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An Empirical Investigation into the Mediating Role of Internal Service Quality on the

Linkage between Internal Organizational Factors and Organizational Performance

By

Khawaja Fawad Latif

Registration No. AUP-11FL-Ph.D (MGT)-3124

Research Thesis Submitted to the Department of Management Sciences, Abasyn

University, Peshawar in Partial Fulfillment of the Requirements for the Degree of

Doctor of Philosophy of the Abasyn University, Pakistan

Faculty of Management and Social Sciences

Abasyn University Peshawar Campus, Ring Road (Charsadda Link), Peshawar,

Khyber Pakhtunkhwa 2015

ii

Certificate of Approval

I certify that I have read ―An Empirical Investigation into the Mediating Role of Internal

Service Quality on the Linkage between Internal Organizational Factors and Organizational

Performance‖ by Khawaja Fawad Latif, AUP-11FL-Ph.D (MGT)-3124 and that in my

opinion this work meets the criteria for approving a thesis submitted in partial fulfillment of

the requirements for the degree of Ph.D. in Management Sciences at Abasyn University,

Peshawar.

Supervisor External Examiner (i)

______________________ ___________________________

Name: Dr. Qadar Bakhsh Baloch Name: Dr. Rashid Rehman

Date: ______________________ Date: ______________________

External Examiner (ii)

___________________________

Name: Dr. Raza Ullah

Date: ______________________

Internal Examiner

___________________________

Name: Dr. Shahid Jan Kakakhel

Date: ______________________

Head of Department

____________________________

Name: Prof. Dr. Aurangzeb

Date: ______________________

iii

Dedication

I dedicate this work to the most important pillars of my life, first and foremost, my

parents who sacrificed their comfort for my education; to my brothers; and to my beloved

wife and son for bearing with my lack of attention during the time I was writing the thesis.

iv

Acknowledgements

I confront scarcity of words to thank the Al-Mighty for granting me the virtue of

knowledge and making me a capable person to utilize the skills i acquired. Afterwards there

are certain other individuals who have helped in pursuing this literary journey. I would like to

extend my appreciation and thanks to my supervisor, Dr. Qadar Bakhsh Baloch for his

constant encouragement, counselling and support. I would like to extend my gratitude to my

teacher, Dr. Shahid Jan Kakakhel for his support and guidance. A special thanks is also due

to the Chancellor Abasyn University, Mr. Muhammad Imran Ullah, and Vice Chancellor,

Prof. Dr. Jamil Ahmad for their constant urge and drive to complete my thesis in time. I

render my earnest gratitude to Dean of Research Prof. Dr. Muhammad Iqbal for his unlimited

support and guidance. A special thanks to my work colleagues, Mr. Shahid Rashid, Mr. Irfan

Ullah, and Mr. Naveed Shinwari for sharing my work load. A note of thanks is also due to

Mr. Aziz Ahmad and Mr. Adeel Wahab Siddiqui for their support.

I would like to thank Mr. Amjad Ali, my teacher, former colleague, and my mentor

for his support and guidance at the start of my academic career. I would also like to extend

my regards to Mr. Sabur Sethi, President, City University of Science and Information

Technology for putting forth his trust in my competencies and providing me with an

opportunity to work at City University after my graduation.

I would like to express my heartfelt thanks to my dearest friend Abdul Wahab for his

constant and sincere prayers and support. Last but not the least a special acknowledgment to

my dear friend, colleague and fellow Ph.D. Scholar, Mr. Muhammad Usman Haider for his

conviction in my abilities and for being an indispensable helping hand at Abasyn University.

v

Table of Contents

Certificate of Approval .............................................................................................................. ii

Dedication ................................................................................................................................ iii

Acknowledgements ................................................................................................................... iv

Table of Contents ....................................................................................................................... v

List of Tables ............................................................................................................................ ix

List of Figures .......................................................................................................................... xii

Abstract ................................................................................................................................... xiv

Chapter 1 Introduction............................................................................................................ 1

1.1. Background ........................................................................................................................... 1

1.2. Statement of Problem ........................................................................................................... 7

1.3. Objectives of the Study ......................................................................................................... 7

1.4. Research Questions ............................................................................................................... 8

1.5. Summary of Theoretical Framework and Research Hypotheses ..................................... 9 1.5.1. Organizational Learning, ISQ and Organizational Performance .................................................. 9 1.5.2. Organizational Collaborative Culture, ISQ and Organizational Performance ............................ 10 1.5.3. Organizational Commitment, ISQ and Organizational Performance ......................................... 10 1.5.4. Perceived Organizational Support, ISQ and Organizational Performance ................................. 11 1.5.5. Role Stress, ISQ and Organizational Performance ..................................................................... 11 1.5.6. Internal Marketing, ISQ and Organizational Performance ......................................................... 11

1.6. Research Scope .................................................................................................................... 12 1.6.1. Conceptual scope ........................................................................................................................ 12 1.6.2. Choice of Data Context .............................................................................................................. 12 1.6.3. Population and Sample. .............................................................................................................. 13

1.7. Significance of the Study .................................................................................................... 13 1.7.1. Academic Significance ............................................................................................................... 13 1.7.2. Organizational Significance ....................................................................................................... 14 1.7.3. Managerial Significance ............................................................................................................. 14 1.7.4. Economic Significance ............................................................................................................... 15 1.7.5. Social Significance ..................................................................................................................... 15

1.8. The Research Contributions .............................................................................................. 15

1.9. Research Plan ...................................................................................................................... 16 1.9.1. Phase 1: Literature Review ......................................................................................................... 17 1.9.2. Phase 2: Research Methodology ................................................................................................ 17 1.9.3. Phase 3: Data Analysis and Interpretation .................................................................................. 18

1.10. Organization of the Study .............................................................................................. 18

Chapter 2 Literature Review ................................................................................................ 20

2.1. Introduction ......................................................................................................................... 20

vi

2.2. The Concept of Quality ....................................................................................................... 20

2.3. Internal Service Quality (ISQ) ........................................................................................... 24 2.3.1. Barriers to Internal Service Quality. ........................................................................................... 29 2.3.2. Fostering Internal Service Quality .............................................................................................. 32 2.3.3. Measuring ISQ ........................................................................................................................... 35 2.3.4. Banks and Internal Service Quality ............................................................................................ 40

2.4. Internal Organizational Factors ........................................................................................ 41 2.4.1. Organizational Learning ............................................................................................................. 53 2.4.2. Organizational Culture ............................................................................................................... 59 2.4.3. Organizational Commitment ...................................................................................................... 69 2.4.4. Perceived Organizational Support (POS) ................................................................................... 76 2.4.5. Role Stress .................................................................................................................................. 80 2.4.6. Internal Marketing ...................................................................................................................... 84

2.5. Organizational Performance .............................................................................................. 91 2.5.1. Earnings per Share ...................................................................................................................... 93 2.5.2. Return on Equity ........................................................................................................................ 93 2.5.3. Return on Assets ......................................................................................................................... 94

2.6. Service Quality and Organizational Performance ........................................................... 94

2.7. Mediating Role of Internal Service Quality ...................................................................... 96

2.8. Summary of Internal Organizational Factors and their Sources ................................... 98

Chapter 3 Conceptual Framework and Hypotheses ......................................................... 100

3.1. Introduction ....................................................................................................................... 100

3.2. Conceptual Framework .................................................................................................... 100

3.3. Research Hypotheses ........................................................................................................ 102 3.3.1. Organizational Learning, ISQ, and Organizational Performance ............................................. 103 3.3.2. Organizational Collaborative Culture, ISQ, and Organizational Performance ......................... 104 3.3.3. Organizational Commitment, ISQ, and Organizational Performance ...................................... 105 3.3.4. Perceived Organizational Support, ISQ, and Organizational Performance .............................. 106 3.3.5. Role Stress, ISQ, and Organizational Performance .................................................................. 107 3.3.6. Internal Marketing, ISQ, and Organizational Performance ...................................................... 108

3.4. Summary ............................................................................................................................ 109

Chapter 4 Research Methodology ...................................................................................... 110

4.1. Research Philosophy ......................................................................................................... 110

4.2. Nature of Research............................................................................................................ 112

4.3. Research Design ................................................................................................................ 112

4.4. Population .......................................................................................................................... 113

4.5. Sample ................................................................................................................................ 114

4.6. Measurement ..................................................................................................................... 115 4.6.1. Internal Service Quality ............................................................................................................ 116 4.6.2. Organizational Learning ........................................................................................................... 118 4.6.3. Organizational Collaborative Culture ....................................................................................... 118 4.6.4. Organizational Commitment .................................................................................................... 119

vii

4.6.5. Perceived Organizational Support ............................................................................................ 120 4.6.6. Role Stress ................................................................................................................................ 120 4.6.7. Internal Marketing .................................................................................................................... 121 4.6.8. Subjective Organizational Performance ................................................................................... 122 4.6.9. Objective Organizational Performance .................................................................................... 123

4.7. Pre-testing .......................................................................................................................... 123 4.7.1. Stage-1 - Content validity ......................................................................................................... 123 4.7.2. Stage Two: Readability ............................................................................................................ 124 4.7.3. Stage Three: Pilot Study ........................................................................................................... 125 4.7.4. Stage Four: Mistake Elimination .............................................................................................. 126

4.8. Data Collection .................................................................................................................. 127

4.9. Data Analysis ..................................................................................................................... 128 4.9.1. Descriptive Analysis ................................................................................................................. 128 4.9.2. Factor Analysis ......................................................................................................................... 128 4.9.3. Validity of Research ................................................................................................................. 129 4.9.4. Reliability Assessment ............................................................................................................. 130 4.9.5. Correlation Analysis ................................................................................................................. 131 4.9.6. Structural Equation Modeling .................................................................................................. 132 4.9.7. Mediation Analysis ................................................................................................................... 134

4.10. Summary of Research Methodology ........................................................................... 136

Chapter 5 Data Analysis and Results ................................................................................. 137

5.1. Descriptive Statistics ......................................................................................................... 137 5.1.1. Data Screening and Cleaning ................................................................................................... 137 5.1.2. Demographic Profile of Respondents ....................................................................................... 137 5.1.3. Descriptive Statistics of Constructs (Means, Skewness and Kurtosis) ..................................... 145

5.2. Factor Analysis .................................................................................................................. 165 5.2.1. Assumptions ............................................................................................................................. 165 5.2.2. Component Matrix ................................................................................................................... 168 5.2.3. Summary of Factor Analysis .................................................................................................... 174

5.3. Reliability ........................................................................................................................... 175

5.4. Construct Validity ............................................................................................................. 177 5.4.1. Convergent Validity ................................................................................................................. 177 5.4.2. Discriminant Validity ............................................................................................................... 178

5.5. Structural Equation Modeling ......................................................................................... 179 5.5.1. Evaluations of Measurement Models ....................................................................................... 179 5.5.2. Hypotheses Testing .................................................................................................................. 193

5.6. ISQ and Employee Demographics ................................................................................... 221 5.6.1. ISQ and Gender ........................................................................................................................ 221 5.6.2. ISQ and Age ............................................................................................................................. 221 5.6.3. ISQ and Rank ........................................................................................................................... 222 5.6.4. ISQ and Employment Type ...................................................................................................... 223 5.6.5. ISQ and Banking System.......................................................................................................... 224 5.6.6. ISQ and Years of Education ..................................................................................................... 225 5.6.7. ISQ and Job Tenure .................................................................................................................. 225 5.6.8. ISQ and Type of Bank .............................................................................................................. 226

5.7. Summary of the Research Results ................................................................................... 226

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Chapter 6 Discussion and Conclusions .............................................................................. 230

6.1. What factors affect organizational performance? ......................................................... 231

6.2. What factors affect ISQ? .................................................................................................. 235

6.3. What is the impact of ISQ on organizational performance? ........................................ 239

6.4. Does ISQ act as mediator between internal organizational factors & organizational

performance? ................................................................................................................................. 240

6.5. Discussion on Measurement and Structural Models ..................................................... 241

6.6. Conclusions ........................................................................................................................ 243

6.7. Implications of the Study .................................................................................................. 246

6.8. Limitations and Delimitations .......................................................................................... 248

6.9. Directions for Future Research ....................................................................................... 249

6.10. Recommendations ......................................................................................................... 250

References ............................................................................................................................. 252

ix

List of Tables

Table 2.1 Description of Concept of Quality ....................................................................................... 21

Table 2.2 Major Barriers to Internal Service Quality ......................................................................... 31

Table 2.3 Initiatives to foster ISQ ........................................................................................................ 35

Table 2.4 Measuring Internal Service Quality ..................................................................................... 39

Table 2.5 Theoretical and Empirical foundation for identification of organizational factors ............ 49

Table 2.6 Summary of Internal Organizational Factors and their Sources ......................................... 99

Table 4.1 Characteristics of Positivism ............................................................................................. 111

Table 4.2 Sample Frame .................................................................................................................... 114

Table 4.3 Internal Service Quality Scale ........................................................................................... 117

Table 4.4 Organizational Learning scale items ................................................................................. 118

Table 4.5 Organizational collaborative culture scale items .............................................................. 119

Table 4.6 Organizational Commitment Scale .................................................................................... 119

Table 4.7 Perceived Organizational Support Scale ........................................................................... 120

Table 4.8 Role Stress Scale ................................................................................................................ 121

Table 4.9 Internal Marketing Scale ................................................................................................... 122

Table 4.10 Subjective organizational performance scale items ......................................................... 123

Table 4.11 Items removed at content validity stage ........................................................................... 124

Table 4.12 Mean Comparison for Constructs .................................................................................... 125

Table 4.13 Items removed during pilot testing stage ......................................................................... 126

Table 4.14 Questionnaires Response Details .................................................................................... 127

Table 4.15 Summary of Recommended fit Indices ............................................................................. 134

Table 5.1 Age Distribution of Respondents ....................................................................................... 138

Table 5.2 Gender distribution of respondents ................................................................................... 139

Table 5.3 Respondent’s years of education ....................................................................................... 140

Table 5.4 Nature of Employment ....................................................................................................... 141

Table 5.5 Rank distribution of respondents ....................................................................................... 142

Table 5.6 Descriptive statistics for Tenure ........................................................................................ 143

Table 5.7 Respondent’s distribution by banking system .................................................................... 143

Table 5.8 Respondent’s distribution by banking system .................................................................... 144

Table 5.9 Descriptive Statistics for organizational learning ............................................................. 146

Table 5.10 Normality distribution testing of organizational learning ............................................... 147

Table 5.11 Descriptive Statistics of organizational commitment ....................................................... 148

Table 5.12 Normality distribution testing of organizational commitment ......................................... 149

Table 5.13 Descriptive Statistics of collaborative culture ................................................................. 150

Table 5.14 Normality distribution testing of collaborative culture ................................................... 151

Table 5.15 Descriptive statistics for perceived organizational support ............................................ 152

Table 5.16 Normality distribution testing of perceived organizational support ................................ 153

Table 5.17 Descriptive statistics for role ambiguity .......................................................................... 154

Table 5.18 Normality distribution testing of role ambiguity .............................................................. 154

Table 5.19 Descriptive statistics for role conflict .............................................................................. 155

Table 5.20 Normality distribution testing of role conflict .................................................................. 156

Table 5.21 Descriptive statistics for internal marketing .................................................................... 156

Table 5.22 Normality testing of internal marketing ........................................................................... 157

Table 5.23 Descriptive statistics for Reliability ................................................................................. 158

Table 5.24 Normality distribution testing of reliability ..................................................................... 159

x

Table 5.25 Descriptive statistics for assurance. ................................................................................ 160

Table 5.26 Normality testing for assurance ....................................................................................... 160

Table 5.27 Descriptive statistics for empathy .................................................................................... 161

Table 5.28 Normality testing of empathy ........................................................................................... 162

Table 5.29 Descriptive statistics for responsiveness .......................................................................... 162

Table 5.30 Normality testing of responsiveness ................................................................................. 163

Table 5.31 Descriptive statistics for organizational performance ..................................................... 164

Table 5.32 Normality testing of organizational performance ............................................................ 164

Table 5.33 Summary of inter-variable correlation ............................................................................ 166

Table 5.34 Assumptions’ statistics for factor analysis ....................................................................... 168

Table 5.35 Component Matrix for Organizational Learning ............................................................. 169

Table 5.36 Component Matrix for organizational commitment ......................................................... 170

Table 5.37 Component Matrix for Organizational collaborative culture .......................................... 170

Table 5.38 Component Matrix for perceived organizational support ............................................... 171

Table 5.39 Component Matrix for role stress .................................................................................... 171

Table 5.40 Component matrix for internal marketing ....................................................................... 172

Table 5.41 Component matrix for internal service quality ................................................................ 173

Table 5.42 Component matrix for organizational performance ........................................................ 174

Table 5.43 Summary of factor analysis .............................................................................................. 175

Table 5.44 Reliability analysis of the constructs ............................................................................... 176

Table 5.45 AVE for constructs ........................................................................................................... 178

Table 5.46 Comparison of Square root of AVE and Inter-Construct Correlations ........................... 179

Table 5.47 Summary of initial and attained findings: Organizational Learning ............................... 180

Table 5.48 Summary of initial and attained findings: Organizational Collaborative Culture .......... 182

Table 5.49 Summary of initial and attained findings: Organizational Commitment ......................... 183

Table 5.50 Summary of initial and attained findings: Organizational Commitment ......................... 185

Table 5.51 Summary of initial and attained findings: Role Stress ..................................................... 186

Table 5.52 Summary of initial and attained findings: Internal Marketing ........................................ 187

Table 5.53 Summary of initial and attained findings: Internal Service Quality ................................ 189

Table 5.54 Summary of initial and attained findings: Organizational Performance ........................ 191

Table 5.55 Summary of the measurement models .............................................................................. 192

Table 5.56 Summary of initial and attained findings: Structural Model A ........................................ 194

Table 5.57 Summary of measurements: Internal Organizational Factors and ISQ .......................... 196

Table 5.58 Summary of initial and attained findings: Structural Model B ........................................ 197

Table 5.59 Summary of measurements: Internal Organizational Factors & Organizational

Performance ........................................................................................................................................ 199

Table 5.60 Summary of initial and attained findings: Structural Model C1-2-3 ............................... 200

Table 5.61 Summary of measurements: Internal Organizational Factors & Organizational

Performance ........................................................................................................................................ 204

Table 5.62 Summary of initial and attained findings: Structural Model D ....................................... 205

Table 5.63 Summary of measurements: ISQ and Organizational Performance (OP) ....................... 206

Table 5.64 Summary of initial and attained findings: Structural Model E1-2-3 ............................... 206

Table 5.65 Summary of measurements: ISQ and Organizational Performance ................................ 208

Table 5.66 Mediation analysis ISQ between OL and OP .................................................................. 210

Table 5.67 Mediation analysis ISQ between CC and OP .................................................................. 211

Table 5.68 Mediation analysis ISQ between OC and OP .................................................................. 212

Table 5.69 Mediation analysis ISQ between POS and OP ................................................................ 213

Table 5.70 Mediation analysis ISQ between RS and OP ................................................................... 214

xi

Table 5.71 Mediation analysis ISQ between IM and OP ................................................................... 215

Table 5.72 Mediation analysis ISQ between OL and ROE ................................................................ 216

Table 5.73 Mediation analysis ISQ between CC and ROE ................................................................ 217

Table 5.74 Mediation analysis ISQ between IM and ROE ................................................................ 218

Table 5.75 Mediation analysis ISQ between OC and ROA ............................................................... 219

Table 5.76 Mediation analysis ISQ between OC and ROE ............................................................... 220

Table 5.77 Compare Means, ISQ with respect to Gender ................................................................. 221

Table 5.78 Compare Means, ISQ with respect to Age ....................................................................... 222

Table 5.79 ANOVA Results, ISQ and Job Rank ................................................................................. 223

Table 5.80 Multiple Comparison across Job Ranks .......................................................................... 223

Table 5.81 Compare Means, ISQ with respect to Employment Type ................................................. 224

Table 5.82 Compare Means, ISQ with respect to Banking System .................................................... 225

Table 5.83 ANOVA results, ISQ across Years of Education .............................................................. 225

Table 5.84 ANOVA results, ISQ across different job tenures ............................................................ 226

Table 5.85 Compare Means, ISQ with respect to Type of Bank ........................................................ 226

Table 5.86 Summary of Hypotheses Results ...................................................................................... 228

xii

List of Figures

Figure 1.1. Theoretical Framework for the Study .................................................................................. 9

Figure 1.2. Research Phase 1 ................................................................................................................ 17



Figure 3.1. Conceptual Framework .................................................................................................... 102

Figure 4.1. Research Design ............................................................................................................... 113

Figure 4.2. Diagrammatic Representation of Mediation Analysis ..................................................... 135

Figure 5.1. Age wise distribution of respondents ............................................................................... 138

Figure 5.2. Gender wise distribution of respondents .......................................................................... 139

Figure 5.3. Distribution of respondents on years of education ........................................................... 140

Figure 5.4. Respondent‘s nature of employment ................................................................................ 141

Figure 5.5. Distribution by job rank ................................................................................................... 142

Figure 5.6. Distribution by Banking System (Source: Field Data) .................................................... 143

Figure 5.7. Distribution by Bank Type ............................................................................................... 144

Figure 5.8. Measurement model for organizational learning ............................................................. 181

Figure 5.9. Measurement model for collaborative culture ................................................................. 182

Figure 5.10. Measurement model for organizational commitment .................................................... 184

Figure 5.11. Measurement model for perceived organizational support ............................................ 185

Figure 5.12. Measurement model for role stress ................................................................................ 187

Figure 5.13. Measurement model for internal marketing ................................................................... 188

Figure 5.14. Measurement model for ISQ .......................................................................................... 190

Figure 5.15. Measurement model for organizational performance .................................................... 192

Figure 5.16. Structural Model A: Internal organizational factors and ISQ ........................................ 195

Figure 5.17. Structural Model B: Internal organizational factors and organizational performance ... 198

Figure 5.18. Structural Model C1: Internal organizational factors and organizational performance . 201



Figure 5.21. Structural Model D: ISQ and organizational performance ............................................ 205

Figure 5.22. Structural Model E1: ISQ and Objective Organizational Performance ......................... 207



Figure 5.25. Mediation: ISQ, OL and OP ........................................................................................... 210

Figure 5.26. Mediation: ISQ, CC and OP ........................................................................................... 211

Figure 5.27. Mediation: ISQ, OC and OP .......................................................................................... 212

Figure 5.28. Mediation: ISQ, POS and OP ......................................................................................... 213

Figure 5.29. Mediation: ISQ, RS and OP ........................................................................................... 214

Figure 5.30. Mediation: ISQ, IM and OP ........................................................................................... 215

Figure 5.31. Mediation: ISQ, OL and ROE ........................................................................................ 216

Figure 5.32. Mediation: ISQ, CC and ROE ........................................................................................ 217

Figure 5.33. Mediation: ISQ, IM and ROE ......................................................................................... 218

Figure 5.34. Mediation: ISQ, OC and ROA ....................................................................................... 219

Figure 5.35. Mediation: ISQ, OC and ROE ....................................................................................... 220

xiii

Abbreviations

Abbreviation Description

ISQ Internal Service Quality

OL Organizational Learning

OC Organizational Commitment

CC Collaborative Culture

POS Perceived Organizational Support

IM Internal Marketing

RS Role Stress

POP Perceived Organizational Performance

ROE Return on Equity

ROA Return on Average Assets

EPS Earnings Per Share

SEM Structural Equation Modelling

CFA Confirmatory Factor Analysis

EFA Exploratory Factor Analysis

AVE Average Variance Extracted

xiv

Abstract

The study seeks to evaluate the mediating role of ISQ on the relationship between

different internal organizational factors and organization performance, furthermore the study

also ascertains the influence of internal organizational factors on ISQ and organizational

performance. Additionally the study also evaluates the impact of ISQ on organizational

performance. The internal organizational factors include; organizational learning,

collaborative culture, organizational commitment, perceived organizational support, role

stress & internal marketing. The study is a descriptive cum correlational, focusing on the

performance and ISQ of different banks operating in Peshawar. The sample included 80 bank

branches, the data was collected from the employees working in different bank branches

located within the city of Peshawar. Banks selected as part of the population required to have

more than five branches. Stratified random sampling technique was utilized to collect the data

from different banks operating in the city of Peshawar. A total of 564 questionnaires were

distributed in 80 different branches of medium and large sized banks. In the present study 404

questionnaires were returned, constituting the response rate of 71.63%. A total of 63

questionnaires were rejected. The total number of questionnaires usable for the study was

341.

Evaluating the impact of different internal organizational factors on ISQ revealed that

three out of six internal organizational factors namely; organizational commitment, role

stress, and internal marketing have a significant influence on the internal service quality.

While three factors namely; organizational learning, collaborative culture and perceived

organizational support did not have a significant influence on the internal service quality. The

results revealed that four out of six internal organizational factors namely; organizational

learning, organizational commitment, role stress, and internal marketing have a significant

influence on the perceived organizational performance. While two factors namely;

xv

collaborative culture and perceived organizational support did not have a significant

influence on the perceived organizational performance. Mediation analysis proved partial

mediation between all internal organizational factors and perceived organizational

performance. The objective measure for bank performance used in the present study included

Return on Equity (ROE), Earnings per Share (EPS) and Return on Assets (ROA). Mediation

analysis between different internal organizational factors and financial organizational

performance showed that ISQ fully mediates the path between organizational learning and

Return on Equity (ROE), collaborative culture and ROE, and internal marketing and ROE.

The study ascertains that ISQ has a significant influence in predicting both subjective and

objective organizational performance measures. The present research strengthens the

theoretical assertions that unless ISQ is not strengthened, the organization will not be able to

attain external service quality, growth and profit. The mediated effect of ISQ is important to

top management, implying their responsibility for investing to create an environment that

nurtures trust, understanding, commitment, provision of timely service, and positivity in

attitude and behavior. Management which expects to reap benefits of service quality must

understand the need of better ISQ and should invest in the intangible factors that have been

proven to affect the tangible profits. The research study affirms that it is not only external

service quality that adds to the profitability of the organizations. Therefore, it is found

imperative for the banks to foster ISQ in their workplace environment.

Keywords: Organizational Learning, Organizational Commitment, Organizational Culture,

Perceived Organizational Support, Role Stress, Internal Marketing, Internal Service Quality,

Organizational Performance

1

Chapter 1

Introduction

1.1. Background

Organizations operate in an extremely competitive, vibrant, challenging, and dynamic

business environment. In response to the pressures of running business in such an

environment, organizations seek ways to add value to the services offered and improve their

service quality. One way to achieve optimal level of service quality is through focus on the

human resources. The role of human resource in the attainment of desired profits is

increasingly catching the focus of the organizations. There is a move from concern for

production to concern for people. This shift is especially true for service industries. The

change in focus is dictated by the understanding that services are created, nurtured, and

delivered through people. Lack of attention towards human resources can seriously hamper

the value of service. This is because in customer contact businesses, quality of service

delivered is strongly linked with the quality of service providers. It is for this reason that the

need for quality improvement continues unabated both in the manufacturing and service

sector (Longenecker & Scazzero, 2000). The challenge to provide efficient and effective

service is dictated by the fact that today‘s customers are more informed, knowledgeable, and

experienced about the variety of products and services being offered in the market. This

awareness about product quality, shape customers‘ expectations about the product, and

compels the business world to meet the expectations and anticipations of the customers

(Prakash & Mohanty, 2012). Improvements in service quality are also necessitated by the fact

that Liberalisation has provided customers the opportunity to choose their service provider.

Thus, customers demand better quality or otherwise they have the chance to shift to another

supplier (Pina, Torres, & Bachiller, 2014).

2

Parasuraman (2002) stressed that scholarly literature attests to the benefits of

providing superior customer service. Emphasis is laid on the business to create meaningful,

memorable customer experiences (Prakash & Mohanty, 2012). This user satisfaction will

come from service quality (Hernon & Whitman, 2001; Wang & Shieh, 2006). Service quality

is an important tool that not only ensures survival but growth in the extremely competitive

business environment. Businesses requires user satisfaction for survival and growth.

Businesses make progress based on the level of relationship it has with the customers. The

key to better relationship is the quality of service customers receive that would make them

come back for the service. Service quality is thus a business imperative, especially for service

sector. The user satisfaction flows from the employees, and employees will not be able to

generate quality service unless or until the services exchanged between different employees

are worthy and valued. Hence, the service providers have placed more emphasis on the

significance of service quality as a way of attaining competitive advantage (Gustaffson, 2009;

Sureshchander, Rajendran, & Anatharaman, 2002; Vanniarajan & Subbash, 2011).

Longenecker and Scazzero (2000) further highlight the value of service quality by referring

to history when quality was referred to as competitive advantage. Today‘s businesses run the

risk of being driven out if they fail to improve the quality, and they referred to quality as a

market segment mandate.

In general, quality is recognized as basic value capable of generating a competitive

advantage through product/service differentiation (Hamid Reza Ghasemian, Azad, &

Seyedaliakbar, 2014). The differentiation of service stimulates customer satisfaction, it can

pay rich dividends like customer retention, cost reduction and increased profits (Zeithaml,

Bitner, & Gremler, 2006). Moreover, businesses should note that service quality is an asset

that needs to be managed, after all, it is more complicated to do service well than to change

the price or to alter the inventory of goods available (Prakash & Mohanty, 2012). This is in

3

fact, due to the complex nature of the service, the people involved, and the nature of the

exchange between the service providers. Effective and efficient management of this asset

would enable businesses to stand out from their competitors (Gracia, Cifre, & Grau, 2010).

Service quality has been identified as one of the key features that ultimately leads to

organizational success; however a decline in service quality leads to deterioration in the level

of customer satisfaction (Frost & Kumar, 2000) which adversely affects organizational

performance. However, increased level of service quality has been found to produce greater

satisfaction amongst customers that could lead to patronage intentions and increased sales

(Prakash & Mohanty, 2012).

Service Quality takes two different forms i-e, external and internal. External service

quality relates to assessment based on what the customers‘ value and what they are willing to

pay for (Dinitzen & Bohlbro, 2010). External service quality is strongly contingent to internal

service i-e, employees receiving high quality internal services would strive to provide higher

quality external service. Internal service quality (ISQ), on the other hand, points to services

provided by distinctive organizational units or the people working in different departments to

other departments or employees within the organization (Stauss, 1995). ISQ refers to an

organization's ability to attract, develop, motivate and retain quality employees (Mok, Sparks,

& Kadampully, 2001). Thus, in order to achieve optimal level of ISQ, organizations will have

to focus on its employees. This is imperative for most services, as the delivery of services

occurs through human interaction (Boshoff & Mels, 1995). While human factors are

significant in all quality enhancement initiatives, they are critical in service industries

(Longenecker & Scazzero, 2000). The level of internal customer (employee) service quality

has an essential impact on the service value provided to the external customer (Bouranta,

Chitiris, & Paravantis, 2009). This is because many of the employees working in an

organization might seldom or never have a direct interaction with the external customers,

4

however the performance and interaction between employees working in different

departments have a direct effect on the service quality perceived by the external customers.

This understanding has stimulated organizational focus on the development of better ISQ that

would aid in fostering external service which would in turn results in attaining healthier

organizational results. It is widely believed that traits related to service personnel have a key

part in determining customer contentment (Hays & Hill, 2001). It is important to study ISQ,

unless the concerns of ISQ are addressed business will not be able to increase the level of

external service quality, and attain growth and profitability (Cook, 2004). The need to study

ISQ is further highlighted by the fact that the quality of external service delivery is a

reflection of the quality of service that people in the organization provide to each other

(Cook, 2008).

Extensive research is available on service quality from the external customer

perspective, however, relatively few studies have concentrated on the factors that

significantly influence employees‘ (Internal Customers) service quality. These researches

which has been carried out in the area of ISQ are in the fields‘ of Healthcare (Gunawardane,

2009; Pantouvakis & Mpogiatzidis, 2013), Insurance (Boshoff & Mels, 1995), Food Industry

(Wildes, 2007; Wildes & Parks, 2005), Banks (Bellou & Andronikidis, 2008; Vanniarajan &

Subbash, 2011), University (Jun & Cai, 2010), hotels (Bai, Brewer, Sammons, & Swerdlow,

2006; Paraskevas, 2001), Pharmaceuticals (ELSamen & Alshurideh, 2012), and Airline (Frost

& Kumar, 2001).

Though, there are numerous research studies on external service quality, only limited

studies have focused on internal service quality especially in commercial banks. Hence, the

present study is operationalized among banks. The banking sector is a demand driven

industry and represents a vital section of the services industry in any country (Mishkin,

2001). The current rapidly changing environment is compelling the attention of banking

5

institutions towards service quality, and retail banks are striving towards increasing customer

satisfaction through improved service quality (Choudury, 2014). This is because growth in

the banking sector and the ever increasing competition among banks has clearly highlighted

the need for customer satisfaction and optimization of customer service for a surge in market

shares and profitability (Anderson et al., 1994). It is however important to note that for many

organizations, quality means meeting customers' requirements. However, customer may not

refer to people outside the organization only, Juran (1988) defined customers as persons who

are not only the organization's customers but also its employees. He included all persons in

customers who are affected by an organization‘s processes and products. Organizations

understanding of how a person working within the organization is affected by the activities

within the organization can not only aid in designing strategies and practices that would offer

a more congenial business environment but also make employee reciprocate with level of

performance desired by the organization.

Existing research studies have identified the need to look at different factors and its

influence on service quality and organizational performance. Different researchers have

studied different factors that can impact on internal service quality, however, there are gaps in

the existing research that suggest directions for further research. Boshoff and Mels (1995)

suggest that future endeavors in the study of ISQ shall include variables other than

organizational commitment. Tsaur and Lin (2004) who studied HRM practices impact on

service quality recommended that future research should present other factors in the study to

help clarify the antecedents of service behavior. Furthermore, they also noted that the earlier

literature suggests that organizational issues could also be predictors of service behavior.

Vella, Gountas, and Walker (2009) stressed that in an organization, there are too many

factors that can impact on service quality, hence services research requires suitable focus and

a manageable count of constructs that appear to be more significant to explain service quality

6

from the employee‘s viewpoint only. Similarly Slatten (2009) recommended that future

research on service quality could include relevant managerial practices other than reward and

support. Andrews, Boyne and Walker (2006) calls for the study of a wider set of measures

that may reveal a stronger link of ISQ with organizational performance. Similarly gaps in the

literature pertinent to organizational performance are also highlighted. Kim (2005) utilized

only four individual-level variables to predict organizational performance and proposed that

future research should look for additional factors that affect organizational performance.

Tseng (2010) suggests the inclusion of a different set of attitudes and behaviors and evaluate

how they impact organizational performance. Hence, based on the limitations of existing

research and future research directions that calls for the inclusion of additional factors that

may carry a significant impact on the ISQ and organizational performance form part of the

present study. The selection of factors is based on the literature pertinent to quality

management, service quality GAPS, and organizational performance. These factors include

Organizational Learning, Collaborative Organizational Culture, Organizational Commitment,

Perceived Organizational Support, Role Stress, and Internal Marketing. The present study

intends to focus on factors that shall be considered by the management to ensure better ISQ

that ultimately leads to improved service delivery to the customers. The factors are derived

from literature and are discussed in detail in chapter 2.

Quality of service and enhanced organizational performance can be warranted through

adoption of two different strategies. One is reactive while the other is proactive. Where

performance management techniques and rewards for better service or performance can be

termed as reactive approaches, since the employee is compensated afterwards and have a

short term influence. These measures may not guarantee optimal service or performance.

Organizational focus on proactive measures that bring about change in how people feel,

perceive, and behave can have a long term effect. Organizations need to focus on the

7

personality of their employees, and how well they interact and respond to each other. This is

possible only through paying attention to organizational initiatives, employee behaviors and

attitudes. Focusing on these factors will lead to changes in the values of the employee. It is

for this reason that the present study attempts to evaluate the influence of different

organizational initiatives and attitudes on both ISQ and organizational performance.

The present study not only brings together different organizational factors, and

evaluates its impact on ISQ but also evaluates the linkage of ISQ with organizational

performance. Further empirical investigation is needed on service quality and its relationship

with organizational performance, especially among different service organizations (Al-Enezi,

2012). The study further evaluates whether ISQ mediates between different internal

organizational factors and organizational performance or not. Since existing studies have

identified how ISQ influences or is influenced by other factors in different industries.

Research has shown the influence of different internal organizational factors on

organizational performance. A causal link could be established based on the existing

literature that shows the influence of different internal organizational factors on ISQ and their

direct impact on organizational performance.

1.2. Statement of Problem

The research reasons that organizational performance will improve on the basis of

ISQ rather than the influence of internal organizational factors alone. The present study seeks

to ascertain if ISQ mediates between internal organizational factors and organizational

performance or otherwise.

1.3. Objectives of the Study

The overarching goal of this research is to examine whether ISQ acts as a mediator

between different internal organizational factors and organizational performance or

8

otherwise. The scarcity of the research in this area highlights a knowledge gap. This study

aims to address this gap. The specific objectives of the study are as under

a. To evaluate factors (organizational learning, organizational collaborative culture,

organizational commitment, perceived organizational support, role stress, and internal

marketing) that significantly influence organizational performance.

b. To investigate factors (organizational learning, organizational collaborative culture,

organizational commitment, perceived organizational support, role stress, and internal

marketing) that significantly influence ISQ.

c. To evaluate the impact of ISQ on Organizational Performance

d. To investigate if ISQ acts as a mediator between internal organizational factors and

organizational performance.

1.4. Research Questions

In order to seek the solution of the research question/problem, the research focused to

find answers to the following questions.

a. What are the internal organizational factors (organizational learning, organizational

collaborative culture, organizational commitment, perceived organizational support,

role stress, and internal marketing) that affect organizational performance?

b. What are the internal organizational factors (organizational learning, organizational

collaborative culture, organizational commitment, perceived organizational support,

role stress, and internal marketing) that affect ISQ?

c. What is the impact of ISQ on organizational performance

d. Does ISQ act as a mediator between internal organizational factors and organizational

performance?

9

1.5. Summary of Theoretical Framework and Research Hypotheses

A number of diverse studies on different internal organizational factors, ISQ and

organizational performance have been studied to draw the theoretical framework for the

current study. The study not only evaluates the direct influence of different internal

organizational factors on ISQ but also on organizational performance. Furthermore, the study

also evaluates the mediating role of ISQ. Based on the extensive review of literature the

following framework of proposed to study the relationships.

Figure ‎1.1. Theoretical Framework for the Study

Based on the aforementioned framework, following set of hypotheses are proposed to test the

relationships

1.5.1. Organizational Learning, ISQ and Organizational Performance

H1a: There is a significant impact of Organizational Learning on ISQ

H1b: There is a significant impact of Organizational Learning on Perceived Organizational

Performance

H1c1-2-3: There is a significant impact of Organizational Learning on Objective

Organizational Performance (EPS, ROE, & ROA)

Organizational Performance Objective Performance

Subjective Performance

Internal

Service Quality

Internal Organizational Factors

Organizational Learning

Collaborative Culture

Internal Marketing

Organizational Commitment

Perceived Organizational Support

Role Stress

10

H1d: ISQ mediates between Organizational Learning and Perceived Organizational

Performance

H1e1-2-3: ISQ mediates between Organizational Learning and Objective Organizational

Performance (EPS, ROE, & ROA)

1.5.2. Organizational Collaborative Culture, ISQ and Organizational

Performance

H2a: There is a significant impact of Organizational Collaborative Culture on ISQ

H2b: There is a significant impact of organizational collaborative culture on Perceived


H2c1-2-3: There is a significant impact of organizational collaborative culture on objective

organizational performance (EPS, ROE, & ROA)

H2d: ISQ mediates between Organizational Culture and Perceived Organizational

Performance

H2e1-2-3: ISQ mediates between Organizational Culture and Objective Organizational


1.5.3. Organizational Commitment, ISQ and Organizational Performance

H3a: There is a significant impact of Organizational Commitment on ISQ.

H3b: There is a significant impact of Organizational Commitment on Perceived


H3c1-2-3: There is a significant impact of organizational commitment on objective


H3d: ISQ mediates between Organizational Commitment and Perceived Organizational

Performance

H3e1-2-3: ISQ mediates between Organizational Commitment and Objective Organizational


11

1.5.4. Perceived Organizational Support, ISQ and Organizational Performance

H4a: There is a significant impact of perceived organizational support on ISQ

H4b: There is a significant impact of perceived organizational support on perceived

organizational performance

H4c1-2-3: There is a significant impact of perceived organizational support on objective


H4d: ISQ mediates between Perceived Organizational Support and Perceived Organizational

Performance

H4e1-2-3: ISQ mediates between Perceived Organizational Support and Objective


1.5.5. Role Stress, ISQ and Organizational Performance

H5a: There is a significant impact of Role Stress on ISQ

H5b: There is a significant impact of Role Stress on Perceived Organizational Performance

H5c1-2-3: There is a significant impact of Role Stress on objective organizational

performance (EPS, ROE, & ROA)

H5d: ISQ mediates between Role Stress and Perceived Organizational Performance

H5e1-2-3: ISQ mediates between Role Stress and Objective Organizational Performance

(EPS, ROE, & ROA)

1.5.6. Internal Marketing, ISQ and Organizational Performance

H6a: There is a significant impact of Internal Marketing on ISQ

H6b: There is a significant impact of Internal Marketing on Perceived Organizational

Performance

H6c1-2-3: There is a significant impact of Internal Marketing on objective organizational


12

H6d: ISQ mediates between Internal Marketing and Perceived Organizational Performance

H6e1-2-3: ISQ mediates between Internal Marketing and Objective Organizational


H7a: There is a significant impact of ISQ on Perceived Organizational Performance

H7b1-2-3: There is a significant impact of ISQ on objective organizational performance

(EPS, ROE, & ROA)

1.6. Research Scope

1.6.1. Conceptual scope

The study examined the relationship between internal organizational factors

(independent variable), ISQ (mediating variable) and organizational performance (dependent

variable) in the context of banking sector.

1.6.2. Choice of Data Context

The referent data set for the study was obtained from the banking industry in Pakistan.

The focus on banking sector in the present study is dictated by the growth of service sector

that gives a new dimension of stability to Pakistan‘s growth process (Ahmed & Ahsan, 2011).

