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EMPLOYEE PERFORMANCE FROM THE LENS OF ISLAMIC WORK ETHICS: MEDIATING ROLE OF PERSONALITY X AND Y.

Byline: Awais Imam Abdus Sattar Abbasi and Saima Muneer

Abstract

The study discussed the relationship of Islamic work ethics (IWE) with employee performance and tested the mediating role of personality X/Y traits along employee characteristics. Study followed ex-post facto design and meditational analysis with randomized design to improve causal inferences. Survey was completed by PhD faculty members. SEM was used for model testing and results significantly suggested IWE affected employee performance and also affected the mediators of personality X and personality Y type employees which significantly affected employee performance. The study adds theoretical and contextual value to literature of ethics as mainstream research is on Western values and organizations. The study also suggests to managers that while operating in Muslim populations/countries Islamic perspective of work values should be considered to enhance employee's performance.

Keywords: Islamic work ethics Performance Personality X Personality Y.

1. INTRODUCTION

The study examined the relationship between Islamic work ethics (IWE) mediating role of personality X/Y traits and employee characteristics on employee performance. Performance is the demand of an organization and to achieve higher performance management and employees are responsible [1]. Above expectation performance is an important input to an organization because all the demands cannot be specified in to employee contract. To achieve targets or exceed performance level employees sometimes adopt illegal activities which also depict their performance but society and organizations want employees to achieve performance within the ethical limits. This is the very reason that every organization has code of conduct or employee handbook. Work ethic has been studied in generally by many scholars [2 3] whereas it's link with various variables have been studied like job satisfaction [4-6] sex differences [4] cross cultural comparison [7]

Organizational commitment [5 8 9] and protestant work ethics [10-12]. Various studies have also found the relationship between the protestant work ethic (PWE) and employee performance as repetitive work performance [13] negative performance [14] work effort and performance [15] . However the relation of Islamic work ethic (IWE) with employee performance either indirectly or directly has not been adequately addressed in the literature as various studies have been made about IWE with control and role conflict and ambiguity [16] attitude towards change [17] organizational commitment and job satisfaction [18] and innovation [19] but hardly any of them addressed employees performance which is the focus of every organization. Situational theories assume that the individual characteristics influence employee performance [20]. As employee performance is the focus of any organization that is the reason an individual is evaluated before commencement of employment [21].

Hence employee individual characteristics also effect employee performance. In the same manner [22] suggested that management perspective (Theory X/Y negative/positive) of how it thinks of employees also effects the employee performance; the theory also discusses the orientation of employees with reference to personality X/Y. As majority of the studies have been done on Western values and organizations therefore studying the Islamic perspective would add to the understanding of variables under studied. Last but not the least after joining the WTO many American/Western companies have setup businesses in Pakistan and facing cultural and ethical challenges of performance as companies try to pursue Western values. The study aims to assess how Islamic work ethics personality X/Y from Theory X/Y and employee characteristics impacts employee performance

2. LITERATURE REVIEW Employee Performance

According to Porter and Lawler [23] there are three ways to measure performance. One is the amount of sales and production rate. The second type is managers rating of an employee. The third type is self-rating or self-appraisal. This approach helps employees to set their own goals. Since measures of performance are rarely common objective or quantifiable therefore this limitation leads to use measure of perceived employee performance. Assessing performance from perceptual data has been well recognized [24-26].There are many definitions of employee performance management but in general it is associated with creating a shared vision of the purpose and aims of the organization helping each individual employee to understand and recognize their part in contributing to them and in so doing to manage and enhance the employee performance of both individuals and the organizations" [27]. Whereas Hersey and Blanchard [28] defines it level of achievement of business and social objectives and responsibilities".

