Organizational commitment of Indian managers in multinational companies.
It is difficult to find any comprehensive work that does not pay attention to the concept of organizational commitment OC (Cooper-Hakim & Viswesvaran 2005, Armstrong-Stassen 2006, Solinger et al. 2008). The exemplary work was carried out by Bcker (1960), Etzioni (1961), Buchanan (1974) and Mowday et al. (1982). In 1990, Allen and Meyer (and Meyer & Allen in 1997) proposed a trichotomic classification: Affective Commitment relates to emotional attachment; Continuance Commitment emphasizes cost-consciousness (close to calculative commitment given by Etzoni); Normative Commitment reflects obligation-consciousness. Researchers have noted that organizational processes and practices deserve attention as potential determinants of OC (Appelbaum et al. 2000, Paul & Anantharaman 2004, Malhotra et al, 2007, Angel et al 2008, Grant et al. 2008). Ogilvie (1986) believed that employee perceptions of organizational policies reflect a sense of reciprocity and the levels of concern that the organization appears to have, for its employees.
Overall, research has shown that individuals and organizations are adversely affected by low commitment and benefit from high commitment (Mathieu & Zajac 1990, Harrison et al. 2006, Meyer et al. 2002, Sahdev 2004). However, the changing employment scenario in a dynamic environment has disrupted employee commitment (Cascio 2003, Chen & Chen 2008). OC in Multinational Companies, therefore, is a topic of growing importance to scholars and practitioners (Taylor et al. 2008, Gelade et al. 2008, Hattrup et al 2008). It is thus worth looking at the status of OC among Indian executives working in multinationals operating in India. Most studies have examined the impact of certain variables on OC, measuring OC with the help of traditional descriptions (Allen & Meyer 1990, Buchanan 1974). However, authors such as Benkhoff (1997) and Swales (2000) have pointed out that it is difficult to make a significant contribution because of the way commitment has been studied. There doesn't seem to be enough work done in this area, in the Indian context. Most of the studies have adopted the questionnaire method to examine OC. Considering these gaps in literature, the current study adopted the qualitative approach, as discussed in below.
The present study is unique in that it does not rely on existing questionnaires on OC. Rather the concept is understood with the help of observations, interactions and interviews with the employees. The grounded theory and the interpretive approach were adopted to understand the nature of OC in the present business environment. According to Locke (2001), the interpretive paradigm focused on understanding the world of lived experience, from the point of view of those who live in it. Therefore, it dealt with subjective reality. Rubin and Rubin (1995) pointed out that interpretive social research focuses on what events and objects mean to people, on how they perceive what happens to them and around them, and how they adapt their behaviour in the light of these meanings and perspectives. An effort has been made to understand employee perceptions and intentions with regard to their association with the organization.
The objective of the study was to understand what is happening to multinational companies in India, as per the lived-in experiences of employees. The employees' commitment towards the organization is based mainly on their perceptions about the four organizational practices: organizational structure, management style, HR practices and non-work practices. The data was collected with the help of non-participatory observations and in-depth interviews with executives at all levels. Data was collected from three multinational companies operating in India. To meet the study objectives, a multiple case study approach (Yin 1984) was adopted. Approximately two months were spent in each organization, to observe employees in their organizational settings and collect the data first hand. Data collection was stopped when similar trends started emerging. Theoretical saturation was the base of ending the data collection phase. 81 executives in the Anglo-American MNC, 59 executives in the Swedish MNC and 24 executives in the Korean MNC were interviewed, across all levels. A sample distribution is given in Table 1. The data was analyzed with the help of a template analysis (King 1994). According to King, a researcher identifies the themes a priori and modifies and adds to them as he interprets the text. Study reliability and validity was achieved keeping in mind the Eisner (1991) and Lincoln and Guba (1985) perspective. The study used multiple sources of data to establish coherence and credibility. A similar process was followed in each case and similar questions were asked to achieve study dependability. The data was validated first with the help of literature reviews and thereafter endorsed by a senior researcher who was researching the same organizations.