Furthermore, the banking industry provides the financial foundation for growth and stability

in any economy and particularly in the developing economies (Uzkurt, Kumar, Kimzan, &

Eminoglu, 2013). The transformation of the Pakistani banking sector over the past 15 years

through liberalization, establishment of private banks, the privatization of public-sector

banks, and the tightening of prudential regulations has resulted in superior banking

performance (di Patti & Hardy, 2005). Similarly State Bank of Pakistan reports that most of

the banks operating in Pakistan are stable, this shows that Pakistani banking industry has

matured and is found to have been working on improving service quality both for the internal

and external customers. Consequently, the study is based in the context of Banking Industry

in Pakistan and aims to interpret findings from the study for support in designing internal

13

organizational strategies and fostering internal service quality to improve organizational

performance.

1.6.3. Population and Sample.

This research is restricted to the Banking sector. The Data was collected from the

Banks located in Peshawar. The population frame for the study was drawn from the banks

listed in Karachi Stock Exchange (KSE) with over five branches in the city of Peshawar. The

banks were selected on the basis that they had more than five branches in the city in order to

have a representative sample. Out of 24 banks listed in KSE, banks with more than 5

branches in the city were included in the study.

The research divided banks into two strata, i-e, Medium and Large Banks. Since

smaller banks had less than or equal to 5 branches in Peshawar. Therefore, they were

excluded from the study. Since Haksever, Cook, & Chaganti (1997) concluded that causes

that lead to service GAPS in large corporations do not exist in smaller firms. The stratified

random sampling technique is utilized, as taking a random sample might not lead to accurate

results and hence they might not be truly a representative of the population, as with the

increase in the magnitude of bank, the timing of service, stress, learning opportunities would

change. It is for this purpose that stratified random sampling technique has been adopted.

Banks with total assets in excess of Rs. 500 billion are categorized as ―Large Banks‖, banks

with total assets in between Rs. 100 billion to Rs. 500 billion are categorized as ―Medium

Size Banks‖. The research adopted the stratified random sampling technique and distributed

banks in homogeneous groups of medium and large banks.

1.7. Significance of the Study

1.7.1. Academic Significance

Service Quality has been identified by both academicians and practitioners as

imperative for organizational survival and growth. The findings of the research will add to

14

the knowledge and understanding of the subject of ISQ. Lack of research in the area of ISQ,

factors that influence ISQ and its relationship with the organizational performance highlight a

knowledge gap. The present study will add to the existing body of knowledge and further

elucidate the phenomenon and its linkage with different internal organizational factors and


1.7.2. Organizational Significance

The study may help in generating greater awareness among banks on the importance

of having better ISQ, as it would serve as a vehicle for organizational effectiveness.

Additionally the research can help business to understand the value and potential contribution

of different internal organizational factors in organizational performance. Furthermore,

internal service quality is an underdeveloped area. This highlights a prospect for service

organizations that operate in highly competitive and often technologically sophisticated

markets to gain an understanding of further ways to extract any potential advantage over their

rivals (Krios, 2005). Conducting this study in Pakistan is also of great value since limited

work is done on service quality in the banking sector.

1.7.3. Managerial Significance

The present study provides significant insight for HR managers in the banking sector.

The study will assist HR managers in developing better understanding of ISQ and whether

ISQ is worth investment and also in evaluating which factors significantly impact ISQ. With

the findings of this study, HR managers can outline policies and procedures that would help

in the establishment of better ISQ. Furthermore, the research would help the business

managers to determine the key factors that contribute towards organizational performance.

Business executives and managers can then channelize their energies towards variables that

are the most significant.

15

1.7.4. Economic Significance

Banks can significantly contribute to the economic development of a country. Banks,

who perform well can help improve the economy of the country since they would be in a

better position to contribute towards the growth of the economy through assistance of

business. A well performing bank also fuels economic activity by permitting businesses to

invest beyond the available cash that impacts the job market through the creation of

opportunities and potentially helps in improving overall productivity of the country.

1.7.5. Social Significance

The research may help in improving people‘s conduct and behaviour. Developing an

understanding of factors that can significant influence employee‘s ability to communicate,

understand, show empathy, being responsive towards others can help shape better employee

behaviour both on and off the job. An employee who shows the necessary work related

behaviours can be a valuable member of the society, since he would be in a better position to

balance both work and personal life. Failing to deliver appropriate internal service quality can

significantly hamper employee‘s ability to deal with people outside work. Since organizations

do not operate in vacuum, they are filled with people from the society, what people

experience at work, they bring it back home to their social life. Hence, better understanding

of how different factors influence ISQ and fostering ISQ have its social implications.

1.8. The Research Contributions

There are both theoretical and practical justifications for the present study. The

theoretical contributions include a better understanding of the different factors that can affect

ISQ, organizational performance and the effects of ISQ on organizational performance.

Furthermore the study also investigates if ISQ mediates between the direct influence of

internal organizational factors and organizational performance, further highlighting the role

16

of ISQ in the indirect influence of different internal organizational factors and organizational

performance. This will further clarify the need for businesses

To focus on skill acquisition that would not only help in performance

improvements, but also aid in timely delivery of service;

To foster collaboration through the establishment of a strong organizational

culture;

To employ internal marketing techniques that lead to consistency in service

quality;

To minimize role ambiguity and conflict that reduces instability and fosters

focus on the job;

To employ supportive management techniques that would induce benevolence

and display favorable attitudes and behaviors ensuring empathy.

The theoretical contribution also takes account of the value of ISQ for the banking

sector. Moreover, the present study would help in the advancement of knowledge in the areas

of organizational learning, employee satisfaction, organizational commitment, perceived

organizational support, role stress, internal marketing and ISQ. On the practical front, the

present study would help practitioners and policy-makers, who wish to make advancements

in firms‘ competitiveness and external service quality through better ISQ, the study would

help identify factors that significantly contribute towards ISQ. The study would also aid in

comprehending the concept of ISQ in more detail.

1.9. Research Plan

The research plan for the study was divided into three phases, steps in each phase

were performed for the completion of this study. The phases and steps in each phase are

identified diagrammatically as follows.

17

1.9.1. Phase 1: Literature Review

The 1st Phase of research started with review of literature pertinent to the scope of

study. Based on the extensive review of existing literature, problem statement was

formulated, and furthermore the literature helped in identification of factors relevant to the

study. The theoretical framework was proposed based on the review of literature.

Figure ‎1.2. Research Phase 1

1.9.2. Phase 2: Research Methodology

In the 2nd

phase, based on the literature review, the research methodology was

designed to attain the desired research objectives. The research methodology started with the

population definition, secondly sampling technique was identified and sample was drawn.

Questionnaire to measure the different variables in the study was designed based on the

available measures. Pre-testing step help purify the questionnaires and finally data was

collected.

Literature Review

Factors Identification

Problem Identification

Theoretical Framework

Hypotheses Development

18

Figure ‎1.3. Research Phase 2

1.9.3. Phase 3: Data Analysis and Interpretation

During the last phase of the study, after collection of the data, data was subjected to

analysis, analysis was carried out in SPSS and AMOS. Results was interpreted and

reported

Figure 1.4. Research Phase 3

1.10. Organization of the Study

Following is the chapterization / arrangements of the research thesis/ report.

Chapter 1: Introduction

Literature Review

Research Methodology

Population Definition

Measurement

Sampling

Pre-Testing

Data Collection

Data Analysis

Interpretation

Reporting

19

Chapter one provides the context of the study. Highlighting the research problem,

research objectives and the research questions. Furthermore the chapter also sheds light on

the scope, significance, contribution of the study and the research plan.

Chapter 2: Literature Review

Chapter two discusses in detail the relevant literature, the concept of the different

variables under study. Furthermore the chapter also discusses in detail the relationship

between different variables.

Chapter 3: Conceptual Framework and Hypotheses

Chapter three, based on the extensive literature review present the conceptual

framework for the study. Furthermore the chapter also present the research hypotheses.

Chapter 4: Research Methodology

Chapter four discusses in detail the research design of the study. This chapter also

includes information pertaining to the research philosophy, nature of research, population,

sample, measuring instruments, and data analysis procedures.

Chapter 5: Data Analysis and Findings

Chapter five reports the results of the empirical research. Initially descriptive statistics

of respondents are discussed, followed by validity and reliability statistics. Hypotheses are

tested using structural measurement models.

Chapter 6: Discussion & Conclusions

In the final chapter, the major findings of the research are discussed and it has been

linked to the findings of previous studies. The chapter further explains the contribution of the

study, limitations & delimitations, directions for future research and conclusions.

To sum up, this chapter highlights the background and overview of the research study.

The background explains the gap in the existing research. Research problem, research

20

questions and objectives, justification, and contribution explicitly indicates the value of

research. The following chapter discusses in detail existing research and theories pertinent to

internal organizational factors, ISQ and organizational performance.

Chapter 2

Literature Review

2.1. Introduction

The literature review is designed to explore the theoretical foundations underpinning

internal organizational factors, their association with Internal Service Quality (ISQ) and

organizational performance. The chapter attempts to identify the influence of different

internal organizational factors on ISQ and on organizational performance. The chapter aims

to:

a. Define and explain the quality concept with special emphasis on service quality,

barriers and means to foster service quality, internal organizational factors and


b. Identify and describe predictors: Organizational Learning (OL), Organizational

Collaborative Culture (CC), Organizational Commitment (OC), Perceived

Organizational Support (POS), Role Stress (RS) and Internal Marketing (IM);

Mediating Variable: ISQ, and dependent variable: Organizational performance.

2.2. The Concept of Quality

Quality is a vital attribute of any product or service, therefore all organizations

vigorously pursue to achieve and maintain it. This is the result of the globalization that is

currently affecting societies resulting in amplified economic competition and mounting

consciousness of the value of quality to success (Kruger, 2001). Its significance is enhanced

21

in the service sector, and more dominant in the banking sector (Bahir & Nantel, 2000).

Quality of service is regarded as an important issue in the banking industry since it has

ostensible relationship with reduced costs (Crosby, 1979) and profitability (Rust & Zahorik,

1993).

Quality has been an elusive concept in business. Many people deem it as some level

of supremacy; while others regard it as lack of manufacturing defects (Evans, 2005). One of

the earliest works on quality is attributed to the three gurus of quality, namely Juran, Crosby

and Deming. Juran referred it to as ―fitness for use” (Juran, 1988) and Crosby`s defined

quality as ―zero defect‖ (Crosby, 1979). Both Juran and Crosby identified the immediate need

of quality. It is however important to note that in both of the definitions, the quality is

determined by the end product that is delivered for use to the customer. Deming, who is

referred to as the father of quality, did not define quality in a single statement. He contested

that it is only the customers who can define quality and it‘s a relative terminology that

changes its meaning contingent to the needs of the customer (Suarez, 1992). Feigenbaum

defined quality of a product or service as “the total composite product and service

characteristics of marketing, engineering, manufacture, and maintenance through which the

product and service in use will meet the expectations of the customer” (Feigenbaum, 1991, p.

7.). International Organization for Standardization, defined quality as ―Degree to which a set

of inherent characteristics fulfils requirements‖. Taap, Chong, Kumar and Fong (2011)

defined quality in manufacturing and services sector as the totality of characteristics and

features of a service or product that stands on its ability to satisfy given needs. The concept of

quality and its definition over the years and evolution is tabulated in table 2.1.

Table ‎2.1

Description of Concept of Quality

Description of Quality Author(s) / Source

22

Fitness for use Juran (1988)

Quality cannot be defined, it‘s a relative terminology that can only be assessed by

the customer.

Suarez (1992)

Zero defects Crosby (1979)

The total composite product and service characteristics of marketing, engineering,

manufacturing, and maintenance through which the product and service in use

will meet the expectations of the customer

Feigenbaum (1991)

Quality is thought of by many people as some level of supremacy or distinctive

brilliance; however it is viewed by others as a lack of manufacturing defects.

Evans (2005)

The Degree to which a set of inherent characteristics fulfils requirements International Organization

for Standardization

Quality in manufacturing and services sector is referred to as the entirety of

features and characteristics of a product or service that bears on its ability to

satisfy given needs.

Taap, Chong, Kumar and

Fong (2011)

Source: Author

Differences exist in the concept of quality between manufacturing and services sector.

It is generally observed that technology controls the quality in the manufacturing companies

while the human interaction in the case of manufacturing industries is minimized. What

makes manufacturing easier than services sector is that batches of product are always large,

and defects are found prior to shipment to the customer; hence it is bound to be easier in the

manufacturing industry in comparison to the service industry (Dale, Williams, Barber, &

Wiele, 1997). The involvement of human interaction makes the management of quality in the

service industry difficult, since human perceptions, attitudes and behaviours change overtime,

this transition may sometime be very swift in nature. Hence, services industry requires the

employees to be high on emotional intelligence, so that they are able to control their emotions

while interacting with customers and fellow workers. In case of the manufacturing sector,

where the quality of product is determined when the customer gets hold of the product, and

23

the products are designed and developed according to the predetermined specifications and

requirements. In case of the manufacturing sector, the customer might have very little or no

interaction with the maker of the product. This is not true for the services sectors, the quality

of services is constantly evaluated by the customer until the interaction between the service

provider and receiver is complete, plus it is not just the service that is evaluated, but also the

performance of service provider.

Different authors have pinpointed some key differences pertinent to quality in

manufacturing and services sector (e.g. Dale, Williams, Barber, & Wiele, 1997, Try &

Schein, 1995, Bitran, 1993). The differences are described as follows:

Process: Manufacturing process variability is much more difficult to control than the

human component in the delivery of services.

Intangibility: Services cannot be touched, tasted or smelled, so quality may be

difficult for consumers to assess and objective measures of performance influence customer

satisfaction in service as well as intangible aspects during the service performance. Service

sector differs in the lack of tangibility of the service offered and consequently the problem of

applying standards in a rigorous and consistent manner.

Heterogeneity: This refers to the fact that services are performances that humans

produce frequently and so no two services would be precisely be the same.

Leadership and Management Support: Leadership is crucial to quality management

process. It is imperative that TQM is initiated and driven from the top of the organization.

The concern for production is relatively higher in the manufacturing sector. However, in

services sector, it is important that the concern for people is relatively higher in services

sector.

24

Simultaneity: Most services are produced and consumed simultaneously, hence

quality of service and customer satisfaction is increasingly reliant on the interaction between

customers and employees.

Perishability: An important element of services is that they cannot be stored, saved

returned, or resold. This demands strong recovery strategies.

2.3. Internal Service Quality (ISQ)

Employees working in an organization can only produce fruitful results for the

business if the communication, coordination, and relationship among them is efficient and

effective. Employees are strongly reliant on each other to produce the required level of

service, this service delivered and received is referred to as ISQ. ISQ is defined as the quality

of service delivered by different departments or the people working in these departments, to

other departments or to workers within the organization (Stauss, 1995). The person delivering

the service is referred to as the supplier, while the person receiving the service is the internal

customer. Hammer (2001) defined ISQ as ―an organized group of related activities that

together create a result of value to customers.‖ (p. 52). It can be asserted that the former

definition highlights the system of ISQ while the latter identifies the ultimate objective of

ISQ. Gremler, Bitner, and Evans (1994) referred to ISQ as a dyadic interaction between an

internal customer and an internal service provider. It leads to the fact that it‘s a two way

relationship, and for successful internal service, efforts are required from both parties. The

concept of ISQ used in this research reflects Heskett et al.‘s (1994) statement that ISQ is

determined by the attitudes employees have towards each other and the way people serve

each other within the organization. In simple terms, ISQ refers to the quality of interaction,

support, and level of communication between different individuals working in an

organization.

25

Internal customer is an important factor in the delivery of service to the external

customer. Internal customers are people in the organization working for different departments

who are interdependent on each other to carry out their work. Internal customer is referred to

individuals of other departments within an organization that an internal supplier serves (Jun

& Cai, 2010). What makes them essential is the fact that they are part of the service delivery

chain (Kendall, 2006). This implies that a business works in the form of a chain where

individuals and different business functions are mutually dependent and are closely linked.

Each takes inputs from each other (Farner, Luthans, & Sommer, 2001) with the ultimate aim

to fulfill the needs of external customers. If an internal supplier fails to provide the desired

level of service to an internal customer, the result would be a less optimal service delivered to

the external customer (Douglass, Calantone, & Keller, 2005). Most researchers agree that

satisfaction of internal customers (i.e. employees) is pivotal for the success of a service firm

(Gremler, Bitner, & Evans, 1995). Ishikawa (1985) stressed on paying attention to the

internal customers and internal relationships. It must be the common goal of each department

to fully satisfy each other through the provision of timely and effective service. This will help

build trust, understanding, and confidence in each other.

Management and staff in organizations rarely understand that employees and

functions are actually customers of each other. It is important to note that business

organizations have been complacent in recognizing the severe repercussions of their sluggish

ISQ and its influence on organizations‘ overall performances (Vanniarajan & Subbash,

2011); Getty and Getty (2000) further identified the role of employees and noted that service

workers bring more to the job than education or work skills. A service company is highly

dependent on the personalities of individual employees who can make or break a service

company. Therefore, the employees of a service organization are the ones who deliver

quality. Failure to focus on the initiatives to foster ISQ makes the management wonder why

26

they have failed to raise staff to care about how and what they need to do for the external

customers (Christensen, Coombes-Betz, & Stein, 2007).

Acknowledging the view that employees are also customers involve managing

people‘s skills to make each person feel valued and communicating the importance of each

job role across the team. There must be a feeling of reliability among staff and they shall

share mutual respect. This will lead to an attitude of satisfaction. When the internal customers

are completely satisfied, the workforce is ready to satisfy its customers (Papasolomou &

Vrontis, 2006). This satisfactory service received by the internal customers (Employees)

within the organization translates into the business ability to please the external customers.

This argument is supported by various researchers who have argued that both internal and

external customers are equally important, and successful quality of service received by the

internal customers would lead to efficient and effective external service as it would result in

more effective performance, lower waste and lower costs (Marshall, Baker, & Finn, 1998;

Stanley & Wisner, 2001). The kind of treatment the internal customers receive severely

affects the external customers; managements‘ inconsiderate behavior towards employees

(Poor working conditions, Low pay, limited career opportunities, lack of training and

development) can stimulate negative attitude in staff that would result in negative behavior

towards the external customer (Christensen et al., 2007). The indecent behavior by the

management towards the employees can also lead to hostile relations between the coworkers,

resulting in retaliation from employees in the form of delays in completion of tasks, sharing

of incorrect information, lack of willingness to help and cooperate with coworkers. Bouranta,

Chitiris and Paravantis (2009) assert the view that if managers wish to improve the external

service quality they should focus on ISQ issues.

Business has laid much of their focus on the external service quality. Hays (1996)

highlighted the ground for this management behavior and further observed that the

27

excitement and passion surrounding the drive and excellence to serve external customers

often outdo the internal activities and processes. The management must understand that if

staff in one department fails to provide timely service to their co-workers in another

department, this will surely result in delayed service to external customers, thus resulting in

negative credibility and loss of reputation. This slowness in focus towards ISQ is changing.

Business organizations are realizing the fact that an adequate level of service received within

the organization would translate into satisfactory external service quality. The quality of

external service is hugely reliant on the quality of internal service. This further highlights the

significance to study internal service encounter (Gunawardane, 2011). It could further be

asserted that for the purpose of achieving higher external service, an organization can be

framed into a chain of individual functional units (Jeng & Kuo, 2012). Thus the ultimate

objective of ISQ is to provide quality service to external customers that actually relies on

delivering service quality across internal units (Brandon-Jones & Silvestro, 2010).

The quality of service, that employees in different departments receive from each

other significantly influence how external customer‘s expectations for service quality are met

since ISQ establishes and reinforces a climate and organizational culture directed towards

quality (Omachonu & Ross, 2005). Boshoff & Mels (1995) identified that most of the service

delivery occurs through human interaction and during that interaction organization require

their employees to infuse extra effort, technically referred to as Discretionary behavior,

however this discretionary effort depends on a variety of factors; some of them include

employee-supervisor relationship, and the level of commitment employees shows towards

organization‘s goals, objectives and values. Having said that, commitment of an employee

has a positive influence on the service quality of employees (Vandenberghe et al., 2007) to

enable business achieve high goals in the way it measures and manages success, it will have

28

to prioritize employees and customers (Heskett, Jones, Loveman, Sasser, & Schlesinger,

1994).

Customers‘ perception of service offered is strongly contingent to the level of service

offered by the employees. Employees working within the organization work closely to create

the service experience for the customers. Heightened level of internal service experience

between the employees can help in creation of an improved service experience for the

customer. It is thus important to note that an organization that wants to better serve its

customer cannot only focus its energies on spending time and money on finding ways to

provide enhanced service to its customers, but on its internal service units as well (Hays,

1996). Cook (2004) endorsed the assertion that many businesses invest their time and effort

in measuring external customer perception, but they fail to recognize that external service is a

reflection of what is happening in the organization between staff and different functions,

different departments provide service to each other, the type of service they provide each

other. It is anticipated that similar type of service would be provided to external customers,

thus if a poor internal service exists, the final service to the customer will be damaged (Kang,

James, & Alexandris, 2002).

A satisfied customer foundation surely guides the business to success if linkage of

external service with the employees is clearly established. ISQ has it imprints on the success

of the business that comes from service performance, while service performance comes from

the quality of service (Zailani, Din, & Wahid, 2006). This quality of service is not only the

external service quality but also the ISQ, since the quality of external service is dictated by

the quality of internal service (Cook, 2004). Not only that ISQ results in external service

quality, but also benefit the organization in a variety of other ways, for instance employee

retention is based on ISQ (Cook, 2008; Dinitzen & Bohlbro, 2010; Suganthi & Samuel,

2004). Furthermore the focus on ISQ is important for business growth (Little & Marandi,

29

2003), it‘s critical in determining the success of an organization in today‘s competitive

environment (Anosike & Eid, 2011; Frost & Kumar, 2001), it is crucial in the effective

implementation of the organizational objectives (Anosike & Eid, 2011). The need for

effective ISQ is further enhanced by the fact that it is the first step in the service-profit chain

(Williams, 2007), since service quality delivered early in the production chain sets an

absolute limit on the potential quality of the final good/service to the external customer

(Hays, 1996).

Successful service organizations value both the customers and employees (Petzer et

al., 2006), since ISQ is contingent to employees, and different employees might have

different expectations of what service is. Employee demographics effect these beliefs (age,

gender, experience, education, and job rank). Some employees define ISQ as helpful

colleagues, while others define it a good organizational structure and reward (Dinitzen &

Bohlbro, 2010). For organizations to be successful they have to be considerate of these

factors. The value of employees in service organizations is further highlighted by Congram

and Friedman (1991), who referred to the significance of employees a total of three times

while describing the ten most important characteristics of successful service firms. The

characteristics are employees who are empowered to assist customers and sometimes in ways

that go beyond the call of duty, employees who believe in what the organization stands for

and employees who work for fulfillment of service promise to the customers. The importance

of providing excellent service to internal customers is evident despite its far reaching benefits

in serving external customers and helping business attain competitive advantage, the area has

received little attention (Jun & Cai, 2010). Hence, the present research endeavors to enrich

the existing literature on ISQ and highlight the role it can play in attainment of improved


2.3.1. Barriers to Internal Service Quality.

30

During the last three decades, considerable literature has been produced on service

quality but the problem still persists and organizations still continue to get it wrong. One of

the reasons is that dimensions of service quality vary across countries, and is affected by

culture, attitudes, values and beliefs. What leads to poor service quality? The question needs

to be answered before one can devise a way to foster it. It is often the case that different

functions in the organization fail to understand the value they add to the service delivery

process. An alarming situation is that only a few managers and employees have

comprehended that individual employees and departments are infact customers of each other

(Boshoff & Mels, 1995). This leads to the thinking in the departments that employees are

mere one unit, performing only a single activity in the process (Stauss, 1995), what they fail

to understand is that they might be that crucial link, they do not contemplate on the fact that

an activity might precede them and an activity will follow them. Douglass, Calantone, and

Keller (2005) call this myopic view of the departments‘ role. This prejudiced approach results

in the loss of focus and departments fail to regard how the output of their activities influences

service downstream to other consumers in the organization. However, this blinkered

approach can be resolved through interdepartmental customer orientation (Stauss, 1995).

Interdepartmental customer orientation is an effort that encourages business functions to view

their internal role as a part of the entire process and understand how their input, job functions,

and services can help foster the level of service provided to the external customer (Douglass

et al., 2005).

While there are departmental issues that hinder service quality, there are

organizational issues that cause friction to enhance service quality. There are instances where

the management of the organizations is not acquainted with the fundamentals of quality

management (Dale, Wiele, & Williams, 2001). Other reasons that emerge from this failure to

understand quality include failure to select talented employees, service process failures,

31

dearth of training, or misalignment of incentives are identified as few reasons for improper

service quality (Gerstner & Libai, 2006). While Lynn, Heinrich, and Hill (2000) asserted that

hindrance in attracting qualified personnel is a reason for poor service quality. Chaker and

Jabnoun (2010) on the other hand identified that goals setting, employee-job fit, management

commitment to quality of service, role conflict, role ambiguity, technology-job fit, horizontal

communication, and propensity to over promise, widens the service quality gaps. Newman

(2001) also found lack of top management commitment and lack of horizontal

communication to be an obstacle to service quality. Similarly, poor communication on part of

the management with the staff may result in employees‘ loss of commitment, feeling of job

dissatisfaction, and confusion resulting in poor service delivery (Zeithaml, Parasuraman, &

Berry, 1990). The lack of inclusion of aforementioned constructs limits the focus of

management, and it may not be able to emphasize on the different dimensions that make up

improved service quality within the business organization. In their studies, Chaker and

Jabnoun (2010) found lack of empowerment, trust deficit, weak culture, lack of

transformational leadership, and centralization to be the factors that act as obstacles to ISQ.

Furthermore, lack of basic application of sophisticated technology and the way

business treat its customers is staggering and unbelievable (Dale et al., 2001). Although Dale

et al. (2001) are referring to customers, it has been emphasized previously that employees are

internal customers who receive service from other departments, and if the treatment they

receive within the organization is not healthy, it will severely influence their work. It is the

employees that can hinder or foster ISQ.

Table ‎2.2

Major Barriers to Internal Service Quality

S. No Study Major Barriers Identified

1 Boshoff & Mels (1995), Stauss (1995) Individuality

32

2 Douglass, Calantone, & Keller (2005) Lacking foresight or intellectual insight.

3 Dale, Wiele, & Williams (2001) Lack of acquaintance to fundamentals of service quality

4 Gerstner & Libai (2006) and Lynn,

Heinrich, & Hill (2000)

Failure to attract qualified personnel

5 Chaker & Jabnoun (2010), Newman

(2001), and Zeithaml, Parasuraman, &

Berry (1990)

Lack of management commitment

Source: Author

2.3.2. Fostering Internal Service Quality

Perceived ISQ can be evaluated as the degree and direction of the discrepancy

between employee‘s perceptions and their expectations about the particular service (Chuang,

2010). For inconsistency to be eradicated, collective efforts within the organization are

required for the positive end results of growth, productivity, profitability, and customer

loyalty; however, it is instrumental to recognize that fostering positive employee behavior

wouldn‘t take place in a vacuum. Organizational efforts in different areas of the organization

are required to nurture ISQ. Service must be viewed as a symbiotic relationship, interactive

system, not as disengaged parts (Shostack, 1987). Chaker and Jabnoun (2010) recommended

that managers may foster service quality through increased decentralization, empowerment

and improved transformational leadership skills. To foster ISQ business needs to commit

similar resources and develop focus towards internal service units as done for external service

quality (Hays, 1996). The ground justification is highlighted by Bellou and Andronikidis

(2008) who contended that personnel who effectively manage internal customers would

exhibit similar, appropriate behavior when interacting with external customers that would

ensure superior external service quality. All of this is not possible without developing an

understanding of the norms, attitudes and cultural background of people; since internal

customers would have different views, priorities, and attitudes. Jeng and Kuo (2012) research

33

on Chinese culture demonstrated that internal customers displayed varied level of importance

of the factors and attributes in ISQ, therefore, to nurture better ISQ, first management must

conduct a thorough assessment of the potency of factors in that particular organization, and

the factors that the organization deems important, only then can the organization decide on

the factors to work on.

Alternatively, ISQ can be fostered through an organizational focus on employees.

Employees who are satisfied with their job are believed to go an extra mile, they show

discretionary behavior and have a positive attitude towards the organization as compared to

those who are dissatisfied. Chaker and Jabnoun (2010) noted that people‘s attitudes

significantly influence service quality dimensions of empathy and responsiveness. Yoon and

Suh (2003) found that satisfied employees are expected to work harder and provide better

services. Employees satisfaction is the key to delivering service quality (Malhotra &

Mukherjee, 2004) since employee satisfaction is the driver of ISQ (Omachonu & Ross,

2005). What follows enhanced internal customer satisfaction is the determination of the

profits of the company (Malhotra & Mukherjee, 2004). Internal customer orientation is of key

advantages to ISQ. As employees in the service chain who are knowledgeable about the

internal customers‘ demands would facilitate interdepartmental synergies desirable to

accomplish organizational goals (Anosike & Eid, 2011).

One approach for the envisaging service system is called ―Blueprinting‖, a technique

can be fruitful for enhancement of internal service levels. Shostack (1987) asserted that a

blueprint must document all process steps and points, the documentation must be carried to

whatever level of detail is needed to distinguish between any two competing services. The

service blueprinting would elucidate the exchanges and transactions that create value between

departments. The process can be helpful in clarifying the interrelated activities and

dependencies amongst departments.

34

Douglass, Calantone, and Keller (2005) proposed internal service level can be

improved if a department whose activity precedes that of another department completes its

task before the department following may begin, thus departments must realize the value of

start-to-finish relationship between them. It is important that the preceding department

understands that the other department would not be able to commence its operation unless the

predecessor finishes its activities. Furthermore, the management needs to focus on the profile

of the staff interacting with the customers, it is where the management cannot exercise it

control over the behaviors of employees and discretionary effort is extremely important in

delivery of superior service quality. The right commitment profile needs to be encouraged

and developed among staff that would enhance the service levels (Malhotra, Mavondo,

Mukherjee, & Hooley, 2013).

Knapp (2010) proposed the idea of internal service desks to respond to questions;

distribute information and handle incidents and service requests for its company‘s employees.

A company can have several types of internal help desks or service desks that employees

contact for support. Organizations may establish HR help desk to assist in medical insurance

or other HR functions. This will help in boosting the satisfaction of internal customers since

their information needs may be sufficed, therefore enabling internal customers to perform

their tasks and the networks of organizational units will be more likely to work effectively

together to attain customer satisfaction (Bellou & Andronikidis, 2008). Petzer et al. (2006)

explain that ISQ is based on better choice and training for workers, quality work environment

and a strong support for workers who work with customers.

Panda (2001) stressed the need for internal customer relationship management. This is

necessitated by the fact that it is not possible for an employee to know everything about the

organization and its offerings in today‘s multilayered and multi-location enterprises. A well-

structured internal customer relationship management program can empower the employees

35

feel the relative impact on the job holders for the enterprise and how their performance

affects the whole chain of external marketing delivery in an organization. The top

management can then address the gaps in the significance of the job done by an employee

and strategic relevance of his contribution to the overall customer satisfaction. It is of great

important for the business to consider initiatives that can foster the level of internal service

quality. The area, if properly nurtured can help the business not only attain the tangible

benefits of profits but also can help in achieving intangible rewards, like employee

satisfaction, customer satisfaction, customer loyalty, and lower turnover rates both for the

employees and customers. The following table summarizes the organizational initiatives for

fostering ISQ.

Table ‎2.3

Initiatives to foster ISQ

S. No Study Initiatives to Foster ISQ

1 Chaker & Jabnoun (2010) and Anosike

& Eid (2011)

Decentralization, Empowerment, Transformational

leadership

2 Shostack (1987) Collectivism in services & Bluprinting

3 Hays (1996) Resource allocation as done for external services

4 Yoon & Suh (2003), Malhotra and

Mukherjee (2004), Omachonu & Ross

(2005), and Anosike & Eid (2011)

Increased employee satisfaction

5 Malhotra, Mavondo, Mukherjee, &

Hooley (2013)

Staff commitment profile

6 Knapp (2010) Internal help desks

7 Petzer et al (2006) Training, quality work environment and support

8 Panda (2001) Internal customer relationship management

Source: Author

2.3.3. Measuring ISQ

36

Service Quality is not easily classifiable and quantifiable owing to the characteristics

of services that differentiate it from from goods, this actually poses a problem with the

management of service quality in service firms. The reason for this difficulty is highlighted

by Parasuraman, Zeithaml, and Berry (1985) who noted that goods have tangible cues to

assess quality, they may include style, hardness, color, label, feel, package, and fit. However,

in case of service fewer tangible cues exist. A number of different scales to measure service

quality have been developed based on the number of different definitions proposed in the past

(Jain & Gupta, 2004). The primary focus of research measuring service quality has been

about how to meet or exceed the external customers' expectation, and has viewed service

quality as a measure of how the service delivered matches consumer‘s expectations (Kang,

James, & Alexandris, 2002). Similar to the measurement of quality perceived by customers in

the form of sets of dimensions or criteria, the quality of internal service that employees

receive from other departments can be meaningfully categorized and measured (Reynoso &

Moores, 1994). One of the approaches to measure ISQ is a gap-based measure, this is

achieved through the utilization of the SERVQUAL scale (Parasuraman et al. 1988).

One of the earliest attempts, on modelling service quality came from Parasuraman,

Berry and Zeithmal (1985). Parasuraman, Zeithaml, and Berry (1985) identified ten

determinants of service quality, as identified in table 3. Parasuraman, Berry and Zeithmal

(1988) measured customers perception of service quality through development of a multi-

item scale from the original ten determinants, after the empirical investigation utilizing factor

analysis, the procedure resulted in a refined scale (SERVQUAL) with 22 items spread among

five dimensions. SERVQUAL instrument has been widely applied for measurement of

external service quality, however Zeithmal, Parasuraman and Berry (1990) claimed that,

37

“SERVQUAL, with appropriate adaptation can be used by departments and division

within a company to ascertain the quality of service they provide to employees in other

departments and divisions”

Similarly Kang, James, and Alexandris (2002) also assert that it seems reasonable to

modify SERVQUAL instrument to measure ISQ. However, despite the widespread

application and rising acceptance, theoretical and operational criticism has been levelled

against SERVQUAL scale.

Buttle (1996) has levelled a number of theoretical issues, he holds the view that the

focus of SERVQUAL is on the process of service delivery while it fails to measure the

outcomes of the service encounter. The five different dimensions are not universal; the

number of dimensions comprising service quality is contextualized; furthermore the items

within the different sub-factors do not always load on to the theoretical factors that one would

expect; Moreover a high degree of interrelation exists between the five dimensions

(Assurance, reliability, empathy, responsiveness and tangibility). While operationally, the

variability in each service quality dimension cannot be captured through the limited number

of items in each dimension (four or five).

There is no agreement on a tool to precisely measure ISQ, a number of different

studies have utilized SERVQUAL to gauge the level of ISQ. A number of attempts have been

made to utilize servqual instrument to measure ISQ. Chaston (1994) studied service gaps in

the UK manufacturing sector, to obtain further understanding of internal customer

management, a modified version of the SERVQUAL research tool was used to survey

managers in UK manufacturing operation. Six dimensions were identified in the study. To be

able to obtain feedback from internal customers in purchasing function, Young and Varble

(1997) used SERVQUAL, the results indicated that SERVQUAL is a useful method for

obtaining feedback from internal customers. The study found reliability to be the most

38

important dimension, while tangibility was found to be less important by the internal

customers.

Reynoso and Moore (1995) studied ISQ at two hospitals in England. They found ten

dimensions of ISQ as shown in table 3. It was concluded that transferability of the

SERVQUAL dimensions from the external to the internal customer appeared to be well

justified. Similarly, Brooks, Lings, and Botschen (1999) compared dimensions of ISQ with

the SERVQUAL dimensions of external service quality which have been proposed by

Parasuraman et al. (1988). They found Eight of the ten dimensions recognized by

Parasuraman et al. (1985) to be important internally and two additional dimensions, proactive

decision making and attention to detail were found to be important in the internal customers'

evaluation of the service received. Tangibility was found to least important to the internal

customer. This is in fact similar to the study by Young and Varble (1997) who also found

tangibles to be least important dimensions for the internal customers. Kuei (1999) carried out

an empirical study to appraise the influence of perceived quality-oriented climate of internal

service providers and actual quality-oriented practices on the perceived ISQ. ISQ was

assessed using the SERVQUAL instrument.

SERVQUAL was grouped into five factors (tangibility, reliability, responsiveness, assurance,

& empathy). It is worth noting that tangibility was not part of the study since internal

customers must use internal service providers, thus the tangibility dimension is not of

concern. The study found that ISQ should be established as a long-term goal of the

organization and SERVQUAL instrument without the tangible dimension is useful for

evaluating ISQ. Based on the findings of existing research, Tangibles dimension was not

included in the present study.

Kang, James, and Alexandris (2002) used the SERVQUAL questionnaire

(Parasuraman, Zeithaml, & Berry, 1988) to develop an instrument that would measure ISQ.

39

They found that ISQ had similar dimensions, namely assurance, tangibility, reliability,

responsiveness, and empathy. Bouranta, Chitiris, and Paravantis (2009) in their study of

restaurant industry in Greece measured ISQ by developing a new scale based on SERVPERF.

On the suggestions of a focus group consisting of five experienced waiters, the initial

instrument was supplemented and improved; the final instrument included 23 items and

exhibited good internal consistency. The dimensions of ISQ included empathy,

responsiveness, professionalism, safety, tangibles, interest and reliability.

Bruhn (2003) employed another service quality instrument for the development of the

internal services satisfaction index at Novartis, which was proposed by Cronin and Taylor

(1992). The dimensions of quality and questions were adjusted to mirror quality aspects of

the internal services at Novartis. ISQ was conceptualized in 12 dimensions, namely

reliability, competence, friendliness, accessibility, time to provide the service, reaction speed,

added value generated, flexibility, customization, transparency in services offered, cost

transparency, and cost-benefit ratio.

There is a great amount of commonality among the dimensions revealed from

different studies. With some studies proposing dimensions different from the others, almost

all of the studies are unanimous in suggessting that Reliability, Tangibles, Assurance,

Responsiveness, and Empathy are key dimensions of measuring service quality. It can also be

observed that all other dimensions stem from the original parasuraman, Zeithaml & Berry

(1985) scale, since all the dimensions measure the level of different positive behaviours

people share at work. The higher the level of positive behaviours perceived by people, the

greater would be the level of service quality.

Table ‎2.4

Measuring Internal Service Quality

S. No Study Dimensions

40

1 Parasuraman, Zeithaml & Berry

(1985)

Responsiveness, Competence, Reliability, Coutesy, Access,

Credibility, Communication, Security, Tangibles,

Understanding/Knowing.

2 Chaston (1994) Reliability, Responsiveness, Tangibles, Assurance, Empathy,

and Proactive Decision Making

3 Young & Varble (1997) Reliability, Tangibles, Assurance, Responsiveness, and

Empathy

4 Reynoso & Moores (1995) Reliability, Tangibles, Flexibility, Promptness,

Professionalism, Confidentiality, Communication,

Helpfullness, Preparedness and Consideration.

5 Lings and Brooks (1998) Reliability, Credibility, Responsiveness, Courtesy,

Competence, Understanding the Customer, Communication,

Proactive Decision Making, Attention to Detail, and Access.

6 Bouranta, Chitiris, & Paravantis

(2009)

Responsiveness, Empathy, Professionalism, Tangibles,

Reliability, and Interest.

7 Bruhn (2003) Competence, Reliability, Accessibiity, Friendliness, Reaction

Speed, Time to provide the service, Flexibility,

Customization, Added Value Generated, Const Benefit Ratio,

Transparency in Services Offered, and Cost Transparency

Source: Author

2.3.4. Banks and Internal Service Quality

The current study is concentrated in the banking sector. In the contemporary world the

area of service quality management is experiencing a number of improvements and especially

in the banking sector, it is hard to identify a single bank that has not instigated any kind of

service quality improvement program. In view of the increasing similarity of product

characteristics, service quality has become indispensable in keeping ahead of competitors.

The focus on service quality is dictated by the expectations that banking operations would be

more dynamic and competitive, since there is increased deregulation, liberalization, and

41

globalization (Taap, Chong, Kumar, & Fong, 2011). This is also necessitated by the fact that

although the contact time between employees and customers may be short, but this contact

happens quite regularly, service provided to the customers most of the times come from

variety of employees working together, data and information are exchanged amongst the

employees to produce quality service to the customer, it could be argued that workers who

effectively manage internal customers would establish similar and suitable behavior when

interacting with external customers (Bellou & Andronikidis, 2008). It is thus asserted that

employee‘s failure to coordinate among themselves will lead to poor quality of service that

will affect the financial performance of the bank since the service quality of banks rely over

the ISQ (Vanniarajan & Babu, 2011). This assertion is validated by Anosike and Eid (2011),

who found a positive influence of ISQ on customer orientation. Thus to improve high quality

of internal service in banks, administration shall prioritize the monitoring and management of

quality initiatives (Bellou & Andronikidis, 2008).

Service Quality has been studied in banking sector. Mukherjee, Nath and Pal (2003)

studied a total of 27 public sector banks and their customers in India. They evaluated the

influence of service quality on financial performance. The results revealed that banks with

higher level of service have an improved resource transformation to performance using

superior service delivery as the medium. The outcome of the study endorsed the linkage

between resources, service quality and performance. Similarly, Sobhy and Megeid (2013)

found positive and direct nexus between customer service quality, profitability and liquidity.

Although, the importance of ISQ in banks is vividly highlighted, there has been very little

research on how ISQ influences bank‘s performance or what factors cause a drive in ISQ.

2.4. Internal Organizational Factors

42

The level of service quality received cannot be detached from the quality of service

provided (Lewis, 1989). This is the reason that service managers are now focusing on factors

that drive profitability, for instance technology supporting Frontline workers, investment in

people, better recruiting, linking compensation to performance at every level, increasing

motivation and training practices (Heskett et al., 1994). A number of different factors

influence the employee‘s level of internal service quality. Organizations require a few key

areas to be consistently valued and cared. It is important for the organizations that these key

factors go in the right way, otherwise organization may have to face negative repercussions.

The choice of antecedents for the present study is guided by the literature that aided in the

identification of factors that could act as potential antecedents to internal service quality and

also carry an impact on organizational performance. As suggested by Tsaur and Lin (2004)

who noted that literature suggests that organizational issues could also be predictors of

service behavior.