Islamic Work Ethic (IWE)

IWE considers dedication to work' as a virtue. It is an obligation of a capable person to exert a sufficient effort in work. To avoid mistakes and overcome obstacles cooperation and consultation is encouraged. To manage individual and social life social relations at work are encouraged. Work itself means of establishing an independent self-identity self-respect personal growth and satisfaction where as creative work is seen as a noble source of accomplishment and happiness. Most importantly IWE considers hard work' as a virtue to succeed one needs to work hard and not working hard is seen as a cause of failure [29]. He further states that IWE is derived from the intentions of the work rather than results of work. To have a welfare society it is necessary to have justice and generosity at the work place. Competition in work is also seen as improvement in work quality.

Concisely IWE argues that there is no meaning of life without work and it is an obligation to engage in economic activities to earn bread and butter [30]. According to IWE work is a noble deed'; it fulfills the necessity of survival and maintains equilibrium in individual and social life. Work gives man sense of independence self- respect satisfaction pleasure and fulfillment. IWE encourages commitment as it can reduce the problems of society if each person is committed to his job and avoid unethical methods of wealth accumulation.

Employee Characteristics

As discussed by Parasuraman Zeithaml [31] that they are many characteristics of an employee according to societies culture and religion but three employee characteristics were found to be the most reliable and valid: (1) empathy (2) reliability (3) expertise. Empathy is defined as the ability to understand another person's perspective and to react emotionally to the other person" [32]. Empathy can be bifurcated into two broad responses: (1) an intellectual reaction towards other person's feelings and thoughts (2) emotional reaction to others. [33] Expertise is defined as the presence of knowledge and the ability to fulfill a task" [31]. Expertise comprises knowledge of products/ services and procedural knowledge of organizational mechanism [34 35]. An employee said to be competent if he has high level of expertise in product knowledge problem solving and operating in complex situations.

Reliability is defined as a sense of duty toward meeting goals or the extent to which an employee makes sure that promised deadlines are met" [31].

Personality X/Y from Theory X/Y

Employers and employees communicate Theory X and Y not only from the words but through behaviors and actions as well. These behaviors and actions can be considering work as bad laziness proactive attitude self-initiative promise incentives rewards or threats and other coercive mechanics [22]. He views Theory X managers see their employees as lazy indifferent unwilling to take responsibility intransigent uncreative and uncooperative" (p. 48). Hence employees act accordingly as they perceive those attitudes and behaviors as the management's view of their work and abilities i.e. instinctively employees does not want to work and see it as a burden therefore their output and direction can only be determined by reward or coercion. Hence such characteristics represent personality X. On the contrary McGregor [22] predicted that Theory Y orientation managers assume that employees have instinctive motivation to do work self-directed and self-controlled.

Hence self- motivation helps them to achieve higher order needs by accomplishing meaning work and involving in decision making which eventually transforms into valuable input to achieve organizational effectiveness i.e. such characteristics represent personality Y.

The study presents the McGregor's sets of assumptions independently however a mix typology also exists therefore it is not necessarily that Theory X and Y are mutually exclusive. It is also possible that employers and employee may exhibit features of both polarities; consequently creating a Theory XY typology eventually creating personality X/Y. Previous studies have produced valid results of each set of typology treating them as independent variables. But the work of Sager [36] produced a three different streams of evidence (X Y and XY) revealing how these predispositions serve as antecedents to employee performance and workplace outcomes i.e..

3. Development of Model and Hypotheses

The literature has already highlighted the significance of IWE [18] whereas employee individual characteristics influence employee performance [20] and Theory X/Y [22] that translates into employee personality type which also effects employee performance. Hence the model is developed to check the relationship of IWE with employee performance Personality X/Y served as a mediator and employee characteristics has an association with IWE. The importance of this study relates to the significance of IWE as the world is debating and questioning the ethical standards of corporate world because of scandal of Pfizer in late 2009 and IMF Managing Director scandal in 2011[37]. Hence the studying Islamic work ethics can improve employee performance and organizational ethical standards.

Further meditational analysis with randomized design is ideal for testing theories because it improves causal inferences therefore the study tries to build and refine theory of Islamic work ethics and employee performance via Personality X/Y.

5. Research Hypotheses

H1: Islamic work ethics have a positive effect on employee performance.