Case 1: A Korean MNC (PC-India, Pseudonym)
It was noticed that the bosses interacted in a rude manner with the executives. During departmental meetings, everybody remained standing and silent and kept nodding 'yes' as and when the boss spoke. The same style percolated down the line. There were eight expatriates posted at PC-India, and the interaction between the Indians and the expatriates was not cordial. Overall, the HR department was considered to be very harsh. The VP (HR) maintained a distance from the managers as well as the workers. "If any worker is told that the VP has called him he feels very nervous". Even managers hesitated to meet him. As an executive noted, "The HR department does not look after the human aspect of the organization."
PC places a lot of emphasis on target achievement. Hence, performance appraisal becomes an important activity. Weekly and six monthly appraisals are verbal and limited to only the status of the targets. Every employee's targets are measured in a quantified form. The performance rating of each employee is clearly displayed on the board-a blue sticker with a smiling face on it when targets are met, and a red one with a sad face when targets are not met. This is the visual management perspective of the Koreans. It is an effort to embarrass a person in front of his/ her colleagues. Culturally, Indians are highly concerned about face saving. This keeps reminding them about their inability to achieve targets. Most of the practices had been transplanted from the parent company and this did not have a positive influence on the Indian employees. Non-work practices like cleaning the desk, morning exercises, and birthday celebrations do not influence performance positively. All employees including the senior ones cleaned their tables themselves, with the exception of the MD who had an office boy for the purpose. Not all managers liked the cleaning part and were often seen to throwing the dusters into the dustbin, as if getting rid of something very distasteful.
Most of the employees pointed out that they were paid well and got an opportunity to learn fast in order to achieve their targets. This formed the basis of their association with PC-India. It was found that as bonus were linked to achieving organizational targets, employees stuck to the organization till a better opportunity came their way. In addition, there was the fear of losing one's job because of not achieving targets. Thus, the nature of OC has been found to be 'continuance commitment'.
The employees were found to be the most stressed out, due to the excessive pressure on them to achieve their targets. One of them confessed: "PC is a good place for learning, but only for two to three years. If you plan to stay longer, you have to plan your retirement early in life!" Most respondents (both workers and managers), said that while their families felt proud to be associated with PC as it enhanced their social status, they also felt "bad and stressed when we stay late."
All important decisions were taken at the top level and very high levels achievement was a major cause of transactional relationships. Employees here met targets out of compulsion, and "stretch their limits to retain membership of the organization". Keeping in view the conventional description of identification with the organization in terms of accomplishing targets or goals, PC-India employees should be perceived as committed employees. Based on observations, it seems more of an "enforced involvement". As far as loyalty to the organization is concerned, most revealed that given a chance they would leave the company.
Summing up the data from the perspective of Allen and Meyer, the dominant nature of OC in the Korean multinational company was continuance commitment. Normative commitment was largely absent and affective commitment was low.
Case 2: A Swedish MNC (AL-India, Pseudonym)
"We have a competent workforce but the commitment level is zero"--the lack of OC at AL-India was emphasized in these words, by many employees. One executive said: "I will leave this job if I get a better break, but I will quit earlier, if I keep getting bad treatment from others." Another respondent said, "People do not have an emotional bond with the company". It was sensed that most employees do not perceive a "sense of significance and autonomy" in their job. There was also a tendency to blame others for not performing their duties.
Despite the heavy work pressure, employees appreciated the good facilities at the multinational companies. They appreciated that multinational companies does not worry about petty matters like travel expenses etc. They also appreciated performance related rewards as compared to time bound promotions in Indian companies.
The respondents also realized that: "Multinational companies have not opened their operations in India for charity. For them the major driving force to enter India is cheap labour, while Indians join multinational companies for better salaries and a higher standards of living. In return, the foreign partner demands hard work and target achievement".
In AL-India, following the desired process or making the required effort to achieve targets was acceptable because it got one a decent rating in the performance appraisal. Employees looked at the organization as a means of fulfilling materialistic and monetary ambitions. Beyond that, there was no drive to do anything for the organization and they would not hesitate to quit the job any day, for a better salary. The high employee turnover rate and the clogged relationship between the employees and the departments made this evident.