The selection of factors is dictated by the fact that quality management and

organizational performance within the financial services sector is dictated by conformance to

requirements' approach and with increasing management's financial and physical control over

people, systems, documentation and procedures. Such approach only moderately addresses

quality because (a) precise `conformance' is hard to attain and (b) this method neglects

employees and customers (Knights & McCabe, 1997). Since, the focus is on control and

making sure that the policies and procedures are followed, the present study attempts to focus

on factors that can lead to initiatives that the banks can easily adopt and implement. A study

of the existing literature from the perspective of Quality Management, Service Quality

GAPS, and Organizational Performance enabled to identify those features which can be

crucial in supporting service quality and improving organizational performance: these are

organizational learning, organizational commitment, collaborative organizational culture, role

43

stress, perceived organizational support, and internal marketing (from Quality Management:

Zeithaml et al., 1990; Boshoff & Mels, 1995; Hauser & Paul, 2006; Ueno, 2008; Ostrom et

al., 2010; Ming, 2010; O‘Neil & Davis, 2010; Agbenyiga, 2011; Pasebani, Mohammadi, &

Yektatyar, 2012; Hon, 2013; Alfalla-Luque, Marin-Garcia, & Medina-Lopez, 2014; from

Service Quality Gaps: Zeithaml, Berry, & Parasuraman, 1988; Gronroos, 1990; Zeithaml,

Berry, Parasuraman, 1990; from Organizational Performance: Ogbonna & Harris, 2000;

Eisenberger, Armeli, Rexwinkel, Lynch, & Rhoades, 2001; Eder & Eisenberger, 2008; Abu-

Jarad, Yusof, & Nikbin, 2010; Boselie, Dietz, & Boon, 2005; Brown, 2011; Samad, 2013;

Hon, 2013).

Limitations of existing research has also helped in identification of different factors to

be included in the present study. The study of these factors can help the business organization

to identify those activities and practices that should be addressed in order to ensure progress.

These factors would either need to be cultivated if they already exist or developed, if they are

not in place. The need for the study is further highlighted since there is barely any research

available that examined the path that relates different internal organizational factors with ISQ

and organizational performance altogether. The literature shows two categories of factors that

have an impact on service quality, managerial (Zeithaml et al., 1988; Dabholkar, & Abston,

2008) and employee aspects (Dabholkar, & Abston, 2008).

Starting with the managerial aspects, an important managerial factor that has a

significant implication for adequate functioning of employees is organizational learning.

Although organizations learn as individuals learn, organizational learning becomes embedded

in organizational memory, in rules, routines and procedures (Yakhlef, 2009). The learning

initiatives are taken by the management of the organization, but require ownership of

employees. Failure to acquire skills will undermine employees‘ responsiveness to the needs

of not only the employees but external customers as well. There has been increasing interest

44

in organizational learning in the workplace. Learning culture has shown to significantly

influence service quality (Pasebani, Mohammadi, & Yektatyar, 2012; Di Xie, 2005; Ming,

2010). There is an agreement that a learning organization will help the business organization

attain a significant competitive advantage through employees who have a clear vision and

understanding of the importance of the service quality (Hays & Hill, 2001; Zeithaml et al.,

1990).

Organizational commitment is one of the employee aspects that has been reported to

have significant implications for both the internal service quality and organizational

performance. The importance of organizational commitment is advocated by the fact that the

higher the degree to which an employee identifies with the organization and its objectives the

better his or her service behavior would be (Boshoff & Mels, 1995). Boshoff & Mels (1995)

further called for the inclusion of other factors and to investigate their impact on service

quality other than organizational commitment. Furthermore O‘Riordan (2003) asserted that

creating and fostering an environment of internal customer service take time, he identified

commitment to regard colleagues as customers and culture as means to create a better internal

service. Research has shown both direct and indirect influence of commitment on

performance. Brown (2011) and Samad (2013) in their study of commitment and financial

performance found a direct, positive and significant influence of employee commitment on

organizational financial performance. Similarly Alfalla-Luque, Marin-Garcia, & Medina-

Lopez (2014) also supported the influence of commitment on all the different dimensions of

performance. While Boselie, Dietz, and Boon (2005) found that the effect of commitment on

performance was mediated by productivity and quality. Keeping in view the direct and

mediated influence of commitment, the factor was included in the study for further analysis.

A major shortfall of the existing research it its focus on customer relationship

management in comparison to attention on the dynamics of effectively supporting and

45

developing personnel who offer service to the customers (Bowen, 2010; Johlke & Duhan,

2000). Appreciating the significant impact that service personnel have on the success of the

business, there shall be an urgency in services research to better recognize how to establish

and leverage organizational cultures that effectively support and develop service employees

(Ostrom et al., 2010). A number of different aspects of organizational culture have been

identified in the GAP Model (Zeithaml, Berry, & Parasuraman, 1988) namely teamwork,

monitoring and supervision, communication and leadership. Teamwork and communication

can be referred to as important determinants of a strong organizational culture. The present

study utilizes collaborative culture since it is more relevant to the banks where working

environments are characterized by trust and interpersonal relationships emphasizing mutual

cooperation among employees. Research has shown the role of culture in fostering service

quality (Agbenyiga, 2011; Raub, 2008; Hauser & Paul, 2006) and organizational outcome

like performance (Abu-Jarad, Yusof, & Nikbin, 2010; Ogbonna & Harris, 2000).

Perception of support from organization leads individuals to feel obligated for making

contributions to their organization (Eder & Eisenberger, 2008). POS has been repeatedly

identified as a factor that can have a significant influence on the working of the employees.

Individuals accompanying the perception of getting support from their organization feel

honored, protected, and acknowledged, and in return exhibit raised assistance, identification,

gratitude, and persistent work (Chiang & Hsie, 2012). Hence POS generates an obligation on

employees to have a concern for the organization‘s prosperity and assist the organization to

attain its goals (Chew & Wong, 2008; Dhar, 2012; Eisenberger, Armeli, Rexwinkel, Lynch,

& Rhoades, 2001). The role of POS in the provision of superior service is evident, however,

there is limited research highlighting the contribution of POS towards service quality, the

present research would help in clarifying the contribution in establishing a higher level of

service quality within the organization.

46

From the management perspective, the relationship between role stress and internal

service quality has significant implications (Boshoff & Mels, 1995). Role stress is an

employee aspect that can result in negative employee reactions that could be damaging to the

organization. Role stress consisting of role ambiguity and role conflict has been identified as

a factor that influences service quality in GAP Model (Zeithaml, Berry, & Parasuraman,

1988). O‘Neil and Davis (2010) noted that stress can influence the service quality and

performance of employees, reduce personal accomplishment, and foster depersonalization

which in turn can impact employees‘ psychological health and business effectiveness. The

banking industry is a high-contact and people-oriented service, where apart from the

customers who are always in contact with the employees, the internal customers are highly

dependent on the service from each other, hence service performance can regarded as the

most important factor that determines service quality. Higher level of stress can result in

emotional exhaustion, which is the state of being overly tired from the emotional demands of

a task (Hon, 2013). Thus affecting employee responsiveness. It is reasonable to expect that

stress is adversely related to employee job attitudes and service performance. Work-related

stress has been linked with damaging work outcomes, for instance low morale, disloyalty,

absenteeism, burnout, job seeking, workplace deviance, and voluntary turnover (Glazer &

Beehr, 2005). Such responses are unfavorable for quality of service and organizational

effectiveness (Hon, 2013).

An important managerial practice that is imperative for the provision of superior

service quality is internal marketing. Ziethaml, Berry, and Parasuraman (1990) argued that

level of service quality deteriorates when internal customers are reluctant or incompetent to

accomplish the required level of service. Reluctance to perform a particular service is

reflected in the attitude of the staff, while lack of ability may arise due to absence of proper

training or other rewards on the part of the organization are necessary to attract and sustain an

47

able, efficient and effective workforce (Zeithaml, Berry, and Parasuraman, 1990).

Furthermore internal marketing is also identified as the strategy to close Gap 3 – the

differences between customer driven service designs/standards and service delivery

(Gronroos, 1990). It is also argued that internal marketing have been seen as vital for closing

Gap 3 (Gronroos, 1990). It is thus off great importance for the service organizations to

identify the steps that could be taken as part of the IM strategy, to make sure that service

personnel; exhibit the requisite attitude and effort to satisfy the customer during the service

encounter. Hence, there is a desperate need to integrate IM functions for the satisfaction of

employees (Zeithaml et al., 1988; Bitner et al., 1990). The need and prominence of IM in

determining the attitudes and behaviors of the service personnel cannot be undermined, and

does call for further research.

In light of the above cited findings, it is obvious that different scholars, researchers,

and practitioners have identified different factors. Six factors have been identified from the

literature for the present study. It is concluded that internal organizational factors contribute

towards enhancement of ISQ, and directly as well as indirectly lead to organizational

performance. The following table shows the factors identified based on the review of

literature. The factors and their relationship with service quality and organizational

performance is discussed in detail in the following sections.

49

Table ‎2.5

Theoretical and Empirical foundation for identification of organizational factors

Predictor Outcome (s) Results Source (s)

Organizational Learning Perceived Service Quality Significant Impact Hays and Hill (2001)

Organizational Learning Internal Service Quality Learning improves levels of internal service Pasebani, Mohammadi, & Yektatyar

(2012), Di Xie (2005), Ming (2010)

Organizational Learning Organizational Performance Learning leads to improved organizational

performance

Thompson and Kahnweiler (2002),

Kandemir and Hult (2005), Skerlavaj

and Dimovski (2006), Ruiz-Mercader,

Merono-Cerdan, and Sabater-Sanchez

(2006), Kuo (2011)

Bureaucratic Culture Service Quality Emphasis on standards and centralization

contributes to high level service behavior by

employees

Raub (2008)

Group Culture Service Quality Significant Influence on Service Quality Hauser and Paul (2006)

Organizational Culture Service Effectiveness Significant Positive Relationship Agbenyiga (2011)

Team oriented

organizational culture

Service Quality Significant Positive Relationship Phapruke (2008)

Organizational Culture Productivity and Work Quality Culture leads to outcomes like Productivity and Mathew, Ogbonna, and Harris (2012)

50

Work Quality

Organizational Culture Service Quality Culture stressing communication can result in

service quality.

Tsai and Tang (2008)

Competitive and

Innovative Culture

Organizational Performance Direct, Strong and Positive association Ogbonna & Harris, 2000

Organizational Culture Financial Performance Positive Relationship Perters and Waterman (1982), Ortiz &

Arnborg (2005), Schlechter (2001)

Involvement and

Cooperative Culture

Organizational Performance Positive Impact Ginevičius and Vaitkūnaite (2006)

Organizational

Commitment

Internal Service Quality Strong Positive Impact Boshoff and Mels (1995)

Organizational

Commitment

Service Quality Positive Relationship Malhotra and Mukherjee (2004)

Employee Commitment Financial Success Positive Correlation Benkhoff (1997)

Lack of Commitment Financial Performance Performance related problems such as, high

costs, low profits, low stock prices and poor

customer service

Pfeffer (1998)

Perceived Organizational

Support

High Quality Employees Positive Relationship Wayne, Shore, & Liden (1997)

Top Management Support Quality Efforts Lack of Support dooms Quality efforts Deming (1982, 1986)

51


Support

Performance Positive influence Byrne & Hochwarter, 2007


Support

Performance Significant Impact Rhoades and Eisenberger (2002)

Stress Output, Product Quality,

Service Morale

Negative Relationship Brown & Uehara (2008)

Role Stress Productivity Negative Impact Koustelios et al (2004), Ofoegbu and

Nwadiani, (2006), Chang and Lu (2007)

Stress Concern for the organization &

colleagues and responsibility

Negative Relationship Fairbrother and Warn (2003)

Stress Service Lack of Direction makes service suffer Varca (1999)

Role Stress Service Gap Role Ambiguity and Role Conflict widens

service gaps

Chaker and Jabnoun (2010)

Role Stress Quality of Work Negative Contribution in Quality Bauer and Brazer (2011)

Stress Job Performance Negative impact Stamper and Johlke (2003)

Stress Organizational Success Stress obstructs organizational success Noblet (2003)

Stress Productivity and Efficiency Stress reduces Productivity and Efficiency Dua (1994)

Internal Marketing (IM) Service Quality IM a solution to the problem of delivering

consistent service quality.

Berry, Hensel and Burke (1976)

IM Employee Behaviours and IM is crucial in producing the mentioned Reza, Javadin, Rayej, Yazdani, Estiri, &

52

Service Interaction outcomes. Aghamiri (2012)

IM Service Train and motivate employees to provide better

service.

Cooper & Cronin, 2000

IM ISQ Strongly related to perceptions of ISQ. Opoku et al. (2009)

IM Service IM dimensions (i.e. training and incentive) were

main drivers of the level of service

Tsai and Tang (2008)

IM Financial Performance Significant Influence Lings and Greenley (2009)

IM Business Performance Significant linear relationship Saad, Ahmed and Rafiq (2002)

IM Organizational Performance Internal marketing has positive impact on

organization performance.

Hwang and Chi‘s (2005)

IM Business Performance Positive influence Panigyrakis and Theodoridis (2009)

Service Quality Business Performance Significant Impact Jain and Gupta (2004)

Service Quality Financial Performance Service improves financial bottom line Getty & Getty (2000)

ISQ Banks Performance Performance improved through ISQ Bellou and Andronikidis (2008)

Source: Author

53

2.4.1. Organizational Learning

Learning is regarded as a key to survival, organizations that fail to learn most often

cease to exist. Organizations must try to comprehend the fact that learning not only helps to

understand the changes that are occurring in the environment, but also helps in making

change happen within the organization. It is an argument in support of organizational learning

that is carried out in organizations by key personnel whose learning is linked to subsequent

changes within the organization (Cook & Yanow, 2011). It is important to note from an

organizational perspective that self-doubt stimulates the learning process; doubt here refers to

the understanding that organizing and operating methods of business are as perfect as they

could be or as optimal as other alternatives. Organizational learning continues as faith

prevails in support of risk-taking linked with new arrangements or methods. It is, however,

important to note that a stronger conviction in support of certain arrangements or actions may

lead to blockage of sustained learning and is difficult to challenge (Srikantia & Pasmore,

1996).

A variety of definitions have been laid out on organizational learning. Most of the

definitions pertinent to organizational learning refer to it as a process. Lien, Hung, and

McLean (2007) refer to it as a process that facilitates the alignment among organizational

strategies, culture, and competitive environment. This is made possible through acquisition of

relevant skills that complement the vision, mission and long terms goals of the business. Day

(1994) referred to it as a process that transform information into knowledge and knowledge

into action. The actions are reflected in associated behavioral and cognitive changes (Kim,

1993). The way these changes are brought about is highlighted by Srikantia and Pasmore

(1996) who referred to it as a process involving confrontation with our own behavior openly;

doubts and convictions are conveyed and deliberated among organizational members, this is

simply stated as the process of detecting and correcting errors (Argyris & Schon, 1978). This,

54

however, is referred to as single-loop learning where a mismatch is corrected through

identification of performance gaps, and changing the action (Argyris & Schon, 1996). The

limitation of single loop learning is identified by Senge (2006) who noted that a mere

adaptability does not facilitate creativity. Daft and Weick (1984) stated that organizational

learning is knowledge about the nexus between the organization‘s activities and its

environment. Similarly, Schwandt and Marquardt (2000) defined organizational learning as a

representation of a multifaceted interrelationship between personnel, their behaviors,

symbols, and methods within the organization. Slater and Narver (1995) called organizational

learning as the development of new knowledge or insights that have the potential to inspire

behavior. According to Panayides (2007), organizational learning is a mean to create and

utilize knowledge to enhance competitive advantage. Two main themes emerge from all the

above definitions; first, organizational learning is concerned with knowledge and second is

pertinent to relationships. Knowledge perspective of organizational learning is more related

to the assimilation and distribution of knowledge that ultimately influences organizational

performance while the second perspective relates it with changes in the behavioral and

cognitive aspects of the business. Individuals through acquisition of relevant skills and

knowledge adapt to the changes and improve both job and organizational performance. It is

clearly visible that in all the different statements, one clear feature of organizational learning

is the change in behavior/actions of individuals working for the organization.

Three different levels of organizational learning, namely individual learning, team

learning, and organizational learning are identified by Solingen, Berghout, Kusters, &

Trienekens (2000). Responsibility on the part of the person to take learning initiative is

referred to as individual learning. Utilizing capability of different people who work together

as a group is called team learning. There is a common learning approach in teams, team

member support each other in attaining individual learning objectives, and cooperating with

55

other teams in the learning process. Individual learning takes shape of organizational learning

when new knowledge is transmitted across departmental boundaries to others working in the

organization that reap the benefits from what has been learned. This is only possible through

interaction and fostering network between the department, developing an understanding of

how different departments and individuals in these departments are linked to each other.

Furthermore how skills set of individuals in a particular department complement personnel

working in other departments. This can be achieved through group trainings and network

meetings.

Single loop, double loop and deuteron learning have been identified as three major

types of learning (Argyris & Schon, 1978). Single loop learning encompasses closing the

performance gaps through detection and correction of errors, this enables business to act upon

their policies and objectives, the outcomes are gauged against the norms and expectations of

the organization. Single loop learning is suitable for the routine and monotonous jobs because

it helps in getting routine jobs done. However, single loop learning does not trigger any

organization wide change. This type of learning be suitable at the very operational level

within the organization. Single loop learning can help both the internal and external customer

receive the service right the first time. Double-loop learning on the other hand points to the

willingness to question long-held assumptions about organizations‘ mission, customers,

capabilities, or strategies. This is a double loop (Argyris, 1978, 1996) or generative learning

(Senge, 2006), since it helps in generating new ideas, concepts, strategies that cultivates the

learning in organization by challenging the underlying governing values. This type of

learning can help understanding why or why not the current processes will work. It can help

in creating a better and enhanced service structure by questioning the existing policies and

practices of the organization. Third is deutero-learning, refers to the mechanism to carry out

56

single-loop and double-loop learning. Deutero-learning is more proactive in nature with

organizational focus on achieving perfection (Argyris & Schon, 1978).

2.4.1.1. Linkage of Organizational Learning with Service Quality and


The question of how organizational learning relates to improvement in service quality

has not yet been sufficiently analyzed. Organizational learning and service quality

complement each other. Since, employees who are better equipped with latest skills can serve

the customers in a better way. There are few studies that highlight the relationship between

organizational learning and service quality. Argyris and Schon (1978) even defined

organizational learning as ―the detection and correction of errors‖. Detection and correction is

the process that would most certainly improve the quality of service, hence when an

organization learns, it equips itself with the ability to solve its problems resulting in timely

delivery of service, this is also known as quality control (Hays & Hill, 2001).

Zohrabi, Mahdavi, & Mahdavi (2013) contend that a strong attitude towards the

prominence of service quality may generate useful competitive advantage to the employees.

Pasebani, Mohammadi, & Yektatyar (2012) called organizational learning as one of the

essential elements that contribute towards ISQ. They concluded that learning culture can help

the staff in the provision of improved service quality. Similarly, Di Xie (2005) in his study

found that application of organizational learning culture can have a decisive role in fostering

ISQ. It was concluded that investment in building a learning culture is worthwhile due to its

potentially strong relationship with employees‘ internal service quality. Likewise, Ming

(2010) in the study of Chinese service organizations found a significant relationship of

organizational learning culture with ISQ. Hays and Hill (2001) also noted that there is a

positive relationship of organizational learning and employee motivation with perceived

service quality. They established in order to achieve supreme service quality it is essential to

57

have motivated employees and organizational learning ability. The need for organizational

learning is further highlighted in the assertion that new knowledge can be engendered from

both the external and internal sources (Yakhlef, 2009). Internal sources are no other than

employees; failure on the part of the organization to foster communication, trust, empathy,

understanding, responsiveness would most certainly deter employees in working together and

creation of new knowledge.

Organizational learning emphasizes performance improvement through the

acquisition of skills that organization and employees were not acquainted with the past.

Organizational learning is inclined towards creating ―useful‖ knowledge for the organization.

Efficiency, innovation, and competitive advantage are few of the valued outcomes created by

a learning organization. Organizational learning brings positive changes in the way people

perceive their internal and external environments (cognitive changes) and how they people

(behavioral changes); this also carries a significant positive impact on organizational

performance (Thompson & Kahnweiler, 2002; Kandemir & Hult, 2005).

Direct and indirect influence of organizational learning on organizational performance

is available in the literature. Skerlavaj and Dimovski (2006) from an employee perspective

established a significant positive and strong impact of organizational learning on

organizational performance. Similarly Ruiz-Mercader, Merono-Cerdan, and Sabater-Sanchez

(2006) also found that individual and organizational learning exhibit a significant and positive

influence on organizational performance. Khandekar and Sharma (2006) in their study of

Indian global organizations, interviewed 100 managers and established a positive link

between organizational learning and performance. Similarly Kuo (2011) found the direct

impact of organizational learning on organizational performance in technology companies in

Taiwan. Skerlavaj, Stemberger, Skrinjar, and Dimovski (2007) in their study of medium and

large Slovenian companies found a statistically significant relationship between

58

organizational learning culture on organizational performance. Skerlavaj, Stemberger,

Skrinjar, and Dimovski (2007) noted that improved organizational learning culture adds to

organizational performance in financial as well as nonfinancial terms but the influence of

learning on performance would be indirect. Song and Kolb (2012) in their SEM analysis

found that the knowledge creation process has a mediating effect on learning organization

culture in predicting the perceived level of organizational financial performance. The linkage

between organizational learning, service quality and organizational performance is further

elucidated by the findings of Rondeau and Wagar (2002) whose study results suggested that a

quality management program without the assistance of a robust organizational learning

culture may not be sufficient to attain improved business performance.

Different dimensions of organizational learning have proved that it has influence over

organizational performance. Michna (2009) in their study of SME‘s in Poland identified 11

dimensions of organizational learning, except strategic ability, all other dimensions had a

significant relationship with organizational performance dimensions (Income Growth and

Employment Growth). However, none of the organizational learning dimensions had any

relationship with index growth. Prieto and Revilla (2006) categorized organizational learning

capability as knowledge stocks and learning flows, they based their data from 111 Spanish

firms and found that organizations with the highest level of knowledge stocks and learning

flows, obtained superior performance. It is thus established that business organizations that

invest efforts in organizational learning generate both tangible and intangible benefits in

terms of an improved efficiency, optimal of employee trust in leadership, decreased costs of

work per employee, committed workforce, flexibility, increased employee satisfaction and

increased financial gains.

The aforementioned literature further elucidates the linkage between organizational

learning, ISQ, and organizational performance. Organizational learning has been found to

59

improve organizational capacity to innovate, efficiency and competitive advantage through

skill acquisition, which can further enhance income growth and financial gains.

Organizational learning can help organizations detect and correct its errors. This can ensure

timely delivery of service. Learning through skill acquisition not only improves employee‘s

capabilities that can make the environment more manageable but also fosters positive

employee behavior, thus putting employees in a better position to understand and respond to

each other‘s problems. Once employee‘s issues are resolved, this can make them focus on the

objectives of the organization and can make them more productive.

2.4.2. Organizational Culture

Culture constitutes a central part of how a business conducts its routine operations.

Several definitions have been put forth to state the concept of organizational culture.

Organizational culture refers to the overall ethos of a business: characteristics that include

both psychological and structural elements, which impact the perceptions and behavior of the

employees (Fletcher & Jones, 1992).Van der Post, de Coning & Smit (1998) stated that

culture is to the organization what personality is to the individual, it is a concealed but

integrated force that provides meaning and direction, thus culture fundamentally defines the

organization. Schein (1992) defined organizational culture as a pattern of basic assumptions

invented, discovered or developed by a given group as it learns to cope with its problem of

external adaptation and internal integration. In the last few decades researchers and managers

have utilized the concept of culture to point to the climate and practices that businesses

develop around their handling of employees, or to the espoused values and credo of an

organization (Schein, 2010). Van den Berg and Wilderom (2004) noted that culture between

departments in an organization may differ, they stated that organizational culture is the shared

perceptions of organizational work practices within organizational units that may differ from

other organizational units. Drake, Gulman, and Roberts (2005) referred to culture as an image

60

of an organization‘s philosophy, history, leadership, values, and shared beliefs. Schein (2010)

asserted that in this context, managers speak of developing the ―right kind of culture,‖ a

―culture of quality‖ or a ―culture of customer service‖. In this case culture points to a certain

values that managers try to instill in their organizations. This right culture is further

elaborated by Pfister (2009), who asserted that a right culture would promote ―effectiveness‖,

an ―ethical culture‖ would contribute towards organizational performance. Pfister (2009),

influenced by Schein‘s work on organizational culture, defined it as,

“A pattern of basic assumptions that a group has invented, discovered, or developed

in learning to cope with its problems of external adaptation and internal integration,

which is represented in a system of shared values defining what is important, and

norms, defining appropriate attitudes and behaviors that guide each individual’s

attitudes and behaviors.”(p. 3)

Since there is a right culture, this refers to the assumption that there are stronger or

weaker cultures and better or worse cultures and that the ―right‖ kind of culture will impact

on the effectiveness of the business organization. There is often the implication in the

managerial literature that for effective performance there is a need of having a culture, it is

imperative that effective organization will only be established if there is a strong culture since

employees would have gelled together, understood the objectives of the organization, respect

and comprehend each other, leading to quality of product and service produced. The original

emphasis on shared values gave rise to the idea of organizational culture's strength (van den

Berg & Wilderom, 2004). Cultural strength points to the valence of the agreement between

employees and their organization on the importance of the key cultural values. The strength

of the cultural connection is based on the identification and significance the employee has for

the organizational values (Booth & Hamer, 2009).

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Varied research studies have classified organizational culture. One of the most widely

used cultural dimensions was put forth by Hofstede (1990). Hofstede (1990) initially

developed four dimensions of culture, namely Power Distance, Uncertainty avoidance,

Individualism/Collectivism, and Masculinity/feminity. Van den Berg and Wilderom (2004)

on the basis of literature review and empirical studies, identified 5 dimensions of

organizational culture i.e. External orientation, Autonomy, human resource orientation,

interdepartmental coordination, and improvement orientation. The culture assessment scale

developed by Cameron and Quinn (2011) is probably the most frequently used questionnaires

to assess organizational culture. Cameron and Quinn (2011) made four quadrants

corresponding with the four organizational cultures:

Clan: Clan culture depicts a one big happy family where people have a lot in common and

working environment is sociable.

Adhocracy: In an adhocracy culture working environment is energetic and creative. Leaders

innovate and take risks.

Hierarchy: The focus in the hierarchy is on completing work and getting things done.

Characteristics of people include competitiveness and concentration on goals.

Market: Market structure is characterized by formalization and structure work environment.

Employees are bound by procedures. Leaders take pride in an efficiency-based coordination.

These four organizational cultures differ deeply on these two dimensions:

External focus and differentiation vs. Internal focus and integration

Flexibility and discretion vs. Stability and control

Glaser, Zamanou, and Hacker (1987) studied organizational culture in 195

government employees representing every level and division in their department and found 6

dimensions i-e. Involvement, Teamwork & Conflict, Information flow, Climate & Morale,

Supervision, and Meetings. Hofstede, Neuijen, Ohayv and Sanders (1990) based on the study

62

in twenty units from ten different organizations in Denmark and Netherlands classified

organizational culture and revealed four manifestations of organizational culture namely

Symbols, Heroes and Rituals which were grouped as Practices, since they were overt and

observable, while the fourth manifestation was termed as Values (feeling of good and evil),

since values are not observable, unconscious and rarely discussable but are manifested in

alternative of behavior. Practices were further divided into the dimensions of Employee

Oriented vs. Job Oriented, People Oriented vs. Results Oriented, Open System vs. Closed

System, Parochial vs. Professional, Normative vs. Pragmatic, and Loose vs. Tight Control.

While values was further divided into dimensions of Work Centrality, Need for Security, and

Need for Authority.

Variety of dimensions are available in the literature pertinent to culture, however, it is

not possible to study all of the dimensions. For the present study, Collaborative Culture scale

is utilized. In the context of the organizational culture, this current study stresses the aspect of

creating a collaborative culture. Collaboration in the current study precisely refers to ‗mutual

sharing norms of behavior‘ (Yang, 2007). According to Flores (2004, p. 300), collaborative

cultures refer ―to working relationships which are spontaneous, voluntary, evolutionary, and

development-oriented‖. Lopez, Peon, and Ordas (2004) defined collaborative culture as one

that values communication, teamwork, empowerment, and respect and leverages the

knowledge of employees resulting in organizational learning. An important aspect in all the

above mentioned definitions of collaborative culture is the supportive behavior that is

extended by workers towards each other, this in fact creates a working environment where

people like to work. Hence a collaborative culture inspires complete engagement of team

members since employees enjoy support from each other, mutual respect, and care (Bstieler

& Hemmert, 2010).

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2.4.2.1. Linkage of Organizational Culture with Service Quality and Organizational

Performance

Although there is a dearth of empirical research that examines the influence of

organizational culture on ISQ in the banking sector, however there have been studies that

have shown the influence of organizational culture on service quality in other sectors. In the

study of airline service employees Zerbe, Dobni and Harel (1998) revealed that service

culture had a direct influence on self-reported service behavior. Similarly Agbenyiga (2011)

in their study of child-welfare agency found a significant influence of organizational culture

on service effectiveness. Literature has identified the need for strong culture to boost level of

service quality within the organization. Gronroos (1990) has identified that a strong culture

that fosters customer/service orientation and comprehension of service quality is vital for

successful service quality management. Moreover, the need for a strong service oriented

culture that inspires employee behavior is necessitated (Zerbe, Dobni & Harel, 1998) since

management in the service sector does not have control over their employees‘ service

behavior (Schneider & Bowen, 1995). A strong service-oriented culture can give guidelines

for right and proper behavior toward customers culminating the need for establishing undue

processes and procedures to monitor employees‘ service delivery. Similarly Mathew,

Ogbonna, and Harris (2012) asserted that organizational culture that exceeds the old-

fashioned approaches of compliance to quality standards or quality control can lead to the

internalization of quality as well as the values, attitudes, and behaviors that promote it.

Beliefs and expectations are part of the organizational culture, and prescribe the way in which

things are done in the organization (Glisson & James, 2002). If the employees within an

organization value keeping their word and trust the coworkers, this will certainly influence

the provision of service with reliability and assurance. Thus, there is a window of opportunity

for organizations to focus on fostering a culture that promotes positive service behavior in

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and out of the organization, and this could very well translate into business profitability. The

study of corporate culture is thus important in trying to better comprehend the context of

organizations and the people managing the organization (Rashid, Sambasivan, & Johari,

2003). Exploring the relationship between organizational culture and service quality

Phapruke (2008) found that team oriented organizational culture has a positive and significant

influence on service quality, strengthening the finding of the study, Chiang and Hsieh (2012)

who found a positive relationship between the employees‘ consciousness of a supportive

organizational culture and their mutually supportive and cooperative behavior. Similarly

Mathew, Ogbonna, and Harris (2012) found in their study of Indian software companies that

organizational culture produces outcomes like worker satisfaction, work quality, and

productivity. Further, satisfaction, quality, and productivity are proposed as leading to firm

profitability and growth while work quality is presented as a significant contributor towards

organizational innovation.

The evaluation of culture is necessary to recognize the kind of culture predominant in

the organization. Culture assessment is an efficient way to recognize complex organizational

culture and to direct and implement organizational changes for enhanced service delivery

structures. According to Abu-Jarad, Yusof, Nikbin (2010) organizational culture carries its

influence on various employees and organizational related outcomes. Schein (1990) and Lok

and Crawford (2004) further highlight the areas that the culture affects, and it includes the

way in which people consciously and subconsciously think, makes decisions and ultimately

the way in which they perceive, feel and act. Corporate culture has an impact on employees‘

behavior, managers may need to shape and develop organizational culture that are more

conducive to the employees and organizational setting (Rashid, Sambasivan, & Johari, 2003).

Hence different organizational cultures have varying influences on the delivery of service as

actions of employees may change due to the work culture prevalent in their organizations.

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However, in most cases a strong culture was found to have significant influence. Glisson

(2007) asserted that rigid organizational cultures are characterized by service providers

having little preference or flexibility; with limited input to key management decisions; and

chained by numerous bureaucratic rules and regulations. This may make it difficult for

internal customer to provide prompt service to the internal suppliers, however Raub (2008)

study of bureaucratic culture and employee behavior in the Swiss hotel industry found that

high level of employee service behavior was determined by emphasis on standards and

centralization.

Developing an appropriate organizational culture should be a critical component in

the success of a bank since banking industry typically involves a high level of interaction

between customers and employees. The need for an appropriate organizational culture in

banks is highlighted by Julian and Ramaseshan (1994) who noted customers' perceptions of

bank‘s culture and image are often based on their exchanges with bank employees. This calls

for motivation and satisfaction of a teller‘s with whom customers interact more frequently.

Given the nature of a teller‘s duty this is not an easy task. The training and socialization

programs that tellers are involved with will play a major role in their level of job satisfaction

and motivation. This can not only be limited to tellers, customers in today‘s banking industry

interact with staff at all levels, thus motivation and job satisfaction is an imperative for all the

employees. Culture can be a mean to enhance the motivation and satisfaction. Tsai and Tang

(2008) from the internal marketing perspective established that organizational culture

stressing over communication and prospects can motivate the staff to have excellent service

quality. Similarly Hauser and Paul (2006) in their study of information system service quality

found that only group culture had a significant influence on service quality.

Papasolomou and Vrontis (2006) in the study of UK retail banking industry found that

treating employees as customers, develops a strong service culture and provides the grounds

66

for a strong brand. This service culture was found to be critical in the TQM implementation

success in the UAE banking sector (Al-Marri, Ahmed, & Zairi 2007). Anosike and Eid

(2011) study in banking sector found that organizational culture provides a unifying focus to

support and guide the attitudes and behaviors of organization members to deliver quality to

other employees. Choudhury (2008) recommended that culture may play an essential role in

determining how external customers perceive what constitutes service quality. Furthermore, it

is suggested that service quality dimensions such as access, understanding of the customer,

and reliability are related to factors of economic development, such as competition, affluence,

infrastructure, education, and technology.

Organizational culture can be described as the bedrock upon which organizational

performance is based. A poor organizational culture and climate will significantly deteriorate

service quality and customer satisfaction and hence the organizational performance (Oh &

Pizam, 2008). It is therefore regarded as one of two types of intangible resources that are

regularly noted in the scholarly management literature to explain the sustainable firm success

is culture (Schein, 1985). The organizational culture practice has been identified as one of the

most crucial factor that determines organizational success than national or occupational

culture (Abu-Jarad, Yusof, Nikbin, 2010). Ogbonna & Harris (2000) identify that the reason

for this is that certain organizational cultures lead to superior financial performance. They

found direct, strong, and positive associations in their analysis of the links between

competitive and innovative forms of culture and organizational performance. Corporate

culture has received much consideration in the recent years due to its potential impact on

organizational performance (Rashid, Sambasivan, & Johari, 2003). Lok and Crawford (2004)

noted that organizational culture can exert substantial impact in organizations, particularly in

areas such as commitment and performance. The prerogative that culture is related to

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organizational performance is instituted on the perceived role that culture can play in

engendering competitive advantage (Ogbonna& Harris, 2000).

Literature on organizational culture constantly reinforces the notion that

organizational culture is necessary for effective functioning and performance of the

organizations. Research has shown significant influence of organizational culture on

subjective organizational performance, however, there has been some, albeit limited

empirical support for the effect of culture on objective organizational performance (Wilderon,

van den Berg, & Wiersma, 2012; Xenikou & Simosi, 2006; Uzkurt, Kumar, Kimzan, &

Eminoglu, 2013). In their study of 36 American companies between 1961 and 1980, Peters

and Waterman (1982) found certain direct links between corporate culture and financial

performance, measured in terms of average turnover growth, compounded asset growth,

average return on capital, mean ratio of market to book value, average return on sales, and

average return on equity. More recent studies have also indicated that organizational culture

has its impact on the long term financial performance of the organizations and culture will be

playing a deciding role in determining the success or failure of organizations (Ortiz &

Arnborg, 2005; Schlechter, 2001)

Xenikou and Simosi (2006) in their study of large financial organization in Greece

found that only two out of four (achievement and adaptive orientation) cultural traits had an

influence on the financial performance, however, Uzkurt, Kumar, Kimzan, & Eminoglu

(2013) studied the influence of innovative organizational culture in the Turkish banking

sector, and found significant influence on objective organizational performance (Profitability,

Market Value and Market Share). Surprisingly, though, Skerlavaj, Stemberger, Skrinjar, and

Dimovski (2007) study of one of the dimensions of organizational culture (Organizational

Learning Culture (OLC)) showed that OLC has a positive direct impact on all three aspects of

non-financial performance perspectives included in the model: customer, supplier and

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performance of the employee. The impact of OLC on financial performance was positive, but

indirect (through non-financial performance from the employee perspective). There has been

evidence of the influence of organizational culture on subjective organizational performance,

Yesil and Kaya (2013) also in their study of firms in Gaziantep in Turkey found that

organizational culture dimensions have no effect on firm financial performance (Sales

Growth and Return on Assets) however the evidence of the impact of organizational culture

on objective organizational performance have been inconclusive due to definitional,

structural and design related differences and problems (Yesil & Kaya, 2013).

A general belief confirms that corporate culture has a long term impact on

performance (Kotter & Heskett, 1992). Ginevičius and Vaitkūnaite (2006) reported that

organizational culture determined by involvement and cooperation positively impacts

organizational performance. Kotter (2012) also suggested that organizational culture has the

potential to improve employee job satisfaction, the sense of certainty about problem solving,

and organizational performance. Dwyer, Richard, & Chadwick (2003) in their study of banks

revealed no significant influence of organizational culture on the financial performance of

banks. Similarly Wilderon, van den Berg, & Wiersma (2012) revealed in the study of a large

Dutch Bank that none of the 5 factors of organizational culture had a significant relationship

with objective organizational performance. However all dimensions except Human-resource

orientation showed a significant relationship with perceived organizational performance.

However contrary to other studies Booth and Hamer (2009) found significant influence of

cultural dimensions (Morale, Job Satisfaction, Tools & support infrastructure and

Manageable workload) on financial performance (Sales Intensity) in UK retail business.

Following this line of logic, this study attempts to further investigate the role of

organizational collaborative culture on firm objective and subjective performance.

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The aforementioned literature can be summarized to further clarify the causal link

between culture, ISQ and organizational performance. Culture constitutes of psychological

and structural elements that affect employee‘s perceptions and behaviours, most important

behaviours in the context of this study are responsiveness, reliability and assurance which

determine the level of ISQ. Enhanced level of these identified behaviours would make a

stronger organizational culture that would help in improving firm profitability. Rigid culture

influences level of cooperation within the organization that has a significant impact on


2.4.3. Organizational Commitment

A number of different definitions have been proposed to elaborate the concept of

Organizational commitment. It includes, process by which the goals of the individuals and

the organization become congruent, attitude or orientation that links the identity of the

employee to the organization, the perceived rewards associated with continued participation,

an involvement with a particular organization, the costs associated with leaving the

organization and normative pressures to act in a way that meets organizational goals (Meyer

& Allen, 1997). Mowday, Porter and Steers (1982) characterized organizational commitment

as a readiness to exert considerable effort on behalf of the organization, a strong belief in and

acceptance of the organizational goals and values, and a strong desire to maintain

membership in an organization. Muthuveloo & Rose (2005) referred to organizational

commitment as the willingness of employees to accept organizational values and goals and

direct efforts towards attainment of these goals. Furthermore commitment was conditioned to

complete involvement and participation in all the activities both work and non-work related

to the organization and to dedicate time and effort towards the advancement of the

organization. Employee commitment to the organization is characterized by a proactive

attitude representing an internalized employee's belief that stems out from soft HR

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approaches (Shepherd & Mathews, 2000). Organizational commitment is a psychological

state that characterizes the employee‘s relationship with the organization (Rashid,

Sambasivan, Johari, & 2003). This relationship is characterized by the relative strength of an

individual‘s identification with and involvement in a particular organization‖ is referred to as

commitment to the organization (Robins, Judge, & Sanghi, 2009). This definition entails a

strong belief and recognition of the organization‘s goals and values and a willingness to exert

considerable effort on behalf of the organization. This is only possible when employees

perceive that they have a connection with their job which is another measure of degree of

organizational commitment (Bai, Brewer, Sammons, & Swerdlow, 2006).

Three main themes emerge from the above statements that describe organizational

commitment, first is characterized by a strong belief in the goals and values of the

organization, second, willingness to go the extra mile, and third continued association with

the organization. It can be asserted that employees having these characteristics have a higher

level of commitment. The three broad themes that emerge from aforementioned definitions of

organizational commitment led Meyer and Allen (1991) to formulate a three dimensional

construct of commitment which included affective, normative and continuance which is

sometimes labeled calculative commitment (Iverson & Buttigieg, 1999). Employees‘

emotional attachment to, identification with and involvement with the organization based on

the positive feeling and emotions towards the organization is referred to as affective

commitment. Employees will continue to work for the organization since they want to

(Gautam, Van Dick & Wagner, 2004).

The commitment based costs associated with leaving the organization is referred to as

continuance commitment (Meyer & Allen, 1997). Gautam Van Dick and Wagner (2004)

identified two reasons for continuance commitment, first the perceived cost of leaving the

organization in the form of payment reduction, loss of pension benefits, and secondly due to

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lack of job openings. Although the employees may be looking to leave the organization, but

this form of commitment ensures that employees continue working for the organization,

regardless of their feeling of discontent and dissatisfaction towards the organization

(Appelbaum, et al, 2004). This may be because such employees are likely to resort to loyalty

or neglect as the response to their dissatisfaction.

When employees feel obligated to continue working for the organization, this may be

due to the internalization of values and goals of the organization, this is referred to as

normative commitment (Meyer & Allen, 1997). Normative commitment refers to an inner

feeling of obligation that pressurizes the employee to continue working for the organization

due to work culture and other socially accepted norms. (Gautam, Van Dick, & Wagner,

2004). This may be due to the support that employee might have received in the past from the

organization, or the reference on which the employees availed the job.

The differentiation point between a committed and not committed employee is that

employees who show commitment are dedicate more of their time, energy and talents to the

workplace. This depicts the acceptance and believe in the organizational goals and values.

Once an employees‘ belief is strong, employees consider organization as their own, this

ownership towards organization translates into discretionary effort, and no compromise on

the quality of product and service. In other words, the willingness of committed employees to

engage in discretionary effort beyond the call of duty make them highly likely to be better

service quality performers. This level of involvement and commitment of the staff leads to a

higher level of service, resulting in a smaller internal service gap (Frost & Kumar, 2001).