H2: Personality X has significant mediating role between the relationship of Islamic work ethics and employee performance.

H3: Personality Y has significant mediating role between the relationship of Islamic work ethics and employee performance.

H4: Islamic work ethics and employee characteristics have a positive effect on employee performance.

6. METHODOLOGY Instruments of the Study

The study utilized the 74 item questionnaire and four instruments were used. Islamic work ethic was measure by 17 items scale [29]. Employee characteristics were measure by 11 items scale [38]. Theory X/Y was measured by 30 items scale[39] whereas employee performance was measured by 16 items scale [40]. All instruments were measured on a five point Likert type scale. The instruments have also demonstrated acceptable validity and reliability in previous studies i.e. Islamic work ethic [41] employee characteristics [38] employee performance by the same author and for Theory X/Y it was used by Chapman [39] and reliability wSasr. tested in current study.

Participants

Data was collected with the help of structured questionnaire. Simple random sampling technique was used. Respondents o2f this study were PhD faculty members of universities of Pakistan. A complete list was prepared from Highe3r Education Commission website and individual universitie4s website whereas the list prepared by the Mir and Abbasi [42] has also contributed in the completion of sampling frame5.

Overall 1000 questionnaires were distributed by email and 639 questionnaires were retrieved with the response rate of 63.9%; out of received questionnaires 503 questionnaires were selected for final analyses rests were incomplete. Hence the sample size of 503 can be considered for SEM analysis as recommended by Monte Carlo study that for SEM analysis there should be minimum 100 cases [43]. In terms of asymptotic theory and covariance stability simulations studies suggest that 100 to 125 or larger sample sizes often produces adequate results provided that reliable measures are used; reliabilities greater than 0.65 [44 45]. The study also exceeds the standard of both sample size and reliability.

The rationale for selecting faculty members as respondents of the study was that the universities provide intellectual and professional output to a society and faculty plays a key role to transform an individual in to a better person. They have a significant role in inducing ethical norms and behavior in the society. Therefore faculty members are the official position holders who can effect and sometimes set the direction of rules regulations and policies [46]. This opinion is further strengthened by IORGA [47] that they are not merely subject specialists but they are moral agents and their interactions and personality also create and build culture which set the standards for a society. Hence it is very pertinent to study those who have a contribution in building the ethical values of the society.

Validity and Reliability

CFA (Confirmatory Factor Analysis) was used to ensure the validity of the scales. As rule of thumb cut off value item factor loading less than .4 is followed. No items were dropped from the scale. Cronbach Alpha of each scale was measured to establish the reliability (Islamic Work Ethics .819; Employee Characteristics .786; Personality X .855; Personality Y .857; Employee Performance .795). Alpha values of all scales were greater than the general acceptable level of .5 [48]. Hence all scales confirmed the reliability standards.

7. RESULTS AND FINDINGS

Model Fit and Hypothesis Testing

The Structural Equation Modeling (SEM) was performed using SPSS 19 and AMOS 19. A correlation table with means and standard deviations is shown in Table 1. In initial data screening the assumptions of multivariate normality and linearity have been evaluated. The data proved linear and normally distributed and with no missing values. Further there was no issue of multicollinearity as none of the correlation coefficient was greater than .9 [49].

Table 1: Means Standard Deviations and Correlations

###Variable###X###SD###1###2###3###4###5

#

###Islamic Work

1###4.06###.45

###Ethics

###Employee

2###3.91###.388###.770

###Performance

###Employee

3###3.95###.408###.663###.632

###Characteristics

4###Personality X###3.2###.642###.157###.298###.201

5###Personality Y###4.03###.514###.381###.472###.383###.369

All variables of the study were significant and positively. Further the highest correlation was between Islamic work ethics and employee performance.

Model 1

SEM model 1 was calculated to test the hypotheses.