The atmosphere at AL-India appeared to be tense and full of mistrust. It may be noted that AL-India had taken over three organizations in India. However issues related to mergers needed to be addressed properly. According to a respondent, "Groupism is still prevalent among the employees of the different merged companies." The first MD, an expatriate, did a good job of instilling a sense of security in employees who were scared of losing their jobs after the takeover. However, the then MD felt "there are many Great Wall(s) of China between groups of managers, there are personal power centres that prevent us from having synergy". The differing work cultures that are already in place might also have a role to play. The MD felt that inculcating a uniform 'AL culture' and getting rid of sub cultures was the top priority for AL-India.
Thus, the nature of OC at AL-India is 'continuance commitment' to the organization. Moral and affective commitment was absent. In the case of AL-India, 'the continuance commitment' can be elucidated as--"keep getting materialistic benefits and quit as and when you get a better job opportunity". The employees in the Swedish MNC were not fearful about losing their jobs, for lack of target achievement.
They were seen to be tense because of lack of job clarity, lack of accountability, lack of trust among employees and personal relationship-driven processes. For instance, a management trainee requested the HR-VP's secretary to maintain records of the new trainees joining the organization. Since this trainee was looking after recruitment, she snubbed him, retorting, "It's your job, you deal with it." However, nobody, not even senior managers were able to take independent decisions, they consulted the MD or waited for a nod from him--either to take a decision or to implement one taken by him. All these factors were seen as causing anxiety and stress.
Thus, the possible explanation for continuance commitment being the prevalent status of OC in this company, could be work pressure on the one hand, and more importantly, the lack of satisfactory HR practices on the other. Employees were not found identifying with the organization, either as members or in terms of objectives.
Case Study 3: An Anglo-American MNC (Si-India, Pseudonym)
Most employees felt that SI-India was "a nice place to work in" and was an organization that considered human resources as its most important asset. The employees felt taken care of and respected, the organization displayed no arbitrary hire-fire practice and the culture was an open culture. The top-level executives appeared to have the trust of most, if not all the employees. The MD was respected but also seen as an employee of the company, and not its owner. Overall, there was not much deviation from the parent company culture. Top executives, especially the MD and the Director (HR & Administration), were perceived as being people who were concerned about the development and career growth of their employees. Yet, some employees felt that there was bias in granting promotions or relaxations, but these employees were the exception rather than the rule, and overall, it was believed that the organization did not encourage such practices.
Despite such positive feelings, 'association with the organization' was largely based only on the tangible and intangible benefits offered by the organization. One employee said, "If you ask me, I just remember the pay cheque that I get every month." However, another executive revealed, "I was offered double the salary but I refused to leave SI." In the same vein, another executive revealed, "I joined SI for the money but later realized that the job portfolio was indeed good. My expectations at joining SI were pay and culture, which are fulfilled." An HR executive shared that some former employees would like to rejoin SI. It seems that after comparing SI with their present company, they realize what they have lost. However, the younger generation was open to the idea of a job change: "Gone are the days when people were wedded to the organization".
An HR executive felt that in any case, it is difficult to satisfy everybody 100 per cent. The commonly found perception which is shared by many employees is that "If you stick with one company, your market value goes down. Furthermore, a few young managers also felt that their services are not fully utilized, as they were also required to do administrative jobs, supervise housekeeping, and perform other routine functions. Young managers expressed their desire for a better [more costly] standard of living. Therefore, a better salary anywhere would attract them.
Employee identification with organizational goals existed in moderation, as most were concerned mainly with the benefits assured in associating with the company. The study revealed that the employees were relaxed and comfortable and not much stressed out. There seemed to be a feeling of trust in the organizational intentions towards its human resources. Employee loyalty towards the organization therefore, is high, though not so among young professionals. The status of OC can be described as a 'continuance commitment with a sense of trust'. Despite appreciating the 'work balance' efforts of SI, its employees feel SI-India is the not the only organization that they would be willing to work for. They would quit the organization for better job opportunities, mainly on account of the fact that continuation with one organization would reduce their market value, and under utilization of their skills. To sum up, like in the other two multinational companies, moral commitment is absent. Affective commitment varies as compared to the other two multinational companies.
Keeping in mind the foregoing discussion, the comparison between the three case studies on organizational practices is given in Table 2.
