participants was 36.9 years. The average weekly hours spent at work was 52.4, and
the average years of work experience of the respondents was 10.7. Finally, 7.3 percent
belonged to senior management, 35.6 percent were from middle management, and 57.1
percent reported working at junior management levels.
Measures
PC. PC was measured using the Psychological Climate Measure (Brown and Leigh,
1996). This scale comprises six factors, namely supportive management, role clarity,
contribution, recognition, self-expression, and challenge and includes 21 items (e.g. my
boss is flexible about how I accomplish my job objectives; management makes it
perfectly clear how my job is to be done; and I feel very useful in my job). The
reliability measure of this scale was 0.90.
OCB. OCB (a ¼ 0:81) was measured using 16 items from the OCB scale reported by
Moorman (1993). Out of these 16 items, four items measured conscientiousness, four
items measured courtesy, three items measured altruism, and five items measured civic
virtue. Some of the items included: I do not abuse the rights of others, I am mindful of
Figure 1.
The path model associated
with the latent constructs
ER how my behaviour affects other people’s jobs, and I obey company rules and
29,6 regulations, even when no one is watching.
Job satisfaction. To measure job satisfaction (a ¼ 0:89) we used the 11-item Job
Satisfaction Instrument (Schnake, 1983), including items such as satisfaction with the
amount of freedom on the job, the chance to learn new things, and job security. Three
items on the scale measure extrinsic satisfaction, four items measure intrinsic
670 motivation, and four items measure social satisfaction.
Employee performance. We measured employee performance (a ¼ 0:90) using
Lynch et al.’s (1999) scale comprising 16 items, of which ten measure in-role
performance (e.g. employees adequately complete assigned duties) and six measure
extra-role performance (e.g. employees continue to look for new opportunities to
improve effectiveness of their work).
Results
Table I presents the means, standard deviations, inter-item correlations, and reliability
indices for the key variables of our study. As can be seen in the table, the key variables
were significantly correlated: PC and OCB (r ¼ 0:44, p , 0:01); PC and job satisfaction
(r ¼ 0:63, p , 0:01); OCB and employee performance (r ¼ 0:63, p , 0:01); and job
satisfaction and employee performance (r ¼ 0:66, p , 0:01).
In order to examine the linkages, we conducted multiple regression analyses on the
variables included in our study. Table II shows the standardized regression estimates
between the key constructs. As shown in Table II, PC significantly influences OCB
(standardized b ¼ 0:65, CR ¼ 8:03), as well as, job satisfaction (standardized b ¼ 0:78,
CR ¼ 9:78). In turn, OCB significantly predicts employee performance (standardized
b ¼ 0:57, CR ¼ 9:20). Finally, job satisfaction was found to have a significant positive
impact upon employee performance (standardized b ¼ 0:43, CR ¼ 8:05).
Next, in order to calculate the fit indices that explain the relationships between the
hypothesized paths among the latent constructs, we used the AMOS 4.0 SEM
procedures (Arbuckle and Wothke, 1999). SEM procedures suggest that the level of
significance is based on the critical ratio (CR) of the regression estimate (Byrne, 2001).
Mean SD 1 2 3 4
Standardized b CR
Discussion
This study was designed to examine the relationship between psychological climate
and employee performance in Indian organization.
The first hypothesis stated that an individual’s perception of the PC will have a
significant and positive impact on his/her displayed OCB. The support for this
hypothesis, in our study, points to the changing nature of the Indian work
environment. As discussed in the initial section of our paper, the opening up of the
Indian economy has ushered in considerable reorganization and restructuring of
policies and procedures within Indian firms. At the same time, there has been a growth
in demand for knowledge workers. Consequently, we observe that the present-day
Indian workforce is more diverse. Additionally, today’s employees are willing to
display behaviour not necessarily described by their job, provided they perceive a
favourable day-to-day work environment.
Fit Indices GFI AGFI PGFI TLI NFI CFI RMSEA Normed x 2
Proposed model 0.97 0.94 0.56 0.99 0.97 0.99 0.03 1.38 Table III.