Model 2

In model 1 complete hypothesized model was tested. Model 1 produced 2 was significant 2 (3 N=503) = 24.274 p=0.000 which suggested that the model was not consistent with the observed data. After analyzing the modification indices errors of personality X and personality Y (e2 and e3) were correlated to obtain a consistent model. the CMIN/DF value should be less than or equal to 5. reasonably fit and can be used.

After linking the path of e2 and e3 model was computed again and presented in Figure 2. In model 2 all developed hypotheses and complete hypothesized model in the study are measured. The 2 of Model 2 was insignificant 2 (2 N=503) = 6.159 p=0.06 which suggested that the model is consistent with the observed data. The model 2 found to be good fit as it yielded a good fit of CMIN = 6.159 DF = 2 CMIN/DF = 3.084.

CMIN/DF was considered to be a good fit of model as recommended by many statisticians. For example Wheaton Muthen [50] suggested that for a good model fit Whereas Carmines and McIver [51] proposed strict criteria which is between 1 and 3. Marsh and Hocevar [52] have also suggested that the value should be between 5 and 2. From the arguments presented for CMIN/DF model 2 is Figure 2. Structure Equation Model 2 In Table 2 other model fit indices are presented which also establishes that model is good fit for examination. For instance GFI=.984 NFI =.979 CFI=.986 and RMSEA=.085. For a good fit model the values of GFI NFI CFI should be close to 1 [49]. Whereas the value of RMSEA should be less than .1 [53]. Hence all the values provide a good model and the model can be used for data analysis.

Post-hoc- modifications were not used for model 2 because of the good model fit of the data Inclusion of the one correlated residual (e2-e3) in Model 2 resulted in a substantial drop in the model fit 2 from 24.274 to 6.159. Notice that degrees of freedom of the 2 were reduced from three degrees of freedom to two degrees of freedom. The one degrees of freedom change occurred

Table 2: Fitness Ratios of Model 2

Fit Measures###Value###Suggested Minimum Levels

Chi-Square###6.159

Df###2

p value###greater than .05

CMIN/DF###3.084###less than 5###[50] [52]

GFI###.984###.95 [49]

NFI###.979###.95 [49]

CFI###.986###.95 [49]

RMESA###.085###less than .1 [53]

ecause each parameter estimated by the model consumes one degree of freedom; since we included new parameter in the modified model (the one residual correlation e2-e3). The residual correlation also resulted in increase in R2 of employee performance from .65 to .66 though R2 = .01; increase was not huge only 1% but error covariance produced a good fit model and their correlation of e2-e3 (.338) was significant and acceptable. The theoretical justification of covariance of residuals springs from the work of McGregor [22] he suggested that it is possible that an employee may exhibit features of both polarities; consequently creating a X/Y and XY typology. Since the X and Y are treated as mediating variables therefore the covariance of residuals reflects the XY topology.

The initial causal variable was Islamic work ethics; the outcome variable was employee performance and the proposed mediating variables were personality X and personality Y. With the help of AMOS 19 structural equation modeling (SEM) was used to verify the hypothesized relationships between causal outcome and mediating variables. Indirect effect was obtained by applying bootstrapping procedure. As recommended by Baron and Kenny [54] the Sobel [55] test should be used for the significance of indirect effect but MacKinnon Lockwood [56] and MacKinnon Lockwood [57] recommended to use bootstrapping over the Sobel test on the grounds that bootstrapping have higher power while maintaining reasonable control over the Type I error rate. Whereas Briggs [58] suggested that bootstrapping generally is superior strategy in small to moderate samples in terms of both power and Type I error rates.