Impact of Organizational Practices
Organizational Structure: Highly hierarchical and centralized organizational structures failed to have a positive impact on OC. Organizational structure plays a significant role in perceiving organizational fairness. Schminke et al. (2000) explored the relationship among the three dimensions of organizational structure--centralization, formalization, and size and perception of procedural and interaction fairness. Data from 11 organizations (N=209) indicated that centralization was negatively related to perception of procedural fairness.
Management Style: the Korean MNC has adopted a highly authoritarian management style. The Swedish MNC has adopted a consultative with a slight authoritarian style and the Anglo-American MNC has adopted a democratic participative style. The authoritarian style did not have a positive impact on OC. The participative style is positively related to OC (Koopman 1991) and the authoritarian style of management is negatively related to OC (Likert 1961).
HR Practices: In all the cases, except for the Anglo-American multinational company, HR practices have no positive impact on OC. Only the Anglo-American multinational company has OC, because of value driven HRM. Patnayak (2000) examined the perception of the HRD climate and its relation ship with OC. Employees, who perceived the HRD climate as positive, had a higher sense of trust in the organization.
Non-work Practices: The Korean MNC imposed their non-work practices on the Indian executives. The Western multinational companies did not impose but left it to the employees to choose and adopt any non-work practices that they were comfortable with. Bae (2004) found through interviews, that Thai employees working in a Korean MNC did not feel enthusiastic about morning exercises. The current study reaffirms Bae's findings in an Indian context.
The foregoing section can be summed up as: continuance commitment is common to all multinational companies taken in the current study; moral commitment is absent and affective commitment varies. Why is continuance commitment prevalent? Why does affective commitment vary?
According to Allen and Meyer's framework, in all the three cases normative commitment is low and continuance commitment is high. It seems that even though they are happy, people do not wish to work with one organization. This shows a shift in the nature of the relationship between the employee and the employer. Continuance commitment is the most prevalent among the employees working in multinational companies operating in India. Continuance commitment is similar to the perspective of exchange theory (Etzoni 1961) and side-bet theory (Becker 1960).
In the light of this discussion, it seems that "identification or a loyalty-type" model is insufficient to explain our findings. The present study clearly points out that "Gone are the days when people were wedded to the organization" as well as the fact that, "Divorce is no more a taboo". However, as mentioned earlier, the classic work by Etzioni on calculative/continuance commitment partly explained the study findings. The main factor behind the calculative analysis in Etzioni's model was the 'economic' factor or to some extent the constraint of finding an alternate job.
In this era of globalization the nature of 'calculativeness' also varies. Now-a-days many job opportunities are available across the globe. Executives work for certain obvious reasons such as better remuneration, or materialistic favours. As long as their needs which include better perks and incentives--are fulfilled, they stay with the organization. Another reason for staying on was 'role satisfaction'.
The exchange analysis is based on many factors such as avenues to grow, opportunities to learn, nature of the assignments, equal and fair treatment, and role satisfaction, besides monetary benefits. Thus, continuance commitment also gets affected by the 'stress level of employees'. It also seems to have an implication on the employee turnover rate. It has been pointed out clearly in the literature that most of the executives experience high level of stress and even burnout due to demanding work pressure and competition. Most often, performance linked practices are adopted, which result into causing excessive performance pressure on the executives. Job stress was negatively correlated with OC (Pattnayak et al. 1999). Support for personal and professional development was found to moderate the relationship between job stress and OC (Vashishtha & Mishra 2000). The reasons for high level of stress could be attributed to organizational practices such as: performance-based salaries and rewards, and a target-based performance appraisal system, and fear of losing the job in the absence of target achievement.
Both the Korean and the Swedish cases are examples of continuance commitment. The nature of the relationship between the employee and the employer in the Korean MNC was perceived as a relationship where an organization can buy the skills and efforts as long as the employees get a better price. The employee is uncomfortable but bears the discomfort for the sake of beneficial transaction. The Swedish case is also similar to the Korean case, though the employee stress level in the Swedish MNC is not as high as it is in the case of the Korean MNC. Mishra and Shrivastava (2001) found that job stress has a moderating effect on the OC and job-satisfaction relationship. As a matter of fact, in Swedish MNC, target pressure was not as high as in the Korean MNC. In the case of the Anglo-American MNC, 'continuance commitment' prevalent can be differentiated with that of the other organizations taken in this study.