A variety of measures are available in the literature to measure organizational

commitment. However, according to Fields (2002), three primary issues that shall be

addressed in measuring organizational commitment:

1. How does it form? – Pointing to the basis of commitment.

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2. What is the evidence of commitment? – Referring to the manifestation of commitment

is it an attitude or behavior)

3. What or who is the employee committed to? – Stating the focus of commitment

Fields (2002) further clarified that each of the dimensions of commitment (Affective,

Normative and Continuance) describe the basis of commitment. With respect to whether term

commitment is an attitude or behavior, affective commitment has been termed as an

attitudinal component, while normative and continuance commitment is termed as behavioral.

The third issue is that of focus. This refers to the notion that is the employees willing to stay

with the organization for personal gains or if the employee really believes in the organization.

This results in personal or organizational focus.

A number of measures are available to measure organizational commitment. One of

the earliest attempt was by Mowday, Steers and Porter (1979) who proposed a 15 item uni-

dimensional scale that asked respondents to rate the statements about their feelings for the

organization. Meyer & Allen (1997) developed one of the most widely used scale for

measuring commitment, as identified and described above. They prescribed 3 different

dimensions (Affective, Normative and Continuance). The instrument had a total of 22 items

with 8 statements to evaluate affective commitment, 6 for normative commitment and 8

pertinent to continuance commitment. Similarly Balfour and Wechsler (1996) produced a 3

dimensional scale consisting of nine items. The three dimensions included commitment based

on affiliation or pride in the organization (Identification Commitment), a commitment based

on identification with the organization (Affiliation Commitment), and commitment based on

satisfactory exchange with the organization (Exchange Commitment) resulting in

appreciation of the individual by the organization. Reviewing the items further revealed that

identification and affiliation, commitment dimensions can be viewed as a subset of affective

commitment scale of Meyer and Allen (1997). Exchange commitment dimensions make the

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scale different from the previously discussed scales, it adds reciprocity to organizational

commitment, and reveals if the employee is getting any intangible reward for the attachment

to the organization.

2.4.3.1. Linkage of Organizational Commitment with Service Quality and


An employee who is attached to an organization would feel differently for his/her job

and the workplace. The feelings and emotions the employee has for the organization makes

the individual thought process very different. The actions of the employee are dictated by the

consequences they have for the business. An employee with heightened affection for the

organization would behave differently not only with the external customers, who are the

ultimate determinant of organizational performance, but also with each and every employee

working within the organization. The level of attachment employee has with the organization

translates into employee attitudes and behaviours. Employee‘s strength of identification with

the organization‘s goals, vision and values is reflected in the employee‘s delivery of service.

(Unzicker, Clow, & Babakus, 2000). Employee identification with the organization has a

significant negative influence on turnover, lower turnover implies that employees would have

worked with each other over a longer period of time, they would understand each other‘s

needs and wants, thus would be in a better position to facilitate fellow workers and the

service received from the fellow workers would be adequately satisfying, since employees

would have longer work tenures. Lower turnover, therefore, means a more experienced crew,

and consequently, better service quality. There has been plenty of research on the effects of

employee commitment on service quality from a customer perspective, however a little

research effort is carried out over the influence on organizational commitment on ISQ.

Boshoff and Mels (1995) studied the influence of organizational commitment on ISQ

in insurance sales people, and found a strong positive impact of commitment on ISQ. This

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was attributed to the fact that salespeople internalize and identify with the organizational

goals, objectives and values, thus will boost ISQ through increased discretionary effort.

Discretionary efforts are of great significance in service industries, since organizations cannot

control the level of interaction between the customer and the employees. The willingness of

employees to engage in discretionary efforts during a service encounter, determines the level

of SQ delivered to customers, leading to customer satisfaction (Zeithaml, Berry, &

Parasuraman, 1990). Discretionary effort is equally important during the contact between

employees. One employee‘s willingness to provide adequate, timely, efficient, and effective

service to the other employee can help the organization produce the desired deliverables and

attain superior performance. The level of service quality provided to the customer is strongly

dictated by the willingness of employees to accept and support organizational goals and act in

a manner that is likely to promote these goals. (Boshoff & Tait, 1996). For example,

Malhotra and Mukherjee study in a major retail bank in the UK (2004) found that the OC of

employees plays a vital role in shaping the level of SQ delivered to customers. Although the

existing research focus on the relationship between commitment and service quality has been

on the external customer. However, superior service to the external customer is strongly

contingent to the enhanced internal service. Hence, it is suggested that employee commitment

can have a significant positive impact on the internal service quality.

Much has been researched on the linkage between commitment and performance. The

objective of the present study pertinent to organizational commitment is two folds. One is to

evaluate the influence of organizational commitment to organizational performance, and the

second is to identify if ISQ mediates the relationship between organizational commitment and

organizational performance. A consensus prevailed in the present age that organizations are

not competing on the basis of products they produce rather the quality of people they employ.

However, in order to achieve performance related objectives, it is essential to deal with issues

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relating to commitment and compliance which is part of the soft HR issue that contributes

towards organizational performance (Adhikari & Gautam, 2011). The generation of

commitment is rooted in the expectation that people can make a difference because of their

capabilities and commitment, which are rare, non-substitutable, valuable and inimitable

(Barney, 1991). It is thus important to understand that organizations understand value its

employees and the payoffs of organizational commitment in terms of organizational success.

Research has shown that organizational commitment is considered to result in greater

effort which, in turn, results in improved performance (Worsfold, 1999). Different results are

found based on the varying definitions of commitment and performance (Somers &

Birnbaum, 1998). Benkhoff (1997) investigated the influence on organizational performance

in terms sales targets met and change in profits. It was found that employee commitment was

positively correlated with the financial success of divisions (in sample bank branches).

Research has revealed that an increased level of employee engagement is positively

associated with financial performance (Collins, 2001; Ingelgard & Norrgren, 2001). While

failure to attain organizational commitment has its consequences in the form of performance

related problems such as high costs, low profits, low stock prices, and poor customer service

(Pfeffer, 1998).

Organizational commitment links employees' identity to the organization, which can

strengthen service delivery. Once employees identify with the organization, this reduces

employee turnover resulting in long term working relationship with the organization that can

also lead to improved service delivery while lack of commitment can slow down the service

delivery. Commitment has been identified as a factor in the provision of long term financial

results. The direction of efforts as a result of employee commitment can aid in higher level of

trust and reliability amongst employees that can produce improved performance.

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2.4.4. Perceived Organizational Support (POS)

Service employees tend to be more responsive towards the needs of the customers, if

they perceive that the management is concerned with meeting their needs (Getty & Getty,

2000). Drawing on the social exchange theory Rhoades and Eisenberger (2002) defined POS

as the employees‘ perception concerning the extent to which the organization values their

contributions and cares about their well-being. Similarly Dawley, Andrews and Bucklew

(2008) described POS as employees‘ beliefs that the organization values their contributions

and well-being. Moreover, POS ―may be used by employees as an indicator of the

organization‘s benevolent or malevolent intent in the expression of exchange of employee

effort for reward and recognition‖ (Lynch, Eisenberger, & Armeli, 1999, pp. 469-70).

Perceived Organizational Support among the employees and the employer develops over time

through numerous exchanges and reflects the level to which workers recognize that their

organization/business is committed to them (Stamper & Johlke, 2003).

The perception of being valued and cared by the management is utilized by the

employees to fulfill their social needs for approval, affiliation, and esteem, and to determine

the organization‘s readiness to compensate the increased effort with greater rewards (Yoon,

SEO & Yoon, 2004). This concept of perceived organizational support based on social

exchange theory (Blau, 1964) and the norm of reciprocity (Gouldner, 1960). Social exchange

theory highlights the reason as to why workers feel indebted to reciprocate actions directed

toward them by the business organization. Social exchange theory states that employees tend

to counter beneficial treatment they receive with positive work-related behaviors (Mishra,

2013). Moreover, an increased level of POS associates with the understanding that employees

who feel a higher level of POS will reciprocate favorable behavior when they trust that the

organization will reward them. The specific benefits exchanged may be valued primarily

because they are symbols of a high-quality relationship (Mishra, 2013). Lambert (2000)

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contended that high level of organizational support may result in positive behaviors valued by

the organizations, this is in response to the benevolent treatment from the organization.

2.4.4.1. Linkage of Perceived Organizational Support with Service Quality and


POS is viewed as an important explanatory framework for understanding the

relationship between employees and the workplace. It is regarded by some researchers as

central in understanding job-related attitudes and behaviors of employees (Shen et al., 2013).

There have been theoretical and practical contributions that highlight the influence of POS on

employees‘ behavior which actually stimulates how employees treat their coworkers and

customers. Employees feelings about the organization‘s care and emphasis are driven by the

perception of the support employees‘ receive at work. Employees with a sense of POS feel

that in circumstances where they need work or life support, the organization is willing to lend

a helping hand; employees personally feel cared for, recognized, and respected, and in turn

display identification, increased cooperation, appreciation, diligent performance, and

reciprocity among workers. The dictionary meaning of reciprocity refers to mutual benefit,

and based on the norm of reciprocity, employees in receipt of greater resources from the

employer are likely to compensate their employers with greater levels of performance

(Eisenberger et al., 1986; Rousseau & Parks, 1993). Based on the principle of reciprocity,

employees with POS not only help coworkers, but also increase their own job satisfaction and

organizational commitment (Chiang & Hsieh, 2012). This helps from the coworkers is

reflected in terms of higher level of trust, increased reliability, deeper understanding of issues

and challenges that leads to joint problem solving, and task responsiveness that results in

efficient and effective working.

It is important to note that achieving service quality and making satisfied and loyal

customers depend on the attitudes, performance and behavior of employees (Kusluvan &

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Kusluvan, 2000). Mohr and Bitner (1995) anticipated that POS has a direct influence on

contact personnel service efforts defined as the amount of energy put into service works.

Likewise, Wayne, Shore, & Liden (1997) found that POS is positively related to a high

quality employee. Similarly, Yoon, Seo & Yoon (2004) argued that POS may greatly impact

employee attitudes and behavioral responses. This is due to the fact that the provision of

organizational support to an employee is likely to engender feelings of benevolence towards

the organization, consolidating the link between employer and employee, which, in turn,

increases the feelings of responsibility to recompense the organization, through the norm of

reciprocity (Maertz, Griffeth, Campbell, & Allen, 2007). Employees who experience high

levels of POS tend to have more feelings of obligation based on the norm of reciprocity. This,

in turn, may contribute to such employees having more favorable attitudes and behaviors

towards their workplace (Shen et al., 2013). Organizational support is thus a necessary pre-

requisite for conducive employee behaviors at work. Deming (1982, 1986) consistently stated

that lack of top management support and poor supervision will doom any quality effort. Juran

(1993) emphasized that management needs to instill a philosophy of continuous improvement

and provide the necessary support in organizational practices.

In order to foster ISQ, managers who expect quality service from employees will have

to provide service quality to workers (Wildes, 2007). Social exchange theory can be applied

to account for the relationship between managers and workers. The norm of reciprocity in

social exchange theory proclaims that an action by one party leads to a response by another

party (Yee, Yeung, & Cheng, 2010). One way to ensure a positive reciprocity orientation is

by ensuring that internal customers are properly supported and consulted with regard to the

service delivery issues (O‘Riordan & Humphreys, 2003). In order to boost ISQ, the employer

has to show devotion towards building a relationship of long-term employment with its

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employees by fulfilling their needs through offering them favorable working conditions; in

return, employees will be satisfied, engaged, committed and loyal.

When employees have high levels of POS, the reciprocity norm (Gouldner, 1960)

motivates them to help the organization reach its goals and objectives. In return of the support

provided by the organization, it expects a high level of performance in return for its

consideration to employees‘ socio emotional needs (Eisenberger, Huntington, Hutchinson, &

Sowa, 1986). Lynch, Eisenberger, and Armeli (1999) theorize that employees who perceive

high levels of perceived organizational support, are more compelled to contribute to the

objectives of the organization. One of the reasons for this can be attributed to the fact that

organizational support works as a resource capable of effecting performance by neutralizing

stressors (Rhoades & Eisenberger, 2002). The support and values employees receive from the

organization results in lower levels of stress and encourages commitment to the organization

that results in a positive influence on performance (Byrne & Hochwarter, 2007). It is however

important to understand that as the perceived organizational support increases; individuals

feeling contempt towards the organization suffer from a few of exploitation that undermines

their inclination to contribute (Lynch, Eisenberger, & Armeli, 1999). Rhoades and

Eisenberger (2002) meta-analysis of POS included 20 performance studies and found a

highly statistically significant relationship between POS and performance. Rhoades and

Eisenberger (2002) reported considerable empirical support for the fact that POS is related to

outcomes favorable to employees (for instance, Job Satisfaction) and the employer, in term of

reduced turnover, performance, lessened withdrawal behavior. One of the purposes of this

research is to examine how perceptions of organizational support influence employees' level

of service quality. Drawing on the norms of reciprocity of social exchange theory, it is argued

that employees who are receive adequate support from their organization will deliver quality

internal service.

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Perceived organizational support neutralizes employee stress and can result in

increased cooperation that can enhance employee responsiveness (the key determinant of

Internal Service Quality). Supportive management induces benevolence that can foster

favorable attitudes and behaviors amongst employees, which can result in increased levels of

empathy in employees, employees would be in a better position to understand the coworker‘s

problems and issues. Furthermore Perceived organizational support leads employees to

reduce tendency to miss the work (Wayne, Shore, & Liden, 1997). This shows that

employees would try to make sure that they perform services rights for the first time and

avoid making corrections later. This is a key characteristic of ISQ and is referred to as

reliability. This would lead to more satisfied employees resulting in enhanced organizational

performance. Furthermore supportive management can lead to the attainment of

organizational objectives. This further establishes the causal link amongst POS, ISQ and


2.4.5. Role Stress

Selye (1936) first coined the term stress in the field of life sciences, describing it as a

force, pressure or strain exercised upon an object or person which tries to resist these forces

and attempt to maintain its original state. The concept of stress is defined differently across

different disciplines, as identified by Rees and Redfern (2000) who asserted that there is no

universally accepted definition for the term stress. Common usage for stress is an "emphasis,

extra force or pressure, tension and strain" (Oxford American Dictionary, 1980). This

definition is not clear by the way individuals experience stress in their lives. Waters and

Ussery (2007) defined stress as an opposing response that employees experience when

external demands exceed their internal capabilities. Thus, there is a gap between the

employee‘s capabilities and the expectations laid onto the employee. Stress at work is mainly

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a result of increased workload, future uncertainty, lack of proper organizational

communication, lack of resources (Ongori & Agolla, 2008).

One of the causes of occupational stress is role stress that can be considered as a

characteristic of most occupations. Role stress in an organizational context is said to occur

when there is a discrepancy between an employees‘ perceived state and desired state,

provided that the presence of this inconsistency is found to be important by the employee

(Edwards, 1992). Once it is considered important, this may lead to stress. It may be regarded

as a result of gaps between an employee‘s perception of the characteristics of a particular role

and what is actually being achieved by the employee currently performing the role (Lambert

& Lambert, 2001). Originally proposed by Gross, Mason and McEachern (1958), role stress

points to a condition where role obligations (i.e., expected, and actual behaviors related to a

job role) are irritating, vague, difficult, impossible or conflicting. Kahn and Quinn (1970)

stated that role stress is everything about a job role that leads to adverse consequences for the

employees.

Role ambiguity and role conflict mainly form role stress in the jobs (Ortqvist &

Wincent, 2006). Lack of clarity and required information that is prerequisite to perform the

job role effectively is referred to as role ambiguity, on the other hand role conflict is a

condition that occurs in an employee when he/she perceives that the demands and

expectations of two or more members of their role set (i.e. Customers and

Supervisors/managers) are unsuited or contrasting (Singh, 1998).

2.4.5.1. Linkage of Role Stress with Service Quality and Organizational

Performance

Stress is a negative psychological phenomenon. Research has shown negative effects

of stress on the way people perform at work. Christo and Pienaar (2006) noted that stress

leads to increased absentee rates, internal conflicts and low employee morale. Stress has been

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related to a reduction in output, product quality, service morale (Brown & Uehara, 2008). A

number of studies have shown that both forms of role stress (Role Conflict and Role

Ambiguity) are related to lower satisfaction levels which may affect empathy, a key

determinant of ISQ, high absenteeism that would affect the employee's ability to provide

reliable service, lack of employee involvement would affect employee responsiveness. All

these characteristics will affect employee productivity and efficiency in the business

(Koustelios et al, 2004; Ofoegbu & Nwadiani, 2006; Chang & Lu, 2007). Fairbrother and

Warn (2003) revealed a number of negatives of stress, apart from reduced efficiency,

decreased capacity to perform, dampened initiative, and reduced interest in working,

increased rigidity of thought, however, two most critical consequences that would result in

loss of optimal ISQ were lack of concern for the organization & colleagues, and a loss of

responsibility. These factors would significantly undermine responsiveness and reliability of

service from the coworkers.

Role stress can result in confusion about the appropriate action to take due to lack of

clarity that comes from role ambiguity, leading to inaction or inappropriate decisions. It is

expected that elevated stressors in one‘s work environment to have detrimental effects on

achievement. Service consults would be less effective at their jobs if they perceive high levels

of job stress in comparison to co-workers whose perception of job stress is low. The

argument is that delivery of persistent and effective quality service will be hampered by the

perception of stressful work environment. Varca (1999) noted that work stressors result in a

lack of direction that yield a situation where service suffers. On the other hand clearly defined

roles decrease job tension and leads to a higher level of service quality (Frost & Kumar,

2001). Bauer and Brazer (2011) examined role stress among new USA principals, they

maintained that all three types of role stress (Role Conflict, Role Ambiguity, & Role

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Overload) contributed to outcomes reflecting the quality of the work experience for

professionals‘.

The different attitudinal and behavioral outcomes of organizational stress can

potentially impact both employee and organizational performance. It is generally accepted,

higher level of stress affects organizational performance, since it reduces productivity and

efficiency (Dua, 1994). Stamper and Johlke (2003) assert that employee stress has negative

effects on the firm itself such as decreased job performance. This mainly stems from the fact

that occupational stress results in decreased capacity to perform, reduced efficiency,

dampened initiative, reduced interest in working, lack of concern for the organization,

increased rigidity of thought, poor internal communication and conflict, poor quality of

products and services (Greenberg & Baron, 2000; Schabracq & Cooper, 2000; Murphy,

1995) all these surely lead to detrimental organizational performance. Stress results in

compromised individual functioning that is related to employee stress (Smith, 2000) and is a

major obstruction to organizational success (Noblet, 2003). In case of being stressed both

work and personal factors are pushed beyond the range of stability (Change & Lu, 2009) thus

resulting in loss of focus and forcing the individuals to react in ways that are not normally

acceptable within in a business organization and thus ultimately resulting in loss of efficiency

and effectiveness (Latif, Nadeem, Khalil, & Zeb, 2012).

It is however, important to understand that stress is not always negative, stress has

also been found to have a positive influence on individuals and thus the organization.

According to Stevenson and Harper (2006), if stress is manageable, it could help improve

individual‘s performance. This is possible because then stress would act as a motivating

agent, providing individual a challenge to perform and would ultimately result in better and

improved organizational performance.

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The aforementioned literature further elucidates the linkage between role stress,

internal service quality and organizational performance. Role stress has been found to result

in instability that results in loss of focus leading to loss in efficiency and effectiveness, which

is a key determinant of organizational performance. Role stress leads to increased levels of

absenteeism that can hamper the provision of reliable service, which in the case of banks can

directly affect customer base and hence the profits of the business. Compromised individual

functioning, lack of clarity, internal conflicts and lack of involvement are other outcomes of

role stress, which would affect responsiveness, empathy (both key determinants of ISQ) and

people performance at work. Empathy is characterized by attention, sensitivity and interests

of coworkers while responsiveness is determined by optimum communication, willingness to

help and efficiency. Lack of empathy and subdued responsiveness would result in poor job

performance.

2.4.6. Internal Marketing

The IM concept was first proposed in the mid 1970‘s by Berry, Hensel and Burke

(1976) as a way of achieving consistent service quality. Berry, Hensel and Burke (1976) first

defined internal marketing as: ―Internal Marketing is concerned with making available

internal products (jobs) that satisfy the needs of a vital internal market (employees) while

satisfying the objectives of the organization‖ (p. 8). Its basic premise was ―to have satisfied

customers, the firm must also have satisfied employees‖ and that this could be best attained

by treating employees as customers (Ahmed & Rafiq, 2002). Similarly Drake, Gulman, and

Roberts (2005) identify the give and take relationship in internal marketing by stating that

internal marketing involves making employees to love the brand, hence, in turn, will

convince the customer to love it. Further Ballantyne (2000) identified the developmental

aspect of internal marketing and why it should be done, Ballantyne (2000) stated that

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“It is a strategy for developing relationships between staff across internal

organizational boundaries. This is done so that staff autonomy and know-how may combine

in opening up knowledge generating processes that challenge any internal activities that need

to be changed. The purpose of this activity is to enhance the quality of external marketing

relationships.”(p. 44)

The need to study IM is required from both the employee and organizational

perspective. Firstly, from the employee perspective, the need to study internal marketing is

warranted by the fact that until recently incentives (usually monetary) were believed to be an

effective technique applied by employers to confirm a form of staff promotion/service

stability. Therefore, if IM as a concept is applied, it should enhance positive interactions

between staff which in turn would ameliorate their relationship with the external customer

(Panigyrakis & Theodoridis, 2008). Secondly, from an organizational perspective, companies

who understand that they must get employees to buy in before the customers starts to buy

have started to put together the blueprint for a long-lasting and successful business. In order

to make an employee buy in, the companies must share information and recognize

employees‘ contributions (Drake, Gulman, & Roberts, 2005). Tsai and Wu (2011) summed

up the benefits reaped by both employees and organizations from an IM initiative in Hospital,

they found reinforcing a hospital‘s mission, strengthening employee relationships, increasing

OC and reducing turnover can be attained utilizing the IM concept. IM is significant since it

allows firms to provide training and development for employees, provide organizational

vision for managers, enhance motivation and inspiration and retain employees.

The literature identifies two primary motives of IM. First, through interactions

between personnel and customers, it complements external strategic marketing efforts,. These

exchanges are perceived as contributory in luring the customer and increased satisfaction

(Panigyrakis & Theodoridis, 2008), this ultimately leads to better financial performance,

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which is evident from the research of Lings and Greenley (2009) who found internal

marketing to be influential in the financial performance of the firm through customer

satisfaction. Shaker and Basem (2010) assert that relationship marketing has a positive

impact on organizational performance. Second, it effectively develops and maintains a

employee base which is both satisfied and motivated, So, the IM initiative assists both the

employees and the organization successfully (Dunne and Barnes, 2000).

As a result of competitive forces and deregulations, many service industries have had

to make major changes, these changes have brought with them challenges and opportunities,

now in order to meet with those challenges and opportunities a greater number of

organizations have comprehended the need for implementing internal marketing programs

(Frost & Kumar, 2001). Internal marketing helps in creating a service and customer-oriented

culture among employees, service organizations are increasingly trying to adopt the concept

of internal marketing (Kang, James, & Alexandris, 2004).

IM elements are described in a variety of ways (Ueno, 1995). Gronroos (2000)

identified eight different activities inherent in IM; namely: management support and internal

dialog, training, HR management, internal mass communication and information support,

developing systems and technology support, external mass communication, internal service

recovery, market segmentation and market research. Foreman and Money (1995) determine

three factors that represent IM: efforts to develop employees, to reward them, and to provide

them with a corporate vision. Moreover, they provide a starting point in the empirical

development of a more comprehensive mix of IM elements (Keller, Lynch, Ellinger, Ozment,

& Calantone, 2006). Ahmed, Rafiq, and Saad (2003) developed a complete set of activities

including: internal communication, strategic rewards, organizational structure, training and

development, physical environment, senior leadership, staffing, selection and succession,

incentive system, empowerment, inter functional coordination, and operational/process

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changes. Akroush, Abu-ElSamen, Samawi, Odetallah, (2012) in their study of tourism

restaurants operating in Jordan found that IM consists of six dimensions: staff recruitment,

staff training, staff motivation, internal communications, staff retention and job security.

Wu, Tsai and Fu (2013) identified two dimensions of internal marketing: Managerial

Support and Internal Communication. Lings and Greenley (2005) identified and confirmed

five dimensions of Internal Market Orientation. These describe different managerial

behaviors associated with internal marketing. The identified factors include Formal face-to-

face information generation, Formal written information generation, Responsiveness,

Informal information generation, and Information dissemination. Gounaris (2006) found a

three factor order construct for internal market orientation. The three sub -dimensions

included internal market intelligence generation, disseminate intelligence, response to

intelligence. Panigyrakis and Theodoridis (2009) further specified that the IM construct,

within the retail industry, consists of five dimensions: formal interaction, reward systems,

feedback, internal procedures and internal customer orientation. Internal marketing for the

present study was assessed using a 15-item scale developed by Foreman and Money (1995).

This scale measures three dimensions of internal marketing: service training programs (seven

items), performance incentives (three items) and vision about service excellence (five items).

2.4.6.1. Linkage of Internal Marketing with Service Quality and Organizational

Performance

In order to enhance the quality of products and services and to attain a better

performance, researchers have utilized the concept of IM. According to Rafiq and Pervaiz

(2000, p. 454),

―Internal marketing is a planned effort using a marketing like approach to overcome

organizational resistance to change and to align, motivate and inter-functionally co-ordinate

and integrate employees towards the effective implementation of corporate and functional

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strategies in order to deliver customer satisfaction through a process of creating motivated

and customer orientated employees.‖

Berry, Hensel and Burke (1976) first proposed internal marketing as a solution to the

problem of delivering consistently high service quality. Internal marketing is presented as a

management approach which enables and motivates all members of the organization (Turkoz

& Akyol, 2008). It has already been established earlier in the internal marketing literature that

the basic premise of internal marketing is to create a satisfied workforce. This satisfaction

would help business in convincing the Frontline employees to accept and support the

organizational values, goals and objectives that should be beneficial to both the organization

and customers as well as to employees (Panigyrakis & Theodoridis, 2009).

One of the most crucial factors that can improve employees‘ behaviors and can polish

their interactions with the customers is IM (Reza, Javadin, Rayej, Yazdani, Estiri, &

Aghamiri, 2012). Internal marketing consists of an effort by the organization to train and

motivate its employees to provide better service (Cooper & Cronin, 2000). It is well

understood that before employees provide a better service to external customers they have to

provide an optimum level of service to the employees within the organization. Kotler (1994)

has advocated the same fact by stating that ―it makes no sense to promise excellent service

before the staff is ready to provide it‖ (p. 22). Staff will only be ready to provide an excellent

service to customers if they receive an optimum level of service within the organization. The

influence of internal marketing on service quality has been iterated a number of times in the

literature. Fisk, Brown and Bitner (1993) identify the fundamental idea that underlies the

concept that everyone in the organization has a customer and that internal customers must be

sold on the service and they are happy in their jobs.

Vasconcelos (2007) argued that improvements in internal marketing strategy such as

developing the internal relationship between the internal customers will give rise to

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improvements in the external marketing strategy. It is important that the needs of the internal

customers and service providers are satisfied and they are motivated (Tsai & Tang, 2008).

Once the needs of the employees are met they become committed, co-operative, and

enthusiastic about the organization, however failure to motivate and satisfy the internal

customers will results in problems for the organization, these problems can be removed

through implementation of internal marketing programs, an internal marketing program will

eliminate departmental walls, integrate members organization wide (Ahmed & Rafiq, 2003),

and thus creates the opportunity to improve quality throughout the organization (Prasad &

Steffes, 2002).

Lings and Brooks (1998) utilized the SERVQUAL scale to examine ISQ. The results

demonstrated that the implementation of internal marketing improves ISQ and influences

external service quality. Lings and Greenley (2005) identified that IM was interchangeably

used with internal-market orientation to improve organizational climate. According to Opoku

et al. (2009), IM is strongly related to the perceptions of ISQ. Their results suggested that

―employees who use and are satisfied with the services offered have higher perceptions of the

interaction quality‖. Similarly, Tsai and Tang (2008) found that IM dimensions (i.e. Training

and incentive) as main drivers of the level of service provided by nurses in Taiwan. Akroush,

Abu-ElSamen, Samawi, Odetallah, (2012) in their study of tourism restaurants operating in

Jordan found that IM consists of six dimensions: staff recruitment, staff training, internal

communications, staff motivation, staff retention, and job security. Staff retention has

positively and significantly affected ISQ. Staff recruitment exerted the strongest effect on

ISQ.

Internal marketing through a planned approach utilizes a marketing like efforts to

educate, coordinate, and motivate internal customers (employees) towards creating

satisfaction for external customers and as an outcome, enhancing organizational performance.

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The development of internal market orientation is expected to have positive consequences for

the firm and its employees (Lings & Greenley, 2005). In order to improve company‘s

performance and its employees, it is necessary to create and align internal association

between departments, functions and its employees inside the organization (Turkoz & Akyol,

2008). Tsai and Tang (2008) stressed that organizations have to treat employees as internal

customers, and satisfy their needs about providing a service, this will encourage employees to

provide service excellence to external customer and add to organizational performance.

Research conducted in the area of IM has ensured a change in the mindset where

organizations are considering their employees as customers, and are considerate of the fact

that in order to ensure success of the business, the employees must be served and the quality

of this service is important as the quality of service to external customer is deemed important.

(ELSamen & Alshurideh, 2012).

Research has shown the positive influence of internal marketing on organizational

performance, Lings and Greenley (2009) found internal marketing influence on financial

performance through customer satisfaction, however Saad, Ahmed and Rafiq (2002) study of

a total number of 504 companies (463 manufacturing and 41 service companies) with 300

employees revealed that there is a significant linear relationship between internal marketing

and business performance. According to Hwang and Chi‘s (2005) empirical results of a

survey of 359 employees working in international hotels in Taiwan, internal marketing has a

positive impact on employee job satisfaction, and both job satisfaction and internal marketing

have positive impacts on organization performances. However Bouranta, Mavridoglou, and

Kyriazopoulos (2005) found a relatively weak effect of Internal Marketing to Business

Performance in banks, one of the reasons accountable for the very feeble bond lies in the fact

that some banks adapted to Internal Marketing very recently hence its effects haven't

appeared yet. Panigyrakis and Theodoridis (2009) study of supermarket chains in Greece

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with nationwide coverage found that IM indeed has a positive influence on business

performance. The conflicting and varied findings from the research requires that the

relationship between ISQ and performance to be further evaluated. The present study strives

to penetrate this gap of negligible research into the effect of internal marketing on


The research studies referenced, clearly highlight the relationship between internal

marketing, internal service quality and organizational performance. Internal marketing can

result in consistency in service quality since it integrates organizational members by

improving organizational climate and acceptance of organizational values and goals. Once

employees start valuing the organization, they feel responsible, and start to take ownership of

their work. This ownership can help in the development of understanding of the needs of both

the employees and the organization and employees try to make sure they perform their jobs

right the first time and respond to queries both within and outside the organization in an

efficient and effective manner. IM can help in improving staff retention and generate

satisfied workforce that enhances service quality and business performance.

2.5. Organizational Performance

The ultimate criterion variable of interest for researchers in any area of management

is organizational performance (Richard, Devinney, Yip, & Johnson, 2009). Organizational

performance is an indicator which measures how well an organization attain their objectives

(Hamon, 2003). Organizational performance alludes to financial performance in economic

terms such as profits and return on investment (Homburg & Pflesser, 2000). A broader

definition is proposed by Richard, Devinney, Yip, and Johnson (2009, pp. 722) who stated

that

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“Organizational performance encompasses three specific areas of firm outcomes: (a)

financial performance (profits, return on assets, return on investment, etc.); (b) product

market performance (sales, market share, etc.); and (c) shareholder return (total shareholder

return, economic value added, etc.).”

Organizational survival is determined by performance, which is at the core of all the

activities that are undertaken by the organization (Abdalkrim, 2013; Bani-Hani, Al-Ahmad,

& Alnajjar, 2009; Choudhary, Akhtar, & Zaheer, 2013). Organizations aim to sustain

competitive advantage and attain high performance. Performance of an organization is the

result of its activities and processes (Robins & Coulter, 2007) and is a reflection of how well

the organization exploits its tangible and intangible resources (Wheelen & Hunger, 2010).

Business organizations are a key element for developing nations, hence these

organizations have a key role to play in our daily lives. Thus, many economists consider

organizations and institutions like an engine that determines the social, political, and

economic progress. Continued performance is the focus of any organizational focus because

only through performance, organizations are able to grow and progress. Thus, performance is

one of the most potent variables in the managerial research (Gavera, Ilies, & Stegerean,

2011).

Research has described OP as a multi-dimensional concept (Hamdam, Pakdel, &

Soheili, 2012; Ouakouak, Ouedraogo, & Mbengue, 2013). There are different aspects on

which organizational performance can be evaluated (Choudhary, Akhtar, & Zaheer, 2013).

Measures for OP can be divided into two categories: financial or non-financial (Abdalkrim,

2013; Akdemir, Erdem, & Polat, 2010; De Waal, 2012; Nzuve and Omolo, 2012).

Organizational performance may be measured using objective or subjective (i.e. Perceptual)

measures. Hancott (2005) revealed that, a number of objective indicators have been adopted

to measure OP, such as net or total asset growth rate, profit growth rate, shareholder return,

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return on sales, growth in market share, return on net assets, and number of new products,

etc. In 1990, return on net assets and return on capital have been applied in performance

measurement as well. Tippins and Sohi (2003) propose that OP is measured on four

dimensions: relative profitability, return on investment, customer retention, and total sales

growth. In the present study, for the present study the focus is on both objective and

subjective performance.

Subjective data involve perceptual judgement, however, traditionally objective data

have been believed to be less biased, but the problem is that it is not always available, when

this is the case subjective data may be a reasonable alternative (McCracken, McIlwain, &

Fottler, 2001). Subjective measures ask supposedly well-informed respondents (key

informants) about organizational performance. According to Singh (2004) a disadvantage of a

perceptual measure is that it can be highly subjective, both in the judgment of organizational

performance itself and in the selection of a competing organization.

The present study also takes into account the objective data pertinent to organizational

performance. The objective data that are incorporated in the present study includes the

following variables

2.5.1. Earnings per Share

It is a part of a company's income (income minus expenses) which is due to each

common stock holders. Earnings per share is a sign of a company's prosperity (firm

performance), also known as market prospect ratio. Higher EPS represents that company is

making more profits which will lead to achieve the modern corporation goal i.e.

maximization of shareholders wealth. (Van Horne, 2012)

2.5.2. Return on Equity

Firm performance can be measured by four financial tools return on sales, return on

assets, market share change and customer satisfaction (Carmeli & Tishler, 2004). Return on

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equity (ROE) is the ratio of net profit to total investment made by the owners. ROE provides

a view in the direction of management efficiency in generating a yield in lieu of the

titleholders of the corporation---depending on the proportion of equity in the concern.

Progressive results of the ratio represents the high level of earnings made by the firm. (Smith

et. al., 1994).

2.5.3. Return on Assets

According to Richard, Devinney, Yip, and Johnson (2009), Return on assets (ROA) is

a standard accounting tool for measuring organizational performance. ROA refers to the

earnings generated by the business in relation to the asset utilized in its operations. Generally

expressed as Net profit/Net Assets. It represents the set of data regarding managerial

expertise and their decisions in the best possible use of resources in order to generate returns

because an organization is being considered on its total financial performance, which

includes judgment made to acquire long term assets or tied up money in land and buildings

(in other words, by means of funds that might be used for additional revenue-generating

investments), or invest in securities. Investors or creditors are more likely interested in ROA

because if a firm return on assets is more than the average return in the industry is more likely

to higher ROE.

2.6. Service Quality and Organizational Performance

Deming (1982) noted that quality initiative within the organization results in

enhanced productivity that ultimately leads to improved competitiveness. Organizational

performance fundamentally depends on its key resource ―people‖. For Quality is the

responsibility of everybody ranging from top management to the unskilled worker

(Feigenbaum, 1983). Feigenbaum, further identified that it is the total participation of all

employees and the total integration of all the company‘s technical and human resources that

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will lead to long-term business success. Juran (1988) highlighted that the involvement of the

management can become visible through the establishment of the Quality Policy.

In the banking industry, the importance of relationship development and maintenance

with key customers has previously been investigated (Madill, Feeney, Riding, &

Haines.2002). Hawke and Heffernan (2006) identified increased profit through reduced risk,

improved communication links, and referrals to be some of the benefits of strong

relationships with key customers. Although, it is noted in the context of external customers

yet repeatedly the same is recorded for the internal customers as well. The bank needs to

maintain cordial relationship within the bank, which would positively influence bank

performance.

The unfounded expectation that the connection between service and profits was

simple and direct results in time to verify the association. A number of arguments are put

forth that identify the reason for failure to track the investment in service quality directly to

profits. First, just as the return of advertising, the benefits of service quality are rarely

identified in the short term and are experienced over time, hence the traditional research

approaches are less amenable to detection. Second, the individual contribution of service has

been difficult to calculate since other than service improvements there are many variables, for

instance pricing, distribution, competition, and advertising that carry a significant influence

on company profits. Third, spending on the right service variables and proper execution is a

key prerequisite as compared to mere expenditures on service (Zeithaml, 2000). However,

studies have revealed that ISQ has a key relationship with organizational performance. ISQ

has come to be recognized as a strategic tool for attaining operational efficiency and

improved business performance (Jain & Gupta, 2004).

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Provision of quality service to external customers is only possible through significant

improvement in organizations' improvement of quality service to internal customers. Better

performance, combined with improved attitudes, transfers itself in quality service delivery.

Improved service and empathy from employees results in willingness of external

customers to purchase the service, which results in improved financial performance (Getty &

Getty, 2000). Provision of service by employees to their coworkers is an important dimension

of ISQ. Adequate service provided would help the employees in performing their duties in an

acceptable manner without any strain of delay or errors, thus, the quality of internal services

affects employee satisfaction (Zhen-You, 2003). Bellou and Andronikidis (2008) conducted a

study on 16 big banks in Greece found that banks‘ performance eventually improved through

improved ISQ that influenced the behavior and satisfaction of the external customers.

2.7. Mediating Role of Internal Service Quality

Based on the aforementioned literature, it is evident that internal organizational factors

do have an influence on organizational performance; however the direct influence is still not

entirely convincing and confirmed. Previous studies have separately investigated the

influence of different internal organizational factors on ISQ, and the influence of ISQ on

organizational performance has also been reported in literature. Hence there exists a causal

relationship between internal organizational factors, ISQ and organizational performance.

ISQ as mediating variable can be central in developing an understanding how different

internal organizational factors and organizational performance are related.

To the best of the researchers‘ knowledge, no research was found in the literature that

evaluated the mediating role of ISQ on the linkage between different internal organizational

factors and organizational performance. Moreover, existing studies have evaluated the

influence of internal organizational factors on ISQ at one hand and the relationship between

ISQ and organizational performance on the other. The present study proposed that the

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influence of internal organizational factors on organizational performance is not direct but is

mediated by ISQ. It is proposed that internal organizational factors influence the way internal

customers, provide services to the internal suppliers, which subsequently leads to better


The banking industry has traditionally focused on how to transform its physical

resources to generate financial performance, and therefore, inadvertently ignored the

mediating role of service quality (Mukherjee, Nath & Pal, 2003). Zellmer-Bruhn and Gibson

(2006) stated that team learning positively influences both task performance and the quality

of interpersonal relations. Knowledge sharing and learning behaviors are positively

associated with business process improvement, product and service offerings which in turn

are positively related to organizational performance (Law and Ngai, 2008). Research has

exhibited indirect influence of organizational learning on organizational performance, Hao,

Kasper, and Muehlbacher (2012) discovered that organizational learning does not impact

directly on performance, but mainly through innovation. ISQ is considered as a prerequisite

for overall company performance (Large & Konig, 2009), while existing research

aforementioned has shown that a number of variable affect ISQ. There are a number of

studies which have reported different mediating variables between organizational culture and

performance (Tseng, 2010; Zheng Yang, McLean, 2010, Han, Kim, Srivasta, 1998).

Similarly, Bae and Ha (2014) noted that prior research approaches the relationship between

commitment and performance from the viewpoint of causality. However, performance is

affected by internal and external factors of firms. These factors could mediate the relationship

between commitment and performance. This further strengthens the assertion that

organizational culture affects performance through other mediating factors.

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2.8. Summary of Internal Organizational Factors and their Sources

Internal Organizational Factors have been researched as one of the characteristics

influencing organizational performance. However, there is a paucity of research which

models and empirically investigates the relationship between different internal organizational

factors and organizational performance. In addition, there is limited research that ascertains

the impact of internal service on organizational performance, similarly fewer researches have

studied ISQ as being impacted by different internal organizational factors. The research

makes an important contribution to the existing literature by empirically examining the

relationship between internal organizational factors, ISQ, and organizational performance.

The present research argues that the direct impact of different internal organizational factors

on organizational performance is through the level of internal service quality. For instance, an

employee facing an increased level of role stress, this may hinder employee‘s ability to

communicate, show support, or provide timely service and in turn influence organizational

performance. Otherwise an increased organizational learning can make employee more

responsive, understanding, trustworthy, and knowledgeable. Existing research in the area of

internal service quality lacks the idea that internal service quality can mediate the relationship

between different internal organizational factors and organizational performance. Previous

studies although limited in the area of internal service quality focus on the antecedents of

internal service quality or the impact of internal service quality on organizational

performance. There is a significant lack of literature and empirical evidence on the role of

internal service quality. The literature suggests a causal relationship between different

internal organizational factors, internal service quality and organizational performance. Based

on the extensive review of literature, six factors were identified to evaluate their influence on

ISQ and organizational performance. The factors and their sources are highlighted in the table

2.6.