Table 3: Mediation Effect of Proposed Hypothesis

###Regression Result###Bootstrap with

###Bias Correction

Path/effect###B###SE###95% CI

c (IWE Per)###.571###.58###.436 .689

ax (IWE Px)###.223###.115###.029 .436

x (Px Per)###.073###.031###.003 .14

ay (IWE Py)###.435###.086###.288 .575

y (Py Per)###.107###.042###.007 .195

c'###.508###.058###.368 .625

ab###.063###.023###.023 .115

At first we tested Islamic work ethics (IWE) and employee performance via personality X. Table 3 shows that the total effect of Islamic work ethics on employee performance was significant c = .571 p less than .01. Islamic work ethics was significantly predictive of the hypothesized mediating variable personality X; ax = .223 p less than .10 and personality X was significantly predictive of employee performance bx = .073 p less than .05. The estimated direct effect of Islamic work ethics on employee performance controlling for personality X was c' = .508 p less than .01. To obtain the indirect effect =.063 bootstrapping was performed; 2000 samples were requested; bias-corrected confidence interval (CI) was created for ab. For 95% CI the lower limit was .023 and the upper limit was .115. Since CI does not include zero which concludes that there is mediation (i.e. the indirect effect is not zero).

Since the direct effect from Islamic work ethics to employee performance (c') was significant and indirect effect of Islamic work ethics on employee performance was also statistically significant therefore the effects of Islamic work ethics on employee performance were partially mediated by personality X. Then tested Islamic work ethics (IWE) and employee performance via personality Y. Table 3 shows that the total effect of Islamic work ethics on employee performance was significant c = .571 pless than .01. Islamic work ethics was significantly predictive of the hypothesized mediating variable personality Y; ay = .435 p less than .01 and personality Y was significantly predictive of employee performance by = .107 p less than .05. The estimated direct effect of Islamic work ethics on employee performance controlling for personality Y was c' = .508 p less than .01. To obtain the indirect effect =.063 bootstrapping was performed; 2000 samples were requested; bias-corrected confidence interval (CI) was created for ab.

For 95% CI the lower limit was .023 and the upper limit was .115. CI does not include zero which concludes that there is mediation (i.e. the indirect effect is not zero). Since the direct effect from Islamic work ethics to employee performance (c') was significant and indirect effect of Islamic work ethics on employee performance was also statistically significant therefore the effects of Islamic work ethics on employee performance were partially mediated by personality Y.

There is a limitation of causal approach in determining indirect effect from SEM software packages as causal step approach works well for a single mediating variable [59] but when there is more than one mediating variable in a model it failed [60 61]. The particular weakness also hinders in SEM which allows the testing of several mediators simultaneously [62 63]. Hence specific indirect effects are not calculated for multiple mediator models by SEM software. The available softwares only provide direct effect aggregate of specific indirect effects (i.e. total indirect effect) and total effect but not the specific indirect of each individual mediator. Since the most important effect in multiple mediator is specific indirect effect [64] therefore there is a dire need to estimate specific indirect effect and without it the true picture cannot be completed.

For multiple mediator scenario the product of coefficient test was designed [65] but it is relatively weak in terms less accurate Type I error rate and low statistical power than the MacKinnon Lockwood [56] product of coefficient equations. Therefore we have used MacKinnon et al formulas; product of coefficient alternatives performs the best in terms of retaining greater statistical power and the maintenance of an accurate Type I error rate.

According to MacKinnon Lockwood [56] equation involves conversion of each parameter estimate that makes up a potential mediating relationship into a z-score by dividing each unstandardized parameter estimate by its respective standard error and then obtaining the product of two z-scores that make up specific indirect effect". Statistical significant can be established by looking to a product of two random normal variables table [66 67]. Later on study by Holbert and Stephenson [68] empirically tested the individual indirect effect of multiple mediators by using MacKinnon Lockwood [56] formulas which produced significant results.

To calculate the specific indirect effect of each mediator we have used the model 2. The z-score product for the mediation path through personality X = (.223/.115) A- (.073/.031) = 4.6 and the path through personality Y = (.435/.086) A- (.107/.042) = 12.9. Consulting the product of two normally distributed variables table in Craig [69] determined that both paths were significant at pless than .01. Hence both mediators proved significant from the perspective of SEM and specific individual indirect effects. Hence from the results of Table 3 and Table 4 the unstandardized regression coefficient (B = .571) associated with the Islamic wok ethics on employee performance was significant (p less than .01).