On the other hand, in the Anglo-American MNC, employees felt comfortable being associated with the organization due to various non-materialistic benefits along with the materialistic exchange, such as work-family balance, and employee friendly practices. The Anglo-American case then is an exception. The employees of the Anglo-American MNC were found to be more relaxed as compared to the other two cases. This could be attributed to factors such as: decentralized decision making, employee friendly HR practices (e.g. work-family balance, concern for the employee's career and development), consultative management style (the boss listens to juniors' suggestions, gives them autonomy in work; no close watch), and a moderate level of boundarylessness that exists between the departments. It was observed that many employees have been working there since the last two-three decades out of choice, not out of compulsion. Studies (Ramsey et al. 2000, Paul & Anantharaman 2004) support that high employee commitment is positively related to HRM. This case appears to be similar to Shore and Tetrick's (1994) concept of the new psychological contract, which is based on an interactive (relational) process and an exchange (transactional) model. Tripathi et al. (2000) findings also indicate that participative organizational culture is related to identification and involvement type of OC.
Based on the above discussion, it is found then, that the nature of OC is more continuance than affective, in multinational companies operating in India. However, the popular meaning of OC lays greater emphasis on the relational/ affective dimension. It also implies that while the nature of OC is transactional, it can be made worthwhile for employees, by nurturing them and fulfilling their needs and expectations. Efforts should be made to fulfil the materialistic and role related needs of employees; this may result in making them more productive, while at the same time, lead to the fulfilment of organizational goals.
The above discussion indicates that employees have continuance commitment with the organization. The Anglo-American MNC case emerged a little distinct as compared to the other two cases. The major reason attributed for this was their human resource practices (such as flexi-time, work family balance) which were more friendly. Thus the employees' level and nature of commitment towards the organization is subject to the employer's employee-friendly and caring practices. However, long-term commitment was not visible in the case of the Anglo-American MNC also, especially among the younger generation.
Organizations should try to make the transactional deal as favourable as possible for both the parties (i.e. the employee and the employer) such as giving the freedom and flexibility that the employee desires. Managers must now put in efforts to fulfil the conditions of "reciprocal exchange", hence creating the "mutually beneficial work environment". In the Indian context, it can be achieved with the help of relational or familial type of leadership (Virmani & Guptan 1991, Virmani 2002). This style is similar to the Nurturant Task leadership style, as given by Sinha (1990). It involves caring for and nurturing subordinates and also being concerned about their growth. Along with the nurturant dimension there seems to be a need to provide employees with the greater opportunities to earn, learn, grow and exposure to varying and challenging roles or assignments. It may also be useful to provide overseas opportunities.
This paper also leaves the seed for deeper thinking for the practitioners to re-examine the nature of association between the employer and the employees. However, only one organization has been studied to represent a country. Therefore the findings of the present study need to be implemented with a caution. Further research is required on a larger sample size.
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Table 1: Executives Interviewed in Three MNCs Levels Anglo- Swedish Korean American MNC MNC MNC Senior 9 18 7 Middle 32 13 5 Lower 41 28 9 Total 81 59 24 Table 2: Comparative Organizational Practices Organizational Korean MNC Swedish MNC Anglo-American Practices MNC Management style Authoritarian; Consultative & Participative Shaming style a bit of Management authoritarian Organizational Centralized; Centralized; Decentralized; Structure moderate low & personal moderate boundarylessness relationship (cross- between driven functional departments teams) HR Practices Mostly adopted Tailor made for Tailor made from the parent local needs; for local company; training is not needs; training: conducted training is performance seriously. con ducted driven. Perception of seriously. HR: Perception of HR harsh & lacks mixed, more negative efficiency positive Non-work Practices Practices Practices Practices (morning (calling (calling exercise, desk seniors by seniors by cleaning) are first name) are first name) imposed; not imposed are not imposed B'day Lacks Lacks Lacks celebration enthusiasm enthusiasm enthusiasm Interaction with Not cordial; Professional & Cordial expatriates impersonal comfortable