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Table ‎2.6

Summary of Internal Organizational Factors and their Sources

Predictors Sources

OL Hays and Hill (2001), Pasebani, Mohammadi, & Yektatyar (2012), Di Xie (2005), Ming (2010),

Thompson and Kahnweiler (2002), Kandemir and Hult (2005), Skerlavaj and Dimovski (2006),

Ruiz-Mercader, Merono-Cerdan, and Sabater-Sanchez (2006), and Kuo (2011)

CC Raub (2008), Hauser and Paul (2006), Agbenyiga (2011), Phapruke (2008), Mathew, Ogbonna,

and Harris (2012), Tsai and Tang (2008), Ogbonna & Harris (2000), Perters and Waterman

(1982), Ortiz & Arnborg (2005), Schlechter (2001), and Ginevičius and Vaitkūnaite (2006)

OC Boshoff and Mels (1995), Malhotra and Mukherjee (2004), Benkhoff (1997), and Pfeffer (1998)

POS Wayne, Shore, & Liden (1997), Deming (1982, 1986), Byrne & Hochwarter, (2007), and Rhoades

and Eisenberger (2002)

RS Brown & Uehara (2008), Koustelios et al (2004), Ofoegbu and Nwadiani, (2006), Chang and Lu

(2007), Fairbrother and Warn (2003), Varca (1999), Chaker and Jabnoun (2010), Bauer and

Brazer (2011), Stamper and Johlke (2003), Noblet (2003), and Dua (1994)

IM Berry, Hensel and Burke (1976), Reza, Javadin, Rayej, Yazdani, Estiri, & Aghamiri (2012),

Cooper & Cronin (2000), Opoku et al. (2009), Tsai and Tang (2008), Lings and Greenley (2009),

Saad, Ahmed and Rafiq (2002), Hwang and Chi‘s (2005), and Panigyrakis and Theodoridis

(2009)

Source: Author

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Chapter 3

Conceptual Framework and Hypotheses

3.1. Introduction

This chapter discusses the theoretical framework of the study. The main objective of this

chapter is to describe the conceptual model, which would encapsulate the available

knowledge and describe the relationship between the different internal organizational factors,

internal service quality, and organizational performance. Furthermore the chapter also

identified the testable hypotheses for the study.

3.2. Conceptual Framework

Based on the extensive literature review, a conceptual model is presented as shown in

the Figure 6. The conceptual model for the study consists of three components.

A set of independent variables, referred to as internal organizational factors,

consisting of six different variables, namely: organizational learning, collaborative

culture, organizational commitment, perceived organizational support, role stress and

internal marketing

A mediating variable, namely internal service quality

The criterion variable named organizational performance.

This conceptual framework was based on the logical theoretical relationships,

presenting that different internal organizational factors affect organizational performance

(Skerlavaj & Dimovski, 2006; Booth & Hamer, 2009; Benkhoff, 1997; Rhoades &

Eisenberger, 2002; Chang & Lu, 2007; Lings & Greenley, 2009). Moreover, in the

relationship between internal organizational factors and the criterion variable i.e.

organizational performance, internal service quality was considered. It was further proposed

that internal service quality mediates the relationship between different internal

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organizational factors and organizational performance. Six different internal organizational

factors form part of the study, namely; Organizational Learning, Collaborative Culture,

Organizational Commitment, Perceived Organizational Support, Role Stress and Internal

Marketing.

The present study advances the research stream that has explored the effects of variety

of internal organizational factors on organizational performance. The research seeks to

validate the direct relationship between the different internal organizational factors under

study and organizational performance. Furthermore the study also assess the relationship

between ISQ and organizational performance. The current study seeks to verify the findings

of existing research that highlights the significant influence of internal organizational factors

and ISQ on organizational performance. The study takes a step in the forward direction by

showing that ISQ mediates the relationship between different internal organizational factors

and organizational performance. Thus it suggests, for instance increase in the satisfaction of

employees with the level internal marketing (One of the different internal organizational

factors) results in higher level of internal service quality of the employees through increased

reliability, assurance, responsiveness and empathy that results in higher level of


Most of the existing research studies have evaluated the direct influence of different

internal organizational factors on organizational performance, with few contributing through

investigation of relationship between different internal organizational factors and ISQ.

Similarly, fewer studies have assessed the impact of ISQ on organizational performance. All

previous research studies culminate at this point. The mediating role of service quality and

precisely the role of ISQ on the relationship between different internal organizational factors

and organizational performance has been neglected.

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The mediating role is investigated in the present research since the banking industry

inadvertently ignores the mediating role of service quality (Mukherjee, Nath & Pal, 2003).

Given these suggested relationships between internal organizational factors, internal service

quality and organizational performance. Efficient and effective management of internal

organizational factors can help improve the level of internal service quality that would

subsequently improve organizational performance. Internal service quality can change the

influence of different independent variables on the ultimate criterion variable, therefore, the

internal service quality was expected to play a mediating role in the relationship between

internal organizational factors and organizational performance. Hence the following

conceptual framework for the study of relationships among different internal organizational

factors, internal service quality and organizational performance is proposed.

Figure ‎3.1. Conceptual Framework

The proposed conceptual framework is tested in chapter five using empirical

information gathered from different banks in this study.

3.3. Research Hypotheses

Based on the conceptual framework formulated on the basis of literature, the

following set of hypotheses is proposed to evaluate the linkage between different internal

Organizational Performance Objective Performance

Subjective Performance

Internal

Service Quality

Internal Organizational Factors



Internal Marketing



Role Stress

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organizational factors, ISQ, and organizational performance. Two different sets of hypotheses

are proposed, the first investigates the direct influence of different internal organizational

factors on ISQ and organizational performance along with the influence of ISQ on

organizational performance. The second set, with very scarce existing research evaluates the

mediating role of ISQ.

3.3.1. Organizational Learning, ISQ, and Organizational Performance

The present research not only tests the direct relationship between organizational

learning, ISQ and organizational performance, but also evaluates the role of ISQ in the

relationship between organizational learning and organizational performance. Organizational

learning has been established as a well-known factor to influence organizational performance

at work. Existing research has shown that learning can help businesses improve their

efficiency and competitive advantage that translates into growth and financial gains.

Literature has shown significantly positive influence of learning on the service quality

(Pasebani, Mohammadi, & Yektatyar; 2012, Di Xie, 2005). Learning can help shape human

behaviour and help employees behave in a manner that is conducive to the environment of

the organization. Based on the aforementioned literature that supports the impact of

organizational learning on both ISQ and organizational performance a causal chain of

relationship between organizational learning, ISQ, and Organizational performance can be

established. Hence, the following hypotheses are proposed to test the relationships.


H1b: There is a significant impact of Organizational Learning on Perceived Organizational

Performance



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H1d: ISQ mediates between Organizational Learning and Perceived Organizational

Performance

H1e1-2-3: ISQ mediates between Organizational Learning and Objective Organizational


3.3.2. Organizational Collaborative Culture, ISQ, and Organizational

Performance

A number of research studies have separately investigated the influence of culture on

both ISQ and organizational performance. Organizational culture has been found to play a

crucial role in achieving superior organizational performance. Strong organizational culture

can help bind the employees together, thus creating an environment within the organization

where employees trust each other and are willing to support and care for each other (Chiang

& Hsieh, 2012). The quality is improved since organizational culture can help provide a

unifying focus to support and guide the attitudes and behaviors of organization members to

deliver quality to other employees (Anosike & Eid, 2011). The literature attests to the impact

of culture on both ISQ and organizational performance. The present study proposes that

culture influences both ISQ and organizational performance and ISQ significantly influences

organizational performance, hence based on the relationships identified in the literature

following hypotheses are proposed to test the relationships.


H2b: There is a positive significant impact of organizational collaborative culture on

Perceived Organizational Performance

H2c1-2-3: There is a positive significant impact of organizational collaborative culture on

objective organizational performance (EPS, ROE, & ROA)

H2d: ISQ mediates between Organizational Culture and Perceived Organizational

Performance

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H2e1-2-3: ISQ mediates between Organizational Culture and Objective Organizational


3.3.3. Organizational Commitment, ISQ, and Organizational Performance

The literature indicates that organizational commitment can significantly influence the

performance of the organization. Employees who believe in the vision/mission of the

organization work selflessly towards betterment of the organization. Employee‘s

identification with the organization and their concern for the fate of the organization can push

the employees to show discretionary behaviour that would further enhance the productivity of

the organization. Failure to attain organizational commitment can result in problems like high

costs, low profits, low stock prices, and poor customer service (Pfeffer, 1998). Organizational

commitment can also help boost employee positive attitude and behaviour towards other

employees, this is caused by their willingness to accept different tasks, their enthusiasm to

put in extra effort, all this can result in reliability of service, timely problem solving and

prompt decision making. The present research hypothesizes that organizational commitment

has direct influence on both ISQ and organizational performance, moreover the direct impact

of commitment on organizational performance is mediated by ISQ. Hence, the following

hypotheses are proposed to ascertain the relationship.






H3d: ISQ mediates between Organizational Commitment and Perceived Organizational

Performance

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H3e1-2-3: ISQ mediates between Organizational Commitment and Objective Organizational


3.3.4. Perceived Organizational Support, ISQ, and Organizational Performance

The research hypothesizes that increased level of perceived organizational support

would significantly influence ISQ and organizational performance, furthermore the

relationship between perceived organizational support and organizational performance is

mediated by ISQ. The literature shows that higher level organizational support positively

impacts organizational performance. Reciprocity norm which is at the heart of the perceived

organizational support make employees to recompense their employers with increased

performance (Eisenberger et al., 1986). This also makes employees render full support to

their fellow employees in performing their services thus helping in fostering improved

service quality. One of the reasons for this enhanced service quality is the feeling of

responsibility that the employees feel towards the organization (Maertz, Griffeth, Campbell,

& Allen, 2007). Based on the relationships identified in the literature, the following set of

hypotheses are proposed to ascertain the relationship between perceived organizational

support, ISQ, and organizational performance.




H4c1-2-3: There is a positive significant impact of perceived organizational support on

objective organizational performance (EPS, ROE, & ROA)

H4d: ISQ mediates between Perceived Organizational Support and Perceived Organizational

Performance

H4e1-2-3: ISQ mediates between Perceived Organizational Support and Objective


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3.3.5. Role Stress, ISQ, and Organizational Performance

An increased amount of stress felt by the employees can significantly hamper the

employee‘s ability to perform that can seriously obstruct attainment of organizational

objectives. Literature on Role Stress in the present study has been determined by Role

Ambiguity and Role Conflict. Research has shown negative influence of role stress on

organizational performance, similarly the inverse relationship between role stress and ISQ is

also evident. Research may results from a number of factors that may include lack of

resources, improper communication, increased workload or uncertainty (Ongori & Agolla,

2008). An Organization will not be able to fulfill its objectives if it fails to address the issues

that foster role stress. Similarly an employee who is stressed due to the aforementioned

factors will not be in a positive to offer quality service to the fellow employees. Since,

employee‘s behaviour would not be conducive towards the coworkers. An individual stressor

that provokes dissatisfaction from the job will eventually release the employee‘s ties to the

organization. This removal of ties results in lack of concern for the coworkers and the

organizational itself. Based on the literature on the relationship among role stress, ISQ and

organizational performance, following relationships are hypothesized.


H5b: There is a significant impact of Role Stress on Perceived Organizational Performance



H5d: ISQ mediates between Role Stress and Perceived Organizational Performance

H5e1-2-3: ISQ mediates between Role Stress and Objective Organizational Performance

(EPS, ROE, & ROA)

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3.3.6. Internal Marketing, ISQ, and Organizational Performance

Although marketing as a concept has mostly been applied to the external customers.

However, in modern management and with the advent of new tools and techniques to foster

both employee and organizational performance, marketing like approaches have also been

formulated for employees who can also be referred to as internal customers. Internal

marketing can offer a course for the organizations to develop long lasting relationship

between staff (Ballantyne, 2000). IM as a strategy can help employees buy into the activities

of the business, once the employees start to believe the strategies of the organization they are

in better positive to persuade external customers. IM can help employees in establishing

enhanced coordination, integration, and internal functionality (Rafiq & Pervaiz, 2000). All

this can certainly enhance the quality of service provided to the external customer and hence

can aid in attaining higher financial gains (Lings & Greenley, 2009). In order to better

comprehend the relationship among internal marketing, ISQ, and organizational performance,

the following hypotheses are proposed.



Performance

H6c1-2-3: There is a significant impact of Internal Marketing on objective organizational


H6d: ISQ mediates between Internal Marketing and Perceived Organizational Performance

H6e1-2-3: ISQ mediates between Internal Marketing and Objective Organizational



H7b1-2-3: There is a significant impact of ISQ on objective organizational performance

(EPS, ROE, & ROA)

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3.4. Summary

The chapter describes in detail the conceptual framework developed for the present

research study. The conceptual framework portrays hypothesized relationship between

different internal organizational factors, internal service quality and organizational

performance.

The conceptual framework can be divided into three halves, with the first focused on

establishing the direct relationship between different internal organizational factors and

organizational performance, the second seeks to establish the direct relationship between

different internal organizational factors and ISQ, while the third seeks to ascertain whether or

not ISQ mediates the relationship between different internal organizational factors and

organizational performance. Finally, based on the theoretical model, specific testable

hypotheses are proposed. The following chapter explain the research methodology

undertaken for the research.

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Chapter 4

Research Methodology

This chapter presents in detail the research methodology adopted for the study. The

chapter explains the steps taken to investigate the mediating role of internal service quality

(ISQ) on the linkage between internal organizational factors and organizational performance.

The chapter discusses methodological details like population, sample, variables, selected

instruments, data collection, tools for analysis, and rationale behind their selection.

4.1. Research Philosophy

The present study is a survey research based on the positivist research paradigm.

Positivism asserts that it is possible to capture reality through the use of research instruments

such as experiments and questionnaires (Blaxter, Hughes, & Tight, 2006), it is a kind of

deductive approach that proves or disapproves hypotheses of a research (Green, 2008).

However, the mainstay of positivism is the use of quantitative approaches (Blaxter, Hughes,

& Tight, 2006).

Robson (2002) identified 5 stages through which positivist research goes

Deduction of hypothesis from theory

Expression of hypothesis in operational terms

Testing the operational hypothesis

Examination of specific outcome of the inquiry

If necessary, modification of the theory

The following tabulated characteristics testify that the research falls in positivist

paradigm as it matches to the criterion identified by Easterby-Smith, Thorpe, and Lowe

(2002) for such research.

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Table ‎4.1

Characteristics of Positivism

Elements Characteristics

The Observer Must be independent The researcher was not part of proposed population for the

study

Human Interest Should be irrelevant No self interest in the results or responses with no relevancy

to any bank.

Explanations Must demonstrate

causality

The research is based on identifying the effect on criterion

variable in numerical terms, showing how the correlation

carry effect of an independent variable on the dependent

variable.

Research progress Hypotheses and

deduction

Based on extensive literature review to propose empirically

testable hypotheses

Concepts Need to be

operationalized so they

can be measured

All variables are operationalized based on detailed review of

existing literature and measured quantitatively

Units of Analysis Should be reduced to the

simplest terms

Respondents include employees working at different

branches of the banks.

Generalization Statistical probability Inferential Statistical techniques are used to generalize

results through identification of level of significance

Sampling Required Large numbers selected

randomly

Stratified random sampling technique is used.

The study commenced with a review of the existing literature, during this stage the

variables were studied, with emphasis on their concepts and measurement, relationships

between variables identified. Based on the review of the literature, a theoretical framework

was proposed and hypotheses formulated. Further to hypotheses development, data were

collected through questionnaires, and it was further analyzed and interpreted to substantiate

the hypothesis. Further the results would be discussed in light of the existing studies.

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The research is an integration of constructs which will be the basis of investigation in

relation to the data collected through a survey from the banks operating in Peshawar,

Pakistan. Using Statistical Package for the Social Science (SPSS), Version 20, and AMOS

the data were analyzed.

4.2. Nature of Research

The research is a mix of quantitative and qualitative nature, as the quality variables

are qualitative in nature and the data acquired, analyzed is quantified & subjected to

statistical techniques to obtain the findings. The study involved attaching numbers to measure

the variables through adaptation of questionnaires, and responses were quantified. A

quantitative survey was conducted to measure variables using a structured questionnaire.

4.3. Research Design

Research design can be thought of as the logic or master plan of a research that

throws light on how the study is to be conducted. Research design is required to identify the

way in which the requisite data can be gathered and analyzed to arrive at a solution (Sekaran,

2003). The research design of current research included several key steps in the process as

shown in Figure below.

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Figure ‎4.1. Research Design

4.4. Population

Population refers to the entire group of people, events, or things of interest that the

researcher wishes to investigate (Sekaran, 2003). The population frame for the study was

drawn from the banks listed in Karachi Stock Exchange (KSE) having over five branches

operating in Pakistan and the city of Peshawar. The banks include the ones which are

controlled centrally by the head offices hence it is assumed that different factors studied in

Peshawar would be similar all over Pakistan. The banks selected should have more than five

Purpose of Study

Types of Investigation

Researcher Interference

Study Setting

Sampling

Instrument

Development

Data Collection

Hypotheses Testing

Descriptive cum Correlational

Minimal: Studying events as they normally occur

Noncontrived

Stratified Random Sampling

Review of Existing Scales/Questionnaires

Questionnaire Measurement Scale

Pre-Testing of Questionnaire

Distribution and Collection Questionnaire

Personal Visits

Postal survey

Data Analysis Descriptive Statistics, Reliability, Validity, Correlation

and Regression

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branches in order to have a representative sample. Out of 24 banks listed in KSE, banks with

more than five branches in the city were included in the study. The list of sample frame or

working population of the research study of February 2014 is tabulated below.

Table ‎4.2

Sample Frame

S.No Banks Total No of Branches

operating in

Peshawar

Total No. of

Employees in

Peshawar

Large Banks

1 Allied Bank Limited 34 238

2 Bank Al-Falah 13 137

3 Habib Bank Limited 27 201

4 National Bank Limited 21 262

5 United Bank Limited 27 159

6 MCB Bank 27 323

Subtotal 149 1320

Medium Banks

7 Bank Al-Habib 9 97

8 Askari Bank 7 104

9 Faysal Bank 9 130

10 Meezan Bank Limited 11 144

11 Bank of Khyber 14 161

Subtotal 50 636

199 1956

4.5. Sample

A sample is referred as a subset of the population, which is truly representative and

proportionate to the strata in the population (Sekaran, 2003). The most accurate way of

research is census, but due to constraint of time, money and resources mostly survey adopt

115

sample (Bajpai, 2011). The stratified random sampling technique is utilized as taking a

random sample may not lead to accurate results since they may not be truly representative of

the population, as with the increase in the magnitude of bank, the timing of service, stress,

learning opportunities would change. It is for this purpose stratified random sampling

technique has been adopted. The groups should be relatively homogeneous and the strata

should contrast with each other (Bajpai, 2011). The banks were divided into two strata,

Medium and Large Banks, since smaller banks had less than or equal to 5 branches in

Peshawar they were excluded from the study. For multivariate research, the sample size

should be at least 10 times or more than the number of variable in the research (Sekaran,

2003). Roscoe (1975) proposed that a sample size of over 30 and less than 500 is appropriate

for most researches and in studies where sample are broken into subsamples (Male/Female,

Conventional/Islamic, or Junior/Middle/Senior), a minimum sample size of 30 in each

category is necessary in each dimension. The total population in the present study is 1956,

based on the sample size calculation for a given population size by Sekaran (2003), it was

decided to take a minimum sample size of 322.

Banks with total assets in excess of Rs. 500 billion is categorized as ―Large Banks‖,

banks with total assets in between Rs. 100 billion to Rs. 500 billion is categorized as

―Medium Size Banks‖. The research adopted the stratified random sampling technique,

distributed population in homogeneous groups of medium and large banks.

4.6. Measurement

Data collection through the survey is an appropriate technique since it allows the

researcher to target a large number of elements in the population and thus reliable and valid

information collected from the selected sample can be generalized over the entire population

(Kerlinger & Lee, 2000).

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In order to investigate the mediating role of ISQ between internal organizational

factors and organizational performance, both primary and secondary data has been collected.

A questionnaire has been used to collect primary data from bank employees, while financial

performance data has been collected from annual bank reports. A rating scale with anchors

from strongly agree to strongly disagree have been used as an option for each statement. Each

option was assigned a rating scale. 1 = Strongly Disagree, 2 = Disagree, 3 = Somewhat

Disagree, 4= Neither Agree nor Disagree, 5 = Somewhat Agree, 6 = Agree, 7 = Strongly

Agree.

The questionnaire was divided into two sections. Section A consisted of questions

pertinent to personal and job related information primarily categorical in nature measured on

nominal and ordinal scale. Section B consisted of perceptual questions relating to

independent, mediating and dependent variables. Three years data relating to financial

performance were taken from the financial reports of the banks submitted available on the

bank's website. Return on Equity (ROE), Earning per Share (EPS), and Return on Assets

(ROA) were the objective measures of organizational performance used in the study.

For measuring the constructs of interests in the present study, scales were adapted

from established measures from existing studies. However a few minor changes were made,

like the original scale had the question ―I am proud to tell others that I am part of this

organization‖, this was changed to ―I am proud to tell others that I am part of this Bank‖.

Each of the construct along with their source and items is further discussed.

4.6.1. Internal Service Quality

ISQ was measured by a scale developed by Kang, James and Alexandris (2002). Five

dimensions were identified from ISQ scale, namely Reliability, Assurance, Tangibles,

Empathy and Responsiveness with reliability of .922, .908, .872, .938 and .938 respectively

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in the original study. Tangibles dimension was not included in the study. A total of 18 items

made up the ISQ scale.

Table ‎4.3

Internal Service Quality Scale

Scale Items

Reliability

1. In my bank coworkers provide service that is promised

2. In my bank coworkers are dependable for handling my problems

3. In my bank coworkers perform services right the first time, to avoid having to make corrections later

4. In my bank coworkers provide correct and necessary information

5. In my bank coworkers are reliable

Assurance

1. In my bank I can trust my coworkers

2. In my bank I feel safe in dealing with coworkers

3. In my bank coworkers are polite and kind

4. In my bank coworkers are knowledgeable

Empathy

1. In my bank coworkers are sincerely concerned about problems

2. In my bank we have convenient working hours

3. In my bank coworkers give me individual attention

4. In my bank coworkers seem to have each other best interests in mind

5. In my bank coworkers are sensitive to my work-related needs

Responsiveness

1. In my bank my communication with coworkers is appropriate, accurate and clear

2. In my bank coworkers respond quickly and efficiently to my request

3. In my bank coworkers are willing to help me

4. In my bank coworkers are willing to accommodate special requests and needs

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4.6.2. Organizational Learning

The organizational learning scale utilized in the present research has been developed

on the instruments devised by García-Morales, Lloréns-Montes, Verdú-Jover (2007) and

Spicer & Sadler-Smith (2006). A few items were removed from Spicer & Sadler-Smith

(2006) scale after discussion with experts and bank executives since they weren‘t relevant to

the banks. Organizational learning scale consisted of a total of eight statements. Higher rating

on the organizational learning scale referred to developed degree of organizational learning.

Table ‎4.4

Organizational Learning scale items

Scale Items

1. This is an open organization and as much information as possible is made available to employees.

2. There exists two-way communication between employees of all levels

3. Feedback system on services is provided to customers and employees

4. The bank has learned or acquired much new and relevant knowledge over the last few years.

5. The learning and development process has helped the bank employees to acquire new skills

6. The learning and development process has helped in building capacities for sustained organizational

effectiveness

7. The Bank‘s performance has been influenced by new learning it has acquired over the last few years.

8. The organization is a learning organization.

9. We actively encourage employees and customers to let us know if we are going wrong in the way we

do things and to let us know how we can improve.

4.6.3. Organizational Collaborative Culture

In order to measure organizational collaborative culture, scale developed by López,

Peón, & Ordás (2004) was utilized for the study. López, Peón, & Ordás (2004) developed the

scale to measure the influence of organizational culture on knowledge management.

Originally there were 8 items in the scale, a higher value of the organizational culture referred

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to a strong culture. López, Peón, & Ordás (2004) removed two items as part of the validation;

reliability for the 6 items was from the study of López, Peón, & Ordás (2004) was reported to

be .848.

Table ‎4.5

Organizational collaborative culture scale items

Scale Items

1. The bank considers change to be natural and necessary

2. The bank considers individuals as an asset and tries to appreciate them continuously

3. Everybody‘s opinions and contributions are respected

4. Problems are discussed openly, to avoid finding culprits

5. Collaboration and co-operation among the different duties

6. In general, all departments are aware of consumer satisfaction

7. Individuals who experiment and take reasonable risks are well considered even if they should be

mistaken

8. The preservation of different point of views is encouraged

4.6.4. Organizational Commitment

Organizational commitment was measured by the nine-item short version of the

Organizational Commitment Questionnaire (OCQ) developed by Mowday, Steers and Porter

(1979).

Table ‎4.6

Organizational Commitment Scale

Scale Items

1. I am willing to put in a great deal of effort beyond that normally expected in order to help this bank be

successful.

2. I talk up this bank to my friends as a great organization to work for.

3. I would accept almost any type of job assignment in order to keep working for this bank

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4. I find that my values and the bank's values are very similar.

5. I am proud to tell others that I am part of this bank.

6. This bank really inspires the very best in me in the way of job performance.

7. I am extremely glad that I chose this bank to work for, over others I was considering at the time I

joined.

8. I really care about the fate of this bank.

9. For me this is the best of all possible banks for which to work.

4.6.5. Perceived Organizational Support

Perceived Organizational Support was measured through the scale developed by

Chiang & Hsieh (2012) based on Rhoades, Eisenberger and Armeli (2001) construct of

perceived organizational support. The reliability for POS in the study by Chiang & Hsieh

(2012) was reported to be .772.

Table ‎4.7

Perceived Organizational Support Scale

Scale Items

1. My bank cares about my opinions

2. My bank really cares about my well being

3. My bank strongly considers my goals and values

4. Help is available from my bank when I have a problem

5. My bank would forgive an honest mistake on my part

4.6.6. Role Stress

Role stress is characterized by role ambiguity and role conflict. Both factors are

measured by instrument developed by Agarwal and Ramaswami (1993). Role ambiguity is

measured by 5 items while role conflict is measured by a total of 6 items. A higher rating of

role ambiguity and role conflict shows increased role stress. In the original study Cronbach‘s

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Alpha for Role Ambiguity was reported to be .89, while reliability for Role Conflict was

reported to be .73, both values are over the acceptable value of .70.

Table ‎4.8

Role Stress Scale

Scale Items

Role ambiguity

1. I don‘t have clear, planned goals and objectives for my job.

2. I am not always sure that I have divided my time properly between tasks.

3. I don‘t know what my responsibilities at work are.

4. I don‘t know exactly what is expected of me at work.

5. It is not explained clearly what tasks have to be done.

6. There are no clear planned goals and objectives for my job.

Role conflict

1. I receive assignments without the resources to complete it.

2. I receive assignments without adequate resources and materials to execute it.

3. I have to break a rule or policy in order to carry out assignments.

4. I do things that are apt to be acceptable by one person but not by others.

5. I receive incompatible requests from two or more people.

6. I work under incompatible policies and guidelines.

7. I work with two or more groups who operate quite differently.

8. I have to do things that should be done differently.

4.6.7. Internal Marketing

The construct for internal marketing was developed by Foreman and Money (1995).

The original scale had a total of 15 items. Foreman and Money (1995) identified three

dimensions of internal marketing, namely Development, Rewards and Vision. The alpha for

the entire scale in the original study was reported to be .94, which is very acceptable.

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Table ‎4.9

Internal Marketing Scale

Scale Items

1. Our bank offers employees a vision that we can believe in.

2. Our bank‘s vision is well communicated to all employees.

3. This bank prepares employees to perform well.

4. Our bank views the development of knowledge and skills in employees as an investment rather than a

cost.

5. Skill and knowledge development of employees happens as an ongoing process in our bank

6. We teach our employees ―why they should do things‖ and not just ―how they should do things‖.

7. This bank goes beyond training and educates employees to work together.

8. This bank measures and rewards employee performance that contributes most to our bank‘s vision.

9. Data gathered from employees is used to improve jobs, and to develop strategy of the bank

10. In our bank, those employees who provide excellent service are rewarded for their efforts.

11. In this bank, employees are properly trained to perform their service roles

12. The bank places considerable emphasis on communication with employees

13. This bank has the flexibility to accommodate the differing needs of employees

14. Our performance measurement and reward systems encourage employees to work together

15. Our bank communicates to employees the importance of their service roles

4.6.8. Subjective Organizational Performance

Subjective organizational performance was measured using the scale developed by

Tseng (2010). A total of 5 items made up the scale with reliability reported to be .913 in the

original study. A higher rating of organizational performance by respondents meant better


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Table ‎4.10

Subjective organizational performance scale items

Scale Items

1. The bank has made a vital improvement in the finance and performance over past few years

2. The bank has made a vital improvement in the relationship between an organization and its customers

over past few years

3. The bank has made a vital improvement in organizational effectiveness and efficiency (e.g. timing of

launching new products or services) over past few years

4. The bank has made a vital improvement in human resources development (e.g. employee skills,

personnel development, etc.) over past few years

5. The bank has made a vital improvement in preparing for the future (e.g. quality/depth of strategic

planning, indicators of partnerships and alliances) over past few years

4.6.9. Objective Organizational Performance

In order to measure the objective organizational performance, book based measures of

organizational performance were utilized. Annual reports were consulted for this purpose.

Following books based measure were used from 3 years annual report of the banks.

Earnings Per Share

Return on Equity

Return on Assets

4.7. Pre-testing

Dillman (2000) identified four stages for the validation of survey instrument. The four

stages are discussed in detail below

4.7.1. Stage-1 - Content validity

Content validity refers to degree to which the content of the items adequately

represents the universe of all relevant items under study. One way to determine content

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validity is to present the instrument to a panel of judges (Cooper & Schindler, 2003). Initially

content validation was performed by the researcher, supervisor and co-supervisor. In the next

phase the questionnaire was presented to Head of Department, three doctoral candidates, 2

experts from banking sector. The panel in both phases were asked to

1. Review the questions, and recommend changes

2. Recommend addition or removal of items from the instrument

3. To suggest if the scales required any changes

The following table shows the items that were removed after through consultation amongst

the panel to evaluate content validity.

Table ‎4.11

Items removed at content validity stage

Construct Items Removed

Organizational Culture Individuals who experiment and take reasonable risks are well

considered even if they should be mistaken

Role Conflict I work with two or more groups who operate quite differently.

4.7.2. Stage Two: Readability

The second stage involves readability of the research instrument, for the purpose of

ascertaining readability of the questionnaire, fellow colleagues, some bank employees were

asked to evaluate the research instrument, the respondents were asked to assess whether the

wording used in the research questionnaire is easy to understand; whether the questions do

not take much time in interpretation; whether items in the questionnaire are not to lengthy

and whether the readers would not lose the concept of the items in case the items get lengthy.

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4.7.3. Stage Three: Pilot Study

Before the actual data collection, a pilot study was conducted in order to evaluate the

instruments that were to be used for actual data collection phase. The objective of the pilot

study was to ascertain the reliability of the constructs, whether the questionnaire is easy to

understand, and to improve the questionnaire in terms of sentence structure and phrasing of

items, if needed. 40 questionnaires were distributed among different bank employees and

discussion was held. Data collected was analyzed using SPSS. Table 19 shows the list of

items that were removed from further research from each construct due to low reliability and

mismatch with the banking sector. The mismatch was assessed after thorough discussion with

the supervisor and executive from different banks.

The second stage in pilot testing involved comparing subjects responses between two

cities. This was done to ensure that the responses between two cities are not significantly

different from each other. The objective measures are taken from the annual reports covering

measures based on the performance of bank as a whole. A total of 80 responses were

gathered and compared between the two cities. Overall results revealed no significant

difference in the means of the different constructs in the study. The reason for the lack of

difference could be attributed to the centralized bank structure, with all banks operating under

the policies outlined by State Bank of Pakistan. The following table shows the results of

mean comparison.

Table ‎4.12

Mean Comparison for Constructs

Construct t Sig.

Organizational Learning .967 .336

Collaborative Culture 1.481 .143

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Organizational Commitment -.177 .860

Internal Marketing .773 .442

Role Stress -.395 .694

Perceived Organizational Support 1.648 .103

Internal Service Quality

Reliability .372 .711

Assurance -.168 .867

Empathy .507 .614

Responsiveness -.153 .879

Organizational Performance -1.652 .103

Table ‎4.13

Items removed during pilot testing stage

Construct Items Removed

Organizational Learning We actively encourage employees and customers to let us know if we are going

wrong in the way we do things and to let us know how we can improve.

Organizational Culture The preservation of different point of views is encouraged

Internal Marketing This bank has the flexibility to accommodate the differing needs of employees

Organizational Commitment For me this is the best of all possible banks for which to work.

Role Stress

Role Ambiguity There are no clear planned goals and objectives for my job.

Role Conflict I have to do things that should be done differently.

4.7.4. Stage Four: Mistake Elimination

In the final stage the modified instrument was examined and any mistakes that might

have gone unnoticed, were removed.

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4.8. Data Collection

The research setting for this study was Public and Private Sector Banks in KPK. The

research primarily focused on the primary sources of data collected through research

questionnaire. The respondents includes branch bankers working at different levels within the

Banking sector.

The data was collected through questionnaires distributed through personal visits

made to the banks, emails and posts. Measurement used was a seven points rating Scale.

Secondary data were to be obtained from relevant research that includes conference

proceedings, annual reports, and research journals.

A total of 564 questionnaires were distributed in 80 different branches of medium and

large sized banks. In the present study 404 questionnaires were returned, constituting the

response rate of 71.63. A total of 63 questionnaires were rejected. The total number of

questionnaires usable for the study was 341. The following table summarizes the banks

selected as sample, questionnaires distributed, questionnaires returned and questionnaires

usable.

Table ‎4.14

Questionnaires Response Details

S.N

o Bank

No. of

Branches

No of

Employees

Questionnaires

Returned

Usable

Questionnaires

1 Allied Bank Limited 10 57 37 30

2 Bank Al-Falah 7 46 35 32

3 Habib Bank Limited 9 57 37 34

4 National Bank Limited 7 54 41 36

5 United Bank Limited 10 55 38 33

6 MCB Bank Limited 7 50 36 29

7 Bank Al-Habib Limited 5 35 22 10

8 Askari Bank 5 46 36 33

9 Faysal Bank Limited 5 35 23 18

10 Meezan Bank 7 51 38 32

11 Bank of Khyber 8 78 61 54

Total Number of Branches 80 564 404 341

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4.9. Data Analysis

The research analysis was combination of descriptive and inferential statistical analysis.

The tools and details of each type of analysis are explained below.

4.9.1. Descriptive Analysis

Descriptive data analysis is used to describe the data. Descriptive statistics are used to

summarize and present data in a form that is easy for the reader to understand. Such

summaries of data, which may be tabular, graphical, or numerical, are referred to as

descriptive statistics(Anderson, Sweeney, & Williams, 2011).Descriptive statistics also help

researchers detect sample characteristics that may influence their conclusions (Thompson,

2009). Descriptive statistics are often said to be univariate in nature because only one

variable is involved in it (Huck, 2012). Descriptive statistics used in the present study seek to

discover any anomalies in the data by analyzing frequencies for each variable. Skewness and

kurtosis values were analyzed to check for distribution. The rule of thumb for skewness and

kurtosis is that the values that fall between +2.00 to -2.00 are considered normal (Lomax &

Hahs-vaughn, 2012; De Laurentis, Maino, & Molteni, 2011).It is however important to note

that sample size do have a significant influence on normality. A study investigating with

small samples of 50 or fewer observations, and especially if the sample size is less than 30 or

so, significant departures from normality can have a substantial impact on the results. For

sample sizes of 200 or more, however, these same effects may be negligible (Hair, Black,

Babin, & Anderson, 2009).

4.9.2. Factor Analysis

Factor analysis is used in the study to test the items in each construct quantitatively.

Factor analysis has been extensively used in research for purification of items. Items that do

not load substantially or items violating the predicted factor structure are eliminated. Factor

analysis is used extensively by researchers involved in the development and evaluation of

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tests and scales. Individual items and questions are analyzed using factor analytic techniques,

the items are refined and reduced (Pallant, 2011). Factor analysis is further utilized to

establish validity of the construct.

4.9.3. Validity of Research

One of the criteria for good measurement is validity (Bajpai, 2011).The core essence

of the word validity is captured by the term accuracy (Huck, 2012). Validity is the ability of

an instrument to measure what it is designed to measure (Pellissier, 2007; Bajpai, 2011).

Validity definition is pertinent to findings of the research, put forth by Saunders, Lewis, and

Thornhill (2009) state that validity is concerned with whether the findings are really about

what they appear to be about. Two form of validities are assessed in the present research,

namely convergent and discriminant validity.

4.9.3.1. Construct Validity

Construct validity is particularly important in quantitative research. Construct validity

exists when a measure reliably measures and truthfully represents a unique concept. In order

to establish construct validity, exploratory factor analysis is utilized (Zikmund, Babin, Carr,

& Griffin, 2013). Factors with Eigen values greater than 1 should be identified and items with

factor loadings less than 0.5 should be deleted (Shi & Wright, 2001). To attain construct

validity the researcher must focus on convergent and discriminant validity (Bajpai, 2011).

4.9.3.1.1. Convergent Validity

According to Zikmund, Babin, Carr, & Griffin (2013) convergent validity is

established when the concepts that should be related to each other, are in fact related, highly

reliable scales show convergent validity. All items in a construct shall converge to establish

convergent validity. Convergent validity is established statistically when items that are meant

to converge (measure the same constructs) have similar scores. Exploratory factor analysis

can be utilized to assess when items ―load‖ appropriately on higher order factors (Recker,

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2013). The uni-factorial nature of variables and constructs confirms the construct validity of

the dimensions under study (Kuei, 1999). Convergent validity through factor analysis is

established when block of items measuring the same construct strongly agree (i-e converge)

in their representation of the underlying construct they were created to measure. This is found

when loadings are high and have narrower range between 0.7 and 0.9, this would result in

greater confidence that all items help in estimation of underlying construct (Widaman, 2010).

Further to factor analysis Average Variance Extracted (AVE) statistic is calculated,

Convergent validity is established if an AVE of 0.5 or greater is achieved for the constructs

(Fornell & Larcker, 1981; Sweeney & Soutar, 2001).

4.9.3.1.2. Discriminant Validity

According to Zikmund, Babin, Carr, & Griffin (2013) discriminant validity refers to

uniqueness or distinctiveness of a construct, discriminant validity is established when a scale

that should not correlate too highly with a measure of a different construct, is in fact not

related. An instrument with high degree of discriminant validity would need to be shown to

correlate poorly (or not at all) with another instrument designed to measure something totally

different (Herbst & Coldwell, 2004). The criterion to evaluate discriminant validity is that

square root of AVE for each construct must be greater than inter-correlations with other

constructs (Bhattacherjee& Sanford, 2006; Kim & Malhotra, 2005; Sweeney & Soutar,

2001).

4.9.4. Reliability Assessment

Apart from validity the other criteria for good measurement is reliability (Bajpai,

2011).The core essence of the word reliability is captured in the term accuracy (Huck, 2012).

Reliability according to Pellissier (2007) deals with the extent to which research finding can

be replicated. According to Nunnally (1978), reliability refers to the extent of measurements

of particular test repeatability. Reliability implies that the instrument should produce

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consistent results. In short reliability is concerned with the consistency of the research

findings (Hair, Celsi, Money, Samouel, & Page, 2003).

A number of ways are available to measure the reliability of an instrument. One is

Test-retest reliability, it is obtained through repeated measurement of the same respondent or

group of respondents using the same instrument. Results are correlated, the higher the

correlation, the greater is the reliability (Hair et. al., 2003; Herbst & Coldwell, 2004). Split

half reliability is another way that refers to the testing of the summated scores. The scale is

split with the intention to correlate one half with the other. The greater the magnitude of

correlation, the greater the reliability (Herbst & Coldwell, 2004). However the most

recommended and widely used measure of reliability is coefficient alpha (α) or Cronbach‘s

(1951) alpha. The range is from 0 to 1. The nearer the value of α to 1 is, the better the

reliability is then. If the value is low, it can be attributed to the items that are too few or there

is very little commonality among the items (Churchill, 1979). Nunnally (1978) suggests that

reliability of 0.5 – 0.6 is sufficient although a coefficient of 0.7 or above is desirable.

Cronbach‘s Alpha is used to test reliability in the current study.

4.9.5. Correlation Analysis

Correlation measures the degree of association between variables (Bajpai, 2011). Two

statistics are important while studying correlation. First is the significance of the relationship,

second is the strength of relationship express as Pearson‘s r. Value for r ranges between 0 and

±1.A value of 0 shows no linear relationship and a value of ±1.00 specifies a perfect linear

relationship, however there is no direct interpretation for values in between. There are several

guidelines available that show different ranges and the relationships are interpreted

accordingly. The relationships can be described in terms of how closely they approach the

extremes (for example, coefficients approaching 0.00 can be described as ―weak‖ and those

approaching ±1.00as―strong‖). The direction of relationship between the variables can either

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be positive or negative. A positive correlation indicates a direct relationship, such cases are

referred to as high-high, low-low. A negative correlation indicates an indirect or inverse

relationship (i.e., high–low, low–high). High refers to high scores on a variable and low

points to low scores.

4.9.6. Structural Equation Modeling

The present study utilizes structural equation modeling technique to test the

measurement and structural models. Structural equation modeling makes use of different

models to represent relationship among observed variables, the fundamental goal is testing

the theorized model hypothesized and how different constructs are related to each other

(Lomax & Schumacker, 2012). The present study tests regression and basic confirmatory

factor models using structural equation modeling. Modeling is performed in IBM SPSS

AMOS 20.

Confirmatory factor models deals with the measurement models, i.e. the relationship

between the observed measures, indicators or items and the latent variable or factors (Hoyle,

2014). The structural regression models resemble confirmatory factor models; moreover they

also hypothesize the relationships between different constructs in the study. These models

can be used to test or disconfirm theories about explanatory relationships amongst various

latent variables (Raykov & Marcoulides, 2006).

It is imperative that the researchers evaluates whether the data fits the model well. A

number of indices are available to test if the model fits the data well. Model fit refers to how

the data reflects underlying theory; however the issue is by no means agreed. There are a

number of fit indices and there exists a wide disparity in agreement on not only the indices to

report but the cut-offs for different indices (Hooper, Coughlan, & Mullen, 2008).