Independence model 0.27 0.16 0.23 0.00 0.00 0.00 0.27 27.65 Fit indices
ER In the second hypothesis we had postulated that PC would significantly and
29,6 positively impact an individual’s level of job satisfaction. The support for this
hypothesis suggests that employees in Indian organizations are increasingly satisfied
with their jobs in cases where they perceive a favourable psychological climate. A
supportive management team that understands the needs and requirements of the
employees is clearly critical in order to provide employees with the elements needed to
672 help them enjoy their work. In addition, it is clear that when employees feel that they
are valued members of the organization, their level of job satisfaction is significantly
affected in the desired direction.
In our third hypothesis, we stated that the level of an individual’s OCB will have a
significant and positive impact on his/her performance. This hypothesis also received
strong support. A display of high levels of OCB indicates that individuals identify
themselves with their organization (Pattnaik and Biswas, 2005) and hold favourable
affective commitment towards their organization (Biswas, 2006). Thus, manifestation
of OCB by individuals indicates their affective attachment to their work and their
workplace. This, in turn, leads to enhanced performance level by individual employees.
In fact, psychological attachment of an employee to his/her job would make him/her
contribute more and more towards his/her in-role requirements. At the same time, the
escalation of involvement with the organization would make the individual employee
exhibit higher levels of extra-role performance.
In the fourth and final hypothesis, we stated that the job satisfaction of an employee
will have a significant and a positive impact on the employee’s performance level.
Earlier, we had operationalized job satisfaction on the basis of extrinsic, intrinsic, and
social satisfaction as proposed by Schnake (1983). Indeed, extrinsic factors such as
level of pay and job security are fundamentally critical for an employee to perform well
on the job. However, given the transitional nature of the Indian workforce in the
contemporary business scenario, it is clear that if organizations are to extract optimal
performance from their employees, they must create an environment whereby
employees derive intrinsic and social satisfaction.
Contemporary human resource strategies in India are geared towards fostering
development and team-building by espousing a spirit of mutual belief and functional
interdependence (Krishna, 1990). In this connection, Krishna (1990) further suggests
that HR departments can play a critical role in the improvement of the motivation and
commitment levels of individual employees. Our results support this assertion, by
confirming the significant positive impact of perceived psychological climate on
individuals’ job satisfaction and OCB.
Our findings offer both theoretical and practical implications. Theoretically, we
have reinforced the distinction between in-role and extra-role performance. Future
research, including investigations in the area of performance appraisal, would do well
to include extra-role performance as a distinct construct in the study of individual
performance. Next, we have demonstrated the generalisability of the construct of
psychological climate, which has hitherto been studied only in a Western context.
Thus, it appears that psychological climate, as a construct, transcends the
individualistic/collectivistic distinction of national cultures.
From a practical perspective, our findings offer several important pointers. First, it
is clear that individuals in the Indian workplace are concerned about the way they are
treated in the workplace, and that their perception of the work environment can
significantly impact their levels of satisfaction. Further, the perceived lack of a suitable Psychological
psychological climate may also lead individuals in Indian organizations to limit any climate in India
extra-role performance. In other words, individuals may do just what the job requires
of them, and withhold OCB, such as helping newcomers to the organization. Given the
speed at which the Indian economy is growing, and the concomitant influx of
expatriates to India, this could spell trouble for global-minded organizations, as local
employees can play a critical role in the success/failure of expatriates (see, for example, 673
Varma et al., 2006).
Overall, our study has pointed to some very important findings, and the
contribution is timely as we extend the investigation of psychological climate to India,
one of the fastest growing economies in the world. However, we would be remiss if we
did not note the limitations of our study. First, our study is based on cross-sectional
data, so our causal findings are constrained by the nature of our design. We hope
future investigations will incorporate longitudinal and other designs. Next, the
respondents in our study were overwhelmingly male (84 percent). This might limit the
generalisability of our findings to other workplaces in India, such as BPOs, where
females are increasingly assuming managerial roles.
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Further reading
Montes, F.J.L., Fuentes, M.D.M. and Fernández, L.M.M. (2003), “Quality management in banking
services: an approach to employee and customer perceptions”, Total Quality Management,
Vol. 14 No. 3, pp. 305-23.
Rao, T.V. (1990), Excellence through Human Resource Development: Improving Productivity and
Competence, Tata McGraw-Hill, New Delhi.
Varma, A., Toh, S.M. and Budhwar, P. (2006), “A new perspective on the female expatriate
experience: the role of host country nationals”, Journal of World Business, Vol. 41,
pp. 112-20.
Corresponding author
Arup Varma can be contacted at: avarma@luc.edu