Hence H1 was accepted which deduced that Islamic work ethics have a positive effect on employee performance. For H2 direct and indirect path coefficients (B = .508 B = .063) were significant at (p less than .01) and (p less than .01) and also the specific indirect effect of personality X (4.6) was also significant (p less than .01) hence it was also accepted. Therefore we can infer that Personality X has significant partial mediating role between the relationship of Islamic work ethics and employee performance. Significant direct and indirect path coefficients

Table 4: Decision of Hypotheses

H.####Independent Variable###Mediating Variable###Dependent Variable###Path Coefficient###Decision

###1###Islamic Wok Ethics###-###Employee Performance###.571###Accepted

###2###Islamic Wok Ethics###Personality X###Employee Performance###.508a .063b 4.6c###Accepted

###3###Islamic Wok Ethics###Personality Y###Employee performance###.508a .063b 2.9c###Accepted

###4###Islamic Wok Ethics###-###Employee Performance###.571 .157###Accepted

###Employee Characteristics

(B = .508 B = .063) of H3 were significant at (p less than .01) and (pless than .01) and also the specific indirect effect of personality Y (12.9) was also significant (p less than .01) hence H3 is also accepted. Therefore we can conclude that Personality Y has significant partial mediating role between the relationship of Islamic work ethics and employee performance. Last hypothesis was also accepted with regression coefficients (B = .571 B = .157) are also significant at (p less than .01) and (p less than .05) and hence H4 was also accepted so we can conclude that Islamic work ethics and employee characteristics have a positive effect on employee performance

8. CONCLUSION AND RECOMMENDATIONS

All of the hypotheses were significant and accepted. Model 2 proved to be good fit according to the chi-square and other indices. Islamic work ethics proved to be a good predictor of employee performance and also Personality X/Y also proved to be a significant mediator between the relationship of Islamic work ethics and employee performance. Individual effects of Personality X/Y are also significant and model shows the covariance of residuals is also good fit according to the results. The rationale behind the covariance of Personality X and Personality Y is that it represents combined topology of XY. The covariance of residuals of Personality X and Personality Y have also increased the goodness of fit and coefficient of determination of the model.

Hence multiple paths from Islamic work ethics to employee performance were significant and it can be concluded that Islamic work ethics can improve the performance of employees by various ways i.e. either by Personality X/Y or their combined topology or with employee characteristics or combined as a whole model.

Results of the study have significant implications for managers and organizations. Code of conduct is indeed a yardstick to evaluate the behavior of organizational members which eventually translated into performance of employees. Since top organizations of the world are Western base; therefore majority of organizations benchmark them which results in adaptation of western norms values and behaviors. The results of the study implies that mangers need to focus on Islamic work ethics which can significantly contribute towards employee performance and even it produces significant results on personality X and personality Y served as mediators. Most importantly the model suits to our contextual norms and values. It is important to signify that with the help of Islamic work ethics we can influence the perspective of personality X employees who thinks that work is a burden considered lazy and reactive.

Significant performance can be improved if Islamic work ethics applies on Personality X employees. Moreover considering and including the Islamic work ethics in code of conduct can enrich the diversity standards of an organization.

9. LIMITATIONS AND FUTURE RESEARCH

Faculty members are the moral agents of the society therefore the study can be extended to measure the effect on society and reciprocal effect of society on personality X/Y and employee characteristics. In current study faculty was not segregated on the basis of designation due to the requirement of simple random sampling; therefore further study can be made to measure the individual effect of designation.

It is important to mention that even this model is significant and provides empirically and theoretically consistent findings they may exits equivalent models. Alternatively nonequivalent models may also fit the data. Hence where possible researchers should try to rule out and test alternative models. Researchers also need to realize that the external environment (economic political social and technological) also affects the performance of an organization and employees. Therefore one needs to take external environment as control variable. Though the model provides good fit of data however to further validate the model a longitudinal research study is required. Along with many other limitations the study cannot be generalized for manufacturing of service industry (hospitals). Though it can be generalized for the category of public and private sector organizations as both types of faculty members have participated in it.

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