The SEM literature pinpoints several indices that can be used to evaluate the goodness

of fit of a specified model to the observed data. It is however important to note that there is

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no agreement on the fit indices that should be reported. There are certain recommendations

available in the literature. Hu and Bentler (1999) recommended reporting, SRMR, CFI, TLI,

and RMSEA. Kashy, Donnerllan, Ackerman, and Russell (2009) suggested CFI or TLI along

with chi-square and RMSEA. Bandalos and Finney (2010) recommended reporting Chi-

Square, CFI, TLI, RMSEA and SRMR. Mueller and Hancock (2010) recommended RMSEA,

SRMR, and at least one of CFI, NFI and TLI. Similarly Widaman (2010) encouraged the use

of chi-square, CFI, TLI and RMSEA. The present study is based on the aforementioned

recommendations and utilizes CMIN, SRMR, CFI, TLI, and RMSEA.

Each of the fit indices has their designated cut-off value. The cutoff value is closed to

.08 for SRMR; and the cutoff value is closed to .06 for RMSEA (Hu and Bentler, 1998)

however the value should not exceed .08. Traditionally the cut off value for CFI is .90 (Wang

& Wang, 2012). Bentler (1990) suggest that CFI and TLI values in the range of .90-.95 are

indicative of acceptable model fit. Brown (2012) asserted that when fit indices fall in the

marginal ranges, it is important to consider consistency of the model expressed by various

types of fit indices. It is thus important to consider and report different fit indices when

evaluating model fit. CMIN is the relative chi-square also called the normed chi-square. This

value equals the chi-square index divided by the degrees of freedom. The criterion for

acceptance varies across researchers, ranging from less than 2 (Ullman, 2001) to less than 5

(Schumacker & Lomax, 2004).

It is important to note that model fit may not be attained in the initial analysis

therefore Anderson and Gerbing (1988) suggested that to improve the model fit, items related

to problematic standard residuals or larger reductions of chi-square were identified and

eliminated one by one for standard residual covariances Brown (2006) recommends a cut off

value 2.0

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Table ‎4.15

Summary of Recommended fit Indices

Level of Fit Measures

RMSEA SRMR CFI TLI CMIN

≤.08 ≤ .08 ≥ .90 ≥ .90 Between 2 to 5

4.9.7. Mediation Analysis

Mediation is a possible form of interrelationship; mediation involves a set of causal

hypotheses. An independent variable may influence the dependent variable through another

variable referred to as mediating variable. Mediation can either be partial or full, if the effect

of independent variable on dependent variable is entirely transmitted by the mediating

variable, this is referred to as full mediation, if the effect of independent variable on

dependent variable is partly transmitted by the mediating variable, this is referred to as partial

mediation (Warner, 2008). In mediation, the focus is on the mechanism that operates between

two predictors and the criterion variable (Jose, 2012). The landmark work on mediation was

by Baron and Kenny in 1986. Baron and Kenny assert that mediating variable accounts for

the relationship between the independent and the dependent variable. Three multiple

regressions are imperative to perform mediation analysis. The technical procedure to test

mediation as is highlighted by Baron and Kenny, which is described below.

1. Mediating variable is regressed on the independent variable (Independent variable is

the predictor and mediating variable is the criterion variable) providing estimate a.

2. Dependent variable is regressed on the independent variable providing estimate c.

3. Dependent variable is regressed on the indpendent variable and the mediating variable

providing estimate c’ and b respectively.

135

Each of the mediation analysis is shown diagramatically as follows.

Figure ‎4.2. Diagrammatic Representation of Mediation Analysis

Once the three different regression analyses are performed, it is argued that one can

determine if mediation occurred. The following conditions must be sbstantiated for mediation

to be supported

1. The independent variable must predict the mediating variable in the first regression

2. The independent variable must predict the dependent variable in the second regression

3. The mediating variable must predict the dependent variable in the third equation

A number of possible outcomes are possible in mediation, Meyers, Gamst, and

Guarino (2013) have identified a number of possible results.

1. Full mediation is observed when the direct relationship between independent and

dependent variabel is fully attenuated (Independent variable does not significantly

predict depdendent variable with mediating variable in the model).

2. Partial mediation is observed when the direct relationship between independent and

dependent variable is still significant but less strong with mediating variable in the

model than it was in isolation.

3. No mediation is observed if the direct relationship between the independent and

dependent variable is as strong with mediating in the model as it was in isolation.

4. The direct relationship between the independent variable and dependent variable is

significantly stronger with the mediating variable in the model than it was in isloation.

MV

IV DV

a b

c‘

c

136

This results signifies that mediating variable has acted as a supressor variable. This

shows that the presence of mediating variable has enhanced the prediction of independent

variable on dependent variable. The presence of mediating variable has helped in purification

of the relationshipe between the predictor and criterion variable.

Once mediation is performed, Sobel test is utilized to evaluate if the effect of the

mediator is significant. The Sobel test performs a statistical test to see if the indirect path

from the IV to the DV is statistically significantly different from zero. This is the same idea

as the test providing support for partial mediation.

4.10. Summary of Research Methodology

The present study is based on the positivist research paradigm that utilizes research

instruments to collect data and hypotheses generated through literature are approved or

disapproved. The population for the study was drawn from banks listed in KSE operating in

the city of Peshawar. Stratified Random Sampling technique is utilized for the selection of

sample. The factors in the study were quantifiable and have been operationalized in existing

research. Questionnaire was developed based on the instruments in existing research studies.

The survey instrument was passed through four different stages of validation as identified by

Dillman (2000). Furthermore the chapter also discussed the data analysis techniques that

would be utilized to describe the data and test the hypotheses. The following chapter

discusses in detail the sample at hand and the research hypotheses.

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Chapter 5

Data Analysis and Results

The chapter provides a detail and in-depth analysis of data gathered from different

banks. Initially descriptive statistics are presented including frequencies for categorical

variables and descriptive statistics including measure of central tendency, analysis of

skewness and kurtosis, validity and reliability analysis.

5.1. Descriptive Statistics

5.1.1. Data Screening and Cleaning

It is imperative that the data is screened and cleansed before any analysis is

performed, this would enhance the confidence in the results and would make sure that the

findings and conclusion is appropriate. Every single item from the questionnaire was

reviewed, minimum and maximum values for all different variables were analyzed to make

sure that they fall within the acceptable range.

5.1.2. Demographic Profile of Respondents

The demographic profile of the respondents is presented in this section to provide an

insight into their composition, age, gender, years of education, nature of employment, job

rank, tenure, banking system in which the respondents currently work and designation.

5.1.2.1. Age

The demographic profile of respondents showed that average age of respondents was

33.58, minimum age of a respondent was 20 years while the oldest bank worker in the study

was 59 years old. Respondents were further classified into different categories. The

categories and representation in different categories in presented in the table and chart below.

Majority of the respondents in the study belonged to the age group 30-39 consisting of 144

(42.2%) respondents.

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Table ‎5.1

Age Distribution of Respondents

Age Group Frequency Percent

20-29 128 37.5

30-39 144 42.2

40-49 41 12.0

50-59 28 8.2

Total 341 100.0

Figure ‎5.1. Age wise distribution of respondents

(Source: Field Data)

5.1.2.2. Gender

Gender distribution of the respondents showed that majority of the respondents were

male (n = 289) representing 84.8 % of the sample, while females were (n = 52) constituting

15.2% of the total sample.

139

Table ‎5.2

Gender distribution of respondents

Gender Frequency Percent

Male 289 84.8

Female 52 15.2

Total 341 100.0

Figure ‎5.2. Gender wise distribution of respondents


5.1.2.3. Years of Education

Years of education was measured in number of years. Average years of education

were 16.12. Majority of the respondents had sixteen followed by eighteen years of education.

140

Table ‎5.3

Respondent’s years of education

Years of Education Frequency Percent

14.00 32 9.4

16.00 247 72.9

17.00 11 3.2

18.00 49 14.5

Total 340 100.0

Figure ‎5.3. Distribution of respondents on years of education


5.1.2.4. Nature of Employment

Survey respondents were asked to identify they nature of employment with the bank.

46 (13.5%) were on contract while 295 (86.5%) were working with the banks on permanent

basis.

141

Table ‎5.4

Nature of Employment

Nature of Employment Frequency Percent

Contract 46 13.5

Permanent 295 86.5

Total 341 100.0

Figure ‎5.4. Respondent‘s nature of employment


5.1.2.5. Job Rank

Respondents job rank was measured on three categories, Junior, middle and senior.

Subjects were asked to identify their job rank. Majority of the respondents were middle

ranked (206) representing 60.4% of the total sample, followed by junior rank employees,

which were 91 (26.4%). A total of 45 (13.2%) senior level employees were part of the study.

142

Table ‎5.5

Rank distribution of respondents

Job Rank Frequency Percent

Junior 90 26.4

Middle 206 60.4

Senior 45 13.2

Total 341 100.0

Figure ‎5.5. Distribution by job rank


5.1.2.6. Tenure

Survey respondents were asked to mention their tenure with the current bank in

number of years. Tenure ranged from .50 to 39. Average tenure was 6.69 years (SD = 7.58).

143

Table ‎5.6

Descriptive statistics for Tenure

N Min Max Mean Std. Deviation

Tenure 333 .50 39.00 6.6979 7.58016

5.1.2.7. Banking System

Banking system in Pakistan is either conventional or Islamic. Data was collected from

both Islamic and conventional banks. 266 (78%) of the respondents were from conventional

banks while 75 (22%) of the respondents were employed at Islamic banks.

Table ‎5.7

Respondent’s distribution by banking system

Banking System Frequency Percent

Conventional 266 78.0

Islamic 75 22.0

Total 341 100.0

Figure ‎5.6. Distribution by Banking System


144

5.1.2.8. Bank Type

Banks in Pakistan fall under two types, public and private. Data was collected from

both Public and Private sector banks. 90 (26.4%) of the respondents were from Public sector

banks while 251 (73.6%) of the respondents were employed in private sector banks.

Table ‎5.8

Respondent’s distribution by banking system

Banking System Frequency Percent

Public 90 26.4

Private 251 73.6

Total 341 100.0

Figure ‎5.7. Distribution by Bank Type


145

5.1.2.9. Designation

Respondents were asked to reveal their designation at the bank. A total of nine

respondents did not reveal their designation. A number of different designations were found.

This is due to the fact that different banks have established different career ladder and have a

number of designations. Appendix 2 shows the frequency distribution for designation of

respondents in the present study.

5.1.3. Descriptive Statistics of Constructs (Means, Skewness and Kurtosis)

This section presents in detail the descriptive analysis of the different constructs.

Sample Size, minimum & maximum value, measure of central tendency, standard deviation

are presented. For the normality distribution testing the skewness and kurtosis were

performed. All the items have shown the acceptable skewness and kurtosis and can be used in

further analysis.

5.1.3.1. Organizational Learning

The first factor that the subjects in the study responded to was organizational learning.

Organizational learning measured the learning initiatives and their implications. The purpose

of this factor is to understand the level of organizational learning within the banks. In order to

develop this understanding descriptive statistics have been carried out to analyze the factor.

Descriptive statistics results are shown in the following table.

146

Table ‎5.9

Descriptive Statistics for organizational learning

N Min Max Mean Std. Deviation

OL1 341 1.00 7.00 4.7683 1.68619

OL2 341 1.00 7.00 4.5836 1.63137

OL3 341 1.00 7.00 4.8504 1.58056

OL4 341 1.00 7.00 5.0880 1.64974

OL5 341 1.00 7.00 5.0411 1.57688

OL6 341 1.00 7.00 5.0323 1.54220

OL7 341 1.00 7.00 4.9648 1.52968

OL8 341 1.00 7.00 5.1114 1.54897

Valid N 341

Descriptive statistics table for organizational learning presents that the respondents

are showing that their banks have initiatives for organizational learning and the employees

see their banks believe in organizational learning. Item OL8 has the highest mean of 5.11

implying that the respondents are of the opinion that the banks they are working for are a

learning organization. It clearly shows that the banks are striving to become a learning

organization.

Organizational learning factor was also analyzed for skewness and kurtosis to see

whether the data is normally distributed. The following table shows that all the items were

normally distributed items are as all the four items are in the range of ±2.

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Table ‎5.10

Normality distribution testing of organizational learning

N Skewness Kurtosis

Statistic Statistic Std. Error Statistic Std. Error

OL1 341 -.624 .132 -.556 .263

OL2 341 -.598 .132 -.591 .263

OL3 341 -.696 .132 -.255 .263

OL4 341 -.948 .132 .183 .263

OL5 341 -.924 .132 .189 .263

OL6 341 -.945 .132 .273 .263

OL7 341 -.972 .132 .372 .263

OL8 341 -.990 .132 .614 .263

Valid N 341

5.1.3.2. Organizational Commitment

In general, organizational commitment construct measures the employee‘s degree of

association with the organization. The construct is operationalized using eight different

questions. The purpose of the construct is to measure and develop an understanding as to how

much an employee identify with the bank. The following table shows the descriptive statistics

for organizational commitment.

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Table ‎5.11

Descriptive Statistics of organizational commitment

N Min Max Mean SD

OC1 341 1.00 7.00 5.3812 1.54391

OC2 341 1.00 7.00 5.1290 1.68237

OC3 341 1.00 7.00 5.0938 1.74305

OC4 341 1.00 7.00 4.7683 1.65804

OC5 341 1.00 7.00 5.4223 1.50996

OC6 341 1.00 7.00 4.9619 1.64719

OC7 341 1.00 7.00 5.1554 1.59296

OC8 341 1.00 7.00 5.4047 1.51866

Valid N 341

It is found that the employees have a strong identification with the bank. All items

results of this factor obtained more than five points in mean analysis except OC4 and OC6

which were very close to five indicating that most of the employees share a good level of

attachment and loyalty with the banks.

The following table represents the skewness and kurtosis analyses in which all items

show the acceptable points indicating the normally distributed data in the data set.

149

Table ‎5.12

Normality distribution testing of organizational commitment

N Skewness Kurtosis


OC1 341 -1.177 .132 1.034 .263

OC2 341 -.920 .132 -.003 .263

OC3 341 -.909 .132 -.105 .263

OC4 341 -.581 .132 -.431 .263

OC5 341 -1.134 .132 .908 .263

OC6 341 -.805 .132 -.105 .263

OC7 341 -.889 .132 .126 .263

OC8 341 -1.183 .132 .985 .263

Valid N 341

5.1.3.3. Collaborative Culture

Collaborative culture is determined by level of collaboration, cooperation, discussion

and awareness about individuals. A total of six questions represented the organizational

collaborative culture. The purpose of this construct is to understand the level of collaboration

prevalent in the banks. The descriptive statistics are tabulated in the following table.

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Table ‎5.13

Descriptive Statistics of collaborative culture

N Min Max Mean SD

CC1 341 1.00 7.00 4.8358 1.62046

CC2 341 1.00 7.00 4.5806 1.69864

CC3 341 1.00 7.00 4.4692 1.75811

CC4 341 1.00 7.00 4.4839 1.65846

CC5 341 1.00 7.00 4.8534 1.52881

CC6 341 1.00 7.00 4.9883 1.52427

Valid N 341

Descriptives table indicates that most of the respondents agreed that their banks have

a collaborative culture. All the items of this factor obtained more than 4 points of means. It

shows that the banks have a culture where collaboration is way of doing things. Overall

average was

Collaborative culture factor was analyzed for skewness and kurtosis to determine

whether the data are normally distributed. The following table shows that all the items were

normally distributed items are as all the four items are in the range of ±2.

151

Table ‎5.14

Normality distribution testing of collaborative culture

N Skewness Kurtosis


CC1 341 -.813 .132 -.067 .263

CC2 341 -.547 .132 -.662 .263

CC3 341 -.571 .132 -.741 .263

CC4 341 -.526 .132 -.565 .263

CC5 341 -.735 .132 -.048 .263

CC6 341 -.852 .132 .126 .263

Valid N 341

5.1.3.4. Perceived Organizational Support

Perceived organizational support determines the level of support the employees

receive from their organization. Perceived organizational support is taken as a predictor

variable in this research. Five questions pertinent to perceived organizational support form

part of this factor. The purpose if this factor is to establish the level of organizational support

employees perceive that they receive from the organization. The results are tabulated below.

152

Table ‎5.15

Descriptive statistics for perceived organizational support

N Min Max Mean SD

POS1 341 1.00 7.00 4.2639 1.68928

POS2 341 1.00 7.00 4.5718 1.72310

POS3 341 1.00 7.00 4.4927 1.68840

POS4 341 1.00 7.00 4.6334 1.75498

POS5 341 1.00 7.00 4.2669 1.88860

Valid N 341

Most of the bankers highlighted that they receive a certain level of support from the

organization. The perceived organization support mean value ranged between the scale

neither agree nor disagree (neutral) and somewhat agree. Highest mean value was found for

POS4, showing that the subjects had help available from the bank in case of a problem.

The items of the perceived organizational support factor were also analyzed for

normality distribution testing and the results of the skewness and kurtosis show that all the

items are normally distributed in data set.

153

Table ‎5.16

Normality distribution testing of perceived organizational support

N Skewness Kurtosis


POS1 341 -.497 .132 -.692 .263

POS2 341 -.593 .132 -.604 .263

POS3 341 -.544 .132 -.632 .263

POS4 341 -.555 .132 -.712 .263

POS5 341 -.373 .132 -1.001 .263

Valid N 341

5.1.3.5. Role Stress

This factor measures the level of stress experienced by the bankers in their jobs. To

operationalize this construct, subjects were asked to rate statements on two sub-factors. Role

ambiguity and role conflict.

5.1.3.5.1. Role Ambiguity

The purpose of this construct to understand how much lack of clarity the bankers

experience in their job. A total of five statement were presented to the bankers to rate their

level of role ambiguity. The following tables shows the descriptive statistics for role

ambiguity.

154

Table ‎5.17

Descriptive statistics for role ambiguity

N Min Max Mean SD

RA1 341 1.00 7.00 2.8563 1.74555

RA2 341 1.00 7.00 2.9413 1.71398

RA3 341 1.00 7.00 2.4018 1.57177

RA4 341 1.00 7.00 2.4868 1.59336

RA5 341 1.00 7.00 2.6129 1.71747

Valid N 341

The statistics show that on average the respondents did not experience role ambiguity,

since most of the responses gathered were between the options disagree and somewhat

disagree. Item RA2 had the highest mean, indicating the only ambiguity most of the

respondents had was clear division of time between tasks. The following table represents the

skewness and kurtosis of role ambiguity factor. All the items fall within the acceptable range.

Table ‎5.18

Normality distribution testing of role ambiguity

N Skewness Kurtosis


RA1 341 .679 .132 -.699 .263

RA2 341 .642 .132 -.742 .263

RA3 341 1.168 .132 .551 .263

RA4 341 1.022 .132 .094 .263

RA5 341 .990 .132 -.031 .263

Valid N 341

155

5.1.3.5.2. Role Conflict

The level of conflict bankers have in performing their job is measured using six

different statements. The following tables shows the descriptive statistics for role conflict.

Table ‎5.19

Descriptive statistics for role conflict

N Min Max Mean SD

RC1 341 1.00 7.00 3.2698 1.81593

RC2 341 1.00 7.00 3.3284 1.85759

RC3 341 1.00 7.00 2.8387 1.72023

RC4 341 1.00 7.00 3.1701 1.71167

RC5 341 1.00 7.00 3.3402 1.73590

RC6 341 1.00 7.00 2.9853 1.79618

Valid N 341

The statistics show that on average the respondents did experience a little amount of

role conflict, since most of the responses gathered were between the options somewhat

disagree and neither agree nor disagree. Item RC5 had the highest mean, indicating that the

bankers receive a lot of incompatible requests from two or more people.

Skewness and kurtosis statistics of the items of the role conflict factor are presented in

the table below. All the items fall within the acceptable range.

156

Table ‎5.20

Normality distribution testing of role conflict

N Skewness Kurtosis


RC1 341 .350 .132 -1.124 .263

RC2 341 .330 .132 -1.240 .263

RC3 341 .607 .132 -.813 .263

RC4 341 .392 .132 -.902 .263

RC5 341 .271 .132 -1.161 .263

RC6 341 .558 .132 -.930 .263

Valid N 341

5.1.3.6. Internal Marketing

Internal marketing construct seeks to determine if the organization treats its

employees as internal customers and employs ways to enhance communication, morale and

retention of employees. Internal marketing is measured using 14 different items. The

following table shows if the banks utilizes internal marketing means in their bank.

Table ‎5.21

Descriptive statistics for internal marketing

N Min Max Mean SD

IM1 341 1.00 7.00 4.8592 1.69883

IM2 341 1.00 7.00 4.9384 1.66248

IM3 341 1.00 7.00 4.9795 1.56887

IM4 341 1.00 7.00 4.8944 1.63976

157

IM5 341 1.00 7.00 4.8944 1.56450

IM6 341 1.00 7.00 4.7361 1.55132

IM7 341 1.00 7.00 4.7625 1.67662

IM8 341 1.00 7.00 4.6305 1.67810

IM9 341 1.00 7.00 4.4076 1.68588

IM10 341 1.00 7.00 4.6804 1.67697

IM11 341 1.00 7.00 4.6569 1.63136

IM12 341 1.00 7.00 4.6364 1.62056

IM14 341 1.00 7.00 4.6833 1.64477

IM15 341 1.00 7.00 4.8123 1.56618

Valid N 341

The above table indicates that overall there is lack of complete agreement on the

internal marketing initiatives of the bank since most of the respondents on all items fell

between scale option neither agree nor disagree and somewhat agree.

Assessing the skewness and kurtosis values for normality distribution indicates that

the data was normally distributed.

Table ‎5.22

Normality testing of internal marketing

N Skewness Kurtosis


IM1 341 -.767 .132 -.327 .263

IM2 341 -.868 .132 -.144 .263

IM3 341 -.894 .132 .149 .263

IM4 341 -.760 .132 -.301 .263

158

IM5 341 -.737 .132 -.194 .263

IM6 341 -.537 .132 -.491 .263

IM7 341 -.690 .132 -.467 .263

IM8 341 -.564 .132 -.663 .263

IM9 341 -.477 .132 -.794 .263

IM10 341 -.604 .132 -.593 .263

IM11 341 -.683 .132 -.300 .263

IM12 341 -.599 .132 -.557 .263

IM14 341 -.656 .132 -.490 .263

IM15 341 -.800 .132 -.150 .263

Valid N 341

5.1.3.7. Internal Service Quality

5.1.3.7.1. Reliability

Reliability refers to the ability of employees to provide the service they are intended

or required to. Reliability is a sub-factor of ISQ. The purpose of this factor is to assess if the

coworkers provide correct, timely and necessary information. The following table reveals the

descriptive statistics for reliability.

Table ‎5.23

Descriptive statistics for Reliability

N Min Max Mean SD

REL1 341 1.00 7.00 4.8739 1.57888

REL2 341 1.00 7.00 4.7947 1.56772

REL3 341 1.00 7.00 4.8915 1.53870

159

REL4 341 1.00 7.00 5.1437 1.43277

REL5 341 1.00 7.00 5.1584 1.54487

Valid N 341

Descriptive statistics show bankers agreement with the reliability of service that

workers receive from the coworkers. Highest average score was found on REL5, showing

that bankers rated their coworkers to be reliable.

Reliability construct was assessed for normality using values of skewness and

kurtosis. The following table shows that normality was attained since the statistics fall in the

acceptable range.

Table ‎5.24

Normality distribution testing of reliability

N Skewness Kurtosis


REL1 341 -.742 .132 -.137 .263

REL2 341 -.771 .132 -.051 .263

REL3 341 -.728 .132 -.096 .263

REL4 341 -.846 .132 .313 .263

REL5 341 -.927 .132 .304 .263

Valid N 341

5.1.3.7.2. Assurance

The second sub-factor of ISQ is assurance. Assurance refers to the feeling of trust,

safety and politeness towards the coworkers. The constructs measures bankers‘ perception

160

about their coworkers if there are trustworthy, polite, kind and knowledgeable. The construct

is made of four items. The following table shows the descriptive statistics for assurance

Table ‎5.25

Descriptive statistics for assurance.

N Min Max Mean SD

ASR1 341 1.00 7.00 5.0821 1.63932

ASR2 341 1.00 7.00 5.2082 1.52452

ASR3 341 1.00 7.00 5.1994 1.50532

ASR4 341 1.00 7.00 5.1378 1.46781

Valid N 341

The results show that there is a good amount of trust that coworkers within the bank

share with each other. Each items average was over 5 (Somewhat Agree).

The following table shows the normality test for assurance using skewness and

kurtosis statistics. The results show that normality was achieved.

Table ‎5.26

Normality testing for assurance

N Skewness Kurtosis


ASR1 341 -.922 .132 .161 .263

ASR2 341 -.977 .132 .492 .263

ASR3 341 -.978 .132 .548 .263

ASR4 341 -.841 .132 .308 .263

Valid N 341

161

5.1.3.7.3. Empathy

Third dimension of ISQ in the study is empathy. Empathy refers to the level of

understanding between the coworkers at the workplace. The purpose of this dimension to

understand if the bankers experienced a caring, individualized attention from their coworkers.

Empathy is measured using five items. The following table shows the descriptive statistics for

empathy.

Table ‎5.27

Descriptive statistics for empathy

N Min Max Mean SD

EMP1 341 1.00 7.00 5.0029 1.49607

EMP2 341 1.00 7.00 4.4721 1.84947

EMP3 341 1.00 7.00 4.7801 1.60193

EMP4 341 1.00 7.00 4.9120 1.42391

EMP5 341 1.00 7.00 4.8680 1.48429

Valid N 341

Descriptive statistics for empathy reveal that there is a slight agreement to the

perception that employees at empathetic. Higher mean value was obtained for EMP1,

indicating that bank workers are concerned about the problems faced within the bank.

The following table shows the skewness and kurtosis values to test the normality of

empathy dimension of ISQ. All items within the factor have acceptable statistics for

normality.

162

Table ‎5.28

Normality testing of empathy

N Skewness Kurtosis


EMP1 341 -.737 .132 -.028 .263

EMP2 341 -.527 .132 -.855 .263

EMP3 341 -.647 .132 -.338 .263

EMP4 341 -.723 .132 .165 .263

EMP5 341 -.727 .132 .089 .263

Valid N 341

5.1.3.7.4. Responsiveness

The last dimension of ISQ is responsiveness. Responsiveness refers to the willingness

to help employees and provide prompt service. The purpose of this construct is to develop an

understanding how much responsive are the employees towards the needs to their coworkers.

Four different statements were adapted from existing literature to measure responsiveness.

The following table shows the descriptive statistics for responsiveness.

Table ‎5.29

Descriptive statistics for responsiveness

N Min Max Mean SD

RES1 341 1.00 7.00 5.3021 1.39525

RES2 341 1.00 7.00 5.0616 1.53939

RES3 341 1.00 7.00 5.1525 1.43083

RES4 341 1.00 7.00 5.1525 1.46736

Valid N 341

163

The results reveal that on all items the average score for responsiveness was found to

be over 5. This shows that coworkers were responsive to the service needs of their coworkers.

Higher mean was found for RES1, indicating that the communication was clear and

appropriate.

The following table shows the normality testing using skewness and kurtosis statistics

for responsiveness. All items statistics fell between the acceptable ranges of ±2.

Table ‎5.30

Normality testing of responsiveness

N Skewness Kurtosis


RES1 341 -.989 .132 .554 .263

RES2 341 -.882 .132 .108 .263

RES3 341 -.894 .132 .424 .263

RES4 341 -.996 .132 .764 .263

Valid N 341

5.1.3.8. Organizational Performance

Subjective organizational performance was measured using five statements that not

only asked the respondents to reveal about sales, but also relationship with customers, human

resource development and preparation for the future. The following table shows the

descriptive statistics based on the rating received by each of the statements in the

organizational performance construct.

164

Table ‎5.31

Descriptive statistics for organizational performance

N Min Max Mean SD

OP1 341 1.00 7.00 5.3666 1.48044

OP2 341 1.00 7.00 5.3490 1.44250

OP3 341 1.00 7.00 5.1290 1.45756

OP4 341 1.00 7.00 5.0352 1.60108

OP5 341 1.00 7.00 5.0792 1.60776

Valid N 341

The descriptive statistics reveal a close agreement of the bank workers to effective

organizational performance. The following table shows the normality testing of

organizational performance construct. All items statistics for skewness and kurtosis fell in the

acceptable range.

Table ‎5.32

Normality testing of organizational performance

N Skewness Kurtosis


OP1 341 -.966 .132 .464 .263

OP2 341 -.917 .132 .393 .263

OP3 341 -.839 .132 .216 .263

OP4 341 -.845 .132 -.021 .263

OP5 341 -.911 .132 .175 .263

Valid N 341

165

5.2. Factor Analysis

After conducting descriptive statistics, factor analysis was performed to identify the

underlying factors. Factor analysis is used to determine what items should be included or

excluded in further analysis. Factor analysis is concerned with whether the covariance or

correlation among a set of observed variables can be explained in terms of a smaller number

of unobservable constructs known as common factors (Landau & Everitt, 2004). Factor

analysis is one of the most commonly used techniques for data reduction and structure

detection. Moreover, it may also be used to decide which items on the scale are to be

included or excluded from the measure.

5.2.1. Assumptions

Before data is factor analyzed, it is important to make sure that data to be analyzed is

appropriate and passes the required assumptions for the analysis. First it is important to make

sure that adequate sample is available for factor analysis. Essentially large enough samples

are required to make sure that the correlations are good representation of their population

values. There are a number of ‗rules of thumb‘ proposed to indicate what constitutes a large

enough dataset: there should be at least 200 scores overall (Hinton, 2004). Field (2005)

suggests that the sample size of 300 or over shall provide a stable factor solution. Tabachnick

and Fidell (2001) also suggest that sample size of at least 300 is adequate for factor analysis;

they also suggest 5 cases for each item are adequate. In the present study the sample size is

341, which is adequate for factor analysis. There are 65 items, the ratio of 5 to 1 is also met.

An alternative method to check sample adequacy is Kaiser-Meyer-Olkin (KMO)

measure of sampling adequacy. The data are judged to be factorable if the KMO measure of

sampling adequacy is greater than .60 (Huck, 2012). The KMO statistic ranges from 0 to 1.

Any value over 0.6 is regarded as acceptable for a factor analysis (Pallant, 2011) as values

166

below this would mean that the factor analysis will not be able to account for much of the

variability in the data and so is not worth undertaking (Hinton, 2004).The results for KMO

measure of sampling adequacy revealed values for all constructs close to 1, indicating that the

sampling condition was satisfied for the analysis. The results for KMO measure of sampling

adequacy are summarized in table 53.

Once it is affirmed that the sample is adequate for factor analysis, inter-variable

correlation analysis shall be conducted for the constructs that are to be factor analyzed. To be

considered suitable for factor analysis, the correlation matrix should show at least some

correlations of r = .3 or greater (Pallant, 2011).Situation may arise when inter-variable

correlation may be too high resulting in multicollinearity. Correlation matrix along with the

determinant statistics shall be examined as this option is vital for testing of multicollinearity.

Field (2005) suggests that determinant of R-matrix should be greater than .00001. In case the

value of determinant is less than the prescribed value, variables that correlate highly shall be

eliminated (r > .8). Inter-variable correlation and determinant statistic for each construct was

examined. The results for inter-variable correlation are summarized in the following table.

Table ‎5.33

Summary of inter-variable correlation

Construct No. of Items Multicollinearity Item(s) removed Items remaining

Organizational Learning 8 OL5-OL6 (OL5) 7

Collaborative Culture 6 - - 6

Organizational Commitment 8 - - 8

Perceived Organizational Support 5 - - 5

Role Stress 11 - - 11

Internal Marketing 14 IM14-IM15 IM15 13

Internal Service Quality 18 ASR1-ASR2 ASR2 14

167

ASR3-ASR4

RES4-RES3

EMP4-EMP5

RES3-RES2

ASR4

RES3

EMP5

Organizational Performance 5 OP4-OP5 OP5 4

Items depicting multicollinearity are deleted from further analysis. Aforementioned

table shows the constructs, the variables with multicollinearity, items removed and items

remaining in each construct.

The second test is the Bartlett‘s test of sphericity. This examines the correlation

matrix, fit‘s an identity matrix. A significant Bartlett test indicates that correlation matrix is

significantly different from an identity matrix. All construct have a significant Bartlett‘s Test

of Sphericity, thus the correlation matrix is significantly different from an identity matrix.

For factor analysis in the present study principal component analysis with varimax

rotation is used. The most commonly used approach for factor analysis is principal

components analysis (Pallant, 2011; Huck, 2011; Bajpai, 2011). The most popular rotation

method used is varimax rotation (Huck, 2012).

An important step in factor analysis is the decision on the number of factors that shall

be extracted. One of the most commonly used techniques is known as Kaiser‘s criterion, or

the eigenvalue rule. Using this rule, only factors with an eigenvalue of 1.0 or more are

retained for further investigation (Pallant, 2011). Thus, big eigenvalues imply useful factors,

whereas small eigenvalues imply superfluous factors. When researchers apply Kaiser‘s

criterion, factors are retained only if they have eigenvalues larger than 1.0. The present study

utilizes eigenvalue to retain factors.

168

Once a factor structure has been found, next step is to decide which variables make up

which factor (Field, 2005). The minimum factor loading criteria was set 0.50 which is

considered higher (Leech, Barrett, & Morgan, 2005).

Table ‎5.34

Assumptions’ statistics for factor analysis

Construct DCMa KMO

b BTS

c

Sig

Organizational Learning .019 .888 1331.463 .000*

Collaborative Culture .054 .862 983.846 .000*

Organizational Commitment .008 .920 1609.251 .000*

Perceived Organizational Support .071 .869 894.402 .000*

Role Stress .000 .881 2571.749 .000*

Internal Marketing .00002 .950 3580.413 .000*

Internal Service Quality .00002 .935 3553.091 .000*

Organizational Performance .087 .804 825.139 .000*

a Determinant of Correlation Matrix

b Kaiser-Meyer-Olkin Measure of Sampling Adequacy

c Bartlett's Test of Sphericity

* p<.001

5.2.2. Component Matrix

After testing the assumptions on each of the construct they were subjected to factor

analysis. Factor analysis results for each construct are described in this section.

169


Organizational learning construct was subjected to factor analysis. A total of seven

items in the construct organizational learning were factor analyzed. The results showed one

factor solution. All items shows loading over .70 which is well over the acceptable factor

loading value. No items were removed, and all items represented the underlying factor

organizational learning.

Table ‎5.35

Component Matrix for Organizational Learning

Construct/Variables Loadings


OL1 .715

OL2 .718

OL3 .795

OL4 .824

OL6 .828

OL7 .827

OL8 .787

5.2.2.2. Organizational Commitment

Organizational commitment construct comprised of 8 items. All items loaded well

above the cut off score of .50 onto a single factor. Thus all items in the factor represent the

underlying latent variable organizational commitment.

170

Table ‎5.36

Component Matrix for organizational commitment



OC1 .672

OC2 .850

OC3 .797

OC4 .751

OC5 .817

OC6 .804

OC7 .835

OC8 .789


A total of six items were part of the collaborative culture. All items were loaded onto

a single factor with all loading over .70. No items were removed, and all items represented

the underlying factor organizational collaborative culture.

Table ‎5.37

Component Matrix for Organizational collaborative culture



CC1 .739

CC2 .805

CC3 .849

CC4 .767

CC5 .835

CC6 .720

171


Perceived organizational support construct comprised of 5 items. Factor loadings

table showed that except POS5 which had the lowest loading of .667 still above the cut off

score, all items had loading over .80. The uni-factorial structure indicates that the items

represent the underlying dimension of perceived organizational support.

Table ‎5.38

Component Matrix for perceived organizational support



POS1 .825

POS2 .878

POS3 .886

POS4 .833

POS5 .667


Role stress construct comprised of 11 items resulted in two distinct factor. Factor one

with had 5 items and represented role ambiguity. Factor two had 6 items and represents role

conflict. No items were removed from the analysis and all items had acceptable loadings.

Table ‎5.39

Component Matrix for role stress


Role Stress

Role Ambiguity

172

RA1 .712

RA2 .682

RA3 .870

RA4 .876

RA5 .794

Role Conflict

RC1 .792

RC2 .806

RC3 .824

RC4 .792

RC5 .829

RC6 .768


Internal marketing construct comprised of a total of 13 items. Factor analysis revealed

a single factor solution with all items loading well above the cutoff point. The following table

shows the loadings for internal marketing construct.

Table ‎5.40

Component matrix for internal marketing


Internal Marketing

IM1 .755

IM2 .811

IM3 .844

IM4 .836

IM5 .809

IM6 .790

173

IM7 .775

IM8 .848

IM9 .708

IM10 .798

IM11 .796

IM12 .834

IM14 .810


ISQ is comprised of 14 items. Factor analysis revealed a two factor solution. The first

was named Reliability while the second was named Empathy and Responsiveness. First

factor had a total of six items. Seven items loaded onto the second factor. One item cross

loaded onto both the factor and hence was removed from further analysis.

Table ‎5.41

Component matrix for internal service quality


Internal Service Quality 1 2

Reliability

REL1 .728

REL2 .808

REL3 .789

REL4 .797

REL5 .807

ASR1 .733

Empathy & Responsiveness

EMP1 .708

EMP2 .729

174

EMP3 .744

EMP4 .749

RES1` .707

RES2 .703

RES4 .710

Item Removed (Cross Loading)

In my bank Coworkers are polite and kind. .526 .529


The results of factor analysis of the criterion variable organizational performance

reveal a uni-factorial solution. All items loaded substantially well onto a single factor with

loadings over .80.

Table ‎5.42

Component matrix for organizational performance



OP1 .827

OP2 .916

OP3 .880

OP4 .851

5.2.3. Summary of Factor Analysis

Factor analysis on organizational learning, collaborative culture, organizational

commitment, perceived organizational support, internal marketing and organizational

performance revealed that these entire constructs are uni-dimensional. Theoretically role

stress is comprised of role ambiguity and role conflict, all items pertinent to role ambiguity

and role conflict converged to form the two factor that make up role stress. Theoretically ISQ

175

is made of four dimensions, however in the present study factor analysis extracted two

factors, reliability and empathy and responsiveness.

The following table shows the summary of factor analysis for all the factors in the

present study. Additional information that makes part of this table is variance explained.

Bajpai (2011) recommends that the factors explaining 60-70% of the cumulative percentage

of variance should be retained. In the present study all factors have achieved the prescribed

limit.

Table ‎5.43

Summary of factor analysis

Constructs No. of

items

No. of items

eliminated

Factors

extracted

Variance

explained (%)

Organizational Learning 7 - 1 61.818

Collaborative Culture 6 - 1 61.976

Organizational Commitment 8 - 1 62.573

Perceived Organizational Support 5 - 1 67.513

Role Stress 11 - 2 69.004

Internal Marketing 13 - 1 64.309

Internal Service Quality 13 1 2 67.551

Organizational Performance 4 - 1 75.551

5.3. Reliability

Once a factor structure is revealed, reliability analysis of the construct is performed.

Cronbach Alpha test has been used to test the reliability of the constructs. The results of the

Alpha Reliability are shown in Table 64. The reliability of the construct in the present study

176

range between .874 and .953. Results indicate that reliability of all the constructs is well

above .8 (Field, 2005) which indicates good reliability is attained. Descriptive for scale item

if deleted were also analyzed to check if there is a substantial increase in reliability upon

deletion of an item. It was found that removing an item would not improve the construct

reliability.

Table ‎5.44

Reliability analysis of the constructs

Construct No. of Items Cronbach‘s Alpha

Organizational Learning 7 .895

Collaborative Culture 6 .876

Organizational Commitment 8 .914

Perceived Organizational Support 5 .874

Role Stress 11 .911

Role Ambiguity 5 .876

Role Conflict 6 .913

Internal Marketing 13 .953

Internal Service Quality 13 .938

Reliability 6 .913

Empathy & Responsiveness 7 .907

177

Organizational Performance 4 .890

5.4. Construct Validity

Construct validity is determined once convergent and discriminant validity is

established.

5.4.1. Convergent Validity

As noted in chapter 4. Convergent validity is established when the concepts that

should be related to each other are in fact related. The uni-factorial nature of variables and

constructs confirms the construct validity of the dimensions under study (Kuei, 1999).

Convergent validity through factor analysis is established when block of items measuring the

same construct strongly agree (i-e converge) in their representation of the underlying

construct they were created to measure. Convergent validity is established if an AVE of 0.5

or greater is achieved for the constructs.

Organizational learning, collaborative culture, organizational commitment, perceived

organizational support, internal marketing and organizational performance constructs are uni

dimensional hence convergent validity is established. Items pertinent to role ambiguity and

role conflict load substantially well onto their respective factors and no cross loadings were

observed, hence all items related to role ambiguity and role conflict converged to form the

two factors that make up role stress. Theoretically ISQ is made of four dimensions, however

in the present study factor analysis extracted two factors, reliability and empathy and

responsiveness, and the items pertinent to the dimensions load onto their respective factors.

Furthermore AVE is calculated, the results revealed that convergent validity for all constructs

is established since the statistics for AVE for all the factors is greater than .50.

178

Table ‎5.45

AVE for constructs

Constructs AVE

Organizational Learning .61

Collaborative Culture .61

Organizational Commitment .62

Perceived Organizational Support .67

Role Stress

Role Ambiguity .62

Role Conflict .64

Internal Marketing .64

Internal Service Quality

Reliability .60

Empathy & Responsiveness .52

Organizational Performance .75

5.4.2. Discriminant Validity

Discriminant validity determines the extent to which sufficiently distinct constructs

are not strongly correlated with each other. Discriminant validity is established if square root

of AVE for each construct is greater than inter-correlations of other constructs. Table 5.46

compares AVE square roots and inter-construct correlations. The results indicate that square

root of AVE of each construct is greater than other inter-construct correlations.

179

Table ‎5.46

Comparison of Square root of AVE and Inter-Construct Correlations

OL OC CC POS RA RC IM REL OP EMPRES

OL (.78)

OC .553**

(.79)

CC .717**

.609**

(.78)

POS .532**

.667**

.690**

(.82)

RA -.236**

-.306**

-.246**

-.220**

(.79)

RC -.284**

-.247**

-.250**

-.213**

.535**

(.80)

IM .647**

.652**

.677**

.702**

-.282**

-.297**

(.80)

REL .516**

.590**

.549**

.528**

-.277**

-.315**

.657**

(.77)

OP .610**

.614**

.552**

.521**

-.328**

-.285**

.689**

.607**

(.86)

EMPRES .501**

.650**

.614**

.569**

-.269**

-.263**

.643**

.720**

.618**

(.72)

5.5. Structural Equation Modeling

This section focuses on the process of the multivariate analysis using structural

equation modeling.

5.5.1. Evaluations of Measurement Models

The present study involves a total of eight different constructs. This section tests subjects

each of the construct to confirmatory factor analysis (CFA) to test if the data fits the

measurement and structural model.


Organizational learning comprised of seven items, one item was removed in

multicollinearity analysis. The items were further subjected to CFA, the results are divided

into two parts, and initial model is compared with the final model. The results of both initial

180

and final model are shown in the table 67. The results indicate a good fit was attained for the

construct organizational learning. Initial loadings indicate low loadings for OL1 and OL2,

initially OL1 was removed and the model was run again, the fit indices improved but still the

results indicated a poor fit, the model was run again and OL2 was removed, Good fit was

attained on the removal of OL3. Remaining items shows good factor loadings. Fit indices

reveal an excellent fit for organizational learning construct. The measurement model along

with the factor loading is presented the figure.

Table ‎5.47

Summary of initial and attained findings: Organizational Learning

Items Initial

Loadings

Final

Standardized

Loadings

C.R.

(t)

OL1 .613

OL2 .622

OL3 .722

OL4 .809 .792 ---

OL6 .825 .846 16.748

OL7 .826 .868 17.172

OL8 .759 .759 14.728

Attained Fit Indices

CMIN/DF (df) SRMR CFI TLI RMSEA

Initial 10.452 (146.335/14) .0695 .90 .850 .167

Final .941 (1.882/2) .0077 1.00 1.00 .000

Composite Reliability: .88

181

Figure ‎5.8. Measurement model for organizational learning

All three items OL1, OL2 and OL3 relates to information sharing, Means analysis

reveal a relatively low means for the three items. This shows lack of access to information,

communication amongst employees and feedback. Organizational learning scale for the

present study comprised of a total of eight items adapted from García-Morales, Lloréns-

Montes, and Verdú-Jover (2007) and Spicer & Sadler-Smith (2006). All items from Spicer &

Sadler-Smith (2006) construct were eliminated, since they used it in sales and marketing

context. All other items from the other study remained. Furthermore the composite reliability

score for this measure is .88 which evinced that the retained items are thought to be reliable

measure.


Collaborative culture comprised of a total of six items. The items were further

subjected to CFA, the results are divided into two parts, and initial model is compared with

the final model. The results of both initial and final model are shown in the following table.

The results indicate a perfect fit obtained for the construct organizational collaborative

culture. In initial CFA, CC1 and CC6 did not load well and thus was deleted. Modification

indices were analyzed and covariances were drawn between the error terms, the final model

had a total of four items.

182

Except for RMSEA and CMIN, three indices SRMR, CFI and TLI showed good fit,

hence the model showed mediocre fit and is used in the further analysis.

Table ‎5.48

Summary of initial and attained findings: Organizational Collaborative Culture

Items Initial

Loadings

Final

Standardized

Loadings

C.R.

(t)

CC1 .669 ---

CC2 .764 .79 ---

CC3 .832 .84 14.47

CC4 .722 .79 12.65

CC5 .790 .75 13.33

CC6 .641 --



Initial 8.037(72.332/9) .459 .935 .892 .144

Final 6.78 (6.78/1) .020 .99 .95 .13


Figure ‎5.9. Measurement model for collaborative culture

Item 1 (CC1) related to change and its appreciation as an imperative, López, Peón,

and Ordás (2004) also found low loading for this item. Literature shows that bank employees

183

do show their concern with respect to change (Awasthy, Vijayalakshmi, & Gupta, 2012), this

could be attributed to the low loadings. Item 6 (CC6) was removed due to low loading. The

composite construct reliability for the four items is .83, the realibility is above the acceptable

level indicating that the retained four items are considered reliable as well as valid for the

construct measure.

5.5.1.3.Organizational Commitment

Organizational commitment was made up of a total of eight items. Initial results of the

CFA showed that OC1 and OC4 had load loadings. First OC1 was removed and measurement

model was run again, the results didn‘t reveal an adequate model fit, further OC4 was

removed from the analysis, the results revealed a good fit. The results of the initial and the

final model are summarized in the table 5.49. A total of 6 items were included for further

analysis. The model is shown in the figure

Table ‎5.49

Summary of initial and attained findings: Organizational Commitment

Items Initial

Loadings

Final

Standardized

Loadings

C.R.

(t)

OC1 .617 ---

OC2 .829 .825 15.267

OC3 .750 .730 13.405

OC4 .700 ---

OC5 .799 .797 17.172

OC6 .767 .760 14.005

OC7 .814 .827 15.302

OC8 .763 .756 ---


184


Initial 5.25(105.175/20) .04 .947 .925 .11

Final 1.94(15.574/8) .01 .99 .98 .05


Figure ‎5.10. Measurement model for organizational commitment

In the study by Lee (2000), OC1 failed to load substantially onto the respective factor

and thus was deleted from further analysis. The items is theoretically very close to OC3 and

OC8, thus deletion of the items would not affect the face validity of the construct. In another

study within Pakistan, Tayyab (2007) found low loadings for items OC1 and OC4 and

relatively low mean values. The construct reliability for organizational commitment was

found to be .90.


Perceived organizational support was made up of a total of five items. Initial results of

the CFA showed that a good fit was attained. Although the loadings for POS5 were low, but

since an acceptable fit was attained, the item is retained for further analysis. The results of the

initial and the final model are summarized in the table 5.50. A total of 5 items were included

for further analysis. The model is shown in the figure

185

Table ‎5.50

Summary of initial and attained findings: Organizational Commitment

Items Initial

Loadings

Final

Standardized

Loadings

C.R.

(t)

POS1 .783 .783 ---

POS2 .854 .854 16.857

POS3 .870 .870 17.181

POS4 .772 .772 14.971

POS5 .563 .563 10.407



Initial 1.71(8.585-/) .01 .99 .99 .04

Final 1.71(8.585-/) .01 .99 .99 .04


Figure ‎5.11. Measurement model for perceived organizational support


The concept of role stress was measure by two constructs; Role ambiguity comprising

5 items and role conflict comprising of 6 items. Initial results of CFA reveal a poor model fit

with none of the indices in the acceptable range. Two items from role ambiguity did not load

186

well and thus were removed, RC2 showed a high standardized residual covariance and thus

was removed from further analysis, RC2 in its meaning is very close to RC1, and thus the

face validity is not affected by deletion of RC2. Removal of items lead to good fit for the role

stress model. The results of the initial and the final model are summarized in the table 5.51. A

total of three items from role ambiguity and five items from role conflict were part of the

model. The model is shown in the figure

Table ‎5.51

Summary of initial and attained findings: Role Stress

Items Initial

Loadings

Final

Standardized

Loadings

C.R.

(t)

Role Ambiguity

RA1 .632 ---

RA2 .621 ---

RA3 .858 .85 18.82

RA4 .902 .91 20.10

RA5 .823 .83 ---

Role Conflict

RC1 .833 .77 15.17

RC2 .853 --- ---

RC3 .808 .83 17.51

RC4 .736 .83 16.97

RC5 .794 .81 ---

RC6 .756 .77 19.97



Initial 7.911 (340.169/43) .06 .88 .85 .14

187

Final 1.50(27.047/18) .02 .99 .99 .03

Composite Reliability:

Figure ‎5.12. Measurement model for role stress


For internal marketing in the initial model 13 items were subjected to CFA. The

results reveal a total of eight items in the final model. Five items were removed from the

analysis due to low loadings and higher standardized residual covariances. The results of the

initial and final attained model are presented in the table 5.52. The figure shows the

measurement model and the loadings for each item.

Table ‎5.52

Summary of initial and attained findings: Internal Marketing

Initial

Loadings

Final

Standardized

Loadings

C.R.

(t)

IM1 .734

IM2 .796 .770

188

IM3 .830

IM4 .822 .831 16.03

IM5 .792

IM6 .770 .792 15.17

IM7 .751 .767 14.61

IM8 .835

IM9 .678

IM10 .780 .758 14.39

IM11 .776 .718 13.50

IM12 .818 .780 16.37

IM14 .790 .747 14.07



Initial 6.62(430.865/65) .04 .897 .877 .129

Final 2.50(32.586/13) .02 .98 .97 .06


Figure ‎5.13. Measurement model for internal marketing

In total five items were removed as part of confirmatory factor analysis. Theoretically

internal marketing construct is divided into three sub-factors, Development, Vision and

Rewards (Foreman & Money, 1995), however in the present study IM was found to be

189

unidimensional in nature. One item from Vision, two from Developments and two from

rewards were removed during CFA. Still two items from Vision and Development were part

of the study covering for the details pertinent for vision and development. The composite

reliability for the construct was .91 that is well over the acceptable value.


Exploratory factor analysis revealed two factors for ISQ namely reliability and

Empathy and Responsiveness. Only one item was removed since it failed to load

substantially. Final ISQ construct had a total of 12 items. The initial and final attained factor

structure is shown in figure. The loadings and indices for initial and final attained model are

shown in table 5.53.

Table ‎5.53

Summary of initial and attained findings: Internal Service Quality

Initial

Loadings

Final

Standardized

Loadings

C.R.

(t)

Reliability

REL1 .725 .707 ---

REL2 .760 .748 13.35

REL3 .819 .809 14.42

REL4 .856 .877 15.44

REL5 .864 .867 15.43

ASR1 .773 .805 14.16

Empathy & Responsiveness

EMP1 .796 .799 ---

EMP2 .499 --- ---

EMP3 .818 .777 15.86

190

EMP4 .829 .793 16.30

RES1 .755 .764 15.54

RES2 .862 .872 18.58

RES4 .846 .864 18.36



Initial 4.09(262.144/64) .04 .93 .92 .09

Final 2.56(131.025/51) .03 .97 .96 .06

Composite Reliability: For Reliability: .91 For Empathy and Responsiveness: .91

Figure ‎5.14. Measurement model for ISQ

One item (EMP2) that measures if the bank has convenient working hours were

removed from the analysis. On deletion of EMP2, the resultant model manifested significant

enrichment to the overall fit of the model as shown in the attained fit indices. It was not a

problem for the six item factor to attain content and face validity. Finally the composite

191

reliability score for reliability is .91 and empathy & responsiveness was found to be .91

which is deemed to be reliable for the measurement of reliability and empathy &

responsiveness. ASR1 for further analysis is referred to as REL6.


Originally organizational performance construct had a total of five items. One item

was removed due to multicollinearity. The four items left were subjected to CFA. The results

showed all items load substantially well onto the construct. The fit indices are indicate an

adequate fit for the construct since RMSEA is a little higher. The initial and final loadings are

compared in table 5.54. The model is shown in figure.

Table ‎5.54

Summary of initial and attained findings: Organizational Performance

Initial

Loadings

Final

Standardized

Loadings

C.R.

(t)

OP1 .77 .77 ---

OP2 .91 .96 17.53

OP3 .82 .77 15.88

OP4 .78 .73 15.07



Initial 15.38(30.769/2) .03 .96 .89 .20

Final 3.10(3.10/1) .00 .99 .98 .07


192

Figure ‎5.15. Measurement model for organizational performance

No items were removed from the analysis. The four items construct to measure

organizational performance has been used in the literature (Tseng, 2010). This approved the

reliability and validity of the measure. The composite reliability for this measure is .88 which

is considered a reliable measure for organizational performance.

5.5.1.9. Summary of measurement models

The results of measurement models for all constructs reveal that a good fit was

obtained for all measurement models. RMSEA was a bit higher for internal marketing, ISQ

and organizational performance, however the values of other indices for these construct

showed good fit. The summary for all measurement models is presented in table 5.55.

Table ‎5.55

Summary of the measurement models

Fit Indices

Constructs CMIN SRMR CFI TLI RMSEA

Organizational Learning .941 .0077 1.00 1.00 .00

Collaborative Culture 6.78 .020 .99 .95 .13

193

Organizational Commitment 1.94 .01 .99 .98 .05

Internal Marketing 2.50 .02 .98 .97 .06

Role Stress 1.50 .02 .99 .99 .03

Perceived Organizational Support 1.71 .01 .99 .99 .04

Internal Service Quality 2.56 .03 .97 .96 .06

Organizational Performance 3.10 .00 .99 .98 .07

5.5.2. Hypotheses Testing

Further to the evaluation of the measurement model for each construct, Structural

equation model was tested. Three different structural models are proposed. First seeks to

investigate the influence of different internal organizational factors on ISQ while the second

model seeks to evaluate the influence of different predictor variables on organizational

performance. The third model evaluates the influence of ISQ on OP.

5.5.2.1. Structural Model A: Internal organizational factors and ISQ

Following the similar approach of comparing initial and attained model, structural

equation model for internal organizational factors and the mediating variable ISQ is

compared. Only one index (TLI) failed to pass the cut-off value, overall the model did show

adequate fit. Factor loadings were analyzed along with standardized residuals and

modification indices. POS5 with low factor loadings were removed and the model was run

again. In the initial model there were a few items with standardized residual covariance just

over 2, removing the items did not improve the model fit significantly, hence the items were

retained. Final model show an adequate fit with all indices attaining the required range. The

following table shows the indices for the final model.

194

Table ‎5.56

Summary of initial and attained findings: Structural Model A



Final 2.181(2006.978/920) .04 .90 .90 .05

195

Figure ‎5.16. Structural Model A: Internal organizational factors and ISQ

196

Table ‎5.57

Summary of measurements: Internal Organizational Factors and ISQ

Hypotheses Structural Paths Std.

loading

C.R P Results

H1a Organizational Learning → ISQ -.023 -.317 .751 Rejected

H2a Collaborative Culture → ISQ .132 1.406 .160 Rejected

H3a Organizational Commitment → ISQ .334 4.393 .000 Supported

H4a Perceived Organizational Support → ISQ -.082 -.815 .415 Rejected

H5a Role Stress → ISQ -.120 -1.948 .050 Supported

H6a Internal Marketing → ISQ .486 5.643 .000 Supported

The table 5.57 shows if the predictor variables in the model had a significant

influence on the mediating variable (ISQ). Each hypothesis is evaluated based on the

standardized coefficient, its critical ratio, significance level. The estimation of hypotheses

demonstrated that three of the hypothesized links were significant whilst two were not.

5.5.2.2. Structural Model B: Internal organizational factors and organizational

performance

Structural model B seeks to find out the relationship between internal organizational

factors and subjective organizational performance. The initially hypothesized model A did

show an acceptable fit. To improve the overall model fit, loadings, modification indices and

standardized residual covariances were analyzed. POS5 with low factor loading was removed

and the model was run again. Analysis of standardized residual covariance‘s also resulted in

removal of one item (OP1) with covariance over the threshold value, item was removed only

if it had a significant influence in improving the overall model fit. The final model is shown

in table 5.58; the figure shows the structural equation model

197

Table ‎5.58

Summary of initial and attained findings: Structural Model B



Final 2.09(1057.833/504) .04 .93 .92 .06

198

Figure ‎5.17. Structural Model B: Internal organizational factors and organizational

performance

199

Table ‎5.59

Summary of measurements: Internal Organizational Factors & Organizational Performance

Hypotheses Structural Paths Std.

loading

C.R P Results

H1b Organizational Learning → Organizational

Performance

.332 4.514 .000 Supported

H2b Collaborative Culture → Organizational Performance -.163 -1.763 .078 Rejected

H3b Organizational Commitment → Organizational

Performance

.186 2.566 .010 Supported

H4b Perceived Organizational Support → Organizational

Performance

-.045 -.456 .649 Rejected

H5b Role Stress → Organizational Performance -.119 -1.793 .049 Supported

H6b Internal Marketing → Organizational Performance .494 5.881 .000 Supported

The table 5.59 shows if the influence of the predictor variables in the model had a

significant influence on the mediating variable (Organizational Performance). Each

hypothesis is evaluated based on the standardized coefficient, its critical ratio, significance

level. The estimation of hypotheses demonstrated that four of the hypothesized links were

significant whilst two were not.

5.5.2.3. Structural Model C: Internal organizational factors and objective


Structural model C seeks to find out the relationship between internal organizational

factors and objective organizational performance. Three different models are tested, each

analyzing the different objective measures. The initially hypothesized models did show an

acceptable fit. POS5 with low factor loading was removed from each of the model. The final

model did revealed an acceptable model fit. The final models is shown in table 5.60, the

figures shows the structural equation models

200

Table ‎5.60

Summary of initial and attained findings: Structural Model C1-2-3


Earnings Per Share

Model C1 CMIN/DF (df) SRMR CFI TLI RMSEA

Final 2.10(1061.769/505) .04 .93 .92 .06

Return on Equity


Final 2.08(1036.670/505) .04 .93 .92 .05

Return on Assets


Final 2.06(1042.517/505) .04 .93 .92 .05

201

Figure ‎5.18. Structural Model C1: Internal organizational factors and organizational

performance

202


performance

203


performance

204

Table ‎5.61

Summary of measurements: Internal Organizational Factors & Organizational Performance

Hypotheses Structural Paths Std. loading C.R P Results

1 Organizational Learning → EPS

Organizational Learning → ROE

Organizational Learning → ROA

-003,

-.039,

.002.

-.031,

-.403,

-.019.

.976,

.687,

.985.

Rejected

Rejected

Rejected

2 Collaborative Culture → EPS

Collaborative Culture → ROE

Collaborative Culture → ROA

.014,

.146,

.086.

.108,

1.147,

.673.

.914,

.251,

.501.

Rejected

Rejected

Rejected

3 Organizational Commitment → EPS

Organizational Commitment → ROE

Organizational Commitment →ROA

.127,

.114,

.147.

1.259,

1.149,

1.465.

.208,

.250,

.143.

Rejected

Rejected

Rejected

4 Internal Marketing → EPS

Internal Marketing → ROE

Internal Marketing → ROA

.198,

.181,

.119.

1.805,

1.670,

1.092.

.071,

.095,

.275

Rejected

Rejected

Rejected

5 Role Stress → EPS

Role Stress → ROE

Role Stress → ROA

.070,

-.022,

.048.

.845,

-.276,

.591.

.398,

.783,

.555.

Rejected

Rejected

Rejected

6 Perceived Organizational Support → EPS

Perceived Organizational Support → ROE

Perceived Organizational Support → ROA

-.266,

-.237,

-.198

-1.937,

-1.738,

-1.447

.053,

.082,

.148.

Rejected

Rejected

Rejected

The table 5.61 shows if the influence of the predictor variables in the model had a no

significant influence on the criterion variable (Objective Organizational Performance). Each

hypothesis is evaluated based on the standardized coefficient, its critical ratio, significance

level. The estimation of hypotheses demonstrated that all other hypothesized links were

insignificant.

205

5.5.2.4. Structural Model D: ISQ and organizational performance

Structural model D evaluates the relationship between ISQ and organizational

performance. The initial model revealed acceptable fit indices for SRMR, CFI and TLI,

however RMSEA showing mediocre fit. The modification indices and standardized residual

covariances were analyzed. One item, RES1 was removed and covariances were drawn

between items of the similar latent construct. The final attained model showed acceptable fit

indices. Table 5.62 shows the comparison between initial and final model.

Table ‎5.62

Summary of initial and attained findings: Structural Model D



2.485(208.70/84) .03 .968 .960 .06

Figure ‎5.21. Structural Model D: ISQ and organizational performance

206

Table ‎5.63

Summary of measurements: ISQ and Organizational Performance (OP)

No Structural Paths Standardized

loading

C.R P Label

1 ISQ → OP .711 10.276 .000 Supported

The table 5.63 shows if the mediating variable (ISQ) had a significant influence on

organizational performance. The hypothesis is evaluated based on the standardized

coefficient, its critical ratio, significance level. The estimation of hypotheses demonstrated

that the hypothesized link between ISQ and organizational performance was significant.

5.5.2.5. Structural Model E: ISQ and Objective Organizational Performance

Structural model E evaluates the relationship between ISQ and objective measures

organizational performance. The initial model did reveal good fit indices for SRMR, TLI, and

CFI; however the value of RMSEA showed mediocre fit. All items loaded substantially well

onto their factors. Any changes to the initial models did not significantly improve the models,

hence no changes were made to the model Table 5.64 shows the final model.

Table ‎5.64

Summary of initial and attained findings: Structural Model E1-2-3


Earnings Per Share

Model E1 CMIN/DF (df) SRMR CFI TLI RMSEA

3.37(212.878/63) .03 .95 .94 .08

Return on Equity


3.34(210.423/63) .03 .95 .94 .08

207

Return on Assets


3.29(207.465./63) .03 .95 .94 .08

Figure ‎5.22. Structural Model E1: ISQ and Objective Organizational Performance


208


Table ‎5.65

Summary of measurements: ISQ and Organizational Performance

Structural Paths Standardized

loading

C.R P Label

ISQ

→

Objective Organizational Performance

(EPS, ROE, ROA.)

.153,

.269,

.216.

2.307,

4.221,

3.425.

.021,

.000,

.000.

Supported

Supported

Supported

The table 5.65 shows if the mediating variable (ISQ) had a significant influence on

objective measures of organizational performance. Contrary to the influence of internal

organizational factors, ISQ did have a significant influence on objective measures of

organizational performance. The hypothesis is evaluated based on the standardized

coefficient, its critical ratio, significance level. The estimation of hypotheses demonstrated

that the hypothesized link between ISQ and financial measures of organizational performance

were significant.

209

5.5.2.6. Mediation Analysis

In this section mediation analysis is performed. A number of conditions were

highlighted in chapter 3, to established mediation. Mediation analysis is performed using

Baron and Kenny Approach through the step wise procedure highlighted by Warner (2013).

Warner (2013) conclude that several condition are required before testing for mediation

1. A significant total relationship between the independent and dependent variable

2. A significant influence of independent variable on the mediating variable

3. A significant influence of mediating variable on dependent variable

Keeping in line with the conditions the following mediation analysis are performed,

1. ISQ mediates between Organizational Learning and Organizational Performance

2. ISQ mediates between Collaborative Culture and Organizational Performance

3. ISQ mediates between Organizational Commitment and Organizational Performance

4. ISQ mediates between Perceived Organizational Support and Organizational

Performance

5. ISQ mediates between Internal Marketing and Organizational Performance

6. ISQ mediates between Role Stress and Organizational Performance

7. ISQ, Organizational Learning and Organizational Performance (ROE)

8. ISQ mediates between Collaborative Culture and Organizational Performance (ROE)

9. ISQ mediates between Internal Marketing and Organizational Performance (ROE)


(ROA)


(ROE)

210

5.5.2.6.1. ISQ, Organizational Learning and Organizational Performance

Mediation analysis was performed using Baron and Kenny (1986) causal approach.

The initial causal variable was organizational learning (OL), the criterion variable was

organizational performance (OP), and the mediating variable was ISQ (ISQ).

The results reveal that the total effect of OL on OP was significant, c = .633, p< .001.

OL was significantly predictive of hypothesized mediating variable, ISQ; a = .513, p< .001,

when controlling for OL, ISQ was significantly predictive of OP, b = .516, p< .001. The

estimated direct effect of OL on OP, controlling for ISQ, was c‘ = .368, P < .001.

The indirect effect, ab, was .264. This was judged to be statistically significant using

Sobel (1982) test, z = 7.80, p< .0001. The coefficients for both a and b were found

statistically significant, the Sobel test for the ab product was also significant, the direct effect

from OL on OP (c‘) was also statistically significant. Since the Sobel test results were

significant, therefore, the effects of OL on OP were partially mediated by ISQ.

Table ‎5.66

Mediation analysis ISQ between OL and OP

Analysis IV – MV (a)

OL - ISQ

MV – DV (b)

ISQ - OP

Direct without

Mediator (c)

Direct with

Mediator (c‘)

Results

Est. S.E Est. S.E Est. Sig Est. Sig

OL – ISQ -

OP

.513 .043 .516 .050 .633 .000 .368 .000 Partial

Mediation

Figure ‎5.25. Mediation: ISQ, OL and OP

ISQ

OL OP

a = .513 b = .516

c‘ = .368

c = .633

211

5.5.2.6.2. ISQ, Collaborative Culture and Organizational Performance


The initial causal variable was collaborative culture (CC), the criterion variable was


The results reveal that the total effect of CC on OP was significant, c = .453, p< .001.

CC was significantly predictive of hypothesized mediating variable, ISQ; a = .478, p< .001,

when controlling for CC, ISQ was significantly predictive of OP, b = .628, p< .001. The

estimated direct effect of CC on OP, controlling for ISQ, was c‘ = .153, P < .001.

The indirect effect, ab, was .300. This was judged to be statistically insignificant

using Sobel (1982) test, z = 8.53, p< .0001. The coefficients for both a and b were found


from CC on OP (c‘) was also statistically significant. Since the Sobel test results were

significant, therefore, the effects of CC on OP were partially mediated by ISQ.

Table ‎5.67

Mediation analysis ISQ between CC and OP


CC - ISQ

MV – DV (b)

ISQ - OP

Direct without

Mediator (c)

Direct with

Mediator (c‘)

Results

Estimate S.E Est. S.E Est. Sig Est. Sig

CC - ISQ -

OP

.478 .038 .628 .054 .453 .000 .153 .000 Partial

Mediation

Figure ‎5.26. Mediation: ISQ, CC and OP

ISQ

CC OP

a = .478 b = .628

c‘ = .153

c = .453

212

5.5.2.6.3. ISQ, Organizational Commitment and Organizational Performance


The initial causal variable was organizational commitment (OC), the criterion variable was


The results reveal that the total effect of OC on OP was significant, c = .625, p< .001.

OC was significantly predictive of hypothesized mediating variable, ISQ; a = .617, p< .001,

when controlling for OC, ISQ was significantly predictive of OP, b = .316, p< .001. The

estimated direct effect of OC on OP, controlling for ISQ, was c‘ = .501, P < .001.


Sobel (1982) test, z = 5.61, p< .001. The coefficients for both a and b were found statistically

significant, the Sobel test for the ab product was also significant, the direct effect from OC on

OP (c‘) was also statistically significant, therefore, the effects of OC on OP were only partly

mediated by ISQ.

Table ‎5.68

Mediation analysis ISQ between OC and OP


OC - ISQ

MV – DV (b)

ISQ - OP

Direct without

Mediator (c)

Direct with

Mediator (c‘)

Results


OC – ISQ -

OP

.617 .037 .316 .053 .625 .000 .501 .000 Partial

Mediation

Figure ‎5.27. Mediation: ISQ, OC and OP

ISQ

OC OP

a = .617 b = .316

c‘ = .501

c = .625

213

5.5.2.6.4. ISQ, Perceived Organizational Support and Organizational Performance


The initial causal variable was Perceived Organizational Support (POS), the criterion variable

was organizational performance (OP), and the mediating variable was ISQ (ISQ).

The results reveal that the total effect of POS on OP was significant, c = .473, p<

.001. POS was significantly predictive of hypothesized mediating variable, ISQ; a = .486, p<

.001, when controlling for POS, ISQ was significantly predictive of OP, b = .600, p< .001.

The estimated direct effect of POS on OP, controlling for ISQ, was c‘ = .181, P < .001.




from POS on OP (c‘) was also statistically significant, therefore, the effects of POS on OP

were only partly mediated by ISQ. Comparison of the coefficients for the direct vs indirect

paths (c‘ = .181 vs. ab = .291) suggest that a large part is mediated by ISQ.

Table ‎5.69

Mediation analysis ISQ between POS and OP


POS - ISQ

MV – DV (b)

ISQ - OP

Direct without

Mediator (c)

Direct with

Mediator (c‘)

Results


POS – ISQ -

OP

.486 .036 .600 .055 .473 .000 .181 .000 Partial

Mediation

Figure ‎5.28. Mediation: ISQ, POS and OP

ISQ

POS OP

a = .486 b = .600

c‘ = .181

c = .473

214

5.5.2.6.5. ISQ, Role Stress and Organizational Performance


The initial causal variable was Role Stress (RS), the criterion variable was organizational

performance (OP), and the mediating variable was ISQ (ISQ).

The results reveal that the total effect of RS on OP was significant, c = -.358, p< .001.

RS was significantly predictive of hypothesized mediating variable, ISQ; a = -.322, p< .001,

when controlling for RS, ISQ was significantly predictive of OP, b = .680, p< .001. The

estimated direct effect of RS on OP, controlling for ISQ, was c‘ = -.139, P < .05.

The indirect effect, ab, was -.218. This was judged to be statistically significant using

Sobel (1982) test, z = -6.08, p< .001. The coefficients for both a and b were found


from RS on OP (c‘) was also statistically significant, therefore, the effects of RS on OP were

only partly mediated by ISQ.

Table ‎5.70

Mediation analysis ISQ between RS and OP


RS - ISQ

MV – DV (b)

ISQ - OP

Direct without

Mediator (c)

Direct with

Mediator (c‘)

Results


RS – ISQ -

OP

-.322 .048 .680 .047 -.358 .000 -.139 .002 Partial

Mediation

Figure ‎5.29. Mediation: ISQ, RS and OP

ISQ

RS OP

a = -.322 b = .680

c‘ =-.139

c =-.358

215

5.5.2.6.6. ISQ, Internal Marketing and Organizational Performance


The initial causal variable was internal marketing (IM), the criterion variable was


The results reveal that the total effect of IM on OP was significant, c = .658, p< .001.

IM was significantly predictive of hypothesized mediating variable, ISQ; a = .615, p< .001,

when controlling for IM, ISQ was significantly predictive of OP, b = .406, p< .001. The

estimated direct effect of IM on OP, controlling for ISQ, was c‘ = .408, P < .001.


Sobel (1982) test, z = 6.52, p< .001. The coefficients for both a and b were found statistically

significant, the Sobel test for the ab product was also significant, the direct effect from IM on

OP (c‘) was also statistically significant, therefore, the effects of IM on OP were only partly

mediated by ISQ.

Table ‎5.71

Mediation analysis ISQ between IM and OP


IM - ISQ

MV – DV (b)

ISQ - OP

Direct without

Mediator (c)

Direct with

Mediator (c‘)

Results


IM – ISQ -

OP

.615 .034 .406 .058 .658 .000 .408 .000 Partial

Mediation

Figure ‎5.30. Mediation: ISQ, IM and OP

ISQ

IM OP

a = .615 b = .406

c‘ = .408

c = .658

216

5.5.2.6.7. ISQ, Organizational Learning and Organizational Performance (ROE)


The initial causal variable was Organizational Learning (OL), the criterion variable was

objective organizational performance (ROE), and the mediating variable was ISQ (ISQ).

The results reveal that the total effect of OL on ROE was significant, c = 1.335, p<

.05. OL was significantly predictive of hypothesized mediating variable, ISQ; a = .513, p<

.001, when controlling for OL, ISQ was significantly predictive of ROE, b = 2.701, p< .001.

The estimated direct effect of OL on ROE, controlling for ISQ, was c‘ = -.051, P > .05.

The indirect effect, ab, was 1.054. This was judged to be statistically significant using



from OL on ROE (c‘) was found to be statistically insignificant, therefore, the effects of OL

on ROE were completely mediated by ISQ.

Table ‎5.72

Mediation analysis ISQ between OL and ROE


OL - ISQ

MV – DV (b)

ISQ - ROE

Direct without

Mediator (c)

Direct with

Mediator (c‘)

Results


OL – ISQ -

ROE

.463 .041 2.778 .641 .977 .048 -.308 .586 Complete

Mediation

Figure ‎5.31. Mediation: ISQ, OL and ROE

ISQ

OL ROE

a = .463 b= 2.778

c‘ =-.308

c =.977

217

5.5.2.6.8. ISQ, Collaborative Culture and Organizational Performance (ROE)


The initial causal variable was Collaborative Culture (CC), the criterion variable was


The results reveal that the total effect of CC on ROE was significant, c = 1.184, p<

.05. CC was significantly predictive of hypothesized mediating variable, ISQ; a = .478, p<

.001, when controlling for CC, ISQ was significantly predictive of ROE, b = 2.764, p< .001.

The estimated direct effect of CC on ROE, controlling for ISQ, was c‘ = -.137, P > .05.




from CC on ROE (c‘) was found to be statistically insignificant, therefore, the effects of CC

on ROE were completely mediated by ISQ.

Table ‎5.73

Mediation analysis ISQ between CC and ROE


CC - ISQ

MV – DV (b)

ISQ - ROE

Direct without

Mediator (c)

Direct with

Mediator (c‘)

Results


CC – ISQ -

ROE

.478 .038 2.764 .676 1.184 .014 -.137 .810 Complete

Mediation

Figure ‎5.32. Mediation: ISQ, CC and ROE

ISQ

CC ROE

a = .478 b= 2.764

c‘ =-.137

c =1.184

218

5.5.2.6.9. ISQ, Internal Marketing and Organizational Performance (ROE)


The initial causal variable was Internal Marketing (IM), the criterion variable was objective

organizational performance (ROE), and the mediating variable was ISQ (ISQ).

The results reveal that the total effect of IM on ROE was significant, c = 1.508, p<

.005. IM was significantly predictive of hypothesized mediating variable, ISQ; a = .615, p<

.001, when controlling for IM, ISQ was significantly predictive of ROE, b = 2.724, p< .001.

The estimated direct effect of IM on ROE, controlling for ISQ, was c‘ = -.268, P > .05.


Sobel (1982) test, z = 3.556, p< .0005. The results reveal that both a and b coefficients were

statistically significant, the Sobel test for the ab product was significant, the direct effect from

IM on ROE (c‘) was found to be statistically insignificant, therefore, the effects of IM on

ROE were completely mediated by ISQ.

Table ‎5.74

Mediation analysis ISQ between IM and ROE

Path IV – MV (a)

IM - ISQ

MV – DV (b)

ISQ - ROE

Direct without

Mediator (c)

Direct with

Mediator (c‘)

Results


IM – ISQ -

ROE

.615 .035 2.724 .750 1.508 .003 -.168 .803 Complete

Mediation

Figure ‎5.33. Mediation: ISQ, IM and ROE

ISQ

IM ROE

a = .615 b= 2.724

c‘ =-.168

c =1.508

219

5.5.2.6.10. ISQ, Organizational Commitment and Organizational Performance (ROA)


The initial causal variable was Organizational Commitment (OC), the criterion variable was

objective organizational performance (ROA), and the mediating variable was ISQ (ISQ).

The results reveal that the total effect of OC on ROA was significant, c = .117, p< .05.

OC was significantly predictive of hypothesized mediating variable, ISQ; a = .617, p< .001,

when controlling for OC, ISQ did not significantly predict ROA, b = -.027, p> .05. The

estimated direct effect of OC on ROA, controlling for ISQ, was c‘ = .233, p < .05.

The indirect effect, ab, was -.016. This was judged to be statistically insignificant

using Sobel (1982) test, z = 0.396, p > .05. The results reveal no significant mediation since

the ISQ did not significantly predict ROA, when controlling for OC.

Table ‎5.75

Mediation analysis ISQ between OC and ROA

Path IV – MV (a)

OC - ISQ

MV – DV (b)

ISQ - ROA

Direct without

Mediator (c)

Direct with

Mediator (c‘)

Results


OC – ISQ -

ROA

.617 .038 -.027 .068 .117 .023 .233 .002 No

Mediation

Figure ‎5.34. Mediation: ISQ, OC and ROA

ISQ

OC ROA

a = .617 b= -.027

c‘ = .233

c = .117

220

5.5.2.6.11. ISQ, Organizational Commitment and Organizational Performance (ROE)


The initial causal variable was Organizational Commitment (OC), the criterion variable was


The results reveal that the total effect of OC on ROE was significant, c = 1.364, p<

.05. OC was significantly predictive of hypothesized mediating variable, ISQ; a = .617, p<

.001, when controlling for OC, ISQ did not significant predict ROE, b = -.515, p > .05. The

estimated direct effect of OC on ROE, controlling for ISQ, was c‘ = .3.047, P < .05.

The indirect effect, ab, was -.317. This was judged to be statistically significant using

Sobel (1982) test, z = .745, p > .05. The results reveal no significant mediation since the ISQ

did not significantly predict ROE, when controlling for OC.

Table ‎5.76

Mediation analysis ISQ between OC and ROE

Path IV – MV (a)

OC - ISQ

MV – DV (b)

ISQ - ROE

Direct without

Mediator (c)

Direct with

Mediator (c‘)

Results


OC – ISQ -

ROE

.617 .037 -.515 .690 1.364 .009 3.047 .000 No

Mediation

Figure ‎5.35. Mediation: ISQ, OC and ROE

ISQ

OC ROE

a = .617 b= -.515

c‘ =3.04

c =1.364

221

5.6. ISQ and Employee Demographics

This section analysis ISQ with respect to different demographical variables in the

study. The demographic variables in the study include gender, age, job rank, employment

type, banking system, years of education, job tenure, and type of bank.

5.6.1. ISQ and Gender

Differences in the perception of level of ISQ was evaluated between Male and Female

Employees. Table 5.77 shows the mean values, standard deviation, t- statistics and p value

male and female respondents with respect to the level of ISQ. It is assumed that there is no

mean difference in both the groups‘ perceptions. The reason for this assumption is that in

modern business world both men and women are considered equal, with both groups having

the ability to perform similar activities and work under similar environment and take similar

challenges. The results of the independent sample t-test reveal no significant difference in the

perceptions of the males and the females with respect to the test variable i.e. ISQ (p > .05).

This shows that both male and female employee have similar perception about their

coworkers. However, still male employee perception of ISQ is slightly higher than female

respondents, although the difference is insignificant. This shows that male employees have a

slightly more positive perception of the level of internal service shared at work.

Table ‎5.77

Compare Means, ISQ with respect to Gender

Gender N Mean Std. Deviation t Sig

ISQ Male 289 5.0551 1.19621

1.536 .125 Female 52 4.7788 1.17965

5.6.2. ISQ and Age

Differences in the perception of ISQ was evaluated across the different age groups. A

total of four age groups were identified in the study, ranging between 20-29, 30-39, 40-49,

222

and 50-59. The results revealed that there is no statistically significant difference between age

groups as determined by one-way ANOVA (F (3, 337) = .675, p = .568). This shows that

with change in age there is no change in the perception of internal service quality received.

Furthermore, the results also promote the assertion that at any age, the organization demands

its employees to provide quality service not only to the external customers but also the

internal members of the organization. It might also be assumed that with an increase in age,

employee ability to be reliable, show responsiveness and assurance might be difficult.

However, results of the present study negate this assertion. The results also lead to the belief

that in modern organizations age does not significantly affect the competency, ability and

responsiveness of its employees. The following table summarized the results of one-way

ANOVA analysis.

Table ‎5.78

Compare Means, ISQ with respect to Age

Sum of Squares df Mean Square F Sig.

Between Groups 2.905 3 .968 .675 .568

Within Groups 483.531 337 1.435

Total 486.436 340

5.6.3. ISQ and Rank

Differences in perception of the internal service quality was compared across different

job ranks. The job ranks in the current study were junior, middle and senior. There was a

statistically significant difference across job rank as determined by one-way ANOVA (F (2,

338) = 3.187, p = .043). A Dunnett T3 post-hoc test revealed that the perception of ISQ was

significantly different between Middle and Senior (p = .010), however, no significant

difference was revealed in any of the other job ranks. The results reveal that employee‘s at

senior level have a significantly better perception of the level of service quality they receive

from their coworkers. Employees in the Junior and Middle level share similar perception,

223

since there is negligible difference in the means of the employees belonging to the junior and

middle level. The results of the one-way ANOVA analysis are summarized in the following

tables.

Table ‎5.79

ANOVA Results, ISQ and Job Rank


Between Groups 9.002 2 4.501 3.187 .043

Within Groups 477.433 338 1.413

Total 486.436 340

Table ‎5.80

Multiple Comparison across Job Ranks

(I) Rank (J) Rank N Mean Std. Deviation Mean Difference

(I-J)

Sig.

Junior Middle

90 4.9750 1.26094 .03608 .994

Senior -.45278 .058

Middle Junior

206 4.9389 1.20613 -.03608 .994

Senior -.48886* .010

Senior Junior

45 5.4278 .92568 .45278 .058

Middle .48886* .010

5.6.4. ISQ and Employment Type

Differences in the perception of level of ISQ was evaluated between Contract and

Permanent Employees. Table 5.81 shows the mean values, standard deviation, t- statistics and

p value for contract and permanent employees with respect to the level of ISQ. It is assumed

that there is no mean difference in both the groups‘ perceptions. The reason for this

assumption is that contract employees would try to make sure that they provide optimum

level of service to the coworkers in order to receive satisfactory rating in performance

appraisal that could lead to a permanent position, in case of permanent employees, they

would make effort to provide superior service to their coworkers in order to have a healthy

224

relationship, receive better performance appraisal, and enhance bank‘s performance that may

result in promotions. The results of the independent sample t-test reveal no significant

difference in the perceptions of the Contract and Permanent employees with respect to the

test variable i.e. ISQ (p > .05). This shows that both contract and permanent employees have

similar perception about their coworkers. However, still contractual employee perception of

ISQ is slightly higher than permanent employees, although the difference is insignificant.

This shows that contract employees have a slightly more positive perception of the level of

internal service shared at work.

Table ‎5.81

Compare Means, ISQ with respect to Employment Type

Employment N Mean Std. Deviation t Sig

ISQ Contract 46 5.2464 1.09741

1.425 .155 Permanent 295 4.9766 1.20845

5.6.5. ISQ and Banking System

Differences in the perception of level of ISQ was evaluated between Conventional

and Islamic banking system. Table 5.82 shows the mean values, standard deviation, t-

statistics and p value conventional and Islamic banks respondents with respect to the level of

ISQ. It is assumed that there is no mean difference in both the groups‘ perceptions. The

reason for this assumption is that Islamic banking system is still developing in Pakistan, and

customers are showing an upward trend in utilizing services of Islamic Banks, this poses a

great threat to the conventional banking system in an Islamic Country. Hence, both bank

employees would try to make sure that their level of internal service is adequate so they can

provide superior external service. The results of the independent sample t-test revealed no

significant difference in the perceptions of the Conventional and Islamic Banking System

with respect to the test variable i.e. ISQ (p > .05). This shows that employees working under

both conventional and Islamic banking system share similar perception about their

225

coworkers. However, still employees working under Islamic banking system perception of

ISQ is slightly higher than employees in conventional system, although the difference is

insignificant. This shows that Islamic system has a slightly more positive perception of the

level of internal service shared at work.

Table ‎5.82

Compare Means, ISQ with respect to Banking System

System N Mean Std. Deviation t Sig

ISQ Conventional 266 4.9699 1.22730

-1.252 .211 Islamic 75 5.1656 1.07197

5.6.6. ISQ and Years of Education


years of education of the employees. Employees in the study had four different years of

education namely; 14, 16, 17, and 18. The results of One-Way ANOVA analysis revealed no

significant difference across different years of education, (F (3, 338) = 1.752, p = .156). The

results of the one-way ANOVA analysis are summarized in the following table.

Table ‎5.83

ANOVA results, ISQ across Years of Education


Between Groups 7.493 3 2.498 1.752 .156

Within Groups 477.533 335 1.425

Total 485.026 338

5.6.7. ISQ and Job Tenure


job tenure of the employees. Employees in the study were divided into four different job

tenures namely; 0-10, 11-20, 21-30, and 31-40. The results of One-Way ANOVA analysis

226

revealed no significant difference across different job tenures, (F (3, 332) = .210, p = .890).

The results of the one-way ANOVA analysis are summarized in the following table.

Table ‎5.84

ANOVA results, ISQ across different job tenures


Between Groups .914 3 .305 .210 .890

Within Groups 477.570 329 1.452

Total 478.484 332

5.6.8. ISQ and Type of Bank

Differences in perception of the internal service quality was compared between public

and private sector banks. Table 5.85 shows the mean values, standard deviation, t- statistics

and p value for public and private banks respondents with respect to the level of ISQ. It is

assumed that there is no mean difference in both the groups‘ perceptions. The results of the

independent sample t-test revealed no significant difference in the perceptions of the public

and private sector banks with respect to the test variable i.e. ISQ (p > .05). This shows that

employees working under both public and private banks system share similar perception

about their coworkers. However, employees working in private sector banks has slightly

better ISQ than employees in public sector banks, although the difference is insignificant.

Table ‎5.85

Compare Means, ISQ with respect to Type of Bank

Type N Mean Std. Deviation t Sig

ISQ Public 90 4.9611 1.07027

-.479 .632 Private 251 5.0315 1.23961

5.7. Summary of the Research Results

This study contributes to the literature on the relationship between different internal

organizational factors, ISQ and organizational performance in the banking sector. It provides

227

empirical evidence to the theoretical model that links different internal organizational factors,

ISQ and organizational performance. It was found that four out of six internal organizational

factors, namely organizational learning, organizational commitment, role stress, and internal

marketing have a significant influence on perceived organizational performance. While two

factors namely collaborative culture and perceived organizational support did not have a

significant influence on organizational performance.

Furthermore the study also evaluated the mediating role of ISQ between different

internal organizational factors and organizational performance. Mediation analysis proved

partial mediation between all internal organizational factors and perceived organizational

performance. ISQ when used a mediator showed partial mediation between OL and POP.

Similarly ISQ partially mediated between CC and POP. ISQ also partially mediated the path

between OC and POP. Partial mediation was also supported between POS and POP; likewise

partial mediation was supported between IM and POP. In case of mediation analysis between

different internal organizational factors and financial organizational performance, ISQ did

show full mediation on a number of instances. The study showed that ISQ fully mediates the

path between OL and ROE, CC and ROE, and IM and ROE.

Further to the evaluation of how the independent, mediating and dependent variables

are related, the present study also evaluated whether there exists any differences in internal

service quality across different demographic variables. The results revealed out of the

different demographic variables considered in the present study, namely; Gender, Age, Job

Rank, Employment type, Banking System, Years of Education, Job Tenure and Type of

Bank. Level of internal service quality was only found be different across Job Ranks, for all

other demographic variables there were no significant differences. Summary of hypotheses

and their results are presented in the following table.

228

Table ‎5.86

Summary of Hypotheses Results

Hypotheses Paths Hypotheses Supported

H1a OL → ISQ Rejected

H1b OL → POP Supported

H1c1 OL → EPS Rejected

H1c2 OL → ROE Rejected

H1c3 OL → ROA Rejected

H1d OL → ISQ → POP Partial Mediation

H1e1 OL → ISQ → EPS No Mediation

H1e2 OL → ISQ → ROE Full Mediation

H1e3 OL → ISQ → ROA No Mediation

H2a CC → ISQ Rejected

H2b CC → POP Rejected

H2c1 CC → EPS Rejected

H2c2 CC → ROE Rejected

H2c3 CC → ROA Rejected

H2d CC → ISQ → POP Partial Mediation

H2e1 CC → ISQ → EPS No Mediation

H2e2 CC → ISQ → ROE Full Mediation

H2e3 CC → ISQ → ROA No Mediation

H3a OC → ISQ Supported

H3b OC → POP Supported

H3c1 OC → EPS Rejected

H3c2 OC → ROE Rejected

H3c3 OC → ROA Rejected

H3d OC → ISQ → POP Partial Mediation

H3e1 OC → ISQ → EPS No Mediation

H3e2 OC → ISQ → ROE No Mediation

229

H3e3 OC → ISQ → ROA No Mediation

H4a POS → ISQ Rejected

H4b POS → POP Rejected

H4c1 POS → EPS Rejected

H4c2 POS → ROE Rejected

H4c3 POS → ROA Rejected

H4d POS → ISQ → POP Partial Mediation

H4e1 POS → ISQ → EPS No Mediation

H4e2 POS → ISQ → ROE No Mediation

H4e3 POS → ISQ → ROA No Mediation

H5a RS → ISQ Supported

H5b RS → POP Supported

H5c1 RS → EPS Rejected

H5c2 RS → ROE Rejected

H5c3 RS → ROA Rejected

H5d RS → ISQ → POP Partial Mediation

H5e1 RS → ISQ → EPS No Mediation

H5e2 RS → ISQ → ROE No Mediation

H5e3 RS → ISQ → ROA No Mediation

H6a IM → ISQ Supported

H6b IM → POP Supported

H6c1 IM → EPS Rejected

H6c2 IM → ROE Rejected

H6c3 IM → ROA Rejected

H6d IM → ISQ → POP Partial Mediation

H6e1 IM → ISQ → EPS No Mediation

H6e2 IM → ISQ → ROE Full Mediation

H6e3 IM → ISQ → ROA No Mediation

H7a ISQ → POP Supported

H7b1 ISQ → EPS Supported

230

H7b2 ISQ → ROE Supported

H7b3 ISQ → ROA Supported

Chapter 6

Discussion and Conclusions

231

The thesis contained an empirical investigation into the mediating role of Internal

Service Quality (ISQ) on the linkage between internal organizational factors and

organizational performance. Internal organizational factors involved organizational learning,

organizational collaborative culture, organizational commitment, perceived organizational

support, role stress and internal marketing.

6.1. What factors affect organizational performance?

The findings of the research question one are based on the validated structural model

that was subsequently purified using (Confirmatory Factor Analysis) CFA as discussed in

chapter 4. Regression along with the coefficients and p value were presented in the table

corresponding to the regression models.

Research question one evaluated the influence of different internal organizational

factors over organizational performance i-e both subjective and objective. In order to evaluate

the influence of different internal organizational factors on organizational performance,

different hypotheses were proposed. To answer the research question one, 12 hypotheses

were developed (H1b, H1c, H2b, H2c, H3b, H3c, H4b, H4c, H5b, H5c, H6b and H6c).

H1b: There is a significant impact of Organizational Learning on Perceived




H2b: There is a positive significant impact of organizational collaborative culture on

Perceived Organizational Performance

H2c1-2-3: There is a positive significant impact of organizational collaborative

culture on objective organizational performance (EPS, ROE, & ROA)

232







H4c1-2-3: There is a positive significant impact of perceived organizational support

on objective organizational performance (EPS, ROE, & ROA)

H5b: There is a significant impact of Role Stress on Perceived Organizational

Performance




Performance

H6c1-2-3: There is a significant impact of Internal Marketing on objective


Analysis of the hypothesis (H1b) indicated that a significant positive relationship

exists between Organizational Learning (OL) and Perceived Organizational Performance

(POP). It implies that better organizational learning initiatives would positively effect on

organizational performance however the current study did not discover significant influence

of OL on any of the three measures of objective organizational performance (H1c). The

finding revealing significant impact of OL on POP is in line with the earlier research

conducted by Skerlavaj and Dimovski (2006) that demonstrated statistically significant

positive and strong impact of organizational learning on organizational performance from the

employee perspective. However, contrary to the study of Skerlavaj and Dimovski (2006) and

233

Ellinger, Ellinger, Yang, and Howton (2002), the current study did not discover significant

influence of OL on financial performance. The study offers support for the existence of a

business case for the concept of organizational learning. The significant positive influence of

organizational learning on organizational performance suggests that there is a payoff for

businesses that hold close practices and strategies consistent with the organizational learning.

In other words, an organization can improve performance if it readjusts itself to the dynamic

environment through the learning process (Wang & Ellinger, 2011).

Analysis of the hypothesis (H2b) through multiple regression model discovered a non-

significant relationship between CC and POP. Parallel to non-significant influence of CC on

perceived organizational performance, the present study did not find significant influence of

CC on any of the three measures of organizational performance (H2c). A scarcity of empirical

studies exist that investigates the influence of collaborative culture on organizational

performance. The finding that CC is not related to POP is in contradiction to the theory and

research studies that has recognized organizational culture as an important driver of better

organizational performance and have shown significant influence of organizational culture on

organizational performance (Orgbanna & Harris, 2000; Lok & Crawford, 2004; Booth &

Hamer, 2009). Earlier studies also failed to discover significant influence of organizational

culture on objective measures of organizational performance (Dwyer, Richard, & Chadwick,

2003; Wilderon, van den Berg & Wiersma, 2012; Yesil & Kaya, 2013). It is recommended

that it is of great benefit for the organizations to nurture a collaborative organizational culture

by instituting mechanisms and structures that focus on creation of environment where

workers share an understanding and further aid in the development of support, care, and

cooperation among employees. The findings that reveal influence of culture on performance

are still mixed and further research needs to be conducted on the nexus between culture and


234

H3b appraised the influence of OC on POP. The results demonstrated a significant

influence of OC on POP. However, the current study did not discover significant influence of

OC on any of the three measures of financial organizational performance (H3c). The results

of the current study are on par with the research findings of Brett, Cron, and Slocum (1995)

and Worsfold (1999). Contrary to the results of current study, Benkhoff (1997), Collins

(2001), Ingelgard & Norrgren (2001) found a significant influence of OC on financial

performance. The present study did not reveal a significant influence of OC on objective

measures of organizational performance. An employee that shows acceptance towards the

values of the organization is highly unlikely to quit on the organization, both in terms of

reduced effort to complete the task and leaving the organization altogether. Hence, it leads to

long-term working relationship between the employee and the organization, helping

organization attain increased profits and enhanced performance.

Analysis of H4b discovered absence of significant influence of POS on POP.

Similarly, in the present study none of the measures of objective organizational performance

were significantly predicted by POS (H4c). Hence, both H4b and H4c were not substantiated.

In contrast to extensive theoretical support, limited empirical support is discovered to exist

for the relationship between POS and performance. The results of the present study are

dissimilar to the findings of Rhoades & Eisenberger (2002) and Armeli, Eisenberger, Fasolo

& Lynch (1998) study who found a significant relationship between POS and Performance.

Since banks operate under tight policies and procedures, there is very limited scope for

mistakes and valuing of opinions. Limited level of POS was experienced by bank employees

in the current study. This can be a reason for insignificant relationship between POS and

POP. However, supportive management that induces among employees the feelings of

compassion, empathy, and identification can lead to enhanced cooperation not only with the

coworkers but also with the organization.

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Furthermore, the analysis of H5b revealed a significant negative influence of RS on

POP. The results showed that an increase in RS that comprised of role ambiguity and role

conflict would lead to a decline in organizational performance. The influence of RS on

objective measures of performance was not found, hence H5c was not substantiated. As

highlighted in the literature, there is lack of empirical support for the influence of role stress

on organizational performance, thus the present study adds to the existing body of research.

The finding is in line with the theoretical assertions that highlight a detrimental effect of

stress on performance (Stamper & Johlke, 2003; Noblet, 2003).

The last of the internal organizational factors was IM, H6b hypothesized that there

exists a significant positive influence of IM on POP. The hypothesis was substantiated and a

significant positive influence of IM was found on POP. Hence, it reveals the IM is

instrumental in the creation of organizational competencies and business performance (Saad,

Ahmad, & Rafiq, 2002). No significant influence was found of IM on financial performance.

Hence H6C was not supported. This finding is dissimilar to the findings of Greenley & Lings

(2002) and Bouranta, Chitiris, & Paravantis (2009) who found a significant influence of IM

on financial performance

The results of the current study reveal that none of the internal organizational factors

significantly predicted the financial performance. As for perceived POP, Only two measures

(CC & POS) did not have a significant influence on POP.

6.2. What factors affect ISQ?


that was subsequently purified using CFA as discussed in chapter 4. Regression along with

the coefficients and p value was presented in the table corresponding to the regression

models.

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Research question two evaluated the influence of different internal organizational

factors on ISQ. To determine the influence of different internal organizational factors on ISQ,

different hypotheses were proposed. To answer the research question two, six hypotheses

were developed (H1a, H2a, H3a, H4a, H5a, and H6a).







Analysis of H1a evaluated the influence of OL on ISQ. The results revealed an

insignificant influence of OL on ISQ. In the current study, the multiple regression models

illustrates that ISQ is not significantly predicted by OL. The results are contrary to the

assertion of Zohrabi, Mahdavi, & Mahdavi (2013) who noted that OL can help in improving

service quality, Pasebani, Mohammadi, & Yektatyar (2012) who in their study found a

significant influence of OL on ISQ. Lack of significance in the current study does imply

limited focus of the banks on organizational learning. Mean analysis of the organizational

learning construct does reveal a limited agreement on part of the employees that banks have

taken initiatives to become an organization of knowledge. Failure to reveal a significant

influence does not undermine the significance of learning in fostering ISQ. An organization

that fails to turn itself into an entity that not only acquires knowledge but also distributes it

amongst its employees is ultimately heading towards destruction. A knowledgeable employee

can be decisive in the success or failure of service delivery. Lack of knowledge can cause

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delays in the deliverance of timely and accurate service since, there would be too many weak

links in the service delivery chain that ultimately provide services.

Analysis of H2a evaluated the influence of CC on ISQ. The results revealed an

insignificant impact of CC on ISQ. Hardly any evidence in the literature is found that tested

the influence of CC on ISQ. However literature does show the influence of different forms of

culture on ISQ. Raub (2008) found a negative relationship between bureaucratic culture and

service quality, the findings of the present study are contrary to the findings of Agbenyiga

(2011), who found a significant influence of organizational culture on service quality. The

lack of significance does not imply that the business may not focus on organizational culture.

Different forms of culture may shape ISQ differently. The positive impact of cooperation,

collaboration, respect and value is well established in the literature. An existence of these

norms within the organization certainly carries its weight in deliverance of quality, since

employees become more approachable, connected and easy to communicate with.

H3a evaluates the influence of OC on ISQ. The present study substantiated the

proposition that OC has a positive and significant influence on ISQ. This indicates that a

higher level of commitment shown by the employees towards their organization would lead

them to be more responsive, trustworthy, compassionate, and willing towards their

coworkers. The findings of the present study are similar to the Boshoff and Mels (1995) who

in their study of OC and ISQ also found a significant influence of OC on ISQ in insurance

salespeople. This further strengthens the assertion by O'Riordan, J. (2003) that commitment

can play its role in development of internal customer service, and commitment will lead

employees to care for the colleagues as if it is their duty. An employee‘s decision to provide

service to an organization wholeheartedly or not depends in large part on how employee feels

about the organization, job and coworkers. Which in this particular case was considerably

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high. The significant linkage between OC and ISQ could be attributed to the fact that

employees feel proud in telling others that they work for a particular bank and that they care

about the fate of the bank. Bank initiatives that help members to identify themselves with

organizational goals and objectives will aid in enhancing internal service quality through

increased discretionary effort.

Next hypothesis H4a evaluated the relationship between POS and ISQ. The study did

not find any significant relationship between POS and ISQ. This could be attributed to the

fact that none of the items average score in the construct POS was over 5, that represents

Somewhat Agree on the rating scale. This forms the perception of the bank employees that

they don‘t receive adequate support from the bank. Thus the link between POS and ISQ was

found to be insignificant. Although, there is insufficient research that evaluates the impact of

POS on ISQ, however, existing research studies support the notion that POS can result in

positive employee behaviours.

Hypothesis H5a evaluated if there exists a negative significant relationship between

RS and ISQ. The current study found a negative significant relationship between RS and ISQ.

Research conducted by Brown and Uehara (2008) found a negative relationship between

stress and service. The respondents in the present study had a low role ambiguity, and such is

expected in banks where roles are clearly defined and employees have a well-established job

description. Thus it could be asserted that the clarity in job role would have helped employees

in providing adequate service to the co-workers.

Hypothesis H6a evaluated if IM carries a significant influence on ISQ. The present

study found a significant influence of IM on ISQ. Available literature on the impact of IM on

ISQ has shown significant influence of IM on ISQ (Lings & Brooks, 1998; Lings & Greely,

2005). In the present study the mean analysis definitely reveal a significant amount of IM

239

initiative undertaken by the banks for its employees. This would help employees in becoming

more committed to the organizations, as revealed earlier; the employees exhibited a level of

commitment towards the organization. Thus internal marketing initiative would have helped

in integrating the employees and create a better organizational climate.

6.3. What is the impact of ISQ on organizational performance?


that was subsequently purified using CFA as discussed in chapter 4.

Research question evaluated the influence of ISQ on both financial and non-financial

performance. In order to evaluate the influence of ISQ on organizational performance,

different hypotheses were proposed. To answer the research question three, four hypotheses

were developed (H7a, H7b1, H7b2, and H7b3).


H7b1-2-3: There is a significant impact of ISQ on objective organizational


The analysis revealed a significant influence of ISQ on both POP and Financial

performance indicators (EPS, ROE, & ROA). Hence, the entire four hypotheses were

substantiated. Study by Bellou and Andronkidis (2008) has shown significant positive

influence of ISQ on organizational performance.

The results reveal a higher degree of responsiveness in bank employees. The results

reveal a significant level of responsiveness by the employees towards their coworkers, this is

a significant factor of ISQ (Zhen-You, 2003), and this improved attitude towards coworkers

helps in attaining improved organizational performance. Responsiveness corresponds to the

fact that bank employees deliver timely service, since operations in bank are interconnected

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to each other, provision of timely service to coworkers can significantly enhance quality of

service provided to the customers, and subsequently would lead to the customer retention, as

well as help in achieving maximum profits.

6.4. Does ISQ act as mediator between internal organizational factors & organizational

performance?

The final research question seeks to ascertain if ISQ mediates between internal

organizational factors and organizational performance. To unearth the answer to this research

question a number of different hypotheses were proposed that stipulated if ISQ mediates

between different internal organizational factors and subjective and objective measures of

organizational performance. No literature is found that explicitly investigates the mediating

role of ISQ. Thus, this study appears to be the first to analyze if ISQ mediates the relationship

between internal organizational factors and organizational performance. However, existing

literature helps in establishing a causal relationship between different internal organizational

factors, ISQ, and organizational performance. Mediating analysis has helped in building and

refining the theory, the present study further facilitated in understanding the causal inference

since earlier studies merely evaluated the direct relationship between the variables. The study

has established the role ISQ can play in explaining the relationship between different internal

organizational factors and organizational performance.

The mediating effects helps assess whether the relationship between two variables is

direct or whether it occurs indirectly through some third (i.e., mediating) variable (Shaver,

2005). Mediation analysis proved partial mediation between all internal organizational factors

and perceived organizational performance. This showed that the relationship between

different internal organizational factors and ISQ to a certain extent (partially) occurs through

the mediating variable ISQ. ISQ when used a mediator showed partial mediation between OL

and POP. Similarly, ISQ partially mediated between CC and POP. ISQ also partially

241

mediated the path between OC and POP. Partial mediation was also supported between POS

and POP. ISQ also partially mediated the path between RS and POP; likewise partial

mediation was supported between IM and POP. Thus, it is partially supported that internal

organizational factors carry an impact on subjective organizational performance through ISQ.

This shows that satisfaction with different internal organizational factors increase an

employee‘s drive to perform well, this initiates positive behaviours among employees, they

are willing to show discretionary behaviours and also prepared to get involved with other

employees. The enthusiasm and conviction of employees is communicated to the coworkers

and hence facilitates employee performance that significantly improves the organizational

performance.

In case of mediation analysis between different internal organizational factors and

financial organizational performance, ISQ certainly depicted full mediation on a number of

instances. The study revealed that ISQ utterly mediates the path between OL and ROE, CC

and ROE, CC and ROA, and IM and ROE. The findings further ascertain the role of ISQ as

mediating variable between different internal organizational factors and organizational

performance. This communicates that the effect of ISQ in improving organizational

performance cannot be negated. Organizations with respect to all other factors shall consider

ISQ, and take concrete steps that foster ISQ.

6.5. Discussion on Measurement and Structural Models

In this research attempt, eight measurement models were identified. Six constructs

pertinent to internal organizational factors were evaluated along with ISQ and POP. At the

very first stage, the constructs were evaluated using EFA, the items were purified and items

with low factor loadings and multicollinearity were removed from further analysis.

Furthermore, the constructs were refined and verified for unidimensionality, validity and

242

reliability by performing CFA. Each of the measurement models displayed good fit, with all

items depicting acceptable loadings and construct reliability.

Exploratory factor analysis revealed two underlying factors in ISQ. This is

contradictory to theoretical dimensions of Reliability, Assurance, Empathy and

Responsiveness identified by Parasuraman, Berry and Zeithaml (1988), Kuei (1999) and

Kang, James, and Alexandris (2002). However the findings of the present study complements

the criticism levelled by Buttle (1996) on the service quality scale. The present study as

identified by Buttle found that items do not load onto the factors which one would expect.

A total of nine structural models were tested to determine the impact of predictors

over criterion variables. The models can also be termed as regression models. Structural

Model A assessed the influence of different internal organizational factors on ISQ. ISQ was

measured by two sub-factors empathy & responsiveness and reliability. The results of CFA

indicated a good model fit. The results of Structural Model A showed that three out of six

internal organizational factors significantly influence ISQ. The significant variables were OC,

RS and IM while insignificant variables were CC, OL and POS.

Structural Model B assessed the influence of different internal organizational factors

on POP. The results of CFA indicated a good model fit. The results of Structural Model B

showed that four out of six internal organizational factors significantly influence POP. The

significant variables were OL, OC, RS and IM while insignificant variables were CC and

POS.

Structural Model C assessed the influence of different internal organizational factors

on financial performance. Each of the financial performance measures (EPS, ROE and ROA)

were tested separately using different models. Thus the sub models could be referred to as

structural model C1-2-3. The results of CFA indicated a good model fit. The results of

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Structural Model C2 and Structural Model C3, testing the influence of internal organizational

factors on EPS, ROE and ROA revealed no significant influence of any of internal

organizational factors over the financial measures (EPS, ROE and ROA).

Structural Model D assessed the influence of ISQ on POP. The results of CFA

indicated a good model fit. The results of Structural Model D exhibited that ISQ had a

significant influence on POP.

Structural Model E assessed the influence of ISQ on financial performance. Each of

the financial performance measures (EPS, ROE and ROA) were tested separately using

different models. Thus, the sub-models could be referred to as structural model E1-2-3. The

results of CFA indicated a good model fit. The results indicated a significant influence of ISQ

on all the three financial measures. ISQ influence on POP was also found significant in

earlier structural model D. This further highlights the importance of ISQ in attaining better


6.6. Conclusions

The overarching goal of this dissertation was to examine whether ISQ acts as a

mediator between different factors internal to the organization and organizational

performance. The lack of research in this area highlights a knowledge gap. This study aims to

address this gap and in doing so provide directions to sustain and improve business

performance.

The study started with extensive review of relevant theoretical literature that focuses

on inter organizational factors, ISQ, and Organizational Performance. Internal organizational

factors that were part of the study included organizational learning, collaborative culture,

organizational commitment, internal marketing, role stress (role conflict and role ambiguity),

244

and perceived organizational support. Review of the literature revealed a significant lack of

empirical studies that investigated the influence of different internal organizational factors on

ISQ; however there is substantial literature on how different internal organizational factors

influence both perceived and objective measures of organizational performance. Moreover

there is a significant lack of research that investigates the mediating role of ISQ. Literature

highlights that different internal organizational factors have a significant influence on ISQ,

and furthermore ISQ has a significant influence on organizational performance, based on this

causal relationship it was hypothesized that there is an indirect influence of different internal

organizational factors on organizational performance, mediated by ISQ. Extensive review of

literature led to the development of empirically testable hypotheses.

The study was a survey based research with a positivist research paradigm with a

deductive approach that utilized quantitative approaches (Blaxter, Hughes, & Tight, 2006).

The population of the study was drawn from Karachi Stock Exchange (KSE) with banks

having more than five branches in the city of Peshawar. Stratified random sampling technique

was utilized with banks divided into two strata of medium and large banks. Questionnaire

was drafted based on the existing constructs from previous studies and was tested using

Dillman (2000) four stages of validation. A few items were removed during the pre-testing

phase. Data were inserted into the software SPSS, the descriptive analysis was conducted

using SPSS; moreover measurement and structural models were developed using AMOS.

The first structural model evaluated the influence of different internal organizational

factors on ISQ. The results showed that out of six, three factors were found to have

significant influence on ISQ. The three factors were organizational commitment, role stress

and internal marketing, while collaborative culture, organizational learning and perceived

organizational support were found insignificant. Based on the findings of this structural

model, the research concludes that for the banks to improve the level of ISQ, the banks

245

should make efforts to improve the level of employee satisfaction with the significant factors

highlighted in the present study and in the existing literature, the better the level of internal

organizational factors the higher would be the level of service the coworkers provide to each

other.

Another important objective of the study was to determine the factors that

significantly influence both perceived and objective measures of organizational performance.

Multiple regression model showed that four factors were found to have significant influence

on perceived organizational performance while two factors had no significant influence.

Organizational learning, organizational commitment, role stress, and internal marketing were

significant however, collaborative culture and perceived organizational support had no

significant influence on perceived organizational performance. None of the internal

organizational factors had a significant influence on any of the objective measures of

organizational performance. The significant influence of internal organizational factors on

perceived organizational performance further strengthened the findings of existing literature

that also showed significant relationship between different factors and performance,

furthermore vigor to the assertion that organizations shall continue to invest in the significant

factors.

The study also evaluated the influence of ISQ on both objective and subjective

measures of organizational performance. The results indicated that ISQ had a significant

influence on both the subjective and objective measures of organizational performance. The

finding strengthens the assertion that unless organizational focus on the service received by

coworkers, the organization cannot attain adequate level of profitability and may not be able

to ensure external service quality that would ultimately harm business performance.

Furthermore, the research main interest was if ISQ acts as a mediator between internal

organizational factors and organizational performance. The finding was partially supported in

246

case of mediation between different internal organizational factors and perceived

organizational performance, the relationship between all internal organizational factors and

organizational performance was partially mediated. As for objective organizational

performance, ISQ fully mediated the relationship between organizational learning and return

on equity, collaborative culture and return on equity, internal marketing and return on equity.

This further substantiates the assertion that ISQ mediates the relationship between internal

organizational factors and performance implying the need to foster ISQ.

6.7. Implications of the Study

This research elucidates the literature through a number of contributions. Foremost,

the present study is the first to incorporate several different internal organizational factors to

review its impact on ISQ. This is especially significant in highlighting the factors that notably

predict and sustain an influence on ISQ. This would help the business to apprehend the value

of different internal organizational factors in establishing satisfactory ISQ. The management

can in turn shift their focus over variables that can help in fostering ISQ.

Secondly, existing study adds to the literature by investigating the influence of

different internal organizational factors on both subjective and objective measures of

organizational performance. Although there have been research that individually evaluated

the influence of different factors on organizational performance, but to date no research has

taken these six factors into account. Multiple regression models identified that four out of six

factors significantly influence POP.

Third, the study ascertains that ISQ has a significant influence in predicting both

subjective and objective organizational performance measures. Such a research is scarce that

investigates the relationship, empirical research is heavily focused on external service quality

that had repeatedly noted significant influence of ISQ on performance (Zeithaml, Bitner, &

247

Gremler, 2006; Prakash & Mohanty, 2012), the present research invigorates the theoretical

assertions that unless ISQ is not strengthened organization will not be able to attain external

service quality, growth and profit (Cook, 2004). Thus it is important for the performance of

business to have strong foundation of ISQ.

Fourth, the present study ascertains if ISQ mediates between different organizational

factors and organizational performance. Direct influence of the factors is supported from the

literature; the study found existence of partial mediation of ISQ between different internal

organizational factors and POP, while ISQ fully mediated the path between some of the

internal organizational factors and financial measure of performance (ROE). This augments

the literature, since there is a dearth of research on the mediating role of ISQ between

different factors and different book measures of organizational performance.

The mediated effect of ISQ is important to top management, implying their

responsibility for investing to create an environment that nurtures trust, understanding,

commitment, provision of timely service, and positivity in attitude and behavior.

Management which expects to reap benefits of service quality must understand the need of

better ISQ and should invest in the intangible factors that have been proven to affect the

tangible profits. Banks operate under tight guidelines; it is for the management to understand

that each bank branch is supplied with adequate and well trained staff, tangible resources to

carry out office duties, training schedules, employee support programs and clear reward

management system that fosters collaboration, support, togetherness and collectivity. The

present research highlights the items that are either highly rated or lowly rated by the bank

workers. One such factor is POS, the mean analysis revealed a low average score on all the

items, highlighting the fact that banks need to provide more support to their staff in order to

248

foster motivation, commitment and goal attainment that would turn into an asset for the

business and help in that aids in achievement of performance.

The present research has strong practical implications. First and foremost the research

study shows it is not only external service quality that adds to the profitability of the

organizations. The research has displayed significant influence of ISQ on both perceived and

objective measures of organizational performance. This shows that it is imperative for the

banks to ensure that they take initiatives that foster ISQ. Furthermore, a new paradigm is

added to existing research that has repeatedly evaluated the influence of different internal

organizational factors on organizational performance, the influence is mediated, although in

most cases partially by ISQ implies that executives should be moving ahead by considering

implementation of initiatives that further strengthen ISQ with the expectation for a business

performance improvement. Investment involves activities that clearly highlight distinct job

roles, learning initiatives that help short and long term development, communication and

development of believe in the mission and vision, and concrete rewards for performance.

Failure to make proper consideration for improvements in ISQ may seriously affect

organizational performance, since employees may not be able to provide timely and adequate

service desired by their coworkers.

6.8. Limitations and Delimitations

Research is constrained by schedules, resources and scope. These constraints limit the

research. Every research is restricted by a number of constraints; the present research is no

exception. In terms of the research methodology, the study uses cross-sectional data and

hence causality of the relationships between predictor and criterion variables should not be

implied from results of this study (Barczak, Lassk, & Mulki, 2010). There may be many

aspects and findings that a longitudinal study can reveal. Bank workers work under tights

249

time schedules with multitude of customers waiting to be served, extracting time to complete

a detailed questionnaire can be a tough ask as well as a challenging endeavor. Thus, a number

of questionnaires were half filled, and a number of time repeated reminders and visits were

made to collect the questionnaires. Another limitation is that the data collected was confined

to one city. Peshawar is the capital of one of four provinces in the country and is a big city

with all banks operating in the city. This may limit the generalizability of the research. The

present study is limited to large and medium sized banks listed in KSE, the study may be

extended to other international and small banks.

6.9. Directions for Future Research

There is always room for the researcher to improve the research and delve into new

directions. The future research may consider more than one city for data collection with the

inclusion of small and other international banks operating in the country. The selection of

different factors in the study was based on the extensive review of literature, future research

study may be based on the selection of factors on preliminary interviews from the bankers.

Furthermore, the study one takes into account only one dimension of organizational culture,

further research may also include different cultural typologies. For instance further research

may include the dimensions namely; human resource orientation, interdepartmental

coordination, and improvement orientation as identified by Van den Berg and Wilderom

(2004) or the typologies identified by Cameron and Quinn (2011). The present study only

focuses on the shorter version of Mowday, Steers and Porter (1979) organizational

commitment scale. Apart from this, future research may include different dimensions of

organizational commitment. The future study may utilize Meyer and Allen (1991) three

dimensional construct of commitment which includes affective, normative and continuance

commitment constructs. The present study addresses an area that has significant implications

250

for banking services theory and practice. Continued refinement of the scale for measuring

internal service quality in retail banking, proposed in this study, is certainly possible based on

further research and trends in retail banking. The current study evaluates the direct influence

of internal service quality on organizational performance, future research may include other

factors in the Heskett (1994) service profit chain.

6.10. Recommendations

Changing people‘s attitudes and behaviours takes time. An organization wishing for

its employees to show positive work related behaviours will have to undertake a number of

different initiatives, and will have to wait to reap the fruits of the efforts since the

development of an internal customer service ethos takes time. However a number of different

points are recommended that the organizations can focus on to foster the different internal

organizational factors and internal service quality that will in the longer run help business

improve its performance.

a. Banks in Pakistan operate under tight control, through increased regulations. Factors

such as transformational leadership, innovation, creativity, and entrepreneurship

might not be very much applicable. Hence, banks shall focus their energies on factors

that are in their control and try to nurture factors that can lend a helping hand in

creating an environment where service quality thrives.

b. First and foremost initiative that any organization needs to undertake is to start

valuing its internal customers, i-e employees. The essence of the statement is that if a

top management wishes its employees to deliver an outstanding level of service to

customers, then it must be prepared to do a great job with its employees‘ by not only

providing the tangible rewards but also working on the motivators (in-tangible

factors).

251

c. Bank can improve the level of internal service quality by improving work

environment, plus branch management should make sure there is no power politics.

This can be achieved through equal opportunities along with equal rights and duties.

d. Internal service can significantly improve if the software‘s, and other resource are

easy to use and are more supportive to the employee with less number of steps to

accomplish a task.

e. To counter role stress the management must ensure equal distribution of work.

Management must make sure that every member should pull their weight.

f. Management can improve the commitment profile of the employees through offering

growth and development opportunities from time to time, and through improved

actionable learning through well designed training programs and performance based

pay.

g. Bank can build a strong culture through emphasis on better recruitment and selection

practices with adequate focus on socialization of staff that would help them

understand not just each other but the bank as well.

h. Organizations need to create an approach that promotes the feeling among employees

that organizations‘ loss is their loss and its profit is their profit.

i. Training for the sake of training will not yield maximum returns for the bank. Banks

shall make training more practical in nature. Trainings that helps create network and

build teams. This can be achieved by maintaining an employee skills database plus

keeping a close eye on the external environment and changes that take place in the

financial circle. Furthermore, the database shall be linked to the bankers‘ career

objectives. This will help link individual and organizational objectives.

252

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Appendix 1

Research Questionnaire (Ph.D. Research Study)

I am a PhD scholar of Management Sciences, conducting a survey on ―An Empirical Investigation into the

Mediating Role of Internal Service Quality on the Linkage between Internal Organizational Factors and

Organizational Performance‖ to complete my Ph.D. dissertation.

Thank you in advance for your kind cooperation.

Section A: General Information

Age: ______________ Gender: Male [ ] Female [ ]

Years of Education: _____________ Nature of

Employment:

Contract [ ] Permanent [ ]

Job Rank: Junior [ ] Tenure at this Bank:

287

Middle [ ]

Senior [ ]

Bank _____________________________

Banking

System:

Conventional [ ]

Islamic [ ]

Designation: _____________________

Section B: Please rate each statement in terms of the degree of agreement with each statement; encircle

appropriate response based on the following scale

SCALE: [1=Strongly Disagree] [2=Disagree] [3=Somewhat Disagree] [4= Neither Agree nor Disagree]

[5=Somewhat Agree] [6=Agree] [7=Strongly Agree]

Section B: Organizational Learning 1 2 3 4 5 6 7

This is an open organization and as much information as possible is made available

to employees.

There exists a two-way communication between employees of all levels

Feedback system on services is provided to customers and employees

The bank has learned or acquired much new and relevant knowledge over the last

few years.

The learning and development process has helped the bank employees to acquire

new skills

The learning and development process has helped in building capacities for

sustained organizational effectiveness

The Bank‘s performance has been influenced by new learning it has acquired over

the last few years.

The organization is a learning organization.

Section C: Organizational Culture 1 2 3 4 5 6 7

The bank considers change to be natural and necessary

The bank considers individuals as an asset and tries to appreciate them

continuously

Everybody‘s opinions and contributions are respected

Problems are discussed openly

Collaboration and co-operation among the different duties and departments is

encouraged

In general, all departments are aware of consumer satisfaction

Section D: Organizational Commitment 1 2 3 4 5 6 7

I am willing to put in a great deal of effort beyond that is normally expected in

order to help this bank be successful.

I talk up this bank to my friends as a great organization to work for.

I would accept almost any type of job assignment in order to keep working for this

bank

I find that my values and the bank's values are very similar.

I am proud to tell others that I am part of this bank.

This bank really inspires the very best in me in the way of job performance.

I am extremely glad that I chose this bank to work for, over others I was

considering at the time I joined.

I really care about the fate of this bank.

Section E: Perceived Organizational Support 1 2 3 4 5 6 7

My bank cares about my opinions.

My bank really cares about my well-being.

My bank strongly considers my goals and values.

Help is available from my bank when I have a problem.

My bank would forgive an honest mistake on my part.

Section F: Role Stress 1 2 3 4 5 6 7

Role ambiguity:

288

I don‘t have clear, planned goals and objectives for my job.

I am not always sure that I have divided my time properly between tasks.

I don‘t know what my responsibilities at work are.

I don‘t know exactly what is expected of me at work.

It is not explained clearly to me what tasks have to be done in the bank.

Role conflict: 1 2 3 4 5 6 7

I receive assignments without the resources to complete it.

I receive assignments without adequate resources and materials to execute it.

I have to break a rule or policy in order to carry out assignments.

I do things that are apt to be acceptable by one person but not by others.

I receive incompatible requests from two or more people.

I work under incompatible policies and guidelines.

Section G: Internal Marketing 1 2 3 4 5 6 7

Our bank offers employees a vision that we can believe in.

Our bank‘s vision is well communicated to all employees.

This bank prepares employees to perform well.

Our bank views the development of knowledge and skills in employees as an

investment rather than a cost.

Skill and knowledge development of employees happens as an ongoing process in

our bank

We teach our employees ―why they should do things‖ and not just ―how they

should do things‖.

This bank goes beyond training and educates employees to work together.

This bank measures and rewards employee performance that contributes most to

our bank‘s vision.

Data gathered from employees is used to improve jobs, and to develop strategy of

the bank

In our bank, those employees who provide excellent service are rewarded for their

efforts.

In this bank, employees are properly trained to perform their service roles.

This bank places considerable emphasis on communication with employees.

Our performance measurement and reward systems encourage employees to work

together.

Our bank communicates to employees the importance of their service roles.

Section H: Service Quality 1 2 3 4 5 6 7

Reliability

In my bank Coworkers provide service that is promised.

In my bank Coworkers are dependable for handling my problems.

In my bank Coworkers perform services right the first time, to avoid having to

make corrections later.

In my bank Coworkers provide correct and necessary information.

In my bank Coworkers are reliable.

Assurance 1 2 3 4 5 6 7

In my bank I can trust my coworkers.

In my bank I feel safe in dealing with coworkers.

In my bank Coworkers are polite and kind.

In my bank Coworkers are knowledgeable.

Empathy 1 2 3 4 5 6 7

In my bank coworkers are sincerely concerned about problems.

In my bank we have convenient working hours.

In my bank coworkers give me individual attention.

In my bank coworkers seem to have each other best interests in mind.

In my bank coworkers are sensitive to my work-related needs.

Responsiveness 1 2 3 4 5 6 7

In the bank my communication with coworkers is appropriate, accurate and clear

In my bank coworkers respond quickly and efficiently to my request

In my bank coworkers are willing to help me

In my bank coworkers are willing to accommodate special requests and needs

289

Section I: Subjective Organizational Performance 1 2 3 4 5 6 7

The bank has made avital improvement in the finance and performance over past

few years

The bank has made a vital improvement in its relationship with customers over past

few years

The bank has made a vital improvement in organizational effectiveness and

efficiency (e.g. timing of launching new products or services) over past few years

The bank has made a vital improvement in human resources development (e.g.

employee skills, personnel development, etc.) over past few years

The bank has made avital improvement in preparing for the future (e.g.

quality/depth of strategic planning, indicators of partnerships and alliances) over

past few years

Appendix 2

Frequency Percent

Missing 9 2.6

Accounts In charge 1 .3

Area Coordinator 1 .3

Area Manager 2 .6

ARM 1 .3

Assistant 1 .3

Assistant Credit Officer 1 .3

290

Assistant Manager 25 7.3

Assistant Vice President 10 2.9

Audit Officer 1 .3

Banking Service Manager 1 .3

BCOT Executive 4 1.2

Branch Manager 2 .6

BSO 5 1.5

Business Development Officer 9 2.6

CAD Officer 1 .3

Cash Officer 9 2.6

Cashier 4 1.2

CCR 1 .3

Chief Cashier 1 .3

Chief Manager 1 .3

Cluster Manager 1 .3

Collection Officer 1 .3

Conventional Officer Grade 1 .3

Credit Assistant 4 1.2

Credit Manager 3 .9

Credit Officer 4 1.2

CSO 3 .9

CSR 1 .3

customer Relationshi 1 .3

Customer Services Officer 2 .6

Establishment Incharge 1 .3

Executive 1 .3

Forex Exchange Officer 1 .3

General Banking Officer 10 2.9

HR Officer 1 .3

Inc Credits 1 .3

291

Inc Deposit 1 .3

Inc Forex 1 .3

Incharge Credit 1 .3

Junior Officer 4 1.2

Manager 24 7.0

Manager Teller 1 .3

Manager Trade 1 .3

MG10 2 .6

MG9 1 .3

Office Assistant 3 .9

Officer 2 .6

Officer ICU 1 .3

OG I 26 7.6

OG II 34 10.0

OG III 23 6.7

Operations Manager 27 7.9

operations Officer 1 .3

Operations Officer 10 2.9

PBM 1 .3

Personal Banking Officer 3 .9

Regional Manager 1 .3

Relationship Manager 6 1.8

Relationship Officer 8 2.3

Retail Banking Officer 3 .9

RM Assets 2 .6

RM Trade 1 .3

RM-CAD 1 .3

Rural Finance Officer 1 .3

SA 1 .3

Senior Officer 3 .9

292

Service Quality Coordinator 1 .3

SHR OFFR 1 .3

Sub Officer 1 .3

System Admin 1 .3

Teller 5 1.5

Trade MG 1 .3

TSO 3 .9

Vice President 8 2.3

Total 341 100.0

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